You are here » Home » Companies » Company Overview » Aditya Birla Fashion & Retail Ltd

Aditya Birla Fashion & Retail Ltd.

BSE: 535755 Sector: Industrials
NSE: ABFRL ISIN Code: INE647O01011
BSE 00:00 | 10 Aug 277.05 0.75
(0.27%)
OPEN

276.70

HIGH

283.60

LOW

276.25

NSE 00:00 | 10 Aug 277.20 1.05
(0.38%)
OPEN

278.65

HIGH

283.80

LOW

276.15

OPEN 276.70
PREVIOUS CLOSE 276.30
VOLUME 354213
52-Week high 321.95
52-Week low 189.50
P/E 68.75
Mkt Cap.(Rs cr) 25,996
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 276.70
CLOSE 276.30
VOLUME 354213
52-Week high 321.95
52-Week low 189.50
P/E 68.75
Mkt Cap.(Rs cr) 25,996
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Aditya Birla Fashion & Retail Ltd. (ABFRL) - Chairman Speech

Company chairman speech

Dear Shareholder

The COVID-19 pandemic has touched every aspect of our lives across the world. It hasaltered mindsets perceptions and strategies for businesses and beyond. If there is oneabiding lesson it is that sustainable growth and development involves holistic nurturingof human natural and financial capital. 2020 is a year that will only gain insignificancewhen viewed through the perspective lens of time.

The Global Economy

The world has been fighting the COVID-19 pandemic for more than a year now and thestruggle has had deleterious economic effects. In 2020 the global economy contracted by3.3% the largest contraction on record at least since World War II. Much of it wasconcentrated in the first half of our fiscal year FY21 as several countries enforcedstrict lockdowns. Economies bounced back – albeit at differentiated speeds – insubsequent quarters on the back of large fiscal stimulus packages especially in thedeveloped countries restocking demand after dilution of lockdowns and improvedconfidence levels following the start of vaccination programmes. As per the recentforecasts from International Monetary Fund (IMF) the US and China are expected to recorda strong recovery in 2021 resulting in a

As per the recent forecasts from International Monetary Fund (IMF) the US and Chinaare expected to record a strong recovery in 2021 resulting in a net positive expansion oftheir economies over the 2019 levels. These two engines of growth are expected to boostdemand for exports from other countries. Even the other two large economies the EU andJapan are expected to expand. net positive expansion of their economies over the 2019levels. These two engines of growth are expected to boost demand for exports from othercountries. Even the other two large economies the EU and Japan are expected toexpand.

In response to the pandemic central banks resorted to strongly supportive monetarypolicies in most developed economies causing interest rates to go down to record lows. Atthe same time another consequence of this policy has been a surfeit of liquidity. Thathas led to a strong rally in prices of many industrial commodities which has also beensupported by the evolving economic recovery stimulus-related demand expectations andcertain supply-side disruptions. This has caused inflationary pressures on the costdynamic of several manufacturing industries. The latest IMF forecast suggests a strong 6%growth in global GDP in 2021. But the occurrence of second and third waves of COVID indifferent parts of the world and reports of virus mutations have created downside risks tothe outlook of a strong growth rebound. Recovery remains uneven and uncertain with theextent of fiscal support and level of vaccination being key differentiators of theshort-term economic outlook across countries.

Indian Economy

Indian economy which was firmly on the path of recovery in the second half of FY21was hit by a rather unexpectedly virulent second wave of COVID-19. That caused a severestrain on healthcare facilities in many parts of the country leading to localizedlockdowns and a fall in mobility to levels seen a year ago. This may lead to somereassessment of growth estimates for FY22.

As a silver lining disruptions to production and supply chains have been far lesssevere during the second wave than during the first wave. Vaccinations are picking uppace which would support faster normalization of mobility levels and of related economicactivities. Continued accommodative monetary policy of the RBI and the expected increasein capex from the Government are factors that will support growth recovery. In additionglobal growth prospects provide us with exports as an additional strong driver of growth.

The longer-term prospects for the Indian economy continue to be robust. Variousinitiatives including privatization of public sector enterprises monetization of assetsimplementation of National Infrastructure Pipeline targeted investment incentives throughthe Production-Linked Incentives Scheme and the new Labour Code are likely to spur avirtuous cycle of investments and growth in the medium-term.

ABG in Perspective

Like for many other organizations the COVID crisis brought out challenges of manyforms. Economic impact and business disruptions apart many members of our extended family– our employees and their near ones our value chain partners our neighbourhoods– faced health emergencies. The pandemic also caused deep psychological scars aspeople had to adjust to new ways of living and working. Notwithstanding these challengesour employees have displayed the highest possible resilience in coping with personalconcerns and yet staying focused on the customers and the business. Our business resultsconvey only a small part of the story of our employee courage compassion communityspirit and cultural strength.

