CFA Institute Research Challenge

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 Juno – Student Research
Sector – Textile, Readymade Apparel
BSE: 532827 | NSE: PAGEIND| ISIN: INE761H01022
PAGE INDUSTRIES LIMITED
Date: 02/11/2016 Current Price: INR 16143.8 (BSE) Recommendation: BUY (22.75%)
Ticker: PAG IN (Bloomberg) USD 1.00: INR 66.7 Target Price: INR 19817.17
Page Industries Limited
This report is published for
educational purposes only by Highlights
students competing in the CFA
Research Challenge We issue a buy recommendation on Page Industries ltd with a one year
target price of INR 19817.17, indicating a 22.75% upside potential on
Share Price Returns
closing price of INR 16143.8 (BSE) on November 02, 2016. The key
rationale behind BUY recommendation are:
Growth Drivers
Page Industries owns licenses for Jockey and Speedo. Both the brands
are affordable but is positioned premium. The branded innerwear
industry in India has shown a compounding growth rate 9%. Increasing
Page Industries Sensex discretionary income and will further drive this industry with similar
Source: Moneycontrol growth rates.
Strong Brand Equity
Market Portfolio
Page Industries has successfully leveraged the brand image of Jockey
Last 16107
Change -247.75 -1.51%
International. It has a strong brand image with a brand equity score of
Bid 16107 17 4.6 among its competitors as per Neilsen survey. It caters to varied
Ask 16278.1 15 population segment with its diverse product line.
Opn/Cls 16015 16354.7 Excellent Financial Profile
Hi/Low 16390 16015
Page Industries has almost no debt on its balance sheet. The
52Hi 17399 10/24/2016
company’s ROE remains at 50% for last 5 years, which is the highest
52Low 9752.35 3/1/2016
among their peers. Total reserves and surplus balance of over INR 500
YTD 2737.3 20.47%
1yRet 2535.5 18.53% crore is adequate to meet the future capital expenditure requirements.
Beta 0.825 SENSEX Page has reduced its cash conversion cycle from 2015 to 2016 which is
AVAT 13.30k -55.23% a positive sign for the company’s long term growth.
MktCap 179.65B Valuations
ADV 214.15M
Valuation based on DCF approach shows the intrinsic value of stock to
Auct Px 16015.05
be INR 16411.46 per share. Page Industries focusses on increasing
Auct Vol 50
Source: Bloomberg profitability, distribution network and brand image. Company is
expected to show higher sales revenue with new product lines
FY-14 FY-15 FY-16 introduced.
Revenue 1,194.17 1,551.63 1,789.67
Risk Factors
Profit 153.78 196.02 232.66
The primary risk factors faced by Page Industries include currency risk
Reserves 277.85 375.61 494.07
0.49 0.35 0.15
that can have impact on royalty payments and raw material cost; input
D/E Ratio
ROE 53.21% 50.68% 46.04%
factor risk (labour and raw material risk). Page Industry now
Source: Team Calculations participates in a very competitive environment among international
brands like Hanes, FCUK, Tommy Hilfiger, US Polo Assn, and Benetton
in India.
 Business Description
Figure 1: India Textile and Apparel
Industry Page Industries Ltd. is the exclusive licensee of Jockey International
250 Inc. (USA) and Speedo International Ltd. for manufacturing,
200
distribution and marketing in India, Nepal, Bangladesh, Sri Lanka and
CAG UAE.
150 PIL has increased the recognition of innerwear as branded apparel in
100
Exports India through brand Jockey. In India, innerwear segment is highly
Domestic unorganised and PIL has been successful in getting a foothold in the
50 organised segment. Speedo is also gaining popularity in India.
0 Swimming has been recognised as an important life skill and increasing
importance of factors such as fitness, hobby, healthy living and weight
management are giving further push to it.
Source: BI, Bloomberg The company began operations in 1995. As of June 2016, it has 13
state-of-the art manufacturing units spread over 1.78 Million sq. ft.
across India with 19,000 strong workforces.
Figure 2: Revenue Breakdown Business Segmentation
Others
2% People in the age group of 15-34 years are the largest consumers of
PIL. Jockey’s products consist of innerwear, socks and leisure wear.
Brand Jockey positions itself in Super premium/lifestyle, aspirational
Liesurew and medium premium brand segment. They have launched various
ear Mens
30% Innerwea categories like Pop colour, USA originals and leisure wear to attract the
r style conscious young people.
Womens 50%
Innerwea
Speedo products consists of swimwear, equipment, water shorts,
r apparel and footwear.
18%
Company Strategy
PIL incorporates Jockey’s philosophy of providing individual freedom
Source: Company Annual Report 2015-16
and promoting uniqueness. Brand portrays itself as spontaneous,
Table 1: City wise presence of EBOs playful and effortless and not confined and routine driven. PIL has
access to ideas, innovations and trends from Jockey International, USA
Major Cities Number of EBOs
and other Jockey licensees throughout the world. It has a strong in-
New Delhi 7
house product development department and is continuously evolving
Hyderabad 28 itself to gain manufacturing expertise and state-of the art technology.
Bengaluru 26 Women innerwear market is worth Rs.12150 crore which contributes
Mumbai 17 to 60% of the total innerwear market in India. PIL is targeting the
Chennai 22 increasing number of working and brand conscious women who desire
Kolkata 9 better fit and quality alongside a wider range of colours, styles, and
Source: Company Website
accessories.
Distributor Network Expansion
Table 2: Product Category Growth Rate Brand Jockey is present in 1400+ towns and cities and is sold through
Expected Growth 277 plus Exclusive Brand Outlets (EBO), 895 Large Format Stores (LFS),
Product Line (Next 10 years) Multi Brand Outlets (MBO), Traditional hosiery stores and Multi-
Men Category 9% purpose stores which is spread pan India.
Women Category 15% Speedo is sold through 1099 outlets in 106 cities which comprises of 18
T Shirt 13% distributors, 9 exclusive brand stores, 140 large format stores and
Kids Category 10.50% other retail stores.
Digitization
Source: Investors Reports
Jockey has launched its own B2C e-commerce portal and has also tied
up with other online retailers to expand its reach.
Opportunities
 Increase in organised retail and disposable income are giving a
favourable push to PIL’s products. Consumers are becoming fashion
conscious, aspirational and brand savvy. Increase in women corporate
workforce and urban women population are further helping PIL in
Figure 3: Sales Revenue (in million INR)
establishing itself.
20000 Threats
Many famous foreign brands are entering Indian markets due to the
15000
potential here. Apparel industry is highly labour intensive and needs
10000
experienced and trained manpower. Availability of raw material at a
reasonable rate is also a main concern for PIL.
5000
Management and Governance
0
2012-13 2013-14 2014-15 2015-16
Source: Annual Reports
PIL is committed to practice of good corporate governance which
emphasis on integrity and accountability. It incorporates high level of
business ethics and effective supervision to enrich the stakeholder’s
value through business excellence. PIL timely and regularly discloses
critical aspects such as financial statements on a timely basis, insider
holdings, audit and nomination & remuneration committee,
Figure 4: Shareholding Pattern compensation policy, and shareholding rights.
Board of Directors
Foreign List of members of Board of Directors is given in Appendix A. The
10% Promoters Independent Directors are briefed at regular intervals about their legal
Public and regulatory roles. A familiarisation program is organised whenever
51% shareholding an Independent director is appointed.
39%
Institutions Insider Holding
Public
shareholding Two Non-Executive Director – Promoters and a Managing Director –
Non-Institutions Promoter are holding about 16.33% of shares each which might lead to
biased decisions on their part. None of the other directors are holding
Source: Company Annual Report
significant number of shares in the company.
Committees
Audit, nomination and remuneration committees have been
established to guide and manage the firm’s operation. Both the
committees are chaired by a combination of Independent and non-
Figure 5: EPS and DPS executive directors (Appendix B). Audit Committee oversees
250 company’s financial reporting process, approval for appointment of
209
176
CFO, obtain legal and professional advice. Nomination and
200
138 remuneration committee looks after performance evaluation,
150
101 appointment and removal of Board of Directors.
85
100
60 72 Shareholder Rights
50
50 PIL has the policy of one share one vote and the facility of e-voting (if
0 the shareholder is unable to attend AGM). This mechanism ensures
2012-13 2013-14 2014-15 2015-16 that the rights as well as the calls of the general public don’t go
uncalled for.
EPS per share Dividend per share
Social Responsibility
Source: Company Annual Report PIL has identified and partnered with Grassroots Research and
Advocacy Movement (GRAAM) to identify and spend the CSR
effectively and wisely towards good cause in a sustainable fashion.
Company is committed to health and safety of its employee and
customers and protecting the environment. They strive to reduce,
reuse and recycle waste. PIL actively donates to ‘Have a Heart
Foundation’. It aims to eradicate hunger, poverty and malnutrition and
 provide education to the deprived section of the society. It promotes
gender equality and developing rural areas.

Figure 6: Per Capita Income Industry Overview

100
90 Indian innerwear market is worth Rs. 19,960 crores (2014) and is
80
70
estimated to grow at 13% till 2024. Although the market was
60 traditionally unorganized but in past 5 years organized innerwear
50
40
segment has shown exemplary performance. The women innerwear
30 market is worth Rs. 12,510 crores and has grown at a CAGR of 15%.
20
10
While men innerwear market is pegged at Rs. 7,450 crores and is
0 increasing at CAGR of 9%. Kids market was USD 8.3 billion in 2013
FY12-13 FY13-14 FY14-15 FY15-16
which is expected to grow at 10.5% till 2023.
Source: Economic Survey 2015-16 Growth Drivers
Rise in Discretionary Income
Increase in household income is instrumental in driving sales to new
customers. As the economy of India grows, the household income will
also grow, thus inducing shift of value creating forces into branded
Figure 7: Women Education apparels segment. As projected by IMF, the GDP growth rate of India
120.00%
would be around 7.10% indicates per capita income will increase.
100.00% Growing number of white collar working women
80.00% There number of women in white collar workforce has been increasing
60.00% even if the growth rates have fallen in past few years. But this is
40.00% Men
certainly a very big growth driver. In year 2013, 45.9% of all enrolled
20.00% Women
0.00%
undergraduate students in India are women while 40.5% of all enrolled
PhD students are women. With women closing in on gap in higher
Law
IT
Engineering

Management

education there will be increase in women white collar workers and

thereby increase in demand for casual and inner wear
Source: Women in Leadership, Catalyst 2015 Urbanization
Demand for premium segment innerwear and casual wear has been
seen in tier 1 and tier 2 cities. As urbanization is increasing, the target
market is also increasing.
Growth in organized retail
Growing retail and e-commerce industry is another growth driver to
this industry. Both of them provide a low cost and larger distribution
Figure 8: Retail Market Growth network. Both of them will have a positive impact on both top line and
800 bottom line of the company.
Low Penetration
600
Despite the growth seen in Indian innerwear market, there is a huge
400 population still buy from unorganized local player. In past five years,
there has been decline in their market share but market potential is
200 huge.
Global Warming
0
2006 2008 2011 2014 In past few years, significant climate changes have been seen in India.
Source: BMI Research, 2014 The ambient temperature has increased and precipitation patterns
have changed. This has changed people lifestyle as well. Global
warming can have a positive impact on leisure and swim wear.
Tourism
Tourism is India is increasing rapidly and is very important to its
economy. It contributed to 6.3% of GDP in year 2015. Government is
also promoting tourism on a large scale. Tourism will boost demand for
leisure wear, beach wear, swim wear etc.
 Competitive Positioning
Over the years, Page Industries has consistently widened its portfolio
of SKUs especially in women category. It entered into tee-shirt
Figure 9: Urban Population segment and now with speedo it ventured into swimwear segment.
Speedo has witnessed 8.5x increase in sales revenue in just two years.
700
Speedo has 986 stores in 74 cities across the country. Jockey has
600
expanded its distribution from 80 stores in 1996 to 30,000+ stores.
500
Jockey has a strong brand equity in consumer minds. It ranks far ahead
400
of its competitors as per brand equity survey conducted by Neilsen. In
300 men’s segment, Jockey is the market leader with strong foothold in
200 south and north India while in women’s category, Jockey is ahead of its
100 competitors in western and southern India. From porters’ competitive
0 forces it can be seen that current competitiveness in this industry is
1991 2001 2008 2030 moderate.
Source: Mckinsey Global Institute

Primary Research Insights

We interacted with some EBOs and Multi Brand Outlets of Jockey and
Speedo to understand the industry closely. Some key insights were:
Figure 10: Innerwear Market
Segmentation Extensive Product line
Customers generally buy innerwear in bulk so stores should have keep
many SKUs of the product line.
Promotions
48% 52%
Innerwear is a necessity product so it does not depend on promotions.
Organised Price Rise
Unorganised
Regular and economy brands of innerwear usually raise prices by 7-8%
annually.
Inventory turnover
Innerwear segment has a higher inventory turnover as compared to
Source: Motilal Oswal
other apparel segments.
Purchasing Behaviour
Most of the shopping of men’s innerwear is done by women and hence
pattern, style and design influence the purchasing decision. Comfort,
Figure 11: Porters’ Five Forces brand and pricing are the key determinants when deciding the
product. Even though Jockey is affordable but it is positioned as a
1. Threat of
premium brand in the customer’s mind. Consumers in the age group of
New
Entrants 18-30 are more experimental and individuals above this age group
6 mostly stick to the same brand even though they upgrade regularly.
4 Women’s innerwear segment is split between top and bottom and top
5. Rivalry
2. Power of
among 2
Suppliers is generally twice as expensive as bottom wear. Women’s spending on
Competitors
0 lingerie is very small as compared to the overall spending on clothes,
shoes and handbags. Depending on the occasion, women use different
4. Threat of 3. Power of innerwear brands. Purchase decision of women lingerie is generally not
Substitutes Customers taken by consulting with salesperson.
1-Least Attractive 5- Most Attractive
Investment Summary
Source: Team Calculations

Strong Brand Image

• Jockey has been positioned itself as “Affordable yet aspirational”
• It has transformed itself into a lifestyle brand
 • Primary research shows that Page is actively involved in BTL
activities and in-store adverts to increase brand image
• Jockey has highest brand equity score as per survey conducted by
Neilsen
• Page spends 4% of its revenue on advertising and brand building
Figure 12: Brand Equity Score Men
Robust Distribution Network
5 Jockey is available in 1400+ cities and towns. The products are sold in
4 Exclusive Brand Outlet (EBO), Large Format Stores (LFS), Multi-Brand
3
Outlet (MBO), traditional hosiery stores and multipurpose stores
across India.
2
• Jockey has 265 EBOs across the country
1 • Exclusive Jockey showrooms for women
0 • Very good reach in tier-2 and tier-3 cities
• 4 EBOs in UAE and 1 in Sri lanka which implies their focus in coming
years is on exports
• Personal B2C e-commerce channel and strategic alliances with other
Innerwear e-commerce players
Source: Neilsen Brand Survey • Speedo brand is available in 1060 stores including 146 LFS across 106
cities and 9 EBOs.
Expansion and new Investments
Page has expanded its installed capacity across various units in 13
locations in the state of Karnataka. It has an expansion planned in
Figure 12: RONW/ROE (%)
KIADB Industrial area, Hasan. Five acres of land has been allotted to
55
Page by KIADB for 99-year lease. Currently civil works has begun at the
facility and commercial production would begin by end of next
50
financial year.
45 Low Penetration
48% of total population is not served by branded innerwear players.
40 There is huge scope of demand from these new customers in future.
FY-12 FY-13 FY-14 FY-15 FY-16 With increasing per capita income, these people would be moving
Source: Team Calculations towards branded apparel and innerwear.
Innovation and New Product Development
With the continued support from Jockey International, USA, and access
to ideas, trends and innovations from forty other Jockey International
licensees throughout the world, Page is committed to newness and
innovation its product line. Page’s design team regularly takes inputs
Figure 13: Reserves and Surplus (in crores)
from global team on fit, size and quality for new product offerings. It
600 can be seen through its expansion into kids wear and tee shirt market,
500 which is one of the fastest growing market in readymade apparel
400 industry.
300 Financial Health
200 Page Industries has almost no debt on its balance sheet. The
100 company’s ROE remains at almost 50% for last 5 years, which is the
0 highest among their peers.
FY-12 FY-13 FY-14 FY-15 FY-16
Source: Team Calculations
Financial Analysis

