NSE: MONTECARLO
Premium Brand synonymous with winter wear
Within the winter wear segment, MCFL remains a premium brand, with product prices in the 2K range. The Monte Carlo brand is fairly well known and is associated with winter wear and sweaters. There are no other significant national-level players who specialize in winter wear, thus leaving MCFL as the dominant player in this segment.
Raw Material Procurement an edge
Most of its winter wear products are woolen, which is a difficult raw material to procure. High quality wool needs to be imported from New Zealand usually, which entails high commission costs. Other players generally produce wool blends, given the difficulties and high cost of using pure wool. For MCFL, however, it procures 96% of its woolen yarns from a related party – Oswal Woollen Mills. Oswal Woollen Mills is the largest player in the woolen yarns business in India. Thus, MCFL is able to secure access to high quality wool at a reasonable price – resulting in robust EBITDA margins of 145% in the woolen segment.
Capital Intensity for wool a barrier
Pure wool requires high working capital requirements as well as fairly heavy capex due to the complexity of the product. For the winter quarter (Oct-Dec), production of woolens has to begin in May. The knitting of wool itself is a time consuming process that results in high inventory requirements. For MCFL, the average capex/sales ratio has been at 41% over FY21-24 (4Y avg). Unorganized players and even other major cotton brands thus need to be prepared to invest significant sums of money to enter the pure wool segment. Thus most competitors sell woolen blends or cheaper, low quality wool.
