Aditya Forge Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian Forging Industry has emerged as a major contributor to the manufacturing sector of the Indian Economy. The industry was previously more labour intensive, but now with increasing globalization it is becoming more capital intensive. The small scale units too are increasing their capital investment to keep pace with the increasing demand especially in the global markets as also broadening the areas of demand for forgings. Many of them are now suppliers to Original Equipment Manufacturers (OEMs) in the automobile sector also, which speaks volumes about efforts at technology and quality up gradation.

OPPORTUNITIES, OUTLOOK AND THREATS

The Board of Directors of the Company have been negotiating with the Madhavpura Mercantile Bank for One Time Settlement (OTS). Accordingly, acceptance, in principle is conveyed to the Bank for repayment of dues. The promoters have expressed willingness to infuse fresh Funds into the Company once the amount of OTS is finalised.

The future looks encouraging for the forging industry in terms of the expected surge in global demand. As a result of liberalization, more MNCs have entered the domestic automobile market. This has opened up more business opportunities for the forging industry. Our products, being major components of Auto industries, your Directors are optimistic for bright prospects in the years to come.

THREATS AND RISKS

Stiff competition, increasing input costs and non-availability of working capital funds has worsened the financial position of the company.

However, Promoters of your Company have been putting their best efforts to tide over the situation by injecting their funds.

FINANCIAL PERFORMANCE WITH RESPECTTO OPERATIONAL PERFORMANCE

The financial condition of the Company has worsened due shortage of funds which resulted in gross underutilisation of capacity and breakeven not being achieved. Due to accumulated losses wiping out the Net Worth of the Company and as per the recommendations of the Auditors of the Company, the Directors recommend that the Company make a reference to Board of Industrial & Financial Reconstruction under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985.

INTERNAL CONTROL SYSTEM AND THEIR EFFICACY

The Company has adequate internal control system in various operational areas of the Company to ensure that the system is being properly observed for better results.

QUALITY

The Company has been focusing on up gradation of quality and innovation.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS Industrial Relations remained cordial throughout the year under review.

CAUTIONARY STATEMENT

Statement in this management analysis detailing the Companys objectives, projections, estimates, expectations, or predictions may be "forward looking" statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that may influence your Companys operations include Global and domestic supply and demand conditions affecting selling prices, input availability and prices, changes in Government policies, regulations, tax regimes, economic development within and outside the country and other allied factors. The Company assumes no responsibility to publicly amend, modify or revise the forward looking statement on the basis of subsequent developments, information or events