Maral Overseas Ltd Management Discussions

An Economic Overview expectations in CY 2023 with a Tgrowth^{heglobaleconomyoutperformed} of 3.2%. This re_ected the overall resilience demonstrated by several large economies.

The world economy was positively impacted by the resumption of normal consumption in China and an acceleration of growth in the US, which neutralised a significant slowdown in Europe following the regional energy shock in 2022. Trends like consumer willingness to continue drawing on excess savings, robust private-sector finances and a renewed _scal easing were also observed.

The global labour market displayed divergent trends between developed and developing economies. Developed countries saw a strong rebound with low unemployment rates while in developing countries, issues like informal employment, gender gaps and high youth unemployment were prominent.

Global factories ended CY 2023 on a weak note with eurozone manufacturing remaining under pressure. Though most of Asias PMIs for December 2023 were negative, other recent data suggests the post-pandemic recovery in the area is beginning to gather momentum. Nonetheless, companies in general remained cautious about the future and continue to exercise caution when it comes to hiring, buying raw materials and managing inventories.

UNCTADdatasuggeststhatin2023,the global merchandise trade experienced a decline of approximately 1% in real terms. This divergence from overall economic growth was in_uenced by various factors, including escalating trade tensions among major economies and a general slowdown in global demand.

Going forward, the world economy is expected to sustain this level throughout 2024.This represents a 0.1 percentage point upgrade from the January 2024 World Economic Outlook (WEO) update, due to the high likelihood of a better performance in the US, China and other large emerging markets. While there may be weaker activity in the Euro Area, global in_ation is very likely to continue to drop.

Indian economy

In a superb display of resilience amidst global economic challenges, Indias economy is anticipated to expand by 7.6% in FY24 owing to strong investment in plant and machinery, robust manufacturing growth and better trades.

On the _ip side, according to the second advance estimate data released by the Ministry of Statistical Planning & Implementation (MoSPI), government spending and consumption increased at a slower-than-expected pace. Additionally, the current years economic growth has been aided by a robust expansion in the mining, manufacturing, construction and services sectors. Despite starting on a bleak note, manufacturing output is also expected to grow at a healthy rate of 8.5% this fiscal year, with increases being reported in six of the eight core industries.

While farm output is expected to grow only at 0.7% this fiscal on account of erratic monsoons, sharply lower than the 1.8% growth projected in January 2024, there is potential for good growth due to recent predictions of a good monsoon in most parts of the country.

Net indirect tax growth hit a six-quarter high of 32% in the third quarter, prompting experts to draw attention to the disparity between the 6.5% growth in gross value addition (GVA) and the 8.4% GDP growth in the same quarter. They expressed concern that this growth may not be sustained.

The Russia-Ukraine conflict disrupted supply chains and caused energy price spikes impacting Indian trade. Furthermore, the slowdown in Europe and certain other advanced economies is predicted to cause exports to rise at a slower rate of 1.5% in rupee terms during FY2023–24 compared to the same period last year. Stagnant interest rate without increase predicts a better tomorrow.

Forecasts from the Reserve Bank of India indicate that the GDP is expected to grow at a strong rate of 7% in the FY2024–25. The rise in household spending and a restored private capital investment cycle support this upbeat outlook. Average infiation remained at 5.1% for the entire FY24 with core infiation staying low for a year now. However, the ongoing global geopolitical issues, rising crude oil prices and resurgence of infiation could dampen the growth of the economy in the future.

The Textile Sector

Global Textile Market

The global textile market size reached US$ 1,027.0 Billion in 2023. Looking forward, the IMARC Group expects the market to reach US$ 1,445.4 Billion by 2032, reflecting a compounded annual growth rate of 3.8% during 2024-2032. Major factors driving the market growth include changing consumer preferences and lifestyle trends. As individuals seek comfort, sustainability and fashion-forward choices, the demand for textiles has increased. Consumers now prefer eco-friendly fabrics, organic materials and functional textiles that offer enhanced performance.

Another driving force is the rapid growth of global population. Besides this, increasing income levels, particularly in emerging economies such as India and China, has enhanced spending on textiles.

