Arvind Fashions Ltd Management Discussions

GLOBAL MARKET

Globally, fiscal year 2024 started with significant concerns on multiple fronts including war, inflation, recession, supply chains, and labour markets, however, the year has witnessed much lesser impact than expected. Inflation receded in most major economies, recession was mostly avoided, supply chain disruption eased considerably, and labour markets remained historically tight.

Now, as we stand in 2024, major central banks appear on the verge of loosening monetary policy, confident that inflation is largely beaten. Although the global economy has slowed, the outlook is somewhat more benign than anticipated. But new problems emerged over the past year. The Russia-Ukraine conflict continues, there is a new war and crisis in the Middle East, tensions between the worlds two largest economies remain significant, and patterns of trade and cross-border investment are shifting.

As a result of the above, the global apparel market witnessed challenges in terms of demand during FY 2024. After the pandemic revealed the limits and risks of global fashion supply chains with an overreliance on China, the all-time high inflation seen since 2022 worsened the situation. Not only brands and retailers felt the pressure of the increasing cost of goods sold (COGS), but they also refrained from passing all these costs to consumers whose budgets were being squeezed. Even if the COGS somewhat normalised in the last quarter of CY 2023, the security crisis in the Red Sea is further disrupting supply chains and inflation as the costs of international shipments rise. In the short term, this poses another pricing conundrum for fashion players, which have already had to contend with costs rising much quicker than the amount they can pass on within consumer pricing. In the longer term, geopolitical tensions will further drive supply chain shifts, which have accelerated since the pandemic.

Emerging trends in Global Apparel and Footwear in 2024 and beyond

In 2024, global sales of apparel and footwear are set to experience moderate growth of approximately 2% in constant terms, and expected to recover to pre-pandemic levels by late 2025 or early 2026. The impact of inflation remains persistent and will translate into cautious discretionary spending levels as the baseline forecast global inflation remains above central banks targets, meaning high interest rates are likely to stay and will continue squeezing consumers disposable incomes.

India, China and the US will continue to be top contributors to global sales, but there is also a growing number of international players seeking to invest in new pockets of growth in Southeast Asia, such as Thailand and Indonesia; Latin America, including Mexico and Brazil; and in the Middle East and African regions, such as the United Arab Emirates and Saudi Arabia, to boost their revenue prospects and diversify their geographic portfolios.

With 32% global sales of apparel and footwear taking place online, the digital transformation continues, albeit at a slower pace than during the pandemic. However, consumers demand the best of both worlds, and delivering a convenient, personalised experience can help win their favour in a saturated digital environment. GenAI and technology can help boost conversion rates and reduce returns by delivering these personal experiences due to offering of a more fluid or visual shopping experience, such as the Google Virtual Try-On tool or instant product recommendations, including those by Indian ecommerce giant Myntra, which is integrating ChatGPT as part of its platforms.

To conclude, the market environment remains extremely challenging for fashion players in 2024, but there are pockets of growth and companies that are able to demonstrate and communicate their value to consumers through tailored product offerings and services will fare better than others. In this quest, it will be critical to invest in the right technology that can support more localised and personalised offerings.

Indian economy overview

India has bounced back strongly since the pandemic and it is now one of the worlds fastest-growing economies. The countrys remarkable GDP growth rate of 8.4% in the third quarter of the fiscal year 2024 surpassed all expectations. The biggest boost to growth came from a rebound in the industrial sector — auto sales, industrial production and corporate profits pointed to resilient performance.

On the demand side, investment and government spending supported growth. Investment data pointed to rising private capex spending. Part of the strong growth in government spending could be attributed to base effects, but the frontloading of government capex also remained a big contributor.

Domestic economic activity continues to expand at an accelerated pace, supported by fixed investment and improving global environment. The second advance estimates (SAE) placed real GDP growth at 7.6% for 2023-24, the third successive year of 7% or higher growth. With rural demand catching up, consumption is expected to support economic growth in 2024-25.

