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Aditya Birla Fashion & Retail Ltd.

BSE: 535755 Sector: Industrials
NSE: ABFRL ISIN Code: INE647O01011
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Aditya Birla Fashion & Retail Ltd. (ABFRL) - Director Report

Company director report

(INCLUDING MANAGEMENT DISCUSSION AND ANALYSIS)

Dear Members

Your Company's directors hereby present the Thirteenth Annual Report ofthe Company together with the audited financial statements of the Company for thefinancial year ended March 31 2020 ("year under review/FY2019-20").

MANAGEMENT DISCUSSION AND ANALYSIS

Overview

According to International Monetary Fund (IMF) the global economyslowed down from its forecasted growth rate of 3.3% to a real Gross Domestic Product (GDP)growth rate of 2.3% in 2019. This poor performance over the past year can be attributed toprolonged trade disputes and wide-ranging policy uncertainties causing significantdisruptions in international supply chains.

Outlook: Global economy

The global economic outlook remained cautious through most of theprevious year. While the IMF originally projected the global GDP to rise to 3.6% in 2020the estimates are being revised downward due to the near-term economic impact of theCOVID-19 pandemic. The latest IMF projections hint that the global economy will contractsharply by 3% in 2020. In a baseline scenario - which assumes that the crisis fades in thesecond half of 2020 - the global economy is estimated to grow by 5.4% in 2021 as economicactivity normalizes backed by policy support.

Outlook: Indian economy

While the Indian economy registered a slowdown in 2019-20 with GDPgrowth at 4.4% (based on ICRA ratings) falling from 6.8% in 2018-19 the growth remainedin the highest decile (Figure 1) among Emerging Market and Developing Economies (EMDEs).The stress on the financial sector and weak rural demand are some of the contributingfactors for this sluggish growth.

The government had taken various measures to revamp the financialsector address the Non-Banking Financial Companies (NBFCs) crisis speed up theresolution process under Insolvency and Bankruptcy Code (IBC) and reduce stress on thereal-estate sector. Additionally the Indian government had cut the corporate tax rate toboost investments and spur growth in the economy.

In response to the COVID-19 pandemic the Reserve Bank of India (RBI)has undertaken liquidity support measures and cut the key interest rates sharply. The RBIhas cut the repo-rate by 110 basis points since April 2019 to ease credit flow in theeconomy. The government further announced a fiscal package of ' 20 lakh crore which is10% of the country's GDP. The package called "Self Reliant India package" wasstructured around embarking on a path

(includes Management Discussion ana Analysis)

to become self-sufficient. The sought to address issues aroundliquidity in the market with focus on the cottage industries and the MSME sector amongstothers.

Potential opportunity for India

Despite economic challenges India's long-term growth story remainsintact. In a baseline scenario India's GDP is expected to reach US$ 5.6 trillion by 2034(Figure 2) and achieve upper-middle income status on the back of digitizationglobalization favorable demographics and reforms.

India continues to be a favorite destination for foreign investment andthe biggest contributor to global economic growth.

Industry Overview

Global apparel market

Global fashion markets are projected to contribute about 2.3% of theworld GDP with the largest share coming from matured markets in developed countries.However as economic growth shifts from the west to developing nations the apparelindustry too is expected to see a dramatic shift in demand patterns.

Emerging markets such as India and China will soon account for thelion's share of the global demand for fashion products. Given the low penetration level oforganized retail and online channels and backed by favorable factors such as a youngdemographic with a large population in the working age these markets are bound to grow atmore than double the 5% growth rate projected for global markets.

On the other hand developed markets have shown maturedcharacteristics which is reflected in their saturated growth rates. Markets in the UnitedStates (US) Europe and other developed countries have already seen deep penetration oforganized retail and branded apparel. Online channels too have made significant inroadsinto these markets and have challenged players to continuously innovate to stay relevant.

Innovation will play a significant role in delivering short-termsustainability targets and reimagining economic models for fashion companies forlonger-term transformation. While 2020 is not expected to be an easy year global fashioncompanies would be required to transform their value chain on multiple fronts whilemitigating risks and managing uncertainties.

Global consumer trends

Consumers across the globe have changing expectations on values frombrands and products. Also their ways of engagements with brands are changing rapidly.Meaningful engagements in the consumer journey are increasingly moving to a combination ofphysical and digital world as more consumers enjoy seamlessness offered by omnichannelretail.

The consumer today is also becoming increasingly sensitive about theenvironmental impact of production processes and prefers sustainably produced products.The consumer today wants to associate with brands that are committed to sustainableprocesses across its supply chain - right from sourcing to packaging of the final product.

Also there is an increasing set of consumers who prefer highlyfunctional products wherein it is possible for them to derive greater utility.

Going forward global fashion players will have to significantlyreinvent themselves by transitioning towards a digital-driven ecosystem and reshape theirvalue chain on levers of sustainability to remain relevant in a fiercely competitivemarket.

Indian market

The Indian apparel industry accounts for approximately 4% of the globalmarket. The apparel industry is one of the largest and the most critical sectors for theIndian economy in terms of output foreign exchange earnings and employment. The industrycontributes approximately 7% to industrial production in value terms 2% to the GDP and15% to the country's export earnings. It presents significant employment opportunitieswith an estimated 4.5 Crore in direct labor workforce (~9% of the total Indian workforce)and 6 Crore workforce employed in allied sectors (~12% of the total Indian workforce).

While the Indian apparel sector is expected to grow at a Compoundannual growth rate (CAGR) of over 10% in the coming years the branded apparel sector willwitness a faster growth. Favourable demographics resulting in a substantial rise inworking age population with higher income and a younger population which is inclined toadopting new trends will be some of the key drivers accelerating the adoption of brandedapparel in India. The branded apparel sector is expected to witness increased penetrationfrom the current levels at 48% (FY 2020) to a substantial share of 56% by 2025. In thesame period the share of organized apparel too will rise to 40% (Figure 3).

Figure 3: Rise of branded Indian apparel and Organized Apparel Retailas a % of Apparel Market

Ratio of contribution for Men's wear: Women's wear: Kids wear stands at41:38:21 for the apparel industry whereas globally the share of women's wear is largerwhen compared to men's wear making it a growth opportunity. The innerwear market in Indiahad a market size of USD 3.5 billion as of 2016 which is expected to grow at 11% CAGR toUSD 11.5 billion by 2026. The premium branded innerwear market is currentlyunderpenetrated in India and offers significant opportunity for growth.

Domestic consumption share favors discretionary spends includingapparel industry

India's domestic consumption share (measured as Private FinalConsumption Expenditure - PFCE) to its GDP was 59% in 2018. In comparison China'sdomestic consumption share to its GDP was 39% in the same year. High share of privateconsumption in the GDP not only insulates India from the vagaries of global economy but italso implies that a sustainable high economic growth in India directly translates into asustained consumer demand for merchandise and services.

In the long-term as more people are expected to move beyond sustenanceliving with rising income levels enabled favorably by demographic advantages India'shousehold consumption expenditure will continue to get altered in favor of discretionarypurchases. Therefore categories such as apparel jewelry processed foods and consumerelectronics are poised to gain a share from this shift.

Indian apparel industry continues to present an exciting opportunity

While the global apparel market is dealing with some pressures Indiahas become a focal point for the fashion industry as its manufacturing sector growsstronger and the middle-class consumer base witnesses a rise in disposable income (Figure4). These together with strong economic fundamentals and increasing tech-savviness makeIndia a lucrative market for the apparel industry. India also continues to present anexciting opportunity particularly for price-competitive players.

Emerging as one of the fastest-growing apparel markets in the worldIndia is set to become a USD 107 billion apparel market by 2025 growing at a CAGR of 10%.This growth is expected to be driven by factors such as increase in purchasing powerresulting in higher primary discretionary spends better access and availability ofproducts deeper brand consciousness increasing urbanization and improved digitization.The branded apparel market is expected to grow at a CAGR of 12-14% during the same period.

Approximately 78% of the population is in the working-age group ofbelow 45 years. The median age in the country is projected to rise from 27 years in 2015to 30 years in 2025 which makes the Indian market attractive from a consumption point ofview.

On an average gross national savings in India constitutes 30% and moreof the GDP (Figure 5) which supports the overall economy even during periods ofinactivity.

Rapid urbanization in tier 2 and tier 3 cities are opening newopportunities for businesses and influencing the traction for organized retail in thecountry. This growth is driven by a rise in average consumption per household which hasincreased by 3.5x in the last decade and is expected to reach ' 335 Lakh Crore by 2028.Internet

penetration in India grew from 4% to 34% between 2007 and 2017. InSeptember 2018 it stood at 88% and 22% in the urban and rural areas respectively.However it is still low and bound to rise due to the proliferation of smartphones and theadvent of 4G and 5G technologies.

Key trends in Indian apparel

Emphasis on fast fashion/private labels

Both online and offline fashion players are increasing their focus onbuilding private labels/in-house brands due to inherent advantages such as lowerconcept-to-customer time faster execution vis-a-vis dealing with third-party brandsbetter control over quality and pricing improved margins and differentiated andexclusive offerings.

Women and kids' fashion as growth drivers

The organized retail market for women and kids' fashion is expected togrow at a CAGR of 32% and 30% respectively during 2017-20. Growing financial independenceof women is driving growth in categories related to fashion beauty and kids offeringpromising segments for Retailers to pursue.

Value fashion - gaining traction

Value fashion is a promising segment in fashion retail with thepossibility of appealing to a wider customer base and reaching more geographies. Popularand mass-priced products constitute over 75% of the total fashion market in India.

Enriching customer experience through visual merchandising

Customer experience in fashion retail is driven by exciting windowdisplays in-store ambiance coordinated product displays lighting music andcommunication. Growing awareness coupled with the entry of international players in theindustry is making visual merchandising as an integral proposition in retail. Retailersare leveraging technologies such as augmented reality to increase footfalls and engagementwithin stores.

E-commerce

The Indian e-commerce market penetration is expected to increase astotal gross merchandise value is expected to grow from ' 1.3 Lakh Crore in 2018 to ' 6.5Lakh Crore by 2025. This will be driven by a wider assortment and convenience. E-commerceon the other hand is moving towards Artificial Intelligence (Al)-based solutions tocater to customized fashion solutions.

Rising exports

India's fashion industry has a well-established supply model thatpropels the growth of this sector particularly in terms of exports. Sourcing from Indiais also expected to rise given its abundant raw material supply and lower average laborcost over other comparable economies.

Business overview

Your Company is India's largest pure-play fashion and lifestyle entitywith an elegant bouquet of leading fashion brands and retail formats.

Lifestyle brands

The lifestyle brands reported revenue of ' 4626 Crore during the yearrecording a growth of 7% over the previous year. The growth is fueled by new storeadditions growth in e-commerce channels product innovation and expansion in newcategories. Lifestyle brands recorded a like-to-like (LTL) growth of 4.5% for the fullyear. The Earnings before interest tax depreciation and amortization (EBITDA) howeverdropped from ' 519 Crore to ' 456 Crore in the current financial year.

