MANAGEMENT DISCUSSION AND ANALYSIS REPORT

ECONOMIC OVERVIEW

The global macroeconomic landscape is currently chartering a rough and uncertain terrain characterized by weak growth of world output. The situation has been exacerbated by; (i) declining prices of a number of commodities, with reduction in crude oil prices being the most visible of them, (ii) turbulent financial markets (more so equity markets), and (iii) volatile exchange rates. These conditions reflect extreme risk-aversion behaviour of global investors, thus putting many, and in particular, commodities exporting economies under considerable stress. Even in these trying and uncertain circumstances, India's growth story has largely remained positive on the strength of domestic absorption, and the country has registered a robust and steady pace of economic growth in 2015-16 as it did in 2014-15. Additionally, its other macroeconomic parameters like inflation, fiscal deficit and current account balance have exhibited distinct signs of improvement. Wholesale price inflation has been in negative territory for more than a year and the all-important consumer prices inflation has declined to nearly half of what it was a few years ago. However, weak growth in advanced and emerging economies has taken its toll on India's exports. As imports have also declined, principally on account of reduced prices of crude oil for which the country is heavily dependent on imports, trade and current account deficits continue to be moderate. Growth in agriculture has slackened due to two successive years of less than-normal monsoon rains. Saving and investment rates are showing hardly any signs of revival. The rupee has debrciated vis-a-vis the US dollar, like most other currencies in the world, although less so in magnitude. At the same time, it has apbrciated against a number of other major currencies.

Despite global headwinds and a truant monsoon, India registered robust growth of 7.2 per cent in 2014-15 and 7.6 per cent in 2015-16, thus becoming the fastest growing major economy in the world. As per the estimates of the International Monetary Fund (IMF), global growth averaged 3.1 per cent in 2015, declining from 3.4 per cent registered in 2014. While growth in advanced economies has improved modestly since 2013, the emerging economies have witnessed a consistently declining trend in growth rate since 2010. It is against this background that the recent Indian growth story appears particularly bright.

INDUSTRY STRUCTURE AND DEVELOPMENT: TEXTILES

Indian Textiles Industry has an over whelming brsence in the economic life of the country. Apart from providing one of the basic necessities of life, the textile industry also plays a pivotal role through its contribution to industrial output, employment generation and export earnings of the country. It contributes about 14% to India's industrial production and 13% to the country's export earnings. The textile sector is one of the largest provider of employment along with agriculture.

The Indian textiles industry rebrsents a widely diverse spectrum of activities with the hand-spun and hand-woven sector at one end, and the capital intensive sophisticated mill sector at the other. The decentralized power looms, hosiery and knitting sectors form the largest section of the Textiles Industry. The close linkage of the Industry to agriculture and the ancient culture, and traditions of the country make the Indian textiles sector unique in comparison to the textiles industry of other countries. This also provides the industry with the capacity to produce a variety of products suitable to the different market segments, both within and outside the country.

India: Apparel Industry

India's T&A industry is estimated to be worth USD 99 billion in 2013, including both domestic consumption and exports, and is projected to grow at a CAGR of 9% to reach USD 237 billion by 2023.

The domestic T&A market was worth USD 59 billion in 2013, and is expected to grow at 9% annually to reach USD 142 billion, by 2023.

Indian Innerwear Market

Among the core apparel categories, innerwear appears to be a potential growth category across all segments. With rising incomes, higher discretionary spending, greater number of working women and growing fashion consciousness, the innerwear segment is expected to continue to progress. Currently, the Indian innerwear market is worth Rs. 19,960 crore (2014)and is estimated to grow at 13 percent to reach Rs. 68,270 crore by 2024. The innerwear market has traditionally been largely unorganised, although in the past few years, the organised innerwear segment has shown promising growth in both men's and women's categories.

Source: Images Business of Fashion

Indian consumer spend on innerwear products is significantly lower than other Asian peers. This trend is visible across both men's and women's segments with gaps of over 90% against countries like Thailand and China. This suggests that there is significant room for growth driven by rising per capita spending on such products.

Looking ahead, we expect growth in the innerwear market to be driven by broad based consumer trends in the form of rising discretionary spend, growing number of mid-high income house hold and rising urbanization.

