FORWARD LOOKING STATEMENT
Statements in this Management Discussion and Analysis of Financial Condition and
Results of Operations of the Company describing the Companys objectives, expectations or
predictions may be forward looking within the meaning of applicable securities laws and
regulations. Forward looking statements are based on certain assumptions and expectations
of future events.
The Company cannot guarantee that these assumptions and expectations are accurate or
will be realized. The Company assumes no responsibility to publicly amend, modify or
revise forward looking statements, on the basis of any subsequent developments,
information or events. Actual results may differ materially from those expressed in the
statement. Important factors that could influence the Companys operations include changes
in government regulations, tax laws, economic developments within the country and such
other factors globally.
The financial statements are prepared under historical cost convention, on accrual
basis of accounting, and in accordance with the provisions of the Companies Act, 1956 (the
Act) and comply with the IND AS Accounting Guidelines. The management of Cantabil Retail
India Ltd. has used estimates and judgments relating to the financial statements on a
prudent and reasonable basis, in order that the financial statements, reflect in a true
and fair manner, the state of affairs and profit for the year.
The following discussions on our financial condition and result of operations should be
read together with our audited consolidated financial statements and the notes to these
statements included in the annual report. Unless otherwise specified or the context
otherwise requires, all references herein to “we”, “us”,
“our”, “the Company”, “Cantabil” are to Cantabil Retail
India Ltd.
ECONOMIC OVERVIEW
Indian Economic Overview
The Indian economys sound economic fundamentals have kept it buoyed amid global
headwinds. The domestic economy sustained its position as the one of the fastest-growing
major economies in the world and is expected to be one of the top three economic powers in
the world over the next 10 to 15 years, backed by its robust democracy and strong
demographics.
The economy has recovered from the impact of the pandemic, staging a near-full recovery
in 2022, ahead of many economies and positioning itself firmly on the pre-pandemic growth
path. Notwithstanding the challenges posed by the global economy and elevated inflation
levels, the economy is estimated to have grown over 6.5% in FY23, largely led by the
resilience of private
consumption.
Strong domestic demand, rising employment indicators and reducing inflationary
pressures all contribute to an optimistic outlook for the Indian economy. Banks, financial
institutions and business entities with healthy balance sheets are helping recover the
growth momentum which had been impacted by COVID. The demographic dividend, the digital
revolution, policy measures aimed at transforming India into a global manufacturing hub, a
rebound in service sector competitiveness, and the favourable geo-economic positioning
that is underway have all improved medium-term prospects. The trends suggest that Indias
economy is on an upward trajectory and the country is well-positioned to continue its
growth despite global turbulence.
Indian Apparel Industry
India has solidified its position as one of the worlds leading garment-manufacturing
countries, boasting a rich history of fine craftsmanship throughout the textile and
apparel value chain. From fibers, yarns, and fabrics to finished apparel, Indian textiles
are revered for their global appeal. Notably, Indias cotton, silk, and denim products
have garnered immense popularity in international fashion hubs. Furthermore, India stands
as one of the largest consumers and producers of cotton, commanding 38% of the global
cotton cultivation area, with an impressive acreage of 13.5 million hectares.
The Indian textile and apparel industry showcases remarkable diversity, encompassing
traditional handloom, handicrafts, wool, silk, and a thriving organized textile sector.
This industrys growth trajectory is equally impressive, with a projected CAGR of 12%, set
to elevate the market size from US$ 152 billion in 2021 to US$ 225 billion by 2025. In
terms of its contribution to the economy, the industry plays a significant role,
accounting for approximately 2% of the gross domestic product (GDP) an estimated US$ 70
billion.
By 2035 over 43% of the countrys population is expected to live in urban areas. This
consistent trend towards urbanization indicates a shifting of preferences away from rural
life to the accessibility and convenience of cities. Increasing affordability, coinciding
with higher urbanization levels is expected to fundamentally alter the consumption basket
over the coming decade. This shift is expected to positively impact the consumption of
lifestyle and fashion products.
Employment generation is another commendable aspect of this industry, as it stands as
the second-largest employer after agriculture. Directly providing jobs to 45 million
individuals and supporting an additional 100 million in the allied sector, the textile and
apparel industry significantly bolsters the nations workforce.
Leading the charge in textile and clothing manufacturing are states such as Andhra
Pradesh, Telangana, Haryana, Jharkhand, and Gujarat, which continue to drive the
industrys growth and prominence.
