BSL Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

Global Economy

Global growth, estimated at 3.2 percent in 2023, is projected to continue at the same pace in 2024 and 2025. The projection for 2024 is revised up by 0.1 percentage point from the January 2024 WEO Update, and by 0.3 percent- age point with respect to the October 2023 WEO forecast. Nevertheless, the projection for global growth in 2024 and 2025 is below the historical (2000-19) annual average of 3.8 percent, reflecting restrictive monetary policies and withdrawal of fiscal support, as well as low underlying productivity growth. Advanced economies are expected to see growth rise slightly, with the increase mainly reflecting a recovery in the euro area from low growth in 2023, whereas emerging market and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences.

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now at 3.1 percent is at its lowest in decades.

Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability.

The recent conflict in the Middle East has heightened geopolitical risks. Global cooperation is critical to address the issues of high debt, climate change, trade fragmentation, and food insecurity and conflict. Across emerging market and developing economies (EMDEs), limited fiscal space highlights the need to improve spending efficiency. Decisive policy action is also needed to encourage a sustained acceleration in investment.

Coal and natural gas prices are expected to continue declining from their earlier peaks, by 25.1 percent for coal and 32.6 per- cent for natural gas in 2024, with the gas market becoming increasingly balanced on account of new supply, dampened demand, and high storage levels. The forecast for nonfuel commodity prices is broadly stable in 2024, with prices for base metals expected to fall by 1.8 percent, on account of weaker industrial activity in Europe and China.

In emerging market and developing economies, growth is expected to be stable at 4.2 percent in 2024 and 2025, with a moderation in emerging and developing Asia offset mainly by rising growth for economies in the Middle East and Central Asia and for sub-Saharan Africa. Low-income developing countries are expected to experience gradually increasing growth, from 4.0 percent in 2023 to 4.7 percent in 2024 and 5.2 percent in 2025, as some constraints on near-term growth ease.

Growth in emerging and developing Asia is expected to fall from an estimated 5.6 percent in 2023 to 5.2 percent in 2024 and 4.9 percent in 2025, a slight upward revision compared with the January 2024 WEO Update. Growth in China is projected to slow from 5.2 percent in 2023 to 4.6 percent in 2024 and 4.1 percent in 2025 as the positive effects of one-off factors including the post pandemic boost to consumption and fiscal stimulus ease and weakness in the property sector persists. Growth in India is projected to remain strong at 6.8 percent in 2024 and 6.5 percent in 2025, with the robustness reflecting continuing strength in domestic demand and a rising working-age population.

Growth in India is projected to remain strong at 6.8 percent in 2024 and 6.5 percent in 2025, with the robustness reflecting continuing strength in domestic demand and a rising working-age population.

Indian Economy

• The projected GDP growth for India in FY24 is expected to surpass 7.2%.

• The economy is expected to expand from about $3.7 trillion this year to $5 trillion in three years, making it the worlds third- largest, and could even reach $7 trillion by 2030.

• India has established itself as the worlds third-largest fintech economy, ranking just behind the USA and the UK.

• Initiatives such as the Skill India Mission, Start-Up India, and Stand- Up India have contributed to an increase in female participation in human capital formation.

• The overall Gross Enrolment Ratio (GER) has experienced substantial growth, more than doubling from 24.5% to 58.2% between FY05 and FY22.

• India has solidified its position as the worlds third-largest fintech economy, following only the USA and the UK, and has surpassed Hong Kong to claim the fourth spot in global stock markets. This success is credited to both domestic and international investor interest, along with sustained IPO activity.

• Digital payment systems like UPI aided the growth of e-commerce, with a projected CAGR of 16% between 2022 and 2026.

• After the pandemic, there has been a recovery in housing prices, with the average annual growth increasing from 2.3% in FY22 to 4.3% in H1 of FY24.

• The Indian corporate bond market has experienced substantial growth, doubling from Rs.43 lakh crore in FY24 to a projected Rs.100-120 lakh crore in FY30, according to CRISIL.

• As per Advance Estimates (AE), the Indian economy is expected to grow at 7.3 per cent for the year ending March, 2024.

• Per Capita Net National Income of India at current prices is estimated at Rs.1,85,854 for the FY 2023-24.

• The highest contributing sectors to the growth rate of FY 202324 are construction, financial services, real estate, electricity, gas, water supply etc. and Mining & quarrying.

