rb denims ltd bonus Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS: R & B DENIMS LIMITED

1. DISCLAIMER

Statements in the Directors? Report & Management Discussion and Analysis describing the Company?s objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company?s operations include raw material availability and its prices, cyclical demand and pricing in the Company?s principle markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

2. GLOBAL DENIM INDUSTRY

The global market for Denim Jeans estimated at US$57.3 Billion in the year 2020, is projected to reach a revised size of US$76.1 Billion by 2026, growing at a CAGR of 4.8% over the analysis period.

The growing interest towards a casual look is fueling the sales in the market. Rising number of women joining workforce, rapid rates of urbanization, westernization of lifestyles in emerging economies, and rising fashion consciousness are factors propelling growth in the global market for denim jeans. Recent popularity of colored denims and launch of newer styles expanded the range of products that are available under this category.

Additionally, jeans are also being considered ideal for various special occasions, apart from casual wear, including formal attire as work wear. All these factors are together buoying growth and also generating renewed interest in the category. Growing penetration of casual wear in the workplace, coupled with rising employment of the young generation have been auguring well for the global denim apparels market. The market is further propelled by the growth in the premium denim jeans segment. Aggressive promotions of innovatively styled denim garments are further driving growth in the jeans segment.

Denims status as a counter-cultural fabric paved the way forward for many youth style trends that continue to shape the fashion industry. This fabric remains an iconic image of Western clothing, and the adoption of jeans by Western women has also caused these types of pants to serve as symbols of womens liberation.

3. INDIAN DENIM INDUSTRY

Indian Denim Industry is showing a notable increase in recent years. Indian denim brands and manufacturers are focusing on increasing their export globally. Considering the significant proportion that India commands inside the international trade of textile and garb, and the industry is ready to add more exceptional manufacturing capabilities.

Along with a boom in potential, encouraging fabric guidelines and favorable exchange fee moves could help India achieve a large export boom.

India?s economy will grow 7.5% in fiscal year (FY) 2022 and 8% in FY2023, supported by increased public investment in infrastructure and a pickup in private investment. The outlook assumes sustained progress in coronavirus disease (COVID-19) vaccinations and that any new variants of the virus are of limited severity. It also factors in the impacts of Russia?s invasion of Ukraine primarily higher global oil and commodity prices that will contribute to rising inflation and a widening of the current account deficit.

Large public infrastructure investments planned over the next 2 years will encourage more private investment. Together with the PM Gati Shakti initiative to improve India?s logistics infrastructure, increased financial and technical support to states to expand capital investment will boost infrastructure spending and help spur economic growth. Private consumption will pick up as labor market conditions improve. The government?s production-linked incentive scheme will provide a thrust to the manufacturing sector in FY2022 and FY2023.

Inflation will likely increase to 5.8% in FY2022 amid rising oil prices. While monetary policy will remain accommodative, the central bank may hike policy rates in the later part of the fiscal year due to tightening of the United States federal funds rate and elevated oil prices. The current account deficit is projected to widen to 2.8% of gross domestic product in FY2022 due to the rising oil import bill, and is expected to decline to 1.9% in FY2023 amid an uptick in export growth. Foreign direct investment inflow is expected to moderate amid rising global uncertainty and tightening of global economic and financial conditions.

4. INDIAN TEXTILE MARKET

India?s textile and apparel products, including handlooms and handicrafts, are exported to more than 100 countries across the globe. India?s key export destinations for textiles and apparel products includes countries namely USA, UAE, the UK, Bangladesh, Germany, China, Spain, France, Italy, Netherlands, Saudi Arabia, etc. USA is the largest importer among all, importing about one fourth of the total exports from India. India and UAE have recently signed a Free Trade Agreement (FTA) and the country is also in the process of negotiating FTAs with EU, Australia, UK, Canada, Israel and other countries/ region which is likely to boost exports of Indian textile and apparels in future by providing competitive edge over other exporting countries.

India is the third-largest textile manufacturing industry and contributes approximately 6% to the total textile production, globally. India ranks 2nd as the largest producer of textiles and garments and is the 5th largest exporter of textiles spanning apparel, home and technical products. India, being one of the largest manufacturers of textile fabrics in the world has suffered due to drop in international demand for their products coupled with prolonged lockdowns and restrictions in majority of countries, higher prices of cotton and other raw materials and several supply chain disruptions. The key markets of denim fabrics in India like Delhi and Mumbai have been one of the worst affected parts of India for Covid-19 pandemic and hence, domestic demand for denim fabrics have been adversely affected.

