Indian Terrain Fashions Ltd Management Discussions.

Economy Overview:

The Indian economy began the FY19 with a healthy 8.2 percent growth on the back of domestic resilience. Growth eased to 7.3 percent in the subsequent quarter due to rising global volatility, largely from financial volatility, normalised monetary policy in advanced economies, externalities from trade disputes and investment rerouting. Further, the Indian rupee suffered because of the crude price shock and conditions exacerbated as recovery in some advanced economies caused faster investment outflows. Despite softer growth, the Indian economy remains one of the fastest growing and possibly the least affected by global turmoil.

The Indian economy is likely to sustain the rebound in FY2018-19 - growth is projected to be in the 7.2 percent to 7.5 percent range and is estimated to remain upward of 7 percent for the year ahead. This is achievable due to the sustained rise in consumption and a gradual revival in investments, especially with a greater focus on infrastructure development. The improving macroeconomic fundamentals have further been supported by the implementation of reform measures, which has helped foster an environment to boost investments and ease banking sector concerns. Together, these augur well for a healthy growth path for the economy.

Real GPD Growth rates (quarterly precentage change year to year).

Note: Estimates for 2018 – 19 have been taken from the budget. Source: CEIC; Deloitte.

Economic momentum which started in April is expected to remain steady this fiscal year. The economy remains vulnerable to domestic and geopolitical risks, especially economic and political changes that can affect relative prices and hurt current and fiscal account deficit. While expectations of inflationary pressures remain benign, concerns have risen on the twin deficit problem—current account deficit and fiscal deficit.

With key economic policies on track, the government is likely to focus on faster policy implementation in the year ahead, with a greater focus on infrastructure development. Government push may encourage muted private investors to participate, thereby fostering private sector expenditure and boosting investments. Investments and growth follow a similar pattern, and investments make up a crucial component for overall growth optimization.

Global Apparel & Textile Industry:

As per the Confederation of Indian Textile Industry (CITI) dated Dec 2018, the Global apparel and textiles industry is anticipated to grow at $1,209 bn in the year 2030 from $784 bn in 2017, of this, apparel market is expected to grow at 4.5% CAGR for the next 12 years. India has a very miniscule share of trade in global apparels, which is around ~4% or $17bn, this share however will change in the years to come and is anticipated to increase to another 400-500bps by the year 2030. One of the biggest advantage an economy like India holds is its strong labour force which makes it conducive to providing complete service offering in comparison to other nations who do not have a solid labour pillar. Although India does face competition from countries like China and Bangladesh, it is one of the countries with strong value chain capabilities for the textile industry.

Indian Apparel Industry:

The Indian Textiles and Apparel (T&A) industry accounts for approximately 4% of the global T&A market. Out of this, the Indian Apparel market has been growing in excess of 5.5% on a yearly basis and is expected to rise to about ~7% over the near future.

The T&A 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 Indian readymade garments/apparels (RMG) industry is the largest segment of the Indian T&A industry accounting for approximately 50% of the total industry. The T&A industry contributes approximately 7% to industrial output in value terms, 2% to the GDP and 15% to the countrys export earnings. It also provides direct employment to over 45 million people and is the second largest provider of employment after agriculture. As per the WTO in its World Trade Statistical Review 2018, India is ranked as the 5th largest exporter of RMG in the world.

The apparel industry (domestic + export) in India grew at a CAGR of 13% from Rs. 2,432 bn in FY10 to Rs. 6,484 bn in FY18. The growth can be attributed to:

• Rising per capita disposable income

• Changing fashion trends

• Growing consumer class

• Rising urbanization

• Increasing retail penetration

• Growing service class and

• Increasing share of the designer wear

Note: PFCE Clothing at current price considered as a proxy for domestic market Source: CMIE

The domestic Indian apparel market can be broadly classified into mens wear, womens wear and kids wear. Currently, mens wear holds the largest share in the apparel market. It accounts for 41% of the market. Womens wear contributes almost 38%, while kids wear contributes the balance 21% of the market

Mens Wear Market:

Mens wear is the largest segment (41%) in the apparel market. Mens wear comprises of shirts, trousers, suits, t-shirts, fitness wear, undergarments and others. Shirts comprises as the largest sub-segment. Mens wear consumers are in a phase of transition; they no longer want to stick to wearing apparel of defined styles and silhouette but also want to experiment with the look of the clothing. The demand for occasion-specific clothing is rising within the mens wear segment.

