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Global Economic Overview

Global growth is projected to fall from an estimated 3.5 percent in 2022 to 3.0 percent in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by historical standards. The rise in central bank policy rates to fight inflation continues to weigh on economic activity. Global headline inflation is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward.

Source: https://www.imf.org/en/Publications/WEO/Issues/2023/07/10/world-economic-outlook-update-july- 2023

Global Growth Outlook Projections (in %)

Country/Group	2022	2023	2024 (Projected)
World Output	3.50	3.00	3.00
Advanced Economies	2.70	1.50	1.40
United States	2.10	1.80	1.00
Euro Area	3.50	0.90	1.50
Japan	1.00	1.40	1.00
United Kingdom	4.10	0.40	1.00
Canada	3.40	1.70	1.40
Other Advanced Economies	2.70	2.00	2.30
Emerging Markets and Developing Economies	4.00	4.00	4.10
Emerging and Developing Asia	4.50	5.30	5.00
China	3.00	5.20	4.50
India*	7.20	6.10	6.30
ASEAN-5	3.40	4.60	4.80
Emerging and Developing Europe	0.80	1.80	2.20
Russia	-2.10	1.50	1.30
Latin America and the Caribbean	3.90	1.90	2.20
Middle East and Central Asia	5.40	2.50	3.20
Sub-Saharan Africa	3.90	3.50	4.10
Emerging Market and Middle- Income Economies	3.90	3.90	3.90

* For India, data and forecasts are presented on a fiscal year basis with FY 2022/23 starting in April 2022. For the April 2023 WEO, Indias growth projections are 6.6% in 2022 and 5.8% in 2024 based on calendar year.

Source: IMF, World Economic Outlook, April 2023.

https://www.imf.org/en/Publications/WEO/Issues/2023/07/10/world-economic-outlook-update-july-2023

Advanced Economies Group

For advanced economies, the growth slowdown projected for 2023 remains significant: from 2.7 percent in 2022 to 1.5 percent in 2023, with a 0.2 percentage point upward revision from the April 2023 WEO. About 93 percent of advanced economies are projected to have lower growth in 2023, and growth in 2024 among this group of economies is projected to remain at 1.4 percent.

In the United States, growth is projected to slow from 2.1 percent in 2022 to 1.8 percent in 2023, and then slow further to 1.0 percent in 2024. For 2023, the forecast has been revised upward by 0.2 percentage point, on account of resilient consumption growth in the first quarter, a reflection of a still-tight labor market that has supported gains in real income and a rebound in vehicle purchases. However, this consumption growth momentum is not expected to last: Consumers have largely depleted excess savings accumulated during the pandemic, and the Federal Reserve is expected to raise rates further.

The recent resolution of the US debt ceiling standoff and, earlier this year, strong action by authorities to contain turbulence in US and Swiss banking, reduced the immediate risks of financial sector turmoil. This moderated adverse risks to the outlook. However, the balance of risks to global growth remains tilted to the downside. Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy. Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. Chinas recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies. On the upside, inflation could fall faster than expected , reducing the need for tight monetary policy, and domestic demand could again prove more resilient

Emerging Market and Developing Economies Group

Growth in emerging and developing Europe is projected to rise to 1.8 percent in 2023, reflecting a 0.6 percentage point upward revision since April, and to rise further to 2.2 percent in 2024. The forecast for Russia in 2023 has been revised upward by 0.8 percentage point to 1.5 percent, reflecting hard data (on retail trade, construction, and industrial production) that point to a strong first half of the year, with a large fiscal stimulus driving that strength.

Growth in emerging and developing Asia is on track to rise to 5.3 percent in 2023, then to moderate to 5.0 percent in 2024, reflecting a modest (0.1 percentage point) downward revision for 2024. The forecast for China is unchanged at 5.2 percent for 2023 and 4.5 percent for 2024, but with a change in composition: Consumption growth has evolved broadly in line with April 2023 WEO projections, but investment has under performed due to the ongoing real estate downturn in that country. Stronger-than-expected net exports have offset some of the investment weakness, although their contribution is declining as the global economy slows.

Growth in India is projected at 6.1 percent in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than-expected growth in the fourth quarter of 2022 as a result of stronger domestic investment.

Growth in the Middle East and Central Asia is projected to decline from 5.4 percent in 2022 to 2.5 percent in 2023, with a downward revision of 0.4 percentage point, mainly attributable to a steeper-than-expected growth slowdown in Saudi Arabia, from 8.7 percent in 2022 to 1.9 percent in 2023, a negative revision of 1.2 percentage points. The downgrade for Saudi Arabia for 2023 reflects production cuts announced in April and June in line with an agreement through OPEC+ (the Organization of the Petroleum Exporting Countries, including Russia and other non-OPEC oil exporters), whereas private investment, including from “giga-project” implementation, continues to support strong non-oil GDP growth.

In sub-Saharan Africa, growth is projected to decline to 3.5 percent in 2023 before picking up to 4.1 percent in 2024. Growth in Nigeria in 2023 and 2024 is projected to gradually decline, in line with April projections, reflecting security issues in the oil sector. In South Africa, growth is expected to decline to 0.3 percent in 2023, with the decline reflecting power shortages, although the forecast has been revised upward by 0.2 percentage point since the April 2023 WEO, on account of resilience in services activity in the first quarter.

Source: World Economic outlook update 2023

Forces shaping the near-term global outlook

The global recovery from the COVID-19 pandemic and Russias invasion of Ukraine is slowing amid widening divergences among economic sectors and regions.

The World Health Organization (WHO) announced in May that it no longer considers COVID-19 to be a “global health emergency.” Supply chains have largely recovered, and shipping costs and suppliers delivery times are back to prepandemic levels. But forces that hindered growth in 2022 persist. Inflation remains high and continues to erode household purchasing power. Policy tightening by central banks in response to inflation has raised the cost of borrowing, constraining economic activity. Immediate concerns about the health of the banking sector have subsided, but high interest rates are filtering through the financial system, and banks in advanced economies have significantly tightened lending standards, curtailing the supply of credit. The impact of higher interest rates extends to public finances, especially in poorer countries grappling with elevated debt costs, constraining room for priority investments. As a result, output losses compared with pre-pandemic forecasts remain large, especially for the worlds poorest nations.

Despite these headwinds, global economic activity was resilient in the first

quarter of 2023, with that resilience driven mainly "by the services sector. The post-pandemic rotation of consumption hack toward services is approaching completion in advanced economies (including in tourism-dependent economies of southern Europe), and it accelerated in a number of emerging market and developing economies in the first quarter . However, as mobility returns to prepandemic levels, the scope for further acceleration appears more limited.

At the same time, non services sectors, including manufacturing, have shown weakness, and high-frequency indicators for the second quarter point to a broader slowdown in activity. Amid softening consumption of goods, heightened uncertainties regarding the future geoeconomic landscape, weak productivity growth, and a more challenging financial environment, firms have scaled back investment in productive capacity.

The fight against inflation continues. Inflation is easing in most countries but remains high, with divergences across economies and inflation measures. Following the buildup of gas inventories in Europe and weaker-than-expected demand in China, energy and food prices have dropped substantially from their 2022 peaks, although food prices remain elevated. Together with the normalization of supply chains, these developments have contributed to a rapid decline in headline inflation in most countries. Core inflation, however, has on average declined more gradually and remains well above most central banks targets. Its persistence reflects, depending on the particular economy considered, pass-through of past shocks to headline inflation into core inflation, corporate profits remaining high, and tight labor markets with strong wage growth, especially in the context of weak productivity growth that lifts unit labor costs. However, to date, wage-price spirals—wherein prices and wages accelerate together for a sustained period—do not appear to have taken hold in the average advanced economy, and longer-term inflation expectations remain anchored. In response to the persistence of core inflation, major central banks have communicated that they will need to tighten monetary policy further. The Federal Reserve paused rate hikes at its June meeting but signaled further ones ahead, and the Reserve Bank of Australia, Bank of Canada, Bank of England, and European Central Bank have continued to raise rates. At the same time, in some other economies, particularly in East Asia, where mobility curbs during the pandemic restricted demand for services longer than elsewhere, core inflation has remained low. In China, where inflation is well below target, the central bank recently cut policy interest rates. The Bank of Japan has kept interest rates near zero under the quantitative and qualitative monetary easing with yield curve control policy.

