Ashima Ltd Management Discussions

ECONOMIC OVERVIEW AND OUTLOOK Global Economy

The global economy remained remarkably resilient. It displayed a mixed landscape, marked by both challenges and opportunities. Economic growth remained uneven across regions, with some economies experiencing robust rebounds while others lag behind. Trade tensions and geopolitical uncertainties continue to influence market sentiments and investment decisions. Supply chain disruptions persist, contributing to inflationary pressures in various sectors. Central banks are navigating the delicate balance of supporting growth while combating inflationary risks through monetary policy adjustments.

Efforts to address climate change are reshaping industries and driving investment towards sustainable practices, presenting both challenges and opportunities. At the same time, technological advancements, particularly in digitalization and automation, are transforming industries and labor markets, leading to shifts in job roles and skills requirements.

Indian Economy

India has emerged as the fastest-growing major economy in the world, backed by its robust democracy and strong partnerships. Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility. The governments focus on infrastructure development and investment in key sectors like manufacturing and technology aims to stimulate growth and create employment opportunities. However, inflationary pressures persist due to supply chain disruptions and rising commodity prices. The growth in nominal GDP during 2023-24 is estimated at 9.1% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as the key drivers of the GDP. Overall, navigating the complexities requires a concerted effort from policymakers and stakeholders to foster inclusive and sustainable growth in the Indian economy.

Indian Textile Industry

The Indian textile industry stands as one of the largest contributors to the countrys economy. However, its current status reflects a blend of resilience amidst challenges and potential for further growth. Government initiatives such as the Production Linked Incentive (PLI) scheme for the textile sector aim to enhance competitiveness, boost exports and attract investments. Additionally, reforms in labor laws and tax structures seek to streamline operations and improve ease of doing business for textile manufacturers.

The Indian textile industry continues to diversify its product offerings, embracing sustainability practices and adopting advanced technologies like automation and digitalization to enhance efficiency and quality. However, challenges such as infrastructural bottlenecks, regulatory complexities and global market fluctuations persist. Addressing these challenges requires a collaborative approach from government, industry players and other stakeholders to sustainably propel the Indian textile industry towards greater resilience, innovation, and competitiveness on the global stage.

Companys Performance

The operational performance of the company has substantially improved during the year as its Real Estate division started booking revenue for its maiden project. The textile business has reported lower loss at PBT level compared to the previous year. The Investment division has achieved substantially improved profitability, consistently outperforming all benchmark indices.

Segment-wise Analysis and Review

The Company is engaged in three business segments viz. Textiles, Real Estate and Investment divisions. Performance analysis for each segment during the year is discussed hereinbelow:

Textiles Division: With the resumption of wet production activities upon commissioning of new Effluent Treatment Plant (ETP) and Zero Liquid Discharge (ZLD) system, the Company reverted to inhouse production and reduced outsourcing. This helped the Company increase its business volumes and in restoring its cost efficiencies. Softened input costs enabled the divisions reduce their variable costs. Dyecot and Denim divisions could therefore record improvement in volumes and profitability. Garment and Attires divisions continued to face competitive pressures and have reported decline in profitability. In overall terms, the textiles business has been able to increase the levels of operations and reduce its losses during the year.

Real Estate Division: The division commenced its activities during the previous year and the business is growing well. Currently there are two projects under progress: “Swan Lake”, which is a week-end homes project and the recently launched “The Sovereign”, which is a luxurious high-rise residential apartment project. The company received overwhelming market response to the Swan Lake project. Out of the total 38,00,000 sq ft, almost 22,75,000 sq ft, i.e. about 60% have been booked. Revenue booked during the year is 6983 lacs. Construction and development work for the project is progressing satisfactorily. The Sovereign project started during the last quarter of the year and the construction work thereof is going well. The total built up area of the project is about 6,46,000 Sq Ft and the company has already invested 9200 lacs for the project. The Swan Lake project has started booking revenue during the last quarter and the division has reported healthy profitability.

Investment Division: The division has reported extraordinary level of profitability (based on mark-to-market accounting) during the current year. It makes investment in equity shares with a long-term perspective. As per accounting norms, periodic performance is reported based on market value of shares held at the end of the period. The division has consistently outperformed the benchmark indices in terms of XIRR. The XIRR for the investments of the Company works out to 78% for the year, compared to XIRR of various benchmark indices ranging from 25% to 39%.

FINANCIAL RESULTS AND OUTLOOK:

Financial performance:

The performance of the company has improved significantly during the year. During the year under review, the company has reported profit of 9,641 lacs compared to loss of 665 lacs during the preceding year. Profitability for the year includes first-time recognition of deferred tax assets of 3500 lacs.

