MANAGEMENT DISCUSSION & ANALYSIS ECONOMY & INDUSTRY SECTION INDIA ECONOMIC OVERVIEW: The Indian economy has been resilient in its resolve to get back on a solid growth trajectory in spite of a global turmoil. The economy witnessed a challenging phase during FY2012-13 and FY2013-14, marked by a slowdown, policy paralysis, rising inaction rate and a widening current account deceit (CAD). This was further escalated by an unsupportive external environment. However, India has weathered the challenges rather boldly and is now back on a revival path with strong policies from the new Government and with a whiff of new optimism. As per the forecast by the International Monetary Fund (IMF), the Indian economy is slowly reviving. The Gross Domestic Product (GDP) of India is expected to test 7.2% in 2015 and zoom up to 7.7% in 2016, surpassing China during that year. This up move is broadly to tread forward with a rise in consumer condense on the back of positive policy actions, improved business climate driving stronger investments and stronger public and private consumption. Growth numbers are now much higher and the current account deceit is comfortable. This is in part due to the fall in gold imports and lower oil prices. New investment project announcements have started to pick up, particularly in the power and transport sectors. Going forward, the bolstering Financial sector health and further Financial inclusion will support growth. The Indian economy is ranked fourth in the world on a purchasing power parity basis after the U.S., the European Union and China. The INR debrciation will further strengthen the export segment and has made the textile industry more cost competitive. The currency is likely to bounce back on the back of a fall in the greenback due to the brvalent global economic turmoil. Further, the fall in inaction to about 5% after hovering around 10% for several years, due to RBI’s steps to tighten the monetary policy by raising interest rates during 2013-14, as well as the government’s efforts to introduce a flexible inflation- targeting framework is a clear positive. It will help deliver low and stable inflation and diminish the prospect of high inflation. The reducing trade deceit with the help of a fall in crude oil prices and higher infrastructure spending and bettered fiscal reforms can have a major positive impact on economic growth. In addition, the Indian economy is all set to move towards a bigger economic picture, with the largest and among the youngest workforces in the world, thereby creating jobs with stronger structural reforms, thus improving the job market scenario. The per capita income has risen during the years and is likely to reach close to Rs. 1.9 lakh by FY2020 (source: DNB). The “Make In India” campaign, an initiative of the Government, is about to bring a change in the business climate by attracting investments. Moving the economy forward in these directions will help India continue along the path towards a brighter economic picture of rapid economic growth and macro-economic stability for many years to come. Undoubtedly, the Indian economy continues to be a bright spot in the global landscape, having become the fastest-growing big market economy in the world. A positive economic outlook clearly indicates that the Indian growth story is seen gaining strength in the years to come. (IMF Projections) (ADB Projections) (IMF Report) INDUSTRY OVERVIEW: TEXTILE AND APPAREL INDUSTRY India is the second-largest producer of textiles and garments in the world with an enormous raw material and manufacturing base. The brsent domestic textile industry is estimated to be $33.23 billion and unstitched garments comprise $8.31 billion. The sector contributes about 14% to industrial production, 4% to GDP, and 27% to the country’s foreign exchange in!ows. According to the Technopak Report, 2014, for almost two decades the textile and apparel industry has been a major contributor to India’s GDP and provides employment to over 45 million people (Source: CII). The industry has also been crucial as far as industrial production and earning of foreign exchange through exports is concerned. Availability of abundant raw material such as cotton, silk, wool and jute and India’s competitiveness in skilled labour has provided unique advantages to its textile and apparel industry. The textile and apparel domestic market has been bigger than the export market. It touched $ 59 billion in FY2013, while the export market stood at $36 billion. The apparel retail sector in India is highly fragmented and only 19% of total sales in India is estimated to be from the organised sector. These numbers are in contrast with that in United States and Europe, where over 80% of total apparel sales are contributed by organised fashion retailers. The size of Indian textile and apparel industry, including the domestic and export market, stood at $70 billion in 2009. This has grown at a CAGR of 8% till 2013. The