Furthermore, technological advancements and innovations in textile manufacturing processes have revolutionised the industry. These advancements improve efficiency and also open up new possibilities for customisation and sustainability. Moreover, Government initiatives promoting domestic textile production or trade agreements significantly impact market dynamics.

Another vital growth driver is the rising demand for stylish apparel across all age groups in the worldwide population, including formal and casual wear.

Industry trends

1) Sustainability

The apparel sector is paying more attention towards sustainability. Manufacturers as well as customers are mainly focusing on sustainability and it is becoming a crucial decision-making factor while buying and selling goods. Textiles manufactured with less environmental impact from recycled materials are more appealing to consumers. Some of the trends regarding sustainability in the textile sector are listed below.

Circular economy: The textile sector is starting to embrace the idea of a circular economy. This entails designing textiles for longer lifespans, to recycle and repurpose them at the end of their life cycles.

Biodegradable textiles: The concept of biodegradable textiles is gaining traction as a solution to environmental concerns. These textiles can break down naturally in the environment, reducing pollution and waste. Examples include biodegradable polyester, polylactic acid (PLA) and bio-based nylon.

2) New Technologies

Newtechnologiesarechangingtheway apparels are designed, manufactured and distributed. Here are some of the prevailing trends concerning the adoption of new technologies in the textile sector.

Digital Textile Printing: This inkjet-based technique effectively applies colourants to fabrics. Due to the recent boom in its use, especially with dye sublimation printing, it is expected to continue growing as technology advances.

Energy-Efficient and High-Speed Apparel Manufacturing:

High-speed and energy-saving manufacturing processes such as ICT systems, automated software programs, robotics and fast digital printing can significantly tackle environmental footprint and waste pollution.

Data Analytics and Artificial Intelligence: Artificial Intelligence and Data Analytics are widely used in retail and wholesale fabric online supply chains for a variety of tasks, including quality control, management automation, product inspection and quality assurance.

3) Focus on Gender-Neutral Clothing

With diversity and inclusivity becoming more prominent, new fashion trends are blurring traditional gender divides and allowing people to express themselves through clothing.

Indian Textile Market

India is fortunate to have an abundance of raw materials needed to produce textiles. Being a top producer of cotton, silk, wool, jute and man made fibre, the nation offers a solid basis for a booming textile sector. Indias success story in the textile industry has been aided by the easy availability of a wide variety of superior raw materials.

In 2022, the Indian textile and apparel market was valued at US$ 172.3 Billion. The IMARC Group projects that the market would increase at a compounded annual growth rate of 14.59% from 2023 to 2028, reaching US$ 387.3 Billion. Some of the major market drivers include the growing demand for high-end clothing and footwear, government initiatives to empower weavers and the increasing trend of sustainably and ethically sourcing materials.

Industry trends

Demand for Man-Made fibres (MMF)

India is the second largest producer of MMFs. The industry anticipates a 75% growth in Indias exports of MMF textiles to US$ 11.4 Billion in 2030 from approximately US$ 6.5 Billion in 2021–

22. This optimistic outlook stems from the Production Linked Incentive (PLI) plan and free trade agreements with the UAE and Australia.

Artisanal and Handcrafted Textiles

A specific segment of consumers is showing renewed interest in traditional handcrafted textiles. This is encouraging innovativeness amongst artisans and also doing its bit to preserve our countrys cultural heritage. Handmade textiles reflect the artists talent, imagination and cultural background. It seems that these consumers are driven by a sense of choosing aesthetic handcrafted textiles over mass-produced machine-made ones. This is also helping craftsmen who rely on their skills to make a living, besides preserving the art of traditional craftsmanship.

Digitalisation

Indias textile industry has seen significant change due to digital adoption, thereby improving efficiency, thanks to computer-controlled production lines, digital dyeing and automated looms. Resource usage is optimised in smart factories thanks to IoT sensor integration. Digital technologies, ranging from e-commerce platforms to inventory management, are revolutionising the marketing, sales and distribution of textiles.

