Table of Contents:
- About Cantabil Retail India Ltd.
- History
- Products
- Geographical Presence
- In-House Manufacturing
- Revenue Distribution
- Cantabil Retail India Ltd. Key Updates and News
- Industry Analysis
- Apparel Industry
- Retail Industry
- Cantabil Retail India Ltd. Risks & Threats
- Cantabil Retail India Ltd. Moat
- Cantabil Retail India Ltd. Financial Analysis
- Conclusion
About Cantabil Retail India Ltd.
Cantabil Retail India Ltd. founded its retail and readymade garment business in the year 2000 by Vijay Bansal and is one of the leading players in the Indian retail sector. It is engaged in the business of manufacturing, branding, and retailing apparel. The company offers a wide range of products including men’s wear, women’s wear, and kid’s wear.
Initial Phase
The company was founded with a vision to provide high-quality fashion at affordable prices. In the early years, cantabil focused only on men’s formal wear with its pillar goal to fill the gap of stylish yet affordable clothing. The company gained popularity in its early years because of its competitive prices and fabric quality. At the time when cantabil retail started the market had mostly expensive brands or were catered by unorganized players. All these gaps and market demographics back then helped cantabil retail to grow and establish itself.
Expansion of Product line:
After the success in the initial phase, Cantabil Retail soon started to expand and diversify its product line. It soon added party wear, semi-formal, and casual wear to its already existing formal wear. It also started catering to women and kids. This helped the company to cater larger customer base.
Company Timeline with Key Achievements and Milestones:
- 2000: Cantabil Retail Brand was founded by Vijay Bansal.
- 2010: Cantabil Retail went public, getting listed on BSE and NSE.
- 2012-2015: Fast and Aggressive expansion opening multiple Exclusive Brand Outlets (EBOs) across India. Rapid expansion led the company to face operational challenges.\
- 2016-2019: Restructuring and Optimization of operations impacted short-term profitability. OMP% being on the lower side.
- 2018: 200 Stores milestone.
- 2022: Reached 400 stores.
- 2023: -The Company has split its face value from Rs. 10/- to Rs. 2.
Core Product:
Brands:
- Cantabil
- Kaneston:
- Crozo
- Kingswood
- Lil’ Potatoes
“Couldn’t find any update on these brands, possibly have been discontinued. Can’t say much about it. We could be wrong no official statement has been found and we have not discussed the same with any company officials.”
Product Line:
Men: Formals, Casuals, Ultra Casuals, Woollen, Knitwear, and many more.
Women: Shirts, Tops, Leggings, Kurtas, Kurtis, Capri, Pants, Jeans, etc.
Kids: Shirts, T-shirts, denim, trousers, Culottes, dresses, tops, jeggings, shorts.
Accessories: Innerwear, Belts, Socks, Ties, Handkerchief, Deo, Slippers, Wallet, Tie, etc.
Geographical Presence:
Cantabil Retail India has its retail presence across India, with over 500 EBOs located in major cities and towns of 20 states. In addition to physical stores, the company is growing its online presence catering pan India with the help of e-commerce. Digital transformation will possibly lead the company to new opportunities and will allow it to benefit from increased online shopping trends.
Cantabil Retail India has been continuously adding store more stores across India, through two formats Company Owned and Company Operated (COCO) & Franchise Owned and Franchise Operated (FOFO). The company has added 86 new stores and has relocated/closed 4 stores in FY24.
Inhouse Manufacturing:
The company has established 2 lakh sq. ft manufacturing facility in Bahadurgarh, Haryana with the capacity to produce 15 lakh Pcs of garment each year. The company operates on an Asset-light model which means the company produces 1/3rd of apparel in-house, 1/3rd on a requirement basis, and 1/3rd is purchased on an FOB basis from manufacturers.
Revenue Channels/Distribution:
Cantabil Retail India Ltd. Key Updates & News
- Cantabil Retail has opened 2 New Showrooms/ Shops during the month of May 2024.
