S Kumars Report v1

7/28/2019 S Kumars Report v1

1/5

S Kumars Nationwide Limited

1. Introduction

1.1IntroductionS. Kumars Nationwide Ltd. (SKNL) is one of the leading textile and Apparel Company in India.Company operates in all 3 segment of textile industry and have presence in all socio economic

segments. With wide product mix, company caters to Economy, Mid-price and Luxury segment.

Some of the SKNL brands are Reid & Taylor, Belmonte, World Players & Stephens Brother. Globally,

SKNL has strong presence in developed economies, with many luxury brands in those markets.

SKNL acquired Leggunio in Italy, Hart Schaffer Marx (HMX) in US and also entered in 80:20 Joint

Venture with Luios Vuitton (LVMH) in UK to expand its overseas market and created a portfolio 45

strong brands. Growth path of SKNL is shown in figure below:-

1.2Business Model/StrategySKLNL business strategies are based on strong distribution network, strong brand presence in all

segments and strong overseas presence. SKNL has presence in all socio economic segments and has

product in price segments, from economy to luxury segment. Companys product portfolio consists

of fabric to ready to wear garments and home textile products. In terms of distribution network,

SKNL follows multi-format pan-India distribution network and currently have 5 distribution

channel network, namely 30000 Multi Brand outlet, Institutional sales, 400 Wholesale network,

export sales & 160 exclusive retail outlet. SKNL acquired brands in developed economies to expand

its overseas market. With the acquisition of Leggunio, HMX and Luis Vuitton, company has

increased its presence in overseas market and are able to generate revenue through export sales.

Listed on BSE

1993

Joint Venture

with Reid &

Taylor

1997Launched

Belmonte

Brand

2006

Acquired

Leggiuno in

Italy

2008Acquired

HMX in US

2009

Launched

World Player

Brand

2010


2/5

Segment Ready-to-wear Home Textiles Fabrics

Economy World Player - S Kumars

Mid-Price Belmonte Carmichael

House

Belmonte

Premium/Luxury Stephens Brother/Reid &

Taylor/Kruger

Benetton Reid &

Taylor/Baruche

2 SWOT Analysis2.1 Strength

Strong Brand presence: - S Kumars is a dominant player in domestic market and onlybrand to be present in all product categories and caters to different socio economic

segments. They have portfolio of well-known brands Reid & Taylorin Premium, Belmonte in

Mid-Price, and World Playerin economy segment. It has strong presence in uniform market

segment with 30% market share and is largest institutional suppliers of textiles.

Strong Distribution network: - SKNL has penetrative distribution network in domesticand international market. SKNL follows 5 channel distribution strategies namely Multi

brand outlets through which they generate more than 50% of their sales and other

channels include institutional Sales, Wholesale network, Export sales and exclusive brand

outlets. SKNL have 30000 retailers, 400 wholesale & 160 distribution exclusive brand

outlets in India.

Strong Global presence: - In last few years, SKNL has increased its presence ininternational market through acquisition ofLeggiuno in Italy, DKNYin UK and HMXin USA.

SKNL also signed an 80:20 joint venture between its wholly owned UK subsidiary SKNL

(U.K) Ltd. Sales from international market were 21% of total sales, important contribution

to overall sales of SKNL.

Strong brand ambassador-led strategy: - SKNL follows strong brand ambassador-ledstrategy to advertise its product in domestic market. Some of the big celebrities associated

with SKNL are Amitabh Bachchan, Shahrukh Khan and Sachin Tendulkar.


3/5

2.2 Weakness

High Debt Level:-In Financial Year12, SKNL has debt-equity ratio of 1.65 due to acquisitionand expansion strategy they followed earlier. Though this debt ratio has decrease over time

but high debt still remains a concern for SKNL.

Recommendation: SKNL should try to decrease its debt-equity ratio by implementing debt

restructuring plan and try to raise equity by going ahead with IPO of Reid & Taylor. These

recommendations have been elaborated in next section.

High Working Capital: - Working capital requirement of SKNL is higher than its competitorin same segment. Inventory days and receivable days are 172 and 111 respectively. More

about this has been discussed in detail in coming section.

Recommendation: Company should try to reduce operating cycle by negotiating with

suppliers and buyers to reduce operating cycles. Mass customization process should be

shifted to end of production process to decrease inventory days.

2.3 Opportunities:

Rising income level: - Per capita income has increased by 11.7% in 2012-2013 and thistrend is expected to continue with average growth rate of 13%. Increase in income level due

to economic growth provides an excellent opportunity to increase its market share in Ready

Income Level

Demand forBranded product

Overseasexpansion

Increase incompetitors

Slowdown inglobal economies

High Debt level

High WorkingCapital

Brand presence

DistributionNetwork

Global Presence

Ambassador-Ledstrategy

Strength Weakness

OpportunitiesThreats


4/5

to wear segment. Transition of customer from economy to mid-price and from mid-price to

luxury segment provides an excellent opportunity to SKNL to increase its margin and

revenue.

Recommendation: Company should focus on manufacturing quality products and increase

its presence in luxury and mid-price segments in India. There is need to identify

states/region with high per capita income and company should plan its expansion strategy

to align themselves with demand from these regions.

Increasing demand for branded garment: - Consumers preference will change fromunbranded product to branded product. Due to this, demand for branded fabric and ready

to wear garment has increased. SKNL can leverage its strong distribution network and

brand presence to tap this opportunity by changing its product mix towards ready to wear

garments to align with consumer preference.

Recommendation: Company should focus increasing its market share in ready to wear

garment. Brand awareness should be increase to attract more customers and more stores

can be opened in multi brand outlets.

Overseas expansion: - SKNL 21% of total sales comes from international market. This isgood indicator for SKNL to expand its market in other developing countries and increase its

product portfolio in developed countries by bringing more products in luxury segment

which will boost its margin and hence revenue.

2.4 Threats:

Increase in competitors: - Many new domestic players have entered into this market andexisting players are diversifying their portfolio by expanding into new segments. Some of

the existing competitors are Raymond, Bombay Dyeing, Provogue, Arvind Mills.

Government policy of allowing FDI in multi brand segment will further enhance this

competition with many new foreign player set to enter Indian market.

Recommendation: SKNL should focus on increasing penetration in mid-urban areas by

leveraging its strong distribution network and try to retain customers through various

loyalty programs.


5/5

Slowdown in global economies: - In last 2 years, European market has experienceslowdown which poses threat to SKNL overseas market in Europe. In scenario of continued

slowdown, this will have impact on SKNL profitability.

References:-

1. http://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.html

2. http://www.moneycontrol.com/financials/skumarsnationwide/ratios/SKN#SKN3. S.Kumars Nationwide Limited-J P Morgan Initiating coverage report , July 20104. S.Kumars Nationwide Limited Annual Report 2011-20125. http://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-

world-player-casual-range
http://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.htmlhttp://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.htmlhttp://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.htmlhttp://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.htmlhttp://www.moneycontrol.com/financials/skumarsnationwide/ratios/SKN#SKNhttp://www.moneycontrol.com/financials/skumarsnationwide/ratios/SKN#SKNhttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://articles.economictimes.indiatimes.com/2010-06-04/news/27594110_1_apparel-brand-world-player-casual-rangehttp://www.moneycontrol.com/financials/skumarsnationwide/ratios/SKN#SKNhttp://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.htmlhttp://www.business-standard.com/article/economy-policy/india-s-per-capita-income-rises-to-rs-5-729-per-month-113020700995_1.html

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S Kumars Report v1