Jet Knitwears Ltd Management Discussions.

ECONOMIC OVERVIEW

Indias diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly less than half of the workforce is in agriculture, but services are the major source of economic growth, accounting for nearly two-thirds of Indias output but employing less than one-third of its labour force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services, business outsourcing services, and software workers.India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the nexRs 10-15 years, backed by its strong democracy and partnerships.Indias GDP is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19. India has retained its position as the third largest startup base in the world with over 4,750 technology start-ups.

The economy of India is a developing mixed economy. It is the worlds seventh-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). The country ranks 139th in per capita GDP (nominal) with $2,134 and 122nd in per capita GDP (PPP) with $7,783 as of 2018. After the 1991 economic liberalization, India achieved 6-7% average GDP growth annually. Since 2014 with the exception of 2017, Indias economy has been the worlds fastest growing major economy, surpassing China.

India has become a major exporter of IT services, Business Process Outsourcing(BPO) services, and software services with $154 billion revenue in FY 2017. The IT industry continues to be the largest private-sector employer in India. India is the second-largest start-up hub in the world with over 3,100 technology start-ups in 2018-19.

Indias labour force is expected to touch 160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute.Indias foreign exchange reserves were US$ 405.64 billion in the week up to March 15, 2019, according to data from the RBI.

India started recovery in 2013-14 when the GDP growth rate accelerated to 6.4% from the previous years 5.5%. The acceleration continued through 2014-15 and 2015-16 with growth rates of 7.5% and 8.0% respectively. For the first time since 1990, India grew faster than China which registered 6.9% growth in 2015. However the growth rate subsequently decelerated, to 7.1% and 6.6% in 2016-17 and 2017-18 respectively,partly because of the disruptive effects of 2016 Indian banknote demonetization and the Goods and Services Tax (India). As of October 2018, India is the worlds fastest growing economy, and is expected to maintain that status for at least three more years.

India is ranked 77th out of 190 countries in the World Banks 2018 ease of doing business index, up 23 points from the last years 100 and up 53 points in just two years. In terms of dealing with construction permits and enforcing contracts, it is ranked among the 10 worst in the world, while it has a relatively favourable ranking when it comes to protecting minority investors or getting credit. The strong efforts taken by the Department of Industrial Policy and Promotion (DIPP) to boost ease of doing business rankings at the state level is said to impact the overall rankings of India.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest

economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers.

The outlook for Indias long-term growth is moderately positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. However, long-term challenges remain significant, including: Indias discrimination against women and girls, an inefficient power generation and distribution system, ineffective enforcement of intellectual property rights, decades-long civil litigation dockets, inadequate transport and agricultural infrastructure, limited non-agricultural employment opportunities, high spending and poorly targeted subsidies, inadequate availability of quality basic and higher education, and accommodating rural-to-urban migration.

INDUSTRY STRUCTURE AND DEVELOPMENT

TEXTILES

India: Textile Industry

The textile industry in India traditionally, after agriculture, is the only industry that has generated huge employment for both skilled and unskilled labour in textiles. The textile industry continues to be the second-largest employment generating sector in India. It offers direct employment to over 35 million in the country.

Indias overall textile exports during FY 2017-18 stood at US$ 39.2 billion in FY18 and is expected to increase to US$ 82.00 billion by 2021 from US$ 31.65 billion in FY 19.

The Indian textiles industry, currently estimated at around US$ 150 billion, is expected to reach US$ 250 billion by 2019. Indias textiles industry contributed seven per cent of the industry output (in value terms) of India in 2017-18.It contributed two per cent to the GDP of India and employs more than 45 million people in 2017-18.The sector contributed 15 per cent to the export earnings of India in 2017-18. The production of raw cotton in India is estimated to have reached 36.1 million bales in FY 19.

The textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed and printed) attracted Foreign Direct Investment (FDI) worth US$ 3.09 billion during April 2000 to December 2018.

Some of the major investments in the Indian textiles industry are as follows:

• In May 2018, textiles sector recorded investments worth Rs 27,000 crore (US$ 4.19 billion) since June 2017.

• The Government of India announced a Special Package to boost exports by US$ 31 billion, create one crore job opportunities and attract investments worth Rs 800.00 billion (US$ 11.93 billion) during 2018-2020. As of AugusRs 2018, it generated additional investments worth Rs 253.45 billion (US$ 3.78 billion) and exports worth Rs 57.28 billion (US$ 854.42 million).

