Kewalchand P. Jain, Chairman & Managing Director, Kewal Kiran Clothing Limited

Kewalchand P. Jain, Chairman & Managing Director, Kewal Kiran Clothing Limited, decided to join the business at early age after completing school. He learnt the business on the job and spearheaded the groups’ foray in to branded apparel business.A keen student of finance and a hands-on manager, he heads the finance functions and is responsible for the overall management of the affairs of the company. Jain is a trustee of Jatnobai Karmchandji Ratanparia Chauhan Charitable Trust. He is also the treasurer of Shree Jain Vyapar Udyog Seva Sansthan.

Kewal Kiran Clothing Limited was incorporated in 1981, the company has been promoted by Kewalchand Jain, Hemant Jain, Dinesh Jain and Vikas Jain. The company started as a garment manufacturing entity and currently has four manufacturing units with total capacity of 3mn garment pieces per annum.KKCL is involved in designing, manufacturing, branding and sales of branded ready-made garments like jeans, T-shirts and trousers. The company is exposed global standards in quality, technology, marketing and branding. The company has sales in Asia, Middle East and CIS. The company designs, manufactures and markets branded jeans, Semi-formal and casual wear for men and women.

Replying to Anil Mascarenhas of India Infoline, Kewal Jain says, "We wish to continue to follow bottom line approach rather than volume growth."

Brief overview of the retail industry. What are the changing trends?
Retail industry is one of the fastest growing industries and India is one of the youngest consumer markets in the world with over 50% of population below the age of 25 years. India’s working population to be 68% in FY2020 from 63% in FY2008; self employed people form a majority of consumers in India. The shopping basket of average Indian ranges from $7-10 lower than international average and is expected to increase with changing trends. Organized retail is projected to receive investments to the tune of $ 25 bn over the next 4-5 years. Retail sales volume in India is 1/3rd of retail sales happening abroad, because of weather conditions and other demographics

In terms of behavior of customers, what are the changes you are seeing?
The customers excessive spending is to be replaced by reason to buy at all. Brands that understand the expectations of customers will survive and prosper. Customers are talking to each other before talking to the brands. Continuous innovation in merchandising, designs and competitive pricing play major role in the success of any brand in the country. In spite of brand conscious market growth in India, value buy in India will continue.

Brand consciousness has picked up because of event based clothes, increasing income levels, emerging class of young generation on account of technology boom. Over a period of time brand has grown as a status symbol. Consumers today are ready to experiment and try new things; this widens the scope for creativity.

Briefly explain to us your journey so far and how your business  model has changed over the years.
The success of Kewal Kiran Clothing Limited can be attributed to a great extent to its pre forecasted fashion theory and highly built-up manufacturing capacity.

Innovation has been the hallmark of Kewal Kiran Clothing Limited. The company's R & D team is constantly innovating - creating an exciting array of product lines in a variety of fabrics, washes and cuts, using the latest technology and processes. The company's own manufacturing and processing set up enables it to have a speedy 'go-to-the market' time frame - from design to production.

"Fashion" with "Quality" is the cornerstone of each collection introduced by the company. The company's strong fashion forecasting and trendsetting abilities have created brands which are vibrant and trendy. Each brand has been carefully crafted keeping in mind desires and attitudes of specific market segments. Each brand is an expression of its customer.

Could you cite some memorable moments in your journey. What was the most difficult time? How did you get over it?
We have sensed the slowdown in 2008 little early than other players in the Industry. Based on our judgment, we have reduced stock levels, implemented cost controls and efforts to increase efficiency. Apportionment of fixed costs on lower net sales during FY09 has resulted in reduction in margins.  We has cushion of Rs.1bn cash in hand during the last year, which had helped in successfully coming out of this recession. However, we are back or better in profitability during the current year. We have already reported PAT margins of 20% in the first half of the year and expect the second half of the year to be better than first half.

We are happy when we have received acclaims from prestigious institutes like ‘Best SME Company in Textiles/Apparel Sector by CNBC TV 18 and ICICI Bank in the year 2005. KKCL had received 3rd IFA Award for most admired fashion campaign of the year 2002 for its ‘Killer brand’.  It has also received Golden scale Trophy by CMAI for denim brand of the year 2002 for its Killer jeans

What are your personal goals and how close are you to achieving the same.
To be a world class business enterprise, creating values, excellence in every business and service to consumers, stake-holders and society. To make KKCL a more than Rs10bn Company by 2019, and as of today we are on the journey to achieve the same.

How much of your revenues come from brands?
We are an established denim player for more than two decades with well diversified product range for both the sexes under established brands like Killer, Lawman, Easies and Integriti. They are positioned to cater to middle and upper middle class segment with monthly earnings of more than 1 lakh.

