Binny Mills Ltd Management Discussions.

(Pursuant to clause 49 (VIII) (D) (1) of the listing agreement)

This report is part of the Directors Report

Economic scenario

Global economic activity has been witnessing a broad based cyclical upturn. The acceleration in global trade outpacing global growth is a welcome development. Inflation remained below policy target levels in many key economies despite rise in some commodity prices and improving demand outlook.However, renewed fears of protectionism, retaliatory actions and trade wars pose a major challenge to the global economy.

After languishing for five consecutive quarters, economic activity in India is quickening. Growth is strengthening as indicated by strong sales growth by corporations, depleting finished goods inventories and restart of investment in fixed assets by corporations and expected record food grain output.

As per the second advance estimates report dated 28thFebruary 2018 of the Central Statistics Office (CSO), the growth in GDP during 2017-18 is estimated at 6.6% ascompared with the growth rate of 7.1% in 2016- 17. Among the sectors that are estimated to register a growth rate of over 7% in the year 2017-18 is the trade sector.

Although export growth slowed down to less than 3 per cent in H2:2017-18 from 6.2 per cent in 1-11:2017- 18, there wasa bounce-back in November 2017 and December 2017 with the easing of implementation hurdles associated with the GST.

The current account deficit (CAD) increased to 2.0 per cent of GDP in Q3:2017-18 from 1.4 per cent of GDP a year ago. The widening of CAD on a year-on-year basis was primarily on account of higher trade deficit.

Opportunities and threats

The Company is engaged in retail sale of textile products. The Companys future relies on the Textile industrys growth.

Government Initiatives

Prime Minister, at the "Textiles in India 2017" exhibition had stated that the time is right for India to direct its focus on textiles exports and stressed the need for innovation and research in textiles for the industry to grow and tap new markets.Moreover, he listed the governments achievements with their industry-friendly initiatives, abolishing 1,200 "outdated laws" and carrying out 7,000 reforms and thus making India more attractive for investments.

The Textile Commissioner has stressed the need to utilise the various schemes launched by the Government, noting that "Rebates on state levies have been introduced to encourage exports. There is an additional 10% subsidy for the garment and made up segments, which means the home textile industry will get an effective 25% capital investment subsidy on the new machines they bring in, leading to efficiency and modernisation of the sector. Furthermore, the subsidies have proved to be very beneficial for the sector and has led to increases in employment and has attracted huge investment."

In order to strengthen its global competitiveness and to support the overall growth of the Textile Industry, Indias GST Council has kept a majority of the industry under the 5% GST slab. The government has also reduced the tax on all job works like weaving, cutting, knitting and embroidery in the textile sector to 5% from the previous rate of 18% as requested by CMAI. Confederation of Indian Textile Industry (CITI) has stated that the reform is a relief for small job work manufacturers in the Textile Sector and will allow the free flow of business across the value chain. Nevertheless, more rate cuts are required from the Government and the GST council for the industry to develop to its full potential.

The Ministry of Textiles has also set up institutional mechanisms to help the textile industry achieve its full potential of production, exports and employment. This includes a Knowledge Network Management System on Product Diversification, Inter-Ministerial Synergy Group on Man-Made Fibre (MMF) and a Task Force on Textiles India involving relevant Ministries, State Governments and Industry partners.

Indias textiles industry offers a vast variety of investment options. The country is an attractive hub for textile production due to the presence of the entire value chain fortextile production from raw materials like cotton, silk, jute, wool and synthetic fibre to spinning, weaving, knitting and apparel manufacturing capacities to skilled and low cost labour. Along with the aim of increasing employment and exports, the government is working towards modernising machines and adding state-of-the-art facilities, which invites foreign investments with innovative technologies. The governments focused and favorable policies and schemes support the steady growth of the sector.

The key initiatives announced in the Union Budget 2018-19 to boost the textiles sector are listed below:

• The Government proposes to increase the financial expenditure under the comprehensive textile sector package for apparel and made ups segments from Rs 6,000 crore to Rs 7,148 crore.This initiative will not only promote exports but also increase production in these 2 labor intensive sectors.

