AB Cotspin Management Discussions


We are primarily engaged in manufacturing of cotton yarn, knitted fabric, cottonseed oil and oilcakes. Our Company commenced its business in 1997 with a cotton ginning plant with cotton bales and cotton seeds being our initial products. Thereafter in the year 2000, we installed a crushing unit to extract oil from cotton and mustard seeds and expanded our product basket with the addition of cotton seed oil, mustard oil and oil cake. In the year 2011, we ventured in manufacturing cotton yarn by setting up a spinning plant. In the year 2014 we installed a knitting machine and thus forayed into manufacturing of knitted fabric. With our expansion over the years under the guidance of our management, we have been able to generate revenue from operations of Rs. 16910.01 lakhs during the financial year 2022-23.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The textile industry in India holds a distinct and significant position. It has been one of the earliest industries to emerge in the country and stands as the second-largest employment provider, next only to agriculture. Catering to one of the most fundamental human needs, the Textile Industry plays a vital role in enhancing the overall quality of life through sustained growth.

What sets it apart is its self-sufficiency, encompassing the entire production process, starting from raw materials to the final products, with considerable value addition at each step. This self-reliance not only fosters economic resilience but also ensures a steady supply of textiles, which is crucial for meeting domestic demands and fostering export opportunities, contributing significantly to the nations economy.

Furthermore, the textile sector has immense potential for creating job opportunities across various sectors, including agriculture, industry, organized, and decentralized setups, spanning both rural and urban areas. Notably, it opens doors for women and disadvantaged individuals, offering them promising avenues for livelihood and progress.

The industrys impact goes beyond economic aspects; it plays a pivotal role in preserving and promoting Indias rich cultural heritage. The diversity of traditional textiles and crafts woven into the fabric of this industry reflects the countrys vibrant history and artistic legacy. By supporting and nurturing these ancient crafts, the textile industry contributes to the conservation of traditional knowledge and skills, passing them on to future generations.

Moreover, the sectors emphasis on sustainable practices and innovations has gained momentum, fostering environmentally friendly manufacturing processes and encouraging eco-conscious consumer choices. As global awareness about environmental issues rises, Indias commitment to sustainable textiles positions it as a responsible and forward-thinking player in the international market.

The textile industry in India not only holds a unique and crucial role in the countrys economy but also serves as a guardian of cultural heritage, a champion of sustainable practices, and a facilitator of social progress by providing employment opportunities to diverse segments of the population. Its continued growth and development will undoubtedly contribute to Indias prosperity and global standing in the years to come.

GLOBAL ECONOMY

Over the course of the past year, the global economy has experienced numerous challenges in the form of geopolitical tension, rising interest rates, high inflation levels. Alongside, the consequences of a sudden surge in COVID-19 cases in China also impacted growth projections.

As per the latest estimates by the International Monetary Fund, the global GDP growth rate is estimated to be 3.4% in CY22 showing resilience towards the recessionary fears. On account of these headwinds, supply chain disruptions were also rampant. Moreover, due to geopolitical conflicts, crude oil prices soared, global trade was impacted and inflationary pressures worsened. To rein in inflation, Central Banks across the world, including the US Federal Reserve, responded with synchronized rate hikes.

A stronger boost from pent-up demand in numerous economies or a fall in inflation is expected in the course of 2023. The emerging and developing economies of the world are likely to play a major role in accelerating global economic growth. Another silver lining is the fact that global inflation is likely to decline from *8.8% in C.Y. 2022 to 6.6% in C.Y. 2023 and 4.3% in C.Y. 2024.

Source- IMF World Economic Outlook, January 2023 INDIAN ECONOMY

The Indian economy is poised to continue its rapid growth trajectory in the fiscal year 2023.

Despite global uncertainties and challenges such as the pandemic-induced contraction, the Russian- Ukraine conflict, and inflation, the Indian economy has exhibited remarkable resilience, rebounding strongly across various sectors. This recovery has placed India on track to reclaim pre-pandemic growth levels in the fiscal year 2023. Indias consistent average growth rate of ~7.5% per annum over the last two decades serves as a testament to its promising path of expansion.

Growth of Indian economy is driven by a large, young, and growing upper-middle-income population with a high propensity to spend. Anticipated growth for the year is 5.9%, with a focus on investment expected to play a vital role in setting India on a path of sustained growth over the next two years. More importantly, IMF expects Indian to grow faster over the next 5 years, with the growth rate averaging 6.1%.

Asian Development Bank (ADB) shares the same optimism about India. ADB Country Director for India Takeo Konishi believes that “Despite the global slowdown, Indias economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand. The Government of Indias strong infrastructure push under the Prime Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth.”

Govt. of Indias commitment to significantly increase capital expenditure in FY2023, despite targeting a lower fiscal deficit of 5.9% of GDP, will also spur demand. This should drive improvement in labour market conditions and consumer confidence, that should in turn drive growth in private consumption.

Source: IMF, April 2023, Asian Development Outlook 2023

OPPORTUNITIES AND THREATS

OPPORTUNITIES-

The textile industry is currently presented with diverse and promising opportunities. Rising global demand driven by a growing population and middle-class, coupled with increasing consumer awareness of sustainability, opens avenues for eco-friendly and innovative textiles. Technological advancements in smart fabrics and online retailing offer new market segments, while a shift towards circular economy practices and collaborations with fashion brands cater to environmentally conscious consumers. Embracing Industry 4.0 technologies and exploring technical textiles can enhance efficiency and tap into higher-

value applications. The industrys adaptability and focus on research and development provide a fertile ground for expansion and innovation in the current period.