Sequential growth in GDP at constant prices (in %)

Indias economy grew "by 8.5% year-on-year in Q2 of FY 22. On a sequential "basis (quarter-on-quarter "basis), domestic economic output expanded "by 10.4%. Earlier in June, Fitch Ratings raised its FY24 (2023-24) growth forecast for the Indian economy to 6.3%, from 6% predicted earlier, citing strong growth in the April- June quarter so far and sustained near-term momentum. Meanwhile, the Reserve Bank of India (RBI) has projected FY24 Indian economic growth at 6.5%. “Growth in India is projected at 6.1% in 2023, a 0.2 percentage point upward revision compared with the April projection, reflecting momentum from stronger-than- expected growth in the fourth quarter of 2022 as a result of stronger domestic investment," IMF said in a report.

Despite the three shocks of COVID-19, Russian-Ukraine conflict and the Central Banks across economies led by Federal Reserve responding with synchronised policy rate hikes to curb inflation, leading to appreciation of US Dollar and the widening of the Current Account Deficits (CAD) in net importing economies, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0 per cent in FY23Manufacturing and investment activities consequently gained traction. By the time the growth of exports moderated, the rebound in domestic consumption had sufficiently matured to take forward the growth of Indias economy. Private Consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the highest among the second quarters of all the years since 2013-14, supported by a rebound in contact-intensive services such as trade, hotel and transport, which registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the previous quarter..

Given the uncertainties surrounding the size of the economic recovery, the RBI is projected to maintain its growth emphasis and maintain its accommodating monetary policy stance even as it moves toward gradual support normalization.

Source: https://pib.gov.in/PressReleasePage.aspx Rs.PRID=1894932

Industrial Growth

The index of industrial production in India grew by 5.2% in May 2023 from 4.2% measured in April 2023, according to data released by the Ministry of Statistics and Programme Implementation on Wednesday. In May 2022, the factory output, measured by the Index of Industrial Production (IIP) was at all time high-growth of 19.6%.

According to data from the National Statistical Office (NSO), the manufacturing sector, which contributes to more than three-fourths of the IIP, witnessed a growth of 5.7% in May up from 4.9% in April 2023.

Source: MOSPI

Consumer Price Inflation

The Consumer Price Index measures the retail inflation the economy by collecting data on change in prices of most common goods and services used by consumers. Indias consumer price index (CPI) inflation rises for the first time in five months to 4.81% in June 2023. Also, the rise in inflation is higher than the streets expectations of 4.58%, nevertheless, the CPI print is still below RBIs upper tolerance limit of 6%.As per the Ministry of Statistics & Programme Implementation, CPI inflation stood at 180.9 in June 2023, versus 178.2 in May month and 172.6 in the same month a year ago.

Road Ahead

India is focusing on renewable sources to generate energy. It is planning to achieve 40% of its energy from non-fossil sources by 2030, which is currently 30% and have plans to increase its renewable energy capacity from to 175 gigawatt (GW) by 2022. In line with this, in May 2021, India, along with the UK, jointly launched a ‘Roadmap 2030 to collaborate and combat climate change by 2030.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behavior and expenditure pattern, according to a Boston Consulting Group (BCG) report. It is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by 2040 as per a report by PricewaterhouseCoopers.

Indias broad variety of fiscal, monetary, and health measures to the crisis aided its recovery and, together with economic reforms, are assisting in mitigating the crisiss longer-term negative effects. Because of increased food and fuel prices, as well as negative terms of trade, inflation is predicted to soar in the next quarters of FY 2022-23. The RBI will most likely lean toward price stability and, as a result, boost policy rates. The next few months will be crucial for Indias economy as the government and the Reserve Bank of India try to balance the pressures on inflation, currency, external accounts, and the budget deficit. The good news is that India has been through the pandemic for over two years and has emerged stronger.

