VIP Clothing Ltd Management Discussions.


The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protective measures are severely impacting economic activity. As a result of the pandemic, the global economy is projected to contract sharply by 3 per cent in 2020, much worse than during the 2008 09 financial crisis. Global growth is projected at -4.9 per cent in 2020, 1.9 per cent points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 per cent. Overall, this would leave 2021 GDP some 6.5 per cent percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty in the world since the 1990s. (source : IMF)

After a contraction in the current financial year, Indias economy is forecast to bounce back with a sharp growth rate of 9.5 per cent next year provided it avoids further deterioration in financial sector health. The coronavirus pandemic will lead to shrinking of the already slowing economy in 2020-21 that started in April. The pandemic has drastically weakened Indias growth outlook and laid bare the challenges caused by a high public-debt burden. The lockdown has been repeatedly extended, although some restrictions have been eased from May 4 in zones with fewer infections. However, new cases have continued to rise. To support the economy, the Reserve Bank of India (RBI) has eased monetary policy by cutting policy rates and providing liquidity through long-term repo operations. Prudential requirements for banks have also been eased to free up liquidity for lending. The government has announced stimulus measures amounting to 10 per cent of GDP, of which the fiscal component of about 1 per cent of GDP is significantly less than many of Indias peers, the rating agency said.


The coronavirus disease (COVID-19) is affecting every sphere of life including manufacturing activities, businesses, etc., across the globe and India is also not spared from the panic situation. The textile industry predominantly employs migrant workers from different States and also a large population comes for work from far off places using public transport. Indias textile industry is one of the economys largest industry. In 2000-01, the textile and garment industries accounted for about 4 per cent of GDP, 14 per cent of industrial output, 18 per cent of industrial employment, and 27 per cent of export earnings (Hashim). Indias textile industry is also significant in a global context, ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns. In contrast to other major textile-producing countries, mostly small-scale, non-integrated spinning, weaving, cloth finishing, and apparel enterprises, many of which use outdated technology, characterize Indias textile sector. Some, mostly larger, firms operate in the "organized" sector where firms must comply with numerous government labour and tax regulations. Most firms, however, operate in the small-scale "unorganized" sector where regulations are less stringent and more easily evaded.

The unique structure of the Indian textile industry is due to the legacy of tax, labour, and other regulatory policies that have favoured small-scale, labour-intensive enterprises, while discriminating against larger scale, more capital-intensive operations. The structure is also due to the historical orientation towards meeting the needs of Indias predominately low-income domestic consumers, rather than the world market. Policy reforms, which began in the 1980s and continued into the 1990s, have led to significant gains in technical efficiency and international competitiveness, particularly in the spinning sector. However, broad scope remains for additional reforms that could enhance the efficiency and competitiveness of Indias weaving, fabric finishing, and apparel sectors. (Source: Fiber fashion)

The textiles industry has made a major contribution to the national economy in terms of net foreign exchange earnings and contribution to the GDP. The textiles sector is the second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of Indias economy. Textiles exports from India will touch US$ 185 billion by the year 2024-25. Export of textiles increase to US$ 41.67 billion in 2014-15 by 3%. In rupee terms, to Rs. 2.55 Lacs Crores as against Rs. 2.48 Lacs Crores in the last year there by showing a growth of 3%. Growth in export of certain segments were high such as handicrafts (17%), carpets (15%) and readymade garments (12%), India has a share of approximately 5% of the global textiles and apparel trade. The technical textile sector has demonstrated encouraging growth trends in India with a CAGR of 8% for the last few years it has reached a size of $13 billion. The sector is expected to show a CAGR of 16% to reach $31 billion by 2020-21. Under the Make in India initiative, investment opportunities for foreign companies and entrepreneurs are available across the entire value chain of synthetics, value-added and specifically fabrics, fabric processing set-ups for all kinds of natural and synthetic textiles, technical textiles, garments, and retail brands. (source: GreenChem Industries)

