Banswara Syntex Ltd:Annual Report 2023-24 Analysis

Banswara Syntex Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Banswara Syntex Ltd. was established in 1976.

Headquarters Location and Global Presence #

The company’s headquarters are located in Banswara, Rajasthan, India. Banswara Syntex has a global presence, exporting its products to various countries.

Company Vision and Mission #

While the publicly stated vision and mission statements might be limited, generally, Banswara Syntex focuses on sustainable textile manufacturing and offering high-quality products to its customers globally.

Key Milestones in Their Growth Journey #

• 1976: Incorporation of the company.
• Significant investments in expanding production capacity over the years, including spinning, weaving, processing, and garmenting.
• Expansion into international markets and building relationships with major brands.
• Focus on sustainable manufacturing practices and investing in eco-friendly technologies.

Stock Exchange Listing Details and Market Capitalization #

Banswara Syntex Ltd. is listed on the Bombay Stock Exchange (BSE) with the code 503508 and the National Stock Exchange (NSE) with the code BANSWRAS. Market capitalization fluctuates; refer to financial websites for current figures.

Recent Financial Performance Highlights #

Refer to recent company annual reports and financial statements available on the company website or financial news portals. These will provide details on revenue, profit, debt, and other key financial indicators.

Management Team and Leadership Structure #

(Information about the management team structure will be on the company website and reports)

Any Notable Awards or Recognitions #

Banswara Syntex has received awards and recognition for its export performance, quality standards, and sustainability efforts.

Their Products #

Complete Product Portfolio with Categories #

Banswara Syntex is a vertically integrated textile company. Their product portfolio includes:

• Yarn: Cotton, blended, and specialty yarns.
• Fabrics: Woven fabrics for apparel and home textiles.
• Garments: A wide range of readymade garments, including formal wear, casual wear, and workwear for men and women.
• Technical Textiles: Fabrics for automotive applications.

Flagship or Signature Product Lines #

Banswara Syntex is known for its workwear and formal wear fabrics and garments.

Key Technological Innovations or Patents #

The company focuses on continuous technological upgrades to improve product quality and reduce environmental impact. This includes investments in:

• Advanced spinning technology.
• Energy-efficient weaving machines.
• Eco-friendly dyeing and finishing processes.

Manufacturing Facilities and Production Capacity #

The company’s main manufacturing facilities are located in Banswara, Rajasthan. These facilities cover the entire textile value chain, from spinning to garmenting. Production capacity details can be found in the company’s annual reports.

Quality Certifications and Standards #

Banswara Syntex maintains quality certifications, demonstrating its commitment to quality standards. ISO 9001 and other relevant textile industry certifications.

Any Unique Selling Propositions or Technological Advantages #

• Vertically integrated operations ensure control over quality and cost throughout the supply chain.
• Strong focus on sustainable manufacturing practices.
• Wide range of products catering to diverse customer needs.

Primary Customers #

Target Industries and Sectors #

• Apparel manufacturers
• Retail brands
• Workwear companies
• Automotive Industry

Geographic Markets (Domestic vs. International) #

Banswara Syntex has a significant presence in both domestic and international markets. They export to countries across Europe, North America, and Asia.

Distribution Network and Sales Channels #

The company uses a mix of direct sales, agents, and distributors to reach its customers.

Major Competitors #

(This section requires deeper industry research. Data on direct competitors and market share can be found via business and financial data providers or industry reports.)

Competitive Advantages and Disadvantages #

Advantages:

• Vertically integrated operations.
• Focus on sustainability.
• Established relationships with major brands.

Disadvantages:

• Susceptible to fluctuations in raw material prices (cotton).
• Competition from low-cost manufacturers in other countries.

How They Differentiate from Competitors #

Sustainability, quality, and a broad product range differentiate Banswara Syntex.

Future Outlook #

Expansion Plans or Growth Strategy #

The company is likely to continue focusing on expanding its presence in key markets, investing in sustainable technologies, and developing new products.

Sustainability Initiatives or ESG Commitments #

Banswara Syntex is committed to reducing its environmental footprint through investments in renewable energy, water conservation, and waste management.

Industry Trends Affecting Their Business #

• Growing demand for sustainable textiles.
• Increasing automation in the textile industry.
• Fluctuations in raw material prices.
• Geopolitical events that could impact supply chains.

Long-term Vision and Strategic Goals #

The company aims to be a leading sustainable textile manufacturer, providing high-quality products to its customers globally while minimizing its environmental impact.

Financial Analysis: Banswara Syntex Limited (FY 2023-24) #

Key Financial Metrics: Trend Analysis (FY2022-23 to FY2023-24) #

The company’s financial performance for FY2023-24 indicates a contraction compared to FY2022-23.

Note: 3-year trend data (FY2021-22) is not readily available in the summary tables of the provided document.

Key Financial Ratios (Standalone) #

The significant decline in profitability ratios (Interest Coverage, RoE, Net Profit Margin, Operating Profit Margin) is a major concern, primarily driven by a 16% decline in revenue from operations and margin pressures due to subdued export demand and domestic market challenges.

Business Segment Performance (Standalone - FY2023-24 vs FY2022-23) #

Note: FY2022-23 segment-wise revenue figures are not explicitly provided in the “SEGMENT-WISE PERFORMANCE” section of the MD&A. Production volume changes indicate a decline across all segments due to pricing pressures, subdued demand (yarn), lower global market demand (fabrics), and slowdown/recession in Europe, UK, and US (garments). Export turnover decreased from ₹725 crore (48% of total turnover) in FY2022-23 to ₹532 crore (42% of total turnover) in FY2023-24.

Major Strategic Initiatives and Progress #

• Modernization & Capacity Expansion:
  • Invested ₹101.58 crore in FY2023-24 for modernization of production capacities (FY2022-23: ₹96.95 crore).
  • Capital-work-in-progress stood at ₹19.65 crore and advances to capital goods suppliers at ₹19.98 crore as of March 31, 2024.
  • Total production capacity as of March 31, 2024: Yarn (141,280 ring spindles, 160 Air Jet spindles), Fabrics (464 shuttle-less looms, 4.0 million meters/month processing), Garments (4.10 Lakh pieces/month).
• Subsidiary Investment: Invested ₹3.74 Crores in the equity shares of wholly-owned subsidiary Banswara Brands Private Limited.
• Future Growth Drivers (Outlook):
  • Focus on domestic consumption of fabrics & garments and global opportunities.
  • Fortifying leadership team and adopting a divisional approach (Yarn, Fabric, Garments) to optimize operational efficiency and profitability.
  • Priorities include developing Value Added Yarn and expanding branded fabric business (as per Annexure 1, Item III.2).
• Human Resources Development:
  • Introduced a comprehensive management trainees program.
  • Offers an extensive internship program.
  • Conducts training & development programs: Team Building/Interpersonal Skills, Personality Development, Leadership Training.
  • Standardizing HR practices and policies across the group.
  • Strengthening compliance structure.
  • Introduced ‘Vartalaap’, a one-to-one employee grievance redressal session.

Risk Landscape Changes #

• Major Threats Identified:
  • Geopolitical Tensions: Trade wars and restrictive trade policies disrupting supply chains and market access. (Persisting threat)
  • Currency Fluctuations: Sharp variations in exchange rates creating an unpredictable business environment. (Persisting threat)
  • Persistent Inflation: Rising commodity prices exerting pressure on profit margins and potentially reducing consumer purchasing power. (Persisting threat)
  • Raw Material Price Volatility: Impacting production costs and overall profitability. (Persisting threat)
  • Subdued Demand & Pricing Pressure: Experienced in FY2023-24, impacting exports (due to geopolitical tensions, recession/slowdown in Europe, Turkey, US, UK) and domestic market. This was a key factor in the decline in operational revenue and margins.
• Opportunities:
  • Strong domestic market foundation with rising disposable incomes and urbanization.
  • Abundant raw materials (cotton, jute) and complete textile value chain in India.
  • Competitive production costs due to a large, skilled workforce.
  • Government initiatives (e.g., promoting technical textiles, SAMARTH scheme, FTAs).
  • Potential for increased exports due to global demand diversification (China+1 strategy) and FTAs (EFTA, potential UK, Canada, EU deals).
  • Indian yarn market expected to grow at 3-4% CAGR (fiscals 2024-2028).

