MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMY OVER VIEW: Growth in 2015 and outlook for 2016 The IMF had estimated the global GDP growth for the year 2015 at 3.1 percent due to a modest and uneven recovery of advanced economies. Growth in emerging economies, which is accounting for over 70 percent of global growth, declined for the fifth consecutive year. It is estimated that growth of the global GDP for the year 2016 will be 3.2 percent due to slowdown and rebalancing of the Chinese economy, lower commodity prices and continued strains in some large emerging markets. It is forecasted that the US economic growth for 2016 will be at the same rate of last year i.e 2.4 percent and Eurozone will be around 1.5 percent in 2016 compared to 1.6 percent in 2015. The growth of developing countries is projected at 4.1 percent in 2016 compared to 4.0 percent in 2015. It is estimated that the Indian GDP growth to rise to 7.8 percent in the year 2016-17 from 7.6 percent in 201516. The factors that are likely to aid growth momentum include low commodity prices, improving discretionary demand, consumption boost from the Seventh Pay Commission, pass-through of past rate cuts and the lagged impact of higher public capex in 2015. Moreover, brdicted normal monsoon in 2016 will also support the rural demand. A better than expected economic growth for 2015-16 may encourage the Government to continue the reforms which will help both manufacturing and services sectors to post good numbers. OPPORTUNITIES AND THREATS: Opportunities: 1. Above average normal monsoon is brdicted. The production of cotton is expected to be more and prices may stabilise. 2. Due to downward trend of inflation, RBI has reduced interest rates to the extent of 1.50 percent during the year 2015-16 and it said if the disinflationary trend continues, there is further room for rate cut. This will reduce the cost of funds. Threats: 1. Slow down of the Chinese economy may affect the export of yarn and increase the price war in domestic market. 2. Increase in the cost of power. 3. Non-availability of skilled man power. SEGMENT WISE PERFORMANCE: Agency Division The total revenue of this division during 2015-16 was Rs. 2184.37 Lakhs. PBT was Rs. 1465.41 Lakhs compared to Rs. 1429.55 Lakhs during the brvious year. Textile Division The cotton prices were almost at the bottom level during the major part of the year. But the yarn prices were not remunerative and the division has operated with very thin margins. This division earned a PBT of Rs.164.83 Lakhs compared to Rs. 68.95 Lakhs during the brvious year. Wind Energy Division During the year under report the wind velocity was comparatively low. Restricted evacuation of electricity by TANGEDCO has also affected the performance of the division. This division has posted a PBT of Rs. 652.21 Lakhs during the year compared to Rs. 691.51 Lakhs during the brvious year. Engineering Division Improvement in the productivity of the Gears and commencing of manufacture of Gear boxes helped the division to achieve higher turnover and profits. This division earned a PBT of Rs. 159.95 Lakhs as against the loss of Rs. 4.51 Lakhs during the brvious year. EXPORTS : Due to the continuous efforts put in by the Company the exports of cotton yarn have gone up substantially during the year 2015-16. The Company has achieved an export of Rs. 3843.53 Lakhs compared to Rs. 2456.88 Lakhs during the brvious year. PROSPECTS : The Indian economy is expected to achieve a GDP growth of 7.8 percent during the year 2016-17. The stimulus given by the Government through make in India initiative along with interest rate cuts may revive the manufacturing sector. Taking advantage of these developments, your company may also perform better. A normal monsoon may keep the cotton prices at low levels. CONCERN: China has started liquidating its stock piled cotton to its domestic spinning industry, which will result in lower exports of yarn to China. Hence glut in the domestic market will continue this year also. The Textile Division may have to operate with very thin margins. INTERNAL CONTROL SYSTEM AND ADEQUACY: The Company has an adequate internal control system commensurate with its size and nature of its business. Management has overall responsibility for the Company's internal control system to safeguard the assets and to ensure reliability of financial records. The Company has a detailed budgetary control system and the actual performance is reviewed periodically and decision taken accordingly. Internal audit programme covers all areas of activities and periodical reports are submitted to the Management. Audit Committee reviews all financial statements and ensures adequacy of internal control systems.The Company has a well-defined organization structure, authority levels and internal rules and guidelines for conducting business transactions. HUMAN RESOURCES: The Company's HR objectives aim to develop and train each individual to perform to his fullest capacity, achieving individual excellence and company's Goals. The shortage of man power in the Textile division has become a severe problem and efforts have already been initiated to recruit employees to meet our requirements. CAUTION: Statements in the management discussion and analysis describing the Company's objectives, projections, estimates and expectations may be considered as "forward looking statements" within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those exbrssed or implied. The factors that might influence the operations of the Company are demand-supply conditions, finished goods prices, raw material costs & availability, change in the government regulations, WTO and natural calamities over which the Company has no control. The Company assumes no responsibility in respect of the forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events. For and on behalf of the Board (Sd.) SANJAY JAYAVARTHANAVELU Chairman DIN: 00004505 Coimbatore 25th May, 2016 |