SVP Global Textiles Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This report covers the operations and financial performance of the Company for the year ended 31st March, 2024 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. 2023 -24	F.Y. 2022 -23
	(Amount Rs. in lakhs)	(Amount Rs. in lakhs)
Total Turnover	312.45	5955.71
Depreciation &	734.99	735.00
Amortization
Total Expenditure	2311.07	6916.18
Profit Before Tax	(12336.05)	(960.47)
Profit After Tax	(12336.05)	(1088.87)
Equity Capital	1265.00	1265.00
Reserves & Surplus	(5412.77)	6923.28

The summarized Consolidated Financial performance is as under:

Particulars	F.Y. 2023 - 24	F.Y. 2022 - 23
	(Amount Rs. In Lakh)	(Amount Rs. In Lakh )
Total Turnover	30192.81	95298.79
Depreciation &	11232.86	9852.18
Amortization
Total Expenditure	63050.29	118601.86
Profit Before Tax	(43194.90)	(23303.07)
Profit After Tax	(43194.90)	(23432.12)
Equity Capital	1265.00	1265.00
Reserves & Surplus	(17838.87)	27503.68

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	2023-24	2022-23	% Change
Debtors	0.04	1.64	(97.49)
Turnover
Inventory	1.98	5.73	(65.47)
Turnover
Interest	(10.58)	0.69	(1696.98)
Coverage Ratio
Current Ratio	2.31	2.79	(17.12)
Debt Equity Ratio	(3.61)	1.61	(325.60)
Operating Profit Margin (%)	(0.25)	(0.59)	56.71
Net Profit Margin (%)	(39.73)	0.10	39238.72
Return on Net Worth (%)	(6.11)	(0.12)	4843.86

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 Economy

The global economy demonstrated strong resilience in the face of economic headwinds during 2023. It managed to expand by 3.2% despite facing geopolitical challenges and fluctuations in commodity prices, leading to inflationary pressures across both advanced and emerging markets. In order to address this issue, central banks of major economies devised strategies. They implemented measured interest rate increases, effectively curbing its escalation. Inflation rates receded more swiftly than anticipated from their peak in 2022, resulting in gradual economic recovery and job creation in the US, Europe and other emerging markets, albeit persistent geopolitical tensions, disrupting global supply chains and trade. Chinas economy continued to experience strain throughout 2023, a trend expected to persist into 2024, given its significant manufacturing capabilities and supply chain influence, posing a potential risk to global economic stability. However, emerging economies like India, Vietnam and Mexico are expected to show positive growth. The disturbances in the Red Sea disrupted supply chains, resulting from the shifts in imports and exports of several economies. Possible causes for growth failures include the property sectors growing problems in

China and abroad, along with a disruptive shift toward tax increments and budget cuts.

Outlook

Global GDP is expected to expand by 3.1% in 2024 and 3.2% in 2025. The forecast is less than the historical (2000 19) average of 3.8% because of high central bank policy rates to control inflation, the withdrawal of government support due to excessive debt-ridden economic activity and low underlying productivity growth. Despite tightening monetary policy and supply-side issues progressively getting better, inflation is generally dropping faster than expected. With a downward revision to the 2025 projection, global headline inflation is expected to drop to 5.8% in 2024 and 4.4% in 2025.

Indian Economy

The Indian economy demonstrated remarkable resilience in the face of global economic challenges. A strong resurgence in consumer demand, excellent performances across manufacturing, services and agricultural sectors, by a favourable monsoon have been pivotal in this growth trajectory.

According to the National Statistical Office (NSO), India has registered a real GDP growth of over 7% during FY 2024. Indias per capita disposable income has been rising over the years and is expected to be Rs. 2.14 lakh in 2023-24, driven by overall economic growth. This rebound in economic growth can be attributed to Indias sound macroeconomic fundamentals, increasing domestic demand and prudent monetary policies implemented by the RBI.

Despite moderate revenue growth, India Incs interest coverage ratio, a measure of financial health, has expanded, across certain sectors including automobiles, cement, consumer durables, hospitality, oil and gas, petrochemicals, pharmaceuticals and power. Considering the China plus One approach of the global community, the general confidence level of Industry remains positive. However, ongoing geopolitical conditions will continue to pose challenges for the textile Industry.

Outlook

With the support of various industry-promoting programmes like the governments ‘Make in India initiative, the manufacturing sector has the potential to expand into a US$ 1 trillion industry by 2025 2026. This push has further increased with the governments Gati Shakti Yojna which provides multi modal connectivity infrastructure for the various SEZs. With such government initiatives, the Indian Manufacturing sector remains optimistic and expected to grow with the aim to regain its growth potential.

Global Textile

The demand for clothing in the main export markets like the US, the EU and the Middle Eastern nations has been affected by unfavorable economic circumstances. India exports a fifth of its garments to the EU, which is still dealing with the fallout from the conflict between Russia and Ukraine. The demand for apparel has decreased in 2023 compared to 2022 in the US and the Middle East due to the ongoing Israel-Gaza conflict. The global textile market was estimated at USD 1,837 billion in 2023 and from 2024 to 2030, revenue is expected to increase at a compound annual growth rate (CAGR) of 7.4%. Throughout the forecast period, the fashion industrys relentless need for clothes combined with the growth of e-commerce platforms is predicted to propel market expansion.

