osiajee texfab ltd share price Management discussions


AnnexureI

Objective of Report

The Objective of this report is to convey Managements perspective on the external environment and textile industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, internal control systems and their adequacy in the Company during the financial year 2022-23 This report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Annual Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) complying with the requirements of the Companies Act, 2013, (Act) and regulations issued by the Securities and Exchange Board of India (SEBI), each as amended from time to time.

External Environment

Global Economic Condition and Outlook:

The year 2022 saw the developed world grapple with some of the highest levels of inflation in recent history. The global recovery from the COVID-19 pandemic and Russias invasion of Ukraine is slowing amid widening divergences among economic sectors and regions. In May, the World Health Organization (WHO) announced COVID-19 as no longer a "global health emergency". However, Inflation remains high and continues to erode household purchasing power. As per the IMF estimates, the world economy grew by 3.4% in 2022. The most notable disparity was seen between the growths of Advanced and Emerging economies. The Advanced economies grew by 2.7% in 2022 while the Emerging economies led by China and India grew by 4% in 2022.

The IMF estimates that the global growth is projected to fall from an estimated 3.5% in 2022 to 3.0% in both 2023 and 2024. Core inflation is generally declining more gradually. Globally, it is set to decline from an annual average of 6.5 percent in 2022 to 6.0 percent in 2023 and 4.7 percent in 2024. The major forces that shaped the world economy in 2022 seem to continue in 2023 but with changed intensities. Debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges. Commodity prices that rose sharply following Russias invasion of Ukraine have moderated, but the war continues, and geopolitical tensions are high. Infectious COVID-19 strains caused widespread outbreaks last year, but economies that were hit hard - most notably China - appear to be recovering with easing of supply-chain disruptions.

While the Western world becomes the epicentre of global tensions, emerging and developing economies are expected to outpace them by growing at 3.9% in 2023 and 4.2% in 2024. Emerging Asian economies led by China and India are bound to grow by 5.3% in 2023 and 5.1% in 2024 respectively.

According to the IMF World Economic Outlook- July 2023, in most economies, the priority remains achieving sustained disinflation while ensuring financial stability. Therefore, central banks should remain focused on restoring price stability and strengthening financial supervision and risk monitoring.

Indian Economy and Outlook:

The IMF has estimated Indias growth at 5.9% in FY23 and 6.3% in FY24, well above other economies of significant scale causing many to state that this could well be Indias decade. India has emerged as the shining beacon in a grim global scenario by growing at 6.8% in 2022. The Reserve Bank of India (RBI) has tried to cushion the economy from rising prices and maintain liquidity. Still navigating inflation and preserving financial stability while boosting growth drivers will continue to be a tightrope walk. The central government has played a major role in boosting the growth of the economy as it continued with its capital expenditure push in the Union Budget 2023-24. In FY 202324, capex is budgeted at 10 lakh crore, which will constitute 3.3% of GDP. As per the RBI, such level of capex spending can take Indias real GDP growth close to 7% in FY24. Despite the challenging global environment, the Indian economy with its strong fundamentals and massive demographic strengths seems en route to outpace other large economies.

Textile Industry

Global Textile Industry

As per the International Textile Manufacturers Federation (ITMF), the Textile sector has seen weakening demand since June 2022 due to persistent global inflation and lingering possibilities of a recession. Inflation has affected consumers and manufacturers alike with manufacturers and suppliers having to pay much more along all stages of their supply chains, from the cost of freight to wage increases for their workers. This has put textile manufacturers in a difficult situation.

Indian Textile Industry

Despite the slowdown in the sector globally, the Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029. In FY23, exports of readymade garments (RMG) cotton including accessories stood at US$ 7.68 billion till January 2023. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally. This has been made possible due to a structurally strong Indian economy fuelled by an ever-increasing domestic demand and some critical policy initiatives taken by the Government of India.

In the Union Budget 2023-24, the government announced various initiatives to aid the Textile and Apparel sector across its value chain from raw materials to manufacturing. The government has a special focus on Extra-Long Staple (ELS) cotton with the adoption of a cluster-based and value chain approach through public-private partnerships (PPP). The focus on enhancing the yield of ELS cotton would help increase the manufacturing of value-added garments and also to reduce the import of ELS cotton. The government also identified five new HS codes for cotton for further classification of cotton as per staple length. This will help in calibrating policy support for the segments which are import dependent or need further incentivisation. The increased outlay of funds to textile-centric schemes like RoDTEP, RoSCTL and the Amended Technology Upgradation Fund Scheme (ATUFS) further underlines the governments focus on textiles. The government has introduced various schemes such as the Scheme for Integrated Textile Parks (SITP) and Mega Integrated Textile Region and Apparel (MITRA) Park scheme to attract private equity in the sector. The PM Mitra Park Scheme under which the government plans to invest over 70,000 crore to set up mega textile parks will provide a massive fillip to the textile sector and will help India transform from only a traditional textile industry to an MMF (man-made fibre) and technical textile hub in the world. The government recently approved an investment of 4,455 crore under this scheme for the creation of seven mega textile parks that would streamline multiple verticals from spinning, weaving and dyeing to printing and garment manufacturing. The government has come up with several export promotion policies for the textile sector as well. It has also allowed 100% FDI in the sector under the automatic route.

The government aims to achieve a 3-5x time increase in the export of technical textiles worth US$ 10 billion over the next three years. Further, Production-linked Incentive (PLI) Scheme worth 10,683 crore (US$ 1.44 billion) for manmade fibre and technical textiles over a five-year period will also help the sector. The capex spending on transportation and logistics sectors by the government has increased to 10 lakh crore in the recent budget. This spending which is roughly about 3% of our GDP will have a ripple effect on multiple industries including the textile sector which could benefit from a smooth and sustainable infrastructure model. The textiles and apparel sector supported by the governments structural and productivity-related policy interventions and fuelled by a rising domestic demand looks well poised to prosper exponentially

OPPORTUNITIES AND GROWTH DRIVERS

• Favourable government initiatives such as the National Technical Textiles Mission (NTTM), 100% FDI in the sector, SAMARTH- Scheme for Capacity Building in the Textile Sector, etc. for the development of the textile industry.

• Extension of the scheme for Rebate of State and Central Taxes and Levies (RoSCTL) till March 31, 2024, for the export of apparel, garments and made-ups with the same rates would benefit textile companies.

• China plus one diversification policy will benefit Indian manufacturers. As global retailers are looking for an alternate supply base, India has greater appeal as an attractive option for manufacturing and exports of textiles and apparels.

• The growth of the technical textile market will create lucrative opportunities

• The rapid growth of the retail sector and E-commerce will boost the growth of the textile and apparel industry.

• Rising disposable income will stimulate domestic demand.

• The growing popularity of the fast fashion products will contribute to the growth of Textile and Apparel Industry.

Threats

• Intense competition in the global market, especially from the textile and garment industries in Bangladesh and China.

• Subdued demand for textile and apparel exports as consumer confidence is low in the key markets.

• Compliance issues with the environmental norms and regulations.

Company Overview

Osiajee Texfab Limited (the Company) incorporated in the year 1995 as a Public Limited Company engaged in the business of trading in Textile Products, the end users of which are various manufacturing houses. The Company is currently dealing in the Textile of Fabrics with the mission to make Osiajee Texfab a trusted name in the textiles segment by delivering best products and customer services. The company is currently involved in trading of fabrics. The company is expanding its reach through modern trade and e-commerce. The Company is currently dealing in trading of Textile products with the mission to make "OSIAJEE" a trusted name in the textiles segment by delivering best products and services to its customers.

The Company operates with its core values of Passion, Excellence, Creativity, Teamwork and Loyalty towards its employees, business partners, consumers and customers. The Company is committed to create future opportunities through growth by seeking long term profitability through win-win situation across all disciplines.

In September, 2021 the Company incorporated a Wholly Owned Subsidiary Company in the name of Osiajee Agro Farms Limited which commenced its business operations in Agro Farming and is generating profits since its first financial year. The wholly owned subsidiary Company endeavors to pursue the high growth opportunities in agriculture, horticulture & agro farming industry and is pursuing high growth agro farming in Eucalyptus and Poplar trees and cultivation of other crops in Hoshiarpur district of Punjab, the produce of which will be sold to nearby plywood industry as well as other wood-based manufacturers.

