MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Global Outlook
In FY23, the global economy started to recover in the aftermath of the COVID-19
pandemic, which lasted two long years. However, its growth was hindered by a series of new
challenges. The Russian-Ukraine war, escalating inflation, and tightening monetary
policies were among the factors that contributed to this setback.
Consequently, the International Monetary Fund (IMF) downgraded the global growth
forecast to 2.8% in 2023, from 3.6% in 2022 (refer Chart I: Estimates of Global Growth).
Russian-Ukraine war
The conflict in Ukraine, which began in early 2022, has had a profound effect on the
global economy, especially raw material prices. Major economies responded to the war by
imposing sanctions on oil and gas imports from Russia.
As Russia is the second-largest oil exporter and third-largest gas exporter, these
sanctions caused a surge in global energy prices. Businesses faced challenges in planning
their energy purchases due to these uncertainties, resulting in higher prices.
Consequently, this contributed to increased inflation and further slowed economic growth.
Rising inflation
In 2022-23, inflation surged to a 40-year high in the United States, and similar trends
were observed in other regions worldwide. Central banks increased interest rates to combat
inflation, but this resulted in a slowdown in economic growth.
Compounding these challenges, the Russia-Ukraine war disrupted global supply chains,
leading to scarcities in raw materials, further driving up production costs and
contributing to the phenomenon of cost-push inflation.
Tightening monetary policies
During FY23, tightening monetary policies became a global trend. The central banks of
numerous countries implemented measures to address surging inflation rates. Higher
interest rates resulted in increased borrowing costs for both businesses and individuals,
leading to reduced investment and slower economic growth.
While these measures were imperative in order to address rising inflation, they posed
risks such as potential recession, financial instability, and a slowdown in global trade.
India
Outlook
One of the Best-Performing Economies
The April 2023 edition of the World Economic Outlook, a bi-annual report published by
the International Monetary Fund (IMF), reported that Indias economy grew at a rate of
5.9% in FY23. This growth played a significant role in contributing to the overall 4.6%
economic growth in Asia, an improvement from 3.8% the previous year.
Although the growth rate was lower than the FY22 rate of 6.8%, it is important to
recognize that India remained among the fastest-growing economies globally, despite the
significant challenges faced by the global economy during this period.
The robust growth of Indias economy in FY23 can be attributed to various factors. It
was driven primarily by private consumption and public infrastructure investment, which
were supported by government policies aimed at enhancing transport infrastructure,
logistics, and the overall business ecosystem. Specifically, the following factors
contributed to the countrys economic performance:
• Implementation of key reforms such as the Goods and Services Tax (GST) and the
Insolvency and Bankruptcy Code (IBC) by the government.
• Indias emergence as a global manufacturing hub, attracting investments and
driving industrial growth.
• The expanding middle class in India, which resulted in increased demand for
goods and services.
• Widespread vaccination coverage, which is enabling people to resume spending on
contact-based services such as restaurants, hotels, shopping malls, and cinemas.
Looking ahead, the growth forecast for India is optimistic. The National Economic
Survey of 2023 highlights several positive trends, including a further rebound in private
consumption and increased capital expenditure (Capex). The Survey also points to other
factors that are contributing to the positive outlook, such as the momentum in the
construction industry, stronger balance sheets of corporations, well-capitalized public
sector banks ready to increase credit supply, and credit growth in the Micro, Small, and
Medium Enterprises (MSME) sector.
Additionally, the manufacturing sector is benefiting from the expansion of public
digital platforms and government initiatives like PM GatiShakti, the National Logistics
Policy, and Production-Linked Incentive schemes, all of which aim to boost manufacturing
output.
Looking ahead, Indias growth in FY24 is expected to be supported by solid domestic
demand and an upswing in capital investment, which bodes well for the countrys economic
prospects.
industry
Update
The global technical textiles market was estimated at $ 212 billion in 2022 and is
expected to reach $ 274 billion by 2027, growing at a CAGR of 5.2% during 2022-27. This is
backed by an increasing global demand for technical textiles across industries and an
expanding base of new applicative products being developed at a rapid rate*. The growth of
the market is being driven by a number of factors, including:
• Increasing demand from end-user industries such as automotive, construction,
medical, and industrial
• Rising awareness of the benefits of technical textiles, such as their
durability, strength, and performance
• Technological advancements in the production of technical textiles
The Asia-Pacific region is the largest market for technical textiles, followed by
Europe and North America. China is the largest producer and consumer of technical textiles
in the world. India is not far behind - the prowess of the Indian technical textiles
industry became apparent in 2020, when the country went from being a nonproducer of
COVID-grade Personal Protective Equipment (PPE), to becoming the worlds second-largest
producer and exporter of PPEs and N-95 masks in a period of six months.