For a sustainable growth trajectory in the long term, bringing more manufacturing opportunities to India, increasing digital adoption across all sectors of the economy, and promoting competitiveness through exports will be important. India will have to leverage its proximity to a sizeable domestic market to increase the scale and scope of economies where it has a competitive advantage. To secure inclusive and widespread growth, it will be necessary to capitalise on the growing environment for trade and investment opportunities by stepping up technological transformation, strengthening governance, and working towards attaining decarbonisation targets for sustainability.

Source: RBI April 2024 Bulletin

Indian Retail overview

Retail Market:

Retail Market in India was valued at Rs 36,880 Bn (USD 461 Bn) in FY 2015 and reached a value of Rs 59,680 Bn (USD 746 Bn) in FY 2020, growing at 10.1% CAGR over this period. The market was valued at Rs 76,080 Bn (USD 951 Bn) in FY 2023 and is projected to grow at a CAGR of 10.4% to reach Rs 1,13,360 Bn (USD 1,418 Bn) by FY 2027.

Apparel Market:

The apparel and accessories market in India was estimated at 5,512 Bn as of FY 2023 and was one of the largest segments of the Indian retail sector. The share of Apparel & Accessories in overall retail is expected to reach 9.4% in 2027 from 7.2% in FY 2023, and 6.1% in FY 2022. Apparel and Accessories is also expected to be the fastest growing sector in the retail basket, with an estimated CAGR of 20.8% from FY 2023-27.

Category	FY 2015	FY 2020	FY 2022	FY 2023	FY 2027 (P)	CAGR (FY 2015-20)	CAGR (FY 2020-22)	CAGR (FY 2023-27)
Total Retail ( Bn)	36,880	59,680	67,520	76,560	1,13,360	10.1%	6.3%	10.3%
Apparel & Apparel Accessories (% of total retail)	7.5%	7.5%	6.1%	7.2%	9.4%	10.1%	-4.1%	20.8%

Apparel market size in India was valued at Rs 5,476 Bn (USD 68.45 Bn) in FY 2023 and projected to grow at a CAGR of ~18% between FY 2023 and FY 2027 to reach Rs 10,683 Bn (USD 133.5 Bn) by FY 2027 on the back of factors like higher brand consciousness, increasing digitisation, greater purchasing power and increasing urbanisation.

While the CAGR of total apparel market between FY 2023 and FY 2027 is expected to be 18.0%, the branded apparel and organised apparel retail are expected to grow at CAGR of 26.1% and 28.9% respectively in the same period, i.e., the growth of both branded apparel share and organised apparel retail share in apparel category will outpace the overall category growth.

These data points suggest the remarkable growth and potential of the Indian apparel and retail sectors. As the apparel market continues to thrive, and the retail and e-commerce industries demonstrate robust expansion, India is poised to play a significant role on the global stage. The confluence of urbanisation, rising income levels, and technological advancements positions India as a key player in shaping the future of the retail and e-commerce landscape.

Source: Technopak Analysis

Branded apparel signifies registered trademarks that are regularly patronised by customers and that are sold through both organised retail and trade channels. Organised retail signifies formal retail channels of Exclusive Brand Outlets (EBOs), Multi Brand Outlets (MBOs), Large Format Stores (LFS), E-commerce etc. Apparel retailed through these organised retail points of sales is necessarily branded. Therefore, organised share is less than the share of Branded apparel in total share.

CONSUMPTION TRENDS IN THE INDIAN FASHION INDUSTRY

The Indian consumers and their apparel preferences are constantly changing. The apparel preferences which were deeply rooted to immensity and richness of Indian culture are now aligning to more refined and globally on-trend fashion. Contemporary Indian apparel has more variations and segments today, than ever before. It is classified into formal, semiformal, casual, active, sports, ethnic, seasonal, leisure, party wears and more. This shift is due to the plenteous exposure of Indian consumers.

