financials share price Management discussions

(ANNEXURE TO DIRECTORS REPORT)

INDUSTRIAL STRUCTURE AND DEVELOPMENTS:

The company was established in the year 1919 and it started manufacturing activity in the year 1922 at Petlad (Gujarat). On different reasons the company almost became a sick unit. The present management took it over in the year 1978 and gradually modernized the manufacturing unit in installments. Continuous upgradation of the unit improved its financial situation. By internal earnings and public issue, right issue, ploughing the working capital by private placement of debentures right from the year 1980 to 1998, the company became a continuous dividend paying company. Its shares were listed with the Bombay Stock Exchange in the year 1986. Dividend was paid to the shareholders continuously since 1986 except for 2-3 years. The company had also given bonus shares at two times. The company setup another yarn manufacturing unit at Borgaon Dist Chhindwara (MP) in the year 1990. Four windmills of the capacity of 1600 KWA (in aggregate) were also set up in Jamnagar, Kutch, Gujarat in the years 2006 and 2007.

Textile Industry is the oldest and highest employment providing industry in India, globally. India is one of the countries having largest textile manufacturing capacity. The important factors which influences the Companys operations are demand and supply conditions, availability of raw material at reasonable rate (cotton), the export market condition, availability of workers of required skills, Government regulations, tax laws, economic developments etc. Ours being mainly a cotton yarn spinning unit has to face all the difficulties which the textile industry is facing in the country.

In the last about 10-15 years many yarn spinning units have been established increasing the production, supply of cotton yarn in the country. Since the new units are eligible for many government benefits and concessions under different policies of the government and since the new units (with new technology) are less labour oriented our company cannot stand in competition with them because their production cost is much lower than that of ours. The companys both the units are established in mofussil area and, therefore, the cost of transportation of raw material and finished goods are also higher. The cost control at different level, wherever possible, and changes according to the times has made the company to survive even under adverse conditions.

OPPORTUNITIES, THREATS, RISKS AND CONCERNS:

The Companys main raw material is Cotton which is an agricultural crop. Its quality and available quantity in the country at reasonable rate depends on timely rains and government policies. Every year minimum support price of cotton is increased by the government, making cotton prices to go up, whether the whole increase in cotton prices can be passed on is always a question mark. Besides which, also 11% import duty on cotton has been imposed, causing imbalance in cotton prices between local and international price, which at times impacts cotton yarn exports.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

The Companys main product is Cotton yarn. Due to fall in export of cotton yarn from India, price realization of yarn has been poor, affecting the Companys profitability. The Company has four Wind Mills, which has been performing average, due to ageing of the machines.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Internal Control Systems and procedures in the Company are commensurate with nature and size of its business. Looking to the different amendments in applicable laws and regulations and much more requirements and disclosures, the management desires to increase the scope of internal audit.

It is to be noted that not only the assets of the Company are safeguarded and protected against any losses, but also all the transactions are properly accounted and that they meet the test of legal compliances.

Apart from regular review and monitoring Internal Control Systems by the Companys Internal Control Department, two independent Chartered Accountants firms have been appointed to conduct the internal audit for the Companys two manufacturing units. This provides reasonable assurance to the effectiveness of the internal control systems and procedures and reliability of financial reporting.

OUTLOOK:

In the immediate future the outlook for cotton yarn appears bleak, because Indian Cotton prices are generally on higher side to international cotton prices. However, with advent of new cotton season, starting late October, things may change for the better.

FINANCIAL AND OPERATIVE PERFORMANCE:

During the year 2022-23, the yarn and cotton market remained highly volatile. Yarn exports from India has taken dip by almost 30 to 40% causing pressure on margins of yarn.

DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT:

In both the Units of the Company, peaceful and amicable relations with the workers were there. However, there continues to be shortage of skilled workers at Petlad Unit. Also absenteeism remain very high in Petlad Unit causing loss of production in Petlad Unit.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONGWITH DETAILED EXPLANATIONS THEREOF:

The following key financial ratios has witnessed a significant change i.e. a change of 25% or more as compared to the financial year 2021-22 and 2022-23 :-

Sr. No. Key Financial Ratios	FY 2022-23	FY 2021-22	Change in % as compared to previous year	Reason
1. Current Ratio	6.15 times	3.87 Times	58.99%	Because of better liquidity, current ratio improved.
2. Net Profit Margin (%)	0.15%	9.21%	-98.38%	Due to high cost of raw material and poor export market.
3. Return on Net Worth (%)	0.85%	23.82%	-96.43%	Due to high cost of raw material and poor export market.
4. Debtors Turnover Ratio	12.55 times	20.82 Times	-39.72%	Better cash management.
5. Inventory Turnover Ratio	3.56 times	3.66 Times	-2.81%	No major Variation.
6. Interest Coverage	18.18 times	61.26 Times	-70.32%	Less profit because of high cotton prices.
7. Operating Profit Margin	2.14%	13.90%	-84.62%	Less profit because of high cotton prices.
8. Debt Equity Ratio	0.004	0.005	-2.35%	No major Variation.

FINANCIAL PERFORMANCE OF CURRENT AND PREVIOUS TWO YEARS BASED ON DIFFERENT INDICATORS

(Rs. In Lakhs)

Year	2020-21	2021-22	2022-23
Capital	688	688	688
Free Reserves	7043	10243	10443
Effective Capital	10557	12793	12640
Exports	4863	11092	5332
Total Sales & other Income	15634	25826	20529
Profit Before Depreciation & Tax	786	3416	403
Dividend Per Share (Rs.)	1.50 Per Share	4 per share	NIL

CAUTIONARY STATEMENT

Any changes in applicable laws, regulations and Government policies and the present epidemic leading to reduction / stoppage of production are beyond the control and anticipations of the management and may adversely affect the profitability of the Company.

	For PBM POLYTEX LIMITED	For PBM POLYTEX LIMITED
	GOPAL PATODIA	CHIRAYUSH PATEL
Place: Vadodara	Managing Director	Independent Director
Date: 12.08.2023	(DIN : 00014247)	(DIN : 08690998)