In 2022 - 23, the global economy experienced significant challenges due to various
factors, including prolonged Russia-Ukraine war, disruptions in the global supply chain
leading to inflationary pressures, with increase in commodity and energy prices. Although
the headwinds affected the global economy, several economies, including the United States,
the euro area, and significant emerging markets and developing economies, witnessed robust
growth in the third quarter. However, in several major economies, the growth tapered off.
The second and third quarters of the Financial Year saw more robust growth due to domestic
factors such as higher-thananticipated private consumption and investment, tighter labour
markets, and greater-than-anticipated fiscal support. Households spent more to satisfy
pent-up demand, particularly on services. Business investment rose to meet demand. On the
supply side, easing bottlenecks and declining transportation costs reduced pressures on
input prices and allowed for a rebound in previously constrained sectors, such as motor
vehicles. Signs are apparent that monetary policy tightening is starting to cool demand
and inflation, but the full impact is unlikely to be realised before 2024.
Global headline inflation appears to have peaked in the second quarter of the Financial
Year. Prices of fuel and non-fuel commodities are declining, lowering headline inflation,
notably in the United States, the euro area, and Latin America. Core inflation, however,
remains well above pre-pandemic levels in most economies. It has persisted amid
second-round effects from earlier cost shocks and tight labour markets with robust wage
growth as consumer demand has remained resilient. Advanced economies grew 2.7% in 2022 and
are expected to witness 1.3% growth in 2023 and 1.4% in 2024. Emerging markets and
developing economies, which grew 4% in 2022, are expected to grow at 3.9% in 2023 and 4.2%
in 2024. About 84% of countries are expected to have a lower headline (consumer price
index) inflation in 2023 than in 2022. Global inflation is set to fall from 8.8% in 2022
to 6.6% in 2023 and 4.3% in 2024.
Outlook
The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in
2023, before settling at 3.0 percent in 2024. Advanced economies are expected to see an
especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In
a plausible alternative scenario with further financial sector stress, global growth
declines to about 2.5 percent in 2023 with advanced economy growth falling below 1
percent. Global headline inflation in the baseline is set to fall from 8.7 percent in 2022
to 7.0 percent in 2023 on the back of lower commodity prices but underlying (core)
inflation is likely to decline more slowly. Inflations return to target is unlikely
before 2025 in most cases.
(Source: IMF April 2023 World Economic Outlook)
Indian Economy
According to the provisional estimates by National Statistics Office (NSO), the GDP
growth rate in FY 2022-23 is projected at 7.2%, lower than the 9.1% witnessed in FY
2021-22, wherein pent-up demand boosted growth. Retail inflation is expected to moderate
in line with wholesale inflation, which fell to a 25-month low in January 2023. FY 2022-23
witnessed high services exports, moderation in oil prices, and a fall in import-intensive
consumption demand. This has aided the expectations of a fall in the current account
deficit in FY 2023-24. This has also led to expectations of a strengthening of the rupee
in the near future. The easing of global inflationary pressure led by falling
international commodity prices and strong government measures are expected to aid economic
growth in India. Indias private non-financial sector debt has witnessed a steady decline
since mid-2021, along with an improvement in the quality of debt.
Cotton Industry Overview
One of the most significant cash crops, cotton contributes around 25% of the worlds
total fibre production. The percentage of cotton in the raw materials consumed by the
Indian textile industry is roughly 60%. India is one of the worlds biggest producers,
users, and exporters of cotton.
Indias cotton imports have gathered pace after the government exempted customs duty on
the commodity on Apr 13. Indian traders and mills have bought 400,000-500,000 bales of
cotton after the duty removal.
Indias cotton acreage in 2022-23 (Jul-Jun) is expected to rise 9% on year to 13.2
million hectare. The stakeholders in the textile industry have urged the government to
extend duty-free cotton imports till Dec 31 to boost textile exports and help address the
dearth of raw material in the market. Global production for the ongoing season is
estimated higher at 26.4 million tonnes, compared with 24.4 million tonnes in the previous
season. The rise has largely been attributed to higher production in Pakistan, Brazil and
the US. In the US, cotton production is estimated at 3.8 million tonnes, as against 3.2
million tonnes a year ago. However, in India, cotton output is expected to fall to 5.8
million tonnes, compared with 6.0 million tonnes in the previous year.
