trident ltd Management discussions

Global economic overview

The global economy faced numerous headwinds such as the food and energy crises in Europe, rising inflation, tight financial conditions, and rising commodity prices during FY23. The conflict between Russia and Ukraine has exacerbated the problem, as has the resurgence of COVID-19 in China. Muted consumer demand and rising prices are affecting 2023 growth prospects. Policy paths in major economies may diverge, leading to US dollar appreciation and cross-border tensions. Energy and food price shocks may also increase inflationary pressures.

However, the IMFs forecast indicates that EMDEs will grow at a 5.3% rate in 2023, reflecting the fact that the regions economic challenges are starting to subside. The aim of global central banks is to improve sentiment while continuously monitoring liquidity positions.

The proper calibration of monetary policy, the outcome of the war in Ukraine, and the likelihood of additional supply-side shocks due to the pandemic, however, will have a significant impact on how the world economy grows.

Outlook

Advanced economies are expected to slow down in the upcoming fiscal, however, a fall in inflation following a peak in 2022 and adjustments to initial energy crisis are expected to cause the global economic growth of 2.9%¹ in 2023.

This would be led by emerging economies like China and India, which are anticipated to have stronger growth. It is predicted that worldwide inflation will decline from 6.6% in 2023 to 4.3%² in 2024 because of policy interventions by major central banks and declining global oil prices.

Non-fuel commodity prices are predicted to fall by an average of 6.3% in 2023 expecting to feed into the existing demand and creating more demand, contributing to the growth of the global economy.³

Strong labour markets and robust wage growth may gradually strengthen consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for further monetary tightening measures.

Indian economic review

Despite a grim global outlook, the Indian economy recorded a growth of 7.2%, reveals the NSO. Banks and the corporate sector both displayed healthy balance sheets, indicating an elevated credit demand. This recovery was considerably facilitated by the Central Governments significant boost in capital expenditure.

Government initiatives, including the PM Gati Shakti - National Master Plan, the National Monetisation Plan (NMP) and the Production-Linked Incentive (PLI), are expected to foster economic growth, going forward. The Reserve Bank of India (RBI) has also exercised prudent and proactive measures to ensure financial stability and address liquidity constraints.

Private consumption in FY23 is projected to have clocked a growth rate of 7.7%. The surge in private consumption has also fuelled production activities, leading to higher capacity utilisation across various sectors.⁴

Outlook

Strong domestic demand, rising employment indicators, reducing inflationary pressures, and a high corporate sector debt profile augur well for the domestic economys growth in the years ahead. As the current account deficit is expected to decrease from the beginning of the year, it would provide a larger safety buffer for capital expenditures, the macroeconomic stability is predicted to further improve in FY23 providing the government more flexibility in managing unforeseen risks and more financial resources to cover unforeseen costs.⁵ The trends suggest that Indias economy is on an upward trajectory, and the country is well-positioned to continue its growth despite global turbulence.

Textile industry overview

Global textile market

Global trade, supply chain digitalisation, and the growth of e-commerce are among the key forces determining the markets growth. However, it is important to note that recent shifts in the market dynamics have affected certain countries, particularly China. As the worlds leading textile exporter, China has experienced a decline in trade due to heightened concerns about cotton sourcing, with customers becoming more cautious. This shift in sentiment has prompted a reduced reliance on China, following the US embargo on Xinjiang cotton. Consequently, it has created a favourable environment for other nations such as India, Bangladesh, and Vietnam to capitalise on the situation by ramping up their production and expanding exports in the textiles and apparels sector.

The global textile market grew from $573.22 billion in 2022 to $610.91 billion in 2023, at a CAGR of 6.6%, and is projected to reach $755.38 billion in 2027 at a CAGR of 5.5%.⁶

Indias textile market

The textile sector is one of the largest employers in the nation, employing an estimated 45 million people directly, including a significant percentage of women and rural residents. The value chain of the textile industry is complex and extends from fibre through ready-to-wear clothing. With a sizeable raw material base and manufacturing strength across its value chain, it is also one of the largest in the world.

