Category: Press Quotes

Les marques étrangères profitent de l’ouverture du commerce de détail

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May 30, 2013

Christine Gilguy, Le Moci (http://www.lemoci.com/)

France, 30 Mai 2013

Il y a à peine un mois, Ikéa, le géant suédois de l’habitat, faisait la Une de la presse indienne et étrangère en annonçant une mise de près de 2 milliards d’euros pour lancer ses dix premiers magasins en Inde. Il venait d’obtenir l’agrément final du gouvernement indien pour investir 105 milliards de roupies (environ 1,95 milliard de dollars) pour créer 10 magasins dans les 10 prochaines années, et 15 autres en option. Des magasins sur le modèle qui a fait son succès en Europe, à une seule petite exception : si son agrément autorise la création de cafés et restaurants dans ses magasins, il exclut toute distribution de produits alimentaires conditionnés.

Neuf mois après la décision du gouvernement indien d’assouplir la législation sur les investissements directs étrangers (IDE) dans le secteur du commerce de détail, l’arrivée de l’enseigne suédoise est emblématique de l’appel d’air provoqué par cette réforme. Elle a concerné deux segments :

• La distribution mono-marque : il est désormais possible aux enseignes monomarque de détenir 100 % d’une société (contre 50 % auparavant) en Inde.

• La distribution multi-marques : les sociétés étrangères peuvent désormais détenir la majorité des sociétés en jointventure (51 %) et s’installer dans les 53 villes de plus d’un million d’habitants que compte l’Inde. Mais la loi oblige les sociétés étrangères à faire 30%de leurs approvisionnements en Inde, auprès de PME, et leur fait obligation d’investir un minimum de 100 millions de dollars dont au moins 50 % doivent aller, dans les trois ans de la première tranche de l’investissement, dans les infrastructures de « back-end » qui incluent un large champ de domaines (process, fabrication, distribution, design, contrôle qualité, etc.). En outre, chaque État indien doit donner son approbation…

C’est le secteur de la distribution monomarque qui répond le plus positivement à l’ouverture indienne. Dans l’habillement et la mode, les annonces se succèdent. La marque britannique Pavers (chaussure), aurait été la première à obtenir un agrément pour implanter une chaîne de boutiques selon la nouvelle législation, avec un investissement de 20 millions de dollars. De son côté, le champion du prêt-à-porter espagnol Zara (Inditex), qui a testé deux premières boutiques dès 2010 à Delhi, a annoncé son intention d’ouvrir 40 boutiques dans le pays. H&M s’apprêterait à investir dans une joint-venture majoritaire, Puma à augmenter son réseau. Pour ne citer que quelques exemples.

L’intérêt pour le marché indien de la part des marques internationales est ancien mais désormais avivé par l’émergence d’une classe moyenne estimée, selon les sources et les critères de définition, entre 150 et 200 à 300 millions de personnes (une cinquantaine de millions pour le segment des plus hauts revenus). Il a d’abord été favorisé par l’urbanisation et le développement de centres commerciaux en milieu urbain : « La croissance du nombre de marques et d’enseignes de distribution internationales opérant en Inde s’est accélérée depuis 2005, avec le développement des investissements indiens dans la distribution et l’immobilier commercial sous la forme de Malls » souligne Devangshu Dutta, consultant indien dont la société, Third Eyesight, est un spécialiste du secteur.

Dans une étude intéressante, Devangshu Dutta montre comment au fil des années, des marques internationales ont fait leurs premiers pas en Inde, sous la forme de licence, franchises, ou de joint-ventures avec des partenaires indiens (1). Mais pour lui, ce ne sont pas les grands groupes qui ont conduit cette vague : « Ce sont les sociétés de taille moyenne qui mènent la charge en Inde, d’avantage que les géants du commerce de détail, bien que ces derniers, à l’instar d’Ikéa,Walmart, Carrefour suscitent plus d’articles dans les médias ».