Lifestyle brands business posted revenue growth of 12% for the firstthree quarters of the financial year with EBITDA margin of 11% (against the full yearEBITDA margin of 9.9%) and was expected to carry this momentum through the remainder ofthe year. However the sudden drop in sales due to the pandemic in the month of March 2020reflected in the last quarter and subsequently in the full year performance of thebusiness.

Table: Overview of Key performance indicators - Lifestyle brands

Lifestyle brands FY16 FY17 FY18 FY19 FY20
Walk-ins (Crores) 0.83 0.79 0.82 0.79 0.70
% growth -12% -11% -4% -5% -8%
Conversion 44% 44% 46% 50% 55%
Average selling price (ASP) 1582 1639 1747 1714 1626
Average bill value (ABV) 3532 3701 4211 4256 4072
Items per bill 2.2 2.3 2.4 2.5 2.5
LTL volume growth -4% -7% 8% 4% 3%
LTL ASP growth 4% 2% 0% 1% 1%
LTL value growth 0% -5.7% 8.6% 5.3% 4.5%

Your Company's lifestyle brands business houses 4 of India's iconicapparel brands addressing diverse customer needs in a unique way:

• Louis Philippe: To inspire the quest of excellence

• Van Heusen: To make professionals fashionable and trendy

• Allen Solly: To encourage unconventional thinking in yourworkplace

• Peter England: To bring alive authenticity and trust in ourrelationships

Louis Philippe Van Heusen Allen Solly and Peter England continued todominate in their respective segments. The Business opened a record number of new storeslast year adding over 400 stores to their network. The brands also expanded their loyalcustomer base to include over 18 million satisfied customers gaining their trust byproviding high-quality products and superb retail experience.

A first in the segment the business continued to be an 'innovationleader' by moving to a 12-season design to market cycle ensuring greater freshness in thebrand merchandise. This new model allows greater agility in the business' supply chainenabling it to respond faster to dynamic customer preferences. The business continued tofocus on building digital capabilities enhance innovation and respond swiftly to changingcustomer needs.

The new growth formats identified by the business that is the women'sand kids wear businesses and Peter England small town format made a significant mark onthe business. The women's and kids wear businesses doubled through the course of lastyear proving to be definite game changers in their respective segments. The business alsosuccessfully piloted Peter England's small town format adding more than 200 stores in itsfirst year of operations. This brand format further leveraged the Company's strongdistribution network into untapped markets.

Pantaloons

Pantaloons continued its remarkable turnaround journey through most ofthe year crossing many milestones in the process. During the first nine months thebusiness witnessed revenue and EBITDA growth of 13% and 19% respectively over the previousyear. The EBITDA margins increased by 50 basis points to 9% as compared to 8.5% last year.

It must be noted that except for March 2020 Pantaloons had a nearperfect FY20. The brand further established its position as a leading player in the valuefashion segment. The sustained focus on product innovation and brand revitalizationallowed the brand to gain traction with its customers. The targeted marketing campaignsrevitalized the brand's image increasing its relevance for its target consumers. Theformat grew its operational network to 342 stores picking up the pace of its retailexpansion strategy. This year Pantaloons forayed into new brands and categories such as'Home' and 'Sarees'.

The business continued on its path to improved profitability bysignificantly investing in product innovation which was substantiated by its improvedsell-through and commendable EOSS performance. For the financial year 2020 the businessreported a revenue growth of 10% at ' 3514 Crore with EBITDA dropping to ' 222 Crore(vis-a-vis ' 231 Crore in FY19) due to the sharp decline in sales in the month of March2020.

Table: Overview of Key performance indicators - Pantaloons

Pantaloons FY16 FY17 FY18 FY19 FY20
Walk-ins (Crores) 4.18 4.68 4.61 7.15 6.97
% growth 5% 0% -9% 5% -2.6%
Conversion 22% 23% 23% 24% 25%
ASP 554 525 666 631 655
ABV 1820 1725 1799 1833 1993
Items per bill 3.3 3.3 2.7 2.9 3.0
LTL volume growth 9% 7% -3% 18% -2%
LTL ASP growth -3% -4% 1% -3% 5%
LTL value growth 5.9% 3.3% -2.6% 14.2% 2.7%

Fast fashion

In line with the strategy outlined in the previous year the businesssuccessfully transitioned PEOPLE into the Pantaloons format as a private label brand.Given the synergies in the brand positioning of the two labels PEOPLE has seen favorableinitial success in the Pantaloons stores appealing to the young customer base of thelatter.

Forever 21 retained profitability enhancement as its primary focus forFY20 and in this regard continued its efforts to optimize its business model. While theyear saw its global parent entity face challenges though the Indian business workedclosely with the new parent entity for designing a new operating model that would improveprofitability in the future.

Innerwear Athleisure and Active wear

The Innerwear Athleisure and Active wear categories are the mostpromising categories in the Company's portfolio and will continue to be a key strategicarea of investment for the organization. Business has grown by 40% last year and widenedits distribution to sell across 20000 outlets. Market leading product innovations in bothmen's and women's segment has resulted in greater acceptance among consumers.

Your Company's management has made strategic investments in the pastfew years to create a separate strategic business unit with an independent team to manageoperations. While these investments have impacted profitability in the initial years itlaid a strong foundation for the business. As the business grows it is strategicallypoised to deliver improved profitability at scale.

Global brands

The Global brands portfolio includes 'The Collective' one of India'slargest multi-brand retailer of luxury brands and select mono brands such as thesuper-premium brand Ralph Lauren casual denim led brand American Eagle and the iconicBritish brands Fred Perry Ted Baker and Hackett London. Your Company continues to focuson expanding its distribution footprint of these iconic brands by launching new stores inpremium markets across the country. American Eagle is on the path to become a formidableplayer in the denim category given its rising brand prominence and product excellence.

With the addition of these Global brands in its portfolio your Companywill continue its trajectory of building a strong-but-selective play in the emergingsuper-premium and bridge-to-luxury segments.

Ethnic wear

Ethnic wear is the largest segment in the Indian apparel segments andthe management of your Company had identified it as a key segment to include in ourportfolio of offerings. Addressing this point your Company entered the promising ethnicsegment through two strategic investments with Jaypore and Shantanu & Nikhil. Jayporeis an ethnic apparel and lifestyle retailer making its products available in domestic andinternational markets through its e-commerce channel. Shantanu & Nikhil are renownedcouturiers in the Indian ethnic space.

Moving forward your Company plans to meaningfully scale its play byexpanding these brands' network. Jaypore will be positioned as an omni-channel business byscaling up its offline presence through standalone stores in key markets. The designexpertise of Shantanu & Nikhil will be utilized to launch a high-fashion ethnic wearbrand to address the fast growing bridge-to-luxury segment with designer ready-to-wearofferings for both men and women.

Business strategy

Your Company will continue to build its leadership position throughinvestments in key strategic themes.

Building strong brands

To maintain its leadership position your Company will continue toinvest in building strong and vibrant brands that evolve with changing customer needs. Inthe current context consumers are likely to opt for trusted brands that ensure a smoothand safe experience on both channels online and offline. Your Company's consumercentricframework is based on continuous research big data analytics real-time feedback fromretail outlets and customer-loyalty programs. In the long run your Company stands tobenefit from nurturing these brands that have a high-recall value and enjoy the trust ofits customers.

Strengthening our portfolio

Over the past few years your Company has taken significant steps togrow its business by entering new business segments exploring new growth opportunitiesfor its existing core businesses and leveraging brand and product category extensions.Innovative strategies have kept these brands relevant with the evolving tastes of thecustomer. Your Company will continuously focus on organic growth of the core businessesimprove their profitability along the way and make strategic investments in maintainingthe iconic stature of its brands. Given the changing operating environment in 2020strengthening the Company's core propositions would become imperative going toward.

Building agile design and supply chain

Your Company works relentlessly to drive agility in the design andsupply chain functions. Its systems are now geared to function in the new normal smoothly.The radical shift from a 4-season cycle to a 12-season cycle helped your Company manageits inventory efficiently thereby bringing flexibility to its buying plans. This hasfurther facilitated the Company to address the newly sought out requirement of producingsafe cloth masks in a short turnaround time. Furthermore your Company re-engineered andre-skilled its workforce for manufacturing lifesaving Personal Protective Equipment(PPEs).

Reaching a wider customer base

Your Company has been growing rapidly through its multi-channeldistribution strategy and over last one year has consummated one of its largest-everstore expansion in the history of your Company. A significant part of this expansion wasinto tier-3 and tier-4 cities though Peter England's small town format. The favorableperformance of this format allowed the Company to open more than 200 stores in the firstyear thereby unlocking potential markets that were previously unpenetrated by brandedplayers.

With the expansion of retail opportunity across India your Companywill continue to explore new markets through its brick and mortar stores alongsidestrengthening its omni-channel play. Your Company believes that an extensive distributionnetwork across markets will help meet the growing demands for high-quality brandedapparel.

Your Company also views e-commerce as an increasingly relevant andsignificant channel a fact highlighted by its increasing contribution in the revenues.Your Company's lifestyle brands business recorded ' 364 Crore revenue from its e-commercechannel a growth of 18.7% over the previous year. Your Company's Pantaloons business hasgiven a big boost to its e-commerce capability by launching a revamped website. Thebusiness recorded sales of ' 38.20 Crore with a growth of 2.1% over the previous year.Your Company's other brands are also now planning to launch dedicated e-commerce websitesand apps to cater to their customer's demands.

Digital transformation

Digital transformation is significantly disrupting the fashion retailindustry globally. Closer home e-commerce players have rapidly grown over the last 5years thereby creating new business models. Several retailers and brands took significantsteps towards omni-channel play and increased their focus on brick and mortar storeswhile others ramped up their online presence. Domestic apparel players including yourCompany have partnered with various e-commerce marketplaces and are working on enablingdelivery from stores for orders received online. Given the strength of your Company'sbrands and the deep reach of its retail network across the country this is a significantopportunity for your Company to establish itself as a leading player in the e-commerce. Weare realigning our business model and processes in-line with changing consumer preferencesfor shopping and engagement to drive future growth and business value. We have severaldigital initiatives to focus on driving e-commerce customer experience and customerengagement.

Your Company has followed a brand-led e-commerce strategy that alignswith its offline business model builds on the strength of its brands and enhances them.The e-commerce stack includes web portals and mobile-sites for each brand and thecapability to integrate seamlessly with over 10 different marketplace partners. This hasbeen developed on a common technology platform that is robust flexible and integratedwith your Company's offline enterprise technology implemented in warehouses and storesenabling seamless omni-channel capabilities. This year your Company has launched severalbrands on multiple marketplace platforms and on-boarded inventory across all itswarehouses and majority of its stores to be available on its websites and marketplaces.Since over 80% of the Company's customers access its brands on mobile devices it hasinitiated mobile app development for key online brands. While the e-commerce functionalityis standard in the apps the Company is also introducing 'digital store' capabilitiesenabling customers to virtually shop in nearby stores and directly interact with storeassociates for planning visits scheduling pickups or alterations. This would also enable'endless aisle' capability for store visitors giving them access to the entire range ofmerchandise that may not be available in the store but can be sourced from warehouses orother stores. To achieve this your Company has added visual AI capabilities on e-commerceproperties to help consumers find similar or matching products and even build an entireensemble.

