MMTC Ltd

Overview of Global Developments in 2009

According to World Trade Organization economists, global economic crisis sparked a12.2% contraction in the volume of global trade in 2009-the largest decline since WorldWar II with basically a sharp reduction in global demand being the primary cause. In value(nominal) terms while the world merchandise exports fell by 23% in 2009, the worldcommercial services' exports declined by 13%. During 2009 trade slump was of synchronizednature with exports and imports of all countries falling at the same time, leaving noregion untouched.

WTO economists have forecast that without any further upheavals in the global economy,world merchandise trade should resume its normal upward trajectory through the end of2010. The WTO Secretariat estimates that during 2010, world exports in volume terms willgrow by 9.5%, and while developed economies' exports will expand 7.5%, the rest of theworld (developing economies plus the CIS) will advance 11%. This projection assumes aresumption of global GDP growth in line with consensus estimates (2.9% at market exchangerates), as well as stability in oil prices and exchange rates.

Overview of Developments in India during 2009-10

As per the Economic Survey 2009-10 presented to Parliament in February 2010, the fiscalyear 2009-10 began as a difficult one. The continued recession in the developed world, forthe better part of 2009-10, meant a sluggish export recovery and a slowdown in financialflows into the economy. Yet, over the span of the year, the economy posted a remarkablerecovery, not only in terms of overall growth figures but, more importantly, in terms ofcertain fundamentals. The Economic Survey 2009-10 states that the economy posted aremarkable recovery and is expected to grow at 7.2 per cent in 2009-10 against 6.7 percent in 2008-09 with the industrial and the service sectors growing at 8.2 and 8.7 percentrespectively. The Survey hopes that the Indian GDP can be expected to grow around 8.5+/-0.25 percent, with a full recovery, breaching the 9 per cent mark in 2011-12.,

Financial Review

Your Company exhibited inspiring performance by achieving record level top lineconsecutively for the sixth year running by registering its highest ever business turnoverof Rs. 451,242 million during fiscal 2009-10. This best ever business turnover in MMTC'shistory since 1963 includes exports of Rs. 32,228 million, highest ever imports of Rs.399,690 million and domestic trade of Rs. 19,324 million. The other trade related earningscontributed Rs. 1397 million. Your Company earned trading profit of Rs. 3176 million. Theprofit before tax and profit after tax earned by the Company amounted to Rs. 3331 millionand Rs. 2162 million respectively. Earning per share for the financial year 2009-10 hasbeen Rs.43.25. The Company's improved management of financial resources yielded netinterest earnings of Rs. 1616 million. The corporate tax liability of the Company during2009-10 works out to Rs. 1085 million. MMTC continues to be a zero long-term debt Company.

Sources and Utilization of Funds

The sources of funds of the Company as on 31st March 2010 comprises of shareholdersfund amounting to Rs 12871.47 million including equity share capital of Rs 500 million,secured and unsecured loan funds of Rs. 46143.61 million and Rs.5504.35 million. TheseFunds have been deployed interalia towards fixed assets amounting to Rs. 1224.56 million,Investments of Rs. 2729.09 million and net current assets of Rs 60339.11 million as on31st March 2010.

Internal Control Procedures

In MMTC, day-to-day affairs are managed at various managerial levels in accordance witha well-defined "Delegation of Powers". Major issues are deliberated to arrive atconscious decisions by the respective Committees of Directors constituted by the Board ofDirectors as detailed in the report on Corporate Governance annexed herewith.

MMTC has well-settled Internal Audit system & Procedures which is commensurate withits diverse functions. The Company has an effective Internal Audit Division, to coordinatewith external auditing firms in conducting internal audit all through the year. TheInternal Audit reports are considered by 'Senior Management Audit Committee' and 'AuditCommittee of Directors'. The Audit Committee also meets the Company's statutory auditorsregularly to ascertain their concerns and observations on financial reports. Thedirections of the Audit Committee are implemented by the Management in all cases.

SUBSIDIARY COMPANY

The wholly owned subsidiary of your Company- MMTC Transnational Pte. Ltd. Singapore(MTPL) was incorporated in October 1994 under the laws of Singapore with a share capitalof USD 1 million. During the year 2009-10, MTPL achieved its second best business turnoverof USD 525 million & second highest Profit after tax of USD 6.54 million sinceinception. The net worth of MTPL stood at USD 18.03 million as on 31st March 2010. MTPLhas so far paid total dividends of US$ 6.15 million as against capital of US$ 1 millioncontributed by your Company besides multiplying its net worth by nearly 18 times since itsinception.

Minerals

Despite the global recession during the early part of 2009-10, reduction ininternational benchmark prices, pressure on availability of ores for exports andconstraints of infrastructure and logistics, your Company maintained its leadershipposition in mineral exports through aggressive marketing efforts, enhanced customer focusand tapping of emerging opportunities, especially in China. During the year 2009-10 China,Japan and South Korea were the key markets where MMTC exported minerals.

Minerals groupof your Company contributed a turnover of Rs. 28143 million during theyear, which includes exports valued at Rs. 26532 million, Imports amounting to Rs. 2million and domestic trade of Rs. 1610 million. In quantitative terms, the exports made bythe group include 59.66 lakh tonnes of iron ore valued at Rs 19244 million, 4.92 lakh MTof chrome concentrate valued at Rs 5244 million, 0.93 lakh MT of chrome ore valued at Rs.1025 million and 2.92 lakh MT of manganese ore valued at Rs. 1019 million. The domestictrade concluded by the group includes 5.89 lakh tonnes of iron ore valued at Rs 1515million, 0.88 lakh tonnes of limestone valued at Rs41 million, 1.02 lakh tonnes ofdolomite valued at Rs 53 million and 2152 tons of Ferro chrome valued at Rs. 1 million.The group also imported 102 tons of manganese ore valued at Rs. 2 million.

The export of Iron & steel making raw material from India has increasedsignificantly in the recent past and the opportunities exist to expand it further infuture. The demand is being driven by China, which has emerged as the largest buyer ofiron ore in the world. The demand from traditional buyers like Japan and South Korea islikely to continue to remain stable. MMTC has secured long-term purchase commitments forfive years beginning FY 2006-07 from Japan and South Korea and annual Memoranda ofAgreements have been signed with them for 2010-11. However the availability of Iron orefor exports during 2010-11 may be adversely affected due to increase in demand fromdomestic steel industry.

Increasingly, like with other products, the iron ore trade also will shift to commodityexchanges and iron ore is already being traded at Singapore and London commodityexchanges. This helps to provide transparency in price discovery. MMTC has promoted acommodity exchange, which has already commenced operations and is the 4th nationalexchange in India to go live. Besides MMTC is co-promoting construction of a permanentiron ore terminal at Ennore Port which shall be operational in August 2011 and shall easeinfrastructure constraints to a notable extent.

Precious Metals. Gems & Jewellery

Your Company enjoys the position of market leader in the Indian bullion trade, havingflexibility to operate from various centers spread all over the country offering novelproduct services, besides maintaining enduring relationship. The Precious Metals, Gems& Jewellery group of the Company contributed a turnover of Rs. 321303 million during2009-10. This performance was realized through diversified activities, which includeimports of gold at Rs. 298113 million, silver worth Rs. 17312 million and rough diamondsworth Rs. 604 million as also domestic sale of gold bar/medallion at Rs. 3429 million,gold worth Rs. 707 million, silver worth Rs. 27 million, jewellery worth Rs 597 million,silver medallion at Rs. 151 million, 'SANCHI' silverware at Rs. 189 million, semi preciousstones worth Rs.15 million and sales at domestic jewellery exhibition at Rs. 159 million.

The Precious Metals Group of your Company is continuously working on improving serviceto customers and now has 25% share of India's gold imports. The Precious Metals group isfocusing on improving sales of value-added products, viz. jewellery, medallions andsilverware. The Company has established a Joint Venture with M/s. Gitanjali (India'sleading retail jewellery company) and a Company by the name of MMTC Gitanjali PrivateLimited has already been incorporated and 14 jewellery retail outlets opened in variouscities across India. It is proposed to open more outlets to increase the retail marketingnetwork. A Joint Venture company for gold/silver refining and medallions manufacture hasalso been incorporated by the name of M/s. MMTC-Pamp India Private Limited. The medallionmanufacturing unit is expected to be operational in the first quarter of 2011. The tie-upwill give your Company opportunity to market a certain percentage of the products of theJoint Venture company.

Metals and Industrial Raw Material

Despite Internationa! slowdown and downward trend in industrial & infrastructuresector in early part of 2009-10, leading to decreased demand for base metals andindustrial raw materials, the Metals group of the Company contributed Rs. 20790 million toMMTC's turnover during 2009-10. The contribution of the group comprised of export of Pigiron produced by NINL a MMTC promoted Iron & steel plant worth Rs. 4891 millions,import of ferrous, non-ferrous metals and industrial raw materials worth Rs. 6635 millionand domestic trade of Rs. 9264 millions including sale of pig iron and slag produced atNINL worth Rs.6352 million.

To further improve its performance during 2009-10, the group shall be improving uponits strategies/ business model for further diversification of its activities, tapping newmarkets/products while maintaining its focus on its core products/ markets, entering intostrategic alliance with producers of non ferrous metals besides improving customerrelationship management, unrelenting focus on Institutional clientele and deeper marketaccess.

Agro Products

The Agro Products group of the Company achieved a turnover of Rs. 15883 millions during2009-10, which includes imports of 2.75 lakh MT dun/yellow peas worth Rs.3967 million,34192 MT pulses worth Rs. 1190 million, 186319 MT of edible oils worth Rs.7743 million and69993 MT Sugar worth Rs. 1723 million, besides domestic trading of LDPE/ cotton/ pulses/sugar worth Rs. 426 million. The group also traded agro products at commodity exchangesand achieved a turnover of Rs. 834 million.

The Agro Group of the Company shall continue to pursue its plans and strategies to meetthe shortages of foodgrains and pulses in the country by imports, export of surplusavailability of agro products besides meeting the challenges stemming from wide variationsin quantity/ product range available for imports/exports and broadening commodity profileto ensure sustainability of business growth in this segment in future.

Fertilizers and Chemicals

The Fertilizer and Chemicals group contributed a turnover of Rs.25029 million. Thegroup's performance during 2009-10 included third country trade of 22500 MT urea worth Rs.390 million, Export of NPK/MOP/DAP worth Rs.415 million, import of 10.36 lakh metrictonnes of urea valued at Rs. 14084 million, Import of 3.77 lakh metric tonnes of muriateof potash at Rs. 9302 million, import of 36000 MT DAP worth Rs. 574 million, imports of40657 MT Sulphur worth Rs. 220 million and soda ash worth Rs.4 million, besides domestictrading of ammonium sulphate produced at NINL the MMTC promoted Iron & Steel plant -valued at Rs. 40 million.

The group judiciously leveraged and synergised MMTC's expertise in bulk handling withdomain knowledge, hands-on experience, expertise in logistics management and skills topredict emerging trends in the global market of fertilizers to realize this noteworthyperformance.

The consumption of fertilizers is growing in India at a rapid pace leading to increasedshortfall between the demand vis-a-vis indigenous production resulting in increased volumeof imports. Moreover, India is largely dependent on imported raw materials such assulphur, rock phosphate and phos acid for indigenous phosphatic industry, Besides this,the country's total requirements of MOP are fully imported. Such a scenario provides lotof potential for future growth in import of fertilizer and fertilizer raw materials,especially in view of enhanced focus of Government on agricultural sector with a view toensure food security for growing population. Keeping in view the above, the group hasplanned during 2010-11, further increase in business volumes by tapping these emergingopportunities. However the volume of fertilizer imports and its prices are dependent onvarious factors like monsoon, Government Policy, domestic production and internationaldemand-supply balance etc.

Coal & Hydrocarbons

The Coal & Hydrocarbons group contributed a turnover of Rs. 39956 million to thehighest ever turnover recorded by your Company. The turnover contributed by the groupincluded import of 59.01 lakh tonnes of steam coal valued at Rs.32574 million, 6.40 lakhtonnes of coking coal valued at Rs. 5465 million and 12527 tones of LAM coke worth Rs. 164million besides domestic trading in LAM coke worth Rs.1285 million, crude tar amounting toRs. 431 million and steam coal worth Rs. 37 million.

With domestic production unable to meet the growing demand of non coking coal for powersector, steel, fertilizer and other heavy industries, the existence of big supply gapcompels the country to depend upon sizable imports. Further the increase in demands ofsteam coal likely to increase considerably in future with many new coal fired generationplants being underway shall be opening up newer vistas for this segment of your Company.The coal & hydrocarbon group of your Company has fine-tuned its strategies to tapthese emerging opportunities to import and serve the increased demand of coal & coketo power, steel, fertilizer, chemical, cement & sponge Iron units in future.

Mica

As reported in earlier years, the changed market requirement and technologicaldevelopments in mica processing technologies globally led to activities at Mica Divisioncoming to a halt since 2002-03. The decision on the review petition filed with theappropriate authorities under the Industrial Disputes Act for closure of Mica Division isyet to be pronounced by the Govt.

Others

The other products contributed Rs. 138 million to the turnover of the Company, whichincluded domestic trade of security equipment & engineering & capital goods worthRs.45 million besides sale of power amounting to Rs. 93 million, generated at the 15 MWwind power farms commissioned in March 2007 in Karnataka.

During the year 2010-11, the Company shall continue availing opportunities emerging innew markets/products for generating additional business revenues for the Company.

Cautionary Statement

Statements in the Management Discussions and Analysis describing the Company'sprojections, estimates, expectations may be "forward looking statements" withinthe meaning of applicable laws and regulations. Actual results could differ materiallyfrom those expressed or implied. Important factors that could make a difference to theCompany's operations include economic conditions affecting demand/supply and priceconditions in the domestic and overseas markets in which the Company operates, changes inGovernment regulations, tax laws, other statutes and other incidental factors.