Introduction

India is the second largest tobacco producer behind China. The country has around 0.45 million hectares of area under tobacco cultivation. About 10% of the total area under tobacco cultivation is in India. Globally, it accounts for 9% of the total tobacco production. The average production for the last 5 years of the country for tobacco crops was around 800 million kg. The country produces various types of tobacco: Flue-cured Virginia tobacco, Country tobacco, Burley tobacco, Bidi tobacco, Rustica tobacco, Hookah, Cigar rapped, Cheroot, Burley, Oriental, Chewing tobacco, etc.

The tobacco industry of India employs about 36 million people in farming, labour activities, manufacturing, processing and export activities. Compared with other tobacco manufacturing countries, India has low production, farming and export cost, making it a popular industry. The Indian manufactured tobacco has an edge over the other tobacco producing countries in terms of lower levels of heavy metals, Tobacco Specific Nitrosamines (TSNAs) and pesticide residues.

Indias major tobacco manufacturing states are Gujarat, Andhra Pradesh, Uttar Pradesh, Karnataka, West Bengal, Telangana and Bihar. Out of these Gujarat, Andhra Pradesh and Uttar Pradesh account for around 45%, 20% and 15% of the countrys total production respectively. Karnataka accounts for around 8% and rest of the states account for about 2-3% of the countrys total tobacco production.

Tobacco Export Trend

India is the 2nd largest exporter of tobacco behind Brazil. It exports various types of tobacco and tobacco products such as stripped, wholly stemmed, cigar cheroots, smoking tobacco, homogenized, flue-cured, sun-cured, extract and essence, FCV tobacco, unmanufactured tobacco and various tobacco products.

During 2022-23 (till August), India exported 68,550 tonnes of FCV tobacco. The quantity of total exports in August 2022 was 15,224 tonnes (valued at US$ 56.21 million), a 192.2% increase from the same period in the previous year. The value of the total FCV tobacco exports during 2021-22 was US$ 359 million (Rs. 2,858 crore). In the same year, the country exported 27,742 tonnes.The exports of unmanufactured tobacco during 2022-23 (till August) were 65,682 tonnes. During April 2022 and May 2022, the exports of unmanufactured tobacco increased by 51% and 14%, respectively, over the same period in the previous year. The value of the total exports during the same period was US$ 515 million (Rs. 4,102 crore). During the year 2021-22, India exported tobacco and tobacco products worth a total of US$ 923.80 million.In September 2022, the export of

tobacco from India was US$ 125.24 million, a 72% rise from September 2021. While the export of tobacco from India in February 2023 stood at US$ 71.47 million from US$ 71.68 million in February 2022 which shows a negative change of 0.29%.

Major Market

India is the only country which produces tobacco in two seasons. It exports to more than 115 countries throughout the world. The country exports tobacco mainly to Belgium, the Philippines, Egypt, Arab Rep., Germany, Nepal, the USA, Turkey, and many more countries worldwide. Out of these countries, Belgium is the biggest

importer of tobacco at around 17% of the total exports from India. Egypt, Arab Rep. and the Philippines are one of the largest tobacco export destinations for India importing around 13% and 12% of the total. The country also exports to Indonesia, France, UAE, Russia, Korea, Sri Lanka, Malaysia, Venezuela, Ethiopia and Nigeria. During 2021-22, India exported US$ 164.8 million worth of tobacco to Belgium. This was an increase of 7% from 2020-21. UAE is among the top importers of tobacco from India, with 2021-22 imports valued at US$ 134.6 million. The value of exports to Singapore and the US during the same period was US$ 34.3 million and US$ 31.7 million, respectively. Some of Indias other tobacco export destinations, i.e. Netherlands and Germany, imported US$ 25.7 million and US$ 15.2 million worth of tobacco from India during 2021-22, respectively .In 2022, the government of India approved the extension of the Interest Equalization Scheme (IES) till 2024. The rates for IES have been revised as 3% for MSMEs (tobacco products have MSME registration) and 2% for manufacturers and merchant exporters.

Government Bodies

Tobacco Board

The Tobacco Board was formed in 1976 and is headquartered in Andhra Pradesh.

