I'd previously written about how retail space at India's airports was a gold mine waiting to be excavated. Now, DNA says that DFS Group, a part of French luxury house LVMH, has been awarded the duty-free retail development contract for Mumbai International Airport Ltd (MIAL). So now, Indian travellers can buy some of the world's leading luxury brands at the airport on your way to Paris, London, Milan or Hong Kong. In fact, travellers at the international terminal have already been greeted by banners announcing the arrival of luxury retail, to be started by January 2008.
Earlier this year, MIAL had floated a global tender under which a joint venture of ITDC and Spanish firm Aldeasa was selected the duty-free operators with a bid amount of Rs 571 crore. But due to issues like a delay in forming the JV as also an attempt by ITDC/Aldeasa to renegotiate the terms of the contract, MIAL decided to terminate the contract and award it to DFS Group, the second highest bidder. Reportedly, the ITDC / Aldeasa combine felt that it had bid too high to make any significant business sense.
The new contract with DFS Group entails the payment of a minimum guarantee to MIAL of Rs 250 crore for three years over and above revenue sharing. Sources said duty-free activities in Mumbai airport accounted for revenues of Rs 45 crore last year.
Located in the international Terminal 2C, the new duty-free shopping area will be spread across 24,541 sq ft. Of this, 14,585 sq. ft will be at the departure level, 8395 sq ft at the arrival level and 1560 sq ft will be for storage.
An executive with MIAL told DNA Money: "The two main revenue-generating items for duty-free shops the world over are liquor and tobacco. We expect the same to be true of Mumbai. There will also be shops selling clothing, cosmetics, perfumes and electronic goods as also various other boutiques."
Duty-free shops are retail outlets that do not apply local or national taxes and duties and are usually found in international airports, sea ports or passenger ships. These shops work on the basis that most countries do not levy taxes on goods to be exported. Internationally, they form a source of significant profits for airport operators.
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On another note, LVMH seems to be pushing for India to become a hub for luxury product manufacturing. In fact, LVMH Global Head (Investor Funds) Daniel Piette is currently in New Delhi along with South Asia & Middle East head Ravi Thakran to initiate talks with the potential companies to invest in.
Says the Economic Times:
When contacted LVMH India group director Vispi Patel confirmed that Piette were here. He, however, chose to downplay the visit.
"They were here to meet different people," he said and declined that any decision on manufacturing unit has crystallised. "We are looking at India as a strong sourcing destination and that explains our interest in the market."
This comes close on the heels of the luxury giant's decision to launch a e500 million private equity (PE) fund in India, by March next year. The company would then begin its investment across different segments. These would include ready-to-wear apparel, watches, jewellery, home furnishing and also leisure. These investments would be mostly in mid-cap companies, Mr Patel added. "We would explore all the sectors that most PE players don't look at."
LVMH had launched two similar PE funds in Europe for investments in area of its core competence. And focused on mid-cap companies that offered expertise in those areas. "The focus would largely be the same for India as well. We would also look at investing in existing manufacturer who could offer expertise lets say, in leather," Mr Patel added.
Earlier this year, Louis Vuitton (LV) reportedly set up a 50:50 JV with South-based maker of high-end leather accessories, Hi Design, to manufacture leather accessories. The greenfield project is looking at setting up a leather manufacturing facility in Puducherry.
Source: Economic Times
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