Cantabil Retail India Ltd Management Discussions.


Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 1956 (the Act) and comply with the IND AS Guidelines. The management of Cantabil Retail India has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on our financial condition and result of operations should be read together with our audited financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", "Cantabil" are to Cantabil Retail India.


Global Economy

The world has changed dramatically since last year. The COVID-19 pandemic and subsequent lockdown that the world has seen, put pressure on all economies. While every national recovery will hinge on country characteristics, the success or failure of major economies and economic blocs will profoundly influence the outlook for smaller economies and developing countries. Recent progress in the vaccination rollout in the United States and other advanced economies has raised expectations for the global economic recovery. According to the Spring 2021 edition of the IMFs Word Economic Outlook, the global economy is projected to expand at a rate of 6 percent in 2021, up from the 5.5 percent growth rate projected in January, due to the faster-than-expected recovery of advanced economies. Bolstered by unprecedented fiscal and monetary stimulus, the United States, China, and Western Europe are poised for a swift rebound: annual GDP growth in the United States, China, and Western Europe are projected to reach 6.4, 8,.4 and 4.5 percent, respectively, in 2021.

Differences in vaccination rates are driving the divergence in growth projections, as the easing of pandemic-related restrictions and the resumption of mobility, production, trade, and travel all hinge on widespread vaccination. While good progress has been achieved overall, vast disparities in vaccination coverage align closely with national income levels. The slow progress of vaccination efforts in developing countries threatens to hinder their recovery while also exacerbating the global risk of virus mutation. Several countries that are currently facing renewed waves of contagion and/or new viral strains have been forced to reimpose restrictions and delay the return of normal economic activity.

Global Industry

Retail relates to the sale of goods and services to consumers. Transactions take place through various channels of distribution across an ever-growing range of industries, such as food, motor vehicles, apparel, and electronics. While physical or in-store retail is the dominant channel in this market, forms of non-store retailing are becoming increasingly popular too. Online retailing or e-commerce channels are carving out a share of the retail sector in many global markets. Many retailers operate an omni channel model, which aims to integrate offline and online channels in a seamless way. In 2019, the global retail market generated sales of nearly 25 trillion U.S. dollars, with a forecast to reach close to 27 trillion U.S. dollars by 2022.

The United States, China, India, and Germany are amongst the worlds top retail markets. As of 2019, the United States was the largest retail market in the world, with sales of over five trillion U.S. dollars. Although physical stores accounted for most sales, the e-commerce channel is becoming more relevant every day, representing a bigger percentage of the retail sales year-over-year. Moreover, China, which has been closely following United States footsteps, surpassed the North American country for the first time in history to be the worlds largest retail market in 2020. Though this trend is forecast to be reversed in 2021, Chinas fast post-pandemic recovery allowed the nation to claim the number one position in the former year. Further, Indias retail market was estimated to reach 1.2 trillion U.S. dollars in 2021. The countrys retail industry accounts for about 10 percent of the GDP and is dominated by the unorganized sector. Lastly, looking into Europe, a market that is estimated to generate around 3.45 trillion euros in 2021, Germany is the major player. According to

Statista estimates, by 2019 the country generated retail revenues of over 670 billion euros and is forecast to grow 0.96 percent until 2024.

The retail market is mature and highly competitive in the developed economies of Europe and North America. On the other hand, the developing economies of Asia-Pacific, the Middle East, and Latin America have been instrumental in driving the market growth. Countries, such as Singapore, Malaysia, and Thailand, are popular shopping destinations in the Asia-Pacific region, with visitors contributing substantially to the retail sectors in the respective markets. Tourists are augmenting the demand for products related to fashion, apparel, and electronics.

Consumer spending, which typically accounts for more than two-thirds of the GDP, has been a key indicator of the health of the retail market. Moreover, the increasing strength of online shopping has been a major driver (especially, during the CoVID crisis). Apart from this, the growing smartphone penetration across countries is driving the e-commerce channel. Also, IoT, Augmented Reality, and other disruptive technologies are reshaping the retail industry. However, price variation between online and brick & mortar stores can challenge the retail market growth.


