Virat Industries Ltd Management Discussions

Overview of the Economy:

Elections, geopolitical tensions, ongoing conflicts, global trade policy risks and climate related shocks heightened uncertainty keeping global growth at moderate level of 3.2/3.3 % in financial year 2024-25 according to IMF.

China, the world’s second largest economy is still burdened with aging work force and crippling debt which are likely to slow the trend growth rate well below Beijing’s official target.

Relatively India continued to shine recording robust economic growth across the various economic indicators as under.

Net direct taxes of Rs. 22.26 lakh crores after a refund of Rs. 4.7 lakh crore registered double digit growth of 13.5% against previous year.

The goods and services tax collection of Rs. 22.08 lakh crore over Rs. 20.18 lakh crore in previous year showed a surge of 9.41%. This was achieved by strong momentum in economy and efficient tax collection efforts.

The merchandise exports of $437.42 billion this year (accounting for about 12% of GDP) are marginally 0.08% higher against previous year. The services export of $383.51 billion this year against $341.06 billion in previous year shows a growth of 12.45%. It is a milestone achievement.

Indias overall export of goods and services have reached a record of $820.38 billion, an increase of 5.5% over $778.13 billion in previous year.

Indias retail inflation declined to 3.3% year on year in March 2025, lowest since August 2019. Indias wholesale price inflation eased to a 6 months’ low of 2.1% in March 2025.

The cumulative net formal jobs created in the first 11 months of FY 2024-25 have hit 13.22 million.

During the year, the Company carried out sales in the following geographical segments.

(In Rs. Lakh)

	Europe	India	Rest of World	Total
Revenues	1241.89	174.27	1583.63	2999.79

Company’s financial and operational performance:

The comparative performance highlights for last five years are as under:

Particulars	Units	INDAS
		2024-25	2023-24	2022-23	2021-22	2020-21
Income Statement
Total Income	Rs. in Lakh	3,267.23	3341.17	3841.90	2513.97	2022.30
Export Sale	Rs. in Lakh	2,825.52	2885.17	3317.35	2090.54	1685.10
Operating EBITDA	Rs. in Lakh	226.81	253.82	378.75	336.30	274.41
Net Profit before Tax	Rs. in Lakh	121.18	103.57	218.00	172.60	92.50
Net Profit after Tax	Rs. in Lakh	90.45	75.88	162.09	135.23	79.49
Cash Profit	Rs. in Lakh	179.18	208.19	315.90	295.62	255.54
Balance Sheet
Net Worth	Rs. in Lakh	2,644.68	2549.93	2499.68	2385.63	2253.25
Capital Employed	Rs. in Lakh	2,642.12	2548.68	2454.94	2375.34	2264.04
Significant Ratios
Operating EBITDA/Net Sale	%	7.56	8.26	10.67	14.51	14.90
Return on Capital Employed (EBIT/Avg. CE)	%	8.40	10.15	15.68	14.41	12.35
Price Earnings Ratio		185.62	142.06	66.32	57.94	22.26
Book Value Per Share	Rs.	53.72	51.79	50.77	48.46	45.77
Current Ratio		5.97	5.24	4.71	5.89	6.94
Operations
Knitting Production	Pairs in lakh	69.80	65.42	97.05	57.62	53.36
Pairs Dispatched	Pairs in lakh	70.41	76.96	84.01	55.89	55.04
Sales realization	Rs. per pair	42.60	39.95	42.25	41.40	33.46
Earnings Per Share		1.84	1.54	3.21	2.69	1.81

There is no change in the nature of business of your Company for the year under review.

Industry Structure and Development

The key players of textile industry are concentrated in India, China, the European union and the United States. Vietnam and Bangladesh have also emerged as significant contributors to the industry. India is estimated to have the worlds third largest textile industry.

India benefits from multitude of factors such as abandunt availability of raw materials including cotton polyester, recycled polyester, nylon, silk and jute along with large pool of skilled manpower and large ancillary industry. It also enjoys benefit of being a cost effective compared to other large textile producing industries.

New technologies and state-of-the-art equipment have enabled the Indian textile industry to become more efficient and productive over the years.

During FY 2024-25, there was an increase of about 10% export of readymade garments and other textiles over previous year.

The rise in export of textile is likely to grow due to lowest increase in tariffs for India compared to other competing countries. Textile industry is the second largest employer of manpower after infrastructure. This rise in export of textile will result in more creation of jobs.

In Union budget of FY 2024-25, 19% increase in allocation from previous year has been marked for ministry of textiles. This substantial rise in allocation underscores several strategic initiatives such as launch of the "cotton mission", support for technical textiles, supporting MSME which comprises 80% of textile industry and promote exports.

