Pashupati Cotspin Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

GLOBAL ECONOMIC OVERVIEW

The Global economy journey has been eventful, starting with supply- chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russias war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening. Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. Many large emerging market economies are performing strongly, increasing their footprint on the global economy. Despite these welcome developments, numerous challenges remain, and decisive actions are needed.

INDIAN ECONOMIC PROSECTIVE

According to a report by IMF Indias economy is projected to grow by 6.8% in 2024, which noted that multinationals extending their manufacturing processes into the country to diversify their supply chains will have a positive impact on Indian exports. The expansion in 2023 was driven by strong public investment outlays as well as the vitality of the services sector which benefited from robust local demand for consumer services and firm external demand for the countrys business services exports. These factors are expected to continue to support growth in India in 2024

TEXTILE INDUSTRY

GLOBAL

The Global Textile market is anticipated to rise at a considerable rate due to factors such as the continued increase in global population and urbanization, the rapid expansion of e-commerce, heightened expenditure on leisure activities, the growing retail penetration, increased internet accessibility and smartphone usage, and a rising preference for contactless delivery solutions. Notable trends expected in the forecast period include a shift towards adopting digital textile printing, focus on utilizing nonwoven fabrics, an emphasis on the use of organic fibers, a spotlight on sustainable fibers, adoption of digital platforms for textile supply chain management.

INDIA

Adverse economic conditions prevailed in major importing Countries, coupled with the Red Sea crisis are impacting the export of Indian textile products, including ready-made garments, to foreign destinations.

However, with the US market showing signs of revival, experts believe exports to improve in the upcoming months. The domestic market, which accounts for around three-fourths of the overall demand, continues to witness a steady growth. Demand ahead of the spring-summer season in the West is likely to boost the off take of garments from India, thereby supporting the growth of the entire value chain. With better consumer demand big retailers in the overseas markets will have to restock inventory, improving order flow from Indian exporters.

A favourable landscape marked by easing cost pressures and demand revival is likely to support the growth of Indian textiles in 2024. Addressing structural challenges and leveraging policy support are pivotal for the textile industrys sustained growth.

COTTON

Cotton is one of the most important cash crops in India. As a raw material for the textile industry, cotton contributes significantly to the agricultural and industrial economics of India and exerts considerable influence on Indias economy. India is one of the major cotton producing as well as cotton consuming countries in the world. The area under cotton crop in India is the largest, constituting nearly one fourth of the world cotton area. Pashupati Cotspin Limited is in industry of procuirng the the best available cotton (Shankar 6) from various vendors and from the said procured cotton the Company is processing the raw cotton and convert them into cotton bales. The said cotton bales are directly sold to the companys customer and a substational quantity of the cotton bales are used by the spinning divison of the Company for manufacturing of cotton yarn which is the final product of the Company.

YARN

The Global cotton yarn market size has grown strongly in recent years due to the growth of the textile industry, the preference for natural fibers, trends in global cotton production, innovations in cotton yarn, and the increased affordability and accessibility of textile materials. However the year under review has witnessed an unprecedented lower margin due to drop in yarn prices on account of fluctuation in cotton prices and lesser demand. The surge in the power cost has also impacted its margin.

RISKS AND THREATS

Risk relating to Raw Materails

Indian Cotton production during the cotton season 2023-24 is 6% lesser than the previous season, as area for alternative crops was favoured over cotton by the Farmers. Cotton production is also affected by pink bollworm and inadequate monsoon in many parts. Global cotton production is expected to be higher by 3%. The main issue during this year will be demand and not supply. Currently, Indian cotton prices are at par with the International prices. If the international prices decline, Indian cotton will become expensive. The Government of India has announced an increase in the Minimum Support Price (MSP) for unginned cotton (Kapas), potentially boosting earnings for Indian farmers.

Market Risks/Industry Risks:

The textile industry is facing a number of challenges due to the massive fluctuations in cotton prices, high inflation, Ukraine war, low demand in Europe and the US, supply chain disruptions and competition from neighbouring countries, high power cost etc. These factors are putting pressures on margin. However, the industry also has a number of opportunities. The industry has grown significantly, tapping into current trends while facing challenges. There are some signs of improvement in the global textile industry. Order cancellations have decreased and inventory levels are under control. Overall, with the remarkable advances and backed by solid domestic consumption and healthy export demand, the future for the Indian textile industry seems to be bright. It is hoped that with the unstinted support from all the Stakeholders Pashuapti Cotspin Limited would be able to manage such risk.

Labour Shortage

India has acquired recognition as a desirable outsourcing location, primarily because of the large labour force availability. The textile industry is the only sector in India that offers skilled and unskilled labourers a significant amount of employment; However, there is a shortage of skilled labour. More than 70% of Indian workers are either illiterate or have just a basic education. The skill shortage in the Indian textile manufacturing is unable to take its skillset forward, or help the sector grow beyond a certain point. The need of the hour is for encouraging education and knowledge transfer through activities like vocational training programs that will also aid in creating job prospects in rural regions. Considering the industrys growth potential and employment generation, in the recent years, the government introduced the Integrated Skill Development Service (ISDS) Scheme to address the skilled labour required to run the diverse textiles sector and its segments.

OUR COMPETITIVE STRENGTHS:

Manufacturing facility with locational advantage and state-of-the-art machinery to deliver quality products

Our manufacturing facility located in Kadi taluka in Gujarat which

enjoys locational advantage since Kadi is a major and one of the best quality cotton growing and processing areas in India that produces one of the best cotton. It is also a major centre for cotton breeding in western zone. Our Kadi unit is located near mehsana so the connectivity to the big ciies such as Ahmedabad, and ports such as kandla and Mundra are easy to reachout which helps in saving logistics cost for export operations.

Quality control measures

Our Company has implemented stringent quality control measures to produce superior quality yarn for our domestic as well as international customers. As the quality of our products depends on the raw material quality, so we source the superior quality raw material from farmers/ suppliers. Bale management system is followed for consistent superior yarn quality, and for this, cotton stock is maintained for 5-6 months. In auto coner utmost care is taken for achieving 85% splice strength with defect-free packages. Further, apart from in process inspection system, our mill has adopted stringent final inspection procedure before dispatching yarn to its customers.

Experienced management team with strong industry expertise

Our Companys Managing Director, Mr. Saurin Jagdish Bhai Parikh, has been instrumental in developing Ginning business of our Company. He has in depth knowledge in selection of Kapas and Cotton. Mr. Tushar Rameshchandra Trivedi, Whole-Time Director of Company, has vast experience in manufacturing of best quality cotton yarn. He also looks after the day-to-day affairs of the Company.

KEY RATIOS

Sr. No. Particular	Ratio For F.Y.			Variance
	2023-24	2022-23
1. Debtors Turnover Ratio	9.49	6.56		44.76%
Formula: Debtors Turnover Ration= Net Credit Sales/Average Account Receivable	Times	Times		Increase in ginning unit sales compare to previous year
Definition: The Debtors Turnover Ratio also called as Receivables Turnover Ratio shows how quickly the credit sales are converted into the cash. This ratio measures the efficiency of a firm in managing and collecting the credit issued to the customers.
2. Inventory Turnover Ratio	15.51	7.61		103.88%
Formula: Inventory Turnover= Sales/Inventory	Times	Times		Increase in ginning unit sales compare to previous year.
Definition: Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a given period. A company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.
3. Current Ratio	1.24	1.16		6.27%
Formula: Current Ratio=Current assets/ Current liability		Times
Definition: The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It compares a firms current assets to its current liabilities, and is expressed as follows: The current ratio is an indication of a firms liquidity.	Times
4. Debt Equity Ratio	1.27		1.56	-18.34%
Formula: Debt Equity Ratio = Debt/Total Equity			Times
Definition:The debt-to-equity ratio is a financial ratio indicating the relative proportion of shareholders equity and debt used to finance a companys assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage.	Times
5. Net Profit Margin Ratio	1.40%		1.11%	25.90%
Formula: Net Profit Margin= Net Profit/ Sales				Increase in net profits due to better operating margins in line with revenue growth.
Definition: The net profit percentage is the ratio of after-tax profits to net sales.
It reveals the remaining profit after all costs of production, administration, and financing have been deducted from sales, and income taxes recognized.

FINANCIAL AND OPERATIONAL PERFORMANCE

(Standalone) (Amount in lakh. Except EPS)

Particulars for the year ended	March 31,2024	March 31,2023
Net revenue from Operations (Sales)	65,837.68	44,273.28
Profit Before Depreciation and Tax	2,250.19	1,481.67
Less: Depreciation	1,133.02	867.64
Profit Before Extra ordinary Items and Tax	1,117.17	614.03
Extra Ordinary Items	0.00	0.00
Profit Before Tax	614.03	614.03
Tax Expense
-Current Tax	23.02	40.47
Less: MAT Credit Receivable	0.00	0.00
-Deferred Tax	263.76	162.79
Profit After Tax	830.39	410.77
EPS (Basic) (In Rs.)	5.43	2.69
EPS (Diluted) (In Rs.)	5.43	2.69

CAUTIONARY STATEMENT

Statements in this Management Discussions and Analysis Report describing the Company objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based on reasonable assumptions and expectations of future events. Actual results could however, differ materially from those expressed or implied.

Factors that could make a difference to the Companys operations include market price both domestic and overseas availability and cost of raw materials, change in Government regulations and tax structure, economic conditions affecting demand/supplies and other factors over which the Company does not have any control.

The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in future.

	By Order of the Board of Directors
	For, PASHUPATI COTSPIN LIMITED
	Sd/-
	Saurin Jagdish Bhai Parikh
Date: 07/09/2024	Chairman & Managing Director
Place: Ahmedabad	(DIN: 02136530)