Lagnam Spintex Ltd Management Discussions

The management discussion and analysis report provide an over view of the nancial and Business activities for the scal year ended on 31 March 2024, gives an overall sight of the yarn industry, opportunities and threats in the business and Companys strategy to deal with that. This report is designed to focus on current years activities, resulting changes and other known facts in conjunction to the nancial and strategic position of the Company.

KEY MARKET INSIGHTS & Economic Scenario

The textile industry in India is largest industry after agriculture and is also highly labour intensive offering the largest volume of employment. India is among the worlds largest producer of textiles and apparels.

The textiles and apparel industry in India has strengths across the entire value chain from ber, yarn, fabric to apparel. The Indian textile and apparel industry is highly diversi ed with a wide range of segments ranging from products of traditional handloom, handicrafts, wool, and silk products to the organized textile industry in India. The organized textile industry in India is characterized by the use of capital-intensive technology for the mass production of textile products and includes spinning, weaving, processing, and apparel manufacturing.

The global cotton yarn market size is projected to grow from $86.11 billion in 2024 to $117.79 billion by 2032, at a CAGR of 4.0% during the forecast period.

Cotton yarn is made using natural cotton harvested from the Cotton plant. These yarns are produced using different types of spinning processes. Based on the spinning process used to manufacture cotton yarn, the yarn produced across the globe can be primarily categorized into two types, carded and combed yarns. Different types of yarns have unique characteristics which ultimately in uence the type of application it will be employed in and the quality of nished textile goods. For example, combed yarn is produced using high-quality cotton ber by adding the combing process to the carded yarn.

Combed yarn is a ner and better quality product, making it useful for manufacturing fabrics with premium texture and durability. The majority of cotton yarn produced across the globe is used to manufacture apparels. Currently, consumers and brands are promoting sustainable fashion like never before, and clothing made using cotton yarn is an excellent choice for sustain ability.

Lockdown restrictions enforced during the COVID-19 pandemic caused supply chain disruptions for various industries across the globe, with this market being no exception. The lockdowns imposed across several countries resulted in logistics challenges, raw material and labor shortages, and other inevitable challenges. Several yarn-manufacturing units were either closed or operating at a reduced capacity owing to the labor-intensive nature of manufacturing facilities. The manufacturing companies in this industry witnessed signi cant price uctuations due to supply shortages and the effect of this disruption still affects the current prices. However, with signi cant control over the spread of the pandemic, the prices of cotton are returning to normalization as the supply chain is getting back on track. This is expected to help the revival of the industry over the next few years.

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 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 Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. The Indian apparel market stood at USS 40 billion in 2020 and is expected to reach US$ 135 billion by 2025.The Rs. 10,683 crores (US$ 1.44 billion) PLI scheme is expected to be a major boost for the textile manufacturers. The scheme proposes to incentivize MMF (man-made ber) apparel, MMF fabrics and 10 segments of technical textiles products.

DEVELOPMENTS& FUTURE OUTLOOK OF THE COTTON YARN INDUSTRY

India is the worlds second-largest producer of textiles and garments.

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of yarns from natural bres like cotton, jute, silk and wool, to synthetic/man-made bres like polyester, viscose, nylon and acrylic.

India is one of the largest producers of cotton and jute in the world. India is also the 2nd largest producer of silk in the world and 95% of the worlds hand-woven fabric comes from India. The Indian technical textiles segment is estimated at $16 bn, approximately 6% of the global market.

The textiles and apparel industry in India is the 2nd largest employer in the country providing direct employment to 45 million people and 100 million people in allied industries.

Production: Cotton production in the upcoming Cotton Season (CS) 2024 is expected to decline to 5.4bn kgs from 5.7bn kgs in CS23. In CS23, the initial stockpiling of cotton resulted in shortage of cotton in the market. Owing to the recent decline in cotton prices, farmers may switch to other crops in search of better prices, which could impact acreage. Given that Indias cotton production is closely tied to acreage, it is unlikely that cotton production would increase in the upcoming season. Experts expect cotton availability to improve in the coming quarters, as the crop has been healthy.

Stable consumption: Cotton consumption could trail production and is likely to stay stable at 5.3bn kgs in CS24, consistent with the previous season.

Improved cotton-yarn spreads stemming from benign raw material prices: Average domestic prices of cotton/yarn rose steeply to touch peak levels of Rs 272/364 per kg during Q1FY23 from Rs 114/203 per kg during Q3FY21. However, during this period, cotton-yarn spreads fell from Rs 97/kg to Rs 92/kg, as prices of cotton increased at a faster clip than those of yarn. In FY23, weak export demand caused yarn prices to fall sharply, leading margins to compress, narrowing the spread between cotton and yarn. Going forward, improved cotton supply to keep cotton prices stable, while superior downstream demand could keep yarn prices rm. CRISIL expects spreads to remain at pre-pandemic levels of Rs 85-90/kg.

Capacity utilization levels expected to improve: Spinners currently operate at 80- 85% capacity, with further 10-15% scope for improvement. Crisil expects overall utilization to improve in FY24, on the back of enriched demand from downstream industries, as utilization levels in knitwear, home textiles, apparel, etc., have risen. Although, capacity utilization in denim is less in India compared to Bangladesh and Turkey, the same is expected to improve, going forward.

