MANAGEMENT DISCUSSION AND ANALYSIS 2015-16

1. OVERVIEW

The World economy was in a slow growth mode during the year under review except in USA. The business situation was also vitiated by second consecutive drought in India due to shortfall in of Monsoon.

Inspite of these adverse factors due to resilience of Indian economy, our Country witnessed a GDP growth of around 7.5%.

The lower crude prices have substantially mitigated the negative impact of low world growth and deficient monsoon in India thereby continuing the growth impulse of our Country’s economy in 2015-16.

The Polymer prices hovered at a lower level during most part of the year. The Polymer consumption has grown by around 14% in volume terms close to two times GDP growth during the year. Such consumption driven growth has not been seen in the last decade.

This augurs well for your Company’s growth plan. The Country has consumed around 13.7 million tons of Plastics in last year compared to around 12 million tons in the brceeding year.

This growth has come principally from increase in domestic consumption. The growth in export of Plastics products was only marginal.

India has huge potential to achieve large scale export of Plastics products from the Country. China exported around USD 104 Billion worth of plastics products in the year 2015 where as our Country has exported plastics products only around USD 4.5 Billion during the same period. To boost the export, the Government has to take several initiatives which only can encourage entrebrneurs to setup large facilities to participate in the export market. Such initiatives are still awaited.

2. INDUSTRY STRUCTURE AND DEVELOPMENT

There is a drive in the Country to start construction of affordable houses in large numbers. The Government has permitted FDI also in realty segment on favorable terms. The large investment outlay in rural sector with an objective of strive doubling the farmer’s per capita income by 2022 along with large investment in road, railways, and maritime economic activities will lead to creation of large number of jobs. All these developments augur well for the growth of Plastics consumption in the country. The same will be beneficial to your Company which can enable the Company to plan for higher growth.

PRODUCT GROUP WISE SHARE IN TURNOVER FOR THE LAST TWO YEARS (% OF VALUE

The net turnover (including other income) of the Company for the period under review was Rs. 2984.48. Crores (including Rs. 53.25 Crores by way of trading in other related products) as against Rs.2982.57 crores (including Rs. 118.66 Crores by way of trading in other related products and Rs. 115.67 crores from sales of brmises) during the corresponding period of the brvious year.

The Company has sold 2,35,306 tons of Plastic products as against 2,07,886 tons of Plastic products in the same period of brvious year, reflecting a growth of 13.19% in product turnover by volume.

The Company exported goods worth US$ 8.42 million as against US$ 9.42 million during the corresponding period of the brvious year.

Profit before interest, debrciation and exceptional items and taxes during the period under review have gone up by Rs. 56.75 crores from Rs. 413.92 crores to Rs. 470.67 crores during the corresponding period of the brvious year.

4. COMPANY’S STRENGTH AND GROWTH DRIVERS

4.1 Manufacturing Sites

During the period under review, two new Green field units have commenced commercial production. Company is actively considering to put up another Green field unit in South India and necessary steps for the same are in progress.

4.2 Distribution network

Your Company is committed to increase its reach by adding more channel partners in several parts of the country. The Company has increased its channel partners from 2469 Nos as on 30th June, 2015 to 2699 as on 31st March, 2016. Distributors are the strength of the Company. Your Company enjoys good rapport and loyalty from its distributors. The distributors are working assiduously to distribute Company’s products in their respective regions in a very efficient manner.

4.3 Growth Drivers

Your Company has increased its share of its Branded products turnover during the year 2015-16 to 82.67% compared to 80.70% in the year 2014-15.

The Company has taken effective measures to increase the product awareness through advertising by way of TV/Radio, Print media, outdoor i.e. bus panel. Hoarding, wall painting etc

Several counterfeit products especially in XF products and Pipe System of the Company are now available in the market. Company has taken several measures to address this menace.

5. OPERATIONAL PERFORMANCE

5.1 Plastics Piping Systems

The business during the year had a good growth with better demand from various segments catered by your Company. It was also supported by the affordable prices of the raw material.

The Company is pursuing its ambition to grow Plastic Pipe System business, seeing its promising potential. The Company is leader in this segment as it has the largest portfolio of products to offer for this segment of the economy.

The Company committed an investment of Rs. 148 cores in nine months period to achieve the objective of growth in the business. Large sums of investments are further planned in the current year.

New plant at Kharagpur has commenced the production. The installations of some lines are in progress. The Company will be able to utilize full capacity of this plant by June 2016. The Company is planning further expansion of Pipe manufacturing capacity at this complex.

At Malanpur, near Gwalior a separate Roto Moulding Plant and new Ware House are in operation. The cPVC pipe production capacity installed at Pipe Plant has stabilized. Another Roto Moulding facility is being commissioned at Kharagpur. It may be in operation by end April’16. The Company’s Roto Moulding facility at Kanpur plant may be in operation by May’16. The Company has launched variety of Septic Tanks in technological tie-up with a South African Company. All of these are well received in the market. Encouraged by the same, the Company has embarked on capacity expansion. The Company aims to introduce many other varieties of Tanks suitable for underground water storage.