The Indian textile and apparel industrys thriving trajectory underscores its
resilience, adaptability, and potential for further development. The Indian apparel
industry has witnessed a shift in consumer preferences, with a growing emphasis on
sustainable and ethically sourced fashion. Customers are increasingly seeking eco-friendly
and socially responsible products, leading to a surge in demand for organic fabrics,
recycled materials, and cruelty-free apparel. As sustainability gains prominence,
companies are making efforts to adopt eco-friendly practices across their supply chains.
The Indian apparel industrys long-term outlook remains positive, driven by a growing
domestic market, export potential, evolving consumer preferences, and supportive
government policies. To capitalize on these opportunities and address challenges,
companies need to foster innovation, embrace sustainability, invest in technology, and
prioritize customer-centric strategies.
Market Size and Growth:
The Indian apparel industry has experienced substantial growth over the years, driven
by a combination of factors such as rising disposable incomes, urbanization, increasing
fashion consciousness, and a growing young population. The industry caters to a diverse
consumer base, ranging from mass-market segments to premium and luxury segments. With a
favourable demographic dividend and expanding middle-class population, the industry is
poised for continued growth in the foreseeable future.
The Indian fashion industry is estimated to be the fourth largest market in the world.
In recent years, private brands have increasingly emerged as the rising stars of retail
and e-commerce. Retailer owned brands, typically offer shoppers value for money while
earning higher margins for retailers with potential to develop into self sustaining
propositions. There is also a growing emphasis on enriching customer experience. Window
displays, instore ambience, coordinated product displays, lighting, music and
communication to help build brand presence and awareness
Export Potential:
India is among the leading apparel exporters globally, renowned for its diverse product
range, skilled workforce, and competitive pricing. The countrys textile and apparel
exports have consistently contributed significantly to foreign exchange earnings. The
industrys export orientation is bolstered by various trade agreements, preferential
access to key markets, and the governments supportive policies and initiatives.
Source https://www.ibef.org/exports/apparel-industry-india
About Cantabil Retail India
Established in 1989, Cantabil Retail India Limited is in the business of designing,
manufacturing, branding and retailing of apparels and accessories. The Company started its
garment manufacturing and retailing business in the year 2000 and opened the first
Cantabil store in September 2000 in New Delhi.
Over the years, Company has established 1,50,000 sq. ft. state of art manufacturing
facility in Bahadurgarh, Haryana with a capacity to produce 15.00 Lakh garment pcs. /p.a
that makes Casual trousers, Formal trousers, Suits & jackets and Shirts. Along with
this, the Company also has two dedicated production units and two warehouses to ensure
seamless & timely Logistics of quality products. The production facilities are
equipped with high quality machines.
The Company sells its products under the brand Cantabil through 447 Exclusive Brand
Outlets (EBOs) as on 31st March 2023 in 19 states which are either Company owned / lease
and Company managed, or Franchisee owned and Franchisee managed. The company believes in
building strong client relationships by effectively delivering good quality products and
acknowledging the changing customer demands.
Financial Overview
The performance of the Company for the financial year ended March 31st, 2023, is as
follows:
Performance Highlights with IND-AS 116 for the full year ended March 31st, 2023:
Revenue from operations stood at Rs. 551.72 crore in FY23 as against Rs 383.2 crores
registering YoY increase of 43.96% on account of steady increase in revenues from same
store growth and new stores.
EBITDA (excluding other income) stood at Rs. 163.65 crore EBITDA Margin was 29.66%
Profit After Tax was at Rs. 67.24 crore PAT Margin was 12.19%
Basic EPS stood at Rs. 41.18
Performance Highlights W/O IND-AS 116 for the full year
ended March 31st, 2023:
EBITDA (excluding other income) stood at Rs. 105.08 crore as against Rs. 74.23 crore in
FY22 on account of increasing ticket size, higher NOBs and better sales
EBITDA Margin in FY23 was 19.05% as against 19.37% in
FY22
Profit after tax was at Rs. 70.25 crore as against Rs. 41.82 crore
in FY22 increase of 67.99%
PAT margin stood at 12.73% as against 10.91% in FY22 increase of 182 bps
Basic EPS Stood at Rs. 43.02
Resource and Liquidity
As on 31st March 2023, the networth of the company stood at Rs. 221.36 crore. There are
no long term debt in the balance sheet
The cash and Cash equivalent at the end of March 2023 were at
Rs. 1.44 crore
As a part of planned strategy, over the year the company has seen steady growth in the
number of stores and consequently our retail business area.
