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Stovec Industries Ltd Management Discussions

Jul 19, 2024|09:55:00 AM

Stovec Industries Ltd Share Price Management Discussions


An economic overview

World Economy:

In 2022, the global economy returned to more normal growth - registering a growth of 3.4% again a global GDP growth of 6.1% in 2021. Inflationary pressures, the Russia- Ukraine war and the resurgence of COVID-19 in China weighed on global economic activity in 2022.

Even as these headwinds persisted across the globe, real GDP surprisingly surged in the third quarter of 2022 in numerous economies, including the US, the euro area, and major emerging markets and developing economies. However, the uptick faded considerably in the last quarter of 2022.

Global headline inflation appeared to have peaked in the third quarter of 2022. This is owing to a considerable drop in the prices of fuel and nonfuel commodities.

Initial estimates put global trade at US$32 trillion in 2022, Trade in goods and services saw good growth, despite the Ukraine situation. Trade in goods grew 10% from last year to US$25 trillion, while trade in services grew 15% to US$7 trillion. A slowdown in global trade towards the close of the year could intensify in 2023.

Going forward, global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, then rise to 3.1% in 2024. The forecast of low growth in 2023 reflects the rise in central bank rates to fight inflation - especially in advanced economies, as well as the war in Ukraine.

Also, global inflation is likely to come down from 8.8% in 2022 to 6.5% in 2023 and further drop to 4.1% in 2024. Structural reforms will help in the fight against inflation by improving productivity and easing supply constraints. Demand for environmentally sustainable products is expected to spur global demand.

Domestic Economy: Recovering from pandemic-induced contraction, the Russian-Ukraine conflict, and inflation, the Indian economy staged a broad-based recovery across sectors. According to the first advance estimate for 2022-23 released by the National Statistical Office (NSO), Indias gross domestic product (GDP) growth is estimated at 7% for 2022-23 (8.7% in 2021-22) on the back of a rebound in services and farm sectors.

The Capital Expenditure of the Central Government and crowding in the private Capex led by the strengthening of the balance sheets of corporates is one of the growth drivers of the Indian economy in the current year. The Indian Rupee performed well compared to other Emerging Market Economies in Apr-De Rs.2022.

Indias revenue remained robust in FY23. Direct tax collections, net of refunds, reached C 12.31 trillion as of January 10, 2023 - 19.5% higher than collections in the corresponding period last year.

According to experts, direct tax collection (comprising corporate tax and personal tax) could exceed C 17.50 trillion, which would surpass the budgeted estimate by almost 23%. GST revenue in FY23 up to January 2023 was 24% higher than the collection during the same period in the previous year.

While Indias retail inflation rate peaked at 7.8% in April 2022, (above the RBIs upper limit of 6%), the overshoot above the upper tolerance level was however one of the lowest in the world. This was owing to the governments multi-pronged approach to tame the increase in price levels.

The Economic Survey for 2022-23 has projected a GDP growth rate in the range of 6 to 6.8% for FY 2023-24. The renewed thrust for capital expenditure, especially for infrastructure creation in the recent budget is expected to provide impetus to Indias economic growth.

The Textile Industry

Textile is the most important basic necessity in the world after food. As such, the entire worlds population is a user of textiles.

For an individual, textile symbolise her/ his cultural, social, economic, political, and religious norms. Textile is a powerful medium to express oneself and influence people.

Textile is one of Indias oldest industries and has a formidable presence in the national economy owing to its employment generation, contribution to industrial production and foreign exchange.

Not only is the textile sector highly labour intensive, but it also employs unskilled and semi-skilled labour force and is also an important source of employment for women.

Indias textile industry is one of the largest in the world with a huge raw material and textiles manufacturing base. It is significantly diversified with hand-spun and hand-woven textiles at one end of the spectrum and state-of-the-art plants at the other end.

Indian textile products are used by consumers across the globe owing to the high-quality fabric used and the affordable cost.

Sources: Fibre2fashion, The Lio blog, Invest India

Performance: After 18 months of robust growth through mid-2022, Indias US$200 Billion textile and apparel industry is facing a crisis. This is primarily because of huge cuts in spending by consumers in the United States, Europe and other big markets following a surge in inflation after the war in Ukraine.

Exports, which constitute about 22% of the industry, have fallen for five months in a row - declining over 15% year-on-year in November to $3.1 Billion.

The home textile segment, which is the second largest export contributor in the textile industry after ready-made garments, also dropped sharply. Also, the, bed, table, and bath linen imports by US and Europe contracted considerably owing to depressed consumer sentiments.

