Global economic scenario and Outlook
According to the International Monetary Fund, the world economy grew by
6.1% in CY2021. Global growth is projected to decline to 3.6% in CY2022 and CY2023. Over
the medium run, global growth is expected to slow to around 3.3% after CY2023. This
reflects an outlook of slow but steady recovery post the contraction in CY2020 which was
severely impacted by pandemic.
Globally, economies continue to witness some form of pandemics
long-term impacts and supply-chain disruptions. However, there are green-shoots visible in
form of increased economic activity and investments, which are expected to return to
pre-pandemic levels. Inflation is a concern as it is estimated to be at 5.7% in advanced
economies and 8.7% in emerging market and developing economies, owing to war-induced
commodity price hikes and expanding pricing pressures.1
Indian economic review and Outlook
India is expected to register a growth of 8.9% in FY22, according to
the second advance estimates of the National Statistical Office (NSO), 1.8% higher than
the pre-pandemic (2019-20) level. On the supply side, real gross value added (GVA)
increased by 8.3% in FY22, with important components such as services surpassing
pre-pandemic levels. GDP growth slowed to 5.4% in Q3 of FY22.2
Headline CPI inflation increased to 6.0% in January 2022 and 6.1% in
February 2022, exceeding the upper tolerance limit Spike in food prices pushed up
inflation, with cereals, vegetables, spices, and protein-based foods such as eggs, meat,
and fish being the main drivers. Core inflation, which excludes food and fuel, remained
high in February. 2
Inflation will be heavily influenced by the growing geopolitical
environment and its impact on global commodity pricing and logistics in the future. In
terms of food costs, domestic cereal prices have risen along with international prices.
Record food grain production and buffer stock levels should keep domestic prices in check.
With significant concerns surrounding global supplies, international
crude oil prices remain unpredictable. With a broad-based increase in the price of
essential industrial inputs and global supply chain disruptions, input cost pressures are
likely to endure than previously anticipated. Their impact on retail prices was minimal
due to the economys continued slack. The manufacturing sector anticipates increased input
and output pricing pressures in the future.
Industry overview
Retail market in India
India is the worlds fifth largest retail destination. In terms of
retail store availability per capita, the country ranks among the best in the world.
Consumers in tier II and tier III cities, have driven remarkable growth for shops in
CY2021.3
The year 2021 marked the gradual recovery from the pandemic struck
precedent year. The retail industry benefitted from the Governments mass vaccination
programmes across the country, resulting in India surpassing 100 crore COVID-19
immunisation. While there were disruptions during the second wave and the third wave of
covid, the recovery in the retail sector post these waves were both sharper and homogenous
across geographies and tiers.
Indian apparel and textile Industry
In 2021, the Indian textile and apparel market was valued at US $151.2
billion. According to a report by IMARC Group, this is estimated to grow to US $344.1
billion by 2027, a CAGR of 14.8% from 2022 to 2027.4
India is one of the worlds top textile and apparel producers and it
contributes 5% to Indias GDP. It generates 7% of the total industry output in value
terms, and 12% of the countrys export revenues. India is the worlds sixth largest
exporter of textiles and apparel. Indias textile and clothing exports are predicted to
exceed $100 billion in the next five years, with a CAGR of 11%.
The textiles and apparel industry in India is the countrys second
largest employer, employing 45 million people directly and another 100 million in
affiliated businesses.
I ndias textile and clothing sector is strong throughout the value
chain, from fibre to yarn to fabric to clothes. The Indian textile and clothing business
is immensely diversified, with segments ranging from traditional handloom, handicrafts,
wool, and silk products to Indias organised textile industry. Spinning, weaving,
processing, and clothing manufacture are all part of Indias organised textile industry,
which is defined by the use of capitalintensive technology for mass production of textile
items. The government is also investing in the Indian textile and apparel industry through
the Integrated Textile Parks Scheme and the Technology Upgradation Fund Scheme to train
workers and attract private investment.
Indian textile and apparel market drivers:
• India has one of the worlds largest youth population.