All the Company's brands have customer-loyalty programs and several ofthem such as the Pantaloons 'Green Card Program' are highly acclaimed in the Industry.These programs help the brand build a loyal customer base and provide them with theability to track customer shopping habits over the years. In the last 5 years yourCompany has rolled out an NPS (Net Promoter Score) program called 'Mission Happiness'across all its major brands which tracks customer satisfaction in stores and postpurchase experience. In the last financial year your Company also introduced a'Customer-360 Program' where a data warehouse has been set up for all customertransaction and interaction data for over 30 million customers across brands. Your Companyhas set up the machine learning capability to consume the customer behavior data and comeup with personalized recommendations at a customer-segment-of-one which can then be usedto run effective personalized campaigns. Your Company has also set up a multi-channelcampaign automation platform that enables communicating with customers on email SMS web/app notifications social media and WhatsApp so that customers can be engaged on theirmost preferred channels.

Your Company expects the digitally enabled hyper-local model to be thenext wave of innovation in fashion retail which it is well-placed to capitalize on withits strong brands loyal customer base and a nation-wide store network. Althoughdirect-to-consumer is the major part of the Company's business it also has a significantindirect model through the distributor-retailer network particularly in the Innerwearbusiness which is the fastest growing division in FY20. Your Company has recently rolledout a retailer mobile app and a WhatsApp service channel enabling it to directly connectwith our network of 20000+ retailers share product information market trends and bookorders for distributors. Your Company is also implementing a 'Distributor ManagementPlatform' to help distributors leverage technology for managing their businesses and a'Mobile-Enabled Salesforce Management Platform' to support sales staff in maximizing theirproductivity.

For the Lifestyle brands business your Company implemented a digitaltrade show platform in FY20 replacing seasonal tradeshows which have been the mainstayof the industry for connecting with the distributor and department store network eversince the Company started it over 20 years ago. This has helped the Company transform itsproduct development life cycle right from the design stage. It has implemented technologyto digitize fabric design and create styles using 3D visualization and rendering. Theapparel images are presented on a tablet app to distributors and department store buyersin a monthly booking cycle. This transformation has enabled the Company to move from a2-season-a-year product life cycle to a continuous product development life cycle whichwill result in quick response to fashion trends lower cost of sampling and fasterinventory turns. This initiative has been a game changer in the current situation whenholding physical tradeshows is not going to be possible for quite some time.

While the focus on digital is more on the front-end your Company hastaken several initiatives in streamlining its backend operations as well mainly byleveraging advanced analytics algorithms. Last year it rolled out a platform across allCompany businesses for automatically replenishing inventory from warehouses to stores.This was done by tracking rate-of-sale and inventory on a daily basis across the entirestore network and replenishing the right products for each store.

Your Company is developing a platform to predict success of fabric andstyles at the design stage based on past sales data and granular product attributeinformation. This will be supplemented with a consumer feedback module and will help inmaking products that are more likely to succeed. Your Company also plans to implement anadvanced analytics solution for pre-season merchandize and assortment planning and dynamicmarkdown management during season. These initiatives will enable in improving full pricesell through and margins at the stores by making the right product in right quantitiesand making them available at the right store and at the right time.

Impact of COVID-19

Economic outlook

The global economic outlook has changed dramatically over the past ofcouple of months of financial year 2019-2020 due to the spread of the COVID-19 pandemic.The pandemic has forced many countries to lock their economies down to control its spreadaffecting the global economy significantly. Although the global growth was estimated at3.3% for 2020 latest projections by the IMF have projected it to contract sharply by 3%in 2020.

The Indian economy like most other global economies is also likely tobear the brunt of the adverse impact of COVID-19. The recovery of the Indian economydepends on two major factors: the magnitude and speed at which COVID-19 spreads; and theduration of the pandemic within India and across the globe.

Your Company's response to the pandemic

Your Company's response has been principally focused on employee safetyand preserving its cash flow. The safety of its employees is the Company's first priorityand hence it was among the first few Corporates in the Retail space to shut its officesand factories as precautionary measures. On the cash front your Company has takencomplete cognizance of the situation and is monitoring its cash position almost on a dailybasis focusing on cash conservation and cost optimization.

To respond to the Country's sudden rise in PPEs and masks requirementfor medical professionals your Company modified its manufacturing operations byre-engineering machines and processes to develop these products. Your Company worked withstate governments in Karnataka and Odisha alongside other local authorities to recommenceoperations in 7 factories in Karnataka and Odisha during the lockdown period.

Business Impact of COVID-19

The COVID-19 pandemic has majorly impacted the overall business andconsumer sentiment in the country. With the implementation of lockdown the retailindustry has been greatly affected and there has been a massive dip in

sales in the short-term. For your Company too the sudden drop in salesin March 2020 significantly affected the Company's reported results given the high fixedcost structure the Company operates with.

The country-wide lockdown has also taken a toll on the supply chain ofthe Company. However as India comes out of this strict lockdown retailers have alreadyplanned some initiatives to restore the supply chain. In light of the supply and demandconstraints brands and retailers are working together design an integrated demand-supplyplanning framework. Given that customers are likely to switch to online shopping channelsin the short-term the scenario will lead to a quick growth in the adoption ofomni-channel strategy among many brick and mortar Retailers. Furthermore when the marketopens with new normal way of working Retailers are gearing up for a post-lockdownscenario by making store environment safe and hygienic for its customers.

Over the past months your Company has been implementing various stepsto mitigate the effect of the pandemic. Your Company's proactive adoption of digitaltechnologies has placed it at a competitive advantage by enabling continued operationsdespite the lockdown. Your Company continued to develop innovative products during theperiod and launched essentials such as face masks to meet the new customer demandsleveraging the support of its robust supply chain. The agility and robust planning of thesupply chain allowed the Company to quickly adapt production orders and helped reduce thefinished goods inventory. As your Company prepared to resume store operations postlockdown extensive measures were undertaken to ensure that its Retail Stores offered aneven safer shopping destination for the customers. Similar care was taken to ensure ahealthy environment at the Company's facilities for the employees to resume work.

In the post-COVID era where the customers are expected to seek moreconvenience and experience the rate of adoption of the omni-channel strategy among thelifestyle fashion players is expected to grow. Over time brands will move to thehyperlocal model for optimizing cost time inventory turns and logistics. Through theCompany's e-commerce partnerships and its own e-commerce channels it is fully prepared toplay well under these circumstances. While horizontal marketplaces will ensure immediateaccess and availability legacy Lifestyle brands will capitalize on their equity trustand salience built over the years. Your Company believes that consumers strongly attributetrust experience and service with organized formats especially with exclusive brandformats and large format. Hence these formats would not cede preference even inpost-COVID times as consumers are eager to re-engage with these formats.

Financial performance and analysis

Particulars

Standalone

Consolidated
Year Ended March 31 2020 Year Ended March 31 2020 (Comparable)* Year Ended March 31 2019 Year Ended March 31 2019
Revenue from Operations 8743 8743 8118 8788
EBITDA (1) (2) 1290 518 619 1277
Finance Costs (2) 423 212 187 425
Depreciation (2) 877 249 282 885
Profit/ (Loss) Before Tax (1) (2) (9) 57 149 (33)
Current Tax - - 22 0
Deferred Tax Assets/ (Liabilities) (6) (6) 194 (3)
Deferred Tax Assets/ (Liabilities) - One time (3) (130) (130) - (130)
Net Profit/ (Loss) After Tax (1) (2) (145) (79) 321 (165)

*Comparable refers to pre Ind AS 116 numbers.

Standalone performance

Particulars As at March 31 2020 As at March 31 2019
Net Fixed Assets (including CWIP) 738 718
Right-of-use assets 2174 -
Goodwill (4) 1860 1860
Deferred Tax Asset (3) (5) 195 263
Investments (6) 170 4
Net Working Capital (7) 1193 286
Capital Employed 6330 3132
Net Worth (5) 1086 1429
Debt (8) 2776 1703
Lease Liability 2467 -

Amounts as at March 31 2020 are not comparable due to impact of Ind AS116.

Notes:

(1) Includes other income of ' 65 Crore (Comparable: ' 52Crore) (Previous year: ' 65 Crore).

(2) Impact of Ind AS 116:

(A

Particulars Year Ended March 31 2020 Year Ended March 31 2020 Year Ended March 31 2020
(As Reported) (Comparable) Increase/ (Decrease)
Rent expense 487 1247 (760)
Finance costs 423 212 210
Depreciation and amortisation expense 877 249 628
Other income 65 52 13
Profit/ (loss) before tax (9) 57 (66)

(3) One-time impact of reversal of deferred tax assets of ' 130Crore as at March 31 2020 is on account of adoption of lower tax rate as permitted undersection 115BAA of Income Tax Act 1961 and also based on review of components of deferredtax assets/ liabilities leading to a reassessment of estimates compared to earlierperiods.

(4) As on March 31 2020 goodwill (after testing for impairment inaccordance with the Ind AS - 36 issued by the Institute of Chartered Accountants of India)stands at' 1860 Crore.

(5) Impact of Ind AS 116 on Net worth of '130 Crore (net ofstraight lining of lease rentals of ' 94 Crore and deferred tax of ' 70 Crore) asat April 1 2019.

(6) Investments include ' 166 Crore towards investments insubsidiaries.

(7) Net working Capital

Particulars As at March 31 2020 As at March 31 2019
Inventory 2349 1921
Trade Receivables 840 781
Cash and Bank Balances 265 57
Other Assets 1098 1016
Less: Trade Payables 2273 2397
Less: Other Liabilities 1086 1092
Net Working Capital 1193 286

• Lower sales than planned in the month of March-20 led toincrease in inventory.

• Higher cash reserves maintained for contingencies during COVID.

(8) Comprises of non-current borrowings current borrowings currentmaturities of long-term borrowings.

Revenue and Earnings before interest tax depreciation andamortization (EBITDA)

Your Company reported revenue growth of 8% at ' 8743 Crore during theyear as compared to ' 8118 Crore in the previous year. Comparable EBITDA for the Companyincluding other income has seen a negative growth from ' 619 Crore in FY19 to ' 518 Crorein FY20. The EBITDA margin of the Company shrunk by 170 basis points from 7.6% to 5.9%.

In line with the results reported by our individual businesses for thefirst nine months the Company as a whole posted a revenue growth of 12% and an EBITDAgrowth of 19% on account of overall improved performance across business segments. Undernormal circumstances our businesses were expected to end the year on a similar growthtrajectory.

Your Company has implemented Ind AS 116 - "Leases" whichbecame mandatory for reporting periods beginning on or after April 1 2019. Accordinglythe Company has applied the modified retrospective approach as a result of whichcomparative information are not required to be restated and the reported EBITDA for theyear ended March 31 2020 are not comparable with the previous years.

Segment performance: Madura Fashion and Lifestyle

Madura Fashion and Lifestyle (MFL) segment includes Lifestyle BrandsFast Fashion and other Businesses. MFL reported a revenue of ' 5434 Crore recordinggrowth of 8% over the previous year.

