MANAGEMENT DISCUSSION AND ANALYSIS REPORT

BUSINESS PERFORMANCE AND OVERVIEW

The Indian economy has faced lacklustre investment momentum in infrastructure,energyand industrial capex for the last couple of years.2014-15 was another difficult year weathered by the Indian economy, where the key drivers for industry remained static lndex of Industrial Production (IIP) remained static for first six months indicating slow activity in manufacturing and industrial sectors. However, in the second half of the fiscal, IIP was marginally positive. However, steel consumption, a major determinant for welding industry and stage of economic development at large, was still at low levels in India.

In this context the net turnover of the Company grew at 7.6% from INR1674 million in 2013-14tolNR 1801 million in 2014-15.

Strategic sourcing of raw materials is a major area of focus for the Company where the Company has taken a lot of efforts. It has helped in cutting down material consumption cost from 74.05% in 2013-14 to 72.21 % in 2014-15.

Employee benefit expense was at the same levels as brvious fiscal. However, the Company faced an upswing in overheads from 12.5% in 2013-14 to 15.5% in 2014-15. During the year under review, the Company had engaged KPMG, leading audit and consultancy service provider, as management consultants. Hence the expenditure outflow was higher.

The Company has been working extensively on reducing its finance cost. We have exited from the consortium banking arrangement with SBI and TJSB and gone ahead with DBS Bank and TJSB in a multiple banking arrangement. This was done after extensive deliberations wherein the Company is getting funds at lower rates of interest from the entrant bank.

Debrciation cost was higher from INR 25 million in 2013-14 to INR 36 million in 2014-15.This was on account of new debrciation policies as per Schedule 11 of the Companies Act,2013, which provides foran accelerated debrciation policy.

There has been a severe brssure on margins in the industry. The bottomline of all players in welding industry has been impacted. Working capital and margins, especially of mass market products, have been under strong brssure due to aggressive pricing and credit terms by competitors. There has been an increase in credit cycles to trade and liquidity crunch in the market raises doubts on credit worthiness of customers.

PBT levels were lower in 2014-15 as compared to 2013-14at3.78%and2.45%of turnover respectively. Subsequently, PAT was at a lower level, at INR 23.67 million in 2014-15 vis-a-vis INR42.78 million in 2013-14.

0UTL00K, 0PP0RTUNITIESANDTHREATS

As discussed earlier, 2014-15 has been a difficult year which has not delivered as per expected targets. However, this year is also seeing winds of positive change and a foundation for future years of growth are being laid down now. When we look across an array of economic indicators, mixed signals continue to brvail. On one hand, CPI is lower, Current Account Deficit (CAD) has narrowed and Re. is displaying remarkable resilience, whereas on the other, IIP remains static, credit off take is weak and growth in core sector has slumped. The shifting trend in economic targets has caused a bit of uncertainty.

Competition from unorganized players with local advantages is brsent. Also, import from China is a major threat on overall price realization, causing burden on margins. The welding industry depends largely on core sectors like infrastructure, power, automobile and refineries. Hence, performance and growth of the overall economy is vital for our industry to show any signs of progress. Power and infrastructure sectors have suffered from funding issues and hence, have not reflected growth figures.

The Indian economy is expected to grow@ 7.5% in 2015-16,on a path where it will eventually overtake China.Although,there is intent in removing the blockades to growth, the practical impact of policy pronouncements is yet to be seen at the ground level. With such positive statistics, your Company is adopting focused business strategies in all spheres. We are aggressively pursuing new geographies and working diligently on product R&D, which will expand the portfolio of our product offerings.

The Government has taken up few initiatives which is going to have an impact on long term growth of the country. The "Make in India' drive is a huge game changer for the economy. This is a major new national program designed to transform India into a manufacturing hub. Development of a robust manufacturing sector is a priority for the Government. Creation of National Industrial Corridors Authority is also another project which will carry out project development activities and facilitate and coordinate central efforts on the industrial corridors. A favourable tax regime and implantation of GST will also have significant changes in the way businesses work.

In summary, the short term outlook is getting increasingly difficult to brdict as there are multiple inter-linked factors. Of course, execution by the Government is key and even if a part of the promises translate to actions, there would be reasonably positive implications for the economy and the country.

Your Company seeks to become the brferred brand for manufacturers and are confident that our single-minded thrust on this objective will yield positive results.

CAUTIONARY STATEMENT

Statement in this Management's Discussion and Analysis detailing the Company's objectives, projections, estimates, estimates, expectations or brdictions are "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations.