nandan denim ltd Management discussions

Economy Overview Global economy

The global economy has recovered from the COVID-19 pandemic and the Russia-Ukraine conflict by 2022, but it continued to face unexpected crises. As a consequence of pent-up demand, supply chain disruptions, and rising commodity prices, inflation in a number of economies reached multi-decade highs in early 2022. The strong monetary policies of central banks, however, helped inflation to start slowing down and commodity prices to gradually soften in late 2022. The global economy is projected to grow by 2.8% and 3.0%, respectively in 2023 and 2024, as compared to 3.4% growth reported in 2022.

World GDP growth % YoY

P: Projected

Source: International Monetary Fund (IMF) April 2023 report

Central banks rapid intervention seems to have reduced the impact of the recent global liquidity problems that arose in the wake of several global banking crises. The advanced economies are anticipated to experience GDP growth rates of 1.3% in 2023 and 1.4% in 2024, as compared to 2.7% in 2022. The reopening of Chinese economy in 2022 and sustained global financial conditions have contributed to a robust start for emerging markets in 2023. It is anticipated that emerging markets and developing economies (EMDEs), will continue to grow by 3.9% in 2023 and 4.2% in 2024 as compared to the 4.0% growth witnessed in 2022. Moreover, emerging markets are expected to outperform other global markets due to strong regional growth and robust economic development in India, China, and other ASEAN countries.

Indian economy

India has emerged as an influential global economy over the past decade as a result of the governments persistent efforts to promote balanced growth and equitable development. India is the worlds fastest-growing economy, with a 7.2% YoY (Year over Year) GDP growth rate in FY 2022-23, according to the Second Advance Estimates Report from the National Statistical Office. Recent out performance of Indias economy, its enormous and increasing population, and its rapid ascent as a manufacturing alternative to China have all stimulated the interest of global investors. In FY 2022-23, India witnessed a significant upsurge in international exports of products and services, reaching unprecedented levels. The remarkable growth within the country was primarily driven by strong demand for Indian services, contributing to the overall expansion of the export sector.

As consumer inflation increased in FY 2022-23, the Reserve Bank of India (RBI) tightened its monetary policy to maintain a balance between inflation and growth. After increasing the repo rate from 4.0% in May 2022 to 6.5% in February 2023 over the course of five separate sessions, the RBIs Monetary Policy Committee (MPC) halted the repo rate increase cycle and maintained its "withdrawal of accommodation" stance. The RBIs SPF (Survey of Professional Forecasters) report

has projected real GDP growth of 6.0% for FY 2023-24 and 6.4% for FY 2024-25. In the budget for the fiscal year 2023-24, there has been a substantial boost in grants for the textile industry, with a total allocation of 4,389.34 crore, showcasing a year-on-year growth of 22.6%. Moreover, it is anticipated that the Union Budgets emphasis on capital expenditure will stimulate private investment, increase employment creation and overall consumer demand, and boost Indias growth potential. The capex budget of 10 lakh crore would also provide a push in the green energy sector as the country is striving at accelerating decarbonisation and growing sustainable energy. Besides, incorporating cutting-edge technologies such as artificial intelligence, the Internet of Things (IoT), and machine learning would also significantly contribute to the digital empowerment of the nation.

Industry Overview

Global Textile Industry Overview and Outlook

The global textile markets growth is expected to be driven by the ever-increasing demand for apparel from the fashion industry, as well as the rapid expansion of e-commerce platforms. The global textile Industry is projected to grow at a compound annual growth rate (CAGR) of 3.52% during the forecast period of 2023 to 2028. The industrys value is expected to increase from $723 billion in 2023 to $859 billion by 2028. In 2022, the cotton segment dominated the market and represented 38.9% of the total revenue share. Cotton is the most important natural fibre in the world due to its superior characteristics, which include high strength, absorption, and colour retention. China, India, and the United States are the worlds largest producers of cotton and cotton-based goods.

The textile industry is a continuously expanding market, with prominent competitors including China, the European Union, the United States, and India. China holds the top position globally as both a producer and exporter of raw textiles and garments. The United States excels in raw cotton production and exports, while also ranking as the leading importer of raw textiles and garments. Within the European Union, Germany, Spain, France, Italy, and Portugal stand out, contributing over one-fifth of the global textile industrys value. India, as the third-largest textile manufacturing industry, accounts for more than 6% of global textile production. The industry benefits from rapid industrialisation in developed and developing countries, as well as advancements in technology that enable modern installations capable of highly efficient fabric production. These factors contribute to increased revenues in the textile industry and are expected to further support its growth during the next five years.

The textile industry operates based on three key principles: design, production, and distribution of various flexible materials, including yarn and clothing. A wide range of manufacturing processes, such as knitting, crocheting, weaving, and others, are extensively utilised to create a diverse array of finished and semi-finished products in sectors such as bedding, clothing, apparel, medical supplies, and other accessories. The growing popularity

of online shopping is anticipated to be a key driver for the textile manufacturing industry. Manufacturers now have access to a broader online platform for selling their products, enabling them to reach customers across various geographical locations. This expanded customer base is expected to contribute to the overall growth of the textile manufacturing market.

The global textile market is projected to experience a compound annual growth rate (CAGR) of 7.6% in terms of revenue from 2023 to 2030. Market progress has been hindered by global trade restrictions resulting from disrupted supply chains and reduced consumption of textile products since the imposed lockdowns. However, the industry is expected to experience a robust recovery in the coming years, supported by government initiatives and increasing public awareness regarding the importance of adopting effective precautionary measures.

Source: https://www.grandviewresearch.com/industry- analysis/textile-market

https://www.mordorintelligence.com/industry- reports/global-textile-industry---growth-trends-and- forecast-2019—2024

Indian Textile Industry Overview and Outlook

The Indian textile industry holds a prominent position across the globe, as the second-largest producer of MMF (Man-Made Fibre) after China. Additionally, India ranks as the third-largest exporter of textiles and apparel globally. The textiles and clothing sector in India is a vital pillar of the national economy. In FY2022, the share of textiles and apparel, including handicrafts, in Indias total merchandise exports stood at a substantial 10.5%. Furthermore, India holds a 4.6% share in the global trade of textiles and apparel. In 2022, the Indian textile and apparel industry achieved a market size of $172.3 billion.

The Indian textile industry has been strategically strengthening its position in major export markets, particularly in the areas of home textiles and readymade garments. The Indian textile industry has benefited from the opportunities arising from the trade tensions between the US and China. India has experienced a significant increase in its share of exports in the home textiles and readymade garments segments, especially to the US. Despite a difficult and sluggish FY2023 characterised by weak demand, high retailer inventory, supply limitations, and rising cotton prices, the textile industry is expected to witness significant growth in the future.

The declining cotton and crude prices are expected to boost profit margins and enhance Indias competitiveness in export markets. Also, with the completion of significant capital expenditures, textile players are well positioned to capitalise on their expanded capacities which would augur the growth in the textile industry. Going ahead, the industry is expected to experience substantial growth, projected to reach $387.3 billion by 2028. This expansion demonstrates a strong CAGR of 14.45% from 2022 to 2028.

Source: Ministry of Textiles, https://www.researchandmarkets. com/reports/5753360/indian-textile-apparel-market- industry-trends#:~:text=The%20Indian%20textile%20 and%20apparel,14.45%25%20during%202022%2D2028.

https://www.financialexpress.com/industry/strong-demand-

in-india-quite-supportive-for-future-growth-of-denim-

industry/2949598/

Key Market Trends

India has emerged as one of the leading global manufacturers and exporters of textiles and garments, experiencing substantial growth in recent years. Here are some significant trends concerning Indias textile industry:

• Increasing textiles exports: The export value of Indian apparel and garments has shown consistent growth over the years. According to the Apparel Export Promotion Council, from April to February in FY2023, cumulative exports of Ready-made Garments (RMG) amounted to 1,180.5 billion demonstrating growth of 11.2% compared to the same period from April 2021 to February 2022. Moreover, improvement in capacity utilisation with higher capacities across the industry is expected to further boost trade volumes in the textiles industry.

