Arvind Fashions Limited Investor Roadshow August 2018

Transcription

1 Arvind Fashions Limited Investor Roadshow August

2 1. What is our track record 2. What is our winning aspiration Agenda 3. Why we are confident of delivering our winning aspiration 4. How we are preparing for the future leveraging digital 5. How our business will look in

3 Track record of robust and profitable growth Sales growing at 22% CAGR With improved profitability Sales (Rs. Cr) EBITDA (Rs. Cr) +22% 3,324 3,794 1,737 2,142 2, % FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 5.5% 6.0% 4.4% 5% 6.3% EBITDA% Fastest growing branded apparel company 2

4 1. What is our track record 2. What is our winning aspiration Agenda 3. Why we are confident of delivering our winning aspiration 4. How we are preparing for the future leveraging digital 5. How our business will look in

5 Our winning aspiration Sales growth at 20%+ CAGR 100 bps improvement each year for the next 4 years With sharp increase in capital efficiency Sales (Rs. Cr) EBIDTA (Rs. Cr) ROCE (%) +20% 3, % 25.0% % FY18 FY19E FY20E FY21E FY22E FY18 FY19E FY20E FY21E FY22E FY18 FY19E FY20E FY21E FY22E 6.3% 7.3% 8.3% 9.3% 10.3% EBIDTA% 4

6 1. What is our track record 2. What is our winning aspiration Agenda Why we are confident of delivering our winning aspiration 3.1 Market 3.2 Powerful portfolio 3.3 Powerful capability platforms How we are preparing for the future leveraging digital 5. How our business will look in

7 India apparel market is growing fast and witnessing rapid shift to branded apparels Overall market growing at ~13% CAGR Branded market growing at ~19% CAGR Total Market ($ Bn) Branded Market ($ Bn) +13% % ~36% ~30% E E Source: Technopak, Images Retail Report; Bottom up market model analysis 6

8 Factors driving market shift Key factors driving market shift Change in income pyramid Market ($ Bn) % Men CAGR ( ) 13% Increase in discretionary spend 48 41% 41% Women 14% Improved access both off-line and online 39% 20% % 2022E Kids 13% Source: Technopak, Images Retail Report; Bottom up market model analysis 7

9 Increasing preferences for casuals & denim wear Age & urbanization in favor of casualization dress code of India is becoming more casual Men s casual wear market expected to grow at 18% Median age in India expected to be 29 years by %+ men wear casuals more than thrice a week 1 Market (USD Bn) Younger people spending more on casual wear 1 33% 41% 56% % 0 23% % % >5 No. of days / week casual wear is worn % % 59% 44% Increasing acceptance of casual wear at work places years Years Spend on casual wear is less than before 40+ years New Age Service Industry In contrast, men's formal wear market expected to grow at ~11% Spend on casual wear has increased or stayed same Established Players 1. Customer research, 2016 Source: BCG Customer research, Bottom up market model 8

10 1. What is our track record 2. What is our winning aspiration Agenda Why we are confident of delivering our winning aspiration 3.1 Market 3.2 Powerful portfolio 3.3 Powerful capability platforms How we are preparing for the future leveraging digital 5. How our business will look in

11 Branded market Arvind s winning portfolio mirrors market trends unmatched portfolio in casuals and denim wear Super Premium $ 0.7 Bn $ 2.0 Bn Mass Premium $ 8.7 Bn $ 26.0 Bn 25-30% market share; higher than #2 and #3 put together in branded premium casual wear market Source: BCG, Internal analysis 10

12 Branded market Powerful portfolio addresses three other significant opportunities Value fashion Kids wear Inner wear $ 2.7 Bn $ 12 Bn $ 2.9 Bn $ 5.1 Bn $1.9 Bn $ 2.8 Bn 11

13 Brand portfolio at different stages of maturity for delivering superior growth Power Brands Specialty Retail Emerging Power Brands Leveraging expanding value market opportunity Large brands 15%+ CAGR with superior financials Leveraging rapid growth in premium beauty market Significant growth and profit driver for the future 12

14 Power brands growing at 15%+ CAGR with superior financials Sales (Rs Cr.) 1,185 18% 2,307 18% 4,000+ FY14 FY18 FY22 EBITDA (%) 11.5% 12.3% 14.5% ROCE (%) Above 35% 13

