E-Land Apparel Ltd Management Discussions.

OVERVIEW OF THE ECONOMY GLOBAL ECONOMY

Although slowdown in the manufacturing sector and trade tensions between the US and China were among the many Factors that softened the economic outlook for 2019, the year did begin on a firm footing. The projected global economic growth, albeit downgraded, was 2.9%. Despite the economic and financial headwinds, growth in developing Asia was projected to remain a robust 5.5% during 2019 (Asian Development Outlook, Update, and September 2019). However, in 2019-20, the Indian economy grew by 4.2% against 6.1% expansion in 2018-19 whereas Chinas growth was 6.1% in 2019 vs. 6.7% in 2018. Growth among advanced economies was forecast to drop to 2% during the year although growth in Sub-Saharan Africa was projected to accelerate to 3.1% (Source: World Economic Outlook, International Monetary Fund). However, due to the COVID-19 pandemic, the International Monetary Fund has projected a sharp contraction of the global economy to a status much worse than what resulted from the 2008-09 financial crisis.

INDIAN ECONOMY

India continues to be one of the fastest growing emerging economies in the world. A slowdown in the manufacturing and construction sector has lately affected GDP growth slightly below 5% in the current fiscal. An impending revival in demand, positive consumption pattern and rising disposable income, makes India the most sought after investment destinations. Already the fifth largest economy in the world, India is supposed to take its place among the worlds top three economic powers in the next 10-15 years. The pandemic has undoubtedly affected India, but with the economic stimulus and the gradual opening up of the lockdown the situation can be expected to improve. Interstate movement of goods is gradually picking up and retail financial transactions are showing a healthy trend.

ANALYSIS AND REVIEW

INDIAN TEXTILE & APPAREL INDUSTRY

India is now a fast emerging market inching to reach half a billion middle income population by 2030. All these factors are good for the Indian textile industry in a long run. Even though the global economic crisis seems to be worsening day-by-day, as long as economies are emerging and growing as those in South and South East Asia, textile industry is here to grow provided it takes competition and innovation seriously. Read below to have an insight of the stand of the Indian Textile Industry in the economy.

INTRODUCTION

Indias textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to Indias exports with approximately 13 per cent of total exports. The textile industry is also labor intensive and is one of the largest employers. The textile industry has two broad segments. First, the unorganized sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. The second is the organized sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale.

The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world.

MARKET SIZE

Textile and apparel trade is predicted to grow at a CAGR of 6.4% during the period 2020-29. Apparel trade is likely to grow at a CAGR of 5.5% and textiles at a CAGR of 7% during the period. Rising disposable income, population, and rapid urbanisation in the emerging economies such as India, the period. Rising disposable income, population, and rapid market growth. The Indian apparel industry was estimated to be worth $62 growing at CAGR of ~7.6% over 2019-29 period.

Where does the Indian Textile Industry Stand now?

A General Impression of the Indian textile industry looking in the past makes one understand that the industry is in a pincl Why so? These are the reasons:

1) Global recession and low purchases by consumers

2) Less export orders due to reductions in inventories by global retail giants like Wal-Mart

3) Price of raw materials like cottons and increase in labour cost.

4) Infrastructure bottlenecks such as power, particularly in Karnataka.

