MANAGEMENT DISCUSSION AND ANALYSIS REPORT Introduction The Hon'ble Calcutta High Court, vide its order dated March 24, 2014 (certified copy received by the Company on November 19, 2014), had approved the Scheme of Arrangement between Manaksia Limited and Manaksia Steels Limited, Manaksia Industries Limited, Manaksia Coated Metals & Industries Limited and Manaksia Aluminium Company Limited and their respective shareholders for demerger and transfer of undertakings of Manaksia Limited (transferor company) into the 4 (Four) Transferee Companies viz. Manaksia Steels Limited, Manaksia Industries Limited, Manaksia Coated Metals & Industries Limited and Manaksia Aluminium Company Limited under Sections 391 to 394 of the Companies Act, 1956. The Scheme became effective from 23rd November, 2014 with the appointed date of 1st October, 2013. Economic Overview Financial Year 2014-15 witnessed volatile markets as economies around the world found themselves at various points in the economic cycle, with monetary easing being the brdominant theme across many geographies. However, growth remained subdued globally, as adverse factors more than off set oil price decline, the quantitative easing in Europe and the growth in South-East Asia. According to the International Monetary Fund, the global economy is expected to grow at 3.4% in Financial Year 2015-16. This is due to the fact that slowdown in production in China and Russia is expected to be more than off set by recovery of the developed economies and growth in South-East Asia. However, currency movements and interest rates continue to be risks for growth in many regions. Developed economies are expected to grow moderately. Economic growth in South Asia is expected to be driven by strong consumption and increasing investment in the region. India is expected to be a major contributor to this growth as it is set to double its economic size by 2019. China witnessed its slowest growth during 2014 in the last 25 years. The lower growth trend in China has adversely impacted commodity markets. China's waning demand and resultant rise in exports poses a risk to leveraging improving domestic demand in South Asia and Europe. Further, movement of currencies against USD would also have a significant impact on the movement of global prices of commodities. Financial Year 2014-15 saw a growing Indian economy, even as advanced and emerging economies grappled with uncertainty and slower growth. Economic growth in India peaked in the second quarter of the fiscal at 8.2% but remained moderate in the third and fourth quarter at around 7.5%. Cyclical macro parameters like inflation, current account deficit have improved during the year due to domestic as well as external factors. Indian rupee was one of the best performers in the world, registering a 4% decline in value as against the USD compared to the rest of the world grappling with devaluation of their currencies. The Indian economy is in the midst of significant structural change and is expected to embark on a sustained economic growth cycle. According to World Bank, India is set to be the world's fastest growing major economy in the Financial Year 2015-16 at 7.5% and gradually move up to 8% in the next two financial years. However, this economic growth will depend on steady implementation of reforms aimed to improve productivity and competitiveness. Government initiatives like 'Make in India' will stimulate manufacturing growth while its focus on infrastructure should revive the investment cycle. This should help India grow while being fiscally prudent. States are also expected to play a key part in GDP growth due to their increased finances via greater share of government taxes. Industry Structure and Developments Manaksia Limited intends to engage itself in trading in the products from the respective industrial sectors, the structure and development of which are as below : Steel : Steel is the barometer of economic development of a country. Steel demand in the world stems from growth and development of the sectors that are end users of steel such as manufacturing, housing, infrastructure, automobile etc. The Indian steel industry has entered into a new development stage from 2007-08, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 3rd largest producer of crude steel in 2015 and the country continues to be the largest producer of sponge iron or DRI in the world. As against this, China's steel production grew only 0.9% to 822.7 million tonnes against 7.5% in the brvious year and it stepped up exports to India by as much as 232% to 3.611 million tonnes in 2014-15 underpinning the concern of the Indian steel industry that arrival of such large quantities of metal from a single foreign source will leave a good portion of domestic capacity idle, besides unsettling the market here. In a bid to protect domestic producers from surging imports from countries such as China and Russia, the government recently raised import duty to 10 per cent from 7.5 percent on flat steel and to 7.5 percent from 5 percent for long steel products, to stem the flood of imports. Aluminium : Global Aluminum demand growth normalized to around 5% in 2012, after a sharp growth in the brceding two years on the back of global recovery from the 2009 crisis. World's leading manufacturer Alcoa has projected demand growth to be in the region of 7% in 2014-15. In 2014-15, China, North America's and Europe's growth was in the region of 7.5%, 3.5% and 1% respectively. The principal user segment in India for aluminium continues to be electrical & electronics sector followed by the automotive & transportation, building & construction, packaging, consumer durables, industrial and other applications including defence. Demand for aluminium is estimated to grow at 6%-8% per annum. Also, demand for the metal is expected to pick up as the scenario improves for user industries, like power, infrastructure and transportation. The demand for aluminium has been strong in recent years. However aluminium industry being cyclical in nature, it could see a downturn in demand with the recent slowdown being witnessed in Indian and world economies. Colour Coated (Pre-painted) Steel and Aluminium Sheets : In India, colour coated sheets are mainly consumed in the sectors of construction and infrastructure, appliances and automotive. In recent years, colour coated coils have gained acceptance in the domestic market and consequently, their consumption has accelerated during the last several years. In the constructi on sector, colour coated sheets have made substanti al progress in replacement of traditi onal asbestos and un-coated