Dear Shareholders,
Your Directors hereby present the 61 Annual Report of your Company along with the
financial results for the year ended 31 March, 2023.
State of affairs of the company
| a. Financial results |
|
(Rs In lakhs) |
| Particulars 31.03.2023 |
31.03.2022 |
|
| Revenue from operations |
95,382 |
99,328 |
| PBIDT |
2,777 |
18,877 |
| Less: Finance cost |
3614 |
2,898 |
| Profit from Operations |
(836) |
15,979 |
| Other Income |
724 |
649 |
| PBDT |
(112) |
16,628 |
| Less: Depreciation and Amortisation |
3340 |
3,253 |
| PBT (Before Exceptional item) |
(3452) |
13,375 |
| Exceptional item |
- |
- |
| PBT (After Exceptional item) |
(3452) |
13,375 |
| Less: Tax expenses |
- |
2,280 |
| Deferred Tax |
(850) |
553 |
| Profit After Tax |
(2602) |
10,542 |
| Other Comprehensive Income |
(519) |
(291) |
| Total Comprehensive Income |
(3121) |
10,251 |
| Add: Opening balance in Retained |
|
|
| Earnings including OCI |
25,936 |
15,685 |
| Less: Transfer to General Reserve |
- |
- |
| Dividend paid during the year |
720 |
- |
| Closing balance in Retained Earnings including OCI |
22,095 |
25,936 |
b. Dividend and Transfer to reserves
Your directors, considering the fact that the company has incurred a loss during the
year under review, have not recommended any dividend. No amount was proposed to be
transferred to reserves.
Industry Overview
FY 2022-23 was a very challenging year for your Company, especially for the spinning
division. Yarn demand which was robust for the most part of FY 21-22 turned sluggish from
the beginning of the year under review. As highlighted last year, the abnormal increase in
cotton was a major reason for this decline in demand along with inflationary pressures
leading to a reduction in discretionary spending by consumers. Another significant reason
was the high inventory in the hands of retailers and brands across the globe, including
India. Aggressive ordering and improvement in logistics and lead times meant that
inventories were double than normal levels leading to a stop on further sourcing by these
brands and retailers.
Cotton prices declined on the face of the anticipated drop in demand with ICE futures
falling from 116 cents in May to 73 cents in October, a drop of almost 40%. This was not
reflected in Indian cotton prices due to the poor cotton crop in the country leading to
Indian cotton prices being higher than international growths for the second half of the
calendar year. The problem was exaggerated by the import duty on cotton which limited
options for imports. Indian spinners were not competitive during this period with
aggressive competition from Chinese and Vietnamese mills. Indian mills also faced
inventory write-downs in the third quarter of the fiscal leading to an erosion of profits.
Your company was forced to reduce capacity utilization in the spinning division to prevent
further buildup of inventories during the third and fourth quarters. As a result of all
the above factors, the spinning division recorded a loss at an operational level.
The performance of the technical textile division was a bright spot for the Company in
an otherwise bleak year. Demand for our products continued to be robust through the year.
The high logistics and freight costs which squeezed margins last year moderated
significantly starting from the second quarter. The division achieved a topline of Rs. 242
Crores, an increase of 54%, on account of increased capacity utilization and higher
productivity levels. Your company plans to increase capacity in this division during FY
23-24 apart from exploring other allied products to diversify the product mix.
Review of operations
Your Company registered a turnover of Rs.95,382 lakhs during FY 2022-23, a decrease of
4% compared to the previous year. Turnover decreased on account of lower capacity
utilization in the spinning division. The company earned a profit of Rs. 2777 Lakhs at an
EBITDA level. During the year under review, your Company struggled to maintain the
improvements in product mix and proportion of value-added products due to a severe decline
in demand from export customers. The Company was forced to increase production of
commodity products for sales in markets such as Bhiwandi and Kolkatta which had reduced
significantly in the previous year. The Companys cashflow was good in the above scenario.
The planned installation of "own captive" solar plants was completed in the
Kanjikode and Hindupur units. The Company now has 10 MW of in-house solar capacity. Apart
from this, the Company has tied up for 12.6 MW "group captive" solar power
supply for its units in Pollachi and Hassan. .
Outlook for the current year
There has been a significant reduction in Indian cotton prices in the current year with
prices hovering between Rs. 60,000 to Rs. 63,000 for most of the season so far. Demand for
yarn has shown some improvement starting from February and the company is on track to
reach full capacity utilization in all its units. But pricing of yarn continues to be a
challenge with profitability still elusive in commodity products due to the high
percentage of the raw material component compared to the sales price. Cotton is still
priced higher compared to man-made alternatives but the gap has narrowed significantly
compared to last year. Cotton availability and quality is good this season which will lend
stability to cotton prices going forward. With inventories in the textile supply chain at
moderate levels and a forecast for a hot summer, there is cautious optimism for an
increase in demand for knitted products in the near future. There are varied predictions
with regard to the monsoon in India and its success or failure will have a bearing on the
revival of the rural economy and the acreage of cotton for the next season. We will
continue to focus on the technical textile division for growth. The company plans to
consolidate the gains of the previous year and reap the benefits of the planned capacity
expansion during the fourth quarter of FY 23-24 and beyond.
Personnel
The Company has been able to continue maintaining cordial relations with its labour
force in all its units. The Company has
st
1462 permanent employees on the roll as on 31 March, 2023.
Internal Control Systems & Risk Management
The Company has adequate internal control systems to monitor business processes,
financial reporting and compliance with applicable Regulations. The systems are
periodically reviewed, by the Audit Committee of the Board, for identification of
deficiencies and necessary timely corrective actions were taken to improve the controls at
all levels. The committee also reviews the statutory auditors report, key issues,
significant processes and accounting policies.
Risk Management is an integral part of the business process. The Company has
constituted a Risk Management Committee and adopted a policy on risk management for
identifying, mitigating and managing risk. The Audit Committee of the Board reviews the
risk management policy periodically. The details about composition of the risk management
committee, policy and its terms of reference have been provided in the Corporate
Governance Report attached to this report.
Number of meetings of the Board
Details of number of meetings of the Board and Committees thereof and the attendance
particulars of the Directors in such meetings are provided under the Corporate Governance
Report.
Declaration by Independent Directors
The Independent Directors have submitted their disclosures to the Board confirming that
they fulfill the requirements enumerated under Section 149(6) of the Companies Act, 2013
(hereinafter "the Act"), and Regulation 25 of The Securities Exchange Board of
India (Listing Obligations and Disclosure Requirements) Regulations,2015.
Directors and Key Managerial Personnel (KMP)
Appointments, Retirements and Resignations
Mr J Govind Raju, Chief Financial Officer has been designated as the Finance Controller
of the Company effective from 22 November, 2022 and Mr. M K Ravindra Kumar was appointed
as Chief Financial Officer of the company effective from 22 November 2022.
There is no cessation of office by any Director due to death or resignation. However,
Mr Ashwin Chandran, Managing Director retired by rotation, and being eligible, offered
himself for reappointment and was reappointed as Director at the AGM held on 22 August,
2022.
The following are the whole-time key managerial personnel of the Company as per Section
203 of the Act as on 31 March,2023, (i) Mr Ashwin Chandran, Chairman and Managing Director
(ii) Mr M K Ravindra Kumar, Chief Financial Officer and (iii) Mrs S Kavitha, Company
Secretary.
The second term of office of Dr Jairam Varadaraj (DIN: 000003361) and Mr Sumanth
Ramamurthi, (DIN: 00002773) as Independent Directors, comes to an end on 31 May,2023,
Board of Directors have placed their appreciation for the contribution made by them during
their Directorship.
Performance Evaluation
The Board of Directors at their meeting held on 13 February, 2023, had carried out an
annual evaluation of its own performance and the performance of the Committees of the
Board and the individual Directors pursuant to the provisions of the Act and the corporate
governance requirements as prescribed by Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements), Regulations 2015 (hereinafter "Listing
Regulations").
The performance of the Board was evaluated by the Board of Directors after seeking
inputs from all the Directors on the basis of criteria such as Board composition and
structure, effectiveness of the Board meetings and process and contributions made by the
Directors.
The performance evaluation of each Director was done by the entire Board of Directors,
excluding the Director being evaluated, taking into consideration inputs received from the
other Directors, covering various aspects of the Boards functioning such as active
participation and contribution during discussions, effective deployment of knowledge and
expertise towards the growth and betterment of the Company, impact and influence on the
growth of the Company and performance of specific duties, obligations and governance.
The performance of the committees was evaluated by the Board after seeking inputs from
the committee members on the basis of criteria such as the composition of the committees
and effectiveness of the committee meetings.
In a separate meeting of Independent Directors held on 24 March, 2023 performance of
the non-independent Directors, performance of the Board as a whole and performance of the
Chairman were evaluated, taking into account the views of the executive Directors and
non-executive Directors.
