INDIAN ECONOMY REVIEW
As per the Central Statistical Office (CSO), the Indian economy grew by a strong 8.7%
in the fiscal year 2021-22, against a contraction of 6.6% in financial year 2020-21. This
dramatic reversal that is unseen among large major economies of the world implies that
overall economic activity has recovered past the pre-pandemic levels. Almost all
indicators demonstrate that the economic impact of the second wave of the virus in Q1 of
2021-22 fiscal was much smaller than that experienced during the full lockdown phase in
2020-21. This also exhibits the sheer resiliency of the economy to bounce back after a
major shock event that has left much of the world paralysed.
The CSO has indicated that GVA (gross value added) during fiscal year ending March 2022
was at 8.1%, as compared to a contraction of 4.8% in the previous year. Furthermore, as
far as the major constituents of the economy are concerned, the agriculture sector slowed
to 3% in 2021-22, after growing 3.3% in the previous year. While the mining and quarrying
sector grew by 11.5% in FY 2021-22, against a contraction of 8.6% in the previous fiscal
year, manufacturing also expanded at a good pace of 9.9%, as against -0.6% in the previous
year. Moreover the services sector was up by 11.1% during 2021-22, as against a
contraction of 202.2% recorded in the previous financial year. Total consumption expanded
by 7% in 2021-22. The primary factor attributable to this is the significant contributions
from government spending, especially in the absence of private sector investment.
Similarly, gross fixed capital (GFC) formation exceeded pre-pandemic levels on the back of
ramped up public expenditure on infrastructure. This is amply evident in the over 35% YoY
increase in capex and proposed infrastructure spend of over Rs.10 lakh crore, as announced
in the Union Budget 2022-23, thus reinforcing the government’s commitment to using
infrastructure as a force multiplier for sustained economic growth. Furthermore, exports
of both goods and services have been exceptionally strong in 2021-22, with imports also
recovering strongly on the back of domestic demand resumption as well as higher
international commodity prices. Moreover, despite the disruptions caused by the global
pandemic, India’s balance of payments has remained in surplus throughout the last two
years. This has allowed the Reserve Bank of India (RBI) to keep accumulating foreign
exchange reserves, which stand at about US$ 600 bn. This is equivalent to about 12-13
months of merchandise imports and is higher than the country’s external debt. The
combination of high foreign exchange reserves alongside sustained foreign direct
investment (FDI) and rising export earnings will provide sufficient buffer against
possible global liquidity tapering in 2022-23. Besides, the government’s GST (Goods
and Services Tax) collections have also been robust, indicating healthy recovery of the
corporate and trade, services and business sectors. The average monthly gross GST
collection for the last quarter (Q4) of FY 2021-22 has been Rs. 1.38 lakh crore, against
the average monthly collection of Rs. 1.10 lakh crore, Rs. 1.15 lakh crore and Rs. 1.30
lakh crore in the first, second and third quarters, respectively. Additionally, the gross
GST revenue collected in the month of March 2022 was Rs. 1.42 lakh crore, which is an
all-time high breaching the earlier record of Rs. 1.40 lakh crore collected in the month
of January 2022.
The Production-Linked Incentive (PLI) scheme of the government is a major initiative
aimed to uplift MSMEs and enhance manufacturing GVA from the current 16.5%, and is likely
to unlock about $520 bn in the country’s output over the medium-term. Further, India
is being increasingly seen as a viable alternative sourcing destination by global
corporations adopting a ‘China+1’ strategy to de-risk their supply chain, thus
embedding the country deeper in global value chains. India is being increasingly seen as a
viable alternative sourcing destination by global corporations adopting a
‘China+1’ strategy to de-risk their supply chain, thus embedding the country
deeper in global value chains.
Despite the several positive developments in India, the global environment still
remains fraught with uncertainty. Runaway inflation is being exacerbated by the
Russia-Ukraine war and the COVID suppression policy of China that has called for strict
lockdowns, thus disrupting global supply chains. Further, at the time of drafting this
report, the Monetary Policy Committee (MPC) of the RBI had already increased the benchmark
policy rate (repo rate) by 40 bps to 4.4% with immediate effect, and also hiked the cash
reserve ratio (CRR) by 50 bps to 4.5% effective May 21, 2022 in an off-cycle meeting, thus
withdrawing its accommodative stance witnessed during the pandemic. This is being seen as
a measure to control inflation that is above the RBI’s target range. Nonetheless,
with the vaccination program, which is to be seen as a key economic indicator, has covered
the bulk of the Indian population and with economic momentum building back and the likely
long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good
position to achieve GDP growth of 8-8.5% in fiscal 2022-23, as estimated by the 2022
Economic Survey.