Innerwear has graduated from being just a functional category to a category that offers additional fashion quotient. It is shifting from a price sensitive category to a brand sensitive category.

Women's Innerwear Market

The women's innerwear market, which is driven by value-added innerwear products, contributes around 60 percent to the market. This market is worth Rs. 12,510 crore, and is growing at a promising CAGR of15 percent. The growing number of working women and the increased share of western wear in their wardrobe have propelled this growth. Further, with the increase in exposure, there is an increased demand for better fits and quality alongside the demand for a wider range of colors,styles, and accessories. Western wear usually encompasses specialized innerwear, which the branded players can provide, for the most part. Brand consciousness is no more restricted to external apparel. Among women's innerwear brands,strong single brands emerge for bottoms and heritage innerwear brands are brferred for bras. Women are increasingly conscious about even the brands and styles for their intimate wear. In fact, this changing brference is no longer restricted to just the metros, but has sbrad to mini metros, tier-I, -II and-III cities. This openness to indulge in branded lingerie has led to a growth in the number of international and domestic innerwear brands brsent in India.

Largely unorganized, the women's innerwear market is at brsent dominated by many local brands. Women tend to exhibit a strong comfort factor in buying lingerie from regular unorganized local stores, brdominantly due to price, but departmental stores are also very popular as they provide range and product displays and also have trial rooms. Exclusive brand stores are explored when looking for depth in styles and variety in colors. Even though there is an increase in the purchase frequency and average spends on innerwear, this category is brdominantly a 'planned purchase' or an 'occasion-based purchase' category,especially among women, who tend to purchase and even splurge on occasions as weddings, anniversaries, holidays,etc. However, promotions and offers tend to induce impulse purchases. Again, experimentation in terms of styles is most often done when buying for special occasions; for daily wear, known styles and brands are brferred.

On the basis of product pricing, the innerwear market is further divided into super-brmium, brmium, medium, and economy segments. Due to increased awareness, the increase in number of brands, and rising discretionary spending, all segments have registered growth. Foreign brands have brought in variety through international styles and fabrics. Indian women are also willing to spend higher-than-before amounts on innerwear. This has provided an exponential boost to brmium and super-brmium innerwear brands. Also, within women's innerwear segment, there is immense potential in the maternity wear segment that needs to be exploited. Currently only select brands, mostly international ones, offer multiple styles of maternity innerwear products. Most other brands offer only one or two styles in this category.

Men's Innerwear Market

The men's innerwear market is pegged at Rs. 7,450 crore and is growing at 9 percent. Even in this segment various domestic and international brands can be found. Various apparel brands and retailers have extended their product portfolios to men's innerwear segment to leverage its growth. Apparel players brdominantly focusing on active wear, casual wear and even formal wear have launched dedicated sub-brands in men's innerwear.

The various sub-categories of men's innerwear available widely and in most brands include vests, briefs, boxers, basic T-shirts, shorts, pajamas, sleepwear and active wear.

Similar to the segments in the women's innerwear market, men's innerwear can also be divided into super-brmium, brmium, medium, and economy segments. It is expected that the brmium and mid price segments will grow fastest, and exponentially in the next few years. This is largely due to consumers becoming more informed. They seek high fashion quotient along with comfort, hygiene,brand image and smart prices.

Youth residing in metros and minimetros engage mostly with brmium brands. The keenness to show off the brands, coupled with a desire to look good, is a significantly strong attribute in the choice of innerwear products and subcategories. A high fashion quotient within the product range helps increase the brand's image and engage consumers.

In contrast consumers residing in tier-I,-II and -III cities are not necessarily fond of brmium brands alone, they straddle all segments including the mass segment. Premium brands are still aspirational for these consumers. Price, comfort and easy availability form the basis of any purchase for this consumer. Neither the brand nor its image has, as yet, a vital role in the purchase decision.

T-Shirt Market

The consumer wardrobe in international as well as in the Indian market is witnessing a constant shift from formal to casual attire. Consequently, casual wear categories like T-shirts, denims, casual shirts and trousers are witnessing a comparatively higher growth rate. The Indian consumer is no longer restricted to same combo of woven shirt and trouser for all occasions. Wardrobe of an Indian consumer has evolved with time and now it is a combination of various different kinds of clothing for different occasions like office, gym, shopping, morning or evening walk, marriage and social gatherings etc. This trend of occasion specific clothing has also provided an additional impetus for the growth of the adaptable casual wear categories like T-shirts.

T-shirt market of India that includes knit shirts, polos, knit tops etc. is estimated to be Rs. 13,830 crore in 2014. This market is expected to grow at an imbrssive compound annual growth rate of 13 percent to reach Rs. 24,940 crore in 2019. This market remains dominated by the men's/ boys' segment that contributes 83 percent to the total market. However the women's/girls' segment is expected to growth faster than the men's/boys' segment owing to increasing acceptance of T-shirts among women and girls.

T-shirt vs. woven shirts in India

The ratio of woven shirts market in India to T-shirts market is 2.5, i.e., the woven shirts market is 2.5 times of the T-shirts market. The higher market size of woven shirts is because of higher penetration of woven garments in general, owing to traditional factors. In India there are a lot of households who have been traditionally depending upon hand loom or power loom for their basic earning. On the other hand, T-shirts is relatively new apparel category that came into existence in the twentieth century only and unlike looms knitting industry still remains clustered around selective areas like Ludhiana, Tirupur, Kolkata, Delhi NCR, etc. Owing to the higher growth of T-shirts demand, it is expected that the woven shirts market to T-shirts market ratio will reduce to 2.1 in the next five years from its brsent value of 2.5.

Geographic distribution of T-shirts market in India

T-shirts market remains dominated by urban India which contribute more than two-thirds of the total market. Penetration of T-shirts among women and girls is mostly an urban phenomenon and is very limited in rural areas. Within urban India, the market growth in metros and mini-metros are primarily driven by value and brands whereas rest of the market is being driven by increasing penetration leading to volume growth

Select trends in T-shirt market of India

The promising T-shirt market is also marked by its dynamism. Indian T-shirt market has witnessed several interesting and distinct trends in recent times. Increasing acceptance of T-shirts by corporates is one of the most noticeable trend. Even professional services companies, over the years, have relaxed their dress code to allow business casual T-shirts to office. The Indian consumer is also increasingly more conscious about the kind of T-shirt she or he is wearing for occasions like gym, yoga and sports. This has provided a boost to the demand of sports wear T-shirts. Consumption of T-shirts is no longer limited to youth. No doubt, youth remain a huge base of consumers, but owing to its comfort and ease of handling properties T-shirt has managed to create a niche for itself even in the wardrobes of middle aged and older consumers.

Printed T-shirts have managed to grab attention of Indian consumers. Print and design of T-shirts have evolved to reflect tourist locations, mythological stories, cartoon characters, architectural monuments, famous personalities and attractive slogans. Demand of T-shirts with embellishments, fluorescent colours, etc., have gained momentum among the youth in recent times.

Kids Wear Market In India

Market Size and Growth

India remains one of the most promising markets for apparel due to the ever burgeoning economic activities and ever widening consumer base. The Indian apparel market is expected to grow at a CAGR of 9%, from USD 41 billion in 2013 to USD 102 billion in 2023. In 2013, kids wear, at USD 8.3 billion, alone contributed 20% of India's apparel market, but given its higher growth rate, this share is expected to increase to 22% by 2023.

Boys wear and Girls wear

The kids wear market is somewhat skewed towards boys wear which by itself is a USD 4.3 billion market, as compared to the USD 4.0 billion-worth girls wear market. But with the increase in spending on the girl child, the girls wear market is expected to catch up with the boys wear market in the near future. It is expected that the girls wear market will grow at a CAGR of 11% over the next decade, while the boys wear market will grow at 10%.

Uniforms and T-shirts/Shirts are the two major categories within the boys wear market. Together, they contribute 57% of the total market. However, Denims and T-shirts are the high growth categories within this segment and are expected to register CAGRs of 15% and 11%, respectively, over the next decade.

On the other hand, Uniforms and Ethnic wear are the two largest categories within the girls wear market. But western wear categories like Denims and T-shirts are growing faster than traditional categories in the girls wear market as well.

Growth Drivers of Kids wear Market

Some distinct factors like changes in the family system, increased spending on children, growing brand awareness among kids, and greater focus on the kids wear market by organized players have contributed significantly to the growth of the kids wear market.

