Stanley Lifestyles Ltd Management Discussions

Economy

Indian economy

The Indian economy witnessed consistent growth with GDP growing by 8.2% in FY 2024, compared to 7.0% in FY 2023.¹ Along with this, the domestic inflation level was 5.4%, enabling an increased level of private consumption. The growth in the economy was significantly supported by the timely interventions made by the Reserve Bank of India and favourable policies implemented by the Indian Government. Along with this, the presidency at the G20 summit played a crucial role in attracting global investors, resulting in an impressive Foreign Direct Investment (FDI) of USD 71.0 billion² in FY 2024. Major growth was experienced in various economic sectors; however, the manufacturing sector grew significantly by 9.9%³ owing to policies such as ‘Make in India and the China+1 strategy.

The Indian economy is anticipated to grow by 7.0% in FY 2025, surpassing Germany and Japan to become the third largest economy. This growth will be cushioned by relevant policies and programmes drafted by the Indian Government and its aim to transform India into a manufacturing hub. To support this aim, the Interim Budget 2024-25 introduced targeted initiatives, including reduced corporate tax for new manufacturing companies as an incentivise to their growth. Moreover, as an after-effect of the general elections in FY 2025, crucial policy changes may be introduced that could shape the economys future growth.

GDP growth trend in India (in%)

Industry

Luxury furniture industry

The Indian furniture industry experienced growth in FY 2024, owing to an expanding middle-class group, increased disposable income and a preference for stylish, space-efficient furniture. Bolstered by the rise in disposable incomes, the luxury furniture segment emerged as the fastest-growing industry in the country. Over time, the domestic luxury furniture market became Indias most vibrant industry with the support of a growing population and increased preferences for customisable furniture.

The domestic luxury furniture industry is highly competitive and caters not only to residential demand but also to the needs of the hospitality industry and business centres, promoting an opulent ambiance. In the reported year, the domestic industry experienced a significant revolution by offering products with exquisite designs and using superior materials. Major metropolitan cities including Mumbai, Delhi and Bangalore made significant contributions to increased demand for luxury furniture in the year under review. Intheforthcomingyears,theIndianfurnituremarketisprojected to achieve a CAGR of 10.9% during 2023-28, reaching USD 32.7 billion by 2026⁴. This growth is expected to be fuelled by increasing demand from the development of sports facilities, cafes and household furniture. Also, the industrys rising contribution to total exports, cushioned by rapid urbanisation and evolving consumer preferences can further benefit the domestic furniture industrys growth. Moreover, with increasing preference among consumers for aesthetically pleasing and comfortable living environments, the domestic luxury market is anticipated to grow in the coming years.

Growth drivers

Rising disposable income

Indias per capita disposable income increased in comparison to the previous year and this development contributed positively to the growth of the luxury furniture industry in FY 2024. With increased purchasing power, consumers invested in enhancing the interiors and preferred higher-end furniture. Additionally, with projected strong economic growth, it is anticipated that the income level will rise in the coming years, further contributing to the growth in the domestic industry.

Expansion in the real estate sector

The expansion of the real estate sector in FY 2024 accelerated the demand for luxurious furniture in the economy. Moreover, by 2050, half of the Indian population is anticipated to shift to urban regions and this can offer the industry bright growth opportunities and this will further create requirements for luxury furniture.

Growth in the retail industry

The growth in the retail sector significantly benefited the domestic industry in the reported year. The ability to showcase the products and implementation of effective marketing strategies helped the sector to increase the sales of higher-end furniture. Moving ahead, the retail market in India is anticipated to grow and attain a market size of USD 1.1 trillion by 2027 and further become USD 2 trillion by 2032 thereby, supporting the growth in the higher-end furniture markets.

Dependency on Immediate Handover of Big Builders

Stanleys business is heavily reliant on new homemakers, accounting for approximately 80% of its sales. Despite the strong growth in premium housing sales over the past 3-4 years, a significant delay of 18 to 24 months has occurred in the handover of sold projects. This trend is evident nationwide, with RERA extending delivery deadlines for over a thousand buildings. As a result of these delays, customers are unable to finalize the sale of their existing properties

Company overview

Stanley Lifestyles Limited

Founded in 2007, as one of the first few premium and luxury furniture brands in India, Stanley Lifestyles Limited (Stanley) has steadily established its presence across super-premium, luxury and ultra-luxury furniture segments. Stanley has a strong presence in the luxury furniture business in the southern region of India especially, Bangalore and Hyderabad. The Company addresses the varied needs and requirements of its diverse customers, providing products across higher price points and along with this it offers comprehensive installation services. The Company has successfully established itself as a trusted brand among its customers by consistently prioritising customer needs and personalised solutions. Stanleys brand awareness efforts are complemented by its large retail network, strategically positioned to capture key markets in the country. In addition to this, the strong brand legacy, integrated design and manufacturing process of the Company helped it to stay ahead of the curve. Stanley is committed to sustainable practices and offers its customers products that align with environmental standards.

