LUX INDUSTRIES: A CUT ABOVE THE REST

July 10, 2017

• Todi brothers own lux { Ashok Kumar Todi(chairman) and brother Pradip Todi(managing director) }
• Headquarters in Kolkata.
• Relationship with supplier is very good and whenever there is smthing new, they make sure Pradip sees it.
• Last few Years
  • have seen hosiery major grow rapidly, moving from topline 500 cr in 2008 to 1,400 cr today, growing 11% a yr ( listed entity Lux Industries had revenue of 972 cr in the financial year ended march 31, 2017 while the rest comes from unlisted subsidiaries.)
  • Profits of the listed company has grown at CAGR 29% in last 5 yrs to 51cr, at a faster clip than market leaders and competitors PAGE INDUSTRIES ( that distributes Jockey in india) and Rupa, which have registered CAGR of 18.8% and 4.77% respectively.

• HISTORY:
  • Late 1957, Girdharilala Todi set up Biswanath Hoisery Mills as an innerware manufacturer
  • 1964, KK Todi ( eldest son) came on board
  • Over next few decades ashok and pradip joined too
  • When Ashok and Pradip joined, lot of work was outsourced to workers to whom yarn was provided and work specifications were mentioned. But they had a large network of distributors. Slowly , they regained control over manufacturing but are still famous for their distribution network.
• Built over 5 decades, lux has 900 distributors across the country. Each distributor srves 400 outlets. Company has also hired its own sales staff of 250 people , who in collaboration with the distributors conduct store recces (survey) to find out whats working.
• ADVERTISEMENT:
  • Turning point in Lux to become 3^rd largest in India ( Jockey and rupa being top 2) has been its move in 1992 to invest big in advertising. Before this, I was advertising in pieces but with the advent of satellite television in 1990s, it reached the masses. It brought slots of ZeeTV and came up with national advertising campaign.
  • Today it spends 75 crores in advertisement
• QUALITY OF PRODUCTS:
  • Cut down number of outsourced processes
  • Pushed for research and development
  • Eg. Fabric processing, stage at which fabric is coloured and bleached has been moved in-house, so have cutting and stitching, allowing it to maintain better control over quality.
  • Invest in advance equiments, which allows it to produce 1.4 millin pieces a day, largest in india.

• While over 90 percent of the innerwear industry is based in and around Kolkata, and some manufacturing is done in Tirupur, Tamil Nadu, Lux now has 11 units across India (in West Bengal, Uttarakhand and Tamil Nadu; the late KK Todi’s sons Rahul and Navin look after the operations of the Tirupur plant)
  • Its latest state-of-the-art factory in Bengal’s Dankuni consolidates all functions like cutting and knitting under one roof, allowing it to benefit from scale of operations, and its automated facilities lead the company to save fabric and ensure better precision.    
• 1993, lux ventured out in premium segment with lux Cozi, at higher price and earning 2-3% more margin than Lux.
• Company is still invested in premiumisaion led growth.
• Its next inflextion point will be its move up the value chain by the 3^rd generation of the family (Saket and Udit)
  • ONN – mens innerware led by Saket in 2011
  • LYRA – women’s innerware led by udit in 2013
• Ebitda margins of
  • ONN & LYRA = 16-17%
  • LUX COZI = 10%
  • LUX = 8%
• Future plans:
  • Steer the flagship ( most important thing owned by the organusation) LUX COZI to youth and urban people
  • Enter high margin segments through LYRA
  • Enter asual wear market with ONN
• Lux’s biggest opportunity could also boomerang as its biggest challenge:
  • Unlike Lux and Lux Cozi that are seen as push brands {PUSH BRANDS=that is the customer buys them because they are visible on shop shelves}, brands like ONN (Rs 100 crore in sales) and Lyra (Rs 175 crore in sales) are marketed as pull brands {PULL BRNADS=those that the customer specifically asks for, allowing the company to sell them at higher prices}.
  • It’s not an easy thing to do in India, where Jockey is perhaps the only innerwear brand to have successfully established itself as a pull brand.
  • They have built separate sales teams and also support their brands with heavy advertising to stay ahead of competition. As Udit explains, “We have a 40-member team that just monitors television channels 24×7 so that we can see where our competitors are advertising and then we can match them.
• FUTURE PLANS:
  • For now, Lux Industries has a target of reaching revenues of Rs 2,000 crore by 2020.
  • The company has expanded its international footprint to the Middle East, Southeast Asia and Africa. This adds about Rs 100 crore to its topline and should be another engine of growth in the years to come.
  • By then, it also expects to merge the unlisted portion of the business, Lyra, into Lux Industries.
  • At, say a 14 percent Ebitda margin, it would make Rs 280 crore, a 197 percent jump from the Rs 94 crore Ebidta it made in the financial year ended March 2017.
  • There are also plans to get into a licencing arrangement with an international innerwear brand (like Page Industries has done with Jockey) that would fetch them a higher margin.