15 USPA case study Category expansion powering the super brand Category launches Mens Casuals Mens Denims & Kids Womens Innerwear Tailored & Active Footwear FY10 FY12 FY13 FY14 FY15 FY18 FY22 2% 2% 2% 2% 5% 7% 4% 16% 12% 33% 19% 100% 100% 51% 29% 52% 29% 25% 10% Mens Casuals Mens Denim Kids Women Innerwear Tailored Active Footwear 14

16 USPA case study Performance snapshot 25% 6x Sales x 2.6x FY22 E FY18 FY14 EBITDA (%) In high teens ROCE (%) Above 35% 15

17 USPA case study Runway for sustained high growth Three categories with combined potential to reach Rs 1000 Cr.+ by 2022 Innerwear Kidswear Footwear Size of the bubble indicates size of the opportunity FY14 FY16 FY18 FY22 E 16

18 USPA case study Runway for sustained high growth Tier 2/3, Department stores and Online will continue to provide growth momentum Retail Department stores Univ. FY15 FY18 Cities #Stores Sales Cities #Stores Sales CAGR FY15 FY18 #Counters Sales #Counters Sales CAGR 429 x 1, x 20% Metros x x 10% Tier x x 12% Online Tier x x 31% FY15 Sales FY18 Sales CAGR Tier x x 23% x 7.7x 97% 17

19 Store Layout Assortment Brand Positioning Leveraging expanding value market opportunity Unlimited case study Key actions Moved from discount proposition to value proposition Outcome A family fashion store Preferred locations malls & high traffic high streets Equal representation for men, women & kids Mainly private brands Large size to optimal Size 10,000 Sq. Ft Gross Margin 38% to 45% Category mix FY15 FY18 Mens-wear 70% 40% Womens Ethnic wear 15% 21% Women-Western wear 5% 14% Kids-wear 7% 18% Accessories 3% 7% 18

20 Scaling up Unlimited Expanding footprint 110 #Stores FY16 FY17 FY18 FY19 Sales (Rs Cr.) 569 FY14 5% 700 FY18 30% FY22E EBITDA (%) 2.9% Break-even 7-8% Proving the concept 230 stores by 2022 Rapid expansion 19

21 Sephora Leading position in premium beauty segment with portfolio of exclusive brands Growing Beauty & Personal Care market Leveraging capabilities Market size ($ Bn) (5%) (8%) 100% Premium ~25% CAGR Premium Market ( ) Brand development 95% 92% Mass ~17% CAGR Mass Market ( ) Go to market capabilities Data source: Euromonitor: Premium beauty and personal care is the aggregation of premium colour cosmetics, fragrances, deodorants, skin care, sun care, baby and child-specific products, bath and shower and hair care. Mass beauty and personal care is the aggregation of mass colour cosmetics, fragrances, deodorants, skin care, sun care, baby and childspecific products, bath and shower and hair care. 20

22 Accelerating momentum to be Rs 1,000 Cr. beauty retailer by 2025 Performance since takeover Sales x 5x FY16 FY18 # stores 4 17* Concept already profitable * As of Aug 2018 Potential to grow to Rs Cr. by FY22 with 50 stores and 15% contribution from online 21

23 Potential power brands growth & profit driver for the future 20% Sales (Rs Cr.) ~400 - FY14 FY18 FY22 EBITDA (%) EBITDA positive FY19 onwards 22

24 Powerful Portfolio - Snapshot FY14 FY18 FY22 E Power brands 1,185 cr 2,300 cr 4,000+ cr Specialty retail 570 cr 830 cr 2,500+ cr Emerging Power brands cr 800+ cr Other brands 155 cr 275 cr 350+ cr 23

25 1. What is our track record 2. What is our winning aspiration Agenda Why we are confident of delivering our winning aspiration 3.1 Market 3.2 Powerful portfolio 3.3 Powerful capability platforms How we are preparing for the future leveraging digital 5. How our business will look in

26 Powerful capability platforms Product/ Design Go-tomarket Sourcing Online Management Team 25

27 Strong Product/Design capabilities Strong Product/Design team 250+ designers & merchants Deep understanding of Indian consumer requirements Track record of creating India specific designs for international brands Innovation leader Slim fit Stitch less shirts Auto flex trousers Eco friendly denim Multi-category design expertise 26

28 Powerful go-to-market capabilities have led to rapid footprint expansion Go to Market Distribution Strength Warehouse & Logistics Retail Stores (# of stores) Multi-brand Departmental stores (# of counters) Cities covered (# of towns) Other Multi-brand stores (# of stores) 189 stores in the top 25 malls vs 115 store for next best competitor. Highest for any lifestyle player in India Brand Development Capabilities Presence in 140+ Tier 2/3 towns 27

