Go Fashion (India) Ltd Management Discussions

GLOBAL ECONOMY

As global inflation dropped from its mid-2022 peak, economic growth remained steady, defying earlier predictions of stagflation and a global recession. This stability was driven by increased government spending, strong household consumption, and a rise in labour force participation. Despite central banks raising interest rates to control inflation, households in major advanced economies used pandemic savings, contributing to this economic resilience.

Global economic growth is estimated at 3.2% for 2023 and is expected to maintain this pace in 2024 and 2025. However, the growth rate is projected to decline to 3.1% over the next five years, the lowest in decades. This slower growth is due to high borrowing costs, reduced fiscal support, the lasting

effects of the Covid-19 pandemic, war in Ukraine and the Middle East, weak productivity growth, and increasing global economic fragmentation. Global inflation is expected to decrease from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets faster than emerging markets and developing economies.

In response to inflation, major central banks raised interest rates to restrictive levels in 2023. This led to higher mortgage costs, difficulties for businesses in refinancing debt, tighter credit availability, and weaker business and residential investment. Despite these challenges, the easing of inflation has led to expectations of declining future interest rates, resulting in lower long-term interest rates and rising equity markets.

OUTLOOK

Looking ahead, there is a cautious optimism surrounding the global economic outlook. With disinflation and steady growth, the likelihood of a hard landing has diminished, and risks to global growth are broadly balanced. Faster disinflation could further ease financial conditions. However, as inflation converges towards target levels and central banks shift towards policy easing in many economies, a tightening of fiscal policies aimed at reducing high government debt?with higher taxes and lower government spending?is expected to weigh on growth. Geopolitical tensions, including global conflicts like wars in Ukraine and Gaza and disputes in the South China Sea, Taiwan, and Ladakh, among other regions, could trigger new price spikes, potentially raising interest rate expectations and reducing asset prices. Additionally, divergent disinflation rates among major economies could cause currency fluctuations that stress financial sectors. Monetary policy remains focused on aligning inflation with targets to pave the way for sustained growth in the medium term.

INDIAN ECONOMY

Indias economy displayed robust growth in FY 2023-24, with real GDP expanding by 8.2%, 8.1%, and 8.4% in the first three quarters, and 7.8% in Q4, resulting in an overall growth rate of 8.2%. Key indicators of this growth include strong PMI in manufacturing and services, positive monsoon forecasts, increased bank credit driven by rising personal loan demand, higher household savings in physical assets, and accelerating auto sales across categories. Inflation has softened, with headline Consumer Price Inflation (CPI) estimated at 5.5% for FY 2023-24, down from 6.7% in FY 2022-

23, and is projected to further decline to 4.5% in FY 2024-25. The Index of Industrial Production (IIP) grew at a cumulative rate of 5.8% in FY 2023-

24, compared to 5.2% in FY 2022-23. Additionally, Indias export performance remained strong, with total exports expected to reach US$ 776.68 Bn in FY 2023-24, while a decrease in imports indicated a healthier trade balance.

The manufacturing sector stands tall as the powerhouse propelling Indias economic ascent, with strong backward and forward linkages generating employment opportunities, fostering innovation, and contributing around 17% to the countrysGDP.Thissectorsgrowth isdriven by rising investments and transformative initiatives like ‘Make in India. In tandem, the textile industry enriches the landscape, contributing around 2.3% to the GDP, 13% to industrial production, and 12% to exports. The textiles and apparel industry, the nations second- largest employment generator, offers livelihoods to 45 Mn individuals directly and 100 Mn across allied industries. To fortify this sector, the Government launched the Production Linked Incentive (PLI) Scheme, earmarking ? 10,683 Crores to drive the Man-Made Fibres (MMF) segment from FY 2020-21 to FY 2025-26.

