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S.Kumars Nationwide Ltd.

BSE: 514304 Sector: Industrials
NSE: SKUMARSYNF ISIN Code: INE772A01016
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S.Kumars Nationwide Ltd. (SKUMARSYNF) - Director Report

Company director report

S. KUMARS NATIONWIDE LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT Your Directors have pleasure in presenting the Twenty Second Annual Report and Audited Statement of Accounts for the year ended 31st March, 2012. Your Company has achieved yet another year of satisfactory performance in turnover and profitability. FINANCIAL HIGHLIGHTS (Rs. in Lacs) 2011-12 2010-11 2011-12 2010-11 Particulars Consolidated Consolidated Standalone Standalone 1. Revenue from Operations (Net) 6,35,462 5,18,082 3,51,083 2,75,762 2. Other Income 967 4,206 201 355 3. Profit From Operations (PBIDT) 1,34,701 1,06,578 77,501 59,350 Less: Finance Costs 53,331 38,458 40,356 31,891 Depreciation and Amortisation expenses 14,777 12,468 9,222 7,400 4. Profit Before Tax 66,593 55,652 27,923 20,059 5. Provision For Taxation 19,508 16,403 9,966 2,789 6. Profit After Tax 47,085 39,249 17,957 17,270 Less: Minority Interest* 7,591 6,155 - - 7. Amount Available For Appropriation 39,494 33,094 17,957 17,270 8. Balance b/f from Previous Year 57,401 29,204 17,421 5,048 Appropriations: 9. Transfer to Debenture Redemption Reserve 203 950 203 950 10. Balance in Restructured Financial Cost written Off 16,288 - 14,310 - 11. Provision for Preference Dividend 32 535 32 535 12. Tax on Preference Dividend 5 89 5 89 13. Proposed Equity Dividend 2,974 2,850 2,974 2,850 14. Tax on proposed Equity Dividend 494 473 494 473 15. Surplus/(Deficit) carried to Balance Sheet 76,899 57,401 17,360 17,421 *The minority interest pertains to investment in Company's subsidiaries, namely Reid & Taylor (India) Ltd. upto 25.61%, HMX Corporation upto 5% and SKNL (UK) Ltd. upto 20% and Marling & Evans Ltd. UK upto 35%. DIVIDEND Your Directors are pleased to recommend a dividend on equity shares of Rs.1 for every share of Rs.10 i.e. @ 10% aggregating payout of Rs.2,974.03 lacs excluding Dividend Tax, which will be paid after obtaining approval of members in general meeting and other necessary permissions. The Directors are also recommending the payment of dividend on preference shares which will be aggregating Rs.31.65 lacs excluding Dividend Tax. YEAR IN RETROSPECT The financial highlights reflect a continued and steady growth for your Company at all levels. Your Company's performance is to be viewed against the background of a slowdown in the world economy and a hesitantly progressing economy on the Indian front. Your Company has achieved and demonstrated its ability to deliver substantial performance through variable and challenging environments which reflects upon the strength and diversity of its business model. Your Company has been able to develop its reputation and image across a number of products and brands in the domestic and international markets. Operating in various product categories and in multiple markets ensures the Company's consistent growth. Your Company manufactures worsted and viscose blended suitings, yarn dyed shirtings, workwear fabric, home textiles and ready-to-wear garments. The Company has achieved consistent revenue growth with satisfactory profit margins - consolidated Sales rose by 22.7% over the previous year and Consolidated Net Profit after Minority interest recorded a 19.3% growth. This is despite not so favourable market conditions and a sluggish economic climate. This is essentially because your Company is present in all product categories - Fabrics, Apparels, Home Textiles, and has brands catering to different socio-economic segments. Your Company is a customer-led, design- centric player with focused brands for each market segment and having manufacturing units in India, Italy, UK, USA and Canada. Your Company's strength is derived from diversity in products and markets. Furthermore, your Company historically has a multi-format distribution network. Because of the extension of fabrics brands into garments and launch of new garment brands, the share of Ready-to-Wear in total revenues is gradually increasing. In the Home Textiles market, however, the growth is stunted. The Baruche Shirt division continued to perform better. Luxury Textiles also grew smartly. On the international front, the progress of Leggiuno in Italy and HMX in USA has improved inspite of the sluggish economies in Europe and USA. In the overall scheme of things, the Sales contribution of SKNL (Standalone) was 55%, RTIL 24% and International Business 21% while proportion of EBIDTA was 57%, 38% and 5% respectively. The performance of Belmonte Uniformity Division was at par compared to the previous year. The sharp rise in input costs was offset by an increase in selling price. Your Company was able to maintain its market share. Belmonte Ready-to-Wear is now well-positioned in the fashion business. It delivers high quality products at a reasonable price and in line with changing trends. With more and more top-of-the-line international brands entering the Indian market, the competition in the branded apparel industry continues to be getting sharper by the day. However, our in-house teams of designers track national and international trends to create innovative fashionable products