MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS India's Textiles and Garments industry, which accounts for 14% of India's total industrial production and 4% of India's GDP, is considered as one of the significant contributor to the national economy. After witnessing challenges during the year 2013 and for most part of 2014 given unfavorable economic conditions, the Indian textiles and garments sector has seen reversal of trends in second half of 2014. With domestic and global economic conditions gradually improving along with the focused efforts made by Ministry of Textiles, Indian textiles and garments sector is set for growth, buoyed by revival in domestic consumption and export demand. Improved demand from the US market, rising cost of labour in China would provide boost to the Indian textile exports In dollar terms, the total value of textile products exported from India touched US $35.4 bn in FY14, which was 12% higher compared to FY13. The US has been the primary market for Indian textile exporters and accounts for the major share of India's textile and garments exports. As per the US Dept. of Commerce's Office of Textiles and Apparel (OTEXA), Indian textile and apparel exports to the US have risen nearly 7% during Jan - Oct 2014 as compared to the brvious corresponding period. During the same period, textile/apparel exports ofChina to the US increased by 1.5%. India's growth in textile and apparel exports can largely be attributed to the steady growth in demand from the US market. In addition to this, others factors that are contributing to India's textile growth story are: • Continuing slowdown in the Chinese textile exports to the US due to rising labour costs and power shortages • Non-compliance of textiles units in Bangladesh to the global safety standards • Labour unrest in Cambodia's textile plant High cost of credit in Vietnam Apbrciation of Indonesian currency during January, 2014 All these factors combined together are expected to enable India to significantly turnaround its textile industry. Also, with economic scenario in the US gradually improving, the demand for textile products is expected to improve further. This would help in the growth of India's textile exports. INDIAN APPAREL RETAIL MARKET The Indian retail market, estimated at US$ 500 billion in 2012, is expected to demonstrate a robust growth rate of 13% p.a. over the coming years to become US$ 1.3 trillion by 2020 (Source: IBEF Retail Sector Report). Apparel retail market's share out of this is 8%, which puts the market size at approx. US$ 40 billion in 2012. The overall consumption growth story of India, driven by favourable demographic trends and rising income level fuelling consumerism, is expected to continue to gain momentum. In addition, favourable government policies to boost investor confidence are increasing investments in organised retail. Currently, organised retail's penetration in India is only 8%, which is expected to increase to 20% by 2020. Indian Apparel market has demonstrated resilience and growth in an environment characterized by slow economic growth. This trend is further strengthened by demographic dividend of India, i.e. young consuming age group. By 2020, India will have 64% of the population in working age group, making it the world's youngest emerging economy. This young consuming class has new aspirations and is more open to experimenting with fashion brands and modern designs. Purchase behaviour of consumers is also going through a significant change. Fashion today is heavily influenced by global social media, international fashion icons, increasing disposable income and rising confidence level. This is leading the shift from need-based purchasing to aspiration-based purchasing, and fast adoption of international fashion statements. Further, favourable policy environment (e.g. the decision to allow Foreign Direct Investment (FDI) in multi-brand retail), has boosted investor confidence and opened doors for many international retailers to enter India. The apparel retail industry is expected to benefit from better product designs, while improving business performance learning from global best practices. The policy also requires investment in backend infrastructure and substantial local sourcing of products. Businesses with strong local expertise and vertical-integrated set-up in textiles and apparel, like your company, are expected to benefit from this. FINANCIAL OVERVIEW Sales Stand Alone: During the year under review, the Company achieved revenue of Rs. 12888.54 Lacs as against Rs. 16337.55 Lacs in brvious year. Consolidated: During the year under review, the Company achieved revenue of Rs. 14884.87 Lacs as against Rs. 19528.73 Lacs in brvious year. Earnings Before Interest, Debrciation & Tax (EBIDT) Stand Alone: During the financial year, the EBIDT was Rs. 186.24 lacs as against EBIDT of Rs. 832.34 lacs for the corresponding brvious financial year. Consolidated: During the financial year, the EBIDT was Rs. 249.73 lacs as against EBIDT of Rs. 802.82 lacs for the corresponding brvious financial year. Net Loss after Tax Stand Alone: During the financial year, Company has incurred a Net loss after tax of Rs. 531.94 Lacs as against Net Loss after tax of Rs. 1620.31 lacs for the corresponding brvious financial year. Consolidated: During the financial year, Company has incurred a Net loss after tax ofRs. 559.42 Lacs as against Net Loss after tax of Rs. 1708.80 lacs for the corresponding brvious financial year. OUTLOOK In the mid-long term, the Indian textile industry is expected to grow very strongly with growth being balanced from both domestic consumption as well as exports demand. In the near-term, domestic demand would depend on the revival of the macro-economic factors. On exports front, there are both positive and