Vedant Fashions Ltd Management Discussions

Indian economic review

The National Statistical Office (NSO), in its second advance estimate of national income expects Indian economy to have GDP growth rate of 7.6% in FY 2023-24 as compared to 7% growth rate in FY 2022-23¹. India is ranked 5^th in worlds GDP rankings in 2024. Indias economy boasts diversity and swift growth, fuelled by key sectors such as information technology, services, agriculture, and manufacturing².

Overview of apparel retail market in India

The Indian Apparel industry is one of the most distinctive in the world because of its ancient techniques and cultural traditions. In the vastness of India, it is but natural that its different parts, in addition to having their own unique cultures and languages, also have a variety in clothing. With the rise of urbanization and the country adopting traditional values at an increasing pace, the fashion and apparel industries are on the wheel of adaptation.

The revenue in the Apparel market in India is projected to reach US$105.50bn in 2024³.

Factors contributing to the growth in domestic apparel retail market.

Source: CRISIL Research

1https://mospi.gov.in/sites/default/files/press_release/PressNote_onGDP_SAE_Q3_FRE_SRE_TRE01032024.pdf

2AsperForbesIndia report published on 10^thApr 2024

3https://www.statista.com/outlook/cmo/apparel/india

The Indian mens wear segment is fuelled by rising disposable incomes, a growing middle class and a newfound fashion focus among men.

The trend of embracing traditional wear underscores a significant shift in Indias fashion scene, extending beyond major urban hubs to meet the aspirations of a wider consumer base. As more men seek to express their cultural heritage through their clothing choices, the demand for garments such as kurtas, sherwanis, and Nehru jackets has been on an upturn, creating a lucrative market opportunity for both established and emerging brands.

Furthermore, it is expected to continue over the coming years, driven by factors such as growing awareness of Indian heritage, the influential presence of celebrities endorsing ethnic wear, and the expanding range of stylish and affordable options available online.

The Indian womens wear market experienced significant growth in recent years, propelled by rising disposable incomes and greater female participation in the workforce. Indias rich tapestry of religious and cultural diversity, which embraces various occasions and festivities, serves as a pivotal driver for the expansion of the womens wear segment in the country. The growth in womens segment can be attributed to various factors, such as a growing middle class, rising disposable income, and an increasing preference for traditional clothing.

An overview of the ethnic-wear market in India

Womens ethnic wear is the largest segment of the overall market as it has found acceptance in both daily wear and office-wear categories, apart from the Indian wedding and celebration wear category. It includes lehengas, kurtis, sarees and salwar kameez. Mens ethnic wear is the second- largest category and has a share of approximately 10% of the overall ethnic market. It is dominated by the Indian wedding and celebration wear market which accounted for approximately 80% of mens ethnic wear sales and includes sherwanis, kurta jacket sets, kurta pajama, Indo-western apparel, etc. Acceptance of ethnic wear during festivals and wedding functions is leading to overall growth of the mens ethnic wear market. Kids ethnic wear accounts for the remaining 9% of the ethnic apparel market¹.

An overview of the Indian wedding and celebration wear market in India⁴

The term "Indian wedding and celebration wear" can be defined as apparel worn on special occasions such as weddings; close-knit family functions such as puja, housewarming, etc.; festivals such as Diwali, Eid, Holi, and Raksha Bandhan; and other events such as Independence Day and Republic Day.

The Indian wedding and celebration wear apparel market is led by multiple factors including the increasing trend of multi-day wedding functions in India, higher spending per consumer etc. Not only is the Indian wedding and celebration wear market driven by the immediate family of the bride and the groom but also their close friends. The Indian wedding and celebration category is also driven by frequent festivities in India.

Growth drivers

O Huge domestic market of 9.5 million to 10 million weddings per year

O Multi-day and multi-event wedding celebrations

O Rising income levels leading to higher discretionary spending

O Increasing tendency of wearing appropriate celebration wear for respective festive events

O Increasing association with brands in celebration ethnic apparel

O Shift from tailored to ready-to-wear celebration ethnic apparel.

