developed developed 52wh 52wl 52wh 52wl chg.mailers.sparkcapital.in/uploads/tech/daily morning note...

SPARK INDIA DAILY

29 December 2014

Indian organized apparel market is to grow ~14% over the next 5 yrs while Men’s wear continues to command lion share of the apparel pie

Source: Company, Spark Capital Research

DEALER COMMENTARY

Our market closed higher on Friday, snapping a two-day losing streak.After

swinging between gains and losses, key benchmark indices edged higher in late

trade. PSU banks and IT shares logged smart gains.Major index gainers

were, realty (0.93%), IT (0.85%), TECk (0.66%) and India infrastructure index

(0.64%). Most pharmaceutical companies rose while broader sentiment was tepid

ahead of the year-end holidays. Volumes remained low. FMCG index fell the

most (0.81%), followed by consumer durables (0.5%) & power (0.16%) PSU

banking stocks were up on hopes of major reforms to be planned in the upcoming

banking chiefs meeting with the PM on January 3. India VIX dropped 2.8% to

14.65. Market breadth was negative.

WHAT’S INSIDE

Indian Terrain Fashion Ltd – Mid cap Idea Note

Exchange and Currency Performance

Spark Focus Stocks

Technical Indicators

Spark Model Portfolio

Today’s News & Announcements

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

793 870 963 1,077 1,208 1,355

1,521 1,699

1,911 2,158

2,471

4,663

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

5,000.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2018E

Rs.b

n

Indian Apparel market (Rs.bn)

Men's wear, 39%

Women's Wear, 32%

Kid's Wear, 22%

Unisex, 7%

SPARK INDIA DAILY

29 December 2014

Today 1d 5d 1m 3m 6m 12m Today 1d 5d 1m 3m 6m 12m

US (Dow Jones) 18,054 0.1 1.5 1.3 5.8 7.1 9.6 0 18 Dollar Index# 90.0 -0.1 0.4 1.8 5.1 12.4 11.9 -0.2 12.3

UK (FTSE100) 6,610 0.2 4.3 -1.8 -0.4 -1.8 -1.3 -4.3 8.8 Pound 1.6 0.1 -0.1 -1.0 -4.1 -9.0 -5.6 -9.4 0.5

Japan (Nikkiei 225) 17,851 0.2 1.3 2.2 9.4 18.3 10.3 -1 29 Yen 120.5 -0.1 -0.4 -1.7 -9.1 -15.9 -12.7 1.1 -16.4

Germany (DAX) 9,922 0.6 3.7 1.4 2.7 -0.2 4.6 -1.7 18.8 Euro 1.2 0.1 -0.3 -2.3 -3.9 -11.0 -11.7 -12.9 0.2

Brazil (IBOV) 50,145 -1.5 2.9 -8.4 -8.2 -5.7 -2.2 -20 12 Real 2.7 1.0 -0.4 -6.3 -9.3 -17.7 -11.8 3.4 -18.2

Russia (Micex) 1,418 0.7 -2.2 -7.6 0.7 -4.0 -5.2 -12.6 19.9 Ruble 54.2 -1.3 2.6 -4.7 -27.2 -37.3 -39.4 46.0 -39.9

India (Sensex) 27,242 0.1 -0.5 -5.1 2.4 8.5 28.5 -5 36 Rupee 63.7 -0.2 -0.7 -2.6 -3.4 -5.5 -2.8 0.3 -8.4

China (SHCOMP) 3,186 0.9 1.9 18.8 35.1 56.4 51.6 -1.2 61.4 Renminbi 6.2 -0.2 0.0 -1.2 -1.1 -0.3 -2.6 0.7 -3.0

South Africa (Jalsh) 49,479 -0.2 4.6 -2.0 -0.1 -1.7 10.2 -5 12 Rand 11.6 0.1 -0.1 -5.1 -2.6 -8.2 -10.0 2.0 -11.3

HK (H S I) 23,789 1.9 4.2 -0.2 0.1 4.0 2.6 -6 13 HK Dollar 7.8 0.0 -0.1 -0.1 0.1 -0.1 -0.1 0.1 -0.1

Korea (Kospi) 1,935 -0.7 0.3 -2.3 -4.5 -2.7 -3.4 -7.6 2.8 Won 1,098.5 0.0 -0.2 1.4 -4.1 -7.9 -3.9 2.2 -8.2

Singapore (Straits) 3,364 0.3 2.6 0.4 2.3 2.8 6.8 -1 14 SG Dollar 1.3 0.1 -0.3 -1.2 -3.7 -5.7 -4.1 0.3 -6.5

Malaysia (KLCI) 1,765 0.1 2.9 -3.0 -4.4 -6.1 -5.1 -6.9 5.6 Ringgit 3.5 -0.2 -0.3 -1.8 -6.2 -8.2 -5.8 0.3 -10.2

Indonesia (Jakarta) 5,178 0.2 1.3 1.1 -0.5 7.0 23.2 -2 24 Ind Rupiah 12,423.0 -0.1 0.1 -1.1 -2.0 -4.4 -1.7 4.1 -9.4

Commodities Commodities

Brent ($/bbl) 59.8 0.6 -2.6 -14.7 -38.5 -47.2 -46.7 -93.5 2.2 Indonesian Coal ($/MT) 64.7 NA NA -1.6 -7.2 -12.2 -19.5 NA NA

WTI ($/bbl) 55.2 0.8 -3.4 -16.8 -40.2 -45.3 -39.6 -83.7 2.2 S Africa Coal ($/MT) 66.1 NA -0.4 1.0 -2.8 -10.5 -22.6 NA NA

Copper ($/MT) 6,302 -0.3 0.0 -4.1 -6.0 -9.0 -12.8 -17.0 0.9 Australia Coal ($/MT) 62.8 NA 1.5 1.1 -3.9 -12.7 -25.8 NA NA

Zinc ($/MT) 2,154 -0.5 1.6 -5.3 -4.9 -1.7 3.2 -12.6 10.0 Gold Spot $/Oz 1,195 -0.2 -0.2 1.8 -2.1 -9.0 -0.7 -14.2 5.6

Aluminium ($/MT) 1,861 -0.6 -2.6 -11.9 -4.2 -1.5 6.9 -15.3 10.5 GOLD INDEX (Rs./10g) 26,895.0 1.5 0.3 2.9 0.4 -4.2 -8.2 -14.6 5.8

Iron Ore ($/MT) 66.4 -0.9 -1.9 -5.3 -18.4 -24.4 -49.4 NA NA Silver Spot $/Oz 16.1 -0.9 0.1 2.6 -8.5 -22.6 -18.3 -27.3 12.8

Lead ($/MT) 1,863 0.2 0.1 -10.1 -10.2 -13.8 -16.9 -22.6 0.2 MCX Silver (Rs./KG) 36,962.0 2.7 1.9 3.6 -5.0 -16.9 -15.9 -29.2 9.1

Performance (%) Performance (%)

Asian Asian

Chg.

From

52WH

Chg.

From

52WL

Developed Developed

BRICS BRICS

Global Indices

Equity Performance (%) Chg.

From

52WH

Chg.

From

52WL

Currency

Currency Performance (%)


SPARK INDIA DAILY

29 December 2014

81 11

130

47 54 111

36

17

53

32 27

32 86

82

64

82 69

76

-

50

100

150

200

250

300

1M

avg

26-D

ec

24-D

ec

23-D

ec

22-D

ec

19-D

ec

Rs. b

n

FII DII Others

NSE / BSE Category wise turnover

Last 5 Day FII Buy FII Sell Net DII Buy DII Sell Net

26-Dec-14 5.6 5.2 0.4 10.6 6.4 4.2

24-Dec-14 51.1 79.2 -28.1 29.1 24.0 5.1

23-Dec-14 21.5 25.9 -4.4 18.5 13.3 5.2

22-Dec-14 25.4 28.8 -3.4 15.4 11.5 3.9

19-Dec-14 52.4 59.1 -6.7 19.3 13.1 6.2

Market Activity FII & DII - Provisional (INR Bn)

Particulars Today 1D 1M 3M 6M 12M

Reverse Repo 56 27 23 29 15 0

Repo 201 183 191 53 218 411

MSF 1 0 9 0 7 274

Net liquidity (146) (156) (176) (24) (210) (685)

Change in BPS

NSE MIBOR 7.55 (64) (53) (20) (73) (130)

1M CP 8.63 - 24 (32) (5) (46)

3M CP 8.69 6 13 (26) (18) (34)

6M CP 8.91 (1) 7 (33) (25) (73)

3M CD 8.40 2 4 (24) (17) (28)

6M CD 8.50 (3) 2 (38) (24) (75)

12M CD 8.66 0 (0) (41) (25) (62)

Change in BPS

India 10 yr 7.98 2 (16) (46) (75) (91)

US 10 yr 2.25 (0) 8 (23) (29) (75)

Spread (India 10Y-US10Y) 573

India 10YR AAA corp 8.56 1 (14) (74) (56) (115)

Spread (India 10Y-AAA10Y) 57

91D T.Bills 8.35 - 8 (17) (21) (34)

1Y T.Bills 8.21 (3) (7) (43) (44) (58)

Call rate 8.14 10 21 28 (8) (71)

Change in BPS

LIBOR 0.16 (8) (18) (44) (68) (160)

MIFOR 8.23 27 36 51 149 146

OIS 8.19 12 15 40 83 102

12m OIS fw d 7.87 (1) 11 (52) (50)

Money Market Rates

Liquidity (Rs. Bn)

LIBOR, MIFOR

Bond Market

Bulk Deals (INR Mn)

