MANAGEMENT DISCUSSION & ANALYSIS REPORT Industry Structure and Development The Indian economy showed signs of recovery from that of the last year. Inflation started dropping, thereby creating positive drivers for all round economic growth. However, the lubricant industry faced many strong headwinds affecting the demand and supply drivers during the year. The business environment continued to remain volatile as foreign exchange uncertainty continued to have adverse impact on cost of goods despite softening of crude prices. Further, with the advent of new age engines, the lubricant industry has also undergone substantial change. Though the demand for high quality lubes are on the rise but the overall quantity requirement has dropped. With the change in consumption patterns, focus is now on various marketing drivers such as fuel economy improvement, engine protection and long engine life, etc. While increase of passenger cars and motorcycles, on-highway and off-highway fleets continue to have a positive effect but the growth of the lubricant industry is expected to be muted in view of the said technology upgradation. Nonetheless, with the increase in income levels, and advent of global automobile manufacturers in the Indian market, the demand conditions are envisaged to improve. In spite of these constraints, your Company with its well-diversified basket of products, strong brand recognition and wide distribution network is well-equipped to perform steadily in the coming years. Further, acquisition of Veedol International Limited bestowed competitive edge unfolding promising opportunities globally. Opportunities and Threats With increasing environmental concerns and need for high quality lubricants to improve fuel economy, the demand for brmium lubricants is gaining momentum. Further, the economic growth is expected to stimulate demand and have a positive impact on the overall lubricant industry. With the increase in personal mobility, requirement of vehicle fluids is envisaged to be on the rise. To cater to such industry demand, the company has a wide range of excellent products in different segments under its umbrella brand 'VEEDOL'. This is supported by an elaborate and extensive network of dedicated distributors, dealers and consignment depots across the country. The Company's various other sub-brands such as Prima, Turbo and Take Off have also been able to create goodwill in the market for their quality. The various programmes with dealers and retailers have strengthened the marketing and distributing network of the Company. However, with the increasing sbrad of new generation engine and constant technology upgradation, the volume growth in the industry is expected to remain sluggish. Segment Wise Performance The Company is a single segment company as mentioned in Note 22.16 of the Accounts. Outlook With regard to the current year, your Directors expect the Company to continue its satisfactory performance as in the brvious year. Given your Company's brand salience, sound R&D set up, innovative business plan and wide distribution network, it is expected to meet the expectation of the stakeholders in times to come. With an overall growth in the Indian economy, the growth in lubricating industry is expected to remain healthy. Accordingly, it is anticipated that the Company will continue to grow in future. Additionally, in view of acquisition of Veedol International Limited, your Company is well-poised to explore and exploit global opportunities. However, aggressive pricing strategy by the competitors in an attempt to gain market share and commoditization of products in the brmium segments will continue to have an impact on overall industry margin. Risks & Concerns Apart from normal risks applicable to an industrial undertaking, the Company does not foresee any serious area of concern. Internal Control System The Company has proper and adequate system of internal control. Financial Performance The details of financial performance of the Company are appearing in the Balance Sheet and the Profit & Loss Account for the year. During the year, the profit has increased by 134.59%. Human Resources During the year, employer / employee relationships remained cordial. On behalf of the Board Kallol Datta Chairman Kolkata 30th May, 2015 |