Kallam Textiles Ltd Management Discussions

TEXTILE INDUSTRY

According to the FICCI-IBA survey, lenders anticipate an improvement in overall asset quality over the next six months but have highlighted risks of high Non-performing Assets (NPA) in sectors such as textiles, food processing, and infra-structure.For the January to June 2024 period, approximately 76 per cent of respondents identified the textile sector as having high NPA levels. The survey indicated that sectors like agriculture, textiles and garments, MSMEs, and gems & jewellery might continue to exhibit NPAs over the coming six months. Bankers noted that these sectors diverge from the overall trend. The adverse international markets have affected the repayment capacity of some textile and garment units, and sector-specific conditions are expected to improve gradually.The survey, conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Indian Banks Association (IBA), included 22 banks, representing about 67 per cent of the banking industry by asset size. The respondent banks remained optimistic about asset quality prospects, supported by policy and regulatory measures. Over half of the respondent banks believe that Gross NPAs will range between 2.5-3 per cent over the next six months. The Financial Stability Report from the RBI, released at the end of June, indicated that scheduled commercial banks gross NPA was at 2.8 per cent, and net NPA was at 0.6 per cent as of the end of March 2024.Respondent bankers cited factors such as a resilient domestic economy, upgraded credit assessment, continuous credit monitoring, lower slippages, high write-offs, and a healthy capital position as reasons for expecting further improvement in asset quality over the next six months.The FICCI-IBA survey also observed that the Indian economy and banking sector remain robust and resilient. With improved balance sheets, banks are supporting economic activity through sustained credit expansion. However, the survey noted that credit growth is surpassing deposit growth, which may lead to liquidity challenges for the banking system. Efforts to raise deposits to match loan growth are underway.

A textile companys NPA status in 2024 25 reflects deeper stress in the sector—high costs, regulatory disruption, weak demand.

At the same time, exports (especially technical textiles), government incentives (PLI, MITRA), and state-level investments offer a path to recovery.

The healthiest firms—those investing in sustainability, digitalization, and process upgrades—are emerging stronger, while heavily-indebted players may fall behind.

Overall, FY 2025 is shaping up as a transitional year: challenging for underperformers, but offering renewal potential for those ready to modernize.

Difficult Year for Textile Sector (FY 2023 24 and into FY 2024 25)

• Cotton prices in India were 10–15 % higher than international rates, weakening competitiveness.

• Combined with global demand slowdown and global conflicts, textile production was severely impacted. Capacity utilization in spinning was below 75%, garment units at 50–60%.

GLOBAL TEXTILE INDUSTRY

• India-UK FTA 2025: Strategic Insights for Textile Exporters and Importers

• India Briefing examines the transformative impact of the India-UK Free Trade Agreement (FTA) on the textile sector, offering data-driven insights, sectoral forecasts, compliance considerations, and strategic recommendations for Indian manufacturers, exports, and UK-based importers.

• The India and the United Kingdom (UK) FTA signed on May 6, 2025, marks a pivotal shift in global textile trade, especially for Indian exporters. The agreement, which addresses various aspects such as pricing, product specifications, regulatory alignment, and trade facilitation, is expected to potentially increase Indias textile and apparel exports to the UK.

• Indias textile exports: Key data and product segments

• India is the worlds second-largest exporter of textiles and a major employment generator, providing livelihoods to over 45 million people. The countrys vast and diverse textile industry contributes majorly to its trade portfolio, supported by a wide range of product categories—from raw materials to high-value finished goods.

• UK market access for Indian exports

• With the UK reshaping its global supply chains post-Brexit and India targeting US$100 billion in textile exports, the FTA offers a timely opportunity for both countries. The terms of agreement provide Indian textile exporters with duty-free access to one of Europes largest apparel import markets, enhancing price competitiveness and strengthening supply chain resilience.

COMPANY OVERVIEW

During the FY 23-24 the company made defaults in repayment of term loan instalments. The banks classified these loans as NPA and issued notices for recovery of these dues u/s 13(2) r.w.s 13(3) of SARFAESI Act, 2002. The banks also issued possession of the properties offered as security u/s 13(4) of the Act. Further during FY 2024-25 the bank filed cases in DRT Visakhapatnam under Recovery of debts Section 19(4) R.D.D.B.F.I. ACT, 1993 and its pending. During the FY 2024-25 the Union bank of India permitted to allow holding on operations with 6% cutback for a period of six months vide letter dated 09-12-2024.

Further FY 2025-26 Indian bank also permitted to allow holding on operations with 6.28% cutback for a period of six months commencing vide letter dated 08-07-2025. The company had informed that to improve its operations and viability the unit has to run at its full working capacity. Since the company had turned NPA, Bankers are not able to support by way of sanction of fresh working capital limits. The Company applied for restructure of these loans which is pending. At Present Un-utilized/ idle capacity is filled by way of Job work to the following Firms i) NSL textiles, ii) BRFL textiles Pvt Ltd., iii) Innovative Textiles Ltd iv) Lorven Textiles LLP v) Wincare Textiles LLP

The management had provided on its future business outlook, estimated projected profitability and cash flows, possible recovery of dues from State government and further the management is in the process of negotiating with the lenders for restructuring of the loans and based on future outlook of the business as projected by the management, the management is of confident about positive outcome of its actions. In view of this, based on the management Projections, the statutory auditors have caried out review the financial statements and have issued an unmodified report. However, reference has been made to material uncertainty related to going concern in preparation of financial_statements

Reasons for sickness:

The management undertook a comprehensive review of the operational and financial losses incurred by the unit. Several contributing factors were identified:

1. Lower Yield in Weaving Operations: Reduced efficiency in the weaving process adversely impacted output and productivity.

2. Increase in Electricity Charges: Elevated power tariffs levied by the government led to a substantial rise in fixed overhead costs.

3. Unfavorable Cotton Price Movement: Higher raw cotton prices, coupled with lower realization in finished goods, compressed profit margins

4. Low Capacity Utilization: Operations were affected by reduced capacity utilization, primarily due to constraints arising from the units NPA classification.

5. Lack of Bank Support: Banks did not provide support for discounting domestic Letters of Credit (LCs), impacting working capital flow.

6. Overall Weak Market Conditions: Industry-wide demand slowdown and price instability further worsened the units financial performance The above stated reasons had adverse impact on the performance of the company which resulted into decrease in profitability of the company in FY 2024-25

OPPORTUNITIES & THREATS [SWOT ANALYSIS]

(i) Opportunities

The textile Industry scenario continues to be difficult and anticipated recovery process is at slow pace.

High volatility in cotton price eroded the working capital of the Textile units, including spinning mills a part from affecting the profitability.

MPEIis"yarnsellingprice–cleanrawmaterialcost",i.e.,conversioncost+profit.Aconsiderable reduction in this value is continuing, indicating the slow recovery from stress faced by textile units.

Our First Quarter ended with Loss and Second quarter is also expected to end with loss, though it may be in declining trend.

Textile units are mostly under stress due to low profitability and slow pace recovery of the industry.

Also, there is still no parity between the raw material price and the yarn selling price. The segment performed well when there was parity between the two factors The spinning mills ,are operating at low-capacity utilization due to low demand in international market due to:

• Russia-Ukraine war

• Recession in major international markets

• Moving customer preference from traditional textiles to recycled textiles

• High raw material cost

• High volatility in raw material cost, etc.

Disruptions in Raw Materials Supply

• Declining cotton production from the level of 398lakh bales to 320to330 lakh bales; India has become a cotton deficit country from state of net exporter of cotton.

• Indiamightrequireover400lakhbalestomeet360lakhbalesfordomestic consumption and remaining for exports.

• Man Made Fiber (MMF) Quality Control Orders stalled imports and disrupted supply of key MMF raw materials like Viscose Staple Fiber and Polyester Staple Fiber including specialty fibers (functional finish fibers, Bamboo, etc.) not produced in the country

Threats

• safety and health of the workers and staff; • disrupted supply chains

• lack of demand or the fear significant drop in demand

• Lack of liquidity.

• Cotton contamination and quality problem.

• Increased pressure on prices.

• Competition from international brands.

OUR COMPETITIVE STRENGTHS:

Manufacturing facility with locational advantage and state-of-the-art machinery to deliver quality products

We have two manufacturing facilities in the state of Andhra Pradesh and our hydro power plant is located in the state of Telangana. Our manufacturing facility located in Guntur, AP enjoys locational advantage since Guntur is a major and one of the best quality cotton growing areas in India that produces MCU5, which is long staple cotton and is suited for fine counts. It is also a major centre for cotton breeding in southern zone. Our Guntur unit is located NH16, Golden Quadrilateral connecting Chennai and Calcutta and in proximity to Krishnapatanam port and Vishakhapatnam port which helps in saving logistics cost for export operations. Further, our weaving and dyeing units are located near to tri-junction with highway access to Chennai, Hyderabad and Calcutta. .All the manufacturing facilities are well equipped to deliver quality products.