Date Script Client Type Qty Price

26/12/2014 VMART FIDELITY TRUSTEE COMPANY

PRIVATE LIMITED A/C B 500,000 563

26/12/2014 VMART CITIGROUP GLOBAL MARKETS

MAURITIUS PVT LTD S 500,000 563


Rank Company Delivery % 30D Del. % Price Chg

1 WIPRO LTD 56.8 60.9 0.3%

2 HOUSING DEVELOPMENT FINANCE 56.8 63.8 1.5%

3 BHARTI AIRTEL LTD 48.6 64.4 0.3%

4 GAIL INDIA LTD 48.6 60.0 0.7%

5 KOTAK MAHINDRA BANK LTD 48.6 55.3 0.6%

6 ITC LTD 47.7 66.4 -0.9%

7 HDFC BANK LIMITED 47.5 52.5 0.4%

8 NMDC LTD 47.3 59.2 -0.3%

9 HINDUSTAN UNILEVER LTD 46.9 61.4 -0.9%

10 HCL TECHNOLOGIES LTD 46.7 60.1 1.6%

Nifty Top 10 Deliveries

SPARK INDIA DAILY

29 December 2014

1D 1M 3M 1Y FY15E FY16E FY15E FY16E

ASHOK LEYLAND LTD 49.8 0.2 (5.1) 20.5 200.6 8077.4 0.3 35.7 NA 28.6 2.9 2.7 Sell

AMARA RAJA BATTERIES LTD 818.7 3.0 9.5 37.9 135.0 33.0 (0.8) 24.8 33.1 25.2 8.1 6.3 Add

GATEWAY DISTRIPARKS LTD 340.0 (0.2) 10.6 30.5 151.3 59.7 (0.8) 52.2 21.3 17.0 3.0 2.7 Buy

KAVERI SEED CO LTD 785.4 (0.5) (8.7) (6.7) 115.4 44.6 (0.5) 64.3 20.1 16.5 7.3 5.3 Buy

SUNDRAM FASTENERS LTD 182.3 (1.5) (4.4) 21.4 280.5 35.8 (0.8) 51.1 NA NA NA NA NA

WABCO INDIA LTD 4596.2 0.8 4.3 21.4 133.6 2.8 (0.5) 81.2 61.5 41.0 9.9 8.1 Add

CHOLAMANDALAM INVESTMENT AND 473.7 (1.3) 5.0 (1.6) 91.5 10.7 (0.4) 65.1 2.6 2.0 2.6 2.0 Buy

CITY UNION BANK LTD 93.3 0.1 0.4 8.4 87.3 108.5 (0.8) 39.5 2.2 1.9 2.2 1.9 Buy

DCB BANK LTD 121.0 1.0 14.5 43.8 117.0 1627.7 1.2 25.3 2.5 2.2 2.5 2.2 Buy

FEDERAL BANK LTD 147.9 0.1 (2.6) 17.9 75.3 1778.7 0.0 52.1 1.7 1.5 1.7 1.5 Buy

INDIAN BANK 206.7 3.4 8.9 35.7 81.8 94.7 (0.2) 33.0 1.1 1.1 1.1 1.1 Sell

KARUR VYSYA BANK LTD 558.3 0.2 4.1 6.2 61.7 95.9 (0.0) 66.9 1.6 1.4 1.6 1.4 Buy

REPCO HOME FINANCE LTD 641.0 2.6 17.9 49.1 80.9 328.0 1.8 94.6 4.8 4.2 4.8 4.2 Buy

SHRIRAM CITY UNION FINANCE 1809.6 1.3 6.4 12.4 70.5 839.9 15.1 99.9 2.9 2.5 2.9 2.5 Buy

SOUTH INDIAN BANK LTD 28.1 0.2 1.6 8.1 36.8 6243.4 1.4 84.8 1.1 1.0 1.1 1.0 Buy

DALMIA BHARAT LTD 442.3 1.9 (11.1) 0.9 165.3 83.2 0.5 94.8 58.3 17.2 1.1 1.1 Buy

RAMCO CEMENTS LTD/THE 331.7 2.5 (2.4) 2.9 74.2 19.7 (0.9) 49.5 28.1 16.4 2.9 2.6 Add

BLUE STAR LTD 311.3 (0.9) (9.4) (10.3) 96.9 11.9 (0.6) 43.9 27.6 20.8 5.2 4.4 Sell

TTK PRESTIGE LTD 3513.6 (0.3) (7.9) (14.2) 1.7 0.9 (0.9) 32.2 31.7 26.4 6.1 5.3 Sell

VA TECH WABAG LTD 1537.2 1.5 (6.5) (9.7) 174.3 4.9 (0.9) 49.1 30.6 24.6 4.3 3.8 Add

V-GUARD INDUSTRIES LTD 1082.0 (0.8) (3.4) 21.5 128.8 959.5 18.3 99.4 36.8 29.0 8.4 6.8 Add

CYIENT LTD 517.1 (0.1) 0.3 19.3 52.3 16.6 (0.7) 64.3 16.4 14.4 3.2 2.7 Add

FIRSTSOURCE SOLUTIONS LTD 34.0 3.5 (3.0) (14.7) 53.8 940.5 (0.2) 58.2 8.1 6.0 0.9 0.8 Buy

HEXAWARE TECHNOLOGIES LTD 195.9 0.6 (10.5) (0.1) 48.5 486.4 (0.1) 32.5 15.2 13.1 4.0 3.7 Reduce

POLARIS CONSULTING & SERVICE 170.8 0.2 (15.8) (33.5) 23.5 189.2 (0.4) 41.1 9.7 7.9 1.0 1.0 Buy

REDINGTON INDIA LTD 132.6 (0.0) 10.6 42.6 77.7 173.8 (0.9) 28.9 13.7 11.3 2.2 1.9 Buy

BIOCON LTD 417.2 1.1 (8.6) (18.0) (10.5) 1451.8 2.5 58.2 18.3 15.6 2.4 2.1 Add

APOLLO HOSPITALS ENTERPRISE 1128.8 (0.8) (3.2) 2.8 20.2 80.5 0.0 57.6 40.6 32.9 4.8 4.3 Sell

BAJAJ CORP LTD 339.6 (0.5) 5.0 30.7 54.4 69.5 (0.9) 67.2 25.4 22.3 9.1 8.6 Buy

BERGER PAINTS INDIA LTD 407.0 0.6 3.4 12.2 80.7 74.1 (0.7) 25.6 45.7 36.3 10.6 8.8 Add

JYOTHY LABORATORIES LTD 249.8 0.9 6.7 2.7 30.0 15.1 (0.9) 46.0 32.5 27.4 5.8 5.2 Buy

KEWAL KIRAN CLOTHING LTD 1849.8 (0.8) (2.4) (0.5) 62.8 0.4 (0.9) 47.6 28.5 22.9 NA NA Buy

LA OPALA RG LTD 445.4 (1.3) 1.6 36.5 271.1 28.1 0.0 37.6 56.4 45.9 15.8 16.4 Add

RELAXO FOOTWEARS LTD 517.7 (1.4) 4.8 8.6 146.0 8.5 (0.1) 57.8 36.8 28.7 8.7 6.8 Add

Consumption

Returns (%)

Auto, Agri &

logistics

Financials

Cement

Pharma

Top Del. % Company Price

IT Services

Delivery

Volume

('000)

Rating

PE for all sectors & P/ABV

for banksEV/EBITDA (x)

Capital Goods

% inc/dec to

30D avgDelivery %

Spark Focus Stocks

SPARK INDIA DAILY

29 December 2014

0

100

200

7600

7700

7800

7900

8000

8100

8200

8300

8400

8500

8600

8700

8800

8900

9000

9100O

I ('0

00)c

on

tracts Call Put

-10

0

10

20

30

7600

7700

7800

7900

8000

8100

8200

8300

8400

8500

8600

8700

8800

8900

9000

9100

Ch

an

ge in

OI

('000)c

on

tracts Call Put

0

150

300

450

7450

7500

7550

7600

7650

7700

7750

7800

7850

7900

7950

8000

8050

8100

8150

8200

8250

8300

8350

8400

8450

8500

8550

8600

8650

8700

8750

8800

8850

8900

8950

9000

9050

9100

Rs. b

n

Total Call Value Total Put Value

Max Pain Theory (based on Index Options) – Indicative Nifty closing for next Expiry

Nifty Open Interest (‘000 contracts) Nifty Open Interest change (‘000 contracts)

Nifty PCR

Technical Indicators

0.8

1.0

1.2

1.4

13-N

ov

15-N

ov

17-N

ov

19-N

ov

21-N

ov

23-N

ov

25-N

ov

27-N

ov

29-N

ov

1-D

ec

3-D

ec

5-D

ec

7-D

ec

9-D

ec

11-D

ec

13-D

ec

15-D

ec

17-D

ec

19-D

ec

21-D

ec

23-D

ec

25-D

ec

Nifty PCR Nifty PCR (30D avg)

FII Open Interest 12-18 12-19 12-22 12-23 12-24 Delta 12-26 Delta Delta

Index Futures 183 192 202 248 259 11.0 139 (119.3) (0.9)

Stock Futures 509 522 523 539 543 4.1 478 (65.5) 2.9

Stock Options 28 28 29 28 28 (0.4) 1 (27.0) 7.4

Index Options 684 723 751 782 781 (0.8) 748 (32.8) (370.8)

Total (Rs. Bn) 1404 1466 1505 1596 1610 13.8 1366 (244.6) (361.3)

Top CompanyPrice

Change

OI

Change

Close

Price

(Rs. / sh)

- - 0.0% -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

Chambal Fertilizers & Chemical -0.3% 0.0% 60

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

- - - -

Oracle Financial Services Soft 0% -28% 3,334

Ultratech Cement Ltd -1% -24% 2,603

Ambuja Cements Ltd 0% -23% 226

Dr Reddy's Laboratories Ltd 0% -22% 3,134

Bharat Heavy Electricals Ltd -1% -21% 252

Infosys Ltd 1.1% -34.6% 1,952

Dabur India Ltd 0.7% -32.4% 230

HCL Technologies Ltd 1.6% -30.5% 1,565

Coal India Ltd 0.4% -30.3% 378

Idea Cellular Ltd 0.6% -28.8% 150

Lo

ng

Un

win

dS

ho

rt

Co

veri

ng

Lo

ng

Bu

ild

up

Sh

ort

Bu

ild

up

SPARK INDIA DAILY

29 December 2014

10.6

10.5

25.3

8.0

8.3

79.0

5.6

10.0

16.0

5.0

1.8

44.1

4.2

9.3

15.1

3.8

0.6

36.8

- 20.0 40.0 60.0 80.0 100.0

V 1.0 (Oct'13 - Jan'14)

