bewakoof: Birla Fashion can pay 100 crore for majority stake in Bewakoof

Aditya Birla Fashion & Retail (ABFRL) is in the final stages of acquiring a controlling stake in clothing and accessories brand Bewakoof for around 100 crore, marking its entry into the direct-to-consumer (D2C) segment.

“Both companies have signed a non-disclosure agreement and have also finished their due diligence. Bewakoof’s team 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 earliest D2C brands in the country, has an annual turnover of around 250 crore. Since inception, it has raised 160 crores of funding from investors including InvestCorp, IvyCap Ventures and Spring Marketing Capital.

India is an attractive market for clothing brands, especially with young people increasingly embracing Western-style clothing, a segment in which Bewakoof operates. However, in recent quarters, the company has sought strategic buyers and invested to fuel its growth plans, the executive said. ABFRL declined to comment while Bewakoof did not respond to ET’s questions.

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

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“We will certainly see many more deals of this type happening in the near future. This also helps early-stage investors secure exit opportunities at a time when larger funding rounds are looking a bit challenging amid a global economic slowdown,” said Dhianu Das, co-founder of Agility Ventures.

ABFRL, which sells clothing and accessories by Louis Philippe, Van Heusen, Allen Solly and Peter England, among others, plans to allow multiple founders to operate within a synergistic platform that will have shared capabilities. During its earnings call last quarter, ABFRL said it will make 8 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 fashion categories.

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

“Although there has been a decline in late stage funding, Indian startups are seeing an increase in large companies looking to acquire established brands with great products and strong customer loyalty. This is not only 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 over the past three years and collectively raised Rs 6,700 crore, 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 both organic and inorganic accumulation, ABFRL’s new venture will initially be incubated and funded by ABFRL and will subsequently bring in external capital to accelerate the growth path at an appropriate time in the future,” said a statement from Nuvama Institutional Equities.

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