superhouse ltd share price Management discussions


MACROECONOMIC OVERVIEW

The overall exports of India during 2022-23 increased from US$ 422.00 billion to US$ 450.96 billion, registering a growth of 6.86% YoY. Exports of leather industry increased from US$ 4.87 billion to US$ 5.26 billion, registering a growth of 7.94% during the year. The increase was registered by all categories of leather and leather products. Footwear and leather goods hold a major share of 69.94% of the total export of leather and leather products with an export value of US$ 2951.25 Million.

The major markets for Indian leather & leather products are USA with the share of 22.30%, Germany at 11.01%, UK at 9.16%, Italy at 6.75%, France at 5.35%, Spain at 4.35%, the Netherlands at 4.18%, China at 2.80%, Belgium at 2.58%, the UAE at 2.36%, Australia at 1.79%, Poland at 1.55 %, Denmark at 1.55%, Japan at 1.48%, Portugal at 1.36%. Canada at 1.34%, Vietnam at 1.23% and Hong Kong at 1.09%. These 18 countries together accounted for nearly 82.23% of Indias total leather and leather products exports.

INDUSTRY STRUCTURE AND DEVELOPMENT

The leather industry holds a prominent place in the Indian economy. The sector is known for its consistency in high export earnings. With total annual exports of over US$ 450.96 billion, export of leather and leather products stood at US$ 5.26 billion during 2022-23.

The domestic leather industry is bestowed with an abundance of raw material resources, as India is endowed with 20% of the worlds cattle and buffalo stock and 11% of goat and sheep stock. Added to this are key underlying strengths, such as skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and dedicated support of allied industries. The leather industry is an employment-intensive sector, providing livelihood opportunity to over 4.42 million people, mostly from the weaker sections of the society. Womens employment is predominant in the leather products sector with about 30% of women being in the workforce.

India is the second largest producer of footwear and leather garments in the world. The leather industry is spread across diverse categories, namely finished leather, footwear, footwear components, leather garments and leather goods, including bags, saddlery, harness and leather gloves. As per DGCI&S export data, export of leather and leather products for the year 2022-23 stood at US$ 5259.53 Million, against export of US$ 4872.70 Million during the previous year.

OPPORTUNITIES AND THREATS

The Government of India had identified the leather sector as a focus sector in the Indian Foreign Trade Policy in view of its immense potential for export growth prospects and employment generation. Accordingly, the government is also implementing various special focus initiatives under the Foreign Trade Policy for facilitating the growth of the leather sector with the implementation of various industrial developmental programs as well as export promotional activities, and keeping in view the past performance and industrys inherent strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards and dedicated support of the allied industries, the Indian leather industry aims to augment production, thereby enhancing exports and resultantly creating additional employment opportunities.

However, despite the growth prospects, challenges abound, including entry of multinationals in the domestic market, international price fluctuation, stringent pollution norms such as zero liquid discharging policy of the government, fast changing fashion trends and cutback of government incentive.

SEGMENT-WISE PERFORMANCE

The segment-wise performance of the company during the year is as under:-

Segments Turnover

a Leather and Leather Products: 552.25 crores (previous year 451.39 crores) b Textile Garments: 91.47 crores (previous year 106.44 crores)

Domestic Sales

The company manufactures and sells its products in the domestic market under the renowned Allen Cooper and Double Duty brands.

OUTLOOK

The Companys products are well-accepted in overseas and Indian markets. The company is focusing to further expand its geographic presence into new countries and also deeper penetration in existing markets through aggressive marketing and distribution. The company is making efforts to penetrate into the fast-growing sectors of sports and kids shoes market. The company is also harnessing e-commerce platforms to expand its marketing activities in the domestic market.

RISK AND CONCERNS

The major raw material for the leather industry is raw hide/ skin. Leather is a natural product and its prices and availability fluctuate from time to time. The company possesses vast experience in sourcing raw materials for its tanneries and leather products divisions from India and outside, which help in keeping prices and availability under check. The output of raw hides/skin also depends upon personal skills of purchasers and technicians, which are being taken care of by the experienced personnel of the company. Substantial revenue of the company is generated in foreign exchange. Adverse foreign exchange rates may affect the profitability of the company. However, experienced professional are keeping close vigilance over movement in currency rates and taking action accordingly to mitigate the risks.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectation, or prediction may be forward-looking statements. Further, the performance of the company is also dependent on domestic and global economic conditions and government and regulatory policies on which the company is not having any control.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from misuse or disposition and those transactions are authorized, recorded and reported correctly. Proper checks and controls have been introduced for all the incoming and outgoing materials. The Audit Committee and Internal Audit Department regularly review the financial and operating controls at all locations of the Company. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data, and for maintaining accountability of assets.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in India. The company has achieved sales and other income of 643.71 crores during the year, against 557.82 crores reported last year. Profit before tax was 26.86 crores and profit after tax was 20.20 crores during the year, as compared to profit before tax of 36.32 crores and profit after tax of 26.71 crores reported during the previous year. The net block of the company as at 31.03.2023 was 198.36 crores, against 180.07 crores as at 31.03.2022. The net current assets as at 31.03.2023 were 126.31 crores, as against 127.03 crores as at 31.03.2022.

Further, the company achieved consolidated sales and other income of 776.57 crores against 663.14 crores reported during the previous year. Consolidated profit before tax was 37.13 crores and profit after tax was 27.92 crores during the year under review, as compared to 42.46 crores and 31.43 crores, respectively, during the previous year. Further, consolidated net block as at 31.03.2023 was 236.1 1 crores, against 211.15 crores as at 31.03.2022. Consolidated net current assets as at 31.03.2023 stood at 184.83 crores as against 180.65 crores as at 31.03.2022. Detailed information on financial performance is given in the appended annual financial statements.

The summarized financial performance during the year is as under:-

Key Financial Summary

The key financial summary of the Company is as under:-

( in lacs)

Particulars STANDALONE CONSOLIDATED
2022-23 2021-22 2022-23 2021-22
Sales 63317.44 54835.30 76599.64 65047.40
Other Income 1054.11 947.06 1057.01 1266.92
PBT 2686.51 3632.49 3712.89 4246.08
PAT 2019.85 2671.49 2792.35 3143.15
Share Capital 1102.50 1102.50 1102.50 1102.50
Other Equity 36364.21 34457.54 42699.62 40425.29
Net Worth 37466.71 35560.04 45340.97 42439.18
Earnings per share 18.32 24.23 24.04 32.24

Key Financial Ratios

The key financial ratios of the Company along with explanation for significant changes are as under:-

No Particulars 2022-23 2021-22
1 Debtor Turnover Ratio 4.23 4.27
2 Inventory Turnover Ratio 3.54 3.54
3 Interest Coverage Ratio 4.87 7.28
4 Current Ratio 1.45 1.47
5 Debt Equity Ratio 0.37 0.34
6 Operating Profit Margin 8.25% 10.58%
7 Net Profit Margin 3.33% 5.05%
8 Return on Net Worth 10.03% 12.46%

There is no significant change in the financial ratios.

INDUSTRIAL RELATIONS AND HUMAN RESOURCES DEVELOPMENT

The relations with employees continued to be cordial during the year. The Directors record their appreciation for the sincere and committed efforts put in by all categories of employees during the year. There were 1384 permanent employees with the company as on 31st March, 2023.