Company Overview
Incorporated in 2009 in Indore as a pioneer in the cotton processing industry with a
new concept of recycling cotton waste to recover cotton fibre and there by supplying it to
the spinning units, the company transition to health and hygiene care products with the
implementation of a modest capacity of only 3000 tonnes of bleached cotton per annum, an
intermediary product for the cotton based health and hygiene industry, Mohini Health &
Hygiene over the years has expanded its operations to include surgical cotton
manufacturing, cotton balls, zig zag cotton and gamjee rolls. It now has an installed
capacity of 10,800 tonnes per annum for producing bleached cotton and 2400 tonnes per
annum for producing surgical cotton products. It also has a built a distribution network
spanning across India with an active dealer and distribution base of 325 dealers, enabling
the company to market several medical consumable products across its chain. The Companys
manufacturing units are strategically located near places from where it sources its raw
materials. It is also well connected to major ports and markets. Investment in world-class
technology, continuous growth and value addition, commitment to consistent product
quality, emphasis on customer satisfaction, and timely delivery of products are integral
to the Companys way of functioning.
Outlook
In FY 2023-24, the Indian economy is expected to continue to be the fastest-growing
economy in the world. The Indian GDP growth is estimated at 6.9% in FY 2022-23 and 6.3% in
FY 2023-24 by the World Bank. The inflation trajectory in India is likely to be determined
by extreme weather conditions like heatwaves and the possibility of an El Nino year,
volatility in international commodity prices and pass-through of input costs to output
prices. Inflation is expected to be moderate in FY 2023-24 compared to FY 2022-23. It will
likely decline to an average of 5.2% amid easing global commodity prices and some
moderation in domestic demand (Source: NSO, World Bank, PIB)
Financial Performance
(Rs. In lakhs)
| Particulars |
2022-23 |
2021-22 |
| Revenue from Operations |
19201.24 |
12734.78 |
| EBDITA |
1062.23 |
769.52 |
| Profit for the year |
678.56 |
545.51 |
| EPS (Basic) |
3.72 |
2.99 |
| EPS (Diluted) |
3.72 |
2.99 |
Statement of Profit & Loss Revenues
Total Revenue for FY 23 stood at Rs. 19201.24 lakhs (Rs. 12734.78 lakhs for FY 22)
during the period under review.
EBDITA
EBITDA for FY 2023 stood at Rs. 1062.23 lakhs.
Net Profit
Net profit for FY 2023 stood at Rs. 678.56 lakhs translating to EPS of Rs. 3.72.
Finance Cost
Finance cost in FY 2023 increased by 18% to Rs. 414.78 lakhs.
Balance Sheet Paid up capital
The total equity share capital for FY 2023 stood at Rs. 18236 lakhs. There has been no
change in the equity share capital of the company over last fiscal.
Net Worth
Net worth for FY 2023 stood at Rs. 8969.67 lakhs from Rs. 8291.11 lakhs in FY 2022. The
increase was mainly on account of increased profitability of the company.
Borrowings
The companys borrowings have increased by 59.88 % to Rs. 816.94 lakhs in FY 2023 from
Rs. 510.96 Lakhs in FY 2022 owing to availment of ECLGS option by the company, the said
funds were utilized to meet the increasing working capital requirement of the company on
account of raw material prices being at a life time high during the period under review.
Key Financial Ratios
A detailed Note on key financial ratios has been provided to Financial Statements.
