MANAGEMENT DISCUSSION AND ANALYSIS REPORT : 1. Industry Structure and developments. Textile & Textile Chemical Industry: India is the world's second largest producer of textiles and garments. Abundant availability of raw materials such as cotton, wool, silk and jute and skilled workforce have made India a sourcing hub. The size of Indian textile and apparel market stood at US$ 89 billion in 2011 and is expected to touch US$ 221 billion by 2020. The industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand. The organized apparel segment is expected to grow at a CAGR of more than 13 per cent over a 10-year period creating enormous opportunities. Apparel constitutes a large share in the overall sector, accounting for 69 per cent in 2012 while textile contributed 31 per cent to the total market share. The total exports of textile and apparel sector from India grew to US$ 33.3 billion in FY12 from US$ 17.6 billion in FY06, implying a compounded annual growth rate (CAGR) of 11.2 per cent. The exports are expected to increase further to US$ 82 billion by 2021.h rate (CAGR) of 11.2 per cent. The exports are expected to increase further to US$ 82 billion by 2021. With Asia’s growing contribution to the global chemical industry, India emerges as one of the focus destinations for chemical companies worldwide. With the current size of approximately $108 billion, the Indian chemical industry accounts for ~3% of the global chemical industry. Two distinct scenarios for the future emerge, based on how effectively the industry leverages its strengths and manages challenges. In the base case scenario, with current initiatives of industry & government, the Indian chemical industry could grow at 11% p.a. to reach size of $224 billion by 2017. However, the industry could aspire to grow much more and its growth potential is limited only by its aspirations. In such an optimistic scenario, high end–use demand based on increasing per capital consumption, improved export competitiveness and resultant growth impact for each sub-sector of the chemical industry could lead to an overall growth rate of over 15% p.a. and a size of $290 billion by 2017 (~6% of global industry). This has a potential for further upside in the future considering India’s increasing competitiveness in manufacturing. 2. Opportunities and Threats Opportunities • Abundant raw material • Low cost skilled labour • Presence across the value chain • Growing domestic market • Strong backward integration • Third largest cotton producer as well a the largest area under cultivation • Increasing brsence across entire value chain • Cheap and skilled manpower • Sharp reduction in borrowing costs • Recent government efforts to promote the industry. Threats • Fragmented industry • Effect of historical government policies • Lower productivity and cost competitiveness • Tech obsolescence. Quality is not consistent • Low level of training. • The export-import policy of India changes too frequently due to which it becomes verydifficult for importers to import goods. • Delay in delivering the goods at the right time. • Lack of economies of scale and advance processing capabilities. 3. Segment –wise or product-wise performance : The Company operates in a single segment of Trading and hence the segment reporting is not applicable to the Company. 4. Outlook The outlook for the coming year 2015-16 looks promising for the Chemicals business at this point in time. Demand is showing signs of improvement and with a price advantage due to our best negotiation abilities we are likely to perform well. However, global recession and market condition may have an impact on our business to suffer which in turn can have bearing on profitability. 5. Risks and Concerns Your Company had put a risk management framework in place post a combrhensive review of its risk management process. Your Company takes a fresh look at the risk management framework through our Audit Committee at least once in a year. The review involved understanding the existing risk management initiatives and assessment of risks in the businesses as the relative control measures and arriving at the desired counter measures keeping in mind the risk appetite of the organization. The audit Committee has periodically reviewed the risks in the business and recommended appropriate risk mitigating actions. The business of the Company is likely to be affected by various internal and external risks enumerated as under: • Our Company does not have adequate Cash flows. Low Cash flow could adversely impact our business, financial condition and results of operations. • Our operations are significantly located in the Ahmedabad Region and failure to expand our operations may restrict our growth and adversely affect our business • Our success depends largely upon the services of our Promoter, Directors and other key managerial personnel and our ability to attract and retain them. • The prices we are able to obtain for the products that we trade depend largely on brvailing market prices. • We face intense competition in our businesses, which may limit our growth and prospects. • Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price. • Global recession and market conditions could cause our business to suffer. • Natural calamities and changing weather conditions caused as a result of global warming could have a negative impact on the Indian economy and consequently impact our business and profitability. • Tax rates applicable to Our Company may increase and may have an adverse impact on our business. • Political instability or changes in the Government could adversely affect economic conditions in India generally and our business in particular. As a responsible employer, to ensure occupational safety and employment standards, your Company maintains strict safety and quality control programs to monitor and control these operational risks. 6. Internal Control System and their adequacy The Company maintains adequate internal control systems, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of company’s assets. Internal Controls are adequately supported by internal audit and periodical review of by the management. The audit committee meets periodically to review with the management and statutory auditors, financial statements. The Audit Committee also meets with the internal auditors to review adequacy /scope of internal audit function, significant findings and follow up thereon and finding of abnormal nature. 7. Discussion on financial performance with respect to operational performance. During the year company has reported total income of Rs. 324.49 lacs as against total income of Rs. 96.30 lacs in the brvious year, Net Profit of the Company during the Current year stand at Rs. 0.60 lacs as against profit of Rs. 0.53 lacs in the brvious year. 8. Material developments in human resources/ Industrial Relations front, including number of people employed. Relations with the employees of the Company at various levels remained harmonial during the year under the review. The Company is making its best efforts to retain and attract talented employees. During the year under the review, the Company has complied with all legislative provisions of labour laws. The number of employees of the company as of 31st March, 2015 was 10. 9. Other Disclosures: a. Basis of related party transaction: During the year under the review, there were no related party transactions. b. Disclosure of Accounting treatments: The Company has followed all relevant Accounting Standards while brparing the financial Statements. c. Board Disclosures - Risk Management: The Company has developed combrhensive risk management policy and same is reviewed by the Audit Committee, which in turn, informs the Board about the risk assessment and minimization procedures. Major risks identified for the Company by the management are Currency fluctuation, Compliance, Regulatory changes, Manufacturing & Supply, Litigation, Information Technology and new capital investments return. The management is however, of the view that none of the above risks may threaten the existence of the Company as robust Risk mitigation mechanism is put in place to ensure that there is nil or minimum impact on the Company in case any of these risks materialize. Since the risk control frame work is new to Indian Corporate Culture, it is being strengthened on continuous basis using the outside professional help. d. Proceeds from public issues, right issues, brferential issues etc: Not applicable, as no capital has been raised by the Company in last 5 Years. Besides above, there was no instance of Non-compliance of any matter related to the capital markets during the last three years. By Order of the Board For, AVI Polymers Limited Mansukh Patel Chairman and Managing Director DIN: 00162160 Date:29/05/2015 Place: Ahmedabad |