Premco Global Ltd Management Discussions.

Overview

The global outbreak of COVID-19 during 2020-21 infected nearly 50 million people as of March 2021, posing a major threat to human health. The Indian GDP grew by -7.3% and Nominal GDP figures stood at -3%. The First Quarter of 2021 (Last Quarter of FY 2021) showed a remarkable recovery of 4%. The year 2020 has been the most challenging year in our lifetimes. What started as a promising year for our industry quickly turned into a difficult one. COVID-19 pandemic brought the entire world to a standstill, equitably affecting markets and supply chains globally.

Consumer purchase of textile and apparel were hit badly due to the global lockdowns and economic recession. The global apparel consumption is estimated to have shrunk by 22% in 2020. However, 2021 looks brighter given the onset of vaccination drives, growth in e-commerce sales of apparel, and resumption of global supply chains.

INDIAN TEXTILE INDUSTRY

" India’s textiles industry contributed 7% to the industry output (by value) in 2018-19. The Indian textiles and apparel industry contributed 2% to the GDP, 12% to export earnings and held 5% of the global trade in textiles and apparel in 2018-19.

The share of the India’s textiles and apparel exports in mercantile shipments was 11% in 2019-20.

Textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country. The domestic textiles and apparel market stood at an estimated US$ 100 billion in FY19.

Exports of textiles (RMG of all textiles, cotton yarn/fabs./made-ups/handloom products, man-made yarn/fabs./made-ups, handicrafts excl. handmade carpets, carpets, jute mfg. including floor coverings) stood at US$ 26.08 billion, as of February 2021

TECHNICAL TEXTILES IN INDIA

PREMCO GLOBAL LIMITED, is a member of Technical Textiles Association. Technical textiles are textiles materials and products used for their technical performance and functional properties. Technical textile has a huge scope in India and is a sunrise sector.

India accounts for 3% of the world’s technical textile production producing roughly 90,000 MT of technical textiles. India accounts for 4% of global technical textile exports and 3% of global imports. The technical textiles industry in India was estimated at Rs 1,16,217 crore in the year 2018. The domestic market is projected to reach Rs.2,00,823 crore by 2021 with a CAGR of 20%. "

OPPORTUNITIES AND THREATS FOR THE COMPANY OPPORTUNITIES:

For the apparel industry in general and our market in particular:

Company has a locational advantage of supplying goods to its overseas customers, as it also has a plant in VIETNAM, which is presently a large global textile Hub, and ranks amongst the most rapidly growing countries for textiles manufacturing and exporting.

Increasing fashion consciousness, higher disposal incomes and consumers becoming more aspirational, discerning and brand savvy, will help the brands for which Company has been manufacturing ELASTIC TAPES grow rapidly and indirectly will increase the demand for Company’s products.

In 2018-19, Company received SINGLE STAR EXPORT

HOUSE CERTIFICATE, which will enable our company to be recognized for ease of operation with tax and banking officials.

THREATS

Many major international apparel brands have commenced operations in India realizing that Indian markets are likely to emerge as one of the largest markets in the world in the next few decades. Due to this we expect enhanced competition for the Company’s Products.

Company’s Exposure to Foreign Currency Risks due to Overseas Operations.

SEGMENTWISE PERFORMANCE:

The Company is mainly engaged in the business of Manufacturing of Woven & Knitted Elastic Tapes and all other activities of the Company revolve around the main business, and as such, there are no separate reportable segments.

OUTLOOK

Company continues to strive for maximizing its capacity utilization in India & Vietnam by concentrating on new customers and innovating and expanding its Product Mix for its Products.

1. FINANCIAL SUMMARY HIGHLIGHTS

The Financial Performance for financial year 2020-2021 is summarized in the following table: -

Rs. in Lakhs

Particulars Standalone Consolidated
March 2021 March 2020 March 2021 March 2020
Total Revenue 6,496.97 4,970.31 10,269.05 8,029.26
Expenses 5,596.33 4,861.04 7,728.19 6,811.60
Profit Before Finance Cost, Depreciation & Amortisation Expenses 900.64 109.27 2,540.86 1,217.66
Finance Cost 80.85 121.29 166.54 222.78
Depreciation & Amortization Exp. 204.05 212.92 457.70 461.72
Profit/(Loss) before Extraordinary Items 615.74 (224.94) 1,916.62 533.16
Extraordinary Items 134.94 22.25 134.94 22.25
Profit/(Loss) before Taxation 480.80 (247.19) 1,781.68 510.91
Less : Provision for current Taxation 79.53 - 167.52 17.81
Deferred Taxation adjustment 44.69 (71.12) 44.69 (71.12)
Short/(Excess) Income Tax Provision (2.88) (2.67) (2.88) (2.67)
Profit/(Loss) After Taxation 359.46 (173.40) 1,572.35 566.89
Minority Interest - - 181.54 108.00
Other Comprehensive Income (Net of Tax) (0.52) (87.56) (0.52) (87.56)
Total Comprehensive Income 358.94 (260.96) 1,571.83 479.33
Paid up Equity Share Capital 330.48 330.48 330.48 330.48
Earnings Per Share (Rs.) 10.88 (7.90) 42.08 11.24

FINANCIAL PERFORMANCE, OPERATIONS AND STATE OF THE COMPANY’S AFFAIRS

STANDALONE ANALYSIS

During the year under review, the total revenue stood at Rs. 6,496.97 Lacs as against Rs. 4,970.31 Lacs in the previous year. Company’s revenue from operations stood at Rs. 6,201.59 Lacs as against Rs. 4,542.36 Lacs in the previous year Other Income stood at Rs. 295.38 Lacs as compared to Rs. 427.95 Lacs in previous year. The Company incurred Net Profit after Tax of Rs. 359.46 Lacs as compared to the Net loss of Rs. 173.40 Lacs during the previous accounting year.

