Management Discussion and Analysis

INDIAN ECONOMY

In 2014-15, the Indian economy grew at 7.4% (GDP at market prices). The landscape of its fiscal environment changed substantially. A number of reforms that were pro-growth were taken, policy initiatives were introduced by the new government; and micro-stability returned, ensuring steady growth.

Indian GDP growth

Falling oil prices aided in lowering current account deficit and inflation. With fiscal deficit at 3.1%, and current account deficit at 1.6% of GDP, India's macroeconomic fundamentals remained robust.

The nation's economic growth was shaped by its ability to attract FDI flows of US$ 35 billion, an increase of 26% in 2014-15. The industrial sector, especially manufacturing, showed a positive growth. IIP was up by 2.8% for April-February 2015, as compared to the contraction of 0.1% in the same period of 2013-14. In addition, the government started the Pradhan Mantri Jan-Dhan Yojana to increase financial inclusion in India. It also introduced the 'Make in India' programme to boost sectors like manufacturing. These factors, given impetus by rapid urbanisation and a mushrooming middle-class with high disposable income helped the economy grow in the last financial year.

INDIAN FURNITURE INDUSTRY

The Asian market is estimated to be the biggest consumer of furniture and India holds a major pie, according to a World Bank study. The furniture industry witnesses demand for a wide range of furniture products, from designer or luxurious furniture to ready-made modular ones.

Rapid urbanisation, favourable demographics, increasing per capita income, nuclear families and rise of the middle class in India are some important demand drivers.

Wood Panel Industry in India

The wood panel market comprises materials used in making furniture, such as plywood, medium density fibreboard (MDF), and decorative veneers. Plywood and MDF form the backbone material for furniture, whereas laminates and decorative veneers are surfacing products and are used for decorative purposes.

The Indian wood panel market is valued at Rs. 285 billion. Plywood has a share of 63% (Rs. 180 billion). Tailwinds to this sector include higher disposable income; rising urbanisation; real estate sector's growth, particularly in Tier II and Tier III cities; and the fast growing replacement market. The government's 'Housing for all by 2022' policy gives further impetus to the plywood industry.

Plywood

The size of the Indian plywood industry stood at Rs. 180 billion. The industry comprises unorganised players, making up for 75% of the market share. Organised players command 25% or a Rs. 45 billion market share. The organised industry has been growing at 12-15% CAGR over the last few years.

Plywood is a manufactured wood panel made from thin sheets of wood veneer. To manufacture plywood, three critical raw materials are needed: face veneers, core/panel veneers and chemicals. The top and bottom layers of plywood utilise face veneers. Core and panel veneers form the intermediate layers.

Face veneer is imported brdominantly from Myanmar. Core timber/veneer is available abundantly from domestic sources. Chemicals are imported or procured from domestic suppliers, depending upon price gaps between international and domestic prices.

The Plywood industry has grown at CAGR of 4-6% over the last five years. Big players have set up facilities overseas. They manufacture veneer, and export it to India. This ensures security of raw materials for big players, as they focus on brand visibility, quality, superior distribution and scale of operations to further gain market share.

Termite resistant plywood signifies a differentiated high-value offering. These high-quality products are being purchased by aspirational India. With unorganised players dominating the industry and GST implementation likely from 2016-17, there is a scope for branded players to narrow cost differential and capture market in the next few years.

Medium density fibreboard (MDF)

The MDF market is worth Rs. 13 billion in India, growing at a CAGR of 15-20% over the last five years. MDF is engineered wood made from wood (fibres), glued together using heat, resin and brssure. It is also a superior substitute for cheap unorganised plywood. It also faces competition from imports. Demand in this sector is driven by ready-made modular furniture, modular kitchen, ready-to-move into offices/retail outlets, a need to substitute low quality plywood, affordability, increasing awareness of customers of better alternatives, and shortage of time. The Centre's hold on fresh licensing for the manufacture of plywood has led to increasing gap between demand and supply. This will increase the use of engineered panel products, which is a positive development for the MDF industry.

