AI Champdany Industries Ltd Management Discussions.

FOR THE FY 2018-19

A. Industry Structure and Development:

During the year under review demand for ‘B Twill bags from the Government Procurement Agencies continued to be good, in fact Jute Industry could not fulfil the demand on several occasions as per the delivery schedule mainly because of bunching of orders by the Procurement Agencies and lower capacity utilisation resulting from shortage of manpower. It is therefore imperative that the Industry body as well as Procurement Agencies should work out a suitable production/supply plan so that in future placement of orders by the Procurement Agencies are reasonably spread throughout the year instead of bunching at a particular time and manufacturing mills could plan their production accordingly so that such complaint can be minimised. Availability of skilled manpower also needs to be augmented by devising some incentive and training scheme in consultation with the Government otherwise production will continue to suffer & Industry may loose its market share in future to alternate products. In the month of October18 antidumping duty was imposed by the Government of India on import of flax yarn from China so as to provide a level playing field to the domestic manufacturers and also to encourage "make-in- India" programme initiated by the Government. This move of the Government greatly helped the domestic flax yarn industry i.e. creating higher demand for the domestic flax yarn as well as improving the price realisation. Your Companys flax yarn manufacturing Unit located at Jagatdal, 24 Parganas, West Bengal is also getting benefitted from the above move and the company is now focusing on increasing the production at the unit by renovating the existing equipments and/or installing balancing machineries & changing the product mix as per market scenario.

B. Opportunities/Threats, Risks & Concerns:

• Opportunities

i) Demand for ‘B Twill bags from the Government Agencies for packaging of food grains is estimated to be strong as such there is an opportunity for the Jute Industry to enhance the production as much as possible & fulfil the demand.

ii) All over the Country, State Governments are discouraging/banning use of plastic which is an environmental hazard. Accordingly, there is a tremendous scope for the Jute Industry to make in-roads in the newer area of Jute products uses replacing plastics and this will not only help the Industry in widening its market but also provide better margins on such value added products.

iii) Demand for flax yarn is continuously rising in the country because of its suitability to the Indian climatic condition and more and more sophisticated and fashionable linen items are made out of flax yarn such as shirts, kurtas, sarees, ladies dresses, furnishing materials etc and after antidumping duty on the Chinese flax yarn, operating environment for flax yarn manufacturing has improved considerably and your Company is exploring all possibilities to cater to such rising demand.

•  Threats/Risks and Concerns

i) Jute Industry is continuously facing shortage of skilled manpower thereby adversely affecting the production despite good demand from the Government Agencies. Therefore, Industry body as well as State/Central Government have to sincerely work for training of workers which is extremely essential for long-term survival of the Industry.

ii) Continuation of compulsory Jute packaging order for food grains which is extended every year is imperative at this stage.

iii) Because of poor flax crop in the main producing Countries such as France & Belgium, availability of the flax fibres is scarce and the prices have also increased substantially. For smooth functioning of flax yarn manufacturing, fibre availability is a very important factor which is dependent on new crop in the above producing Countries.

C. Outlook:

So far weather conditions for growth of jute crop has been favourable and barring natural vagaries it is expected that ensuing jute crop should be better than previous year and with reasonable carry forward stock from previous year, going forward prices of raw jute should soften. Demand for ‘B Twill jute bags for packaging of food grains by the Government Procurement Agencies continues to be good and as per present indications it should remain good throughout the year.

Your flax yarn unit located at Jagatdal, District 24 Parganas, West Bengal is expected to see good performance in the current year as demand for flax (linen) products is growing steadily in the domestic market with operating cycle for the flax (linen) industry turning favourable. At the moment, only thing to be watched for Flax Industry is availability of fibre which is mainly imported from Belgium and France where next crop is expected to be bumper in view of record high prices realised by farmers for previous crop. Your company is putting maximum focus on increasing the production of flax yarn at its Jagatdal Unit by refurbishing the existing equipment as well as adding balancing machineries wherever required.

With the formation of stable Government at the Center there is a high expectation that foreign inflow of funds in the Country will accelerate in the coming years which will result in all round economic development in the Country. As per the recent report of the World Bank, India is likely to emerge as fastest growing economy in the world in the next 3 years even outpacing China. This augurs well for the entire economy which will create demand for all kind of resources including real estate/land parcels etc. Your company having sizable non-core land parcels built over last more than 3 decades and has been looking for monetization of these assets for last few years but could not do so due to sluggish real estate market can now look forward with optimism to monetize some of these prime assets which will help the company in reducing its interest cost substantially.

D. Internal Control System & Adequacy:

The Company has a proper internal control system in place across all its operations. Internal audit work has been assigned to a professional firm of Chartered Accountants who have expressed satisfaction about the adequacy of internal control systems and procedures followed by the Company. The Audit Committee reviews the observations of the internal auditors and implementation aspects on a regular basis.

E. Financial & Operating Performance:

Sales/Income from operation was to Rs. 131.74 Crores compared to Rs. Rs.127.82 Crores in the previous year. Production and efficiency at Wellington Jute Mill and Yarn & Weaving unit located at Rishra continues to be low, also adversely affected by shortage of skilled manpower. As part of the restructuring exercise, the company entered into a MOU with a prospective buyer for sale of Wellington Jute Mill and Yarn & Weaving unit located at Rishra but the transaction could not proceed due to non-payment of next instalment by the buyer as per the terms of MOU and accordingly the MOU had to be terminated and matter is under arbitration. After the above transaction which could not fructify, the company is trying to revive the operations at the above units and in this process appointed a senior long experienced executive of Jute Mill administration as Group President and efforts are continuing for improvement of operations. Besides, all feasible options are being evaluated as part of restructuring exercise including monetization of some of the non-core assets as explained here in above so as to streamline the operations of the company.

F. Material Development in Human Resources/Industrial Relations Front:

The Company continues to rationalize its workforce and put emphasis on providing quality training under the Companys programme.

Yarn Unit and Libra Carpet Unit located at Choudwar, District Cuttack, Odisha, Weaving Unit at Rishra, Yarn and Weaving Unit at Konnagar continued to be under suspension of work.

G. Cautionary Statements:

Certain statements in this report may be construed as forward looking statements which have been made as required by laws and regulations, as applicable. There are several factors, which would be beyond the control of management and as such, may affect the actual results, which could be different from that envisaged.