Manufacturing

In FY 2024, Stanley had two manufacturing facilities in Karnataka. The manufacturing units of the Company are focused on producing bespoke products under the brand name Stanley and manufacturing various home furnishing solutions for multinational players. These facilities leverage advanced machinery and skilled labour to develop products that exceed customer expectations. In addition to this, regular monitoring and strict quality control measures enable the Company to uphold its commitment to meet international standards.

Financial

Particulars	FY 2024	FY 2023	Y-o-Y (%) Change
Revenue from operations (in million)	4,325	4,190	3%
Total income	4,438	4,256	4%
EBITDA	849	827	3%
EBITDA Margin (%)	19.6%	19.7%	0%
Profit before tax	390	464	-16%
Profit after tax	291	350	-17%
Profit after tax margin (%)	6.7%	8.3%	-19%
Return on Net Worth (%)	12%	15%	-20%

Key financial ratios

Particulars	FY 2024	FY 2023	Y-o-Y (%) Change	Reasons of variance
Current Ratio	2	2	-22%	No material Change
Debt equity ratio	1	1	17%	No material Change
Inventory turnover ratio	2	2	-11%	No material Change
Trade Receivables Turnover Ratio	20	24	-13%	No material Change
Trade payables Turnover Ratio	4	6	-37%	Decrease in purchase of the Group during the year has resulted in movement in this ratio
Net Capital Turnover Ratio	4	3	26%	Increase in turnover and profit of the Group during the year has resulted in movement in this ratio
Net Profit Ratio	7%	8%	-19%	No material Change
Return on Capital Employed (%)	13%	17%	-24%	No material Change

Note: +(-) 25% has been considered as Non-Material

Risk management

Risk description	Mitigation strategy
Any Fluctuations in the economic parameters in the Companys operating environment can pose an Economic risk, thereby, hindering its sustainable growth.	The Company regularly monitors the changes in the economic trends and accordingly strategises its business activities. This helps the organisation to minimise the impacts of the economic fluctuations on the business operations.
As Stanley is heavily reliant on the sale of sofas and recliners, it is vulnerable to Concentration risk. This has the potential to affect its operational and financial efficiency.	Taking into consideration the risk arising from majorly selling sofa and recliner, the Company diversified its offerings by introducing kitchen and cabinet divisions across the country. The expansion focused on catering to the untapped markets, such as, Gujarat and Chennai. Along with this, the Company also opened new Anchor stores to foray into new business segments.
Any delay in procuring the raw materials can pose a Procurement risk, negatively affecting the timely delivery of the products.	The Company focused on procuring raw materials from various countries and also increased leather localisation in terms of quantity and value. This helped in reducing the reliance on the finished leather purchase.
Any change in rules and regulations create a Regulatory risk for the Company that impacts its smooth operational efficiency.	The Company has a well-established compliance team and a robust mechanism to streamline the process. Also, experienced consultant firms hired by the organisation guided through various listing and non-listing compliances.
	Additionally, the Company also provided training to its employees to upskill their efficiency and therefore helping the organisation to effectively meet the regulatory requirements.

Human resource

The skilled and experienced workforce of the Company has been consistently driving the Company to success by enabling it to accomplish its goals. The Company recognises their hard work and expertise in enhancing its effectiveness and productivity, providing them with regular in-house training sessions on quality control and manufacturing. Additionally, the sales staff are provided with trainings aimed at enhancing their marketing skills and product knowledge.

Internal control systems and their adequacy

Strong internal financial controls and processes are used by the company to protect assets, stop fraud and mistakes, and guarantee the accuracy of accounting records. This method also helps to ensure that trustworthy financial reports are prepared on schedule. To monitor the amount spent on new projects, the company maintains a capital expenditure control mechanism and conducts regular business reviews. Senior

Management receives regular updates on audit findings. Internal controls are thoroughly reviewed once a year, and any necessary adjustments are made to bring them into compliance with company policies.

Cautionary statement

A few forward-looking comments regarding future prospects in the MDA section contain both known and unknown risks and uncertainties that could materially affect actual outcomes. These statements, which are predicated on assumptions made using available data and may vary over time, represent the Companys current beliefs, objectives, and goals as of the date they were made. Risks can also arise from unpredictable variables like shifting regulations and the state of the economy. In light of new information or anticipated developments, the Company is under no duty to update these statements. A number of variables, such as shifts in governmental policies and the state of the domestic and global economies, could affect the actual results.