Innerwear Market Size & Growth

The innerwear industry in India holds immense growth potential and it is evident from the entry of large international brands in the Indian market in the last few years. A key factor characterizing the huge growth in the Indian innerwear market is the increasing size of the organized market and the declining share of the unorganized market resulting in growing independent brands taking charge of the market.

The Indian innerwear market continues to be underpenetrated and thereby holds immense business opportunities. The Indian innerwear market is certainly one of the most unique markets amongst the major markets of the world today. A distinctive shift from price sensitivity to brand sensitivity and preference for bold colours and innovative designs are two key trends to have emerged in this segment. Provided the positive macro and demographic fundamentals, the innerwear market has a favourable demand growth outlook over the medium-to-long term. The Indian innerwear market is expected to witness expansion in the near future. However, lesser product portfolio and high costs of brand building are expected to be the challenges for this sector. Brand sensitivity is the major trend in the Indian innerwear industry.

Indian Fashion Retail which is currently estimated at Rs 3,22,209crore is expected to grow at a CAGR of 7.7 percent over the next decade to reach Rs 6,74,037 crore by 2027. Among all the fashion categories, innerwear has emerged as one of the fastest growing categories in last few decades. A commodity which was earlier depicted as a day-to-day essential has transformed itself into fashion wear with more emphasis on styling and comfort. Traditionally, the innerwear market was largely fragmented and unorganised. But, in last few years the organised innerwear segment has shown promising growth in both mens and womens categories.

The innerwear category, currently estimated to be worth Rs 28,781 crore, accounts for 10 percent of the total apparel market in 2017.

The innerwear market in India is segmented between men and the more fancy-driven womens and both markets are growing significantly. While the global mens innerwear segment is estimated to grow at a CAGR of 5.8 per cent to reach $13.6 billion by the end of 2024, womens innerwear is projected to grow at a CAGR of 6.4 per cent to reach $55.83 billion by the end of 2024. Growth is boosted by organised retail penetration and increase in monobrand and multibrand outlets. But Indian

Womens Innerwear Market

The Indian innerwear market is primarily dominated by womens innerwear which accounts for 64 percent of the total innerwear market and it accounts for 15 percent of the total womens apparel market. Various product categories in womens innerwear are - brassieres, camisoles, panties, tees, nighties, shorts, etc. Brassieres and panties contribute 85 percent of the total womens innerwear segment.

Womens innerwear segment is poised to grow at an impressive growth rate of 12 percent over the next decade to reach Rs 56,364 crore by 2027 from current market size of Rs 18,454 crore.

Branded innerwear contributes 38-42 percent of the total womens innerwear market and this share is expected to grow to 45-48 percent of the total womens market by 2022.

Women are conscious about the brands and styles for their intimate wear. The trend is not restricted to just metros but can be witnessed spreading in Tier I, II and III cities. This adoption of branded lingerie has led to influx of international and domestic innerwear brands.

Mens Innerwear Market

The mens innerwear market is currently valued at Rs 9,477 crore and is expected to grow at a CAGR of 7 percent over the next decade to reach Rs 17,894 crore by 2027. It contributes 7 percent of the total mens apparel market.

The market is dominated by a large number of small-scale players making ~60-65 percent of the market fragmented and unorganised. However, the market segment is evolving gradually and moving towards organised retail.

Kids wear

The kids segment in the innerwear category is a highly unorganised and fragmented category. Local MBOs and regional players are known for catering to kidsRs segment of the innerwear market. Although there are some brands for teensRs innerwear, they dont have a large assortment. Kids innerwear is estimated to be worth Rs 850 crore in 2017 and is expected to grow at a promising CAGR of 12 percent over the next decade to reach Rs 2,640 crore by 2027.

Till recently, there had been no specialisation in kidsRs innerwear category. The same players that were manufacturing mens and womens innerwear had extended lines for kids innerwear. But, things are changing and there are specific innerwear brands for kids who are giving plethora of options in kids innerwear segment. Yet, the category holds unexploited potential which gives innerwear brands huge opportunities to tap this segment.