The Company has tied-up for Technology and plant for the production of Double Wall Corrugated HDPE Pipes.

The Company expects to commence production by end of first quarter of current financial year. The Company has successfully produced Multilayer foam pipe of 200 mm diameter. The large dia Foam pipe has been well received in the market. The approval of BIS for the same is in process.

The Company has developed an economic model of Manhole of 1 meter Dia. This will enable it to compare favorably with conventional man-hole on cost basis also apart from its superior advantages compared to conventional brick and mortar Man holes. The Company is now geared-up to offer large varieties of products to cater the sewerage and drainage segment of the housing requirement.

The Company is in process of setting up a new plant to manufacture PVC Pipes in its Jalgaon Plant where it has vacant land available. The same will be able to produce 20,000 tons product after going in full operation. The same may go in production by January/March 2017 quarter. The Company is offering large varieties of submersible and Cassein Pipes to cater to Agricultural and Household requirements. The submersible pipe offered by the Company are getting encouraging response. The monthly requirement serviced by the Company in this segment has gone up from 270 tons to 500 tons. By October 2016, the same is expected to go upto 750 tons. These pipes are produced at Gadegaon complex. The Company aims to offer this product from Company’s other Pipe Plants also.

The Company during the period under review registered an overall volume growth of 18.76% in Plastic Piping System made from different plastic materials. The Company registered a volume growth of 23.74% in cPVC system sale and a volume growth in sale of HDPE Pipe System at 24.09% within this overall growth of Plastics Pipe System business. Overall the Company sold 162,370 Tons of Pipe System compared to 136,717 Tons in comparable 9 months period of the proceding year.

The Company introduced 55 nos. of variety of Injection Moulded Pipe fittings during 2015-16. These all have been well received in the market. The sale of moulded fittings increased by 18.7% in volume terms during the year under review. The Company has plans of introducing 172 items of fittings by second/third quarter of current year.

The total product portfolio in Pipe System has reached 6729 Nos which is the largest offered in the country. Encouraged by the growth of cPVC products business, the Company has committed further investment, to produce CPVC Pipe system up to diameter of 10” before the end of June’16, which can cater to Industrial Segments in a cost effective manner compared to use of pipes made from conventional materials.

The Company has decided to enter into Plastic Industrial Value segment for medium to heavy-duty applications. The Company will offer certain varieties of products in this segment during the first quarter of this year. Subrme FlameGuard®- CPVC Fire Sprinkler System

Every day 54 persons die in fire accidents in India. Mumbai Fire Brigade has started routine audit of the building falling in its jurisdiction. The purpose of the audits is to check whether the proper fire fighting system is in place. Fire Brigade has appointed licensed agencies to carry out this job. Automatic fire sprinkler system plays an important role in controlling fire in its initial stage as most of the fires get extinguished in initial stage. On this fact Maharashtra fire Dept has issued a circular and made installments of fire sprinkler system compulsory in each and every residential room in building above 45 m. For buildings between 25m to 45m the sprinkler system is compulsory in common areas like lift lobby. Apart from the residential buildings, the system may be installed in Commercial buildings, IT parks, educational institutes, Museums, auditoriums etc. The traditional fire sprinkler system in metal has many disadvantages like corrosion, heavy in weight, short life. Many time the system does not work as the sprinkler flow path in sprinkler get blocked either by corrosion particles or by molten drips while welding.

The CPVC fire sprinkler system overcomes all these disadvantages of the traditional system. The water filled weight of the system is only 40% than that of the metal system. The system is totally free from corrosion and the minimum life expectancy is of 50 years against 15 years for the traditional system. Though in one to one comparison of material for the system is expensive but the advantages offered by it far outweighs the increased cost.

There are only two companies in the world which manufactures the UL listed CPVC compound for the fire sprinkler system. Both are based in USA. One is Lubrizol with brand name of Blazemaster. The other is Spears with brand name of Flame Guard. The Company has tied up with Spears Manufacturing Company; Los Angles The Company started the manufacture of pipes from the imported compound from Spears. The fittings and the required solvent cement will be imported from Spears. The Company is authorized to use “FLAME GUARD” brand on its CPVC fire sprinkler system.

The Company is manufacturing pipes under Brand name “Subrme Flame Guard”. The Company’s pipes have passed stringent UL testing. Pipes made by the Company are UL listed in July, 2015. The Company’s pipes also have passed the BIS testing. The Company will shortly get the necessary BIS license for marking the CPVC fire sprinkler pipe.

The Company has started the marketing of this product in Mumbai City. Last month, the Company has launched the product. The Company’s rebrsentatives now also met several reputed developers and consultants in Mumbai. The Company has received good response. The Company’s collaborators trained 38 fire officers from Mumbai fire Brigade recently.

The Company has also launched the system in Sri Lankan Market along with its collaborators. The Company is hopeful that it will soon cater to Sri Lankan requirement also for the same product.

The AQUAKRAFT Bath Fittings introduced by the Company faced initial teething troubles, which have been fully overcome. The portfolio in Bath Fittings has reached to 90 items i.e., an increase of 39 items during the year. The Company plans to further increase the range during 2016-17 by introducing a variety of Plastics Bath fittings. The Chrome plated range may get launched during the current year.

The Company’s Export business saw a flat growth of mere 1.4% in US $ terms. The Company is continuously trying to boost its export business of Piping Systems.

The Division’s Value Added Products sale increased to 32.7% against 29.8% of last year. The Company has also added further 49 direct business Channel partners during the year taking the total to 835 Nos.

The Company continues to expand its reach by appointing Distributors in areas where there is a gap. The Company’s Piping System is now available in several parts of the Country as Company is establishing retail network through its distributors.

The Company has started another Knowledge center at Cochin for the customer of Southern India. Similarly the steps have been taken to open the Knowledge Centre at Malanpur and Kharagpur for North and Eastern region customers. This will enable the Company to train larger numbers of Plumbers, Dealers and concerned people in this field.

The “SUbrME’’ Brand in Plastics Piping System enjoys immense reputation among Architects and Plumbing Consultants.

The Company spent around Rs. 12 crores nine months on Brand building activities for its Plastic Piping Division through the following tools:

a. Print Media through several monthly journals and dailies

b. Participation in Exhibition locally and internationally

c. Holding Architects / Plumbing Contractors / Builders / Plumbers meet at various locations in the country

d. Outdoor – Bus Panel, In-shop brands, Hoarding-wall painting

e. Glow sign and Flex Board at Retail Shops

f. Arranging visit of Architects/Plumbing Consultants / Plumbers / Builders / Farmers / Dealers / Government officials to the Company’s Knowledge Centre at Gadegaon

5.2 CONSUMER PRODUCTS

5.2.1 Furniture

The Company manufactures furniture at five different locations viz: Puducherry (UT), Durgapur (West Bengal), Derabassi (Punjab), Gadegaon (Maharashtra) & Guwahati (Assam) to cater effectively to different regions of the country. The Sales turnover for July15-March16 of Furniture Business grew by 14% in value to Rs. 217 Crores over last year same period and by 17% in volume indicating robust growth in Furniture Business this year.

The wide acceptance of some of the brmium models such as Cambridge, Web, Texas etc. by customers due to their unique design, strength & contemporary looks has helped in establishing the Company to be a market leader in brmium range of products. The latest introduction of Empire & Omega has further reinforced the Company’s image of market leader in introducing innovative & high quality products. The Company introduced chairs made with Gas Assisted Moulding technology and Glass Fiber Reinforced PP which is another first to the Company’s credit.

The Company’s business quantum of Premium Products grew by 23% which was aided by introduction of various brmium products. The Company plans to further enhance the range of value added products. Some of the new products are being introduced from April itself which would help in increasing the sales of such brmium products during the current year.

The Company introduced 8 new models last year & plans to introduce 7 new models over next 3 months. Since a major number of these models would be Premium Products, it will further broaden the range of value added products. Some of these models will be unique in design and reinforce the brmium brand image of subrme furniture.

The favorable raw material availability with better marketing strategy helped the Company to improve OPM of this segment in the year under review. Encouraged by improved OPM, large volume growth & better future prospects, the Company made a commitment to invest over Rs. 41 Crores in this business segment in the year.

The Company is putting up a Green Field Project to manufacture new category of Furniture Products at Kharagpur with an investment of around Rs. 24 Crores. This was expected to go in production by first quarter of 2016 but due to initial technical hiccups it has been delayed. It is likely to go in production by July - September quarter of 2016. The scope for export of these products is good. The Company plans to focus on export of these products in a big way.

The Company continues to explore export opportunities for its brmium products. In order to reach out to international customers, the Company participated in two international exhibitions. The response in both the exhibitions has been encouraging. The Company plans to participate in five international exhibitions in the current year to increase its footprint of countries covered. The Company has initiated the process of getting necessary certifications & product tests done essential for export to world market. This process has helped in further improving the quality of furniture. The Company has been made aware about fine nuances which make a difference in product quality & its appeal.

The Company has completed 25 years of Furniture Business. It is in the process of celebrating Silver Jubilee with its Channel Partners. The meeting with key distributors in various regions has helped in reinforcing the relationship with them. A special recognition is being done for partners associated with the Company for 20 years in this business. The Company has set a Vision to be the largest manufacturer of Plastic Furniture in India by 2020.

The Company continues to expand its reach throughout the Country. It has a network of 746 channel partners promoting its products. The Company also started promoting sales of its products through E commerce. It will continue to make dedicated efforts for boosting the sales through E sites. The Company’s products are now available on major E commerce sites i.e. Amazon, Flipkart, Snap deal & Pepper Fry etc.