ROE Decomposition
PAGE has been enjoying a good ROE as compared to that of the
industry over the years and has outperformed its peers when it comes
to ROE. The reason is primarily because of lower asset to equity ratio
 due to lower dependency on debt, more efficient use of assets leading
to higher asset turnover and lower interest payments.
(1*2*3*4*5) 1 2 3 4 5 6(2*5)

Figure 14: Cash Conversion Cycle (in days) Net Profit Pretax
EBIT Sales Assets Compound
Year ROE /Pretax Profit
/Sales /Assets /Equity leverage
Profit /EBIT
100

95 2015-16 45.70% 67.58% 95.76% 20.09% 1.88 1.87 1.79

90 2014-15 50.30% 66.83% 94.63% 19.98% 1.87 2.13 2.01

85 2013-14 52.81% 65.86% 95.76% 20.42% 1.77 2.32 2.22

80 Financial Ratios
FY-12 FY-13 FY-14 FY-15 FY-16 PIL’s Cash conversion cycle is quite low as compared to its peers which
Source: Team Calculations indicates the company’s long term growth as less cash is tied up in the
inventory and trade receivables. Company enjoys a good credit terms
with the lenders and other creditors. Though in 2016 the trend has
reversed a bit but it can be controlled if better inventory management
Figure 15: Financial Leverage (D/E) techniques are employed by the company such as JIT, ABC Analysis and
0.6 Six sigma to maintain inventory level close to EOQ level. From the
0.5 liquidity ratios, it is observed that current ratio is high but quick ratio is
0.4
low which means that inventory of PIL is high and they should try to
0.3
0.2 minimize it.
0.1 Ratios 2016 2015 2014 2013 2012
Profitability Ratios
0
PBIT Margin (%) 20.15 20.08 20.53 19.82 20.59
FY-12 FY-13 FY-14 FY-15 FY-16
Net Profit Margin (%) 13.04 12.7 12.94 12.84 13.16
Source: Team Calculations Return on Net Worth / Equity (%) 46.04 50.68 53.21 52.7 54.27
Return on Assets (%) 24.62 23.8 22.96 23.85 24.21
Total Debt / Equity (X) 0.15 0.35 0.49 0.41 0.39
Liquidity Ratios
Current Ratio (X) 2.2 1.79 1.58 1.65 1.54
Table 3: Cost of Equity Quick Ratio (X) 0.46 0.37 0.33 0.4 0.39
Activity Ratios
Inventory Turnover Ratio (X) 3.31 3.48 3.28 3.73 3.96
Beta 0.81579
Asset Turnover Ratio (%) 1.89 1.8738 1.7735 1.8565 1.8394
Return on Market 9.51% Cash conversion cycle 95 98 96 89 90
Valuation Ratios
Risk Free Rate 6.90%
Basic EPS (Rs.) 208.59 175.75 137.87 100.89 80.68
Cost Of Equity 9.03% Earnings Retention Ratio (%) 59.25 59.04 56.49 50.45 54.14