THREATS:

The textile industry faces several threats in the current period. Fluctuating raw material prices and supply chain disruptions pose challenges to cost management and production stability. Intense competition in pricing and customer base can erode profitability. Moreover, changing consumer preferences and demands require constant innovation and adaptation. Compliance with evolving environmental regulations and geopolitical uncertainties further add to the industrys complexities.

However, we are making all our efforts to mitigate these risks and concerns, and proactively develop risk management strategies, invest in research and development, stay adaptable to market changes, foster a culture of innovation, and prioritize sustainability practices throughout the operations.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The Company has one segment of activity namely “Cotton Ginning”. Hence, Accounting Standard on Segment Reporting (AS - 17) issued by the Institute of Chartered Accountant of India does not apply.

RISK AND CONCERNS

The company is subject to various business risks, both internal and external, as the growth of our industries is closely tied to the overall economic conditions. The primary risk that the business encounters is the potential impact of adverse changes in the economy. Additionally, the company faces significant competition in terms of pricing and attracting and retaining customers.

OUTLOOK

Our firm conviction lies in leveraging our strengths to establish a prominent position in the global textile industry, providing us with a competitive advantage. Over the years, we have cultivated enduring relationships with our clients, and our proven track record of delivering high-quality products throughout the textile industry further reinforces these bonds, leading to an upsurge in repeat business from our existing clientele.

Moreover, our customer base is spread across numerous countries and regions, which strategically reduces our dependence on any particular country or region. This diversification in clientele enhances our resilience and positions us to adapt more effectively to market fluctuations and changes in demand.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate and efficient internal control system, which provide protection to all its assets against loss from unauthorized use and for correct reporting of transactions. The Company has put in place proper controls, which are reviewed at regular intervals to ensure that transactions are properly authorized and correctly reported and assets are safeguarded. The Audit Committee of the Board addresses issue raised by Auditor. The internal control system are implemented to safeguard the companys assets from loss and damages. To keep constant check on cost structure and to provide adequate financial and accounting controls and implement accounting standards. In addition to above, the Company has formulated a vigil Mechanism (Whistle Blower Policy) for its Directors and Employees of the Company for reporting genuine concern about unethical practices and suspected malpractices.

HUMAN RESOURCE MANAGEMENT

Human capital is highly regarded as a valuable and essential resource, playing a pivotal role in the Companys overall success. We firmly believe that our employees constitute the key pillar behind our achievements in the market. To foster a culture of excellence, we have consistently invested in creating a work environment that empowers individuals to realize their full potential and continuously raise the bar.

Recruitment, training, and development, along with competitive compensation, are the fundamental elements that shape our organizational culture. Our unwavering commitment lies in providing a safe, secure, and healthy working atmosphere for all our employees. Striving for excellence, we continuously aim to surpass both industry standards and our internal benchmarks concerning staff productivity and performance.

At all levels, employees and teams align their professional ambitions with the organizations broader goals and objectives, instilling a sense of purpose and direction throughout the company. As a company, we are dedicated to being recognized as one of the top employers in the industry.

Our industrial relations remain cordial and satisfactory, with a harmonious relationship between the Company and its workers and employees at all levels. We genuinely appreciate our employees efforts and take great pride in their dedication, sincerity, and hard work. Empowering individuals with stable and long-term employment has been one of the core objectives of the Company.

As of March 31, 2023, the Company had 361 permanent employees on its payroll, reflecting our commitment to nurturing a skilled and dedicated workforce to drive our continued growth and success.

DISCUSSION ON FINANCIAL PERFORMANCE

1. The Summary of the Operating performance is given below:

Particulars

F.Y. 2022-23 F.Y. 2021-22 % of Change

Revenue from Operation

16910.01 14068.87 20.19%

Operating Profit (EBITDA)

1099.66 1452.47 24.29%

Finance Cost

349.94 216.18 61.87%

Depreciation Cost

492.43 327.88 50.18%

Profit Before Tax

257.29 908.41 71.67%

Profit After Tax

193.30 683.32 71.71%

Your Companys Total Income (Revenue) during the year under review was Rs. 16910.01 Lakhs as compared to Rs. 14068.87 Lakhs in the previous year. Profit before Tax for the year 2022-23 was Rs. 257.29 Lakhs as against Rs. 908.41 Lakhs in the previous year. Profit after Tax for the year 2022-23 stood at Rs. 193.30 Lakhs as against Rs. 683.32 Lakhs in the previous year.

The Financial Results for the year ended March 31, 2023, have been prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act, 2013 and other accounting principles generally accepted in India. Previous periods figures have been restated as per Ind AS to make them comparable.

2. KEY FINANCIAL RATIOS OF THE COMPANY SHOWING FINANCIAL PERFORMANCE ARE AS UNDER:

Ratios

F.Y. 2022-23 F.Y. 2021-22 % of Change

Debtors Turnover Ratio

15.64 18.31 -14.58%

Creditors Turnover Ratio

15950.76 260.60 6020.78%

Inventory Turnover

5.45 6.02 -9.47%

Interest Coverage Ratio

1.55 6.05 -74.38%

Current Ratio

1.29 1.93 -33.16%

Debt Equity Ratio

2.51 1.13 122.12%

Operating Profit Margin (%)

1.52 7.72 -80.31%

Net Profit Margin (%)

0.01 0.05 -80%

Return on Net worth (%)

0.04 0.16 -75%

CAUTIONARY STATEMENT

Statements made herein describing the Companys expectations are “forward looking statement.” The actual results may differ from those expected or predicted since the Companys operations are influenced by many external factors which are beyond the control of your Company. These include climatic and economic conditions affecting demand and supply, government regulations, taxation, and natural calamities over which the Company does not have any direct control.

For and on behalf of the Board

Sd/-

Deepak Garg

Chairman and Managing Director
DIN: 00843929
Punjab
25th August, 2023