Sri Nacha. Cott. Management Discussions


The management discussion and analysis given below discuss the key issues of the industry.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The textile industry is the largest employer of workforce after agriculture; it plays a crucial role in the Indian economy. Its importance to the Indian economy is recognised for its significant contribution to industrial production and export earnings.

The financial year 2022-23 was a tough year for Indian spinners due to uncompetitive cotton and yarn prices and slowdown in demand. The cotton price faced a steep increase, with all time high levels hit the contribution level for the spinners. Due to this Indian cotton yarn became costly and uncompetitive in the international market. There was also a slowdown in demand for cotton yarn from developed nations due to recession and other blended yarn options.

OPPORTUNITIES, THREATS, RISKS AND CONCERNS:

The spinning industry is dependent on cotton which is an agricultural product and this single input will be about 60% of the selling price of yarn, hence, price fluctuations and availability of cotton will play major role in the performance of spinning mills always.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

At present, the segmental reporting is not applicable to the company as it operates only in single reportable business

i.e. "Textiles".

OUTLOOK:

The cotton prices at present have reduced on par with international cotton market price whereas the demand for cotton yarn and export market is yet to improve. 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.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a proper and adequate internal control system to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition. All the transactions are authorized, recorded and reported correctly.

FINANCIAL PERFORMANCE

Key Financial Ratios

FY 2022-23 FY 2021-22 Change %

Debtors Turnover Ratio

10.69 17.03 -37%

Inventory Turnover Ratio

1.90 2.78 -31%

Current Ratio

2.14 1.77 20%

Interest Coverage Ratio

-0.31 2.66 -112%

Debit Equity Ratio

2.16 1.86 16%

Return on net worth Ratio

-12.90 23.9 154%

Net profit margin

2.86 2.72 -205%

Operating profit margin

-1.07 6.18 -117%

The changes above 25% in ratios are mainly due to decrease in sales and loss.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT:

The Company has been conducting training & motivational programs for both the management staff and the workers. The purpose is to increase the competency levels in the organization. The Company recognizes the importance and contribution of its human resources for its growth and development and is committed to the development of its people.

CAUTIONARY STATEMENT:

Certain statements made in the Management Analysis and Report relating to companys outlook, expectations, etc. may constitute forward looking statements within the meaning of the applicable laws and regulations. Actual results may vary from outlook, expectations etc., whether express or implied. Several factors could make significant difference to the Companys operations which may include climate conditions, economic conditions affecting demand and supply, Government regulations, natural calamity, etc. over which the company does not have any control.

9 SRI NACHAMMAI COTTON MILLS LIMITED

ANNEXURE TO DIRECTORS REPORT ANNEXURE-II

Conservation of energy, technology adsorption and research and development and foreign exchange earnings and outgo.

Particulars

Current Year ended 31.03.2023 Previous year ended 31.03.2022

1 (A) POWER AND FUEL CONSUMPTION (a) Electricity Purchased Units

1,44,25,170.00 2,70,88,364.00

Total Amount (Rs.)

12,11,33,308.00 18,27,74,982.00

Rate Per Unit (Rs.)

8.40 6.75

(b) Own Generation (i) Through Diesel Generation Units

12,323.00 47,881.00

Unit per litre of Diesel

1.93 2.56

Cost/ Unit (Rs.)

45.11 28.55

(ii) Through Steam Turbine / Generator

Nil Nil

2 Coal

Nil Nil

3 Furnace Oil

Nil Nil

4 Other / Internal Generation

Nil Nil

(b) Consumption per unit of production Yarn produced (Kgs)

39,00,998.00 77,48,560.00

Electricity Consumed (Units)

1,44,37,493.00 2,71,36,245.00

Consumption per Kg. of Yarn

3.70 3.50

(B) PARTICULARS OF TECHNOLOGY ABSORPTION The Company has no R & D Division. The Company is a member of The South India Textile Research Association and gets the benefits of their research. (C) PARTICULARS ON FOREIGN EXCHANGE EARNINGS AND OUTGO EARNINGS : Direct Exports

Nil Nil

OUTGO : Import of Spares

33,77,805.00 4,76,23,013.00

Import of Capital Goods

- -

Import of Raw Materials

11,79,85,305.00 -
12,13,63,110.00 4,76,23,013.00

For and on behalf of the Board of Directors

SD/-

P.Umayal,

Chairman cum Managing Director

Place : Salem

Date : 22.05.2023

Din 00110260