birla cotsyn india ltd share price Management discussions

1. OVERVIEW OF INDIAN TEXTILE INDUSTRY Background

Indias textiles sector is one of the mainstays of the national economy. It is also one of the largest contributing sectors of Indias exports. The textiles industry is labour intensive and is one of the largest employers.

The textile industry has two broad segments, namely handloom, handicrafts, sericulture, power looms in the unorganized sector and spinning, apparel, garmenting, made ups in the organized sector.

2. OPPORTUNITIES AND THREATS

Opportunity

Low per-capita domestic consumption of textile indicating significant potential growth. Indias global share is just 5%. Companies need to concentrate on new product developments. Increased use of CAD to develop designing capabilities and for developing greater options.

Threats

Competition is not just in exports, but is also likely within the country due to cheaper imports of goods of higher quality at lower costs. Standards such as SA-8000 or WARP have resulted in increased pressure on companies for improvement of their working practices. Alternative competitive advantages would continue to be a barrier.

3. SEGMENT-WISE PERFORMANCE

Segment-wise performance of the company for the Financial Year ended 31st March, 2018 (Standalone) is given below:

	(Amount in Rs.)
Particulars	Textile - Yarn
Income	1,130,789,940
Expenditure	1,019,943,809
Depreciation	136,212,332
Exceptional Item	-
PBIT	(25,366,201)
FOB Value of Exports	91,395,162

4. OUTLOOK

The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade. The organized apparel segment is expected to grow at a compound annual growth rate (CAGR) of more than 15 per cent over a 10-year period. The textiles sector has witnessed a spurt in investment during the last five years.

5. RISK & CONCERNS

1. The Company is exposed to risks from market fluctuations of foreign exchange, interest rates and crude oil prices.

2. The Company is exposed to the risk of price fluctuation on cotton as well as finished goods in all its products. Unexpectedly increase in the rates of raw cotton due to speculative activities, increase in labour rate and power rates by Maharashtra Government are increased the risk. Poor demand of cotton yarn in domestic market as well as supply pressure due to less exports of cotton yarn to China are adversely affected the Company and the yarn prices prevailing, could not able to absorb the additional expenditure. These risks are not significant considering the inventory levels and normal co-relation in the price of cotton and finished goods.

3. Apart from the risks on account of interest rate, foreign exchange and regulatory change, various business of the company are exposed to certain operating business risks, which are managed by regular monitoring and corrective actions.

6. INTERNAL CONTROL SYSTEMS

The Company has an intricate system of internal control procedure commensurate to its size and nature of the business. This internal control system ensures optimal use of the Companys resource and provides for well administered policies, guidelines, authorization and approval procedures.

The Company has appointed internal auditor who carries out audit of accounts, internal control systems & procedures on regular basis. They are well guided by the Audit Committee of the Board of Directors, who approves their audit plans, reviews their report and also make necessary suggestions for its further improvements.

7. FINANCIAL PERFORMANCE

The Companys revenue from operations (Excluding the other Income) for the financial year ended 31st March 2018 is Rs. 1,029,428,422/- as against Rs. 956,284,937/- during the period 2016-17. Profit before tax for the financial year ended 31st March 2018 has resulted in a loss of Rs. 889,433,660/- as compared to Rs. 882,669,595/- during the period 2016-17 due to the deteriorating conditions prevailing in the Textile industry and also due to provision of non recovery of capital advances/ writing off capital work in progress in respect of projects which could not be implemented.

8. HUMAN RESOURCES

The Company has focused on building the organization for developing human resources. More attempts are now being given to develop a better structure in this important area with a long term future in mind.

The Company has taken various initiatives towards recruitment and retention of the best talent within and outside the industry. It encourages employees to take part in various internal and external training programs. This along with the rewards & recognition gives opportunity to talented employees to take higher responsibilities in the organization.

As in the past, the industrial relation continues to remain generally cordial at all locations of the Company.

The company has employee strength of around 1100.

Health & Safety:

The Company continuously focus on the health & safety of all its workers & staff. Adequate safety measures have been taken at all the plants for the prevention of accidents or other untoward incident.

The necessary medical facilities are available for the workers, staff and their family members to enable them to maintain good health.

9. CAUTIONARY STATEMENT

Some of the statements contained within this report may be forward looking in nature and may involve risks and uncertainties. Actual Result and Outcomes in future may vary materially from those discussed herein. Factors that may cause such variances include, but are not limited to management of growth, market acceptance of Companys product and services, risk associated with new product version, dependence on third party relationship and the activities of competitors.