V 1.1 (Jan'14 - Apr'14)

V 1.2 (Apr'14 to Aug'14)

V1.3 (Aug'14 to Sep'14)

v1.4 (Sep'14 to date)

Total

Sensex BSE200 Spark

0

50

100

Oct-

13

No

v-1

3

Dec-1

3

Jan

-14

Feb-1

4

Mar-

14

Ap

r-14

May-1

4

Jun

-14

Jul-

14

Aug

-14

Sep

-14

Oct-

14

No

v-1

4

Dec-1

4

%

Spark Portfolio BSE 200 INDEX

Spark Returns

Spark Portfolio returns vs. BSE 200 returns

Spark Portfolio returns outperformance to BSE 200

*Returns since 19th Sep’14 (Recent portfolio revision date)

C ompanyB SE 2 0 0

W eight s

Spark

W eight s

B loomberg

C ode

M cap

( R s. B n)C M P

6 M A vg

( R s. M n)

A bso lut e

1 Y r

R et urn

A bso lut e

R et urns t o

dat e*

W eight ed

R et urns t o

dat e*

F inancials - OW 2 5.8 % 3 2 .0 % 2 4 .9 % 5.3 %

HDFC Bank Ltd 6.0% HDFCB IN Equity 2,292 949 1,781 42.9% 10.3% 0.6%

Kotak M ahindra Bank Ltd 4.0% KM B IN Equity 967 1,253 1,348 69.5% 17.8% 0.7%

IndusInd Bank Ltd 5.0% IIB IN Equity 415 784 599 87.1% 24.5% 1.2%

Power Finance Corp 3.0% POWF IN Equity 397 301 1,090 96.2% 22.1% 0.7%

Yes Bank Ltd 6.0% YES IN Equity 309 741 1,899 101.1% 27.2% 1.6%

Federal Bank Ltd 3.0% FB IN Equity 126 148 606 78.0% 17.1% 0.5%

Karur Vysya Bank 3.0% KVB IN Equity 67 558 83 66.0% 2.0% 0.1%

Cholamandalam Inv. 2.0% CIFC IN Equity 68 474 15 93.9% -6.1% -0.1%

Healt hcare - EW 7.1% 7.0 % 5.9 % 1.0 %

Sun Pharma Ltd 3.0% SUNP IN Equity 1,680 811 2,016 41.1% 0.5% 0.0%

Cadila Healthcare Ltd 2.0% CDH IN Equity 323 1,576 144 101.9% 22.3% 0.4%

Torrent Pharma 2.0% TRP IN Equity 184 1,086 89 132.6% 28.5% 0.6%

Inf o rmat ion Techno logy - U W 13 .3 % 8 .0 % 1.5% 0 .1%

Infosys Ltd 3.0% INFO IN Equity 2,242 1,952 5,369 12.1% 5.5% 0.2%

Wipro Ltd 3.0% WPRO IN Equity 1,351 547 1,102 0.0% -7.0% -0.2%

Cyient Ltd 2.0% CYL IN Equity 58 517 49 54.6% 8.9% 0.2%

Oil & Gas - OW 9 .9 % 12 .0 % 6 .6 % - 0 .6 %

ONGC Ltd 6.0% ONGC IN Equity 2,947 344 2,188 21.3% -14.7% -0.9%

BPCL Ltd 4.0% BPCL IN Equity 467 646 1,156 88.2% -1.8% -0.1%

GSPL Ltd 2.0% GUJS IN Equity 63 112 165 88.4% 16.1% 0.3%

C onsumer - EW 12 .6 % 12 .0 % 8 .5% 1.0 %

Asian Paints Ltd 4.0% APNT IN Equity 697 727 879 51.5% 8.6% 0.3%

Titan Ltd 3.0% TTAN IN Equity 326 367 426 61.1% -5.5% -0.2%

Bata Ltd 3.0% BATA IN Equity 82 1,279 220 22.0% -1.6% 0.0%

Whirlpool Ltd 2.0% WHIRL IN Equity 79 622 90 196.0% 45.0% 0.9%

A ut o - OW 10 .2 % 12 .0 % 7.0 % 0 .4 %

Tata M otors Ltd 4.0% TTM T IN Equity 1,465 485 2,845 31.0% -6.5% -0.3%

Hero M otocorp Ltd 3.0% HM CL IN Equity 618 3,096 1,638 53.8% 4.9% 0.1%

Exide Industries Ltd 3.0% EXID IN Equity 150 177 497 48.0% 2.5% 0.1%

Wabco India Ltd 2.0% WIL IN Equity 87 4,596 35 134.0% 22.8% 0.5%

Inf rast ruct ure - U W 9 .1% 7.0 % 10 .2 % 0 .2 %

Gujartat Pipavav Port Ltd 3.0% GPPV IN Equity 84 175 183 180.3% 0.3% 0.0%

AIA Engineering Ltd 2.0% AIAE IN Equity 98 1,034 128 117.8% 10.4% 0.2%

Ashoka Buildcon 2.0% ASBL IN Equity 22 138 25 123.8% 0.2% 0.0%

M at erials - EW 1.9 % 3 .0 % 3 .4 % 0 .3 %

Shree Cement Ltd 3.0% SRCM IN Equity 325 9,323 126 113.0% 8.6% 0.3%

Ot hers 2 .0 % 1.6 % 0 .5%

Redington 2.0% REDI IN Equity 53 133 197 79.3% 26.5% 0.5%

C ash & Ot hers 10 .2 % 5.0 %

Tot al 10 0 .0 % 6 7.9 % 8 .3 %

Spark Model Portfolio

-10

0

10

20

30

40

Oct-

13

No

v-1

3

Dec-1

3

Jan

-14

Feb-1

4

Mar-

14

Ap

r-14

May-1

4

Jun

-14

Jul-

14

Aug

-14

Sep

-14

Oct-

14

No

v-1

4

Dec-1

4

%

Outperformance (wrt BSE 200 )

SPARK INDIA DAILY

29 December 2014

Today’s News

Sector News

Macro Govt spent less than 30% of Plan budget in key sectors in first six months

Domestic M&As surge to a four-year high in 2014

Spending rate outpaces credit card issuance growth in 2014

EPFO returns beat inflation for the first time since global crisis

Pharma Lupin gets USFDA approval for generic Epivir

Lupin eyes acquisition in US, EU

IT Amazon’s India dreams may remain in the cloud for now

Electronics fund to promote startups soon

TCS refutes online forum’s layoff numbers

Infosys will remain a services firm, says Sikka; promises to deliver more

value

Zensar signs new deals in infrastructure management

Infosys ties up with training firms to improve efficiency

Microsoft CEO Satya Nadella urges Ravi Shankar Prasad to allow White-

fi technology to provide Internet in villages

Consumption Personal care drives FMCG business on rural push

2014: Slow Business for FMCG, Executive Moves Aplenty

Jyothy Laboratories: Sparkling colours

As competition intensifies, Amul steps up efforts to remain ‘The Taste of

India’

GlaxoSmithKline: Fast-tracking innovation

Today’s News

Today’s News

Sector News

Elder Health Care in talks with Japanese firm to launch skin-care product

Offline apparel stores brace for tough test amid e-commerce blitz

'Shoe makers should focus on brand building

Indian e-commerce to hit $100 bn value by 2019: Assocham

Average Indian to spend Rs 10,000 on e-commerce in 2015: Study

Cap Goods VA Tech WABAG bags World Bank-funded project in Philippines

Banking ING Vysya Bank employees to strike on Jan 7

Sumitomo Mitsui may take up to 10 per cent stake in Reliance Bank

Manappuram Group may apply for banking licence

RBI's upper age limit of 70 for private bank CEOs may not be good news for

everyone

Axis Bank in talks for tie-up with payments bank

RBI governor Raghuram Rajan questions farm debt waiver schemes

Promoters must put more skin in game, feels Uday Kotak

http://www.livemint.com/Money/NztbvLpoSSXqfcclsi7JKM/Govt-spent-less-than-30-of-Plan-budget-in-key-sectors-in-fi.html?utm_source=copy

http://www.livemint.com/Companies/RDoRplvJ9kBYJYZ5ysnDWL/Domestic-MAs-surge-to-a-fouryear-high-in-2014.html?utm_source=copy



http://www.business-standard.com/article/finance/credit-card-spends-outpace-growth-in-2014-114122700222_1.html

http://www.business-standard.com/article/pf/epfo-returns-beat-inflation-for-the-first-time-since-global-crisis-114122700145_1.html

http://www.myiris.com/news/company-update/lupin-gets-fda-approval-for-generic-epivir-tablets/20141226161956199



http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/lupin-eyes-acquisitions-in-us-europe-to-bolster-overseas-presence/articleshow/45665665.cms



http://www.thehindubusinessline.com/features/smartbuy/tech-news/amazons-india-dreams-may-remain-in-the-cloud-for-now/article6728509.ece

http://www.thehindubusinessline.com/features/smartbuy/tech-news/electronics-fund-to-promote-startups-soon/article6732948.ece




http://www.thehindubusinessline.com/features/smartbuy/tcs-refutes-online-forums-layoff-numbers/article6732878.ece

http://www.thehindubusinessline.com/features/smartbuy/tech-news/infosys-will-remain-a-services-firm-says-sikka-promises-to-deliver-more-value/article6728453.ece

http://www.thehindubusinessline.com/features/smartbuy/tech-news/infosys-will-remain-a-services-firm-says-sikka-promises-to-deliver-more-value/article6728453.ece

http://www.thehindubusinessline.com/features/smartbuy/tech-news/zensar-signs-new-deals-in-infrastructure-management/article6727917.ece



http://economictimes.indiatimes.com/articleshow/45671596.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst













http://economictimes.indiatimes.com/articleshow/45658549.cms

http://profit.ndtv.com/news/corporates/article-2014-slow-business-for-fmcg-executive-moves-aplenty-718878

http://www.afaqs.com/news/story/42876_Jyothy-Laboratories:-Sparkling-colours



http://www.financialexpress.com/article/companies/as-competition-intensifies-amul-steps-up-efforts-to-remain-the-taste-of-india/23973/





http://www.business-standard.com/article/management/fast-tracking-innovation-114122800634_1.html



http://www.thehindubusinessline.com/companies/elder-health-care-in-talks-with-a-japanese-firm-to-launch-skincare-product/article6732612.ece



http://www.livemint.com/Industry/JxlpWOdOxycYr1kPdKflEM/Offline-apparel-stores-brace-for-tough-test-amid-ecommerce.html



http://www.business-standard.com/article/companies/shoe-makers-should-focus-on-brand-building-114122800617_1.html

http://www.business-standard.com/article/companies/indian-e-commerce-to-hit-100-bn-value-by-2019-assocham-114122700409_1.html







http://timesofindia.indiatimes.com/tech/tech-news/Average-Indian-to-spend-Rs-10000-on-e-commerce-in-2015-Study/articleshow/45666502.cms



http://articles.economictimes.indiatimes.com/2014-12-26/news/57420519_1_va-tech-wabag-water-treatment-player-world-bank



http://www.business-standard.com/article/companies/ing-vysya-bank-employees-to-strike-on-jan-7-114122800556_1.html





http://www.thehindubusinessline.com/industry-and-economy/banking/manappuram-group-may-apply-for-banking-licence/article6728425.ece?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication&utm_reader=feedly



http://www.business-standard.com/article/finance/rbi-s-upper-age-limit-of-70-for-private-bank-ceos-may-not-be-good-news-for-everyone-114122600105_1.html

































http://www.business-standard.com/article/pti-stories/axis-bank-in-talks-for-tie-up-with-payments-bank-114122800132_1.html



http://articles.economictimes.indiatimes.com/2014-12-27/news/57441230_1_farm-debt-waiver-debt-relief-scheme-ineligible-farmers










SPARK INDIA DAILY

29 December 2014

Intellect Design Disclosures under Reg. 29(1) of SEBI (SAST) Regulations, 2011

TechM Allotment of shares

RBI Money Market Operations as on December 24, 2014

SBIN Clarification sought from State Bank of India

IIB Re-appointment of Managing Director & CEO

Today’s Announcements

http://www.bseindia.com/xml-data/corpfiling/AttachHis/Intellect_Design_Arena_Ltd_261214_SAST1.pdf

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=0BDA5DC9-802C-463C-BA52-BE3956658166



http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=32853

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=8D916BDF-5C68-4241-8B91-EA4234F90A33

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=0646891D-9F22-4BAE-BF5D-C53ACBCD302C



Indian Terrain Fashion Ltd (ITFL) CMP

Rs.552

Stock performance (%)

1m 3m 12m

ITFL 8% 85% 340%

Sensex -4% 3% 29%

CNX CONS 2% 3% 29%

Financial summary

Year Revenues (Rs. mn) EBITDA (Rs. mn) PAT (Rs. mn) EPS (Rs.) P/E(x) EV/EBITDA(x) ROE (%) ROCE (%)

FY14 2,321 242 99 17.4 31.8 15.0 31.9 19.4

FY15E 2,818 310 155 26.9 20.5 11.7 35.3 22.6

FY16E 3,379 399 218 37.8 14.6 9.1 34.8 23.6

FY17E 3,977 485 264 45.7 12.1 7.3 31.0 23.0

Date 26 Dec 2014

Market Data

SENSEX 27209

Nifty 8174

Bloomberg ITFL IN

Shares o/s 6mn

Market Cap Rs. 3bn

52-wk High-Low Rs. 606-101

3m Avg. Daily Vol Rs. 8mn

Index member NA

Latest shareholding (%)

Promoters 38.4

Institutions 7.7

Public 53.9

Mid-Cap Idea Increasing exposure to global fashion trends coupled with economic boom post liberalization in 1991 set the fashion industry

rolling in India. Given the potential consumer base, several apparel MNC brands ventured into the Indian organized apparel

retail space since 1991 looking to cement their place in the Indian markets. Despite the Indian consumer’s innate want to

imitate western consumer, fashion brands have found it difficult to serve an homogenous offering for heterogeneous Indian

consumer clusters. Several Indian apparel brands too emerged, however only a few were able to survive a down-cycle (2008-

2012). Indian Terrain Fashion Ltd (ITFL) hinging on brand equity, built through its superior offerings is one of such Indian

apparel brands that has not only survived the onslaught but continues to maintain a niche in Indian fashion industry. ‘Indian

Terrain’ operates in the niche premium men’s casual wear market. Overall, men’s wear category is expected to witness strong

traction on the back of favourable demographics and inflection in per capita income. Though, we continue to prefer players

who possess strong terms of trade in the apparel retail space, we believe ITFL’s brand equity, entrenched distribution,

sourcing capabilities and design competency should enable them to achieve better terms of trade in medium to long term.

Category growth triggers: Increase in per capita apparel consumption led by favorable demographics, rise in organized work-

force and change in buying pattern to be the long term volume growth drivers. With Indian per capita GDP crossing $1500 mark,

we believe several discretionary categories would begin to witness positively skewed growth as observed in several other emerging

economies, which should see categories as Men’s wear witnessing increased premiumization as consumers upgrade from

unorganized offerings.

Strong brand equity: Targeting a niche consumer segment, Indian Terrain has managed to build a strong brand equity among its

consumer base, primarily through its superior and differentiated product offerings. Being a pioneer of ‘smart casuals’ in India,

Indian Terrain has managed to redefine fashion for its target market. Entry of several MNC players off-late into the ‘smart casuals’

market not only illustrates the category potential but also ITFL’s ability to tap into niche fashion trends well ahead of even MNCs.

Entrenched Distribution: ITFL has managed to develop a pan India distribution structure through its Exclusive Brand Outlets

(EBOs), Multi Brand Outlets (MBOs), Large Format Stores (LFS) and online channels. Strategic locations of EBOs, beyond

contributing to 1/3rd of revenues also acts as a branding tool. ITFL remains the preferred supplier for several LFS and MBOs. Being

in fashion, ITFL has also embraced e-commerce quicker than several of its peers.

Sourcing Capabilities: ITFL has a robust supply chain network, with woven fabrics being purchased and job-work being done by

Celebrity fashions (CFL) and other outsourced players. Knitted garments meanwhile are directly purchased. Association with CFL

has enabled ITFL gaining immense management, sourcing and design capabilities.

Design Competencies: Being in the fashion industry, ITFL refurbishes majority of its product line every season assisted by a

robust design team that continuously monitor fashion trends in India and globally. Further, incessant monitoring of product line

offtakes and ITFL’s leaner structure enables quicker design turnover. We also acknowledge exciting potential in complementary

categories too.

TEJASH SHAH, [email protected] +91 22 4228 8155

GNANA SUNDAR [email protected] +91 44 4344 0062

MADHAV PVR [email protected] +91 44 4344 0061

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

“AU COURANT”


Rs.552 Corporate Factsheet

Corporate Factsheet

Promoter Background Indian Terrain Fashion Limited (ITFL)’s business operations are managed by a dedicated set of professionals

with rich industry experience and capabilities. The promoters Mr. V. Rajagopal and his wife Mrs. Rama

Rajagopal have been in the textile sector for more than two and a half decades catering to international fashion

brands like Tommy Hilfiger, Timberland, Nautica and The North Face among others through its group entity

Celebrity Fashions Limited.

Presence The company retails across the country with more than 1000 points of sale through 540 Multi Brand Outlets, 156

doors of Large Format Stores and 108 Exclusive Brand Outlets in addition to retailing through online channels.

Management depth Number of Promoter directors – 2; Mr. V.Rajagopal – Chairman and Managing Director; Mrs. Rama

Rajagopal - Executive Director; Top Management: Mr, Charath Narasimhan – CEO; Mr. Amitabh Suri – COO;

Ms. Visalakshi .L-CFO; Mr. Selin Reubalin – Head (Manufacturing & Supply Chain); Mr. Priyank Karnam – Head

(Design) and Ms. Shehnaz Sharif – Head (Merchandising)

Business ITFL is engaged in the manufacturing and retailing of premium casual wear for men. ITFL offers around 25

variants in the product categories of Shirts, Trousers, T. Shirts & Shorts.

Corporate Structure Group Companies: Celebrity Clothing, Celebrity Fashion & Celebrity Connections ( Part of manufacturing is

outsourced to group companies on job work basis; All group companies cater to the export market)

Revenue Model (FY14) Product wise break up: Shirts -46%; Trousers- 32%; T-shirts – 12%; Others-10%

Capacity The company does not have any manufacturing facilities. While fabric is procured, job work is undertaken by

celebrity fashions and three other third party manufacturers.

