Angel Fibers Management Discussions


COMPANYS BUSINESS

The Companys principal line of business is manufacturing of Cotton Yarn, The Company has spinning units located near Rajkot, one of the develop belt of cotton crop of Gujarat with an installed capacity of 39648 spindles.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Since ancient times, Indian textiles industry have been one of the strongest backbones of the Indian economy. Yarn, which is made by compiling continuous strands of natural and synthetic fibers together to weave fabrics, is the oxygen of this industry.

Textile industry of India is one of the worlds biggest textile industries, the Indian textile sector has a large store of raw materials and a huge support base for textile manufacturing. In fact, the Indian economy is hugely dependent on this industry. More than twenty-seven percent of Indias foreign exchange income comes from the export of textiles and cloth. In the total industrial production of the country, the contribution of the textile sector amounts to 14 percent. It also contributes about 3 percent to the total GDP of the nation.

The Indian textile industry is the second largest employment provider after agriculture. It is highly labour intensive, and the industry has significantly emerged as a source of income for the unskilled, semi-skilled, and women labour force in the country. It provides livelihood to more than 45 million people directly and more than 60 million people indirectly through its allied industries.

Developments of the Indian textile industry for the reporting financial year shows tepid growth as the export demand for these products remained soft due to slow global demand. Survey report issued by the Confederation of Indian Textile Industry (CITI) showed that the textile sector recorded private investment of about Rs.10,000 crore in first half of 2022-

23 (i.e., April 2022 to September 2022). But the investment slowed down to around Rs. 7,000 crore in second half of the current fiscal. Textile sector was underperformer compared to other economic sectors.

The growth in textile sector was disappointing because of tepid demand from global market. Except may month, first eight months of the current fiscal, the sector faced dark side. The textiles sector growth remained negative in the remaining seven months from April to November 2022.

(source - yarnbiz & fibre2fashion)

GLOBAL AND INDIAN COTTON INDUSTRY OVERVIEW

Exports of US for the year 2022-23 were lowered by 2,50,000 bales compared with the previous month to 12 million bales. This is despite higher US production and is attributed to lower global demand, with global consumption forecast down more than 800,000 bales compared with the previous month to 110.9 million.

Major consumers including India, China, and Pakistan are facing challenges including a downward trend in profit margins and yarn orders, which in turn have resulted in conservative buying practices for cotton lint.

Indias yarn production was 341.91 lakh bales in FY 2022-23, with the approximate increase of 20% as compared to FY 2021-22. Indias yarn exports were declined in volume but increased in value during the first half of 2022. India exported 9.69 lakh ton yarn worth $3.472 during the year under review. Bangladesh remained the top buyer with 32.72% share, while Turkey stood second with import of 11.40% of all Indian exports during the period.

The price rise in cotton improved foreign exchange earnings but discouraged export volume. However, the export of first half of 2022 decreased in terms of value and volume both when compared with second half of 2021, when 13 lakh ton yarn valued at $4.096 billion was exported. The arrival of new cotton crop in India beginning in October led to a jump in yarn export during the second half of the last year.

(Source - fashionnetwork)

OPPORTUNITIES

Indian textile companies are working on modernizing their manufacturing units and mills with the latest technologies like compact spinning and also adopted highly precise tools to control the process like splicers, auto-coners and electric cleaners, which gives the business an edge over international competition resulting to Indias yarn export capacity. Some of the most famous and esteemed Indian cotton yarns are available worldwide to all in the form of gassed, dyed, bleached, twisted, bleached and greige yarn. Fashionable yarns like high twist, blends, melange and stretch are also available to meet the various needs and demands of the fashion sector, industrial fabric clothing sector and textile and hosiery sector. India is fully equipped with the best resources to meet all types of regular and premium consumer needs in this business.

(source - yarnbiz)

THREATS

Cotton Yarn industry is mainly dependent on the production of cotton crop, and farming of cotton crop is again dependent on the rain which might be uncertain sometimes. Hence there might be chances for shortage of raw materials.

Secondly, in the adaptive fashion trend, many fabrics are created from synthetic or man-made yarns. With the use of latest technologies and consumer demand, these synthetic yarn passes through many chemical processes to achieve its feel like cotton or natural yarn. Further, many types of hybrid yarns are also developed now a days, fabric of which give more comfort and durability matching with the fashion. Due to mixing and blending options, sole need for cotton yarn may affect negatively.

SEGMENTAL REVIEW AND ANALYSIS

Company is engaged in manufacturing of only one product i.e. cotton yarn and hence there is single segment reporting. The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

RISKS AND CONCERNS

Overall there is no such material negative impact on company is expected because market is now on its routine functioning and in recent months there was booming effects in the textile industry.

