India: Soch Apparels looking to raise capital from PE funds

Photo: Mint

After its deal with Manyavar brand owner Vedant Fashions Pvt. Ltd did not materialise in August, women’s ethnic wear brand Soch Apparels Pvt. Ltd is now looking at raising capital from private equity (PE) funds.

Soch would prefer a PE firm that has experience in the consumer space so that it can go beyond just capital infusion and add value as well, chief executive officer Vinay Chatlani said in an interview.

Vedant had been in discussions to buy Soch since April in a proposed deal worth Rs1,200 crore, Mint reported on 30 August, citing people aware of the development on condition of anonymity.

“I won’t go into details about who we were talking to. We were open to it and we are open to it,” Soch’s Chatlani said, adding that if Soch starts talking with funds again it will probably happen either in November or January or February, 2018.

While the family-run firm is not completely closed to the idea of a strategic investment, if it goes down that route it has to be with someone who adds a lot of value, he said. That could come in the form of another brand that may have a lot of synergies with Soch, or one that brings more back-end retail value, or value in terms of sharing retail spaces, reducing expenses and rentals.

“That would be the only scenario in which we would look at a strategic (investor) because otherwise a lot of times strategic investors think that they can pay less and get a brand,” Chatlani said.

Even without any capital infusion, Soch expects to earn revenue of Rs425 crore in 2017-18 and is targeting growth of 40% on that in 2018-19. The company estimates that it will end this year with 120 exclusive outlets and plans to add 40 more next year. It is also looking at expanding beyond the country starting with Southeast Asian markets, probably towards the end of the year or the beginning of the next calendar year.

“We don’t need the capital so if we get the right person at the right time we will take them. The best time to take someone in as an investor is when you don’t need them,” Chatlani said.

The Indian womenswear market was estimated to be worth Rs1.128 trillion last year and grew at a compound annual growth rate (CAGR) of 11.4% between 2011 and 2016, according to data from research firm Euromonitor International. The CAGR over the next five years is likely to be a much slower 3%, Euromonitor predicts.

In 2016, several mid-sized apparel makers initiated talks with private equity firms to raise funds, Mint reported last September, after a US-based firm invested $140 million for a minority stake in TCNS Clothing Co. Pvt. Ltd.

TCNS Clothing sells the popular brand W, which competes with the likes of Soch. Companies ranging from Esjay International Pvt. Ltd —owner of apparel brand Chemistry—to underwear maker Dixcy Textiles Pvt. Ltd were looking to woo private equity funds.

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