DISCLAIMER
Statements in the Directors Report & Management Discussion and
Analysis describing the Companys 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 Companys
operations include raw material availability and its prices, cyclical demand and pricing
in the Companys 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.
MARKET CONTEXT - GLOBAL AND INDIAN ECONOMY AND OUTLOOK
GLOBAL ECONOMY OUTLOOK
Global growth is projected to fall from an estimated 3.5 percent in
2022 to 3.0 percent in both 2023 and 2024. The rise in central bank policy rates to fight
inflation continues to weigh on economic activity. Global headline inflation is expected
to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024.
Underlying (core) inflation is projected to decline more gradually, and forecasts for
inflation in 2024 have been revised upward.
The recent resolution of the US debt ceiling standoff and, earlier this
year, strong action by authorities to contain turbulence in US and Swiss banking reduced
the immediate risks of financial sector turmoil. This moderated adverse risks to the
outlook. However, the balance of risks to global growth remains tilted to the downside.
Inflation could remain high and even rise if further shocks occur, including those from an
intensification of the war in Ukraine and extreme weather-related events, triggering more
restrictive monetary policy. Financial sector turbulence could resume as markets adjust to
further policy tightening by central banks. Chinas recovery cou ld slow, in part as a
result of unresolved real estate problems, with negative cross-border spillovers.
Sovereign debt distress could spread to a wider group of economies. On the upside,
inflation could fall faster than expected; reducing the need for tight monetary policy,
and domestic demand could again prove more resilient.
In most economies, the priority remains achieving sustained
disinflation while ensuring financial stability. Therefore, central banks should remain
focused on restoring price stability and strengthen financial supervision and risk
monitoring. Should market strains materialize, countries should provide liquidity promptly
while mitigating the possibility of moral hazard. They should also build fiscal buffers,
with the composition of fiscal adjustment ensuring targeted support for the most
vulnerable. Improvements to the supply side of the economy would facilitate fiscal
consolidation and a smoother decline of inflation toward target levels.
INDIAN ECONOMY OVERVIEW
India is one of the fastest growing economies of the world and is
poised to continue on this path, with aspirations to reach high middle income status by
2047, the centenary of Indian independence. It is also committed to ensuring that its
continued growth path is equipped to deal with the challenges of climate change, and in
line with its goal of achieving net-zero emissions by 2070.
The growth of the past two decades has also led to India making
remarkable progress in reducing extreme poverty. Between 2011 and 2019, the country is
estimated to have halved the share of the population living in extreme poverty - below
$2.15 per person per day (2017 PPP) (World Bank Poverty and Inequality Portal and Macro
Poverty Outlook, spring 2023). In recent years, however, the pace of poverty reduction has
slowed especially during the COVID-19 pandemic, but has since moderated in 2021-22.
The World Bank is partnering with the government in this effort by
helping strengthen policies, institutions, and investments to create a better future for
the country and its people through green, resilient, and inclusive development.
With the world facing geopolitical issues, and trade and supply chain
challenges, Indias success is often looked at closely. The global composite purchasing
managers index (PMI) marked its first expansion during H2FY23, in February 2023. This was
led by recovery in manufacturing and stable contribution from the service sector. India
has consolidated its position in both manufacturing and services, becoming one of the top
performers of PMI expansion. The success can also be attributed to the fact that it is
home to the largest population in the world, now accounting for >15% of the global
population. Also, the demographic division is favorably skewed towards it being the
largest contributor to the global workforce for several decades now. During 2023, China
could benefit from the pent-up demand with its reopening. India, however, is expected to
be the fastest-growing country within the G20.
India has assumed G20 Presidency (a group of 20 countries which
represents 75% of global trade and 85% of global GDP) for 2023. It operates on the
philosophy of ‘Vasudhaiva Kutumbakam: One Earth-One Family-One Future that envisions
the whole world as one family living in harmony with each other. The macroeconomic outlook
for India has improved with interest rates almost peaking. Also, the comfortable inflation
trajectory has resulted RBI to pause its rate hike cycle. The structural tailwinds of
positioning India as a global manufacturing outsourcing hub through PLI schemes and FTAs
would catalyse the capacity expansion cycle across industries. This capacity expansion
would be largely front loaded by public sector which is also factored in the FY23 budget.
