Rajkamal Synthetics Ltd Management Discussions

INDIA TEXTILE INDUSTRY OVERVIEW/ INDUSTRY STRUCTURE AND DEVELOPMENTS

Indias 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, while the capital-intensive sophisticated mills sector on the other end. The decentralised power looms/ hosiery and knitting sector forms the largest component in 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. Indias textiles industry has a capacity to produce wide variety of products suitable for different market segments, both within India and across the world. The textiles sector has witnessed a spurt in investment during the last five years. Exports have been a core feature of Indias textile sector. Exports of both man-made textile and readymade garments have seen a major boost. A major factor behind the robustness of Indias textile industry is its strong production base with a wide range of fibres and yarns. India is among the top producers of jute and silk, and beyond its natural fibres such as cotton, jute, silk and wool; and synthetic, its manmade fibres such as polyester, viscose, nylon and acrylic have also created a niche for themselves in the market.

OPPORTUNITIES AND THREATS

Opportunities

Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the sector under the automatic route. Union Budget 2020- 21, a National Technical Textiles Mission is proposed for a period from 2020-21 to 2023-24 at an estimated outlay of Rs.1,480 crore (US$ 211.76 million). In Union Budget 202122, the announcement on setting up of seven mega textiles parks, will directly impacting the textile industry. With the concept of these mega parks with a plug and play model, Indian textile and apparel sector, particularly SMEs, can work on scale and build competitiveness in manufacturing. The Production Linked Incentive (PLI) scheme for man-made fibres and technical textiles with a total outlay of Rs.10,683 crore will help the textile industry to become globally competitive, attract large investments and boost employment generation.

Custom duty policy announced has dual objectives of promoting domestic manufacturing and helping India get on to global value chain and export better as the domestic textile industry will get easy access to raw materials and exports of value-added products, which will make textile industry globally competitive. The Budget allocates Rs.700 crore for Amended Technology Upgradation Scheme (ATUFs) which will help to clear the pending capital subsidy.

The Company undertakes no obligations to publicly update or revise any of the opinions of statements expressed in this report. Readers are hence cautioned not to place undue reliance on these statements and are advised to conduct their own investigation and analysis of the information contained or referred to this statement before taking any action with regard to specific objectives.

Threats

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

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

• Compliance issues with the environmental norms and regulations

• The Companys business may be impacted by introduction of new policies or changes in existing policies.

• Companys proposed step - The Companys management team keeps a close eye on policy regulations and formulates company plans appropriately.

• Low-cost imports due to favourable government policies in other countries may pose significant risk to business and impact pricing strategy.

• Companys proposed step - The Companys competitive advantage comes from leveraging economies of scale, cutting-edge technology and strategic partnerships with all stakeholders to offer competitive rates globally.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

As the Company is dealing in only in one industry and offers products and services that are interlinked to each other segment reporting is not applicable to the Company. There is no identical geographical segment of the Company as there are no major differences in factors affecting the segment of market.

OUTLOOK OF THE COMPANY

The Company is continuously trying to accomplish the desired results. Steps have been taken for cost diminution and manufacturing quality products by various installed machineries of the Company. Various aspects of working conditions of workers, health related issues, minimizing risk of accidents at work place etc. are being taken care of by the Company. The Company will achieve more turnover by various marketing strategies, offering more quality products, etc. in coming years followed by increase in profit margin by way of various cost cutting techniques and optimum utilization of various resources of the Company.

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, 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.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

• The Company has proper and adequate system of internal control, commensurate with the size and nature of its business. Regular internal audits and checks carried out and also management reviews the internal control system and procedures to ensure orderly and efficient conduct of business and to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and that transactions are authorised, recorded and reported correctly.

• The Company has well defined internal control system. Internal audit in the organization is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organization. The Audit Committee, comprising Independent Directors, regularly reviews audit plans, significant audit findings, adequacy of internal controls, and compliance with Accounting Standards, among others.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

(Amount in Lakhs)

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

• The Company believes that its people are its most important asset and thus continuously strive to scale up its employee engagement through well-structured systems and a visionary HR philosophy.

• The Company continues to lays emphasis on building and sustaining the excellent organization climate based on human performance. Performance management is the key word for the Company. Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation in the Company.

• We are highly focused on developing our employees to perform with the same excellence for the challenges and huge business opportunities that are envisaged in future.

• The Company firmly believes that intellectual capital and human resources is the backbone of the Companys success.

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

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF

DISLCOURE OF ACCOUNTING TREATMENT

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