Over the last two decades, Kolkata-based fashion designer Sabyasachi Mukherjee didn’t allow outside funding into his business which is now almost synonymous with Indian luxury wedding fashion. Years ago, L Capital (now L Catterton, the $20 billion private equity firm co-founded by LVMH) wanted to back the luxury fashion house but, for Mukherjee, it was too premature a business then for large investors to fund. In an interview to Fortune India in 2019, however, Mukherjee expressed interest in investor money. “The business has developed an identity now… and I will be in control of the situation. I will not let outsiders control it,” he had said then.

Circa 2021: On Wednesday evening, Mumbai-based fashion retailer Aditya Birla Fashion and Retail Limited (ABFRL) announced an infusion of ₹398 crore for a 51% stake in the designer’s fashion company Sabyasachi Couture which sells garments, accessories, and fine jewellery under his eponymous label. Reason: To ensure continuity and long-term sustainable growth, the designer said in a statement.

“Sabyasachi’s is among the most successful designer businesses to have emerged in the last two decades. While most designers have struggled to scale their business, Sabyasachi Mukherjee has successfully scaled his product offer as well as brand portfolio over the years. However, the business has been hit hard during the pandemic like all fashion and retail businesses, and a significant injection of money is needed to maintain the business momentum, and to scale it further,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight.

Experts say that the overall luxury market has suffered from a Coronavirus-induced shutdown in global travel since March last year. The pandemic has slowed over a decade of growth across luxury categories including fashion.

According to a December report by consulting firm McKinsey and The Business of Fashion, the global fashion industry’s profit is expected to fall by 93% in 2020. “Many fashion companies have taken time during the crisis to reshape their business models, streamline their operations, and sharpen their customer propositions,” the report added.

Dutta feels corporate partnerships and acquisitions allow a designer-entrepreneur and his/her investor partners to unlock some of the value that is being built.

Mukherjee has built arguably the biggest couture wear brand in the country, collaborated with global brands such as Christian Louboutin, the French king of luxury footwear, American upscale home furnishing chain Pottery Barn, Hong Kong-based luxury retail store Lane Crawford, Forevermark Diamonds and even Indian brands like Asian Paints. The designer brand also has a strong export business and ships garments, accessories, and fine jewellery to countries such as the U.S., the U.K., Hong Kong and the Middle East.

In the 20 years since he started out, Mukherjee has dressed heiresses, Bollywood actors, models, and hundreds of brides across the world. In 2018, he didn’t just design for the Deepika Padukone-Ranveer Singh wedding, but also other high-profile weddings including those of Priyanka Chopra-Nick Jonas and Isha Ambani-Anand Piramal.

Over the last few years, the Sabyasachi label has grown slowly but steadily. In FY18, Sabyasachi Couture posted a revenue of ₹209 crore followed by ₹253 crore in FY19 and ₹274 crore in FY20.

Indian fashion is predominantly sold in India, with wedding clothing comprising more than 90% of the market. The Sabyasachi brand is associated with opulent traditional wedding lehengas and sherwanis that start at about ₹1 lakh but can go above ₹10 lakh. In an earlier interview to Fortune India, Mukherjee expressed his desire to go beyond being just a wedding apparel designer and create a global luxury lifestyle brand that includes everything from undergarments and perfume to cosmetics and home furnishings.

“If you look at the model of Chanel, there’s nothing minimalistic about the clothes. The clothes are the trophy of their business, but the main money comes from cosmetics, shoes, accessories, and jewellery,” the 47-year-old designer had said then, adding that he wanted to grow the business into products that people can afford, such as cosmetics and perfumes. “You go mass without diluting the sensibilities of the brand,” Mukherjee had noted.

ABFRL expects the deal to accelerate the company’s strategy to capture a large share of the ethnic wear market through a comprehensive and attractive portfolio of brands, across key consumer segments, usage occasions and geographies, the company said in a statement adding that it plans to build a large ethnic wear business over the next few years.

ABFRL, which owns fashion brands such as Peter England, Louis Philippe, and Van Heusen, has made two key acquisitions in the Indian ethnic wear and lifestyle space in the past. In 2019, ABFRL picked up a 51% stake in fashion designers Shantanu & Nikhil’s Finesse International Design which makes bespoke apparel, footwear and accessories for men and women reportedly for ₹60 crore. The same year it also acquired ethnic wear and lifestyle retailer Jaypore for ₹110 crore.

“Over the next few years, ABFRL intends to craft a portfolio that addresses the entire gamut of ethnic wear segments: value, premium, and luxury,” Ashish Dikshit, managing director, ABFRL noted in a statement.

In October last year, Walmart-owned Flipkart Group, which owns fashion portal Myntra, acquired a 7.8% stake in ABFRL at an investment of ₹1,500 crore. For ABFRL, which operates a network of more than 3,000 stores and has over 6,700 points of sale across India, the deal will lead to a significant reduction in its debt.

Industry experts point out that ABFRL would have acquired a majority in a business with an eye towards scaling Sabyasachi into a larger brand, available at more accessible price points to a much larger audience, both in India and internationally. This may happen using the much larger retail platform that is available to ABFRL. Dutta feels it is quite likely that, in due course, ABFRL will wish to own the business in its entirety.

“There may be benefits from operational and systems disciplines, sourcing strengths, the financial muscle of a larger partner, but the brand and its intrinsic identity must not be diluted. If the brand has to maintain its cachet, its distinctiveness, it would need to be allowed to run with significant independence on the product and the customer experience side,” he adds.

For that, we might have to wait a little longer.

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