Euro Leder Fashion Ltd Management Discussions

The Management Discussion and Analysis Report on the business of the Company for the year ended 31^st March, 2024 has been attempted to include discussion on all the specified matters to the extent relevant or within limits that in our opinion are imposed by the Companys own competitive position.

The Company manufactures leather garments exclusively for export and has its factory at Pammal, Uttiramerur and Vadadavur. All the units are self-sufficient to perform their duties and functions. The commitment of the Company towards quality and customer orientation reflects in its well-established clientele.

The Leather industry in India holds a significant place in the Indian economy. This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the Country. India is the second largest exporter of leather garments. Added to this are the strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and the dedicated support of the allied industries.

The major production centers for leather and leather products in India are located in the States of Tamil Nadu - Chennai, Ambur, Ranipet, Vaniyambadi, Vellore, Pemambur, Trichy, Dindigul and Erode apart from other states like Uttar Pradesh, Maharashtra, Punjab, Karnataka, Kerala, Delhi and Rajasthan.

During the Financial Year 2023-24, your Company achieved a turnover of Rs. 3204.15 lakhs and profit of Rs. 50.10 lakhs. The export sales was Rs. 3130.15 lakhs as against of Rs. 3858.19 lakhs of FY 23. Detailed report on financial performance of the Company is provided in the Directors Report. The Company has no term loan outstanding as on March 31, 2024.

The Company has only one segment i.e. Leather garments and related products and the performance is already captured in Directors Report and Financial Statements

The Company has adopted a time-bound policy in the short term, to balance production to level which could avoid built up inventory and has taken special measures to bring down stocks to optimum levels. However, in spite of the operating gains the margins have been under strain for the following reasons:

1) Increase in major input costs particularly of leather.

2) Globally leather garments have registered a decline in realization and this affected India also.

3) Average price realization per garment to Rs.5744/- during the year. Buyers domination was pronounced and our buyers abroad bargained hard in view of the falling Indian Rupee against the Euro and U.S.Dollars.

4) Freight rates and selling expenses rose appreciably, further pushing the costs.

These factors constitute the threats faced by the company.

The India Leather Market was valued at USD 6.8 Billion in 2020 and is projected to reach USD 10.3 Billion by 2026, growing at a CAGR of 7.6% during the forecast period 2021-2026. The leather industry is one of Indias oldest industries with a long heritage dating back centuries, and it plays an important role in contributing to the countrys economy both through exports and employment generation. It has been estimated that this sector employs 2.5 million people directly or indirectly across various segments such as manufacturing, production, tanning, retailing etc., making it one of the largest employers in India after agriculture

Increasing Demand for Leather Goods: Rising disposable income levels among consumers coupled with changing fashion trends have propelled demand for leather-based goods globally including from countries like China; this is expected to drive growth of the market over the next few years. In addition, there are numerous initiatives taken by local as well as regional government authorities encouraging production & sales of leather goods which will further fuel growth prospects for this market in near future

The prices associated with raw materials used in production process is quite expensive which ultimately affects profitability margins resulting reduced revenue opportunities companies operating within space creating challenge them

Consumers increasingly aware environmental problems related use natural resources manufacture commodities including animal hide, they looking ecofriendly alternatives instead of traditional methods sustain their lifestyles without harming planet - thereby boosting popularity of green leather products amongst customers.

The overall impact on revenue and profitability would have been better but for the depreciating rupee, given that sales are export-oriented, while majority of raw materials are procured domestically. Operating margins are expected to remain range bound at 6 to6.5 per cent over the medium term.

Given increased raw material cost, inventory holding has become costlier. Additionally, due to lower cash generation, working capital requirement at the sector level could be 15 to20 per cent higher in the near term. However, demand being sluggish, capacity expansion will be on the backburner. Consequently, long-term debt addition should also be low.

The Companys strength lies in the quality of its products and the promising looks continued patronage of its buyers. However, the realization per garment is likely to be low. The peak season is due to start shortly. The order position is expected to be healthy by FY24-25 and the Company should register a healthy improvement in its performance by end of FY 2025.

Risks and Concerns Economic and political factors, both national and global that are beyond control and factors force majeure may directly affect performance of the Company as well as the Leather industry. These factors include interest rates and its impact on availability of retail space, rate of economic growth, fiscal and monetary policies of governments, inflation,

deflation, consumer credit availability, consumer debt levels, tax rates and policy, unemployment trends, terrorist threats and activities, worldwide military and domestic disturbances and conflicts, pandemics, and other matters that influence consumer confidence and spending.

The Company is subject to risks arising from material price and exchange rate fluctuations which may adversely affect our financial performance. The availability and retention of talent, product quality management, innovation and new product development, rapidly changing consumer preferences, impact of strategic and marketing initiatives, data security etc. may affect your Company.

Your Company monitors its major risks and concerns at regular intervals. Appropriate steps are taken in consultation with all the concerned including the Audit Committee and the Board to identify and mitigate such risks.

The Company is conscious of the need for environmentally clean and safe operations to ensure safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources.

Over the last year, Human Resources have taken various initiatives for employee benefit and retention. The initiatives undertaken by the Human Resources Department is always aimed at operationalizing the companys Vision and long term & short term strategy. The relationship of your Company with employees has been cordial during the year.

There were no further or typical areas of risks or concerns outside the usual course of business foreseeable at this time. Internal control systems had been found to be adequate and are continuously reviewed for further improvement.

Our team is committed to the Boards dictates on standards of conduct as well as good governance and exercise of due diligence including compliance of all relevant laws and regulations. Our appreciation is due to all employees, gratefulness to our board, shareholders and Banks.