• Growing demand in key markets: The demand for Indian apparel and garments is primarily driven by key markets such as the United States, Europe, and the United Arab Emirates (UAE). The US serves as the largest market for Indian textiles and garments, followed by the UAE, the UK, and Germany.

• Adequate Government Support: The recent Union Budget for FY2024, has delivered a significant boost to the textile industry. The government has planned to establish seven mega textile parks across India. This strategic move not only creates more employment opportunities but also strengthens the Micro, Small, and Medium Enterprises (MSME) sector. These textile parks would be equipped with advanced infrastructure and offer tax benefits and other incentives to textile companies. Funding for programmes like the National Technical Textiles Mission (NTTM), PM-MITRA, and the textile development cluster plan has also been allocated. The allocation for ATUFs (Amended Technology Upgradation Funds Scheme) has seen a significant increase from 650 crore in 2022-23 to 900 crore in 2023-24. This increase will expedite pending payment processes.

To enhance the productivity of extra-long staple cotton, a cluster-based and value-chain approach will be implemented through public-private partnerships. This initiative aims to ensure raw material security for the garment industry. Furthermore, the identification of five new HS Codes will enable further classification of cotton based on staple length. There has been an increase in the allocation for both RoDTEP (Remission of Duties or Taxes on Export Products Scheme) and

RoSCTL (Scheme for Rebate of State and Central Taxes and Levies on Export of Garments and Made- ups). Additionally, a corpus of 9,000 crore have been allocated to revamp credit guarantee schemes, aiming to provide collateral-free guaranteed credit worth 2 lakh crore.

The PLI Scheme, initiated by the government with an approved outlay of 10,683 crore, aims to promote the manufacturing of MMF apparel, MMF fabrics, and Technical Textile products within the country. This scheme is designed to enhance the size, scale, and competitiveness of the textile industry. Recognising the importance of the textile sector in generating employment, the government has also implemented several labour-friendly policies.

Diversification of product offerings: Indian textile and garment manufacturers are diversifying their product offerings to meet the evolving preferences of consumers. This includes a growing demand for athleisure wear, resulting in an increase in the production of activewear in India. Indian textile companies, including prominent yarn manufacturers, are embarking on expansion initiatives. They are either venturing into the production of knitted fabric or diversifying their operations by entering the denim fabric segment or exploring other related categories.

Investment in technology and innovation: Indian textile and garment manufacturers are investing in technology and innovation to enhance their production processes and deliver high-quality products. This involves the implementation of automation, artificial intelligence, and 3D printing to improve efficiency and reduce production costs. The textile industry has experienced remarkable advancements in digital printing, fabric weaving, and various other processes, resulting in the production of fabrics with enhanced precision, uniformity, and cost-effectiveness. Digital printing technology has revolutionised the industry by enabling the printing of fabrics with more vivid and accurate colours, while inkjet printing has significantly accelerated the production speed of printed fabrics. Moreover, digital weaving techniques have unlocked new possibilities for creating intricate patterns and styles with exceptional durability and strength. These innovations have not only elevated the quality of fabrics but have also streamlined production processes, making them more efficient and productive. With the continuous development of advanced spinning machinery and tools, automation has become increasingly vital, enabling mills to enhance operational efficiency and productivity.

3enim Industry Blobal Denim Industry

enim, a versatile textile commonly associated with jeans ind a key element of casual wear, has established itself as a taple in the global apparel market. The global market value

of denim fabric was estimated to be approximately $27.1 billion in 2022, and it is anticipated to surpass $35 billion by 2027. Alongside the influence of fashion trends, the adoption of advanced technologies in the manufacturing process has played a significant role in the industrys growth. Innovative manufacturing techniques, including laser technology and eco-friendly practices, are now being employed to produce denim garments. These advancements not only minimise waste but also reduce water and energy consumption, making the manufacturing process environmentally sustainable and economically efficient.

