Axita Cotton Management Discussions


This report covers the operations and financial performance of the Company for the year ended March 31,2022 and forms part of the Annual Report.

BUSINESS SCENARIO:

The last two years the countrys economy has seen turbulence and uncertainty in terms of COVID - 19. After weathering over two years of the pandemic, the global business community was eager to get down to real business. But the war in Ukraine has triggered significant slowdown in global growth in 2022 and to inflation. However, the emergence of new COVID-19 variants could prolong the pandemic and induce renewed economic disruptions. By March 2022, India administered a massive vaccine doses, amongst the highest in the world. Further, the RBI and the Indian government have taken a range of fiscal and monetary measures in the last two years to provide support to domestic businesses, and ensure ample liquidity in the system.

OVERALL REVIEW:

India has emerged as the worlds fastest-growing major economy, and it is predicted to be one of the top economic powers in the next decade, owing to its robust democracy and strong partnerships. India is the largest producer of cotton globally. It is a crop that holds significant importance for the Indian economy and the livelihood of the Indian cotton farmers. The industry is sustaining livelihoods to millions of people in rural and semi urban areas by providing them employment directly and indirectly, including a large number of women and rural population. Cotton is one of the most important cash crops and accounts for around 25% of the total global fibre production. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. The ongoing global slowdown coupled with sharp increase in the prices of raw cotton are posing serious challenges to the Textile Industry.

COMPANY OVERVIEW:

Our Company main business of Ginning and Pressing of Seed Cotton ("Kapas"). Our Company is producing cotton bales and cotton seeds. Our Company also engaged in the business of Trading of Kapas, cotton bales and cotton seeds. Our Company also doing ginning and pressing of Kapas on job work basis. The production facility of our Company is situated at Kadi in Mahesana District of Gujarat state. Axita Cotton Limited is well-known Company in our Business Sector.

During the Financial Year 2021-22, the Company continued to achieve greater heights despite several hurdles faced. The overall profitability of the Company during the year under review have grown as compared to the previous year. Our Companys exports have decreased in financial year 2021 -22 as compared to previous financial year 2020-21 but Our Companys domestic sales have increased in financial year 2021-22 as compared to previous financial year 2020-21. Our Companys products demand was high in the domestic market during the financial year 2021-22.

OPPORTUNITIES AND THREATS, RISKS AND CONCERNS (OTRC):

Management Discussion and Analysis mainly comprise the statements which may, inter alia, involve predictions based on perceptions and may, therefore, be prone to risks and uncertainties. It is the sum total of the Companys jexpectations, beliefs, estimates and projections which may be forward looking or depressing within the meaning : of applicable laws and regulations. The actual results could differ materially from those expressed herein specially or impliedly.

The OTRC have the various bench mark and keep changing on the various domestic global business outlooks.

Opportunities:

1. Expertise in new products development.

2. Policy Support: Several policy support initiatives taken by the government of India favourably

3. Moreover, several countries of the world have realized that dependence on the one country for its textiles requirements is not a good policy. So, in the changed global scenario they have started looking for alternative production sources and has started working on China plus one strategy for the requirement of Textile Products.

4. Various incentives offered by the government, have provided the much needed impetus to the Textile industry.

5. Consumers are more attracted towards local good quality products which are more reliable.

Threats, Risks and Concerns:

No industry is free from normal business risk, threats and concerns.

1. Uncertainty on monsoon.

2. Higher Cost of Raw Materials

3. Global Events like escalation of war in Ukraine

4. Rising crude oil prices

5. Logistic Risk: The scarcity and long delivery times of raw materials is still present due to complicated and highly expensive transports

6. Price fluctuations

7. Exchange fluctuations in case of Exports

8. High inflation

OUTLOOK AND FUTURE PROSPECTS:

We are pleased to inform you that the year gone by has been excellent for the Textile Industry. The government is making all possible efforts towards gaining access to the new markets. Indian Textile Industry is one of the key industry of the country and the Government through its policies and initiatives continues to give further push to the industry so that it become global competitive and increase its Global share.

The high cotton prices coupled with slackness in Global demand are affecting the fortunes of the Textile Industry. The Future is still not clear. Your management is looking at the future with optimism and expects that with the improvement in the global demand and softening of raw cotton prices in the coming periods, will give a relief to the Textile Industry.

SUBSIDIARIES/JOINT VENTURES:

The Company does not have subsidiaries, associates and joint ventures companies.

HUMAN RESOURCES:

The Companys relations with the employees continued to be cordial and harmonious relations 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.

