MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS Tinna Rubber And Infrastructure Limited is a market leader in the field of rubber and bituminous products and the Company has captured a substantial market share by maintaining high quality, reliability and customer satisfaction. Tinna has established nationwide foot print by setting up plants in North, South, East and West of the country viz., Panipat (Haryana), Kalamb (Himachal Pradesh), Wada (Maharashtra), Gummidipundi (Tamilnadu) and Haldia (West Bengal). Your Company is a leading manufacturer of Crumb Rubber (CR) Powder which acts as a substitute to natural rubber. The Company, in a short span of three years has become market leader in recycling of waste tyres in the Country. This sector has many small, fragmented and unorganised players sbrad across the Country. The management realised it very early that we will need to create differentiation in order to enable us to compete effectively and operate at healthy margins. We are pleased to share that the Company has built a unique position for itself in this trade by operating at a national level and creating economies of scale. Also, we believe that there is no other Company in this Sector which is as effectively integrated, forward and backward, as us. As natural resources are limited, recycling has gained traction worldwide. Now Companies are articulating a vision of using greater portion of recycled material in their products and formulations. The rubber industry is no exception to this. 'End of life' tyres are important source of recycled rubber around the world and over the years its status has changed from 'waste' to 'resource'. Therefore, the Company has achieved record Profit before tax and extra ordinary items of Rs. 972.38 lacs as compared to Rs. 418.08 lacs in the brvious Financial Year showing a remarkable growth of 132.54 %. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE As a rubber compounder/ recycler of waste tyre your Company is playing a vital role in caring for environment by using waste tyres which is a serious environmental hazard. The business of the Company mainly consists of manufacturing of Crumb Rubber Modifier (CRM), Crumb Rubber Modified Bitumen (CRMB), Polymer Modified Bitumen (PMB), Crumb Rubber, Steel Scrap, Hi Carbon Steel Shots and Reclaim Rubber/ Ultra Fine Crumb Rubber. The Company started commercial production of Hi Carbon Steel Shots during Financial Year 2104-15 and Reclaim Rubber/ Ultra Fine Crumb Rubber during the Financial Year 2015-16. The full impact of addition of Reclaim Rubber compound and Hi Carbon Steel Shots to our portfolio of products should be visible in Financial Year 2016-17. Detailed figures of product wise sale are given in Note 22 of the Statement of Profit & Loss. During the Financial Year 2014-15 the Company generated 42 % revenue from sales of products other than road related products as compared to 21 % last Financial Year and Nil in Financial Year 2011-12. We have done so in a planned manner to de-risk our business from over dependency on the road and infrastructure sector. This was achieved by extensive research and development and qualitative improvements to crumb rubber and commencement of manufacturing of Hi carbon steel shots. OUTLOOK Our research in Crumb Rubber Modifier in 1990's resulted in successfully starting of manufacturing of Crumb Rubber Modifier (CRM) in year 2001. As a part of backward integration, the Company has set up four plants in year 2012 to make Crumb Rubber Powder from Scrap tyres. As a part of forward integration the Company has already started its state of the art 3rd generation plant to make ultrafine Crumb Rubber Compound (Reclaim Rubber) from Crumb Rubber which will enable the Company to achieve further value addition. We have also ordered two additional lines to manufacture reclaim rubber which shall be commissioned during the Financial Year 2015-16. The Company is also very actively exploring the overseas market for export of crumb rubber and reclaim of crumb rubber. Company also achieved landmark of processing over 30,000 tons of "end of life" tyres during the Financial Year 2014-15. Thereby turning waste in wealth and helping the environment at the same time. In Financial Year 2014-15 the Company established wire processing plant to make value added quality Hi Carbon Steel Shots from the scrap wire segregated from the old used tyres. These are extensively used in foundries, casting industry and by the br fab manufacturing industry. In the light of addition of Reclaim Rubber Compound and Hi Carbon Steel Shots to our portfolio of products in year 2014-15, we expect rapid growth in coming year. OPPORTUNITIES AND THREATS OPPORTUNITIES • There are opportunities to increase market penetration by launching innovative rubber related products. • There are opportunities to reduce cost due to higher efficiency and our scale of operations. • We are seeing renewed focus of our Government to accelerate spending in road building and infrastructure, which will result in higher sales of CRM in the very near future. • The Company is engaging with private player in the petro chemical refinery business to enhance its footprint for marketing Bitumen modifier. • The Company is exploring opportunities to process tyres in overseas locations. • There is strong export demand for Crumb Rubber and Reclaim Rubber Compound and the same is being actively explored. THREATS • Interest rates continue to be the key issue. Any increase in the interest rate will have negative impact on the profitability of the Company. • Foreign Exchange fluctuation may affect the Company adversely as we import waste tyres for processing. • Slowdown in Infrastructure activity due to financial constraints. • Any increase in taxes and change in Government policies may have negative impact on the Company. • Normal competition from other competitors. RISKS AND CONCERNS Your Company follows a proactive risk management policy aimed at protecting its employees, assets and the environment while at the same time ensuring growth and continuity of its business. Regular updates are made available to the Directors of the Company in Board Meetings. Key risks identified by your Company are as under: • Any economic slowdown may adversely impact the business. • Tyres are highly inflammable and your Company's property and stock are subject to risk of loss due to fire and flood and these are mitigated with insurance and fire detecting and firefighting equipments and proper security personnel. Regular training program for employees are being organised by the Company relating to fire control. • Any change in Government policies may adversely affect the demand/profitability of the product. • Technology obsolescence is an inherent business risk in a fast changing world and speed of change and adaptability is crucial for survival of the business. • The domestic, regional and global macro- economic environment directly influences the demand of the bitumen modifier. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY A system of internal control, commensurate with the size and nature of its business, forms an integral part of the Company's corporate governance policies. The Company has a proper and adequate system of internal control commensurate with the size and nature of its business. Some of the significant features of internal control systems include: • Ensuring compliance with laws, regulations, standards and internal procedures and systems. • De-risking the Company's assets/resources and protecting them from any loss. • Ensuring the accounting system's integrity proper and authorised recording and reporting of all transactions. • Preparing and monitoring of annual budgets for all operating and service functions. Ensuring the reliability of all financial and operational information. • Forming an Audit committee of the Board of Directors. The Audit Committee regularly reviews audit plans, significant audit findings, controls and compliance with accounting standards and so on. • Continuous up-gradation of IT Systems. FINANC IAL PERFORMANC E VIZ-A-VIZ OPERATIONAL PERFORMANCE The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Statements and other financial statements forming part of this Annual Report. For financial highlights please refer heading 'FINANCIAL RESULTS' of Directors' Report. HUMAN RESOURC ES AND INDUSTRIAL RELATIONS The Company firmly believes that Human Resource is the key driver for the success of any organization. Teamwork is encouraged and at the same time every individual is trained and empowered to take right decisions at right time. Training has become a part of the lives of every employee so that innovation becomes the key for all their activities. Your Company has a dedicated team of 756 employees as on 31st March, 2015 as compared to 454 employees as on 31st March, 2014 showing a growth of66.52%. CAUTIONARY STATEMENT Investors are cautioned that statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimates and 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 the Company's operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas market in which the Company operates, risks inherent in the Company's growth strategy, change in Government regulations, tax laws and other statutes and other incidental factors. |