export market is projected to more than double from $36 billion in 2013 to $85 billion by 2023. The domestic market, too, is seen growing owing to an increase in spending by the middle class. Domestic textile (including home textiles and technical textiles) and apparel market is seen growing at a CAGR of 9% from $59 billion in 2013 to $141 billion by 2023. (Source: Technopak Report, 2014) THE INDIAN RETAIL AND APPAREL RETAIL MARKET: AN OVERVIEW India’s retail market is seen doubling to $1 trillion by 2020 from $600 billion in 2015, a growth of 12%, in line with the historical trends. A rapid growth in the retailing industry is driven by four key factors: • Income growth: ~3 times increase in average household income from $6,393 in 2010 to $18,448 in 2020 • Urbanisation: 40% population to live in urban cities by 2020, up from 31% in 2010 • Nuclearisation: Over 200 million households to be nuclear by 2020-with 25-50% higher consumption per capita spend • Attitudinal shifts: Around 75% of population by 2020 will belong to Generation 1 with distinctly higher consumption levels Source – IBEF, Technopak The apparel retail market comprises ~8% of India’s total retail market. The organised Branded Apparel market comprises ~19% of the total apparel market, which stands at $41 billion. BRANDED APPAREL RETAIL INDUSTRY IN INDIA: The Indian apparel market has been highly unorganized. A healthy economic growth, changing demographic parole, increasing disposable income, and changing consumer tastes and brferences are driving growth in the organized retail market in India. The emergence of exclusive brand outlets, multi-brand outlets, departmental stores and cash & carry retail formats are making it convenient for Indian consumers to explore the latest fashion trends and look fashionable. Internet has made online retailing and m-tailing as the best shopping medium. Retailers are increasingly opting for “omni-channel retailing” to attract and gain customers and be ahead of competition. By 2020, the organized “Apparel Retail” segment is estimated to contribute approximately 40% of the total apparel market . Even as the apparel market is sbrad across India, there is a substantial difference in the characteristics of different markets across different regions. The demand pattern and price sensitivity of metros (Mumbai and Delhi/NCR) varies substantially from that of a smaller city or town. (Source: Technopak Report, 2014) Retail spending in the top seven Indian cities currently amounts to Rs 3.58 trillion ($57.56 billion), with organised retail penetration standing at 19% in 2014. In recent times, the established players and brands have realized the growing need to shift their focus from metros to Tier-I and Tier-II cities to tap the sprouting growth opportunities emerging in these cities. The smaller cities are witnessing a surge in consumption of apparel in value and volume terms. (Source: Technopak Report, 2014) Traditionally, the Indian apparel retail market has been dominated by domestic players. However, changes in brvious years have paved way for a lucrative path for international brands and retailers to establish their footprint in India. Young adults across metros, Tier-I and Tier-II cities are more as pirational and experimentalist. As a result, deeply penetrated brands in the masstige segment are leading growth in the lifestyle & apparel market through the value of their offerings, in terms of price as well as additional attributes. The Technopak Report, 2014, classi"es India’s apparel market into three groups: men’s wear, women’s wear and kid’s apparel. Men’s wear segment contributes the most to the apparel market at 42%, followed by women’s wear at 38% and kids at 20%. The CAGR of men’s wear is seen at around 9%, while women’s wear is seen growing at a rate of 10% for the next 10 years. The kids apparel market is expected to demonstrate the highest growth with a CAGR of 10.50%. (Source: Technopak Report, 2014) Men’s Apparel Industry: Men’s wear is a br-dominant segment in India. It is expected to grow by 9% CAGR to reach $39,575 million in 2023, compared to $17,271 million in 2013. The market is dominated by popular product categories such as shirts and trousers. However, western wear categories such as denim, active wear and t-shirts are the fastest growing categories in the segment. (Source: Technopak Report, 2014) The men’s wear wardrobe has expanded substantially. There is sharper segmenting in this segment to include sports/gym wear, occasion specific ethnic wear, casual wear, ofce wear, night wear and party wear. The men’s denim market is expected to grow at 14% per year. Women’s Apparel Industry: The women’s wear market of India contributes 38% to the Indian apparel market, largely dominated by the unorganized players. However, with an increasing brference for branded apparel, regional brands and international brands have expanded their geographical brsence. The women’s wear market is expected to