INDIAN TEXTILE INDUSTRY OPPORTUNITIES

The fundamental strength of Indian textile industry is its strong production base with wide range of fibers/yarns. These are natural fibers such as cotton, jute, silk and wool and synthetic/man-made fibers like polyester, viscose, nylon and acrylic. In producer-driven value chains, large, usually transnational, manufacturers play the central roles in coordinating production networks. Textile industry is capital- and technology-intensive comparable with automobiles, aircraft, computers, semiconductors and heavy machinery industry. Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in developing countries. This pattern of trade-led industrialization has become common in labor intensive, consumer-goods industries such as garments, footwear, toys, handicrafts and consumer electronics. Large manufacturers control the producer-driven value chains at the point of production, while marketers and merchandisers exercise the main leverage in buyer- driven value chains at the design and retail stages. Apparel is an ideal industry for examining the dynamics of buyer- driven value chains. The relative ease of setting up clothing companies, coupled with the prevalence of developed- country protectionism in this sector, has led to an unparalleled diversity of garment exporters in the third world. Apparel is an ideal industry for examining the dynamics of buyer-driven value chains. The global apparel market size is expected to reach US $2.6 trillion in 2025 growing by a projected rate of _4_%. The major growth drivers of the global apparel market will be the developing economies, mainly China and India, both growing in double digits. China will become the biggest apparel market adding more than US $378 bn. in market size by 2025, while India will be the second most attractive apparel market adding around US $_121bn. by 2025. A large and growing domestic demand coupled with increasing spending power of people in these two countries will result in the combined addition of around US $_500 bn. in the global apparel market size by 2025. The combined apparel market size of China and India i.e. US $_795 bn. is expected to exceed combined market size of EU and USA i.e. US $775 bn, by 2025. India has a share of approximately 5% of the global textile and apparel trade.

INDIAN TEXTILE INDUSTRY CHALLENGES (OPPORTUNITIES AND THREATS)

The Indian textile industry is highly fragmented and is being dominated by the unorganized sector and small and medium industries. The changing government policies at the state and central government levels are posing major challenges to the textile industry. The tax structures GST (Goods and Service Tax) make the garments expensive. Another important thereat is raising interest rates and labor wages and workers salaries. There is higher level of attrition in the garment industry. Although central government is wooing the foreign investors the investment is coming in the textile industry. In India places such as Bangalore, Mumbai, New Delhi and Tirupur are the hubs of textile garment industries. These manufacturers have ability to produce the entire range of woven wear and knitwear at low cost with reasonably good quality within the short notices. The Indian textile industry has its own limitations such as accesses to latest technology and failures to meet global standards in the highly competitive export market. There is fierce competition from China, Bangladesh and Sri Lanka in the low price garment market. In the global market tariff and non-tariff barriers coupled with quota is posing major challenge to the Indian textile Industry. The environmental and social issues like child labor and personal safety norms are also some of the challenges for the textile industry in India.

IMPACT OF PANDEMIC COVID-19

Besides all, the world has witnessed a major crises led by the spread through of Pandemic Coronavirus (COVID-19) emerging from China during the month December 2019 and thereafter spreading through in almost all countries of world. In India, outbreak of Pandemic COVID-19 occurred during the month of January 2020. Thus, the Honble Prime Minister Shri Narendra Modi to break the chain for the spread of this pandemic disease of COVID-19 had imposed the Nationwide Lockdown w.e.f. 21st March 2020 in the country.

The adverse impact of coronavirus Covid -19 on Indias apparel and textile industry is beginning to show in Bengaluru, the countrys largest textile manufacturing hub that employs about 2.5 lakh workers. Many of the highly employment-intensive clothing units in and around the city are either shutting down their operations or laying off employees, even as Karnataka is limping back to normalcy from the Covid-induced lockdown. At least four clothing manufacturing units in Bengaluru, of Garden City Fashion, Sonal Garments, Texport Industries and Punith Creations, have shut their operations or laid off half their workforce by August 2020. Many factories are expected to tread the same path.

As a consequence of this outbreak Covid-19 and thereafter lockdown, all economic activities came to standstill and had caused a major setback for all industries due to this unforeseen event. Various guidelines were issued by government department of Ministry of Home Affairs (MHA) during lockdown period for the safeguard of all including employees and working class people to fight against such situations. However, Industries started their operations at a very slow pace as millions practice social distancing to stem the spread of COVID-19 (coronavirus). This unplanned events have caused huge devastating impact on the organization. As a result, company is either currently experiencing or anticipating significant constraints on cash and working capital, including potential liquidity challenges.