Raw material:

Cotton yarn prices started going down since start of the year and remained soft after a volatile movement during the year, driven by almost similar pattern in cotton prices. Fluctuations in international demand continued playing a pivotal role in the domestic yarn prices occasionally. Though company works mostly on pre-booked orders, a favourable raw material price scenario helps the company positively.

Dyes and Chemicals:

The prices of dyes and chemicals have remained mostly on a downward side during the year. Prices of basic chemicals have reduced compared to those of dyestuff and specialty chemicals. The company keeps on making efforts to optimize the costs on a continuous basis by various ways including changes in recipe, process as well as going for newer and/or alternative chemicals. Changes in the prices are regularly updated for arriving at final product pricing.

Utilities:

Power tariff has gone up marginally during the year, whereas fuel costs have reduced on account of reduced coal prices.

Other expenses:

The company continues to exercise appropriate cost control mechanism in order to manage the impact of inflationary pressure on the overhead expenses. The costs of such overheads have however increased during the year mainly on account of increased level of operational activities across its business divisions.

Interest and others:

Finance costs during the year have gone up on account of increased borrowing levels for working capital requirement.

Significant changes in financial ratios and explanations thereon are appearing at note no. 49 to the Financial Statements.

Outlook:

The Real Estate Business started booking revenue, which is a landmark moment for the Company as it moves ahead with its ambitious plans to capitalise on the vast opportunities that real estate market offers in Ahmedabad. Going forward, real estate business is expected to assume more significance for the Company for its future growth and profitability.

The Company expects real estate business to continue to contribute to growth and higher profitability of the Company in the times to come. Textile business is likely to continues facing challenges on various fronts.

The Investment division is performing exceedingly well and is well poised to take advantage of robust India story.

Resources and liquidity

There is a proper system in place to manage current assets. It ensures efficient utilisation of liquidity and keeps inventories and receivables under control. Managing operating cycle of the company is an important exercise and company uses appropriate measures to manage it on a regular basis.

Opportunities:

The Real Estate sector, which has seen growth momentum since the past several years, offers significant growth opportunities to the Company. The Company is well poised to take advantage of these opportunities. The textile industry offers various opportunities, especially on account of the recent shift towards sustainability across its entire value chain, which requires continuous efforts on improving manufacturing and technical capabilities.

Threats:

The Indian Real Estate Sector faces threats like adverse impact on demand due to factors such as high / rising interest rates on borrowings and affordability issues for customers as property prices go up due to increasing cost of land and construction.

While the Indian textile industry presents numerous opportunities, it also faces several threats including supply chain disruption, price volatility, competition, changing consumer preferences, geopolitical uncertainty, etc. To mitigate these threats, businesses need to adopt proactive strategies focused on innovation, diversification, cost optimization, risk management, etc.

Risks and Concerns:

The management of the company identifies, reviews and develops a plan for reducing risks on an ongoing basis. The company has an effective framework for assessment and mitigation of the risk. Managing working capital cycle and keeping a close track of its inventory and receivables are pivotal to running business efficiently.

Internal Control Systems and their adequacy:

The Company has in place internal control systems commensurate with the size and nature of its business activities and to safeguard the interests of the company. The Board of Directors and Audit Committee are responsible for ensuring that the Internal Controls system laid down by the Company is adequate and operating effectively by reviewing at regular intervals. Internal Control system is in line with compliances requirement and expectations of business associates.

Research and Development:

The company has sound technical knowledge and competent resources in the various areas of business it operates in. Continuous product improvement and process optimization is being followed on a routine basis which helps it achieve operational efficiency and improved product profile.

Human Resources and Industrial Relations:

Human resources are at the centre of any entitys success. The Company continues to take good care of this valuable resource and provide them with a safe and excellent working environment. This enables it to attract, develop and retain the talent required for driving sustainable growth of the company. As on March 31, 2024, there are 239 permanent employees on the rolls of the Company. During the financial year under review the company has maintained peaceful and harmonious industrial relations.

Cautionary Statement:

Statements of Management Discussion and Analysis Report hereinabove contain certain forward-looking objectives, based on various assumptions on the Companys present and future business strategies and the environment in which we operate. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. The operations of the Company could be influenced by various factors such as domestic and global demand and supply conditions affecting sales volumes and selling prices of finished goods, input availability and cost, new regulations and Government policies, Tax Laws within the country and other factors like litigation and industrial relations of the Company.

	For and on behalf of the Board
	Chintan N. Parikh
Date: May 25, 2024	Chairman & Managing Director
Place: Ahmedabad	(DIN: 00155225)