ECONOMIC AND INDUSTRY OVERVIEW GLOBAL ECONOMY
Global economic recovery remains dim amid COVID-19 pandemic, the war in Ukraine,
surging inflation, rising interest rates and heightened uncertainties. Instead, the world
economy faces the risk of a prolonged period of low growth as the lingering effects of the
COVID-19 pandemic, the ever-worsening impact of climate change and macroeconomic
structural challenges remain unaddressed. Global trade remains under pressure due to
geopolitical tensions, weakening global demand and tighter monetary and fiscal policies.
According to the report, the world economy is now projected to grow by 2.3 per cent in
2023 and 2.5 per cent in 2024, a slight uptick in the global growth forecast for 2023.
INDIAN ECONOMY: Cautiously shining amid global uncertainty
The effects of the slowdown in global economic growth resulting from high inflation and
the continuing war between Russia and Ukraine are also seen to be affecting Indias
economic performance. The country recorded growth of 6.1% for the quarter March 2023. The
countrys real GDP growth in the fiscal year 2022-23 is estimated at 7.2%.
Despite the sluggish growth, we still expect India to be one of the major beacons of
growth in 2023, driven by robust domestic demand and favorable government initiatives are
expected to help India remain as one of the fastest growing major economies globally.
However, external challenges, such as a slowdown in the global economy and monetary
tightening in advanced economies, are factors that could affect the countrys growth. The
efforts of the Union Budget 2023-24 to improve the disposable income of taxpayers in the
country is expected to boost consumption via an increase in discretionary spending. In
addition, the strong capital expenditure push provided by the Union Budget, with an
increased outlay of 37.4% in comparison to the fiscal year 2022-23, is expected to drive
growth, investments, and job creation. Strong credit growth and resilience in financial
markets are further expected to create an environment that supports investments.
TEXTILE INDUSTRY
The global textile market size was valued at USD 1,695.13 billion in 2022 and is
anticipated to grow at a compound annual growth rate (CAGR) of 7.6% in terms of revenue
from 2023 to 2030. The textile industry has evolved greatly since the invention of the
cotton gin. Both industrialized and developing countries now have modern installations
capable of highly efficient fabric production. In addition to mechanical improvements in
yarn and fabric manufacture, there have been rapid advances in development of new fibres,
processes to improve textile characteristics, and testing methods allowing greater quality
control.
INDIAN TEXTILE AND APPAREL INDUSTRY
India is the worlds second-largest producer of textiles and garments. The textiles and
apparel industry in India has strengths across the entire value chain from fiber, yarn,
fabric to apparel. The Indian textile and apparel industry is highly diversified with a
wide range of segments ranging from products of traditional handloom, handicrafts, wool,
and silk products to the organized textile industry in India. The organized textile
industry in India is characterized by the use of capitalintensive technology for the mass
production of textile products and includes spinning, weaving, processing, and apparel
manufacturing. The global apparel market size is expected to grow from $551.36 billion in
2021 to $605.4 billion in 2022 at a compound annual growth rate (CAGR) of 9.8%. The
apparel market is expected to grow to $843.13 billion in 2026 at a CAGR of 8.6%.
Market Outlook
India has a share of 4.6% of the global trade in textiles and apparel. The Indian
textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190
billion by 2025-26. The sector is also the second largest provider of employment in India,
after agriculture. India is the 3rd largest exporter of Textiles & Apparel
in the world. Indias textiles and clothing industry is one of the mainstays of the
national economy. The share of textile and apparel (T&A) including handicrafts in
Indias total merchandise exports stood at a significant 10.5% in 2021-22.
Government Initiatives
The Indian government has come up with several export promotion policies for the
textiles sector. It has also allowed 100% FDI in the sector under the automatic route.
Other Initiatives taken by the Government of India are:
• In May 2022, Minister of Micro, Small and Medium Enterprises, Mr. Narayan Rane,
inaugurated the Center of Excellence for Khadi (CoEK) at NIFT, Delhi. In order to produce
innovative fabrics and apparel that will meet the needs of both domestic and foreign
consumers, the CoEK will seek to introduce the newest designs and adopt procedures that
adhere to international standards.
• In March 2022, the Ministry of Textiles, in collaboration with the Confederation
of Indian Industries (CII), organized a day-long International Conference on Technical
Textiles with the theme: Creating the Winning Leap in Technical Textiles.
• The Government of India has earmarked a corpus of Rs. 1,000 crore (US$ 127.72
million) dedicated for research and development of the technical textiles sector.
• Under the Union Budget 2022-23, the total allocation for the textile sector was
Rs. 12,382 crore (US$ 1.62 billion). Out of this, Rs.133.83 crore (US$ 17.5 million) is
for the Textile Cluster Development Scheme, Rs. 100 crore (US$ 13.07 million) for the
National Technical Textiles Mission, and Rs. 15 crore (US$ 1.96 million) each for PM Mega
Integrated Textile Region and Apparel parks scheme and the PLI Scheme.
• For export of handloom products globally, the Handloom Export Promotion Council
(HEPC) is participating in various international fairs/events with handloom
exporters/weavers to sell their handloom products in the international markets under NHDP.
