Aditya Birla Fashion & Retail Ltd Management Discussions.

To avoid repetition of information, the Management Discussion and Analysis, on performance of the Company, is presented below.


In 2016, the Global economy was subdued, as reflected in the IMF world economic growth numbers of 3.1% vs 3.4% in previous year. The slowdown was mainly on account of sluggish growth in advanced economies while the emerging markets and developing economies grew at a healthy 4.1%, despite both China and India experiencing a decelerated growth over previous year. Furthermore, financial markets witnessed a broad uptrend in 2016, notwithstanding events such as Brexit and the process of normalization of interest rates by the US Fed towards year-end.

India continued to be the fastest-growing major economy in the world. As per the advance estimates released by the Central Statistical Organization ("CSO"), in FY 2016-17, Indias GDP grew at 7.1%, slowing down from 7.9% growth in the previous year. Macro-economic fundamentals of the economy remained healthy - with moderation of inflation, fiscal deficit and current account deficit.

In November 2016, the country witnessed demonetization of higher denomination currency notes that created a temporary impact on consumer demand. However, by the end of the financial year, the economy got back to normal, as suggested by the high-frequency economic indicators.

India has implemented Goods and Services Tax ("GST") with effect from July 1, 2017. This will create a common market for goods and services, improved tax compliance and governance, thereby creating a favorable ecosystem for business growth.

Industry Structure and Developments

The apparel industry has evolved rapidly over the past few years driven by the entry of international brands, emergence of E-commerce players with deep pockets and rapid growth of value fashion category.

International players in the premium and mid-premium segments are pursuing a clear strategy of expansion and have even adjusted price points to suit the Indian market. Value Fashion players continue to expand aggressively, outpacing the industry growth.

E-commerce is witnessing rapid consolidation, creating unprecedented scale and gaining deep access to markets and consumers. This creates an opportunity for strong brands to partner with E-commerce players and enlarge the consumer base.

The industry continued to witness high discounting and promotions during the full price periods as players pursued growth in a soft environment.

Business Overview

Your Company, with a turnover of 6,633 Crore in FY 2016-17, has become Indias first billion-dollar pure play fashion powerhouse.

Lifestyle Brands

With over 9 million deeply engaged customers and the largest distribution network, our lifestyle brands - Louis Philippe, Van Heusen, Allen Solly and Peter England, continue to lead the market in their respective segment. Three out of the four brands have crossed the 1,000 Crore mark in consumer sales. The leadership position of our brands has been further strengthened with the roll-out of omni channel capabilities across 500+ stores in the network, giving consumers unprecedented access to a wide variety and choice of our products. Our relentless focus on consumer experience, innovation and brand building has helped us build a strong equity with our consumers.


Pantaloons, with a growth of 18.4%, is amongst the fastest growing retailers in the value fashion segment. During the year under review, Pantaloons opened 79 stores and ended the year with a total of 209 stores spanning over 3.2 million sq.ft. The share of exclusive brands in the portfolio grew from 62% to 67%. Pantaloons has moved from a two-season cycle to a four-season cycle, bringing freshness and constantly updated fashion to our stores.

Pantaloons has been awarded the IMAGES Most Admired Affordable Fashion Retailer of the year. Its customer relationship program with over 7 million deeply engaged customers is one of the key drivers of growth, contributing to almost 80% of sales.

Fast Fashion

Your Company has been first off the blocks in recognizing fashion segments of the future and has not only laid a strong foundation for it, but also taken definitive strides in responding to the opportunities. Youth fast fashion is one of the fastest growing segments and through its two Retail Brands - People and Forever 21 - the Company has made its foray into this segment. Forever 21 is an iconic global fast fashion brand that brings the latest global fashion to the Indian market, while People is a young and edgy brand that seeks to address the fashion aspirations of the youth of the country. These brands are poised for rapid scale up in the coming years.