A return to office culture

With a shift away from permanent work-from-home situations, Indian textile manufacturers could see a positive impact on the demand for garments. As Indian professionals return to offices, there will be a surge in buying work-appropriate clothing.

Performance

The Indian Textile industry witnessed major challenges in 2023 due to fluctuating cotton prices, diminishing demand, capacity under-utilisation and dumping of inferior but cheap imported fabrics and garments from China and Bangladesh. Buying by the US and EU remained quite low for an unusually long period, which affected exports.

In FY 24, India experienced a 3.24% decline in its textile and apparel exports, amounting to $34.430 billion. This decrease was attributed to geopolitical tensions in key markets and an uptick in interest rates aimed at managing infiation. The combined contribution of textiles and apparel to Indias overall merchandise exports decreased from 8.26% to 7.88% compared to the previous year. Although textile exports saw a slight uptick, there was a notable decrease in apparel exports.

The export value of readymade garments, comprising approximately 42% of the total export basket, saw a notable 10% decline, amounting to US$ 14.5 billion. North America emerged as the leading export market with a total of US$ 11 billion, followed by Europe at US$ 10 billion. Additionally, West Asia and North Africa combined contributed US$ 4 billion to the export figures.

Amidst the challenges faced the only hope was the export of cotton yarn, fabrics, made-ups, and handloom products experienced a notable upswing, amounting to an increase of US$ 740 billion in FY 24 compared to the previous scal year. However, alongside geopolitical tensions and high-interest rates, escalated logistical costs due to the red sea crisis emerged as additional hurdles, dampening the textile export landscape.

Government Initiatives:

The Government launched a

Scheme for Integrated Textile Park (SITP). The plan attempts to establish new, globally recognised parks as hubs for textile development. Overall, 54 textile parks were approved under the programme.

The Amended Technology Upgradation Fund Scheme (ATUFS) provides financial help to textile mills to upgrade their technology. The scheme was amended in 2022 to make it more accessible and user-friendly. The amended scheme provides a higher subsidy for the installation of new machinery. It also covers the cost of training workers. The announcement in the union budget 2024-25 shows that the Government has made a remarkable advancement with the increased allocation of approximately 27.60%. The extension of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme for two years has been warmly received by the textile and apparel industry. The schemes continuation is deemed essential for long-term trade planning, and the augmented allocation in the budget reflects a concerted effort towards sustaining this crucial initiative. The Government of India announced that it will create seven PM MITRA (Prime Minister Mega Integrated Textile Region and Apparel Parks) in the states of Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh and Maharashtra. Nearly 70,000 Crore investment and the creation of two million jobs is envisaged through these parks.

The Spinning Sector

The first half of FY24 experienced headwinds in the cotton spinning sector due to the following reasons.

Disparity between domestic and international cotton prices Decline in global demand owing to infiation Increased energy and supply chain costs Towards the end of the year, the cotton spinning industry experienced some relief as the price of cotton dropped. However, despite this positive change, the sector faced challenges due to weak demand within the country and lower profits throughout FY24. Consequently, spinners decided to put a hold on their significant investment plans for the foreseeable future.

According to ICRAs projections, there might be a slight increase in investment announcements in FY25. This uptick is anticipated to be driven by the need for modernising machinery, the infiux of demand stemming from the China Plus One initiative and an anticipated improvement in domestic demand from companies producing downstream apparel.

In addition to this, the Government of India has taken various initiatives to promote Indian cotton. Some of them are Kasturi Cotton Bharat: The Ministry of Textiles Kasturi Cotton Bharat programme is a first-of-its-kind branding, traceability and certification initiative run in concert with trade associations, industry and the Government. To promote and enhance the value of Indian cotton in both domestic and international markets, stakeholders from all across the supply chain—including farmers, ginning units, spinning mills, processing houses, weaving units, garmenting units, home textile manufacturers, retailers and brands—will work together.

A Memorandum of Understanding (MoU) has been signed by The Cotton Textiles Export Promotion Council (‘TEXPROCIL) and the Cotton Corporation of India (‘CCI) on behalf of the Indian government, Ministry of Textiles and Kasturi Cotton Bharat. This MOU is meant to encourage trade and industry to work on the principle of self-regulation by owning the responsibility of Traceability, Certification and Branding.