galvanized iron roofing sheets, primarily due to health, aesthetics, durability and environmental reasons. Colour coated sheets have found extensive use in roofing applications and also in the br-fabricated structures sectors. Packaging Products : The global packaging industry is growing fast. Rapid growth in packaging usage in fast growing economies has resulted in new opportunities for the packaging sector. However, rising input costs is a concern for this industry. Higher level of consumer spending and changing consumer tastes has encouraged increases in line extensions and new product introductions. Packaging has emerged as a critical component of shelf life, branding, merchandising, and promotional activities as companies increasingly want their products to stand out. Packaging companies are constantly trying to improve package design by investi ng in research and development. Domestic Insecticides - Mosquito Repellent Coils & Vaporizers India has a large and growing market for mosquito repellants. Many methods are used in households for dealing with the mosquito menace. Coils were the first mosquito repellants to be introduced in the Indian market. The mosquito repellents are available as coils, vaporizers, or as liquids in form of aerosol sprays. There is also a cream component of the market for personal use. The demand for mosquito repellent coils is understood to be growing fast in the rural areas, whereas in urban areas the vaporizers and aerosols are replacing coils. In the rural markets, the dominant products are again coils. According to industry reports, the Indian mosquito repellent market is expected to grow rapidly in the early 21st century. Our Business Your Company intends to engage itself in trading in the following products : • Value added steel products comprising Cold Rolled Sheets used in interior and exterior panels of automobiles, buses and commercial vehicles, Galvanised Corrugated Sheets used in the rural housing sector and factory sheds and Galvanised Plain Sheets, used in the manufacture of containers and water tanks and Colour Coated (Pre-painted) Coils and Sheets for sale to construction, housing, consumer durable and other industries. • Aluminium rolled products in coil and sheet form used in closures, bus bodies, flooring and general engineering purposes and Aluminium alloy ingots used in the steel and automotive industry. • Roll on Pilfer Proof (ROPP) Closures for liquor and pharmaceutical sectors, Crown Closures for beer and carbonated soft drink sectors, Plastic Closures for carbonated soft drinks and mineral water sectors and Metal Containers for shoe polishes, cosmetics and tea. Other packaging products in which the Company deals with are Aluminium Semi-Rigid Containers and table foil, Printed Metal Sheets, Printing Inks, Adhesives, Lacquers and Varnishes and Corrugated Boxes made of cardboard. • Domestic Insecticides in the form of Mosquito Repellent Coils and Vaporizers. Overview of Operations Results During the year under review, the revenue of your Company stood at Rs. 2426.55 lacs, as compared to Rs. 59740.33 lacs during the brvious year ended March 31, 2014 (which includes the turnover of the br-demerged undertakings of Manaksia Limited for the period April 1 to September 30, 2014). During the year, the Company earned a net profit of Rs. 737.06 lacs as compared to a profit of Rs. 2300.52 lacs during brvious year ended on March 31, 2014 (which includes the profit of the br-demerged undertakings of Manaksia Limited for the period April 1 to September 30, 2014). Risks and Concerns Your Company is aggressively looking for growth opportunities and new markets in all the products that it deals in. The Company is exposed to a number of market risks arising from its normal business activities. These risks include changes in prices of the products dealt with, foreign currency exchange rate, interest rate which may adversely impact the Company's financial assets, liabilities and/or future cash flows. The Company continues to mitigate these risks by careful planning of optimum sales mix, active treasury management and penetration in different markets, both domestic and international. Opportunities and Threats A varied portfolio of products dealt with by the Company and considerable geographical brsence and reach, both domestic and international, have helped the Company to try and de-risk its business and meet the risks with suitable brcaution. Future Outlook The Company is taking all possible steps to improve its performance. The Company is also exploring various avenues for improving its bottomline. The company is also making certain strategic changes which would result in further reduction of costs thereby contributing to the profitability in the years to come. Internal Control Systems The Company has an effective system of internal controls which helps it to maintain both internal controls and procedures to ensure all transactions are authorised, recorded and reported correctly and also ensure disclosure and protection of physical and intellectual property. The Company has appointed a firm of Chartered Accountants as Internal Auditors who independently evaluate the adequacy of the internal controls from time to time. For transparency and effectiveness, the management duly considers and takes appropriate action on the recommendations made by Statutory Auditors, Internal Auditors and by Management Committee / Audit Committee of the Board of Directors. The company utilises the SAP Platform in order to have proper internal control procedure with the required authorization and "maker and checker" concept. This helps in correct recording of transactions and elimination and timely rectification of errors. Human Resources During the year under review, employee relations continued to be cordial throughout the year. The Company employs about 80 people. Finance Cost Finance Cost, during the year under review stood at Rs 20.04 lacs, as compared to Rs. 1602.02 lacs for the financial year ended on March 31, 2014. Cautionary Statement Statements in the Management Discussion and Analysis, describing the company's objectives, outlook and expectati on, may constitute "Forward Looking Statements" within the meaning of applicable laws and regulations. Actual results may differ from those exbrssed or implied expectations, projections etc. Several factors make a significant difference to the company's operations, including climatic conditions, economic scenario affecting demand and supply, Government regulations, taxation, natural calamity and other such factors over which the company does not have any direct control. |