• The Ministry of Textiles has also been implementing the Handloom Marketing
Assistance (HMA), a component of National Handloom Development Programme (NHDP) all across
India. HMA provides a marketing platform to the handloom weavers/agencies to sell their
products directly to the consumers and develop and promote the marketing channel through
organizing expos/events in domestic as well as export markets.
• In November 2021, Minister of Textiles, Commerce and Industry, Consumer Affairs
& Food and Public Distribution, Mr. Piyush Goyal, stated the desire to target a 3-5x
time increase in the export of technical textiles worth US$ 10 billion over the next three
years.
• The Indian government has notified uniform goods and services tax rate at 12% on
man-made fabrics (MMF), MMF yarns, MMF fabrics and apparel, which came into effect from
January 1, 2022.
• Minister of Textiles, Commerce and Industry, Consumer Affairs & Food and
Public Distribution, Mr. Piyush Goyal, announced a mega handloom cluster in Manipur and a
handloom and handicraft village at Moirang in Bishnupur. The mega cluster will be set up
at an estimated cost of Rs. 30 crore (US$ 4.03 million) under the National Handloom
Development Programme (NHDP).
• In October 2021, Minister for Commerce and Industry, Textiles, Consumer Affairs,
Food & Public Distribution, Mr. Piyush Goyal, announced the creation of 100 textile
machinery champions in the country, and to promote them in the global market. Through
this, the government aims to make India a global player in textiles machinery.
• In October 2021, the Ministry of Textiles approved the continuation of the
comprehensive handicrafts cluster development scheme with a total outlay of Rs. 160 crore
(US$ 21.39 million). Through this scheme, the government aims to support domestic SMEs and
local artisans.
• In October 2021, the government introduced SAMARTH training at 75 training
centers across the country, to accelerate the schemes coverage among artisans.
• The government allocated funds worth Rs. 17,822 crore (US$ 2.38 billion) between
FY16-22 for the Amended Technology Up-gradation Fund Scheme (a-TUFS), to boost the
Indian textile industry and enable ease of doing business.
OPPORTUNITIES
The textile industry in India is very strong as it has a variety of natural and
man-made fibres and yarns. Indias textile industry plays a technological and
capital-intensive role and is compared with industries like heavy machinery, automobiles
etc. Since the pattern of industrialisation in trade has become common in consumer goods
industries and labour-intensive industries there is immense opportunity in the textile
industry.
India has one of the fastest-growing economies. This creates a boost in the purchasing
power of the people while it also spurs the demand for products of the textile industry.
This boost results in a wide range of capacity to manufacture different products that can
be transported within India as well as across the world. Apart from this, India has one of
the most extremely varied textile sectors as it has hand-woven textiles on one end while
capital intensive mills on the other end which results in an enormous number of
opportunities in the textile industry, as follows
• Buyer attention to the Asian market: Many international buyers are more
interested in the Asian section of the market. This may be a golden opportunity for Asian
industries to take the market by storm. It will also be a huge turning point for this
industry in general.
• Increased disposal income and purchasing power of Indian consumers: It is
interesting to remark that the disposable income of the home has been increasing and it
is perceived more than doubled since 1985. With the advance in income, the patterns of
consumer choices have changed and a new middle class has originated, which is developing
at a fast rate. Several studies have estimated that in the next decade, middle class would
be the predominant part of the Indian population. This class covers major customer of the
product of the Company.
• Buyer initiatives for productivity: In this field, many times buyers take
responsibility to initiate the push for productivity. This shows that the buyers are
actually interested in the said products. So, this gives a huge boost to morale.
THREATS
Though there are many opportunities and investments in the textile industry, like any
other industry, the textile industry of India also undergoes certain challenges. The
frequently changing policies stated by the government at the central and state levels
create immense pressure on the textile industry.
Another challenge that the textile industry faces is the limitation to access the
latest and best technology while also failing to meet the global standards in the
competitive export market. Apart from these issues like child labour, competition from
neighbouring countries regarding low-cost garments, personal safety norms. Some of the
challenges the Indian textile industry faces are:
• E-shops and on-demand shops: There are many e-shops and on-demand shops that
are mushrooming their way into the market. Now, the market actually has some internal
competition going on. So, these new shops often end up stealing a lot of customers away
from the industry.
• High making cost: The making cost for this industry is quite high and very
hard to achieve. So this makes having profit very hard.
• High wastage: The textile industry is infamous for its widespread resource
waste, particularly water. Textiles is the second biggest polluting industry. Your Company
is continuously making efforts to reduce the wastage arising from the production.
• Low cost imported fabrics: Indian textile manufacturers face the force per
unit area of cheap import of synthetic yarn from other states.
Risk and Concern
1. Product concentration or dependence: A certain product range dominates the
companys product range. Significant revenues or profits of the company flow from these
products and hence any adverse impact on the sale of few products could impact the
business severely.
Mitigation: The Company should monitor the demand forecasts and threats to these
products closely. New technological developments in the product area (like new fibre &
finish & fashion developments) are also closely watched and the company aims to be the
leader in adopting changes to product range. The company should also continuously
undertake new product development initiatives or spirit offs from existing products that
will reduce the dependency on a small number of products.
