Luxury's New Lotus

By Marion Hume/London, Kate Betts

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.

"Fifteen years ago, India was much more traditional. We had two TV channels. Now we have more than 80. The Internet, the media have changed so much," Mafatlal notes, although she adds that the retail scene is still underdeveloped. "We have no upmarket malls, no shopping streets. There is no Bond Street. Local designers tend to sell from their own villas."

Pockets of resistance to Western ways of spending remain. "Older people cannot understand why you would spend as much on a handbag as you would on a piece of jewelry, which will increase in value," says Mafatlal, who adds that fine jewelry will always remain important in India. Today's younger women want accessories that can live up to their jewels, hence Mafatlal's insistence that Valentino, given the designer's taste for decorative accessories, be the first brand in MLP's portfolio.

The hardest sell could be the category for which Valentino is best known--gowns. "Don't forget, we have the sari. It's sexier than any other dress," says Mafatlal. "We have a very strong sense of our own culture. The sari is always going to stay for black-tie functions, although women do want gowns for less formal occasions."

Once Mafatlal identified Valentino as her quarry, she had some persuading to do. "I didn't know him. Then, early in 2004, I was having lunch at the jet-set London restaurant San Lorenzo, and Mr. Valentino and his entourage walked in. So I sent over a note, and Carlos [Souza, the company's indefatigable majordomo] came over, and we talked."

As to why Valentino chose Mafatlal, besides the fact that she makes a great model for the clothes, it was clear she had the drive and the business smarts, says Valentino CEO Michele Norsa. (She has since become CEO of Ferragamo.) What also helped cement the deal was Norsa's deep knowledge of India, not just from a business standpoint but also from the position of a real love of the country, which he had first visited on vacation in 1977. As soon as she found that out, Mafatlal knew her dream could work.

"Lots of people had approached us about a partnership there," says Norsa, "but it was of key importance to us to work with someone who really understood luxury. In 1.3 billion people in China, you wouldn't find one like Sheetal. She combines both the right image for us with knowing how to reach the right group."

Mafatlal lives most of the year in Bombay, so why is her first retail site in New Delhi? "Bombay has Bollywood, it has glamour, but northern India is more flamboyant, and activities are centered on hotels," she explains. New Delhi's climate and seasonal changes are also better for fashion. "This is still a developing country," says Mafatlal. "What we are doing is an entirely new concept. It's not as if they can go window shopping!"