Shantai Industries Ltd Management Discussions

This section shall include discussion on the following matters within the limits set by the listed entitys competitive position: a. Industry structure and developments. b. Opportunities and Threats. c. Segment–wise or product-wise performance. d. Outlook e. Risks and Concerns f. Internal control systems and their adequacy g. Discussion on financial performance with respect to operational performance. h. Material developments in Human Resources / Industrial Relations front, including number of people employed. i. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

1. Debtors Turnover

2. Inventory Turnover

3. Interest Coverage Ratio

4. Current Ratio

5. Debt Equity Ratio

6. Operating Profit Margin (%)

7. Net Profit Margin (%) or sector-specific equivalent ratios, as applicable. j. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

This Report contains forward-looking statements that involve risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the included financial statements and the notes.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Economy And Outlook

Amidst the prevailing global economic landscape, challenges such as a subdued manufacturing environment, faltering trade flows and persistent inflation concerns paint a complex picture for the future ahead. However, amidst these challenges, certain sectors, notably services, demonstrate resilience.

The recent update from the International Monetary Fund (IMF) offers a glimmer of hope, with a modest upgrade in growth projections for 2024 and 2025. Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, marking an increase from previous forecasts. This uptick is attributed to the stronger-than-expected resilience observed in the United States and several major emerging market economies, coupled with fiscal support measures in China. However, these growth projections still fall below the historical average of 3.8 percent, largely due to factors such as elevated central bank policy rates to combat inflation, reduced fiscal stimulus amidst high debt levels, and sluggish underlying productivity growth.

Furthermore, there is a notable decline in global inflation rates, driven by the resolution of supply-side constraints and the implementation of tighter monetary policies. Global headline inflation is anticipated to decrease to 5.8 percent in 2024 and further to 4.4 percent in 2025, with the latter figure being revised downward.

Additionally, the year 2024 also marks changing geopolitical situation for several nations which may introduce a degree of uncertainty. These changing landscapes hold implications beyond borders, influencing economic and public policy in an increasingly fractious global landscape. Despite potential challenges, these developments underscore the ongoing efforts to navigate economic challenges while striving for stability and sustainable growth in the global economy.

Indian Economic Overview & Outlook

Indias economy has experienced a significant surge over the past decade, elevating it from the 10th to the 4th position in the global rankings, thereby establishing its position as a major economic powerhouse on the world stage.

The revised growth of India for FY 2023-24 estimated to 6.8% from 6.1% reflects stronger-than expected data in 2023, with GDP growth estimated at 6.4% for 2025, with nominal gross domestic product (GDP) for FY 2023-24 at current prices being estimated at INR 293.90 trillion (US$ 3.53 trillion). Robust indicators such as goods and services tax collections, rising auto sales, and double digit credit growth point to resilient urban consumption demand, complemented by expanding manufacturing and services PMIs on the supply side. This positive economic outlook is reinforced by the governments proactive measures, as evidenced by the interim budget for fiscal year 2024-25, which targets a capital expenditure allocation of Rs 11.1 lakh crore, signifying a 16.9% increase over the previous years estimates. While private industrial capital spending has been sluggish, ongoing benefits from supply chain diversification and the governments Production Linked Incentive scheme are expected to spur investment in key manufacturing sectors.

In Budget 2024 presented by Union Finance Minister Nirmala Sitharaman outlined pivotal initiatives to propel India towards becoming a developed nation by 2047. The budget reiterated the governments commitment to the "Make in India" initiative, particularly focusing on positioning India as a hub for semiconductor and electronics manufacturing.

This positive economic outlook is reinforced by the governments proactive measures, as evidenced by the interim budget for fiscal year 2024-25, which targets a capital expenditure allocation of Rs. 11.1 lakh crore, signifying a 16.9% increase over the previous years estimates. While private industrial capital spending has been sluggish, ongoing benefits from supply chain diversification and the governments Production Linked Incentive scheme are expected to spur investment in key manufacturing sectors. The budget allocation for the textiles sector has been increased by 974 crore to 4,417.09 crore in the Union Budget 2024-25. The budget, presented by Union Finance Minister Nirmala Sitharaman on Tuesday, raised the allocation for research and capacity building in the sector to 686 crore from 380 crore.

