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Pioneer Embroideries Ltd Management Discussions

Jul 16, 2024|12:00:00 AM

Pioneer Embroideries Ltd Share Price Management Discussions

Global Economic Overview In the last few quarters, the world has experienced heightened geopolitical tensions, rising interest rates, and high inflation now begun to stabilize. The IMF estimates global GDP to decline from 3.4% in 2022 to 2.8% in 2023, but has forecasted a rebound to 3.0% in 2024. Despite challenges like the conflict in Ukraine and central bank rate hikes, there is a cautiously optimistic outlook for economic resilience.

Global Economic Growth: Actual and Projections (%)

Particulars 2022 2023 (P) 2024 (E)
Global Economy 3.4 2.8 3.0
Advanced Economies 2.7 1.3 1.4
Emerging Markets and
Developing Economies 4.0 3.9 4.2

India Economic Outlook

The overall outlook for the Indian economy remains positive, with expectations of a turnaround in investments leading to sustainable growth. In FY24, India is projected to grow at a moderate pace of 6.0% to 6.5%, while the global economy continues to face challenges.

. However, economic conditions have Throughout the year, the Indian economy encountered its share of resurgence in domestic economic activity in the previous fiscal year, FY23 saw a period of normalization, with demand in many industries gradually moderating but remaining robust.

However, recent GDP estimates and revisions of the past three years data paint a more encouraging picture. India emerged stronger from the pandemic than initially assumed, with steady momentum in growth since FY23. This upward revision can be attributed primarily to better-than-expected growth in manufacturing and construction sectors.

Looking ahead, it is anticipated that the virtuous circle of job creation, income, productivity, demand, and exports, supported by favourable demographics in the medium term, will contribute to further economic growth in the coming years. Despite the challenges faced, the Indian economy is poised to build on its resilience and strengthen its position in the global economic landscape


The Revision In Growth Numbers-Then And Now

Old New Change in bps Old New Change in bps
Annual 3.7 3.9 28 3.7 3.9 14
FY20 Q1 -21.4 -21.0 35 -23.8 -23.4 43
Q2 -5.9 -5.1 78 -6.6 -5.7 88
Q3 2.1 2.8 68 0.7 1.6 89
Q4 5.7 6.3 62 2.5 3.4 87
Annual -4.8 -4.2 61 -6.7 -5.8 83
FY21 Q1 18.1 20.2 215 20.1 21.6 145
Q2 8.3 9.3 103 8.4 9.1 71
Q3 4.7 4.7 4.5 5.4 5.2 -20
Q4 3.9 3.9 1.2 4.1 4.0 -14
Annual 8.1 8.8 70 8.8 9.1 29
FY22 Q1 12.7 12.1 -64 13.5 13.2 -31
Q2 5.6 5.5 -12 6.3 6.3 -2
Q3 - 4.6 - - 4.4 -
Q4 - - - - - -
FY23 Annual 6.7 6.6 -8.4 7.0 7.0 5

Source: Press Information Bureau, Government of India; Centre for Monitoring Indian Economy (CMIE); Deloitte research. Deloitte Insights : deloitte.com/insights

Global Textile & Apparel Industry

According to the International Textile Manufacturers Federation (ITMF), since June 2022, the textile industry has been facing declining demand, primarily due to the ongoing global inflation and the looming possibility of a recession. The impact of inflation has been felt throughout the supply chain, affecting both consumers and manufacturers. Manufacturers and suppliers are grappling with significantly higher costs, ranging from increased freight expenses to wage hikes for their employees, placing them in a precarious position. The global apparel market experienced a contraction from US$ 1.6 trillion in 2019 to US$ 1.3 trillion in 2020, driven by the COVID-19 pandemic. However, there has been a steady recovery, and in 2022, the market reached US$ 1.7 trillion. Looking ahead, it is projected to surpass US$ 2.3 trillion by 2030, with an expected compound annual growth rate (CAGR) of 4% from 2022.

