Nahar Spinning Mills Ltd Management Discussions.


The Global Economy faced several challenges last year ranging from slackness in demand, trade dispute between U.S.A and China and other Geo Political uncertainty which slowdown the Global trade. The outbreak of COVID-19, a global pandemic further impacted the economic and social activity all over the world and has changed the global growth outlook in the year ahead. The advance economies like U.S.A. and Europe etc., has shown a moderate growth. In major emerging economies too, the economic activity remained weak due to slackness in global demand.

In India too, the economic implications of the COVID-19 pandemic are far reaching and has caused significant disturbance and slowdown of economic activity. To control the pandemic and its economic effect, the government and the policy makers acted promptly and imposed lockdown restrictions from 23rd March, 2020 to 31st May, 2020. The restrictions forced the industry to temporarily suspend their operations. The Government has taken steps to meet the challenges caused by the COVID-19 pandemic. It is expected that the policies measures taken by the Government will definitely provide the much needed support to the Indian economy.


The Indian Textile Industry is one of the largest in the World enjoying its presence in the entire value chain i.e. cotton, yarn, fiber and apparel. The uniqueness of the industry lies in its strength both in the organized and unorganized Sector. The Textile Industry continues to hold a dominant position in countrys economic structure because of its huge contribution towards employment generation, Industrial Output and Export earnings. The importance of the industry is evident from the fact that it is sustaining livelihoods of 45 million people by providing them employment directly, contributing 7% of Industry output in value term 4% to Indias GDP, 14% to Index of Industrial Production(IIP) and contributing 15% to the countrys total exports basket (Source: Annual Report 2017-18 of Ministry of Textiles).

As per current estimation, size of Indian Textile Industry is around $137 billion but the Government of India through its National vision document has set the target for Indian Textile and apparel industry to $350 billion by 2025. With this ambitious target the industry can change the job scenario and manufacturing landscape. The Government is fully conscious of its role in achieving this ambitious target and therefore is taking several Initiatives

in the form of policies and programmes for the Textile sector so that India becomes a Global Textile Hub. Your Management is quite optimistic that Industry with the support of favorable Government Policies and Programes will be able to increase its share in Global Textile Markets.

In line with the global trends and to remain competitive, your company continues to modernize, upgrade and expand its capacities so that it remains globally competitive in terms of cost and quality. OPPORTUNITIES AND THREATS We would like to inform that presently Indias share in the Global Textile export is just 5% which is minuscule as compared to Chinas share of 38%. Due to its relatively cheap land and labor, factories equipped with the latest technology and favorable policies for foreign investors, China is a Global manufacturing hub. However, the ongoing tariff war between the U.S.A and China and now the COVID-19 outbreak has completely disrupted Chinas supply chain. As a result, global companies are actively looking to diversify their manufacturing and production base outside China. India certainly has an edge to be an alternative manufacturing hub for global players as two major things required to run textile Industry are cotton and work force and they are abundantly available in the country.

The relative success of the Spinning Industry is dependent on the availability of Raw Cotton at reasonable prices. The Raw cotton is the main Raw material (constituting approx. 60% of the total cost) for the manufacture of cotton yarn and it is dependent on the Nature i.e. Good/Bad Monsoon. So availability of raw cotton at reasonable prices is crucial for the spinning Industry. Any significant change in raw cotton prices can affect the performance of the Industry.

The Textile Industry is also not free from normal business risks and threats. The Outbreak of COVID-19 pandemic severally impacted the Textile industry. The slowdown in the Global Trade affected exports of textile products. Moreover, exports continues to face stiff challenges from the small countries like Bangladesh, Sri Lanka, Taiwan and Pakistan etc., who have got the preferred treatment from the countries of European union and U.S. The currency fluctuations are also impacting the financial performance of the Textile Industry. The above mentioned factors have had and will continue to have a significant bearing on the financial performance of the Industry in the coming period too.


The Outbreak of Coronavirus pandemic severally impacted the businesses across all sectors and geographies. The lockdown restrictions imposed by the central / state government from 23rd March, 2020 to 31st May, 2020 forced the company to temporarily suspend operations in all its units. Thereafter, the Government allowed some essential industries to operate and the company after seeking necessary approvals / permissions from the Government Authorities, commenced its operations partially in April, 2020 with limited workforce. The company gradually increased the capacity utilization and it expect to reach the pre COVID- 19 manufacturing level shortly.


The U.S. and China trade war coupled with geo-political uncertainty and outbreak of COVID-19 pandemic has severely affected the textile industry. The prevailing situation is still uncertain and is changing dynamically.

To enable the Industry to meet the global challenges, the Government is expected, through its Policies, would support the industry by working out suitable strategies/ policies so that Textile Industry is able to enhance its competitive advantage to achieve sustained growth in Exports as well as Domestic markets. The Industry on their part should also continuously modernize and upgrade its Technology to maintain its core competence and convert it into the competitive edge over others.

Your management is looking at the future with optimism and expects that situation will improve for better in the second half of the current financial year. We expect that in this difficult period, Government will support the Spinning industry in the form of favorable Textile policies, incentives and other benefits which are of paramount importance for the future growth of the Industry.


