MANAGEMENT DISCUSSION AND ANALYSIS Economy Overview: A REPORT The Textile Association (India) in association with Thailand Convention & Exhibition Bureau organized Global Textile Congress at Bangkok on 13th to 15th February, 2015 to develop lasting business relations between countries producing textile fibres, fabrics, machineries and carrying out extensive research in all related areas. The theme of Congress "Global Textile - Opportunities and Challenges in an Integrated World" was very meticulously selected to garner knowledge and expertise of galaxy of eminent speakers of world fame. This international event was conceived two years ago and tremendous efforts were made to achieve success. All possible detailing were done in a very systematic manner, selection of speakers, papers, ten sessions addressing various issues of Textile Industry, two panel discussions widely attended and deliberations by almost 30 Research Scholars and Faculty members made the conference big knowledge pool. Various others important issues such as Foreign Exchange, Contract Management, HRD Matters, Supply Chain, Shipping were also discussed by very capable speakers. The Global Textile Congress was attended by more than 600 delegates from 18 countries during which more than 60 papers. Since, this international conference was to address important issues related to Textile Industry in Middle East, West Africa, Far East region including China, Indonesia, South Korea, Japan, Singapore and Hong Kong and India, the Congress assumed tremendous distinction for providing a springboard to the textile industry in India to reach out to other nations with recognition. The MMF textile segment is one of the most promising sectors of the textile value chain. The advancement of technology and wide application of functional textiles give enormous growth potential to manmade fibre based products in India. MMF textiles constitute nearly half of the domestic textile market and two thirds of the global market. However, India's share in global exports of man-made fibre based textiles is only around 3% and our domestic fibre consumption is dominated by cotton. Indian industry has to diversify substantially into MMF based textiles, without losing our strength in cotton. Exports have been registering imbrssive growth in the case of finished products, especially garments. The efforts of our exporters to diversify into new markets in the context of the demand recession in our traditional markets in recent years have started showing positive results. Revival of demand in the major textile consuming countries, stability in the price of basic raw materials like cotton and petroleum products, absence of volatility in the value of rupee against dollar and the falling trend of inflation in the domestic economy are expected to help the textile sector to grow further in the coming months. The recent measures taken by government to reduce interest rates and liberalise labour laws and the industry friendly bills that are expected to be passed in the parliament would help to augment investment in the manufacturing sector including in the textiles industry. At the State level also, industry-friendly textile policies have been announced by the States with substantial textile production, creating a competitive investment climate. While some of the measures announced in the budget 2015-2016 will help manufacturing industries in the long run, there is practically no textile specific proposal in it. Continuation of the optional excise duty regime is perhaps the only silver line in the whole budget as far as the textiles industry is concerned. In the budget the TUF's subsidy allocation done of Rs.1520 crore for 2015-16. •India has the second largest manufacturing capacity globally. •The Indian textile industry accounts for about 24% of the world's spindle capacity and 8% of global rotor capacity. •India has the highest loom capacity (including hand looms) with 63% of the world's market share. •India accounts for about 14% of the world's production of textile fibre and yarn and is the largest producer of jute and the second largest producer of silk and cotton. •A strong production base of a wide range of fibre/yarn from natural fibres like cotton/jute, silk and wool to synthetic man-made fibres like polyester, viscose, nylon and acrylic. •Increased penetration of organised retail, favourable demographics and rising income levels to drive textile demand. •India enjoys a comparative advantage in terms of skilled manpower and cost of production over major textile producers. •Abundant raw material and increasing demand for exports to boost fibre production. •Abundant availability of raw materials such as cotton, wool, silk and jute. •Scheme for Integrated Textile Parks provides world class infrastructure to new textile units. To date, 57 Textile Parks have been sanctioned with an investment of INR 60 Billion. By 2017, 25 more Textile Parks are to be sanctioned. •Integrated Processing Development Scheme for sanctioning processing parks has been initiated. INR 5 Billion has been earmarked for this scheme. •Integrated Skill Development Scheme has provided training to 1.5 Million people to cover all sub-sectors of textiles such as Textile and Apparel, Handicrafts, Handlooms, Jute and Sericulture. Outlook: India's medium-term growth is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has not yet fully addressed, including poverty, inadequate physical and social infrastructure, limited non-agricultural employment opportunities, inadequate availability of quality basic and higher education, and accommodating rural-to-urban