Region 2019 2020 2021 2022 CAGR 2019-22 CAGR 2022-30 (P) 2030 (P)
United States 235 177 251 276 6% 3% 350
EU-27 264 220 211 246 -2% 3% 310
China 184 166 188 244 10% 8% 450
India 78 55 80 92 6% 9% 180
Japan 101 81 78 64 -14% 3% 80
UK 69 60 78 74 2% 3% 95
Brazil 48 34 39 39 -7% 5% 60
Canada 28 17 21 24 -6% 5% 35
Row 621 457 522 640 1% 3% 810
World 1,628 1,267 1,468 1,699 1% 4% 2,370

Global Textile & Apparel Trade

In 2021, the global textile and apparel trade was valued at US$ 871 billion, having grown at an approximate CAGR of 3% since 2017. This trade is anticipated to reach US$ 1.2 trillion by 2030, growing at a CAGR of 4%. Despite the current challenges, there are positive growth prospects for the industry in the coming years.

"The global textile and apparel industry has shown a steady recovery, reaching US$1.7 trillion in 2022. It is projected to grow to US$2.3 trillion by 2030 with a CAGR of 4%, indicating positive growth prospects."

Indian Textile & Apparel Industry

The Indian textile and apparel market is estimated to be valued at US$ 165 billion in the year 2022-23. The domestic market makes a substantial contribution, accounting for approximately 76% of the total market size, while exports constitute the remaining 24%. Within the domestic market, the apparel segment holds the largest share, comprising about 74% of the market. Following closely is the technical textiles segment, which accounts for approximately 20% of the market share. These figures highlight the significant presence of both the apparel and technical textiles sectors within the thriving Indian textile market

Indian T & A market size (2022-23 Estimates) US$ 165 Bn

Domestic Market

US$ 125 Bn


US$ 40 Bn


US$ 92 Bn

Home Textiles

US$ 9 Bn

Technical textiles

US$ 24 Bn


US$ 16.5 Bn


US$ 23.5 Bn

Indias Domestic Textile & Apparel Market

The Indian domestic textile and apparel market has witnessed impressive growth, expanding from US$ 50 billion in 2010-11 to US$ 110 billion in 2021-22, indicating a notable growth rate of 7%. Looking ahead, the market is poised for even more substantial growth, with an expected compound annual growth rate (CAGR) of 10% from 2021-22 to 2030-31. This projection suggests that the Indian T&A market is likely to reach an impressive value of US$ 250 billion by the year 2030-31. Such robust growth figures underscore the sectors potential and its significance in contributing to the countrys economy.

"The Indian domestic textile and apparel market is projected to grow even more substantially with an expected CAGR of 10%, reaching an impressive value of US$ 250 billion by 2030-31."

Indias Textile & Apparel Exports

Indias textile and apparel exports have exhibited steady growth, achieving a commendable compound annual growth rate (CAGR) of 4% since 2010-11, resulting in reaching US$ 43 billion in 2021-22. Looking ahead, there are even more promising prospects, as exports are anticipated to surge at a CAGR of 10% from 2021-22, aiming to achieve a remarkable US$ 100 billion by 2030-31.

Of the total exports, apparel constitutes the largest segment, accounting for approximately 37% of the T&A exports in the year 2021-22. This emphasizes the significanceof the apparel industry in Indias global trade and highlights the potential for further growth in this particular segment in the coming years. The projections showcase Indias position as a strong player in the international T&A market and signify the countrys potential to further expand its export capabilities in the future"The exports are anticipated to surge further at a CAGR of 10% from 2021-22, aiming to achieve US$ 100 billion by 2030-31."

Indias Textile & Apparel Imports

Indias textile and apparel imports have experienced robust growth, achieving a commendable compound annual growth rate (CAGR) of 7% since 2010-11, resulting in reaching US$ 8.3 billion in 2021-22. Looking ahead, there are even more promising prospects, as imports are anticipated to continue their upward trajectory at a CAGR of 8% from 2021-22, aiming to surpass US$ 16 billion by 2030-31.

India holds a prominent position as the foremost exporter of natural spun yarn, primarily cotton-based. In various categories, it ranks among the top 5 global exporters, including natural fiber, MMF spun yarn, filament yarn, and home textiles. However, India lags in global rankings in certain categories such as MMF staple fibers, knitted fabric, and apparel. Indias strong presence in the global market for natural spun yarn underscores its significant role in the textile industry. The countrys expertise in cotton-based products has positioned it as a key player in meeting the demand for natural fibers worldwide. Additionally, Indias remarkable performance in exporting MMF spun yarn and filament yarn further cements its status as a significant contributor to the global textile trade.

