<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPOR</dhhead>
This report covers the operations and financial performance of the
Company for the year ended 31st March, 2023 and forms a part of the Directors Report.
Forward looking statements made in this Report, are based on certain
assumptions and expectations of future events. The company cannot guarantee that these
assumptions and expectations will be accurate or will be realized.
Business & Performance Overview:
SVP Global Textiles Ltd. (SVP) is the fastest growing Multinational
cotton yarn manufacturing company. The Company has consolidated manufacturing capacity of
over 400,000 spindles and 5900 Rotors and is one of the leading Compact Cotton Yarn
manufacturer in India i.e. the highest quality of cotton yarn in the world.
The financial statements have been prepared in accordance with Ind AS
Rules, prescribed under Section 133 of the Companies Act, 2013 read with the Companies
(Indian Accounting Standards) Rules, 2015 and the other recognized accounting practices
and policies to the extent applicable.
The summarized standalone financial performance is as under:
Particulars |
F.Y. 2022 -23 (Amount Rs. in lakhs) |
F.Y. 2021 -22 (Amount Rs. in lakhs) |
| Total Turnover |
5955.71 |
11942.03 |
| Depreciation & Amortization |
735.00 |
735.04 |
| Total Expenditure |
6916.18 |
11814.63 |
| Profit Before Tax |
(960.47) |
127.40 |
| Profit After Tax |
(1088.87) |
129.80 |
| Equity Capital |
1265.00 |
1265.00 |
| Reserves & Surplus |
6923.28 |
8001.18 |
The summarized Consolidated Financial performance is as under:
Particulars |
F.Y. 2022 - 23 (Amount Rs. In Lakh) |
F.Y. 2021 - 22 (Amount Rs. In Lakh ) |
| Total Turnover |
95298.79 |
177838.44 |
| Depreciation & Amortization |
9852.18 |
8574.08 |
| Total Expenditure |
118601.86 |
170702.24 |
| Profit Before Tax |
(23303.07) |
7136.21 |
| Profit After Tax |
(23432.12) |
7128.97 |
| Equity Capital |
1265.00 |
1265.00 |
| Reserves & Surplus |
27503.68 |
56897.14 |
The Management accepts responsibility for the integrity and objectivity
of these statements as well as for the various estimates & judgments used therein.
DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONG WITH
DETAILS EXPLANATIONS
Ratios |
2022-23 |
2021-22 |
% Change |
| Debtors Turnover |
1.64 |
2.45 |
(33.41) |
| Inventory Turnover |
5.73 |
5.14 |
11.32 |
| Interest Coverage Ratio |
0.69 |
1.71 |
(59.81) |
| Current Ratio |
2.79 |
2.52 |
10.93 |
| Debt Equity Ratio |
1.61 |
1.55 |
4.07 |
| Operating Profit Margin (%) |
(0.59) |
0.17 |
(447.58) |
| Net Profit Margin (%) |
0.10 |
0.01 |
(938.88) |
| Return on Net Worth (%) |
(0.76) |
0.10 |
(853.91) |
Industry Structure and Developments:
The Textile Industry is facing exceptional and unprecedented
challenging conditions. There is a rise of demand for low-cost products having sustainable
and environment - friendly production processes. Consumers are seeking products that are
made from renewable materials and from sustainable manufacturing processes. Further,
rising importance of digital technology in textile products, 3D modelling and other
technologies are enabling manufacturers to create more innovative and customized products
while improving production efficiencies and reducing waste.
Hence, there is an optimism that post geopolitical stabilization,
textile sector will show positive trends due to new opportunities and technological
innovations supported by domestic & global demand, investment incentives (PLI) and
strong balance sheets of companies. Further, China plus one policy adopted by USA / Europe
will give a boost to Indian Textile Sector.
The textiles industry in India is also labour intensive and is one of
the largest employers. The textile industry has two broad segments. First, the
un-organized sector consists of handloom, handicrafts and sericulture, which are operated
on a small scale and through traditional tools and methods. The second is the organized
sector consisting of spinning, apparel and garments segment which apply modern machinery
and techniques such as economies of scale.
Global economic overview and outlook
Global economic activity experienced a broad- slowdown, with inflation
higher than seen in several decades. The cost-of-living crisis, tightening financial
conditions in most regions, Russias invasion of Ukraine, and the lingering COVID-19
pandemic all impacted the growth. The growth rate decined to 3.4% in 2022 from 6.4 % in
2021.
The global economic output is expected to witness steady growth, driven
by stabilising inflationary pressures due to central banks policies, reviving consumer
sentiment and investor confidence. The employment scenario in the US and other advanced
economies has recovered from pandemic levels and rising disposable income is also likely
to support growth in the coming years. Emerging and developing countries are also
witnessing growth across multiple sectors, powered by government focus on infrastructure
and manufacturing sectors. China has also recovered from its COVID impact on the economy
and businesses
The global economy is anticipated to experience a growth rate of 2.8%
in CY23, which is expected to gradually increase and stabilise at 3.0% in CY24. Emerging
markets and developing economies, including India, are powering ahead in many cases, with
growth rates expected to witness a significant upsurge this year
Indian economic overview
Despite global challenges, Indias economic activity has remained
robust due to a favourable domestic policy environment and the Governments continued
emphasis on structural reforms and Indian economys growth slowed to 7.2% in the financial
year 2022-23, as compared to a 9.1% rise in the previous fiscal year.
