Interview with Sanjay Gujral

Sanjay Gujral
Sanjay Gujral
Regional MD
L Capital Asia (LVMH)
L Capital Asia (LVMH)

How much do you invest in each deal, and what kind of returns do you expect from your investments?

When L Capital Asia was launched in 2009-10, investment sizes ranged around US$ 20-25 million. Today, with its second fund, the firm leads many investments in excess of US$ 100 million, with average deal sizes of around US$ 80 million. While we are not averse to looking at deals below US$ 50 million in size, they would be more an exception than principal focus. Of course in the Indian context, we need to adopt a more flexible approach given very few deals above US$ 50 million. In terms of return expectations, we aim to deliver our investors at least 2.5-3 x cost in US$ terms or internal rate of return (IRR) in excess of 25 per cent.

How are Indian consumer markets different from Asian markets?

There are various differences between Indian and other Asian markets. The differences could range from factors like culture, language, economic development or per capita incomes on one hand to issues like stages of development of organised retail, availability of quality retail infrastructure and retail talent on the other. Differences could also range from issues like logistics, taxation and other trade and non-trade barriers to entry, etc. Each market will have its own nuance. As investors, it is very important for us to understand these nuances and try not to extrapolate trends on a very generic basis. The one big issue for India relative to other markets is the development of modern retail infrastructure. There are simply not enough quality malls, and where they exist, the rental costs are fairly high compared to regional or global standards or the level of sales that are generated. This is a broader issue tied very intrinsically to the high cost of real estate in India, time, money and effort it can take to get any large project going in the country. To give you a contrasting example, we have an investment in a Chinese outlet mall wherein the company has been provided preferential access to land parcels by the government, encouraging the company to develop retail infrastructure. As a result, real estate is not a huge deterrent for the establishment of the retail businesses. It results in all-round economic development for the province, as well as ensures better outcomes for the retail business. While that is possible in the Chinese context, we know that the governments in India may not have the same flexibility. This is also one of the reasons why on a relative basis, e-commerce development versus organised retail development is on a much sounder footing in India compared to other markets.

Do you feel India's malls are well-equipped and glamorous enough to house glamorous brands? Or when do you feel India will reach that stage?

It is very difficult to generalise. Clearly, some of the big metros have a few malls that attract luxury brands. But for the most part, one would believe that top-tier luxury brands like Louis Vuitton, Dior, Hermes, Chanel, etc, do not have access to adequate, high-quality malls. There is a long way to go.
Published on: 04/11/2015

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of

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