STL Global Ltd Management Discussions.

Indias economy is expected to grow 7.3% in the financial year 2018-19 and accelerate to 7.5% in 2019-20, bottoming out from the impact of demonetisation and GST, the World Bank has stated even as it highlighted private investments and exports as the two lagging engines of growth. In its latest India Development Update, the World Bank said Indias economy will grow 7.3% in fiscal year 2018-19. The Governments push towards manufacturing sector and digital economy and Make in India initiatives will provide the thrust for fuelling economic growth. The expectation of normal rainfall in 2018 is a further shot in the arm for positive impact on the Agricultural and Manufacturing Sectors. Domestic and Export Garment segment continues to evolve faster in India. Influence of competitively priced private labels in modern trade and e-commerce market places is bringing in new value conscious consumers to the industry. On the other hand, fashion led premium consumers preferences are switching over to product made from high end fabrics and innovative designs. The market is clearly drawing distinction between the value led and the fashion conscious consumers both in terms of product as well as the channel preferences. GST implementation has helped the organized retailers by reducing influx of cheap alternatives from abroad and domestic unorganized industry.

Continuous Efforts of the Management of your company resulted into 30% increase in topline in textile segment and continuous increased profitability by achieving cost effectiveness has put the company on track of growth after a long difficult era.

Global economic overview

At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies. The upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating. Per capita growth will be insufficient to narrow the income gap with advanced economies in about 35 percent of emerging market and developing economies in 2019, with the share increasing to 60 percent in countries affected by fragility, conflict, and violence. A number of developments could act as a further brake on activity. A sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies. Past increases in public and private debt could heighten vulnerability to swings in financing conditions and market sentiment. Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.

Industry Structure and Development:

The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. 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. The Government of India announced a Special Package to boost exports by US$ 31 billion, create one crore job opportunities and attract investments worth Rs 800.00 billion (US$ 11.93 billion) during 2018-2020. As of August 2018, it generated additional investments worth Rs 253.45 billion (US$ 3.78 billion) and exports worth Rs 57.28 billion (US$ 854.42 million). 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. The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two subsectors of Textiles Industry - Readymade garments and Made ups - from 2 per cent to 4 per cent

Opportunities and Threats:

During the year some of initiatives were taken by the government to further promote the industry are as under:

• As of August 2018, the Government of India has increased the basic custom duty to 20 per cent from 10 per cent on 501 textile products, to boost Make in India and indigenous production.

• The Government of India announced a Special Package to boost exports by US$ 31 billion, create one crore job opportunity and attract investments worth Rs 80,000 crore (US$ 11.93 billion) during 2018-2020. As of August 2018 it generated additional investments worth Rs 25,345 crore (US$ 3.78 billion) and exports worth Rs 57.28 billion (US$ 854.42 million).

• The Government of India has taken several measures including Amended Technology Up-gradation Fund Scheme (A-TUFS), scheme is estimated to create employment for 35 lakh people and enable investments worth Rs 95,000 crore (US$ 14.17 billion) by 2022.

• Integrated Wool Development Programme (IWDP) approved by Government of India to provide support to the wool sector starting from wool rearer to end consumer which aims to enhance the quality and increase the production during 2017-18 and 2019-20.

• The Cabinet Committee on Economic Affairs (CCEA), Government of India has approved a new skill development scheme named Scheme for Capacity Building in Textile Sector (SCBTS) with an outlay of Rs 1,300 crore (US$ 202.9 million) from 2017-18 to 2019-20

Indian textile industry challenges

While China – the worlds largest apparel manufacturer and exporter, continues to shed market share in the global trade, India has not been able to capitalize on the opportunity. Instead, a large chunk has been garnered by Bangladesh and Vietnam, the second and the third largest apparel exporting nations globally. While Bangladesh has been the key beneficiary in the EU, Vietnam has maintained growth in its stronghold market of the US. The concerns are heightened by the developments in the international trade including allegations of the US against certain export subsidy schemes in India as well as progress on certain large free trade agreements (FTA) which can materially alter the global trade dynamics. The most prominent amongst these is the Comprehensive and Progressive Trans Pacific Partnership (CP TPP), which is the third largest free trade area in the world by GDP. . By mid-January 2019, the agreement had entered into force between seven of the eleven nations. Even though there is some respite for India considering that the leading apparel importing regions are not yet a part of the CP TPP, any incremental developments on this front could prove to be a potential threat as it could considerably strengthen Vietnams competitiveness. Another FTA being closely watched is the EU-Vietnam FTA. Conclusion of the FTA can weaken Indias competitive positioning in one of the key apparel markets, accounting for ~37% of Indias apparel exports in CY2018. This can be corroborated from the fact that Bangladesh, which enjoys a duty-free access to the EU market since 2001 under the Generalized Scheme of Preferences, has been able to expand its market share in EU from less than 7% in 2001 to ~20% at present, while India has been able to barely maintain its share at ~6-7%.

The management of Your Company visualize massive Opportunities in Textile Industry forcing to think about some expansion plans associated with improved and latest technology but the biggest challenge before the management of your company to maintain this marvelous growth passing through the challenges and facing threats in the global Economic scenario discussed above.