suumaya industries ltd share price Management discussions


GLOBAL ECONOMY & OUTLOOK

Under the effects of the Russia-Ukraine crisis and the looming US-China turmoil, the global financial economy is floating in a period of uncertainty and tension. Countries are on a rocky road to recovery amidst the ongoing tussles troubling the economys performance.

Inflation levels on a sky-high and tight monetary policies paint a scenario of restricted growth. Noting these factors, the baseline real GDP growth rate was expected to fall from 3.4% in 2022 to 2.8% in 2023. Its expected that advanced economies will face a profound impact from the economic downturn.

However, its not all gloomy. With the rapid infrastructure developments and falling inequality index, consumer demand is expected to shoot up and carry the economy on an up-trend. Reports project the GDP growth to settle at 3% in 2024, commencing on a new recovery path.

The current economic scenario points toward an era of subdued, yet subpar growth levels. Faced with several limitations, the economy is holding up strong and showing high signs of resilience.

The upcoming years will be held by emerging economies. Data points from developing countries point toward strong service sector development, improving the relative market situation. Consumer spending and industrial investments are expected to be on the rise, leading to a moderation in the overall economic conditions.

Looking 10 years ahead, the global economy is showing an opportunistic blend of disruptions and possibilities. Impacts from the macroeconomic shocks will fade out in the face of the growing consumer and investor confidence index. Most indicators point toward financial market stability, with emerging markets making greater contributions to economic developments.

(Source: High Inflation: Impact and the Policy Response - Explained, pointwise-ForumlAS Blog)

INDIAN ECONOMY & OUTLOOK

Suumayas dawn into the new phase is facing directly into Indias development and journey to be a superpower. Our services and industrial impacts are targeted to fill the gaps and power macro-level growth in the economy.

Across sectors, the Indian economy is growing stronger than ever. The agricultural sector, the hub of our nation, is set to witness rapid developments driven by advanced technology Suumaya has already set out plans to contribute to this development with digital innovations and a robust distribution network across the agro-value chain.

With a 4% share in the global trade in the textile industry, India stands as the 2nd largest garment producer. Moreover, cotton production is expected to reach 7.2 million tonnes by 2030. We intend to play a significant part in developing this industry with a mix of our retail stores and B2B textile trade network.

Indias trade regime also seems to be on a rising stage. Both imports and exports are expected to grow at 10% and 14% CAGR respectively. In light of this, Suumaya is rapidly growing its B2B trade arm, promoting global trade.

Contributing to the growth of the economy from every end, Suumaya has charted out a holistic action plan to accelerate Indias journey to become a superpower by 2030. We are undertaking initiatives to ensure that this development journey is sustainable and organically sufficient.

(Source: Textile Industry in India, Leading Yarn Manufacturers in India - IBEF)

INDUSTRY OVERVIEW

Suumayas growth avenues are synonymous with that of India. Weve contributed to and catalyzed the developing trends in the agriculture, textiles, retail, and trade industries across the nation.

POLYMERS

Economic Overview

Polymers and PVCs play a major role in Indias vibrant, $190 billion petrochemicals industry. Owed to its wide-ranging use cases, the products generate extensive demand from manufacturers, retailers, and even end-consumers. Moreover, polymers and PVC are seen as sustainable and eco-friendly substitutes for other materials like wood, paper, metal and others.

With the growing population, robust economic developments, and macro fundamentals, India is expected to contribute 10% to the global demand growth in the petrochemical industry. Currently, the nation ranks 3rd in polymer consumption. In 2022, India witnessed a massive polymer production volume of 12.47 million metric tonnes.

Polymers, along with other popular petrochemical products, see a never-ending use across healthcare, housing, cleaning, construction and more. The rapid industrialization, demographic conditions, and stress on environmental sustainability are propelling the petrochemical and polymers industry throughout the nation.

The Government of India has launched several PLI schemes and initiatives to support the production and distribution of polymers and other petrochemicals, laying the foundation for sustainable economic growth.

