Rupa & Company Ltd Management Discussions.

Industry Structure and Development

The World Bank raised its forecast of India’s FY22 growth to 10.1%, substantially higher than the 5.4% it had projected in January, according to its South Asia Economic Focus Spring update report. However, reflecting the uncertainty on account of the pandemic, the World Bank chose to provide a range for its FY 22 prediction of 7.5-12.5% due to "significant uncertainty at this stage about both epidemiological and policy developments".

The improvements came on the back of the country’s vaccination drive, which was likely to spur activity in contact-intensive sectors and the government’s infrastructure push in the budget. With regard to the range, the growth would depend on the progress of the vaccinations, whether new restrictions to mobility would be required, and how quickly the world economy recovers. Acknowledging that the wide range was not normal, it also reflected the difficulty in measuring gross domestic product (GDP) due to the impact of the pandemic on the informal economy. The International Monetary Fund had a more optimistic outlook, pegging India’s growth at 11.5% in FY22. The World Bank also tempered its estimate of India’s FY 21 GDP contraction to 8.5% from -9.6% earlier as the recovery accelerated in the July-December period with private consumption and investment showing a sharp rebound.1 The Reserve Bank of India said in its annual report that the impact of the Covid-19 second wave on the Indian economy is not as bad as the first wave, but the surrounding uncertainties remain. The central bank noted that while the Indian economy has not moderated to the extent it did during the first wave, enveloping uncertainties can be a hindrance in the short term. It further stated that India’s growth prospects primarily hinge upon how fast the economy can arrest the impact of the second wave of the pandemic. Although the economy was hit by the second wave of the coronavirus pandemic, it remained resilient on the back of a bountiful harvest in the RBI farming season as well as the momentum of activity in sectors such as road construction, information technology, housing and freight transportation.

The recovery of the economy from the Covid-19 will critically depend on the robust revival of private demand that may be led by the consumption in the short-run but will require acceleration of investment to sustain the recovery. The second wave of the pandemic has set off "a raft of revisions to growth projections" and the concurrence on growth rate was leaning towards its projections. The central bank, in the report, once again pegged a 10.5% growth for Indias economy for the 2021-22 financial year. RBI further said that a collective global effort to fight the pandemic will surely bring better results than individual countries fighting on their own.2

The Government of India introduced bold reforms across sectors to drive the Country’s economy and push towards self-reliant India. The Government has stressed to become vocal for local products and make them global, and announced Self-reliant India or "Atmanirbhar Bharat" in five phases, consisting of five pillars, namely, Economy, Infrastructure, System, Vibrant Demography and Demand.

Textile Industry

India’s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The decentralised power looms/ hosiery and knitting sector forms the largest component in the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. India’s textiles industry has a capacity to produce wide variety of products suitable for different market segments, both within India and across the world.

The textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed and printed) attracted Foreign Direct Investment (FDI) worth US$ 3.68 billion from April 2000 to December 2020. The Government of India has come up with several export promotion policies for the textiles sector. It has also allowed 100% FDI in the sector under the automatic route. The future for the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players into the Indian market. High economic growth has resulted in higher disposable income. This has led to rise in demand for products creating a huge domestic market.3

Innerwear Industry4

The Indian innerwear market was valued at ~Rs 320 billion in 2018 and is expected to grow at a CAGR of ~11% over the next decade to reach ~Rs 897 billion by 2028E. In the past, innerwear was depicted as a mere essential ‘commodity’ but in the last few years transformed itself into a fashion statement. Players now focused on the width of the product range; men’s and women’s innerwear began to be marketed through retail formats. Domestic demand of innerwear has changed with rising incomes, higher discretionary spending, rise in number of working women and growing fashion consciousness coupled with increased fashion consciousness among millennials. The innerwear segment is now expected to gain a new round of traction. Most major brands across the men’s and women’s segments are expanding their portfolio.

The innerwear market is evolving gradually and moving towards organised retail. Lately, the premium innerwear market in India has been experiencing the increasing entry of global brands, mostly through partnerships and tie-ups with home-grown brands. Organised players have invested significantly in building capability around: design & fit; sourcing; and channel presence, to ensure that their distinct positioning translates in to retail connect with consumers. This has fuelled demand shift towards organised from the unorganised segment. The distribution structure of the innerwear category is much more diversified and balanced, allowing the terms of trade in favour of the branded players. Brands are continuously focusing on product consistency and design over a period of time to avoid losing a satisfied consumer. Moreover, a steady stream of new products keeps distributors and retailers active and interested. Industry players constantly looking for a new revenue stream or product segmentation where they can generate higher realization than the regular innerwear. Fortunately, a new trend emerges in the industry where players are focusing on outerwear like track pants, shorts, T-shirts and most importantly athleisure wear, which will give them a higher margin on select products.

