Avon Corporation Ltd Management Discussions

We, Avon Corporation Limited, are truly inspired by the eternal symbol of mankinds progress. The glory of weighing scales industry itself needs no introduction. Its use in various sectors like like healthcare, pharma, government, retail, gyms, jewellery, etc. and large number of other sectors, are indeed a fascination to all of us. The Company is a one of the leading manufacturer of weighing scales, with an objective to provide highest quality standard products to its customers. To meet the customer demand at every level is the vital force that drives the organization towards higher performances standards of manufacturing and product quality. To achieve this at every stage of manufacturing cycle, the Company has set the Six P Progress Maxim based on Policy, Product, Process, Prevention, Protection and Project, enabling it to stay at the forefront of Manufacturing Technology. Our professionally qualified team of technologist and engineers ensure a high satisfactory level of products in all respects.

(A) INDUSTRY STRUCTURE AND DEVELOPMENTS:

Weighing industry is booming like fire in the forest, in todays world although consciously or unconsciously we weigh most of the things from the time we get up from the bed till we are off to sleep, starting from your tooth paste how much to use till how many calories to consume in our day. So these situations have created hyper growth in weighing industry. Weighing industry is may be ranked among the necessaries of life to every individual of human society. They enter into the economical arrangements and daily concerns of every family. They are necessary to every occupation to human industry. The demand for weighing scales is expected to increase considering growth of user industries viz. diversified with different kinds of software related to various industries like healthcare, pharma, government, retail, gyms, jewellery, etc.. There are a number of players in the Industry, many in SSI Sector. Therefore, the Markets & Capacities are fragmented in the Country.

The development of the weighing scales industry is linked with the countrys economic and health development. The Weighing scales industry overthe decade has grown by about 45%. Its a full- fledged industry which is all geared to set new records.

(B) OPPORTUNITIES AND THREATS

Our Company is engaged in manufacturing Weighing Scales, which has utilizations in various industries healthcare, pharma, government, retail, gyms, jewellery, etc. Since years the Company has served its customers successfully. As market demand forthe weighing scales is increasing, opportunities for our Company is also growing high and our competition in the market is becoming tough but we have confidence in our high quality productto survive and grow in a competitive market. The growth of the industry allows the necessary opportunities forthe Company to grow. The Company believes that commitment and reliability in dealings with customers are primary pre-requisites for successful and sustained business relationship. This principle controls all aspects of the Companys approach to its customers. The Company shall endeavour to provide value for money by maintaining consistency, quality and reliability. The Companys opportunities lie in the adequate demand forthe Weighing scales which has utilizations in various industries healthcare, pharma, government, retail, gyms, jewellery, etc. The Company has sustained intense competition in its segment and has created its own different image.. The Company has a wide dealer network spread all over the country through which the Company has already established its presence in the market. The Company has more than a decade of rich experience of serving its customers beyond their expectations. With the growth of the industry and introduction of new products and technology, the industry presents excellent opportunity for growth and profit earning forthe leading and established players.

• The Company may face tough competition from the leading players in the Industry.

• Growing consumer awareness is driving up the expectations in terms of providing world class features and technology for which adequate price realization is not always possible.

• Stringent norms and regulations could bring new complexities and cost increase for the industry, impacting the Companys business.WTO, Free Trade Agreements and other similar policies could make the market more competitive for local manufacturers.

(c) PERFORMANCE:

The year gone by was a year full of achievements for the Company. The Company has improved its performance significantly in the previous year. It has gained the ability to have revenue streams from a number of industry sectors as well as retail sectors. The demand has augmented mainly due to amortization of manufacturing, procurement and sales system. The Company has launched various products with superior technology in the Market. The Company is involved in manufacturing weighing scale. In order to expand the business further, the Company has opened a wholly owned subsidiary at Sharjah, Dubai. The figures of production and sales forthe products being manufactured by the Company are furnished in the Notes on Accounts.

Avon has developed specific industry expertise in providing weighing solutions in pharmaceuticals, chemicals, gems, jewellery industries, etc.

(D) FUTURE OUTLOOK

Weighing scales are going to buoyant in the coming years in the market. It acts as the necessity, comfort and luxury in ones life and therefore would be demanded by the people of all classes in society. In all past years our domestic industry had performed very well and demands for the the products are ever increasing. Obviously it has bright future the Company has built itself to face each and every market challenges. The long-term outlook of Avon is positive, as the demand for its products grow at a enhanced rate. Our Company is sure of achieving its goals by its un-definable and its operational efficiencies. Looking at the growing demand of the Weighing Scales and to introduce a new set of exclusive scales, the Company has proposed to increase the installed capacity of manufacturing Division by setting up additional machines.

Your Company seeks to be a cost effective high quality producer and is focused on maintaining its cost competitiveness in order to avail benefits of large scale production at one place.

(E) RISKS AND CONCERNS:

The link between risk and reward has become more important for the company, as it grapples with the challenges of growing and delivering profit amidst stiff competition from global players. The world economic environment, client expectations and competitive landscape continue to evolve. In the highly competitive market subject to rapid technological changes and regulatory developments, the Companys ability to manage diverse risks determine its success. As the business environment remains challenging and scale becomes the most critical component for survival, the Company continues to invest in growth drivers namely people and processes besides the expansion plan so as to remain in the race at a good position. The Company continues to remain focused on its core competence product i.e. Weighing Scales. The Company is also prone to certain risks and concerns such as increase in material costs, competition from un-organised sector, increase in capital costs to meet the increased demand for new products. Another major source of Companys products demand is X, which mainly depends on the Y Failure of Y will definitely affect the demand of Companys products. Low value addition and stiff competition in the market continues to have an impact on the Companys realizations and also exerts pressure on the margins.