It highlights the central governments projected spend of a record 7.5 trillion in
capacity creation during the year. The allocation would be largely towards mega public
programmes like NIP and Gati Shakti which would revitalise Indias Infrastructure cycle.
Over the last decade, India has made several reforms which have created a sustainable
framework for economic growth and have laid the foundation for a sustained high- growth
phase in the economy. Improvements in socio-economic parameters and moderation in
population growth makes situations favourable for secular growth in per capita income
TEXTILES
Global Textile Industry
The global textile market size was valued at USD 1,695.13 billion in
2022 and is anticipated to grow at a compound annual growth rate (CAGR) of 7.6% in terms
of revenue from 2023 to 2030. The ever-increasing apparel demand from the fashion
industry, coupled with the meteoric growth of e-commerce platforms, is expected to drive
market growth over the forecast period. The textile industry works on three major
principles, namely the design, production, and distribution of different flexible
materials such as yarn and clothing. Many processes, such as knitting, crocheting,
weaving, and others, are primarily used to manufacture a wide range of finished and
semi-finished goods in bedding, clothing, apparel, medical, and other accessories.
The past year saw the addition of seven new Pradhan Mantri Mega
Integrated Textile Region and Apparel (PM MITRA) Parks and an added investment of a
whopping Rs. 19,000 crores of investments in the sector under the Production-Linked
Incentive (PLI) Scheme for textiles. And now, the proposal to accelerate public private
partnerships (PPPs) in the latest Union Budget is likely to enhance productivity of
extra-long staple cotton. The Make In India campaign, while attracting investment and
new manufacturing opportunities, also ensures constructive government provisions for the
development of textile trade and manufacturing.
The global Textile fibre consumption volumes for 2022 stood at 102.9
MT. It is estimated to reach 120 MT by 2027, with a 3.1% CAGR. Globally, Polyester
commands ~56% of this consumption, followed by cotton contributing ~25%. Unlike both these
fibres, which are commodity-led (cotton and crude) and inherently volatile, Viscose has
succeeded in developing a niche within the fibre consumption basket and has demonstrated a
stable demand, supply and price trajectory. Also known as ‘Cellulosic Fibre, Viscose
currently commands a ~7% share in global fibre consumption. It is expected to reach >8%
over the next five years, positioning itself as the fastest- growing fibre.
The United States and the European Union were among the major textile
export destinations. However, due to the rise in inflation because of the Ukraine War,
consumers in the United States and Europe, and other markets have reduced apparel
purchases. Due to the decrease in demand, the export of textiles and apparel decreased by
13.9 percent in the financial year 2023.
The cotton segment led the market and accounted for 38.9% of the
overall revenue share 2022. Cotton is the worlds most important natural fiber, attributed
to its superior properties, such as high stren gth, absorption, and color retention.
China, India, and the U.S. are the primary producers of cotton and cotton-based products
worldwide.
The expansion of the textile industry, on account of the rising demand
for garments and apparel in these countries, is likely to augment the demand for cotton,
which is expected to drive segment growth over the forecast period. According to a report
published by the Textile Exchange, more than 95% of all industry-grade cotton is grown in
Brazil, India, China, Pakistan, the U.S., Australia, Cameroon, and Cote dIvoire.
The chemical-based textile segment accounted for an estimated market
volume of 68,609.1 million tons in 2022, playing an essential role in the textile
manufacturing industry. Though chemicals are hazardous to human health and the
environment, they are extensively used as mercerizing agents, neutralizers, leveling
agents, binders, thickeners, and stain-removers in the textile industry.
