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Soumik Kar
"There is a huge gap in the menswear segment, especially in the ethnic wear and occasion wear segments" Kulin Lalbhai, Executive director (L)

"We have a really good chance to create a world-scale business. That is certainly not possible in textiles" Sanjay Lalbhai, Chairman and managing director (M)

"We have set a Rs 1000-crore revenue target for the technical textiles business by 2019" Punit Lalbhai, Executive director (R)

arvind
A Brand New Spin
The Lalbhai family is closely knitting a strategy that aims to transform Arvind into a retail and brand powerhouse. Will they succeed?
COMMENTS PRINT

Sometime in mid-2011, Sanjay Lalbhai got a call from his younger son, Kulin. An engineer from Stanford with two years experience at McKinsey under his belt, Kulin was studying MBA at Harvard Business School when he was struck by an idea for the family’s textile and brands business. A fan of e-commerce — he wrote two papers on the subject at Harvard — Kulin detailed an online business plan to his father over several long-distance phone calls. Lalbhai didn’t need much convincing. “I simply asked him to take charge of the idea once he returned. To my mind, this initiative was the need of the hour,” recalls Lalbhai as he sips coffee at Arvind Ltd’s sprawling plant at Naroda, about 15 km from central Ahmedabad.

It’s a sign of changing times at a company that made its name as a textile major over the past decades. And this isn’t the first time the Rs 6,862-crore Arvind has reinvented itself — from its first licensed brand in 1993, the company focused exclusively on denim between 1997 and 2002, eventually becoming the world’s largest producer of the fabric and now having 30 brands, including global heavyweights such as Gap, Nautica, The Children’s Place, Hanes and Calvin Klein under its umbrella. Now Lalbhai, the chairman and MD of the family-controlled company, harbours ambitions of crossing Rs 18,000 crore by 2019. (see: Projecting growth) If that dream is to turn to reality, it is brands and the retail business that will need to rise to the occasion. The 60-year-old Lalbhai is counting on just that — he anticipates that five years from now, this business will be worth over Rs 7,000 crore and account for a substantial 39% of turnover, from Rs 1,915 crore today and a much smaller 28% contribution. Textiles, including denim, which brought in 68% of turnover in FY14, will drop to 44% by FY19.

Kulin’s e-commerce plan has just been launched through Arvind Internet, a newly created subsidiary. Its first foray is Creyate, where online customers can customise their clothes, which will then be made at the Arvind factory and delivered within 10-12 days. Lalbhai thinks Creyate is just the first of at least 10 more ideas around e-commerce. “Arvind should become a brand powerhouse and that, with retail, will become a big value creator. The branded apparel business is really where telecom and private banking were before the phase of big-bang growth,” Lalbhai says. “This is the inflection point for Arvind.”

The Back Story

Any conversation with Lalbhai or his two sons, Punit and Kulin, veers back to brands and retail soon. Meet the three of them together and the obsession with brands is even more obvious — one starts a topic, another continues it and the third gives it a new dimension, but it comes back to the same theme. “Earlier, brands and retail would never find a mention beyond turnover and Ebitda at a board meeting. Today, we spend three-quarters of our time discussing brands and retail. That is how important it is to us,” says Lalbhai Sr.

From its inception in 1931 till the 1990s, though, Arvind was only about textile manufacture. In 1993, it took its first step in the branded world. Lalbhai, who joined the family business in the late 1970s after completing his MBA from Jamnalal Bajaj Institute of Management Studies, inked a licensing deal with New York-based Cluett Peabody Co to launch Arrow shirts in India. Arrow was a mass brand in the US but Lalbhai’s dipstick survey had convinced him there was pent-up demand in India for global brands. He launched Arrow as premium menswear and the brand hasn’t looked back since.

Around the same time, though, on the advice of consultants and strategic advisors, Lalbhai decided to stick to the textiles business. He invested heavily in increasing denim capacity, borrowing heavily and even withdrawing from existing products such as sarees and handkerchiefs. By 1998, Arvind was the world’s largest producer of denim, with a capacity of 120 million metre. But as demand for the sturdy fabric collapsed, by 2001, Arvind was on the brink of bankruptcy, with a standalone loss of Rs 500 crore and debt of Rs 2,400 crore. Even now, says Lalbhai, “I may be the largest producer of denim globally, but I still account for only 2%. The fact is that this business can grow only at a certain pace.” The problem, he points out, is of oversupply and intense competition: denim production globally is really a case of many small players.

