Suryalata Spinning Mills Ltd Management Discussions.

Overview of Operations:

Suiyalata Spinning Mills Limited is one of the largest producers of Synthetic blended Yarns. The company produce 100% PSF, 100% VSF. Melange. P/V blended yams with counts ranging from 12s to 60s. The company is having two manufacturing units at Kalwakurthy and Urukonda- pet; on Kalwakurthy - Jadcheria Road, only an hour away from the Hyderabad International Airport and the distance between the units is 7 Kms. The Company is having total installed capacity of 1,16,976 spindles in the Two manufacturing units. Both the manufacturing units are reached to almost equivalent spindle capacities i.e Kalwakurthy unit has an installed capacity of 60,000 spindles and Urukonda- pet unit has an installed capacity of 56,976 spindles. The units are maintaining standard operational system and certification of “ISO 9001:2015."

The company uses Polyester Staple Fiber (PSF) &. Viscose Staple Fiber (VSF) as inputs for manufacture Yarn. We are one of the major customers of Reliance Industries as we consume approximately 5% of their PSF production quantities.

We sell otu finished goods YARN to various Dealers located In the Indian Domestic Market as well as in the international market. Domestic sales are mainly in Mumbai. Kolkata, Delhi, Ahmedabad, Ludhiana and ichalkaranjl, Export sales are to countries like Brazil. Turkey. Spain. Iran, Argentina, Peru, Indonesia and other European countries,

COVID 19 Pandemic

At Suryalata, we have formulated a COVID-19 Core committees at manufacturing locations with different section heads to educate the workers and various precautionary measures to follow regularly during tills Pandemic. Management initiatives in providing sanitization, providing masks to all workmen, periodical health checkups and timely Vaccination was resulted to safe guard the fiealth of our personnel and also their family members. The Company had to keep operations of its two plants closed in April 2020 and could begin in a gradual manner from first week of May 2020 onwards complying the prescribed guidelines. These strict implementation of the framed precautionary measures helped to function the plants without major setbacks during the year. During lire unlock periods.

India is currently experiencing a massive second wave of COVID-19 infections. However, we expect no major change in the economic activity as the nation is preparing to face the pandemic with vaccines.

Global economic overview

The global economy reported de-growth of 3.5% in 2020 compared to a growth of 2,9% in 2019. This steep decline in global economic growth was largely due to the outbreak

of tiie novel corona virus and consequent suspension of economic activities across the world. The global economy is projected to grow by 5.5% in 2021 largely due to the successful roll-out of vaccines across the globe, coupled with policy support in large economies. (Source: IMF).

Indian economic review

The Indian government responded with sensitivity to control the pandemics spread. It introduced economic concessions to prevent banking and non-banking defaults through loan repayment moratoriums, economic reforms and confidence-enhancing measures. When aggregated, these catalysed a recovery in consumer sentiment and economic growth.

The Indian and state governments selectively lifted controls on movement, public gatherings and events from June (in Telangana State from May) 2020 onwards. The result Is that Indias relief consumption, following the lifting of social distancing controls, translated Into a full-blown economic recovery. A number of sectors in India - Textile, real estate, steel, cement, home building products and consumer durtibles, among others reported unprecedented growth. India de-grew at a relatively improved 7.5 per cent in the July-September quarter and reported 0.4 pet cent growth in the October- December quarter.

Indian Outlook

The Indian economy is projected to grow by more than 10% in FY22 as per various institutional estimates, making it one of the fastest-growing economies. Indias growth journey could be the result of a culmination of favorable tailwinds like consistent agricultural performance, flattening of the COVID-19 infection curve, increase In government spending, reforms and an efficient roll-out of the vaccine, among others.

However, the only dampener is the surge in Covid-19 in the first quarter of the current financial year that could affect public consumption of products and services.

Indian textiles and apparel industry

The Indian textile and apparel industrys market size was pegged at IIS$ 133 billion in 2020. This industry contributes to 2% of Indias GDP and is anticipated to grow at a CAGR of 13.80% during 2021-2026. The Government made investments under Integrated Textile Parks Scheme and the Technology Upgradation Fund to encourage private investments.

The country is among one of the largest producers of textile and apparel. The Indian textile and apparel industry contributes to 7% of global industry ourpur in terms of value and 12% through exports.

In terms of employment, the Indian textile industry is the second largest employer in the countiy after die agricultural sector, providing direct and indirect employment to around 100 million people.

Growth drivers

Lower cost of production: India has a lower cost of production in terms of skilled manpower and availability of abundant raw materials, which gives the country a competitive advantage over other countries.

