MANAGEMENT DISCUSSION AND ANALYSIS
1. Industry structure and development
The financial year 2012-13 will be remembered for the economic and political turmoilthat engulfed most parts of the world. The year has witnessed the economic decline ofEurope and America and a sluggish performance by the BRIC nations which fell short of alloptimistic predictions.
India has not been unaffected by this turmoil. Rising fiscal deficits, adverse tradebalance and continued inflation resulted in high interest rates and weakening of theRupee. Uncertain political environment resulting in policy and regulatory delays inimplementing reforms slowed down the economic growth. The industrial growth was at 0.9%during April-February 2013, even lower than 2.8% recorded during April-February 2008-09(the year of financial crisis). In Financial Year 2013 manufacturing grew at 1.9%, miningindustry recorded a fall of 2.5% while the auto industry grew only by 3%.
Engineering industry forms the backbone of any economy as it is intensely linked withmany other core sectors. The same is true in case of the Indian engineering sector also.In the engineering field India has achieved a markeable landmark. Design engineering isvital for application of engineering knowledge in industry or for the advancement ofwell-being of mankind. This goes to show that this industry has huge potential in years tocome.
2. Opportunities and threats
Design engineering is the main business activity of the company which constitutes majorpart of operating income of the Company. However, the increase in cost especially the costof technical personnel required to carry on design engineering activities and competitivemarket may act as major threats which may have adverse bearing on performance of theCompany. Further, the clientele of the Company is limited therefore the profitability ofthe Company is exposed to greater degree of risk.
In order to achieve high GDP growth rate, large amount of investments are expected tobe made in diverse sectors of Indian economy. The prospect of the Company to a largeextent is dependent on the macroeconomic determinants of the Indian industry. The Companycaters to the design engineering needs of engineering and project execution companies. Thework of the Company is dependent on the orders received from these companies. It isexpected that the Government of India will take some bold steps to stimulate the rate ofeconomic development of the country. It is expected that in the years to come the Companywill be able to fetch more work from the companies using the design engineering servicesof the Company.
4. Segment wise or Product wise performance
Fusion Fittings (I) Limited is a technology led Company, specialized in process designengineering for various process plants and is primarily engaged in design engineering forelectricity tower, electricity lines and related works. The Company largely deals with twogroups of services one for erection of electricity towers and another for laying ofelectricity lines. The development of the Company primarily hinges on the growth plan ofits user industries.
The global industrial sluggish performance since last three years affected adverselythe Indian industrial performance and engineering industry. Consequently, the demand ofthe services offered by the Company has reduced materially. The total income of theCompany in the Financial Year ended March 31, 2013 is Rs. 241.54 lac and Profit after taxis Rs. 215.95 lac as against total income of Rs. 278.12 lac and Profit after tax is Rs.237.39 lac in the previous year ended March 31, 2012.
5. Risks and Concerns
The Company is mainly engaged in the business of Design engineering and providesservices to other companies. As there has been an economic slowdown in the world and Indiahas also been affected by the same, there has been an adverse affect of the slowdown onInfrastructure Sector of the Country. As your Company provides services to Infrastructuresector, it has also not been left untouched due to the slowdown. The performance of theCompany is likely to improve when the Infrastructure Sector recovers from the economicslowdown.
However, the Company has a well-defined Risk Management Policy. The Company on regularbasis reviews its Risk Management Policy and takes proactive steps to safeguard andminimize any adversity related to the Market, Technology, People, Environment/ Regulatory,Financial, Information Technology and Opportunity Risks. Wherever necessary, the Companytakes adequate insurance coverage of its assets for safeguarding itself from unforeseenrisks.
6. Internal control systems and their adequacy
The Company has an adequate system of internal controls implemented by the managementtowards achieving efficiency in operations, optimum utilisation of resources and effectivemonitoring thereof and compliance with applicable laws. The internal audit program isundertaken at regular intervals to ensure the correctness, accuracy, authenticity andreliability of the accounting and financial transactions. Further a qualified andindependent Audit Committee of the Board of Directors reviews the internal audit reportsand the adequacy of internal controls to ensure the transparency and proper compliances.
7. Human Resource development
Your Company recognizes the critical importance of its human capital and believes thatthe human capital is the key engine for its growth and competitiveness. CompanysHuman Resource agenda for the year was focused on strengthening four key areas: building arobust and diverse talent pipeline, enhancing individual and organisational capabilitiesfor future readiness, driving greater employee engagement and strengthening employeerelations.