Despite these positive developments, the Indian economy faces several challenges. However, these challenges also present opportunities for improvement. The focus on reviving private investment, enhancing the manufacturing sector, improving wages, and reducing debt can drive sustainable growth. The debt burden, with interest payments by the central and state governments constituting nearly 5% of the countrys GDP and

consuming 25% of all revenues, needs urgent attention, but with strategic reforms, this can be effectively managed.

Indian Economy GDP Growth Rate (in %)

Year	FY	FY	FY	FY	FY
	2019- 20	2020- 21	2021- 22	2022-23	2023-24
GDP Growth Rate (%)	4.2	(6.6)	8.7	7.2	7.6

OUTLOOK

The outlook for Indias economic growth remains highly positive, with growth expected to surpass 7% in FY 2024-25. The World Bank projects a 7.5% growth rate for CY 2024. By CY 2040, India is anticipated to contribute 30% of global GDP and potentially reach nearly US$ 7 trillion by FY 2030-31, becoming the worlds third-largest economy. Government initiatives such as the Production Linked Incentive (PLI) scheme and the Make in India campaign are set to bolster economic growth and attract significant investments, positioning India as a leading globa economic powerhouse. With strategic reforms and a focus on export competitiveness, stable inflation, and private investment, India is well-placed to sustain its rapid growth trajectory and address existing challenges effectively.

GLOBAL APPAREL MARKET

For CY 2024, global revenue in the apparel market is estimated to reach US$ 1.79 Tn, with an anticipated annual growth rate of 2.81% between CY 2024 and CY 2028 (CAGR). Among the various segments within the apparel market, womens apparel is the largest, with an anticipated market volume of US$ 0.94 Tn, covering 52.51% of the market in CY2024. This is followed bythe Mens Wear segment at a 32.01% worth about US$ 537.50 Bn and Kids Wear worth US$ 23.37 Bn. The United States leads in global revenue, with an estimated US$ 359 Bn in CY 2024. Meanwhile, the apparel market in China is experiencing a surge in demand for luxury brands, with consumers willing to pay premium prices for high-quality products.

In terms of per capita revenue, the apparel market is predicted to generate US$ 230.90 per person in CY 2024, considering the worldwide population.

Looking ahead, the volume in the apparel market is projected to reach 196.1 Bn pieces by CY 2028, with an expected volume growth of 1.3% in CY 2025. The average volume per person in the apparel market is estimated to be 24.1 pieces in CY 2024. Furthermore, it is anticipated that 95% of sales in the apparel market by CY 2024 will be attributed to non-luxury items.

This growth of the apparel market has been fuelled by increased spending in emerging markets such as China and India, where the rising middle class is now investing more in fashion apparel. Technological advancements have also played a crucial role. The introduction of automated garment assembly lines and the integration of big data have led to more precise, localised, and affordable manufacturing processes. Companies are now leveraging Al algorithms to identify trends and design garments that align with consumer preferences. The rise of e-commerce and online shopping platforms has furtherfacilitated global accesst oapparei brandsand products, significantly contributing to steady market growth. Moreover, the importance of sustainability and ethical sourcing practices is growing, influencing consumer choices, and prompting industry changes. Source: [https:/A/vww.statista.com/outlook/cmo/ apparelA/vorldwidel

RETAIL MARKET IN INDIA

The Indian retail industry has seen remarkable growth, becoming one of the largest retail markets globally. The industrys overall size increased by 34% from US$ 890 Bn in CY 2019 to US$ 1.2 Tn in CY 2023, positioning India as the fifth-largest retail market worldwide. This growth was fuelled by three key segments: the food and grocery retail sector was valued at over US$ 660 Bn, contributing 55% to total retail sales; the apparel and footwear industry at a 12% market share with a market size of US$ 144 Bn. The consumer electronics and appliances segment was valued at US$ 96 Bn, experiencing 8% growth due to rising disposable incomes and technologica advancements.

Looking ahead, the Indian retail market is projected to surpass US$ 2 Tn by 2030, expanding at a CACR of 10% over the next decade. The key growth drivers for the market include increasing urbanisation, rising incomes, and expanding internet and smartphone use, which are expected to boost e-commerce sales.

However, the industry faces challenges such as a geographically dispersed population, small ticket sizes, complex distribution networks, limited IT systems, and the dominance of unorganized local stores, which make up over 90% of retail trade. Improving labors productivity and training will be crucial for sustained growth.

INDIAN APPAREL MARKET

The Indian apparel market is projected to generate revenue of US$ 105.50 Bn in CY 2024 and is further anticipated to grow from CY 2024 to CY 2028 at an annual growth rate of 3.81% (CACR) anticipated from. This growth is driven by higher brand consciousness, increasing digitization, greater purchasing power, and urbanisation. Indias per capita revenue from the apparel market stands at approximately US$ 73.19. The volume of the apparel market in India is expected to reach 40.1 Bn pieces by CY 2028, with a volume growth of 3.7% anticipated in 2025.

Non-luxury apparel dominates the market, with 99% of sales in India attributed to this category by CY 2024, indicating the price sensitivity and value-driven preferences of Indian consumers.The urban market, contributing 60% of total demand, is largely driven by major citieslike Delhi NCRand Mumbai,withgrowing demand from Tier II and III cities accounting for 57% of urban demand. The expansion of e-commerce and online shopping platforms, along with the rise of brick-and-mortar formats like Exclusive Brand Outlets (EBOs) and Large Format Stores (LFS), further supports the market growth. Overall, favourable economic conditions, demographic shifts, and evolving consumer preferences are supporting the growth ofthe Indian apparel market, while the focus on sustainability and ethical production aligns with global trends, positioning India as a key player in the global apparel industry.

Source: [https://www.statista.com/outlook/cmo/ apparel/india. Technopak Analysis]

Competition within the Indian apparel retail market is fierce, characterised by the presence of domestic and international brands \/ying for market dominance. The success of the market hinges on offering compelling products, creating immersive shopping experiences, and implementing effective marketing strategies to captivate consumers. Additionally, embracing omnichannel approaches, including e-commerce and mobile applications, is crucial as consumers seamlessly navigate between offline and online channels.

Source: [India Retail Outlook2024, CBRE Research]

WOMEN APPAREL MARKET IN INDIA

The women apparel market is expected to grow annually at a compound annual growth rate (CACR) of 3.99% from CY 2024 to CY 2028. Analysing the per capita figures, in 2024, the revenue generated per personin Indiaswomensapparel market is US$35.41. By CY 2028, the volume in this market is expected to reach 15.1 Bn pieces, with an anticipated volume growth of 3.9% in CY 2025. The average volume per person is projected to be 9.0 pieces in CY 2024.

Overall, the womens apparel market in India shows robust growth prospects, driven by both an increase in consumer spending and a sustained interest in traditional attire. This segments performance reflects broader economic trends and cultural factors influencing consumer behaviour in India.

Source: [https://www.statista.com/outlook/cmo/ apparel/women-s-apparel/indial

KEY GROWTH DRIVERS Government Intervention

Budgetary Allocation for FY 2024-25

In the Interim Union Budget announced for FY 2024- 25, the Ministry of Textiles witnessed a substantial increase of approximately 27.60% in allocation compared to the previous year, with a total budget of? 4,392.85 Crores, up from ? 3,443.09 Crores.

• Procurement of Cotton: ? 600 Crores was allocated for Cotton Corporation of Indias price support scheme, responding to the slump in cotton prices, contrasting with minimal allocation in the previous fiscal year.

• Scheme Allocations: Increased funding for handicraft development, the National Technics

Textiles Mission, and the PM MITRA scheme was noted.

• Rebate Scheme: Allocation for the RoSCTL scheme, providing rebates on state and centra taxes for apparel and garment exports, rose from ? 8,404.66 Crores to ? 9,246 Crores.

• Export Promotion: Despite a reduction in export promotion funds from ? 59 Crores to ? 5 Crores, the extension of the RoSCTL scheme until March 2026 was welcomed by the textile industry for providing stability in policy planning.

