Suryavanshi Spinning Mills Ltd Management Discussions

1. INDUSTRY STRUCTURE, DEVELOPMENT AND PRODUCT WISE PERFORMANCE

Company is in the business of manufacturing of Polyester, polyester-viscose Blended Yarns and other Textiles & Medical Textiles Products at Aliabad, Shameerpet Mandal, Medchal -Malkajgiri District. – 500 101, in the state of Telangana catering to both domestic and the export markets.

The textile and apparel industry contributes 2.3% to the countrys GDP . The Indian textile and apparel market size is valued at approximately US$ 165 billion in FY 2022-23, with the domestic market contributing 76% to the market size and exports accounting for the remaining 24%. The market is projected to grow at a 10% CAGR to reach US$ 250 billion by FY 2030-31, driven by sustained growth in domestic demand and significant export potential.

The industry witnessed several challenges in FY 2023-24, including fluctuating raw material prices, reduced demand, capacity under-utilisation, and the influx of imported fabrics and garments from China and Bangladesh. Additionally, sluggish demand persisted in major garment-importing countries for an extended period, significantly impacting exports. Indias textile exports declined by 3% compared to the previous fiscal year, reaching US$ 34.4 billion in FY 2023-24. Within the textile sector, the segment encompassing cotton yarn, fabrics, made-ups, and handloom products witnessed a notable Y-o-Y increase in exports by US$ 740 million in FY 2023-24 over the previous year, due to a surge in cotton yarn exports. The segment of readymade garments, comprising 42% of total textile exports, experienced a 10% decline in FY 2023-24 compared to the previous year. Indias textile export performance was adversely affected by unfavourable economic conditions in Western markets, geopolitical tensions, inflation, and increased sea and air freight charges.

2. INDIAN TEXTILE INDUSTRY

According to CRISIL research, the domestic textile industry is on a path to recovery. Growth is expected to revive, supported by sustained domestic demand, stability in cotton prices, and export recovery. Additionally, it is anticipated that orders from major US retailers will rise as the backlog of inventory from FY 2022-23 diminishes due to improvements in global supply chain challenges and a gradual sales recovery.

Indias competitiveness is expected to improve in the medium term due to positive developments, such as free trade agreements (FTA) with the UK and the establishment of textile parks under the PM MITRA scheme and Scheme for Integrated Textile Park (SITP), further supported by conducive government initiatives. From allowing 100% FDI in the Indian textile sector to initiating various schemes, the government aims for comprehensive improvement within the textile industry, bolstering domestic manufacturing capabilities, and boosting exports in the textiles and apparel sector.

The PLI Scheme, with an outlay of Rs10,683 crore for textile products like MMF apparel, MMF fabrics, and technical textiles over five years, will facilitate the textile sector in achieving size and scale . Furthermore, the governments sanction to establish 7 PM MITRA Parks with world- class infrastructure and an outlay of Rs 4,445 crore until FY 2027-28 is anticipated to propel the growth of the textile sector. This initiative will enable the transition of Indias traditional textile industry to become a global hub for MMF and technical textiles. Furthermore, the National Technical Textiles Mission (NTTM), aimed at promoting and supporting the technical textile sector in the country, is expected to create lucrative opportunities for the Indian textile market to capture the global market. The textiles and apparel industry is positioned for impressive growth in the coming years, buoyed by government policy measures, resilient domestic demand, and a gradual improvement in exports.

3. OPPORTUNITIES AND THREATS Opportunities:

E-commerce expansion and meteoric rise of the retail sector are contributing to the growth of the industry.

There is a growing demand for environmentally friendly and sustainable textiles and garments as consumers are increasingly concerned about the environmental impact of textiles and are demanding more sustainable options.

Comprehensive Economic Partnership Agreements (CEPAs) and Free Trade Agreements (FTAs) with various countries are poised to boost exports of Indian textiles and open up new markets for the sector.

The trade diversification policy presents an opportunity for the Indian textile and apparel industry, as global companies are seeking to diversify their production and sourcing activities away from China. India is well-positioned to capitalize on this trend, capture a considerable share of this global shift and establish itself as a global manufacturing hub.

