krishna knitwear technology ltd Management discussions
Krishna Knitwear Technology Ltd.
Date: 2004.03.31. Management discussion and analysis
MANAGEMENT DISCUSSION AND ANALYSIS REPORT FOR THE YEAR ENDED 31ST MARCH,
2004.
a) Overall Review
The management of Krishna Knitwear Technology Ltd presents its analysis
report covering performance and outlook of the Company. The management
accepts responsibility for the integrity and objectivity of the financial
statements. However, readers are cautioned that this discussion contains
certain forward-looking statements that involve risk and uncertainties.
b) Industry structure and Developments :
The Indian textile industry could well be on the threshold of exponential
growth. This optimism stems from the dismantling of the quota system.
Currently, global textile trade is governed by physical restrictions, or
quotas in the lucrative US and European markets. Come January 1, 2005,
quotas will be completely phased out and have far-reaching impact on world
trade in textiles and clothing.
The Indian industry is expected to be one of the major beneficiaries with
its share of global trade forecast to grow the fastest as its current quota
allocation is among the lowest. Indias textile exports are expected to
grow at a CAGR of 21 per cent to US $50 billion by 2010.
Indian textile sector is expected to draw its global competitiveness from
its high degree of integration, low cost labour and proximity to cotton
growing areas. Its major competitor will be China. But selective quota
restrictions on China will help domestic players.
c) Opportunity and Threats :
It is expected that Indian economy should grow by over 5% per annum over
the next few years. Per capital consumption in India for most products
remains amongst the lowest in the world. With the phasing out of quota
system, opportunities should be available to competitive textile producers
but with a serious threat of competition from other textile producers in
the world. However, with the encouragement offered to the textile Industry
by the Central Government through reduction of excise duties and favourable
exim policy, the Industry should be able to exploit these opportunities and
face challenges in the domestic as well as international markets.
d) Segment-wise Performance.
The Companys products namely yarns and fabrics can be categorised into one
segment called Textile. Hence, separate financial results are not
compiled for this segment. The overall performance of the Company is
provided in the Directors Report under the head Financial Results.
e) Outlook
The Company has drawn out and is implementing an extensive action plan
which comprises thrust on high margin products, reduction in raw material
costs, rationalization of operations and over-heads, optimising inventory
level, selective credit policy to customers and liquidation of non-moving
inventories and overdue receivables.
The Company with its superior product mix and higher value-addition,
coupled with the change in industry scenario like more fiscal incentives as
announced by Government of India for textile industry, change in consumer
preferences from woven to knitted clothes etc, is expected to benefit
significantly.
Forward-looking statements are based on certain assumptions and
expectations of the future events that are subject to risks and
uncertainties. Actual future results and trend may differ materially from
historical results, depending on variety of factors.
f) Risk and Concern
There are no major risk and concern to the Companys operation except from
the competitive pricing pressure from cheaper imports, unethical
competitions from silk units, free market policies and removal of
quantitative restrictions.
g) Internal Control system and their adequacy
The Internal Control system of the Company is commensurate with the size of
the Company and nature of its business. The Internal Control system of the
Company ensures that all assets are safe guarded and protected against loss
from unauthorized use or disposition and the transactions are authorized,
recorded accurately.
h) Financial Performance Vs. Operational Performance
The Company has achieved a sales turnover of Rs.989.22 Crores in F.Y.2004
as against Rs.833.18 Crores in F.Y.2003, an increase of 19%. The Exports
have gone up to Rs.45.94 Crores in F.Y. 2004 from Rs.16.34 Crores in
F.Y.2003, an increase of 181 %. This is mainly on account of completion of
the expansion-cum-backward integration project under TUFS, appraised by
IFCI. The Company has achieved cash accruals of Rs. 87 Crores. The net
profit has gone up to Rs.2 Crores in F.Y.2004 from Rs.0.97 Crores in
F.Y.2003, an increase of 107%. The P.B.I.D.T. has increased to Rs.140
Crores in F.Y.2004 from Rs.128 Crores in F.Y.2003, an increase of 10%.
i) Development in Human Resources/Industrial Relation front
The focus of Human resource development in the Company is on building and
developing intellectual capital through innovative ideas. The industrial
relation climate of the Company continues to remain harmonious with focus
on quality and safety.
j) Research and Development
Increased globalization has made the marketing of products and retention of
customers highly competitive. The need of the hour is total customer
satisfaction and value for money from the products marketed. Keeping this
objective as paramount, the research and development activities were
focused into prompt attention to major customer complaints/suggestions in
order to retain/enhance customer satisfaction. The Company has started
launching products of better quality and new look as per customer
requirements.