Looking at the potential of the industry, the Indian government has launched various programmes to support domestic textile producers. Under the broad objectives of several government policy programmes, including ‘Skill India and ‘Make in India, the government is encouraging investment in this area, which will generate more employment, enterprises, and chances for skill development. The government has launched various schemes such as Scheme for Capacity Building in Textile Sector (SAMARTH), Amended Technology Up-gradation Fund Scheme (ATUFS), Production Linked Incentive (PLI) Scheme, PM Mega Integrated Textile Region and Apparel (PM MITRA), Integrated Processing Development Scheme (IPDS) to increase capacity, investments and job opportunities in the industry. ⁷

To boost the productivity of the sector, the central government increased the budget allocation of ministry of textiles from Rs 3,579.61 crores in the previous fiscal to Rs 4,389.34 crores in the current fiscal in the Union Budget 2023-24. It aims to increase coordination between farmers, the State, and industry for input supply, extension services, and market links. Additionally, to

Growth drivers⁸

1. Competitive manufacturing costs and organized retail landscape & e-Commerce

2. Presence of entire value chains and large and growing domestic market

3. Increased focus on technical textiles due to growth of end-user industries

4. Presence of world class infrastructure and modern production process.

improve credit availability for capital expenditure in the industry, the budget proposed allocating Rs 900.0 crores for the Amended Technology Upgradation Fund Scheme (ATUFS) for 2023-24 as opposed to Rs 650.0 crores for 2022-23.⁹

Paper industry overview

Global paper industry

Put this first -The global paper industry encountered several challenges during FY23, including supply chain disruptions, declining consumer spending and reduced demand for paper products. The industry faced increased environmental scrutiny and regulations, leading to a shift towards more sustainable packaging alternatives and a decline in paper usage. Moreover, the rising costs of raw materials, such as wood pulp and energy, posed significant challenges for paper manufacturers, affecting their profitability. The global pulp and paper market is estimated to be $387.6 billion in 2022 and is expected to grow at a CAGR of 3.5% to $477.7 billion from 2023 to 2028.

However,the surge in demand for paper in both developed and emerging nations chemical and industrial processing industries will result in long-term growth. In addition, the market is expected to be driven by the expansion of several end-user industries and the expanding markets for paper and pulp in packaging, particularly in emerging countries.

Indian paper industry

The paper market in India expanded at a CAGR of more than 8% during 2022 to 2027. The entire paper market is made up of paperboard and industrial packaging, stationery, newspaper print and specialty paper. Paperboard and industrial packaging paper and paper stationery together provided about two-thirds of the market share of the overall paper market among all of these categories. During the forecast period, it is expected that the paperboard and industrial packaging paper and newspaper print markets would account for over 70% of the total paper market. In terms of annual market growth in volume terms, it is anticipated that the paper stationery and specialty paper markets would witness a growing trend. The government is focused on to reforming the forest policy as it would be necessary for the wood-based paper sector so that plantations can be grown by industry, cooperatives of farmers, and state governments, which would increase the competitiveness of the paper industry in India.¹⁰

Growth drivers

• Government initiatives to ban single-use plastic

• Rising disposable income

• Higher literacy rate

• Growth of FMCG market

Company overview

Trident limited is the flagship Company of Trident Group, an Indian business conglomerate and a global player. Headquartered in Ludhiana, Punjab, Trident Limited is a vertically integrated textile (Yarn, Towel & Bedsheets) and Paper (Wheat Straw-based) manufacturer. Tridents towel, yarn, bed sheets and paper businesses have earned global recognition and are delighting millions of consumers across India and the world. Trident is one of the largest players in home textile in India. Supplying national, captive, and retailer owned brands, the organization is highly decorated with awards from its customers, vendors, and various government entities in recognition of advancing the highest standards in product quality, social responsibility, and environmental stewardship.

The Company operates in four major business segments: Yarn, Towel, Bedsheets and Paper & Chemicals with its manufacturing facilities located in Punjab and Madhya Pradesh.

