Nicco Corporation Ltd

Power Cables Division :

The Energy Cables sector experienced no growth in 2009 but started recovering in 2010.However, margins continue to be under extreme pressure in all areas especially in theMedium Voltage XLPE Cables and Low Voltage Power Cables. This has been due toover-capacity in the industry and enhanced competition. Multinational companies are in theprocess of establishing their base through Joint Ventures and greenfield ventures.Although margins are not expected to improve significantly, the growth envisaged in thepower and utility segments augurs well for the Cable industry.

Project Division :

The Project Division undertakes execution of multidisciplinary engineering projects andhas established itself as an Engineering, Procurement and Construction (EPC) contractor ofrepute in the Country. The Division also provides Engineering Consultancy Services. Whilemajor projects have been planned in the target industries such as Oil & Gas,Petrochemicals, Refineries, Nuclear Power, Ferrous and Non-Ferrous and ChemicalIndustries, a large number of newer competitors have emerged which has led to increasedcompetition.

Power Cables Division :

The Cable Division registered a gross sales turnover of Rs. 201 crores. While the salesof Speciality Cables manufactured in Shyamnagar remained at levels similar to last year,there was a drop in sales of Medium Voltage XLPE cables produced at Baripada mainly due tosuspension of operations for 5 months as also a shortage of working capital finance.Operations have since resumed.

Inadequacy of working capital continues to adversely impact the performance of thisdivision.

Project Division

The Project Division had carried forward orders worth Rs. 156 crores as on 31st March2010. The Division registered a turnover of Rs. 119 crores. The performance of theDivision remained restricted due to a substantial shortage of working capital. Themajority of work at two loss making projects at IOCL Panipat, and NALCO, Damanjodi hasbeen completed. With continuing investments in the Steel, Oil and Gas and Power Sectors,the market for turnkey projects improved. During the course of the year, the Divisionsecured orders worth around Rs. 90 crores with reasonable margins.

Power Cables Division :

The strategic focus continues to be on increasing the volume of Speciality Cablesespecially in the segments of Railways, Ship Wiring, Wind Energy and Defence industrialapplications. Efforts will also continue for penetrating new market segments.

Project Division :

Major focus areas for growth would be in the business areas of Chemical Plants, TankageTerminals, Effluent/Water Treatment Plants, Utility packages in the Steel Sector andEngineering Services.

Demand:

The basis of cable demand is the projected GDP growth of around 9%. Any slow down inthis growth is likely to impact negatively on industrial/infra-structure projects thusaffecting demand of cables.

Raw Material Prices:

Substantial volatility in the prices of commodities particularly metals are a concernarea and may affect margins.

Competion:

Competition is an area of concern which has generated sustained pressure on margins.This situation is monitored continuously.

Finance

The shortage of working capital remains an area of concern.

Project Division :

The majority of the long term contracts are on a fixed price basis and as such thedivision is exposed to volatility in prices of materials like steel and cement. Thebooking of fresh contracts will be contingent on industrial capex and especially theconstruction of new plants in core sectors like steel, oil and gas and petrochemicals. Dueto the shortage of skilled engineers, the sector is vulnerable to turnover of manpower andincreases in employee costs.

E. internal Control Systems and their Adequacy

Adequate Internal Control procedures are being followed commensurate with the size andnature of business of the Company for efficient usage and protection of Company'sresources as also to ensure strict adherence to statutory compliances requirements. Theexisting system provides laid down procedures for authorizations and approvals of alltransactions. Regular Internal Audits are conducted by external Chartered Accountantfirms. The Internal Audit Reports with Management observations along with action takenreports on earlier decisions are submitted to the Audit Committee of the Board. The AuditCommittee monitors the performance and efficacy in resource utilization of the Committee.The Audit Committee also monitors the adequacy of internal control Systems. The AuditCommittee's observations and recommendations are reported to the Board of Directors atregular intervals.

F. Human Resource Management

The Company continues to focus on training employees for skill upgradation, leadershipand team building in its endeavour to build a learning organisation. Employees performanceis measured through an internal appraisal system. The Company has raised around Rs. 1.00Crore towards equity contribution at the rate of 10% of salary from all employeesincluding whole-time Directors as per CDR scheme. Barring a brief period, IndustrialRelations at Shyamnagar plant remained harmonious. The Baripada plant underwent aSuspension of Operations for 5 months. Operations resumed in April 2010 after an amicablesettlement with workers.

G. Financial and Operational Performance

The performance of the Company remained at a very low level due to the followingreasons :

1. Delayed implementation of CDR package.

2. Inadequate Working Capital

3. After effect of sudden withdrawal of Prysmian from the deal as also the negativecovenants.

4. Temporary suspension of work at factories.

The approved CDR package was implemented on 30th June 2009. The performance for theperiod under review also suffered due to labour unrest on bonus issue at both thefactories. However, the issues were resolved and the suspension of operations were liftedafter reaching amicable settlement with unions/workmen.

H. Outlook

With the implementation of stricter cost control and productivity improvement measures,it is expected that the performance of the Company will significantly improve. The WorkingCapital situation, however, will remain critical and is a limiting factor. The Company iscontemplating several measures for mobilization of funds into the Company by furtherinternal restructuring. With all these actions, it is expected that the Company will beable to improve its performance in the future.

I. Cautionary Statement

Statements in the Management Discussion and Analysis Report in regard to projections,estimates and expectations have been made in good faith. Many unforeseen factors may comeinto play and affect the actual results, which could be different from what the Directorsenvisage in terms of future performance and outlook. The factors include:

Raw material availability and its prices, demand and pricing in the Company's markets,changes in government regulations, economic developments in India, shortage of workingcapital and other incidental factors could make a difference to the Company's operations.Industry information contained in this Report, have been based on information gatheredfrom various published and unpublished reports and their accuracy, reliability andcompleteness cannot be assured.

ANNEXURE TO THE REPORT OF THE DIRECTORS

Information under Section 217(1)(e) of the Companies Act, 1956 read with Companies(Disclosure of particulars in the Report of the Board of Directors) Rules, 1988.

1. RESEARCH AND DEVELOPMENT

The R&D Centre of your Company has been concentrating on development of newer costeffective compounds for Specialized Cables and Electron Beam Cables.

2. TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

Your Company has absorbed the updated polymer technology for development of newercompounds.

3. FOREIGN EXCHANGE EARNINGS AND OUTGO