Last year was an interesting year in the life of our company. Interesting is a greatway to say there is rarely a dull moment in business today and Winsome Textile wasno exception this year. We celebrated many successes worked through a few minor setbackscreated a host of opportunities and would like to thank you for showing your continuoussupport all along. I have discussed virtually every year in our Annual Report we believethe ultimate success of any business should primarily be measured by the per sharefundamental value it creates. Success is measured by the free cash flow created in ourbusiness return on invested capital and growth in per share book value of the companyoverall. From these perspectives we had a challenging year.
In the previous year we focused on innovation and strengthening ourselves at the core.To ensure that we are on the path to becoming a Global player in innovative andvalue added textile' we were supported indefinitely by our in-house Research &Development Unit at the Baddi Plant. The unit is now recognized by the Ministry of Scienceand Industrial Research Government of India and has contributed towards many innovations.
Although our business growth this year was not inspiring it needs to be seen in awider context including the whole transformation that the industry is going through.Consumer behavior is changing customers' expectations are increasing and the competitivelandscape is being redrawn. The scope of profit in the mlange yarn segment has attractedmany small players into the market as the margins in such specialty yarns are fairly high.This has given birth to an excess of supply of mlange yarn in the market. The mlangeyarn segment in itself is transforming from being a specialty product to being a commodityand therefore discounting the returns to that of a regular commodity. This is wherestrengthening of the core capabilities is important. Despite this challenge we havemanaged to stand out of the competition with our high quality product and criticalexperience that we hold in this segment. We have maintained our market position whereasthe market as a whole has shown a downtrend.
It is fair to say that the months following demonetization were challenging and broughtalong with them a shortage in demand from the higher entities of our value chain. Theimplementation of GST did not bring much joy either and further rattled the industry butwe can proudly acknowledge that we performed fairly well considering the volatility of themarket surrounding us.
At the beginning of the year the demand forecast for Mlange yarn was projected todecline because of change in fashion trends. As the year progressed the prediction heldtrue leading to a steep decline in the demand. We reacted to this trend early and werewell prepared for the market and adapted accordingly. Even with a decline in the marketwe have managed to stay on par with the income of the previous financial year. Theindustry experience enables us to tackle such cyclic trends in the yarn business and givesus an edge over the competition.
Our decision to increase the knitting capacity from 6 tons per day to 8 tons per dayhas paid its dividend by supporting the yarn business better in this challenging year. Weintend to further grow this segment in coming years to diversify our business and increaseour vertical integration capabilities.
The market volatility is not limited to just our industry the value of Rupee hasdepreciated fairly over last few months and a continuation of this trend will lead toincrease in realization for the company in the coming times. However unlikely a suddenappreciation in Rupee could lead to a stronger competition with internationalmanufacturers.
Our manufacturing EBITDA margin has seen a decline of around 5% in comparison to theprevious year. However we have managed to reduce our long term borrowings by around 22%within the last financial year.
To sustain the momentum of our company we realize the need to lay a solid foundationof people process and systems. We acknowledge the importance of these initiatives andhence we have taken this as a major goal. Towards this goal we are glad to share that ourcompany has embarked upon major organizational development initiatives in the areas ofbuilding human resources capabilities and supported by a robust technology platform. In anera where all organizations have access to the similar opportunities same financialresources strategies and markets what di_erentiates excellent organizations from othersare their intangible assets. These include our Organization Structure Peoplecompetencies Systems & Processes our
Culture and most importantly our Values & Beliefs. Our approach towards growthremains una_ected by the sluggish demand price erosion and liquidity mismatch. We aredetermined to continue di_erentiating ourselves from the competition with the quality ofour products. The competition may have created a surplus of supply in the market but webelieve in the quality of our products and the customers' confidence we have gained overthe years. I must assure our shareholders that our experience in the market gives us anopportunity to better understand the market. This year we read the market early andemphasized on increasing our knitting capacity at the same time strengthening the yarnsegment. Our performance this year gives me satisfaction that if at a time of sectoralweakness we can manage such results we should be tremendously confident of theopportunities that lie in front of us once the market stabilizes and gets back on track.In this coming year we will look forward to investing even more on innovation as well ason marketing. The increased presence of competition has given unprecedented importance tomarketing ourselves both domestically and internationally. Our target will be to increaseour clientele and continue working closely with our esteemed clients. I would like to showmy regards to all my colleagues across the country and the globe for their tremendousdedication commitment and contribution to strengthening Winsome Textile. We arecontinuously working forward to fulfill our mission of generating maximum value for ourstakeholders. We have come out of these turbulent times stronger more resolute andprepared to reap the benefits of the hard work we put in. We are driven by our aspirationsfor tomorrow! I would like to pay my sincere appreciation to the Board of Directors fortheir guidance. I would like to express my gratitude to all our stakeholders for theircontinuing faith in Winsome Textile.
Yours Sincerely Ashish Bagrodia
Chairman & Managing Director
Winsome Textile Industries Ltd.