alps industries ltd share price Management discussions

I. TEXTILES INDUSTRY STRUCTURE AND DEVELOPMENT

The Government of India has supported the textile industry by multiple package dedicated only to the garment and made-ups sector which gave much needed impetus for the growth in the vital segments of the textile sector. According to the Union Budget for FY 2021-22, of the total allocation of 12,382 crore for the textile sector for next financial year, 133.83 crore is for Textile Cluster Development Scheme, 100 crore for National Technical Textiles Mission, and 15 crore each for PM Mega Integrated Textile Region and Apparel parks scheme and the Production Linked Incentive Scheme. According to finance minister, production linked incentive in 14 sectors will create 60 lakh jobs and has the potential to generate Rs. 30 lakh crore in production over the next five years. The Centre has also allocated 105 Crore for FY23 towards the Raw Material Supply Scheme. India is going to be one of the major consumers of technical textiles especially in the segments of Buildtech, Meditech and Oekotech in the coming years and can facilitate growth in this particular sector. Aatmanirbhar Swastha Bharata and Jal Jeevan Mission will complement Indias consumption of technical textiles in the coming years. There is ample scope and end number of opportunities for the industry players for growth in technical textiles andleverage & generate employment opportunity for the youths. Today, there is a thriving 1-billion-dollar industry wherein 1100 companies are catering to the global demand of health care sector. The textile industry should leverage on this strong foundation laid by our industry during the Covid-19 pandemic, in the years to come. The global investors to take full advantage of recent development wherein the Government has planned to set up Seven Textile Parks in the upcoming years as announced in FY 2020-21 under the Mega Investment Textiles Parks Scheme (MITRA). This opened up new avenues for the global investment companies to invest in India and take benefit of the emerging opportunities that India is offering to the global investors. This will also help Indian textile industry to become globally competitive and generate new employment opportunities for the rural masses, especially to the poor and illiterate women. It is required to educate MSME textile players to focus more on adopting global standards so thatthey can partner with the global sourcing giants in fulfilling their requirements. There are needs of Sustainable Textiles which is also the only success mantra for the future growth of the textile sector if they have to compete with the low-cost countries.

COTTON

Cotton is one of the most important cash crops and accounts for around 25% of the total global fibre production. In the raw material consumption basket of the Indian textile industry, the proportion of cotton is around 60%. The consumption of cotton is approximately300 lakh bales (170 kg each) per year. India occupies first position in the world in cotton acreage with around 133lakh hectares under cotton cultivation which is around 41% of the world area of 320.54 lakh hectares as per thee report of ministry of Textiles. The Cotton Corporation of India (CCI) will see allocation of 9,243 crore for the next financial year as against 8,440 crore in the revised budget allocation for the current year, for the committed liability of the government to the Corporation.

YARN A SIGNIFICANT SEGMENT

The recession in the textile industry since the past five-six years, higher electricity rates, rising cotton prices and no increase in yarn rates, high-interest rates on bank loans in addition to the trade war between USA and China have adversely affected the yarn business, Of the 150 spinning mills in the state, nearly 45 mills are closed, 70 are active and another 30 mills are in the process of construction as on closing of previous financial year. The textile sector has been allocated 12,382 crore for the textile sector for next financial year which, as per proposed plans of the Ministry, will be offered for incremental production in man-made fibre items and technical textiles products. The PLI scheme is to promote domestic manufacturing, for both sales within the country and exports, by providing financial incentives on incremental turnover for five years. While the rates of incentive to be offered to the textiles sector linked to incremental production areset to be one of the highest amongst the existing sectors, some in the industry are of the view that it would be of limited advantage if most units get excluded.

MACRO LEVEL OPPORTUNITIES AND THREATS

The Company has a robust Enterprise Risk Management framework which enables it to take certain risks to remain competitive and achieve higher growth and at the same time mitigate other risks to maintain sustainable results. Under the framework, the Company has laid down a Risk Management Plan which defines the process for identification of risks, its assessment, mitigation measures, monitoring and reporting. While the Company, through its employees and Executive Management, continuously assess the identified Risks, the Risk Management Committee reviews the identified Risks and its mitigation measures annually. The Company has identified 17 Risks-5 Strategic Risks, 10 Operational Risks & 2 Regulatory Risks. Key Strategic Risks include demand destruction, changing customer preference and supply chain disruption due to pandemic, reputational risk, succession planning & business continuity planning. Key Operating Risks include customers credit risk, fluctuating forex rates and cotton prices, cyber security risk, IT system breakdown, labour unrest, fire & safety, concentration of business with certain customers and sustainability. Regulatory Risks include changes in bilateral/ multilateral trade agreements, international trade disputes and regulatory compliances. Our approach to performance management is a holistic one wherein, while holding people accountable, we look at continuous development and create opportunities for them to excel in new and/ or larger roles. Performance dialogues create opportunities.

A. GOVERNMENT POLICIES-TEXTILE SECTOR

In the wake of the ongoing pandemic, all nations have suffered at large across all industries. Textile Industry too has been no exception to the brunt faced due to the impact of the coronavirus. While most economies are still struggling to get up, India surprisingly has sprung back with the ferociousness of a panther from the third quarter onward. Despite the country coming to a standstill for months and finances and supply chains being adversely affected, Indian textile industry too is gradually scaling back to its pre-covid glory. While credit for this does go to our robust organizations, the various initiatives and steps taken by the Government of India to facilitate this positive movement in the textile industry cannot be ignored. The support provided by the government with its ongoing schemes and the launch of new measures have provided the strong framework that domestic textile manufacturers were seeking to setup their products on. Atmanirbhar Bharat, one of the most important lessons learnt this year has definitely been the need to be self reliant. As part of the "Atmanirbharat Bharat" program, "Make in India" slogan has been launched to reboot and revamp the economy post the first impact of the pandemic. As per data, India has jumped up 79 positions on the ease of doing business ranking after the launch of various schemes under "Make in India" campaign. The new proposed law regarding indirect taxes will result in ‘Fibre-neutrality effect on the Indian textiles sector. The new proposed law regarding indirect taxes willresult in ‘Fibre-neutrality effect on the Indian textiles sector, according to the Ministry of Textiles.

III. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

In terms of the Ind AS, there is only one reportable segmenti.e.,Textile Segment. Hence the segmentwise reporting is no applicable.

IV. OUTLOOK AT LARGE

The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sectorhas experienced a rapid growth in the past decade with the entry of several international players. However, Outlook for global economic growth started on a weak note in 2021, and continued during the year 2021-22 as well. Manufacturing activity and trade growth continued to be low key. The year was marked by geopolitical tensions and trade-war rhetoric mainly between the US and China & Russia and Ukraine. This clearly reflected in reduced confidence on the future of the global trading system and international cooperation, and impacted investment decisions, and global trade. Several economies signaled and adopted an accommodating monetary policy which cushioned the impact of global tensions on financial market sentiment and activity.

The textile market is expected to grow at a compound annual growth rate of 4.0% from 2022 to 2030 to reach USD 1,420.3 billion by 2030. The global textile market is expected to grow from $530.97 billion in 2021 to $575.06 billion in 2022 at a compound annual growth rate (CAGR) of 8.3%. The market is expected to grow to $760.21 billion in 2026 at a compound annual growth rate (CAGR) of 7.2%.

V. RISKS AND CONCERNS

Raw Material Price Risk: Cotton are the major raw materials used by the Company for textile. Volatility in prices impacts the overall cost of production, and thus, the profitability.

Currency Risk: As the Company deals in the international market, it is exposed to currency volatility, which impacts the overall revenue of the Company.

Geographical Risk

Concentration in a particular territory leads to a depleting market presence of the Company.

Policy Risk

Implementation of any policy which is not in favour of the Company hampers the operations of the Company.

Competition Risk

There are many emerging countries, where production costs are relatively lower than that of India. This poses a potential threat to the Company.

COVID-19

The fast spread of the COVID-19 virus has affected the globe posing enormous health, economic, environmental, and social challenges to its population. This pandemic can be accounted for of the most extreme challenges that mankind has faced in the modern time. The outbreak has disrupted the majority of the global supply chains across South and Southeast Asia. The economic depression is visible across the globe but emerging nations are suffering the deepest impact. The industry on its part would have to ensure a pandemic resilient manufacturing environment with functional exchange of peoptudle and goods. The government put and operatedlarge number of vaccination centers to curb the impact of this deadly virus. Once larger parts of the population are immunized against COVID-19 and restrictions start to be lifted, companies expect a gradual improvement in economic conditions which will translate into output growth. Meanwhile, goods producers expect output to increase over the coming 12 months.

Mitigation Strategy

? Strong relationship with vendors and proximity to the raw material sources ensures easy availability. The Company also plans to save land costs and inventory management keeping in view the historical cycle of input prices. From time to time, the Company hedges raw-material against order book.

? Currency risks are managed by constant monitoring exposures and limiting the same in view of applicable margins under the relevant Market engagements. Also, some portion of the foreign currency is hedged to mitigate any adverse movements in currency fluctuations.

? The Government of India has come up with various incentives such asrebate onstate levies, duty drawback, and ATUFS, among others. The Company has leveraged on these initiatives to stay ahead in the market.

? The Company benefits out of economies of scale, cutting-edge technology, and loyal partnerships to offer competitive rates to its clients across the globe.

