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Sutlej Textiles and Industries Ltd.

BSE: 532782 Sector: Industrials
NSE: SUTLEJTEX ISIN Code: INE645H01027
BSE 00:00 | 07 Aug 18.90 0.05
(0.27%)
OPEN

19.00

HIGH

19.00

LOW

18.90

NSE 00:00 | 07 Aug 18.90 0.05
(0.27%)
OPEN

19.35

HIGH

19.35

LOW

18.80

OPEN 19.00
PREVIOUS CLOSE 18.85
VOLUME 2036
52-Week high 38.90
52-Week low 15.40
P/E 7.94
Mkt Cap.(Rs cr) 310
Buy Price 18.00
Buy Qty 1.00
Sell Price 18.95
Sell Qty 59.00
OPEN 19.00
CLOSE 18.85
VOLUME 2036
52-Week high 38.90
52-Week low 15.40
P/E 7.94
Mkt Cap.(Rs cr) 310
Buy Price 18.00
Buy Qty 1.00
Sell Price 18.95
Sell Qty 59.00

Sutlej Textiles and Industries Ltd. (SUTLEJTEX) - Chairman Speech

Company chairman speech

overview

I present the performance of Sutlej Textiles and Industries Limited for the financialyear 2018-19.

The year under review proved to be a challenging year for the Indian economy in generaland the country's textile sector in particular.

Despite the various challenges I am pleased to communicate that Sutlej performedbetter than the sectoral average. The Company reported a top line growth of 4.09% even asmargins remained under pressure on account of subdued demand. The scenario was aggravatedby unprecedented volatility in raw material costs and exchange rates creating uncertaintyand affecting market sentiment. This is a transitional phase and the Company should reporta performance rebound as soon as the consumer sentiment revives.

The dynamic India growth story

The Indian economy continues to be the biggest driver of the Indian textile sectorproviding a large captive market and various realities that make India one of the mostexciting exporters of textile products. India emerged as a trillion-dollar economy at theend of the first sixty years since

Independence; the country added the next trillion dollars to its economy in only thenext seven years; the country is well on its way to emerge as a US$ 10 trillion economy ina little more than the next decade. This growth – arguably the fastest among majoreconomies – is the principal driver of the country's textile sector. The country'sgrowth continues to generate increased disposable incomes. A growth in India's aspirationsis derived from the expectation of a better tomorrow greater willingness to spend thansave and the openness to take credit.

After growing 7.2% in FY2017-18 the Indian economy slowed to 6.8% in FY2018-19. Aftera creditable first half the pace of the Indian economy eased considerably in the secondhalf following a liquidity crunch. Rural growth moderated to about 1.2 times in urbanareas compared with 1.5 times a year ago for fast- moving consumer goods on account of thenational economic slowdown and declining agriculture revenues.

India's growth was also affected by a weakening global economy: from 3.8% in 2017 to3.6% in 2018 largely on account of the failure of Brexit negotiations tightened financialconditions geopolitical tensions and higher crude prices. The ongoing trade disputebetween the US and China affected the global sentiment. The US increased import dutiesfrom 10 per cent to 25 per cent on US$ 200 billion worth of Chinese imports in 2019demanding that China reduce the massive trade deficit. The worrying feature is that globalgrowth is now estimated at 3.3% in 2019 on account of a sustained weakening in advancedeconomies.

The Indian textile sector overview

From a short-term perspective a number of challenges affected the Indian economy ingeneral and the textile sector in particular.

The general economic slowdown affected consumer sentiment and promoted a ‘savefirst' approach.

Consumers focused on experiential spending over apparel deferring purchases.Relatively lower investments in garmenting within the country compared to a sizablebuild-up in yarn capacity affected offtake and realizations. There was a yarnmanufacturing capacity accumulation in some Indian states following the announcement ofattractive investment-based tax incentives. On the other hand the cost of raw materialsremained high. Increase in the crude oil rates impacted the price of polyester staplefibre a major raw material as it is a downstream product of crude oil. In case of cottonour other major raw material the prices were impacted following the announcement ofincreased minimum support price by the government and the effect of the pink bollworm pestattack that affected crop output. There are also challenges in terms of power cost anddeclining availability of trained manpower.

From a long-term perspective the Indian textile sector appears at an exciting point inits existence. The coming together of the millennial generation the influence of theinternet and growth in personal vanity cum aspirations combined to create a demand fortextile products. There has been increased traction from the consumption of functional andfashionable textile products. There is a greater alignment with shorter fashion cycles ina single year as opposed to the conventional approach of four fashion seasons a year.

How Sutlej addressed the slowdown

Sutlej was affected by the slowdown in India's textile industry. Rather than wait forthe sectoral slowdown to pass I am pleased to report that Sutlej selected to counter theprevailing realities through various initiatives.

The Company did not increase manufacturing capacities in the last two years selectinginstead to consolidate and increase manufacturing efficiencies. The Company focused on newproduct development. It entered new territories to increase exports. It focused onsweating manufacturing facilities maintaining its average capacity utilization at around95%. It broad-based the global presence by selling deeper and larger in the markets of itspresence. It strengthened gearing from 1.15 in the previous year to 0.97.

Banking on strengths

Sutlej is India's largest spun-dyed yarn manufacturer (including cotton cotton-blendeddyed and melange yarns). Our spinning capacity of 420840 spindles generates attractiveeconomies of scale. We produce niche yarns in a wide range of counts blends and shades.Our fibre- dyed products provide ready-to-use convenience for downstream manufacturers.The Company broad-based its business across product portfolio markets geographies andcustomers. This broad-basing represents the core of our de-risking initiative making itpossible to moderate the impact of an unexpected weakness in any one segment.

The Company positioned itself as a one-stop solution for all types of ring spun dyedyarns to service growing customer needs and account for a larger share of the customer'swallet.

The Company selected to leverage its large proportion of modern spindleage addressingthe manufacture of value-added yarns to invest in sectoral downturns with the objective tocapitalize effectively on rebounds.

New initiatives

At Sutlej we believe that every slowdown represents an opportunity to make selectiveinvestments.

During the course of this downturn the Company invested in a decisive backwardintegration comprising the setting up of the Rs. 189 crore green-fibre project (recycledpolyester staple fibre) scheduled to be commissioned in the first quarter of 2020 - 21.Almost entire production of the green-fibre plant will be captively consumed which willreduce manufacturing costs deliver consistent product quality and enhance theprofitability of our yarn business.

We have also decided to invest around Rs. 80 crore to broaden product portfolio of ourhome-fabric manufacturing facility and have also engaged specialized designers and seniormarketing professionals. As a result of this increased focus we believe that the hometextiles business should turn around going forward. By investing selectively in ourbusiness for sustainable gains in addition to sweating our existing assets we believe weare attractively positioned to reduce costs enhance value-addition and increase volumesthe very competencies required to strengthen our business sustainability and enhance valuefor all those associated with our Company.

Overview

I would like to end by expressing my heartfelt thanks to all our stakeholders for theircontinued support.

C. S. Nopany

Executive Chairman