MANAGEMENT DISCUSSION AND ANALYSIS (MDA) Global Economy The recovery in the United States was stronger than expected, while economic performance in all other major economies most notably Japan fell short of expectations.The UK is well on its way to recovery. Investment growth in China declined in the third quarter of 2014, and leading indicators point to a further slowdown. Emerging economies continued to contribute about two-thirds of global growth; however these economies disappointed as a result of a less favourable investment climate and weak external demand. According to the World Bank, global GDP actually grew at 2.6 per cent in 2014 after growing at 2.5 per cent in 2013. While the World Bank's earlier projection for 2014 was 3.2 per cent, the growth momentum failed to pick up in several developed and developing nations during the second half of 2014. The World Bank expects the global growth rate for 2015 to be 3.0 percent. The estimates by International Monetary Fund (IMF) are slightly more optimistic than that of World Bank. IMF expects global economy to grow by 3.5 per cent in 2015 and by 3.8 per cent in 2016. A number of country specific challenges like infrastructure bottlenecks, increased financial risks and political tensions continued to loom over these economies. However, there is a view that many of these emerging economies including India have put the worst behind them. Indian Economy In 2014-15, Indian economy grew at 7.3% (GDP at market prices). The falling oil prices has aided in lower current account deficit and inflation. With fiscal deficit at below 4%, and current account deficit at 1.6% of GDP, India's macroeconomic fundamentals are healthy. Indian economy has gained momentum following pro-economic reforms, initiated by the new government. The Government envisages GDP growth upto 8% in FY16 driven by strengthening macroeconomic fundamentals and implementation of policy reforms recently announced will be critical growth enablers to de-bottleneck stalled projects, improve the investment outlook and the ease of doing business in the country. The reforms include deregulation of diesel prices, direct transfer of cooking gas subsidy, hiking FDI cap in defence and insurance, ordinance on coal and telecom spectrum allocation. 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. India is set to become the world's fastest-growing major economy by 2016 ahead of China, the International Monetary Fund (IMF) said in its recent latest forecast. India is expected to grow at 6.3 percent in 2015, and 6.5 per cent in 2016 by when it is likely to cross China's projected growth rate. India's macro-economic prospects have strengthened and the country is best positioned among emerging market economies, gaining global investor's attention. In FY16, the growth rate is likely to go up further to anything between 8.1 - 8.5 per cent making India world's fastest growing large economy. IMF also expects India to overtake China in terms of growth rate in 2016. The Government of India has been successful in containing inflation and the low oil prices are unlikely to put any upward brssure on inflation. Global Textile Industry In this economic backdrop, there were mixed signals from the global textile industry during 2013 and 2014. While the overall steady growth trend is apparent, there are also several structural changes taking place. The Global textile and clothing industry is estimated to register a growth of 4-5% in 2014-15. The growth could have been stronger, but subdued Q4 led to lower estimated growth. India is expected to achieve around USD 39 billion. The slowdown in exports to China and following commodity prices impacted the world exports. The global apparel market, which is the primary end-user segment for the entire textiles value chain, was around US$ 1,146 Bn in 2013 and is estimated around US$ 1,200 Bn in 2014. This overall market is growing at 5% CAGR and is estimated to reach US$ 2,110 by 2025. This growth in market size in value terms can be attributed to growing population, increasing per capita consumption globally. Indian Textile Industry : As per Textile Report The opening up of economy gave the much needed thrust to the Indian textile industry, which has now successfully become one of the largest in the world. It also plays a major role in the economy of the country. This sector contributed 14% to industrial production, 4% to the gross domestic product and 17% to the country's export earnings. It provided direct employment to 35 million people. India has the potential to increase its textile and apparel share in the world trade from the current level of 4.5 % to 8% and each us $ 80 billion by 2020. Indian Dying & Printing Industry Textile processing is one of the important industries related with textile manufacturing operations. Textile processing is a general term that covers right from singeing (protruding fiber removal) to finishing and printing of fabric. The various steps a fabric goes into are singeing, desizing, bleaching, dyeing, and finishing. Bleaching is a process to make the fabric or yarn look brighter and whiter. Dyeing is a process of applying coloring matter directly on fiber without any additives. Finishing is the final process to impart the required end use finishes to the fabric and lastly the printing process on fabric which is a science as well as an art. Textile auxiliaries such as chemicals are used for all stages of the textile manufacturing process that is from br-treatment to dyeing and printing and finishing. The textile industry occupies a leading position in the hierarchy of the Indian manufacturing industry. It has witnessed several new directions in the era of liberalization. While textile exports are increasing and India has become the largest exporter in world trade in cotton yarn and is an important player of readymade garments, country's international textile trade constitutes a mere 3% of the total world textile trade. Several mills have opted for modernization and expansion and are going in for export-oriented units (EOUs) focused on production of cotton yarn. It has passed through cyclical oscillations and at brsent, it is witnessing a recovery after a downturn. Of the entire industry volume of about 5 million tonnes, polyester and polyester filament yarn account for about 1.7 million tonnes, and acrylic, nylon, and viscose taken together for 300,000 tonnes. The balance is rebrsented by cotton textiles. A majority - some three