- Cantabil Retail Promoters are repurchasing shares from the open market.
- EBITDA for Q4FY24 was Rs. 43.9 crores with a margin of 22.6%.
- PAT margin for Q4FY24 stood at Rs. 18.3 crores.
- Cantabil Retail India Ltd.’s credit ratings reaffirmed by ICRA, with rated amount increased to Rs. 75 crore from 60 crore.
Cantabil Retail India Ltd. Industry Analysis
For the industry analysis of Cantabil Retail India Ltd., we will be analyzing the Indian Apparel and Retail Industry and will come up with a holistic view.
Indian Apparel Industry:
India is one of the largest producers of textiles and apparel in the world. Indian cotton, silk, and denim are the most demanded in other countries. The revenue in the apparel market in India is projected to be $105Bn in 2024 and it is supposed to grow at 4-5% CAGR from 2024-2028. Most of the time textile and apparel together are considered as one Industry and it is projected to grow at 10-12% CAGR. Per capita spending on apparel in India stands at Rs.6500 in 2023 and is expected to increase to 8000 by 2025. This per capita spending shows the potential affordable branded clothing has in India and companies like Cantabil Retail India will benefit in large.
Source: Statista
Retail Industry:
India is currently the 4th largest retail market, accounting for 10% of India’s GDP. In the year 2021, India was ranked 2nd in the Global Retail Development Index (GRDI). Apparel and Footwear constitute 9% of the total retail market. Indian retail market is expected to grow at 25% CAGR and reach $1 Trillion by 2027 and $2 Trillion by 2032. An important thing to consider is only 12% of the total retail market is organized retail. When an economy grows, unorganized markets shift towards organized markets led by corporates. So, in the next 5 years, we can expect that organized retail share will increase to 30-35%.
The E-commerce market which is part of the retail market has been growing at a faster pace with 18% CAGR. E-commerce is expected to cross $350Bn in GMV in FY30 and it was valued at $70 Billion in 2022. Currently, E-commerce market value accounts for only 7% of the total retail market. India’s E-commerce will be 3rd largest in the world by 2030.
Soure: IBEF
Key Trends:
Growing Income: Indians will have more purchasing power with rising income levels. This will add more people to the consumption class which will as a result increase demand.
Faster adoption of digital changes: With a high youth population and cheap internet, any new trend or technology gets adopted quickly in Indian homes. This is the reason for fast e-commerce growth and acceptance.
Growth in rural consumption: Rural consumption is supposed to grow 4.5x by 2030 faster than Urban consumption which will grow 3.5x by 2030.
Urbanization: It is estimated that by 2035 more than 43% of the country’s population will be living in Urban areas. This change resulting in higher urbanization will increase the consumption basket in the coming decade.
Competitive Landscape:
As we discussed above, with time Unorganized retail will shift towards Organized retail. Competition will be cutthroat, with new players entering the market and existing players expanding their service area. We can see it happening with several startups coming up in the affordable clothing segment catering to the masses.
This will be challenging for companies like Cantabil Retail because they need to compete with new startups/entrants but also with well-established players like Reliance, Tata, Birla, and Arvind who are coming up with new affordable clothing brands.
Competitors:
This sector is very competitive and will be more competitive in the coming years, we will see a few Listed players in India who compete with Cantabil Retail India Ltd.
Above are some of the listed companies that we believe are direct competitors of Cantabil Retail, which operates pan India and is in the same segment of retail fashion. Companies like Aditya Birla Fashion and Retail, TCNS Clothing Co. Ltd., and Active Clothing Co. Ltd. have multiple brands under them which cater to multiple segments under different brand names.
Cantabil Retail India Ltd. Threats and Risks
- Competition Risk: Cantabil Retail India will keep facing competition from domestic and global players. Domestic Brands like Reliance, Raymond, Arvind, and ABFRL, and International Brands like Zara, H&M, and Celio are current competitors. And then there will be emerging competitors who are new entrants. This intense competition can give rise to price wars and reduced margins. The global competition also means markets getting filled with cheap clothes manufactured from Bangladesh and Vietnam.