The hoard is a facilitator to the tobacco growers, traders and exporters. The functions of the hoard are the promotion of all categories of tobacco and allied products, overseeing the production and distribution of the products for domestic as well as exports and regulating the Flue-cured Virginia (FCV) tobacco. Some of the other roles of the Tobacco board are advising the central government, propagating information, sponsoring and encouraging scientific and technological research related to tobacco promotion.

Government Initiatives

Duty Draw Back Scheme

The goal of the scheme is to cut the duty and tax chargeable on imported products that will be used to manufacture exported goods from India. Under this scheme, the unmanufactured tobacco, cigars, cheroots, cigarettes, manufactured tobacco, products containing tobacco, reconstituted tobacco, nicotine, tobacco substitutes, etc. will receive a 0.15% drawback rate.

Interest Equalization Scheme (IES)

The scheme originally came into effect in 2015 and has received an extension till 2024. The interest equalization will be provided pre and post shipment Rupee export credit. As per the extension, the rates for IES will be 3% for MSMEs, 2% for manufacturers and merchant exporters of 410 tariff specified lines.

Tobacco Growers Welfare Scheme

The scheme is aimed at welfare of the FCV tobacco growers and their dependent families. A Tobacco Boards Growers Welfare Fund has been approved by the Ministry of Commerce and Industry of India under this scheme. The total corpus approved is Rs. 25 crores (US$ 3.14 million).

Source: https://www.ibef.org/exports/tobacco-industry-india Company Overview

Elitecon International Limited (hereinafter referred as to as “EIL” or “Elitecon”) was established in the year 1987. Erstwhile it was known as Kashiram Jain And Company Limited. Elitecon is listed on Bombay Stock Exchange (BSE) and the Calcutta Stock Exchange (CSE).

Since 2021, it has been currently producing and trading cigarettes, smoking mixture, sheesha, and other related tobacco industry products on both domestic and international markets. Elitecon currently conducts business in the UAE, Singapore, Hong Kong, and other countries in Europe, including the UK, and it has additional goals for products including chewing tobacco, snuff grinders, match lights, matches, match boxes, pipes, and other items.

Elitecon has introduced brands like INHALE in the cigarette sector and Al Noor in the sheesha category. In the next month of 2022, the production plant is

especially planned to grow. The companys human resource strength is currently 100, but by the end of the fiscal year, that strength is expected to reach about 500.

EIL has made investments in modern machinery to support the automation of its facility. Our ability to provide a seamless and effective production flow is made possible by their cutting-edge characteristics. On a regular basis, these machines go through extensive upgrades to determine whether all of its parts are in efficient working state. The ability to store the majority of the items in the most effective way possible in a large warehouse provides us an advantage over our rivals and allows us to satisfy various market demands.

The manufacturing procedure is clearly defined and was created by highly skilled professionals while taking into consideration the delicate balance that must be achieved to produce wide and varied flavors with various types of tobacco mix. To suit contemporary and international demands for tobacco products, our companys research and development department is continually working to create new product lines. We have the capabilities to manufacture any kind of tobacco product in accordance with this specification and requirements of the customer.

Financial Performance & Analysis

(Rs. In Lakhs)

Particulars	For the year ended 31-032022	For the year ended 31-03-2023
Revenue from operations	1,930.45	5796.40
Other Income	21.76	36.81
Total Revenue	1,952.21	5833.21
Earnings before interest, taxes depreciation and amortization	173.94	(7545.05)
Earnings before interest and taxes	84.59	(7784.90)
Profit before Taxation	58.19	(7821.22)
- Current Tax	13.41
- Deferred Tax	1.37	(3.11)
Net Profit/ (Loss) For the Year	43.41	(7818.11)

Following are important ratios showing better performance in FY 2023:

Particulars	Units	FY 2021	FY 2022	FY 2023
Profitabilit y Ratios
EBITDA Margin	%	-41.77%	8.91%	-130.80
EBIT Margin	%	-41.77%	4.33%	-134.94%
Net Profit Margin	%	-41.77%	2.22%	-134.93%
Growth Ratios
Net worth	%	-1.28%	26.92%	-1964.94%
Return Ratios
Return on Equity	%	-1.30%	10.91%	105.36%
Return on Capital Employed	%	-1.17%	2.64%	893.49%
Return on Assets	%	-1.11%	0.51%	-90.65% -90.65%
Leverage Ratios
Debt to Equity	Times	0.11	7.00	-883
Debt to EBITDA	Times	-8.24	15.96	(0.87)
Interest Coverage	Times	0.00	3.20	(214.34)
Debt to Assets	Times	0.09	0.33	0.75
Efficiency Ratios
Asset Turnover	Times	0.03	0.44	0.68
Receivable Turnover	Times	1.24	31.69	10.15
Receivable Days	Days	294	12	68

