future enterprises ltd share price Management discussions

Economic Overview

India focused on saving lives and livelihoods by its willingness to take short-term pain for long-term gain, at the onset of the COVID-19 pandemic. An early, intense lockdown provided a strategy to save lives and preserve livelihoods via economic recovery in the medium to long-term. A public investment programme centered around the National Infrastructure Pipeline to accelerate the demand push and further the recovery was rolled out.

As per the Reserve Bank of Indias (RBI) estimates, Indias real GDP growth is projected at 9.5% in FY22, which includes growth of 18.5% in the first quarter of FY22; 7.9% growth in the second quarter of FY22; 7.2% growth in the third quarter of FY22 and 6.6% growth in the fourth quarter of FY22. A V-shaped recovery is expected, and there has been a resurgence in high frequency indicators such as power demand, e-way bills, GST collection, steel consumption, etc.

As anticipated, while the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery has been a V-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key economic indicators. Starting July, a resilient V-shaped recovery is underway, as demonstrated by the recovery in GDP growth in Q2 after the sharp decline in Q1, a sustained resurgence in high frequency indicators such as power demand, E-way bills, GST collection, steel consumption, etc. The reignited inter and intra state movement and record-high monthly GST collections have marked the unlocking of industrial and commercial activity. A sharp rise in commercial paper issuances, easing yields, and sturdy credit growth to MSMEs portend revamped credit flows for enterprises to survive and grow. Imports contracted more sharply than exports, with Forex reserves rising to cover 18 months of imports. Inflation, mainly driven by food prices, remained above 6 per cent for much of the year; the softening in December suggests easing of supply-side constraints.

Indias GDP is estimated to contract by 7.7 per cent in FY2020-21, composed of a sharp 15.7 per cent decline in first half and a modest 0.1 per cent fall in the second half. Sector-wise, agriculture has remained the silver lining while contact-based services, manufacturing, construction were hit hardest, and have been recovering steadily. Government consumption and net exports have cushioned the growth from diving further down.

The V-shaped economic recovery is supported by the initiation of a mega vaccination drive with hopes of a robust recovery in the services sector. Together, prospects for robust growth in consumption and investment have been rekindled with the estimated real GDP growth for FY 2021-22 at 11 per cent, though second wave of Covid-19 during the first quarter of the financial year could prove a dampener to the estimated real GDP growth rate.

Operational Overview

Future Enterprises Limited (FEL) is a leading integrated fashion business, home to distinguished fashion labels and well-established retail destinations. It is fashion manufacturing company of Future Group and it will continue to operate in fashion consolidation having vast experience in predicting trends.

FY 2021 was challenging year for the business. Revenues declined sharply due to the pandemic, coupled with the lockdown impacted the operations of shopping malls and retail stores across all states. Restrictions on movements of employees, customers and goods - during the early stage of the lockdown-impacted the retail trade severely. Hence, the off-take of fashion merchandise by the retail companies was severely impacted. Company focused on rationalising its cost base aggressively.

There is going to be significant challenges in the short to medium term as the country is slowly recovering from the second wave of COVID-19 and the government taking measures to bring back life to normalcy in a phased manner.

Awards & Recognition

The Group as well as the Company had been recognised and awarded for its various initiatives in the retail sector from time to time. The Company now being part of the B2B business initiative, there is no specific categories in which it would be recognised and awarded as in past. However, the various initiatives of the Company, are helping the other retail formats of the Group to compete for various award categories and get recognitions as in past.


Considering the industry in which the Company operates and the challenges of understanding these markets, the responsibility to understand and cater to the needs of the customer is a substantial risk. With the increasing competition, current state of the textile and apparel industry, and the frequent change in customer expectations as a result of the pandemic, the risk of company losing its market share is also something the company evaluates on an ongoing basis. The Companys B2B customers has a strong digital presence and is leveraging the same to thrive during these times which has witnessed an increase in overall customer base shifting to online buying. Frequent interactions with the customers and various other initiatives are undertaken by the Company to sustain during such unprecedented times.

Human Resource Initiatives

At FEL we believe that our employees are the cornerstone of our growth and progress and they are the Companys most valuable asset. The Company has employee-friendly policies and promotes a healthy work culture which is essential for overall development of the employees. We understand the importance of work life balance and we make constant efforts to encourage a culture with emphasis on the same. The industrial relations remained generally cordial throughout the year under review. The Company continues to focus on overall individual development and the aspirational needs of employees are kept in mind while formulating various policies.

