MANAGEMENT DISCUSSION AND ANALYSIS REPORT
GLOBAL ECONOMY OVERVIEW
The global macro-economic scenario during the financial year 2024-25 was another period of subdued growth marked by high inflation and interest rates, geo-political tensions, concerns of recession and supply chain constraints. In spite of these challenges and risks, the global economic growth expectations can be viewed with cautious optimism. Global economic growth is projected to remain at 3.2% in 2025, the same pace as in 2023 and 2024.
In spite of global economic risks, emerging India is poised to be the fastest growing economy for the next few years and a preferred market for investments. India has gained a strong presence in various global diplomatic and trade forums and made progress towards achieving its goal to be a global manufacturing hub. As global supply chains seek to diversify, India stands to gain as a stable destination for manufacturing and business. The Indian economy, bolstered by strong macro fundamentals, retained its growth momentum primarily driven by government investments in infrastructure, invitation to global and local players to boost local production and manufacturing in India. In 2024-25, real GDP growth was estimated at 6.5 per cent. The Reserve Bank of India expects the same rate to continue in 2025-26. This performance comes at a time when the global economy faces uncertainty, making Indias steady momentum all the more significant.
India showed a remarkable performance, closing 2023 with a GDP of US$ 3.73 trillion. With a projected GDP growth rate of 6.3 percent, India is geared to become a US$ 5 trillion economy by 2027*.
According to IMF estimates, both Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) inflows have increased in 2023, and are projected to be US$ 44.4 billion and US$ 33.9 billion respectively, in 2024. The increase in foreign investment is a testament to the fact that India is perceived as an emerging power that has the potential to generate a steady return on investment with a negligible risk premium.
Another key focus of the Government has been on sustainability and green growth. All these measures had a cascading effect on capacity utilization, and with the strong corporate balance sheet, private sector is at the threshold of resurgent investment cycle.
INDIAN ECONOMIC OVERVIEW
Indias growth continues to be resilient despite some signs of moderation in growth, says the World Bank in its latest India Development Update, the World Bank Indias biannual flagship publication.
After overtaking the United Kingdom (UK) to become the become fifth largest economy in Q1 FY23, India is expected to emerge as the fourth-largest economy in the world in 2025, overtaking Japan with a nominal Gross Domestic Product (GDP) of Rs. 3,49,68,900 crore (US$ 4.1 trillion). Sustained economic momentum backed by domestic reforms and global positioning under the vision of Aatmanirbhar Bharat, India is expected reach the Rs. 4,26,45,000 crore (US$ 5 trillion) GDP mark by 2027 and surpass Germany by 2028. In FY25, Indias exports stood at Rs. 37.31 lakh crore (US$ 433.56 billion), with Engineering Goods (26.88%), Petroleum Products (13.86%) and electronic goods (8.89%) being the top three exported commodity. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months. Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers.
The manufacturing sector currently contributes approximately 17% to Indias GDP. The Indian government aims to increase this to 25% by 2025. This target is part of the "Make in India" initiative, which aims to boost domestic manufacturing and transform India into a global manufacturing hub.
Indian Textile Industry
The textile and apparel industry contributes 2.3% to our GDP, 13% to industrial production, and 12% to exports. India exported textile items worth US$ 34.4 billion in 2023-24, with apparel constituting 42% of the export basket, followed by raw materials/semi-finished materials at 34% and finished non-apparel goods at 30%. It is also the second largest employment generators, after agriculture, with over 45 million people employed directly, including many women and the rural population. As further evidence of the inclusive nature of this industry, nearly 80% of its capacity is spread across Micro, Small and Medium Enterprises (MSME) clusters in the country.
The sector also has perfect alignment with the Governments overall objectives of Make in India, Skill India, Womens Empowerment, Rural Youth Employment and inclusive growth. The industry produces about 22,000 million pieces of garments per year, with the market size projected to reach US$ 350 billion by 2030, from the current $174 billion.
Recently, the Ministry of Textiles reported a 7% increase in textile and apparel exports, including handicrafts, from April to December 2024, compared to the same period the previous year. In line with the growth roadmap, the Indian textile market currently ranks fifth globally, and the government is actively working to accelerate this growth to a rate of 15-20% over the next five years.
Union Budget Allocations for Ministry of Textiles
The Union Budget announced an outlay of Rs.5272 crores for the Ministry of Textiles for 202526. This is an increase of 19% over budget estimates of 2024-25 (Rs. 4417.03 crore).
INDUSTRY STRUCTURE AND DEVELOPMENT
The global textile industry has been facing exceptionally challenging conditions since the past two years due to the restrictions imposed because of the Covid-19 pandemic. Further, the global supply chain had seen unprecedented levels of pressure and disruption due to logistical impasse. This led to delayed delivery resulting into reduced product shelf life and increased inventory at importer/retailer level which resulted in reduction in export orders/delayed picking of confirmed orders, apart from sharp increase in vessel shipping cost. Further, prodigious liquidity globally led to a proliferation in commodity prices including Cotton, Dyes, Chemicals, Coal, etc.
