Business environment in FY23 remains challenging, says Arvind chairman Sanjay Lalbhai

The business environment in FY23 remains challenging due to the lingering impact of high prices of cotton, dyes & chemicals and packaging material witnessed in the last fiscal, says textile manufacturer Arvind Ltd's chairman Sanjay Lalbhai. However, the company is well positioned to weather the uncertain environment, said Lalbhai in his address to the shareholders in the annual report of Arvind Ltd.

"As FY2023 progresses ahead, we expect the business environment facing your Company to remain challenging and uncertain," Sanjay Lalbhai said.

As such, the company intends to continue the operating discipline and financial conservatism that has successfully guided in recent times, he added.

"In tandem, we will also ensure that the Company's growth engines such as Advanced Materials and Garmenting get requisite investments and sponsorship to realise their full potential," he said adding company "is well positioned to weather the uncertain environment and seize the opportunities that come our way".

According to the company, the rise in raw material costs, especially cotton prices fuelled by low cotton stock availability coupled with inflation has put extreme pressure on the margins of the textiles industry.

The government's support moves as an increase in rates of incentives for the exports of readymade garments and dress materials from 2% to 4% and the National Technical Textiles Mission under which 100% FDI in the textile industry was allowed, along with the PLI scheme for textiles, are going to provide a stimulus to the industry.

Over the short-term outlook, Arvind said: "The pressure on input costs is likely to be strong. The EBIDTA and margins will continue to remain impacted as a result of the steep increase in input cost witnessed during Q4 of FY 2021-22 due to lag effect on price increases."

Most optimistic estimates indicate cotton prices softening moderately by November 2022 upon new crop arrival, Arvind added.

"We are optimistic in the medium to long term and the intention is to continue our medium-term strategy of reducing the long-term debt," said Arvind.

Over the last several quarters, Arvind Ltd, the flagship company of the Lalbhai Group, has consistently kept its focus on reducing its long-term debt as one of its top priorities, he said.

In FY22, Arvind maintained tight management of 'operations, working capital and capital expenditures" which enabled the company to reduce its long-term debt by Rs 415 crore.

For the financial year ended on March 31, 2022, Ahemdabad-based Arvind Ltd revenue was at Rs 8,034 crore.

While talking about the financial year 2021-22, Lalbhai said it started off on a sombre note as the Delta variant led to colossal loss of lives and livelihoods. However, as vaccination gained momentum and the deadly strain also subsided.

"By the time the festive season started, the country's mood and the business environment became quite upbeat. Most company results for Q3 and 04 surprised us positively," he added.