The denim fabric has undergone multiple transformations, and fashion designers and manufacturers worldwide continue to discover innovative applications for denim. It has shaped numerous fashion trends that continue to influence the industry today. The global market for denim fabric has also been propelled by several factors, including the availability of affordable denim fabrics and socioeconomic trends. The demand for denim has spanned across the globe, with notable market interest in regions including North America, Europe, Asia-Pacific, and Latin America. Traditionally, North America and Europe have been robust markets for denim, benefiting from their well-established fashion industries and consumer preferences. Countries such as India, China, Brazil, Italy, and Bangladesh possess ample cotton resources, creating a strong demand for denim. Consequently, new manufacturers are entering the market, and established players are expanding their global footprint, leading to intense competition across numerous countries. Source: https ://www.statis ta.com/topics/5959/denim- market-worldwide/#dossier-chapter5

Indian Denim Industry

The denim market has grown significantly in recent years, owing to the growing demand for denim garments worldwide. Consumers have embraced a diverse range of colours, styles, and finishes, leading to the expansion of the denim market beyond traditional blue jeans. For several years, the Indian domestic denim market has consistently maintained an average CAGR ranging from 8% to 9%. It is anticipated that by 2028, the markets value will ascend to approximately $12.27 billion. Many national and international brands are expanding their foothold in the Indian market, capitalising on not only metropolitan cities but also Tier-3 and Tier-4 cities, which present promising markets for jeans.

India has the second-largest installed capacity for denim fabrics in the world, with an annual production capacity exceeding 1,600 million metres, following China. Presently, there are over 50 denim fabric mills operating in the organised segment within the country, marking a significant increase of approximately 60% compared to the number ten years ago. Around 850-900 million metres of denim fabric, accounting for roughly 55% of Indias total capacity, are utilised within the domestic market. This includes the manufacturing of jeans for both local consumption and export purposes. The remaining fabric is exported to various countries such as Bangladesh, Colombia, Venezuela, Egypt, Sri Lanka, and others. India has long been recognised as a leader in denim

fabric production, and more recently, the domestic jeans market has been experiencing steady growth, surpassing the global growth rate. The Indian denim fabric industry is poised for continued growth in the foreseeable future, projected to achieve a higher growth rate in the near future.

Source: https://www.financialexpress.com/industry/strong- demand-in-india-quite-supportive-for-future-growth-of- denim-industry/2949598/ https://markwideresearch.com/denim-market/

Opportunities and Threats Opportunities

• Underpenetration in the domestic denim market: In

the past five years, the growth of Indias denim industry has surpassed that of the domestic apparel sector and the global denim market. Despite this exceptional performance, India remains underpenetrated compared to developed economies. Moreover, factors such as a lower dependency ratio, rising urbanisation, the countrys pervasive trend of westernisation and the growing acceptance of denim among women and children are expected to contribute significantly to the industrys growth rate.

• Focus on sustainability: Denim mills, renowned within the fashion industry, are progressively embracing recycling in their production processes. Indian denim brands are putting significant efforts into developing more ethical denim textiles that bridge the gap between fashion and sustainability. These materials cater to environmentally conscious customers seeking stylish and versatile clothing options. Increasing customised services would lead to a higher acquisition of customers in the denim industry and is also expected to boost growth in the industry.

• Industry-wide expansion and consolidation drive:

To enhance denim manufacturing capabilities, some mills are making investments in spindles. This strategic move allows them to tap into additional domestic and international markets while reducing their reliance on yarn markets. By incorporating backward integration, businesses can effectively manage raw material availability and streamline cost-effective manufacturing processes. While larger, more established mills are concentrating their efforts on consolidating their operations, a growing number of newer, smaller firms are making strides toward expansion. Increasing expansion and consolidation activities would effectively contribute to the growth of the denim markets in India.

• Technological advancements: Technological

advancements have brought about a significant transformation in denim fabric production. Innovations like laser finishing and 3D printing have revolutionised the industry, empowering designers with enhanced capabilities and boosting production efficiency. These advancements have contributed to the overall growth of the market.

• Growing prominence of athleisure: The rise of athleisure wear has also made a notable impact on the denim fabric market. The increasing demand for clothing that seamlessly blends comfort and functionality has prompted manufacturers to incorporate stretch and performance properties into denim fabrics. This shift towards athleisure-inspired denim caters to evolving consumer preferences and has further fuelled the markets expansion.

