MANAGEMENT DISCUSSION AND ANALYSIS REPORT Overview AksharChem (India) Limited is a globally renowned player in the Dye Intermediates Industry and manufactures and exports the Vinyl Sulphone. Furthermore pursuant to the Scheme of Arrangement in the nature of demerger and transfer of CPC Green Division of Asahi Songwon Colors Limited sanctioned by Hon'ble High Court of Gujarat, the pigment division has been demerged to the Company. Hence with effect from appointed date the Company has two marketable products, i.e. Dye Intermediates and CPC Green. The Company has fully dedicated Plant for both the products at Village Indrad, Tal: Kadi, Dist: Mehsana in the State of Gujarat. Segment-Wise or Product-Wise Performance In accordance with Accounting Standard - 17, the Company has two reportable business segments. i.e. Dye Intermediates and Pigments. Dye Intermediates business of the Company mainly consist the manufacturing of Vinyl Sulphone catering to both international as well as domestic customers. Vinyl Sulphone is Industrial Chemicals used as a key raw material in the manufacturing of reactive dyes, which is having application in textiles. Pigments business of the Company mainly comprises of manufacturing of CPC Green catering to both international as well as domestic customers. CPC Green is Industrial Chemicals used as a key raw material in manufacturing of printing inks, paints, rubber, plastics and leather industry. I. Dye Intermediates A. Industry Structure and Developments The Company is manufacturing the product namely Vinyl Sulphone which falls in the category of Dye Intermediates. Majority of the production of the Company is exported to most of the discerning markets in Asia. The China factor and increase in competition continues to affect the industry, but overall performance of the Company is quite satisfactory. B. Opportunities And Threats India is one of the largest exporter of Dye Intermediates across the globe. Availability of technically trained manpower, better price realization globally and strong brsence on market are the key growth drivers. Competition in the domestic as well as international market has intensified and forced the players to adopt aggressive marketing strategy and promotional campaigns to capture and protect their market shares. The Company has the plans to penetrate better in to world market by exploring market opportunities in new regions like middle east, south east Asia and Africa. Sharp fluctuations in value of the Indian Rupee, the rising inventory prices and competitive brssure from China and other developed markets have put brssure on the profitability of the Company. C. Outlook The Profit margin in the industry are under brssure. However the Company has taken remedial measures. The Company is confident to meet the challenges with its strategic planning, productivity improvement and cost reduction exercise. Additionally, Company is focusing on new grades and new application to expand the share in existing market. Company is spending more on product safety and sustainability to meet regulatory compliance in future. The Company after demerger of Green division from Asahi Songwon Colors Limited got wide marketing network and mainly efforts to export and also to manufacture other value added products. D. Risks And Concerns The risk management function is integral to the company and its objectives includes ensuring that critical risk are identified continuously, monitored and managed effectively in order to protect the company's business However, the changes in the tax laws, Government policies and regulatory requirement might affect the company's business. There is also a great deal of uncertainty regarding pricing and availability of key intermediates from China which could impact the company's profitability to the extent that the same are not absorbed by the market through price increase and / or could have a negative impact on the demand in the market. Currency risks mainly arise out of overseas operations. Exchange rate fluctuation could significantly impact earnings because of the Company is having significant exports. The company is operating in highly competitive market. The management has already taken initiatives in advance for mitigating the above mentioned risk and concerns/challenges. The company has taken major initiatives like focus on cost reduction through inventory management techniques, manufacturing process without compromising quality of products, retaining talented employees and promotional activities like advertising, participation on trade exhibition, strategic partnership, customer relations etc. II. Pigments A. Industry Structure And Developments Another product of the Company is CPC Green which falls in the category of Pigments. The Pigment Industry worldwide is one of the dominant industries. Majority of the production of the Company is exported, hence the growth of the Pigment Industry has more or less moved in tandem with the growth of Global economy. Mainly paint, inks, plastics, cosmetics, fashion accessories are the user industries. The Company's products are exported to most of the discerning markets in Europe, America, Asia and far East. B. Opportunities and Threats The Indian Paint Industry in particular has undergone sophistication in the last couple of years in terms of high end Product range and technological competence. Inks and plastics market also holds lot of promise as the Paper and Printing Industry is poised to record growth. Pigment manufacturers in the developed countries, owing to high manufacturing costs and stringent environment control regulations are shifting their manufacturing bases to developing countries. This provides an opportunity to Indian manufacturers to get exposed to world class manufacturing practices. The Pigment Industry has to address the issues of REACH Compliances for issues relating to clean and green environment. C. Outlook The Global economic environment continued to be under stress in the background of recession in Europe, slow growth in the America, and in most emerging-market economies. The effect of Euro zone crisis continues to affect key economies in Central and Eastern Europe. On the other hand turmoil in the Middle East is causing serious economic risks, constraining global growth. D. Risks And Concerns Compliance of REACH regulations is a time consuming an expensive proposition make entrance of the Company's Pigments in the European market a challenging task. Further volatility of the Rupee vis a vis the US Dollar, fluctuation in the prices of inputs is a matter of serious concern as it vitiate the key advantage of competitive pricing. The Company is operating in a segment dominated by multinational companies with cutting edge technologies in Pigment manufacturing. This provides an opportunity as well as an operating risk. The Company has a Risk Management Policy in place to assess and minimize business risk, to ensure protection of the environment and enable discharging its legal requirements concerning emission, waste water and waste disposal. Company is more focusing on Environment aspects and in process of getting permission for new/existing products carrying enhancement. The Company is in compliance with legal requirements concerning emission, waste water and waste disposal and accords top priority to work place safety at all its manufacturing sites. Internal Control Systems and their Adequacy The Company has an internal control system commensurate with the size and nature of business. The Company is committed to ensuring a combrhensive internal control structure to ensure across the board operational efficiency and compliance with applicable laws besides ensuring that all its assets are adequately safeguarded and protected. All internal control systems are regularly reviewed to ensure efficacy and suitability to changing requirements and regulations. The Company has retained the services of independent firms of professionals to conduct internal audits and provide reports on the adequacy or otherwise of internal control systems. All these reports and observations are regularly reviewed by the top management and also by the Audit Committee of the Board and gaps, if any, are addressed by rectifying systems and policies. The Company has established a Risk Management Policy to maintain the highest standards of environment, safety and health as also in other functional and operational areas which is strictly adhered to. Human Resources Development Your Company firmly believes that employees are the most valuable assets and key players of business success and sustained growth. Various employee benefits, recreational and team building efforts are made to enhance employee skills, motivation as also to foster team spirit. Industrial relations remained harmonious with a focus on productivity, quality and safety throughout the year. The Company has 106 employees as on year ended 31 March, 2015. The Board of Directors place on record their apbrciation for the efforts put in by all employees to achieve good performance and looks forward to its continuation. Cautionary Statement Some of the statements in this "Management Discussion and Analysis", describing the Company's objectives, projections, estimates, expectations and brdictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those exbrssed or implied, since the Company's operations are influenced by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. |