MANAGEMENT DISCUSSION AND ANALYSIS REPORT
This report includes discussion on the following matters within the limits set by theCompany's competitive position:
Industry structure and developments
Your Company's products are used by various industries such as Agrochemicals,Pharmaceuticals, Polymers and Dyestuffs for either making further intermediates or finalproducts.
Your Company is associated with makers of polymers for various uses. It is expectedthat there will be double digit growth for end products made of polymers in the comingyear. Looking to the future market trend many new capacities are being generated aroundthe world. During the year, your Company has been able to get its products registered withthem after undergoing long evaluation process.
In order to cater to expanded market needs, new capacity has been added coupled withfurther strengthening of logistic services.
The Indian economy also experienced notable surge in growth but its favourable impactgot blunted by unprecedented inflation. Your Company was also not immune to this and wehad to face the situation by lowering our profitability to remain competitive in theinternational market.
On the export front your Company has been able to retain its customers. During the year2010-11, we have registered a healthy growth. However, our profitability was affected inthe last quarter of 2010-11 due to strengthening of the Indian Rupee against majorcurrencies of the world.
Realizing the importance of the domestic market which had withstood the global meltdown, we are in the process of developing new molecules to be introduced soon in themarket.
The Indian Pharma industry has been abuzz with developmental activities due to itsinherent strength resulting in proposals coming from multinational companies for eithercontract research ortoll manufacturing.
With about 15 -20 Active Pharmaceuticals Ingredients (APIs) worth more than USD 50billion sales getting off patent in the coming 2-3 years' time, big opportunity is openingup for Indian companies to embark into introduction of new molecules in the form ofintermediates and APIs.
Your Company is studying these products closely for developing their raw materials. Ina few cases we have collaborative work also going on with some large pharma companies inIndia to ensure that products are developed to match the technical requirement.
During the year, your Company has been able to get approval from a number of renownedpharma companies as registered source and we expect that efforts put in now will bearfruit in the coming years when targeted APIs are off patented. Some of the productionactivities will be undertaken in Sam Finechem Ltd., a Pharma intermediates company inwhich your Company holds 50% equity and has management control.
During the financial year 2010-2011, your Company has been able to increase its salesrevenue in the Agrochemicals sector. By and large, the agrochemical season was good due tonormal monsoon in India resulting in good demand for Company's products.
Your Company has developed products for production of fungicides and herbicides and hasbeen able to position them successfully during the year under review. It is expected thatsales of both the products will go up in the coming year.
We shall remain associated with agriculture sector by supplying vital raw materials forproducing plant protection chemicals and our endeavor will be to develop a few moreproducts for this vital and essential sector.
The Indian pesticides market is, however undergoing rapid changes and it appears thatsome of the end products will be phased out from the market which will have some adverseimpact on sales of one of our main products. Your Company is watching the situation and isworking on mitigating steps.
Opportunities and threats
The end use segments are showing promising results and the forecast is that the Indianchemical industry will have robust growth in the coming year, thus opening up newopportunities for your Company.
Developments in China have a world-wide impact. Recent policy changes resulting inclosure of several factories and the Chinese RMB strengthening against major currencieshave opened up possibilities of export of some of your Company's products to China.
If inflation rate is not kept under check, it will have severe impact on industrieswhich will lose their competitiveness in the international market.
The strengthening of the Indian economy will further strengthen the Rupee against USDor Euro which will affect the pricing of products.
The hike in price of oil will have negative impact on our business as input cost wouldincrease.
Risk and Concerns
Increase in costs of inputs - raw materials, power and fuel and the strengthening ofthe Rupee are major causes for concern.
Our aim is to achieve balanced market spread for both domestic sales and exports andfor that internal planning has been done.
It will not be out of place to mention that we foresee reasonable growth in the comingyear for the products made by your Company.
No Company can survive if it is not putting sincere efforts to bring innovation in workand conserving natural resources. Your Company is also actively working on all possibleareas to either bring down cost or improve efficiency, be it in the form of EnergyConservation or reducing wastage.
Environment, health and safety are the prime focus areas and the Company will not leaveany stone unturned to ensure that not only we stick to norms but surpass them whereverpossible.
Segment wise performance
The Company has only one business segment namely "Chemicals". The informationin respect of secondary segment as per the Accounting Standard (AS-17) "SegmentReporting" issued by the Institute of Chartered Accountants of India is given underNote No. 17 in Schedule 22 of Annual Accounts.
Internal Control Systems and their adequacy
As reported in previous year, your Company maintains an adequate and effective internalcontrol system commensurate with its size and complexity. The internal control systems aresupplemented through an extensive internal audit programme and periodic review bymanagement.
Discussion on financial performance with respect to operational performance
The net sales of the Company for the year under review is Rs. 182.30 crores as againstRs. 113.41 crores in the previous year. In the year under review sales has increased by 61% in comparison to previous year. During the year Profit After Tax is Rs. 12.78 croresvis-a-vis profit of Rs.4.55 crores in the previous year.
Human resources /Industrial relations
The employee strength as on 31st March, 2011 was 609 in comparison to 514 in theprevious year, an increase of about 16 %, in anticipation of increased production andsales activities.
Awell-defined performance management appraisal system also is in place.
Industrial Relations continue to be cordial.
Statements in this report on Management Discussion and Analysis relating to theCompany's objectives, projections, estimates, expectations or prediction may be forwardlooking within the meaning of applicable securities laws and regulations. These statementsare based on certain assumptions and expectations of future events. Actual results mightdiffer materially from those expressed or implied depending upon factors such as climaticconditions, global and domestic demand-supply conditions, finished goods prices, rawmaterials cost and availability, foreign exchange market movements, changes in Governmentregulations and tax structure, economic and political developments within India and thecountries with which the Company has business and otherfactors such as litigation andindustrial relations.
The Company assumes no responsibility in respect of forward looking statements hereinwhich may undergo changes in future on the basis of subsequent developments, informationor events.