Bella Casa Fashion & Retail Ltd Management Discussions

Company Overview

Established in 1996, Bella Casa Fashion & Retail Ltd (BCFRL) stands as a prominent player in Indias apparel and home furnishing industry. Its operations encompass two key segments:

The company offers comprehensive fashion manufacturing and designing services to over 50+ major domestic brands and retailers, driving its B2B endeavours; product range includes Western and Indian attire for women, as well as traditional Indian wear for men and kids.

Secondly, the company is engages in the manufacturing, branding, and distribution of home furnishing products under the esteemed "Bella Casa" brand, catering to the B2C market. Currently companys home furnishing products are present in over 5000+ retailers, on all the major ecommerce platforms and on its proprietary online sales channel www.bellacasa.in. Product range includes Bed sheets, Dohars, Comforters, and Pillow Covers.

Company has three manufacturing plants located in Jaipur, with a capacity of 10 lakhs pcs per month and employs 3000+ employees. Over the course of last 28 years, the company has consistently demonstrated its capabilities & focused approach on developing products according to the dynamic market demands, keeping pace with the ever-evolving trends in the fashion landscape.

Economic Review

The global economy exhibited impressive resilience in 2023, achieving a growth rate of 3.2% as reported by the International Monetary Fund (IMF). Advanced economies grew by 1.6%, while emerging market and middle-income economies led the growth with a rate of 4.1%. This progress was achieved despite several challenges, such as geopolitical tensions between Russia and Ukraine, ongoing conflicts in the Red Sea, disrupted global trade, increased transportation costs, and strained supply chains. Higher inflation also posed a challenge, prompting many central banks to tighten monetary policy and raise interest rates in a coordinated manner, which affected business conditions. Additionally, the slow economic recovery in China and other large emerging markets further impacted global trade. The Euro area experienced sluggish growth, with only a 0.4% increase in 2023.

On a positive note, global headline inflation decreased more rapidly than anticipated, dropping from 8.7% in 2022 to 6.8% in 2023, and is projected to fall further to 5.9% in 2024 and 4.5% in 2025. Other factors contributing to the global economys momentum include notable recoveries in the United States and other significant emerging markets and middle-income economies. The US economy expanded by 2.5% in 2023, with growth projections for 2024 revised upward by 0.6% to 2.7%. This recovery is supported by stronger-than-expected private consumption, despite tight but gradually easing labor markets. In advanced economies, household spending increased due to savings accumulated during the pandemic, and higher-than-expected government spending further boosted aggregate demand across most regions.

Outlook

According to IMF projections, the global economy is expected to maintain a steady growth rate of 3.2% in both 2024 and 2025. The growth forecasts for advanced economies and emerging markets in 2024 are 1.7% and 4.2%, respectively. Notably, the projection for advanced economies has been revised upward by 0.2% from the January 2024 outlook. However, the ongoing conflict between Russia and Ukraine could negatively impact economic prospects. Additionally, increasing geopolitical tensions in the Middle East and continued attacks on the Red Sea route could further complicate the situation, posing significant risks to the global economy. Despite these challenges, inflation is expected to continue its downward trend towards target levels, leading central banks in major economies to likely begin reducing policy rates in the latter half of 2024.

Indian Economy Overview

Amidst a global slowdown, the Indian economy has shown remarkable resilience. According to the second advance estimate of National Income for FY 2023-24, the Indian economy grew by 7.6%, surpassing the 7.0% growth rate of FY 2022-23. The construction and manufacturing sectors demonstrated robust growth, with expansions of 10.7% and 8.5%, respectively. This economic success can be attributed to several key factors, including strong domestic demand, decreasing inflation, and supportive government policies.

In FY 2023-24, the GST collection reached Rs. 20.18 lakh crore, reflecting an 11.7% growth, driven by strong domestic demand. Moreover, the Index of Industrial Production (IIP) shows that Indias industrial output increased by 6.1% in the first three quarters of FY 2023-24, up from 5.5% in the same period the previous year. This broad-based economic growth is evident from the upward trend in both the IIP data and GST collections, signifying robust activity across multiple sectors and highlighting their contribution to the overall health of the economy. Furthermore, from April to February in FY 2023-24, the combined growth rate of the Index of Eight Core Industries (ICI) stood at 7.7% (provisional), marking an expansion compared to the corresponding period last year. The growth in ICI suggests a strengthening foundation for overall economic growth.