• E-commerce expansion: The expansion of the denim market has been greatly facilitated by the growth of e-commerce. Online platforms have played a significant role in providing convenient access to a wide array of denim products, thereby attracting a substantial customer base.

I n addition to fashion and style preferences, the entire denim industry has received a boost from factors such as increasing urbanisation, celebrity endorsements, product innovation, and evolving lifestyles.

Threats

• Raw Material Prices: The fluctuations in the prices of raw materials, such as cotton, polyester, and dyes, can significantly affect the production costs for textile and denim manufacturers. Sudden spikes in prices can adversely impact profit margins and the industrys competitiveness.

• Trade Disputes and Tariffs: International trade disputes and imposition of tariffs on textiles and denim products can disrupt global supply chains and impact export- import relationships. The tariff barriers could lead to reduced exports and increase costs for businesses thereby posing threats to the global textile and denim industry.

• Environmental Concerns: Sustainability and environmental issues have been gaining huge attention in the textile and denim industry. Concerns related to water usage, chemical pollution, and waste generation are increasing thereby prompting industry players to adopt more eco-friendly practices and comply with stringent environmental regulations.

I n response to these challenges, both the global and Indian textile and denim industries have been focussing on innovation, sustainability, technology adoption, and strategic collaborations to stay competitive and resilient in the dynamic market landscape.

Company Overview Company Background

Nandan Denim Limited, (hereafter referred to as ‘NDL or ‘the Company) based in Ahmedabad, Gujarat, was founded as a private limited corporation on August 9, 1994 under the name Nandan Exim Private Limited. Vedprakash D Chiripal and Brijmohan Chiripal founded the Company with the intent of manufacturing, trading, and exporting textiles. The Company began with a small number of powerlooms and is

now an expansive textile conglomerate manufacturing every textile product ranging from fibre to apparel under one roof.

NDL has an integrated denim manufacturing process from spinning to delivering finished fabric. Initially, the Company operated in the domestic and international cloth commerce sector, but later expanded into the production of denim fabrics. Over the years, the Company has transitioned from an only denim manufacturer to a manufacturer of superior quality shirting and other fabrics.

NDL manufactures and distributes denim fabric, yarn/dyed yarn, cotton fabric, and shirting fabric to consumers in different parts of the globe. NDL produces primarily grey cotton fabrics, khakis, and denims. Moreover, the Company specialises in manufacturing fabrics with a wide range of weaves, colours, textile combinations, and weights. Their product offerings include denim twills, stretch bull denim, and broken twills, among others. Additionally, they provide grey cotton fabric and blend textiles. The Companys inventory primarily comprises cotton fibres, denim fabrics, and ready-to-wear garments. The Company has established a consistent market leadership owing to its huge economies of scale and diverse product portfolio. NDL has been known for providing high-quality products that satisfy evolving customers preferences.

As Indias largest denim supplier, the Company consistently stays ahead of fashion curve, while excelling market trends to maintain a seamless supply for partners in over 15 countries. NDLs annual operational capacity is 50 million metres. The Company employs 1,182 individuals across all of its locations and generated 2,026.76 crore in revenue in FY 2022-23.

Key Business Strengths

• State-of-the-Art Manufacturing Facilities

The NDL Group manages a vertically integrated production line of significant scale, which includes in-house operations for spinning, weaving, dyeing, processing, and finishing yarn and fabric. The Companys internal manufacturing capabilities allow for streamlined production processes and its facilities hold an ISO 17050-1 Standard 100 by OEKO-TEX quality certification to ensure efficient management. Additionally, the Company has acquired the following certifications:

• Global Organic Textile Standard (GOTS) certified

• Global Recycled Standard (GRS) certified

• Organic Content Standard (OCS) certified

• Recycled Claim Standard (RCS) certified

• Better Cotton Initiative (BCI) certification

The production facilities of the Company are housed within its Piplej and Bareja plants located in Ahmedabad, ensuring a continuous and uninterrupted manufacturing process. NDL develops a fabric from cotton fibres, and the internal R&D (Research and Development) department

supports innovation. The Company possesses a strong and reliable infrastructure, including superior facilities, which enhances the productivity, efficiency, and overall quality of both employees and products.

