MANAGEMENT DISCUSSION & ANALYSIS LEATHER APPAREL The Leather Apparel group continues to generate significant revenue growth for the Company. We are leveraging design, garment making and business development capabilities to drive the business. Our broadened customer base and geographic reach including increased USA penetration are also contributing to the results. As India's largest leather garment manufacturer, we are producing for brands like All Saints, Whistles. Coach, ilmberland, Ralph Lauren, Calvin Klein, G Star Raw, Levi's and others. We work closely with our customers to design, develop and produce new, compelling products that continue to excite their consumers. Strong working relationships with our customers are also part of Bhartiya's formula for success. Important to our long-term strategy, we are leveraging the benefits of vertical integration and horizontal production expansion to position the Company for sustained financial improvements. In early 2015 we inaugurated a new state-of-the-art garment factory in Bangalore, which will operate with greater efficiencies and lower unit cost. Our tannery operations have expanded product development capabilities to produce new, innovative leathers, finishes, and treatments to support new garment design and development. The Company has successfully combined garment making experience, supported by superior design and leather development, to create a unique competitive position. As global markets recover, and with our focus on geographic reach and customer development, the Leather Apparel group will continue to produce positive, sustained operational and financial results. ACCESSORIES The Company's Accessories group, based in Chennai, India has generated dramatic growth over the past several years, and significant improvement is projected this year. The Chennai team is utilizing strengthened internal design talent, expanded leather development capabilities, and an existing portfolio of Bhartiya customer relationships to drive its business. The strategic focus is to build a stronger base of core customers, and to provide better-best products to support their requirements. The Accessories group is producing bags, accessories, and small leather goods including belts for well-known international customers including Polo Ralph Lauren, Baden, Whistles, Esprit, Coach, Tommy Hilfiger, G Star Raw, and others. We are concentrating on superior product design and the utilization of better materials and hardware to produce beautiful leather products. Accessories growth is driven by a focus on its core businesses, combined with flawless execution. Strengthened key customer relationships, supported by superior product and on-time delivery, are creating these improved results. Having produced Coach's signature Snoopy leather dog to launch their 2015 collections, the Chennai team is now at work creating the next, new 2016 Coach introduction. We are also at the threshold to adding several najoi etailers to oui die \ list which will significantly improve Chennai's financial performance. The Company is encouraged by the growth of the Accessories group. We are currently planning to expand accessories production capacity within the Company's owned Special Economic Zone (SEZ) in Tada, India. Growth rates with core customers demonstrate a sustainable and profitable business ahead for us. TEXTILE APPAREL The Company's product-sou rcing Textile group services global brands and retailers in Europe, South America and North America, supporting their India and Bangladesh product needs. We design, develop, and source textile clothing for companies who may not operate sourcing offices in India. We provide sophisticated one-stop shop solutions to meet our customers' specific textile clothing needs. We call it 'virtual manufacturing.' The Company provides customer targeted products supported by in-house design, competitive pricing, prod ict q lality and reliable logistics. We have expanded the breadth of our product range. We have also broadened the geographic reach of our customer base beyond Europe to include South America and the US. Our customer portfolio includes Okiadi, Cato, Tao, Sears, Joe Fresh, Combipel and others. The Textile team is comprised of a talented and experienced team of1 sourcing professionals. The group's merchandising approach and aim is to provide high value apparel, produced and supplied through a reliable supply chain to support the customer's needs. We have expanded our Textile internal management team, and broadened sales coverage to support anticipated, planned growth. OUTERWEAR The Company has recently launched the Bangalore, India based textile Outerwear group. It will focus on better product driven by design and technical materials. We have recruited talented industry veterans to manage, oversee and build the business. We have also expanded our planning, production and marketing base and capabilities in India to support this business. Management Is enthusiastic about our prospects, and expects the Outerwear group will generate revenues equivalent to our garment leather within the next 4-5 years. We will focus outerwear product development and marketing efforts on better US and European brands and retailers. INTERNATIONAL The Company is expanding the International business, headquartered In Neuchatel, Switzerland. The Company's fur operations will continue