Team Details

Name of Institute : IMT Ghaziabad

Team Member #1
Name : Sanket Shalu
Mobile : 8975830495
Email : pgp18sanketsunilshalu@imt.ac.in

Team Member #2
Name : Srijani Dhara
Mobile : 8961582466
Email : pgp18srijanidhara@imt.ac.in
Team Member #3
Name : Shivang Bhagat
Mobile : 8000619870
Email : dcp18shivangkamleshbhagat@imt.ac.in
1
Aditya Birla Fashion & Retail Ltd
 Brief company background

• ABFRL emerged after the merger of Pantaloons Fashion and Retail (PFRL) and Madura
Fashion & Lifestyle (MFL) in May 2015
• It is a manufacturer and retailer of clothing, footwear, and leather products
• It offers western, ethnic, formal, party and active wear for men, women, and kids as well
as footwear, handbags, cosmetics, perfumes, fashion jewelries, and watches
• It hosts India's largest fashion network which includes 2,700+ ABFRL brand outlets, a
footprint of 7.5 million sq. ft. of retail space across 750+ cities and towns
• It has approx. 30 million Loyalty Members as of 31st March 2019
• It has a strong portfolio of brands like Louis Philippe, Peter England, Allen Solly, Van
Heusen etc
• It has acquired licensing rights for other brands like Forever 21, Simon Carter, Ted
Becker, Ralph Lauren, People, The Collective etc
• It has around 23269 employees all over the world

3
QGLP Analysis
 QGLP in a nutshell
“QGLP – Quality, Growth, Longevity, reasonable Price”
Quality of business x Quality of management
• Current market leader in branded fashion retail
sector
• Strong & reputed brand portfolio
• Strong improvement in RoE & RoA
• Good supply chain management
QGLP
Price
• Fairly valued in terms P/E of 45.67
• Good future earnings leading to valuation growth
• 3 year target price of Rs 277.3
• Revenue growth at CAGR of 13.5%
Growth in earnings
• Huge growth opportunity due to low market
penetration of branded apparel in India
• Aggressive network expansion of retail stores
• Increasing EBIT and profit margins over years
• Acquisition of new brands like Jaypore
Longevity – of both Q & G
• Strong and diverse brand portfolio giving
sustainable competitive advantage
• The apparel market growing at CAGR of 12%
• Low penetration of current brands will lead to
future growth
5
 Q – Quality
 Quality of Business
 Opportunity in Indian fashion apparel retail market –
• ABFRL is market leader in apparel industry which (domestic + exports) in India grew at a CAGR of
13% from Rs. 2,432 billion in FY10 to Rs. 6,484 billion in FY18 [1]
• India’s domestic apparel market is expected to grow at 11-12% CAGR and reach about $160 billion
by 2025[2]
• Unbranded apparels in India account for around 60% market share which gives huge growth
opportunity for branded apparels to drive penetration leading to revenue growth[3]
• Rising per capita income growing at 10% and rising number of working women in India expected to
increase consumer spending on branded products[4]
• With world’s largest youth population becoming fashion conscious owing to mass media and social
media penetration, India is expected to see gradual growth in demand for branded fashion
apparels
• Reduced pricing pressure as branded fashion retail sector in India is highly concentrated with only
ABFRL and Future Lifestyle Fashions Ltd (FLFL) carrying majority of market share

[1]http://www.careratings.com/upload/NewsFiles/Studies/Indian%20Ready%20Made%20Garments%20(Apparel)%20Industry.pdf
[2] https://www.business-standard.com/article/companies/domestic-apparel-market-to-grow-by-12-on-robust-demand-cmai-118071600951_1.html
[3] https://www.brand-experts.com/brand-expansion/india-fashion-retail/
[4] https://www.businesstoday.in/current/economy-politics/india-per-capita-income-rises-10-to-rs-10534-a-month-in-fy19/story/352805.html 6
 Q – Quality
 Quality of Business
Force Comments Score
Inter-firm rivalry Limited competition from oligopolistic organized market, 0.5
No competition from unorganized sector due to increased brand consciousness
Bargaining power of No direct bargaining power but can indirectly force to reduce price by switching 0.5
customers brands
Bargaining power of No significant bargaining power to local players in highly fragmented industry 0
suppliers
Threat of new entrants No threat of new entrants due to high initial capital expenditure requirement 0

Threat of substitutes High threat from major market players with similar brand portfolio 1

ABFRL Return Ratios 15

ABFRL Profitability Ratios
40
10
20
5
0
-20 2013 2014 2015 2016 2017 2018 2019 0
-40 2013 2014 2015 2016 2017 2018 2019
-5
-60
-10
-80
-15
RoE RoA RoCE EBITDA margin Operating margin NPAT margin 7
 Q – Quality
 Quality of Management
 Unquestionable Integrity
• High promoter stake : 60% of ABFRL stock is owned by promotors and no part of it is pledged
implying promoters’ high skin in the game[5]
• Excellent team of 7 directors and 12 Key Domain Heads from varied backgrounds with
experience from world’s largest conglomerates

 Demonstrable Competence
• In house team for Strategic Direction and Consultation: The Vanguard under Aditya Birla
Management Corporation Private Limited (ABMCPL) guides the group companies for their
corporate functions [6]

 Sustainable Strategy of Doing business - ReEarth Campaign (5)

• 20% Reduction in carbon footprint(expense ~4 Cr.)
• 73% of water is recycled and reused
• 21% energy efficiency due energy efficiency measures
• 87% sustainable packaging used and Zero waste to Landfills

[5] ABFRL Annual Report, 2018-19

[6] Aditya Birla website, Leadership
8
 G – Growth
 Strategy adopted to improve revenue growth –
 Network Expansion
• Addition of 60 – 70 stores in Pantaloons and 400 stores in Madura Lifestyle by FY 2020[7]
• Focus on e-commerce channel growth through e-commerce portal Trendin[8]

 Product enhancement
• Pilot testing of new 12 season inventory model to increase freshness of products and rapid
adaption by ABFRL to ever changing customer tastes[9]
• Improved ‘full price sell through’ to sustain profit margins

 Brand investment & Category expansion

• Acquisition of 100% stake in strong brands Jaypore and Décor to expand into ethnic wear market
which holds 71% share in women’s apparels and is underpenetrated by brands with fastest
growth at CAGR of 9%[10]
• Acquisition of 51% stake in Finesse which has super premium brand Shantanu & Nikhil
• Expansion of women’s branded premium innerwear segment through exclusive stores & websites

[7] https://www.thehindubusinessline.com/companies/aditya-birla-fashion-retail-to-roll-out-470-new-stores-in-fy20/article28879323.ece#
[8] https://www.adityabirla.com/media/press-reports/creating-e-commerce-ethos-madura
[9] https://www.dnaindia.com/business/report-aditya-birla-fashion-mulls-12-season-cycle-for-madura-fashion-and-lifestyle-business-2779602
[10] http://www.technopak.com/Files/indian-ethnic-wear-market.pdf
9
 G – Growth

• Both expected revenue and EBITDA to grow by a CAGR of 13.5% over FY 2019 – 22
• Strong growth in profitability margin due to efficient markdown & discount management and
enhanced product portfolio
• Higher other income & lower depreciation expense expected to boost PBT over FY 2019 - 22

Revenue (in Rs Lakh) EBITDA (in Rs Lakh)

1400000 100000 13.5%
13.5% 90484
1196392 90000
1200000 79721
1054090 80000
70239
1000000
10.4% 928714 70000 32% 61885
818250
720488 60000
800000 664101
50000 47550 50109
607200
`
600000
40000
30000 26954
400000
20000
200000
10000
0 0
2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 10
2022
L – Longevity

 Longevity of quality
• Latest ethnic wear acquisitions will provide an existing ecosystem (designing team, supply
chain, dealer network) in an underpenetrated category that can be scaled up to further drive
penetration in vast ethnic wear market
• Highly reputed and very diverse brand portfolio will provide sustainable competitive
advantage to ABFRL

 Longevity of growth
• Targeting the long tail of rural market with Peter England Red stores to have a pan India
presence will further increase growth
• Expected revenue growth from e-commerce channels due to increased demand
• Long term growth drivers like fashion conscious young population of India and growth in
their disposable income along with ABFRL’s availability on different channels with larger
number of stores than any other fashion house will continue to boost its growth more than
the industry average of 10-12%

11
 P – Price

• The current P/E multiple of ABFRL is 45.67 which is very close to industry average of 44.87
considering peer group of Future Lifestyle Fashion Ltd, TCNS Clothing Co Ltd, VMART Retail Ltd.
Hence, we can say that ABFRL is fairly priced.

• Assuming that the P/E multiple stays constant from FY19 to FY22, we use current P/E of ABFRL to
find target stock price for FY22 during exit. Furthermore using projected income statement and
balance sheet for FY 2019 – 22, the target price comes out to be Rs 277.31
Hence, we give a strong buy recommendation.

FY 19 FY 22(Est)

PAT Rs 321.22 Cr Rs 469.66 Cr SALES REVENUE(%)

Fast Others
Shares outstanding 77,34,81,460 77,34,81,460 Fashions

EPS Rs 4.15 Rs 6.07 Madura

Lifstyle
P/E 45.67 45.67 Brands
Pantalo
Stock price Rs 189.663 Rs 277.31 ons

Market cap Rs 14661 Cr Rs 21449.7 Cr 12

 Financial Summary

 Income Statement Projections for FY 2020 – 22

In Rs Lakhs 2019 2020 2021 2022 Assumptions

Revenue growth at a CAGR of 13.5%
Revenue 818250 928713.8 1054090 1196392.27 similar as y-o-y growth of
FY 2018 – 19
Gross Profit margin 52.03% - same as
Gross Profit 425753 483229.7 548465.7 622508.52
of FY 2018 – 19

EBITDA margin 7.56% - same as of

EBITDA 61885 70239.48 79721.8 90484.24
FY 2018 – 19
PAT margin 4% - same as of
PAT 32122 36458.47 41380.36 46966.71
FY 2018 - 19

13
 Financial Summary

 Balance Sheet Projections for FY 2020 - 22

In Rs Lakhs 2019 2020 2021 2022 Assumptions

Shareholders
142888 179346.5 220726.8 267693.5 Share capital to remain same throughout
’ funds

Total Equities
662107 698559.5 758078.4 836742
& Liabilities

as the same y-o-y growth as

Current Asset 336916 390893.6 475083 592522.7
FY 2018 -19

Non Current
325191 307665.8 282995.5 244219.2
Assets

14
Risks & Concerns

• Threat posed by existing competition can cut into revenue growth

• Losses in its Fast Fashions & Others business segment putting pressure on its
overall profitability

• Entry of strong foreign players in lucrative Indian apparel market can reduce
revenue growth

• Owing to heavy investments in brand building and pushing leisure wear and
ethnic wear products, it may be difficult to achieve breakeven in the near future

• Demand can be a concern due to current economic slowdown

15
Thank You

16