Globe Textiles (India) Ltd Management Discussions

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

GLOBAL ECONOMY

The year 2022 began with cautious optimism as the lingering effects of the Covid-19 pandemic continued to subside. However, the global economy still had to struggle with several headwinds, such as increasing inflation, geopolitical tensions, the Russia-Ukraine war, and a tightening monetary policy. To control the inflationary pressure, the central banks of various countries increased the interest rate, which impacted the bond market. Major international banks faced the heat from tightened monetary policy as it placed them on shaky ground, further deteriorating their performance, including the collapse of Silicon Valley Bank.

According to the International Monetary Fund (IMF), the global growth rate contracted from 3.4% in 2022 to 2.8% in 2023 due to these events and is expected to reach 3.0% in 2024. The global economic outlook for advanced economies is expected to experience a significant slowdown in growth, declining from 2.7% in 2022 to 1.3% in 2023, increasing to 1.4% in 2024 due to the fragmentation of geo-economics. Emerging markets and developing economies showed stronger economic prospects than advanced economies, with the average growth rate for these economies reaching 3.9% in 2023, and a 4.2% projected increase in 2024..

INDIAN ECONOMY

Indias economy showed remarkable recovery, surpassing many other nations and positioning it for a return to its pre-Covid-19 pandemic growth trajectory in 2022-23. Over the past decade, India has ascended from the tenth-largest economy in the world to become a significant player in the global economy. Its economic success is accredited to essential reforms, including liberalization, reduction of bureaucracy and corruption, infrastructure investments, and enhanced accessibility to financing for small and medium-sized businesses.

The estimates of the Economic Survey 2022-23 indicate a GDP growth of 7.2%. This growth can said to be driven by an optimistic business environment, robust industrial output, increased consumer spending, rapid vaccination coverage, increasing GST collections, and the vision of Aatmanirbhar Bharat. Despite a downward revision from 2021-22s growth of 8.7%, the 2022-23 estimate is still higher than that of major economies.

Initiatives like Amritkaal and Saptarishis focus on addressing economic disparities, empowering individuals in rural areas, enhancing technological capabilities, and reducing dependence on Government assistance. The Governments inclusive development approach, coupled with efforts to expand infrastructure, tap into untapped potential, promote sustainable growth, harness the youth demographic dividend, and strengthen the financial sector, are key drivers propelling India towards a promising and prosperous future.

The Russia-Ukraine war has disrupted the global supply chain system, leading to higher crude oil prices and food shortages worldwide. Retail inflation, measured by the Consumer Price Index (CPI), reached 6.8% in 2022-23. This was largely due to the Russia-Ukraine conflict and crop failures, resulting from excessive heat in some parts of the country. The conflict has further disrupted the restoration of supply chains, which were previously impacted by Covid-19 lockdowns and limited trade traffic. During 2022-23, the agricultural sector demonstrated a growth rate of 3.5%, while the industrial sector exhibited a growth rate of 4.1%.

According to the estimates of the Economic Survey 2022- 23, the Union Governments fiscal deficit has decreased to 6.7% of GDP in 2021-22, and it has further declined to 6.4% of GDP in 2022-23. This steady reduction aligns with the Governments fiscal glide path and reflects prudent fiscal management, backed by robust revenue collection over the past two years.

GLOBAL TEXTILE AND APPREL INDUSTRY

The textile industry is a major sector that encompasses various activities related to the design, production, and distribution of textiles and clothing. It includes a wide range of products, such as fabrics, yarns, apparel, home textiles, and technical textiles. During 2022-27, the textile industry worldwide is anticipated to witness a projected CAGR of 5.67%. This growth is expected to be driven by various factors, such as increasing population, rising disposable income, and changing fashion trends. The demand for textiles and clothing is anticipated to rise with an increase in population, especially in emerging economies, such as India and China.

The Covid-19 pandemic has further accelerated the increasing popularity of online shopping, due to its convenience, wider range of options, and lower prices. Consequently, the online retail marketplace has experienced growth, and now accounts for 15.9% of the industrys total value, with niche online retailers leading the way. Additionally, the apparel industry is also witnessing a shift towards sustainable and eco-friendly practices, which is further catalyzing the growth of the industry. Consumers are becoming more conscious of the environmental impact of apparel production, and they are now opting for sustainable clothing options.

INDIAN TEXTILE AND APPREL INDUSTRY

The industry encompasses a diverse range of activities, from traditional hand weaving to modern textile mills, and is expected to grow significantly in the coming years. India has long been known as a manufacturing hub for the textile and apparel industry due to its rich textile heritage, skilled craftsmanship, and low labour costs. India is the sixth-largest exporter of textiles and apparels in the world. The Indian technical textiles segment is estimated at USD 16 Billion, approximately 6% of the global market.

The Indian textile industry is the second-largest producer of man-made fibre (MMF) after China. Major textile and apparel export destinations for India include the US, EU-27 and UK, which account for approximately 50% of Indias textiles and apparel exports. India has a share of 4.6% of the global trade in textiles and apparel. The textile and apparel industry in India holds the second position in terms of employment prospects, with over 45 Million people directly employed and 100 Million people employed in allied industries.

The Indian garment industry has emerged as one of the worlds fastest-growing sectors, due to its creativity, diversity, and sustainability. As a result, it is gaining increasing global recognition. The Indian garment market is anticipated to register a compound annual growth rate (CAGR) of 11-12% from 2022, reaching USD 115-125 Billion by 2025. India plays a significant role in the global fashion industry as a major exporter of fabrics and accessories. Indian ethnic designs and materials are highly regarded by fashion houses and garment manufacturers worldwide. When it comes to sourcing for fashion wear, India is a crucial player in the international fashion arena, particularly in the realm of fabrics. Optimistic consumers are expected to release pent-up purchasing power and renew their wardrobes, leading to a projected increase in fashion sales in 2022-23. As social life resumes in many significant countries across the world, the luxury sector is predicted to experience a full recovery .(Source:https://timesofindia.indiatimes.com/readersblog/fashioninfo/indian-fashion-industry-in-next-2-years-trends-challenges-andopportunities-50945/)

Government initiatives

• The government has improved the existing Credit Guarantee Trust for micro and small enterprises by adding more funds for textile business owners.

• The government allowed 100% foreign direct investment (FDI) in the textile industry, making it easier for small companies to grow and export their products to other countries.

• The National Technical Textiles Mission proposed in the Union Budget for 2020-21 will be active till 2023-24 with an estimated expense of Rs. 1,480 crore for the betterment of the textile industry.

• The government announced that the packaging of food grains, sugar and other dry food materials will be only in jute sacks. This is expected to boost jute textile with better business profits in India.

• The rates of incentives for the exports of readymade garments and dress materials have been increased from 2% to 4% by the Directorate General of Foreign Trade. This will help textile industry to earn more profits by exporting their products.

• The Indian government approved the Integrated Wool Development Programme (IWDP) to support the production of woolen garments. The quality and production speed of woolen garments are expected to improve with the use of high-quality materials.

• The government launched the Scheme for Capacity Building in Textile Sector (SCBTS) with an estimated expense of Rs. 1,300 crore for skill development in the textile industry.

• The government launched Prime Minister Mega Integrated Textile Region and Apparel (PM MITRA) scheme to improve the infrastructure of the textile industry. (Source: fashinza.com)

Union Budget FY 2023-24 provisions

The Budget 2022-23 sought to lay the foundation for the future of the Indian economy through projects like PM Gati Shakti, Inclusive Development, Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action, as well as Financing of Investments. The capital expenditure of the Indian government expanded 35.4% from Rs. 5.54 lakh crore to Rs. 7.50 lakh crore. An outlay of Rs. 5.25 lakh crore was made to the Ministry of Defence (13.31% of the total Budget outlay). An announcement of nearly Rs. 20,000 crore was made for the PM Gati Shakti National Master Plan to catalyze the infrastructure sector. An outlay of Rs. 1.97 lakh crore was announced for Production Linked Incentive schemes across 13 sectors.

