Arvind Limited At an Inflection. 23 rd May 2013, Ahmedabad

Transcription

1 Arvind Limited At an Inflection 23 rd May 213, Ahmedabad

2 Agenda Snapshot of Arvind A Changing Picture Overall Vision and Division-wise Growth Plans Summary and Conclusion: Overall Value Creation Path 2

3 Arvind Limited At a Glance 17% topline growth over the last 5 years Coupled with rising margins......and higher returns with lower leverage Op. Rev, Rs Cr 1, 5, 2,793 3,28 FY 9 FY 1 +17% 4,85 FY 11 4,925 FY 12 5,293 FY 13 Margins % FY 9 FY FY FY FY 13 D/E % FY FY 1 RoCE % FY 11 FY 12 FY 13 Op. EBITDA % EBIT % ROCE % D/E ratio Largely stable mix of businesses over this period to balance investment needs in new businesses with internal cash flow accruals 1% 6% 4% 5% 5% 4% 25% 22% 23% 27% 25% 38% 41% 39% 36% 43% Other Brands & Retail Other Textiles 3% 32% 33% 33% 28% Denim FY 9 FY 1 FY 11 FY 12 FY 13 3

4 EBIDTA margin Continued Q-o-Q improvement in margins for both Textiles as well as Brands & Retail businesses Textiles B & R Total 15.6% 15.7% 13.6% 13.1% 6.6% 7.2% 14.7% 7.7% 12.% 13.4% 1.3% 15.6% 11.2% 16.2% 6.% 12.4% 17.3% 18.1% 13.6% 14.4% 6.6% 6.8% 1.2% 1.1% Q Q Q Q Q Q Q Q Margins in B&R improving even after including losses from the newly acquired brands 4

5 Revenue, EBIDTA and PAT are at all-time high Revenue Rs Cr EBIDTA Rs Cr * * Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q PAT Rs Cr * * Strike period 2 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 5

6 Arvind Limited A Changing Picture 15, 1, Overall, 2%+ growth targeted over the next 5 years with stable margins... Op. Rev, Rs Cr 5, 1% 5,293 FY 13 2% 8, FY 15 4% 6% 25% 31% 13, FY 18 38% Maintaining EBIT at ~11-12% Through greater focus on B2C portfolio and relatively asset-light businesses 1% Other Brands & Retail Arvind at the inflection of accelerating growth in B2C businesses Critical mass across major businesses to fund growth largely through internal cash flows Target higher growth in differentiated B2C businesses of brands and retail, in an asset-light manner Focus on lean management of highasset businesses, with scale advantage Further optimization of cash flows through opportunistic monetization of real-estate 43% 4% 28% 24% 35% 17% Other Textiles Denim FY 13 FY 15 FY 18 6

7 Agenda Snapshot of Arvind A Changing Picture Overall Vision and Division-wise Growth Plans Summary and Conclusion: Overall Value Creation Path 7

8 Arvind is uniquely positioned to leverage the immense India and global opportunity in clothing Huge India consumption story Rising disposable incomes Younger earning population Catching up with western trends More quality conscious, more brand conscious Platform of strong P&L and Balance Sheet Critical mass across major businesses to fund growth vehicles largely through internal cash flows Lean management of high-asset businesses, with scale advantage and greater differentiation Uniquely positioned to leverage the massive opportunity Integrated value chain capabilities Ability to manufacture with best cost-quality-design, build great brands, and sell globally Strong track record of success Sweet spot of global textile and apparel competitiveness Cotton production Availability of young low cost workforce Increasing competitiveness Vs China Proximity and conducive business environment to Bangladesh Strategy statement: Pivot around the unique position to diversify into less cyclical, more differentiated B2C businesses with asset-light growth, while protecting the core and making select large bets for the future 8

9 Three pillars of Arvind strategic growth vision Be the largest integrated textiles and apparel player in India with leadership position in several global markets 1 Mature Businesses Denim fabric 2 Established growth businesses Wovens fabric Garmenting Brands Retail 3 Future bets Technical textiles Custom clothing 9

10 Denim business in strong health, with robust cash flows and moderate growth plans Strong overall growth trajectory while stabilizing at high margin levels Reached a dominant global position in denim manufacturing Op. Rev, Rs Cr +16% FY9 FY1 FY11 FY12 FY13 EBITDA % FY9 FY1 FY11 FY12 FY13 Position: 13% market share in India, 5% market share with leading domestic and international brands in India Strengths: Cost leadership, strong design capabilities, ability to differentiate Opportunities: Maintain higher than industry contributions with steady growth Future strategy Mid-term plans: Grow topline by steady 8-1% p.a. Target volume and margin improvement through technological breakthroughs Capacity addition in line with planned growth, target 14 Mn Mtrs capacity by FY18, from current 93 Mn Mtrs Lean cost and asset management Moderate growth with margin protection Strong cash flows, low investments Differentiation with strong pricing power and design innovations 1

11 Wovens provide a great balance of high growth opportunity and strong cash flows Very strong topline growth while stabilizing at high margin levels Built a critical mass in shirtings and khakis towards a strong global play Op. Rev, Rs Cr +24% FY9 FY1 FY11 FY12 FY13 EBITDA % FY9 FY1 FY11 FY12 FY13 Position: Leader in the domestic market, and slowly gaining global position of strength Strengths: Short length order production, short lead times, wide range of finishes and design capabilities Opportunities: Significant growth through unmatched order fulfilment and design capabilities, expansion of global GTM Future strategy Mid-term plans: Grow topline by 12-15% p.a. Target strong volume growth through greater penetration of global market Develop more expansive global GTM Capacity addition in line with planned growth, target Mn Mtr capacity by FY18, from current 87 Mn Mtrs Strong growth with global GTM Strong cash flows, moderate investments Differentiation with strong pricing power and design innovations 11

12 Garmenting strategic to increase vertical business with global and Indian apparel brands Focus on turnaround & consolidating position over the last few years Now stable operations ready to take off with strong opportunity set Op. Rev, Rs Cr % FY9 FY1 FY11 FY12 FY13 EBITDA % FY9 FY1 FY11 FY12 FY13 Position: Stable and strong management team, achieved profitable operations Strengths: Quick turnaround and high service levels, strong customer relationships with global majors from fabric operations Opportunities: Capture greater share of vertical market, exploit opportunity to leverage manufacturing in Bangladesh Future strategy Mid-term plans: Grow topline by 2-25% p.a. Build operations of a global buying house headquartered in Bangladesh Set up a Greenfield denim garments plant in Bangladesh Set up a Greenfield suit manufacturing unit in India in collaboration with a worldrenowned Japanese company Target strong growth with stable margins Leverage fabric opportunities for vertical demand Strengthen global supply chain 12

13 Brands & Retail with breakthrough topline growth opportunity and strengthening margins Fast overall growth, with retail business model evolving Achieved a unique portfolio position, poised for breakthrough growth Op. Rev, Rs Cr % FY9 FY1 FY11 FY12 FY13 Excise duty affecting margins, now reversed 8 6 EBITDA % FY9 FY1 FY11 FY12 FY Position: Unmatched portfolio of owned and licensed brands, mix of retail formats Strengths: Differentiated offering for all segments, brand building capabilities, bargaining power with channel, leveraged sourcing and shared services Opportunities: Develop many Power Brands and dominant retail formats Future strategy Mid-term plans: Grow topline by 25-3% p.a. leveraging both the organic and inorganic routes Partner with global players to bring unique brands and formats to India Build many Power Brands, leveraging unmatched brand and retail capabilities Strengthen value retail format and step up on specialty retail opportunities Target breakthrough growth in topline Improve bottom-line with scaling up of power brands and new brands growing to critical size, stabilized value retail format Opening up other exciting opportunities 13

14 Arvind has an unmatched portfolio of owned and licensed Brands and retail formats Product Brands (Licensed) Retail Brands JV Brand Product Brands (Owned) 14

15 The diverse brand portfolio strategically built by Arvind, for a unique and advantaged play 1 Mastered the learning curve of growing strong new brands 5 out of top 1 international brands in India built by Arvind 2 Ability to address diverse segments through a differentiated portfolio Presence across market segments, dominant in many segments already 3 Strong distribution strength to quickly grow new brands High bargaining power with channel, strong reach leading to fast ramp-up 4 Able to build strong and cost-effective supply chain Sourcing leverage, well-oiled supply chain and logistics machinery 5 Able to rationalize the cost of building brands Through expert team capabilities and shared services 15

16 Retail Brands Arvind able to address diverse segments through a differentiated brands and retail play Market Size Estimates for 215 Menswear Womenswear Rs 95, Cr/ $17 Bn Rs 72, Cr/$12 Bn Kidswear Rs 44, Cr/$8 Bn Innerwear Rs 18, Cr/$3 Bn Bridge Premium Value Bridge Premium Value 16

17 Arvind has exceptional leverage in malls Mall Type A + Malls Arvind space requirement (sq.ft. ) ~8, A Malls ~6, B Malls ~3, Arvind is the only player which can take anchor space, ground floor, first floor & upper floor stores in all grades of malls 17

18 Excellent distribution strength to expand its growth brands No. of Counters / Doors No. of Retail Stores in India No. of Towns Retail Space No. of Retail Stores International Dubai South Africa Department Store Counters India Middle East South Africa Others Multibrand Outlets: India Mn. Sq. ft

19 Strategy to create many Power Brands, with strong topline growth and healthy bottomline Power brands Revenues Rs Cr 1, +43% 5 EBITDA Rs Cr EBITDA % % 9.4% 1.5% 7.4% % Among the top Indian apparel brands Very strong growth over a sustained period Operating at double digit store contributions Strong growth in LTL store sales, new stores also viable in a short span Significant sourcing leverage and channel bargaining power FY9 FY1 FY11 FY12 FY13 EBITDA % EBITDA Rs Cr Revenue Rs Cr Opportunity to significantly grow current power brands profitably, as well as to create many more power brands 19

20 Arvind looking to fully leverage India s evolving Retail play Retail Segment Major Players (Domestic & international) Now Future Bridge to Luxury Dept. Store Premium Dept. Store Fast Fashion Specialty Retail Kids Youth Family Value format Target to be among the Top 3 Players in the Apparel Retail Landscape 2

21 Arvind well-positioned to be a formidable brands and retail player over the next 5 yrs Topline Rs Cr 6, 5, 4, 3, 2, 1,53 1, Strong topline growth through organic and inorganic routes Building several Power brands, while leveraging the portfolio strengths Introducing newer retail formats, in partnership with global majors Strengthening bottom-line 5-55 Cr FY Organic - Power Brands Organic - Growth & New Brands Organic - Value retail Organic - Specialty Retail Inorganic - New Brands Inorganic - Specialty Retail Total FY

22 Additionally, selective large bets being placed on potential future discontinuities Select examples of future bets Future bets Technical Textiles Custom Clothing Key activities and plan going forward Rationale: High growth segments: Industrial, automotives, infrastructure, etc High margins, RoCE entry barriers, long term contracts, predictability Synergies with current textiles operations, strong existing capabilities Growth plans Evaluating areas of market attractiveness and capability fit Selective growth in priority areas through organic and inorganic routes Vision: Build a 1, Cr business in next 5 yrs, through organic & inorganic routes Rationale: Gap in the available market offerings for mid-premium custom clothing Potential to create a new business model with attractive margin structure Strong existing capabilities, to augment with best-in-class technology Growth plans Building brick-and-click business model and preparing back-end Setting up a Greenfield suits factory in collaboration with world-renowned Japanese player, apart from augmenting existing garmenting capabilities Vision: Build a 1, Cr business in next 5 yrs, largely organically 22

23 Agenda Snapshot of Arvind A Changing Picture Overall Vision and Division-wise Growth Plans Summary and Conclusion: Overall Value Creation Path 23

24 Summary: Arvind Limited is at an inflection point Uniquely positioned to leverage the immense India and global opportunity in clothing Denim business to witness moderate growth and strong cash flows with moderate investments Wovens and Garment operations stabilized, positioned for strong growth as well as healthy cash generation Brands and Retail play uniquely poised, moving towards breakthrough growth with strong profitability Strategic bets being placed on potential future discontinuities These are exciting times for Arvind 24

25 Conclusion: Clear Value Creation Path Cash balance for growth, healthy leverage Faster growth in assetlight, B2C portfolio with higher RoCE Margins improvement, with critical mass and greater scale Strong topline growth 2%+ Strong internal cash flows, opportunistic asset monetization 25

26 Thank You