Acknit Industries Ltd Management Discussions

Annexure - VI

In terms of Regulation 34(2) read with Paragraph B of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis Report is attached hereto forms part of this Report.

GENERAL ECONOMIC STATE:

Global growth proved resilient in 2023, with inflation declining more quickly than anticipated. Outcomes diverged across countries, with strong growth in the United States and many emerging-market economies offset by a slowdown in most European countries. Recent indicators point to some moderation of growth, with the effects of tighter financial conditions continuing to appear in credit and housing markets, and global trade remaining subdued. Attacks on ships in the Red Sea have raised shipping costs sharply and lengthened delivery times, disrupting production schedules and raising price pressures. Global GDP growth is projected to ease to 2.9% in 2024, from 3.1% in 2023, before recovering to 3.0% in 2025 as financial conditions ease. Annual GDP growth in the United States is projected to remain supported by household spending and strong labour market conditions, but moderate to 2.1% in 2024 and 1.7% in 2025. Euro area GDP growth is projected to be 0.6% in 2024 and 1.3% in 2025, with activity held back by tight credit conditions in the near term before picking up as real incomes strengthen. Growth in China is expected to ease to 4.7% in 2024 and 4.2% in 2025, despite additional policy stimulus, reflecting subdued consumer demand, high debt and the weak property market. Inflation is projected to be back to target in most G20 countries by the end of 2025. Headline inflation in the G20 economies is projected to drop from 6.6% in 2024 to 3.8% in 2025, with core inflation in the G20 advanced economies easing to 2.5% in 2024 and 2.1% in 2025. However, it is too soon to be sure that underlying price pressures are fully contained. Labour market conditions have become better balanced, but unit labour cost growth generally remains above rates compatible with medium-term inflation objectives. Geopolitical risks remain high, particularly relating to the ongoing conflict in the Middle East following the terrorist attacks on Israel by Hamas A widening or escalation of the conflict could disrupt shipping more extensively than presently expected, intensify supply bottlenecks, and push up energy prices if traffic is interrupted in the key routes for the transport of oil and gas from the Middle East to Asia, Europe and the Americas. Persisting service price pressures could also generate upside inflation surprises and trigger financial market repricing as expectations of monetary policy easing are reassessed. Growth could also be weaker than projected if the lingering effects from past policy rate increases are stronger than expected. Monetary policy needs to remain prudent to ensure that underlying inflationary pressures are durably contained. Scope exists to lower policy interest rates as inflation declines, but the policy stance should remain restrictive in most major economies for some time to come. Governments face mounting fiscal challenges from rising debt burdens and sizeable additional future spending pressures. Stronger near-term efforts to contain spending growth and well-designed medium-term fiscal frameworks are needed to help ensure sustainability and provide flexibility to respond to future shocks. The foundations for future growth need to be strengthened by policy reforms to improve educational outcomes, enhance skills development, and reduce constraints in labour and product markets that impede investment and labour force participation. Enhanced international co-operation is needed to revive global trade, ensure faster and better co-ordinated progress towards decarbonisation, and alleviate debt burdens in lower-income countries.

OPERATING SEGMENTS IN THE COMPANY:

The Company operates through four (4) broad segments. They are -

1. Manufacturing Hand Gloves of various materials and diverse qualities for industrial safety modules for both export and domestic markets;

2. Manufacturing of both industrial safety garments and readymade garments in bulk for both export as well as for domestic markets;

3. Power generation by operation of wind mills to supply on commercial base; and

4. Procurement, part processing and supply of non-conventional industrial safety gears in domestic market and in export.

CHALLENGES:

Indias economic performance has remained robust despite global challenges and geopolitical concerns. This can be attributed to strong domestic demand, rural demand pickup, robust investment and sustained manufacturing momentum. It is to be mentioned that the price pressures continue to abate from the country. "Globally, inflation management continues to remain a key priority." Indias retail inflation for the fiscal year 2023-24 has seen a significant downturn, marking its lowest point since the onset of the Covid-19 pandemic. Reflecting this trend, the Reserve Bank of Indias Monetary Policy Committee decided to maintain policy rates at their current levels, citing the ongoing reduction in price pressures across the country. The committee emphasised the importance of achieving sustained alignment of inflation with its target of 4 percent. Despite the positive trajectory, the RBI acknowledged potential challenges on the horizon, including geopolitical tensions, domestic weather-related disruptions, and the Indian Meteorological Departments forecast of an above-normal monsoon in the upcoming fiscal year. In light of these factors, the RBI has projected Consumer Price Index inflation for the fiscal year 2024-25 at 4.5 percent. Furthermore, both the RBI and the International Monetary Fund have issued optimistic growth projections for India, bolstering confidence in the nations economic outlook. Notably, March 2024 witnessed several indicators of robust economic performance, including record-breaking achievements in the stock market, remarkable Goods and Services Tax collections and substantial growth in both the manufacturing and services sectors. The buoyant domestic economic landscape is further evidenced by improvements in consumer and investor confidence, reflected in enhanced sentiment across various sectors. The March review stated that the global trade is estimated to have contracted in 2023, driven by reduced demand in developed nations and trade weaknesses, coupled with a decline in global commodity prices. This, in turn, led to a moderation in Indias merchandise exports and imports. The slowing of trade has resulted in the merchandise trade deficit narrowing in FY 2023-24, as exports have shown a smaller contraction than imports. However, the non-petroleum and non-gems & jewellery merchandise export have shown resilience with a sustained uptick in the last few months, growing at 3 percent in FY 2023-24. Services exports expanded at their fastest pace in FY 2023-24, supported by rising software exports and business services exports. Owing to these developments, Indias current account deficit improved in the first nine months of FY 2023-24 compared to the corresponding period of the previous year. The capital inflows in India saw a significant turnaround in FY 2023-24. Indias foreign exchange reserves reached an all-time high in March 2024, sufficient to cover 11 months of projected imports and more than 100 percent of total external debt. "Overall, resilient growth, robust economic activity indicators, price stability and steady external sector performance continue to support Indias promising economic performance amidst uncertain global conditions."

Challenges facing the Company vis-a-vis the Country:

India has sustained its export growth notwithstanding the global challenges emerging due to issues like the Israel-Hamas war and the Budget has laid strong foundation to push the economic growth. Certainly, the country is facing "very severe" challenges due to these conflicts. But despite these challenges, India continues to be bright spot in terms of economy, economic growth and continue to broadly sustained exports. Geopolitically, global affairs are becoming more complex and challenging due to wars and conflicts. Globalisation is being redefined with restoring and friend-shoring, disruption and fragmentation of supply chains, and competition for critical minerals and technologies. A new world order is emerging after the Covid pandemic. The Russia-Ukraine war, the Israel-Hamas conflict and the Red Sea crisis have disrupted the global supply chains. Red Sea is the busiest trade route as it accounts for 30 percent of global container traffic and 12 percent of global trade. Red Sea has led to a significant increase in transportation cost and delay as Indian Exporters have to send their consignments through the Cape of Good Hope, encircling Africa. Due to these challenges the growth potential on the trade front is slowing very significantly and showing weakness. Due to these wars and crises, logistics and shipment lines out of India for exports are getting impacted significantly. Indias exports rose by only 1 percent to USD 38.45 billion in December 2023 while the trade deficit narrowed to a three-month low of USD 19.8 billion. Exports during April-December this fiscal dipped by 5.7 percent to USD 317.12 billion. Importers contracted by 7.93 percent to USD 505.15 billion, leaving a trade deficit of USD 188.02 billion in the first three quarters as against USD 212.34 billion in April-December 2022.

RISKS AND CONCERNS:

Risk is integral to any business and Acknit is no exception. The major areas of risks as envisaged by the company are as under:

1. Fluctuations in foreign currency and exchange.

2. Export Credit Risk among the most significant financial risks.

3. Loss or damage to goods in transfer.

4. Country Risk being the most complex risk factor covering the overall economic, political and legal stability of a company.

5. Shipping risks.

6. Supply chain disruptions.

7. Customers changing needs and preferences.

8. Cyber security risks.

9. Ability to hire and retain skilled employees.

10. Timely availability of raw materials (domestic as well as imported)

The Board of Directors revises the Companys business risks and formulates strategies to mitigate those risks. The Senior Management team, led by the Managing Director, is responsible for proactively managing risks with appropriate mitigation measures and ensuring their implementation thereof.

INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Company has implemented robust internal controls to ensure strict adherence to applicable laws and regulations, safeguard company assets, and ensure the accuracy of financial reporting. The establishment of effective internal controls is of utmost importance for any organisation, as it ensures efficient, effective and ethically sound business operations. The Companys internal control framework comprises a comprehensive set of policies, procedures, and guidelines that provide adequate oversight over financial reporting and other critical aspects of the organisation. The organisational structure is well-defined, with clear delineation of roles and responsibilities, fostering accountability and transparency in decision-making processes. A comprehensive system of internal controls safeguards the integrity of the Companys financial reporting process. This includes the segregation of duties, access restrictions, and regular review procedures as integral components of the control environment. The independent audit committee plays a pivotal role in monitoring internal control procedures and provides regular updates to the board of directors.

FINANCIAL PERFORMANCE:

The Company could achieve a turnover of Rs. 22,065.73 Lakhs and total comprehensive income of Rs. 886.70 Lakhs during the year under review.

Segment-wise performance:

( Rs. in Lakhs)

PARTICULARS	2023-24	2022-23
Manufacturing of hand gloves:
Segment Revenue	12,605.81	14,710.19
Segment Results	1,349.70	1,410.71
Manufacturing of garments:
Segment Revenue	7,310.69	8091.14
Segment Results	377.66	456.22
Power Generation - through windmill:
Segment Revenue	43.11	38.91
Segment Results	(5.88)	(7.73)
Others:
Segment Revenue	2,106.12	1,006.63
Segment Results	77.70	8.76

HUMAN RESOURCE:

At Acknit, we acknowledge the valuable contributions of our employees in propelling our journey to greatness in the export industry. Our core values revolve around cherishing our employees as the driving force behind our success. We take immense pride in our human resource policy, carefully crafted to cultivate a positive and thriving work environment that fuels employee engagement, fosters career growth, and sparks the flames of progression. We know that a company is only as strong as its talent pool, and thats why we are wholeheartedly committed to building a team of exceptional individuals who share our passion for excellence.

CAUTIONARY STATEMENT:

The statements in the "Management Discussion and Analysis Report" describe the Companys objectives, projections, expectations, estimates or forecasts which may be "forward-looking statements" within the meaning of the applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied therein due to risks and uncertainties. Important factors that could influence the Companys operations, inter alia, include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic, political developments within the country and other factors such as litigations and industrial relations.

	For ACKNIT INDUSTRIES LIMITED
	Sd/-
	Shri Krishan Saraf
Place: Kolkata	Managing Director
Date: 22nd May, 2024	DIN: 00128999