MANAGEMENT DISCUSSION AND ANALYSIS:

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Company's operations were affected for the whole year under review on account of un-remunerative product prices. The product prices were very low for major part of the year, well below the variable cost of production itself. For certain periods Propylene supplies by HPCL were also somewhat lower due to the outage of one of the product Condensers in the Propylene Recovery Unit of HPCL, damaged due to a Fire accident earlier. A new imported Condenser was installed and commissioned during the first week of April, 2015 which removed the bottleneck in Propylene production by HPCL. The bottleneck has arisen on a Force Maejure condition. HPCL have since demonstrated higher Propylene produc­tion, meeting full scale requirement of our Company. Poor product prices and consequently unit shutdown for prolonged period during the year resulted in poor financial performance.

The Company has negotiated with HPCL for revision in the basis of Propylene pricing related to crude prices on a short-term basis, in order to avoid wide variation between Propy-lene and product prices.

The Company has taken up with the Government of India for levy of Anti-dumping Duty on both the main products, 2-Ethyl Hexanol and Normal Butanol in view of the injury to the Com­pany caused by dumping of these products into India by ex­porting countries. At this stage, the Company feels that it is likely that certain Anti-dumping Duties will be levied on both the products that may result in improved performance of the Company. HPCL has since established full scale operations of their Propylene Recovery Unit which will assist your Com­pany in operating the unit at full capacity that can also con­tribute to better performance of the Company.

OPPORTUNITIES AND THREATS:

The Company is expected to realise full capacity in view of HPCL's capability to operate their Propylene Recovery Unit at full capacity which can contribute for favourable perfor­mance of the Company. Expected levying of Anti-dumping Duties also contribute towards improved performance of the Company. However, international product prices, strength­ening of Rupee against Dollar may impact the Company's performance to some extent.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has internal control systems commensurate with the size of the business operations. A Chartered Ac­countants' firm is engaged to carry internal audit covering the entire operations. The Audit firm submits internal audit report periodically with their suggestions and / or corrections. Audit Committee critically deliberates and reviews such in­ternal audit reports and ensures effectiveness of the internal control systems.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS:

As far as the Human Resources is concerned, the employ­ees are being trained to meet the Plant requirements from time to time by motivating them in a positive way and the industrial relations continue to be cordial throughout the year.

The total number of employees employed as on 31.3.2015 is 268.

FUTURE OUTLOOK:

Your Company has overcome the raw material supply con­straints faced due to fire accident in supplier's brmises dur­ing August, 2013. However, the Company's performance to a large extent is influenced by International demand and sup­ply position and prices, crude prices, exchange fluctuations etc. Overall operations are expected to improve in the com­ing years.

RISKS AND CONCERNS:

The Company is depending for its major raw material i.e., Propylene from a single source i.e., HPCL, Visakha Refin­ery. However, the risk is built in the project evaluation. The crude prices, exchange fluctuations and middle-east political stability is a major concern to the Company's performance.

CAUTIONARY STATEMENT:

The statements describing the Company's outlook, estimates or brdictions may be forward-looking statements based on certain assumptions of future events. Actual results may dif­fer materially from those exbrssed or implied, since the Company's operations are influenced by external or internal factors. Your Company closely monitors all major develop­ments likely to affect the operations and will respond to meet the potential threats and to gain from any possible opportuni­ties.