Management Discussion and Analysis

A. Business Overview

Zinc carbon batteries

Zinc carbon sales of organized manufacturers have reported sales at around 99% as compared to brvious year. However, the dry battery consumption in India is much more due to continuous import of Chinese batteries at dumped price. In this context there is a scope for organized sector to grow.

Another significant factor which is affecting the sales turnover is due to the shift in consumer brference from high value D size batteries towards low priced AA / AAA size batteries.

The above trend is in line with the global trend and envisaging the change in trend towards miniaturization, your Company has invested in enhancing the production capacity of AAA category. The growth in AAA category is expected to continue in the years to come and your Company is well placed to take advantage of this growing segment.

Alkaline batteries

At brsent battery industry in India is dominated by zinc carbon batteries and alkaline contributes only 4% of the total battery demand in the country. Contrary to this, in developed countries the alkaline segment dominates the total battery demand.

Alkaline is a category for future growth. Realizing this, your Company is aggressively concentrating its activities towards improvement of sales in this category. The Company is pleased to report having doubled its share in this category during the year 2015-16 v/s brvious year.

Flashlights

Flashlight market is shared equally by organized and unorganized sectors. Unorganized sector continuously launch look alike low price models. This coupled with weak monsoon has resulted into flashlight segment showing de-growth for the year 2015-16 at around 90% in the organized sector.

Your Company is pleased to report achieving growth rate of 102% during the year. The Company foresees large opportunity in flashlight market owing to ever increasing demand of alternative solutions required by consumers to cope with power cuts.

Rechargeable batteries

Rechargeable battery market is stagnant and contributes around 1% to total battery demand. This segment is dominated by imported cheap rechargeable batteries.

Your Company has successfully marked its brsence in marketing and sales of “eneloop” brand of rechargeable batteries and chargers. Company intends to aggressively face the challenges from cheap imported products.

Dealers and consumers apbrciate the quality & superiority of our rechargeable batteries but are attracted by huge margins and low offer rates of imported rechargeable batteries.

B. Industry Structure and Development

Organized battery industry has marginally gone down in the financial year 2015-16. It also indicates changes in the buying brferences of the consumer. “D Size” continues to de-grow. De-growth in “AA” Economy segment and double digit growth in “AAA” segment has opened up challenges to be faced in the year 2016-17.

As a result of consumer shift towards miniaturization, “AAA” segment has played a very positive role in maintaining sales of the industry and is expected to grow further.

Company is pleased to announce that having enhanced its production capabilities with successful commissioning of new “AAA” production line, it is well placed to take advantage in this growing segment.

Marketing and Distribution

Your Company has been continuously making efforts not only to strengthen its distribution network but simultaneously also concentrating on improving the productivity of each and every members of its sales team through training and educative programs.

To support productivity enhancement the Company has also undertaken various brand building activities in rural as well as urban markets such as wall paintings, sun sheds, dealer boards and advertisement in bus panels etc. The Company also continued its basic activity i.e. “DISHA” which helped in improving the visibility of Panasonic batteries at shop fronts.

C. Opportunities and threats

Opportunities

Presently, per capita consumption of batteries in India is quite low as compared to other developed countries.

It indicates potential for higher future growth. Battery is the cheapest source of portable power and its consumption is always expected to grow as it also is an item of recurring use. Changing usage patterns, arrival of new appliances, shift towards miniaturization of appliances, growing income levels and changing life style promises growth especially in AA/AAA batteries.

Threats

Import of huge quantity of low performance cheap Chinese batteries poses a big threat to the organized sector of the Industry. It not only poses more brssure on the pricing of economy range of batteries but also augments price competition giving lower operating margins which leaves less scope for research and development.

D. Risks & Concerns

Continuous upward trend in raw material cost and devaluation of rupee are a matter of concern for the Indian economy including battery industry.

E. Outlook

The current trend of battery usage pattern in India is gradually moving in line with global trend. It is a positive sign and first step towards moving up with the global per capita consumption which at brsent is much higher than the per capita consumption in India.

F. Internal Financial Controls

The Company has an adequate system of internal control to ensure compliance with policies and procedures.

The internal audit is done by an independent firm of Chartered Accountants. Internal audits are regularly carried out to review the internal control systems. The internal audit reports along with recommendations contained therein are reviewed by the Audit Committee of the Board.

G. Development in Human Resource and Industrial Relation

Your Directors wish to place on record their apbrciation to all its employees for their sustained efforts and valuable contribution. Your Company works on the principle of “People before Product”, which enables cordial relationship amongst the employees.

The total employee strength of the Company as on March 31, 2016 stood at 836.

H. Research & Development

The goal of our Company is to supply high quality products to our valued customers. Need of customers is changing frequently as per the usage pattern of gadgets. If additional features of environment friendly products with high quality & safety features are available, it would lead to higher level of customer satisfaction and consumer delight. Keeping the above objective in view, the research and development activities were focused towards manufacturing of best quality products with low manufacturing cost, incorporating additional features of safety of appliances and offering environment friendly products.

As a part of continual improvement, your Company, during the year, has taken lead in eliminating heavy metal i.e. “Lead” (Pb) from dry battery for which efforts during past several years have been made under the guidance of the Panasonic Corporation, Japan. The above is the joint effort made by your Company under the guidance of Panasonic Corporation to manufacture lead free batteries despite the lead levels being permissible as per the Indian regulation.

As a result of the above initiative, effective from August 2016 onwards, your Company will be the only Company in India manufacturing the lead free dry battery. You would be happy to know that at brsent, yours is the only Company in India to manufacture complete range of eco-friendly products.

Your Company is planning to create awareness amongst employees and business partners etc. by way of special training programs and conferences with the sales channels to take advantage of this exclusive initiative in the market place.

Your Company is also committed to be “No. 1 Green Innovative Company in India” by supplying eco-friendly products adopting global vision philosophy of Panasonic Corporation.

During the year, your Company has enhanced the manufacturing capacity of R03/ AAA battery by introduction of new manufacturing line, to meet the growing segment.

During the year, several activities were undertaken to improve product quality without increasing cost and process losses by use of statistical methods like QC seven tools, Q.C. Circle and Kaizen activities. This will lead to enhancement in the confidence level of the employees, suppliers, business associates and customers.

You will be glad to know that, during the year, your Company introduced the highest performance grade of product in R20 paste type “Panasonic Gold” in attractive packaging with the objective to provide “Value for Money” to our valued customers.

Further, during the year under review, your Company improved the recycle rate as per the guidelines of collaborator for the waste generated out of manufacturing process. Your Company also carried out various environmental activities like tree plantation, training and awareness to employees to conserve natural resources.