S P Apparels Ltd Management Discussions.


The widespread impact of the Covid-19 pandemic across regions has materially altered the demand-supply scenario for the global apparel trade in CY2020. Covid 19 led to a significant decline in demand from the key consuming regions of the US and the EU. It also impacted the ability of supplying regions to sustain operations, given the labour - intensive nature of operations. The immediate impact aside, recovery was expected to be gradual. On the demand side, consumer reluctance to visit crowded places, despite lockdowns being lifted, is keeping footfalls subdued in offline retail. Also, overall pressure on corporate performance, which has triggered job losses and pay cuts across sectors, as well as the overall stress in the economy are affecting discretionary consumer spending in the near term, resulting in deferment of purchases and affecting demand for apparels.

Global Apparel Trade: Global apparel trade witnessed a marginal ~1% YoY contraction in CY2019E, following a ~5%YoY growth reported earlier in CY2018. The decline was driven by subdued demand trends in the EU, even as apparel imports by the US stood ~1% higher on a YoY basis. However, apparel imports by the US, which accounts for a one-fifth share in the global apparel trade, witnessed a sharp ~ 10.7% YoY declined in January 2020, while imports by the EU declined by ~4% YoY. Apparel imports by the US de-grew by ~11% YoY in February 2020 and ~15% YoY in March 2020, followed by a step de-growth of 44%.6% and 60.1% YoY in April and May 2020, respectively (February-May 2020 data for EU is not yet published). Further, with lockdown in India from March 25, 2020 onwards, US imports from India also decline steeply by ~46% YoY and ~ 84 YoY in US$ terms and by ~42% and ~83% in volume terms in April and May 2020 respectively.

Overall in 5M CY2020, US apparels imports declined by ~27-28% on a YoY basis in US$ terms, as well as in volume terms. While US apparel imports from India also declined by ~26-27% YoYin 5M CY2020 in volume as well as value (USD) terms, US imports from China declined at a higher rate of ~40% YoY in volume terms and by ~49% YoY in US$ terms during the same period amid trade tensions. It is pertinent to note that during the recent months, the average sales realizations for apparel imports by the US have also shrunk. The realizations declined by ~6.7% and ~3.4% in April and May 2020 respectively.

Indias apparels export: A gradual pick up in demand has been observed during May- June 2020, owing to easing of lockdown restrictions in India as well as globally and following a threefold increase in May 2020 from the low of USD 0.13 billion in April 2020, exports jumped threefold in May 2020. In June 2020, Indias apparel exports increased for the second consecutive month by ~56% to USD 0.8 billion. Nevertheless, the exports remained ~35% lower YoY in June 2020 in USD terms. In April and May 2020, Indias apparel exports had fallen by ~91% and 66% YoY respectively. Overall, in the first three months of the current fiscal, Indias apparel exports dropped by ~65% on a YoY basis. To contain the spread of the pandemic, India implemented a nation wide lockdown wef March 25, 2020. Most textile companies remained shut during April 2020, barring a few which resumed operations after taking requisite approvals from the authorities. As manufacturing operations remained curtailed, shipments/ dispatch of ready materials from India were affected, thereby resulting in a steep decline in exports during the month. However, with resumption of operations towards mid-May, and gradual ramp-up thereafter owing to lifting of restrictions across regions, exports witnessed a sequential improvement in the last two months. Demand, however, remained subdued. Seven of Indias top apparel export centres which account for nearly half of Indias total apparel exports, are among the regions worst affected by Covid-19 pandemic. As a result, the domestic apparel sector is witnessing significant turbulence and the ongoing Spring- Summer Season 2020 (which typically ends in August) has been adversely impacted. Despite a gradual opening up of markets across the globe, apparel exporters have witnessed deferment of orders/ order cancellations owing to overall slowdown in consumer discretionary spending in the key buying markets of the US and the EU.

In FY2020, Indias apparel export were down by ~4% YoY in USD terms, following a 3.4% YoY decline in FY2019. In rupee terms, in FY 2020 the decline in Indias apparel exports was relatively lower at ~2.5% YoY FY 2020, vis-a-vis a 4.6% YoY growth in FY 2019, owing to sharp rupee depreciation in the past two years. While exports to the US continued to grow in FY 2020, the same was more than offset by a decline in exports to the EU. In the current fiscal, while the overall apparel imports by the US declined by ~53% on a YoY basis

in April and May 2020, US imports from India declined by a steeper ~64% YoY, as manufacturing operations remained curtailed in India due to the nationwide lockdown.


SPAL is one of the leading manufacturers and exporters of knitted garments for infants and children. It has long standing relationships with reputed international brands and is a preferred vendor. Currently operates 23 factories in close proximity to key sources of raw materials and skilled labor. SPALs facilities are equipped with advanced manufacturing machineries with latest technology and automation. The Company has demonstrated ability to set up integrated facilities to scale-up operations.


1. Increasing Cost of Raw Materials:

Cotton prices in India remain high. While the international cotton prices came down by more than 25%, Indian cotton prices came down only by 8%, mainly on account of higher support price fixed by government.

2. Competition from neighbouring Countries:

Indias competitiveness in the global apparel trade is challenged by lack of scale in garment manufacturing, Seasonality, limited product categories, inadequate capability in the synthetic value chain, limited number of preferential trade agreements, etc.

China has retained its top ranking and is far ahead of its competitors with major share of international apparel trade. China, Bangladesh, Vietnam, Sri Lanka, Cambodia, Indonesia and India are the key exporters of Garments. The opportunities for Indian exporters for sourcing orders remains subdued in the absence of adequate trade agreements providing preferential status, a privilege enjoyed by exporters from other competing countries.

3. Withdrawal of Government Grants:

Government Grants and subsidies for exports and imports are always subject to risk. Withdrawal of subsidies by the Government will have a negative impact on the bottom line of the Company.


Our company had recorded total revenue of Rs. 8326.73 Mns, EBITDA Rs. 1068.55 Mns and PAT Rs. 469.19 Mns for the FY 2019 - 20.


The Company has a proper and adequate internal control systems to ensure that all assets are safeguarded and protected against unauthorised use or disposition and the transactions are authorised, recorded and reported correctly.

Key Financial Ratios

(Explanations for significant change i.e. change of 25% or more as compared to the immediately previous financial year)

Key Financial Ratios 2019-20 2018-19 % of change Explanation for the change
Debtors Turnover 0.14 0.16 -14.92% NOT APPLICABLE
Inventory Turnover 0.31 0.30 4.52% NOT APPLICABLE
Current Ratio 1.57 1.46 7.57% NOT APPLICABLE
Interest Coverage Ratio 0.35 18.65 98.10% Change due to foreign Currency restatement
Debt Equity Ratio 0.41 0.44 -6.06% NOT APPLICABLE
Operating Profit Margin (%) 8.35 16.54 -49.50% Reduction in margin due to MEIS withdrawal by the Government & Currency High Volatility
Net Profit Margin (%) 5.81 8.84 34.32% Reduction in margin due to MEIS withdrawal by the Government & Currency High Volatility