Profitable Growth. Innovation for Tomorrow.
I write to you as I complete two years of my journey at the helm of your Company. Atthe outset let me thank you for your unstinted support; it has helped me and my teamwithstand the turbulence faced by the Indian economy in the recent past. I am proud toreport that we performed rather well improving our profits significantly while protectingour top line from severe degrowth. As we move forward your Company continues to be drivenby three principles: profitable growth innovation-led focus and gold standards ofgovernance.
Permit me to discuss your Company's performance in my letter first and then share withyou our macroeconomic viewpoint. I believe that as stakeholders all of us need tounderstand how our strategy of focussing on high-margin high-end science-led productsolutions that I spoke of last year has started yielding positive results. Indeed by thefundamentals of our business we are now more competitive disciplined andexcellence-oriented.
Our Performance: Value Creation through Value Addition
During the past year we continued with our strategy of driving our product mix towardshigh value- addition items and move away
from the high volume low margin manufacturing approach of earlier years. We hadanticipated an initial slowdown of revenues during the first few quarters and sales topick up steam during the quarters thereafter. However early in the 3rdquarter demonetization almost brought business to a standstill especially with ourexposure to the agriculture and rural markets where cash transactions dominate. Salesplummeted and slowdown was experienced for the second half of the year.
We had two choices. We could either return to high volume low margin job workmanufacturing to make up for lost sales or stick our neck out and remain steadfast withour innovation- led R&D strategy. We plumped for the latter for two reasons: Firstlywe believe demonetization was worth the
During the past year we continued with our strategy of driving our product mixtowards high value-addition items and move away from the high volume low marginmanufacturing approach of earlier years.
short-term pain for long-term gains. Secondly we felt it is prudent to pursue a'profitable growth' strategy to protect our bottom line rather than chase growth at allcost. I personally believe that chasing growth at the cost of profits is not a great ideafor our stakeholders. It reminds me of an old saying "Revenue is Vanity but Profitis Sanity".
During FY2017 your Company's revenues stood at Rs. 5928.39 lac as compared to Rs.6169.35 lac for FY2016. However PAT registered a significant Y-o-Y jump of 37% to Rs.239.49 lac in the year from the previous year's Rs. 175.22 lac. Despite our sales fallingbehind by a few inches as compared to last year our profitability increased by 37%!
We believe our customers appreciate the fact that we have introduced new-agescientific applications and custom solutions both in knitted and woven products andtherefore willingly pay a premium. Another factor worth noting is that per unitprofitability has gone up significantly and should continue to grow as we move towardsbecoming an IPR- driven science-led technical textiles player.
I accept that we missed our revenue targets as per our plans. But I hope you willappreciate the fact that it was not entirely our doing. However we upped our profitssignificantly thanks to a focus on cost rationalization automation and high-endcomputerized production. Indeed our ability to garner premium prices while simultaneouslybringing down input costs through higher productivity and
a complete organizational revamp led to improved performance during the year despitetop line stagnation. We will continue with our focus on profitability and bring back ourtop line growth projections to a 20%
CAGR for the next 3 years. However with the introduction of GST we have await-and-watch policy to understand its implications and whether it will affect our topline in the short term.
Global Overview - Uncertainty & Disruption is the New Normal
Two seminal events during the last year demonstrated that uncertainty andunpredictability are the new normal! UK's exit from the European Union and the US electionresults conclusively showed how even the best predicted and planned outcomes could beoverturned by mandates bordering on socio-economic fallacies. The Middle East crisis isanother example where business leaders were left helpless due to geopolitical events.(Incidentally we learnt this first hand when a large shipment for a Qatari customer wasdelayed).
However on the positive side innovation-led thinking disruptive technology-drivensolutions and science-based customer applications are sprouting across the worldregularly. Entrepreneurship is being realized through private money that is promoting moreexperimentation.
In our business chemical science and its applications and solutions are a key focusarea for innovation across the world. Last year saw the commercialization of our R&Defforts in the science and applications space where customers benefited from the endproducts.
Technical Textiles - Democratizing Usage From Labs to Citizen's Homes
In the last decade the use of technical textiles has been democratized around theglobe. For example technical textiles were considered for use in high-end and inventiveapplications meant mostly for use in government-sponsored scientific space programmes likespace suits. Today space travel has been commercialized with Virgin Galactic becoming theworld's first commercial spaceline creating a need for space suits produced on a massscale. Now technical textiles are widely used in agriculture (agrotech) packagingindustry (packtech) sustainable infrastructure (geotech) and safety and protection(protech). Your Company's current focus is in the above four areas.
Among textiles technical textiles have seen the maximum growth across world markets.It is expected that the global technical textile market will reach USD 160.38 billion by2018. When it comes to volume the world's technical textile production is projected tohit 42.2 million metric tonnes by 2020 representing a CAGR of about 4.68% from 2015 to2020 according to a report from Technavio.
Some of the most critical unsolved
Among textiles technical textiles have seen the maximum growth across world markets. itis expected that the global technical textile market will reach uSD 160.38 billion by2018.
problems challenging humankind are being addressed through the use of technicaltextiles. This includes increasing yields per hectare and reducing wastage buildingecofriendly and safe infrastructure and addressing environmental concerns. Today whitegoods manufacturers and consumer & health food companies are using technical textileapplications to improve end- product life make them lightweight (efficient) preventcounterfeiting and promote branding. The 4th largest decorative paintmanufacturer in Asia uses our packaging solutions to ensure superior branding mitigatecounterfeiting and enable a pilferage- free experience for consumers.
Indian Economy - Democracy Demography Demand Digitization
In the coming years the Asia Pacific region will witness high population growth andthe potential of the technical textiles industry will be the greatest here. The region isslated to be the world's largest market for technical industries between 2017 and 2027accounting for more than 50% of global industry revenues . Expectedly India and Chinawill lead the demand momentum.
India's technical textiles sector is expected to expand at a CAGR of 6.8% as againstthe global rate of 4.6%. According to a report by ICRA Management Consultants the Indiantechnical textile industry witnessed 57% growth in value over the last five years.Further it is projected to be valued at INR 116217 crore in 2017-18. An enablingregulatory environment that will facilitate numerous technical and fiscal incentives willsupport the sector's performance.
Today we have a government led by a determined and action-oriented Prime Minister whois open to innovative ideas. Public spending especially in the areas of agricultureinter-city road and city infrastructure etc. is overtaking private sector plans.Additionally the government is keen on science-led development and technical textilesform a special focus area. From starting Centres of Excellence to awareness creation andeven providing machinery space quality control labs etc. the government is encouragingSmall & Medium Businesses to enter technical textile manufacturing. Standardization oftechnical textile products is another area of focus for the government. Even as thecountry's economic growth was drawn back at 7.1% for FY2017
India continues to outperform major developed economies.
The above policy direction gels well with established technical textile players likeRishi Techtex as we have developed superior knowledge and R&D-led advanced productsand applications. While we become a focussed R&D and science-led business with newapplications and innovations we will create strategic partnerships with new'micropreneurs' who have manufacturing facilities with standard quality control.Currently about 9% of the world's total technical textile consumption is 'Made in India'.Besides the export market technical textiles have a huge domestic opportunity ascurrently about 30% of our country's demand is being met by costly imports.
The future beckons - An ideas- heavy Asset-right R&D & innovation company
Let me share with you certain strategic and long-term changes that we have implementedduring the year based on an outward customer focus. During the year we launched many newproducts the details of which are mentioned inside the report. However the point that Iwish to make is that today with over three decades of experience and a state-of-the-artR&D facility and latest machinery we have created an innovation edge that very fewtechnical textile companies have in the domestic market. We intend to become aresearch-based technical textiles company with a dual focus - product development ofhigh-end value-added solutions and a nimble customer-focussed marketing and salesorganization.
We are the first Indian technical textile (public limited) company to get the BIScertificate for shade nets under IS 16008. Rishi Techtex is the first company in India tomake thermal nets in-house which so far have been imported by local players. Our researchteam and scientists' ability to develop complex import- substitute indigenous productsproves that the organization is moving from the earlier manufacturing mindset towards ascientific temper. Our shade nets for grape growers have resulted in 33% increase inincome. We launched fire retardant shade nets as part of our protech portfolio the firstby an Indian company as others rely on imports. These shade nets will be used for outdoorcovering and safety purposes in stadiums and sports arenas.
Our Capex during the year was focussed on a few specific things: a) state-of-the-artmachinery purchased for automation and computerised production processes b) Retoolingcurrent machinery to increase productivity speed and quality while reducing wastage c) anasset-right strategy whereby our investments will be in high-end technology intellectualcapital and R&D labs rather than pure manufacturing. Discontinuation of job workhelped us raise margins. Going ahead once our products and applications are successfullycommercialized and ready for scale up we will look at
Besides the export market technical textiles have a huge domestic opportunity ascurrently about 30% of our country's demand is being met by costly imports.
capable outsourcing vendors. Our capital investments will be more towards getting thebest human capital rather than blocking it in plant and machinery. Also training anddevelopment safety and health at our plants remain a key priority.
Finally I want to thank all of you without whose support and blessings this journeywould not have been possible. I wish to leave you with an anecdote that will give you apeek into things to come. This year we experimented with a new sales channel by creatingan online product presence across leading e-commerce sites. This shows our ability tothink like a start-up adopt innovate ideas experiment with the unknown and then deliversustainable science- based outcomes for a better safer and more productive tomorrow.
|Warm Regards |
|Abhishek Patel |
|Managing Director |