| Financial Year |
No. of Stores |
| FY2022-23 |
447 |
| FY2021-22 |
378 |
| FY2020-21 |
320 |
| FY2019-20 |
302 |
| FY2018-19 |
241 |
Segment wise business performance
The company is operating in three broad category i.e. Mens wear, Womens wear and
Kids Wear. The company is into manufacturing of shirts, denims, trousers, business and
party wear suits, t-shirts, woollen jackets, pullovers, shorts, jeggings, kurtis, and
accessories for men and women.
Revenue share from these categories are as follows
| Categories |
% of Revenue |
| Mens Wear |
86% |
| Womens Wear |
9% |
| Kids Wear |
2% |
| Accessories |
3% |
Risks and concerns |
Like any business, The Company encounters a range of risks both internally
and externally while conducting day-to-day operations and striving to achieve long-term
objectives. To address these risks, comprehensive policies and dedicated risk workshops
are implemented for each business vertical and key support functions. During these
workshops, risks are identified, assessed, analysed, and either accepted or mitigated to
an acceptable level, aligning with the organizations risk appetite. Regular reviews of
risk registers are conducted to ensure ongoing vigilance.
The following are the primary Risks and Concerns faced by the
Company:
Credit Risk:
The Company is not exposed to significant concentrations of credit risk as
policies are in place to cover retail sales where collections are primarily made in cash
or through credit card payments. The Company adopts prudent criteria in its investment
policy, the main objectives of which are to reduce the credit risk associated with
investment products and the counterparty risk associated with financial institutions. The
Company considers the solvency, liquidity, asset quality and management prudence of the
counter parties, as well as the performance potential of the counter parties in stressed
conditions.
Interest Rate Risk:
To mitigate interest rate risk, the Company carefully manages its
debt-equity ratio, utilizing a combination of loans and internal cash accruals. Working
capital is prudently managed to minimize overall interest costs. The Company intend to
reduce overall debt exposure to minimise the risk.
Competition Risk:
Competition risk arises from multiple players vying for market share. The
Company has strategically positioned itself with strong differentiators in product,
quality, and design, making it resilient to competition. Continuous investments in
technology and human resources help maintain a competitive edge. A stable client base
further safeguards against this risk. The Company employs disciplined managers,
customer-centric solutions, competitive pricing, aggressive marketing strategies, and
prudent financial management to mitigate the impact of competition.
Input Cost Risk:
Changes in raw material prices, power costs, and other input expenses may
impact profitability and cost-effectiveness. The Company closely monitors significant
risks related to raw material prices and power availability.
Liability Risk:
To address liability risk arising from equipment damage, injuries, or
third-party claims, the Company relies on contractual obligations and insurance coverage.
Real Estate Risk:
Effective management of store expansion and operations in new locations
presents real estate risk. The Company faces challenges related to securing commercially
viable properties in suitable locations, executing sale deeds and license registrations in
a timely manner, and obtaining necessary regulatory approvals.
In summary, the Company is proactive in identifying and managing risks
through well-defined policies, strategic positioning, prudent financial management, and
continuous investments in key areas. By adopting a systematic approach the Company aims to
minimize the impact of potential risks and ensure sustained growth and success.
Opportunities
India boasts a massive domestic market with a population of 1.5 billion, offering
lucrative growth prospects in domestic textiles and apparel consumption. The demand for
nonwoven textiles is on the rise, attracting imports of machinery and technology through
preferential tariffs and foreign direct investment (FDI) with foreign companies.
Recently, there has been a significant increase in demand for branded and high-quality
clothing due to the growing consciousness among the Indian population.
Opportunities for introducing quality branded products into this expanding market are
abundant. Despite being a major global supplier of denim fabric, per capita denim
consumption in India remains relatively low at 0.1 meters, presenting a significant
potential for growth with the countrys economic development and increased consumer
spending on clothing.
Several market drivers contribute to the textile sectors growth. The governments
initiatives such as the Scheme for Integrated Textile Parks (SITP) and the Technology
Upgradation Fund Scheme (TUFS) encourage private equity investments and workforce skill
development with substantial funding. The allowance of 100 percent FDI in the textile
sector and free trade agreements with ASEAN countries and the proposed agreement with the
European Union also boost textile exports.
