Virat Industries Ltd Management Discussions

Companys financial and operational performance:

There is no change in the nature of business of your Company for the year under review.

Industry Structure and Development

The key players of the textile industry are concentrated in India, China, the European Union and the United States. Vietnam and Bangladesh have also emerged as significant contributors to the industry. India is estimated to have the worlds third largest textile industry.

India benefits from multitude of factors such as abundant availability of raw materials including cotton, polyester, nylon, silk, wool and jute, along with a large pool of skilled manpower and large ancillary industry. It also enjoys benefits of being a cost effective compared to other large textile producing countries.

New technologies and state-of-the art equipment have enabled the Indian textile industry to become more efficient and productive over the years.

Notwithstanding the availability of such facilities and resources the textile industry including garments has been struggling to increase international market share. Besides the industrys performance in export market this year was lack luster. The problems faced by Indian Textile Industry are as under; Wide variation in cotton prices from time to time making it difficult to quote price for long term export contracts in export market, where the prices are quoted two times in a year. 10.6% import duty has been imposed by the European Union on exports from India. Countries like Vietnam, Sri Lanka and Bangladesh are exempted from such duty. Due to this Indian players have a lower market penetration in Europe. Indian exports have decreased in last two consecutive years and exports of readymade garments were 10% lower this year against preceding year. The exports of knitwear are adversely impacted.

In short, the employment potential of Indias textile and clothing industry remains grossly underutilized, particularly in MMF sector.

Opportunities:

If Free Trade Agreement between India and other overseas countries are fully implemented, there will saving of 10.6% import duty to overseas customers purchasing goods from India. This will boost exports from India. It will be a level playing field for India like other members of the European Union.

Significant developments are taking place in preparation of fancy yarns in India both cotton and manmade. This offers opportunity to weaving and knitting manufacturers to seize the opportunity and go for value added products for export and local markets.

Extension of the scheme for Rebate of State and Central Taxes and Levies (RoSCTL) till March26 for the export of apparel, garment and made ups with same rates would benefit textile companies.

The prices of your companys export products have a very wide range from 25 per pair to above 100 per pair (Football socks). The export of football and other high price socks is around 4.5 to 5.5 lakh pairs per year. Your company is making efforts to accelerate the market share of such socks to improve average realised price per pair and overall profitability

Threats:

There is intense competition in the global markets especially from the garment industries from Turkey and China.

Global economic slowdown continues, with many countries of the world having become epicenter of geopolitical tensions. Due to this there is subdual demand for apparel and garments in key markets.

Import duty of 10.6% still continues, making India incompetitive on the price level.

In India, many factories use spun polyester yarn in place of cotton yarn for inner wear apparel. Since the Polyester yarn is cheaper, in local markets innerwear polyester textiles are posing big price threat to cotton textiles.

Unorganized sector goods with cheaper prices are overwhelmingly competing with organized sector goods.

Key Financial Ratios:

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The existing internal financial controls are commensurate with the nature, size, complexity, and business processes followed by the Company. They have been reviewed and found generally satisfactory on the following key control matrices.

Entity Level Control Financial Control Operational Control

which included authority and organization matrix, risk management practices, compliance framework within the origination, ethics and fraud risk management, management Information system, self-assessment of control point, business continuity and disaster recovery planning, budgetary system, etc.

Section 134(5)(e) of the Companies Act, 2013 requires the submission of a report by the Board of Directors of a listed Company which includes a statement ensuring that the Company has laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and operating effectively.

During the year, the Company followed Policy Documents with regard to Internal Financial Control, along with Risk Control Matrix. The same have been tested by the Internal Auditors and the Statutory Auditors.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

The workforce is a critical factor in maintaining quality and safety, which strengthens the competitive position and the human resource policies focus on training and retaining of the employees of the Company. The Company trains employees regularly to increase the level of operational excellence, improve productivity and maintain compliance standards on quality and safety. Employees are offered performance-linked incentives and benefits and the Company conducts employee engagement programs from time to time. The Company also hires contract labour. The company has 155 employees on payroll.

The Company would like to sincerely appreciate the valuable contribution and support of employees towards the performance and growth of the Company. The management team comprises of professionals with a proven track record. The Company continues to remain focused and sensitive to the role of human resources in optimizing results in all its areas of working and its industrial relations also continue to be cordial.