Lahoti Overseas Ltd Management Discussions.

Industry Structure and Development Textile division:

The Textile Industry in India is second largest employer after agriculture providing jobs to the various class of peoples and is one of the significant contributors to the Indian economy. During the year 2018-19, the Cotton Textile Industry in India has experienced an improvement on account of overall demands from overseas markets. The depreciation of the Indian currency has helped achieving better realizations for export and has increased the competitiveness of the Exports from India. However the sluggishness in world market particularly in the last quarter of the Financial year combined together with the appreciation of the Indian Currency has affected the competitiveness of the Indian Export, reflecting lower volumes and profits for the exporters.

Besides the hiccups caused due to demonetization, implementation of GST the Indian economy is returning to a steady and healthy growth. Textile sector being a prominent employment generator, is likely to be a favorite of the Government and is expected to receive a good support from the Government for its growth.

With domestic and global economic conditions gradually improving along with the focused efforts made by Ministry of Textiles, Indian textiles and garments sector is set for growth, buoyed by revival in domestic consumption and export demand.

Lahoti Overseas Limited is mainly engaged in the export trading of cotton yarn in all coarser and fine counts, grey cotton fabrics where the Company has strong presence and leadership. The Company is mainly targeting the export of cotton yarn and fabrics to Far East Asian countries like South Korea, China, Japan, Hong Kong, Malaysia, Vietnam and also cater to Gulf, Mediterranean, European, North and South American markets. The Company enjoys the excellent relationship with its overseas customers, which has been built over the years by strictly adhering to delivery schedules maintaining consistent quality and providing prompt after sales service.

Power Projects Division:

Government of India has taken several measures to encourage Renewable Energy Sector in India. Many State Governments and Government undertakings also have come out with the Reverse Bidding System to fulfil their obligations for Renewable Energy and combined with this sector has become the most talked about sector attracting huge investments and has the potential for huge growth in future.

Lahoti Overseas Limited has ventured into the Renewable Energy Sector by installation of Wind Power projects and Solar Power projects. However the falling trend in the power purchase prices are affecting adversely on the profit margins and growth prospects.

Awards and Recognitions

• The Company has won the Gold, Silver & Bronze trophies consistently since 1997 from TEXPROCIL (Cotton Textile Export Promotion Council) for excellence in export of cotton yarn.

• The Company has won the prestigious "Niryat Shree" award from The Federation of Indian Export Organization (FIEO) for the year 20032004. The Company also won Silver plaque from Government of Maharashtra for the year 1995-96, 1996-97 and Gold Plaque for the year 2009-2010.

• The Company has won the Business World International Business Award for Category - "Best Export House" for excellent performance in exports in the year 2010-11.

• The Company have received Second Award in Merchant Exporter Category and Third Award in Trading House Category from Government of Maharashtra for its export performance in the year 2010-11.

• Recently, the Company has been awarded with Gold Trophy Award for highest exports of Cotton Yarn (count 50s & below Gold Plaque award for highest exports of Cotton Fabric (Grey) in category - I (counts 51s and above) by Texprocil for the year 2017-18.

These awards recognised the efforts of the Company in the creation of path breaking trends and excellent export performance in Cotton Textile Industry.

Opportunities and Threats

Textile Division

The future of Indian Cotton Textile Industry is highly depending on availability of raw material at a competitive price. With the introduction of Hybrids and BT Cotton, the cotton production in India is increasing every year. The government is making efforts to supply proper quality seeds at a reasonable price to the growers and it is expected that the supply of quality cotton will be comfortable.

In the past, the Textile Industry did not develop in an organized manner and the policy favored fragmentation resulting in organized players suffering heavily because of the distorted fiscal structure. Fortunately, in the last few years, the Government has now provided level playing field to all the sectors of textile industry and therefore, large investments are coming in the textile industry. Government had given good incentives under Technology Upgradation Fund Scheme, Textile Park Scheme and also benefits to the processing sector, which will give boost to the textile industry. Further upon introduction of GST, will provide level playing field for all the segments of the industry and will be a positive factor for the growth of the industry.

Power Projects Division:

Power Projects specifically the Renewable Energy projects are highly capital intensive. These projects are also dependant on natural resources like wind, water, sunlight etc. The requirement of good infrastructures such as connectivity of roads, viability of communication systems play key roles in such projects. Being highly capital intensive, the cost of production of energy is relatively higher in such projects. However there is no consumption of Raw Materials and also due to the substantial reduction in the capital cost in recent times, these projects are now becoming viable. The floor price of REC have been revised downwards recently will help to increase the sale of REC, however the matter of allowing the vintage multiplier to the old investors in the sector is still to be resolved and the same is subjudised.

Segment wise and Product wise performance Textile Division

Revenue in Textile Division has shown a increased by Rs. 17,855.70 Lakhs when compared to last year. The profits of the Company shown increase of Rs. 1,300.26 Lakhs when compared to last year profits.

Power Projects Division:

Revenue from Power Division increased by Rs. 381.50 Lakhs when compared to last year. However the Profits of Power division has shown an increase by Rs. 265.89 lakhs.

Outlook

Textile Division

The long term objective of the Company is to remain strong player in the cotton textiles export market with strong emphasis on product and market development, value added yarns, customer services and Technology Up gradation. Your Company is also continuously improving its operational efficiency, and cost control which alone can improve the bottom line in future in highly competitive environment. Further, your Company is hopeful to get advantage of the overall good times likely to come for the Indian Cotton Textile Industry and will do all out efforts to secure the bigger share of the increasing market in future.