Indian Economy

As per the official data released by the ministry of statistics and program implementation, the Indian economy contracted by 7.3% in FY 2020-21, on the bac of fantastic fourth quarter which witnessed a growth of the April-June quarter of this fiscal year. Though, this is the worst decline ever observed since the ministry had started compiling GDP stats quarterly in 1996, still it is marginally better than estimated 8% contraction. The RBI in its the June Monetary Policy has predicted a GDP growth of 9.5% for FY 2021-22.

In 2020, an estimated 10 million migrant workers returned to their native places after the imposition of the lockdown. The second wave of Covid-19 has brutally exposed and worsened existing vulnerabilities in the Indian economy. Indias $2.9 trillion economy remains shuttered during the lockdown period, except for some essential services and activities. As shops, eateries, factories, transport services, business establishments were shuttered, the lockdown had a devastating impact on slowing down the economy. The informal sectors of the economy have been worst hit by the global epidemic.

But Indian economy is recovering fast. The pace of vaccination in India is going on full steam and a very fast pace. As on 16th August, 2021 the total vaccine doses administered are more than 54.60 crore. The Government has set itself a target of making available over 200 crore doses by December 2021. This is one of the biggest vaccination drive taken by any nation in history. According to Moodys Indias GDP, which shrank from $2.87 trillion in 2019-20 to $2.66 trillion in 2020-21, is estimated to reach around $4 trillion in 2024-25.

Indian Industry

The domestic textiles and apparel industry contributes 2% of Indias GDP, 7% of industry output in value terms and 12% of the countrys export earnings. The textiles and apparel industry in India is the second largest employer in the country providing direct employment to 45 million people and 60 million people in allied industries. The share of Indias textile and apparel exports in mercantile exports is 11% for the year 2019-20. India has also become the second largest manufacture of PPE in the world. More than 600 companies in India are certified to produce PPEs today, whose global market worth is expected to be over $92.5 bn by 2025, up from $52.7 bn in 2019.

• FDI in the textile and apparel industry has reached upto $3.45 bn during 2020

• Exports in the textile and apparel industry are expected to reached $300 bn by 2024-25 resulting in a tripling of Indian market share from 5% to 15%

• To double the industry size to $300 bn 2025-26, 7 mega textile parks have been planned

• Indian technical textiles market is expected to grow at a rapid 7.6% in the Asia Pacific region to reach $23.3 bn in 2027, up from $14 bn in 2020

• The domestic technical textile market for synthetic polymer was valued at $7.1 bn in 2020 and is projected to reach $11.6 bn by 2027, growing at a CAGR of 7.2%, while technical textile market for woven is expected to grow at a CAGR of 7.4% to $15.7 bn by 2027, up from $9.5 bn in 2020.

Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to take advantage of this growth and aim to grow, diversify and introduce new formats to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers selling brands. The focus should be on branding the retail business itself. In their preparation to face fierce competitive pressure, Indian retailers must come to recognize the value of building their own stores as brands to reinforce their marketing positioning, to communicate quality as well as value for money. Sustainable competitive advantage will be dependent on translating core values combining products, image and reputation into a coherent retail brand strategy.

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About Cantabil Retail India

Established in 1989, Cantabil Retail India Ltd. is in the business of designing, manufacturing, branding and retailing of apparels and accessories. The Company started its garment manufacturing and retailing business in the year 2000 and opened the first Cantabil store in September 2000 in New Delhi.

Over the years, Company has established 1,50,000 sq. ft. state of art manufacturing facility in Bahadurgarh, Haryana with a capacity to produce 10.00 Lakh garment pcs. /p.a that makes Casual trousers, Formal trousers, Suits & jackets and Shirts. Along with this, the Company also has two dedicated production units and two warehouses to ensure seamless & timely Logistics of quality products.

The Company sells its products under one single brands-Cantabil, offering Mens, Women, Children and Accessories. The Company has consolidated its sub-brands and shall sell its products under the brand Cantabil. It sells its products through 336 Exclusive Brand Outlets (EBOs) in 18 states which are either Company owned / lease and Franchisee managed, or Franchisee owned, and Franchisee managed. The Company believes in building strong client relationships by effectively delivering good quality products and acknowledging the changing customer demands.


The performance of the Company for the financial year ended March 31st, 2021, is as follows:

Performance Highlights with IND-AS 116 for the full year ended March 31st, 2021:

Revenue from operations was at Rs. 251.64 crore in FY21 as against Rs. 338.04 crore in FY20 YoY decline of 25.56% mainly driven by nationwide lockdown in Q1 FY21 and conditions imposed on working of store days and hours in Q2 FY21

EBITDA (excluding other income) stood at Rs. 59.36 crore EBITDA Margin was 23.59%

Profit After Tax was at Rs. 9.66 crore PAT Margin was 3.84% Basic EPS stood at Rs.5.92

Performance Highlights W/O IND-AS 116 for the full year ended March 31st, 2021:

EBITDA (excluding other income) stood at Rs. 35.16 crore in FY21 as against Rs 46.25crore in the FY20 YoY decline of 23.98% mainly due to drop in revenue

EBITDA Margin was 13.97% in FY21 as against 13.68% in FY20, a jump of 29 bps

Profit After Tax was at Rs. 17.86 crore in FY21 as against Rs. 22.88 crore in FY20 YoY decline of 21.92%

PAT Margin was 7.10% in FY21 as against 6.77% in FY20, a jump of 33 bps

EPS stood at Rs. 10.94 in FY21


As on March 31, 2021, the net worth stood at Rs. 124.04 crore and the debt was at Rs. 14.37 crore The cash and cash equivalents at the end of March 31, 2021 were Rs. 8.26 crore The net debt to equity ratio of the Company stood at 0.05 as on March 31, 2021

Over the years we have seen steady growth in the number of stores and consequently our retail business area.

Financial Year No. of Stores
FY 2020-21 320
FY 2019-20 302
FY 2018-19 241
FY 2017-18 184
FY 2016-17 168

Segment wise Business Performance

The Company is operating in three broad segments i.e., Mens wear, Womens Wear and Kids Wear. The Company is into manufacturing of shirts, denims, trousers, business and party wear suits, t-shirts, woollen jackets, pullovers, shorts, jeggings, kurtis and accessories for men and women.

Revenue share of four broad segments are stated below:

Name and Description of main products / services % to total turnover of the Company
Mens Wear 86%
Womens Wear 9%
Kids Wear 2%
Accessories 3%


Like every business, the company faces risks, both internal and external, in the undertaking of its day-to-day operations and in pursuit of its longer-term objectives. Risk analysis is a continuous task and dedicated risk workshops are conducted for each business vertical and key support functions wherein risks are identified, assessed, analyzed and accepted / mitigated to an acceptable level within the risk appetite of the organization.

The Company analyzed the following Risks and Concerns:

Credit Risk

To manage its credit exposure, Cantabil has determined a credit policy with credit limit requests and approval procedures. Company does its own research of clients financial health and project prospects before bidding for a project. Timely and rigorous process is followed up with clients for payments as per schedule. The company has suitably streamlined the process to develop a focused and aggressive receivables management system to ensure timely collections.

Interest Rate Risk

The Company has judiciously managed the debt-equity ratio. It has been using a mix of working capital loans and internal cash accruals. The Company has repaid its all Term liabilities and very well managed the working capital to reduce the overall interest cost.

Competition Risk

This risk arises from more players wanting a share in the same pie. Like in most other industries, opportunity brings with itself competition. We face different levels of competition in each segment, from domestic as well as multinational companies. The Company has created strong differentiators in project execution, quality and delivery which make it resilient to competition. Furthermore, the Company continues to invest in technology and its people to remain ahead of the curve. A strong, stable client base consisting of large and mid-sized corporations further helps to insulate the Company from this risk. We counter this risk with the quality of our infrastructure, our customer-centric approach and our ability to innovate customer specific solutions, focusing on pricing and aggressive marketing strategy, disciplined project executions, coupled with prudent financial and human resources management and better control over costs. Thus, we do not expect to be significantly affected by this risk.

Input Cost Risk

Our profitability and cost effectiveness may be affected due to change in the prices of raw materials, power and other input costs. Some of the risks that are potentially significant in nature and need careful monitoring are Raw Materials prices, availability of Power etc.