fourths - of the textile mills are in the private sector. A few of the units are in the co-operative sector with the public sector (Central and State) accounting for about 15% of the total. The textile industry is classified into (i) textile mills comprising composite and spinning mills in the organized segment, (ii) small power loom and handloom units in the decentralized segment, (iii) khadi-based units, (iv) manmade and synthetic fibre and spinning units, v) knitting units, and (vi) made-ups (garments). Besides, the industry has a large number of small units scattered all over the country which are engaged in processing, dyeing and printing of yarn, fabrics and for conversion. The processing units include sizing, desizing, kiering, bleaching, mercerizing, dyeing, printing and finishing. Another factor that is hurting the Indian synthetic sector is the high import duties and domestic taxes on manmade fibres. The synthetic textiles industry last month sought an overhaul in the excise and customs regime to enable it to compete with countries such as Bangladesh, China and Vietnam. Further, the benefits for promoting exports to major emerging markets for MMF textiles such as Latin America, Far East and African countries have been completely stopped in the new FTP without giving the sector's exporters any scope for adjustment. After tough competition from cotton last year, the manmade yarn and fabric industry is expected to grow at a higher rate of five to seven per cent in 2015-16, on the back of stable crude oil prices. However, it is the domestic market that will see the larger growth, as Indian synthetic yarn and fabric performance has not been one of the best internationally. Business Overview : The year under review remained as a year of modification in engineering & process to focus on manufacturing value added product & process, Over the years, we have developed capabilities to customize and improve our product designs by absorbing, adapting and improving the acquired technology from both national and international suppliers. We are continuing to enhance the operational efficiency of our plants leading to higher value creation. RESULTS REVIEW Turnover : Betex India Limited has achieved a turnover of Rs. 4399.44 Lacs in the year 2014-15 as against Rs. 3904.06 Lacs during the brvious year. Increase in sales was noted due to increase in volume of processing of fabrics. Other Income : Other income consisting receipt of Dividend, Discounts and Interest on Fixed Deposit and Profit/(Loss) from Shares & Mutual Funds. Other income for the year 2014-15 is amounting of Rs. 24.56 Lacs against Rs. 33.58 Lacs in the brvious year. Consumption of Raw material : Consumption of raw material increased from Rs. 1712.49 Lacs to Rs. 2428.49 Lacs due to increase in total dying & processing fabric meters. Employee Cost : Employees cost were increased from Rs. 595.02 Lacs to Rs. 734.58 Lacs. This increase is mainly due to higher increments given to employees and further recruitment of employees. Interest Cost : Interest cost were increased from Rs. 72.04 Lacs to Rs. 92.32 Lacs due to increase in Loan Capital. Despite the challenges, FY 2014-15 has been a year in which your Company made good progress in strengthening the established business segments through high value products and also reported positive contribution in the overall segment. Despite the volatility in the second half of the year, your Company was able to deliver continued growth in profitability. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:- The company's well defined organizational structure, documented policy guidelines, defined authority matrix and internal controls ensure efficiency of operations, compliance with internal policies & applicable laws and regulations and optimal use of company's resources, safeguard of all assets , proper authorization and recording of transactions and compliances with applicable laws. ENERGY CONSERVATION The Conservation of energy in all the possible areas is undertaken as an important means of achieving cost reduction. Saving in electricity, fuel and power consumption receive due attention of the management on a continuous basis. Various measures have been taken to reduce fuel consumption, reducing leakages, improving power factor optimizing process controls etc. resulting in energy savings. THREAT, RISKS AND CONCERNS The objective of risk management frame work is to identify events that may affect the company, and manage risk in order to provide reasonable assurance regarding achieving the company's objective. The company is operating in an environment that is becoming more and more competitive. The company seeks to ensure that the risks if undertakes are commensurate with returns. Successful risk management implies not avoidance of risk, but anticipation of the same, and formulation and implementation of relevant mitigation strategies. a) RISK AGAINST FIRE , FLOOD AND ACCIDENTS Risk against fire, flood, accident, health related problems and accidents of workforce are common risks attached to the working of any plant/company. Management has taken reasonable steps to counter the risk. The company has taken Combrhensive All Risk Insurance Policy, which covers company's assets against all risks. Accidents due to human failure are being tackled through the continuous training to our technical and other staffs and through regular monitoring and supervision. All the employees of the company are also insured under Group Insurance Policy of Life Insurance Corp. of India. b) ECONOMIC RISK Domestic sales contribute to a major part of the revenue of the company so, the factors that may adversely affect the Indian economy and in turn company's business includes rising in interest rate, debrcation of rupees, inflation, change in tax structure, fiscal and monetary policies, scarcity of credits, global trade slowdown etc. Moreover, Indian economy grew at 7.3% (GDP at market prices) in 2014-15. India is witnessing improving macroeconomic fundamentals - moderating inflation, stabilising currency and improving consumer demand. c) COMPETITION RISK We face competition from existing players and potential entrants in the Indian textile industry. The Indian textile industry is highly competitive both in the Dying & Printing Process. Domestic production is dominated by few organized players who have integrated facilities and large economies of scale and the unorganized sector is virtually absent. The company has a well