Pact Industries Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian textile industry is a key contributor to the countrys manufacturing output and employment. However, during FY 2024 25, the sector witnessed significant headwinds due to global economic slowdown, subdued export demand, rising input costs, and supply chain disruptions.

The textile processing sub-sector, where our Company operates, faced challenges including fluctuating raw material prices (especially cotton and dyes), rising energy and labor costs, and increasing compliance pressure on environmental norms. Many players in the dyeing and finishing segment witnessed squeezed margins or negative returns.

OPPORTUNITIES AND THREATS

Opportunities:

Increasing demand for processed and finished fabrics in both domestic and international markets. Government initiatives such as the Production Linked Incentive (PLI) scheme and the MITRA parks scheme promoting integrated textile value chains. Rising trend toward sustainable and eco-friendly processing, opening avenues for green chemistry and waterless dyeing technologies. Export potential due to Indias competitive labor costs and abundant raw material availability.

Threats:

Volatility in raw material prices (especially cotton and polyester).

Environmental regulations and compliance challenges related to effluent treatment and chemical usage. Competition from unorganized sector and cheaper imports.

SEGMENT WISE OR PRODUCT-WISE PERFORMANCE

The Company operates in the textile processing segment, focusing on dyeing, bleaching, printing, mercerizing, finishing, and related services. The revenue during the year dropped due to reduced capacity utilization and fall in orders from key clients in both domestic and export markets.

OUTLOOK

While the near-term outlook remains cautious due to industry-wide pressures, the Company is focused on Rationalizing operating costs, including energy, chemicals, and labor and Exploring product diversification into value-added and technical textiles.

RISKS AND CONCERNS

Losses during the year have impacted cash flows and working capital availability. Fluctuations in fiber and chemical prices are affecting cost structures. Due to reduced demand, machinery utilization has been sub-optimal.

The Company has initiated risk management processes to monitor and mitigate these exposures.

FINANCIAL/OPERATIONAL PERFORMANCE:

The consolidated Revenues was Rs. 166.85 and Loss before tax was Rs. 495.66 and Loss after Tax was Rs. 502.39 as on 31.03.2025. The detailed performance has already been discussed in the Directors Report under the column ‘Financial Performance.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company is maintaining an efficient and effective system of Internal Financial Control for the facilitation of speedy and 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 laws and regulations and procedures. Further, the statutory auditors of the Company have verified the systems and processes and confirmed that the internal financial controls system over financial reporting is operating effectively. Pursuant to the provisions of Section 138 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, the Company has also appointed M/s. Bipin Bihari Singh as an Internal Auditor of the Company. The Company has in place adequate internal financial control systems with reference to the Financial Statements. The Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board which also reviews the adequacy and effectiveness of the internal controls in the Company. 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 two non-executive directors and one managing director has been constituted. All the significant audit observation and follow up action thereon are taken care of by the Audit Committee. The Committee oversees the adequacy of Internal Control. The Audit Committee met five 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.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

Due to operational challenges, the Company undertook limited hiring during the year. Employee rationalization and role restructuring were initiated to manage fixed costs.

As of March 31, 2025, the total headcount stood at 1 (One).

Despite financial pressures, industrial relations remained stable, and employee morale was managed through transparent communication and partial continuity of welfare measures.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

As per SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to provide details of significant changes (change of 25% or more as compared to immediately previous financial year) in key financial ratios. Accordingly, the Company has identified the following ratios as key financial ratios:-

Ratio	Unit	F.Y. 2024-2025	F.Y. 2023-2024	% Change
Current Ratio	%	0.63	1.05	-39.40
Debt Equity Ratio	%	-4.02	5.06	-179.50
Return on Equity		-0.907	-0.932	-2.69
Ratio	%
Inventory Turnover		0.95	1.48	-35.42
Ratio	%
Trade Receivables		0.24	0.64	-62.55
Turnover Ratio	%
Trade Payable		0.000	3.217	-100.00
Turnover Ratio	%
Net Capital		-0.42	12.65	-103.30
Turnover Ratio	times
Net Profit Ratio	%	-3.0111	-0.7936	279.41
Return on Capital		1.807	-1.937	-193.28
Employed	%

EXPLANATION FOR CHANGE OF 25% OR MORE IN KEY FINANCIAL RATIOS:

During the financial year 2024 2025, several key financial ratios witnessed significant changes of 25% or more, indicating notable shifts in the companys financial health and operations. The Current Ratio declined by 39.40%, reflecting weakened short-term liquidity, possibly due to reduced current assets or increased current liabilities. The Debt-Equity Ratio saw a sharp negative shift of 179.50%, indicating negative shareholders equity or increased reliance on debt, which raises concerns about solvency. A decline of 35.42% in the Inventory Turnover Ratio suggests slower inventory movement, potentially due to reduced sales or overstocking. The Trade

Receivables Turnover Ratio dropped by 62.55%, pointing to delays in customer collections. A 100% drop in the Trade Payables Turnover Ratio implies either minimal credit purchases or delayed supplier payments. The Net Capital Turnover Ratio turned negative with a 103.30% fall, highlighting inefficient use of capital, likely due to negative working capital or reduced revenues. The Net Profit Ratio deteriorated by 279.41%, indicating increased losses, while the Return on Capital Employed (ROCE) improved by 193.28%, moving from negative to positive, suggesting a marginal improvement in capital efficiency despite overall losses.

ACCOUNTING TREATMENT:

The financial statements of the Company for financial year 2024-2025 have been prepared in accordance with the applicable accounting principles in India and the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013 read with the rules made thereunder. The Company has followed accounting principles generally accepted in India, including the Indian Accounting Standards (‘Ind AS) specified under Section 133 of the Companies Act, 2013 (‘the Act) and other relevant provisions of the Act. The significant accounting policies which are consistently applied are set out in the notes to the financial statements.

CAUTIONARY STATEMENT:

This report contains forward-looking statements based on certain assumptions and expectations of future events. Actual results could differ materially due to various factors beyond the Companys control, including economic conditions, changes in government regulations, tax laws, and other incidental factors.

	For Pact Industries Limited
Place: Ludhiana, Punjab	(Harpreet Singh)
Date : 13.08.2025	Chairman and Managing Director
	DIN: 00570541