Bang Overseas Ltd Management Discussions.

ECONOMIC AND INDUSTRY OVERVIEW

Economy

India’s economy slowed down due to the sudden outbreak of the COVID-19 pandemic. Indian economy was struggling through a subdued economic environment with consumption, exports and private investment witnessing severe slowdown. Exports contracted during the entire financial year and consumption, which was the key growth engine, fell even more. The overall slowdown got further impacted due to the pandemic. After six weeks complete lockdown the government started easing restrictions in a phased manner to give pace to economic activities. The government is also taking initiatives to spur growth and provide support for the economy, along with fostering domestic industries through ‘Atmanirbhar Bharat’. The Board and the Management will continue to closely monitor the situation as it evolves and do its best to take all necessary measures, in the interests of all stakeholders of the Company. India’s economy grew at a better-than-expected rate of 1.6% in the January-March quarter from a year ago, but the severe second Covid wave has created economic uncertainty and dampened sentiment. The economy, which was facing a slowdown even before the pandemic broke out last year, contracted by 7.3% during April 2020 to March 2021 fiscal (FY21), weighed down by nationwide lockdown that pummelled consumption and halted most economic activities. This is the first full-year contraction in the Indian economy in the last four decades since 1979-80, when GDP had shrunk by 5.2%. The economy has grown by 4% in the previous 2019-20 fiscal. The Government does not expect the severe second wave to have a large economic impact. However, the outlook appears uncertain.

Looking to the present situation of pandemic, the extent to which the same will impact Company’s future financial results is currently uncertain and will depend on future developments.

Indian Textile Industry

India’s textiles industry goes back several centuries and is among the oldest industries in the country. After agriculture, it is the second largest generator of income, employing close to 40 million people, and contributing 10% to the country’s manufacturing, owing to its labour intensive nature. The industry is vertically integrated with almost all sub-sectors and is thus integral to the economy. India is the second largest producer and exporter of textiles after China and fourth largest producer and exporter of apparel after China, Bangladesh and Vietnam.

The year under review saw a significant reduction in polyester demand and supply owing to the pandemic. However, the industry recovered ferociously after the 1st wave and did rather good overall for the year.

However, one factor affecting India’s textile trade is currency fluctuation that remains a challenge for the industry. Exports have been a core feature of India’s textile sector. Indian textiles and apparel exports were estimated at $35.5 billion in 2019 and is expected to grow at a CAGR of 11% over the next decade to reach $100 billion by 2029. Exports of both man-made textile and ready made garments have seen a major boost. A major factor behind the robustness of India’s textile industry is its strong production base with a wide range of fibres and yarns. India is among the top producers of jute and silk, and beyond its natural fibres such as cotton, jute, silk and wool; and synthetic, its manmade fibres such as polyester, viscose, nylon and acrylic have also created a niche for themselves in the market. Company is proud to be part of this illustrious history of textiles in India. A vertically and horizontally integrated manufacturer of textiles, Company produces High quality fabrics. This business vertical has been nurtured by strong channel partner relationships and has been a key enabler for its widespread reach throughout India.

Indian Apparel Industry

The year under review saw a significant reduction in polyester demand and supply owing to the pandemic. However, the industry recovered ferociously after the1st wave and did rather good overall for the year. This was true for the company’s products as well.Raw material prices have recovered considerably but the industry has witnessed healthy pricing power andbeen able to pass on these increases to the customer.It is expected that once the 2nd wave wanes in the current fiscal, demand would recover as before.

The branded apparel industry is closely linked to growth in consumption and overall economic and consumer sentiment. The industry is likely to face strong headwinds in the short term driven by multiple factors, including social distancing measures, impact of lockdowns and slowdown in consumption. The retailing sector has been impacted with malls being shut and risk of prolonged or recurring lockdowns leading to lower footfalls. The retailing industry is also witnessing a collaborative approach with retailers and mall owners restructuring business arrangements in a mutually conducive manner to tide over this challenging period. The government is moving, decisively towards resumption of economic activity along with ramping up of health support facilities and managing the process surgically rather than through expansive lockdowns.

