Interview with Deepak Chiripal

Deepak Chiripal
CEO
Nandan Denim

We spend days trying to fix things that appear to be basic

The Indian denim industry is booming. Leading manufacturer Nandan Denim claims to hold 10 per cent share of the Indian denim industry and 1 per cent share of the global denim industry. Deepak Chiripal, CEO of Nandan Denim, shares his thoughts in an exclusive interview with Fibre2Fashion.

What is the size of the denim market in India? By what percentage is it expected to grow?

Denim manufacturing competence in India is around 1.2 billion metres of installed capacity that can physically deliver around a billion metres. This is expected to reach 1.6 billion metres by December 2016, considering projects under execution. Current domestic consumption is around 700-800 million metres, and that leaves around 200-300 million metres for exports. The domestic market has been growing at a whopping 15-18 per cent CAGR. Therefore, it is expected to hit 2 billion metres by 2020. International trade has been growing at around 3-5 per cent. By the strength of raw materials that we have built and inherited, Indian textiles are perhaps going to be a major beneficiary, with the largest cotton crop at disposal coupled with the Make-in-India drive. The domestic denim market is projected to register revenue of ₹27,200 crore by 2018 with a modest CAGR of 15 per cent due to major demand drivers such as: a. More than 65 per cent of the population is less than 35 years of age b. Retail penetration in Tier II, Tier III cities c. Rising footprint of e-commerce d. Higher disposable income e. Fashion consciousness f. Rising demand from untapped womenswear segment. Currently, 85 per cent of this consumption is from the menswear segment, 9 per cent from the womenswear segment and 6 per cent from the kidswear segment. The change in this demography poses huge growth opportunities. g. Growing preference of denim as workwear h. Per capita consumption of denim is 0.3 pairs per person in India in comparison with two pairs in China and eight or nine pairs in the United Kingdom and the United States of America, signifying immense growth opportunity. Looking at the above factors, domestic demand is expected to grow by leaps and bounds, much higher than the growth recorded in the past. However, import dependence on China for cotton can also foster export growth much above the international trade growth rate.

What percentage of the denim market for women would you like to claim for yourself?

The denim fabric meant for womenswear segment is expected to be light-weight, stretchable and a bit fancy, looking at the multiple functions that the gender is engaged in daily. Women, particularly in India, have multiple responsibilities. Therefore, the fabric they use is expected to be robust enough to support them apart from maintaining a relatively higher fashion quotient, unlike their gender counterparts elsewhere. The gender ratio in India is currently biased towards the menswear segment, and the same has been the case with the denim sector. Nandan, as a company, has full-fledged facilities to cater to the higher expectations of the womenswear segment. We would prefer to have almost 50 per cent of revenues coming from the segmental diversity. Having said so, we have to admit that the national average of denim consumption by women is less than 10 per cent of the gross domestic sale of denim. Nandan is much ahead of national average. We are focused on building higher functional denim for women. We expect to garner a larger share of the growing pie belonging to this segment.

What percentage of the overall denim market would Nandan Denim like to claim for itself? By what percentage is this likely to increase, and within what time frame?

Currently, denim capacity in India is 1.2 billion metres per annum. Out of this, production capacity is 1 billion metres per annum, considering 85 per cent to 90 per cent utilisation. Nandan Denim commands a capacity of 99 million metres per annum as on 30 September 2015, which translates into nearly 10 per cent of the Indian denim industry. India has a 10 per cent share in the global denim market, which translates into 1 per cent share of Nandan Denim in the global denim market. One out of every 100 people in the world uses our fabric.

What are the new styles, designs and product innovations that we can expect from Nandan Denim in its new collections?

Nandan Denim supplies products through an unmatched portfolio of customers across the globe. The reach of our distribution network motivates us to continuously explore products which are forward-looking and bind us to different apparel brands. We also innovate. Our strategy is to have a portfolio of hybrid brands, straddling across consumer segments and price points. The company has set up an in-house creative design studio and product development cell. This studio is managed by a team of designers and technocrats from India's premier art and design, textiles and technology learning and research institutions. The cell's continuous focus is on creating and sustaining new market trends, fashion and product requirements which meet customers' needs in order to have a larger share in the sales pie. Fashion, being a subjective matter, will continue to drive product innovations and styles to increase comfort and fashion quotient of the users.

What does the Indian denim industry require?

We are blessed with raw material like cotton and a huge domestic market that offers ample opportunities to each of the players for growth. However, technological obsolescence forces some players to confine themselves to their costs and product innovations. The industry needs to regularly upgrade its machines or technology to remain relevant in the fashion centric industry. In the world of denim, only the one with the most flexible technology will be able to innovate and survive. Essentially, it means R&D alone won't make one grow. One needs to spend to remain relevant, particularly in the domestic market where the market is still at an evolving stage.

Can you throw some light on your market penetration strategy in Tier III and IV cities?

In the domestic market, Nandan Denim has tie-ups with around 35-40 distributors who sell our products pan-India. Our actual strength gets multiplied with the eco-system of Chiripal Group, which enables us to capitalise on generating leads for the cross selling of products. Users across the country are catered to by these major distribution points. With the advent of newer products at differing price points, we keep adding a new channel partnership to expand our reach to the users. The ongoing continuous customer contact programmes enable the company to seize early opportunities for enhancing distribution reach through more than one possible solution, making it the largest selling denim fabric in India.

What has been your growth in the last two to three years? What is the target for the next two years?

Nandan Denim has the second largest denim fabric manufacturing capacity in India and fifth largest in the world. Total income from operations increased by 22.7 per cent, ie to ₹ 1096.5 crore in FY 2015 from ₹ 893.80 crore in FY 2014. The rise in revenue was driven by a healthy increase in denim volume and realisation on the back of an improving demand scenario and a favourable product mix. The company successfully diversified into yarn-dyed shirting business, achieving revenue of ₹ 116 crore and contributing 11 per cent to FY 2015 total revenue. The company continued to increase its penetration in the international market to drive its export business forward, as revenue from exports grew 75 per cent to reach ₹ 136.3 crore in FY 2015 from ₹ 77.7 crore in FY 2014. The total income from operations grew at CAGR of 21 per cent over the period of five years ending FY 2015. EBITDA grew at CAGR growth of 25 per cent, and PAT grew at 31 per cent CAGR for the five years period. We have been driving growth in revenue through addition of capacities year after year. So far, we have been successful and ready to claim the status of being the biggest denim player in India within one decade. Before adding any more capacity, we will be building our internal competence to exceed internal goals. Our near-term revenue growth will be derived from such internal projects that will have a larger impact on profitability.

What percentage of revenue is ploughed back into R&D?

Our business doesn't require a long gestation period of product development and testing before being put to use. We don't undertake R&D on a fundamental basis. Most of our products are developed in-house, in line with market expectations and upcoming fashion trends. Product development doesn't entail huge costs in financial terms. Yet they cost heavily on the imagination front. We spend days trying to fix certain things that appear to be basic.

Published on: 21/12/2015

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.