The widespread demand and expansion calls for an extensive supply chain network that connects industrial manufacturers with retailers and users. In line with this, we are witnessing rapid developments in the industrys supply chain, creating a seamless ecosystem between the raw material manufacturers, exporters and end-consumers.

From a business perspective, the petrochemical industry has massive potential for expansion and advancement, particularly in its distribution and supply chain network.

(Source: India will contribute 10% of incremental global petchem demand growth: Puri (business- standard.com)

Suumayas Vision

We plan to expand our region of business across India.

While we currently deal mostly with the western and north-western arm of the nations, Suumaya has charted out expansion plans to conquer the east and southeast regions over the coming years.

With the growing importance of innovative raw materials and products, Suumaya also has plans to diversify its product portfolio with emerging resourceful materials. The idea is to increase the accessibility to quality raw materials, inducing a culture of innovation, thereby empowering the "Make in India" initiative.

Opportunities & Threats

Opportunities

New Products can be added

The market of polymers and PVC including that of raw materials is very extensive and vast. New products can be added to the existing products to capture wider markets.

New regions can be explored

With growing demand, new regions and areas can be explored for supply chain of these products

Change in Consumer behaviour

Change in consumer behaviour leads to more innovation and more demand for products in the market

Threats

Market Competition

There are various market players which causes tremendous competition in the field thus giving a strong market competition.

Price Fluctuation

Fluctuation of prices in the industry can lead to losses.

Risk and Risk Mitigation

Risk

- Unstructured process workflow can affect productivity

- Low demand of particular products in off seasons

- Change in government laws and policies

- Increasing competition with over market vendors

- Employee poaching and low retention rates

Mitigating the Risks

- Diversifying product range and strategizing procurement according to the seasons

- Multiple brands from different countries are imported to navigate laws

- Focused team providing quality service & products to establish strong brand rapport

- Enhancing work environment with regular counseling and skip-level meetings

AGRICULTURE

Economic Overview

Indias agriculture sector is at a crucial point. 75 years ago, the sector was the primary driver of our economy, contributing to more than half of its GDP. Today, 55% of the Indian population is dependent on the agriculture sector as their primary source of livelihood. Clearly, then, agriculture holds a special place in the Indian economy in more than one way.

Hosting the largest fertile land to plant crops like wheat and rice, India has positioned itself as the land of diverse herbs and spices. It is also the largest producer of milk, pulses, and spices. In 2022, India was responsible for 50% of the worlds rice market.

The industry has reached a massive size of INR 80,550 billion and is expected to grow at an impressive CAGR of 12% by 2028.

There are several factors catalysing this rapid development:

- Fruitful weather conditions and a diverse seasonal landscape that welcomes a wide variety of crops.

- Highly cultivable land provides ideal conditions for farming and irrigation.

- Investments in technological advancements to improve the produce quality and processing speed across the sector.

- A growth in urbanization and disposable incomes pulling up the produce demand

- A bounce back in consumer spending by 6.6%

Particularly, the government and investors are showing increasing interest towards the adoption of AgTech and modern trade policies. The new technologies and the advent of AgTech have become crucial to facilitate growth in the sector. From enhancing farmers lives to increasing operational effectiveness, AgTech will remain a key focus to foster sustainable development.

In support of sector modernization, the Indian Government has launched the Digital Agriculture Mission for 2021-25, aiming for widespread digital transformation across agricultural practices. A report from McKinsey suggests that the AgTech ecosystem can potentially increase the average farmers income by 25-35%.

Looking ahead, Indias agricultural sector is in the wake of a sustainable transformation journey. The increasing investments in infrastructure, government support, and technological developments are expected to generate great momentum in the near future.

Suumayas Vision

Suumaya Agros vision for 2023-24 is filled with adding value and increasing efficiency across the supply and manufacturing chain. The expansion motto were following for the upcoming year is "Creating value with intelligence".

- Generate a sustainable business with GMV of INR 500 Crore with a GM of 10% for the FY 2023-24.

- Create a healthy ratio of 65:35 of Domestic and Exports Trade, and ratio of 80:20 of Structured Wetted Trade and Opportunistic Deals.