E-Commerce Industry

The e-commerce market has changed the way business is transacted, whether in retail or business-to- business, locally or globally. Prior to the Internet, success in retail was said to hinge on location, location and location. Now, the Internet is a global marketplace, affording even the smallest retailer a national -- if not a global -- presence. Brick-and-mortar locations now have websites, and new companies now sell products that were unthinkable prior to the Internet and the boom in related technology. The scope of the e-commerce marketplace is difficult to measure. The e-commerce market has become such a vital part of the economy that is difficult to pinpoint exactly where e-commerce begins and the old world economy ends.

E-commerce markets are growing at noticeable rates. The online market is expected to grow by 56% in 2015-2020. In 2017, retail e-commerce sales worldwide amounted to 2.3 trillion US dollars and e-retail revenues are projected to grow to 4.88 trillion US dollars in 2021. Traditional markets are only expected 2% growth during the same time. Mortar retailers are struggling because of online retailers ability to offer lower prices and higher efficiency. Many larger retailers are able to maintain a presence offline and online by linking physical and online offerings.

E-commerce allows customers to overcome geographical barriers and allows them to purchase products anytime and from anywhere. Online and traditional markets have different strategies for conducting business. Traditional retailers offer fewer assortments of products because of shelf space where, online retailers often hold no inventory but send customer orders directly to the manufacture. The pricing strategies are also different for traditional and online retailers. Traditional retailers base their prices on store traffic and the cost to keep inventory. Online retailers base prices on the speed of delivery.

There are two ways for marketers to conduct business through e-commerce: fully online or online along with a brick and mortar store. Online marketers can offer lower prices, greater product selection, and high efficiency rates. Many customers prefer online markets if the products can be delivered quickly at relatively low price. However, online retailers cannot offer the physical experience that traditional retailers can. It can be difficult to judge the quality of a product without the physical experience, which may cause customers to experience product or seller uncertainty. Another issue regarding the online market is concerns about the security of online transactions. Many customers remain loyal to well- known retailers because of this issue.

Security is a primary problem for e-commerce in developed and developing countries. E-commerce security is protecting businessRs websites and costumers from unauthorized access, use, alteration, or destruction. The type of threats include: malicious codes, unwanted programs (ad ware, spyware), phishing, hacking, and cyber vandalism. E-commerce websites use different tools to avert security threats. These tools include firewalls, encryption software, digital certificates, and passwords.

E-commerce helps create new job opportunities due to information related services, software app and digital products. It also causes job losses. The areas with the greatest predicted job-loss are retail, postal, and travel agencies. The development of e-commerce will create jobs that require highly skilled workers to manage large amounts of information, customer demands, and production processes. In contrast, people with poor technical skills cannot enjoy the wages welfare. On the other hand, because e- commerce requires sufficient stocks that could be delivered to customers in time, the warehouse becomes an important element. Warehouse needs more staff to manage, supervise and organize, thus the condition of warehouse environment will be concerned by employees.

OPPORTUNITIES AND THREATS Opportunities

The Indian textile industry has several strengths. First is the availability of low cost labour. The nation has skilled manpower at very low prices which in turn reduces the cost of production. Increasing fashion consciousness and consumers becoming more aspirational, discerning and brand savy. Another opportunity for the Indian textile industry is elimination of quotas. After the removal quotas there is increase in the exports of textiles and clothing to the United States and European Union but not as much as China. The industry has also taken some steps to improve the brand value of India.

The Company has a range of products such as Innerwears, Socks, T-shirts, Lowers and Thermals which are available in superior cotton fabrics and vibrant styles enabling it to cater to the demands of the consumers of our products in various markets. We are having a wide range of retailer network of more than 5,000 retailers who are served being directly by our sales depots in the different parts of North India. We have been marketing our products through strong brands "JET" and "LYCOT". "JET" is 30 years old whereas "LYCOT" is 10 years old.

Threats

High competition from other Asian countries like China and other countries pose a risk to the growth prospects of the Indian textile industry. These countries are meeting customer preferences by providing innovative textile products having great design and quality at lower prices.Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world. Your Company faces intense competition between established brands and private labels.

