Mayur Uniquoters Ltd Management Discussions

REPORT

Management Discussion and Analysis Report popularly known as MDAR is the communication straight from the management to their valued shareholders giving them insights into the present business conditions of the company and its future potential. It gives a birds eye view about the Companys objective, predictions and forward looking statements. This report is an integral part of the Boards Report. Aspects on industry structure and developments, opportunities and threats, outlook, risks, internal control systems and their adequacy, material developments in human resources and industrial relations have been covered in this Report.

Companys financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values are as per the provisions of the Companies Act, 2013 ("the Act") and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act, read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, and relevant amendments Rules issued thereafter.

Our Vision is to be preferred supplier to automotive, footwear and leather goods to the leading OEMs in the World. Our values and guiding principle have been woven around seven major aspects which are evidently visible in all the activities performed by the Company i.e. Customer Satisfaction, Innovation, Quality Product and Service, Employee Growth, Culture, Being Sensitive towards Society and Environment Protection. This guiding principle is now the culture of the organization and ensures that both internal and external customers are satisfied.

ECONOMIC OVERVIEW GLOBAL

In 2023, the global economy grew by 3.2%, exhibiting resilient growth with signs of an improved global outlook. The impact of tighter monetary conditions continues, especially in housing and credit markets, but global activity is proving relatively resilient, inflation is falling faster than initially projected, and private sector confidence is improving. Real incomes have begun to rise as inflation has slowed and trade growth has become positive. The concerted efforts of central banks across the globe to tame inflationary pressures, along with a broad base increase in labour force participation and the gradual expansion of global supplies, aided deceleration in inflation. Developments continue to differ among countries, with lacklustre outcomes in many advanced economies, particularly in Europe, counterbalanced by strong growth in the United States and many emerging markets.

As per the IMF, global growth in 2024 and 2025 is estimated to remain persistent at 3.2%, supported by robust government and private spending in several economies. A faster pace of disinflation and steady growth could lead to easing out of tight financial policies. Growth in advanced economies is expected to accelerate slightly to 1.7% and 1.8% in 2024 and 2025, respectively, from 1.6% in 2023. Economic growth in EDMEs is expected to be at similar levels of 4.3% in 2023 and 4.2% in both 2024 and 2025. In the near term, it is imperative for the central banks to manage monetary policy to ensure continued deceleration in inflation and rebuild budgetary capacity to deal with future shocks. Calibrated structural reforms remain the key to reinforcing enhanced productivity and debt sustainability and accelerating convergence towards higher income levels. Multilateral coordination has become more crucial for debt resolution, the mitigation of the effects of climate change, and facilitating the green energy transition in accordance with the 2023 Conference of the Parties to the UN Framework Convention on Climate Change (COP28).

Source: World Economic Outlook April 2024, IMF

DOMESTIC ECONOMY OVERVIEW

Amidst a challenging global scenario, India has emerged as a significant economic and geopolitical power. 2023 was a landmark year for India, as it assumed the presidency of the G20. India remained the fastest growing large economy in the world. According to the National Statistical Office (NSO), the real GDP growth is estimated at 8.2% for FY 2024, as compared to 7.0% in FY 2023. India has been a key growth engine for the world, contributing approximately 16% to global growth in 2023.

Real Gross Value-Added has grown by 7.2% in FY 2024 over 6.7% in 2022-23. This GVA growth has been mainly due to significant growth of 9.9% in Manufacturing sector in FY 2024 over -2.2% in FY 2023 and growth of 7.1% in FY 2024 over 1.9% in FY 2023 for Mining & Quarrying sector. The central bank, the Reserve Bank of India (RBI), continued to keep tight monetary controls with the aim of progressively aligning inflation with the 4% target.