Innerwear is an attractive growing market with few organized players. The Company entered this market with the launch of Van Heusen innerwear, loungewear and leisurewear for men. Initial results have been very encouraging and the company plans to steadily scale it up and build a large profitable business in the coming years.

International Brands

The Collective is Indias largest multi-brand retailer of international brands. In FY 2016-17, your Company signed up with international brands Simon Carter and Ted Baker for the Indian market. These brands will be launched in FY 2017-18. With the addition of these brands in its portfolio, your Company has a meaningful play in the emerging Super Premium and Bridge to Luxury Segment.


As with most other businesses in the country, your Company was also impacted by demonetization. While the retail channel recovered quickly, businesses like wholesale customers, suppliers, franchise operations took longer. Overall business returned to normalcy by end of financial year.


Your Company has worked closely with its vendors and partners and is now fully prepared to ensure a smooth transition into the new GST regime.

Business Strategy

Your Company will continue to build on its leadership position through investments in key strategic themes. Building Strong Brands

In order to maintain its leadership position, your Company will continue to invest in brand building, product design and a refreshed store experience. It will sharpen the brand promise through differentiated merchandise and product innovation. Consumer experience is being upgraded through consumer centricity initiatives and digital transformation at stores. The consumer centricity framework is based on continuous consumer research, big data analytics, real-time consumer feedback from retail outlets and a constantly upgrading loyalty program.

Enhancing Portfolio

Your Company continuously identifies emerging segments in the market and seeks to enhance its play through a combination of brand extensions, new product launches and strategic acquisitions.

In the last few years, your Company expanded its presence in casual wear through brand extensions and gained a strong position in the fast growing value fashion segment through Pantaloons. In FY 2016-17 the portfolio has been further strengthened with the acquisition of rights of Forever 21 and launch of mens innerwear under the brand Van Heusen.

As we move forward, your Company will continue to explore further growth opportunities in fast growing segments such as womenswear, casual and super-premium categories.

Building agile Design and Supply Chain

Design and product development is at the core of the apparel business and your Company will continue to invest behind these functions. In FY 2016-17, your Company has shifted from a two-season cycle to a four-season cycle - Spring, Summer, Festive and Winter, thereby building an agile design and supply chain ecosystem. This is a significant internal transformation your Company has undertaken to offer greater freshness and latest fashion in line with changing consumer trends.

Expanding distribution footprint

Your Company has been growing rapidly through its multi-channel distribution strategy and is now present in more than 750 cities. It has identified markets in Tier II/III cities for further expansion even while it increases its penetration in existing territories, thereby gaining strong position across these markets to meet the growing demand for high-quality ready-made branded apparel.

Financial Performance

Restatement of Financial Statements in terms of Indian Accounting Standards ("Ind AS")

The Financial Statements of the Company for the previous years (including the ones with respect to year ended March 31,2016) were prepared in accordance with the applicable Accounting Standards, notified under Companies (Accounting Standard) Rule, 2006 (as amended) and other relevant provisions (hereinafter referred to as Previous GAAP).

The Company has adopted Ind AS notified by the Ministry of Corporate Affairs ("MCA") w.e.f. April 1, 2016 - with a transition date of April 1, 2015, in view of the provisions of Section 133 of the Companies Act, 2013 (the "Act", which term shall include the Rules made thereunder) read with the Companies (Indian Accounting Standards) Rules, 2015.

Accordingly, the Financial Statements for the year under review have been prepared in accordance with the Ind AS.

Also, as per the provisions of Ind AS 101 with respect to "First-time Adoption of Indian Accounting Standards", all Ind AS and interpretations - that are applicable for the financial statements of the Company for the year under review, are applied retrospectively and consistently for all the financial years presented and accordingly, the comparative period figures has been restated to that extent and the impact of transition from Previous GAAP to Ind AS has been accounted for in opening reserves.

