REPORT ON MANAGEMENT DISCUSSION AND ANALYSIS

I. Industry Structure and Development

Global Business Scenario

As per International Copper Study Group (ICSG), the world mine production (copper content) in the year 2014 grew by 2.3% to 18.7 million tonnes (Mt) compared to 9% in 2013. Copper concentrate contributes 79% of the world mine production and balance 21% comes from solvent extraction route. Performance of Eight major mines which accounts for 33% of the world production declined by 4.5%.Production from major producing countries viz, Chile, Peru, Indonesia Zambia were affected due to operational constraints and delays in start-up of new projects expected for 2014.It is forecasted that in 2015, world mine production is expected to increase by around 5% in both 2015 and 2016 to 19.5 Mt (million tonnes) and 20.5 Mt respectively.

World refined copper production has increased by around 7 % to 22.4 Mt in 2014 compared with refined production in 2013. Excluding China, world refined production increased by 3%. World refined copper production in 2015 is expected to increase by around 4% to 23.4 Mt mainly due to capacity expansions of refinery plants in China. Primary refined production (excluding SX-EW) is expected to grow by 6% this year benefiting from increased availability of concentrate while secondary production is forecast to decline by 2% on continued tightness in the scrap market.

World demand of refined copper is estimated to have increased by 7% in 2014 to 22.9 Mt following an increase of 4.5% in 2013 ICSG expects that world refined copper demand in 2015 is expected to increase by only 0.6% mainly due of lower demand growth in China at around 1% and flat demand growth from rest of the world. Based on the current assumptions, the market is expected to return to surplus in 2015 by around 3.6 lakh tonne after five consecutive years of deficits. A number of factors create significant uncertainty in the demand forecast, and that the global market balances could vary from those projected currently.

Indian Copper Scenario

Currently, three major players dominate the Indian Copper Industry. Hindustan Copper Limited (HCL) in Public Sector, M/s Hindalco and M/s Sterlite Industries in Private Sector. HCL is the only vertically integrated copper producer in the country, while. M/s Hindalco at Dahej in Gujarat and M/s Sterlite Industries in Tuticorn in Tamil Nadu have setup port based smelting and refining plants which depend on imported mineral in the form of concentrate either from their own mines abroad or other overseas sources. In addition there are a few installations to produce Electro-won Copper but their capacities are still very low, and production is inconsistent.

In the fiscal 2014-15, the copper ore production in India was 3.5 million tonnes which is 8% lower compared to 2013-14. Metal in concentrate production was 24,879 tonnes which is lower by 23% over 2013-14. Refined copper production during FY 2014-15 was 7.6 lakh tonnes, as compared to 6.50 lakh tonnes in FY 2013-14. It is estimated that during FY 2014-15, the consumption of refined was around 5.80 lakh tonnes.

As of now, there is a high level of deficit in the mining capacity and surplus in the refining capacity. Domestic production of concentrate accounts for only 4% of the total requirement. Consequently, India imported around 1,908,888 tonnes of copper concentrate (about 572,700 tonnes of metal) in FY 2014-15. However, India is self sufficient in refined copper production and has emerged as net exporter of refined copper. There is, however, also a cross trading in the import / export of refined copper, and during the FY 2014 -15, around 350,000 tones of refined copper was exported as compared to 255,891 tonnes in 2013-14.

II. Outlook, Opportunities and Threats:

The production of refined in the country in coming years is expected to remain robust. The production is  expected to increase further with acquisition of Jhagadia Copper Ltd by Hindustan Copper in 2015. The Jhagadia plant which was closed since 2009, operates on secondary route and has the capacity to produce 50,000 tonnes of refined copper annually.

Copper consumption growth rate is likely to increase around 6% to 7% due to improvement in growth rate of manufacturing, housing & infrastructure & Power sectors. The "Make in India" programme of Govt. of India which is expected to drive manufacturing growth will increase the demand of copper significantly. The key growth drivers in the Country are the continuing demand from power and construction sectors. .Electrical & power sectors account for nearly one-third( ~35%) of the refined copper consumption, followed by 11% by the transport ( auto and railways) industry, 8 % each by construction & consumer durables industry. The growing environment consciousness and an emphasis on using more energy-efficient appliances would also help to protect demand for copper in India.