Approximately half of the overall population is under the age of 30. This age group is one
of the largest textile and garment consumers, and it is likely to drive spending over the
next five years.
• Online retailing has seen considerable growth in the country,
fuelled by increased internet usage. Consumers are now searching for shopping convenience,
a variety of options, better deals, and easy return policies. The growth in online sales
enabled the textile industry to reach customers across the country.
• Consumers are changing from need-based clothing to
aspiration-based clothing as a result of a shift in buying behaviour. Buying clothes has
become more than a fundamental requirement; it is now an expression of desire,
personality, and a status symbol, in contrast to prior years, when Indian consumers
purchased fashion products as and when required. Though basic textiles remain a component
of the consumers basket, demand for aspirational clothing has grown in recent years.
Womens Apparel wear market
Womens apparel is growing faster than mens apparel and is set to
surpass the size of mens apparel market by CY2025, reaching an estimated market size of
USD 39 billion by CY2025.5
Womens apparel market is largely dominated by two segments: Sarees
which is estimated to grow at 6% and the Ethnic-wear segment (Salwar, Kurta, Dupatta, SKD
sets, Ethnic dresses etc) which is expected to grow much faster at 11%. The ethnic-wear
categories have long since been a top pick across geographies as well as among customer
segments from varied socio-economic origins, ages, and lifestyles and the evolving
consumer preferences is fuelling the growth of Ethnic-wear on a large base of the market.
Branded clothing accounts for less than a quarter of the womens market
today but fuelled by demand side dynamics such as shifting consumer behaviour, an increase
in the number of working women, increase in disposable income, etc, the share of branded
segment within overall womens apparel market is expected to grow sixfold in the next
decade.
Company overview
TCNS is among select few success stories in creating multiple scaled
independent brands in Womens apparel segment. TCNS has a portfolio of 4 segment
defining brands which sets it poised for high-growth possibilities in the Womens
apparel segment.
The Company has emerged as the market leader in the womens ethnic
and fusion wear category, because of deep insights into the target "Indian women
customer", unmatched brand building capabilities, diversified and responsive supply
chain, widest pan-India reach, established online and omni-channel capabilities, and
Institutionalized product design capabilities and strong supply chain infrastructure.
A team of 50+ designers with an institutionalized design process
encompassing understanding of evolving customer preferences, understanding of regional
complexity, robust feedback process, data insights and a scientific approach to size and
fits backed by pan-India anthropometric study, gives a competitive advantage to the
company. The company refreshes its inventory every two to three weeks with 5000+ designs
throughout the year.
The Company has evolved from being a pure play apparel company to a
lifestyle company. Following its success in scaling up its brands in apparel segment, the
Company is expanding its brand portfolio into other products that offer head-to-toe
fashion solutions for women.
Operational Overview:
Managing COVID-19
After two years and multiple waves of COVID-19 that significantly
disrupted corporate operations, the pandemic is now subsiding into an endemic. The Indian
apparel sector too has been experiencing a gradual return to normalcy. The focus of the
company over the last two years has been conservation of its balance sheet strength and
with the recovery of the apparel sector, the company is now switching gears and focussing
on accelerated growth. The companys offline network have also tracked ahead of
pre-covid numbers and with continued aggression on store expansion front, robust traction
in MBO and online channel, new product forays across brands and categories, the Company
has all key enablers across product, supply chain and distribution to pursue aggressive
growth.
Strategic initiatives
During the fiscal FY22, the Companys first focus area was to
expand its store footprints. It started with an accelerated store expansion plan in
Quarter 3 and added 48 net stores in the financial year. The Company incubated two
initiatives to expand its retail footprint – Project RISE which is about opening
flagship stores in key markets and Project Bharat which is about expanding presence in
tier 3 / 4 cities through franchisee route. The Company ended the financial year with 14
Project Rise stores, which are already tracking at 1.5-2X of sales from same catchment
areas. The Company unveiled Ws new avatar with a completely new retail identity with
the opening of a 3000 sq. ft. Project Rise store in Indira Nagar, Bengaluru. The store
encapsulates and showcases all categories like apparel, footwear and accessories. Project
Bharat also saw opening up of 15 new stores in FY22.
