Runeecha Textiles Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENT

For the Textiles industry, the global focus is shifting from China to India due to cost and stability factors. The governments positive steps are expected to help this shift and if foreign investments in textiles retail materialises, the consumption of the textile products in the domestic market should increase in the years to come. Recently, Government has withdrawn the requirement of export contract registration for cotton and cotton yarn and now these are in the free list, without any requirement of registration, which should boost export of cotton yarn and simultaneously, the domestic market is expected to improve. The recently announced Foreign Trade Policy 2015- 2020 in which the export obligation for domestic procurement of capital goods under EPCG has been reduced from 90% to 75% and the said Policy has also introduced a single Merchandise Exports from India Scheme (MEIS) as against 5 different schemes for rewarding merchandise exports with different kinds of scripts with varying conditions. This has simplified the procedure/documentation to get the export benefits quickly, which will promote textile exports from India. Power and labour costs are increasing, due to which, cost of production has been going up. The expected fall in the value of rupee should act positively for promotion of exports.

OPPORTUNITIES AND THREATS

There is scope for growth in the textile industry as Indias share in the global trade in textiles is weak, compared to other countries, based on the availability of raw material and skills. The free trade environment is a good opportunity for Indian textile industry to increase its share in the global market.

Lack of uninterrupted power, increased power costs, higher transaction costs, high cost of labour are hindering the progress. However, we are making all out efforts to cope with all these challenges by continuous efforts at cost reduction, process improvements, diversification of products and improving productivity by improving efficiencies

BUSINESS OUTLOOK

Indian economy is expected to grow by 7.8% in CY 2016 (7.3% in CY 2015) as forecasted by World Bank. Similar figures for World are 2.9% (2.4%), USA 2.1% (1.6%) and China 6.3% (6.4%). Estimates for fiscal 2016-17 by RBI and other financial institutions for Indias GDP are 7.6-7.8%. Consumer Price Inflation is steadily coming down and is now below 5% prompting RBI to also reduce benchmark lending rates China is expected to adopt policies leading to growth of services and domestic consumption and reduce dependence on exports of goods. Monetary policy tightening cycle in the United States is likely to proceed without undue turbulence. Stabilizing crude oil prices despite any agreement between major producers is also positive for global economy. We are focusing on Exports and Technical Textiles (including products for institutional sector). Our products are well accepted in International Market as well as in Defence, Paramilitary forces, Steel and Oil Companies. RTL is planning to leverage the safety and security solutions with an understanding that there has been a buying of more than Rs. 4000 crore of such products.

RISK MANAGEMENT

The ability to take risks is the hallmark of any good enterprise, but if those risks are managed ineffectively, then growth can be adversely affected. Corporate reality is today besieged with challenges. Whether those challenges relate to governance, people, process or technology, there has to be methodology to address all of them efficiently. In our company, we adopt a risk intelligent approach to manage financial, technology and business risks. Our risk management initiatives are directed so as to better align our business objectives and strategies with the need of todays competitive market. Your Company has a well-defined risk management framework in place. Under this framework, the Management identifies and monitors business risks on a continuous basis, and initiates appropriate risk mitigation steps as and when deemed necessary. Our company has established procedures to periodically place before the Board the risk assessment and minimization procedures being followed by the Company and steps taken by it to mitigate those risks through a properly defined framework.

QUALITY

Quality is intrinsic to Runeecha Textiles philosophy, and is visible everywhere in its process driven manufacturing and control systems. Well defined quality tests are employed at every stage of the production process from the selection and procurement of raw materials, to inspection of final product and after sales support. In addition, customer satisfaction exercises are frequently conducted for feedback. Stringent control processes ensure that Runeecha Textiles products meet rigorous quality norms. Long term relationships with customers, especially in the quality conscious European markets, are a testimony to our high and consistent standards.

HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS

Your Company has adopted a progressive policy for helping employees to develop their organizational skill, knowledge, and abilities to achieve greater efficiency. The focus of all aspects of Human Resource Development is on developing superior workforce so that the organization and individual employees can accomplish their work goals of service to customers. Welfare and training at all levels of our employees continue to be areas of major focus for the Company. Your Company recognises human resources as the backbone of its long-term success. It emphasis on safe work practices and productivity improvement is unrelenting.

The industrial relations remained cordial throughout the year. The employees of the Company are extending a very productive co-operation in the efforts of the management to carry the Company to greater heights.

INFORMATION TECHNOLOGY

Runeecha Textiles extensively leverages IT tools in its operations to achieve greaterproductivity and efficiency.

INTERNAL CONTROL SYSTEM

Your Company has an adequate and effective internal control system to ensure that assets and interests of the Company are safeguarded and reliability of accounting data and accuracy are ensured with proper checks and balances.

The internal control system is improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements. The Audit Committee, Board of Directors, Statutory Auditors and the business heads are periodically apprised of the internal audit findings and the corrective actions taken. The company has already appointed Internal auditors for strengthening the internal control system of the company and they are conducting Audit on regular basis. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them.

ENVIRONMENT AND SAFETY

The Company continues to focus on maintenance and performance improvement of related pollution control facilities like effluent treatment plant and waste disposal facility at its manufacturing locations. The Company recognises protection and management of environment as one of its highest priorities and every effort is made to conserve and protect the environment.

The management of your company has always given special attention to maintain harmonious industrial relations and this year also the Industrial Relations generally remained cordial.

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 and the countries with which the Company has business contacts. 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.