thapar ispat ltd Management discussions

THAPAR ISPAT LIMITED ANNUAL REPORT 2009-2010 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRIAL AND ECONOMIC SCENARIO The fiscal year 2009-2010 begin as a difficult one. There was a significant slowdown in the growth rate in the second half of 2008-09, following the worldwide financial crisis in 2007. The growth rate of GDP in 2008-09 was 6.7%. There was apprehension that this trend would persist for some time. The real turnaround came in the second quarter of 2009-2010 when the economy grew by 7.9% with the industrial sector growing at 8.2%. the broad based nature of recovery of the economy and huge internal consumption demand. However, since December 2009, there have been signs of some respite , the industrial and economic scenario in context of Steel sector seems to be fairly good. The signs of revival of infrastructure and construction make our sector even more lucrative and the one with high growth potential. THREATS, RISKS AND CONCERNS Steel industry is highly fragmented and competitive and increased competitive pressure may adversely affect the financial results. Significant increase in prices or shortage of raw material could affect the results of operations and financial conditions of the company. Any disruption in supply, may adversely affect the operation of the company. Any variation in demand of derived industries may adversely affect the demand of the products. Most of the raw materials are procured from local producers which involve logistic issues, economic decision making into ensuring optimum inventory. Rising prices of raw material is another obstacle. As steel industry is capital and labour intensive , it involves high power and fuel consumption , so any change in the cost of capital, labour, fuel and power may adversely affect the performance of the company. Any change in tax regime, financial policies and environmental regulations by Central as well as State Government, political instability at the Central or State level may affect the financial position of the company. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Thapar Ispat Limited has a comprehensive internal control system equipped with qualified and experienced personal.. This ensures smooth corporate functioning and astute control of quality management within the overall work ethic of the company. Your companys internal control system ensures that all transactions are duly authorized, recorded and reported. Other than that the company has put in place well defined delegation of power with authority limits for approving revenue as well as capital expenditure. The company has an Audit Committee which regularly reviews the internal control systems. HUMAN RESOURCES/INDUSTRIAL RELATIONS The industrial relations climate in the company remained harmonious and peaceful during the year. The company has been taking initiatives for harnessing the inherent strengths of its employees, and for continuous improvement in work culture and operating and maintenance practices. CAUTIONARY STATEMENT Statement in the Directors Report and Management and Discussion Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements*. Although we believe our expectations are based on reasonable assumptions, these forward looking statements may be influenced by numerous risks and uncertainties that could cause actual outcome and results to be materially different from those expressed or implied. Important factors that could influence the companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in government regulations , tax laws and other factors such as litigations and industrial relations. The company takes no responsibility for any consequences of decisions made based on such statements , and holds no obligation to update these in future. By order of the Board For THAPAR ISPAT LIMITED Sd/- Sd/- (Damanjit Singh) (Bhag Singh) Executive Director Director PLACE: LUDHIANA DATED: 03/12/2010