MANAGEMENT DISCUSSION AND ANALYSIS REPORT Readers are cautioned that this discussion and analysis contains forward looking statements that involve risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or otherwise. Actual results, performance or achievements and risks and opportunities could differ materially from those exbrssed or implied in these statements. Readers are cautioned not to place undue reliance on these statements that speak only as of their date. The following discussion and analysis should be read in conjunction with the Company's financial statement included herein and notes thereto. a. INDUSTRY STRUCTURE AND FUTURE OUTLOOK/ DEVELOPMENTS The Indian Textile Industry is one of the leading textile industries in the world. The textiles and apparels sector is a major contributor to the Indian economy in terms of gross domestic product (GDP), industrial production and the country's total export earnings. India earns about 27 per cent of its total foreign exchange through textile exports. Besides, the Indian Textile industry contributes 14 per cent of the total industrial production of the Country. This sector provides employment to over 35 million people and it is expected that the textile industry will generate new jobs during the ensuing years. The industry went through a challenging year with the global sluggishness in world economies. India has been able to face the global economic downturn better than most other countries. India's textile industry has a pervasive effect on its economic life. The Indian textile industry uses a large and diverse range of fibres and yarn, however, cotton is its major input material. Therefore, cotton availability and prices are a major determinant of production efficiency and profitability of textile units. Though the global economy seem to be coming out of the crisis, recovery may be unsteady for a while. The Continuous improvement and investment in weaving and processing will help to meet the demand of quality textiles, which will give an edge to the Indian textile industry over competitors. Upgrading technology and infrastructure is an ongoing process and, with the added support of Government bodies it should boost the Indian textile further. The Textile industry holds a significant position in India by catering to the most basic needs - clothing. The Indian textiles industry is integrated in terms of being extensively engaged in the procurement of raw materials right up to the final production of the actual textile product. The year 2014-15 had been a year of greater global volatility and uncertainty. The decline in oil prices, adjustments in exchange rate, quantitative easing program of ECB, concerns over Greece, geo-political tension in Middle east etc., as well as concern over economic and political future of Euro area and European Union are some of the factors which were at play. The global growth in 2014 was lower than initially expected and picked up only marginally in 2014, to 2.6%, from 2.5% in 2013. The global economy is struggling to gain momentum as many high-income countries continue to grapple with legacies of the global financial crisis, while emerging economies are less dynamic than in the past. World GDP is expected to grow by 3% in 2015 and 3.3% in 2016. As regards Indian economy, after years of diminutive growth the reform momentum has picked up in India..The Indian economy grew at 7.3 per cent in 2014-15 due to improvement in the performance of both services as well as manufacturing sectors. In 2014-15, Indian exports fell 1.23 per cent to $310 billion from the brvious financial year, missing the $340 billion target. But Indian textile and readymade garments sector did well during year 2014-15. As per data of Ministry of Textiles, India's exports of readymade garments jumped 33 per cent from INR 72,592 crore in 2013-14 to INR 96,523 crore in 2014-15. Demand revival in the US and European Union emerging from economic activities picking up in these markets has boosted garment export during the year. Overall Textile and clothing exports in 2014-15 registered a growth at $41.7 billion as against $39.3 bn in 2013-14. As the Indian Government too, has over the last few months taken some action to revive industrial growth, encourage fresh investment and committed to reforms for industry, our economy in the coming years should regain a trajectory of high growth. Concerns and Threats The unfavorable fluctuations in cotton prices and other input costs make it difficult for Indian exporters to compete in the international market. The unfavorable foreign exchange fluctuations and non-availability of skilled workers also are hurdles faced by the exporters including the Company. We are trying to focus on cost cutting strategies, development of new makets and maintain the quality of our products to satisfy and exceed the expectations of the market and look forward to a better market sentiment for textiles. The primary raw material is cotton and cotton yarn, which are being sourced from the domestic market. Cotton is an agricultural product and its supply and quality are subject to forces of nature. Any material shortage or interruption in the domestic supply or deterioration in the quality of cotton due to natural causes or other factors could result in increased production costs, which the industry may not successfully be able to pass on to customers, which in turn would have an material adverse effect on business. There can be no assurance that the price levels of cotton will remain favorable. Any increase in cotton prices would have a material adverse effect