ANNEXURE I TO DIRECTORS REPORT
1. OVERVIEW OF THE ECONOMY
The global economy has witnessed uncertain times with geopolitical uncertainty,
lingering supply chain disruption, a high inflationary scenario, spikes in commodity
prices, and unexpected failures of major banks. It remains entangled between the
cross-currents of slowing growth and high inflation. As per latest estimates from the
International Monetary Fund, global growth will bottom out at 2.8% in 2023 as compared to
3.4% in 2022. The International Monetary Funds latest estimates indicate that India is
expected to maintain its position as a favorable contributor to the global economic
expansion, despite the global headwinds.
According to the RBI, Indias real GDP will grow by 7.85% during 2023-24. The growth
will be mainly driven by private consumption, rural demand, capital expenditure in public
spending, and moderation in commodity prices. The Economic Survey of 2022-23 highlights
that Indias import bill witnessed a rise during the year due to high oil prices, causing
an increase in the trade deficit Nevertheless, concerns regarding the financing of the
Current Account Deficit (CAD) have diminished, owing the ample levels of foreign exchange
reserves and the favorable state of external debt.
This optimistic growth projection is partly due to the economys resilience, as
evidenced by the smooth shift of private consumption becoming the primary growth driver,
dislodging the export stimuli. This boost in private consumption has additionally fueled
production activity, resulting in enhanced capacity utilization across various sectors.
Despite its relative outperformance compared to other developing economies, the country
faces several challenges. These challenges include adverse geopolitical developments,
rising global financial instability, elevated inflation, and financial tightening
impacting the cost of capital.
2. OVERVIEW OF TEXTILE AND ALLIED PRODUCT AND TECHNOLOGY SECTOR
The textile sector is one of the oldest industries in India, employing around 45
Million workers, including 3.5 Million handloom workers. The country enjoys a competitive
edge in the global textile market, owing to its diverse production base, encompassing a
wide range of fibers and yarns. These include natural fibers like jute, silk and wool, and
synthetic/man-made fibers like polyester, viscose, nylon, and acrylic.
The industrys growth is fueled by the rise in incomes, greater discretionary spending,
and the resulting increase in consumption. This is expected to generate a higher demand
for quality textiles. Additionally, India boasts an average age of 28.2 years and a
population of over 1.4 Billion , creating a vast potential market for manufacturers to tap
into and capitalize on. In addition, the Governments increased allocations and reforms
aim to bolster the textile sector. An illustrative manifestation of this is the
announcement of the launch of seven PM Mitra (Pradhan Mantri Mega Integrated Textile
Region and Apparel) Park sites across seven Indian states, including Tamil Nadu,
Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh, and Maharashtra. Moreover,
the growth in demand for traditional consumer textile products is driven by the increased
allocation of funds by various state governments for the procurement of these products
under various social welfare schemes, intended to distribute them to economically
underprivileged people. The rising per capita income as a result of strong economic
growth contribute to higher discretionary spending, which augurs well for the growth of
technical textiles in general and health & hygiene products in particular. In this
segment as well, many state governments allocate funds consistently to promote awareness
about personal hygiene, especially feminine hygiene. This allocation of funds generates a
good demand for these products. Personal care & hygiene is a 1.12 Lakhs Crores market
in India, and this product space is expanding significantly with the increase in
e-commerce adoption and last-mile access to consumers.
Additionally, the anticipated rise in per capita income of the country is expected to
set off a positive domino effect, particularly benefitingthe education sector, leading to
an increased demand for smart learning solutions. Thereby, holding the potential to have
cascading effects on other sectors, including hygiene and FMCG. The Indian Government has
increased its focus and budgetary allocation in the education sector. For 2023-24, the net
grant under the union budget has increased by ~17% to 68,804/- Crores. Under the Samagra
Shiksha Scheme, state governments and UTs will be provided assistance in developing
(Information and Communication Technology) ICT labs, digital content, and smart
classrooms. Already in July 2022, ICT labs for 1,20,614 schools, smart classrooms for
82,120 schools, and 14,82,565 tablets for teachers have been approved and sanctioned.
3. OVERVIEW OF THE COMPANYS PERFORMANCE
Mafatlal Industries Limited (also referred to as ‘MIL or ‘The Company)
primarily operates in the textile and related product segment, along with the technology
and related product segment. The Company has identified these segments as separate
reporting segments starting from July 01, 2022.
The Company utilizes a strategic combination of in-house manufacturing and
specification-based outsourcing. Despite the difficulties caused by the Covid-19 pandemic,
MIL has witnessed a robust performance during the reporting year. It has successfully
dealt with the external business environment during 2022-23, which posed challenges like
volatile raw material prices, inflationary pressure, and surge in the cost of capital. In
continuation of the strategic steps taken up by MIL in recent years, it is currently
focused on strengthening its outsourcing-led product portfolio, catering to demands coming
from Government/ institutional segments, rationalizing & strengthening its sales
force, building a resilient and agile supply chain framework and charting a sustainable
growth trajectory.
During the year under review, various key factors contributed to the 33% growth in
revenue. These factors include the strong performance observed in the school uniform
segment, fuelled by a recovery in market demand, the garment segment, primarily due to the
supply made to large institutions. Furthermore, the health & hygiene segment
experienced growth due to good product quality, strong institutional demand, and improved
traction in direct consumer demand. Additionally, MIL witnessed successful project
implementation and demonstrated a strong performance in the education-led technology
segment, collaborating with multiple state governments.
i. Performance Review
Total revenue increased by 33% to 1,41,562.38 Lakhs, and earnings before interest
& depreciation EBITDA is 7,389.06 Lakhs, compared to 7,667.43 Lakhs in the
previous financial year.
ii. Table of Financials
Rs In Lakhs
| For the Year Ended on |
| Particulars |
March 31, 2023 |
March 31, 2022 |
|
Amount |
% of Revenue |
Amount |
% of Revenue |
| Revenue from Operations |
1,37,052.29 |
97% |
99,939.51 |
94% |
| Other Income |
4,510.09 |
3% |
6,436.79 |
6% |
| Total Revenue |
1,41,562.38 |
100% |
1,06,376.30 |
100% |
| Cost of Material Consumed |
20,057.50 |
14% |
17,550.93 |
16% |
| Purchase of Stock-in-Trade |
90,662.03 |
64% |
66,068.05 |
62% |
| Changes in Inventory of Finished Goods, Work-in-Progress |
(3,460.66) |
(2%) |
(4,392.05) |
(4%) |
| & Stock-in-Trade |
|
|
|
|
| Employee Benefit Expenses |
5,203.93 |
4% |
4,153.43 |
4% |
| Other Expenses |
21,710.52 |
15% |
15,328.51 |
14% |
| Total Expenses |
1,34,173.32 |
95% |
98,708.87 |
93% |
| EBITDA |
7,389.06 |
5% |
7,667.43 |
7% |
| Finance Cost |
1,771.75 |
1% |
1,859.39 |
2% |
| Depreciation & Amortization |
1,536.18 |
1% |
1,567.07 |
1% |
| Profit/(Loss) Before Exceptional Items & Tax |
4,081.13 |
3% |
4,240.97 |
4% |
| Exceptional Items |
(53.57) |
0% |
(1,016.72) |
(1%) |
| Profit/(Loss) Before Tax |
4,027.56 |
3% |
3,224.25 |
3% |
| Net Tax Expenses |
(279.46) |
0% |
(295.14) |
0% |
| Profit /(Loss) for the Year 3,748.10 |
3% |
2,929.11 |
3% |
|
REVENUE FROM OPERATIONS AND OTHER INCOME
MILs revenue from operations increased by 37% compared to the previous financial year.
The Companys other income, including interest income, net gain on foreign currency
transactions and other non-operating income from sale of non-core assets, decreased by 30%
compared to the previous year.
EBITDA
The total EBITDA for 2022-23 was 7,389.06 Lakhs as against 7,667.43 Lakhs reported
in previous financial year. This decline in EBITDA is due to higher cost of raw materials
and increased utility costs incurred during 2022-23.
