Dhanlaxmi Fabrics Ltd Management Discussions.

Your Directors are pleased to present the Management Discussion and Analysis Report for the year ended 31stMarch, 2018.

The Management Discussion and Analysis have been included in consonance with the Code of Corporate Governance as approved by The Securities and Exchange Board of India (SEBI). Investors are cautioned that these discussions contain certain forward looking statements that involve risk and uncertainties including those risks which are inherent in the Companys growth and strategy. The company undertakes no obligation to publicly update or revise any of the opinions or forward looking statements expressed in this report consequent to new information or developments, events or otherwise.

The management of the company is presenting herein the overview, opportunities and threats, initiatives by the Company and overall strategy of the company and its outlook for the future. This outlook is based on managements own assessment and it may vary due to future economic and other future developments in the country.

The operational performance and future outlook of the business has been reviewed by the management based on current resources and future development of the Company.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Indian textile Industry has inherent linkage with agriculture and with the culture & traditions of the country making for its versatile spread of products appropriate for both domestic and the export markets. The textile industry contributes to 10% of manufacturing production, 2% of Indias GDP and to 13% of the countrys export earnings. With over 45 million people employed directly, the textile industry is one of the largest sources of employment generation in the country.

The major sub sector that comprise the organized textile sector include the organized cotton and man-made fiber textile mill industry and manufacturing integrated unit involved in processing, weaving and printing, fabric finishing, garmenting and selling.

In keeping with goal of making Indias development inclusive and participative, the Governments central focus has been on increasing textile manufacturing by building the best in class manufacturing infrastructure, up-gradation of technology, fostering innovation, enhancing skills and traditional strengths in the textile section. Ministry of Textile has launched successful schemes such as the A-TUFS, SITP and Technology Mission for bringing together the facilities for upgrading Technology and also to strengthen technical Textile.

The Government has approved the Amended Technology Up-gradation Fund Scheme (A-TUFS) in place of RRTUFS for technology up-gradation of the textiles industry with one time capital subsidy for eligible machinery benchmark segments which have got higher employment and export potential such as garmenting and technical textiles subject to cap of 30 Crores segments such weaving for brand new shuttle less looms including weaving preparatory and processing.

SEGMENT WISE OR PRODUCT-WISE PERFORMANCE:

In the Textile Industry the Companys main business vertical is Textile Processing for both Yarn and fabric. Being an integrated unit weaving i.e. fabric making is another vertical wherein company is involved in cloth manufacturing as well as job work. Almost 50% of the turnover of the company is booked by this Division.

The other segment is energy; this business vertical is of non-conventional energy generation from wind, located in Dhule district of Maharashtra. Presently power generated through this wind energy is being sold to MSEDCL. Company is using Production of this segment as a captive consumption from this year.

OUT LOOK:

The Company is successful in maintaining the increasing trend of turnover and profit in the changing business environment, though it is influenced by internal and external factors within and outside India. Even after the hit of demonetization the company has sustained and successful in keeping its market share intact. The overall business prospects for the Company is positive and management is ready to face the upcoming challenges like GST in the financial year 2017-18. From the present stand of textile manufacturers in the industry against GST it seems that market will be little slow, this will show the impact on first Quarter turnover but we are sure that we will be stable in achieving our yearly turnover and margin in this year.

Being 25 years old unit placed within the thickly populated area at the out skirts of the Dombivali is very much thirsty for expansion and looking for sizable land parcel, Keeping this in mind, company has already booked a plot of 40,000/ - sq. mtrs. at Five Star MIDC of Kagal Industrial area of Hatkalnge Taluka in Kolhapur District. To make further investment in the said plot company is exploring possibility of bank funding.

RISK AND CONCERNS :

The Company is always devoted on its core competence stuff in yarn and fabric processing, weaving, printing activities with creative ideas in designing, by and large to cater the market demand. This has a great impact on the operational performance in all the divisions of the company and effects on cost of production. Quality production is the essence of our job work of weaving and processing division.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY :

To achieve optimum use of available resources i.e. Material, Manpower, Money and Energy Companys operating procedures and controls are in place and monitored with intense care and supervision of the staff and management. Adequate measures have been adopted by the company with upgradation of EDP system in this year with introduction of SAP based ERP along with earlier computerized accounting system Tally ERP 9,

DISCUSSIONS ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE :

Due to increasing competition an Introduction of GST regime, there is a decrease in Company turnover by 24.28% over the previous year turnover.

Particulars 2017-18 2016-17
Turnover
Processing Charges Fabric / Yarn 3240.60 3292.52
Fabrics /Yarn / Garment Sale 3787.03 5917.99
Power Sale 0.00 70.71
Total 7027.63 9281.21
Profitability
Net Profit after Taxation 156.05 251.87
Add : (Less): Loss/Profit on Sale of Fixed Asset 0.00 (10.10)
Extraordinary Expenses 0.00 0.0
Less : Income from house property 59.46 44.14
Net Profit by Operation 96.59 197.63

HUMAN RESOURCE DEVELOPMENT:

The Company believes that the human resources are vital resources in giving the Company a competitive edge in the current business environment. The Companys philosophy is to provide congenial work environment, performance oriented work culture, knowledge acquisition / dissemination, creativity and responsibility. As in the past, the company enjoyed cordial relations with the employees at all levels.

STATE OF AFFAIRS OF THE COMPANY :

In textile segment the company is having fabric process house and yarn dyeing unit at Dombivali, District Thane and weaving unit at Ichalkaranji, District Kolhapur. Fabric process house is fully equipped with latest machinery to bleach, dye, print& finish all type of textile fabric. Yarn dyeing unit is also fully equipped to bleach & dye the yarn required for fancy fabric. Weaving unit is consisting of 36 air jet looms equip to produce 36 lacs mtr per year.

