Baroda Rayon Corporation Ltd Management Discussions

REPORT AS PER REGULATION 34(2) OF SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015

Overview of Economy & Industry Scenario

Global Economy and Outlook

The global economy is gradually recovering from the impact of pandemic and at the same time facing new challenges emerging from Russias invasion of Ukraine. Tightening of monetary policy by most Central Banks is expected to have a positive impact. Despite monetary tightening, inflation is persistent in many key economies and it is anticipated that global inflation will fall from 8.7% last year to 7% this year and settle at around 5% in the year 2024.

Indian Economic Overview

The Indian Economy continues to show resilience amid Global Uncertainties. Despite significant challenges in the global environment, India was one of the fastest growing economies in the world. Indias overall growth remains robust and is estimated to be 6.9% for the financial year 2022-23. Growth was driven by strong investment activity augmented by the governments capex push and buoyant private consumption.

Structural reforms like the National Infrastructure Pipeline and National Monetization Plan by the Government is expected to further boost infrastructure development. It is paving the path for further development and continues to encourage projects across sectors, including reforms for improving labour laws. V-shaped economic recovery is due to mega vaccination drive, robust recovery in the services sector and growth in consumption and investment. This is being demonstrated in high frequency indicators such as power demand, rail freight, GST collection etc. Almost all emerging economies are reeling under external shocks, but Indias underlying economic fundamentals are strong and despite the short-term headwinds, the impact on the longterm outlook is expected to be marginal.

Inflation remained high, averaging around 6.7% in FY 2022-23 but the current-account deficit narrowed in Q3 on the back of strong growth in service exports and easing global commodity prices.

Dwelling on the outlook for FY2023-24, the Economic Survey 2022-23 issued by Ministry of Finance projects that, Indias recovery from the pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment. It further affirms that aided by healthy financials, incipient signs of a new private sector capital formation cycle are visible and more importantly, compensating for the private sectors caution in capital expenditure, the government raised capital expenditure substantially.

TEXTILES

Global Textile Industry

The global textile market grew from about $573 billion in 2022 to about US$ 610 billion in 2023 at a compound annual growth rate (CAGR) of 6.6%. The Russia- Ukraine war has led to an increase in commodity prices and supply chain disruptions, causing inflation across goods and services impacting economies across the globe. The textile market is however expected to grow to about US$ 755 billion in 2027 at a CAGR of 5.5%.

The COVID-19 pandemic and the Russia - Ukraine war had challenged the textile industry drastically which is now on a recovery stage. Increasing demand for apparel from the fashion industry coupled with the growth of e-commerce platforms is expected to drive the market growth over the next few years.

The textile industry is an ever-growing market, with key competitors being China, the European Union, the United States, and India. China is the worlds leading producer and exporter of both raw textiles and garments. India is among the top five textile manufacturing country and is responsible for more than 6% of the total textile production, globally.

The rapid industrialization in the developed and developing countries and the evolving technology are helping the textile industry to have modern installations which are capable of high-efficient fabric production.

Indian Textile Industry

India is the worlds second-largest producer of textiles and garments. It is also the sixth-largest exporter of textiles spanning apparel, home and technical products. 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. The textiles and apparel industry contribute 2.3% to the countrys GDP, 13% to industrial production and 12% to exports. The textile industry has around 45 million of workers employed in the textiles sector, including 3.5 million handloom workers.Indias textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY. Total textile exports are expected to reach US$ 65 billion by FY26.

The Textile and Apparel market is poised to grow, led by boost in demand and the government support in form of attractive schemes such as Production Linked Incentive (PLI),Mega Investment Textile Parks (MITRA) will further drive the way for the US$ 250 billion target. Another step taken bythe Ministry of Textiles towards positioning India as a global leader in technical textiles manufacturing is the invitation of Research proposals for

Funding for Design, Development and Manufacturing of Machinery, Tools, Equipment, and Testing Instruments under NTTM.

Opportunities. Threats and Challenges Opportunities

? The company has inherent strength due to its prime location.

? Changes in economic legislations and rationalization of the tax structure and duty structure such as custom duty etc.

? VFY is emerging as a fiber with new applications. The general economic well being has resulted in the switch back to the use of this fiber for sarees and furnishing fabrics.

