Banswara Syntex Ltd Management Discussions

Indias textile sector, renowned for its heritage and skilled workforce, remains a crucial driver of the Nations economy. While a dip in exports was seen in FY24 due to global factors, having said that, the industry is poised for growth in CY25 due to a strong domestic market, potential export rebounds, and lower cotton prices. Sustainability is a growing focus, with manufacturers embracing ecofriendly materials and cleaner processes. Technological advancements in areas like digital printing and supply chain management are also propelling the sector forward. Additionally, recent FTAs like the one with EFTA and potential deals with the UK and Canada offer promising avenues for export growth.

India has a 4.6% share of the global trade in textiles and apparel. Moreover, India is the worlds 3^rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$ 65 billion by FY 2026. Additionally, the industry stands to benefit from global demand diversification away from China. The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5^th largest technical textiles market in the world. Indias Spartech industry is estimated around US$ 1.17 million in 2022-23.

Source: https://www.ibef.org/industrv/textiles

The global textile market is poised for steady growth between CY2023 and CY2027, driven by several key factors. Despite facing challenges during the COVID-19 pandemic, the industry rebounded in CY2021 and continued its upward trajectory in CY2022 and CY2023. Anticipated growth is fuelled by increasing demand for apparel, particularly from the fashion sector, along with the expanding influence of e-commerce platforms. Moreover, the enduring popularity of cotton, valued for its strength, absorbency, and color retention, is expected to sustain its dominance in the market. Similarly, man-made textiles are set to maintain their significant market share, supported by factors such as easy access to raw materials, population growth, and the evolving preferences for varied textile textures and designs.

OPPORTUNITIES AND THREATS

Indias textile sector thrives on a strong foundation of resources and a growing domestic market. The abundant availability of raw materials like cotton and jute, along with a complete textile value chain, makes India a major player. A large, skilled workforce keeps production costs competitive, and rising disposable incomes within the country fuel demand for textiles. Government initiatives promoting technical textiles for new applications further diversify and strengthen this key driver of the Indian economy.

India, as a major player in the global textile market, stands to benefit from increasing globalization and cross-border trade agreements, which provide expanded market access for its textile products. Additionally, the rising per capita income in India and globally suggests a growing domestic and international demand for textiles and apparel.

Also, Indias consumer base and demand are set to strengthen further due to factors like a growing population, rising urbanization, and a youthful demographic profile. Also, Indias urban population is expected to continue to rise on the back of economic growth. The share of urban population is projected to increase to nearly 40% by 2030, according to a UN report on urbanisation.

It is crucial to address several significant threats that could impact the companys business operations and financial performance. Geopolitical tensions, including trade wars between major economies and restrictive trade policies, pose substantial threats, potentially disrupting supply chains and market access. Sharp fluctuations in currency exchange rates further exacerbate these challenges, creating an unpredictable business environment. Additionally, persistent inflation, driven by rising commodity prices, is expected to exert pressure on profit margins. This inflationary trend could also lead to reduced purchasing power among consumers, resulting in notable shifts in consumer behavior that might negatively affect the textile market. Furthermore, the volatility in raw material prices adds another layer of threat, potentially impacting production costs and overall profitability. Your Company remains vigilant and proactive in mitigating these threats through strategic planning and robust risk management practices.

GOVERNMENT INITIATIVES

The Government of India has introduced various schemes for modernization and infrastructure development. Additionally, budget allocation to the Ministry of Textiles for fiscal 2025 has been raised by about 28%, amounting to Rs. 44 billion. The government has also launched initiatives like The Scheme for Capacity Building in Textiles Sector (SAMARTH) and Free Trade Agreement to enhance the textile sectors economies of scale, export potential, and competitiveness.

1. The Scheme for Capacity Building in Textiles Sector (SAMARTH) is dedicated to enhancing the skills of the workforce in the textile industry. Implemented through a network of Implementing Partners comprising Textile Industry/Industry Associations, State Government agencies, and Sectoral Organizations of the Ministry of Textiles, SAMARTH aims to empower individuals with the necessary skills and knowledge to thrive in the evolving textile landscape.

2. Free Trade Agreement:

Opportunity in European Union (EU) India seeking Free trade agreement (FTA) with EU, combined with the possibility that Bangladesh could lose Most favoured-nation (MFN) status after graduating from LDC (Least developed Countries) in 2026, which could lead to an increase in exports from India to EU.