forward as we 'harvest' this long-standing business. The sales expansion of our China produced PU entry-priced outerwear will be significant, and is supported by the Milan design studio, with the products produced and outsourced through independent, contracted factories in China. Bhartiya's Hangzhou, China sourcing office oversees China sampling commercialization and production. We are expanding our International group's management and sales team as we position this business for future, continued growth. We expect sustainable revenue and margin growth from the international business. The brponderance of the International group's China outerwear production is lower priced garments, made primarily in PU or pigskin materials. This allows our retailer and branded customers to merchandise entry retail price- point garments made in these materials. Top customers include VF Corporation, Zara, Mango, River Island, Gas and others. OVERVIEW Since our founding in 1987, Bhartiya International has evolved and been supported by our overseas offices grown into a diverse global apparel company, With strong Indian roots, and a proud entrebrneurial heritage and spirit, the Company is poised for sustained future growth in all business groups. The Company is vertically aligned from design to manufacturing, with a strong and experienced logistics and back office support structure The Company Is positioned for immediate revenue and operating margin improvement in each division: Leather Apparel, Accessories, Textile, Outerwear and international. We expect upcoming fiscal year results to be the best in the Company's history. As global brands and retailers look to India for sourcing options after China, Bhartiya International is positioned to support their apparel product neeos and requirements. HUMAN RESOURCES Bhartiya's belief in nurturing talent has engrossed in the DNAof the organization so much so that; most of the key initiative taken by us in the last year has revolved around talent and their development. Last year saw ihe advenl of many policies which have a direct impact on the functioning of an organization and that of an individual like Code of Conduct and Prevention of Sexual Harassment policy, Bhartiya has maintained their philosophy of continuous improvement in acquiring talent, retaining talent and providing a job enriching experience to each individual. Our belief in nurturing fresh talent led us to conceptualize a program to groom the youngsters of today into the leaders of tomorrow, We named this program as the "Budding Leaders". These Budding Leaders brings the fresh thought process and gives a new perspective to look at things at the strategic and operational levels which increases the competitiveness amongst people. With the expansion in business, we worked out various strategies to acquire the best class of talent, which will help us in building the organization of future. INTERNAL CONTROL SYSTEM The Company has robust system of internal control to provide the reasonable assurance that all information used within the business and for external reporting is adequate. The Company has in house internal audit function manned by experienced Chartered Accountant reporting into Audit Committee. Risk based internal audits as per audit charter approved by audit committee have been conducted during the year with an objective to ensure trie: accuracy of financial reporting, • operating effectiveness, safeguarding of Company's assets, compliance to the applicable statutes and company policies and procedures The audit report has been submitted to Audit Committee for consideration. Further, to ensure the completeness the Risk and Control Matrix is maintained for the process audited. With the endeavor to strengthen the internal control mechanism and accuracy of reporting, Company is in the process of implementing an ERR specific to the fashion industry. RISK MANAGEMENT The Company has formed Risk Management Committee which identifies, assesses and manages risk at Strategic, Operational and Compliance leveis, across business units, functions and geographies. The board of directors are informed about the risks or opportunities that could have an adverse impact on the Company's operations or to that could be exploited to maximize the gains. The processes and procedures are in place to act in a time bound manner to manage the risks or opportunities. The risk management process is reviewed and evaluated by the board of directors, Bhartiya International's exposure to foreign currency risk is restricted to its imports and exports. These risks are minimized through welMhought-out financial operations, astute treasury management and effective use of hedge options. CAUTIONARY STATEMENT Ail the statements and assertions in this report regarding the projections, estimates and outlook are subject to current market situations and expected effects of future events on current and developing circumstances. Results may vary due to a number of factors, which could effect the Company's business operations, such as demand and supply conditions, price inputs, change in government levies and regulations, industrial relations and other economic variables in the country. Bhartiya International cannot be held responsible in any way for such statements and it undertakes no obligations to publicly update these to reflect subsequent events or circumstances. |
