MANAGEMENT DISCUSSION AND ANALYSIS REPORT Overview As the third largest consumer of polymers, India ranks only after China and USA. Evaluation of the polymer industry trends reveals strong growth prospects citing the increased usage of plastics across sectors. The sector is projected to grow at the rate of 5.4% in 2014 and 6.5% in 2015 citing the growing demand from various industries. Furthermore, with the key market players integrating more back-end exploration and refining businesses, alongside streamlining their sourcing operations, opportunities are expected to increase in the coming years. With this change of guard in government, industry will also revive which will also consume lots of pipes in coming years which is mainly because of demand in agriculture pipes, plumbing pipes and industrial pipes. Four major factors are contributing to the favorable outlook: shale oil and gas developments, regional market expansion, innovation and increased awareness. PVC pipe demand is projected to accelerate through 2019, reaching 30.3 million metric tons. Through to 2019, HDPE demand is projected to rise 7.2% a year to 17.5 million metric tons. The Indian Pipe Industry has experienced rapid growth in the last several years. The major reasons for the growth of this industry is increasing demand for pipes in the irrigation sector, oil and gas sector and also the real estate industry. The demand for plastic pipes such as PVC and CPVC is also increasing as these pipes are better in quality and durability. Infrastructure development, urbanization and the subsequent development of residential and industrial construction are facilitating the growth of the pipe industry in India. Opportunities Evaluation of the polymer industry trends reveals strong growth prospects citing the increased usage of plastics across sectors. Furthermore, with the key market players integrating more back-end exploration and refining businesses, alongside streamlining their sourcing operations, opportunities are expected to increase in the coming years. The next few years are likely to witness the launch of new plastic products into the market. As plastics perform efficiently in utility water systems, cable protection, under-floor heating, and other similar applications, escalating opportunities in these areas are projected to bode well for plastic pipes in the future. In the past few years, government of India has initiated many new projects and investments in the irrigation sector. The focus of the government is on rural water management, which will be fulfilled only when there will be proper infrastructure for the transportation of water to the end-user. This factor will remain as one of the major drivers for the growth of PVC pipe industry in the country along with the expansion of housing sector and increasing demand for oil and gas transportation. The growing Indian economy creates unbrcedented opportunities for SIL to significantly invest and expand in each of its core business. Threats There is a need to keep vigil on the quality of products being offered in market place as many players have joined the wagon. Constant increase in prices of Raw Material is a severe issue for the PVC Pipes since it has a direct effect over the prices of finished goods product demand. There are many other threats which includes increasing crude oil prices, import threat from Middle East, Neighboring countries specializing in processing industries could lead to imports and replacement threat from substitutes. Internal Control Systems At SIL, have well defined and adequate internal controls and procedures, commensurate with its size and nature of its operations. This is further strengthened by the Internal Audit done concurrently. An Audit Committee, headed by a Non-Executive Independent Director, reviewed audit observations periodically. The Audit Committee of Directors, in its periodical meetings, reviews the adequacy of internal control systems and procedures and suggests areas of improvements Human Resources During the year 2014-15, the company has maintained cordial and harmonious relation with the employees throughout the year. Total employee strength as on 31/03/2015 was 419. Cautionary Statement The Statement made in this Report on Management Discussions and Analysis, describing the Company's view may be forward looking statements within the meaning of the applicable security regulations and laws. These assumptions are based on certain expectations on demand, imports, and availability of power rates etc. and any change in Government laws and the economic situation in the country may mark a difference to the Company's operations. The Company assumes no responsibility in respect of forward-looking statements herein, which may undergo changes in future for reasons beyond the control of the Company. For and on behalf of the Board of Directors MukeshSangla Chairman & Managing Director DIN00189676 Place : Indore Date : August 7, 2015 |