Arvind 3.0 Investor Presentation May 2016 Agenda FY2016 at a - PowerPoint PPT Presentation

Arvind 3.0 Investor Presentation May 2016

Agenda • FY2016 – at a glance • Strategic agenda – Brands and Retail • Value creation case 2

Over the last 5 years, we have achieved robust revenue growth, while maintaining margins, returns and a stable leverage ..and robust returns 14% overall top-line growth during Margins maintained on with stable leverage the last 5 years an overall basis… Op. Rev, Rs Cr Margins % D/E % D/EBIDTA 9,000 8,442 8,450 +14% 7,851 20 2.5 3.5 18 17 17 17 16 6,862 3.2 3.1 3.0 3.0 15 2.0 3.0 6,000 5,293 61% 3.0 4,925 63% 10 68% 1.5 1.2 6 1.1 70% 69% 2.5 3,000 5 1.2 1.1 32% 5 5 5 5 1.0 30% 28% 0 26% 27% 0.5 2.0 FY ’12 FY ’13 FY ’14 FY ’15 FY ’16 FY ’12 FY ’13 FY ’14 FY ’15 FY ’16 0 FY ’12 FY ’13 FY ’14 FY ’15 FY ’16 Textiles % B & R % D / EBIDTA D/E ratio Textiles B & R 3

Recap: Arvind’s growth and value creation agenda driven by two parallel strategic journeys Opportunity Arvind’s strategic journeys Value creation logic • Portfolio of high and 1 Brands & Retail: Break-through growth moderate growth businesses – Industry leading portfolio of brands: own and licensed • Historic unlock • Maintain/ expand of branded – Grow speciality retail aggressively margins apparel market in India • Reducing leverage over time 2 Fabrics & Apparel: Vertical, differentiated – High growth in • Global textile and asset light asset-light B&R and apparel – Asset-balanced value chains – Vertical garmenting growth in textiles – Moderately growing wovens business and garmenting – Stable and differentiated denim business • Sharp focus on target RoCE 20%+ 4

Fabric business has delivered strong EBITDA and ROCE growth despite volatile external environment 10% top-line growth in fabrics was coupled with ..while cotton prices and US$ expanded margin, improved ROCE and cashflows … remained highly volatile 150 19.5% Margin Cotton Price (c/lb) 18.1 expansion, 17.8 100 17.7 17.6 18.0% while growing Op. EBITDA % 17.1 revenue 50 16.5% 0 30 27 27 Apr, Apr, Apr, Apr, 25 Significant 2012 2013 2014 2015 25 21 shift in ROCE 70 ROCE % 19 profile 20 INR per US$ 65 60 15 55 FOCF, Rs Cr 50 332 400 45 279 Steadily 149 200 40 51 improving Apr, Apr, Apr, Apr, 0 2012 2013 2014 2015 cashflows -48 -200 FY12 FY13 FY14 FY15 FY16 5

Vertical garmenting will dominate the agenda for our fabrics business 10+ customers already served through Top-line from garmenting grew by vertical offering – clear plans to step-up ~20% in FY2016 % of fabric output sold as garment ~ 20-22% 1,000 883 +18% 800 712 672 600 ~ 6% 504 460 400 200 FY 15-16 FY 19-20 0 FY12 FY13 FY14 FY15 FY16 • Deeper customer relationships giving • Added capacity of 1 million units in revenue visibility and stability • Platform to expand customer value through Bangalore • Operations in new facilities stabilized design/development partnerships • Supply chain simplicity/ transparency 6

Brands & Retail business has achieved breakthrough growth, increased revenue by 2.5x over last 5 years Sales growing at 25%+ yoy Strong and improving bottom line Capital efficiency : Poised to Improve ROCE (%) EBIDTA (Rs Cr) Sales (Rs. Cr) 178 2,740 8.7% 7.7% 2,361 +25% +27% 1,915 122 5.5% 97 1,405 4.2% 1,314 4.0% 3.9% 77 68 67 935 2.7% 732 42 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY10 FY11 FY12 FY13 FY14 FY15 FY16 5.8 8.2 5.0 4.9 5.1 5.2 6.5 EBIDTA % Fastest growing player in Indian apparel retail F 7

Power Brands delivered strong revenue growth and margin expansion, while growth brands started delivering positive EBITDA Power Brands delivered steady growth, Growth Brands collectively delivered +ve increasing profitability EBITDA, as they grew rapidly Revenues Rs Cr Revenues Rs Cr 2,000 500 +21% 1,604 +64% 413 400 1,334 350 1,500 1,068 300 918 1,000 218 758 200 500 93 100 0 0 FY12 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 EBITDA % EBITDA % 13% 14 20 1% 11% -6% 12 11% 0 10% -16% -20% 9% 10 -20 -40 8 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 8

Specialty retail forays were very successful, while re-structuring of discount/value retail started to deliver results Successful debutants in specialty retail Mega-mart relaunched as Unlimited • Restructuring agenda • Enabled play in new fast growing categories – youth, children’s wear and women’s – Closure of 55 loss making stores • Each store delivered store level profitability – Product mix largely private brands within the year of start with high gross margins – likely to start contributing to – Single size store footprint company P&L from year 3 – Family Store (more women’s lines) • Well recognized global brands – will accrue • Initial results brand equity value as the businesses grow – Full price sell through up 15% • Include exclusive rights for online/ e- – 6% improvement in gross margin commerce play – Old stock reduced by 5% (fresh inventory) 9

Agenda • FY2016 – at a glance • Strategic agenda – Brands and Retail • Value creation case 10

Indian apparel demand is at the cusp of significant growth as the economy crosses $2000 GDP per capita China apparel consumption took-off Indian apparel consumption Branded segment to grow at $2k GDP per capita stands to grow significantly at 1.5x the overall market Billion USD USD per capita ‘000 USD Per Capita GDP (Nominal) 88 200 Branded 9 2,671 200 GDP (RHS) Unbranded 8 Apparel Consumption 30 7 (per capita) 150 2,269 6 52 118 5 1,942 40 15 100 $37 4 10 60 3 58 1,627 45 50 2 1,496 37 30 1 0 0 2000 2005 2010 2015 2012 2014 2016 2018 2020 2011 2015 2021E Top 15 brands have grown at 24% CAGR in last 5 years (industry @ 6.5%) Source : IMF, Wazir, CLSA, World Bank, FICCI 11

Arvind is well positioned to be India’s lifestyle powerhouse by 2020 Strong portfolio of iconic global brands Robust platform and industry leading across all market segments/ formats capabilities to enable the growth Powerful Platforms For Sustained Growth Brand Relationships 3. Global Supply 2. International 1. Go-To-Market 4. E-Commerce Chain 5. Best Talent Base Platform will easily scale-up to enable our $1 Billion by 2020 aspiration for the B&R business 12

Our agenda in Brands and Retail will be driven by 3 clear sets of priorities 1 • Build on the power brands through category and channel expansion • Specialty retail to quickly gain strength due to strengths of brands Consolidate existing business • Growth brands moving towards double digit EBITDA • Enhance returns through operational efficiency 2 • Carefully monitor evolution and performance of recent launches Strategically • Take calculated bets on new opportunities manage portfolio • Maintain financial discipline while making new investments 3 • Ensure seam-less customer journeys across all channels/ touch-points Powerful Omni/ • Maintain full complementarity with overall B&R play Digital play 13

1 Consolidate existing businesses Key Priority of the Brands & Retail business over the next Two Years is to grow Topline with Improved Profitability and ROCE … and EBITDA at 35%+ Top- line expected to grow at 25%+… Healthy returns • ROCE will improve 2x 4,618 466 to reach 16-18% range 25-26% • 35-38% Improvement powered by an efficiency improvement program 2,740 2,635 that is delivering 178 200 o GP improvement of 3% to 5% Power Brands o 5% sell thru improvement Specialty Retail o Inventory turns up by ~30% Growth Brands 2016 2018 2016 2018 14

2 Strategically manage portfolio We will continue to manage our B&R portfolio to ensure that we meet the evolving market needs while balancing financial performance Critical to dynamically maintain B&R portfolio Calibrated additions to B&R portfolio • Large opportunities with potential to • ‘Current’ to consumer preferences become 500 cr in 5 years and EBITDA breakeven in 2 years • Trending brands • Enable play in attractive adjacencies • Unfolding shopping behavior • Niche brands that add value to NNNOW.com Investments in new brand are guided by our philosophy of limiting the overall EBITDA impact 15

3 Powerful Omni/ Digital play Arvind Ltd. has launched NNNOW.com – a powerful omni-channel portal that integrates online and offline shopping Arvind Internet Offer Integral to B&R Strategy • Official online channel for ALBL brands • Platform for creating own-brands or brand extensions in select categories • Exciting omni-channel features – Endless aisles • Digitization of ALBL brand stores – Express delivery – Convenient returns • Distinctive online experience – Authentic brand shops – Curated ensembles – Global brands 16

We expect to clock healthy growth, profitability and capital efficiency in our quest to $1B in B&R by 2020 Sales growing at ~22%+ yoy Strong bottom line growth Improving capital efficiency Sales (Rs. Cr) EBIDTA (Rs. Cr) ROCE (%) 22% - 25% 30% - 35% 20% - 25% 2740 5.5% 2361 3.9% 178 122 FY 15 FY 16 FY 17 FY 18 FY 20 FY15 FY16 FY17 FY18 FY 20 FY15 FY16 FY17 FY18 FY20 EBIDTA % 5.2 6.5 17