The key metro cities have been worst hit in terms of number of cases due to the high density of population while rural and semi-urban areas have been less impacted. Higher farm income, reverse migration and increased public expenditure is likely to result in restoration of demand in rural and semi-urban areas, including discretionary demand as suggested by preliminary trends that point towards potential rebound in demand for two wheelers and automobiles. Consumer behaviour and choices will also get impacted with Work from Home norms and a shift in preference towards comfort and casual wear. Near-term trends will witness sharp contraction resulting in consolidation in the industry and well-capitalised businesses in the organised sector are likely to gain in the long term.

The pandemic has resulted in a huge number of job losses. According to CMIE over 97% Indians have become poorer compared with the last year and unemployment levels are at 13.73%. This will take a toll on consumption and consumption led Companies. Given the strong recovery in other countries commodity prices may remain strong and there is a worry about inflation, global as well as local, and its impact on interest rates.

Overview

Total revenue from operations registered decline of 42.52% with revenue of 56.59 Crore compared to 98.46 Crore in FY 2019-20.

Profit Before Tax (PBT) stood at 0.76 Crore. Net profit before tax has comparatively declined lesser to 40.90% as compare to FY 2019-20. Profit After Tax (PAT) has increased to 1.24 Crore as compared to 7.15 Crore in the FY 2019-20 due to Exceptional items as mentioned in financials.

Highlights of the Company’s Financial Performance:

Sales

Standalone: During the year under review, the Company achieved revenue of Rs. 5659.33 Lacs as against Rs. 9846.06 Lacs in previous year.

Consolidated: During the year under review, the Company achieved revenue of Rs. 5711.66 Lacs as against Rs. 11061.55 Lacs in previous year.

Earnings Before Interest, Depreciation & Tax (EBIDT)

Standalone: During the financial year, the EBIDT was Rs. 342.69lacs as against EBIDT of Rs. 426.84lacs for the corresponding previous financial year.

Consolidated: During the financial year, the EBIDT was Rs. 365.64lacs as against EBIDT of Rs. 444.66lacs for the corresponding previous financial year.

Net Profit after Tax including comprehensive income

Standalone: During the financial year, Company has incurred a Net profit after tax of Rs. 127.32Lacs as against Net profit after tax of Rs. 717.03lacs for the corresponding previous financial year.

Consolidated: During the financial year, Company has incurred a Net profit after tax of Rs.142.59 Lacs as against Net Profit after tax of Rs. 730.57Lacs for the corresponding previous financial year.

DETAILSOFSIGNIFICANTCHANGESINKEYFINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THERE FOR:

During the year 2020-21:

a) Debtors Turnover ratio: 0.81% Increased by 0.34%

b) Inventory Turnover ratio: 0.342% Increased by 0.03%

c) Current Ratio: 2.42% Increased by 0.25%

d) Debt to Equity ratio: 0.29% Decreased by 0.05%

e) Net Profit Margin: 0.012% Decreased by 0.0003%

f) Return on Net Worth: Decreased by 0.073%

The change in point a, b and e above is due to decrease in Sales during the year.

Increase in point c above is due to increase in Current Liabilities and decrease in Current Assets.

The change in point d is due to increase in current liabilities.

The change in point f above is due to decrease in Net Income as sales during the year has reduced.

OUTLOOK, OPPORTUNITIES AND THREATS

The COVID-19 pandemic is a global humanitarian and health crisis, which continues to impact the major part of the country and the other geographies also reporting second and third waves of infections. The actions taken by various governments to contain the pandemic, such as closing of borders and lockdown restrictions, have resulted in significant disruption to people and businesses.

The uncertainty in demand with prolonged economic imp acts of the COVID-19 pandemic will result in impact to production and may cause us to implement major cost control measures and other initiatives. New and changing regulatory compliance, corporate governance and disclosure requirements may increase our costs of compliance. Change in the policies of the Government of India may adversely affect economic conditions in the country generally, which could impact our business and prospects.

Covid has resulted in the loss of senior factory personnel and continues to pose a risk to health of employees just is does to the wider public. Risks related to the market in which we operate, may affect our profitability negatively if shut down is prolonged or if we are unable to eliminate fixed or committed costs in line with reduced demand.Unavailability of supply of electricity is another risk factor.

