ideal carpets ltd Management discussions

Management Discussion and Analysis

OVERVIEW

OVERALL REVIEW

The Company adhered to the previous years marketing policy and concentrated more on domestic market during the year as against Europe and USA during previous years. It has never compromised on the quality of its products and firmly believes in its marketing strength and skills of its work force. However the Companys growth has been deteriorated due to increased global competition in the overseas market on the one hand and availability of machine made carpets at economical price on the other hand. Further, man-made carpets being a commodity for higher segment of the society, its demand has also affected due to economic instability and overall inflation in India and abroad. Inspite of all these factors, the company has made a successful attempt in domestic market to sell its product at reasonable profit.

FINANCIAL PERFORMANCE

Particulars	2011-2012	2010-2011	% Increase/Decrease
Domestic Sales	41,971,226.00	17,959,221.34	+133.70%
Export Sales	34,542,894.00	43,571,011.00	-20.72%
Total Turnover	76,514,120.00	61,530,232.34	+24.35%
Profit/(Loss) before Tax	601,654.46	417,748.87	+44.02%
Less: Provision for tax	258,951.00	290,285.00	-10.79%
Profit/(Loss) after Tax	342,703.46	127,463.87	+168.86%

Due to increased overseas competition, there is a reduction in demand of companys products in international markets. Accordingly, export sales of the Company has been reduced by 20.72% as compared to previous Financial Year. However, inspite of stiff competition from man-made carpet from China and Korea, the company has been able to increased its domestic sale by 133.70% in comparison to previous year. Overall, the Company achieved total sales turnover of Rs. 765.14 Lacs for the year ended 31st March 2012 as compared to Rs. 615.30 Lacs of the previous year resulting into overall increase of net profit by 24.35%. It has earned profit before tax of Rs. 6.01 Lacs as compared to profit of Rs. 4.17 Lacs during previous year. The Management is keep to change its marketing and production strategies in the current year to improve its financial performance.

INTERNAL CONTROL SYSTEMS

The Company has adequate internal control procedures commensurate with the nature and size of its business. There is a proper safeguard of assets through internal control system, which prevents any wastage, loss and unauthorized use of any assets. Checks and balances are in place to ensure that transactions are adequately authorised any reported correctly. The internal audit department of the company audit activities of various departments to ensure that internal controls are in place. These are then reviewed by the Audit Committee of the Board and corrective actions are taken by the company where needed.

The companys system primarily covers the aspects such as:

1. Control over operating parameters and various factors relating to production.

2. Efficient use and protection of resources.

3. Accuracy and promptness of financial reporting.

4. Compliance with laws and regulations.

OPPORTUNITIES AND THREATS

Hand knotted carpet industry is one of the oldest industries of our nation. The craftsmanship coupled with traditional design skill of Indian weavers has been acknowledged world over for centuries. However, the Company is presently facing stiff competition from China, Japan, Korea, Pakistan & Nepal due to their unbelievable low price. It has been observed that the demand for synthetic carpets is rapidly increasing as compared to woolen carpets. Moreover, the International trade of the Company is subject to currency rate fluctuation.

OUTLOOK:

Keeping in view, the economic scenario of Overseas main market of the company namely Europe & USA, it is very difficult to survive on export trade. Your company is focusing more on domestic market and economy range of small size carpets, to enter into domestic virgin market i.e. mass middle class Indian society. It is expected that domestic sales turnover should further increase during current financial year.

RISK MANAGEMENT

The Company derives revenues from both International and domestic markets. Any change in the color and design of the Carpets in the International market adversely affect the demand for the products and indirectly affecting the growth, development of companys products. However, this indicates to be a low area of concern.

The risk in the nature of change in import-export tariffs, non-availability of raw material, change in the strategies of the International markets, timely working capital arrangements etc., affects a lot in working of a carpet industry. The companys main thrust is export and any unfavorable movement in the value of the Indian Rupees will decrease the amount of receivables from export debtors. The outlook for the Indian Rupee is also now considered to be relatively stable.

Appropriate steps have been taken in order to face currency rate fluctuation risks. The company continues to follow suitable strategies to positively modify its risk profile by eliminating key business risks and implementing strategies to minimize the high risks.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has adequate internal audit and internal control systems to ensure that all transactions adhere to procedure and meet statutory requirements. The internal control system consists of regular operative performance evaluation and devising corrective, measures thereof and comprehensive internal and external audit. The audit observations are periodically reviewed by the audit committee and necessary directions are issue wherever required.

HUMAN RESOURCES

Your companys human resource continues to be the biggest asset as it is the ultimate key to the success of the organization. Employees relations were cordial and peaceful. The company is committed to foster a high performance environment, which characterizes the organizational climate that delivers the business strategy. The company has low labour turnover and has adequate system to reward and recognize the employee contribution towards the growth of the company. The Company is also committed to follow other measures to enhance the motivation and commitment of the work force and building up a unique positive work culture.

CAUTIONARY STATEMENT

Statements in the Management Discussions and Analysis describe the companys objectives, projections, estimates, and expectations as "forward-looking statements" within the meaning of applicable Securities Laws and Regulations. As forward looking statements are based on certain assumptions and expectations of future events over which the company has no control, the company cannot guarantee their accuracy nor can it warrants that the same will be realized by the company. Actual results could be differ materially from those expressed or implied. The important factors that could make a difference to the companys operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the company operates, changes in the Government regulations, tax corporate and other law and other incidental facts.

For IDEAL CARPETS LIMITED

CHAIRMAN & MANAGING DIRECTOR