When I first heard about it, I thought someone’s posted a joke on social media. But when I looked it up, it was real. After digesting the news and giving it a deep thought, it made sense at many levels. So the biggest news in the world of luxury today, is true! French luxury conglomerate Louis Vuitton Moet Hennessey (LVMH) have disclosed their interest to invest $ 500 million in Indian brand ‘Patanjali’. One might wonder what’s in it for LVMH while Patanjali sure could benefit from this massive injection of capital and use it to expand its network globally.
LVMH needs no introduction and anything that contains ‘LV’ in it, is big news in Luxury. It’s the world’s largest luxury conglomerate which houses more than 70 luxury brands across 5 major verticals in its kitty. LVMH plans to invest this capital through its Private Equity fund L Catterton, which mainly focuses on grabbing a pie of upcoming consumer brands around the world. L Catterton has an impressive list of brands it has invested in, and in various sectors i.e. Retail, F&B and Consumer Products and Services.
LVMH’s affair with India started almost 10 years ago when they started to look into new, more cultural economies. Some might say that the financial crisis of 2008 was a wakeup call for them. After extensive research, in 2012, LVMH invested and bought a stake in Fab India, the Indian ethnic retail brand in a deal which was valued at Rs. 150 crore. This investment bore fruit when they exited and sold their stake in a deal worth Rs 730 crore in late 2016. Now that’s nearly 400% return and LVMH is smiling all the way to the bank.
With increasingly slimmer chances of such returns internationally and given the growth Patanjali has had in a very short span of time, LVMH sees this as the next big bet in the Indian consumer products segment. However, Patanjali is no luxury brand. Perhaps with this investment LVMH envisions to tap into India’s rich heritage ‘Ayurveda’ and not to forget the immense following of ‘Baba Ramdev’, to develop synergies. Whatever the results, it will be an interesting case to see how LVMH and Patanjali take this forward.