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

May 2016

Arvind 3.0

Investor Presentation

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Agenda

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

3

Over the last 5 years, we have achieved robust revenue growth, while maintaining margins, returns and a stable leverage

3,000 6,000 9,000 FY ’13 5,293 FY ’12 FY ’14 6,862 4,925 7,851

• Op. Rev, Rs Cr

+14%

8,442 FY ’16 FY ’15 17 17 18 17 16 6 5 5 5 5 5 10 15 20 FY ’16

Margins %

FY ’12 FY ’15 FY ’14 FY ’13 B & R % Textiles % 1.2 1.2 1.1 1.1 1.0 3.0 3.1 3.2 3.0 2.0 2.5 3.0 3.5 2.0 1.5 0.5 2.5

D/E %

FY ’16 FY ’15

D/EBIDTA

FY ’12 3.0 FY ’14 FY ’13 D/E ratio D / EBIDTA Textiles B & R

14% overall top-line growth during the last 5 years Margins maintained on an overall basis… ..and robust returns with stable leverage

70% 68% 63% 26% 28% 30% 61% 32% 69% 27%

8,450

4

• Historic unlock
• f branded

apparel market in India

• Global textile

and apparel value chains

Recap: Arvind’s growth and value creation agenda driven by two parallel strategic journeys

Fabrics & Apparel: Vertical, differentiated and asset light – Vertical garmenting – Moderately growing wovens business – Stable and differentiated denim business

Opportunity Arvind’s strategic journeys Value creation logic

Brands & Retail: Break-through growth – Industry leading portfolio of brands:

• wn and licensed

– Grow speciality retail aggressively

• Portfolio of high and

moderate growth businesses

• Maintain/ expand

margins

• Reducing leverage
• ver time

– High growth in

asset-light B&R

– Asset-balanced

growth in textiles and garmenting

• Sharp focus on target

RoCE 20%+

1 2

5

Fabric business has delivered strong EBITDA and ROCE growth despite volatile external environment

10% top-line growth in fabrics was coupled with expanded margin, improved ROCE and cashflows… ..while cotton prices and US$ remained highly volatile

Margin expansion, while growing revenue Significant shift in ROCE profile

27 27 25 19 21 15 20 25 30 ROCE % 18.1 17.8 17.6 17.1 17.7 16.5% 18.0% 19.5%

• Op. EBITDA %

50 100 150 Apr, 2013 Apr, 2014 Apr, 2012 Apr, 2015 Cotton Price (c/lb) 40 45 50 55 60 65 70 Apr, 2013 Apr, 2014 Apr, 2012 Apr, 2015 INR per US$ 332 279 149 51

• 48
• 200

200 400 FY16

FOCF, Rs Cr

FY15 FY12 FY14 FY13

Steadily improving cashflows

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Vertical garmenting will dominate the agenda for our fabrics business

Top-line from garmenting grew by ~20% in FY2016 10+ customers already served through vertical offering – clear plans to step-up

883 712 672 504 460 200 400 600 800 1,000 FY16 +18% FY14 FY12 FY15 FY13

FY 15-16 FY 19-20

• Added capacity of 1 million units in

Bangalore

• Operations in new facilities stabilized
• Deeper customer relationships giving

revenue visibility and stability

• Platform to expand customer value through

design/development partnerships

• Supply chain simplicity/ transparency

% of fabric output sold as garment

~ 6% ~ 20-22%

7

Sales growing at 25%+ yoy Strong and improving bottom line Capital efficiency : Poised to Improve ROCE (%) Sales (Rs. Cr) EBIDTA (Rs Cr)

EBIDTA %

F

4.9 5.1 5.2 6.5 5.0 8.2 5.8

Brands & Retail business has achieved breakthrough growth, increased revenue by 2.5x over last 5 years

2,740 2,361 1,915 1,314 935 732 1,405 +25% FY16 FY12 FY14 FY13 FY15 FY11 FY10 178 122 97 68 67 77 42 FY13 FY12 FY11 +27% FY16 FY14 FY10 FY15 FY16 5.5% FY14 4.2% FY15 3.9% FY13 FY12 FY11 8.7% FY10 4.0% 7.7% 2.7%

Fastest growing player in Indian apparel retail

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Power Brands delivered strong revenue growth and margin expansion, while growth brands started delivering positive EBITDA

8 10 12 14 FY16 FY15

10% 11% 13% 11%

FY14

9%

FY12 FY13 EBITDA %

1,604 1,334 1,068 918 758

500 1,000 1,500 2,000

FY16 FY12 FY15 +21% FY14 FY13

Revenues Rs Cr Power Brands delivered steady growth, increasing profitability

413 350 218 93 100 200 300 400 500 FY16 +64% FY15 Revenues Rs Cr FY14 FY13

• 40
• 20

20

• 16%

FY13

• 20%
• 6%

EBITDA % FY16

1%

FY15 FY14 Growth Brands collectively delivered +ve EBITDA, as they grew rapidly

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Specialty retail forays were very successful, while re-structuring of discount/value retail started to deliver results

Successful debutants in specialty retail

• Enabled play in new fast growing categories –

youth, children’s wear and women’s

• Each store delivered store level profitability

within the year of start – likely to start contributing to company P&L from year 3

• Well recognized global brands – will accrue

brand equity value as the businesses grow

• Include exclusive rights for online/ e-

commerce play

Mega-mart relaunched as Unlimited

• Restructuring agenda

– Closure of 55 loss making stores – Product mix largely private brands with high gross margins – Single size store footprint – Family Store (more women’s lines)

