It would be customary to begin my statement with an analysis of the previous year''''s performance.
I will take the opportunity to address the shareholders apprehension about our capacity expansion, encapsulated in a single question: where will Nandan Denim market the incremental outputRs,
This question is relevant and timely. According to media reports, India nurses excess denim capacity and needs to export to protect domestic realizations.
However, this reality is true only for the short-term.
If one takes a three to five year horizon, we foresee industry realities transforming from surplus to shortage.
The Indian denim market is growing annually at about ~18% against the global average of 3-5%. Assuming that this growth rate continues, India would need 2000 mn metres of denim fabric to feed its rising fabric appetite.
At Nandan Denim, we believe there are a number of factors promising 18% annual growth in the domestic denim market.
India suffers from the lowest per capita denim jeans consumption in the world - 0.3 denim jeans pair - even as China''''s stands at 2 and US and UK at 8 and 9 respectively. This under-penetration is on account of a mere 7% of India''''s population driving 49% of the country''''s jeans consumption and nearly 85% of the country''''s consumption being accounted by men.
We believe that this reality could soon change for good reasons:
Youth: India is the youngest country of the world; more than 50% Indians are below 25 years and 65% below 35 years. The inspirational youth (15-29 year olds) with rising spending power account for 26% of the consuming population. By 2020, it is estimated that the average age in the country will be 29, an attractive average of young earners and consumers desiring to try out the new.
Urbanization: About 377 million in India''''s population of 1.27 billion are urban. With more than 10 million people migrating to cities and towns every year, the country''''s urban population is expected to reach about 600 million by 2031.
Smart Cities: The Central Government has selected 20 cities to launch its large-scale urban makeover plan. It proposes to invest C50,802 crore on these cities in the first phase of an ambitious plan to set up 100 ''''Smart Cities.
Workforce: India is expected to add 110 million people to its labour force in 10 years. Besides, by 2020, India could have 116 million workers in the work-starting age bracket of 20-24 years (China 94 million).
Working women: The number of women joining India''''s workforce is increasing.
India''''s government is preparing to extend mandatory paid maternity leave to six-and-a-half months -- among the longest such periods in the world. This could add to India''''s working women population and in turn add 200 bps to India''''s GDP according to the Organization for Economic Cooperation & Development.
Earnings: India''''s per capita income has increased - from RS,71,050 in FY13
to RS,93,231 in FY16 and could cross RS,100,000 in FY17, leading to an increase in discretionary spending.
Reach: The e-commerce revolution has extended fashion awareness and apparel availability to Tier II and III cities.
During the past 12 to 18 months, there has been a decline in the production of denim fabrics in US and China, resulting in accelerated denim manufacturing opportunities: from 35% of India''''s total textile exports to 45% by 2020.
At Nandan Denim, we have drawn out a two-pronged strategy.
Streamline operations for maximizing asset utilization and optimizing costs
Enhance knowledge on the fashion ability of denim (value-added)
Enhance infrastructure and product development capabilities customized around select geographies and preferences
Build expertise and capabilities to maximize value-added production
Deepen global presence in existing and high-growth geographies
Strengthen customer loyalty Overview
The big message I would like to leave with shareholders is that Nandan Denim is at an inflection point where an interesting volume-value play will strengthen growth and profitability, enhancing shareholder value.
On behalf of the Board of the Company,
I would like to express gratitude to our stakeholders, customers and employees for their unstinted support in growing our respect and performance.