Key Vendors Arvind Mills, Vardhaman Textiles, Ashima group, JCT Mills, Suryajyothi Spinning Mills

Key Success Factors Robust brand with premium positioning , healthy distribution network, in-house designing capabilities and

strong sourcing eco-system

Credit Rating CRISIL BB/Stable/CRISIL A4 ( Double B rating for the long term facilities and A4 for the short term facilities)

Corporate Bankers State Bank of India

HDFC Bank Limited

Auditors M/S Anil Nair & Associates; M/S CNGSN & Associates


Rs.552 Time Line – Pre & Post Celebrity Fashions

2001 2001 2010 2010 2011

2011 2012 2012 2013 2014

Celebrity fashions

establishes

‘INDIAN TERRAIN’

brand

Retail operation

commences with 2

stores in Chennai

& Bangalore

Achieves

revenues of

Rs.1.0bn – A

milestone

considering the

brand was only 9

years old

Incorporated as a

Standalone

company

Demerged from

Celebrity

Fashions

Listed on BSE

and NSE Recognised as the

11th most trusted

brand by “Brand

Equity”

Achieves Pan-

India status

with ~800

points of sale

Achieves a

revenue

milestone of

Rs.1.5bn

Revenue

crosses Rs.2bn

and has

expanded in

excess of 100

EBOs

Ind

ian

Te

rra

in

As

a p

art

of

Ce

leb

rity

Fas

hio

ns

Source: Company Filings, Spark Capital Research


Rs.552 Business Overview

…especially in shirts & trousers that contribute to ~3/4th of sales


PAT also on the uptrend, margins showing a good uptick


…led by good performance across product categories…


Robust revenue growth over the past four years…


India

n T

err

ain

Pro

duct

off

erings

Shirts

Trousers

T-shirts

Shorts

9 variants

3 variants

9 variants

2 variants

1.21 1.41

1.57

2.32

0.0

0.5

1.0

1.5

2.0

2.5

FY 11 FY 12 FY 13 FY 14

Rs.b

n

Net Sales

63.2

17.7

41.1

98.8

5.2%

1.3%

2.6%

4.3%

0%

1%

2%

3%

4%

5%

6%

0

20

40

60

80

100

120

FY 11 FY 12 FY 13 FY 14

% o

f net sale

s

Rs.m

n

PAT PAT as a % of sales

Shirts, 46%

Trousers, 32%

T-Shirts, 12%

Jackets, 4%

Shorts, 3%

Knitwear, 2%

Others, 1%


Rs.552

Indian Terrain business Model

Source: Company, Spark Capital Research

Business Model

Raw Material

Suppliers

Indian Terrain

Procurement

Division

Celebrity Fashions Other Apparel

Manufacturer

Indian Terrain

Warehouse

EBOs LFOs MBOs

Refinishing Center

Indian Terrain

Design

Department

Distributors

Online


Rs.552 Investment Thesis

Drivers of Future Growth


ITFL boasts of an

entrenched

distribution network

which is expected

to immensely

improve their share

in the rapidly

growing men’s

wear market.

Expansion into

tier2/3 towns

coupled with

incessant new

product launches

to be a key volume

growth driver.

V

o

l

u

m

e

O

f

f

t

a

k

e

P

r

I

c

in

g

P

o

w

e

r

With Indian per

capita income at

an inflection point,

we believe further

growth in per

capita Income

should begin to

positively impact

discretionary

categories as

apparels in a non-

linear manner.

ITFL, given its

strong brands to be

a key beneficiary of

shift from

unorganised and

entry level

products

Tapping into the lucrative Indian apparel market

Strong Brand

Entrenched Distribution

# 1 Organized Men’s

wear market gaining

prominence

# 2 Brand Equity # 3 Entrenched

Distribution

# 4 Sourcing

Capabilities

Economic Moat origins here

# 5 Designing

Competencies


Rs.552 # 1 Organized Men’s wear market gaining prominence – Organised apparel market to gain growth momentum

Casuals continue to be the preferred style of clothing

Source: Bloomberg Business Intelligence, Spark Capital Research

Few of the leading apparel brands in India


…Men’s wear continues to command lion share of the apparel pie


Indian organized apparel market is to grow ~14% over the next 5 yrs…


793 870 963 1,077 1,208 1,355

1,521 1,699

1,911 2,158

2,471

4,663

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

5,000.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2018E

Rs.b

n

Indian Apparel market (Rs.bn)

Men's wear, 39%

Women's Wear, 32%

Kid's Wear, 22%

Unisex, 7%

Casual, 53%

Sports, 27%

Formal, 15%

Others, 5%


Rs.552 # 1 Organized Men’s wear market gaining prominence – It’s a ‘MAN’S’ thing

Shirts and trousers not only continue to lead volume offtakes…


…but also have contributed significantly to value growth.


…as they have been in the past 5 years


Improvement in offtakes & premiumization to be key growth drivers…


363 399 438 482 535 590

653 722

803 899

1,020

1,928

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2018E

Rs.b

n

Indian Men's wear market (Rs.bn)

5.7% 6.3% 6.4% 6.7% 7.2%

10.7% 10.5% 11.2% 12.0% 13.5%

-0.5%

1.5%

3.5%

5.5%

7.5%

9.5%

11.5%

13.5%

2009 2010 2011 2012 2013

Volume Value

Shirts, 30%

Trousers, 24%

Denim, 9%

Winterwear, 8%

Innerwear, 8%

T-Shirts, 6%

Suits, 6% Others, 9%

48% 41% 58%

45%

24% 24%

9%

10%

17% 20% 16%

17%

11% 15% 17% 28%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

2006 2015E 2006 2015E

Shirts Market Trousers Market

Low (<Rs.1000) Economy (Rs.1000-Rs.2000)

Mid-Market (Rs.2000-Rs.5000) Premium & Above (>Rs.5000)


Rs.552 # 1 Organized Men’s wear market gaining prominence – Long way to catch up

China ($79bn)

India ($17bn)

Indonesia ($3bn)

Japan ($22bn)

Australia ($5bn)

Russia ($14bn)

Argentina ($5bn)

Brazil ($12bn)

Mexico ($5bn)

France ($14bn) Germany ($23bn)

Italy ($14bn)

Turkey ($8bn)

UK ($18bn)

0

5

10

15

20

25

30

35

40

45

50

0 1 2 3 4 5 6 7 8

Reta

il S

elli

ng P

rice (

US

D)

Per Capita Consumption (Volume)

Volume Drivers

Pri

ce

Dri

ve

rs

Disposable

Income

Inflection

Organised

market traction

Urbanisation

Exhibitionist

culture

Increase in

organised jobs

Online retail

penetration

Favourable

Demographics

Higher

wardrobe

turnover



Rs.552 # 1 Organized Men’s wear market gaining prominence – ‘Men will be Men’

…due to job demands and…

Source: Economic Survey 2014, Spark Capital Research

…increasing availability to lead to volume growth

Source: CRISIL, Spark Capital Research

…wanting to purchase on desire rather than on need…

Source: Consumer Research, Spark Capital Research

Larger younger population which is…

Source: Indian Census Bureau, Spark Capital Research

61 62 62 62 61

58 53

50 46

42 36

29 23

17 12

7 5

55 54 55 55 54

51 49

46 44

40 35

29 23

18 13

9 7

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80+

When Needed 18%

Worn Out 16%

Out Of Style 20%

Peer Pressure 17%

Impulse 15%

Sale 14%

Want Based 66%

27.5 28.2 28.7 29.0 29.6 30.8

32.0

20

22

24

26

28

30

32

34

2008 2009 2010 2011 2012 2013P 2014P

Organised Sector Jobs (mn)

15 24 38 58 91

139

224

334

504

1.5% 1.6%

1.4% 1.4% 1.6% 1.6%

1.8% 2.0%

2.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

0

100

200

300

400

500

600

% o

f org

anis

ed r

eta

il

Rs.b

n

Online Reatil Market ( Rs.bn) % Of Organised Retail


Rs.552 # 1 Organized Men’s wear market gaining prominence – ‘Fat wallets, smart clothing’

Middle of the pyramid comprising of 200mn to be the key segment…

Source: World Bank, Spark Capital Research

…to drive consumption of organized apparel retail in India

Source: IBEF, Spark Capital Research

…similar trend waiting to happen as India crosses the $1500 mark…

Source: Bloomberg Business Intelligence, World Bank, Spark Capital Research

Non-linear positive consumption as per capita crosses $1500…

Source: Bloomberg Business Intelligence, World Bank, Spark Capital Research

2014 , ~40%

2001 , ~25%

Organized players have not only

taken a significant pie of share in the

apparel market but also continue to

grow indicating the appetite for

organized players in the category.

25m people

2.1% of India’s

population 23m people

2% of India’s population

164m people

13.5% of India’s population

125m people

10.3% of India’s population

874m people

72% of India’s population

<$1050

$1050-$1550

$1550-$3250

$3250-$5250

>$5250

0

200

400

600

800

1000

1200

1400

1600

1800

0

200

400

600

800

1,000

1,200

Per

capita G

DP

(U

SD

)

Men's

wear

mark

et S

ize (

Rs.b

n)

India Per Capita GDP (USD) India Men's wear Apparel market (Rs.bn)

0

1000

2000

3000

4000

5000

6000

7000

8000

0

100

200

300

400

500

600

Per

capita G

DP

(U

SD

)

Men's

wear

mark

et S

ize (

CN

Y b

n)

China Per Capita GDP (USD) China Men's wear Apparel market (CNY bn)


Rs.552 Indian Terrain Fashion Ltd (ITFL) Economic Moat

Indian Terrain

Fashion Ltd (ITFL)

E

N

T

R

Y

B

A

R

R

I

E

R

CRITICAL SUCCESS FACTORS

Kewal Kiran

Clothing Ltd (KKCL)

Zodiac Clothing

Arvind

Brands

Source: Spark Capital Research

Brand Equity Pricing Power/ Customer Loyalty

Terms of trade Entrenched Distribution

EBOs Network Sourcing Capabilities Diversified Product mix


Rs.552 # 2 Brand Equity – “It’s all in the name”

…at competitive pricing points


Industry veterans opinion on brand “Indian Terrain”


…has enabled ‘Indian Terrain’ achieve great success in short time…


Niche offerings at superior quality…

• Indian Terrain Fashion Ltd (ITFL) is a smart casual men’s wear brand

offering Shirts, Trousers, T-Shirts, Shorts, Knitwear and Jackets product

lines.

• Brand offerings are in mid-premium pricing range, targeting the upper

middle class.

• The brand offers the non-conventional smart casual offerings targeting

customers within age group of ~25-44.

• The Chennai based brand has pan India presence with ~1000 point of

sales in the form of EBOs, MBOs and LFS retail formats.


