MANAGEMENT DISCUSSIONS AND ANALYSIS

The Management of the Company is pleased to brsent its Report on Industry scenario including Company's performance during the financial year 2015-16.

Industry Structure and Developments

The textile industry is brsently largest industry of modern India and it is one of the oldest industries in Indian economy dating back since many centuries. As of now the textile sector is one of the largest contributors to India's exports with approximately eleven percent (11%) of total exports. It accounts for over 20 percent of industrial production and is closely linked with the agricultural and rural economy. The textiles industry is labour intensive and is one of the largest employers and employing about 45 million people. The textile industry has made a major contribution to the national economy in terms of direct and indirect employment generation and net foreign exchange earnings. The sector contributes about 14 percent to industrial production, 4 percent to the gross domestic product (GDP), and a major contributor to the country's foreign exchange inflows.

The textile industry has two broad segments, one is unorganised sector consists of handloom, handicrafts and sericulture, which are mostly concentrated in the small scale sector and second is the organised sector consisting of spinning, apparel and garments segment which employ mechanization and modern technologies for production. Now the textile sector is expanding and technical textiles are being included in the industry. Technical textiles are accounted to be the fastest growing sector of the textile industry and it is manufacturing towards non-clothing applications. In India the consumption of technical textile is increasing day by day and it's growing at twice rate of textiles for clothing applications. India is the second largest producer of textiles and garments in the world. The Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021, according to a report by Technopak Advisors.

Opportunities and Threats

The textile industry records an annual growth of around 6 - 8% and the retail businesses including e-commerce business are providing opportunities to industry's segments like handicrafts, handlooms and apparels. An upsurge in the purchasing power and disposable income of Indian customers has opened room for new market development. The export from China is lowering which will provide to enhance the market share to other low cost countries including India. The labour cost in China is expected to increase as per the market research which will be another major factor for India to grab the market share of China.

Competing with other progressing countries will always be a threat for Indian Textile Industry and striking a balance between the quality and price of products will also play a major role. Environmental and international labor laws and its compliances will increase the cost of production which may adversely affect the Industry.

Segment-wise or product-wise performance

The activity of the Company can be broadly divided into two categories; one is traditional textile business which includes yarn, knitted fabric and knitted garment business and second is technical textile business which includes nonwoven fabric and its converted products like wet and dry wipes. The performance of technical textiles business has done better than traditional textiles.

Outlook

A "Make in India" campaign covering 25 sectors which also includes the textile and garment industry and Company sees good prospects in time to come. 100% foreign direct investment (FDI) under the automatic route in the textile sector subject to all applicable regulations and laws can create a favorable environment for textile industry. Company sees good prospect in the business of technical textile and expect that margins in traditional textile business will improve in future.

Risk and Concerns

The textiles industry is one of the oldest industries in the world and India is one of the global pioneers in this industry. The Indian textile industry occupies a significant place in many economies across the globe. The followings may be considered as a risk and concerns for the Indian textile industry:

• High competition and low profit margins

• Low share in global exports, despite being the largest producer, scale disadvantage vis-a-vis competing countries

• Low competitiveness in man-made fibres

• Labour advantage gradually diminishing

• Low demand in International market

• Increase in power cost

• Government policies such as unbalanced incentives

Internal control system and their adequacy

To ensure sound and appropriate business operations, internal audits are conducted to verify the adequacy and effectiveness of our internal control system.

The internal control system is first of all a "management" tool, in that it is useful and necessary for the Board of Directors, Executive Directors and Managers in general for correctly and effectively performing the tasks assigned to them. The internal control system permits monitoring of compliance with the rules and procedures governing performance of all the Company's business activities. Company's internal control system has been developed as a direct process aimed at pursuing the values of substantial and procedural fairness, transparency and accountability, ensuring:

(i) efficiency, transparency and traceability of transactions and management activities in general;

(ii) reliability of accounting and management data and financial information;

(iii) compliance with laws and regulations;

(iv) protection of the company's integrity, also in order to brvent fraud damaging the Company and the financial markets. The key rules underlying the Company's internal control system are:

separation of roles in performance of the principal activities involved in individual operative processes;

• traceability and constant visibility of decisions;

• management of decision-making processes on the basis of objective criteria.

Financial performance with respect to operational performance

The same is referred to Audited Financial Statement which is forming part of the Annual Report of 2015-16.

Human Resources / Industrial Relations

The Company lays due emphasis on all round development of its human resources and trains its workers for skill development and motivates them to focus on achieving the Company's goals and objectives. Industrial relations continued to be cordial and satisfactory during the year under review. The Company had 2325 employees on its payroll as on March 31, 2016.

Cautionary Note

Certain statement in the "Management Discussion and Analysis" section may be forward looking and are stated as required by applicable laws and regulations. Unforeseen factors may affect the actual result, which could be different from what the Management envisage in terms of future performance and outlook.