fairdeal filaments ltd Management discussions

 

Industry structure, Developments, Opportunities, threats and outlook :

Indias textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to Indias exports with approximately 13 per cent of total exports. The textiles industry is labour intensive and is one of the largest employers. The industry realised export earnings worth US$ 37.74 billion in 2017-18. The industry is the second largest employer after agriculture, providing employment about 105 million people directly and indirectly. The Indian Textile Industry contributes approximately 2 per cent to Indias Gross Domestic Product (GDP), and 14 per cent to overall Index of Industrial Production (IIP).

The textile industry plays a pivotal role through its contribution to industrial output, employment generation, and the export earnings of the country. The textile industry has a capacity to produce a versatile spread of products appropriate for varied market segments, both domestic and the export markets.

In spite of lot of challenges faced in inter national scenario in terms of trade, and the policy changes of many countries, India is still in a position to retain the stability of the currency, this shows that the Economy is becoming stronger and vibrant to take the challenges whatever may come in future. Raw material prices fluctuate in line with international prices and will continue to have an impact on the companys performance as raw materials constitute significant component of net sales.

FY 2017-18 marked a significant economic measure by the government: The Goods and Services Tax (GST) was implemented from July, 2017 as the nation moved to ‘one nation-one tax. The reform measure has helped India move into the Top 100 Club in World Banks ‘Global Ease of Doing Business rankings.

Indias economy picked up some pace in FY 2017-18 and the gross domestic product growth was better than FY 2016-17. The structural reform of The Goods and Services Tax (GST) within a year of demonetisation is expected to provide a boost to the economic growth and investments in the long run.

With an improving business ecosystem, stable macroeconomic indicators and a liberal FDI regime, foreign capital inflow has provided impetus to the domestic economy. According to World Banks Global Economic Prospects report, Indias GDP is expected to rise to 7.4% in FY 2018-19 and 7.8% in FY 2019-20.

The Government has been overall supportive in encouraging textile Industry India, Textiles and garment industry has been included in list of 25 sectors of ‘Make in India initiative of the Government of India. With the right Government policies we believe that the Indian Textile Industry is well poised to benefit from the large opportunity offered in the domestic and export market. 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.

Risk and concerns :

Fairdeal is engaged in manufacture of texturised, twisted and sized yarn and weaving on water-jet looms. The basic raw material for manufacturing companys product is POY, FDY, PFY etc. The company is a Marketing agent of Reliance Industries Limited for yarn products and supplying yarn to various big players in the market. Fluctuating prices of raw material is a big concern for the industry which may strain the profitability margins. The company has established network for marketing of its products, wide spread customer base, good market reputation and quality of the products, the company is in a position to pass on increase if any in cost to their customers.

Internal Control System and their adequacy :

The Company has a robust internal control system commensurate with the size and scale of its operations. Roles and responsibilities are clearly defined and assigned. Standard operating procedures are in place by way of built in controls in ERP system and have been designed to provide a reasonable assurance. Internal audit is used as an effective tool to check and enhance efficacy of systems, processes and controls of the Company. The review plan, drawn in consultation with the senior management, covers all the major areas. These are aimed at giving the Audit Committee a reasonable assurance on the reliability of financial reporting and statutory & regulatory compliances, effectiveness and efficiency of your Companys operations. The Internal Financial Control Systems are reviewed periodically and revised to keep in tune with the changing business environment.

Financial Performance :

Earnings before Interest, Depreciation and Tax (EBIDTA), during the year under review are Rs.947.83 lacs as compared to Rs.854.90 lacs for the previous year. Profit before tax for the financial year under review has increased to Rs.265.80 lacs from Rs.188.25 lacs for the previous year. Your Company has earned a Net Profit after tax of Rs.201.25 lacs increase by 14.33% from Rs.176.02 lacs of previous year.

Human Resource Development/Industrial Relations :

Fairdeal recognizes that its people are most valuable resources and therefore as a policy of nurturing talent and ensuring that there is growth and their capabilities grow in relation to the growth of the company. The human resources function takes into account the capability, commitment and sincerity while evaluating talent within the company and suitable reward structure is in place to ensure maximum employee satisfaction. Regular training programs have been in place to improve the work capability at various levels in order to improve the competencies and skills.

Forward Looking Statement Cautionary Statement :

Certain statement made in the Management Discussion and Analysis Report relating to the Companys objectives, projections, outlook, expectations etc. are "forward looking statements" within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results may differ from those expressed or implied, depending upon economic conditions affecting demand/supply and price levels in the market, Government policies and other incidental or related factors.