The Indian consumers which comprise the largest Gen Z population in the world with a median age of 27 years are more experimental by nature and more inclusive and intermingling with different cultures and social structures. There are more youngsters having started to earn at a much younger age and hence, more inclined to spend on better and more aspirational things in life. These cultural, psychographic and behavioural changes are also reflective in their apparel consumption.

As new trends emerge in the Indian fashion industry, AFL is ready and equipped to leverage these trends by servicing the new priorities and demands of customers.

The apparel market is seeing a change from need-based purchase to more of lifestyle-based purchase. Consumers today with more disposable income are more aware of growing trends, latest fashion etc. They are conscious about their image and want to dress according to the occasion. This has resulted into creation of more occasion-specific categories like Daily Casuals, Party Wear, Lounge Wear, Travel Wear apart from the traditional Wedding & Festival Wear.

AFL through its industry leading brands has expanded product lines to cater to its customers needs for multiple occasions

Indias pre-disposition towards casual wear has grown exponentially over the last few years. Categories such as polos, denim, casual shirts, sneakers etc. are growing at a much higher CAGR. The increased urbanisation, social media connectivity, growth and influence of mobile internet and increased buying propensity amongst consumers have also helped advance the casual wear market. With its easy to maintain & wear, casual dressing is becoming a more preferred lifestyle choice.

AFL stands to significantly gain from its pivot towards getting strong international casual wear brands to India, much ahead of its peers in the industry

The role of women in Indian families is changing with them contributing more to household income and driving higher aspirations. The transition in the lives of women has in turn positively affected the kidswear market. With change in wardrobe preferences of the women, there is a subsequent change in the wardrobe preferences for their kids also. The kidswear market, most of which is unorganised currently in India, is expected to reach -Rs 1,25,000 crore by 2024.

AFL has a leadership position in kidswear industry and has increased offering of womenswear through its marquee brands

The entire landscape of consumers preferred way of buying has changed over the last many years. It involves using different channels like brick & mortar stores (EBOs, MBOs, LFS), as well as online channels. The customer can search for products on one channel and make the purchase from any other channel of their choice. One of the key advantages is that it enables brands to capture all types of footfall across different retail environments, leading to higher growth opportunities.

AFL is well-positioned through its multi-channel approach having 900+ EBOs across the country and focussed on higher retail expansion

ARVIND FASHIONS LIMITED

Arvind Fashions Ltd. (AFL) is one of Indias top casual and denim players, a lifestyle powerhouse with a strong portfolio of fashion brands catering to consumers across sub-categories and price points. The Company is engaged in the business of designing, sourcing, marketing and selling branded readymade apparel, footwear, innerwear and other accessories for men, women and kids.

Offering both international and indigenous labels, the Companys family of brands include U.S. Polo Assn., Arrow, Tommy Hilfiger, Calvin Klein and Flying Machine. Epitomising innovation, quality and customer-centricity, these brands have established leading positions in their respective segments.

The Companys offerings are distributed and sold across the country through multiple distribution channels such as Exclusive Brand Outlets (EBOs), Multi-Brand Outlets (MBOs), Large Format Stores (LFS), and E-commerce platforms operated by self (Company-owned websites) as well as those operated by e-commerce marketplace players.

The Companys diversified brand portfolio combined with its multi-channel distribution helps it to maintain a balanced approach, ensuring that its operating results are not solely dependent on a single brand, category or distribution channel.

KEY STRENGTHS OF THE COMPANYS PORTFOLIO

• Lifestyle offering across international and aspirational brands

• Wide spectrum of price points and usage occasions to cater to large consumer segments

• Distribution strength which reaches multiple cities and towns across India

• Future-ready by being digitally capable with presence across all direct-to-consumer touchpoints, e.g., own website, strong marketplace and very large e-commerce partner portal play

• Strong extensions into adjacent categories of footwear, womenswear, innerwear, kidswear and accessories across brands

BRANDS AND PRODUCT GROUPS

The Companys brands have a strong historical performance and robust long-term growth potential, as discussed below.