- Diversify risk by venturing into new commodities including Spices & Dry Fruits, Pulses, Oilseeds & Veg Oils, Fruits & Vegetables, Super Foods & Food Ingredients.

- Automate onboarding process for clients and suppliers with digital-first platforms

- Hone the teams trading and analysis experience and expertise

Opportunities & Threats Opportunities

Imports to Increase

Indian Imports to increase in medium term from current US$ 30+ billion at 10% CAGR. Especially Pulses, Veg Oils and Dry Fruits.

Exports to Increase

Indian Exports to increase from current US$ 50+ billion at 14% CAGR. Especially Spices, Dry Fruits, Fruits & Vegetables, and Millets.

Modern Trade & AgTech Expanding

Lots of AgTech and Modern Trade players are looking to structured sourcing of agri commodities.

New Product Lines Emerging

Super foods like millets, berries and Natural/Organic produce markets are expanding.

Trade Getting Organized

FPOs, Multi State Cooperatives, Corporates, and VC backed startups are entering market trade is getting organized

Stress on Sustainability

Leads to need for traceability, better compliance, enhanced efficiencies, and accountability in trade.

Threats

- Commodity Volatility and market conditions

- Lack of staffing in key roles

- Abrupt Government Regulations and any policy changes

Risk and Risk Mitigation Risk

- Commodity Volatility and market conditions

- Lack of staffing in key roles

- Abrupt Government Regulations and any policy changes

- Wrong call by the team on forecasts especially for opportunist trade

Mitigating the Risks

- Were enabling a tech-powered agro-trading house with a structured approach

- Creating accessibility to better opportunities by emphasizing long-term revenue stability

- Generating increasing returns on capital deployed, inducing better margins overall

TEXTILES

Economic Overview

The textile sector in India is at its prime. Dating back to a rich heritage of traditional handlooms, textiles in the nation have an impressive reputation across the globe. From local craftsmen to sophisticated mills, the nation is home to a diverse nature of textile production and distribution. 4% of the global trade in textiles and garments originates from India.

The economy stands to be the worlds 2nd largest producer of in the industry. As per reports, a growing consumer demand and production advantages will contribute to a CAGR of 10%, reaching a value of $190 billion by 2025-26. The fundamental power for this growth is linked to Indias strong production base across major fabrics and natural fibres like cotton, jute, and wool among others.

In an effort to accelerate this production value, the government has launched PLI schemes worth $1.44 billion, consequently pushing forward the "Make in India" initiative. Enjoying an ever-evolving consumer demand and consistent government support, the industry is on track for a bright future ahead.

Major players, along with the higher authorities, are taking active steps to make this growth sustainable and beneficial to the environment. The industry is inclining toward organic fabrics, recyclable materials, and intelligent utilization of technology to embrace sustainable development.

The textile market is expected to take the front seat in Indias development. With the increasing exports, distinctive production advantage, and rising consumer demand, the industry is clearly a strong point for our economy. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029.

Suumayas Vision

Marching forward with a varied product portfolio, smarter sourcing strategies, and a vision for geographical expansion, Suumayas textile business is on track for unparalleled greatness. Suumaya intends to capitalize on the industrys growing nature, innovating and developing to induce overall advancement throughout the organization.

- Increase quality and resilience throughout the supply chain with new vendors with wide-ranging products and raw materials

- Embracing latest technologies and tools to allow human labour to focus on other relevant tasks

- Enhancing the sourcing capabilities with quality rapport-building processes

Opportunities & Threats

Opportunities

- Indias versatile textile produce ranging from hand-woven fabrics to capital intensive mills

- Increasing consumer demand for textiles with the growing per capita GDP

- Rising investor interest and trade opportunities within the industry accelerates development

Threats

- Tax regimes and GST makes textiles more expensive.

