MANAGEMENT DISCUSSION AND ANALYSIS BUSINESS ENVIRONMENT : LPG industry is not new to India and dates back to 1950s. In India, the LPG industry is quite extensive and there are players across the LPG value chain, such as : LPG importers and import terminal operators, LPG storage tank manufacturing players, LPG suppliers & distributors catering to: Domestic, Industrial, Commercial and Transport, LPG cylinder manufacturers and LPG kit manufacturers. The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The primary objective of this model was to make the economy of India the fastest developing economy in the globe with capabilities that help it match up with the biggest economies of the world. LPG is brsent in all the four key end-consumer segments : Domestic, Industrial, Commercial and Transport. With the growth and economic development in the country, an increase in the energy/fuel consumption of the consumer segment is inevitable. With the rise in the energy requirement of the country, there is definitely an opportunity for the LPG industry to scale-up and increase its penetration in the consumer base. Changing Business Landscape brings New Set of Challenges & Opportunities in LPG market in India, conceived by InfraInsights is rightly timed and designed to provide an in-depth assessment of key elements such as: Changes in the historic subsidy regime in LPG segment, Impact of domestic LPG price recovery on end-user market, New set of opportunities & challenges for Oil Marketing Companies and Parallel Marketing Companies in LPG and outlook on likely changes in the overall LPG business landscape in India. The contents of the report are elaborate and the framework as such is designed not only for the LPG import and retail & marketing companies but also for the companies involved in the manufacturing of the LPG cylinders, Bulk LPG storage, Kit manufacturers and OEM's. AREA OF OCCUPANCY: Following are the areas in which the company has establish the business & marks its brsence : • CNG & High Pressure Cylinder • LPG Bottling Services • ALDS • Crude Crackingv & Ethanol • Pack Cylinders • LPG & CNG Meters • Hot Repairs & Transportation OPPORTUNITIES & THREATS The incumbent government is in a full swing to bring the economy back on its feet. The government has signaled that in the days to come, the market realities will come thick and fast, giving the economy a much needed respite from subdued prices and subsidy. It is estimated that the combined subsidy from subsidized LPG cylinder and Kerosene It is only a matter of time that the economy is given a "bitter medicine", which will have a ripple effect on regions and markets. It is expected that the government will increase the price of domestic LPG cylinder which create better opportunities with margin. The energy sector has witnessed mixed news during the current fiscal so far. While crude prices firmed up in the global market, the government's freeze on prices of petro-products affected margins of oil companies. However, the government took a series of steps starting mid-June including excise duty reduction and price increases. This was followed by another series of duty cuts (this time excise as well as custom duties). Historically, demand for petroleum products has traced the economic growth of the country. With GDP expected to grow further in the long-term, the energy sector would benefit from the same, going forward. Liquefied Petroleum Gas (LPG) Market occupied (Refinery, Associated Gas and Non-Associated Gas) for Residential/Commercial, Chemical, Industrial, Auto Fuel, Refineries and Other Applications - Global Industry Analysis, Size, Share, Growth & Trends. The increasing number of autogas vehicles in countries such as Turkey, Poland and South Korea among others is expected to boost LPG consumption. On account of LPG's cost and environmental benefits, demand is expected to increase in the residential/commercial and auto fuel sector. The global Liquefied Petroleum Gas (LPG) market record remarkable growth with estimates and forecast, in terms of volume as well as revenue. It analyses the global LPG market, market players and market competition through tools such as value chain analysis and Porter's five force model. The value chain analysis of the market provides detailed understanding of each player in the value chain including supplier, buyer manufacturer and end user. The study uses Porter's five force model to give a combrhensive view of the competition in the market. Looking at the ever growing needs of Domestic as well as Commercial LPG, we brdict tremendous growth in all the segments of our business i.e. Cylinder manufacturing, Hot & Cold Repairs, LPG Blending, LPG Bottling, ALDS & Packed Cylinders. In recent times, management noticed that there is a huge scope if we expand our operations to the Hot & Cold repair business segment as existing cylinders by and large at circulation needs to be checked & repaired at regular interval and your company is fully equipped with technical knowhow of the repairs. Making no delay in grabbing this opportunity, the management stepped into this segment of business. Further, a recent shift in government policy of restricting the subsidized cylinders have created huge opportunity as this has brought private players in level playing field. Since such changes, our recently launched new product called "GO GAS Packed Cylinder Division" has shown a good response. With this Diversified platform of business we suppose that it will help us to sustain even in the adverse market conditions as our various divisions will be hedging the risks for each other. During the period under review the company has being trying hard to sustain due to rising prices of LPG & steep depletion of Rupee. Our business has inherent risk of changes in government policies & ups & downs in foreign exchange. Other risk factors like availability of raw material, labour & other inputs have always been a burden on the manufacturing segment of the company. However the management is keen about the risks involved in the business and has been taking sufficient brcautions while carrying out its operations. RISK MANAGEMENT The Company has always prided itself on its prudent financial management. The Company focuses on managing capital judiciously to ensure that the debt equity ratio remains comfortable and the Company is not financially stressed under any circumstances. Stringent controls on project costs are exercised and any project cost overruns are strictly monitored. The Company is proactively engaged in making the most of emerging business opportunities. The Company has an experienced team of employees that remains abreast of industrial developments and continually focus on deriving the fullest advantage from these. Your company continuously monitors all the risks indulged in the business & keeps the management sound about the facts. Our professional risk management team with all the technical knowledge have their sheer focus on identifying & minimizing the risks. Being cautious about their work, our team periodically reviews all the results & analysis they work upon. It is the sole aim of our risk management team to assure confidence among the stakeholders & to comply with the risk management policies required by the amended clause 49 of the listing agreement INTERNAL CONTROL SYSTEMS: The Company has adequate internal control systems that are commensurate with the size and nature of its business. The system has been designed to ensure that the assets of the Company are acquired in an economical manner and safeguards remain in place for their upkeep and to ensure their protection against any damage or destruction. Controls relating to the financial and operational aspects of the business remain in place and are working satisfactorily to detect exceptions and raise alerts. The Company enforces stringent compliance with all applicable laws and internal policies. The internal auditors of the Company regularly carry out reviews of the internal control system to detect deviations. The report of the internal auditors is submitted to the management on a monthly basis and is helpful in the brvention and detection of fraud and to report any discrepancies in the day-today activities of the Company. Further, internal control systems are periodically review by the Audit Committee and are kept updated and consistent with the requirements of the organisation. FUTURE OF PETROLEUM INDUSTRY Oil & Gas is the most complex sector of the business. Hence it is very difficult to brdict the stability of this sector & a lot of research is required to foresee the market conditions. Your company being very particular about its business tries at its best to hedge the future uncertainties & focuses on survival even in worse market conditions. The future of Indian petroleum industry depends on: • Demand for petroleum is growing in leaps and bounds • Shifting focus to more production of olefin - ethylene, propylene, butadiene, • Price and availability of crude oil and gas as feedstock would still be critical factors • The demand of the end products would affect the demand of the intermediary products. HUMAN RESOURCES DEVELOPMENT The Company built a team of professionals with deep knowledge and insight in the areas where the Company operates. The Company intends to draw on these strengths to enhance its scale and scope of operations in the years to come. Company takes pride in being an equal opportunity employer. The management is regularly appraising the performance of employees, providing feedback wherever necessary to improve performance and productivity. Industrial relations with the staff remained cordial during the year. Your Company firmly believes in good, motivated workforce and for this the Company continues to focus on Executive Development and Employee Training by arranging in-house training programmers for its employees at regular intervals both on job as well off-job to acquaint them with the changing business/ industrial scenario |