Urban India today is characterized by a nuclear family with double income parents who are willing to spend extra higher share of their wallets on their children. Consequently the spending on children's apparel, with better brand image and quality has received a boost. At the same time, Indian kids in both urban and semi-urban India are increasingly exposed to various media and are thus aware about brands which cater to them. They have also started participating actively in purchase decisions relating to their apparel.

Organized retailers and brands have also contributed immensely to the growth of the kids wear market. Some of them have invested time and money in establishing brands which target the requirements of children as well as parents. They have managed to attract consumers through the right product assortment, better visual merchandising, and focused advertising and promotional strategies.

Swimwear

Although the market is still at its nascent stage, it is nevertheless showing a great potential for the growth of swimwear and resort wear in the country. Most parents and schools now recognize swimming as an important life skill and want their kids to learn swimming. Most modern high rise apartment complexes in metro cities provide swimming pool access for their residents. Traditionally, while community clubs are for the 'very elite and privileged', it still is playing a fairly significant form of access.

In the brvious year, the Company had commissioned AC Nielsen to conduct a combrhensive study on the swimwear category & consumer behavior of swimmers in India. As per the study, 3% of urban population in audience of 'SEC A/B,' at an all India level across both gender groups are penetration swimmers (those swimming twice a week in summer season). The research also shows that 24% of the non-swimmers surveyed, demonstrated likelihood to swim in the future' which shows that there is a fairly large potential of non-swimmers 'who are willing to swim'.

E-Commerce Industry

The e-commerce industry in the country is likely to be worth USD 38 billion by 2016, a 67 per cent jump over the USD 23 billion revenues for 2015, as per industry body Assocham. India's e-commerce market was worth about USD 3.8 billion in 2009, it went up to USD 17 billion in 2014 and to USD 23 billion in 2015 and is expected to touch whopping USD 38 billion mark by 2016,

Increasing internet and mobile penetration, growing acceptability of online payments and favorable demographics has provided the e-commerce sector in India the unique opportunity to companies to connect with their customers. There would be over a five to seven fold increase in revenue generated through e-commerce as compared to last year with all branded apparel, accessories, jewellery, gifts, footwear are available at a cheaper rates and delivered at the doorstep.

In 2015, the highest growth rate was seen in the apparel segment almost 69.5 per cent over last year, followed by electronic items by 62 percent, baby care products at 53 per cent, beauty and personal care products at 52 per cent and home furnishings at 49 per cent. It revealed that Mumbai ranks first in online shopping followed by Delhi, Ahmedabad, Bangalore and Kolkata.

The Company has started its own online store www.jockeyindia.com  and further tied up with various leading online retailers to increase the reach of the product to the entire country.

OPPORTUNITIES AND THREATS

Opportunities:

For the apparel industry in general and our market in particular:

• More organized retail. Better consumer retail experience

• Increasing fashion consciousness and consumers becoming more aspirational, discerning and brand savvy

• The factors that determine consumption, education, occupation, urbanization, rise in nuclear families moving in a positive direction

• Increasing urban women population and women corporate workforce

• Increasing brand consciousness and spending on kids

• Higher disposable income

• Increasing online retail

Many major international apparel brands have commenced operations in India realizing that Indian markets is likely to emerge as one of the largest market in the world in the next few decades.

OUTLOOK

In anticipation of growing demand, the company has substantially expanded its installed capacity. With the ongoing addition of new buildings, infrastructure and facilities, the installed capacity is scalable and can be ramped up with incremental machinery or man power to meet the expected healthy growth in demand.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The company is engaged in the business of manufacturing garments. Therefore there is no separate reportable segment.

RISK AND CONCERN

The Company has robust risk management procedures to identify and evaluate risks on an ongoing basis. The identified risks are integrated into the business plan and a detailed action plan to mitigate the identified business risk and concerns is put in place.

The key risks and concern identified by the company and its mitigation plans are:

Availability of Labour

The industry is growing at a fast pace, in a highly labour intensive sector and demand for experienced and trained manpower is outstripping supply. The ability to retain existing talent and attract new talent assumes crucial importance. The Company has created long term plans with the objective of motivating employees to create a sense of "belonging' and a 'feel good' environment. The company has set up manufacturing facilities outside Bangalore and further planning more such facilities where ample labour is available. The Company has set up robust training centers at various units where newcomers to the labour force receive structured training.