In addition, exports from India have also suffered owing to preferential tariff treatment towards countries like Bangladesh and Vietnam, cheap imports from China and some other countries in certain segments. This is hurting the domestic industry.

Domestic sales remained sluggish, despite the healthy economic progress made by India, due to high raw material costs and cheap imported garments and other textile products with the reopening of China.

The escalated raw material prices also impacted domestic demand. The price of cotton in India had more than doubled to cross the C 100,000 mark per candy during the current financial year, leading to an increase in yarn prices too. This impacted the profitability of textile majors who could not pass on the raw material cost hike to the end consumer.

While the overall economy is relatively strong and is outperforming major economies, the textile sector is a notable exception and orders suggest the downturn will continue well into 2023.

Despite this downturn in fortunes of the textile industry, the government remains steadfast on its goal of increasing textile exports from India, from the current US$ 44.4 Billion to US$ 100 Billion in the next five years. This will require addressing the challenges faced by the sector to ensure an efficient and integrated textile sector.

Sources :Economictimes, ThePrint, Business Standard

Government initiatives: The Government has taken important steps for strengthening the domestic textile sector. They include the following:

• The government of India (GoI) launched PLI (Production Linked Incentive) scheme with an outlay of Rs.10,683 crore to promote the production of MMF (Man-made Fibre) apparel, MMF fabrics and technical textiles to facilitate the textile Industry to achieve both size and scale.

• GoI approved the setting up of 7 PM Mega Integrated Textile Region and Apparel (PM MITRA) parks to develop world-class infrastructure with a total allocation of RS.4445 crore for a period of up to 2027-28.

• Under National Technical Textile Mission (NTTM), 74 research proposals valued at RS.232 crore have been approved in the category of specialty fibre and technical textiles.

• Investment of C 10,218 crore confirmed by the industry in 2,443 subsidy cases. RS.621.41 crore subsidy released in 3,159 cases under Amended Technology Upgradation Fund Scheme (ATUFS) and Special campaigns.

• A total of 73,919 people have been trained out of which 38,823 persons were given placement under the SAMARTH scheme for capacity building in the textile sector.

• A new campus of NIFT (National Institute of Fashion Technology) has been initiated for 2022-23 in Daman. Other new campus buildings are coming up in Bhopal and Srinagar.

• 44 R&D projects in the silk sector have been initiated and 23 were concluded with the achievement of training 9,777 persons in various activities related to the sector.

• Cotton cultivation has increased by 5% to 125.02 lakh hectares as against 119.10 lakh hectares last year. KASTURI COTTON INDIA, the brand name for Indian cotton has been launched. Further, to boost the mechanised harvesting of cotton, improve the quality of cotton and reduce labour costs, 75,000 handheld kapas plucker machines are being distributed.

Source: PIB

Global efforts: The Comprehensive Economic Partnership Agreement with the UAE became operational on May 1, 2022.

This Government initiative allows most of the countrys exports duty-free access to the Emirates.

The free trade agreement (FTA) between India and Australia, came into effect on Thursday, December 29. This agreement promises to strengthen trade ties and will help scale bilateral trade in goods and services in the next five years.

The Government intensified its efforts to finalise the FTA with the UK. The two nations reaffirmed their commitment to the early conclusion of a "balanced and comprehensive" FTA in early 2023.

These Government initiatives should go a long way in strengthening the competitive edge of the domestic textile industry.

Growth drivers

Easy availability of raw materials: India isone of the largest cotton producers in the world. As of 2022, about 120.69 lakh hectares of land are under cotton cultivation and a total of 362.18 lakh bales have been produced in 2021-22 which is one of the largest in the world. Also, cotton comes in a large variety. Iediais also the 2nd largest producer of sil kundUUOo of the hand-woven fabrics come from India.

Sources :TEXMiN,

A_ordable production infrastructure and qualified personnel: India is present across the entire value chain of textiles, right from raw material production to packaging and selling in the retail market and adds considerable value at each stage of the value chain. The entrepreneurial mindset of entrepreneurs, qualified personnel trained in good institutions, low wages, technology upgradation and continuous government support has enabled India to build a robust textile manufacturing infrastructure that serves as a textile hub for global brands.

The China+1 policy deepening: Repeated disruptions in China, owing to policy changes and multiple waves of Covid-19 have appreciably dampened the trust factor in Chinese textile players. As a result, Western apparel majors have intensified their efforts in widening their supplier base. This augurs well for the Indian textile industry.

