supertex industries ltd Management discussions

GLOBAL-ECONOMIC OVERVIEW

The global economy is demonstrating signs of resilience in 2023 after the high market volatility in 2022 which was owing to geopolitical instability, the Russia -Ukraine war, supply chain disruptions, higher inflation, and tighter monetary conditions among others. To control inflation, Global Central Banks started, increasing the interest rates and tightening the liquidity, in coordinated manner. RBI increased interest rates by 2.5%. Even after lifting of lockdowns and opening-up of the economy. Chinese growth remained subdued. Rising interest rates, slower growth in China and vanishing liquidity led to global slowdown and resulting in dent on exports and private capex investments. However, normalizing of supply- chain, and cooling down of inflation and Crude towards end of the year created hope for next financial year. As per various estimates, India’s real GDP is estimated to have grown at around 7% in 2022-23.

The man- made fibre (MMF) industry in India is expanding rapidly, ranking second in cellulose fibre/ yarn production and second in synthetic fibre production globally. Demand for man- made fibres in India is expected to rise due to increasing demand and use in nonwovens and technical textiles.

INDIA – ECONOMIC OVERVIEW

India continues to be among the fastest-growing economies in the world. Despite a challenging external environment, the Indian economy registered healthy growth in FY 2022-23. The real GDP grew by 7.2% in FY 2022-23 which is amongst the highest globally (9.1% in FY 2021-22) and reflects India’s underlying economic resilience, relatively robust domestic consumption and lesser dependence on global demand. The accelerated pace of economic reforms has led to the sustainable growth of the Indian economy and strengthened its position in the world.

However higher inflation remains a challenge and headline inflation increased to 6.7% in FY 2022-23 from 5.5% in FY 2021-22. Following the gradual normalisation of global supply chains, softening of global commodity prices, and successive hikes in the policy repo rate by 250 basis points in FY 2022-23 by the Reserve Bank of India (RBI), the consumer price index (CPI) inflation subsided to 4.25% (provisional) in May 2023 against 4.70% recorded in April 2023.

TEXTILE INDUSTRY SCENARIO

India is the second largest producer of textiles and apparel in the world and contributes 4% share of the global trade in textiles and apparel. The textiles and apparel industry contributes 2.3% to India’s GDP, 13% to industrial production and 12% to exports. The Indian textiles market is expected to be worth more than US $ 209 billion by 2029.

India is the third largest exporter of textiles and apparel in the world with a massive raw material and manufacturing base. In FY 2022-23, textile exports shrank to 23% primarily due to tepid demand from the global market. Export markets are expected to improve gradually and will show resilience as the macro environment in the US and EU markets have started to show some improvement in the outlook. However, the overall prognosis remains cautious considering higher inflation, the ongoing war and the reopening of China.

OPPORTUNITIES AND THREATS

India’s man-made fibre (MMF) market is slowly but steadily becoming an emerging sub-section within the textile sector. With the rise in demand for technical and medical textiles, India has seen a surge in demand for MMFs. The government has put crucial measures in place for the sector to thrive, including the Production Linked Incentive (PLI) scheme for Man-made Textiles and the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme. FTA with different countries will also boost export.

Inflation and rising input prices remain major industry- wide headwinds. Intense Competition in the global market, especially from the textile and garment industries in Bangladesh and China will adversely impact the textile and apparel industry in India.

COMPANY REVIEW

The production of the Company picked up during the year and exports activity has also resumed in the current year. The realizations were better during the year. However, the rising interest cost during the year was a cause of concern which affected the overall profitability of the company.

COMPANY OUTLOOK

The conditions in the market have started to improve and the company is hopeful of better realizations in the coming year due to increased capacity utilization and pick up in the exports in the coming year. The company plans to lower its interest burden by better financial management.

SEGMENT-WISE PERFORMANCE ( in lakhs)

Sr.	Particulars	Year Ended
		31-Mar-23	31-Mar-22
1	Segment Revenue
	(a) Domestic	6101	6492
	(b) International	716	98
	Total (Net Sales/Income from Operations)	6817	6590
2	Segment Results
	(a) Domestic	326	334
	(b) International	38	(5)
	Total	364	329
	Less : Finance cost	344	311
	Total Profit before Tax	20	18

RISK MANAGEMENT

Geopolitical tension, supply chain disruptions, higher inflation, monetary tightening and global economic slowdown may reduce consumer spending impact the growth of the Company. The company’s performance depends on the demand from domestic as well as overseas markets. Any slowdown in demand may lead to decline in production/ sales and thus impact profitability.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCE AND INDUSTRIAL RELATIONS

As on March 31, 2023 the Company had 63 permanent employees at its manufacturing plants and administrative offices. The Company recognises the importance of Human Resource as a key asset instrumental in its growth. The Company believes in acquisition, retention and growth of talented team players. The Industrial Relations in the Company are satisfactory and cordial.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an internal control system in place which is commensurate with the size and nature of the business. The internal controls are aligned with statutory requirements and designed to safeguard the assets of the Company. The Management reviews and strengthens the controls periodically. Apart from self monitoring of the internal controls, there is an independent Chartered Accountant firm appointed to conduct internal audit of the Companys operations. The Statutory Auditors present their observations to the Audit Committee on financial statements including the financial reporting system. The Audit Committee takes due cognisance of the observations made by the auditors and gives their suggestions for improvement. The suggestions of the Audit Committee further ensure the quality and adequacy of the control systems.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE Highlights:

(Rs in lakhs)

	2022-23	2021-22
Revenue from operations	6817	6590
Profit before Finance Cost, Depreciation, Exceptional items and Tax	458	406
Finance Cost	344	311
Depreciation	94	77
Deferred Tax	(15)	(6)
Profit After Tax	5	12
Earnings per share	0.06	0.07

Significant Changes in Key Financial Ratios:

During the year, there was significant change in the following key financial ratio as compared to the previous year:

Ratio	2022-23	2021-22	Reason for change
Net Profit Margin Ratio %	0.001	0.18	Higher charge of Deferred tax
Return on Equity %	0.002	0.41	Higher charge of Deferred tax
Creditors Turnover Ratio	4.03	3.16	Better rolling of trade payables
Stock Turnover Ratio	12.67	10.16	Faster turnaround of Inventories

Forward Looking Statements

Certain statements in this report on "Management Discussions and Analysis" may be forward looking statements within the meaning of applicable securities laws and regulations. There are several factors, which would be beyond the control of the management, and as such, actual results could differ materially from those expressed or implied.