PE eyes kids' wear

Even a couple of years ago, there’s hardly any kids’ wear brand to consider. Largely unorganised, this kids’ wear market is now the target for many brands since the space gives ample of opportunity to experiment with international styling. The end result is galloping growth of kids’ wear brands, attracting the attention of the PE firms.

The potential

Gone are those days when parents use to make decisions for their kids, now they don’t have the time to do so! Now kids know what to wear, what to play, what to eat and which brand to buy.  They want the best for their birthdays and festivals. With growing age of a kid, you have growing demands and you have growing number of retailers to cater to these demands.

Today’s generation is much into making careers; so both the parents are working professionals, and are dying under the guilt of leaving their kids alone. To get out of that guilt, they shower their kids with presents. Also with increasing disposable income and less kids in the family, people have more money to spend on their kids. This is a golden opportunity for retailers that can attract more buyers and use customers’ emotions towards their sales. On this Mr Harish Bijoor, Brand Expert & CEO, Harish Bijoor Consults Inc. says, “The overall rag trade in India is a big business. A sub-set of this big business opportunity is the kids’ wear business. This segment is not only high volume, but is high value as well. More often than not, parents are willing to spend a lot more on kids clothing than on adult clothing.”

Current scenario

Catching hold of these advancements in kids’ wear retail market, funders have come to know that it’s a market to put in their hard earned money. That’s why PE funders are flying like vultures on kids’ wear market to take a piece of their share and invest in them.

Recently we have seen TPG Growth and Bain Capital collectively buying out 35 per cent shares of Lilliput, the leading kids’ wear brand in India, for Rs 175 crore. With this funding, Lilliput is planning to double its retail space from 2,35,000 to 4,50,000 sq ft with 70 stores in India and 4 stores in West Asia, specifically in Abu Dhabi, Dubai and Kuwait.  Also stepping into the wagon are brands like Catmoss and Gini and Jony. Catmoss is in talks with the PE firm, Saif Partners. Catmoss is eying Rs 70 crore by selling 30 per cent of its stake. Following suit, Gini & Jony is also looking for funding of Rs 150 crore.

Why PE funding?

Why do companies prefer PE funding? What are its advantages? Answering these questions Mr Bijoor says, “The PE funding is a great tool to use in a market where there are no immediate returns assured. Brands will pay back the money in the medium term, rather in the short term.” This surely takes off the load of making money quickly and also gives time to the brand owners to take things forward with a clear mind.

Putting light on the other side of PE funding, the Co-founder & Director of Forum Synergies, Mr Hamechandra Javeri says, “On the flip side, PE capital is demanding, needs businessmen who are transparent and result oriented, and that’s a weakness of some Indian entrepreneurs.” So, brands should know entering in a PE contract is not all games.

Decision Making

How does a funder decide what’s the right brand for it? “There are two key criteria: the first one is the quality of the promoter/entrepreneur and the long term profitability of the business model. A committed, passionate, knowledgeable and transparent businessman are preconditions to any investment, he/she is not someone who merely signs a cheque. That will create conflict. The second criterion of a sound business model is critical. Many businessmen are unable to ensure a sound profit trajectory over a long term. Some businessmen chased unstable metrics that questionably increased enterprise value and amassed huge losses that made businesses collapse,” says Mr Javeri.

Mr Bijoor being on the consulting side also adds “For getting a 360 degree business, you need a 360 degree view” which means having an external consultant always helps in better decision making.

Kids’ wear being the latest interest of the PE firms sends a positive vibe across the market signifying brand expansion in terms of larger customer base and more product offerings.