The second focus area for the Company was to expand its online
business. The Companys online business on both its own website and other
marketplaces grew meaningfully in FY22 over a large base. The brand websites have grown
ahead of third-party channels and now contribute around one-fifth of the online sales. A
key focus for us has been building on the D2C (Direct to Consumer) model and its share has
more than doubled over last year to contribute majority of sales in FY22. The Omni-channel
fulfilment continued to scale up strongly and now contributes to ~20% of sales for select
channels.
Third focus area was cash conservation and cost controls. Maintaining
balance sheet strength was the primary objective of the Company that was laid out at the
beginning of pandemic. The Company ended FY22 with more than Rs 150 Crs. of cash reserves.
The Company managed to survive the pandemic and retain its cash reserves without any
external funding.
Outlook
With occasions making a comeback and workplaces progressively
reopening, the womens ethnic apparel market is expanding. The company is witnessing
a strong resurgence of consumers coming back to stores and engaging with fashion as
opposed to a need-based chore. The year is also witnessing aggressive rollout plans by its
channel partners in LFS and Online spaces and seeing a revival of MBO channel.
The Companys focus for FY23 will be accelerated growth. The
Company has planned to scale its foray across channel and expand product assortment.
One of the key priorities would be store expansion - both horizontal
and vertical. The Company would be targeting to open over 100 new stores in FY23 including
store expansion in Tier 3 and 4 towns with Project Bharat and opening of new or
upgradation of existing stores under Project Rise.
Offline growth would be complemented with aggressive growth in the
Online business across both third-party marketplaces and brand websites. Strategic
marketing, scaling up of the omni-channel fulfilment model & launching of online-first
products would be key levers. Growth in own websites would be further enabled by
personalization and improved communication for the consumers.
Financial Overview:
The Companys financials for FY22 continued to be impacted due to
2nd and 3rd waves of COVID-19. The Company reported total revenues of Rs 896 Crs and
incurred a loss of Rs 5.7 Crs due to impact of pandemic related lock-downs, store closures
and other restrictions.
H in Million
| Particulars |
2021-22 |
2020-21 |
% Increase/ (Decrease) |
| Total Revenue |
8960.52 |
6355.36 |
41% |
| EBIDTA |
1243.35 |
514.29 |
142% |
| PBT |
(72.19) |
(769.38) |
NA |
| PAT |
(57.28) |
(563.83) |
NA |
| Total Asset |
12607.09 |
10741.43 |
17% |
| Earnings per Share (EPS) in H |
(0.90) |
(8.85) |
NA |
Key Ratios
In accordance with the SEBI (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations 2018, the Company is required to provide details of
significant changes (i.e. change of 25% or more as compared to the immediately previous
financial year) in key financial ratios, along with detailed explanations therefor. The
key financial ratios are given below:
| Ratios |
FY 2021-22 |
FY 2020-21 |
| Debtors Turnover (in times) |
5.29 |
3.73 |
| Inventory Turnover (in times) |
1.16 |
0.72 |
| Interest Coverage Ratio (in times) |
13.90 |
16.18 |
| Current Ratio (in times) |
2.66 |
3.65 |
| Debt Equity Ratio (in times) |
0.00 |
0.01 |
| Operating Profit Margin (in %) |
65.45% |
57.14% |
| Net Profit Margin (in %) |
(1)% |
(9)% |
| Return on Net Worth (in %) |
5% |
(7)% |
Internal Control:
The Companys internal control system guarantees that transactions
are properly authorised, recorded, and reported. Internal control is exercised using the
Enterprise Resource Planning (ERP) systems procedures and rights. Internal auditing
is used to enhance the controls. The Audit Committee reviews the audit findings and
corrective actions performed on a regular basis to verify the internal control
systems effectiveness.
Human Resources:
Our people are our most precious asset, and we strive to create a
high-performing entrepreneurial organisation where everyone is driven to achieve their
full potential. We are proud of our professional and healthy work culture, which is based
on strong corporate values. Employees are given an enabling working environment and
culture, as well as equal opportunities for learning and personal development. People are
our most valuable asset, and we invest in their total well-being. The Company has a total
of 4305 employees as on March 31, 2022 including contractual, temporary and permanent
employees.