5.3 INDUSTRIAL PRODUCTS

5.3.1 Industrial components

The year started with bullish sentiments and expectations of economic revival under the new Government, raising the hopes of arresting recessionary trend of brvious few years both in Automotive and Consumer Durable sector. In such anticipation, the Division had projected 10% revenue and volume growth in both the sectors. However, lower than expected rate of economic revival, consecutive two drought years, delayed production ramp-ups by customers and uncertainty on GST passing took its toll on planned volume growth but the company managed to level the volumes with last year. However, with the steep drop in all Polymer prices, the division suffered revenue de-growth of 12% in spite of almost flat volume growth. The Company expects that the slow but steady demand revival witnessed during the year would accelerate further during the current year.

Noida Plant revenue, which suffered due to relocation of two major customers, started yielding positive results in view of the continued focus to develop new products and customers. Noida plant improved its customer base in Auto sector improving the sales revenue for this sector from 2.1% in FY 12-13 to 26% in FY 15-16 wrt total sale from the plant. This is helping to counter volatility in production volume as Auto production has low seasonal influence. Supplies for Honda Car for one of its compact SUV model declined as the demand for the model slowed. The plant started manufacturing complete Coolers for one of the reputed customers in this segment, during brvious year, got fully stabilized and Company supplied improved volume of coolers. Company expects good growth in this product as it has opened a new avenue for the company.

With the continued efforts in developing new Business Mix, company expects steady growth at Noida plant in future. Auto Business in the western India continued to suffer even during FY 15-16 affecting revenue at Talegaon Plant. De-growth over last year was due to execution of huge order for EVM parts during FY 14-15 and is not there in FY 15-16. This is not a regular business for the company. Without considering this business, the volume growth is 2%. The business of some automotive models, which were acquired during brvious years from the major customer like Tata Motors, is yet to takeoff as expected, due to slow ramp up. Supply of Cockpit Assembly started for the LCV/ MCV Model ‘Ultra’ of Tata Motors; albeit in small quantity. Company expects the volumes to get ramped up during the current year. Development process is on for a new model of Vespa for Piaggio, which would be launched during second quarter of the current year. This model and the existing one together are expected to improve revenue of Talegaon plant.

Company is aggressively focusing to improve business at Talegaon by strengthening its Business Development cell. Khushkhera Plant sales in volume terms remained flat. Supplies have been successfully established for one of the brstigious Premium Hatch Back model of Honda Car, New Jazz. Development process for a New SUV for Honda Car is complete and Mass production of this model will start during the first quarter of the current year. Company has been continuously getting good business from Honda in all its new models. Company expects good long-term prospects with Honda Motors.

Focused drive was taken to consolidate operations for future growth sustenance of the unit. Lots of steps to re-orient the entire manufacturing operation are taken to strengthen the plant operations so that it could be ready for future growth for which Company is optimistic.

Chennai Plant Volume growth remained flat, as growth in Washing machine segment of one of the major customer didn’t happen as planned. A new Customer, BOSCH has set up a huge manufacturing facility in India and would be launching various other Home Appliance products during next few years. Company expects good growth with this customer in years to come. The prospects in automotive sector for this unit are looking bright and it is expected to form a significant portion of plant revenue. The Capacity utilization of the plant is at optimum level since last two years. Company plans realign its Customer-Mix for more productive capacity utilization.

Puducherry Plant achieved volume growth of 7% in tonnage terms and 12% in quantity terms. Value de-growth was more due to production of higher quantum of low cost models of washing machines by the customer. The initiative taken during the brvious couple of years to automate the plant for manpower rationalization, consistency in quality, improving productivity, has fruetified.

Durgapur Plant witnessed flat volume growth. Company expects better growth during this year from all the customers of this plant. Company has recently acquired a new business from Tier 1 Company in Auto Segment, which should add to the revenue. The Water Purifiers being manufactured for one of the Company’s major customer registered a de-growth due to weak demand for the product, adversely affecting the revenue demand. Customer is expecting good volume revival during the current year as it appears from their encouraging projections.

Company has taken initiative to rationalize and reorient the machine capacities at its various locations to align it with the changed Product- Mix. While doing so, the new machines and equipment being added are being equipped with the latest Technology, Energy efficiency and being designed for Good repeatability for better quality. All these initiatives will ensure better Quality, Productivity, Safety, Energy conservation and Cost optimization. It would help to negate the impact of inflation due to various manufacturing cost increases and there by remained competitive. The various such initiatives of the Company would also support Environment and Green Initiatives.

Continuous focus on employee engagement initiatives is helping company to enhance its Human Capital. Overall rating of the company by its customers meets or exceeds their expectations. Company is considered a highly dependable and valuable supplier. Company received various Awards and Recognitions from time to time from its customers for its support in Quality, Cost, Delivery and New product development, Overall Support, Best Practices etc.