 
 
"Our rationale for investing in Arvind was its ability to play the branded apparels game without running the risk of depending on a single brand"Renuka Ramnath, Founder, Multiples Alternate Asset Management
 
 
When denim collapsed, Arvind had its own brands such as Flying Machine, Newport, Ruf N Tuf and Excalibur in addition to Arrow, but these had remained secondary to its primary textiles business. Perhaps Arvind would have done better to turn its focus to its licensed and own brands foray much earlier; competitor Madura Fashion & Lifestyle seems to have benefited from that strategy — the Aditya Birla group company raked in revenue of Rs 3,226 crore in FY14 from just four brands, Louis Philippe, Van Heusen, Allen Solly and Peter England, which it has licensed for perpetuity, substantially more than the Rs 1,915 crore Arvind made with its 30 brands (a mix of owned and licensed). Ironically, about 30% of Madura’s fabric demand is met by Arvind, says Susheel Kaul, CEO for Arvind’s wovens business. Investors, though, seem convinced that Arvind can bridge the gap comfortably. In January this year, Renuka Ramnath’s Multiples Alternate Asset Management shelled out Rs 150 crore for a 4% stake in Arvind at Rs 150 a share; the share quotes Rs 292 as of September 1. “Arvind has been valued not as a brand company but as a textile company, which presented a huge opportunity for us. Our rationale for investing in Arvind was its ability to play the branded apparels game without running the risk of depending on a single brand,” says Ramnath, who is also an independent director on Arvind’s board.

She points out that the top of the pyramid in this industry is growing but small, while the bottom is intensively competitive. “We found the middle, which addresses an aspiring population that will spend more with rising incomes, very interesting. Arvind looks well-placed here,” Ramnath adds. For his part, Lalbhai, too, is confident of transforming into a brands and retail player. “It has been proven globally that when a country gets to a per capita income of $1,500, people start to spend on clothing. When it reaches $2,500, they spend disproportionately in this category,” says Lalbhai. “The bottomline is that we have a really good chance to create a world-scale business here. That is certainly not possible in textiles.” Whether that scale will yield great returns is another question altogether, but a few years ago, building a portfolio of brands was a distant dream.

Brands For All

When Suresh J joined Arvind in September 2005, it was clear that he had his task cut out. Against Arvind’s net sales of Rs 1,937 crore in FY05, the brands business had a modest topline of Rs 200 crore and was in the red by Rs 20 crore. The portfolio included licensed brands (Arrow, Lee and Wrangler) as well as own labels such as Flying Machine, Newport, Excalibur and Ruf N Tuf. The only bright spark was the Tommy Hilfiger joint venture with the Murjani group, which had been launched the previous year. “It wasn’t an easy situation to be in,” says Suresh, MD, Arvind Lifestyle Brands (ALBL), with a wry smile. The mandate from Lalbhai, though, was uncompromising. “He said brands would become a big story and I had to build the business,” the 56-year-old adds.

 
 
"When a brand touches Rs 250 crore, RoCE becomes attractive. By the time it touches Rs 350 crore, it makes tonnes of money"Jayesh Shah, director and CFO, Arvind
 
 
A branding and marketing veteran with over three decades of experience, one of the first steps Suresh took was to up Arvind’s brand profile. Value brands such as Excalibur and Newport were moved to the group’s sole retail venture, Megamart, which was relaunched on a value-brand platform. Arrow reached out to a younger customer group — with extensions such as Arrow Sport — to dispel the perception that this was a brand your dad would wear. Similarly, Flying Machine (FM), which was being seen as a fuddy-duddy label, was repositioned as a youth brand with Abhishek Bachchan as brand ambassador. “There was a point when stock was coming back from the market. FM was a dying brand, so it was possible to take a chance,” he explains.

By 2007, ALBL’s loss had been reduced to Rs 2 crore, while topline had doubled to Rs 400 crore. The next target was to cross Rs 1,000 crore revenue by 2011, which meant the portfolio had to be expanded. The four big menswear brands in the market at the time — Arrow, Louis Philippe, Van Heusen and Allen Solly — addressed formal, casual and eveningwear at the same time, says Kulin Lalbhai, executive director, Arvind. “The opportunity was in the market pivoting to casuals and that was too big to ignore,” Kulin adds.

