Ashnoor Textile Mills Ltd Management Discussions

A. Business Overview

Ashnoor Textile Mills Limited is engaged in the manufacture and export of terry towels. It has only one plant located at Gurugram. The company generates more than 70% of its income from operations through the export of its products. The main exports are to the USA. So, the business prospects of the company are dependent on global, particularly the economic conditions in the USA, as well as the Indian economy.

B. Industry Structure and Development

Indias textile sector provides livelihoods to millions of households and is the second largest employer, employing more than 40 million workers. The textile sector, generating formal and productive jobs, has the potential for broader social transformation, generating exports and growth. The terry towels form an integral part of the textile segment. The demand for terry towels varies across countries depending upon various factors like population, demographics, living style, economic status, and climatic conditions. In India, terry fabrics are manufactured mainly in decentralized handloom and power loom sectors, and only 10-15% of total terry fabric production is produced in the organized sector. We are one of the terry towel manufacturers in the organized sector. Most of the organized sector units are engaged in catering to the export market and also the quality segment of domestic markets.

Europe and the USA continue to be the prime markets for terry towels, but Indian exporters of terry towels have a comparative disadvantage in exporting to Europe due to tariff protection given to exports from other countries like Pakistan, Turkey, and Bangladesh. So, the main focus of the company is to concentrate on exporting to the USA. According to the US Office of Textiles and Apparel data, India caters to about 45% of the total import of terry towels imported by the country. Indian exporters have been able to capture the share due to easy cotton availability and favorable labour conditions.

C. Opportunities and Threats and Future Outlook, and Global Economic Conditions

The company is engaged in the manufacture and export of terry towels, which are used mainly in the hotel industry. After COVID-19, the demand-supply dynamics have undergone volatile changes. In the financial year 2022-23, there was a slowdown in demand due to a cooling down of the pent-up demand seen post covid. The effect of an increase in capacities by the Indian manufacturers post-COVID to fulfil pent-up demand also aggravated the impact of the slowdown in demand. The US Central Bank has followed monetary tightening policies in the last two years post-COVID. Still, the financial year 2024-25 was comparatively better than the earlier one due to the continued normalization process.

Now, although the rate tightening cycle is over and the US was expected to reverse the tightening policy in the coming months, with the change of Government in the USA and the present policies of the US Government, the US interest rates continue to be at elevated levels, which are suppressing the demand. Since we are primarily exporting to the USA, the demand scenario there becomes very important.

The recent increase in tariffs by the US Government has been a shock to the world, and the quantum of increase is unprecedented. The levy of an additional penal tariff of 25% in August 2025 over the previous increase of the reciprocal tariff of 25% has resulted in a temporary virtual halt in exports to the USA.

The trade talks with the Indian Government are going on, and it is expected that the tariffs will be revised to normal levels comparable to other countries in the course of time. But for the time being, a lot of uncertainty continues.

Even if the tariffs on India are brought to levels comparable with the other countries, some pain will still be there in terms of demand slowdown and the margins. Unless things become certain, it is difficult to assess the ultimate impact.

As far as our company is concerned, it is enjoying very good liquidity and a healthy financial position, and it should be in a position to cope with the situation on the liquidity front. The company has improved its margins in the last few years, which should provide a cushion to the tariff impact.

The silver lining is that the raw materials prices are on the lower side, and there is hope for eventual loosening of the interest rate cycle by the US government. In a nutshell, there is a pain in the short run, but things might absorb the current shocks in the medium to long run.

D. Segment Reporting

The company has only one segment of activity, namely Terry Towels, as per the definition of Segment according to the Accounting Standard-17 issued by the Institute of Chartered Accountants of India. The companys performance in the said segment has been discussed in detail in this report.

