MANAGEMENT DISCUSSION AND ANALYSIS

I. TEXTILES INDUSTRY STRUCTURE AND DEVELOPMENT

The global tender will be one of the factors that will support the prices in the near to medium term. Further, the Government is expected to revise MSP of most kharif crops in shortly. Once kapas prices are revised, it will have a bearing on the prices of ginned cotton as well. The other cause of current distress is high volatility, either coming from vagaries of nature or tumbling prices. Today, it is not only unseasonal rains and hailstorms, but also crash in prices of several Agri-commodities, be it potatoes or corn or cotton. Their tumbling prices have slashed farmers' incomes substantially, and the MSP system is benefiting less than 10% of the farmers. It is the efforts of Indian companies to take the initiative of the Trans-Pacific Partnership [TPP] trade deal which will offer a boost to the local garment and textile industry.

The Merchandise Export Incentive Scheme (MEIS), however, ignores markets such as China, Bangladesh, Sri Lanka, Turkey, Vietnam and South Korea, which are major destinations for yarn and fabric from India. India's only major hope in textiles now is as supplier of raw cotton. But that would imply it getting confined to the upstream and lower end of the textile value chain. Exports of raw cotton during April-February 2015 have declined by 41.32 per cent in quantity terms and 46.6 per cent in value terms as compared to same period 2013-14. As exports account for a substantial share of India's production of cotton, the decline in exports has resulted in a surplus forthe domestic market and has impacted the cotton growers. Unseasonal rains in central parts of the country including Gujarat, Maharashtra and Madhya Pradesh has resulted in loss of about five lakh bales (of 170 kg each) of cotton this season to September.

Technology should be evaluated on a cost-benefit basis. At brsent, the Indian spinning industry is essentially paying for the R&D done abroad. Unless this scenario changes, this arrangement cannot be in the best interest of our nation. But technology is such an extremely powerful tool that every new development has to be evaluated for its merits. Ignoring key technological developments is extremely dangerous. Embracing any bought-out technology far ahead too early or far behind too late the pack will be monetarily disadvantageous. Textile exporters are feeling letdown by the new foreign trade policy (FTP), which they said has ignored the cotton yarn sector. The estimated exports for the Textile& Clothing sector during the brvious fiscal year (2014-2015) is approximately US$ 35.96 billion against US$ 34.29 billion in fiscal2013-2014 marking a growth of 4.88%.

COTTON

Duringthe year, low export demand from China has been weighing heavily on cotton till now. But prices are expected to move northwards in the near to medium term as the minimum support price (MSP) for kharif crops are likely to be revised and a deficient monsoon will affect sowing of cotton. Cotton prices had touched the four-year low as they dipped to Rs 13,990 per bale in the third week of January. Prices had seen a high of Rs 21,440 per bale in May 2014. In 2014-15, cotton prices have been falling continuously and trading on a negative note because of higher production and lower export demand from China. The offtake by China, which used to buy 50 per cent of Indian cotton, came down to 10 per cent this time. Against 11.79 million bales of cotton exported in 2013-14, only 4.5 million bales have been exported till now in 2014-15. As the price of kapas or raw cotton fell below MSP, the Cotton Corporation of India hiked the procurement of cotton from farmers. CCI has procured over 86 lakh bales of cotton in 2014-15 against 40,800 bales in the brvious year. Indian spinners are the major consumers of ELS Cotton and holds high regards globally when it comes to spinning finer yarn counts. Indian Spinners have to continually maintain the leadership position for which they need a consistent supply of good quality ELS Cotton. This Panel discussion among the elite user fraternity would try to address the current issues in regard to the availability and usage of ELS Cotton. The current cotton Textiles supply chain is witnessing an unbrcedented shifts due to ever- increasing production costs, rapidly changing consumer behavior and increasing level of social and environmental awareness. This demands a stronger and sustainable partnerships among all the stake holders of the supply chain.