MFL is expanding its presence in the retail channel by opening newstores and ends the year with 2388 exclusive brand outlets ("EBOs") and 294value stores. MFL's share of revenue from retail channel increased to ~45% from ~43% inthe previous year.

Segment performance: Pantaloons

Pantaloons reported a revenue of ' 3514 Crore recording growth of 10%over the previous year. During the year it added 34 stores taking the total number ofstores to 342 spanning 4.4 million square feet. Pantaloons reaches out to large middleclass Indian households with its diversified offerings for men women and kids.

Finance cost

Finance cost for the year was ' 212 Crore on a comparable basisincreased from ' 187 Crore in the previous year in line with the increase in borrowingsof the Company. The average borrowing cost for the Company is at 7.5% as compared to 8.0%in the previous year. The reported finance cost of the Company is ' 423 Crore due to theimpact of Ind AS 116.

Depreciation

Depreciation during the year reduced from ' 282 Crore in the previousyear to ' 249 Crore on comparable basis. The reported depreciation of ' 877 Crore includesthe impact of Ind AS 116.

Dividend

In view of accumulated losses of previous years no amount is proposedto be transferred to reserves and the Directors have not recommended payment of anydividend for the year under review.

Borrowings

To ensure greater financial flexibility and an optimal financingstructure your Company at the Twelfth Annual General Meeting held on August 21 2019obtained approval of the shareholders by way of a special resolution to raise funds byissuance of non-convertible debentures for an amount of up to ' 1250 Crore on privateplacement basis within the overall borrowing limits of the Company as approved by theshareholders from time to time.

Consolidated performance

At consolidated level your Company reported a revenue of ' 8788 Croreand comparable EBITDA of ' 500 Crore with EBITDA margin at 5.7%. However the reportedEBITDA for the financial year stood at ' 1277 Crore.

Standalone Key financial ratios

Particulars As at March 31 2020 As at March 31 2019
Debtors Turnover Ratio 10.79 12.18
Inventory Turnover Ratio 4.09 4.49
Interest Coverage Ratio (1) 1.27 1.80
Current Ratio 0.73 0.83
Debt Equity Ratio (3) 2.31 1.15
EBITDA Margin (2) 14.8% 7.6%
Operating Profit Margin 4.7% 4.1%
Net Profit Margin (3) -1.7% 4.0%
Return on Net Worth (3) 38.1% 23.6%
Return on Average Capital Employed 8.7% 11.1%

The formulae used in the computation of the above ratios are asfollows:

Ratio Formula
Debtors Turnover Ratio Revenue from Operations / Average of opening and closing Trade Receivables
Inventory Turnover Ratio Revenue from Operations / Average of opening and closing Inventories
Interest Coverage Ratio Earnings Before Interest and Tax* / Finance Costs (Pre- Ind AS 116)
Current Ratio Current Assets / Current Liabilities
Debt Equity Ratio Debt** / Net Worth
EBITDA Margin EBITDA / Revenue from Operations
Operating Profit Margin Earnings Before Interest and Tax / Revenue from Operations
Net Profit Margin Profit After Tax / Revenue from Operations
Return on Net Worth Earnings Before Interest and Tax / Net Worth
Return on Average Capital Employed Earnings Before Interest and Tax / Average Capital Employed

* Earnings Before Interest and Tax = Net Profit/(Loss) After Tax + Tax+ Interest Expense (excludes Interest accounted as per Ind AS 116 and interest on otherthan Borrowings)

** Debt = Borrowings (excluding Lease Liabilities accounted as per IndAS 116) - Cash and Bank Balance (includes FD) - Liquid Investments

Details of significant changes in the key financial ratios: (i.e.change of 25% or more as compared to the immediately previous financial year)

(1) Interest Coverage Ratio - Ratio has worsened due to decline inprofitability on account of COVID-19.

(2) EBIDTA Margin - Ratio has improved on account of impact of Ind AS116 implementation due to which rent expenses has declined.

(3) Debt Equity Ratio Net Profit Margin and Return on Net Worth -Ratios have worsened due to decline in profitability on account of COVID-19 increase inborrowings and reversal of deferred tax assets due to onetime impact of income tax ratechange.

SWOT ANALYSIS Strengths

Home of iconic brands

Your Company is known for building India's iconic apparel brands. Thesebrands have achieved this status with customers by continuously innovating products thatare serviced through a large and robust distribution network.

This is further supported by world-class advertising campaigns thathelp customers resonate deeply with these brands. Your Company's brands are its strongestand most fundamental strategic assets which are constantly being transformed to evolvewith changing customer behaviors. This has further resulted in the brands expanding theirportfolio beyond their core segment.

As the world prepares for the new normal your Company's brands willplay an integral role in the lives of its customers. Consumers are more likely to interactwith brands that can address their need for protection and safety.

High on innovation

Product innovation is a game changer for the organization backed by astrong team. This innovation is being driven across design product development andsourcing verticals. Over the years your Company has made significant investments indesign and supply chain and was a leading player in the market to adopt substantialchanges in this regard. Your Company made a transformational change by moving from aconventional 4-season model to a 12-season model. These innovations are further aligned tothe Company's ideology of adopting global sustainability practices.

Wide distribution network

Your Company has one of the largest distribution networks of apparelbusiness in the country with over 2940 stores and over 31000 points of sale. YourCompany is making deep inroads in tier 3 and 4 markets with new strategies such as PeterEngland's small town format. This move offers a competitive advantage to the Company inunderpenetrated markets that holds a significant proportion of the country's wealth.

Talent driven organization

Your Company takes pride in its immense talent pool and believes inconstantly nurturing and building this talent which gives it a formidable competitiveedge. Building on the principles of a professional meritocratic and progressiveorganization the Company focusses on people development at the core of its businessstrategy.

Your Company echoes the values of the Aditya Birla Group and is keen onprotecting its people helping them tide through cyclical business changes. Theorganization has undertaken several programs to ensure the physical and mental well-beingof its employees believing that employee support would be fundamental in recovering fromany disruption.

Strong leadership and Corporate governance

The leadership team of the Company is proud to have some of finesttalent in the industry. Further most of this talent is home grown and has contributed tomany important milestones in the Company's journey of over two decades. Your Company'sboard of directors include prominent industry stalwarts with rich experience acrossdiverse consumer-facing Industries and multiple geographies.

Weaknesses

Change in shopping behavior

Your Company has built a strong formidable position for itself in thebrick and mortar retail space. While it has been making constant stride in the directionof digital adoption especially on the customer-facing end the digital channel stillcontributes to a small proportion of its overall sales. With e-commerce likely to play animportant in the times ahead as the customers may prefer a less physical shopping stylethe Company needs to continue taking significant strides towards increasing its businessthrough this channel.

Smaller presence in some important segments

Over the last few years the Indian apparel industry has witnessedrapid growth in the casual denim and women's wear segments. While the Company's brandshave a legacy of offering men's formal wear it has been able to make tremendous stridesin extending offerings within these brands to cover some of these opportunities. Thecasuals and denims offerings from brands as well as women's and kid's wear businesseshave received favorable response from the customers since their launch and are nowaccounting for a meaningful share of revenues. However to

build a strong and balanced portfolio that addresses these gaps and isaligned to the future configuration of the apparel market the Company will need to retainits focus on these segments and take strategic steps to enhance these segments.

Opportunities

Promising domestic market

The Indian apparel market still promises to be one of the fastestgrowing apparel markets in the world and is projected to grow at a CAGR of 10% to reachUSD 107 billion by 2025. This growth is expected to be driven by factors such as increasedpurchasing power driving growth in primary discretionary spend better access andavailability of products brand consciousness increasing urbanization and risingdigitization. Growing its significance within this market is the branded apparel segmentwhich is projected to grow at 13.4% during the same time period. Your Company with itsbouquet of Lifestyle brands cutting across various market segments and its expansiveretail network is well placed to leverage this opportunity.

As the market evolves it will see the emergence of new categorieswhich will rapidly gain prominence. Women's formal wear kids wear men's casual wear anddenims are some such market segments which have gained significance in the recent past.Your Company has made meaningful investments in these segments which has resulted in apromising response in the market. Similarly the Company continues to identify emergingtrends and make strategic investments to offer a comprehensive portfolio of brands to itscustomers.

Rising affluence and increasing global exposure have led to growth inthe premium international brands business in India some of which are being offered by theCompany as a part of strategic partnerships.

Digital-first industry approach

Your Company had identified digital transformation as one of its corestrategic areas a few years back and has tried to adopt technology into variousprocesses primarily aimed at enhancing the consumer shopping experience. While theCompany continues to build its omni-channel play capabilities it is also creating anengaged digital presence across all media channels which has become a primary source ofbrand discovery for customers.

In response to the current pandemic and the possible long lastingchange it may render on the future ways of buying the Company is working on ramping upits e-commerce play and is soon launching apps for all its brands apart from improvingthe experience of the brand websites. Additionally your Company is looking at adoptinginnovating technologies to enable digital trials of garments (to allow non-touch trials ofgarments) and a gamified shopping experience (to allow shoppers to experience the storeremotely leveraging AR technology).

Threats and risks

Impact of COVID 19 on the retail sector

The impact of COVID 19 on the fashion and retail sector in theshort-term is two-fold. Firstly restrictions on movement of people implemented to containthe spread of the infection impacts the sale of products. Secondly the economic pressurefelt as an aftermath to the pandemic may change the frequency of apparel purchase as itis more discretionary in nature.

As a result of the above factors sector is likely to witness liquidityissues resulting from servicing high-fixed costs under circumstances of potentiallyvolatile revenue for an uncertain period.

Increased value consciousness

Over the past years e-commerce has seen a significant impact inconsumer's expectations from brands. There has been a focus on seeking higher value moneyresulting in heavy discounting in the industry. Mega sales around festivals became acharacteristic of the market thereby shifting a large portion of sales towards theseevents stfling profit margins.

In the long-term increased discounting can pose a big risk in theapparel industry. Apparel players are now focusing on sharpening their core customerproposition with innovative products attractive pricing and delightful pre and postpurchase experience. These initiative will help consumers shift back to a full-price saleregime.

Commoditization of fashion

While the value fashion space has emerged as a new area of opportunityfor apparel players it is being rapidly swamped by new entrants in the market. The natureof this format however can commoditize fashion expectations for customers who areexperiencing quality retail for the first time. This can make it difficult for brands toconnect with such customers and build a long-term relationship.

Inadequate supply of quality retail space

Commercial real estate in India has seen a slowdown in the past fewyears. Lack of prime retail land and high- property rates in prime areas has furtherdiscouraged developers from investing in commercial spaces resulting in high rentals anduntenable economics for retailers.

Limited availability of talent

The apparel industry has been facing difficulty in attracting qualitytalent as the growth of e-commerce companies and advent of international players in Indiahas lured most talent away from conventional apparel players. The industry experiencesdemand for talent exceeding supply in critical areas such as analytical thinkingtechnical competency and leadership skills. The above two factors have made talentdevelopment and management an extremely crucial part of business strategy.

