MD & CEO’s Message
“Our transformation, started in 2015, has been marked by resilience, patience, and incremental progress. As our product mix evolves, we anticipate a shift towards specialised products for sustained profitability.”
- Abhishek R Mandawewala
MD & CEO
Dear Shareholders,
Financial Year 2023 was yet another tough year for our
company as our numbers slipped from where we were last
year. This was further exacerbated by stock losses caused by
a sharp fall in the raw material prices. While a track record
of consistent profitability growth eludes us, I am confident
that our business continues to become more robust with
each passing year and has become more so over the last 12
fiscal months. Eventually, we will see the efforts of the last
8 years culminate into a business that will deliver stable and
relatively predictable results, less impacted by the vagaries
of the market and more as a result of competing from a
position of an unfair competitive advantage in our favour.
While the results were not favourable, there are several
small wins that we ought to celebrate.
- The robustness of our floor covering business improved further. We added more customers to our portfolio and were able to bring down our customer concentration further. We have more business coming from alternate segments. We commercialised our innovative products with more customers and now have a bigger piece of the pie coming from these products. Despite a year where the overall market is down, we continued to maintain momentum.
- We successfully completed the first phase of our expansion in technical yarns and are on track to producing and selling 2.5x the volumes that we were producing earlier. We also managed to expand our sales network internationally which will create a robust pipeline of new customers over the coming years.
- While we have struggled with production efficiencies, we have learnt a great deal about commercialising new products and are far more equipped to commercialise future innovations.
- While the textile division continues to drag profitability, we have improved the share of value-added products such as Mono yarns and Silque.
- Our share of exports continued to grow and inched closer to the 50% mark with the share of value-added products increasing higher than before.
- We have also successfully made progress on the supply chain side by creating a more robust mix of suppliers, particularly in auxiliaries such as packing materials and masterbatches, reducing single vendor dependency in the several items.
That said, our business was plagued by several issues
which affected the profitability this year. A tough domestic
market continued; a decrease in raw material prices
coupled with a unique situation of lower-than-expected
production efficiencies and higher costs due to the learning
curve associated with the launch of several new products
and programmes caused our profitability to drop. Lower
efficiencies of new products on specialised machines
also meant lower than planned production, leading to air
freights to keep up with customer expectations. A global
slowdown in consumption led to over capacities in China
which resulted in low-cost goods, particularly nylon, being
dumped in our markets and significantly affecting our
margins, particularly in commodity segments. The drop in
local demand coupled with cheap imports also meant low-
capacity utilizations and caused fixed costs to be absorbed
by lower producing units further impacting margins.
As I write this letter, we have been successful in stabilising
a few of our new products, achieving the desired level of
production efficiencies and internal rejection levels.
An example of this is our proprietary Soft Polyester product
which took 4 years from product development to launch to
commercialization and finally stabilisation. However, there is
still some distance to go in some of our other innovations.
I hope that we will be able to address many of these issues
in the coming fiscal year. There are several other areas that
we hope to focus on and gain from in the coming year.
- Improving production efficiencies and bringing down the rate of off-grade production in the floor covering segment is going to have the highest impact on profitability going forward.
- Improving capacity utilisations in the commodity segments by increasing the sales of value add products such as Silque and mono yarns will help us cushion the impact of low sales in segments such as nylon. At low/minimum capex we hope to convert lines to these products and continue to reduce exposure/exit of non-profitable commodity segments, which are lower in the value chain.
- We are in the process of commissioning 3 new lines in the technical yarn segment which have been installed in place of and by replacing old non profitable commodity lines.
- Raw material prices particularly in nylon seem to have hit the bottom and stock losses of the previous few quarters should now stop. As prices normalise, these will result in stock gains going forward.
The journey thus far has been incredibly tough and
painstaking. This transformation journey started in 2015
and we have faced challenges every step of the way.
This includes building a capable team, building the right
infrastructure, building the sales network and reaching
the right customers, creating the products, getting
approvals and winning awards for supply of these products,
commercialising these products, building the right systems
for controlling and effectively managing multiple product
lines and finally stabilising the production of these products.
The lifecycle for each product is on average 5 years.
External shocks have not helped our cause.
But it is important to remain resilient, patient and
continue to work undeterred and address challenges
one step at a time. As our product mix continues to
shift from commodity products, the base of our profitability
will increasingly start coming from established specialised
products which will have a longer period of above average
returns compared to commodity products. As this happens,
our results should look vastly different as compared to what
they look like today.
I would like to end this letter on a note of thanks to all our
shareholders, who have continued to support us through
this journey. Finally, I would also like to thank all of our
employees for continuing to believe in our vision and
working tirelessly towards it.