Rajkamal Synthetics Ltd Management Discussions

The company was incorporated in May 1981 as a private limited company in the name of Shree Balaji Calendaring House Pvt Ltd. Subsequently, the name of the Company was changed to Balaji Prints Pvt Ltd in 1982. It was converted into a public limited company on 17 December 1982. The company commenced its textile processing activities in January 1982 on rental machineries and in 1983, it set up a cotton-cum-synthetic textile processing unit at Dombivli in Thane district of Maharashtra. This unit was set up for processing, bleaching and calendaring of fabrics and sarees. Early in 1986, the name of the Company was changed to Rajkamal Synthetics Limited. The company also has a manufacturing unit at Surat, Gujarat. To augment its trading activities the Company set up a division International Cloth Agency at Bombay in April 1986. In December 1986, the company issued 4.5 lac 15% non-convertible debentures of Rs 100 each for Rs 450 lakhs on rights basis to equity shareholders. In 1989-90, the company undertook an expansion programme at its Sachin (Surat) plant to increase the printing and dyeing capacities. The companys plant at Sachin is closed since

June 1993 due to lack of working capital. The company sold its Sachin plant to Mittal Fabric Manufacturing Co Pvt Ltd in March 1996, for a sum of Rs 175 lacs .

FINANCIAL PERFORMANCE

Particulars	Ended on March 31, 2024 (in Rs)	Ended onMarch 31, 2023 (in Rs.)
Revenue from Operation	10.61	20.74
Other Income	29.00	16.32
Total Income	39.61	37.06
Cost of Material Consumed	-	-
Purchases of stock-in-trade	12.24	0.00
Changes in inventories of finishedgoods, and Stock-in-trade	(3.16)	4.51
Employees Benefit Expense	2.80	0.20
Depreciation	1.16	1.66
Finance Cost	0.61	-
Other Expenses	11.18	13.40
/Profit Before Tax (PBT)	14.78	17.31
Tax Expenses	(0.30)	3.31
Profit After Tax (PAT)	15.08	14.00
Share in (loss)/profit of associates	-	-
	15.08	14.00
Profit After Tax (Share in associates)
Items that will not be reclassified to Profit & Loss	0.10	0.087
Total Comprehensive Income for the year	15.17	14.10
PBT Ratio	37.31	46.69
PAT Ratio	38.06	67.50

ECONOMIC OVERVIEW GLOBAL ECONOMY

The year 2022 saw the developed world grapple with some of the highest levels of inflation in recent history. Fuelled by historic fiscal and monetary support to counter the impact of COVID-19, the prices of food and fuel became the primary concern of the policymakers especially in the second half of the year. 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 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. Although inflation has declined as central banks have raised interest rates, underlying price pressures are proving sticky, with labour markets tight in several economies. The US Federal Reserve in a quick turn of stance, started hiking the interest rates, which has continued well into the summer of 2023. The Eurozone continued to struggle with energy prices, partly as a result of the war and the absence of Russian gas flowing in through Nordstream pipelines. The IMF has projected the global GDP to grow by 2.8% in 2023 before rising slowly and settling at 3.0% five years out the lowest medium-term forecast in decades. The anaemic outlook is partially due to the relatively slower decline of global inflation which is set to fall from 8.7% in 2022 to 7.0% in 2023 on the back of lower commodity prices. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7% in 2022 to 1.3% in 2023. The US and Eurozone economies are expected to see muted growth at 1.6% and 0.8% respectively in 2023, while the UK economy is expected to see a contraction of 0.3%. The World Bank has raised fears that the ongoing slump in global economic growth will likely result in a "lost decade".

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.

INDIAN ECONOMY

India has emerged as the shining beacon in a grim global scenario by growing at 6.8% in

2022. The IMF has estimated Indias growth at 5.9% in FY-23 and 6.3% in FY-24, well above other economies of significant scale causing many to state that this could well be Indias decade. 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 2023-24, 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 FY-24. Despite the challenging global environment, the Indian economy with its strong fundamentals and massive demographic strengths seems en route to outpace other large economies.