India is working on getting an FTA with both the United Kingdom (UK) and European Union (EU). However, the FTA between Vietnam and the EU, which went into effect in August 2020, has strengthened Vietnams position in the EU market and may prove to be a competitive barrier for Indian exports in the EU region.

Industry Outlook

1. Based on the identified drivers and trends in the global textile industry, the outlook for the Indian textile industry appears promising. India, as a major player in the global textile market, stands to benefit from increasing globalization and cross-border trade agreements, which provide expanded market access for its textile products. Additionally the rising per capita income in India and globally suggests a growing domestic and international demand for textiles and apparel.

2. Changing consumer preferences, especially towards fast fashion and sustainable clothing, present opportunities for Indian textile manufacturers to innovate and cater to evolving market trends. The Indian textile industry can leverage its strengths in traditional craftsmanship and sustainable practices to meet the demand for eco-friendly textiles.

3. Moreover, as the global economy recovers, particularly in key export markets for Indian textiles, such as the European Union, there is potential for increased exports and growth in the Indian textile sector. Embracing sustainability initiatives and integrating technology into manufacturing processes can further enhance the competitiveness and growth prospects of the Indian textile industry.

4. Also, the Indian yarn market is expected to increase at a 3-4% CAGR between fiscals 2024 and 2028 and reach Rs. 1,980-2,020 billion due to steady growth in domestic demand led by improving discretionary spending and gradual recovery in demand from European Union and United States.

RISKS & CONCERNS

Management Discussion and Analysis mainly comprise the statements which may, inter alia, involve predictions based on perceptions and may, therefore, be prone to risks and uncertainties. It is the sum of the Companys expectations, beliefs, estimates and projections which may be forward looking or depressing within the meaning of applicable laws and regulations. The actual results could differ materially from those expressed herein specifically or impliedly. The shareholders are cautioned to keep this in view in conjunction with the Companys financial statements.

SEGMENT-WISE PERFORMANCE

The core business of the Company is manufacturing and marketing of spun synthetic blended yarn, wool and wool mix yarn, spun synthetic and worsted fabrics and cotton & linen fabrics besides readymade garments. The Company also produces technical fabrics. During the year revenue from operation of all three divisions of the Company as follow;

Division	Revenue (Rs. In Crores)	Volume
Yarn	512	229 Lakhs Kgs.
Fabric	456	193 Lakhs Mtrs.
Garment	282	36 lakhs Pcs.

OUTLOOK

Your Companys future growth is built on two parallel growth drivers viz., domestic consumption of fabrics & garments and large global opportunities in textiles and clothing. With the markets opening for retailers in the US and Europe and domestic demand gaining traction, coupled with the opotential, your companys future growth trajectory looks robust. To harness these opportunities effectively, were fortifying our leadership team and adopting a divisional approach, specifically focusing on Yarn, Fabric, and Garments. This strategic restructuring aims to optimize operational efficiency and maximize profitability within each segment, aligning with our overarching goal of achieving scalable growth.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The operating performance of the Company has been detailed in the Directors Report under the heads Financial Statements and Operations and State of Affairs.

During the year that went by, in the wake of the pandemic, the West and EU have adopted a China+1 strategy, leading to a decline in demand for textiles produced in China. Consequently, India has emerged as one of the favourable destinations for textile manufacturing outside of China. Indias share in the textile market is projected to increase in the coming years, with textile exports from India expected to reach approximately ~20 billion. Recognizing this trend, the Indian Government has introduced initiatives such as the PLI scheme for textiles and the PMMITRA initiative. As part of these efforts, the establishment of 7 mega textile parks in India, with a combined investment of Rs. 70,000 crores, will further incentivize manufacturing and boost exports. We have observed a rise in demand for our textiles from global customers because of these developments. Hence, the future of the textile industry in India appears promising..

The profit before interest, depreciation, and tax (PBIDT) during 2023-24 has been Rs. 121 crore as against Rs. 213 crore during 202223. The profit before depreciation and tax (PBDT) has been Rs. 91 crore as against Rs. 181 crore during 2022-23. The Net Profit earned during the year is Rs. 36 Crores as against Rs.113 crores in 2022-23. Export sales contribution had come down from 48 % to 42% of total Sales whereas Domestic contribution has increased from 52% to 58%.

