We submit herewith our Managements Discussion & Analysis Report for the year ended
March 31, 2023. We have included discussions on all specified matters to the extent
relevant or within limits that in our opinion are imposed by the Companys competitive
position.
ECONOMIC OVERVIEW
GLOBAL ECONOMIC OVERVIEW
The global economy is gradually recovering from the impact of pandemic and at the same
time facing new challenges emerging from Russias invasion of Ukraine. Tightening of
monetary policy by most Central Banks is expected to have a positive impact. Despite
monetary tightening, inflation is persistent in many key economies and it is anticipated
that global inflation will fall from 8.7% last year to 7% this year and settle at around
5% in the year 2024.
INDIAN ECONOMIC OVERVIEW
The Indian Economy continues to show resilience amid Global Uncertainties. Despite
significant challenges in the global environment, India was one of the fastest growing
economies in the world. Indias overall growth remains robust and is estimated to be 6.9%
for the financial year 2022-23. Growth was driven by strong investment activity augmented
by the governments capex push and buoyant private consumption.
Structural reforms like the National Infrastructure Pipeline and National Monetization
Plan by the Government is expected to further boost infrastructure development. It is
paving the path for further development and continues to encourage projects across
sectors, including reforms for improving labour laws. V-shaped economic recovery is due to
mega vaccination drive, robust recovery in the services sector and growth in consumption
and investment. This is being demonstrated in high frequency indicators such as power
demand, rail freight, GST collection etc. Almost all emerging economies are reeling under
external shocks, but Indias underlying economic fundamentals are strong and despite the
short-term headwinds, the impact on the long-term outlook is expected to be marginal.
Inflation remained high, averaging around 6.7% in FY 2022-23 but the current-account
deficit narrowed in Q3 on the back of strong growth in service exports and easing global
commodity prices.
Dwelling on the outlook for FY2023-24, the Economic Survey 2022-23 issued by Ministry
of Finance projects that, Indias recovery from the pandemic was relatively quick, and
growth in the upcoming year will be supported by solid domestic demand and a pickup in
capital investment. It further affirms that aided by healthy financials, incipient signs
of a new private sector capital formation cycle are visible and more importantly,
compensating for the private sectors caution in capital expenditure, the government
raised capital expenditure substantially.
Explaining the economic outlook factoring global rudiments, the slow down in global
growth and economic output coupled with increased uncertainty is likely to dampen global
trade growth. Strong domestic demand amidst high commodity prices will raise Indias total
import bill and contribute to unfavourable developments in the current account balance.
These may be exacerbated by plateauing export growth on account of slackening global
demand. Should the current account deficit widen further, the currency may come under
depreciation pressure. Also, entrenched inflation may prolong the tightening cycle, and
therefore, borrowing costs may stay higher for longer. In such a scenario, global
economy may be characterised by low growth in FY24. However, the scenario of subdued
global growth presents two silver linings - oil prices will stay low, and Indias CAD will
be better than currently projected. The overall external situation is expected to remain
manageable for India.
TEXTILES
Global Textile Industry
The global textile market grew from about $573 billion in 2022 to about US$ 610 billion
in 2023 at a compound annual growth rate (CAGR) of 6.6%. The Russia- Ukraine war has led
to an increase in commodity prices and supply chain disruptions, causing inflation across
goods and services impacting economies across the globe. The textile market is however
expected to grow to about US$ 755 billion in 2027 at a CAGR of 5.5%.
The COVID-19 pandemic and the Russia - Ukraine war had challenged the textile industry
drastically which is now on a recovery stage. Increasing demand for apparel from the
fashion industry coupled with the growth of e-commerce platforms is expected to drive the
market growth over the next few years.
The textile industry is an ever-growing market, with key competitors being China, the
European Union, the United States, and India. China is the worlds leading producer and
exporter of both raw textiles and garments. India is among the top five textile
manufacturing country and is responsible for more than 6% of the total textile production,
globally. The rapid industrialization in the developed and developing countries and the
evolving technology are helping the textile industry to have modern installations which
are capable of high-efficient fabric production.