• Initial results

– Full price sell through up 15% – 6% improvement in gross margin – Old stock reduced by 5% (fresh inventory)

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Agenda

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

11

Indian apparel demand is at the cusp of significant growth as the economy crosses $2000 GDP per capita

China apparel consumption took-off at $2k GDP per capita Indian apparel consumption stands to grow significantly 200 118 60 45 50 100 150 200 8 4 9 7 6 5 1 2 3 2010 2000 2005 2015 GDP (RHS) Apparel Consumption (per capita) 2,671 2,269 1,942 1,627 1,496 2018 2020 2016 2014 2012 $37 Per Capita GDP (Nominal)

Source : IMF, Wazir, CLSA, World Bank, FICCI

Branded segment to grow at 1.5x the overall market 30 37 58 10 15 30 2011 2021E 40 2015 52 88 Unbranded Branded Top 15 brands have grown at 24% CAGR in last 5 years (industry @ 6.5%)

Billion USD ‘000 USD USD per capita

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Arvind is well positioned to be India’s lifestyle powerhouse by 2020

• 5. Best Talent Base

Powerful Platforms For Sustained Growth

• 1. Go-To-Market
• 2. International

Brand Relationships

• 3. Global Supply

Chain

• 4. E-Commerce

Strong portfolio of iconic global brands across all market segments/ formats Robust platform and industry leading capabilities to enable the growth Platform will easily scale-up to enable our $1 Billion by 2020 aspiration for the B&R business

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Our agenda in Brands and Retail will be driven by 3 clear sets

• f priorities
• Build on the power brands through category and channel expansion
• Specialty retail to quickly gain strength due to strengths of brands
• Growth brands moving towards double digit EBITDA
• Enhance returns through operational efficiency
• Carefully monitor evolution and performance of recent launches
• Take calculated bets on new opportunities
• Maintain financial discipline while making new investments
• Ensure seam-less customer journeys across all channels/ touch-points
• Maintain full complementarity with overall B&R play

Consolidate existing business Strategically manage portfolio Powerful Omni/ Digital play 1 2 3

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Key Priority of the Brands & Retail business over the next Two Years is to grow Topline with Improved Profitability and ROCE

1

Consolidate existing businesses

Growth Brands 2,635 4,618 Specialty Retail 2016 Power Brands 2018 2018 2016 466 200

25-26% 35-38%

Top-line expected to grow at 25%+… … and EBITDA at 35%+ Healthy returns

• ROCE will improve 2x

to reach 16-18% range

• Improvement powered

by an efficiency improvement program that is delivering

• GP improvement
• f 3% to 5%
• 5% sell thru

improvement

• Inventory turns

up by ~30%

2,740 178

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We will continue to manage our B&R portfolio to ensure that we meet the evolving market needs while balancing financial performance

• Large opportunities with potential to

become 500 cr in 5 years and EBITDA breakeven in 2 years

• Enable play in attractive adjacencies
• Niche brands that add value to

NNNOW.com

Critical to dynamically maintain B&R portfolio

Investments in new brand are guided by our philosophy of limiting the overall EBITDA impact

• ‘Current’ to consumer preferences
• Trending brands
• Unfolding shopping behavior

Calibrated additions to B&R portfolio

2

Strategically manage portfolio

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Arvind Ltd. has launched NNNOW.com – a powerful omni-channel portal that integrates online and offline shopping

• Exciting omni-channel features

– Endless aisles – Express delivery – Convenient returns

• Distinctive online experience

– Authentic brand shops – Curated ensembles – Global brands Arvind Internet Offer

• Official online channel for ALBL brands
• Platform for creating own-brands or

brand extensions in select categories

• Digitization of ALBL brand stores

Integral to B&R Strategy

3

Powerful Omni/ Digital play

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22% - 25%

Sales growing at ~22%+ yoy Strong bottom line growth Improving capital efficiency

Sales (Rs. Cr) EBIDTA (Rs. Cr) ROCE (%)

FY15 FY16 FY17 FY18 FY 20 FY15 FY16 FY17 FY18 FY20

EBIDTA %

5.2

FY 18 FY 16 FY 17 FY 15 FY 20

We expect to clock healthy growth, profitability and capital efficiency in our quest to $1B in B&R by 2020

30% - 35% 20% - 25% 6.5

2361 2740 122 178 3.9% 5.5%

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Agenda

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

19

Summary of value creation agenda over next 4-5 years

• Powered by 25-30% continuing growth in

B2C businesses

• Measured capacity addition and higher

value addition in fabrics

• Stepped-up vertical play

GROWTH Maintain 15% overall topline growth PROFITABILITY EBITDA growth in tandem with topline

• Push business mix towards B2C (~40-45%

by FY20 as against ~32% in FY16)

• Maintain a carefully designed portfolio of

licensed and own brands available thru

• ptimal mix of offline, online and omni

channels

BUSINESS MIX Sharpen and expand B2C plays

• Systematic reduction of debt ratio yoy
• Maintain strong capex discipline
• Margin Improvement
• Target ROCE to reach 18-20% by FY20

(against 14% in FY16)

RETURNS Tight management of capital employed

• Target yoy improvement in margins in B2C

business as

• Almost all brands/Retail formats are
• ut of investment phase
• Operating leverage to continue in

matured brands

Thank You!