Rubfila International Ltd Management Discussions.

Rubfila operates mainly in the elastic market which is a critical segment in the supply chain eco system catering to the inner wear industry. During the year under review Company posted a gross sales turnover of Rs. 21,374.21 Lakhs.

A) INDUSTRY STRUCTURE AND DEVELOPMENT :

Market Scenario

After a few years of witnessing growth, headwinds were visible in the hosiery industry in the last year, in line with the general economic scenario prevalent in the country. Irrespective of this, the industry is believed to be growing though at a lower rate.

The textile industry which used to operate under the zero tax regime went through teething troubles when GST was implemented in 2017. This pain continued in the past year due to liquidity issues which existed in the market. Even during the festival seasons, economic activities did not pick up as was seen in the past. It was in this adverse environment that the company managed to grow its sales in volume though there was a dip in the sales value. This was due to the dip in the unit sales value realisation since the company was compelled to benchmark its price against the landed cost of imported rubber threads. This had led to a reduction in the imports by 600 MT over the Year on Year basis. While there are negative signs on economy all around, the company looks forward to positive changes in the overall economy as well as in the textile sector towards the end of the current financial year. The fact that the product caters to the basic needs of consumers ensures that there could be traction in demand even in a sluggish market. Also, the Central as well as various state governments are in the process of revising minimum wages for workers which will lead to more money in the hands of the consumers. With the higher income levels, the consumption for these basic needs is expected to go up which is a positive for the industry.

The company continued to be the largest player of rubber threads in India and doesnt foresee any change in the status in the coming year too. The size of the world market for rubber threads is small when compared to many industries, but inside this, there are a few larger markets in China, Brazil, Turkey etc where large customers exist. Since the company had decided to proceed with expansion of production capacity, conscious efforts are taken targeting new overseas markets. The results have been encouraging with the company adding new customers from many countries. The company foresees itself as a dominant player in the international market in the near term.

OPPORTUNITIES AND THREATS :

Strengths of the Company are:

1. Largest manufacturing capacity for rubber threads in the country.

2. Reputed brand name.

3. Caters to majority of the Indian customers spread over the hosiery clusters of Delhi, Kolkata, Ahmedabad, Surat, and Tirupur and other parts of the country. The company maintains regional marketing offices in all the above regions so as to have a close contact with the customers.

4. Has strong presence in the international market with repeat orders from customers.

5. Experienced and committed employees with in depth knowledge of the industry.

The major threats being faced by the Company are :

1. Cheaper imports of rubber threads from Malaysia and Thailand.

2. Large un utilised capacities in the South East Asian countries.

3. Higher import duties for Centrifuged Latex, the major raw material.

4. Policy constraints on imports of natural latex.

5. High volatility in the domestic latex prices.

6. Liquidity constraints in the domestic markets.

7. Inverted duty structure in imports.

8. Usage of spandex in the market.

OUTLOOK :

The company has undertaken a major expansion plan by putting up a new factory in Tamil Nadu. With additional capacity, it is optimistic in making inroads further into the domestic and international markets. If the US-China trade war can lead more opportunities for the Indian industry in the textile sector, it would be a boon to the rubber threads industry too. Any turnaround in the textile segment will percolate down to the undergarments sector too benefitting the rubber thread industry.

B) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY :

The Company has proper and adequate internal control systems to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly.

C) FINANCIAL AND OPERATIONAL PERFORMANCE :

Please refer Board Report on performance review.

D) MATERIAL DEVELOPMENTS IN HUMAN RESOURCES /INDUSTRIAL RELATIONS FRONT:

The company has a committed team of employees working at various levels, which has been the differentiating factor when compared to other players in the industry. Without their support, the company could not have achieved this levels of performance and the management is thankful to them for that.

The company maintains a cordial relationship with all the employees. As part of the compensation plans, it had entered into a Long Term Wage settlement with recognised Trade Unions for a 3-year period ending on31-03-2020.