Precot Management Discussions

Dear Shareholders,

Your Directors hereby present the 60th Annual Report of your Company along with the financial results for the year ended 31st March, 2022.

State of affairs of the company

a. Financial results

(Rs In lakhs)

Particulars 31.03.2022 31.03.2021
Revenue from operations 99,328 66,514
PBIDT 18,877 9,314
Less: Finance cost 2,898 3,272
Profit from Operations 15,979 6,042
Other Income 649 570
PBDT 16,628 6,612
Less: Depreciation and Amortisation 3,253 3,317
PBT (Before Exceptional item) 13,375 3,295
Exceptional item - -
PBT (After Exceptional item) 13,375 3295
Less: Tax expenses 2,280 -
Deferred Tax 553 -
Profit After Tax 10,542 3,295
Other Comprehensive Income (291) (149)
Total Comprehensive Income 10,251 3,146
Add: Opening balance in Retained Earnings including OCI 15,685 12,539
Less: Transfer to General Reserve - -
Closing balance in Retained Earnings
including OCI 25,936 15,685

b. Dividend

The Board is glad to recommend a dividend of Rs 6 /-per share (60% on face value of Rs.10/-each) for the financial year 2021-22.

Industry Overview

FY 2021-22 was a good year for your Company, as well as the Indian Textile and Clothing Industry. Despite the impact of the second wave of the pandemic in the first quarter of the financial year, demand remained robust for textile products throughout the year. That led a to a sustained demand for yarn from both the export and domestic markets which resulted in significantly better price realization and operating margins for spinners. While the utilization of our capacities was affected in the first quarter due to the impact of the second wave of Covid in India, performance remained strong in the other quarters.

The technical textile division continues to grow in revenues although the sharp escalation in freight, logistics and packaging costs impacted the bottom line. The company has entered new markets, notably Canada and Vietnam and expanded its market share in countries such as Australia and the UK. With utilization of current machines at close to optimal capacity utilisation, the Company is investing in modern machinery to increase capacity of finished products.

Review of operations

Your Company registered a turnover of Rs.99,328 Lakhs during FY 2021-22, an increase of 49% compared to the previous year. Turnover increased on account of better capacity utilization in all units and higher yarn prices. Profit from operations increased to Rs. 15,978 Lakhs compared to Rs.6,042 Lakhs in the previous year. During the year under review, Precot has continued to reap the benefits of the improvements in productivity and product mix that were done in the spinning business during the past few years. The spinning division continues to reduce reliance on commodity products and increase production of value-added yarns. Your company has completed the planned investments in compact spinning and spindle monitoring systems. The technical textiles division achieved a turnover of Rs.15,704 Lakhs as compared to Rs.13,887 Lakhs in the previous year.

Outlook for the current year

The abnormal increase in cotton prices is a serious cause for concern. Lower production in India, logistics problems for shippers and merchants and the 10% duty levied on the import of cotton are the major reasons for the doubling of Indian cotton prices in less than a year. Margins of spinning mills are being squeezed as they are not able to pass on increases in cotton prices since March, 2022 to their buyers. Demand destruction is also happening for cotton products as retailers are hesitant or unable to proportionately increase prices and are looking at cheaper alternatives to cotton products.

Price of commodities other than cotton have also registered sharp increases which have resulted in higher transport, power, packaging and warehousing costs. With inflation on the rise, central banks around the world are raising interest rates. With higher borrowing costs and lower consumer confidence, consumption is bound to be affected. With most economies and countries opening up post Covid, the service industry especially travel and hospitality has rebounded sharply. Services will garner a bigger share of expenditure going forward which will in turn affect spending on manufactured goods.


The Company has been able to continuously maintaining cordial relations with its labour force in all its units. The Company has 1445 permanent employees on the roll as on 31s1 March, 2022.

Internal Control Systems & Risk Management

The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable Regulations. The systems are periodically reviewed, by the Audit Committee of the Board, for identification of deficiencies and necessary timely corrective actions were taken to improve the controls at all levels. The committee also reviews the statutory auditors report, key issues, significant processes and accounting policies.

Risk Management is an integral part of the business process. The Company has constituted a Risk Management Committee and adopted a policy on risk management for identifying, mitigating and managing risk. The Audit Committee of the Board reviews the risk management policy periodically. The details about composition of the risk management committee, policy and its terms of reference have been provided in the Corporate Governance Report attached to this report.

Number of meetings of the Board

Details of number of meetings of the Board and Committees thereof and the attendance particulars of the Directors in such meetings are provided under the Corporate Governance Report.

Declaration by Independent Directors

The Independent Directors have submitted their disclosures to the Board confirming that they fulfill the requirements enumerated under Section 149(6) of the Companies Act, 2013 (hereinafter "the Act"), and Regulation 25 of The Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,2015.

Directors and Key Managerial Personnel (KMP) Appointments, Retirements and Resignations

Mr. A.P Ramkumar, Chief Financial Officer, resigned on 31st August, 2021 and Mr. Kuppu Dhandapani was appointed as Chief Financial Officer effective from 1st September, 2021. However, Mr Kuppu Dhandapani sadly passed away on 5th November, 2021 due to complications after heart surgery. Thereafter Mr J Govind Raju, Head - Accounts, Audit and Tax has been designated as the Chief Financial Officer of the company effective from 10lh February 2022.

There is no change in the constitution of the board during the year under review. However, Mr Prashanth Chandran, Managing Director retired by rotation, and being eligible, offered himself for reappointment and was reappointed as Director at the AGM held on 17.09.2021.

The Board of Directors at their meeting held on 25 th May, 2022 on the recommendation of the Nomination and Remuneration committee re-appointed Mr Ashwin Chandran, as the Chairman and Managing Director, Mr Prashanth Chandran as Vice Chairman and Managing Director and Mr T Kumar as Executive Director of the company for a term of three years effective from 01-Apr-2023. Necessary resolutions are being moved at the ensuing annual general meeting for shareholders approval.

Mr Arun Selvaraj and Dr Vinay Balaji Naidu have been appointed as Additional Directors (Non-Executive and Independent) of the company by the Board of Directors at their meeting held on 25th May, 2022 on the recommendation of the Nomination and Remuneration committee. The Board has recommended the appointment of Mr Arun Selvaraj and Dr Vinay Balaji Naidu as Additional Directors of the company to hold office till the conclusion of the ensuing Annual General Meeting. Suitable resolutions are also moved for the approval of the shareholders for their appointment as Independent Directors for a period of five years from the date of AGM. Detailed explanatory statement and brief bio data of the directors are annexed to the notice of AGM.

The following are the whole-time key managerial personnel of the Company as per Section 203 of the Act as on 31st March,2022,

(i) Mr Ashwin Chandran, Chairman and Managing Director

(ii) Mr J Govind Raju, Chief Financial Officer & (iii) Mrs S Kavitha, Company Secretary.

Performance Evaluation

The Board of Directors at their meeting held on 9th February, 2022, had carried out an annual evaluation of its own performance and the performance of the Committees of the Board and the individual Directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015 (hereinafter "Listing Regulations").

The performance of the Board was evaluated by the Board of Directors after seeking inputs from all the Directors on the basis of criteria such as Board composition and structure, effectiveness of the Board meetings and process and contributions made by the Directors.

The performance evaluation of each Director was done by the entire Board of Directors, excluding the Director being evaluated, taking into consideration inputs received from the other Directors, covering various aspects of the Boards functioning such as active participation and contribution during discussions, effective deployment of knowledge and expertise towards the growth and betterment of the Company, impact and influence on the growth of the Company and performance of specific duties, obligations and governance.

The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of criteria such as the composition of the committees and effectiveness of the committee meetings.

In a separate meeting of Independent Directors held on 23rd March, 2022 performance of the non-independent Directors, performance of the Board as a whole and performance of the Chairman were evaluated, taking into account the views of the executive Directors and non-executive Directors.

The Board also carried out an evaluation on the performance of the Independent Directors and also verified the fulfilment of the criteria for independence as specified under listing Regulations and their independence from the management. This evaluation of

Independent Directors was done by the entire Board, excluding the Independent Directors being evaluated.

Policy on Directors appointment and remuneration and other details

The Companys policy on Directors appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance Report.

Auditors report and Secretarial Auditors report

The auditors report and secretarial auditors report do not contain any qualifications, reservation or adverse remarks.

During the year under review, neither the Statutory auditors nor the Secretarial Auditor have reported to the Audit Committee, any instances of fraud committed against the Company by its officers or employees.

The report of the Secretarial Auditor is furnished as Annexure A and forms part of this report.

Receipt of commission by Whole Time Directors from the Company or receipt of commission/remuneration from subsidiary Company

During the year under review all the Executive Directors have received commission from the Company. They have not received any commission/ remuneration from subsidiaries during the year under review.

Annual Return

The extract of the annual return pursuant to Section 92 read with rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the website of the Company under investors.

Secretarial Standards

The Company complies with all the applicable mandatory secretarial standards issued by the Institute of Company Secretaries of India.

Particulars of Employees

The particulars as required under rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure B.

Consolidation of Accounts

The Company has control over "Suprem Associates", a partnership firm by holding majority of the shares in the firm. The accounts of the said firm are consolidated as per the requirement of Indian Accounting Standards (IndAS).

Maintenance of Cost Records

The Company is maintaining the cost records as specified under Section 148(1) of the Companies Act, 2013.

Audit Committee

The Company has constituted an Audit Committee as per Section 177 of the Act and Listing Regulations.

The details pertaining to vigil mechanism, composition and meetings of the Audit Committee are included in the Corporate Governance Report.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The details as required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, is detailed in Annexure C.

Corporate Governance

A report on Corporate Governance is furnished as Annexure D and forms part of this report. This includes other disclosures as required under the provisions of the Act. The Company has complied with the conditions relating to corporate governance as stipulated in Regulation 34 of the Listing Regulations.

