Singer India Ltd Management Discussions

Indian Economy

Despite grappling with various global challenges, India maintained its position as one of the worlds fastest-growing major economies in FY 2024. With a robust macroeconomic framework, burgeoning domestic demand, and prudent monetary policies implemented by the Reserve Bank of India (RBI), Indias real GDP expanded by 7.6%. Headline inflation, as measured by the year-on-year changes in the all-India consumer price index (CPI), stabilised at 5.1% in February 2024.

Merchandise exports experienced a seasonal upsurge in March 2024, coinciding with a peak in industrial production. The manufacturing sector emerged as a key driver of industrial growth, registering a steady 11.6% increase throughout FY 2024. Notably, enhanced capacity utilisation across manufacturing propelled economic expansion further.

Despite the declining inflation rates coupled and heightened credit demand an atmosphere of economic optimism prevailed. Efforts to streamline supply chains and increased government expenditure shielded India from significant economic disruptions. India is increasingly viewed as a viable alternative to China and is projected to become the worlds third-largest economy by 2027.

Outlook

The Indian economy remains optimistic supported by strong fundamentals such as political stability, heightened government focus on public capital expenditure, a gradual rise in private capital expenditure and growing credit demand. The robust banking and financial services sector are expected to strengthen the nations growth trajectory. India has swiftly established itself as a preferred manufacturing hub, catering to the rising global demand for manufactured products. Leveraging its large domestic market and expanding export prospects, Indias growth trajectory is expected to surpass other economies in the foreseeable future.

India GDP growth rate¹

Industry Overview

The Sewing Machine Industry

It is exciting to see that the sewing machine industry in the country is evolving and adapting to modern demands, while preserving its traditions. With a projected Compound Annual Growth Rate (CAGR) of over 4.6% from 2023 to 2032, the global sewing machine market is expected to grow from USD 6.8 billion in 2023 to USD 10.3 billion by 2032, with significant potential for expansion across various market segments.²

For the domestic market, the household sewing machines sector is projected to grow at a CAGR of 5.5% from 2022 to

2030.³ This growth can be attributed to the increasing demand for electronic sewing machines and rising disposable incomes among consumers. The Asia Pacific region, particularly India, is expected to see the highest growth rate in the household sewing machines market. This growth is driven by the increasing demand for household products and the rising number of manufacturers in the region. The availability of low-cost raw materials in India will continue to drive regional growth over the forecast period.

The emphasis on displaying the ease and functionality of sewing machines, particularly the Auto Zig Zag models, at competitive pricing is a smart strategy to drive demand. Moreover, the growing interest in crafts and self-expression is leading to renewed interest in developing sewing as a skill, thus fuelling growth in the industry.

Incorporating best-in-class technologies into sewing machines to make them more user-friendly and enjoyable to use is a key aspect for future growth. Additionally, leveraging digital communication and marketing channels can help raise awareness and familiarity with sewing and embroidery, especially with the rise of online education platforms offering tutorials and classes.

The governments initiatives to empower women economically through skill development, including providing sewing machines, aligns well with the industrys growth trajectory. Furthermore, the Make in India initiative can additionally bolster the sewing machine segment by promoting local manufacturing and production.

Overall, the sewing machine industry in the country is poised for significant expansion, driven by a combination of technological advancements, changing consumer interests, expansion of fashion & Apparel Industry and supportive government policies.

The Consumer Durables Industry

The Indian consumer durables industry, comprising a wide range of household items including appliances and electronics, has recorded substantial growth in the recent years facilitated by demographic shifts and macroeconomic trends. Furthermore, the industry is poised for significant expansion influenced by growing middle-economic class and evolving lifestyle.

Market Trends and Consumer Demand

Urbanisation and rising disposable incomes are facilitating enhanced consumer spending on durable goods. These have significantly fuelled the demand for high-quality, durable appliances that align with modern urban lifestyles. The trend towards premiumisation is particularly notable with consumers nationwide. It has also been observed that Tier 2 and Tier 3 cities are showing a preference for high-end products that demonstrate superior performance, enhanced features, and an aesthetic appeal.