Womens Wear Market:

Womens wear contributes (38%) in the apparel market. Ethnic is the largest sub-segment in womens wear category. The growth in the segment is attributed to rising income levels and the rising number of working women. The changing consumer preference and easy availability of RTW apparel in various colors, size and patterns, were the other drivers of demand in this segment

Kids Wear Market:

Kids wear contributes 21% to the apparel market. It is the fastest growing segment in the apparel market. Boys wear enjoys slightly higher market share as compared to girls wear. Uniforms form the largest sub segment of the same.

The domestic apparel market can also be broadly divided by price into super premium, premium, medium, economy, and value segments. Demand for various apparel categories varies substantially across the country. The urban metro market comprising of cities such as Delhi NCR, Mumbai, Bangalore, Chennai, etc., is the biggest market for apparel in India and contributes over 20% to the Indian apparel market. Considering that less than 20% of Indias population lives in these cities this indicates the higher purchasing power in urban areas and frequency of purchases.

The apparel market in India is rapidly evolving with a shift in consumer tastes towards branded apparel providing strong investment opportunities. The branded apparel segment to outpace the industry growth rate by 1.5x and reach to US$ 30 bn by 2021.

The apparel industry is largely consumption-driven and therefore, the economic cycles have a direct impact on the performance of the industry. The industry now stabilising post the demonetisation and the implementation of the goods and service tax (GST) regime, the demand from both domestic and international markets, has picked up. Higher purchasing power leads to increased spending, thereby driving the demand for apparels and home textiles, while during the economic slowdown, the spending power and in turn consumption decreases.

Key Government Initiatives:

• In March 2019, the Central government approved a scheme to rebate State and Central Embedded Taxes for apparels and made-ups exports

• The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for Readymade garments and Made ups - from 2% to 4%.

• The Government of India has increased the basic custom duty to 20% from 10% on over 500 textile products to boost indigenous production and the Make in India program.

• The Amending Technology Up-gradation Fund Scheme (A-TUFS), is estimated to create employment for 35 lakh people and enable investments worth Rs 95,000 crores by 2022.

• The Government of India has approved a skill development scheme named ‘Scheme for Capacity Building in Textile Sector (SCBTS) with an outlay of Rs 1,300 crores from 2017-18 to 2019-20.

• The Union Ministry of Textiles, Government of India, along with Energy Efficiency Services Ltd (EESL), has launched a technology up gradation scheme called SAATHI (Sustainable and Accelerated Adoption of Efficient Textile Technologies to Help Small Industries) for revive the power loom sector of India.

Company Overview:

Indian Terrain Fashions Ltd, (ITFL) incorporated in 2009, was initially a division of Celebrity Fashions Limited. However post September 2010, ITFL was demerged from the parent Company. Indian Terrain Fashions Ltd is one of the leading ready-made garment retailers in India with a presence across 200+ towns and cities in India in the mens wear, boys wear and fashion accessories in the domestic market sold through a combination of Direct to Consumer and Wholesale channels. Product categories include shirts, trousers, t-shirts, jeanswear, shorts, sweaters and accessories like belts, bags, wallets and socks, etc.

As on FY19, ITFL recorded revenue of Rs 422 crores registering a growth of 5.2%. The momentum of growth was witnessed across both the business of Mens and Boys wear. Growth of Mens wear came out of expanded product offerings and Boys wear on account of aggressive product and pricing strategy. Boys wear contributed to around 10% of the overall revenues . Revenue growth was broad based across channels. Direct to consumer channels grew 3.1% during the FY19. EBO to be the key focus channel on asset light franchised model. E-Commerce grew 175% strongly across platforms and has continue to be a focus Channel for future.

In order to strengthen and reinforce the reputation of Indian Terrain, your Company has continued to invest in promoting the brand through the various marketing initiatives which has led to an increase additional demand and create has a top of the mind brand recall which can be witnessed through the sales in this fiscal year.

We endeavor to continue with our brand building exercises and increase customer engagement and enhance the overall experience through the use of our offerings and customer loyalty programs and continued strong focus on digital platforms and strong social media connect with consumers. We expect these initiatives to pay out in the form of increased brand awareness, acquire customers, and increase customer traffic to the various stores.