grow from $15,493 million in 2013 by 10% CAGR to touch $38,915 million in 2023. The growth in the market captures two essential brference shifts. Firstly, a shift from non-branded apparel to branded apparel, and secondly, increasing the share of western wear to ethnic wear categories. (Source: Technopak Report, 2014) Kids Apparel Industry: The kids apparel segment is the fastest growing, contributing 20% to the total apparel market in India. This is expected to grow at 10.5% CAGR to touch $22,369 million by 2023. The branded and designer kids apparel segment is emerging as a promising opportunity in the luxury and brmium category. The factors driving the kids apparel market are increasing expenditure on kids and improved awareness of kids brands. Additionally, due to increased media exposure, kids have also become more fashion conscious today and incense their parents to allow them to experiment with clothing. (Source: Technopak Report, 2014) Branded kids’ wear retail in itself is a high growth opportunity area, as the market is dominated by local and unorganised players. The absence of a significant player in the mid-tier segment brsents a huge prospect. There is still a substantial gap in the need for design and quality in kids apparel, providing ample opportunities for organized players Woollen Apparel: The current size of India’s winter wear market is approximately $2,341 million and is growing at CAGR of 9%. Between men, women and kids segment, the men’s segment contributes as high as 51% of the entire segment. Most segments in winter wear, such as shawls, men’s suits, jackets, blazers and sweaters are registering a double-digit growth. Hence, winter wear is seen as a lucrative business proposition, despite facing various issues such as infrastructure and labour costs to name a few. Aspects such as investment in new technologies and keeping updated with international trends have further helped in boosting the industry. (Source: Technopak Report, 2014) In India, the winter wear market is clearly segmented between branded and unbranded players. The ratio is 70:30, with 70% players belonging to the unbranded sector. The established domestic brands are trying to capture increased market share by innovating and introducing new lines every season. Innovative pricing and discount sales are helping them increase footfalls to their exclusive brand outlets (EBOs). Most lifestyle apparel brands have an exclusive range of winter wear for specific months. However, there aren’t many exclusive players in this segment. (Source: Technopak Report, 2014) In India, due to varied geographical distribution, the country experiences different climatic conditions during the same part of the year. Winters are brdominant in the northern parts of India – from November to February. Hence, the northern and the eastern markets mark the maximum amount of sales in the woollen category. Gradually, the segment is "nding space in, mini metros and Tier I cities in other regions as well. Thus, it is of utmost importance in a heterogeneous market such as India to have a region-speci"c range. Though the segment has shown promising growth and elicited enthusiasm from brands and retailers, there is still an arduous task ahead for merchandisers and product developers. (Source: Technopak Report, 2014) Woollen apparel industry forecast: Woollen apparel market has traditionally been unbranded and fragmented. However, due to increasing brand and fashion consciousness of consumers, the branded woollen apparel market is seen witnessing much higher growth vis-à-vis the unbranded segment. (Source: Technopak Report, 2014) The higher growth trajectory is expected with a rise in the income levels, growing spending capacity, increasing urbanization, rising middle class, diverse sales network, favorable demographics with increasing young inspirational population, increasing exposure to fashion trends and increasing awareness for brands and improved self-consciousness among the growing population. This primarily contributes to the branded woolen apparel market in India. As per the latest data available, the per capita apparel consumption of apparel grade wool in India is estimated to grow at a CAGR of 5.6% between 2012 and 2017. Due to an increase in the per capita consumption of apparel grade wool, the CAGR for volume and value growth of the woollen apparel market in India during 2012 and 2017 is expected to be 7% and 12%, respectively COMPANY OVERVIEW SECTION COMPANY OVERVIEW Monte Carlo Fashions Limited was launched in 1984 as an exclusive woollen brand by the Group Company Oswal Woollen Mills Limited (“OWML”). During that time, the industry was largely dominated by unorganised players. However, by developing and delivering superior design and quality apparel, the Company has been able to delight its customers and win their loyalty over the years. This has enabled the Company to emerge as one of the leading Indian apparel brands today. In fact, it