Quality control measures

Our Company has implemented stringent quality control measures to produce superior quality yarn and fabric for our domestic and international customers. As the quality of our products depends on the raw material quality, so we source the superior quality raw material from farmers/suppliers. We carry raw material inspection on Uster HVI Spectrum and UsterAfis Pro -2 for 2.5% SL, uniformity, MIC, Strength, Short fiber content % and neps /grm. Bale management system is followed for consistent superior yarn quality, and for this, cotton stock is maintained for 5-6 months. Carding and combing process is optimized for NRE of 75% to 85% and 65% to 70% respectively. RIETER D35 /D40 / D45 draw frames are maintained for less than 0.50%.In ring frame breakages are maintained below 5 to 6 breaks per 100-spindle hour. In auto coner utmost care is taken for achieving 85% splice strength with defect-free packages.

Further, apart from in process inspection system, our mill has adopted stringent final inspection procedure before dispatching yarn to its customers.

Wide range of products across cotton yarn and woven fabrics businesses

We have continuously expanded our range of products to cater to the customized requirements of our customers. Our product range includes Ring Spun combed yarn (from Ne.30s to Ne.80s combed warp / compact), TFO ring spun yarn, Open End yarn (from Ne10s to Ne20s), TFO open end yarn,, BCI certified yarn and woven fabric such as yarn dyed shirting and bottom weight fabric. Our yarn dyed shirting includes cotton range and blended products.

Experienced management team with strong industry expertise

Our Managing Director, Mr. PoluriVenkateshwara Reddy, has been instrumental in developing Ginning Business of our Company. He has in depth knowledge in selection of Kapas and Cotton. Mr. GurramVenkata Krishna Reddy, Joint Managing Director and CEO, has vast experience in Manufacturing of Cotton Yarn. He also looks after the day-to-day affairs of the Company.

OUR STRATEGY

Improvement in range of our Products:

We are focusing on development of more specialized and customized grades for specific applications in conjunction with our Customers. For this purpose, we are also focusing on improving our technical expertise to support customers and market development.

Customer relationship, sales, and distribution strategy

In India, we have been selling our products mainly to customers in South and Western India. Furthermore, our growth also depends on our ability to attract additional fabric and garment manufacturers, and distributors. Accordingly, we intend to continue to focus on developing and strengthening our sales and distribution network, and introducing integrated solutions for the benefit of our customers. As a part of our sales and distribution strategy, we propose to penetrate the domestic market further and at the same time we propose to continue our endeavor to establish a global presence for our products through the export market in the near future by further developing strategic relationships with key clients.

Captive power: Clean/Green Energy

We are working on reducing electricity cost. SITRA report on Energy monitoring is submitted. Operational Cost Optimization-Captive Power Electricity is one of our biggest costs by adding captive power generation will reduce our operational costs. Increasing our captive solar power generation will help us strengthen our PAT in the future. We have total requirement of 4.0 MW solar power to feed all the units so far we are executing net metering project under HT metering GNT 509, GNT3035 & ONG 828 totaling 3MW capacity.

Our fabric made of organic or BCI cotton in combination with clean energy will make our fabric more sustainable and attract clothing brands in the future.

RISK & AREAS OF CONCERNS:

The Key factor in determining a companys performance is the companys ability to manage the risks in it business/ environment effectively. Many risks exist in a companys operating environment and they emerge on a regular basis,Viz Currency Risk, Commodity price Risk and Human Resource Risk. Risk management is embedded in operating framework of your Company. The risk management framework defines the risk management approach of the Company and also includes the periodical review of such risks. Your Company believes that managing risks helps in maximizing returns. The Board and the Audit Committee review the risk management framework periodically.

Other risk, factors include:

THE DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS AND RISK MANAGEMENT PRACTICES.

The Details regarding adequacy of internal control system is available in the Directors Report, which should be treated as forming part of this Management Discussion and Analysis Report.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED i. Safety, Health And Environment:

Safety, Health and Environment is one of the primary focus areas for your Company. We are conducting our business with respect and care for people and the environment. We have the responsibility towards the utilization of natural resources.

Your Company will always set the objectives and targets that result in continuous improvement of our Safety, health and environmental performance. Your company has Complying with agreed corporate requirements that embrace the duty of care, including compliance with applicable laws. ii. Human Resources And Industrial Relations:

Employees are the valuable assets and the strength of an organization in its growth, prosperity and development. Your Company is continuously striving to create appropriate environment, opportunity and systems for development and utilization of their full potential. The Company continued to have cordial and harmonious relations with its employees. It considers manpower as its assets and that people had been the driving force for growth of the Company.

DISCLOSURE OF ACCOUNTING TREATMENT:

Disclosure of Accounting Treatment in the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies, which are consistently applied, are set out in the Notes to the Financial Statements.

MARKETING APPROACH AND MARKETING SET UP

Our team including Directors through their relevant experience and good rapport with our customers due to the timely delivery of quality products has played an instrumental role in creating and expanding a work platform for our Company. We have dedicated teams of Marketing Personnel in our Ring Spinning and Open End Division as well as Weaving and Dyeing Division. The Marketing division has well trained team with six officials for spinning division and seven in weaving division. The marketing division is headed by an official of the rank of President and is directly under control of our executive Directors. The sales and marketing of Yarn and fabric is based on factors such as quality, easy availability and competitive pricing of the products. Our client base includes reputed corporate houses in the India textile industry and in the global markets we export our products to a number of countries as well. Some of our major domestic corporate clients include Universal Cottex, Gimatex Industries Limited to whom we sell our Yarn and Jhakaria Fabrics to whom we sell fabric. We also export our products to Paramount Textiles Limited in Bangladesh, Zhejiang Zhongda Group International Trading Co. and Xiamin ITG Group Co. Ltd. in China. Our Company has loyal and committed customer base who keep buying company products from time to time.

MANUFACTURING FACILITIES:

The details of our manufacturing facilities are as given below:

Ginning, Spinning & Open End Plants – Our Ginning, Spinning and Open End plants are located at NH 16, Chowdavaram, Guntur -522 019, Andhra Pradesh, spread in an area of 23.14 acres. We operate 59,280 spindles of Ring Spinning out of which 34,416 are compact & 24,864 are Non-Compact and 2,912 rotors for manufacturing open end yarn. Ginning Division has a capacity to press 6,000 bales per month. Ring Spinning Division has a production capacity of 420 tons per month whereas our Open end Division has a capacity of 500 tons per month.

Weaving&DyeingPlants–Our weaving and dyeing divisions are located at Kunkupadu village - 523265, Addankimandel, District – Bapatla, Andhra Pradesh spread in an area of 134.01 acres. Our Weaving division has production capacity of 248 looms whereas our dyeing division has a capacity of 3,000 kgs per day.

Hydel Plants – Your Company has three hydroelectric plants with a total capacity of 4.0 MW, two with the capacity of 1.6 MW each and one with 0.8 MW. The plants are located at Nelakondapalli - 507160, District - Khammam, Telangana spread in an area of 39.06 acres. These plants are on 16th & 17th branch canal of NagarjunaSagar project left to main canal. Solar Plants – Solar Plants – Your Company had established 2.0 MW AC at spinning unit, chowdavaram and 1.0MW AC at weaving unit, kunkupadu ,addanki. The generation had been very encouraging. We plan to increase solar capacity in the next financialyear.your company is expanding solar plant at Guntur by 1.0 MWAC and at Weavingpalny by 0.6 MWAC

The details of sale of our products for FY 2024 - 2025 is as under:

	Year ended 31st March, 2025		Year ended 31st March, 2024
Particulars	Quantity (in Kgs)	Revenue (in Rs.)	Quantity (in Kgs)	Revenue (in Rs.)
i) Cotton Yarn	50,23,196	11,635.84	63,19,651	15,307.94
ii) OE Yarn	10,56,832	1,888.26	34,79,712	6,081.53
iii) Cotton PC Yarn	-	-	12,672	21.95
iv) Cotton PV Yarn	-	-	35,742	64.21
v) Cotton Waste	9,64,624	546.90	11,05,605	874.89
vi) OE Waste	4,49,596	295.59	7,32,957	182.62
vii) Cotton Seed	2,239	0.45	14,45,101	423.45
viii) Cotton Lint	-	-	7,48,917	1,197.36
ix) Sale of Kappas	870	0.35	-	-
x) Sale of Gray Fabric (Mtrs)	1,24,79,910	7,899.30	1,94,29,905	12,690.11
xi) Sale of Fabric Waste	93,977	21.50	1,19,328	42.70
xii) Sale of Dyed Fabric (Mtrs)	22,90,333	2,466.93	29,74,306	3,390.54
xiii) Sale of Dyed Yarn (Kgs)	8,524	28.67	5,05,008	1,997.49
xiv) Sale of Garments	10,488	21.05	-	-
xv) Sale of Solar Power (KWH)	94,57,077	425.57	96,06,375	432.29
xvi) Sale of Power (KWH)	61,57,248	260.19	2,88,250	16.56
		25,490.58		42,723.64
Less: Inter divisional transfers
Cotton Yarn	55,343	154.50	7,15,966	2,312.60
OE yarn	-	-	50,450	94.79
Dyed yarn	8,524	28.67	5,05,008	1,997.49
Dyed Fabric	1,20,341	104.67	-	-
Cotton Waste	3,03,654	179.49	8,34,501	665.07
Cotton Lint	-	-	7,48,917	1,197.36
Power	1,20,88,685	543.09	96,06,375	432.29
		1,010.42		6,699.59
TOTAL		24,480.16		36,024.05

CAPACITY AND CAPACITY UTILISATION:

	Fiscal 2024-25		Fiscal 2023-24		Fiscal 2022-23
Manufacturing Facility	Installed capacity	Capacity Utilization	Installed capacity	Capacity Utilization	Installed capacity	Capacity Utilization
Ginning Division	28 Gins	NIL	28 Gins	31.7	28 Gins	44.1
Spinning Division	59,280 Spindles	60.65	59,280 Spindles	80.86	59,280 Spindles	76.49
Open End Division	2,912 Rotors	63.28	2,912 Rotors	92.42	2,912 Rotors	90.33
Weaving Division	248 Looms	65.26	248 Looms	85.73	248 Looms	72.03
Dyeing Division	3,000 KG/P.A	45.99	3,000 KG/P.A	57.49	3,000 KG/P.A	47.18
Hydel Plant	4MW	NIL	4MW	NIL	4MW	20.63

 

Sl. No. Particulars	Formula	Year Ended March 31, 2024 (Audited)	Year Ended March 31, 2023 (Audited)	Variance (in %)	Reason for variance
Current ratio - 1 [no. of times] Debt-equity	Current assets/Current liabilities	0.33	0.52	(35.66)	Increase in utilisation of working capital during the year Increased due to decrease of equity
2 ratio - [no. of times] Debt service coverage ratio	Total debt/Equity (PAT + Depreciation +	115.64	6.34	(1724.66)	consequent to decrease of pro_ts Decrease in
3 (DSCR) - [no. of times] Return on	Interest / (Interest and Principal repayments)	0.12	0.18	(31.04)	pro_tability compared to last year Decrease in
4 equity (%) Inventory	PAT/Av. Equity	(1.79)	(54.97)	(138.00)	pro_tability compared to last year
5 turnover - [no. of days] Trade Receivables	Turnover/Av. Inventory	19.15	13.85	38.27
6 turnover - [no. of days] Trade payables	Turnover/Av. Receivables	27.10	19.36	39.95	Increase in trade
7 turnover ratio - [no. of days] Net capital	Purchases/Av. Payables	14.61	24.04	39.20	payables during the year Decrease in working
8 turnover (no. of times) Net pro_t Ratio	Turnover/Working capital	(1.12)	(2.87)	61.00	capital during the year Decrease in
9 (in %)	PAT/Turnover	(18.45)	(10.19)	(97.48)	pro_tability compared to last year
Return on 10 Capital employed (%) Return on 11 investment (%)	EBIT/Capital employed	(8.05) Nil	(5.64) Nil	(1988) Nil	Decrease in pro_tability compared to last year

CAUTIONARY STATEMENT:

Statements in the Directors Report and Management Discussion and Analysis describing the Companies objectives, projections, estimates, expectations may be "forward looking statements" within the meaning of applicable security laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the companys operations include, among others, economic conditions effecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.

		For and on behalf of Board of Directors
	Sd/-	Sd/-
Date : 13-08-2025
	G.V. Krishna Reddy	P. Venkateswara Reddy
Place : Chowdavaram, Guntur	Joint Managing Director	Managing Director
	DIN: 00018713	DIN : 00018677