Using a mission-driven approach, the Ministry of Textiles is spearheading this project and allocating budgetary assistance in line with the D15 Crore commitment from trade and industry bodies. This collaborative endeavour, which will last for three years from 2022–2023 to 2024–2025, is expected to have a good effect on the Indian textile industry as a whole and raise the value and perception of Indian cotton globally.

The Business and its Performance

About Maral

Maral Overseas Limited is an integrated textile company across the entire textile value chain. It produces a wide variety of yarns, fabrics, and apparel for global and Indian brands. Headquartered in Noida, the Companys yarn business is its key revenue spinner and business driver; while the Management focuses on the fabric and garment divisions owing to increased value-addition and product acceptance by global marquee brands.

SWOT Analysis

STRENGTHS

Integrated facility with best-in-class equipment A wide and growing product portfolio High-quality standards endorsed by global certifications Healthy business relations with leading sports and athleisure brands Sharp focus on developing customised products for customers Regular business investments to align with dynamic sectoral realities and customer requirements

WEAKNESSES

Fragmented and unorganised industry

OPPORTUNITIES

India is a large and growing textile market E-commerce is booming Export opportunities abound owing to the China+1 practice adopted by the Western World FTAs signed/in the process of being endorsed provide interesting growth opportunities

THREATS

Volatility in raw material prices Disturbed supply chain owing to geopolitical tensions prevailing across the globe

Business Performance

In FY24, the Companys business performance resembled that of the previous year, as it saw no notable improvement, largely attributed to a temporary lull in the textile market. Global textile markets, especially the US and Europe, slumped owing to elevated infiation levels. Consumers diverted their spending to deleverage their position as interest rates across the world climbed to new highs.

As end-consumer demand dropped, the entire global textile pipeline squeezed purchases to the bare minimum. This hampered the inflow of business to the Company.

To overcome those challenging times, the Company consolidated its garments operations to align with customer demand. It implemented important cost optimisation measures and focused on capitalising on every business opportunity that helped in absorbing overall costs better. The Company also partnered with global brands that expanded its reach and consolidated tie-ups with existing customers.

The Company focused on developing new and niche products and worked hard on showcasing these products. New products were introduced such as m?lange yarn, flame retardant yarn and aramid yarn to soilidify its position in advanced textile solutions. The initial response to these products was heartening – the Company expects these products to emerge as important revenue drivers going forward.

The Company commissioned its m?lange yarn unit towards the close of FY24. This infrastructural showpiece houses the most sophisticated equipment and cutting-edge technology to produce one of the _nest m?lange yarns. While a part of the output will be used for manufacturing garments for global marquee clients, the rest will be sold to large domestic and international brands.

Financial Performance

Your Company achieved a turnover of C960.06 Crore for the financial year ended 31^st March, 2024 against C1,025.85 Crore in the previous financial year ended 31^st March, 2023. Further, the Company achieved an operational profit of C59.75 Crore for the financial year ended 31^st March, 2024 as against C34.71 Crore in the previous financial year. The Company recorded a Net Loss at C9.77 Crore for the financial year ended 31^st March, 2024 as against a Net loss of C15.93 Crore reported in the previous financial year. The segment-wise revenue performance of your Company for the financial year ended 31^st March, 2024 was C517.15 Crore, C232.05 Crore and C210.85 Crore for Yarn, Fabric and Garments respectively.

Change in Return on Net Worth in comparison to the previous year: The Management utilized business liquidity for investing in strategic decisions that promise to sustain growth over the medium term. During the FY24, the Net worth decreased from C140.99 Crore as of 31^st March 2023 to C131.54 Crore as on 31^st March 2024. The return on net worth was (7.2) % in FY24 against (11.30)% in the FY23.

Significant changes i.e., a change of 25% or more in the key financial ratios

In accordance with the Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the details of significant changes i.e., change of 25% or more in key financial ratios as compared to the immediate previous financial year, along with detailed explanations are reported hereunder.