Wool-based textiles accounted for 13.3% of the market share in revenue
in 2022. Wool, primarily composed of hydrogen, carbon, sulfur, and nitrogen, is
extensively used to manufacture insulation products such as winter wear, blankets,
carpeting, upholstery, etc. In addition, the same raw material-based products are used to
absorb odor and noise in heavy machinery, thereby contributing to the growth of the
technical application segment.
Some other raw materials used in the production of textiles are silk,
minerals such as glass fibers and asbestos, and other synthetic materials. Silk finds
extensive use in the manufacturing of clothing items, surgical sutures, parachutes, silk
comforters, and other products having high strength and elasticity, which is expected to
drive the segment growth over the forecast period.
Indian Textile Industry
The Indian textile industry dates to ancient times about five thousand
years ago. The industry has changed tremendously, having transitioned from the handlooms
of pre-colonial India to the huge modern machinery that exists today. The textile industry
is valued at 223 billion U.S. dollars and contributes about two percent of the countrys
GDP. Besides, the export of Indian textiles contributed to setting up global trade
systems. India is the second largest producer of textiles in the world after China.
Additionally, the industry offers enormous employment opportunities for
skilled and unskilled workers. It is one of the main sources of livelihood for women in
rural India. The production of fibers, spinning yarn, weaving fabric, dyeing, and printing
textiles, as well as cloth production, are all part of Indias vast textile sector. The
industry generates an array of products for both domestic and international markets. The
leading textile-producing states are Gujarat, Maharashtra, and Tamil Nadu.
India exports textiles and apparel to more than 100 nations worldwide.
It is the third-largest exporter of textiles globally. Ready-made garments were the most
exported product, followed by cotton textiles and man- made textiles in the financial year
2022. During the same year, textile exports peaked in value worth over 44 billion U.S.
dollars.
The country has a long history of producing high-quality textiles in
both contemporary and traditional designs. The uniqueness of this industry lies in its
rich cultural heritage evident in the many types of textiles produced across different
regions of India. It is also heavily reliant on the agriculture industry for raw materials
such as cotton,silketc.
Traditional textiles encompass both handloom and machine-made textiles
made of cotton, jute, silk, and wool. India produces the most cotton accounting for 23
percent of global production, with about 39 percent of land area under cultivation.
MANPOWER SUPPLY/STAFFING SEGMENT/FLEXI STAFFING
One of the segments of SBC Exports is Manpower supply/Staffing segment/
flexi staffing to different agency consisting of government and non-government
Undertakings.
The staffing industry includes organizations whose purpose is to locate
and/or supply workers for other organizations.
The term "flexi staffing" describes a situation in which a
corporation hires workers on a temporary basis, either for a long-specified period of time
or until the task is completed. These employees could be via employment agencies or
referrals on a contract basis. These type of services helps to hire people when the
company is out of staff. If a company doesnt have enough employees, they can look for a
new permanent employee, but they can also use flexible staffing services in which they can
hire independent contractors, part-time employees, or temporary worker.
GLOBAL INDUSTRY
The predicted revenue for the global staffing industry in 2022 was
estimated at over 650 billion U.S dollars, following two years of continuous growth. The
industry took a big hit during the peak of the coronavirus pandemic in 2020, however
revenue has bounced back to surpass pre-pandemic figures. The largest revenue segment of
this industry is agency work, comprising approximately 75 percent of the market in 2020.
Recruitment services constitute the remainder. The staffing industry has shown steady
growth over the years. While the pace of growth may vary from region to region and
industry to industry, it has generally remained positive.
INDIAN INDUSTRY
Staffing industry grew at 20% YoY. The markets are stabilizing with new
employment growth as witnessed with a continued robust demand across sectors except IT.
Net headcount growth for staffing Industry (represented by ISF members) in the last 4
quarters, has grown at 2.32 lakhs indicating significant new employment demand.
Staffing industry added new employment at a sharp 21.9% YoY (2021 22),
compared to a 3.6% new employment generated in the previous year.
Flexi Staffing Industry overall continued a double digit new employment
growth trend at 14% YoY 2022-23 and also Flexi Staffing Industry came back with a Quarter
on Quarter (Net employment) growth at 0.4% in Q422 -23. General Flexi Staffing industry
witnessed new employment growth at 15.3% YoY, whereas maintained growth at 0.8% in Q4
2022-23 (QoQ).
OUTLOOK
SBC Exports Limited predominately consists of textile business,
manufacturing of readymade garments, providing IT and Manpower Services. The Indian
textile industry has the capacity to produce a wide variety of products suitable to
different market segments, both within India and across the world. We are also focusing on
new age, high performance fabrics which allow us an entry into a fast growing newer
product segment. We are seeing new growth opportunities in advanced material division and
the segment continues to grow at a rapid pace. In our B2C business of brands and retail,
we have been growing through a portfolio of strong international brands and specialty
retail stores that have presence across multiple channels, price points and consumer
segments.
We are rapidly expanding our distribution footprint further across our
brands, which is likely to be a major growth driver in the future. Our speciality retail
business is doing well and we are investing to grow this business at a significant pace in
the current year, we expect our EBITDA margins also to improve and your directors are
hopeful that in current year better financial results would follow.
During FY 2022-23, The Company continued to introduce new innovative
products. On woven products side, the focus of innovation was around experimentation with
new sustainable fibers, creative blends and significant reduction in use of dyes,
chemicals and in turn, water. The B2C business was re-structured in this year and all
channels were brought under one common leadership to drive a concerted and integrated
strategy. 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.
Post the second wave of COVID infections and the lockdown in Q1 FY22,
the retail network witnessed a strong comeback in the remaining quarters especially in
third and fourth quarters.
OPERATIONAL PERFORMANCE OF SBC EXPORTS LTD- CONSOLIDATED
a) Revenue from Operations: The Group reported Revenue from Operations
of ? 19572.60 Lakhs during the year 2022-23 as against ? 16885.11 Lakhs in the previous
year, resulting in an increase of approx 15.91%
b) Total Comprehensive income: The Group reported Total Comprehensive
income for the period of ? 863.84 Lakhs as against ? 392.84 Lakhs in the previous year
resulting in a growth of 119.89%.
*Above Chart depicts consolidated data.
OPERATIONAL AND FINANCIAL PERFORMANCE - STANDALONE
a) Revenue from Operations: The Company has reported Revenue from
Operations of ? 18805.45 Lakhs during the year 2022-23 as against ? 16815.73 Lakhs in the
previous year, resulting an increase of 11.85%.
b) Total Comprehensive income: The Company reported Total Comprehensive
income of ? 854.56 Lakhs during 2022-23 as against ? 390.03 Lakhs in the previous year
resulting in a growth of approx 119.10%.
*Above Chart depicts Standalone data.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE
The company has mainly 2(Two) segments i.e. IT Support Services and
Garments Sales.
The company has reported Segment Revenue (Income) in IT Support
services of ? 8769.29 Lakhs during the year 2022-23 as against ? 10274.91 Lakhs and during
the year 2022-23, company reported Segment Revenue (Income) in Garments Sales of ?
10036.16 Lakhs as against ? 6268.17 Lakhs, resulting in increase in Total Segment Revenue
from ? 16815.74 Lakhs to ? 18805.45 Lakhs.
Furthermore Profit before tax (segment wise) stood as ? 917.80 Lakhs
during the year 2022-2023 as in comparison to ? 560.15 Lakhs in year 2021-22.
INTERNAL CONTROL SYSTEM
A properly designed and consistently enforced system of operational and
financial control helps the Companys Board of Directors and management to safeguard the
resources, produce reliable financial reports, and comply with laws and regulations.
Effective internal control also reduces the possibility of significant errors and
irregularities and assists in their timely detection when they do occur. The internal
Auditors regularly monitor and evaluate the efficiency and adequacy of internal control
systems in the Company, its compliance with operating systems and accounting procedures,
and ensure that the internal control systems are properly followed by all concerned
departments of the Company. Significant audit observations and corrective actions are
taken thereon and are presented to the Audit Committee of the Board.
