CLC Industries Ltd Management Discussions

Global Economy

The global economy is at a critical juncture. While signs of stabilisation emerging during the year, major policy shifts and tariff wars and geopolitical tensions reset the global trade system to test its resilience. According to the IMF World Economic Outlook, April 2025, the world economy grew by 3.3 percent in 2024, and is projected to grow by 2.8 percent and 3.0 percent in 2025 and 2026 respectively.

While these figures reflect a stable trend, they also signal that the pace of growth is more moderate compared to the past. Sectorwise, the global services sector continued to expand, while manufacturing showed signs of weakness, particularly in Europe. Trade policy uncertainty remains high, with more protectionist measures being adopted by major economies. This could impact investment flows and global trade if such trends continue. Looking ahead, risks from geopolitical tensions and climaterelated events persists. As the global economy adjusts to new realities, businesses are focusing more on resilience, diversification, and longterm value creation.

ICRA expects the domestic cotton spinning industry to recover in Financial Year 20242025, growing by 68%, supported by a 46% volume growth and mild realization gains. This follows two consecutive years of degrowth on the back of subdued domestic demand and falling yarn realizations. Over twothirds of the total cotton yarn produced is consumed domestically, where green shoots of recovery are visible from the downstream segments, such as readymade garments and home textiles. Exports, which rebounded in Financial Year 20242025 on a lower base, are likely to normalize in Financial Year 20242025. While the exports will remain exposed to headwinds from sluggish global demand, a shift in sourcing preference away from other countries will offset this impact to an extent. Domestic cotton prices, which peaked sharply in H1 Financial Year 20242025and reached a lifetime high of 284 per kg, have been declining over the last two years. The average prices, which fell by 26% YoY in Financial Year 20242025 amid a moderation in global prices and weak demand from the enduser segments, are likely to marginally increase in the near term with a recovery in demand and an expected reduction in the cotton sown area. Cotton yarn prices, too, had been declining since June 2022 amid softening cotton fiber prices and slowing demand from the downstream segments.

Segment Reporting:

Below are some of the key challenges faced by the Indian textile industry:

1. Capital intensity: The textile sector in India requires significant capital investment, which affects its ability to compete on a global scale.

2. Production chain issues: Poor coordination and communication within the textile production chain causes delays, increases costs, and leads to missed opportunities. 3. Resource management: Improper management of resources like energy, water, dyes, and other materials drive up costs and harm the environment. Inefficient energy use, in particular, leads to increase in production expenses and deplete natural resources.

6. Consumer demand: Shifting consumer preferences and fluctuating demand for textiles and apparel affects the business. Slow market demand and rapidly changing trends leads to excess inventory, low production, and declining exports.

7. Volatile costs: Rising labour costs due to a shortage of skilled workers, combined with reliance on labourintensive technologies, as well as fluctuations in raw material and transportation prices, have the capability to disrupt business operations.

8. Regulations and compliance: Strict environmental regulations and changing government policies can affect operational efficiency and profitability, adding further pressure on textile companies.

Strength:

Experienced promoters with over 35 years of experience; Availability of skilled manpower;

India is the third largest producer of cotton with the largest area under cotton cultivation.

The textile industry, along with the Company, is expected to grow steadily, driven by increasing urbanization and greater awareness of fashion trends. The future outlook remains promising. The threats for the industry and the Company comprises of competition from emerging countries. Pricing pressures on finished goods, inflation, foreign exchange fluctuation, international disturbances and others, comprise the key threats.

The manufacturing facility of the company is situated at, D48, Baramati MIDC, Baramati Pune Maharashtra413133 and spreads over 70,000 square meters. The Company has 32,400 spindles for cotton yarn having capacity to produce approx. 11.50 metric tons per day of highquality yarn.

Performance:

The Company has recorded total revenue from operations during the financial year 202425 of 61.62 Crores, as compared in the previous financial year 202324.

Financial Review:

Financial Ratios:

Human Resources:

Human resource is considered as the most valuable of all resources available to the Company. The Company continues to lay emphasis on building and sustaining an excellent organization climate based on human performance. Its human resource division plays a crucial role to build a strong and talented workforce. It provides opportunities for professional and personal development and implements comprehensive employee engagement and development programmers to enhance the productivity and skills of its employees. The number of permanent employees on the rolls of Company are 24.

We are really proud of our "HUMAN RESOURCES". We believe that our employees make a key difference to our business success. Employees are one of our key stakeholders and needless to mention that managing our human capital has been our key strength and pride. It is our firm belief that nurturing and strengthening the human resource capital is of utmost importance to run the organization effectively and smoothly. Therefore, the HR function takes pride in managing the human capital both with warmth and care as a hallmark of a caring organization. The Human Capital is managed in a structured manner with key focus areas being Talent Management, Organizational capability Development, Employee Engagement and harmonious Industrial Relations.

Risks and Concerns:

The Company has a robust Enterprise Risk Management framework for the timely and effective identification, assessment and mitigation of key Business and operational risks.

The Companys processes for risk identification, assessment, mitigation, and reporting are supported by an effective framework for risk management. Indian Textile Industry continues to face stiff competition from China, Bangladesh,

Taiwan and other emerging economies.

The relative competitiveness of Industry is dependent upon the raw cotton prices, exchange rates and prevalent interest rates regime. The primary raw material for the manufacturing of yarn is cotton which is an agriculture produce. Its supply and quality are subject to forces of nature i.e. Monsoon.

Any increase in the prices of raw cotton will make the things difficult for the Textile Industry resulting weak demand and thin margins. Thus, availability of raw cotton at the reasonable prices is crucial for the spinning industry. Any significant change in the raw cotton prices can affect the performance of the industry.

Internal control systems and their adequacy:

Your Company has been regularly reviewing and updating its internal controls by benchmarking against the industry standards. Dynamics of changing business requirements, statutory compliances and corporate governance are adopted in existing systems after careful review to remain in line with compliance requirements and expectations of business partners like customers and institutions. Senior management monitors the recommendations of internal audits for continuous system updating. IT System infrastructure is updated regularly to support business decision making as well as better control.