Various high-frequency indicators, such as GST collections, railway and
air traffic, electronic toll collections and E- Way bill volume, suggest a robust economic
recovery in India. This persistent growth momentum has positioned India as an attractive
investment destination. Furthermore, India is expected to retain its status as the
fastest- growing G-20 nation in the coming years.
The Indian governments initiatives, such as the PM Gati Shakti -
National Master Plan, the National Monetisation Plan (NMP) and the Production-Linked
Incentive (PLI), have been instrumental in fostering economic growth. The Reserve Bank of
India (RBI) has also taken prudent and proactive measures to ensure financial stability
and address liquidity constraints. These factors have contributed to the Indian economys
resilience and stimulated substantial investments.
Outlook
The Textile Industry is facing exceptional and unprecedented
challenging conditions. There is a rise of demand for low-cost products having sustainable
and environment - friendly production processes. Consumers are seeking products that are
made from renewable materials and from sustainable manufacturing processes. Further,
rising importance of digital technology in textile products, 3D modelling and other
technologies are enabling manufacturers to create more innovative and customized products
while improving production efficiencies and reducing waste.
Hence, there is an optimism that post geopolitical stabilization,
textile sector will show positive trends due to new opportunities and technological
innovations supported by domestic & global demand, investment incentives (PLI) and
strong balance sheets of companies. Further, China plus one policy adopted by USA / Europe
will give a boost to Indian Textile Sector.
Global textile and apparel industry
The global textile industry is valued at roughly USD 985 billion, and
it is expected to grow at a CAGR of nearly 4.2%, reaching approximately USD 1.268 billion
by 2028
While inflation is the most concerning issue the changing consumer
preferences, rapid population growth, rising preferences for ecofriendly, organic, and
functional textiles, technological advancements, and government regulations and
initiatives are some of the major factors propelling the market.,
Indian textile and apparel industry
India holds the position of being the worlds second-largest producer
of textiles and garments, while also ranking as the sixth- largest exporter of textiles,
encompassing apparel, home, and technical products. Its contribution to the global trade
in textiles and apparel stands at 4%. The textiles and apparel industry contributes 2.3%
to Indias GDP, 13% to industrial production, and 12% to exports. The sector employs
approximately 45 million workers, including 3.5 million handloom workers. In 2021, the
size of Indias textile market reached US$ 223 billion, exhibiting a compound annual
growth rate (CAGR) of 10.23% since 2016
Outlook The year 2023 has arrived with high hopes for the Indian
textile industry. Following a period of turmoil and uncertainty, the sector appears to be
on track for good stable development. This positive mood is the outcome of several
initiatives taken by the Union Government to strengthen the prospects of the textile
sector. These actions, which include bolstering technological and MMF textiles through the
PLI programme, developing mega textile parks, signing FTAs and MoUs with other nations,
and so on, are intended to propel the Indian textile sector to new heights.
Indian Cotton Textiles industry
India holds the position of being the largest global producer of
cotton. Estimated cotton production stood at 312.03 lakh bales during the cotton season of
2021-22, and it is projected to reach 330 lakh bales in 2022-23. The cotton textiles
industry encountered several challenges in FY 2022-23, including soaring cotton prices,
disparities between international and domestic cotton prices, and sluggish demand. As a
result, the industry had to reduce production and experienced lower profit margins.
However, there has been a recent cooling down of cotton prices by approximately 45% from
their peak of Rs 1.1 lakh, and the disparity between international and domestic prices has
also significantly diminished.
Opportunities
China plus one strategy
The China Plus One strategy presents a significant opportunity for
India to enhance its manufacturing capabilities and attract more foreign investment.
Indias textile exports are predicted to increase by 81% to USD 65 billion by 2026. This
growth will be supported by the global China Plus One sentiment. This increase will
result in 7.5- 10 million new jobs.
Increased retail industry
The retail sector in India is highly distributed and largely
unorganised. This sector contains over 13 million retail outlets and accounts for
approximately 95 to 96 percent of India’s total retail business. However, going
forward, growth in organised retailing is expected due to economic growth, changing
lifestyle of the people and globalisation. Moreover, the Indian retail industry is seeing
robust development as a result of increasing expenditure spending by Indian consumers,
particularly the younger generation, and an increase in disposable incomes Apart from
that, metropolises and small towns are witnessing a significant shift in customer tastes
and lifestyle, and have therefore become attractive markets for merchants
Rise in per capita income
The demand for textiles and clothing will be driven by an increase in
disposable income and a growing middle class. With new Capex, the textile industry may
concentrate on value-added or premium items. This will assist businesses with the adequate
capacity to meet the upcoming demand early and boost their profitability.
