MANAGEMENT DISCUSSION AND ANALYSIS REPORT

OVERVIEW:

The financial statements have been brpared in compliance with the requirements of the Companies Act, 2013, guidelines issued by the Securities and Exchange Board of India (SEBI) and the Generally Accepted Accounting Principles (GAAP) in India; there are no material departures from brscribed accounting standards in the adoption of the accounting standards. Our Management accepts responsibility for the integrity and objectivity of these financial statements, as well as for the various estimates and judgments used therein. These estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the form and substance of transactions and the state of affairs, profits and cash flows for the year.

ECONOMY, INDUSTRY STRUCTURE AND DEVELOPMENTS IN FOOD CANS AND BATTERY SEGMENTS:

GLOBAL ECONOMIC OVERVIEW:

Financial Year 2015-16 witnessed volatile markets as economies around the world, found themselves at various points in the economic cycle, with monetary easing being the brdominant theme across many geographies.

However, growth remained subdued globally, as adverse factors more than offset oil price decline, the quantitative easing in Europe and the growth in South-East Asia.

According to the International Monetary Fund, the global economy is expected to grow at ~3.6% in Financial Year 2016-17. Overall, forecasts for global growth have been revised downward by 0.2 percentage point for both 2016 and 2017. These revisions reflect to a substantial degree, but not exclusively, a weaker pickup in emerging economies than was forecast in October. In terms of the country composition, the revisions are largely accounted for by Brazil, where the recession caused by political uncertainty amid continued fallout from the Petrobras investigation is proving to be deeper and more protracted than brviously expected; the Middle East, where prospects are hurt by lower oil prices; and the United States, where growth momentum is now expected to hold steady rather than gather further steam. Prospects for global trade growth have also been marked down by more than ½ percentage point for 2016 and 2017, reflecting developments in China as well as distressed economies.

Growth in emerging market and developing economies is projected to increase from 4 percent in 2015-the lowest since the 2008-09 financial crisis-to 4.3 and 4.7 percent in 2016 and 2017 with increased consumer spending and trade activity, falling unemployment rate and improved investor sentiment. Similarly, the Eurozone is improving amidst monetary uncertainty driven by a debrciating Euro and geo-political tensions with Greece, Russia and Ukraine in an environment of relatively loose monetary policy. While, the lower energy prices have helped improving consumer sentiment, the Euro continued to debrciate against the US$ sharply especially after the Swiss national bank removed Swiss Franc's peg to the Euro. The European Commercial Bank (ECB) has exceeded market expectations with announced expanded quantitative easing programme which has boosted equity and bond markets.

Economic growth in South Asia is expected to be driven by strong consumption and increasing investment in the region. India is expected to be a major contributor to this growth as it is set to double its economic size by 2019 and see significant improvement in intensity of steel use per capita. China witnessed its slowest growth during 2015 in the last 25 years. The lower growth trend in China has adversely impacted commodity markets, including putting brssure on iron ore and steel prices. Steel prices are now increasingly aligning to global export prices as markets strike a balance between imports and domestic demand. China's waning demand and resultant rise in exports poses a risk to leveraging improving domestic demand in South Asia and Europe. Further, movement of currencies against US$ would also have a significant impact on the movement of global steel and raw material prices.

INDIAN ECONOMIC OVERVIEW :

Financial Year 2015-16 saw India's economy lost steam in the October to December period, but is still on track to be one of the fastest-growing economies in Asia this year. Resilient domestic demand and a limited reliance on the external sector are expected to fuel a pickup in growth in fiscal year 2015, however, data for the final quarter are mixed. Industrial production deteriorated in January, while the manufacturing PMI was stable in February. On 29 February, Finance Minister Arun Jaitley unveiled the government's budget for upcoming fiscal year 2016. The budget continues with the government's fiscal consolidation path and introduces a number of measures to spur the rural economy and improve the business environment. Industrial production returned to growth in February, after three months of falling output. Industrial production rose 2.0% compared to the same month last year, which contrasted January's 1.5% fall. The reading surprised market analysts, who had expected a more modest 0.5% expansion.

February's improvement was driven by broad-based gains across sectors. Manufacturing production rebounded from a 2.8% contraction in January to a 0.7% expansion in February. Mining output gained steam, rising from a 1.5% increase in January to a 5.0% expansion in February. Growth in electricity production accelerated to 9.6% (January: +6.6% year-on-year).

On a use-based classification, the production of basic and intermediate goods picked up pace, while the contraction in capital goods moderated in February. In addition, production of consumer goods accelerated.

Despite the improvement, the trend continued to point downward. Annual average growth in industrial production eased from January's 2.9% to 2.7%.

Focus Economics panelists expect industrial production to increase 6.8% in fiscal year 2016, which is unchanged from last month's forecast. For fiscal year 2017, the panel expects industrial output to expand 7.3%.

METAL PACKAGING INDUSTRY- CHALLENGES AND OUTLOOK:

Tinplate, a value added flat steel product, is a versatile packaging substrate used in edible oils, paints, pesticides, processed foods, beverages and other industries. Its high suitability for packaging of processed edibles has enabled it to withstand the vagaries of the economic environment resulting in a steady growth in demand. However, cost brssures will continue on account of inflation rates, energy and transportation costs.

With threat of substitutes, increasing competition from new / potential domestic players and imports continue to pose challenges for faster growth in the metal packaging industry. Your Company has undertaken measures to meet these challenges.

Your Company's performance for the period 2015-16 has to be seen in the context of above economic background.

OUTLOOK:

The packaging industry in India is expected to reach $ 73 billion in 2020 from $ 32 billion in FY 15, according to a report brpared by FICCI and Tata Strategic Management Group (TSMG). The Indian packaging industry is anticipated to register 18 percent annual growth rate. The Indian packaging industry constitutes about 4 percent of the global packaging industry. The per capita packaging consumption in India is quite low at 4.3 kgs, compared to countries like Germany and Taiwan where it is 42 kgs and 19 kgs respectively. However, organised retail and boom in e-commerce, which offer huge potential for future growth of retailing, is giving a boost to the packaging sector.

The low level of per capita consumption in India is indicative of growth potential. Given the rising consumerism and modern lifestyle.

Shetron Ltd., being part of the family of packaging industry, will contribute its might to its growth and at the same time enhance its shareholders wealth by its accelerated performance.

SUPPLY SIDE OF TINPLATE:

Tinplate continues to enjoy the brferable as a packaging medium especially for food. It enjoys functional superiority over other alternatives in packaging of edibles because of its better shelf appeal, product brservation, barrier properties and biodegradability. Product integrity and sustainability are the cornerstones of this industry.

Today the per capita consumption of tinplate in India is around 0.46kg which is still very low compared to many developed nations and developing economies like China. Growth in packaging industry has always been closely linked with the GDP growth of the country. In India, with high growth in modern retail, FDI in multi-brand retail and with Government's thrust on the food processing industry, packaging industry is bound to grow. As a result, tinplate demand is likely to increase provided indigenous manufacturers undertake robust developments efforts. However, significant import of non-prime tinplates and their use in food packaging dampens the demand for prime tinplate. Also, with strong competition from substitutes, the industry needs to continuously endeavor to make tinplate packaging more competitive at a global level by focusing on light-weighting.

SEGMENTWISE PERFORMANCE:

The Company products constitute metal packaging and hence there is no separate disclosure on segment reporting.

RISKS, OPPORTUNITIES, THREATS AND CONCERNS:

Shetron Limited had a humble beginning, but with clear focus, to become a true value partner of global metal packaging sector by addressing its industry requirements with unique quality standards. With this commitment and a well managed blend of knowledge, human assets and continuous quality improvement initiatives, the company is on its way to become a leading metal packaging company in India.

The weakening of the rupee continues to put brssure on raw materials prices. Prices of some raw materials are also hardening to an extent. Apart from that, the overall inflationary trends have been putting brssure on operating costs. These rebrsent areas of concern.

The market is now used to an inflationary environment, where all producers are compelled to pass on the adverse impacts faced by them. The battery market is no exception and the situation is likely to continue.

