Sri Nachammai Cotton Mills Limited (SNCM) is an established Indian textile manufacturer specializing in the production and sale of cotton yarn. Operating as a single-segment entity under the **'Textiles'** classification, the company manages its manufacturing through two primary units located in Chettinad, Tamil Nadu. --- ### **Manufacturing Infrastructure and Asset Base** Since its inception in 1980 with **16,120 spindles**, the company has significantly expanded its industrial footprint. The current infrastructure is designed for high-volume yarn production, supported by captive power generation to manage operational overheads. | Asset Type | Current Capacity / Detail | | :--- | :--- | | **Spindles** | **53,664** | | **Rotors** | **504** | | **Solar Power (Captive)** | **4 MW Total** (2 MW commissioned FY25; 2 MW added Aug 2025) | | **Plant Locations** | **Unit A & Unit B**, Chettinad, Sivaganga District, Tamil Nadu | | **Leased Assets** | Cancellable operating lease for **Supreme Yarn Spinners Private Limited** | --- ### **Strategic Operational Adjustments & Cost Management** In response to a challenging macroeconomic environment for textiles, SNCM has shifted from a growth-oriented volume strategy to a capital-preservation and efficiency-first model. * **Capacity Rationalization:** Due to a persistent disparity between raw cotton and yarn prices, the company has moved away from full-scale operations. As of February 2026, the company operates only **one unit for 3 shifts**. This follows a previous period where the plant was restricted to a **single-shift basis** to mitigate mounting operational losses. * **Energy Transformation:** Power and fuel costs have historically been a major drain on margins. By commissioning a **4 MW captive solar plant**, the company achieved a drastic reduction in energy expenses. Quarterly power and fuel costs dropped from **₹2,184.36 crore** (Dec 2024) to **₹91.62 Lakhs** (Dec 2025). * **Lease Management:** While the company maintains a lease for the assets of **Supreme Yarn Spinners Private Limited**, production at this facility was discontinued in early 2023 to streamline the cost base. --- ### **Financial Performance and Capital Restructuring** The company’s financial strategy focuses on maintaining liquidity and extending debt obligations to navigate periods of sluggish demand. **Key Financial Metrics** | Metric | FY 2024-25 | FY 2023-24 | | :--- | :--- | :--- | | **Turnover** | **Rs. 69.17 Crore** | **Rs. 66.36 Crore** | | **Net Loss** | **Rs. 3.23 Crore** | **Rs. 4.72 Crore** | | **Dividend** | **Nil** | **Nil** | **Capital Structure and Debt Modification** * **Preference Share Extension:** In December 2024, the company secured shareholder approval to extend the redemption of **1,500,000 (0%) Redeemable Preference Shares** (Face Value **Rs. 100**). * **Maturity Realignment:** Originally due in April 2025, the maturity has been extended by **7 years** to **April 10, 2032**, reaching the maximum **20-year** limit under the Companies Act. * **Accounting Gain:** Under **Ind AS 109**, this extension was treated as a "substantial modification." The liability was derecognized and re-recognized at a fair value of **Rs. 8.41 Crore**, resulting in a non-cash exceptional income of **Rs. 6.59 Crore** for the **FY 2025-26** nine-month period. * **Debt Security:** Working capital and term loans from **Indian Overseas Bank** are secured by a first charge on the entire block of assets and personal guarantees from the Managing Director and Chairman totaling **Rs. 22.20 Crores**. --- ### **Governance and Leadership Continuity** SNCM relies on a long-tenured management team, recently reinforced by a board refreshment to align with modern regulatory standards. * **Executive Stability:** The company has extended the tenures of its primary leaders through **December 18, 2028**: * **Mrs. P. Umayal** (Chairman cum Managing Director): Annual Salary **Rs. 15.00 Lakhs**. * **Mr. P. Palaniappan** (Managing Director): Annual Salary **Rs. 15.00 Lakhs**. * **Board Refreshment:** In **December 2024**, three long-standing directors retired. New Independent Directors, **Sri A. Arunkumar** and **Sri N. Dinesh**, were appointed for five-year terms ending **December 9, 2029**, to provide fresh oversight. --- ### **Risk Profile and Mitigation Strategies** The company operates in a high-volatility sector where raw material costs and global trade dynamics dictate profitability. **Operational & Industry Risks** * **Raw Material Sensitivity:** Cotton constitutes approximately **60%** of the yarn selling price. The company is highly exposed to agricultural price fluctuations and does not engage in formal **commodity hedging**. * **Market Shifts:** There is a structural shift in consumer preference toward **artificial and recycled fibres**, leading to the under-utilization of traditional cotton spindles. * **Import Pressure:** The domestic market faces headwinds from the **dumping of imported fabrics and garments**, which suppresses local yarn demand. **Financial Risk Management** | Risk Category | Management Strategy | | :--- | :--- | | **Interest Rate Risk** | Management of a mix of fixed/floating rates; a **25 bps** shift impacts profit by **Rs. 10.30 Lakhs**. | | **Credit Risk** | Customers undergo credit evaluation; high-risk exposures are secured via **Bank Guarantees or Letters of Credit**. | | **Liquidity Risk** | Surplus funds are held in **bank deposits** and **high-grade debt/arbitrage mutual funds**. | | **Forex Risk** | Monitored via a **2% sensitivity analysis**; managed through **forward contracts** and **currency swaps** for imports. | --- ### **Future Outlook** Sri Nachammai Cotton Mills is currently in a defensive posture, prioritizing **cost-control**, **energy self-sufficiency** through solar expansion, and **capital preservation** via the deferment of preference share redemptions. The company’s ability to return to profitability depends on the narrowing of the cotton-yarn price gap and a recovery in domestic yarn demand.