Statement of Profit and Loss

(Amount in Rs. Crore)
Particulars As on March 31,2017 As on March 31,2016
Revenue 6,633 6,035
EBITDA* 476 405
Finance Cost 180 177
EBDT 296 228
Depreciation 242 338
Earnings Before Tax 54 (110)
Provision for Taxation - -
Net Profit /(Loss)* 54 (110)
Other Comprehensive Income (9) 0
Total Comprehensive Income /(Loss)* 45 (110)

* Includes Other income of 22 Crore (Previous year: 5 Crore) and Finance income of 16 Crore (Previous year: 21 Crore) Revenue

Your Company reported revenue of 6,633 Crore during the year under review, recording a growth of 9.9% over the previous year.

Segment: Madura Fashion & Lifestyle ("MFL")

MFL reported a revenue of 4,114 Crore recording growth of 3.4% over the previous year.

Its retail channel, which comprises 1,878 Exclusive Brand Outlets ("EBOs") and 174 value stores spanning 3 million square feet, accounts for ~45% of MFLs revenue and reaches out to 10.4 million loyal consumers. Besides these EBOs, MFL is reaching customers through 7800+ additional points of sales including Multi Brand Outlets ("MBOs") and Shop-In-Shops ("SISs") in Department Stores.

Segment: Pantaloons

Pantaloons reported a revenue of 2,552 Crore recording growth of 18.4% over the previous year. During the year, it added 79 stores taking the total number of stores to 209 spanning 3.2 million sq.ft. Pantaloons reaches out to large middle class Indian households with its diversified offerings for men, women and kids.

Operating Profit

Combined EBITDA of both the segments including other income and finance income is 476 Crore (7.2%), which grew by 17.5% over the previous year EBITDA of 405 Crore (6.7%).

Finance Cost

During the year under review, your Company reduced the average borrowing cost from ~9.3% in previous year to ~7.7% . Your Company explored various options for bringing down the cost of borrowings which included availing of short-term instruments like commercial paper and export packing credit and longterm instruments like Redeemable Non-Convertible Debentures. This was further aided by the reduction in the overall interest rates in the economy.


The depreciation cost was higher during the previous year as the Company had reassessed the useful life of leasehold improvements and immovable fixtures for its Pantaloons business, from the period of lease to six years, as the same better reflects the expected usage of such assets.

Balance Sheet

(Amount in Crore)
Particulars As on March 31,2017 As on March 31,2016
Net Fixed Assets (Including Capital Advances and CWIP) 696 567
Goodwill* 1,860 1,795
Net Working Capital 509 424
Capital Employed 3,065 2,786
Net Worth 958 905
DebtA 2,107 1,881


* Arising on account of transfer to the company of the following businesses -

• Pantaloons (Financial Year 2012-13) - 1,168 Crore,

• Madura Fashion and Lifestyle (Financial Year 2015-16 - 628 Crore

• Forever 21 (Financial Year 2016-17) - 64 Crore

A Includes interest accrued but not due on borrowings.

As on March 31,2017, Goodwill (after testing for impairment in accordance with the Ind AS - 36 issued by the Institute of Chartered Accountants of India) stands at 1,860 Crore.

Net Working Capital as on March 31, 2017 includes Inventory of 1,431 Crore, Trade Receivables of 454 Crore, Cash and Bank Balance of 44 Crore and Trade Payables of 1,551 Crore.


While the Company has made a profit for the year, in view of accumulated losses of previous years, no amount is proposed to be transferred to reserves and your Directors have not recommended payment of any dividend for the year under review.


In order to ensure greater financial flexibility and an optimal financing structure, your Company at the Ninth Annual General Meeting, obtained approval of the Members by way of a Special Resolution, to raise funds by issuance of Non-Convertible Debentures for an amount of upto 1,250 Crore, on private placement basis, within the overall borrowing limits of the Company as approved by the Members from time to time. Pursuant to the said approval, during the year, your Company issued Non-Convertible Debentures of 660 Crore.

SWOT Analysis


Portfolio of strong brands

With its portfolio of established brands and large format fashion retail presence, your Company has a leading position in the Indian apparel market and caters to consumers across all segments, from Luxury to Value; including men, women and kids in the formal, casual and ethnic space.

Deep expertise in Design, Product Development and Sourcing

Your Company has invested deeply in building strong design and product development capabilities. This coupled with global sourcing capabilities and robust supply chain systems has helped in continuously bringing to the market innovative products in line with rapidly changing fashion trends.

Largest Distribution Network

Your Company has a wide distribution network spread across 750+ cities through 2,261 stores, 3,300+ SISs and 4,500+ MBOs; making it the largest distribution network of any apparel business in the country.

Strong People Processes

Your Company attracts the best people in the apparel Industry and has strong systems of nurturing the talent backed by robust people development processes, mentoring, career development programs and employee engagement initiatives.


Inadequate presence in fast growing segments

While the company has a strong presence and brands in menswear segment and has recently entered fast fashion and innerwear categories, it has a relatively lower presence in western womenswear, casualwear, denims and kidswear segments. As part of its strategy, your Company is keenly focusing to quickly build capabilities in these segments as well.

Opportunities Large Growing Market

Rising incomes, increasing disposition towards fashion, greater access and awareness about brands is creating a large shift towards branded fashion across the country.

While consumers in larger cities still have access to brands and organized retailers, the overall market continues to remain under-penetrated. This offers growth opportunities in Tier II/III cities. Duly recognizing the opportunity, your Company has built its growth strategy around these key markets.

The company is also looking to tap the opportunity in the super-premium segment as more affluent consumers seek international brands and global experiences.

As consumers are shifting to online purchase, your Company sees an opportunity in building a substantial online business.

Threats and Risks

Scarcity of quality retail space

Retail space in India is limited to key markets and a few successful malls, leading to a scarcity of suitable retail spaces at the right rentals.

Emergence of E-commerce players with deep pockets

The share of online business is growing rapidly and will continue to disrupt the value proposition to customers through deep discounting and promotions.

Talent Retention

The company faces constant threat to its talent pool from competition; primarily from the new international players and E-commerce companies in the industry.

Outlook - Way Forward

With the government focused towards improving the investment environment and the consumer inflation well under check, the economy is poised for continued robust growth. This improving economic scenario should translate into increased consumer spend over time.

Your Company is well-positioned to exploit the potential in this growing market with its diverse product offerings across varied categories and price points for changing consumer needs.

Risk Management and Internal Controls

Effective governance and risk management form the bedrock of a companys sustained performance and revolve around rigorous implementation of standardized policies and processes and development of strong internal control systems.

Your Board has constituted a Risk Management Committee ("RMC") for identification, evaluation and mitigation of operational, strategic and external risks. RMC has a defined role and overall responsibility for monitoring and reviewing the Risk Management Plan and associated practices of the Company. Details of the composition of the RMC have been disclosed as part of the Corporate Governance Report.

Your Company also has an Internal Committee to support and assist the RMC in identifying, evaluating and mitigating operational, strategic and external risks.

This internal committee is headed by the Chief Financial Officer of your Company who is also the Chief Risk Officer of the Company and it is supported by individual Risk Officers covering legal, supply chain, manufacturing, human resources, finance, business development, IT, sales and marketing functions. This internal committee assists the RMC in defining the framework for risk management and compliance and undertakes assessment of risks, adopts the risk mitigation plans and regularly monitors them in a structured, controlled environment. It also reviews developments in the socio-economic environment and identifies internal threats and opportunities, updates the framework and refines processes and systems for mitigation.

