SKS Textiles Ltd Management Discussions.

ANNEXURE V

The Management of M/s S K S Textiles Limited is presenting the Management Discussion and Analysis Report covering the operations and financial performance of the Company for the financial year 2018-2019. The Company is engaged in manufacturing and trading of grey fabrics and finished fabrics for shirting, suiting and other accessories for its own brand and also outsourcing basis for other fabric/garment companies.

INDUSTRY STRUCTURE & DEVELOPMENT

The fundamental strength of India Textile Industry flows from its strong production base of wide range of fibers/yarns-from natural fibers like cotton, jute silk and wool to synthetic/manmade fibers like polyester, viscose, nylon and acrylic. The Indian textile industry is likely to continue its growth, Buyoed by strong domestic consumption as well as export demand. It is currently estimated at around US$ 150 billion and is expected to reach US$ 230 billion by 2020. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The Indian textile Industry contributes approximately 4 percent to India s gross domestic product (GDP), 10 percent of manufacturing production and 14 percent to overall index of industrial Production (IIP). India accounts of 63 percent of global market share of textiles and garments. India accounts for about 14 percent of world s production of textile fibers and yarns.

OUTLOOK

The Indian textile industry has a potential to double itself in size over the next 6-7 years, Government has been overall supportive in encouraging textile industry in India. Textile and garment industry has been included in list of 25 sectors of "Make in India" initiative of the Government of India. 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. Under the Make in India intitative, investment opportunities for foreign companies and entrepreneurs are available across the entire value chain of synthetic, value added and specialty fabrics, fabric processing set ups for all kinds of natural and synthetic textiles, technical textiles, garments and retail brands.

COMPETITION

The industry in which we operate is highly competitive and fragmented. Competition emerges from small as well as big players in the textile industry. The organized players in the industry compete with each by providing high quality-time bound products and value added services. We have a number of competitors offering services similar to us. We believe the principal elements of Competition in textile industry are price, fabric quality, timely delivery and reliability. We compete against our competitors by establishing ourselves as a designer based manufacturing unit with industry expertise in blending, dying and printing which enables us to provide our clients with innovative designs suitable to current fashion and market requirements.

SWOT ANALYSIS OF INDIAN TEXTILE:

India s textile industry is one of the world s leading textile industries. Few years back, this industry came under the unorganized sector, but this scene got completely revolutionized after the Indian economy s liberalization. Right after liberalization, the textile industry in India got the much-needed push, and today it is counted as one of the largest industries in the world. Till date, only China is one nation that could match up to the competitiveness of the Indian textile industry.

Strengths

• The Indian textile industry is autonomous and self-governing.

• There is easy availability of low cost and proficient manpower that contributes extensively in the growth of the industry.

• Raw material is easily accessible this acts as a major contributing factor in controlling the costs and minimizes the operational effort.

• The economy is growing rapidly and one can observe a potential international and domestic market.

• The fiber industry is growing at a rapid speed as large varieties of cotton fiber are available easily.

• The industry has an added advantage of having numerous segments which help in the provision of a huge variety of products.

Weaknesses

• The textile industry of India is one of the highly disintegrated industries

• Few segments of this industry are not highly productive.

• There is a huge dependency of the industry on cotton.

• The mill segment is gradually declining.

• Labour laws are not very favorable.

• The power and interest rates, and indirect taxes are high.

• The act of generating economies of scale lacks. Opportunities

• The textile industry records an annual growth of around 6-8%.

• A shift towards the market of branded ready-made garment is being observed.

• More number of emerging malls and retail industries are providing opportunities to industry s segments like handicrafts and apparels.

• There is a provision of more FDI and investment opportunities.

• Withdrawal of quota restriction is contributing immensely in market development.

• The global needs are being catered with product development.

• An upsurge in the purchasing power and disposable income of Indian customers has opened room for new market development.

Threats

• Competing with other progressing countries like China.

• Striking a balance between the quality and price of products.

• Satisfying the demands of people all across the globe and at the same time, steadily improving the quality of the products.

• Striking a balance between demand and supply.

• Environmental and international labour laws.

• Removal of quota system will fluctuate the export demand.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company is engaged in the business of manufacturing and sale of textile accordingly this is the only single reportable segment.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new/revised standard operating procedures. The Company s internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to N N K & CO. a reputed firm of Chartered Accountants. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

ENVIRONMENT AND SAFETY

The Company is conscious of the importance of environmentally clean and safe operations. The Company s policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Company has team of qualified and dedicated personnel who have contributed to the consolidation of the operations of your Company. Your Company s industrial relations continued to be harmonious during the year under review. Your Company has succeeded in attracting and retaining key professional and intends to continue to seek fresh talents to further enhance and grow our business.

CAUTIONERY STATEMENT

Statement in this report describing the Company s objective, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual result may differ materially from those expressed in the statements. Important factors that could influence the Company s operations include economic conditions affecting demand / supply price condition in the domestic markets in which the Company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.