Men’s innerwear segment

Men’s innerwear market was valued at Rs 110 billion in 2018 and is expected to grow at a CAGR of 7% over the next decade to reach Rs 218 billion by 2028. Innerwear market is classified into five product categories: low, economy, mid-market, premium, and super-premium. The Rs 6.5 billion super premium category grew by ~26% and the Rs 18 billion premium segment by ~22% in FY20 whereas the Rs 47 billion medium category, retailing at an average Rs 250 a piece, grew at a much slower rate of ~17%. Most Indian brands are largely in the mid-to economy segment, catering to the masses. There are more than 1 lakh MBOs (multi-brand outlets) across India, which account for over ~60% of the total sales of undergarments, while the rest take place through modern trade formats like malls or online portals.

Product categories in men’s innerwear include briefs, trunks, vests, boxer shorts among others. The market has historically been highly fragmented and unorganised. Even today it is dominated by numerous small-scale players that cater to ~60-65% of the total demand. However, the market segment is evolving and is gradually moving towards organised retail. Indian innerwear market has witnessed a changing trend in the past with more and more people opting for better quality branded products. Men’s innerwear segment has a very high branded proportion accounting for ~61% of total market size. Looking ahead, growth in the innerwear market is expected to be driven by broad based consumer trends in the form of rising discretionary spends, growing number of mid-high-income household and increasing urbanization. Innerwear has progressed from being just a functional category to making a bold fashion statement. It is a welcome shift from a price sensitive category to a brand sensitive category. Indian consumer spends on innerwear products is significantly lower than other Asian peers. This suggests that there is significant room for growth, driven by rising per capita spend on such products.

Women’s innerwear segment

Indian innerwear market is primarily dominated by women’s innerwear, which accounts for ~66% of the total innerwear market and accounts for ~15% of the women’s apparel market. Branded innerwear contributes ~38- 42% of the women’s innerwear market and this share is expected to grow to ~45-48% by 2023. Product categories in women’s innerwear include brassieres, camisoles, panties, tees, nighties, shorts, etc. Brassieres and panties contribute 85% of the total women’s innerwear segment.

Women’s innerwear segment is poised to grow at an impressive growth rate of ~12.5% over the next decade to reach ~Rs 680 billion by 2028 from the market size of ~Rs 210 billion in 2018. Branded innerwear in women’s segment contributes ~38-42% of the total women’s innerwear market and is expected to increase to ~45-48% of the total market by 2023. During FY15-20, the women’s innerwear segment grew at 14%, outperforming the overall innerwear segment and the men’s innerwear segment growth. While all segments contributed to this growth, leaders were medium, premium and super premium categories. While this can be broadly attributed to the advent of multinational brands in the market place and the growth of organised retail, a host of other variables like growing number of working women, changing fashion trends, increased awareness about better fits, quality, brands, colours, styling, increasing per capita disposable income, rising level of information and media exposure have also given the industry a new dimension. The trend is not restricted to just metros but can be witnessed spreading in Tier-I, II and III cities. Price points vary based on the range and category of products.

Athleisure segment – A new emerging segment

Casualisation as a trend has been gaining traction in terms of Athleisure, Comfort Wear, T-shirts, Shorts and Sportswear. Customers are getting comfortable with the idea of wearing premium dressed up and easy-to-wear, casual wear which is well represented by Athleisure category. India’s athleisure market is growing at 18-20% currently and current market size is estimated at Rs 540 billion. Of this, the men’s wear segment accounted for 8-10% growth and the women’s and children’s segments 11-15%. This trend of athleisure, majorly driven by millennials, is expected to expand reach beyond urban India to Tier II and Tier III regions. While the scenario appears muted following the pandemic, the fundamental strength of the athleisure segment is expected to become pronounced when consumer sentiment revives. In the athleisure segment, style quotient is not critical but comfort is, similar to innerwear purchase and industry players suggest that hosiery is a big channel for sale of utility T-Shirts.