The Board also carried out an evaluation on the performance of the Independent
Directors and also verified the fulfilment of the criteria for independence as specified
under listing Regulations and their independence from the management. This evaluation of
Independent Directors was done by the entire Board, excluding the Independent Directors
being evaluated.
Policy on Directors appointment and remuneration and other details
The Companys policy on Directors appointment and remuneration and other matters
provided in Section 178(3) of the Act has been disclosed in the Corporate Governance
Report.
Auditors report and Secretarial Auditors report
The auditors report and secretarial auditors report do not contain any
qualifications, reservation or adverse remarks.
During the year under review, neither the Statutory auditors nor the Secretarial
Auditor have reported to the Audit Committee, any instances of fraud committed against the
Company by its officers or employees.
The report of the Secretarial Auditor is furnished as Annexure A and forms part
of this report.
Receipt of any commission by Whole Time Directors from the Company or receipt of
commission/remuneration from subsidiary Company
Whole Time Directors have not received any commission from company or any commission/
remuneration from subsidiaries during the year under review.
Annual Return
The extract of the annual return pursuant to Section 92 read with rule 12 of the
Companies (Management and Administration) Rules, 2014 is available on the website of the
Company www.precot.com under investors.
Secretarial Standards
The Company complies with all the applicable mandatory secretarial standards issued by
the Institute of Company Secretaries of India.
Particulars of Employees
The particulars as required under rule 5 of Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, is provided in Annexure B.
Consolidation of Accounts
The Company has control over "Suprem Associates", a partnership firm by
holding majority of the shares in the firm. The accounts of the said firm are consolidated
as per the requirement of Indian Accounting Standards (IndAS).
Maintenance of Cost Records
The Company is maintaining the cost records as specified under Section 148(1) of the
Companies Act, 2013.
Audit Committee
The Company has constituted an Audit Committee as per Section 177 of the Act and
Listing Regulations.
The details pertaining to vigil mechanism, composition and meetings of the Audit
Committee are included in the Corporate Governance Report.
Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo
The details as required under Section 134(3)(m) of the Act read with Rule 8 of the
Companies (Accounts) Rules, 2014, is detailed in Annexure C.
Corporate Governance
A report on corporate governance is furnished as Annexure D and forms part of
this report. This includes other disclosures as required under the provisions of the Act.
The Company has complied with the conditions relating to corporate governance as
stipulated in Regulation 34 of the Listing Regulations.
Corporate Social Responsibility (CSR)
The CSR Committee comprises of 1. Mr Ashwin Chandran, 2. Mr Prashanth Chandran and 3.
Mr Sumanth Ramamurthi. This committee takes care of CSR policy execution to ensure that
the CSR objectives of the Company are met. The CSR policy deals with allocation of funds,
activities, identification of programmes, approval, implementation, monitoring and
reporting.
For the financial year 2022-23, the Company spent Rs. 99.09 lakshs on CSR activities as
per the provisions of the Companies Act. Annual report on Corporate Social Responsibility
is provided in Annexure E.
The CSR policy is available on the Companys website http://www.precot.com/investors.
Particulars of Loan, Guarantees or Investments
Details as per the provisions of Section 186 of the Act, is given under notes to
financial statements.
Related Party Transactions
None of the transactions with related parties falls under the scope of Section 188(1)
of the Act. Information on transactions with related parties pursuant to Section 134(3)(h)
of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure
F in Form AOC-2 and the same forms part of this report.
The Board has approved a policy for related party transactions which is available on
the Companys website http://www.precot.com/investors
Directors responsibility statement
The Directors confirm that:
a) The applicable accounting standards have been followed and proper explanations
provided relating to material departures, if any,
b) The Company has adopted prudent and consistent accounting policies so as to give a
true and fair view of the state of affairs of the Company,
c) Proper and sufficient care has been taken for maintenance of adequate accounting
records under the provisions of the Companies Act for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities,
d) The annual accounts of the Company have been prepared on a going concern basis,
e) The internal financial controls are adequate and are operating effectively, and
f) A proper system for ensuring compliance of all the applicable laws are put in place
and are operating effectively.
Statutory Auditors
M/s VKS Aiyer & Co., Chartered Accountants (Firm Registration No. 000066S),
pursuant to the provisions of Section 139 of the Act, were appointed as the statutory
auditors of the Company for a term of 5 years from the conclusion of the 56 AGM till the
conclusion of the 61 AGM to be held in the year 2023.