The Company has adequate system of Internal Controls to help Management
review the effectiveness of the Financial and Operating Controls and assurance about
adherence to Companys laid down Systems and Procedures. The evaluation included
documentation review, inquiry, inspection, testing and other procedures. The controls are
reviewed at regular intervals to ensure that transactions are properly authorized,
correctly reported and assets are safeguarded. The Audit Committee periodically reviews
the findings and recommendations of the Auditors and takes corrective action as deemed
necessary.
RISKS & CONCERNS
Risk Management is an on-going process within the organisation. Your
Company has a robust risk management framework to identify, monitor and minimise risks.
The Board has a policy to oversee the risk mitigation performed by the executive
management which includes identification, assessment, monitoring and reporting of risks.
• Supply Chain Disruptions: The textile industry often relies on
complex global supply chains for raw materials, manufacturing, and distribution.
Disruptions such as natural disasters, geopolitical tensions, or global pandemics can
significantly impact the supply chain, leading to delays, shortages, and increased costs.
• Fluctuating Raw Material Prices: The cost of raw materials like
cotton, wool, synthetic fibers, and dyes can be volatile due to factors like market
demand, weather conditions, and geopolitical events. Sudden price spikes can lead to
higher production costs, affecting profitability.
• Competition and Market Volatility: The textile industry is
highly competitive, with various companies vying for market share. Rapid changes in
consumer preferences, fashion trends, and technological advancements can lead to market
volatility and affect demand.
• Global Economic Factors: Economic downturns can impact consumer
spending on textiles, as it is often considered a discretionary expense. Global economic
fluctuations can lead to reduced demand and affect the industrys financial stability.
• Seasonal nature of business: Woollen knitted garments contribute
around one-third of total sales. This leads to the highly seasonal nature of the business,
with most of the yearly turnover accruing during the third quarter of the financial year.
However, the Company has been focusing on cotton and cotton- blended apparel and
diversifying the product range to include home furnishings and kids apparel. With this,
the seasonal nature of business is expected to reduce over the coming years.
• E-commerce and Changing Retail Landscape: The rise of e-commerce
has shifted consumer behavior, leading to a decline in traditional brick-and-mortar
retail. Textile companies need to adapt to these changes and invest in online platforms
and digital marketing strategies.
SBC EXPORTS LIMITED ADVANTAGES
• Quality Products: we focus on producing high-quality textiles,
it giveus a competitive edge in the global market. Quality products often lead to customer
satisfaction, repeat business, and positive brand reputation.
• Diverse Product Range: Offering a diverse range of textile
products, such as fabrics, garments, home textiles, or technical textiles, has attract a
broader customer base and help the company adapt to changing market demands.
• Global Market Reach: Establishment of a strong network of
distributors, agents, or online platforms has helped "SBC Exports Limited"
access international markets, expanding its customer base beyond its domestic region.
• Technology Integration: Incorporating technology for efficient
production processes, inventory management, and customer interaction has enhanced
operational efficiency and customer experience.
• Effective Marketing and Branding: Implementing effective
marketing strategies and building a strong brand identity has help "SBC Exports
Limited" differentiate itself and attract loyal customers.
• Sustainable Practices: Embracing environmentally friendly
practices, such as sustainable sourcing, eco- friendly production processes, and
responsible waste management, has appeal to conscious consumers and meet increasing demand
for sustainable products.
• Technology Up gradation: In order to stay up-to-date with
technological advancements and modernize its operations, the company has introduced an
advanced automatic whole-garment manufacturing facility.
OPPORTUNITIES
• Global Demand for Sustainable Textiles: As sustainability
becomes a crucial focus in the textile industry, we can capitalize on our expertise in
natural fibers like cotton and traditional weaving techniques to produce eco-friendly and
ethically sourced textiles.
