Vardhman Polytex Management Discussions


The global economy is going for a gradual recovery from the powerful blows of the pandemic and of Russias unprovoked war on Ukraine. China is rebounding strongly following the reopening of its economy. Supply-chain disruptions are unwinding, while the dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronous tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back toward its targets. In IMFs forecast, global growth will bottom out at 2.8 percent in 2023 and would rise modestly to 3.0 percent in 2024. Global inflation will decrease, although more slowly than initially anticipated, from 8.7 percent in 2022 to 7.0 percent in 2023 and 4.9 percent in 2024.

Notably, emerging market and developing economies are already powering ahead in many cases, with growth rates jumping from 2.8 percent in 2022 to 4.5 percent in 2023. The slowdown is concentrated in advanced economies, especially the euro area and the United Kingdom, where growth is expected to fall to 0.7 percent and –0.4 percent, respectively, in 2023 before rebounding to 1.8 and 2.0 percent in 2024.

(Source: IMFs World Economic Outlook-2023 APR)

Indian Economy

The Indian economy, however, appears to have moved on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also faced the challenge of reining in inflation that the European strife accentuated. Measures taken by the government and RBI, along with the easing of global commodity prices, have finally managed to bring retail inflation below the RBI upper tolerance target. However, the challenge of the depreciating rupee, although better performing than most other currencies, persists with the likelihood of further increases in policy rates by the US Fed. The widening of the CAD may also continue as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong. The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year.

Despite these, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0 per cent in FY23. These optimistic growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private consumption seamlessly replacing the export stimuli as the leading driver of growth. The uptick in private consumption has also given a boost to production activity resulting in an increase in capacity utilisation across sectors. The rebound in consumption was engineered by the near-universal vaccination coverage overseen by the government that brought people back to the streets to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, among others.

(Source: RBI Economic Survey 2022-23)


The global textile industry is moderately competitive, with companies increasing their product portfolio and expanding their production capacity to serve the growing demand, particularly in emerging markets. However, the markets fragmented nature is expected to refrain investments by prospective companies over the forecast period. Furthermore, several companies adopted expansion strategies to strengthen their market position and have a competitive edge over others. The market players compete based on differentiation in technology, design, product innovation, and customer-centric products. The market also possesses various strengths such as flexibility, rich heritage, mass production capabilities, capital investment capabilities, high-performance machinery, value-added textile production, and strong R&D. Rising awareness toward reducing greenhouse emissions on a global level owing to the implementation of stringent regulations by the European Commission and EPA to reduce environmental pollution is expected to force textile manufacturers to develop new products by utilizing bio-based polyesters, including bio-PET as raw material. The economic value generated by the textile industry was estimated at approximately USD 1.7 trillion in 2022 with 7.8% CAGR (2023-2030). This economic output is an amalgamation of businesses that are involved in the manufacturing, distribution & supply, and application of textiles.


Indian Textiles Industry

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool, to synthetic/man-made fibres like polyester, viscose, nylon and acrylic. The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. Indias textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both within India and across the world.

The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. India has a 4% share of the global trade in textiles and apparel. India is the worlds largest producer of cotton. Estimated production stood at 362.18 lakh bales during cotton season 2021-22. Domestic consumption for the 2021-22 cotton season is estimated to be at 338 lakh bales. Cotton production in India is projected to reach 7.2 million tonnes by 2030, driven by increasing demand from consumers. In FY23, exports of readymade garments (RMG) cotton including accessories stood at US$ 7.68 billion till January 2023. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally. Indias textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY. During April-October in FY23, the total exports of textiles stood at US$ 21.15 billion. Indias textile and apparel exports to the US, its single largest market, stood at 27% of the total export value in FY22. Exports of readymade garments including cotton accessories stood at US$ 6.19 billion in FY22.


India has the worlds second largest spinning capacity, commanding a share of the global Cotton Yarn market. Cotton Yarn accounts for nearly 73% of total spun yarn production. India produces a comprehensive range of yarns for every conceivable end use – non-spun or open-end; combed or carded, basic, compact, m?lange or fancy. With more companies modernizing their mills with state-of-the-art technology, Indian cotton yarn markets is set to boost its export potential. The worlds most renowned Indian Cotton Yarns are available as greige, bleached, mercerized, gassed, twisted, dyed or an endless range of fashion yarns like m?lange, stretch, blends, high twist and so on to meet the different applications in fashion, clothing, home textiles, hosiery and industrial fabrics. India can meet every customer requirement whether large or small, regular or customized, premium or basic. Today, Indian yarn is widely accepted in International markets as the exporters here regularly meet the needs of importers with unmatched efficiency. China is the largest importer of yarns from India.


Opportunities & Threats 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 is estimated to be the second most appealing market by the year 2025.

India is one of the fastest-growing economies and 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.


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 competition from neighbouring countries regarding low-cost garments is also the challenge the Indian textile industry faces.


