INDIA BUSINESS WORLD - MARCH 16th - MARCH 31st - 2008
TOMMY HILFIGER CONSIDERS DIRECT OWNERSHIP OF ITS INDIAN OPERATIONS BY BRINGING 51% FDI
Global premium lifestyle brand Tommy Hilfiger, controlled by buyout private equity Apax Partners, is looking at direct ownership of its India operations by bringing in the maximum permissible 51% foreign direct investment (FDI) allowed in single brand retail.
Sources said the Amsterdam-based Tommy Hilfiger Europe BV, which has effectively become the global headquarters for the original American designer brand following the Apax takeover, was considering buyout of the perpetual India rights, currently with the Murjani Group.
The Murjanis were the investors behind a young Tommy Hilfiger when the American designer introduced his first signature collection back in 1985, just like Gloria Vanderbilt, another global brand the Murjanis helped build around the same time.
The Mohan Murjani-led group, after exiting their investments in Tommy Hilfiger Corporation, sewed up a deal to keep the perpetual brand rights for India as well as control over sourcing operations from here. The Murjanis ceded sourcing operations back to Tommy Hilfiger sometime back, but scripted the brand’s retail foray into the country in 2004. With this, Tommy would be joining the growing club of global brands that are opting for a direct role in developing India’s buoyant market.
Such a development would also add weight to Apax Partners’ plans to take Tommy Hilfiger public again, once the markets recover, through an offering at Frankfurt. When contacted, Vijay Murjani completely denied any plans to exit Tommy Hilfiger and added there was /nothing on the negotiating table right now.
The Murjanis operate Tommy Hilfiger’s core fashion apparel business through an equal joint venture with Arvind Mills, which has 23 doors across the country at present. The Murjanis have also inked licensing deals with other Indian corporates like Titan Industries for watches and Welspun for home furnishings. It is believed that Tommy Hilfiger sees the potential of doubling its revenue annually for the next 3-4 years, with the brand retail value including accessories estimated at around $30 million currently.
The new Tommy Hilfiger business development team for Asia-Pacific is keen push ahead in the region, especially in a market like India where the brand has a first mover advantage and is performing well. However, there is no clarity yet on what structure Tommy Hilfiger Europe may adopt for taking charge of domestic operations, and if it would keep Murjanis and Arvind as future partners. The Murjanis, meanwhile, through their Brand Marketing India Pvt Ltd, are also pumping investments to develop other international fashion brands like Gucci, Jimmy Choo and French Connection in the domestic market, where developing a fashion business is a sure cash burner given the steep real estate costs. BMI recently raised $10 million through a private placement with VC fund Matrix Partners.
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