All employees are constantly re-oriented to ensure utmost focus on Customer Satisfaction.

The Journey towards excellence is being cultivated as a culture and will be continuous. Efforts are being accelerated to increase customer and product base, bring in new technology, Automation, Effective cost management to ensure sustained growth with profits.

5.3.2 Material Handling Products

Material Handling Division has witnessed mixed performance during the period under review. Industrial crates and pallets have grown decently where as Soft Drinks and Fruits & Vegetable crates business has witnessed a de-growth. This division mainly caters to the following products:

1) Crates for Industrial, Retail and warehousing

2) Diaries, Fisheries and Fruits & Vegetables.

3) Bottle Crates for beverages Industry.

4) Pallet for multipurpose usages

5) Roto moulding Crates, Pallets and Bins

In Industrial crates sector, which mainly has a customer base in Automobile, Appliances and Engineering sectors, with improved coverage and patronage from regular and loyal customers, the Company registered a volume growth close to around 13% and revenue growth of 7%.

With its excellent servicing on all India basis supported by regional manufacturing units with excellent quality, the Company expects to grow much better in the current year. Company plans to introduce several new models in the current year specially for customers in retail and Automobile sectors.

The country has witnessed poor monsoon consecutively for the last two years resulting in a lower business in Fruits & Vegetables and fisheries crates segments. Moreover, there has been a shift to use recycled material crates in these segments for lower pricing where your Company is not participating. The Company, however, is still being patronized by quality conscious customers and confident of retaining these customers. The Dairy business in India is on a consistent growth path. The Company has introduced many models to cater to this industry but the regional and recycled low price players pose a serious competition in business with co-operative federations. Nevertheless, the Company is aggressively marketing its crates to important Private dairy customers and has been successful with few good accounts.

The Company has registered around 9% volume growth in Injection moulded pallets. The Company’s consistent efforts to educate and create awareness regarding superiority of Plastics Pallets over wooden Pallets have started showing results in both Industrial as well as in Government sector.

The pallets have also been approved and are under annual rate contract with DGS&D. The Polymers manufactures have also agreed to use Injection Moulded Plastic Pallets against wooden Pallets being currently used by them. The Company expects pallet business to grow significantly in coming years. With above promising scenario the Company has already taken steps to enhance the Pallet manufacturing capacity and by introducing additional models for varied applications. With Government’s countrywide initiative for SWATCH BHARAT ABHIYAN and Company’s focused efforts are giving encouraging results for business of Roto Moulded Garbage bins and Pallets. The trend makes the Company confident to introduce many new models of Garbage bins and Pallets to cater to specific requirement from the sector.

Company has its Roto Moulding facility at Gadegaon in Maharashtra. During the period under review it has set up new facility and commenced production of Roto Moulded products from its Malanpur (M.P.) plant. Further two more are being set up at Kanpur in north India & at Kharagpur in West Bengal. The same would be operational in April/June 2016 quarter. The Company shall have distribution and servicing advantages for catering to most part of the country after start up at these locations. The Company expects promising growth opportunities in this product line in coming years.

The business of bottle crates have seen a steep downfall due to adverse business conditions brvalent in the soft drink industry during the period under review and also due to market inclination towards one way packaging, where Company’s crates are not used. The Company, however, continues exploring opportunities and expects a reasonable business in current year from major soft drink players.  

The Company has been successful in its approach to widen coverage through its channel partners particularly in geographical locations where its direct coverage has been difficult. The Company now has a network of 214 active distributors across the country against earlier 202 Nos. The Company aims to appoint further distributors in this segment to increase its reach through the country.

5.4 PACKAGING PRODUCTS

5.4.1 Packaging films

The Company continued to show positive growth during the period under review. Domestic sales grew from 5404 tons to 5812 tons (a growth of 7.5%) while sales in value reduced from Rs. 94.7 crores to Rs. 90.9 crores. The division term processed 6141 tons of polymers against 5867 tons in the brvious year.

New players continue to enter the market but Company managed to sustain its share with the large customers. Growth has come mainly from edible oil and convertor segment with new customers being added regularly. A specialty product - High Gloss film has been successfully developed and is finding good response from customers. Other value-added products like UHT milk film have also been successfully developed and are expected to contribute to higher sales in the coming year. Exports were 587 tons as against 472 tons registering a growth of 24%. New customers have been added and exports are expected to show further growth. Participation in international exhibitions has helped in higher export sales and the company intends to expand its reach to new countries. The company expects a volume growth of about 10% in the current year.

5.4.2 Protective packaging products

Protective Packaging Division grew by 10% in volume terms and 5% in value terms compared to the last year. Delay in startup of Kharagpur plant resulted in a lower than expected growth. The PPD division of Kharagpur plant is now fully operational & is expected to achieve a turnover of Rs. 50 crore this year.