is consistently recognised as a ‘Superbrand’ for woollen knitted apparels in each edition of Consumer Super brands India, since its "rst edition in September 2004. Initially launched as an exclusive woollen brand, the Company has successfully diversi"ed over the years. It has created a combrhensive range of woollen, cotton & cotton blended, knitted and woven apparels and home furnishings through its Palatine, Denim, Alpha and Tweens range, under the umbrella Brand “Monte Carlo”. Our vast range of products showcase our clear capabilities in anticipating, identifying and responding to the changing fashion trends in the apparel market. In 2011, the branded apparel business of the parent company, Oswal Woollen Mills Ltd., was demerged into Monte Carlo Fashions Limited (MCFL), which retains the ownership of the brand ‘Monte Carlo’. OVERVIEW OF DESIGN & MANUFACTURING CAPABILITIES The Company has an in-house dedicated design team of over 30+ professionals (as on 31st March, 2015). Our designers are well equalized from brstigious design institutes such as NIFT and possess strong industry experience. The Design Team travels across the globe to understand emerging trends in global fashion, which facilitates creation of exciting new designs for our collection. We maintain a continuous approach on developing new products, improving the existing ones and effectively forecasting fashion trends. The Company maintains a robust mechanism for gauging customer demand and gaining effective feedback of our products. This is facilitated by an extensive network of Exclusive Commissioned Agents by way of direct access to dealers, distributors and retailers in India and by conducting regular market surveys. This approach helps the Company to remain continually updated about the market pulse. We currently operate three manufacturing facilities in Ludhiana, at Punjab. One of these facilities is for woollen apparel products, while the remaining two are for the manufacturing of cotton apparel products. To boost creativity and innovation and facilitate smooth development of new products, our manufacturing plants include facilities for product development, a design studio and sampling infrastructure. Almost all the woolen-knitted products are manufactured in-house. In April 2014, we commenced in-house manufacturing of some of our cotton T-shirts, thermals and socks. For production of the remaining cotton and cotton-blended products, we follow an asset light model by outsourcing production to a network of entities with whom we enjoy a long-term relationship. OVERVIEW OF PRODUCT CATEGORIES Our company has a combrhensive product range comprising of knitted & woven woollen apparel, cotton & cotton-blended apparel, kids wear & home furnishing. Monte Carlo’ is the !warship brand with a portfolio of woollen apparel and cotton and cotton-blended apparel. Our customers associate the ‘Monte Carlo’ brand with high-quality brmium and mid-brmium apparel – one that incorporates quality materials, modern fashion and comfort. Our Range of Products under the “Monte Carlo” brand: • ‘Platine’ - Our brmium range for men • ‘Denim’ - Our exclusive range for denim apparel • ‘Alpha’ - Our exclusive range for women • ‘Tweens’ - Our exclusive range for kids • ‘Cloak & Decker’ - Our economy range Winter wear contributes a significant portion to our total revenues, which adds to the seasonal nature of our business. The seasonality is primarily because the sale of winter products (sweaters, woollen knitted jackets, cardigans) and sale of certain cotton and cotton-blended products (cotton jackets, track suits, sweat shirts, full sleeve t-shirts, thermals and shirts) mainly occurs between October and January. As a result, the third quarter usually contributes a majority share (>50%) of our full- year revenues. Winter products are typically higher in value in terms of production cost as well as sales revenue. And hence, these generate higher revenue in comparison with our non-winter products. While we already have a pan-India brsence, we seek to penetrate further in the western and southern regions of India with a combrhensive range of cotton and cotton-blended products catering to all seasons. Given the tropical climate in these regions, we seek to further expand our product range in cotton and cotton-blended apparel segments. Our aim is to focus on cotton and cotton-blended shirts, trousers, t-shirts and denims to expand our all-season product range and strengthen the pan-India operations. Our end eavour is to increase our share of all-season products with pan-India appeal in order to increase revenues in southern and western regions of India. This would enable generation of a faster pace of growth and reduce the seasonal impact. Our combrhensive portfolio of products and brands across varied price points enables us to cater to and target a wider and diversion customer base. REGION & CATEGORY WISE REVENUE OVERVIEW Monte Carlo Fashions Limited was initially