bhartiya international ltd Management discussions


Industry Update

The fashion industry experienced robust growth for an extended period of time post covid due to revival of latent demand across markets. However, inflation and depressed customer sentiments in certain geographies have resulted in moderate growth rates in the second half of 2022.

Going forward, the luxury fashion sector is expected to outperform the rest of the industry, as shoppers continue to travel and spend, and thus remain more insulated from the effects of hyperinflation. Based on McKinseys analysis of fashion forecasts, the luxury sector is expected to grow between 5 and 10 percent in 2023, driven by strong momentum in China (projected to grow between 9 and 14 percent) and in the United States (projected to grow between 5 and 10 percent).

Despite headwinds created by the global recessionary trends, India is gaining traction as a reliable sourcing hub due to our stable economy and relatively qualified yet cheaper labour.

About The Company

Bhartiyas Journey

Bhartiyas institutional journey began in 1987, focusing on design-led manufacturing. Over the last three decades, it has grown into a global company with a presence in six countries, becoming a preferred partner for over 100 retailers and brands worldwide. As a vertically integrated company, it covers material sourcing, design development, manufacturing, and quality assurance, excelling as a full-service supply chain platform with a commitment to sustainability. This integrated approach ensures a comprehensive view of all delivery components, fostering agility and quick decision-making,

Design-Driven Success

Design is at the heart of Bhartiyas operations. Its cutting-edge in-house R & D department, led by design professionals in Milan, Italy, Gurgaon, Bangalore, and Chennai, drives constant product innovation. By combining a design-focused mindset with an industrial delivery model, it achieves higher margins and a scalable business. Collaborating with leading global brands has further solidified its business model and ensured stability.

Key Business Divisions

Leather Garments Division

Bhartiyas Leather Garments Division is a core pillar of the company, offering a comprehensive range of mens and womens outerwear apparel. It takes pride in being among the largest manufacturers of leather garments globally, gaining an edge in an industry filled with numerous smaller players. This divisions success lies in their ability to build scale, ensuring steady state profitability even amid changing market dynamics.

The fashion industry is evolving rapidly, and sustainability has become a significant concern. Recognizing this, Bhartiya is committed to being a responsible partner to over 100 global brands they collaborate with. As part of its sustainability efforts, companys Tannery based in Chennai is moving towards ethical and sustainable production methods. The tannery sources and produces leathers that are traceable, sustainable, organic, and biodegradable. This initiative aligns with our mission to support partner brands in remaining relevant to their customers and the world by contributing to efficient resource use and promoting a sustainable future.

A key driver of manufacturing prowess is the team of leading design professionals based in Milan, Gurgaon, and Bangalore. Constantly innovating and incorporating the latest fashion trends, this talented team plays a crucial role in delivering high-quality products. Bhartiyas strong expertise across the value chain, covering designing, sourcing, and manufacturing, ensures efficient processes and higher capacity utilization, resulting in a predictable business model with enhanced profitability.

Having established a robust business model, the Leather Garments Division is now positioned to benefit from operating leverage. With low incremental costs, additional sales directly translate into improved bottom-line performance. The focus in this segment is to cultivate long-term partnerships with a concentrated list of high-value customers while also diversifying its client base to reduce business risks.

To fuel further growth, Bhartiya has ramped up its marketing network by engaging agents in key geographies. These agents work on a variable incentive model linked to sales, making it a cost-effective growth strategy with minimal fixed cost investment for the company.

Accessories Division

The Accessories Division at Bhartiya plays a vital role in the global fashion market, manufacturing both leather and non-leather bags, accessories, and belts for esteemed international brands. The journey in this segment started over a decade ago, commencing with a factory dedicated to bags and accessories in Chennai.

Over the past two years, Bhartiya has successfully partnered with renowned fashion brands like Coach and Ralph Lauren, leading to their products being shipped to major fashion hubs worldwide. The division currently operates four facilities, one of which is located in Tada, Andhra Pradesh. This ultra-modern facility is equipped with state-of-the-art equipment and highly skilled resources at all levels, enabling it to deliver approximately one million pieces each year.

As with the other divisions, Indias reputation as a reliable sourcing hub, coupled with Bhartiyas capabilities in design and product development, positions the Accessories Division for rapid growth over the next few years. The expertise extends across various categories, including bags, belts, wallets, and other small leather goods, and that are continually scaling up the manufacturing facilities to meet growing demand.

Textile Outerwear Division

Bhartiyas Textile Outerwear Division is known for delivering some of the best quality products to reputed retailers and brands. Specializing in a variety of styles for both mens and womens outerwear categories, this division has experienced rapid expansion in recent years.

A key factor behind their success is the cross-sell strategy, where it offers multiple product lines to the existing global client base. This approach has not only strengthened the relationships with current customers but also attracted new ones, driving sustained growth in the segment.

To bolster its capabilities, Bhartiya has reinforced the production teams by leveraging a strong talent pool from the manufacturing industry. This strategic move ensures efficient operations and further contributes to sustained profitability. As we continue to focus on high-value products, the Textile Outerwear Division remains a significant lever for growth within the company, set to expand its business volume in the coming years.

Virtual Manufacturing Division

While Bhartiya continues to prioritize building manufacturing capabilities for its clients, the company has also identified an untapped opportunity in the virtual manufacturing space. India, especially post-Covid, has emerged as a key sourcing location for global customers and retailers within the apparel and fashion industry.