In power segment the company has installed Wind turbine of 1.25 MW in Dhule Maharashtra and 2.00 MW in Nettur Tamilnadu.

CHANGE IN THE NATURE OF BUSINESS, IF ANY :

There was no change in the nature of business of the Company or any of its subsidiaries during the year.

OPPORTUNITIES AND THREATS :

The imminent opening up of the export markets without the fetters of the quota system, the strong demand for fabrics from the garment sector and the slew of policy initiatives by the government to revitalize the industry are key factors that have led to a more favourable business environment and enhanced investor interest.

The removal of mandatory duty on pure cotton will lead to increased transparency especially in the cotton yarn market. Tax compliant mills will now have a fair deal in the market as against Tax evading/exempted mills.

The opening of the doors of World markets by desalting of quotas by January 2005 is a tremendous opportunity for cost-effective and quality producers although China is expected to offer stiff competition in order to reap the opportunities.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE :

The Companys main business Segment is Textile Processing but in the year 2004-05 the Company has enter into a new segment of Power generation by installing Wind turbine of 1.25 MW in Dhule Maharashtra. Again in the year 2005-06 Company has installed 8 WTG of 0.25 MW each (total 2.00 MW) in Nettur Tamilnadu. Presently power generated through Wind is being sold to Maharashtra State Electricity Distribution Corporation and Tamilnadu Electricity Board. The Turnover and Profit figures of both the segments are shown separately in Notes to Accounts. The geographical segment is India.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY :

The Companys operating and business control procedures have been framed in order that they ensure efficient use of resources and comply with the procedures and regulatory requirements. The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that transaction are authorized, recorded and reported correctly.

DISCUSSIONS ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE :

Due to Introduction of GST in India, it has impact on our industry. The Turnover of this year has fallen down 24.28% and it result in decrease in operational profits in comparison to previous year.

Particulars 2017-18 2016-17
Turnover (Rs. In Lakhs) (Rs. In Lakhs)
Processing Charges Fabric /Yarn, Labour 3240.60 3736.07
Fabrics / Yarn /Garment Sale 3787.03 5474.44
Power Sale 0.00 70.74
Total 7027.63 9281.21
Profitability
Net Profit after Taxation 156.05 251.87

PERFORMANCE OF THE BOARD AND COMMITTEES :

During the year under review, the performance of the Board & Committees and Individual Director(s) based on the below parameters was satisfactory:

(a) Most of the Directors attended the Board meeting;

(b) The remunerations paid to executive Directors are strictly as per the company and industry policy. (c) The Independent Directors only received sitting fees.

(d) The Independent Directors contributed a lot in the Board and committee deliberation and business and operation of the company and subsidiaries based on their experience and knowledge and Independent views.

(e) The Credit Policy, Loan Policy and compliances were reviewed periodically;

(f) Risk Management Policy was implemented at all critical levels and monitored by the Internal Audit team who places report with the Board and Audit committee.

EMPLOYER/EMPLOYEE RELATIONS :

The relationship with the workers of the Companys manufacturing units and other staff has continued to be cordial. The Directors wish to put on record their sincere appreciation and gratitude for the services rendered by the workers and staff at all levels.

HUMAN RESOURCES MANAGEMENT :

We take this opportunity to thank employees at all levels for their dedicated service and contribution made towards the growth of the company. The relationship with the workers of the Companys manufacturing units and other staff has continued to be cordial.

To ensure good human resources management at the company, we focus on all aspects of the employee lifecycle. This provides a holistic experience for the employee as well. During their tenure at the Company, employees are motivated through various skill-development, engagement and volunteering programs.

As per provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is given to this Boards report. In terms of Section 197(12) of the Companies Act, 2013, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, no employee(s) drawing remuneration in excess of limits set out in said rules forms part of the annual report.

Considering the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report is being sent to the members of the Company and others entitled thereto. The said information is available for inspection at the registered office of the Company during business hours from 11 a.m to 5 p.m on working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy thereof, may write to the Company Secretary in this regard.

The Company believes that the human resources are vital resource in giving the Company a competitive edge in the current business environment. The Companys philosophy is to provide congenial work environment, performance oriented work culture, knowledge acquisition / dissemination, creativity and responsibility. As in the past, the Company enjoyed cordial relations with the employees at all levels.

FUTURE OUTLOOK :

Now days the readymade garments and online shopping trends is increasing in India due to this the demand of designer fancy fabrics will substantially increase. Your company is ready to take advantage of this increase demand of fancy fabric with the help of its weaving unit installed in Sep- 2013 and capable to produce all type of grey fancy fabrics which can be process at its most modern process house. Your Directors are hopeful for better future. The Company is proactively responding to the changing business environment and is confident of sustaining its market share by improving competitive position in the market. The overall business outlook for the Company is promising with improvement in overall economic environment. Efforts towards higher operational efficiencies shall continue. The Company continues to examine the possibilities of expansion and will make the necessary investments when attractive opportunities arise.

CAUTIONARY STATEMENT :

Statements in foregoing paragraphs of this report describing the current industry structure, outlook, opportunities, etc., may be construed as "forward looking statements", based on certain assumptions of future events over which the Company exercises no control. Therefore, there can be no guarantee as to their accuracy. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be implied by these forward looking statements.

FOR & ON BEHALF OF THE BOARD
Sd/- Sd/-
Vinod S. Jhawar Ramautar S. Jhawar Place: Mumbai
(Managing Director) (Chairman & Director) Date: 10.08.2018