MANAGEMENT DISCUSSION AND ANALYSIS

Overview

The financial year 2015-16 was one of the most challenging and difficult period for all industries and more particularly industries in the business of commodities. Industrial recession was sbrad over ot only domestically but also internationally due to melt down of Chinese industrial growth. The overall basic industries particularly steel and aluminium are struggling to survive due to uncertainties about the future and thereby no green field expansions are happening anywhere.

During the last quarter of FY15, heightened risk averseness led to dumping of commodities across the board. The resultant rise in US Dollars, coupled with surging Chinese exports following slowing demand growth in China resulted in a sharp decline in LME, which dropped sharply by almost 10%. This was also accompanied with significant decline in regional brmium, resulting in a large decline in all inclusive aluminium realisations putting brssure on margins. Goa Carbon Limited is one of the producers of Calcined Petroleum Coke (CPC), which is used as primary Carbon source by Aluminum, Steel and Titanium dioxide industries. Therefore, there is a direct relationship between the progress and growth of CPC industries with the progress and growth of aluminium and steel industries. Aluminium industry is the main user of CPC which consumes almost 75% of production. The domestic demand is mainly impacted due to inordinate delay by Indian Smelters in implementing expansion projects. The international market is seriously affected by over supply of CPC by China.

Outlook

As said above, the growth of CPC industry is directly linked with the growth of Aluminum industry. It is expected that globally Aluminium industry will grow from 57.6 Mn MT in 2015 to 68.4 Mn MT in 2020 at compounded growth rate of 3.5% due to its increasing use in packaging, transportation and construction due to its inherent quality of light weight, superior electric conductivity, non-corrosive and high strength. Most of this growth will come from Middle East and Asia.

Therefore, with the growth of aluminium industry, it is expected CPC industry will grow in the same proportion. Similarly, in the recent past, there is a demographic shift in the manufacture of aluminum from the western countries to Asia and Middle East. The Company is expected to perform better on this front due to proximity to market to deliver expected increase in CPC demand in a more economic way.

Risk and concerns

As the commodity prices had impacted all basic industries, which resulted in drastic capacity curtailment by the industries including aluminium and therefore the reduction in capacity utilization by aluminium smelters affected negatively the demand for CPC.

The worldwide recession mainly due to China crisis had direct impact on demand for US Dollars which resulted in the volatility of Indian Currency also. As Goa Carbon mainly imports its raw material, it remains vulnerable to US Dollars. The Company has a prudent foreign exchange management policy and does not speculate on foreign currency.

The Company has another challenge to source right type of raw material which is also known as Green Petroleum Coke on a continuous basis as the demand for right quality of material is ever increasing. However, the Company tries to overcome this difficulty by closely working on regular basis with the aluminium smelters to blend different type of material thereby to optimize available raw material to make it more competitive and profitable to meet the requirements of the smelters.

Research and Development

Research and development is an ongoing process at Goa Carbon. The Company is continuously innovating and discovering methods and concepts to improve the quality of its product and achieve operational efficiency.

The company is awarded with quality certification of ISO 9001 and ISO 14001 which also demonstrates the ability of the Company to achieve higher level of customer satisfaction.

Financial Review

The financial statements have been brpared in compliance with the requirements of the Companies Act, 2013. The key financial ratios are given below in percentage, except for earnings per share

Internal Control System

The company has adequate internal control system commensurate with its size and business. The Internal Auditor reviews that all the transactions of the company are in line with the compliance of laws, policies and procedures and have been correctly recorded and reported. The Internal Audit is conducted on regular basis and the reports are submitted to the Audit Committee of Directors at their quarterly meetings.

Human Resources

As on March 31, 2016, the Company had 221 employees consisting of 16 managerial personnel and 205 other employees including workmen.

The Company has excellent combination of experienced and talented Technical Managers. The Company also undertakes on regular basis various training programmes to keep its employees updated on new technical developments and information which directly results in optimum capacity utilization and cost effectiveness.

The Company’s relation with its employees continues to be cordial. The Company always reciprocates commitment to its employees in order to motivate them to perform the best.

Statutory Compliance

All declarations and compliances with respect to the applicable statutes, enactments and guidelines are submitted at every meeting of the Board of Directors of the Company. The Company Secretary who is also the Compliance Officer gives a declaration of compliance to the Board with respect to the applicable provisions of Companies Act, 1956 / 2013 and SEBI Regulations.

Cautionary Statement

Some of the statements given in the above management discussion and analysis about the Company’s projections, objectives, estimates, expectations and brdictions may be ‘forward looking statements’ within the meaning of applicable securities laws and regulations. The actual results may differ substantially from these exbrssed or implied statements. Significant factors that could make a difference to the company’s operations including domestic and global economic conditions affecting demand and supply and price conditions in the industry, changes in Government laws, tax regime and other statutory changes, environment laws and labour relations. The Company undertakes no obligation to periodically revise any such forward looking statement to reflect future events or circumstances.