Outlook - The way forward

As per estimates the Indian economy is expected to be on its course tobe among the top three economies of the world. The economy is expected to show strongresilience to any disruptions in the long-term due to favorable factors such asdemographic advantage and high domestic consumption share which helps insulate the Indianeconomy from global disruptions.

In the near-term the policy environment is expected to be stable witha focus on reviving credit and investments. The government will continue its focus onenhancing ease of doing business infrastructure development and digital India programs.These investments will help the Economy to recover to past levels of growth. The improvingeconomic scenario is expected to translate into positive consumer sentiment. Key factorsdriving the India consumption story include a large proportion of young population risingurbanization growing affluence increasing discretionary spending and deeper penetrationof digital.

The management believes the new fiscal year will be full of challengesdue to uncertainties related to the pandemic. Your Company expects demand to graduallycome back to normalcy over the next few quarters. Immediate strategic imperatives will beto operate at heightened intensity on safety and hygiene optimize cost and cash flowsaccelerate digital and omni-channel outreach and stay watchful of attractive real estateopportunities. As the year progresses and things return to normal your Company should bein a much stronger position to bounce back given its portfolio of strong brandsinnovative processes and a credible workforce.

Risk management

Effective governance and risk management form the bedrock of aCompany's sustained performance. The framework revolves around rigorous implementation ofstandardized policies and processes and development of strong internal control systems.

Your Company has constituted a Risk Management and SustainabilityCommittee ("RMSC") for identification evaluation and mitigation of operationalstrategic and external risks. The RMSC is supported by an internal committee whichconsists of experts from various business processes and segments. The internal committeeassists the RMSC in defining the framework for risk management and compliance andundertakes assessment of risks adopts the risk mitigation plans and regularly monitorsthem in a structured and controlled environment. It also reviews developments in thesocio-economic environment and identifies internal threats and opportunities updates theframework and refines processes and systems for mitigation. Details of the composition ofthe RMSC and the Risk Management Policy adopted by the board have been disclosedseparately.

The key identified risks are covered as part of threats in the SWOTanalysis.

Internal control systems and their adequacy

Your Company's internal control systems commensurate with the nature ofits business and the size and complexity of its operations. These internal controlsystems comprising policies and procedures are designed to ensure sound management ofthe Company's operations safekeeping of its assets optimal utilisation of resourcesreliability of its financial information and compliance. These systems and procedurescovering all functions and business areas are periodically reviewed and routinely testedand certified by statutory as well as internal auditors. The audit committee reviewsadequacy and effectiveness of the Company's internal control environment and monitors theimplementation of audit recommendations including the strengthening of the Company's riskmanagement policies and systems.

Human resources

Your Company's people vision is to "to drive a high performing andcustomer centric culture with happy and value oriented employees" Your Company'sperformance is anchored on its capabilities and productivity; customer-centric culturethrough a strong service orientation; happiness through purposeful behaviour by highquality talent; value-oriented through a deep commitment to the values of the Aditya BirlaGroup.

Your Company has a workforce of 25000+ employees with a mix of peoplefrom different social economic and geographic backgrounds. It also has a healthy genderdiversity with 52.5% of the workforce comprising of women employees. 62.8% of theemployees of the Company are in less than 30 years of age group. This has helped us builda huge knowledge capital with varied educational and industry experience.

Your Company has maintained healthy cordial and harmonious industrialrelations at all levels through proactive ER development initiatives gender diversityand community development.

Delivering 'Employee Value Proposition' (EVP) through people strategy:

"The biggest brands and best people" is the philosophy thatdrives your Company. Your Company has well-known brands in its repertoire and it is thepeople behind the brands who have made the brands what they are. The unique employee valueproposition of your Company - "A World of Opportunities" makes it a preferredemployer for professionals in the industry. Your Company is committed to strengthen itsemployee value proposition in every aspect - career growth learning and developmentrewards and recognition and enrichment of life through healthy work environment andwell-being programs.

Career growth programs

At your Company the management believes in harnessing the leadershipand people capabilities through sharp focus and initiatives on talent development. YourCompany has established an active 'Talent Review Process' to take stock of successionplanning for key roles in the business. The highlighted employees are reviewed based onperformance and potential to assess their readiness for future roles that sets the pathfor faster growth in the organization. Your Company has created strong ownership andgovernance on careers through its talent councils which run at both the apex and businessunit levels. The talent councils are chaired by business leaders who meet at periodicintervals and play a key role in defining the development agenda for the talent pool.

In 2019 a 'Leadership Development Program' was launched to buildfuture-readiness of select high-potential employees from mid-management cadre who aregroomed for senior management roles within the organization. Your Company's 'Hiring andTalent Development' processes are built around promoting internal talent to live up to itsemployee value proposition. Of the open junior management positions 46% were filledinternally while 844 store employees were prepared to take up higher roles at retail andregional levels. The organization witnessed 27% role movements at manufacturing sites toprovide employees with a holistic view of functions and operations. We firmly believe inhiring promising entry-level talent through the Company's 'Young Talent ManagementProgram' (striders) from premier B-schools and fashion institutes (such as NationalInstitute of Fashion Technology) to create a strong future pipeline.

Learning and development initiatives

With the emphasis on promoting internal talent the organization hasinvested in capability building across functional and leadership domains.

Employees are committed to their learning plans and a host of platformsare available to help them fulfil their learning needs. Various learning institutes suchas 'Gyanodaya' - Aditya Birla Group global centre for leadership learning 'ABFRLUniversity' - an internally run functional and behavioural learning academy and 'GyanodayaVirtual Campus' (GVC) learning app to promote self-paced learning.

The learning programs focus on classroom training as well as on-the-jobdevelopment which is enabled through various business and functional projects.

In FY20 27 store managers have been identified as India's 'FinestStore Managers' who were given the opportunity to enrol in a well-structured 'GeneralManagement Program' in partnership with B-schools such as the IIMs.

Your Company supports employees in building a future for their childrenthrough the 'Pratibha Scholarship Programme' where employees' children are granted ascholarship for pursuing graduate and post-graduate education in their chosen field. Inaddition to this the Company has 'A World of Opportunities' (AWOO) Foundationwhich supports the funding of education for children of workmen and store associates.

Rewards and recognition programs

Your Company's initiatives are aligned to drive a culture ofmeritocracy and ensure market competitiveness. Your Company takes a holistic approachtowards its rewards program. This covers monetary (fixed compensation variable pay andlong-term incentive plan) and non-monetary rewards (benefits program recognitionprograms and work-life effectiveness program). CTCs are based on performance in the joband the potential of the employee. Your Company strives to ensure non-discrimination inpay because of gender age and experience of the individual. Your Company's rewardsapproach lays emphasis on programs that incentivize both short-term and long-term businessperformance. The remuneration is market competitive and emphasizes on'Pay-for-Performance' by aligning incentives with business strategies to reward employeeswho exceed Group business and individual goals. The reward policies and programs upholdfairness and consistency as a key measure of success at your Company. Various fairnessmeasures are put in place in scenarios such as maternity leave inter- or intra-businesstransfers.

Celebrating success through recognition programmes are at the core ofbuilding a vibrant Company culture. In 2019 'ABFRL Awards' was launched as a platform torecognize and celebrate excellence at work and communicate business results and goals.These awards not only recognize outstanding contributions to your Company but also enableexchange of ideas and learning. Cross-functional teams across businesses present theircase studies to an external jury comprising industry luminaries and an audience ofemployees. Industry doyens are invited for sessions on leadership and discussions onindustry best practices. The first edition of the ABFRL awards witnessed 186 individualnominations 121 team nominations with 88 final winners across all categories. Thewinners of ABFRL awards formed the pool of nominees for ABG Chairman's awards.

Your Company's recognition programs also include PACE GEMS RetailOscars etc. across various lines of businesses that celebrate and recognise team andindividual achievements value champions and feats achieved by employees beyond the callof duty.

Enriched work-life balance

Your Company's vision is to create a fulfilling and caring workplacewhere employees are valued and supported both as an individual and as an employee. YourCompany is committed to provide facilities to support employees with work-life challengeswhile enjoying a fulfilling career. Its initiatives including leave policies flexiblework arrangements and employee wellness programs aim to help employees maintain a healthywork-life balance. By reviewing the decision powers and the layers in the decision makingyour Company has worked at creating a more empowering workplace leading to fasterdecision making and market response time. This has led to higher employee productivity andimproved work-life balance.

Your Company's 'Annual Employee Engagement Calendars' are availableacross its offices factories and stores. These calendars list out events and celebrationsplanned for employees. Through engagement programmes your Company encourages a sense ofbelonging and ownership among employees resulting in workplace satisfaction retentionand enhanced productivity. Sports event such as 'Retail Olympics' has led to increasedemployee bonding and competitiveness. Your Company's engagement index in the employeesurvey witnessed a substantial increase from 80% in 2017 to 85% in 2019.

In a quest to make life simpler for its internal customers (yourCompany's employees) your Company has embarked on reimagining people processes andprovide digital solutions. 'ZOE' your Company's HR Chatbot was introduced to allemployees in May 2019 as 24*7 HR employee partner. Zoe has been enabled to provide withinformation about our people processes such as payroll information policy informationlinks to other internal portals and IJPs etc. It is also equipped to conduct shortinternal surveys and helps employees know their colleagues and locate nearby stores of theCompany's brands.

In FY20 your Company accelerated its gender diversity agenda to ensureretention and development of women talent in the organization. This agenda included'Mentorship Programs' with senior leaders and gender sensitization workshops. A 'DiversityCouncil' has been formalized comprising thought leaders and influencers to formulate andadvocate your Company's 'Diversity and Inclusion Agenda' in the coming year.

Your Company's CSR initiatives encourage employee volunteering for thecommon good of the community. Over 5000 employees participated clocking 24000+volunteering hours in FY 2020.

Sustainability

At Aditya Birla Group sustainability is fundamental to all itsendeavors. It echoes ABG's responsibility towards society environment and everystakeholder in constructing a stable and responsible foundation for the enterprise. Tofurther the ambition of becoming the leading Indian conglomerate for sustainable businessthe Group has articulated a sustainability framework which acts as the guiding principlefor all the Group companies. Each of the businesses within the conglomerate is aligned tothe ABG sustainability framework which is based on parameters such as the nature of thebusiness and location.

Your Company endeavors to achieve leadership in sustainable fashion andco-create long-term value for stakeholders. Your Company is committed to integratesustainability in business decisions across our value chain with an aim to redesign thefuture of business. While your Company celebrates a leadership position in the fashionsegment and continues to grow brand salience and consumer base; it will continue to worktowards giving back to the environment through our 'ReEarth' sustainability program.

The ReEarth sustainability program is a movement to give back to ourplanet what we've taken from it over the years. It is a construct that goes beyondconservation and encourages rejuvenation. At your Company the structured sustainabilityjourney through the programme 'ReEarth - For Our Tomorrow' was initiated in FY 201213with ten missions; with each mission having defined annual targets demarcatedresponsibilities prescribed timelines and an efficient monitoring and evaluationframework.

Your Company has also carried out a future proofing exercise to unveilthe risks and opportunities and consequentially prioritize them to facilitate informednear term decision making. The ultimate goal is to develop a robust strategy stresstested well-equipped to respond to changing scenarios and use innovative approaches totake advantage of new opportunities.