Pursuant to the provisions of Section 139, Section 142 and other applicable provisions,
if any, of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules,
2014 (including any statutory modification(s) thereof, for the time being in force) the
Board of Directors, on the recommendation of the Audit Committee, have re-appointed, M/s
VKS Aiyer & Co.,Chartered Accountants (ICAI Firm Registration No.000066S) as Statutory
Auditors of the Company for a second term of five years to hold office from the conclusion
of 61 Annual General Meeting till the conclusion of 66 Annual General Meeting subject to
the approval of shareholders at the ensuing Annual General Meeting . Accordingly, a
resolution seeking members approval for their reappointment as Statutory Auditor is
included as Item No.3 of the AGM notice.
They have confirmed that they are not disqualified and are eligible to continue in the
office for the year 2023-24.
Cost Auditor
Pursuant to Section 148 of the Act, read with the Companies (Cost Records and Audit)
Rules 2014, the Board of Directors, on the recommendation of the Audit Committee,
appointed Mr R Krishnan, Cost Accountant (Associate regn. no. 7799), as the cost auditor
of the Company for the financial year 2023-24.
Accordingly, a resolution seeking members ratification for the remuneration payable to
Mr R Krishnan, Cost Auditor is included as Item No.4 of the AGM notice.
Secretarial Auditor
Pursuant to Section 204 of the Act, the Board of Directors has appointed Mr K
Duraisami, Practicing Company Secretary, Coimbatore as the secretarial auditor of the
Company for the financial year 2023-24.
Insider Trading Regulations
Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations,
2015, the Insider Trading Code to regulate, monitor and report trading by insiders and
the Code of Practices and Procedures for fair disclosure of Unpublished Price Sensitive
Information are in force.
Change in nature of business
There was no change in the nature of the business of the Company during the year under
review.
Deposits from public
The Company has not accepted any deposits from public and as such, no amount on account
of principal or interest on deposits from public was outstanding as on the date of the
balance sheet.
Material Changes
No material changes or commitments affecting the financial position of the Company
occurred between the end of the financial year (i.e.31 March, 2023) and the date of this
report.
Vigil Mechanism/ Whistle Blower Policy
The Company has formulated and published a Whistle Blower Policy to provide Vigil
Mechanism for employees including Directors of the Company to report genuine concerns and
to ensure strict compliance with ethical and legal standards across the Company. The
provisions of this policy are in line with the provisions of the Section 177(9) of the Act
and Listing Regulations, are available on the website of the Company at
http://www.precot.com/investors. The details of Whistle Blower Policy forms part of the
Corporate Governance Report annexed with this report.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013
The Company has constituted an internal complaints committee to address the complaints
regarding sexual harassment. All employees are covered under this policy. The Company has
not received any complaints during the year under review. The details relating to
Complaints forms part of the Corporate Governance report.
Details of Application made or any proceeding pending under The Insolvency and
Bankruptcy Code, 2016 during the year
No applications have been made and no proceedings are pending against the Company under
the Insolvency and Bankruptcy Code, 2016 during the year under review.
Details of difference between amount of the valuation done at the time of one time
settlement and the valuation done while taking loan from the banks or financial
institutions along with the reasons thereof
The disclosure under this clause is not applicable as the Company has not undertaken
any one-time settlement with the banks or financial institutions during the year under
review.
Unclaimed Shares
In accordance with the requirement of Regulation 34(3) and Schedule V Part F of Listing
Regulations, the details in respect of equity shares lying in the suspense account is as
follows. .
| Particulars |
Number of share holders |
Number of Equity Shares |
| Aggregate number of shareholders and the outstanding shares in the suspense account as
on 01-Apr- 2022 |
206 |
40750 |
| Number of shareholders approached the Company for transfer of shares from suspense
account during the year |
1 |
500 |
| Number of shareholders to whom shares were transferred from suspense account during
the year |
1 |
500 |
| Aggregate number of shareholders and outstanding shares in the suspense account as on
31-Mar- 2023 |
205 |
40250 |
The voting rights on the shares outstanding in the suspense account as on 31 March,
2023 shall remain frozen till the rightful owner of such shares claims the shares.
Acknowledgment
Your Directors thank the Shareholders, Customers, Suppliers and Bankers for their
continued support during the year. Your Directors also place on record their appreciation
of the contributions made by Employees at all levels towards the growth of the Company.
| Coimbatore |
|
|
By order of the Board |
| 26-May-2023 |
|
|
Ashwin Chandran |
|
Chairman and Managing Director |
+91-9892691696