Shirts, 43%

Trousers, 29%

T-Shirts, 18%

Shorts, 4%

Knitwear, 3%

Jackets, 2%

Others, 1%

1599 1599

799

2799

1599 1499

2299 2699

1299

7999

1999 2399

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Shirts Trousers T-Shirts Jackets Shorts Knitwear

Rs

Mr. Raja, MD Pothys (MBO) and Mr. Bhaskar Bhat, MD Titan Company

talk on how much brand Indian Terrain means to them

https://www.youtube.com/watch?v=9z1SCSVdB84

https://www.youtube.com/watch?v=1xz0EoHhidI


Rs.552 # 2 Brand Equity – Built over time operating in a niche consumer space

Product Segment

Demographics

Product Line

Formal Wear -

Premium

Top

Executives

Shirts,

Trousers,

Suits

High Pricing Power

High Brand Loyalty

Competitive

Intensity

High – Mostly

Multi National

Brands

Formal Wear -

Economy

Working

Professionals

Shirts,

Trousers,

Suits

Medium

Low

High –

Domestic &

International

Brands

Denim -

Premium

Youngsters

Jackets,

Trousers

High

Low

Medium – No

Definitive

positioning

Denim -

Economy

Teenagers

Jackets,

Trousers

Low

Low

High – Several

brands

tapping

conversion

Casual Wear -

Premium

Working

Professionals

Shirts,

T-Shirts,

Trousers,

Shorts

High

High

Medium –

Niche

Offerings at

premium price

Casual Wear -

Economy

Lower Middle

Class

Shirts,

T-Shirts,

Trousers,

Shorts

Low

Low

High – No

definitive

brand play

Source: Spark Capital Research Indian Terrain brand has created a niche positioning for themselves, targeting the premium casual wear segment


Rs.552 # 2 Brand Equity – “ In hunt for the manly, cool, colorful, unconventional guy…”

MASCULINE

COLORFUL

FUNKY

UN-

CONVEN

TIONAL



Rs.552 # 2 Brand Equity – Attractively positioned in terms of offerings…

Fo

rma

l Ca

su

al

Affordable

Luxury



Rs.552 # 2 Brand Equity – …and in terms of pricing

Premium (> ₹5,000)

(1%)

Mid segment (₹1,500- 5,000)

(9%)

Mass market (₹200- 1,500)

(90% of overall market)



Rs.552 # 3 Entrenched Distribution – Strong Pan India Presence across all major formats

Points of Sale

(PoS)

EBOs

Over 1,000 points of sale across different distribution channels

LFSs MBOs

EBOs –

Company Owned

Franchisee

Operated

EBOs – Franchisee

Owned Franchisee

Operated EBOs – Exclusive Branded Outlets

LFSs – Large Format Outlets

MBOs – Multi-Branded Outlets

EBOs –

Company Owned

Company

Operated

Online Retail

% no of Stores 3% 21% 76%

% of Sales

(FY14) 5% 33% 36% 26%



Rs.552 # 3 Entrenched Distribution – EBO’s not only act as a POS but also a branding vehicle

With more stores being opened in tier 2/3 towns, varying throughput


ITFL EBOs operate on tight operating mechanics

• ITFL has three type of EBO’s – Company owned company operated, company

owned franchisee operated and franchisee owned franchisee operated. All of

ITFL’s EBOs either work on the inventory on consignment model or through the

sale or return model.

• ITFL’s EBOs are of three formats – Flagship (1500 + sq.ft), Class A (800-1200

sq.ft) and Class B (500-800 sq.ft).

• The company focuses on saturation in a single market via the hub & spoke

model. In order to foster loyalty, the company ensures that the option of setting

up an additional franchisee within the same place/region first goes to the

existing franchisee and only if he refuses a new franchisee partner is sought.

• ITFL also derives a significant portion of revenues from Tier 2 and Tier 3 cities

which are expected to contribute to the next leg of growth. Currently ITFL’s

EBOs are penetrated up to Tier 4 cities.


…led by increase in number of stores


EBOs continue contribute to ~1/3rd of revenues…


400 507 532 774 527

33%

36%

34%

33% 34%

32%

32%

33%

33%

34%

34%

35%

35%

36%

36%

37%

0

100

200

300

400

500

600

700

800

900

FY11 FY12 FY13 FY14 1HFY15

% o

f sale

s

Rs.m

n

Revenues % of total sales

70 86

98 110

0

20

40

60

80

100

120

FY12 FY13 FY14 1HFY15

No.of EBO's

7.24 6.18

7.90

4.79

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00


Average Sales per store (Rs.mn)/Annum


Rs.552 # 3 Entrenched Distribution – Large Format Stores (LFS) contributes to ~1/3 of sale

…and steady increase in their revenue per store throughput


LFS remains a key channel for product line expansion

ITFL is currently present across all the major department stores in the country

viz. Shoppers stop, Lifestyle, Central, Westside and Globus.

Within a short span of time, ITFL has risen to be one of the top 3 suppliers for

several of LFSs.

With LFS’s expecting to increase their retail presence by significant expansion

plans, ITFL’s revenues from the LFS channel is also expected to gradually

increase with ITFL continuing to partner with them.

ITFL remains one of the prime vendors for several LFS despite several other

players flooding the market with higher commission, indicating the brand’s long

standing equity with consumers and LFS.

ITFL continues to take constructive feedback from LFS on product alignment.


…with steady increase in number of LFS counters…


Lifestyle, Shoppers Stop & Central contribute ~90% of LFS revenue…


477 482 557

831

567

39%

34%

36% 36%

37%

31%

32%

33%

34%

35%

36%

37%

38%

39%

40%

0

100

200

300

400

500

600

700

800

900

FY11 FY12 FY13 FY14 1HFY15

% o

f sale

s

Rs.m

n


4.30 4.42

5.69

3.64

0

1

2

3

4

5

6



112 126

146 156

0

20

40

60

80

100

120

140

160

180


No.of LFS


Rs.552 # 3 Entrenched Distribution – MBOs restructuring continues to be an ongoing activity

…varying throughput per store.


Long standing strong mutual relationship with MBOs.

• The southern and western regions contribute to major portion of ITFL’s

revenues from MBOs. The company offers a credit period of ~60 days to its

MBOs.

• ITFL pre books its requests from MBOs through road shows twice a year.

• While the company supplies to MBOs directly in southern and western India, it

has around ten distributors through whom it supplies to around 250 MBO’s in

northern and eastern India.

• However, ITFL’s sales to distributors are majorly on outright sales basis with

low sales returns.

• Good liaison with several MBO players has enabled ITFL remain the preferred

supplier with various MBOs.


…despite challenging negotiations and…


Revenue contribution from MBOs steadily increasing…


291 358 406 602

24%

25%

26% 26%

23%

24%

24%

25%

25%

26%

26%

27%

0

100

200

300

400

500

600

700

FY11 FY12 FY13 FY14

% o

f sale

s

Rs.m

n


0.52

0.75

0.94

0.65

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0



687

539 642

540

0

100

200

300

400

500

600

700

800


No.of MBOs


Rs.552 # 3 Entrenched Distribution – Leveraging ‘e-commerce’

With apparels contributing to ~30% of e-commerce sales…

Source: PWC, Spark Capital Research

…ITFL has ventured into the space with a clear mandate

• ITFL products are available across several online retailers, we understand that

the company has embraced online model to steadfast its growth.

• Online model has off-late not only emerged as an alternative sales channel but

also a strong branding tool. ITFL engages with its potential consumers across

several digital platforms including social websites as facebook and twitter.

• Being in fashion business, ITFL has clearly stated its preference to cater to all

channels that would help them reach out to their target ‘Upper middle class’

men.

• We understand that Indian Terrain was one of the largest selling brand in

Flipkart ‘Big Billion Day’ sales, and also witnessed good traction in other online

platforms.

• ITFL also sells on its own website – www.indianterrain.com, attracting younger

population with variety of offers and promotions.


…considering the immense opportunity it presents

Source: PWC, Spark Capital Research

Being in fashion industry, ITFL has embraced E-Format quicker…


37 64 73 113 107

3.1%

4.5% 4.6% 4.9%

6.9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-

20

40

60

80

100

120

FY11 FY12 FY13 FY14 H1FY15

% o

f sale

s

Rs.m

n

E-commerce % of sales

0.4 0.6 1.0 1.5 2.3

7.5 3.8 5.3

7.0 9.5

12.6

20.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2009 2010 2011 2012 2013 2017E

Rs.b

n

E-Commerce E-Tailing

Apparels & Accessories,

30%

Electronics, 34%

Books, 15%

Beauty & Personal Care,

10%

Home & Furnishing, 6%

Healthcare, 3%

Baby products, 2%

http://www.indianterrain.com/






Rs.552 # 4 Sourcing Capabilities – Strong back-end to meet robust sales

Woven fabrics are purchased from ~6-8 mills…


…which are then sub-contracted to make finished goods


Raw material purchase on the rise to meet increasing demand


Knitted garments are purchased while woven fabrics are procured


69% 71% 81%

72%

31% 29% 19%

28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY 11 FY 12 FY 13 FY 14

Raw Material Purchase of Finsihed goods

9% 16%

52%

-1%

-32%

143%

-50%

0%

50%

100%

150%

200%

FY 12 FY 13 FY 14

Raw Material Purchase of Finsihed goods

186 143

165

287

15%

10% 11%

12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

50

100

150

200

250

300

350

FY 11 FY 12 FY 13 FY 14

% o

f sale

s

Rs.m

n

Subcontracting expenses % of total income

31% 49%

24%

69% 51%

76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY12 FY13 FY14

Top 3 suppliers % of overall raw material consumed

Rest of the suppliers as a % of overall raw materials consumed


Rs.552 # 4 Sourcing Capabilities – Strong back-end network to meet varying demands

Inventory Purchase Mechanism

Shirts

Trousers

Shorts

Procured from ~6-8 Suppliers

Arvind Clothing

Tallam

Suryajothi

JCT etc…

Job-Work

Celebrity Fashions (~50%)

Other Outsourced Players

(~50%)

Woven Fabric

Woven Garments

Knitwear Garments Procured from

Regional Suppliers

T-Shirts

Winter

Wear

Woolen



Rs.552

Production Capacity


# 4 Sourcing Capabilities – CFL provides manufacturing/ design expertise

Key Clientele


Capacity

• Designing Know-how: ITFL benefits from strong product understanding and

design sensibility leveraging CFL’s technical know how gained through

servicing the best in-class international brands. The company enjoys a rich

know-how acquired over the years by catering to the best of the brands in the

world of fashion and design.