Business Overview

Throughout FY 2023-24, the Company navigated through a challenging business landscape, confronting both setbacks and successes alike. However, the Companys strong performance amid adversity proved its resilience and the collective strength of its team. Over the past year, the Company has faced a multitude of challenges, overcoming each with confidence and determination.

The demand for lower prices from the market, coupled with the burden of high cost & slow-moving inventory, presented formidable challenges that the Company effectively addressed.

The year, 2023-2024, brought forth new hurdles in the form of cancellation of the Zig Zag Machine license by the BIS, posing a significant setback to its most profitable segment. However, through swift action and resilience, the Company overcame the obstacle, and resumed sales of the Zig Zag machines successfully. The Company also faced suspension of few of our products by Canteen Store Department (CSD), and despite the loss in sales due to the action taken by CSD, the Company successfully resolved the concerns and got the supplies reinstated for distribution in CSD canteens.

The Company remained anchored in its core business ethos, values, and principles. Looking ahead, its focus will remain on prioritising value engineering initiatives, cost optimisation, refining its product messaging, streamlining inventory management, optimising operations, and fostering stronger stakeholder engagement.

The Companys overall gross margin has grown by 2.9% in FY 2023-24. This growth in gross margin can be attributed to price repositioning, cost optimisation, channel, and product mix improvements. Additionally, the Company significantly optimised the after-sales service cost which resulted in reduction of cost by a sum of INR 1.9 crore by minimizing the production of high-failure products, restructuring the service business thereby rationalising workforce, and enforcing strict control on sales returns.

The Company realigned the sales teams to bring sharper focus across the Sewing Machine and Home Appliances segments, which helped to create an efficient and high performing sales team. The Company optimised the sales force to bring sharper focus on productivity, while also strengthening the sales force in some markets for distribution expansion. These steps are aimed at charting a course for sustainable growth, increasing the Companys market share across product lines, and cultivating a performance driven work culture where talent thrives.

With respect to the Home Appliances business, the Company will continue to focus on achieving profitable growth, backed by launching and focussing on profitable and high-quality products. The company will forge stronger vendor partnerships to develop and offer high quality & premium products thus enabling better pricing & premium positioning in the consumer mind.

The Company will shift focus from offering me-too products to introducing newer designs with distinct features across key product lines. The Company will place heightened emphasis on after-sales service. Leveraging digitisation in service operations is yet another key initiative of the Company. Through digitisation, the Company aims to enhance the overall consumer experience through seamless end-to- end monitoring, reducing turnaround time for response and resolution, thereby reinforcing consumer preference for the Singer brand.

Outlook and Opportunities

The Company is confidently aiming to focus more on enhancing revenue and margins across the sewing machines and household appliances segments. Also, the Company is focusing on strengthening its design and development capabilities to introduce differentiated product offerings across the sewing machines and appliances categories. The Company aims to strengthen the lineup of current products with new value-added offerings which will support the premium brand positioning, thus helping in improving consumer preference for Singer brand.

The Company plans to improve and strengthen its Branding and Marketing efforts across BTL, Digital platforms, Ecommerce platforms & trade partner engagement. The Company also aims to offer a first-of-its-kind experiential and engaging retail concept for Singer India.

The Company aims to strengthen its Sewing Studio offerings, improve its course material; thereby attracting younger talent to learn the art of sewing and embroidery, thus creating deeper engagement with fast expanding customer base who are keen to learn the sewing & crafting skills.

The company is exploring a manufacturing facility in India, with the support of the SVP global, which will cater to the domestic & global demand, and open an impressive avenue for the Companys growth.

Threats, Risks and Concerns

The Company has identified the following risks to its operations-

1. Intense competition, especially from unorganised sectors & cheap imported products, across business segments, poses risk to the Company for revenue growth. To address this risk, the Company is offering and creating value engineering products, communicating product benefits, creating experiences and engagement with the products, advertising and using social media to run campaigns to enhance its brand recall and inform consumers about the new launches. Implementation of QCO by the government will further restrict import of cheap imitations in Zig Zag machines.

