K P R Mill Ltd Management Discussions.




Global growth level that was forecast at 3.2 percent in 2019 was marginally picking up to 3.5 percent in the beginning of 2020. The Global financial conditions started improving across the world, although with rising debt levels; An uneasy cessation of trade hostilities between China and the United States provided some relief. The bright spot in the global economy continued to be consumer spending. But the Corona virus that started in Chinas Wuhan has affected almost all parts of the world, and is seen as one of the worst periods in human history. Almost all major economies are under complete or partial lockdown. The pandemic has shaken up both the human race and the economies of these countries. The disaster COVID-19 has delivered an enormous global shock, leading to steep recessions in many countries, the deepest global recession in decades. Per capita incomes in most emerging and developing economies started shrinking.


India became the worlds fifth largest economy last year. The countrys GDP growth has been among the highest in the world in the past decade - regularly achieving annual growth of between 6-7%. When ranked by nominal GDP, the country leapfrogged France and the UK. The Indian economy expanded 3.1 percent year-on-year in the first quarter of 2020, beating market forecasts of a 2.1 percent rise, still the slowest GDP growth. As the country imposed a nationwide lockdown from March 24th 2020 aiming to contain the spread of the corona virus in India, growth was estimated to have slowed to 4.2 per cent in the fiscal 2020.But the recent World Banks latest report predicts that due to Corona virus lockdown halting economic activity Indias economy is expected to shrink by 3.2%


The global textile market size was estimated to exhibit a CAGR of 4.3% from 2020 to 2027 owing to the increased demand for apparels, especially in developing countries. Furthermore, increasing disposable income and rapid urbanization were driving the overall market growth. But due to economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it the global textile market is expected to decline from $673.9 billion in 2019 to $655.2 billion in 2020 at a compound annual growth rate (CAGR) of -2.8%. However the market is then expected to recover and grow at a CAGR of 7% from 2021 and reach $795.4 billion in 2023.


A stable outlook was forecast for the textile sector for FY 2020 following strong domestic demand, waning impact of the disruptions due to GST and demonetization and rising exports aided by a weak rupee. Liquidity of the majority of players in the sector remained adequate, along with an improvement in operational cash generation, backed by steady raw material costs and strong demand from end-user segments. But with the emergence of COVID Pandemic the Yarn exports fell considerably during the quarter ended March as imports by China, which accounts for a third of Indias yarn exports fell as garment units there shuttered. Imports by Bangladesh, which accounts for nearly a fifth of Indias yarn exports, also declined, according to a Crisil Research report. The demand for textile products abroad and domestic sales have come down due to the panic situation created by the COVID-19 outbreak. The business community is scared on account of cash crunch, supply chain disturbance and manpower-related issues.

Indias major export destinations, the United States and Europe, are the worst affected. It is tough to say when these countries will return to normal life. Some of the new challenges are safety, lack of supply and demand in addition to liquidity crunch. A new opportunity seems to be medical textile products. Indian companies should start preparing to face such challenges without depending much on government measures, which may offer only limited relief.


Cotton is one of the most important commercial crops cultivated in India. In the raw material consumption basket of the Indian textile industry, the proportion of cotton is around 60%. It plays a major role in sustaining the livelihood of cotton farmers. India also has the distinction of having the laigest area under cotton cultivation in the world. In cotton year 2019-20, the Indian farmers had achieved a record cotton-sowing of over 125 lakh hectare and with sufficient rainfall, the countiy could achieve increased cotton crop despite damage to the crop in some pockets due to flooding on account of excess rains,. Although, India is a surplus cotton economy, yet its surplus cotton availability is decreasing year after year. Indias cotton productivity level is now among the lowest in the world, according to the Cotton Association of India (CAI).