on the industry. However, the Company has over the years developed considerable expertise in responding to the changes in prices & demand. Due to company's integration & order based pricing, the company is generally able to pass on the increase in raw material prices to its customers. Opportunities The good thing about Indian economy and textile industry is that both are more insulated from the effects of world recessions or financial crisis . Around 70 percent of India's garment exports are towards its traditional markets of the US and the EU. However, apparel exporters are currently on the look out for new markets. To reduce dependence on traditional markets like the US and Europe, apparel exporters are exploring new markets in Japan, West Asia, Africa, Middle East and Australia . Retail boom in India is credited more to domestic consumers and it is not export driven. Internal consumption of India is very strong, compared to China which depends largely on exports, which has the potential danger of turning into a threat. 60 percent of retail sales in India catering to the domestic market, in fact acts as a shield to the Indian retailer at large. The need is now that the Government should support in terms of higher duty draw back rates to offset cost disadvantages in India. Side by side it should go for a faster formulation and implementation of sound policies for supporting textile sector. It is expected that the Govt. of India will take suitable steps and adopt sutiable policies to boost the Indian textile industry. The apparel industry provides employment to about seven million people, out of which almost half of them are engaged in the export sector. Still there are wide opportunities available to Indian industry not only to grow in international markets but also domestically. The Government proposes to increase the investment in this sector to generate more employment through various schemes viz. Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS), Integrated Skill Development Scheme (ISDS), Technology Mission on Technical Textiles (TMTT). India's textiles and clothing industry is one of the mainstays of the national economy. It is also one of the largest contributing sectors of India's exports worldwide. The report of the Working Group constituted by the Planning Commission on boosting India's manufacturing exports during 12th Five Year Plan (2012-17), envisages India's exports of Textiles and Clothing at USD 64.41 billion by the end of March, 2017 b. COMPANY'S GROWTH PROSPECTS AND NEAR TERM OUTLOOK Although the growth momentum of the Indian economy was impacted with the global economic slowdown, the severity of the impact on India was considerably less when compared to most developed economies. The fiscal and monetary policies implemented by the Government of India helped the economy to weather the downturn phase. The future seems to be good for the Indian Textile Industry both at domestic and international levels as India is still maintaining itself as an attractive destination for retail industry and foreign investments. While it is not possible to fully escape the impact of the global uncertainties, the Indian economy is better placed than many to withstand the shock. During the year under review, the business and economic environment in India and other emerging countries remained challenging. The GDP growth rate dipped below 5%, amongst the lowest levels in a decade. The year witnessed several volatile events like significant debrciation of the rupee, burgeoning current account deficit, weakening and uncertain demand, elevated inflation and interest rates all of which lead to declining business confidence. Despite challenging global and Indian scenario, the Company recorded a very good performance in terms of increased turnover as well as increased profitability. During the year 2014-15, the Company was able to achieve turnover of Rs. 12496.50 Lacs as against Rs. 11153.09 Lacs in the brvious year, showing an increase of 12.05% over the brvious year. The Profits after Tax of the Company for the year ended 31.03.2015 has been Rs. 219.11 Lacs as against Rs. 197.67 Lacs in the brvious year showing an increase of 10.85% over the brvious. The Exports of the Company for the financial year ended 31.03.2015 were to the tune of Rs. 1390.49 Lacs as against Rs. 1714.67 Lacs in the brvious year. During the year 2014-15, the Company came up with and completed its modernization and expansion of dyeing and fabric division by setting up new Boiler, imported dyeing Machines, imported stenter and open width compacter, Weft Straightener water softening plant, DM Plant, Thermic Fluid Boiler and other fabric division machines and utilities. The Company is now planning yarn dyeing and setting up of a unit for manufacturing of sewing/stitching thread. The company is planning to widen its markets both at domestic levels and at international levels. The long term prospects of the company are good along the growth path. TURNOVER AND PROFITS Despite challenging global and Indian scenario, the Company recorded a very good performance in terms of increased turnover as well as increased profitability. During the year 2014-15, the Company was able to achieve turnover of Rs. 12496.50 Lacs as against Rs. 11153.09 Lacs in the brvious year, showing an increase of 12.05% over the brvious year. The Profits after Tax of the Company for the year ended 31.03.2015 has been Rs. 219.11 Lacs as against Rs. 197.67 Lacs in the brvious year showing an increase of 10.85% over the brvious. The Exports of the Company for the financial year ended 31.03.2015 