29 Sourcing expertise - Scaled up business without any manufacturing investments through strategic vendor relationships Handling large volumes Annual sourcing volume (in mn) Multi category expertise Number of product categories FY14 Menswear Womens wear FY18 Menswear Womens wear Kids wear Innerwear 28

30 Strong e-commerce expertise Sales (Rs Cr.) +86% Own e-commerce Own e-ecommerce through NNNOW.com Differentiated through Omni-channel Experience GMV run rate at 100 Cr+ contributing to 10% of ecommerce sales 30 FY14 FY16 FY18 3 rd Party e-commerce Share % 2% 6% 9% Strategic partner to all e-commerce players First call for any new e-commerce player Strong pricing control 29

31 Has the best track record in scaling up brands leveraging powerful capability platforms Year of launch and current size Rs Cr Rs 150+ Cr Rs 100+ Cr 30

32 Experienced Leadership Team Six Business Leaders J Suresh Managing Director & CEO, 13 Yrs in Arvind 18 Yrs in HUL MBA IIM Bangalore Four Functional Heads S Kannan CFO 7+ Yrs at Arvind 23+ Yrs of experience of which 12 yrs in HUL Chartered Accountant Alok Dubey CEO, Lifestyle Brands 12+ Yrs in Arvind 21 Yrs of Experience in Titan, Swatch MBA Parag Dani CEO, BTL Brands 2+ Yr in Arvind 21+ Yrs of experience in Madura, Levis and Reliance MBA Jamnalal Bajaj Sumit Dhingra CEO, HBD Brands 8 Yrs in Arvind 12 Yrs of experience in Madura MBA IIM Lucknow Vivek Bali COO- Sephora Joined in Yrs experience in beauty retail at Lakme Lever, Polaroid, Avon Beauty, Reliance Retail and Landmark Group PGPIM from IMI CS Shekar CEO, Value Fashion Joined Arvind in Yrs of experience in Landmark Group in India and Middle East Nitin Agarwal COO Innerwear Business 3+ Yrs of experience in Arvind 12+ Yrs of experience MBA - IIM Lucknow Anindya Ray Sr. VP Sourcing & Tech Services 10+ Yrs at Arvind 21+ Yrs at Madura, UCB & Arvind Shilpa Vaid Chief HR Officer 18+ Yrs of experience 2+ Yrs at Arvind MBA Piyush Chowhan CIO 2+ Yrs in Arvind 18+ Yrs experience in retail & technology MBA 31

33 Organization structure geared to scale up brands with low fixed cost Brand s own capabilities Arvind s plug and play capabilities 1 Sourcing Product Finance Sales channels 3 3 IT 4 4 Logistics Marketing 5 5 HR 32

34 1. What is our track record 2. What is our winning aspiration Agenda 3. Why we are confident of delivering our winning aspiration 4. How we are preparing for the future leveraging digital 5. How our business will look in

35 Three key transformational projects to sustain competitive edge and deliver superior financial performance Supply chain optimization Analytics driven retail planning AI driven buying Auto replenishment Best in class omni-channel capabilities Endless aisles Click and collect Store order and home fulfillment Store digitization Improve speed to market, through manufacturing flexibility 30-40% of products to move to sourcing lead times of <12 weeks.. delivering superior financial performance Improved LTL growth Higher inventory turns Improved from 3x in FY17 to 3.7x in FY18 Target of 4.6x in FY19 and 4.9x going forward Improved profitability through higher full price sell through 34

36 1. What is our track record 2. What is our winning aspiration Agenda 3. Why we are confident of delivering our winning aspiration 4. How we are preparing for the future leveraging digital 5. How our business will look in

37 Shape of our portfolio FY 14 FY18 FY 22 E 100+ Cr #4 #5 # Cr #1 #3 #3 1,000+ Cr - - #1 2,000+ Cr - - #2 36

38 Shape of our business Sales to grow at 20%+ yoy 100 bps improvement for the next 4 yrs Steady rise in Capital efficiency Sales (Rs. Cr) EBIDTA (Rs. Cr) ROCE (%) +20% 3, % 25.0% % FY18 FY19E FY20E FY21E FY22E FY18 FY19E FY20E FY21E FY22E FY18 FY19E FY20E FY21E FY22E 6.3% 7.3% 8.3% 9.3% 10.3% EBIDTA% 37

39 Thank You!