Going by the optimistic sentiments in the textile industry, one can boldly say that the industry will do better in 2022. Hybrid editions of exhibitions and better performance in the last three months of 2021 have given new wings of optimism to the industry, driving out to a large extent the setbacks the industry suffered in 2020 & 2021.

The textiles and apparel industry in India has strengths across the entire value chain from fiber, yarn, fabric to apparel. It is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool and silk products to the organized textile industry. The organized textile industry is characterized by the use of capital-intensive technology for mass production of textile products and includes spinning, weaving, processing, and apparel manufacturing.

Indian Textile and Apparel Market reached a value of US$ 151.2 Billion in 2021. The market to reach US$ 344.1 Billion by 2027, CAGR of 14.8% during 2022-2027. "In terms of product categories, the export of cotton textiles was USD 17.2 billion with 39 per cent share registering a growth of 54 per cent and 67 per cent during 2021-22 over FY21 and FY20, respectively,"

Export of ready-made garments stood at USD 16 billion with 36 per cent share showing a growth of 31 per cent and 3 per cent during 2021-22 over FY21 and FY20, respectively.

Man-made textiles exports were to the tune of USD 6.3 billion with a 14 per cent share, which shows a growth of 51 per cent and 18 per cent during 2021-22 over FY21 and FY20, respectively.

Export of handicrafts was USD 2.1 billion with 5 per cent share, reporting a growth of 22 per cent and 16 per cent during 2021-22 over FY21 and FY20, respectively.

SWOT Analysis

Strengths:

Flexible Labor Market: This sector in particular needs an abundance of manpower. However, in Asia, the price of labor is very low.

Quality of Fabric: Denim is a sturdy and durable fabric, which is woven in a manner that it can be effortlessly worn in rough conditions, which makes denim a wardrobe essential and are looked at as fashion symbol.

Worldwide Demand: Clothing articles are one of the basic human needs. Everyone wants to have a good quality product for a cheaper price. That?s where the textile industries come in. They offer decent clothes for a reasonable price. This is the main reason, they get many buyers.

Strong backward linkage facilities: This industry possesses strong backward linkage facilities. This has proven to be a great asset on multiple occasions. This causes this sector to improve more in its own way. Also, it provides the industry with some much-needed support.

Presence of economic zones: An economic zone is a type of facility that ensures that the buyer gets to buy many products with the least tax possible. This encourages buyers to buy more from this industry. This, as a result, allows the industry to make more sales and earn many profits.

Weakness:

Lack of modern machinery: The industry lacks technology-oriented machinery and production systems. If these aren?t updated then they could take a heavy toll on its production. This will later reflect in its sales and profits.

Changing Trend: The fashion trends keep changing constantly thus leading to inventory issues. People tend to purchase different brand thereby leading to old stocks lying around.

Unable to go with the flow: Once a steady line of the production system is in place, it is very hard to suddenly change it to accommodate any new type of clothing article. As a result, it lacks product diversification. It also has a very short lead time which is not good for this line of work. It holds back the whole industry.

Lack of forecasting: Lack of forecasting is the main cause of production setbacks. If an industry is unable to provide a good forecast, it often causes major issues in the marketing sector. The quantity available does not match the assumed quantity.

Opportunities:

Buyer attention on the Indian market: Many of the international buyers are being more interested in the Indian market. This may be a golden opportunity for the Indian industries to take the market by storm. It will also be a huge turning point for this industry in general.

Open costing facility for the international buyer: Many international customers find their interest in this field being renewed by the open costing facility. This gives them a huge advantage to draw more buyers in.

Power of Media: Company should find out many innovative ways by making use of modern day media, to reach the consumers. By this, the company will get new opportunities to perform better and to reach out to new extremes.

Government and non-government training programs: There are a lot of people who work in this field. Even though they have curiosity, they often lack the skills that are needed. So, these government and non-government training programs can help them to enhance their skill-set. This provides the chance of improvement to this sector.

Buyer initiatives for productivity: In this field, many times buyers take responsibility to initiate the push for productivity. This shows that the buyers are actually interested in the said products. So, this gives a huge boost to the morale.

Threats:

E-shops and on-demand shops: There are many e-shops and on-demand shops that are mushrooming their way into the market. Now, the market actually has some internal competition going on. So, these new shops often end up stealing a lot of customers away from the industry.

High making cost: The making cost for this industry is quite high and very hard to achieve. So this makes having profit very hard.

Switch in brands: Many local and popular international brands are a threat to the Company. People will switch between the brand easily based on style, design, and comfort, as customers look for greater comfort and convenience and thus the trends are shifting from jeans to leggings and track pants.

