Kamadgiri Fashion Ltd Management Discussions.

MANAGEMENT DISCUSSION AND ANALYSIS INDIAN ECONOMIC SCENARIO

Indian economy is heading towards becoming more formalised economy post demonetisation and the implementation of the landmark Goods and Service Tax (‘GST’). India’s growth rate is expected to be around 7-7.3%. The Government of India is targeting to become US$ 5 trillion economy by 2024-25.

INDIAN TEXTILE INDUSTRY

Indian textile industry has strength across the entire value chain from natural to man-made fiber to apparel to home furnishings

It is one of the largest industries in India. It is the second largest industry in terms of providing employment opportunities in the country. Its share in the nation’s GDP is 6% and in exports is 13%. The sector is the second largest employer after agriculture. India has traditionally been exporting low value textiles products

(fiber, yarn, fabric) more than apparel. India’s focus now is shifting towards value addition within the country and in exports of finished products rather than exporting raw material and intermediate products. India is aspiring to achieve 20% growth in exports over the next decade. India would be exporting about US$ 185 billion of textile and apparel by 2024-25. Considering the targeted growth in exports, India should by then have a market share of 15% to 20% of the global textile and apparel trade from the present level of 5%.

KEY GROWTH DRIVERS FOR INDIA

Stability Stable government;

Reforms Social, Economic and Cultural;

Demography 65% of the population is below the age of 35 years;

Make in India Encouragement for indigenous manufacturing;

Startup hub India is home to second largest start-up hub in the world.

OPPORTUNITIES AND THREATS Opportunities

International Trade Relations - Declining trade relations between United States of America and China;

E-commerce World’s fastest growing market in retail sector and is expected to grow upto 7% by 2021;

Policies Various policy initiatives and programmes for development of textiles and handicrafts, particularly for technology, infrastructure creation, skill development.

Threats

Retaining customers due to growing competition;

Make balance between price and quality;

Product obsolescence due to ever evolving fashion trends.

PERFORMANCE REVIEW

Large opportunities in global textile and clothing markets have led in growth of weaving business and it continues to show good performance. Performance of finished fabric unit which caters to readymade garment manufacturers and brands was satisfactory. ‘True Value’ – the value for money brand of the Company has evolved as one of the leading brands for quality suiting’s and shirting’s. ‘True Linen’ linen fabric brand of the Company has maintained its established recall value and its loyal customer base in addition to adding new customer base. The readymade garment manufacturing unit of the Company has been catering to the satisfaction of customer brands. "Risque" Men’s Casual Shirt Brand launched during the year, mainly targeted for online market and distribution network has had initial encouraging response.

FUTURE OUTLOOK

With stable policy, uniform tax regime and expected good monsoon, the Company expects the consumption to grow. To cater the steadily growing requirement, the Company is proposing to add additional capacity in garmenting, which has been discussed in detail in Boards Report. The Company also has encouraging plans for recently launched "Risque" and its designing and manufacturing of Women’s Wear initiative, which has also been discussed in detail in Boards Report.

The Company would continue to operate its existing manufacturing capicities at optimum level to continue its present performance. Further, the Compnay is trying to get into garmenting activities, which would be more revenue accertive and its initiative to reduce overall cost of operations, would further improve its profitability.

RISK MANAGEMENT

In today’s economic environment, Risk Management is very critical for smooth operations. The main objective of risk management is to identify, monitor and take precautionary measures in respect of the events that may pose risks for the business. The Company’s risk management is embedded in the business processes. The Company ensures that all the current and future material risk assessed,exposures quantified, are identified, mitigated, minimised and managed.

INTERNAL CONTROL SYSTEMS

Your Company has put in place internal control systems and a structured internal audit process vested with the task of safeguarding the assets of the organisation and ensuring reliability and accuracy of the accounting and other operational data. Internal audit is conducted for all the processes to identify risks and verify whether all systems and processes are commensurate with the business size and structure. These internal controls are verified by professionals and presented to the Members of the

Audit Committee to keep a check on existing systems and take corrective action to further enhance control measures.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Sales

The Company’s Sales were at Rs 31,861.26 Lakhs for the financial year ended March 31, 2019 as against Rs 33,152.52 Lakhs in the previous financial year.

Profit Before Tax

Profit Before Tax of the Company for the financial year ended

March 31, 2019 stood at Rs 737.03 Lakhs as against Rs 1,062.03

Lakhs in the previous financial year.

Interest

Interest & other borrowing cost outflow isRs 723.82 Lakhs for the financial year ended March 31, 2019 as againstRs 717.30 Lakhs in the previous financial year.

Net Profit

Net Profit of the Company for the financial year ended March 31,

2019 stood at Rs 471.18 Lakhs as against Rs 651.31 Lakhs in the previous financial year.

Dividend

The Company has proposed a dividend of Rs 2/- (20%) per Equity

Share for the financial year ended March 31, 2019 same as paid in the previous financial year.

Capital Employed

The capital employed in the business is Rs 9,335.41 Lakhs as at March 31, 2019. Return on Capital employed during 2018-19 is

15.65% as compared to 18.85% during the previous financial year

2017–18.

Surplus Management

The Company generated a cash profit ofRs 919.91 Lakhs for the financial year ended March 31, 2019 as compared toRs 1,093.65 Lakhs in the previous financial year. The balance amount, after cash outflow on account of proposed dividend, is ploughed back into the business to fund growth. The growth of the Company has been partly been funded by the cash generated from the business as well as from additional funds borrowed.

Debt- Equity

Debt – Equity ratio of the Company has decreased from 1.30 in the previous financial year to 1.13 as at March 31, 2019.

Earnings Per Share (EPS)

The Company’s Basic EPS has decreased from Rs 11.10 in the previous financial year toRs 8.03 and Diluted EPS has decreased from Rs 11.10 in the previous financial year to Rs 8.03 for the financial year ended as on March 31, 2019.

HUMAN RESOURCE

Your Company strongly believes that its employees are its biggest assets and have played a major role in its growth. The Company has permanent employee strength of 1,744 as on March 31, 2019. The Company believes in inclusive growth and being an employer of choice. As the Company has now three different operating units, human resource and relationship with the employees plays a key role in its smooth operations. The Company pays required attention on the development and social needs of workers and staff. The Company is in a continuous process of evaluating, training, motivating and rewarding its employees for their unstinted performance and contributions to the Company so that the Company also receives the same in future.