MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Economy and market outlook

The year 2015 recorded a distinct slow down in the global growth and most of the developed and emerging markets economies have witnessed a fall in their growth rates. Europe, Japan and China's growth remained under brssure whereas US economy started late showing sign of improvement. Liberty exports, mainly to Middle East and European countries, have contributed approx 8% of the total revenue of the Company for financial year 2015.

At domestic level, better economic situation, feel good factors along with the positive sentiments post general elections helped India to be among the better performing emerging markets. Inflation, the major cause of concern in the recent past, remained moderated whereas rupee remained comparatively stable during financial year 2015.

Disposable income level though increases, yet consumer confidence and accordingly their spent remained muted. Overall, 2015, in view of the slowdown in global and domestic economy, remained challenging for the Company.

Liberty's performance for 2015 is to be seen in this above given economic environment.

At retail level, where Liberty dominantly operates, it seems that momentum will take some more time to start reflecting in Company's performance.

The Indian Footwear Industry-Structure and Development, Opportunities/Threats, Risk and Concern

The Indian Leather industry dominantly rebrsenting through footwear holds a prominent place in the Indian economy. This industry has shown its potential through its consistency in high export earnings and its ranking amongst most foreign exchange earners for the country continuously in the past several years. Indian Footwear sector is mainly benefited from its command on reliable resources, quality finished leather, technological competence, expertise available with human capital, low cost of Labour as compare to other developed countries and established track record for manufacturing meeting global standards.

India is the 2nd largest, China being 1st, producer of footwear and other leather articles in the world and for the year 2014-15, the exports of this segment after registering a growth of 9.37% ,touched US $ 6.5 billion. Government of India, because of its performance and further potential to improve, has identified this sector as a thrust sector in many of its promotional schemes including foreign trade policy.

Government in consultation with RBI is also working on to reintroduce interest subvention scheme for promoting footwear exports by increasing competitiveness of Indian industry in the global markets.

Liberty with its quality oriented products and its consistent performance at the export front is well placed to have benefits from these developments.

Domestic market has huge potential and incredible opportunities to grow in near future due to development of new markets, change in consumption habits similar to developed countries, tilt towards organized retailing, awareness for branded products and modernization of lifestyles. Bulk customer segment is also up-coming because of change in brferences and desire to satisfy the aspirations of the working force. The urbanization trends, increase in education levels and use of technology would also prove as impetus in future for the footwear industry.

The recent initiatives, including Make in India and skill development, implemented by the Government of India would also create innumerable opportunities for Indian footwear manufacturers to better their performance and the competitiveness.

The changes introduced by the Government of India in its FDI policies and the recent amendments in the Union Budget-2015 for reduction of excise duty on certain category of leather shoes are very encouraging for the overall development of the industry and will help domestic footwear players to increase their competitiveness in the long run.

The change in consumer brference, acceptability of the new launches, change in input costs, competition, Macro economic factors and currency fluctuations are few of the risks and concern areas associated with the business in which Liberty operates.

Liberty enjoys strong brand equity and has a pan India retail brsence which is being continuously augmented to satisfy consumer aspirations and this will have way for Liberty to supplement its future success of growth.

Internal Control System and its Adequacy

Liberty's internal financial controls are adequate and operate effectively and ensure orderly and efficient conduct of its business including adherence to its policies, safeguard its assets, brvent and detect frauds and errors, maintain accuracy and completeness of its accounting records and further enable it in timely brparation of reliable financial information. These controls have been integrated with the Company's risk management policy to ensure that control measures for the effective mitigation of risks identified are in place. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

The Company has in place a strong and independent Internal Audit Department which is responsible for assessing and improving the effectiveness of internal financial control and governance. To maintain  its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

Liberty has an independent Audit committee which acts in accordance with the terms of reference specified in writing by the Board including evaluation of internal financial controls and risk management system.

The Audit Committee, on behalf of the Board, assesses the adequacy and effectiveness of the internal control system in detecting fraud, irregularities or infringement of laws, rules and regulations or material control failures on a regular basis by reviewing the work and findings of Internal Audit Department.

The CEO/CFO certification provided elsewhere in the Annual Report confers the adequacy of internal control systems and procedures  followed by the Company.

Financial Performance: The highlights of the financial performance of the Company during the year ended 31st March, 2015 have been stated in the Directors' Report for the year ended 31st March, 2015, which appears separately in the Annual Report. The brief details of the performance of the Company during the year under consideration are given as under:

Capital Structure: During the year, there has been no change in the  Capital Structure of the Company and Paid up Capital of the Company was Rs.1704 lacs as on 31st March, 2015.

Reserves & Surplus: The Company's reserves and surplus has increased from Rs. 12052.19 Lacs to Rs. 12791.13 Lacs in 2014-15.

Long Term Borrowings: During the year under review, the Company availed Term Loan of Rs.570.32 Lacs as against brvious year's Rs.836.97 Lacs. The outstanding amount of the Term Loan (Non Current and Current maturities) as on 31st March, 2015 was Rs.1768.31 Lacs as against brvious year's Rs.1876.05 Lacs.

Other Long Term Borrowings: During the year under review, the  other long term borrowings, which consists of securities received from channel partners, increased by Rs.82.73 Lacs and stood at Rs.576.21 Lacs (Previous year Rs.493.48 Lacs).

Short Term Borrowings: The amount of working Capital loan  secured through the Company's current assets stood at Rs. 12103.25  Lacs as compared to Rs.9609.72 Lacs in the brious year. The increase in borrowings is because of expansion of new retail stores of the Company. Further, for short term requirements, the Company has availed unsecured short term loans from the related parties and the  outstanding balance as on 31st March 2015 remained at Rs. 13.35 Lacs (Previous year Rs.179.84 Lacs ).