INDUSTRY STRUCTURE AND DEVELOPMENTS
Textile and apparel industry
According to the Ministry of Textiles, Government of India, India’s textile
industry is one of the largest in the world with a huge raw material base and established
manufacturing strengths across the value chain. This makes the country the 6th largest
exporter of textiles and apparel globally. India’s textiles and clothing industry is
one of the mainstays of the national economy. The uniqueness of the Indian textile
industry lies in its strength, both in the hand-woven sector as well as in the
capital-intensive mill sector. The country’s mill sector is the second largest in the
world. Traditional sectors, including handloom, handicrafts and small-scale power loom
units are the biggest source of employment for millions of people in rural and semi-urban
areas, thus offering direct employment and livelihood opportunity to skilled and
semi-skilled workers, including a large number of women. The sector has strong alignment
with the government’s key initiatives of Make in India, Skill India, Women
Empowerment and Rural Youth Employment.
India recorded its highest-ever textiles and apparel exports in 2021-22 at USD 44.4
billion, as per the Ministry of Textiles, Government of India. The exports tally, which
also includes handicrafts, indicates a substantial increase of 41% and 26% over the
corresponding figures in FY 2020-21 and FY 2019-20, respectively.
In a major development for the domestic textiles sector, the government approved the
Production-Linked Incentive (PLI) Scheme for textiles, focusing on man-made fiber (MMF)
apparel, MMF fabrics, and products of technical textiles to enhance India’s
manufacturing capabilities and exports. The scheme has an approved financial outlay of Rs.
106.83 billion over a five-year period. While the notification for the scheme was issued
on September 24, 2021, operational guidelines for the PLI Scheme were issued on December
28, 2021.
Some of the key other initiatives of the government in support of the domestic textiles
and apparel sector include: l Technology aid through the Amended
Technology Fund Upgradation Scheme (ATUFS) with an outlay of Rs. 17,822 crore that aims to
mobilise new investments of about Rs. 95,000 crore and create new employment for about 3.5
mn l Support for skilling through ‘Samarth’ that was
formulated under the broad skilling framework adopted by the Ministry of Skill Development
& Entrepreneurship, with advanced features such as training of trainers, dedicated
call centre with helpline number, mobile app-based Management Information System (MIS),
on-line monitoring of the training process, etc. l Infrastructure
development via the PM-Mega Integrated Textiles Regions and Apparel Park (PM-MITRA)
launched in October 2021 to bolster India’s textile industry by way of enabling scale
of operations, optimising logistics cost by housing the entire value chain in a single
location, attracting investment, generating employment and augmenting export potential.
The government plans to set up 7 PM-MITRA Parks in greenfield/brownfield sites and has a
budgetary outlay of Rs. 4,445 crore for a period 2021-22 to 2027-28.
The Goverment of India supported the domestic Textile and Appearel sector through
Technology aid through the Amended Technology Fund Upgradation Scheme (ATUFS) with an
outlay of Rs. 17,822 crore.
l Textile Cluster Development Scheme (TCDS) that envisages developing
an integrated workspace and linkages-based ecosystem for existing as well as potential
textile units to make them operationally and financially viable. The total outlay of the
scheme is Rs. 853 crore for completing ongoing projects.
l Integrated Processing Development Scheme (IPDS) that aims to
facilitate the textiles industry to meet the required environmental standards and support
new Common Effluent Treatment Plants (CETP)/upgradation of CETPs in existing processing
clusters, etc.
Indian innerwear industry & Outlook
The Indian innerwear market is currently estimated to be worth Rs. 475 bn, accounting
for 9-10% of the total domestic fashion retail market. It is expected to grow at a CAGR of
13% during FY 2020-25 (Source : Dolat Capital).
Innerwear has graduated from being just a functional category to a category that offers
additional fashion quotient. With rising aspirations and disposable incomes, the innerwear
industry is witnessing a perceptible shift from a price-sensitive category to a
brand-sensitive category. This represents a major opportunity for branded players.
Furthermore, traditionally, the innerwear market was largely fragmented and unorganised.
Yet, over the recent years, the organised innerwear segment has shown promising growth in
both men’s and women’s categories, getting a thrust from rising brand
consciousness, need for added comfort, seamless availability offline and online, including
via easy access from several fashion e-comm players, and products being available across
diverse price points, thus suiting all budgets and expectations. Today, with the lifting
of COVID-induced lockdowns and rising mobility, the innerwear industry is likely to
witness huge pent-up demand. Furthermore, innerwear being a discretionary product,
consumers with rising discretionary incomes will likely accelerate purchase decisions,
thus giving an added impetus to overall demand. Over the long term, urbanisation, growing
disposable and discretionary incomes, and increasing consumer preference for branded
products, the innerwear industry is likely to emerge as a promising retail segment of the
future. The shift from unbranded to branded products and from the unorganised to the
organised players embodies a major structural demand driver for India’s innerwear
industry.
Indian innerwear market
| 2020 |
2025 (E) |
| Rs. 475 bn |
Rs. 876 bn |
CAGR 2020-2025 (E): 13%
Men’s innerwear segment
Men’s innerwear segment, which is currently estimated at Rs. 139 bn, is projected
to grow at a CAGR of 10.3% to reach a size of Rs. 226 bn by FY 25E. It contributes 29% of
total innerwear market and is characterised by the presence of numerous Indian and
international brands. The men’s innerwear segment is largely dominated by organised
players with about 60% of the market share (Source : Dolat Capital).
The current industry trends exhibit an inclination amongst Indian men to spend more on
innerwear, leading to continued growth in this category, especially in the premium, super
premium and luxury price segments. Though MBOs (multi brand outlets) are still considered
to be the most preferred channel for buying innerwear, organised retail
The current industry trends exhibit an inclination amongst Indian men to spend more on
innerwear, leading to continued growth in this category.
formats such as EBOs (exclusive brand outlets), departmental stores and LFS (large
format stores) are also gaining traction and popularity, as more and more brands enter
into the premium and luxury categories. Furthermore, the recent popularity of online
retail, especially for apparel shopping, has also permeated into the innerwear category,
providing much more exposure to the consumer. Online retail is also giving consumers the
accessibility to top brands in areas where these brands have no physical presence, thereby
opening up a new retail/demand channel for companies. Going forward, men’s innerwear
category is projected to expand at a 10.3% CAGR to reach a size of Rs. 226 bn by 2025 from
Rs. 139 bn in 2020, thus constituting about 26% of the total innerwear industry in
2025. The share of mid and premium product categories is expected to grow to 38% and 18%,
respectively in 2022, up from 35% and 16% in 2018. The share of the economy category is
projected to decline during this period from 47% to 41%. Sizeable opportunity exists in
terms of growing spends on innerwear and rising need for comfortable innerwear, even as
innovation in terms of new designs and materials also help sustain consumer interest.
Men’s innerwear market
| 2020 |
2025 (E) |
| Rs. 139 bn |
Rs. 226 bn |
CAGR 2020-2025 (E): 10.3%
Women’s innerwear segment
The women’s innerwear market to grow at a 14% CAGR vs. 10.3% CAGR for men’s
innerwear market, till 2025 (Source Dolat Capital). This is on account of women’s
innerwear segment possessing high growth potential considering low penetration and higher
share of unorganised/non-branded products. Thus, the industry expects growth in the
innerwear market to be driven by women’s segment at least over the next decade, as
branded players focus on capturing market share from the unorganised players and as women
from urban, semi-urban as well as rural areas prioritise comfort and protection through
innerwear. Furthermore, given a variety of design options and innovations, the
women’s innerwear segment, which is approximately 68% of the total innerwear market,
is more dynamic and includes a wider range of product offerings.
Thus, women’s innerwear market is likely to grow at a faster pace compared to
men’s innerwear segment, from Rs. 321 bn in FY 2020 to an estimated Rs. 621 bn in FY
2025. This growth in demand is attributable to growing number of working women and rising
fashion consciousness amongst women, especially on account of increased online exposure.
Women are becoming increasingly conscious about their intimate wear brands and styles, not
just in metros, but also in smaller towns and cities. In order to cater to the growing
demand, the industry has consistently launched new collections for women’s innerwear.
Furthermore, disruptive ad campaigns focused on raising awareness and dedicated women EBOs
assuring enhanced privacy have also helped expand the size of the market. As these trends
play out and as the market consolidates from being currently fragmented, women’s
innerwear offers tremendous market potential, with the size of this industry expected to
reach about 71% of the total innerwear market size in 2025.