migration. Risks and concerns: There are some areas of concerns, which need to be stated here. Along-with recovery, the textile industry is also facing increase in input prices in sync with the global trends and apbrciating rupee. In our view, there is need for an integrated approach to be adopted for the development of the textile and clothing industry in the country. Such an approach is required to ward off any such situation where the strengths of one segment of the textile industry is being undermined for passing temporary relief to another segment of the industry leading to permanent damage to the complete textile value chain. In our views, if any segment suffers from some systemic disadvantages affecting its global competitiveness, it should be overcome through suitable incentives mechanism without affecting any other segment of the industry. Company's Business The company has established its brand name "VALSON" in polyester texturised yarn since 1983. Today we are one of the leading manufacturers of Polyester Texturised & Twisted Yarn and Processors of Cotton, Polyester and other Fancy yarns in India with Customers having diverse uses its end-users comprise players from the shirting, suiting's, label, upholstery, hosiery, furnishings, automotive and ready-made garments industries etc. Quality Products and Services has been our top most priority and after continuous research, we have ventured into the dyeing of various qualities of yarns. We have more than 55000 shades in our data bank. The Company is into manufacturing and exporter of Polyester Dyed Yarn and processors of Cotton and other fancy yarn. It has activities like Texturising, Twisting, Coning and Dyeing Plants to produce Quality Polyester Texturised Twisted Yarn and other fancy yarn. The Manufacturing process is as under: The basic raw material used for texturising is Partially Oriented Yarn popularly known as POY. It is fragile, weak, delicate and easily breakable. POY does not have any purposeful use as it lacks the stability, strength, and therefore it cannot be directly used for weaving or knitting. The term Texturising means the production of a permanent crimp in the initially straight fiber or filament yarn. It increases the bulk and improves the elasticity of yarn. This activity fully draws POY yarn to comply with the market requirement and therefore it is different commercial commodity. The POY after the Texturising process is known as "Weft Yarn". The twisted crimp yarn is hard, strong and not easily breakable. It gives the yarn a feel of natural like cotton or wool. The "Weft Yarn" is further twisted for the purpose of imparting the required strength, which is necessary to withstand the high speed run on looms for the purpose of weaving. The twisted yarn is known in commercial parlance as "Warp Yarn". The Texturised and twisted yarn is properly washed and thereafter is dyed under quality parameters to get Colour Strength, Tone, Dispersion and Sublimation fastness. The Dyed Yarn is wound around standard size cones before they are packed for dispatch. The Company has established its brand as reputed manufacturer of quality, polyester dyed yarn and processors of cotton and other fancy yarn. It has been supplying its products through the network of agents in market. There are about 10 to 15 major agents sbrad over in Maharashtra, Delhi, Punjab, Northern and Southern India. There scope of activity of agents will also include the following: - 1) To book the orders and to render various incidental services including the monitoring of the follow up of the same. 2) To obtain the general market information and acquaint the Company from time to time. 3) To receive the payment and statutory forms for and on behalf of the Company in respect of direct invoice raised on the customers for supply of material delivered as per their instruction at anywhere in India. The Company is exploring new avenues to increase the export base and has chalked out strategic growth plan for the potential market in Middle East, U K, Egypt, Mexico and other European markets. Our products quality has been accepted world wide as a result company's export has grown by 27.5% compared to last year. We are getting incentives like duty drawback for export of our goods and have covered our products under Focus Scheme declared by Ministry of Commerce as an additional incentive to increase the export and capture global market. Opportunities: The biggest growth opportunity for the textile industry arises from the changed global scenario of quota free business environment. Valson Industries Limited has already grabbed the opportunity and is rapidly growing in the huge domestic and export market. India's strong performance and growth in the textiles sector is aided by several key advantages that the country enjoys, in terms of easy availability of labour and material, large market demand, brsence of supporting industries and supporting policy initiatives from the government. Threats: Along with the opportunity that the quota free regime offers, there lies the threat of stiff global competition which indirectly would result in price brssure. Indian textile exporters are facing stiff competition and they lack policy and labour law reforms. But the Company through its quality production competes well with other players in this sector. Segment-wise performance: The Company falls within a single business segment viz. 