GLOBAL ECONOMY
The global economy started the year on a high note due to the effective
implementation of immunisation programs across countries. The economic recovery gained
momentum as communities and nations opened up, fueled by robust consumer spending and
demand. As a result, the global economy recovered from a 3.1% contraction in 2020 to grow
by 6.1% in 2021.
However, in February 2022, the conflict
between Ukraine and Russia began and led to supply chain disruptions, a
rise in crude oil and food prices, and inflationary pressures, which hindered the
availability of agricultural inputs and exacerbated the global inflationary climate. The
conflict has continued far longer than anticipated and is likely to impede economic
recovery and cause one of the worst humanitarian catastrophes in the world.
Cautious
The outlook for the coming year remains cautious, as concerns such as
the high inflationary climate and the ripple effect of global supply chain disruptions
continue to weaken the recovery process.
INDIAN ECONOMY 2
After experiencing a 6.6% decline in FY21 due to the pandemic, the
Indian economy expanded by 8.7% in FY22. The deadly Sars-Cov2 delta virus outbreak in
April 2021 caused havoc and claimed more lives than the initial wave in 2020.
Localised restrictions slowed the recovery in the first three months of
the year, while the inflation driven by price pressure hurt economic sentiment in the
second half. However, the RBIs continuing accommodative stance aided the nations
recovery during the reviewed fiscal year. The PLI scheme, which sought to make India a hub
for global manufacturing, was the most notable of the various initiatives the Indian
government took to improve the manufacturing industry as the government continued to
prioritise the manufacturing sector for its growth goals.
Overall, the outlook for the coming
year remains cautious, as concerns such as the high inflationary
climate and the ripple effect of global supply chain disruptions continue to slow the
recovery process. Moreover, with the Reserve Bank of India increasing interest rates to
combat inflation, the upcoming fiscal year is anticipated to experience a deceleration in
GDP.
GLOBAL TEXTILES INDUSTRY
GLOBAL TEXTILE MARKET SIZE (IN USD BILLION) 3
The global textile market, estimated to be worth USD 978 billion in
2021, is likely to grow at a CAGR of 4-5% between 2021 and 2026. During the forecast
period, the market is anticipated to be driven by the fashion industrys growing need for
garments and the rise of e-commerce platforms. However, the pandemic has impeded the
growth of the market. In addition, global trade restrictions created by a disrupted supply
chain and a fall in textile product consumption have negatively impacted the market.
Nevertheless, with government support and increased public awareness of effective
preventative measures, the industry is projected to recover strongly over the forecast
period.
Polyester is expected to grow at a 3-4% CAGR between 2021 and 2026,
owing to the rising demand for polyester fibres in the textile industry and rapid growth
of the fashion industry in developed countries coupled with shifting consumer preferences
for polyester blended fibres. Rapidly changing fashion trends and modern living standards
will create opportunities for high-end polyester fibres with high durability,
quick-drying, and easy-to-clean properties. Rising income levels and rapid urbanisation
have fueled fashion trends in several emerging economies.
In addition, polyester fibres are now exclusively used for sports and
gym clothing due to their lightweight and moisture- wicking properties, further
accelerating market growth.
RECYCLED POLYESTER YARN 4
Textile consumption has increased over the years due to rising
discretionary spending and trends, such as online retail. However, the expansion of the
textile industry has had an adverse impact on the environment due to waste generation.
Despite efforts to reuse and reduce clothing waste, a large portion ends up in landfills.
To tackle the high volumes of waste generated, international brands are now increasing
scrutiny on their supply chain practices. This scrutiny is one of the key factors driving
the need for recycle solutions for textile waste.
Due to increased customer awareness and demand for recycled polyester
from brands, the production of recycled polyester increased from 7.9 million tonnes in
2019 to
8.4 million tonnes in 2020 which is roughly 15% of the global PET
market.
Currently, 99% of all recycled polyester is made from PET plastic
bottles. However, with an increasing demand for post-consumer bottles by the bottle
industry, competition for post-consumer bottles is increasing. Therefore, pre and
post-consumer textile recycling is an important strategy to ensure future feedstock supply
for the rPET textile industry.
The market share of chemically or biologically recycled polyester is
still very low. Efforts to scale chemical and biological recycling are being seen globally
and each company is finding solutions to technological challenges, feedstock availability,
and energy use. With multiple companies starting commercial production of chemically
recycled polyester soon and
TREND AND OUTLOOK OF INDIAN TEXTILE AND APPAREL MARKET (INR IN BILLION)
Domestic Indian textile consists of Ready-made garments, Technical
textiles, and Home- made Textiles further companies in the research and development phase,
the market share of chemically recycled polyester is expected to grow in the coming years.
INDIAN TEXTILE INDUSTRY
The Indian textile and apparel industry plays a significant role in the
nations economic growth. According to the Ministry of Textiles annual report for 2020-21,
Indian textiles and apparel contributed 11.8% of total exports in the fiscal year 2020.
Furthermore, the Indian textile and apparel industry accounts for 5% of the global textile
and apparel industry. The primary strength of the Indian textile and apparel industry is
its sizable raw material base and manufacturing units, which are present throughout the
value chain. In addition, the industry provides direct and indirect employment to more
than 45 million and 100 million people, including women and the rural population.
The Indian textile and apparel market, pegged at INR 8,153 billion in
the fiscal year 2021, is anticipated to grow at a CAGR of 11-13% between fiscal years 2022
and 2026 and reach a value of INR 15,300 - INR 15,400 billion. During this period, it is
anticipated that exports will grow at a CAGR of 9 to 10%, while the domestic industry will
grow at a slightly higher pace of 13 to 15%.
Various economic factors, such as a rise in discretionary income and
urbanisation, will drive the continued expansion of the Indian textiles and apparel
market. In addition, an increase in online retailing, a shift from cotton to man-made
fibre, and the expansion of global industry outside of China would contribute to the
growth trajectory of the Indian markets.
INDIAN YARN INDUSTRY
INDIAN TEXTILE YARN MARKET (IN INR BILLION) 7
The textile yarn market in India, which accounted for approximately INR
1.4 trillion in the fiscal year 2020, decreased by 19% and reached INR 1.1 trillion in the
fiscal year 2021 due to the pandemics impact on consumption. However, the market for
textile yarn is anticipated to have increased between 28 and 32 % in the fiscal year 2022,
driven by pent- up demand as stores reopened and economic activity increased following the
lifting of nationwide lockdowns.
Additionally, the increase in cotton yarn costs bolstered the demand
for polyester and viscose yarn. As global economic conditions improve, demand from key
export markets such as Brazil, Turkey, and the United States (US) is anticipated to
increase further. Nonetheless, competition from China will continue to be one of the
primary factors affecting Indias export growth.
Recent announcements by the Indian government, including performance-
linked incentive (PLI) schemes and mega investment textile parks (MITRA), are designed to
improve the textile industrys economies of scale, export potential, and competitiveness.
If both programmes are implemented effectively and promptly, they will increase MMF- based
RMG exports, thereby increasing demand for MMF and yarn. As a result, between fiscal years
2022 and 2026, the MMF market is anticipated to grow at a CAGR of 7 to 10%.
COMPANY OVERVIEW
Filatex India Limited, incorporated in 1990, is one of Indias largest
and integrated Polyester Filament Yarn manufacturers. With an annual
production capacity of over 400,000 tonnes, the Company is a trusted brand in the country,
offering a diverse range of products such as POY, FDY, DTY, and ATY. Headquartered in
Delhi, the Company has a significant national and international footprint.
The Companys two cutting-edge manufacturing facilities in Dahej and
Dadra, combined with its extensive experience of more than 28 years, enable it to
implement its ethos of quality in every aspect of a value chain. In recent years, the
Company has
consistently outpaced industry growth and emerged as the trusted
partner
„ of choice for its customers in the textiles industry.
FINANCIAL PERFORMANCE
- During the year, the Company recorded a production volume of 3,41,480
MT as
- against 2,58,693 MT in FY21. The sales
- volume increased to 3,40,480 MT as
- against 2,59,905 MT in the previous
- year. The revenue from operations grew by 72% from INR 2,227 crores
in FY21
- to INR 3,828 crores in FY22. EBITDA stood at INR 531.1 Crores
compared to INR 347.3 crores recording a growth of 53%. The net profit increased by 82% to
INR 302.7 crores from INR 165.8 crores in FY21. A healthy cash flow surplus enabled the
Company to prepay a large share of term loans in this financial year, reducing the
debt-equity ratio to 0.33 from 0.77. In March 2022, the board also approved the buyback
offer at the rate of INR 140 per share for an amount of INR 59.50 crores.
| in INR crores |
Q1FY22 |
Q2FY22 |
Q3FY22 |
Q4FY22 |
| Revenue from Operations (Net Sales) |
698.91 |
964.95 |
1,074.22 |
1,090.01 |
| EBITDA |
101.17 |
125.14 |
159.18 |
145.62 |
| PBT (Before exceptional item) |
76.12 |
109.57 |
147.63 |
123.63 |
| PAT |
52.14 |
73.78 |
98.25 |
78.55 |
KEY FINANCIAL RATIOS
Disclosures of key changes in financial indicators [SEBI (LODR)
(Amendment) Regulations, 2018, Para 3(x)(b)]
| RATIO |
FY22 |
FY21 |
CHANGE % |
REMARKS |
| Debtor Turnover Ratio in days |
12.71 |
19.69 |
(35.44) |
Due to loss of revenue in H1FY21 caused by
the Covid-19 pandemic and subsequent lockdown, the full-year debtor days give a skewed
picture. However, if we consider a comparison with H2FY21 once the lockdowns were lifted,
the debtor turnover ratio is 11.49 days in H2FY21 compared to 12.71 days in FY22. |
| Inventory Turnover Ratio in days |
30.04 |
34.93 |
(14.00) |
|
| Interest Coverage Ratio |
24.47 |
7.73 |
216.55 |
Strong growth operating profits supported by
cash flow generation helped Company repay the long term borrowings, resulting in improving
interest coverage ratio |
| Current Ratio |
1.59 |
1.34 |
18.66 |
|
| Debt Equity Ratio |
0.33 |
0.77 |
(57.14) |
Strong growth operating profits supported by
cash flow generation helped Company repay the long term borrowings, reduction in
debt-equity ratio |
| Operating Profit Margin |
13.87 |
15.60 |
(11.08) |
|
| Net Profit Margin |
7.91 |
7.45 |
6.17 |
|
| Return on Net Worth |
32.76 |
24.43 |
34.10 |
Strong operating performance through the
year resulted in higher profitability and subsequently higher return on net worth. |
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
Employees are regarded as the Companys most valuable asset. To that
end, the Company has developed policies to nurture employee talent and ensure that
opportunities for advancement are available and that their skills grow in tandem with
their responsibilities. The HR department considers skill, commitment, and sincerity when
evaluating organisational talent. In addition, the Company has offered ESOPs to senior
employees in order to retain valuable employees. The Group Accident Insurance Scheme has
also been implemented as a welfare measure for all employees.
Human resource policies that are consistent and equitable ensure that
industrial relations remain peaceful and cordial, which increases productivity and
effectiveness.
By establishing systems and processes and emphasising the recruitment
of high-quality labour, the Company aims to foster a growth-oriented culture among its
employees. In addition, the emphasis on transparent performance evaluation and incentive
schemes tied to productivity has resulted in a more motivated workforce and higher
productivity. A further important step for senior-level promotions and recruitment is the
administration of temperament and management aptitude tests, which aid in evaluating the
soft skills required for directing the Companys operations.
The Company also regularly conducts training programmes to improve
employees skill sets and work capabilities at all levels, which is critical for their
growth. Furthermore, a strong emphasis is placed on developing a succession plan for all
key positions. This emphasis is extended to well- qualified, young family members
undergoing rigorous operational training.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Filatex has a robust internal monitoring and control system to ensure
the efficiency of operations and processes, the protection of company assets from
unauthorised use, and the authorisation of financial transactions.
The Companys internal control system is proportional to its size,
scope, and operational complexity. The Company has a Budgetary Control system, and the
management routinely monitors actual performance. In addition, it has a clearly defined
organisational structure, authority matrix, and internal regulations.
The internal control system ensures the accuracy of financial and other
records for preparing financial statements and keeping accurate asset records.
An independent agency continues to serve as the Companys Internal
Auditor, reviewing "Operations & Systems" audits per the audit committees
guidelines. As part of their duties, internal auditors evaluate and assess the adequacy
and effectiveness of internal control measures and compliance with generally accepted
accounting principles and statutory requirements. The internal audit reports are
discussed/reviewed by senior management and the Boards audit committee, and based on
their recommendations, the appropriate compliance measures are implemented.
CAUTIONARY STATEMENT
Investors are cautioned that this discussion contains forward-looking
statements that involve risks and uncertainties. When used in this discussion, words like
will, shall, anticipate, believe, estimate,
intend and expect and other similar expressions, as they relate to
the Company or its business, are intended to identify such forward- looking statements.
The Company undertakes no obligations to publicly update or revise any
forward- looking statements, whether as a result of new information, future events, or
otherwise. Accordingly, actual results, performances, or achievements could differ
materially from those expressed or implied in such statements. Factors that could cause or
contribute to such differences include key raw materials availability and prices, cyclical
demand of the products in the markets, changes in Government regulations, exchange rate
fluctuations, tax regimes, economic developments within India and the countries in which
the Company conducts business and other incidental factors.
Readers are cautioned not to place undue reliance on the
forward-looking statements as they speak only as of their dates.
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