From 2008 onward, Arvind signed up with a bevy of casual wear brands, including US Polo, Ed Hardy, Gant and, most recently, Gap. “Not only are we across the value chain but we understand the process from fabric to retail,” says Lalbhai, explaining why international brands like to be associated with Arvind. Currently, it has 30 brands under its belt, 17 licensed and 13 homegrown. The arrangement is a straightforward, royalty-driven one, where Arvind pays 3-5% of sales annually. While the arrangement is never for less than 20 years, for some brands such as US Polo, it is for perpetuity.

“US Polo was a game-changer,” says Suresh. Not only was the brand profitable since its launch — it currently brings in revenue of Rs 400 crore a year and its kidswear extension, another Rs 100 crore — Arvind also tweaked its retail strategy for the first time, with unprecedented results. When US Polo was launched in 2008, the approach was to reach consumers in stores they already visited, rather than opening new stores. “We created a shop-in-shop that created a new ambience for the brand. The concept was unknown then,” says Suresh. Within the space in stores such as Lifestyle and Shoppers Stop, Arvind added innovations such as wood flooring and rosewood paneling. “The idea came out of financial compulsion,” he says candidly: US Polo is a premium brand, with prices starting at Rs 900 for a T-shirt and Rs 1,600 for a shirt. Still, a company-owned store approach would have been ruinously expensive.

Arvind adopted a similar approach a few months ago for alternative lifestyle fashion brand Ed Hardy as well. Instead of rent, it paid the retailer a margin on sales: “A big advantage of this approach is that we can pull out easily if the brand is not working,” says Suresh. It’s cheaper to do up, too: a store costs nothing less than Rs 2,500 per sq ft in fittings and décor; the shop-in-shop can be done up in under Rs 750 per sq ft. 

Today, Flying Machine and Arrow form two of the four power brands of ALBL, along with US Polo and Tommy Hilfiger. In FY14, these four power brands (defined as having over Rs 100 crore in revenue and double-digit margins and growth of at least 20%) brought in revenue of Rs 1,185 crore, with an Ebitda of Rs 137 crore (11.5% of revenue). In 2009, the corresponding revenue figure was Rs 218 crore, while the Ebitda was a modest Rs 5 crore (2.4% of revenue). (see: The power of four)

Jayesh Shah, director and CFO, Arvind, explains what brand revenue numbers actually mean for the company. “Typically, at a level of Rs 100 crore-Rs 150 crore, the brand gets out of negative Ebitda. By the time it touches Rs 250 crore, the return on capital employed becomes attractive. By the time it gets to Rs 350 crore, a brand makes tonnes of money,” he explains. Currently, Arrow clocks about Rs 400 crore and Tommy Hilfiger brings in Rs 300 crore. Sportswear brand Nautica earns around Rs 100 crore, while innerwear brand Hanes earned Rs 45 crore last year and will double this year. Of its portfolio, the 12 value brands sold through Megamart are profitable and 90% of the remaining 16 are profit-making too (two, Gap and The Children’s Place, have just been added).

Pain Point

Of course, there’s still a long way to go before those numbers come close to what Madura is already clocking: Louis Philippe and Van Heusen bring in revenue of Rs 850 crore and Rs 750 crore, respectively. And really, the brands business doesn’t even seem all that lucrative. On a topline of Rs 3,226 crore, Madura Fashion & Lifestyle makes Ebit of Rs 299 crore — that is, a margin of only around 9%. At the PAT level, the margin will shrink further. And this is for an established player with four marquee brands. If that doesn’t sound so impressive, check out the numbers for ALBL, whose 30 brands include some of the world’s best-known fashion labels. The brands and textiles business, on a topline of Rs 1,915 crore in FY14, generated an Ebit of a minuscule Rs 42 crore, that is, a margin of a much lower 2.19%. At the PAT level, don’t expect anything better. The rush to expand its brands portfolio and increase retail presence, then, doesn’t sound like such a hot idea — not when the payoff isn’t commensurate with the effort involved.

 
 
"Our gross margins are at about 45%, while the industry operates at 65-70%"Vasanth Kumar, executive director, Max Retail
 
 
One reason why companies aren’t making money in this business is the lack of brand stickiness and the availability of multitude of brands. Nitin Jain, MD and president, OCM India, says, “While there is some level of brand stickiness in the niche segment, the readymade garment space is extremely crowded with big challenges. A large proportion of business is done through end of season discount sales and there is a very high degree of obsolescence.” Points out Nabankur Gupta, former group president, Raymond, “While it is nice to have foreign/licensed brands in one’s portfolio, it does not come cheap. Companies in the business know that there is only a limited audience for licensed brands, but the problem is you have too many licensed brands fighting for the same set of consumers.”

