Art Of The Deal: Luxury's New Lotus

WHEN A MYSTERIOUS and beautiful newcomer took her seat at the Valentino show in Paris in March sporting a 20-carat diamond ring on one hand and a 200-carat emerald on the other, her appearance sent a frisson of intrigue through the front-row crowd. Was she a couture client slumming it at the ready-to-wear shows?

It never occurred to anybody in the basement of the Louvre that morning that Sheetal Mafatlal, 33, was one of India's biggest luxury dealmakers. Although Mafatlal could easily afford to scoop up gowns by the gross, she wasn't shopping for herself. She was on a fact-finding mission as a prelude to opening the first Valentino store in India, in partnership with Valentino Fashion Group SpA, in New Delhi's five-star Shangri-La hotel. Valentino is the first of several Western designers introduced into India by MLP (Mafatlal Luxury Private), the company Mafatlal heads.

When Sheetal Bhagat, already a stylish fixture on the nation's social pages, married Atulya Mafatlal in 2000, she joined one of India's oldest industrial families. But she never wanted to be just a trophy wife. Mafatlal has degrees in finance and law from Bombay and has also studied at Harvard. "I always wanted to go into something connected with fashion, not designing but running a conglomerate," says Mafatlal when we meet in London.

Mafatlal's first job was with one of her father's businesses—a purveyor of industrial fabric for conveyor belts. She went on to build her own business selling modular kitchens before founding MLP. "As an entrepreneur, I identified that our lifestyle is changing," she says. "We're on the upward curve of the retail boom, although the market is still not a mature market. I wanted to start with the right brand to spell Western luxury."

Unlike other emerging markets—China, Russia, Dubai—India has consistently had its share of superwealthy consumers. Western luxury brands aren't new to India either. In their heyday, the maharajas were enthusiastic customers for Louis Vuitton trunks and Boucheron and Cartier jewels as well as Osler chandeliers. What has changed radically is that there is a burgeoning middle class of 300 million people—growing by 25 million each year.

It is their spending patterns that excite entrepreneurs like Mafatlal. In spite of the maharajas' opulent purchases of old, India has had a tradition of fiscal conservatism, of saving rather than spending. Yet the combination of a GDP rising at 8% per annum and one of the world's youngest populations (more than 200 million people between the ages of 15 and 24) means spending power has shifted to those with a fever for fashion. Add to that the booming media in the world's largest democracy bringing brand awareness, plus the reduction of once punitive import taxes, and India starts looking like a gold mine—except for its labyrinthine bureaucracy, which can be as time consuming as it was in the days of the Raj.

But that has not stopped the fashion flock from, well, flocking. Louis Vuitton braved these waters three years back, when import taxes were still high. Since then, Dior has entered the market, as has Versace. An Indian edition of Vogue will soon join Elle in competition with an already robust local fashion press.