Vardhman Textiles Ltd Management Discussions

Global Economy

The world economy has faced instability and uncertainty, primarily linked to geopolitical tensions. While these tensions largely remained contained at a regional level, the interconnected global supply chain and the European Unions energy dependence on Russia have adversely affected the EU economy. The world economy is estimated to grow at 3.3% in 2024, with its contours unlikely to change significantly in the ensuing years of 2025 and 2026. The crude oil prices benchmarked against the Brent Crude Oil Index moved between USD 91/barrel in April 2024 and USD 69/barrel by the end of the year, providing some respite from cost-push inflation for developing countries, especially in Asia, which grew by 5.3% in 2024. As per IMF, within Asia, Chinas economy grew by 5% while the Indian economy to grew by 6.5%.

The economic growth in Asia is also projected to slow down in 2025, linked with slower growth in world trade, which increased by 2.7% in 2024. The restricted trade policy and high tariffs threatened to be imposed by USA and retaliated by other countries like EU and China may result into contraction in the world trade in 2025, which is likely to have a negative impact upon world economy, which may grew at a lower rate of growth of 2.8% in 2025 as per IMF World Economic Outlook April 2025. However, countries like India, which are mainly domestic-driven economy may not be much affect and may continue to grow above 6 percent in 2025 also with supportive fiscal and monetary policies likely to be pursued by the government.

World Textile Trade

USA textiles and clothing imports, which may be referred to as an indicator of world textiles and clothing trade trends in 2024, increased by 3% from USD 105 bn in 2023 to USD 108 bn in 2024. The trend continued in 2025 as textiles and clothing imports grew by about 10% during January to February 2025 as well. However, with the USAs proposed tariff plan, it is apprehended that the world textiles and clothing trade may grow at slow pace in 2025.

Indian Textile Industry

The Indian textile industry suffered headwinds in 2024 linked to higher cotton prices and slow demand, which has resulted in low capacity utilisation and also witnessed closure of about 8-10 million spindles in the country (as per industry estimates). The textiles and clothing exports also reduced by about 2% from USD 36 bn in FY 2023 to USD 35 bn in FY 2024. Industry opined that Indian textiles and clothing exports may accelerate with the successful completion of trade agreements with the EU and the USA in the coming years.

World Cotton Outlook

For the cotton year 2024-25, the United States Department of Agriculture (USDA) estimated a rise in global cotton production by 1.73 million tons, resulting in a total of 26.33 million tons, as reported in the March 2025 World Agricultural Supply and Demand Estimates (WASDE) report. World ending stocks for 2024-25 are projected to rise by around 1.00 million tons to 17.05 million tons.

The projected consumption for 2024-25 is estimated to rise to 25.37 million tons as against 24.99 million tons during 2023-24. The world trade of cotton is projected to decrease from 9.71 million tons during 2023-24 to 9.29 million tons during 2024-25.

Chinas production is estimated to increase substantially from 5.95 million tons during 2023-24 to 6.91 million tons during 2024-25. Chinas imports are estimated to be substantially lower from 3.26 million tons during 2023-24 to 1.48 million tons during 2024-25.

World cotton production for the period 2025-26 is anticipated to decline below the levels projected for 2024-25. A reduction in production is forecasted for China, India, Turkey, Australia, and Egypt, while increases are expected for Brazil, Mexico and Argentina.

Cotton Futures on Inter-Continental Exchange (ICE) has fallen to a low level of USC 65 /Lb during March, 2025 (against average of USC 80 / Lb approx. for cotton season 2023-24). This is primarily due to the excess supply and lower demand of cotton globally. Additionally, the prevailing uncertainty in world markets due to the tariff war is also affecting demand adversely.

Indian Cotton Outlook

In the 2024-25 crop year (October 2024–September 2025), Indias cotton industry faced supply constraints but remained resilient, per the Cotton Association of Indias (CAI) reports. Production is estimated to drop to 29.13 million bales (170 kg each), down from 30.97 million bales in 2023-24, due to crop losses in Maharashtra from uneven rainfall. Domestic consumption stabilised at 31.75 million bales. Imports are expected to rise to 3.3 million bales from 2.04 million, while exports would be steady at 1.55 million bales. Ending stocks tightened to 2.35 million bales. Cotton Corporation of India (CCI) has purchased around 10 million bales during the current cotton season under Minimum Support Price operations.

Comparison with International Cotton Prices

Indian cotton prices were higher than international benchmarks. Average Indian cotton was priced higher than its Brazilian, U.S., Australian, and African counterparts. This disparity, despite an 11% import duty, made imports attractive, with imports jumping substantially. Even the global prices, like the Cotlook A Index, remained below Indias domestic rates, reflecting weak global demand and higher Indian supply constraints.

Financial Performance

( Rs in crore)

Particulars	2024-25	2023-24	Change
Revenue form Operations	9,587.21	9,298.68	3.10%
Operating Profit (EBITDA)	1,624.63	1,291.93	25.75%
Finance Cost	77.02	101.99	-24.48%
Depreciation Cost	397.92	398.96	-0.26%
Profit before Tax	1,149.69	790.98	45.35%
Profit after Tax	879.07	607.63	44.67%

 

Financial Ratios _	2024-25	2023-24	%Change	Reason
Debtor Turnover Ratio (Days)	49	47	4.26%	-
Inventory Turnover (Days)	140	162	-13.58%	-
Interest Coverage Ratio (Times)	17.97	10.93	64.40%	Due to an increase in operational profits, while interest expenses declined compared to last year.
Current Ratio (Times)	4.80	3.13	53.35%	Due to a decrease in borrowings compared to last year.
Debt-Equity Ratio (Times)	0.13	0.20	-35.00%	Due to a decrease in borrowings compared to last year.
EBITDA Margin (%)	16.95	13.89	22.03%	Due to an increase in operational profits compared to last year.
Net Profit Margin (%)	8.83	6.31	39.94%	Due to an increase in operational profits compared to last year.
Return on Net Worth (%)	9.18	6.90	33.04%	Due to an increase in operational profits compared to last year.

Human Resources/ Industrial Relations

A culture of meritocracy is followed in Vardhman Textiles. The Company makes sure that everyone gets equal opportunity and respect and is treated with dignity. It also believes in fulfilling the employees developmental needs. In order to achieve that, the Company conducts various programmes for skill and knowledge development. The work environment is based on the holistic growth of the team. During the year, the Company has employed around 23,196 employees on the rolls. Further, industrial relations remained peaceful and harmonious during the year.

Internal Control System and Adequacies

To make sure that the Company is up-to-date with the industry standard, it regularly reviews and updates its internal controls and measures itself with the industry Standards. In order to stay compliant, the dynamics of evolving business requirements, legal compliances and corporate governance are incorporated into current systems after a thorough evaluation with regard to the expectations of business partners, such as customers and institutions and compliance needs. Senior management keeps an eye on the internal audits suggestions for ongoing system updates. The infrastructure of IT systems is upgraded frequently to facilitate improved controls and corporate decision-making to make sure that the Company is not lagging in technology and is at par with the industry.