Dans la distribution multi-marque, les grandes enseignes, longtemps interdites pour le commerce de détail par la réglementation indienne, restent toutefois absentes. Trop timide et restrictive, la réforme intervenue le 20 septembre 2012 ne les a pas convaincus et on attend toujours les annonces d’investissements des grandes enseignes comme Walmart, Tesco ou Carrefour, déjà présentes dans le cash & carry. Les enseignes américaines et britanniques feraient un intense lobbying pour obtenir de nouveaux assouplissements. Dans la liste de leurs récriminations à l’égard de la réforme, l’une des principales portes sur le fait que les dépenses effectuées dans le foncier ou les loyers – très élevés en Inde – ne soient pas comptés dans les investissements d’infrastructures de « back-end ».

« C’est clairement une orientation trop restrictive », commente un article du libéral Asia Times (2). Le même article épingle aussi le fait que sur les 53 villes autorisées, seules une vingtaine sont réellement ouvertes à ce jour à ce type d’IDE en raison de l’opposition des États indiens concernés… Seuls 10 États indiens ont approuvé cette réforme à ce jour (dont Delhi, Maharashtra et Haryana). Il y a peu de chance que les enseignes de la grande distribution occidentale obtiennent gain de cause avant les prochaines élections générales, prévues en 2014. « Les Kirana Stores (ndlr : les petits commerces), constituent un lobby très puissant qui s’oppose à cette ouverture », analyse Alain Bogé, consultant et spécialiste français du secteur de la mode en Asie, vice-président du Business Fashion Forum, un think tank dédié aux acteurs de la mode (3). C’est donc le mono-marque qui est, pour l’heure, boosté par l’ouverture indienne.

Et dans ce secteur, les Français ont du retard. Selon Third Eyesight, les marques tricolores ne représentent que 10 % des marques internationales implantées en Inde. Les Américains sont en tête, suivis des Italiens et des Britanniques (graphique).

Hors luxe – LVMH est très actif actuellement, avec l’acquisition de son ancien partenaire Genesis et de la marque indienne Liliput –, les marques françaises sont surtout présentes dans les produits cosmétiques et de soins de beauté.

« Les Américains et les Britanniques ont certainement l’avantage de la langue, l’anglais, avance Devangshu Dutta. Il est possible que les Italiens tirent avantage de leur présence sur d’autres marchés, donc soient plus visibles pour des partenaires et consommateurs indiens potentiels que les Français ».

Dans l’habillement, qui représente un tiers de la distribution organisée (voir chiffres clés), Alain Bogé reconnaît que les griffes françaises ne sont pas légion : Promod, Okaidi, Celio…« Elles sont encore rebutées par la complexité du marché » analyse-t-il. En premier lieu, le secteur est encore très largement dominé par le commerce informel, dont font partie les kirana stores, qui pèsent 92 % du marché selon un chiffre cité par une étude du cabinet Deloitte. En outre, loin d’être unifiée, l’Inde et ses 28 États sont multiples. Hors du luxe, les success stories de marques occidentales sont souvent celles d’une bonne adaptation au marché local en s’appuyant sur un partenaire indien – pas toujours facile à trouver sans conseils ou accompagnement extérieur –, qui connaît bien le marché. « Les sociétés qui souhaitent réaliser un chiffre d’affaires significatif et générer des retours sur investissement en Inde doivent se doter d’une stratégie de marque, et d’un mix produitprix-distribution adapté à l’Inde plutôt que de faire un copier/coller de leur modèle français ou international », confirme Devangshu Dutta.

S’appuyer sur un partenaire indien – même si on opte pour une filiale à 100 % – est en l’occurrence fortement recommandé lorsqu’on n’a pas la puissance de frappe d’un Ikéa. Alain Bogé insiste lourdement sur ce point rappelant que Zara a commencé prudemment à Delhi, en joint-venture, en testant une boutique dans un centre commercial. « Il y a trois avantages à s’appuyer sur un partenaire indien, résume le Français. Il connaît les segments à attaquer et les prix ; il sait à qui donner les dessous-detable pour faire avancer les dossiers dans un pays où la corruption est endémique et à tous les niveaux ; enfin, il peut éventuellement participer au financement, sachant qu’un bon tiers des transactions en Inde se font en cash. »