Threats:

Fluctuations in raw material prices and the high cost of energy and transportation pose significant challenges for the industry players, as increasing prices exert pressure on margins.

The textile industry in India is highly capital-intensive, which impacts its competitiveness in the global market. Increasing competition from textile manufacturing hubs in countries, like Bangladesh, Vietnam, Indonesia and

China will pose a threat to Indias textile and apparel exports. Furthermore, the industry faces stiff competition from international retailers and fashion brands.

Rising labour costs, the shortage of skilled labour and overreliance on labour-intensive technologies may impact the operations.

4. RISKS AND CONCERNS:

The Company has identified key risks such as Technology obsolescence, Market/Industry Risks, Logistics Risks, Political environmental risks, Disaster risks, Financial Risks, Labour Shortage and Foreign Exchange Rate Risks. Key Risks include fluctuation in raw materials prices, increased global and local competition, sales channel disruption. Retaining the existing talent pool and attracting new talent. Reduced purchasing power and increased demand could result in significant shifts in consumer behaviour, negatively impacting the textile and apparel market. Consumers might seek more budget-friendly options, potentially leading to reduced growth and profitability for the Company.

5. OUT LOOK:

The economy is on the path of recovery and the company expects good demand for its products in domestic as well as international markets.

Your company believes that the completion in the emerging markets will be met by developing production system based on cost efficiency, high productivity and maintaining stringent quality parameters, etc. Availability of quality raw material at competitive prices, uninterrupted quality power supply and labour are the three critical inputs for an industry. The company will give utmost priority to maintain the above issues.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate and effective internal control system commensurate with the size and complexity of the organization. The Company has undertaken a comprehensive review of all internal control systems to take care of the needs of the expanding size of the Company and believes that these systems provide, among other things, a reasonable assurance that transactions are executed with management authorization. It also ensures that they are recorded in all material respect to permit preparation of financial statements in conformity with established accounting principles along with the assets of the Company being adequately safeguarded against significant misuse or loss. The company has also upgraded the IT support systems. A system of internal audit to meet the statutory requirement as well as to ensure proper implementation of management and accounting controls is in place. The Audit Committee periodically reviews the adequacy of the internal audit functions.

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

The aim is to create an inclusive working environment that attracts and retains the best people, enhances their flexibility, capability and motivation and encourages them to be involved in the growth of the Company. We believe in sophisticated equipment and skilled employee resources, together with strong management and design capabilities. As on 31.03.2024 the Company has 29 employees on rolls of the company.

8. ACCOUNTING TREATMENT

In the preparation of the financial statements the Company has followed the Indian Accounting Standards (IND AS) specified under Section 133 of the Act, read with relevant rules made there under. The Significant Accounting policies which are consistently applied have been set out in the notes to the financial statements.

9. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

In view of change in operations the companys revenue from operations was Rs. 5430.29 lakhs in the previous financial year and it is decreased to Rs. 65.68 lakhs during the financial year 2023-24.

10. HEALTH, SAFETY AND SECURITY MEASURES:

The Company continues to accord the highest priority to health and safety of its employees and communities it operates in. The Company has been fully committed to comply with all applicable laws and regulations and maintains the highest standard of Occupational Health and Safety and ensures safer plants by conducting safety audits, risk assessments and periodic safety awareness campaigns and training to employees. We believe in good health of our employees. Modern occupational health and medical services are accessible to all employees through well-equipped occupational health centers at all manufacturing units. Further, the Company had taken all precautionary and safety measures for its employees during pandemic and continue to ensure all preventive and protective safeguards for all employees against such threats at its plant and sites.

11. CAUTIONARY STATEMENT

1. Readers are advised to kindly note that the above discussion contains statements about risks, concerns, opportunities, etc., which are valid only at the time of making the statements. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. A variety of factors known / unknown, expected or otherwise may influence the financial results. These statements are not expected to be updated or revised to take care of any changes in the underlying presumptions.

2. Readers may therefore appreciate the context in which these statements are made before making use of the same. The company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future based on subsequent developments, information or events.