• The Government also proposes to increase the allocation of funds under the TUF Scheme from Rs. 2,013 crores in 2017-18 to Rs. 2,300 for 2018-19,

• The government proposes to contribute 12% of the wages of new employees in EPF for all the sectors for next 3 years with the extension of fixed term employment in all sectors and reduction in women employees contribution to 8% for first three years from 12 %. All these are positive steps forthe textile sector. This proposal will create employment opportunities especially for women in textiles sector and contribute significantly towards "Make in India" campaign".

• The government proposal to reduce the income tax rate to 25 percent will immensely benefit the micro, small and medium enterprises who have reported turnover up to Rs.250 crore in the financial year 2016-17.

The future forthe Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand.

The threats to the textiles industry are in the form of lack of enough skilled workforce and urgent need for labour reforms in this sector. There is a need for attracting more investments in the industry. The technology up gradation of the textile mills is another area of serious concern. The biggest challenge facing the Indian textile industry is competition from the other low cost neighbouring countries which attract more business from the international market because of lower production costs, ease in doing business and easier trade routes, according to an industry expert.

Risks and concerns

The company is engaged in trading business. Hence, the risks associated with the stiff competition in retail textile business are the major risk for the Company. But, the company has built up reputation among the buyers and has created a brand image for its products. Hence, it is confident of mitigating the effects of the risks. Internal control systems and their adequacy

The Company has proper and adequate internal control systems commensurate with its size and nature of operations, to provide reasonable assurance that all assets are safeguarded, transactions are authorised, recorded and reported DroDerlv and that all applicable statutes and corporate policies are dulv complied with.

Human Resources Development and Industrial Relations

The Company attaches considerable importance to Human Resource Development and harmonious industrial relations. There are senior and experienced professionals managing the operations of its divisions. The company takes all efforts to train its employees to make them a skilled employee. The overall industrial relations, during the year, were cordial.

Environmental protection

The Environmental Policy of your company is maintaining clean and green environment and ecofriendly atmosphere. Your company has been complying with applicable environmental regulations and preventing pollution in all operations.Your company continues to strive for energy saving and conservation of natural reserves.

Risk Management

Risk Management is an ongoing process. The Board of directors has constituted a Risk Management Committee of three members, all of whom are directors on the Board. The Risk Management Committee has approved the revised Risk Management Policy. The Board has defined the roles and responsibilities of the Risk Management Committee and has delegated the monitoring and reviewing of the Risk Management Plan to the Committee. The terms of reference of the Risk Management Committee include review of Risk Management Policy, approval of Risk Management Plan, implementing, monitoring and reviewing the Risk Management Plan.

The Company maintains Risk Register listing all the risks likely to affect the achievement of the business goals set by the Company. Significant risks are identified using a scoring methodology. The process of Risk Management includes Risk Identification and Categorization, Risk Description and Risk Mitigation. The Risk Owners are accountable to the Risk Management Committee for identification, assessment, aggregation, reporting and monitoring of the risks related to their respective areas / functions.

The key implementation areas for Risk Mitigation are as follows:

For Finance function: Treasury operations and fund transfers
For Computer systems and Data maintenance Data Security
For purchase and sales functions Credit Administration

The Company is exposed mainly to Credit Risk and Cash Management Risk in its business operations. The Company has taken over the business of erstwhile Binny Ltd along with the respective business division employees. Their expertise in dealing with suppliers and customers has helped to mitigate the Credit Risk. The sales collections at the showrooms of the Company are mainly in the form of cash. This exposes our Company to cash management risk. In order to mitigate the same, the Company ensures efficient and secured collection at its showrooms. The cash collections are deposited in the Companys bank account the next day. The Company has also adopted stringent checks and internal controls at its showrooms. At the Head Office of the Company, each days collections are monitored and reconciled on a daily basis. Such procedures and internal controls has helped to mitigate Cash Management Risk.

Cautionary Statement

This report contains forward looking statements that involve risks and uncertainties including, but not limited to, risks inherent in the Companys growth strategy, dependence on certain businesses, dependence on availability of qualified and trained manpower, economic conditions, government policies and other factors. Actual results, performance or achievements could differ materially from those expressed or implied in such forward looking statements. This report should be read in conjunction with the financial statements included herein and the notes thereto.