MANAGEMENT DISCUSSION AND ANALYSIS

Macroeconomic Overview.

Macroeconomic fundamentals have dramatically improved for the better, reflected in both temporal and cross-country comparisons. Inflation has declined by over 6 percentage points since late 2013, and the current account deficit has shrivelled from a peak of 6.7 percent of GDP (in Q3, 2012-13) to an estimated 1.0 percent in the coming fiscal year. Foreign portfolio flows have stabilized the rupee, exerting downward brssure on long-term interest rates, reflected in the yield on 10-years government securities, and contributed to the surge in equity prices. As a result of these improvements, India's macroeconomic position now compares favourably with other countries.

India ranks amongst the most attractive investment destinations, well above other countries. It ranks well above the mean for its investment grade category, and also above the mean for the investment category above it (on the basis of the new growth estimates). The reality and prospect of high and rising growth, combined with macroeconomic stability, is the promise of India going forward. Today, India's fortunes have improved dramatically and India demonstrated the greatest improvement in the MVI while many others maintained the status quo or showed only a marginal improvement or deteriorated dramatically (Russia). India is still more vulnerable than the mean of countries in its investor rating category (BBB) but is less so than many of its larger emerging market peers.

However, due to decrease in currency rate of Euro, Pound and Yen, the overall export from Indian marginely decreased by 1.22% in doller terms.

India's exports during 2014-15 were valued as INR 18977.86 billion, registering a decline of .38% over the level of INR 19050.11 billion in 2013-14 in rupee terms. As against overall decrease of 1.22% in Export, the growth rate of Leather Industries was 9.37% in doller terms during 2014-15.

Industry Structure and Development

The Leather Industry holds a prominent place in the Indian economy. This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the country. With an annual turnover of over US$ 12 billion, the export of leather and leather products increased manifold over the past decades and touched US$ 6.5 billion during 2014-15, recording a cumulative annual growth rate of about 13.10% (5 years).

The Leather industry is bestowed with an affluence of raw materials as India is endowed with 21% of world cattle & buffalo and 11% of world goat & sheep population. Added to this are the strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and the dedicated support of the allied industries. The leather industry is an employment intensive sector, providing jobs to about 2.5 million people, mostly from the weaker sections of the society. Women's employment is brdominant in the leather products sector with about 30% share.

India is the second largest producer of footwear and leather garments in the world.

The leather industry is sbrad in different segments, namely, Finished Leather, Footwear, Footwear Components, Leather Garments and Leather Goods including Bags, Saddlery, Harness and Leather Gloves.

As per DGCI&S monthly export data, the export of leather and leather products for the year 2014-15 stands at US$.6494.41 million against the export of US$5937.97 million during the brvious period, registering a positive growth of 9.37%. In Rupee terms imbrssive growth of 10.53% registered during the year.

The major markets for Indian Leather & Leather Products are Germany with a share of 12.32%, USA 11.83%, U.K. 11.57%, Italy 7.76%, Hong Kong 6.50% , France 5.72%, Spain 5.41%, UAE 4.3%, Netherlands 3.46%, China 2.99%, Vietnam 1.78%, Belgium 1.68% and Denmark 1.29%. These 13 countries together accounts for nearly 75% of India's total leather & leather products export.

Opportunities and Threats :-

The Government of India had identified the Leather Sector as a Focus Sector in the Indian Foreign Trade Policy in view of its immense potential for export growth prospects and employment generation. Accordingly, the Government is also implementing various Special Focus Initiatives under the Foreign Trade Policy for the growth of leather sector. With the implementation of various industrial developmental programmes as well as export promotional activities; and keeping in view the past performance, and industry's inherent strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and dedicated support of the allied industries, the Indian leather industry aims to augment the production, thereby enhance export, and resultantly create additional employment opportunities.

However, with such good opportunities, there are certain threats like entry of multinationals in domestic market, International price fluctuation, Stringent Pollution norm like zero liquid discharging policy of the government, fast charging fashion trends and withdrawal of Government incentive.

Segment-wise Performance :-

The segment-wise performance of the company during the year is as under :-

SegmentsTurnover

a. Leather and Leather Products Rs. 585.37 Crores(brvious year Rs. 562.88 crores)

b. Textile Garments Rs. 117.62 Crores(brvious year Rs. 95.96 Crores)

Domestic Sales :

The company is manufacturing and selling its products in domestic market with reputed Allen Cooper Brand.

Outlook :-

As a medium to long-run prospects of Indian Economy, including the Industrial Sector, continues to be positive, a rise in saving and demand for consumable products is quite inevitable. The leather industry is basically a consumer product industry, hence with the increase in demand for consumer production; the prospect of the leather industry is bright. During the current year the pace of growth of leather industry is expected to be maintained.

Risk and Concerns :-

The major raw material for the leather industry is raw hide/skins. Leather is a natural product and its prices and availability are changing from time to time. The company is having vast experience in sourcing the raw materials for its tanneries and leather products divisions from India and outside which help in keeping the prices and availability under control. The output of raw hides/skins also depends upon personal skill of the purchasers and technicians, which are being properly taken care-of by the experienced personnel of the company. The substantial revenue of the company is being generated in foreign exchange. The adverse foreign exchange rates may affect the profitability of the company. The experienced professional of the company are keeping close watch over movement in currency rates.

Cautionary Statement :-

Statement in the Management Discussion and Analysis, describing the Company's objectives, projections, estimates, expectation, or brdiction may be 'forward-looking statement'. Further, the performance of the company is also dependent on domestic and global economic conditions, government and regulatory policies on which the company is not having any control.

Internal Control System and their Adequacy :-

The company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from misuse or disposition and those transactions are authorized, recorded and reported correctly. Proper checks and controls have been introduced for all the incoming and outgoing materials. The Audit Committee and Internal Audit Department regularly review the financial and operating controls at all locations of the Company. The internal control is designed to ensure that the financial and other records are reliable for brparing financial statements and other data, and for maintaining accountability of assets.

Financial Performance with respect to Operational Performance:-

The financial statements have been brpared in compliance with the requirements of the companies Act, 2013 and Generally Accepted Accounting Principles in India. The company has achieved the sales and other income of Rs 712.02 crores during the year against Rs. 671.75 crores reported last year. The profit after tax was Rs 32.47 crores during the year as compared to Rs. 32.45 crores reported during the brvious year. The gross block of the company as at 31.03.2015 was Rs 289.01 crores against Rs. 270.81 crores as at 31.03.2014. The net current assets as at 31.03.2015 were Rs 47.38 crores as against Rs. 41.15 crores as at 31.03.2014.

Industrial Relations and Human Resources Development:-

The relations with the employees continued to be cordial during the year. Directors record their apbrciation for the sincere and hard work put in by all categories of employees during the year. There were 1844 permanent employees with the company as on 31st March, 2015.