negative factors. Positive factors include the weak currency and decreasing cost competitiveness of China that are likely to give positive impetus to the Indian exports. At the same time, factors like slowdown and uncertainty in the global markets, volatile foreign exchange rates and increase in cotton and yarn prices are likely to negatively affect growth and profitability for the textile exports. In this scenario of high material cost market, you will apbrciate the hardship the company is facing. However, we are hopeful for change in this scenario soon. Due to adverse dollar rupee equation, the Company also focusing to increase buying of ready products from the domestic Indian manufacturers. Also we are introducing heavy new fabrics which can be sold at good earnings. Your Company has two wholly owned subsidiaries at Hong Kong, Slovakia in order to trade its garments overseas and established a place in International market as well. OPPORTUNITIES 1. Large, Potential Domestic and International Market. 2. Market is gradually shifting towards Branded Readymade Garment. 3. Greater Investment and FDI opportunities are available. 4. Large and diversified segment that provide wide array of products 5. Emerging Retail industry and Malls provide huge opportunities for the apparel, Handicraft and other segments of industry. THREATS 1. Competition from other developing countries, especially China. 2. To make balance between price and quality 3. Presence of many unorganised players 4. International labor and Environmental Laws 5. Continuous quality improvement is need of the hour as there are different demand patterns all over the world. RISK & CONCERNS Key concern remains cheap imports. Failure of monsoon in India could lead to brssure on costs which may be difficult to pass on to customers. Under these circumstances the Company remains cautiously optimistic ofthe future prospect ofthe business. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The company has well defined and adequate internal control systems to monitor internal business process across departments to ensure efficient operations, compliance with internal policies, financial reporting, accurate reporting of financial transactions, compliance with applicable laws and to ensure that all the assets are safeguarded as well as are more productive. These internal controls are supplemented by periodic audits with management reports which are reviewed by our Audit Committee. We have a qualified and independent Audit Committee which comprises our Board of Directors. The Audit Committee reviews the adequacy and efficiency of internal controls and recommends any improvements or corrections. These internal controls ensure efficiency in operations, compliance with the internal policies of the Company, applicable laws and regulations, protection of resources and the accurate reporting of financial transactions. The head of various monitoring cells, statutory auditors and internal auditors are invited to attend the Audit Committee meetings. The Company also has an internal audit system which is conducted by an Independent firm of Chartered Accountants viz. Vishal Khade & Co., so as to cover various operations on continuous basis and regularly monitor the Internal Control Systems and their Implementation. Summarized Internal Audit Observations/Reports are reviewed by the Audit Committee on a regular basis. The finance and accounts functions of the Company are well staffed with qualified and experienced members. ENVIRONMENT & SAFETY/NATURE & SECURITY Your Company is highly committed to environment friendly processes and operations. Therefore, it undertakes its operations in such a manner that it does not affect the Environment in one hand and also maintains the required Environmental balance in the other hand. Your Company has always ensured the Environmental Safety, complied with the various Environmental Laws from time to time and further commits to follow the same in future. HUMAN RESOURCE- THE BIGGEST COMPETITIVE EDGE Your Company believes that its Employees are the backbone of the Company and the reason behind the position of your company are its Employees. The Company is in a continuous process of evaluating, training, motivating and rewarding its employees for their unstinted performance and contributions to the Company so that the Company also receives the same in future also. Therefore, the total numbers of employees of the Company as on March 31, 2015 were 959. CAUTIONARY STATEMENT The Statements as mentioned in this Management and Discussion Analysis Report (M&DAR) contain certain forward-looking statements within the meaning of applicable laws/ Regulations and which are quoted on basis of certain assumptions, expectations, forecasts and studies undertaken by the Company. Such Statements are "forward looking statements" which reflect the Management's intention to undertake certain actions describing their objectives and expectations with the Company as based on certain assumptions and brdictions. Readers are cautioned not to place undue reliance on these forward looking statements. Our operations and actual results are dependent on various factors within and outside the control of the Management so there are chances that they may vary from what is been quoted in this M&DAR. 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/policies and tax structure, economic developments within India and the countries with which the Company has business relations/contacts, as well as other factors such as, litigations and industrial relations. We assume no responsibility in respect of "forward looking statements" mentioned herein which may undergo changes in future on the basis of subsequent developments, information or events. Actual results may differ from those exbrssed or implied herein. |
