MANAGEMENT DISCUSSION AND ANALYSIS REPORT INDUSTRY STRUCTURE & DEVELOPMENTS: Business overview Sterling Tools limited is engaged in manufacturing of high tensile cold forged fasteners. Thus the performance of Company is mainly dependent on the growth of automobile sector. The Indian automotive market is one of the most competitive markets with low costs, which make it an attractive assembly base for foreign automotive manufacturers. India is the second fastest growing automobile market in the world after China. The automobile industry accounts for 22 per cent of the country's manufacturing Gross Domestic Product (GDP). An expanding middle class, young population, and an increasing interest of the companies in exploring the rural markets have made the two wheelers segment (with 80 per cent market share) the leader of the Indian automobile market. The overall passenger vehicle segment has 14 per cent market share. India is also a substantial Auto Exporter, with solid export growth expectations for the near future. Various initiatives by the Government of India and the major automobile players in the Indian market is expected to make India a leader in the Two Wheeler and Four Wheeler market in the World by 2020. As per the industrial statistic furnished by Society of Indian Automobile Manufacturers (SIAM), the production, export and domestic sales trends in the Automobile industry for various financial years are detailed below: Production The industry produced a total of 23,366,246 vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in April-March 2015 as against 21,500,165 in April-March 2014, registering a growth of 8.68 percent over the same period last year. Domestic Sales The sales of Passenger Vehicles grew by 3.90 percent in April-March 2015 over the same period last year. Within the Passenger Vehicles segment, Passenger Cars and Utility Vehicles grew by 4.99 percent and 5.30 percent respectively, while Vans declined by (-) 10.19 percent in April-March 2015 over the same period last year. The overall Commercial Vehicles segment registered a de-growth of (-) 2.83 percent in April-March 2015 as compared to same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) grew by 16.02 percent and Light Commercial Vehicles declined by (-) 11.57 percent. Exports In April-March 2015, overall automobile exports grew by 14.89 percent over the same period last year. Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers grew by 4.42 percent, 11.33 percent, 15.44 percent and 17.93 percent respectively during April-March 2015 over the same period last year. OPPORTUNITIES & THREATS As mentioned earlier, the performance of our Company is associated with the performance of Automobile Industry in India. The factors which contribute towards the growth of the Automobile Industry are detailed below: Moreover, our Company is known for its quality products and we are expanding our business in Global Market especially in Europe and North America. Threats • Less skilled labor and lack of technologies is one of the threat which exists for Indian Automobile Sector. • Increase in the import tariff and technology cost makes production cost higher. • Increased congestion in urban areas is one of the main reason which creates hindrance in growth of Automobile Sector. PRODUCT-WISE PERFORMANCE The Company operates in one segment only i.e. High Tensile Cold Forged Fasteners. The performance of this product is covered in 'Review of Operations' which forms part of Directors' Report. RISK & CONCERNS The Company is exposed to external and internal risks associated with the business such as downturn in economy, input prices, reputation, interest rates, foreign exchange, information systems, etc. It is also facing stiff competition from both domestic and overseas. All the aforesaid risks are managed through continuous review of business parameters on a regular basis by the management. The Board of Directors are also informed periodically of the risks and concerns. Corrective actions and mitigation measures are taken as needed. Your Company has a well defined Risk Management Strategy which is reviewed by the Risk Management Committee/Audit committee on regular basis for mitigating risk factors. INTERNAL CONTROL SYSTEM & THEIR ADEQUACY: Your Company has a proper and adequate system of internal control commensurate with the size and nature of its business. The internal controls span across operations, inventory, fixed assets, financial records and regulatory compliances. The internal audit department reviews the internal controls periodically. The reports of internal auditors are reviewed from time to time with respect to areas which require further strengthening of controls. The significant findings of internal auditors are placed before the Audit Committee. The improvements directed by the Audit Committee after reviews are implemented and their adequacy and effectiveness are monitored periodically. A CEO and CFO Certificate forming part of the Corporate Governance Report confirm the existence of effective Internal Control Systems and procedures in the Company. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: Revenue from Operations (Gross) for the year ended March 31, 2015 at Rs. 38074.94 Lacs show the increase of 13.61% against Rs. 33513.63 Lacs for the brvious year despite enormous competition in automotive and other sector. • Operating profit, excluding other income was Rs. 4710.21 Lacs for the year 2014-2015 increased by 13.17% as compared Rs. 4162.11 Lacs for the year 2013-2014. • Operating margin was 13.74% for the year 2014-2015 as against 13.81% for the year 2013-2014. • Other income was Rs. 132.13 Lacs for the year 2014-2015 increased by 121.21% as against Rs. 59.73 Lacs for the year 2013-2014. • Interest expenses were Rs. 543.52 Lacs for the year 2014-2015 as against Rs. 714.60 Lacs for the year 2013-2014. • Corporate tax liability including Deferred, Fringe Benefit and Wealth Tax Liability for the year was Rs. 751.78 Lacs for the year 2014-2015 as against Rs. 858.36 Lacs for the year 2013-2014. • Net profit was Rs. 2122.16 Lacs for the year 2014-2015 increased by 35.83% as against Rs. 1562.42 Lacs for the year 2013-2014. • Paid up equity share capital as on March 31, 2015 stood at Rs. 684.46 Lacs • Earnings Per share (EPS) was Rs. 31.00 for the year 2014-2015 as against Rs. 22.83 for the year 2013-2014. • Cash Earnings Per share (CEPS) was Rs. 48.58 for the year 2014-2015 as against Rs. 37.87 for the year 2013-2014. • STL has contributed a foreign exchange to the tune of Rs. 3630.87 Lacs for the year 2014-2015 as against Rs. 3458.91 Lacs for the year 2013-2014. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED: Your Company strongly and firmly believes that the employee is the first customer an organization has to win, and to fulfill this purpose it is important to have a team whose members are well conversant with both technical and commercial knowledge. Being a manufacturing Company, workers form an important link in the chain of growth. A congenial atmosphere has been created at the shop floor level and all facilities required for a secure and cordial environment are provided. Management at all level takes care of the interest of the workforce and frequent interactive sessions are conducted throughout the year. Your Company continues to reward to its talented employees at all levels to recognize every effort made towards improvement in the workplace. The employee-management relations have remained positive throughout the year. Initiatives are being taken to enhance the productivity of employees. At Sterling lot of focus has been given to HR Transformation activities to restore the HR organisation structure and processes. Significant efforts have gone into developing the existing Human Resources of the Company by organizing various trainings in-house as well as out bound trainings to enhance the behavior potentials of employees such as leadership qualities, communication, quality aspects, analytical capabilities etc. Apart from above said, the requisite trainings related to job work, as well as for job rotations have also been organized by the Company to enhance the multi skill abilities of existing work force. As on 31st March, 2015, 602 employees are on Sterling's payroll. Cautionary Statement Statements in this management Discussion and Analysis Report describing the Company's objectives, projections, estimates and expectation may be "forward looking statement" within the meaning of applicable laws and regulations. Actual results might differ from those either exbrssed or implied. Important factors that could affect the Company's performance include economic developments within the country, demand and supply conditions in the Industry, changes in the Government regulations, tax laws and other factor such as litigation and industrial relations. |