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Annexure-D

The Management Discussion and Analysis Report on the business of the Company for the year ended 31st March, 2023 has been attempted to include discussion on all the specified matters to the extent relevant or within limits that in our opinion are imposed by the Companys own competitive position.

1. COMPANY AND INDUSTRY STRUCTURE:

The Company manufactures leather garments exclusively for export and has its factory at Pammal, Uttiramerur and Vadadavur. All the units are self-sufficient to perform their duties and functions. The commitment of the Company towards quality and customer orientation reflects in its well-established clientele.

The Leather industry in India holds a significant place in the Indian economy. This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the Country. India is the second largest exporter of leather garments. Added to this are the strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and the dedicated support of the allied industries.

The major production centers for leather and leather products in India are located in the States of Tamil Nadu Chennai, Ambur, Ranipet, Vaniyambadi, Vellore, Pernambur, Trichy, Dindigul and Erode apart from other states like Uttar Pradesh, Maharashtra, Punjab, Karnataka, Kerala, Delhi and Rajasthan

2. REVIEW OF OPERATIONS:

During the Financial Year 2022-23, your Company achieved a turnover of Rs. 3924.45 lakhs and profit of Rs. 51.90 lakhs. The export sales was Rs. 3858.19 lakhs as against of Rs. 2994.52 lakhs of FY 22. Detailed report on financial performance of the Company is provided in the Directors Report. The Company has no term loan outstanding as on March 31, 2023.

The Company has only one segment i.e. Leather garments and related products and the performance is already captured in Directors Report and Financial Statements

The Company has adopted a time-bound policy in the short term, to balance production to level which could avoid built up inventory and has taken special measures to bring down stocks to optimum levels. However, in spite of the operating gains the margins have been under strain for the following reasons:

1) Increase in major input costs particularly of leather.

2) Globally leather garments have registered a decline in realization and this affected India also.

3) Average price realization per garment to Rs.5824/- during the year. Buyers domination was pronounced and our buyers abroad bargained hard in view of the falling Indian Rupee against the Euro and U.S.Dollars.

4) Freight rates and selling expenses rose appreciably, further pushing the costs. These factors constitute the threats faced by the company.

3. OUTLOOK:

Indian leather apparel and accessories sectors revenue is expected to decline by 7-8 per cent in FY 24 mainly due to slowdown in consumer demand in the US and Europe. In the current fiscal, the leather apparel and accessories sectors revenue is expected to be flattish, after a strong performance in the previous fiscal.

In FY23, operating margin will crimp by about 150 basis points (bps) year-on-year, especially as cost remains elevated due to supply constraints in the sector. Realisation for leather garments shrank 7-8 per cent on-year in the first half of this fiscal. However, raw material cost especially hide and chemicals has surged 400-500 bps and remains sticky as hide availability has remained constrained over the years, due to curbs on unlicensed and smaller suppliers

The overall impact on profitability would have been better but for the depreciating rupee, given that sales are export-oriented, while majority of raw materials are procured domestically. Operating margins are expected to remain range bound at 6-6.5 per cent over the medium term.

Given increased raw material cost, inventory holding has become costlier. Additionally, due to lower cash generation, working capital requirement at the sector level could be 15-20 per cent higher in the near term. However, demand being sluggish, capacity expansion will be on the backburner. Consequently, long-term debt addition should also be low.

The Companys strength lies in the quality of its products and the promising looks continued patronage of its buyers. However, the realization per garment is likely to be low. The peak season is due to start shortly. The order position is expected to be healthy by FY23-24 and the Company should register a healthy improvement in its performance by end of FY 2024.

4. IMPACT OF COVID-19

There are bright opportunities for start-ups in the leather and leather products, as there were good prospects for growth both on the domestic front and in exports. Despite the continuing Covid-19 pandemic in 2022, the Council for Leather Exports was undertaking a multi-pronged, aggressive and pro-active marketing strategy to tap the potential available in various markets. Future growth of Indian leather products in India will continue to be market driven. The European countries and the US are major consumers for the Indian leather industry. On the whole, the leather industry has very good potential for growth and development both on the domestic front and in exports.

Your Company with more than three decades of experience in manufacturing and marketing of leather products, is better placed than its peers to counter these uncertain times.

5.RISK AND CONCERNS

Risks and Concerns Economic and political factors, both national and global that are beyond control and factors force majeure may directly affect performance of the Company as well as the Leather industry. These factors include interest rates and its impact on availability of retail space, rate of economic growth, fiscal and monetary policies of governments, inflation, deflation, consumer credit availability, consumer debt levels, tax rates and policy, unemployment trends, terrorist threats and activities, worldwide military and domestic disturbances and conflicts, pandemics, and other matters that influence consumer confidence and spending.

The Company is subject to risks arising from material price and exchange rate fluctuations which may adversely affect our financial performance. The availability and retention of talent, product quality management, innovation and new product development, rapidly changing consumer preferences, impact of strategic and marketing initiatives, data security etc. may affect your Company.

Your Company monitors its major risks and concerns at regular intervals. Appropriate steps are taken in consultation with all the concerned including the Audit Committee and the Board to identify and mitigate such risks.

6. ENVIRONMENT AND SAFETY:

The Company is conscious of the need for environmentally clean and safe operations to ensure safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources.

7. HUMAN RESOURCES:

Over the last year, Human Resources have taken various initiatives for employee benefit and retention. The initiatives undertaken by the Human Resources

Department is always aimed at operationalizing the companys Vision and long term & short term strategy. The relationship of your Company with employees has been cordial during the year

8. OTHER MATTERS:

There were no further or typical areas of risks or concerns outside the usual course of business foreseeable at this time. Internal control systems had been found to be adequate and are continuously reviewed for further improvement. Our team is committed to the Boards dictates on standards of conduct as well as good governance and exercise of due diligence including compliance of all relevant laws and regulations. Our appreciation is due to all employees, gratefulness to our board, shareholders and Banks.

On Behalf of the Board of Directors

EURO LEDER FASHION LIMITED

RM.Lakshmanan

P.Shanmathy

Place: Chennai

Managing Director

Director

Date: 25th May, 2023

(DIN: 00039603)

(DIN: 09743522