U.S. Polo Assn. is one of Indias largest casualwear brands with strong multi-category and multi-channel play. The brand has premiumised its mens product offerings through innovation and has expanded its kidswear and womenswear portfolios by enhancing quality and increasing assortment. Engagement with influencers and celebrities on social media has further boosted the brands visibility and appeal. The brand remains focussed on driving product innovation, expanding its retail footprint, and strengthening adjacent categories such as footwear and innerwear. New, innovative retail formats and larger stores showcasing all product categories have been launched to further scale up the brand.

Arrow is a brand with a strong heritage value. The brand has refreshed its retail identity while driving product innovation through premiumisation and delivering a superior consumer experience. It has invested in a demand-based pull supply chain mechanism to enable automated replenishment and increase the share of sales from core products, thereby enhancing product freshness across exclusive brand outlets (EBOs) and enriching the shopping experience. Arrow plans to aggressively expand its retail footprint over the next few years to maintain its growth momentum and execute a multi-channel strategy.

Tommy Hilfiger has emerged as Indias leading international premium casual wear brand. Its enduring style and appeal have captivated Indian consumers, solidifying its position as a beloved and trusted fashion icon. The brands product portfolio spans various categories, including mens, womens, and kids sportswear, denim, accessories, and footwear, meeting the diverse sartorial preferences of fashion enthusiasts. The brands growth is driven by multiple factors, including category extensions such as a tailored line, product premiumisation, market expansion, and opening of stores in Tier 2 and Tier 3 cities.

Calvin Klein is Indias #2 casualwear brand in the super-premium segment. The brands strategic focus on store upgrades and the introduction of multi-category stores has enhanced retail channel productivity. By effectively communicating its identity as an ultra-chic and glamorous fashion brand, Calvin Klein continues to strengthen its appeal among its valued customers. The brand is expanding its presence in the online channel and fortifying entry-level price point products to reach a broader audience. Additionally, the accessories range, including mens and womens handbags, opens new avenues for growth.

Flying Machine is Indias original jeans brand with a 40-year legacy, consistently striving to solidify its position as Indias premier denim brand. The brand is boldly reinventing itself to resonate with the dynamic preferences of Gen Z consumers. From fashion-forward denim to cutting-edge accessories, each product reflects the brands commitment to staying relevant and appealing to the younger generation.

BUSINESS PERFORMANCE AND STRATEGY

Despite a softness in consumer demand leading to modest growth, the Companys decisive focus on growing existing brands, coupled with strong cost optimisation measures, has delivered strong bottom-line performance. Enhanced controls over gross working capital and significant profitability improvements have strengthened the balance sheet and substantially improved return on capital employed (ROCE). The Company remains committed to expanding its store network (in terms of square footage) across the country. This strategy will further enable the Company to continue its journey of improved financial performance, generating value for both customers and shareholders in the coming years.

• Sharp focus on scaling marquee brands holding leadership positions in the market coupled with increased investments in advertising

• Increasing sales productivity per store through higher like-to- like growth

• Expanding retail presence across India through asset-light model

• Expanding adjacent categories like kidswear, footwear, womenswear, innerwear, and accessories by capitalising on established brand reputation

• Utilising robust omnichannel abilities to enhance growth within the online channel

• Continued focus on improving full price sell- thru

• Application of analytics- driven approach to reduce discounts

• Sharper cost control:

- Efficiently managing fixed expenses to achieve operational advantages

- Optimising operating costs of stores and shutting down unprofitable stores

- Controlling overheads to drive efficiencies

• Reduction in borrowing leading to reduction in interest cost

• Continued focus on efficient working capital management

• Automated replenishment of core products and agile supply chain resulting in improved inventory control

• Flexible sourcing methods to facilitate purchase of market- appropriate products in closer alignment with season launches