Source: [https://indiashippinanews.com/textile- industrv-addresses-interim-budaet/1

PM-Mega Integrated Textile Region and Apparel (MITRA) Park Scheme

Launched in 2023, this initiative aims to establish seven textile parks with state-of-the-art infrastructure, common utilities, and R&D labs over a three-year period. These parks will be established on both greenfield and brownfield sites, indicating a comprehensive approach to utilising available land resources. With a significant budget of ? 4,445 Crores allocated for the initiative, it demonstrates the Governments commitment to investing in the development of the textile industry.

Scheme for Capacity Building In Textile Sector (SAMARTH)

SAMARTH, a flagship initiative under the Indian Government, addresses the textile sectors skilled manpower needs. Aligned with ‘Skill India, it offers demand-driven, placement-oriented skilling programsto boost job creation. Approved until March 2024, it targets training 10 Lakhs individuals over three years (2017-2020), emphasising skill promotion in traditional sectors and providing sustainable ivelihoods nationwide.

Source: [https://samarth-textiles.aov.in/1 Roadmap for Textiles Production and Exports

The Government has discussed a roadmap to achieve the target of US$ 250 Bn in textiles production and US$ 100 Bn in exports by CY 2030. This ambitious goal aims to drive industry growth, boost exports and position India as a key player in the global textile market.

Source: [https://www.investindia.gov.in/sector/ textiles-apparell

Young Demography

India boasts a vibrant demographic landscape, with a median age of 28.7 years in FY 2022-23, setting it apart asa dynamic market with ayouthful consumer base. This demographic dividend propels Indias stature as a burgeoning market, surpassing even developed economies in retail consumption trends.

Source: [World Population Review, Technopak

Analysis]

Increasing Urbanisation

The rapid pace of urbanisation in India serves as a critical catalyst for economic growth, with urban areas contributing a significant 63% to the countrys GDP. By FY 2024-25, an estimated 37% of Indias population, totalling 519 Mn individuals, is projected to inhabit urban centres. This urbanisation wave signifies a substantial market opportunity, allowing businesses to capitalise on the evolving needs and preferences of urban consumers.

Source: [World Bank]

Crowing Middle Class

The growing middle class, characterized by a surge in households earning between US$ 10,000 to US$ 50,000 annually, fuels increased expenditure across various discretionary categories, including apparel. This trend reflects upward mobility, with lower-income households transitioning into the middle class due to rising incomes.

Source: [EIU, Technopak Analysis]

Womens Workforce Empowerment

The Labor Force Participation Rate (LFPR) for women aged 15 years and above in India has been on a steady rise, reaching 49.9% during October- December 2023 from 48.2% during the period in the previous year. As women gain greater financial independence, the demand for professional attire is growing, particularly among millennial women who wield more financial autonomy and decisionmaking power, driving significant contributions to the womens apparel market.

Source: rhttps://pib.gov.in/PressReleaselframePaae.

aspx?PRID=2005297l

Integration of Virtual Reality

The integration of virtual reality to enhance the shopping experience represents a pivotal trend

shaping the growth trajectory of the womens apparel market. Virtual shopping experiences enable consumers to virtually try on garments, confirming fit, style, and colour before making a purchase. This innovative technology not only enhances consumer convenience but also addresses issues related to sizing and product returns.

Increasing Fashion Consciousness

The proliferation of social media and fashion influencers has sparked a surge in fashion consciousness among women. They are now more attuned to the latest trends, styles, and brands, resulting in a heightened demand for diverse fashionable clothing options.

Omnichannel Approach

By adopting omnichannel strategies and platforms, such as physical stores and e-commerce, brands are enhancing customer engagement by providing seamless access to clothing information and captivating content. The rapid expansion of e-retai in India is projected to continue, with a compound annual growth rate (CAGR) of 27%, reaching US$163 Bn by CY 2026.