that customers would relate and we are able to capitalize on the rebound in customer confidence. The TWS factory in Bangalore is making shirts and trousers largely for domestic market. The Suit factory which is relatively new has focused and developed customers in the domestic market with the brands and also institutional orders. In the Luxury Textiles division, in order to neutralize the steep increase in wool prices, selling prices were suitably increased. New and innovative products were developed and introduced such as Showcase suiting fabric, pure wool suiting with Jacquard designs, designing with Laser engraving, etc. The International Business segment includes HMX of USA, Leggiuno of Italy and DKNY related operations in the U.K. International acquisitions facilitate transfer of technical know-how for high value shirting and garmenting. EXPORTS The ongoing volatility on the Europe front and lack of economic spark in the American market has caused greater pressure on the country's exports. This has affected India's foreign trade in the past year. The slowdown has also been more obvious in the emerging and developing economies. The overall consumption of textile fabric and apparel in the world markets reportedly went down. Though, your Company is predominantly a domestic player, it was able to almost maintain its exports at Rs.66.92 crores as against Rs.68.50 crores in the previous year. Additionally, exports from the Company's subsidiary Reid & Taylor (India) Ltd. reached Rs.37.47 crores (previous year Rs.42.47crores). New markets in Africa, South America and Japan are being explored so that we can establish our presence with our premium brand image and quality products. CURRENT BUSINESS OUTLOOK AND PLANS 'Belmonte' in the Consumer Textiles segment and 'Reid & Taylor' in the Luxury Textiles segment remain key contributors to the overall performance of the Company. Going forward, the management is confident about your Company's continued progress. Strong synergies between domestic and international business through 'back-end front-end' model, enhanced distribution network, a comprehensive portfolio of 45 brands addressing all demographic segments, vertically and laterally integrated business, seamless supply chain and presence across the value chain have provided for a strong foundation to step up growth over the coming years. We anticipate healthy demand for the textiles and apparel industry in India driven by growth in organized retailing, increasing consumerism, expanding middle class and heightened brand consciousness among the youth. We plan to expand the retail network through exclusive brand outlets largely in the tier 1 & 2 cities. Your Company will also increase presence of its products in Large Format Stores in the current financial year. Your Company is engaged in capacity expansion to keep up with the increasing demand for its products. Expansion of weaving and finishing capacity is under implementation and suit factory has been set up and part production has commenced. This will help cater to the increasing demand in the Ready-to-Wear segment. Luxury Cotton division is growing at a rapid pace registering noticeable growth in revenues and profitability with improved assets utilization and productivity levels. Additionally, the 'World Player' brand which addresses the economy segment, witnessed strong traction. We anticipate significant volumes from the brand as the market penetration and operational efficiencies improve. Plans for the nationwide unveiling of Kruger, a premium casual brand, have been progressing well with the launch expected soon. Raw material prices are expected to be stable although at higher levels. The outlook for the current year looks bright as more Corporates as well as Government institutions are looking for reliable and good brands for their consumption. We are poised very favourably in the garment and apparel space given the depth and diversity of our operations. Reid & Taylor (India) Ltd. (RTIL) Initial Public Offering (IPO): Members are aware that the Company's subsidiary Reid & Taylor (India) Ltd. had completed all the required formalities to make an Initial Public Offering of issue size Rs.1000 crores, of which Rs.500 crores was primary issue for funding growth and Rs.500 crores was secondary issue being offer for sale of equity shares by existing shareholders. However, because of the sluggish market conditions throughout the past months and an uncertain IPO climate, RTIL management has decided to defer its IPO for the time being. CORPORATE SOCIAL RESPONSIBILITY (CSR) Your Company is committed to support CSR initiatives and contribute towards the welfare and social upliftment of the community. In the year under review, your Company donated sums upto 0,25,000 towards educational activities of youth and tribals. Furthermore, your Companys' subsidiary Anjaneya Foundation, which is set up in order to promote and support charitable activities, donated a sum of 2,75,000/- towards educational and medical assistance. SHARE CAPITAL The equity share capital of the Company as at 31st March, 2012 has gone up by Rs.12,42,50,000/- from the previous year-end. This is as a result of allotment of 1,24,25,000 equity shares of Rs. 10/- each to Sansar Exim Private Limited, a promoter group Company on 13th December, 2011 on conversion of 1,24,25,000 Equity Share Warrants into equivalent numbers of equity shares of Rs. 10/- each at a premium of Rs. 54.53 per share. The said Equity Share Warrants were issued pursuant to the Special Resolution passed by the shareholders through Postal Ballot Notice dated 19th April, 2010 and Postal Ballot result declared on 31st May, 2010. EMPLOYEES STOCK OPTION SCHEME (ESOP) As at 31st March, 2012 there were 9,11,820 nos. of options in force to the senior employees at a price of Rs. 89.60 per option. No options were exercised during the year under report. The Company cancelled / withdrew 5,75,080 ESOPs granted under Employees Stock Option Scheme to the ex-employees of the Company who did not subscribe shares under ESOP Scheme. HUMAN RESOURCE Your Company recognizes that employees play a key role in making our business successful and we achieve that through empowering our employees. Your Company maintained an environment dedicated to maintaining high employees' sense of pride, morale and teamwork. The Human Resource Development activities focused on multi-skills training and performance management workshops. The functioning and activities were further aligned to Company's business objectives. The ongoing thrust on rationalization of manpower with focus on proper utilization continued with implementation of Zero-base manpower budget. CORPORATE GOVERNANCE To comply with the conditions of Corporate Governance, pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a separate section on Management Discussion and Analysis and Corporate Governance together with a certificate from the Company's Auditors confirming compliance is included in the Annual Report. INFORMATION TECHNOLOGY Your Company is in the process of Enterprise Resource Planning (ERP) implementation. Keeping in mind our business requirements, Management evaluated and decided to implement combination of two ERP's, i.e. NOW from Datatex for all operational areas and ORACLE FINANCIALS for financial accounting. Several modules of the above two ERP's are being implemented for the Company's Textile and Apparel business in India. In totality, the Company will have 16 implementation locations including Mysore as base location, where the connectivity through dedicated lease lines and video conference facility has been given. DIRECTORATE The management is sad to inform about the demise of Dr. A.C.Shah, the then Chairman of the Company, who passed away on 16th January, 2012 due to ill- health. He was Chairman of the Company from 8th July, 2005. The Board placed on record the invaluable contribution to the deliberations, advice and guidance given by late Dr. A. C. Shah during his tenure as Chairman. The Board unanimously appointed Shri Nitin S. Kasliwal, Vice Chairman and Managing Director to be the Chairman of the Board w.e.f from 13th February, 2012. Vide letter dated 15th September, 2011, India Debt Management Private Limited appointed Shri Susheel Kak as Nominee Director vice Shri Anish Modi. The Board placed on record the guidance, advice and support given by Shri Anish Modi during his tenure as Director. We look forward to the guidance and experience of Shri Susheel Kak to help the Company in achieving its objectives. Vide letter dated 18th April, 2012, Exim Bank appointed Shri Sujeet Bhale as Nominee Director vice Dr. Vinayshil Gautam. The Board placed on record the guidance, advice and support given by Dr. Vinayshil Gautam during his tenure as Director. We look forward to the guidance and experience of Shri Sujeet Bhale to help the Company in achieving its objectives. In accordance with the Companies Act, 1956 and the Company's Articles of Association, Shri M. Damodaran, Shri Jitender Balakrishnan and Shri Denys Firth retire by rotation and being eligible offer themselves for re- appointment. DIRECTOR'S RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956: 1) that in preparation of the Annual accounts the applicable Accounting Standards have been followed along with proper explanations relating to material departures, if any; 2) that such accounting policies have been selected and applied consistently, and judgements and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the Statement ofProfit and Loss of the Company for the year ended on that date; 3) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; 4) that the annual accounts have been prepared on a going concern basis. DEPOSITS Fixed Deposits received from the shareholders and the public stood at Rs.Nil as on 31st March, 2012 (Previous year Rs. Nil). There is no deposit or interest claimed but remained unpaid. All the claimed deposits with interest have been repaid in time. Members are aware that the fixed deposit schemes have been discontinued with effect from 1st April, 2001, as benefits were not commensurate with administrative costs. STATUTORY INFORMATION FINANCE AND ACCOUNTS The observations made by the Auditors in their Report and included in the relevant notes forming part of the Accounts, are self explanatory. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements have been prepared by your Company in accordance with the applicable Accounting Standards (AS 21, AS 23 and AS 27) issued by the Institute of Chartered Accountants of India and the same together with Auditors Report thereon form part of the Annual Report. SUBSIDIARY COMPANIES The statement pursuant to Section 212 of the Companies Act, 1956 containing the details of the Company's subsidiaries is attached. Pursuant to direction under section 212(8) of the Companies Act, 1956 by Government of India, Ministry of Corporate Affairs, New Delhi vide General Circular No. - 2/2011 No. 51/12/2007-CL-III dated 8th February, 2011, the Board of Directors, by passing resolution on 30th May, 2012, gave consent for not publishing/attaching copies of the Balance Sheets, Statement ofProfit & Loss, Reports of the Board and the Auditors of all the Subsidiary Companies with the audited financial statements of the Company as at 31st March, 2012. The annual accounts of the subsidiary companies are kept for inspection by any shareholder at the registered office of the Company and shall be made available to shareholders seeking such information at any point of time. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Additional information required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 in respect of Conservation of Energy and Technology Absorption is given in the prescribed forms which are given in Annexure '1' to the Directors' Report. PARTICULARS OF EMPLOYEES Information as per Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. However, as per the provisions of Section 219 (1) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to all shareholders of the Company excluding the statement of particulars of employees under Section 217(2A) of the Companies Act. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company. AUDITORS The Board, on the recommendation of the Audit Committee, has proposed that M/s. Haribhakti & Co. Chartered Accountants, Mumbai, be re-appointed as the Statutory Auditors of the Company and to hold office till the conclusion of the next Annual General Meeting of the Company. M/s. Haribhakti & Co., have forwarded their certificate to the Company stating that their re- appointment, if made, will be within the limit specified in that behalf in sub-section (IB) of section 224 of the Companies Act, 1956. In respect of observations made by the Auditors, please refer to notes to Financial Statements, note no. 27 in respect of Standalone Financial Statements and notes no. 27 to 31 in respect of Consolidated Financial Statements which are self - explanatory and hence in the opinion of the Directors, do not require any further explanation. With respect to other observations, these are receiving the management's attention and will be satisfactorily resolved. ACKNOWLEDGEMENT Your Directors wish to place on record the excellent support, assistance and guidance provided by the financial institutions, banks, customers, suppliers and other business associates. Thanks are also due to your Company's employees for their tireless efforts and high degree of commitment and dedication. Your Directors especially appreciate the continued understanding and confidence of the Members. By Order of the Board For S. KUMARS NATIONWIDE LIMITED Place: Mumbai Nitin S. Kasliwal Date : 30th May, 2012 Chairman & Managing Director ANNEXURE (1) TO THE DIRECTORS REPORT A. CONSERVATION OF ENERGY Energy Conservation measures taken Energy resources are essential part of our life and its availability is also inadequate. We are committed for most advantageous utilization of various forms of energy in cost effective methods for conservation of the precious energy resources. We at SKNL, are continuously committed to adopt Energy Conservation measures and practices in all our processes, activities, products and services. Practicing Continuous implementation of energy conservation measures has resulted in a steady decline of specific Energy consumption. Some major energy conservation measures carried out during the year are as under: (i) Utilizing Yarn dyeing cooling return water, as feed water to Boiler Yarn dyeing process water (having average temperature of around 50 Deg ) is used as feed water to Boiler for Steam generation. Considering average rise of 15 Deg C and 30 KLD water, saving per day will be 450 Kcal/Day, i.e 47 Kg of Furnace Oil. (ii) Installation of VFD in Compressor & STP Plant Variable frequency drive has been installed in Compressor Water pump (18.5 KW) and STP Air blower (3.7 Kw), to run plant with required flow. Total Power consumption are: Without VFD 426 Kwh per day With VFD 340 Kwh per day Saving in power consumption is 86 units per day i.e 30960 units per Year (iii) Rain Water Harvesting We have set up water harvesting system in the plant, whereby we collect whole rain water & use the same in manufacturing process. Total quantity collected during season was over 10000 KL. (iv) Recycle of Pad dry and Stenter Cooling cylinders We are collecting process water of Pad dry and stenter cooling cylinders and after Alteration it is being reused again in process . Total Water recovered per day will be around 30 m3 /day. Total Water recycled per year will be 10800 m3. (v) Utilising Singeing Burner cooling water & CRP vapour condensate. Hot water from Singeing Burner and CRP vapour condensate is being utilized in Pre treatment range . This in turn reduces water & steam consumptions for PTR . (Average Water temperature gain of 10 deg) Total soft water saving will be around 5000 Kl/Year Total Steam saving will be around 75 Tons/Year (vi) Optimization of Stenter m/c chamber temperature and Exhaust gas settings Optimized Stenter m/c process temperature requirements achieved by reduction of 20 Deg C Temperature . Also exhaust gas requirements has been optimized and reduction of 20% exhaust air is achieved in Stenter process This has resulted in saving of around 5 Gms of Gas/Mt of Fabric. B. TECHNOLOGY ABSORPTION Efforts made in Technology Absorption - As per Form 'B' given below: Research & Development (R & D) FORM 'B' 1. Specific areas in which R&D carried out by the Company: Focus is given on Continual Product development and research. 