India’s first saree-focussed company, Sai Silks (Kalamandir) Limited has filed an offer document for going public. It has made a big mark in the burgeoning saree market with a robust business model in high-end and value retailing.
Entering its sprawling showroom in Jubilee Hills, Hyderabad, one cannot help but notice the intricate details of the design and aesthetics. The entrance is lined with 20-foot columns, providing a feel of the grandeur of an imperial mahal. The interiors are steeped in Indian culture.
Here, one sees dozens of representatives tending to customers in traditional Indian style. We saw a pujari (priest) standing before the mandir (shrine), blessing every saree purchased amid the chanting of auspicious mantras.
This is the Kancheepuram Varamahalakshmi Silks retail store, coming from the stable of the high-end saree and fashion retailer Sai Silks (Kalamandir).
The ethnic fashion chain’s MD, Nagakanaka Durga Prasad Chalavadi, 54, explains that “this approach to selling sarees is to make a special occasion such as a wedding, even more special and memorable. An Indian wedding and the accompanying celebrations are some of the most auspicious occasions for a family, and we want to make even the shopping experience equally memorable for customers. When you put customers in front, you create beautiful and long-term relations. At Sai Silks (Kalamandir) Limited, the idea is to live up to our customers’ expectations, and it’s working quite well for us since we can see its success”.
Strong retailing brands
No doubt, the strategy is paying off handsomely for Sai Silks. The products under the Kancheepuram Varamahalakshmi Silks format store range from approximately Rs4,000 to Rs2,50,000, and sales are booming. A customer’s exclusive experience is well-served through this format. The average invoice value for sales for Varamahalakshmi (excluding e-commerce sales) in FY22 was Rs12,581, an increase of 22 per cent against Rs10,325 in FY20.
“Sai Silks’ revenue and profit after tax in FY19, FY20 and FY21 are some of the highest among its peers,” says a Technopak Report. In fact, Sai Silks recently opened its 50th store under the Varamahalakshmi Silks format in Chennai. The business plan is that it operates four types of unique store formats: Kalamandir, Kancheepuram Varamahalakshmi Silks, Mandir, and KLM Fashion Malls.
It’s a well-thought-out strategy, aimed at straddling various prices in the ethnic saree and fashion-retail market. The idea is to cater to vast segments, including premium ethnic fashion, mid-market High-Street fashion and value fashion. “We create a differentiated shopping experience for customers, which is a key factor in word-of-mouth reference as well as helping us increase our average business per customer across all prices. We have introduced certain unique experiences, and have invested in interior work at our stores to ensure that the overall ambience matches the shopping experience,” says co-promoter Jhansi Rani Chalavadi.
While the retail formats cater to different segments, the mass, middle and creamy layers, the brilliant strategy employed by Sai Silks is that it has kept the distinction between these segments, so that each retail chain can carve and expand its own niche and brand-awareness.
Sai Silks’ first brand-named retail store, Kalamandir, was established in 2005 in Ameerpet, Hyderabad, in Telangana and the company has never looked back. The nomenclature ‘Symbol of the South’ is apt for this brand, which showcases affordability with contemporary designs that target middle-class and upper-middle- class customers. Products include different varieties of sarees, such as tusser, silk, kota, kora, khadi, georgette, cotton and matka.
Sai Silks operates 11 small, medium and large Kalamandir stores, across Andhra Pradesh, Telangana and Karnataka, with an aggregate area of 102,487 sq ft, larger than many retail malls. “Our Kalamandir format has sarees intricately woven by a team of weavers, artisans and designers to ensure that each piece is of top quality, and that the brand’s vision is carried out seamlessly. Our Kalamandir stores, in line with the theme of the brand, are more contemporary in design. The Kalamandir format stores are for middle-income retail customers, each piece crafted to provide the best options within budgets. It has helped us springboard our success as our first store was in the Kalamandir format,” says R Balaji Bharadwaj, senior vice president.
The Kalamandir format has been priced at just a little under the Kancheepuram Varamahalakshmi Silks format. Sarees here range from Rs1,000 to Rs1,00,000. The average invoice value for sales for Kalamandir (excluding e-commerce sales) in FY22 was Rs4,843 compared to Rs3,953 in FY20.
Not to leave out any segment of the retail saree market, Sai Silks went on to establish another super-luxury saree and ethnic-wear retailing format, ‘Mandir’, in 2011. The store is a one-stop destination for high-end ultra-premium designer sarees, including party wear, festival wear and occasional wear, and lehengas that can be customised.
With exquisite designs and gold-laced sarees for the big occasion, the ‘Mandir’ retail format has created a unique name for itself. The retail price of the Mandir range is approximately Rs6,000-Rs3,50,000. The average invoice value for sales for Mandir (excluding e-commerce sales) in FY22 was Rs24,853, compared to Rs17,918 in FY20.
No doubt, the fashion retailer has sarees at the centre of its growth strategy. Starting from one store in 2005, Sai Silks has widened its reach and grown in size to about 50 stores.
The firm also retails high-end party wear, lehengas, men’s ethnic wear and children’s ethnic wear, while sarees continue to dominate the southern Indian market.
Market voices extrapolate that the saree market is worth over Rs1 lakh crore, thanks to the unorganised segment, the huge demand from women as well as GST figures cited by the trade. Overall, eight out of every 10 households (or 20 crore out of the 25 crore households) in India reported purchasing at least one saree in a year, according to analysis data from the last round of the consumer expenditure survey conducted by the National Sample Survey Office (NSSO). The share of households purchasing sarees is higher in rural India at 85 per cent. In urban India, 74 per cent households reported purchasing sarees.
In the 25 crore households, there are an estimated 37.6 crore women who are above 25 years of age (census estimates). The women in this age group are the target consumers of sarees who continue to buy sarees for both daily wear and celebration wear. The number of women above the age of 25 is expected to reach 45.5 crore by 2031 and ~49 crore by 2036. Imagine, 25 crore households or 37 crore Indian women spend an average of Rs4,000-Rs4,500 annually and the size of the Indian saree industry is in excess of Rs1 lakh crore (Rs1 lakh crore or $15 billion-plus). The saree category is expected to grow at a CAGR of 6.5 per cent from FY2020 to FY 2025.
The upside is that this niche market is seeing the entry of mega-corporations. Conglomerates such as Reliance Retail, Aditya Birla and the high-end jewellery chain, Titan, have already rolled out saree brands in the domestic market, investing substantial amounts in brand-building and sales.
With three marquee-retailing formats in ethnic sarees, the firm has established a formidable presence against the competition, both in retailing as well as in revenues and profitability. Chalavadi recognised the opportunity of the huge gap in the saree market where quality and value play a dominant role. With Kancheepuram Varamahalakshmi Silks, Mandir and Kalamandir, the company no doubt is the cynosure of all eyes in the high-end ethnic wear and saree market
When you put customers in front, you create beautiful and long-term relations. At Sai Silks, the idea is to live up to our customers’ expectations, and it’s working quite well for us since we can see its success
“The growth of the regulated market was led by those such as Sai Silks (Kalamandir), Pothys, Nalli, etc, which are expanding their footprint and depth in market and expanding the growth. Due to its dominance in the Indian market, Sai Silks has outpaced much of the competition. With its placement across categories, it has become the third-largest in the south Indian saree market,” says the Technopak report.
Sai Silks’ FY20 revenues were Rs1,178 crore, compared to Nalli’s which were Rs573 crore. Pothys is one of the largest in the southern Indian market, with a revenue of Rs1,599 crore. But going by the manner in which Sai Silks has been expanding its retail footprint, it seems that the firm will catch up with the market leader in the future. In fact, Sai Silks is one of the few ethnic-wear saree brands to have consistently posted profits in the last 3 years.
“Our investment in our brand, advertising and marketing has been one of the key factors enabling us to distinguish ourselves from our competitors, and resulting in greater awareness. Our growth strategy has also been consistent and we have been able to vastly expand, compared with some very old and established competitors,” says Rachamadugu Balaji Bhardwaj, senior vice-president.
“Sai Silks’ strength lies in creating innovative designs with an emphasis on quality to offer new and varied products to our customers throughout the year. We leverage the design infrastructure that is available with third-party manufacturers to maintain the latest design trends. We constantly interact with independent designers to raise the bar of creativity throughout the year, and these designs are then subsequently sent to master weavers and third-party manufacturers. This has enabled us to remain on top of the creativity curve and give high quality products to our customers,” says Kalyan Srinivas Annam, whole-time director.
Sai Silks also develops distinctive and unique marketing campaigns to generate high customer engagement. “We have been investing a lot in brand building and we regularly implement targeted campaigns. We also maintain consistency in pricing across channels, offline and online, so that customers can experience our service seamlessly,” says Bharadwaj.
Value fashion on the rise
Another segment that has been seeing good growth for Sai Silks is value fashion. KLM Fashion Mall is Sai Silks’ latest store format. Established in 2017, the first one was opened in Ameerpet, Hyderabad, providing value-fashion to young people and others with new-age fashion choices at affordable, value-for-money prices. Since 2017, Sai Silks has opened 18 large-format stores across three states with an aggregate area of 336,608 sq ft. The average size of KLM Fashion Mall stores is approximately 18,700 sq ft.
KLM Fashion Malls are strategically located to be accessible to families. For example, the KLM Fashion Mall in Marathahalli, Bengaluru, is located in the centre of Bengaluru’s IT hub to attract value-fashion shoppers. At the same time, the mall provides discounts throughout the year to encourage customers to purchase more as well as to maximise its invoice value.
While this appeals to the mass market and drives customers, KLM Fashion Mall products are affordable and meant to cater to value retail customers as daily drivers. The average invoice value for sales of KLM Fashion Malls (excluding e-commerce sales) in FY22 was Rs2,440 against Rs2,148 in FY20, showing that demand drivers such as increase in demographics and rising income levels are in favour of its products.
“In value fashion retailing, consumer trends have been shifting toward private labels which provide quality products and affordable prices. The value-fashion category is expected to increase from Rs25,500 crore in FY20, at a 6 per cent CAGR over the next 5 years,” according to the Technopak Report.
Sai Silks also has a good strategy in place for inventory and logistics, with its supply chain coming from three warehouses, one each in Karnataka, Andhra Pradesh and Telangana. Together, they have an aggregate area of approximately 162,000 sq ft, as of 31 May, 2022. The firm also has a designated storage space at one of its stores in Chennai, Tamil Nadu.
Sai Silks is expanding its footprint within India through owned stores and franchise networks by leveraging its brand appeal across formats. It intends to open approximately 30 stores across South India, of which five will be through franchisees. These have been planned over the course of the next two fiscals.
Sai Silks will explore further franchisee and B2B models with the objective of tapping the non-regulated segment as well as improving return ratios through expanding margins. Sai Silks uses its in-house ERP system to increase efficiency in its business, and is investing further in IT infrastructure.
Its sales and marketing expenses are consistent with its strategy to expand its brand presence. It spent Rs26.9 crore in advertising, about 2.39 per cent of its FY22 revenues. Further, it constantly targets customers through differentiated sales and marketing efforts, which include selling its products through live shows and video-based commerce on social media platforms.
It has also been active on social media, with 983,276 followers on Facebook, 310,400 on Instagram and 109,060 on YouTube. This helps it expand its digital and social media operations and cultivating brand loyalty through marketing videos and other learning programs on social media.
Revenues from operations stood at Rs1,129.3 crore in FY22 compared to Rs677.2 crore in FY21. All this on the back of the healthy 34.66 per cent gross margin in FY22. Further, the EBITDA margin was 9.48 per cent and 12.11 per cent, respectively, which is quite good. The firm’s FY22 RoCE was 21.71 per cent. “It’s been our endeavour to focus on strengthening our sales channels to benefit from evolving customer trends. We have a dedicated team in place and we are making investments in various channels to build a highly engaging experience for our customers,” says Chalavadi who is looking at Sai Silks’ huge expansion plans. The firm is raising Rs600 crore from fresh equity to fund capital expenditure of 25 new stores, and two warehouses.