SWOT analysis Strengths

• Continuous government support

• Relatively lower costs

• Substantial availability of raw materials

• Reduced supply time

• Digitalization catalyzing e-commerce growth

• Increase in Population

• Low cost and skilled manpower

• Growing urbanization

• Rising disposable incomes

Weaknesses

• Competitive imports

• Unadaptable labour laws

• Growing competition from e-commerce

• Increased reliance on cotton

• Use of outdated technology

Opportunities

• Economic growth and manufacturing of value-added

• Growing investments and FDI opportunities

• products to boost unit value realization

• Government of Indias Make in India initiative

• Constant innovation and technological up-gradation

Threats

• Outbreak of pandemic like COVID-19 hampering

• International labour and environmental laws

• Growth of international brands

• manufacturing and sales

• Geographical disadvantages

• Inventory pile ups on account of global slowdown

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The Company has determined its business as Textiles Trading and Manufacturing. Since there is no other business segment in which the Company operates, there are no other primary reportable segments.

For the period under review, the Company has noted the export sales of Rs. 67.23 Cr and domestic sales of Rs. 316.41 Cr.

OUTLOOK

In FY 2024, the Company expects to be on a profitable growth momentum. In the Domestic Market, the overall consumer sentiments are expected to remain positive.

In the Exports market, B2B businesses of Garments are expected to retain healthy order flow. The pressure on margins is forcing textile players to either absorb or pass on the price hikes wherever possible.

RISKS AND CONCERNS

The broader trends in the economy are expected to have a direct impact on your Companys growth prospects as well. Inflation is expected to remain elevated for the foreseeable future, driven by war- induced commodity price increases and broadening price pressures. Additionally, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets. In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparel.

HEALTH, SAFETY AND ENVIRONMENT

Company considers its Human Resources as a very important asset and a key in achieving operational performance. Company continues to provide them with a safe and comfortable working environment. During the difficult pandemic times, the company has taken numerous precautions to protect its staff and workers. The company regularly complies with all stipulated environmental and safety norms.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has an effective internal control and risk-mitigation system, which is constantly assessed and strengthened with new/revised standard operating procedures. The Companys internal control system is commensurate with its size, scale and complexities of operations. To enhance the internal control procedures, the Company has appointed Shailesh & Co. as its internal auditor.

It also ensures that they are recorded in all material respect to permit preparation of financial statements in conformity with established accounting principles along with the assets of the Company being adequately safeguarded against significant loss or misuse. An independent Internal Audit function is an important element of Companys Internal Control System. This is supplemented through an extensive internal audit program and periodic review by the management and the Audit Committee of Board.

PERFORMANCE

Key Highlights of the Companys financial performance for the year ended March 31, 2023 is summarized below:

		(INR in Lakhs)
Particulars	March 31, 2023	March 31, 2022
Revenue from Operations (Net)	40183.18	38556.23
Operating Profit	565.86	653.28
Tax Expenses / Credit (Incl. Deferred Tax)	115.33	139.73
Profit after Tax	450.53	513.55
EPS:
EPS (Basic)	0.30	0.50
EPS (Diluted)	0.30	0.50

The Financial Statements as stated above are also available on the website of the Company at www.globetextiles.net.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

As on March 31, 2023, we have 399 employees across in our businesses. The industrial relations remained cordial throughout the year. The employees of the Company have extended a very productive cooperation in the efforts of the management to carry the Company to greater heights. Continuous training down the line is a normal feature in the Company to upgrade the skills and knowledge of the employees and workmen of the Company.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AND RETURN ON NETWORTH

The changes in the key financial ratios for the financial year 2022-23 as compared to the immediately previous financial year are provided under Note 34 to the Standalone Financial Statements and hence not repeated here for the sake of brevity.

CAUTIONARY STATEMENT

Statement in Management Discussion and Analysis report describing the Companys objectives, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could make a difference to the Companys operations include finished goods prices, raw materials costs and its availability, domestic as well as global demand supply conditions, fluctuations in exchange rates, changes in Government policies, tax changes, economic developments within India and the countries with which the Company has business contacts. The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future based on subsequent developments, information, or events.