CONSOLIDATED ANALYSIS

During the year under review, on consolidated basis, the total Revenue stood at Rs. 10,269.05 Lacs as compared to Rs. 8,029.26 Lacs in the previous year. Revenue from operations stood at Rs.9,954.46 Lacs as against Rs. 7,632.16 Lacs in the previous year. Other Income stood at Rs. 314.59 Lacs as compared to Rs. 397.10 Lacs in previous year. Net Profit after Tax stood at Rs. 1,572.35 Lacs as compared to the Net Profit after Tax of Rs. 566.89 Lacs during the previous accounting year.

FINANCIAL VISION AND OUTLOOK:

The Company Targets to Maximize, its capacity utilisation in India & Vietnam, for the financial year 2020-21 by entering new markets like Europe and Bangladesh and introducing new Products.

Key financial measures (Standalone)

2020-21 2019-20
Financial Stability Ratios :
Total Debt/Equity (x) 0.03: 1
Current Ratio (x) 2.95 3.25
Quick Ratio (x) 1.56 1.98
Interest cover (x) 6.94 (2.04)
Performance Ratios :
Return on Assets (%) 4.33 -3.33
RoCE (%) 5.42 -4.08
Asset Turnover (%) 74.87 57.88
Working Capital/Sales (x) 0.42 0.60
Return on Equity (%) 5.42 -4.08
Profitability Ratios :
EBITDA (%) 12.34 -0.75
PBT (%) 7.74 -8.11
PAT (%) 5.79 -5.74
Efficiency Ratios :
Receivables in days 76 65
Inventory in days 147 144
Payables in days 48 55
Working capital cycle in days 295 391

Key financial measures (Consolidated)

2020-21 2019-20
Financial Stability Ratios :
Total Debt/Equity (x) - -
Current Ratio (x) 3.84 3.21
Quick Ratio (x) 2.35 1.63
Interest cover (x) 11.69 2.75
Performance Ratios :
Return on Assets (%) 12.17 3.73
RoCE (%) 16.39 4.97
Asset Turnover (%) 87.14 76.71
Working Capital/Sales (x) 0.48 0.46
Return on Equity (%) 16.39 4.97
Profitability Ratios :
EBITDA (%) 24.16 14.07
PBT (%) 17.89 5.10
PAT (%) 13.97 4.87
Efficiency Ratios :
Receivables in days 56 33
Inventory in days 187 216
Payables in days 37 43
Working capital cycle in days 389 359
Growth Ratios (Y-o-Y) :
Net revenue growth (%) 27.90 11.33
Net sales growth (%) 30.61 9.18
EBITDA growth (%) 123.93 33.16
PBT growth (%) 357.12 1.31
PAT growth (%) 274.41 9.25

MATERIAL DEVELOPMENT IN HUMAN RESOURCES (INCLUDING NO OF PERSONNEL EMPLOYED)

The Company believes that Human Resources is one of the most vital resources and a key pillar in providing the Organization a competitive edge in a current business environment.

The Work Environment is very challenging and performance oriented. The Company recognizes employees potential and provides them with growth opportunities and takes suitable measures for employees welfare.

As on 31st March 2021, Premco Global limited Employs 500 strong work force in Indian Operations and more than 300 Managers , Workers and staff in Vietnam.

Performance Management for Staff Members :

The Company has designed and implemented a Performance Management System (PMS) that allows individual Goal/KRA (Key Result Area) setting. This enables a two-way discussion between a Staff Member and his/her Reporting Manager (Coach) which ensures that the organization’s objectives are percolated down to teams and individuals.

Talent Acquisition:

The Company continues to strengthen both leadership and managerial team. Taking into consideration the increasing scale of operation, we have inducted senior leaders and executives who bring rich experience from world-class organizations around the world, as well as youngsters , who bring fresh energy into our organization.

GROUP INSURANCE (COVID 19) :

Company has covered its all employees for group insurance to ensure that all the employees get safety and also ensured that all the plants comply with government norms to ensure social distancing and safety measures.

Company has also invested into PPE to ensure fumigation and other sanitization facilities within the Offices which work under COVID 19 scenarios.

For Employees in the Age Group of plus 60, the Company has offered them full Protection upto 3 Lacs for any disease by covering them in a separate Mediclaim Group Insurance Policy.

WORK FROM HOME FACILITY :

During Pandemic, Company offered its employees work from Home facility to ensure that Company’s IT integrated Solutions are used to fullest Extent , enable Company to meet the statutory requirements as well Tax Compliances in addition to Employee Working Facility.