However, some common risks like Currency Risk, Commodity price Risk and Human Resource Risk etc. permanently exist in a companys operating environment and they emerge on a regular basis, Risk management is embedded in operating framework of the Company. The risk management framework defines the risk management approach of the Company and also includes the periodical review of such risks. The Board and the Audit Committee regularly review the risk management framework.

OUTLOOK

After the historical rise in cotton prices in the last cotton season, in the next season, cotton prices was reduced. Simultaneously yarn prices also reduced unreasonably. On account of higher cotton prices, export of yarn, fabric and garment sector was affected badly. Many of the manufacturers in textile industry have operated their facility at their half capacity for three to four months. Your Company also got affected with this scenario and had to operate with partial capacity and incurred huge fix costs resulting negative in profit.

The global textile market grew from $573.22 billion in 2022 to $610.91 billion in 2023 at a compound annual growth rate (CAGR) of 6.6%. Increased penetration of organized retail, favorable demographics, rising income level, and favorable government policies are expected to drive the demand for textiles.

(source: researchandmarkets)

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate internal control procedures and systems commensurate with its size and nature of its business for purchase of raw materials, plant and machinery, components and other items and sale of goods. The system covers all major processes including operations, to ensure reliability of financial reporting, compliance with policies, procedures, laws and regulations, safeguarding of assets and economical and efficient use of resources.

The checks and controls are reviewed by the Audit Committee for improvement in each of these areas on a periodical basis. The internal control systems are improved and modified continuously to meet with changes in business conditions, statutory and accounting requirements. Moreover, the present management has experienced team for technical staff, who are already trained and are able to manage production cycle smoothly.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company operates in a Single Segment of Textiles; brief of the financial performance is here-in-below.

Particulars FY 2022-23 FY 2021-22
Revenue from operations 120,73,50,609.00 247,71,05,460.00
Other income 286,27,093.00 5,73,54,534.00
Total revenue 123,59,77,702.00 253,44,59,994.00
EBITDA 725,70,278.00 26,27,31,732.00
Less:
Finance Costs 3,22,38,902.00 4,72,28,678.00
Depreciation8,66,41,814.00 10,18,44,985.00
Profit before tax, exceptional and extraordinary items (4,63,10,438.00) 11,36,58,069.00
Add/(Less): Exceptional/Extraordinary income/(expense) 0.00 0.00
Profit before tax (4,63,10,438.00) 11,36,58,069.00
Less: Taxes on income 40,52,949.00 1,99,06,044.00
Profit after tax (5,03,63,388.00) 9,37,52,025.00
EPS – Basic (2.01) 3.75
EPS – Diluted (2.01) 3.75

For financial performance concerning operational performance, please refer to the Boards Report.

DETAILS OF SIGNIFICANT CHANGES i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations, thereof :

Ratio FY 2022-23 FY 2021-22 % Change Reason For Change
Debtors Turnover Ratio 33.18 days 14.82 days 123.89% As higher days credit is given to debtors, DTO is high
Inventory Turnover Ratio 65.92 times 36.07 times 82.76% Due to reduction in sales as compared to previous years, ITO is low
Interest Coverage Ratio -0.11 Times 4.34 times -102.53 Due to decrease in earnings before interest and tax in the year under consideration as compared to previous year , the ratio is low
Current Ratio 1.78 Times 2.02 times -11.88 Due to Decrease in current Assets (inventory & other current Assets)
Debt-Equity Ratio 2.13 2.06 3.4 Due to decrease in reserves(equity) during the year under consideration.
Net Profit Ratio -4.17% 3.78% -210.32 Due to reduction in revenue from operation in the year under consideration as compared to previous year
Operating Profit Margin Ratio 9.68% 10.42% -7.10 Due to decrease in turnover, operating profit margin ratio has decreased

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Companys relations with the employees continued to be cordial and harmonious with its employees. It considers manpower as its assets and that people had been driving force for growth and expansion of the Company. The Company acknowledge that its principal assets is it employees. The Company invested extensively in formal and informal training.

The total number of on roll office employees in the Company was 36, while factory workforce consist approx. 180 employees for the reporting financial year. The Company will continue to create opportunity and ensure recruitment of diverse candidates without compromising on meritocracy.

Industrial relations were quite pleasant throughout the year.

HEALTH, SAFETY AND SECURITY MEASURES

The Company continues to accord the highest priority to health and safety of its employees and communities it operates in. The Company has been fully committed to comply with all applicable laws and regulations and maintains the highest standard of Occupational Health and Safety and ensures safer plants by conducting safety audits, risk assessments and periodic safety awareness campaigns and training to employees. We believe in good health of our employees.

Date : 04.09.2023 For and on Behalf of the Board of Directors,
Place : Haripar, Jamanagar ANGEL FIBERS LIMITED
Mr. Rohankumar Raiyani
Managing Director
(DIN :08814726)