Warburg, Advent Remain Committed to Exiting Apparel Investments After a Decade

Private Equity Firms Face Headwinds in Indian Apparels Industry

Global private equity firms that invested in the Indian apparels industry are facing significant challenges in exiting their investments, as the industry struggles with weakening revenues, profitability, and credit profiles. Two prominent examples of this challenge are Warburg Pincus-backed BIBA Fashion and Advent International-owned Modenik Lifestyle.

Warburg Pincus invested in BIBA in 2013, betting on the rapid growth of India's branded ethnic wear market. The retailer reported a revenue of Rs 766.1 crore in FY20, but saw its revenue dip to Rs 569.1 crore in FY21 due to the COVID-19 pandemic. However, driven by the post-pandemic consumption boom and store expansion, BIBA quickly saw its revenues peak to Rs 874.8 crore in FY23, a 39 percent jump from the previous year. The company also filed IPO papers in 2022, offering a potential exit to Warburg Pincus.

However, the post-pandemic momentum witnessed by BIBA quickly reversed. Revenue declined around 13 percent to Rs 758 crore in FY24 amid weak industry demand and other internal issues. The company swung to a loss of Rs 95.5 crore from a profit of Rs 53 crore. Its operating margins declined from 21 percent in FY23 to 10 percent in FY24 because of under-absorption of fixed costs, higher discounting, and losses in distribution channels.

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The pressure has only intensified since then. In a May report, Icra pegged BIBA's revenue at around Rs 730 crore in FY26, significantly below the FY23 peak. The company has continued to struggle with elevated inventory levels despite repeated liquidation efforts, the rating agency said.

In a similar situation, Advent International-owned Modenik Lifestyle has faced slowing demand and pricing pressure in the innerwear market. Advent acquired innerwear maker Dixcy Textiles in 2017 before combining the business with lingerie brand Enamor under Modenik Lifestyle. The company looked well-positioned during the post-pandemic rebound, but the industry slowdown soon exposed the fragility of margins.

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The challenges persisted into FY24 and FY25. In October 2024, rating agencies noted that Modenik continued to face pressure on earnings because of weak realisations and intense competition despite volume growth of around 12 percent. Modenik reported a loss of Rs 50.85 crore in FY24 and a loss of Rs 24.85 crore in FY25, while revenue remained stagnant at Rs 1,217 crore and Rs 1,222 crore.

Industry observers noted that private equity funds typically look to exit their investments in five to seven years or less. However, more than 13 years after Warburg's original investment, the PE firm is still awaiting an exit.