No industry is free from normal business risk and concerns. Indian Textile Industry continues to face stiff competition from China, Bangladesh, Taiwan Sri Lanka and other emerging economies. The relative competitiveness of Industry is dependent upon the raw cotton prices, exchange rates and prevalent interest rates regime. The primary raw material for the manufacturing of yarn is cotton which is an agriculture produce. Its supply and quality are subject to forces of nature i.e. Monsoon. Any increase in the prices of raw cotton will make the things difficult for the Textile Industry resulting weak demand and thin margins. Thus availability of raw cotton at the reasonable prices is crucial for the spinning industry. Any significant change in the raw cotton prices can affect the performance of the


The high rate of interest is affecting the financial performance of the textile industry. The Spinning industry being more capital intensive requires huge funds, long term as well as short term in the form of working capital for its running. The Industry should also be given Interest subvention as given to other Sector. The government must support the industry by providing cheap finance so that the industry remains financially viable. Though RBI has taken some remedial measures in this regard but still a lot more is required so that the Textile Industry could meet the challenges ahead.

In addition to the above, the other concerns like reduction in the duty drawback, higher transaction costs, high cost of labour, continuously increasing prices of raw material are posing a risk to the growth of Indian Textile Industry. The Government should extend a helping hand to the existing Textile Units so that they can become globally competitive and contribute towards the growth of the country.


The Company is maintaining an efficient and effective system of Internal Financial Control for facilitating accurate compilation of financial statements. The companys Internal Control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with procedures, laws and regulations. The Companys Internal Control system commensurate with the nature of its business and the size of its operations. In order to further strengthen the Internal Control system and to automate the various processes of the business, company is making use of Enterprises Resource Planning (ERP).

The Company has also appointed Piyush Singla & Associates, Chartered Accountants Firm, as Internal Auditors of the Company for the financial year 2020-21. The Company is also having Internal Audit Department to test the adequacy and effectiveness of Internal Control Systems laid down by the Management and suggests improvement in the systems. Internal Audit Reports are discussed with the Management. During the year, Companys Internal Controls were tested and no reportable weakness in the system was observed.

Apart from this, an Audit Committee consisting of three non executive directors has been constituted. All the significant audit observation and follow up action thereon are taken care of by the Audit Committee. The Audit Committee met four times during the financial year under review. The Company has also established a Vigil

Mechanism as per section 177(9) of Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014.


The Company is operating in single segment only i.e. Textile. We wish to inform you that the year gone by has been a very difficult and challenging year for Textiles Industry. The COVID-19 impacted Companys normal business operations. The Company experienced lot of cancellations and renegotiations in its export and local contracts. Besides, Trade tension between U.S. and China, slackness in global as well as domestic demand and fall in the prices of products impacted Companys operational and financial performance. The Company achieved a total income from operations of Rs. 2089.98 crores showing a downfall of 9.83% as compared to the previous year. The profitability of the Company was severely impacted and it suffered a net loss of Rs. 53.06 crores. The detailed performance has already been discussed in the Directors Report under the column Operational Review and State of Affairs.


Beyond Balance Sheet lies Companys singly biggest Asset Human Resources. The Company is of firm belief that the Human Resources are the driving force that propels a Company towards progress and success. The Company continued its policy of attracting and recruiting the best available talent so that it can face business challenges ahead. The Company also offers attractive compensation packages to retain and motivate the professionals so that they can give their best.

We would also like to inform you that during the challenging period of COVID-19 pandemic, Company has taken all possible steps to take care of the safety, security and health of the worker/employee. The Company provided masks, hand sanitizer, regular body temperature checkup facility at the factory as well as office premises. The Company has also ensured that Companys factories and offices are sanitized at regular interval to safeguard its worker/ employees. The total permanent employees strength of the Company was 13163 as on 31st March, 2020. The industrial relation continued to remain cordial during the year.


The SEBI LODR (Listing Obligation and disclosure requirements) (Amendment) Regulations, 2018 has mandated that Company should provide detail of Significant Changes in Key Sector Financial ratios. We would like to inform you that in the following key financial ratios there have been Significant Change as compared to the last year:

Particulars Financial Year 2019-20 Financial Year 2018-19
DEBT EQUITY RATIO Long term debt/Equity 0.24 0.14
OPERATING PROFIT MARGIN RATIO Gross Profit/Turnover 5.12 11.68
NET PROFIT MARGIN RATIO Net Profit/Turnover -2.55 2.82
CHANGE IN RETURN ON NET WORTH PAT/Net worth -17.84 11.36

*Formulae recasted even for last year

As the members must be aware that year 2019-20 was a very difficult period for Textile Industry and the Company suffered a loss of Rs. 53.06 Crores resulting adverse impact on the Interest coverage Ratio, Operating Profit Margin Ratio, Net Profit Margin Ratio and Change in Return on Net Worth. Further, change in Debt Equity ratio is primarily on account of higher Long Term Debt. Though COVID-19 impacted companys operations from 25th March, 2020 onwards but still your management is quite optimistic with the recovery in the economies of the world it will be able to achieve normal growth from the second half of the current financial year.


Though the statement and views expressed in the above said report are on the basis of best judgment but the actual future results might differ from whatever is stated in the report.