Kids wear segment

The kids wear market in India is estimated at Rs 819 billion and expected to grow at a CAGR of ~8.5% in the next 5 years. With a booming kids population in India and owing to distinct factors like the growing trend of nuclear family system, increased spending on children, greater brand awareness among kids, and better focus on this segment by organized players, the kids wear industry is poised to grow in the coming years. Albeit largely unorganised today, this segment is closely following suit the men’s and women’s segment to become the next organised sector play for innerwear industry.

Factors driving growth

The innerwear market is being driven by few key factors or trends. All these factors spell good news for the current manufacturers of inner wear in the country and also for the companies wishful of entering the segment. These factors contribute to the rising demand in this segment in India and the world and tremendous scope available for businesses. a) Rapid urbanization, rurbanization & changing demographics:

India is going through the process of rapid growth in urban population as well as increase in the number of towns and cities on its path of transforming from a developing nation to a developed one. While on one hand masses are shifting base to cities and metros for better opportunities, on the other hand rural population is also becoming infused with urban patterns and culture which is referred to as Rurbanization. In addition, demographics of the country is changing with increase in working age population, male-female ratio, increasing female literacy rates, changing birth and death rates, etc.

b) Growing consumer profiles:

The sudden mushrooming growth rate of the innerwear segment stems from the ever-changing consumer profiles. New age consumers are well-educated, fashion and quality conscious, well-dressed with better spending capacity owing to higher disposable incomes combined with a sense of clarity of their needs, wants and desires. Consumers segment is mainly from the aspirational working class and upper class with currency they are willing to expend. Being associated with distinguished brand names and need for sense of belonging to the upper segments of the society is what shapes the consumers’ needs for such items. Further, the customer also has been aware of the functional properties of usage of good quality innerwear for support and protection of the body.

c) Rising working women population:

The number of working women has escalated tremendously in the last few years due to growing awareness as a society which is taking steps in higher education and working opportunities for women. The taste and style of working women are ever evolving coupled with freedom to spend higher. d) Growth of organized and online retail: Retailing is one of the important sectors of the Indian economy contributing to 20% of the GDP of the country. Indian retail market is among the top five retail markets in the world and is expected to touch US$ 2 trillion by 2025. Emerging organized retail is beneficial for manufacturers looking to invest in this sector. The online retail is on a high growth trajectory on account of the digital revolution going on in the country. India is expected to become the fastest growing e-commerce market with robust investment as its backbone. e) Emerging categories: Indian consumers are becoming increasingly aware of the kind of ensemble they want for any occasion or purpose. This has led to increase in demand in special categories within intimate wear such as shapewear, sleepwear, swimwear, athleisure etc. Among these, the sleepwear category has already seen growth in both branded and unbranded segments. However, other categories such as shapewear and swimwear still present a lot of possibilities.5

Covid-19’s Impact

The Covid-19 pandemic has had a major impact on overall business and consumer sentiment in the country. The consumer sentiment is cautious at present and it is expected that the consumers are expected to tone down their discretionary spends as compared to essentials, which is likely to impact the apparel category in the short term and thus a skewed demand towards impulse & casual wear. While the consumers are eager to get back to the retail environment, in the new scenario we expect that they will seek more value in everything they purchase. Given that the customers are expected to prefer online channel in the short term, this event could also fasten the adoption of omnichannel strategy among many brick & mortar retailers. On the other end, the retailers are also gearing up to grab the post lockdown opportunity when the market opens up to a new normal by working towards making the store environment safe & hygiene for customers. We believe given the initiatives taken by retailer and stakeholders in the supply chain as well as customer’s willingness to come return to the retail environment, we believe that this situation is a blip and the expect the normalcy to return back to over time. In the post Covid era, where the customers are expected to seek more convenience and experience, the rate of adoption of omnichannel strategy among the lifestyle fashion players is expected to increase. Consumers strongly attribute trust, experience and service with organized formats, especially exclusive brand formats and large format. These formats have not ceded preference even in post Covid times as consumers are eager to re-engage with these formats.6


Vocal for Local: Initiatives taken by the Government to promote local products and make it global will boost huge opportunities to local manufacturers. Additionally, consumers are more expected to look for locally manufactured products.

Increasing Women Workforce as well as increased Women participation in Fitness and Sports and other physical activities: With changing societal mind set and increasing gender equality at office, women entering workforce has been on the rise in past few years. This coupled with aspirations to spend on self-development, is giving rise to the consumption of new categories like personal care, readymade products, etc.

