krishna knitwear technology ltd Management discussions

Krishna Knitwear Technology Ltd. Date: 2004.03.31. Management discussion and analysis MANAGEMENT DISCUSSION AND ANALYSIS REPORT FOR THE YEAR ENDED 31ST MARCH, 2004. a) Overall Review The management of Krishna Knitwear Technology Ltd presents its analysis report covering performance and outlook of the Company. The management accepts responsibility for the integrity and objectivity of the financial statements. However, readers are cautioned that this discussion contains certain forward-looking statements that involve risk and uncertainties. b) Industry structure and Developments : The Indian textile industry could well be on the threshold of exponential growth. This optimism stems from the dismantling of the quota system. Currently, global textile trade is governed by physical restrictions, or quotas in the lucrative US and European markets. Come January 1, 2005, quotas will be completely phased out and have far-reaching impact on world trade in textiles and clothing. The Indian industry is expected to be one of the major beneficiaries with its share of global trade forecast to grow the fastest as its current quota allocation is among the lowest. Indias textile exports are expected to grow at a CAGR of 21 per cent to US $50 billion by 2010. Indian textile sector is expected to draw its global competitiveness from its high degree of integration, low cost labour and proximity to cotton growing areas. Its major competitor will be China. But selective quota restrictions on China will help domestic players. c) Opportunity and Threats : It is expected that Indian economy should grow by over 5% per annum over the next few years. Per capital consumption in India for most products remains amongst the lowest in the world. With the phasing out of quota system, opportunities should be available to competitive textile producers but with a serious threat of competition from other textile producers in the world. However, with the encouragement offered to the textile Industry by the Central Government through reduction of excise duties and favourable exim policy, the Industry should be able to exploit these opportunities and face challenges in the domestic as well as international markets. d) Segment-wise Performance. The Companys products namely yarns and fabrics can be categorised into one segment called Textile. Hence, separate financial results are not compiled for this segment. The overall performance of the Company is provided in the Directors Report under the head Financial Results. e) Outlook The Company has drawn out and is implementing an extensive action plan which comprises thrust on high margin products, reduction in raw material costs, rationalization of operations and over-heads, optimising inventory level, selective credit policy to customers and liquidation of non-moving inventories and overdue receivables. The Company with its superior product mix and higher value-addition, coupled with the change in industry scenario like more fiscal incentives as announced by Government of India for textile industry, change in consumer preferences from woven to knitted clothes etc, is expected to benefit significantly. Forward-looking statements are based on certain assumptions and expectations of the future events that are subject to risks and uncertainties. Actual future results and trend may differ materially from historical results, depending on variety of factors. f) Risk and Concern There are no major risk and concern to the Companys operation except from the competitive pricing pressure from cheaper imports, unethical competitions from silk units, free market policies and removal of quantitative restrictions. g) Internal Control system and their adequacy The Internal Control system of the Company is commensurate with the size of the Company and nature of its business. The Internal Control system of the Company ensures that all assets are safe guarded and protected against loss from unauthorized use or disposition and the transactions are authorized, recorded accurately. h) Financial Performance Vs. Operational Performance The Company has achieved a sales turnover of Rs.989.22 Crores in F.Y.2004 as against Rs.833.18 Crores in F.Y.2003, an increase of 19%. The Exports have gone up to Rs.45.94 Crores in F.Y. 2004 from Rs.16.34 Crores in F.Y.2003, an increase of 181 %. This is mainly on account of completion of the expansion-cum-backward integration project under TUFS, appraised by IFCI. The Company has achieved cash accruals of Rs. 87 Crores. The net profit has gone up to Rs.2 Crores in F.Y.2004 from Rs.0.97 Crores in F.Y.2003, an increase of 107%. The P.B.I.D.T. has increased to Rs.140 Crores in F.Y.2004 from Rs.128 Crores in F.Y.2003, an increase of 10%. i) Development in Human Resources/Industrial Relation front The focus of Human resource development in the Company is on building and developing intellectual capital through innovative ideas. The industrial relation climate of the Company continues to remain harmonious with focus on quality and safety. j) Research and Development Increased globalization has made the marketing of products and retention of customers highly competitive. The need of the hour is total customer satisfaction and value for money from the products marketed. Keeping this objective as paramount, the research and development activities were focused into prompt attention to major customer complaints/suggestions in order to retain/enhance customer satisfaction. The Company has started launching products of better quality and new look as per customer requirements.