The Indian economy is witnessing faster disin ation. During FY 2022-23, Indias average CPI inflation stood at 6.7%, exceeding the RBIs tolerance band of 4% (+/- 2%). To address the inflationary pressure, the Reserve Bank of India (RBI) tightened its monetary policy, holding the repo rate steady at 6.5% for the past seven consecutive policy reviews. The higher interest rate and tighter monetary policy have helped moderate inflation, leading to an average inflation rate of 5.4% in FY 2023-24, despite food supply shocks. Looking ahead, inflation is projected to contract further to 4.5% in the next financial year.

However, the global economic slowdown and continuous attacks on the Red Sea have significantly affected Indias merchandise exports. Total exports in FY 2023-24 amounted to USD 437.06 billion, reflecting a contraction of 3.09% compared to the previous scal year. Concurrently, Indias imports also decreased by 5.41% to USD 677.24 billion, thereby sustaining the overall trade balance.

Outlook

The Indian economy is poised for a promising outlook in the upcoming financial year. The Reserve Bank of India (RBI) has projected a growth rate of 7% for FY 2024-25. Additionally, the International Monetary Fund (IMF) predicts that the Indian economy will grow by 6.8% in CY 2024 and by 6.5% in 2025. However, any escalation of geopolitical conflicts could exacerbate inflationary pressures and impact trade. Moreover, prolonged higher interest rates could negatively affect the overall business environment. Despite these challenges, the Indian economy is expected to demonstrate resilience, bolstered by proactive government measures.

In a significant move, the government has increased capital expenditure by allocating 11.11 trillion for infrastructure development projects in FY 2024-25. Various government initiatives, such as the Production Linked Incentive (PLI) scheme, streamlined policies to facilitate trade and investment, increased FDI limits, and enhanced infrastructure facilities, are expected to support the Indian economy.

INDUSTRY LANDSCAPE

GLOBAL APPAREL BUSINESS

The Apparel Market is projected to be valued at USD 1.36 trillion in 2024, with anticipated growth to USD 1.78 trillion by 2029, indicating a compound annual growth rate (CAGR) of 4.63% over the forecast span from 2024 to 2029.

The growth in global apparel market is likely to be driven by the rise of online shopping, enabling manufacturers to reach broader audiences geographically. E-commerce platforms have expanded sales opportunities, particularly for traditional garments previously confined to local markets.

In the luxury market, the rising per capita income and a preference for branded products is driving demand , notably in the womens segment . With increasing maturity, changing fashion trends and retail dynamics fuelling market growth, the industry is emergence of strong players making the market highly competitive.

In the earlier part of FY24, the industry encountered enduring and intensifying challenges. Across regions, Europe and the United States experienced sluggish growth throughout the year, while Chinas initially robust performance waned in the latter half. Despite an initially strong showing, the luxury segment also started to experience the impacts of decreased demand in the latter part of the year, resulting in decelerating sales and erratic performance.

Heading into the future, fashion industry is expected to be impacted by the concerns around geopolitics, heightened by conflicts in Europe and the Middle East, alongside strained international relations elsewhere. In addition to geopolitics, the industry is also facing significant challenges from economic volatility and inflation.

Source: www.mordorintelligence.com/

INDIA APPAREL MARKET

India is among the top garment-manufacturing countries in the world. Indian textiles and apparel products have a history of fine craftsmanship across the entire value chain from bre, yarn, and fabric to apparel with high global appeal. Indias cotton, silk, and denim are highly popular in other countries, and Indian apparel too has found success across fashion centres around the world. India is one of the largest consumers and producers of cotton with the highest acreage of 12.5 million hectares which is 38% of the global area under cotton cultivation. The Indian textile and apparel industry is highly diversied with a wide range of segments ranging from products of traditional handloom, handicrafts, wool, and silk products to the organized textile industry in India.

Indias textile and apparel market size is growing at a CAGR of 14.59% from US$ 172.3 billion in 2022 and is expected to reach US$ 387.3 billion by 2028. Industry is one of the biggest contributors to the economy with a 2.3% contribution to the gross domestic product (GDP) which is approx. US$ 70 billion. It is also the second largest employer after agriculture, providing direct employment to 45 million people and 100 million people in the allied sector. Andhra Pradesh, Telangana, Haryana, Jharkhand, and Gujarat are the top textile and clothing manufacturing states in India.

Source: www.ibef.org/

INDIA HOME TEXTILE MARKET

The India home textile market is projected to grow significantly, with an estimated size of USD 9.60 billion in 2024, expected to reach USD 15.36 billion by 2029, growing at a compound annual growth rate (CAGR) of 9.84% during the forecast period (2024-2029). This market expansion has attracted foreign brands, which have entered the Indian market through direct investment or joint ventures. The growth of the Indian home textiles sector is driven by rising household incomes, increasing population, higher income levels, the expansion of organized retail, and the growth of end-use sectors like housing, hospitality, and healthcare. India holds almost 7% of the global home textiles trade and has a significant share of exports to the United States.

Despite volatile market conditions and higher in ation impacting various economic sectors, including the home textile industry, the sector is showing signs of recovery. The pandemic caused a decline in demand, disrupted logistics, and halted external trade, leading to order cancellations and suspensions from international and domestic buyers, which severely impacted the industrys value chain.

As the Indian economy recovers from the pandemic, the home textiles market is rebounding, supported by rising pent-up demand. Efforts in quality improvement, innovations through R&D programs, and value-added features are positioning Indias home textile products as leaders in the global market. Delhi has become a significant production and export centre for home textiles. Additionally, the recovering tourism industry in India is expected to boost demand for home textiles in the hospitality sector and among households.

Source: www.mordorintelligence.com/

FASHION AND HOME FURNISHING INDUSTRY GROWTH DRIVERS

Rising Per Capita Income, Higher Disposable Incomes, and Preferences for Brands

In FY24, Indias per capital national income increased from Rs. 99,404 to Rs. 1,06,744. The steady rise in per capita income and higher disposable incomes have led to increased consumer spending on apparel. There is a growing preference for branded apparel, driven by changing lifestyle patterns and increased fashion consciousness among consumers. This shift towards branded products is further propelling the growth of the Indian apparel industry, as consumers seek quality, style, and value for money.

Government Initiatives

The Indian Government is actively working to promote the growth and development of the countrys textile sector, implementing a range of effective and meaningful schemes over the years.

In FY24, the Government launched the PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks Scheme to develop world-class infrastructure, including plug-and-play facilities, with an outlay of ~Rs. 4,445 crore for a period up to 2027-28. The PM MITRA Parks Scheme is inspired by the 5F vision of the Honble Prime Minister: Farm to Fibre to Factory to Fashion to Foreign. It envisages nearly Rs. 70,000 crore in investment and the generation of 20 lakh employment opportunities. These initiatives are aimed at nhancing the infrastructure and capacity of the textile and apparel industry, driving substantial growth and positioning India as a global leader in this sector.

Additionally, the Governments efforts to improve the ease of doing business in the country by reducing compliance burdens and costs will attract foreign investments, leading to further benefits for the textile sector.

Presence of Entire Value Chains and Large and Growing Domestic Market

The Indian apparel industry is supported by a comprehensive value chain that encompasses raw material production, spinning, weaving, processing, and garment manufacturing. This integrated value chain ensures streamlined operations and cost ef ciencies. Moreover, India has a large and growing domestic market, driven by a population with increasing purchasing power and changing fashion preferences. The robust domestic demand provides a stable foundation for the industrys expansion.

World-Class Infrastructure

Indias apparel industry benefits from world-class infrastructure that supports the entire manufacturing and distribution process. Modern facilities, equipped with the latest technology, ensure efficient production and high-quality output. The countrys extensive network of ports, highways, and railways facilitates smooth logistics and export processes, making India a favourable destination for apparel manufacturing and trade.

Abundance of Raw Material and Availability of Skilled Manpower

India is one of the largest producers of cotton and has ample availability of other raw materials such as silk, jute, and wool. This abundance ensures a steady supply chain for the apparel industry. Additionally, India boasts a vast pool of skilled manpower, with a workforce adept in traditional craftsmanship as well as modern manufacturing techniques. This combination of raw material availability and skilled labour contributes significantly to the industrys growth and global competitiveness.

Competitive Manufacturing Costs and Organized Retail Landscape & E-Commerce

India offers competitive manufacturing costs due to its lower labour costs compared to many other countries. This cost advantage attracts both domestic and international brands to set up manufacturing units in India. Furthermore, the organized retail landscape and the rapid growth of e-commerce have revolutionized the apparel industry. Organized retail chains and online platforms provide extensive reach and accessibility, driving sales and fostering market growth.

OPPORTUNITY

(i) The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand and declining imports

(ii) Urbanization is expected to support higher growth due to changes in fashion & trends.

(iii) Migration to organised retail market and e-commerce (un-branded to branded)

(iv) Upscaling of consumer preferences towards quality & aspirational products

(v) Rapid growth of value fashion market with legacy business houses expanding with stores across all segments (including tier 2 and tier 3 markets)

THREATS

(i) 100 percent FDI (automatic route) is allowed in the Indian textile sector

(ii) Increased Competition from Local & Big Players.

(iii) Our operations are in an unorganized sector, which is prone to changes in government policies.

