eastern silk industries ltd Management discussions

(In terms of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015)

1. OVERALL REVIEW, INDUSTRY STRUCTURE AND DEVELOPMENTS

The Company is principally engaged in the business of manufacturing of textile and allied products currently from developing yarn to producing premium fashionable fabrics and related products. The factory operations in the year under review had been severely impacted due to the initiation of Corporate Insolvency Resolution Process (CIRP) against the Company.

The overall performance of the Company for the year under review has significantly gone down wherein "Revenue from Operations" of the Company registered decrease in the sales, compared to the previous year. The performance of the Company during the year under review showed decrease in the sales due to the non-supportive markets and varied changes in the customer preferences and impacted due to the initiation of Corporate Insolvency Resolution Process (CIRP). The infusion of the new machineries and technology would be required to bring down the cost of production. The company is developing standard designs in common warps for regular products to reduce cost and it is hoped that these measures will bring the positive results for the future. The equilibrium in demand supply will take some time.

2. OPPORTUNITIES AND THREATS

The Company is engaged in manufacturing of textile and allied products currently from developing yarn to producing premium fashionable fabrics. Keeping itself updated on fashion and market trends worldwide, the company is today globally recognized for its deep understanding of silk.

The threat is from small players who will enter the market and existing players creating competition in these segments due to which the margins will be under pressure in the future.

Company Status:

The Honble Adjudicating Authority, i.e., National Company Law Tribunal, Kolkata Bench, has admitted the Company Petition i.e. C.P. No. (IB) No.588/KB/2020 on 10.06.2022, filed by the Financial Creditor, Export-import Bank Of India initiating Corporate Insolvency Resolution Process ("CIRP") under Insolvency & Bankruptcy Code, 2016 (hereinafter referred to as "Code") in the matter of M/s. Eastern Silk Industries Ltd. ("Corporate Debtor"). The Adjudicating Authority appointed- Mr. Anil Agarwal as Interim Resolution Professional (IRP) vide its said order dated 10.06.2022.

The Committee of Creditors in its first meeting of Committee of Creditors ("CoC") held on 08.07.2022 approved the appointment of undersigned as Resolution Professional ("RP"). Thereupon an application was filed by the CoC, before Honble NCLT, for the appointment of undersigned as Resolution Professional in the captioned matter. Subsequently, the Honble NCLT allowed the application and appointed the undersigned as Resolution Professional in this matter vide its Order dated 29.07.2022 (copy of the same was received on 04.08.2022).

The Resolution Professional pursuant to the approval of Resolution No. 2 i.e. Resolution plan submitted by Ajay Bikram Singh through Baumann Dekor Pvt. Ltd. in the last COC Meeting, filed an application seeking exclusion of the period of CIRP from 07.12.2022 till 30.01.2023 i.e. 54 days, before Honble NCLT on 07.03.2023. The RP thereafter filed an application before the Honble NCLT on 09.03.2023 seeking approval of the Resolution plan submitted by Ajay Bikram Singh through Baumann Dekor Pvt. Ltd under Section 31(1). The said application is pending before Honble NCLT.

The Company is under the Corporate Insolvency Resolution Process .. Internal control systems are regarded as being adequate and are continuously reviewed for further improvement. Our team is committed to the Boards dictates on standards of conduct as well as good governance and exercise of due diligence including compliance with all relevant regulations and laws. We record our appreciation of all our sincere employees, gratefulness to our Shareholders, lenders and banks and other stakeholders, concerned Government and other authorities and our channel partners for their continued support and to customers for their reposing faith and confidence in us.

Company Outlook:

The Company hopes to turn around its performance on approval of the Resolution Plan by Honble NCLT.

3. RISK MANAGEMENT

Risk Management are is presented in the Directors Report of the Company which forms an integral part of this Report.

4. SEGMENT WISE AND PRODUCT WISE PERFORMANCE

The Companys business activities falls within a single primary segment viz. Textiles. The Company does not have any other segment as of now. The products and dealings are closely related with textiles and its allied products.

5. HEALTHY, SAFETY AND ENVIRONMENT

The Company accords significant importance to health, safety and Environment and related issues are taken up on priority basis. The Company ensures compliance of all statutory regulations related to Health, Safety and Environment. The Companys business activities falls within a single primary segment viz. Textiles. The Company believes in environmental protection and maintaining ecological balance. All discharges are closely monitored and were well within the statutory norms during the year under review.

6. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company strongly believes in the importance of Human Capital and nurturing the same. To match with the fast-paced technological changes and also the changes in their business environment, the employees are provided regular training for upgradation of skills. The Company understands the importance of multi-skilling and job rotation and hence scientifically moves its employees in various roles thereby creating a versatile work force. In the year under review, the Company had a strength of 289 permanent employees.

7. INTERNALLY CONTROL SYSTEM AND THEIR ADEQUACY .

The Company has established Internal Financial Control System for ensuring the orderly and efficient conduct of the business including adherence to Companys Policies, the safeguarding of assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable Financial Statements.

8. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE (Forms part of Directors Report)

8(ii) FINANCIAL STATEMENT

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (a change of 25% or more as compared to the previous financial year) in key financial ratios, along with detailed explanations thereof. The key financial ratios are given below:

Key financial ratios	2022-23	2021-22	Difference (%)
Debtors turnover	1.96	3.03	(35.17%)
Inventory turnover	0.78	1.22	(35.95%)
Interest coverage ratio	Not Applicable, since the Company has no Borrowings in pervious year involving interest coverage.
Current ratio (in times)	0.36	0.42	(13.78%)
Debt equity ratio (in times)	10.15	10.33	(1.70%)
Operating Profit Margin (in %)	(35.03)	(7.83)	(347.38%)
Net profit margin (in %)	(37.97)	(9.39)	(304.56%)
Return on net worth (in %)**	Refer Note 1**

Note 1**Since Net worth is negative and denominator is negative, the Return on net worth shown as Nil (-)?

The reason of the Operating Profit, Net Profit Margin and Return on net worth is more than 25% or more as compared to the previous financial year due to decrease in the sales, non-supportive markets, varied changes in the customer preferences and initiation of CIRP by NCLT wide order dated 10th June 2022 which effected the marketability of the Company. As the global textile market is interconnected, this outbreak has a global impact on the business.

9. CAUTIONARY STATEMENT

Certain statements in this report on Management Discussion and Analysis describing the Companys view about the industry, objectives, projections, estimates, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those implied therein. Important factors that could make a difference include economic developments within India and countries with which the Company conducts business, government regulations and tax regime, availability of raw materials and prices and other incidental factors.