MANAGEMENT DISCUSSION AND ANALYSIS Some statements in this discussion describing the projections, estimates, expectations or outlook may be forward looking. Actual results may, however, differ materially from those stated, on account of various factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which your Company conducts its business, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints, etc. Global Growth: Recent Developments and Prospects Global growth in 2014 was a modest 3.4 percent, reflecting a pickup in growth in advanced economies relative to the brvious year and a slowdown in emerging market and developing economies. Complex forces that affected global activity in 2014 are still shaping the outlook: medium- and long-term trends, global shocks, and many country - or region-specific factors. Growth is projected to be stronger in 2015 relative to 2014 in advanced economies, but weaker in emerging markets, reflecting more subdued prospects for some large emerging market economies and oil exporters. Global growth is forecast at 3.5 percent in 2015 and 3.8 percent in 2016, with uneven prospects. The decline in oil prices could boost activity more than expected. Geopolitical tensions continue to pose threats, and risks of disruptive shifts in asset prices remain relevant. In some advanced economies, protracted low inflation or deflation also pose risks to activity. Indian Economy However, the Indian economy demonstrated its resilience during the year 2014-15 and overcame the adverse effect of a sub- optimal monsoon on the agriculture sector by improved performance in the industrial and service sector . The economy grew at 7.3% during the year supported well by the manufacturing and service sectors which grew up by 6% and 10% respectively in 2014-15 as compared to 4.5% and 9 % in 2013-14 . The Indian Rupee faired well during 2014-15 as it saw the lowest debrciation in the past four years. the market Infrastructure Sector Development & Bitumen Demand : India's Planning Commission has projected an investment of US$ 1 trillion for the infrastructure sector during the 12th Five-Year Plan (2012-17), with 40 per cent of the funds coming from the country's private sector. India's focus on infrastructure since the turn of the millennium has helped make it the second fastest growing economy in the world. The country's constant growth gives investors, domestic and foreign, a tremendous opportunity for investment in its infrastructure sector. While the role of foreign investment in the sector cannot be overstated, domestic companies too are making a mark abroad. A strong infrastructure sector is vital to the development of a country's economy. Here, the Indian government has played an important role. Just recently, it allowed 100 per cent foreign direct investment (FDI) under the automatic route for port development projects. The government has also, this year, decided to convert roads into national highways, and has sought collaboration with Sudan in the field of renewable energy. The market of Bitumen is basically a function of growth of road infrastructure growth in the country. The ambitious road expansion and up-gradation plans by the government in next 5-year plan augur well for the growth of Bitumen Industry. Market Sales of Bitumen is approximately 5000 TMT/ year with a growth of 10-12% per annum. A sharp pickup in road construction led to a 93% surge in bitumen imports in 2014-15. Bitumen is the first layer even in concrete roads and a step-up in construction activity is bound to reflect in the consumption of the commodity. Our Operations Manufacturing and Trading of Bitumen & Bituminous Products The Company is a leading manufacturers and traders of Bitumen & Bituminous products in the country today. Our rich background of being in the logistics business (transportation of Bitumen & LPG) has been instrumental in driving our decision to foray into this segment. We enjoy cordial relations with all major road contractors in India thanks to our long standing brsence in the industry and professional conduct. Selling our products to clients, for who we used to provide logistics facilities earlier, was thereby relatively easy. We have expertise in Bituminous products and have established state of the art factory at Belgaum and Hyderabad. All our units are well equipped with modern laboratories. We manufacture and market quality products like Paving grade Bitumen. Industrial Grade Bitumen, Bitumen Emulsions, Modified Bitumen, Bitu Coat, Bitumen Paints, Bitumen Insulation material etc which are known for their quality and standard Bulk Bitumen Storage Facilities at Karwar We are also amongst the leading organized importers of Bitumen into India. Our bulk storage facility is conveniently at Karwar (South India) near the port. Imports so made cater to the large requirements of the south. Project under Implimentation (Construction of Liquid Cargo Storage Tanks) To further enhance our efficiencies and cater to the demand supply gap of Bitumen and Bituminous products, the Company has decided to install our own bulk Liquid Cargo Storage Tanks at Karwar Port, the land for which has already been allotted by the Director of Ports and and Inland Water Transport Karwar. The project is under implementation. With its commissioning, we expect to have locational benefits resulting in cost cutting which consequently may enhance our profitability. Bulk Bitumen Transportation We are the pioneers of logistics in Bitumen, which is brdominantly used in road construction business. It can be procured either in bulk or in packed form. In either case the product has to be dispatched to the construction site or to the storage facilities of our industrial consumers. The bulk bitumen is transported via specially designed tankers that are insulated and have pumping facility for loading and unloading the bitumen. Most of our Bitumen tankers are under contract with major oil companies in India like HPCL, BPCL and IOCL and by other major consumers of the product. Bulk LPG Transportation We are amongst the leading transporters of LPG in India, which is the most widely used fuel for domestic as well as industrial purposes. While we already own a large fleet of tankers, we also hire tankers on long term contracts to cater to the demand from customers. LPG is mainly sourced from domestic refineries and via bulk imports. Bulk LPG is mainly transported from the source to the industrial user or to their bottling plants through specially designed tankers. LPG, being highly inflammable, require tankers that take care of all safety aspects while loading, transporting and unloading. Most of the LPG tankers are under contract with major oil companies like HPCL, BPCL and IOCL. Authorized Service Centre of Ashok Leyland. Owning such a large fleet of tankers necessarily calls