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Lux Industries Chairman's Speech > Engineering - Heavy > Chairman's Speech from Lux Industries - BSE: 539542, NSE: LUXIND

Lux Industries

BSE: 539542|NSE: LUXIND|ISIN: INE150G01020|SECTOR: Textiles - Processing
Dec 09, 16:00
-39.4 (-2.86%)
Dec 09, 15:48
-34.45 (-2.49%)
VOLUME 45,545
Mar 17
Chairman's Speech (Lux Industries) Year : Mar '18

Dear Shareholder’s

The introduction of the Goods & Services Tax in 2017 represents an inflection point in the existence of India’s hosiery sector.

By unifying the indirect tax structure, the government has attempted to create a level playing field. For long, unorganised hosiery sector brands outside the country’s tax systems and competed aggressively with tax-compliant players. In doing so, they often under-cut market realisations and disturbed market pricing.

The implementation of GST narrowed the cost differential between the organised and unorganised players. By enhancing the relative competitiveness of the organised sector, the government has inspired a re-balancing of the business. The market share of the country’s unorganised sector is expected to decline; the share of the organised sector is likely to increase. When one considers that India’s apparel and hosiery markets would continue to grow organically, the reality is that India’s organised players will need to catch up with two marketplace shifts - from unorganised to organised on the one hand and the organic growth of the market on the other.

At Lux, we recognise that when a shift of such magnitude occurs, the response cannot be usual. Such a scenario requires companies to restructure their businesses to address the potentially unprecedented upside. Companies responding to such a sectoral inflection point by making only cosmetic changes in their business model would perhaps bye missing the overall import of such an opportunity.

At Lux, we responded with a bold and decisive initiative. In 2017-18, the company announced a proposal to merge its two group constituents J.M. Hosiery and Ebell Fashions with itself. We wish to communicate to our shareholders that both these Group constituents are profitable and the decision to merge these companies would prove value- and EPS-accretive. The appointed date of the merger was April 1, 2018, which means that the full impact of the merger will reflect from 2018-19 onwards.

The value that these constituents bring to the business is distinctive. J.M. Hosiery owns the men’s brand GenX; Ebell Fashions owns the women’s brand Lyra. Their accretion to the Lux business will be complementary and profitable.

The consolidated impact on the business would result in each of the merged arms growing faster than usual and their resulting synergies-cum-economies translating into accelerated growth of the parent company as well.

Lux Industries finished 2017-18 with revenues of RS.1,139 cr and following the merger, we expect to accelerate business growth to achieve RS.2,200 crore in revenues by 2020.

In doing so, we expect to sustain all the things that we hold dear to our company: the ability to grow faster than the rest of the market, the ability to strengthen operating margins and the ability to reinvest accruals to grow our brands, visibility and distribution network.

The principal message that I wish to send out is that the proposed merger is a game-changer, strengthening our industry leadership and business sustainability.

Ashok Todi, Chairman

Source : Dion Global Solutions Limited
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