Further, the industry is characterised by unpredictability. “When times are good, people come and make huge investments but once bad times set in, there is a question mark on survival,” says Surendra Shetty, CFO, Siyaram Silk Mills. He knows what he’s talking about — Siyaram was a raging success in the 1980s, with its iconic tagline ‘Coming home to Siyaram’ still hummed by that generation. Now, though, the brand and the product have been relegated to the sidelines. “Creating a brand is very difficult as you have to invest huge sums of money and need to be patient,” Shetty adds.

Anees Noorani, vice-chairman and managing director, Zodiac Clothing, though, differs. “As you go up the value chain, brand loyalty keeps growing. The value-driven consumer is known to be more price-driven than brand-driven and is spurred by a deal, which results in him forgoing quality and/or design.” But a quick glance at Zodiac’s numbers does not seem to underscore the point. The company’s RoE for the past five years averaged at 10%, which is far from impressive.

Still, Arvind is persevering and remains confident of hitting the high notes with its brands and retail. Shah, a three-decade veteran at Arvind, is confident that it is only a matter of time. Indeed, there’s a good chance that ALBL could be listed in FY18. “Today, it is resting on Arvind and is in need of capital. By the time ALBL gets to around Rs 5,000 crore, it will achieve critical mass,” says Shah. “The transformation at Megamart should be complete during the current fiscal and in one stroke, there will be a lot of action,” he adds.

The Retail Conundrum

That will be a welcome change. In many ways, retail has been Arvind’s bête noire for several years. Compared with Madura’s 1,550 exclusive brand outlets for four brands [EBOs], Arvind is more thinly spread, with 1,130 stores for its 28 brands. Madura Fashion & Lifestyle CEO Ashish Dikshit is categorical about the advantages of own stores, saying it allows consumers to experience brands in a more controlled environment. “It gives us the option of showcasing the entire portfolio,” Dikshit adds.

Textile industry veteran Vikram Rao, who has worked with both the Aditya Birla group and Arvind Mills, points out that Madura’s EBOs have contributed greatly to the company’s growth — 50% of Madura’s revenue is from EBOs. “EBOs require serious investments and high levels of competencies. It is a strategy that can pay rich dividends if executed well,” he says. At the same time, warns Gupta of ex-Raymond fame, “Retail of licensed brands is more expensive compared with an owned brand; advertising costs more and there is royalty to be paid. All this leaves very little on the table for the brand owner.” For his part, Suresh is more comfortable taking the EBO route once a brand is successful. “Every store has to be a profit centre and not just a marketing tool. Yes, a store can be a good advertisement for the brand but it is an expensive one,” he insists. Currently, Arvind has EBOs for all its power brands — FM, US Polo, Arrow and Tommy Hilfiger — as well as for its premium brands such as Nautica, Calvin Klein and now, Gap and The Children’s Place. Typically, 35% of Arvind’s sales is from EBOs, while the remaining 65% comes from multi-brand and department stores.

 
 
"Our manufacturing facility in Ethiopia will serve as an entry point into Africa"Suresh J, managing director, Arvind Lifestyle Brands
 
 
If Arvind has lost out by going slow on opening retail stores for its licensed brands, it has struggled to make a go of other retail initiatives as well. In 1995, it launched Megamart, a discount destination for shoppers seeking bargains on big brands. The large-format stores — some as big as 50,000 sq ft — filled with discounted items that didn’t sell in regular stores may have still worked, but for three reasons: wafer-thin margins, high dependence on other brands to supply unsold stock and a change in tax laws that imposed excise on the MRP, rather than the discounted price. “Clearly, it was a bad idea. Today, we offer only our brands and Megamart is more about value and less about discounting,” says Suresh.

The Megamart relaunch started a couple of years ago. From 220 stores at the peak, there are now only 145. Store size has been pruned to the more manageable 10,000-15,000 sq ft range and there are 22 revamped stores across Karnataka, Andhra Pradesh and Tamil Nadu, 15 of which opened last year. The plan is to relaunch 25 stores each year, beginning with west India and Punjab. The company is spending around Rs 30 crore on promoting the new stores, including television ads in Tamil Nadu and press in other states.