launched as an exclusive woollen brand. The Company has well diversion brsence across different categories such as Cotton, Home Furnishing and Kids. Currently, winter wear contributes around ~34% of the Company’s total revenues. Historically, the Company’s brsence has been strong in Northern and Eastern regions of the country. However, we remain focused to improve our brsence in Southern and Western regions too by increasing the share of “all season” cotton product categories. STRONG RETAIL & DISTRIBUTION NETWORK The Company’s portfolio of products is sold through ‘Monte Carlo Exclusive Brand Outlets’ (EBOs), Multi-Brand Outlets (MBOs) and a network of National Chain Stores (NCS) that merchandise products in an environment that reinforces its brand in brmium and mid-brmium categories. The environment also provides a superior and distinct in-store experience. Most of its EBOs are located in high street locations, lifestyle centers and malls, positioning it as a brmium and mid- brmium brand in the apparel industry. The superior in-store experience facilitates in maintaining its brand loyalty and strengthening brand equity. Online Presence The Company has also entered into distribution agreements with online sales platforms to leverage digital commerce. With the online retail segment witnessing a rapid pace of growth, the Company end eavours to capitalize on this exciting new channel and gain by way of instant pan-India reach. The Company has established an e-commerce brsence through its own portal “montecarlo. in” and by way of tie-ups with digital platforms such as Flipkart and Snapdeal, among others EBOs: We have rapidly expanded the number of EBOs from 152 in FY2012 to 214 in FY2015. Our brsence is mainly concentrated in northern, central and eastern India. EBOs – COCO: 20 stores leased; Managed by company personnel; Inventory owned by MCFL EBOs – FOFO: 194 EBOs on Franchise basis; Products supplied on Pre-order Outright Basis The locations for EBOs which are “franchise owned-franchise operated” are decided by the Company. The "t-outs layout and "xtures and the look and feel of the store is denned by the Company to ensure the ambience and in-store experience is never compromised. The store level expenses - rent, staff salary and other overheads - are borne by the franchisee. Since this format is an asset-light model of expansion, it is highly scalable and enables expansion at a robust pace. MBOs - Products are supplied through 21 exclusive commission agents to 1,500+ MBOs on an outright basis. NCS – Products are also supplied to 89 National Chain Stores (NCS) on Sale or Return / Outright Sale basis. It is supplied to 6 large retail chains with a nationwide brsence, such as Reliance Retail, Shopper’s Stop, Madura Garments, Pantaloons, Metro and Carrefour. THE WAY FORWARD The Company’s future growth strategy is a combination of three prime elements – branding & promotion to enhance brand visibility; increasing focus on cotton & cotton-blended apparel; and expansion of retail distribution network. • Focus on branding & promotion to further increase visibility of “Monte Carlo” brand, enabling it to grab a larger market share. We will continue to increase brand awareness and customer loyalty through our marketing efforts and planned retail expansion. • The 'Monte Carlo’ brand has historically been associated with winter-wear for its woollen knitted apparel. This has led to a strong brsence in the northern and eastern regions of India. However, over the years, the Company has successfully diversi!ed its operations, with the cotton segment contributing more than half of its overall revenues. Focus is on increasing emphasis on cotton & cotton-blended apparels and plan on aggressively ramping-up distribution and sales of a range of cotton and cotton-blended products catering to all-seasons to strengthen its pan-India operations. Target is to open 275 Exclusive Brand Outlets (EBOs)over the next 2-3 years mainly through the franchisee route and establish a truly pan-India brsence by increasing penetration in southern and western regions of India. The Company is also focusing on tapping the rapidly growing online sales platform through its own portal as well as through tie-ups with leading e-commerce portals in India. SWOT Analysis STRENGTHS • Strong Expertise and Experience in Textiles and Brand Building The management team, led by Mr. Jawaha Lal Oswal having more than 50 years of experience in the textiles and woollen industry, has been instrumental and integral in driving growth and expanding at a robust pace, diversifying into different product categories, continuously evolving and managing change effectively and enabling Monte Carlo Fashions to become the success story that it is today. • Dominant Player in Woollen and Knitted Apparel Monte Carlo was launched as an exclusive woollen brand by Oswal Woollen Mills Limited in 1984, when the apparel market was fragmented and dominated by unbranded