The lingerie section of stores in the country is no longer stacked with dull products, manned by indifferent sales personnel. Inner wear has now become as sensitive to trends in design, comfort, and styling as any other piece of clothing.

“People are buying products that are comfortable and trendy, and moving from unbranded to branded,” says Kailash Bhatia, CEO, Pantaloons Retail.

Analysts say the rise in incomes and the changing tastes of consumers are big positives for the sector. CRISIL, the credit ratings company, estimates that in 2010 the Indian inner wear industry was worth Rs 13,000 crore and will register a compounded annual growth rate (CAGR) of 15.9% over the next five years. Also, there is immense growth possible in the rural market because of the projected penetration of branded garments. Rural markets comprised 62.7% of the total inner wear industry in 2010, and is expected to have a CAGR of 17.4% in the next five years.

Investors see this growth as an opportunity, showing particular confidence in two big Bangalore-based players—Page Industries and Lovable Lingerie. “Inner wear is a high-growth area. It is big on capital efficiency and resembles the business model of a consumer goods firm. These two have been able to build strong sales and distribution systems over the years. You cannot compete effectively by merely spending money,” says V.T. Bharadwaj, managing director of venture capital firm Sequoia Capital.

Behind this investor confidence are strong growth figures posted by the two companies. In the past six months, the stock of Page Industries, manufacturers and distributors of Jockey, has given returns of about 58%. From Rs 1,625 on March 31, the stock has moved up to Rs 2,570.1 on September 30. The stock also touched a 52-week high of Rs 2,771.9 on Aug. 11. The scrip of Lovable Lingerie, the manufacturer and distributor of premium women’s inner wear, has provided about 80% returns since it listed on March 24. From a price of Rs 245.2 on March 31, the stock has climbed to Rs 453.5 on Sept. 30, with a high of Rs 637
on September 7.

Nalanda India Fund, HDFC Prudence Fund, and IDFC Premier Equity Fund, among others, have invested in Page, and Lovable has investment from Sequoia Capital and the HSBC India Opportunities Fund.

“Private equity players and other investors have an appetite for companies with strong brands and distribution networks,” says Rahul Porwal, associate director of investment bank Anand Rathi. Jockey is available at 68 exclusive shops and over 18,000 stores in 1,200 cities and towns across India, while Lovable retails through 1,200 outlets and its sub brand, Daisy Dee, retails through 5,500 stores, serviced by 65 distributors.

For the quarter ended June 30, Page Industries registered sales of Rs 176.91 crore up from Rs 119.7 crore in the corresponding quarter last year and a net profit after tax of Rs 27.68 crore. For the same quarter Lovable posted a net profit of Rs 7 crore and net sales of Rs 49.8 crore.

Despite high valuations, analysts feel these two stocks are good long-term bets. “In a slow-growing economy margins might take a small hit, but the fundamental demand in this sector will be unchanged,” says Jitendra Sriram, head of equities, HSBC Securities.

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