The division continues to increase share of value added products in its turnover. This resulted in improved profitability over the brvious year. Reduction of raw material prices have reduced the growth in topline during the year but however contributed to the better operating margins. Some of the other factors that contributed to higher VA sales are

1. Substantially increased yield & productivity of our cross linked block foam.

2. Introduction of several VA products in all product lines this year.

While most competitors, including several new ones, adopt unethical practices offering falsely certified products, denting the Company’s business in some of the price sensitive markets, thereby reducing its growth in those segments, your company continues to position itself to give all its products with the appropriate certification only. This is resulting in building up its credibility in the market for the commitment of quality and service.

The division has now introduced several high level certified products such as ROHS, REACH. This will result in good business with quality conscious customers. The division is working to strengthen the manufacturing process and marketing to capture the new business sectors with the above range of certified products.

The division’s vision of having widest range of products, and to work as a cost effective solution provider is now yielding good results. Several new products have been added last year & more products will be developed in the coming year as well. The division is planning to increase saleable capacity of cross linked block foam from 4600 MTPA to 6000 MTPA during the year at Malanpur and Hosur locations.

The division is creating a new vertical to manufacture consumer products from its existing range of mainline products. The first 40 SKUs will be introduced before the end of June this year & is expected to cross 100 SKUs by end of March 2017.

The commercial production of the new Kharagpur unit started in January this year, The unit is now fully functional. The products are now capturing the local markets, which could hitherto not be penetrated. We expect a good business growth in East Zone. Creation of new acoustic products with proper certification is taking longer than expected. The division is quite bullish on its prospects.

Packaging vertical

The business growth of standard polyethylene and air bubble is significantly low as many local competitors have now entered in to the market. To retain the business, the division is constantly working on cost reduction, customizing products & introducing composites to its vast range.

Construction Vertical

The vertical has achieved growth of 13% in value terms and 8.4% in volume terms. Since last few years the vertical has not grown adequately due to poor growth in the real estate & infrastructure sectors. To increase the business opportunities & growth, several new products have been introduced. This is expected to yield better business during the current year. The division is also strengthening its reach by adding new distributor/dealer network in new geographical regions.

Insulation Vertical

Insulation business grew by only 6.5% in value and 9% in volume. During the year two more new manufacturers have entered in the markets, who have started diluting the quality standards of the product. The division is working through technological innovation for the reduction of product cost without deteriorating the specified quality standards as well as introducing new products in this vertical. The newly introduced in-house developed air filled INSU shield is now slowly finding acceptance as a superior product at competitive prices.

Technological Development

The division was awarded 1st prize for innovation in Polymer waste management, for developing a cross linked foam with 50% usage of recycled Capcell wastage (a thermo set material hitherto sparsely usable) and runner up prize for innovation in polymer application for developing composite of epe & Silpaulin for the application of floor protection in the 6th National Awards for Technology Innovation in Petrochemical and Downstream Plastic Processing Industry at the hands of Shri Ananth kumar, honorable minister for Chemicals & Petrochemicals.

After a successful in house R& D project in pilot stage, the division has started the project for making rebonded blocks by using 100% unusable waste of crosslink product for acoustic application. The product is expected to be on offer, within the next few months’ time.

Several new crosslink block foams using several new generation & highly technical polymers have been developed. These new products would help the division to participate in markets, hitherto dominated by imports. The in house R&D team is also working on several pilot projects which should bring significant changes (reducing costs & offering enhanced products) to the division in the forthcoming year.

5.4.3 Cross laminated film

Business for Cross Laminated film and products grew by 9.49% in Value terms. The Company sold 14201 tons of products against 13413 tons during the corresponding brvious period. Exports were lower by 4.87% to 852 tons from 896 tons.

The domestic market grew by 6.96% in volume during the period of 9 months from July 15 to March 16. The growth could have been higher but for the insufficient rainfall throughout the country last year. There was de-growth in Exports against the backdrop of threatening global financial uncertainties.

The 35GSM Silpoly Liner has not made much progress since its introduction in the Indian market three years back. Though the 35GSM Silpoly Liner has not performed as expected, nevertheless, it has a bright future. The Company is trying hard to popularize this multiutility product through its dealer/ distributor network. The efforts are likely to bear fruits in the near future.

Cross Laminated Film is mainly used for making Tarpaulins, bags, fumigation covers, vermibed, rainwater harvesting systems, Pond Lining and varieties of other agricultural applications. The Union Budget of 2016-17 has laid lot of thrust on the agriculture sector. The Government is according top priority to the water management as it is vital for the agriculture sector to flourish. The Government is focusing on rainwater harvesting & building water tanks for conservation of water. The Government policy augurs well for Company’s products as they find usage in water harvesting, water tanks & other agricultural applications. This year it is brdicted that there will be no effect of El Nino and the monsoon will be normal. This may boost the demand for tarpaulins and other agricultural applications from this film.