YARN-ASIGNIFICANT SEGMENT

Man-made fibre yarn as well as woven and knitted fabrics, in addition to Garments, have been extended a 2 per cent incentive (in the form of fully transferable duty scrips) in the EU, the US, Canada and Japan. However, sops in these markets do not help yarn and fabric producers, as they export very little to these markets. The Merchandise Export Incentive Scheme (MEIS), however, ignores markets such as China, Bangladesh, Sri Lanka, Turkey, Vietnam and South Korea, which are major destinations for yarn and fabric from India. India's only major hope in textiles now is as supplier of raw cotton. But that would imply it getting confined to the upstream and lower end of the textile value chain. Exports of raw cotton during April-February 2015 have declined by 41.32 per cent in quantity terms and 46.6 per cent in value terms as compared to same period 2013-14. As exports account for a substantial share of India's production of cotton, the decline in exports has resulted in a surplus for the domestic market and has impacted the cotton growers. Unseasonal rains in central parts of the country including Gujarat, Maharashtra and Madhya Pradesh has resulted in loss of about five lakh bales (of 170 kg each) of cotton this season to September.

II. OPPORTUNITIES AND THREATS

Inflation in textiles matters just as much as food inflation, especially for the poor. At the same time, it is necessary to understand the nature of inflation in textiles. Given the impact on poor consumers in our country, it is obvious that we need to keep the inflation numbers of synthetic and manmade textiles under close watch. It is clear that the bad part of textile inflation has mainly to do with the large wedge between domestic and global synthetic fiber prices. Indian cotton crop remains heavily monsoon dependent due to lack of irrigation in most cotton growing region. The weather risk to prices are on upside. A lower-than-normal monsoon may trigger a shift in cropping pattern this year, mainly in the South where farmers could plant more "dry crops", such as maize and cotton which require less water. Another important issue is the availability, quality and price of power. The availability of good quality power at reasonable prices is critical for sustainability of the industry. However, the cost of power has been continuously increasing, adding to input cost brssure in the industry. The non-availability of skilled manpower along with high labour cost brvailing in the country is growing concern area for textile industry. Unseasonal rain becomes another risk factor harvesting of cotton.

A. Government policies-Textile Sector

Textile exporters are feeling let down by the new Foreign Trade Policy (FTP), which has ignored the cotton yarn sector. The Commerce Ministry announced the much-awaited FTP which outlines the vision, goals and objectives for the country's export-import sector for 2015-20, with the high export targets set by the government. The sectors like textile and clothing, the second-largest employment provider in the country, has not got its due in the FTP. The textile sector has been granted duty scrips of 2 percent only for mainstream cotton textile products at a time when it's facing challenges in the form of high tariffs and barriers due to brferential tariff arrangements. In contrast, higher rates have been given for handlooms, carpets, coir products under the Merchandise Exports from India Scheme (MEIS).Sectors like cotton yarn have been totally ignored, especially at a time when exports of these products have declined sharply and face high logistics cost. Under FTP 2015-2020 some amendments have been notified like omission of Provision related to EPCG authorization on annual requirement and technological upgradation of existing EPCG Machinery. The limit on value of spares imported has now been relaxed, validity of the authorization is now limited to 18 months from the date of issue of such authorization, export of restricted goods under the authorization now allowed. In the backdrop of nationwide farmer distress, particularly among cotton farmers, the government has been urged to allow farmers to use the reusable straight line BN Bt cotton seed and other similar varieties as against those non-reusable hybrid seeds being sold by corporate.

Union Budget 2015-16 has evoked mixed response from the Indian textile industry. Budget ignored the highly labour intensive textile industry which has significant potential for growth. The only positive aspect of the Budget for the textile sector was the continuation of the optional excise duty regime. Fresh investments will be impossible under the Technology Upgradation Fund Scheme (TUFS) during 2015-16, owingto reduction in allocation for the scheme from Rs 1864 crore in 2014-15 to Rs 1520 crore for 2015-16. There is no funds available for fresh investments under the scheme as of now. Increase in service tax to 14 per cent will have an adverse impact on the textile industry. The hike in effective rate of excise duty on manmade fibres from 12.36 per cent to 12.5 per cent under the current Budget will also negatively affect the industry. However it has marked a good beginning to achieve the 'Make in India' vision. The government is extending the optional CENVAT route for cotton textiles and also for the announcement of implementing GST with effect from 1 April, 2016. The decision in the reduction in corporate tax from 30 per centto 25 per cent is a positive feature. All industries Duty drawback rate should be enhanced immediately after taking into account the new incidence of service Tax, excise duty and increase of excise duty on diesel.

