INDUSTRY STRUCTURE AND DEVELOPMENTS
Global Economic Outlook
Over the course of the past year, the global economy has experienced numerous
challenges in the form of geopolitical tension with the prolonged Russia-Ukraine conflict,
economic Challenges, rising interest rates, high inflation levels.
| Indian Economy Outlook |
India and China are expected to contribute over 50% to global growth in CY23.
Indias presidency of the G20 Summit in 2023 has significantly boosted its international
standing. |
The Indian economy remained remarkably resilient to global challenges in F.Y. 2022-23 -
making it the fifth largest economy globally in terms of nominal GDP. World Bank in its
economic outlook report notes that although significant challenges remain in the global
environment, India was one of the fastest growing economies in the world. Sectoral
analysis reveals that growth was driven by robust construction activity aided by increased
infrastructure investment both by the Central Government and State Governments, which
paved the way for large-scale employment opportunities. Indias digital infrastructure has
strengthened in the last few years and the widespread adoption of real-time digital
payments is estimated to have unlocked 0.56% of GDP.
Despite high inflation, the Indian economy has achieved GDP growth of 7.2% in F.Y.
2022-23. According to the International Monetary Fund, Indian economy is projected to
deliver robust growth of 5.9% for 2023, highest amongst the emerging economies, driven by
strong domestic demand and healthy consumption growth supported by an improvement in
labour market conditions, increasing consumer confidence, an expected recovery in rural
demand and higher purchasing power with moderating of inflation. To drive the virtuous
cycle of infrastructure investment and job creation, the Union Government has considerably
increased the capital expenditure outlay to Rs.10 Lakh Crore, which is 33% higher than the
previous year. The increase in infrastructure spending, especially in tier II and tier III
cities is anticipated to have a substantial effect on the Indian economy, generating new
employment opportunities and stimulating growth.
Overall, the demand conditions in India remain conducive to supporting economic
activity. India faces the coming financial year with confidence imparted by underlying and
overall macroeconomic stability, while being on the alert against geo-political and
geo-economic risks.
Economic Survey: 2021-2022: Textile Sector
The Textile industry is one of the countrys most significant sources of employment
generation, with an estimated 4.5 crore people directly engaged in this sector, including
a large number of women and the rural population. To boost the production capacity, the
government launched the Textile PLI Scheme with an approved outlay of ?10,683 crore over
five years starting from 1st January 2022 to promote investments and increase the
production of Man-Made Fibre (MMF) Apparel, MMF Fabrics and Products of Technical
Textiles. The government approved the setting up of seven PM Mega Integrated Textile
Region and Apparel (PM MITRA) Parks which will reduce logistics costs and improve the
competitiveness of Indian Textile. Textile sector is one of the sector in the list of 27
sectors under Make in India 2.0 to further enhance Indias integration in the global
value chain.
Textile Industry
The industry seems to be headed towards a positive steady growth phase, after a period
of turbulence. The Textile industry in India is a vast and dynamic sector, playing a
significant role in the countrys economy. With a rich history of textiles that dates back
millennia, India continues to be a major producer and exporter of fabrics, clothing, and
home textiles. At present, India holds a 4% stake in the worldwide trade of textiles and
apparel. It is predicted that Indias textile and apparel sector will expand at a rate of
10% per annum from 2019-20 to 2025-26, taking the industrys value to US$ 190 billion.
The Indian textile industry was always known for its employment generation
capabilities. Direct Employment in Textiles sector is estimated at 45 million. The textile
company is dedicated to reducing waste and promoting sustainability through its recycling
and upcycling initiatives.
Indian Apparel Industry
Indias textiles sector is one of the oldest industries in the Indian economy, dating
back to several centuries. The industry is extremely varied, with hand-spun and hand-woven
textiles sectors at one end of the spectrum, with the capital-intensive sophisticated
mills sector at the other end. The decentralised power looms/ hosiery and knitting sector
form the largest component of the textiles sector. The close linkage of textiles industry
to agriculture (for raw materials such as cotton) and the ancient culture and traditions
of the country in terms of textiles makes it unique in comparison to other industries in
the country. Indias textiles industry has a capacity to produce a wide variety of
products suitable for different market segments, both within India and across the world.
The Key Advantages of the Indian Textile Industry
> India is the worlds second-largest producer of textiles and garments. It is also
the sixth-largest exporter of textiles spanning apparel, home and technical products.
> It is the industry in the country which is self-reliant and complete in the value
chain i.e. from raw material to highest value added products;
> The Indian textile and apparel industry is expected to grow at 10% CAGR from
2019-20 to reach US$ 190 billion by 2025-26.
> India has a 4% share of the global trade in textiles and apparel.
> The Textile and Apparel market is poised to grow, led by boost in demand and the
government support in form of attractive schemes such as Production Linked Incentive
(PLI), Mega Investment Textile Parks (MITRA);
> Design and fashion capabilities are key strengths that will enable Indian players
to strengthen their relationships with global retailers and score over their Chinese
competitors. Production facilities are available across the textile value chain, from
spinning to garments manufacturing. The industry is investing in technology and increasing
its capacities which should prove a major asset in the years to come;
> Large Indian players such as Arvind Mills, Welspun India, Vardhman textiles,
Raymond, Trident have established themselves as quality producers in the global market.
This recognition would further enable India to leverage its position among global
retailers. India has gathered experience in terms of working with global brands and this
should benefit Indian vendors;
> Competitive advantage: Abundant availability of raw materials such as cotton,
wool, silk and jute. Outlook
The revenue generated by the global apparel market is steadily increasing over the
course of the observed time period. The global apparel market grew from $610.12 billion in
2022 to $652.94 billion in 2023 at a compound annual growth rate (CAGR) of 7.0%. The
Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19
pandemic, at least in the short term. The war between these two countries has led to
economic sanctions on multiple countries, a surge in commodity prices, and supply chain
disruptions, causing inflation across goods and services and affecting many markets across
the globe. The apparel market is expected to grow to $830.69 billion in 2027 at a CAGR of
6.2%.
The Indian textiles market is expected to be worth more than US$ 209 billion by 2029
The apparel market encompasses every kind of clothing, from sportswear to business
wear, from value clothing to statement luxury pieces. After difficulties in 2020, during
the coronavirus pandemic, when sales across the apparel industry took a hit, the global
demand for clothing and shoes is set to rise again. The countries that account for the
majority of this apparel demand are the United States and China, both generating
substantially higher revenues than any other country. It is perhaps no surprise that the
same two countries play a significant role in international trade. China leads the
rankings for the highest value of apparel exports. The U.S. is second only to the EU in
the value of apparel imports. India is one of the country in Top 5 Global Textile Leaders
List.
Increasing demand for online shopping is expected to help the apparel manufacturing
market grow. Manufacturers can now sell their products on a larger platform than before,
which will increase their customer base geographically driving the growth of the apparel
manufacturing market. In countries, such as India, for instance, e-commerce portals have
boosted the sales of traditional garments by giving larger exposure to producers who were
confined to one geography where the weaving community was located. Along with
digitalization, another key apparel industry trend is sustainability. More consumers are
concerned about the future of the planet and are putting pressure on fashion brands that
do not have ecofriendly practices
| Market Size |
India is pioneering sustainable textiles contributing to lesser carbon footprint
and promoting circular economy: Union Textile Minister, Shri Piyush Goyal Source:
Ministry of Textile |
India has a share of 4.6% of the global trade in textiles and apparel. The sector is
also the second largest provider of employment in India, after agriculture. The sector has
perfect alignment with Governments key initiatives of Make in India, Skill India, Women
Empowerment and Rural Youth Employment. India is the 3rd largest exporter of Textiles
& Apparel in the world. Indias textiles and clothing industry is one of the mainstays
of the national economy. India has a share of 4.6% of the global trade in textiles and
apparel. The Indian textile and apparel industry is expected to grow at 10% CAGR from
2019-20 to reach US$ 190 billion by 2025-26.
The consumption of cotton is approximately 316 lakh bales (170 kg each) per year. India
occupies first position in the world in cotton acreage with around 119.10 lakh hectares
under cotton cultivation which is around 36% of the world area of 326.36 lakh hectares.
India has emerged one of the largest producers, consumers and exporters of cotton in the
World. The share of textile and apparel (T&A) including handicrafts in Indias total
merchandise exports stood at a significant 10.5% in 2021-22. India has a share of 4.6% of
the global trade in textiles and apparel.
Government Initiatives
The Indian government has come up with several export promotion policies for the
textiles sector. It has also allowed 100% FDI in the sector under the automatic route.
Other initiatives taken by the Government of India are:
In February 2023, the union government approved 1,000 acres for setting up a textile
park in Lucknow.
In February 2023, according to the Union Budget 2023-24, the total allocation for the
textile sector was Rs.4389.24 crore (US$ 536.4 million). Out of this, Rs.900 crore (US$
109.99 million) is for Amended Technology Upgradation Fund Scheme (ATUFS), Rs.450 crore
(US$ 54.99 million) for National Technical Textiles Mission, and Rs.60 crore (US$ 7.33
million) for Integrated Processing Development Scheme.
In December 2022, a total of 44 R&D projects were started, and 23 of them were
successfully completed. 9777 people were trained in a variety of activities relating to
the silk industry.
In December 2022, a total of US$ 75.74 million (Rs.621.41 crore) in subsidies was
distributed in 3,159 cases under the Amended Technology Upgradation Fund Scheme, with
special campaigns held in significant clusters to settle backlog cases.
In December 2022, a total of 73,919 people (SC: 18,194, ST: 8,877, and Women: 64,352)
have received training, out of which 38,823 have received placement under SAMARTH.
The establishment of 7 (seven) PM Mega Integrated Textile Region and Apparel (PM MITRA)
Parks with a total investment of US$ 541.82 million (Rs.4445 crore) for the years up to
2027-28 was approved by the government.
In the academic year 2022-23, the opening of a new campus of the National Institute of
Fashion Technology (NIFT) in Daman. Moreover, new campus buildings are being constructed
in Bhopal and Srinagar.
Under the National Technical Textile Mission (NTTM), 74 research projects for
speciality fibre and technical textiles valued at US$ 28.27 million (Rs. 232 crore) were
approved. 31 new HSN codes have been developed in this space.
In November 2022, Tamil Nadu Chief Minister Mr. M. K. Stalin announced the
establishment of a "Textile City" in Chennai as part of Tamil Nadus strategy to
become a major participant in the global textile industry. Additionally, the state will
build a 1,500-acre textile park in the Virudhunagar district, for which SIPCOT will buy
land.
In June 2022, Minister of Textiles, Commerce and Industry, Consumer Affairs & Food
and Public Distribution, Mr. Piyush Goyal, stated that the Indian government wants to
establish 75 textile hubs, similar to Tiruppur, which will greatly increase employment
opportunities while promoting the export of textile products and ensuring the use of
sustainable technology.
In June 2022, Amazon India signed a MoU with the Manipur Handloom & Handicrafts
Development Corporation Limited (MHHDCL), a Government of Manipur entity, to encourage the
development of weavers and artisans throughout the state.
In June 2022, the Kerala government announced that it would provide free training to
1,975 candidates under the SAMARTH scheme of the textile industry.
The Sustainable Textiles for Sustainable Development (SusTex) project by the United
Nations Climate Change entity enhances the employment and working circumstances of textile
artisans while promoting the sustainable production and use of environmentally friendly
textiles.
In May 2022, Minister of Micro, Small and Medium Enterprises, Mr. Narayan Rane,
inaugurated the Center of Excellence for Khadi (CoEK) at NIFT, Delhi. In order to produce
innovative fabrics and apparel that will meet the needs of both domestic and foreign
consumers, the CoEK will seek to introduce the newest designs and adopt procedures that
adhere to international standards.
In April 2022, Minister of Commerce and Industry, Consumer Affairs, Food and Public
Distribution and Textiles, Mr. Piyush Goyal, said that new Economic Cooperation and Trade
Agreements with Australia and the UAE would open infinite opportunities for textiles and
handloom. Indian textile exports to Australia and the UAE would now face zero duties, and
he expressed confidence that soon Europe, Canada, the UK and GCC countries would also
welcome Indian textile exports at zero duty.
Opportunities
The Indian textile industry is in a much stronger place than it was at any point of
time in the last half a dozen decades. The raise in productivity, increase in exports,
replication of investment during few years under Technology Upgradation Fund Scheme
(TUFS), clearly put forward that the Indian textile manufacturing industry has capability
in facing the challenges of modern economic system. Its the time, to strengthen the
Company through fuller exploiting of available opportunities in both the domestic and
worldwide markets which are summarized here below:
I. Growth in Domestic Market: The domestic textiles and apparel market in India is
one of the emerging markets in the world. The Indian textile and clothing industry had
been one of the industries to bounce back in the fastest mode, during the post pandemic
scenario.
II. Increased retail industry and malls provide huge opportunities: The growth in
organized retailing is expected due to economic growth, changing lifestyle of the people
and globalization. Apart this, metropolises and small towns are perceiving a major move in
consumer preferences and life style, and have subsequently developed as eye-catching
markets for the Company.
III. Increased disposal income and purchasing power of Indian consumers: The
patterns of consumer choices have changed and a new middle class has originated, which is
developing at a fast rate. Several studies have estimated that in the next decade, middle
class would be the predominant part of the Indian population. This class covers major
customer of the product of the Company.
IV. Great investment and FDI opportunities: As the Indian textile industry
appearances for faster development, many companies across the world showing interest in
investing their funds in India.
Threats
I. Competition from other companies: The Indian cotton textile industry has been
facing increasing competition in world markets. This is largely due to low productivity
and high cost of production and consequently high prices of Indian cotton cloth textiles.
II. Rising input costs: Monetary value of inputs indicating the huge cost increase,
which in yield would be a problem of increased production cost. Prices of cotton has been
increased around 30%-40%. This has created a critical situation for the cotton textile
industry. The business is affecting due to faster hike in raw material costs.
III. Low cost imported fabrics: Indian textile manufacturers face the force per
unit area of cheap import of synthetic yarn from other states.
IV. Other threats faced by the Company: Apart from those mentioned above there are
many other threats which are faced by the Company. Following is the list of other threats:
1. High Transportation Cost
2. Increase in labour
3. Cost Risk of cyber-attack
4. Frequent changes in consumer sentiments & preferences
RISK AND CONCERNS
Risks are inherent in all businesses. The challenge for the Company is to effectively
and responsibly manage and control the risks on a sustained basis to enhance returns.
| Industry Risk |
Raw Material Risk |
Product Substitution Risk |
| The demand for textiles is perennial and major fluctuations occur largely due to
changes in overall economic growth and manufacturing competitiveness. However, the
business is cyclical on the supply side considering the quantum of capital investment
involved in capacity expansion. This makes it necessary for the Company to incur large
capital expenditure at the right time. |
The Company is exposed to the vagaries of nature, with cotton being the principal raw
material for fabric manufacturing. |
Man Made Fibers are a direct substitute for cotton textiles. |
| Risk Mitigation: |
Risk Mitigation: |
Risk Mitigation: |
| The Company has consistently invested funds in its manufacturing plant to bring them
in line with the latest technology. This prudence is reflected in the enhanced market
presence due to higher production and improved quality at a lower cost of production. |
Procurement of raw cotton at right price remains crucial. The Company covers its
cotton requirements from time to time through the domestic and international markets. The
Company also seeks out alternative cotton varieties and blends to increase its raw
material basket. Thus, this enables an in built risk mitigation for cotton price
fluctuation. |
The Company specializes in producing the best quality cotton fabrics, which are at par
with the highest global quality standards and has created a niche positioning with
products which cater to high-end customers. The company also makes cotton shirts. |
Discussion on Financial Performance with Respect to Operational Performance On
Standalone basis
• The Companys Total Revenue was Rs.12242.92 Lakh in 2022-23 as compared to
Rs.8038.03 Lakh in the previous year, an increase of about 34.34%.
• Earnings Before Interest, Depreciation, Taxes, Amortizations and Exceptional
Items (EBIDTA) was Rs.554.71 Lakh as compared to Rs.676.96 Lakh, decrease of about 18.05%.
• Profit before Tax was Rs.339.58 Lakh as compared to Rs.464.53 Lakh in the
previous year, decrease of about 26.90%.
• The Net Profit for the year was Rs.120.18 Lakh as compared to Rs.460.10 Lakh in
the previous year, decrease of about 73.88%.
• Total comprehensive income was Rs.122.66 Lakh as against Rs.446.09 Lakh in the
previous year, an increase of about 72.50%.
On Consolidated basis
• The Companys Total Revenue was Rs. 11753.29 Lakh in 2022-23 as compared to
Rs.8350.35 Lakh in the previous year, an increase of about 28.95%.
• Earnings before Interest, Depreciation, Taxes, Amortizations and Exceptional
Items (EBIDTA) was Rs.572.50 Lakh as compared to Rs.715.84 Lakh, decrease of about 20.02%.
• Profit before Tax was Rs.351.58 Lakhs as compared to Rs.502.46 Lakh in the
previous year, decrease of about 30.03%.
• The Net Profit for the year was Rs.115.11 Lakh as compared to Rs.493.27 Lakh in
the previous year an decrease of about 76.66%.
• Total comprehensive income was Rs.117.44 Lakh as against Rs.480.42 Lakh in the
previous year, decrease of about 75.55%.
The detailed Financial and Operational Performance present in notes to accounts for the
financial year 2022-23 which forms a part of this Annual Report.
Details of Changes in Key Financial Ratio & Return on Net Worth
The key financial ratios of the Company where there has been significant change (25% or
more) and change in Return on Net Worth are summarized below along with detailed
explanation:
| Particulars |
2023 (%) |
2022 (%) |
% of Change |
Detailed Explanation for significant change |
| Debtors Turnover |
5654.51 |
6,190.95 |
8.67 |
- |
| Inventory Turnover |
3680.51 |
2,377.91 |
35.39 |
On account of company performance. |
| Current Ratio |
2.03 |
2.67 |
0.64 |
- |
| Debt Equity Ratio |
0.36 |
0.32 |
0.04 |
- |
| Interest Coverage Ratio |
5.31 |
105.51 |
|
- |
| Operating Profit Margin (%) |
1.00 |
6.00 |
|
- |
| Net Profit Margin (%) |
0.98 |
6.00 |
|
- |
| Return on Net Worth |
1.40 |
0.05 |
|
- |
Human Resource
The Company takes pride in the commitment, competence and dedication shown by its
employees in all areas of business. The companys belief is that its people are the
primary source of its competitive advantage
and consistently puts emphasis on Human Resources Development, which remains vital and
strategic to the company. The Company is committed to nurturing, enhancing and retaining
talent through Learning & Organizational Development to support the organizations
growth and its sustainability in the long run. Cordial employee relations, in keeping with
tradition, are being pursued vigorously. Industrial relations have continued to be
harmonious throughout the year. This has been possible by creating a performance driven
culture against the backdrop of care and concern for all employees. Objective appraisal
systems based on Key Result Areas (KRAs) are in place.
The total numbers of employees of the Company as on March 31, 2023 was 349.
Internal Control Systems & their Adequacy
Sound internal control systems are a prerequisite for building and enhancing
shareholder value in the long run. The Company has a sound system of internal controls
commensurate with the size of the Company and the nature of its business to ensure that
all assets are safe guarded and protected against loss from unauthorized use or
disposition and that transactions are authorized and recorded reported correctly and
adequately. The Companys internal control are supplemented by internal audits, review by
management and documented policies, guidelines and procedures. The internal control is
designed to ensure that financial and other records are reliable for preparing financial
information and for maintaining accountability of assets.
The Audit Committee of the Board of Directors actively reviews the adequacy and
effectiveness of internal controls systems and suggests improvement for strengthening
them.
Cautionary Statement
Statements in this report on Management Discussion and Analysis describing the
Companys objectives, projections, estimates, expectations or predictions maybe forward
looking statements within the meaning of applicable laws or regulations. These statements
are based on certain assumptions and reasonable expectation of future events. Actual
results could however differ materially from those expressed or implied. Important factors
that could make a difference to the Companys operations include global and domestic
demand- supply conditions, finished goods prices, raw materials cost & availability,
changes in Government regulations and tax structure, economic developments within India
and the Countries with which the Company has business contacts and other factors such as
litigation and industrial relations. The Company assumes no responsibility in respect of
the forward looking statements herein which may undergo changes in future on the on the
basis of subsequent developments, information or events.
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