Birla Fashion may pay Rs 100 crore for majority stake in Bewakoof

“Both companies have signed a non-disclosure agreement and have also finished due diligence. The team at Bewakoof is also moving to join Aditya Birla’s new firm,” said a senior executive, who did not wish to be identified.

Bewakoof, founded in 2012, one of the first D2C brands in the country, has annual revenues of about 250 crore. Since inception, it has raised 160 crore in funding from investors including InvestCorp, IvyCap Ventures and Spring Marketing Capital.

India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing, a segment where Bewakoof operates. However, over the past few quarters, the company have been looking at strategic buyers and invest to fuel their growth plans, said the executive.
ABFRL declined to comment while Bewakoof did not respond to ET’s queries.

In June, ABFRL set up its D2C entity TMRW and said it will acquire as well as incubate 30 brands in the next three years. The new firm, which is acquiring Bewakoof, is part of ABFRL’s strategy to build a portfolio of new-age, digital brands across categories in fashion, beauty and lifestyle segments.

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“We are surely going to see a lot more such deals happening in the near future. This also helps early-stage investors get exit opportunities at a time when larger funding rounds look a tad challenging amidst a global economic slowdown,” said Dhianu Das, cofounder, Agility Ventures.

ABFRL, which sells clothes and accessories from Louis Philippe, Van Heusen, Allen Solly and Peter England, among others, plans to enable multiple founders to operate within a synergistic platform that will have shared capabilities. During its earnings call last quarter, ABFRL said it will make eight to 10 investments in early-stage digital first brands by the end of this financial year and that its initial focus will be on broad categories of fashion.

Experts said traditional companies have the wherewithal to acquire new D2C brands to compensate for their late entry in the online space, a channel that now accounts for 30-50% for several brands.

“Although there has been a drop in late-stage funding, Indian startups are seeing an uprise in large corporates looking at acquiring established brands with great products and strong customer loyalty. This is not just strategic but also a natural growth path for these companies,” said Abhimanyu Bisht, CEO, Venture Catalysts.

Nearly 590 new D2C companies have entered the Indian market in the past three years, and they have raised Rs 6,700 crore altogether, according to Tracxn, a market intelligence provider of private company data. The D2C market opportunity in India is expected to be $100 billion (about Rs 8 lakh crore) by 2025, according to experts.

“With organic and inorganic build-up, ABFRL’s new venture will be initially incubated and funded by ABFRL and will subsequently bring in external capital to accelerate the growth journey at an appropriate time in the future,” said a note by Nuvama Institutional Equities.