padam cotton yarns ltd Management discussions

OPERATIONS

INDIAN ECONOMY

Indias economy has experienced a significant surge over the past nine years, elevating it from the 10^th to the 5^th position in the global rankings, thereby establishing its position as a major economic powerhouse on the world stage. Indias economy primarily thrives on domestic demand, with consumption and investments accounting for 70% of economic activity. The Union Governments financial performance in the fiscal year 2022-23 has remained strong due to the revival of economic activity, an increase in gross tax revenues from direct taxes and Goods & Services Tax (GST], and realistic assumptions in the Budget. As the economy recovers from the Covid-19 pandemic, investments have been made across various sectors, boosted by government PLI schemes. The Union Government has maintained its focus on capital expenditure (Capex] during the year. The Centre has also incentivized the State Governments through interest free loans and enhanced borrowing ceilings to prioritize their spending on Capex. Indias services exports have remained resilient during the Covid-19 pandemic and amid geopolitical uncertainties driven by higher demand for digital support.

INDIAN TEXTILE INDUSTRY

Indias textile sector provides livelihoods to millions of households and has the.second largest employer, employing more than 40 million workers. The textile sector, generating formal and productive jobs, has the potential for broader social transformation, generating exports and growth.

The textile sector is one of the critical sectors of the Indian economy, accounting for more than 2 percent of the total GDP and more than 12 percent of the manufacturing sector gross domestic product [GDP], The sector is also the second largest provider of employment in India, after agriculture. It provides employment to an estimated 45 million people directly and to another 60 million indirectly through allied activities. Not only is the textile sector highly labour intensive, it also employs unskilled and semi-skilled labour force and is also an important source of employment for women.

During and post the pandemic period, the textile sector witnessed robust demand as consumers remained at home and focused on health and hygiene factors. As a result, the prices of cotton and yarn went up. This resulted in buoyant markets, high operating utilisation and gains to the textile industry including spinning mills. This scenario continued till the mid of the current fiscal year. However, the scenarios changed with fall in demand from end user segments, resulting in lower cotton and yarn prices. The Spinning mills faced the headwinds as the spread between cotton and yearn was curtained. The lower demand resulted in reduced operations and utilisation of spinning mills.

BUSINESS OPERATIONS

The Company was incorporated on November 2, 1994 and has not carried any commercial activity during the year under review as the entire plant & machinery and major parts of the building had got damaged in July, 2001 due to major fire in the factory premises.

OPPORTUNITIES. THREATS. RISKS AND CONCERNS

The textile industry in India is very strong as it has a variety of natural and man-made fibres and yarns. Indias textile industry plays a technological and capital-intensive role and is compared with industries like heavy machinery, automobile etc. Since the pattern of industrialisation in trade has become common in consumer goods industries and labourintensive industries there is immense opportunity in the textile industry.

India has one of the fastest growing economies with the GDP increasing to 7.2% in the year 2017- 2018. This creates a boost in the purchasing power of the people while it also spurs the demand for products of the textile industry. This boost results in a wide range of capacity to manufacture different products that can be transported within India as well as across the world.

Apart from this, India has one of the most extremely varied textile sectors as it has hand woven textiles on one end while capital intensive mills on the other end which results in an enormous number of opportunities in the textile industry.

Though there are many opportunities and investment in the textile industry, like any other industry, the textile industry of India also undergoes certain challenges. The frequently changing policies stated by the government at the central and state levels create an immense pressure on the textile industry. The GST applied on the products makes the garments and clothes even more expensive.

Another challenge that the textile industry faces is the limitation to access the latest and best technology while also failing to meet the global standards in the competitive export market. Apart from these issues like child labour, competition from neighbouring countries regarding low-cost garments, personal safety norms are some of the challenges the Indian textile industry faces.

Padam Cotton Yarns Limited has exposures in the business of Textile Segment. It is exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

OUTLOOK

Indias economy rebounded quickly from a steep contraction in 2020, but a severe second wave of the coronavirus has increased risks to the outlook with potential larger-term credit implications. Risk to Indias credit profile, including a persistent slow-down in growth, weak government finances and rising financial sector risk, have been exacerbated by the shock.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company maintains an adequate internal control system and procedures commensurate with its size and nature of operations. The internal control systems are designed to provide a reasonable assurance over reliability in financial reporting, ensure appropriate authorization of transactions, safeguard the assets of the Company and prevent misuse/ losses and legal compliances.

The internal control system includes a well-defined delegation of authority and a comprehensive Management Information System coupled with quarterly reviews of operational and financial performance, a well-structured budgeting process and internal audit. The Internal Audit reports are periodically reviewed by the management and the Audit Committee and necessary improvements are undertaken, if required.

HUMAN CAPITAL MANAGEMENT

The Company has not carried out any manufacturing activities during the financial year ended on 31^st March, 2023 as the entire plant & machinery and major parts of the building had got damaged in July, 2001 due to major fire in the factory premises. Hence, the clause related to material developments in the Human Resources and /or Industrial Relations front, is not applicable to our Company for the financial year 2022- 23. Number of people employed by Padam Cotton Yarns Limited are only three including all categories as on March 31,2023.

CAUTIONARY STATEMENT

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations, or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include finished goods prices, raw materials costs and availability, global and domestic demand supply conditions, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future based on subsequent developments, information or events.

For and on behalf of the Board of Directors Padam Cotton Yarns Limited

Sd/-	Sd/-	Sd/-
(Rajev Gupta)	(Shivam Gupta)	(Radhika Gupta)
Director	Chief Financial Officer	Managing Director

Date: 28.08.2023 Place: Karnal