Revenue from Operation: The Revenue rose from Rs.1930.45 in the financial year 2021-2022 to Rs 5796.40 lakhs in the financial year 2022-2023 and the company was able to generate more revenue than its average revenue in last 4 years. In last 3 years company has provided with growth of 703% CAGR. The growth in revenue can be attributed to the change in market scenario, opening up of the economy and trade resumptions post COVID-19 lockdown in 2020-21.

Other Income: Other income for the financial year 2022-2023 increased by 69% at Rs. 36.81lakhs as compared to Rs. 21.76 lakhs in the previous year due to exchange fluctuations gains & other non-operating income.

Operating Cost and EBITDA: The EBITDA before exceptional items decreased to Rs-7545.05 lakhs for the financial year 2022-2023 as compared to Rs. 173.94 lakhs for the financial year 2021-2022. This was mainly due to increase in Cost of goods sold. On the other hand, the EBITDA Margin slightly declined from 8.91%% for the financial year 2021-22 to (129.35) for the financial year 2022-23. The operating cost increased from Rs. 1778.27 lakhs for the financial year 2021-22 to Rs.13378.25 Lakhs for the financial year 2022-23.

Debt and Finance cost: There has been increase in total debt which includes long term & short term from Rs. 2776 for the financial year 2021-22 to Rs.6491.84 for the financial year 2022-23. Thus, finance cost for the financial year 2022-23 at Rs 36.32 lakhs in comparison to 26.40 for the previous year.

Profit after Tax: Profit after Tax (PAT) at Rs (7818.11) lakhs for the financial year 2022-23 decreased by -18110.14% as compared to Rs. 43.41 lakhs in the previous year majorly due to cost of materials consumed

Growth Ratios: The Networth has dropped by -1964.94 for the financial year 2022-23 from 26.92 for the financial year 2021-22 mainly due to huge growth in cogs and mainly due to following reasons discussed above.

Leverage Ratios: Leverage ratio provides an indication of how the companys assets and business operations are financed (using debt or equity). Looking at the leverage ratios it could be concluded that the company has increased its debt leverage but at the same time it has sufficient interest coverage and have been able to generate enough profits to meet its interest expenses. Hence, performed well on solvency front.

Efficiency Ratios: Efficiency ratio is used to evaluate how effectively a company manages its assets and liabilities. The company has been performing well in terms of industry parameters.

Liquidity: Cash balances decreased to Rs. 19.92 Lakhs in the financial year 202223 as compared to Rs. 72.21 Lakhs in the previous year.

(Rs. In Lakhs)

Particulars	For the year ended 31-03-2022	For the year ended 31-03-2023
Net Cash Generated from Operating Activities(A)	-2455.05	-2888.06
Net Cash used in Investing Activities (B)	-219.18	-804.35
Net Cash Generated from Financing Activities (C)	2744.46	3640.12
Net increase/decrease in cash (D=A+B+C)	70.22	-52.29
Cash and Cash Equivalents at the beginning (E)	1.99	72.21
Cash and Cash Equivalents at the end (F=D+E)	72.21	19.92

*Particulars mentioned above are in line with year ended 31^st March, 2023

Risk Management

The Company is exposed to specific risks that are particular to its business and environment within which it operates, including Foreign Exchange Risk, Interest Rate Risk, Commodity Price Risk, Risk of Product Concentration and other Business Risk. While risk is an inherent aspect of any business, the Company is conscious of the need to have an effective monitoring mechanism and has put in place appropriate measure for its mitigation including business portfolio risk, financial risk and legal risk and internal process risk.

