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

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.

Warm Regards

Abhishek R Mandawewala - Md & Ceo’S Message