India enjoys a competitive edge with abundant availability of raw materials like
cotton, wool, silk, and jute, along with a skilled workforce and cost-effective production
compared to other major textile producers.
Increasing prosperity among consumers, with rising per capita income and changing
buying behaviour, has resulted in higher spending on clothing. Additionally, the
penetration of organized retail in India has attracted international fashion brands,
leading to a surge in fashion apparel consumption.
Indias status as the largest producer and net exporter of cotton grants domestic
textile players access to a continuous supply of raw materials at competitive prices. This
advantage, coupled with low labour, power, and water costs, makes India an attractive
manufacturing destination.
Changing lifestyles, with more women joining the workforce, have driven a shift from
home-oriented to career-oriented perspectives. This trend is expected to boost demand in
the womens work wear segment.
Overall, the Indian textile sector is poised for substantial growth, driven by
favourable government policies, abundant resources, rising consumer prosperity, and
evolving market dynamics.
Challenges/ Threats
Global Competition:
The textiles industry faces intense competition on a global scale, particularly from
low-cost manufacturing countries like China and Bangladesh. This competitive pressure puts
a strain on the Indian market. To address these challenges, new strategies for low-cost
manufacturing need to be devised.
Inadequate Infrastructure:
One of the major hurdles for the Indian textiles industry is the inadequate
infrastructure. Issues with logistics, power supply, and transportation networks
significantly impact the industrys efficiency.
Shortage of Skilled Labour:
The textiles industry often experiences a shortage of skilled labour, leading to sudden
challenges. The scarcity of skilled workers may result from mass labour migration or other
factors. To overcome this, there is a need for skill development initiatives and
successful models to tackle the labour shortage.
Compliance with Environmental Regulations:
As environmental sustainability gains importance, adhering to environmental regulations
becomes crucial for the industrys growth. The textiles sector faces challenges in meeting
these standards and must explore strategies to adopt eco-friendly practices and
technologies for its betterment.
Internal control systems and adequacy
The Company implemented proper and adequate systems of internal control to ensure that
all assets are safeguarded and protected against loss from any unauthorized use or
disposition and all transactions are authorized, recorded and reported correctly. The
Company also implemented effective systems for achieving highest level of efficiency in
operations, to achieve optimum and effective utilization of resources, monitoring thereof
and the compliance with provisions all laws including the Companies Act, 2013, Listing
Agreement, directions issued by the Securities and Exchange Board of India, labour laws,
tax laws etc. It also aimed at improvement in financial management, and investment policy.
The System ensures appropriate information flow to facilitate effective monitoring. The
internal audit system also ensures formation and implementation of corporate policies for
financial reporting, accounting, information security, project appraisal, and corporate
governance. A qualified and independent Audit Committee of the Board of Directors also
reviews the internal control system and its impacts on improvement of overall performance
of the Company.
The Company has put in place internal control systems and a structured internal audit
process vested with the task of safeguarding the assets of the organization and ensuring
reliability and accuracy of the accounting and other operational data. The internal audit
department reports to the Audit Committee of the Board of Directors.
Similarly, the Company maintains a system of monthly review of the business as a key
operational control, wherein the performance of units is reviewed and corrective action is
initiated. The Company also have in place a capital expenditure control system for
authorising spend on new assets and projects. Accountability is established for
implementing the projects on time and within the approved budget.
The Audit Committee and the Senior Management Team are regularly apprised of the
internal audit findings and regular updates are provided of the action taken on the
internal audit reports. The Audit Committee reviews the quarterly, half yearly and the
annual financial statements of the Company. A detailed note on the functioning of the
Audit Committee and of the other committees of the Board forms part of the section on
corporate governance in the Annual Report.
During the year, the Company carried out a detailed review of internal financial
controls. The findings were satisfactory and suggestions for improvement have been taken
up for implementation. Policy guidelines and Standard Operating Procedures (SOPs) continue
to be updated where required, to keep pace with business requirements.
Human Resources
The Companys HR philosophy revolves around fostering a high-performing organization
where each individual is driven to unleash their full potential. We aim to cultivate a
culture that encourages personal and professional excellence, empowering our employees to
contribute effectively towards achieving both individual and departmental objectives. At
present, we have a dedicated workforce of 4000 + employees, and our industrial relations
remain harmonious and satisfactory.