'Yarns'. The sales are substantially in the domestic market, and the financial statements are reflective of the information required by Accounting Standard 17 "Segment Reporting", notified under the Companies (Accounting Standards) Rules, 2006. Human Resources: Valson recognizes that nurturing and developing human resources by recruiting the best talent is vital to the long term success of the company. Employees are provided with continues opportunities for active learning and development which are viewed as the key drivers of our growth and thereby contributing to the success of the Company. The remuneration structure is linked directly with performance and reward. The Company acknowledges that human resources are its biggest asset and hence who have been nurtured and strengthened over the years. Insurance: Valson Industries Limited has insured its assets and operations against all insurable risks including fire, earthquake, flood, and etc. as part of its overall risk management strategies. Safety, Health and Environment At Valson, safety is considered a high priority and all efforts are made to ensure safe working environment for employees. All probable incidents are analyzed and corrective actions are taken. Employees are trained in safe practices to be followed at work places at all the times. Environmental Preservation: Quality of human life is the most important factor to sustain life and this could be achieved through brservation of natural environment. The Company's R & D Department continues to develop new shades in an environmentally sustainable manner. The Company always consumes eco-friendly dyes, colours and chemicals. The Company has also installed an Effluent Treatment plant for proper treatment of waste water. Your company's strength lies in consistent quality consciousness and eco-friendly awareness Material developments in Human Resources / Industrial Relations: The company has always considered human resources as the driving force for progress and success and they are the main assets of the company. Management is of the firm belief that the growth of the company is due to the continuous contribution from its manpower. The company has the required number of skilled and semi-skilled persons and it constantly tries to improve their quality and productivity and provides a congenial working environment for them. The company is committed for continual improvement in all aspects of social standard, business and employee's welfare to grow as an ethical business. We believe that harmony amongst employees, employer and business leads to socio economic improvement. The industrial relations continued to be extremely cordial during the year. Internal control systems and their adequacy: The Company has a formal system of internal control testing which examines both the design effectiveness and operational effectiveness to ensure reliability of financial and operational information and all statutory / regulatory compliances. The Company's business process is on ERP platforms and financial accounting is done according to the procedure manual for an account which has monitoring strongly at regular intervals and reporting process resulting in financial discipline and accountability. Internal Control weaknesses are reported regularly and timely steps are taken as and when required. Internal Auditor carries out the audit work regularly throughout the year and periodically places the internal audit report before the Audit Committee and the Management. The Audit Committee discusses significant findings with the internal auditors and timely solution is suggested for the same. Suggested steps are implemented to improve the internal control system, to ensure that all the assets are safeguarded and protected from unauthorised use and that the transactions are authorised, recorded and reported correctly. Discussion on financial performance with respect to operational performance: During the year, your company has performed substantially well mainly due to it's rich experience and concentration on optimum utilisation of capacity along with better conversion and also monitoring, controlling and restricting the manufacturing expenses. FY 2014-15 proved to be a challenging year amidst global economic uncertainties and disturbances in many parts of the world. Despite these constraints and challenging environment, the company performed well and the highlights of the performance are as under: •There is a growth of 8.60% in Texturising Production (4781 MT) and 6.5% in Dyeing production (4588 MT) compare to last year. •The growth of 4% in the quantity sold compare to last year and also the growth of 12% the dyed yarn sale compare to last year. •The Export turnover has increased to 27.5% i.e. Rs. 861.54 Lacs compare to Last year Rs. Rs.675.86 Lacs. •The Company has repaid it's term loan and Deposits and manage the working capital efficiently which results in reduction in finance cost drastically to Rs. 122.43 Lacs from Rs. 184.48 Lacs (i.e. reduction of 34%). •As per the schedule II of the Companies Act 2013 there is changes in the debrciation calculation which result into increase of debrciation by 27% i.e. Rs. 306.82 Lacs from Rs. 241.15 Lacs. •The Operating profit of the company is 6.75% compare to last year 6.01% (i.e. growth of 12.25%). •The Net profit before Tax of the company is 2.73% compare to last year 1.98% (i.e. growth of 38 %). •The Net profit after Tax of the company is 2.03% compare to last year 1.47% (i.e. growth of 37.6 %). •The Return of Net worth of the company is 9.02% compare to last year 6.76% (i.e. growth of 33.5 %). The Company shall direct all its efforts and resources towards a strong and healthy shareholders wealth creation. For and on behalf of the Board of Directors Mr. Suresh N. Mutreja Chairman & Managing Director Mumbai Date: 22nd May, 2015 |