1. INDUSTRY STRUCTURE, DEVELOPMENT AND PRODUCT WISE PERFORMANCE
India?s GDP has reached $3.75 trillion in 2023. The textile
industry continues to contribute immensely to the exchequer – 4% to the global trade
in textiles and apparel, 2% to the GDP (approx. $70 billion), and constitutes 7% of
industry output in terms of value. In Merchandise exports have registered highest ever
annual exports of USD 447.46 billion with 6.03% growth during FY 2022-23 surpassing the
previous year (FY 2021-22) record exports of USD 422.00 billion. The production of
textiles as measured by the Index of Industrial Production (IIP) for textile has seen a
consistent decline since March 2022. The index value, which was 118.5 in March 2022, has
fallen to 102.3 in October 2022. On a cumulative basis from April to October, 2022, the
index value is lower than the corresponding period in the last year.
The financial year 2022-23 opened with a firm belief that the pandemic
was rapidly on the wane and that India was poised to grow at a fast pace and quickly
ascend to the pre-pandemic growth path. The economy was expected to grow at 6.5 to 7% for
FY23 despite pandemic recovery and the Russia-Ukraine war. India?s economic growth in
FY23 has been principally led by private consumption and capital formation.
Company is in the business of manufacturing of Polyester,
polyester-viscose Blended Yarns and other Textiles & Medical Textiles Products at
Aliabad, Shameerpet Mandal, Ranga Reddy District, in the state of Telangana catering to
both domestic and the export markets.
The historical high demand for Cotton resulted in spiraling its prices
both the domestic and international markets. However the consequential increase in yarn
prices was not commensurate with the increase in price of cotton thereby impacting the
margin in yarn segment.
2. INDIAN TEXTILE INDUSTRY
Empowered with the abundant availabilities of Cotton, India also has a
large pool of manpower which is advantageous since textile and apparel is a
labour-intensive sector. The Indian Textile and apparel manufacturing is second largest in
the world that spans the entire value chain from fibre to finished goods. All these
factors promoted India as one of the leading manufactures and a sourcing hub. The
enthusiasm in the textile industry on account of the latest FTAs is expected to move
beyond enhanced market access and trade.
The Indian textile and apparel market size reached US$ 172.3 Billion in
2022. Looking forward, IMARC Group expects the market to reach US$ 387.3 Billion by 2028,
exhibiting a growth rate (CAGR) of 14.59% during 2023-2028. India has a 4% share of the
global trade in textiles and apparel. India is the world?s largest producer of
cotton. Estimated production stood at 362.18 lakh bales during cotton season 2021-22.
Domestic consumption for the 2021-22 cotton season is estimated to be at 338 lakh bales.
Cotton production in India is projected to reach 7.2 million tonnes (~43 million bales of
170 kg each) by 2030, driven by increasing demand from consumers. In FY23, exports of
readymade garments (RMG) cotton including accessories stood at US$ 7.68 billion till
January 2023. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9%
share globally. India?s textiles industry has around 4.5 crore employed workers
including 35.22 lakh handloom workers across the country. In December 2021, the government
approved a production-linked incentive (PLI) scheme for textiles. The scheme is expected
to promote production of man-made fabric (MMF) apparel, MMF fabrics and products of
technical textiles with an aim to increase the global presence of India in these products.
The government announced extension of the Rebate of State and Central Taxes and Levies
(RoSCTL) scheme for apparel and madeups for three years. The Government aims to encourage
private investments through investments under Integrated Textile Parks Scheme and the
Technology Upgradation Fund. The Indian textile industry is the second largest employer in
the country after the agricultural sector, in terms of employment creation, offering
direct and indirect employment to around 100 million people.
3. OPPORTUNITIES AND THREATS Opportunities:
• China plus one policy, Economic collapse /volatility in Sri
Lanka, Myanmar, Bangladesh, and Pakistan has played out in favour of India as the world
has started looking at India as reliable partner for their requirement.
• Rising demand for low cost, sustainable and eco-friendly
products. This presents an opportunity for textile manufacturers to develop new products
that are made from renewable materials and produced using sustainable manufacturing
processes. Cost can be reduced by blending with cheaper man-made fibre.
• Emergence of new Markets: FTA with Australia, Comprehensive
Economic Partnership Agreement (CEPA) with UAE and expected favourable trade agreements
with UK / Europe present an opportunity for textile manufacturers to expand into new
markets and diversify their customer base.
Threats:
• The biggest threat to cotton products is competition from other
low-cost man-made fibres. Consumers are shifting their focus to low-cost products which
has led to intensecompetition and pricing pressure in the global textile industry.
• There is a high cost to comply with environmental, social and
labour regulations which can be costly and time - consuming.
• Further the textile industry is highly sensitive to global
economic conditions and can be significantly impacted by global demand and pricing.
4. RISKS AND CONCERNS:
The Company has identified key risks such as Market risks, Regulatory
risks, Human resource risks, Commodity price 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. Regulatory Risks include
changes in taxation regime, government policies with respect to textiles, pollution
control, Industrial Relation issues & regulatory compliances.
Cotton/power and fuel costs are of concern. Our primary raw material is
cotton, which we source from the domestic market. Cotton is an agricultural product and
its supply and quality are subject to forces of nature. Any material shortage or
interruption in the domestic supply or deterioration in the quality of cotton due to
natural causes or other factors could result in increased production costs. There is
propagation in cotton prices which cannot be absorbed in finished goods prices. Preference
is shifting from Cotton fibres to manmade fibres i.e. synthetic, polyester etc. which are
available at lower prices. This is putting pressure on margin. Power and Fuel are also
major manufacturing costs while producing textiles. Any increase in these costs has a
negative impact on the profits of the company.
5. OUT LOOK:
However, the overall Indian economy is relatively strong and is
outperforming major economies; the textile sector is a notable exception. Exports which
constituted 22% of industry have fallen significantly. Domestic market is flooded with
cheap imported garments that have disrupted the local manufacturers.
India?s recovery from the pandemic was relatively quick, and
growth in the upcoming year will be supported by solid domestic demand and a pickup in
capital investment. In 2022, the overall size of the home textiles & furnishing
industry, including the unorganized sector, was about $18-19 billion, of which $8.2
billion was exported and remaining $10 billion was domestic consumption. Even though
India?s? outlook is positive for the upcoming financial year, the global
outlook, especially the advanced economy are weighed down on account of a combination of a
unique set of challenges expected to impart a few downside risks. This would have an
impact on the export market for textile industry. However, the inclusive and higher
expected domestic consumption would compensate for the reduced exports. The manufacturers,
who will be able to address these challenges, while also differentiating themselves
through innovation and quality, are likely to be successful in times to come.
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 31.03.2023 the Company has 30 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 company?s revenue from
operations was Rs. 5284.05 lakhs in the previous financial year and it is increased to Rs.
5312.93 lakhs during the financial year 2022-23.
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.
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.
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