Premco Global Ltd Management Discussions.

Indian fashion retail is presently witnessing astrong demand for knitwear products The knitwear market is expected to grow at a promising rate of 9 percent over the next decade to reach 1,61,700 crores from the current market size of 68,932 crores.

Mens wear is the single largest category in knitwear, accounting for 40 percent of the market, followed by womens wear, boys wear and girls wear with market shares of 34 percent, 18 percent and 8 percent respectively. The innerwearcategory , in which Premco Global operates , accounts for 34% of knitwear market

The innerwear category, estimated to be worth 27,931 crore, accounts for 10 percent of the TOTAL apparel market in 2017. It is expected to grow at an impressive CAGR of 10% over the next decade to reach 74,258 crore.

The mens innerwear market, which is estimated to be worth 9,477 crore in the year 2017, is estimated to grow at a CAGR of 6 percent to reach 17,894 crore by 2027.

Indian consumer spend on innerwear products is significantly lower than other Asian peers. This trend is visible across both mens and womens segments with gaps of over 90% against countries like Thailand and China. This suggests that there is significant room for growth driven by rising per capita spending on such products.

Looking ahead, we expect growth in the innerwear market to be driven by broad based consumer trends in the form of rising discretionary spend, growing number of mid-high-income house hold and rising urbanization. Innerwear has graduated from being just a functional category to a category that offers additional fashion quotient. It is shifting from a price sensitive category to a brand sensitive category. Source: CLSA Asia-

Pacific Markets, Euro monitor.

Premco Global which basically caters to Mens Innerwear category, has invested Rs230.85 Lacs in Capital expenditure for modernizing the Indian Operations.The areas of expenditure include modernizing of warehousing at Dadra factory and an increasein automation of its other Plants as well.

The year 2018-19 being the first FULL year in which GST was applicable (from April 18 to March 19), the results will have some difference in presentation compared to last y the ear where part of the year was under the old VAT system. Hence the ‘ other revenue figures are not comparable to last year, which included

Duty Drawback income as well (Upto june, 30 2017)

OPPORTUNITIES AND THREATS FOR THE COMPANY OPPORTUNITIES :

For the apparel industry in general and our market in particular:

* In 2018-19, Company received SINGLE STAR EXPORT HOUSE CERTIFICATE, which will enable ourcompany to be recognized for ease of operation with tax and banking officials.

Company having locational advantage of supply of goods to overseas customer as It has plant in VIETNAM , which is presently a large global textile Hub, and ranks amongst the maost rapidly growing countries for textiles manufacturing and exporting..

Increasing fashion consciousness , higher disposal incomes and consumers becoming more aspirational, discerning and brand savvy , will help the brands for which Company has been manufacturing ELASTIC TAPES grow rapidly and indirectly will increase the demand for Companys products.

THREATS

Many major international apparel brands have commenced operations in India realizing that Indian markets are likely to emerge as one of the largest markets in the world in the next few decades. Due to this many small and big players will with the Companys business.

Companys Exposure to Foreign Currency Risks due to Overseas Operations.

SEGMENTWISE PERFORAMNCE :

As per the Management, Company is mainly engaged in the business of Manufacturing of Woven & Knitted Elastic Tapes and all other activities of the Company revolve around the main business, and as such, there are no separate reportable segments.

OUTLOOK

Company continues to strive for utilizing its FULL capacity by concentrating on new customers in India and overseas markets for its Products.

The Companys Vietnam Operations caters to large global orders i. IN the ensuing year ,It expects to achieve 90% capacity

Utilization, thereby improving Profitability and margins.

Looking ahead, the Company has already developed and launched new and innovative products , including Dyed Tapes and Tapes made from Super Soft yarns. The Company expects to cater to large orders from Global brands and customers.

