Luxury retailers follow the money to India’s new affluent

MUMBAI - A few blocks from the Reserve Bank of India’s headquarters in Mumbai lies the true marker of the country’s rising wealth – a new store from Indian fashion designer Sabyasachi Mukherjee in a restored building dating from the early 1900s.

The opening of the four-storey flagship makes Mr Sabyasachi the latest luxury retailer to follow the money to southern Mumbai, which has been the home of India’s financial services industry since the precursor to the Bombay Stock Exchange began there under a banyan tree in 1875.

In more recent years, Hermes International, Christian Louboutin and others have set up shop, willing to pay the neighbourhood’s skyrocketing rents for space in historic real estate and access to a rising upper class.

“The coming of age of the Indian high-net-worth-individual market is really attracting luxury players,” said Mr Anurag Mathur, a partner at Bain & Company in New Delhi.

The Covid-19 pandemic fuelled a desire for personal luxury while limiting travel, making Indians buy these goods in their home country, he said.

For luxury brands, “there’s clearly a desire to look for a new frontier and India very much, with its change, offers that”.

Around 1.66 million people in India are forecast to have more than a million dollars’ net worth by 2027.

The bracket of those with US$30 million (S$40.6 million) to their name is projected to grow by almost 60 per cent in the five years from 2022, according to Knight Frank’s Wealth Report.

Signs that international brands are paying attention were on full display earlier in 2023 when Dior chose Mumbai’s iconic Gateway of India as the backdrop for its first runway show in India.

The collection boasted sequinned dresses, bright pops of pink and traditional Indian needlework on jackets, skirts and bags in an appeal to local consumers, and their wallets.

The neighbourhood around the Gateway – including the boutique-filled The Taj Mahal Palace hotel – has always been home to affluent, old-school business families.

But while commercial real estate has become too pricey for some financial services firms, several international brands see the value.

“The increased demand for luxury brands, the limited supply of properties available and severe market competition have forced rentals higher,” said Mr Karl Nagarwalla of Nagarwalla Estates, a group that has helped companies such as Hermes and Louboutin get their showrooms in the city.

Monthly rent for retail spaces in the area can stretch beyond US$6,044 to US$7,250 for a 1,000 sq ft space, he said.

As a result, many banks, mutual fund managers and traders have moved to new financial districts, including the Bandra Kurla Complex anchored by Bank of America and Citibank, as well as suburban areas to the north.

Sabyasachi, known for its elaborate wedding dresses and jewelry, has been able to expand with backing from Aditya Birla Fashion and Retail, which took a 51 per cent stake in the brand with an all-cash deal in 2021.

The investment helped Aditya Birla in its most recent quarter – the company reported a loss in the three months ended June, but said Sabysaschi’s revenue rose and sales have had “good traction” at the Mumbai store, according to filings to the Bombay Stock Exchange.

Aditya Birla is not alone in adding premium and luxury brands to its portfolio.

Asia’s richest man, Mr Mukesh Ambani, also has set his sights on bringing luxury experiences to India.

His Reliance Brands has invested in MM Styles, which owns the eponymous fashion house run by Bollywood stylist Manish Malhotra.

The conglomerate has also taken a 52 per cent stake in the label of Ritu Kumar, another Indian designer.

Reliance’s latest financial results highlight the growth in non-food business, with its retail unit that includes fashion and lifestyle brands delivering 15 per cent growth in revenue year on year.

“The competitiveness is good – the market as a collective is growing. There’s enough and more opportunity for all the brands to have over the next decade or so,” Bain’s Mr Mathur said. “The pandemic made people question what are they storing their money for.” BLOOMBERG