Guys,
We have been maintaining that Management commentary will need to be cross-checked. There can be more to the Story than is being put out. Some salient data points from my industry contact:
1). Atleast 7 players of comparable sizes to Kitex and supplying to common customers. Some are expanding in a big way too.
2). BEST Corp, SP Apparels, First Step, Jupiter Knitting, CMI, Jay Jay Mills, Kitex
3). First Step Bangalore has expanded recently and put up a new state-of-the-art facility near Bangalore
4). Quality being a big differentiator - NOT TRUE - too much of a drum is being beaten on the Quality front. Harping too much on the product. While it may be debatable that Kitex supplies fabric made of better quality yarn - that’s hardly the buying differentiator ever - as everyone meets the minimum standards needed. “Unnis-bees” ka difference doesn’t sway buyer order placement who are focused on profitability. At best it is a good selling point. Price and on-time delivery record sways buyer behaviour. **Have you guys asked Vendors about their on-time delivery record?**Ask about past 4 seasons - and you may get a better grip on the situation.
5). Atleast one of the big buyers mentioned by Kitex - sources 5x higher from BEST Corp and First-Step 2x higher than it sources from Kitex. All things being equal (read minimum specified quality), Price, On-time delivery record, and Relationship has more sway on the buyer order placement and scale-up from season to season
6). Almost all Buyers put a cap on max 30-40% exposure to a single vendor. It is safer for both parties. Some have expanded capacities in place now to scale up on relationships.
7). First-Step quality is like “Makkhan” - the exact words used. There is another player like Prime-Tex whose quality is the best - super premium - but his overheads are higher. Volumes for this particular vendor is at 65% of Kitex for that one player cited above.
8). Bangladesh is also scaling up in Infant-wear. Jay Jay Mills in particular is one audited facility (when quizzed about prevalent social ethical norms) as is Inter-Stop Bangladesh. Besides Bangladesh has the advantage of zero duty (LDP=0) even if say India could match competitive pricing
9). Baby Suit Realisation per Vendor : ~$1.1 on an average
10). Retail MRP in US is 3x average vendor realisation. However there are low-downs. On actuals, on an average there would be only a 20-40% mark-up on the vendor price depending on the player. Some like TESCO operate at lower markups but higher volumes.