Bannari Amman Spinning Mills Ltd Management Discussions

COMPANYS BUSINESS

The Companys principal line of business is manufacturing and marketing of Cotton Yarn, Woven and Knitted fabrics, Home Textiles, Knitted Garments and Processing of fabrics. The Company has two spinning units near Dindigul, Tamilnadu with an installed capacity of 145440 spindles, Weaving and Home Textiles units at Karanampettai near Palladam with an installed capacity of 153 looms, Processing unit at SIPCOT, Perundurai with an installed capacity to process 5400 tonnes of fabric per annum, Knitting unit at Karanampettai near Palladam with installed capacity to produce 7200 tonnes of knitted fabric per annum, Garment units at Palladam Hi-tech weaving park and 27 Windmills with an installed capacity of 23.40 MW green power which is entirely used for captive consumption.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The textile industry is a vital sector of the Indian economy with a rich history dating back several centuries. The Indian textile industry is diverse encompassing a wide range of textiles including apparel, home textiles, technical textiles and traditional handloom textiles. It is one of the largest employers in the country generating jobs across the entire value chain from cotton farming and spinning to weaving, dyeing, printing and garment manufacturing. India is the worlds second largest producer of textiles and garments, sixth largest exporter of textiles spanning yarn, fabric, apparel, home and technical textile products with a share of 4% of the global trade in textiles and apparel. Indias textile and apparel exports stood at USD 44.4 billion in FY 22, an increase of 40% over the previous year and expected to reach USD 65 billion by FY 2026.

However at present Indias textile and apparel industry is facing a crisis as consumers in the United States, Europe and other big markets have cut spending on clothing following a surge in inflation after the war in Ukraine. While the overall economy is relatively strong and is outperforming major economies, the textile sector is a notable exception and orders suggest the downturn will continue well into 2023 thereby indicating a tough year for the industry.

OPPORTUNITIES AND THREATS

Notwithstanding the head winds being faced by the Industry presently, the Indian textile industry is in a much stronger position as compared to past period. Growth in domestic market, increased retail penetration, shift from unorganized to organized retail, Government support and initiatives, China vacating space in International trade are some of the factors which offer tremendous opportunity for India to improve its market share significantly in both domestic and export markets.

OUTLOOK

The government of India has initiated various policies to support textile and apparel sectors growth for the long-term horizon. Government has approved setting up of 7 Mega Integrated Textile Region and

Apparel Parks with a total outlay of INR.4,445 crore in a period of 5 years to attract cutting age technology and boost FDI and local investment in the sector. The PLI scheme for textiles is a part of the comprehensive package of measures by the Government of India to promote textile sector. The Government has recently concluded FTAs with United Arab Emirates and Australis which is expected to give a boost to the trade with the respective countries. In addition, Government is in negotiations with UK, EU to finalise FTA which could further boost our exports to these economies.

At present, the rising demand for textiles and apparel to manufacture premium quality clothing represents one of the key factors influencing the market positively in India. In addition, the easy accessibility and availability of various raw materials, such as cotton, wool, and silk, in India is contributing to the growth of the market. Apart from this, key market players are manufacturing textiles and apparel with sustainable and ethically sourced materials. They are also minimizing the use of various toxic chemicals in the textile processing and dying method to reduce water pollution in India.. Moreover, the growing number of e-commerce businesses and distribution channels selling premium quality fabrics and apparel online is offering a favorable market outlook. Furthermore, the increasing demand for durable and long-lasting clothing items due to the rising awareness about the harmful impacts of fast fashion on the environment is bolstering the market growth in India.

Hence the outlook for textile industry looks promising though the current scenario is not encouraging.

RISKS AND CONCERNS

Availability of Cotton, the main raw material for manufacture of Cotton Yarn, is subject to the vagaries of nature and the prices also fluctuate wildly based on supply/demand in the World market and Government policy on export of Cotton. Availability of skilled man power, Inadequate infrastructure, compliance with environmental regulations, fragmented supply chain are among other concerns which will have a bearing on the fortunes of the Industry.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate internal control procedures and systems commensurate with its size and nature of its business for purchase of raw materials, plant and machinery, components and other items and sale of goods. The checks and controls are reviewed by the Audit Committee for improvement in each of these areas on a periodical basis. The internal control systems are improved and modified continuously to meet with changes in business conditions, statutory and accounting requirements.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial performance of the Company has been discussed at length in Directors Report to the Members.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS FOR THE FINANCIAL YEAR 2021-22 AND 2022-23.

S.No. Ratios	31.3.2023	31.3.2022
1 Debtors Turnover	6.10	8.42
2 Inventory Turnover	3.39	4.39
3 Interest coverage	0.60	2.26
4 Current Ratio	1.25	1.37
5 Debt Equity Ratio	1.39	0.97
6 Operating Profit margin	(0.60%)	9.19%
7 Net Profit margin	(3.18%)	3.79%

DETAILS OF ANY CHANGE IN RETURN ON NETWORTH AS COMPARED TO IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF

Return on Networth 31.3.2023 - (8.42%) Return on Networth 31.3.2022 - 10.88%

The RONW has been impacted during FY 23 as the performance of the Company was severely affected due to weak demand for textile products which in turn led to reduced margins.

MEDIUM TERM AND LONG TERM STRATEGIES

The Company currently manufactures Cotton yarn, Knitted fabric, Grey and bleached woven fabric, made ups, Processed knit fabric and Apparel products for men, women and kids. The medium and long term strategies that will be initiated by the Company are discussed below.

Cotton Yarn :

The Spinning units production capacity has been increased from about 90 tonnes of cotton yarn per day to about 105 tonnes of cotton yarn per day. Moreover the Company plans to introduce new product mixes for quality sensitive consumers. Efforts are also under way to broaden the customer base.

Knitted fabric :

The Knitting unit presently produces about 20 to 25 tonnes of fabric per day. Production is against orders and emphasis will be on producing value added fabric (Lycra).

Woven fabric :

Production of fabric is generally against orders. A portion of fabric produced is transferred to Home Textile division for manufacture of value added products. Efforts are underway to identify new markets.

Home Textiles :

The main products are bleached fabric and madeups like bed linen products meant mainly for exports. Home textiles is one of the focus areas for the Company. The Company has installed machines to start Terry Towels production on trial basis apart from existing products.

Garments :

The Company is focusing on Garments segment which will cater to both domestic & export markets. (Disclosure with limits set by competitive position, medium term and long term strategies as approved by Board of Directors)

	By Order of the Board
	S V ARUMUGAM
Coimbatore	CHAIRMAN & MANAGING DIRECTOR
30th May, 2023	DIN 00002458