resurgere mines minerals india ltd Management discussions

POLYGEL TECHNOLOGIES (INDIA) PRIVATE LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS: Our Company is one of the manufactures of Cable Gel, Adhesives & Sealants and Specialty Chemicals in the country with installed capacity of 10000 MT per annum. Polygel has emerged as the market leader for Cable Gels in India and the Companys products are exported to more than 15 countries including Germany, Israel and U.K. Polygel is an ISO: 9001:2000 Company. Milestones achieved since commencement of business. 1998: Was profitable in the very 1st year of operations. 2000: First Company in India to manufacture Thixotropic Gels (For Optic fibre) In India. 2000: First ISO - 9002 accredited cable Gel manufacturing Company in India & only exporter. 2001: Developed international standard R&D capability. 2001: only Company in India & second in the world to develop Thixotropic Water Swellable Gel 2002: Market leader in Hot Melt Gels (for PIJF Cable) in India commanding market share of over 35%. 2002: Registered turnover of approx. Rs. 28 crores & net profit of Rs.2.5 crores for the year ended 31st March 02. 2003: Initiated successful diversification of business portfolio into Performance Chemicals, i.e. Titanates and Adhesives and Sealants. 2004: Continued track record of Profitability and Dividend. 2005: Successful approvals from OEM customers like Maruti, Hero Honda, Telco, Mahindra, etc. 2006: Launch of Adhesives Sealants in Retail as well as 100% jump in export volumes. 2007: Participation of Canbank Venture Capital Fund as Equity partners in the company. 2005: Acquisition of business of Kores Polymer division and Brands and Distribution network of the division. Granted Export House Status OPPORTUNITIES, THREATS, OUTLOOK, RISKS AND CONCERNS The Company has mitigated considerable risk arising out of its dependence on the Telecom Cable market over the last 5 years. Adhesives and Sealants now contribute over 80% of its revenues and spread over more than 600 customers and 250 Distributors. The market is large and wide and the products range is wide. The risk of product obsolescence is also not very high as these products have wide ranging applications are sold through widely distributed channels. The companys profitability and revenues can be effected by slow down in volumes of exports or imports on account of Government policy, Global Market factors, any unfavorable trends in import tariffs, etc. Company is exposed to Foreign Exchange risk as 1/3rd of the revenues come from Exports though there is natural hedge in the form of large Imports of raw materials but there still remains a concern of Timing of Transaction/Volatility of Currency. Fluctuation in Crude Oil prices and Global Geo-political Dynamics can affect the cost of acquisition of inputs as most of the raw materials prices are linked to Oil Prices. SEGMENT WISE PERFORMANCE The Performance of various Business Units is enumerated below: (Rs. is Lakhs) SBU Domestic Export Total % Sales % Sales 07-08 07-08 TELECOM GELS (TG) 451.86 359.32 811.18 10.64 20.22 ORGANO-METALLIC 193.50 501.69 695.19 9.12 7.10 COMPOUND (OMC) 5950.08 166.65 6116.73 80.24 72.68 ADHESIVE, SEALANTS & IND. CONSUMABLES (ASIC) TOTAL 6595.44 1027.66 7623.10 100.00 100.00 ABU Performance FY 07-08 ASIC 80% Gels 11% OMC 9% KEY-HIGHLIGHTS OF 2007-08 Revenues have increased by 32.39% during the year under review compared to previous year. Revenues from Telecom Gels have reduced to 10.64% of the total revenues as against 20.22% last year. * Revenues from Adhesive, Sealants & Industrial Consumables have increased to 80.24% of total revenues as against 72.68% last year. * PAT has increased marginally as compared to the last year. EXPORTS Exports have constituted approx. 13.5% of the total revenues for the year. We have opened up new markets in UAE, Korea, Taiwan and USA for the companys new products. FUTURE OUTLOOK The Addressable market size for Retail of Adhesives is estimated to be in the region of Rs. 1500 Crores. The market size is large enough for your company to be able to comfortably gather 10-15% market shares in 3-4 years time, thereby bringing in a sizeable new business to the tune of Rs.100.00 Crores for your company. The construction chemicals exterior paints and textures market is estimated at approx. Rs. 2000 crores and with the acquisition of Pegasus - which is an stablished brand for more than 50 years , the company expects to grow its market share and revenues exponentially in this segment. We expect the construction business to record > 30% growth in revenues in the Indian economy and accordingly the company is positioning itself to benefit from this opportunity. INTERNAL CONTROL SYSTEM AND ADEQUACY The Company has a proper and adequate system of internal controls to ensure that all the assets are safeguarded against loss from unauthorized use or disposal and that transaction are authorized recorded and reported correctly. The company conducts internal audit of various departments and Processes through an independent internal auditor and reports observations along with Action Taken Reports to the management from time to time. The companies have also constituted a Credit Control team to Assess, Monitor and manage the quality of Customers and Receivables and to establish sound Risk management Processes. Your company has implemented an Enterprise Resource Planning Software module last year. The entire IT Hardware has been upgraded to the latest available and the software module is currently under implementation. We expect to be ERP online w.e.f. 1st April 2007. Your company has also initiated taking adequate Foreign Exchange risk cover for all foreign exchange transactions FINANCIAL PERFORMANCE Financial results and performance for the year are elaborated in the Directors Report. HUMAN RESOURCES Industrial relations continued to be cordial at our factory & Corporate Office. Training programmed has been organized to improve the job skills and productivity. Your company has increased its manpower strength to 114 from 95 of last year. A Core team has been formed which will carry out the Companys vision and strategy to make it a Rs 250 Crores Turnover company over a period of 3 years. A greater emphasis is now on Empowerment, Training and Skill development of Employees. The Company has initiated various Employees friendly welfare programs covering the family members also.