Textile Industry
Textile industry plays a pivotal role in providing one of the most basic needs of
people-clothing. It is not only second largest employment provider after agriculture, but
is one of the critical drivers of Indian economy. Globally, textile industry has seen an
unprecedented growth, paving the way for increasing role of Indian Textile companies in
the global textile industry. The textile and apparel industry has been growing
proportionally with the changes in the world of garments. The global textile industry has
seen both rise and fall in the year 2019.
Global Textile Market Overview
The global textile and apparel industry has grown over the years and is expected to
further grow along with growing consumption of textile and apparel products in developing
countries and a gradual economic recovery of major developed markets. China, European
Union (EU28), and India remained the worlds top three exporters of textiles in 2017.
Altogether, these top three accounted for 66.3% of world textile exports in 2017, up from
65.9% in 2016. All the top three countries also enjoyed a faster-than-average export
growth in 2017, including 5.0% of China, 5.8% of EU(28) and 5.9% of India.
The global textile market was valued at approximately USD 858 billion in 2018 and is
expected to generate around USD 1,207 billion by 2025, at a CAGR of around 5% between 2019
and 2025. By region, North America is projected to grow significantly in the upcoming
years. The U.S. textile industry primarily depends on importers and suppliers of textile
materials. Asia Pacific is anticipated to grow at the highest CAGR in the global textile
market in the years ahead. The growing regional population, increasing disposable income
of the people, and changing lifestyles are expected to drive the textile market in this
region. Moreover, the surging requirement of industrial apparels and fabrics in emerging
economies like China and India is also likely to propel the textile market in this region.
Additionally, China, India, and Bangladesh are the largest producers of textile raw
materials, such as raw cotton and silk. This is anticipated to further boost the textile
market in the Asia Pacific region. The European textile market is expected to grow
substantially in the upcoming years. Germany, UK, and France are the top textile producers
in the region. Germany is the most dominating nation in the European textile market.
(Source: Zion Market Research) Apparel is anticipated to witness a CAGR of 4.42% from 2019
to 2025 owing to increasing demand for luxury and trending fashionable clothes. It is
expected that apparel market size of the countries like India and China will grow at a
CAGR of 12% and 11% respectively in coming 10 years whereas the growth rate of other
countries will be comparatively very low. The apparel consumption is forecast to grow at a
CAGR of 4% and reach US$2.6 trillion by 2025.
It is expected that the combined apparel market size of China and India, i.e., $795
billion is expected to exceed combined market size of EU and USA, i.e., $775 billion, by
2025. Trends facilitating the growth in India are increasing youth population and high
purchasing power, shift from need-based purchase to aspiration- based purchase, growing
urbanization increasing the market demand, increased penetration of technology and greater
access to internet resulting in significant growth in online retail sales.
Indian Textile Market Overview
The Indian domestic consumption of textile and apparel is valued at US$ 80 billion in
2015. Within this, apparel retail contributes US$ 59 billion, technical textiles
contribute US$ 15 billion and home textiles contribute US$ 6 billion. The domestic apparel
market worth US$ 59 billion has registered a robust CAGR of 10% since 2005 despite global
demand uncertainties. Indian domestic market has performed better than the largest
consumption regions like US, EU and Japan, where depressed economic conditions led to
lower demand growth. Due to presence of strong fundamentals, the domestic apparel market
size of India is expected to reach a level US$ 180 billion by 2025.
Overview of the Global Trade/Economy
The Global Textile Industry over last several years has become one of the most
important industries. There is no denying that textile industry contributes significantly
to economic growth in the global economy. The current global apparel market is worth US$
1.7 trillion and it constitutes around 2% of the worlds GDP. At 18% of the global total,
India is the worlds largest producer of cotton. It also has the largest area under cotton
cultivation in the world, representing about 25% of the worlds area under cultivation.
The cotton industry in India leans towards apparel exports, contributing approximately 51%
to overall apparel exports in FY 18. Approximately 74% of the apparel exported from India
is made of cotton. Indias cotton yarn exports between April and June this year was 33%
lower compared to the same period last year, leading to concern among textile mills. The
Cotton Textiles Export Promotion Council (Texprocil) has pointed out that cotton yarn
exports from April to June 2019 was 226 million kg as against 338 million kg during the
same period last year. In June, the exports were just 59 million kg, which is 50.74% less
compared to June 2018. The World Bank has retained projections for Indias economic growth
at 7.5 per cent for the current fiscal year even as it cut global economic expansion by
0.3 percentage points. In its Global Economic Prospects report, the World Bank, however,
pegged the growth at the same pace of 7.5 per cent for the next two fiscal years.
