Economic Overview
The International Monetary Fund (IMF) has projected global growth to decline from 3.4
percent in 2022 to 2.8 percent in 2023, before settling at 3.0 percent in 2024. Advanced
economies are expected to see an especially pronounced growth slowdown, from 2.7 percent
in 2022 to 1.3 percent in 2023
Industry Structure and Development
Indias Textile & Apparel (T&A) Industry is one of the oldest industries and
has a formidable presence in the national economy. Indian T&A industry is the second
largest in the world after China and spans across the entire value chain. T&A sector
is the 2nd largest employment-providing sector in India after agriculture. It provides
direct and indirect employment to more than 10 crore people including a large number of
women and the rural population.
The textile and apparel industry faces weaker sentiments due to global concerns,
domestic lifestyle changes, and slower export demand High inflation across the globe has
reduced the consumers purchasing power, which is the major cause of slowdown in textiles
and apparel exports. Developing countries including India are facing serious challenges in
textiles and exports.
The two major markets the US and EU accounting for over 60 per cent of the Indian
textiles and apparel demand, have remained sluggish for the last six months, due to
headwinds arising out of surge of inflation and uncertain geopolitical scenario. Consumers
in these two and other markets have cut down spending on clothing, as they have to spend
more on other household expenses.
Indias textile and apparel exports to the US declined by 23.94 per cent to $4.70
billion during July-December 2022 compared to $6.18 billion during January-June 2022.
Likewise, Indias export to EU-27 countries also declined by 24.54 per cent to $3.29
billion in the second half of 2022 compared to $4.36 billion during January-June 2022.
Opportunities & Threat:
TheIndiantextileandapparel market has significant potential, with the industry
projected to reach $190 billion by 2025-26.
Due to the ‘China Plus One sourcing strategy adopted by global brands and
retailers, China is expected to continue losing its share in the global markets, which
could be beneficial for Indian Exporters.
This global economic gloom is increasingly reflected in consumers shopping habits, and
the fashion industry is expecting that demand will be weakened or unpredictable in the
year ahead.
Segment Review
Celebrity Fashions Limited is engaged in the business of designing, manufacturing and
selling of garments and we cater to the demand of leading international brands.
Risks and Concern
The textile industry is facing limitations in accessing the latest and best technology
while also failing to meet the global standards in the competitive export market. Apart
from these issues like child labour, competition from neighboring countries regarding
low-cost garments, personal safety norms, infrastructure bottlenecks, rising environmental
concerns are some of the challenges the Indian textile industry faces.
Several risks including the lower profit share, alongside cost reduction pressure from
the buyers threaten the survival of the Readymade Garment exporters.
Outlook
Indias textile and garment industry faced a significant a challenging start to the new
fiscal year.
The coming year is likely another year full of challenges and opportunities for the
Indian apparel industry. Despite the challenges ahead, we believe that our principal
competitive strengths, which differentiate us from other players in the garments industry
will help us to progress in the right direction in times of uncertainty.
Internal Control Systems and their Adequacy
The Company has developed adequate internal control system commensurate to its size and
business to ensure that all assets are safeguarded and protected against any loss from
unauthorized use or disposition and that all transactions are authorized, recorded and
reported correctly. The internal audit reports are periodically reviewed by the Management
together with the Audit Committee of the Board. The Company has a strong Management
Information System as a part of Control Mechanism.
Human Resources/Industrial Relations
Industrial relations have continued to be harmonious at all units throughout the year.
No man-days were lost due to strike, lock out etc.
Measures for employees safety, their welfare and development received top priorities.
Your Company has a vision of being an ‘Injury Free and ‘Zero Environment
Incident organisation. Over the past many years, your Company has been progressing well
on the safety record in factories and facilities. The Company had around 3993 employees as
on 31st March 2023.