2. Benefits derived as a result of the above R&D As a result we are able to cater high end market ,improved product quality and customer satisfaction . 3. Future plan of action Same as above 4. Research and Development Technology Absorption, Adoption and Innovation The Company has absorbed the technology of manufacturing exclusive high value super fine cotton shirting fabric 1. Efforts, in brief, made towards technology absorption, adoption and innovation: Latest state of the art technology machines and testing equipments have been imported from Western Europe, which give consistent high value end product and are being tested and maintained regularly for consistent quality. Additional Equipments for testing and new product developments have been installed for faster and accurate product manufacturing. 2. Benefits derived as a result of the above efforts With continuous product and design developments, two new complete product range of High value added Shirting is being offered to high end brands. 3. Information regarding Imported Technology All testing and manufacturing equipments have been imported from Europe. Latest technology machinery with automation has been adopted. C. FOREIGN EXCHANGE EARNINGS AND OUTGO a) Activities relating to export, initiatives to increase exports, Developments of new export markets for Products and Services and Export Plan: The company has continued to maintain focus on and avail of export opportunities based on economic consideration During the year the Company has exports (FOB value) worth Rs. 6,692.53 Lacs. b) Total Foreign exchange earned and used (Rs. in Lacs) Current Year Previous Year 2011-12 2010-11 a. Total Foreign Exchange earned 6,692.53 6,850.46 b. Total savings in foreign exchange through products manufactured by the Company and deemed exports - - Sub Total (a + b) 6,692.53 6,850.46 c. Total Foreign Exchange used 7,149.14 11,774.09 FORM A FORMING PART OF ANNEXURE (1) Form for Disclosure of particulars with respect to conservation of Energy Part A - POWER AND FUEL CONSUMPTION Electricity Purchased Current year Previous year Units in lacs 275.30 224.64 Total Amount Rs. lacs 1,566.46 1,130.32 Rate/Units Rs. 5.69 4.62 Own generation Through Deisel generator Units (D. G. Units) in lacs 4.52 6.02 Unit/Liter of Diesel Oil 4.79 4.71 Cost/Unit Rs. 5.97 5.89 Part B - CONSUMPTION PER UNIT OF PRODUCTION Electricity Current year Previous year Fabrics KWH/Mts 0.32 0.33 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS The year 2011-12 was again a very challenging year both globally and domestically. The world output growth dropped to 3.9% in 2010-11 from 5.3% during 2009-10, mainly due to the depressed performance of European countries on account of continued and protracted Sovereign Debt crisis. India witnessed moderate growth, high inflation, a slowdown in reforms and heightened concerns around governance. The country's annual GDP growth has been dragged down to 6.5%, the lowest since 2002-03 (previous year 8.4%). The slowdown in manufacturing to 2.5% for the year, compared to 7.6% for the previous year is particularly depressing. The fiscal deficit for 201112 was 5.9% higher than the estimated 4.6%. Economists have attributed the fall this time to a poor performance in manufacturing, mining and construction, a high interest rate regime, environmental issues, land acquisition problems and an uncertain global economy. Industry captains believe that the reform process should be given top priority, subsidies should be cut and FDI in various sectors be allowed. The indifferent business sentiment has been keeping the private investment in the country low. During this period, it is extremely important to restore the confidence levels of investors. And for this the government needs to ensure that the reform process is continuous and very comprehensive. The Monetary Policy stance by the RBI during the year 2011- 12 continued to remain tight, aiming at controlling inflation and containing inflationary expectations. While the global growth rate is likely to remain subdued, the world economy is expected to continue on the path of recovery. Industry Captains are still positive about the India story and have ranked the country as the fourth most favourable nation for overall growth prospects in the next 12 months, just behind China, the US and Brazil. The domestic market opportunities remain large. Indian economy has been immensely benefited by the Textile sector's contribution to the growth of manufacturing sector through continued innovation and modernization. The sector has vast growth potential in view of its inherent strengths of strong raw material base and traditional craftsmanship and designing skills. Indian Textiles and Clothing Industry, is one of the mainstays of the national economy. The profile of the Indian consumer is changing because of rapid urbanization, changing preferences due to rise in income and a young workforce. Opportunities/Threats/Challenges SKNL continued to perform above par in the face of global and domestic economic uncertainty. 