Indian Terrain Fashions Ltd Management Discussions

INDIAN INDUSTRY OUTLOOK, OVERVIEW AND DEVELOPMENTS:

(A) Textile and Apparels:

• India is the worlds second-largest producer of textiles and garments. It is also the sixth-largest exporter of textiles spanning apparel, home and technical products. India has a 4.6% share of the global trade in textiles and apparel;

• The textiles and apparel industry contributes 2.3% to the countrys GDP, 13% to industrial production and 12% to exports.

• The textile industry has around 45 million workers employed in the textiles sector, including 3.5 million handloom workers. Indias textile and apparel exports stood at US$ 20.01 billion in FY24 (April-October).

• The Indian textile and apparel industry is expected to grow at 10% CAGR to reach US$ 190 billion by 2025-26.

• The 10,683 crore (US$ 1.44 billion) PLI scheme is expected to be a major boost for textile manufacturers. The scheme proposes to incentivise MMF (man-made fibre) apparel, MMF fabrics and 10 segments of technical textiles products.

• India ranks among the top five global exporters in several textile categories, with exports expected to reach US$ 65 billion by FY 2026.

(B) Key textiles and apparel zones in India:

(C) Revolutionary trends shaping the Indian textile industry:

• Emphasis On Sustainability:

Companies are redefining their entire value chain, from sourcing raw materials to production, supply chain management and waste recycling, as they transition from a linear to a circular operational model. This holistic approach addresses both pre- and post-consumer waste, making sustainability a cornerstone of the Indian textile industrys future.

Increasing Focus On Technical Textiles:

The technical textile sector specialises in producing advanced fabrics by employing cutting-edge technology on natural and synthetic fibres. This industry prioritises materials with heightened durability, exceptional insulation and enhanced heat resistance.

• Increasing Demand For Man-made Fibres:

India stands as the worlds second-largest producer of man-made fibres. These fibres contribute to nearly 100% of non-cotton and blended fabrics, offering versatility and cost-efficiency. Currently, the country produces a staggering 1,441 million kilogrammes of synthetic fibres and over 3,000 million kilogrammes of synthetic filaments.

• Growing Need for Yarn Quality:

Quality now tops price in importance for todays consumers. In garment manufacturing, it spans processes and products, encompassing attributes like durability, aesthetics, functionality and adherence to standards. Manufacturers are vital in meeting these requirements, as consumers prioritize value and reliability. Quality remains central in the garment manufacturing industry.

• Demand For Natural Fibres:

In an increasingly eco-conscious world, the textile industry is witnessing a rising appetite for natural fibres. These fibres, including cotton, silk, linen, wool, jute and cashmere are at the core of the Indian textiles industry, which is poised to grow from its current valuation of $138 billion to a projected $195 billion by 2025.

Rise In Digital Textile Printing:

Its adoption, particularly with dye sublimation printing, has surged in recent times and is poised for continued growth as technology evolves. This innovative approach empowers designers and manufacturers to unleash their creative potential, reduce waste and meet the demands of a rapidly changing market, while maintaining vibrant and high-quality textile designs.

(D) Future of the Indian textile market:

Looking ahead, the Indian textile market is anticipated to exceed a valuation of US$ 209 billion by 2029. The textile sector remains resilient by evolving to meet the demands of a changing world, actively embracing innovation, sustainability and consumer preferences to maintain its enduring relevance.

GLOBAL INDUSTRY OUTLOOK, OVERVIEW AND DEVELOPMENTS:

(A) Textile market size:

The ever-evolving textile industry stands at the cusp of significant transformation, spurred by technological advancements and changing consumer behaviors. As the global landscape shifts towards a more digital and sustainable future, understanding these dynamics is crucial for decision-makers in the textile sector.

The textile market size has grown strongly in recent years. It will grow from $638.03 billion in 2023 to $689.54 billion in 2024 at a compound annual growth rate (CAGR) of 8.1%. The growth witnessed in the historical period can be ascribed to factors such as the expansion of the global population, heightened demand for man-made fibers, government initiatives supporting the textile industry, robust economic growth in emerging markets, and the implementation of restrictions on plastic usage.

(B) Factors driving the Global textile market growth:

• Growing fashion clothing market;

• Demand for customised products,

• Sustainability in production processes,

• Adoption of technical textiles

• Corporate restructuring and investment in manufacturing processes

• Eco-friendly textiles

(C) Global Textile Market Segmental Analysis:

	• Natural fibers led the industry and held a 44.1% share of revenue in 2023 due to their broad use in a variety of applications in the fashion & appar sector.
Analysis by Product	• Polyester is predicted to experience a 7.4% increase in sales between 2024 and 2031, a trend that can be linked to the materials advantageous traits like high strength, chemical and wrinkle resistance, and rapid drying.
	• The demand for high-quality colored and printed fabrics as well as crease-free suiting & shirting fabrics is also anticipated to rise significantly throughout the course.
Analysis by Application	• Due to its high-performance qualities and end- user applications, the demand in textiles in the technological category is anticipated to increase at the fastest rate, 7.7%, in terms of value over the projected period.

(D) Global Textile Market Dynamics:

• Growing Population and Urbanization (Market Drivers):

The increasing global population and rapid urbanization are driving the demand for textiles. As more people move to urban areas, the need for clothing, home textiles, and other textile products increases, stimulating market growth.

• Intense Competition (Market Restraints):

The textile market is highly competitive, with numerous manufacturers and suppliers worldwide. Intense competition can lead to price pressures and lower profit margins, especially for commoditized textile products.

THE WAY FORWARD:

As the industry continues to be challenged by geopolitical and economic headwinds, fashion leaders in 2024 will look to strike a careful balance between managing uncertainty and seizing opportunities. With cost-saving tactics mostly exhausted, companies may focus on growing sales, underpinned by new pricing and promotion strategies. Across the industry, net intent to raise prices is more than 50 percent, according to the BoF–McKinsey Executive Survey. At the same time, reduced cost pressures could provide a potential boost to performance. As climate change brings increasingly extreme weather events and global temperatures rise, the coming year is likely to mark a heightened industry focus on environmental, social, and governance issues. The most successful companies will find a balance between sustainability initiatives, risk management, and commercial imperatives.

In the era of uncertain world, consumer discretionary spend will be weighted toward trusted categories and brands. Consumers are expected to travel more and continue spending more time outdoors. And they prefer emotional connections and authenticity over celebrity endorsements. All told, executives are bracing for a strategically complex year ahead. To counter uncertainty, the companies shall prepare for a wide range of outcomes.

RISKS, OPPORTUNITIES AND THREATS:

Risks	Opportunities	Threats
• Fluctuating raw material prices impacting profitability	• Diverse product range	• Volatile economic conditions impacting consumer spending
• Regulatory compliances with increase in operational complexities	• Proper presence across India with key players along with E-commerce enabling wider market reach	• Rapid changes in the fashions trends
• Intense competition which leads to price wars and margin pressures	• Driving the need for efficient supply chains & sustainable fashion	• Competition from big conglomerates affects the sector specific industries

THE INDIAN TERRAIN FASHIONS LIMITED STORY

Indian Terrain Fashions Limited (ITFL) is a well-established apparel retailer in India, specializing in the mens smart casual category under the brand name ‘Indian Terrain. With a sharp focus on providing comfortable clothing that caters to the needs of millennial consumers, Indian Terrains brand philosophy of "Makes You Feel Good" resonates well with a younger generation of audiences, further strengthening its visibility in the markets it operates in. The company distributes its products through various channels, including multi-branded outlets, exclusive brand outlets, large format stores, and e-commerce platforms.

With the apparel segment in India presenting a significant growth opportunity, Indian Terrain recognises this potential and has strategically chosen a minimal capital investment approach, leveraging the availability of apparel manufacturers in India. This decision not only aids profitability but also aligns with the interests of shareholders and stakeholders. The companys commitment to providing premium fabrics, superior tailoring, and comfortable fits has made Indian Terrain a preferred choice for cosmopolitan, upwardly mobile young Indian men seeking affordable yet stylish smart-casual clothing.

Indian Terrains commitment to sustainability, as evidenced by its Fairtrade Label certification, further enhances its brand reputation. As the company continues to evolve and engage with consumers, its brand promise of creating clothing that combines elegance, style, and comfort remains at the forefront of its mission to provide customers with a satisfying shopping experience.

The company is actively investing in building a stronger brand presence by adopting social media and digital marketing strategies, as well as engaging directly with end consumers. This approach allows Indian Terrain to stay relevant and aligned with upcoming fashion trends.

STRATEGIC STORE FORMATS:

The Company retails across the country through 236 Exclusive Outlets, 800+ Multi Brand Outlets, 500+ doors of Large Format Stores such as Lifestyle, Shoppers Stop, and Central and 4+ key e-commerce platforms.

Store Format	As on 31st March, 2024
COCO (Company Owned Company Operated)	12
COFO (Company Owned Franchise Operated)	72
FOFO (Franchise Owned Franchise Operated)	125
EFO (Exclusive Factory Outlet)	26
Out of India	1
Total	236

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Board has devised systems, policies and procedures/frameworks, which are currently operational within your Company for ensuring the orderly and efficient conduct of its business, which includes adherence to policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. In line with best practices, the Audit Committee and the Board reviews these internal control systems to ensure they remain effective and are achieving their intended purpose. Where weaknesses, if any, are identified as a result of the reviews, new procedures are put in place to strengthen controls. These controls are in turn reviewed at regular intervals.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Performance Metrics	FY 2023-24	FY2022-23	Change %
Revenue from Operations	456.01	500.80	(8.94)
Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA)	33.99	61.09	(44.36)
Depreciation and Amortisation Expense	22.28	22.77	(2.15)
Earnings Before Interest and Tax (EBIT)	11.71	32.42	(63.88)
Finance Costs (Interest)	21.81	21.92	(0.50)
Earnings After Tax (EAT)	(14.93)	7.09	(310.58)
Shareholders Fund	196.88	211.54	(6.93)
Earnings Per Share (EPS)	(3.37)	1.62	(308.02)
Net Fixed Assets	19.65	24.39	(19.43)

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

The employees of the Company are our best assets and their commitment towards work is directly proportional to our inherent strength. At Indian Terrain Fashions Limited (ITFL), we encourage our people to discover and realise their valuable potential. Having varied experiences and exposures, implementing challenging tasks along with continuous learning enables the employees of ITFL deliver optimum results. Acculturing new employees through physical interactions with senior colleagues and leaders, by observing and following their behaviours and ways of thinking have been crucial keeping the employees in momentum. ITFL being an equal opportunity employer and has a well-defined and progressive diversity, equity and inclusion approach embracing all diversity parameters which includes gender, marital status, religion, race/caste, colour, age, ancestry, nationality, language, ethnic origin, socio-economic status, physical appearance, disability, gender identity and/or expression and any other category protected by applicable law.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS,

ALONG-WITH DETAILED EXPLANATIONS:

Key Financial Ratios	FY 2023-24	FY 2022-23	Change %	Remarks
Debtors Turnover (in times)	1.70	2.08	(18.04)	Due to increase in Debtors & decrease in Revenue from Operations for the year
Inventory Turnover (in times)	4.07	4.79	(14.96)	Due to decrease in Inventory & Revenue from Operations for the year
Interest Coverage Ratio (in times)	1.55	2.79	(44.44)	Due to proportionate reduction in Revenue from Operations
Current Ratio (in times)	1.59	1.62	(1.84)	Due to increase in current Assets over the increase in current Liabilities
Debt Equity Ratio (in times)	0.48	0.25	(92.39)	Due to the additional debt raised during the year
Operating Profit Margin (%)	7.45	12.19	(38.88)	Due to proportionate reduction in Revenue from Operations
Net Profit Margin (%)	(3.27)	1.42	(330.28)	Due to loss during the current financial year
Return on Networth (%)	(7.58)	3.44	(320.35)	Due to loss during the current financial year

CAUTIONARY STATEMENT:

Statements in this Annual Report on describing our objective, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable laws, rules, regulations, etc. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets, in which we operate, in addition to changes in government regulations, tax laws and other statutes and incidental factors.

	For and on behalf of Board of Directors
	Indian Terrain Fashions Limited
sd/-	sd/-
Venkatesh Rajagopal	Charath Ram Narsimhan
Chairman & Whole-time Director	Managing Director & CEO
DIN: 00003625	DIN: 06497859
Date: 19th August, 2024
Place: Chennai