Vardhman Polytex Limited manufactures yarns that are synonymous with the highest quality. With prominent position in the domestic and international market, its range of Cotton Yarns (Carded, Combed, Organic, BCI), Cotton Polyester Yarns and Value Added Yarns (Grey and Dyed) in variable counts, hold a place of pride in the industry. Using the finest raw materials and cutting edge technology for production, each yarn confirms to highest global standards. The company puts forth fresh products through constant innovation and synchronization with trends. The company has production facilities located at three locations at Ludhiana (Punjab), Bhatinda (Punjab) and Nalagarh (Himachal Pradesh).

Segment-wise/Product-wise Performance

The company operates in one segment only i.e Textile and product-wise sale details are as under:

Rs in Lakh

Sale of products

2022-23 2021-22
Grey yarn 43462.42 75377.61
Dyed yarn 7711.04 9470.68
Garments 121.09 103.75
Waste sale 5532.83 7535.37
Trading goods (textile ) 4594.52 65.87
Job charges income 129.14 306.23
Total 61551.04 92859.51


The future of the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. India is working on various major initiatives to boost its technical textile industry. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade. The growth in textiles will be driven by growing household income, increasing population and increasing demand by sectors like housing, hospitality, healthcare, etc.

During FY 2023-24, major focus of the company shall be on cost cutting measures, improving productivity, reduction in wastage, efforts on taking quality to next level, deriving efficiency to make products further cost competitive and debt cost reduction. Despite all odds, the company expects to bounce back. It is a testing times for all of us, but with our good brand image and network in the market, we expect to be back on track soon.

Management perception of Risk & Concerns

Textile sector faces an array of challenges like rising labour costs, production and process automation, ‘reshoring and ‘nearshoring, as well as increased pressure to transition towards a more sustainable business model, with improved wages and working conditions. In todays challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The main risks inter alia include strategic risk, operational risk, financial risk and compliances & legal risk. The fast technology obsolescence, high cost of manufacturing and economic uncertainty in key global markets are the major risk/ concerns of the business.

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Audit Committee also evaluates risk management system of the Company periodically. To cover foreign exchange risk, the Company transacts its all exports through secured mode either against LC or partial advance payment and foreign currency is being hedged simultaneously against almost all confirmed contracts. The company has very agile corporate team of professionals keeping tab on business developments and working efficiently to mitigate the various risks.

Internal Control System & 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 the follow-up action required. The Company conducts its business with integrity and high standards of ethical behavior and in compliance with the all applicable laws and regulations that govern its business.

Discussion on Financial Performance with respect to Operational Performance

During the FY 2022-23, your company achieved total revenue from operations of Rs.615.51 Crores showing decline from last years figure of Rs.928.59 Crores. EBITDA of the Company was Rs.67.08 Crores as against last years figure of Rs.62.25 Crores. Profit before tax was Rs.1.49 Crores during the year under review.

The past few years have been quite tough for the company which required resilience and adaptability. The textile industry experienced a significant downturn in the past year resulting in adverse effects on our revenue as well. Additionally, our liquidity position has also been under strain which impacted the operations. Management is of the strong belief that the textile industry will rebound from its current depressed state, presenting us with opportunities for growth and profitability.

Resource utilization:

The gross fixed assets as at 31st March, 2023 were Rs. 57,707.80 lakh as against Rs. 58,175.46 lakh in the previous year. The Net block of assets as on 31st March, 2023 was Rs.15,423.22 lakh as compared to Rs.16,541.15 lakh in the previous year.

Inventory levels as at 31st March, 2023 were Rs.1,592.72 lakh as against Rs.4,375.49 lakh in the previous year. The trade receivable as at 31st March, 2023 were Rs.18.57 lakh as against Rs. 1,079.74 lakh in the previous year.

Financial condition & liquidity:

(Rs In Lakh)


2022-23 2021-22

Cash & cash equivalents

Beginning of the year 14.61 9.05
End of the year 43.61 14.61

Net cash provided(used) by:

Operating Activities 4030.13 6146.46
Investing Activities (64.79) (64.57)
Financial Activities (3936.34) (6076.33)

Human Resources Development:

The total number of employees as on 31st March, 2023 were 2076. The industrial relations in all units of the Company continue to be cordial. Your Company believes that its employees are its core strength and development of people is a key priority for the organization to drive business objectives and goals. Robust HR policies are in place which enables building a stronger performance culture.

Health & Safety Measures:

As a conscientious and caring employer, the Company actively pursues safety and health measures continuously. We believe in good health of our employees. Modern occupational health and medical services are accessible to all employees.

The Company has always considered safety as one of its key focus areas and strives to make continuous improvement on this front. The Company is committed to complying with all relevant regulations and ensure safer plants by conducting safety audits, risk assessments and periodic safety awareness campaigns and training to employees.

Significant key financial ratios


FY 2022-23 FY 2021-22
(i) Debtors Turnover 3.27 5.45
(ii) Inventory Turnover 9.44 17.26
(iii) Interest Coverage Ratio -0.79 0.76
(iv) Current Ratio 0.11 0.14
(v) Debt Equity Ratio -1.24 -0.001
(vi) Operating Profit Margin (%) -6.87 5.25
(vii) Net Profit Margin (%) 0.20 -1.70
(viii) Return on Net Worth -0.003 0.04

Cautionary Statement:

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and 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 finished goods prices, raw materials costs and availability, global and domestic demand-supply conditions, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. 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.