As on 31.03.2020 ( In Lakhs Bales)
Opening Stock 44.41
Production 360.00
Imports 25.00
Consumption 331.00
Exports 50.00
Closing Stock 48.41

(Source: Cotton Advisory Board) YARN

The Indian cotton spinning industry, which was already facing multiple headwinds such as low demand, unfavorable duty structure and fluctuating cotton fibre prices has been impacted further due to the Trade war between China and USA that has resulted in reduction of prices and accumulation of stock; Facing lean demand since 2014-15, with intermittent spells of good periods, the Indian cotton yarn industry was expecting a change of fortune in 2019-20. Though exports to China increased by around 47 per cent in FY19 over FY18, it declined significantly by 43 per cent in the first 10 months of FY20 on a year-on-year basis. Chinas major cotton yarn demand is now being catered to by other neighboring Countries. The last quarter of the financial year (january-March), which is usually the best quarter for the Indian cotton spinners, was expected to bring some cheer in the form of better spreads and better profitability margins due to lower cotton prices, is now confronted with yet another challenge in the form of COVID-19 pandemic.


Dynamics of the global apparel market keeps changing drastically. Growth of apparel markets in developed countries were slowing down, while a robust growth was seen in the developing nations. Among the emerging markets, India was quickly becoming a preferred destination for international apparel brands. Global brands with deep pockets were making a beeline into the Indian market due to its stabilized economy. Indian apparel market was calculated to grow at a CAGR of 13%. There are several ingrained factors such as the industry being independent and self-reliant; availability of resources ensuring competitive advantage etc. With the outbreak started in China, initially, it was looking like an opportunity for Indian exporters.

This was because European customers, who were traditionally sourcing from China, started discussions with Indian exporters for new orders. But ever since the Corona virus started spreading to Europe, things have turned upside down. Most countries are under lockdown, stores are shut due to restrictions by their governments and people dont go out and stay at home. The drop is mainly due to weak buying and many customers going bankrupt or witnessing lower sales. According to the ICRA report, demand from the EU has remained weak and recent trends in US apparel imports have also been discouraging.

Internal control

Internal Control is a process for assuring of an organizations objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization. At the organizational level, internal control objectives relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations. Our Internal control System is fully equipped with necessary checks and balances ensuring that the transactions are adequately authorized and reported correctly. The Internal Auditor conducts regular Audits of various departments and Units to ensure that necessary controls are in place.

The Audit Committee while reviewing the system and the Internal Audit Report, call for comments of Auditors on internal control systems and discuss any related issues with the Auditors and the Management of the company before submission to the Board. The independent Directors also satisfy themselves on the integrity of financial information and ensure that financial controls including Signature controls. Budget Controls, Data control and systems of risk management are in place. The systems and procedures are documented by way of Manual.


KPR, well known for its dynamic employee welfare practice continue to contribute to the well being of the Employees by extending various facilities and infrastructures. Active participation of women in economic activities and decisions, would contribute towards overall economic development. India is poised to emerge as one of the most developed, more literate, knowledgeable and economically at the forefront. Realising the need to empower women KPR recruits 90% of its employees from the womenfolk and that too from downtrodden villages. Education is an essential factor of social change and development in any society and any country. Moreover it is rightly said that to educate the women is to educate the whole family. Towards that objective right from the inception of the Company the Promoters were keen on extending higher education facilities to the Employees and providing excellent higher education facilities. Making best use of the facilities the Employees pass out the Government examinations with flying colors, securing Medals, Awards and Ranks etc.


In FY 2020 the Garments production increased by about 5% over previous Year i.e. 98.67 Million Garments. The revenue from garments was Rs 1271 Crores and the yarn & fabrics were Rs 1267 Crores. EBITDA and PAT have also increased over previous year. The Central Governments Regulatory mechanism on sugar sales facilitated higher revenue in Sugar segment. The Covid pandemic impact and the valuation of inventory at lower of cost and net realizable value during the last quarter have impacted the performance marginally. Our FASO brand retail products have started entering the market. We hope to continue the growth momentum once the normalcy returns in the Market.


