L Catterton doubles down on India, warns against ‘growth at any price’ bets

Mumbai: Global private equity firm L Catterton said it is stepping up its India push with a more critical view amid investors chasing the country's consumption story at any price, risking bets on businesses that may not hold up.

The private equity firm backed by French luxury fashion house LVMH Moet Hennessy Louis Vuitton said it is positioning itself as selective in a market where valuations in consumer firms have often run ahead of fundamentals. Its approach - back differentiated, founder-led businesses in attractive categories but avoid companies prioritising growth without proving they can make money.

"The businesses must be in a structurally attractive category, at the intersection of multiple reinforcing themes and have a strong founder-driven intensity," said Vikram Kumaraswamy, partner at L Catterton. He added that real differentiation comes from brand, product or distribution strength-not just riding category tailwinds.

The strategy comes as investor competition intensifies across India's consumer landscape, from food and beverages to beauty and quick commerce, with many deals driven by momentum rather than discipline.

Catterton had so far been placing bets on Indian firms through its Asia fund. However, two years ago, it roped in former CEO and managing director of Hindustan Unilever, Sanjiv Mehta, to deepen India-focused investments. The L Catterton India Fund I, a category Il alternative investment fund (AIF), has a target of $400 million with an additional greenshoe option of $200 million.

"This is the first time L Catterton is raising an India-focused fund, which in many ways is a commitment to double down into India," said Mehta. He described India as "the largest consumer story, for many years to come," but cautioned that not all growth stories are built to last.

However, it said a key red flag is business models that rely heavily on top-line expansion without demonstrating improving unit economics. "One is a business which is so excessively focused on top line growth and hasn't demonstrated the ability to deliver better economics at this scale," Kumaraswamy told ET, pointing specifically to digital-first brands dependent on single platforms. "You still have to keep putting 25% of revenue onto the platform... that's a red flag."

Instead, L Catterton is targeting companies benefiting from multiple structural trends. For instance, its investment in Farmley reflects a bet on rising health awareness, more frequent snacking and the rapid expansion of quick commerce.

The firm is also wary of capital-intensive businesses and those heavily exposed to regulatory risks.

while remaining cautious on ideas that have yet to prove scalability. Still, it isn't excluding sectors outright. "We don't exclude... but we put in a real microscopic lens to see the stage of evolution," Mehta said.

L Catterton's operator-led model where it works closely with portfolio companies is central to its pitch. Recent investments include Farmley, Haldiram's and Healing Hands, all sourced through proprietary channels, allowing entry at 20%-40% lower valuations than market benchmarks, according to the firm.

With signs of a broader reset in private markets, Mehta said discipline is returning. "Now there is more sanity... people were willing to put in money at any valuation," he said, adding L Catterton won't "fall under the FOMO trap."