Nitin Spinners Ltd Management Discussions.


The global economic momentum softened to 2.9% in 2019. This slowdown was by the virtue of rising trade barriers, weakening business sentiments, tighter financial conditions, and geopolitical tensions. The overall economy seemed weak for most part of the year. However, some green shoots of stabilisation were visible at the end of the year. These signs of recovery were largely owing to the US-China Phase-1 trade talk, easing Brexit concern, and improvement in manufacturing and service sector. These developments were upshots of various reforms and monetary policies announced by the Governments and Central banks around the world for strengthening economies. But the outbreak of Covid-19 grievously disrupted the supply chain and manufacturing activities across economies. The world economy is now bound to plunge into a severe recession - the first since 1870 to be precipitated by a pandemic. The global growth for 2020 has been anticipated to drag down to (3)%. Disruptions in supply chain, dip in commodity prices and fall in capital expenditures are likely to be the key causes behind the slowdown.


The COVID-19 impact on the economy will last for a longer period. However, the containment efforts and measures are expected to decrease gradually. The recovery speed and the probability of the vaccine will play a crucial role in the overall recovery. Additionally, economy-supporting sectors have been encouraged to resume their functioning by the Government for stabilising the economy. According to the IMF estimates, the global economy is projected to grow by 5.8% in 2021, supported by policy and fiscal reforms which will strengthen the economys growth. (Source: IMF)


The Indian economy has showcased a promising journey of growth over the past few years. However, it was faced by several headwinds in the financial year 2019-20. The GDP growth rate touched an 11-year low of 4.2% in the 2019-20 as compared to 6.1% in 2018-19. This slowdown can be attributed to subdued private consumption, weak investments, sluggish growth in the manufacturing sector and declining credit growth.

However, for reviving the growth, the Government announced a slew of measures that included corporate tax rate cut, income tax rate cut, hike in import duties and increase in Minimum Support Prices (MSP) for farmers. The RBI also stepped in at various intervals by reducing repo rate and reverse repo rate. A strong hope of recovery in the last quarter of 201920 was seen prevailing. However, the economy was hit by the sudden and massive outbreak of COVID-19. The resultant lockdown disrupted all the economic activities and increased unemployment.

To counteract this, the Government along with the RBI, promptly announced fiscal and monetary stimulus and fundamental reforms. This included wage support, in-kind and cash transfers to lower-income households and deferral of tax payments. Further, these measures are said to boost private investments, increase liquidity, support, and revive back some of the crucial sectors. Further, the Government also announced financial package worth of 20 Lacs Crores to support the five pillars of the country - economy, infrastructure, technology- driven system, demography, and demand.


In the short term, the measures taken by the Government are expected to reduce the impact of Covid-19 and help spur economic activities. With a growth rate of 3.7%, the agriculture and allied sector remained resilient during the year. The Indian GDP is expected to be impacted substantially in 2021 due to COVID-19. Besides, favourable international oil prices are likely to keep Indias inflation rates manageable and lower its current account and fiscal deficit.


The Global textile and apparel industry is going through structural changes, with market share steering towards China, India, Bangladesh and Vietnam from western countries. The industry is dependent on the agricultural sector for raw material and the Asian countries are rich with it. In CY 2019, the global textile market valuation stood at US$ 961.5 billion. Segment wise, the textile market is categorised into natural fibres, polyesters, nylon, and others. The natural fibres comprise cotton, linen, flax, silk, hemp, and wool. In terms of raw materials volume, cotton accounted for majority of the market share with 39.5% in CY 2019 (Source: Irikworld Magazine, Feb 2020). The higher acceptance of cotton can be attributed to its superior quality like high absorbency, strength, and colour retention. Besides, cotton is considered biodegradable in nature and is hence eco-friendly as well. This augurs well for the growth prospects of cotton.


Given the integrated nature of the business, in the near term, the global apparel and textile sector growth is bound to be impacted by Covid-19. However, in long term, it is expected to clock in a CAGR of 4.3% from 2020 to 2027, owing to the rising demand and lower input cost in the developing countries (Source: Inkworld Magazine, Feb 2020).