OUTLOOK

The future of the apparel market and the innerwear category appears promising. In anticipation of growing demand, the company has substantially expanded its installed capacity. Your Company operates from Kanpur with having dealers/vendors in North India. Enhancing our presence in additional region will enable us to reach out to a larger population. Further, our Company believes in maintain long term relationship with our customers by adding value through innovations, quality assurance and timely delivery of our products which will ultimately enhance our sales. It has been a long and motivating journey towards this pinnacle of success and no efforts are being spared to further strengthen the accomplishments of the company.

SEGMENT -WISE OR PRODUCT -WISE PERFORMANCE

The company is engaged in the business of manufacturing garments. Therefore there is no separate reportable segment. However, your Company havebeen marketing our products through strong brands "JET" and "LYCOT". "JET" is 30 years old whereas "LYCOT" is 10 years old.Your Company believes in providing those products to our consumers that are Skin Friendly and Anti-Bacterial. Your Company markets its products through various brands like "Lycot Australia", "Jet", "Jet Eco", "Fresh- Long", "Boski" and "Take- off". Various product manufactured by our Company are Vest, Underwear (including Boxers, Briefs & Trunks), Brassiere, Panties, Socks, T-shirts, Thermals, Lowers, etc. Our Company caters to everyday range of comfortable Innerwear, Socks, T-shirts and Thermals which are available in superior cotton fabrics, vibrant styles and are ideally suited for men and women. Product wise Performance during the year is as under:

PRODUCT WISE DETAILS 2018-19 2017-18
Hosiery Products 3776.08 3591.34
Winter Garments 392.41 178.55
Ladies Garments 308.72 266.49
Cotton Cloth 228.55 268.21
Jeans 27.08 -
Total 4732.84 4304.59

RISK AND CONCERN

The Company has robust risk management procedures to identify and evaluate risks on an ongoing basis. The Company believes that risks that are well managed can create opportunities, whereas risks that are incorrectly managed could lead to financial and reputation loss. Appropriate steps are taken in consultations with all concerned to mitigate such risks. The following are some of the key risks as perceived by the Company:

• Availability of Labour

The ability to retain existing talent and attract new talent assumes crucial importance. The industry is growing at a fast pace, in a highly labour intensive sector and demand for experienced and trained manpower is outstripping supply. The Company has created long term plans with the objective of motivating employees to create a sense of "belonging" and a ‘feel goodRs environment. The company is also aggressively taking steps to monitor and improve productivity, which will mitigate the impact of labour and material cost increases to some extent.

• Economic Uncertainty:

Slow economic growth in the international or national economies and uncertainties regarding future economic prospects, among other things, could affect consumer discretionary spending and therefore can impact business. Through brand strengthening and expanding presence across the globe the Company endeavours to mitigate the impact of this risk as far as possible.

• Increase in Input and Labour costs:

The availability of raw materials at reasonable rates is one of the main concerns of the company. However the company is confident that increases in raw material cost, if and when they occur, can be passed on to consumers because of the strong pricing power of its brands. The company is also aggressively taking steps to monitor and improve productivity, which will mitigate the impact of labour and material cost increases to some extent.

INTERNAL CONTROL SYSTEM AND ADEQUACY

Management has overall responsibility for the Companys internal control system to safeguard the assets and to ensure reliability of financial records. The Company has an adequate internal control system commensurate with its size and nature of its business. The Company has a detailed budgetary control system and the actual performance is reviewed periodically and decisions taken accordingly. The Company also conducts regular internal audits to test the adequacy and efficacy of its internal control processes and bring out any deviation to internal control procedures.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

In order to achieve operationalexcellence and maintain a competitive edge, the Companyinvests in building and nurturing a strong talented pool byinstituting best practices with respect to its employees.The Company makes substantive and sustained efforts towards building an eco-system which promotes thedevelopment and advancement of all its employees and employees feel a sense of belonging to thecompany and camaraderie with their team, andaspire for individual excellence while contributingto achieve departmental objectives. The Company has strength of abouRs 50 employees as on March 31, 2019.

CAUTIONARY STATEMENT

Statements in the Management Discussion Analysisdescribing the Companys objectives, projections,estimates and expectations may be considered as"forward looking statements" within the meaning of applicable securities laws and regulations. The Company cannot guarantee that these assumptions are accurate or will berealized. Actual results could differ materially from those expressedor implied.The Company assumes no responsibility in respectto the forward looking statements herein whichmay undergo changes in future on the basis ofsubsequent developments, information or events.