Megamart now no longer offers 70-80% off tags, instead pushing its own value brands such as Excalibur and Newport and international chain-store brands such as Geoffrey Beene and Cherokee. Suresh claims the new retail strategy is working well: at the operating level, with smaller stores, it is possible to recover the money almost immediately, while at the capex level it will take about two years. “In the earlier model, operating break-even was never less than a year and half, while it could take five years at the capex level,” he adds.

Where Arvind was a pioneer in the factory outlet category in India — and found that market rough going — making a mark with a refurbished Megamart will be even tougher. Competition in this space is intense, with players such as Reliance Trends and Max already entrenched in the same price band, and Pantaloon, Westside and Globus a notch higher. Vasanth Kumar, executive director, Max Retail, a part of the Landmark Group that owns Lifestyle, says the first few years were tortuous. “We opened 50 stores between 2006 and 2010 and it was extremely challenging. We stuck it out since we knew that was the only way to get it right,” he says.

Max, which has a mall-driven retail approach, made it through by keeping an iron hand on costs — it opted for first floor or basement locations that were up to 30% cheaper than ground floor rentals, and ensured operating costs were never more than 30% of topline. “Our gross margins are at about 45%, while the industry operates at 65-70%. Given that our products were 25% cheaper, this kind of control over costs was mandatory,” says Kumar. Today, the Rs 1,100-crore Max operates its 105 stores in the 9,000-12,000 sq ft range, similar to Megamart, across 45 cities. The target now is to open a new store every 12 days — 30 stores this year alone. Kumar hopes to maintain that pace over the next two years.

Interestingly, when it comes to the supply side, Max and Arvind aren’t all that different. While Max is totally dependent on third-party suppliers for its apparel, Arvind, too, opts for outside suppliers if that is cheaper. The advantage it has, of course, is that it supplies the fabric for many of the brands supplied at Megamart.

 
 
"Today, of the 140 million metre of denim produced, at least 40% is through value-added products, compared with 10% of the 85 million metre in 2006"Aamir Akhtar, CEO, denim, Arvind
 
 
Megamart aside, Arvind also wants to step up the action in the specialty retail segment (focused on one segment, such as innerwear, sportswear, kidswear, etc.). Already present in the category through Nautica and Hanes, Kulin wants to take it a step further and create a truly Indian brand. “That is a white space where we can do some serious work,” he says. Specialty retail will transform the brands and retail industry, declares Lalbhai. “It will be a big miss if we are not there. Globally, giants such as H&M, Gap, Uniqlo, Zara and Forever 21 are huge in specialty retail,” he emphasises.

On the anvil is a specialty retail foray in kidswear, an idea borne out of the success of US Polo in this segment and in addition to the licensing deal with the US-based The Children’s Place to open 50 stores starting September 2015. “We realised that the market was substantially larger. We are convinced that specialty retail for kids will be a game-changer,” says Suresh. Innerwear is also on Arvind’s radar: early last year, ALBL acquired the Indian operations of Hanesbrands and in March this year, signed a deal with Calvin Klein India (a Rs 125-crore brand that has a target of hitting Rs 500 crore by 2019).

There is also scope for expanding further on the department store vertical, where Arvind already has tie-ups with chains such as Debenhams and Next, which it acquired in 2012 from Planet Retail. This foray will also be through the newly-launched Arvind Store, positioned as a fabric and fashion retailing vertical. In Ahmedabad’s busy CG Road, the city’s most expensive retail location, the Arvind Store occupies an area of around 4,000 sq ft, selling the company’s brands and fabric. One section of the store caters to people looking for clothes that the readymade section is unlikely to address. “There is a huge gap in the menswear segment, especially in the ethnic wear and occasion wear segments, that we can get into,” says Kulin. According to him, there are takers aplenty for offerings such as denim sherwanis, chinos jodhpuris and linen bandhgalas, all of which can be made to order at the store itself. “None of this can be readymade wear. The opportunity will be Indians spending a disproportionate amount of money on festivals and other occasions,” he adds, as his father nods in confirmation.