Freight on board cost: Many times, the seller has to take the responsibility for goods, freight, and marine insurance. This is a convenient system no doubt. But if an accident happens the loss is very hard to deal with. This will majorly impact the earnings of it.

Political and environmental crisis: Countries that have a troublesome political environment have fewer buyers than those that don?t have them. Environmental issues can also influence the flow of buyers in a country.

5. INDIAN DENIM MARKET

The growing denim market, both internationally and nationally, is the main reason why leading mills are optimistically believing that denim will continue to tap growth in the years to come.

Denim is the fastest recovering market segment post the pandemic outbreak. India has been a leader in denim fabrics and off late the domestic jeans market has also been growing steadily, in fact faster than the global growth rate; various market studies suggest that the Indian domestic market for denim has been maintaining an average CAGR of 8 to 9 per cent for few years.

The market is projected to grow at a CAGR of 14.5 per cent and reach Rs 39,651 Crore by 2022, and Rs 77,999 Crore market by 2026. The mens denim segment comprises 84 per cent of the market while the womens denim segment and kids denim segment comprise 10 per cent and 6 per cent respectively.

Issues and Challenges for Denim Market

? India at present lacks behind in its ability of the denim product development and innovation.

? There is a need to develop a larger portfolio of denim garments and accessories, including shorts, shirts, bags, dresses, accessories among others.

? At present the market is skewed towards denim jeans.

? The weight (gsm) range of available denim fabric could be broadened to widen denim application. Most of the Branded Companies manufacture the high class of denims only.

? Emphasis is also to be given on low price segment jeans for the rural and semi urban Population.

? There is a lot of scope of improvement in right processing and value addition in denim through fashion-led processes and finishes.

? Establishment of high-quality processing and washing units could help to improve the quality of finishes and colours, this attracting more consumers to try denim.

? The increasing awareness of sustainable fashion provides additional opportunity to promote denim as a product of natural cotton fibre which is perceived as eco-friendlier than synthetics

6. ROAD AHEAD

The last few years have redefined the textile industry with the denim sector going through a big revamp in terms of the fits and fabric constructions.

Denim is the fastest recovering market segment post the pandemic outbreak. India has been a leader in denim fabrics and off late the domestic jeans market has also been growing steadily, in fact faster than the global growth rate; various market studies suggest that the Indian domestic market for denim has been maintaining an average CAGR of 8 to 9 per cent for few years.

Due to receding impact of second wave coupled with increase in vaccination, the domestic demand in denim textile market should show improvement in coming quarters. International demand for Indian Denim fabrics have also shown improvement due to vaccination in major developed countries and opening up of the economies by the Governments.

7. INDUSTRY OUTLOOK

Denim has usually been an integral part of the style, from work wear to casual wear denim has transformed the style world. All Indian generations are embracing denim higher than ever, especially Indian youths. For a majority of the Indian children, denim isnt just informal put on, but its more of a fashion statement. The Indian denim market is segmented into three categories: Men, Women, and Children. 85 percent of the denim market is dominated with the aid of men, while women contribute best 10 percentage, and the kids contribute around 6 percent of the overall Indian denim market. In the era of globalization, younger India prefers denim as part of their wardrobe essential. As consistent with the Indian consumer story, the middle class is majorly driving the boom of denim marketplace. Growing denim manufacturers across the globe are looking at India as an emerging denim export area wing to its first-class standards, cost-effectiveness, and a massive pool of tremendous workforce.

8. FINANCIAL RESULTS & PERFORMANCE

Particulars	For the year ended 31-03-2022*	For the year ended 31-03-2021*
Revenue from operations	29,623.52	17,415.28
Other Income	109.34	351.09
Total Revenue	29,732.86	17,766.37
Profit before tax and Exceptional Items	2,662.89	1,015.99
Exceptional Items	143.04	0.00
Profit before Taxation	2,805.93	1,015.99
-Current Tax	(478.16)	(187.10)
-Deferred Tax	(211.29)	5.20
-Short Provision for Income Tax expense relating to prior	(4.96)	(1.59)
Year
Net Profit/ (Loss) For The Year	2,111.52	832.49
Other Comprehensive Income for the	5.58	13.67
Year, Net of Tax
Total Comprehensive Income for the Year	2,117.10	846.16

* Figures regrouped wherever necessary

The Company discloses financial results on quarterly basis of which results are subjected to limited review and publishes audited financial results on an annual basis. The Financial

Statements as stated above are also available on the Company?s website www.rnbdenims.com.

