fenoplast ltd Management discussions

a) Industry Structure and Developments:

The Company is engaged in manufacturing of PVC Film and PVC Leather Cloth.

PVC Film is majorly used in the pharma application for tablets packaging, healthcare products packaging and is gaining acceptance in the packaging of consumer goods like shaving products, tooth brushes, batteries, tools and toys etc.

PVC Leather Cloth is mostly used for car upholstery, motor cycle seat covers, auto rickshaw hoods and seats, tractors, trucks and buses. It is also used for making ladies bags and footwear.

India is one of the most promising exporters of plastics among developing countries. Demand from original equipment manufacturers (OEMs) has led the Indian plastic industry to focus more on delivering products customized in line with end-user needs like design, style, and pattern. The Indian plastics industry offers excellent potential in terms of capacity, infrastructure and cheap labour availability. Among the industrys major strengths is the availability of raw materials in the country. With increasing usage of plastics in automobiles, consumer packaging and impact of increased infrastructure spending in India, the plastic industry will emerge as a giant in the industrial scenario of India.

b) Opportunities and Threats:

Opportunities: Growth in industry will be majorly impacted by the increased growth from end use industries, growing consumerism, government initiatives etc. The Company is already an established supplier to Suzuki, Hyundai Motors, TVS Motor Company, Maruti, Mahindra and Mahindra, Volkswagen and Daimler Benz. Growth of the automotive industry pushes the demand for the Companys product, PVC Leather.

PVC Film is consumed by a large number of small and medium sized manufacturers to make finished products. In recent years, manufacturing of finished PVC products has experienced rapid growth and it remains one of the fastest growing sectors in India and around the world. There has been growth in demand from pharma sector and new applications for visual packaging auguring well for PVC film. This would be definitely a positive and good opportunity to your Company which is one of the prominent players.

Threats:

Major threat is due to increased cost of raw materials, high cost of finished plastic products, ever increasing crude oil prices, high finance cost, and import threat from other countries due to specialized processing, replacement threat from substitutes which would affect the margins.

c) Risks and concerns:

The major risks and concerns as perceived by the Company relate to increase in prices of principal raw material due to increase in the prices of crude oil and rupee devaluation. The Company has devised a system to identify and take corrective and quick decision as and when this risks and concerns arise.

d) Segment-wise performance

PVC Leather Cloth: The production during the year is 72.31 LLn. Mtrs.as against 81.70 LLn. Mts. in the previous year.

PVC Film: Production of PVC Film was 5611.88 MT as against the previous years production of 10,095.67 MT in the previous year.

Financial Performance

The net profit before tax for the year is Rs.123.46Lakhs as compared to previous year Rs.255.61Lakhs.

e) Adequacy of Internal Control Systems

The Company has implemented an enterprise resource plan, SAP which facilitates the management to access all the systems and to have control on operations. The final costs have gone up due to increase in the raw materials cost and also due to payment of salaries and wages arrears on finalization of agreement with workers.

Internal Audit is conducted regularly at the plants, depots and marketing offices covering the key areas of operations. It is an independent objective and assurance function responsible for evaluating and improving the effectiveness of risk management control and governance processes.

The Audit Committee monitors performance of internal audit on a periodic basis through review of audit score, audit finding and action taken on the observation.

Effective implementation of internal controls has yielded better results. The Company has good internal audit system to monitor and check the systems periodically.

The members are informed that the Company has been accredited with quality standards of ISO/ TS16949:2009, Periodical internal quality audits and management review meetings ensure successful implementation of the Quality Management System. Surveillance audit for continuation of ISO certification will be conducted by external auditors.

f) Human Resources

The Companys industrial relations continued to be harmonious with its workforce during the year under review. The Company would be imparting training to employees at all levels for proper implementation and running of the new ERP package SAP and to get maximum benefit out of the same. The total number of employees are 286.

g) Details of Significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanation:

During the year, there is no significant change in the financial ratios of the company which are more than 25 % as compared to the previous year.

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with detailed explanation:

There is no significant change during the current financial year 2018-19, comparing with previous financial year 2017-18.

Annexure -7

a) Information as per Rule 5(1) of Chapter XIII, Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

The percentage increase in remuneration of each Director and Chief Financial Officer during the financial year 2018-19 and ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2018-19 are as under:

Name of Director/ KMP and Designation	The ratio of the remuneration of each director to the median remuneration of the employees for the financial year	The Percentage increase in remun- eration of each director, CFO, CEO in the financial year	The percentage increase in the median remuneration of employees in the financial year
1. H. Kishen	38.89	0.00	0.00
2. H. Krishna Kumar	37.50	0.00	0.00
3. H. Sanjay Kumar	22.22	60.16	150250
4. VBVR Ratnaji	7.39	0.00	0.00
5. K.Mohith Kumar	2.50	0.00	0.00

Note: Except Managing Director, and Whole-time Directors, none of the other Directors are paid any remuneration except sitting fees and reimbursement of expenses for attending Board and Committee Meetings. The details sitting fees paid are given in the Report on Corporate Governance which forms part of this Annual Report.

i) The median remuneration of employees of the Company during the Financial Year was Rs. 18,000/-

ii) In the Financial Year, there was a decrease of -0.55%in the median remuneration of employees;

iii) There were 286 permanent employees on the rolls of Company as on March 31, 2019;

iv) Average percentage increase made in the salaries of employees other than the managerial personnel in the last financial year i.e. 2018-19 was 0.00% whereas the decrease/ increase in the managerial remuneration for the same financial year was NIL

v) It is hereby affirmed that the remuneration paid is as per the as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees.

For and on behalf of the Board of Directors

Sd/-

B.KAMALAKAR RAO

CHAIRMAN

Place : Secunderabad

Date : 09-08-2019