Nitin Spinners Ltd Management Discussions.

Global Economic Overview

The shake-up in all economies due to the prolonged Covid-19 stay will have a lasting impact on growth. However, most economies are responding well to the current crisis with renewed stimulus and tailor-made strategies designed to mitigate the losses of the year gone by.

The global economic output is expected to expand 4% in 2021 and moderate to 3.8% in 2022, weighed down by the pandemics lasting damage to potential growth. On the other hand, the overall global market is expected to strengthen over the forecast horizon as confidence, consumption, and trade gradually improve, primarily supported by the ongoing vaccination.

The global financial conditions have also eased considerably, especially after tightening early last year, primarily supported by monetary policy accommodation. Growth in Emerging Markets and Developing Economies (EMDEs) is expected to bounce back to 5% in 2021 from a 2.6% contraction in 2020. With a sharp contraction of 9.5% in 2020, global trade is expected to experience a modest pickup to an average of 5.1% in 2021-22.

The highly uncertain evolution of the pandemic, influenced by Government actions, social behaviour, and vaccine-related developments, will play a critical role in shaping the global recoverys strength and durability.


The economys structure is changing as per the pandemic, with some industries shrinking, while others are growing. It impacted the mix of jobs available and the mix of skills required of the labour force. The global economic growth is projected at 6% in 2021 and 4.4% in 2022 on the expectation of a sustained recovery. The main pointers to this would be the gradual return to normalcy owing to worldwide vaccination drive, reducing unemployment rate, and policies and reforms announced by Governments worldwide. As pent-up demand gets unleashed and consumer confidence returns, spending will also increase across sectors. However, new variants of the virus and more waves of Covid-19 might come in between expectation and reality.

Indian Economic Overview

According to the United Nations, India is expected to grow to 7.5% for 2021 and it is projected to grow by 10.1% in 2022. However, the outlook for the year remains highly fragile since India has been particularly affected by a more lethal second wave. Indias total spending on health has remained almost stagnant at 1.5% of the Gross Domestic Product (GDP) in the last four years. But given the situation, the Government is projecting an increase to 1.8% this financial year and to 2.5% by 2025.

The Net Foreign Direct Investment has also remained firm throughout. Over 47% of the FDI has flown into the computer software and hardware sector, while construction accounted for 13.9%. Among these, manufacturing, chemicals, metals, and products and transport have also announced a significant number of new projects, indicating that the capital investments have remained strong despite the uncertainties. The overall economy, however, is likely to witness stress despite a V-shaped recovery.


The Indian Government is curating a stimulus package for sectors worst affected by the pandemic, aiming to support an economy struggling with a slew of localised lockdowns due to the second wave. The finance ministry is also working on proposals to bolster tourism, aviation, and hospitality industries and small and medium-sized companies.

In April 2021, the finance ministry eased rules for Government departments capital expenditure to boost spending. In addition to the low base effect in 2020-21, these will be some of the crucial drivers that will steer growth over the next two years:

Rapid vaccination pace and low death rates despite high infections

Strong growth in private investment and its rebound stimulated by reforms and schemes

Pent-up demand backed by savings made by high- and mid-income consumers who are waiting to spend

Fiscal spending on building assets and infrastructure, which will have a high multiplier effect on the income, jobs, and private investments, will likely start gaining momentum on the ground

Global Textile and Apparel Industry

The global textile market size was estimated at US$ 1,000.3 billion in 2020, and it is projected to reach US$ 1,041.8 billion in 2021, with an expected CAGR of 4.4% from 2021 to 2028. Increasing demand for apparel from the fashion industry, coupled with the growth of e-commerce platforms, is expected to drive the market over the forecast period.

Cotton being the worlds most important natural fibre, accounted for the largest revenue share of more than 39% in 2020. Whereas the wool segment accounted for a revenue share of 13.3% in 2020 and natural fibres made up 44% of total the global share in 2020. (Source:


The demand for textiles will rise manifold, as it is expected that the global population will touch the 8.1-billion mark by 2025. The global apparel market will grow to US$ 2.1 trillion by 2025. Apparel demand from the fashion industry, rising e-commerce, and global demand for crease-free fabrics and high-quality dyed and printed fabrics is expected to drive this growth. The technical segment is also expected to grow at 3.7% annually from CY2021 to 2028.

Indian Textile and Apparel Industry

India is the worlds second-largest producer of textiles and garments. It is also the fifth-largest exporter of textiles spanning apparel, home, and technical products. Textiles export stood at US$ 26.08 billion as of February 2021.The textiles and apparel industry contributes 2.3% to the countrys GDP, 13% to industrial production, and 12% to exports. Rising per capita income, favourable demographics, and a shift in preference to branded products is helping the demand escalate north. The sector has witnessed a spurt in investment during the last five years. It attracted Foreign Direct Investment (FDI) worth US$ 3.68 billion from April 2000 to December 2020. It also employs around 4.5 Crores workers, including 35.22 lakh handloom workers.

