INDUSTRY AND ECONOMIC OVERVIEW:
Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10% of the countrys gross domestic product (GDP) and around eight% of the employment. India is the worlds fifth-largest global destination in the retail space. India ranked 73 in the United Nations Conference on Trade and Developments Business-to-Consumer (B2C) E-commerce Index 2019. India is the worlds fifth-largest global destination in the retail space and ranked 63 in World Banks Doing Business 2020.
India is the worlds fifth-largest global destination in the retail space. In FDI Confidence Index, India ranked 16 (after US, Canada, Germany, United Kingdom, China, Japan, France, Australia, Switzerland, and Italy).
INDIAN RETAIL INDUSTRY: -
The Retail sector in India has seen a lot of investments and developments in the recent past. Indias retail trading sector attracted US$ 3.96 billion FDIs between April 2000-March 2022.According to data released by the Ministry of Statistics & Programme Implementation (MoSPI), Indias Consumer Price Index (CPI) based retail inflation increased to 7.04% YoY in May 2022 on the back of the base effect and cheaper food prices.
In June 2022, Reliance Brands Limited inks a JV with plastic legno spa to strengthen toy manufacturing ecosystem in India.In June 2022, Aditya Birla Group formally launches TMRW - a Digital First House of Brands venture in the Fashion & Lifestyle space. In May 2022, Reliance brands limited (rbl) partnered with Tods S.p.A, the iconic Italian luxury brand to become the official retailer of the brand across all categories including footwear, handbags and accessories in the Indian market.In FY 2021-22 (till 20th March 2022) total number of digital payment transactions volume stood at Rs. 8,193 crore (US$ 1.05 billion).Retail tech companies supporting the retail sector with services such as digital ledgers, inventory management, payments solutions, and tools for logistics and fulfillment are taking off in India. In the first nine months of 2021, investors pumped in US$ 843 million into 200 small and mid-sized retail technology companies, which is an additional 260% of capital compared to the entire 2020.
Department for Promotion of Industry and Internal Trade announced that it is working on a regulatory compliance portal to minimize burdensome compliance processes between industries and the government.In October 2021, retailers in India increased by 14% compared with last year.The Indian retail trading has received Foreign Direct Investment (FDI) equity inflow totalling US$ 3.61 billion during April 2000-June 2021, according to Department for Promotion of Industry and Internal Trade (DPIIT).With the rising need for consumer goods in different sectors including consumer electronics and home appliances, many companies have invested in the Indian retail space in the past few months.
BUSINESS OUT LOOK:
As per Kearney Research, Indias retail industry is projected to grow at 9% over 2019-2030, from US$ 779 billion in 2019 to US$ 1,407 billion by 2026 and more than US$ 1.8 trillion by 2030. Revenue of Indias offline retailers, also known as brick and mortar (B&M) retailers, is expected to increase by Rs. 10,000-12,000 crore (US$ 1.39-2.77 billion) in FY20. Indias direct selling industry is expected to be valued at US$ 2.14 billion by the end of 2021. E-Retail has been a boon during the pandemic and according to a report by Bain & Company in association with Flipkart How India Shops Online 2021 the e-retail market is expected to grow to US$ 120-140 billion by FY26, increasing at approximately 25-30% p.a. over the next 5 years.
India has the third-highest number of e-retail shoppers (only behind China, the US). The new-age logistics players are expected to deliver 2.5 billion Direct-to-Consumer (D2C) shipments by 2030. Online used car transaction penetration is expected to grow by 9x in the next 10 years.
The Year under review the company achieved a negative growth in topline and the bottom line. Last year the company was plagued with delays in store operations due to covid induced lockdowns and restriction and hence the decline numbers in topline . The business was impacted more by the second and third waves as compared to the first wave of covid. However the management is confident of returning to topline growths in the current year.
The company is in a continuous approach to achieve highest standards of operational efficiency. The company has this year took on job work basis manufacturing facility to start its own production. With more 80 machines available to the company on job work basis we shall be able to handle its own brand manufacturing and scale the same. With own brands available in the market and on the website the company would be able to improve its margins.
CUSTOMER AND MARKETING OVERVIEW
The company continues to run a lot of marketing and promotion scheme across the year. The company in the current year had spent above 12 Million rupees with Facebook and google in the year as its promotion and advertising spends. During the year the company also carried out a lot of outdoor media advertising and marketing which has help develop the brand further.
INTERNAL CONTROLS AND THEIR ADEQUACY
The Company had identified the key risks and control process to mitigate the same. Further, the Company continues this process of Enterprise Risk Management in order to identify the new risks and to define and establish the control process to mitigate the identified risks. Further, the Internal Control Framework for financial reporting, organization structure, documented authorities and procedures and internal controls are being reviewed on continuous basis and any issues arising out of the said are addressed appropriately.
The Company is continuously upgrading its internal control systems by measuring state of controls at various locations. Controls in backend system have been strengthened.
India is the fifth largest preferred retail destination globally. The sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also intier II and tierIII cities.
The organised Indian retail industry has begun experiencing an increased level of activity in the private label space. The organised retail sector is forecast to witness strong growth in the coming years.
The share of private label strategy in the US and UK markets is 19% and 39%, respectively, while its share in India is just 6%. Stores like Shopper Stop and Lifestyle generates 15 to 25% of their revenue from private label brands.
Indias price competitiveness attracts large retail players to use it as a sourcing base.
Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and are moving from third-party buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying offices.
Luxury retailing is gaining importance in India. This includes gourment retailing, accessories and jewellery among many others. Luxury market of India is expected to grow to US$ 30 billion by the end of 2020 from US $ 23.8 billion in 2017, Supported by growing exposure of international brands among Indian youth and higher purchasing power of the upper class in tier II and III cities, according to ASSOCHAM.
And we at Nivaka we feel we are rightly placed to take advantage of this opportunity.
RISKS AND THREATS
The state of external environment, including factors like interest rates, inflation, growth in economic activity, rationalization of tax structure, job creation and consumer sentiment continues to be the biggest source of threat as well as opportunity for the Company. Any slowdown in the economic activity in the Country, significant job losses or high rates of inflation can severely impact the consumption and therefore growth of the Company.
The company has clocked in an EPS of Rs. 0.03 this year as compared to 0.06 in the last year.
REVIEW OF FINANCIAL PERFORMANCE OF THE COMPANY FOR THE YEAR UNDER REVIEW
|Profit Before tax||30.59||59.56|
Statement in the Management discussion and Analysis describing Companys objective, projections, estimates, expectations 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 a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic markets in which the Company operates changes in the Government regulations, tax laws, statute and other incidental factors.