Pour ne parler que du prêt-à-porter et des accessoires de mode, si les Zara, Mango, Benetton et autre Esprit sont déjà installés, que de belles marques indiennes ont d’ores et déjà émergé – Liliput, Fabindia… – il reste de nombreuses opportunités compte tenu du potentiel de croissance extraordinaire du secteur. Alain Bogé est par exemple convaincu que les marques françaises de la mode enfantine ont une belle carte à jouer au pays où l’enfant est roi. « Lorsque mes amis indiens viennent en France, ils vont faire leur shopping chez Bonpoint ou Tartine & Chocolat. Okaidi y est déjà, il faut y aller » estime-t-il. Pour lui, les villes où il faut être abritent les principaux pôles de consommation du pays, avec une population jeune et ouverte à la nouveauté : New Delhi la capitale, mais aussi Mumbai la capitale économique, suivies de Bengalore, Hyderabad, Ludhiana ou encore Ahmedabad. Mais surtout, ne pas trop tarder : « Il faut y être dès maintenant car les meilleurs emplacements et les meilleurs partenaires seront pris d’ici quelque temps ». La Chambre de commerce franco-indienne (CCIFI) organise début juillet, en partenariat avec CCI International Nord de France, la première conférence sur le commerce de détail en Inde à Lille, au coeur de l’industrie de la distribution française, le 9 juillet. Un bon signe…

(1) Lire l’article « Entry Strategy of global Brand – Impact of FDI »
(2) « India’s retail FDI bid fails to sell », 3 mai 2013, sur Asia Times
(3) www.businessfashionforum.com

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After McDowell’s success, USL increases focus on higher-priced brands

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May 13, 2013

Mihir Dalal, MINT (A Wall Street Journal Partner)

Bangalore, May 13, 2013

After successfully wooing drinkers toward McDowell’s No.1 products from cheaper labels such as Bagpiper, United Spirits Ltd is increasing its focus on higher-priced brands such as Antiquity whiskey and Black Dog scotch.

From April to December, the volume growth of United Spirits’ premium brands—products including and priced more than its McDowell’s No.1 whiskey—was 18%, faster than the industry average of 12%, according to data supplied by the company. A majority of the growth was driven by McDowell’s No.1 whiskey and rum, both of which overtook Bagpiper, the company’s largest-selling brand for more than a decade.

United Spirits expects its other premium brands to continue growing faster than the market this year partly as it shifts its marketing spending toward these products, managing director Ashok Capoor said in an email.

India’s largest distiller has introduced new packaging or ‘packaging value adds’ for some products such as Antiquity Blue, one of its highest-margin brands, Capoor said.

According to analysts, it’s essential for United Spirits to accelerate sales growth of premium products and show more consistency in growth if it wants to catch up with France’s Pernod Ricard SA, which earns more profits in India than United Spirits despite selling less than a fourth of its rival’s volumes.

The reach and variety of United Spirits’ product portfolio is unrivalled in India. It has brands at practically all the price points from Bagpiper at the lower end to Black Dog scotch at the upper end and products such as McDowell’s No.1 and Signature in between.

“The width of portfolio allows companies to use distribution muscle and gain margins and market share. It also allows companies to shield themselves from a drop in sales of a given brand as they have others, some even in the same segment, to make up for it. This kind of a flanking strategy also reduces the manoeuvring room for any competitor,” said Devangshu Dutta, CEO of retail consulting firm Third Eyesight.

For instance, last year, Signature whiskey—one of the company’s fastest-growing premium products of the past five years—saw a drop in growth last financial year. However, Signature Premier, a brand variant that is 10% costlier than Signature, grew significantly more than the latter, Capoor said.

“There were some interim ‘downtrades’ from Signature in a few markets. Royal Challenge was the major beneficiary in such states. Each brand has a role to play in the premium price ladder. For example, Antiquity Blue sits at the top end of this ladder driving imagery for the franchise, while Antiquity Rare is pitched to facilitate upgrades from brands below it in the price ladder,” he said.

The flip side is that it can become unwieldy to manage so many brands and can lead to inconsistency in growth.

United Spirits has more than 10 brands priced higher than McDowell’s No.1 whiskey and rum that contribute significantly to sales and profits. In comparison, Pernod Ricard gets a majority of its business from just four whiskey labels—Royal Stag, Imperial Blue, Blender’s Pride and 100 Pipers scotch. These brands, three of which are priced higher than competing products by United Spirits, have consistently reported compounded annual growth of 17-31% in 2007-2011, according to data by International Wine and Spirit Research (IWSR).