2. Exposure to toxic materials: The textile industry is one of the higher polluting
industry in the world in terms of exposure to toxic materials. The air and water are the
most ways to expose the toxic materials. Thousands of workers are engaged in textile
industry. The textile industry involves various types of dyes and chemicals. After weaving
there are so many processes are involved in textile industries.
Mitigation: Company shall make more use of natural fiber in production of finished
to reduce pollution from toxic materials.
3. Slow economic growth/ recession: Reduction in buying power of the end customer
base.
Mitigation: The Company regularly track economic and buying trends and accordingly
changes product mix to suit current market demands.
4. Risk of rejections: High rejection rates for finished goods could result in
business and reputation loss.
Mitigation: All the divisions of the company follow very stringent quality
assurance & inspection norms. The product is finally inspected & confirmed for its
quality before dispatch to customer. Company recognizes quality of its product as its
strategic strength.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
On Standalone basis:
• The Companys Total Revenue was Rs.6281.58 Lakhs in 2022-23 as compared to
Rs.3246.30 Lakhs in the previous year, an increase of about 93.50 %.
• Earnings before Interest, Depreciation, Taxes, Amortizations and Exceptional
Items (EBIDTA) was Rs.470.17 Lakhs as compared to Rs.141.70 Lakhs, an increase of about
232 %.
• Profit before Tax was Rs.297.91 Lakhs as compared to Rs.69.61 Lakhs in the
previous year, an increase of about 328 %.
• The Net Profit for the year was Rs.288.97 Lakhs as compared to Rs.62.86 Lakhs in
the previous year, an increase of about 360 %.
The detailed Financial and Operational Performance present in notes to accounts for the
financial year 2022-23 which forms a part of this Annual Report.
DETAILS OF CHANGES IN KEY FINANCIAL RATIO & RETURN ON NET WORTH
The key financial ratios of the Company where there has been significant change and
change in
Return on Net Worth are summarized below along with detailed explanation:
| Particulars |
2023 (%) |
2022 (%) |
% of Change |
Detailed Explanation for significant change |
| Debtors Turnover |
2.45 |
1.90 |
1.51 |
Increase sales volume in second half of the year - results increase in Debtors at the
end of the year. |
| Inventory Turnover |
1.69 |
1.36 |
0.25 |
Inventory built up for quick sale of goods and higher demands in coming months |
| Current Ratio |
1.67 |
1.23 |
0.37 |
It because of increase in short term Debt |
| Debt Equity Ratio |
3.75 |
3.43 |
0.09 |
Marginal increase |
| Interest Coverage Ratio |
7.04 |
4.88 |
0.44 |
Increase of margin because of increase in profit Volume. |
| Operating Profit Margin (%) |
288.97 |
62.86 |
360.00 |
|
| Net Profit Margin (%) |
4.60 % |
1.94 % |
2.66% |
|
| Return on Net Worth |
20.77% |
6.79% |
140 % |
|
HUMAN RESOURCE
The Company takes pride in the commitment, competence and dedication shown by its
employees in all areas of business. The companys belief is that its people are the
primary source of its competitive advantage and consistently puts emphasis on Human
Resources Development, which remains vital and strategic to the company. The Company is
committed to nurturing, enhancing and retaining talent through Learning &
Organizational Development to support the organizations growth and its sustainability in
the long run. Cordial employee relations, in keeping with tradition, are being pursued
vigorously. Industrial relations have continued to be harmonious throughout the year. This
has been possible by creating a performance driven culture against the backdrop of care
and concern for all employees. Objective appraisal systems based on Key Result Areas
(KRAs) are in place.
The total numbers of employees of the Company as on March 31, 2023 was 350.
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
The Company follows a robust internal control system to ensure that it complements its
growth objectives and at the same time complies with laws and regulations, as well as
provide a safety valve against fraud and malfeasance. Besides protecting the companys
assets, it also constantly checks on the contemporariness of its control, policy, and
technology design. Based on that it suggests improvements and/or enhancements to its
operational processes and reporting systems. An extensive, year-round, independent
internal audit has been the edifice of the companys Internal Control system.
The Audit Committee of the Board of Directors actively reviews the adequacy and
effectiveness of internal controls systems and suggests improvement for strengthening
them.
CAUTIONARY STATEMENT
Statements in this report on Management Discussion and Analysis describing the
Companys objectives, projections, estimates, expectations, or predictions maybe
forward-looking statements within the meaning of applicable laws or regulations. These
statements are based on certain assumptions and reasonable expectation of future events.
Actual results could however differ materially from those expressed or implied. Important
factors that could make a difference to the Companys operations include global and
domestic demand- supply conditions, finished goods prices, raw materials cost &
availability, changes in Government regulations and tax structure, economic developments
within India and the Countries with which the Company has business contacts and other
factors such as litigation and industrial relations. The Company assumes no responsibility
in respect of the forward-looking statements herein which may undergo changes in future on
the on the basis of subsequent developments, information or events.
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