Nov. 6 (Bloomberg) -- India’s billionaire steelmaking Mittal family ventured into luxury goods as Megha Mittal, the 33-year-old daughter-in-law of steel magnate Lakshmi, agreed to buy Germany’s insolvent Escada AG.

The Mittal family trust is buying Escada’s main business, brand rights, production facilities and distribution network, the Munich-based company said late yesterday, without disclosing the purchase price. The sale will probably be complete by the end of this year, according to Escada spokesman Frank Elsner.

Megha Mittal, daughter of an Indian textile investor and a graduate of the University of Pennsylvania’s Wharton business school, met Escada workers in Munich today. She said Chief Executive Officer Bruno Saelzer would keep his job and staff wouldn’t be cut, according to Elsner.

“It may well be a vanity project, but I’m sure at heart she would want to make it a success,” said Asish Bhattacharyya, a finance professor at the Indian Institute of Management in Kolkata. “It’s quite normal among Indian business families to open or buy a new business for family members.”

Lakshmi Mittal, who now lives in one of London’s most expensive homes, turned a family-owned Indonesian steel mill into the world’s biggest steelmaker over 30 years through acquisitions. He ranks eighth on this year’s Forbes list of billionaires, with an estimated fortune of $19.3 billion.

Megha Mittal is married to his son Aditya Mittal, chief financial officer of the family’s main business, Luxembourg- based ArcelorMittal.

Demi Moore, Snakeskin Bags

The Mittals signed their agreement with Escada’s insolvency administrator. They’re taking on a business where management upheavals, design flops and a failed expansion into different lines led to almost 100 million euros ($148 million) in losses over two years.

“We’ve found our ideal partner in the Mittal family,” Saelzer, the former leader of Hugo Boss AG, said in Escada’s statement. He was brought in to rescue the company by the previous owners, Germany’s billionaire Herz brothers.

Their bid to turn around the company failed, and their investment crumbled to little over 3 million euros from about 75 million euros in mid-2008.

Escada, whose dresses are worn by actress Demi Moore and socialite Paris Hilton, filed for bankruptcy Aug. 13 after holders of only about half its bonds backed a refinancing, derailing a plan to obtain a bank loan and raise capital.

Textile Magnate’s Daughter

Founded in 1976 by a Munich couple, Escada dresses can cost more than 10,000 euros. The company’s accessories include eyewear, snakeskin handbags and fragrances. The company makes most of its revenue outside Germany, and is popular with affluent women in the U.S. and Russia.

“It could work,” said Armando Branchini, founder of Intercorporate, a luxury-goods consulting firm in Milan. “There’s growing interest for luxury in India, and the Mittal family has a very strong business background.”

Megha Mittal is the daughter of Mahendra Kumar Patodia, an Indian businessman with holdings in textiles. Deutsche Presse Agentur reported that she pressed for the family purchase. The Mittals beat out bids from Sven Ley, son of one of Escada’s founders, and Azmi Mikati, Financial Times Deutschland reported.

A spokeswoman for the Mittals declined to discuss the price paid for Escada and said Megha Mittal wasn’t immediately available for an interview.

Mittal’s purchase excludes assets guaranteed to bondholders, the statement said, without giving more detail.

Escada’s shares surged today, even amid skepticism owners of the current stock will see any cash from today’s agreement.

Escada rose 19 cents, or 37 percent, to 70 cents in Frankfurt trading today. The stock has still lost 79 percent of its value this year, following an 82 percent plunge in 2008.

“Those who buy the shares today are hard-core gamblers, as shareholders usually don’t see any money if they are invested in an insolvent company,” said Klaus Kraenzle, an analyst at GSC Research GmbH in Dusseldorf.

To contact the reporter on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net; Holger Elfes in Dusseldorf at helfes@bloomberg.net; Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net.

Last Updated: November 6, 2009 15:25 EST