Hindoostan Spinning and Weaving Mills Ltd merged Management Discussions

A. BUSINESS SEGMENT - TEXTILES

Industry Structure & Developments

The Indian textile industry saw a year filled with opportunities as well as challenges. Instability of raw material and fabric prices seems to have become a standard characteristic of the industry. Domestic demand for fabrics was healthy for most of this year. The export markets also showed improved trends for our Company and we have capitalized on the opportunities.

The last quarter of the year saw a significant rise in fabric as well as raw material prices. The increases in fabric prices were more than that of raw material, which has benefited the Company by way of higher margins.

The textile industry on the whole has shown good potential. However, the road to success will depend on diversification and the ability to respond quickly to the changing market scenarios. The Company is well placed to participate in the opportunities that the industry has to offer.

Opportunities and Threats

The future of the textile industry is linked to the growth of India. It can be assumed that as India will see steady growth so will the consumption of textiles. Though volumes are bound to be good in commodity products, their margins will remain under pressure. Finding and penetrating niche product areas will present good opportunities for better margins in the years to come.

The ever rising power and fuel costs and the increase in labour costs are significant threats to the Company. Alternative power possibilities and automation of processes need to be given importance to overcome these potential threats. Global competition particularly from Pakistan and China and Preferential trade agreements with EU nations have been putting pressure on exports and fast action from the Indian government on these lines is imperative for sustainability of exports.

Risks and Concerns

Government policies are critical to the success of the textile industry and need to be aimed towards the long term sustainability of the Indian Textile Industry. High volatility in raw material prices has become a hindrance to long term planning particularly for exports and will be an ongoing concern which will need to be regularly addressed. The sharply rising energy price is another major concern faced by the industry today as well as in the years to come.

The Company is continuously focused on addressing these concerns by way of improving operational parameters, regular energy saving exercises and effective raw material procurement and sales strategies while never losing sight of superior service to our customers.

Outlook

The future outlook of our Company looks positive. The Company plans to continuously invest in new machineries, a skilled workforce and establishing a stronger goodwill in the market. The continued focus on delivering quality products to our customers with commitment and timeliness as well as diversification and value added products will help the Company to grow steadily and maintain healthy margins.

Domestic consumption on the whole has a positive outlook at the present time, but will be dictated by the behavior of raw material prices and threat of cheap imports in the near future. The Company is also focused on capturing key international markets but much depends on trade policy support from the government.

The Company continues to focus on its core values viz. Versatility, Quality and Commitment.

B. BUSINESS SEGMENT - ROLL MANUFACTURING

Industry Structure and Development

The year under review was a fairly stable year for the textile machinery industry. As a large part of the segments products cater to the textile industry, the fluctuations in demand also move similarly. Considering a steady growth pattern for the textile industry, we expect our customers to increase their capacities gradually.

The export market has shown good promise and has a healthy demand for Calendar Rolls. Capitalizing on these overseas opportunities will be a key factor in the years to come.

opportunities and Threats

The Company has opened an additional roll manufacturing facility in Karad with expanded capacity and modern machinery. This should enable us to increase domestic market share and more importantly that in the international market.Value added rolls for the steel and automotive industry as well as improvement of our current core product range will be crucial for success in the future. Continuous focus on customer needs and reseach and development will enable us to capitalize on growth opportunities

Maintaining quality standards and the highest levels of customer service are the biggest challenges which the Company needs to meet. Training and retaining of skilled manpower will also play a key role. The management is continuously taking steps to ensure customer satisfaction and building our goodwill in the market.

Risks and Concerns

Although the business operates in a niche industry segment, its competitors, both domestic and international are of constant concern. Market penetration, maintenance of quality and superior customer service need to be maintained to mitigate risks of losing market share.

outlook

With the establishment of the new factory with improved technology and processes, the Company looks forward to improve quality and lower costs for its products, which should improve its position in the market. Focus on new product development and research and development will enable the Company to capitalize on the domestic and international opportunities and improve its performance.

C. REVIEW AND ANALYSIS

i) Financial Performance

The financial performance of the Company has been good despite the disruption due to the labour strike. The previous modernization and expansion plans have helped the Company strengthen its position in the market. The Company continues to focus on its core products and strong operational principles to sustain its growth. Flexibility to adapt quickly and strategic sale/purchase will be a key to success in volatile scenarios.

During the Year under review, Revenue from Operations is Rs. 106.44 crores as compared to Rs. 102.72 crores in the Previous Year. The segment wise details are as under:

		Rs.in crores
Segment	Current Year	Previous Year
Textiles	99.79	95.89
Calender Roll	6.65	6.83
	106.44	102.72

The Export turnover on FOB basis is Rs.16.56 crores as against Rs.5.37 crores in the previous year.

Operational margins in Textile unit have improved mainly on account of higher sales realisations, improving Productivity, Procurement Cost, reductions in rejections and Product Mix as per market demand.

The roll manufacturing business has had a transitional year with focus on its new manufacturing plant at Karad. While production for this year was similar to that of last year, the additional costs of putting up of the new facility has affected profitability. The new plant has been erected and production began towards the end of the year. The outcome of this initiative will be seen in the next year and should improve both the top as well as bottom line for the business.

ii) Profitability

Overall Profit before Depreciation, Interest and Tax has improved at Rs.10.19 crores in the current year as compared to Rs.2.44 crores in the previous year. Net Profit before Tax of Rs.5.41 crores as compared to Loss of Rs.1.86 crores in the previous Year.

D. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate Internal Control Systems to ensure that all its assets are properly safeguarded. The systems and procedures of the Company are designed to ensure proper internal controls to give true and accurate information to the management. The management continuously reviews the Internal Control Systems and procedures to ensure smooth and efficient conduct of business. Various economic measures and improvements in certain areas suggested by Internal Auditors are also discussed from time to time in the Audit Committee Meetings for all round improvement in the working of the Company.

E. HUMAN RESOURCES/INDUSTRIAL RELATIONS

The Company had around 462 employees as on March 31, 2013. Occupational health, safety and environment were given due importance through training and awareness programmes. Measures for safety of employees, their training, welfare and development, attracting and retaining talent continued to receive top priority. Functional trainings for plant employees at Karad were undertaken during the year towards competency building. HR activities are now becoming more focused and peaceful and healthy relations through regular interaction with recognized union/ workers is on topmost priority. The management and union have equally recognized the need of dialogue and flexible thinking to avoid any labour disruptions in future.

F. CAUTIONARY STATEMENT

The statements made in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include availability of raw materials and their prices and domestic and global demand and supply conditions, changes in Government regulations and tax policies, economic development within India and so many other incidental and relevant factors.

The Company assumes no responsibility in respect of the forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.