- Lack of accessibility to the latest technologies relative to the global market

- Competition from neighbouring countries

Risk and Risk Mitigation

Risk

- Financial risks occurring due to weak credit cycles

- Disruptions in the supply chain affecting production

- Fluctuating trends among fast fashion causing dead stock

Mitigating the Risks

- Increasing visibility and transparency in the supply chain process

- Insuring trade and evaluating credit facilities of parties involved

- Building a responsible and reliable sourcing strategy

- Staying on top of trends with innovations and expanding product bouquet

RETAIL

Economic Overview

With growing consumer demand, fast-paced digital advancements, and increasing investor interests

- Indias retail industry has never been healthier. Nodding to its favouring factors, the nation stands as the 5th largest retail market across the globe. The industry is a major contributor to nationwide development, accounting for 10% of Indias GDP and 8% of total employment.

As we see a rise in purchasing power and increasing disposable incomes, the demand for retail and FMCG goods is only expected to increase with time. Interestingly enough, 61% of this demand originates from tier II and tier III cities. This points toward a closing inequality gap across the nation, as we move toward a sustainable and inclusive growth period.

Indias retail developments are a fascinating feat. With the abundance of labour and low-cost resources, the sector always has one foot on the accelerator pedal. As a result of several favouring factors working together, the retail sector is projected to reach a whopping value of $2 trillion by 2032 - revealed in a report by BCG.

Foreign investors and major players have their eyes set on the Indian retail sector, given its population abundance, high demand growth, increasing consumer spending and other factors contributing to a positive future trajectory. The growth is being felt throughout the nation - from big urban cities to remote rural areas.

In light of the rapid developments, major retailers and government initiatives are aiming for a sustainable, digital-led transformation across the industry. The digital revolution paints a picture of a cost-effective, interconnected future for Indias retail.

Overall, Indias retail industry is a transformative era. The long-term growth prospects seem extremely promising, lined with innovative advancements, favourable demographics, and new market entrants.

FASHION

Suumayas Vision

Suumayas retail fashion business is booming. We plan to expand our distribution reach and increase product diversity to facilitate further development and accelerate overall business growth. The primary plan of action is to identify gaps and fill them with targeted planning and improvements.

- While we hold strong presence in North and North east of India; we wish to grow our reach across the entirety of India, and international markets.

- We aim to host a varied and diversified product bouquet under M&A format. This will bring more power and sustainable growth to the company as a whole.

- We plan to strengthen brand positioning and establish an omnichannel presence in both Domestic and International markets to exploit the opportunities in the ever-growing retail industry.

Opportunities & Threats

Opportunities

- Ever increasing domestic demand of consumers in the apparel industry

- Governments PLI schemes are expected to boost the nations textile manufacturing capabilities and exports

Threats

- Consumers active shift toward fast fashion creates uncertainty in the market.

- Credit cycles are deteriorating and increasing in duration, causing financial instability

- Inter and intra-nation competition affecting efficiency

Risk and Risk Mitigation Risk

- Inability to conquer international markets with current product portfolio

- Dependency on 3rd party vendors for supply of raw materials

- Lack of innovation in fabrics impacts market growth among fast fashion

Mitigating the Risks

- Expanding product bouquet on EOM basis to cater to a larger Target Group

- Speeding up the Design-to-shelf time to keep up with Fast fashion trends

- Increasing operating flexibility to accommodate and pivot during crisis (e.g COVID-19)

- Better Quality and Monopolizing sourcing to reduce supplier dependency and increase innovation in RM

- Inducing credit and pricing control policies

RURAL RETAIL Suumayas Vision

Were aiming for a horizontal and vertical expansion for Suuvidhams horizons. With new product lines and greater region covered, the companys new era will be filled with unstoppable development past rural retail barriers.

- After identifying Biscuits, Namkeens, and Chocolate as three potential growth areas, we plan to establish them as Suuvidhams primary driving force for rural retail

- Introduce EV vehicles in delivery fleet to promote sustainability

- Digitalize the platform end-to-end for increased process efficiency

Opportunities & Threats

Opportunities

- Inefficient supply of FMCGs creates room for increased distribution

- Price war between wholesalers allows brands to work better with us

Threats

- Possibility of the sales representatives starting their own business

- Competing with established and trusted brand names

- Inconsistency in product quality across all MFG plants

Risk and Risk Mitigation Risk

- Retailers spend an average of Rs. 3250 per order

- Local brands lose sales for delays in delivery and lack of product variants

- 69% of consumers now buy directly from local wholesalers

- There exists a market gap in the market availability for small brands

Mitigating the Risks

- We provide both online and offline facilities to order and pay for goods

- Were reducing expenses and transport costs for salesmen and small retailers

- Were closing the market gap by increasing accessibility to local brands

Financial Performance vis a vis operational performance

In continuation with the operational performance highlighted in product wise performance, the performance of the Company for the financial year ended March 31, 2023, is as follows:

