Sri Arumuga Enterprise Ltd Management Discussions

Industry Structure and Development

The spinning industry is continuously expanding in South Asia and China in the last few years and is becoming growth engine of these economics.

At present the contribution of the Indian Textile Industry to its GDP is about 4.8%. Role of Textile Industry in India GDP has been quite beneficial in the economic life of the country. The worldwide trade of textiles and clothing has boosted up the GDP of India to a great extent as this sector has brought in a huge amount of revenue in the country.

Indias textile industry is one of the leading textile industries in the world, exporting to over 100 countries. It contributes a significant 17 percent to Indias overall export earnings and employs over 35 million people directly, making it the second largest source of employment after agriculture

After the removal of quotas by European Union in 2005 and because of Textile Upgradation Fund (TUF) interest susbsidy, huge capacity expansions have taken place in Textile Industry in India.

The government has set the target for textile exports in the 2014-15 financial year at US$60 billion. Policies of Government of India provides opportunities for the Indian Textile Export during the financial year 2014-2015.

Outlook

The outlook for Textile Industry in India is optimistic. It is expected that Indian Textile Industry would continue to grow at an impressive rate. The fundamental strength of this industry flows from its strong production base of wide range of fibres/ yarns from natural fibres like cotton, jute, silk and wool to synthetic / man-made fibres like polyester, viscose, nylon and acrylic. In fact, apart from China, no other country can boast of such strong and diverse base in textile fibres/ yarns. The complex and varied structure of industry coupled with Indias close linkage with culture and multi-fibre raw material base enables it to produce variety of products for varying consumer needs and preferences. The growth pattern of the Indian Textile Industry in the last decade has been considerably more than the previous decades, primarily on account of liberalization of trade and economic policies initiated by the Indian Government in the 1990s.

The inherent strengths of the Textile Industry have seen the Textile Industry through rough days and hard times. There have been many periods of adversity, when growth charts have dipped and it has appeared that misfortune will overtake. But like phoenix, the Textile Industry has risen each time from the ashes.

Risk & Concerns

High volatility of cotton, yarn prices, rupee exchange rate, high attrition and shortage of work force are the major concerns for us. In order to mitigate the above risks, we have been taking several initiatives like lowering inventory levels, reducing manpower requirement by modernization of machines, application of autonomous maintenance philosophy, rationalization of workforce, Employee training and development, etc.

Internal Controls

There is proper and adequate system of Internal Controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized recorded and reported correctly. The internal control systems are supplemented by Internal Audits and review of the same by Audit Committee at corporate level.

Acknowledgement

Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable cooperation and support to the Company. They also take this opportunity to express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.