k g denim ltd share price Management discussions

Regulation 34 read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 Industry structure and developments:

is a leading manufacturer of Denim Fabric. It has manufacturing facilities for Denim Fabric, Apparel Fabric, Readymade Garments and Home Textile products also generating steam for captive consumption and power for both captive consumption and outside sales.

Due to geopolitical issues, US and Western markets were impacted significantly in the financial 2022-23, which leads to lower demand for our products. Further abnormal increases in yarn and fuel prices affected our sales and profit margin significantly during the year. Ultimately the net worth of the company is also come down significantly and unable to achieve the expected cash margin. In the current year 2023-24, both yarn and fuel prices are in decreasing trend and demand for our products are increasing in both domestic and export market. We anticipate strong business volume and good cash margins for the Financial Year 2023-24.

Opportunities and Threats:

The textile industry is one of the largest industries in India and contributes a huge sum to the national economy. In India, it is the largest employment provider.

Opportunities:

After Covid 19 pandemic growth rate of the Domestic Textile Industry increased to 6-8% per annum.

It has a large potential for domestic and international markets continuous product development to cater to global needs by conducting research and development programs will increase the export market.

The Market is gradually shifting towards branded readymade garments. Our company is having separate readymade garments manufactured unit.

Emerging retail industries and malls provide huge opportunities for textile businesses. India has availability of skilled labour at a lower cost which in turn reduces the cost of production.

India also has large varieties of cotton fibers which make it distinct from other countries.

Indian textile industry is a self-reliant industry. It has a complete value chain from the procurement of raw materials to the production of finished goods.

Threads:

The textile industry lacks technology oriented machinery and production systems. Lack of forecasting is the main cause of production setbacks.

Lack of technological development affects productivity and other activities in the whole value chain. Infrastructural bottlenecks and efficiency such as transaction time at ports and transportation time.

Competition from other developing countries, especially China. Expenses like indirect taxes, power and interests are comparatively high in India. India is the geographical distance from the major global markets of the US, Europe and Japan. Big geographical distance results in high shipping expenses and lengthy lead time.

Product-wise performance:

The Companys business is manufacturing and selling Denim Fabric, Apparel Fabric, Home textiles products & Readymade Garments. It consists of 70% of total revenue. Balance revenue from other divisions namely Home textiles, Readymade Garments and Power Plant. The company is also having a power plant for captive consumption of power and steam and also sells power units to outside parties.

Fabric Divisions:

The business of manufacturing and selling Denim and Apparel fabric comes under the fabric division. During the financial year, we anticipated good profits from the fabric divisions. But unfortunately, demand for our products is very low in the export market due to geopolitical issues. Though we have a demand for our products in the domestic market, still we are unable to achieve an estimated margin in the fabric business due to abnormal increases in yarn prices and also coal prices. Due to the increase in the above raw material and input cost, our capacity utilization is low which ultimately affected our profit margin. During the financial year 2023-24, the prices of yarn and coal prices are coming down very sharply and demand for our products both export and domestic is in increasing trend and we are able to achieve more than 80% of capacity and also prices of our products are stable and we foresee a productive financial year 2023-24 with a commendable profit margin.

Home Textiles and Readymade Garments:

Home Textile division is manufacturer and seller of Home textiles products in the export market only and most of the products are exported to the US and Europe. Due to the recession in the above countries, we are unable to achieve the estimated sales and profit during the year. Further increases in fabric prices are also affecting our profit margin.

We have identified plenty of opportunities for our home textiles products in export markets namely Africa , Australia , Russia, Singapore and Malaysia apart from US and Europe. Now the prices of grey fabric are coming down in proportion to yarn prices and export orders are coming up regularly. Hence we hope during the financial year 2023-24, we will achieve good business volume along with good margins.

Power Plant:

We are utilizing the required power and steam from our own power plant. During the year, we expected a good reduction in the coal prices. But unfortunately, the prices were not reduced much. However, in financial year 2023-24, coal prices fell dramatically, which in turn decreased the cost of power and fuel for our products. This will help us to increase our profit margin.

Outlook

The Market is coming back to normal after the last 12 months of demand drop due to the geopolitical situation. Our company has orders currently to sell at close to 80% capacity. It is a current reporting period our margins have been affected due to high raw material and fuel prices. Now the decreasing trend of yarn prices, fuel prices and other input costs and high demand for our products will foresee healthy margins in the financial year 2023-24.

Risks and concerns

The Company recognizes that risk is an integral and unavoidable component of the business. The Company is committed to managing the risk in a proactive and effective manner. Identify the key risks having a severe impact on our business and take suitable measures to mitigate them.

The common risks are operational risks, raw material risk, financial risk and market risks etc.,. In todays challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans company are imperative. Senior Executives is continuously monitoring the risk areas that could have an impact on the performance of the company and take appropriate actions to maximize opportunities in all activities and to minimize adversity.

Internal control systems and their adequacy:

The Company has a proper and adequate internal control system that is commensurate with its size and nature of business, to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded, and reported correctly.

The internal control system of the Company is supplemented by an extensive program of internal audits conducted by Internal auditors. The audit observations and corrective actions taken thereon are periodically reviewed by the management to ensure the effectiveness of the internal control system, which provides reasonable assurance of effectiveness and efficiency of operations, adequacy of safeguards for assets, prevention and detection of frauds and errors and accuracy and completeness of the accounting records

Financial performance with respect to operational performance

The financial performance of the company during the financial year 2022-23 has been discussed in the Directors Report and the audited financial statements, which have been prepared in accordance with the requirement of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, discloses a true and fair view of the performance of the company during the said period.

Material development in Human Resources / Industrial Relations front, including number of people employed :

Number of people employed - 1131

Industrial relations in your plant and organization remained harmonious throughout the year. Your company emphasizes the safety of people working on its premises. Structured safety meetings were frequently held, and safety programs were organized from time to time.

The management continues to lay emphasis on identifying and developing talent in organizations with a view to retaining them and imparting further training to those capable of handling additional responsibilities. This works to increase employee satisfaction within the organization, by providing employees with fresh challenges and opportunities. Developing people and harnessing their ideas are high priorities for the company.

Financial Ratios: -

The key Financial Ratios of the company are given below with an explanation in case of significant change

CAUTIONARY STATEMENT

The Management Discussion and Analysis contain forward looking statements regarding Companys projections and expectations and the actual results could differ materially from those expressed on account of various factors like raw material prices, change in demand, government regulation etc., and the readers are cautioned against placing undue reliance on the same.By order of the Board