Liability Risk

This risk refers to our liability arising from any damage to equipment, life and third parties which may adversely affect our business. The Company attempts to mitigate this risk through contractual obligations and insurance policies.

Real Estate Risk

There is risk in effective management of store expansion and operations in newer locations/cities/states. Availability of commercially viable real estate properties at suitable locations for new stores, timely execution of sale deeds and license registrations and getting regulatory approvals for these properties.


Changing consumer preferences and growing Industrial base

• With ever changing consumer needs and demands, today consumers are looking for a complete package with good quality product and design

• With rising income and urbanization, increases consumers purchasing power

Partner with Retail Outlets

• Partner with established retail outlets like Shoppers Stop, Lifestyle, Central, etc.


• Competition from local and multinational players

• Regulatory changes

• Input Cost risk

• Attraction and retention of human capital

• Technological Advancements


The Company implemented proper and adequate systems of internal control to ensure that all assets are safeguarded and protected against loss from any unauthorized use or disposition and all transactions are authorized, recorded and reported correctly. The Company also implemented effective systems for achieving highest level of efficiency in operations, to achieve optimum and effective utilization of resources, monitoring thereof and the compliance with provisions all laws including the Companies Act, 2013, Listing Agreement, directions issued by the Securities and Exchange Board of India, labour laws, tax laws etc. It also aimed at improvement in financial management, and investment policy. The System ensures appropriate information flow to facilitate effective monitoring. The internal audit system also ensures formation and implementation of corporate policies for financial reporting, accounting, information security, project appraisal, and corporate governance. A qualified and independent Audit Committee of the Board of Directors also reviews the internal control system and its impacts on improvement of overall performance of the Company.

The Company has put in place internal control systems and a structured internal audit process vested with the task of safeguarding the assets of the organization and ensuring reliability and accuracy of the accounting and other operational data. The internal audit department reports to the Audit Committee of the Board of Directors.

Similarly, the Company maintains a system of monthly review of the business as a key operational control, wherein the performance of units is reviewed and corrective action is initiated. The Company also have in place a capital expenditure control system for authorising spend on new assets and projects. Accountability is established for implementing the projects on time and within the approved budget.

The Audit Committee and the Senior Management Team are regularly apprised of the internal audit findings and regular updates are provided of the action taken on the internal audit reports. The Audit Committee reviews the quarterly, half yearly and the annual financial statements of the Company. A detailed note on the functioning of the Audit Committee and of the other committees of the Board forms part of the section on corporate governance in the Annual Report.

During the year, the Company carried out a detailed review of internal financial controls. The findings were satisfactory and suggestions for improvement have been taken up for implementation. Policy guidelines and Standard Operating Procedures (SOPs) continue to be updated where required, to keep pace with business requirements.


The Companys HR philosophy is to establish and build a high performing organization, where each individual is motivated to perform to the fullest capacity: to contribute to developing and achieving individual excellence and departmental objectives and continuously improve performance to realize the full potential of our personnel. As on March 31, 2021, Company is giving employment to approx. 1900+permanent employees and approx. 700 contractual employees. Industrial relations are cordial and satisfactory.

Employees are critical to our business. The Company internally assess its employees to periodically identify competency gaps and use development inputs (such as skill up gradation training) to address these gaps. The Company has implemented staff training policies and assessment procedures and intend to continue placing emphasis on attracting and retaining motivated employees.

The Company also plans to continue investing in training programmes and other resources that enhance employees skills and productivity which will continue to help our employees develop understanding of the customer-oriented corporate culture and service quality standards to enable them to continue to meet the customers changing needs and preferences.

Information Technology

Our deep understanding of local needs and our ability to adapt quickly to changing consumer preferences has helped our performance driven growth. Our robust IT systems have significantly aided this growth by simplifying complex processes throughout our operations.

Our IT systems are equipped with an array of data management tools specific to our business needs and support key aspects of our business. IT has enabled our cash management systems, in-store systems, logistics systems, human resources, project management, maintenance and other administrative functions. This implementation has contributed positively towards minimizing product shortage, pilferage, out of stock situations etc. and has increased overall operational efficiency.