- Increasing Expenses: Increasing prices, poor power infrastructure, and other input expenses are giving rise to expenses that impact profitability. Material costs have increased from 28.94% in FY23 to 31.71% in FY24. Employee costs have increased from 17.68% in FY23 to 19.25% in FY24.
- Regulations: Apparel retail businesses have both government regulatory and environmental regulatory issues. Regulations are labour laws, environmental standards, and taxation policies all increase operational costs and impact profitability.
- Brand Reputation: Brand reputation is important for every fashion company. Brand image and recognition are what differentiate brands from one another. It is very hard for any fashion company to maintain its brand image and continue with its positive image in an intensely competitive environment. Also, brand recall seems to be low. It is generally challenging to achieve high customer retention and build a loyal customer base in the market segment where Cantabil Retail operates.
- Consumer Trend: Fashion is one business where trends change every other day. And to keep up with the pace a brand needs continuous innovation and adaption. Customers are becoming aware of environmental impact and are looking for sustainable products that don’t harm the environment. With fast-changing consumer preferences brands like cantabil have to keep innovating and have to keep themselves relevant.
Cantabil Retail India Ltd. Strong Moat
- Extensive Retail Network: Cantabil Retail India has more than 500 EBOs across 20+ states. And has been adding more stores through the COCO and FOFO. The company is aggressively expanding itself in Tier 2 and Tier 3 cities. These cities are where the future potential lies as the Indian rural population will see a shift to urban cities.
- Vertical Integration: Cantabil Retail India does its manufacturing, designing, and branding in-house. Vertical Integration allows Cantabil Retail to control quality, price, and changing trends. It also helps the company to manage its supply chain more efficiently. This is a major competitive edge to keep production costs down and not solely depend upon third-party manufacturers.
- Asset-Light Model: Cantabil Retail India has an asset-light business model. It means that the company produces 1/3rd of apparel in-house in its Haryana plant, 1/3rd of apparel is fulfilled by contract job workers and 1/3rd is purchased from manufacturers on FOB. This mix helps the company to manage quality, and remain cost-efficient and overall, this should help in better working capital management.
- Affordable Clothing: Cantabil Retail India has products at a very affordable price, targeting the lower middle class and middle class. Cantabil Retail India’s product range starts from Rs.399 and goes up to Rs.2,499. Retail Stores and E-commerce always have discounts so one can get products even cheaper. This price point allows it to cater to the masses.
- Brand Recognition: According to our research brand does have a positive image as few customers we talked to had good to say about the brand. Because cantabil has chosen brick and mortar model to grow it helps create a strong brand presence. A major factor is that Cantabil provides value for money, High-Quality apparel at a very affordable price.
Cantabil Retail India Ltd. Financial Analysis
Cantabil Retail India’s revenue has grown at a 34%CAGR over the last 3 years. But slowed down the previous year and saw 12% YoY growth. The company aims to increase its revenue to 1000 crore by mid-2027. According to the management target, we should see YoY growth for the next 2-3 years around 14-16%.
Average Selling Price (ASP) has gone down to 1039 in FY24 from Rs. 1058 in FY23, but Average Basket Size has gone up in FY24 to Rs. 4,099 from Rs. 3954 in FY23. The slight decrease in ASP may signal heavy discounting or can be a strategy to bring down prices for better market reach, this needs to be tracked to understand the overall impact in coming quarters. Another concern with Cantabil Retail is its Same-Store Sales Growth (SSG) is down by 4% in FY24. Also, Sales Per Square Foot (PSF) is down from Rs. 903 in FY23 to Rs. 802 in FY24, Cantabil Retail Space has also gone up from 5.27 Lakh Sq. Ft in FY23 to 6.64 Lakh Sq. Ft. in FY24.
Falling PSF is a short-term concern only if Cantabil Retail can manage it effectively as we assume new stores are slow at driving sales numbers and in the long term it can benefit from increasing retail space. Falling SSG is a RED FLAG as the core business is struggling to keep up with sales maybe because of increased competition, Operational issues, or change in customer preference. We need to constantly monitor these metrics as a single Financial Year can’t tell the whole picture.
Cantabil Retail has come a long way in improving its finances over the decade, but operating profit remains volatile. The OPM remains volatile because of unstable expenses, as we have also discussed issues with companies increasing expenses.
Margins for Cantabil Retail are not stable which is something to be concerned about this company. Though they have shown improvement and growth, especially post covid, it is a good sign but because of the volatile margin, it is hard to predict how things will perform in the future. EBITDA Margin in FY22 was 22.87% which Increased to 29.8% in FY24 and then fell to 26.4% in FY24. PAT% has been in the range of 10-12% for the last 3 years have shown a lot of improvement from the pre-covid range of 3-5%.
Gross Margin has constantly improved YoY and currently stands at 56% for FY24. Gross margin is up to the industry benchmark and we can say that for Cantabil Retail gross margin between 40-50% is reasonable and anything above that is good.
Cantabil Retail Inventory days are 121 which is ok as per industry standards, reasonable inventory days indicate good operational efficiency. 121 Inventory days mean it takes about 4 months for Cantabil Retail to turnover inventory which is more than the ideal range of 60-90 days. It’s not bad but this indicates that the company has room for improvement in their demand forecasting, sales strategy, and product mix. High Inventory days can cause cashflow constraints which here should not be an issue for Cantabil Retail as 121 inventory days are manageable.
Low Debt to Equity Ratio is a positive sign, FY24 Debt to Equity Ratio is 0.03. Anything below 1 is considered good. So Cantabil Retail is managing its debt effectively, reducing financial risk. Low ratio indicates a conservative approach to leveraging and strong financial management.
Profitability Ratios:
Profitability Ratios have shown an uptrend from FY21 to FY23 but have declined across all Profitability Ratios. This indicates that FY24 had been challenging in maintaining a high level of efficiency and profitability.
Liquidity Ratio:
Cantabil Retail shows a strong liquidity position with improvement the in current and the quick ratio. Volatility in Inventory Turnover needs to be tracked closely. Overall company shows indicate prioritizing strong financial stability and liquidity and careful management of liquid assets.
Conclusion
Cantabil Retail India seems like could emerge as the biggest affordable fashion retail brand. The stock is trading at a P/E of 33 which is very close to the average Industry PE of 32 making it reasonably valued. It is one of the emerging retail fashion brands in the Tier 2 and Tier 3 cities pan India, with good profitability and liquidity position.
Vertical Integration and an asset-light model of business give it an edge over its competitors. With over 30 years of experience, Cantabil Retail has weathered numerous challenges and continues to grow aggressively. This resilience instills confidence in investors, showcasing the company’s ability to overcome difficult times and maintain robust business growth.
Overall company is Financially strong, though the company needs to work on margin volatility cut down, and get control over its expenses. Falling Same Store Sales Growth (SSG) is another major concern that investors should keep track of in the coming Quarter/Year. Cantabil Retail’s primary goal is to grow through brick-and-mortar expansion, specifically targeting Tier 2 and Tier 3 cities. E-commerce is not currently the company’s major focus. This strategic decision to limit emphasis on e-commerce should be considered within the context of a rapidly digitizing retail environment.
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Disclaimer:
“We are not a registered equity research analyst as per SEBI regulations. The views and opinions expressed in this report on Cantabil Retail India Ltd. are of our own and are provided for informational purposes only. We may hold the stock of Cantabil Retail India Ltd. in our personal portfolio, which may influence my views.
This report does not constitute an offer or recommendation to buy or sell any securities. Readers are advised to conduct their own research and consult with SEBI-registered financial advisors before making any investment decisions. The accuracy and completeness of the information provided are not guaranteed, and any reliance on this report is at the reader’s own risk.”
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