Key Industry Updates in Indian Textile Industry

Exports Went for a Rollercoaster Ride

Indian textile and apparel exports in 2022 were a tale of ups and downs. The year started strong, with exports crossing US$ 20 billion in the first half, indicating a remarkable 12% increase compared to the same period in 2021, hinting at the possibility of reaching all-time high exports. However, the latter half of the year witnessed a dramatic decline, leading to expectations of a significant 8-10% drop in T&A exports compared to the previous year.

FTA Signing and Discussions

India actively engaged in Free Trade Agreement (FTA) activities in 2022. The country successfully concluded two FTAs with the United Arab Emirates (UAE) and Australia, fostering stronger trade relations with these nations. However, the eagerly anticipated FTA with the United Kingdom (UK) could not be signed during the year but remains on the agenda for 2023. Additionally, India and Canada resumed FTA negotiations after a five-year gap and are currently exploring the possibility of an interim trade deal.

New State Textile Policies

In 2022, several Indian states took proactive steps to boost their textile sectors. Bihar joined the ranks of states with dedicated textile sector policies, reflecting its commitment to support and promote the industrys growth. Furthermore, the states of Uttar Pradesh (UP) and Odisha released updated textile policies following the expiration of the previous ones, signalling their determination to nurture the textile sector within their regions.

Central Government Initiatives

The Central Government played a pivotal role in advancing the textile industry through various initiatives. Under the Production Linked Incentive (PLI) Scheme, 64 projects in the manmade value chain, including fabrics, garments, and technical textiles, were approved, attracting a cumulative investment of approximately US$ 2.5 billion and fostering growth and innovation in the sector. Additionally, in October, the Ministry of Textiles released a draft of the Production Linked Incentive 2.0 scheme, signalling the governments ongoing efforts to drive growth in the textile industry. The approval of 63 new projects under the National Textile Technology Mission (NTTM) in 2022, with a total project cost of around US$ 20 million, further demonstrated the governments commitment to supporting textile initiatives and technological advancements in the field

Key Highlights from FY24 Budget

Budget Allocation for Textile Ministry witnessed a 23% Increase.

The Government has shown its commitment to the textile sector by increasing the budget allocation for the Textile Ministry. The allocation has risen from Rs 3,580 crore (revised budget estimates for 2022-23) to Rs 4,389 crore, marking an overall increase of 23%. This significant boost in funding is expected to have a positive impact on various schemes and initiatives aimed at promoting growth and development in the textile industry.

Key Proposals in the Budget Allocation

The ATUFS (Amended Technology Upgradation Fund Scheme) receives a higher allocation of Rs 900 crore, up from Rs 650 crore in the revised budget estimates for 2022-2023. This increase will facilitate greater investment in the modernization and upgradation of textile machinery and technology, contributing to improved productivity and competitiveness. The National Technical Textile Mission witnesses a substantial rise in allocation, from Rs 37 crore (revised budget estimates under the budget proposal 2022-23) to Rs 450 crore. This significant increase underscores the Governments focus on promoting research, training, and innovation in the technical textile segment, fostering its growth and development.

The PM Mitra scheme also experiences a remarkable boost in funding, with its allocation increasing from Rs 3.50 crore in the revised budget estimate for 2022-23 to Rs 200 crore. This initiative aims to support and empower the textile industrys workforce, contributing to enhanced skill development and employment opportunities.

"The FY24 budget shows a 23% increase in budget allocation for the Textile Ministry, with significant boosts ATUFS, National Technical Textile Mission, and PM Mitra"

Opportunities and Threats


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

The extension of the Rebate of State and Central Taxes and Levies (RoSCTL) programme through March 31, 2024, for the export of clothes, garments, and made-ups at the same rates, would help textile industries.

Indian manufacturing will gain from the China plus one diversification programme. As global retailers seek an alternative supply base, India is becoming a more appealing option for textile and clothing manufacture and exports.

The expansion of the technical textile market will generate profitable prospects.


Textile being a labour-intensive industry, a shortage of skilled workers may have an impact on operations, making it Intense worldwide market rivalry, particularly from Bangladesh and Chinas textile and garment industries. Weak demand for textile and clothing exports as consumer confidence in key markets remains low. Environmental rules and regulations are not being followed.

