Mohota Industries Ltd Management Discussions.

ECONOMIC AND INDUSTRY OVERVIEW

GLOBAL ECONOMY

In 2018, the global economy began its journey on a firm footing with estimated global economic growth of 3.6% (Source: World Economic Outlook by International Monetary Fund (IMF)). During the second half of 2018, this rate of development gradually declined, owing to impending US-China trade dispute and some slowdown across developed markets. Emerging and developing markets of Asia maintained their steady progress at 6.4% during 2018. However, its important to note that Indias economy expanded at 7.1% in 2018 vis--vis 6.7% in 2017, whereas Chinas growth deteriorated from 6.9% in 2017 to 6.6% in 2018 (Source: IMF). Sub-Saharan Africas economy also sustained a steady rise of 3% during the year.

INDIAN ECONOMY

India continues to be one of the fastest growing major economies in the world and is expected to be among the worlds top three economic powers in the next 10-15 years. The Indian economy is expected to improve and close the year 2019 with a GDP growth of 7.3% (Source: IMF). Sustained real GDP growth of over 6% since FY19 has led to a fundamental transformation of Indias economy. Today, India is the worlds seventh largest economy in real terms, backed by strong demand, positive consumption pattern and rising disposable income. In PPP terms, the economy is expected to be among the top five global economies by 2020.

GLOBAL TEXTILE

The global textile scenario is continuously evolving. Over the years, it has witnessed multiple shifts in consumption and production patterns, including shifts in geographical manufacturing hubs, as the industry is driven by the availability of cheap labour. The textile and apparel trade is predicted to grow at a CAGR of 3.7% during the period 2018-28. During this period, the increase in apparel trade is expected to be at a CAGR of 4.5% and textiles at a CAGR of 2.5%. India and China have a strong textile manufacturing base, and thus are emerging as both sourcing and consuming nations. Currently, China holds the largest share in textile and apparel global trade. It has vertically integrated supply chain from production of fibre to weaving of fabric and garmenting. The sector also has the capability to manufacture all categories of products and a conducive ecosystem to provide complete service offering to brands and retailers. However, the increasing labour and energy costs have mitigated the international competitive advantage of China to some extent. The global apparel manufacturers are finding Bangladesh, Vietnam and India as competitive markets over China.

INDIAN TEXTILE INDUSTRY

Indias textiles industry is among the oldest industries in the country dating back several centuries. It is one of the largest contributors to the economy accounting for ~4% of the GDP. It is the second largest contributor towards employment generation, after agriculture, contributing 10% to the countrys manufacturing, owing to its labour-intensive nature. The industry is characterised by its robust vertical integration in almost all the sub-sectors.

The textiles and apparel industry constitutes ~14% of the total exports of the country. India is the second largest producer and exporter of textiles after China and fourth largest producer and exporter of apparel after China, Bangladesh and Vietnam. The mitigation of the repercussions of currency fluctuation remains a challenge for the industry. Exports have been a core feature of Indias textile sector. Indian textiles and apparel exports were estimated at $39 billion and is expected to grow at a CAGR of 7.5% over the next decade to reach $76 billion by 2028. The fundamental strength of Indias textile industry is its strong production base with a wide range of fibres and yarns that include natural fibres like cotton, jute, silk and wool; and synthetic and manmade fibres such as polyester, viscose, nylon and acrylic.

At Mohota Industries Limited, We are growing since 1980 The Company has grown over the years on the back of strong agent relationships, some lasting more than 50 years, as well as a wide distribution reach. With a strong Agent network that drives robust Mohota fabric demand across India, the company has consistently been trying to improve the sales service and qualities of the product and services keeping up with the customers needs and preferences.

INDIAN RETAIL SECTOR

Indias retail industry growth is predominantly supported by expanding consumption patterns and rising income levels. With a dynamic demographic shift consisting of young consumers, the demand is expected to remain positive. Moreover, the growing penetration of mobile and internet across the interiors of India has led to a significant rise in e-commerce shopping.

Mohota industries Ltd. has more than 30 Agents with 2000 retail networks across the cities in India

Opportunities and Challenges

The future for the Indian textile industry looks promising, buoyed by strong domestic consumption. Overall, the government has been supportive in encouraging textile industry in India. Many incentives and schemes have been announced in the Union Budget to promote the sector. Further, introduction of GST is seen as a positive step in the long run. With the right government policies, we believe that the Indian Textile Industry is well poised to benefit from the large opportunity offered in the domestic and export market.

However, there are several challenges ahead for the Textile industry for enhancing its competitive strength and global positioning in terms of inflexible labour laws, poor infrastructure and competition from other low cost countries which will have to be addressed to sustain the growth momentum of the industry.

STRENGTHS OF THE TEXTILE INDUSTRY

The following are a few strengths of the Indian Textile Industry: An Independent and self-reliant industry; Large and potential domestic and international market;

Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across the operations; Availability of skilled manpower provides competitive advantage to the industry; Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry; Promising export potential.

WEAKNESSES OF THE TEXTILE INDUSTRY

The following are a few drawbacks of the textile industry, which it has to overcome.

The Industry is a highly fragmented Industry. It is highly dependent on Cotton.

There is lower productivity in various segments. There is a declining Mill Segment.

Lack of Technological Development that affect the productivity and other activities in whole value chain. Infrastructural Bottlenecks and inefficiencies such as, transaction time at ports and transportation time. Unfavorable labour laws.

Lack of trade membership, which restricts us to tap other potential markets.

SEGMENTWISE PERFORMANCE:

The Company has only one business segment i.e. " Textiles" .

INTERNAL CONTROL SYSTEM AND ADEQUACY:

The Company has a proper and adequate Internal Control System to ensure that its assets are safeguarded and protected against unauthorized use and disposition and all the transactions are properly recorded and reported. The Company also has a system of management reviews to ensure compliance with the prescribed procedures and authority levels.

Pursuant to section 134(5)(e) of the Companies Act, 2013, The Company has proper and adequate Internal Control and Internal Financial Control System, same is reviewed by Companys Internal Auditor together with Statutory Auditors, the Report by auditor on the companys Internal Financial Control System forms a part of Independent Auditors Report.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT

Employees are the companys most valuable resources. The company continues to create a favorable environment at work place. The company also recognizes the importance of training and continuously deputes its work force in various courses/seminars relating to important management tools like ‘Total Quality Management (TQM). The management is specifically calling professionals from various research institutes to train its work force. There were 984 permanent employees on the rolls of the Company.

The Company has taken following initiatives for skill development program for worker & staff.

1. Training to maintenance staff by qualified engineers from Voltas Ltd., Murata Machinery, Saurer Schlafhorst and Toyota.

2. Shop floor training to technical staff on " Air Engineering" (Humidification system) by B.T.R.A. a renowned textile research association.

3 Training to shop floor workers/operatives by trainer from U.T.T.S., Ahmedabad who guided them about discipline and work procedure while working on machines with proper safety for Toyota Airjet Looms.

4 Deputed staff members to attend National Textile Conference organized by Textile Association of India.

5. Deputed employees to attend various seminars organized by EPFO, VIA, ICSI etc. as a part of an ongoing development process.

Following social activities held by the Company

Organized Blood donation Camp on Founders Day of the Company i.e. on 29th March by which donated 100+ units of blood to Blood Bank.

Industrial relations are cordial and satisfactory.

Cautionary Statement:

Statements made in this report describing outlook as well as Companys Plan Projections and expectations may constitute ‘forward looking Statements within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.

On Behalf of the Board
Sd/-
Place: HINGANGHAT Vinod Kumar Mohota
Date: 14/08/2019 Chairman & Managing Director