VIP Clothing Ltd Management Discussions.


After strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of last year, reflecting a confluence of factors affecting major economies. Chinas growth declined following a combination of needed regulatory tightening to rein in shadow banking and an increase in trade tensions with the United States. As a result of these developments, global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020. In India, growth is projected to pick up to 7.3 percent in 2019 and 7.5 percent in 2020, supported by the continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy (source: IMF)

The Indian economy started the fiscal year 2018 19 with a healthy 8.2 percent growth in the first quarter on the back of domestic resilience. Growth eased to 7.3 percent in the subsequent quarter due to rising global volatility, largely from financial volatility, normalized monetary policy in advanced economies, externalities from trade disputes, and investment rerouting. Further, the Indian rupee suffered because of the crude price shock, and conditions exacerbated as recovery in some advanced economies caused faster investment outflows. Notwithstanding unforeseen global events, growth for India is estimated to remain upward of 7 percent for the year ahead. These projections could be attributed to the sustained rise in consumption and a gradual revival in investments, especially with a greater focus on infrastructure development.


Indian textile industry: Indias textiles industry is among the oldest industries in the country dating back several centuries. It is one of the largest contributors to the economy accounting for ~4% of the GDP. It is the second largest contributor towards employment generation, after agriculture, contributing 10% to the countrys manufacturing, owing to its labour-intensive nature. The industry is characterised by its robust vertical integration in almost all the sub-sectors. The textiles and apparel industry constitutes ~14% of the total exports of the country. India is the second largest producer and exporter of textiles after China and fourth largest producer and exporter of apparel after China, Bangladesh and Vietnam. The mitigation of the repercussions of currency fluctuation remains a challenge for the industry. Exports have been a core feature of Indias textile sector. Indian textiles and apparel exports were estimated at $39 billion and is expected to grow at a CAGR of 7.5% over the next decade to reach $76 billion by 2028. The fundamental strength of Indias textile industry is its strong production base with a wide range of fibres and yarns that include natural fibres like cotton, jute, silk and wool; and synthetic and manmade fibres such as polyester, viscose, nylon and acrylic.


The 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.

Indian Fashion Retail which was estimated at Rs. 3,61,000 crore is 2019 is expected to grow at a CAGR of 8.1 percent over the next decade to reach Rs. 7,88,500 crore by 2028. Among all the fashion categories, innerwear has emerged as one of the fastest growing categories in last few decades. A commodity which was earlier depicted as a day-to-day essential has transformed itself into fashion wear with more emphasis on styling and comfort. Traditionally, the innerwear market was largely fragmented and unorganised. But, in last few years the organised innerwear segment has shown promising growth in both mens and womens categories.

The innerwear category, currently estimated to be worth Rs. 32,000 crore, accounts for 9 percent of the total apparel market in 2019. In recent years, the womens innerwear segment has grown consistently and was estimated to be worth Rs. 21,000 crore in 2018. It is expected to grow at an impressive CAGR of 12.5 percent over the next decade to reach Rs. 68,000 crore by 2028. The mens innerwear market, which is estimated to be worth Rs. 11,000 crore in the year 2018, is estimated to grow at a CAGR of 7 percent to reach Rs. 21,800 crore by 2028.Kids innerwear market was worth Rs. 850 crore in 2017 and is expected to grow at a CAGR of 12 percent to reach Rs. 2,640 crore by 2027.

The Indian innerwear market is primarily segmented into mens innerwear and womens innerwear. Currently, the womens segment dominates the innerwear category by constituting 64 percent of the total innerwear market. Mens segment is 33 percent and kids 3 percent of the total innerwear market.


The Indian innerwear market is primarily dominated by womens innerwear which accounts for 64 percent of the total innerwear market and it accounts for 16 percent 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 percent of the total womens innerwear segment.

Womens innerwear segment is poised to grow at an impressive growth rate of 12.5 percent 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 percent of the total womens innerwear market and this share is expected to grow to 45-48 percent 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.


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

The market is dominated by a large number of small-scale players making ~60-65 percent of the market fragmented and unorganised. However, the market segment is evolving gradually and moving towards organised retail.


The kids segment in the innerwear category is a highly unorganised and fragmented category. Local MBOs and regional players are known for catering to kids segment of the innerwear market. Although there are some brands for teens innerwear, they dont have a large assortment. Kids innerwear is estimated to be worth Rs. 850 crore in 2017 and is expected to grow at a promising CAGR of 12 percent over the next decade to reach Rs. 2,640 crore by 2027.

Till recently, there had been no specialisation in kids innerwear category. The same players that were manufacturing mens and womens innerwear had extended lines for kids innerwear. But, things are changing and there are specific innerwear brands for kids who are giving plethora of options in kids innerwear segment. Yet, the category holds unexploited potential which gives innerwear brands huge opportunities to tap this segment.


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

India is the fastest growing market for the E-commerce sector. Revenue from the sector is expected to increase from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at annual rate of 51%, the highest in the world.

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 US$ 200 billion by 2027 from US$ 38.5 billion in 2017. Indias e-commerce market has the potential to grow more than four folds to 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. Average online retail spending in India was US$ 224 per user in 2017.

E-commerce and consumer internet companies in India received more than 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 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.

Much growth of the industry has been triggered by increasing internet and smartphone penetration. 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. As of December 2018 overall internet penetration in India was 46.13 per cent. The number of internet users in India is expected to increase from 604.21 million as of December 2018 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 23.87 per cent. The e-commerce retail logistics market in India is estimated at US$ 1.35 billion in 2018 and is expected to grow at a 36 per cent CAGR over the next five years.

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 market place model of B2C e-commerce are expected to further propel growth in the sectors. As of August 2018, the government is working on the second draft of e-commerce policy, incorporating inputs from various industry stakeholders. In February 2019, the Government of India released the Draft National e-Commerce Policy which encourages FDI in the market place 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.

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 SAP 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, 2019 the Company had 2083 (Executives 414 + Workers 1669) 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 2018-19 2017-18 Change Change (%)
Revenue from operation 20746 22238 (1491) -6.71%
Profit before Interest, Depreciation & Tax (excluding Other Income) 364 1050 (686) -65.37%
Less: Finance cost 881 1093 (213) -19.45%
Less: Depreciation 331 335 (4) -1.31%
Add: Other Income 197 128 69 53.87%
Profit/(Loss) Before exceptional item and Tax (651) (251) (400) 159.72%
Profit for the year (619) (307) (312) 101.59%

Key Financial Ratios

Particulars 2018-19 2017-18 Change (%)
Return on Net Worth (%) -3.41% -1.56% 119%
Return on Capital Employed (%) -2.62% -0.98% 166%
Basic EPS (after exceptional items) in Rs. -0.75 -0.37 103%
Debtors Turnover 3.30 3.77 -12%
Inventory Turnover 1.31 1.43 -8%
Interest coverage ratio 0.26 0.77 -66%
Current Ratio 1.78 1.81 -2%
Debt Equity Ratio 0.44 0.41 7%
Operating Profit Margin (%) 1.8% 4.7% -63%
Net Profit Margin (%) -3.0% -1.4% 116%

Explanation on Key Financial Ratio: Due to increased competitive intensity and contraction of overall demand, there was a drop in our turnover in FY19 as compared to FY18. The drop in turnover has an negative impact on profitability and financial ratios for FY19 as compared to FY18.