About Saraswati Saree Depot Limited

Saraswati Sree Depot Limited is key player in sarees wholesale (B2B) segment (Source: CRISIL Report)and their origin into the sarees business dates  back to the year 1966. They are also engaged in the wholesale business of other women’s apparel wear such as kurtis ,dress materials, blouse pieces, lehengas, bottoms, etc. On an average of more than 90% of their total revenues are generated from sale of sarees. In Fiscal 2024, they have served over 13,000 unique customers and their product catalogue consists of more than 3,00,000 different SKUs.

Saree is an ethnic wear garment which has its origin in India and is one of the most popular readymade garment in India which is wore on casual occasions as well as on festive occasions.  A saree typically ranges from six to nine yards in length and can be worn in several ways. In India there are different kind of sarees which are prevalent with Indian women. The most prevalent sarees include silk sarees, cotton sarees, synthetic fibre sarees etc. apart from these prevalent fabric sarees, there are blends and mixture of fabrics in which sarees are available across the saree industry in India. The demand for saree market in India in recent years have come from growth in the wedding and celebration wear market. However, the industry is seeing the change in the consumer buying pattern as customers are seeking quality and premium products. The change in the buying pattern has resulted in players selling higher priced sarees than the value range  sarees. This is expected to drive  the growth for the market in the coming years. Saree industry in India is expected to grow at a 5-6% CAGR over fiscal 2024 to fiscal 2029 reaching Rs 650-675 billion by fiscal 2029. 

The saree market in India has been traditionally dominated by small retail shops and unorganised players who usually have standalone outlets which is characterised by loyal customer group. The unorganised players usually have fewer number of SKUs, and many of these players stock the sarees based on the local or region specific demand. On the other hand, with rising aspiration of the country’s middle class and rising disposable income, the organised players are tapping in to this demand for branded and quality products. The organised retailers in particular are targeting the saree market with offerings in the mid to premium range. As the disposable income for people in India increases and large global and Indian brands across the industries make their way into the overall  apparel market, the aspiration to wear branded apparel have increased in the Indian population. For sarees as well this aspiration has created an opportunity for organised branded players to launch their offerings to cater to this particular demand.

APPAREL INDUSTRY OF INDIA
The apparel industry comprises companies that design and sell clothes. Within this, the readymade garments (RMG) or apparel segment includes shirts, trousers, T-shirts and jeans. It also comprises ethnic wear, such as kurtas, salwar kameez, lehengas and sarees. 

Indian apparels players employ various business models. The two key differentiating  factors  in  these models are the strategy used to manufacture or procure (purchase or outsource) apparel, and the strategy used to distribute it. The business models can be analysed by dividing into three stages: manufacturing, branding  and  distribution. Companies often operate across segments, depending on their strategy and business model.

Furthermore, among ethnic apparel players, supply chain management is as an important aspect. Players manage their vendors as well as contract manufacturers to maintain the quality and output of apparel. Players also associate themselves with jobbers, which only manufacture for a particular  company. Among players who opt to manufacture on their own, the working capital requirement is typically higher. Players who are engaged in in-house manufacturing also need to keep a track on the procurement of raw material and inventory.

The size of the apparel market in India is estimated to have grown at a CAGR of ~3-4% between FY2019 and FY2024. The segment faced consumption slowdown in FY2020. Growth in the market was impacted in  FY2021  because  of  pandemic-induced  slowdown and the ban on sale of non-essentials during the financial year. Further, lower discretionary spending, delays in the opening of malls and lower footfalls impacted demand. FY2021 witnessed a decline of ~25% due to the impact of the pandemic. The market recovered in FY2022 as economy started to open up and there was gradual recovery in the market going in to FY2023 as people started returning to retail shops. In FY2024, market the apparel market in India showed robust growth of 9% on account of sustained demand recovery in the domestic market. Additionally, apparel market in India is expected to grow at a CAGR of 10-11% CAGR by FY2029 owning to combination of factors, including the revival of international trade, improved market conditions, and increase in the disposable income of Indian households.

Long-term growth in the domestic market will be driven by rising working population and income levels, higher penetration  oforganised retail stores and e-commerce, and growing preference for RMG over tailor-made garments.

Ethnic wear contributed to 30% of total apparel market in FY2024

Ethnic wear contributed to approximately 30% of the overall apparel market in India. The ethnic wear segment mainly consists of casual and celebration ethnic wear for both men and women. However with changing consumer preference for western wear and ethnic wear being constrained to celebration/wedding wear, the share of ethnic wear in overall apparel industry is expected to decrease going ahead with share falling to ~25-28% by FY2029. Western wear in comparison is expected to grow at a faster rate than ethnic wear and hence is expected to occupy major share in the overall apparel industry and will constitute approximately 72-75% of the overall market by FY2029.
 

Men’s wear is the biggest contributor of apparel industry in India

Men's wear dominates the market with a substantial share of 42% in FY2024. This signifies that men's clothing holds  a prominent position in the Indian apparel industry, indicating a robust demand and popularity among male consumers. Women's wear closely follows men’s wear representing about 40% of the market, reflecting  its strong presence and demand in the industry. It further highlights the importance of offering diverse and fashionable options to cater to the evolving tastes and preferences of female consumers. The Kid's wear segment captures a market share of 18% indicating a significant but relatively smaller portion of the overall pie.

OVERVIEW OF INDIAN APPAREL EXPORTS
India's apparel exports encompass a diverse range of products that cater to global markets. India has established itself as a prominent player in the international textile and apparel industry and is the third largest exporter of textiles and apparels in theworld, exporting various types of garments to meet the evolving demands of consumers worldwide.

One of the major categories of apparel exports from India is Readymade Garments (RMG) which includes a wide array of clothing such as shirts, t-shirts, trousers, dresses, skirts, blouses, and more. The RMG segment offers an extensive range of styles, designs, and sizes to cater to different consumer preferences across various regions. Ethnic wear also holds a significant position in India's apparel exports and includes traditional Indian clothing such as sarees, salwar kameez, lehengas, and sherwanis. Thesegarments showcase the rich cultural heritage of India and are highly sought after by the Indian diaspora and enthusiasts of Indian fashion across the globe.

Additionally, knitwear and innerwear also make a considerable share in total textiles and knitted garments such as sweaters, cardigans, pullovers, and jerseys. India's knitwear exports showcase a combination of basic and fashionable styles, appealing to diverse market segments. Furthermore, sportswear and activewear have gained prominence in recent years.

OVERVIEW OF SAREE INDUSTRY IN INDIA
Saree is an ethnic wear garment which has origin in India and is one of the most popular readymade garment in India which is wore on casual occasions as well as on celebration occasions. A saree typically ranges from six to nine yards in length and can be worn in several ways. In India there are different kind of sarees which are prevalent with Indian women. The most prevalent sarees include silk sarees, cotton sarees, synthetic fibre sarees etc. apart from these prevalent fabric sarees, there are blends and mixture of fabrics in which sarees are available across the saree industry in India.

The saree industry in India grew at ~3-4% CAGR over FY2018 to 2020 fuelled by growth in the overall apparel market as well as other macro factors like increased disposable income in the past. The saree industry in India was valued at ~Rs 558 billion in FY2020 and saw a steep decline of ~43% in FY2021 owing to shutdown of most of the saree outlets due to pandemic. However, the market rebounded  by ~44%  on-year in FY2022 as normalcy returned and economy started to reopen. The weddings which were postponed due to pandemic were the major demand drivers for the saree industry in FY2022. The recovery for the market continued in FY2023 as well as normalcy returned to the economy and more and more customers stated visiting the shops and other retail saree outlets. After recovering from covid-19 related stress in FY2023, saree industry recorded ~5% growth supported by demand from festive  and wedding season. The saree industry grew at estimated ~5% in FY2024 with estimated value of ~Rs.515 billion in FY2024. 

With customers moving towards e-commerce and online platforms for purchase, the share of online sales also increased in overall apparel industry. E-commerce has grown significantly in India in recent years due to wider selection of products, higher discounts, greater convenience of shopping (including door-step  delivery) and payment channels (including cash-on-delivery, mobile wallets, UPI) along with an increase in internet penetration and discretionary spending. The e-commerce format accounted for about 4-5% of the saree industry in India in FY2024. With e-commerce business also making steady growth, many of the organised players are making focused and substantial investments in new technologies and omni-channel (physical store and online site) infrastructure. Growing internet penetration and industry focus towards consumer stickiness will drive growth for e-commerce in the saree industry. Further, there is an increasing trend of brands focusing on direct-to-customer (D2C) retailing through their own brand websites, which not only provides them with higher visibility but also enables better control over data, client  requirements, feedback, uniformity in pricing and high conversion ratio. Also, with advent of social media, more consumers are aware of the trends on the digital commerce across the apparel industry. Hence, by FY2029, e-commerce  penetration is expected to increase up to 9-11% in saree industry in India.

