super spinning mills ltd share price Management discussions

Global Scenario & Industry Condition

The year gone by has been a tough one starting with the continuing conflict between Russia and Ukraine, Global Inflation, Rise in price of essentials etc. This has reduced the imports of Yarn, Fabric and Apparel from across the world to USA & Europe. Demand recession continues in these countries, and we hope the situation will improve in the future.

The recovery of demand for textile products during the last year could not be sustained for long due to various factors like an increase in the cotton prices, geopolitical conditions and high inflation across the globe. The Indian polyester and viscose yarn noticed mixed trend, with polyester-cotton (PC) yarn showing a declining trend. Many of the mills across India, have either stopped their production totally or have reduced their production capacity, for want of sufficient orders for yarn and also due to labour shortage. Raw material costs have been increasing globally, coupled with a shortage of skilled workers. While a shift is taking place of textiles industries from China and Bangladesh to India, the industrial climate in India has also become adverse due to regular increases in input costs.

Review of Operations & Outlook for current year

The FY 22-23 was a challenging year when compared to FY 21-22. During the year 22-23, capacity utilisation was in the range of 60 to 70% only and occasionally went down to as low as 30 to 40 % because of the uncertain market conditions. In addition, APSPDCL increased the electricity tariff, resulting in 20-25% increase in power cost. Due to poor market demand for yarn and higher Cotton prices, we were not operating at our full capacity. We also faced a major breakdown of machinery at the unit and had to stop the production from mid of May 2023. The cost of the necessary repairs and replacements was significantly high. Taking all these factors are taken into consideration, the Directors at their meeting held on 26th July 2023 decided to dispose the Super B Units plant and machinery and the Company has commenced the process of obtaining shareholder consent for the same purpose via Postal Ballot by July 2023. The sale proceeds from the transaction shall be utilised for discharging the liabilities of the Company. Further, the Company has given specific properties on operating lease arrangements. As the Companys liabilities are significantly reduced and its focus is shifting to exploring additional business opportunities, such as rental services, it is anticipated that the Company will experience a rapid recovery in the foreseeable future.

Opportunities & Threats

Textile industry is concerned about the various threats which includes factors such as rising competition in the market both on the domestic & export front, geopolitical tensions, cost of raw material and its availability, slowdown in demand & change in fashion trends, etc. These challenges need to be overcome by all the companies, including our Company. The changing nature of the real estate sector means there are several opportunities for Companies with commercial property. Also Leasing out commercial property can provide a steady stream of income for the company. However economic conditions, saturation of the commercial real estate market and other related expenses could pose a threat to the Company at large. Your company is hoping for a better future performance considering these factors.

Risks and concerns

The Company is exposed to a number of risks such as economic, regulatory, taxation and environmental risks as well as sectoral investment outlook. In India, a real estate companys business is dependent on the easy availability of finance. An economic slowdown can result in fund shortages as lenders may want to act safe.

Health, safety and Security Environment

Your Company has always been adopting all possible safety measures concerning the health and safety of the Workers and staffs at all levels. Your company is committed to providing all its employees with a healthy and safe work environment.

Human Resources/Industrial Relations

Industrial relations remained cordial during the period under review. Necessary measures are being adopted to improve the life, work culture, productivity, efficiency and effectiveness of the workers and staff at all levels. The Company has 304 employees on roll as on 31st March 2023.

Internal control systems and their adequacy

The internal financial control policies and procedures followed and adopted by the Company for ensuring orderly and efficient conduct of the business are adequate and operating effectively. The adequacy and effectiveness of the internal control systems is also being periodically reviewed by the Audit Committee of the company.

The Company has internal control policies and procedures commensurate with its size and the nature of its business. A report of auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of internal financial controls is annexed with the Auditors report.

Discussion on financial performance with respect to operational performance

Directors Report contains details pertaining to the financial and operational performance of the company for the financial year 2022-23. Further, the audited financial statements, which has been prepared in accordance with the requirement of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, discloses a true and fair view of the performance of the company during the said period.

Segment-wise or product-wise performance

The company has reported two business segments, which are Textiles and Rental Services. Segment wise details of the same are mentioned in "Note 41 – Operating Segments" which forms part of the Annual Report.

Details of Key Financial ratios

S. No Description	31.03.2023	31.03.2022	Variation in %	Reason
1. Debtors Turnover	19	6	216.67%	Due to the increase in the Average trade Receivable in the current year compared to the Previous Year.
2. Inventory Turnover	60	53	13.21%	-
3. Interest Coverage Ratio	(0.26)	0.21	(227%)	On account of the loss in the current Year compared to the Profit in the previous Year
4. Current ratio	0.50	0.57	(12%)	-
5. Debt Equity ratio	0.49	0.34	44%	On account of the erosion of Total Equity due to losses in the current year.
6. Operating Profit Margin %	(11.60%)	7.43%	(19.03%)	On account of the loss in the current Year compared to the Profit in the previous Year
7. Net Profit Margin (%)	(22.87%)	0.89%	(23.76%)	On account of the loss in the current Year compared to the Profit in the previous Year
8. Return on Networth	(21.92%)	0.77%	(22.69%)	On account of the loss in the current Year compared to the Profit in the previous Year