Trident limited, which caters to the domestic markets of the Company through online & offline channels. founded over three decades ago, is a globally recognised integrated home textile manufacturer with a proven track record of excellence. With world-class infrastructure and advanced technology, the Company has established itself as one of the worlds largest wheat straw-based paper manufacturers. This remarkable achievement is a testament to Tridents unwavering commitment to sustainability and eco-friendliness. Trident is also renowned for its business partnerships. It has become the number one brand in the North Indian region for the branded copier segment.

Tridents success is not just limited to its resilient performance but has deep-rooted values of sustainability and social responsibility. The Companys mission is to create products that meet customers expectations while adhering to the highest standards of sustainability. Trident believes in delivering not just quality products, but also a positive impact on society and the planet.

At Trident, innovation and creativity are encouraged, and new ideas are continuously explored to meet the ever-evolving demands of the market. The Companys commitment to sustainability, combined with its strong financials, advanced technology, and dynamic workforce, makes it a force to be reckoned with in the global business landscape.

Trident Global Corp Limited is the Companys retail arm, which caters to the domestic markets of the Company through online and offline channels. Trident Europe Limited offers proximity to European markets and strengthens the Companys brand presence. The company has a presence in over 100 countries around the world, with national presence in Chandigarh, Bhopal, Gurugram, New Delhi and Mumbai, and international presence in New York, USA, Dubai and UK.

The Company intends to investigate a range of capital allocation methodologies, improve return ratios, expand present operations, and diversify into new industries through both organic and inorganic means to increase shareholder value. The Company investigates various methods to unlock value, create synergies and investigate business ties. The Companys growth plan also includes product development, e-commerce, brand promotion, and the best utilisation of leverage capacity to create value.

Business overview

Textiles

Key highlights	Sales (H million)	EBIT margin
FY 2023	49,243	6.6%
FY 2022	59,395	18.4%

Yarn

Yarn business has been operational for over three decades and presently offers one of Indias largest spinning facility on a single campus. It generates premium cotton yarn used in domestic textile manufacturing. The Companys manufacturing facilities are equipped with cutting-edge technology, The Company has a broad range of high-quality yarns in its product portfolio.

Highlights 2022-23

	Revenue split
	Yarn
FY23	24%
FY22	28%

Cotton yarn product portfolio

• 100% cotton combed yarn

• Special open-end yarn

• Organic cotton yarn

• Core spun yarn

• Blended yarn

• Eli-twist yarn

• Slub yarn

• Compact yarn

• Air rich yarn

• Certified cotton yarn

• M lange yarn

• Packed dye yarn

• Gassed mercerized yarn

• Zero twist yarn

• Wrapper yarn

• Bamboo/ cotton yarn

• Modal/ cotton yarn

• Soya/ cotton yarn

• Polyester/ cotton yarn

• BCI cotton yarn

• BMP cotton yarn

• 100% dyed yarn

Home textiles

The Company is one of the biggest vertically integrated businesses in the home textile industry globally, Bath and bed linen are the Companys two primary industry segments. Trident is dedicated to innovation in all facets of its business, including the infrastructure for manufacturing, the use of fibres, yarn

Online presence

Due to its omni-channel retail expertise, the Company has gained a footing on e-commerce platforms. To take advantage of emerging market opportunities, Trident is now focusing on accelerating expansion through digital channels.

Bath linen division

The Company is the largest terry towel manufacturer and a significant bath linen supplier in the US. Trident has always been at the forefront of innovation, launching products of the highest quality that adhere to global standards. Two of the Companys production facilities for home linens are in Barnala (Punjab) and Budni (Madhya Pradesh).

Bath linen product portfolio

• Luxury

• Organic

• Spa and hotel

• Beach

• Designer

• Jacquard

• Dobby texture

• Bath mats

• Checkered

• Waffle

• Infants and kids

• Bath rugs

production and processing. The business is well-versed in every aspect of its value chain.

The Company keeps up with industry trends and its clients, thanks to its design studios in the US and the UK. It has a professional team of trained designers from renowned Indian colleges for end-to-end product and print design innovation.

Bed linen division

Trident offers comprehensive bedding solutions and has an extensive product line and strong design capabilities. ITridents commitment to quality and innovation has made it a trusted name in the industry.