Impact of COVID-19 on Industry

Indian Textiles and Apparels industry accounts for approximately 4 percent of the global textile and apparel market. The textile and apparel industry is one of the largest and the most important sectors for the Indian economy in terms of output, foreign exchange earnings and employment. The industry contributes approximately 7 percent to industrial output in value terms, 2 percent to the GDP and 15 percent to the countrys export earnings.

The areas that face the crisis created by COVID-19 pandemic are:

Labour force and employment: Textile and apparel provides direct employment to over 45 million people, but the nationwide lockdown has led to a temporary closure of factories and lay-offs among low wage workers.

Import & Exports of raw material and readymade garment:

The COVID-19 pandemic is primarily expected to adversely impact exports and with second-order impact on the domestic markets with both exports as well as domestic sales falling.

The pandemic has affected the majority of Indias export market (the US and EU together constitute for approximately,

60 percent of the total apparel exports from India in value terms), causing order cancellations/deferral of order leading to inventory build-up and expectation of slower realization of export receivables leading to higher working capital requirements.

Apparel exports are expected to fall due to drying up of order in the last quarter of FY20, working capital issues and lack of clarity on the duties and incentives especially when exporters from Bangladesh, Sri Lanka and Vietnam receive preferential access.

Additionally, domestic consumption is also getting impacted due to all India closure. New store openings have stopped and even domestic stores are facing an inventory build-up due to apparel sources for the upcoming summer season, Further, domestic prices could be negatively impacted if exporters dump their inventories in the domestic market leading to even reduced margins. This could lead to short term blips such as reduced employment of casual labour (factory closures and people moving back to their hometowns) and reduced consumption.

Cash flow constraints: The sector has been grappling with profitability issue due to a sharp decline in yarn exports, cheaper imports etc. these issues only look to get aggravated further with the current crisis.

Supply chain disruption: The garment manufacturers need to look at local sourcing opportunities, due impact on import and export.

Consumer sentiment: If nationwide lockdown continues and the situation persists, will impact consumer sentiment on the higher side, due to closure of market and mall also to maintaining the social distancing, safety and health.

The extent of the outbreak and lockdown has directly impacted the length of the recovery cycle. However, to minimize the impact the Confederation of Indian Textile Industry (CITI) has requested the government to immediately announce a relief package for the textile and apparel sector to mitigate the crisis being faced by the capital and labour-intensive textile Industry, post the corona virus spread.

Source: impact-of-covid-19-on-the-indian-apparel-textile-industry/

Our business operations faced several challenges including:

• Temporary store closure for operations due to local restrictions

• Significantly reduced footfall at operational stores

• Reduced employee attendance due to local transport restrictions

• Temporary stoppage of all manufacturing activities

• Disruption in Supply Chain due to restricted manpower, transportation and material unavailability


The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behavior, ushering a revolution in shopping in India. Modern retailing has entered the market in India as is observed in the form of bustling shopping centers, multi-storied malls and the huge complexes that offer shopping, entertainment, and food all under one roof.

A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working women population and emerging opportunities in the services sector are going to be the key factors in the growth of organized retail sector in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping newer businesses to enter the India Retail Industry. In India the vast middle class is almost an untapped industry making it the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the India Retail Industry to grow faster.

As for the Company, it is mainly focused on tapping the vast middle-class population of the country, with rightly planned decision to expand and create brand visibility in tier 2 and tier 3 cities and penetrate further in the Tier 1 cities. People living in these towns and cities have the urge and willingness to spend but do not have enough options or choices. Cantabil tries to fill in the long gap between bigger brands in the metros and no brands available in smaller cities. It tries to bring fashion to these places at affordable pricing with best design and quality possible.

The Company also focuses on branding itself as a family brand which can provide everything under one roof to enhance shopping experience for customers. Along with this, it also aims at providing grater shopping experience by providing modern in-store experience with perfect store design and lighting effects and also good salesmanship. The in-store staff is given appropriate training by the Company to make sure that each and every customer is treated well and equally.

The Company has managed to overcome Covid at the best of its abilities and not let business get affected. Even during such times, we managed to open 18 new stores with the help and perseverance of our employees and highly dedicated and efficient management team.