pasupati fabrics ltd Management discussions

PASUPATI FABRICS LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENT: The Textile Industry continues to play a dominant role in the Indian economy and has shown significant growth in the recent past. Home Textile Industry, however is passing through a phase of over - capacity, dependent on overseas business, which is becoming highly competitive. It is likely to take quite sometime before this demand - supply mismatch gets corrected. OPPORTUNITIES AND THREATS: Over build-up capacities in Asian Region including India, poses a temporary threat to demand-supply position, is expected to gradually stabilize. Demand for life-style products amongst the burgeoning middle and high- income consumers at home continue unabated. Consequently the market for premium home textiles is growing at a rapid pace, largely homeowners age and high international awareness. OUTLOOK: The current short-term prospects seem disturbing due to the above threats particularly since the currencies of competing countries have not correspondingly appreciated. Besides, interest and fuel costs have also gone up substantially having its adverse effect on the margins. However, the long-term prospects for the industry are expected to be encouraging. SEGMENT WISE PERFORMANCE: Being a composite textile mill segment reporting as prescribed under AS 17 issued by the Institute of Chartered Accountants of India (ICAI), is not applicable to the Company. RISK AND CONCERNS: The increasing energy costs, higher cotton prices, unfavorable exchange rates and intense price competition caused by over - capacity are some of the immediate risks and concerns to be addressed going forward. INTERNAL CONTROLS AND SYSTEMS: The key features of the internal control system in the Company are given below: 1. Transactions are properly recorded and accounted for. 2. Accounting records are maintained complying with all the statutory laws and reflects true and fair view. 3. There are adequate management reporting systems for control and monitoring of performance. 4. Budgetary control system is in place and are further being strengthened to control consumption of raw material and to check rejections. 5. Periodical review of internal controls systems by the Management and Audit Committee Meeting is undertaken. 6. Periodical review of system, procedures and transactions by internal auditors is conducted, and the necessary steps are being taken to strengthen the same further. HUMAN RESOURCES AND INDUSTRIAL RELATIONS: The companys human resources philosophy is to establish and build a strong performance and competence driven culture with greater sense of accountability and responsibility. The effort to rationalize and streamline the work-force is a continuous process. The industrial relations scenario remained harmonious throughout the year. However in the current year, the plant had to be laid off from 171 May 2008 till 30th June 2008 for restructuring & reorganization of the labour in view of reduced activities. DISCLOSURE RELATING TO SENIOR MANAGEMENT: During the year under review there was no material financial or commercial transaction where senior management personnel has personal interest that may have potential conflict with the interest of the Company at large. CAUTIONARY STATEMENT: The above Management Discussion and Analysis describing the Companys Objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include external economic conditions affecting demand / supply influencing price conditions in the market in which the Company operates, changes in Government regulations, statutes, tax laws and other incidental factors.