Tuni Textile Mills Ltd Management Discussions.


Global headwinds and challenges in the domestic financial sector moderated the growth of Indian economy in 2019-20. The real GDP growth moderated to 5.0 percent in 2019-20 as compared to 6.8 percent in 2018-19. Despite a temporary moderation in the Gross Domestic Product (GDP) growth in 2019-20, the fundamentals of Indian economy remain strong and GDP growth is expected to rebound from the first quarter of 2020-21. Fiscal situation remained close to the consolidation path and consumer price inflation was within the targeted limits set by the monetary policy committee of Reserve Bank of India (RBI). Despite continuing sluggishness in global demand the Current Account Deficit (CAD) narrowed to 1.5 percent of GDP in first half (H1) of 2019-20 from 2.1 percent in 2018-19. Global confidence in the Indian economy improved as reflected in growing inflows of net Foreign Direct Investment (FDI) and an all-time high accumulation of foreign exchange reserves of US$ 457.5 billion as in end December, 2019. India moving up by 14 positions to 63rd rank in 2019 World Banks Ease of Doing Business 2020 Report, has among others, contributed to the increase in global confidence in Indian economy. India has emerged as an important player in the world on the back of high GDP growth and announcement/implementation of critical measures in the current year and last few years.

Indian Economy

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. Indias growth in the fourth quarter of the fiscal year 2020 went down to 3.1% according to the Ministry of Statistics. The Chief Economic Adviser to the Government of India said that this drop is mainly due to the coronavirus pandemic effect on the Indian economy. Notably India had also been witnessing a pre-pandemic slowdown, and according to the World Bank, the current pandemic has "magnified pre-existing risks to Indias economic outlook". The World Bank and rating agencies had initially revised Indias growth for FY2021 with the lowest figures India has seen in three decades since Indias economic liberalization in the 1990s. However after the announcement of the economic package in mid-May, Indias GDP estimates were downgraded even more to negative figures, signalling a deep recession. (The ratings of over 30 countries have been downgraded during this period.) On 26 May, CRISIL announced that this will perhaps be Indias worst recession since independence. State Bank of India research estimates a contraction of over 40% in the GDP in Q1 FY21. The contraction will not be uniform, rather it will differ according to various parameters such as state and sector.


The coronavirus disease (COVID-19) is affecting every sphere of life including manufacturing activities, businesses, etc., across the globe and India is also not spared from the panic situation. The textile industry predominantly employs migrant workers from different States and also a large population comes for work from far off places using public transport. Under the current scenario, especially the constant preventing measures being taken and awareness created by the Government to fight against the Coronavirus pandemic, majority of the workers are not reporting for work and the migrant workers are also returning to their native places. This situation is likely to intensify and result in mass stoppage of production in the industry. With the expected steep reduction in demand due to sudden stoppage of exports/imports and also domestic sales due to the closure of malls and retail showrooms, the industry is likely to face unprecedented and severe losses and needs immediate financial relief to mitigate the crisis. Therefore, the textile industry, being labour and capital intensive, needs immediate help to tide over the worst ever crisis being faced by the industry. Indias economic growth could take a hit of up to half a percentage point in FY21 because of the disruptions caused by the Covid-19 outbreak, early estimates by the government suggest. But independent economists see a deeper cut of up to one percentage point.


Chinas reduced imports of cotton yarn from India are continuing and the trend is expected to continue in near future thus overall yarn demand is projected to remain lower. China, the largest importer of cotton yarn, has replaced India with Vietnam and Indonesia, as they have duty-free access. Further, Indian exports of cotton yarn are subject to a 4% duty in the EU, while Vietnam and Indonesia have a 3.2% tariff and least developed countries (LDCs) get duty-free access. Therefore such favored policy to some of the Asian countries and LDCs has made Indian market uncompetitive. The

Indian cotton spinning industry, which is already facing various problems, is now confronted with yet another challenge in the form of COVID-19 pandemic. Following shutdown of manufacturing units and weak downstream demand in both domestic and export markets the cotton yarn industry is staring at extremely challenging time this year. In the medium to long-term, it is expected that some demand from the US and the EU markets may shift gradually from China to other major garment manufacturers viz. Vietnam, Bangladesh, India and Cambodia.


Currently the biggest threat is COVID 19 and its impact. It is expected that overall textile business will be severely affected which would result in various job losses across the value chain. First half of FY 21 is expected to be very tough and the second half is expected to give some relief to the business and the society in general if all the countries especially India is able to control the COVID 19 Pandemic. The Cotton yarn prices do not move in tandem with that of cotton, as demand for cotton yarn is always over shadowed by higher supply. Cotton prices in India do not move in sync with international cotton prices, which makes hedging difficult. The rise in international trade and the consequent integration of domestic cotton markets with global markets expose the domestic stakeholders to international price fluctuations and the risks resulting therefrom. For Companys business, cotton is the key raw material/ commodity and the company is exposed to price variation in cotton. The Company has in place Commodity Risk Management Policy. The Company regularly monitors cotton prices and take appropriate decisions to minimize the risks. As regards foreign exchange risks, the Company evaluates foreign exchange rate exposure arising from these transactions and take appropriate steps to mitigate such exposure and to minimize the impact of volatility in foreign exchange fluctuations on the earnings.


Tuni Textile Mills Ltd. (TUNI) has exposures in the business of Textile Segment. TUNI are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.


The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Companys business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Companys control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility. The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.


The Company takes pride in the commitment, competence and dedication of its employees in all areas of the business. The Company has a structured induction process and management development programs to upgrade skills of managers. Your Company believes in the potential of people to go beyond and be the game-changing force for business transformation and success. This potential is harnessed by fostering an open and inclusive work culture that enables breakthrough performance and comprehensive development of employees through the three pillars of Leading Self, Leading Teams and Leading Business.


The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.


The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company is continued to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Companys Board of Directors and the Companys Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis.

The Company has complied with all requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market during the last three years.

Mumbai, July 24, 2020 By order of the Board
Registered Office : Narendra Kumar Sureka
63/71, Dadiseth Agiary Lane DIN : 01963265
3rd Floor, Kalbadevi Road, Mumbai-400002 Managing Director