The success story gets even better. As the global technical textiles industry continues
to grow, India is poised to benefit from this expansion owing to its new-found competency.
In 2023, the country became the fifth-largest producer of technical textiles in the
world and employs around 10 million people. The industry contributes around 2% to Indias
GDP. Domestic consumption and export are both expected to grow rapidly in the next few
years, making this an important time for the industry.
Deciphering Indias Technical Textiles Industry: What Factors are Driving its Future?
The Indian technical textiles industry is expanding quickly in terms of output and
value. A variety of industries benefit from its products as these products have improved
functional qualities such as greater tenacity and strength as well as better thermal and
chemical resistance.
Technical textiles are used in a wide variety of industries (see image: Technical
Textiles Applications - Major Industries), thereby making it a high-value sector.
Consequently, Indias technical textiles sector is set to benefit significantly from
the governments key projects across different sectors.
In order to optimize domestic and global growth opportunities, India must focus on
creating a world- class technical textiles ecosystem, up-skill the workforce, facilitate
the creation of advanced indigenous technologies and products, and foster strategic
international collaborations.
Rishi Techtex:
FY23 Review
The Board of Directors presents its report along with the audited financials of the
company for the year ended 31st March 2023 (refer Table I: Financial and Operational
Highlights).
Table I: Financial and Operational Highlights
| Particulars |
FY23 |
FY22 |
| Total Revenues |
Rs. 10,725.11 lakhs |
Rs. 10,108.44 lakhs |
| Total Expenses |
Rs. 10,599.91 lakhs |
Rs. 9,898.97 lakhs |
| Profit/ (loss) Before Tax |
Rs. 125.20 lakhs |
Rs. 209.47 lakhs |
| Operating Profit Margin |
5.56% |
6.29% |
| Total Tax Expense |
Rs. 13.94 lakhs |
: Rs.77.62 lakhs |
| Profit/(loss) for the period |
Rs. 111.26 lakhs |
Rs. 131.85 lakhs |
| Net Profit Margins |
1.17% |
2.08% |
| Debtors Turnover |
13.12% |
11.89% |
| Inventory Turnover |
25.17% |
25.42% |
| Interest Coverage Ratio |
1.89% |
1.89% |
| Current Ratio |
1.46% |
1.70% |
| Debt Equity Ratio |
1.06% |
0.98% |
Performance Analysis
During the period under review, Rishi Techtex delivered a stable performance in terms
of revenues in spite of raw material cost pressures - from Rs.100.86 crore in FY22, we
registered a 6% increase to Rs.106.84 crore in FY23. It is noteworthy to mention here that
despite operating in geopolitically risky markets and facing increased raw material costs,
we have maintained or even slightly increased our turnover. Our ability to overcome these
obstacles demonstrates our resilience and strategic capabilities. We decided not to pass
on the increase in raw material costs to our customers in favour of long-term
relationships and business purposes.
However, the profits before tax recorded a decrease of~-40% - from Rs.2.09 crore in
FY22 to Rs.1.25 crore in FY23. Further, the net profit also witnessed a decline of ~-15% -
from Rs.1.31 crore in FY22 to Rs.1.11 crore in FY23.
Our primary focus is to foster strong partnerships, ensuring mutual benefits and growth
opportunities.
One of the main reasons for the performance is a strategic shift in our business
approach. In the following paragraphs, we provide a brief overview of the same:
Woven Division
In FY23, we decided to temporarily set aside our focus on engaging in price battles and
negotiations in the Woven Division. Instead, we chose to prioritize increasing our market
share. A closer examination of our financials will illustrate this strategic shift. While
there have been some challenges along the way, we acknowledge that our choices were
somewhat limited. Essentially, if we wanted to pursue sales growth and customer
relationships, we would have to accept a decrease in profits for this fiscal year.
Nonetheless, we chose this strategy.
