MANAGEMENT DISCUSSION AND ANALYSIS REPORT AS PER CLAUSE 49 OF THE LISTING AGREEMENT Overview of Economy As per the latest GDP growth estimates, Indian economy grew up 7.4% in FY 2015 compared to 6.9% in FY 2014, mostly driven by improved economic fundamentals and revision of GDP methodology calculation. Even inflation showed signs of moderation, a welcome sign - wholesale price and consumer price inflation declined to 4.2% and 7.4% respectively, compared with last year's 6.3% and 10.1%. Reduced inflation, falling crude oil prices, stable Rupee, improved purchasing power and consumer spending, higher capital inflows supported by the government policy reforms have already put India on an accelerating growth track and improved the business outlook. The Government envisages GDP growth to accelerate to 8% in FY 2016 driven by strengthening macroeconomic fundamentals and implementation of policy reforms recently announced. Reforms like e-auction of coal mines and telecom, FDI hike in insurance, speedier regulatory approvals etc. will be critical growth enablers to de-bottleneck stalled projects, improve the investment outlook and the ease of doing the business in the country. Reforms currently underway such as GST implementation, Amendment on Land Acquisition Bill, Labour Reforms, etc. are expected to provide the requisite thrust for growth in the medium-term. Industry Scenario Textile and Apparel Industry Conditions The Textile and Apparel Industry contributes around 6% to India's GDP, 11% to export earnings and is the second largest employer after agriculture. The industry has shown continued growth with a potential to increase its global trade share from the current 4.5% to 8% in the next 5 years supported by a rich abundance of raw material, skilled labour and talent. In FY 2015, the textile industry is estimated to have contributed USD 42 billion (4%) to India's GDP, and 27% to the country's foreign exchange inflows. Opportunities. Threats and Challenges Opportunities - The company has inherent strength due to its prime location. - Changes in economic legislations and rationalization of the tax structure and duty structure such as VAT, custom duty etc. - VFY is emerging as a fiber with new applications. The general economic well being has resulted in the switch back to the use of this fiber for sarees and furnishing fabrics. -More competitive strength due to the availability of captive power plant. - Huge infrastructure facility to meet the current and future demand. -'Make in India' campaign is a testimony to the huge growth potential in the industry, both in terms of infrastructure and skill improvement. Threats - The goodwill of the company is decreased due to legal proceedings and labor disputes which are still going on. - The Company is experiencing brssure on margins due to severe competition from other low-cost countries like China. Threat from PFY due to its lower price has been a factor that has been having a cyclical impact in the market. - The Company perceives threat from imports and consequent brssure on domestic prices, apart from the increase in cost of raw materials and other inputs. Increase in coal prices has increased the cost of power. - Rising input costs (wages, power and interest cost), restrictive labour laws and intensified competition from other low cost countries like China. Risk & Concerns The major risk is due to the globalization of the economy which could result in cheaper goods being dumped by China. Thus anti dumping duty is an important factor which has a major bearing on the perceived risk. The risk in terms of maintenance has been substantially addressed during the course of this year. The risk now shifts to availability of skilled personnel as the industry is generally facing shortage of skilled manpower. Internal Control System and their adequacy Since the operational activities of the company are discontinued since August'2008, there is no internal control procedures commensurate with the size of the Company and the nature of the Business. The company is planning to implement a full fledged computerized system which is likely to address most of the issues with respect to internal controls, as and when operations restart. Discussion of the Financial Performance with respect to operational performance The financial performance of the company is not so good during the year under review as there is no production activities carried on by the company and due to that there is no income from operations generated by the company. The operations of the company are totally stopped and which also affect the financial performance of the company. |