Handloom weavers are one of the key elements in the saree industry supply chain

The weave is the interlacement of warp and weft yarns to produce a woven fabric. Fabrics are manufactured in wide varieties and designs. The basic weaves are plain, twill and satin. All the others are derivatives of these basic weaves or their combination. The handloom uses manual labour for producing the fabric from raw yarn instead of power looms which are run by electricity. The handloom weavers are one of the critical elements in the saree industry supply chain with many of the saree products being produced through these handlooms. The key saree products prevalent in India like Paithani, Kancheepuram, Thirubuvanam, Jamdani, Chanderi, Maheshwari, Patola, Banarasi etc. are produced by handloom weavers located near the origin of these sarees in different states. The handloom weaving in India has traditional values attached to it and have been in place from hundreds of years in some cases. 

According to the Fourth All India Handloom Census, the total number of households in India engaged in handloom  activities  (weaving and allied activities) is 3.1 million 0.7 million handloom worker households weave sarees, which is approximately 22.9% of all such households. The State of West Bengal dominates the saree production market but so does Tamil Nadu and Andhra Pradesh besides the North East (silk sarees from Assam and Tripura). Together these 5 States accounts for over 78.6% of the handloom saree production in the country.

South India is a dominant saree market with presence of cotton and silk producing hubs

The saree market in India is characterised by regional specialities with each of the state and region having its own speciality in terms of fabric, design and weaving patterns. Also saree market in India is driven by traditions and festivities across the states in India with each state and region having various festivals and occasions across the year. 

For sarees along with the tradition and festivities, the origin where its raw material is produced also holds major  significance.  Some  of  the  key  raw  materials  for  saree  like  cotton  and  silk are  predominantly produced  in  the southern  and  western  states  of India  like  Karnataka,  Tamil  Nadu,  Andhra  Pradesh, Maharashtra  etc.  These  regions  being  the  major  producer  of these  raw  material  have  also thrived  in becoming  textile  hubs  in  the  country  and  saree  products  in  particular.  Some of the signature saree productsfrom these states include Kanjeevaram saree-Tamil Nadu, Mysore sarees-Karnataka, Nauvari Saree/Paithani saree-Maharashtra. Apart from this West Bengal in the eastern region have also thrived in the saree market owing to presence of largenumber of handloom weavers in the state. 

Weaving  patterns  and  method  of  weaving  also  plays  role  in  defining  regional  dynamics  in  the  saree market in India.  The presence of handloom weavers across the  eastern and southern states makes  it a preferred destination for handloom based sarees like cotton sarees and silk sarees. Whereas in Western region particularly in Gujarat and Maharashtra, presence of powerloom/textile mills makes it a hub for powerloom based saree products like synthetic fibre based sarees which are mostly value range products.

SARASWATI SAREE DEPOT LIMITED STRENGTHS
1. Diversified supplier and cystomer base
2. Diverse Product Portfolio
3. Experienced Promoters & management team
4. Existing client and supplier relationships
5. Collaborative and experienced work force

SARASWATI SAREE DEPOT LIMITED STRATEGIES
1. Strengthening Inventory Management Practices
2. Entering into men's ethnic wear segment
3. Leverage Technology to bring cost efficiency and enhance customer experience
4. Capitalize on the increasing e-commerce for penetration in retail wholesale category

SARASWATI SAREE DEPOT LIMITED RISK FACTORS & CONCERNS
1. The business is highly concentrated on the sale of women’s sarees and is vulnerable to variations in demand
2. They operate out of two stores in Maharashtra which are located at Kolhapurand Ulhasnagar.
3. The Company is operating in wholesale segment due to which they lack visibility and direct connection with the end consumers of their products which may adversely affect their ability to build brand loyalty and awareness with the end consumers.
4. The business is subject to seasonality. Lower revenues in the festive period of any Fiscal may adversely affect their business, financial condition, results of operations and prospects.
5. A significant portion of their sales are derived from the western zone and any adverse developments in this market could adversely affect their business.
6. They do not manufacture any of their products and rely entirely on weavers/suppliers for the manufacturing of all their products.
7. Their market presence in southern India is not proportionate to the industry norm.