The primary change in the risk landscape for FY2023-24 was the materialization of demand-side risks (subdued export and domestic demand) and pricing pressures, significantly impacting financial performance.

ESG Initiatives and Metrics #

• Corporate Social Responsibility (CSR):
  • Average net profit for CSR calculation (last 3 years): ₹8381.54 Lakhs.
  • 2% CSR obligation for FY2023-24: ₹167.63 Lakhs.
  • Total amount spent on CSR in FY2023-24: ₹169.69 Lakhs (exceeding obligation).
  • CSR focus areas: Healthcare, Education, Rural Development, Gender Equality, Environmental Sustainability, National Heritage, Art and Culture, Disaster Response, Contribution to Funds.
  • Projects undertaken in FY2023-24 (other than ongoing): Training for rural sports, promoting education & vocational skills, eradicating hunger/poverty/malnutrition (including public toilets & safe drinking water), environmental sustainability, protection of national heritage, promoting healthcare. All these projects were in the local area of Banswara (Rajasthan).
• Energy Conservation:
  • Continued efforts to improve energy usage efficiencies.
  • FY2023-24 savings of ₹89.92 Lakhs in electricity bills through rebates.
  • Installed 873 energy-efficient LED lights.
  • Replaced several motors with energy-efficient ones.
  • Installed a 4 MW Solar Power plant.
  • Upgradation of spinning machinery (various replacements with energy-efficient models).
  • Replacement of old TFO Machines saving ₹80 Lakh annually.
  • Replacement of old Autoconer Machines saving ₹12 Lakh annually

Detailed Analysis #

Banswara Syntex Limited - Financial Analysis Report for FY 2023-24 #

Standalone Balance Sheet Summary (₹ in Lakhs) #

Standalone Statement of Profit and Loss Summary (₹ in Lakhs) #

Cash Management Analysis: Banswara Syntex Limited (FY 2023-24) #

Cash Flow and Liquidity #

Operating, Investing, and Financing Cash Flow Components (Standalone Basis, ₹ in Lakhs) #

Note: Capex taken as “Acquisition of Property, Plant and Equipment” from ICF. Net Debt from FCF components (Proceeds - Repayments of Term Loans +/- Change in Working Capital Facilities). FCFF and FCFE are indicative based on available cash flow statement items.

Working Capital Management Efficiency (Standalone Basis) #

Financial Performance and Risk Analysis: Banswara Syntex Limited (FY 2023-24) #

Overall Financial Performance Overview #

Banswara Syntex Limited reported a significant downturn in financial performance for FY 2023-24. Revenue from operations declined by 15.7% to ₹1264 crore from ₹1499 crore in FY 2022-23. Profit Before Interest, Depreciation & Tax (PBIDT) fell sharply to ₹121 crore from ₹213 crore, and Profit After Tax (PAT) decreased to ₹36 crore from ₹113 crore. Earnings Per Share (EPS) consequently dropped to ₹10.30 from ₹32.55. Export turnover decreased from ₹725 crore to ₹532 crore (42% of total turnover vs. 48% previously). The company is seeking shareholder approval to waive recovery of excess managerial remuneration totaling ₹89.55 lakhs due to inadequate profits under Section 198 of the Companies Act, 2013.