Debt
MIL repaid a total 1,639.77 Lakhs in long-term debt, which is primarily in the form
of rupee-term loans, in line with its repayment schedule. The Company also repaid 488.62
Lakhs in long-term debt before maturity to reduce the finance cost. Furthermore, net
short-term borrowings decreased by 353.36 Lakhs. The Company maintained borrowings to
provide working capital support for its core business operations.
Finance Costs
The finance cost for 2022-23 was 1,771.75 Lakhs as against 1,859.39 Lakhs for
2021-22. The reduction in finance costs is primarily on account of the repayment of the
long-term debt. Finance cost as a percentage of total revenue reduced to 1% from 2% in
2022-23.
Depreciation
Depreciation in absolute terms decreased to 1,536.18/- Lakhs as compared to
1,567.07 Lakhs in 2021-22. As a percentage to total revenue, depreciation reduced to 1.1%
from 1.5% in 2022-23.
Exceptional Item
During the year, MIL recognized an amount of 53.57 Lakhs as ex-gratia compensation,
payable to those employees who opted for retirement during the year, as an exceptional
item.
Changes in Key Financial Ratios & Reason thereof
The key financial ratios during the year under review experienced changes compared to
2021-22, following an improvement in operating performance and an the improved balance
sheet. All profitability EBITDA margin (positive 5% in the last financial year from a
positive 7% in the previous financial year), was negatively impacted due to higher raw
material costs and increased utility cost. Despite the drop in EBITDA
%, the net profit margin remained at the same level of positive 3% in the last
financial year as in the previous financial year on account of a reduction financecost &
depreciation. Since sales and collections from debtors were regular, there was an
improvement in the debtors turnover (5.1 in 2022-23 as against 4.2 in 2021-22) and
current ratio (1 in 2022-23 as against 0.98 in 2021-22). The debt equity ratio improved to
0.15 in 2022-23 from 0.16 in 2021-22 on account of a repayment of significant debt during
the year under review.
Human Resources and Safety
MIL is committed to the well-being of its employees. The Company provides them with an
environment to grow through continuous employee engagement activities and training &
development seminars, fostering a goal-oriented approach.
The Company emphasizes creating a performance-driven organization where talent and
merit are suitably rewarded. MIL continuously implements initiatives and measures to build
a workplace that prioritizes safe work practices. The total number of permanent employees
as of March 31, 2023, stood at 1,121, compared to the previous years count of 948.
iii. Overview of Product Portfolio & Operating Performance
The Companys focus lies in meeting the domestic demand for consumer textiles, health
& hygiene, and education-led technology segments. In the consumer textile portfolio,
MIL holds a prominent position in the supply of school uniforms, corporate uniforms,
garments, including traditional wear like sarees, and fabrics sold directly to the
customers. Additionally, it operates within the export segment and is one of the major
voile exporters in the country.
Fulfilling the domestic demand for textiles arising from rural India and major
Tier-II/Tier-III markets across the nation is a top priority for MIL. The Company serves
customers across India through its widespread dealer network of over 1,000 dealers. The
in-house technical capabilities, developed in the textile segment, help the Company to
maintain quality, initiate the development of new product categories, and deliver a faster
turnaround. In the health & hygiene segment, increase in consumer spending, and growth
from e-commerce platforms, social media campaigns, and sales network are providing
sustainable growth. MIL remained committed to expanding its reach in the hygiene business
by strengthening the brand for baby diapers, adult diapers, and sanitary napkins, and by
building a strong sales force across the country to meet the demand arising out of hygiene
segment.
During the year, the Companys revenue witnessed robust growth, owing to its
participation in Government tenders for the supply of textiles, hygiene products, and
education-led technology products. Additionally, the Company successfully completed
projects in the technology sector by building in-house expertise and talent.
iv. Outlook
MIL expects the growth to sustain with a diversified product portfolio, a focus on
catering to demand coming from institutions/Governments, a wider distribution network for
consumer facing products, a robust supply chain mechanism, and a lower fixed cost.
Additionally, the Company will continue to closely monitor the external environmental
factors like inflation, credit growth, and geopolitical risks that may affect the business
adversely. MIL holds an optimistic outlook for growth in the medium-term in both revenue
and operating margin.•
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