defined TQM system of control points, combrhensive budgetary controls and review system to monitor its operations to remain cost competitive than its peer group. The company also widened the value added product portfolio to address a broader client base. d) STRATEGIC RISK Strategic plans for the company's business take in to account likely risks in the industrial environment from competition, changing customer needs, obsolescence and technological changes. Obsolescence of technology may affect the production process. The annual plans that are drawn up consider the risks that are likely to impact the Company's objectives in that year and the counter-measures put in place. f) MARKET RISK Market risks relate to the possibility that the fair value or future cash flows of a financial instrument could fluctuate due to variations in market prices. Market risks include currency risk and interest-rate risk. WASTE MANAGEMENT We have adopted various methods and practices for solid and hazardous waste management. Solid waste like polymer are sold to authorized parties for re-use. The company has also an ETP plant for treating polluted water of the plant. Hazardous wastes are handled through registered recyclers, who are authorized by the concerned Pollution Control Boards. SAFETY, HEALTH AND ENVIRONMENT CONTROLS (EHS) In keeping with the environment-conscious tenor of the times, your company has taken effective steps in creating an aesthetic, environment-friendly industrial habitat in its factory units, mobilizing support and generating interest among staffs and labours for maintaining hygienic and green surroundings. Being providing continual efforts and stress on fire and safety, no major incident was noted in the year 2014-15. The Company is aware of its responsibilities as a good corporate citizen, in health, safety and environmental management. To achieve the environment, health & safety visions, various objectives have been set forth. These are as follows :- - Compliance with environment, health & safety laws and regular assessment of the compliance of operations against the requirement. - Ensuring safety related practices to enable employees and others to eliminate work related injury and illness. - First Aid training camps organized. - State-of-the-art fire and safety installations to meet emergencies within the company, as well as nearby areas. - Training and counseling of employees, contractors, sub-contractors and transporters to ensure effects of environment, health and safety. - Training and motivating employees to understand their EHS responsibilities and to participate actively in EHS program. - Imparting fire fighting training to personnel and mock drills to ensure safety brparedness. - Toilets and drinking water facility provided and they are being regularly inspected for cleanness. - Proactive measures to increase usage of recycled water. - To abide by all statutory compliance as per Factories Act,1948 HUMAN RESOURCES The company firmly believes that success of any organization largely depends upon availability of human assets within the organization as it is one of the most valuable assets because revenue and profit growth cannot take place without the right equality of people. To that effect, company has taken a series of measures that ensures that the most appropriate people are recruited in to the organization. a) RECRUITMENT POLICY The Company has been able to attract a team of dedicated professionals with appropriate expertise and experience, leaders who are passionate, eager to learn and succeed. Recruitment based on merit by following well defined and systematic selection procedures eliminating discrimination, sustain motivated and quality work force through appropriate and fair performance evaluation to retain the best talent. Various training programs, with internal and external experts are organized regularly for skill upgradation. The sincere efforts of the employees have resulted in major administrative expense savings. b) PERFORMANCE APPRAISAL SYSTEM A competency based performance appraisal system has been devised and implemented the same across the organization. The best performers get recognized and rewarded by the management with the objective of motivating them for further improved performance. Employees are promoted to higher positions on the basis of their performance, attitude and potential to motivate them for further improvement in their work. c) PERSONNEL TRAINING The company from time to time fosters a culture of training, people development and meritocracy to ensure that the maximum efficiencies are derived from its human capital. The newly recruited employees undergo a combrhensive induction program. The employees underwent both functional/technical and behavioral training that would eventually result in improved productivity. Safety training is given on regular basis to all employees including temporary employees. d) LABOUR RELATIONS On the labour front, during the year, there were no incidents of labour unrest or stoppage of work on account of labour issues and relationship with them continues to be cordial. To increase team spirit inter department tournaments are organized and various festivals are celebrated in the company. STATUTORY COMPLIANCE The Whole-time Directors and CFO makes a declaration at each Board Meeting regarding the compliance with the provisions of various statutes, after obtaining confirmation from all the units of the Company. The Company Secretary ensures compliance accordance to SEBI regulations and provisions of the Listing Agreement. CORPORATE SOCIAL SERVICE The company is committed to its corporate social responsibility and undertakes programs that are sustainable and relevant to local needs. The company has under taken a range of activities in respect of health care and education to improve living conditions of the villagers in the neighborhood of its factories under its CSR program. CAUTIONARY STATEMENT Statement in the Management Discussion and Analysis ( MDA ) describing the company's objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Several factors could make significant impact on the company's operation. These include geo political uncertainties affecting demand and supply and Government regulations, tax laws and other factors such as litigations and industrial relations. Identified as having been approved by the Board of Directors of Betex India Limited Manish Kumar Somani Director Surat, 14th Day of August, 2015 |