Company & Business Overview

The Companys product portfolio consists of Specialized Polyester Filament Yarn, Embroidered Laces and Fabrics, Braided Laces, etc. The products of the Company and their manufacturing locations are as follows:

Product Location
Specialized Polyester Filament Yarn Kala-amb (Himachal Pradesh)
Embroidered Laces- Fabric & Guipure, Embroidered dress material (made on Schiffli machines) Sarigam (Gujarat)
Embroidered Fabrics Allover Fabrics & Laces (made on Schiffli Naroli (Dadra & Nagar Haveli)
Braided Laces (made on Bobbin Lace Machines) Sarigam (Gujarat)

Performance Review

Specialty Polyester Filament Yarn (SPFY)

The Companys Specialty Polyester Filament Yarn (SPFY) vertical remains main contributor to the business, contributing 84.0% to the overall turnover and accounting for almost all operating profits. In the latest fiscal year, SPFY reported a full-year income of 24,905 lakhs, a slight decline from 25,096 lakhs in the previous year. Sales volumes for SPFY business slightly decline of 1.4% to 15,789 MT compared to 16,021 MT in the previous year, with an average realization of 158 per Kg. Despite the steady sales volumes, the business faced challenges due to high raw material prices and cheaper Chinese imports, resulting in lower margins.

Local sales of SPFY stood at 20,856 lakhs in the year under review as compared to 22,034 lakhs in the previous year, a decline of 5.3%. However, export revenues increased by 32.2% to 4,049 lakhs in the year under review from 3,062 lakhs in the previous year. Despite challenges, the SPFY business has exhibited resilience and adaptability, navigating through input cost fluctuations, export prospects, shifting local demand levels, and pricing pressures. Continuous investments in capacities, development under the Silkolite brand, expanded product range, value-added processes, improved efficiencies, process automation, product development, and a strong marketing network profitability havecontributedtoits To further strengthen its position, the Company has undertaken a capacity expansion project, increasing capacity from 18,000 MT to 26,000 MT at a capex of 58 crore, with production expected to commence in Q3 of FY24.

"The Companys SPFY business is a major revenue generator, overcoming market challenges through continuous innovation and strategic investments. Despite high raw material costs."

Embroidery and Laces Business

The Embroidery and Laces (EL) business experienced a robust demand recovery in both domestic and international markets, achieving a turnover of 4,583 lakhs, a 14.2% increase from the previous years 4,012 lakhs.

To sustain and strengthen the Embroidery and Laces (EL) business, PEL plans to undertake several strategic initiatives. The Company aims to invest in new equipment, optimize operations, reduce overhead costs, improve outsourcing practices, explore new sales channels, and enhance overall business These measures are expected to drive increased profitability in the coming quarters.

In line with its commitment to modernization, PEL, as a lead promoter in the Shree Ganesh Integrated Textile Park (SGITPL) with a 33.23% stake, is upgrading its EL production facility. The Company is replacing its 32 existing machines with 8 new-generation units, with the transformation scheduled for full commercial utilisation in Q3 of FY24. This modernization effort is anticipated to significantly enhance capacity, quality, and efficiency while reducing costs.

Furthermore, joining SGITPL not only aligns with PELs business objectives but also makes the Company eligible for government grants. To support this modernization initiative, PEL invested approximately 33 Crore for importing machinery from Lasser AG, Switzerland, and an additional 7 Crore for ancillary machinery and utilities.

As the SGITPL unit nears completion, PEL is presented with a timely opportunity to expand its operations and leverage the integrated textile parks advantages. This strategic move underscores the Companys commitment to growth and modernization, positioning it to strengthen its presence in the market. Highlight of the Section“PELs Embroidery and Laces (EL) business witnessed a 14.21% increase in turnover, achieving 4,583 lakhs, driven by robust demand recovery in domestic and international markets.”


In the year under review, the Companys turnover increased to 29,664 lakhs, a rise of approximately 1.5% from 29,217 lakhs the previous year. This growth was primarily driven by primarily on account increase in turnover in EL segment as compared to previous year.


The profit before finance costs, depreciation, tax, and exceptional items for the year was 1,531 lakhs compared to 2,653 lakhs in the previous year. Operational cash profit for the year stood at 1,167 lakhs compared to 2,333 lakhs in the previous year. Cash profit including Exceptional Items stood 11% lower at 2,079 lakhs (previous year 2,333 lakhs).