FINANCIAL HIGHLIGHTS

During FY 2023-24, your Companys total sales registered a percentage increase of 13.92 %. Net Revenue being 23046.34 Lacs in FY 2024 as against 20,229.68 Lacs in FY 2023. Return on net worth of the Company in FY 2024 is 12.00% as against 10.27% in FY 2023.

Table 1 : Financial Performance & Analysis

Particulars	2023-24	2022-23	Changes in Crores	%
Total Income	23046.34	20,229.68	2,816.66	13.92
Total Expenditure	21,112.58	18,630.21	2,482.37	13.32
Earning Before Finance Cost, Depreciation &	1,933.76	1,599.47	334.29	20.90
Amortization and Tax (EBIDTA)
Less: Finance Cost	387.8	389.79	-1.99	-0.51
Less: Depreciation & Amortization expenses	188.57	176.53	12.04	6.82
Pro t Before Tax and Exceptional Items	1,357.39	1,033.15	324.24	31.38
Less: Tax Expenses	339.17	257.12	82.05	31.91
Profit after Tax	1,018.22	776.03	242.19	31.21
Comprehensive Income	2.33	4.67	-2.34	-50.11
Total Comprehensive Income for the period after Tax	1,020.55	780.70	239.85	30.72

 

S.No.	Particulars	2023-24	2022-23
1	Debtors Turnover Ratio	6.19	4.68
2	Inventory Turnover Ratio	2.04	2.01
3	Interest Coverage Ratio	4.67	3.76
4	Current Ratio	1.91	1.98
5	Debt Equity Ratio	0.50	0.50
6	Debt Service Coverage Ratio	3.23	2.25
7	Gross Pro t Ratio	15.34%	15.11%
8	Operating Pro t Ratio	7.58%	7.05%
9	Return on Net-Worth	12.00%	10.27%
10	Operating Cost Ratio	92.42%	92.95%
11	Pro t before tax to Sales	5.90%	5.12%
12	Net Pro t Ratio	4.43%	3.85%
13	EBIT	7.58%	7.05%
14	EBIDTA	8.40%	7.93%

Debtors Turnover Ratio- increased from 4.68 in the Financial Year 2022-23 to 6.19 in the Financial Year 2023-24 due to increase in recoverability from trade receivables.

Interest Coverage Ratio- increased from 3.76 in the Financial Year 2022-23 to 4.67 in the Financial Year 2023-24 due to increase in profits.

Debt Service Coverage Ratio - increased from 2.25 in the Financial Year 2022-23 to 3.23 in the Financial Year 2023-24increased Due to increase in operating pro ts.

Table 3: Working Capital

 

As days of sales	2023-24	2022-23
Inventories	178.87	181.47
Receivables	58.99	77.97
Payables	50.19	60.36
Working Capital	107.90	113.06

Table 4: Cash & Debt Position

In Lacs	2023-24	2022-23
Debt	4,201.92	3,754.97
Cash and Cash Equivalents	13.25	16.80
Net Cash	4.43	7.06

Table 5: ROIC and Return on Net Worth

Ratios	2023-24	2022-23
ROIC	12.00%	10.00%
Return on Net Worth	12.00%	10.27%

OUTLOOK

The outlook for the Indian textile industry continues to be positive. The factors which contribute to the India advantage are expected to continue over the medium term. This is expected to help India enhance its market share further in the other key geographies.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has designed and implemented robust internal control systems in line with the nature, size, geographical spread and complexities of business operations. Internal control policies and procedures are designed to provide reasonable assurance towards the effectiveness and efficiency of its operations, reliability of financial reporting, compliance with applicable laws and regulations, prevention and detection of frauds & errors and Safeguarding of its assets.

The Company has a strong governance structure with related authorities and responsibilities assigned to the Committees of the Board, function heads and various process owners. The established policy framework is reviewed periodically to keep them contemporary and relevant to the changing business environment.

Detailed procedures, SOPs, work instructions and controls are well documented, digitized and embedded in business processes to ensure the mitigation of risks in operations, reporting and compliance. Such internal controls are regularly tested for adequacy of design and operating effectiveness. Compliance with policies and procedures is an integral part of the management review process. The Companys ERP, system infrastructure and checks are integral parts of the internal control system. The company has been leveraging data analytics, predictive and visualization tools to identify data exceptions and trends for minimizing errors and avenues to improve the processes. The Company has a strong compliance management system to monitor the compliance status online and to update compliance requirements with the latest changes in statutes and business operations. The Company has laid out a process for business plan approval and periodic a review including review of business performance, capital and revenue expenditure and new business investments.

