alembic ltd Management discussions

Management Discussion and Analysis

i) Industry structure and developments

The Company operates in the business segment of consumer chemicals. The Company manufactures specialized formulations to serve its customers who in turn further manufacture consumer goods for Home and Personal Care, Decorative Paints, Agrochemicals and various industrial formulations.

With the projected growth rate of India GDP in 2013 by various global and Indian economic agencies, the business climate in India has become more challenging for 2013. The slowdown in infrastructure, has added to the overall slowdown in various sectors of economy.

The Company is putting in its best efforts to overcome the slowdown, by means of efficiencies increasing across supply chain, and hence target higher capacity utilization at Roha. The Company is also planning to import and trade specialty formulations in the Indian market to differentiate its product offerings from the commodity market.

ii) Operating and Financial Performance of the Company

During the current year of April 2013 to March 2014, the sales amounted to Rs 26,572 lakhs. The Company is making efforts to increase the number of products whereby the Company will be in a position to increase the margin on sales.

Analysis of Operating Performance*

( Rs in Lakhs)

		2013-14	2012-13
1.	Net sales/Income from operations	26,572	28,097
2.	Total operating income	26,729	28,441
3.	Total operating expense	26,939	28,464
4.	Operating (Loss)/profit	(210)	(22)
5.	Operating (Loss)/Profit (%)	(0.79)	(0.08)
6.	Operating (Loss)/Profit to capital employed (%)	(4.01)	(0.38)
7.	Inventory Turnover (Times)	7.9	8.6
8.	Current ratio	1.7	1.9
9.	Debt : Equity ratio	0.59	0.37
10.	Production (MT)	66,034	79,138
11.	Overallcapacityutilization(%)	79.1	75.8
12.	Value of sales per employee	139.04	148.43

Cash Flow Analysis*

( Rs in Lakhs)

	2013-14	2012-13
Sources of Funds:
Cash Flow from operations	210.89	1306.46
Non-operation Cash Flows	14.19	10.66
Increase in Bank Borrowings	1310.13	—
Fixed deposits matured	19.61	299.99
Sale of Fixed Assets	16.64	3711.63
	1571.46	5328.74
Utilisation of Funds:
Capital Expenditure (including plant under construction)	534.40	1038.11
Interest Paid	180.06	460.01
Dividend (Including dividend tax)	78.99	0.98
Net change in working capital	888.45	1317.59
Net Increase/(decrease) in cash and cash equivalents	(158.84)	(461.29)
Decrease in Bank Borrowings	—	2263.49
Income tax payment	48.40	709.85
	1571.46	5328.74

Non-operating cash flow includes interest income received on deposits with government utility companies.

* Figures stated above are not comparable as financial statements for the year 2013-14 and period 2012-13 were prepared for 12 months and 15 months respectively.

iii) Internal control systems and their adequacy

During the year, no significant internal control issue was identified. Internal checks and controls appropriate to the growing size of the Company’s business are being introduced.

An independent firm of Chartered Accountant is entrusted with the Internal Audit of the Company.

iv) Risks and concerns

Slowdown in world economies may result in reduction in demand.

v) Future Outlook

The Company continues its efforts to increase the utilization of its installed capacities, which will be crucial to achieve an improvement in the operational results. Priority is given to capitalize on the quality of its products and services as well as to optimise its industrial operations and to assure a competitive supply of raw materials. The Company is also taking efforts to increase the product line whereby the Company will be in a position to increase the margin on sales.

(The statement in this report including Management’s Discussions & Analysis Report reflects Company’s projections, estimates, expectations or predictions. These may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied, since the Company’s operations are influenced by many external and internal factors beyond the control of the Company.)

C) Directors

During the year, Mr. Ian Brown and Mr. Michel Ybert will retire by rotation at the ensuing Annual General Meeting. Resolutions are being proposed for their reappointment. Mr. Suresh Talwar, Mr. Sanjeev Mukerjee and Mr. Yogesh Thar are being proposed to be appointed as Independent Directors of the Company as per the provisions of the Companies Act, 2013.

D) Directors’ Responsibility Statement

To the best of our knowledge and belief and according to the information and explanations obtained by us, we make the following statement in terms of Section 217(2AA) of the Companies Act, 1956:

1. that in the preparation of the annual accounts for the year ended 31^st March 2014; the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;

2. that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31^st March 2014 and of the profit of the Company for the year on that date;

3. that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. that the Directors had prepared the annual accounts on a ‘going concern’ basis.

E) Corporate Governance

As required under Clause 49 of the Listing Agreement, disclosures on the points relating to Corporate Governance are given in Annexure I to this report.

F) Energy Conservation, Technology Absorption and Foreign Exchange Earnings/Outgo

The information required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is given in the annexure to this report, marked Annexure II.

G) Health, Safety & Environment

The Company recognises importance of health and safety of its employees and its neighbourhood. Regular safety audits are being conducted by internal teams as well as external experts.

Safety and environmental impact standards are periodically reviewed and upgraded based on these studies. The Company is committed in ensuring a clean environment and makes efforts to ensure that not only its premises but also the neighbourhood is not affected adversely by its operations.

H) Employees

As at 31^st March 2014, the Company had 296 employees.

We place on record our high appreciation of the contribution of employees at all levels for their cooperation and for reduction of cost of operations, wherever possible.

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors’ Report. Having regard to the provisions of Section 219(1) (b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

The status of complaints received from female employees with regard to sexual harassment during the year is as under:

Number of Complaints of sexual harassment received during the period December 2013 to March 2014	Number of complaints disposed off during the period December 2013 to March 2014	Nature of action taken by the employer
NIL	Not applicable	Not applicable

I) Auditors

Deloitte Haskins & Sells, Chartered Accountants, Auditors of the Company, will retire at the conclusion of the 48^th Annual General Meeting. They are eligible for reappointment and a resolution is being proposed for their re-appointment for approval of the members.

J) Cost Audit

Cost Audit Report for the financial year 2012-13 was filed with the Ministry of Corporate Affairs on 15^th August 2013 in XBRL format.

M/s. Kishore Bhatia & Associates, Cost Accountants, has been appointed as the Cost Auditor of the Company under Section 233B of the Companies Act, 1956 for the financial year 2013-14. Cost Audit Report for the year 2013-14 shall be submitted with the Ministry of Corporate Affairs within six months from the closure of the financial year i.e. on or before 30^th September 2014.

K) Delisting of Equity Shares

The equity shares of the Company will be delisted from BSE records w. e. f. Wednesday, 28^th May 2014. Exit Option will be kept open by the Acquirer-Solvay SA to the remaining public shareholders for a period of one year from the date of delisting at the rate of Rs 1,200 /- (Rupees One Thousand Two Hundred only) per equity share, being the exit price determined.

L) Acknowledgement

We acknowledge the support of our shareholders, suppliers, customers and banks enjoyed by the Company and look forward to their continuing patronage.

For and on behalf of the Board of Directors

Mumbai	S. N. Talwar
23rd May 2014	Chairman