Yarn Syndicate Ltd Management Discussions

A. Overview of the Global Economy:

The global yarn industry continues to experience steady growth, with recent industry reports estimating the market to be valued at approximately $14.98 billion in FY 2024 25, reflecting a compound annual growth rate (CAGR) of around 4.5% since 2020. The Asia-Pacific region maintains its dominance in the global yarn market, driven by key players such as China, India, Bangladesh, and Vietnam, which benefit from low labor costs, abundant raw material availability, and well-established textile manufacturing infrastructures. This region accounts for the largest market share globally and remains the hub of both yarn production and export. Other important yarn-producing regions include North America, Europe, and South America, although they face higher production costs and stricter regulatory environments. The industry continues to grapple with challenges such as intense global competition, price volatility in raw materials (especially cotton and synthetic fibers), rising labor and energy costs, and increasing pressure to comply with environmental and sustainability regulations. While the impacts of the COVID-19 pandemic have largely subsided, its aftereffects on supply chains and production efficiency continue to influence market dynamics. Additionally, emerging trends such as eco-friendly yarns, digitalization in textile production, and growing demand from the fashion and athleisure sectors are shaping the future of the industry.

B. Overview of the Indian Economy:

The domestic trading market for yarn is a significant sector for our company. It involves exporting yarn products manufactured in our facilities to various domestic trading partners. This market plays a crucial role in our revenue generation and overall growth strategy. The domestic market for yarn trading offers several advantages for our business. Firstly, it allows us to leverage our existing manufacturing capabilities and infrastructure, ensuring efficient production and supply chain management. Additionally, the domestic market provides proximity, enabling shorter lead times and reduced transportation costs. Furthermore, by targeting domestic traders, we can tap into the growing demand for high-quality yarn products within our country, which has witnessed a surge in textile manufacturing.

C. Outlook:

During the reporting period, our export of yarn to the domestic trading market witnessed positive growth. We experienced an increase in sales volume, leading to a rise in revenue from this segment. The steady demand for quality yarn products in the domestic market contributed to our success.

D. Industry structure and development:

The Indian textile and apparel sector continues to hold a significant position in the national economy, contributing approximately 2.3% to GDP, 13% to industrial production, and 12% to total exports, while providing direct employment to around 45 million people, with MSME clusters forming the backbone of the industry.

In FY 2023 24, India’s textile and apparel exports stood at USD 35.9 billion. A notable highlight was the robust performance of technical textiles, with exports reaching 24,732.68 crore (approximately USD 3 billion), representing year-on-year growth of 15.5% and a CAGR of nearly 11% over the past four years.

While official estimates for FY 2024 25 are awaited, industry projections indicate that the domestic textile market is on track to reach USD 350 billion by 2030, with exports anticipated to rise to USD 65 billion by FY 2025 26.

Policy support remains a key enabler of sectoral growth. In the Union Budget 2024 25, the total allocation for the textile sector was approximately 4,417.09 crore. In addition, the 10,683 crore Production-Linked Incentive (PLI) Scheme is expected to significantly boost manufacturing competitiveness, particularly in man-made fibre (MMF) apparel and MMF fabrics, with a focus on technology adoption, scale efficiency, and global market penetration

E. Opportunities and Threats:

Opportunities:

1. Rising Demand in Apparel and Textile Industry: The global increase in population, urbanization, and fashion-conscious consumers has led to a consistent rise in demand for garments and home textiles, which directly fuels the need for yarn as a base material.

2. Expansion in Technical and Industrial Textiles: Theres a growing market for technical textiles used in sectors such as automotive, agriculture, healthcare, and sports. These applications often require specialized yarns, providing an opportunity for innovation and high-margin products.

3. Government Schemes and Incentives: Many governments are offering financial assistance, tax breaks, and infrastructure support to boost the textile and yarn sector under various development schemes, encouraging expansion and modernization.

4. Market Research and Development: Our continuous market research and development efforts have allowed us to identify emerging trends and customer preferences in the domestic market. By aligning our product offerings with these demands, we have managed to stay ahead of the competition.

Threats:

1. Volatility in Raw Material Prices: The prices of cotton, polyester, and other essential inputs often fluctuate due to factors like weather conditions, global demand, and supply chain disruptions, which can lead to unstable production costs and profit margins.

2. High Competition and Market Saturation: The yarn industry is highly competitive, with many players offering similar products. This intense rivalry can result in price wars, reduced profitability, and the need for constant differentiation.

3. Stringent Environmental Regulations: Increased focus on environmental compliance, particularly related to water pollution, chemical use, and carbon emissions, can increase operational costs and require additional investment in eco-friendly technologies.

4. Emerging Technologies: Advancements in alternative materials could render existing offerings obsolete.

F. Segment-wise or Product-wise performance:

The Company operates in One Primary Segment i.e. "Manufacturing and Trading in Textiles".

G. Future Outlook:

Looking ahead, we remain optimistic about the prospects of our export of yarn to the domestic trading market. We will focus on the following strategies to sustain growth and capitalize on emerging opportunities:

Demand for textiles

Raw material availability and prices Technological advancements Sustainability and eco-friendly practices Global trade and geopolitical factors Online Expansion Premiumisation and access to global brands Further Growth of Private Brands Focus on analytics

H. Risks and concerns:

Management recognizes the following principal risks that may influence decisions made by investors given their significant impact on business conditions as stated in the securities report, and among matters pertaining to accounting status, consolidated companies’ financial status and business performance, as well as cash flows. Our risk management system addresses the increasingly complex risks that we face in our day-to-day operations. The risk management system conducts risk analysis of economic and social changes and implements preventive measures that are best suit for the Company.

I. Internal control systems and their adequacy:

The company has implemented proper system for safeguarding the operations/business of the company, through which the assets are verified and frauds, errors are reduced and accounts, information connected to it are maintained such, so as to timely completion of the statements.

The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. The company has internal audit and verification at regular intervals.

The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of company.

H. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2023-24 is described in the Directors’ Report of the Company.

I. Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer - employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

J. Caution Statement:

Statements made in the Management Discussion and Analysis describing the various parts may be “forward looking statement” within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Govt. Regulations and amendments in tax laws and other internal and external factors.