Emtex Industries India Ltd Management Discussions

EMTEX INDUSTRIES (INDIA) LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS The Union Government has been extending support to Textile Industry, in view of its importance in the overall context of employment generation, foreign exchange earnings and tax revenue for the Government. The industry directly employs over 35 million people and contributes 14% of total industrial production of the country. The industry has earned 17% of Indias foreign exchange earnings. The employment potential of this sector is so vast that it is estimated to provide additional employment to 6.5 million people during the Eleventh Five Year Plan. It is heartening that budgetary provision for Technology Up-gradation Fund (TUF) has been increased and the DEPB Scheme has also been extended up to March, 2011. But, there is an element of suspense in the ad hoc-ism, which needs to be addressed by the Union Govt. Governmental support, encouragement and concerted efforts by the Industry are called for to register steady increase, both in domestic production and share in international trade which presently is at a low level. PERFORMANCE OVERVIEW: The company was not able to exploit the business opportunities, as working capital limits with banks remained frozen for the past few years. The revised DRP cum OTS submitted to Operating Agency on 17/12/2009 is taken as the basis for settling the dues of the company. DIVISION-WISE PERFORMANCE: The company has only two divisions, namely Textiles and Chemicals. The performance of the divisions is discussed below: TEXTILE DIVISION: The company has been striving to improve the productivity and optimization of stenter-wise utilisation of plant capacity. Effective steps are also being taken for cost reduction. Positive results would surely emerge especially with settlement of dues of secured creditors as discussed above and availing of working capital to improve the liquidity position. We also will reenter exports arena once adequate working capital is tied up, without which we will not be able to stick to exacting production schedules of overseas buyers. CHEMICAL DIVISION: QUIMICA: As stated we felt it prudent to close down the operations of this division until situations improve. COMPANY PROSPECTS The company has been in the business of textile trade and processing for the past three decades, thus gaining very valuable experience and expertise. The company is well equipped with all required machineries to process all kinds of fabrics and has expertise to meet most demanding specifications according to changing fashions in textile fabrics. But, absence of working capital stands in the way of exploiting them. Once the OTS is implemented and working capital is availed of, the operations would start generating profit with the help and involvement of our skilled and competent people. The companys products are still in demand in the international market and therefore the brand equity of the company remains unaffected. OPPORTUNITIES The Union Government has taken a series of measures to support the textile sector in the country. Your company has good processing facilities, though requiring up-gradation and is committed to avail of opportunities for development of business. With Govt.s support, we are sure to go ahead taking advantage of every opportunity, subject to removal of the hindrances stated above and getting required support from the Govt., BIFR, lenders and banks. RISK MANAGEMENT The Company is subject to usual vagaries of international business risks, exchange fluctuation, influence of other internal and external factors affecting any business in general. FOREIGN CURRENCY RISKS The Company has plans to do direct exports after the OTS is implemented. The exports are usually in US$, which currency, of late is showing wide fluctuation. We shall take a median rate for fixing the prices, situation permitting and thus cover the risk to a great extent. We do not import any raw material / consumables. Hence, foreign currency fluctuation risk is limited to the foreign currency transactions relating to exports. DOMESTIC COMPETITION The Company faces competition from both organized and unorganized sectors. As domestic sales are very low, it is not considered a serious issue. The contacts and relation with overseas clients of yester years are maintained and it would be only a question of time and efforts to revive them and restart business. TECHNOLOGICAL UPGRADATION The company has not been able to take advantages of Technological Up- gradation schemes, as it has been a sick unit with all limits frozen by banks and financial institutions. When these financial constraints are removed and its revised DRP is implemented, the company hopes to make investment to upgrade its machineries over a period of time. CAUTIONARY STATEMENT Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be considered as Forward Looking Statements within the meaning of the applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied.