MANAGEMENT DISCUSSION AND ANALYSIS REPORT INDUSTRY STRUCTURE AND DEVELOPMENTS: Textile Industry contributes nearly 14% of the total Industrial Production of the country and also contributes 3% to the GDP of the country. The country earns about 27% of its foreign exchange through textile export. Considering the slow global economic recovery so far, there is a need to improve competitiveness of the sector in the global market. Within textile, 'Home Textile' market is estimated at over 10,000 crores. Of this, the organized sector accounts for under 10%. The Home Textile category is expected to grow at 8% p.a. and the share of organized sector is expected to improve. The emergence of strong modern trade and rapidly growing large format stores is expected to help upgradation of the market and also aid growth of organized sector players. OPPORTUNITIES AND THREATS: Opportunities * Abundant availability of Raw Materials. India has significantly lower raw material costs, wastage costs and labour costs when compared to other countries. Greater Investment and Foreign Direct Investment opportunities are available. Increased Disposable Income and Purchasing Power of Indian Customer opens New Market Development. Strong brsence of related and supporting industries. Textile machinery Indian textile machinery manufacturers are able to produce at competitive prices sophisticated machines of higher speed and production capability. The textile industry also gets significant support from the well developed IT capabilities of Indian firms. Threats Fragmented structure with the dominance of the small scale sector * High power costs Rising interest rates and transaction costs Unfriendly labour laws Logistical disadvantages in terms of shipping costs and time pose serious threats to its growth Foreign investments are not coming in as the overall factors influencing the industry are not investment friendly. Geographical Disadvantages. International labor and Environmental Laws. Increase in rate of service tax from 10 percent to 12 percent has given the intense competition in the Industry. Increased competition also translates into serious brssures on cost. These added to soaring commodity prices and volatility of exchange rates pose a serious challenge to cost management. SEGMENT WISE PERFORMANCE: The Company has identified its activities as single segment. Hence, the Company's performance is to be viewed as a single segment company operating in textile industry. RECENT TREND AND FUTURE OUTLOOK: The textile industry is undergoing a major reorientation towards non-clothing applications of textiles, known as technical textiles, which are growing roughly at twice rate of textiles for clothing applications and now account for more than half of total textile production. Technical textiles have many applications including bed sheets; filtration and abrasive materials; furniture and healthcare upholstery; thermal protection and blood-absorbing materials; seatbelts; adhesive tape, and multiple other specialized products and applications. While the year 2013-14 was not a rewarding period from business perspective, few positives could be derived out of the operation such as efforts toward energy conservation, maintaining a reasonably healthy capacity utilisation compared to the industry average, an improved gross realisation and stable top line compared to brvious year. With our sustained efforts in these fronts coupled with anticipated improved demand and higher capacity utilization, we expect the business to improve and become profitable. This will further be aided by your Company's focus on speciality fibres, innovative product mix and long term measures for cost reduction by converting fuel from RLNG to coal. RISKS AND CONCERNS: High inflation could adversely impact the domestic demand, especially since the 'Home Category' is considered as 'non-essential' in the family's consumption basket. Aggressive competition by new players, who wish to enter the category pose a risk of the Company losing its market share. The conversion cost could sharply escalate with severe energy price rise as well as increased labour cost due to hike in minimum wages. The Company will focus on contemporary designs, better value proposition in the product basket through continuous innovation and on cost management to mitigate the risks. We will also strive to widen the customer base in the exports business to address the challenges in the market. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company maintains adequate internal control systems, which provide among other things reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of Company's assets. The Internal Auditors have introduced several objective tools to assess strengths of our internal controls as also, identify areas where it need to be further strengthened. The scope and authority of the Internal Audit are well defined in the internal audit charter, approved by the Audit Committee. Internal audit plays a key role in providing an assurance to the Board of Directors of adequate internal control system. The audit committee at its meetings reviewed the reports of the internal auditors as well as the Risk Management process of the Company. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: The financial performance of the Company for the year 2013-14 is described in the Directors' Report under the head "Financial Performance of the Company'. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT: Your Company has undertaken certain employees' development initiatives which have very positive impact on the morale and team spirit of the employees. The Company has continued to give special attention to Human Resources/Industrial Relations development. Industrial relations remained cordial throughout the year and there was no incidence of strike, lock-out etc. Functional training and employee engagement was given adequate weightage during the year to enhance employee productivity and morale. Re-training on occupational, health, safety and environment were carried out in both the manufacturing facilities to improve awareness. CAUTIONARY STATEMENT: Statement in this Management Discussion and Analysis Report, describing the Company's objectives, estimates and expectations may constitute "Forward Looking Statements' within the meaning of applicable laws or regulations. Actual results might differ materially from those either exbrssed or implied. By Order of the Board of Directors Sd/- (Rakesh Kansal) Managing Director (DIN: 01735388) Sd/- (Bipin Patel) Director (DIN: 03190744) Sd/- (Mayur Shah) Director DIN: 03313341) Date : 30/05/2014 Place : Ludhiana |