MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Dyes industry in India is one of the most important segments in the chemical industry which has forward and backward linkages with a variety of sectors like textiles, printing inks and foodstuffs. Dyes are colouring pigments that find application in a variety of industries. The origin of the Indian dyestuff industry can be traced to the fifties when most dyes and intermediaries were totally imported in the country. Thereafter, gradually manufacturing of dyestuffs picked up in the country and in the early eighties this industry started export in good quantity. Indian dyestuff industry is today totally self-sufficient with majority of inputs manufactured locally. India is currently producing all varieties of synthetic dyestuffs and also backward integrated with intermediates. India has emerged as a global supplier of dyestuffs and dye intermediates, particularly for reactive, acid, base, vat and direct dyes. India accounts for approximately 6% of the world production of the sector of the industry. Further India accounts for approximately 16% of the world production of dyestuff and dye intermediates. India's low per capita chemical consumption coupled with rising income levels offers significant growth opportunities for the industry. However, for capitalizing on these opportunities, the industry needs to address the challenges of appropriate skilling of the workforce, bridging technology gaps, securing access to raw material, ensuring compliance to global standards and creating industry specific infrastructure.

OPPURTUNITIES AND THREATS

Like every industry, dyestuff Industry has its own share of opportunities and threats to face to survive in the market. Industry has a potential for technology up-gradation to provide value added products. Further developed countries are looking at outsourcing dyes production to developing countries, as production facilities shift base to Asian countries like India and China. However the industry faces infrastructure challenges as there is a lack of ideal, dedicated and adequate availability of land at suitable locations. There is a shortage of skilled manpower for the dyestuff and pigment industry. On environment front, though there are other industries, which are equally or more polluting, dyes industry is considered to be the most polluting due to visibility of color. Poor image due to wrong public perception is affecting the industry. There is also the challenge of several small and medium sized units with outdated technology

OUTLOOK

The markets look positive and encouraging for the dyes and intermediates segment. There is an expected growth of 6% per year. There are various contributory factors for such growth like expansion of the middle class, particularly in the Asia Pacific and Africa-Mideast regions, which is accelerating global consumer spending, which is beneficial to textiles sector. It is also estimated that dyes consumption will remain concentrated in the Asia Pacific region, where the majority of world textile and consumer plastic product production occurs. While China still remains the dominant global consumer of dyes, rapid growth will also be experienced in smaller Asian markets such as Bangladesh, India, and Vietnam as textile producers continue to move production to countries with the lowest labour costs. Rising consumer spending will drive increased demand for organic colorants in textiles and plastics, while strong growth in global construction activity will boost demand in paints and coatings.

RISKS AND CONCERNS

Since the Company operates in the chemical sector the most important risk is of the Environmental Laws. Any change in the environmental laws of the state or country of export would damage the current business position. Major raw materials to the company are always under inflationary brssure this is usually due to supply and demand of the raw materials coupled with the fact that 90% of the competition is locally confined to just two states in India i.e Gujarat and Maharashtra. There is a lot of volatility in prices of the raw material in the Dyestuff Industry, further they are directly linked with the crude oil prices which is a major cause of concern to the business. Further there are numerous other factors affecting the business; stringent controls in running the manufacturing units being one of them. The development in technology in this industry is very slow compared to other industries. Further the margins in the business being meagre, companies avoid spending on innovations. Further the business operations of the Company are also exposed to a variety of financial risks such as market risk (foreign exchange risk, interest rate risk and price risk), credit risk, liquidity risk etc.

The borrowings of the Company as on March 31, 2015 were Rs.. 3403.80 lacs.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate system of internal controls to ensure that all the assets are safeguarded and are productive. Necessary checks and balances are in place to ensure that transactions are adequately authorized and reported correctly. The Audit Committee of the Board reviews these and the Company, when needed, takes corrective actions.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company could not restart the manufacturing operations during the financial year due to financial constraints. Resumption of production facilities of Patalganga unit will require heavy capital expenditure and the Company currently is not in the position to incur the same. During the year the Company had undertaken trading activity and sold some old machinery. Net sales of the Company for the year under review were Rs.. 82.96 lacs. Total revenue for the year aggregated to Rs.. 120.67 lacs as against Rs.. 98.08 lacs for the brvious year. Net loss before exceptional items and taxes for the year were Rs.. 107.55 lacs as against Rs 290.10lacs.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES

The Company had only 1 employee during the Financial Year 2014-15. Further as the Company did not conduct any operations, there was no material development in human resource aspect of the Company. The Company had only 1 employee as on March 31, 2015, as the Company had not undertaken any operation.

CAUTIONARY STATEMENT

Management Discussion and Analysis Report contain forward looking statements describing the Company's projections and estimates. These are based on certain assumptions and expectations of future events. The Company cannot guarantee the realisation of projections as the actual results may differ due to factors like prices of raw materials, demand-supply conditions, changes in government regulations, tax structures, etc., which are beyond the control of the management.