kothari products share price Management discussions

The information, as required under SEBI (Listing Obligations & Disclosures Requirements) Regulations, 2015 is as under:-

a) INDUSTRY STRUCTURE AND DEVELOPMENTS

As per World Economic Outlook released by IMF in April 2019, after strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of last year, reflecting a confluence of factors affecting major economies.

There have been several developments in the global arena with the US-China trade wars being at the forefront. Prima facie it looks like that there could be something positive for India. The issue of Brexit is also to be resolved and in these uncertain times there is also discussion on whether or not India will be able to leverage any collateral gains from any of these changes so as to enhance growth in exports. The government has highlighted exports as a focal area and hence both headwinds and tailwinds operating from the outside world which will impact the future course of our trade.

The Economic Survey for 2018-19 has reaffirmed the slowdown in the domestic economy and has indicated a marginal and gradual pick up in the ongoing financial year (2019-20), contingent on a pick-up in private investments and consumption. Domestic political stability is seen as providing an impetus to future economic activity.

In view of aforesaid the domestic industry may grow but the international trade would be under pressure both in terms of value and margins, which would also be a great challenge to your Company.

b) OPPORTUNITIES & THREATS

The Union Budget 2019-20 laid out the strategic blue print to make India a USD 5 Trillion economy in next few years. By focusing broadly on infrastructure, affordable housing, recapitalization of PSU banks and supporting NBFCs and agriculture sector, government has shown intent to revitalize the economy. However the prospects for the export sector are not projected to see an improvement owning to global trade tensions and political uncertainities which could impact economic growth. Moreover the trading industry may face the risk of imposition of higher tariffs on import/export of certain commodities by the government of some countries. The same may also result in price war among key competitors.

As the Company deals in international trade, it is exposed to foreign currency risks but fluctuation risk is minimized to the great extent by natural hedging. Company also has in house treasury with well-defined hedging policy through which company monitors its currency exposure on continuous basis and employs various hedging tools like forward cover, options etc.

Company does have comprehensive risk management system in place which includes internal controls which are commensurate to the size and nature of the inherent risks of companys businesses. These Risk Management system and processes enable the company in identifying and managing the risks appropriately.

c) SEGMENT-WISE PERFORMANCE

In trading division companys emphasis is on consolidation and diversification instead of expansion. Company has surrendered its credit facilities under consortium banking arrangements as it was not getting desired benefits / support from banking channels, which has affected the trading sector performance. The revenue of the Trading division during the year under review has been र 325701 Lacs as compared to र 422178 Lacs during the previous year and that of the Real Estate etc., has been र 3930 Lacs as compared to र 2059 Lacs during the previous year. The Profit before tax and interest from both the aforesaid division is at र 1484 Lacs and र 3524 Lacs respectively as compared to previous year gures of र 6474 Lacs & र 1198 Lacs respectively.

d) OUTLOOK:

As a result of these developments, global growth is now projected to slow down and with trade tensions increasingly taking a toll on business confidence internationally, so, financial market sentiment is sluggish and the outlook for the International Trade for your Company looks challenging.

However your Company, with the stable government at the centre and make in India initiative, sees improvement in domestic trade and real estate business. The period of crisis and uncertainty in the markets seem to be short lived which we feel your company will be able to tide over properly and shall also embark upon other trade prospects including diversification.

e) RISKS AND CONCERNS:

These aspects have been mentioned under the Heading "Opportunities and Threats"

f) DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE COMPARED TO THE IMMEDIATE PREVIOUS FINANCIAL YEAR)

S. No	Financial Ratios	2018-19	2017-18	% Change	Remarks for Variation
1	Debtors Turnover Ratio	2.34	3.47	(32.61)	Majorly due to change in business model.
2	Interest Coverage Ratio	1.76	6.16	(71.38)	Majorly due to increase in interest cost and decrease in Profit.
3	Current Ratio	1.44	1.10	30.70	Although there is decrease in both current assets and current liabilities but CL decreased more than CA due to sharp decrease in creditors because of change in business model / surrender of bank credit facilities.
4	Debt Equity Ratio	0.0018	0.0028	(34.13)	Majorly due to reduction of long term liabilities.
5	Operating Profit Margin (%)	0.81	1.81	(55.48)	Due to reduction of interest income on FDRs and Forex Loss.
6	Net Profit Margin (%)	0.63	1.06	(40.57)	Due to reduction of interest income on FDRs and increase in interest cost.
7	Return on Networth (%)	2.33	5.09	(54.20)	Due to reduction of overall Profitability because of reduction of interest income on FDRs and Forex Loss.