INDUSTRY STRUCTURE AND DEVELOPMENTS Indian textile and apparel 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. 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 is 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 THREATS Opportunities

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 ‘fast fashion products will contribute to the growth of the textile and apparel industry

Threats

Being a labour-intensive sector, the shortage of skilled workforce may impact the operations and there will be a struggle to complete orders

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

KEY FINANCIAL RATIOS

Particulars	As at March 31, 2024	As at March 31, 2023	Change in %	Reason
1. Current Ratio	1.18	1.57	(24.84)	Change in ratio due to increase in current assets and increase in current liabilities.
2. Debt-Equity Ratio	0.22	(2.61)	108.43	Change in ratio due to decrease in total debt.
3. Debt Service Coverage Ratio	5.90	0.92	541.30	Change is on account of increase in earnings before interest, tax, and depreciation.
4. Return on Equity Ratio%	6.13	(1.04)	689.42	Change is on account of increase in earnings before interest, tax, and depreciation.
5. Inventory turnover ratio	(0.64)	0.80	180	Change is on account of increase in Inventory
6. Trade Receivables Turnover Ratio	-	-	- -
7. Trade Payables Turnover ratio	1.50	19.19	(92.18)	Change is on account of increase in cost of purchase of goods and services as well as increase in average payables.
8. Net Capital turnover ratio	1.67	4.65	(64.08)	Change in ratio is due to decrease in revenue from operation.
9. Net profit Ratio %	0.38	0.38	-	No Change in ratio
10. Return on capital employed %	1.06	1.59	(33.33)	Change in ratio is due to decrease in earnings before interest and tax.

RISKS AND CONCERNS

Raw material risk: The volatility in prices of raw materials such as cotton, specialty fibres and yarns, glass roving, specialty chemicals and a variety of resin increases the input costs which adversely impacts the Companys profitability. Further, many raw materials used in

AMD has a correlation with crude oil prices and volatility in crude oil prices may weaken AMD margins. The Company monitors price fluctuations and follows inventory management and responsive procurement policy to ensure timely procurement of raw materials at competitive prices. It also engages in contracts with clients and tries to pass on variations in the prices of raw materials to them to protect margins.

Economic risk: The geopolitical turmoil, global economic slowdown, high inflation and the threat of a looming recession in key markets like the US and Europe have led to a slowdown in the export market. Demand compression would reduce the Companys export business. Macro environment in the US/EU markets has started to show some improvement in the outlook, though the export demand would stay uncertain. However, the domestic market will continue to provide sizeable business opportunities for the Company.

Logistics risk: The ongoing Russia-Ukraine war has adversely impacted the global supply chain network. Since majority of the Companys business is exports-oriented and it depends on the supply chain for exporting final products, any kind of disruptions in the supply chain, ever-rising container shipping cost, availability and delays pose severe challenges for the business. Further, inadequate and inefficient logistics in India lead to delays and high costs of logistics. The Company has strengthened its supply chain network and developed strong relationships with suppliers and vendors for smooth operations. Disaster risk: The Company is susceptible to disasters and crises such as pandemics, earthquakes, geopolitical instability, fire hazards, etc. which may cause operational disruption, shutdown or production cuts, project delays, supply chain hurdles, and increased construction costs. The Company prioritises the safety of its stakeholder community and ensures business survival during unpredictable crises. It has a well-designed safety management policy that eliminates/reduces the risk of workplace incidents. Its proper implementation and updation enable effective prevention besides equipping the employees to handle any incident that may occur. To reduce exposure to fire-related hazards, it has placed pressurised fire protection and related systems at strategic locations to deal with any fire-related incidents.

Technology Risk: There is a constant requirement for technology upgradation and regular R&D to enhance efficiency and productivity. Failure to use the latest and sustainable technologies to cater to the changing requirements of the global market may lead to loss of business. The Company gives utmost importance to technology and proactively invests in R&D, modern and sustainable technologies, machinery and equipment for improving the manufacturing process, and quality and strengthening its product portfolio to cater to emerging market trends.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company considers its employees as the most important asset and integral to its competitive position. It has a well designed HR policy that promotes a conducive work environment, inclusive growth, equal opportunities and competitiveness and aligns employees goals with the organisations growth vision. Its human resource division plays a crucial role to build a strong and talented workforce. It provides opportunities for professional and personal development and implements comprehensive employee engagement and development programmes to enhance the productivity and skills of its employees. Further, industry relations remained peaceful and harmonious during the year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains an efficient internal control system commensurate with the size, nature and complexity of its business. The internal control system is responsible for addressing the evolving risks in the business, reliability of financial information, timely reporting of operational and financial transactions, safeguarding of assets and stringent adherence to the applicable laws and regulations. The internal auditors of the Company are responsible for regular monitoring and review of these controls. The Audit Committee periodically reviews the audit reports and ensures correction of any variance, as may be required. Key observations are communicated to the management who undertakes prompt corrective actions.

DISLCOURE OF ACCOUNTING TREATMENT

While preparation of financial statements, treatment as prescribed in an Accounting Standard has been followed.