Outlook - Polyester yarn industry

Industry dynamics: Crisil estimates Indias polyester bre market to touch ~Rs 1.7-1.75 tn with a total capacity of ~5.5mn tonnes pa in FY24. Top 5 polyester yarn manufacturers in India account for ~70% market share. Key raw materials, i.e., PTA (Puri ed Terephthalic Acid) and MEG (Mono Ethylene Glycol), constitute~80% of the total manufacturing costs in this segment. Demand for polyester yarn is primarily driven by outdoor, athleisure clothing, home textiles, industrial applications, etc.

China dominates global polyester yarn trade: Strong incentives have led China to expand capacity across the man-made bre value chain in the last 2 decades, expanding its market share from 43% in CY18 to 54% in CY22.

Chinas polyester yarn capacity is 8-9x that of India. India has limited backward integration, resulting in country importing ~25% of its RM, as against China, which imports mere 2-3%. Although India and China face similar tariffs from top polyester yarn importing countries, China dominates the global polyester yarn trade primarily due to its scale of operations.

Price realisations: Yarn prices expected to remain stable in FY25 as dumping of cheaper polyester yarn in India likely to reduce however, there is a possibility of increased risk of dumping of cheap polyester fabrics. PTA and MEG prices expected to decline.

Implementation of QCO mandates a BIS

(Bureau of Indian Standards) certi cation: Slowdown in Chinese domestic market has led to oversupply of cheap polyester yarn in the global market impacting export demand. Thus, BIS certi cation and quality control measure were implemented in Oct 2023, which is expected to bene t Indian polyester yarn manufacturers, as dumping of cheap polyester yarn in India by China will be curtailed, supporting realization and volumes for Indian players in domestic markets. Post implementation, polyester yarn imports declined to 13k tonnes in Nov 2023 from 106k tonnes in Sep 2023 and 58k tonnes in Oct 2023. Imports are expected to reduce by 40-50% from 455K tonnes in CY24E to 240-260k tonnes in CY25. However, given ~6 months of delay in implementing QCOs, Chinese imports entered India covering the entire festive season sales in FY24, which has led to huge inventory buildup. As Chinas consumption is yet to fall below the expected levels, global markets would continue to be ooded with Chinese cheap polyester yarn.

Crisil expects moderate revenue growth in FY25

Cotton yarn: Crisil expects revenue to drop by 5-7% in FY24. However, in FY25 it expects revenue to see a moderate 4-6% surge, in anticipation of normalized volume growth, improved availability of cotton and steady yarn prices.

Polyester yarn: Revenue is expected to expand moderately by 2-4% in FY25, following attish growth in FY24 due to ooding of cheap polyester yarn by China. Growth will likely be supported by favourable government regulations (implementation of QCOs), gradual improvement in volumes, with reduction in cheap polyester yarn imports from China. However, dumping of cheaper Chinese polyester fabrics in the domestic market could restrict sales growth.

Operating margins to recover gradually

Cotton yarn: Post lower margins in H1FY24 due to lower spreads and inventory losses, operating margins began to rebound Q3FY24 onwards, as CS24 commenced and reduced inventory losses. Operating margins are expected to recover 100-150 basis points from decadal lows of 8.5-9% in FY24 to 10-10.5% in FY25, owing to expected improvement in cotton yarn spreads and fewer inventory losses. Experts anticipate better pro tability for spinners in FY25 than in FY24.

Polyester yarn: Expected reduction in RM prices (PTA & MEG), stable polyester yarn prices, moderate sales growth and reduction in cheaper imports of polyester yarn from China is expected to improve pro tability by 50-100bps to 6.5-7.5% in FY25.

Capex

Cotton yarn: In FY24, capex plans of larger players were impacted due to stress on margins in the industry. CRISIL expects capex to recover slowly from FY25. However, experts on the panel believed capex could be limited and revival unlikely in the near term, unless a major export demand emerges. Experts believe 8-10% margins in the spinning industry would be insuf cient to incur fresh capex.

Polyester yarn: The industry added 5-6% of its capacity in last two years, which should operationalize in FY25. Hence, no major capex is planned for FY25.

Export have posted strong growth over the years:

Indias cotton yarn exports to surge by 85% to 90% in FY2024: ICRA

In ICRAs recently published research note on the domestic cotton spinning industry, the rating agency expects demand for the industry to improve by close to 12-14% in volume terms in FY2024 on a yearly basis, with yarn exports likely to increase by a sharp 85% to 90%, on the back of a shift in sourcing preference away from China, and the expectations of demand improving for the spring/summer season in the US and the EU regions that will drive domestic demand from apparel and home textile manufacturers. However, a sharp moderation in cotton prices, leading to lower yarn realizations, is likely to translate to a 9-10% year-on-year (YoY) decline in revenues to ~Rs. 33,465 crores in FY2024.

Cotton yarn exports typically account for ~25-35% of Indias cotton yarn production, while the remaining is accounted for by the domestic market. While a steep decline (53%) was witnessed in cotton yarn exports in FY2023, there has been a trend reversal in the current scal. In 7M FY2024, overall yarn export volumes grew by ~142% (on a YoY basis) on a low base, and with increased exports to China, resulting in the share of exports in the overall production increasing from 19% in FY2023 to ~33% in 7M FY2024. For the full year FY2024, ICRA estimates Indias yarn exports to increase by ~85- 90% on a YoY basis. Bangladesh, China, and Vietnam account for ~60% of these exports. With the share of Asia in Indian yarn exports being ~70%, no immediate impact on Indian yarn exports is expected due to the ongoing Red Sea con ict; any sustained continuance of this face-off would have a direct impact on apparel export volumes and a consequent impact on both domestic and export demand for cotton yarn and its realisations.

Cotton is one of the most important commercial crops cultivated in India and accounts for around 25% of the total global cotton production. It plays a major role in sustaining the livelihood of an estimated 6 million cotton farmers and 40-50 million people engaged in related activity such as cotton processing & trade. The Indian Textile Industry consumes a diverse range of bres and yarns and the ratio of use of cotton to non - cotton bres in India is around 60:40 whereas it is 30:70 in the rest of the world.

Apart from being the provider of a basic necessity of life i.e. clothing which is next only to food, cotton is also one of the largest contributor to Indias net foreign exchange by way of exports in the form of raw cotton, intermediate products such as yarn and fabrics to ultimate nished products in the form of garments, made ups and knitwear. Due to its economic importance in India, it is also termed as "White-Gold".

Species of Cultivated Cotton:

India is the country to grow all four species of cultivated cotton Gossypiumarboreum and Herbaceum (Asian cotton), G.barbadense (Egyptian cotton) and G. hirsutum (American Upland cotton).

Majority of the cotton production comes from ten major cotton growing states, which are grouped into three diverse agro-ecological zones, as under:

Northern Zone: Punjab, Haryana and Rajasthan

Central Zone: Gujarat, Maharashtra and Madhya Pradesh

Southern Zone: Telangana, Andhra Pradesh, Karnataka and Tamil Nadu

Indias total production of cotton in the year 2023-24 (until November 2023) is 31.6 million bales (bales of 170 kg each). Total production of cotton in the year 2022-23 was 34.3 million bales and in 2021-22, it stood at 31.1 million bales. The Central Zone (which comprises states like Gujarat, Maharashtra, and Madhya Pradesh) was the biggest producer of cotton in India in 2022-23, with Gujarat being the highest producer of the Central Zone, contributing 9.49 million bales (bales of 170 kg each). Saurashtra constitutes about 70% of Gujarats cotton production, with farmers in Amreli - the states largest cotton district - playing a key role. Yavatamal, Buldhana, Akola Amravati Nagpur Washim, and Wardha are the districts of Vidarbha which are Maharashtras major cotton-producing areas.

The Southern Zone (which comprises states like Telangana, Andhra Pradesh, Karnataka, and Tamil Nadu) is the second biggest producer of cotton, producing about 28.5% of the nations cotton, with Telangana producing the largest in the Southern Zone and the third largest in the country, contributing 5.31 million bales (bales of 170 kg each). The cotton textiles industry is the second largest employer in the country after agriculture, while also sustaining the livelihoods of an estimated 6.5 million cotton farmers and driving a large export market.

According to Nishant Asher, secretary of Indian Cotton Federation (ICF), the main issue this year was the demand and not supply. The daily arrivals to the market during the year was 70,000 to one lakh bales. Currently, Indian cotton prices are on a par with the international prices. If the international prices decline, Indian cotton will become expensive. This will hit the domestic textile industry.

The cotton production in India for 2023-24 is slightly lower than the previous years. In India, the lowest cotton production was recorded in 2008-09 with 29 million bales, according to the Cotton Advisory Board.

Further, the cost of raw cotton, the primary material for cotton yarn, can be subject to uctuations due to factors such as weather conditions, global supply and demand, and trade policies. In contrast, synthetic bers used in synthetic yarn, such as polyester or nylon, are derived from petrochemicals, which can be subject to separate supply and price dynamics. Modern synthetic ber manufacturing processes are highly automated and can achieve economies of scale, which can lead to lower production costs.

Despite all the dif culties faced during the year due to unfavorable international market condition and unpredictable cotton prices, Your Company has never slow down the production and tried to mitigate it and entered in to new markets, delivering best quality products and adopting better marketing strategies.

Government Support and Initiatives in Textile Sector

PM MITRA

The Government has launched PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks Scheme to develop world class infrastructure including plug and play facility with an outlay of Rs. 4445 crores for a period up-to 2027-28. PM MITRA Parks Scheme are inspired by the 5F vision of Honble Prime Minister - Farm to Fibre to Factory to Fashion to Foreign. Nearly Rs. 70,000 crore investment and 20 lakhs employment generation is envisaged. Parks will offer an opportunity to create an integrated textiles value chain right from spinning, weaving, processing/dyeing and printing to garment manufacturing at a single location. World-class industrial infrastructure would attract cutting edge technology and boost FDI and local investment in the sector. Centre and States to form SPVs for setting up PM MITRA Parks. These parks will be developed in PPP mode.

Amended Technology Upgradation Fund Scheme (ATUFS)

Under ATUFS, ratio of MSME: Non MSME is 89:11, while under previous versions of TUFS it was 30:70. Higher incentives of 15% (Rs 30 crore) for entities for employment potential segments viz. Technical Textiles and garment/made ups. Employment support to more than 17 lakhs (3.9 lakhs New and 13.4 lakhs Existing) over seven years. Out of total 3.9 lakhs new employment generated, 1.12 lakh (29%) are women.

