The goods and services tax (GST) system has been a milestone decision for the country, but its effects are going to linger a bit longer in the textiles and apparel industry. I believe that, on-going implementations will result in making it the biggest booster to the country’s economy in the coming decades, explained Shivendra Nigam, CFO, Cantabil Retail.
In an interview with ETCFO’s Shivani Phaugat, Shivendra Nigam the CFO of Cantabil Retail India Ltd shared his views on their strategy for coping with the economic slowdown, consumption trends, corporate tax, the lingering effects of GST in organising the industry and how offline stores still have an upper hand against the e-commerce industry.
Cantabil Retail India a fashion brand is into designing, manufacturing, branding and retailing of apparels.
Q: How has the slowdown affected you? Are you giving any offers to deal with it?
Shivendra Nigam: In our industry, inventory management is the most crucial part in retail and considering the current scenario of slowdown, the requirement of efficient management has become more critical. The companies at present might be facing the challenge of inventory piling up due to lesser spending by consumers in the past few months.
To tackle the slowdown, we have completely aligned our production and procurement of materials with budgeted sales. This has helped us in avoiding any downward impact on our cash flows and thus has not affected us.
Q: Where do you see the next big trend of growth coming within consumption?
Shivendra Nigam: We see immense potential in tier-2 and tier-3 cities for fashion retail with young aspirant generation coming up. They are keen on spending in affordable brands. We have a target audience of growing middle class and believe in offering “quality products at competitive price”. So, we clearly see the next big growth from these cities and towns.
Q: Where do you see the maximum growth come — from online or offline stores? What do you think modern retailers should do against the backdrop of rising influence of e-commerce?
Shivendra Nigam: I see online stores as fashion portals that have made consumers more aware about the latest fashion and trends available in the market. This in turn has proven to be an added advantage for offline stores. Despite the online penetration, offline stores are still the first choice of consumers for fashion and we believe that there is good potential for growth in the segment.
Further the e-commerce challenge can be handled better by enhancing the customer’s shopping experience with zero compromise on basics like quality and competitive pricing. I believe that the touch and feel factor while shopping in fashion retail along with basics will prevail as an advantageous factor.
Q: As a CFO in the apparel/retail sector what are the real challenges that you face?
Shivendra Nigam: The apparel industry has largely been an unorganised sector and is still a work in progress of becoming organised. Cantabil is an organised player and has been regularly adopting and implementing various statutory regulations with a complete set of professional mechanism.
Some of my challenges include voluminous transactions, keeping pace with rapid changes in regulatory norms and GST implementations.
The specific challenge in the GST comes in claiming inputs as most of the vendors are not organised, so getting them organised and to be compliant on a monthly basis is the key challenge for us.
Q: There was a lot of fan fair when the Corporate Tax was reduced. Will you be shifting to this new tax regime or continue with the old one?
Shivendra Nigam: We are paying taxes in Book Profit under Minimum Alternate Tax (MAT) provisions of the Income Tax Act. The company will continue to pay taxes under MAT for this financial year and will get the benefit of tax cut under MAT. With the continued rapid growth of the company, we are expecting to fall under normal tax provisions in coming years.
Q: Demonetisation and GST have had a major impact on textiles and apparel industry. Do you believe that the effects are over?
Shivendra Nigam: The textiles and apparel industry have largely been a part of the unorganised sector and are currently in the process of being revamped to a more organised sector. Demonetisation and GST system have been milestone decisions for the country and it is going to take a bit longer for the textiles and apparel industry to settle down completely. But I believe that the overall GST implementation will definitely result in being the biggest booster to the country’s economy in the coming decades.
Q: What sort of technology trends do you see coming up in the apparel/retail industry?
Shivendra Nigam: I follow the philosophy of organised brick and mortar retail where customers spending quality time while shopping. The sector needs technologies that can help customers make their shopping experience smooth and quick. I see technological solutions like digital price tags, automated payouts and self-check outs come up as the next big thing for the industry.
Q: What are your capex plans? Will you continue to open more stores?
Shivendra Nigam: Canatbil has a significant presence in tier-1 cities and majority of our expansion plans are targeted towards tier-2 and tier-3 cities. Expansion in these towns is cost effective and less competitive as not many brands are available in these markets.
For this we are planning to open up 70-75 new stores in the next one year as a part of our growth strategy. The strategy will include both company owned stores as well as asset light franchise models. The company has planned to spend in the range of approx Rs 1500 per square feet on capex in company owned stores, considering the design and size of the stores.