'Belmonte' and 'Reid & Taylor' remain key contributors to the overall performance of the Company. SKNL's key strengths are: 1. Only Indian Company to operate 45 globally well-established textile and apparel brands. 2. Not dependent on one raw material source as inputs include wool, polyester, rayon, linen and cotton. 3. Manufacturing units in India, Italy, UK, USA and Canada with cost- effective outsourcing. 4. Strong synergy between Indian and International operations through back- end, front end model. 5. Rapidly expanding franchise / distribution network in India through exclusive brand outlets. Higher raw material costs, slowdown in global as well as domestic economy and competition from other countries in the neighbourhood could adversely impact the profitability and the competitiveness. However, the Company's operations are resilient enough to withstand unfavorable conditions. A brief review of some of the SBU's is given hereunder: Blended and Uniform fabrics Consumer Textiles division focuses on the economy and mid-price strata of the society and deals in fabrics for work wear, uniforms and daily wear. The Company is market leader in Uniforms with 30% market share and is one of the largest institutional suppliers of textiles to defence and police forces in India. Total Home Expressions Though the Carmichael House brand has been well-accepted, the market for Home Textiles has been generally lukewarm and therefore the growth in the Division has been subdued. Baruche Superfine Cottons (BSFC) The Luxury Cotton division manufacturing high quality shirting fabric, primarily for export, is a high margin business and is achieving good growth with high capacity utilization at the state-of-the-art plant near Bharuch in Gujarat. Luxury Textiles The Reid & Taylor (India) Ltd. subsidiary continued to be a prime revenue driver reporting consistent growth over a period of time. Despite increased selling expenses and rising raw material prices for both polyester and wool, EBIDTA margins remained fairly steady due to expanding volumes and better realizations in polyester-wool as well as polyester-viscose fabrics. The subsidiary plans to soon launch 'Kruger', a premium casual brand. Ready to Wear This Division consists of garments / apparel represented by Reid & Taylor, Belmonte and World Player and has achieved significant improvement in revenues and profitability with good market penetration extending to several districts in India. International Businesses This segment includes HMX, Leggiuno and DKNY related operations. Despite the worldwide economic uncertainty, revenues and margins have been improving. Growth Prospects The Company historically has followed a well-planned growth strategy. Capacity expansion at Dewas, Mysore and Bharuch have been implemented and the suit factory at Bangalore has been set up and part production has commenced. The Company plans to capture more value from direct retailing and increasing the share of ready-to-wear in revenue composition. Financial Performance The Company's performance is consistently on a growth trajectory. It continues to maintain healthy financial ratios with conservative leverage providing flexibility for expansion. Risks and Concerns The domestic, regional and global economic environment directly influences the consumption of textile products. Any economic slowdown can adversely impact demand-supply dynamics and profitability of all industry players including our Company. However, with some exception, the Company's operations have historically shown significant resilience to the fluctuations of economic and industry cycles. The Company's diverse product portfolio and broad product mix basket is an added asset, providing a buffer against market fluctuations. The Company is exposed to risks from market fluctuations of foreign exchange, interest rates, commodity prices, business risk and compliance risks. Business risk evaluation and management is an ongoing process within the Company which is managed by regular monitoring and corrective actions. The Company adopts a prudent and conservative risk-mitigating strategy to minimize any adverse impact. The Company's strong reputation for quality product differentiation and service, the existence of a powerful brand image and a robust marketing network mitigates the impact of price rise of raw materials. Adequacy of Internal Control The Company has a 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 transactions are authorized, recorded and reported correctly. The internal control systems are supplemented by an extensive programme of internal audits, reviews by management and documented guidelines and procedures. The internal control systems are designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets. Cautionary Statement Statements made in this report in describing the Company's objectives, projections, estimates, expectations or predictions may be 'forward-looking statements' within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. Actual results could differ materially from those expressed in the statement or implied due to the influence of external and internal factors, which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events.