Alok Industries Limited (Alok__/_ Company) is one of Indias large vertically integrated textile Company with uniqueness of integration in both Cotton and Polyester segments. In the Cotton segment, the Company is integrated right from spinning to weaving, processing, finished fabrics, bedsheets, towels and garments. In case of polyester, the integration is from continuous polymerization where PTA and MEG are used to make melt to produce polyester chips to Partially Oriented Yarn (POY), Fully Drawn Yarn (FDY), Drawn Texturized Yarn (DTY) and Polyester Staple Fiber (PSF). Aloks plants are situated at Vapi (in Gujarat) and Silvassa (part of a Union Territory near Vapi) and the Company has a wide customer base across the world that includes global retail brands, textile importers, private labels, and domestic retailers, garment and textile manufacturers and traders. Alok, on 17th July, 2017 underwent a corporate insolvency resolution process under section 31 of the Insolvency and Bankruptcy Code, 2016. Reliance Industries Limited (RIL) along with the JM Financial Asset Reconstruction Company Limited (JMFARC) and JMFARC – March 2018 – Trust submitted a Resolution plan that was approved by the Honble National Company Law Tribunal, Ahmedabad Bench (Approved Resolution Plan) vide its order dated 8th March, 2019. The implementation of the Approved Resolution Plan was concluded with the re-constitution of the Board of Directors of Alok on 14th September, 2020.
FY2023 was a challenging year in many ways. The world economy was just settling down post the COVID pandemic when the Russia-Ukraine conflict caused a disruption. The major economies of the world witnessed an unprecedented energy crisis as the energy costs of energy increased manifold in Western countries. This led to record high inflation, lower disposable income in the hands of the masses and to poor demand in these economies. Due to the economic downturn in neighboring countries with large garment manufacturing set-ups, the Company reduced its business with them on account of the business risks involved. All these factors combined to have an adverse effect on the Company as a whole and more specifically in the downstream businesses of bedding, towels, and apparel fabrics. In addition, the volatility in raw material prices also took a toll on the Companys operations. Cotton prices reached a record high level of Rs1,06,000/- per candy (355.56 kgs) in May 2022 and then came down to Rs61,800/- in March 2023. Though the price reduction was positive, due to subdued demand for yarn on the export front as well as from the domestic downstream industry, the prices of cotton yarn fell even more. The volatility in PTA and MEG prices, supply from Chinese market and fall in export demand affected the Polyester yarn industry bringing the margins down. All these factors led to a loss at EBITDA level for the Company. The Company reported a negative EBITDA of Rs30 crores in FY2023 as compared to an EBITDA of Rs611 crores in FY2022. The overall sales for the Company declined by 5.6% to Rs6,748 crores for the year ended 31st March, 2023 as compared to sales of Rs7,151 crores in the previous year. The decline in sales was led by a fall of 34.5% in exports. Domestic sales increased by 3.4%.
The volatility in raw material prices and decline in export demand also impacted the overall textile industry leading to weak performance of the industry players. The impact on Alok was more pronounced as the Company had barely emerged out of an insolvency process and was trying to reestablish itself. The strong background and support of the present promoters and the synergies in group operations is enabling the Company to sustain in the challenging environment. The Companys standalone rating continues to be CARE AA representing strong business fundamentals. The detailed analysis of the performance of the Company has been given in Section 4 "Financial Performance".
1. Economic Overview
1.1. Global Economic Overview
The global economy witnessed lower growth rates in 2022 after significant growth in 2021. Global real GDP is estimated to have grown at 3.4% in 2022 compared to an increase of 6.2% in 2021. Emerging market GDP growth rate, though higher than the global rate, is significantly lower than the growth witnessed last year. Emerging markets grew by 3.9%, a number slightly higher than in pre-pandemic era. Advanced economies witnessed a similar trend and grew by 2.7%. Due to lower growth rates and high inflation concerns globally, there has been a slow-down in global consumption.
The US economy grew at the rate of 2% in the year 2022 compared to 5.9% increase in 2021. EU economy also grew by 3.5% in 2022 compared to an increase of 5.3% in 2021. However, with rising inflation and the continuing Russia-Ukraine conflict, the economic-outlook is neutral and slow to moderate growth can be expected in the year to come. EU is also witnessing a high inflation in the energy cost as the supply has been disrupted due to the Russia-Ukraine conflict. Inflation is expected to decline in the near term and positively impact global demand by the next year.
The global economy is predicted to strengthen in 2023 as inflation subsides gradually. Inflation rates in the US are expected to decline in 2023, post which, a dip in interest rates may be expected in the later quarters of the year. In the EU, major economies like Germany, Italy and Spain witnessed inflation levels surpassing 8.5% in the year 2022 which is expected to reduce within the next year. With the reopening of Chinese economy, the supply demand scenario is stabilizing and expected to improve further.
1.2. India Economic Overview
Indias economy was also affected by the global macro factors; however, India has still outperformed the global average due to strong domestic demand fundamentals.. The real GDP has grown by 6.8% in 2022 compared to a growth of 8.7% in 2021. The Indian economy is expected to grow at a sustained pace with the risk of pandemic reduced especially for domestic demand. Retail inflation reached 7.79% in April 2022, above the medium-term target of 6% of the RBI. To tackle the rising prices, RBI hiked the repo rate six times in FY 2022-23, from 4% at the beginning to 6.5% at the close of the financial year.
Overall Index of Industrial Production (IIP) of India as of January 2023, has been recorded at 146.4, 5.2% higher than the values in January 2022. Average overall IIP in 2022 was significantly higher than last years average, depicting a boost in the manufacturing in India.
For the textile and apparel industry, manufacturing has declined in the year 2022 as a result of lower global demand. Subsequently, Index of Industrial Production (IIP) has declined by 21% for apparel and 12% for textiles in the period 21-Dec,22. The IIP levels in year 2022 have been on a gradual decline post March. The ofitake for apparel in US and EU markets were subdued in 2022 as a result of high inventory build-up by US brands and retailers caused by supply chain issues. Further, inflationary pressures have slowed the market causing ripple effect on the supply chain and manufacturing. As the inflation subsides and interest rates start to decline, the demand is expected to increase and positively impact textiles and apparel manufacturing.
With the increasing purchasing power and a flourishing middle-class population in India, consumer confidence index is on a constant rise and has grown from 63.7 in January 2022 to 84.8 in January 2023. To further meet demands of global buyers, the Indian government is also focusing on infrastructure spending and encouraging industries to invest through various schemes like PLI across industries, which will further facilitate growth in the economy in the future.
2. Textile & Apparel Industry Overview
2.1. Global Textile & Apparel Market Overview
The global apparel consumption in 2022 is estimated to be US$ 1.7 trillion, rising by 4% from a previous high of US$ 1.63 trillion in 2019. US continues to be the biggest market growing at a CAGR of 6% from 2019-22, followed by EU, China and India. China continues to grow at the rate of 10% and is expected to grow further at the rate of 8% until 2030 to become the largest market at US$ 450 billion by 2030 surpassing US and EU. During 2019-22, Indian Apparel Market size grew by 6% and is expected to grow at much faster rate of 9% CAGR from 2022-30 to reach apparel market size of US$ 180 billion by 2030. The global apparel demand is expected to grow at a CAGR of 4% from the current US$ 1.7 trillion to reach ~US$ 2.4 trillion by the year 2030. It is projected that China and India will be the fastest-growing apparel markets, both growing in double digits. India will also be one of the most attractive apparel markets reaching US$ 180 billion by 2030. The high growth in these markets will be primarily driven by the economic growth and increasing disposable incomes of a large population base.
Table 1: Global Apparel Market Size (Value: US$ Bn.)
| CAGR | CAGR | 2030 | |||||
| Region | 2019 | 2020 | 2021 | 2022 | 2019-22 | 2022-30 (P) | (P) |
| United States | 235 | 177 | 251 | 276 | 6% | 3% | 350 |
| EU-27 | 264 | 220 | 211 | 246 | -2% | 3% | 310 |
| China | 184 | 166 | 188 | 244 | 10% | 8% | 450 |
| India | 78 | 55 | 80 | 92 | 6% | 9% | 180 |
| Japan | 101 | 81 | 78 | 64 | -14% | 3% | 80 |
| UK | 69 | 60 | 78 | 74 | 2% | 3% | 95 |
| Brazil | 48 | 34 | 39 | 39 | -7% | 5% | 60 |
| Canada | 28 | 17 | 21 | 24 | -6% | 5% | 35 |
| RoW | 621 | 457 | 522 | 640 | 1% | 3% | 810 |
| World | 1,628 | 1,267 | 1,468 | 1,699 | 1% | 4% | 2,370 |
Source: Wazir Analysis
The global textile industry is undergoing a structural shift in many aspects. Some of the key trends influencing the textile and apparel industry are the following: Most of the major global brands have plans to become fully sustainable in their sourcing soon. Going forward it will become a non-negotiable aspect when buyers decide on their suppliers. The global buyers are looking for fully integrated suppliers to have better control over quality and better supply chain efficiencies along with visibility. The demand for synthetic textiles has continued to increase due to their better product properties like durability, water repellent nature, wrinkle resistance, color retention, and luster compared to natural fibres. Further, demand for synthetic textiles has also risen with the high growth in activewear and athleisure categories.
The manufacturing processes and supply chain are getting digitized. Industries worldwide are adopting manufacturing processes based on automation and artificial intelligence, collectively known as Industry 4.0.
Consumers are looking for comfortable clothing along with hygiene which has led to requirements of more functionality in garments and fabrics including different types of finishes like water repellent, antimicrobial etc., besides usage of stretch fabrics in most of the casual and activewear categories.
2.1.1. Global Textile & Apparel Trade
The Global Textile and Apparel (T&A) trade has gone through many ups and downs in the last decade due to various macroeconomic, social, and geopolitical factors. Despite several challenges, the trade has continued to grow over the years. Global T&A trade accounted for US$871 billion in 2021 growing at 3.2% CAGR since
2010. Category wise break down of the trade reveals that apparel has the largest share of 57% constituting US$494 billion. Despite several headwinds in global trade, the long-term scenario for global trade remains positive as economies are expected to rebound once the challenges are contained. Consequently, the global T&A trade is expected to reach US$1200 Billion by 2030 growing at 3.6% CAGR. The expected growth in trade offers a good opportunity for all the T&A manufacturing countries.
2.1.2. Key Exporters
Table 2: T&A Exports (Value: US$ Bn.)
| Exports (2021) | |||||
| Rank | Country | Textile | Apparel | Total | Share |
| 1 | China | 153.5 | 164.9 | 318 | 37% |
| 2 | Bangladesh | 2.4 | 40.1 | 42.5 | 5% |
| 3 | India | 26.3 | 15.2 | 41.5 | 5% |
| 4 | Germany | 15.1 | 25.2 | 40.3 | 5% |
| 5 | Vietnam | 9.1 | 28.7 | 37.8 | 4% |
| 6 | Italy | 12.3 | 24.7 | 36.9 | 4% |
| 7 | Turkey | 15.8 | 18.3 | 34.1 | 4% |
| 8 | USA | 20.4 | 5.2 | 25.5 | 3% |
| 9 | Spain | 5.3 | 15.4 | 20.7 | 2% |
| 10 | Netherlands | 6.1 | 13.8 | 19.9 | 2% |
| RoW | 111 | 142 | 253 | 29% | |
| Total | 377 | 494 | 871 |
Source: UN Comtrade & Wazir Analysis
China constitutes 37% share in the global trade of textile and apparel, followed by Bangladesh and India at 5% each. However, one of the key sourcing trends recently has been buyers diversifying sourcing from China to alternate destinations to reduce their sourcing risks. The US ban on Xinjiang cotton has further incentivized buyers to look for alternate sourcing destinations. The share has mainly been taken up by Vietnam and Bangladesh. India, having a complete ecosystem, a stable political climate and well-established global position, is also being looked at as a strong alternative to China.
2.1.3. USA imports
Textile and apparel imports in the US have grown by 12% over 2021 and reached US$ 132 billion in 2022. USAs overall imports from China continue to decline and have declined by over 10% from 2021 and reached a value of US$ 33 billion. Subsequently, the share of imports from other key countries has grown significantly. While Indias exports to the USA have been the same as in 2021, Vietnam and Bangladesh have seen major growth in comparison to their exports in 2021 (25% each).
In the year 2022, US apparel store sales significantly increased over the last year. US apparel imports recovered steadily in the first 3 quarters of the calendar year; the demand however declined in the last quarter of the year.
2.1.4. EU imports
Textile and apparel imports to the EU have surpassed previous highs to reach US$ 138 billion in 2022 compared to US$ 127 billion in 2021. Exports from China to the EU has grown by 7% from US$ 40 billion in 2021 to US$ 43 billion in 2022. The imports from Bangladesh have also seen a significant growth of ~30% over 2021 to reach US$ 22 billion in 2022. The exports of Turkey and Pakistan has also witnessed a positive spike in their exports to EU.
In the year 2022, EU-27 apparel imports increased compared to 2021, however imports took a hit in the last quarter of the year. Months of August, September and October witnessed the highest imports of apparel in EU.
Figure 9: Monthly T&A Imports of the EU (Value US$ Bn.)
2.2. Indian Textile and Apparel Industry
Indias overall Textile and Apparel market is estimated at US$ 165 billion in 2022-23. The market has grown over the years due to a robust domestic demand and a fundamental and steady export position. The market is expected to grow on the back of continued growth in domestic demand and high potential growth in exports.
2.2.1. Indias Domestic Market Scenario
The domestic textile and apparel market is currently valued at US$ 125 billion and by 2030 it is expected to grow at a 9.6% CAGR to reach US$250 billion. Apparel, which accounts for the majority of the market, is expected to grow at a rate of 9.5% CAGR, followed by Technical Textiles, which is predicted to grow at a rate of 10.5% CAGR. Home Textiles, another important constituent of the domestic T&A market, is also expected to grow and reach a substantial value of US$16 billion by 2030 growing at 8.2% CAGR.
2.2.2. Indias Exports Scenario
The textile and apparel sector is a major contributor to Indias total export earnings. Currently, it contributes to 9% of total export earnings of India. Indias textile and apparel exports in 2021-22 was US$ 43 billion and is estimated to be US$ 40 billion in 2022-23. With global buyers looking for alternatives to China, India has a good opportunity to increase its global export share. Indian government is also pushing for more investments aggressively through schemes like PLI to increase the product basket and increase exports. Accordingly, Indias exports are projected to reach US$ 100 billion by 2030, growing at a CAGR of 10%. Indias apparel exports are forecasted to reach US$ 45 billion by 2030 growing at 12.1% CAGR since 2021 while textile exports growing at the rate of 8.2% CAGR is likely to reach US$55 billion by 2030. Indias exports are anticipated to grow along with the growth in global trade and India is expected to increase its share from the current 5% to 8% by 2030.
2.2.3. Indias Imports Scenario
Indias imports have been increasing over the last few years. This trend was, however also disrupted by the pandemic. Indias textile & apparel import was US$ 8.6 billion in 2019-20 and is expected to be at US$ 11.3 billion in 2022-23. The imports are expected to continue to rise at a modest rate of 6% as seen from 2010 to 2021. A large part of imports comprises fibre, yarn and fabrics of synthetic fibres which are not made extensively in India.
3. Alok Business Segments
Alok Industries has a strong presence in both the Cotton and Polyester segments. In the Cotton segment, the Company is integrated from spinning to weaving, processing, finished fabrics, bedsheets, towels and garments. In case of Polyester too, the Company is fully integrated starting from continuous polymerization plant to the production of chips, POY, FDY, DTY and PSF.
The Companys vertically integrated facilities and flexibility of operations enables it to produce cotton and cotton blended fabrics in various counts and construction and a wide range of finishes. The Companys global scale integrated plants, modern manufacturing flexibility, product development team and competent marketing force facilitates a deep understanding of customer needs and its satisfactory fulfilment.
The Company has a large customer base comprising of domestic and overseas retailers, brands, and garment exporters in India and converter countries (countries which primarily do garment manufacturing like Bangladesh, Vietnam, Sri Lanka) who are vendors to major international labels. This product, customer and market diversification enables risk mitigation and places the Company at a competitive advantage over other players in the industry. Alok has also ensured that its target market is a diverse mix of the international market, garment export trade and domestic market.
The Company operates under the following four divisions:
Spinning Division
Polyester Division
Home Textiles Division
Apparel and Fabric Division
Given below is a brief market overview of the key business segments of Alok i.e., Spinning, Polyester, Home textiles and Apparel and Fabric segments.
3.1 Spinning
The global trade of cotton yarn was valued at US$ 17.2 billion in 2021, an increase of ~50% over 2020. The significant increase is a result of demand recovery post Covid. Cotton prices increased significantly post covid with the surge in demand along with supply challenges, which further impacted yarn prices. However, cotton prices eased in latter half of 2022 leading to easing of yarn prices as well caused by a reduced demand in the supply chain as a result of global economic slowdown.
India is a leading producer of spun yarn for both natural and man-made yarn production. India has an installed capacity of 57 million spindles, producing approximately 5846 million kg of yarn in 2021-22. India is one of the largest producers and exporters of cotton yarn in the world with a production of 4092 million kgs. Overall spun yarn production has grown at 1.2% CAGR since 2019-20 despite a dip in 2020-21 during the covid pandemic peak.
Table 3: Yarn Production in India (Value: Mn Kg)
| Yarn | 2019-20 | 2020-21 | 2021-22 | CAGR |
| 100% Cotton | 3,996 | 3,509 | 4,092 | 1.2% |
| Spun Yarn | ||||
| Blends and | 1,663 | 1,401 | 1,754 | 2.7% |
| other spun Yarn | ||||
| Total Spun Yarn | 5,713 | 4,910 | 5,846 | 1.2% |
The exports stayed stagnant during the covid era but witnessed a surge in demand in the year 2021 and exports went up to US$ 4.9 billion jumping to an all-time high. Global buyers are looking for new destinations to source cotton yarn especially post the Xinjiang cotton ban on China and accordingly demand for Indian cotton yarn has also increased. However, with slowdown in global demand in 2022, Indias yarn exports were impacted with reduced exports of US$ 3.4 billion in 2022.
Indian spinners over the last few decades have invested extensively in bringing in the latest spinning technologies and infrastructure to India. Alok is one of the major players in the Indian spinning industry with modern infrastructure and focus on research and product development. Aloks spinning plants are situated at Silvassa. Majority of the yarn (about 55% to 60%) is captively consumed in the woven fabrics, knitted fabrics, bedding and terry towel divisions.
3.2 Polyester
Globally, the demand for polyester has been soaring majorly because of two reasons; firstly, the rise in cotton prices has forced major buyers across the globe to opt for polyester blends to reduce prices and thereby target a larger set of customers. Secondly, customer demand has continued to increase in categories like athleisure, womens fashion, lingerie etc. where polyester is used extensively. As of 2022, polyester accounts for 57% of the total world fibre consumption of 103 Mn Tons/ Annum. Polyester fibre consumption is expected to grow by another 22 million tons to reach a level of 81 million tons annually and is expected to form a share of 60% of global fibre consumption of 136 million tons by 2030.
In 2021, the global trade of Polyester Staple Fibre (PSF) stood at US$ 4.4 billion and that of Polyester Yarn stood at US$ 11.2 billion. PSF has been growing at a CAGR of 2% since 2015, while Polyester yarn has been growing at a CAGR of 8%. Polyester is manufactured from crude oil derivatives and resultantly, rising oil prices due to global demand conditions and the Russia – Ukraine conflict has led to a rise in polyester prices as well.
The decrease in trade in 2022 over 2021 is a result of global economic slowdown and thus lower demand in the major consumer regions. Therefore, it is expected that as the demand goes up globally, Indias exports of polyester shall rise coherently. Furthermore, Indias domestic market for technical textiles, sportswear and athleisurewear is increasing at a rapid pace. India is the second-largest producer of polyester and Indias polyester exports were worth US$ 1.4 billion in 2022 (US$1.1 billion of filament yarn and US$ 0.3 billion of stable fibre). The Production Linked Incentive (PLI) Scheme launched by the Government of India is poised to increase the production of man-made fibre-based textiles and apparel in India and is expected to attract investments of up to Rs50,000 crores in the entire man-made fibre textile value chain. This will further drive the consumption of polyester in the future.
India has the presence of a complete polyester value chain in the country right from the fibre and filament producers up to finished goods producers viz. garments, technical textiles and home textiles. Alok is amongst the top players in Polyester with a wide range of products on offer. The prime market for Alok presently is domestic with about 4%-5% of polyester yarn / PSF being consumed internally. Exports constitute about 6% of the total polyester sales.
3.3 Home Textiles
The global trade of home textiles was US$ 60 billion in 2021 increasing sharply from the 2019 value of US$ 50 billion. The year 2021 witnessed a surge in demand in the global market post the pandemic and the global trade value took a steep upward curve. Moreover, the trade of home textiles was also driven by the trends like work from home and an increase in spending for home and hygiene products post pandemic in the developed markets like US.
The Indian home textiles/exports stood at around US$ 6.2 billion in 2022 declining significantly by 13% compared to 2021. Exports of Home textile were affected by the decreased demand due to global slowdown and inflationary concerns in the major markets. The exports are expected to bounce back once the global economy stabilises. India, over the last few years has successfully managed to build its position as a large manufacturer of home textiles in the world, only behind China, with a share of 10% in the global home textile trade.
India exports its home textiles products primarily to the EU and USA, which constitute more than 70% of Indias home textiles export markets. India has a strong manufacturing ecosystem for home textiles with the presence of large and integrated players with strong capabilities which serve as a huge advantage in the post-covid world, in catering to global market requirements.
Alok is amongst the large home textile manufacturers / exporters in India and has a sizeable capacity in bedding as well as terry towels. Aloks weaving facility and main stitching unit for bedding is at Silvassa and fabric processing is at Vapi. The entire terry-towel manufacturing is at Vapi.
The major export market for home textile products for the Company is USA, which is the largest consuming centre for home products in the world. The other export destinations include European countries and Australia. The domestic market is also growing significantly and presently is about 26% of the total home textile sales of the Company.
3.4 Apparel Fabrics
The global trade of fabric has been increasing at a CAGR of 2% since 2010 and has reached US$ 112 billion. The share of woven fabrics has fallen from 72% in 2010 to 64% in 2021 and the same can be explained by increasing popularity of knitted apparel due to their comfort properties. Share of knitted apparel is further expected to grow along with growth in comfortable clothing and casual wear. China is the largest exporter of fabric exporting a total of US$ 64.8 billion worth of fabrics in the year 2021, having 58% share of the global fabric trade, followed by Italy and India with ~4% share each.
In 2022, Indias exports of fabric were valued at US$ 4.8 billion, with woven fabric accounting for US$ 4.1 billion and knitted fabric making up US$ 0.7 billion. However, due to reduced global demand, fabric exports have remained stagnant since 2021.
Global apparel trade has been growing at a CAGR of 4% since 2010 and reached US$ 494 billion in the year 2021. A slow shift from woven to knitted apparel can be witnessed as the share of knitted apparel has grown by 2 percentage points (from 52% in 2010 to 54% in 2021). The pace of this shift is expected to be elevated as the new-age consumer is inclined towards comfort and athleisurewear. China is the largest exporter of apparel accounting for 33% of the global trade of apparel followed by Bangladesh and Vietnam at 8% and 6% respectively, with India having a share of 3%.
Indias apparel exports have grown from US$ 15.2 billion in 2021 to US$ 16.7 billion in 2022 and have surpassed 2019 levels. Moreover, the government is keen to support the apparel industry through several policy initiatives and the recently launched schemes like PLI and MITRA are expected to further boost the industry in apparel manufacturing and attract global buyers to India.
Currently, as the world looks at India as an alternative to China, it is a great opportunity for India to capture a larger share of the global market. In order to tap the opportunity, manufacturers need to focus on attaining manufacturing excellence, setting higher quality benchmarks, timely deliveries and adoption of state-of-the-art machinery as per the buyers requirement. Diversification to markets beyond US, EU also need to be looked at more aggressively. The growing domestic market also augurs well for the textile and apparel industry and provides sufficient scope for future growth. Alok is a leading player in apparel fabric segment with a large and integrated set up. Its weaving, knitting, embroidery and garmenting facilities are situated at Silvassa and processing plants and one garment unit is situated at Vapi. Presently, the export market constitutes about 17% of the market for Apparel Fabric Division of the Company.
4. Financial Performance (Standalone)
During the current financial year, the market situation all around and across product segments was very challenging. Demand from the major market, USA fell considerably due to economic downturn in their economy and other major economies viz Europe and UK also faced the brunt of the Russia-Ukraine conflict. As an outcome, the demand on the export front came down sharply which impacted exports across all product segments in general and more specifically in the downstream businesses of Bedding, Towels and Apparel Fabrics. This resulted in decline in exports by 34.5% to Rs1113.6 crore as compared to exports of Rs1699.5 crore in the previous year. The volatility in raw material prices also affected the polyester and spinning businesses where the margins came down substantially and impacted profitability of those segments.
Though the operating rate for the Company on average was ~69% as compared to the average operating rate of ~76% in the previous year, the decline in EBITDA was high due to higher impact of raw material cost which increased during the year by almost 6.8% as a percentage to sales. This was the main reason for the Company reporting loss at EBITDA level of Rs30.9 crore for the year as compared to EBITDA of Rs611.6 crore in FY 22. Table 4 gives the summarized profit and loss statement of the Company in the current financial year compared to the previous financial year. The brief analysis of the standalone results, which relates to the textile business of the Company, is given in the table below:
Table 4: Summarized Profit and Loss Account (Standalone)
| (Rs in Crore) | ||
| PROFIT & LOSS ACCOUNT | 31st March, 2023 | 31st March, 2022 |
| Rs Crore | Rs Crore | |
| Domestic Sales | 5,634.73 | 5,451.37 |
| Export Sales | 1,113.59 | 1,699.54 |
| NET SALES | 6,748.32 | 7,150.91 |
| Other Income | 37.51 | 40.33 |
| TOTAL INCOME | 6,785.83 | 7,191.24 |
| Material Costs | 4,991.48 | 4,817.57 |
| Purchase of stock in trade | 14.28 | - |
| Employee Benefits | 430.94 | 394.92 |
| Other Expenses - without provisions | 1,363.43 | 1,355.25 |
| TOTAL EXPENSES | 6,800.13 | 6,567.74 |
| OPERATING EBIDTA before provisions | -14.30 | 623.50 |
| Other Expenses – provisions | 16.63 | 11.89 |
| OPERATING EBIDTA after provisions | -30.93 | 611.61 |
| Depreciation | -356.30 | -333.00 |
| (Rs in Crore) | ||
| PROFIT & LOSS ACCOUNT | 31st March, 2023 | 31st March, 2022 |
| Rs Crore | Rs Crore | |
| OPERATING EBIT | -387.23 | 278.61 |
| Interest & Finance Costs | -487.66 | -462.79 |
| OPERATING PBT | -874.89 | -184.18 |
| Add / (Less): Provision for Taxes | - | - |
| PROFIT AFTER TAX | -874.89 | -184.18 |
| Other Comprehensive Income | 4.23 | -0.50 |
| Total Comprehensive Income | -870.66 | -184.68 |
Profit and Loss Analysis
Net Sales for the year were Rs6,748.32 crore comprising of domestic sales of Rs5,634.73 crore and export sales of Rs1,113.59 crore (previous year sales Rs7,150.91 crore: domestic Rs5,451.35 crore and export Rs1,699.5 crore). The sales during the year decreased by 5.6% over the previous year due to demand related challenges in the export markets owing to downturn witnessed by major economies of the World resulting from the Russia – Ukraine conflict. The exports fell by 34.5% whereas domestic sales increased by 3.4% as compared to previous year.
