Dear Shareholders,
The occasion of presenting you the annual report for the financial year
FY 2023-24 is also an opportunity for me to share with you our perspective on the global
economic conditions, its impact upon textile industry and our response as a textile
company. The year has been a year of challenges for us. Being export oriented industry,
textile industry's performance is subject to the global market conditions, which have
been difficult due to geopolitical conditions in the FY 2023-24 and situation has not much
changed thereafter.
Nevertheless, the domestic economy of India remained resilient to
global upheavals to great extents in terms of moderate inflation, and stable fiscal and
monetary policy. The real GDP growth of above 8% in FY 2023-24 against about 7% growth in
FY 2022-23 has kept the general confidence level high in the Indian economy. Economic
Survey of India projects 6.5-7% GDP in the ensuing financial year FY 2024-25. This is
based on healthy projection of the manufacturing sector keeping in view ‘China plus
One' approach of the global community. Further, it is expected that private sector
may also follow the capex buoyancy shown by public sector in India in last couple of
years.
Textile industry
The Indian textile industry has been growing organically and is,
presently, estimated at about USD 165 billion, which is projected to grow to about USD 350
billion by 2030. These projections are based on export of about USD 100 billion of textile
and clothing (T&C). This scenario offers scope for growth/ opportunities in the
textile industry. Though, challenges emanating from the prevailing geopolitical conditions
may act as head-winds.
Vardhman has consistently followed a prudent policy of harmonious
relations with all stakeholders including employees.
Business update-Yarns
The year was quite volatile in terms of cotton and yarn prices. With
lower cotton prices and slower demand, the international prices of cotton yarn remained
under pressure. Further, increased differential in international cotton prices and
domestic cotton prices also squeezed the margins of domestic spinning Industry. Cotton
being the key raw material for our Company has profound influence on our margins. In India
we are not free to import cotton as there is an import duty of 11% for cotton.
Unremarkably, the prices of cotton in the international markets have dropped down
drastically. This will make our prices, based on Minimum Support Price (MSP) of Govt. of
India, uncompetitive. If this phenomenon persists, the Industry may face formidable
challenges. We earnestly hope that Govt. may take appropriate decision to keep the
Industry competitive. The spinning capacity utilization in India was about 70% only during
the year. As a natural corollary of above factors, the profit margins remain lower as
compared to the previous year.
Nevertheless, there is no directional impact on the future outlook of
the cotton yarn business as we intend to invest H 1,000 crore+ for technology upgradation,
balancing equipment for optimisation and limited expansion.
Business update-Fabrics
The fabric business has performed better in line with our expectations
and market conditions and has seen 85-90% capacity utilization. We would like to apprise
you that your management has decided to expand its fabric division by venturing into
technical textiles with an initial investment of approx. H 300 crore apart from normal
modernisation projects undertaken by the Company. Recognising the global shift towards
non-cotton material, your Company will manufacture about 15 lac meters/ month of fabric
having usage in sportswear, active wears and other industrial and defence applications.
This strategic move will diversify our product portfolio and give us a competitive edge,
allowing us to cater to a broader range of customer needs and preferences. We intend to
increase this capacity gradually, linked with market feedback coming from consumers.
Commitment to Sustainability and Green Energy
With environment, health and safety becoming new addition in customer
expectations/ demand interwoven with product's technical and value proposition, a
great emphasis is given on sustainability of our operations in aforesaid areas.
Sustainability is at the heart of our strategy. We are committed to
increase the share of green energy in our operations. Currently, green power makes up
about 2.5% of our total energy consumption, and we aim to raise this to 35-40% within the
next couple of years through investments in solar and wind energy projects. These
initiatives are a testament to our dedication to environmental stewardship and operational
efficiency.
Our commitment to sustainability goes beyond energy consumption. We are
also focused on reducing our water usage, minimizing waste and promoting sustainable
practices across our supply chain. By integrating sustainability into every aspect of our
operations, we are not only protecting the environment but also creating long-term value
for our stakeholders.
Human Resources
Vardhman has consistently followed a prudent policy of harmonious
relations with all stakeholders including employees. Talent identification and development
is vital to the success of any organisation. We have always earmarked reasonable budget
for this and always believe in giving opportunity to the young aspirants. Our policies are
integrated with our business goals.
While the global business environment is challenging due to
geopolitical reasons well known to all and thus, having some concerns for immediate future
business environment in exports as well as domestic market, we are hopeful for the bright
future of the textile industry in India and continue to work hard to strive for sailing
during difficult times and prepare for new opportunities through operational excellence,
technological upgradation, scaling up and connect with customers to create value for them
on continuous basis.
Sincerely,
Shri Paul Oswal
Chairman