Financial Performance:
The Companys performance during the year as compared with previous year is summarized
below:
|
FY 2022-23 |
FY 2021-22 |
|
Amount (In Crs.) |
% to Revenues |
Amount (In Crs.) |
% to Revenues |
| Revenue from Operations |
364.21 |
|
327.69 |
|
| Other Income |
0.13 |
of our business operations & ensuring 0.28 |
| Total revenues |
364.34 |
|
327.97 |
|
| Cost of Materials |
227.14 |
62.37% |
196.79 |
60.05% |
| Changes in Inventories of |
(23.96) |
(6.58)% |
6.03 |
1.84% |
| Finished Goods & Work-in- |
|
|
|
|
| Progress - (Inc) / Dec |
|
|
|
|
| Employee Benefit Expenses |
80.57 |
22.12% |
65.51 |
19.99% |
| Other Expenses |
58.99 |
16.20% |
37.57 |
11.47% |
| Total Expenses |
342.74 |
94.11% |
305.9 |
93.35% |
| EBIDTA |
21.6 |
5.93% |
22.07 |
6.74% |
| Depreciation |
8.23 |
2.26% |
7.31 |
2.23% |
| Finance Costs |
7.22 |
1.98% |
5.98 |
1.82% |
Profit / (Loss) before Tax and Exceptional Items |
6.15 |
1.69% |
8.78 |
2.68% |
Exceptional Item - Expense / (Income) |
0 |
0.00% |
0 |
0.00% |
| Profit / (Loss) before Tax after |
6.15 |
1.69% |
8.78 |
2.68% |
| Exceptional Items |
|
|
|
|
| Tax Expenses |
0 |
0.00% |
0 |
0.00% |
| Other comprehensive income |
0.55 |
0.15% |
(2.46) |
(0.75)% |
| Total Comprehensive Income |
6.70 |
1.84% |
6.32 |
1.93% |
| for the year |
|
|
|
|
Profitability and Financial risks
Ratios |
FY 2022-23 |
FY 2021-22 |
Change (%) |
| Current Ratio |
1.16 |
1.11 |
4 |
| Debt Equity Ratio |
3.06 |
5.08 |
(40)1 |
| Operating Profit Margin (%) |
5.93 |
6.74 |
(12) |
| Net Profit Margin (%) |
1.69 |
2.68 |
(37)2 |
| Interest Coverage Ratio |
1.90 |
2.50 |
(25) |
| Debtors Turnover Ratio |
7.26 |
5.37 |
353 |
| Inventory Turnover Ratio |
2.43 |
3.10 |
(22) |
| Return on Net worth |
25.09 |
42.19 |
(41)4 |
1. Increase in Share capital and decrease in borrowings. 2. Decrease in profit on
account of increase in other expenses. 3. Debtors turnover is higher due to realisation of
debtors during FY23. 4. Due to increase in share capital during FY23.
Disclaimer
Statement 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 materially differ from those expressed or implied
Forex Risk
The Companys policy is to systematically hedge its long term foreign exchange risks as
well as short term exposures in line with its hedging policy. In addition to this, the
company also has a natural hedge on the imports of the company which is almost 40%-50% of
its Exports.
Business Philosophy
At Celebrity Fashions, our business philosophy is based on 3 pillars:
1. Operational Excellence
2. Wastage Elimination
3. Fiscal Discipline/Cost Management
The 3 fundamentals frame the culture of the organization and permeate all interactions
of stakeholders, both internal & external.
I. Operational Excellence
As the preferred supply chain partner for global brands, our approach is centered that
we optimize onmaximizingthe fixed asset turnover. We continue to focus on building a
culture of performance with a relentless focus on execution
Our operations are modular in nature, involving the synchronization of multiple
stations & processes to deliver product to our customer i. On time ii. World class
quality iii. At a Competitive price
We have focused on the real time application of the above principles to ensure that
once an order is taken into production, that it is packed and delivered without any
disturbances. Our aim is to shift from an efficiency allow the organization to benefit
from continuous cash flows to forecast our future revenues better.
II. Wastage Elimination
The above pillar can be further segregated into 2 categories:
Wastage in terms of i. Raw Materials ii. Non-Value Adding processes
As a manufacturer with 30 years of experience, there is a large amount of domain
knowledge existing in the company that has come from working with the very best of global
brands across product categories. In the coming quarters, we aim to centralize this domain
knowledge with a focus on elimination non-value adding processes; resulting in more
predictability in our outcomes & maximizing our opportunity to ship given a set of
inputs. We have prioritized preparatory work & other R&D activities to ensure that
the factory is able to pursue a plug and play approach which would allow them to minimize
disruptions and maximize output.
III. Fiscal Discipline
The business of Apparel Manufacturing is price sensitive & competitive. As a member
of a global supply chain, we are competing with vendors from across the globe. As
mentioned earlier, countries such as Bangladesh & Vietnam enjoy far lower labor costs
putting India at a straight disadvantage as a result.
Apart from the yields that bear fruit as result of the combination of the earlier 2
points, we are also driving a culture of fiduciary responsibility across all stakeholders.
Our focus is on rationalizing every rupee spent to ensure that it is spent to improve the
performance of the organization and weed out any unnecessary expenditure. This fundamental
has pushed us to relook at our inventory carrying levels to minimize holding &
interest costs. We continue to work with our vendors and suppliers with the aim to save
every possible rupee in the value chain, without compromising on the world class service
that we are known for.
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