The domestic textiles and apparel industry contributes 13% to the countrys industrial production. It caters the domestic as well as the global market, accounting for 12% of the countrys export earnings (Source: Invest India). Development in countrys infrastructure, corporate tax rate cut, favourable policies for MSMEs and easing labour laws make the entire value chain

of textile and apparel space exciting. The vast availability of the raw material and skilled labour enables producers to rationalise the cost. Even, the end-user industries ride high on the favourable demographics, increasing retail outlets and rise in the buying spree through e-commerce websites. Since the industry provides employment to about 105 Million people, the Governments attention to push this sector, always remains high on priority.


The COVID-19 Pandemic event has severely affected the Indian textile & apparel industry, in terms of both exports and domestic consumption. With the steep reduction in demand due to sudden halt of global trade and domestic sales due to the closure of retail stores, the industry is likely to face unprecedented and severe losses.

On the positive side, buyers are expected to increasingly look to replace China. This can help India gain market share. Besides, the Governments focus towards self-reliance can surge the internal demand for raw materials, thereby uplifting the industry eco system.

COVID-19 recovery to benefit textile and apparel Industry (Estimated)

(Source: Wazir Report ‘Impact of Covid-19 on Apparel Industry, 2020)

Cotton Industry

According to the Cotton Association of India (CAI), the cotton production between October 2019 to April 2020 was estimated at 329.59 lacs bales of 170 kgs (Source: Economic Times, 25th May, 2020). Backed by this estimation, the country retained its tag of the largest cotton producer in the world. There is still an immense scope of growth, considering the low productivity per hectare in India. Improving farming techniques will also help turn around the industrys prevailing scenario in the country.

Cotton yarn industry suffered severely during the year due to volatility and mismatch in cotton prices. While the international cotton price plunged about 25% during the year, the domestic cotton price, during the same period, was almost 20% higher than the former. The high prices can be accredited to the 28% increase in Minimum Support Price (MSP) of seed cotton

(Kapas) and the damage caused to crops in some parts of the country. As a result, exports became uncompetitive, leading to unhealthy competition. This affected domestic cotton yarn spinners as they witnessed erosion of margins, owing to narrowed spread between cotton and yarn prices, as compared to the last fiscal year.


Decline in raw material prices

Cotton prices declined post COVID-19 induced lockdown due to the fear of downswing in consumption. This created a greater opportunity for yarn makers to either stock cotton in bulk and increase their margins or pass down the cost benefits to end-user industries to increase their volumes.


The COVID-19 induced lockdown caused millions of workers to migrate back home, leaving behind a shortage of labour. Therefore, deploying automation in manufacturing plants can help players sustain better to tackle the production shortfall during such times.


Companies could also explore emerging product categories such as medical textiles (surgical gloves, personal protective masks, gowns, wipes, etc.) and other textile items required for healthcare facilities like hospital bedsheets, mattresses etc. With countries increased focus on healthcare, medical textiles is likely to see a surge in demand.

Rise in the E-Commerce

E-commerce is playing a major role in the present scenario of textile and apparel industry. Continuous development and adoption of e-commerce is supported by the increasing penetration of the smartphones and cheaper internet. About half the population in India now has access to internet, helping companies in both B2B and B2C space to build a stronger customer base.


Chinas gradual comeback in the market

China has almost eliminated its COVID-19 cases. This has enabled their textile players to operate their facilities flexibly. So, any demand from the overseas market can easily be met by China. However, the downside risk still persists owing to the sentiments of ‘boycott Chinese products all around the globe.

High tariff

The Indian textile companies face higher trade restrictions as compared to its peers like Bangladesh, Vietnam, and Pakistan. The average tariff on textile products faced by India in the EU and the US is 5.9% and 6.2%, respectively (Source: Economic Times, 22nd January, 2019).


Established in the year 1992 and headquartered in Bhilwara (Rajasthan), Nitin Spinners is a leading manufacturer of cotton yarn, knitted, finished and printed fabrics. The Company manufactures wide range of Cotton and blended yarns, knitted fabrics, woven greige and finished and printed woven Fabrics. Over the years, the Company has explored new opportunities and widened product range as well as geographical spread with its presence in more than 50 countries.