During the year, Your Company recorded total revenue of 29,732.86 Lacs against Rs. 17,766.37 Lacs in the previous year, representing a increase of 67.35% during the year and Profit before Tax Rs. 2,805.93 Lacs as compared to Rs. 1,015.99 Lacs during the year. Total Income during the year Rs. 2,117.10 as compared to Rs. 846.16 in the previous year.

9. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has appropriate internal control systems for business processes, with regard to efficiency of operations, financial reporting, compliance with applicable laws and regulations etc. All operating parameters are monitored and controlled. Regular internal audits and checks ensure that responsibilities are executed effectively. The system is improved and modified continuously to meet with changes in business conditions, statutory and accounting requirements.

The reports and findings of the internal auditors and the internal control system are periodically reviewed by the Audit Committee. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the internal audit report, process owners undertake corrective action in the respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

10. RISK AND CONCERNS

The Company?s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company?s risk management assessment and policies and processes are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company?s activities.

Also, the price of cotton has risen too much now, which is a major concern for the textile industry. Consumers are therefore shifting their focus from cotton to man-made fibres. However with the abolition of import duty, prices should cool down. Further, increase in prices of other commodities such as coal, dyes and chemicals are also making the industry non-competitive.

11. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

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. In discharging their role and responsibilities, the department also engages external audit firms, wherever deemed necessary. 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. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

12. ENVIRONMENT, HEALTH AND SAFETY

The Company understands that EHS related incidents could pose severe regulatory and reputational risks. The remedial costs for these risks are huge and have a long bearing impact on the Company. Awareness sessions are conducted on an ongoing basis to ensure the safety of employees involved in manufacturing processes of the Company. Measures are taken to avoid any untoward incident which could result in EHS risk for the company. The Company believes that protecting the environment is one of its responsibilities as a good corporate citizen and is devotedly committed to this cause. The Company is committed to attainment of environmental and economic benefits from efficient use of energy, water, chemicals and waste reduction. The Company understands its obligations relating to social and environmental concerns, risks and opportunities. The Company ensures fulfillment of compliance obligations that relate to its products, environmental aspects and occupational health and safety.

The Company rely that the health and safety of the workers and the persons residing in the vicinity of its plants is fundamental to the business. Commitment to the identification and elimination or control of the workplace hazards for protection of all is utmost importance. The manufacturing operations are conducted to ensure sensitivity towards the environment and minimize waste by encouraging "Green" practices. The Company continued to enjoy healthy industrial relations during the year.

The Company believes that Human Resources shape the success of its business vision. The company is committed to investing in hiring the right talent, sustainably engaging and developing them, retaining and rewarding them to deliver organizational results and growth.

Our emphasis on continual improvement in health and safety of our workers continues to remain strong as ever. Any risk that deems to be high in the Hazard Identification and Risk Analysis (HIRA) are prioritized and taken in to management plan. Various control measures adopted to oversee safe functioning of scores of activities. This is recognition of our adherence to health and safety by an independent agency.

13. HUMAN RESOURCE MANAGEMENT

At R & B Denims Limited, employees are its prime assets and a vital key to its success. The company is committed to creating a professional culture to nurture and enable people to grow in their careers alongside Company?s success. The Company aims to build an inclusive and empowering work environment, focused on enhancing employee experiences. The Company?s philosophy for People, Process, Policies and Practices contributes towards building an agile and performance-oriented organization. The company constantly strives to strengthen its manpower in alignment with the business needs and continue to engage them through various initiatives in the realm of learning & development opportunities, reward & recognition, employee engagement activities and career growth.

14. SUSTAINABLE DEVELOPMENT

Sustainable development is at the core of the Company?s operations which is also outlined in the Environment, Health and Safety Practices. The Company follows sound environmental management practices at its manufacturing unit to assess and address potential environmental risks. We understand that environmental risks may affect business operations and also pose potential threat. The Company has its own ways to identify and assess the potential environmental risks at the design stage itself.

15. SIGNIFICANT CHANGES

Ratio	2021-22	2020-21
Debtor Turnover Ratio	5.68 times	3.49 times
Inventory Turnover Ratio	65.17 times	19.66 times
Interest Coverage Ratio	8.53 times	3.72 times
Current Ratio	1.49 times	1.36 times
Debt Equity Ratio	0.89 times	1.08 times
Operating Profit Margin	13.36%	9.82%
Net Profit Margin	7.13%	4.78%
Return on Equity	39.32%	21.41%

For the Board of Director

R & B Denims Limited

Sd/- Sd/-

Rajkumar Borana Amit Dalmia Managing Director Whole Time Director DIN: 01091166 DIN:00034642

Place: Surat

Date: 10/08/2022