E-Land Apparel Ltd Management Discussions

OVERVIEW OF GLOBAL ECONOMY:

The apparel and textile industry are a cornerstone of the global economy and a significant contributor to Indias GDP. The global apparel industry has experienced significant shifts in recent years, driven by changes in consumer preferences, technological advancements, and economic factors. In 2024, the revenue in the Apparel market worldwide is estimated to reach a staggering US$1.79tn. The average volume per person in the Apparel market is estimated to be 24.1pieces in 2024.This market is projected to experience an annual growth rate of 2.81% between 2024 and 2028 (CAGR). Additionally, there is an expected volume growth of 1.3% in 2025.

MARKET DYNAMICS AND GROWTH OPPORTUNITIES:

The Indian apparel market is one of the largest in the world, valued at over $100 billion. It has been experiencing steady growth and is expected to continue expanding at a compound annual growth rate (CAGR) of around 7-8% over the next few years.

Key Drivers of Growth

Urbanization and Lifestyle Changes: Rapid urbanization and changing lifestyles are driving demand for fashionable and trendy clothing. Growing E-Commerce: The rise of online shopping platforms has revolutionized the apparel industry, providing a wide reach and convenience to consumers. E-commerce is expected to continue growing, with online sales contributing significantly to overall revenue.

Youth Demographics: India has a large young population that is highly fashion-conscious and increasingly influences apparel trends.

Industry Structure and Developments-

The Indian apparel industry is one of the largest in the world, with a rich history of textile production and a diverse consumer base. However, the industry has faced several headwinds: Shift in Consumer Preferences: There has been a noticeable shift towards casual wear, athleisure, and sustainable fashion. Consumers are increasingly valuing quality and ethical production practices over price. E-commerce Penetration: The rise of e-commerce has transformed the retail landscape, with online sales becoming a significant portion of overall apparel sales. The COVID-19 pandemic accelerated this trend, with many consumers opting for online shopping over traditional brick-and-mortar stores. Raw Material Prices: Fluctuations in the prices of raw materials such as cotton and synthetic fibers have impacted production costs, putting pressure on margins.

Government Policies: The Indian governments policies on labor, trade, and taxation have also influenced the operational environment. Initiatives like the Production-Linked Incentive (PLI) scheme are expected to boost the textile sector, though the full benefits are yet to be realized. The Indian apparel market, while holding strong potential, has also been impacted by these global trends. The revenue in the Apparel market in India is projected to reach US$105.50bn in 2024. It is anticipated to grow annually by 3.81% for next two years. The Company, engaged in the business of apparels, has navigated through a challenging fiscal year marked by competitive pressures, supply chain disruptions, and the broader economic slowdown. In light of the projected 3.7% volume growth in 2025, the Company remains dedicated to fortifying its market position. We are committed to optimizing our operations and aligning our strategies with emerging industry trends to capitalize on market opportunities and achieve sustained growth.

INDIAN TEXTILE INDUSTRY:

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. Technological advancements are also driving opportunities in the industry. The adoption of automation, artificial intelligence, and sustainable practices can enhance production efficiency, reduce costs, and improve product quality. Investment in modern machinery and infrastructure, such as the development of textile parks and clusters, promises to attract investment and streamline supply chains. Additionally, the rise of e-commerce platforms offers new avenues for reaching broader audiences and tapping into emerging consumer segments, while digital marketing strategies can enhance brand visibility and drive sales. In rural and semi-rural areas, opportunities lie in promoting traditional handloom and handicraft textiles, which can attract niche markets both domestically and internationally. This not only supports local economies but also preserves traditional practices. Government initiatives, including subsidies, tax benefits, and export incentives, further bolster the industrys growth potential. Embracing sustainability through eco-friendly textiles and circular economy practices can appeal to environmentally conscious consumers and open new market segments. In terms of per person revenues, in India generates approximately US$73.19 in 2024. Looking ahead, the volume of the Apparel market in India is expected to reach 40.1bn pieces by 2028. Furthermore, it is expected that 99% of sales in the Apparel market in India will be attributed to non-luxury by 2024. Indias apparel market is experiencing a surge in demand for sustainable and ethically produced clothing, driven by increasing consumer awareness and a shift towards conscious consumerism.

GROWTH OPPORTUNITIES:

Tier 2 and Tier 3 Cities: There is significant growth potential in smaller cities, where rising incomes and changing lifestyles are driving demand for branded apparel.

Private Label and Exclusive Brands: Developing exclusive brands and private labels can attract niche markets and enhance profitability. Collaboration with Influencers: Partnering with fashion influencers and celebrities can boost brand visibility and appeal, especially among younger consumers.

INDIAN TEXTILE INDUSTRY THREATS:

Economic Uncertainty: Macroeconomic factors, including inflation and interest rates, continue to pose risks to consumer spending and business operations. Competition: The entry of global brands into the Indian market and the rise of domestic players have intensified competition, putting pressure on pricing and market share. Regulatory Risks: Changes in government policies, particularly those related to labor laws and taxation, could impact the cost structure and operational flexibility of the Company.

OPERATIONAL PERFORMANCE:

Despite the challenging conditions, the Company has taken several steps to streamline its operations and mitigate losses: Product Portfolio: The Company has focused on diversifying its product portfolio to include a mix of traditional wear, casual wear, and sustainable clothing lines. Efforts are being made to innovate in design and fabric to cater to evolving consumer demands. Supply Chain Management: In response to supply chain disruptions, the Company has worked towards strengthening relationships with suppliers and optimizing its inventory management. However, challenges persist in ensuring timely procurement of raw materials at favorable prices. Cost Management: The Company has undertaken rigorous cost management initiatives, including reducing overheads, optimizing workforce deployment, and renegotiating vendor contracts. These measures have been crucial in limiting the impact of reduced sales on the bottom line.

RISK MANAGEMENT:

The Company has a robust risk management framework in place to identify, assess, and mitigate key risks. Regular reviews are conducted to ensure alignment with the changing business environment. The focus is on financial prudence, operational efficiency, and strategic agility.

HUMAN RESOURCES:

The Company believes that its employees are its greatest assets. Initiatives have been undertaken to enhance employee engagement, training, and development. However, the need for cost management has also led to a rationalization of the workforce, with efforts made to minimize the impact on morale and productivity.

OUTLOOK:

While the current market environment remains challenging, the Company is cautiously optimistic about the future. The strategic initiatives undertaken in product innovation, cost management, and digital transformation are expected to yield positive results in the medium to long term. The Company remains committed to navigating these turbulent times and is confident in its ability to emerge stronger.

INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Company has implemented adequate internal control systems commensurate with the size and nature of its business. These systems are designed to ensure operational efficiency, compliance with laws and regulations, and the safeguarding of assets. Regular audits are conducted to assess the effectiveness of these controls, and necessary improvements are made as required.

KEY FINANCIAL RATIOS

Sr. No Particulars of Ratio	31.03.2024	31.03.2023
1. Debtors Turnover	8.89	10.75
2. Inventory Turnover	6.99	6.44
3. Interest Coverage Ra o (%)	25.41	-20.36
4. Current Ra o	1.77	1.75
5. Debt Equity Ra o	-0.10	-1.10
6. Opera ng Pro t Margin (%)	5.96	-4.43
7. Net Pro t Margin (%)	-18.49	-17.31
8. Return on Capital Employed	2.86	2.47

CONCLUSION:

The Indian apparel and textile industry is well-positioned for continued growth, driven by domestic demand, export potential, and technological advancements. By capitalizing on opportunities such as sustainability, e-commerce, and infrastructure investment, and by addressing challenges through strategic initiatives, companies can achieve substantial success. The sectors dynamic nature presents both opportunities and risks, and maintaining agility and innovation will be key to navigating this evolving landscape. With a focus on consumer trends, technological integration, and market expansion, the industry is set to thrive and contribute significantly to the economy.