• Strengthened operational oversight over the inventory procurement process

Financial Performance and Analysis

Consolidated Financial Performance and Analysis

Particulars	Year Ended March 31, 2024	Year Ended March 31, 2023
Revenue from Operations	4,259	4,070
Other Income	34	50
Total Income	4,293	4,120
EBITDA	544	473
Exceptional Items	(6)	-
Finance Costs	144	121
Depreciation	230	203
Profit Before Taxes	164	149
Tax Expense Charge/(Credit)	57	40
Profit / (Loss) After Tax for Continued Operations	107	109
Discontinued Operations	30	(22)
Profit/(Loss) Before Minority Interest (Continuing and Discontinued Operations)	137	87
Minority Interest	56	50
Net Profit/(Loss) for Equity Shareholders of Parent	81	37
Other Comprehensive Income/(Loss) (Net of Tax)	(2)	(1)
Net Profit/ (Loss) after other comprehensive income/ (loss)	79	36

Balance Sheet

Particulars	Year Ended March 31, 2024	Year Ended March 31, 2023
Net Fixed Assets	274	259
Net Working Capital	779	671
Deferred Tax Asset	389	412
Other Current assets/ Non -Current Assets and Liabilities	304	407
Discontinued Operations (Asset less Liabilities)	(31)	-
IndAS 116 Impact
ROU Assets	625	608
Lease Liability	(682)	(667)
Capital Employed	1,658	1,690
Networth	1,192	1,092
Debt	466	598
Capital Employed	1,658	1,690

Revenue from Operations:

The Company registered revenue from operations of Rs 4,259.1 crore in FY 2024, compared to Rs 4,069.5 crore in FY 2023, achieving a 5% growth despite a challenging environment. This growth was driven by a healthy retail like-for-like growth of 4% and a sharper focus on retail channel execution, leading to an improvement in the retail channel mix by over 300 basis points. Additionally, the Companys continued investments in adjacent categories such as kidswear and womenswear, as well as the online direct-to-consumer channel, contributed to this positive performance.

Other Income:

Other Income includes Rs 7.6 crore of gain on reassessment of lease and Rs 15.3 crore on account of interest income on financial assets and fair value of security deposit.

EBITDA:

EBITDA, or Earnings Before Interest, Depreciation, Amortisation, and Taxes, was Rs 544.3 crore for the Company, compared to Rs 473.3 crore in FY 2023, reflecting a 15% year-over-year growth. EBITDA margins improved by ~120 basis points, primarily driven by improvement in gross margins, higher full-price sell-thru, and cost optimisation efforts. The Company remains focussed on improving profitability in the future as well.

Finance Cost:

Finance cost includes (a) interest on borrowings of Rs 80.3 crore and (b) interest on lease liabilities of Rs 63.9 crore.

Depreciation:

This includes depreciation of Rs 55.3 crore on assets invested by the Company and Rs 174.8 crore on Right of Use (ROU) assets for leases in FY 2024.

Discontinued Operations:

The Company has, during the year, divested the Sephora India Business to Reliance Beauty & Personal Care Limited, in addition to discontinuing other dormant brands such as EdHardy and Aeropostale. Accordingly, the loss before tax relating to these discontinued businesses have been disclosed separately as discontinued operations in accordance with Ind AS 105. The profit on discontinued operations during the year was Rs 30.5 crore (compared to loss of Rs 22.3 crore in FY 2023).

Minority Interest:

This represents share of profits / loss pertaining to twc of the subsidiary companies PVH Arvind Fashions Private Limited and Arvind Youth Brands Private Limited.

Net Working Capital:

Net Working Capital stood at Rs 778.8 crore as on March 31, 2024 compared to Rs 670.9 crore the previous year The breakup of the reported figures is mentioned below,

Particulars	As on March 31, 2024	As on March 31, 2023
Inventory (Including Returnable Assets)	1,068	1,131
Trade Receivables	647	560
Less: Trade Payables	936	1,020
Net Working Capital	779	671

Debt:

Total debt for the Company reduced by Rs 131.6 crore during the year and stood at Rs 466.1 crore as on March 31,2024, compared to Rs 597.6 crore as on March 31,2023.

