sri ramakrishna mills coimbatore ltd Management discussions

From a high, growth and demand for the textiles sector has moderated this financial year. The industry is seeing tough times due to costlier raw materials and global economic challenges. Costlier cotton is the key pain point for the Indian garment industry. Cotton yarn price was not in tune with rise in cotton prices. With minimum support prices higher the prices of cotton will remain higher.

Opportunities and Threats

The historical high demand for Cotton resulted in spiraling of prices both in domestic and international markets. However the consequential increase in yarn prices was not commensurate with the increase in price of cotton and will cause losses in yarn segment. Company keeps on improving its manufacturing and technical capabilities as part of a systematic approach. The Textile scenario has seen with lower activity and capacity utilization from spinning to garmenting during the recent period and is likely to remain so.

Outlook

The Company expects the overall demand to remain low. Coming year will be challenging with respect to pricing. The domestic textile sector is critical to Indias progress owing to its contribution to economic growth and foreign currency earnings, and the creation ofemployment opportunities. Unless textile exports pick up substantially, the whole sector will work below capacities.

Risk & Concerns

Cotton plays an important role in the Indian economy. The wild fluctuation in its prices - highest ever has impacted the margins of the Industry as a whole. Though the cotton prices have cooled down against its peak price, the prices are still higher with no parity between cotton and yarn.

Internal Controls

The Company has adequate internal control system to monitor internal business process, financial reporting and compliance with applicable laws. The adequacy and effectiveness of the control system are being reviewed periodically to see that it conforms to the policies and procedures adopted by the company so as to meet the statutory requirements. The Audit Committee at its meetings regularly reviewed the significant observations of the compliance and other reports.

Human Resources Management

Necessary initiatives have been taken for improving the skills of the employees by providing outside training and deputing them to attend various programmes so as to enable them to update their knowledge. Being a Member of The Southern India Mills Association, the Company avails the services of the Association with regard to development of its human resources.

Promotions are effected after carrying out evaluation of performance of the employees.

Review by Audit Committee

The Management Discussion and Analysis was placed before the Audit Committee and duly reviewed by the Committee.

Financial Results

SEBI has mandated under SEBI (LO & DR) Regulations 2015 amendment that the Annual Report for the year ended 31.03.2023 should contain the following ratios for the year and also for the previous year with explanation where the variation is more than 25%

Particulars	Unit of Measurement	March 31, 2023	March 31, 2022	Variation in %
Current Ratio	In multiple	1.06	1.27	(17%)
Debt- Equity Ratio	In multiple	0.58	0.80	(28%)
Debt Service Coverage Ratio	In multiple	0.77	0.72	7%
Return on Equity (ROE)	In %	4.58%	30.01%	(25.43%)
Inventory Turnover Ratio	In Days	435	372	16.94%
Trade Receivables Turnover Ratio	In Days	52	97	(46.39%)
Trade Payables Turnover Ratio	In Days	70	49	42.86%
Net Capital Turnover Ratio	In Days	417	420	(0.71%)
Net Profit Ratio	In %	0.71%	5.22%	(4.51%)
Return on Capital Employed	In %	16.96%	24.63%	(7.67%)
Return on investment	In %	0.56%	3.61%	(3.05%)
Interest Coverage Ratio	In multiple	1.13%	2.11%	(46.45%)

Formula adopted for above Ratios:

(a) Current Ratio = Current Assets / (Total Current Liabilities – Security Deposits payable on Demand – Current maturities of Long Term Debt) (b) Debt-Equity Ratio = Total Long Term Debt / Total Equity .

(c) Debt Service Coverage Ratio = (EBITDA – Current Tax) / (Principal Repayment + Gross Interest on term loans) (d) Return on Equity Ratio = Total Comprehensive Income / Average Total Equity (e) Inventory Turnover Ratio (Average Inventory days) = 365 / (Net Revenue / Average Inventories) (f) Trade receivables Turnover Ratio (Average Receivables days) = 365 / (Net Revenue / Average Trade receivables) (g) Trade Payables Turnover Ratio (Average Payable days) = 365 / (Net credit purchases / Average Trade payables)

(h) Net Capital Turnover Ratio = (Inventory Turnover Ratio + Trade receivables turnover ratio – Trade payables turnover ratio) (i) Net Profit Ratio = Net Profit / Net Revenue (j) Return on Capital employed = (Total Comprehensive Income + Interest) / (Average of (Equity + Total Debt) (k) Return on Investment (Assets) = Total Comprehensive Income / Average Total Assets (l) Interest Coverage Ratio = Profit for the year (before finance cost) / Finance Cost