• Sourcing capabilities: ITFL continues to leverage CF’s expertise and

infrastructure set up for quality assurance and agility in responding to changing

markets. Currently ~50% of ITFL’s woven requirements are sourced from

Celebrity fashions, all on arms length basis.

• Management expertise: Majority of ITFL’s top management including the CEO

and COO have been with the company since the time it was part of CF and

during its initial stages of growth. Hence, the company benefits from its

accumulated industry knowledge and lessons from its learning curve over the

years.


Rich experience in World Textile market

• Though ITFL follows an asset light business model, it benefits from

captive manufacturing facilities of its group company Celebrity fashions (CF) which

is one of the largest manufacturer of men’s trousers in the country.

• CF has been engaged in the Textile sector for over two decades

manufacturing for some of the biggest fashion brands in the world.

• The company enjoys established relationships with leading international

brands and has developed strong expertise over the years contract manufacturing

as per clients needs and specifications with a strong workforce of 4,700 people.

• The company’s product portfolio includes shirts, pants, shorts, jackets and

dresses among others primarily in the fully woven cotton category catering to both

men & women.

• CF has three manufacturing facilities in Chennai with close proximity to

the port and airport.


# Product category Capacity

(pieces/month)

1 Bottoms 165,000

2 Shirts 140,000


Rs.552 # 5 Designing Competencies – only ‘Leaner Structures’ survive in the fashion market

ITFL quicker turnaround to facilitate replacement nature…


Fashion has undergone several changes in the past 20 years…


Formals

Inner Wear

Casual Shirts

Semi casual

trousers

T-Shirts

Winter Wear

Replenishment

Purchase

Replacement

Purchase

Denims

1990-1995

Era of Tailored Clothing

1995-2005

Emergence of Ready-

made Garments

2005-2008

Branded Apparel Market

(Formals)

2008-2012

Rise in Niche

Categories (Denims, Khakis)

2012-2014

Smart Casuals/

Friday Dressings

Gamut of offerings while maintaining its niche in premium casual…


Shirts

Darthmouth Strips

Evening Solids

Explorer Check

Gingham

Factory

Irish Linen

Linens

University Checks

Vintage Solid

Work wear Chsck, Solid and Stripe

Trousers

Vintage

Vintage Khaki

Work wear Khaki

T Shirts

Engineered Polo

Every Day Polo

Graphic Tee

Mercerized Polo

Printed Polo

Rugby Polo

Tipped Polo

Vintage Henley

Vintage Polo

Shorts

Vantage

Cargo

IT Offerings


Rs.552 # 5 Designing Competencies – Strong current line/ Solid complementary potential

…Potential in complementing categories too exciting


Men - Mainstream Men – Seasonal

Offerings Women’s wear Accessories

Casual Shirts

T-Shirts

Khaki Trousers

Shorts

Denims

Formals

Woollen Clothing

Jackets

Bandhgala

Innerwear

Sleepwear

Sportswear

Socks

Wallets

Belts

Caps

Sunglasses

Boots

Tops

Leggings/

Jeggings

Accessories

Categories ITFL is already

present in Potential categories

• Given that ITFL operates in a fashion

category, designing competencies

determine the continuous success of the

brand.

• Providing uniform offerings across

heterogeneous cultures is a challenge

that the ‘Indian Terrain’ brand

consistently encounters. However no

region specific offerings are launched

thereby maintaining brand consistency.

• ITFL operates a ~9 member design team

including a Head Of Design (HOD) that

persistently scout for global fashion

trends.

• Continues monitoring of consumer

buying patterns also assists in immediate

course correction methodologies and

further design excellence.

• Operates on a dual Inventory cycle

(Spring/Summer Collection and

Winter/Autumn collection). Conducts

trade shows ahead of the season to

confirm orders from LFS counters and

MBOs.

Having failed

in women’s

wear earlier,

probability of

re-launch of

women range

however seem

unlikely in

near term


Rs.552 Corporate Governance

BOD/Top Management

Auditors

Succession Planning

Related Party

Transactions

Cases against

management/Company

FY11 FY12 FY13 FY14

Total No. of Directors 6 7 6 6

No. of Independent Directors 3 4 4 4

No. of changes in directors over last year 1

Current auditors of the company M/S Anil Nair & Associates and M/S CNGSN & Associates

are the joint auditors of the company.

Any change in auditors over last five years?

There has been no change in the auditors since inception

of the company

The company is professionally managed by set of dedicated individuals majority of whom have been with the company

since inception. Since, majority of the top and middle management are still young with at least two decades away for

retirement, there are no concerns regarding succession planning at present.

Job work charges, material purchases and rental paid to Celebrity fashions limited

FY11 FY12 FY13 FY14

Total Charges (In Rs.mn) 191 199 189 364

% of Sales 16% 14% 12% 16%

There are no notable cases against ITFL, however Celebrity Fashions Ltd (CFL) was involved in a civil suit in

distant past. Metropolitan Trading Company had filed a civil suit against CFL in the High Court of Calcutta for

alleged infringement of copyright of their registered design of the ‘three hole button’ which Celebrity Fashions

Private Limited had used for the manufacturing of shirts.


Rs.552 Corporate Governance

BOD Remuneration as a % of PAT


Holding Structure


Pledge transfer as part of the demerger from Celebrity Fashions Ltd…


Well diversified board presence as per SEBI guidelines


Mr.

Rajagopal

Mrs

Rama

Rajagopal

Mr. N K

Ranganath

Mr. P.S

Raman

Mr. Harsh

Bahadhur

Mr. Manoj

Mohanka

Audit

Committee Yes - Yes - Yes Yes

Remuneration

Committee - - Yes Yes Yes Yes

Investor

Grievance

Committee Yes - Yes Yes - -

Name Remuneration

(Rs)

Remuneration

as % of PAT Position

Mr. V Rajagopal 36,00,000 3.64% CMD

Mrs. Rama Rajagopal 36,00,000 3.64% Executive director

Mr. N K Ranganath 49,000 - Director

Mr, P S Raman 10,000 - Director

Mr. Harsh Bahadhur 47,500 - Director

Mr.Manoj Mohanka 11,500 - Director

Total 73,18,000

47.3% 47.0% 47.0% 46.3% 39.0% 39.0% 39.0% 38.4%

7.4% 7.4% 7.4% 7.3%

0.45%

52.7% 53.0% 53.0% 53.7% 53.7% 53.7% 53.7% 53.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

Promoter group FII DII Others

66.7% 66.7% 66.7% 66.7%

79.3%

69.0% 69.0% 69.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

ITFL Pledged shares ( as a % of promoter holdings)


Rs.552 Risks & Concerns


•We are cognizant of the fact that there are transfer pricing risk as ITFL continues to use CFL as a key manufacturing partner. We however take comfort that ITFL has all its dealings with CFL on an ‘Arm’s length basis’

Embedded risk of transfer prising with Celebrity Fashions Limited (CFL)

•Celebrity fashion has had historical incidence of delay in debt payments, though it is an underlying risk, we are not unduly worried given CFL only does job work for ITFL

Celebrity fashion’s delay in debt repayments (FY11-FY13)

•Off-late several MNC apparel retail players have also ventured into the ‘smart casual’ space with a sub-brand in an attempt to grab share from Indian Terrain.

Rising competitive intensity from MNC’s and Domestic apparel players

•An overall slowdown in apparel retail space and especially in men's wear segment could impact Indian Terrain near term revenue growth significantly.

Slow down in Men’s wear offtakes

•Given that ITFL is in the ‘fashion’ business, constant innovation becomes a necessity to keep offerings up to date with latest trends. Failure to do so could impact customer walk-ins

Consistent innovation pipeline needed for ‘Fashion’ business

•In an attempt to expand, ITFL’s current terms of trade a below industry standards, we however believe that with improved cash position, terms of trade can become favourable

Relatively weak terms of trade


Rs.552 Operating performance on improving trend…

Margins also inching upwards…


Despite incessant increase in marketing costs


...led by healthy volume growth and price mix increase


Strong revenue performance…


10% 13%

29%

17% 16% 16%

11%

48%

21% 20%

0%

10%

20%

30%

40%

50%

60%

FY12 FY13 FY14 FY15E FY16E Volume growth Value growth

218 268

318

459 527

625 18%

19%

20%

20%

19% 19%

17%

17%

18%

18%

19%

19%

20%

20%

21%

0

100

200

300

400

500

600

700

FY11 FY12 FY13 FY14 FY15E FY16E

% o

f sale

s

Rs.m

n

Marketing Expenses (A&P + S&D) % of Net Sales

1.21 1.41 1.57 2.32 2.82 3.38

16%

11%

48%

21% 20%

0%

10%

20%

30%

40%

50%

60%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


Rs.b

n

Net Sales (Rs.bn) Revenue growth

66%

58% 62% 61%

58% 59%

10% 9% 10% 10% 11% 12%

5% 1% 3% 4% 6% 6%

-10%

0%

10%

20%

30%

40%

50%

60%

70%


Gross Margin EBITDA Margin PAT Margin


Rs.552 …so have been the balance sheet metrics

Cash flows to improve on better operating performance…


…also leading to improve capital efficiency


…while D/E returns to more stable levels


Gross block addition limited as ITFL focusses on asset light model..