According to the RBI, recovery in rabi sowing, sustained profitability in manufacturing, and the underlying resilience of services should support economic activity in FY 2025. It has pegged GDP growth at 7.0% in FY 2025. Consumer price inflation is expected to moderate to 4.5% as compared to the estimated 5.5% in FY 2024 and 6.7% recorded in FY 2023. While the outlook is positive, with a backdrop of risks posed by geopolitical uncertainty, climate change, global indebtedness, and technology disruptions, Inflation, although slightly down, continues to hover above the RBIs target. The ongoing geopolitical climate and potential global economic slowdown pose a threat to Indias exports and foreign investments.

Continued broad-based policy initiatives and structural reforms encompassing inclusive growth, a revival in consumption, and fast-paced adoption of new and emerging technologies to enhance productivity signal a prosperous future for the Indian economy. Indias economic fundamentals remain strong with the governments unwavering commitment to increase capital expenditure in the near term.

Source: NSO

INDUSTRIAL STRUCTURE AND DEVELOPMENTS

The global synthetic leather market size is estimated to grow from $41.1 billion in 2024 to $88 billion by 2035, growing at a CAGR of 7.17%, during the forecast period, 2024-2035. The new research study consists of industry trends, detailed market analysis, patent analysis, value chain analysis, SWOT analysis, and market forecast and opportunity analysis. The growth in the market size over the next decade is likely to be the result of the anticipated surge in demand for vegan and sustainable materials.

Globally increasing demand from the footwear sector is expected to be a key factor propelling the overall market growth. The high cost of natural leather is another factor that has driven the need for natural leather replacements. PU and PVC leather is another essential type of synthetic leather that has grown in popularity due to its diverse uses, including shopping bags, cosmetic bags, wallets, suitcases, purses, and travel bags.

Synthetic Leather Market Key Takeaways

• Asia Pacific held market share of 42.64% in 2023.

• By product, the polyurethane (PU) synthetic leather segment registered a maximum market share of 53% in 2023.

• By application, the footwear segment is expected to capture the biggest revenue share of 31% in 2023.

The synthetic leather market is expected to grow significantly over the forecast period owing to the rising demand for synthetic leather in footwear and automotive applications. Synthetic leathers are blends of polyurethane and polyvinyl chloride. At present, several market players are also engaged in the introduction of bio based materials for leather. Increasing demand for synthetic leather in the footwear industry owing to cheaper prices is expected to fuel the market growth over the forecast period.

Synthetic leather has been replacing genuine leather at a steady rate. The market is expected to gain considerable market share in the footwear segment in the coming years on account of rising usage of artificial leather grades in boots, sneakers, womens sandals, and mens formal shoes. Moreover, increasing per capita disposable income is expected to boost the demand for synthetic leather in various application segments.

Increasing market penetration of synthetic leather materials in automotive interior applications is expected to be a critical factor for growth. Car manufacturers are adopting synthetic leather materials owing to their high durability, wear resistance, and cost-effective production. Passenger vehicles targeted primarily at the middle income class consumer group are the major end user of faux leather in automotive segment. Faux leather is affordable and easier to maintain as compared to real leather, which aids in attracting a large number of consumers. Utilization of artificial leather reduces the overall cost of the vehicle, thereby assisting manufacturers in achieving stable economies of scale.

Increasing demand of footwear expected to be a major factor that propels the overall market growth for synthetic leather. Synthetic leather is a suitable alternative as it comprises of a cloth base that is coated with synthetic resins. Thus, synthetic leather completely serves the purpose of real leather by offering a leather-like finish, thereby anticipated to augment its demand across wide application area that includes footwear, fabrics, upholstery, clothing, and others. The production process of synthetic leather has evolved over the past few years to curb down the rate of hunting and protect the animal life.

The global demand for leather materials has seen a paradigm shift owing to its increasing application across automotive, furnishing, bags, clothing, and many others. Manufacturers have been focusing significantly to shift their sources for raw materials towards the Asian suppliers for example India, Vietnam and China because of low cost of labour & freight along with an abundance of raw material in the region.