The Company had faced disruption in their operation which has caused the major difficulty to timely execute the work and have further led to financial losses by way of cancellation of Orders. Loss of Income and negative cash flow due to such event had made difficult to bear the basic operational cost as there was no major benefits from to the Industry from the stimulus package introduced by the government. Considering the fact that the situation is exceptional and is changing dynamically, the Company is not in a position to=gauge=with_certainty,_the_future_impact= on its operations. Further, due such current pandemic situation, company is sure that demand in garments will take some time certainly for pick up.

CONCLUSION

The Indian textile industry requires support from both the Central and State governments to become competitive in the Global market. The Skill India and Make-in India programs of Central government headed by Prime Minister Shri Narendra Modi is helping the industry in getting required skilled manpower and good market for textile products. It is high time for the textile industry to upgrade their technology and implement ERP to streamline supply chain and enhance customer relations management activities. These measures are enabling the industry in becoming competitive in the global market. The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the last decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market. The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. 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 organized apparel segment is expected to grow at a Compound Annual Growth Rate (CAGR) of more than 13 per cent over a 10-year period The Union Ministry of Textiles, which has set a target of doubling textile exports in 10 years, plans to enter into bilateral agreements with Africa and Australia along with working on a new textile policy to promote value addition, apart from finalizing guidelines for the revised Textile up gradation Fund Scheme (TUFS). The Indian textile and apparel industry has been adversely impacted in the short to mid-term due to lockdown and lower consumer spends. The sector is reeling under liquidity and cost pressure as well due to the unprecedented damage caused by COVID-19 In 2020-21. However The Indian cotton textile industry is expected to showcase a stable growth in FY 2021-22, supported by stable input prices, healthy capacity utilization and steady domestic demand. High economic growth has resulted in higher disposable income. This has led to rise in demand for products creating a huge domestic market. The domestic market for apparel and lifestyle products, currently estimated at US$ 85 billion, is expected to reach US $160 billion by 2025.

DISCUSSION OF FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE & INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Discussion of Financial Performance with respect to Operational Performance & Internal Control Systems and their Adequacy has been discussed in Directors Report.

HUMAN RESOURCE MANAGEMENT AND INDUSTRIAL RELATIONS:

The Company takes pride in the commitment, competence and dedication of its employees in all areas of the business. The Company is committed to nurturing, enhancing and retaining its top talent through superior learning and organizational development. This is a part of our Corporate HR function and is a critical pillar to support the organizations growth and its sustainability in the long run.

Human resources continue to be an invaluable and intangible asset and a key success factor for the Company to grow and sustain its market position in a highly competitive environment. Your Company firmly believes that people are the pivotal force behind the growth and excellence in business operations. The overall performance and the market position of the Company are the result of combined strength of its people.

The company focuses on developing leadership skills, building talent for the future, and improving organizational & human capability through competency mapping of managerial positions in all areas of the Companys operations. The Company is committed to provide the best environment to its employees to work and to inculcate a sense of ownership and pride.

Particulars of Ratio 31.03.2020 31.03.2019
1. Debtors Turnover 8.27 8.11
2. Inventory Turnover 9.27 8.97
3. Interest Coverage 9.63% 6.18%
Ratio (%)
4. Current Ratio 1.34 1.84
5. Debt Equity Ratio -1.24 -1.26
6. Operating Profit -3.08% 1.40%
Margin (%)
7. Net Profit Margin (%) -35% 24%

Key Financial Ratios:

Details pertaining to Net-worth of the Company:

Particulars 31.03.2020 31.03.2019
(In Rs.) (In Rs.)
Net-worth -35,857.96 -30,645.15

CAUTIONARY STATEMENT:

Statements in this Directors Report and 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 differ materially from those expressed or implied. Important factors that could make difference to the Companys operations include raw material availability and its prices, cyclical demand and pricing in the Companys principle markets, changes in Government regulations, Tax regimes, economic developments, within India and the countries in which the Company conducts business and other ancillary factors. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements might differ materially from those either expressed or implied herein.

For and on Behalf of the Board of Directors
E-Land Apparel Limited
Date: September 04, 2020 SD/- SD/-
Place: Bengaluru. Jae Ho Song Chong Tae Baek
Managing Director Independent Director
DIN:07830731 DIN :01566661