Kamadgiri Fashion Ltd Management Discussions.

INDIAN ECONOMIC SCENARIO

The implementation of the landmark Goods and Service Tax (‘GST) has appeared as an apparent headwind for economy as a whole inspite of initial disruptions. After growing at a steady pace in the first quarter of 2017-18, there was a decline in Indian economic growth rate due to slowdown in consumer spending and exports. Indias economic growth rate had rebounded in third quarter of FY 2017-18 and growth trajectory is expected to continue going forward. Indian economy is on a recovery path and is the fastest growing economy in the world. India has emerged as a ‘bright spot in an otherwise subdued world economy.

INDIAN TEXTILE INDUSTRY

Indian textiles industry is one of the oldest and largest industries in the world. It is one of the largest contributors to Indias exports, it roughly contributes about 11% of total exports. Textile industry is one of the largest employer in the country and employs about

45 million people directly. It broadly has two segments first, the unorganised sector consisting of handlooms, handicrafts and sericulture and the second is the organised sector consisting of spinning, weaving, knitting, garments and home textiles segment. The sector contributes 7% of Industrial output in value terms, 2% to Indias Gross Domestic Product (‘GDP) and 15% of the countrys export earnings.

KEY GROWTH DRIVERS FOR INDIA

Increase in manufacturing cost of China that forces brands and retailers to look beyond China;

Stronger ability of Indian manufacturers to adhere to compliance norms in comparison to other low-cost manufacturing countries like Bangladesh or Vietnam;

Implementation of GST;

Government initiatives to push growth and investment in

Textile sector.

OPPORTUNITIES AND THREATS

Opportunities

Market is gradually shifting towards Branded Textile products and Readymade Garments;

Rise in e-commerce activities in retail sector for fashion led consumption;

Greater investment and FDI opportunities are available in specialised, technical and engineering Textile.

Threats

Make balance between price and quality;

Presence of many unorganised players leading to reduction of overall contribution from any product;

Increasing costs of various input services and products is affecting the overall profitability

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 suitings and shirtings. ‘True Linen linen fabric brand for 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 brands.

FUTURE OUTLOOK

In view of the better outlook for economy and in expectation of increase in overall consumption of consumer goods, the Company expects its readymade garmenting business to contribute more to top-line as well as bottom-line. The readymade garmenting is focusing on new growth opportunities considering the large domestic consumption.The Company expects to improve its performance in weaving and fabric business. The Company proposes to launch "RISQUE" – Mens Casual Shirts Brand targeted for online market and distribution network. The Company also proposes to enter Womens Wear segment wherein it will use fabric manufacturing capacity of the Company to offer innovative fabrics for womens garments and use these fabrics to create garment samplings eventually to create a womens wear brand in the long-run.

RISK MANAGEMENT

In todays economic environment, Risk Management is a 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 Companys 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 SYSYTEMS

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 Companys Sales has increased to Rs 33,152.91 Lakhs for the financialyear ended March 31, 2018 as against Rs 30,482.91 Lakhs in the previous year.

Profit Before Tax

Profit Before Tax of the Company for the financial year ended

March 31, 2018 stood at Rs 1,062.03 Lakhs as against Rs 414.19

Lakhs in the previous financial year.

Interest

Interest & other borrowing cost outflow isRs 717.30 Lakhs for the financial year ended March 31, 2018 as againstRs 843. 89 lakhs in the previous financial year.

Net Profit

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

2018 stood at Rs 651.31 Lakhs as against Rs 281.54 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, 2018 as against Rs 1.50/- (15%) paid in the previous financial year.

Capital Employed

The capital employed in the business is Rs 5492.58 Lakhs as at March 31, 2018. Return on Capital employed during 2017-18 is 32.40% as compared to 24.93% during 2016 – 17.

Surplus Management

The Company generate a cash profit ofRs 1093.65 Lakhs for the financial year ended March 31, 2018 as compared to Rs 716.28 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 party 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 1.38 in the previous year to 1.30 as at March 31, 2018.

Earnings Per Share (EPS)

The Companys Basic Earnings Per Share (EPS) has increased/ decreased from Rs 4.80 in the previous year to Rs11.10 and Diluted Earnings Per Share (EPS) has increased/decreased from Rs 4.80 in the previous year to Rs11.10 for the financial year ended as on

March 31, 2018.

HUMAN RESOURCE

Your company strongly believes that its employees are its biggest assets and have played a major role in it growth. The Company has permanent employee strength of 1660 as on March 31, 2018. 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 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 also.

CAUTIONARY STATEMENT

Statement in the report of management discussion and analysis and/or elsewhere in this report contains "forward looking statement" which may be identified by their use of words like ‘plans, ‘expects, ‘will, ‘anticipates, ‘believes, ‘intends, ‘projects, ‘estimates or other words of similar meaning. All statements that address expectation or projections about the future, including but not limited to statements about the Companys strategy for growth, product development, market position, expenditures and financial results are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized.

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.