The threat from counterfeit/ cheap product in the Asian Market has subsided. With the oil prices stabilizing the Company expects to fare better in these markets in the coming year. The Company’s talks with some chain stores in USA have gained momentum & are in the final stages of fructification. The business advisor appointed in USA last year by the Company has helped in generating enquiries which are likely to fructify into orders in the current year. This will open the door to Company’s product in USA which wit has great market potential. The Company expects to strengthen its base in the European Market by introducing products with newer applications.

The Company sold 501 tons of Cross Line Bonded Film products against 392 tons during the brvious corresponding brvious period. The Company has placed orders for Cross Line Die Parts for other two extruders which may be operational by October 2016. With additional capacity at its disposal, the Company will introduce this product across various thicknesses. The Company aims to increase the sale of this product substantially.

The Company has enhanced the fabrication capacity at uvala & Silvassa by appointing some new contractors having greater worker strength. This will ensure timely supplies of products which are seasonal & thereby generate additional sales.

The Company has installed a 6 colour 9’ Printing machine

in the period under review. The Company aims to increase its product range by selling film on Rolls, fabricated products for various applications other than Tarpaulins, printed film on rolls, Fire Retardant and Corrosion Resistant film in the coming year.

The Technical collaborator of the Company has overcome the deficiencies in the technology perfection of cross plastic film. They are confident of developing a perfect product process in few months. If everything goes as per plan the Company may put up facility to manufacture this product at Muvala (Gujarat) in near future.

5.5 Construction business

Company’s fully operational commercial complex has about 63,848 sq. ft unsold area out of the total saleable area of about 2,82,835 sq. ft. An area of about, 2.12 Lakhs sq. feet has already been sold and net revenue of Rs. 338.70 crores have already been realized. Although there were many potential enquiries but due to sluggish business scenario of prospective buyers, no sale transaction could be fructified during the period under review.

Commercial brmises market sentiments is improving with lower new construction activities in this segment. Company expects better realization per sq. ft. for the remaining area available for sale considering limited availability of good office brmises in the vicinity of Company’s locations.

Premises of your Company are strategically located supported with well laid out metro rail and road connectivity. The area is the entertainment hub of the town. The brmises are well equipped with best of the features and facilities and one of the best corporate address in Mumbai Suburbs

There are signs of economic revival in the country. The interest rates softening gradually. In view of improvement in the real estate market in the commercial sector, the Company expects balance monetization should happen in all probabilities during the current year. It may add to the Company’s cash flow anywhere between Rs. 125 to v 150 crores.

5.6. Composite LPG cylinder

Your Company has continued its efforts for business opportunities for this new generation product. There are many encouraging inquiries from many developing and under developed countries. The Company hopes to convert them into orders for good business prospect during the current year.

Being highly technical product, Company has learnt about various improvements required from its initial supplies to Korean Customers. The Company has identified and implemented the required improvements in the product. Government of India through Ministry of Petroleum is taking initiatives for Indian consumers and making all efforts to launch Composite LPG Cylinders in domestic Market. Composite cylinders are quiet safe since they do not explode and cause injuries/death to surrounding people in case of fire or any other mishap. Further Composite cylinder being translucent would also reduce pilferage and wastage of gas for the end consumer and as such is well suited for Indian market.

The Company has received initial educational order from Hindustan Petroleum Corporation Ltd. (HPCL) for its two sizes 5 kg and 10 kg. The dispatches are planned to be made in April, 2016. The Company has also received an order for 7.5 kg and 15 kg cylinders which is under development and would be ready in second quarter of 2016. The Company is confident that with all the initiatives and development taking place, there shall be good demand for the product from Indian oil marketing companies.

The Company has also developed new size and added variety to its offerings and is engaged in new developments to minimize product costs. Company continues to get all assistance from its technology partner for product development. Company is also developing cylinder of different sizes/capacities to cater to the different market segments in different countries. At the same time, the Company is also increasing its marketing reach with better rebrsentative network across the globe.

The current year seems to be the transforming year for the composite cylinder division. The Company may start reaping the benefits of its investments.

6. FINANCE

During the nine months period under review average monthly net borrowing level came down by Rs. 258.77 crores i.e. from v 660.15 crores in F.Y. 2014-15 to Rs. 401.38 crores in corresponding period of F.Y. 2015-16. At the end of the period under review, total borrowings reduced by Rs. 279.16 crores from Rs. 691.98 crores as at 31st March, 2015 to Rs. 412.82 crores as at 31st March, 2016, The principal factors for reduction in the borrowings were (i) Better management of working capital (ii) Healthy generation of cash flows from operations & (iii) Decline in raw material (polymer) prices by 10 to 15% during the first six months of the period resulting in overall lower working capital requirements.

In the last quarter (January-March), polymer prices have started to increase. They remained range bound at the elevated level.

The Company has been able to negotiate favorable credit terms with its Suppliers/Bankers. The Company’s arrangement (through its Bankers) to finance its channel partners for their working capital requirements at very competitive rates, is gradually gaining momentum. This arrangement is expected to be opted for by more & more channel partners in the coming year/s.

