MANAGEMENT DISCUSSION AND ANALYSIS

I. INDUSTRY STRUCTURE AND DEVELOPMENTS

According to world bank the global economy is expected to grow at 2.8 % in 2015 and will pick up growth upto 3.2 % in 2016-17. It will be supported by continual low commodity prices and general financial conditions. U.S., Europe & Japan are brdicted to continue to grow. High Income countries are expected to grow by 2 % in 2015 & 2.3 % in 2016-17. Developing countries are expected to grow at 4.4 % in 2015 & 5.3 % in 2016-17.

Indian economy grew at 7.3 % in the financial year 2014 -15 and is expected to grow at 7.5 in 2015-16. Lower oil prices, contained inflation, stable financial sector and favourable policy actions are expected to support growth in the coming financial year.

Plastic industry is one of the fastest growing sectors in Indian economy and is growing at double the pace of the national GDP. Plastic processing industry in India has grown at a CAGR of 12 % from 6 MnMT in Financial year 2008 to 12 MnMt in Financial year 2014.

Masterbatch Industry is the direct beneficiary from growth in Plastic processing industry. Masterbatches are key ingredients in successful product formulation for plastic Industry. These are concentrated mixture of pigments & additives which are used by plastic processors to enhance the performance properties of the end product and also help reduce cost of the end product. These are generally sold as white masterbatches, black masterbatches and colour masterbatches etc.

Masterbatch Industry in India is highly fragmented with a few major players & large number of small and medium players who account for majority of the market share. Increasing use of plastics in agriculture, packaging, automobile, consumer goods etc. is going to be major growth driver for the masterbatch industry in India.

FINANCIAL HIGHLIGHTS WITH RESPECT TO OPERATIONAL PERFORMANCE

The Income from operations increase by 6.12 % from Rs. 46,583.88 Lacs F. Y. 2013-14 to Rs. 49,435.40 Lacs in F.Y. 2014-15 which was primarily on account of company's continued trust on marketing and brand building initiatives. The exports during the year were Rs. 14,167.70 Lacs marginally higher than Rs. 14,145.98 Lacs during F. Y. 2013-14 primarily due to sluggish export market conditions. The company will continue to focus on high performance and specialty masterbatches to diversify its product range and boost sales. During the year company participated in various domestic & international exhibitions like chinaplas Interplastic 2014, Plastindia 2015 to showcase its products and increase its market reach.

PBDIT increased by 3.90 % from Rs. 5,068.04 Lacs in F. Y. 2013-14 to Rs. 5,265.49 Lacs in F.Y. 2014-15. Profit before tax increased by 5.48 % from Rs. 4,058.70 Lacs in F.Y. 2013-14 to Rs. 4,281.33 Lacs in F.Y. 2014-15. Net profit increase by 10.33 % from Rs. 2,723.85 Lacs in F.Y. 2013­14 to Rs. 3,005.12 Lacs in F.Y. 2014-15.

III. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Your Company operates in one segment only -masterbatches

IV. OPPORTUNITIES AND THREATS

Plastic processing Industry in India is expected to grow at 10 % to reach 18 MnMT in F. Y. 2018 which will be about Rs. 1,37,000 Cr in value terms. The major growth driver basically will be the current low level of per capita consumption of plastics in India as compared to other developed countries. Sectors like agriculture, packaging, automotive still have very low level of plastic consumption in India and will provide a great potential for growth of plastic industry in future.

With increasing penetration of plastics in various existing applications plastic consumption in India & world wide is expected to grow substantially. Stable economy & increasing industrialization will also provide the additional boost to the Industry.

However volatile prices of raw materials, lack of infrastructure, environmental myths are different challenges which the industry will have to face.

Research & development of new products and improvement in range of products is vital to the growth of company. With dedicated in-house R & D laboratory recognized by Department of Scientific & Industrial Research the company is confident that it can maintain its leadership position by offering innovative, cost effective and value products. Company also holds various trade marks which help to protect the names of the company's product in the industry & provide recognition to the Company's products distinct from the competitors.

V. BUSINESS OUTLOOK

Plastics today are almost indispensable part of modern lifestyle. They are successfully replacing traditional materials because of their light weight, durability & design flexibility. There are several emerging trends in varied application of plastics which are expected to propel growth of demand in plastic consumption.

Reduction in customs duty by government is expected to benefit domestic manufacturers & this would spurt growth in the Indian Industry, which will inturn boost the consumption of plastics. Policy initiatives like 'Make in India' campaign is also expected to give a positive boost to the Industry.

The decrease in feedstock prices also are expected to benefit the companies in India. To cater to this increase in demand and to build scales of operation the company has planned substantial expansion of capacity. A new unit with substantial capacity is being setup near Palsana, Surat which will be commissioned in a phased manner.

The Company will also strategically focus on controlling costs, increasing energy efficiency and enhancing its product portfolio to enhance our market share

VI. RISK AND CONCERNS

The business environment is cyclic in nature and is affected by general economic conditions. Deterioration in the sales and profitability of the industries to which company caters to can have an adverse impact on performance of the Company.

Changes in foreign currency exchange rates, Shortage or price increase of raw materials, increasing power and fuel costs, can also have an adverse impact of the performance of the Company.

In terms of requirement of the clause 49 of the listing agreement the Company has laid down procedure to inform the Board about risk assessment & minimization procedure. The management is taking constant steps like internal review, combrhensive insurance policies, hedging to monitor and mitigate the risks associated with the business.

VII. INTERNAL CON TROL SYSTEM AND THEIR ADEQUACY

Your Company has a system of internal controls which is commensurate with the size and nature of operations. These controls ensure that all the assets are safeguarded and protected against loss from unauthorised use or disposition and that the transactions are authorised, recorded and reported diligently. There are well established policies and procedures in place across your Company.

Internal Audit Team consists of well experienced members, which constantly review various aspects of control systems and conduct audit under well laid down audit programmes to ensure effectiveness of the controls. The said internal audit team continuously review the control system and undertakes audit of special areas in-depth.

VIII. HUMAN RESOURCE

The overall industrial relations during the year under review were peaceful. Contribution and co-operation from all levels of employees was excellent and the same has been apbrciated & supported well by the management through its continuous & systematic training programmes. Manpower as on 31st March, 2015 including Workers, Staff and Executives was 564.

IX. CAUTIONARY STATEMENT

Estimation and expectation made in the Report may differ from actual performance due to various Economic Conditions, Government Policies and other related factors.

(references:- FICCI Knowledge Paper on 'New Horisons for Indian Plastics Processing Industry.')

For and on behalf of the board

S. V. Kabra

Chairman & Managing Director

Place : Mumbai

Date : 26th May, 2015