Underwear stands out as investors lose shirt - Daily News and Analysis

Twenty-five years ago, almost every state had a local hosiery manufacturer but no one had heard of underwear shares.
In the last one year, however, shares of innerwear manufacturers have delivered 38% returns even as the market lost a fifth of its value.

Celebrity endorsements, joint ventures with foreign marquee names and a reluctance among consumers to wear baniyans with holes have meant an intense buzz around undergarment makers.

The first such company to go public in India was TT Ltd, way back in 1990. Then in 1996, Rupa Co floated on the Calcutta and Ahmedabad stock exchanges. It was another nine years before Maxwell Industries, the maker of Frenchie and VIP brands, listed.

Then came Page Industries Ltd in 2007 and Lovable Lingerie in 2011.

Three weeks back, Rupa Co got listed on the Bombay Stock Exchange.

The innerwear frenzy has been such on the Street that in the last quarter, Page, Maxwell and Lovable added `820 crore to investor wealth.

Multi-chaddi nation
Flash back again two-and-a-half decades, and there was not one national innerwear brand. While Lux Industries was strong in Madhya Pradesh, Rupa dominated Bihar and Jharkhand, and TT found success in Uttar Pradesh.

Anybody who could cover more than 2-3 states then was considered a national player. Now all organised players are pan-India, have better vision and good distribution, says Sanjay K Jain, managing director of TT.

But as branded players gained distribution muscle, spruced up product portfolios and spent big on advertising by roping in Bollywoods macho men Govinda, Sunny Deol, Sanjay Dutt, Salman Khan, Hrithik Roshan and Shahrukh Khan the threads started coming apart for the local chaddi-baniyan makers.
Going under

Hundreds have been wiped out or are on the brink of extinction because of the huge consumer shift to branded innerwear, said Pius Thomas, general manager, finance of Page Industries, the exclusive licensee of the Jockey brand in India.

Before Jockey debuted some 15 years ago, Thomas said, underwear was sold at hosiery stores stacked in cardboard boxes at low prices.

They sold a limited variety in 2-3 colours. The customer would select and get it wrapped in a newspaper. Jockey then offered 20 styles, 5 sizes. We revolutionised the underwear industry and a lot of people followed us.

Mine-is-bigger adspend
Today consumers have brand awareness andspend more on fashionable innerwear, says PR Agarwala, chairman of Rupa Co.

"When it comes to fashion, there is no limit to quantity. Today a consumer buys one, tomorrow he may fancy four. Even the rural consumers want branded innerwear, they want to wear what they see in the media, he said.

That is spurring a competition in adspend.

Today, Rupas adspends are three times Pages, which doesnt advertise on television - it relies more on in-store branding, hoardings and the print medium.

Thomas, however, said the company will have a television campaign this year.

No other market in the world spends as much on advertising innerwear, Jain swears.

The reason is not hard to find.

The proportion of people who use branded innerwear is small so the long-term potential of the segment is very promising, said D D Sharma, vice president of retail research at Anand Rathi Financial Services, the brokerage.

There is a clear rise in purchasing power and people are willing to buy more premium brands. Since this is not a very high-value item, demand is more resilient, he said.

So Rupa, which spent `36 crore in each of the last three years on advertising, would continue to spend big for the next two - this time to grow presence in the premium segment.

Mass to class
Thomas claims Jockey is the fastest-growing brand in the premium segment but admits rivals are responding to customer demands quickly.

Rupa entered the nations psyche with a rollicking, risqu pitch on television: Agar Rupa ka underwear pehnoge, to Rupa kya pehnegi (What will Rupa wear if you wear a Rupa underwear)?

That was the secret to its mass appeal - not any less contributed by Bollywood star Govindas punchline Yeh andar ki baat hai.
Agarwal says after so many years, his company has graduated.

We are more into premium and super-premium now. And the contribution from the premium segment will increase significantly in the years to come. 65% of our consumers are below 25 years and they observe fashion trends. We have to follow global brands like Fruit of the Loom, Jockey, Hanes. We have to monitor every brand coming in the market and accordingly adapt, he said.

Whats good for the firms is that consumers are also buying innerwear more frequently and more at one go, just like in the developed world, as standard of living improves.

Earlier men would be okay wearing baniyans with holes, now they are disposing them of faster, said Ramesh Agarwal, director, Rupa Co.

Apart from urban consumers spending more on innerwear, growth is also being fuelled by the emergence of first-time rural consumers in the branded segment.

There is a clear rise in purchasing power and people are willing to buy more premium brands. Since this is not a very high-value item, demand is more resilient, Sharma of Anand Rathi said.

Lovable listing
What got the industry in limelight in the recent years, Jain and Thomas believe, is the listing of Page. The industry otherwise has been growing what can be called a healthy rate, Jain said.
For investors, too, innerwear shares have stood out. Over the last one year, the return for the segment is 38% even as the Sensex lost 19.5%.

Not surprisingly, more are keen to list their shares.

Lux Industries of the Lux Cozi brand is set to list on the BSE on its exchange for small and medium enterprises.

Inner stability
Shares of such companies, therefore, offer more stability during economic uncertainty, said David Pezarkar, head of equities at Daiwa Asset Management.

These have a more predictable earnings stream. Such stocks are expected to give steady returns to investors but probably they wont match the explosive rise seen earlier, he said.
For the Street, therefore, the story of the brief is a long one.