The list of the potential risks the industry is exposed to domestically/internationally are given below:

Business Operational Risk: The business operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events like economic and market conditions, cut throat competitions at local as well as at international level, even events which are not directly connected with the organization like natural disasters, political and military turmoil etc. It can be minimized by decreasing labor turnover, power cost, logistics, balancing demand & supply risks, implementing latest technologies, Un-interrupted availability of raw material at competitive prices so as to avoid production loss, maintenance of quality and harmonizing production for completing the orders in time as well. Fluctuations of prices in international market which can impact the price / cost of a particular product(s) and its blend(s) is also a part of business operational risk.

Raw material risk: There is always a risk of inadequate or non-availability of raw materials in the market due to volatility in the prices of cotton, transportation cost etc. which could impede business profits and prospects.

Supplier Risk: We rely heavily on third parties to source our raw materials. Our primary raw materials come from third-party suppliers, and while we wont have any trouble finding new ones if we do, there is no assurance that our current or potential suppliers, as well as our on-the-job personnel, will continue to provide us with the necessary volume of raw materials and services.

Manufacturing Risk: Our manufacturing facility has operational risks such as machinery unavailability, breakdown, obsolescence, or failure, disruption in power supplies or processes, performance below projected levels of efficiency, and labour disputes. Our machines have finite lifespan as well as annual over hauled maintenance. We have signed into technical support service agreements to ensure the proper operation and maintenance of our equipment and machinery.

Quality Risk: Our products are influenced by consumer expectations, customer preferences and trends. Failure to maintain our product quality standards may have an impact on our business. Even though we have strict quality control methods in place, we have deployed lab testers to ensure that our products will always meet our clients quality standards.

Foreign Exchange / Currency risk: We are certainly vulnerable to foreign currency exchange rates, which could have a major unfavourable effect on our operating results and financial situation. Our company has recently expanded into international markets and now sells products both domestically and internationally. Exporting our goods allows us to acquire foreign exchange gains and outgo in terms of FOB value. The exchange rate between the Rupee and other currencies fluctuates and may continue risk in our revenue. Any adverse or unexpected swing in the exchange rate of any foreign currency to Indian Rupees for businesses in order to correctly hedge their positions with international institutions may have an impact on our Companys results of operations.

Competition Risk: We confront competition in our industry from both organised and unorganized companies, which could have a negative impact on our business operations and financial situation. We largely compete based on quality, client happiness, and marketing. We think that to compete effectively, we must preserve our reputation, be flexible and timely in responding to quickly changing market demands and consumer preferences and provide customers with a diverse range of textiles at competitive rates.

Political Risk: Political risk may be defined as the probability that a political event will impact adversely on a firms profit. It represents the financial risk that a countrys government will suddenly change its policies.

Technological risk: Technology can response corporate culture and facilitate innovative procedures. In this industry, the firm is constantly required to make changes and transformations in the production process over time, upgrade their machinery besides creating new facilities and additional capacities in order to survive in the highly competitive market.

Human Resource Development/Industrial Relation

The Company rely that the health and safety of the workers and the persons residing in the vicinity of its plants is fundamental to the business. Commitment to the identification and elimination or control of the workplace hazards for protection of all is utmost importance. The manufacturing operations are conducted to ensure sensitivity towards the environment and minimize waste by encouraging “Green” practices. The Company continued to enjoy healthy industrial relations during the year.

Health & Safety

The company considers health and safety to be an essential province. The company has provided appropriate facilities for all workers and employees, such as adequate lighting, ventilation, and lack of congestion, as well as medical kits, stretchers, and fire extinguishers, among other things, at prominent locations. Personnel at supervisory level have been trained in basic life support techniques. The safety measures taken by the company has resulted in improving the conditions under which workers are employed and work, consequently increasing the productivity.

Infrastructure

The company is equipped with modern infrastructure facilities which assist in smooth production. The companys manufacturing unit is outfitted with advanced machines and equipment and a trained staff, who have years of experience behind them. To sell products to the clients, the company has facilitated a smooth transportation mechanism through a strong base of transporters and traders.

Cautionary Statement

The above Management Discussion and Analysis contains certain forward-looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding a fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation etc. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future or update any forward-looking statements made from time to time on behalf of the Company.