Kamadgiri Fashion Ltd Management Discussions

GLOBAL ECONOMY AND OUTLOOK

In CY 2023, the global economy experienced a modest recovery, growing by an estimated 3.2%. This was driven by increased consumer demand, savings accumulated during pandemic restrictions, and abundant job opportunities. Advanced economies like the United States saw a growth rate of 2.5%, fueled by strong consumer spending and a robust job market. The Eurozones growth was slower at 0.4%, impacted by high energy prices and low consumer confidence. Emerging and developing economies fared better, collectively growing by 4.3%, with Chinas reopening and Indias strong domestic demand being significant contributors.

Despite overall growth, inflation remained a major concern. Although headline inflation began to cool by the years end, it stayed above central bank targets. Major central banks, including the Federal Reserve and the European Central Bank, responded by raising interest rates and tightening financial conditions.

Looking ahead to CY 2024 and 2025, the global economy is projected to grow at a modest 3.2% annually. This stability comes despite stricter monetary policies, reduced government spending, and slow productivity gains. Inflation is expected to decrease to 5.9% in CY 2024 and 4.5% in CY 2025. Policymakers face the challenge of managing this decline without hindering growth. Opportunities lie in faster disinflation and Chinas recovery, while geopolitical tensions and persistent inflation remain risks. Long-term growth, especially in emerging markets, depends on structural reforms to boost productivity and ensure sustainable debt levels.

INDIAN ECONOMY AND OUTLOOK

In CY 2024 and 2025, the global economy is projected to grow at 3.2% annually despite challenges from stricter monetary policies, reduced government spending, and slow productivity gains. Inflation is expected to cool to 5.9% in CY 2024 and 4.5% in CY 2025. Opportunities include faster disinflation and Chinas recovery, while geopolitical tensions and persistent inflation pose risks. Long-term growth relies on structural reforms to boost productivity and ensure sustainable debt levels.

Indias economy is estimated to grow at 7.6% in FY 2023-24, driven by robust domestic demand and proactive policy measures. The construction sector is expected to grow by 10.7%, and the manufacturing sector by 8.5%. The global rating agency Moodys anticipates India will continue outpacing other G-20 economies. Investments under the Governments production linked incentive (PLI) scheme have reached nearly 95,000 Crores, resulting in significant production and employment gains.

India remains an appealing investment destination due to its large market size, skilled workforce, and improving infrastructure. The IMF forecasts Indias growth at around 6.5% in FY 2024-25, supported by strong economic fundamentals and strategic initiatives in manufacturing, clean energy, and export diversification. Despite challenges, Indias economic outlook is positive.

OPPORTUNITIES AND THREATS OPPORTUNITIES

• Opportunities in the Indian Market

• Government thrust for development will boost a rise in demand THREATS

• Competitive manufacturing costs;

• Change in Government regulatory norms;

• Rising Labour Wages;

• Volatile Market.

PERFORMANCE REVIEW & OUTLOOK

Our business remains steadfast in its commitment to enhancing the casual wear segment within our portfolio, strategically targeting the preferences of the younger demographic. This deliberate focus has been a pivotal driver of our growth trajectory, aligning with market trends that favor casual attire among the youth.

Our weaving division continues to exhibit robust performance, upholding its strong track record of excellence. This success is underpinned by our unwavering dedication to quality and continuous innovation. Additionally, our finished fabric unit, a critical supplier to readymade garment manufacturers and renowned brands, has significantly bolstered KFLs market standing. The sustained high demand for our finished fabrics highlights our market reputation for superior quality and reliability.

Looking forward, we will intensify our efforts to optimize operational efficiencies by minimizing redundancies and streamlining processes. This operational optimization will enable us to exploit market opportunities effectively, ensuring sustained growth and profitability. Furthermore, we plan to leverage cutting-edge technological advancements to enhance our production capabilities and product offerings, thereby maintaining our competitive advantage.

Expanding our market reach remains a strategic priority. By penetrating new markets and fortifying our presence in existing ones, we aim to solidify our market position. We are confident that these strategic initiatives will not only drive long-term growth but also deliver substantial value to our stakeholders. Our commitment to innovation, quality, and market expansion positions us for continued success in the evolving market landscape.

RISK MANAGEMENT

Risks and threats are often precursors to corporate crises. While some risks are universal and can impact any company, others are specific to an organizations business or industry. Regardless of the nature of the risks or threats, it is crucial for companies to have an up-to-date crisis management plan in place to effectively address and mitigate the impact when these risks materialize.

INTERNAL CONTROL SYSTEMS

Your Company has a robust internal financial control system that is well-suited to the size and complexity of its operations. Comprehensive checks and controls are implemented to safeguard all assets, detect and prevent errors and fraud, and ensure transactions are appropriately verified, authorized, recorded, and reported.

The Companys Internal Auditors conduct thorough audits of various departments to ensure the effectiveness of internal controls, submitting Quarterly Reports to the Audit Committee. The Audit Committee regularly reviews these reports and oversees the implementation of any necessary corrective actions. Additionally, the Internal Auditors assess the effectiveness of the Companys internal financial control system, with no significant inefficiencies reported.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE SALES

The Companys Sales were at 21,760.03 Lakhs for the financial year ended March 31, 2024 as against 28,088.67 Lakhs in the previous financial year.

PROFIT/ LOSS BEFORE TAX

Profit/(Loss) Before Tax of the Company for the financial year ended March 31,2024 stood at Loss of (177.12 Lakhs) as against Profit before tax of Rs. 223.09 Lakhs in the previous financial year.

INTEREST

Interest & other borrowing cost outflow is 742.90 Lakhs for the financial year ended March 31,2024 as against 882.60 Lakhs in the previous financial year.

NET PROFIT/ LOSS

Net Profit/(Loss) of the Company for the financial year ended March 31,2024 stood at Loss of (140.90 Lakhs) as against Profit of 147.57 Lakhs in the previous financial year.

DIVIDEND

The Board of Directors have not proposed any dividend for the year.

CAPITAL EMPLOYED

The capital employed in the business is 4,703.18 Lakhs as at March 31,2024. Return on Capital employed during 2023-24 is 0.12% as compared to 0.19 % during the previous financial year 2023-24.

SURPLUS MANAGEMENT

The Company had incurred cash profit of 280.51 Lakhs for the financial year ended March 31, 2024 as compared to cash profit of 767.57 Lakhs in the previous financial year.

SIGNIFICANT FINANCIAL RATIOS

EARNINGS PER SHARE (‘EPS)

The Companys Basic EPS has decreased from 2.51 in the previous financial year to ( 2.40) and Diluted EPS has decreased from 2.51 in the previous financial year to (2.40) for the financial year ended as on March 31,2024.

HUMAN RESOURCE

Your Company firmly believes that its employees are its greatest assets, playing a crucial role in its growth. As of March 31, 2024, the Company has a permanent employee strength of 322. Emphasizing inclusive growth, the Company strives to be an employer of choice. With three distinct operating units, effective human resource management and strong employee relations are vital for smooth operations.

The Company is dedicated to addressing the development and social needs of its workforce. Ongoing initiatives focus on evaluating, training, motivating, and rewarding employees for their exceptional performance and contributions. This continuous investment ensures sustained commitment and excellence from employees, benefiting the Company in the long term.

CAUTIONARY STATEMENT

Estimates and expectations stated in this Management Discussion and Analysis may be ‘forward-looking within the meaning of applicable securities, laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations, include economic conditions in the Government regulations, tax laws, other statutes and other incidental factors.

The Companys actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise and forward-looking statements, on the basis of any subsequent development, information or events.