MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE, SCENARIO & DEVELOPMENT The Indian textiles industry is set for strong growth, buoyed by strong domestic consumption as well as export demand. The most significant change in the Indian textiles industry has been the advent of man-made fibres (MMF). India has successfully placed its innovative range of MMF textiles in almost all the countries across the globe. India is the bright spot on the "cloudy global horizon" and Asia's third largest Economy. Recent policy reforms and improved business confidence have provided a booster shot to economic activity. While India's growth rate is expected to improve from 7.2 per cent in last fiscal to 7.5 per cent this year The textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed and printed) attracted foreign direct investment (FDI) worth Rs.6,710.94 crore (US$ 1.11 billion) during April 2000 to February 2014. Man-made fibres includes manufacturing of clothes using fiber or filament synthetic yarns. It is produced in the large power loom factories. They account for the largest sector of the textile production in India. This sector provides employment to about 4.8 million people. Installed capacity of Polyester filament yarn has marginally increased from 2058 million kg. during the year 2009-10 to 2118 million kg. in 201415 (upto December 2014). Production however has been reduced from 1434.88 million kg. during the year 2009-10 to 1213.06 kg. during the year 2013-14 and 873 million kg during 2014-15 (upto December 2014) Installed capacity of Nylon filament yarn is at the same level at 32 million kg since 2009-10; production was decreased from 30.35 million kg during the year 2009-10 to 23.98 million kg during the year 2013-14. The textile industry holds significant brsence in Indian economy. The size of the industry is currently estimated to be over $120 billion. It contributes around 14% in industrial production, 4% of the country's GDP and 12% of the country's merchandise exports. At just 5.2 per cent share of global trade, the Indian textile industry ranks second in the world, far behind China. The Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021, according to a report by the experts. The dramatic fall in global crude prices is a big boost for India as it can bring down the country's annual oil import bill by about USD 50 billion. This welcome development enhances disposable income which will increase consumer demand for other goods and services, reduce input cost of businesses which will increase margins and help enthuse investment demand. This will also aid Government finances by reducing the energy subsidy burden. The continued fall in crude oil prices over recent months has however led to domestic synthetic yarn makers incurring stock and margin losses. The fall in prices of petrochemicals, including key polyester yarn raw material such as monoethylene glycol (MEG) and purified terephthalic acid (PTA) has forced yarn makers to reduce prices. Adding to the problem for synthetic yarn makers is the sluggish demand from mills. In the short run, growth will receive a boost from lower oil prices, from likely monetary policy easing facilitated by lower inflation and lower inflationary expectations. Medium-term prospects will be conditioned by the "balance sheet syndrome with Indian characteristics," which has the potential to hold back rapid increases in private sector investment. The new government has undertaken a number of new reform measures whose cumulative impact could be substantial. India's apparels, home textiles and technical textiles segments are expected to double their market size. OPPORTUNITY AND THREATS The volatility in the Crude oil prices affects prices of PTA and MEG which are raw materials for polyester chips. Sluggishness in demand and sudden change in prices of crude affects margin on products. The Company's sound business strategy is to concentrate on specialty & high quality yarns especially conventionally dyed & dope-dyed yarns, constant development of new products to strengthen its position in domestic as well as International markets, stepping up production of high contributing Nylon grey & dyed yarns, increase in capacity of texturised yarn, introduction of new products, etc. PRODUCT WISE PERFORMANCE The Company manufactures Partially Oriented Yarn (POY), Texturised yarn/ Dyed yarn. Revenue from POY were of Rs.126.77 Crores as compared to Rs.121.40 Crores of brvious year, from Texturised Yarn/Dyed yarn were of Rs.752.43 Crores as compared to Rs.819.07 Crores of brvious year. OUTLOOK The Company is in the process of doubling capacity of BCF yarn, increasing capacity of texturized yarn, mother yarn, constant development of new products, R & D work in master batch, concentration on products yielding high margins are expected to increase margins of profits. RISKS & CONCERNS Sluggish in demand of polyester, fluctuation in price of crude oil, foreign exchange are concern for the Company. The Company expects to mitigate the impact of risks and concerns since the Company concentrates on Specialty yarns, High quality and development of new products constantly. ADEQUACY OF INTERNAL CONTROL SYSTEM Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that transaction are authorised, recorded and reported correctly. The Company has SOP defining system, authority of executives, etc., internal audit system which covers cost saving aspects, system and procedure improvement. Such reports are regularly reviewed by the management and corrective measures are timely taken for improving efficiency. DISCUSSION ON FINANCIAL PERFORMANCE REVENUE Details are mentioned in Directors' report HUMAN RESOURCES During the year under review, your Company continued its concern for development of its personnel through various training programmes. Besides, Management has laid special emphasis on strengthening HR activities for all levels in the Organization with an introduction of PMS module. Industrial relations during the year were cordial. CAUTION STATEMENT Company's performance as exbrssed or implied could differ materially due to economic conditions affecting demand/supply and price condition in the domestic & overseas markets, changes in the government regulations, tax laws & other incidental factors. For and on behalf of the Board of Directors B. A. Kale Executive Director R.R.Mandawewala Director Mumbai, Date: 31st July 2015 |