FINANCIAL PERFORMANCE :

Rs. in Lakhs

PARTICULARS Standalone Consolidated
March 2019 March 2018 March 2019 March 2018
Revenue from Operations 5323.39 6567.42 7,212.41 8,136.64
Expenses 4985.15 5609.82 6409.93 7044.55
Profit Before Finance Cost, Depreciation & Amortization Exp. 338.24 957.60 802.48 1092.09
Finance Cost 79.62 83.41 150.17 100.36
Depreciation & Amortization Exp. 171.81 191.44 271.84 273.90
Profit before Exceptional Items 86.81 682.75 380.47 717.81
Extra Ordinary Item (106.56) - (106.56) -
Profit before Taxation (19.75) 682.75 273.91 717.81
Less : Provision for current Taxation 19.16 234.49 19.16 234.49
Deferred Taxation adjustment (54.78) (57.56) (54.78) (57.56)
Profit After Taxation 15.87 505.82 309.53 540.88
Minority Interest - - (48.82) (14.41)
Other Comprehensive Income (Net of Tax) 79.17 1.65 79.17 1.65
TOTAL Comprehensive Income 95.04 507.47 339.88 528.12
Paid up Equity Share Capital 330.48 330.48 330.48 330.48
Earnings Per Share (Rs.) 2.88 15.36 10.28 15.98

STANDALONE ANALYSIS

During the year under review, Companys revenue from operations stood at Rs. 5323.39 Lacs as against Rs.6567.42 Lacs in the previous year, The Company has earned a Net profit after Tax of Rs. 15.87 Lacs as compared to the Net Profit after Tax of Rs. 505.82 Lacs during the previous accounting year.

The Companys EBDIT for the year on STANDALONE basis was at Rs 338.24 Lacs as against Rs. 957.6 Lacs. The STANDALONE Profit after Tax of the Company Stood at Rs 15.87 as against Rs. 505.82 Lacs.

Extraordinary item includes expenditure of Rs. 106.56 Lakhs booked towards reversal of GST credit on inventory held as on date of implementation of GST law i.e. Rs. 82.25 for Trans 1 credit (01.07.2017) & Rs. 24.31 for in-advert credit ( 01.08.2018).

On the STANDALONE basis, Companys other operating revenue was lower by 67.02 % (Rs. 145.77 Lacs) due to lower duty drawback incentives post GST era w.e.f. 01.10.2017. Company has since revised the export prices to cover the cost. Other income was higher by 6.33% (Rs. 23.70 Lacs) as compared to previous year.

Domestic sales were lower by 10% (Rs. 295.98 Lacs) as compared to previous year. The decline was mainly on account of Lower domestic demand due to floods in Central &Southern part of India.

The Company exports were lower by 23% i.e. (Rs. 713.94 Lacs). This was on account of lower trading activity with companys own subsidiary & lower sales to one of our large customers.

PGVL Vietnam was able to develop and &procure supplies locally , thereby reducing the Raw Material sourcing from India. The Company was able to pass on the lower duty drawback effect due to reduction in Rates to export customers, thereby improving the RM Consumption to Sales ratio by 3.36 %.

There is an increase in RM Cost of Rs. 61.56 Lacs due to increase in RM Prices

The Company has incurred expenses (other than RM Cost) of Rs. 2496.59 Lacs in current year as compared to previous year of Rs. 2435.03 Lacs. Also Employee cost increased by Rs 25.15 Lacs as compared to previous year, which was on account of new recruitment in the Marketing division , which would strongly focus on new Markets , and building business with big brands Internationally and in India .

There has been decline in finance cost of Rs. 3.79 Lacs and Depreciation by Rs. 19.63 Lacs during the FINANCIAL year.

The Companys manufacturing expenses were higher by Rs. 59.83 Lacs due to revision in Contract / Piece rate & high electricity rates / cost. This was also partly due to higher production volumes

CONSOLIDATED ANALYSIS

During the year under review, On Consolidated basis, revenue from operations stood at Rs. 7,212.41 Lacs as against Rs. 8,136.64 Lacs in the previous year and Net Profit after Tax stood efficiencies at 309.53Lacs as compared to the Net Profit after Tax of Rs. 540.88Lacs during the previous accounting year.

The Companys Consolidated EBDIT for the year stood at Rs. 802.48Lacs as against Rs. 1092.09Lacs, The Consolidated

Profit after Tax of the Company Stood at Rs. 309.53Lacs as against Rs. 540.88Lacs. On the Consolidated basis, Companys other operating revenue was lower by 67.02 % (Rs. 145.77 Lacs) due to lower duty drawback incentives post GST era w.e.f. 01.10.2017. Company has since revised the export prices to cover the cost. Other income was increased by 4.90 % (Rs. 14.66 Lacs) as compared to previous year.

The Company exports were lower by 8.23% i.e. (Rs. 388.01 Lacs). This was on account of lower sales to one of our large customers , as well as depressed market for all textile products due to poor retail sales globally. Companys GrossMargins (Sales minus RM Cost on products improved substantially from 46.54% to 53.80% ensuring net saving of Rs. 503.71 Lacs.

The Company has incurred expenses (Other than RM Cost) of Rs. 3632.59 Lacs in current year as compared to previous year of Rs. 3350.04 Lacs. There is a slight increase in expenses of Rs. 282.54 Lacs on account of increase in cost of Raw Material and growing competition in market. The rise in cost was partly also due to different Product Mix.

Also Employee cost increased by Rs 173.20 Lacs as compared to previous year, which was on account of new recruitment in the Marketing division , which would strongly focus on new Markets , and building business with big brands Internationally and in India .Also Vietnam Plant was run at Higher Capacity as compared to previous year resulting in Higher Employee cost incurred at Vietnam.

There has been increase in finance cost of Rs. 49.81 Lacs due to higher working Capital and Exchange Loss. Further there was a slight decline in Depreciation by Rs. 2.06 Lacs during the FINANCIAL year.

The Companys manufacturing expenses were higher by Rs. 61.59 Lacs due to revision in Contract / Piece rate & high electricity rates / cost. This was also partly due to higher production rates.

FINANCIAL VISION AND OUTLOOK:

Company has been successful in training and fully operationalizing its VIETNAM PLANT facilities with achieving FINANCIAL breakeven and turnaround in Profitability as compared to PREVIOUS FINANCIAL year.

With Vietnam Operations achieving more than 75% operational this year, the Company is now focusing on improving its capacity utilizations in both India and Vietnam Operations , by developing new customers and offering them innovative products .

Company expects and targets to achieve a targeted growth of 10 to 15% next year. This will leverage the Companys Margins and Profitability.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES (INCLUDING NO OF PERSONNEL EMPLOYED)

The Company believes that Human Resources is one of the most vital resources and a key pillar in providing the Organization a competitive edge in a current business environment.

The Work Environment is very challenging and performance oriented. The Company recognizes employees potential and provides them with growth opportunities and takes suitable measures for employees welfare.

As on 31st March 2019, Premco Global limited Employs 500 strong work force in Indian Operations and more than 250 Managers , Workers and staff in Vietnam.

Performance Management for Staff Members

The Company has designed and implemented a Performance Management System (PMS) that allows individual Goal/KRA (Key Result Area) setting. This enables a two-way discussion between a Staff Member and his/her Reporting Manager (Coach) which ensures that the organizations objectives are percolated down to teams and individuals.

Talent Acquisition:

The Company continues to strengthen both leadership and managerial team. Taking into consideration the increasing scale of operation, we have inducted senior leaders and executives who bring rich experience from world-class organizations around the world, as well as youngsters, who bring fresh energy into our organization.

PICNIC :

Company conducts Picnic for its employees at the end of year. This year was carried out at Imagica, Khopoli, where employees participated alongwith their families and enjoyed the day.

Training :

The Company has taken various technical upgradation and training Programmes to upgrade the communication ,safety and technical skills of their employees. The Company conducts on the Job Training also gives rewards for Improvement in Delivery, Quality of products and automation within the Plants.