2. An increase in raw material prices can lead to higher manufacturing costs, thereby affecting the Companys revenue and profitability. The Company is implementing cost reduction strategies through design optimisation, exploring alternative cost efficient suppliers, to mitigate the impact of rising raw material prices.

3. Uncertain supply of raw materials can disrupt business continuity, leading to production delays and the Companys ability to effectively cater to growing consumer demand. To ensure a steady supply and mitigate potential disruptions, the Company diversifies its supplier base and maintains strategic reserves of critical materials.

4. Currency fluctuations can affect the financial performance of the Company. The Company manages the foreign exchange risk with appropriate hedging activities in accordance with the policies of the Company.

5. Supply chain disruptions in the import of traded goods can impact the Companys operations and impede new product development. For continuity and support new product initiatives, the Company invests in strengthening its supply chain resilience by developing alternative logistics arrangements and establishing strong relationships with multiple suppliers.

6. Cybersecurity risks: To mitigate the risk of external cyberattacks which can impact our business, the Company has deployed “firewalls” and “threat monitoring systems” in place, complete with immediate response capabilities to mitigate identified threats. The Company also maintains a system for the control and reporting of access of critical IT systems. The Company has implemented policies which cover the protection of both business and personal information, as well as the use of IT systems and applications by our employees. The Company is using most of the applications on cloud and some of the applications are on SaaS based model. Robust and scalable system architecture with multi-level redundancy is built on the cloud that allows real time data replication capability. This ensures system resilience including minimum downtime of the systems and minimum to zero data loss in case of any disaster. The Company is hosting information on its public websites and has systems in place to monitor compliance with appropriate privacy laws and regulations.

The Board of Directors of the Company and the Audit Committee of Directors periodically review the Companys risk management policy, considering emerging risks and developing action plans to determine the Companys risk exposure.

Segment-wise Performance.

Sewing Machines

The Companys core business of sewing machines has accounted for a revenue of INR 308.2 crore, close to last year of INR 312.8 crore.

The Companys Sewing Machine Business segment contribution before exceptional items improved to INR 37.1 crore, 11.9% to revenue, as against last years contribution of INR 33.2 crore of 10.6% to revenue. The improvement in contribution is mainly due to the improvement in gross margin attributed to various initiatives i.e. sales price repositioning, procurement cost optimisation and better margin product mix improvements.

In the upcoming year, the Company will work on value engineering & reducing costs, to offer better products at competitive prices with the objective of improving its gross margin and capturing a higher market share in the overall industry. It plans to emphasise growing the industrial sewing machines segment by introducing a new range of efficient sewing machines at reasonable prices to effectively compete and expand its market share in this flourishing segment.

The household Zig Zag machines have an incredibly low penetration in India and offer immense potential for expansion. Raising consumer awareness about the ease-of-use and functional versatility of these machines will drive demand in this segment. The Company intends to introduce a new range of machines in the household Zig Zag category with the additional capability of embroidery.

Apart from leveraging digital technology through virtual training academy, the Company will step up the efforts to raise awareness around the innovative features of the new AZZ machines, by significantly increasing the number of promoters across the country. Their main objective would be to assist the unaccustomed user of AZZ sewing machine become familiar with the modern technology, thus promoting the growing trend of craft and personalisation.

Home Appliances

The Company has consolidated Home Appliances business by cutting down some of its unprofitable products and related operating cost and realigned the strategies to focus on high margin products & channels. This has resulted reduction in revenue and operating loss. Net segment revenue for the appliances segment was recorded at INR 117.2 crore as against last years INR 147.5 crore. The Home Appliances segment operating loss in FY 2023-24 reduced to INR 9.8 crore against the loss of INR 11.2 crore for FY 2022-23.

In recent years, the appliances segment is making good efforts in consolidating its market presence and adding a premium edge to its product offerings to cater to a more discerning customer base. To drive profitable growth, the approach is to increase brand familiarity, drive premiumisation and differentiate the products in an increasingly competitive market.