ITFL being a contemporary mens wear and boys wear apparel brand priced in mid to premium range, targeting the upper and middle-class consumers. With rising youth population preference for casual wear among men on this style of clothing, resulted in increased demand for Smart Casuals

ITFL being uniquely positioned, to cater to the working population between 25-45 years, has managed to differentiate itself with its designs and superior quality products. Indian Terrain has been prudent in establishing itself as a niche category within a fragmented industry.

Company Strategy Going Ahead:

• Increased investments in marketing to strengthen brand visibility.

• Focus and build on Direct to consumer channels and E-com.

• Invest in Brand Marketing significantly

• Improve operational efficiencies and returns to the stakeholders

Our Value Chain:

Indian Terrain Fashion Ltd value chain can be summarized from the above. Each process is interlinked and play a vital role in the final outcome of the apparel.

The design team is in-house and oversees the product designs which are aligned to the brand of Indian Terrain. This is foremost one of the precursor and key functions of the Apparel process. ITFL has been first of a kind to launch hem shirts, khakis, slim-fit cotton shirts, slim-fit chinos thus meeting the growing customer needs creating a solid customer base

The approval runs follows the procurement of fabrics from reputed mills, ITFL has built a strong network and relation and thus, has barging power among its suppliers. As quality is a key norm for apparels, Indian Terrain has its own in-house Procurement team which watches over quality and comfort standards that have been defined for the brand. To maintain uniformity in the quality standards, each stage is monitored closely, for e.g. fabric and garment package testing, etc. Post the design specifications and the procurement the manufacturing of the garment is outsourced. This is what makes Indian Terrain an Asset light model maintaining laser-focus on critical factors of quality and brand equity and which is why ITFL does not invest in capacities. Post this process, pre-production and sample sizes are tested and followed up with a Final inspection, after which a warehouse check is done.

Sales and distribution of products are effected through fairly good presence across the country with presence in around 250+ large towns through 161 exclusive doors, 380+ departmental stores and over 1400 + multi-branded outlets in addition to leveraging the online platforms.


For the Year ended
Particulars 31st March, 2019 31st March, 2018
Revenue 422.37 401.45
EBITDA 53.81 50.36
Finance costs 8.46 7.04
Depreciation 5.54 4.22
Earnings before tax 39.81 39.10
Current tax 13.89 6.84
Deferred tax 0.21 6.82
Excess)/short fall of previous year - -
Net profit 25.71 25.44
Other comprehensive income for the year (0.06) (0.25)
Total comprehensive income for the year 25.65 25.19
Earnings per Share (in Rs.)
6.78 6.71
• Basic
• Diluted 6.78 6.71


Particulars For the Year ended
31st March, 2019 31st March, 2018
Debtors turnover ratio 1.8 2.2
Inventory turnover ratio 6.2 5.0
Interest coverage ratio 5.4 6.2
Current ratio 2.1 2.1
Debt equity ratio 0.14 0.19
EBITDA margin 12.0% 11.9%
Operating profit margin 10.7% 10.9%
Net profit margin 6.1% 6.3%
Return on net worth 11.2% 12.5%
Return on average capital employed 17.3% 17.9%

Details of significant changes (i.e, change of 25% or more as compared to the previous financial year) in the key financial ratios: Debt to Equity Ratio – Ratios have improved due to better operational efficiency and lower debts.

Internal Controls and Risk Management:

The Company has developed adequate internal control system commensurate to its size and business to ensure that all assets are safeguarded and protected against any loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly. The internal audit reports are periodically reviewed by the Management together with the Audit Committee of the Board.

Business risk evaluation and mitigation is an ongoing process. The Board has constituted the Risk Management Committee for identification, evaluation and mitigation of operational, strategic and external risks. The Committee has the overall responsibility for monitoring and reviewing the Risk Mitigation plans. Details of the composition of the Risk Management Committee are disclosed as part of Corporate Governance Report.

Human Resources:

The company had 567 employees as on 31st March, 2019. Your company firmly believes that talent is the driving force behind successful business. Accordingly, the company continuously invests, evaluates and improves development of human capital efforts. The top priorities of the Company include measures for employees safety, their welfare and development. The company follows a targeted approach in training, appraisal and retention of leaders and other employees.


Statement in this Management Discussion and Analysis 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 materially differ from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, global demand-supply conditions, changes in governmental regulations and tax structure, economic structure within India and the countries with which the Company has business contacts and other incidental factors. The following discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.

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