Piotex Industries Ltd Management Discussions

1. Industry Structure and Developments

India?s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk, and wool, to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. India?s textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both within India and across the world.

According to Crisil Ratings, the organised retail apparel sector is projected to achieve revenue growth of 810% in FY25, driven by rising demand from a normal monsoon, easing inflation, and the festive and wedding seasons.

The increasing preference for affordable, trendy fashion clothing that mimics high-fashion designs is expected to be the primary revenue driver. In order to attract private equity and employee more people, the government introduced various schemes such as the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS) and Mega Integrated Textile Region and Apparel (MITRA) Park scheme.

Market Size

The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$ 350 billion by 2030. Moreover, India is the worlds 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$100 billion.

The textiles and apparel industry contributes 2.3% to the country?s GDP, 13% to industrial production and 12% to exports. The textile industry in India is predicted to double its contribution to the GDP, rising from 2.3% to approximately 5% by the end of this decade.

Textile manufacturing in India has been steadily recovering amid the pandemic. The manufacturing of textiles Index for the month of June 2024 is 106.

Global apparel market is expected to grow at a CAGR of around 8% to reach US$ 2.37 trillion by 2030 and the Global Textile & Apparel trade is expected to grow at a CAGR of 4% to reach US$ 1.2 trillion by 2030.

India?s home textile industry is expected to expand at a CAGR of 8.9% during 2023-32 and reached US$ 23.32 billion in 2032 from US$ 10.78 billion in 2023.

The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5^th largest technical textiles market in the world. India?s sportech industry is estimated around US$ 1.17 million in 2022-23.

The Indian Medical Textiles market for drapes and gowns is around US$ 9.71 million in 2022 and is expected to grow at 15% to reach US$ 22.45 million by 2027.

The Indian composites market is expected to reach an estimated value of US$ 1.9 billion by 2026 with a CAGR of 16.3% from 2021 to 2026 and the Indian consumption of composite materials will touch 7,68,200 tonnes in 2027.

India is the world?s largest producer of cotton. In the first advances, the agriculture ministry projected cotton output for 2023-24 at 31.6 million bales. According to the Cotton Association of India (CAI), the total availability of cotton in the 2023-24 season has been pegged at 34.6 million bales, against 31.1 million bales of domestic demand, including 28 million bales for mills, 1.5 million for small-scale industries, and 1.6 million bales for non-mills. Cotton production in India is projected to reach 7.2 million tonnes (~43 million

bales of 170 kg each) by 2030, driven by increasing demand from consumers. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally.

In 2022-23, the production of fibre in India stood at 2.15 million tonnes. While for yarn, the production stood at 5,185 million kgs during the same period. Natural fibres are regarded as the backbone of the Indian textile industry, which is expected to grow from US$ 138 billion to US$ 195 billion by 2025.

Indias textile industry is on the brink of expansion, with total textile export projected to reach US$ 65 billion by FY26.

India saw a 36.4% increase in industrial design applications, particularly in textiles, accessories, tools, machines, health, and cosmetics.

According to ICRA, Indian apparel exporters are projected to achieve revenue growth of 9-11% in FY25, driven by the gradual reduction of retail inventory in key end markets and a shift in global sourcing towards India.

During FY24, the total exports of textiles (including handicrafts) stood at US$ 35.9 billion. Exports of textiles (RMG of all textiles, cotton yarns/fabs/made-ups/handloom products, man-made yarns/fabs/made-ups, handicrafts excl. handmade carpets, carpets and jute mfg. including floor coverings) stood at US$ 35.90 billion in FY24. In FY24, exports of readymade garments including accessories stood at US$ 14.23 billion. India?s textile and apparel exports to the US, its single largest market, stood at 32.7% of the total export value in FY24.

In FY25 (April- June) the total exports of textiles stood at US$ 9.17 billion

In FY25 (April-June), exports of readymade garments including accessories stood at US$ 2,244 million.

India?s textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country.

2. Opportunities and Threats

Opportunities

- Government Incentives: The PLI scheme and other textile promotion policies support capital investment and competitiveness.

- Export Potential: Increasing demand from markets like the USA, EU, and Middle East for synthetic and blended textiles.

- Digital Transformation: Technology adoption in manufacturing and supply chain offers enhanced efficiency.

- Sustainability Trend: Rising demand for eco-friendly and recycled synthetic fibers creates new product lines.

Threats

- Raw Material Price Volatility: Prices of petrochemical-based raw materials such as polyester and nylon fluctuate with global crude oil prices.

- Global Trade Disruptions: Ongoing conflicts and trade protectionist policies may affect exports.

- Labour and Compliance Costs: Increased regulations and cost of compliance may affect profitability.

- Competition: Rising competition from global players in low-cost economies such as Vietnam and Bangladesh.

3. Segment-wise or Product-wise Performance

The Company is operating only in one segment. The turnover/performance of the Company has been disclosed in the Directors report under the Head "Review of Operations, sales and working results."

4. Outlook

Your company remains committed to upholding the highest standards of governance, transparency, and ethical practices. With India racing towards growth and becoming a strong economy, we look forward to emerge as a strong, reliable, and sustainable company. Together, we shall embrace the future with optimism, determination, and the desire to build a brighter tomorrow.

5. Risks and Concerns

Key risks faced by the Company include:

• Commodity Price Risk: Raw materials like polyester chips and filaments are crude-oil derivatives.

• Currency Risk: Export receivables are subject to forex fluctuations.

• Credit Risk: Delays in receivables from domestic and overseas clients.

• Environmental Compliance Risk: Non-compliance with stringent pollution control norms can attract penalties.

The Company has robust risk management and hedging mechanisms in place, including forward contracts, inventory management, and diversified client portfolios.

6. Internal Control Systems and Their Adequacy

The Company has a sound internal control system commensurate with its size and nature of operations. It includes policies and procedures to ensure:

• Efficient use and protection of resources.

• Accuracy and completeness of accounting records.

• Compliance with applicable laws and regulations.

Periodic internal audits are conducted and findings reported to the Audit Committee and Board for necessary action. No significant internal control weaknesses were observed during the year.

7. Financial Performance with Respect to Operational Performance

8. Material Developments in Human Resources / Industrial Relations

The company continues to give utmost importance to Human Resources Development and keeps relations normal. As on 31st March, 2025, there are 28 employees.

Industrial relations continue to be harmonious and normal.

9. Details of Significant Changes in Key Financial Ratios

Reasons for Variations

1 Current Ratio : It is increased due to decrease in current liablity.

2 Debt-Equity Ratio : It is decreased due to increase in total equity.

3 Debt Service Coverage Ratio : It is decreases due to increase in interest expenses and current maturity of long term debt.

4 Return on Equity (ROE)(%): It is decreased due to increase in Seurity premium

5 Inventory Turnover Ratio : It is decrease due to increase in average inventory

6 Trade payables turnover ratio: It is increased due to decrease in Trade payable

7 Return on Capital Employed : It is decreased due to increase in capital employed

8 Return on investments(%): It is decreased due to increase in equity and reserves & surplus as well

10. Cautionary Statement

Statements in this Management Discussion and Analysis describing the Company?s objectives, projections, estimates, expectations, or predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various factors including changes in economic, political, and regulatory environments, natural calamities, and market conditions.