We are our own competition; optimistic about FY21: Chandrasekhar K, Page Industries

You have called your performance this quarter a temporary blip. Do we expect these expenditures to normalise soon? How long is temporary?
There is a temporary dip in PAT and that is because of the investment we have made in sales, marketing, in people and technology. We have senior people on board. This the only way for us to drive sustainable growth in the future. Also, in terms of volumes, revenue has grown by 7% both in Q3 and for nine months. Our expectation was much higher. If we had volume growth in the mid teens, all of these expenses would have been fully absorbed and we would have been able to achieve the margins. At present, we are in a sluggish phase as far as demand is concerned. Whenever demand returns, we will be back to the margins that we have been delivering.

When do you expect the situation to normalise? Would it be fair to expect margins bouncing back to previous levels of 20% plus anytime soon?
The margins would bounce back but then the growth has to come in the demand so definitely we are looking at FY21 with much more planning and optimism than we have it now.

Does demand continue to be as weak in Q4? What is the sense you are getting from the grass roots? Is the worst over?
We do not approach the market only from the margin perspective. Our strategy has always been to invest for the future growth. We have an extremely strong balance sheet and we are debt free and are able to invest to create that growth. The market demand being whatever, the macro situation will affect everyone. But we are in an under penetrated premium apparel market and there is multiple opportunity for us to grow. We have been expanding the presence and distribution in exclusive business outlets and we are continuing to invest in technology.

The Street is expecting the industry to grow by 10% in FY21. Do you concur with that? How do you see Page Industries growing vis-à-vis the industry?
A double digit growth is something we always plan for. That is the way we prepare both the backend and the frontend of the organisation, in terms of channel and the solution. So yes the FY21 should be better than FY20. But I am not too sure whether it will be 10% growth for everyone. We have to wait and watch in Q4 as to how the demand pattern turns.

Competition is also getting aggressive. The Birlas are pushing the Van Heusen brand and then there are the likes of H&M etc. How are you protecting your market share?
We do not look at it as a market share. It is an underpenetrated premium apparel market. We look at the penetration levels. The penetration into the premium market is of the order of 20% in premium men innerwear. We have a penetration of close to 6% to 8% in the women’s market as well as in the Athleisure which is the active wear segment. So the market is there, competition has been there, we have been in business for the past 25 years in India. We have faced competition only in the past two decades. Some have disappeared, some people have stayed. Our approach has always been to grow the market. We respect all the competition and we learn from them, but it is not an impediment as far as our plans to grow.

Recently questions have been raised over the two pillars of Page’s peak narrative that the company is economy proof and competition proof. Is the concern justified?
Page is also an example because we had almost double digit volume and revenue growth in the past. We have been subject to the demand and consumption story being sluggish but the differentiation as far as Page is concerned is that we have a strong balance sheet and a very large consumer base. We reach out to more than 63,000 retail outlets and we are able to withstand the slow phase. That is the reason we are able to invest.

We have confidence and optimism that the market will return with respect to growth and we will succeed. We can say that we are our own competition. What we mean is that having been around for 25 years, we are able to improve on our value for money proposition in the premium quality apparel space. And because this market is underpenetrated, we are best placed to take advantage of that.

You are expanding your channel presence in exclusive business outlets. Does it mean you would be reducing focus in small outlets? What is the difference in returns from EBOs versus small multi brand stores?
In terms of the constant growth across channels, each channel is treated separately. We have 720 exclusive business outlets. They call as EBOs and we have a target of reaching the EBOs to a 1,000 plus, which will possibly happen in FY21.

MBOs are also growing. We have to reach out to the consumer base and we are continuing to do that. We are present in large format stores as well as on e-commerce. All these channels are continuing to grow.

What about your plans to enhance distribution? Is this going to be the new pillar of growth?
We serve 63,000 retail outlets and these are serviced by about 4,300 plus distributor accounts. So, distribution is growing all the time.

Speedo has not picked up in India as yet. When do you see it contributing meaningfully to Page Industries? What are your plans to expand beyond the Jockey brand?
Swimming is a sports activity and it is still at a nascent stage in terms of widespread acceptance by the entire population. Also the access to swimming is not available to everyone. But Speedo International, whom we represent, has done a market study; India is the fastest growing swimming market and therefore we are present in 1,300 plus retail outlets and about 44 EBOs and we are taking all the steps to improve the market reach.

Of course, Speedo is a niche market and it cannot be as big as Jockey, but it has its own place and this is also the first few years of operating in India.

Page has been aggressively working on ramping up the kids clothing portfolio. You have set up an independent sales team for that. What is the acceptance like?
The acceptance has been pretty good. We have grown almost 45% this year and we have also created a separate channel for kids. That means, right from the country level to the field, we have a 100-plus-strong sales force. We also appointed Jockey Junior’s specific channel partners in 50 cities and this is only the phase one. We are also planning to open exclusive Jockey Junior EBOs in the coming quarter.