Source: Team Calculation

Valuation
The Valuation number has been derived at by fundamental DCF
Table 3: Cost as % of Sales
valuation, wherein the financial performance till FY 2026 has been
Royalty 4.90% estimated and a terminal growth rate of 6.25% has been attached to it
Raw Materials 49.20% to derive at the valuation.
Excise Duty 0.31% Method Used
Power and
0.71%
Free Cash Flow to Equity, in which the FCFE was discounted at Re to
Fuel Cost
derive the Value of Equity.
Employee
15.30%
Cost Key Variables
Miscellaneous The Beta has been calculated by running a linear regression of One
21.20%
Expenses
year daily returns of the PAGE industries stock against the market
Source: Team Calculation (NIFTY 50 used as a proxy for the market). We have assumed one year
 data as there has not been a structural change in the market over this
period. As observed by the regression analysis, PAGE has a beta of
0.8157.
Figure 16: Growth Rate YoY
Cost of Equity has been estimated using the Capital Asset Pricing
30.00% Model. As an input to the CAPM, the risk-free rate has been taken as
20.00% the rate of a 10-year Government Bond (6.9%).
10.00% Also, the market rate of return was calculated using the Implied cost
0.00% of capital (ICOC), wherein the Dividend yield (based on year t=1) was
2024
2017
2018
2019
2020
2021
2022
2023

2025
2026
1.6% and dividend growth was 7.9% giving a market return of 9.5%.
The Implied Risk Premium of market in India is 2.6%
Source: Team Calculation Growth of Sales Revenue has been calculated by looking at the
historical growth rate of sales, the rate of growth of industry size, the
growth of men’s women’s and sportswear, the population growth of
Figure 17: Sensitivity Analysis India, the competition etc.
So, we expect the growth to happen at similar lines as historically, but
due to the larger base effect the rate will slow down.
Costs have been estimated to mostly continue to be a percentage of
sales (historically derived).
The major cost for the company was observed to be the raw materials
costs. The royalty system for the company was fixed at 4.9%
The net block of assets grew at a similar pace to that of sales
(historically observed) which have been taken into consideration. The
capacity utilization would improve due to which the additions to the
asset base will reduce a little going on.
Other Important Assumptions
• There would be no further debt repaid or taken, the requirements
will be sourced/financed internally.
Source: Team Calculation
• The Cost of Equity is assumed to remain constant over the 10 year
estimation period
Figure 18: Sensitivity Analysis • There would be no further expansion into other geographies.
• The royalty terms will not change
Price sensitivity to CF • The exclusivity of the company will hold
prediction Sensitivity Analysis
30000.00 The Discounted cash flow valuation model requires several key
25000.00 assumptions on critical inputs like cost of equity, terminal growth rate,
20000.00 sales growth, the cash flow predication accuracy etc . The target stock
15000.00
price can be quite sensitive to these inputs and vary significantly as the
10000.00
assumptions about these inputs change. To assess the impact of these
5000.00
0.00
key inputs on the intrinsic stock price, sensitivity analysis has been
115% 110% 105% 100% 95% 90% done by changing two of these factors in combination and arriving at
the target price
Source: Team Calculation The target stock price is found to be quite sensitive to the terminal
growth rate and the cost of capital, with the target stock price varying
quite significantly as these inputs change.
 Relative Valuation
Table 4: Relative Valuation Page trades at a significant premium on P/E multiples to other listed
innerwear players like Rupa and Maxwell. This P/E multiple is justified
due to the following factors:
Comparison Page Lovable Maxwell Rupa • Distributor model followed by Page instead of wholesale channel,
5 yr Revenue CAGR 35.70% 18.20% 6.10% 16.80% which gives higher control to Page and constrained WC
5 yr PAT CAGR 37.20% 43.50% -5.50% 35.40%
5 Yr Avg Roe 55.00% 22.00% 4.90% 23.10% requirements
5 yr Avg Roce 35.30% 20.90% 10.90% 21.80%
P/E 76.10 22.30 21.40 43.87
• Due to the lesser mix of contractual laborer with Page, higher
PE/G(5yr hist) 2.2 0.7 NA 0.8
efficiencies are maintained
• The competition in men’s innerwear segment is far less when
Source: Team Calculation compared to vests. Page’s revenue contribution from men’s
innerwear is 70-75% of lowers, but this number is significantly
lower for its peers like Rupa (40%)
Figure 19: INR vs USD • Brand recall for Jockey Is really high and is perceived as an
aspirational product due to which higher margins (price) and
volume is seen for Page when compared to peers

