DEAR SHAREHOLDERS,
It is with great pleasure that I present to you the inaugural
integrated report of Arvind Fashions Limited (AFL). As we navigate a dynamic and
ever-evolving business landscape, our goal is to provide a comprehensive overview of our
financial performance, strategic initiatives, and the value we create for all our
stakeholders. This report marks a significant milestone in our journey, underscoring our
commitment to transparency, accountability, and sustainable growth. While enhancing the
quality of our disclosures, this report also fosters integrated thinking across our
organisation for the delivery of holistic long-term value.
The Indian retail industry is a critical driver of the nation's
economy, contributing 10% to the GDP. In recent years, the sector has experienced
substantial growth, driven by increasing urbanisation, rising disposable incomes, and
widespread digitalisation across the value chain. Currently, India ranks among the top
five retail markets globally and is projected to become the world's third-largest consumer
market by 2030, following only China and the US. This growth trajectory highlights the
vast potential and promising future of the Indian retail industry. The fashion and
lifestyle segment, valued at USD 110 billion, stands as India's second-largest
consumer category, with around 10% of this value stemming from online sales, demonstrating
how e-commerce is democratising access to fashion.
Following a surge in spending across various segments, from clothes to
cars, driven by post-pandemic revenge shopping, FY 2024 witnessed a slowdown in retail
sales in India. Inflationary trends dampened consumer sentiment, leading to more cautious
spending on discretionary products. Compared to a 6.8% growth in FY 2023, household
consumption expenditure growth moderated to an estimated 4% in FY 2024, even as the Indian
economy expanded at a robust 8.2%. Additionally, post-pandemic consumption patterns have
shifted, with demand for luxury and premium products growing faster than for basic goods.
With an expected rise in the number of middle- to high-income households with increasing
disposable incomes, this trend is likely to be further amplified, driving overall growth
in household consumption expenditure.
EXPANSION INTO ADJACENT CATEGORIES SUCH AS WOMEN'S WEAR,
KIDS' WEAR, INNERWEAR, FOOTWEAR, AND ACCESSORIES ALSO PROVIDES MULTIPLE GROWTH LEVERS
FOR OUR BRANDS.
Despite muted market conditions, your Company has continued its journey
of profitable growth, reaffirming the strength of our brands and the effectiveness of our
business strategy. We remain focussed on expanding the retail footprint across brands and
entering Tier II and III cities in India, where significant potential remains untapped,
while also accelerating growth in the online direct-to-consumer channel. Across our
brands, premiumisation is a core theme. As consumers increasingly gravitate towards
aspirational products, our marquee portfolio is well-positioned to benefit from this
ongoing premiumisation trend. Expansion into adjacent categories such as women's
wear, kids' wear, innerwear, footwear, and accessories also provides multiple growth
levers for our brands. Bolstered by our commendable financial performance and a positive
future outlook, the Board is pleased to announce a dividend recommendation of 1.25 per
share for the full year.
I would like to further mention that we divested our prestige-beauty
& cosmetic business, Sephora, during the year. With this strategic move, we completed
our portfolio rationalisation exercise. Our stated goal has been to build a portfolio
focussed on high return on capital and strong cash flow. The proceeds from the divestment
were utilised for debt repayment and in scaling up our marquee brands. This divestment
also positions AFL as a pure-play branded fashion company, enabling us to focus our
management bandwidth on growing these brands.
The strength of a company lies in its people. Our sustained success is
a reflection of our strong leadership team, the professionalism we have fostered, and the
dedication of our employees. We remain committed to investing in our people, helping them
achieve their personal career goals and maintaining a healthy work-life balance, with
‘Quality of Work Life' being a key element of our organisational culture. Our
steadfast commitment to the highest standards of governance, professionalism, and
transparency forms the bedrock of our efforts to sustainably enhance stakeholder value.
Our Board of Directors comprises well-regarded and experienced industry professionals, and
we have established multiple committees and policies that ensure robust corporate
governance, drive ethical behaviour, and enforce disciplined norms across the
organisation.
Promoting sustainable practices is vital to us as we strive to do our
bit for our Planet while continuing to meet evolving customer expectations and ensure the
long-term viability of our business. From using eco-friendly materials and packaging to
adopting internationally recognised standards in our supply chain, we are committed to
offering sustainable fashion to our customers. Additionally, we focus on increasing the
share of renewable energy in our operations and driving effective waste management to
conserve natural resources and protect our environment. Our corporate social
responsibility initiatives further reflect our dedication to making a positive impact in
our local communities.
Despite various global uncertainties, India's macroeconomic
parameters remain strong, and the Indian economy is poised to maintain its status as the
world's fastest-growing major economy. Downward-trending inflation, coupled with the
realisation of a normal monsoon, may open up the possibility of rate cuts by the RBI in
the second half of FY 2025. A reduction in policy rates will stimulate private consumption
growth, which bodes well for the retail and fashion industry to rebound after a
challenging demand environment over the past year. As the operating environment
progressively improves, I am more excited than ever about the future of our Company. By
investing in growing the scale of our brands and focussing on superior retail execution,
we remain committed to our vision of being among the most respected retail and apparel
players in the country.
In conclusion, I extend my heartfelt appreciation to my fellow Board
Members for their invaluable guidance. I also wish to express my gratitude to all our
stakeholders for their unwavering trust in our Company. With this steadfast support, AFL
is well-positioned to continue its growth journey and deliver substantial long-term value.
Warm regards,
Mr. Sanjay Lalbhai