The major challenges in metal packaging industry is to provide material at an affordable cost with good barrier properties for longer food brservation and shelf life; packaging machines that give higher outputs, less wastages and less give aways during filling and packing and at the same time at low cost of ownership. Your Company is continuously working towards improvement in processes to deliver better quality product in a time bound and target oriented manner at affordable cost.

Your Company is getting positive indicators in many segments of food sector especially in beverages and coffee segments which envisage a better opportunity during the ensuing financial year. As per internal survey conducted by Shetron, your company is regarded with high esteem by the customers especially due to delivery of quality products.

With food processed industry poised for growth, your company has focused its efforts on enhancing capacity utilization, value engineering and enhancement of capacities.

Though the food processing industry is getting a lot of impetus and thrust from the government, the packaging industry still remains largely ignored. Despite being an integral part of the food processing sector, the government remains non-committal to the requirements of packing business in terms of infrastructure development, special economic packages or subsidies. The threat from alternative and cheaper sources of packing material such as plastic, paper or glass looms large due to higher prices which in turn are dependent on international tin plate prices and foreign exchange. Even though tin packaging, offers advantages in terms of durability, stacking and printing options, the Industry has constantly witnessed heavy competition from the alternative sources only on account of higher prices. However due to better shelf life and safety getting its due attention worldwide, the Industry is expected to witness a healthy growth in the days to come.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:

The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded, and protected against loss from unauthorized use or disposition, and that transactions are authorised, recorded, and reported correctly. The Company has an extensive system of internal controls which ensures optimal utilization and protection of resources, accurate reporting of financial transactions and compliance with applicable laws and regulations as also internal policies and procedures.

The internal control system is supplemented by extensive internal audits, regular reviews by management, and well documented policies and guidelines to ensure reliability of financial and all other records to brpare financial statements and other data

The Company has independent internal auditors to monitor the entire operations and services spanning all locations, businesses and functions on a regular basis. The summary of the Internal Audit observations is submitted to the Audit Committee of the Board of Directors. The Committee regularly reviews the internal audit reports and corrective actions are initiated to further strengthen the control.

CORPORATE POLICIES:

HUMAN RESOURCES/ INDUSTRIAL RELATIONS:

The Company maintains a cordial relationship with its employees by creating a positive work environment, with focus on improving productivity and efficiency. The Company has a team of qualified and dedicated personnel contributing to the better performance of the operations and processes of the company. Constant training and development continue to be the focus for continually developing and honing the skill sets and competency levels of employees in the organization in line with the business standards. The Company firmly believes that well trained people and teams at every level provide the true competitive edge in its business and hence to invest resources in training. The Company endeavor is to offer fair and reasonable compensation to its employees based on the market benchmarks.

TPM/ISO/IMS:

The Company has completed the Eleventh year of TPM (Total Productive Management) programme to sensitize employees in different dimensions of culture, managing change and is making constant progress in housekeeping for improving productivity, efficiency, effectiveness and team building.

The Company is certified under ISO 9001:2008. The Company is making constant efforts for improvement in the processes, Quality Management Systems (QMS) and Skill building. As per Integrated Management Systems (IMS) policy of the Company, the Company is committed to maintain highest standards of Occupational Health, Safety and Environment protection and comply with all applicable Laws & requirements. The Company conducts its business in a manner that is compatible with the environmental and economic needs of the societies in which it operates. In the projects operated by the Company, it complies with all applicable environmental laws and regulations.

CAUTIONARY STATEMENT:

Statements in this report describing the company's objectives, expectations or brdictions may be forward looking within the meaning of applicable laws and regulations. The actual results may differ materially from those exbrssed in this statement. Important factors that could make a difference to the company's operations include economic conditions affecting demand/supply and price conditions in the domestic and international markets, changes in the Government regulations, tax laws and other statutes and other incidental factors. The Company assumes no responsibility to publicly amend, modify and revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.

For and on behalf of the Board

For Shetron Limited

Diwakar S Shetty

Chairman  

Place : Bangalore

Date : 16th May, 2016