VI. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

High accuracy in recording and providing reliable financial & operational support is ensured through stringent procedures. The Companys internal team and Audit Committee monitor business operations and any deviations are promptly brought to the notice of the Management board. These findings provide input for risk identification and assessment, post which prompt risk mitigation strategies are deployed towards a seamless growth of the Company. Internal audit process verifies whether all systems and processes are commensurate with the business size and structure. Adequate internal control systems safeguard the assets of the company with timely identification and intervention to assuage risks. The internal audit report is discussed with the senior management and members of Audit Committee to keep a check on the existing systems and take corrective action to further enhance the control measures. Regular internal audits and checks are carried out to ensure the robustness of the system. The Management also reviews from time to time the internal control systems and procedures to ensure their proper application. The emphasis on internal controls prevails across functions and processes, covering the entire gamut of various activities.

VII. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During current Financial Year under review your company has recorded the total revenue of Rs. 30631.56 Lakh as compared to previous financial yearof Rs. 25523.77 Lakh. Despite an increase in total revenue it earned a negative EBIDTA 1254.62Lakh (previous year positive EBIDTA of Rs. 629.40 Lakh) and a negative PAT of Rs. 8471.82 Lakh (previous year negative PAT Rs. 7455.87) after recognizing the provision of Depreciation and Interest in term of INDAS.

VIII. MATERIAL DEVELOPMENTS ON HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The company has been consistently maintaining harmonious & cordial relations with the employees at all the locations. The Company continues to lay emphasis on building and sustaining culture of larger family, caring & supporting each other. During the year, with consistent review and efforts for optimization of available manpower resources, no. of employees was 1334 as compare to 1281 last year. However due to downfall in the manufacturing facilities and non availability of operative assets, company may not continue with the employee strength in coming year.

IX. MEDIUM-TERM AND LONG-TERM STRATEGY

In terms ofSEBI/HO/CFD/CMD/CIR/P/2018/79 May 10, 2018 the disclosure of Medium and Long-term strategy of the company, for the next financial year ending on March 31, 2023 is within the limits set by its competitive position. However the company is struggling to maintain the same level of its business as all the operative assets have been taken over by the lenders under the provisions of SARFAESI.

X. STATUTORY COMPLIANCE

The Executive Director makes a declaration at each Board Meeting regarding the compliance with the provisions of various statutes, after obtaining confirmation from all the units of the company. The Company Secretary ensures compliance accordance to SEBI regulations and provisions of the Listing Regulations.

XI. DETAILS OF SIGNIFICANT CHANGES

As required the details of changes of 25% or more as compared to the immediately previous financial year in key financial ratios along with detailed reasons therefore are as under:

S. No.	Particulars	Current Year 31.03.2022	Previous Year 31.03.2021	Reasons of change.
1.	Current ratio (in times)	0.13	0.18	The current assets were reduced due to sale of entire inventory during the current year hence the change in Current Ratio.
2.	Debt-Equity ratio ( times)	-1.00	-1.24	Explanation not required. ( There reduction in Debts due to realization out of proceeds of sale of assets of company under the provisions of SARFAESI by lenders hence the reduction in Debt Equity Ratio.)
3.	Debt service coverage ratio (in times)	(0.03)	0.02	The Company could not serve the Interest as well as Principal Debts due to negative cash earnings during the year hence reduction in Debt Service Coverage Ratio.
4.	Return on equity ratio (in %)	12.63%	12.62%	Explanation Not Require
5.	Inventory turnover ratio (in times)	9.52	9.42	The Inventory is Nil at the current yearend since sold, hence the high Inventory turnover ratio.
6.	Trade receivables turnover ratio (in times)	20.57	9.23	Explanation Not Require
7.	Trade payable turnover ratio (in times)	7.59	5.51	The trade payables at the current yearend are less since reduction in purchases of material in last quarter of the year hence the increase in trade payable turnover ratio.
8.	Net capital turnover ratio (in times)	(1.01)	(0.79)	The net working capital at the current yearend reduced while the revenue from operation has increased during the year hence change in Net capital employed ration.
9.	Net profit ratio (in %)	-28.01%	-29.34%	Explanation not required
10. 11.	Return on capital employed (in %) Return on investment (in	-1497.01% -	-11.88% -	The recovery of borrowed funds was made during the year out of sale of assets while the net loss increased for the year hence change in Return on capital employed ratio. Explanation not

 

%)

required

XII. CAUTIONARY STATEMENT

The Management Discussion and Analysis Report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this Management Discussion and Analysis Report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the Governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and otherincidental factors.It is much more unpredictable due to COVID VIRUS, the challenge are to guard against any community spread and move to flattening the curve, as quickly as possible to get normalize the market trends. The Management has made these statements based on itscurrent expectations and projections about future events. Wherever possible, it has tried to identify such statements by using words such as ‘anticipate, ‘estimate‘ expect, ‘project, ‘intend, ‘plan, ‘believe and words of similar substance. The management cannot guarantee that the seforward-looking statements will berealized, although it believes that it has been prudent in making these assumptions.