Maris Spinners Ltd Management Discussions

The Company is in the business of manufacturing 100% Cotton Yarns, having its units at Hunsur, Mysore Dt., Karnataka and Manapparai, Trichy District, Tamilnadu. The unit supplies its produce to the domestic markets.

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool, to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

Adverse economic conditions in the major export destinations - such as European Union (EU), the US and the Middle East countries - have influenced the apparels demand. While EU, which accounts for a fifth of Indias apparel exports, is still grappling with the ripple effect of Ukraine-Russia war, the US and Middle East (impacted by ongoing Israel-Gaza war) have witnessed lower demand.

However, the worst seems to be behind as 2024 dawns. With the US market showing signs of revival, experts believe exports to improve in the upcoming months. According to CRISIL, Indias textiles industry is expected to rebound in calendar year (CY) 2024 on three tailwinds: consistent improvement in domestic demand, gradual recovery in exports and lower cotton prices.

The domestic market, which accounts for around three-fourths of the overall demand, continues to witness a steady growth. Demand ahead of the spring-summer season in the West is likely to boost the off take of garments from India, thereby supporting the growth of the entire value chain. With better consumer demand big retailers in the overseas markets will have to restock inventory, improving order flow from Indian exporters.

Cotton prices in India have eased from their highs and, with cotton production estimated to be higher this cotton season, the prices are unlikely to rise anytime soon. Higher availability of cotton and low cotton prices can offer a much-needed support to the domestic textile value chain, which relies more on natural fibre than crude oil-linked synthetic textiles.

As the largest exporter of cotton yarn, India supplies to the very nations it competes with in the global apparel market. To further propel exports, India needs to rethink on how to capitalise its dominant position in cotton production (as the country accounts for approximately a quarter of the global output). One way could be to encourage (or force via government policy interventions) companies to increase value addition of yarn into garment instead of pushing for raw material or yarn exports.

There is also a need to create globally-recognised Indian garment brands for better margins. As a step in this direction, Clothing Manufacturers Association of India (CMAI) hosted the first "Brands of India" event recently in Dubai, where more than 350 domestic brands exhibited their wares. In the future, CMAI is looking to hold the event in other markets like Australia, the US and the UK.

A favourable landscape marked by easing cost pressures and demand revival is likely to support the growth of Indian textiles in 2024. Addressing structural challenges and leveraging policy support are pivotal for the textile industrys sustained growth.

Indias textile exports shrank 4.2% year-on-year (yoy) in the first 11 months of the current financial year, hurt by adverse economic conditions in major destinations such as the European Union (EU), the US, and West Asian nations, according to the commerce ministry data analyzed by Mint.

India exported textiles worth $30.96 billion during April 2023-February 2024, down from $32.33 billion in the corresponding period of the previous fiscal year.

"The possibility of a course-correction in the upcoming months is bleak, and the downward trend is expected to continue in March as well. Adverse economic conditions, coupled with the Red Sea crisis, are impacting the export of textile products, including ready-made garments, to foreign destinations," a senior government official, who requested not to be identified, said.

During the 11 months till February, the export of ready-made garments fell to $13.05 billion from $14.73 billion in the corresponding months of the previous fiscal year. Similarly, the export of jute declined to $310 million from $400 million, while yarn exports fell from $4.47 billion to $4.23 billion.

The export performance of different categories in the textile sector varied during the current fiscal year. The export of ready-made garments contracted by 11.4%, while jute exports saw a more significant contraction of 22.5%. Yarn exports also experienced a contraction, albeit at a lower rate of 5.3%.

However, industry experts are hopeful that exports will improve in the upcoming months, especially with the US market showing signs of revival.

According to Crisil, Indias textile industry is expected to grow in calendar year 2024, driven by a consistent improvement in domestic demand, gradual recovery in exports, and lower cotton prices.

"Adverse economic conditions in Western markets have indeed had a negative impact on textile and apparel exports. Some of these challenges can be overcome by exploring markets in the east such as Japan and Korea along with a focus on natural fibres and cotton which will continue to see growth in demand.

"Also, the luxury sector is relatively immune to economic cycles and can be an opportunity for Indias rich tradition in weaving and embroidery".

The main buyers of Indian ready-made garments (RMG) are European nations led by Germany, the Netherlands, Italy, Poland and Denmark.

As Yemens Houthi militants continue to target ships in the Red Sea, Indian exports are facing higher shipping costs due to rerouting from Africa. Around 95% of vessels have rerouted around the Cape of Good Hope, adding 4,000-6,000 nautical miles and 14-20 days to journeys.

India is the worlds sixth-largest exporter of textiles and apparel, with the domestic apparel and textile industry contributing about 2.3% to the countrys GDP, 13% to industrial production, and 12% to exports.

Indias textile and apparel market size is growing at a CAGR of 14.59% from $172.3 billion in 2022 and is expected to reach $387.3 billion by 2028, according to Indian Brand Equity Foundation (IBEF), a body established by the ministry of commerce and industry.

The textile industry is also the second-largest employer after agriculture, providing direct employment to 45 million people and 100 million people in the allied sector.

