MANAGEMENT DISCUSSION & ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

India Textile Industry is one of the leading textile industries in the world. Textile Industry has played a key role in the country's progress over the years and the situation is likely to gain momentum in the times ahead.

There has been a phenomenal growth of this industry during the last four decades. Indian textile industry largely depends upon the manufacturing and export. It also plays a major role in the economy of the country. India earns about 27% of its total foreign exchange through textile exports. Further, the textile industry of India also contributes nearly 14% of the total industrial production of the country. It also contributes around 3% to the GDP of the country. The textiles industry is also labour intensive and is one of the largest employers. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors as per Textile Reviews.

The Indian textiles industry, currently estimated at around US$ 108 billion, is expected to reach US$ 223 billion by 2021. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly.

The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under the automatic route. Duty Free Entitlement to Garment Exports, Proposed 24/7 customs clearance facility at 13 airports and 14 sea ports, Integrated Skill Development scheme, North East Region Textile Promotion Scheme, Focus Market scheme etc. It is expected that these measures will help the Industry to grow further and increase its global share, at brsent, which is second to China.

It is also an established fact that in any economy which is on the path of growth, from developing to developed, growth of Textile industry becomes a priority.

The Indian Government in a pro - active manner has set in motion lots of economic initiatives. These initiatives in the long run would sustain positive economic growth which is fundamental for the overall growth and standard of living under "Make in India" initiative.

OPPORTUNITIES AND THREATS

In the current financial year the growth of textiles is expected to be better than the brvious years. However, The Indian Textile Industry continues to go through a difficult phase due to poor international demand and protection policies implemented by importing nations. Local demand for textile products continues to slow down due to high inflation and economic slowdown with brdiction of normal mansoon this year, local market is expected to recover and give boot to local demand. Many states in India have announced Textile policy to achieve thus value adding to local raw material demand. The recoveries in US, European and Asian economies is good for the Industry and will boost the exports to these economies. The slowdown of China textile exports on account of various factors i.e. Increased labour cost, currency value and increased domestic demand is providing new place of opportunities. This is going to prove blessing in disguise for the Indian Textile industry and offer an excellent opportunity for increasing Textile exports to the overseas markets.

Other side, due to high cost of production in the developed nations most of the manufacturing operations are shifting to the developing nations. India being the second largest producer of cotton in the world will have a major share in export of textile products. Textile is the second largest employment generating industry in the country; therefore, the Government is continuously extending its support for the growth of this segment. With the apbrciation of the yuan, China exports will become expensive. This will a major factor in increase of India's Export. India has a lot of positive internal factors which can make it a world leader in textiles;

a. Low Cost of labour

b. Stable Political Climate, trade friendly economic laws, balanced and growing economy.

c. Government priority for investment in power generation.

Cotton Scenario - India

India's cotton production, during the crop year 2015-16, is estimated to be 341.50 lakh bales, as per the Cotton Association of India (CAI). The overall output of cotton for the crop year 2014-15 was 382.75 lakh bales, the Association said in a statement consumption in the local market is expected to be 305 lakh bales.

Company Outlook

The Company, focus of manufacturing specialty yarns, continues to have good demand for its products and continues to strengthen its production base by modernization and adding balancing equipments. After the said expansion Company's Spindale capacity stands to 35520 spindles and 13260 TFO. Your company has positioned itself as one of the leading integrated Textile Players to reap the benefits of economies of scale and become globally competitive in terms of cost and quality. These measures will continue to support the operations of the company.

The company also proposes to invest funds for setting up a plant with 18000 spindles at capital cost of Rs. 60 Crores.

Risks and Concerns

The Government policies and volatile economic environment and have a bearing on the overall performance of the company.

Financial Highlight:

Revenue from operations increased from Rs. 593.04 crores in 2014-15 to Rs. 620.94 crores in 2015-16. Profit before Tax decreased from Rs. 18.07 crores to Rs.15.32 crores. Profit after Tax decreased from Rs. 11.89 crores to Rs. 10.39 crores.

Basic Earnings Per share (EPS) decreased from Rs.13.37 to Rs. 9.34 (on increased capital after Bonus issue)

Human Resources

Your Company considers human resource to be an important and valuable asset for the organization. Therefore, it constantly strives to attract and retain best "Talents" for the brsent and future business requirements and growth. The company has grown due to the commitment, dedication and passion of our employees and we thank them for their continuous support, efforts and sacrifices. The company expects their continuous guidance and support in future. The company inspires and motivates employees and promotes teamwork, trust and confidence for the organizational growth and to attain its goals. The required Initiatives are taken in the areas of employee's health, safety training and development. Company takes pains to see that employee's interest and growth are not overlooked.

Risk Management and Internal Control System

The Company has a proper and adequate system of controls in order to ensure that all assets are safeguarded against loss from unauthorized use or disposal. Regular Internal Audit checks are carried out to ensure that the responsibilities are executed effectively and that proper and adequate systems are in place and is reviewed by auditing committee set by the Management.

Your company continues to comply with laws, regulations and policies as per the regulatory guidelines that are applicable. Your company maintain strong compliance and has dedicated Compliance Department for ensuring regulatory compliance.

The Company monitors principal risks and uncertainties that can impact our ability to achieve strategic objectives. Internal controls are regularly tested for design and operating effectiveness. The Internal Control System is supplemented by defined risk management programme identifying and mitigating risks which are reviewed by the Board of Directors of the Company

Cautionary Statement

Certain statement as discussed and mentioned in the Management Discussion & Analysis and elsewhere in the report, constitute forward- looking statements articulated as the management's expectations for the future business prospects of the Company. Words, and variations of words, such as "expect", "propose", ""will", "estimate", "believe", "continue", "opportunity", "project" and similar exbrssion are intended to identify forward-looking statements. However, there are risks and uncertainties associated due to the general macroeconomic conditions in which the Company operates. Also, the factors like nature of the Company's business, foreign currency fluctuations, regulatory initiatives, tender processes in the Government, Public Sector and other large undertakings, competition etc. are not in the control of the Company. Such uncontrollable factors are crucial for success of the Company's business plans or brdictions, which may cause the actual results to materially differ from the performance or achievements, discussed or implied by such forward looking statements. The Company undertakes no obligation to publicly update or revise any forward looking statements.