• Robust R&D Activity

The Company has developed a dynamic product portfolio that combines utility and function owing to its R&D efforts, constant focus on product innovations, and commitment to delivering excellence. The Company takes a proactive approach to anticipating emerging fashion trends and remaining ahead in the fashion industry. It offers a wide variety of denim and shirt fabrics that complement both traditional and contemporary fashion trends. Additionally, the Company invests in cutting-edge technology to remain competitive in the global market.

• Excellent Product Quality

The Companys infrastructure, technology, and manufacturing facilities have enabled it to manufacture products of unparalleled quality over the years. During yarn production, special rewinding machines guarantee proper waxing. All of its products are subjected to stringent quality measures to attain a consistent quality structure across the board. In addition, each fabric set is evaluated for quality according to ASTM (American Society for Testing and Materials) and AATCC (American Association of Textile Chemists and Colorists) specifications before shipment. Following the tensile strength test, shrinkage, weight, and movement are evaluated using a chemical test and cutting-edge technology. These cutting-edge production methods, backed by extensive research, ensure the continuous maintenance of high-quality standards.

• Strong Exports:

NDL has been reliable supplier to over 15 countries around the globe. The Company has relationships with prominent U.S. retailers. Its jeans, denim, and other products are utilised by over 20 well-known global corporations.

Operational Performance

• Denim - NDL is Indias leading denim supplier. It is capable of producing 50 million metres per annum

(MMPA). It offers numerous product categories, such as Core Classics, Reinvented Classics, Novelties, Structured, Knit Denim, Innovations, Light Weight Denim, Blends, Feather Touch, Stretch Tech, and Prints. Innovation and technology in denim are integral to the Companys mission to create new types of denim to meet contemporary requirements and desires.

• Shirting - NDL has a dyeing facility that enables its shirt fabrics to come in a wider range of hues. The Company provides a wide variety of fabric shades due to its 20 TPD (tonnes per day) yarn dyeing plant with several configurations starting from 6 kg. In addition, there are high-speed airjet looms and rapiers with dobby attachments for 10 MMPA-worth of cutting- edge weaving facilities. With these facilities, the Company guarantees the production of high-quality fabrics, including plain, twill, dobby, chambray, fil a fil, herringbone, basket weave, and pin-point oxford. Modern processing equipment & finishing machines for all kinds of finishes, such as Easy to Iron, brushing, carbon peaching, Calendaring machines, create a wide range of finished products to cater to all types of customers. Its variations include Basic, Smart Casual, Casual, Textured, Indigo, Sulphur, Fancy, and Blends. These shirting fabrics are produced in-house from 100 percent cotton fabric. In addition to blending cotton with other fibres such as tencel, viscose, modal, and linen, the Company creates novel shirting styles with enriched designs & aesthetics, by way of having a state-of-the-art in-house Design Studio and product development facilities.

• Yarn Dyeing - NDL provides a variety of compositions and counts of blended yarn as well as dyed yarn for the hosiery and weaving industries. The yarn dyeing facility can do any colour of packaged yarn in accordance with customer specifications. The Companys wide array of dyeing vessels from 6 kg to 900 kg capacities give its yarn a competitive edge. Company has facilities to do the larger yarn dye packages of size of 1,200-1,300 grams, due to which there are fewer cone adjustments during knitting and warping, thus it improves knitting and warping efficiency and reduces waste. The unit is Oeko tex certified, which is must for supplying yarn and fabrics made of these yarns to Europe.