PLI Scheme

The Government has approved the Production Linked Incentive (PLI) Scheme for Textiles with an approved outlay of Rs 10,683 crore over a ve year period to promote production of MMF Apparel, MMF Fabrics and products of Technical Textiles in the country to enable Textile sector to achieve size and scale and to become competitive The Scheme has two parts: Part-1 envisages a minimum investment of Rs.300 crore & minimum turnover of Rs.600 crore per company and Part-2 envisages a minimum investment of Rs.100 crore & minimum turnover of Rs.200 crore per company There will be two years of gestation period under the Scheme (FY: 2022-23 and FY. 2023- 24). The incentive will be provided to the companies under the scheme on achieving the threshold investment and threshold turnover and thereafter incremental turnover. 64 applicants were selected under the Scheme. In the approved 64 applications, the total proposed investment would be Rs.19,798 crore, projected turnover would be Rs.1,93,926 crore and proposed employment generation would be 2,45,362. As per Quarterly Review Reports (QRRs) as on 30.09.2023, the eligible investment made under the Scheme was Rs. 2,119 crore of 30 selected applicants, out of which 12 selected applicants started commercial production, turnover achieved was Rs. 520 crore including export of Rs.81 crore and employment generated was 8,214.

Ministry of Textiles has reopened the PLI portal for inviting fresh applications from interested companies under the scheme upto 31st December 2023

Bharat Tex 2024

BHARAT TEX 2024 is a global textile mega event organized by a consortium of 11 Textile Export Promotion Councils and supported by the Ministry of Textiles. It is scheduled from February 26-29, 2024 in New Delhi. With a focus on sustainability and resilient supply chains, it promises to be a tapestry of tradition and technology attracting the best and the brightest from the textile world. It will have dedicated pavilions on Sustainability and Recycling, thematic discussions on resilient global supply chains and digitization, interactive fabric testing zones, product demonstrations and master-classes by crafts persons and events involving global brands and international designers. Bharat Tex 2024 will be a unique experience for knowledge, business and networking. The mega event will feature an exhibition spread across nearly 20 lakh sq. ft area showcasing Apparel, Home Furnishings, Floor Coverings, Fibres, Yarns, Threads, Fabrics, Carpets, Silk, Textiles based Handicrafts, Technical Textiles and much more. It will also feature nearly 50 different knowledge sessions providing an excellent platform for knowledge exchange, information dissemination and Government to Government and Business to Business interactions.

SAMARTH

The Government with a view to enhance the skills of the workforce in the textile sector has formulated Samarth Scheme under a broad skilling policy framework with the objective of providing opportunity for sustainable livelihood. The implementation period of the scheme is upto March 2024.

The scheme aims to provide demand driven and placement oriented National Skill Quali cation Framework (NSQF) compliant skilling programmes to incentivize and supplement the efforts of the industry in creating jobs in the organised textile sector and related sectors, covering the entire value chain of textiles excluding spinning & weaving and in addition it also provides skilling and skill-upgradation in the traditional textile sectors.

The skilling programme under the scheme is implemented through Implementing Partners (IPs) comprising Textile Industry/Industry Associations, State Government agencies and Sectoral Organizations of Ministry of Textiles. Under the Scheme 2,47,465 persons have been trained as on 11.12.2023.

Remission of Duties or Taxes on Export Product (RoDTEP)

The government of India introduced a new scheme, named RoDTEP, in September 2019 and released a budget allocation of Rs. 500 billion by March 13, 2020, in a move to replace MEIS (which ends in December 2019) and RoSL (only refunds state taxes). The new scheme is in terms with the conditions of the WTO, where incentives cannot be provided, but the taxes incurred during the process can be refunded. Hence, the government plans to refund all state (RoSL) and Central government taxes incurred by the export players during the manufacturing process of RMG. According to the government, this new scheme would "adequately compensate" for the current 6% (4% MEIS and 2% RMG) bene ts being availed of by the RMG exporters and help them stay competitive enough in the international trade market.

Innovations to create sustainable textiles

Arvind Limited, the largest textile to technology conglomerate in India, and PurFi Global LLC, a sustainable technology rm that specializes in rejuvenating textile waste into virgin grade products, have formed a joint venture to reduce the quantity of textile waste dumped in land lls.

The Sustainable Textiles for Sustainable Development (SusTex) project by the United Nations Climate Change entity enhances the employment and working circumstances of textile artisans while promoting the sustainable production and use of environmentally friendly textiles.

Many Indian textile players are now opting for sustainable production. BRFL Textiles Private Limited (BTPL), Indias largest fabric processing facility, has introducing a new sulphur dyeing process involving continuous dyeing without requiring water. BTPL is the rst company in the textile sector to implement this new process of dyeing, making it the pioneer of this innovative sustainable process.

Sangam India Ltd, one of the foremost producers in PV dyed yarn, cotton and OE yarn and also ready to stitch fabric, has installed two solar power plants of 5 MW that on average helps them to bring down their carbon footprint by at least 20% per annum. SIL also plans to increase the use of recycled bre, leading to lesser consumption of plastic waste by using it as a raw material.

Scaling-up organic cotton industry

India is expected to host the 81st Plenary Meeting of the International Cotton Advisory Committee (ICAC) from 2nd to 5th December 2023 in Mumbai with the theme "Cotton Value Chain- Local Innovations for Global Prosperity".

Cott-Ally mobile app has been developed for farmers to increase awareness about MSP rates, nearest procurement centers, payment tracking, best farm practices etc.

In March 2022, the Tamil Nadu government included a Sustainable Cotton Cultivation Mission in its agriculture budget by allocating US$ 1.86 million (Rs.15.32 crore) to enhance the yield of organic cotton.