Trade Payables: The Trade Payable of Rs.9083.65 Lacs (Previous year  Rs.8220.46 Lacs) included an amount of Rs.29.96 Lacs (as against the  brvious year's Rs. 114.32 Lacs) due towards M/s Liberty Enterprises, Liberty Group Marketing Division, Liberty Footwear Co., the partnership  firms in which few of the Directors and their relatives are interested,  under the terms of the respective agreements dated 3rd April, 2013.

Other Current Liabilities & Provisions: Other current liabilities & provisions amounting to Rs.2807.80 Lacs (Previous year Rs.2851.73 Lacs)  consists of long term debts from banks and others due within 12 months from the date of reporting, advances from customers, expenses payables, other liabilities, Proposed Dividend, provision for dividend distribution tax, provision for taxation (net of MAT credit entitlement) and provision for excise duty.

Fixed Assets: In the year 2014-15, Liberty's Fixed Assets Block (including tangible and intangible assets) increased by Rs.1864.64 Lacs. The said increase was mainly because of purchase of furniture &  fixtures for new retail stores, new moulds at plants and towards normal capital expenditure in furtherance to the business operations of the Company.

Non-Current Investments: At the year end, Liberty's non-current investments in its only overseas Subsidiary stood at Rs. 121.93 Lacs (brvious year Rs. 121.93 Lacs). The said overseas Subsidiary has not yet commenced its business operations; therefore, no further  investments have been made in this subsidiary.

Long Term Loans & Advances: Long term loans & advances  amounting to Rs.1826.69 Lacs (Previous year Rs.1387.21 Lacs) consists  of security deposits of Rs.544.97 Lacs (Previous year Rs.405.42 Lacs),  Share Application Money (pending allotment) paid to overseas Wholly Owned Subsidiary of Rs.180.49 Lacs (Previous year Rs.180.49 Lacs) and MAT Credit Entitlement Rs.1117.63 Lacs (Previous year Rs. 810.09 Lacs).

During the year, the Company has made a provision of Rs.NIL (Previous  year Rs. 21.56 Lacs) for the security deposits considered as doubtful.

Inventories: Inventories, comprising finished goods, raw materials,  work in process etc. as at 31st March, 2015, stood at Rs.14,320.96 Lacs as against brvious year's Rs.11,240.49 Lacs. The increase in inventory is mainly because of expansion of program being undertaken by the Company during the year where new stores were opened with  seeding stock.

The Inventory turnover ratio for the year ended 31st March, 2015 was 96 days as against 82 days in the brvious year.

Trade Receivables: Trade Receivables, with an average realization  period of 77 days (84 days in the brvious year) stood at Rs. 11481.32 Lacs in 2014-15 as against the brvious year's Rs.11565.85 Lacs. Out of  the trade receivables, Rs.1472.68 Lacs as against the brvious year's Rs.1266.52 Lacs were due from overseas customers.

The Company after considering the recovery process has made a  provision of Rs.47.09 Lacs against brvious year's Rs.300.74 for doubtful  debts. During the year, the Company has written off its book debts of Rs.111.96 Lacs as against brvious year's Rs.277.06 Lacs. Further, the Company has recovered its Bad Debts of Rs.77.84 Lacs as against  brvious year's Rs. 7.83 Lacs

Short Term Loans & Advances: The Short Term Loans and Advances given by the Company included an advance Income Tax  (including Minimum Alternate Tax) of Rs.273.77 Lacs in 2014-15 as against the brvious year's Rs.304.85 Lacs, export benefit receivables of Rs. 151.22 Lacs as against the brvious year's Rs.143.27 Lacs and brpaid expenses of Rs.136.23 Lacs as against the brvious year's Rs.64.85 Lacs.

Revenue from Operations and Profits: Liberty's total Income,  comprising sales and other Income, increased from Rs.50136.12 Lacs to Rs.54874.47 Lacs in 2014-15. Profit after tax, after making a provision for debrciation, increased from Rs. 1414.99 Lacs to Rs.1500.03 Lacs in 2014-15. The Company's net profit, after considering a tax provision of Rs.285.93 Lacs as against the brvious year's Rs.307.25 Lacs, MAT Credit Entitlement of Rs.127.35 Lacs (Previous year's Rs. 187.19 Lacs), a deferred tax assets of Rs.255.89 Lacs as against brvious year's Rs. 47.38  Lacs and prior period income on account of Income tax for earlier  years of Rs.108.85 Lacs as against prior period Expenses on account of income tax for earlier years of Rs.2.86 Lacs stood at Rs. 1706.20 Lacs in 2014-15 as against the Previous year's Rs.1339.45 Lacs.

Finance Costs: Liberty's finance costs stood at Rs.1606.68 Lacs in  2014-15 (Previous year's Rs.1607.27 Lacs), comprising interest on term  loans, working capital loans, other loans and bank charges.

Human Resource Developments: Liberty has a defined uniform HR Policies for all employees/workers to define the HR functions and to  make Liberty such a Place or Institution where the people working has defined role and responsibilities with a sense of belongingness amongst them. During the year under consideration, HR function  implemented various initiatives to support this.

During the year under consideration several initiatives through training & motivational programmes were taken to improve employees' knowledge, skills and effectiveness to improve productivity and to establish better inter se relations amongst themselves. The relationship with the employees has been cordial and they have  extended their support to the financial performance of the Company

As on 31st March, 2015, the total employees' strength of the Company stood at 2418 as compared to brvious year's 2423.

Cautionary Statement: Statements in the Management's discussion and analysis, describing the Company's objectives, expectations and industrial outlook, may constitute forward looking statement within the meaning of applicable laws. The actual results might differ  materially from those either exbrssed or implied.