Growth of Markets including malls: With online players now delivering to the smallest of towns, consumers in these cities are aware of many international and indigenous brands available in the market. This spells a big opportunity for the modern retailers who are looking to enter into Tier III & IV markets. Many consumers living in Tier III &IV towns have now experienced the brands, through online purchases. Mall development is expected to come from Tier III cities, which would make the brands more visible and lead to opportunities.

Abundant availability of raw material: India is the largest producer of cotton and second largest producer of polyester in the world. Large scale availability of important textile fibers has helped the development of downstream manufacturing value chain-yarns, fabrics and garments.

Manpower availability, quality and cost: India’s current population is approximately 1.30 billion and around 65% of the total population falls under the working age bracket at present with many youth joining the workforce every year.

Under the Make in India campaign, the Government has also put a lot of focus on increasing the skill level of the work force to not only ensure the quantity but also the quality of the workforce.

Large existing manufacturing set-up: India also has well established production facilities in the textile value chain from fiber to finished products (apparel, home textiles and technical textiles). India has one of the best and the largest state- of-the-art spinning capacities in the world.


Low level of awareness regarding what one should wear that will last for a good life span. Retailers do not educate their customers either as they are either not aware themselves or consider it delicate to talk to customers regarding a personal product such as underwear.

Changing consumer behavior.

Emerging multi-national brands and their entry to the Indian market.

High cost of brand building.

Infrastructural bottlenecks and efficiency.

Imports from other countries.

Investment in New Technology

Risks and Concerns

Pandemic Covid-19 situation: We are witnessing a second wave of Covid-19 infection and it has again resulted in disruption of business activity. Although vaccine has been rolled out in the country, but any further deterioration in situation may adversely affect the business.

Volatility in the raw material prices: Cotton yarn and fabric accounts for approximately, 70% of the total raw material cost. Currently, the Company is able to pass on any rise in the prices of raw material 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.

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 the existing players in the organized sector.

Changing customer’s behavior and spending capacity: Rapid change in the customers’ preferences, from one brand to another, makes it very difficult for a Company to establish a permanent connect and in gaining brand loyalty, consequently, leading to loss of business to its competitors. Furthermore, where, the improving Indian demographics have given credence to the Indian consumption story, any downward deviation in economic growth, will impact the 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 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 quarterly basis, for reviewing. Suggestions for improvements are considered and the Audit Committee asserts stringent corrective actions and follows up 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 of Directors informed of its observations, from time to time.

Financial Performance

(Rs. in Lakhs)

Particulars 2020-21 2019-20 Change %
Revenue from Operations 1,26,121.68 94,140.11 31,981.57 33.97
Other Income 599.84 790.95 –191.11 –24.16
Profit before Finance Charges, Tax, Depreciation/ Amortization (PBITDA) 26,378.13 13,251.98 13,126.15 99.05
Less: Finance Charges 944.07 1,481.22 –537.15 –36.26
Profit before Tax, Depreciation/ Amortization (PBTDA) 25,434.06 11,770.76 13,663.30 116.08
Less: Depreciation/ Amortization 1,132.36 1,567.92 –435.56 –27.78
Profit before Taxation (PBT) 24,301.70 10,202.84 14,098.86 138.19
Less: Tax Expense 6,211.77 2,196.31 4,015.46 182.83
Profit after Taxation (PAT) 18,089.93 8,006.53 10,083.40 125.94

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 2020-21 vis--vis 2019-20 along with changes therein are reproduced herein below:

Ratio Financial Year Financial Year
2020-21 2019-20
i. Debtors Turnover 3.80 4.10
ii. Inventory Turnover 3.35 2.12
iii. Interest Coverage Ratio 26.74 7.89
iv. Current Ratio 2.61 2.17
v. Debt Equity Ratio 0.13 0.22
vi. Operating Profit Margin/ EBIDTA (%) 20.40 13.20
vii. Net Profit Margin (%) 14.30 8.50
viii. Return on Net Worth (%) 25.60 13.30


During the year under review, the Company witnessed record growth across key financial parameters on the back of a strong volume growth, operational efficiencies, better product mix and cost rationalisation programmes.

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 creation and development of good quality and dedicated human capital, essential to the Company’s business and operations. Rupa always focusses in grooming and training its workforce via imparting specialized and technical training, at regular intervals, which helps improve their knowledge, skill 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. This HR policy empowers the Company to attract, integrate and retain the best talent, requisite to its line of business and necessary for powering its growth. As on March 31, 2021, the number of permanent employees, on the rolls of Company, was 1054. Further, the 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, includes 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.