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Nagreeka Exports Ltd Management Discussions

Jul 19, 2024|09:44:56 AM

Nagreeka Exports Ltd Share Price Management Discussions

(1) Economic Scenario

(a) Global Economy

The Global economy has started recovering from the impact of the Pandemic but it is still marred by profound shocks and unprecedented uncertainty and faces new challenges emerging from the Russia - Ukraine war. It also faces headwinds such as the food and energy crises in Europe, rising inflation, tight financial condition, rising commodity prices, resurgence of covid 19 in China disruption and huge changes in supply chains.

Tightening of monetary policy by most central banks is expected to have positive impact, despite monetary tightening inflation that is persistent in many key economies and it is anticipated that global inflation will fall from 8.7% last year to 7.00% this year before settling around 5.00% in the year 2024.

International food, energy, oil and other commodity prices have eased moderately in recent times. Easing supply chain disruption could also help cool inflation and limit the need for future monetary tightening measures. The aim of the global central banks is to improve sentiments while continuously monitoring liquidity position. The outcome of the war in Ukraine will have a significant impact on how the world economy grows.

(b) Indian Economy

Despite a grim and hostile international environment, the Indian economy has remained resilient, drawing strength from its Macro Economic fundamentals. Banks are healthier than before the crisis, indicating an elevated credit demand. This strength has been considerably facilitated by the Central Governments significant boost in capital expenditure. India is widely seen as a bright spot in an otherwise gloomy world. Yet our inflation remains elevated, as in most parts of the world.

Government initiatives including the PM Gati Shakthi, National Master Plan, the National Monetisation Plan (NMP) and the Production Linked Incentive (PLI) are expected to foster economic growth, going forward. The Reserve Bank of India (RBI) has also exercised prudent and Proactive measures to ensure financial stability and address liquidity constraint. The surge in private consumption has also fueled production activities, leading to higher capacity utilization across value sectors. This will help the economy back onto a growth path.

(2) Industry Scenario and Development

Dwelling on the outlook for FY 2022-23, the economic survey 2022-23 issued by Ministry of finance highlights that Indias recovery from the Pandemic was relatively quick and projects growth in the upcoming years will be supported by solid domestic demand and pick up in capital investment. The Indian cotton textile Industry is expected to show stable growth supported by stable input prices, healthy capacity utilization and steady international and domestic demand. Growth of E-commerce - increase in demand for online shopping is expected to drive the textile manufacturing industry and its market.

The enthusiasm in the textile industry is on the account of the latest FTAs executed with Australia & UAE. They are expected to enhance market access and trade. There appear to be plenty of opportunities for the Indian textile Industry arising globally as the majority of companies and customers are looking for market diversification and explicitly, India is their most favoured destination. The country has the potential to grab the emerging demand and grow its market by making investments in sustainability, circularity and traceability. Strong domestic demand, rising disposable income, higher literacy rate, growth of FMGC markets, rising employment indicators, and trends suggest that Indias economy is on an upward trajectory and the country is well positioned to continue its growth despite global turbulence.

The Government is taking effective steps to increase present production of textiles from existing USD 150 billion to USD 300 billion and export from USD 44 billion to USD 100 billion by the year 2030. The Government has also launched the PM Mitra Park Scheme to promote seven integrated textile parks in the country. Furthermore, the Government has also launched projects to improve yield of cotton in India and Kasturi Cotton India Scheme to brand Indian Cotton.

(3) Opportunities, Threat & Outlook

There appear to be plenty of opportunities for the Indian Textile industry as India is empowered with abundant availabilities of cotton, and a large pool of man power. This will be an advantageous factor to the Indian textile industry as cotton has a prominent share in the textile manufacturing sector, and the textile & apparel manufacturing sector is highly labour intensive. The increasing application and uses of cotton in various industries are also driving the demand for cotton textile from many countries across the globe.

The Indian Textile Industry is optimistic of retaining their growth level with supportive government policies. The cotton prices have started stabilizing and the order position continues to be encouraging. The situation is showing signs of improvement with gradual reduction in commodity prices. FTAs with the UK, EU, & Canada, each having a significant market, are under negotiation and are likely to create more market opportunities for the entire textile value chain.

It seems that demand will increase further as imports of goods will reduce due to the prevailing negative sentiment. Being a reputed manufacturer of world class quality product and international presence across the globe we are optimistic of a bright future. Business volumes are expected to increase as consumers are attracted towards quality product.

The Global Textile Market grew from USD 573.22 Billion in 2022 to USD 610.91 Billion in 2023 at a Compound Annual Growth Rate (CAGR) of 6.60%. Growth of e-commerce, and increasing demand for online shopping is expected to fuel the growth of textile manufacturing. The textile market is expected to grow to USD 755.35 Billion by 2027 at CAGR of 5.50% (source business research company)

A fall in inflation following a peak in 2022 and adjustment of the initial energy crisis are expected to result in global economic growth of 2.90% in 2023 (source IMF world economic outlook April-2023). This would be lead by emerging economies like India and china which are anticipated to have a stronger growth. Non fuel commodity prices are predicted to fall by an average of 6.30% in 2023 expecting to feed into the existing demand and creating more demand contributing to the growth of global economy.

Availability of quality cotton at reasonable price plays an important role in textile industry globally. India is one of the largest producers and exporters of cotton yarn. Raw material costs continue to remain at an elevated level and fluctuation in prices are wild, impacting the margin of the industry as a whole. However, increase in cotton cultivation area and increase in per hectare yield are likely to mitigate its impact during the next financial year. Though cotton prices have cooled down since its peak level they are still higher than the previous levels. The prudent cotton procurement strategy enables the company to procure quality cotton at competitive price.

Other important Threats are volatility in currency, rising cost of wages and salaries, availability of appropriate man power, increased cost of power, and volatility in overseas freight.

Risk Management is an integral part of Companys management over the years. The Company has identified key internal and external risk factors associated with the operations of the company and the control processes to mitigate such risks. Further the company regularly reviews the identified risks and control process.

(4) Management perception of Risk Concern

The prices of raw cotton play a vital role on the fortunes of the textile industry. Various strategies are adopted by the Management from time to time to hedge the said risk. With an established Currency

Risk Management Policy, the foreign currency exposures are continuously monitored and hedged accordingly which helps mitigate risk arising from volatile and fluctuating currency exchange rates.

(5) Internal Control System

The Company has an effective and adequate internal control system and procedures which are commensurate with its size and nature of business. The Internal control systems are designed in such way that all the assets are safeguarded and protected against loss and all transactions are authorized, recorded and reported correctly. The Audit Committee monitors and evaluates and reviews the Internal Financial Control systems of the Company. Regular Internal Audits and checks are carried out to provide assurance that the responsibilities at various levels are discharged effectively and that adequate systems are in place.

(6) Human Resources / Industrial Relations

Employees are the cornerstone of our business success. The Company has a supportive work culture and the employees have a strong affinity to the Company. We have an experienced and qualified workforce across multiple disciplines. We are also led by a dedicated and experienced executive management team that has a median of about 20 years of experience across the trade. Performance management is the key word for the company. Your Company also conducts in house training program at various levels. Industrial relations have been very smooth throughout the year.

(7) Cautionary Statement:

The report may contain "forward looking statement" that describes our objectives, plan or goals. All these forward looking statements are subject to certain risks and uncertainties including but not limited to Government action, economic development, global and domestic demand-supply conditions, finished goods prices, raw materials etc that could cause the actual results to differ materially from those contemplated by the relevant forward looking statements

The Company assumes no responsibility in respect of the forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.

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