Kasturi Cotton Bharat

Kasturi Cotton Bharat programme of Ministry of Textiles is a rst of its kind branding, traceability and certi cation exercise carried out jointly by the Government of India, Trade Bodies and Industry to promote Indian Cotton. Stakeholders across the supply chain including farmers, Ginning Units, Spinning Mills, Processing Houses, Weaving Units, Garmenting Units, Home Textile manufacturers and even Retailers and Brands will be involved in a collaborative effort to promote and enhance the value of Indian Cotton across the domestic and overseas markets.

To encourage the Trade and Industry to work on the principle of self-regulation by owning complete responsibility of Traceability, Certi cation and Branding of Kasturi Cotton Bharat, MoU has been signed between CCI on behalf of Govt. of India, Ministry of Textiles and TEXPROCIL.

The Ministry of Textiles is driving this initiative in a mission-oriented approach, allocating budgetary support in alignment with Rs.15 crores contribution from Trade & Industry Bodies. Spanning three years from 2022-23 to 2024-25, this collaborative effort anticipates a positive impact on the entire Indian Textile Industry, fostering an elevated global perception and value for Indian Cotton.

Milestones achieved in this initiative are as under:

Certi cation protocol has been nalized for standardization of quality for 29 mm and 30 mm cotton, which is under long staple cotton category. The sampling and testing will be carried out through authorized National Accreditation Board for Certi cation Bodies and NABL-accredited agencies/labs.

All the ginners in the country have been empowered to produce Kasturi Cotton Bharat brand as per stipulated protocol.

Leading companies and associated Ginning units are being registered for participating Kasturi Cotton initiative and 306 units on-boarded till date including 290 Ginners &16 supply chain members.

First Lot of certi ed Kasturi Cotton was produced in the month of November 2023 by the Cotton Corporation of India Ltd.

To provide complete traceability of Kasturi Cotton Bharat across the supply chain, QR based certi cation technology are being used at each stage of the processing and a blockchain based software platform will provide end to end traceability and transaction certi cate. In this regard, Microsite with QR code veri cation and Block Chain technology has been developed.

Kasturi Cotton Bharat website has been launched on the occasion of world cotton day on 7th October 2023. This website provides a digital platform for necessary information and updates on these initiatives and highlights the registration process for ginners to produce Kasturi Cotton Bharat Brand and its processes that make the branded Indian cotton unique.

Advertisement agency has been nalized for managing the campaign at national and international level. So far, Two Brand Films and Three Celebrity Endorsement Films with Shri Pankaj Tripathi along with Festive Greeting videos and still photographs has been developed.

The international launch of Kasturi Cotton Bharat was executed at the 81st Plenary Session of the International Cotton Advisory Committee (ICAC) held in Mumbai during 2nd to 5th Dec.2023.

Honble Union Minister of Textile, Commerce & Industry, Consumer Affairs and Food & Public Distribution, Shri Piyush Goyal unveiled Kasturi Cotton My Stamp along with the inaugural set of products made out of Kasturi Cotton i.e. a stunning T-Shirt and a beautifully designed hand towel during inaugural session of 81st Plenary meeting of International Advisory Committee (ICAC) held on 2nd December 2023. Transaction certi cates for sale and purchase of Kasturi cotton and its products was also issued during the aforesaid event.

COMPETITION IN FOREIGN MARKETS

With 50 Million Spindles and 0.75 Mn Open-End Rotors, India has the worlds second largest spinning capacity, commanding a share of the global Cotton Yarn market - currently producing over 4700 Mn.Kgs of spun yarn of which over 3,400 Mn.Kgs is cotton yarn. Cotton Yarn accounts for nearly 73% of total spun yarn production. Indian Spinning Industry is the most modern and ef cient in the world.

India produces a comprehensive range of yarns for every conveyable end use - non-spun or open-end; combed or carded, basic, compact, melange or fancy. Indias 1943 spinning mills produce them all for requirements ranging from a ne 200 count to a coarse 2 count.

The worlds most renowned Indian Cotton Yarns are available as greige, bleached, mercerized, gassed, twisted, dyed or an endless range of fashion yarns like melange, stretch, blends, high twist and so on to meet the different applications in fashion, clothing, home textiles, hosiery and industrial fabrics. India can meet every customer requirement whether large or small, regular or customized, premium or basic.

Constant induction of state-of-the-art technologies like compact spinning, using the most advanced yarn - processing technology and high-precision process controls tools like electronic cleaners, auto slavers, splicers, two-for-one twisters and auto-coners give Indian mills a competitive advantage.

Today, Indian yarn is widely accepted in International markets as the exporters here regularly meet the needs of importers with unmatched ef ciency and economy in countries like USA, Italy, Spain, Japan, China, South Korea, Taiwan, Bangladesh, Vietnam etc.

The Indian cotton textile industry has been facing increasing competition in world markets. This is largely due to high cost of p r o d u c t i o n a n d consequently high prices of cotton. It is paradoxical in a country where wages are low and cotton is internally available.

Availability of quality cotton in required volume can be made achievable through framing Government Policies for increasing the productivity of cotton on par with international producers.

Though the mandatory compliance of BIS

Standard for several textile products including MMF Fibre, Yarn, Technical Textile products, etc., by way of issuing Quality Control Orders (QCO) is a welcome move and would encourage Atma Nirbhar Bharat, it lacks workable standards. Also, the initial investment towards establishment of lab and its connected mandates is beyond the capacity of the growing MSME sector that accounts over 85% of the entire textile value chain. The industry, industry Associations and the government are actively involved in addressing the issues in complying the QCOs. The Government is in the process of bringing more than 100 QCOs covering the entire textile value chain.

Indias textile and apparel industry can be labelled as that rocket which zoomed off to the skies but lost its zz somewhere in between. Despite being the second-largest exporter of textiles and accounting for 5% of the global share of textiles and apparel, Indias rst runners up crown face stiff chances of being taken away by smaller countries like Vietnam and Bangladesh.

The principles of sustainability, traceability and circularity have begun to rule the export market. The domestic manufacturers are also working towards incorporating the same in the manufacturing process. However, the cost of certi cation to prove the same is already on higher side and still escalating.

GROWTH FACTORS

India is the third largest producer of cotton with the largest area under cotton cultivation in the world. It has an edge in low-cost cotton sourcing compared to other countries.

Presence of entire value chains Competitive manufacturing costs Availability of skilled manpower Large and growing domestic market

Rising per capita income, higher disposable incomes and preferences for brands

India has gathered experience in terms of working with global brands and this should bene t Indian vendors.

China losing its competitive edge to India

Easy and on-demand availability of credit

Exporters gaining from strong global demand:

India is the worlds second-largest textile exporter. Capacity built over years has led to low cost of production per unit in Indias textile industry. This has lent a strong competitive advantage to the countrys textile exporters over key global peers.

The Indian Medical Textiles market for drapes and gowns is around US$ 9.71 million in 2022 and is expected to grow at 15% to reach US$22.45 million by 2027.

The Indian composites market is expected to reach an estimated value of US$ 1.9 billion by 2026 with a CAGR of 16.3% from 2021 to2026 and the Indian consumption of composite materials will touch7,68,200 tonnes in 2027.

During (April-September) 2023-24, the total exports of textiles stood at US$ 20.01 billion.

In the coming decade, Africa and Latin America could very well turn out to be the key markets for Indian textiles.

In April 2022, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Mr. Piyush Goyal, said that new Economic Cooperation and Trade Agreements with Australia and the UAE would open in nite opportunities for textiles and handloom. Indian textile exports to Australia and the UAE would now face zero duties, and he expressed con dence that soon Europe, Canada, the UK and GCC countries would also welcome Indian textile exports at zero duty.

Strategies:

Exploring existing potential and new product development

Lean Manufacturing- to minimise waste and create more v a l u e - o r i e n t e d products

Energy- sustainable manufacturing and use of energy ef cient machinery

Assets Reliability- adopting smart machineries and incorporate arti cial intelligence

Product development for immediate market needs

Building value around the commodity

Organisational Alignment- clear assignment of duties towards every management personnel for smooth and ef cient operations

Focused on Innovation & Technology

OPPORTUNITIES AND THREATS

Opportunities-

Immense growth potential

In September 2023, Shadowfax inaugurated a 1.5 lakh sq. ft. ful lment center in Surat with 10 lakh orders per day processing capacity.

The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand.

The textile and apparel industry is expected to grow to US$190 billion by FY26.

Bilateral relations:

In October 2021, the Ministry of Textiles and GIZ

(Deutsche Gesellschaft fur Internationale Zusammenarbeit) signed an MoU to implement theIndo German Technical Cooperation project. The project aims to increase the value addition from sustainable cotton production in the country.

Industry bodies to host the largest global mega textiles event, Bharat Tex 2024 from February 26-29, 2024, in New Delhi. According to Union Minister, Mr. Piyush Goyal, Bharat Tex 2024 Expo is a testament to Indias commitment to becoming a global textile powerhouse.

Supply chain:

In recent times, China is facing issues with respect to wage increases and shortage of workforce. This would be an opportunity for India which could act as an alternative destination for foreign players to enter. In addition, this would aid investors to avoid the US-China trade issues thus reducing the supply chain disruptions. Furthermore, India being worlds largest manufacturer of cotton and second largest manufacturer of polyester and viscose would further support the yarn manufacturing industry.

Increased Disposable Income and Purchasing Power of Indian Customer opens New Market Development.

Product development and Diversi cation to cater global needs.

Large, Potential Domestic and International Market.

Opportunity in European Union (EU)

Government Initiatives for exports

Union Budget 2023-24:

Under the Union Budget 2023-24, the government has allocated:

Rs. 4,389.24 crore (US$ 536.4 million) to the Ministry of Textiles.

Rs. 900 crore (US$ 109.99 million) is for Amended Technology Upgradation Fund Scheme (ATUFS).

Rs. 60 crore (US$ 7.33 million) for Integrated Processing Development Scheme.

Rs. 450 crore (US$ 54.99 million) for National Technical Textiles Mission.

Foreign investments:

The Government is taking initiatives to attract foreign investment in the textile sector through promotional visits to countries such as Japan, Germany, Italy and France.

According to the new Draft of the National Textile Policy, the Government is planning to attract foreign investment and creating employment opportunities for 35 million people.

In December 2019, online clothing brand Henry

& Smith raised US$ 1 million from WEH

Ventures and Rukam Capital.

India can become the one-stop sourcing destination for companies from Association of Southeast Asian Nations (ASEAN) as there existseveral opportunities for textile manufacturing companies from 10-nation bloc to invest in India.

Threats and Challenges-

High Technological Upgradation Costs

Staying competitive in the Cotton Suppliers industry demands continuous technological upgrades. However, the costs associated with implementing advanced machinery and processes can be a signi cant barrier for smaller manufacturers, posing a challenge to their ability to keep pace with larger counterparts.

Global Competition

Indian cotton yarn manufacturers face intense competition on the global stage. Competing with other cotton-producing countries requires a delicate woven fabric manufacturers balance of cost-effectiveness, quality assurance, and agility in responding to market trends.