Consumer Shift from Unbranded to Branded Bottom Wear

Consumers are increasingly shifting from unbranded to branded bottom wear due to several factors, such as the desire for better quality, durability, fashion trends, social status, and peer influence. The textile industrys growth, increased consumer awareness, and changing economic conditions have significantly contributed to this trend.

SWOT ANALYSIS

Strengths

1. India has a large and rapidly growing womens apparel market driven by rising incomes, increasing urbanisation,and ayoung population.

2. India is self-sufficient in raw materials, especially natural fibres like cotton, which is a major strength for the womens apparel industry.

3. India has a large pool of low-cost skilled labour suitable for the labour-intensive womens apparel manufacturing.

4. The predominantly small-scale manufacturing setup allows the womens apparel industry to be more adaptable and flexible in handling smaller and more specific orders.

Weaknesses

1. The industry is highly fragmented with many small and medium-sized players, limiting economies of scale.

2. Many players, especially the smaller ones, lack access to modern technology and machinery, impacting productivity and quality.

3. Inadequate infrastructure like power supply, transportation, and logistics hampers the efficient functioning of the industry.

Opportunities

1. The expanding middle class with rising disposable incomes and evolving fashion preferences offer immense growth opportunities.

2. The rapid growth of organised retail, both offline and online, provides a significant opportunity for the womens apparel industry.

3. With the right policies and support, the industry can significantly increase its exports to global markets.

Threats

1. The industry faces intense competition from other low-cost manufacturing hubs like Bangladesh, Vietnam, and China.

2. Volatility in prices of raw materials like cotton can impact the profitability of players.

3. Shifts in global trade policies and regulations can affect the industrys export competitiveness.

COMPANY OVERVIEW

Co Fashion (India) Limited is a leading company in

the Indian womens bottom-wear market, holding

an 8% market share in branded womens bottom- wear. The Companys brand, ‘Co Colors, well-known for itsquality and innovation, was founded in 2010 by Prakash Kumar Saraogi, Cautam Saraogi and Rahul Saraogi, and is headquartered in Chennai. CFIL has pioneered the design, development, sourcing, marketing, and retailing of a wide range of womens bottom-wear products, thus identifying and tapping into its untapped potential. The Company caters to various categories such as western wear, fusion wear, ethnic wear, athleisure, and denim, serving women and girls of all age groups and sizes. CFILs direct-to-consumer approach ensures it delivers premium products at competitive prices, making the Company a trusted and preferred choice in the market.

Highlights of the Year

In FY 2023-24, Co Fashion experienced significant growth, with net revenues, increasing by 15% from ? 6,653 Mn in FY 2022-23 to ? 7,628 Mn in FY 2023-24. Revenue was primarily driven by the strong performance of Exclusive Brand Outlets (EBOs), which contributed approximately 73.2% to the overall revenue. Large Format Stores (LFS) were the second-largest contributor, accounting for 21% of sales. The online channel accounted for 2.9% of revenue, with one-third of online sales coming from the Companys own website.

The Company continued its strategic expansion, with net additions of 84 EBOs and 439 LFS doors, bringing the total to 714 EBOs and 2,189 LFS doors. Despite flat same-store sales growth (SSSC), strategic pricing and a favourable sales mix, including an increase in average selling price, helped maintain market resilience.

Co Fashion demonstrated strong financial management, generating a strong positive operating cash flow (OCF) of ? 111.0 Crores in FY2023-24, a substantial increase from ? 19.5 Crores in FY 2022-23 on a pre-IND AS 116 basis. This significant improvement in cash flow generation highlights the Companys ability to effectively manage working capital and convert operations into cash, supporting its overall financial performance and growth strategy.