As the lockdowns took a firm grip on people's lives and constraints mounted in theearly part of the financial year our leadership teams rose to the occasion with robustplanning and continuous communication with people

Notwithstanding these challenges our employees have displayed the highest possibleresilience in coping with personal concerns and yet staying focused on the customers andthe business. Our business results convey only a small part of the story of our employeecourage compassion community spirit and cultural strength.

Workplace health hygiene and COVID-appropriate behaviour remained the focus of ourmanagers at all levels helping the organization to stay ever vigilant. ‘Test Treatand Trace' was the mantra of protection and well-being followed scrupulously.

at all levels through the organization. Personally it was energizing for me to engageat scale with employees globally through a series of digital town halls that instilledconfidence in employees and reinforced the power of ‘One ABG'. The ‘RespondRecover and Re-imagine' framework underpinned several new initiatives. These includedclose coordination among HR teams across the Group units to respond to local-levelchallenges by leveraging the organizational resources and a thrust on disseminatingrelevant information through all digital channels about the resources lined up to help theextended ABG family deal with the emergencies.

COVID warriors were trained and voluntary networks were formed to assist our employeesand their families in need. Preferential tie-ups with local hospitals and a centralcoordination centre with an external party were set up to provide special assistance toour employees through Doctors' network telemedicine and other COVID related Healthassistance. Workplace health hygiene and COVID-appropriate behaviour remained the focusof our managers at all levels helping the organization to stay ever vigilant. ‘TestTreat and Trace' was the mantra of protection and well-being followed scrupulously. Apartfrom focusing on health emergencies initiatives for mental agility and continuouslearning were taken to maintain organizational morale. A learning programme christened as‘Chairman's Invitation Series' was curated to bring the best insights on a changingworld from the world's leading thought leaders. There was an increased thrust on onlineeducation recognition and knowledge sharing sessions.

These well-rounded initiatives on the people front also helped our Business performanceto bounce back strongly. The focus on customers and costs remained undiminished though theyear. Critical business processes such as new line commissioning new product launchesnew system and technology implementation- all happened seamlessly and presented a uniquehuman story of innovation and fortitude bringing alive the values of commitment andpassion. People learnt new skills and new behaviour at work while not being at office orat the workplace as one knows. People engagement team trust and Group values proved to bethe energy and the glue for our performance.

In the spirit of not letting a crisis go to waste our HR Teams globally collaboratedto create a long-term HR Strategy for the Group and individual businesses. This wasachieved even while working remotely; 150 of the HR leaders came together digitally over afour-month period to craft a coherent HR strategy to reflect both

Group aspirations and the business needs. Premised on creating an Avant-Garde HRstrategy the work focused on employee experience and business productivity in a balancedmix with growth technology and talent as other critical pillars. This HR strategy isunder dissemination to various stakeholders and an annual action agenda is being rolledout at all levels. This has been a signature example of collaboration thought leadershipand determined action – ingredients that usually make up most successfulorganizations.

Sustainable Focus

The experience of the past year reinforces the criticality and importance ofsustainable businesses. At Aditya Birla Group sustainable business model needs to havethree pillars – responsible stewardship stakeholder engagement and future proofing.We use four dimensions of Business sector Geography of operation Value chain and Timehorizons to identify issues that are material for the sustainability of our businesses;and then create approaches to balance risks and opportunities for all

Critical business processes such as new line commissioning new product launches newsystem and technology implementation- all happened seamlessly and presented a unique humanstory of innovation and fortitude bringing alive the values of commitment and passion.

The reported full-year revenue of the Company for FY21 stood at Rs.5181 Crorewith a 60% recovery vs last year reported revenue of Rs.8743 Crore. The Companyrecorded an EBITDA margin of 12.9% despite the continuing headwinds due to the pandemic. thosematerial issues. For example on environment energy conservation initiatives help us tomitigate risks while solar energy and climate-resilient products help us to pursueopportunities. Since transparency is fundamental to our approach on Sustainability mostof the ABG companies have consciously begun their journey to ‘mainstream' ESGreporting.

Your Company's Performance

Your Company is India's leading branded fashion player with a portfolio of some of themost aspirational brands of the country. Spanning retail space of 8.4 million sq. ft. itis India's first billion-dollar pure-play fashion powerhouse with an elegant bouquet ofleading fashion brands and retail formats established for over 25 years. With its vastnetwork spanning 850+ cities in India the Company has built a strong distributionserving the country's large and fast-growing brand-conscious consumers.