O Addition of new categories such as Indo-western wear

O Increased penetration of branded players in tier-II and tier-III markets

Company overview and segment performance

Incorporated in 2002, Vedant Fashions is the largest Company in India in the mens Indian wedding and celebration wear segment in terms of revenue, OPBDIT and profit after tax.⁴ ‘Manyavar brand is a category leader in the branded Indian wedding and celebration wear market with a pan-India presence.⁴

We have established a multi-channel network and introduced brands by identifying gaps in the under-served and high-growth Indian wedding and celebration wear category.

We focus on spreading Indias vibrant culture, traditions, and heritage through our aspirational yet value for money brands at a diverse range of price points. We offer a one-stop destination with a wide-spectrum of product offerings for every celebratory occasion and aim to deliver an aristocratic yet seamless purchase experience to our customers through our aesthetic franchisee-owned exclusive brand stores.

We are focused on strengthening their leadership position in the organised Indian wedding and celebration wear market and establishing dominance in the premium and value segments of the mens Indian wedding and celebration wear market, respectively, through their brands ‘Twamev and ‘Manthan, and in the womens Indian wedding and celebration wear market, through their brand ‘Mohey, which was launched in 2015.

‘Mebaz is a one-stop heritage brand of ethnic celebration wear catering to the entire family, with an established presence in the states of Andhra Pradesh and Telangana.

The Companys portfolio of products includes a diverse range of attires and accessories, each conceptualised by their designers who have experience in serving the distinct regional preferences of the Indian customer.

The organisation leverages effective brand advertising with distinct targeted marketing campaign using digital and social media, billboards, multiplex theatres, television advertisements and live events, to build a stronger connection with its customers.

Based on the Companys operating structure and available information, the Company has only one reportable segment i.e., branded fashion apparel and accessories.

The below table highlights our bouquet of brands, along with their relevant positioning in the market, the price spectrum of the product mix of each brand and the distribution channel through which each brands products are available in the market.

Year	Brand Positioning	Price Spectrum	Distribution Channel
1999*	Mens and boys flagship brand	Mid-premium	EBOs, MBOs, LFS, e-commerce
2015	Womens flagship brand	Mid-premium	EBOs and ecommerce
2019	Mens and Womens premium brand	Premium	EBOs
2017**	Mens, womens, and kids brand for the South Indian market	Mid-premium to premium	EBOs
2018#	Mens value brand	Value	MBOs, LFS, ecommerce

* The brand ‘Manyavar commenced operations through a predecessor entity in 1999.

**The brand ‘Mebaz commenced operations in 2002 and was acquired by the Company in financial year 2018.

#Large scale operations commenced following a refreshed launch in 2018.

Competitive Strengths/Opportunities & Challenges

The Companys key competitive strengths act as a barrier for entry of other players in the organised Indian wedding and celebration wear market. The strengths include:

O Market-leader in the Indian celebration wear segment with a diverse portfolio of brands catering to the aspirations of the entire family.

O Large and growing Indian wedding and celebration wear market driven by increased customer spending on such wear.

O Omni-channel network with the seamless integration of our offline and online channels

O Differentiated business model combining the strengths of retailing with branded consumer play.

O Technology-based strong supply chain and inventory replenishment systems driven by system-wide data analytics, strong processes, and long-standing vendor relationships.

O Experienced and professional founder-led leadership team.

The industry in which the Company operates may face challenges due to high concentration on Indian wedding and celebration wear and vulnerable to variations in demand, as well as changes in consumer preferences. Our business and operations could be adversely affected by health epidemics like COVID-19 pandemic. Also, other competitors may increase competition for any Company falling under the said industry. The risk management strategy of the Company is geared to identify risks/threats to the business promptly and respond to emergencies in a timely manner.

Business Outlook

We are asset-light in respect of our plant, property and equipment which enables us to achieve a high return on capital employed, primarily due to the nature of our sourcing and manufacturing operations, with a substantial majority of our sales being generated through our franchisee-owned EBOs. As a result, we do not need to invest in developing manufacturing facilities or a distribution system and by using economies of scale, we are able to optimize several costs such as our production and procurement costs, distribution costs and employee costs, thereby leading to improved profitability. Our omni- channel presence, through EBOs and online platforms, is designed in a manner such that products across our brands are available under one universal platform. As a result, we are able to make our products available to our customers through their preferred mode of shopping and purchasing. Through our network of over 300 franchisees, we have a track record of commanding a high initial capital commitment from our franchisees and in return, provide all necessary support in connection with identifying and approving potential locations for new stores, managing multi-channel advertising on a national and regional basis, store development and inventory management, management of the supply chain and provide detailed training programmes for store staff and franchisees. We also incur lease costs in connection with EBOs operated by our franchisees on premises leased by us.

