MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Management Discussion and Analysis sets out the developments in the businessenvironment and the Company's performance since our last report. This analysis supplementsthe Directors' Report and the Audited Financial Statements forming part of this AnnualReport.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
Forgings Industry was established to cater the needs of Automobile Industry. Forging isa manufacture process where metal is pressed, pounded or squeezed under great pressureinto components catering largely to the requirement of automotive and power sectors. Theforging industry produces over Nine Lakh tons per year to cater various sectors in Indiaand abroad.
As you are aware, the global credit meltdown that followed soon translated to the realeconomy. By the fourth quarter of 2008, every major developed nation was in recessionwhich is expected to continue through out the calendar year 2009 and hence the growthmomentum is moderated. Like all other emerging economies, India too was impacted by creditcrisis. The timely fiscal stimulus packages announced by the Government of India, theswift monetary easing and regulatory action by the Reserve Bank of India, helped toprevent the slowdown and keep the economy stable. With the expected market demand andsustained realizations, the prospects of your Company during the current year are expectedto be optimistic.
The Demand for your company's products is from reputed market leaders like TELCO, TATAMotors, Maruti Udyog etc., continues to be very strong. The several new auto componentsdeveloped by your company management is another plus factor, which will augment growth insales volume and profitability.
OPPORTUNITIES AND THREATS:
The year 2010-11 is expected to be challenging for Forging Units. Competition driven,narrowing down and focusing on taking appropriate initiatives and measures for yourCompany to emerge operationally and financially stronger.
The company is engaged in 'forgings' and all activities of the company revolve aroundthis business. As such the whole of the performance of the 'Company's is attributable toone segment only.
RISKS AND CONCERNS:
Please refer to Risk Management section appearing elsewhere in the Annual Report.
The Company is continuously moving forward to achieve operational excellence and valueaddition for the stakeholders through operational synergy, higher capacity utilization,cost reduction and continuous improvement in its activities.
INTERNAL CONTROL SYSTEMS AND ADEQUACY:
The Company has internal control system, which ensures that all the assets areprotected against loss from unauthorized use and all the transactions are recorded andreported correctly.
The internal control system is supplemented by the extensive programme of audits andreviews by the Management. The internal control systems are designed to ensure that thefinancial and other records are reliable for preparing financial statements and other dataand for maintaining accountability of assets.
Further, reliance of all internal control functions and its entire gamut of activitiesare covered by independent audit, conducted by the auditors, whose findings are reviewedregularly by the Audit Committee and Management of the Company.
FINANCIAL PERFORMANCE & OPERATIONAL PERFORMANCE:
This has been dealt with in the Directors' Report.
SAFETY, HEALTH & ENVIRONMENT:
The Company is giving utmost importance to safety, health and environment relatedissues. The safety management systems in the company are regularly being improved andupgraded. Systems for monitoring activities relating to health, hygiene and safety havebeen setup at every plant. Training and awareness programmes are conducted regularly onsafety, health and environment.
HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS:
Human capital is one of the key elements of your Company. The Company's human resourcepolicies are aimed at motivating its employees to deliver high quality performance andreward talent with adequate compensation and accelerated career growth opportunities.Company is continuously striving to create appropriate environment, opportunities andsystems to facilitate identification, development, utilization of their full potential andinculcate a sense of belongingness. The Company's industrial relations continued to beharmonious during the year under review.
Statements made in the Management Discussion and Analysis Report relating the Company'sobjectives, projections, outlook, expectations, estimates etc., may constitute 'forwardlooking statements' within the meaning of applicable laws and regulations. Thesestatements are based on certain assumptions in respect of future events and Companyassumes no responsibility in case the actual results differ materially due to change ininternal or external factors.
The Company is committed to strength its Risk Management capability on continuous basiswith the aim to protect and enhance shareholder value. The Company's risk managementensures compliance with the requirements of amended Clause 49 of the Listing Agreement.
Due to increase in the cost of inputs and raw-materials used by it,the Company is facedwith the threat of pressure on margins.
To counter this risk, the Company has made a policy to increase the volume by achievingmaximum capacity utilization. Further cost control measures have been initiated at allprocesses.
As the Company's market is highly competitive in view of increase in demand forvehicles, it is exposed to the risk of competitors.
To counter this risk, the Company is focusing on increasing its market share innon-auto sector also.
As the Company is engaged in Forgings activity/it is exposed to the risk of environmentand pollution controls. The Company is an ISO 9001:2000 certified and strictly follows theapplicable norms. The company is committed for conservation of environment and developmentof greenery. Quality Certification standards of TS 169494 are under implementation.
Labour unrest may affect the production and the Company is exposed to such risk.
Since inception the Company is maintaining excellent labour relations and there havebeen no loss of man-days on this account. The Company continues to maintain good labourrelations.
FOREIGN EXCHANGE RISK
Company's market at present is domestic and there is no risk of foreign exchangefluctuations.
The Company is exposed to risk of default in payment by its customers.
To counter this risk, the credit worthiness is evaluated before supply to minimize suchrisk and most of the bills are discounted on hundi system.