MANAGEMENT DISCUSSION AND ANALYSIS REPORT This report includes discussion on the following matters within the limits set by the Company's competitive position: INDUSTRY STRUCTURE AND DEVELOPMENTS The Company's products are used in many applications including polymers, plastics, performance materials, agrochemicals, coatings, pharmaceuticals, personal care, flavours and fragrance. Your Company focuses mainly on chlorinated products where it has technical expertise and excellent relationships with customers including many global chemical giants. Together with this, the market in all regions of the world developed by the Company helps maintain a balanced and sustained business. The company has been developing new products that shall make application portfolio a lot wider than today. This will help the company grow further and provide stability and consistency of revenue and margins. POLYMERS AND SPECIALITY PLASTICS AND PERFORMANCE MATERIALS The polymers and speciality plastics market has remained stagnant for the last few years. However, due to new applications of such polymers and plastics, the pattern is changing in favour of slow but steady growth. Your Company manufactures key base products for such plastics and polymers. It is expected that this business should grow at steady pace over the next few years. With new specialty plastics being continuously developed based on end-applications, the Company envisages this segment to grow substantially over the next 4 to 5 years. If the low crude prices are sustained over the long term, the growth in this segment can be significant. PHARMA PRODUCTS Your Company has built an excellent reputation as a reliable supplier to many leading Pharma companies. In the light of Company enjoying a strong relationship with its customers in this segment, the customers have been demanding more products from the Company. Due to its specific requirements to comply with regulatory aspects, it takes a little longer time for commercial supply to start. However, in the coming years, we expect Pharma products to be a good contributor to future growth. Your Company is focused on developing the capabilities needed to cater to multi-stage reaction products and investing in plant facilities to be able to make such products. AGROCHEMICALS & DYESTUFF The overall agrochemical market was subdued during the year due to uneven rainfall. The agrochemical market is expected to improve this year with forecast of good rainfall. However, low cost imports of agrochemicals and monsoon dependency are the key factors which may have an adverse impact on agrochemical sector. The Company has been focusing on high value products for this application segment recently. This may give good growth in the coming period. Due to effluent disposal issues, the dyestuff industry is facing problems of lower capacity utilisation. This is adversely affecting the market for Thionyl Chloride. We do not expect any significant growth in this segment. FLAVOURS AND FRAGRANCES Your Company has also started to cater to the needs of personal care product manufacturers. This area of business is expected to grow over the next few years. OPPORTUNITIES AND THREATS Opportunities While there is negative economic outlook in many countries, the Chemical and Pharmaceutical industries, due to their inherent nature, have been growing and are expected to grow at steady pace. This, combined with low crude prices may provide a good opportunity for your Company for good growth. The customers have been demanding strong EHS performance from suppliers. Your Company has a good reputation for EHS with customers. This can provide further opportunities for growth. Threats Increased competition may affect your Company's capability in sustaining profits. Imported raw materials may be affected considering weakening Rupee. If the crude prices go substantially up suddenly, many customers may be affected resulting in lower revenue and margins for your Company. If rupee becomes too strong, it may affect the Company's margins as your Company has substantial export business. RISKS AND CONCERNS Your Company is constantly watching the factors like increase in input cost, lowering value of Rupee and increased competition and taking steps to mitigate the risks as much as possible. A structured risk management process is in place to capture and mitigate risks at all times. OUTLOOK The Company, with its excellent reputation for quality, delivery and EHS with the global chemical giants and wide product portfolio having many important applications, is expected to continue to grow at a steady pace while retaining largely the current level of margins. The polymers and performance material segment is expected to provide good growth with pharmaceuticals also being a good driver for growth. SEGMENT WISE PERFORMANCE The Company has only one business segment, namely "Chemicals". The information in respect of secondary segment as per the Accounting Standard (AS-17) "Segment Reporting" issued by the Institute of Chartered Accountants of India is given under Note No. 29(A) in the Notes forming part of the Consolidated Financial Statements. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Your Company maintains an adequate and effective internal control system commensurate with its size and complexity. The internal control systems are supplemented through an extensive internal audit programme and periodic review by management. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE The net sale of the Company for the year under review is Rs.278.34 Crores as compared to Rs.257.39 Crores in the brvious year, an increase of 8.15%. During the financial year 2015-16, the Company registered net profit of Rs.21.28 Crores as against net profit of Rs.11.06 Crores in the brvious year. HUMAN RESOURCES In line with the HR strategy, the Company continued to improve its HR systems and processes with a view to increase employee engagement and satisfaction. In order to improve the productivity and ability of the employees of the organisation to meet future challenges, a manpower restructuring and organisation structure augmentation process has been initiated. Employee development programmes focusing on capability building are conducted regularly. Role-specific talent development initiatives have been introduced across the organisation. All the HR processes and initiatives brvailing in the Company have been strengthened. COMMUNITY ENGAGEMENT AND ENVIRONMENT MANAGEMENT The Company strongly believes that organizations and businesses can play a significant role in creating a sustainable and inclusive future with its stakeholders. It believes in a cohesive, inclusive and integrated society in which all individuals have access to opportunities for personal and economic growth. For several decades, the Company has consistently demonstrated its concern for the community (both internal and external) and a respect for its environment and the local ecology. It has been associated with a scalable, sustainable and integrated development of communities in and around its location at Ekalbara in District Vadodara. Sustainability concerns are an integral part of the Company's value system. Over the years, the Company has embedded these values into its operations in a variety of ways, such as promoting rural development, undertaking and establishing programmes and processes for greening and conservation and promotion of volunteerism within the organization. An integrated approach is adopted towards development, wherein creating social capital within the communities that it serves is given prime importance. People participation is vital to the success of the programmes and it forms the basis of all the projects. Through its focused initiatives and participatory approach like Quality Circle meetings and Open General Meeting it is ensured that the employees become the real managers and owners and work towards their own development and that of the society at large. Communication of Company's performance and objectives to employees at all levels by Management has become a culture of the Company. TRAINING PERFORMANCE To develop the skills and instill behavioural and personality development traits in all supervisory staff and managerial cadre, the Company organized a number of training programmes during the year. These training programmes are identified through the Performance Management System by synchronizing organizational needs with individual needs. In these diverse programmes, 10,621 man-hours of training was imparted to employees. Apart from in-house training programmes, employees were also nominated for attending external training programmes on subjects of importance for business. INDUSTRIAL RELATIONS Industrial peace and harmony based on healthy employee relations have continued throughout the year. The Company and the Union enjoy a very cordial and mutually respectful relationship. The grievances/issues raised by the employees/Union were given due attention. The issues brought up by them were settled through regular meetings and interactions between the Management and the Union and action as mutually agreed was taken to settle them. CAUTIONARY STATEMENT Statements in this report on Management Discussion and Analysis relating to the Company 's objectives, projections, estimates, expectations or brdiction may be forward looking within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results might differ materially from those exbrssed or implied depending upon factors such as climatic conditions, global and domestic demand-supply conditions, finished goods prices, raw materials cost and availability, foreign exchange market movements, changes in Government regulations and tax structure, economic and political developments within India and the countries with which the Company has business and other factors such as litigation and industrial relations. The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events. |