GOVERNMENT INITIATIVES

The Indian government has come up with several export promotion policies for the textiles sector. It has also allowed 100% FDI in the sector under the automatic route.

1. Strengths:

a) Basic raw materials:

The strong point of India is that, it is very self-sufficient in raw materials, especially when it comes to natural fibers. It is seen that, the third-largest cotton crop in the world is grown in India. The speciality of Indian textile industry is that, all types of fibres are produced and handled here.

b) Labour:

The Indian apparel and textile industry has long been supported by low-cost labour and strong entrepreneurial abilities.

c) Adaptability:

The garment industrys predominately small-scale manufacturing gives for more flexibility in handling more specific and smaller orders.

The textile sector in India offers a number of advantages. The first is the accessibility of inexpensive labour. According to facts, the country has highly skilled labour available for very little money, which lowers the cost of production. India has a lot of raw materials available, which helps to minimise costs and shorten lead times. Resources including jute, cotton, silk, and cotton yarn, as well as man-made fibres, are particularly abundant in India. Another highlight area of India is its large diversity of cotton fibres that stands India apart from other nations. They go on to say that the textile as well as garment sector in India is very self-reliant one. From the acquisition of raw materials through the creation of completed items, it has a whole value chain.

2. Weaknesses:

a) Increased reliance on cotton:

Due to over-concentration on cotton, the majority of the global market is ignored, synthetic products are expensive in India, and the fabric needed for items like swimwear, skywear, and industrial gear is comparatively scarce.

b) The Spinning Sector:

The spinning industry has to adopt new technologies because it is not modernized.

c) The Weaving Sector:

India has a comparatively small number of looms without shuttles.

d) Processing of Fabrics:

The weakest link in the Indian textile value chain is processing, which has a negative impact on the countrys capacity to compete in export markets.

e) Deficient Infrastructure:

Indias export competitiveness is being harmed along the entire textile supply chain by high electricity prices and lengthy export lead times.

f) Low Labour Productivity:

In India, productivity levels for producing different types of clothing are much lower.

3. Opportunities:

a) Increased Industry:

By 2030, the global textile market would increase at a rate of 7.6%, reaching $1695 billion.

b) Market entry via bilateral negotiations:

Due to bilateral agreements between participating nations, trade between regional trade blocs is expanding.

c) Information technology integration:

In the production of clothing, "Supply Chain Management" and "Information Technology" are essential. The availability of EDI (Electronic Data Interchange) facilitates quick, simple, transparent communication and minimizes duplication.

d) The Possibility of High-Value Items:

India has the chance to raise its UVRs (Unit Value Realization) through rising up the value chain, creating value-added goods, and developing a steadily growing number of technologically advanced goods.

Technical textiles, product development and diversification, FDI, and brand awareness are just a few of the prospects available to the Indian textile sector. The Indian textile sector can maintain its current expansion and prosper in the near future thanks to technical fabrics. Additionally, it will aid in the development of the sector (Rakshit, Hira, and Gangopadhyay, 2007). India uses relatively little technological textiles. In the upcoming years, both woven and nonwoven technology textiles will prosper in India.

4. Threats:

a) Decline in the fashion cycle:

The number of seasons per year has increased, shortening the cycle of fashion as a result.

b) Formation of Trading Blocks:

The world trade environment has changed as a result of trading blocs like NAFTA, SAPTA, etc. If there were bilateral agreements, Indian exports would suffer significantly.

It is clearly found that, China shows the greatest and big challenge to the Indian textile industry on and around the international market. India is also threatened because of the low-cost producers such as Pakistan and Bangladesh, which can decrease Indias demand for exports in the future. The another point of threat is Indias geographic distance from the US, Europe, and Japans three largest markets, as opposed to rivals Mexico, China, etc., which are geographically closer. Long lead times and high transportation costs are the results of great distance.

Conclusion:

The global textile market is currently worth $400 billion. According to data and the facts it is forecasted that, the output of textiles will rise by 25% globally, with Asia playing a major role. As per as the Indian textile and apparel sector is considered as one of the largest in the world, plays a vital role in the Indian economy, and is very old. The scale, scope, depth, and competitiveness of the Indian textile and apparel sector is incomparable by any other country, exception of China. India now has the chance to work on its inherent strengths and become the top sourcing and investment place after quotas were removed at the end of 2004.

The Company has an adequate internal control system commensurate with the size and complexity of the organization. The Company has undertaken a comprehensive review of all internal control systems to take care of the needs of the expanding size of the Company and also upgraded the IT support systems. A system of internal audit to meet the statutory requirement as well as to ensure proper implementation of management and accounting controls is in place. The Audit Committee periodically reviews the adequacy of the internal audit functions.

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

There are no material developments in the Human Resources area. The industrial relations have been generally satisfactory. The Company constantly reviews the man power requirements and has a properly equipped Department to take care of the requirements. The total number of people employed by the Company as on 31.03.2024 was 491.

PERFORMANCE

The total Revenue for the year 2023-24 was Rs. 16,065.32 lakhs with a Loss of Rs. 1,326.58 lakhs.

In the preparation of financial statements, no treatment different from that prescribed in Accounting Standard has been followed.