global knitfab 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 INDUSTRY IN INDIA- STRUCTURE AND DEVELOPMENT

Indias textile sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to Indias exports. The textile industry is also labor intensive and is one of the largest employer. The textile industry has two broad segments. First, the unorganised sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. The second is the organised sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale.

India was the largest producer of cotton in 2016-17. India accounts for good percentage of the worlds production of textile fibres & yarns (largest producer of jute, 2^nd largest producer of silk & cotton; & 3^rd largest in cellulosic fibre). Fabric production in the country rose to millions in FY -2017. The industry is the second largest employer after agriculture, providing employment to over millions of people directly and indirectly. The Indian Textile Industry contributes a good percentage to Indias Gross Domestic Product (GDP), and overall Index of Industrial Production (IIP).

The Indian Textiles Industry has an overwhelming presence in the economic life of the country. Apart from providing one of the basic necessities of life, the textiles industry also plays a vital role through its contribution to industrial output, employment generation, and the export earnings of the Country.

OPPORTUNITIES

The most significant change in the Indian textile industry has been the advent of man-made fibres (MMF). India has successfully placed its innovative range of MMF textiles in almost all the countries across the globe. The future outlook 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.

Opportunities available to the Company in the present scenario, which can be seized for the benefit of the Company and ultimately to the stakeholders, can be summarized as under:

1. As of November 2016, the government has extended the duty drawback facility on all textile products & increased the rates in some cases for 1 year to boost exports in the sector.

2. In the Union budget, a good amount has been allocated to the Ministry of Textiles in order to support various schemes covering the textile industry.

3. Indias home textile industry is expected to expand at a Compound Annual Growth Rate (CAGR) Indian home textile industry (USD billion) of 8.3 per cent during 2014–21 to USD8.2 billion in 2021 from USD4.7 billion in 2014.

4. Capacity built over years has led to low cost of production per unit in Indias textile industry; this has lent a strong competitive advantage to the countrys textile exporters relative to key global peers.

5. Indias growing population has been a key driver of textile consumption growth in the country.

6. The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand

7. The sector is expected to reach USD226 billion by FY-2023

8. Population is expected to reach to 1.34 billion by FY-2019

9. Urbanization is expected to support higher growth due to change in fashion & trends.

Some of initiatives taken by government to further promote the industry are as under:

1. Subsidies on machinery and infrastructure:

a) The Revised Restructured Technology Upgradation Fund Scheme (RRTUFS) covers manufacturing of major machinery for technical textiles for 5 per cent interest reimbursement and 10 per cent capital subsidy in addition to 5 per cent interest reimbursement also provided to the specified technical textile machinery under RRTUFS. b) Under the Scheme for Integrated Textile Parks (SITP), the Government of India provides assistance for creation of infrastructure in the parks to the extent of 40 per cent with a limit up to Rs 40 crore (US$ 6 million). Under this scheme the technical textile units can also avail its benefits. c) The major machinery for production of technical textiles receives a concessional customs duty list of 5 per cent.

THREATS

Based on review of the textile market situation and level of rivalry present in the domestic market, following threats might be present in the market, which can hinder growth of the revenue of the Company:

1. Intense competition between established brands and private label brands.

2. 100 per cent FDI (automatic route) is allowed in the Indian textile sector.

3. Low cost substitute products from countries like Pakistan and Bangladesh.

4. Significant presence of small suppliers has reduced the bargaining power.

5. Major clothing brands have better bargaining power over textile manufacturers, as the product differentiation is low and number of players are high and fragmented.

DISSCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and applicable accounting standards issued by the Institute of Chartered Accountants of India. The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements forming part of this annual report.

INTERNAL CONTROL SYSTEM

Given the magnitude and nature of its business, the Company has maintained sound and commercial practice with an effective internal control system.The system ensures that all transactions are authorized, recorded and reported correctly to safeguard the assets of the Company and protect them from any loss due to unauthorized use or disposition. The adequate internal information system is in place to ensure proper information flow for the decision-making process. The Company also has well-established processes and clearly defined roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedures specific to the respective businesses, adherence to which is strictly ensured. Internal audit is carried out frequently to create awareness and to take corrective actions on the respective units or areas, which need rectification. These reports are then reviewed by the management team and the Audit Committee for follow-up action.

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 Companys 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 Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys 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.

	For and on behalf of the Board of Directors
	Global Knitfab Limited
	Sd/-
Date: 06/09/2017	Ashwani Gupta
Place: Chandigarh	Managing Director