The outbreak of COVID-19 pandemic and the subsequent lockdowns created a lot of disruption, panic and uncertainty. The pandemic has disrupted organizations and led everyone to think differently about their role in a new work environment while ensuring health, safety and well-being of the employees and their families. We have taken certain initiatives to help our employees and their families including organising COVID-19 vaccination for employees and providing them access to medical care facilities.

Business Outlook

The Government of India is working on major initiatives and reforms in the Textile and Apparel sector, including launch of a ‘Mega Integrated Textile Region and Apparel (MITRA) Park scheme to establish seven textile parks with state-of-the-art infrastructure, common utilities and R&D lab over a three-year period; starting a focused product scheme; positioning the country as a global hub in the man-made fibre (MMF) and technical textiles segments. Competitive advantage, robust demand, favourable government policies, increasing investments and urbanisation are expected to be the key drivers for revival of the industry.

The fashion and apparel industry witnessed signs of recovery since Q3, FY 21 during the festive period.

The sector continued to improve since festive period until it got hit by second covid wave in March. The sector is expected to rebound from second half of the year, as Indias consumption patterns are expected to revive. The priorities of industry players will be that stores remain operational, manage cash flows tightly, leverage digital platforms and ensure customer and employee safety by following all protocols and ensure faster vaccination for all their employees.

India ranks 2nd as the largest producer of textiles and garments and is the 5th largest exporter of textiles spanning apparel, home and technical products. The Indian textile and apparel industry is set for growth, buoyed by both strong domestic consumption as well as export demand. Favourable demographic, rising per capital income and a shift in customer preference to branded products is expected to revive the textile and apparel industry which has been severely impacted by the COVID-19 pandemic.

Risks andThreats

The pandemic has been a unique economic shock that has triggered both supply and demand side shocks simultaneously across economies around the world. Increased uncertainty, lower confidence, loss of incomes, weaker growth prospects, fear of contagion, curtailment of spending options due to closure of all contact-sensitive activities, the triggering of precautionary savings, risk aversion among businesses and resultant fall in consumption and investment – leading to the first order demand shock. The supply chain disruptions caused by closure of economic activity and restricted movement of labour lead to the first order supply shocks.

The first order supply side disruptions potentially created second round effects on both demand and supply. Theinitialsupplyshock,resultinginwageandincomeloss, could impact aggregate demand and impair productive capacity leading to supply shocks. These effects were further amplified through international trade and financial linkages, dampening global activity and pushing commodity prices down. The feedback loops of demand and supply generated potential hysteresis effects - when households demand less, firms get reduced revenues, which feeds into reduced activity by firms, and thus reduced household income.

The policies to ‘flatten the epidemiological curve, therefore, needed to be accompanied by economic policies designed and targeted to mitigate the resulting shock to the economic system and ‘flatten the recession curve. There was, however, unprecedented uncertainty about the potential spread of the pandemic. The pandemic, therefore, posed unprecedented dilemmas before policymakers – lives vs livelihoods and flattening the twin curves of pandemic and the resultant economic recession.

Internal controls and their adequacy

Companys internal controls and risk management practices are validated periodically with suitable review mechanisms in place. The internal control over Financial Reporting is the bedrock for the risk and control framework for Company. The companies Act 2013 requires the Board of Directors and statutory auditors of the Company to comment on sufficiency of internal controls.

FEL has instituted the three lines of defence model, viz. (i) management and internal control measures, (ii) financials controls, risk management practices, security measures and compliance oversight, and (iii) a robust internal audit function providing the third level of defence.

The Company has identified key external and internal risks associated with the operations as well as control process to mitigate such risks. Further, regular review of identification of risks and control process to mitigate such identified risks ensures new evolved risks are identified well within time and appropriate control process to counter such risks is established. All such internal controls and their adequacy, financial and risk management policies, significant audit findings, compliance with accounting and or other standards are regularly reviewed by the Audit Committee.

Review of Financial Performance of the Company for the year under review. sales: The Companys Sales and Other Operating Income has decreased from Rs. 4,043.15 Crore in previous twelve months to Rs. 886.93 Crore with YOY de-growth of 78.06 % for the financial year ended March 31, 2021. The Covid-19 pandemic has had a significant impact on business. Operational challenges mounted due to restricted movement and disrupted supply lines.

Loss Before tax: Loss Before Tax (including exceptional items) of the Company for financial year ended March 31, 2021 stood at Rs. 1,067.79 Crore as compared to Loss Before Tax of Rs. 325.36 Crore during the previous twelve months. nterest: i Interest & Financial charges outflow has Increased from Rs. 635.75 Crore incurred in previous twelve months to Rs. 717.00 Crore for financial year ended March 31, 2021 due to increase in debt.

Net Profit/Loss: Net Loss (including exceptional items) of the Company for financial year ended March 31, 2021 stood at Rs. 1,049.90 Crore as compared to Net loss of Rs. 288.50 Crore in the previous twelve months with increase of Rs. 761.40 Crore over the previous twelve months due to Covid-19 pandemic which had significant impact on business of the Company.

dividend: While considering the Companys dividend distribution policy, the uncertainties created by COVID-19 and in view of Loss during the year under review, the Board has not recommended any dividend for the financial year ended March 31, 2021.

capital employed: The capital employed (net of cash) in the business is Rs. 9,013.71 Crore as at March 31, 2021. Return on capital employed (EBIDTA including exceptional item/average capital employed) during FY 2020-21 is 2.75% as compared to 11.58% during FY 2019-20.

surplus management: The Company have cash loss of

Rs. 439.12 Crore (without impact of IND AS) for financial year ended March 31, 2021 as compared to cash profit of

Rs. 517.46 Crore in the previous twelve months.

equity share capital: The equity share capital of the Company Rs. 98.86 Crore during the financial year under review.

debt-equity: Debt-Equity ratio of the Company was 2.52 times as at March 31, 2021.

earnings Per share (ePs): The Companys Basic EPS has gone down from Rs. (5.84) per share in previous financial year to Rs. (21.24) per share for the current financial year ended March 31, 2021.

cash earnings Per share (cePs): The Companys Cash Earnings per Share (CEPS) has decreased to Rs. (8.23) in current financial year in comparison to Rs. 9.70 in the preceding financial year.

investment: The Companys investment portfolio has decreased from Rs. 1,233.44 Crore to Rs. 1,180.52 Crore during the current financial year ended March 31, 2021. The decreased in investment during the financial year is mainly due to divestment in equity of Livquick

Technology (india) Private Limited, debentures of Galaxy Cloud Kitchens Limited, 9% Corporate bonds of Mahindra

& Mahindra Financial Services Limited and 8.45% Corporate bonds of Bajaj Finance Limited.

Net worth: The Net worth of the Company has decreased from Rs. 3,630.36 crore to Rs. 2,573.41 mainly due to Loss for the current year.

Details of significant changes (i.e. changes of 25% or more as compared to immediately previous financial year) in key financial ratios along with detailed explanations therefor, including:

Debtors Turnover 0.43
Inventory Turnover 0.82
Interest Coverage Ratio 0.36
Current Ratio 1.03
Debt Equity Ratio 2.52
Gross Margin 26.50%
Net Margin (118.37%)
Return on Net Worth (33.85%)

Details of significant changes in the key financial ratios:

1. Debtors Turnover and Inventory Turnover: It has been adversely affected due to decline in revenue on account of COVID-19.

2. Current Ratio: It has been adversely affected due to decline in revenue and profitability on account of COVID-19.

3. Interest coverage ratio: It has been adversely affected due to decline in profitability on account of COVID-19.

4. Debt*-Equity ratio and Return on Net Worth: Ratios have been adversely impacted due to decline in profitability on account of COVID-19 and increase in borrowings.

5. Net Profit Margin: It has been adversely affected due to decline in profitability on account of COVID-19.

*Debt = Borrowings (excluding Lease Liabilities accounted as per Ind AS 116)


The statement forming part of this Report may contain certain forward-looking remarks with meaning of applicable Laws and Regulations. Many factors could cause the actual results, performances, or achievements of the Company to be materially different from any future results, performances, achievements. Significant factors that could make difference to the Companys operations include domestic and international economic conditions, changes in government regulations, tax regime and other statutes.