United Spirits’ premium brands have shown less consistency. Black Dog and Antiquity Blue both reported an increase in volumes at a compounded annual rate of over 30% in2007-2011, according to IWSR data. This year too both products gained market share from rivals such as Beam Inc.’s Teacher’s as United Spirits increased distribution in so-called tier 2 cities. The company’s McDowell’s VSOP brandy grew by 53% last year, taking significant market share from rivals especially in Tamil Nadu.

However, Antiquity Rare and Royal Challenge, other premium products, grew less than 8% over the same period. Another premium brand, McDowell’s No.1 Platinum, a pricier variant of McDowell’s whiskey, reported a sharp drop in growth last year partly due to price increases. McDowell’s Platinum, which was launched three years ago, reported a volume rise of just 15% after sales nearly quadrupled in 2011-2012.

Still, some analysts said that United Spirits’ wide portfolio would serve the company well in future, especially given the impending stake sale to Diageo Plc. The world’s largest distiller announced in November that it would pay $2.1 billion for a 53.4% stake in Vijay Mallya’s United Spirits. The deal is expected to be completed in the quarter to June, though Diageo will end up owning roughly 30% or lesser.

United Spirits has a much wider approach than Pernod, which has “extremely good” but fewer brands placed in attractive niches, said Sunita Sachdev, an analyst at brokerage UBS Securities.

“It’s not a like-to-like comparison between United Spirits’ and Pernod’s strategies. Going forward, with Diageo coming in, we expect to see increased ‘premiumization’ across brands at United Spirits. There should be heightened competition with both global players in India, but given the strength of United Spirits portfolio—and complemented by Diageo’s branding and marketing expertise—this is going to be a formidable challenge for the rest of the industry,” Sachdev said.

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Zodiac A WINNER BY DESIGN – How Indian garment maker Zodiac broke into the world of high fashion in Europe

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May 12, 2013

Walk into high-fashion clothing chain Bijenkorf’s outlet in Krasnapolski Square in Amsterdam’s main shopping district and tick off the shirt brands on display. Armani, Hugo Boss, Calvin Klein, Zodiac,… Zodiac? Doesn’t quite gel here, does it? Bijenkorf does not think so. You will find Mumbai-based Zodiac Clothing Company’s branded shirts jostling global brands for space even in its outlets in Holland’s other big cities, Rotterdam and The Hague. In the UK, 130-odd Ciro Citterio classic menswear retail stores have placed Zodiac shirts next to Polestar shirts made by the UK-based Thomas Pink, considered the world’s best shirt makers.

And what a good job that is. Last year, Zodiac sold shirts worth Rs 21 crore in the UK and the Netherlands. That is 17% of its total sales and a third of its exports. Zodiac shirts retail at 50 euros in Europe, nearly twice the domestic cost, and are more expensive than other private labels, which retail at 40 euros (higher-end brands like Hugo Boss and Armani sell at 60-plus euros). So, if volumes go up, the upside is huge. Noorani knows that. He is investing a “substantial” amount in building a 5,000 sq ft design centre in his office in central Mumbai. His next target: the German and the US markets.

Zodiac’s brand sales overseas may be tiny compared to India’s $5-billion garment exports. Yet it is significant. So far, Indian firms worked on a cost-plus basis with foreign retailers taking the bulk of the margins. Says Noorani: “In the long run, we will get more money for our hard work and the efficiencies we create.”

In reality, Zodiac is not too different from other Indian exporters. Like the Bangalore-based Goculdas images, it makes shirts in its fully-automated factory in Bangalore. It sources fabric from the same Indian mills that other top exporters buy from. It employs 3,500 workers, as much as any exporter of its size. Much of its income comes from making and exporting shirts for private labels abroad. So what makes Zodiac special?

Noorani shows you a series of cards with swatches of fabric stuck on them. These are designs and weaves that Zodiac designers have specially created for different markets. Based on these, Zodiac will make collections for different seasons – like the Florentine collection for summer. And this is where it begins to differ from others. Traditionally, when a GAP or a Wal-Mart buys from India, it supplies the exporter with a set of designs. The exporter translates the designs into shirts with little value addition.

Zodiac’s model changes that. When Noorani started selling in Europe in 1996, he set up design offices in the UK and Germany. These offices track international fashion trends and create shirt designs for every season. These are then fabricated into shirts and sent to Europe. The process does not end there. Designers in India modify those designs to create newer lines, which are then hawked to buyers who order shirts for their own brands. A few days ago, Dubai-based retailer Splash chose half-a-dozen designs based on the Florentine collection. As a result, Zodiac shirts for other labels export at 15-20 euros compared to 6-10 euros that other exporters make. Says Delhi-based textile consultant Creatnet Services’ Devangshu Dutta: “Design is the simplest way that Indian companies can move up the value chain.”

It is not that other Indian exporters don’t design. Mumbai-based Go-Go International’s director Rajiv Goenka buys garments from malls and exclusive showrooms in Paris and Germany, restyles them and shows them to foreign buyers. But this is only a way to get more business; Goenka gets no premium for his labour. Says Dutta: “Buyers are quick to realise these designs are not original and, hence, won’t pay anything extra.”

Zodiac’s design process is more intensive. A typical stylesheet that its international designers create contains the type of fabric, the weaves and the colours in vogue, and the like. Textile engineers in Mumbai weave a sample of that fabric style in their in-house unit and send it to the international designers for approval. Once approved, the fabric is produced at looms it has hired in three leading mills in India. The result: in three months, Zodiac has unique designs to offer to its foreign customers, way ahead of other Indian exporters.

Other Indian firms, too, are waking up to the opportunity. Last year, Raymond, which sells woollen fabric in Europe and the Middle East, bought a suit-making factory in Portugal along with its design team. Today, it sells 300-400 Parx suits a day in Spain and Portugal. Arvind sells its Arrow shirts in the Middle East, while Birla group company Indian Rayon has enlisted the help of European designers to dress up its shirts.

But it will not be easy. Zodiac cannot build its brand quickly. And Noorani does not want to sell his clubwear brand Zod! abroad yet even though a German chain has shown interest in it. That’s because reputed retailers do not stock single-product ranges. Hugo Boss sells perfumes, shirts, ties and wallets. Flagship Zodiac has built such a product line over the years; one-year-old Zod! is still to do so. Even if it wants to have a new product line, it will have to invest big money. For shirts, Zodiac invested Rs 20 crore. And a few months back, it bought Niryat Sam’s factory for Rs 25 crore as it wants to make trousers. In an earlier interview with BW, chairman M.Y. Noorani said: “In the shirting business, the more number of years you are in the business, the more respectable you become. Building a premium brand is really a long haul.”

Can Zodiac withstand that?

Earlier, in Messe Frankfurt’s Heimtextil fair in Germany, Zeba was the only Indian home textile firm invited to the select ‘Trends Hall’. This year, it plans to open its own stores in Belgium, Morocco and Germany in addition to existing ones in the UK and Spain. All in the name of design.

Till three years ago, Zeba was like any other exporter. It sold to big stores across the world, but produced only what buyers wanted – till Krishna Mehta came on the scene, after a stint in New York’s Fashion Institute of Technology. Now 30% of Zeba’s Rs 60-crore revenues come from own-brand sales in India and abroad. Krishna expects the firm to eventually sell more of the Zeba brand than under the brands of other, big foreign buyers.

Krishna does not think that designing for global markets is hard. He draws ideas from the Internet, catalogues, while travelling and “any other source”. He has designers from the National Institute of Design, the National Institute of Fashion Technology and institutes in Mumbai. Krishna says: “The most important aspect of designing is the final presentation to customers. That’s where most Indians fail.”

Besides design, detailed photo shoots of the product and cataloguing, too, has paid good dividends. Last year, when exports of other companies fell, Zeba’s customers increased orders by 25%. This year, while volumes from old UK buyers have not increase a lot, many new stores have signed on. Says Zeba director Rajan Mehta (left): ” Design has changed the way we do business. We are now in control. ”

This article is from the 12 May,2003 issue of Businessworld.

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Are we like this only?

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May 2, 2013

Priyanka Pani, The Hindu Businessline

Mumbai, May 2, 2013

They are all over the place – on a hoarding, on the telly, on the radio, in the newspaper – ads caustically caricaturing South Indians, harping on their idiosyncrasies, mocking their mannerisms, their language, their accent.

‘Betterrr safe thaaaan saari’ goes the television campaign by travel portal GoIbibo, which has been criticised as being in “very bad taste” and “irritating” by many consumers for obvious reasons.

A huge chunk of advertisements these days playing out on the idiot box are portraying South Indian stereotypes – they do not know about Holi, all nurses hail from Kerala, or even that people from the South have a typical accent.

The Idea commercial featuring a South Indian dad running away from kids playing Holi is a case in point as is Dhoni’s missing pillow in the Gulf Oil advert. Don’t look now, but there is a Rajnikanth lookalike in the Finolex commercial as well as the You Telecom one, and Kareena Kapoor’s ‘Romba Nalla’ selling point for Mahindra Duro.

A campaign by mosquito repellent Hit has a nurse, with a distinct South Indian twang. Again, this is supposed to appeal to the mindset that all nurses are from the South and will have a heavy accent, says Kiran Khalap, co-founder of creative agency Cholorphyll.

Of late, every third advertisement that we see on television has some South Indian connect or element attached to it. So, are marketers trying to engage the so called ‘conservative’ South Indians?

Subhobroto Chakroborty, Business Head, Genesis Advertising, says, “Breaking the clutter in the Southern market is difficult. Hence, creative agencies are coming out with new ideas and different marketing strategies to woo the Southerners.”

Other advertising experts say advertising in India has suddenly discovered the South as the consumption story is picking up there. “Even though southern States contribute about 56 per cent to the Indian GDP, they were not known as spenders but huge savers. This phenomenon is changing,” says brand strategist Harish Bijoor, CEO of Harish Bijoor Consults Inc.

Earlier, gold, utensils or financial products were the high-priority areas for the Southerner, who chose not to spend much on comfort, says Bijoor. But things have changed of late. The priorities are changing and so is the buying pattern, he adds.

While Virat Kohli is endorsing Nestle’s Munch South style, playing B. K. Vaali, a Tamil look-alike of his who manages to get a shot at an entry into the local cricket team just by crunching on a Munch bar and distracting the opposite team, Chennai Super Kings’ captain M. S. Dhoni is endorsing Gulf Oil.

The list goes on: Telugu superstar Mahesh Babu toppled Bollywood’s ‘Akki’ Akshay Kumar to become the brand ambassador for Thums Up. This year, marketers have entered into a kind of rat race to inject humour into their ads with some quirky southern dialogues thrown in for good measure.

Santosh Desai, CEO of Futurebrands, believes advertisers have woken up to the fact that India is not just in New Delhi-NCR or the metro region alone, and that they need to look at other markets too.

“Media is no more region-specific. The same advertisement is reaching out to a nondescript village in Karnataka and Rajasthan as well as the big metros,” said Desai. When regional food becomes popular in the metros and more and more marriages cross geographical and linguistic barriers, why should ads be left behind, he asks.

PepsiCo’s recent television commercial for 7-Up shows a girl waiting for transport on a hot sunny day, and is suddenly entertained by a Kathakali dancer, who appears to be gyrating to a salsa number.

Khalap believes ad makers are no longer putting a face to any region, but are looking at all consumers. The trend appears to be sweeping across corporates. From chocolate companies to AC manufacturers, banks to financial service companies, and even lubricant makers, companies have jumped on the bandwagon, all rolling southwards.

AC firm Voltas has a Tamil-accented male protagonist to promote its all-weather air conditioner. Competitor Lloyds AC too has decided to take the southern route.

Alpana Parida of DY Works says with people travelling to other States for work or business opportunities, advertisers feel the need to stay connected with consumers in different and unique ways.

Devangshu Dutta, founder of marketing research firm Third Eyesight, adds that creative agencies have always used humour to break the clutter. Hence they come out with extraordinary – which could be senseless – and funny ads that viewers might instantly connect to. For example, the Maruti advertisement featuring a Sikh son and dad (“Petrol khatam hi nahin hondaah”) is still fresh in consumers’ minds and has nothing to do with Punjabis but with the fact that Maruti is sold more in North India, he adds. The southern element in ads can also be attributed in large part to the fact that the consumption story is now being driven by the South Indians and that a large part of South India resides in the North too. This is probably what prompted Havells to launch a campaign for its grinders where the idlis made with its help substitute flowers that decorate the house for festivities.

