Bombay Rayon Fashions Ltd Management Discussions

Industry Structure and Development

India s 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. India s textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both within India and across the world. India s textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country. 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 is the world s largest producer of cotton. Estimated production stood at 362.18 lakh bales during cotton season 2021-22 even after the impact of second wave of COVID 19 pandemic. India s textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY. Exports of readymade garments including cotton accessories stood at US$ 6.19 billion in FY22.

The impact of the Russia and Ukraine war on global cotton textile industrial chain is gradually expanding.

Opportunities & Threats Opportunities -

The textile industry in India is particularly robust due to the wide diversity of natural and synthetic fibers and yarns. Compared to sectors such as heavy equipment, vehicles, etc., the textile industry in India is technologically advanced and capital-intensive. Since the trend of industrialization in trade has grown prevalent in consumer goods sectors and labor-intensive industries, there are enormous opportunities in the textile sector. India is projected to be the second most attractive market by 2025, contributing up to US$ 121 billion, while China is projected to be the most attractive market, contributing up to US$ 378 billion. In 2017-2018, India has one of the fastest-growing economies, with a GDP growth rate of 7.2%. This increases the spending power of the general population and stimulates demand for textile sector goods. This expansion results in a vast array of manufacturing capacities for diverse items that may be shipped both inside India and beyond.

In addition, India has one of the most diverse textile industries, with hand-woven textiles on one end and capitalintensive mills on the other, resulting in a vast range of possibilities within the textile industry and also India has an advantage in relation to abundant availability of Raw Materials, presence of complete value chain as from fibre/ filament to garment/made-ups manufacturing are present, competitive cost of Manufacturing, availability of readymade infrastructure, Availability of Large Pool of Skilled & English Speaking Manpower, Large and Growing Domestic Market, Government Support

The supply chain gap developed due to this pandemic has added more weightage.

Threats-

Although there are numerous prospects and investments in the textile sector, similar to other industries, the textile business in India faces significant obstacles. The textile sector is under intense pressure as a result of the government s frequent policy changes at the national and state levels. The clothing and apparel are more costly due to the application of the GST.

The textile industry s lack of access to the newest and most advanced technologies, as well as its inability to fulfil global export market criteria, represents a further difficulty. In addition to these concerns, the Indian textile sector also confronts obstacles such as child labor, competition from neighbouring nations in the area of low-cost clothing, and personal safety regulations.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE</p>

The Company is engaged in the business of manufacturing and sale of textile accordingly this is the only single reportable segment.

OUTLOOK

To overcome the obstacles and accomplish the anticipated worldwide market objective, India s textile sector is required to make several modifications and apply some new practices to increase its competitiveness. One of the implementations to boost production includes a greater emphasis on technological upgrades and weaving capacity expansion. Additionally, state governments should provide clearance for effluent treatment facilities to elevate the commercial market in its entirety.

The Indian textile sector would thrive to tremendous heights if both the national and state governments provide adequate assistance to its small and large-scale players. In addition to educating their staff to suit the changing needs of the contemporary market, the Indian textile sector should also consider decreasing the levies placed on government-subsidized export.

Risks & Concerns

With respect to risks in relation to your company, at present Corporate Insolvency Resolution Process (CIRP) has been initiated in the Company.

After the year end, on 7th June, 2022, the Hon ble National Company Law Tribunal, Mumbai (NCLT) has admitted the petition filed by one of the operational creditor of the Company for initiation of Corporate Insolvency Resolution Process (CIRP) in the Company and Interim Resolution Professional was appointed by NCLT. One of the directors of the suspended Board Mr. Prashant Agrawal filed an appeal before Hon ble National Company Law Appellate Tribunal, New Delhi (NCLAT) which was dismissed by NCLAT by Order dated 15th July, 2022. The first meeting of Committee of Creditors (CoC) was held on 26th July, 2022. The CoC in its first meeting has considered and approved amongst other matters, the appointment of Resolution Professional (RP), Mr. Satish Kumar Gupta, replacing the present Interim Resolution Professional (IRP), Mr. Santanu T. Ray. NCLT vide its Order dated 4th August, 2022 has approved the appointment of Resolution Professional (RP).

Further, one of the company of the company is non-operational due to power cut on non-payment of dues.

Currently, Corporate Insolvency Resolution Process is ongoing, RP along with CoC will invite Resolution Plans for the Company for revival of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new/revised standard operating procedures. The Company s internal control system is commensurate with its size, scale and complexities of its operations. The Management of the Company actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE,

The Company is doing the business of weaving of fabrics and manufacturing of accessories for garments. The major business of manufacturing of finished fabrics was demerged by the Company during the FY 2020-21. The revenue generated from these businesses during the year under review is Rs. 83.08 crores. The second wave of COVID 19 pandemic had a major impact in Bangalore. The manufacturing unit had to suspend its operations at Bangalore unit for few months of beginning of FY 2021-22. The loss for the year has increased from Rs. 299.95 crores to Rs. 1147.20 crores which is mainly because of writing off of loss incurred by the company in value of obsolete & non- moving inventory and writing off of non- recoverable debts.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. The Company is committed to nurturing, enhancing and retaining top talent through superior Learning. This is a part of Corporate HR function and is a critical pillar to support the organizations growth and its sustainability in the long run. Total employees strength of the Company as on 31st March 2022 was 591