MANAGEMENT DISCUSSION AND ANALYSIS REPORT 1. Industry Structure and Development The Company is engaged in manufacturing and marketing of welded and seamless steel tubes of different sizes and specifications and Cold Formed Coupling Nuts. These products are mainly supplied to the Original Equipment Manufacturers (OEMs) of the Automotive sector, Farm Equipment manufacturers, Construction equipment manufacturers, Refrigerator manufacturers and other Engineering Industries. Market conditions continued to be challenging on account of deficient monsoon resulting in debrssed rural economy which particularly severely affected sectors like Farm Equipments, 2 wheelers etc. Some revival was noticed in commercial vehicles segment. The Company is also operating in Power Sector through Windmills installed in Maharashtra and Gujarat in a modest way. 2. Opportunities & Threats Opportunities: Forecast of favourable monsoon has definitely given hope of growth in some major sectors. Construction equipment sector is also expected to grow after a long lull on account of several infrastructure projects going on stream and Government's focus on investments in infrastructure. Lowering of interest rates also will increase demand and your Company expects healthy growth in near future Threats: Growth in economy has invariably lead to increase in inflation and consequential increase in interest rates. High inflation is a major threat to continuous period of growth. Tightening of emission norms could see change in technology and could impact demand for Company's products 4. Outlook Improvement in global economy, hopefully a good monsoon and stable political environment in the country should improve investment climate in India which is likely to improve demand for our products in near future. 5. Risk and Concerns Government of India is considering imposing of an Anti-dumping duty on imports of Seamless Steel Pipes imported from China. This may lead to increase in cost of raw materials. Increase in labour cost and possible increase in fuel cost may result in increased manufacturing cost. Competition from country like China particularly in Refrigerator segment could result in lower margins. The Company evaluates and monitors all risks associated with various areas of operations such as production, sales, inventory management, debtors management, insurance, legal and other issues like safety and environment with a view to mitigate the adverse impact of the risk factors 6. Internal Control Systems The Company has an internal control system in place which is commensurate with the size and nature of its business. The internal control system ensures that all the assets of the Company are safeguarded from loss, damage or disposition. Checks and controls are in place to ensure that transactions are adequately authorized and recorded and that they are reported correctly. The internal control system is supplemented by an extensive programe of internal audit by a firm of independent Chartered Accountants and external statutory audit which is periodically reviewed by the management and Audit Committee. The Audit Committee of the Board regularly reviews compliance with the Company's policies, procedures and statutory requirements in consultation with the Statutory Auditors and the Internal Auditors, who also attend the Audit Committee meetings. 7. Financial Performance with respect to Operational Performance Sales and Profit: During the year, Net Sales has marginally increased by approximately 0.50% and increase of 20.90% was seen in the Operating Profit. Capital Investment: Capital Investment of f. 118.80 lacs were made during the year. The entire capital investment has been made out of the Company's internal cash accruals. The capacity expansion and modernization of existing plant for manufacture of Cold Drawn Seamless Steel Tubes which commenced in the year 2013-14 is now complete and the company is now ready to cater to increased demand expected in near future. 8. Human Resources and Industrial Relations Industrial relations were harmonious throughout the year. The Company also provides suitable environment for development of leadership skills which enables it to recruit and retain quality professionals in all the fields. Safety, Health and Environment (SHE) Management Safety: Your Company continues to adopt best safety practices which has resulted into a reduced accident and severity rate. The initiation of new personnel in SHE practices before their deployment to the shop floor contributed to a significant reduction in unsafe practices. This is progressively taking the Company towards achieving the target of Zero Accidents. Regular safety inspection of plant and machinery is carried out to mitigate hazards by terminating the hazard at source by technology up gradation and treating the hazards against exposure to personnel by implementing engineering controls. Cautionary Statement Statements in this Management Discussion and Analysis describing the Company's objectives, projections, estimates and expectations are "forward looking statement" within the meaning of applicable laws and regulations. Actual results might differ materially from those either exbrssed or implied. The Management is confident that your Company with its qualitative products and enduring relations with OEM and commitment of its staff, will continue to sustain its growth and payout by way of dividend to the shareholders in the year 2016-2017. For GANDHI SPECIAL TUBES LTD. Manhar G. Gandhi Chairman and Managing Director Place: Mumbai Date: 16-05-2016 |