For the current fiscal year, the growth is quite high, given the fact that Indias
economy grew just 6.8 per cent in 2018-19, a five-year low. Also, the growth plunged to
5.8 per cent in the fourth quarter of the fiscal year, also a five-year bottom. Also, the
International Monetary Fund (IMF) had earlier cut economic growth of India to 7.3 per cent
from earlier projection of 7.5 per cent. The Governments push towards manufacturing
sector and digital economy and "Make in India" initiatives, will further provide
the thrust for fuelling economic growth, in times to come. In this process, investment of
about US$ 180 billion to US$ 200 billion would take place and about 35 million additional
jobs would get created.
The Indian government has come up with a number of export promotion policies for the
textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under
the automatic route.
Overall Company Performance Review
Your Company has integrated Cotton, Polyester & blended Yarn manufacturing
facilities in India with a capacity of 2,14,416 spindles and stable customer base with
long term mutually beneficial business relationship both in India and abroad. Your company
has presence across the entire value chain of cotton and polyester yarn with ability to
offer varied products as required by the Indian and global markets.
During the year under review, only three plants were working on suboptimal capacity due
to shortage of working capital, resulting decline in turnover and EBDITA of the Company.
Baramati plant was non operational throughout the year due to non availability of funds.
All debt whether long term or working capital is NPA as on date .
The reason for distress starts when Companys debt was restructured first time under
CDR in 2008 owing to Global meltdown and Industry / economy recession. Assets of SPENTEX
Tashkent-Toyetpa Tekstil Limited (STTTL), nationalized illegally by Uzbekistan Govt. and
matter are pending at international Courts. In 2011, due to adverse change in government
policies like imposing ban on yarn export & withdrawal of drawback resulted into
pilling up inventories which led to the steep volatility in raw cotton and sudden falling
of yarn prices, had adverse impact on the health of Textile (spinning) sector.
Management Perception on Opportunities, Risks, Concern & Outlook Opportunities
& Outlook
Your Company has been taking several initiatives for restructuring of business
processes, improving plant efficiency and cost savings which should bear fruits in the
future. Your Company has approached the banks/financial institutions to bailout the
Company from the present situation, by restructuring its loans and to extend financial
assistance to address its requirement of working capital, and other needs. Hopefully, your
Company would be successful, to get restructuring of its debts done in due course. With
adequate working capital and a strong export base built over the years, your Company will
continue to offer market driven quality product mix for progressively improving its
operational profile and outcomes. Your Company is in process of reviewing its strategy and
tools to find ways to increase its turnover, reduce its costs and achieve a higher value
addition so that it could come out with the positive result in the near future. Management
is keeping a close watch on various threats/risks being faced by the company and taking
all appropriate steps to improve the performance of the Company.
With due strategic focus on efficient plant operations, cost cutting, close monitoring
of operations by management and other administrative & operational initiatives taken
by the company, and keeping in view the market trends & the emerging business
scenario, your Company is confident of achieving improvement in its operational
performance in near future.
Risks and Concerns
The Indian textile sector is facing major challenges in the form of rising production
costs due to increasing, wages, power and interest cost which has an adverse cascading
effect on the industry as a whole.
Further due to fluctuating cotton and yarn prices and uncertainties in the foreign
exchange market, increase in power cost and lack of adequate working capital, the EBIDTA
levels may remain stagnant during the year. However, your directors and management would
take all necessary measures to hedge these risks and increase the EBIDTA levels in coming
quarters and with that your Company expects business environment to improve going forward.
With the strong domestic consumption trend and initiatives formulated by the company with
regard to product mix, waste material control & other related issues, your directors
are confident that sales volumes would reasonably shore up with consequent strengthening
of the margins in due course.
Internal Control Systems and Adequacy
The Company has well-established processes and defined the roles and responsibilities
for people at various levels. The control mechanism also involves well documented
policies, authorization guidelines commensurate with the level of responsibility specific
to the respective businesses. Adherence to these processes is ensured through frequent
internal audits. The internal audits conducted are reviewed by the Audit Committee and
requisite guidelines and procedures augment the internal controls. The internal control
system is designed to ensure that financial and other records are reliable for preparing
financial statements and other information which ensures that all transactions are
properly reported and classified in the financial records. Based on the internal audit
reports, process owners undertake corrective actions in their respective areas and thereby
further strengthen the controls, significant audit observations and corrective actions
thereon are presented to the Audit Committee of the Board.
Human Resources/Industrial Relations
The Company and its management value the talent, commitment and dedication of its
employees and acknowledge their contribution. All employees in the Company work as a team
and integral part of the family, sharing their ideas and concerns through discussions and
intranet network installed across the units. Industrial Relations scenario at all units
continues to be healthy and enthusiastic.
Cautionary Statement
Statements in this Management Discussion and Analysis Report 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 a difference to the Companys operations include raw material availability and
prices, cyclical demand and pricing in the Companys principal markets, changes in
Government regulation, tax regimes, economic developments within India and the countries
in which the Company conducts business and other incidental factors, including
availability of adequate working capital etc.
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