MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

The year 2015 has proved challenging for India specifically on the weather front, with deficient monsoons and drought at one end, and unseasonal rain and devastating floods at the other.

Adapting to climate change and building sustainable and relevant agricultural systems would strongly relate to a healthier economy. Sustainability through improvements in efficiency and a focus on environmental issues and through addressing opportunities that climate change and evolving eco systems bring.

Despite being the world's fastest growing economy the country, is far from achieving the Sustainable Development Goals adopted in 2015. Whilst India has 17% of the world's population it is home to 31.5% of the world's extremely poor and nothing but transformative change that balances economic growth with conservation, beyond mere convenience, can turn the tide. The chemical industry has the power and opportunity to influence and advance the human condition towards a sustainable society and planet.

Current challenges in the economy, with lower than anticipated growth and serious reduction in private investment (as banks saddled with stressed assets are unable to lend) together with slack global demand, have dampened earlier growth estimates.

In addition earlier challenges of poor infrastructure and port facility, complex tax and duty structures have not been overcome.

However, the reduction in crude oil prices has allowed the government to reduce the fiscal deficit and bring inflation under control.

It remains to be seen whether the country is really in a state of sustainable recovery and whether we can continue to be the fastest growing economy in the world.

In addition the past year saw serious reduction in growth of several core infrastructure industries. Crude oil, coal, steel and cement all saw a slowdown in 2015-16. Industrial production declined by 1.8% in June 2016 against a growth of 2.8% in the brvious year.

According to IIP data the chemical industry recorded negative growth of 2% in January 2016.

In the coming financial year the Indian economy is slated to grow at 7.6% inspite of poor global demand and the reduction in exports seen over the brvious year. This growth would be consumption driven, and therefore sufficiently sustainable. This would result in a surge of consumption for Specialty Chemicals.

It is brdicted that the Specialty Chemical market which is currently USD 30 Billion will grow to a level of USD 80 Billion by 2023.

With growth estimates of 14% CAGR the Specialty Chemical industry is expected to grow much faster than India's GDP The vast potential for growth for the finished products from the chemical sector can be envisaged by comparing the per capita consumption of these products against world averages. Compared to developed markets the usage of Specialty Chemicals in India is fairly low.

Most Specialty Chemical companies in India have asserted their domestic brsence by designing and developing products that are very specific to the performance needs of an industrial application for a particular customer/ customers.

Dai-ichi has established and positioned itself in this way in developed areas like the Oil field sector, the Rayon industry and the Paint industry by understanding the customer's needs in full, and designing niche products to meet these performance specifications.

Financial Highlights

The total Sales Revenue for the company was Rs. 1249 million. Once again, there was only marginal growth in certain industrial segments, due to the challenges faced by our customers during the year. However, on the export front the company has more than doubled sales as compared to last year.

The enhanced profit from operations has come from change in product mix and consequent reduction in RM consumption and enhanced export sales.

Sector wise Performance:

There continues to be poor growth in the traditional businesses of the company, as most customers were facing a slow down due to the state of the global economy, and the vagaries of consumer demand (affecting the sales of Specialty Chemical companies supplying to the chemical sector that face the consumer.)

In addition the impact of lowered crude oil prices resulted in lower raw material prices, alerting all customers to ask for discounts in pricing.

The Company's business with its J V partner NALCO CHAMPION has grown both domestically, but especially where exports are concerned. Our ability to continuously develop and formulate products that are crude specific and meet the performance needs of the customer have allowed us to enhance business in this area substantially. The lower prices of crude oil have marginally impacted expansions and delayed projects in the Oil sector, but the impact of this on the company has not been noticeable so far.

The Company's Polyacrylamide plant at Kurkumbh has once again seen a poor year as it faced customer resistance from the Mining and Coal sectors and aggressive competition in the Sugar sector. The company's efforts to export product are receiving limited success so far. The company now is looking for a strategic relationship with an International player to support its brsence in this field.

The Company's expansion at Dahej has received environmental clearance earlier this year and the company is in the process of awarding contracts to its Technology supplier as well Engineering Consultants.

It is expected that by the second/ third quarter next year some of the crucial plants would be operational at Dahej.

At this time as the company contemplates doubling its capacity and setting up state of the art, new facilities at Dahej, it is strengthening its portfolio of products to include greener products and processes not only in its brsent area of focus viz Paints Coatings and Textile, but also in looking at new areas where its ability to synthesise well defined and meaningful products using newer processes and technologies will be recognised. Slowly the company's new speciality products which were being stalled by customers as being too expensive are now being accepted and introduced into the market. The company's array of products in the area of Emulsion Polymersation and Paints are slowly gaining recognition as reputed paint companies are including these products in their main stream offerings. Requirement of water based Paints & Coatings and the requirements of APEO free products speeded up the development of several new anionic and non ionic surfactants. So also a number of reactive & polymerizable surfactants specifically for exterior coating could be successfully launched. As time goes this segment should see phenomenal growth for which new generation polymerizable surfactants are also being targeted. The company could develop several surfactant formulations for making micro emulsion in the areas of Amino silicone oil, PDMS silicone oil and Diesel-water micro emulsion for static diesel engines.

The R&D developed super emulsifiers for pigment emulsions for Textile Printing:

1) APEO free surfactants

2) In the areas of pigment purification and processing

The company has worked on APGs which are based on natural resources. More work is at hand to further the progress in this area.

Another area of achievement are products for Construction Industry. A major breakthrough was in the development of clinker saver and strength enhancer for cement manufacturing followed by Super Plasticizers for High Strength self compacting Cement Concrete.

Working Capital Management:

The significant ratios of the Company such as Ratio of Inventory to Sales is 10.70%, Receivable to Sales is 15.79%, and Net Working Capital to Sales is 28.28%.

The working capital was rotated 3 times in the year, showing effective working capital management. Funds surplus to the operational requirements have been invested in safe and relatively risk free instruments to earn a reasonable return.