Laminated flooring

Wooden flooring business in India is estimated over Rs. 150 billion in 2014-15. Market share of laminated flooring is around 80%, against other wooden flooring solutions. Moreover, share of wooden flooring in India is 2%, against the global standard of 38%, leaving ample scope for growth. The Indian wooden flooring market is expected to grow by 15% year-on-year. Reputed real estate builders have also started using laminated flooring, as designer tiles are expensive.

Key trends

Indian manufacturers brfer to import timber in log form to supply to domestic furniture makers. Imports are mostly from Malaysia, Indonesia, Nigeria, Ivory Coast, Ghana, Togo, Gabon, Brazil, Panama, Costa Rica, Ecuador and New Zealand. The concept of industry-owned plantations of eucalyptus, poplar, casuarinas and acacia mangium is on rise. This is to help secure raw material-timber, besides conserving India's forest reserves and brventing illegal felling of trees. Most mid-sized and small wood buyers procure lumber and logs from wholesale markets. However, large construction projects and manufacturers purchase directly from wood manufacturers and importers.

Accelerated activity in several wood using sectors shall induce growth in the industry.

GROWTH DRIVERS Construction

The government aims to make India a world centre for construction equipment and manufacturing. Sustainability in construction is also a matter of concern. India's construction sector is valued at US$ 157 billion in 2014, and is estimated to grow at 8-9% each year (Source: pwc, 2014). Growing urbanisation levels in India are fuelling an increase in construction activity.

Real Estate

Foreign direct investment (FDI) in the Indian real estate sector is expected to get a lift. The government's 'housing for all' initiative is driving Indian investment into housing. Real estate comprises residential and commercial buildings, and there is a growing focus on more complex realty projects. According to the

Boxes of Laminated Flooring

National Council for Applied Economic Research (NCAER), the middle class grew from 11 million households in 2001-02 to 31 million households in 2010-11. It is expected to reach 53 million in 2015-16. This middle class is demanding new homes, along with modifications in the existing interiors.

Smart cities

India is building 100 smart cities to accommodate India's growing urban population and to boost development. Urban planning needs to leverage technology and optimise resources to improve quality of life and delivery of public services. Green and sustainable construction techniques are vital to the future of the industry across the world.

Office/residential building

As FDI in real estate is relaxed, there is a burgeoning demand for office space. Office space supply in top eight Indian cities is expected to reach 180 million sq ft. during 2012-2016. Moreover, an increasing number of corporate offices, being set up in Tier II and Tier III cities, will drive demand for office furniture.

Retail

Organised retailing grew to 10% of India's retail. Both domestic and international retailers provide impetus to the retail industry's growth. The Ministry of Commerce and Industry has given approval for 100% FDI for multi-brand retail outlets. Organised retail is likely to grow at 40% per annum in India.

Hospitality

The hospitality segment in India is witnessing a robust demand growth, rising tourism business and leisure travel. This opportunity is being seized by hoteliers, and several hotel projects are in the pipeline. The demand for interior furniture is on rise. Hence, the demand for the wood industry is likely to grow as budget hotels, service apartments, spas and other niche centres get established.

Healthcare

India's healthcare sector is expected to grow from US$ 78.6 billion in 2012 to US$ 158.2 billion in 2017. Per capita healthcare expenditure is increasing at a CAGR of 10.3%, driving more construction in healthcare facilities, and demanding more furnishing products.

Others drivers

There are many drivers for the industry, such as:

India's rising per capita income that grew from Rs. 80,388 in 2013-14 to Rs. 88,533 in 2014-15.

India's young population with an average age of 24 years. This demographic segment has a higher disposable, and a desire for better lifestyle with stylish interiors.

The likelihood of India to emerge as the world's largest middle class consumer market, by 2030, with an aggregate consumer spend of nearly US$ 13 trillion.

The rising number of nuclear families. This demographic segment has recorded a 70% growth. These usually comprise just one married couple, driving the need for quality housing.

OUTLOOK

A growing middle class in India seeks new wood products, especially in the sustainable green wood segment. Reconstituted wood products, such as plywood, and medium density fibre boards are likely to be used increasingly by real estate developers, furniture makers, railways and defence, among others. To ensure a profitable wood supply-chain, there is need for sufficient infrastructure and transport facilities. Another future event that will lead to an organised industry's growth is the implementation of GST. Innovations and use of technology shall help the wood industry to grow profitably, and leverage opportunities in the future.