Bed linen product portfolio

• Bed linen

• Luxury

• Organic

• Spa and hotel

• Beach

• Designer

• Jacquard

• Dobby texture

• Bath mats

• Checkered

• Waffle

• Infants and kids

• Bath rugs

Hometextiles	Revenue split
FY 2023	54%
FY 2022	58%

Competitive advantage:

• Qualified and skilled manpower

• Cotton quality and availability

• Favourable government policies

• Competitive cost of production

• Backward integration with yarn

• Global friendly environment

Copier paper

Trident is a leading supplier of multi-color, quick-turn publishing and branded copier paper, with a 175,000 TPA capacity. It is among the worlds largest wheat straw-based paper producers and prioritises technological superiority with top-notch equipment and environmental awareness. Tridents brand equity has improved due to its customer-centric approach.

Branded copier paper

• Trident Spectra

• Trident My Choice

• Trident Natural

• Trident Eco Green

• Trident Royal Touch

• Trident Digi Print

• Trident Spectra Bond

Writing and printing maplitho paper

• Super Line

• Prime Line

• Cartridge paper

• Index paper

• Stiffener paper

• Diamond Line

• Drawing paper

• Platinum Line

• Silver Line

• Trident Royale

• Copier Grade

Bible and offset printing paper

• Bible

• Cream wove

• Offset (watermark)

• Paper

Chemical and power segment

Based on a borosilicate glass manufacturing facility from Germanys De Dietrich Process Systems, a leader in the world of glass plants, Trident is among the top producers of sulphuric acid in India, producing exceptional quality LR/AR grade sulphuric acid. The Company is one of the main manufacturers of industrial and battery-grade sulphuric acid in North India. It produces consistent, effective and high-quality output on a larger scale.

The Company specialises in three varieties of sulphuric acids— commercial grade, battery grade, and laboratory reagent (LR) grade. Each of these varieties has a unique composition and is employed in a variety of ways. The Companys sulphuric acid serves several battery needs and is used to make zinc sulphate, alum, fertilisers, detergent and dyes.

Financial Performance

The total income of the Company during the year under review has been H62,913 million as against H69,415 million in the previous financial year. The Operating Profit (EBITDA) for the year stood at H9,418 million as compared to H15,100 million in the previous financial year, a decrease of 38 percent. The Company has earned a net profit of H4,219 million as against H8,150 million in the previous financial year, a decrease of 48 percent. The Companys earnings per share were Rs 0.84 during the current year (previous year INR 1.63).

Statement of profit and loss

Revenue

Total Revenue for the FY23 stood at Rs 62,913 million as compared to Rs 69,415 million in FY22. This is mainly because of high inflation resulting into input price & increase in supply chain cost impacting margins.

EBITDA

EBITDA for FY23 stood at H9,418 million, (Previous Year Rs 15,100 million) which translates into a margin of 15% (Previous Year 22%).

Net profit

Net profit for FY23 stood at H4,219 million (Previous Year Rs 8,150 million) translating to EPS of Rs 0.84 (Previous Year Rs 1.63)

Dividend

The company has maintained healthy dividend percentage of 36% on face value of each equity share. The dividend pay-out ratio stood at 43% for FY 2022-23.

Finance cost

Finance cost in FY23 reduced by 9.8% to Rs 774 million.

Segmental revenues

Textiles:Revenue stood at Rs 49,243 million in FY23 over Rs 59,423 million in FY22. EBIT margin for the segment stood at 6.6% (previous year EBIT margin 18.4%)

Paper & chemicals: Revenue stood at Rs 13,432 million in FY23 over Rs 9,797 million in FY22. EBIT margin for the segment stood at 30.6% Previous year EBIT margin 24.3%.

Balance sheet

Paid-up capital

The total equity share capital for FY23 stood at Rs 5,096 million. There has been no change in the equity share capital of the company over last fiscal.

Net worth

Net worth for FY 2023 stood at Rs 41,258 million from Rs 37,972 million in FY 2022. The increase was mainly on account of increased profitability of the Company.

Key financial ratios

A detailed note on Key financial ratios has been provided in Note 56 to Standalone financial statements.