Regular communication and awareness towards the Code of Conduct, whistle-blower process and various policies and procedures are done to ensure common understanding on these leveraging e-modules. The Company has strong Internal Audit governance to assure the adequacy and effectiveness of internal controls. The risk-based internal audit plan covering key business processes and establishments is approved by the Audit Committee. This Committee periodically reviews the adequacy and effectiveness of the Companys internal financial controls and the implementation of audit recommendations.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

HUMAN RESOURCES

We remain steadfast in our mission to attract and retain top talent, promote a culture of continuous learning and development, encourage high performance, maintain positive industrial relations, and ensure a safe and inclusive workplace. Our employees are our most valuable assets, and we are proud to showcase our human resource initiatives in this new chapter of our Companys history.

Focused on Learning and Development We understand the importance of investing in employees growth and development to ensure their success. We have implemented several initiatives to promote a culture of continuous learning. We have expanded our training programmes, including leadership development, technical training, and cross-functional collaboration. Our mentoring programme has helped our employees build relationships and receive valuable guidance from experienced leaders. We also encourage our employees to pursue external certifications and educational opportunities to enhance their skills and knowledge.

Promoting high performance and excellence in all aspects of our business is essential during the integration process. We are committed to aligning our goals and objectives with those of the Company to ensure a seamless integration process. Our performance management system is designed to provide regular feedback, goal setting, and performance evaluation, enabling our employees to develop and achieve their full potential in the new organisation. We are also leveraging digital tools to facilitate performance management, such as online goal setting and progress tracking. We have also implemented a rewards and recognition programme to acknowledge outstanding performance and incentivise our employees to continue striving for excellence. By recognising and rewarding high performers, we foster engagement and create a culture of excellence.

INDUSTRIAL RELATIONS

Industrial Relations remained cordial throughout the year across all our manufacturing units and facilities and the Board records its appreciation for the contribution of all employees towards the growth of the company without which the achievements made, would not have been possible. As of 31 March 2024, the Company has 856 employees on roll.

RISKS AND CONCERNS

The broader trends in the economy are expected to have a direct impact on your Companys growth prospects as well. In ation is expected to remain elevated for the foreseeable future, driven by war-induced commodity price increases and broadening price pressures. In addition, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets.

In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparel. Migration to value for- money options could also lead to reduced growth and pro tability for your Company.

A detailed Risk Management Framework as well as their mitigation is given in Directors Report at Page 26 of this Annual Report.

DISCLOSURE OF ACCOUNTING TREATMENT IN THE PREPARATION OF THE FINANCIAL STATEMENT,

The Company has followed the Indian Accounting Standards referred to in section 133 of the Companies Act, 2013. The Significant Accounting Policies which are consistently applied are set out in the Notes to the Financial Statements.

MARKETING STRATEGIES-

Further widening of our customer base

With the growing opportunities available in the market, we will endeavor to continue to grow our business by adding new customers in existing and new geographies, new market segments. We are looking towards expanding our customer base in Middle East countries. We are also making efforts and diagnosing the domestic markets for our own brands product. With the widening of the customer base for our Brand product, we can leverage the production capacity and the experience of our production team. We aim to do this by effectively leveraging our marketing skills and relationships and focusing on total customer orientation.

Reduction of operational costs and achieving efficiency

Apart from expanding business and revenues, we have to look for areas to reduce costs and achieve efficiencies in order to remain a cost-competitive company. We try to reduce the wastages and control the production on the production floor through effective supervision. Our focus has been to reduce operational costs to gain a competitive edge.

To build up a professional organization

We believe in transparency, commitment and coordination in our work, with our suppliers, customers, government authorities, banks, financial institutions etc. We have a blend of experience and sufficient staff for taking care of our day-to-day operations. We also consult with external agencies on a case-to-case basis on the technical and financial aspects of our business. We wish to make it sounder and stronger in times to come.

Focus on a cordial relationship with our Suppliers, Customer and employees

We believe that developing and maintaining long-term sustainable relationships with our suppliers, customers and employees will help us in achieving the organizational goals, increasing sales and entering into new markets.

Optimal Utilization of Resources: -

Our Company constantly endeavors to improve our production process, skill up-gradation of workers, modernization of machinery to optimize the utilization of resources. We analyze our existing raw material procurement policy and manufacturing processes to identify the areas of bottlenecks and take corrective measures wherever possible. This helps us in improving ef ciency and putting resources to optimal use.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Companys operations include raw material availability and its prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

For and on the behalf of the BELLA CASA FASHION & RETAIL LIMITED
Sd/-	Sd/-
Harish Kumar Gupta	Pawan Kumar Gupta
Chairman & Whole-Time Director	Managing Director
DIN: 01323944	DIN: 01543446
Date - Friday, 26 July, 2024
Place - Jaipur