B. EXPORT-AN INSIGHT

In 2014, India emerged as a world's second largest textile exporter, with textiles and clothing exports worth US$40.2bn, India now commands more than 5% share in the global textile and clothing trade. Cotton has played an extremely important role in contributing towards this robust growth , be it Cotton Fibre, Cotton Yarn , Cotton Textiles or Apparel, all the Sectors have shown an imbrssive growth. India holds a leadership position when it comes to spinning fine yarn counts. Indian Spinners have contributed more than US$4.8bn to Indian Textile exports in Financial Year 2013-14. The

Panel discussion on Creating Successful partnerships in the Textile Supply Chain" at COTTON USA Seminar session will bring together experts from each segment of the supply chain to discuss how the successful partnerships can be formed among the upstream and downstream players to propel the growth in Textiles and Clothing sector. According to the latest global lifestyle monitor study conducted by Cotton Incorporated, "Cotton meets Consumer Expectations", as more than 8 in 10 shoppers in India describe cotton as good quality.

III. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

There are three major business segments viz. Home Furnishing & Fashion Accessories, Yarn, and Architectural Products as per the Accounting Standards 17 issued by the Institute of Chartered Accountants of India. All these segments performed reasonably well. The share of each segment in the overall turnover of the company is 23.83 % for Home Furnishing & Fashion Accessories, 70.21 % for Yarn and 5.96 % for Architectural products. The detailed performance has already been discussed in the Directors' Report.

IV. OUTLOOK

We are making all efforts to cope up with the challenges through continuous cost reduction, process improvements, diversification of products, rationalization of costs, training the workforce on the continued basis, improving efficiencies and creating a strong customer oriented approach. Ourtextile unit has a competitive edge in terms of quality, designs and innovative products. We expect much better performance in the coming years on the back of revival in the world economy including India. Your directors believe that sales volumes are reasonably expected to increase and consequently margins are also expected to be strengthened. However with the greater customer satisfaction, increase in existing customer loyalty, constant offering by the Company of its value added products, constantly improving its product mix with an increase in awareness of Alps products, and with the increased realization against USD on exports, better recovery is not only expected but is likely to be strengthened in due course.

V. RISKS AND CONCERNS

The cotton industry is also brsently facing challenges like increase in labour cost, increasing power tariff & fuel charges, increase in transportation and inventory carrying charges, which are further likely to impact its margins. Cotton prices which have almost stabilized now may tend to increase due to various extraneous factors and lead to uncertainty. To bring growth and sustainability to the export markets and promote export, there is need to consistently seek new markets and tailor make products to suit the trends. The risks are inherent in all businesses. The challenge for the Company is to effectively and responsibly manage and control the risks on a sustained basis to enhance returns. All the current and fixed assets of the company also suffer from the risk of natural calamity. However, it has been insured from the reputed insurance companies.

VI. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate systems of internal control, to safeguard assets against loss from unauthorized use or disposition. This also ensures that all transactions are authorised, recorded and reported correctly. Regular internal audits and checks are carried out to ensure the robustness of the system. The Management also reviews from time to time the internal control systems and procedures to ensure their proper application. The emphasis on internal controls brvails across functions and processes, covering the entire gamut of various activities. Effective and combrhensive reviews by the Audit Committee of the Board further enhance the level and quality of internal controls within the organization. The Company has adequate internal control systems for business processes, with regards to efficiency of operations, financial reporting and controls, compliance with applicable laws and regulations, etc. Clearly defined roles and responsibilities down the line for all managerial positions have also been institutionalized. All operating parameters are monitored and controlled. Regular internal audits and checks to ensure that responsibilities are being executed effectively are carried out. In order to further strengthen the internal control system and to automate the various process of the business, the implementations of Enterprises Resource Planning (ERP) by SAP-AC have been accomplished.