Indian Textile Industry
India is the worlds second-largest producer of textiles and garments. It is also the
sixth-largest exporter of textiles spanning apparel, home and technical products. The
Indian textile and apparel industry is expected to grow at 10% CAGR from 201920 to reach
US$ 190 billion by 2025-26. India has a 4% share of the global trade in textiles and
apparel. The textiles and apparel industry contribute 2.3% to the countrys GDP, 13% to
industrial production and 12% to exports. The textile industry has around 45 million of
workers employed in the textiles sector, including 3.5 million handloom workers. Indias
textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a
41% increase YoY. Total textile exports are expected to reach US$ 65 billion by FY26.
The Textile and Apparel market is poised to grow, led by boost in demand and the
government support in form of attractive schemes such as Production Linked Incentive
(PLI), Mega Investment Textile Parks (MITRA) will further drive the way for the US$ 250
billion target. Another step taken by the Ministry of Textiles towards positioning India
as a global leader in technical textiles manufacturing is the invitation of Research
proposals for Funding for Design, Development and Manufacturing of Machinery, Tools,
Equipment, and Testing Instruments under NTTM.
India exports multiple woollen products including tops, worsted yarn, ready-made
garments, woollen yarn, wool tops, fabric, shoddy yarn, shoddy fabrics, blankets,
knitwear, hand-made carpets, and machine-made carpets, etc. In 2021-22 (until January
2022), the export of woolen items was US$ 1.57 billion ( 12,877.52 crore). In the year
2020-21, the total export value of wool and woollen products were US$ 935 million ( 69.31
billion). The same for the year 2019-20 was US$ 1.3 billion ( 91.72 billion). The floor
coverings and carpets made of wool are the largest exported woollen product from India.
During 202021, the share of these products in total woollen exports was 42%, valued at US$
395 million.
From April 2021-September 2021, exports of wool and wool blended products stood at US$
908.02 million ( 7,481.65 crore), a 49.34% increase as compared to the same period the
previous year.
The woollen yarn and articles of apparel & clothing accessories, both knitted and
non-knitted, are among Indias largest exported woollen products. During 2021-22, the
export of wool yarn, fabrics, made-ups, etc., from India were valued at US$ 98.65 million.
The apparel and clothing accessories of wool (knitted and non-knitted) exports during the
same year was US$ 296 million with a share of 32% in the total exports.
COMPANY & INDUSTRY STRUCTURE
The Company operates in woollen worsted textiles segment and operates a fully equipped
composite mill (ISO 9001 certified) in Jamnagar, Gujarat, which has been manufacturing
high quality worsted fabrics for over last seven decades. The woollen worsted industry in
the country comprises of a few mills in the organized sector and a number of units in the
unorganized sector. Companys commitment to quality and customer orientation reflects in
its strong widely recognized and valuable brand - DIGJAM. The mill had a proven
track record of design and manufacture of high-quality fabrics. The Company is proactive
in its marketing efforts by enhancing its brand visibility, strengthening marketing
organization and closer interaction with and expansion of its channel partners.
OPERATIONS
The company recorded a revenue of 3,410.59 lakh as compared to the last years
revenue of 3603.69 lakh. The net loss after tax (after exceptional item and other
comprehensive income) of the Company for the year under review is (1,188.27) lakh as
compared to the last years net profit of 149.44 lakh for the previous year. The net
loss for the current year includes an exceptional item of 389.94 lakh on account of
asset held for sale, more particularly described in Note No. 27. of the Financial
Statements.
The textile industry remains one of the mainstays of the national economy, and a
significant contributor to Indian exports. The woollen/worsted fabric industry, however,
increasingly faces challenges in the market from changing consumption patterns driven by
cheaper alternative fabrics and shift away from daily formal wear. The demand during the
year was particularly affected due to general liquidity constraints in the market. The
prices of wool have surged further during the year setting new highs, mainly due to
shortage of raw materials and several supply chain disruptions have worsened the situation
globally, resulting in higher raw material cost.
Pursuant to Honble NCLT, Ahmedabad Bench order dated May 27, 2020 ("NCLT
Order"), the Adjudicating Authority approved the resolution plan ("Approved
Resolution Plan") submitted by Finquest Financial Solutions Private Limited
("FFSPL") ("Resolution Applicants") for the Company under Section 31
of the Code. The Reconstituted Board of the Company took over control over the operation
w.e.f. November 22, 2020 and new management was put in place. The new management of the
Company is gaining the confidence of the various stakeholders viz. vendors, suppliers,
lenders and customers etc.