To strengthen the Virtual Manufacturing Division, Bhartiya has invested in enhancing its marketing and creative design teams. The goal is to expand partnerships within the UK, Europe, and the US. Additionally, it has begun building key partnerships in other strategically important regions outside the US and UK, seeking long-term collaborations with well-established volume retailers. Collaboration remains a central theme as Bhartiya builds teams, explores new partnerships, and collaborates with new customers to drive growth. The company is also focused on increasing wallet share with existing retail partners, fortifying relationships that contribute to mutual success. Strengthening its vendor network is a priority for Bhartiya, both within India and through manufacturing partnerships in Bangladesh and

China. This allows us to tap into new markets and enhance production capacity.

Key features of the business division are:

• Asset-light model with minimal working capital exposure and no fixed asset investments

• Scalable business model as capacity enhancement can be done without owning factories

Our Company

Human Resource

Bhartiyas human resources is the strong foundation for creating many possibilities for its business. Du ring the year under review, the efficient operations of manufacturing units, market development and expansion for various products was the highlight of our people effort. Continuous people development for developing knowledge and skills coupled with sound people practices will deliver the talent needs of the organization. The organization took all the necessary precautions during pandemic and have extended support to the workers to sustain their livelihood. Many programs have been initiated to maintain the mental wellbeing of people and a continuous communication with the teams have been ensured to upkeep the motivation level intact Massive vaccination drives at all locations couple with testing have ensured that our people and their families are safe and secured at all times. Our people are worki ng round the clock to fu If i I the deliverables promised to our customers thereby maintaining the customer delight. All this has been made possible due to the never-ending efforts of our teams and their belongingness towards the organization.

Internal Control

The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and that the transactions are authorised, recorded and reported correctly. Such internal controls are supplemented by an extensive programme of internal audits, review by management and documented policies, guidelines and procedures. These are designed to ensure that financial and other records are reliable for preparing financial information and other reports and for maintaining regular accountability of the Companys assets. The internal auditors present their report to the Audit Committee of the Board.

Financial Performance

On Consolidated basis, during the year under review, the Company achieved a turnover of Rs. 79859.80 Lakhs. The Net Profit/(loss) after taxes minority interest and share of prof it/(loss) of associates was reported at Rs. 6257.63 Lakhs as against loss of Rs. 1656.39 Lakhs in the previous year.

On Standalone basis, during the year under review, the Company achieved a turnover of Rs. 66443.38 Lakhs. The Net Profit after taxes was reported at Rs, 1617,26 Lakhs as compared to Rs, 1194.90 Lakhs in the previous year.

Significant Changes in Fanancial Ratios

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, a Company is required to give details of significant changes (change of 25% or more as compared to the immediate previous financial year) in its financial ratios.

Accordingly, on Standalone basis, Debtor Turnover ratio increased to 7,88 for FY 2022-23 compared to 6,29 in FY 2021-22 (an increase of 25.28%).

On consolidated basis, under the year review, Return on Capital employed increased to 30.25 for FY 2022-23 compared to 4.51 in FY 2021-22 (an increase of 570%).

Risk Management

The Company has made process which identifies, assesses and manages risk at Strategic, Operational and Compliance levels, across business units, functions and geographies. The board of directors are informed about the risks or opportunities that could have an adverse impact on the Companys operations or to that could be exploited to maximize the gains. The processes and procedures are in place to act in a time bound manner to manage the risks or opportunities. The risk management process is reviewed and evaluated by the board of directors, Bhartiya Internationals exposure to foreign currency risk is restricted to its imports and exports. These risks are minimized through well-thought-out financial operations, astute treasury management and effective use of hedge options.

Cautionary Statement

All the statements and assertions in this report regarding the projections, estimates and outlook are subject to current market situations and expected effects of future events on current and developing circumstances. Results may vary due to a number of factors, which could effect the Companys business operations, such as demand and supply conditions, price inputs, change in government levies and regulations, industrial relations and other economic variables in the country. Bhartiya International cannot be held responsible in any way for such statements and it undertakes no obligations to publicly update these to reflect subsequent events or circumstances.

Bhartiya City, Bengaluru, India

Located in Bengaluru; Bhartiya City is an urban smart city spanning across 125+ acres. Seamlessly integrating homes, schools, malls, and hotels, it offers a holistic and efficient lifestyle for its residents and people in Bengaluru. Cutting-edge technology drives sustainability, energy efficiency, and connectivity, enhancing the quality of life. This innovative urban marvel sets a new standard for urban planning and community development. The township is the single largest urban development of its kind within the corporation limits of any metropolitan city in the country.

The companys flagship residential brand Nikoo Homes is Indias first branded residential project with focus on Family, Community, Culture, Health, and Learning. The focus is to build communities and give families a chance to live a better life.

After successful launch of Nikoo 1 & 2 and with over 5000 happy Nikoo families residing, Nikoo 4 became one of the fastest selling projects on Bangalore. The company is in the process of launching Nikoo 5 shortly.

Bhartiya City has already developed 3 million square feet (msf) IT office space with another 1 msf under development.

The Leela Hotel & Convention Centre boasts of one of the largest convention centres in Bengaluru. It regularly hosts events and conventions and is becoming a popular destination for large scale events. Bhartiya City also features luxury private residences located at the city center overlooking lush green Central Park. Defined by a sophisticated sense of style and luxurious finishes, these residences come embellished with the legendary Leela service.

The much-awaited Mall of Bengaluru is open to public. With popular brands like Mango, Marks & Spencer, Lifestyle, Apple, Bose etc,; the mall has become the entertainment and shopping capital. With events and international concerts taking place, PVR opening, food court and great restaurants opening up; the mall offers everything as envisioned. The Mall provides an experience where art, culture, shopping, retail, and entertainment all converge in bringing thousands of people together from in and around Bengaluru city.

The city that started with a dream to create a good life is now a reality and a known landmark in Bengaluru.