The socks industry being majorly an unorganized and fragmented sector the entire industry size and figures cannot be estimated. The socks and accessories market in India has grown tremendously over the decade. Indian socks industry is maturing and with urban population evolving, demand for casuals, sports and fashion socks is picking up. Millennials are very brand conscious and demand for branded wear is on the rise. There is growth in the industry in tier I and II markets and brand awareness are growing significantly.
OPPORTUNITIES AND THREATS
The textile and sock industries face a mix of opportunities and threats.
Key opportunities include growing global demand, particularly for sustainable and functional products, and the potential for technological advancements like AI-powered production and smart textiles.
However, threats include economic volatility, price competition, supply chain disruptions, and the need to address environmental concerns and waste management.
SEGMENT-WISE OR PRODUCT WISE PERFORMANCE
The Company has one segment activity namely socks, in line with the definition of "segment" as per Accounting Standard 17 issued by the Institute of Chartered Accountants of India. The performance of the Company is discussed separately in the Directors Report.
OUTLOOK
Coming year will be challenging with respect to pricing. Due to constant investment in latest machinery your company is able to target a vast audience, enhancing product quality, improving delivery schedules and giving superior customer service. Expectations are high, prospects are bright, but capitalizing on the new emerging opportunities will be a challenge for the socks manufacturing Companies.
The Companys Socks Division is optimistic of growth through continued network expansion and innovation. The Business will continue to focus on increasing the premium and fashion quotient of its offerings on the basis of a deep understanding of consumer preferences and delivering products of worldclass quality.
RISKS AND CONCERNS
The major challenge that the textile, apparel and hosiery industry faces is of ever-increasing production costs arising out of rising wages, power and other overheads.
The sock industry faces risks related to intense competition, changing market trends, and fluctuating demand due to weather and consumer behaviour. Additionally, concerns exist about material quality, potential skin irritation from synthetic fibres, and moisture control issues, particularly in cheaper socks. Environmental impact and the complexities of custom sock sourcing are also notable challenges.
In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparel.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company maintains adequate and effective Internal Control Systems commensurate with its size and complexity. It believes that these systems provide, among other things, a reasonable assurance that transactions are executed with management authorization. It also ensures that they are recorded in all material respect to permit preparation of financial statements in conformity with established accounting principles along with the assets of the Company being adequately safeguarded against significant loss or misuse. An independent Internal Audit function is an important element of Companys Internal Control System. This is supplemented through an extensive internal audit program and periodic review by the management and the Audit Committee of Board.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
During the year under review, the total production of the socks was steady but margin was better due to decrease in input costs. The Profit before tax recorded during the year was Rs. 153.43 Lakhs as against Profit of Rs. 145.98 Lakhs in the previous financial year.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED
At Spenta, we are committed to sustainable work practices and a transparent work culture. The year gone by brought many challenges owing to Covid led disruptions which posed serious threats to the entire mankind. Amidst all these thought-provoking scenarios, we leveraged use of digital assets to connect with various stakeholders, including our employees. IT tools were optimally utilised for skills enhancement and training of employees when most of the business activities were standstill everywhere.
Maintaining balance between safety of employees and business continuity, Work from Home (WFH) facility was accorded to people immediately post lockdown. As the things started to ease, proactive measures for employees were undertaken like, workplace SOPs, awareness sessions, etc. Similarly,
our factories resumed operations with robust hygiene norms and considering all the social- distancing regulations.
As always, people development continues to be an extremely important area in your Company. Anchoring developmental conversations at every level and ensuring that all managers are skilled in holding developmental conversations has been an area of focus. The industrial relations remained cordial throughout the year. The employees of the Company have extended a very productive cooperation in the efforts of the management to carry the Company to greater heights.
The Company had on rolls total of 75 permanent employees as on 31st March, 2025 excluding employees on contract basis and job workers.
RATIO ANALYSIS
Particulars |
2024-2025 | 2023-2024 | Change |
Debtors Turnover Ratio |
4.31 | 3.00 | 1.31 |
Inventory Turnover Ratio |
1.63 | 1.28 | 0.35 |
Interest coverage Ratio |
2.26 | 2.32 | -0.06 |
Current Ratio |
1.74 | 1.77 | -0.03 |
Debt Equity Ratio |
0.77 | 0.80 | -0.03 |
Operating Profit Margin Ratio (%) |
7.33% | 9.35% | -2.02% |
Net Profit Margin Ratio (%) |
2.55% | 3.13% | -0.58% |
Return on Net worth (%) |
4.17% | 3.92% | 0.25% |
> Debtors Turnover Ratio: Significant Change indicating sound and effective collection tactics and customers paying their debts on time
> Inventory Turnover Ratio: Slight Change indicating strong sales and efficient management of inventories
> Interest Coverage Ratio: No material Change is observed
> Current Ratio: No material Change is observed
> Debt Equity Ratio: No material Change is observed
> Operating Profit Margin: Slight Change indicating higher operational and variable costs and no corresponding change in product pricing
> Net Profit Margin: Slight Change indicating increase in indirect costs and high competition
> Return On Net Worth: Slight Change indicating good financial health
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