Xinhe gets L Capital funding for growth, added IP protection

Private equity fund L Capital Asia affiliated with multinational luxury goods conglomerate LVMH announced last December that it will provide capital to Xinhe Fashion Co Ltd to become its second-largest equity stakeholder.

Funding of the Xiamen-based clothes marker is the first mainland investment by the equity fund.

The partnership is expected to bring a "qualitative leap" to Xinhe and its brands and help Chinese fashion brands go global with higher quality at a faster pace, said Luo Yonghui, general manager of the company,

Both parties will also have more cooperation in intellectual property protection in the global fashion industry, Luo added.

Founded in 2010, L Capital Asia is focused on emerging Asian economies such as China and India.

Its business covers a variety of sectors ranging from fashion, beauty, healthcare, home decoration and hotels to entertainment, media and education.

Xinhe was founded by Sun Jui-Hung from Taiwan in 1992. His specialty in clothes design dovetailed nicely with Luo's expertise in retail sales, so their business "went smoothly in the initial years".

Yet as their products established a reputation, they encountered attacks from counterfeiters.

To address the issue, the company began to register trademarks and enhance branding management.

Xinhe has now developed six brands designed for different market segments.

It also established legal and brand departments to monitor the market.

In the case of trademark infringements, the two departments take legal action to maintain the company's interests.

Another tactic the company uses to fight counterfeits is to accelerate expansion of its own distribution network.

"Our company is positioned in middle and high-end markets," Luo said. "Most of our products are sold at department stores in China."

With more than 600 franchised stores across the country, Xinhe generated some 2.8 billion yuan ($443.8 million) in sales last year, he added.

"Being just one step away from your rivals puts a company in a more vulnerable position for intellectual property infringements," Luo said.

"So if we can widen the distance and leave our competitors behind, we will also distance ourselves from being infringed upon."

The company's strong intellectual property protection awareness, expanded distribution channels and growing sales caught the attention of L Capital Asia, which is seeking to expand investment in Asian brands.

After more than a year of negotiations, the two parties reached an agreement on strategic cooperation and equity.

"As the purchasing power of Chinese consumers is growing for high-end garments and luxuries, the collaboration with LVMH, the world's largest luxury goods group, is mutually beneficial," Luo said.