Management Discussion and Analysis ReportEconomy:
The global economic recovery continues to progress however there are still someconcerns over some western developed markets. The emerging economies are providing stronggrowth while the United States and Europe are slowly gaining momentum. However, risingprices of oil, commodities and food as well as the effect of natural disasters andpolitical instability lead to concerns over inflation.
Indian GDP is still growing at an estimated rate of 8.6% for 2010-11 and remains as oneof the better performing emerging market economies. With improving liquidity and thegrowth environment in the developed world, equity flows have rebounded. This quick revivalin global risk appetite means that the Indian corporate sector could access risk capitalfrom international capital markets easily. This is helping the corporate sector repairtheir balance sheets faster, thus reducing the risk of harmful feedback of largenon-performing loans in the banking system, increased risk aversion and slower growth.
Inflation continues to pose a risk as well as tighter monetary conditions and potentialrising prices that are eating into the consumers disposable income.
Business Overview:
In line with the aspirations of positive growth and development of new business,Cravatex Limited is looking into the future by investing behind its core operations ofFitness Equipment Distribution under the brand Proline Fitness and the sports footwear andapparel market by representing the one hundred year old Italian sportswear brand Fila.
Fitness and Sports:
We continue to be the market leader in the Fitness Equipment sector through our brandProline Fitness, distributing the products of the third largest fitness company in theworld Johnson Health Tech. Our commitment to customer service, an extensive product rangeand strong corporate infrastructure has helped us secure market leadership and maintainquality despite fierce competition.
The Fitness market in India continues to grow at a rapid pace, fueled by the expansionof chain health clubs such as Talwalkars and Gold’s Gym. The penetration of thesebrands into Tier II and Tier III cities is creating an awareness for a healthy lifestylein the consumer. Proline Fitness is capitalising on this growth by forming strategicpartnerships with these esteemed firms and providing them with the high quality equipmentand customer service they demand.
When it comes to fitness at home, Proline Fitness has created a retail network of 51stores across India which provide a full range of home use fitness equipment to theconsumer. We pride ourselves in the ability to recommend an effective fitness solution forany customer who comes to our stores. Proline Fitness will concentrate on increasing thescope and offering at our retail by opening more stores and maintaining a competitiveproduct mix.
The market for premium sports apparel and footwear in India has gone through a periodof quick expansion and is predicted to continue growing at a CAGR of around 15% during2011-14 and is currently worth Rs. 2500 crores. The mounting popularity of sports,increase in the personal disposable income and change in the lifestyle are the majorcatalyst for the growth.
In a market defined by price conscious consumers, extensive competition and limitedchannels of distribution, Fila India has shown great promise in it’s debut year ofoperations. The footwear driven approach to the market has led the brand to be present inover 1135 doors for footwear, 105 doors for apparel and a presence in over 200 shop inshops in large format stores. Fila has also opened its first 4 retail stores this year andplans a more retail led approach to the market in the coming years.