Dynamics of the global apparel market keeps changing drastically. Growth of apparel markets in developed countries are slowing down, while simultaneously, it is seeing a robust growth in the developing nations. There is a paradigm shift due to demanding customer base, with trends inclining towards product differentiation much influenced by social, economical and environmental concerns. Among the emerging markets, India is quickly becoming a preferred destination for international apparel brands. Indian apparel market is calculated to grow at a CAGR of 13% and is predicted to reach approximately US$ 124 billion by 2020. Aspirations and ground realities are what it takes to success. Global brands with deep pockets are making a beeline into the Indian market due to its stabilized economy. Many global brands are penetrating into the I and II tier cities, while domestic brands are also strengthening their position. The nod of the Central Government for FDI will further boost the presence of global brands in India. (source : Fiber fashion)


Indian Textiles and Apparels [Garment Sector] industry, accounts for approximately 4% of the global Textiles and Apparels market. The Textiles and Apparels market industry is one of the largest and the most important sectors for the Indian economy in terms of output, foreign exchange earnings and employment. The industry contributes approximately 7% to industrial output in value terms, 2% to the GDP and 15% to the countrys export earnings. Exports and domestic consumption are both expected to be sluggish in the near term due to the impact of COVID-19.

Among all the fashion categories, innerwear has emerged as one of the fastest growing categories over the last few decades. A commodity which was earlier depicted as a mere essential has in the last few years transformed itself into a fashion statement. The Indian innerwear market currently estimated to be worth Rs. 32,000 Crore accounts for ~9 per cent of the total domestic fashion retail market. Domestic demand of innerwear has changed with consumer buying behavior, transforming from need based to aspiration based, coupled with increased fashion consciousness among millennial. Innerwear category has broadened from basic requirement of commodity wear to designer wear with emphasis on styling and comfort. The Indian innerwear market holds immense growth potential and is slated to grow phenomenally over the next 5 years. The Indian innerwear market is primarily segmented into mens innerwear and womens innerwear. Currently, the womens segment dominates the innerwear category by constituting 64 per cent of the total innerwear market. Mens segment is 33 per cent and kids 3 per cent of the total innerwear market. (source: Indian companies)


The Indian innerwear market is primarily dominated by womens innerwear which accounts for 64 per cent of the total innerwear market and it accounts for 16 per cent of the total womens apparel market. Various product categories in womens innerwear are brassieres, camisoles, panties, tees, nighties, shorts, etc. Brassieres and panties contribute 85 per cent of the total womens innerwear segment.

Womens innerwear segment is poised to grow at an impressive growth rate of 12.5 per cent over the next decade to reach Rs. 68,000 Crore by 2028 from current market size of Rs. 21,000 Crore. Branded innerwear contributes 38-42 per cent of the total womens innerwear market and this share is expected to grow to 45-48 per cent of the total womens market by 2023.

Women are conscious about the brands and styles for their intimate wear. The trend is not restricted to just metros but can be witnessed spreading in Tier I, II and III cities. This adoption of branded lingerie has led to influx of international and domestic innerwear brands. (source: Indian companies)


The mens innerwear market is currently valued at Rs. 11,000 Crore and is expected to grow at a CAGR of 7 per cent over the next decade to reach Rs. 21,800 Crore by 2028. It contributes 7 per cent of the total mens apparel market.

The market is dominated by a large number of small-scale players making ~60-65 per cent of the market fragmented and unorganised. However, the market segment is evolving gradually and moving towards organised retail. (source: Indian companies)


The kids wear market in India is estimated at Rs 81,900 crores and expected to grow at a CAGR of 8.5% in the next five 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. (source: Indian companies)

Market for kids apparel is the fastest growing industry in India. Childrens garments are available in various forms and designs. There is an excellent opportunity for the organised players to lay a strong foundation in this segment. Indian market is now moving towards an international look in terms of childrens apparel.

Branded kids apparel market is in its nascent stage in India with a handful of national and international brands. Today Indian kids wear branded market is growing at 15% per annum. Some major changes in trends are taking place in the market for kids apparel. One of the important changes is the increasing preference for branded apparel. This shift is taking place on account of changes such as a rise in the disposable income of the people and the increasing influence of western world. The other important change that is taking place in this area is the emergence of kids as an independent buyer group. Influenced by mass media and peer pressure, todays kids are more informed and self-conscious.

A cursory analysis of the kids buying behaviour indicates that they are an independent customer group displaying considerable pester power that they have inculcated and now seem to be exerting. Additionally, kids are highly self-conscious and can be easily affected by peer pressure, at a very young age, and thus can be very demanding, often at the cost of the parents peace of mind if not their pockets. (source: Indian textile journal)


The present market trends show an inclination amongst Indian consumers to spend more on innerwear, leading to aggressive growth of this category especially in premium and luxury price segments. The recent mode of retailing through online channels has permeated into the innerwear category as well giving it much exposure to the consumers.

It is evident that Indian innerwear industry has come a long way in last decade and perception of todays consumer towards innerwear has changed. The category is no more considered a basic necessity but a fashion indulgence which gives confidence and feel good factor.

Growing Indian middle class- moving up ladder

Rising disposable income, economic growth and dual income households has led in the emergence of a middle class which is ready to spend and experiment with fashion and style. With more income to spend the middle class has become more brand conscious. This has led to higher value and volume.

Change from need driven to aspiration driven buying

The recent consumer trends show that price is not the most important criteria anymore for this segment. For evolving consumers, looking good has become an important aspect of life. Therefore, spending on apparel, personal care and grooming is on the rise.

Occasion specific products like seamless bras, strapless bras, padded bras, bralettes, etc. are being sought. There has been a rising demand for functionality based womens innerwear like shapewear, tummy tuckers, etc. for women desiring a slimmer look; non-wired brassieres for woman facing comfort issues after prolonged use of wired ones; and sports bras suitable for physically active women.

Emergence of online retail channels

The emergence of online retail channels has bolstered sales of premium innerwear among the youth. The fashion conscious women residing in tier I, II cities with limited access to brick and mortar stores are most benefitted through the emergence of online retail in innerwear segment. It has been witnessed that women are the key buyers of innerwear available on online channels. (Source : Images of Business Fashion)

E-Commerce Industry

The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest e-commerce market in the world by 2034. The e-commerce market is expected to reach Rs.13,97,800 crore (US$ 200 billion) by 2027 from Rs 2,69,076.5 crore (US$ 38.5 billion) in 2017. Indias e-commerce market has the potential to grow more than four folds to Rs 10,48,350 crore (US$ 150 billion) by 2022 supported by rising incomes and surge in internet users. Online shoppers in India are expected to reach 120 million in 2018 and eventually 220 million by 2025. Online retailers now deliver to 15,000-20,000 pin codes out of nearly 100,000 pin codes in the country. E-Commerce and consumer internet companies in India received more than Rs. 48,923 crore (US$ 7 billion) in private equity and venture capital in 2018. Online retail sales in India are expected to grow by 31 per cent to touch Rs. 2,28,540.3 crore (US$ 32.70 billion) in 2018, led by Flipkart, Amazon India and Paytm Mall. Online retail is expected to contribute 2.9 per cent of retail market in 2018. (Source:

Much growth of the industry has been triggered by increasing internet and smartphone penetration and by 2022, smartphone users are expected to reach 859 million and e-commerce sector expected to grow 1,200 per cent by 2026. During April-June quarter 2019, smartphone shipment in India grew 9.9 per cent year-on-year to 36.9 million shipments. Internet penetration in India grew from just 4 per cent in 2007 to 34.42 per cent in 2017, registering a CAGR of 24 per cent between 2007 and 2017. In FY20, internet penetration in India was 50.52 per cent. The number of internet users in India is expected to increase from 665.31 million as of June 2019 to 829 million by 2021. Internet penetration in rural India is expected to grow as high as 45 per cent by 2021 compared to the current rate of 26.57 per cent. The e-commerce retail logistics market in India is estimated at Rs. 9,435.15 crore (US$ 1.35 billion) in 2018 and is expected to grow at a 36 per cent CAGR over the next five years. It also received and investment of Rs. 43,681.25 core (US$ 6.25 billion) from January May 2019. In the festive sale (September 29-October 4, 2019), the e-tailers in India achieved US$ 3 billion of Gross Merchandise Value (GMV).

