MANAGEMENT DISCUSSION AND ANALYSIS BACKGROUND The Management Discussion and Analysis sets out the development in the business environment and the Company's Performance since last report. This analysis supplements the Directors' Report and the Audited Financial Statement forming part of this Report. INDUSTRY STRUCTURE AND DEVELOPMENTS Cement demand in the country is directly impacted by the growth of its infrastructure, Housing & Construction Sectors and the Industry's growth largely depends on how these sectors perform. The Cement Industry in India witnessed a capacity addition of 15 MTPA during FY 2015. However, due to sluggish demand in the latter part of the year, PAN India capacity utilisation for the year was at a low of around 70%. After the initial few months of robust demand, partly due to delayed monsoon, there was a slowdown in the demand growth in the latter part of the year as a result of low government spending on Infra Projects, lack of investments in the corporate sector, restrained demand from Housing Sector, low rural income due to deficient monsoon in FY 2014 and unseasonal rains during March 2015. It is estimated that the industry may have registered a demand growth of under 5% in FY 2015, significantly lower than the anticipated levels. On the operating cost front, the softening of energy costs globally has taken some brssure off coal prices (and consequentially power cost). Rail freight for cement and coal has been hiked in the Railway budget brsented in February 2015; however there was a softening in road freight rates due to lower diesel prices. As is widely known, India has a huge unmet need and therefore, the potential for development in the infrastructure and Construction Sectors. Given its strong correlation with Infrastructure and Housing sectors, Cement Industry is expected to benefit substantially a soon as these sectors take off. Overview of Indian Economy: The GDP growth of Indian economy was 4.7% in the year 2013-14. The economy has remained challenged as growth has been below 5% in the last 7 quarters between Q1, 2012-2013 to Q4, 2013-2014. The year witnessed sustained high inflation and a highly volatile exchange rate in the first half of the year. The subsequent tightening of monetary policy effectively choked economic recovery. Domestically, structural reforms did not proceed at the pace expected by markets, as bottlenecks continued to hamper investment projects, particularly in the critical power sector. BUSINESS OVERVIEW Macro-economic and policy uncertainties, persisting inflation, tight liquidity conditions and high interest rates adversely impacted business environment in India in the year 2014-15 however your Company is focusing on the road construction and development in India. The project implementation is undertaken with the assistance of sub-contractors and other agencies. Niraj provides the necessary technical and financial assistance to the sub-contractors. OPPORTUNITIES AND THREATS: OPPORTUNITY: Historically, the government has played a key role in supplying and regulating infrastructure services in India and private sector has not participated in infrastructure development. However, due to the public sector's limited ability to meet the massive infrastructure funding requirements, private sector investment in infrastructure is critical. Therefore, the Indian government is actively encouraging private investments in infrastructure. Niraj currently has projects operational at Ludhiana, Odisha and Bangalore THREATS The Company operates in a competitive environment. Much depends on type of project, contract value, potential margin, location of project, reputation of client etc. The company mainly competes mid segment Road Construction Companies in India. Competitive bidding, rising prices, Non availability of Land and Fixed Price Contracts are some of the key factors for slow growth in past years. Also the business is capital intensive which requires high level of long-term debt financing and arrangement of capital required for various projects is dependent on various factors like the internal accruals, size of award of the projects and availability of credit from banks and financial institutions etc. SEGMENT-WISE / PRODUCT-WISE PERFORMANCE & OUTLOOK: The Company operates in only one business segment i.e. Road Construction. RISKS AND CONCERNS: The Risk Management and Control Systems are considered to be in balance with Company's risk profile and appetite, although such systems can never provide absolute assurance. Company's Risk Management and Control Systems are subject to continuous review and adaptations in order to remain in balance with its growing business size and changes in its risk profile. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has appropriate internal control systems for business processes with regard to its operations, financial reporting and compliance with applicable laws and regulations. HUMAN RESOURCE MANAGEMENT: Your Company has valued both experience and fresh talent, and takes pride in the commitment, competence and dedication shown by its employees in all areas of business and is conscious of the importance of environmentally clean and safe operations. Upgradation of technical skills training is periodically given to employees as per identified requirements while employees are encouraged to participate in personality development, soft skills enhancement programmes etc. especially for the marketing and technical staffs. SAFE HARBOUR CLAUSE: Statements in the Management Discussion and Analysis describing the Company's objectives and expectations may be "forward looking statement" within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and reasonable expectation of future events. Actual results could however differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include, among others, economic conditions affecting demand/ supply, price conditions in the domestic and overseas market in which the Company operates, changes in the Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts and other factors such as litigation and industrial relations. CONCLUSION: Though the company cannot assess its success on short term profits and financial performance is the main factor to overall success, we with entire system are keen in improving our performance of every individual employee just as much as we are doing for improving our every product. For and on behalf of the Board of Directors Vijay Kumar Chopra Managing Director (DIN:01067794) Place : Mumbai Date : 21 August, 2015 |