ABOUT GREENPLY

Greenply Industries Limited, India's brmier interior infrastructure company, manufactures, markets, distributes and brands plywood and medium density fibreboards. The Company enjoys a leadership position in this sector, accounting for almost 30% of the organised plywood and 30% of the MDF market in India.

It has four state-of-the-art manufacturing facilities for plywood and one facility for MDF, sbrad nationwide, and produces world-class wood panel products. The Company has a brsence in over 300 cities across 21 states, serviced through a well-entrenched distribution network of 1,550 distributors, and 10,000 retailers, and 45 branches pan-India.

The Company is the brferred partner of choice for a large number of office and home builders. It has a combrhensive product portfolio of servicing clients under brand names of Greenply Plywood, Green Club Premium Ply, Optima Red, Ecotec, Green Panelmax and Green Floormax, among others. Its wide price range makes it one of most brferred brands.

Greenply is a leading manufacturer of quality plywood and allied products in India. The Company has four operational plywood plants, with an annual cumulative capacity of 32.40 mn sq. mtr or 1,29,600 cubic mtrs. Greenply offers a range of excellent quality plywood, made from brmium A+ grade timber. It further undergoes a rigorous five-stage manufacturing process to make it termite and borer resistant.

Made from 100% hard wood or Gurjan timber, Greenply plywood has high dimensional stability and is warp free. Moreover, all Greenply products are eco-friendly and emission free. It is the first company in India to introduce a lifetime guarantee in its brmium products, Green Club and Green Club Plus Plywood.

Division strengths

Brand: Most brferred plywood brand in India. Consistently growing brand recognition will grow brand leadership.

Scale: Possesses one of the largest plywood making capacities of 32.40 mn sq mtrs across four plants.

Product range: A well diversified product mix (across all price points) positions the Company to an advantageous position.

Raw material security: All plants are located near raw material sources or port connectivity. The Nagaland and Uttarakhand plants are proximate to local timber resources. The West Bengal and Gujarat plants import wood/processed wood from Southeast Asia, Europe and Africa.

Presence: Strategic manufacturing locations make it possible to supply products pan-India, saving transportation costs.

Quality: It enjoys CE marking, which testifies that the product complies with quality and processes. This marking also provides access to Europe, without product adaptation or re-checking.

Regulated industry: The Company enjoys a competitive advantage as the government has restricted the issue of new licenses in this segment, owing to environmental concerns.

Green company: The Ecomark from BIS authorities and FSC certification reflects high social and environmental standards.

Highlights, 2014-15

Achieved average capacity utilisation of 102% at the plywood manufacturing units.

• Enhanced sales from 44.5 mn sq.mtr in 2013­14 to 46.11 mn sq.mtr.

•Volumes in the outsourced segment grew by 34.29% from 9.80 mn sq mtrs in 2013-14 to 13.16 mn sq mtrs in 2014-15.

•Average realisation increased from Rs. 222 per sq. mtr in 2013-14 to Rs. 241 per sq. mtr.

•Launched several new products across various categories.

•Strengthened dealer relationships by reinforcing existing relationships, regular visits, handholding initiatives and knowledge sharing sessions.

• Penetrated the largely untapped rural market, and strengthened rural sales distributor base.

•Reinforced above the line (ATL) TV, radio, cinema, digital, print and below the line (BTL) promotional activities through sponsorships, exhibitions, discounts and coupons.

•Advertising and promotion expenditure witness 53% increase to Rs. 36.29 crore.

•Continued to air the 'Forever New' advertisement on the electronic media.

Road ahead

The resurgence in the economy and the government's focus on 'housing for all' by 2022, will help increase the demand for plywood. Increasing shift from unbranded to branded plywood is likely to benefit branded players in a big way, as 75% of the industry is still dominated by unorganised players.

An alternative to plywood, medium density fibreboard (MDF) is an engineered wood product made from composite wood. MDF is a unique mix of durability, look, texture, richness and the feel of seasoned wood, with properties to replace solid timber. Greenply's MDF is marketed under the brand 'Green Panelmax'. The Company enjoys 30% share of domestic MDF market.