A young demographic profile, rising internet penetration and relative better economic performance are the key drivers of this sector. The Government of Indias policies and regulatory frameworks such as 100 per cent foreign direct investment (FDI) in B2B e-commerce and 100 per cent FDI under automatic route under the marketplace model of B2C e-commerce are expected to further propel growth in the sectors. As per the new Foreign Direct Investment (FDI) policy, online entities through foreign investments cannot offer the products which are sold by retailers in which they hold equity stake. In February 2019, the Government of India released the Draft National E-Commerce Policy which encourages FDI in the marketplace model of e-commerce. Further, it states that the FDI policy for e-commerce sector has been developed to ensure a level playing field for all participants. According to the draft, a registered entity is needed for the e-commerce sites and apps to operate in India. Government also proposed the National E-commerce Policy, set up the lawful agenda on cross-border data flow, no data will be shared with foreign government without any prior authorisation of Indian government. Through its Digital India campaign, the Government of India is aiming to create a trillion-dollar online economy by 2025.

(Source : Indian E-commerce Industry Analysis Report)

Segment wise or product wise performance

The Company is engaged in the business of manufacturing garments. Therefore there is no separate reportable segment.

Outlook on strengths and Opportunities:


The Company since long engaged in the manufacture and marketing of innerwear under band name VIP, Frenchie, Feelings and Leader, has the state of art machinery and infrastructure of manufacturing. The Company has strong recall value of brand in the market with robust sales channel from distribution & wholesales to modern trade, institution, e-commerce and retail store sales channel to cater the needs of the consumer.


The growth of innerwear segment, in India, can be attributed to the introduction of various international brands and other regional players. The evolution of branded innerwear is mainly rooted in urban India. But, influx of international brands into Tier I and II cities have resulted in providing a huge untapped market for organised players, with attention on western outfits and an increasing demand for occasion and output based innerwear, the market has seen a holistic boom. Today, people look for innerwear with optimum functionality and comfort.

The rising purchasing power among customers and increasing working women are other factors that have boosted the market. The innerwear market is poised to grow at impressive pace in near future. The changing demographics, growing youth population ready to experiment with colours, fashion and trends etc and there are plethora of growth prospects for both international and domestic innerwear bands to expand their current product portfolio and experiment with new offerings.

Outlook on weakness and threats:

The Industry is highly fragmented and manually intensive with Low productivity and high dependence on cotton. The industry dominated by small scale enterprises with and lack of skilled labour and low labour productivity due to out-dated technology. The challenges which industry faces is timely and efficient delivery of products, no stock rotation leading to outdated stock, Increased cost of Reverse Logistics, Managing Multiple Warehouses and Stores. There is high competition from international and domestic players and it has been growing in the years to come.

Risk and Concerns:

The Company is exposed to various types of risks associated with business of the Company, which will be internal as well as external risk. One of the key risks faced by the Company in todays scenario is the fluctuations in the price of raw material. Any increase in prices of raw materials could create a strain on the operating margins of the Company. We operate in a highly competitive market with competitors who may have better ability to spend more aggressively on advertisement and marketing and more flexibility to respond to changing business and economic conditions. Further, there are regional or smaller competitors who have certain advantages over us. An increase in the amount of competition that we face could have a material adverse effect on our market share and sales. The Company has in place risk management procedure to identify and evaluate the risk on a regular basis. The Company has the risk management committee, who brain-storm on the various risks associated with the Company. The details of risk committee have been mentioned in the Corporate Governance report.

Internal control system and adequacy:

The Company has implemented adequate procedure and internal controls which provide reasonable assurance regarding reliability of financial reporting and preparation of financial statement. The Company also ensures that internal controls are operating effectively.

Internal audit covers all areas of activities and periodical internal audit reports are submitted to the management for review to strengthen any areas which requires more focus. The Audit Committee reviews all financial statements, performance and ensures adequacy of internal control systems. The Company has a well-defined organization structure, authority levels and internal rules and guidelines for conducting business transactions.

The software solutions such as SAP, DMS, field assistance and number of other robust system provides the Company to control over various business processes, increases productivity, better inventory management, promotes quality, reduced material cost, effective human resources management, reduced overheads boosts profits, plan its sales, production and monitor and control the processes in case any deviation.