Government Initiatives

In the Union Budget 2021-22, the Government announced various initiatives to enhance the growth of this sector. Here are a few of the highlights:

Launch a Mega Integrated Textile Region and Apparel (MITRA) Park scheme to establish seven textile parks with state-of-the-art infrastructure, shared utilities, and R&D lab over three years

Funds allocated for setting up Kakatiya Mega Textile Park (KMTP) at an estimated cost of Rs.1,552 Crores (US$ 212 Million)

Gujarat Government announced two mega textile parks for enabling forward and backward integration

Ministry of Textiles favoured a limited deal for the India-UK free trade agreement that could boost the garments sector (Source: IBEF, May 2021).


The Indian textile and apparel industry is expected to grow to US$ 190 billion by FY26, driven by increased awareness of goods and higher disposable incomes. Increased penetration of organised retail, favourable demographics, and rising income level will drive demand for textiles. The Government initiatives such as the National Textile Policy, the SMARTH scheme, the easy availability of raw materials, and the rising income levels will also add to this sectors critical growth.

Cotton Industry

India accounts for 26% of the worlds total cotton production and maintains its position as the worlds largest cotton producer (Source: IBEF, May 2021).Production grew from 30.0 Million bales in 2015-16 to 35.4 Million bales in 2019-20. Cotton production is expected to reach 36.0 Million bales. The Indian cotton industry acts as a source of income to 5.8 Million cotton farmers and also for 40 to 50 Million people in the allied industries such as cotton processing and trade.

Cotton prices have ruled higher than the Minimum Support Price (MSP) of _ 5,515 a quintal since the beginning of October 2020 due to the sharp increase in global prices since June 2020. However, the prices were competitive against global prices, as there was good demand for Indian Textile products in the global market.


Favourable demographics and landscape

In the second half of 2020-21, we witnessed households switching from an ‘essentials-only spending to discretionary spending with the gradual reopening and unlocking of the economy. This is likely to be the case in 2021-22, especially with the increasing penetration of organised retail (physical and e-commerce).

Ready for pent-up demand

The Company can focus on value-added or premium products with new Capex by capitalising on the current low-interest regime and easy liquidity. These, combined with the visibilities of robust demand post-Covid-19, will help companies with the suitable capacity to capture the future demand early and increase their margins.

Incentive Schemes

The Central Government has announced Production Link Incentive Scheme (PLI) for Textile sector and the Government of Rajasthan has put in place Rajasthan Investment Production Scheme provides for Interest, Electricity Duty etc. subsidies for installation/expansion of Textiles Units.

100% FDI allowance

It will encourage the foreign apparel industry to enter the market. Already, the existing global investors in the Indian textile industry, include prominent western brands such as Zara, Forever 21, Levis, Benetton, and Marks & Spencer. It also allows them to be near raw material suppliers, as India is one of the few countries in the world with presence across the textile value chain.

Improving farming techniques

Despite being the worlds largest cotton producer, Indias yield in terms of kilograms of cotton per hectare of land under cotton cultivation is extremely low. Indias output is at 487 kgs/ha, as against the world average yield of 768 kgs/ ha. Modernisation of farming techniques and the use of machinery and equipment are likely to culminate into higher profits. Furthermore, the rising trend of the agri-tech theme in start-ups is expected to act as a tailwind.


Availability of cotton

Any significant damage to cotton crops in India or overseas due to natural calamities may cause severe price, supply disruption and create uncertainty.

Pandemic and its variants

The long duration of second wave or further waves of the pandemic and its variants can disrupt trade.

Uncertainty over physical retail

With new Covid-19 variants and waves, the opening of physical apparel retail stores remains uncertain. Physical retail is the preferred mode for shopping apparel for consumers, as they can feel the fabric, gauge the size/fitting, try wearing the clothes. Consumers are unlikely to spend large sums on apparel in the absence/only partial presence of physical retail under the current circumstances.

Dependency on labour

The Indian textile industry is still a highly labour-intensive one, unlike other countries, where a large part of the process is automated. This dependency on labour makes the sector vulnerable to the cost of rising wages and labour unrest.

Company Overview

Incorporated in 1992 in Bhilwara with a small capacity of only 384 rotors, Nitin Spinners over the years has expanded its operations to include open-end yarns, ring-spun yarns, blended yarns, knitted fabrics, and finished woven fabrics. It now has an installed capacity of 3,00,048 Spindles and 3,488 Rotors, producing 72,000 tons of yarn per annum. It also has an installed capacity of 63 Knitting Machines, producing 8,500 tons of knitted fabrics per annum and 168 looms and dyeing, printing, and finishing capacities to make approximately 300 lakh meters of fabrics per annum.

