How has been the historical performance of Winsome Yarns?

Revenue and Operating Performance Trends

Winsome Yarns’ net sales have seen a steep decline over the seven-year period under review. From a peak exceeding ₹370 crores in fiscal 2016, sales dropped sharply to just over ₹35 crores by fiscal 2021. This contraction reflects a severe downturn in business activity, with total operating income mirroring this trend. The company’s raw material costs and employee expenses have also decreased in line with lower sales, but not sufficiently to offset the revenue decline.

Operating profitability has remained negative throughout, with operating profit margins consistently below zero. The margin worsened notably in fiscal 2020 and 2021, reaching nearly -18% in the latest year. Despite some other income contributions, the company has been unable to generate positive earnings before interest, depreciation, and tax (EBITDA), indicating ongoing operational challenges.

Profitability and Losses

The company has consistently reported net losses, with profit after tax (PAT) margins deeply negative across all years. The largest loss was recorded in fiscal 2019, with a net deficit exceeding ₹115 crores. Although losses narrowed somewhat in subsequent years, the company remained unprofitable with a PAT margin of nearly -60% in fiscal 2021. Earnings per share have been negative throughout, reflecting the sustained lack of profitability.

Interest expenses have been relatively low in recent years, but depreciation charges remain substantial, further pressuring the bottom line. Exceptional items have occasionally impacted results, notably in fiscal 2019 and 2020, exacerbating losses.

Balance Sheet and Financial Position

Winsome Yarns’ balance sheet reveals a distressed financial position. Shareholders’ funds have been negative since at least fiscal 2018, indicating accumulated losses have eroded net worth. The adjusted book value per share has declined steadily, reaching a negative ₹57.84 by fiscal 2023. Total liabilities have decreased over time but remain significant relative to total assets, which have contracted sharply from ₹464 crores in fiscal 2018 to just over ₹216 crores in fiscal 2023.

The company carries a high level of short-term borrowings, consistently around ₹556 crores, which underscores liquidity pressures. Current liabilities exceed current assets by a wide margin, resulting in negative net current assets. This imbalance highlights ongoing working capital challenges.

Cash Flow and Liquidity

Cash flow from operating activities has been minimal or negative in recent years, with only a modest positive inflow recorded in fiscal 2018. Investing and financing activities have also contributed little to improving liquidity. The closing cash and cash equivalents have remained low, around ₹1 crore in recent years, reflecting tight cash reserves.

Overall, the company’s cash flow position underscores the difficulties in generating sufficient internal funds to support operations and debt obligations.

Summary of Historical Performance

In summary, Winsome Yarns has faced a prolonged period of financial distress characterised by sharply declining revenues, persistent operating losses, and a deteriorating balance sheet. Despite reductions in costs, the company has been unable to return to profitability or improve its cash flow position. Negative shareholders’ equity and high borrowings further complicate the financial outlook.

Investors should carefully consider these factors when analysing the company’s prospects, as the historical performance indicates significant challenges in stabilising and growing the business.

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