A strong domestic market: Strong economic performance, tamed inflation and increased disposable income in the hands of the average Indian are expected to shore up the domestic demand for textile products. Coupled with that, the rapid growth in e-commerce and organised retail have made the Indian textile market increasingly lucrative where every industry player is competing to get a sizable chunk of the pie.

E-commerce and organised retail:

E-commerce has catapulted the fortunes of numerous sectors and the textile industry is no exception. Experts suggest that e-commerce is going to be the catalyst for development in the future, not just in the textile industry, but in the overall economy as well.

In recent years, the Indian retail sector experienced a massive boom across various categories which marked the changing attitude of Indian consumers as well as their acceptance of organised retail formats. With domestic consumption increasing appreciably post-Covid, experts believe a majority of this demand will be met by organised retail in the years to come.

Long term estimates: The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$190 Billion by 2025-26

Opportunities for Rotary and Digital Textile Printing

Rising disposable incomes: Indias per capita income has more than doubled over the past nine years to C 1.97 lakh. This has left more disposable income in the hands of the average Indian. This is expected to fuel the demand for textile products.

Middle-class boom: Indias 63 biggest cities (which includes Tier 1 & 2 cities) are now home to more than a quarter of its middle class. They also generate 29% of the countrys disposable income which fuels the demand for goods and services, supporting economic progress.

Youth and fashion textile: Powered by rapid urbanisation, higher purchasing power, a dramatic change in lifestyle, a rising number of young people and ever- changing fashion trends, the demand for printed fabrics is expected to increase exponentially. Creating niche designs specifically to cater to the youth is expected to emerge as a key driver for the growth of printed fabrics.

Fashion as a growth driver: The fashion industry which is heavily inclined towards the demand of the youth is one of the growth drivers for the fabric printing space. Diverse fabrics and diverse designs provide a new look to outfits which usually triggers a new fashion trend that help faster product sales. However, these fashion industry cycles have a short duration. As a result, it becomes imperative for fabric printers to reinvent themselves to start a new fashion cycle each time the last trend fades away.

An uptick in real estate: According to the CBRE-CII joint report named Indian Realty - Charting the growth roadmap for 2022, the real estate sector experienced steady growth through the year 2022. This upward growth was primarily on the back of rising demand from office, retail and residential spaces as the government reforms continued to encourage the overall realty sector. This trend is expected to continue, which should provide a healthy uptick in the demand for home furnishings.

Travel & adventure: 2022 has been a year of recovery for the travel sector - best indicated by the fact that 24% of Indians took at least one vacation a month on average, compared to the global average of 11%. The travel-tourism-hospitality troika is reasonably confident that this trend will only grow in 2023. This should provide a spurt to travel-friendly printed fabrics.

Expanding textiles capacities: Buoyed by the sizeable opportunities ahead in the global and domestic markets further fuelled by favourable government incentives, textile players, small and large are making a sizeable investment to expand their manufacturing infrastructure. This should increase the demand for textile printing solutions over the coming years.

Sources: Moneycontrol, Fortun India, Business India


Economic challenges: Muted economic growth by major economies of the world, which could be further dampened by the banking crisis which has only started unfolding could impact the demand for textiles from global consumers.

Inflationary challenges: Continuing geopolitical stress and the probability of escalation of the war between Russia and Ukraine is expected to fuel inflation further. This would dampen consumer sentiments and the prospects for the textile sector.

Fiscal challenges: Increasing interest rates across the world and in India as a tool to control inflation would put investment plans on the backburner for most industry houses.

Company overview

Stovec Industries is a part of the prestigious SPGPrints Group headquartered in Boxmeer, Netherlands and is globally renowned for its new innovations in cutting-edge printing technology in the textile industry.

Stovec provides diverse technology-driven textile printing solutions to marquee textile majors in India and across the globe. The Company deals primarily with rotary printing systems, digital textile printing machines and related consumables.

Aligning with the parent, Stovec uniqueness rests on its passion to develop innovative machines that meet the dynamic requirements of its customers. Its ability to stay ahead of the curve has positioned Stovec as the leader in the fabric printing technology space.

Headquartered in Ahmedabad, Gujarat, the Companys operations are spearheaded by Mr. Shailesh Wani, Managing Director and managed by a strong team of experienced professionals. The Companys equity is listed on the BSE in India.