As of, Mar 31, 2024, we had a retail footprint of 1.7 million square feet covering 676 EBOs globally (including 127 shop-in-shops) spanning across 255 cities and towns in India, and 13 overseas across the United States, Canada, UK and the UAE, which are countries with a large Indian diaspora. In addition to our offline retail presence, our consumers also have the option of placing orders through our website (www.manyavar.com), and through leading lateral e-commerce platforms. As our offline and online channels are integrated, our customers can place orders for our products either offline or online and have the flexibility of buying products at one store and returning at another or browsing our product catalogues and placing orders online with doorstep delivery. In Financial Year 2024, we opened 5 exclusive brand stores of Twamev Brand and opened first flagship EBO store of Mohey brand. We have also opened the largest store of Manyavar and Mohey Brand in the city of Bengaluru measuring more than 22k sq. ft. approximately.

Technology is at the forefront of our operations and is essential to us being able to attain operational efficiencies in our sourcing, manufacturing, distribution, and sales processes and delivering an enhanced retail experience to our customers. Most of our business operations are system- driven with limited manual intervention. We utilise data analytics for capturing and analysing evolving consumer preferences and purchase trends across the country and have developed a strong expertise and understanding of consumer preferences across India. We also rely upon our technology platforms to monitor and manage store inventory levels on a real-time basis and integrate our stock and supply chain with our production cycle. Our back- end production processes, including our supply chain and inventory management are data-based and algorithmically managed with every stage system-driven, including the procurement of raw materials, manufacturing (on an SKU- identifiable basis), warehouse inventory management and store replenishment. As a result, we have a record of every product sold at our franchisee owned EBOs and are able to maintain synchronisation between store inventory, sales, and billing cycles from each store. We have also upgraded website to support the customer product selection and sales processes.

As an organization, we recognize the importance of digital interventions at various touchpoints in a customers presales & post-sales journey, so we continuously plan to revamp and upgrade the digital experience. In this context, weve taken significant strides in integrating online and offline touchpoints such as the launch of our Book a Video Call feature, catering to our online customers, seamlessly bridging their online browsing experience with personalized buying concierge service, which will help in product discovery online and/or lead online customer to stores. This innovative initiative not only enhances convenience but also fosters a deeper engagement with our brand. Furthermore, were excited to announce the pilot launch of our in-store digital experience, aimed at revolutionizing the post- purchase journey. Through this initiative, customers can enjoy a digitally enhanced alteration process, streamlining their experience and embracing the power of digitalization in every aspect of their interaction with our brand. These advancements along with our first phase launch in last year, which includes shifting to new tech stacks in the domains of CRM, Ecommerce & MarTech along with relaunch of new e-commerce website etc. act as a strong foundation on which Omnichannel customer journey has been build. The underlying idea for such transformation is improving customer delight, retention & operational efficiency across channels.

To achieve a deeper, connect with our consumers, we utilise targeted marketing campaigns through digital and social media, billboards, multiplex cinemas, television advertisement and live events. We believe we have developed a strong brand identity through effective brand advertising and distinct marketing campaigns for our brands. We attempt to connect with our customers at an emotional level through subtle messages that our customers can relate to. These include values-based messaging themes embedded around traditional cultural values, such as "Taiyaar Hokar Aaiye", "Diwali Wali Feeling", "Dulhan wali feeling", "Shaadi Grand Hogi", "Pehno Apni Pehchan" "Apno Wali Shaadi" and "Shaadi ka Kharcha Adha Adha". Some of our campaigns are also based on specific categories of persons such as groomsmen or specific celebrations and occasions. This year we launched a special campaign showcasing our Vesthi/Pancha collection, tailored specifically for South Indian weddings, under the newly introduced Vivaham collection and also launched campaign emphasizing the cherished bond between fathers and sons.