We believe that our business is backed by necessary skills and expertise and remain
cautiously optimistic that performance will improve as the Resolution Plan has been
approved now, with continuing momentum of operational improvements and expected upturn in
the economic conditions helping domestic as well as export demand.
The Company is in process to sale / dispose of surplus land ad measuring 65,584.50 Sq.
Mtrs. as identified by the Board of Directors at their meeting held on August 29, 2022 for
consideration not less than Rs. 60 Crore. Subsequently, the Board has also obtained
Shareholder consent to sale / dispose of above said land by passing Special Resolution at
7th Annual General meeting held on September 24, 2022. Further, the management has entered
into Memorandum of understanding with buyer to sale the aforesaid surplus land and against
this sale of land the Company has received almost 50% of amount against the sale
consideration of Rs. 60.21 Crore. The advance received from the buyer is shown in the
notes to financial statement.
In additional to above, the Management is also looking forward to further monetise
existing non-core assets so as to invest into the working capital requirements of the
Company.
KEY RATIOS
| Particulars |
FY 22-23 |
FY 21-22 |
% Variance |
| Current Ratio (times) |
0.48 |
0.69 |
-31% |
| Debt Equity Ratio (times) |
2.61 |
2.10 |
24% |
| Debt Service Coverage Ratio (times) |
(0.08) |
0.19 |
-142% |
| Return on Equity Ratio (%) |
(0.36) |
0.03 |
-1296% |
| Inventory Turnover Ratio (times) |
1.88 |
2.37 |
-21% |
| Trade Receivables Turnover Ratio (times) |
3.44 |
5.30 |
-35% |
| Trade payables Turnover Ratio (times) |
2.52 |
3.66 |
-31% |
| Net Capital Turnover Ratio (times) |
(1.03) |
(2.34) |
-56% |
| Net Profit Ratio (%) |
(0.37) |
0.04 |
-1055% |
| Return on Capital Employed Ratio (%) |
(0.08) |
0.03 |
-413% |
ENVIRONMENT & SAFETY
We are fully conscious of the need for both environmentally clean and safe operations.
Our policy requires all operations to be conducted in a way so as to ensure safety of all
concerned, compliance of statutory and industrial requirements for environment protection
and conservation of natural resources.
HUMAN RESOURCES
Management recognizes that employees represent our greatest assets and it is only
through motivated, creative and committed employees that we can achieve our aims. Hence,
the Company attempts to take care of welfare and betterment of employees.
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.
OTHER MATTERS
Pursuant to its order dated May 27, 2020 NCLT Order, the Adjudicating Authority
approved the resolution plan submitted by Finquest Financial Solutions Private Limited
("Promoter Company"). The Promoter Company has implemented the Plan by payment
of last tranche to Financial Creditors as per their claim filed during Corporate
Insolvency Resolution Process to utilize the Companys intrinsic strengths. Internal
control systems are regarded as being adequate and are continuously reviewed for further
improvement. Our team is committed to the Boards dictates on standards of conduct as well
as good governance and exercise of due diligence including compliance with all relevant
regulations and laws. We record our appreciation of all our sincere employees,
gratefulness to our Shareholders, lenders and banks and other stakeholders, concerned
Government and other authorities and our channel partners for their continued support and
to customers for their reposing faith and confidence in us.
CAUTIONARY STATEMENT
Statements in this "Managements Discussion & Analysis" which seek to
describe the Companys objectives, projections, estimates, expectations or predictions may
be considered to be "forward looking statements" within the meaning of
applicable securities laws or regulations. However, actual results could or may differ
materially from those expressed or implied. Important factors that could make a difference
to the Companys operations also include success of implementation of the approved
Resolution Plan, global and Indian demand-supply conditions, finished goods prices,
feedstock availability and prices, cyclical demand and pricing in the Companys markets,
changes in Government regulations, tax regimes, economic developments within India and
countries with which the Company conducts business besides other factors, such as
litigation and labour negotiations.
For and on behalf of the Board of Directors
| Hardik Patel |
Vinayak Hoskote Rao |
| Chairman |
Executive Director |
| DIN:00590663 |
DIN:10073636 |
| Mumbai |
Jamnagar |
| May 29, 2023 |
May 29, 2023 |
+91-9892691696
