MANAGEMENT DISCUSSION & ANALYSIS Forming part of the Annual Report for the year ended March 31, 2015 Overview of the Economy India is set to emerge as the world's fastest-growing major economy by 2015 ahead of China, as per the recent report by The World Bank. India's Gross Domestic Product (GDP) is expected to grow at 7.5 per cent in 2015, as per the report. The improvement in India's economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, RBPs inflation focus supported by benign global commodity prices. Indian economy has weathered many challenges successfully in recent times and is currently placed on a cyclical upturn, on the back of strong policies and a whiff of new optimism. India's economy has witnessed a significant economic growth in the recent past, growing by 7.3 per cent in 2015 as against 6.9 per cent in 2014. According IMF World Economic Outlook April, 2015, India ranks seventh globally in terms of GDP at current prices and is expected to grow at 7.5 per cent in 2016. IMF released an update to its World Economic Outlook report brdicting that India's economy will overtake China in terms of its annual growth rate by 2016. While the growth in industrial and services sectors improved significantly, growth in the agricultural sector, affected by a sub-optimal monsoon, declined in 2014-15. The sectors that are estimated to record higher growth in 2014-15 include; manufacturing, construction, electricity, gas, water supply and other utility services, financial, real estate and professional services, public administration, defense and other services Industry and Services The performance of key industrial sectors based on the Index of Industrial Production (IIP) reveals the reversal in trends of industrial production in 2014-15, which had slowed down since 2011-12. The factors constraining further growth acceleration in manufacturing sector include; high rate of interest, infrastructure bottlenecks and low domestic and external demand. In terms of use-based classification, basic goods and capital goods witnessed marked improvement in growth during April-December 2014-15. While the growth in intermediate goods remained sluggish, the consumer goods contracted in April-December 2014-15, particularly due to contraction in consumer durables sector. BUSINESS SEGMENTS The Company's business is broadly classified in the following sectors: 1. Engineering 2. Real Estate • Residential • Commercial - Hotel cum revolving restaurant • Multiplex • IT Park ENGINEERING DIVISION OMIL, India's leading hydro-Mechanical Engineering Company with a well established brsence in infrastructure and realty business. Company has successfully executed over 55 hydro-mechanical contracts across 18 states in India and overseas. The Company has recently executed designing to commissioning of one of the world's largest vertical lift gates at Koldam Electric project in Himachal Pradesh. Also mobilized machinery and manpower on a treacherous, mountainous and difficult terrain for execution of the Uri Hydro Electric project at Bramble, Srinagar(8-9 Kms from Indo -Pak border INDUSTRY OVERVIEW • BJP government's 'Make in India' campaign has got the attention of several in infrastructure and engineering multi nationals including GE and ThyssenKrupp, which are considering investing in the country. • Current spending on engineering services is projected to increase to USS 1.1 trillion by 2020. • Investment is expected to reach 10 per cent of GDP by 2016-17. Going forward in the XII Plan period (2012-17), the Government is expecting about half of the total investment requirement of USS 970 billion in the infrastructure • India is blessed with immense amount of hydro-electric potential and ranks 5th in terms of exploitable hydro-potential on global scenario. As per assessment made by CEA, India is endowed with economically exploitable hydro-power potential to the tune of 1 48 700 MW of installed capacity. GLOBAL INFRASTRUCTURE OUTLOOK Accelerating urbanization especially in India and China -is set to boost emerging Asia's share of global spending on infrastructure and capital projects over the next decade, slashing the developed world's market share by 2025. CHALLENGES OF HYDROPOWER DEVELOPMENT While hydropower plays an important role in the energy and development strategies of India, such natural resource projects are inherently challenging. Environmental and social impacts are inevitable but they can be mitigated. Hydropower development in India has seen significant strides in understanding and addressing these impacts and the lessons learned from past engagements are now being incorporated in project selection and design. These lessons, coupled with suggestions from civil society, have resulted in changes to the laws and regulations that govern hydropower development today. As a result, there have been improvements on the ground, including greater public consultation with people affected by such projects; better monitoring of the environmental and social aspects of projects; and improvements in resettlement policy and practice. The Government has also ensured that the methodology used by Central power agencies to select sites has improved, as has the capacity of various hydropower developing agencies to deal with complexities in project identification, engineering and design. FUTURE OUTLOOK • Plans to enter new verticals. • Agriculture / Food processing/ FMCG-Looking into major food parks • Ware housing and logistics • Oil and gas • Packaging and Manufacturing • EPC for Smart city and airports • Plans to enter Africa for Roads, Hydro, EPC, Construction • Enlarge global footprint through acquisitions and strategic Joint Ventures in the core business • Establish brsence in varied structural steel design & fabrication works in bridges, large building constructions & heavy engineering works • Key & strategic real estate projects on very promising locations • India has the second largest potential in the world both in Hydro-electric power and irrigation. The government of India plans of River linking project which signals to huge huge scope for Om metals kind of work. STRATEGIES Om Metals is the leading player in the hydro mechanical segment. However the company is not content with garnering a majority of the market share. Our team at OMIL is always striving to constantly upgrade its benchmarks to meet and conquer the growing competitiveness of this segment. We will be further consolidating our position as one of India's leading hydro mechanical equipment manufacturers by securing and executing larger and more complex projects To cement our position in the industry, we are also looking at inorganic growth opportunities in the global arena, in order to grow and boost our international brsence. At OMIL, we expect to make a growing, strategic and very opportunistic investment in real estate & infrastructure projects to enhance the shareholder value. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY As provided under board's report RISK MANAGEMENT Periodic assessments to identify the risk areas are carried out and management is briefed on the risks in advance to enable the company to control risk through a properly defined plan. The risks are classified as financial risks, operational risks and market risks. The risks are taken into account while brparing the annual business plan for the year. The Board is also periodically informed of the business risks and the actions taken to manage them. The Company has formulated a policy for Risk management with the following objectives: • Provide an overview of the principles of risk management Explain approach adopted by the Company for risk management Define the organizational structure for effective risk management Develop a "risk" culture that encourages all employees to identify risks and associated opportunities and to respond to them with effective actions. Identify, assess and manage existing and new risks in a planned and coordinated manner with minimum disruption and cost, to protect and brserve Company's human, physical and financial assets. OPTION 1 Fundamentals of our risk management system The company has in place a code of conduct and high safety standards in plant operation to protect its employees and the environment. The company has instituted control bodies which verify important business decisions. Organizational measures are undertaken to brvent the infringement of guidelines and laws. Goals of risk management At OMIL, the risks are detected at their earliest possible and necessary measures are taken to avoid economic and environmental damage. The company lays due emphasis on avoidance of risks that threaten the company's continued existence. Organizational, responsibilities and tools Regular risk analyses at the corporate level are conducted by OMIL's management and by various departmental heads. Specific risks pertaining to operating divisions and units are continually registered, evaluated and monitored centrally. The Board of Directors regularly receives reports on the risk situation of the company. Cautionary Statement The statements in this report, particularly which relate to Management Discussion and Analysis describing the Company's objectives, plans, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those exbrssed or implied in the statement depending on the circumstances. |