Raw material price uctuations

Raw material cost (raw cotton) is the largest cost component for the yarn-manufacturing industry, accounting for a major share in players operating income. In case of cotton yarn, as cotton is a seasonal commodity, procuring raw cotton supplies at the right time and at the right price is crucial. Similarly, uctuations in the price of naphtha would affect the polyester yarn manufacturers. These raw material price uctuations impact yarn players, due to limited ability to fully pass on the price rise and inventory losses, when sharp price correction happens. Hence, the major determinant of pro tability for a yarn manufacturer is the management of raw material price uctuations, which also makes it a key challenge for the industry.

Competition from other developing countries. Currency risk/ Exchange rate uctuations International labor and Environmental Laws. Supply Chain Disruptions

The industry is susceptible to supply chain disruptions, whether due to geopolitical tensions, natural disasters, or unforeseen events. These disruptions can lead to delays in production and increased operational costs.

GLOBAL OUTLOOK

The Cotton Yarn Market size was at USD 69.43 billion in 2023, USD 73.21 billion in 2024, and is expected to grow at a CAGR of 5.76% to reach USD 102.82 billion by 2030. India aims to achieve a prominent global position in manufacturing and exports of different types of textiles including jute, silk, cotton and wool. India has the potential to increase its textile exports in the next ve years. Exports of Cotton yarns are a signi cant component of Indias export basket, as it plays a vital role in boosting the domestic economy.

Exporters gaining from strong global demand

India is the worlds second-largest textile exporter. Capacity built over years has led to low cost of production per unit in Indias textile industry. This has lent a strong competitive advantage to the countrys textile exporters over key global peers.

During (April-September) 2023-24, the total exports of textiles stood at US$ 20.01 billion.

In the coming decade, Africa and Latin America could very well turnout to be the key markets for Indian textiles.

In April 2022, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Mr. Piyush Goyal, said that new Economic Cooperation and Trade Agreements with Australia and the UAE would open in nite opportunities for textiles and handloom. Indian textile exports to Australia and the UAE would now face zero duties, and he expressed con dence that soon Europe, Canada, the UK and GCC countries would also welcome Indian textile exports at zero duty.

The Ministry of Textiles favored limited deal for the India-UK free trade agreement that could boost the garments sector. Under the proposed trade agreement, the Textile Ministry expects more market access for the Indian textiles and clothing sector in order to achieve its full potential.

SEGMENT ANALYSIS

Yarn is the core of all fabrics- be it garments or home furnishings. The Company Produces "Cotton Yarn" using Cotton as raw material. We can call it a Sustainable Yarn production because it has been manufactured keeping environment, humans and the economy in balance. Our yarns do not deplete the earths resources or cause carbon footprints. They are organically grown or manufactured by recycling.

As the Company is manufacturing only the one product i.e. Cotton Yarn, Therefore, segment/product-wise details are not applicable.

COMPANY REVIEW

The manufacturing facility of The Company (LSL) is situated at A 51-53, RIICO Growth Centre, Hamirgarh of Bhilwara District in the Rajasthan State and spreads over 48,263 square meters. The Company has an installed capacity of 1,920 rotors in open-end segment, 25536 spindles in ring spinning segment and 41,472 spindles in Compact Ring Spinning segment for cotton yarn having capacity to produce approx. 69.45tons per day of high-quality yarn.

During the year, the Company has commissioned the Expansion Project of 41,472 spindles of compact cotton yarn at a costing of Rs. 218 Cr., two months ahead of the schedule i.e. 31st January, 2024 without any time and cost overrun. The plant is equipped with modern and automatic plant and machinery. The level of advancement determines the productivity of machines and labour, which in turn, determines the production, operating cost and pro tability of The Company. Our technical team in spinning is well equipped with modern spinning technology and processing techniques by virtue of which we are able to ensure quality yarn.

Lagnam Spintex is presently exporting cotton yarns to countries like Portugal, Bangladesh, Colombia, Poland, China, Peru, Germany, Mauritius, Malaysia,South Korea, Turkey, Taiwan, Italy, USA, Spain, Germany and others. The products are widely used in apparel and garment industry, industrial fabrics, towels, Denims etc.

PERFORMANCE

The Company has recorded total revenue from operations during the Financial year 2023-24 of Rs. 43750.24 Lacs against the total revenue of

Rs. 30465.93 Lacs in the previous nancial year 2022-23, an increase of about 44%.

The Total expenses of the Company during the nancial year 2023-24 is Rs. 41697.12 Lacs against the expenses of Rs. 29216.33 Lacs in the previous nancial year 2022-23. The expenses have increased during the year majorly due to the additional expenses of the expansion project of 41,472 spindles of Compact Cotton Yarn commissioned during the year w.e.f. 31 January, 2024.

The Pro t after tax is Rs. 1457.32 Lacs for the nancial year 2023-24 as compare to Rs. 976.28 Lacs in the previous nancial year 2022-23, a sharp increase of about 49%.

RISK & CONCERNS

No industry is free from normal business risk and concerns. Indian Textile Industry continues to face stiff competition from China, Bangladesh, Taiwan and other emerging economies. The relative competitiveness of Industry is dependent upon the raw cotton prices, exchange rates and prevalent interest rates regime. The primary raw material for the manufacturing of yarn is cotton which is an agriculture produce. Its supply and quality are subject to forces of nature i.e. Monsoon. Any increase in the prices of raw cotton will make the things dif cult for the Textile Industry resulting weak demand and thin margins. Thus availability of raw cotton at the reasonable prices is crucial for the spinning industry. Any signi cant change in the raw cotton prices can affect the performance of the Industry.