Risk Analysis #

Strategic Risks #

• Risk Factors:
  • Sustained downturn in global textile demand due to geopolitical tensions, recession, and slowdown in key export markets (Europe, Turkey, US, UK).
  • Intense competition in domestic and international markets, leading to pricing pressures.
  • Fluctuations in international trade policies, tariffs, and potential impact of new/pending Free Trade Agreements (FTAs).
  • Shifting consumer preferences towards sustainable and technically advanced textiles.
  • Dependency on export markets (42% of turnover).
• Severity: High
• Likelihood: High
• Trend: Worsening in FY24.
• Mitigation Strategies:
  • Focus on value-added yarn and expanding branded fabric business.
  • Optimizing capacity utilization for operational efficiency.
  • Exploring emerging export opportunities and leveraging government schemes (PLI, PMMITRA).
  • Investment in modernization (₹101.58 crore in FY24).
  • Wholly-owned subsidiary (Banswara Brands Private Limited) for D2C/retail/e-commerce.
• Control Effectiveness: Moderate
• Potential Financial Impact & YoY Change:
  • Actual FY24 Impact: Revenue decline of 15.7% (₹235 crore). Export turnover decline of 26.6% (₹193 crore). PAT decline of 68.1% (₹77 crore).
  • YoY Change: Significant negative impact on all key financial metrics.

Operational Risks #

• Risk Factors:
  • Volatility in raw material prices (cotton, synthetics) and availability.
  • Underutilization of production capacities due to demand slowdown (Yarn production -6%, Fabrics -15%, Garments -14% YoY).
  • Maintaining operational efficiency across diverse production units (spinning, weaving, finishing, garments).
  • Potential disruptions in supply chain and logistics.
  • Labor relations and skill availability/retention.
• Severity: Medium to High
• Likelihood: Medium
• Trend: Negative in FY24 due to production cuts.
• Mitigation Strategies:
  • Modernization of production capacities (₹101.58 crore invested in FY24).
  • Captive thermal power plant (33 MW) to manage energy costs.
  • Focus on efficient resource utilization and energy conservation measures.
  • HR initiatives: Management trainee programs, internships, training & development, standardizing HR policies.
  • Internal audit and review of internal financial controls.
• Control Effectiveness: Moderate
• Potential Financial Impact & YoY Change:
  • Actual FY24 Impact: Reduced production volumes directly contribute to lower revenue.
  • YoY Change: Decreased production across all segments.

Financial Risks #

• Risk Factors:
  • Significant decline in profitability impacting debt servicing capacity.
  • Foreign exchange rate fluctuations impacting export realization and import costs.
  • Liquidity management, particularly with declining profits and ongoing capex.
  • Ability to secure financing for future expansions/modernization at favorable terms.
  • Return on capital employed and equity significantly reduced.
  • Pressure on working capital management.
• Severity: High
• Likelihood: High
• Trend: Worsening in FY24 for profitability and debt serviceability metrics.
• Mitigation Strategies:
  • Prudent capital expenditure and debt management.
  • Use of forward contracts to mitigate foreign currency risk.
  • Monitoring key financial ratios and working capital.

Banswara Syntex Limited - Financial Analysis Report FY 2023-24 #

Long-term Strategic Goals and Progress #

The company’s long-term strategy focuses on leveraging domestic consumption growth and global textile opportunities. Progress in FY24 was hampered by adverse market conditions, leading to a 16% revenue decline to ₹1264 crore and a significant drop in Profit After Tax (PAT) to ₹36 crore. Key strategic initiatives include:

• Modernization and Capacity Enhancement: Investment of ₹101.58 crore in FY24 for modernizing production capacities. Current capacity: 141,280 ring spindles, 464 shuttle-less looms, and garment manufacturing capacity of 4.10 lakh pieces/month.
• Product Diversification and Value Addition: Focus on developing value-added yarn and expanding the branded fabric business. Products include synthetic blended yarn, wool yarn, fabrics, technical fabrics, and readymade garments.
• Divisional Restructuring: Adoption of a divisional approach (Yarn, Fabric, and Garments) to optimize operational efficiency and profitability.
• Market Development: Aiming to capitalize on the “China+1” strategy and Free Trade Agreements (FTAs) to boost exports. Export turnover fell to ₹532 crore (42% of total turnover) from ₹725 crore (48%) in FY23.

Competitive Advantages and Market Positioning #

• Vertical Integration: Operates as a vertically integrated textile mill.
• Diversified Product Portfolio: Manufacturing capabilities across yarn, fabrics (including technical fabrics), and garments.
• Captive Power Generation: Two captive thermal power plants with 33 MW capacity.
• Market Positioning: Increased reliance on the domestic market (58% of sales vs. 52% in FY23) as export markets faced headwinds.

Innovation Initiatives and R&D Effectiveness #

The annual report emphasizes technology absorption and efficiency improvements.

• Technology Upgradation: Investments in modern spinning machinery and TFO machines.
• Energy Efficiency: Installation of a 4 MW Solar Power plant and various energy-efficient measures.
• Product Innovation Focus: Stated priority to develop “Value Added yarn.”

M&A Strategy and Execution #

• Subsidiary Development (Banswara Brands Private Limited): Investment of ₹3.74 crore.
• Joint Venture (Tesca Textiles & Seat Components (India) Private Limited): 40.64% stake. JV saw a decline in production and revenue.
• Overall M&A Strategy: Focused on specific vertical/market expansions through a subsidiary and a JV.

Management’s Track Record in Execution #

• FY24 Performance: Decline in revenue (16%) and PAT (from ₹113 Cr to ₹36 Cr).
• Capital Expenditure: Investment in modernization (₹101.58 crore in FY24).
• Managerial Remuneration: Proposed ratification for excess remuneration paid in FY23-24. Proposed significant revisions upwards in remuneration effective April 1, 2024, subject to shareholder approval.
• Cost Auditor Remuneration: Proposed ratification for Cost Auditors’ remuneration of ₹2,60,000 for FY25.

Capital Allocation Strategy #

• Modernization of Assets: ₹101.58 crore invested in FY24.
• Investment in Subsidiary: ₹3.74 crore invested in Banswara Brands Private Limited.
• Dividend Distribution: Dividend reduced to ₹1 per share.
• Debt Management: Secured new term loans of ₹76.00 crore and repaid term loans of ₹38.58 crore.

Organizational Changes and Their Impact #

• Divisional Restructuring: Implementation of a divisional structure (Yarn, Fabric, Garments).

Banswara Syntex Limited - FY 2023-24 Financial Analysis #

Financial Performance Overview (Standalone & Consolidated) #

Banswara Syntex Limited reported a significant downturn in financial performance for FY 2023-24 compared to FY 2022-23, driven by subdued demand, geopolitical tensions, and pricing pressures in both export and domestic markets.

• Revenue from Operations:
  • Standalone: ₹1,26,401.03 Lakhs, a decrease of 15.70% from ₹1,49,944.06 Lakhs in FY23.
  • Consolidated: ₹1,26,401.03 Lakhs, indicating minimal revenue contribution from subsidiaries/JVs at the consolidated level after eliminations.
• Profitability:
  • PBIDT (Standalone): Declined by 43.13% to ₹12,127.41 Lakhs from ₹21,324.12 Lakhs.
  • PBT (Standalone): Decreased by 65.93% to ₹4,883.02 Lakhs from ₹14,332.13 Lakhs.
  • PAT (Standalone): Fell by 67.70% to ₹3,646.06 Lakhs from ₹11,288.27 Lakhs.
  • PAT (Consolidated, attributable to owners): Decreased by 68.47% to ₹3,554.12 Lakhs from ₹11,274.25 Lakhs.
• Earnings Per Share (EPS):
  • Basic EPS (Standalone): ₹10.30, down from ₹32.55.
  • Basic EPS (Consolidated): ₹10.38, down from ₹32.93.
• Dividend:
  • A final dividend of ₹1 per equity share (20% on face value of ₹5) has been recommended for FY24, compared to ₹3 per share in FY23.
  • Total dividend payout, if approved, will be ₹3.42 crore, down from ₹10.27 crore.
• Key Ratios (Changes >25% as per MD&A):
  • Interest Coverage Ratio: Significant adverse change.
  • Return on Equity Ratio: Significant adverse change.
  • Net Profit Margin Ratio: Significant adverse change.
  • Return on Net Worth: Significant adverse change.
  • Operating Profit Margin Ratio: Significant adverse change.