The Companys manufacturing units are strategically located near places from where it sources its raw materials. It is also well connected to major ports and markets. Investment in world-class technology, continuous growth and value addition, commitment to consistent product quality, emphasis on customer satisfaction, and timely delivery of products are integral to the Companys way of functioning.

Financial Performance

Particulars 2020-21 2019-20
Revenue from operations 1,624.41 1,438.06
Other income 1.90 2.13
Total income 1,626.31 1,440.19
Earnings Before Interest, Tax and Depreciation & Amortisation 259.16 171.90
Profit for the year 68.87 23.82
EPS (Basic) (In _) 12.25 4.24
EPS (Diluted) (In _) 12.25 4.24

For financial and product-wise performance concerning operational performance, please refer to the ‘Financial Results and ‘Operational Performance section of the Boards Report.

The Company operates in a Single Segment of Textiles.

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, therefore:

2020-21 2019-20 % change Reason for change
Inventory Turnover 4.58 5.43 -15.65% Higher inventories days due to value addition activities
Interest Coverage Ratio 4.21 3.09 36.25% Improved due to higher operating profit margins
Current Ratio 1.27 1.15 10.43% Improved due to higher operating cash flow
Debt Equity Ratio 1.20 1.53 -21.57% Reduced due to repayments and increase in Net worth
Debtors Turnover 9.79 9.41 4.04% Average realisation period reduced
Operating Profit Margin 15.95% 11.95% 33.47% Increased sale of value-added products, cost optimisation, and better realisations
Net Profit Margin 4.24% 1.66% 155.42% Due to higher production and turnover and better- operating margins
Return on Net Worth 12.23% 4.82% 153.73% Due to higher profits
Earnings Per Share 12.25 4.24 188.92% Due to higher profits

Risk Management

Risk management measures are essential to a governance system. Therefore, it contributes to its strategic goals and safeguards its value, assets, and reputation. Here are some of the risks and mitigation strategies of Nitin Spinners:

Risk Impact Mitigation
Competition Risk An increase in competition negatively impact the market margin profile and return on employed. could The distinctly differentiated brand image, share, long-standing customer relationships and capital economies of scale help the Company mitigate this risk.
Foreign Currency Exchange Rate Risk Given that exports constitute revenue, hedging mechanisms could hamper the revenue. 63% of the The Company mitigates this risk by way of strengthening the Indian Rupee its robust currency and systems and export pricing.
Raw Material Price Inflation Risk An increase in cotton prices can adversely impact the Company. The Company has a team that constantly monitors the cotton prices and follows a diplomatic stocking policy to hedge against any sharp movements.
Risk Impact Mitigation
Reputation Risk Any delay in payments to lenders/ suppliers or poor quality of products can lead to loss of trust in our integrity and adversely impact business performance. The Company makes a conscious attempt to meet the expectations of all stakeholders and have stringent quality control procedures in place to ensure superior product quality.
Customer Concentration Risk Any concentration of customers can cause loss of revenue in case of failure of any big customer. The Company continuously aims to strengthen its customer relationships and strives to add new customers across geographies to diversify the customer base.

Environment and Safety

Clean and safe environmental operations form Nitin Spinners key priorities. The Company conducts all its operations, ensuring the safety of everyone concerned, compliance with statutory and industrial requirements for environment protection, and conservation of natural resources to the extent possible. The Company is also accredited with OHSAS18001:2007 (Occupational Health & Safety Management System) certification from the British Standards India (BSI).

Human Resources

Human resource is a crucial asset for a Company to achieve sustained growth. To attract, retain and develop its talent pool, the Company has consistently recognised talent, imparted training, and followed the golden principle of rewarding performance. Besides, it is committed to individual well-being and safety at the workplace and it is proud to attract the talent that it needs for future growth. Most importantly, it places great emphasis on eliminating all forms of discrimination in terms of employment and professional activities (gender, age, race, political a_liation, religion, among others).It pays special attention to professional equality, gender equality, the employment of seniors and young people, the employment of people with disabilities. It also has been accredited with S.A. 8000:2014 (Social Accountability System) certification from the BSI. As of 31st March, 2021, the Companys strength stood at 5,172 employees.

Internal Control Systems and Their Adequacy

Nitin Spinners has appropriate systems for internal control. These systems are continually improved and modified to meet the changes in the business conditions and the statutory and accounting requirements. The Company also has a robust Management Information System, an integral part of the control mechanism. The Audit Committee of the Board of Directors reviews the efficiency and effectiveness of the internal control systems. It then suggests solutions to improve and strengthen. The internal control system was tested during the year, and no material weakness in design or operations was found.

Cautionary Statements

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions, may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

For and on Behalf of the Board of Directors
R. L. Nolkha
Place : Hamirgarh, Bhilwara Chairman
Date : 3rd August, 2021 (DIN – 00060746)