Morarjee Textiles estimates adverse Covid-19 impact on profitability and liquidity

The moratorium period of six months on servicing of loans, enabled by RBI has greatly helped the company in managing the liquidity situation.

Aug 12, 2020 10:08 IST India Infoline News Service

Morarjee Textiles Limited informed the exchanges on Tuesday that the company’s capital and sanctioned financial facilities remain intact. However, the profitability of the company has been adversely affected due to continued fixed costs and loan servicing costs with very low levels of sales.

The long term impact on profitability will depend on the nature and time taken for recovery of business. The company is facing liquidity concerns owing to delay in receivable collections. It has been focusing on collections of the receivables to meet the operating payments. The company has implemented very strict cost control measures to conserve liquidity.

The moratorium period of six months on servicing of loans, enabled by RBI has greatly helped the company in managing the liquidity situation. The existing financing arrangements may need to be reworked based on evolving business situation to support liquidity needs.

The company sees no immediate impairment on any of its assets due to Covid-19. The Internal financial reporting and control have been maintained during the Covid-19 period. With the emerging concept of work from home, various Information Technology and Cyber Security measures have been taken for data protection.

After easing down of lockdown the company has not faced any major supply chain problem. Outbound supply chain continues to be marginally affected due to many localised lockdowns in many parts of the country.

The movement of goods was impacted during lockdown period creating disruptions on the supply side. In addition, many of the manufacturing units from whom the company sources its raw material were closed. While there may be some difficulties in sourcing the raw materials in a timely manner, the company has been carrying Inventory of raw-materials just before announcement of lockdown that will take care for couple of months.

Due to Covid-19 the overall demand for fabric and apparel has decreased substantially due to slow down of retail activities and cut back by end consumers in discretionary spending. The demand is expected to revive towards end of FY21.

There have been delays in meeting payments to suppliers, service providers of the company. Many of the customers have kept contracts on hold or cancelled orders due to the Covid-19 pandemic.

Due to lockdown the company’s overall operations, including manufacturing operations were shut down from March 22 till May 15, 2020 to comply with Government guidelines. At present, the company is operating at single shift basis.

The office operations have been started as per Government guidelines. In Lockdown 3, the manufacturing was started in Nagpur plant with limited manpower from May 16, 2020. Other than manufacturing at Nagpur Plant, all other operations of the company continued in limited way through remote mode (work from home) using various digital mediums and ERP during the lockdown period.

Morarjee Textiles Ltd is currently trading at Rs11.20 down by Rs0 or 0% from its previous closing of Rs11.20 on the BSE.

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