Following up on my comment from December 2023. Chins' Portfolio - #217 by asarun
Unfortunately, since then, the competitive intensity only seems to have worsened based on Dollar’s and Rupa’s latest results. In addition, overall demand growth is probably not great either. None of the newer brands (mostly D2C) are profitable and their valuation levels have plateaued too with new fundraising at similar valuation levels as before. I don’t know much about regional brands - so I am unsure if this competitive intensity is also coming from regional brands. Maybe someone who tracks regional brands can comment about that. Wonder how long this competitive intensity will last, but hard to see at least the new-age brands being able to sustain their discounting much longer.
However, Dollar and Rupa seem to have taken slightly different approaches in tackling the challenges. Dollar’s not giving up share and grew quite well in Q1 (supported by modern retail and ecommerce/quick commerce), but profitability is still poor and receivables seem to be going up. Rupa’s Q1 results were quite dismal on the other hand. A steep 13% drop in volumes - they seem to be unwilling to play the discounting game at present. Other developments - Dollar’s ‘Project Lakshya’ (the new distribution model) is temporarily on pause because of fears of market share disruptions. Dollar has also paused EBO roll-outs, given they don’t see a route to make money from EBOs. I expect this will be the case for Rupa too though I haven’t seen the numbers yet.
Unless mass consumption demand goes up and competitive intensity from new-age brands reduces, nothing much to look forward to here, it appears.