Interview with Sanjay Gujral

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

Only 10% of our total funds have gone into Indian businesses
The Indian fashion and apparel industry has a long way to go as compared to other markets like China. Sanjay Gujral, Regional MD, L Capital Asia (LVMH) talks about the Indian market in detail along with their investment strategies and plans in an interview with

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.

Do you see India as a market where any brand can experiment with their products?

Well, I don't know what dimension of experimentation you are talking about or whether the reference is to foreign brands or local brands. If you look at foreign brands, we have seen instances of some global brands launching India-specific products, such as Canali or Jimmy Choo, which have clearly helped expand their business in India. So to that extent, yes, experimentation can work.

What are the trends in malls in Singapore and China currently? What new can be expected there?

Given the unique constraints around availability and cost of real estate in India, I don't think one can really draw straight-of-the-bat examples. That being said, mall management is a specialised field and simple elements like zoning, brand mix, adequate food-and-beverages or entertainment options, mall maintenance, etc, are all elements that need greater focus.

Which of your ambitious future plans will the L Capital Asia funding facilitate?

At L Capital Asia, we like to play the role of value-added investors - with a very deep and singular focus on lifestyle consumer businesses across the domains of consumer product brands (in categories like fashion, accessories, footwear and handbags, watches and jewellery, home decor, etc); beauty and wellness (both products and services); lifestyle, food and beverage (both products and services); selective retail and distribution; media and entertainment and travel, tourism and hospitality. Geographically, we started with a very strong focus on only two countries: China and India. Today, our reach is pan-Asian, with investments in China, India, Australia, Singapore, Taiwan, Korea, the UAE, etc. Currently, less than 10 per cent of the funds that we have deployed so far have gone into Indian businesses. Only three of our 25 investments till date have been in Indian companies. While we have not made a new investment in India for the last three years, we do view the market as having strong long-term potential across all our focussed sub-sectors. We hope to increase our investment activity in the country going forward.

How do you feel e-shopping will change the way people shop in future?

The digital domain is having a big influence globally on how people shop, be it online or offline. So, it is not only about wider product availability, convenience and price arbitrage or discounts. It is also about how brands engage with consumers. E-shopping or e-commerce is but only one facet of the broader development. Internationally, companies are really working on more holistic O2O (offline to online) initiatives. We would expect that trend to permeate into India as well.
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