Global Economy and Outlook
The Global economy considerably slowed down in 2022 relative to 2021.
Following a slowdown at the end of 2022, economic activity rebounded in H1 2023. This
rebound was driven in part by strong growth in China, as the lifting of COVID-19
restrictions unleashed pent-up demand, though recent indicators suggest that momentum is
slowing in China predominantly in Real estate sector companies & youth employment
crises, the Chinese yuan also has been weaker in 7.15-30/$.
Europe showed resilience to the energy price shock stemming from
Russias war against Ukraine. The US economy remains strong, Real consumer spending
grew at a solid pace early 2023 however owing to higher interest rates and tighter
financial conditions it appears to be moderating. Manufacturing output and real fixed
investment has been stable over last year or so. The Labour / Job market remains strong in
terms of job openings and wage increases have moderated. In the last 9 months, Crude Oil
has remained ~$75-85 $ after rising above $120 in 2022 and core metals too have corrected
from their peaks though their current levels are elevated from pre-pandemic era.
Asia (ex-China) is the bright spot, viz India, Vietnam, Indonesia, etc.
The demographic dividend, stable governments, China Plus One and positive capital flows
aided good economic recovery despite geopolitical issues around the region.
2024 looks promising despite an expectation of recession by global
pundits in the next 6-9 months mainly on account of housing / real estate sector which
forms major part of US & Chinese economy, withdrawal/reduction of stimulus by G7,
relatively higher energy prices & geopolitical challenges. Lastly, the Global economy
has sustained a COVID shock, 5%+ USD rates, Semiconductor shortage, Oil price Shock, War,
etc. all in the last 3 years yet emerged strong and grown, which reiterates the resilience
of the Global economy. Also there has been significant underinvestment in manufacturing
ex-China globally over last 15 years, which presents an opportunity of growth for
incumbents and fresh investments into productive side of the economy perhaps at the cost
of excesses in the tech and consumer side of the economy.
Indian Economy and Outlook
Indias economic growth in FY23 has been principally led by
private consumption, Government expenditure and capital formation and they have helped
generate employment as seen in the declining urban unemployment rate and in the faster net
registration in Employee Provident Fund. Moreover, Worlds second-largest vaccination
drive involving more than 2 billion doses also served to lift consumer sentiments that may
prolong the rebound in consumption. Still, private capex soon needs to take up the
leadership role to put job creation on a fast track.
Growth is expected to be brisk in FY24 as a vigorous credit disbursal,
and capital investment cycle is expected to unfold in India with the strengthening of the
balance sheets of the corporate and banking sectors. Further support to economic growth
will come from the expansion of public digital platforms and path-breaking measures such
as PM Gati Shakti, the National Logistics Policy, and the Production-Linked Incentive
schemes to boost manufacturing output. The fiscal discipline in last 3 years and multifold
efforts ensured Inflation was managed well and rate hikes were within manageable levels in
the economy. The Public sector banks are in a very healthy position and most of the
non-bank PSU now delivering record profitability is another bright spot in the economy.
These entities are paying dividends and have become engines to drive capex in years to
come.
India is unanimously expected globally to be fastest growing economy
for FY 24/FY 25 in the world with our economy being 5th currently and expected
to be third largest globally within 4 years.
INDUSTRY STRUCTURE AND DEVELOPMENTS
Automobile is the lifeline of present society. Trade, Industry and
Commercial activity are extremely dependent on this sector. Therefore, it is no exception
that tremendous growth and development is taking place in this sector. This automotive
sector consumes a lot of textile materials that may be visible or concealed in automobile.
The global consumption of textiles used in automobile industry is estimated to be over 4.5
lakh tonnes.
Indias textiles sector is one of the oldest industries in the
Indian economy, dating back to several centuries. Indias strengths have already been
defined in traditional textiles and natural fibres globally. It is the second largest
producer of polyester in the world and is now emerging as a key player in the technical
textiles industry contributing to a market size of $ 19 Bn. Technical textiles is a
fast-growing sub-segment that finds its usage in an array of sectors. The end use
application of technical textiles is widespread and seen in industries such as
agriculture, automotive, construction, sports apparel, healthcare etc.
Technical textiles provide new opportunity to the Indian textile
industry to have long term sustainable future and as a segment is directly proportional to
the stage of industrialization and economic growth of any country. Developing countries
undergoing large scale industrialization fuel the demand for technical textile products.
Indias leap towards modernization and its manufacturing competitiveness are some of
the key contributors to the growth of this segment. India has the advantage of having a
strong raw material (fiber) base of cotton, man-made fiber, silk, wool and jute. Moreover,
India possesses excellence in the entire value chain extending from fiber to fabric to
garments.
The Indian market also witnessed an impact due to shortage of
semiconductors, non-availability of essential commodities, steep increase of inputs costs
etc. The Indian market in many ways is also influenced by Government policies and
regulations notified from time to time. Favorable government policies and improved
incentives will provide support and impetus to the industrial growth. Other enabling
factors in the growth of the industry include domestic market demand, FDI, JVs, and
competitive strategies by the corporations.
Rising middle-class income and a huge youth population will result in
strong demand. India is closer to the milestone of 4 Million passenger car produced per
year with most car manufacturers increasing capacity and looking at the potential growth
of the sector.
OPPORTUNITIES AND THREATS/CHALLENGES
Opportunities
The growth in Passenger car production and Indian economy projected to
be 3rd largest is a great opportunity. Also under China plus One, technical
textiles is a core focus sector with an exclusive PLI scheme for its development.
Threats / Challenges
The main raw materials for the company are Polyester yarn, PU Form and
Dyes. The prices of said raw materials undergo lot of volatility depending on global crude
prices and supply chain dynamics. High capital expenditure and skilled professional are
key constrains in the sector.
The per capita consumption of technical textiles in India is 1.7 per kg
vis-a-vis 10-12 kg in developed countries. Globally, the technical textiles contribute to
about 27 percent of textile industry, in some of the western countries its share is even
50 percent while in India it is a meagre 11 percent. However, rising awareness regarding
the benefits of technical textile is projected to propel its demand across various end-use
industries.
A recent study revealed that the Global Purified Terephthalic Acid was
worth USD 54. Billion in 2021 and is projected to reach USD 78.1 Billion by the year 2028,
growing at a CGAR OF 5.6% over the analysis period of 2022-2028. The expansion in the
purified terephthalic acid market is primarily attributed to the increment in demand for
purified terephthalic acid (PTA) in packaging as well as textile industries coupled with
the ongoing trend towards urbanization and industrialization. Moreover, the improved
lifestyle of consumers in the Asia-Pacific is also a significant factor driving the growth
of the global terephthalic acid market during the forecast period 2022-2028.
SEGMENT WISE/ PRODUCT WISE PERFORMANCE
The Company is currently operating primarily under single business
segment of manufacturing of technical textiles for Automotives.
COMPANY OVERVIEW AND OUTLOOK
The Company caters to Original Equipment Manufacturers (OEMs) and are
largely concentrated in the domestic market. The Company derives more than 90% of its
revenue from the domestic market. The Company currently estimates a market share of over
35% - 40% in the automotive fabrics business in India and aims to increase its market
share with existing OEMs. The company has grown its Export business during the last few
years and is actively looking to grow it further.
Company has an in-house research and development department to develop
new designs as per the market trends. Further, Company works closely with its existing
customers for development of latest designs and regular upgradation of technologies and
know-how of its product enable it to continuously evolve technologically and remain
competitive. The Long-term presence in the industry and its consistent performance in the
terms of reliable & innovation, helps the company in getting regular orders as a
preferred supplier. The Company believes that it will continue to benefit from its long
presence in the automotive fabric industry and established relations with OEMs over the
medium term.
The Company has continuously evolved in development planning and
execution strategy to align with specific product needs and standardization of processes.
There is constant interaction taking place with OEMs to showcase innovative capabilities
which are in sync with the themes / vision of the OEMs for the future launches. The
other set of factors that drive all new developments towards FTAL is QDS (Quality,
Delivery & Service). Quality levels were drastically improved and 100% compliance to
delivery schedules followed with all OEMs. Since all OEMs are Just in Time customers, the
inventory flow management is key to gain QDS points.
RISKS AND CONCERNS
The Company is exposed to external and internal risks associated with
the business. The operations of the Company are directly dependent on the growth of the
Indian automotive industry.
The companys business may be impacted by introduction of new
policies or changes in existing policies. The companys management team keeps a close eye
on policy regulations and formulates company plans appropriately.
The companys raw material prices are influenced directly by
global crude oil and INR depreciation, therefore ongoing geopolitical crises poses
material risks.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The company has a proper and adequate system of internal controls to
ensure that all assets are safeguarded and protected against loss from unauthorized use or
disposition and that all transactions are properly authorized, recorded and reported
correctly. Further, the internal control system is designed to ensure that all the
financial and other records are reliable for preparing financial statements and for
maintaining accountability of the assets.
Further, the adequacy of Internal Control Systems has also been
mentioned in the Auditors Report.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Financial Performance
1) Net Sales for the quarter ended March 31, 2023 stood at INR 40.11
Crores versus Rs. 83.32 Crores for quarter ended March 31, 2022.
2) Net Sales for the year ended March 31, 2023 stood at INR 168.47
Crores vs Rs. 196.03 Crores for year ended March 31, 2022.
3) Operating Profit (PBDIT) for the year ended March 31, 2023 stood at
Rs.15.62 Crores vs Rs. 24.69 Crores for the previous year
4) Net Profit before Tax (NPBT) for the year ended March 31, 2023 stood
at Rs. 6.97 Crores vs INR 15.09 Crores for the year ended March 31, 2022.
5) Net Profit after Tax (NPAT) for the year ended March 31, 2023 stood
at Rs. 4.40 Crores vs Rs. 12.95 Crores for the year ended March 31, 2022.
6) Company has opted to continue with the old Corporate Income Tax
regime for the current year.
7) Earnings Per Share for the year ended March 31, 2023 is Rs 4.11 per
share versus Rs. 12.08 per share for year ended March 31, 2022.
HUMAN RESOURCES/ INDUSTRIAL RELATIONS
Your Company is committed to create an environment of engagement,
transparency and meritocracy while also being performance oriented and balanced by
responsibility towards the community it impacts. To the Company, its people are a very
valuable resource.
Your Company aims to create an environment where every employee can
contribute to the companys performance, excel and grow in their respective jobs. Our
focus is to recruit employees with right skills and talent, raise competency through
training and development, recognize and reward leadership and performance.
Companys talent acquisition strategy is to hire candidates with
the right competencies required by the business at the right time. In an increasingly
competitive market for talent, Your Company continues to focus on attracting and retaining
the right talent. It is committed to provide the right opportunities to employees to
realise their potential.
Your Company continues to enhance employee experience while listening
and acting on feedback received through the employee engagement. Your Company has
continued to maintain amicable industrial relations by focusing on increased worker level
engagement through formal and informal Communication and training forums.
KEY FINANCIAL RATIOS
| Sr. No. Ratios |
2022-23 |
2021-22 |
Explanation for significant change |
| 1. Debtor Turnover Ratio (times) |
3.82 |
4.10 |
Not applicable |
| 2. Inventory Turnover Ratio (times) |
6.43 |
8.01 |
Not applicable |
| 3. Current Ratio (times) |
1.66 |
1.36 |
Not applicable |
| 4. Debt Equity Ratio (times) |
0.97 |
1.39 |
Growth in revenue was funded through incremental working
capital leading to increase in ratio. |
| 5. Interest Coverage Ratio (times) |
3.06 |
2.86 |
Not applicable |
| 6. Operating Profit Margin (%) |
9.29 |
12.60 |
Significant increase in raw material cost along-with other
variables leading to decrease in ratio. |
| 7. Net Profit Margin (%) |
3 |
7 |
Significant increase in raw material cost along-with other
variables leading to decrease in ratio. |
| 8. Return on Net Worth (%) |
8 |
26 |
Significant increase in raw material cost along-with other
variables leading to decrease in ratio |
CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing the
Companys objective, projections, estimates, expectations or predictions may be
forward looking statements within the meaning of the applicable corporate laws and
regulations. It may be noted that the actual results may differ from that expressed or
implied herein.
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