were to the tune of Rs. 1390.49 Lacs as against Rs. 1714.67 Lacs in the brvious year. d. INTERNAL CONTROL SYSTEMS The Company has evolved a system of internal controls to ensure that the assets are safeguarded and transactions are authorised, recorded and correctly reported. The internal control system is supplemented by management reviews and independent periodical reviews by the outside chartered accountancy firms which evaluate the functioning and quality of internal controls and provides assurance of its adequacy and effectiveness. The scope of internal audit covers a wide variety of operational methods and, as a minimum, ensures compliance with specified standards with regard to availability and suitability of policies and procedures, extent of adherence, reliability of management information system and authorization procedures including steps for safeguarding of assets. The reports of internal audit are placed before Audit Committee of the Directors. Audit Committee reviews such audit findings and the adequacy of internal control systems. The Statutory Auditors and the Internal Auditors of the Company also interact with the Audit Committee to share their findings and the status of corrective actions under implementation. e. DEVELOPMENTS ON HUMAN RESOURCES AND INDUSTRIAL RELATIONS The year under review has seen changes in the policies and procedures to make the organization high performing and successful. The Company has always valued its human resources and believes in optimum potential of each employee. During the period under review, the industrial relations were cordial without any disruptions of manufacturing activities. Additional appointments were made and annual increments were granted to salaries of employees during the period under review. As on 31st March, 2015, the Company had 234 employees on rolls. f. RISKS, THREATS AND RISK MANAGEMENT Your Company faces general risks inherent in any business including political, legal, geographical, economical, environmental and competition risks and takes appropriate steps to mitigate them and reduce their impact to the extent possible. The exports of the company are subject to set legal procedures and Govt. Rules, approvals and regulations and any change in them may affect the business of the Company. Raw material prices also affect the financial performance of the company. RISKS AND THREATS The opening of the international markets has thrown a host of opportunities with unique set of challenges. Today we can take justifiable pride in having joined the ranks of the US$ trillion economies of the world. The change being witnessed can be attributed to several factors including increasing purchasing power of the masses, shifts in the buying behavior, demography dynamics, and growing urbanisation, opening up of the retail segment to private and foreign players and changing trends/lifestyle. Investments in the textile sector have increased significantly over the last three to four years. The Indian textile sector faces a number of challenges, foremost being fluctuating cotton and raw material prices, infrastructure and inflexible labour laws. Inflow into India of spurious fabric material, counterfeit, fake and misleading selvedge descriptions continues. However, recognizing the threat these spurious imports poses, if continued unchecked, the government has taken a number of steps to check the inflow of such products. International players are seeking manufacturers with vertically integrated product development facilities and ability for managing quality and costs. Though India is being recognized in this regard and sourcing of value-added products from India is increasing, China continues to be a dominant player in the market with better infrastructure facilities. With its currency in an advantageous position, China is a stronger competitor in exports as well as in the domestic market. The Company is experiencing brssure on margins due to severe competition from other low-cost countries. Textile being a labour intensive industry, rising labor and skilled human resource costs can put brssure on margins. In order to take advantage of quota-free era, textile and apparel industry require huge investments in infrastructure and also Government's support by various incentives, relaxation and promotions etc, to improve efficiencies and productivity and reduce costs. g. OPPRTUNITIES AVAILABLE TO THE COMPANY The Indian Textile industry is expected to get momentum in the coming times. The Company is committed to increase its productivity and bring overall modernization in the manufacturing process. The Company has already made expansion and modernization in dyeing and fabrics units and now planning for setting up of yarn dyeing and is also side by side considering manufacture of allied products in the textile sector . h. SUBISIDIARY There is no Subsidiary of the Company. i. SEGMENT WISE PERFORMANCE The operations of the Company comprise of only one segment i.e. Textile Manufacturing, therefore the whole position as depicted are in respect of the said segment. In respect of other commercial disclosures, the Notes on Accounts and the Schedules are self explanatory and can be referred to. j. RISK MANAGEMENT POLICY IMPLEMENTATION In today's economic environment, Risk Management is a very important part of business. The main aim of risk management is to identify, monitor and take brcautionary measures in respect of the events that may pose risks for the business. Your Company's risk management is embedded in the business processes. Your company has identified the following risks:__ |