FDI opportunities
Among growing countries, India has the most free and transparent rules
regarding Foreign Direct Investment (FDI). India is an appealing destination for FDI in
the textile industry. Under the automatic method, 100% FDI is permitted in the textile
sector.
Growth in domestic market
The domestic textiles and apparel market in India is one of the
emerging markets in the world. Rising income levels of consumers and rapid urbanisation
are key factors for the increase in demand in the domestic market. The organised retailing
sector flourishing and further inviting FDI into the sector. As a result of this several
international companies are interested in starting up their business functions in India
soon. These all are a clear evidence that the Indian domestic trade is going to touch new
heights.
Threats
Infrastructure bottlenecks
The poor quality of Indian Infrastructure implores serious setbacks in
the textile industry in India. The bulk of India’s cotton textile plants employ
outmoded technology. According to one estimate, more than 60% of the spindles in India are
older than 25 years.
Automatic looms make up just 18% of all looms in the country, compared
to the worldwide average of 62% and 100% in the US.
Competition from other exporting countries
The Indian textile business faces competition from nations such as
China, Germany, Bangladesh, Sri Lanka, Turkey, Vietnam, Italy, and others. These nations
have already established their core competencies and well-known USPs in the global market.
Bangladesh’s apparel exports have already overtaken those of India. Vietnam has grown
its market share in international trade in recent years. Ethiopia and Myanmar, on the
other hand, are luring foreign customers and investors. All of these nations will be
serious competitors for India in the near future
Availability and price of cotton
Natural disasters that significantly harm cotton harvests in India may
result in sharp price increases, supply disruptions and unpredictability.
Risk and Concerns:
The US dollar has strengthened continuously against the Indian Rupee
and other currencies, due to the Russia - Ukraine war and the recession in the European
market.
Risks can come from uncertainties in foreign exchange financial
markets, legal liabilities, credit risk, accidents, natural causes and disasters. Your
company has adopted appropriate procedure and policies to safeguard it against such type
of risks and uncertainty.
Internal Control systems and their adequacy:
The Company has a well-established framework of internal controls in
all areas of its operations, including suitable monitoring procedures and competent
personnel. In addition to statutory audit, the financial controls of the Company at
various locations are reviewed by the Internal Auditors, who report their findings to the
Audit Committee of the Board. The Audit Committee is headed by an Independent Director and
this ensures independence of functions and transparency of the process of supervision. The
Committee meets on a regular basis to review the progress of the internal audit
initiatives, significant audit observations and planning and implementation of follow-up
action required. The Company conducts its business with integrity and high standards of
ethical behavior and in compliance with the laws and regulations that govern its business.
The Companys internal control system aims to ensure that:
All Statutory Laws and regulations are complied with;
The instructions and directional guidelines fixed by Executive
Management or the Management/ Board are applied;
The Companys internal processes are functioning correctly,
particularly those implicating the security of its assets;
Financial information is reliable; and generally contributes to the
control over its activities, to the efficiency of its operations and to the efficient
utilization of its resources.
Material development in Human Resources / Industrial Relation:
The Company is having a competent team of dedicated employees. The
company recognizes the importance and the contribution of its human resources for its
growth and development. The company follows a progressive policy to retain its employees
including their Training and skill development. The focus of all aspects of Human Resource
Development is on developing a superior workforce so that the organization and individual
employee can accomplish their work goals of service to customers. HR policies of your
company are being aligned with the current trends in the market. The Company follows a
recognition and reward scheme that motivates the employees to perform better.
Health and Safety Measures
As a conscientious and caring employer, the Company actively pursues
safety and health measures continuously. Modern occupational health and medical services
are accessible to all employees through well-equipped occupational health center at all
manufacturing units. At all Plants, adequate safety measures for prevention of any
untoward incident have always been taken. The Company has a range of policies, including
on quality, safety and health aspects to guide the employees work practices, actions and
decisions. The Company strives to continuously improve the effectiveness of its policies
and the employees are encouraged to contribute their best in this direction. All employees
are obliged to ensure that they fully understand all policies and they do fully comply
with the requirements thereof
Cautionary Statement
Statement in this Managements Discussion and Analysis detailing the
Companys objectives, projections, estimates, expectations or predictions are
"forward-looking statements" within the meaning of applicable securities laws
and regulations. Actual results could differ materially from those expressed or implied.
Important factors that could make a difference to the Companys operations include global
and Indian demand-supply conditions, finished goods prices, feedstock availability and
prices, cyclical demand and pricing in the Companys principal markets, changes in
Government regulations, tax regimes, economic developments within India and the countries
within which the Company conducts business and other factors such as litigation and labour
negotiations.
The Company assumes no responsibility in respect of the forward looking
statements herein, which may undergo changes in future on the basis of subsequent
developments, information or events.
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