A Smart Buy: Exclusive brand outlets contribute 35% to Arvind’s sales, while multi-brand and department stores make for the rest

Getting Technical

For all Arvind’s current focus on brands and retail, the company expects to see significant action going forward in online and technical textiles (specialised fabrics for defence and industrial use). Lalbhai’s elder son, 32-year-old Punit, spearheads the nascent technical textiles business and says this is a Rs 90,000-crore industry in India, “which is still not of very good quality”. Punit, an executive director in Arvind, has set the business a target of Rs 1,000 crore revenue by 2019 from the current Rs 70 crore, and is looking at markets such as protective textiles, industrial fabrics, composites and non-wovens — used in windmill blades, cars, conveyor belts, construction and transport — to get there. “There will be huge opportunities in industries such as power and infrastructure. Technical textiles is a big story in countries such as Japan, South Korea and China,” he says.

Arvind’s advantage in the online business, according to Kulin, is that it understands the entire fibre-to-fashion process. “In that sense, our approach can be fundamentally different from someone who runs a catalogue business or just sells brands at a discount,” he says. Punit chips in that online brands are unfettered by the offline process and can work on their own supply chain.

 
 
"Our first overseas manufacturing facility in Ethiopia will serve as an entry point to Africa"Ashish Kumar, CEO, garments, Arvind
 
 
Citing international players such as Bonobos and Asos, whose online businesses are hugely successful, Kulin says the opportunity in online comes on the back of the physical experience not being sufficient in tomorrow’s world. “Online really offers two formats today. One is about clothes and accessories and the other sells everything under the same roof,” he explains. In his view, there is a third play — omni-channel — used by large players such as Gap and Macy’s, which combine brick-and-mortar with an online model. Creyate, to his mind, is positioned on the “factory at your fingertips” platform, using an entirely automated and modular supply chain to create customised clothes at the factory level. “We will use technology such as magic mirrors that create virtual images and motion sensors to drive the concept,” says Kulin. Adds Punit, “There are very serious restrictions today in brick-and-mortar on creativity and choice. This will address all of that.” For instance, the evolving womenswear segment, which has a small place in Arvind’s stores today, could see the emergence of a bigger market online. Kulin estimates that this e-commerce initiative, for which Rs 20 crore has been invested to date, can be a Rs 1,000-crore business in three years. He declines to share details on future investments, saying they will made “as and when required”.

The focus on the new-age businesses has had a rub-off on older ventures like denim as well. According to Aamir Akhtar, CEO for denim at Arvind, value-added products in denim contributed a minuscule 10% of the 85 million metre that was produced in 2006. “Today, of the 140 million metre, at least 40% is value-added denim. At 40% in some categories, the margins, too, are impressive,” he says. New products such as neo denim (a fabric that retains the dyed look but uses little water), that sells over 10 million metre, and the soft mink finish, which sells 3-4 million metre, are the result of continuous research and feedback from overseas markets.

Likewise, the garments business, which makes readymade apparel for clients such as H&M, Esprit and Zara, is setting up a manufacturing unit in Ethiopia. “This will be our first facility outside India. The fabric will come from Naroda and will be converted in Ethiopia before it is shipped to other parts of the world,” says Ashish Kumar, CEO, garments. With wage costs in Ethiopia a third of what prevails in India, there is enough money to be made. “We will manufacture 5 million shirts in the first phase at our all-women factory. This will be our entry point into Africa,” he says.

Back home in India, Arvind is setting up a factory near Bengaluru to make suits. It is a product segment that brings gross margins as high as 60-70% and so far, Arvind has been taking on Madura (which sells as much as 1 million units each year) using third-party manufacturing. With the factory expected to go onstream later this year, Suresh thinks Arvind could sell about 40,000 units each year — still nowhere close to Raymond and Madura, but critical from the store point of view since it is a high-margin, high-value product.

Without a doubt, much has changed at Arvind. It is no longer a one-trick pony that eats, breathes and thinks denim. CFO Shah admits that despite that, Arvind’s valuation is dampened because of investors historically not making money on textile stocks. “Most companies went overboard on investments and raised huge levels of debt. Besides, the industry is capital-intensive and generating free cash flow is a serious challenge,” Shah points out. In his view, only an asset-light strategy that can generate high revenue out of low levels of investment can change the story.

As Lalbhai embarks on this tough journey, he will need to focus on his strengths and keep a very close eye on competition. He seems to be doing the latter rather well — he openly admits to often wearing rival brands. The last time he went shopping, Lalbhai picked up six pairs of chinos made by ColorPlus and the store manager was startled when he saw on the name on the credit card. “I told him ColorPlus makes the best chinos and he was quite happy to hear it,” says Lalbhai, nonchalantly. He’s now waiting for the day when his rivals say the same about his brands — and mean it.

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