MANAGEMENT DISCUSSION AND ANALYSIS

The Management and Discussion Analysis Report sets out developments in the business, environment and company's performance since our last report. The analysis supplements the Directors' Report and audited financial statements which form together part of this Annual Report.

INDUSTRY OUTLOOK, OPPORTUNITIES AND THREATS

During the year 2015-16, the Company achieved a turnover of T 733 Million compared to the turnover of T 684 Million during 2014-15 i.e. around 7% increase in sales compared to the brvious year. Net Profit during the year 2015-16 is T 23 Million compared to Net Profit of T 3 Million achieved during 2014-15. The improvement in current year's performance can be attributed to the cost saving measures implemented by the company as well as sale of high value products during the year.

OUTLOOK

The Chemical Industry in India is a key constituent of Indian Economy, accounting for about 2.11 percent of the gross domestic product (GDP). In terms of volume of production, Indian Chemical Industry is the third largest producer in Asia and sixth largest in the world.

Indian Chemical Industry generated business worth US$ 118 billion in 2014. Bulk Chemicals account for 39 percent of the Indian Chemical Industry, followed by Agrochemicals (20.3 percent) and Specialty Chemicals (19.5 percent).

India's growing per capita consumption and demand for agriculture-related chemicals offers huge scope of growth for the sector in the future. From April 2000 to May 2015, total foreign direct investment (FDI) inflows into the Indian chemicals industry (excluding fertilisers) were US$ 10.49 billion.

The Government of India has been supportive to the sector. 100 per cent FDI is permissible in the Indian Chemicals sector while manufacturing of most chemical products is de-licensed. The Government has also been encouraging Research and Development (R&D) in the sector. Moreover, the Government is continuously reducing the list of reserved chemical items for production in the small-scale sector, thereby facilitating greater investment in technology up-gradation and modernisation.

The Government has launched the Draft National Chemical Policy, which aims to increase chemical sector's share in country's GDP.

THREATS

Imports from Global Chemical Companies is a threat to Indian chemical industry. The Indian tax structure is still lower as compared to other countries and hence many Global Chemical companies with larger production capacities are trying to concentrate on Indian market. The company has plans to mitigate the threat by producing high quality products at competitive prices.

PRODUCT PERFORMANCE

The company has sold 1610 MT of finished products during 2015-16 as against 1533 MT in the brvious year. During the year company had sold high value products, therefore even though the turnover is slightly increased net profit is increased drastically.

Company had a mixture of products of sodium derivatives, pyridine derivatives and fine chemicals, company is continuously developing new products and commercialize the same on campaign basis, your company is planning to expand and/or diversify the range of products in the coming years and expecting the increase in turnover and margins.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The company has in place effective systems of internal control commensurate to its size and nature of business which provides for:

• Efficient use and safeguarding resources

• Accurate recording and custody of assets

• Compliance with brvalent statutes, policies, procedures, listing requirements, management guidelines and circulars

• Transactions being accurately recorded ,cross verified and promptly reported

• Adherence to applicable accounting standards and policies

• IT systems which include controls for facilitating the above

The internal control system provides for well documented policies, guidelines, authorizations and approval procedures. The internal audit reports are laid before Audit Committee and discussions were held periodically by the Audit Committee at its meetings. The observations /findings made in internal audit reports, along with the status of action thereon are reviewed by the Audit committee of the Board of directors on a regular basis.

The company has an exhaustive budgetary control system and the management regularly reviews actual performance

HUMAN RESOURCE DEVELOPMENT

The Company believes that the key to success lies in creating and nourishing a pool of talent within its people whose skills, expertise and experience provide the impetus towards market leadership. Also, the dedication, commitment and aspirations of its Employees provide the fuel for excellence in performance. The Company's human resource practices are widely accepted by the management, staff and workers. During the year under review, the Industrial relations with Employees/workers at all the Company's locations continued to be harmonious and positive.

CAUTIONARY AND FORWARD LOOKING STATEMENT

Statements in the Management discussion and Analysis Report which describe the Company's objectives, projections, estimates, expectations or brdictions may be considered to be "forward-looking statements" within the meaning of applicable Securities Laws and Regulations. These statements are based on certain assumptions and expectations of future events. Actual results could however materially differ from those exbrssed or implied. Important factors that could make a difference to the Company's Operations include global and Indian political, economic & demand-supply conditions, finished goods prices, raw materials cost & availability, cyclical demand and pricing in the company's principal markets, changes in Government regulations, Policies, tax regimes, economic developments within India besides other factors such as litigation and industrial relations as well as the ability to implement the strategies.