MANAGEMENT DISCUSSION AND ANALYSIS & CORPORATE GOVERNANCE REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE & DEVELOPMENT:

Your company operates across the following major market sectors :

(a) Industry OEM (b) Distribution Channel (c) Exports

The main business of the Company is manufacturing and sale of instrument cooling fans and shaded pole motors used for industrial purposes. The industry is directly related to the growth of the user industry in which the products find applications. The instrument cooling fans and shaded pole motors are mainly used in the computer hardware equipments, power supply equipments, textile machines, refrigeration industry, injection molding machines, photocopying machines etc.

OPPORTUNITIES, THREATS, OUTLOOK, RISKS AND CONCERNS:

During the year 2014, the global economy struggled to gain momentum. According to World Bank's Economic Prospects report released in January 2015, global growth in year 2014 was placed at 2.6%. The report mentions rise in economic activity in United States while Euro area continues to give mixed signals and China seems to be undergoing a carefully managed slowdown. Sharp decline in oil prices since mid 2014 is expected to support economic activity especially in oil importing developing economies. Overall, the report expects global economic growth in year 2015 at 3.0%, that is only slightly higher than year 2014. At home in India, after slowing to sub 5% in financial year 2013-14, Indian economy is showing signs of moderate growth momentum during the current fiscal year 2014-15. Going forward the nation has high expectations that the current government at the Centre will take measures to boost the Indian economy in short and medium term. The key focus area would be to revive the investment cycle. Policies and reforms to make, 'Make in India' campaign successful would play an important role in powering the economic growth. In general, there are expectations that economic growth in financial year 2015 will be better than year 2014. The recent World Bank report forecasts India's GDP growth at around 6.4% in financial year 2015.

Competition:

Competitive intensity in the Fan and Motor industry is gradually increasing as described below:

1) With expectations of long-term positive development of Indian economy, some global and Chinese brands are expanding their manufacturing base in India.

2) Some of the brands manufactured in China are imported and sold in the country at very low prices

3) Due to weak implementation of IPR in India, counterfeit products continue to pose unhealthy competition to reputed brands like ours.

At the same time we are convinced that Indian customers have faith in our brand due to excellent quality of our products and due to our ability to offer value added services. We, therefore stay focused on our long-term strategy to invest in and offer best in-class engineered solutions to our customers.

Your company has strong brsence in Indian market. Some of the initiatives taken by your company to secure long-term success in industrial business are as follows:

1) We have invested in advanced technology to produce Energy Saving Fans and Motors to provide Low cost and high efficiency products.

2) We have set a basis for development and production of high performance Fans and Motors for meeting the ever changing demand of customers.

3) The technical competence of our engineers is the key success factor for your organization. Our combrhensive understanding of customer's business and his processes, deep know-how of key equipment and applications help us in designing and providing efficient and sustainable solutions far beyond a mere supply of products to our customers.

4) The Company is regularly investing in modernization and up gradation of its production facilities which poised the Company to take maximum advantage of demand of its products.

5) The Company will continue its focus on better cost management, reducing inefficiency, improving supply chain and improving productivity so that it can continue to improve its operating performance.

The company's operations are brdominantly comprise of only one business segment - Instrument Cooling Fans / Motors.

EXPORTS:

During the year, revenue from exports grew by 85% due to extension of product scope and due to favorable impact of exchange rates. Further development in export business is influenced by global economic outlook. Your company continues to focus on realizing global levels of quality and productivity to remain competitive in these markets.

1. We continue to develop new products and expand our portfolio to get increased share with our customers in focus sectors.

2. We continued to expand our channel reach globally to facilitate brand recognition. Our initiative to enhance technical competence of our channel partners adds to our strength. Based on positive economic outlook for year 2015 and our successful strategy to invest in continued expansion of manufacturing and engineering footprint, your company is determined to maintain its growth approach.

3. We also aim at increasing brand awareness by participating in Trade Shows and through intensified advertisement at a global level.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The internal audit functions of the company are carried out by a firm of Chartered Accountants. The scope and authority of the Internal Audit function is defined by the Audit Committee. The Internal Auditors reports to the Chairman of the Audit Committee of the Board.

The Internal Auditors monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies of the Company.

Based on the report of internal auditors, the Company undertakes corrective action in their respective areas and thereby strengthens the controls. Significant audit observations and recommendations along with corrective actions thereon are brsented to the Audit Committee of the Board.

FINANCIAL AND OPERATIONAL PERFORMANCE:

During the year under review, the Company has achieved total revenue of Rs.  528193369.30 as against total revenue of Rs.  400994598.99 in the brvious year. The Company has earned profit before tax of Rs. 37443328.76 during the year as against the profit before tax of Rs.  29041487.51 in the brvious year.

The challenges described above could not affect the Company much and your Company was able to register net profit of Rs.  24997071.27 as against net profit of last year Rs.  19512005.51 in spite of global recessionary trends. During the current financial year, the Company is working for increasing its top line and bottom line.

HUMAN RESOURCES:

Your Company takes great pride in the commitment, competence and vigour shown by its workforce in all realms of business. The Company continues to take new initiatives to further align its HR policies to meet the growing needs of its business. People development continues to be a key focus area at Rexnord. Your Company has implemented many in house training programs to keep them abreast of the latest developments in the industry and economy. To establish direct link between performance and reward, your Company has been steadily increasing the weightage of actual performance in remuneration packages.

The Company has, under its employment 72 officers and other staff including executive directors.

The Focus of the Company for the next financial year is: S Market Leadership

To provide quality, reliability and good value in the products we sell. To be sensitive and responsive to changing customer needs right from product development stage to after-sales-service. To aim to become market leaders in whatever we take up.

S Price Competitiveness

To improve our competitiveness by constantly enhancing the performance of our manufacturing, development, marketing and administrative functions. We would like to improve our profits by higher market share rather than by higher margin.

S Customer Satisfaction

To develop the right relationship between the Company and all its customers so that customer's needs are met simply and effectively.

CAUTIONARY STATEMENT:

Statement in the Management Discussion and Analysis describing the Company's objectives, expectations, estimates or brdictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those exbrssed in the statement due to external factors. Important factors that could influence the Company's operations include global and domestic supply and demand conditions affecting selling prices of finished goods, input availability and prices, changes in Government regulations, tax laws, economic developments within the country and other incidental factors. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis, of any subsequent developments, events or information.