Investment Risks

Currency risk
For FY 2015-16, outflow on account of import of raw materials,
Source: Trading Economics machinery, spares etc. amounted to Rs. 1,702 Million. Company’s
exposure to foreign currency is increased in last four years.
Expenditure incurred in foreign currency is increased by 57% from FY
2014-15 to FY 2015-16. The recent weakening in the price of rupee is
Figure 20: Expenditure incurred in foreign thus a matter of high concern for Industry in general and Page
currency (In Millions)
industries in particular.
1000
Raw Material and Input Factor Risk
800 Page Industries imports a significant portion of raw material from
600 China and some other countries. For some of these imported raw
Raw
400 Materials materials, the company is hugely dependent on few suppliers. Any
200 Royalty disruption at suppliers end to meet the supply could adversely affect
0 their manufacturing capabilities. In recent years dependency on
imported raw materials is increased, while in FY 2014-15, 8% of total
raw material was imported; for FY 2015-16 it has been increased 15%
Source: Company Report of total.
The industry is growing at a fast pace, in a highly labour intensive
sector and demand for experienced and trained manpower is
outstripping supply. Whilst outsourcing of the manufacturing process
is a possible option for small-scale mid-premium businesses,
outsourcing innovative and premium product manufacturing is
unproductive given the extent of training, regular monitoring and
versatility of skills required for such products.
Highly Competitive Segment
Many major international apparel brands have commenced operations
in India realizing that Indian market is likely to emerge as one of the
 largest market in the world in the next few decades. The innerwear
industry has witnessed, over the past 2-3 years, the expansion of new
Figure 20: Indigenous vs Imported raw international brands like Hanes, FCUK, Tommy Hilfiger, US Polo Assn.,
material and Benetton in India. These international peers can successfully offer
the same following characteristics viz: (a) comfortable and durable
7000 products; (b) affordable prices for some brands like Hanes and USPA;
6000
and (c) aspirational brand recall.
5000
4000 Dependence on Economy
3000 Indigenous The global macroeconomic landscape is currently chartering a rough
2000 and uncertain terrain characterized by weak growth of world output.
Imported
1000 The situation has been exacerbated by; (i) declining prices of a number
0
of commodities, with reduction in crude oil prices being the most
visible of them, ii) turbulent financial markets (more so equity
markets), and (iii) volatile exchange rates.
The industry growth is directly correlated with the growth of economy.
Source: Company Report
The spur in economic activity has been slow in the recent years and for
the industry growth to happen, the GDP of the country should revive.
So, any slowdown of economy in future will pose risk to the industry.
Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report does not hold a financial interest in the
securities of this company.
The author(s), or a member of their household, of this report does not know of the existence of any
conflicts of interest that might bias the content or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does not serve as an officer, director or advisory board
member of the subject company.
Market making:
The author(s) does not act as a market maker in the subject company’s securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally vailable to the public
and believed by the author(s) to be reliable, but the author(s) does not make any representation or
warranty, express or implied, as to its accuracy or completeness. The information is not intended to be
used as the basis of any investment decisions by any person or entity. This information does not constitute
investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report
should not be considered to be a recommendation by any individual affiliated with Indian Association of
Investment Professionals (IAIP), CFA Institute or the CFA Institute Research Challenge with regard to this
company’s stock.

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