Do not get surprised if your neighbouring hair salon is rechristened as a public-listed company in your next visit.
Tapping opportunities in this growing industry, major players are expanding their business and raising funds through the public market or private equity route.
According a recent PricewaterhouseCoopers (PwC) study, the Indian wellness industry will touch the Rs 85,000-crore (Rs 850-billion) mark in the next three years from the current size of Rs 49,000 crore (Rs 490 billion).
Jawed Habib Hair & Beauty Ltd (JHHBL), the hair salon chain, is the latest entrant in the market to raise fund. The company is expecting nod from market regulator Securities and Exchange Board of India (Sebi) to go ahead with its plan to raise Rs 60 crore (Rs 600 million) from the primary market.
The company, which is valued at Rs 240 crore, will dilute about 25 per cent stake through the proposed initial public offering (IPO).
In December 2010, Sparrow Hill Advisory Pvt Ltd, the private equity investor in Jawed Habib, exited with 30 per cent return. Sparrow Hill sold its 40 per cent stake worth Rs 6 crore (Rs 60 million) to Greenfield Investments for Rs 8 crore (Rs 80 million).
JHHBL is also backed by Brand Equity Treaties Ltd that had invested about Rs 2.6 crore (Rs 26 million) in the company.
The company, owned by celebrity hair dresser Jawed Habib Akhter, runs 286 outlets, including high-end salons, regular salons-HairXpreso and academies.
"Our future expansions include proposed acquisitions abroad as well as setting up new joint ventures. We will spend a significant amount for brand building also," said Rohit Arora, director.
In 2009, Helion Venture Partners invested Rs 20 crore (Rs 200 million) in You Look Good (YLG), a chain of salons and spas, owned by Bangalore-based R&R Salon Pvt Ltd. Kanwal Singh, co-founder, said, "The health and wellness space is large and growing rapidly across Tier-I and the smaller cities. There are no major organised players so the opportunity to create a strong national leader is what attracts the investors."
Beauty and wellness player Vandana Luthra Curls and Curves (VLCC) has also raised private equity funding from ARIA Investment Partners ($3 million), Hong Kong-based CLSA Capital Partners ($10 million) and Everstone Capital's Indivision fund ($22 million). Last month, VLCC bought back CLSA's stake in the company.
VLCC has plans to launch a new range of cosmetic products in specific category and will spend around Rs 200 crore (Rs 2 billion) over the next two years on domestic and overseas expansion.
Sandeep Ahuja, managing director said, "As of now, we plan to use internal accruals for our expansions. A few private equity (PE) firms have shown interest. However, we have not decided about fund-raising through this route."
Its plans to float an IPO has been kept on hold. Last year, Mumbai-based salon chain Enrich raised PE funding worth $10 million from Nimesh Kampani-owned JM Financial India Fund.
Harinder Sawhney, director, JM Financial India Fund, said, "There are a handful number of organised players available in the hair-styling industry. Due to the quality concern, consumers nowadays prefer these branded outlets than the neighbourhood barber shops."
According to a PwC report, the growing wellness industry has attracted a large number of domestic entrants and international players.
"Indian youth (in the age group 15 to 34 years) comprises over 34 per cent of the population. This is expected to cross 400 million by 2015 and forms the core target group for wellness products and services," the report added.
"While per capita spend on beauty services in India has gone up to $2.3, it lags significantly behind countries like China (spends $10.3) and Malaysia ($ 30.2)," Arora said.
"Apart from IPO, there would also be opportunities of exit via sale to international chains who may want to enter India," Singh said.
The overall wellness market in India is estimated at Rs 49,000 crore (Rs 490 billion) and wellness services alone comprise 40 per cent of this market.