SAP software products provide powerful instruments for helping companies to manage their financials, logistics, human resources, and other business areas. The backbone of SAP software offering is SAP ERP system which is the most advanced Enterprise Resource Planning (ERP) system from currently available ones. Presently the SAP system is running smoothly.

Human resource & industrial relations:

Industrial relations are the relationships between employees and employers within the organizational settings. From this perspective, industrial relations cover all aspects of the employment relationship, including human resource management, employee relations, and union-management (or labour) relations.

This year, while we understood that to be a successful enterprise, we have to do two things quite well: To stay innovative and creative in terms of product development and design, but at the same time we have to be tightly controlled about certain aspect of our Corporate behaviour and culture The HR function as a whole, acted as a change agent and were able to identify and implement the change management role behaviours.

In terms of Talent acquisition, we have been able to acquire Key senior managerial & Senior Leadership talent from the organisation of repute with an industry acceptable lead time and were also instrumental to attract diverse talents across levels from the Industry.

In order to attract, retain and motivate the best available talent, Company provides an opportunity to employees to participate in the growth of the Company, besides creating long term wealth in their hands. As the business environment is becoming increasingly competitive, it is important to attract and retain qualified, talented and competent personnel in the Company. Your Company believes in rewarding its Employees for their continuous hard work, dedication and support, which has led the Company on the growth path.

At our manufacturing units, we handle the health, hygiene, safety issues by conducting awareness programs and imparting periodic training to employees on the proper use of automated machines & equipment in order to obtain / achieve manufacturing excellence.

With the implementation of SAP system, we have attained the integration of all systems & processes across the organisation. As a part of digitalization of processes and paper-less office, we are pursuing with Employees Self Service Portal in the name of Task Manager. This online platform will take many of HR activities online and will ensure real-time control system."

Strengthening the employer-employee relationship is the strategic role of our Human Resource Department. We have continuously facilitated and formulated the work strategy and determined the functional processes necessary for smooth transition of the organisation goals and objectives. We constantly strive to develop strategic solution to employment-related matters that affect the organisations ability to meet its productivity and performance goals.

As on March 31, 2020 the Company had 1408 (Employees 385 + Workers 1023) people working directly and indirectly with the Company. The industrial relations at the Companys units, head office were cordial throughout the year.

Finance review: Financial performance and analysis

(Rs. In Lakhs)

Particulars 2019-20 2018-19 Change Change (%)
Revenue from operation 17276.41 20746.35 -3469.94 -16.73%
Profit before Interest, Depreciation & Tax (excluding Other Income) -1572.94 363.67 -1936.61 -532.52%
Less : Finance Cost 1038.21 880.70 157.51 17.88%
Less : Depreciation 424.05 331.01 93.04 28.11%
Add : Other Income 277.21 196.97 80.24 40.74%
Profit/(Loss) Before exceptional item and Tax -2757.99 -651.07 -2106.92 323.61%
Profit for the year (excluding OCI) -1495.04 -619.34 -875.70 141.39%
Profit for the year (including OCI) -1495.04 -619.34 -875.70 141.39%

Key Financial Ratios

Particulars 2019-20 2018-19 Change (%)
Return on Net Worth (%) -11.02% -4.22% -161.14%
Return on Capital Employed (%) -16.74% -3.36% -398.21%
Basic EPS (after exceptional items) in Rs. -1.81 -0.75 -141.33%
Debtors Turnover 3.17 3.30 -3.94%
Inventory Turnover 1.37 1.35 1.48%
Interest Coverage Ratio -1.66 0.26 -738.46%
Current Ratio 1.50 1.77 -15.25%
Debt Equity Ratio 0.58 0.55 -5.45%
Operating Profit Margin (%) -9.10% 1.75% -620.00%
Net Profit Margin (%) -8.65% -2.99% -189.30%

Explanation on Key Financial Ratio:

The rapid spread of the COVID-19 pandemic across countries, including India, has not spared Indias apparel sector either, adding to the woes of the player who have already experienced a rather challenging fiscal 2020. Amid a subdued demand scenario in the domestic as well as the international markets, intensifying competition and lags witnessed in the clearance of export incentives, there was a drop in turnover and negative impact on profitability and financial ratios for FY20 as compared to FY19.