rainbow denim ltd Management discussions

1. Background

Pursuant to the Order dated December 9, 2019 of the Honble National Company Law Tribunal - Chandigarh Bench ("NCLT Order"), Corporate Insolvency Resolution Process ("CIR Process") has been initiated for the Company in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016, ("Code") and related Rules and Regulations issued thereunder. Mr. Dharmendra Kumar Bhasin ( Registration No. IBBI/ IPA-002/IP-N00816/2019-2020/L2564.) has been appointed as the Resolution Professional ("RP") in terms of the NCLT Order. The powers of Board of Directors of the Company stand suspended effective from the CIR Process commencement date and such powers along with the management of affairs of the Company are vested with the IRP.

2. As the Company is in CIR Process hence the information about Industry Structure and Developments, outlook, opportunity and threats, developments, risk and concerns has not been provided separately.

3. SEGMENTWISE PERFORMANCE

The Company operates only in one Segment, viz. manufacture of Denim Fabric and the same is reflected in the financial statements.

4. INTERNAL CONTROL SYSTEMS

The Company has an adequate system of internal controls that ensures that all assets are protected against loss from unauthorized use or disposition and all transactions are recorded and reported in conformity with generally accepted accounting principles.

5. FINANCIAL PERFORMANCE

During the year under review, the Company has achieved a sales turnover of Rupees 45.74 lakhs as compared to a turnover of Rupees 402 lakhs during the previous year.

During the year under review, Company has incurred Loss after tax of Rupees 753.05 lakhs as compared to loss of Rupees 1541.47 lakhs during the previous year.

6. SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

PARTICULARS	For the year ended March 31, 2021	For the year ended March 31, 2020
Debtors turnover ratio	7.79	2.63
Inventory turnover ratio (On Cost of Goods sold) **	1.93	2.56
Interest coverage ratio (Earnings before interest and tax / finance cost) **	0.42	(0.28)
Current ratio **	0.04	0.07
Debt Equity ratio	(0.80)	(0.76)
Operating margin ratio (operating profit = profit before tax + depreciation + finance cost + loss on disposal of property, plant - other income/ revenue from operation) **	(1630.55%)	(260.01%)
Net Profit Margin (Profit for the year / revenue from operation) **	(65.70)	(86.50%)
Return on Net worth (RONW) @	4.66	10.00%

** These Ratios deteriorated due to decline in total Turnover from 1782 Lakhs to 1146 Lakhs during the current year as compared to previous year.

@ Return on Net worth (RONW) is positive because the Company incurred loss and Shareholders" Fund is also negative.

7. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

During the year under review, the manufacturing activities at the Companys Plant continued to be suspended. The Industrial Relations were affected due to labour unrest at the Lalru Plant.

9. CAUTIONARY STATEMENT

Statements in this Report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include outcome of the Corporate Resolution Process. The Company assumes no responsibility to amend, modify or revise any of the statements on the basis of subsequent developments, information or events.

	FOR RAINBOW DENIM LIMITED ( By the Order of the Resolution Professional)
Place : Mumbai	H D. RAMSINGHANI CHAIRMAN
Date : August 12, 2021	DIN:00035416