Latest technologies, continuous investments, and international quality standard products have made Nitin one of the leaders in cotton yarn and fabric manufacturing. With its focussed endeavours and strong research and development, the Company has been successful in developing value-added products. These products combined with systematic processes and robust distribution network has enabled the Company to create value for both its global and domestic client base. The Companys plants are in close proximity to raw material sources as well as accessibility to modern shipping ports. As a part of value addition and widening its product range the Company has set up an Integrated Textiles Complex at Tehsil Begun, District Chittorgarh equipped with most modern Spinning, Weaving, Dyeing, Finishing and Printing Facilities, with Zero Pollution emissions. With this the Company is now equipped to supply high value fabrics to Fashion Brands and also cater to other Apparel segments.



Contribution to the revenue (%)

Reason for the change
2019-20 2018-19
Yarn 73.33 79.20 Slowly and steadily, the share of revenue is shifting towards fabrics segment.
Knitted fabrics 10.52 14.34
Woven fabrics 8.80 -
Other 7.35 6.46


The Financial Results of the Companys performance for the year under review and those of the previous year are as follows: -

Particulars 2019-20 2018-19
Revenue from operations 1438.06 1242.51
Other income 2.13 2.77
Total income 1440.19 1245.28
Earnings before interest, tax and depreciation & amortization 171.90 180.84
Profit for the year 23.82 64.11
EPS (Basic) (In ) 4.24 11.43
EPS (Diluted) (In ) 4.24 11.43

For financial and product wise performance with respect to operational performance, please refer to “Financial Results” and “Operational Performance” section of Boards Report

The Company operates in Single Segment of Textiles.

DETAILS OF SIGNIFICANT CHANGES Key Financial Ratios and Performance:

2019-20 2018-19 %Change Increase (decrease) Explanation in case change is 25% or more, as compared to the previous year
Inventory turnover 5.43 5.70 (4.74) N.A.
Interest coverage ratio 3.09 6.26 (50.64) Interest cost increased due to additional loans for new project
Current ratio 1.15 1.43 (19.58) N.A.
Debt equity ratio 1.53 1.40 9 N.A.
Debtors turnover 9.41 10.76 12.55 N.A.
Operating profit margin 11.95% 14.55% (17.87) N.A.
Net profit margin 1.66% 5.16% (67.83) 1. Interest & Depreciation cost increased due to new
Return on net worth 4.82% 13.29% (63.73) project
EPS 4.24 11.43 (62.90) 2. Operating margins decreased due to:
(i) Very high cotton prices in India, as compared to the international market, in the first half of the year
(ii) Global lockdown due to COVID-19 pandemic in the last quarter


There are certain key risks associated with our Company. Such risks are stated in the table below along with our mitigation strategies for curbing the same.

Risk Impact Mitigation strategies
Economic downturn A downturn in the economy can adversely affect products demand. Our products are exported globally. We have been actively engaged in widening our geographical presence while continuously expanding our product portfolio. Not being bound to a specific region and a basket of products to offer from gives us the ability to face such downturns.
Increase in raw material prices An increase in cotton prices can adversely impact our Company. Our purchasing policy allows us to enjoy control over the purchase price. We constantly track cotton prices and store the raw material as and when price decreases. This practice helps us mitigate the risk of price.
Quality risk Any kind of divergence in the quality standards of our products may lead to customer and client erosion. We closely monitor the quality of our products with the help of our dedicated quality assurance team. This team is responsible for supervising quality control while assuring that the standards, as set by the Company, are diligently met with.
Availability of skilled personnel Our success depends upon our ability to attract and retain skilled personnel. Any kind of failure in this area can adversely affect our business and operations. We conduct induction programmes to nurture our talent in a structured manner. We also offer various incentives and growth opportunities to our people. This helps retain the talented and skilled workforce.
Competition risk An increase in the competition from textile industry can severely hamper our Companys market share. The Company is a prominent player in this segment. The Company has always focused on quality products with strong brand equity. Its ability to understand the market demand and fulfil it accordingly helps them retain clients and market position.
Risk of foreign exchange We generate majority of our revenue from the global operations. Given the nature of business, a large proportion of the costs are denominated in Indian rupees (INR), leading to currency exposure. The Company mitigates its foreign exchange risk through application of hedging policy.
Technology risk A technology-intensive business like ours can fall prey to technological obsolescence. We continuously upgrade technical support used in our manufacturing, research & development facilities. We actively invest in R&D to keep ourselves updated with the technological change and replace the obsolete technology.