• The Indian economy is on track to hit US$5 trillion by 2027 on the strength of development of the financial sector and the countrys demographic advantage as per the Reserve Bank of India (RBI).

Global Textile Industry

The textile market size has grown strongly in recent years. It will grow from $638.03 billion in 2023 to $689.54 billion in 2024 at a compound annual growth rate (CAGR) of 8.1%. It is valued at USD 1250083.65 million in 2023 and is expected to expand at a CAGR of 3.98% during the forecast period, reaching USD 1579729.67 million by 2031.The growth witnessed in the historical period can be ascribed to factors such as the expansion of the global population, heightened demand for man-made fibers, government initiatives supporting the textile industry, robust economic growth in emerging markets, and the implementation of restrictions on plastic usage.

The textile industry worldwide has been experiencing a crisis for several years. When visiting major European and global exhibitions, you cannot deny the fact that production is gradually shifting from Europe to Asia. The average order backlog has stabilized around 2 months since July 2023, with no change in January 2024, while capacity utilization remained at the lowest level recorded (67 percent), reflecting a cautious production outlook. Concerns over weakening demand in the global textile value chain have decreased, with a drop in respondents citing it as a main concern to 67 percent in January 2024, the lowest since May 2023. Despite this weakening demand, the phase has led to reduced rather than cancelled orders, a departure from early pandemic responses. Inventories in the textile value chain are deemed average by 57% of participants, with South Americans reporting higher levels and garment producers noting the lowest inventories, indicating a nuanced view of the current market conditions.

The textile market size is expected to see strong growth in the next few years. It will grow to $903.45 billion in 2028 at a compound annual growth rate (CAGR) of 7.0%. The anticipated growth in the upcoming period can be attributed to factors such as the continued increase in global population and urbanization, the rapid expansion of e-commerce, heightened expenditure on leisure activities, the growing retail penetration, increased internet accessibility and smartphone usage, and a rising preference for contactless delivery solutions. Notable trends expected in the forecast period include a shift towards adopting digital textile printing inks, a focus on utilizing non-woven fabrics, an emphasis on the use of organic fibers, a spotlight on sustainable fibers, integration of blockchain technology into manufacturing processes, adoption of digital platforms for textile supply chain management, collaboration with technology companies to design and develop smart fabrics, investment in robotics and automation, incorporation of artificial intelligence, and emphasis on partnerships and collaborations to foster innovation in product development.

Indian Textile Industry MARKET SIZE

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 4.6% share of the global trade in textiles and apparel. Moreover, India is the worlds 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$ 65 billion by FY 2026.

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.

The Indian Medical Textiles market for drapes and gowns is around US$ 9.71 million in 2022 and is expected to grow at 15% to reach US$ 22.45 million by 2027.

The Indian composites market is expected to reach an estimated value of US$ 1.9 billion by 2026 with a CAGR of 16.3% from 2021 to 2026 and the Indian consumption of composite materials will touch 7,68,200 tonnes in 2027.

India is the worlds largest producer of cotton. In the first advances, the agriculture ministry projected cotton output for 2023-24 at 31.6 million bales. According to the Cotton Association of India (CAI), the total availability of cotton in the 2023-24 season has been pegged at 34.6 million bales, against 31.1 million bales of domestic demand, including 28 million bales for mills, 1.5 million for small-scale industries, and 1.6 million bales for non-mills. Cotton production in India is projected to reach 7.2 million tonnes (~43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally.

INVESTMENT

Total FDI inflows in the textiles sector stood at US$ 4.34 billion between April 2000-September 2023. The textile sector has witnessed a spurt in investment during the last five years.

GOVERNMENT INITIATIVES

• DS Groups luxury menswear division, Brioni inaugurates its first boutique in India in November 2023.

• In November 2023, Reliance Foundation launched the first Swadesh handicrafts store in Hyderabad, aimed at supporting and promoting Indian craftwork.

• Industry bodies to host the largest global mega textiles event, Bharat Tex 2024 from February 26-29, 2024, in New Delhi. According to Union Minister, Mr. Piyush Goyal, Bharat Tex 2024 Expo is a testament to Indias commitment to becoming a global textile powerhouse.

• In September 2023, the Khadi and Village Industries Commission signed 3 MoUs to promote Khadi Products.

• In September 2023, Grasim Industries plans to open nearly 120 retail stores over the upcoming 2 years, by expanding its footprint in smaller cities and towns.

• In September 2023, Reliance Retail Ventures Ltd. (RRVL) announced the acquisition of Ed-a-Mamma for a 51% stake.

• In September 2023, Shadowfax inaugurated a 1.5 lakh sq. ft. fulfilment centre in Surat with 10 lakh orders per day processing capacity.

• In August 2023, the Ministry of Textiles approved 26 engineering institutions for the introduction of Technical Textiles under the National Technical Textiles Mission.

• In July 2023, PM MITRA Park, Amravati expected to attract investment of Rs.10,000 crore (US$ 1.20 billion) and create employment for 300,000 individuals.

• In May 2023, an investment of around Rs.6,850 crore (US$ 824.25 million) is expected in the PM MITRA Park in Madhya Pradesh and Rs.8,675 crore (US$1.04 billion) in other parts of the state.

• In May 2023, Aditya Birla Fashion and Retail Ltd. announced the acquisition of TCNS Clothing with a deal size of US$ 198.54 million.

• India is expected to host the 81st Plenary Meeting of the International Cotton Advisory Committee (ICAC) from 2nd to 5th December 2023 in Mumbai with the theme "Cotton Value Chain- Local Innovations for Global Prosperity".

• Cott-Ally mobile app has been developed for farmers to increase awareness about MSP rates, nearest procurement centers, payment tracking, best farm practices etc.

• In April 2023, Godrej Consumer Products Ltd (GCPL) announced the Rs.2,825 crore (US$ 339.93 million) acquisition of Raymond Consumer Care Ltd (RCCL).

Outlook: The future of the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. India is working on various major initiatives to boost its technical textile industry. Owing to the pandemic, the demand for technical textiles in the form of PPE suits and equipment is on the rise. The government is supporting the sector through funding and machinery sponsoring.

Top players in the sector are achieving sustainability in their products by manufacturing textiles that use natural recyclable materials.

With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market. The growth in textiles will be driven by growing household income, increasing population and increasing demand by sectors like housing, hospitality, healthcare, etc.

The technical textiles market for automotive textiles is projected to increase to US$ 3.7 billion by 2027, from US$ 2.4 billion in 2020. Similarly, the industrial textiles market is likely to increase at an 8%

CAGR from US$ 2 billion in 2020 to US$ 3.3 billion in 2027. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029.

Operational Performance

The Product wise performance during the year is as under:

				( Rs. in Crore)
	for the year ended
Particulars	31.03.2024		31.03.2023
	Qty.	Value	Qty.	Value
a) Fabrics (Lakh Mtrs.)	186.96	337.83	182.93	353.47
b) Yarn ( MT)	10568	298.02	2890	97.57
c) Readymade Garments (No. of Pcs.)	1281	0.18	12911	0.48
d) Power (Lakh Units)	27.05	1.06	25.35	0.99
e) Job Work		19.58		17.14
f) Export Incentives		9.78		2.09
Total		666.45		471.74

SWOT ANALYSIS

STRENGTHS

> Strong Brand image and consistent performance.

> Abundant Raw material availability.

> Accessibility of skilled manpower.

> Growing Economy and potential domestic and international market.

WEAKNESSES

> Higher Indirect taxes, Power and Interest rates.

> Excess capacity in India.

> Highly fragmented Industry.

> Infrastructural bottlenecks and efficiency.

OPPORTUNITIES

> Increased Disposable Income and Purchasing Power of Indian Customer open New Market Development.

> Large, Potential Domestic and International market.

> Greater Investment and FDI opportunities are available.

> Elimination of Quota Restriction leads to greater Market Development.

IHRtAIS

> International Labour and Environmental laws.

> Long lead times and high transportation costs are the results of great distance.

> Geographical disadvantages.

> To make balance between price and quality.

> Decline in the fashion cycle.

> Formation of Trading Blocks.

Risks and Concerns

The broader trends in the economy are expected to have a direct impact on your Companys growth prospects as well. Inflation is expected to remain elevated for the foreseeable future, driven by war- induced commodity price increases and broadening price pressures. In addition, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets.

In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparel. Migration to value for money options could also lead to reduced growth and profitability for your Company.

