Sanjay Lalbhai, Chairman, Arvind Ltd., shares his thoughts on the current economic scenario and future growth prospects
VUCA – an acronym that captures Volatility, Uncertainty, Complexity and Ambiguity of general situations was introduced by leadership theorists in the 1980s, and was first used by the US Army War College to describe the complex post cold war world. The IT industry has been using the phrase more frequently to describe the pace of change triggered by rapid development and deployment of technology. Confluence of multiple forces is making this descriptor quite apt for the world in 2022.
The general socio-political-economic environment for leaders of all spheres has never been so dynamic. Pandemic, geopolitical actions and economic turbulence are simultaneously impacting us which is causing an unprecedented volatility in the operating environment and testing the mettle of the most astute and visionary leaders.
For Indian businesses, the financial year 2021-22 started off on a sombre note as the Delta variant led to colossal loss of lives and livelihoods. While the vaccines had started rolling out, the country’s civic and healthcare systems struggled to withstand the onslaught of the virulent variant. Many fellow citizens and families lost their loved ones despite heroic efforts by our healthcare workers and civic authorities. Fortunately, as the year progressed, our vaccination programme gained momentum and the deadly strain also subsided. By the time the festive season started, the country’s mood and business environment became quite upbeat. Most company results for Q3 and Q4 surprised us positively.
Globally as well, the key markets in developed economies remained buoyant as governments rolled out ever larger economic packages to pre-empt any possible slowdown. Supported by historic dose of quantitative easing, rock-bottom interest rates, explicit employment support and generous dole-outs to citizens, consumer demand stayed strong. Economies posted growth despite the supply chain challenges that started in 2020 remained so throughout 2021 and beyond.
Economists, policymakers and business leaders increasingly felt that the exuberance was getting irrational, and things could start correcting anytime. As we have seen in recent weeks, the economic policy choices that helped the world sail through in the difficult COVID times has resulted in historically high inflation rates. Central banks are faced with the tricky situation of the need to urgently tame down inflation while not pushing economies into a recession. The war in Ukraine has further worsened the socio-economic situation in Europe, China, which was an engine of global economic growth is stuttering back from a stringent zero COVID policy that kept its citizens locked-in for weeks. Lesser developed and smaller countries have suffered disproportionately as stronger nations cornered vaccines and other resources. Many economies, including those in our neighbourhood, became further stressed as many projects funded by China started to become unviable.
In comparison, the Indian economy has done well. In hindsight, the relatively smaller policy support that the government injected to address the COVID situation, has resulted in a relatively smaller inflation problem to deal with. The Government’s investment in setting up Aadhar and mobility infrastructure is proving to be a structural asset for ensuring transfer of benefits, distribution of vaccines, financial inclusion and overall digitization. The Indian start-up ecosystem is vibrant and companies respectably with that of the US and China.
We, at Arvind, have always been strong believers in our ability to bounce back, innovate and win. While the world ahead still faces difficult and unpredictable circumstances, we remain optimistic about India being uniquely placed to best weather it all. This belief translates into continuing, though calibrated, investments in pursuit of greener technologies, more sustainable and innovative products, and nurturing our prized customer relationships that go back many decades.
FY2022 saw the Advanced Material Division (AMD) crossing the INR 1,000 crore mark. AMD achieved this feat despite severe input cost pressures as prices of key raw materials such as specialty fibres and yarns, glass roving, specialty chemicals and variety of resin systems soared through the roof. Also, the ever-increasing container shipping cost, availability and delays posed severe challenges for this largely export oriented business. AMD is poised to continue delivering robust growth as customers grant larger shares to our products.
Arvind is a pioneer in implementing sustainable practices in textile manufacturing. We have made investments in proprietary Zero Liquid Discharge, rooftop solar and other solutions. The value of these practices got highlighted when the Ahmedabad High Court initiated action against polluting textile units, and our facilities were acknowledged to be compliant to the environmental norms. Arvind already operates the largest rooftop solar installation in the country. We have signed a MoU for a 47-MW hybrid solar-wind project, which will take the share of sustainable energy to over 25% of the company’s total.
Over the last several quarters, we have consistently kept our focus on reducing our long-term debt as one of our top priorities. Through this financial year as well, we maintained tight management of operations, working capital and capital expenditures which enabled Arvind to reduce its long-term debt by INR 415 crores.
As FY2023 progresses ahead, we expect the business environment facing the company to remain challenging and uncertain. As such, we intend to continue the operating discipline and financial conservation that has successfully guided us in recent times. 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.