Green Panelmax MDF is a revolutionary product made with a unique fibre-interlocking technology, which leads to high bonding strength and rigidity. It is loaded with features, best suited for constructing strong and durable furniture and creating unique interiors.

MDF is used in a wide range of applications -panelling, furniture, door frames, handicraft, display or exhibition stands and signage, false ceilings, toys, carving and moulded panels, partitions, footwear industry and educational equipment.

Division strengths

Manufacturing capability: The Company's MDF manufacturing facility at Pantnagar, Uttarakhand (180,000 CBM annual capacity) is the first-of-its-kind in India that incorporates the latest European technologies. This state-of-the-art manufacturing facility is also the country's largest and most technologically advanced plant in its category.

Product durability: Greenply's MDF boards are made with advanced technology to offer tough resistance to all sorts of impact and wear and tear. The interlocking technology used in manufacturing leads to high bonding strength and greater rigidity.

Quality: The Company has implemented stringent quality measures at every stage of the manufacturing process. This ensures smooth finish, superior machining characteristics, consistent quality and strength. The latest testing technology guarantees consistent surface density and thickness.

Raw material availability: The Company's MDF unit is located in Pantnagar, proximate to agro-forestry resources like eucalyptus and poplar trees.

Eco-friendly: The Company's MDF is produced from 100% renewable and sustainable wood. They are sourced from agro-forestry plantation trees that have a lifecycle of 3-4 years, causing no harm to forest.

Wide product range: Greenply is the first manufacturer in India to offer such a vast range of MDF in a variety of thicknesses and sizes. The qualities are available in all its products, ranging from plain, br-laminated and veneered Green Panelmax MDF board to plain and br-laminated HDF.

Best building material: The Company's MDF boards allow brcise routing, machining and finishing techniques for a superior finish. Absence of latex makes it ideal for surface finishes, such as painting and polishing. Moreover, various chemical treatments make them termite, borer and fungus resistant.

HIGHLIGHTS, 2014-15

•Capacity utilisation stood at 90% (76% in 2013-14).

•Increased production from 1,36,723 CBM in 2013-14 to 1,61,229 CBM.

•Average realisations stood at Rs. 25,238 per CBM, compared to Rs. 25,552 per CBM in the brvious year due to introduction of new products in the economy range.

•Registered better volumes of brmium offerings like br-laminated MDF boards and exterior grade MDF boards.

•Extensive product range, catering to different sections addressed at countering cheaper plywood segment.

HUMAN RESOURCE

A company needs to attract, develop and retain talents to ensure long-term growth and success. It hires talented and value-driven people to ensure sustainable growth. At Greenply, people are the biggest assets. The Company has undertaken various knowledge sharing and training initiatives to sharpen and nurture their skills. Greenply is fostering a culture of ownership and rewards people for 'thinking out of the box' that gives encouragement to surge ahead of competition and to succeed.

Recruitment

The recruitment process was dovetailed with business targets by individual departments, leading to the identification of manpower needs and followed by proactive recruitment. During 2014-15, the Company added several new members.

Training and knowledge sharing

Green Edge - Skills to Surge: Launched sales training workshops for ASM and aspiring ASMs across the country, to ensure uniformity of selling skills. This enhances effectiveness in selling and gives improved results.

¦ Green Mantra: Conducted organisational and product orientation programmes at the manufacturing units, for both new and existing members.

Erudition: Initiated a knowledge transmission platform to act as a linking point amid knowledge seekers and transmitters. Through this platform, the Company aspires to sbrad awareness conversely and create future group of specialists. Branch trainings initiated a revision on products and processes

So Conclave: Organised orientation programmes for the business development team and frequent product touch points to keep them abreast on product knowledge.

KAT Boot Camp: Initiated knowledge sharing on product refreshes, along with outbound experience with holistic management and learning.

Management Development Programme:

Cross functional leaders were nominated for programmes organised by IIMs, to acquire best practices, ideologies and approaches for individual growth and organisational betterment.