Your Company reviews progress of sustainability missions and relatedprojects & initiatives while ensuring all environmental and social risks are wellcovered to provide strategic inputs in driving sustainability goals.

The focus initially was on own operations: to improve resourceefficiencies ensure health and safety streamline data management and monitor ourfacilities and retail stores. Your Company propelled sustainability across theorganization by emphasizing on energy carbon water waste and green building and alsopartnered with global sustainability forums to exchange insights and gain knowledge onbest practices and steer the industry towards greener practices.

The next step was to expand the scope of approach and include upstreamand downstream members of the value chain within the purview of sustainability. As a partof upstream operations Company collaborated with our suppliers reaching out to themthrough various platforms and elevating their own sustainability approach. For downstreamoperations the Company developed a robust communication and engagement strategy toconnect with our customers and actively promote sustainable practices on their end.

What began as a mission-based approach focusing on own operations israpidly maturing in its sustainability journey. Your Company achieved this through productsustainability renewable resource consumption supply chain circularity and strategiccollaboration with global and national organizations along with memberships on globalplatforms. The sustainability commitment towards people and the planet has helped to dosome exceptional work that has won national and global recognition.

Moving into FY20 the Company plans to widen the scope of itssustainability initiatives from operational efficiencies and product life cycle todeveloping a product centric approach. For additional information kindly refer BusinessResponsibility Report which forms part of this Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

The audited financial statements of your Company for the year underreview ("financial statements") are in conformity with the requirementsof the Companies Act 2013 read with the rules made thereunder ("Act")and the Accounting Standards. The financial statements fairly reflect the form andsubstance of transactions carried out during the year under review and reasonably presentyour Company's financial condition and results of operations.

Your directors confirm that:

a) in the preparation of the annual accounts the applicable accountingstandards had been followed along with proper explanation relating to material departuresif any;

b) accounting policies selected have been applied consistently andreasonable & prudent judgments and estimates were made so as to give a true and fairview of the state of affairs of your Company as at the end of the year under review andthe profit & loss of your Company for the year under review;

c) proper and sufficient care has been taken for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of your Company and for preventing and detecting fraud and otherirregularities;

d) the annual accounts of your Company have been prepared on a 'goingconcern' basis;

e) adequate internal financial controls were laid down and followed byyour Company and such internal financial controls were operating effectively; and

f) proper systems have been devised by your Company to ensurecompliance with the provisions of all applicable laws and such systems were adequate andoperating effectively.

Compliance with Secretarial Standards

Your directors confirm that during the year under review the Companyhas been in compliance with the applicable Secretarial Standards issued by the Instituteof Company Secretaries of India.

SHARE CAPITAL Equity share capital

The paid-up equity share capital of your Company as at the end of theyear under review stood at ' 773.95 Crore vis-a-vis ' 773.48 Crore as at the end ofprevious year.

Details of shares allotted during the year under review are as under:

(i) Allotment made pursuant to the Employee Stock Option Scheme - 2013 ("Scheme2013")

126742 equity shares of ' 10/- each were allotted to the eligibleemployees of the Company pursuant to the exercise of stock options granted to them underthe Scheme 2013.

(ii) Allotment made pursuant to the Aditya Birla Fashion and RetailLimited Employee Stock Option Scheme 2017

("Scheme 2017")

339785 equity shares of ' 10/- each were allotted to the eligibleemployees of the Company pursuant to the exercise of stock options granted to them underthe Scheme 2017.

Preference share capital

The paid-up preference share capital of your Company as at the end ofthe year under review stood at ' 50.50 Lakh (same as at the end of previous year).

Pursuant to the terms of issuance the due dates for redemption of 8%Redeemable Cumulative Preference Shares and 6% Redeemable Cumulative Preference Shareswere March 30 2019 and October 13 2019 respectively.

Considering the fact that the Company did not have distributableprofits in terms of Section 123 of the Act (Profit available for distribution post settingoff past accumulated losses) and pursuant to the unanimous consent of all the preferenceshareholders and in terms of the applicable provisions of the Act the Board of Directorsof the Company vide a circular resolution dated April 11 2019 approved the variation interms of the preference shares to the extent of extending their respective redemptiondates by a period of 5 years more particularly as under:

Class of preference shares Revised redemption date
500000 8% Redeemable Cumulative Preference Shares of ' 10/- each March 29 2024
500 6% Redeemable Cumulative Preference Shares of ' 100/- each October 12 2024

DISCLOSURES IN TERMS OF THE PROVISIONS OF THE ACT & SECURITIES ANDEXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS2015 ("SEBI Listing Regulations")

A. Board of Directors ("Board")

(i) Number of meetings

The Board met 8 times during the year under review. The details of suchmeetings are disclosed in the Corporate Governance Report forming part of this AnnualReport. The maximum gap between any two consecutive meetings was less than 120 (onehundred and twenty) days as stipulated under Section 173(1) of the Act and Regulation17(2) of the SEBI Listing Regulations and the Secretarial Standards issued by Institute ofCompany Secretaries of India.

(ii) Appointments and resignations

a) Resignations/ Retirements

1) Mr. Bharat Patel ceased to be an Independent Director of the Companyon completion of his 5 (five) year tenure on August 21 2019.

2) Mr. Pranab Barua resigned from the Board of the Company as aNon-Executive Director of the Company w.e.f. closing hours of December 31 2019 due toretirement from the Aditya Birla Group.

3) Mr. Arun Thiagarajan ceased to be an Independent Director of theCompany on completion of his 5 (five) year tenure on May 10 2020.

The Board places on record its appreciation towards valuablecontribution made by Mr. Patel Mr. Barua and Mr. Thiagarajan during their tenure with theCompany.

b) Appointments

The Board of Directors on recommendation of the Nomination andRemuneration Committee and subject to Shareholder's approval at the ensuing Annual GeneralMeeting appointed:

1) Mr. Himanshu Kapania as a Non-Executive Director and Vice Chairmanof the Board w.e.f. January 1 2020;

2) Mr. Sunirmal Talukdar as an Independent Director of the Companyw.e.f. March 11 2020.

Mr. Kapania and Mr. Talukdar hold office until the date of AnnualGeneral Meeting of the Company.

Resolutions seeking their appointment alongwith their profile asrequired under Regulation 36(3) of SEBI Listing Regulations form part of the Notice ofThirteenth Annual General Meeting.

c) Re-appointment

In accordance with the provisions of the Act and the Articles ofAssociation of the Company Mr. Sushil Agarwal Non-executive Director of the Company isdue to retire by rotation at the ensuing Thirteenth Annual General Meeting and beingeligible he has offered himself for re-appointment.

Resolution seeking his re-appointment alongwith his profile as requiredunder Regulation 36(3) of SEBI Listing Regulations forms part of the Notice of ThirteenthAnnual General Meeting.

(iii) Board evaluation

The Company has devised a framework for performance evaluation ofBoard its committees and individual directors in terms of the provisions of the Act SEBIListing Regulations and the Nomination Policy of the Company.

During the year under review the Board carried out the evaluation ofits own performance and that of its committees and the individual directors. Theperformance evaluation of Non-Independent Directors and the Board as a whole was carriedout by the Independent Directors.

The evaluation process consisted of structured questionnaires coveringvarious aspects of the functioning of the Board and its committees such as compositionexperience and competencies performance of specific duties and obligations governanceissues etc. The Board also carried out the evaluation of the performance of IndividualDirectors based on criteria such as contribution of the director at the meetingsstrategic perspective or inputs regarding the growth and performance of the Company etc.

Further pursuant to the applicable provisions of the Act theperformance evaluation criteria for the Independent Directors is disclosed in theCorporate Governance Report forming part of this Annual Report.

(iv) Declaration of independence

The Company has received necessary declaration from each IndependentDirector of the Company stating that they meet the criteria of independence as provided inSection 149(6) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations ("saiddeclarations").

Based on the declarations received from the Directors the Boardconfirms that the Independent Directors fulfill the conditions as specified underSchedule V of the Listing Regulations and are independent of the management.

B. Committees of the Board

(i) Audit Committee

Your Company has a duly constituted audit committee with itscomposition quorum powers role and scope in accordance with Section 177 of the Act andRegulation 18 of the SEBI Listing Regulations. Details regarding the composition of theAudit Committee alongwith the dates of meeting and the Terms of Reference of theCommittee is disclosed in the Corporate Governance Report forming part of this AnnualReport.

For the year under review all the recommendations made by the AuditCommittee to the Board were duly accepted by the Board.

Vigil Mechanism

The Board has on recommendation of its audit committee duly adopted aVigil Mechanism/ Whistle Blower Policy and the details of which are provided in theCorporate Governance Report forming part of this Annual Report.

Adequate safeguards are provided against victimisation to those whoavail of the mechanism and direct access to the Chairperson of the audit committee isprovided to them. The details of establishment of vigil mechanism is also available on thewebsite of the Company i.e. www.abfrl.com.

(ii) Nomination and Remuneration Committee ("NRC")

Your Company has a duly constituted NRC with its composition quorumpowers role and scope in accordance with Section 178 of the Act and Regulation 19 of theSEBI Listing Regulations. Details regarding the composition of the NRC alongwith the datesof meeting and the terms of reference of the committee is disclosed in the CorporateGovernance Report forming part of this Annual Report.

Nomination Policy and Executive Remuneration Policy/Philosophy

In terms of Section 178 of the Act and Regulation 19 of the SEBIListing Regulations the Board of your Company had on recommendation of the NRC adopteda Nomination Policy which inter alia enumerates the Company's policy on appointment ofdirectors KMP and senior management. Further the Board has on recommendation of NRCalso adopted a policy entailing Executive Remuneration Philosophy which coversremuneration philosophy covering the directors KMP senior management and other employeesof the Company.

Both the aforesaid policies as amended from time to time pursuant tothe amendment in the applicable regulatory provisions are available on the website of theCompany i.e. www.abfrl.com.

Salient features of the aforesaid policies are as under:

(a) Nomination Policy

The Nomination Policy is enacted mainly to deal with the followingmatters falling within the scope of the NRC:

• To institute processes which enable the identification ofindividuals who are qualified to become directors and who may be appointed as keymanagerial personnel and/or in senior management and recommend to the Board of Directorstheir appointment and removal from time to time;

• To devise a policy on board diversity;

• To review and implement the succession and development plans formanaging director executive directors and officers forming part of senior management;

• To formulate the criteria for determining qualificationspositive attributes and independence of directors;

• To establish evaluation criteria of board its committees andeach director.

(b) Executive Remuneration Policy/ Philosophy

This Policy supports the design of programmes that align executiverewards - including incentive programmes retirement benefit programmes promotion andadvancement opportunities - with the long-term success of the Stakeholders of the Company.

The executive remuneration program of the Company is designed toattract retain and reward talented executives who will contribute to our long-termsuccess and thereby build value for our shareholders and intends to:

• Provide for monetary and non-monetary remuneration elements toour executives on a holistic basis.

• Emphasize "Pay for Performance" by aligning incentiveswith business strategies to reward executives who achieve or exceed Group business andindividual goals.

During the year under review the Executive Remuneration Policy/Philosophy of the Company was amended to incorporate the extended scope of NRC pursuant toamendment in the SEBI Listing Regulations wherein the NRC has to recommend to the Boardall remuneration in whatever form payable to the senior management.

(iii) Risk Management and Sustainability Committee ("RMSC")

Your Company has a duly constituted RMSC which is inter alia entrustedwith the responsibility of monitoring and reviewing the risk management plan and the cybersecurity of the Company and such other functions as may be delegated by the Board fromtime to time.

On March 11 2020 the Risk Management Committee of the Board ofDirectors was renamed as the 'Risk Management and Sustainability Committee' to reflect itsscope more accurately.

The composition quorum powers role and scope of the RMSC are inaccordance with the applicable provisions of the Act and Regulation 21 of the SEBI ListingRegulations. Details regarding the composition of the RMSC alongwith the dates of meetingand the terms of reference of the committee is disclosed in the Corporate GovernanceReport forming part of this Annual Report.

Mr. Jagdish Bajaj Chief Financial Officer of the Company is also theChief Risk Officer of your Company. Risk Management Policy

Your Company has framed and implemented a Risk Management Policy interms of the provisions of Regulation 17 of the SEBI Listing Regulations for theassessment and minimisation of risk including identification therein of elements of riskif any which may threaten the existence of the Company.

The policy is reviewed periodically by the RMSC alongwith the keyrisks and related mitigation plans. More details on risks and threats have been disclosedhereinabove as part of the Management Discussion and Analysis.

Further in view of the ever increasing size and complexity of thebusiness operations your Company is exposed to various risks emanating from frauds.Accordingly the Board has on recommendation of the Audit Committee also adopted anAnti-Fraud Policy and a Whistle Blower Policy to put in place a system for detectingand/or preventing and/or deterring and/or controlling the occurrence of frauds.

(iv) Corporate Social Responsibility Committee ("CSRcommittee")

Your Company has a duly constituted CSR committee with itscomposition quorum powers role and scope in accordance with Section 135 of the Act.Details regarding the composition of the CSR committee alongwith the dates of meeting andthe terms of reference of the committee is disclosed in the Corporate Governance Reportforming part of this Annual Report.

Corporate Social Responsibility Policy ("CSR Policy")

The Board has pursuant to the recommendation of the CSR Committeewith a vision "to actively contribute to the social and economic development of thecommunities in which your Company operates and in doing so build a better sustainableway of life for the weaker Sections of society and raise the country's human developmentindex" adopted a CSR Policy and the same is available on the website of the Companyi.e. www.abfrl.com.

The scope of the CSR Policy is as under:

i. Planning Project or programmes which the Company plans to undertakefalling within the purview of Schedule VII of the Act;

ii. Monitoring process of such project or programmes.

The CSR Policy of the Company inter alia includes the process to beimplemented with respect to the identification of projects and philosophy of the Companyalongwith key endeavours and goals i.e.

• Education - to spark the desire for learning and knowledge;

• Health care - to render quality health care facilities to peopleliving in the villages and elsewhere through our hospitals;

• Sustainable livelihood - to provide livelihood in a locallyappropriate and environmentally sustainable manner;

• Infrastructure development - to set up essential services thatform the foundation of sustainable development; and

• Social cause - to bring about the social change we advocate andsupport.

CSR initiatives taken during the year

Your Company's CSR activities are mainly focused towards EducationHealth Sanitation Water Digitisation Sustainable livelihood Institutional Building andSocial Causes.

An annual report on CSR activities of the Company for the financialyear 2019-20 is annexed as Annexure I to this Report.

(iv) Stakeholders Relationship Committee ("SRC")

Your Company has a duly constituted SRC with its composition quorumpowers role and scope in accordance with in accordance with Section 178 of the Act andRegulation 20 of the SEBI Listing Regulations. Details regarding the composition quorumpowers role and scope of the SRC alongwith the dates of meeting are disclosed in theCorporate Governance Report forming part of this Annual Report.

The Committee specifically looks into interest of shareholdersdebenture holders and other security holders. It periodically reviews the status ofshareholder grievances and redressal of the same.

Ms. Geetika Anand Vice President & Company Secretary being theCompliance Officer of your Company is responsible for the redressal of grievances of theshareholders debenture holders and other security holders.

C. Key Managerial Personnel

Pursuant to Section 203 of the Act the key managerial personnel ("KMP")of the Company are:

i. Mr. Ashish Dikshit Managing Director;

ii. Mr. Jagdish Bajaj Chief Financial Officer; and

iii. Ms. Geetika Anand Company Secretary.

D. Remuneration of directors and employees

Disclosure comprising particulars with respect to the remuneration ofdirectors and employees as required to be disclosed in terms of the provisions of Section197(12) of the Act and rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed as Annexure II to this Report.

The statement containing names of top ten employees in terms ofremuneration drawn and the particulars of employees as required under Section 197(12) ofthe Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is provided in a separate annexure forming part of thisreport. Further the report and the accounts are being sent to the Members excluding theaforesaid annexure. In terms of Section 136 of the Act the said annexure is open forinspection and any Member interested in obtaining a copy of the same may write to theCompany Secretary.

E. Employee stock option scheme and share based employee benefits

Grant of share based benefits to employees is a mechanism to align theinterest of the employees with those of the Company to provide them with an opportunityto share the growth of the Company and also to foster long-term commitment.

Employee Stock Options Scheme and Restricted Stock Units

Your Company regards employee stock options as instruments that wouldenable the employees to share the value they create for the Company in the years to come.Accordingly in terms of the provisions of applicable laws and pursuant to the approval ofthe Board and the members of the Company the NRC has duly implemented the 'Employee StockOptions Scheme - 2013' ("Scheme 2013") the 'Aditya Birla Fashion andRetail Limited Employee Stock Option Scheme 2017' ("Scheme 2017") and'Aditya Birla Fashion and Retail Limited Employee Stock Option Scheme 2019' ("Scheme2019") to grant the stock options in the form of Options and Restricted stockunits ("RSUs") to the employees of the Company.

All the Schemes of the Company i.e. Scheme 2013 Scheme 2017 and Scheme2019 are governed by the Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 ("SEBI SBEB Regulations") and in terms of theapprovals granted by the shareholders of the Company the NRC inter alia administersimplements and monitors the aforesaid schemes thereby governing the grant of share basedbenefits to its employees in the form of RSUs.

Stock Appreciation Rights

Your Company has also instituted a 'Plan for Stock Appreciation RightsPlan 2013' ("SAR Plan 2013") in the year 2013 which is a cash basedplan linked to the actual stock price movement over the plan tenure.

Further pursuant to the enforcement of SEBI SBEB Regulations in theevent of transfer of employee to any Group Company ("said transfer") allthe options and RSUs granted to an employee under the employee stock option scheme of theCompany if not exercised by such employee before the last working day in the Companyshall lapse as on the date of said transfer.

In view of the above in order to compensate the loss to an employeedue to the lapse of options and RSUs in the event of said transfer and pursuant to theapproval of the Board vide a resolution passed at its meeting held on February 4 2019the NRC at its meeting held on May 15 2019 instituted and implemented the 'Aditya BirlaFashion and Retail Limited Stock Appreciation Rights Scheme 2019' ("SARScheme2019") to grant SARs in the form of 'Option SARs' (in place of options) and 'RSUSARs' (in place of the RSUs) to such employees.

The above SAR Plan 2013 and SAR Scheme 2019 does not give rise to anyright towards any equity share of the Company and hence they are not covered under theprovisions of SEBI SBEB Regulations. On exercise of the SARs granted under the said plan/scheme the employee exercising the SARs becomes entitled to receive cash in terms of therespective plan/ scheme.

In terms of the provisions of Regulation 14 of the SEBI SBEBRegulations details of the aforesaid schemes are annexed as Annexure III to this Report.

A certificate from the Statutory Auditor of the Company confirmingthat the aforesaid schemes have been implemented in accordance with the SEBI SBEBRegulations will be open for inspection at the ensuing Thirteenth Annual General Meeting.

F. Related party transactions

All related party transactions entered into during the year underreview were approved by the audit committee and the board from time to time and the sameare disclosed in the financial statements of your Company for the year under review.Further pursuant to the provisions of the Act and the SEBI Listing Regulations the Boardhas on recommendation of its audit committee adopted a Policy on Related PartyTransactions and the said policy is available on the website of the Company i.e.www.abfrl.com.

Further in terms of the provisions of Section 188(1) of the Act readwith the Companies (Meetings of Board and its Powers) Rules 2014 and Regulation 23 of theSEBI Listing Regulations all contracts/ arrangements/ transactions entered into by theCompany with its related parties during the year under review were

• in "ordinary course of business" of the Company

• on "an arm's length basis" and

• not "material".

All transactions with related parties are in accordance with the policyon related party transactions formulated by the Company.

Accordingly Form No. AOC-2 prescribed under the provisions of Section134(3)(h) of the Act and rule 8 of the Companies (Accounts) Rules 2014 for disclosure ofdetails of related party transactions which are "not at arm's length basis" andalso which are "material and at arm's length basis" is not provided as anannexure of this Report.

G. Dividend Distribution Policy

In terms of Regulation 43A of the SEBI Listing Regulations yourCompany has formulated a Dividend Distribution Policy with an objective to provide thedividend distribution framework to the Stakeholders of the Company. The policy sets outvarious internal and external factors which shall be considered by the Board indetermining the dividend pay-out. The policy is annexed as Annexure IV to this Report andis also available on the website of the Company i.e. www.abfrl.com.

H. Strategic initiatives during the year

Your Company entered into a Share Purchase Agreement ("SPA")dated June 10 2019 and completed acquisition of Jaypore Ecommerce Private Limited ("Jaypore")on July 2 2019 an entity selling ethnic fashion merchandise under its own brand"Jaypore" and certain other third-party brands. Consequent to this acquisitionJaypore Inc. USA an overseas wholly owned subsidiary of Jaypore has also become awholly-owned subsidiary of our Company.

Further we completed the acquisition of TG Apparel & Decor PrivateLimited ("TGApparel") an entity which retails ethnic fashion bothonline and offline by entering into a SPA dated June 10 2019 and completed acquisitionon July 2 2019.

Our Company entered into a strategic partnership with FinesseInternational Design Private Limited ("Finesse") through a ShareSubscription and Purchase Agreement dated July 15 2019 and completed the acquisition onJuly 26 2019 for acquisition of 51% stake in Finesse.

Accordingly Jaypore Jaypore Inc USA TG Apparel and Finesse becamesubsidiaries of our Company. These investments were made to foray into the large andgrowing branded ethnic wear space in line with our portfolio expansion strategy.

I. Subsidiaries joint ventures associate companies

During the year the Company acquired Jaypore Jaypore Inc USA TGApparel and acquired 51% stake in Finesse resulting in these entities becoming thesubsidiaries of our Company

Your Company does not have any material subsidiary as defined underRegulation 16(1)(c) of SEBI Listing Regulations.

The Financial Statements of your Company's subsidiaries and relatedinformation have been placed on the website of your Company viz. www.abfrl.com.

