MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis. A. Industry Structure and Developments During the year, the luggage Industry witnessed an all-round growth. Growth was seen across channels and product categories. This growth has been fueled mainly by a continuous shift of consumer brference from unorga-nized sector to organized sector, growth in air travel, good wedding season, Government's focus on tourism, a growing acceptance of luggage as a lifestyle product. Strong growth was seen in Hyper market and in E - commerce channels. Growth in these channels was led mainly better pricing and convenient shopping experience provided by Hyper market and E - commerce. As per World Travel & Tourism council, the outlook for Travel & Tourism in 2016 remains robust, despite economic fragilities and other sources of volatility in the wider market. The sector's GDP growth contribution is expected to accelerate and again outpace growth of the wider economy. The direct contribution of Travel & Tourism to GDP is forecast to rise by 7.1% in 2016, and to rise by 7.9% pa, from 2016-2026. Company Development: The Company witnessed a good growth in the topline during the year under review, owing to good wedding season and increase in domestic and international travel. New product introductions supported by strong below the line advertising and robust distribution led to positive growth. Company is becoming multi brand as during the year it acquired brands like Genius & Magnum and also signed a distribution agreement for India with ANTLER, a popular luggage brand in UK. The Company has introduced an exciting new range of Polycarbonate luggage, popularly known as PC zippered luggage, which is light weight & durable. The material provides a variety of opportunities to integrate fashion cues in the product. The Company also launched new product categories eg. Backpacks, Laptop Bags. All these products are very well received by the market. The Company has improved its brsence in Hypermarkets by increasing the count of point of sales in larger retail chains Big Bazaar, D' Mart, Reliance, Bharti Walmart, Aditya Birla Retail, Vishal, TESCO & Hypercity etc. Company has grown significantly in ecommerce in marketplace websites such as amazon.in, snapdeal.com , myntra.com , jabong.com & flipkart.com etc. The Company also operates from 50+ exclusive retail stores. Thus across channels, several new product ranges were launched across price points, in both PC & soft luggage categories, with a special thrust on polycarbonate, business collections and backpacks. Debrciation of rupee against USD has put brssure on margins. Imported Soft luggage across product categories is the highest contributor to sales of the Company. During the year, rupee remained weak and the Company's buying costs of imported products remained high in rupee terms. The Company was able to negotiate and limit cost increases in dollar terms with the Chinese supplier due to its increased negotiating power. Further, due to intense competition, only some increases were passed on to customer through price increases which partially but not fully offset these increased costs. Prices of polymer, aluminum and polycarbonate, the basic raw material for hard luggage, remained under control due to softening of crude prices. B. Opportunities and Threats Keeping pace with market growth or even outperforming the market in the coming years is the biggest challenge. On the other hand, due to its linear structure, faster and better decision making allows the Company to grab opportunities in time. The key opportunities lie in gaining leadership position in new category like school bags. Also the Company sees good opportunity in backpacks and PC categories where good growth is expected as consumers upgrade from unbranded to branded products. C. Segment/ Product-wise Performance Major growth is observed in soft luggage uprights and polycarbonate uprights, whereas traditional hard luggage, made of Poly Propylene saw a steep drop in Sales. This shift is due to change in consumer brferences towards the convenience of light and wheeled travel products and away from heavier products without wheels. Soft luggage is major contributor to the Company's sales. D. Outlook Though a challenge, the Company is confident to grow faster than the market growth. The topline is likely to keep growing at a good rate due to new and better product offerings and robust distribution network. However, the margins may continue to experience brssure on account of weaker rupee, intense competition, advertisement spends etc. Considering the threats, opportunities and the strengths of the Company, the key task at hand will be to make the most of the category growth across all price segments and maintain margins to the best possible level without affecting volume growth. The Company will try to pass on some escalations through price increases and better price negotiations on purchase side. The Company will also manage other costs. Considering the above, the outlook for the current year looks bright, except for unfavorable impact, if any, on account of rupee debrciation, weaker consumer sentiment or other unforeseen circumstances. E. Risks and Concerns Like any other entity, the Company is exposed to various risks and uncertainties and also has access to opportunities across its national brsence. The Company's performance, future prospects and cash flow generation could be materially impacted by any of these risks or opportunities. The major risks as identified by the Company are overdependence on China for purchase of soft luggage, risk of exchange loss associated with imports, unfair competition, brand positioning, etc. Safari follows the Enterprise Risk Management (ERM) framework to manage these risks which is primarily based on the integrated framework for enterprise risk management and internal controls developed by the Risk Management Committee. F Internal Control Systems M/s. Ernst & Young LLP, Chartered Accountants, were appointed as the Internal Auditors of the Company to review internal controls periodically with specific reference to evaluation of the current business processes, identify gaps, inefficiencies, process exceptions and suggest action plans, verify adherence to risk mitigation plans, to review plant operations / effectiveness, sales planning and distribution channels, branches of the Company, to provide assurance regarding various compliances by assessing the reliability of financial controls and compliance with applicable laws and regulations. The Company has a regular check on expenses including capex in relation to an approved budget. The Company has documented policies and SOPs with regards to all major activities. The Internal Auditors submit their reports to the Audit Committee every quarter. The management considers and takes appropriate action on the recom-mendations made by the Statutory Auditors, Internal Auditors and the Audit Committee of the Company. Significant policies with changes during the year, if any, have been disclosed in the notes to the financial statement. G Financial Performance Sales: The Revenue from Operations and Other Income of the Company for the year ended 31 st March 2016 was at Rs. 27,764.86 lacs (Previous Year Rs. 21,650.89 lacs). Expenditure: The Company continued to exercise cost control by effectively implementing various cost management initiatives. Profit: Profit after Tax for the year under review amounted to Rs. 780.07 lacs (Previous Year Rs. 427.03 lacs). H Human Resource Development & Industrial Relations A note on Human Resource is provided in the Directors Report. During the year under review, recruitment process was further strengthened. Human Resource Department of the Company focused on timely and effective execution of its plans. Required talent was made available to various functions on time. Also based on well-defined training process, the Company identified the needs of training and required training was parted to employees to improve efficiencies and capabilities. During the year Industrial Relations remained cordial. The employee strength as on 31st March 2016 was 745. |