Divinus Fabrics Ltd Management Discussions.

We submit herewith the "Management Discussion and Analysis Report" on the business of the Company as applicable to the extent relevant.

TEXTILE PRODUCTS

• GLOBAL TEXTILE INDUSTRY

The global textile and apparel industry is continuously evolving. Over the years, it has witnessed multiple shifts in consumption and production patterns, including shifts in geographical manufacturing hubs, as the industry is driven by the availability of cheap labour.

The textile and apparel trade is predicted to grow at a CAGR of 3.7% during the period 2018-28. During this period, the increase in apparel trade is expected to be at a CAGR of 4.5% and textiles at a CAGR of 2.5%.

Even though apparel industry is dominated by developed markets of EU and the US, the emerging markets led by countries such as India, China, Russia and Brazil are becoming consumption markets. Simultaneously, India and China have strong textile manufacturing base, and thus are emerging as both sourcing and consuming nations.

Currently, China holds the largest share in textile and apparel global trade. It has vertically integrated supply chain from production of fibre to weaving of fabric and garmenting. The sector also has the capability to manufacture all categories of products and a conducive ecosystem to provide complete service offering to brands and retailers. However, the increasing labour and energy costs have mitigated the international competitive advantage of China to some extent. The global apparel manufacturers are finding Bangladesh, Vietnam and India as competitive markets over China.

• INDIAN TEXTILE INDUSTRY

India’s textiles industry is among the oldest industries in the country dating back several centuries. It is one of the largest contributors to the economy accounting for ~4% of the GDP. It is the second largest contributor towards employment generation, after agriculture, contributing 10% to the country’s manufacturing, owing to its labour-intensive nature. The industry is characterised by its robust vertical integration in almost all the sub-sectors. The textiles and apparel industry constitutes ~14% of the total exports of the country. India is the second largest producer and exporter of textiles after China and fourth largest producer and exporter of apparel after China, Bangladesh and Vietnam. The mitigation of the repercussions of currency fluctuation remains a challenge for the industry. Exports have been a core feature of India’s textile sector. Indian textiles and apparel exports were estimated at $39 billion and is expected to grow at a CAGR of 7.5% over the next decade to reach $76 billion by 2028. The fundamental strength of India’s textile industry is its strong production base with a wide range of fibres and yarns that include natural fibres like cotton, jute, silk and wool; and synthetic and manmade fibres such as polyester, viscose, nylon and acrylic.

• OPPORTUNITIES

Our strengths revolve around our penchant for innovation and consistent product development with the aim of creating a clear differentiation from competition, our strong passion for sustainability and the circular economy, our thought leadership in creating intellectual property and our ability to partner with multiple agencies to realise our four pillar strategy.

Our key weakness at this point in time is the limited breadth of our product basket and our lack of diversification within the realm of Home Textiles. We are actively evaluating the possibility of moving into the manufacture of related product categories and hence meaning more to end customers by offering a ‘one stop shop’ opportunity. The risk of foreign exchange fluctuations is a reality in this business, but with the robust mechanics of our treasury department, we are able to take proactive steps to mitigate potential risks.

• INTERNAL CONTROLS AND RISK MANAGEMENT

Our Company has a well-established framework of internal controls across all the businesses and in all the areas of its operations. The Company has adequate monitoring procedures and has appointed competent personnel to safeguard its assets, protect loss from unauthorized use or disposition ensuring reliably authorized, accurately recorded and transparently reported transactions. Establishment of highly efficient management information and reporting systems combined with robust corporate policies form the overall control mechanisms.

The Company conducts its business with integrity, high standards of ethical behaviour and in compliance with all applicable laws and regulations that govern its business. The Audit Committee of the Board of Directors reviews the internal control systems on a regular basis to improve their effectiveness besides verifying statutory compliances. The Audit Committee meets periodically to discuss findings of the internal auditors along with the remedial actions that have been recorded or have been taken by the management to address weaknesses of the system. A compliance management tool has also been adopted recently to ensure timely compliance with legal, financial, environmental, labour and other relevant regulations.

• HUMAN RESOURCE DEVELOPMENT

The Company regards its human resources as amongst its most valuable assets and proactively reviews policies and processes by creating a work environment that encourages initiative, provides challenges and opportunities and recognizes the performance and potential of its employees attracting and retaining the best manpower available by providing high degree of motivation.

Your Company believes in trust, transparency & teamwork to improve employees productivity at all levels.

• CAUTIONARY STATEMENT

The management discussion and analysis report containing your Company’s objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operation include raw material availability and prices, cyclical demandand pricing in the Company’s principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India andthe countries with which the Company conducts business and other incidental factors.

On behalf of the Board of Directors
For DIVINUS FABRICS LIMITED
Sd/-
GAGAN ANAND
Date: 13.08.2019 (DIN: 06957651)
Place: Delhi Managing Director