The Government’s ability to limit the spread of the virus and materially increase the rate of vaccinations will have a direct impact on the trajectory of both health and economic outcome.

The initial response to the pandemic was through expansive, countrywide, administrative lockdowns to safeguard public health. But prolonged lockdown led to disruption in economic activity and the trend now is towards opening up of economy and business activities.

RISK AND CONCERNS

Economic recovery is expected to be gradual because a certain amount of social distancing will continue over the short to medium term to avoid another wave of infection. The process of recovery is likely to be gradual and uneven across different sectors with discretionary consumption taking the brunt as spending is geared towards essentials, healthcare and connectivity that enables work from home. Sectors catering to social distancing, including personal mobility, packaged foods, telecom, and home improvement, automation, white goods, and consumer electronics, are likely to witness pent up demand and recover faster. On the other hand businesses such as retail, hospitality, tourism, cinemas, exhibitions, social gatherings etc. may see restricted activity.

It is difficult to predict consumer behaviour even after the restrictions are lifted but fashion consciousness and retail therapy have become a core part of human lifestyle and are likely to recover and gain momentum eventually. Also, the impact is likely to vary with rural and semi-urban areas witnessing faster recovery and low incidence of new cases. This period can be a test of survival for many companies, especially those with leveraged balance sheets, high-cost structures and concentrated geographic and channel concentration. The future belongs to companies and businesses that can sail through these turbulent waters as the industry goes through a phase of consolidation. Based on its good financials and disciplined cost control the Company has the ability to protect interests of all its stakeholders. With the added the strength of its strong brands and robust pan India distribution network the Company is well positioned to meet the near-term challenges and emerge stronger and more committed to its long-term vision of pursuing sustainable and profitable growth.

ENVIRONMENT & SAFETY/NATURE & SECURITY

Your Company is highly committed to environment friendly processes and operations. Therefore, it undertakes its operations in such a manner that it does not affect the Environment in one hand and also maintains the required Environmental balance in the other hand. The Company actively pursues safety and health measures continuously Your Company has always ensured the Environmental Safety, complied with the various Environmental Laws from time to time and further commits to follow the same in future.

INTERNAL CONTROL SYSTEMSAND THEIRADEQUACY

Sound internal control systems are a prerequisite for building and enhancing shareholder value in the long run. The Company has a sound system of internal controls commensurate with the size of the Company and the nature of its business to ensure that all assets are safe guarded and protected against loss from unauthorised use or disposition and that transactions are authorised and recorded reported correctly and adequately. The Company’s internal control are supplemented by internal audits, review by management and documented policies, guidelines and procedures. The internal control is designed to ensure that financial and other records are reliable for preparing financial information and for maintaining accountability of assets.

The key constituents of the internal control system are:

Establishment and review of business plans

Identification of key risks and opportunities

Clear and well-defined organisational structure and limits of financial authority

Continuous identification of area requiring strengthening of internal controls

Operating procedures to ensure effectiveness of business process

Systems of monitoring compliance with statutory regulations

Well-defined principles and procedures for evaluation of new business proposals capital expenditure A robust management information system Strong internal audit and review system The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness ofinternal controls systems and suggests improvement for strengthening them.

HUMAN RESOURCE

The performance of Company is driven by a highly motivated and professional team of employees. Company is focused on attracting, retaining and grooming the best talent available. The Company continued to invest in building competence in the organisation through employee training and development and compensation structure that rewards performance. The Company has also taken steps to further strengthen the employee morale by enhancing internal communication mechanism and aligning the employees with the Company’s strategic vision and initiatives to promote business excellence.

The Company continued to maintain excellent industrial relations with all its employees at manufacturing facilities. Adequate safety and welfare measures are in place and we will continue to improve the same on ongoing basis.

The total numbers of employees of the Company as on March 31, 2021 was 154.

CAUTIONARY STATEMENT

This discussion contains certain forward-looking statements within the meaning of applicable securities laws. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflects management’s analysis describing our objectives and expectations based on certain information and assumptions. Our operations are dependent on various internal and external factors within and outside the control of the management.

We assume no responsibility in respect of the forward-looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events. Actual results may differ from those expressed or implied herein.