The Company has successfully entered the Retail segment by launching its maiden retail Brand FASO offering premium Mens wear that stands as testimony to 100% organic and sustainable fashion. FASO offers a collection of innerwear that is designed with greater ecological integrity. In addition to providing stylish collection with bright trendy colours, the 100% superfine combed organic cotton products would offer ultra soft comfort that naturally makes it veiy skin-friendly. Available in Brief, Trunk, Boxer Shorts, Vest, Gym Vest, Muscle Tee and Athleisure the FASO products are manufactured using micro nylon elastic and due care is taken from fibre to finished products using in-house state- of-the-art technology and process facilities across the value chain. FASO currently has 34 styles of Inner wear & Athleisure wear in its product basket and more styles will be added during the current year. Its product range is explained below:

Range Segmentation

Comfort The comfort range is the essential everyday classic. Italian-inspired styles of briefs, trunks and vests with easy-does-it appeal. Basic perfection available in sophisticated natural shades.
Style Cool and stylish range of briefs, trunks and vests with vibrant colours and prints. A Perfect match for fashionistas.
Supreme - Premium range of vests, briefs and trunks crafted with uptown polish and Personality. Impeccable fabrics, detailing and cuts will transform the look from Simple to stunning.
Athleisure - Range of Italian-inspired stylish and comfortable shorts, tracks and tees designed to make one to feel as a modern mover.


Due to countrywide lockdown, the industry is grappling with major hurdles in the following areas:

Labour force and employment:

Textile & Apparels provides direct employment to over 45 million people but the nationwide lockdown has led to a temporary closure of factories and lay-offs have already begun among low wage workers. K.P.R. Supported by the best Employee facilities could retain most of its Employees during Covid pandemic taking care of their safely and security.

Domestic sales & Exports:

The Covid-19 pandemic is primarily expected to adversely impact exports as well as domestic sales. This has affected the majority of Indias export market (the US and EU together constitute for approximately, 60% of the total apparel exports from India in value terms), causing order cancellations/deferral of order leading to inventory build-up and expectation of slower realization of export receivables leading to higher working capital requirements. Additionally, domestic consumption is also getting impacted due to all India closure. New store openings have stopped and even domestic stores are facing an inventory build-up due to apparel sources for the upcoming summer season. Further, domestic prices could be negatively impacted if exporters dump their inventories in the domestic market leading to even reduced margins.

K.P.R has indeed felt its impact but hope to stabilize in the subsequent quarters with the backing of its long term consumers and reputed Buyers.

Cash flow constraints:

The industry is prone to face challenges, like cash flow constraints, lower demand and stunted growth prospects that are an upshot of hampered operations. However, demand is bound to revive as the world emerges from this crisis which will indeed be a gradual process. To give a fillip to the sector in a more sustainable manner, it is understood that the Government is working in tandem with the Industry and other stakeholders. Indias population and huge domestics consumption is its strength and the strategic roadmap being worked out is expected to enable India to achieve their full potential in the years to come.

K.P.R. also faced this constraint but with prudential cash management and planning its impact could be reduced.

Supply chain disruption:

No doubt, the COVID-19 crisis has significantly disrupted all supply chains. But with the gradual resumption of activities the impact is managed. Our experienced Logistics team at eveiy Unit and our continued cordial relation with the long term supply chain agencies would help us to mitigate this impact.

Consumer sentiment:

If nationwide lockdown continues and the situation persists, it will impact consumer sentiment on the higher side, due to closure of the market and also due to maintaining social distancing safety and health. K.P.R.s customers are long term associates and with the reputation earned through supply of best quality of products and prompt supply we are hopeful of mitigating this hurdle.


The current year began on a subdued note, as the economy was already facing challenges. With the slowdown in global trade, both exports and imports have continued to decline. Consumer spending was still holding up when the onslaught of the pandemic resulted in a sharp decline. The growth in private consumption expenditure fell, leaving only government consumption to drive growth. Getting growth back is essential, for that is the only way to protect/generate jobs and livelihoods and to retain the great strides that India has made in reducing poverty since independence. The Indian economy is expected to contract this year; the previous contractions were all driven by decline in agricultural production while this year the agricultural sector is likely to be the only one to expand. The need of the hour is for government and industry to work together to return to a sustainable growth path. Many global companies would shift buying from China to other countries, including India. As food and clothing will continue to remain key purchases, there is always hope for this industry. The Indian textile industry is on a strong footing to get a major share in the global export market. India is one of the largest producers of raw materials such as natural fibres - cotton and jute - as well as of synthetic fibres. Once life is back to normal, people are expected to shop as a feel-good element after months of lockdown and depression.

K.P. Ramasamy
Coimbatore Chairman
27.06.2020 DIN: 00003736