- Total Net revenue stood at Rs. 22.26 crores for the year ended March 31, 2023, as against Rs. 155.43 crores for the year ended March 31, 2022

- The EBIDTA (earnings before interest, depreciation and tax) was Rs. (151.01) crores for the year ended March 31, 2023, as against Rs. (12.99) crores for the corresponding previous period.

- The profit after tax for the financial year ended March 31, 2023, was Rs. (154.77) crores as against Rs. (296.15) crores for the corresponding previous period.

FINANCIAL PERFORMANCE VIS A VIS OPERATIONAL PERFORMANCE

STANDALONE KEY RATIOS

Particulars FY2022-23 FY2021-22 Reason
Debt-equity Ratio 0.09 0.07 Due to higher rate of finance cost and net loss of the company debt to equity ratio increased marginally.
Inventory turnover (Days) 1.92 0.4 Due to increase in closing stock at the end of the year, in the revised business model company can convert its inventory into cash and profit.
Debtors Turnover 768.00 3.11 Due to reduction in overall turnover of the company. Average collection from customer increased.
Interest Coverage ratio (56.69) 78.51 Due to increase in expenses, provisions and reduction in turnover, profitability of the company declined which leads to negative interest coverage ratio.
Current ratio 2.32 1.79 Due to BTA of Agro Business, total current assets improved and average collection from debtors is also improved which leads to improving in overall working capital cycle in effect current ratio improved.
Operating Profit Margin (%) (741.63) 8.80 Due to increase in expenses and provisions and reduction in turnover, profitability of the company declined which leads to negative operating profit margin ratio.
Net Profit Margin (%) (6.95) 6.36 Due to increase in other expenses, finance cost and provisions, net profitability of the company declined which leads to negative net profit margin ratio.

CONSOLIDATED KEY RATIOS

Particulars FY2022-23 FY2021-22 Reason
Debt-equity Ratio 0.38 0.75 The company had repaid overall long-term borrowing as a result of which there is significant positive impact in the debt-to-equity ratio.
Inventory turnover (Days) 12.64 2.70 Due to increase in closing stock at the end of the year and in the revised business model company can convert its inventory into cash and profit.
Debtors Turnover 601.00 12.81 Due to reduction in overall turnover of the group. Average collection from customer increased.
Interest Coverage ratio (84.87) 126.90 Due to increase in expenses, provisions and reduction in turnover, profitability of the company declined which leads to negative interest coverage ratio.
Current ratio 1.62 1.96 Increase in current liability and provision due to which current ratio of group companies decreased marginally
Operating Profit Margin (%) (82.62) 8.11 Due to increase in expenses and provisions and reduction in turnover, profitability of the company declined which leads to negative operating profit margin ratio.
Net Profit Margin (%) (0.71) 6.80 Due to increase in other expenses, finance cost and provisions, net profitability of the company declined which leads to negative net profit margin ratio.

Internal control and system adequacy

The Company has effective and adequate internal audit and control systems, commensurate with the business size to safeguard assets and protect against loss from any unauthorised use or disposition. Regular internal audit visits to the operations are undertaken to ensure that high standards of internal controls are maintained at each level of the organisation. The Companys internal controls are supplemented by an extensive programme of internal audits, reviewed by management and documented policies, guidelines and procedures.

Human resources

Suumaya Industries Limiteds human resource practices helped reinforce market leadership. The Company invested in formal and informal training as well as on-thejob learning. It emphasised engagements with employees by providing an enriched workplace, challenging job profile and regular dialogues with the management. The Company enjoys one of the highest employee retention rates in the industry; it creates leaders from within, strengthening prospects. During the year end, the Company had 68 employees.