PBM Polytex Ltd Management Discussions

(ANNEXURE TO DIRECTORS REPORT)

??Industrial Structure and Developments

PBM Polytex Limited, established in 1919, began manufacturing operations in 1922 at Petlad, Gujarat. After facing near-terminal financial distress, the Company was revived by the current management in 1978 through phased modernization. Between 1980 and 1998, capital was raised through internal accruals, public and rights issues, and private placement of debentures, transforming PBM into a consistent dividend-paying entity. Its shares were listed on the Bombay Stock Exchange in 1986, and bonus shares were issued twice.

A second spinning unit was established in 1990 at Borgaon, District Chhindwara (MP). The Company also invested in renewable energy by installing four windmills (aggregate capacity: 1600 KWA) in Jamnagar and Kutch, Gujarat, during 2006 07. In FY 2024 25, PBM Polytex expanded its sustainability initiatives:

Phase I Solar Plant: Commissioned at a cost of 1.82 Crore, generating 9.19 lakh units annually, resulting in savings of 66 lakh per year. The project was fully funded without borrowings.

Phase II Solar Plant: Commissioned in May 2025 at a cost of 54 lakh, expected to generate 9.95 lakh units annually, with projected savings of 10 lakh per year.

These investments reflect the Companys commitment to reducing energy costs and enhancing operational resilience.

??Market Analysis

The Indian textile industry remains one of the largest employment generators globally. However, cotton yarn spinning units face mounting challenges: -Cotton Price Disparity: As of August 2025, Indian cotton prices remain elevated 71.21/quintal for medium staple and 75.21 for long staple following a 7.6% MSP hike. This has pushed ready cotton prices up by 2,500 per candy.

-Global Benchmark: International cotton prices hover around 64.5 cents/lb, creating a significant cost gap.

-Import Duty Impact: The 11% import duty on cotton continues to distort competitiveness, although a temporary waiver (Aug Sep 2025) offers short-term relief.

-Export Headwinds: A 25 50% tariff imposed by the United States has sharply reduced export viability, particularly for cotton yarn.

The Company reported a Profit after Tax (PAT) of 1.47 Crore for QE June 2025, marking a 32.4% decline from the prior four-quarter average.

??Opportunities, Threats, Risks & Concerns Opportunities:

-Solar energy investments to reduce power costs

-Policy advocacy for permanent removal of cotton import duties -Export diversification to mitigate tariff risks

Threats & Risks:

-Cotton remains a rain-dependent crop, vulnerable to climatic and policy shifts -Rising MSP and import duties inflate input costs -Competition from newer, tech-enabled units with lower production costs

??Segment-Wise Performance

Cotton Yarn: The Companys core product continues to face margin pressure due to poor price realization and weak export demand.

Wind Energy: The four windmills are operating at average efficiency due to aging infrastructure. Solar Power: The newly commissioned solar plants are expected to significantly reduce energy costs and improve sustainability metrics.

??Internal Control Systems and adequecy

The Company maintains robust internal controls commensurate with its scale and complexity. To enhance compliance and transparency two independent Chartered Accountant firms conduct internal audits at Petlad and Borgaon units. Internal Control Department regularly monitors asset protection, transaction accuracy, and legal compliance.

??Outlook

The near-term outlook for cotton yarn remains subdued due to elevated domestic cotton prices and global trade barriers. However, the upcoming cotton season (October onwards) may offer relief. The solar power investment is expected to improve cost efficiency and support long-term profitability.

??Financial & Operational Performance

FY 2024 25 witnessed high volatility in cotton and yarn markets. Domestic demand remained tepid, compressing margins. Operational cost pressures persisted due to high input prices and limited pricing power.

??Human Resources & Industrial Relations

Industrial relations remained stable across both units. Both units continues to face a shortage of skilled workers and high absenteeism, resulting in production losses. Industry-wide, absenteeism in spinning mills ranges from 11 20% daily, driven by strenuous working conditions and low job satisfaction. The HR department is actively recruiting and training apprentices to stabilize manpower and restore production efficiency.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONGWITH DETAILED EXPLANATIONS THEREOF:

The following key financial ratios in FY 2024-25 has witnessed a significant change i.e. a change of 25% or more as compared to the FY 2023-24 :-

FINANCIAL PERFORMANCE OF CURRENT AND PREVIOUS TWO YEARS BASED ON DIFFERENT INDICATORS

CAUTIONARY STATEMENT

Any changes in applicable laws, regulations and Government policies and the present epidemic leading to reduction / stoppage of production are beyond the control and anticipations of the management and may adversely affect the profitability of the Company.