(ANNEXURE TO DIRECTORS REPORT)
INDUSTRIAL STRUCTURE AND DEVELOPMENTS:
The company was established in the year 1919 and it started manufacturing activity in the year 1922 at Petlad (Gujarat). On different reasons the company almost became a sick unit. The present management took it over in the year 1978 and gradually modernized the manufacturing unit in installments. Continuous upgradation of the unit improved its financial situation. By internal earnings and public issue, right issue, ploughing the working capital by private placement of debentures right from the year 1980 to 1998, the company became a continuous dividend paying company. Its shares were listed with the Bombay Stock Exchange in the year 1986. Dividend was paid to the shareholders continuously since 1986 except for 2-3 years. The company had also given bonus shares at two times. The company setup another yarn manufacturing unit at Borgaon Dist Chhindwara (MP) in the year 1990. Four windmills of the capacity of 1600 KWA (in aggregate) were also set up in Jamnagar, Kutch, Gujarat in the years 2006 and 2007.
Textile Industry is the oldest and highest employment providing industry in India, globally. India is one of the countries having largest textile manufacturing capacity. The important factors which influences the Companys operations are demand and supply conditions, availability of raw material at reasonable rate (cotton), the export market condition, availability of workers of required skills, Government regulations, tax laws, economic developments etc. Ours being mainly a cotton yarn spinning unit has to face all the difficulties which the textile industry is facing in the country.
In the last about 10-15 years many yarn spinning units have been established increasing the production, supply of cotton yarn in the country. Since the new units are eligible for many government benefits and concessions under different policies of the government and since the new units (with new technology) are less labour oriented our company cannot stand in competition with them because their production cost is much lower than that of ours. The companys both the units are established in mofussil area and, therefore, the cost of transportation of raw material and finished goods are also higher. The cost control at different level, wherever possible, and changes according to the times has made the company to survive even under adverse conditions.
OPPORTUNITIES, THREATS, RISKS AND CONCERNS:
The Companys main raw material is Cotton which is an agricultural crop. Its quality and available quantity in the country at reasonable rate depends on proper rains and government policies towards exports, as well as, on international market. The steep increase in Minimum Support Price of Cotton by the Government, which was made in the last year, is a continuous factor on increase in cotton prices whereas the realization of yarn is dependent on market conditions.
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:
The Companys main product is Cotton Yarn which is about 95.42% of total sales. As stated above, there are four Windmills where the electricity generation depends upon weather conditions.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Internal Control Systems and procedures in the Company are commensurate with nature and size of its business. Looking to the different amendments in applicable laws and regulations and much more requirements and disclosures, the management desires to increase the scope of internal audit.
It is to be noted that not only the assets of the Company are safeguarded and protected against any losses, but also all the transactions are properly accounted and that they meet the test of legal compliances.
Apart from regular review and monitoring Internal Control Systems by the Companys Internal Control Department, two independent Chartered Accountants firms have been appointed to conduct the internal audit for the Companys two manufacturing units. This provides reasonable assurance to the effectiveness of the internal control systems and procedures and reliability of financial reporting.
The management has programme of replacing the old machineries by installing new machines gradually to improve the quality of production. The availability of labour of required skills, however, on regular basis, is a matter of concern.
The Exchange Rate Fluctuations, increase in Power Rate, volatility in Cotton and Yarn prices are the risks and the matters of concern which may affect financial results/profitability.
FINANCIAL AND OPERATIVE PERFORMANCE:
During the year 2021-22, the yarn market was highly explosive. Price of raw Cotton and Cotton yarn increased abnormally. The demand for cotton yarn also remained very good. This helped the Company to have better margin for its yarn.
In both the Units of the Company, peaceful and amicable relations with the workers were there. However, there continues to be shortage of skilled workers at Petlad Unit. Also absenteeism remain very high in Petlad Unit causing loss of production in Petlad Unit.
DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONGWITH DETAILED EXPLANATIONS THEREOF:
The following key financial ratios has witnessed a significant change i.e. a change of 25% or more as compared to the financial year 2020-21 and 2021-22 :-
|Sr. No. Key Financial Ratios||FY 2021-22||FY 2020-21||Change in % as compared to previous year||Reason|
|1. Current Ratio||3.87 Times||3.46 Times||11.71%||Because of higher profits during the year, current ratio improved.|
|2. Net Profit Margin (%)||9.21%||2.05%||348.42%||Due to very good demand of cotton yarn, the Company could enjoy better prices including the profit margin|
|3. Return on Net Worth (%)||23.82%||4.44%||436.27%||Because of high realization of cotton yarn, return on net worth increased substantially.|
|4. Debtors Turnover Ratio||20.82 Times||15.43 Times||34.87%||Sales proceeds due to higher prices was little slower.|
|5. Inventory Turnover Ratio||3.66 Times||2.88 Times||26.94%||Substantially higher prices of cotton and cotton yarn.|
|6. Interest Coverage||61.26 Times||25.74 Times||138%||Because of higher operating profit.|
|7. Operating Profit Margin||13.90%||5.34%||160.23%||Because of higher realization of cotton yarn.|
|8. Debt Equity Ratio||0.005||0.004||27.71%||Increase in ratio mainly on account of increase in lease liability as compared to previous year|
FINANCIAL PERFORMANCE OF CURRENT AND PREVIOUS TWO YEARS BASED ON DIFFERENT INDICATORS
(Rs. In Lakhs)
|Total Sales & other Income||17369||15634||25826|
|Profit Before Depreciation & Tax||197||786||3416|
|Dividend Per Share (Rs.)||NIL||1.50 Per Share||4 per share|
Any changes in applicable laws, regulations and Government policies and the present epidemic leading to reduction / stoppage of production are beyond the control and anticipations of the management and may adversely affect the profitability of the Company.
|For PBM POLYTEX LIMITED||For PBM POLYTEX LIMITED|
|GOPAL PATODIA||CHIRAYUSH PATEL|
|Place: Vadodara||Managing Director||Independent Director|
|Date : 12.08.2022||(DIN :00014247)||(DIN :08690998)|