Other Income for the year was Rs37.51 crore (previous year Rs40.33 crore). A major part of the other income comprises of gain relating to foreign currency exchange rate difference of Rs27.74 crore (previous year Rs27.14 crore), interest income on fixed deposit with banks Rs2.19 crore (previous year Rs3.26 crore), insurance claim received Rs2.26 crore (previous year Rs2.12 crore) and Sundry Credit balance written back Rs1.58 crore (previous year Rs6.86 crore), profit on sale of fixed assets Rs1.51 crore (previous year Rs0.10 crore) etc.
Material Cost including purchase of stock in trade of Rs14.28 crore (previous year nil) for the current financial year was Rs5005.76 crore as compared to Rs4,817.57 crore in the previous period. As a percentage of sales, material cost increased from 67.37% in the previous period to 74.18% in the current year due to substantial increase in raw material prices both in cotton and polyester stream. People Costs in the current financial year increased to Rs430.94 crore as compared to Rs394.92 crore in the previous period. As a percentage to sales, also it increased to 6.39% in FY 2021-22 as compared to 5.52% in FY 2021-22. The total head count however, came down as on 31st March, 2023 to 22699 people as compared to 26462 as on 31st March, 2022.
Other Expenses (without Provisions) in the current year were Rs1363.43 crore as compared to Rs1355.25 crore in the previous period. The major items of other expenses for the year were Power & Fuel Rs809.48 crore (previous year Rs774.61 crore), Labour charges Rs122.25 crore (previous year Rs136.73 crore), stores & spares consumed Rs113.21 crore (previous year Rs104.87 crore), freight Coolie & cartage Rs65.47 crore (previous year Rs92.56 crore), process charges Rs85.35 crore (previous year Rs68.96 crore) etc.
Operating Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA) without provisions / impairments for the year was loss of Rs14.30 crore as compared to profit of Rs623.5 crore in the previous year. The loss is mainly attributable to the raw material cost which as a percentage to sales increased during FY 23 by 6.8% to 74.2%. Further, there was increase in people cost as a percentage to sales by 0.86% and other expenses increased as a percentage to sales by 1.25%. Thus, EBIDTA (before provisions) as percentage to sales which was 8.72% in FY 22 became negative 0.21% in FY 23.
Provisions includes provision debtors of Rs16.63 crore during the year as compared to Rs11.89 crore in the previous year which were relating to provisions on debtors and export incentives.
Operating Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA) after provisions / impairments for the year was loss of Rs30.9 crore as compared to profit of Rs611.6 crore in the previous year.
Depreciation for the year was Rs356.3 crore as compared to Rs333.00 crore in the previous year. As a percentage to sales depreciation cost increased to 5.3% in FY 23 as compared to 4.7% in FY 22. Interest & Finance Cost for the current year was Rs487.66 crore (previous year Rs462.79 crore) comprising of interest on term loan of Rs421.09 crore (previous year Rs430.91 crore), interest on working capital of Rs19.33 crore (previous year Rs7.56 crore), interest on Preference Shares of Rs23.46 crore (previous year Rs24.32 crore) and interest to others Rs23.78 crore (previous year nil). Operating PBT and PAT. The Profit Before Tax for the year was loss of Rs874.89 crore as compared to loss of Rs184.18 crore in the previous year. Since there was no provision for Tax in both the years, the Profit After Tax for the year also was loss of Rs874.89 crore as compared to loss of Rs184.18 crore in the previous year. Other Comprehensive Income for the year was Rs4.23 crore as compared to loss of Rs0.50 crore in the previous year.
| Net (Loss) / Profit After Other Comprehensive |
| Income was a loss of Rs870.66 crore in the current |
| year against loss of Rs184.68 crore in the previous period. |
| Key Ratios |
| Table 5 gives the Key ratios of the Company (standalone). |
| Table 5: Key Ratios (standalone) |
| Sr. Particulars | 31 March , | 31 March, |
| No. | 2023 | 2022 |
| 1 Debtors Turnover – Days | 16 | 24 |
| 2 Inventory Turnover – Days | 51 | 60 |
| 3 Interest Coverage | -0.03 | 1.35 |
| 4 Current Ratio | 0.62 | 1.09 |
| 5a Debt – Equity | -0.24 | -0.29 |
| 5b Debt – Equity (quasi) | 13.65 | 4.04 |
| 6a Operating EBIDTA Margin (%) | -0.21% | 8.7% |
| without provisions | ||
| 6b Operating EBIDTA Margin (%) | -0.46% | 8.55% |
| after provisions | ||
| 7 Net Profit Margin (%) | -12.96% | -2.58% |
Comments on Ratios:
Debtors Turnover Days: Debtor turnover days at 16 days decreased during the year as compared to previous year debtor turnover days of 24 days. In absolute terms, debtors as on 31st March, 2023 decreased to Rs293.64 crore as compared to Rs475.11 crore as on 31st March, 2022.
Inventory Turnover Days: Inventory turnover days at 51 days also decreased during the current year as compared inventory turnover days of 60 days in the previous year. In absolute terms also inventory decreased to Rs926.2 crore as compared to Rs1182.75 crore in the previous year. Interest Coverage Ratio: Our interest outgo for the year was Rs487.66 crore previous year interest Rs462.79 crore). Due to negative EBIDTA for the year of Rs14.30 crore (previous year Rs623.50 crore), the interest coverage ratio is negative 0.03, as compared to 1.35 times in the previous year. Current Ratio: The current ratio for FY 23 was 0.62 times as compared to 1.09 times in the previous year. The total current assets for the year also came down to Rs1,621.1 crore (previous year Rs2,103.28 crore). The installment of term loan due within a year for the year increased to Rs604.75 crore (Rs334.84 crore in the previous year). The current liabilities for the year increased to Rs2605.35 crore, including term loan due within a year, (Rs1,934.10 crore in the previous year).
Debt / Equity Ratio: The Net worth of the Company in FY 23 was negative at Rs17, 320.72 crore (Previous year negative net worth of Rs16,450.05 crore). The rise in negative net worth during the year was due to loss of Rs870.66 crore (previous year loss of Rs184.68 crore). The outside long-term debt of the Company as on 31st March, 2023 net of cash and balances was Rs4,145.35 crore (Previous year Rs4,744.57 crore). The Debt / Equity ratio for the year thus was negative 0.24 as compared to negative 0.29 in the previous year.
Quasi- Debt / Equity Ratio: The quasi net- worth of the Company as on 31st March, 2023 was Rs303.62 crore (previous year 1,173.33 crore). The same is arrived at by adding Rs17,384.02 crore (previous year Rs17,384.02 crore) interest free long-term loans from the promoters and long-term preference shares of Rs240.31 crore (Previous year Rs239.35 crore) subscribed by the promoters to the equity & reserves. Based on this, the quasi debt/ equity ratio as on 31st March, 2023 was 13.65 as compared to 4.04 as on 31st March, 2022.
Operating EBITDA before considering Provisioning: Operating Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA) without considering provisions for the year was loss of Rs14.30 crore which was negative 0.21% as a percentage to sales (previous year profit of Rs623.5 crore @ 8.72% to sales). The loss is mainly attributable to the raw material cost which as a percentage to sales increased by 6.81% to 74.18%. There was increase in people cost as a percentage to sales by 0.86% and other expenses increased as a percentage to sales by 1.25%.
Operating EBITDA after considering Provisioning: Operating Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA) for the year was loss of Rs30.93 crore (previous year profit of Rs611.61 crore) after considering provisioning of Rs16.63 crores (previous year provisioning of Rs11. 89 crore). As a percentage to sales, operating EBITDA was negative at 0.46% (previous year 8.55%).
Net (Loss) / Profit After Tax: Net Loss After Tax was of Rs874.89 crore in the current year (previous year net loss of Rs184.18 crore). The loss from EBITDA further increased on account of depreciation for the year of Rs356.3 crore (previous year Rs333.0 crore) and interest cost of Rs487.66 crore (previous year Rs462.79 crore). The Net profit Margin for the year was negative 12.96 % as compared to negative 2.58 % in the previous year.
Cash Flows
Table 6 gives the abridged cash flow statement of the Company.