products. However, by delivering superior design and quality woollen products over the last three decades, it has carved a niche for itself and risen to become one of the most recognized and reputed apparel brands in northern and eastern India. In fact, ‘Monte Carlo’ has been given the tag of ‘Super brand’ for woollen knitted apparel in each edition of Consumer Super brands India, since its "rst edition in September 2004. Today, the Monte Carlo brand is well placed and positioned to capitalize on rising growth opportunities brsented by the Indian woollen market. • Strong Retail Presence in Northern, Central and Eastern Regions Initially launched as an exclusive woollen apparel brand, its primary markets have been the northern, central and eastern regions of India. Over the years, it has built an extensive retail brsence and reach in these regions. Now, with diversification of its product range, the company has leveraged its strong Brand equity and brsence built over the years and successfully launched other categories such as Cotton, Children Wear and Home Furnishings. • No Major Inventory risk due to Robust Business Model with Majority of Sales through Outright Sale Model Our business model is fairly robust and distinct. Over 90% of our sales are through the outright sale basis. We manufacture on the basis of br-booking of orders for apparels. Therefore, the Company does not have any major inventory risk. With the MBOs, there is no stock correction as well as no discount sharing, whereas, with EBOs, there is 5% stock correction and discount sharing ranging from 5% to 17.5%. • No Major Credit risk due to Robust Business Model All our sales to MBOs are through Exclusive Commission Agents working with the Company over the last 3 decades. These agents earn 6% commission for the sale through their network and are responsible for payments from respective MBOs. The supplies to EBOs are backed by either a Bank Guarantee or a Post-dated Cheque. • In-house Manufacturing and Excellent Design Capabilities Today, the customers have become extremely discerning and fashion conscious, laying a great deal of emphasis on the design and quality of the product. The Company’s extremely equalized and professional 30+ member design, development and merchandising team helps in successfully innovating and developing new products, improving existing ones and forecasting future fashion trends. The Company boasts of a dedicated design team comprising of alumni from top national design institutes such as NIFT having considerable experience in the industry, who continuously travel and follow the emerging global trends for creation of new designs. Also with the help of its commissioned agents, the Company can feel the market pulse enabling better understanding of consumer demand and receiving valuable feedback and information on acceptance of products. In-house manufacturing of woollen apparel products helps in generating higher margins and follows an asset-light model by outsourcing the major portion of cotton garments production to a network of job work entities with whom we enjoy a long-term relationship, helping drive better return ratios. WEAKNESSES • Seasonal nature of business Woollen knitted garments sales contribute around one-third of total sales. This leads to highly seasonal nature of the business, with over 50% of the yearly turnover coming in the third quarter. However, the Company has been laying an increasing emphasis on cotton and cotton-blended apparel and diversifying the product range to include home furnishings and kids’ apparel. With this, the seasonal nature of business is expected to diminish over the coming years. • Woollen apparel not a Pan-India phenomenon India being a tropical country, the country as whole does not experience intense winters, particularly the Southern & Western region. Due to this, the market for woollen products is primarily limited only to Northern and Eastern India. With the Company focusing on expanding and promoting cotton and cotton-blended apparel, it can establish a pan-India brsence. • Fragmented Market The Indian apparels market is highly fragmented, with organised players commanding only ~ 19% market share, in stark contrast to the United States and European markets where organized players have more than 80% market share. (Source Technopak Report 2014) This peculiarity makes the Indian apparel market becoming price sensitive and sometimes adversely affecting margins. However, with growing brand awareness and fashion consciousness, demand for superior quality and design is rising at a robust pace. This will help organized players significantly increase their market over the coming years. OPPORTUNITIES • Favourable Demographics The favorable demographic problem of the country, coupled with the improving economic scenario, makes the Indian apparel market extremely attractive. This offers a sustainable long-term growth potential. 