Key Ratios

Particulars	FY 2023-24	FY 2022-23
Debt-equity ratio (%)	0.78	0.65
Debtors turnover (days)	38	40
Inventory turnover (days)	104	126
Debtors turnover	10.07	10.05
Inventory turnover(%)	3.42	3.36
Interest coverage ratio (x)	6.20	7.46
Current ratio (x)	3.96	3.56
Cross margin (%)	61.7	60.7
EBITDA margin (%)	31.8	31.9
Net profit margin (%)	10.9	12.4

Outlook

The Company is committed to strategic expansion and operational excellence, following the COCO model for optimal control. CFILs focus includes expanding its Exclusive Brand Outlet (EBO) network, particularly in Tier II and Tier III cities, and deepening its presence in the South and West, while also growing in the North and East. The Company plans to add 120-150 EBOs annually. This approach will reduce working capital needs and boost cash flow. The Company aims for sustained profitability, leveraging technology for cost efficiency and enhanced customer experience, and do not foresee raising external funding for growth.

Risk Management

GFILs Risk Management Committee is dedicated to swiftly identifying and addressing risks. Recognising that risk isan integral aspect of business, theCompany is committed to proactive risk management.

Raw Material Risk: Fluctuating raw material costs could impact the business.

Mitigation: Mitigating resource volatility by

passing cost increases to customers. Raw material costs represented 33% of revenues in FY 2023-24, compared to 33% in FY 2022-23.

Competition Risk: New competitors entering the market could affect profitability.

Mitigation: Leveraging a broad product range (4000+ SKUs), innovative products, strong brand recognition, and operational efficiency.

Trend Risk: Failure to meet consumer preferences could impact the business.

Mitigation: Focusing exclusively on a diverse range of bottom wear products and investing in product development and innovation.

Quality Risk: Poor product range, quality, and manufacturing inefficiencies could harm the business.

Mitigation: Partnering with top-tier suppliers, maintaining a strong quality control team, and ensuring a robust distribution network to uphold product quality.

Customer Attrition Risk: Losing customers could reduce revenues and profits.

Mitigation: Offering a diverse product portfolio, catering to various categories and body types, and providing over 50+ styles of bottom wear in more than 120+ colours.

Supply Chain Risk: Supply chain disruptions, such as delays in receiving raw materials or finished goods, could impact production and inventory management.

Mitigation: Implementing robust supply chain management, maintaining alternative sourcing options, and building strong relationships with reliable suppliers.

Economic Risk: Economic downturns or changes in consumer spending could reduce demand for apparel products.

Mitigation: Conducting market research to

understand consumer trends, diversifying product offerings, and implementing adaptable pricing strategies.

Operational Risk: Operational inefficiencies,

including poor inventory management, inadequate staffing, or operational errors, may affect productivity and customer satisfaction.

Mitigation: Implementing effective inventory

management systems, investing in employee training, and establishing stringent quality control measures to improve operational efficiency and reduce errors.

Internal Control Systems and Their Adequacy

CFIL prioritises the maintenance of effective internal controlsystemsandensuresadherenceto established regulations.The Company has implemented a robust internal audit system that is continuously monitored and updated to protect our assets and promptly address any issues. CFILs internal auditors reports are regularly reviewed by the Audit Committee, which takes note of any observations and enacts necessary corrective measures. The Committee maintains open communication with both statutory and internal auditors to ensure the smooth operation of the Companys internal control systems.

Human Resources

Go Fashions strong FIR practices are crucial to its success and leadership. As of March 31, 2024, GFIL employed 5,000 people.The Company invests heavily in comprehensive training programmes, including both formal and informal methods, as well as on-the- job learning initiatives. The Companys commitment to employee engagement is demonstrated through a rich workplace environment, stimulating job roles, and ongoing dialogue at all levels.

Cautionary Statement

This section outlines the Companys goals, projections, expectations, and estimations, which may include ‘forward-looking statements as

defined by applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. The Company cannot guarantee the accuracy or realisation of these assumptions and expectations. Actual results may differ significantly from those projected due to external factors beyond the Companys control. The Company assumes no obligation to publicly update or revise any forward-looking statements based on subsequent developments, information, or events.