Financial performance

The Company recorded an annual revenue of RS.2,358.49 Million in 2022 compared to RS.2,333.61 Million in 2021. The Profit Before Tax stood at RS.324.46 Million in 2022 against RS.390.46 in 2021.

Changes in financial ratios over last year

Financial ratios



Change (%)

Debtors Turnover (in days)




Inventory Turnover (in days)




EBITDA Margin (%)




Net Profit Margin (%)




Return on Net Worth (%)




1) Inventory turnover ratio effected due to increase in level of raw material and finished goods inventory.

2) EBITDA margin decreased primarily on account of decrease in net profit before exceptional item for the year.

3) Return on net-worth reduced due to decrease in net profit before exceptional Item for the current year.

Segment-wise performance

The Companys segment-wise revenue performances are as follows:

(Rs. in Million)




Textile consumables & machinery



Graphic products






Product branding

Inspired by nature, we have rebranded our products with the elements of the environment. The digital printers Rose, Jasmine, Magnolia are named after "flowers"; digital inks Morpho, Alcon & Pasha named after "butterflies"; and our conventional rotary machines Teak, Palm, Kapok are named after "rainforest trees" & many other products in a similar way. The new names are complemented with new logos and a new colours scheme.

Participation in exhibitions

Stovec has been forthcoming in participating in exhibitions, relating to both label & textile market, to showcase the latest innovations in the respective field. Exhibitions have also served Stovec as an influential platform to engage, share knowledge and foster lasting relations with industry professionals & experts.

LabelExpo India exhibition

In November 2022, Stovec participated in LabelExpo India exhibition, the largest event for the label and package printing industry in India. The Company showcased its RotaMesh?, RotaPlate? screens at its 24

sq. mtr. stall at this 4-day event. The team at the stall interacted with all prospective customers, introducing them to the unique benefits of rotary screen printing in field of printed electronics.

India ITME 2022

Stovec also participated in the India ITME 2022 exhibition held in December 2022, a prestigious textile engineering and technology B2B Exhibition which is hosted once in 4 years in the country. The 135 sq. mtr. SPGPrints booth witnessed huge footfall of visitors for all four days of the exhibition to understand the latest innovations launched by the Company in rotary & digital textile printing relating to fashion and the home-furnishing industry.

At the exhibition, the Company launched two new products - the new robust entry level digital printer - DART for Indian customers who wish to kick start their journey in digital textile printing and TEAK, its latest innovation in rotary portfolio which is a 2.45 meters wide rotary printing machine with Universal Repeat functionality.

With the introduction of TEAK, Stovec now possesses the complete rotary printing machine portfolio to meet all customer demands in the market up to 2.45 meter wide fabrics.

The Companys investments in exhibitions is expected to yield promising business and healthy returns over the medium term.

Human Resource & Internal Management

The Company recognises its human assets as the most important resource for growth. The Company accords the highest importance to human resource development and continuously endeavors to enhance the capacity and capability of all the team members.

The Company continued to enhance the teams skills and capabilities through its training curriculum which includes technical, commercial and behavioural skills which is imparted through the conventional and digital methods. The HR team continued to curate engagement forums for its team to strengthen team bonding and uplift their motivation.

Further, the Companys employee-friendly HR policies and its seamless roll-out ensures harmony throughout the Company, nurtures growth, makes communication easier between different level of the organisation and looks after the overall well-being of all the team members.

Internal Control System

Internal controls are an important aspect of the Companys overall structure and ensure compliance with rules & regulations. These controls safeguard assets, prevent frauds & errors, and aid in tracking of financial transactions. The effectiveness of the internal control systems is audited by the Companys internal and statutory auditors. The Boards Audit Committee examines the internal audit plan and guarantees adequacy and efficacy of these controls. It also examines the operation of the whistleblower system and keeps track of the actions taken in response to the reported cases.

Risks and Concerns

Risk management is integral to any business. Stovec has devised its risk management mechanism to predict, preempt and prevent financial or commercial risks, errors and frauds. It simultaneously strengthens the Companys business model with the objective of making profitable growth sustainable. The framework involves an integrated risk appraisal system and mitigation strategy with all key managers being part of the mechanism. The control measures are placed before the Companys board for periodic review and improvement.

Cautionary Statement

The cautionary statement forming a part of this Report may contain certain forward-looking remarks within the meaning of applicable Laws and Regulations. Many factors could cause the Companys actual results, performances, or achievements to be materially different from any future results, performances, or achievements. Significant factors that could make a difference to the Companys operations include domestic and international economic conditions, changes in Government regulations, tax regimes and other statutes.

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