There are certain key risks associated with our Company. Such risks are stated in the table below along with our mitigation strategies for curbing the same:

Economic downturn	A downturn in the economy can adversely affect products demand.	Our products are exported globally. We have been actively engaged in widening our geographical presence while continuously expanding our product portfolio. Not being bound to a speci c region and a basket of products to offer from gives us the ability to face such downturns.
Increase in raw material prices	An increase in cotton prices can adversely impact our Company.	Our purchasing policy allows us to enjoy control over the purchase price. We constantly track cotton prices and store the raw material as and when price decreases. This practice helps us mitigate the risk of price.
Quality risk	Any kind of divergence in the quality standards of our products may lead to customer and client erosion.	We closely monitor the quality of our products with the help of our dedicated quality assurance team. This team is responsible for supervising quality control while assuring that the standards, as set by the Company, are diligently met with.
Availability of skilled personnel	Our success depends upon our ability to attract and retain skilled personnel. Any kind of failure in this area can adversely affect our business and operations.	We conduct induction programmes to nurture our talent in a structured manner. We also offer various incentives and growth opportunities to our people. This helps retain the talented and skilled workforce.
Competition risk	An increase in the competition from textile industry can severely hamper our Companys market share.	The Company is a prominent player in this segment. The Company has always focused on quality products with strong brand equity. Its ability to understand the market demand and ful l it accordingly helps them retain clients and market position.
Risk of foreign exchange	We generate majority of our revenue from the global operations. Given the nature of business, a large proportion of the costs are denominated in Indian rupees (INR), leading to currency exposure.	The Company mitigates its foreign exchange risk through application of hedging policy.
Technology risk	A technology-intensive business like ours can fall prey to technological obsolescence.	We continuously upgrade technical support used in our manufacturing, research & development facilities. We actively invest in R&D to keep ourselves updated with the technological change and replace the obsolete technology.

INFORMATION TECHNOLOGY

In todays global marketplace change is inevitable and to keep ahead of this any organization must use Information Technology to drive Innovation which is the path to quick business decisions. Lagnam is a rm believer that without IT no organization can function, therefore our end-to-end Business Process Management tool based on Infor LX ERP platform went live along with our COD in 2019. After making signi cant investment in its IT infrastructure and solutions, Lagnam would be one of the very few manufacturing companies that has signi cant budget allocated for IT upgradation to adopt to ever evolving technological solutions.

As our systems are maturing, we are immensely proud to use the full potential of technology in various day to day activities:

We have a centralized single network infrastructure secured by a robust Firewall monitored and managed by our team on regular basis. On this network all our manufacturing machines as well as user computers are connected for ease of access

All our end user machines and servers are protected by McAfee Enterprise level End Point Security system to safeguard any virus attacks on our network

The management and operational team have easy access to all the operational data of various machines on the tip of their ngers at all the time for a quick proactive action.

We have a complete HRMS and Payroll system to fully utilize our human resource potential.

We recently invested in a customized Cotton

Bale Management system to keep our product quality consistent.

We have developed in house Open source email server to support our BPM system to send out reports by department to everyone at the end of the day to take corrective actions as and when required.

Use of collaborative tools for easy information sharing across various departments.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Lagnam Spintex has appropriate systems for internal control. These systems are continually improved and modi ed to meet the changes in the business conditions and the statutory and accounting requirements. The Company also has a robust Management Information System, an integral part of the control mechanism. The Audit Committee of the Board of Directors reviews the ef ciency and effectiveness of the internal control systems. It then suggests solutions to improve and strengthen. The internal control system was tested during the year, and no material weakness in design or operations was found.

HUMAN RESOURCES AND INDUSTRIAL RELATION

Human resource is a crucial asset for a Company to achieve sustained growth. To attract, retain and develop its talent pool, the Company has consistently recognized talent, imparted training, and followed the golden principle of rewarding performance. Besides, it is committed to individual well-being and safety at the workplace and it is proud to attract the talent that it needs for future growth. Most importantly, it places great emphasis on eliminating all forms of discrimination in terms of employment and professional activities (gender, age, race, political af liation, religion, among others). It pays special attention to professional equality, gender equality, the employment of seniors and young people, the employment of people with disabilities.

The Company has cordial and harmonious industrial relations at all levels of organizations. The company believes that the industry has the tremendous potential to impact the society, nation and the world positively. At present company has employed man power of around 835 peoples including technical, non-technical, managerial and non- managerial, casual and contract labour.

ENVIRONMENT AND SAFETY

Clean and safe environmental operations are LAGNAMs key priorities. The Company conducts all its operations, ensuring the safety of everyone concerned, compliance with statutory and industrial requirements for environment protection, and conservation of natural resources to the extent possible.The Company policy requires the conduct of all operations in such a manner so as to ensure the safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources to the extent possible.

CAUTIONARY STATEMENT

Certain statement made in this report describing Companys Objective, Projects, estimates and expectations may be forward looking statement within the applicable laws and Regulations. Actual results may differ from such expectations and forward-looking statement due to various risk and uncertainties. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized.

The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could in uence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

	For and on Behalf of the Board of Directors
	D. P. Mangal
Place : Bhilwara	Executive Chairman
Date : 29.04.2024	(DIN - 01205208)