The Management Discussion and Analysis Report has been prepared in accordance with the
provisions of Regulation 34(2)(e) of Listing Regulations, read with Schedule V(B) thereto,
with a view to provide an analysis of the business and Financial Statements of the Company
for FY 2022-23 and should be read in conjunction with the respective Financial Statements
and notes thereon.
1. ECONOMIC OVERVIEW
Global Economy
Global economic activity is experiencing a broad-based and sharper-than-expected
slowdown, with inflation higher than seen in several decades. The cost-of-living crisis,
tightening financial conditions in most regions, Russia - Ukraine conflict, and the after
effect of COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to
slow from 6.0 per cent in 2021 to 3.2 percent in 2022 and 2.7 per cent in 2023. This is
the weakest growth profile since 2001 except for the global financial crisis and the acute
phase of the COVID-19 pandemic.
The frailties of the Chinese economy due to resurgence of pandemic further contributed
to weakening the growth forecasts. Slowing global growth apart from monetary tightening
may also lead to a financial contagion emanating from the advanced economies where the
debt of the non-financial sector has risen the most since the global financial crisis.
With inflation persisting in the advanced economies and the central banks hinting at
further rate hikes, downside risks to the global economic outlook appear elevated.
The rate hike by the US Fed drove capital into the US markets causing the US Dollar to
appreciate against most currencies. This led to the widening of the Current Account
Deficits (CAD) and increased inflationary pressures in net importing economies. Iran and
North Korea have also defied the international community by pursuing atomic programs that
in case of North Korea has culminated in the production of nuclear weapons. It is believed
that North Korea played a major role in Irans development of ballistic missiles that are
perceived as a serious threat by regional counties.
Outlook
Russia-Ukraine conflict continues to overshadow the world economy. Despite recent signs
of improvement, recovery over the next two years is expected to be moderate. The outlook
remains fragile and downside risks predominate. High uncertainty generated by the war
could take a heavy toll on activity. Trade tensions are high and could worsen. Concerns
about financial vulnerabilities have risen, including in financial institutions, housing
markets and low-income countries. While headline inflation has started declining, it
remains elevated and could persist longer. (Source OECD)
In the developed economies, inflation is slowly easing but it is still high enough to
push consumption levels lower and keep interest rates elevated. In emerging economies,
disinflation is proceeding more rapidly, especially for producer prices. (Source Mckinsey
Global Economics Intelligence executive summary, Feb 2023)
Indian Economy and Outlook
Economy
Credit growth to the micro, small, and medium enterprises (MSME) sector has been
remarkably high, over 30.5 per cent, on average during Jan-Nov 2022. Capital expenditure
(capex) of the central government, which increased by 63.4 per cent in the first eight
months of FY 2022-23, was another growth driver of the Indian economy in the current year.
Private consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY 2022-23, the
highest among the second quarters of all the years since 2013-14, supported by a rebound
in contact-intensive services such as trade, hotel and transport. Return of migrant
workers to construction activities helped housing market witnessing a significant decline
in inventory overhang to 33 months in Q3 of FY 2022-23 from 42 months last year. Surge in
growth of exports in FY 2021-22 and the first half of FY 2022-23 induced a shift in the
gears of the production processes from mild acceleration to cruise mode.
GST revenues clocked 13% growth Year-on-Year. Total gross collection for 2022-23 stands
at Rs18.10 lakh crore. Direct Tax collections up to 10th March, 2023 show that gross
collections are at Rs 16.68 lakh crore which is 22.58% higher than the gross collections
for the corresponding period of last year. The growth rate for Corporate Income Tax is
18.08% while that for Personal Income (including STT) is 27.57%.
Outlook
The Economic Survey by the Ministry of Finance projects a baseline GDP growth of 6.5
per cent in real terms in FY 2023-24.
