MANAGEMENT DISCUSSION AND ANALYSIS

Acrylic Fibre Industry in India is mainly dependent on domestic sales and imported raw materials. While, sales of the acrylic fibre by domestic Industry has been lower by 12% during the year under consideration as compared with brvious year, there is substantial increase in the inputs cost due to weak Indian currency against the US Dollars. Domestic Acrylic Industry has gone through tough time this year due to substantial increase in the dumping of Acrylic Fibre in India by certain countries.

Indian economy is gaining momentum and picking up steadily after recording lower growth in earlier 4 years. Indian GDP growth was 5.1% in 2012-13, 6.9% in 2013-14 and 7.3% in 2014-15. The Govt. of India economic survey has projected the economy to expand at the rate of 8.1- 8.50% in 2015-16. As per the world Bank recent report, reforms by Indian Govt. has buoyed the confidence in the Investors in India. Besides, falling crude oil prices have reduced its vulnerability as an importer. Concerns over the current account deficit, fiscal account deficit and inflation have dissipated with the fall in oil prices. Bank expects that there is going to be all round development this year and growth in South Asia is also expected to continue firming to 7.1%. This will be led by a cyclical recovery in India with growth rate of 7.5% in 2015-16 going upto 8% in 2016-17, supported by a gradual strengthening of demand in high income countries as well. With this pace of growth in economy coming back after four years, spending on luxury and clothing is likely to see reversing trend thereby reviving demand for manmade fibres and yarns. Though with the US Federal reserve expected to raise interest rates in coming few months, there could be temporary shocks of less capital flows to developing countries raising current rates and higher market volatility.

With the opening of reforms process, now International Luxury clothing brands like GAP (USA), ZARA (Spanish), H&M (Swedish retailer), Uniqlo (Japanese) and many more are targeting setting up of retail stores in India. As per the United Nation conference on trade and development (UNCTAP)'s world investment report 2015 India is now among Top 10 FDI destinations. FDI inflow in the calendar year 2014 has increased to US$ 34 billion as against US$ 28 billion in 2013 thus putting India at No. 9 in the world ranking for FDI inflows. With renewed interest of FDIs, Textile Mills in India will be looking to increase the capex on modernization, capacity expansion and quality improvements.

Indian exports are declining since December 2014 owing to weak global demand and fall in crude oil prices. Indian Companies earnings remained weak in 2014-15 especially in the last quarter. Overall performance would have been worse if India inc had not got some relief on raw material cost in January - March quarter of the year. One of the major reason for Companies saving on input cost was a steep fall in prices of crude oil and its derivatives. Brent crude oil averaged US$ 53.9 a barrel, a level seen after several years. There was decline of more than 50% in the prices compared with average prices in first half of the year. Effect of the softness in commodities prices has two way effect on Industry - near term pain but long term gain Raw material costs are widely expected to remain weak. This together with expected fall in interest cost should boost net profit margins of Indian producers in textile fibres in 2015-16.

Under the "Make in India" initiative Indian Government has identified 25 industrial sectors in which India has the potential to be world leader. These sectors include 'Textile' for growth of Indian economy & employment generation.

There is a firmness in agri-commodity prices begining mid April 2015 when Indian meterological department first came out with a rainfall forecast of 93% of long period average. Little over 60% of cultivable land is rainfed and 70% of the annual rainfall take place during monsoon. The cotton association of India has reduced its production estimate of cotton for the 2014-15 season to 38.27 million bales (of 170 kg each) from brvious estimate of 39 million bales while domestic consumption is estimated at 31 million bales. Any loss of natural fibres is a gain for man made fibres.

Industry Structure and Developments

In 2014-15, Acrylic Fibre market generally moved up till August 14 and started to retreat from late August and thereafter stabilised from February 2015 onward.

World Production of Acrylic Fibre has decreased to 18.50 Lac MT in the year 2014-15 compared to 19.14 Lacs MT during brvious year, showing a negative growth of 3%. Indian production of Acrylic Fibre, which was 0.88 Lacs MT during the brvious year, has also decreased to 0.85 Lacs MT during the year under consideration. The slowing global economy weighed down by softness in commodity prices, uncertainty about fiscal policy in USA and lower consumer spending affected the growth of Industry. China is consuming nearly 45% Acrylic Fibre of the total world consumption. This year Chinese import of Acrylic Fibre reduced from 2.12 Lac MT in last year to 1.59 Lacs MT, showing a drop of 25%.

During the year, domestic industry has suffered losses due to increase in dumping of fibre by certain countries which are doing large scale dumping of fibre in Indian market and thus causing severe injury to the domestic industry. This is under consideration of the Govt. Authorities and continuation of anti dumping duty by Govt shall help in saving domestic industry from the adverse impact of dumping.

Opportunities and Threat

Your Company is working on development of products for new markets in Europe, Africa, and South America. These efforts are expected to yield positive results as samples and trial consignments are well apbrciated by customers. There are some more new investments coming up in the domestic Spinning Industry to create more capacity for yarn production. This will also help in better demand for our products.

Threats before the industry at brsent are dumping, currency fluctuation, sudden increase in competition from other fibers; The threat of dumping has increased further with overseas demand affected and producers from those countries looking for other markets. Besides, weather is also an important factor as length of winter and extent of cold weather also influences the consumption of Acrylic Fibre.

Your Company is dependent on imported raw materials to a large extent and sudden increase in crude oil, naphtha or gas prices also adversely affect the Company.

Segment-wise/Product wise performance

The Company is primarily engaged i.e. "Manufacture and sale/ trading of Acrylic Fibre/ Yarn" and operating from one geographical location only catering to different segment of textile industry. The said treatment is in accordance with the principle enunciated in the accounting standard on segment reporting (AS-17), and is explained under para no. 7 of the Note No. 23 on Notes on Accounts, forming part of Annual Report.

Risk Management

The Committee ensures compliance of all the fiscal, industrial, labour and environments laws by using adequate internal control measures and through regular monitoring by the respective departmental heads in the Company.

Cautionary Statement:

Statements in this report on Management Discussion and Analysis describing the Company's Objectives, projections, estimates, expectations or brdictions may be "forward looking" within the meaning of applicable Securities laws and regulations. Actual results could differ materially from those exbrssed or implied.