• E-commerce Growth: The rise of e-commerce offers Indian textile
companies a platform to showcase their products globally. Establishing an online presence
and utilizing digital marketing can open up new markets and customer segments.
• Fashion and Apparel Export: Indias rich cultural heritage and
craftsmanship can be leveraged to create unique and artistic fashion and apparel items
that appeal to international markets, including high-end designer brands.
• Changing consumer preferences: With ever changing consumer needs
and demands, today consumers are looking for a complete package with good quality product
and design. Additionally, with rising income and urbanization, increases consumers
purchasing power where lies the huge growth potential for comprehensive range that SBC
Exports offers to its diversified audience, spanning different age groups and segments.
• Government Initiatives: The Indian government has launched
various schemes and incentives to promote the textile industry, such as the "Make in
India" campaign and support for skill development. Companies can take advantage of
these initiatives to enhance their capabilities.
• Innovation in Design and Materials: By investing in innovative
design and materials, Indian textile companies can create products that stand out in the
global market. Experimenting with new fabrics, prints, and patterns can lead to unique
offerings.
HUMAN RESOURCE & INDUSTRIAL RELATIONS
The Company has an excellent track record of cordial and harmonious
industrial relations, and over the years not a single man-day was lost on account of
labour unrest. In view of its aggressive growth plans, the Company enhanced its focus on
improving human resource productivity and efficiency. The Company is of the firm belief
that human resource is the driving force that propels a Company towards progress and
success. The Company is committed to the development of its people. The total permanent
employee strength of the Company was 450 As of March 31,2023. The Industrial relations
were cordial and satisfactory
KEY FINANCIAL RATIOS
| Ratio |
FY 2022-23 |
FY 2021-22 |
% of Change |
Reasons for change in the ratio by more than
25% |
| Current Ratio |
1.35 |
1.29 |
5.35 |
NA |
| Debt-Equity Ratio |
0.77 |
0.35 |
116.93 |
Due to huge increase in debts as comparison
to Previous year |
| Debt Service Coverage Ratio |
6.07 |
5.61 |
8.10 |
NA |
| Return On Equity ratio |
0.19 |
0.13 |
49.75 |
Due to huge increase in other Income in
comparison to Previous year |
| Inventory Turnover Ratio |
6.69 |
6.59 |
1.47 |
NA |
| Trade Receivables Turnover Ratio |
3.56 |
4.57 |
-22.12 |
NA |
| Trade Payables Turnover ratio |
5.29 |
4.45 |
18.94 |
NA |
| Net Capital turnover ratio |
7.18 |
8.89 |
-19.22 |
NA |
| Net profit ratio |
0.05 |
0.03 |
46.51 |
Due to huge increase in Income in comparison
to Previous year |
| Return on Capital Employed |
0.27 |
0.23 |
20.97 |
NA |
| Return on Investment |
0.03 |
0.01 |
167.45 |
Due to huge increase in return on Investment
as comparison to Previous year |
CAUTIONARY STATEMENT
This document contains statements about expected future events,
financial and operating results of SBC Exports Limited, which are forward-looking. By
their nature, forward-looking statements require the Company to make assumptions and are
subject to inherent risks and uncertainties. There is a significant risk that the
assumptions, predictions, and other forward-looking statements will not prove to be
accurate. Readers are cautioned not to place undue reliance on forward-looking statements
as several factors could cause assumptions, actual future results and events to differ
materially from those expressed in the forward-looking statements. Accordingly, this
document is subject to the disclaimer and qualified in its entirety by the assumptions,
qualifications and risk factors referred to in the managements discussion and analysis of
SBC Exports Limited for the financial year ended March 31,2023.
| For SBC EXPORTS LIMITED |
|
| GOVINDJI GUPTA |
|
| Director |
|
| DIN:01632764 |
DEEPIKA GUPTA |
| Date: 23.08.2023 |
Director |
| Place: Sahibabad |
DIN:03319765 |
+91-9892691696
