Malwa Cotton Spinning Mills Ltd Management Discussions

Industry Structure and Developments

Indian textile enjoys a rich heritage. If we talk about the Indian textile industry and its structure in the present era, it is one of the leading industries in the world. Even the structure and the welfare schemes floated by the Indian government are much comprehensive. Due to which India projected a high production of textile. The significance of the textile industry is due to its contribution in the industrial production, employment, and also earns foreign exchange by way of exports. The textile sector in India is one of the largest in the world. The Indian textile industry can be divided into three segments: 1) Cotton Textiles 2) Synthetic Textiles 3) Other like Wool, Jute, Silk, etc. Unlike other major textile-producing countries, Indias textile industry is comprised mostly of small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises. This unique industry structure is primarily a legacy of government policies that have promoted labour intensive, small-scale operations and discriminated against larger scale firms.

Opportunities

• More number of emerging malls and retail industries are providing opportunities to industrys segments like handicrafts and apparels.

• There is a provision of more FDI and investment opportunities.

• Withdrawal of quota restriction is contributing immensely in market development.

• The global needs are being catered with product development.

• An upsurge in the purchasing power and disposable income of Indian customers has opened room for new market development.

Threats

• Competing with other progressing countries like China.

• Striking a balance between the quality and price of products.

• Satisfying the demands of people all across the globe and at the same time, steadily improving the quality of the products.

• Striking a balance between demand and supply.

• Environmental and international labor laws.

• Removal of quota system will fluctuate the export demand Strengths

• The Indian textile industry is autonomous and self-governing.

• There is easy availability of low cost and proficient manpower that contributes extensively in the growth of the industry.

• Raw material is easily accessible - this acts as a major contributing factor in controlling the costs and minimizes the operational effort.

• The economy is growing rapidly and one can observe a potential international and domestic market.

• When we talk about the highest yarn exporters, India is known as one of the largest exporters in the international market. India accounts for around 25% share of the global trade in cotton yarn.

• The fiber industry is growing at a rapid speed as large varieties of cotton fiber are available easily.

• The apparel industry holds about 12% of the total export across the globe.

• The industry has an added advantage of having numerous segments which help in the provision of a huge variety of products.

Weaknesses

• The textile industry of India is one of the highly disintegrated industries.

• Few segments of this industry are not highly productive.

• There is a huge dependency of the industry on cotton.

• The mill segment is gradually declining.

• Labor laws are not very favorable.

• The power and interest rates, and indirect taxes are high.

• Inadequacy of technological development which in turn is responsible for affecting the productivity.

• The act of generating economies of scale lacks.

Future Outlook

The domestic textile and apparel industry is projected to grow at a CAGR of 12% for the next 10 years, so as to reach a level of US $350 billion. Encouraged by the turnaround in the textile exports, India is expected to grow at a CAGR of 20% for the next 10 years so as to reach a level of US $300 billion. The Government of India has envisioned an investment in this sector to the extent of US $120 billion for the next 10 years to create additional employment of 35 million jobs. The Government wants to achieve US $650 billion size of industry by achieving the following:

Scales across the value chain, Attracting investment in this sector, Working on skill development. Reforms in the labour laws Structural shift with increasing value addition in India, Diversification of exports in terms of product

and market, Building of brand Make In India is going to be a major promoting area of Government of India, particularly in textiles and garments and handloom sector. The Government also wants to re-engineer the existing schemes of policies: Technological Upgradation Fund (TUF), Scheme for Integrated Textile Parks (SITP). The future outlook for the Indian textile and apparel industry is promising. The new Government in India has a strong commitment to uplifting the complete value chain. While increasing disposable income, changing lifestyles and increasing demand for quality products are set to fuel the need for apparel, the Governments inclination towards skill development and Make in India branding is creating a conducive environment for increasing the manufacturing base as well as for large investments in the country.

Risks and concerns

The textile industry is reeling under manifold problems. The Sickness is widespread in the cotton textile industry. After the engineering industry, the cotton textile industry has the highest incidence of sickness. The plant and machinery and technology employed by a number of units are obsolete. The need today is to make the industry technologically up-to-date and also expand capacity as such it is of utmost importance that the whole industry is technologically updated.

Internal Control System and their adequacy

The Company has well defined internal control system. The Company takes abundant care to design, review and monitor the working of internal control system. Internal Audit in the organization is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organization. All significant issues are brought to the attention of the Audit Committee of the Board.

The Audit Committee of Board of Directors continuously reviews the adequacy of internal controls. Financial/operational Performance

Human Resources/Industrial Relations

The Company continues to lay emphasis on building and maintaining good relations with the workers and staff. Industrial Relations in the Company remained cordial and peaceful during the year.

Health and Safety Measures

The Company has health and workplace safety programmes in place and has established policies and procedures aimed at ensuring compliance with applicable legislative requirements. The manufacturing operations are conducted to ensure sensitivity towards environment and to help minimize waste by encouraging "Green" practices. Efficient management and use of renewable resources is encouraged. The Company believes that the health and safety of workers and persons residing in the vicinity of its plants is fundamental to the business. Cautionary Statement

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand-supply conditions, finished goods prices, raw materials costs and availability, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India.

The Company assumes no responsibility in respect of the forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.