Industry Outlook and Trends

The textile sector is one of the critical sectors of the Indian economy, accounting for more than 2 percent of the total GDP and more than 12 percent of the manufacturing sector gross domestic product (GDP). The sector is also the second largest provider of employment in India, after agriculture. It provides employment to approx. 45 million people directly and to another 60 millionindirectly through allied activities. Not only is the textile sector highly labour intensive, it also employs unskilled and semi-skilled labour force and is also an important source of employment for women.

The Indian Textile industry is growing at CAGR of 14.9%. The domestic apparel and textile industry inIndia contributing to 2% of countrys GDP, 7% of the industry output in value terms. The share of the textiles and apparels in overall textile basket is consistently increasing. Indias exports of Technical Textiles products registering a growth rate of 28.4% YoY.

As per the United Nations estimates, worlds population could reach around 8.5 billion by 2030, 9.7 billion by 2050 and 11.2 billion by 2100 and following this the global apparel market is projected to grow to USD 1.65 trillion by 2025 and USD 2.7 trillion by 2030.

The Government of India has increased the budget allocation for the Ministry of Textiles by 27.60%, reaching to 4,392.85 crore for the financial year 2024-25. This enhanced funding demonstrates the governments commitment to supporting the textile sector through its various schemes and programs such as PM Mitra Park, NITTM, A-TUF, ISDS, RoDTEP, RoSCTL etc.

The Government of India through various incentive schemes such as Production Linked Incentive (PLI), Maga Investment Textiles Parks (MITRA,) support the growth of Textiles Industry. In recent past, the Government removed the import duty on cotton on Extra Long Staple (ELS) cotton, addressing demands from its textile industry. Indian Textiles industry imports ELS cotton from countries like USA, Egypt, etc. and using for producing high valued textile & apparel products mainlyfor exports purpose. During Apr-Dec 2023, India imported around 56,205 MT of Extra-Large Cotton, mostly from USA (44.6%) and Egypt (40.1%).

According to data released by the Ministry of Commerce & Industry, Indias cotton yarn, fabrics/made-ups, and handloom exports witnessed a significant growth of 6.71% year-on-year, reaching a total value of $11.7 billion in the fiscal year 2023-24. This remarkable increase occurred despite an overall 3% decline in total exports during the same period. In the last fiscal year, the top export markets included the United States (25%), Bangladesh, China, Sri Lanka, and the United Arab Emirates (UAE). Additionally, exports expanded into new markets such as Anguilla, Serbia, Georgia, and others, showcasing Indias dynamic trade reach.

Opportunites in 2024

Digital textile printing, an inkjet-based technique, revolutionizes the textile industry by efficiently applying colorants to fabrics. Its adoption, particularly with dye sublimation printing, has surged in recent times and is poised for continued growth as technology evolves. This innovative approach empowers designers and manufacturers to unleash their creative potential, reduce waste and meet the demands of a rapidly changing market, while maintaining vibrant and high-quality textile designs.

In an increasingly eco-conscious world, the textile industry is witnessing a rising appetite for natural fibres. These fibres, including cotton, silk, linen, wool, jute and cashmere are at the core of the Indian textiles industry, which is poised to grow from its current valuation of $138 billion to a projected $195 billion by 2025. Notably, these natural fibres are celebrated for their eco-friendly attributes, characterised by a unique blend of lightweight durability. China, India and the United States are at the forefront of this trend, promoting natural fibres to sustain the growth of the global textile industry. As the demand for sustainable fashion continues to rise, natural fibres are expected to remain at the forefront of the industry.

Segment-Wise or Product-Wise Performance

Over the last few years, as a growth oriented company we have focused on diversifying into finished products as we see a long run way for growth in sales of these products. This has helped us to grow our profitability margins.

The total revenue of the company stood at INR Lacs 129.19 which was INR 60.02Lacsin previous year.

Outlook

The company has increased focus on eco-friendly practices in the manufacturing process. The market is experiencing a considerable shift towards sustainability and eco-friendly textile manufacturing processes. In addition, growing environmental awareness among consumers and industry stakeholders has resulted in a shift towards an environmentally friendly textile manufacturing process.