Risk Management:
The companys risk management infrastructure includes the people,
processes, and technology. We follow a 4 step process of Risk Management : (1) identify
& measure, (2) mitigate, (3) monitor and (4) report key risks for the organization.
The risks are monitored quarterly and reported to the Risk Management Committee
periodically. The risks are measured basis likelihood of its occurrence and the possible
impact of the risk in a 5 X 5 matrix.
The key risk areas for the company are :
| Key Risks |
Mitigation |
| Strategic Risks: Ability to retain leadership position
in the Women Ethnic-wear market and adapting to market changes. |
Creativity is at the core of TCNS brands and being the market
leaders, we strive to be ahead of the fashion curve all the time. To build our edge
further, we have set up the "Incubation Cell"- an initiative to push the
envelope on product innovation beyond what we are doing today. It is like an "Art
Lab" where the ideas are developed into something real, tangible and beautiful. |
|
Observation, Ideation, Innovation and Implementation are the
founding principles. The cell hosts a dynamic environment to facilitate a free flow of
thoughts, co-creation and collaborative development. |
| Financial Risks: Ability to sustain and grow margins,
optimize working capital. |
Womens ethnic wear is inherently a complex category due to
the nature of fabrics, trims and value-additions involved and it requires a robust, agile
and extensive supply chain base. At TCNS, we have been associated with 150+ suppliers for
years now. While the manufacturing is outsourced, control over the entire supply chain
enables us to re-engineer the product to mitigate any raw material price increases. |
|
We have invested in Automated Inventory Management System.
The data analytics based system assists in the buying, allocation and replenishment
process. When completely implemented, the system will not only result in operational
efficiencies but will also play a critical role in reducing discounting at our points of
sales and inventory levels across the supply chain. |
| Operational Risks: Prevent design failures, inventory
build-up, concentration of business with limited customers or suppliers etc. |
The design process seamlessly integrates multiple stages of
trend analysis, product conceptualization, print creation and range planning to produce
the final products. Strong creative orientation and institutionalised product creation
processes to ensure the balance of creativity and commerce for every single range,
reducing risk of design failure. |
|
Internal control process for approval of inventory buying
along with the implementation of automated inventory management system ensures that the
risk of inventory build-up is minimized. |
|
We work with a wide array of fabric and job-work suppliers to
ensure that the purchase of fabric and production is not concentrated with one vendor or
job-worker. Similarly, our distribution is well diversified across channels and customers
such that the business is rerisked from customer concentration. |
| People Risks: Ensure retention of current talent and
ability to attract right talent for growth plans of the company. |
We believe in providing the right environment, enriching
culture and opportunity to grow to our employees. Various training and upskilling
opportunity is provided to employees across the organization on a continuous basis. A
transparent performance management system is in place to reward performance. To derisk the
business from undesirable attrition, a multi- pronged approach is taken to identify
critical roles and proactively plan for succession. |
| Data/Technology Risks: Ability to deploy right
technology for various business segments to ensure internal controls and enhance
productivity of operations while ensure data privacy & data security. |
We continuously invest in technology solutions to enhance
control over processes and improve efficiency of functions across planning, warehousing,
retail operations, finance etc. In parallel, we take data privacy of our stakeholders
seriously and have put in processes and tools to ensure that is not compromised. IT
infrastructure is continuously monitored and upgraded as needed to mitigate the risk of
any cyber attack and a regular data backup & recovery mechanism is in place. |
Disclaimer
Statements in Management Discussion and Analysis describing the
Companys objectives, projections, estimates, expectations and it may includes any
‘forward looking statements within the meaning of applicable securities law and
regulations. Actual results may differ materially from those expressed or implied.
Important factors that could make a difference to results include economic conditions
affecting demand / supply, price conditions in domestic and overseas markets in which the
Company operates, competitive pressures in these markets, changes in government
regulations, tax laws and other statutes and incidental factors.
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