A stable outlook on cotton and synthetic textiles would result from favourable policy environment, improvements in demand-supply position, continued stability in input costs and consequent improvement in margins/liquidity. However, the good monsoon and pick up in Indian economy due to various measures taken by the Government would unleash demand in the long run and offset any slowdown in exports. Further, the hope of revival of Chinese economy will also bring the positive growth for this sector.

By encashing the rich experience gained by the Company in the Cotton Textile sector, the company has plans to increase its efforts of marketing and to open up foreign offices in order to better serve its customers. The emphasis will also be on more exports of value added items such as dyed yarns, speciality yarns and grey and dyed fabrics.

Power Projects Division:

The overall outlook of the Renewable Energy sector in India has been positive. The supportive steps taken by Government of India and almost all State Governments in India have given a big boost to this sector. The reduction in capital cost of the project particularly in Solar Power have made this sector viable and due to the improvement in technology, this sector will become more competitive and self-sufficient. India has huge potential for Wind and Solar Power as the availability of wind and sunlight are available in abundance in India with favorable weather conditions and India has the fifth largest installed wind power capacity in the world.

Risks and Concern

A. Brief risk factors for Textile projects

• Our business shall dependent on the availability/ supply and cost of raw materials which we source from domestic suppliers. Any significant increase in the prices of these raw materials or decrease in the availability of the raw materials, could adversely affect our results of operations;

• Our business is subject to regulation by several authorities, which could have an adverse effect on our business and our results of operations;

• We are heavily dependent on our Promoters and the loss of their guidance and services may adversely affect our business or results of operations;

• Change in Government of Indias Economic Liberalization policies may hinder prices of our equity shares;

• Change in Tax laws in India (i.e. Goods & Service Tax & Income Tax) may increase tax liabilities of the company inversely affecting PAT;

• Slowdown in the Indian economy may inverse effect in our profit;

• Any Natural calamities, terrorist attack on India may hinder our profit;

• Change in economic regulations and laws may also effect the company adversely.

B. Brief risk factors for Power projects

• Risk of property damage or liability stemming from errors during the building of new projects;

• Risk affecting the viability of the project developer, for example, risks related to key personnel, financial solidity and technical ability to execute on plans;

• Risk of environmental damage caused by the solar park including any liability following such damage;

• Risk of insufficient access to investment and operating capital;

• Risk of a cost increases for key input factors such as labour or modules, or rate decreases for electricity generated;

• Risk of unscheduled plant closure due to the lack of resources, equipment damages or component failures;

• Risk of reduction in sale price;

• Risk of components generating less electricity over time than expected;

• Risk of a change in policy that may affect the profitability of the project, for example changes in levels of tax credit or RPS targets. Also, this includes changes in policy as related to permitting and interconnection and implementation of such policy by Government;

• Risk of changes in electricity generation due to lack of sunshine or dust covering solar panels for long periods of time;

• Risk that all or parts of the solar park will be subject to sabotage, terrorism or theft and thus generate less electricity than planned;

• Risk of Natural Calamities.

Internal Control Systems and their adequacy

The Company has a proper adequate internal control system to ensure that all the assets are safe guarded and protected against the loss from unauthorized usage or disposition and that transactions are authorized, recorded and reported correctly.

The internal control is supplemented by an extensive internal audit, periodical review by the management and documented policies, guidelines and procedures. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets.

Financial and Operational Performance

During the year under review your Company has reported a total income of Rs.64,658.49 Lakhs out of which the sale realization has increased by 39.79% at Rs. 62,233.95 Lakhs when compared to previous years proceeds of Rs.44,518.56 Lakhs from the textile division and a increase of 38.93% at Rs.785.86 Lakhs when compared to previous year proceeds of Rs. 565.62 Lakhs in the Power division.

Further the non-operating income amounts to Rs.482.09 Lakhs which has increased by 51.02% Rs. 319.22 Lakhs as compared to the previous year .

Liquidity and Capital Resources

Particulars 2018-2019 2017-2018
(Rs. in Lakhs) (Rs. in Lakhs)
Cash and Cash Equivalents -
Beginning of the year 690.96 834.23
End of the year 620.11 690.96
Net Cash provided (used) by -
Operating activities 2026.92 (374.45)
Investment activities 1483.09 108.36
Financial activities (3439.17) 122.82

During the year, there has been a Cash inflow from Operating activity to the extent Rs.2026.92 lakhs as against cash outflow of Rs.374.45 Lakhs during the corresponding previous year. Further during the year there is cash inflow of Rs.1483.09 Lakhs on account of Investment activity as against inflow of Rs.108.36 Lakhs during the previous year. During the year the outflow generated over finance activity is Rs.3439.17 Lakhs as compare to inflow of Rs.122.82 Lakhs in the previous year.

Material Developments in Human Resources

The Company continues to lay emphasis on developing and facilitating optimum human performance. Performance management was the key word for the Company this year. Recruitment process has been strengthened to ensure higher competence levels.

Human Resources and Industrial Relations

Human Resource is the most vital factor to achieve the goals of any organization. To maintain its competitive edge in a highly dynamic industry, Company recognizes the importance of having a work force which is consumer-focused, performance-driven and future- capable. We believe in fostering equal employment opportunities, where individuals are selected and treated on the basis of their job-relevant merits and are given equal opportunities within the organization

There were 43 permanent employees on the rolls of the Company as on 31st March, 2019.

For and on behalf of the Board of Directors
Sd/- Sd/-
Ujwal Rambilas Lahoti Umesh Rambilas Lahoti
(Executive Chairman) (Managing Director)
(DIN: 00360785) (DIN: 00361216)
Place: Mumbai
Date : August 9, 2019