Women’s innerwear market
| 2020 |
2025 (E) |
| Rs. 321 bn |
Rs. 621 bn |
CAGR 2020-2025 (E): 14%
Kids wear segment
The Indian kids wear market is highly unorganised and fragmented with a large number of
local MBOs and regional players. India has the world’s largest young population in
the age group of 0-14 years and accounts for as much as 27% of the total population.
Moreover, with growing trends of nuclear family system, increased spending on children and
rising brand awareness among children, the kids wear market in India, which is worth Rs.
1,022 bn in 2020, is expected to grow at a CAGR of 10% in the next 5 years.
Athleisure wear segment
Athleisure as a category was already gaining traction during the pre-COVID era and now,
owing to work from home as also growing fitness consciousness amongst consumers, the
segment is witnessing significant acceleration. India’s athleisure market is
estimated at Rs. 54,000 cr and is growing at 18-20% annually (Source : Philip Capital).
Athleisure is not just a fashion essential anymore; it has emerged as a medium for
expression and an insignia of the young and the young at heart. In India, the demand for
casual wear is rapidly escalating, as the modern Indian consumer does not wish to
compromise on comfort, functionality and looks. With rapid globalisation and the advent of
digital media, the spread of fashion across global cultures have picked up tremendous
pace. Consumers, ever connected and digitally aware, are constantly following
international trends, which has also given a boost to the domestic activewear/athleisure
segment.
Going forward, the benefits of athleisure apparel, like prolonged durability, improved
range of motion, breathability of material and superior comfort are some of the major
factors that will continue to influence the growth of the athleisure/ activewear industry.
Key trends observed in the innerwear industry
The future outlook of the Indian innerwear industry appears positive on account of
several factors as per a research by www.indiaretailing.com which includes:
l Shift from the unorganised sector to the organised segment,
especially with the unorganised players being weakened by the pandemic and thus also
having limited advertising and marketing power.
l Transition to branded innerwear products on the back of greater awareness
creation by the organised players and consumers choosing these products for enhanced
comfort.
l Rising disposable incomes, thus driving discretionary purchases for
consumers to try out new products that innovate around styles, designs and materials. l
Multiple channels of easy product availability, including EBOs, MBOs and online that
provide the added convenience of home delivery.
l Growing frequency of purchases given an impetus by higher discretionary
spends
l Permanency in hybrid work trends driving the athleisure wear industry, as
consumers choose comfort and style.
l Growing health consciousness and the need to look good while working out
will also especially drive athleisure wear demand
l Celebrity marketing will continue to have a positive brand rub-off,
propelling demand in especially semi-urban and rural regions
l Growing power of digital influencers and their large fan following
will also emerge as a major driver of influencing innerwear and outerwear demand
Opportunities
l Attractive demographics with a large youth population
l Shift in market demand from unbranded products to proven branded products,
especially driven by higher awareness and celebrity advertising
l Premiumisation trends with consumers up-trading from economy to
higher value premium and luxury products
l Work from home and hybrid work trends driving demand for comfort
wear products l Increased awareness among women about intimate wear
products
l Trends in more women stepping out for work and participating in the formal
workforce, driving both- demand for women inner wear and higher discretionary/disposable
incomes
Threats
l Inflationary pressures threatening price and demand stability
l Labour availability challenges and costly training expenses incurred for
skilling
l Changing consumer behavior.
l High cost of brand building
l Emerging multi-national brands and their entry to the Indian market.
l Infrastructural bottlenecks and efficiency l Imports from
other countries.
Risks and concerns
l Covid-19 pandemic situation: Resurgence of potential new waves of
Covid-19 may impact the business.
l Volatility in raw material prices: Cotton yarn and fabric account
for approximately 70% of the total raw material cost. Currently, the Company is able to
pass on any rise in raw material costs to the consumer. Any inability to pass on the
impact of rise in raw material prices may negatively impact the estimated margin of the
Company, resulting in lower earnings.
l Entry of foreign players: With markets being global and digital, it
is becoming easier for foreign brands to penetrate into Indian domestic markets via direct
and indirect strategic tie-ups largely in the premium and super-premium segments, thus
creating stiff competition for existing players in the organized sector.
l Changing customer behaviour and spending capacity: Rapid
changes in consumer preferences from one brand to another makes it difficult for a Company
to establish a permanent connect and in gaining brand loyalty, consequently leading to
loss of business to competitors. Furthermore, improving Indian demographic profile has
given credence to the Indian consumption story and any downward deviation in economic
growth may impact consumers’ discretionary spends, thereby negatively impacting the
earning potential of the Company.