The decline in profitability is attributed to a 16% fall in overall revenue from operations due to weak export demand (turnover down to ₹532 crore from ₹725 crore) and challenging domestic market conditions, leading to significant margin pressure.

Operational Performance #

• Production Volumes:
  • Yarn: 287 Lakh kgs (down 6.21% from 306 Lakh kgs), due to pricing pressure and subdued demand.
  • Fabrics: 263 Lakh meters (down 14.89% from 309 Lakh meters), due to lower global market demand.
  • Garments: 36 Lakh pieces (down 14.29% from 42 Lakh pieces

Audit and Regulatory Analysis #

Financial Analysis Report: Banswara Syntex Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

• The Independent Auditors, K G Somani & Co LLP, issued an unmodified opinion on the standalone Ind AS financial statements for the year ended March 31, 2024.

Key Audit Matter #

• Existence, valuation of inventory, and significant judgments/estimates related to provision for obsolescence of slow and non-moving inventory.

Emphasis/Qualification #

• Managerial remuneration paid to Whole-Time Directors for FY 2023-24 exceeded the limit prescribed under Section 197 read with Schedule V of the Companies Act, 2013, by ₹89.55 lakhs. This payment is subject to shareholder approval for waiver/ratification at the upcoming AGM.
• Unpaid dividend for FY 2011-12 amounting to ₹4.30 lakhs, though deposited with the IEPF authority, was erroneously returned and the matter is pending resolution.

Consolidated Financial Statements #

• K G Somani & Co LLP also issued an unmodified opinion on the consolidated Ind AS financial statements.

Key Audit Matter #

• Similar to standalone statements, inventory existence, valuation, and obsolescence provision.

Other Auditors #

• The audit relies on the reports of other auditors for one joint venture (Tesca Textiles & Seat Components (India) Private Limited, share of net profit ₹171.52 lakhs) and one subsidiary (Banswara Brands Private Limited, whose financials were not material in terms of profit/loss to the consolidated figures but whose assets and revenues were included).

Emphasis/Qualification #

• The same issue regarding managerial remuneration exceeding statutory limits by ₹89.55 lakhs is noted, subject to shareholder approval. The IEPF dividend matter is also reiterated.

Key Accounting Policies and Changes #

Material Accounting Policies #

• The company prepares its financial statements under the historical cost convention (except certain financial instruments at fair value) on an accrual basis, complying with Ind AS. Key policies include:

Revenue Recognition (Ind AS 115) #

• Revenue from sale of goods is recognized upon transfer of control. Export incentives are recognized on an accrual basis.

Property, Plant & Equipment (PPE) (Ind AS 16) #

• Measured at cost less accumulated depreciation. Depreciation is on SLM basis over useful lives specified in Schedule II of the Companies Act, 2013, or as per technical assessment for plant & machinery (5-30 years).

Intangible Assets (Ind AS 38) #

• Measured at cost less accumulated amortization. Software and brands are amortized over 5-6 years.

Inventories (Ind AS 2) #

• Valued at the lower of cost (weighted average) or net realizable value.

Financial Instruments (Ind AS 109) #

• Classified and measured at amortized cost, Fair Value Through Profit or Loss (FVTPL), or Fair Value Through Other Comprehensive Income (FVTOCI). Expected Credit Loss (ECL) model is applied for impairment.