Risks and Concerns

Supply Chain Disruptions

The textile industry relies on complex global supply chains involving raw material suppliers, manufacturers, and distributors. Disruptions such as natural disasters, political instability, trade disputes, or logistics issues (e.g., port congestion, transportation delays) can disrupt production schedules and increase costs.

Volatility in Raw Material Prices

Fluctuations in the prices of raw materials (e.g., cotton, synthetic fibers) can significantly impact manufacturing costs and profit margins. Price volatility is influenced by factors such as global demand-supply dynamics, weather conditions affecting crop yields, and geopolitical tensions affecting trade.

Environmental Impact and Sustainability

The textile industry is resource-intensive and has a substantial environmental footprint. Concerns include water consumption and pollution from dyeing and finishing processes, chemical usage, greenhouse gas emissions, and waste generation.

Competitive Pressures

Intense competition within the industry, both from domestic and international players, can lead to price wars and margin erosion. Companies must differentiate themselves through innovation, quality, sustainability credentials, and effective brand management to maintain market share and profitability.

Shifts in Consumer Preferences

Rapid changes in consumer preferences and trends (e.g., towards sustainable and ethical products, fast fashion) can pose challenges for companies that are slow to adapt. Understanding and responding to these shifts are critical for maintaining consumer loyalty and market relevance.

Technological Disruptions

While technological advancements offer opportunities for efficiency improvements and innovation, they also pose risks to companies that fail to keep pace with industry developments. Adoption of new technologies such as automation, digitalization, and smart textiles requires significant investment and strategic planning.

Internal Control Systems and Their Adequacy

Achieving adequacy in internal controls requires a comprehensive and integrated approach that addresses risks across all levels and functions of the organization. It requires commitment from management, ongoing monitoring and evaluation, and responsiveness to changes in the internal and external environment. Well-designed and effectively implemented internal controls contribute to operational efficiency, reliability of financial reporting, compliance with laws and regulations, and protection of assets. All the internal control measures have been reviewed by Audit Committee and the Management and necessary steps has been taken to improve the same to meet the companys objective.

Discussion on Financial Performance with respect to Operational Performance

During the FY 2023-24, company had placed adequate internal control in the company and ace in achieving the more than 100% increase in revenue from operations to INR 129.19 Lacs as compared to INR 60.022 Lacs in previous year.

Details of Significant Changes in Key Financial Ratios

The Significant ratios of the company are as follow: -

S. N.
Ratio	2024	2023
1 Income from Operations (In Lakhs)	129.19	60.02
2 Operating Profit Margin	-4.86%	-15.89%
3 Debt to Equity Ratio	NA	NA
4 Interest Service Coverage Ratio	NA	NA
5 Inventory Turnover Ratio	NA	0.117
6 Current Ratio	273.12	33.44
7 Trade Receivables Turnover Ratio	1.17	0.73
8 Trade Payables Turnover Ratio	2.33	8.21
10 Net Profit Margin	-4.88%	-15.94%
11 Return on Net Worth	-0.88%	-1.32%

Reasons for significant variation in ratios:

The reasons for variation in excess of 25% in various ratios are explained as follows:-

1. Operating Profit Margin

During the year, the companys operating expense has reduced and revenue has increased, hence, there is a variation in Operating Profit Margin

2. Current Ratio

During the year, current liability of the company has decreased significantly as compare to the current asset of the company and hence, there is a variation in current ratio.

3. Trade Receivables turnover ratio

During the year, the turnover and trade receivable of the company has increased significantly and thus, there is a variation in the Trade Receivable Turnover Ratio in the current year as compared to the earlier year.

4. Trade payables turnover ratio

During the year, the purchase of the company has decreased Significantly and hence, there is a variation in the Trade Payable Turnover Ratio.

5. Net profit ratio

During the year, the company has incurred a loss.

6. Return on Net Worth

During the year, the loss incurred by the company has decreased substantially as compared to previous year thus, there is a variation in the Return on Capital Employed Ratio.

For the Board of Directors

Shantai Industries Limited

 

Sd/-

Harishbhai Fatandas Sawlani

Chairman and Managing Director

DIN: 00831848

 

Date: 02/08/2024