Management Discussions & Analysis MACRO ECONOMIC ENVIRONMENT India is set to become the world's fastest-growing major economy by 2016 ahead of China, the International Monetary Fund (IMF) said in its recent latest forecast. India is expected to grow at 6.3 per cent in 2015, and 6.5 per cent in 2016 by when it is likely to cross China's projected growth rate, the IMF said in the latest update of its World Economic Outlook. India's macro-economic prospects have strengthened and the country is best positioned among emerging market economies, gaining global investor's attention, says a report by ICICI Bank. The improvement in India's economic fundamentals has accelerated in FY2015 with the combined impact of a strong Government mandate, RBI's inflation focus supported by benign global commodity prices. The government, engineering an economic rebound with a slew of reforms, has unveiled a new statistical method to calculate the national income with a broader framework that turned up a pleasant surprise: GDP in the past year 2014-2015 grew 6.9 per cent instead of the earlier 4.7 per cent. The revision in base year of India's national accounts will increase the size of the economy to Rs 111.7 trillion (US$ 1.8 trillion) in FY14, according to India Ratings. The size of the Indian economy was at about Rs 93.89 trillion (US$ 1.51 trillion) in 2012-13. Also, Capital Economics (CE), an independent macro-economic research company, released its India Watch research report recently, cataloguing its interbrtation and expectations on the upcoming Budget 2015. It sees Indian economy expanding by 5.5 per cent in 2015, owing to the fall in crude oil prices and interest rates. Stating that its great time to invest in India, Minister of State for Finance Mr. Jayant Sinha said the Indian economy has potential to become a US$ 4-5 trillion economy in the next 10-12 years. REVIEW OF OPERATIONS The revenue for the year declined mainly due to lack of demand by consumers and steep competition in the market. In spite of the adverse business condition, the Company's bottom line growth was almost in line with brvious years' performance. The Company registered a gross income of Rs. 959.78 Lac in comparison to last year figure of Rs. 1471.00 Lac. PBT Margin for the year stood at Rs. 26.15 Lac in comparison to last years' figure of Rs. 26.13 Lac where as Profit after Tax and Extra-Ordinary items stood at Rs. 10.02 Lac in comparison to last years' figure of Rs. 18.06 Lac. The different of net profit in comparison to last year was mainly due to adjustment of debrciation. In term of Segment wise performance, your Company has achieved a Gross Sales of Rs. 731.47 Lac in Textile Segment and Gross Revenue of Rs. 228.31 Lac in Investment & Financial Services Activities. In term of Net Profit (PBT) for the year, the Company has incurred a Net Loss of Rs. 0.88 Lac in Textile Segment and earned a profit of Rs. 73.61 Lac from Investment & Financing activities whereas suffered a loss of Rs. 46.58 Lac from F&O trading activities. BUSINESS SEGMENT During the year, the Company was operating into following Business segments - • Trading of Grey & Synthetic Fabric • Trading / Investment in Shares & Securities • Deploying surplus funds into Treasury Operations OPPORTUNITIES Textile Industry The Indian textile industry is expected to clock double-digit growth while budget proposals and some of the steps taken by government recently are expected to increase the discretionary income in the hands of consumers according to a statement made by a top official of Raymond. India is the one of the world's largest producers of textiles and garments. Abundant availability of raw materials such as cotton, wool, silk and jute as well as skilled workforce have made the country a sourcing hub. It is the world's second largest producer of textiles and garments. The Indian textiles industry accounts for about 24 per cent of the world's spindle capacity and eight per cent of global rotor capacity. The potential size of the Indian textiles and apparel industry is expected to reach US$ 223 billion by 2021, according to a report by Technopak Advisors. The textiles 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 per cent to industrial production, four per cent to the gross domestic product (GDP), and 27 per cent to the country's foreign exchange inflows. It provides direct employment to over 45 million people. The textiles sector is the second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of India's economy. The Indian textiles industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand. The industry is expected to reach US$ 220 billion by 2020, according to estimates by Alok Industries Ltd. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with several international players like Marks & Spencer, Guess and Next having entered the Indian market. The organised apparel segment is expected to grow at a compound annual growth rate (CAGR) of more than 13 per cent over a 10-year period. Financial Activities The segment has witnessed considerable growth in the last few years and is now being recognised as complementary to the banking sector due to implementation of innovative marketing strategies, introduction of tailor-made products, customer-oriented services, attractive rates of return on deposits and simplified procedures, etc. Capital Market Activities Capital markets have continued to scale record levels as euphoria has built up on the possible trajectory of the Indian economy. The markets seem to have priced in a favourable policy environment and a consequent increase in corporate performance in the coming years. As is the case whenever there is a turn in the economy, capital markets take the lead as they price in future improvement in the macroeconomic fundamentals of the economy. The clear mandate given to the central government and the business friendly reforms expected as a result of this has raised the expectation of both domestic and foreign investors. Further, factors such as rising growth prospects, contraction in Current Account Deficit (CAD) as well as the recent stabilization of the rupee have all contributed to this positive sentiment. Investors have been betting heavily on the economy which has led to high growth of the capital markets. The SENSEX has witnessed a consistent rise in 2014-2015 with a growth of more than 40%, reaching record highs and crossing the 30,000 mark in March 2015. THREATS & CONCERNS According to the recent study by CII, lack of focus on synthetic value chain, manpower challenge and duty disadvantage in major markets compared to our competing nations are main threats that can mar the anticipated growth at country level. For manufacturers to take benefit of the domestic market growth story, the requirement will be to be flexible enough to tap opportunities appearing in various market segments. On one hand the manufacturers will need to cater large international brands and retailers, who will brfer sourcing locally; while there will be fast growing Indian brands too. Need of brands and retailers to develop lower cost business models will be the key to enhance their brsence in cities beyond Tier I and II. For this, e-commerce will become more important. In regard to Money market, in the past few years, the increased competition from banks in the retail finance segment has led to excess diversification by NBFCS from their core business activities. The sector has witnessed introduction of various innovative products such as used vehicles financing, small personal loans, three-wheeler financing, IPO financing, finance for tyres & fuel, asset management, mutual fund distribution and insurance advisory, etc. Besides, NBFCs are aspiring to emerge as a one-stop shop for all financial services. NBFCs have also ventured into riskier segments such as unsecured loans, purchase finance for used commercial vehicles, capital market lending, etc. Moreover, NBFC's customer profile is concentrated on the self-employed segment. The earlier mentioned factors increase their risk profile which could have adverse impact on the financial health of NBFCs. In regard to Capital Market, success in this market demands leaders who can manage through uncertainty and complexity as they seek to deal with regulatory change while brparing for the future. This in turn demands a clear sense of who their key customers and markets are going to be in five years' time and what investments and changes will be needed to respond. It also requires a forward looking view on how regulation will interact with the other transformational trends in areas such as cost, returns and the ability to meet customer expectations. HUMAN RESOURCES The Company recognizes that its success is deeply embedded in the success of its human capital. During 2014-2015, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives. CORPORATE SUSTAINABILITY AND SOCIAL RESPONSIBILITY The Company constantly strives to meet and exceed expectations in terms of the quality of its business and services. The Company commits itself to ethical and sustainable operation and development of all business activities according to responsible care and its own code of conduct. Corporate Social Responsibility is an integral part of the Company's philosophy and participates in activities in the area of education and health. CAUTIONARY STATEMENT Certain statements under "Management Discussion & Analysis" describing the Company's objectives, projections, estimates, expectations or brdictions may be forward looking statement within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those exbrssed or implied, since the Company's operations are influenced by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. COMPLIANCE The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company is continued to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Company's Board of Directors and the Company's Compliance Policy. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/internal guidelines on a periodic basis. New Instructions/Guidelines issued by the regulatory authorities were disseminated across the Company to ensure that the business and functional units operate within the boundaries set by regulators and that compliance risks are suitably monitored and mitigated in course of their activities and processes. New products and process launched during the year were subjected to scrutiny from the Compliance Standpoint and proposals of financial services were screened from risk control prospective. The Company has complied with all requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market during the last three years. By order of the Board For Khoobsurat Limited Goutam Bose (DIN:02504803) Managing Director Kolkata, May 29, 2015 Registered Office : Room No. 40, 5th Floor, Martin Burn House, 1, R N Mukherjee Road Kolkata-700 001 |