It is a little more than a decade since Aditya Birla Nuvo (ABN) started its journey from being a small manufacturing company to grow over the years to become a $4.5 billion conglomerate. In line with its vision, most of the businesses are leaders in their respective fields. Even during 2011-12 when the Indian economy passed through a challenging phase, most of the ABN businesses outperformed the industry.
For 2011-12, ABN’s consolidated revenue stood at $4.5 billion (Rs. 21,840 crores) vis-à-vis $3.6 billion (Rs. 18,188 crores) in the previous year. EBITDA surged by 21 per cent to $652 million (Rs. 3,259 crores). Net profit at $178 million (Rs. 890 crores) was up eight per cent in comparison to $164 million (Rs. 822 crores) in the earlier year.
In the fashion & lifestyle business, Madura is the largest premium branded apparel player in India. It has almost doubled its revenue in the past two years. Its operating market size will further expand with the proposed acquisition of the controlling stake in the Pantaloons format of the Future Group.
Madura Fashion & Lifestyle, part of ABN’s business, outperformed the market, logging a revenue growth of 24 per cent. Its revenue at $450 million (about Rs. 2,250 crores), and ROACE at 21 per cent is indeed a commendable feat. Having laid a solid foundation for sustainable growth, its retail footprint extends to 1,129 stores spanning 1.6 million square feet.
The proposed acquisition of a controlling stake in the Pantaloons format of the Future Group is in line with the company’s strategic intent to fortify the leadership position in this segment. It will enable the company to create the largest integrated branded fashion player in the country. This acquisition will catapult Madura Fashion to a leading position in all the segments through an extension into kids wear and women wear.
The Textiles business posted its highest-ever earnings and crossed the Rs. 1,000-crore revenue mark. To capitalise on the increasing popularity of linen, 17 exclusive stores of ‘Linen Club’ have been added, taking the total to 57 stores. The company is further exploring capacity expansion in the Linen Yarn and the Linen Fabric segments.
In the Rayon business, the company enjoys the rare distinction of being the largest Indian exporter of viscose filament yarn (VFY) for the seventh consecutive year. ABN’s VFY expansion is on track. The company expects its commissioning by the end of 2012-13 and the 45,625 tons caustic soda plant expansion by 2013-14.
Madura Fashion & Lifestyle is the largest premium branded apparel player in India. Its premium brands – Louis Philippe, VanHeusen and Allen Solly – and its mass brand – Peter England, are leaders in respective categories. Madura also retails international brands like Armani Collezioni, Hugo Boss, Versace Collection, Hackett, Adidas, Puma, Samsonite, etc., under one roof ‘The Collective’. Madura also has a strategic tie-up with the leading international brand Esprit for distribution of its apparels in India.
Looking at the overall branded apparel business, the industry has posted healthy growth in the previous two years, driven by rapid retail expansion. This growth momentum moderated during 2011-12, particularly in the second half of the year, largely due to the base effect and subdued demand. Overall consumer spends on discretionary categories like premium branded apparels have been affected by the inflationary pressure coupled with the increase effected in apparel prices of 15-20 per cent across the industry to partly pass on the rise in cotton prices and excise duty. Most of the players reported flat to negative same stores sales growth. In this scenario, Madura Fashion continued to outperform the industry, with its like to like stores sales growing in double digits.
The long-term growth outlook of the domestic branded apparel industry remains bright, backed as it is by strong demographics, viz., rising disposable income, expansion of an aspiring middle class segment, large young population and the growing trend towards branded apparels. However, in the short term, consumer spends on premium branded apparels are expected to remain subdued on account of high inflation. Madura will continue to leverage its brand leadership, expand its retail space and strengthen channel relationships with its aim of exceeding the industry growth.
Jaya Shree Textiles
Jaya Shree Textiles (JST) is the largest manufacturer of linen yarn and linen fabric in India with spinning and weaving capacities at 15,640 spindles and 106 looms respectively. It is a leading manufacturer of wool tops and worsted yarn in India with a capacity of seven carding machines and 25,984 spindles respectively. Its revenue crossed the Rs. 1,000-crore mark.
JST has successfully transformed linen into a lifestyle symbol. It retails linen fabric under the well-known brand “Linen Club Fabrics”.
The company achieved its highest-ever earnings, driven by improved realisation across segments and volume growth in the linen segment. Linen yarn and linen fabric segments registered 14 per cent and 7 per cent growth in sales volume respectively. The wool segment registered a lower export volume.
Rising per capita income and growing popularity of linen as a style and comfort fabric guarantee a brighter future for the linen segment. JST is considering capacity expansion in the linen yarn and fabric segments to capitalise on the rising demand. It will also continue to focus on the high margin linen fabric OTC segment.
Indian Rayon
Indian Rayon, the second largest manufacturer of viscose filament yarn in India, became the largest exporter of VFY from India for the seventh year in a row. Domestic consumption of VFY grew by one per cent to 56,727 MT in 2011-12. Domestic VFY production moved up by four per cent to 42,356 MT, while imports increased by 10 per cent to 22,403 MT. VFY exports grew by 12 per cent to 6,118 MT.
Indian Rayon registered growth in VFY sales volume and maintained inventories at optimum level driven by higher exports, strategic marketing and better product mix. Revenue from the VFY segment grew by 21 per cent to Rs. 467 crores. VFY realization increased by 17 per cent while VFY sales volume grew by four per cent.
Indian Rayon has commenced expansion of its VFY capacity using Spool Technology from ENKA, Germany. The new technology will help it manufacture premium segment quality yarn and cater to the high margin premium segment.
Out of total planned capex of Rs. 270 crores for fiscal 2012-13, a sum of Rs. 76 crores was spent till March last.