Further, your Company has set up internal controls and policies related to financial reporting of transactions and efficient business operations in compliance with relevant laws and regulations. Internal reporting systems are in place for effective measurement of various business parameters related to revenue, expenses and reporting, in line with the provisions of the Act. Internal Audit Reports are tabled and reviewed by the Audit Committee and corrective measures are taken up promptly to improve the systems and processes.

Details with respect to the Risk Management Policy adopted by the Board have been disclosed separately hereinbelow.

Human Resources

Powered by a team of 19,397 employees, we believe that our employees provide us with a competitive edge.

Your Company believes in harnessing its leadership and people capabilities through sharp focus and initiatives on talent development. We have instituted an active talent review process to take stock of succession planning for key roles in the businesses. We review our talent based on their performance and potential to assess their readiness for future roles of higher scale and complexity. We also invest in hiring bright entry level talent through our Management Trainee Programs to create the future leadership pipeline.

We believe in developing our employees through multiple experiences requiring them to handle scale and complexity. We have instituted this through varied job rotation and project roles. We have also put in place knowledge integration through Function based Councils. This helps to share experience, best practices and collective learning across our brands, formats and regions. We have also started investing in digital capabilities and have created an omni-channel organization to drive our agenda forward. Plans are afoot to strengthen our capability in this area.

The Aditya Birla Centre for Retail Excellence (ABCRE) continues to focus on capability building in our customer facing roles across our wide network of Stores through a learning calendar and learning delivery teams. Working with the business teams, it curates learning needs, creates contents for program and delivers training through its trainers and retail operations teams for our store staff.

We have put in place various recognition initiatives for our employees to reward them on their noteworthy performance and contribution. This is accorded at various platforms such as CEO Town Hall, annual meets of employees and Store Manager Meets. Various events such as Retail Olympics infuse bonding and team work among our employees through competitive sports events.


Your Company has been proud recipient of the following Awards and Recognitions during the year under review:

• The Company won the Best Customer Experience Award for Best Use of Insights to Enhance Customer Experience at the Customer Engagement Summit 2017 by Terragni Consulting, India;

• Madura Fashion & Lifestyle has been named as one of the Top 100 Best Companies for Women in India by Working Mother Media (US based leading firm for women) and AVTAR Group (Pioneer firm in India for providing career opportunities to women);

• Peter England won the Best Performing Brand in Mens Formal /Casual Wear at The Flipkart Fashion Conclave 2017;

• Peter England won the Best Customer Relationship Management Program Award at the Customer Loyalty Summit 2017 by Kamikaze B2B Media (a leading marketing service organization in the B2B space);

• Forever 21 won the Most Popular Womens Brand on e-commerce platform, Myntra in 2016;

• Pantaloons won the Most Admired Affordable Fashion Retailer of the Year at the IMAGES Fashion Awards 2017; and

• Pantaloons bagged 3 Awards in the categories of "Best Customer Centric Company", "Best Loyalty Program in Retail Sector - Large /Multi - Brand Format" and "Best Use of Customer & Data Analytics in Loyalty Program" at the Customer Loyalty Summit 2017 by Kamikaze B2B Media.


Safety has always been one of the key focus areas of your Company and our goal is to achieve zero severity level 5 incidents at workplace by year 2020. In order to ensure this, we have instituted various mechanisms to assess, manage and improve safety practices.

During the year, there were 5 lost time injuries with no fatalities in operations under our control.


• There was no revision in the Financial Statements for the Financial Year, other than as necessitated in terms of the provisions of the Act.

• Your Company has not issued any shares with differential voting rights.

• During the year, there was no change in the nature of business of your Company.

• No Material changes and commitments have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of the report affecting the financial position of the Company.

• Your Company has not issued any Sweat Equity Shares.

• Details pertaining to Unclaimed Shares Demat Suspense Account of your Company, are disclosed as part of the "General Shareholder Information".

• Your Company does not have any Subsidiary as on the date of this report and accordingly, it does not have any policy for determining the "Material Subsidiary".

• Your Company does not engage in Commodity hedging activities.