for periodic maintenance. As also, our entire fleet of tankers come from the Ashok Leyland stable. Both these factors influenced our decision to set up an authorized service center, for Ashok Leyland vehicles, within the company. Not only does this ensure a timely turnaround of the fleet serviced but is an economically beneficial proposition for the company. We have our own workshop and maintenance facilities at strategic locations like Mumbai, Baroda and Jodhpur. Wind Mills Considering the likely shortage of energy resources in the future, we have also diversified into Non-Conventional energy generation by installing wind mills at Rajasthan and Maharashtra. Financial Performance and Operations: The key indicators of your Company's financial performance for the year ended March 31, 2015 are brsented in the accompanying financial statements, which have been brpared in accordance with the requirements of the Companies Act, 2013 and the rules made thereunder, Generally Accepted Accounting Principles (GAAP) and the Accounting Standards brvailing in India. Your Directors feel pleasure to report that during the financial year 2014-2015, your Company achieved a Turnover of Rs. 22,007.70 Lacs and made a Net Profit before Tax and Debrciation of Rs. 1247.77 Lacs as compared to a Turnover of Rs. 17,704.36 Lacs and Profit before Tax and Debrciation of Rs. 1046.99 Lacs in the brvious financial year. Your Company's Net Profit after Tax for the Financial Year 2014-15 was Rs. 579.23 Lacs as compared to Rs. 496.58 Lacs in the Financial Year 2013 - 2014 . The Net Worth of the Company for the Financial Year 2014-15 was Rs. 4313.07 Lacs as compared to Rs. 3832.54 Lacs during the Financial Year 2013-14, thus indicating an imbrssive growth on all these fronts. Your Company is hopeful to sustain its growth track record and expects to perform better in the current financial year 2015-16. Dividend Your Directors have recommended a dividend of Rs. 1.50 on per equity share of the face value of Rs. 10 each for the Financial Year ended March 31, 2015, subject to declaration/ confirmation of the members at the ensuing Annual General Meeting of your Company. Segment Wise /Product Wise Performance Presently , your Company's operations are related to Trading and Manufacturing of Petrochemicals [Bituminous and allied products, Transportation for Bitumen and LPG and power generation through Wind mill operations. For Segment wise/ Product wise performance of the Company, please refer to Financial Statements of the Company. Risk And Concerns Industry Risk Like any other industry, our industry is prone to impacts due to fluctuations in the economy caused by changes in global and domestic economies, changes in local market conditions, competition in the industry, government policies and regulations, fluctuations in interest rates and foreign exchange rates and other social factors. However, our Company is least prone to industry risks as has under its fold various business segments like manufacturing and trading of Bitumen and Bituminous products , Logistics and transportation and wind mills operations for energy generation and all these segments cater to infrastructural sector , the growth and development of which is br condition for economy and industrial growth of the country. Further, your Company regularly monitors the economic and industrial trends and reviews its short and long term business policies and strategies accordingly. Geographic Concentration Risk Your Company does not run any geographic concentration risk as it has manufacturing facilities in different states and regions and it shall continue to pursue this policy of non- concentration of facilities in one particular state or region. Cost Risk The Company does not envisage any cost risks as the increased costs are generally passed on to the end users. However, as on going process, various cost reduction measures are initiated by the Company from time to time . Your Company has initiated various cost reduction measures to mitigate cost risk. Competition Risk There are no major competition risks to our Company as in our business segments, there is large potential for growth and expansion in all spheres of manufacturing, trading and service activities. Our Strengths, Opportunities And Threats Our Strengths • Promoters with over 4 decades of Industry experience • A profitable, dividend paying Company • Well established, integrated and diversified Company • Fine combination of backward and forward integration • Healthy Financials with low debt- equity ratio • Lower PE Ratio on future profitability leading scope for enhanced capital valuation • Capex requirements primarily from own resources • Strong relationships with oil companies , transport contractors and other clients, Banks, Institutions • Eminent Board of Directors • Benefits of a Listed Company Opportunities - Infrastructure projects under Govt's priority agenda. - Endless opportunities for expansion of Bitumen & Bitumenous Products as Road Construction within the ambit of infrastructural growth. - Huge deficit in power demand and power supply leaving tremendous scope for expansion of Wind Power Mills - Import of Bitumen under favorable EXIM Policy of Govt of India provides ready road construction projects - Backward integration in Bitumen production and energy generation would minimize dependency on oil companies Threats There are no major threats before us as ours is a well diversified and fundamentally strong Company with clear vision for future growth and prosperity. Internal Control Systems And Their Adequacy Your Company has in place an adequate system of internal controls, with documented procedures covering all corporate functions. Systems of internal controls are designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws and regulations. The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the compliance reports submitted to them. Human Resources Your Company is committed to attract, develop and retain high quality talent. We promote culture of higher commitment and entrebrneurial approach across all over management positions to foster organization's growth. During the year under report, your company maintained harmonious and cordial industrial relations with its staff and employees. Safety, Health And Development In order to sustain human capital and social development, the Company actively pursue Safety, Health and Environmental issue in a continuous manner. Management Information Systems Our management information systems continues to play a vital role in sustaining the competitive position in the market and supporting in the growth of our Company. Our Certifications Our Credit ratings with NSIC - CRISIL for small scale industries has been awarded as SE 1B. This rating indicates our high performance capability and financial strength. |