Risk Management
Risk management measures are essential to a governance system. Therefore, it
contributes to its strategic goals and safeguards its value, assets, and reputation. Here
are some of the risks and mitigation strategies of Mohini:
| Risk |
Impact |
Mitigation |
| Competition Risk |
The Company mitigates this risk byway of its robust currency hedging
mechanisms and systems and export pricing. |
The distinctly differentiated brand image, long-standing customer
relationships and economies of scale help the Company mitigate this risk. Further the
company outperforms its competitors through constant innovation and product development. |
| Foreign Currency Exchange Rate RiskRate Risk |
Foreign currency fluctuations may impact the company as it has strong
international relationships. |
Continuous tracking of currency updates enables management of margins.
Measured hedging in foreign currency helps mitigate exchange rate fluctuations. |
| Raw Material Price Inflation Risk |
Cotton and cotton products are used as raw material for its
manufacturing. Consequently, unavailability of raw material or price fluctuations may
impact production |
Strong and long-term relationships with vendors to help ensure timely
availability of raw materials. Further the Company has a team that constantly monitors the
cotton prices and follows a diplomatic stocking policy to hedge against any sharp
movements. |
| Reputation Risk |
Any delay in payments to lenders/ suppliers or poor quality of products
can lead to loss of trust in our integrity and adversely impact business performance. |
The Company makes a conscious attempt to meet the expectations of all
stakeholders and have stringentquality control procedures in place to ensure superior
product quality |
| Customer Concentration Risk |
Any concentration of customers can cause loss of revenue in case of
failure of any big customer. |
The Company continuously aims to strengthen its customer relationships
and strives to add new customers across geographies to diversify the customer base. |
| Regulatory Change Risk |
The companys business may be impacted by introduction of new policies
or changes in existing policies. |
The companys management team keeps a close eye on policy regulations
and formulates company plans appropriately |
| Risk from Low Cost imports |
Low-cost imports due to favorable government policies in other countries
may pose significant risk to business and impact pricing strategy. |
The companys competitive advantage comes from leveraging economies of
scale, cutting-edge technology and strategic partnerships with all stakeholders to offer
competitive rates globally. |
Environment and Safety
Clean and safe environmental operations form Mohinis key priorities. The Company
conducts all its operations, ensuring the safety of everyone concerned, compliance with
statutory and industrial requirements for environment protection and conservation of
natural resources to the extent possible.
Human Resources
Human resource is a crucial asset for a Company to achieve sustained growth. To
attract, retain and develop its talent pool, the Company has consistently recognised
talent, imparted training, and followed the golden principle of rewarding performance.
Besides, it is committed to individual well-being and safety at the workplace and it is
proud to attract the talent that it needs for future growth. Most importantly, it places
great emphasis on eliminating all forms of discrimination in terms of employment and
professional activities (gender, age, race, political affiliation, religion, among
others). It pays special attention to professional equality, gender equality, the
employment of seniors and young people, the employment of people with disabilities.
Internal Control Systems and Their Adequacy
Mohini has appropriate systems for internal control. These systems are continually
improved and modified to meet the changes in the business conditions and the statutory and
accounting requirements. The Company also has a robust Management Information System, an
integral part of the control mechanism. The Audit Committee of the Board of Directors
reviews the efficiency and effectiveness of the internal control systems. It then suggests
solutions to improve and strengthen. The internal control system was tested during the
year, and no material weakness in design or operations was found. Business operations are
closely monitored by the internal team and an Audit Committee. The Management Board is
promptly notified in case of any deviations.
The companys robust internal control systems for financial reporting are commensurate
with its size and its industry sectors. These systems ensure efficiency and productivity
at all levels, while safeguarding its assets. Stringent procedures are in place to
ascertain high accuracy in recording and providing consistent financial and operational
support. To ensure seamless growth, risk identification and assessment, as well as
mitigation strategies are designed on the basis of these findings.
Cautionary Statements
Statements in this Management Discussion and Analysis describing the Companys
objectives, projections, estimates, expectations or predictions, may be
‘forward-looking statements within the meaning of applicable laws and regulations.
Actual results could differ materially from those expressed or implied. Important factors
that could make a difference to the Companys operations include raw material availability
and prices, cyclical demand and pricing in the Companys principal markets, changes in
Government regulations, tax regimes, economic developments within India and the countries
in which the Company conducts business and other incidental factors.
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