Corporate Social Responsibility (CSR)

The CSR Committee comprises of 1. Mr Ashwin Chandran, 2. Mr Prashanth Chandran and 3. Mr Sumanth Ramamurthi. This committee takes care of CSR policy execution to ensure that the CSR objectives of the Company are met. The CSR policy deals with allocation of funds, activities, identification of programmes, approval, implementation, monitoring and reporting. .

For the financial year 2021-22, the Company spent Rs.3.8 lakhs on CSR activities as per the provisions of the Companies Act. Annual report on Corporate Social Responsibility is provided in

Annexure E.

The CSR policy is available on the Companys website

Particulars of Loan, Guarantees or Investments

Details as per the provisions of Section 186 of the Act, is given under notes to financial statements.

Related Party Transactions

None of the transactions with related parties falls under the scope of Section 188(1) of the Act. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure F in Form AOC-2 and the same forms part of this report.

The Board has approved a policy for related party transactions which is available on the Companys website

Directors responsibility statement

Your Directors confirm that:

a) The applicable accounting standards have been followed and proper explanations provided relating to material departures, if any,

b) The Company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the Company,

c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities,

d) The annual accounts of the Company have been prepared on a going concern basis,

e) The internal financial controls are adequate and are operating effectively, and

f) A proper system for ensuring compliance of all the applicable laws are put in place and are operating effectively.

Statutory Auditors

M/s VKS Aiyer & Co., Chartered Accountants (Firm Registration No. 000066S), pursuant to the provisions of Section 139 of the Act, were appointed as the statutory auditors of the Company for a term of 5 years from the conclusion of the 56lh AGM till the conclusion of the 61st AGM to be held in the year 2023. They have confirmed that they are not disqualified and are eligible to continue in the office for the year 2022-23.

Cost Auditor

Pursuant to Section 148 of the Act, read with the Companies (Cost Records and Audit) Rules 2014, the Board of Directors, on the recommendation of the Audit Committee, appointed Mr. R Krishnan, Cost Accountant (Associate regn. no. 7799), as the cost auditor of the Company for the financial year 2022-23.

Accordingly, a resolution seeking members ratification for the remuneration payable to Mr R Krishnan, Cost Auditor is included as Item No.12 of the AGM notice.

Secretarial Auditor

Pursuant to Section 204 of the Act, the Board of Directors has appointed Mr K Duraisami, Practicing Company Secretary, Coimbatore as the secretarial auditor of the Company for the financial year 2022-23.

Insider Trading Regulations

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, 2015, the Insider Trading Code to regulate, monitor and report trading by insiders and the Code of

Practices and Procedures for fair disclosure of Unpublished Price Sensitive Information are in force.

Change in nature of business

There was no change in the nature of the business of the Company during the year under review.

Deposits from public

The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.


In April, 2022 your company has issued 700 Nos of Unlisted Secured Redeemable Non-convertible Debentures of 10 lakh each aggregating to 70 crores on private placement basis to refinance existing term loans and to meet capital expenditure and for general corporate purpose.

Material Changes

No material changes or commitments affecting the financial position of the Company occurred between the end of the financial year (i.e.31st March, 2022) and the date of this report.

Vigil Mechanism/ Whistle Blower Policy

The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including Directors of the Company to report genuine concerns and to ensure strict compliance with ethical and legal standards across the Company. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and Listing Regulations, are available on the website of the Company at The details of Whistle Blower Policy forms part of the Corporate Governance Report annexed with this report.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has constituted an internal complaints committee to address the complaints regarding sexual harassment. All employees are covered under this policy. The Company has not received any complaints during the year under review. The details relating to Complaints forms part of the Corporate Governance report.

Details of Application made or any proceeding pending under The Insolvency and Bankruptcy Code, 2016 during the year

No applications have been made and no proceedings are pending against the Company under the Insolvency and Bankruptcy Code, 2016 during the year under review.

Details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the banks or financial institutions along with the reasons thereof

The disclosure under this clause is not applicable as the Company has not undertaken any one-time settlement with the banks or financial institutions during the year under review.

Unclaimed Shares

In accordance with the requirement of Regulation 34(3) and Schedule V Part F of Listing Regulations, the details in respect of equity shares lying in the suspense account is as follows.

Particulars Number of share holders Number of Equity Shares
Aggregate number of shareholders and the outstanding shares in the suspense account as on 01-Apr-2021 231 44725
Number of shareholders approached the Company for transfer of shares from suspense account during the year 25 3975
Number of shareholders to whom shares were transferred from suspense account during the year 25 3975
Aggregate number of shareholders and outstanding shares in the suspense account as on 31-Mar-2022. 206 40750

The voting rights on the shares outstanding in the suspense account as on 31st March, 2022 shall remain frozen till the rightful owner of such shares claims the shares.


Your Directors thank the Shareholders, Customers, Suppliers and Bankers for their continued support during the year. Your Directors also place on record their appreciation for the contributions made by Employees at all levels towards the growth of the Company.

By order of the Board
Coimbatore Ashwin Chandran
25-May-2022 Chairman and Managing Director