The footwear industry has experienced a tremendous expansion in recent years as a result of rising demand from emerging markets. However, because of the global recession, consumer spending has slightly decreased in the United States and other European nations. South Asian nations like Vietnam, Thailand, South Korea, China, and India have all expressed a strong interest. Asias demand for synthetic leather is likely to be greatly impacted by this.

More foreign investment will speed up industrial penetration in emerging economies throughout the course of the projection period. One of the first industries to adjust to the global shift in consumer spending habits was the luxury industry.

BUSINESS OUTLOOK

The Asia Pacific synthetic leather market size was estimated at USD 17.95 billion in 2023 and is predicted to be worth around USD 39.99 billion by 2033, at a CAGR of 8.3% from 2024 to 2033.

The Asia Pacific encountered the largest value share of more than 42.64% in the year 2023 and expected to maintain the same trend over the analysis period. India, China, and South Korea are the major countries that drive the growth of the market in the region. Further, increasing disposable income along with rising population across the region offers numerous opportunities for the market growth.

North America and Europe witness sluggish growth owing to the maturity of the market. In addition, the ongoing trade war between China and the U.S. along with drastic decline in the cross-border trade with the spread of the coronavirus pandemic that originated in Wuhan, China, has initiated trust issues between the two countries that further expected to negatively impact market growth in the upcoming years. High climate control, superior comfort, and easy-to-style properties of synthetic leather have made them increasingly in the fashion industry. Besides this investment from leading fashion brands towards developing apparel and footwear from artificial leather coupled with increasing demand from consumers will pump up the market growth in upcoming years.

The synthetic leather market in India has witnessed robust growth in recent years, primarily driven by the escalating demand for eco-friendly and cruelty-free alternatives to traditional animal leather. Additionally, advancements in technology and manufacturing processes have significantly improved the quality and durability of synthetic leather, contributing to its expanding market share. Furthermore, the rising awareness of environmental sustainability and the adverse impact of conventional leather production on ecosystems have propelled consumers and industries alike to shift towards synthetic leather. Moreover, the fashion industrys increasing preference for synthetic leather in designing trendy and innovative products has further fueled market growth. The versatility of synthetic leather, allowing for a wide range of textures, colors, and finishes, has made it a favored choice among designers and manufacturers seeking creative flexibility. Furthermore, the cost-effectiveness of synthetic leather compared to genuine leather has attracted budget-conscious consumers, further stimulating market demand. In addition, government regulations promoting sustainable practices and discouraging the use of animal products have played a pivotal role in steering the synthetic leather market. These regulatory initiatives, coupled with the growing emphasis on corporate social responsibility, have prompted businesses to adopt synthetic leather alternatives, driving the market forward. In conclusion, a confluence of factors, including environmental consciousness, technological advancements, design flexibility, cost-effectiveness, and regulatory support, collectively propel the dynamic growth of the synthetic leather market in India.

Mayur, has the largest capacity for manufacturing of synthetic leather in domestic organized segment with capacity of annual production of 48.60 Million linear meters of PVC coated fabric and 5.00 Million Linear meter of PU coated fabric. MUL manufactures more than 400 variants of artificial leather from PVC polymer which finds application in footwear (shoes/sandals insole and uppers), automotive (seat upholstery and inner linings), furniture & fashion items (apparel) and leather goods.

Mayur, has a diversified clientele across various industries and caters to the synthetic leather requirements of reputed players like BMW, Mercedes Benz, Chrysler, Ford, Hyundai, MG, KIA, Maruti Suzuki, Tata, Toyota, Mahindra & Mahindra, ISUZU, Suzuki, Honda, Renualt, Skoda/Volkswagen, Stellantis, Hero, Bajaj, Royal Enfield, TVS, Piaggio, Sonalika Tractor, Lear, TS Tech Sun, Bharat Seat, Krishna Maruti, Sharda Motors, S.I. Interpact Group, Swaraj Auto, Polor Auto etc. among automotives and Bata, Paragon, Lancer, Action, Relaxo, VKC Group etc. among footwear segment.