Total revenue comes from brands. The break up of each brand contribution to our revenues is outlined below.

Give us an idea about the number of stores you have. What is the plan for each of the categories?
As of now the store count is at 135 outlets out of which, 89 stores are k- Lounge Stores, 19 are Killer Stores, 15 Integriti, 3 Lawman Stores and 9 Factory Outlets. We have laid out a plan to open 40 to 50 K-Lounge stores every year.

Break up of the ownership of the stores is outlined below.

You have a wide product line. Are all these manufactured in-house? How much do you outsource?
We have four facilities spread over at Vapi, Daman and Mumbai, which has made us an integrated player in denim industry. We have presence in entire value chain of retail from sourcing of merchandise to retailing. Entire manufacturing of all our brands are done in house. This has resulted in better control on merchandising, quality, time lines, cost and margins.

Tell us about your manufacturing facilities. What is the capacity and utilization?
We have four manufacturing facilities spread over at Vapi, Daman and Mumbai. All of our plants are technologically integrated to produce world class finishing and quality to compete with international brands. We presently operate with a capacity of more than 3 million garments in a year and is expected to grow up to 4 million garments by December 2010. We have almost doubled our capacity in the last 2 years.

Comment on your distribution network.
The Company distributes and retails its Products through Distributors appointed pan India to reach out to the Multiple Brand Outlets (MBOs),  retail chain K-Lounge, Exclusive Brand Outlets (EBO's), National Chain Stores (NCS) and exports. The Company has presence in over 2500 MBOs, and has over 135 retail stores and exports to Middle East, Sri Lanka, Nepal, Turkey etc.

What is your outlook for the coming years?
In FY09 we have achieved sales of Rs1.53bn with Killer contributing 53%, Lawman 21%, Integriti 24% and Easies 2%. The operating margin for the year was at 20%. We have already closed our net sales at Rs970mn and PAT at Rs180mn for the first of the current fiscal year. We are back on our PAT margins of 19% during the first half of the year. Because of the expected growth in the business of second half of the year, our margins should further improve.

We expect to grow at 20-25% CAGR in the next 3 years and growth rte might be upgraded to 40-45%, if expansion plans announced by MBOs/ large format stores in the recent past, streamlines on time.

What are your strategies for growth?
We wish to continue to follow bottom line approach rather than volume growth.

Given the economic conditions, our leverage position of the company at any given point of time will not be more than 0.3 to 0.5 times. Margins will go up further because of fixed costs being apportioned over larger sales. We are enjoying better bargaining power with vendors and large format retailers, because of comfortable liquidity position of the company.

About 10% of sales is spent on essentials- advertisement & sales promotion activities across flagship Brands. Rejuvenating the brand positioning strategy by introducing new campaigns, expanding product portfolio of all the brands to include lifestyle products for target customers were all part of the strategy.

Any capex plans. How would they be funded?
The company is working on the franchise model and wishes to add 40-50 stores every year.  

The remaining unutilized funds to the tune of Rs. 32 crore raised through IPO should be utilized in the next 12 months for expanding stores.

Your message to people who want to join the industry?
To create and sustain a brand, a new entrant needs to have a long term prospective. Since it is a dynamic industry the individual will have to have patience to grow and sustain. One has to remember that fashion has a long gestation period.

Do you hire from B-Schools? What is your advice to B-Schools and B-School students?
Yes we do hire from B-School. At KKCL we have various departments. Namely, Merchandising, Marketing, Advertising, Brand promotion, designing, CRM, Retail, logistics Quality control, production H R, etc. for which we recruit from B-Schools.

For an individual to reach a level of CEO, he requires to have hands on experience in all the departments. Fashion is a dynamic industry and individual has to be proactive and has to have out of box thinking. Innovative ideas need to be incorporated on a regular basis.

Your message to shareholders?
Our company is an integrated company with having presence from sourcing merchandise to retailing apparels under established brands. There is lot of value we do internally across all the processes to deliver best quality at best price. Branding as a concept takes decades to deliver volume growth, however we have cut short the time because of flat structure the world is following today. Major brands in the world might have taken ten decades to become global brands, but we should take only 3 to 4 decades to develop as a global brand. Out of this we have already traveled a journey of two decades.

We have been delivering good returns on the capital employed in the business since inception. Our PAT margins are the best in the industry at 20%. The growth achieved today is a natural growth, now onwards; we are focusing more on aggressively pushing growth across all channels like MBOs, large format stores and K-Lounge. This strategy would add growth at top-line also.

We remained as a dividend paying company. In the last 3 years we have declared dividend of 25%, 40% and 30% respectively. Because of the nature of the business, investors should have minimum of 4 to 5 years origin to earn good returns.