Sustain. Empower. Grow. – is an ethic that Sutlej has lived across the last nine decades of its existence. The Company’s philosophy is about growing patience and perseverance in the face of challenging market realities. It is about empowering employees to respond with initiatives that strengthen the business. It is about the coming together of sustenance and empowerment leading to sustainable growth.
The validation of this ethic is reflected in the longevity of our Company. The fact that we have survived and succeeded in this challenging space across political, economic and technology cycles is a vindication of our commitment to perpetually expand capacities and capitalize on economies of scale, invest in ongoing modernization to enhance operating efficiencies, and deepen a culture of innovation with the objective to bring differentiated products to consumers.
Seldom has this commitment been tested more than in the last two years, marked by a pandemic slowdown that translated into a decline in revenues, margins and profits in FY 2020-21 and a rebound in our financial and operating parameters in FY 2021-22. During the slowdown, the Company kept faith and focus on the core elements of its business. This focus was validated during the year under review when the Company reported a vigorous rebound. This rebound was marked by profitable growth: 62% growth in revenues was corresponded by a 186% increase in EBIDTA.
The global economy grew from 3.3% to 5.9% in 2021. The Indian economy rebounded from a degrowth of 7.3% in FY2020-21 to a growth of 8.7% in FY 2021-22. The country’s manufacturing sector grew 12.5% compared with a degrowth of 7.2% in the previous financial year. The global textile sector grew 10.1% during the year under review.
The US sanctions on Xinjiang cotton in China opened a new market for India’s export of spun-dyed yarns. The emergence of the China-plusone factor turned serious global buyers towards India for long-term engagement. The announcement of long-term textile sector policies by the Indian government enhanced clarity. The benefits of RODTEP (WTO-compliant) strengthened the Indian textile sector. The Indian government entered into free trade agreements with countries. The extension of the production-linked incentive scheme extended to man-made fibres. The government announced the launch of mega textile parks.
It would appear that the Company’s vigorous performance rebound was achieved in a conducive business environment. The reality was that the Company’s performance in the last two years was in the face of unprecedented business realities that put a premium on seeking new ways to sustain and grow. There was a sharp rise in cotton price, crude oil, other commodities and interest rates. The outbreak of the Ukraine-Russia war affected global business sentiment, affecting textile exports. There was a slowdown in the Chinese economy that moderated textile demand.
The BANI factor
So, what has transpired in the last couple of years that is different from previous slowdowns coupled with subsequent recoveries, one may ask. I believe that the VUCA (volatileuncertain-complex-ambiguous) environment of the past has been replaced with BANI (brittle, anxious, non-linear and incomprehensible).
A new understanding of BANI is necessary to comprehend challenges of the Company’s operating environment. The brittle nature of the operating environment is reflected in its vulnerability to external shocks and unforeseen developments, affecting not just a country or two but becoming an extensive multi-country phenomenon. The brittleness of the modern world was highlighted when a pandemic outbreak exposed the fragility of the global social and economic environment.
The other visible feature of this new normal is a sense of anxiousness. This anxiety is affecting consumer purchase; in turn, this is influencing capital expenditure by companies. The one offshoot of this reality is that staggered capacity creation is resulting in a sharp increase in product and resource inflation, creating a second layer of anxiety related to the sustenance of trends and a preference for the status quo.
The third feature of BANI is a growing non-linearity of the modern world. The conventional relationship between cause and effect is no longer evident. What worked in the past is not working in the present and may not work in the future either. An entire eco-system of predictability has been threatened leading to a hesitation in decisionmaking.
The last dimension of BANI is the word ‘incomprehensible’. An abundance of data is not necessarily leading to informed decisionmaking. A real-time understanding of range of global realities is overloading the mind with data that is putting a premium on detached and objective decision making.
The answers coming out of the conventional shifting of data are not leading to clarity. The result is a decline in the understanding of our space, economy and global direction. What used to be simple is now complex; what required simple deduction is now guess work.
The bottom line of this new normal is that a mistake can set one back by years. Companies do not only need to be right; they need to be more right than ever. They need to be resilient during phases of uncertainty and be among the first to rebound during periods of economic recovery. They need to mitigate the impact of downtrends (however long that lasts); they need to maximize cash flows during periods of recovery (however brief).
Sustain. Empower. Grow.
At Sutlej, we believe that the new normal warrants a new way of doing business. What worked for us in the past needs to be questioned; what was taken as the surest way to do things needs to be re-examined.
At Sutlej, our re-examination comprises three words that have been sequenced into a statement: ‘Sustain. Empower. Grow.’ This line has acquired a deeper relevance; it encapsulates a clarity of how companies like ours can negotiate external challenges and protect business sustainability.
The word ‘sustain’ draws on the Company’s rich multi-decade culture of manufacturing excellence. The word draws on the Company’s deep-rooted understanding of balanced risk and caution; it draws on the Company’s institutionalized knowledge across roles and functions; it draws on good business practices. The bottom line is that ‘sustain’ is really the Company’s shock absorber that is its most effective insurance against external volatility.
The word ‘empower’ draws attention to the need for informed collective action. This action is not about decisions taken in an ivory tower; it is about engaging the organization down to the last person standing, drawing on that person’s knowledge, initiative and passion for organizational benefit.
The competitive companies of the 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 market environment. There will be a bigger premium on the need to learn and unlearn; on the need to harness talent for customer benefit; on the need to reorganize, train and share information; on the need to celebrate every small win and see failures as learning opportunities; on the need to strengthen the enumeration culture so that the organization speaks with data as a credible basis; on the need to make the Company a preferred place to work in.
The word ‘grow’ represents a predictable outcome of initiatives. The priority for our Company is to grow bottom-up, widen the portfolio, launch pioneering products, strengthen backward integration, deepen ecological relevance, strengthen the ‘head to tail’ alignment and see change as an opportunity. The priority will enhance organizational flexibility and responsiveness.
Out of the uncertainties created by the pandemic and upheaval in the social-political environment, a new Sutlej is emerging. This Sutlej is raising the bar across virtually all roles and functions. The Company is not just focusing on customer service; it is obsessed with customer delight. The Company engages periodically with customers to understand how Sutlej can help take their business ahead. The result is that Sutlej launched new products and attracted new customers, which generated around 15% revenues during the year under review, a sizeable share for an initiative that will now be rapidly scaled.