? ‘Make in India/AtmanirbharYojana campaign is a testimony to the huge growth potential in the industry, both in terms of infrastructure and skill improvement.

Threats

? Threat from PFY due to its lower price has been a factor that has been having a cyclical impact in the market.

? The Company perceives threat from imports and consequent pressure on domestic prices, apart from the increase in cost of raw materials and other inputs.

? Rising input costs (wages, power and interest cost), restrictive labour laws and intensified competition from other low cost countries like China.

Risk & Concerns

The broader trends in the economy are expected to have a direct impact on your Companys growth prospects as well. Inflation is expected to remain elevated for the foreseeable future, driven by war-induced commodity price increases and broadening price pressures. In addition, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets.

In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviors and adversely impact the market for textiles.

Your companys entire operational activities in textile segment are stand still since August 2008.

REAL ESTATE

Global Real Estate Market

The global real estate market is expected to reach a value of about US$ 7.8 Trillion by 2027, exhibiting a CAGR of 1.90% during 2022-2027. The market is expected to grow at a healthy pace owing to the rising population, desire for personal household space, burgeoning need for quality housing and infrastructure, and the increasing trend of nuclear families. In line with this, the shifting consumer preferences toward a clean, safe, and secure environment, along with rapid infrastructural development, such as enhanced connectivity via roads, air, and railways are creating a positive outlook for the markets.

Indian Real Estate Market

In the past decade, the real estate market has undergone a transformation. Sustainability, landscape design, gated communities, improved amenities, mortgage rates, and expanded government assistance for low-income residents are just some of the cutting-edge real estate trends that have emerged. Despite rising construction costs and a significant hike in the repo rate, the real estate sector has seen a considerable upswing. After two long years of pandemic-related lockdowns and subsequent economic turmoil, the industry has experienced a comprehensive recovery this year through Tier I, II and III cities.

Trends indicate that buyers prefer investing in projects of established/credible players to avoid any kind of risk. Good track record, credibility, greater transparency, and customer confidence in reputed players will boost established players gain a stronger foothold in the Indian market.

Discussion of the Financial Performance with respect to operational performance

The company has following ongoing real estate projects at Udhna, Surat City namely -

1) Shree Laxminarayan Industrial Park - Z Row - Plotted Development (RERA No. - PR/GJ/SURAT/SURAT CITY/Surat Municipal Corporation/PN221AA10121/121022) which was launched in August 2022 and have received overwhelming response from the customers. Out of total 503 units, 131 units were sold during the year.

2) Surat Textile Bourse Phase -1 (Part-A) - Commercial (RERA No. - PR/GJ/SURAT/SURAT CITY/Surat Municipal Corporation/CN283AA10183/261222) was launched in October 2022.

3) Surat Textile Bourse Phase -1 (Part-B) - Commercial (RERA No. - PR/GJ/SURAT/SURAT CITY/Surat Municipal Corporation/CN317AA10217/280223) was launched in December 2022.

Key Financial Ratios -

Sr No Key Financial Ratios	2022-23	2021 -22	Variance%	Detailed comments
1 Debtors Turnover	-	-	-	N.A. (refer note below)
2 Inventory Turnover	-	-	-	N.A. (refer note below)
3 Interest Coverage Ratio	-	-	-	N.A. (refer note below)
4 Current Ratio	3.79	2.42	56.61	Increase in current assets.
5 Debt Equity Ratio	1.16	15.61	92.56	Increase in total equity.
6 Operating Profit Margin (%)	-	-	-	N.A. (refer note below)
7 Net Profit Margin (%)	-	-	-	N.A. (refer note below)
Return on Equity (%) 8	169.03%	-230.79%	173.24	Increase in Average Shareholders Equity
Return on Capital Employed 9 (%)	48.40%	115%	57.94	Decrease in EBIT
10 Return on Investment (%)	0.73%	0.18%	302.12	Increase in Gain on Investments

Note - As the entire operational activity in textile segment of the company is standstill since August 2008, some ratios are N.A.

For and on behalf of the Board of Directors

	Damodarbhai Patel
Place: Surat	Chairman & Managing Director
Date: 29th August, 2023	DIN: 00056513