Globally the fashion retail industry was among the most severely impacted sectors bythe pandemic and the subsequent lockdowns. Your Company was also affected by the demandcompression and supply challenges during the period.

However the Company used these conditions to improve its overall competitive positionin the market. This was done by driving comprehensive cost reductions aligning theproduct mix with changing consumer needs and accelerating the digital transformationjourney. The reported full-year revenue of the Company for FY21 stood at Rs.5181 Crorewith a 60% recovery vs last year reported revenue of Rs.8743 Crore. The Company recordedan EBITDA margin of 12.9% despite the continuing headwinds due to the pandemic. This wasachieved by focused efforts towards cost reduction to the tune of

Rs.1200 Crore over last year.

Last year your Company also strengthened its balance sheet by infusing equity througha Rights Issue and a strategic minority investment. These steps to fortify the balancesheet will enable the Company to stay lean and agile and yet make swift leaps for growthon the other side of this pandemic.

As the 1st wave of the pandemic brought the country to a grinding halt giventhe nationwide lockdown sales got severely impacted due to the shutdown of stores.

The Company utilized this time to reskill its staff and collaborate with governmentinstitutions to manufacture PPEs and masks for frontline COVID warriors. When the countrybegan to gradually unlock during the second quarter our stores ensured global safetystandards to enable safe shopping for our consumers.

Your Company refreshed its product portfolio quickly to meet the changing consumerrequirements during the pandemic. The strong recovery trajectory recorded by the Companyin the second half of the year was fuelled by increased share of product categories suchas casual wear active wear athleisure wear and loungewear.

In line with changing consumer affinity e-commerce your Company focused onstrengthening the e-commerce play of its brands by building improved brand websites forsuperior consumer experience complementing its offline strategy in retail.

Your Company accelerated Omni channel rollout to let its consumers shop virtually andbe served through nearby stores by connecting the inventory of more than

1000 stores to its e-commerce platform. The Company's own E-commerce channel postedstrong growth with the category growing almost three folds over previous years.and comfort with

Your Company accelerated Omni channel rollout to let its consumers shop virtually andbe served through nearby stores by connecting the inventory of more than 1000 stores toits e-commerce platform.

In FY21 ABFRL further enriched its portfolio with new partnerships with two of India'smost iconic designers Sabyasachi Mukherjee and Tarun Tahiliani.

Your Company also accelerated the digitization of its internal processes across designmerchandising and marketing. It had initiated a new operating model in its design supplychain and go-to-market strategies to design and offer products 12 times a year instead ofthe industry norm of 2 times through a proprietary digital platform.

This has made the business more agile and flexible which has been a source of strengthin the current uncertain market conditions.

The pandemic did not deter our physical network expansion plan as we still see apparelas a highly underpenetrated category in India. Your Company also significantly acceleratedits play in the ethnic segment in line with its strategy to build a strong presenceacross all meaningfully large segments of the apparel fashion market. The Company enteredthis segment in FY20 with the acquisition of Jaypore a premium craft-based artisanalbrand and through an investment in Shantanu & Nikhil one of India's leadingdesigner-duo with a distinct play in the occasion wear segment. In FY21 ABFRL furtherenriched its portfolio with new partnerships with two of India's most iconic designersSabyasachi Mukherjee and Tarun Tahiliani.

Outlook

The next fiscal is going to be a race to normalcy for the industry with re-invigoratedmarket sentiments. We are looking at the new fiscal with a cautious optimism aroundmarkets and consumer preferences. The Indian economy is headed towards a steady recoveryglimpses of which we could see during the festive season of FY21.

As vaccination drives progress throughout the country we expect consumers to get backto shopping with a renewed optimism. As mobility picks up the demand for categories likeformals occasion wear festive wear and accessories will recover once again. With adigitally and structurally transformed business your Company is well poised to capturethe post-pandemic opportunity.

ABFRL's capital structure has undergone a significant change and the balance sheet hasbeen further strengthened. This should fortify the business from short term disruptions.A leaner firm with a diverse and well-executed portfolio play will enable ABFRL toposition itself as a leader across all fashion and lifestyle segments ranging from valueretail premium brands to luxury.

Conclusion

The year-long response to the pandemic across the globe exhibited all that is nobleand uplifting in the human spirit.

A spirit that was also in display in your Company's actions and performance during theyear.

Through this pandemic your Company's people and systems have been battle tested andeven better prepared to face any competitive challenge or serious external disruption. Ithas strengthened the bonds within opened better vistas of co-operation and convinced ourstakeholders that our people deliver – no matter what! That is our best assurance ofsustainability and continued collective prosperity.

Yours sincerely

Kumar Mangalam Birla

Chairman

.