We are confident that our choices will enable us to achieve a full-fledged recovery. In
fact, we are well on track to nearly double our net profit in FY24, a positive indication
of our progress and resilience.
Knitted Division
The knitted division faced a performance setback owing to the downturn in export
markets during the last year. Unfortunately, the export markets we traditionally serve did
not bounce back to their prepandemic levels. As a result, our export performance was below
expectations in FY23. We aimed to rely more on sales within the country to strengthen our
financial position.
Consequently, we further expanded our domestic network in pan-India markets. We
strategically onboarded new customers, achieving notable margin improvements within this
division. These enhancements effectively mitigated the revenue challenges we faced in the
export division of the segment.
To further consolidate our presence, in FY23, we actively enhanced our relationships
with suppliers, striving to establish a solid foundation that would lead to improvements
in our throughput, cost efficiency, and overall business performance. Our primary focus is
to foster strong partnerships, ensuring mutual benefits and growth opportunities.
Segment-wise
Performance
Woven Bags
Performance in Numbers
During the year under review, the woven bags division registered revenues of Rs.71.49
crore, contributing to 66.91% of the companys overall income, as against Rs.66.55 crore
in FY22, when it contributed to 66% of the companys revenues (see Chart III: Revenues
from Woven Bags).
During the period under review, our manufacturing capacity averaged 25 lakhs - 27 lakhs
bags per month.
FY23 in Review
Rishi Techtex is a supplier of woven bags for one of Indias largest paint
manufacturing companies, Asian Paints. In FY23, we successfully expanded our customer base
and were successful in acquiring new domestic customers in this segment.
The reason Rishi Techtex is a supplier of choice is our superior execution of orders
and our ability to provide a wide range of products that meets the diverse needs of our
customers.
The variety of products we offer caters to the demands of large customers, making us
their preferred choice over other suppliers in the market.
Having said that, it is challenging to generate significant profits in the woven bags
segment due to minimal margins and the hyper-competitive landscape. Since woven bags are
typically lower-cost items compared to high-end products, manufacturers need to achieve
economies of scale to make the business financially viable.
Over the years, Rishi Techtex has fine-tuned its business model to address these
contingencies. These include strategic aspects such as our capacity to handle large orders
and meet customers customization demands promptly, effective inventory management, and
supply chain optimization. These factors have played critical roles in sustaining
profitability and success in the volume-based woven bags manufacturing business. In
addition, our continuous focus on enhancing our quality of offerings contributes to this
positive trend. Consequently, we have been able to capture a reasonable market share.
On the strength of these factors, we anticipate further improvement, which will further
enable us to retain our leadership position in the woven bags market in the foreseeable
future.
investment in new-age technologies
The woven market segment recently witnessed an increase in the demand for Biaxially
Oriented Polypropylene (BOPP) style printed bags. This involves printing detailed designs
on BOPP film and then laminating it on the back of the bag. This process enables high
levels of detail in the bags appearance, making it more visually appealing than the
regular Flexo printed bags.
Although, Rishi Techtex has historically outsourced BOPP printing due to the cost of
the specialized machinery, we may evaluate the possibility of investing in our own
equipment to enhance our production capabilities and potentially improve profitability in
the future.
Capturing new domestic entrants
We anticipate the entry of a few major players into the paints segment who would be our
potential customers.
We are engaging with them and believe that when they enter, it will prove advantageous
to our business.
Quality will remain a top priority as we uphold our commitment to delivering superior
products and services to our valued clientele.
increase bag production volume
In terms of volumes produced, our objective in the woven bags division is to increase
the monthly number of bags manufactured from the current average of 26 lakhs to nearly 34
lakhs. While we are making progress and are confident of surpassing 30 lakhs bags per
month, market dynamics and uncertainties may impact the final outcome.
As circumstances evolve, the exact figure remains uncertain, but we are committed to
continuously improving and striving towards our ambitious targets.
Knitted Division
Performance in Numbers
During the year under review, the knitted division registered revenues of Rs.35.34
crore, against Rs.34.30 crore in FY22.
Further, the segment contributed 33.08%, against 34% of the overall company income
during the previous fiscal (see Chart IV: Revenues from Knitted Division).
Chart IV: Revenues from Knitted Division
FY23 in Review
In FY23, we leveraged our innate strengths of innovation, automated manufacturing, cost
optimization, and strong stakeholder relationships to further strengthen our leadership
position in the knitted division market.
During the course of FY23, we also focused on streamlining our product processes and
making the business more profitable. For instance, currently, the process of manufacturing
these shade nets involves a manual approach, resulting in occasional errors due to custom
sizing.
By streamlining the production process with due mechanical intervention, we can offer a
competitive rate for the product, and even if there are any rejections, we can factor them
into the costing.
Another factor that impacted our performance during FY23 was the inability of export
markets to bounce back to pre-pandemic levels. Despite efforts to boost exports, they did
not bounce back as anticipated. Given global geopolitical conditions, we do not expect
exports to improve any time soon. Hence, we changed our strategy slightly and focused more
on domestic markets.
In FY23, we successfully expanded our sales network to numerous traders across various
states, strengthening our pan-India presence and further augmenting our wide-reaching
distribution network. Our local customers are performing well, and we have seen an
improvement in our profit margins.
This is because we have managed to retain some of the profits instead of constantly
passing them on to our customers.
Forward Strategy
Revitalizing export markets
We are actively working on revitalizing our export efforts. However, it is worth noting
that quality standard requirements have become more stringent, which has presented a
challenge. Nevertheless, we are committed to addressing this issue and anticipate
resolving it by the end of FY24 by putting in place better processes and optimizing our
operations. Through these initiatives, our goal is to gain access to premium export
markets.
Process automation
We are focused on significantly improving our execution process, both in terms of
formulation and implementation. Our goal is to replace manual methods with automated,
consistent procedures. This shift will allow us to closely monitor the entire process and
ensure product quality. As a result, we can confidently offer our products without
concerns about potential rejections or negative repercussions.
Reinstating leadership position in domestic market
Our scale, product integrity, competitive pricing, and turnaround speed have been
instrumental in reinforcing our leadership position in the Indian market. Going forward,
we will maintain our competitive edge by leveraging these core strengths.
Human Resources
Being an innovation- and science-led enterprise, Rishi Techtex acknowledges the
paramount importance of scientific talent and human ingenuity in driving its success. The
collective performance of our team members directly influences our capacity to deliver,
being our primary differentiating factor in the fiercely competitive industry landscape.
In FY23, Rishi Techtex has made a strategic decision to focus on a multi-generational
recruitment strategy to gain a competitive edge and foster a culture of innovation and
stability within the organization. Embracing a diverse blend of experienced personnel and
young talent will result in several advantages for the organization:
Knowledge Transfer
By encouraging mentorship and collaboration, the multi-generational manpower strategy
at Rishi Techtex ensures that valuable industry insights and expertise are passed on,
preventing a knowledge gap and enhancing overall productivity within the organization.
Creativity and Adaptability
In FY23, we witnessed young recruits bringing in fresh perspectives and cutting-edge
technological skills. This was complemented by the deep-rooted experience of our seasoned
employees and their ability to navigate market fluctuations effectively.
Strengthened employee engagement and retention
As part of our multi-generational recruitment strategy, seasoned employees felt valued
and respected for their contributions, while younger workers found inspiration and career
growth opportunities in a supportive environment.
Future Outlook
According to the India 2047-Vision and Strategic Roadmap for Technical Textiles in
India report by KPMG, the Knitted and Woven divisions accounted for ~78% of the global
technical textiles industry output in 2022. The trend is expected to continue in the
foreseeable future (refer Chart V: Value of Global Technical Textiles Industry by Process)
According to the same report, "Indigenously manufactured technical textiles are
anticipated to serve a sizeable market for various end-use industries with focus on
technical properties, innovation, rising demand from a number of industries encompassing
almost all areas of manufacturing and infrastructure development. The industry has huge
potential for growth, and is expected to grow at a fast pace in the coming years, driven
by increasing demand for advanced materials and the growing population."
It is worthwhile to note that Rishi Techtex operates in four segments which
cumulatively earned 53% of the entire technical textiles industrys revenues in 2021-22,
amounting to Rs.72,698 crore (See chart VI: Technical Textiles Production in India).
| Segment |
Products |
Opportunities |
| Agrotech |
Crop covers, mulch mats, bird netting, shade nets, windbreaker |
Will continue to grow as the worlds population increases and demand for food grows |
| Packtech |
Woven sacks, wrapping fabric, flexible intermediate bulk containers (FIBCs) |
Will also see growth as the popularity of e-commerce industries increases |
| Protech |
Fire-resistant clothing, high-visibility clothing, chemical protective clothing,
industrial gloves |
Will be in high demand as businesses and governments look to protect themselves from
cyber-attacks and other threats |
| Buildtech |
Geotextiles, air filtration fabrics, building insulation, architectural fabrics |
Will continue to grow as global infrastructure needs expand |
Going forward, these sectors are poised for super growth and rapid evolution - both
domestically and globally, in the years to come.
Opportunities & Threats
Standards and Quality Control Initiatives
The Ministry of Textiles in India has embarked on a collaborative effort with the
Bureau of Indian Standards (BIS) to establish and uphold standards for advanced
technical-textile products. With a focus on specialized and technologically advanced
items, this partnership has already resulted in the development of more than 500 Indian
standards by BIS.
An additional 40 standards are currently being developed, aimed at elevating the
quality of technical textiles and bolstering domestic production.
The primary objectives behind these Quality Control Orders (QCOs) are to safeguard
human, animal, and plant health; ensure environmental integrity; prevent misleading trade
practices; and bolster national security. This strategic approach seeks to continuously
refine existing standards, align Indian technical textile norms with global benchmarks,
and enforce mandatory adherence across diverse applications.
Promoting Mandatory Usage
In a bid to catalyse the domestic market, institutional procurement and obligatory
utilization of technical textiles within various ministries and departments have been
identified as crucial catalysts. By scrutinizing current standards, codes, guidelines, and
other related frameworks, these entities will identify areas where the incorporation of
technical textiles can be mandated. The integration of such mandates will be seamlessly
woven into pertinent standards, specifications, codes, guidelines, and project-specific
requirements.
Furthermore, a comprehensive exploration is underway to identify key domains within
flagship schemes and initiatives of diverse ministries, wherein technical textiles can be
optimally employed. This proactive approach aims to usher in a transformative shift and
maximize the utilization of technical-textile products across a spectrum of government
projects.
At Rishi Techtex, we intend to leverage these opportunities by:
• Upholding our commitment to unwavering quality:
The BIS approval for our agritech segment nets positions us favourably for domestic
government tenders and also enhances our prowess in international exports.
• Harnessing customs duty benefits:
Strategic capital expenditure investments aimed at modernizing our facilities with
cutting-edge technology enables us to leverage customs duty concessions effectively.
• Pioneering high-margin innovations:
Through innovation, we create high-margin offerings that align seamlessly with the
evolving mandates of diverse government-regulated, end-user industries.
These proactive measures ensure our engagement in emerging opportunities and
sustainable growth. By adhering to these principles, we fortify our standing in the
technical textiles sector, fostering competitiveness, expanding market reach, and
capitalizing on lucrative avenues for sustained success.
Risks and Concerns
The organization faces risks and concerns related to external events, such as
conflicts, terrorism, natural disasters, pandemics, and man-made disasters. These events
could hinder the organizations growth.
Additionally, policy changes at the national and international levels may lead to
currency rate fluctuations, impacting the companys performance. Industry-specific risks,
such as the availability of raw materials, fluctuations in oil prices, and changes in
interest rates, also pose challenges.
Internal Control Systems and their Adequacy
The company has put in place appropriate internal control systems and procedures that
cover all financial and operational functions, considering the size and nature of its
operations. An Internal Auditor, appointed by the company, conducts audits to evaluate the
effectiveness and sufficiency of the internal control system. This includes ensuring
compliance with operating systems, accounting procedures, and policies across all company
locations. Whenever necessary, the management takes corrective actions to strengthen the
controls based on the Internal Auditors report.
Cautionary Statement
Statements in the Management Discussion and Analysis regarding the companys
objectives, projections, estimates, and expectations may be considered
"forward-looking statements" under applicable securities laws and regulations.
It is important to note that actual results could differ significantly from what is
expressed or implied in these statements. Factors such as economic conditions affecting
demand, supply, and pricing in both domestic and overseas markets, changes in government
regulations, tax laws, and other relevant factors can impact the companys operations.
In a bid to catalyse the domestic market, institutional procurement and obligatory
utilization of technical textiles within various ministries and departments have been
identified as crucial catalysts.
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