Clean and safe environmental operations form the Companys key priorities. The Company conducts all its operations ensuring the safety of everyone concerned, compliance of statutory and industrial requirements for environment protection, and conservation of natural resources to the extent possible. Additionally, the Company is also accredited with OHSAS18001:2007 (Occupational Health & Safety Management System) certification from the British Standards India (BSI).


A team, when it works together, can always achieve more than what an individual can. Our people are at the heart of all that we do in business. Their talent and competencies drive our Company to the next level of growth. We focus on creating a work environment fostering thought leadership, innovation and a culture of involvement, participation, and transparency. Nitin continuously strives to provide ample opportunities to collaborate, learn and grow within the organisation. As a Company, we believe that engaged employees contribute more effectively and optimally towards organisational growth. Thus, we constantly endeavour to provide opportunities that engage our employees, creating a positive workplace environment. For this, we organised various engagement initiatives like trainings and developments during the year. We have also been accredited with SA 8000:2014 (Social Accountability System) certification from the BSI. As on 31st March, 2020, the Companys strength stood at 4173 employees in the work force.


The Company has appropriate systems for internal control. These systems are continually improved and modified to meet the changes in business conditions and the statutory and accounting requirements. The Company also has a strong Management Information System, which is an integral part of control mechanism. The Audit Committee of the Board of Directors reviews the efficiency and effectiveness of internal control systems. It then suggests solutions to improve and strengthen. During the year, the internal control system was tested and no material weakness in design or operations were found.


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.


The Companys philosophy on Corporate Governance envisages attainment of high level of transparency, accountability and integrity in all its facets.

The Company has consistently practiced good Corporate Governance norms for the efficient conduct of its business and its obligations towards all its stakeholders viz., the shareholders, customers, employees and the community in which the Company operates. The Company is committed to observe good governance by focusing on adequate & timely disclosures, transparent & robust accounting policies, strong & independent Board and endeavors to maximise shareholders benefit. The Company believes that it shall go beyond adherence of regulatory frameworks in disclosing material information to the stakeholders. We believe that Corporate Governance is a journey to constantly improving sustainable value creation. The Board of Directors of the Company plays a central role in the good Corporate Governance by building up strong principles and values on which the Company operates.


Composition, Category and Attendance at Meetings

The Board of Directors of the Company consists of eminent persons with considerable professional expertise and experience in business and industry, finance, management, legal and marketing. The Company has a balanced mix of Executive and Non-Executive Directors, the Board comprises of six Directors including one Woman Director and composition of Board of Directors of the Company is in conformity with Regulation 17(1) of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (herein after referred as “Listing Regulations”) and applicable provisions of the Companies Act, 2013. The Company has 50% Non Executive Directors, it has an Executive Chairman and the numbers of Independent Directors are 50% of the total number of Directors. The Independent Directors with their diverse knowledge, experience and expertise bring in their independent judgment in the deliberation and decisions of the Board.

Number of Board Meetings

During the financial year 2019-20, four meetings of the Board of Directors were held on 25.05.2019, 10.08.2019, 13.11.2019 and 07.02.2020 and the maximum time gap between any two meetings was not more than one hundred twenty days. The frequency of the meetings is enough for the Board to undertake its duties effectively.

The 27th Annual General Meeting of the Company was held on 20.09.2019.

The Composition of the Board of Directors, attendance at Board & last Annual General Meeting, number of other Directorship, Committee Membership and Chairmanship are as under: -

Name of Directors Category of Directorship Board Meetings attended out Attendance at last AGM held on 20.09.2019 Directorship in other Companies

No. of other Committees in which Member or Chairperson

of 4 Meetings Chairman Member
Shri Ratan Lal Nolkha Promoter Executive 4 Yes 4 Nil Nil
Shri Dinesh Nolkha Promoter Executive 4 Yes 3 Nil Nil
Shri Nitin Nolakha Promoter Executive 4 Yes 2 Nil Nil
Shri Yeshwantlal Ratilal Shah Independent Non-Executive 4 Yes Nil Nil Nil
Dr. Rabisankar Chattopadhyay Independent Non-Executive 4 No Nil Nil Nil
Smt. Aditi Mehta Independent Non-Executive 3 No Nil Nil Nil