Standard Industries Ltd Management Discussions.
TEXTILE TRADING DIVISION & OUTLOOK
For the Financial Year under review viz., April, 2018 to March, 2019, the Company has achieved a Textile Trading turnover of Rs. 1258.19 lakhs in comparison with Rs. 999.42 lakhs for the previous Financial Year. Thus achieving an increase of 26%.
In addition to our regular product range of PV Suiting/ Uniform Suiting and Shirting, 100% Cotton Poplin, Lawn, etc., this year we have added Poly Cotton Shirting. Our range of products is well accepted in the market and this has helped us in achieving better turnover.
The effect of GST has benefitted the Corporate Sector giving level playing field against the decentralized sector. The Company is planning to expand other potential markets for our products which may help in getting better results in the current year.
PROPERTY DIVISION & OUTLOOK
The Standard Mills Company Limited was incorporated in India in the year 1892 under the Indian Companies Act, 1882. In line with the diverse nature of its business, it had changed its name from The Standard Mills Company Limited to Standard Industries Limited, (the Company) in October 1989. The Company also has a Property Division which comprises of assets which are in excess of business needs, which the Company would liquidate based on market conditions.
The Company had on 1st September, 2016, entered into a Memorandum of Understanding (MOU) in respect of the proposed transfer and assignment to Feat Properties Private Limited of the Companys leasehold rights in approx. 62.25 acres comprising of Plot No. 4 situated at Trans-Thane Creek Industrial Area in the Village of Ghansoli and Savali, District Thane ("Property"). The said MOU contemplated fulfilment of various conditions precedent as well as other terms and conditions, to be satisfied by the respective Parties. Certain conditions precedent/terms and conditions were not fulfilled. Accordingly, the said transfer and assignment of the property has not been completed. Arising out of and in pursuance of such compliances, the Parties have mutually decided to terminate the said MOU. Consequently, Standard Industries Limited and Feat Properties Private Limited have terminated the said MOU on 29th March, 2019, vide Letter of Termination dated 29th March, 2019, in accordance with the terms and conditions contained therein.
Influence of competitively priced private labels in modern trade and e-commerce market places is bringing in new value conscious consumers to the Industry. On the other hand, fashion led premium consumers preferences are switching over to product made from high end fabrics and innovative designs. The market is clearly drawing distinction between the value led and the fashion conscious consumers both in terms of product as well as the channel preferences. GST implementation has helped the Corporate Sector giving it an edge over the domestic unorganised Industry.
During the year under review, turnover of Textile Trading has increased compared to last year.
The Company is optimistic in Textile Trading, as our main strength is brand image and this has given us growth in our turnover. We have introduced Poly Cotton Shirting in our product range and our range of products is well accepted in the market place.
The Property Division of the Company has its presence in Navi Mumbai area since 5 decades which is fast developing.
The textile trading faces the threat of constant inflow of cheaper alternatives from unorganised sector.
Due to increase in competition from other players in the market, the margins of the Company may be under pressure.
OPPORTUNITIES & CHALLENGES
The Company largely benefits from its strong brand name. By introducing poly cotton shirting, more value added fabric and new product line, the Companys performance in textile trading will be enhanced.
GST has led to reduction in import duties across the segments leading to serious threat of imports from China, Thailand, etc.
Downward revision in duty drawback rates has added to the woes of the Textile Sector.
Based on the market conditions, the Company is awaitng a good opportunity to liquidate the companys leasehold rights at Navi Mumbai, District Thane.
Segment-wise performance together with discussion on financial performance with reference to the operational performance has been dealt with in the Directors Report which should be treated as forming part of the Management Discussion and Analysis.
INTERNAL CONTROL SYSTEMS & ADEQUACIES
The Company has proper and adequate system of internal control to ensure that all assets are safeguarded and protected against loss from unauthorized use on disposition and transactions are authorized, recorded and reported correctly.
Internal control systems are supplemented by Internal Audit Reviews, coupled with guidelines and procedures updated from time to time by the Management.
Internal control systems are established to ensure that the financial and other records are reliable for preparing financial statements.
Internal Audit System is engaged in evaluation of internal control systems. Internal audit findings and recommendations are reviewed by the Management and Audit Committee of the Board of Directors.
As on 31st March, 2019, the employees strength (on permanent roll) of the Company was 12.
FINANCIAL STATEMENT ANALYSIS
In accordance with SEBI (Listing Obligation and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios.
The Company has identified the following ratios as key financial ratios:
|Particulars||Note no.||Year ended March 31, 2019||Year ended March 31, 2018|
|Debtors Turnover (in days)||1||68||48|
|Inventory Turnover (in days)||2||7||15|
|Interest Coverage Ratio||3||(0.30)||2.81|
|Debt Equity Ratio||5||2.79||1.30|
|Operating Profit Margin (%)||6||3.58%||-2.80%|
|Net Profit Margin (%)||7||-188.41%||112.45%|
Ratios where there has been a significant change from year ended March 31, 2018 to year ended March 31, 2019
1. Debtors Turnover (in days): Debtors turnover is computed as net credit sales divided by average account receivable. The movement in this ratio is on account of increase in credit sales and average debtors during the current year as compared to the previous year.
2. Inventory Turnover (in days): Inventory turnover is computed as cost of goods sold divided by average inventory. The movement in this ratio is on account of increase in cost of goods sold which is directly related to the increase in the Companys sales and decrease in average inventory balance during the current year as compared to the previous year.
3. Interest Coverage Ratio: Interest coverage ratio is computed as Earnings before interest and Tax (EBIT) divided by Interest expense. The movement in this ratio is on account of increase in the Companys interest cost, as additional loan is withdrawn during the current year.
4. Current ratio: Current ratio is computed as current assets divided by current liabilities. The movement in this ratio is on account of increase in current liability during the current year as compared to the previous year which includes current maturities of long-term borrowings.
5. Debt Equity Ratio: Debt equity ratio is computed as Long-term Debts divided by shareholders fund. The movement in this ratio is on account of additional loan withdrawn during the current year as compared to the previous year.
6. Operating Profit Margin (%): Operating profit margin is computed as operating income divided by revenue. The movement in ratio is on account of increase in Revenue and operating income during the current year as compared to the previous year. As there was operating loss in the previous year and operating profit in the current year the ratio moves from negative to positive.
7. Net Profit Margin (%): Net profit margin is computed as net profit divided by revenue. The movement in ratio is on account of increase in revenue during the current year as compared to the previous year. Additionally the Company has incurred a net loss during the current year as compared to net profit during the previous year.
THE DETAILS OF RETURN ON NET WORTH ARE GIVEN BELOW:
|Particulars||Year ended March 31, 2019||Year ended March 31, 2018|
|Return on Net Worth (%)||-35.76%||14.21%|
Return on net worth is computed as net profit by average net worth. Net profit has declined to net loss i.e. from profit of 1144.06 lakhs to loss of 2410.14 lakhs. Additionally there is no movement in each item of Net worth except retained earnings.