Table 6: Summarized Cash Flow Statement
| ( Rs Crore) | ||
| PARTICULARS | 31st March, | 31st March, |
| 2023 | 2022 | |
| Net cash (used in) / generated | 784.46 | 215.72 |
| from operating activities | ||
| Net cash (used in) / generated | -30.77 | -63.20 |
| from investing activities | ||
| Net cash (used in) / generated | -758.09 | -323.67 |
| from financing activities | ||
| Net (Decrease)/Increase in | -4.40 | -171.15 |
| Cash and Cash equivalents | ||
| Cash and Cash equivalents as | ||
| at year end | ||
| At the beginning of the year | 5.19 | 176.34 |
| At the end of the year | 0.79 | 5.19 |
| Net (Decrease)/Increase in | -4.40 | 5.19 |
| Cash and Cash equivalents |
a. Cash Flow from Operating Activities: During the Financial Year, Company generated negative Operating Cash flow of Rs17.64 crore (previous year Rs612.18 crore) before working capital changes). The changes in working capital by way of reduction during the year were Rs808.26 crore (Negative Rs390.63 crore in the previous year). After considering Income tax of Rs6.16 crore (previous year Rs5.84 crore), the cash flow from operation for the year is Rs784.46 crore (Rs215.72 crore for previous year). The Company could generate the cash flow from operations during the year despite negative EBITDA due to reduction in net working capital achieved during the year. b. Cash Flow from Investing Activities: There was a net cash utilisation of Rs30.77 crore from investing activities in March, 2023 (cash utilisation of Rs63.20 crore in March, 2022). The major utilisation was towards purchase of capital goods / maintenance capex/ CWIP during the year by the Company amounting to Rs37.89 crore (Previous year Rs103.22 crore). The major receipt during the year is proceeds from sale of assets Rs7.50 crore (previous year Rs0.16 crore). The other inflow for the year was receipt of interest of Rs1.75 crore (previous year Rs2.01 crore). The utilisation during the year towards placement of Fixed deposit with banks is Rs2.59 crore (previous year inflow of maturity of fixed deposit Rs37.60 crore). c. Cash Flow from Financing Activities: The net cash used in Financing activities was Rs758.09 crore in March, 2023 as compared Rs323.67 crore cash utilisation in March, 2022. The major utilisation during the year was towards interest payment of Rs457.04 crore on the term loan, working capital and others (Rs446.44 crore in March, 2022). The repayment of term loans have also started in FY 23 amounting to Rs334.84 crore (previous year nil). The inflow in financing activities during the year was working capital borrowing of Rs36.32 crore (Rs122.77 crore net in previous year). d. Cash Flow Summary: Overall, there was a net Cash utilisation of Rs4.40 crore in FY23 (previous year cash utilisation was Rs171.15 crore). Textiles Business: Operations Review Overview
Aloks business comprises of a single business segment i.e., Textiles. Within Textiles, Aloks business comprises of Cotton Yarn, Apparel Fabric (Wovens, Knits & Garments), Home Textiles (Sheeting & Terry Towel), and Polyester Yarn. The division wise sales and its bifurcation into domestic and export is given in table 7 below:
Table 7: Snapshot of Aloks product-group wise sales distribution Rs ( Crore)
| PARTICULARS | 12 M YTD ENDED 31ST MARCH, 2023 | 12 M YTD ENDED 31ST MARCH, 2022 | CHANGE | ||||||
| LOCAL | EXPORT | TOTAL | % TO | LOCAL | EXPORT | TOTAL | % TO | ||
| SALES | SALES | ||||||||
| COTTON YARN | 534.50 | 20.73 | 555.23 | 8.23% | 526.1 | 57.8 | 583.9 | 8.17% | -4.9% |
| APPAREL FABRIC | |||||||||
| WOVEN | 693.03 | 70.21 | 763.24 | 11.31% | 574.62 | 101.63 | 676.25 | 9.46% | 12.9% |
| KNITTING | 110.18 | 97.81 | 207.99 | 3.08% | 144.23 | 146.14 | 290.37 | 4.06% | -28.4% |
| GARMENTS | 186.02 | 65.45 | 251.47 | 3.73% | 103.82 | 4.00 | 107.82 | 1.51% | 133.2% |
| SAFETY TEXTILE | 1.48 | 0.00 | 1.48 | 0.02% | 10.53 | -0.34 | 10.19 | 0.14% | -85.5% |
| 990.71 | 233.47 | 1,224.18 | 18.14% | 833.20 | 251.43 | 1084.63 | 15.17% | 12.9% | |
| HOME TEXTILES | |||||||||
| BEDDING | 134.39 | 484.65 | 619.04 | 9.17% | 82.91 | 781.96 | 864.87 | 12.09% | -28.4% |
| TERRY TOWEL | 81.81 | 131.12 | 212.93 | 3.16% | 118.83 | 145.27 | 264.11 | 3.69% | -19.4% |
| 216.20 | 615.77 | 831.98 | 12.33% | 201.74 | 927.23 | 1128.98 | 15.78% | -26.3% | |
| POLYESTER YARN | 3,897.63 | 239.31 | 4,136.94 | 61.30% | 3,890.29 | 463.11 | 4,353.40 | 60.88% | -5.0% |
| TOTAL | 5,639.04 | 1,109.28 | 6,748.32 | 100.00% | 5,451.37 | 1,699.54 | 7,150.91 | 100.00% | -5.6% |
Exports
Due to the global economic disturbance mainly caused by the Russia- Ukraine conflict, the demand from western markets declined. As a result, Aloks export business during the year decreased by 34.5% to Rs1,109.28 crore as against Rs1699.54 crore in the previous year.
The table below depicts the share of different regions in Aloks exports. The share of USA in overall exports basket of Alok is gradually declining over the years. However, it remained the dominant market during the year with 39.03% share in exports (Previous year 43.36%). The share of Asia is increasing year after year. It increased from 27.67% in the previous year to 34.77% in the current year. The share of Europe decreased by almost 50% during the year from 13.48% in the previous year to 6.68% in the current year. Share of African continent has increased to 13.67% in the current year as compared to 10.38% in the previous year.
Table 8: Regional Distribution of Exports
| Regions | 31st March, 2023 | 31st March, 2022 | ||||
| Rs Crore | US$ Mln | % to total | Rs Crore | US$ Mln | % to total | |
| Africa | 152.24 | 19.34 | 13.67% | 176.35 | 23.90 | 10.38% |
| Asia | 387.15 | 49.12 | 34.77% | 470.20 | 63.84 | 27.67% |
| Asia – Pacific | 4.62 | 0.58 | 0.41% | 25.01 | 3.40 | 1.47% |
| Europe | 74.43 | 9.54 | 6.68% | 229.18 | 23.34 | 13.48% |
| North America | 55.90 | 7.18 | 5.02% | 45.52 | 6.15 | 2.68% |
| South America | 4.59 | 0.57 | 0.41% | 16.38 | 2.23 | 0.96% |
| US | 434.65 | 55.45 | 39.03% | 736.91 | 100.03 | 43.36% |
| Total | 1,113.58 | 141.78 | 100.00% | 1,699.54 | 222.88 | 100.00% |
Manufacturing & Business Excellence:
Alok Industries Limited is an integrated textile manufacturer with operations in both cotton and polyester value chains. The Company has created world scale capacities and has a market presence in the domestic as well as export markets. It has global retailers, brands, reputed garment manufacturer and traders in its portfolio of customers. Aloks business excellence is driven by the following strategic advantages: Established relationship with leading global brands and retailers State-of-the-art manufacturing facilities and supporting infrastructure Strong emphasis on Quality, Cost and Delivery (QCD) Economies of Scale that provide competitive advantages Forward and Backward integration leading to assured quality parameters across the chain Wide range of products across different product segments In-house product development and designing strength The Company has received certification of Integrated Management System comprising of ISO 9001:2015 (QMS), ISO 14001: 2015 (EMS) and OHSAS 18001: 2007 indicating the robust systems and processes being followed by the Company. Alok is also compliant with the health, safety, and environment norms and has obtained various eco certifications for its products, as required in export markets. Details of these certifications are covered under the section "Quality, Safety, Health and Environment".
Quality, Safety, Health and Environment
1. Quality, Safety, Health, and Environment
At Alok, continuous efforts at developing world class processes and quality assurance are a fundamental and non-negotiable part of the way business is conducted. There is constant focus on manufacturing and allied practices to adhere to the concept of ‘get it right - first time and every time. To achieve this, the Companys products, manufacturing processes and equipment are rigorously checked for quality standards and process deviations, if any.
