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Riba Textiles Ltd Management Discussions

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Jul 19, 2024|09:56:00 AM

Riba Textiles Ltd Share Price Management Discussions

The Riba management conducted a SWOT analysis and reviewed our overall strategy to become a market leader in our highly competitive market through various product and procedural innovations. The company is very optimistic of capturing a substantial share of the export market in our segment inspite of the threats faced due to the liberalization and increased competition from well established companies from abroad and within India. Riba has been highly innovative with regular new product launches in the market which has helped garner a much larger proportionate market share for Riba in spite of the extremely adverse market conditions leading to subdued demand.

1. Global Textile Market Overview (World Economic Review)

The main types of textile are other textile product mills, fabrics, yarn, fiber and thread, home furnishings and floor coverings, textile and fabric finishing, and fabric coating mills. Household furniture refers to all mobile, compactable goods or machinery used to furnish a home, such as chairs, tables, sofas, mattresses, and so on. The different materials include cotton, jute, silk, synthetics, and wool and involves various process such as woven, and non-woven.

The global textile market grew from $573.22 billion in 2022 to $610.91 billion in 2023 at a compound annual growth rate (CAGR) of 6.6%. The Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19 pandemic, at least in the short term. The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe. The textile market is expected to grow to $755.38 billion in 2027 at a CAGR of 5.5%.

The Global Towel market is anticipated to rise at a considerable rate during the forecast period, between 2023 and 2030. In 2022, the market is growing at a steady rate and with the rising adoption of strategies by key players, the market is expected to rise over the projected horizon.

North America, especially The United States, will still play an important role which cannot be ignored. Any changes from United States might affect the development trend of Towel. The market in North America is expected to grow considerably during the forecast period. The high adoption of advanced technology and the presence of large players in this region are likely to create ample growth opportunities for the market.

Europe also play important roles in global market, with a magnificent growth in CAGR during the Forecast period 2022-2030.

Towel Market size is projected to reach Multimillion USD by 2030, In comparison to 2022, at unexpected CAGR during 20222030.

Bath Towel Market was valued at USD 4860 billion in the year 2021, and it is expected to reach USD 5.171.04 billion by 2028. increasing at a CAGR of 6.4% from 2022 to 2028. Bath Towels are still a crucial fashion accessory and a consistent source of cash for the industry. Bath Towels have recently risen in popularity as one of the most coveted personal items all around the world. The availability, prominence, and desirability of different bath towels have increased their wide acceptance and potent performance

2. Indian Textiles Market (Towels-Market Size)

In global home textile segment, cotton terry towels is the single largest commodity with a massive market share of 14 per cent. According to the Office of Textiles and Apparels (OTEXA) US, in CY 2019, India supplied about 39 per cent of the import of cotton towels to the US, which has grown significantly from the level of 30 per cent in CY 2009.

Terry towel is one of the strong product categories for Indian textile companies as Indian giants have a major share in the worlds leading market. Global home textile industry is expected to increase to US $ 60 billion by 2025 from US $ 52 billion currently. In India, the home textile industry is expected to almost double from current level of US $ 8 billion by 2025-26.

In global home textile segment, cotton terry towels is the single largest commodity with a massive market share of 14 per cent. According to the Office of Textiles and Apparels (OTEXA) US, in CY 2019, India supplied about 39 per cent of the import of cotton towels to the US, which has grown significantly from the level of 30 per cent in CY 2009. The hospitality and spa industry, a major consumer of towels, is badly impacted in last one year and is still under pressure. It impacted the market for towel segment negatively but the good thing is that despite this setback, the segment has ample opportunities for India and Indian giants are geared up to grab these opportunities.

For towels, the export demand in India is mainly driven by the US, the largest market, accounting for 60 per cent of Indias home textile exports. Compared to a 9 per cent increase in Indias home textile product export of US $ 5.7 billion in FY 2021, exports to the US increased by 14 per cent, while exports to the other major markets of the UK and the EU reported a year-on-year decline during the year.

On the other hand, despite the duty disadvantage of 9 to 10 per cent, Indias towel export to US is around 20 per cent of Europes total towel sourcing.

