Modern Threads (I) Ltd Management Discussions

ANNEXURE “F” TO THE BOARDS REPORT

GLOBAL ECONOMY

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability.

Source https://www.imf.org

INDIAN ECONOMY

Indias real GDP growth for FY 2024-25 is projected at 6.4 percent, aligning with its decadal average. The real gross value added (GVA) is also expected to grow at the same rate. While the global economy grew by 3.3 percent in 2023, the IMF projects a 3.2 percent growth rate over the next 5 years. For FY 2025-26, Indias GDP growth is forecasted to range between 6.3 percent and 6.8 percent, depending on external factors. The survey underlines Indias commitment to structural reforms and deregulation to strengthen its medium-term growth potential.

However, geopolitical tensions, global trade risks, and ongoing conflicts remain significant concerns. Inflationary trends indicate a decline, with retail headline inflation reducing from 5.4 percent in FY24 to 4.9 percent in April December 2024. Capital expenditure has consistently improved, with an 8.2 percent year-on-year increase post-general elections (July November 2024). India also maintains its position as the seventh-largest global exporter of services, reflecting its strong competitiveness in the sector.

Private consumption and investment remain crucial drivers of economic growth. Rural demand is showing signs of recovery, supported by higher agricultural output and government welfare measures. Urban consumption continues to be robust, driven by increased disposable incomes, a thriving services sector, and improved employment prospects. Meanwhile, government spending on social infrastructure, including healthcare and education, remains a priority to ensure inclusive growth. Source http://www.india.brifing.com

GLOBAL TEXTILE INDUSTRY

The textile market size has grown strongly in recent years. It will grow from $640.43 billion in 2024 to $696.16 billion in 2025 at a compound annual growth rate (CAGR) of 8.7%. The growth in the historic period can be attributed to growth in world population, increased demand for man-made fibers, government initiatives for the textile industry, strong economic growth in emerging markets and a ban on plastic usage.

The textile market size is expected to see strong growth in the next few years. It will grow to $915.96 billion in 2029 at a compound annual growth rate (CAGR) of 7.1%. The growth in the forecast period can be attributed to global population growth and urbanization, a rapid growth in e-commerce, rising spend on leisure, increasing retail penetration, increasing internet penetration and smartphone usage and growing preference for contactless delivery solutions. Major trends in the forecast period include focus on adopting digital textile printing inks, focus on use of non-woven fabrics, focus on using organic fibers, focus on sustainable fibers, focus on using blockchain in the manufacturing processes, focus on implementing digital platforms in textile supply chain management, focus on collaborating with technology companies to design and develop smart fabrics, focus on adopting robotics and automation, focus on investing in artificial intelligence and focus on partnerships and collaborations to develop innovative products. Source https://www.researchandmarkets.com

INDIAN TEXTILE INDUSTRY

While CY2024 was a mix bag for the Indian T&A sector, the year CY2025 is expected to be a better one. The second half of 2024 saw a distinct recovery in the overall exports after multiple quarters of subdued performance in the backdrop of sluggish demand in the major markets of the EU and the US. For the last two consecutive quarters of the past year, both these markets have witnessed demand upsurge as consumers commenced fresh buying on the retail front. Festive season added to the fervour with inventory depleting fast and retailers looking to replenish their stocks eagerly with new merchandise. Other textile items like fabrics and made-ups are also finding renewed buying support in the export markets.

According to CRISIL Ratings, Indias home textile industry is set to see 6-8 per cent growth this fiscal (FY25) riding on resilient demand from the US and expansion in the domestic market, notwithstanding some lingering logistical challenges. This follows a 9-10 per cent rebound in revenue growth in the last fiscal. The Indian home textile industry derives 70-75 per cent of its revenue from exports, even as the US alone accounts for 60 per cent and the remaining 25-30 per cent from the domestic market.

Source : textileinsights.in

GOVERNMENT INITIATIVES

The Indian government has introduced several initiatives in the 2024-25 period to boost the textile industry, focusing on areas like infrastructure, skill development and exports. Key measures include the establishment of PM MITRA Parks, the Rebate of State and Central Taxes and Levies (RoSCTL) scheme and the Samarth scheme for skill development. Additionally, the government is promoting technical textiles and supporting cotton production through various schemes

COMPANY OVERVIEW

Modern Threads (India) Limited (MTIL) is engaged in the textile industry, offering a diverse range of products including worsted yarn, wool tops, wool grease, polyester viscose fiber-dyed yarn, 100% polyester yarn, and lanolin. The company began its journey in 1973 under the name Modern Woollens, focusing on the production of wool and wool-blended worsted yarn in India. In 1989, MTIL expanded into the manufacturing of wool tops, and in 2006, it doubled its production capacity for both wool and blended worsted yarn.

Further expansion occurred in 2014 with the addition of approximately 1,000 spindles and preparatory equipment, increasing the annual worsted yarn production capacity from 1,700 to 2,100 tons. Aligning with Indias broader industrial growth, the company has emerged as one of the leading manufacturers and exporters of wool and blended worsted yarn in the country.

Operating from its facility in Bhilwara, Rajasthan, Modern Woollens has established a strong international presence and reputation. The company enforces rigorous quality control standards using an advanced in-house laboratory equipped with ‘Inter-Wool Lab-accredited instruments. Over the years, MTIL has consistently received accolades for its excellence in exports, with its products now reaching over 25 countries, including regions in Europe, Latin America, the Far East, the Middle East and Africa.

Company Foundation

Industrial Structure and Development

The worsted yarn segment of Textile Industry is moving ahead and likely to grow fast in coming years. The turn of woollens as a fashion fabric in global as well as domestic markets, coupled with renewed attention on specialty and high value-added yarn will be growth drivers for woollen division of the Company. The Company is proposed to capture the growth potential through its wide range of products of worsted yarn by entering in foreign markets.

Outlook

Consistent efforts are being made by the Woollens Division of the Company to ensure sustainable leadership for its products in global market. Woollen Division has also initiated efforts to retain existing customers base and contracting newer customers in overseas market with different product range in worsted yarn so as to achieve improved performance and profitability in the ensuing period.

Opportunities and Threats

In the current age of liberation and globalization, your Board considers it appropriate to explore new business areas/opportunities to broad base investment and industry presence to attain its main purpose of delivering long term value to the shareholders of new improved means as etc. Growth prospects of the Woollen & Yarn divisions of the Company are bright due to ongoing efforts of management for improving operational efficiency, cost reduction and better management of available financial resources. Your company is expecting improved performance of woollen division as well as yarn division in the coming years.

Significant presence of small suppliers which has reduced the bargaining power, threat from unorganized sector & low cost substitute products from other countries are also factors of concern for management.

Risk and Concerns

The Companys management follows a structured and effective risk management framework to support the processes of identifying, assessing, mitigating, and reporting risks. A wide spectrum of risks such as business environment risks, market fluctuations, political uncertainties, environmental factors, and liquidity challenges are regularly identified. Once these risks are recognized, management evaluates their potential impact and formulates appropriate strategies to mitigate them.

Financial Performance

Details of significant changes i.e change of 25% or more as compared to the immediately previous financial year: