MANAGEMENT DISCUSSION AND ANALYSIS REPORT

GENERAL REVIEW

The Company was incorporated in the year 1971 in New Delhi. The Company has three business divisions namely the Abrasives Grains Division at Porbandar, Gujarat that manufactures fused alumina grains and calcined products, the Refractory Monolithics Division that manufactures refractory castables and monolithics and the Power division comprising of thermal power plants and wind turbine generators.

The Abrasives Grains Division, the first of Company's all divisions, was established in the year 1974. The Company also has a Power Division that generates electricity for captive consumption which was set up in 1998 and expanded in 2007 with the addition of a 9 MW coal based thermal power plant. In 2010, the Company ventured into green energy projects by setting up wind turbines. At brsent the total commissioned capacity of the wind farms is 11.1 MW. The power generated from the windmills is sold to the state electricity board with which there are power purchase agreements in place.

BUSINESS DIVISIONS/SEGMENTS

As mentioned above, the Company has two major business segments in terms of the nature of output (i) Fused Aluminium Oxide Grains including Calcined Products and Refractories Monolithics and (ii) Electricity (Power Division), which have been elucidated in the following paragraphs:

ABRASIVE GRAINS & REFRACTORY MONOLITHICS

The Abrasives Grains Division at Porbandar is the first manufacturing unit set up by the Company. The Division manufactures calcined bauxite and fused aluminium oxide abrasive grains. Raw bauxite and calcined alumina are the basic raw materials used for the manufacture of abrasive grains. Raw bauxite is procured from mines owned by the Company and others and calcined alumina is purchased from aluminium companies, Hindalco Industries Limited being prominent amongst them. These products are used in the manufacture of refractories and grinding wheels & coated abrasives. The Company manufactures refractory castables & monolithics used in the cement & steel industries. It is also located in Porbandar, Gujarat.

POWER GENERATION

The Company has a total thermal power plant capacity of 18 MW out of which 9 MW is based on coal and 9 MW on furnace oil. The thermal power plant based on coal is more economical and is operated at full capacity. The electricity from this power division is meant for captive consumption by the manufacturing division at Porbandar. The Company also has wind power generation capacity of 11.1 MW. The power generated by these plants is sold to the respective state power distribution companies.

FINANCIALS OF SEGMENTS

Financials of business segments are given in detail in note 25 (Segment Information) of the Annual Report.

FINANCIALS AND INTERNAL CONTROL

During the year under review the gross turnover of the company was Rs. 20,427.24 Lacs and gross profit & net profit were Rs. 1,713.90 Lacs & Rs. 1,230.92 Lacs respectively. The turnover of the abrasives grains was Rs. 14242.55 Lacs. During the year, the Company has sold/ export non plant grade bauxite amounting to Rs. 69.27 Lacs. The management expects that the company will sale/export non-plant grade bauxite at various mines in Jamnagar district, Gujarat. During the year under review gross revenue for sale of power (wind energy) was Rs. 626.96 Lacs.

The Company has an adequate internal control system which is commensurate with its size and which adopts the best practices brvalent in the industry. Besides conducting internal audit at regular intervals and implementing the measures suggested from time to time there is a statutory audit committee comprising of majority of independent directors in place to oversee the internal control processes in the Company.

HUMAN RESOURCES

The Company believes in the strength of human resources and that it is the best form of business capital which needs to be explored and utilised to full potential. At the company, constant efforts are made in developing human resources by providing necessary training and taking care of employee welfare. The Company endeavors to keep the employees' motivation level high by providing congenial work atmosphere and rewarding/remunerating adequately. There are cordial relations between the management and the employees.

CONCERNS AND FUTURE OUTLOOK

The Company is optimistic about increasing profitability on the back of increasing revenue and margins in the near term. Despite the recent downturn in Refractory market, and increasing competition from Chinese suppliers, company is positioned to leverage its competent resource strength and large production capacity. Further the recent trend of declining fuel prices globally will mitigate the margin risks we face as a result of drop in refractory and raw material prices & help sustain market share.

To meet increasing domestic & global demand and more stringent quality and environmental requirements we are planning to modernise and expand our production facility using latest available technology. There projects will help us launch some new products and grades as well and potentially increase margins in existing products. A new and dedicated team is being developed to explore export opportunities for the company, and we are expecting significant growth in revenue over a medium term timeframe.

To conclude, the strategic location of manufacturing facility, captive mineral resources and in-house thermal based power generation facility continue to keep us in a leadership position and we expect our renewed innovative focus and efficiency improvement initiatives will contribute to achieve and exceed our objectives.

CAUTIONARY STATEMENT

The Management Discussion and Analysis Report contains some forward looking statements based upon the information and data available with the Company, assumptions with regard to global economic conditions, the government policies etc. The Company cannot guarantee the accuracy of assumptions and perceived performance of the Company in future. Hence it is cautioned that the actual results may differ from those exbrssed or implied in this report.