INDUSTRY OUTLOOK

India’s macro-economic scenario remained gloomy during the initial months of the financial year 201415. The interest rates remained high resulting in subdued demand and investments. Delayed decision making due to uncertain political and economic conditions further stalled major infrastructure and power projects. There is considerable hope that new Government will create an environment conducive to business and industry. India’s textile industry plays a significant role in the economic development of the country in terms of net foreign exchange earnings and employment generation. The Industry contributes around 4% to India’s GDP, around 11% to the country’s export earnings and nearly 14% to Industrial production, besides providing direct employment to over 45 million people. Thus, the growth and overall development of this industry has a direct bearing on the nation’s economic strength.

India accounts for 22% of the world’s installed capacity of spindles and is one of the largest exporters of yarn in international market. It has second highest spindles in the world after China. India ranks as world’s second largest cotton consumer, exporter and producer accounting for 23% of world’s total production. In India with increased acreage, large scale adoption of Bt Cotton, increase in minimum support price coupled with an increase in productive levels, cotton crop is expected to be 400 lac bales for the current season 2014-15 against 375 lacs bales during previous season. The Cotton Yarn and Knitted Fabric prices fell sharply due to reduction in cotton prices and demand from International Market was subdued. As a result Operating margins of the Cotton Yarn and fabric industry as well as your company have reduced to some extent. However, the overall Operating profit of the Company increased by 10.56% due to increase in volume.

OPPORTUNITIES AND THREATS

India is the second largest populated country in the world. Hence, the demand for textile products in India is very large and growing with the increase in disposable income of the people. A very high proportion of young and working population is also

a favourable factor influencing domestic demand for textiles. The decline in textile and apparel industry in the developed countries has created opportunity for developing countries for export upto US$140 billion by 2020. Hence, there is huge opportunity for India to reach upto US$ 80 billion exports by 2020. 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 scale of economies, offering wide product range and broad base its customer profile. We expect good growth in the demand for our products in the upcoming 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 of Clause 49 of the Listing Agreement. 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 64% 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 2014-15 was 2315 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 : 04.05.2015 Chairman & Managing Director
(DIN - 00060746)