The yearsProfitBefore Tax (PBT) amounted to 1,233 lakhs from 1,525 lakhs in the previous year. The Companys Profit After Tax (PAT) amounted to 871 lakhs, compared to 1,105 lakhs in the previous year. The decline in the Companys operational profit margins was primarily attributed to macro factors such as increased crude oil prices, inadequate demand in certain overseas markets, and shifting consumption pattern. Margin erosion was alsosignificantly attributable to cheaper Chinese imports, which affected entire polyester yarn segment.

"The Companys turnover for the year increased to 29,664 lakhs (1.5% rise). However, operational profits saw y and production, decline of 42.3%, primarily attributed to higher raw material costs affecting profit margins."

Risks and Concerns

The Company has a strong Enterprise Risk Management framework in place to identify, assess, and mitigate significant business and operational risks in a timely and effective manner. The following are the primary risks and their accompanying mitigation measures:

•Raw material risk and Mitigation:

The volatility of raw material prices, such as cotton, specialty specialised chemicals, and a range of resins, raises input costs, reducing the Companys profitability. To ensure timely acquisition of raw materials at competitive prices, the Company analyses price variations and adopts inventory management and responsive procurement policies. It also enters into contracts with clients and attempts to pass on changes in raw material pricing to them in order to safeguard margins. •Economic risk and Mitigation:

The geopolitical upheaval, global economic slowdown, high inflation, and the danger of a future recession in important markets such as the United States and Europe have slowed the export market. Demand contraction would have a negative impact on the Companys export business. The macro climate in the US/EU markets has begun to improve in the outlook, however export demand remains uncertain. The domestic market, on the other hand, will continue to generate significant business prospects for the Company.

• Logistics risk and Mitigation:

The ongoing conflicthas had a Russia-Ukraine negative influence on the global supply chain network. Any disruptions in the supply chain, increased container shipping costs, availability, and delays pose significant problems to the business. Furthermore, inefficlogistics in India cause insufficientand delays and excessive logistical expenses. For smooth operations, the Company has enhanced its supply chain network and created strong partnerships with suppliers and vendors.

• Technology Risk and Mitigation:

To improve continuing need for technological advancement and ongoing R&D. Failure to deploy cutting-edge, long-lasting technologies to meet the changing needs of the global market may result in business failure. The Company prioritises technology and invests aggressively in R&D, contemporary and sustainable technologies, machinery and equipment for enhancing manufacturing processes and quality, as well as strengthening its product line to meet evolving market trends.

Human Resources / Industrial Relations

The Company regards its people as its most valuable asset and an essential component of its competitive position. It has a well-designed human resources policy that fosters a positive work environment, inclusive growth, equitable opportunities, and competitiveness, as well as aligning employees goals with the organizations growth vision. Its human resources division is critical in developing a robust and competent team. It offers possibilities for professional and personal growth and conducts comprehensive employee engagement and development programmes to boost staff productivity and capabilities. As of March 31, 2023, the Company employed 872 people. Furthermore, during the year, industrial relations remained tranquil and cooperative.

Internal Control Systems and their Adequacy

The Company maintains an effective internal control system that is proportionate to the size, nature, and complexity of its operations. The internal control system is in charge of taking care of growing risks in the organisation, ensuring the dependability of financial information, timely reporting of operational and financial activities, asset safeguarding, and strict adherence to applicable laws and regulations. The Companys internal auditors are in charge of regular monitoring and examination of these controls. The Audit Committee evaluates the audit reports on a regular basis and ensures that any deviations are corrected as needed. Key observations are relayed to management, who takes immediate corrective action.


The Companys objectives, projections, outlook, expectations, estimates, and other information expressed in the Management Discussion and Analysis may be considered forward-looking statements under applicable securities laws and regulations. These statements are based on certain assumptions that the Company cannot guarantee.

Several circumstances, some of which the Company may not have direct control over, could have a substantial impact on the Companys operations. As a result, actual results may differ materially from such projections, whether expressed or implied, because it would be beyond the Companys ability to successfully implement its growth strategy. The Company assumes no obligation or responsibility to update forward-looking statements or to publicly amend, modify, or revise them to reflect events or circumstances that occur after the date of the statement on the basis of subsequent development, information, or events.

The Management of Pioneer Embroideries Ltd. (Pioneer, or the Company) presents below an analysis of its performance during the year under review, i.e., accounting year ended 31st March, 2023 (for the period April 1, 2022 up to March 31, 2023).

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