In the Western world, terry towels generate majority of sales in the towel segment. Even in India, the largest global suppliers from the country are now looking aggressively at domestic branded terry towel market. The high growth potential with good margins is the attraction.

However, in volume terms, the terry towels are currently contributing around 20 per cent of the domestic sales in India. The remaining 80 per cent comes from Honey Comb/ Huccabuck (Gamchas)/ Non-Terry towels.

3 Sustainability at the core

Sustainable products and practices are being pushed further by the global buyers and are impacting the specification of the products The hospitality towels are blended with 15-20 per cent polyester while towels made from recycled cotton blended yarns are in demand. Sustainable fibres like Hemp are also being blended with cotton.

Growing concern for health and hygiene is one factor increasing the demand of disposable towels. At the same time, antibacterial, antifungal and antiviral finish are becoming normal rather than being exception and this shall dominate from now onwards.

Further, with the thrust on technical textiles, technology shall improve the absorbency of these towels.

With increasing yarn prices and global economy looking for less water consumption across the value chain, the non-terry towel market share shall improve globally.

4. Investment

The global cotton towel market size was valued at $4.04 billion in 2022 & is projected to grow from $4.25 billion in 2023 to $6.36 billion by 2030.

Bath Towel Market was valued at USD 4860 billion in the year 2021, and it is expected to reach USD 5,171.04 billion by 2028, increasing at a CAGR of 6.4% from 2022 to 2028. Bath Towels are still a crucial fashion accessory and a consistent source of cash for the industry. Bath Towels have recently risen in popularity as one of the most coveted personal items all around the world. The availability, prominence, and desirability of different bath towels have increased their wide acceptance and potent performance

Despite the presence of intense competition, due to the global recovery trend is clear, investors are still optimistic about this area, and it will still be more new investments entering the field in the future.

5. Government Initiatives

The Government has taken following steps to modernize the textile industry, enhance export and to promote FDI in textile sector on pan-India basis:

i) Government has approved setting up of Seven PradhanMantri Mega Integrated Textile Region and Apparel (PM MITRA) Parks in Greenfield/Brownfield sites with an outlay of Rs. 4,445 crore for a period of seven years up to 2027-28. These parks will enable the textile industry to become globally competitive, attract large investment and boost employment generation.

ii) Government has approved the Production Linked Incentive (PLI) Scheme for Textiles, with an approved outlay of Rs 10,683 crore, to promote production of Man Made Fiber (MMF) Apparel, MMF Fabrics and Products of Technical Textiles in the country to enable Textile sector to achieve size and scale and to become competitive.

iii) Government has allocated an outlay of Rs 1480 crore for the National Technical Textiles Mission (NTTM) to promote and develop technical textiles sector in India.

iv) Silk Samagra-2 scheme is being implemented from the year 2021-22 to 2025-26 for development of sericulture industry in the country.

v) Government is also implementing various schemes/ programmers such as SAMARTH- Scheme for Capacity Building in Textile Sector, National Handloom Development Programme, Raw Material Supply Scheme, National Handicraft Development Programme, Comprehensive Handicrafts Cluster Development Scheme, Integrated Wool Development Programme etc. to promote and develop indigenous textile sector.

vi) India has so far signed 13 Free Trade Agreements (FTAs) including recently concluded Comprehensive Economic Partnership Agreement with UAE and Economic Cooperation and Trade Agreement with Australia; and 6 Preferential Trade Agreements with various trading partners. Government has entered into negotiations for FTA with trading partners such as the United Kingdom, European Union, Canada for enhancing market access of Indian products, including textiles, keeping in mind the national interest and domestic sensitivities.

vii) Market Access Initiative scheme provides financial support to various Export Promotion Councils and Trade Bodies engaged in promotion of textiles and garments exports, for organising and participating in trade fairs, exhibitions, buyer-seller meets etc.

viii) Government has put in place liberal and transparent investor-friendly Foreign Direct Investment (FDI) policy. 100% FDI is allowed in the textile sector under the automatic route. The amount of investment brought through FDI in the textile sector from 2017-2022 was US $ 1522.23 million.

Following MoUs have been signed with other countries to boost textile industry in the country:

• MoU with National Agriculture Food Research Organization, Japan to promote collaborative research in the field of silkworm and silk industry.

