Acknit Industries Ltd Management Discussions.

GENERAL ECONOMIC STATE:

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. Financial Year 2018-19 marked a significant economic measure by the government. The Goods and Service Tax (GST) implemented from July2017, Once fully implemented and linked with direct taxes, would benefit the economy, help bring in transparency, make small businesses strong, create more employment and ultimately reduce tax burden for the common man. Amid slowing global merchandise trade growth, Indias exports in the Financial Year 2018-19 registered a high score.

OPERATING SEGMENTS IN THE COMPANY:

The company operates in three distinct segments

1. Manufacturing of hand gloves

2. Manufacturing of garments

3. Power Generation through wind mill

SEGMENT WISE PRODUCT ANALYSIS:

The company has been in the business of manufacturing and export of hand gloves and other acclaimed industrial safety wears of every description to cater the needs of industrial safety measures at workplaces. Over the years the Company gradually diversified its product range by addition to cotton & synthetic knitted gloves, the other varieties of PU Latex & nitrile coating, dotted gloves and leather gloves and protective garments and wears for industrial safety measures which are considered as essential to minimize risks at workplaces across the world. The Company has also diversified its activity in the area of manufacturing garments for kids wear for the "Brand Market" with further expansion programme to venture in fashion categories.

After having its duly established presence as manufacturer and supplier of various types of Industrial Safety Wears and gadgets in the International Industrial Market and ensuring a steady flow of orders and fresh enquiries, the Company turned its attention to expansion programme through diversification of business modules.

In this regard, the Company after thorough investigation of domestic market demands and Companys own capability to properly serving the market demands commenced its new venture of manufacturing Kids Wears for supply in bulk to the order of leading Brand leaders in the market as per their specifications.

Thus the Garment Division of the Company commenced its operation around 2007-08 and in stages started new units at 3 rented premises in North 24 Parganas. After overcoming the initial teething phase, the Garment Division have since started contributing to the Companys turnover as well as profit margins which is being increased day by day substantially.

The Garment Division is now planning to expand its area of operation and exploring the area of Fashion Designing and supplying to the orders of the Market.

On the other hand, around the year 2006-07, the Company as a part of its Tax Planning, established 2 windmills at Dhule in Maharashtra with the Finance of Suzlon. The entire production of Power generated by the windmills are fully purchased by the State of Maharashtra. The entire loan of Suzlon has since been paid off and thereby entire revenue from windmills after deduction of operation cost, goes to add up to the Net Profit of the Company. The Company may consider to add up further units as may be advised.

CHALLENGES:

l Strategies like innovation of products and improvisations calls for investments in the company; these involve additional finance costs and therefore generates risks in the business;

l The industry endures low profitability and lower cash accruals. Further, low operating profitability is sensitive to Government incentives as well;

l Foreign dumping specially from China has been creating severe challenges in the manufacturing industry of industrial protective gears as well as garment industries;

l Incentive credit period for the power generation segment being over, the business requires proper power buy-out offers from the Governments at justified mark-ups to ensure sustainability as the same is not the core business of the company.

RISKS AND CONCERNS:

l Companys results are affected by competitive conditions and customer preferences;

l Higher manpower costs, strict labour laws and looming labour shortage creates major risk concerns;

l Being export oriented company, international markets and policies creates forex fluctuations thus making the company subject to exchange rate fluctuation risks.

INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The company has appropriate internal control system for business process across various divisions with regard to efficiency of operations, financial reporting, compliance with applicable laws and regulations. The company has kept highly skilled technical and administrative people at our mill, due to which the internal control systems are strictly maintained i.e. increasing productivity and cutting cost at every stage. Under the supervision of highly experienced technical people, we are able to produce highest quality of products for export market. Regular internal audits and checks ensure that responsibility is executed effectively. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them.

FINANCIAL PERFORMANCE:

The Company could achieve a turnover of Rs 17378.61 Lakhs and total comprehensive income of Rs 425.47 Lakhs during the year under review.

Segment-wise performance:

( Rs in Lakhs)

PARTICULARS 2018-19 2017-18
Manufacturing of hand gloves :
Segment Revenue Rs 11817.86 Rs 11163.63
Segment Results Rs 1163.02 Rs 1071.52
Manufacturing of garments :
Segment Revenue Rs 5441.54 Rs 4958.66
Segment Results Rs 163.91 Rs 183.10
Power Generation through wind mill :
Segment Revenue Rs 119.21 Rs 86.83
Segment Results Rs 74.67 Rs 47.50

HUMAN RESOURCE:

The company ensures to stick to its policy of proper human resource procurement, development and utilisation. Compliance with proper state human resource laws and uniform human resource policies in the company ensure early mitigation of all human resource issues in the company. The cost of staff and workers is increasing abnormally due to high cost of living and there is a shortage of skilled workers. The Company has had very harmonious relations with its workforce during the year.

For and on behalf of the Board of Directors
For Acknit Industries Limited
Shri Krishan Saraf
Place: Kolkata Managing Director
Date: 29th May, 2019 DIN: 00128999