FINANCIAL RESULTS:

The Companys financial performance for the year ended on March 31,2022 is summarized below:

(Amount Rs. in Lacs)

PARTICULARS YEAR ENDED 31.03.2022 YEAR ENDED 31.03.2021
Revenue from Operations 82282.26 61879.29
Other Income 675.36 14.80
Total Income from Operations (Net) 82957.62 61894.09
PARTICULARS YEAR ENDED 31.03.2022 YEAR ENDED 31.03.2021
Earnings Before Interest, Taxes, Depreciation and Amortization Expense 2162.23 917.37
Less: Finance Cost 168.10 329.09
Less: Depreciation and Amortization Expense 49.60 44.23
Profit Before Tax 1944.53 544.05
Less: Tax Expenses
Current Tax 513.21 140.52
Deferred Tax (22.51) 30.16
Profit After Taxation 1453.83 373.36

Note: Previous years figures have been regrouped / reclassified wherever necessary to correspond with the current years classification / disclosure and may not be comparable with the figures reported earlier.

COMPANYS PERFORMANCE:

During the year under review, the Company recorded Revenue from Operations of Rs. 82,282.26 Lakhs for the F.Y.

2021 -22 as compared to Rs. 61,879.29 Lakhs during the previous F.Y. 2020-21.

During the year under review, the Company achieved Earnings before Interest, Taxes, Depreciation and Amortization Expense of Rs. 2,162.23 Lakhs for the F.Y. 2021-22 as compared to Rs. 917.37 Lakhs during the previous F.Y. 2020-21.

During the year under review, the Company achieved Profit after Taxation of Rs. 1,453.83 Lakhs for the F.Y. 2021 - 22 as compared to Rs. 373.36 Lakhs during the previous F.Y. 2020-21.

Export Sales for the F.Y. 2021-2022 was Rs. 25,245.19 Lakhs as compared to Rs. 41333.57 Lakhs for the F.Y. 20202021. .

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE:

The Company operates in only single segment. Hence segment wise performance is not applicable.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Axita Cotton Limited has appropriate systems for internal control. Internal Control system and adequacy Internal Control measures and systems are established to ensure the correctness of the transactions and safe guarding of the assets by the Internal Auditor of the Company and Chief Financial Officer of the Company. This ensures that the Companys resources are put to optimum use and all transactions are authorized, recorded and reported correctly to the Management. The company has a regular practice of enhancing its system control in line with changing requirements of the business and the industry. The Internal control checks and internal audit programmers adopted by our Company plays an important role in the risk management feedback loop in which the information generated in the internal control process is reported back to the Board and Management. The internal control systems are modified continuously to meet the dynamic change. Further the Audit Committeef the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of internal controls.

*

KEY FINANCIAL RATIOS:

The key Financial Ratios during Financial Year 2021-22 vis-a-vis Financial Year 2020-21 are as below:

Ratio Numerator Denominator Current Period Previo us Period % Variance Reason for Variance
Current Ratio (in times) Current Assets Current Liabilities 1.46 1.23 18.70% -
Debt - Equity Ratio (in times) Total debt Shareholders Equity 0 0.6 (100.00%) Due to Repayment of all Loans.
Debt Service Coverage Ratio (in times) Earnings available for debt service Debt Service 1.11 1.50 (26.00%) Prepayment of all loans.
Return on Equity Ratio (in %) Net Profit after taxes - preference dividend (if any) Avg. Shareholders Equity 49.88% 18.71% 166.60% As there is positive growth in our Net Profit thats the reason Return of Equity Positively affected.
Inventory Turnover Ratio (in times) Cost of Goods sold Average Inventory 10.54 9.40 12.13%
Trade Receivables Turnover Ratio (in times) Net Credit Sales Average Trade Receivables 119.40 94.43 26.45% Due adequate credit policies Companys efficiency of accounts receivables collection increased.
Trade Payables Turnover Ratio (in times) Net credit purchase Average Trade Payables 13.21 14.06 (6.05%)
Net Capital Turnover Ratio (in times) Revenue from Operations Net Working Capital = Current Assets- Current Liabilities 24.07 30.99 (22.33%)
Net Profit Ratio (in %) / Net Profit Revenue from Operations 1.77% 0.60% 195.00% Due to significant changes in the Revenue from Other Income and also increase in revenue from main stream operations
Return on Capital Employed (in %) EBIT Capital Employed 0.39% 0.37% 5.41%
Return of Investment (in %) Income Generated from Investment Funds Average Invested funds Not Applicable as such there is no kind of investment in our Company

Note: Previous years figures have been regrouped / reclassified wherever necessary to correspond with the 1 current years classification / disclosure and may not be comparable with the figures reported earlier.

Note: Reason for Variance are provided in case of changes of 25% or more as compared to Financial Year 2020,21

CAUTIONARY STATEMENT:

Statements on the Management Discussion and Analysis and current years outlook are Managements perception at the time of drawing this report. Actual results may be materially different from those expressed in the statement. : Important

Registered office: For and on behalf of the Board of Directors
Axita Cotton Limited CIN: L17200GJ2013PLC076059
Servey No. 324 357 358, Kadi Thol Road, Borisana Kadi, Mahesana - 382715 Gujarat Date: August 12, 2022 Nitinbhai Govindbhai Patel Kushal Nitinbhai Patel Chairman Cum Managing Director Managing Director
Place: Kadi, Mahesana DIN: 06626646 DIN: 06626639