MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

De Nora India Limited (DNIL) is engaged in the manufacture and coating of anode and cathode for electrolytic process for several industrial applications like for instance in the chlor-alkali industry, water and waste water treatment, pulp and paper manufacturing, surface finishing and plating industries and cathodic protection systems of steel structure and of cement. All these applications are developing starting from the expertise of it's main shareholder in electrolytic processes and in catalytic coatings.

DNIL was set up with technical and financial collaboration of "Gruppo De Nora" of Italy, a world market leader in this segment. The Company's core business lies in Chlor-alkali sector, which is highly cyclic in nature. In order to reduce the fluctuation of turnover, the Company expanded its activities in other markets, introducing and then manufacturing in it's factory important technologies such for instance Cathodic Protection Systems, Electrochlorination Systems, and Platinized Titanium Anodes for surface finish application. Over the years DNIL established itself as a recognized leader of the industries it serves with high standard of quality of it's products and services.

Recoating of anode and cathode is a specialised process, formulation of which involves use of noble metals. These formulations and processes are proprietary and because of its affiliation to "Gruppo De Nora", the Company has the authority to use these formulations and processes, giving it the prominent market share in India. DNIL not only provides support to Chlorine Engineers, Krupp Uhde and Severn Trent De Nora customers in India but is also equipped to give technical support to all other technology suppliers of electrolytic processes sector.

OPPORTUNITIES AND THREATS

The Goa factory is equipped with all the necessary equipment and facilities to meet the demands of the Chlor-alkali industry. The Company continues to remain the market leader in the Chlor-alkali and Cathodic Protection Systems business. The main activity of the Company is dependent on recoating of electrode for membrane cell electrolysers in chlor-alkali plant, which is cyclic in nature because the life of the coating lasts for 6 to 8 years, now since plants have become older the cycle is fating, resulting in lower risks.

The income from recoating business contributes a major share in Company's total income and lesser demand for recoating business due to the cyclic nature was the main cause for reduced turnover during this year. The Mercury Cell Plants are gradually being converted into Membrane Cell Plants. Your Company does not get the business of Anode/Cathodes coating at this conversion stage since these are inbuilt in the new cells and the complete set of cell elements are imported by the customers. Your Company is not in the business of manufacturing membrane cell elements and the recoating business in respect of these anode/cathodes will happen only after 8 years.

ELECTROCHEMICAL PRODUCTS PERFORMANCE

The Company registered turnover of Rs. 305.21 million during the year from the sale of it's products.

OUTLOOK

The Company is looking forward to maintain its position of market leader in membrane recoating activity and cathodic protection systems. The Directors are hopeful that ongoing efforts made in the field of chlorate cells fabrication would pave way for the future growth of the Company.

DNIL has successfully developed the new business of supplying special electrodes for water treatment mainly for treating pharmaceutical waste water. DNIL was able to achieve the expected business in 2014 & looks forward to continue to develop this biz segment in 2015 as well. DNIL is also continuing to market new products of De Nora Next namely: Solar Mac NGOTM & Giselle.

RISKS & CONCERNS

Excessive dependency on Chlor-alkali business increases risks and the Company is taking steps to minimize this risk by developing the market of its other products as well as introducing new products/technologies in the market. The electrochlorination business is hampered by severe price competition due to entry of various small competitors having significant influence in their limited area of operation. The electrochlorination business requires aggressive pricing and several distributors in the territory.

The major area of concern for the Company is the impact in contribution caused by the uncontrollable changes in the raw material cost. The Company tries to minimise the risk by incorporating Price Variance Clause in the Orders. In the event the Company is not able to enforce the Price Variance Clause in the Orders, the secondary option is placing the order for full quantity of noble metals soon after signing of each big order, even if the project execution is of a longer duration.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an effective and adequate system of internal control, commensurate with the size and nature of the business of the Company. Checks and balances are in place to ensure the reliability and accuracy of accounting data. The systems are aimed at ensuring adherence to policies. A system of validation, approval and authorization, physical safeguards and access restrictions are given utmost importance.

The internal control is supplemented by Internal Audit conducted by Independent Auditors on a quarterly basis. The reports of the Internal Auditors, their findings, recommendations and the compliance thereof, are reviewed by the Management and the Audit Committee of the Board of Directors. The adequacy of the internal control systems is also examined by the Statutory Auditors of the Company.

FINANCIAL PERFORMANCE

During the financial year under review, the Company achieved a turnover (Sales and other income) of Rs. 327.66 millions and the Profit after Tax of Rs. 42.52 millions.

MATERIAL DEVELOPMENT IN HUMAN RESOURCE

Human resources continue to be a key thrust area. The Company's relationship with the work force and the union continues to be very cordial indicating the brvalence of high degree of excellent relationship between employees and management. The management has been able to develop a harmonious and cordial industrial relations environment in the Company through regular, periodic meetings with the employees' rebrsentatives. Issues of concerns of employees are resolved through mutual, collaborative and participative discussions.

The Company has also continuously endeavored towards improving gender diversity and creating a safe, just and fair workplace for its employees. In line with the provisions of the 'The Sexual Harassment of Women at Workplace

(Prevention of Sexual Harassment Avoidance and Redressal) Act, 2013, the Company has formed an Internal Complaints Committee (ICC) with set guidelines to address issues of sexual harassment at the work place towards any woman associates. The Company is committed to providing equal opportunities without regard to their race, caste, sex, religion, colour, nationality, disability etc. All the women employees (permanent, temporary, contractual and trainees) as well as any women visiting the Company's brmises or women service providers are allowed to have access to the ICC. All employees are treated with dignity with a view to maintain a work environment free of sexual harassment whether physical, verbal or psychological.

CAUTIONARY STATEMENT

Estimates and expectations stated in this Management Discussion and Analysis may be "forward-looking" statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to your Company's operations include economic conditions affecting demand / supply and price conditions in the domestic and international markets, changes in the Government regulations, tax laws, statutes and other incidental factors.