cravatex ltd share price Management discussions

(a) Industry Structure and Development

Major sources of companys revenue are from Trading and rentals from its office properties. The economic progress plays a big role in consumer demand. Post Covid-19 the countrys economy started showing signs of come back. The demand for discretionary consumer goods picked up slowly, especially the sports goods including the textiles related goods. As the trailing impact of Covid-19 is fading along with relaxation in restrictions, the consumer demand is showing signs of rebound, especially the retail segment. As regards office properties, the demand for rental offices are static.

(b) Opportunity and Threats

The company being in the retail segment for a long time, exploring of opportunities in the segment is undeniable. Efforts are made to examine the sustainable options available carefully especially in the post Covid changed scenario and the Digital/ Artificial Intelligence era. Apart from the market related threats, global and climate changes are the latest threats. The ongoing Russian war and political turbulence inside and outside the country needs to be watched. The overall impact on the economy in general and market in particular needs to be tackled. The company is sensitive and alert to all these threats for taking appropriate steps as and when required.

(c) Segment wise/product wise Performance and outlook

The companys performance for the year is covered in the Annual report. The improving economic and market conditions appear conducive for a better business prospects. However the global adverse events which are uncontrollable may impact the businesses.

(d) Risks and concerns

The company was successful in navigating the Covid-19 pandemic with minimum adverse impact. While making the risk assessment, internal and external, domestic and global factors are examined for mitigation. The company has taken adequate steps to mitigate the risk as much as possible.

(e) Internal control system and their adequacy

Internal Control System is the backbone of a healthy corporate governance and one of the risk management tools. The company strongly believes in corporate discipline of internal controls. The company has implemented adequate and appropriate process, internal controls and monitoring system for safety and security of its business and assets. The internal audit is conducted by an independent external Auditors evaluating the functioning and quality of internal controls. Improvements are implemented from time to time.

(f) Discussion on financial performance with respect to operational performance

With receding Covid restrictions leading to improvement in overall market activities, the trading picked up resulting in improved earnings over previous year. Although the lease income was flat due to contracted rentals, Dividend income was marginally higher than last year. During the year, the company sold its 100% stake in Cravatex Brands Limited, a wholly-owned loss making subsidiary. The one time loss arising from the sale adversely impacted the net profits. However, with this development, the company is relieved of the pressure on financial commitment for supporting the subsidiary in coming years. The overall operations and business of the company were conducted in a normal environment.

(g) Material developments in Human Resources/Industrial Relations front, including number of people employed

There are no material development in Human resource/Industrial Relations front. The company promotes employee friendly HR policy. Flexible options for work from home are given to the employees as a part of safety and comfort. The overall industrial relation had been satisfactory. The company has 8 employees on it rolls as at 31st March 2023.

The details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios and change in return on net worth along with detailed explanations therefor are as follows:

Sr. Particulars	2022-23	2021-22
1 Debtors Turnover Ratio*	57.22	30.91
2 Inventory Turnover Ratio**	N.A.	0.98
3 Interest Coverage Ratio	NIL	NIL
4 Debt to Equity Ratio	N.A.	0.07
5 Current Ratio	2.32	0.46
6 Operating Profit Margin Ratio	3.09	4.29%
7 Net Profit Margin Ratio	(202.96)	39.16%
8 Return on Net worth (With Exceptional Loss)	(190.28)	10.41%
9 Return on Net worth (Without Exceptional Loss)	39.11	10.41

* Debtors are reckoned on average basis.

** Inventory is reckoned on average basis.

Reasons for significant change in ratios as on 31st March 2023 vis a vis the previous year are as follows:

1. Debtors turnover ratio: During the last quarter of FY 2022-23, the activity was lower on account of seasonal factors and hence the ratio has improved over previous year.

2. Inventory turnover: Due to nil inventory holding, the ratio is not applicable.

3. Interest coverage ratio: Being a debt free company, the ratio is not applicable.

4. Debt to Equity ratio: Being a debt free company, the ratio is not applicable.

5. Current Ratio: The proceeds of sale of subsidiary which are invested in Mutual fund for short duration, has contributed to the increase in Current assets as against the marginal increase in current liabilities. Hence the ratio has improved.

6. Operating profit margin ratio: During FY 2022-23, due to the external reasons, there was pressure on overall margin. Hence the ratio was moderate.

7. Net profit margin ratio: Net profit margin ratio as result of one-time exceptional loss on sale of subsidiary is negative. However, excluding this exceptional item the ratio has marginally improved from 39.16% in previous year to 41.80%.

8. & 9. Return on Net Worth: During the year, the equity has reduced due to sale of a subsidiary. The ratio without considering the exceptional item of one-time loss on sale of a subsidiary indicates substantial improvement over previous year on lower equity as on as 31st March 2023 along with a marginal increase in profits. The ratio after considering the said exceptional item of one time loss was negative.

Disclosure of Accounting Treatment

The Company had adopted the Indian Accounting Standards (IND AS) and accordingly, the financial statements including the consolidated financial statements have been prepared in accordance with the recognition and measurement principles in IND AS interim financial reporting and those prescribed under the Companies Act, 2013 read with the relevant rules issued thereunder and the other accounting principles issued by the Institute of Chartered Accountants of India.