Faze Three Autofab Ltd Management Discussions.


Economy and Outlook

Indias GDP is rebounding in FY 22 from contraction in FY 21 due to COVID crises. The sectoral recovery story is not uniform, overall, FY 22 is expected to be much better than FY 21 for all sectors. The Export sector catering to the USA, UK & Europe did very well in H2 of FY 21 owing to pent up demand and supply chain disruption from China. Western Governments and Central banks have coordinated fiscal and monetary measures of unprecedented magnitude to ensure that demand is not destroyed and businesses are not shut down. Also unemployment benefits have been generous. The aforesaid has contributed to robust exports demand and the trend is accelerating in FY 22. Domestically agriculture, infrastructure and essential goods have grown with support from the government. Commodity prices viz. Steel, Crude, Cement, Cotton, etc. are at multi-year highs posing risk to pace of recovery. RBI has been at the forefront to support the economy & ensure that both retail and corporate credit is adequately supplied so that both demand and supply side is not affected. The moratorium has helped many however, full recovery from the scars of the pandemic is still away on levered individuals / firms. Indian economy by and large has been robust except for the travel, tourism, hospitality, etc. sector which has acute stress and needs urgent attention. Availability of labor / talent is back to normal as vaccination rate improves. Last 12-15 months have seen huge foreign inflows in new generation technology businesses and manufacturing set ups. China plus One initiative has accelerated a tangible move across the sectors in India. Global companies have preferred India over other South Asian peers owing to a stable government, size of economy, availability of talent, incentives / policies, lower income tax rates, etc. Government has been proactive in announcing PLI schemes to capture the manufacturing movement from aforesaid.

India is seeing a paradigm shift in business moving from the informal sector to the formal sector on the supply side. This shift comes with its share of stress in the informal sector as India has for long relied on its informal economy however one can expect this shift to be long term structurally positive for the economy.

The equity markets have been buoyant tracking its global peers. The increase in retail participation across the globe has grown ~2-3x of pre-covid times. Banking credit has been adequate and timely with support from governments aiding businesses. However, going forward Businesses should budget a higher rate and tighter credit given the inflation risk on the horizon.

Overall India is in a bright spot to benefit from global recovery and enjoys patronage from global investors and companies as a preferred partner. Local demand is picking up and a stable government in its second term is expected to accelerate growth while keeping worries on fiscal and inflation as second priorities. The Reserve bank under the current governor has done a phenomenal navigation under this crisis on Financial Stability, Interest Rates, Policies and exchange. Indias exchange reserves are over $ 600 Bn and provide confidence to Western governments / investors on Indias stability.

A high degree of uncertainty surrounds these projections, with many possible downside and upside risks. Much still depends on the race between the virus and vaccines. Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis.


Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. Indias strengths have already been defined in traditional textiles and natural fibres globally. It is the second largest producer of polyester in the world and is now emerging as a key player in the technical textiles industry contributing to a market size of $ 19 Bn. Technical textiles is a fast-growing sub-segment that finds its usage in an array of sectors.

The end use application of technical textiles is widespread and seen in industries such as agriculture, automotive, construction, sports apparel, healthcare etc.

Technical textiles as a segment is directly proportional to the stage of industrialization and economic growth of any country. Developing countries undergoing large scale industrialization fuel the demand for technical textile products. Indias leap towards modernization and its manufacturing competitiveness are some of the key contributors to the growth of this segment. India has the advantage of having a strong raw material (fiber) base – of cotton, man-made fiber, silk, wool and jute. Moreover, India possesses excellence in the entire value chain extending from fiber to fabric to garments. Despite achieving a high growth rate, the per capita consumption of technical textiles in India is 1.7 per kg vis-a-vis 10-12 kg in developed countries. Technical textile accounts for approximately 13% of Indias total textile and apparel market and contributes to Indias GDP at 0.7%. However, rising awareness regarding the benefits of technical textile is projected to propel its demand across various end-use industries.

The automotive industry pumped the brakes hard in the early months of the global COVID-19 pandemic. The effects began in China, where sales plunged 71 percent in February 2020; by April, sales had dropped 47 percent in the United States and divide 80 percent in Europe. Having endured and managed to recover from the disruptions induced by a once-in-a-century event, the Indian auto sector is cautiously looking forward to 2021 with hopes of putting up a better show in the post-COVID-19 world, although a lot will hinge on how the economy grows. The industrys engines never stopped running, and two wheelers and cars have come roaring back. The third and fourth quarter of FY 2020-21 have seen rapid (and in some cases, record) levels of production.


The Company caters to Original Equipment Manufacturers (OEMs) and are largely concentrated in the domestic market. The Company derives more than 90% of its revenue from the domestic market. The Company currently has a market share of over 45% in the automotive fabrics business in India and (as per company estimates) aims to increase its market share with existing OEMs. The company has grown its Export business during the last few years and is actively looking to grow it further.

Company has an in-house research and development department to develop new designs as per the market trends. Further, Company works closely with its existing customers for development of latest designs and regular upgradation of technologies and know-how of its product enable it to continuously evolve technologically and remain competitive. The Long-term presence in the industry and its consistent performance in the terms of reliable & innovation, helps the company in getting regular orders as a preferred supplier. The Company believes that it will continue to benefit from its long presence in the automotive fabric industry and established relations with OEMs over the medium term.

The Company has continuously evolved in development planning and execution strategy to align with specific product needs and standardization of processes. There is constant interaction taking place with OEMs to showcase innovative capabilities which are in sync with the themes / vision of the OEMs for the future launches. The other set of factors that drive all new developments towards FTAL is QDS (Quality, Delivery & Service). Quality levels were drastically improved and 100% compliance to delivery schedules followed with all OEMs. Since all OEMs are Just in Time customers, the inventory flow management is key to gain QDS points.

The Company was able to sustain its overall business risk profile in the financial year 2020-21, marked by the significant improvement in its operating margin around 16.85% from 10.75% in Financial year 2019-20; despite a drop in revenues of around 19% due to COVID induced lockdown in Q1FY21. The improvement in margin has been driven primarily by subdued prices of key raw materials and efficiency enhancement as compared to previous financial year. Further, healthy accretions to reserves in financial year 2020-21 has resulted in improvement in the capital structure, with total outside liabilities to adjusted net worth at approximately 1.6 times as on March 31, 2021 from 2.2 times as on March 31, 2020.

The company expects its annual revenue to surpass FY 2020 levels in FY 2022 regardless of growth % of the overall automotive industry owing to a wide base of customers in the automotive fabric segment and new product developments under technical textile segments which are expected to get new orders in FY 22/23. Also, the company will actively pursue to grow its exports market across all geographies since the earlier joint venture commitment with global partners constrained the company to pursue certain specific accounts. The Net profit % to Revenue would depend on the trend in raw materials prices while they are dependent on crude and demand/supply dynamics. However, the company expects to maintain the average NP% trend of last 2 years going forward unless there is abnormally high rise in RM prices.



The Company operates in the Automotive Technical Textile Sector and its performance is directly linked to the performance of the automotive sector. Last year, after the first lockdown, sales of passenger vehicles (PV) and two-wheelers rose at a brisk pace. As per wholesale data by the Society of Indian Automobile Manufacturers (SIAM), from August to October 2020, auto sales were higher compared to the same period in 2019.

The shift from shared mobility to personal, low interest rates, discounts and sharp rural recovery led to that sales spike. In addition, higher government spending in the infrastructure space gave a push to the commercial vehicle (CV) segment (goods carriers). A positive monsoon, strong rural demand and the availability of finance were all indicators of a good economic recovery and buoyant demand, going forward. The new vehicle scrappage policy is also said to help boost demand for new vehicles after removing old unfit vehicles currently playing on Indian roads. Further, announcements with regards increased spend on road infrastructure, voluntary scrappage policy, Research & Development and PLI among others, augur well for the automotive sector.

In June 2021, from two wheelers, Passenger Vehicles, Commercial Vehicles in all categories were up on YOY basis, passenger vehicles maintained to see good demand as customers continued to show keenness in vehicles for observing social distancing and safety of their families. Two-wheeler category though in green has witnessed a softer recovery as the rural market is taking time to get back from the post second wave. Commercial vehicle segment has seen a staggering growth over last year, though on a very low base as there were product shortages due to BS-VI transition.

Threats and Challenges

The main raw materials for the company are Polyester yarn, PU Form and Dyes. These products are procured from the local market however their prices are benchmarked against the Crude Prices. Prices of polyester yarn and its key input, purified terephthalic acid (PTA), fell after the onset of the pandemic. But they rebounded in September 2020-January 2021, with the price of yarn rising faster than PTA. The overall yarn prices have increased because of a sharp rebound in demand in the second half of the fiscal year 2020-21. Globally, too, prices have recovered more than 50 percent since they slumped in March-April 2020.

Indian automakers have been struggling for long, reeling first under the economic slowdown, which in turn got exacerbated by the Covid-19-induced national lockdown. The lockdown had sent a shockwave through the auto industry, throttling consumer demand, and subsequently, affecting automobile sales. In the Second half of FY 2020-21 automakers had seen a spike in prices due to the industrys transition to stricter BS-VI emission norms as well as higher commodity prices. The rise in commodity prices this time is, similarly, expected to hit the customer as well. The decision by automakers to pass on higher commodity prices onto the customers along-with the adverse economic climate wrought by the pandemic can again come back to bite the automakers.

The second wave of the pandemic unfolded with predictions of a third wave in the offing poses a major threat due to lockdown like restrictions & supply chain disruptions. Government restrictions on account of the COVID-19 pandemic could affect smooth operation of business activities. People are anticipating a third wave. Covid-19 spread into tier-2 cities this time leading to lesser savings for people in urban and rural India, there is a major economic impact at the bottom of the pyramid which is expected to affect the sales of entry-level cars up to INR 4 lakhs and two-wheelers.


The company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are properly authorized, recorded and reported correctly. Further, the internal control system is designed to ensure that all the financial and other records are reliable for preparing financial statements and for maintaining accountability of the assets.

Further, the adequacy of Internal Control Systems has also been mentioned in the Auditors Report.


Operational Performance

During the year under review, your company reported a profit of Rs. 14.11 Crores before tax adjustments as compared to profit of Rs. 8.40 Crores in the previous year. Revenue from operations were reported at 134.14 Crores for FY 2020-21 against 165.85 Crores in the previous financial year, however, the Net Profit after Tax figures have been considerably up on YOY basis.


Our utmost priority has been health, safety and well-being of the people. The Company has initiated a vaccination drive for its employees. We have been proactive and swift in ensuring safe working conditions, strict standards of social distancing, necessary infrastructure and equipment across all our operations.

Your Company is committed to create an environment of engagement, transparency and meritocracy while also being performance oriented and balanced by responsibility towards the community it impacts. To the Company, its people are a very valuable resource.

Companys talent acquisition strategy is to hire candidates with the right competencies required by the business at the right time. In an increasingly competitive market for talent, Your Company continues to focus on attracting and retaining the right talent. It is committed to provide the right opportunities to employees to realise their potential.

Your Company continues to enhance employee experience while listening and acting on feedback received through the employee engagement. Your Company has continued to maintain amicable industrial relations by focusing on increased worker level engagement through formal and informal Communication and training forums.


The Company is moving towards processes and machines which are more sustainable and reduce energy use. Your Company continues to monitor and ensure the highest standards of environmental, health and safety norms. The Company has also taken various steps to conserve energy such as Installation of Low KwH LED lights across the unit. The Company has recently invested and installed a 110 kWh solar power plant at one of its unit in Dadra, further contributing towards the growth of clean energy.

All the emissions / waste generated by your Company are generally within the permissible limits given by respective state Pollution Control Boards (PCBs). Ensure compliance with applicable pollution and environmental laws at the Companys works / factories / locations by putting in place effective systems in this regard and review the same periodically.


Statements in the Management Discussion and Analysis describing the Companys objective, projections, estimates, expectations or predictions may be forward looking statements within the meaning of the applicable corporate laws and regulation. It may be noted that the actual results may differ from that expressed or implied herein.

For and on behalf of the Board of Directors
Ajay Anand Rashmi Anand
Place: Mumbai Managing Director Director
Date: July 22, 2021 DIN: 00373248 DIN: 00366258