Risk management is embedded in your Companys operating framework. Your Company believes that managing risks helps in maximizing returns. The companys approach to addressing business risk is comprehensive and includes periodic review of such risks and a framework for mitigating controls and reporting mechanism of such risks. The risk management framework is reviewed periodically by the Board and the Audit committee. Some of the risks that the company is exposed to are:

1. competitive risk:

The apparel industry is subject to rapidly evolving fashion trends, and we must continuously offer innovative and upgraded products to maintain and grow our existing businesses. Investments in the industries have started picking up with no barriers for entry of new players. Your Company continues to focus on increasing its market share and focusing more on R&D, Quality, Cost and Timely delivery that help create differentiation and provide optimum service to its customers to expose competition risk.

2. FINANCIAL (FUNDING RISK):

Any increase in interest rate can affect the finance cost. The Companys policy is to borrow long term borrowing in Indian Rupee to avoid any rate variation risks. The Company has adopted a prudent and conservative risk mitigation strategy to minimize interest costs. The textile industry faces various financial risks, from having lenient payment terms to negotiating weak contracts.

You must practice caution to ensure prompt payments for items delivered, which is possible through various strategies, including placing requirements for advanced payments, leveraging invoice factoring, seeking bank guarantees, and insuring trade credit. Furthermore, be sure to evaluate the risk scores of your current and potential customers to minimize the likelihood of nonpayment.

3. FOREIGN EXCHANGE RISK:

Foreign exchange risks are quantified by identifying contractually committed future currency transactions. The Companys policy is to hedge all long term foreign exchange risk as well as short term exposures within the defined parameters. The long term foreign exchange liability is hedged and hedging reserve is maintained as per requirement of Ind-AS.

4. COMPLIANCE AND CONTROL RISK:

The evolution of the global regulatory environment has resulted into increased regulatory scrutiny that has raised the minimum standards to be maintained by BSL Limited. This signifies the alignment of corporate performance objectives, while ensuring compliance with regulatory requirements. The Company is regularly monitoring and reviews the changes in regulatory framework and also monitoring its compliance mechanism so as to ensure that instances of non-compliance do not occur.

5. RAW Material PRIcE Risk:

The Company is exposed to the risk of raw material prices of Polyester, Viscose, P/V blended yarn, Silk and Wool. The Company hedges this risk by purchasing the required raw material at the time of booking of sales contracts. Also this risk is being managed by way of inventory management and forward booking.

6. HUMAN RESOURCES RISK:

Retaining the existing talent pool and attracting new manpower are major risks. The Company hedges this risk by setting benchmark of the best HR practices and carrying out necessary improvements to attract and retain the best talent. The Company has initiated various measures such as rollout of strategic talent management system, training and integration of learning activities.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Company has an Internal Audit department with adequate experience and expertise in internal controls, operating system and procedures. In discharging their role and responsibilities, the department is supported by an external audit firm.

The Internal Audit Department reviews the adequacy of internal control system in the Company, its compliance with operating systems

and laid down policies and procedures. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen them. The Company has a robust Management Information System, which is an integral part of the control mechanism. The company is using SAP which is used all over the World as an ERP due to its robust and end-to-end control mechanism.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

This part has been discussed in Boards Report.

HUMAN RESOURCE AND INDUSTRIAL RELATION

The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. The Company has a structured induction process and management development programs to upgrade skills of the employees.

The Companys HR practices, systems and people development initiatives are focused on deployment and scouting for the "Best Fit" talent for all key roles. Pay for performance, reward and recognition programmes, job enrichment and lateral movements provide opportunity for growth & development of the talent pool.

The Company is committed to nurturing, enhancing and retaining top talent through superior Learning & Organization Development interventions. Corporate learning and Organization Development is a part of Corporate HR function. It is a critical pillar to support the organization growth and its sustainability over the long run.

CAUTIONARY STATEMENT

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and 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 costs and availability, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. The Company assumes no responsibility in respect of the forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.

Notes:1. There is no Significant Changes (change of 25% or more) as compared to the previous financial year 2022-23 in Key Financial Ratio except Interest Coverage Ratio, Net Profit Margin and Return on Net worth.

2. The Profit for the year is lower because of higher finance cost and higher depreciation expenses due to cotton spinning project and other capex plans of the company.