VII. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECTTO OPERATIONAL PERFORMANCE

Your company has sbrad its wings in most of the markets now like US, UK, South East Asia, Australia, NZ and Middle East. It was planned to avoid Europe and Latin America for sometime till the worst is over there. Your company have emerged in last few years as a serious supplier of blackouts cotton and natural upholstery fabrics. We expect the upward trend in export business. Company has also introduced some of the new product in export segment like Multi-head embroidered fabrics which has higher value proposition, outdoor fabrics etc. This range is expected to have lesser competition, is highly technical and with a higher value.

To maintain the market share in domestic Market in Made ups Segments Company have introduced various new products/range in its CMT divisions and Fabric. Your company is catering to almost all big retailers related to above segment by introducing various rage in the product line like Curtains, Cushion, pillows, bed Linen and Table Cloth. In Fabric by roll focus is always on Quantity as well as quality to serve the customers in best possible way. The last year performance was better than in comparison to past years in terms of Values, Quality etc. It is our endeavor to increase the business by timely meeting the demands of the market. Your company is targeting for a leading name in field of home textiles for which by networking for direct supply to leading international customers, implementation of SAP and introducing the new segment e-business on domestic and exports. Duringthe period under review your company could not maintain the EBITDA which drops to Rs.194.69 millions in comparison to Rs417.61 million in brvious year due to various unavoidable factors. Company has incurred a net loss of Rs 294.87 millions in comparison to net loss of Rs. 1176.56 millions in the brvious year showing the increase, inspite of meeting the various operational challenges in the production and marketing front, like decrease in the margin of yarn, uptrend in cotton prices and consolidation/merging and closing of some of its units on economical viability grounds duringthe brvious year but having the financial impact duringthe current year under review. The impact of measures for improvement in the performance will be reflected in the current year's financial parameters.

VIII. MATERIAL DEVELOPMENTS ON HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBEROF PEOPLE EMPLOYED

During the year, special attention has been given to strengthen the training set-up at different Unit locations starting with mandatory Induction Training for all the new joinees in the team, developing internal trainers, restructuring the training modules, developing good training material and hiring more competent trainers. Besides, initiatives have been taken to get affiliation from the Textile Sector Skill Council (TSC) for various job roles in Spinning, Weaving, Processing and knitting to benchmark the training material and processes with the best in the Industry.

Our basic objective to ensure availability of the right Human Resources at right time is met through timely sourcing. The initiatives to improve the organization structure, optimize the utilization of available human resources, clearly defining the job responsibilities so as to avoid over-lapping and also defining Key Results Areas and Key Performance Indices for better focus and assessment of the contributions are part of the continuous improvement process. Formulating/continuously reviewing HR policies for its effective and fair implementation and improving hygiene factors for facilitating creation of a conducive work environment are part of the routine. Consistent efforts continued to improve the female workers/employees ratio, particularly at the shop floor, in-line with the national policy of gender equality. The Sexual Harassment Policy formulated during brvious year in line with the government directives implemented, though there was no case reported, thereby reassuring that the company gives safe and congenial environment for females to work. The company's commitment for treating its employees with human dignity and fairness were visible in its efforts throughout the year. The company's concerns for welfare of its workforce continued during the year and accordingly Croup Personnel Accident Insurance policy/ESI/WC policies were continued further as in the past. The company has been consistently maintaining harmonious & cordial relations with the employees at all the locations. During the year, the Company employed around 2366 employees (2600 employees during brvious year 2013-14). Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants.

CAUTIONARY STATEMENT

Statements in this report on Management Discussion and Analysis, describing the Company's objectives, projections, estimates, expectations or brdictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and domestic demand-supply conditions, finished goods prices, raw materials costs and availability, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. 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