Financial Ratios (on Consolidated Financial Statements)

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has identified the following key financial ratios at the consolidated level:

Particulars*	As on March 31, 2024	As on March 31, 2023
Debtors Turnover Ratio	7.06	7.19
Inventory Turnover Ratio	4.50	4.49
Interest Coverage Ratio	2.18	2.23
Current Ratio	1.27	1.20
Debt Equity Ratio	0.46	0.66
EBITDA Margin	12.78%	11.63%
Operating Profit Margin	7.38%	6.64%
Net Profit Margin	2.50%	2.68%
Return on Net Worth	26.36%	24.75%
Return on Average Capital Employed	18.77%	16.96%

* All Ratios have been worked out considering only continuing operations

The formula used for the computation of the above ratios are as follows:

Particulars*	Formula
Debtors Turnover Ratio	Revenue from Operations / Average of opening and closing Trade Receivables
Inventory Turnover Ratio	Revenue from Operations / Average of opening and closing Inventories
Interest Coverage Ratio	EBITDA less Depreciation / Finance Costs
Current Ratio	Current Assets / Current Liabilities
Debt Equity Ratio	Debt / Net Worth
EBITDA Margin	EBITDA / Revenue from Operations
Operating Profit Margin	EBITDA less Depreciation / Revenue from Operations
Net Profit Margin	Profit After Tax / Revenue from Operations
Return on Net Worth	EBITDA less Depreciation / Net Worth
Return on Average Capital Employed	EBITDA less Depreciation / Average Capital Employed

Commentary on significant changes in key financial ratios (i.e., changes of 25% or more compared to the immediately preceding financial year)

Debt Equity Ratio: There has been a significant improvement in debt-equity ratio compared to previous year. The Company has generated healthy cash flows and de-leveraged the balance sheet. Coupled with improved financial performance, this has led to higher profit after tax, resulting in an increase in the net worth of the Company.

BUSINESS OUTLOOK

With demand trends continuing to improve and the Companys decisive focus on scaling up its five brands through innovative retail formats, higher network expansion, and efficient working capital management, the Company remains optimistic about its growth and profitability prospects in FY 2025.

The Company will continue to drive product innovation to premiumise the brands, coupled with substantial investments in advertising and re-energising brand salience. The Company will maintain its focus on improving profitability through operating leverage and cost optimisation.

The Company has significant potential in scaling up adjacent categories across its brands, such as footwear, kidswear, womenswear, innerwear, and other accessories. It will accelerate its retail network expansion across the country and plans to significantly increase its sq. ft. addition in FY 2025. The Company continues to strengthen retail experience standards while implementing a multichannel strategy to grow each of its brands.

With sharper control over working capital and lower capital expenditures on account of franchisee-led expansion, the Company expects to generate higher free cash flow, thereby further improving the return on capital employed and return on equity. The Company has significantly strengthened its position as a dominant player in the retail and apparel sector and will continue to pursue multiple growth opportunities in the medium and long term.

RISK MANAGEMENT

The success of current as well as future performance of AFL is subject to a variety of factors, including but not limited to forecasting and managing of risks and uncertainties, which are described as below:

1) Strategic Risks - These risks arise from the Companys strategies and objectives towards business, which could potentially risk impact longterm continuity and sustainability.

2) Operational Risks - The risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events, leading to potential disruptions in the smooth functioning of the business.

3) Regulatory Risks - Lack of a structured framework for compliance with statutory/legal laws and regulations pose risks that could affect the organisations credibility, leading to financial implications.

The Company has a robust enterprise risk management framework that identifies potential risks, defines strategies for mitigating their impact, and establishes processes for their continuous monitoring. The Company has identified the key risks, including Strategic, Operational and Regulatory risk. Some of the identified risks and their mitigation plans are described below:

1) Strategic Risks

a) Inability to renew brand licence due to noncompliance with contractual conditions or failure to meet agreed performance parameters can seriously impact profitability. The Company regularly reviews critical performance parameters for brand licence renewal. It has established a structured framework for periodic vendor, product, and store compliance audits to ensure that there are no violations to licensee/ sub licensee obligations.