World Cotton Outlook

The main cotton producing countries in world are China, India, USA, Brazil, Pakistan and Australia. Together, these countries account for more than three fourth of world production. World cotton production for 2023/24 is expected to decline by approx. 2% from 25.32 million tons in 2022/23 to 24.73 million tons in 2023/24. The major reduction has been noticed in China and USA. The world consumption in 2023/24 is expected to increase by 1.5% from 24.31 million MT in 2022/23 to 24.68 million tons in 2023/24. World trade of cotton is up 1.38 million tons to 9.58 million tons as China imports are raised by 1.87 million tons to 3.22 million tons, the highest level in 11 years. This is partially offset by Pakistan imports projected down by 0.37 million tons.

Brazilian exports are expected to increase by 0.62 million tons. The Closing stocks for 2023/24 is expected to remain at 17.52 million tons almost same as for the cotton year 2022/23. The global yield is expected to drop 1% to 761 kg/ha. Global yield has been falling from the last a few years and this is likely due to adverse weather conditions.

Indian Textile

The Indian textile industrys recovery in the upcoming calendar year (CY) 2024, hinges on factors such as, an increase in local demand, recovery in exports and stabilized cotton prices. Roughly, three-fourths of the total demand is met by the domestic market, which is still not vibrant. Indias T&C exports decreased by 4.13% during FY23-24 over FY22-23. T&C exports declined from USD 35.16 billion in FY22- 23 to USD 33.71 billion in FY23-24. As T&C exports account for 1/3rd of textile output in the country, a significant boost in export performance is required to achieve higher share in the world trade of T&C and create gainful employment. This textile sector needs to leverage regulatory support and address structural difficulties in order to continue growing.

Indian Cotton Outlook

Indias textile industry is mainly cotton based, therefore, cotton plays a major role in the Indian Economy. The area under cotton cultivation in the year 2022/23 in India was about 12.9 million hectares which has decreased by 3% to 12.5 million hectares in the year 2023/24. The estimation for production of the cotton crop for the 2023/24 season is 310 lac bales (of 170 kgs each). The cotton consumption in the year 2023/24 is projected to be at 317 lac bales. Import of cotton is estimated to be around 20 lac bales. Export of cotton is estimated to be at 22 lac bales (approx.) in 2023/24. The Closing stock for the season 2023/24 is expected to near about 20 lakh bales.

Opportunities

Sourcing shifts : With the ever-changing global geo-political scenario global buyers want to de-risk their sourcing strategy and reduce their dependence on China, which has been the most dominant supplier of textiles and apparel over the years. India stands to gain from this shift and there is a huge opportunity for India to have foot in the door of global buyers and make the most out of this opportunity. Attracting foreign direct investments (FDI) to enhance the value chain and infrastructure will be pivotal in capitalizing on this window.

Sustainable manufacturing :

As the world undergoes a transformative shift towards sustainable and innovative materials, India has a golden opportunity to emerge as a key player in these sectors with increase in using organic and recycled materials, water and energy conservation and increased use of renewable energy.

Technological advancements :

The textile sector has experienced a significant amount of investment in technology and automation. Productivity can be enhanced by automation, reduced cost and consistent quality. Advanced technologies like AI and machine learning can be introduced for better production planning, inventory management and predictive maintenance. The recent years have witnessed rapid advancements in digital textile technologies. Advances in digital printing, fabric weaving and other processes have enabled the production of a wide range of fabrics with greater accuracy, consistency and cost efficiency than ever before. Digital printing has also allowed more vibrant and accurate colours to be printed onto fabrics, and inkjet printing has made production of printed fabrics faster.

Free Trade Agreements (FTAs)

Recent FTAs signed with countries like Australia, and the UAE can be leveraged to boost exports. The potential for new FTAs with the UK, Canada, and the European Union holds the promise of further expanding Indias reach in international markets. While it may be a challenge to establish these FTAs, these will benefit Indian textile and apparel exports as and when they are finalized.

Scope of Self-employment Opportunities

The textile industry offers vast Self-employment opportunities. There is something for everyone, from designing and producing unique clothing to creating custom blankets and upholstery.

The rise of e-commerce

The rise of e-commerce has created new opportunities for the textile industry. E-commerce allows textile manufacturers to reach a wider audience and sell their products directly to consumers.

Threats

Global Competition

The textile industry in India faces heavy competition from other South East Asian countries such as China, Bangladesh, Vietnam and Indonesia. Lower labour and production costs in these countries make them more cost-effective for buyers. Also competition from synthetic fibres is fierce, as they are cheaper , easy to maintain and more durable.

Uncertainty of prices and availability of Cotton

Indian Cotton Textiles may lose may lose competitiveness and advantage in the Global trade, if the cotton crop is substantially reduced, and if Indian cotton prices are higher than International cotton. Paucity of Quality Raw Materials India faces a unique challenge when it comes to cotton production per Hectare. While India contributes more than 25% of the total cotton production area in the world, the annual production is only around 8% of the global value.

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.