Prakash Woollen & Synthetic Mills Ltd Management Discussions.

1) OVERVIEW OF THE ECONOMY Global Economy

The Government is expected to announce its new textile policy with an ambitious target of achieving 20 per cent share of the global textile trade and helping the domestic industry attain a size of $650 billion by 2024-25 by focusing on investments, skill development and labour law reforms. The policy blueprint, termed the ‘Vision, Strategy and Action Plan for the textiles and apparel industry, lays thrust upon diversification of exports through new products and markets along with increasing value addition and promoting innovation and R&D activities.

The textile industry is expected to attract investment of about $120 billion by 2024-25 and create about 35 million additional jobs in the process. Exports are also expected to rise from the current $39 billion to $300 billion by 2024-25. The action plan notes that attracting the required investment entails ready availability of developed land with adequate infrastructure, skilled manpower and easy connectivity to ports, along with creation of new mega textile parks, lowering the cost of production and logistics, and encouraging new entrants through start-ups as well as FDI. (Source: indiantextilemagazine)

Indian economy

"In India, growth is estimated to have slowed to 4.2 per cent in the fiscal year 2019/20 (the year ending in March-2020) and output is projected to contract by 3.2 per cent in fiscal year 2020/21, when the impact of COVID-19 will largely materialize.

According to the IMF, the Indian economy grew by 4.2% in 2019, against 6.1% in 2018, forcing policymakers and markets to rethink Indias economic outlook. Slower domestic consumption dragged on growth and tighter credit conditions led to weaker private investment, which have translated into fewer jobs. Three of the four growth engines - private consumption, private investment, and exports - have slowed down significantly. The significant fall in consumption - which is the biggest contributor of growth - points to fragile consumer sentiment and purchasing ability. As such, the government has announced a slew of reforms to jump-start the economy. According to the updated IMF forecasts from 14th April 2020, due to the outbreak of the COVID-19, GDP growth is expected to fall to 1.9% in 2020 and pick up to 7.4%, subject to the post-pandemic global economy recovery.

2) ANALYSIS AND REVIEW Business Outlook

Under the current scenario, especially the constant preventing measures being taken and awareness created by the Government to fight against the Coronavirus pandemic, majority of the workers are not reporting for work and the migrant workers are also returning to their native places. This situation is likely to intensify and result in mass stoppage of production in the industry.

With the expected steep reduction in demand due to sudden stoppage of exports/imports and also domestic sales due to the closure of malls and retail showrooms, the industry is likely to face unprecedented and severe losses and needs immediate financial relief to mitigate the crisis. Therefore, the textile industry, being labour and capital intensive, needs immediate help to tide over the worst ever crisis being faced by the industry.

Indias economic growth could take a hit of up to half a percentage point in FY21 because of the disruptions caused by the Covid- 19 outbreak, early estimates by the government suggest. But independent economists see a deeper cut of up to one percentage point. (Source: Indian textile journal)

3) Indian Textile Industry

India Textile Industry is one of the leading textile industries in the world. Though was predominantly unorganized industry even a few years back, but the scenario started changing after the economic liberalization of Indian economy in 1991. The opening up of economy gave the much-needed thrust to the Indian textile industry, which has now successfully become one of the largest in the world.

India textile industry largely depends upon the textile manufacturing and export. It also plays a major role in the economy of the country. India earns about 27% of its total foreign exchange through textile exports. Further, the textile industry of India also contributes nearly 14% of the total industrial production of the country. It also contributes around 3% to the GDP of the country. India textile industry is also the largest in the country in terms of employment generation. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors. Indian textile industry currently generates employment to more than 35 million people. It is also estimated that, the industry will generate 12 million new jobs by the year 2010. (Source: Fibre to fashion Blog)

4) Opportunities and Threats

Regularly, world textile trading increases with 3 - 4% year by year, and domestic growth rate is 6 - 8% per year. It shows potentiality of domestic and international market. As per the market demand, diversification and innovations in product ranges are possible in Gujarat. Market for textile wet processors and apparel manufacturers are with wide boundary. There is not any restriction in development and innovations. Government has introduced Start-up and Innovation policies at study level. So the student can also innovate and start his own start-up with government funding. Small and medium scales industries are widely recognized by foreign market for exporting the material. Market for application of technical textiles in apparel is still open for innovations and new designs. Gujarat has the chances for increasing Unit Value Realization with producing value added products and product with new technological application. Utilization of IT in industries improve the communication more transparent and reduced the same exercises.

Processing industries from developing countries are in competition. Quality of processing as well as for garment has to be improve regularly and also achieve the demand of purchaser. Labour laws and Environmental laws are the big challenge for wet processing industries in Gujarat. Satisfaction of customer with demand, supply, price and quality. Quality assurance and environmental standards like, SA, ISO, OHSAS etc. Bilateral agreements reduced the Gujarat export.

(Source: Textile Value Chain)

5) Risk and Concerns

In principle, risk always results as a consequence of activities or as a consequence of non-activities. Risk Management and Risk Monitoring are important in recognizing and controlling risks. Risk mitigation is also an exercise aiming to reduce the loss or injury arising out of various risk exposures. Prakash Woollen adopts a systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and regulations. The Company believes that this would ensure mitigating risks proactively and help to achieve stated objectives. The Company will consider activities at all levels of the organization and its Risk Management with focus on three key elements, viz.,

(1) Risk Assessment- detailed study of threats and vulnerability and resultant exposure to various risks.

(2) Risk Management and Monitoring- the probability of risk assumption is estimated with available data and information. (3) Risk Mitigation- Measures adopted to mitigate risk by the Company.

The Audit Committee has additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

6) Internal Control Systems and their Adequacy

The Companys internal audit system has been continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The Audit Committee reviews reports presented by the internal auditors on a regular basis. The Committee makes note of the audit observations and takes corrective actions, if necessary. It maintains constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively. Apart from the above the company has engaged M/s Pulkit Rastogi & Co.- Amroha, Chartered Accountant, to conduct Internal Audit during the year 2019-20.

7) Financial and operational performance

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in India. Please refer Directors Report in this respect.

The Company is engaged in the blankets business only. Therefore there is only one reportable segment in accordance with the Accounting Standards on Segment Reporting (Ind AS 108).

There are no material changes or commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this Report.

8) Human Resources and Industrial Relations

Human resource is considered as the most valuable of all resources available to the Company. The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve with ongoing technological advancements. During the year the no. of employees associated with the company were 28.

The role of human resource management in organization is at counter stage. Managers are aware that HRM is a function that must play a vital role in the success of organization. It is an active participant in charting the strategic course an organization must take place to remain competitive, productive and efficient. Its focal point is people, people are the life blood of the organization. The uniqueness of HRM lies in its emphases on the people in work setting and its concerns for the well living and comfort of the human resources in an organization. The HRM function is much more integrated and strategically involved. HRM and every other functions must work together to achieve the level of organization. Effectiveness required competing locally and internationally.

Industrial relation is the one of the major component which determine the potentiality and stability of the employees as well as helps to enrich the productivity of the business establishments. Textile industries were contributing more to the Indian economy in terms of export earnings as well as generating employment opportunities. Most of the modern days business establishments have failed to maintain the good industrial relations as well as face the labour scarcity due to high employee turnover. The relationship between the employees and employers determine the productivity of the enterprises. If the industrial relation is good the enterprise will attain the success in all the side especially in terms of producing the materials without much defects.