• MoU signed between Central Silk Board and "Uzbekipaksanoat", Uzbekistan on cooperation in Sericulture and Silk industry.

• MoU signed between M/o Textiles, Govt, of India and Department of Agriculture, Fisheries and Forestry, Govt, of Australia for establishing a Joint Working Group on cooperation in the field of Wool and Woolen products.

• MoU between India and Sri Lanka on procedural arrangements for import of apparel articles from Sri Lanka to India on Tariff Rate Quota under India Sri Lanka Free Trade Agreement.

• MoU between India and Sri Lanka on cooperation in the development of Small and Medium-sized Enter-prises in handloom, powerloom and textiles.

• MoU signed between Textiles Committee, Govt, of India and M/s Nissenken Quality Evaluation Centre, Japan.

Government is implementing various schemes such as PM-MITRA, PLI, NTTM etc. for undertaking numerous technology centric approaches for increasing production in the textile sector all over the country.

7. Road Ahead

Growing Demand from the Hospitality Sector to Boost Market Expansion

Increasing number of international visitors is projected to drive growth of cotton market share. In addition, rising governments spending on the infrastructure development including roads, airports and hotels accelerates the market growth. In addition, growing prevalence of the e-commerce industry combined with their easy return and exchange policy is likely to boost the markets growth. For instance according to the U.S. Census Bureau News, e-commerce sales in the U.S. reached to USD 870 billion in 2021, an increase of 14.2% over 2020 and an increase of 50.5% over 2019.

Increasing Awareness about Health and Hygiene to Expand Product Demand

In recent times, consumers are increasingly focusing on their health and hygiene through the consumption of quality products which is driving the market growth of cotton towel household and commercial settings such as hotels, restaurants and fitness centers are continuously concentrating on the hygiene of the consumers by using unique and high quality products. Therefore, the growing demand of cotton material towels from residential and commercial sector of sector is set to drive the growth of entire market. For instance, according to the U.S. Census Bureau statistics, new residential housing sales in U.S. increased from nearly 770000 housing units in January 2020 to 1000000 units in January 2021.

8. WEAKNESSES

Fluctuation in the cost of raw materials affects the production of the product and hands limiting the product revenues globally. Additionally, the higher cost of technology and production process also restricts the product demand worldwide. Higher raw material cost increase the production cost at company level. This raises the price of the final product and consequently hindering the growth of the market. Moreover labors are involved throughout the supply chain, from sourcing to transporting and delivering the final products. If there is a chance change in the labor force along the way. there may be a change in the commodity price and hence restraining the market growth. For instance, in the event of labor shifts such as labor strike, there will be fewer workers to procure or ship materials, resulting in reducing the supply and impacting the price of raw materials.

9. Riba Textiles Ltd

COMPANY OVERVIEW

Riba Textiles Limited is an export-oriented Terry Towels, its allied products & Tufted Rugs manufacturing unit based 100 kms from New Delhi in the state Of Haryana, India. Riba is registered on the Indian stock market and has been growing emblematically over the past decade with present capacity of 8.000 tons annually due for another expansion in 2022. The production unit encompasses 16 acres of land with a built-up area of 400,000 square feet incorporating all the state-of-the-art machineries from across the globe. Riba is a fully integrated unit with an ultramodern composite plant incorporating Dyeing, Weaving, Finishing, Sublimation, Embroideries and Riba is able to transmute cotton yarn into marvelous towels / bath rugs for our perceptive customers. The array of towels and allied products comprise of all possible permutations and combinations buttressed by the newest designs developed by Riba design team plus product improvement by the production team.

Riba is particularly proud to be the leading manufacturer of beach towels in India with an enormous jacquard weaving capacity servicing customers from both seasonal beach markets above and below the equator. Our line of customers takes account of departmental stores and importers right across the globe with trades in 30 countries incorporating maximum continents.

Riba is a socially responsible manufacturer having all the indispensable compliances from the most stringent customers accompanied by BSCI 2.0 / ISO 9001:2015 / Oekotex 100 certifications.

