Fashion retailer Aditya Birla Fashion and Retail Ltd (ABFRL) is upping its ante in the ethnic wear segment. After picking up a stake in Sabyasachi, it has announced a strategic partnership with designer Tarun Tahiliani, marking its foray into the men’s premium ethnic wear category.

As part of this deal, ABFRL and Tarun Tahiliani will form new entity and launch a contemporary men’s ethnic wear brand where ABFRL will hold 80 percent stake and Tarun Tahiliani will hold the remaining 20 percent.

In its deal with Tarun Tahiliani, ABFRL intends to build a Rs 500 crore business over the next five years with over 250 stores across India. ABFRL will also acquire 33 percent stake in the existing Luxury Couture business of Tarun Tahiliani, with the option to increase it to 51 percent in the next few years.

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"This partnership is in line with our stated strategy to craft a portfolio of brands that address the entire gamut of ethnic wear segments: value, premium and luxury," Ashish Dikshit, managing director, ABFRL.

This is ABFRL’s fourth investment in in the past year with premium Indian ethnic wear brand. In January 2021, ABFRL acquired 51 percent stake in designer Sabyasachi's brand for Rs 398 crore.

Prior to this, it acquired a 51 percent stake in Finesse International Design which runs bridge-to-luxury celebration wear brand Shantanu & Nikhil in July 2019, and acquired ethnic apparel and lifestyle retailer Jaypore for Rs 110 crore in June 2019.

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"The ethnic wear segment is a large and growing market with a significant opportunity to build scale. The combined expertise of Tarun Tahiliani and ABFRL will enable the new brand to make a strong impact in the market. The existing couture brand will continue to benefit from the fast-growing luxury segment of the market," Dikshit added.

ABFRL has set a strategy of building an ethnic wear business over the next few years where it intends to create a portfolio of brands addressing entire gamut of ethnic wear segment across premium, mid-value and value categories. Apart from the premium brands it has acquired over the past year, ABFRL currently sends ethnic wear under Pantaloons and ‘Maharaja’ under its Loius Philippe brand.

In the last quarter, ABFRL's ethnic subsidiaries reported Rs 17 crore revenue in Q3, down 15 percent year-on-year, and the company said the focus under the ethnic segment was on new store launches in acquired businesses, expanded its portfolio through new acquisitions.

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Analysts believe that the opportunity for ABFRL in this space is large. According to Technpak, the Indian ethnic wear category -- defined as Salwar, Kurta, Dress (SKD) – is estimated to be $20 billion in FY21. The premium market accounts for about 5 percent of this, while the mid-to-high priced segment makes up about 15-20 percent and remaining is the value segment.

Arvind Singhal, chairman and managing director of Technopak said the market, in absolute terms in very large and is a win-win both for ABFRL and the designers.

"Barring Sabyasachi and Anita Dongre, no Indian designer has succeeded commercially, so whether it is Rohit Bahl, Tarun Tahiliani, their public image is much larger than the price of their balance sheet. So a professionally managed commercial interest driven company can help commercialise the talent of these designers. It’s a good strategy both on part of people selling to them and for Aditya Birla," Singhal told CNBC-TV18.

Experts believe that the market for ethnic wear is robust, especially because every Indian wedding and festival is becoming increasingly more traditional. It is also a category that works very well for the export market because non-resident Indians are driven by such premium brands for all important occasions.

There is no direct competition either for ABFRL in the premium ethnic wear space either, according to Singhal.

"There is Manyavar in this space, but that operates at a very mass level. But with the portfolio of designers who are known for ethnic clothing, there is no other company in India. Reliance brands is bringing in international brands and the only Indian brand they have here is Satya Paul," Singhal added.

(Edited by : Jomy)

First Published:Feb 24, 2021 7:41 PM IST