Pursuant to the provisions of Section 129(3) of the Act read with theCompanies (Accounts) Rules 2014 a statement containing the salient features of financialstatements of the Company's subsidiaries in Form No. AOC-1 is annexed as Annexure V tothis Report.

Your Company has formulated a Policy for determining MaterialSubsidiaries. The said policy is available on the website of the Company i.e.www.abfrl.com.

Further no company became/ ceased to be an associate of the Company.Also the Company did not become a part of any joint venture during the year under review.

J. Conservation of energy technology absorption foreign exchangeearnings and outgo

Your Company consciously makes all efforts to conserve energy acrossall its operations. A report containing details with respect to conservation of energytechnology absorption and foreign exchange earnings and outgo required to be disclosed interms of Section 134(3)(m) of the Act read with the Companies (Accounts) Rules 2014 isannexed as Annexure VI to this Report.

K. Sustainability and Business Responsibility Report

Your Company's sustainability initiatives are aligned with the AdityaBirla Group's sustainability vision which mainly comprises of responsible stewardshipstakeholder engagement and future-proofing. Accordingly under the aegis of the AdityaBirla Group's sustainability vision your Company is strengthening its 'ReEarth'programme to design a roadmap which will align with the group level sustainabilitypolicies and international frameworks.

Through this mission we hope to create a future ready organisationwhich can pre-empt imminent challenges and address the needs of all stakeholders.

In accordance with our sustainability vision and in terms of Regulation34(2)(f) of the SEBI Listing Regulations a Sustainability and Business ResponsibilityReport forms a part of this Annual Report.

L. Auditors and Auditors report

(i) Statutory Auditor

M/s. S R B C & CO LLP Chartered Accountants (ICAI Registration No.324982E/E30003) were appointed as the Statutory Auditors of the Company at the 9thAGM for a term of 5 years i.e. till the conclusion of the 14th AGM.

Further the Auditors' Report "with an unmodified opinion"given by the Statutory Auditors on the financial statements of the Company for financialyear 2019-20 is disclosed in the financial statements forming part of this Annual Report.There has been no qualification reservation adverse remark or disclaimer given by theStatutory Auditor in their Report for the year under review.

The notes to the financial statements are self-explanatory and do notcall for any further comments.

(ii) Secretarial Auditor

Pursuant to the provisions of Section 204 of the Act M/s. DilipBharadiya & Associates Company Secretaries were appointed as the Secretarial Auditorof the Company to conduct secretarial audit of the board processes for the year underreview.

The Secretarial Audit Report given by the Secretarial Auditor of theCompany is annexed as Annexure VII to this Report. There has been no qualificationreservation adverse remark or disclaimer given by the Secretarial Auditor in his Reportfor the year under review.

(iii) Cost Auditor

During the year under review your Company was not required to maintaincost records under subSection (1) of Section 148 of the Act. Hence the provisions relatedto appointment of Cost Auditor is not applicable.

Further no fraud in terms of the provisions of Section 143(12) of theAct has been reported by the Auditors in their report for the year under review.

M. Material changes and commitment affecting financial position of thecompany

Rights Issue:

The Board of Directors of your Company at its meeting held on May 272020 inter alia considered and approved the raising of funds by way of Rights Issuefor an amount not exceeding ' 1000 crore (the "saidIssue") subject tosuch approvals as may be required under applicable laws.

Your Company evaluated various options and is of the view that rightsissue would be an equitable mode of fund raising as it gives its shareholders an equalopportunity to participate in the growth of the Company. Your Company intends to raisecapital to meet its objectives of reducing its leverage strengthening its balance sheetand for general corporate purposes including working capital.

Your Company intends to complete the said Issue at the earliestsubject to market conditions and other factors including receipt of any regulatoryapprovals.

N. Other Disclosures

In terms of the applicable provisions of the Act and SEBI ListingRegulations your Company additionally discloses that during the year under review:

• there was no change in the nature of business of your Company;

• your Company has not accepted any fixed deposits from the publicfalling under Section 73 of the Act read with the Companies (Acceptance of Deposits)Rules 2014. Thus as on March 31 2020 there were no deposits which were unpaid orunclaimed and due for repayment hence there has been no default in repayment of depositsor payment of interest thereon;

• your Company has not issued any shares with differential votingrights;

• your Company has not issued any sweat equity shares;

• no significant or material orders were passed by the regulatorsor courts or tribunals which impact the going concern status operations of your Company infuture.

• your Company has not transferred any amount to the Reserves;

• your Company has not raised any funds through preferentialallotment or qualified institutions placement as per Regulation 32(7A) of SEBI ListingRegulations.

It is further disclosed that:

• There is no plan to revise the financial statements ordirectors' report in respect of any previous financial year.

• Particulars of the loans guarantees and investments as requiredunder Section 186 of the Act are disclosed in the financial statements of your Company forthe year under review.

• Details pertaining to unclaimed shares demat suspense account ofyour Company are disclosed in the General Shareholder Information forming part of thisAnnual Report.

• Your Company does not engage in commodity hedging activities.

CORPORATE GOVERNANCE

Your Company is committed to maintain the highest standards ofCorporate Governance and adheres to the Corporate Governance requirements set out by theSEBI. The report on Corporate Governance as stipulated under the Listing Regulations formspart of the Annual Report.

Your Company has duly complied with the Corporate Governancerequirements as set out under Chapter IV of the SEBI Listing Regulations and the M/s.Dilip Bharadiya & Associates Company Secretaries vide their certificate dated May27 2020 have confirmed that the Company is and has been compliant with the conditionsstipulated in the chapter IV of the SEBI Listing Regulations. The said certificate isannexed as Annexure VIII to this Report.

EXTRACT OF ANNUAL RETURN

Pursuant to the provisions of Sections 92(3) and 134(3)(a) of the Actand the Companies (Management and Administration) Rules 2014 an extract of the AnnualReturn in Form no. MGT-9 is annexed as Annexure IX to this Report and is also available onthe website of the Company i.e. www.abfrl.com.

DISCLOSURES PURSUANT TO THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE(PREVENTION PROHIBITION AND REDRESSAL) ACT 2013

Your Company has in place a policy on Prevention of Sexual Harassmentat Workplace which is in line with requirements of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 ("POSH Act").The objective of this policy is to provide an effective complaint redressal mechanism ifthere is an occurrence of sexual harassment.

This policy is applicable to all employees irrespective of their leveland it also includes 'Third Party Harassment' cases i.e. where sexual harassment iscommitted by any person who is not an employee of the Company.

Your Company has also set up an internal complaints committee at eachof its administrative office which is duly constituted in compliance with the provisionsof the POSH Act. Further the Company also conducts interactive sessions for all theemployees to build awareness amongst employees about the policy and the provisions ofPOSH Act.

During the year under review no cases were filed under the POSH Act.

AWARDS AND RECOGNITIONS

Your Company has been proud recipient of many awards and recognitionsduring the year under review and significant ones amongst them are as under:

• Two Awards from Frost & Sullivan and TERI at Sustainability4.0 Awards 2019 for o Sustainable Corporate of the Year

o Merit in Micro Manufacturing Initiative

• Won the 6th Indian Green Building Council (IGBC)Green Champion Award under the 'Pioneer in large scale adoption of green buildings inIndustrial sector' category.

• Awarded with the 'Platinum Standard' for the Attibele (LBRD)Warehouse rated by CII for its 'Green Building Mission'.

• Secured 8th position globally in the Dow JonesSustainability Indices (SAM Corporate Sustainability Assessment) in the Textile Appareland Luxury Goods Sector. The SAM CSA methodology is used among others to selectcompanies for the Dow Jones Sustainability Indices (DJSI).

• Won two Golden Globe Tigers Awards 2019 in the followingcategories:

o Best Sustainability Report

o Excellence in CSR Leadership

• Won the 'CSR Project of the Year Award' for its VillageDevelopment Project at the Corporate Social Responsibility Summit and Awards 2019.

• Received the 'CII SCALE (Supply Chain and Logistics Excellence)National Award 2019' in the Garments and Textiles category.

• Received the 'Best IBP (Integrated Business Planning) Process'in the Apparel Industry at the ISCM Demand Planning Forecasting Awards 2019.

• Received the 'Unnatha Suraksha Puraskara' by the National SafetyCouncil Karnataka Chapter 2019 for its factories - Crafted Clothing Limited HarithaApparels Limited and Europa Garments Limited.

• Won the 'Best Overall Performance Award 2019' from Super Dry forMadura Garments Exports.

• Internal Magazine "InTouch" awarded with:

o Silver at the Fulcrum Award for the Best Use of InternalCommunications 2019.

o First prize for Best Newsletter (English) at The Public RelationsSociety of India (PRSI) National Awards 2019.

o Crystal Award for Best Digital Newsletter at the Public RelationsCouncil of India (PRCI) Excellence Awards 2019.

o Best Internal Publication at the CORP COM & PR Excellence Awards2019.

Madura Fashion & Lifestyle division:

• Quality Team from Madura Fashion & Lifestyle won two awardsat the NCQC 2019 o Par Excellence Award for Shirt Packaging Standardization Process

o Excellence Award for its Quality app

• Louis Philippe awarded the 'Best Men's Formal Wear Brand' at theMyntra Tech Threads 2019.

• Simon Carter won the 'IMAGES Most Admired Fashion Design Conceptof the Year Store Design' at the 20th Annual IMAGES Fashion Awards.

Pantaloons

• Recognized as the "Most Trusted Fashion Retailer" byBrand Equity Most Trusted Brands - Retailers 2020.

• Awarded Silver for "Best Use of Entertainment Channel - TheStyle Stage of Swaggers" at Exchange4Media Primetime Awards 2020.

• Pantaloons awarded "Best use of Analytics - MissionHappiness" by Aditya Birla Group at its Mission Happiness Meet 2020.

• Received the "Segment of One Marketing Silver Award"by Aditya Birla Group at its Customer Centricity Conference 2020.

• Won "The Social Media Campaign of the Year 2019 - Girls#Make Your Move" at The National Awards for Marketing Excellence.

• Won two awards by Inkspell Masters of Modern Marketing in 2019

o "The Best Direct marketing campaign for its Trip Down MemoryLane Campaign" o "The Best ATL Campaign - Pujo" by a Retail enterprise

• Awarded "The Best Loyalty Program Fashion & Beauty(Greencard)" by Marketing Magazine APAC at The Loyalty & Engagement Awards 2019.

• Awarded Silver for its Direct Marketing campaign "It's notalways about discounts & offers - Goa Cruise" by The Advertising Club Bangaloreat the Big Bang Awards 2019.

ACKNOWLEDGEMENT

We take this opportunity to thank all the customers membersinvestors vendors suppliers business associates bankers and financial institutions fortheir continuous support. We also thank the Central and State Governments and otherregulatory authorities for their co-operation.

We acknowledge the patronage of the Aditya Birla Group and above allwe place on record our sincere appreciation for the hard-work solidarity and contributionof each and every employee of the Company in driving the growth of the Company.

For and on behalf of the Board of Directors

Place : Mumbai Ashish Dikshit Sukanya Kripalu
Date : May 27 2020 Managing Director Independent Director