Opportunities:

India has started exporting electronic components to China and Vietnam for the first time for manufacturing Apple products like mac books, iPad, watches, pencil and iPhone. All these parts barring iPads are exported to the assembling locations to be utilised in making the final products. "Make in India" efforts have thus borne fruit and provided good opportunity to enhance exports. Export target of $35-40 billion is set to be achieved by 2030. The government is soon to come out with a production linked incentive (PLI scheme) of more than $3 billion for this project.

Indias textile exports are estimated at $33.2 billion in April 2024 to February 2025 period of which 30% were dispatched to United States. Following lower tariff rates than competing China, Vietnam and Bangladesh, the export revenues are likely to grow. Given the intrinsic strength of Indian apparel sector and availability of entire chain, there is an opportunity for India to work for contract manufacturers of global brands to export business.

Also India has an opportunity to take advantage of lower tariff rate in American markets to export chemicals, plastic and rubber goods etc.

India exports many products to America which work as raw material for getting converted into finished goods of their very popular and prestigious brands after brilliant packaging. For example, Americas Levis jeans acknowledged as one of the worlds biggest clothing companies, Denim cloth, one basic ingredient for Levis is purchased from India in bulk. Besides, other European brands like Zara and H&M also purchase denim cloth from India.

Also majority of Nike shoes are not made in USA. In fact, India has a role here too as it is home to extensive shoe making skills.

There are many more such products exported to America as raw materials.

India can convert some such raw materials into finished goods with latest equipment, skillful labour and innovative packaging and sell it in domestic markets or export to America with hiking prices to luxury level. The business for India will grow significantly. There are many affluent people in India having high disposable income who will patronize such final products if the quality is approved.

Free trade agreement (FTA) between India with UAE, Australia and Switzerland has already made. Such agreement with UK and European union are at final stage (FTA with UK is finalized on 6^th May, 2025).

The implementation of these agreements is expected to boost Indias exports in various sectors including textile, leather, jewellery, marine and processed agriculture products. India will be level field player with other members of European Union.

Threats:

If border tensions around India continues or escalates, that may impact the projection of economy.

Import duty of 10.6% still continues, despite many discussions. This is making India incompetent on price level.

If India is to increase exports to reputed brands, more skillful operators are required and need right type of training at manufacturing level.

In India, many factories use spun polyester yarn in place of cotton yarn for inner wear apparel. Since the Polyester yarn is cheaper, in local markets innerwear polyester textiles are posing big price threat to cotton textiles.

Key Financial Ratios:

The key financial ratios for the financials are as per the below table:

Particulars	2024-25	2023-24
Debtors turnover ratio	5.53	6.51
Inventory turnover ratio	3.08	3.07
Current ratio	5.97	5.27
Debt equity ratio	0.02	0.03
Operating profit margin (%)	6.54	7.35
Net profit margin (%)	3.02	2.47
Return on net worth	3.42	2.96

Formulae used for computation of key financial ratios are as follows:

Debtors turnover ratio	Net sales (i.e. revenue from operations) /Average of opening and closing trade receivables
Inventory turnover ratio	Net sales /Average of opening and closing inventories
Current ratio	Current assets /Current liabilities
Debt equity ratio	Debt (net of cash) /Total equity
Operating profit margin (%)	Profit before interest and taxes /Net sales
Net profit margin (%)	Profit after tax /Net sales
Return on net worth (%)	Profit after tax /Average of total equity

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The existing internal financial controls are commensurate with the nature, size, complexity, and business processes followed by the Company. They have been reviewed and found generally satisfactory on the following key control matrices.

a) Entity Level Control

b) Financial Control

c) Operational Control which included authority and organization matrix, risk management practices, compliance framework within the origination, ethics and fraud risk management, management Information system, self-assessment of control point, business continuity and disaster recovery planning, budgetary system, etc.

Section 134(5)(e) of the Companies Act, 2013 requires the submission of a report by the Board of Directors of a listed Company which includes a statement ensuring that the Company has laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and operating effectively.

During the year, the Company followed Policy Documents with regard to Internal Financial Control, along with Risk Control Matrix. The same have been tested by the I nternal Auditors and the Statutory Auditors.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT,

INCLUDING NUMBER OF PEOPLE EMPLOYED:

The workforce is a critical factor in maintaining quality and safety, which strengthens the competitive position and the human resource policies focus on training and retaining of the employees of the Company. The Company trains employees regularly to increase the level of operational excellence, improve productivity and maintain compliance standards on quality and safety. Employees are offered performance-linked incentives and benefits and the Company conducts employee engagement programs from time to time. The Company also hires contract labour. The company has 150 employees on payroll.

The Company would like to sincerely appreciate the valuable contribution and support of employees towards the performance and growth of the Company. The management team comprises of professionals with a proven track record. The Company continues to remain focused and sensitive to the role of human resources in optimizing results in all its areas of working and its industrial relations also continue to be cordial.