94 100 99 95 115

155

0

20

40

60

80

100

120

140

160

180


Rs.m

n

Gross Block

521 593 605 564 564 574

2.62

2.84 2.35

1.56

1.09

0.78

0.00

0.50

1.00

1.50

2.00

2.50

3.00

460

480

500

520

540

560

580

600

620


In R

s.m

n

Total Debt Debt equity

-483

48 62

139 116 126

-493

41 62

144 96 86

-600

-500

-400

-300

-200

-100

0

100

200


OCF FCF

32%

9%

18%

32% 35% 35%

16%

12% 15%

19% 23% 24%

0%

5%

10%

15%

20%

25%

30%

35%

40%


ROE ROCE


Rs.552 Peer Comparison

Sales FY12: Rs.1,410mn

FY13:Rs.1,567mn

FY14:Rs.2,321mn

FY12: 8.8%

FY13: 9.7%

FY14: 10.4%

EBITDA Margin

Gross Margin FY12: 58.4%

FY13: 61.6%

FY14: 61.3%

FY12:Rs.3,019mn

FY13:Rs.3,030mn

FY14:Rs.3,672mn

FY12: 24.3%

FY13: 24.3%

FY14: 25.4%

FY12: 48.8%

FY13: 50.5%

FY14: 50.1%

FY12:Rs.3,832mn

FY13:Rs.3,633mn

FY14:Rs.4,140mn

FY12: 8.8%

FY13: 9.4%

FY14: 11.0%

FY12: 56.4%

FY13: 55.9%

FY14: 56.6%

FY12:Rs.52,887mn

FY13:Rs.53,731mn

FY14:Rs.69,315mn

FY12: 1.8%

FY13: 1.4%

FY14: 1.4%

FY12: 56.6%

FY13: 58.5%

FY14: 54.9%

FY12:Rs.3,754mn

FY13:Rs.4,165mn

FY14:Rs.5,189mn

FY12: 22.7%

FY13: 19.9%

FY14: 21.1%

FY12: 51.3%

FY13: 50.2%

FY14: 49.7%

FY12:Rs.3,937mn

FY13:Rs.3,992mn

FY14:Rs.4,727mn

FY12: 8.3%

FY13: 13.5%

FY14: 19.1%

FY12: NA

FY13: NA

FY14: NA

Indian Terrain KKCL Zodiac Arvind Mills Monte Carlo VF Brands

Source: Bloomberg, Spark Capital Research

OPPORTUNITY

PAT Margin

Working Capital

Days

FY12: 1.3%

FY13: 2.6%

FY14: 4.3%

FY12: 175 days

FY13: 175 days

FY14: 134 days

ROE

FY12: 8.7%

FY13: 17.6%

FY14: 31.9%

FY12: 17.3%

FY13: 17.6%

FY14: 18.35

FY12: 61 days

FY13: 70 days

FY14: 71 days

FY12: 24.6%

FY13: 22.3%

FY14: 24.6%

FY12: 4.4%

FY13: 3.6%

FY14: 5.2%

FY12: 86 days

FY13: 89 days

FY14: 102 days

FY12: 8%

FY13: 5.9%

FY14: 8.8%

FY12: 3.3%

FY13: 4.1%

FY14: 5.2%

FY12: 71 days

FY13: 76 days

FY14: 70 days

FY12: 23.4%

FY13: 11.6%

FY14: 14.6%

FY12: 13%

FY13: 11.9%

FY14: 10.7%

FY12: 79 days

FY13: 130 days

FY14: 144 days

FY12:NA

FY13: 20.6%

FY14: 15.7%

FY12: 1.3%

FY13: 11.9%

FY14: 14.2%

FY12: NA

FY13: 61 days

FY14: 69 days

FY12:NA

FY13: 31.2%

FY14: 32.0%

OPPORTUNITY


Rs.552 Relative Valuation

Healthy fundamentals have also led to PE rapidly expanding


4 year historical forward P/E


… leading to clearly outperforming the market in the past year…


Returns from ITFL has tracked its revenue growth off-late…


1M return

(%)

3M return

(%)

6M return

(%)

YTD return

(%)

1YR return

(%)

ITFL 13% 61% 296% 364% 379%

Sensex -3% 3% 10% 30% 30%

Nifty -2% 3% 10% 31% 32%

BSE FMCG 0% 3% 19% 19% 20%

CNX FMCG 0% 2% 19% 19% 21%

CNX Consumption -2% 4% 16% 30% 30%

P/E Multiple

range No. of days traded % of no. of days

Cumulative

traded no. of

days

%of Cumulative

no. of days

4x 280 20% 280 20%

4 - 8x 570 41% 850 62%

8 - 12x 139 10% 989 72%

12 - 16x 108 8% 1097 80%

16 - 20x 61 4% 1158 84%

20 - 24x 141 10% 1299 94%

24 - 28x 78 6% 1377 100%

Total 1377 100%

14.0x

8.0x

2.0x

26.0x

20.0x

0

100

200

300

400

500

600

700

800

900

1000

Mar-

11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2

Sep-1

2

Dec-1

2

Mar-

13

Jun-1

3

Sep-1

3

Dec-1

3

Mar-

14

Jun-1

4

Sep-1

4

Dec-1

4

0

100

200

300

400

500

600

700

800

Sensex return Consumption Index return Indian Terrain Price return


Rs.552

Abridged Financial Statements

Rs. mn FY14 FY15E FY16E FY17E FY14 FY15E FY16E FY17E

Profit & Loss Growth Ratios (%)

Revenue 2,321 2,818 3,379 3,977 Revenues 48% 21% 20% 18%

EBIDTA 242 310 399 485 EBIDTA 59% 28% 29% 22%

Other Income 3 3 7 7 Normalised PAT 140% 57% 41% 21%

Depreciation 25 26 30 34 Margins (%)

EBIT 220 287 376 459 Gross 61.3% 58.0% 58.5% 59.0%

Interest 95 90 85 82 EBIDTA 10.4% 11.0% 11.8% 12.2%

PBT 125 197 291 377 Normalised PAT 4.3% 5.5% 6.5% 6.6%

Tax 26 41 73 113 Leverage Ratios (x)

Normalised PAT 99 155 218 264 Debt to Equity 1.6 1.1 0.8 0.5

Balance Sheet Current Ratio 2.6 2.7 2.8 2.8

Net Worth 362 518 736 967 Return Ratios (%)

Loan Funds 564 564 574 520 RoCE 19.4% 22.6% 23.6% 23.0%

Deffered Tax Liabilities 0 0 0 0 RoE 31.9% 35.3% 34.8% 31.0%

Sources of Funds 926 1,082 1,310 1,486 Total Asset Turnover (x) 2.6 2.8 2.8 2.8

Net Block 78 72 82 78 Per Share

Capital WIP 0 0 0 0 Normalised EPS (Rs.) 17.4 26.9 37.8 45.7

Goodwill 0 0 0 0 Diluted EPS (Rs.) 17.2 25.1 35.4 42.7

Investments 88 88 88 88 Dividend (Rs.) 0.0 0.0 0.0 5.0

Total Current Assets 1,240 1,476 1,778 2,049 Valuation Metrics

Total Current Liabilities 481 555 640 730 Current Market Price 552

Net Current Assets 759 921 1,139 1,319 Shares Outstanding (mn) 5.7 5.8 5.8 5.8

Application of Funds 926 1,082 1,310 1,486 Market Cap. (Rs. mn) 3,186

Cash Flow Enterprise Value (Rs. mn) 3,635 3,625 3,618 3,564

Cash Flow from Operation 139 116 126 191 EV /Sales (x) 1.6 1.3 1.1 0.9

Cash Flow from Investments 7 -17 -33 -23 Price/Earnings (x) 31.8 20.5 14.6 12.1

Free Cash Flow 144 96 86 161 Price/Book (x) 8.8 6.2 4.3 3.3

Cash Flow from Financing -144 -89 -75 -169 EV/EBIDTA (x) 15.0 11.7 9.1 7.3

Closing Cash Balance 27 37 54 54 FCF Yield 4.5% 3.0% 2.7% 5.1%

Financial Summary


Rs.552 Recommendation History

0

100

200

300

400

500

600

700

1-Jan-11 1-Jul-11 1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14

Historical Target

Indian Terrain Fashions


Rs.552 Disclaimer

Spark Disclaimer

Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities and

infrastructure advisory services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker.

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in the last five years. We

have not been debarred from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of

time.

Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered

with SEBI as Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure

advisory services.

This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.

This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should

be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of

companies referred to in this document.

Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies

referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This

document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published,

copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to or use by any person or entity who is a citizen or resident of or located in

any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Spark Capital

and/or its affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to

a certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such applicable restrictions. This

material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal.

Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this

document. Spark Capital , its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or

deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit

investment banking or other business from, any company referred to in this report.

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark

Capital. While we would endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information.

Also, there may be regulatory, compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective

directors, employees, agents or representatives shall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents

or any errors or discrepancies herein or for any decisions or actions taken in reliance on the report or the inability to use or access our service in this report or for any loss or

damages whether direct or indirect, incidental, special or consequential including without limitation loss of revenue or profits that may arise from or in connection with the use of

or reliance on this report.


Rs.552 Disclaimer (Cont’d)

Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,

Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement Yes/No

Analyst financial interest in the company No

Group/directors ownership of the subject company covered No

Investment banking relationship with the company covered No

Spark Capital’s ownership/any other financial interest in the company covered No

Associates of Spark Capital’s ownership more than 1% in the company covered No

Any other material conflict of interest at the time of publishing the research report No

Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months:

Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

products or services other than those above

in connection with research report

No

Whether Research Analyst has served as an officer, director or employee of the subject company covered No

Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research

analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

Additional Disclaimer for US Institutional Investors

This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under

the Securities Exchange Act of 1934, as amended) only by Decker and Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act

of 1934, as amended). Decker and Co accepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in

the research material may do so through Decker and Co. All responsibility for the distribution of this report by Decker and Co, LLC in the US shall be borne by Decker and Co,

LLC. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if Spark Capital

Advisors (India) Private Limited or Decker and Co, LLC is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should

satisfy yourself before reading it that Decker and Co, LLC and Spark Capital Advisors (India) Private Limited are permitted to provide research material concerning investment

to you under relevant legislation and regulations;

developed developed 52wh 52wl 52wh 52wl chg.mailers.sparkcapital.in/uploads/tech/daily morning note...

Documents