Bombay Dyeing & Manufacturing Company Ltd Management Discussions

ANNEXURE B to Directors Report

The world economy faces divergent near-term growth prospects. Emerging market economies led by Asia are poised to outperform the rest of the world. The Indian economy recorded stronger than expected growth in FY 2023-24, underpinned by a shift from consumption to investment. The governments focus on capital expenditure (capex) is beginning to attract private investment.

The high visibility of structural demand and healthier corporate and bank balance sheets will likely be the galvanising forces for growth going forward. Even as inflation is on the ebb with broad-based softening of core inflation. The Indian economy is experiencing a conducive macroeconomic configuration that can be its launching pad for a step-up in its growth trajectory.

Technology is offering new growth opportunities to seize by becoming more competitive and efficient. The time has come for the country to build world class infrastructure, strong manufacturing bases, a high- quality labour force and global leadership in services to convert these favourable factors into opportunities and strengths over the next few decades.

BOMBAY REALTY

Industry Structure and Developments

Post Pandemic there has been a significant y-o-y increase in sales across all major cities in India with The Mumbai Metropolitan Region (MMR) being the front runner. This resurgence highlights the regions robust recovery and its dominant share in the national real estate landscape. The MMR region, Indias most valued real estate market, is currently experiencing a surge in end-user demand, promising sustained sales momentum. People are looking for upgradation of homes in the aftermath of the pandemic with a inclination towards larger premium homes. After a long period, property prices have started moving forward. Due to increase in transparency and RERA guidelines, the consumers are well protected leading to all time high in consumer confidence in builders. With the growing infrastructure projects including the construction of new highways like Coastal road, Worli-Sewri connector, metro lines and other transport links, the MMR region will continue to attract professionals from other parts of the country leading to an increase in demand for residential apartments. The Company expects a positive trend for residential real estate market in the upcoming years.

Opportunities and Threats

The real estate market in India and Mumbai continues to do well. With the growing population in the city, improved infrastructure and increase in affordability index, there is a huge demand for appropriate sized homes in good locations. Our land parcel is well located to take advantage of the positive trends in residential real estate.

There have been significant amount of new project launches and the trend is going to continue into the new financial year also. A situation of surplus supply in the residential market could put pressures on the pricing. Further, the global political turmoils could also dampen the spirit of the market and have a direct impact on demand and pricing.

Outlook

With zero debt obligations, your Company is well placed in to enjoy the benefits of a large contiguous land parcel, giving it a significant advantage over other real estate players. The strategic location of the site, being well connected with the commercial hub of Central Mumbai and with the improvements in infrastructure developments such as the Worli Sewri Link Road (1.5 kms from the site) and the proposed new Mumbai International airport, will add more value to the site.

Risks and Concerns

While overall there is increased buoyancy in the residential real estate market, there are continuing concerns of increasing construction costs, liquidity issues and other regulatory issues which could impact the market. Further, concerns over rising property prices and project execution risks continue to remain. With the improved infrastructure across the city including the suburbs and neighboring cities of Navi Mumbai, new micro markets are being developed which could push consumers into buying homes in these new micro markets making an impact on the overall demand in the main Island City.

HOME & YOU

Industry Structure and Developments

India is the worlds second-largest producer of textiles and garments. It is also the fifth-largest exporter of textiles spanning apparel, home and technical products and accounts for almost 7 percent of global home textiles trade. It is also one of the top suppliers to the US which is the worlds biggest home textile-consuming market. Increasing efforts in quality improvement, innovations through R&D programs, and other preferential value-added features have helped Indias home textile products become more popular in the global market. The superior quality of Indian home textiles makes companies in India a leader in the US and the UK, contributing two-thirds to their exports. India enjoys a comparative advantage in terms of skilled manpower and in cost of production, relative to major textile producers.

The textiles and apparel industry contributes 2.3% to the countrys GDP, 13% to industrial production and 12% to exports. The textile industry in India is predicted to double its contribution to the GDP, rising from 2.3% to approximately 5% by the end of this decade.

Opportunities and Threats

Our brand is the identity of Home Textile in India. Bombay Dyeing is a household name for every Indian from urban to the rural population. There are enormous opportunities in product and design innovations to address the changing preferences of young vibrant India.

While the industry continues to be influenced by wild swings in commodity prices, it is also facing major challenges in the form of hike in fuel price, increasing wages and raw material costs. Key threats for the brand continue to be the constant inflow of cheaper alternatives from the unorganized sector as well as inflow of low priced material from neighbouring countries.

Outlook

The demand for categories like Bed linen, Bath linen and Top of the Bed (TOB) will continue to see the good growth in the coming years. Consumers are already back to shopping with a renewed positivity. Post Covid times consumer spending has increased towards home fashion products and consumer wants to have luxury living and wish to spend money on good quality linen products -- Bombay Dyeing being a strong home fashion brand consumers aspire to use our products which gives us lot of opportunity to expand our products in Retail Division.