Financial Performance

On standalone basis, the Company earned total income of Rs. 79.70 Lakhs in the current year as against Rs. 215.81 Lakhs in the previous year and earned a profit before tax of Rs. 3.22 Lakhs in the current year as against Rs. 2.09 Lakhs in the previous year. After providing for tax expense of Rs. 0.84 Lakhs, the Company earned a net profit of Rs. 2.38 Lakhs for the year ended March 31, 2023 as compared to Rs. 1.55 Lakhs for the year ended March 31, 2022, improving the Earnings Per share of the Company from 0.03 in the year 2022 to 0.04 in the year 2023.

Segment wise or Product wise Performance

The Company is engaged in the business of trading in textile products and there is no separate reportable segment.

Risk and Concern

Risk is an integral and unavoidable component of all businesses. The broader trends in the economy are expected to have a direct impact on your Companys growth prospects as well. Inflation is expected to remain elevated for the foreseeable future, driven by war-induced commodity price increases and broadening price pressures.

In addition, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets. In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparel. Migration to value-for-money options could also lead to reduced growth and profitability for your Company.

Though risks cannot be completely eliminated, an effective risk management plan ensures that risks are reduced, avoided, retained or shared. The Companys risk management procedure helps identify and evaluate risks on an ongoing basis. The following are the Principal Risks considered by the Company:

• The companys business may be impacted by introduction of new policies or changes in existing policies Mitigation: The Companys management team keeps a close eye on policy regulations and formulates company plans appropriately.

• Emerging businesses, capital expenditure for capacity expansion, among other purposes. Mitigation: Have well-defined processes and procedures in place for obtaining approvals for investments in new businesses and capacity expansions

• Commodity Price Risk.

Mitigation: Strong and long-term relationships with vendors to help ensure timely availability of raw materials.

Internal Control Systems

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Company has an Internal Audit Department with adequate experience and expertise in internal controls, operating system and procedures. The Internal Audit Department reviews the adequacy of internal control system in the Company, its compliance with operating systems and laid down policies and procedures. Based on the report of internal audit function, process owners undertake corrective actions in their respective areas and thereby strengthen the controls. The Audit Committee reviews all financial statements to ensure adequacy of internal control systems. The Company has a well-defined organization structure, authority levels and internal rules and guidelines for conducting business transactions.

Human Resource Management and Industrial Relations

Human Capital is considered a key resource and an intrinsic contributor to a Companys success. At Osiajee Texfab Limited we believe our employees are the cornerstone of our growth and progress and Companys most valuable asset. We promote a healthy work culture along with employee friendly policies for the overall development of our employees. We ensure a safe, transparent, healthy, progressive and productive work environment conducive to enhancing employee productivity. Training and Development Programs are periodically conducted for employees. These programs are organized to create opportunity for employees to learn, grow and take their career ahead and forward. During the year under review, Industrial relations remained cordial and the Board records its appreciation for the contribution of all employees towards the growth of the company. As on March 31, 2023 the Company has 10 employees.

Key Financial Ratios:

The details of Key Financial Ratios are mentioned in the Standalone and Consolidated Financial Statements of the Company under note no. 26 in the notes to accounts of the Financial Statements.

Statutory Compliance:

The Company has in place adequate systems and processes to ensure that it is in compliance with all applicable laws. The Company Secretary is responsible for implementing the systems and processes for monitoring compliance with the applicable laws and for ensuring that the system and processes are operating effectively.

Cautionary Statement:

The Managements Discussion & Analysis Report which seeks to describe the Companys objectives, projections, estimates, expectations and predictions may be considered to be "forward-looking statements" as of the date of this report and are stated as required by applicable laws and regulations. Actual performance and results could differ materially from those expressed or implied and the Company owes no obligation to publicly update these forward looking statements to reflect subsequent events or circumstances. Market data and product analysis contained in this Report has been obtained from internal Company reports and industry publications, but their accuracy and completeness are not guaranteed and their reliability cannot be assured

For and on behalf of the Board of Directors

For Osiajee Texfab Limited

Sd/-

Ms. Vibha Jain Non- Executive Director

DIN:09191000

Sd/-

Ms. Reema Saroya Managing Director

DIN:08292397

Place: Hoshiarpur

Date: 09.08.2023