Financial Highlights

Particulars	FY2023	FY2022	YoY (%) Change
Revenue from operations (in crore)	2,026.76	2,175.57	-6.84
PAT (In crore)	0.80	67.82	-98.8
EBIDTA (In crore)	95.98	178.71	-46.3
Debtor Turnover (days)	71.97	74.82	-3.8
Inventory Turnover (days)	49.67	48.26	2.92
Interest Coverage Ratio (in times)	1.11	3.46	-68.20
Current Ratio (In times)	1.32	1.38	-4.35
Debt/Equity Ratio (in times)	0.86	1.04	-17.31
EBIDTA Margin (%)	4.74	7.99	-40.68
Net Profit Margin (%)	0.04	3.21	-98.75
Return on Net Worth	0.28	12.59	-97.78

Key Ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor. The key financial ratios are given as follows:

Particulars	FY2023	FY2022	Reasons of variance
Debt Service Coverage Ratio	0.19	0.33	Due to decrease in Profitability the ratio has decreased.
Return on Equity Ratio	0.00	0.13	Due to decrease in Profitability the ratio has decreased.
Inventory Turnover Ratio	7.35	7.56	-
Trade Receivables Turnover Ratio	4.97	5.86	-
Trade payables Turnover Ratio	7.36	9.26	-
Net Capital Turnover Ratio	11.30	8.83	-
Net Profit Ratio	0.00	0.03	Due to decrease in Profitability the ratio has decreased.
Return on Capital Employed	0.10	0.24	Due to decrease in Profitability the ratio has decreased.
Return on Investment	(0.39)	0.21	Due to reduction in Investment price the ratio has decreased.

Business Outlook

Macroeconomic factors like US-China trade tensions, the "China Plus One" strategy, better availability of skilled labour in India, and government initiatives like the Production Linked Incentive (PLI) scheme are expected to boost the textile industry. NDLs industry-leading position would also enable it to become its customers preferred choice. The Company has been upgrading and expanding its current capacities to meet the needs of its consumers in light of anticipated demand. The Company is in the midst of introducing new weave designs and several innovative water-saving product designs. The Company has been developing ultra-stretch and two-way stretch denims to accommodate its consumers changing preferences. The Company ensures on-time delivery and gives its customers delivery services for its various products. Additionally, the Company has prioritised product innovation on a regular basis for the best customer experience.

The Company is confident that the robust demand for denim will contribute to its future development. The Company will continue to offer the latest fashions and designs to customers worldwide while paving a sustainable route for its shareholders through excellent leadership, best practices, and continuous innovation.

Internal Controls

The Companys internal control system is proportional to the size, nature, and complexity of its operations. The internal control system is accountable for addressing the evolving business risks, the accuracy of financial data, the timely reporting of operational and financial transactions, the protection of assets, and the strict observance of applicable laws and regulations. The Companys internal auditors are responsible for monitoring and reviewing these controls on a regular basis. Periodically, the Audit Committee examines the audit reports and ensures any discrepancies are rectified as necessary. Important observations are conveyed to the management, who promptly implements corrective actions.

Key Risks

• Raw material risk:

The volatility in prices of raw materials such as cotton, specialty fibres and textiles, glass roving, specialty chemicals and a variety of resins increases input costs, which has a negative impact on the profitability of the Company. In addition, many of the Companys raw materials have a correlation with crude oil prices, and volatility in crude oil prices may reduce the Companys profit margins.

Mitigation

The Company monitors price fluctuations and adheres to inventory management and a flexible procurement policy to ensure timely and cost-effective procurement of raw materials. To protect margins, it also enters into contracts with customers and attempts to pass on fluctuations in the cost of basic materials.

• Technology Risk

Enhancing efficiency and productivity necessitates constant technological innovation and ongoing R&D. Failure to use the most recent and sustainable technologies to meet the ever-changing demands of the global market may result in business failure.

Mitigation

The Company places the utmost importance on technology and invests aggressively in R&D, modern and sustainable technologies, machinery and equipment for enhancing the manufacturing process and product quality, as well as broadening its product offering to accommodate emergent market trends.

• Economic Risk

Geopolitical unrest, global economic slowdown and high inflation in key markets such as the United States and Europe have slowed the export market. Demand contraction would diminish the Companys exports.

Mitigation

The macroeconomic outlook for the U.S. and European Union markets has begun to strengthen, although export demand will remain uncertain. However, the domestic market will continue to provide the Company with substantial business opportunities.

• Exchange Rate Volatility Risk

The Company deals in foreign currency for its textile exports and a substantial portion of its expenses being in Indian rupees, any fluctuation in currency exchange rates would directly impact the Companys performance.