Indias recovery from the pandemic was relatively quick, and growth in the upcoming
year will be supported by solid domestic demand and a pickup in capital investment. Aided
by healthy financials, incipient signs of a new private sector capital formation cycle are
visible and more importantly, compensating for the private sectors caution in capital
expenditure, the government raised capital expenditure substantially.
Budgeted capital expenditure rose 2.7 times in the last seven years, from FY16 to FY23,
reinvigorating the Capex cycle. Structural reforms such as the introduction of the Goods
and Services Tax and the Insolvency and Bankruptcy Code enhanced the efficiency and
transparency of the economy and ensured financial discipline and better compliance.
Growth is expected to be brisk in FY 2023-24 as a vigorous credit disbursal, and
capital investment cycle is expected to unfold in India with the strengthening of the
balance sheets of the corporate and banking sectors. Further support to economic growth
will come from the expansion of public digital platforms and path-breaking measures such
as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive
schemes to boost manufacturing output.
Despite the three shocks of COVID-19, Russian-Ukraine conflict and the Central Banks
across economies led by Federal Reserve responding with synchronised policy rate hikes to
curb inflation, leading to appreciation of US Dollar and the widening of the Current
Account Deficits (CAD) in net importing economies, agencies worldwide continue to project
India as the fastest growing major economy.
Global growth is forecasted to slow from 3.2 per cent in 2022 to 2.7 per cent in 2023
as per IMFs
World Economic Outlook, October 2022. A slower growth in economic output coupled with
increased uncertainty will dampen trade growth. This is seen in the lower forecast for
growth in global trade by the World Trade Organisation, from 3.5 per cent in 2022 to 1.0
per cent in 2023.
On the external front, risks to the current account balance stem from multiple sources.
While commodity prices have retreated from record highs, they are still above pre-conflict
levels. Strong domestic demand amidst high commodity prices will raise Indias total
import bill and contribute to unfavourable developments in the current account balance.
These may be exacerbated by plateauing export growth on account of slackening global
demand. Should the current account deficit widen further, the currency may come under
depreciation pressure.
Entrenched inflation may prolong the tightening cycle, and therefore, borrowing costs
may stay ‘higher for longer. In such a scenario, global economy may be characterised
by low growth in FY24.
However, the scenario of subdued global growth presents two silver linings oil prices
will stay low, and Indias CAD will be better than currently projected. The overall
external situation will remain manageable.
Further, the world is trying to de-dollarize the international market amid a global
economic slowdown and Indian Rupee is now going global as 18 countries have agreed to
trade in Rupee, which will reduce the trade related transaction costs, boost trade and
reduce Indias trade deficit.
2. INDUSTRY STRUCTURE AND DEVELOPMENTS Overview of apparel retail market in
India
The Indian Apparel industry is one of the most distinctive in the world because of its
ancient techniques and cultural traditions. In the vastness of India, it is but natural
that its different parts, in addition to having their own unique cultures and languages,
also have a variety in clothing. With the rise of urbanization and the country adopting
traditional values at an increasing pace, the fashion and apparel industries are on the
wheel of adaptation.
Revenue in the Apparel market amounts to US$ 96.47bn in 2023. (Source:
https://www.statista.com/outlook/cmo/apparel/india)
The domestic market is expected to continue to grow strongly until Financial Year 2025,
clocking up to INR 8.1 trillion to INR 8.2 trillion, registering a CAGR of about 18% to
20% between Financial Years 2022 and 2025.
Indian wedding and celebration wear market in India
(Source: CRISIL Research)
Ethnic wear in India accounted for about 32% of the overall apparel retail market in
India as of Financial Year 2020. Womens ethnic wear is the largest segment of the overall
market as it has found acceptance in both daily wear and office-wear categories, apart
from the Indian wedding and celebration wear category. It includes lehengas, kurtis,
sarees and salwar kameez. Mens ethnic wear is the second-largest category and has a share
of approximately 10% of the overall ethnic market. It is dominated by the Indian wedding
and celebration wear market which accounted for approximately 80% of mens ethnic wear
sales and includes sherwanis, kurta jacket sets, kurta pajama, Indowestern apparel, etc.
Acceptance of ethnic wear during festivals and wedding functions is leading to overall
growth of the mens ethnic wear market. Kids ethnic wear accounts for the remaining 9% of
the ethnic apparel market.
Salt business
Salt market forecast projected to reach $19.4 billion by 2030, with global industrial
salt market forecast expected at a CAGR of 3.2% from 2021 to 2030.
Globalisation and influence of western culture in developing economies are boosting the
demand for sea salt as well as the sea salt markets future trends. The growing interest
of consumers in foreign cuisine, such as Italian and French food that require flavors and
seasonings, is likely to drive sales of sea salt and also the sea salt market
opportunities.
3. Opportunities and Threats: Opportunities
A shift towards the market of branded ready-made garment is being observed.
Increased Disposable Income and Purchasing Power of Indian Customer opens New Market
Development.
More number of emerging malls and retail industries are providing opportunities to
industrys segments like handicrafts and apparels.
There is a provision of more FDI and investment opportunities.
Subsidy from the central government to give boost to the home textiles Industry.
Threats
Continuous Quality Improvement is the need of hour as there are different demand
pattern all over the world.
Striking a balance between the quality and price of products.
4. RISKS AND CONCERNS
• Changes in market trends, fashion and consumer preferences and increase in
Competition that are largely beyond our control could adversely affect our business,
financial condition, results of operations and prospects.
• Our cost of fabrication is exposed to fluctuations in the prices of material.
• Natural calamities and force majeure events may have an adverse impact on our
business.
• Political instability or changes in the Government could adversely affect
economic conditions in India generally and our business in particular.
• Global economic, political and social conditions may harm our ability to do
business, increase our costs and negatively affect our stock price.
• We may suffer loss of income, if our products/designs are duplicated by our
competitors.
•We face competition in our business from both domestic and international brands.
Such competition would have an adverse impact on our business and financial performance.
• Our insurance coverage may not adequately protect us against future unforeseen
liabilities and this may have a material adverse effect on our business.
• Other types of risks include Strategic Risk, Business Risk, Finance Risk,
Environment Risk, Personnel Risk, Operational Risk, Reputation Risk, Regulatory Risk,
Technology Risk, etc. Your company aims at enhancing and maximizing shareholders value by
achieving appropriate tradeoff between risk & returns.
5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has a well-established framework of internal controls in all areas of its
operations, including suitable monitoring procedures and competent personnel. In addition
to statutory audit, the financial controls of the Company at various locations are
reviewed by the Internal Auditors, who report their findings to the Audit Committee of the
Board. The Audit Committee is headed by an Independent Director and this ensures
independence of functions and transparency of the process of supervision. The Committee
meets on a regular basis to review the progress of the internal audit initiatives,
significant audit observations and planning and implementation of the follow-up action
required. The Company conducts its business with integrity and high standards of ethical
behaviour and in compliance with the all applicable laws and regulations that govern its
business.
6. FINANCIAL AND OPERATIONAL PERFORMANCE
Please refer financial statement.
7. HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATIONS
The man machine combination is balanced optimally as the Company believes that Human
Resource is one of the most vital resources and a key pillar in providing the Organization
a competitive edge in current business environment. A motivated and efficient workforce
can help it attain its target in a realistic manner. Taking cognizance of that fact, the
Company provides extensive training to its employees in order to develop their skill sets
and keep them motivated. The Company appreciates the productive co-operation extended by
its employees in the efforts of the management to carry the Company to greater heights.
The industrial relations in all units of the Company continue to be cordial.
8. CAUTIONARY STATEMENT
The statements made above may be construed as Forward Looking Statements within the
meaning of the applicable laws and regulations. Actual performance of the Company may vary
substantially depending upon the business structure and model from time to time. Important
external and internal factors may force a downtrend in the operations of the Company.
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