MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENT

The emulsion industry continues to be dominated by 7 major manufacturers and several small scale ones sbrad across the country .The political uncertainty that was brvailing in the earlier years leading to discomfort in the industry had been overcome with the swearing in of majority led government at the centre. This had given rise to a sense of "feel good" factor to the industries and better days ahead are anticipated. The fluctuation in the Rupee/dollar parity has stabilized and oil bill import has gone down due to a steep fall in the crude prices.

However it was difficult for most of the industries to immediately come out of the earlier years negative effects and in the process a few of our competitors tried to increase their volumes by resorting to offering even below cost rates. Despite this scenario your company did not resort to any distress selling as was being done by some of the competitors as the same would have been counter productive. Your company managed to keep its market share by focusing more on exports and also expanding the customer base.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE MANUFACTURING DIVISION

During the year the production has increased from 27707 M. Tonnes to 28908 M. Tonnes in terms of volume, registering growth of 4.23 %. In value terms the sales has increased from Rs.16589 Lacs to Rs. 18647 Lacs registering a growth of 12%. It is pertinent to note that the share of industrial adhesives, which is an important product category from your company's perspective, has increased.

TRADING DIVISION

In the trading segment, the turnover has decreased from Rs.6829 Lacs to Rs.6778 Lacs registering a nominal decline due to company's conscious decision to focus on manufacturing activities as the raw material prices are highly volatile.

FOREIGN EXCHANGE FLUCTUATIONS

Your Company's business is brdominantly import-centric. Due to volatility in the foreign exchange market during the year under report, your company has incurred a foreign currency loss of Rs.141.57Lacs as compared to loss of Rs.459.10 Lacs in the brvious year. Your company has reported lower profits of Rs.38.02 Lacs (after deferred tax of Rs.15.79 Lacs) primarily due to the said foreign currency fluctuation loss.

STRENGTH, OPPORTUNITIES, THREATS, RISKS, CONCERNS

Your company's product mix can be broadly categorized into paint, adhesives, textiles and construction chemicals. Considering diversity of the end use where the products are supplied, this forms the intrinsic strength as there is no overdependence on any industry. Accordingly depending on the performance of the various segments thrust is given to generate volumes and profitability. Being associated with well known corporate in the paint sector your company seeks great opportunities as these companies have been continually performing well and their results show good growth every year. Similarly the opportunities for exports are huge and your company's products are finding more and more acceptance in many countries. In the case of adhesives, some product not only have a good potential but also contribute significantly to value addition and thus these areas are being exploited more and more. The threat arising from activities of our competitors especially the MNC's who have put up manufacturing units in India is being effectively neutralized due to our lower overhead costs and also products not being available in their range. However the one big concern, due to some of the large paint houses starting their own paint emulsion manufacture for captive consumption is being overcome by tapping more medium sized paint units who are financially sound and having reasonable brsence in the market scenario.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has in place the control systems based on the use of computer software that generate sufficient management information for internal control purpose. The executive directors closely monitor the operations of your Company personally. Having regard to the size and nature of the business, your Company has adequate internal control procedures for managerial control.

HUMAN RESOURCES/INDUSTRIAL RELATIONS

The industrial relations are cordial from inception till date.

OUTLOOK

Amongst its basket of products, your Company's major sales and focus pertain to the emulsions for the Paint Industry. M ost of the major players in this industry have brdicted a better growth in the decorative paint sector. Our emulsions are brdominantly used for making decorative paints; which would certainly provide a greater fillip to our sales. The results also have been extremely encouraging in the other sectors including adhesives and the area of exports. All this augurs well for your Company in the coming months.

DISCLAIMER

Statements in the Management Discussion and Analysis Report describing your Company's objectives, estimates, expectations may be "forward-looking statements " within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to your Company's operations include economic conditions affecting demand/supply, price conditions in the domestic and overseas markets in which your Company operates, changes in Government regulations, tax laws and other statutes.