Innerwear Industry – Sector Report By SMIFS

In this report, SMIFS has discussed four large players, i.e. PAGE Industries (Hold), Lux Industries Ltd (Strong Buy), Dollar Industries Ltd — (Strong Buy), Rupa & Company Ltd- (Buy).

The Indian innerwear market was valued at ~Rs 320 billion in 2018 and is expected to grow at a CAGR of ~11% over the next decade to reach ~Rs 897 billion by 2028E. In the past, innerwear was depicted as a mere essential ‘commodity’ but in the last few years transformed itself into a fashion statement. Players now focused on the width of the product range; men’s and women’s innerwear began to be marketed through retail formats. Domestic demand of innerwear has changed with rising incomes, higher discretionary spending, rise in number of working women and growing fashion consciousness coupled with increased fashion consciousness among millennials. The innerwear segment is now expected to gain a new round of traction. Most major brands across the men’s and women’s segments are expanding their portfolio.

 The innerwear market is dominated by a large number of small-scale players, making ~60-65% of the market unorganised. However, the market is evolving gradually and moving towards organised retail. Lately, the premium innerwear market in India has been experiencing the increasing entry of global brands, mostly through partnerships and tie-ups with home-grown brands.

 Organised players have invested significantly in building capability around: 1) design & fit; 2) sourcing; and 3) channel presence, to ensure that their distinct positioning translates in to retail connect with consumers. This has fuelled demand shift towards organised from the unorganised segment.

 The distribution structure of the innerwear category is much more diversified and balanced, allowing the terms of trade in favour of the branded players. Home grown brands achieved the respectable size of Rs.~10 bn, which many branded apparel brands are still struggling to achieve. Brands are continuously focusing on product consistency and design over a period of time to avoid losing a satisfied consumer. Moreover, a steady stream of new products keeps distributors and retailers active and interested.

 Industry players constantly looking for a new revenue stream or product segmentation where they can generate higher realization than the regular innerwear. Fortunately, a new trend emerges in the industry where players are focusing on outerwear like track pants, shorts, T-shirts and most importantly athleisure wear, which will give them a higher margin on select products.

 The listed players in this sector are Page, Lux, Dollar, Rupa, and VIP Clothing. While traditional players like Lux, Dollar and Rupa have a wide range of brands, they earn majority of their revenue from economy segment brands. Only Page via Jockey has cracked the segment with a premium brand and today it has become the single largest branded apparel brand across categories. After Page, various other players have also launched premium innerwear with limited success. Only Van Heusen has gained some traction over the past 3-4 years. Furthermore, super premium category is currently serviced by foreign brands like St.Michael, Marks & Spencer etc. These foreign brands are easily available in India, especially in the Metros. In innerwear, because of the lower -ticket size, upgrading is much easier and affordable for a lower per capita economy such as India. By paying as little as Rs 60-70/piece more, a person could upgrade from an economy brand to a mid-premium brand.

 Over the years, the industry has created a huge entry barrier by creating brands backed by big celebrity endorsement. Moreover, modules and fixtures for product display, attractive packaging and point-of-sale imagery ensured respective brands was brought into limelight using first-of-its-kind brand communication.