E. Risks and Concerns

For towels, the export demand in India is mainly driven by the US, the largest market for terry towels, and the Company primarily caters to exports to the US. The geographical concentration is a risk. The levy of tariffs by the US Government is the major risk at present, and the matter has been discussed in the earlier paragraphs. The volatility in raw material prices and exchange rate fluctuations are other risks that can turn both favourable and unfavourable. The macro conditions in terms of demand slowdown are also a matter of concern.

F. Internal Control Systems and Their Adequacy

The Company maintains adequate systems of internal controls to ensure that all assets are safeguarded against loss from unauthorized use or disposition. The Companys policies, procedures, and guidelines are in place. The Company also has adequate procedures for internal financial controls to detect and prevent fraud and protect the Companys resources. The financial statements are prepared in accordance with the accounting standards issued by the Institute of Chartered Accountants of India and a report on the Internal Financial Controls under clause (l) of sub-section (3) of Section 143 of the Companies Act, 2013 as given by the Independent Auditors and attached with Annual Report signifies that an adequate internal financial controls system over financial reporting is maintained and such financial controls over financial reporting were operating effectively as at March 31, 2025

G. Financial and Operational Performance

The operations and performance of the Company in the last year, 2024-25, have been extremely satisfactory. During the year under review, i.e. FY 2024-25, the Companys income increased by 35.36831% as compared to that in FY 2023-24. The improvement was on account of sales as well as margins. Due to strict cost control measures adopted and other incomes generated from surplus working capital, the profit after tax increased by 114.80% from Rs 7.43 crore in FY 23-24 to Rs 15.96 crore in FY 2024-25.

The Companys financial position will continue to be very strong.

H. Human Resources/Industrial Relations

The Company has always valued its human resources. It believes in the unlimited potential of each of its staff. Dedicated and efficient employees are great assets of the Company and the most important ingredientfor achieving good performance. During the financial year, the overall industrial relations remained cordial in the Company.

I. Accounting Treatment

The financial statements of the Company have been prepared to comply with the Indian Accounting Standards (Ind AS), including the rules notified under the relevant provisions of the Companies Act, 2013. The Company had prepared the Financial Statements for the previous year by complying same Accounting Standards.

Details of significant changes in key financial ratios, along with details, are given below: Ratios	As on 31.03.2025	As on 31.03.2024	Percentage change	Remarks/ Response
Current	1.89	1.67	13.74%	Surplus cash accruals were invested in marketable securities thereby increasing current assets and current ratio
Debt Equity	0.74	1.18	-37.67	Increase in equity due to issue of shares on the right basis and plough back of profits
Debt Service Coverage	2.31	1.86	24.16%	Increase in profits and repayment of loans
Return on Equity	21.22%	12.32%	72.17%	Increase in profits due to an increase in sales and profit margins
Inventory Turnover	3.27	2.72	20.05%	The ratio increased due to increase efficiency in inventery management
Trade Receivable Turnover	5.27	4.26	23.75%	There was improvment and due to better realization of receiable
Trade Payable Turnover	27.31	21.89	24.76%	Quick payment of creditors due to easy liquidity.
Net Working Capital Turnover	3.81	5.96	-36.08	Increase in current assets
Net Profit	8.67%	5.47%	58.57%	Increase in profits due to an increase in sales and profit margins
Return on Capital Employed	24.82%	16.54%	50.06%	Increase in profits due to an increase in sales and profit margins
Return on Investment	19.95%	31.97%	-37.60%	Decline in profitability on investment in securities.
Operating Profit	13.55%	10.28%	31.83%	Increase in Margins

Disclaimer

Readers are cautioned that this discussion and analysis contain certain forward-looking statements. All these statements always have certain risks and uncertainties. Actual results could differ materially from those expressed or implied, and the Company is not bound to publicly update or revise forward-looking statements. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements.

For Ashnoor Textile Mills Limited
Sd/-	Sd/-
Suneel Gupta	Sangeeta Gupta
Managing Director	Director	Place: Gurugram
DIN-00052084	DIN-00052121	Date: May 29, 2025