Increase in demand of end-user segments: There has been an increase in the demand for technical textiles on account of growth of its end-user segments such as automotive, health care, infrastructure and oil and petroleum.

Growth of Indian online retail sector: The market size of Indian online retail sector has increased from US$ 32.7 billion in 2018 to US$ 60 billion in 2020. This rapid expansion can be credited to increase in e-commerce, government policy of allowing 100% FDI into the sector and increase in digital buyers. This rise in digitization is expected to strengthen demand for textiles and apparel in the country.

Policy support: The Government provided a total outlay of T 10,683 crore under the Production Linked Scheme for man-made fibres and technical textiles. Moreover, T/00 crore was allocated in the Union Budget 2021-22 for Amended Technology Upgradation Scheme (ATUFs) against ? 545 crore in the last one, which will help in clearing the pending capital subsidy.

(Source: Invest India, Financial Express)

Risks

1. COVID 3,d wave fear and Complete Vaccination for all.

2. Uncertainty about the future due to COVID and Its Variants

3. Lack of Demand in the Product.

4. Transport and Export restrictions due to COVID

5. Cost Inflation for Raw Material, Personal and other Operational Costs.

Internal Control Systems and their Adequacy:

The Company has a well established framework of internal controls in all areas of its operations, including suitable monitoring procedures and competent personnel. In addition to statutoty audit, the financial controls of the Company at various locations are reviewed by the Internal Auditors, who report their findings to the Audit Committee of the Board. The Audit Committee is headed by an Independent Director and this ensures independence of functions and transparency of the process of supervision.

The Committee meets to review the progress of the internal audit initiatives, significant audit observations and planning and implementation of follow-up action required. The Company conducts its business with integrity and high standard of ethical behavior and in compliance with the laws and regulations that govern its business.

Review of Financial & Operational performance:

Revenue from operations of your Company for the Financial Year 2020-21 was 27,653 Lakhs in comparison to ? 37,014 Lakhs in the previous year. The production during the year was 21,488 MTS in comparison to 26,165 MTS in previous year. The Company operation was dropped by ONE Quarter period in theyear 2020-21 due to COVID-19 Pandemic.

Your Company has earned a Profit Before Tax of ? 2648 Lakhs in comparison to ? 1,991 Lakhs in the previous year. The Company earned a profit after tax of T18 7 7 Lakhs in comparison co ? 1,411 Lakhs in the previous year.

Key Financial Ratios:

Debtors / Turnover; Current year — 6.06 % ( previous year 6.68%) Improved with close monitoring of customer collections.
Inventory/ Turnover: Current year - 16.20% ( previous year 6.85%) Stocks Increased due to sluggishness in the market and slow movement of stocks in Match 2021.
Interest Coverage Ratio Current year - 3.05% ( previous year 2.70%) Increased with improvement of margin on sale of products.
Debt / Equity Ratio Currentyear -0.52 ( previous year 0.78) Improved due to repayment of borrowings and increase of equity.
Operating Profit Margin (PBT) Current year - 9.58% ( previous year 5.38%) increased with better realization of selling prices.
Net Profit Margin (PAT) Current year - 6.78% ( previous year 3.81%) Increased with lower rate of Taxes and better realization of selling prices.
Return on Net worth Current year - 12.65%: (previous year 10.91%) Increased with better realization of average selling prices.

Human resources and industrial relations

The Company believes that the quaiily of employees is the key to its success. In view of this, it is committed to equip them with skills, enabling them to evolve with technological advancements.

During the year, the Company organised training programmes in technical skills, behavioral skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and code of conduct. Considering the health and safety of employees and advisories, orders and directions issued by State and Central Governments to restrict the novel corona virus, the Company implemented a work from home policy to ensure employee safety.

The HR department of the Company was continuously in touch with employees to guide and solve problems. It created awareness regarding COVID19 and educated employees about precautions. The Company conducted all interviews through telephone and video calls in reference to the need for social distancing. The Company prepared a systematic operating plan to address COVID-19 after the lockdown is lifted. The Companys permanent employee strength stood at 1376 as on 3151 March, 2021.

Corporate Social Responsibility

Tiie company formulated CSR polity to touch and transform peoples lives by promoting health care, education including special education among children and employment opportunities for women, providing malnutrition, sanitation and drinking water, animal welfare etc,.

During the year Suryalata has taken up initiative to educate Vedic students thru Vedic vidyalayam and animal welfare by maintaining Goshala, contributions made to help the poor students with special education required to participate in competitive exams and also took COVID protection measures.

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectations and estimations, which may be forward-looking statements within the meaning of applicable laws and regulations.