1. Increasing disposable Incomes and purchasing power India has been witnessing continuous rise in its per capita income. With the improving economic climate, the rise in incomes is expected to continue. Per capita GDP at current market price is estimated to grow from Rs. 0.8 lakh in FY2013 to Rs. 1.9 lakh by FY2020 (Source: DNB). The number of middle class households is expected to grow sharply from 35 million in 2012 to 58 million by 2020. (Source: Technopak Report, 2014) 2. Young population and increasing brand awareness and Fashion Consciousness India has a large local and youth population. The median age of India’s population is 27 years. (Source: CIA, The World Fact book) Indian consumers, especially the youth, are becoming increasingly discerning not only in metros/ Tier 1 cities, but also in Tier 2 and 3 cities, giving increasing brference to quality and design. This changing demand climate will help top quality brands such as Monte Carlo increase their market share significantly. 3. Increasing Urbanization Nearly 35% of the Indian population is expected to be living in urban centers by 2017. This higher level of urbanization will lead to consumers trying to upgrade their lifestyles, leading to increased discretionary spending, even in the apparel category. (Source: Technopak Report, 2014). The share of India’s discretionary spending is set to increase from 59% in 2010 to 67% in 2020.(Source: DNB) • Increasing emphasis on cotton and cotton-blended apparel to tap pan-India market The Company is currently focusing on promoting and expanding sales of cotton apparel aggressively. This will enable Monte Carlo to tap the entire Indian market, increasing the share of revenues signi"cantly from southern and western regions in the long-term. • Increasing penetration of Organized Retail Penetration of organised retail is increasing at a robust pace. In fact, organized retail is estimated to contribute 25% to the total Indian apparel market in 2015, growing from 17% contribution in 2010. The contribution of organized retail is expected to further increase sharply to 40% by 2020. Increasing penetration of organized retail, especially in tier 2 and tier 3 cities, will provide immense growth opportunities to top quality organized apparel players. (Source: Technopak Report, 2014) • Diversification across various Product Categories Today, Monte Carlo Fashions has diversi"ed across different product categories such as Cottons, Kids and Home Furnishing. It has a combrhensive product and brand portfolio catering to varied segments such as kids, youth, middle and senior. This is brvalent in both woolen and cotton & cotton blended apparels sbrad across varied price points, enabling them to service the economy and mid-brmium to brmium segments. The ability to tap varied segments of the market provides the Company with tremendous opportunities to grow at a brisk pace. THREATS • Rising competition among organized players The size of the Indian apparel market and its inherent long-term growth potential makes it extremely attractive to branded players across the world. This has led to great deal of competition among the organized players to grab the largest share of the pie. With an increase in the number of international brands entering India and many looking to enter soon, the competition is expected to intensify further. • Low entry barriers The absence of significant entry barriers leads to an increase in the number of players, especially the unorganized players. This can escalate the degree of competition, making market penetration and sustaining of higher margins even tougher. • Dependence on Rainfall and climatic conditions Rainfall plays an important role in the apparel industry. Absence of adequate rainfall can lead to a significant decline in the availability of cotton, besides having an adverse impact on the economy, and consequently, the consumer demand. This can adversely impact the top line and margins too. Shorter and less intense winters can also adversely impact sales of the woolen segment. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has proper and adequate internal control systems to ensure that all the assets are safeguarded and that all transactions are authorized, recorded and reported correctly. Regular internal audits and checks are carried out to ensure that the responsibilities are executed effectively and that the systems are adequate. Management continuously reviews the internal control systems and procedures to ensure the efficient conduct of business. The Audit Committee of the Board oversees the internal controls within the organization. MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATION FRONT The company is of "rm belief that human resources are the driving force that propels a company towards progress and success and the company is committed to the development of its people. The total permanent employee’s strength rose from 1458 to 1610 as on 31st March 2015. The Industrial relations were cordial and satisfactory. |