gloster ltd Management discussions

a) Industry structure and developments

By a notification during the year under review the Government of India has maintained the compulsory packing norms for food grains and sugar under Jute Packaging Materials (Compulsory use for Packing Commodities) Act, 1987 (JPMA) at the 90% & 20% of production respectively. The said notification was valid upto 31st March, 2016 and is expected to be extended further.

b) Opportunities and Threats/Risks & Concerns

Opportunities

- Weak rupee may off er better opportunity for export of jute products at competitive prices;

- More & more concerns are being shown for reducing carbon foot prints world over and this opens doors for use of more biodegradable & sustainable products made from natural fibers like jute;

- Demand for promotional bags, lifestyle products & made ups and jute geo textiles are expected to see an upsurge;

- The industry is getting incentives under difierent schemes as below:

i. Government of India, Ministry of Textiles have launched a new scheme "Amended Technology Upgradition Fund Scheme (ATUFS)", which provides 15% Capital Investment Subsidy on eligible machines with a Capital Investment Subsidy per individual entity of Rs 30.00 crores for the period 13.01.2016 to 31.03.2022

ii. Incentive Scheme for Acquisition of Plants & Machinery (ISAPM) from National Jute Board has been made effective for installation of Plant & Machinery from 1st October, 2013 and will continue upto 31st March, 2017. The incentive shall be 20% of cost of Plant & Machinery with a ceiling of Rs 2.50 crores per jute mill during the period.

iii. The Government has introduced a new export incentive scheme named as Merchandise Exports from India Scheme (MEIS) for export of specified goods to specified countries. Incentive under MEIS shall be payable as percentage of realised FOB value in free foreign currency in the form of duty free scrips of 5% on products exported by the Company .

Risk & Concern/ Threat

- Further dilution of compulsory Jute Packing Order and lower order from government quarters can adversely affect the market of jute products;

- Ever increasing dearness allowance and related increase in employee cost lead to regular increase in overall cost of production;

- Import of jute goods in India from Bangladesh and Nepal at significantly lower prices may adversely affect the domestic jute sector / industry;

- More competition from synthetic packaging materials specifically because of falling crude prices ;

c) Segment-wise or product-wise performance

The Company is engaged in the business of manufacturing Jute goods and is managed organizationally as a single unit. Accordingly the company has only one business. However, the Company has customers in India as well as outside India and thus segment reporting on the Geographical location of its customers is as below:

	Inside India		Outside India		Total
Particulars	2015-16	2014-15	2015-16	2014-15	2015-16	2014-15
Segment revenue by location of customers	31,580.00	23,136.11	10,632.88	8,919.91	42,212.88	32,056.02
Carrying amount of segment assets	2,044.08	1,458.73	508.44	309.65	2,552.52	1,768.38
Additions to tangible and intangible assets	1,507.37	989.79	–	–	1,507.37	989.79

d) Outlook

The initial forecast of raw jute crop in the forthcoming jute season seems to be good. There is low carryover of raw jute stock at the beginning of current year. Prices of raw jute at the beginning of the current jute season are likely to be firm with a sharp fall in prices as fresh crop hits the market..

The 5th Phase of modernization was completed during the year and the Company has taken up the 6th Phase of modernization.

Your management is continuing its efforts to improve the eficiency which should result into better performance.

e) Internal control systems and their adequacy

The Company has adequate internal control system commensurate with the size, scale and complexity of its operations which provides reasonable assurance with regard to safeguarding the Company’s assets, promoting operational eficiency by cost control, preventing revenue leakages and ensuring adequate financial and accounting controls and compliance with various statutory provisions. A qualified and independent Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them.

A summary of Internal Audit observations and Action Taken Reports are placed before the Audit Committee on a periodical basis, for review.

f) Discussion on financial performance with respect to operational performance

The following are the significant areas of financial performance:

			Rs lakhs
Particulars	2015-16	2014-15	Increase/ (Decrease)
Revenue from operations	42,710.70	32,542.33	10,168.37
Raw material cost	25,030.46	16,714.41	8,316.05
Finance costs	411.50	488.01	(76.51)
Profit for the year	2,464.02	1,323.55	1,140.47

g) Human Resources & Industrial Relations

The Company is continuing its efforts through training to enhance competence of its manpower to make them more resourceful in their present job and also to prepare them for future roles. The Company has also introduced stafi welfare schemes under which benefits are provided to deserving members of stafi.

h) Cautionary statement

Statements made in this section of the report are based on assumptions and expectations of future events. Actual results could however difier materially from those expressed or implied. Important factors that could make a difference include finished goods prices, raw material cost and its availability, change in Government regulations, tax laws, economic developments within the country, currency fiuctuation and other factors such as litigation.