Price differential is the main driver for copper substitution. At current price, copper is at significant risk of substitution in roofing, plumbing tubes, refrigeration, air-conditioning. Owing to substitution, copper demand has reduced in the last few years. One of the most brvalent substitutes, aluminum, has largely replaced copper in automotive brcision tubing to reduce vehicle weight. However, around 50% of copper demand cannot be substituted in applications highly reliant on copper's conductivity, such as building wire, power-generation infrastructure and electrical connectors.

III. Segment-wise or product-wise performance

The Company is operating in single Copper manufacturing segment.

IV. Risks and concerns

The Company has laid down risk management framework keeping the Company's objectives, growth strategy and process complexities arising out of its business operations. Risk management in HCL is a continuous process of identifying, assessing and managing all the opportunities, threats and risks faced by the company to achieve its goals.

V. Internal control systems and their adequacy

The Company has internal control systems which is commensurate with the size and operations of the Company. 

VI. Discussion on financial performance in respect to operational performance

Capital Expenditure

During the year, the expenditure on account of Replacements & Renewals (R&R) of plant & machinery, mine expansion and mine development stood at Rs.399.03 crore which was entirely funded through the internal resources of the Company and no Government support for capital expenditure was asked for.

Borrowings

During the year, your Company had no short term and long term borrowings in its books as it is a debt free company.

Contribution to Exchequer

During the FY 2014-15, the Company contributed a sum of Rs.284.68 crore to the exchequer by way of duties, taxes and royalties, as against Rs.380.29 crore in 2013-14,

 VII. Material developments in Human Resources / Industrial Relations front including number of people employed

Industrial Relations & Employees Participation in Management

Industrial Relations situation in all the Units of the Company continued to be harmonious and peaceful. The successful operation of various Bi-partite fora at the Apex, Unit and Shop-floor levels have contributed immensely towards the smooth functioning of the Company. 

Reservation for appointment of SC/ST/OBC Candidates

The Company adheres to the brscribed Government guidelines on reservation for SC/ST/OBC categories in all recruitment activities. The rebrsentation of SC, ST and OBC employees out of the total manpower of 3676 as on 31 March, 2015 is 17.25%, 13.44 % and 10.31 % respectively.

Human Resource Development

Based on identified needs, Training and Development at all levels of employees is given due priority by the Company to increase employee effectiveness and productivity. The Company selectively nominated employees for specialized training Programmes / Workshops / Seminars / Conferences organized by reputed professional organizations and Institutes. In FY 2014-15, against a training target of 7500 mandays, 8126 mandays of training was achieved.

Communal Harmony and National Integration

In the townships of the Company located at Khetri, Malanjkhand and Ghatsila as well as in other places of work, the employees of different caste, creed, region and religion live together in harmony and celebrate all religious festivals with pomp and gaiety.

The Status of implementation of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

In pursuance to the judgment of the Subrme Court, HCL has set up Committees for the Prevention of Sexual Harassment of Women at work place in all the Units/Offices of the Company. A provision in this regard has also been incorporated in the Conduct, Discipline and Appeal Rules of HCL. During the year under report, no incidence of harassment amongst employees on the basis of gender came to light.

The status of implementation of The Persons with Disability Act, 1995

Recruitment: In recruitment matters the reservation policy was adhered to as per Government of India directives and duly incorporated in advertisements published, wherever applicable.

Scholarship: HCL grants Scholarship to Employee's Children under a special scheme. Particular care and wide publicity is given to the scheme. 10 scholarships are given for differently abled children of the employees.

Ramp: Ramps have been constructed at Hospital, Works and General Office for Person with Disability (PWD) so as to enable easier access to elevated areas in buildings and for their mobility with ease.

Conveyance Allowance: Conveyance Allowance / Transport Subsidy to PWD employees is paid at higher rates than other employee as per Government Directives.