2) Operational Risks

a) High interest costs and fixed retail costs consume significant portion of the margins, thereby limiting the capability to invest in business transformation. Excess inventory build-up and delayed payments by customers could increase the need for working capital.

Significant actions have taken place in over the last few years to strengthen the balance sheet in terms of additional liquidity being available with the Company. With strengthened provisioning norms, there is a significant focus on improving the inventory turns and timely realisation of receivables, which will remain a key management focus going forward. Significant cost optimisation efforts were undertaken during FY 2024, and the Company continues to prioritise driving operational efficiencies.

b) International trade disputes or changes in government policy, especially over imports from China, may significantly disrupt the supply chain. Further, sharp fluctuations in forex rates can adversely impact the margins. The management closely monitors international trade policies to leverage competitiveness and make informed decisions when placing import orders. All precommitted outflows are adequately hedged. The Company is also shifting focus to domestic procurements and developing capabilities to source from nearby neighboring countries such as Bangladesh, Vietnam, and Sri Lanka.

c) Inadequate digitisation and IT infrastructure can be a serious risk for the Company, both from a business perspective as well as from the perspective of finance, legal and compliance. The Company has invested significantly in upgrading its IT infrastructure over the last two years and continues to evolve in response to the changing technological landscape.

d) Counterfeit products of key brands like U.S. Polo Assn., Tommy Hilfiger, Calvin Klein, FM and Arrow pose a serious threat to the brand image, leading to the dilution of brand value. The lack of an adequate legal framework and robust mechanism to control unauthorised use of brand logos or product information, such as labels, contributes to this risk.

Continuous audits of vendors to ensure compliance, coordinated intelligence gathering on counterfeit activities in coordination with brand owners and relentless efforts in seeking the strictest actions against counterfeit producers and distributors enable the

Company to check counterfeits. The Company actively engages with industry peers on brand protection strategies and building common platforms for countering counterfeit products. Additionally, the Company is evaluating changes in its approach to ensure vendors are never in possession of excess or QC-failed products, with all such inventory being handled internally by the Company.

3) Regulatory Risks

Increasing compliance requirements under governing laws and regulations in a timely manner is a continuing challenge. The Company has established a structured framework of accountability across the senior management team, supported by a third- party tool for online monitoring of compliance status across key processes.

HUMAN RESOURCE

AFL believes its people are its most important asset. The Company employs over 6,445 individuals with an average age of 29 and a gender diversity rate of 17%. This year, the Company focussed on enhancing work quality and business ease by building collaborative and progressive systems and processes.

Known for its quality work environment, autonomy, growth opportunities, and support, AFL attracts top talent across the country. DEI (Diversity, Equity, and Inclusion) initiatives are central to the Companys culture, promoting diverse backgrounds, fair treatment, and a supportive environment for all.

Employee engagement is prioritised through initiatives like "Arvind Voice" and exit surveys, fostering transparency and empowerment. Leaders connect with employees via town halls and engagement programmes to share achievements and future plans. The Company recognises outstanding performance with Retail, Value, and Spotlight awards.

Arvind University, the Companys learning and development centre, ensures continuous employee growth and skill enhancement, aligning programmes with business objectives to address skill gaps and stay agile in the evolving retail landscape.

Progressive policies like Flexi-time, Gender Neutral, Equal Employment Opportunity, Paternity & Adoption, and Creche Services, along with professional development and career mobility opportunities, foster an environment of empowerment and engagement. Arvind Care, the Companys safety and wellness initiative, reflects a commitment to employee health and happiness, offering free health check-ups, Doctor-on-Call services, medical facilities, and a gym.

The Company remains dedicated to nurturing a workforce that thrives both personally and professionally, driving the sustained success and growth of the organisation.

CAUTIONARY STATEMENT

The Management Discussion and Analysis may contain some statements describing the Companys objectives, plans, projections, estimates, and expectations which may be forward-looking statements within the meaning of applicable laws and regulations and are based on informed judgements and estimates. Actual results may differ materially from those expressed or implied.