The Indian Rupee remained volatile against US Dollar as well as other major currencies during the major part of the period under review. However, due to Company’s policy to keep all its Long term foreign exchange liabilities fully hedged and to keep Short term liabilities (Trade exposures) optimally hedged, it has been able to mitigate the risk arising out of the volatility of Indian currency. By the end of the period under review, the Indian Rupee has apbrciated against US Dollar and has remained range bound since then.

During the period under review, the Company has not availed any fresh Loans & it has re-paid the Term loan installments of Rs. 48.05 crores. Company has no plans to increase its borrowing levels. It wishes to become virtual debt free in next couple of years.

The interest & financial charges during the period under review have come down from v 47.01 crores (for the 9 month period ended 31st March, 2015) to Rs. 27.56 crores (for the 9 month period ended 31st March, 2016). The Average cost of borrowing as at 31st March, 2016 was 8.78% vis-à-vis 8.57% as at 30th June, 2015.

The Company has been able to meet its Working Capital requirements through a judicious mix of raising Commercial Papers and ailment of Short Term Loans at considerable lower rates of interest. Company also continues to avail Buyer’s Credit for financing its import of raw materials and capital goods by way of optimally hedged foreign exchange exposure at competitive rates.

Considering the sustained business profile and healthy financial risk profile, CRISIL has reaffirmed its rating on the Long Term Banking facilities at “CRISIL AA Stable”. The rating for Company’s Short Term Banking facilities and programme has been reaffirmed at “CRISIL A+”. The reaffirmation of the rating reflects that the Company’ is having diversified product profile, strong market position across segments, pan India manufacturing network, capability of introduction of new products, prudent gearing & interest coverage ratios and healthy generation of cash flows, resulting in substantial increase in the net worth of the Company.

During the current period under review, the Company has incurred Capex of Rs.234.42 crores and the same is funded through Internal Accruals and Supplier’s Credit. During the Current year, Company envisages Capex of about Rs.250 crores mainly on following segments:-

(1) To invest in moulds for large varieties of Pipe fittings at Jalgaon and Malanpur

(2) To procure Land and start brparing for a green site project in South India.

(3) To replace inefficient injection moulding machines in plastic piping system at Jalgaon by energy efficient machines.

(4) To replace inefficient injection moulding machines in furniture division and to enlarge range of brmium furniture products

(5) To introduce new range of items in bathroom fittings

(6) To introduce new range of roto moulded products

(7) To install new extrusion lines for PVC Pipes & PE pipes at Kharagpur

(8) To put up a 20,000 tons annual capacity of PVC Pipe at Jalgaon.

(9) To increase capacity and variety of PVC Pipe System at Kanpur Dehat.

(10) To increase capacities of Protective Packaging Products at Malanpur and Hosur and to add varieties of Products.

(11) To invest in Performance Packaging Films to acquire additional land.

(12) To introduce additional product/range of Material Handling Product.

(13) To invest in balancing equipments and automation at all the plants as may be required

The Company is confident of meeting its Capital Expenditure requirements through its internal accruals & suppliers’ Credit. The company is also expecting to monetize its remaining saleable area from its commercial brmises. That will further strengthen the cash flow of the Company.

The Company’s focus shall remain to (i) closely monitor its receivables, inventories and other working capital components and (ii) to reduce its overall debt level to have lower interest and financial cost further in the coming years.

7. INTERNAL CONTROL SYSTEM

The Company has adequate internal audit and control systems. Internal auditors comprising of professional firms of Chartered Accountants have been entrusted the job to conduct regular internal audits at all units/ locations and report to the management the lapses, if any. Both internal auditors and statutory auditors independently evaluate the adequacy of internal control system. Based on the audit observations and suggestions, follow up, remedial measures are being taken including review and increase in the scope of coverage, if necessary. The Audit Committee of Directors, in its periodical meetings, reviews the adequacy of internal control systems and procedures and suggests areas of improvements.

The Company has undertaken a detailed exercise to revisit its control systems in technical and other non financial areas to align them properly with Management Information Systems (MIS) to make MIS more efficient and result oriented. Information technology base created by the Company over the period is providing a very useful helping hand in the process. Needless to mention, that ensuring maintenance of proper accounting records, safeguarding assets against loss and misappropriation, compliance of applicable laws, rules and regulations and providing reasonable assurance against fraud and errors will continue to remain central point of the entire control systems.

8. HUMAN RESOURCES

Human resource is considered as key to the future growth strategy of the Company and looks upon to focus its efforts to further align human resource policies, processes and initiatives to meet its business needs. In order to focus on keeping employees abreast of technological and technical developments, the Company provides opportunity for training and learning within the country and abroad. Industrial relations at all the units and locations are cordial.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company’s objectives, expectations or brdictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those exbrssed in the statement. Important factors that would influence the Company’s operations include cost of raw materials, tax laws, interest and power cost and economic developments and such other factors within the country and the international economic and financial developments.