The Companys adherence to internationally recognized certification standards and compliances has been recognized by reputed certification bodies (see Table 9). Today, the Company has the following certifications/ accreditations:
Table 9: Major Certification- Divisions, Plants & Locations Covered
| Certification | Division / Plant / Location |
| ISO 9001:2015 (QMS) | Process House, Vapi (Normal & Wider width) |
| ISO 14001:2015 (EMS) | |
| ISO | Knits Processing, Vapi |
| 45001:2018(OHSAS) | Terry Towel, Vapi |
| (Integrated Management System) | |
| Weaving, Silvassa | |
| CP, POY, FDY, PSF and Texturizing, | |
| Silvassa | |
| Spinning and Knitting, Silvassa | |
| Embroidery, Silvassa | |
| Made Ups, Vapi | |
| Made Ups Garments, Vapi | |
| SMETA-Sedex | SMUGMT-Vapi, Silvassa |
| Members Ethical | Terry Towel, Knits processing |
| Trade Audit | |
| WRAP- Worldwide | |
| Responsible | |
| Accreditation | |
| Program. | |
| BSCI-Business Social | |
| Compliance Initiative | |
| (Social requirements) | |
| GOTS: Global Organic | Head Office, Mumbai |
| Textile Standards | Spinning & Knitting Division, |
| OCS-Organic Content | Silvassa |
| Standard | |
| Weaving Division, Silvassa | |
| GRS: Global Recycle | |
| Standards. | Process House (Normal & Wider |
| Width), Vapi | |
| RCS: Recycled Claim | |
| Standards | Made ups & Garments Division, |
| Silvassa | |
| Knit Processing, Vapi | |
| Terry Towel Division, Vapi | |
| Hemming Division, Silvassa | |
| Made-ups Division, Vapi | |
| Embroidery Division, Silvassa | |
| POY Units, Silvassa | |
| Certification | Division / Plant / Location |
| Fair Trade- FLOCERT: | Spinning & Knitting Division, |
| Fair-trade Standard | Silvassa |
| for Fibre Crops for | Weaving Division, Silvassa |
| Small Producer | |
| Process House (Normal & Wider | |
| Organizations | |
| Width), Vapi | |
| Made ups & Garments Division, | |
| Silvassa | |
| Knit Processing, Vapi | |
| Terry Towel Division, Vapi | |
| Hemming Division, Silvassa | |
| Made-ups Division, Vapi | |
| OEKO Tex Standard – | Made –ups (Product Class I & II)- |
| Product Class | Conventional & Organic |
| I & II | Woven & Knitted Fabric (Product |
| Class I & II) Conventional & Organic | |
| Texturized Yarn (Product Class I)- | |
| Virgin Polyester | |
| Cotton and blended yarn (Product | |
| Class I) Conventional & Organic | |
| Terry Towels (Product Class I) | |
| Conventional & Organic | |
| Garments (Product Class I) | |
| Conventional | |
| Woven and Knitted Fabric- | |
| (Commission dying and printing) | |
| (Product Class I) | |
| Woven & Knitted Micro Polyester | |
| (Product Class I) | |
| STeP Certification | Process House, Vapi (Normal & |
| (Sustainable Textile | Wider width) |
| Production) & Made In | Knits Processing, Vapi |
| Green Label | |
| Terry Towel, Vapi | |
| Made Ups, Vapi/Silvassa | |
| Garments, Vapi/Silvassa |
In addition to the certifications detailed above, Alok also holds the following certifications:
Egyptian Cotton Certificate - License for using Cotton Egyptian SUPIMA Cotton Certificate- License for using Cotton Supima Cotton USA – License for using Cotton USA
Cotton made in Africa (CmiA)- Mass balance yarns produced in compliance with licensed CmiA.
IATF (International Automotive Task Force) 16949:2016 –Polyester Plant, Silvassa.
NABL Lab Certification ISO 17025:2005 at Vapi NWP Lab.
Silvassa SMUGMT Unit for Medical Devices- Isolation Gowns and Protective Coveralls Silvassa- Safety & Textile Unit for Medical Devices- Face Masks in various Fabrics and Non-Woven Masks.
Awards received by the Company:
Aloks performance, especially in exports of cotton goods and polyester yarn have been recognized through successive awards from TEXPROCIL and SRTEPC in the past for many years. For the year 2021-22, Company has received Certificate of Merit from The Synthetic & Rayon Textile Export Promotion Council for achieving growth in Export Performance.
Subsidiaries
The Company has following direct and step -down subsidiaries as given in Table 10 below.
Table 10: Subsidiaries, Step Down Subsidiaries and Joint Ventures
| Sr. Name of the Subsidiary No. | Country of Incorporation | Relationship (Subsidiary of) | % of Ownership |
| 1 Alok Infrastructure Limited | India | Alok Industries Limited | 100% |
| 2 Alok Worldwide Limited | BVI | Alok Industries Limited | 100% |
| 3 Alok International (Middle East) FZE | Dubai | Alok Industries Limited | 100% |
| 4 Alok Singapore Pte Limited | Singapore | Alok Industries Limited | 100% |
| 5 Alok International Inc | USA | Alok Industries Limited | 100% |
| Step Down Subsidiaries | |||
| 1 Alok Industries International Ltd. | BVI | Alok Infrastructure Ltd. | 100% |
| 2 Grabal Alok International Ltd. | BVI | Alok Infrastructure Ltd. | 100% |
| 3 Grabal Alok UK Ltd. (Under Liquidation) | United Kingdom | Alok Industries International Ltd., BVI | 99.21% |
| Grabal Alok International Ltd., BVI | 0.66% | ||
| 4 Mileta a.s. | Czech Republic | Alok Industries International Ltd., BVI | 100% |
| Joint Venture Companies | (Joint Venture with) | ||
| 1 New City of Bombay Manufacturing Mills Ltd. | India | Alok Industries Limited | 49% |
| 2 Aurangabad Textiles and Apparel Parks Limited | India | Alok Industries Limited | 49% |
Textiles: Mileta
Through its step-down subsidiary, Alok Industries International Limited, BVI, Alok has a 100% stake in Mileta, a Czech-based fabric manufacturing Company. Miletas facilities are located in Horice (Weaving and Administration) and Cerny Dul (Processing) in the Czech Republic. Mileta has high end technological skill in yarn-dyed fabrics and hemming that results in higher per unit realisation. The Mileta range of products includes high quality shirting, batistes and voiles, complete line of functional table linen, bed linen and handkerchiefs. It supplies its fabrics to almost all the leading brands in Europe and USA.
For the year ended 31st March, 2023, Mileta has achieved sales of Rs190.09 crore and made a profit of Rs7.96 crore (non-operational) as compared to sales of Rs159.23 crore and loss of Rs (8.70) crore in March 2022.
UK Retail: Store Twenty One
Alok held a 99.87% equity stake in Grabal Alok (UK) Ltd, through its step down subsidiaries Alok Industries International Limited and Grabal Alok International Limited. Grabal Alok UK used to operate the ‘Store Twenty One chain of value-format stores in UK.
Grabal Alok UK was taken under liquidation on 10th July 2017. The Company has provisioned for the entire investment.
Investment: Alok Infrastructure Limited
The Company made certain investments in the realty sector through its 100% subsidiary Alok Infrastructure Limited. The plan was to create value and monetise the same at the right opportunity. However, depressed market conditions in the real estate space resulted in the Company having to dispose off some of its assets at losses. The Company has also provided for the loans / advances to the extent not recoverable from its subsidiaries. There are no operations being carried out presently in Alok Infrastructure Limited and it had a revenue of RsNil for the year (Previous Year Rs0.03 crore) and loss for the year was Rs12.84 crore (Previous Year loss of Rs12.50) crore. The loss is mainly on account of interest provision on loan.
Other Subsidiaries
The other direct and step-down subsidiaries of the Company are non-operational. The performance of all of subsidiaries and step down subsidiaries are given in table 13.
Consolidated Results
Tables 11, 12 and 13 give the profit and loss highlights, balance sheet highlights and Company wise sales of Alok for the year was Rs993.12 crore (previous year loss Rs250.56) crore.
Table 11: Consolidated Profit and Loss Summary
| FY 2022-23 | FY 2021-22 | |
| Particulars | ||
| Amount Crore | Amount Crore | |
| Net Sales | 6,937.29 | 7,309.50 |
| Other Income | 64.72 | 44.91 |
| Total Income | 7,002.01 | 7,354.41 |
| Material Costs | 5,086.06 | 4,884.05 |
| Employee Benefits | 491.73 | 449.30 |
| Other Expenses | 1,437.05 | 1,411.14 |
| Total Expenses | 7,014.84 | 6,744.49 |
| Operating EBIDTA | -12.83 | 609.92 |
| Depreciation | -364.91 | -342.16 |
| Operating EBIT | -377.74 | 267.76 |
| Interest | -501.24 | -476.20 |
| Operating Profit / (Loss) | ||
| -878.98 | -208.44 | |
| Before Tax | ||
| Add: Provision For Taxes | -0.51 | 0.82 |
| Profit / (Loss) After Tax | -879.49 | -207.62 |
| Share of Profit / (Loss) From | ||
| -0.97 | -0.98 | |
| Associates (Net) | ||
| Profit / (Loss)After Minority | ||
| -880.46 | -208.60 | |
| Interest | ||
| Other Comprehensive Income | -112.66 | -41.95 |
| Loss After Other | ||
| -993.12 | -250.55 | |
| Comprehensive Income |
Table 12: Consolidated Balance Sheet Summary
| ( Rs Crore) | ||
| Particulars | As at | As at |
| 31.03.2023 | 31.03.2022 | |
| Share Holders Fund | -18,900.43 | -17,907.31 |
| Non-Current Liabilities | 21,948.83 | 22,477.12 |
| Current Liabilities | 4,412.71 | 3,657.76 |
| Total Equity and Liabilities | 7,461.11 | 8,227.57 |
| Non-Current Assets | 5,653.47 | 5,961.60 |
| Current Assets | 1,807.64 | 2,265.97 |
| Total Assets | 7,461.11 | 8,227.57 |
Table 13: Company wise Sales & Profit / (Loss) in total Consolidated Performance
| ( Rs Crore) | ||||
| Sr. Name of the Company | 31.03.2023 | 31.03.2022 | ||
| No | Sales | Profit/(Loss) | Sales | Profit/(Loss) |
| 1 Alok Industries Limited | 6,748.32 | -870.68 | 7,150.91 | -184.67 |
| 2 Alok Infrastructure Limited | - | -12.84 | 0.03 | -12.50 |
| 3 Alok International Inc. | - | -38.46 | - | -2.11 |
| 4 Mileta A.S | 190.09 | 7.96 | 159.23 | -8.70 |
| 5 Alok Industries International Limited | - | -169.47 | - | -53.87 |
| 6 Grabal Alok International Limited | - | -62.05 | - | -19.49 |
| 7 Alok World Wide Limited | - | 0.11 | - | 0.04 |
| 8 Alok Singapore Pte Limited | - | -12.69 | - | -3.99 |
| 9 Alok International (Middle East) FZE | - | -1.20 | - | -0.42 |
| Total | 6,938.41 | -1,159.32 | 7,310.17 | -285.70 |
| Effect of elimination entries | -1.12 | 166.20 | -0.67 | 35.14 |
| Consolidated (Loss) / Profit | 6,937.29 | -993.12 | 7,309.50 | -250.56 |
Human Resource
At Alok, human capital is a key business imperative. To create a work environment which nurtures performance excellence, the Company has invested in employee engagement and welfare activities by regularly undertaking employee skill development initiatives to align employees skill sets with organizational requirements. During the year, the Company also emphasized on promoting an evolving work culture with focus on cost optimization, good governance, transparency, safety, health, diversity and inclusion, protection of environment and overall wellbeing of the employees. The Companys people practices have enabled to create an environment of collaboration and connect, which has aided in achieving cordial industrial relations.
With a total employee strength as on 31st March, 2023, including contract workers at 22,699, the Company has been continuously striving to be an "Employer of Choice" among the prospective candidates. To achieve this goal, the Companys HR Policies & Practices are continuously enhanced. As a recognition to this endeavour, the Company was adjudged as amongst Top Organisations with Innovative HR Practices in the 21st Asia Pacific HRM Congress Awards in Bengaluru on 20th September 2022.
Also, in improving gender diversity, Aloks efforts have shown positive results with increased number of women workforces, especially in the Made-up & Garments divisions. The COVID-19 pandemic had thrown new set of challenges and the Company continues to evolve in its post covid welfare activities supporting the families of the deceased employees. Alok Industries pursued vaccination coverage of over 99% of its own employees and contract workforce across all locations and businesses.
Aloks Performance Management System (‘PMS) which continues to be central to the Talent Management & Review initiatives, helped in improving productivity through focused approach of assisting employees in attaining set goals. During FY 2022-23, several initiatives, such as throughput improvement, cycle time reduction, operational excellence projects, along with efforts to identify redundancy, supported the ever-evolving business needs. The Company made significant progress in simplifying processes and systems to make them more efficient and effective. Employee Productivity continued to be the focus area of the Company during the year and several initiatives to provide monetary incentives, reward and recognitions for improving work efficiency, enhanced output, attendance etc. were undertaken. Employees were also sensitised on productivity improvement through various training programs.
Further multiple initiatives on skill building of workforce were undertaken during the year both for permanent employees and contract workers. This is manifested in the fact that during FY 22-23, the total Training man-days was 5,82,734. Also, total workforce who received training coverage were 4,400 permanent employees and 2,900 contract workers, specifically in the area of improving awareness in Safety, Health & Environment standards.
To help prevent accidents & injuries, every employee and associate were provided with an overview of the Companys Safety Policies & Procedures, with necessary safety awareness trainings, information on emergency protocols, use of Personal Protective Equipment (PPE), teachings on potential safety hazards at workplace and how to avoid the normal slips, trips and falls.
In the area of spreading POSH (Prevention of Sexual Harassment) awareness, programmes for all women employees in the organization were arranged. Organizing POSH trainings was a step towards not only protecting the rights of women employees but ensuring equality at the workplace.
As part of the health initiatives Alok has been promoting Yoga among employees. This unique regular physical exercise is a union of the body & consciousness for attaining definitive peace. Every year International Yoga Day and No Tobacco Day are also celebrated across the organization. The other initiative of free employee health check-up camps helps employees monitor their health and provides them the guidance to follow healthy practices. It pushes employees to go for a healthy lifestyle, balanced diet, daily exercise, and many more healthy habits.
Employee engagement & welfare activities has been in focus for the Company, around which several initiatives such as organising Annual Health Check-up Camp, regular workshops for women on POSH (Prevention of Sexual Harassment) Awareness, Alok Annual Sports Meet, Long Service Awards for Employees and several Family Get Togethers are now part of the yearly calendar. Your Company considers employees and associates as significant assets as they possess valuable business knowledge, work experience, and problem-solving ability which are hard to replace. Hence, to reward and recognise the unique sense of ownership and commitment of these employees, various welfare functions are organised in a grand scale across Company units like rewarding & recognising - Best Employees of the Month, Long Service Awards & Annual Sports Meet, Get-together of families residing in the Company housing colonies for celebration of New Year, and festivities during Navratri, Diwali, and Holi.
To establish better Employee, connect, multiple forums & mediums were used by management, such as Central
Grievance Cell, open house session entitled "Maan Ki Baat" for workers, "Chai Pe Charcha" with senior leadership, weekly breakfast meetings at residential colony with Permanent Workers, Jobbers & Trainees etc. for two-way communication & interaction; thereby creating a platform to understand new challenges, key concerns and find redressal solutions.
Sustainable Business Practices and Corporate Social Responsibility (CSR)
At Alok, there has been a constant endeavour to actively champion a strong conscience towards all stakeholders and engaging in sustainable business practice by reducing, reusing, recycling and conservation of all natural resources. Alok remains committed to its core values on Environment, Health, Safety, Society, and Sustainability. Promoting energy efficient products, processes, and greener businesses by production and use of renewable sources of energy and recharging ground water levels, undertaking plantations, a_orestation activities and conserving biodiversity, the Company has aligned its sustainability initiatives to evolve as a synchronized positive force. Your Company has also been embracing an accountable and transparent governance and leadership structure that integrates sustainability considerations into all its business decisions.
It is this underlying philosophy that shapes your Companys continuing commitment to environment sustainability and community development. The most recent initiatives are: The use of Biomass briquettes of cotton seed / dust, ground nutshell / saw dust as fuel in solid fuel fired boilers for steam generation Recycle Polyester and Polyester Yarn waste and flakes to produce 100% recycled Polyester Fibre Responsibly recycling more than 60% of the waste to productive use Achieve 86% of water recyclability Alok abides by the belief that innovation and sustainability will promote the journey to decarbonisation, energy efficiency and promotion of a circular economy. The Company is also aiming at reducing the carbon intensity of its operations by 50% by 2025 from the base of 2019 and plan to continue increasing its share of Good and Green products in its overall portfolio through conscientious raw material sourcing, environmentally responsible design, and greener manufacturing processes.
For the Company, the Corporate Social Responsibility (CSR) initiatives has thus far been focused on extending support to communities in and around the manufacturing units, empowering women through providing them with self-employment opportunities in the field of tailoring and engaging them in Garment manufacturing process, which can be leveraged by individual women as well as womens self-help groups (SHGs). Also, the Company has been patronising skill development initiatives though Skill Development Centre for Garment Stitching at Silvassa and supported in the establishment of a Dialysis Centre at Civil Hospital, Silvassa.
Risks & Risk Mitigation
RISK ASSOCIATED WITH THE COMPANY:
The Company is exposed to various risks which include factors such as rising competition in the market on the domestic and export fronts, duty free access to competing countries in US and European markets, uncertain business environment including conflict between Russia and Ukraine, rupee fluctuation, volatility in raw material prices and its availability, slowdown in demand and change in fashion trends, possibility of increase in interest rates, etc. Besides this the Company is also exposed to factors such as the change in government policies, duties & taxes, availability of power from the grid, availability of labour etc. The Company tries to mitigate these risks by taking quick actions and proactive initiatives to minimize the impact of these risks to the extent possible. Some of these threats are given below:
Raw material related Risk:
Raw material being a major cost of production, Companys operations and profitability are significantly dependent on price and timely availability of raw materials used in production process. The primary raw materials for our textile operations are raw cotton and Purified Terephthalic Acid (PTA) & Mono-Ethylene Glycol (MEG). The Company also buys cotton yarn, polyester yarn and fabrics of specifications required by customers which are not produced in its plants or in case the internal capacities are not available.
Cotton:
Being an agricultural commodity, prices of cotton are affected by a range of factors like changes in weather conditions affecting sowing, government policies and regulations. Governing taxes, tariffs, duties, subsidies, import and export restrictions on agricultural commodities, overall supply situation in the world, etc. all these influence pricing and demand supply situation in this industry. The planting of certain crops versus other uses of agricultural resources, the location and size of crop production, volume and types of imports and exports, etc. determine availability of cotton. As the Chart below shows, cotton prices during 2022-23 saw an unprecedented increase to Rs1,06,930/- per candy (355.56 kgs) in May 2022. Thereafter it started coming down and with the arrival of new crop and lower than expected demand, the cotton prices came down to Rs61,000/ per candy in March 2023. Considering the demand trend and arrival of fresh cotton, the cotton rates are expected to come down by another Rs2000 to Rs3000 per candy.
The Company has an experienced team for procurement of raw cotton with a deep understanding of this natural fibre. As a Company, we have adopted various processes whereby we are expanding our sources across different supply chain intermediaries and other stake holders. Cotton being an international commodity, our focus remains optimizing domestic and international opportunities to create a competitive edge of sourcing based on landed cost.
Polyester:
For the Companys polyester yarn operations, PTA and MEG are the major raw materials that are required in the manufacturing of Partially Oriented Yarn (POY) and other polyester yarn. Being petrochemical products, prices of PTA and MEG are linked to naphtha prices and ethylene prices, respectively, which in turn fluctuate in line with fluctuations in the crude oil prices as can be seen from the Chart below.
As can be seen from the chart, both PTA and MEG prices during the financial year 2022-23 were moving in tandem with the price of crude oil (Brent). PTA prices moved from USD 907 per ton in April 2022 and showed a rising trend and reached a peak of USD 1006 per ton in June 2022. Thereafter it showed a downtrend and in March 2023 it was at USD 788 per ton.
MEG prices, on the other hand, was having a declining trend starting from USD 650 per ton in April 2022 and coming down to USD 512 per ton in March 2023.
Being a commodity product, the prices of finished goods like Draw Texturised Yarn (DTY) and Fully Drawn Yarn (FDY), etc. also move with the movement in raw material prices albeit with a lag on both sides. The Company has assured supplies of PTA and MEG from Reliance Industries Limited at internationally competitive prices and on an arms length basis.
Market related Risk:
The Companys performance also depends upon the demand situation. A slowdown in demand may lead to decline in production / sales and thus impact profitability. Similarly, Companys value-added segment of Apparel Fabrics and to some extent Home Textiles, are also subject to trends in fashion and consumer behaviour. Moreover, major international incidents such as Russia - Ukraine conflicts also impact the demand from the impacted economies.
The Companys products are sold in both domestic as well as exports markets. While the Companys major sales are in domestic market (about 75% - 80%), exports are also expected to remain a sizeable part (about 20% - 25%) of the Companys revenues. The Companys exports markets, predominantly USA, Europe, and Asia, are very competitive with high emphasis on timely delivery. All the products of the Company are getting exported. Home textiles (bedding and towels) are the major chunk of the Companys exports constituting about 55% of the total exports.
Ability to develop products as demanded by customers and new designs development capability are critical factors for exports markets. The Company has been so far successful in meeting these demands over the years and has also won several export awards in the past instituted by the Government and Export Promotion Councils. India no longer enjoys preferred market access in terms of concessional import duties in major exporting countries like USA & Europe. This is making countries like Bangladesh comparatively more price competitive. As a result, other nations like Bangladesh are competing aggressively to capture market share. The Company is progressively widening its markets with increasing focus on Asia and some countries in Africa to mitigate the challenges that are likely to arise in the developed markets. The Company has been able to retain key customers in USA and Europe, albeit with lower volumes. Now with completion of the necessary maintenance of its plants, the Company is confident of bringing into its fold, customers who have moved away in the last few years, given the quality of the products and capacity to supply large volumes consistently. In the domestic market as well, the Company faces competition from organised big players and the unorganised small and fragmented players. The Company has developed a good reputation amongst the domestic traders, garment manufacturers and brands due to quality, design capabilities and cost. Further, the Company has started building relationships with large retailers (physical and online) to supply fabrics and garments. The Companys operations are now getting scaled up and it is fully prepared to meet larger volumes. The Company is confident that it would regain a preferred supplier status for big brands and retailers given the quality, design capability and the capacity to provide large volumes on a consistent basis. The Company has been a leading supplier of polyester yarns over the years given its large capacity, the quality, and the range of its products. The Polyester operations are now fully stabilized, and the Company is re-establishing itself as a premium supplier of polyester yarn and fibre.
Financial Risk:
The Company must meet its financial obligations on time. The Company has an outstanding term loan from banks of Rs4,802 crore and working capital limits of Rs415 crore. The Company is required to meet the interest obligation on these loans periodically and also has to meet the repayment of term loan as per the terms of sanction. Moreover, the Companys loans are linked to MCLR of the sanctioning banks. Any increase in MCLR would lead to increase in interest rate for the Company on its borrowings.
The Companys present rating is AA stable (by CARE) which denotes high level of certainty of meeting debt obligations.
Information Technology Risk
Information and Technology being the major backbone of Companys overall operation and data storage / analysis, is another key risk area identified by the Company and several measures are being taken to strengthen the same and mitigate the risk associated with this.
The Company is in the process of re-implementing SAP software on a new landscape to replace the present instance, which has been functional since 2007. Testing and Training are progressing, and following core modules are expected to go live during next financial year (2023-24):
| a. Sales and Distribution |
| b. Materials Management |
| c. Finance and Controlling |
| d. Production and Planning |
| e. Quality Management |
| f. Plant Maintenance |
| g. Logistics & EWM |
Other modules/functions such as Human Capital Management, CRM, BI etc. are planned in phase 2. Infrastructure, network, and applications continue to be secured through firewalls and role-based authorizations. In addition to the generator power backup provided by building facility infrastructure, multiple UPS systems installed in data Centre support power requirement for another 4-6 hours. New SAP landscape is proposed to be installed at a data Centre, which ensures redundancy and concurrent maintainability. SAP database is secured by replicating online at different geographical locations using different technologies to mitigate risks arising out of any possible technology issues. This is done with the primary objective to achieve highest possible Recovery Point Objective (RPO). However, Recovery Time Objective (RTO) remains a constraint as the current environment does not run on a scalable infrastructure. This is considered in the new implementation as a key requirement and a much more robust database replication is being planned to ensure higher RTO. Cyber security being a major concern for the IT ecosystem, we continue to focus on enhancing cyber security architecture which can protect our landscape from a wider range of security threats under guidance of "IRM - Governance & Risk Management, Reliance Industries Ltd". Access to computing infrastructure such as servers, workstations, network devices etc. are monitored very closely for possible security threats. Necessary controls are strengthened on a continuous basis. Remote working is enabled for all employees who need to access Companys computing resources from anywhere through secure and controlled paths created through VPN.
Some of the improvements done during the financial year are: A large percentage of old and obsolete IT systems are replaced with new systems. Network infrastructure is being hardened to mitigate security threats (ongoing process).
Multi-factor Authentication (MFA) is enforced in Office 365, wherever possible.
MAC address binding is made mandatory for Wi-Fi access. Implemented stronger password management system across applications and devices. Network bandwidth is continuously optimized to ensure seamless access to applications/database from all locations.
Currency Risk
The Company is subject to currency exposure risk given its significant size of exports. The Companys imports are much lower as compared to its exports and thus as far as foreign currency payments are concerned, the Company has a natural hedge. The Company has been sanctioned a limit to hedge the currency exposure on export receivables and covers exports to the extent needed to cover open risk (net). The Company also has in place a hedging policy to mitigate currency risks. The currency risk is thus adequately mitigated.
Impact of COVID-19 Pandemic and Russia- Ukraine Conflict
The second and third wave of COVID-19 pandemic had impacted the normal business operations of the Company by way of interruption in production, supply chain disruption, unavailability of personnel, etc. However, the Company was well geared with set processes and precautionary measures and as a result there was not much impact on production and supply of goods. The threat related to pandemic is now minimal and the business is getting back to normalcy. However, in 2022-23 world was majority impacted by the conflicts between Russia and Ukraine. The major exports markets of the Company - USA and Europe were affected by the conflict and faced inflationary pressures. This has in turn affected the demand for the Companys products in those markets. The situation is improving but in a slow pace. The Company is closely monitoring the situation and making changes in its marketing strategy to minimise the impact.
Government Policies:
The Companys business also has a threat of sudden change in government policies like policies relating to export and import of certain products, change in customs duty structure, change in export incentives, change in GST rates, etc. Similarly other government policies such as policies relating to labour etc. also have their impact in overall competitiveness of the Company as compared to the competing countries in the international markets. The Company monitors the changes in government policies on day-to-day basis and forms appropriate strategies to mitigate the impact on the Company while ensuring adequate compliances.
Outlook
The inflation in the major economies of US, Europe and UK is coming down slowly. The central banks interest rate hike scenario in those countries is also now teeming down. As a result, these economies are expected to improve gradually. Some sign of demand revival from those countries is also visible based on the recent meetings our marketing teams had with the international buyers. The cotton prices have also come down to about Rs58,000/- Rs59,000/- per candy and the crude is moving in a range bound manner. We, therefore, expect overall market situation to improve in FY 2024 and with the gradual revival of demand, our operating rates of the downstream businesses is expected to improve during the year. This along with several measures undertaken by the Company to improve quality, sales realisation and cost reduction are expected to yield positive results during the year. The strong support from our promoters RIL is also to be considered as an important factor for our solidity. We therefore look at the future optimistically.
Internal Control and Adequacy
The Company has in place a well-established framework of internal control systems which are commensurate with the size and complexity of its business. The Company has an independent internal audit function covering major areas of operations and the same is carried out by an external Chartered Accountant firm engaged for this purpose.
Cautionary Statement
Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations. These statements have been based on current expectations and projections about future events. Wherever possible, all precautions have been taken to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expect, ‘project, ‘intend, ‘plan, ‘believe and words of similar substance in connection with any discussion of future performance. Such statements, however, involve known and unknown risks, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs and may cause actual results to differ materially. There is no certainty that these forward-looking statements will be realised, although due care has been taken in making these assumptions. There is no obligation to publicly update any forward-looking statements, whether related to new information, future events or otherwise.
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