The major reasons behind the same is due to subdued demand, Textile industry is going through headwinds. Lack of exports demand due to geopolitical tensions, recession and slowdown in Europe, Turkey, US and UK had an impact Companys exports turnover and domestic market continued to face challenges on demand and pricing pressure and overall revenue from operation declined by 16% for the year.

INTERNAL CONTROL SYSTEMS & ADEQUACY

A detailed note on internal control systems and adequacy has been mentioned in the Boards Report.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

As required, the following are the key ratios having significant changes i.e. change 25 % or more as compared to the previous financial year:

Key Ratios

Particulars	31s* March 2024	31st March 2023	Changes in %
Current Ratio	1.60	1.53	4.55
Debt-Equity Ratio	0.66	0.73	(9.51)
Interest Coverage Ratio	1.27	2.41	(47.19)
Return on Equity Ratio	0.07	0.25	(72.98)
Inventory turnover Ratio	4.32	5.06	(14.64)
Debtors turnover Ratio	6.03	8.85	(31.90)
Net Profit Margin Ratio	0.03	0.07	(62.49)
Return on Net Worth	0.09	0.19	(55.51)
Operating Profit Margin Ratio	0.06	0.11	(46.74)

Please refer to Note No. 54 of Standalone Financial Statement for the reason of more than 25% variance.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Banswara Syntex Limited continues to believe that its human capital is its most invaluable asset. The company remains dedicated to investing in its people by enhancing their capabilities, honing their expertise, and fostering a spirit of leadership. This approach ensures a dynamic and innovative workplace environment.

Key Initiatives in FY24:

1. Management Trainees Program: The company has introduced a comprehensive management trainees program aimed

at grooming future leaders by providing hands-on experience and mentorship. This program recruits fresh graduates from

leading institutions and immerses them in various aspects of the business.

2. Internship Program: Banswara Syntex Limited offers an extensive internship program that provides students with practical

experience in the textile industry. Interns are mentored by experienced professionals and given opportunities to work on real

time projects, thus preparing them for future roles within the industry.

3. Training & Development Program:

i) Team Building/Interpersonal Skills: Regular workshops are conducted to improve team dynamics and interpersonal skills among employees.

ii) Personality Development Program: Focused on junior and middle level staff to enhance their confidence level to deal with various situations in and out of the work.

iii) Leadership Training Program: Focused on middle and senior-level managers, this program enhances leadership capabilities through advanced management training modules.

4. Standardizing HR Practices and Policies: The company has taken steps to standardize HR practices and policies across all its divisions and locations ensuring consistency, fairness, and compliance throughout the Banswara group.

5. Strengthening the Compliance Structure: Efforts are being made to reinforce the companys compliance structure, ensuring adherence to all legal and regulatory requirements, thereby minimizing risks and enhancing governance.

6. Employee Engagement: Many events have been organized to foster a sense of community and enhance employee morale. Such activities encourage teamwork, celebrate cultural diversity, and provide a platform for employees to relax and rejuvenate.

Below the is a staff count difference between March 2023 and March 2024.

LOCATION	March 2023	March 2024
Banswara	990	1008
Daman	255	287
Mumbai	110	136
Surat	145	111
TOTAL	1,500	1,542

7. Vartalaap: The company has introduced “Vartalaap”, a one-to-one employee grievance redressal session between employees and HR. This initiative aims to address employees concerns effectively, giving them a sense of belongingness and fostering a transparent and supportive workplace culture.

These initiatives underscore Banswara Syntex Limiteds commitment to nurturing its human resources and creating an environment that promotes growth, engagement, and well-being for all the employees.

The industrial relations in all units of the Company continue to be cordial. The skills, experience and passion of our people facilitate deeper customer understanding and engaging relationships and strengthen our brand value as a preferred employer. We continue to step up efforts to accelerate our value-based growth strategy and the overall development of human capital. We nurture our people by investing in their empowerment through learning and development, wellness, and safety besides providing workplace facilities.

CAUTIONARY STATEMENTS

Statements in this Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations, or predictions, may be “forward looking statements” within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

	For and behalf of the Board of Directors
	Sd/-
	Rakesh Mehra
Place: Mumbai	Chairman
Dated: 11th May, 2024	DIN: 00467321