Recognizing the indispensable role of employees in our success, we conduct internal
assessments periodically to identify competency gaps. To bridge these gaps, we provide
developmental inputs, including skill upgradation training. Our focus on attracting and
retaining motivated employees remains steadfast, as we believe that a motivated workforce
is the cornerstone of our growth.
Investing in our employees growth is a priority for us, and we plan to continue
offering comprehensive training programs and allocating resources to enhance their skills
and productivity. Equipping our employees with a profound understanding of our
customer-oriented corporate culture and service quality standards is crucial, allowing
them to adapt seamlessly to changing customer preferences and needs.
By nurturing and empowering our workforce, we are confident that we will create a
resilient and adaptable organization capable of meeting the challenges of a dynamic
business landscape while delivering exceptional value to our customers.
Information Technology
In the pursuit of performance-driven growth, our company has harnessed a deep
understanding of local needs while remaining agile in adapting to evolving consumer
preferences. This approach has proven instrumental in achieving remarkable progress. We
attribute a significant part of our success to the establishment of a robust Enterprise
Resource Planning (ERP) system and a suite of powerful IT systems. These technologies have
effectively simplified complex processes across our operations, allowing us to respond
swiftly to changing market demands.
Our IT infrastructure is tailored to our specific business needs, with a wide range of
data management tools that play a crucial role in supporting key aspects of our
operations. Notably, these systems have been instrumental in bolstering our cash
management, in-store operations, logistics, human resources, project management,
maintenance, and other administrative functions. The implementation of these IT solutions
has resulted in substantial benefits, including minimizing product shortages, mitigating
pilferage, and reducing instances of out-of-stock situations. Moreover, they have
significantly enhanced overall operational efficiency.
Through the synergistic interplay of our deep understanding of local markets and our
tech-enabled adaptability, we have been able to cultivate a competitive edge and deliver
enhanced value to our stakeholders. As a testament to our commitment to continuous
improvement, we remain dedicated to further refining our IT systems and exploring
innovative ways to optimize our processes for sustained growth and excellence.
Outlook:
As we enter the new fiscal year, Cantabil Retail India Ltd. stands poised to leverage
several favourable factors in the Indian market to further solidify its position as one of
the leading integrated player in the designing, manufacturing, branding, and retailing of
apparels and accessories across the nation. The following key factors that are expected to
positively impact the companys performance:
1. Rising Income and Improving Standard of Living:
Indias economy has been witnessing steady growth, resulting in rising income levels
and an improving standard of living for the countrys population. With more disposable
income in the hands of consumers, the demand for branded apparel and lifestyle products is
expected to grow. Cantabil Retail India Ltd. is well-positioned to capitalize on this
trend and capture a larger share of the growing market.
2. Brand Awareness and Recognition:
Cantabil has successfully built a strong brand presence in the Indian retail market.
The companys commitment to delivering high-quality products, trendy designs, and
affordable pricing has resonated well with customers across different demographics. As
brand awareness continues to increase, Cantabil is likely to experience higher footfall in
its retail stores, leading to increased sales and market share.
3. Expanding Retail Footprint:
The companys strategy of expanding its retail footprint in strategic locations across
India has been yielding positive results. In the coming year, Cantabil plans to open new
retail outlets in high-potential markets, thereby increasing its geographical reach. The
expansion will enable the company to tap into new customer segments and enhance its
overall sales performance.
4. E-commerce Growth:
The rapid growth of e-commerce in India presents a significant opportunity for
Cantabil. The companys robust online platform and omni-channel approach allow it to cater
to the increasing number of tech-savvy consumers who prefer shopping online. The company
will continue to invest in its e-commerce infrastructure and digital marketing efforts to
drive online sales and strengthen its online presence.
5. Focus on Innovation and Design:
Cantabils emphasis on innovation and design has been a key driver of its success. The
companys ability to adapt to changing fashion trends and consumer preferences sets it
apart from its competitors.
6. Customer Loyalty and Retention:
Building and maintaining customer loyalty will be a top priority as the company will be
investing in customer engagement programs, personalized offerings, and loyalty rewards to
ensure repeat business and foster long-term relationships with its customers.
Cantabil Retail India Ltd. remains optimistic about the future as it prepares to
capitalize on the opportunities presented by Indias economic growth, rising income
levels, and increasing brand awareness. The companys strategic initiatives, expanding
retail presence, focus on e-commerce, design innovation, and cost management are expected
to drive sustained growth and shareholder value.
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