INDUSTRY STRUCTURE & DEVELOPMENT

India has become the fastest growing economy in the world and it has grown by 7.50% during the year 2015-16. The inflow of the FDI has been highest ever; interest rates are in downward regime, "Make in India" and "Ease of doing Business" initiatives of the Government created an environment conducive to business and industry. However, the export is a weak area, the cumulative exports declined by 15.85% to $261.13 billion in the year 2015-16 against $310.30 billion in 2014-15. In the absence of supporting global demand, the domestic market will need to drive economic growth in next couple of years. India is the second largest global producer of textiles and garments. The abundant availability of raw materials (cotton, wool, silk and jute) and skilled workforce have graduated India into global sourcing hub, employment driver and net foreign exchange earner. Thus, Indian Textile Industry has an overwhelming presence in the economic life of the country.

The Indian textile industry accounts for about 24% of the world's installed capacity of spindles and about 8% of global rotor capacity. It has second highest spindles in the world after China. Cotton is the leading crop in India's textile sector, accounting for more than half the country's fibre consumption. Its production, however, largely depend on climatic conditions. The Cotton Association of India (CAI) estimates that country's cotton output for the year 2015-16 shall be 341 lacs bales against 382.75 lacs bales in the year 2014-15 due to adverse climatic conditions. The cotton price in the year 2015-16 remained stable but in the year 2016-17 there may be increasing trend in the prices.

OPPORTUNITIES AND THREATS

The size of the Indian textile and apparel industry is expected to reach $223 billion by 2021. The Indian textile Industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand. The exports of textile and clothing products, account for 35% of the total textile sector in India. In spite of overall decline of 15.85% in export of the country during 2015-16, the export of textile sector remain flat at $40 billion and your Company registered remarkable growth of 35.53% in Exports during the year over the previous year. A strong raw material production base, a vast pool of skilled and unskilled personnel, cheap labour, good export potential and low import contents are some of the salient features of the Indian textile industry. With the increase in capacities, the company will be able to achieve balancing in operations, offering wide product range and broad base its customer profile. We expect good growth in the demand for our products in the coming years and improvement in the margins of the Company.

The threats to the Company's product includes severe competition both in domestic and international markets leading to pricing pressures of finished goods, inflation, foreign exchange fluctuation, volatility in input cost, cotton crop, interest rates, power cost etc. Government Policies also play major role in the growth of the Industry.

OPERATIONAL REVIEW

Please refer to the paragraph under the heading "Financial Results" and "Operational Review" in the main Directors' Report.

SEGMENTWISE PERFORMANCE

The Management reviewed the disclosure requirement of Segment wise reporting and is of the view that since the Company's products are covered under Textile Industry which is single business segment in terms of AS-17 and therefore separate disclosure on reporting by business segment is not required.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has proper systems for Internal Control. The systems are improved and modified continuously to meet with changes in business conditions, statutory and accounting requirements. The Audit Committee of Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them. The Company has strong Management Information System, which is an integral part of control mechanism.

RISK MANAGEMENT

The risk management framework of the Company ensures compliance with the requirements SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Framework establishes risk management across all service areas and functions of the Company, and has in place procedure to inform the top Management about the risk assessment and minimization process. The Company is exposed to risks from market fluctuations of foreign exchange, finance and commodity price risk.

FOREIGN EXCHANGE RISK

The Company has considerable exposure in foreign currency as the export constitutes about 69% of the total turnover. In the market determined exchange rate regime and volatility in the forex market affects realization of the Company. The Company has well documented foreign exchange risk policy and currency risks are hedged accordingly through forward contracts.

FINANCE RISKS

The Company has financed a substantial part of its expansion plans through debt. The debt agreements are subject to financial covenants. The forecast cash requirements of the Company are closely monitored along with actual and projected to ensure adherence to covenants.

COMMODITY PRICE RISK

The Company is exposed to the risk of price fluctuation on cotton and coal well as finished goods. Input costs, being based on agriculture, are influenced not only by the vagaries of nature but also government policies and the movements in the international market. Your Company continues to recognize the importance of the price value equation and the need to be sensitive to price changes to counter the volatility of input costs and the same is managed through judicious purchase and stocking.

RISK ELEMENT IN INDIVIDUAL BUSINESS

Apart from the risks on account of interest rate, foreign exchange and regulatory change, various business of the Company are exposed to certain operating business risks, which are managed by regular monitoring and corrective actions.

ENVIRONMENT AND SAFETY

The Company is conscious of the need for environmentally clean and safe operations. The Company policy requires the conduct of all operations in such manner so as to ensure safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources to the extent possible.

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Human resource is the most valuable asset in any organization. The Company focuses on the training and development of its people. The company has taken various initiatives to improve and enhance skill of its people. The industrial relations remained cordial in our plant. The total strength as at the end of the financial year 2015-16 was 2333 employees.

CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include raw material availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

For and on Behalf of the Board of Directors
Place : Bhilwara R. L. NOLKHA
Date : 03.05.2016 Chairman
(DIN - 00060746)