Motivation initiatives

Green glory league: Organised annual employee meet with games, entertainment, rewards and learning programmes.

Loyalty Award: Felicitated 108 employees for completing 5, 10, 15 and 20 years of association with Greenply.

Bank at your Doorstep: Initiated an employee helpdesk, offering one-stop solutions for all pending bank work from office.

Festival celebration: Celebrated various festivals round the year with gift distribution and employee engagement activities.

Women's Day celebration: Celebrated Women's Day by acknowledging contribution of all women employees.

Other initiatives

Put in place a forum called 'Sahyog', where the employees can connect with the Company with their queries, grievances, ideas and suggestions.

Way forward

Balanced Scorecard: Balanced scorecard defines what management means by 'performance', and measures taken to achieve desired results. Balanced scorecard translates targets and performance measures that can be quantified and appraised.

Back2Basics: Monthly online product knowledge quiz to assess the required product training intervention, and craft required training programmes. The intent is to ensure that the sales force is aware of the product updates. This also helps evaluate their progress.

Video conference: Plan to implement video conferencing facility for frequent interactions between zones and branches, minimising travel to an extent.

¦ Cross functional audit: Quarterly/half-yearly integrated internal review mechanism, to ascertain departmental efficiencies to be initiated.

Employee satisfaction survey: Employee engagement and satisfaction survey to be initiated, to gauge employee satisfaction.

Post Graduate Scholarship Programme (PGSP): PGSP for managers and above through leading B-Schools. This would support employees in their skill enhancement and act as a retention tool for the organisation.

SAFETY HEALTH AND ENVIRONMENT

Greenply is responsible towards the society. The Company's efforts mirror its motive of creating a balance between business and community welfare. The Greenply Board of

Directors and management team is working together to operating ethically, demonstrating environmental responsibility engaging stakeholders and benefitting the communities.

Prevention and control of air pollution

Greenply is committed to implement state-of-the-art technologies to brvent air pollution. ESP (Electro Specific Precipitator) is installed in the plants to entrap the floating gas particles. It brings down the SPM level within brscribed limits of flue gas emissions through appropriate height stack.

Flue gas from small capacity boilers is passed through wet scrubber. It strips off the floating ash particles before emitting of the gas into the atmosphere through a chimney.

The manufacturing area is ventilated with natural draft ventilation, as well with forced draft ventilation for machines emitting hot gas.

Water Pollution Control

Plyboard manufacturing is a dry process except for floor wash / vessel wash from resin plants.

Blow down from boiler and floor wash from resin plant is mixed in equalisation tank for further chemical treatment in ETP.

Liquid effluent from de-fibrater of MDF plant is mainly residual wood fibre and dissolved lignin in steam condensate water.

Such effluent is screened to remove the suspended wood fibres, used as fuel in the boilers. The residual water is taken for chemical treatment in ETP. Sediment solids are dried in SDB and disposed as solid waste. The filtrate water is recycled as feed water for wet scrubber, as well as for gardening within the plant area and achieve zero discharge of contaminates from the plant.

Hazardous solid waste management

The solid waste generated from the plant is mainly wood ash from boilers. It is disposed as bio fertiliser for farming, as well as ground fills in the dump yard.

Other solid waste include dry sludge from the liquid effluent treatment plant. It is stored in an appropriate shed, in leak-proof containers. Then it is disposed through a contact arrangement, with a solid waste disposal dump yard agency.

Noise pollution control

Plyboard and MDF board manufacturing is relatively a silent process, except while chipping or peeling of wood. Adequate measures are implemented to restrict the sbrad of such noise by acoustic hood / enclosures. It provides mufflers for the operators. Plant buildings are well ventilated and a high roof is provided to eliminate echoes.

Precautions against safety hazard

A fire hydrant (external and internal hydrants) system is laid across the plant. It reaches the water jet in the plant area, in case of any eventuality.

Appropriate reserve storage of water for fire-fighting is maintained in RCC underground tanks.

The system operates as wet riser with an electric driven fire pump and jokey pump. Both the pumps are provided with diesel generating set power supply with an auto start system. It always keeps the system in operation.

In MDF plant, fire detection and extinguishing system is installed with means of automatic operation and control. The system comprises water sprinklers for the wood fibre handling and hot brss, among other features.

Fire extinguishers that will fulfil the demand of the day are located at strategic locations for quick control. All electric panels are kept in a well-ventilated area. A structured brventive maintenance schedules are in place for upkeep of all electrical components. This is to avoid heat up of the same.

A fire-fighting squad is available at the plant all the time. It is trained for fire extinguishing techniques in the wood based industry.

Fire tender services are available in closely located fire stations of the industrial area, as part of facilities for protection in case of a major fire.

Health safety measures

Health and safety of each individual working within the plant area is a prime concern of the management. Therefore, appropriate brcautions are taken in the area in accordance to safety norms.

The entire electrical panel's operation area is provided with rubber mats. This provides safety against electrical shock during operation / maintenance efforts. The rotating equipment is provided with safety fence / motor guards for human safety. All hot surface pipes / equipment are provided with appropriate insulation for human safety. Appropriate work platforms and ladders are provided for operation / maintenance of the components located at heights.

Precautionary sign boards are displayed at specific locations for awareness of the operation staff. Ear plugs, safety goggles, safety shoes, safety helmets, safety gloves, safety masks and safety gadgets (PPE), among others are provided to the staff.

First aid boxes are made available across the plant for the primary treatment of minor injuries. An ambulance is also available around the clock within the plant for the transfer of an injured worker in case of an emergency.

Group panel hospitals are designated for emergency service support to the work staff.

INFORMATION TECHNOLOGY

Information technology helps synchronise day-to-day operations. Greenply works on the SAP platform. All its plants are connected through this platform, ensuring better financial management, material management, production planning, plant maintenance and quality management.

Post demerger, information technology was established as a centralised function for both divisions for better integration and synergy.

To enhance the efficiency of sales force Customer Relationship Management (CRM), initiatives were taken. These CRM initiatives not only enhanced the customer relationship but also maximised the effectiveness of the Company's sales force. It became a critical component for the Company for its ability to directly link to its customers.

The Company has moved the mail server to cloud, offering greater scalability and flexibility than server-based email. The Company invested in SAP HANA to build a sustainable IT platform for future growth. This would facilitate access to real-time information for faster operations. The Company also invested in business intelligence infrastructure for better and faster decision-making.

Greenply plans to start a video conferencing platform across all locations to accelerate communication and reduce travelling expenses.

RISK MANAGEMENT AND CONTROL

The Company’s risk management policy stems from a philosophy of pursuing sustainable growth and creating economic value, while calibrating and mitigating risks. It is integral to how we plan and execute business strategies.

Plywood and medium-density fibreboard (MDF) find versatile use in furniture and home building sectors than any other forms of man-made fibre. A combination of expanding economy, rising purchasing power, growing middle class and wider applications reflect sustainable market growth in the future.

Realty boom in cities like Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Surat, Vadodara and Visakhapatnam is expected to add over 354 million square feet of residential space in 3 years, and increase business prospects for Greenply.

Downturn in the economic condition that might affect the Company's performance.

Competition from the unorganised players might result in a decline in profitability.

Strategic response

¦ The Indian economy grew from 6.9% in 2013­14 to 7.4% in 2014-15, indicating a steady growth in the economic condition.

Strategic response

Greenply enjoys 30% of the organised plywood market, and 30% of the MDF market in the country.

India's per capita income grew from Rs. 80,388 in 2013-14 to Rs. 88,533 in 2014-15, which is a 37.6% income growth.

The Company is brsent in two business verticals - plywood and MDF, making for a diverse income portfolio.

The business may cease to remain attractive due to the de-growth in the downstream industry.

Strategic response

The Indian real estate sector has noticed high growth in recent times. With the rise in demand for office spaces, as well as residential spaces, the sector has been the second most active sector. The market size is expected to reach to a market of US$ 180 billion by 2020.

To accommodate the rapid urbanisation, the Government of India has allotted Rs. 6,000 crore for building 100 smart cities, and to develop infrastructure in another 500 cities.

Middle-class India shall drive new homes and modify existing interiors, auguring well for Greenply.

