It would be customary to begin my statement with an analysis of the previousyears performance.
I will take the opportunity to address the shareholders apprehension about our capacityexpansion encapsulated in a single question: where will Nandan Denim market theincremental output?
This question is relevant and timely. According to media reports India nurses excessdenim capacity and needs to export to protect domestic realisations.
However this reality is true only for the short-term.
If one takes a three to five year horizon we foresee industry realities transformingfrom surplus to shortage.
The Indian denim market is growing annually at about ~18% against the global average of3-5%. Assuming that this growth rate continues India would need 2000 mn metres of denimfabric to feed its rising fabric appetite.
At Nandan Denim we believe there are a number of factors promising 18% annual growthin the domestic denim market.
India suffers from the lowest per capita denim jeans consumption in the world - 0.3denim jeans pair - even as Chinas stands at 2 and US and UK at 8 and 9 respectively.This under-penetration is on account of a mere 7% of Indias population driving 49%of the countrys jeans consumption and nearly 85% of the countrys consumptionbeing 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 below25 years and 65% below 35 years. The aspirational youth (15-29 year olds) with risingspending power account for 26% of the consuming population. By 2020 it is estimated thatthe average age in the country will be 29 an attractive average of young earners andconsumers desiring to try out the new.
Urbanisation: About 377 million in Indias population of 1.27 billion areurban. With more than 10 million people migrating to cities and towns every year thecountrys urban population is expected to reach about 600 million by 2031.
Smart Cities: The Central Government has selected 20 cities to launch itslarge-scale urban makeover plan. It proposes to invest C50802 crore on these cities inthe 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 10years. Besides by 2020 India could have 116 million workers in the work-starting agebracket of 20-24 years (China 94 million).
Working women: The number of women joining Indias workforce is increasing.Indias government is preparing to extend mandatory paid maternity leave tosix-and-a-half months -- among the longest such periods in the world. This could add toIndias working women population and in turn add 200 bps to Indias GDPaccording to the Organisation for Economic Cooperation & Development.
Earnings: Indias per capita income has increased from C71050 in FY13to C93231 in FY16 and could cross C100000 in FY17 leading to an increase indiscretionary spending.
Reach: The e-commerce revolution has extended fashion awareness and apparelavailability to Tier II and III cities.
During the past 12 to 18 months there has been a decline in the production of denimfabrics in US and China resulting in accelerated denim manufacturing opportunities: from35% of Indias total textile exports to 45% by 2020.
At Nandan Denim we have drawn out a two-pronged strategy.
Streamline operations for maximising asset utilisation and optimising costs
Enhance knowledge on the fashionability of denim (value-added)
Enhance infrastructure and product development capabilities customised aroundselect geographies and preferences
Build expertise and capabilities to maximise value-added production
Deepen global presence in existing and high-growth geographies
Strengthen customer loyalty
The big message I would like to leave with shareholders is that Nandan Denim is at aninflection point where an interesting volume-value play will strengthen growth andprofitability enhancing shareholder value.
On behalf of the Board of the Company I would like to express gratitude to ourstakeholders customers and employees for their unstinted support in growing our respectand performance.