Mohit Industries Ltd Management Discussions

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. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation. Despite monetary tightening, inflation is persistent in many key economies and Global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024.

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.

India to witness GDP growth of 6.0 per cent to 6.8 per cent in 2023-24, depending on the trajectory of economic and political developments globally. Economic Survey 2022-23 projects a baseline GDP growth of 6.5 percent in real terms in FY24. Credit growth to the Micro, Small, and Medium Enterprises (MSME) sector has been remarkably high, over 30.5 per cent, on average during Jan-Nov 2022. Capital expenditure (capex) of the Central Government, which increased by 63.4 percent in the first eight months of FY23, was another growth driver of the Indian economy in the current year. RBI projects headline inflation at 6.8 percent in FY23, which is outside its target range

Explaining the economic outlook factoring global rudiments, the slowdown in global growth and economic output coupled with increased uncertainty is likely to dampen global trade growth. Strong domestic demand amidst high commodity prices will raise Indias total import bill and contribute to unfavorable developments in the current account balance. These may be exacerbated by plateauing export growth on account of slackening global demand. Should the current account deficit widen further, the currency may come under depreciation pressure. Also, entrenched inflation may prolong the tightening cycle, and therefore, borrowing costs may stay ‘higher for longer. In such a scenario, global economy may be characterized by low growth in FY24. However, the scenario of subdued global growth presents two silver linings – oil prices will stay low, and Indias CAD will be better than currently projected. The overall external situation is expected to remain manageable for India.

The global textile market grew from $573.22 billion in 2022 to $610.91 billion in 2023 at a compound annual growth rate (CAGR) of 6.6%. The Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19 pandemic, at least in the short term. The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe. The textile market is expected to grow to $755.38 billion in 2027 at a CAGR of 5.5%.

The countries covered in the textile market are Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Nigeria, Norway, Peru, Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Turkey, UAE, UK, USA, Venezuela, Vietnam.

Companies around the world and across all segments face a "perfect storm" scenario, it claims, with high production costs and relatively low demand. At the same time, companies expectation for the business climate in six months-time have been improving since November 2022. It is unclear if this growing optimism about the mid-term future is due to a belief that the situation cannot get much worse or anticipation for a well-founded economic normalization. Order intake has also steadily decreased since November 2021, mostly in line with the trend in the business situation, the report showed. The rate of decline has nevertheless slowed down in March 2023, likely due to weak demand.

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.

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. Indias growth cycles have become highly synchronized with those of advanced economies over the years. The most important and direct impact of this will be reduced demand for Indian goods abroad. 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 by the 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. In FY 2022-23, exports of readymade garments cotton including accessories stood at US$ 7.68 billion till January 2023. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally. The major service offerings of the technical textile industry include thermal protection and blood-absorbing materials, seatbelts and adhesive tapes. The technical textile industry is expected to expand at a CAGR of 13.11 percent during FY18–23 to USD 32 billion in FY23. The targeted market size would be achieved by targeting non-woven technical textiles.

The company is equipped with modern infrastructure facilities which assist in smooth production. The companys manufacturing unit is outfitted with advanced machines and equipment and a trained staff, who have years of experience behind them. To sell products to the clients, the company has facilitated a smooth transportation mechanism through a strong base of transporters and traders.

During the year, your Company recorded total revenue of 16,992.58 Lakhs against Rs. 16,986.16 Lakhs in the previous year, resulting into Loss before Tax of Rs. 128.99 Lakhs during the year as compared to Profit before Tax Rs. 36.23 Lakhs in previous. Total Comprehensive Income during the year was Rs. 266.86 Lakhs as compared to Rs. 598.10 Lakhs in the previous year. A significant portion of revenue is generated through export of products of the company. Any change in the duty structure, import and export policy has significant bearing on revenue realization of the Company. Fluctuation in exchange rate of Indian currency has significant bearing on profitability.

Key rations based on Standalone Financial Statement of company is as mentioned below:

The textile industry in India is very strong as it has a variety of natural and man-made fibers and yarns. Indias textile industry plays a technological and capital-intensive role and is compared with industries like heavy machinery, automobiles etc. Since the pattern of industrialization in trade has become common in consumer goods industries and labor-intensive industries there is immense opportunity in the textile industry. India is estimated to be the second most appealing market by the year 2025 contributing up to US$ 121billion whereas China has been estimated to be the biggest appealing market contributor by adding US$ 378 billion by the year 2025.

India has one of the fastest-growing economies with the GDP increasing to 7.2 percent in the year 2017- 2018. This creates a boost in the purchasing power of the people while it also spurs the demand for products of the textile industry. This boost results in a wide range of capacity to manufacture different products that can be transported within India as well as across the world. Apart from this, India has one of the most extremely varied textile sectors as it has hand-woven textiles on one end while capital intensive mills on the other end which results in an enormous number of opportunities in the textile industry.

India supplies 8 percent of the global demand for denim fabric. Per-capita denim consumption in India is estimated at 0.1 meters, about one-fifth of the global average. Domestic demand is expected to surge with the significant growth in the Indian economy and increased consumer spending on clothing.

Though there are many opportunities and investments in the textile industry, like any other industry, the textile industry of India also undergoes certain challenges. The frequently changing policies stated by the government at the central and state levels create immense pressure on the textile industry. The GST applied on the products make the garments and clothes even more expensive.

Another challenge that the textile industry faces is the limitation to access the latest and best technology while also failing to meet the global standards in the competitive export market. Apart from these issues like child labor, competition from neighboring countries regarding low-cost garments, personal safety norms are some of the challenges the Indian textile industry faces.

Higher input costs compared to competing nations Absence of fiber neutrality Low technology level Absence of Free Trade Agreements with major markets Fragmented nature of industry lacking economies of scale

The Company and the Management has established adequate Internal Control systems to ensure reliable financial reporting. The Companys internal control procedures commensurate with the size and nature of business. Detailed procedural manuals are in place to ensure that all the assets are safeguarded, protected against loss and all transactions are authorized, recorded and reported correctly. The Company always adheres to set guidelines and follows all Accounting Standards prescribed for maintenance of books of accounts and reporting of financial statements. The internal control systems of the Company are monitored and evaluated by internal auditors and their audit reports are periodically reviewed by the Audit Committee of the Board of Directors.

The Company recognizes human capital as strategic resource and believes empowerment of employees across the organization in order to achieve organizational effectiveness. There have been no material developments/significant changes in Human Resource during the year under review. The companys industrial relations remained cordial during the year. Your directors acknowledge the support and cooperation from employees at all levels. As on 31.03.2023 there are 364 employees on the records of the Company.

The statements in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied.