Hindoostan Mills Ltd Management Discussions

A. BUSINESS SEGMENT – TEXTILES: Industry Structure & Development:

Indian economy is staging a broad based recovery across sectors, positioning to ascend to pre-pandemic growth path in FY23. Indias GDP growth is expected to remain robust in FY24. GDP forecast for FY24 to be in the range of 6-6.8 %.

The textile sector, after the agricultural sector, represents the oldest and most important industrial sector in India. The domestic apparel & textile industry in India contributes approx. 2% to the countrys GDP, 7% of industry output in value terms. The share of textile, apparel and handicrafts in Indias total exports was 11.4% in 2020-21. India holds 4% share of the global trade in textiles and apparel. The textiles and apparel industry in India has strengths across the entire value chain from fiber, yarn, fabric to apparel. The Indian textile and apparel industry is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool, and silk products to the organized textile industry in India. The organized textile industry in India is characterized by the use of capital-intensive technology for the mass production of textile products and includes spinning, weaving, processing, and apparel manufacturing.

The highest contributors to FDI in the Textile sector of India (including dyed, printed) from April 2016 to March 2021 are Japan, Mauritius, Italy, and Belgium. India has set green goals as a key agenda en route to achieving Amrit Kaal. Industries and businesses, therefore, are making conscious efforts to formulate strategies to walk the fine line between bettering bottom lines and adopting environment-friendly practices.

The current geo-political situation continues to adversely affect businesses all over the world. Indias economy will likely slow due to tightening financial conditions and supply chain disruptions due to a prolong war in Europe. According to a report by Crisil, Indias merchandise export growth is likely to moderate to 2-4 per cent in the coming fiscal year as two of the countrys biggest destinations for exports the US and EU are expected to slow down sharply. A slowdown in 2023 in advanced economies, especially the U.S. and the eurozone, is expected to make Indias export trade vulnerable.

With volatile raw material prices and diminishing demand, the Indian Textile industry also has been facing headwinds over the last more than one year. After this period of exorbitant raw material prices, the situation is finally looking up with lower and stable cotton prices and some improvement in demand for textile and apparels. The earthquake has destroyed many spinning factories in Turkey, so they are buying cotton yarn from India. The European countries have also placed orders with India. Customs duty on cotton imports was waived w.e.f 14 April 2022, until 30 September 2022.

Government has launched the Production Linked Incentive (PLI) Scheme with an approved outlay of INR 10,683 crores to promote production of MMF Apparel, MMF

Fabrics and Products of Technical Textiles in the country to enable Textiles Industry to achieve size and scale and to become competitive.

Further, the Government has approved the setting up of seven P M Mega Textile Parks at Tamil Nadu, Telangana, Karnataka, Maharashtra, Gujarat, MP and UP to develop world class infrastructure for a period up to 2027-28. These will boost the textile sector in line with 5F (Farm to Fibre to Factory to Fashion to Foreign) vision.

India is working on major initiatives, to boost its technical textile industry. Government is supporting the sector through funding and machinery sponsoring.

Strengths and Opportunities:

Our textile business has an integrated manufacturing facility for yarns and fabrics which helps serving unique customer requirements and strictly adheres to committed quality and delivery schedules. In addition, the business strives to serve large and small customers with the same level of service and quality. The company is perceived as a producer of quality goods and this goodwill is helpful in staying competitive in the domestic and export markets. The Company also scores on the services being provided to the customer especially terms of timely delivery and after sales service. With a wide range of products in cotton, polyester cotton, linen and linen blends, viscose, modal and lycra in greige and finished varieties, our textile business continue to be a one stop shop for discerning buyers.

The demographics and increasing purchasing power of the countrys population indicate a growth in the textile demand in the country which is a positive indication for the company.

W eaknesses and threats:

The ever increasing no. of low-cost manufacturing hubs in textiles, specially fabrics, continuous drop in demand, labour issues continues to pose a challenge to us. In the long term, volatility of raw material and process costs is bound to have negative impact on the market.

Outlook:

W e will continue our focus on value addition by developing innovative products, increasing the share of sustainable products while also optimizing utilization and productivity and providing best services to all our stakeholders.

B. BUSINESS SEGMENT – ENGINEERING: Industry Structure and Development:

EHL hasstrongdesignandengineeringcapability,knowledge and manufacturing prowess. It has transformed itself to a preferred developed partner through concentrated focus on innovation, technology and value addition. Covid-19 pandemic impacted our core businesses adversely and is still recovering from the impact of lockdown and market volatility. Post Covid, things are keeping up in sectors such as Steel. The Business performance enhancement, market opportunity assessment, market penetration, sector mapping and growth strategy were key focus areas through out to indulge in new sectors. We are keen to establish ourselves in MDF and Plywood, and Corrugation industry with our applicator rolls and press rolls. We have strengthened our position in Calender Manufacturing over last year and are on the path of expanding our reach and share of wallet in the market.

Str engths and Opportunities: Innovation is a continuing on-going process in the Company, which has helped us to explore new ideas and deliver solutions for transformation consistently. The pooling of our technical knowhow enables us to uniquely provide optimal results every time everywhere. The opportunity to build up better sales pipeline and on top projects with diversificationof products has increased our share of wallet in machine building along with customer satisfaction. This year we were able to secure big project in steel from CMI for AM/NS for non woven rolls. Supplier consolidation, Product portfolio, material substitutions are few factors to enhance strategic change.

W eaknesses and threats:

High volatility in prices of key raw materials. Inventory management.

Long sales cycle in steel industry.

Market competition – grey market pricing. T echnological upgrades, industry dynamics.

Import lead time and its dependency across all business segments.

After sales support on site especially in machine building.

Iteration rate.

Outlook:

The general business outlook remains positive in view of the overall demand condition. Increasing share of value added products remains one of the top priorities with focused cost management and continuous bench marking of best practices. Continuous efforts to enhance the brand image of the Company by focusing on R&D, quality, cost, timely delivery and customer service will help to scale up our market share.

Performance, Risks and concerns, Internal control systems and their adequacy and industrial relations are mentioned in the Directors Report.

Key ratios are mentioned in Annexure A to Notes to financial statements, page No.110.