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India's tryst with luxury brands

A Pall Mall in downtown India with Bentleys and Rolls parked on either side of the asphalt may no longer be further from the truth.

, TNN|
Sep 14, 2007, 03.38 AM IST
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NEW DELHI: A Pall Mall in downtown India with Bentleys and Rolls parked on either side of the asphalt may no longer be further from the truth. With the Sensex zooming and the sectors booming, the country is getting wealthier.

So, if the Gucci Group plans to celebrate the launch of its first independent store in Mumbai, LVMH Moet Hennessy Louis Vuitton is busy hawking luxury products to Indian celebrities and Spanish porcelain figurine maker, Lladro, is beefing up its retail presence in the country. “People are increasingly getting comfortable spending on luxury products in India,” says Narayan Sheshadri, chairman & CEO, Halcyon Group. “While it’s a narrow band of audience yet, the rise of younger and daring aspirants promises to expand that.”

Luxury may still be far from its three-dimensional art form — space, time and emotions — as the rich world sees, it’s fast emerging as a new plaything at the hands of mega rich Indians. “India is one of the most promising markets for luxury goods, that are expected to register even a stronger performance than those from mature markets like Europe, US and Japan,” says Davide Sburlati, senior partner at Value Partners, an international strategic consulting firm.

Led by accelerating industrial activity, active capital markets and strong GDP growth, the high networth individual (HNI) population grew by 8.3% in 2006 to 9.5 million. In India, the number increased 20% to cross 1,00,000, with an average net worth of $3.5 million.

So, what seemed like a trickle of global luxury brands into India a few years back has turned into a cascade. It’s not just the global mega luxury brands that are making a beeline to the Indian shores, Indian businesses and investors too have begun eyeing the luxury market in the country.

Take the case of Indian business houses such as Sahara Group’s recent launch of the country’s first customised luxury holiday package — Paradiso’s 101 Millionaire Holidays. The offering includes holidays at over 165 luxury properties across the globe, including exclusive island holidays at a whopping $46,000 a night. And scores of Indian investors have taken up franchise or licence to hawk luxury products here. That gives some sense of how a luxury market is likely to evolve in the coming days.

While businesses cater to this burgeoning breed of rich and famous, financial services firms and investors are eagerly watching the development to spot any investment opportunities in the emerging scenario. Sudden exposure and availability of wealth have given a new confidence to the Indians to not just splurge, but also look for ways and means to multiply their wealth.

Wealth managers have started playing a key role in influencing the consumption and investment behavior — which impacts the luxury industry worldwide. India is no different and is expected to follow the same evolution curve. Today, almost all financial services firms have woken to the fact that they need to beef up their offerings for the ultra-rich Indians.

They are looking at areas like real estate and art for investment advisory opportunity apart from a variety of other new instruments. “Wealth management, although still at a nascent stage, is poised to rapidly evolve into an advisory that looks at the high net worth clients’ innermost aspirations and advises them on exclusive assets such as art and pedigree horses,” says Alok Vajpeyi, vice-chairman & MD, Dawnay Day AV.

According to Sanjay Kapoor, MD, Genesis Colours, the maker of Satya Paul brand, the luxury market in India is still developing and the business has slightly longer gestation period. However, considering it is highly scalable, it has all the potential for private equity investments, especially in segments such as fashion design, jewellery, hospitality and art.” “Investors are certainly looking at the luxury market in India, but India has to prove itself in that space to be able to mop up sufficient funding like China,” he says. Genesis attracted investment from financial services firm, JM Financial, over a year back.
The old luxury consumers have been shopping abroad for some time now, but there’s been a mental shift amongst them. They have grown out of their obsession with overseas buys and begun to scout the domestic market for their purchase needs, says Kapoor. More than that, it is the new customers entering the market which make luxury sector all the more exciting. They are consuming luxury products as a part of their lives.

Catch this debate and its speakers live on September 20 & 21 at The Economic Times Dialogue on Luxury. To register, log on to www.luxury@economictimes.com
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