Internal control system and their adequacy
The Company has adequate system of internal controls system commensurate with its
nature of business and size of operations to safeguard and protect from loss, unauthorized
use or disposition of the Company’s resources. There are proper procedures for
authorization, recording and reporting of transactions to the management. Systems and
procedures exist to ensure that all transactions are recorded as necessary to permit
preparation of financial statements in conformity with applicable accounting standards and
principles or any other criteria applicable to such statements, and to maintain
accountability for aspects. The Company’s internal audit process covers all
significant operational areas and reviews the in-system checks regularly. The internal
audit report, submitted by the internal auditors, is placed before the Audit Committee of
the Company’s Board of Directors on a quarterly basis for review. Suggestions for
improvements are considered and the Audit Committee asserts stringent corrective actions
and follow-ups on the implementations thereof. The Audit Committee periodically meets the
statutory and internal auditors of the Company to ascertain their views on the adequacy of
internal control system and keeps the Board informed of its observations from time to
time.
Financial performance and Analysis
| Particulars |
2021-22 |
2020-21 |
Change |
% |
| Revenue from Operations |
1,42,867.48 |
1,28,740.17 |
14,127.31 |
10.97 |
| Other Income |
1,070.45 |
730.02 |
340.43 |
46.63 |
| Profit before Finance Charges, Tax, Depreciation/Amortization |
27,780.06 |
26,319.86 |
1,460.20 |
5.55 |
| (PBITDA) |
|
|
|
|
| Less: Finance Charges |
1,870.46 |
1,342.91 |
527.55 |
39.28 |
| Profit before Tax, Depreciation/Amortization (PBTDA) |
25,909.60 |
24,976.95 |
932.65 |
3.73 |
| Less: Depreciation/Amortization |
1,383.69 |
1,373.14 |
10.55 |
0.77 |
| Profit before Taxation (PBT) |
24,525.91 |
23,603.81 |
922.10 |
3.91 |
| Less: Tax Expense |
5,449.91 |
6,211.77 |
-761.86 |
-12.27% |
| Profit after Taxation (PAT) |
19,076.00 |
17,392.04 |
1683.96 |
9.68 |
*Previous year figures have been re-stated wherever required.
The Company is engaged in the business of manufacturing of hosiery and related products
and there is no separate reportable segment.
Key financial ratios
As required, pursuant to Schedule V(B) to the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, key financial ratios for the financial year 2021-22
vis-?-vis 2020-21, along with changes therein, are reproduced herein below:
| Sl. No. Ratio |
FY 2021-22 |
FY 2020-21 |
| i. Debtors’ Turnover |
3.16 |
4.20 |
| ii. Inventory Turnover |
2.96 |
3.03 |
| iii. Interest Coverage Ratio |
14.11 |
18.58 |
| iv. Current Ratio |
2.02 |
2.32 |
| v. Debt Equity Ratio |
0.28 |
0.06 |
| vi. Operating Profit Margin/EBIDTA Margin (%) |
18.70 |
19.88 |
| vii. Net Profit Margin (%) |
13.35 |
13.51 |
| viii. Return on Net Worth (%) |
23.83 |
26.76 |
Notes:
In the preparation of financial statements, the treatment, as prescribed in the
applicable IND Accounting Standards are followed.
Human Resources and Industrial Relations
The Human Resources (HR) function of an organization is vital to the creation and
development of good quality and dedicated human capital, essential to the Company’s
business and operations. Rupa always focuses in grooming and training its workforce via
imparting specialized and technical training at regular intervals, which helps improve
their knowledge, skills and competency to execute their assignments, effectively and
efficiently. Employee incentivisation, professional growth, participation and recognition
are always part of the Company’s HR management, with focus on upgrading their quality
of life and job satisfaction. The Company’s HR policy empowers it to attract,
integrate and retain the best talent, requisite to its line of business and necessary for
powering its growth. As on March 31, 2022, the number of permanent employees on the rolls
of Company, was 1152. Further, industrial relations have remained cordial during the
period under review.
Cautionary Statement
Statements in this Management Discussion and Analysis Report describing the objectives,
projections, estimates and expectations are ‘forward-looking statements’ within
the meaning of applicable laws and regulations and are subject to volatile market
conditions. Actual results could differ materially from those expressed or implied.
Important factors that could make a difference to the Company’s operations, include
economic conditions affecting demand/supply and price conditions in the markets in which
the Company operates, changes in Government regulations, tax laws, statutes and other
incidental factors.
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