Increase in Input and Labour costs

The availability of raw materials at reasonable rates is one of the main concerns of the company.

However the company is confident that increases in raw material cost, if and when they occur, can be passed on to consumers because of the strong pricing power of its brands. The company is also aggressively taking steps to monitor and improve productivity, which will mitigate the impact of labour and material cost increases to some extent.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Company has an adequate internal control system commensurate with its size and nature of its business. Management has overall responsibility for the Company's internal control system to safeguard the assets and to ensure reliability of financial records. The Company has a detailed budgetary control system and the actual performance is reviewed periodically and decisions taken accordingly.

Internal audit program covers all areas of activities and periodical reports are submitted to the Management. Audit Committee reviews all financial statements and ensures adequacy of internal control systems. The Company has a well-defined organization structure, authority levels and internal rules and guidelines for conducting business transactions.

SAP software has provided the Company with the best structures, disciplined systems, best practices, enabling the Company to improve efficiency, smooth planning, monitoring and control. SAP is proving to be an extremely useful and essential tool for the Company as it embarks on its aggressive growth plans. An exciting extension of the SAP is the continuously evolving Business Intelligence module that is creating smart and concise management reports profoundly aiding decision making.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company's HR objectives seek to attain a high performing organization, where each individual is empowered and motivated to perform to fullest capacity; where every employee feels a sense of belonging to the company and the team, aspiring for individual excellence while contributing to achieve departmental objectives.

Your Company fully values the human capital, it deploys and credits its success to them. It has been the consistent endeavor of the Company to create a congenial and challenging working atmosphere wherein every employee can identify his/her own strength and deliver to his/her full potential.

Outbound Training Program: More than two hundred executives and managers from all functions underwent Out Bound Training Program. Outbound Training is the training method for enhancing organizational performance through experiential learning. Such programs are often also referred to as corporate adventure training and outdoor management development. Activities are designed to improve leadership, communication skill, planning, change management, delegation, teamwork, and motivation.

Considering our expanding workforce, the company embraced technology to provide simplified, employee-friendly and automated HR services. Accordingly, we engaged a software partner - HR Mantra - to implement an integrated HR Management System (HRMS) that provides seamless technology support for the entire employee lifecycle (recruitment to retirement). Online modules for Payroll, Attendance and Leave Management have been implemented, while the remaining modules like Recruitment & On-boarding, Performance Management, Talent Management, Learning & Development and Rewards & Recognition will be implemented in the coming months.

Your company took a major initiative to support employees in safeguarding their health and meeting spiraling healthcare costs. For the first time, we introduced a Medical Insurance Scheme for staff members outside the ESI umbrella.

In order to retain and attract talent from other sectors, our HR practices are constantly evolving in line with market practices. We embarked on an exercise to benchmark our HR policies and practices and, accordingly, introduced flexible work hours and five-day week at our Corporate Office and Head Office.

During the year, we expanded our leadership team by inducting senior leaders and executives, who bring rich experience from world class companies across different industries. We also recruited external talent to head our newly created Business Excellence function that will focus on benchmarking our systems and processes, with an aim to ensure sustainable and scalable growth.

Safety First: Safety is another function that we consciously strengthened, keeping in mind, the increasing complexity and sbrad of our operations, and ensuring that employee well-being remains a priority. We hired senior managerial resources to lead the safety initiatives at our manufacturing facilities.

Industrial Relations remain cordial throughout the year and the Board records its apbrciation for the contribution of all employees towards the growth of the company without which the achievements made would not have been possible.

Grow your own Timber: The Company has established "Page School of Learning', where women workers from the shop-floor are provided with in- house learning system to elevate their career to the next level. During this learning process, the workers are given training on organizational culture & values, manufacturing operations, industrial engineering, people management and leadership skills for a period of three to four months. On successful completion of training, they are promoted to the next level as Junior Supervisors in a coronation programme. Thirty such Junior Supervisors were developed last year and have been performing exceedingly well.

As of 31st March, 2016, the Company had 19,332 employees on its roll.

CAUTION:

Statements in the Management Discussion Analysis describing the Company's objectives, projections, estimates and expectations may be considered as "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. The factors that might influence the operations of the Company are economic conditions, government regulations and natural calamities over which the Company has no control.

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.