10. Initiatives has been taken by the Company

During the f.y 2022-23 company made an investment in plant & Machiery of Rs 9.56 core to increase production / sales, and also company have a further plan to increase weaving capcacity in next year and expect that an amount of approx. Rs 10 crore to invest in Plant & machinery.

11. Financial Performance / Product wise Performance

During the year under review (2022-23) your company has achieved a turnover of Rs.24269.43 Lacs against the last year (20212022) turnover of Rs.23460.97 Lacs. Your Company has earned a net profit of Rs. 740.25 Lacs in 2022-23 as against a profit of Rs. 489.01 Lacs during 2021-22. In view of improving financial results and positive outlook of the near future, your directors are hopeful that in current year better financial results would follow.

12. Key Financial Ratios

KEY FINANCIAL RATIO 31.03.2023 31.03.2022 DEVIATION
Interest Service Coverage Ratio 7.60 6.56 15.91%
Debt Service Coverage Ratio 1.16 1.11 3.89%
Debt Equity Ratio 0.32 0.42 -23.56%
Current Ratio 1.35 1.37 -1.58%
Long Tenn Debt to Working Capital 0.25 0.30 -15.99%
Bad Debts to accounts receivable Ratio 0.00 0.00 -
Current Liability Ratio - - -
Total Debts to Total Aseets 0.77 0.91 -15.75%
Debtors Turnover Ratio 3.30 3.14 5.15%
Operating Margin (%) 16.23% 13.96% 16.24%
Net Profit Margin (%) 3.05% 2.08% 46.55%
Return to Equity Ratio 0.09 0.07 37.63%
Return on Capital Employed 0.13 0.11 19.96%

# The Company has worked on their cost of production which got reduce during FY 2022-23 and impact of that the margin of the company has been increased. The incremental margin has improved our return on Equity and other respective Ratios.

13. Risks and concerns

Our major markets are western countries which are all going through recessionary impacts of covid related inflationary pressures and the Ukraine war is making the situation worse. Riba has increased our market penetration both within countries and also added new markets to offset these challenges and hope to manage the situation as per in the past.

14. Internal Control Systems and their adequacy

The company has a proper and adequate system of internal controls commensurate with its size to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly.

There is an Internal Audit Committee with clearly laid down powers and responsibilities that are entrusted to them to ensure that the Internal Audit Department works independently. This department maintains various manuals which contain various controls and checklists that are to be carried out before execution of any activity.

Internal checks are exercised so that the various procedures are laid at the time of delegation of authorities and other procedures are strictly followed. The delegation clearly indicates the powers along with the monetary limits, wherever necessary, that can be exercised by various levels of Managers in the Company.

Similarly, the Company has well defined manuals for all the functional areas, viz., Production, Sales, Administration, Personnel, etc. These manuals contain elaborate procedures and checklist for the related activities. Necessary controls and checks are exercised by strictly adhering to the various procedures and checklist prescribed in the Manuals. Also these are updated from time to time on ongoing basis, keeping in view the latest developments in different areas.

Proper controls and checks are exercised by the company by following the procedures prescribed in the various manuals. The company is in the process of developing software for improving our systems further.

15. Material Developments in Human Resources/ industrial relations front, including number of people employed

The company believes that employees are the real strength of organization. Employee involvement continued to receive the focus it deserves. The Company has identified Human Resources Development as a major strategic initiative since it believes that peoples contribution will be the main engine for growth. Current efforts include building skills, attracting and retaining talent and nurturing and developing leadership potential.

Industrial relations during the year remained cordial and initiative were taken to enhance productivity of employees. The company is gearing itself to take on the challenges in the business environment and march towards achieving its mission with success. At present company is employing man power of around 950 peoples including technical, non-technical, managerial and non- managerial, casual and contract labor.

16. Cautionary Statement

Statements used in the Management Discussion and Analysis should be read in conjunction with the Companys Audited standalone financials along with the auditors report as on March 31, 2023 which forms an integral part of the annual report, describing the Companys objectives, projections, estimates and expectations, may constitute forward looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.

By order of the Board of Directors

For Riba Textiles Limited

Sd/-
Place : Panipat Asha Garg
Date : 05.09.2023 Chairperson & Whole-time Director
DIN:06987609

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