Headquartered in Kolkata, we are led by our founder, Chairman and Managing Director, Mr. Ravi Modi, a first- generation entrepreneur who has proven his flair for the art of brand building and retailing with the success of our brands. Mr. Modi is supported by an experienced management team whose achievements have been recognised by a number of industry awards including awards received during FY 2023- 2024 such as "Indias Retail Champions Award" by RAI; "Most Admired Fashion Brand of The Year" by IFA etc. We have also received other awards historically such as the "EY Entrepreneur of the year - Consumer Products and Retail", "India Retail Champions Awards 2023", "Business Leader of the Year by Sanmarg", "Entrepreneur Of the Year, Best Financial Performance - ET Bengal", "IMAGES Most Admired Fashion Brand of the Year: MENS ETHNIC/FUSION WEAR", along with other awards such as Global Award for Retail Excellence, 2020, Indias Retail Champion (Speciality Retail), 2020, and Best Mens Ethnic Wear Brand (East), 2019.

Risk and Concerns

Your Company has adopted a risk management policy for promoting a pro-active approach in reporting, evaluating, and resolving risks associated with the Companys business. The Companys Risk Management Committee (RMC) comprises of three Directors out of which two are Independent Directors, which overviews the process of identification, monitoring, and review of all the elements of risk(s) associated with the Company. The Company has assessed the risks and there is an adequate risk management infrastructure in place capable to identify and mitigate the risks. The Companys Risk Management Policy is established to identify and analyse internal and external risks faced by the Company, to set appropriate risk limits, to lay down measures for risk assessment and mitigation including systems and processes for internal control of identified risks and to monitor risks and adherence to limits. Risk management processes and systems are reviewed regularly to reflect changes in market conditions and the Companys line of activities. The Company has also designated an employee as ‘Risk Manager for the purpose of effective coordination of the risk management mechanism.

Our current growth strategies include:

(i) expanding our footprint within and outside India.

(ii) scaling up our emerging brands through increased up- selling and cross-selling initiatives;

(iii) enhancement of brand appeal through targeted marketing initiatives;

(iv) the significant potential and space for growth of our existing and emerging brands; and

(v) adopting a disciplined approach towards future acquisitions.

Discussion on financial performance with respect to operational performance:

The Company has taken various operational measures like strengthening its supply-chain and vendor management by introducing tech-based fully-integrated supply chain with automated replenishment system; strengthening inventory management by introducing Algorithm-based inventory management system for real time monitoring store inventory at EBOs; collecting secondary sales data to analyse consumer buying behaviour; Product development on the basis of prevailing trends & consumer preferences gathered via data analysis, market surveys for the improvement in performance and achieving better results.

Financial statement

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (a change of 25% or more as compared to the previous financial year) in key financial ratios, along with detailed explanations thereof. The key financial ratios are given below:

Key financial ratios	2023-24	2022-23	Difference (%)
Debtors turnover	2.63	3.06	(14.05%)
Inventory turnover	8.76	8.43	3.91%
Interest coverage ratio	Not Applicable, since the Company has no Borrowings involving interest coverage.
Current ratio (in times)	3.68	3.33	10.51%
Debt equity ratio (in times)	0.28	0.21	33.33%
Net profit margin (in %)	30.37%	31.89%	(4.77%)
Return on net worth# (in %)	40.32%	47.38%	(14.90%)

# here return on net worth indicates return on capital employed as disclosed in the financi?is

Reasons for variance of more than 25% in above ratios: Increase in debt equity ratio is due to increase in lease liabilities on account of new store opening and lease renewals during the year.

Human resources

The continued growth of the Companys business depends on the ability to attract, hire, train and retain skilled personnel. In the year under review, the Company had a strength of 754 employees.

For the financial years ended March 31 of 2023 and 2024, the employee benefits expense amounted to ^ 551.80 million and ^ 566.20 million, respectively, representing 6.93% and 6.40% respectively, of the total expenses.

Internal control system and the adequacy

A separate paragraph on internal control systems and their adequacy has been provided separately in the Boards Report.

Cautionary statement

Certain statements in the MDA section concerning future prospects may be forward-looking statements which involve a number of underlying identified/non identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro-environment, a global pandemic like Covid-19 may pose an unforeseen, unprecedented, unascertainable, and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based are also subject to change accordingly. These forward-looking statements represent only the Companys current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.