Key Ratios

	FY24	FY23	% Change	Remarks
Stability Ratios
Debt-equity Ratio (in times)	1.45	0.81	79	Majorly due to increase in long term debts
Interest Coverage Ratio (in times)	3.55	2.54	39.70	Majorly due to better profitability
Liquidity Ratios
Current Ratio (in times)	1.10	1.18	(6.43)
Debtor Turnover Ratio (in times)	8.72	9.84	(11.38)
Inventory Turnover Ratio (in times)	5.59	5.39	3.68
Profitability Ratios
Operating Profit Margin (%)	6.22	3.38	83.95	Majorly due to better profitability
Net Profit Margin (%)	(1.02)	(1.55)	(34.49)	Majorly due to better profitability

Disclosure of Accounting Treatment

The Company has followed the same accounting treatment prescribed in the relevant Accounting Standards while preparing the Financial Statements.

Internal Control and their Adequacy

The Companys internal controls are commensurate with its size and the nature of its operations. They have been designed to provide reasonable assurance about recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use and ensuring compliance with corporate policies. The all-encompassing control framework covers all key business functions in addition to governance, compliance, audit, control and reporting.

The Companys state-of-the-art ERP system, coupled with stringent procedures, ensures high accuracy in recording and providing reliable financial and operational information, meeting statutory compliances. Internal Audit reports are periodically reviewed by the Management and the Boards Audit Committee, and necessary improvements are undertaken if required. These _ndings provide inputs for risk identification and assessment. Timely and adequate measures are undertaken to ensure the undisrupted functioning of the business. The Company has engaged independent Chartered Accountant firms with vast experience and knowledge to monitor internal controls. The Companys robust and comprehensive internal control systems and processes are reviewed periodically in line with the evolving business ecosystems.

Human Resource

Maral understands that an organisation is only as good as its members. The Company has distinguished itself from its competitors by promoting a dynamic work culture. From imparting technical expertise and providing soft skills training - Maral has earned the devotion of its workforce. The Company has made a conscious effort to develop a staff that is varied and re_ective of the environment in which it operates. This, together with a culture that values education, health and transparency, Maral has brought out the best in its workers.

With the aim of incorporating a diverse and inclusive culture, the Company takes various initiatives for building awareness and fostering an impartial work environment. The HR policy is designed to build a more competent workforce that is aligned to the rapidly evolving business dynamics and promotes a culture of adaptability to changes, agility to work fast and af_nity to grow.

With open, equitable performance reviewsandgender-neutralprocedures, our 6609 strong workforce is able to work the best of its ability in a safe and secure environment. To provide employees a platform for making meaningful and pro-development constructive comments, the Company has also established programs within its appraisal system.

Risk Management

Demand risk: Tepid demand conditions could impact business performance.

Mitigation measures

A dull business environment would impact the entire textile sector and Maral would also face the heat of a dismal ecosystem. What works in the Companys favour is its continuous efforts to widen the product base and expand its opportunity horizons. To that extent, the Company would be lesser impacted by throttled demand for standard products.

Raw material risk: Availability of raw material at stable prices is an essential prerequisite for business profitability.

Mitigation measures

India has an abundance of fibres for the textile sector, hence availability has never been an issue. Moreover, the Company has strong business relations with its vendor base to ensure seamless raw material availability. The Company leverages its good offices with its large vendor base to secure the best prices for key inputs.

Customer risk: Customer attrition could impact business prospects.

Mitigation measures

Marals ability to customise products according to customer requirements and deliver products aligned to time schedules allows it to retain and grow along with its customers. Over the last three years, the Company has added 200 new customers to its portfolio – this has ensured that it does not get over-dependent on specific customers. Further, its m?lange unit will help the Company add many more customers in the current year.

Environment Risk: Textile manufacturing processes lead to GHG emissions that are detrimental to the environment and business sustainability.

Mitigation: Maral is committed to preserving the environment for which it has designed comprehensive environmental management plans to reduce the carbon footprint. Every year, the Company continues to invest time and resources in environment management initiatives – detailed elsewhere in the report.