Risks and Concerns

The price of cotton has risen, which is a major concern for the textile industry. Retail division has taken necessary steps to reduce the credit risk and increased the distribution. The Company is currently operating with a lean cost business model.

POLYESTER BUSINESS

Industry Structure and Developments

Your Company is one of the seven producers of Polyester Staple Fibre (PSF) in the country with a market share of around 12%. While the market leader is fully vertically integrated, the other producers, including the Company are stand-alone Polyester manufacturers. New capacities added during last six years have resulted in substantial surplus capacity in the country and increased competition for the Company.

The overall polyester industrys capacity utilization remained around 80%. The Companys utilisation remained comparatively higher at 86%. Impact on demand due to geopolitical events and inflation/recession in western countries posed a major challenge to increase/maintain the sales volume and capacity utilization for the industry while also adversely affecting the margins.

In the backdrop of volatile crude oil prices the prices of petrochemicals PTA and MEG, the raw materials for your Company remained volatile. Domestic availability of raw materials remained tight and industry had to depend on imports to sustain optimum operating rates.

Recycled polyester has been gaining market share due to price differential. However, a wide range of fibre produced by your Company is of superior quality and has wider usage compared to such recycled fibre. Therefore, despite competition from such cheaper fibre, your Company is able to maintain the market share and higher capacity utilisation rate. However, we expect that with increasing awareness regarding reducing the usage of PET Bottles there may not be enough raw material available for recycled fibre over the following years. This is expected to benefit virgin fibre producers like your Company.

Opportunities and Threats

While the year 2023-24 has been a very tough year there are many positive developments for the year 2024-25 including Governments control on inferior quality products imported into India earlier that are now being checked through Quality Control Orders by Bureau of Indian Standards. This will certainly give strength to domestically produced better quality products. The impact of the two wars in Europe and Asia is also expected to fade off soon during the year 2024-25 thereby giving much needed respite to the Textile Industry. The new energy saving initiatives by your Company are also expected to give the much desired strength to PSF Division.

Outlook

We expect crude oil prices to largely remain range bound now due to global state of economy and sea freight that posed challenges due to rising trend owing to war in Asia has also started to fall during the year 2024-25 and shall definitely help our exports. The world demand in textiles too is seeing a trend of shifting from China to other Asian countries including India that is also supposed to help us.

Risks and Concerns

Prices of raw materials as well as energy costs, the two major input costs for the PSF division are significantly dependent on crude oil price. Changes in oil prices could lead to impact on margins and profitability. With the main input costs based in US$, fluctuations in the Indian Rupee/US$ exchange rate could impact the business and margin. Supply and price of cotton crop in India and globally could have an impact on the demand of PSF. Increased competition due to surplus capacity in the country has resulted in pressure on margins due to price undercutting in the market. Any future wars or delay in an end to the two existing wars is also an area of concern.

SEGMENT-WISE PERFORMANCE

Segment-wise performance together with a discussion on operational and financial performance has been covered in the Directors Report which should be treated as forming part of this Management Discussion and Analysis Report.

INTERNAL CONTROLS

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

M/s. PKF Sridhar Santhanam LLP, Chartered Accountants, were the Internal Auditors of the Company for FY 2023-24. The reports and findings of the internal auditors and the internal control system are periodically reviewed by the Audit Committee. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the internal audit report, process owners undertake corrective action in the respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

HUMAN RESOURCES

At Bombay Dyeing, employees are its prime assets and a vital key to its success. The Company is committed to creating a professional culture to nurture and enable people to grow in their careers alongside Companys success. The Company constantly strives to strengthen its manpower in alignment with the business needs and continue to engage them through various initiatives in the realm of learning & development opportunities, reward & recognition, employee engagement activities and career growth.

KEY FINANCIAL RATIOS

The Company has identified the following ratios as key financial ratios:

Sr. No. Particulars	2023-24	2022-23	Explanation for Significant Change
1 Debtors Turnover Ratio (times)	10.60	9.52	Ratio has improved as there is substantial reduction in receivables on account of better collections.
2 Inventory Turnover Ratio (times)	2.51	1.84	Ratio has improved due to lower year end Inventory on account of sale of Flats and FSI in Real Estate segment.
3 Interest Coverage Ratio (times)	12.18	0.07	Improvement on account of lower interest due to prepayment of all loans during the year.
4 Current Ratio (times)	2.00	1.03	Ratio has improved due to repayment of Current Borrowings.
5 Debt Equity Ratio (times)	0.00	*	Debt Equity ratio is NIL as the Company has repaid all its debt during the current year.
6 Operating Profit Margin (%)	1.80	1.29	Margin has improved due to improved profitability of BR and Textile division.
7 Net Profit Margin (%)	174.62	(19.32)	Net profit margin of current year is better than previous year due to gain on sale of Land at Worli
8 Return on Net Worth (%)	159.70	*	Return on Net worth of current year is better than previous year due to gain on sale of Land at Worli

*Debt Equity Ratio and Return on Net worth (%) are not calculated as the equity value is negative

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulation, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.