Overview
Our theme for the year - Sustain. Empower. Grow. - is an ethic that theCompany has lived across the last nine decades of its existence. The Company?sphilosophy is about growing patience and perseverance in the face of challenging marketrealities. It is about empowering employees to respond with initiatives that strengthenthe business. It is about the coming together of sustenance and empowerment leading tosustainable growth.
The validation of this ethic is reflected in the longevity of ourCompany. The fact that we have survived and succeeded in this challenging space acrosspolitical economic and technology cycles is a vindication of our commitment toperpetually expand capacities and capitalize on economies of scale invest in ongoingmodernization to enhance operating efficiencies and deepen a culture of innovation withthe objective to bring differentiated products to consumers. Seldom has this commitmentbeen tested more than in the last two years marked by a pandemic slowdown that translatedinto a decline in revenues margins and profits in FY 2020-21 and a rebound in ourfinancial and operating parameters in FY 2021-22. During the slowdown the Company keptfaith and focus on the core elements of its business. This focus was validated during theyear under review when the Company reported a vigorous rebound. This rebound was marked byprofitable growth: 62% growth in revenues was corresponded by a 186% increase in EBIDTA.
Economic background
The global economy grew from 3.3% to 5.9% in 2021. The Indian economyrebounded from a degrowth of 7.3% in FY2020-21 to a growth of 8.7% in FY 2021-22. Thecountry?s manufacturing sector grew 12.5% compared with a degrowth of 7.2% in theprevious financial year. The global textile sector grew 10.1% during the year underreview. The US sanctions on Xinjiang cotton in China opened a new market for India?sexport of spun-dyed yarns. The emergence of the China-plus-one factor turned seriousglobal buyers towards India for long-term engagement. The announcement of long-termtextile sector policies by the Indian government enhanced clarity. The benefits of RODTEP(WTO-compliant) strengthened the Indian textile sector. The Indian government entered intofree trade agreements with countries. The extension of the production-linked incentivescheme extended to man-made fibres. The government announced the launch of mega textileparks.
It would appear that the Company?s vigorous performance reboundwas achieved in a conducive business environment. The reality was that the Company?sperformance in the last two years was in the face of unprecedented business realities thatput a premium on seeking new ways to sustain and grow.
There was a sharp rise in cotton price crude oil other commoditiesand interest rates. The outbreak of the Ukraine-Russia war affected global businesssentiment affecting textile exports. There was a slowdown in the Chinese economy thatmoderated textile demand.
The BANI factor
So what has transpired in the last couple of years that is differentfrom previous slowdowns coupled with subsequent recoveries one may ask. I believe thatthe VUCA (volatile-uncertain-complex-ambiguous) environment of the past has been replacedwith BANI (brittle anxious non-linear and incomprehensible). A new understanding of BANIis necessary to comprehend challenges of the Company?s operating environment. Thebrittle nature of the operating environment is reflected in its vulnerability to externalshocks and unforeseen developments affecting not just a country or two but becoming anextensive multi-country phenomenon. The brittleness of the modern world was highlightedwhen a pandemic outbreak exposed the fragility of the global social and economicenvironment.
The other visible feature of this new normal is a sense of anxiousness.This anxiety is affecting consumer purchase; in turn this is influencing capitalexpenditure by companies. The one offshoot of this reality is that staggered capacitycreation is resulting in a sharp increase in product and resource inflation creating asecond layer of anxiety related to the sustenance of trends and a preference for thestatus quo. The third feature of BANI is a growing non-linearity of the modern world. Theconventional relationship between cause and effect is no longer evident. What worked inthe past is not working in the present and may not work in the future either. An entireeco-system of predictability has been threatened leading to a hesitation indecision-making.
The last dimension of BANI is the word ‘incomprehensible?. Anabundance of data is not necessarily leading to informed decision-making. A real-timeunderstanding of range of global realities is overloading the mind with data that isputting a premium on detached and objective decision making. The answers coming out of theconventional shifting of data are not leading to clarity. The result is a decline in theunderstanding of our space economy and global direction. What used to be simple is nowcomplex; what required simple deduction is now guess work. The bottom line of this newnormal is that a mistake can set one back by years. Companies do not only need to beright; they need to be more right than ever. They need to be resilient during phases ofuncertainty and be among the first to rebound during periods of economic recovery. Theyneed to mitigate the impact of downtrends (however long that lasts); they need to maximizecash flows during periods of recovery (however brief).
Sustain. Empower. Grow.
At Sutlej we believe that the new normal warrants a new way of doingbusiness.
What worked for us in the past needs to be questioned; what was takenas the surest way to do things needs to be re-examined.
At Sutlej our re-examination comprises three words that have beensequenced into a statement: ‘Sustain. Empower. Grow.? This line has acquired adeeper relevance; it encapsulates a clarity of how companies like ours can negotiateexternal challenges and protect business sustainability.
The word ‘sustain? draws on the Company?s richmulti-decade culture of manufacturing excellence. The word draws on the Company?sdeep-rooted understanding of balanced risk and caution; it draws on the Company?sinstitutionalized knowledge across roles and functions; it draws on good businesspractices. The bottom line is that ‘sustain? is really the Company?s shockabsorber that is its most effective insurance against external volatility.
The word ‘empower? draws attention to the need for informedcollective action. This action is not about decisions taken in an ivory tower; it is aboutengaging the organization down to the last person standing drawing on that person?sknowledge initiative and passion for organizational benefit. The competitive companies ofthe future will be those that engage their talent more productively. The effectiveness of‘empower? will be increasingly derived from talent recruitment and empowerment;it will be derived from the capacity to reappraise and adapt nimbly to the marketenvironment. There will be a bigger premium on the need to learn and unlearn; on the needto harness talent for customer benefit; on the need to reorganize train and shareinformation; on the need to celebrate every small win and see failures as learningopportunities; on the need to strengthen the enumeration culture so that the organizationspeaks with data as a credible basis; on the need to make the Company a preferred place towork in.
The word ‘grow? represents a predictable outcome ofinitiatives. The priority for our Company is to grow bottom-up widen the portfoliolaunch pioneering products strengthen backward integration deepen ecological relevancestrengthen the ‘head to tail? alignment and see change as an opportunity. Thepriority will enhance organizational flexibility and responsiveness.
Enriching outcomes
Out of the uncertainties created by the pandemic and upheaval in thesocial-political environment a new Sutlej is emerging.
This Sutlej is raising the bar across virtually all roles andfunctions. The Company is not just focusing on customer service; it is obsessed withcustomer delight. The Company engages periodically with customers to understand how Sutlejcan help take their business ahead. The result is that Sutlej launched new products andattracted new customers which generated around 15% revenues during the year under reviewa sizeable share for an initiative that will now be rapidly scaled.
At Sutlej we are cautiously optimistic of prospects even as theCompany continues to wait and watch the unfolding scenario before committing any sizeableinvestment in manufacturing capacity. The Company will sweat manufacturing facilitieswidening its value-addition and enhance stakeholder value.
I must end by expressing
my heartfelt thanks to all our
stakeholders for their support.
C. S. Nopany
Chairman