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Raymond to focus on growth, profitability in current fiscal

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April 30, 2013

Madhurima Nandy , MINT (A Wall Street Journal Partner)

Bangalore, April 30, 2013

After focusing on consolidation and margin improvement for a year, apparel maker Raymond Ltd intends to return its sights to growth and higher profitability in the current fiscal year.

Top Raymond executives sent out the signal in a conference call with analysts on Monday in which Raymond’s newly appointed chief financial officer M. Shivkumar indicated that the company’s net debt may go up by Rs.150-200 crore this financial year owing to the company’s capital expenditure plans.

Around Rs.342 crore of debt is due for repayment in the third and fourth quarters of 2013-14 which will be replaced by long-term debt, or other loans, he said.

Raymond appointed consultancy Accenture Plc last year for a margin improvement programme and consolidated its apparel business structure to improve cost efficiency. These measures have resulted in the firm boosting cash flow from operations by 42% to Rs.326 crore in the year ended March, according to brokerage PhillipCapital (India) Pvt. Ltd.

The management indicated that 2013-14 will see a lower proportion of discounted sales and better control over inventory levels, two factors that analysts say typically eat into profitability and dent cash flows.

“The company has been focusing on improving cash flows and margin improvement. While the net debt, at Rs.1,347 crore, has remained almost same compared to a year before, investors would ask for reduction in debt by sale of non-core assets,” said Ankur Agarwal, an analyst at Nomura Equity Research.

On the analysts’ call, Raymond executives said a team is exploring options to realize value from its 120 acres of land in Thane on the outskirts of Mumbai.

The inventory days—a measure of efficiency based on the number of days that a company holds its inventory before selling it—declined from 155 days to 144 days in FY13 and the improvement is largely led by textile business as well as liquidation of inventory in branded apparel business, said a report by PhillipCapital.

In the March quarter, Raymond opened 22 new stores and closed 14 stores.

Raymond has restructured its top management, splitting its portfolio and separating the strategy and finance divisions in March. H. Sunder, who was the chief financial officer and headed both finance and strategy portfolios, will now focus on strategy, while Shivkumar, who joined Raymond last year from Jet Airways (India) Ltd, was made CFO.

Robert Lobo, who earlier headed the brands ColorPlus and Raymond Premium Apparel is now president-group apparel at Raymond, and will oversee all the four brands in the branded apparel business segment such as Park Avenue, Parx, Raymond Premium Apparel and ColorPlus.

“The company has initiated a restructuring process for its apparel business structure which involves getting a distinct strategy for each of its brands. It only helped that the company has put one person in complete charge, instead of two people heading the brands earlier,” said an analyst, who didn’t want to be named.

Last Friday, Raymond posted an 80.75% drop in net profit for the March-ended quarter from the year-ago period to Rs.61 lakh, while revenue rose 13% to Rs.1,081.36 crore. The firm said that the net profit falling to Rs.61 lakh was “mainly due to reversal of deferred tax asset provisioning”. The fall in profit came after adjusting for exceptional items and taxes.

A Nomura Equities Research report said the streamlining of Raymond’s branded apparel business includes fine-tuning the communication strategy for each brand and focus on sales channels that would help in brand visibility.

One of the key measures that Raymond has taken up in branded apparel business is the transitioning of Park Avenue from The Raymond Shop (TRS), a retail store format, to exclusive brand outlets (EBO). Raymond Premium Apparel, the high-end segment will be sold through TRS.

Raymond executives mentioned on Monday that while the first phase of transitioning Park Avenue to exclusive outlets has been completed, the company will decide on the second phase depending on consumer demand for the brand and Raymond Premium Apparel.

Gautam Hari Singhania, chairman and managing director, said in a statement that the focus has been on improving the operational efficiencies, through supply chain management initiatives, cost rationalization and consolidation of apparel business operations, which resulted in pull back of profitability and improvement in cash flows.

Raymond shares rose 5.43% to close at Rs.281.3 on Monday on the BSE while the benchmark Sensex gained 0.52% to close at 19,387.5 points.

Apparel companies have been struggling to garner sales, along with high levels of inventory of unsold stock and discounted sales eating into healthy margins, said analysts.

“The key challenges for apparel brands today are to get adequate sales per outlet and maintaining an excitement about product ranges to pull (in) consumers. Discounted sales have also put the margin mix of companies and their cash flows out of balance for a while now, including promotions that are done to drive footfalls,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight.