Race Eco Chain Ltd Management Discussions.

1. Industry Structure and Development

We are currently engaged in the business of trading of fabrics. We are a multi-product fabric trading and our range includes fabrics for bedding, windows dressing, decorative, pillows and accents, table linen, kitchen linen and other home furnishing fabrics. We have a diverse product portfolio. We also participate in auctions carried by authorized agents of customs and ports to buy the textile materials confiscated by them. We are able to get these textile materials at a cheaper rate from these auctions.

Our Business Process is buying regular lots through mils & traders and buying odd lots in the auction by authorised agents of customs & ports, then after direct sale or get some process done from the outside and then sale.

We are currently serving the corporate and other clients from various spheres of textile industry. Our customers during FY 2017-2018 include Alps Industries Limited, Damodar Yarn Agency, Ganpati Textiles, Geetansh Corporations, Ishan International, Maecomm Enterprises, Creations Overseas, Neha Creation and Opyarn Agency amongst others.

2. Industry Overview

Indias textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to Indias exports with approximately 13 per cent of total exports. The textiles industry is also labour intensive and is one of the largest employers. The textile industry has two broad segments. First, the unorganized sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. The second is the organised sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale.

The textile industry employs about 105 million people directly and indirectly. Indias overall textile exports during FY 2017-18 stood at US$ 37.74 billion.

The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector at the other end of the spectrum. The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world.

2.1 Market Size

The Indian textiles industry, currently estimated at around US$ 150 billion, is expected to reach US$ 230 billion by 2020. The Indian Textile Industry contributes approximately 2 per cent to Indias Gross Domestic Product (GDP), 10 per cent of manufacturing production and 14 per cent to overall Index of Industrial Production (IIP).

The production of cotton in India is estimated to increase by 9.3 per cent year-on-year to reach 37.7 million bales in FY 2017-18. The total area under cultivation of cotton in India is expected to increase by 7 per cent to 11.3 million hectares in 2017-18, on account of expectations of better returns from rising prices and improved crop yields during the year 2016-17.

Indian exports of locally made retail and lifestyle products grew at a compound annual growth rate (CAGR) of 10 per cent from 2013 to 2016, mainly led by bedding bath and home decor products and textiles.

3. Government Initiatives

The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under the automatic route.

Initiative will be taken into consideration by Government of India.

• The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two subsectors of Textiles Industry - Readymade garments and Made ups - from 2 per cent to 4 per cent.

• As of August 2018, the Government of India has increased the basic custom duty to 20 per cent from 10 per cent on 501 textile products, to boost Make in India and indigenous production.

• The Government of India announced a Special Package to boost exports by US$ 31 billion, create one crore job opportunity and attract investments worth Rs 80,000 crore (US$ 11.93 billion) during 2018-2020. As of August 2018, it generated additional investments worth Rs 25,345 crore (US$ 3.78 billion) and exports worth Rs 57.28 billion (US$ 854.42 million).

• The Government of India has taken several measures including Amended Technology Up- gradation Fund Scheme (A-TUFS), scheme is estimated to create employment for 35 lakh people and enable investments worth Rs 95,000 crore (US$ 14.17 billion) by 2022.

• Integrated Wool Development Programmed (IWDP) approved by Government of India to provide support to the wool sector starting from wool rearer to end consumer which aims to enhance the quality and increase the production during 2017-18 and 2019-20.

• The Cabinet Committee on Economic Affairs (CCEA), Government of India has approved a new skill development scheme named Scheme for Capacity Building in Textile Sector (SCBTS) with an outlay of Rs 1,300 crore (US$ 202.9 million) from 2017-18 to 2019-20.

References: Ministry of Textiles, Indian Textile Journal, Department of Industrial Policy and Promotion, Press Information Bureau, Union Budget 2017-18.

4.Operational Performance

During the current period, your company has shown decrease in revenue to the extent of Rs. 5524.45during FY 2017-18 to Rs. 5018.48 Lakhs during FY 2018-19. PAT has shown and decreases from Rs. 8.06 lacs during FY 2017-18 to Rs. 5.07 lacs during FY 2018-19.

5. Outlook

Indian textiles industry is a well-established with showing strong features and a bright future. In fact, the country is the second biggest textiles manufacturer worldwide, right after China. Similar force is demonstrated in the cotton production and consumption trend where India ranks just after China and USA. The textiles manufacturing business is a pioneer activity in the Indian manufacturing sector and it has a primordial importance in the economic life of the country, which is still predominantly based on the agro- alimentary sector. Employing around 35 million people, textiles industry stands as a major foreign currency revenue generator and further proves it in its 14% share of industrial production and the 16% of export revenues it generated.

Textiles industry is not limited to manufacture and export of garments. The success of Indian textiles lies in effective vertical integrations policies which have helped operators in taming the processes which while lying beyond simple manufacturing exercise do have a serious impact on it, for example, raw material treatment. Thus, cotton, jute, silk or wool and even synthetic material are also produced by this industry to complement and strengthen the garments manufacturing industry. Almost one quarter of the worlds spindle 74 activities is hosted in India, again positioning itself just after China. Looming is another important element that accounts for significant activity in this industry; in fact, it takes an impressive 61% share including handlooms. The country is also significant textiles fiber and yarn manufacturer on the world scene, taking on its own a 12% share of the worlds production volume. India ranks on the second place as regards in production of silk and cellulose fiber and yarn whilst standing on the fifth position when it comes to synthetic fiber and yarn.

In that view, many manufacturing companies in India are rushing towards expansion and modernization options. Manufacturers are having recourse to fund raising programmes pushing EPS to higher growth, dissolving equity on its way. Business collaborations with foreign players, creation of buying offices and Governments effort to enhance quality production and export are many visible signs of Indians coming into force on the global market.

6. Risk & Concerns

The Company is mainly exposed to external risks in the form of reduction in value of its investments and fall in returns due to dip in the investee companys performance. The Company is also exposed to the fluctuations of economy and industry cycles / downturns.

7. Adequacy of Internal Control System

The Company has adequate internal control systems for the business processes in respect of all operations, financial reporting, compliance with laws and regulations etc. The management information system forms an effective and sound tool for monitoring and controlling all operating parameters. Regular internal audits ensure that responsibilities are executed effectively. The Audit Committee reviews the adequacy of internal controls on regular basis.

8. Human Resource Development

The Company firmly believes that motivated and empowered employees are the cornerstone of competitive advantage. The Companys employee value proposition is based on a strong focus on employee development, providing a satisfying work environment, performance appraisal and counseling and appropriate empowerment.

The Company continues to maintain and enjoy a cordial relationship with its employees, providing positive environment to improve efficiency with regular investments in upgrading the knowledge and skills of the employees.

9. Cautionary Statement

The Statement in this Management Discussion and Analysis report, describing the Companys outlook, projections, estimates, expectations or predictions may be "Forward looking Statements" within the meaning of applicable securities laws or regulations. Actual results could differ materially from those expressed or implied.

For and on behalf of the board of directors
Sunil Kumar Malik
Managing Director
Place: Delhi DIN: 00143453
Date: 31.08.2019 159, GaganVihar, Delhi-110051