The net worth of HNIs in India is expected to increase from Rs. 45 trillion in 2010-11 to Rs. 235 trillion in 2015-16. HNIs use a fifth of their earnings for investments, of which 37% is in real estate, demanding brmium housing and housing products.

Realty boom in cities like Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Surat, Vadodara and Visakhapatnam is expected to add over 354 million square feet of residential space in 3 years, and increase business prospects for Greenply.

Competition from the unorganised players might result in a decline in profitability.

Strategic response

Greenply enjoys 30% of the organised plywood market, and 30% of the MDF market in the country.

Constant communication of the Company with its interior designers, architects, carpenters, contractors and retailers, fortify strong brand recall.

Greenply operates in segments, where the government manages the grant of new licenses for manufacturing of wood-based products.

Consistent innovation in new product development and value-added products across two divisions is consistently increasing the Company's prominence.

Growing competition from peers could dent realisations.

Strategic response

The Company has invested in technologies and equipment to enable optimum utilisation of resources and reduce production costs.

Average realisations grew for both plywood and MDF divisions.

Increased average realisations through re-engineering and superior service.

Reinforced itself as one of the lowest cost producers in both plywood and MDF.

Enhanced value-added products for existing and new clients.

Disagreement with environmental criterion could dampen brand name.

Strategic response

¦ The Company dispenses high-yielding saplings to reduce greenery loss, and secure future raw material needs.

¦ The Company's cohesion to the highest social and environmental standards secured the FSC certification.

Divergence from quality standards could lead to attrition among buyers.

Strategic response

The Company invested in world-class manufacturing technologies from best-in-class global technology providers.

The Company's plywood is made from brmium A+ grade timber which undergoes a rigorous five-stage manufacturing process to make it termite and borer resistant.

¦ The Company's unique MDF fibre-interlocking technology leads to high bonding strength and rigidity. It is loaded with features, which are best suited for constructing strong and durable furniture, and creating unique interiors.

Inability to address evolving customer needs may reduce the market share.

Strategic response

The Company is brsent across 21 states, with a pan-India marketing network and over 45 marketing offices (covering 300 cities) and over 12,000 influencers like dealers, distributors, interior designers and retailers.

The Company offers one of the largest ranges of interior infrastructure products (plywood and MDF).

The Company makes consistent product launches and widens choice.

The Company introduced a laminated product range in MDF, enhancing value proposition.

Due to increased market competition, the Company's brand might lose its visibility.

Strategic response

¦ During 2014-15, the Company invested Rs. 43.11 crore in brand building.

Proactive advertisement initiatives across various media (outdoor, print and electronic), to enhance visibility and brand image.

¦ The Company focused on a 360-degree brand building exercise, comprising successful promotional drive, and engaging customers across multiple points. This resulted in an integrated communication approach.

Failure to control costs of key inputs could hamper the Company's growth.

Strategic response

•Enjoyed economies of scale in the procurement of raw materials and consumables.

•Maintained adequate raw material inventory to ensure seamless operations.

•Strengthened raw material sources by adding several new vendors.

• Entered into long-term contracts with critical input vendors for uninterrupted supply.

•Undertook a plantation drive across plant locations with high yielding clones, ensuring raw material security.

Lack of funds could shake the daily operations, affecting business performance.

Strategic response

The Company remains adequately funded in terms of its working capital requirements through a consortium of six banks.

•Greenply enjoyed a comfortable debt-equity ratio of 0.7 at the close of 2014-15, as against 1.0 in the brvious year, 2013-14.

• Consistent profit plough-back policy provided liquidity to enhance growth.

•Continuous initiatives were taken to reduce debtor cycle and strengthen cycle to further optimise use of working capital.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place robust internal control procedures commensurate with its size and operations. The Board of Directors, responsible for the internal control system, sets the guidelines, verifying its adequacy, effectiveness and application. The Company's internal control system is designed to ensure management efficiency, measurability and verifiability, reliability of accounting and management information, compliance with all applicable laws and regulations, and the protection of the Company's assets. This is to timely identify and manage the Company's risks (operational, compliance-related, economic and financial).