Mayur is also exporting to automotive OEM i.e. Mercedes Benz and BMW in the European market. Mayur has a subsidiary company named Mayur Uniquoters SA (Pty) Ltd in South Africa, which will develop logistics to facilitate exports to Mercedes Benz and BMW.

We have also into the retail furnishing business under the brand name "TEXTURE AND HUES" to serve our retail customer through our wholly owned subsidiary company ‘Mayur Tecfab Private Limited and we are getting good response in the retail business from the our dealers.

OPPORTUNITIESAND THREATS

The rising demand for animal-free and sustainable products is a major driver of the Global Synthetic Leather Market. This is because synthetic leather is seen as a viable alternative to traditional leather and is increasingly being used in various industries, including fashion, automotive, and furniture.

The synthetic leather market has experienced significant growth in recent years and is expected to continue its upward trajectory in the coming years. Growth in various end-use industries such as automotive, footwear, and fashion is driving the demand for synthetic leather. The market is also being propelled by factors like increasing urbanization, rising disposable incomes, and changing consumer preferences. Technological advancements in the manufacturing processes have also contributed to market growth. Moreover, the growing focus on sustainable and eco-friendly alternatives to genuine leather is expected to further boost the synthetic leather market. Overall, the market outlook for synthetic leather remains positive, with steady growth expected in the future.

OPPORTUNITIES

• Development of new types of high quality PU coated fabric

• Product Diversification

• Growing Demand from the Footwear and Automotive Industry

• Strong and eco-sustainable product

• Export opportunities to neighboring countries

• Modernized manufacturing units

• Optimizing production cost

• Trained / skilled manpower at competitive wage level

• Being a Cheaper alternative to natural leather with good aesthetic quality, demand to continue to remain strong

• Presence in global market

THREATS

• Unfavorable foreign exchange rate fluctuations

• Lack of poor policies for the specific development of the sector

• Some raw material not available locally; it increases cost and lead tuff competitiveness

• Non-biodegradability of synthetic leather

• Irregular supply of raw material

• Increase in competition

• Increase in logistic cost

SEGMENT-WISE PERFORMANCE

The Company deals only in one segment i.e. manufacturing and sale of PU/PVC Synthetic Leather, accordingly there is only a single reportable segment.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The overview of financial performance with respect to operational performance of the Company can be obtained from the various following ratio analysis.

• Debtor Turnover Ratio is 3.26 times

• Inventory Turnover Ratio is 2.78 times

• Interest Coverage Ratio is 80.19 times

• Current Ratio is 8.76 times

• Debt to Equity Ratio is 0.02 times

• Operating Profit Margin Ratio is 19.80 percentage

• Net Profit Margin Ratio is 15.04 percentage

RISKS AND CONCERNS

The risks and opportunities inherent to all corporations are inseparable elements. The Directors and management of the Company make constructive decisions to protect the interests of stakeholders. The Company has implemented a Risk Management Policy, which is continuously monitored and reviewed under the guidance of Audit and Risk Management Committee. This Committee convene periodically to identify processes exposed to risks, determine risk mitigation strategies, and oversee their implementation.

The Company recognises that the emerging and identified risks need to be managed and mitigated to:

• Protect its shareholders and other stakeholders interest,

• Achieve its business objective, and

• Enable sustainable growth.

The Company is continuously and carefully monitoring the risks and concerns related to the business for example: macro-economic factors, foreign exchange fluctuation, geographical concentration, change in the Government policies and legislation, increase in the raw material prices etc. The Company has also taken several insurance policies to mitigate other risks and concerns of the Company.

RESEARCH AND DEVELOPMENT (R&D)

Research and Development activities have played a pivotal role in differentiating the overall attributes of synthetic leather from traditional leather. In this direction, your Company has increased its R&D efforts in scope and scale for comprehensive and integrated research works in the identified thrust areas.

Our R&D work towards the development of synthetic leather with various new textures, colors, patterns, and functionalities to develop synthetic leather with superior properties. We continuously strive towards in-house product development /innovation and sustainable synthetic leather in tune with evolving industry trends.

With experienced and qualified human resources our R&D capabilities are the driving forces of our current momentum and future growth of the organization. With innovation instilled into culture of the company at various levels, R&D is a crucial attribute in fostering our vision to become a global leader in the synthetic leather Industry.

The Company is providing new products from time to time which helps in expanding the business to new dimensions. Customer from OEMs, automobile, footwear, furniture and upholstery, leather goods, sports equipment and fashion industry have varied requirements which are all successfully fulfilled in our prototype laboratories. To mention their achievements, the R&D wing delivers a good number of samples on every working day.

Strategically, Mayur is well placed to create PVC/PU leather products for every part of interior trim applications meeting worldwide standards. We are augmenting our research capabilities and expanding our product portfolio to address the prospective demand across global markets.

Further to meet out the requirements of the customers in the new era as per the international standards and advance technology, we are planning for setting up a new world-class R&D Centre which will focus on developing, demonstrating, innovative and environment friendly, customer centric products and process technologies for developing new and critical product in the artificial synthetic leather industry.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

To ensure effective internal controls across business processes and systems, the Company has established a robust framework that is designed to provide reliable and quality assurance related to the Companys financial and operational information so that it can comply with applicable laws and safeguard its assets. The framework comprises both entity-level controls and business process controls. The adequacy and efficacy of these controls are evaluated on a regular basis.

To facilitate the same, following measures have been initiated:

• The internal control systems are evaluated with respect to their compliance with the operating systems and policies of the Company across all locations.

• The Company has put in place robust data security management.

• The Company is employing data analytics in the internal audit.

• All operations are executed through Standard Operating Procedures (SOPs) in all functional activities, and these are updated and validated periodically as per the business need.

Commensurate with the size and nature of operations, the Company has adequate systems of internal control comprising authorization levels, supervision, checks and balances and procedures through documented guidelines which provide that all transactions are authorized, recorded and reported correctly and compliance with policies and statutes are ensured.

The Company has an independent internal audit system to monitor the entire operations and services. The top management and Audit Committee of the Board review the findings of the Internal Auditor and takes remedial actions accordingly.

The division also assesses opportunities for improvement in business processes, systems & controls and it provides the recommendations for design to add value to the organization and it also follows up on the implementation of corrective actions and improvements in business processes after review by the audit committee and senior management.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATION

The Company always believes that its growth is closely linked with the growth and overall development of its employees. The Company is committed to upgrade the skill of its employees and to create an environment where excellence is recognized and rewarded. The target is to place right people at right position and to enhance the efficiency, working speed, competency and time management skill of its employees. The Companys endeavour is to create an environment where people can use all of their capabilities in promoting the business of the Company. The number of people employed, as of March 31, 2024 are 475.

CAUTIONARY STATEMENT

Statement in the Management Discussion and Analysis and Directors Report describing the Companies strengths, objectives, strategies, projection and estimate are forward looking and progressive within the meaning of all applicable laws and regulation. Actual results may vary depending upon the various aspects of the economic such as government policies, rules and regulations, economic conditions and other incidental factors. Important factors that could make a difference to our Companys operations include raw material availability and prices, cyclical demand and pricing in our principal markets, changes in government regulations, tax regimes, economic developments within India and outside the countries in which we conduct business and other incidental factors. Management will not be in any way responsible for the actions taken based on such statements.

	For and on behalf of the Board of Directors of
	Mayur Uniquoters Limited
	Suresh Kumar Poddar
Place : Jaipur	(Chairman and Managing Director & CEO)
Dated : August 08, 2024	DIN: 00022395