Through collaborations with renowned suppliers, the Company aims to improve the quality of the Companys products. Also, bolstering the after-sales service to improve customer satisfaction will foster consumer loyalty and increase demand for Singers expanded product line.

Adopting digital technology for improving customer experience

To improve the customer experience, the Company has launched Singer Live Assist, the first-of-its-kind virtual service for consumers across the country. The service very effectively improves the after sales experience by reducing the turnaround time to give demonstration of the new product, especially in far flung areas, saves on service costs, and prevents post-sales service delays, which helps to strengthen customer relationships.

The Singer Live Assist was felicitated with the ‘Best use of technology in enhancing customer experience award at the third annual CX Excellence Awards 2024 Delhi, organised by Quantic India - SAP.

Going forward, the Company will continue to prioritise customercentric initiatives at the core of its business objectives. These initiatives will be backed by strategic consumer-driven events aimed at boosting brand recall and consumer engagement.

Internal Control Systems and Adequacy

The Company has adequate systems of internal controls for operations, ensuring optimum utilisation of resources, effective monitoring, and compliance with all applicable rules. The internal control system is commensurate with the size and nature of the Companys operations.

A firm of Chartered Accountants conducts internal audits on a quarterly basis. The Audit Committee reviews the audit reports submitted by the internal auditors. The Committee also meets the Companys statutory auditors and internal auditors to ascertain their views on the adequacy of internal control systems and keeps the Board of Directors informed of its major observations from time to time, if any.

Human Resources

The Company upholds the highest standards of Human Resource management principles across all operational aspects—ensuring strict adherence to regulatory requirements.

To achieve organisational objectives, the Company offers its people continuous learning and development opportunities. To create a secure workplace, the Company organises training sessions covering safety-best practices for its people.

In 2023, the Company was certified as a Great Place to Work. This acknowledgement boosted the confidence of both the Companys internal and external stakeholders.

Disclosure of Accounting Treatment

During the year under review, there has been no change in the accounting treatment. The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS).

Details of significant changes (that is, a change of 25% or more as compared to the previous fiscal year) in key financial ratios, along with a detailed explanation, include-

Financial Overview

Key Financial Metrices	FY1 2023-24	FY 2022-23	Change	Change %	Reason for Change in the Ratio by More than twenty- five%
Total Income (INR Cr)	433.07	464.75	-31.68	-6.82
Profit Before Tax (INR Cr)	6.13	10.96	-4.83	-44.07	Profit decreased due to the exceptional item of Rs. 7.24 Crores in last year, Profit increased excluding exceptional item.
Profit After Tax (INR Cr)	4.50	8.32	-3.82	-45.91	Profit decreased due to the exceptional item of Rs. 5.53 Crores in last year, Profit increased excluding exceptional item.
Key Financial Metrices	FY 2023-24	FY 2022-23	Change	Change %	Reason for Change in the Ratio by More than twenty- five%
Debtors Turnover Ratio	11.34	10.26	1.08	10.53
Inventory Turnover Ratio	3.57	4.73	-1.16	-24.52
Interest Coverage Ratio	18.89	7.29	11.60	159.12	Ratio increased due to lower the Interest Cost and Higher the EBIT
Current Ratio	2.36	2.51	-0.15	-5.98
Debt Equity Ratio			-
(Represents lease liabilities)			-
Operating Profit Margin (%)	1.53	0.81	0.72	88.89	Higher ratio on account of increase in operating profit during the current year.
Net Profit Margin (%)	1.06	1.81	-0.75	-41.44	Lower ratio on account of last year exceptional item of Rs.5.53 Crores.
Return on Net Worth (%)	3.11	6.12	-3.01	-49.18	Lower ratio on account of last year exceptional item of Rs.5.53 Crores.

Cautionary Statement

Statements in this MDA describing the Companys objectives, projections, estimates and expectations may be ‘forward-looking statements within the meaning of applicable laws and regulations. The Management has based these statements on current expectations and projections about future events. Such statements involve known and unknown risks, significant changes in the political and economic environment, tax laws and so on, and may cause actual results to differ materially.