Mitigation

Exposures on foreign currency sales are managed through the hedging activities, which is periodically reviewed to ensure that fluctuations in currency exchange rates are managed appropriately. In addition, the Company uses forward contracts and foreign exchange options to hedge risk arising from changes and fluctuations in foreign currency exchange rates.

• Attrition Risk

Labour-intensive Indian textile industry has been facing a shortage of qualified labourers. Hence, the Company might as well face attrition risk.

Mitigation

The government is attempting to close the shortage of talent in the textile industry through programmes such as PMKVY (Pradhan Mantri Kaushal Vikas Yojana). However, NDL does not encounter this issue due to its best HR practices, which are unique and distinguishable from those of its competitors. Low absenteeism and attrition rates, increased productivity, and the ability to recruit the necessary workforce are the results of its strategic HR policies.

• Logistics Cost Risk: The Companys business is also focussed on textile exports and is dependent on the supply chain for exporting final products, any disruptions in the supply chain, rising container shipping costs, availability, and delays pose significant challenges to the Companys operations. In addition, inadequate and inefficient logistics in India contribute to delays and excessive logistics costs.

Mitigation

The Company has bolstered its supply chain network and established long-standing relationships with its suppliers and vendors to facilitate efficient operations.

Human Resources

The Company considers its employees to be its most valuable asset and an integral part of its competitive position. It has a well-designed HR policy that promotes a conducive work environment, inclusive growth, equal opportunities, and competitiveness, and aligns the objectives of its employees

with the organisations vision for growth. Its division of human resources plays a crucial role in developing a robust and talented workforce. It provides opportunities for professional and personal development and implements comprehensive employee engagement and development programmes to increase employee productivity and skills. The Company prioritises the health and safety of its employees. Throughout the course of the year, the Company organised a variety of employee motivation and empowerment initiatives to promote employee engagement. The Company takes pride in its ability to develop their talents and encourage teamwork, and also to actively promote a culture based on strong values. As of March 31, 2023, the total number of Company employees stood at 1,182.

Sustainability

The Company is committed to protecting the environment in a responsible manner. Water management has always been an important priority for the Company due to the nature of the business. Large volumes of water are used in the manufacturing textile sector due to the need to clean raw materials and for various flushing operations during production. The Company demonstrates a strong commitment towards efficient water management, environmental responsibility and acknowledges its duty towards the environment. The Company uses an Effluent Treatment Plant (ETP) and a Reverse Osmosis (RO) Plant for water recycling and reuse to conserve water. The wastewater is subjected to responsible treatment at a Sewage Treatment Plant (STP), and the treated water is reused for gardening purposes.

As a responsible corporate citizen, the Company provides its communities with a variety of health and education programmes. The Company also endeavours to create a work environment in which all of its employees can excel. The use of LEDs for department illumination, the implementation of solar panel systems, and the reuse of process water from condensate recovery have all contributed to the Companys carbon neutrality. To ensure its long-term viability, it conforms to all chemical standards. As a carbon-neutral Company, the Company has implemented measures to support the recovery of condensate from processed water and to reduce its energy needs. Additionally, the Company recycles denim to manage its refuse. A Caustic Recovery Plant (CRP) is used for caustic recycling and processing. After closely examining the denim manufacturing process, the Company continues to refine its waste management policies in order to minimise its waste production.

Disclaimer

It is possible that some of the forward-looking statements contained in the MDA section regarding future prospects could be deemed forward-looking statements, which are subject to risks and uncertainties. The Company and the environment in which it operates may face unforeseen,

unprecedented, unascertainable and constantly evolving risk(s) due to global pandemics such as COVID-19. The reports facts and figures are derived from assumptions made based on information available both internally and externally. These assumptions are subject to change over time, which also affects the estimates based on them. Any

forward-looking statement only speaks as of the date on which it was made, and any forward-looking statement represents only the Companys current intentions, beliefs, or expectations. As a result of new information, future events, or otherwise, the Company assumes no obligation to revise or update any forward-looking statements.