(F) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has adequate internal control systems and procedures that are commensurate with the size and nature of its business. The system of internal control is designed to manage rather than eliminate risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or losses. During the year controls have been refined and improved. Implementation internal control policy is achieved through a clearly defined operating structure with lines of responsibility and delegated authority. The Companys operating procedure includes appropriate systems for reporting information to management. These procedures are business dependent but all significant operational business use newly upgraded systems with automated controls and reconciliation process. In addition, we have a comprehensive Management Information System involving daily MIS reporting, monthly and quarterly performance reviews. A number of processes have been instituted for monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective actions. The Company has well developed and adequately staffed internal audit and management audit function that work under the guidance of the Audit & Governance Committee. A Management Audit team headed by Managing Director has also been formed that reviews regularly the significant internal audit observations to ensure all issues are properly addressed.

(G) DISCUSSION ON OPERATIONAL AND FINANCIAL PERFORMANCE:

Results of operations

The Audited Consolidated Financial Results are given for the Financial year ended on 31st March, 2013. The report contains review of the operations of the Company

The Company on consolidated basis earned total revenues of Rs.611959135.23 and the net loss after tax recorded by the Company was Rs. 1262512176.88 . The Company incurred total expenses of Rs 1763600209.32.

Consolidated Profit before and aftertax, the loss before tax was Rs.1261419782.88 The Consolidated net loss after tax was Rs. 1262512176.88

(H) HUMAN RESOURCE DEVELOPMENT

The dedicated team of employees atAvon, earns credit for the Companys performance. Industrial relations have been harmonious and morale and efficiency high. The Company believes that the human resources are vital resource in giving the Company a competitive edge in the current business environment. The Companys philosophy is to provide congenial work environment, performance oriented work culture, knowledge acquisition/dissemination, creativity and responsibility. As in the past, the Company enjoyed cordial relations with the employees at all levels. CAUTIONARY STATEMENT:

Statement in the Management Discussion and Analysis describing the Companys objectives, projections, expectations, estimations are based on current business environment. Actual results could differ from those expressed or implied based on future economic and other development. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.

PRACTICING COMPANY SECRETARY CERTIFICATE ON CORPORATE GOVERNANCE

The Members

M/S Avon Corporation Limited

DLH Park, Office No. 1106,11* Floor,

NearMTNL, S.V. Road,

Goregaon (W), Mumbai - 400 062.

We have examined the compliance of conditions of Corporate Governance by M/s Avon Corporation Limited (the company), having registered office situated at DLH Park, Office No. 1106,11 * Floor, Near MTNL, S. V. Road, Goregaon (W), Mumbai - 400 062. forthe year ended March 31,2013, as stipulated in Clause 49 of the Listing Agreement of the said Company with the M/s Bombay Stock Exchange Limited, Mumbai.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examinations were limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement with M/s Bombay Stock Exchange Limited, Mumbai.

As perthe records of the Company, there were no investor grievances remaining unattended for period exceeding one month against the Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

(Practicing Company Secretary)	For Nishant Jawasa
Place: Mumbai	M No.:FCS 6557, CR No. 6993
Date: 30.05.2013

Declaration by Managing Director (MD)

As provided in Clause 49 of the Listing Agreement with the Stock exchange, I, Pankaj Saraiya, Managing Director of Avon Corporation Limited, hereby declare that all the Board members and Senior management personnel have affirmed the compliance with the code of conduct for the year ended 31⁵¹ March, 2013.

Place: Mumbai Pankaj Saraiya

Date: 30" May, 2013 (Managing Director)

Certificate by Chief Executive Officer (CEO)

I, Pankaj Saraiya, Managing Director/CEO of Avon Corporation Limited certify that:

(a) We have reviewed financial statements and the cash flow statement forthe year and that to the best of their knowledge and belief:

(i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

(ii) these statements together present a true and fair view of the Companys affairs and are in compliance with existing accounting standards, applicable laws and regulations.

(b) There are, to the best of their knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Companys code of conduct.

(c) They accept responsibility for establishing and maintaining internal controls for financial reporting and that they have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and they have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps they have taken or propose to take to rectify these deficiencies.

(d) They have indicated to the auditors and the Audit committee:

(i) significant changes in internal control overt inancial reporting during the year;

(ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and

(iii) instances of significant fraud of which they have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Companys internal control system overt inancial reporting.

Place: Mumbai	Pankaj Saraiya
Date: 30th May, 2013	(Managing Director & CEO)

AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE

To the Members,

Avon Corporation Limited

We have examined the compliance of conditions of Corporate Governance by Avon Corporation Limited, forthe year ended on 31 st March 2013, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination has been limited to a review of the procedures and implementation thereof adopted by the Company for ensuring compliance with the conditions of the Corporate Governance as stipulated in the said Clause. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us and based

on the representations made by the Directors and the Management, we certify that the Company has complied with the conditions of

Corporate Governance as stipulated in Clause 49 of the above-mentioned Listing Agreement.

We state that such compliance is neither an assurance as to future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

ForAtulB.Shah&Co.

Chartered Accountants

F.R.NO.130818W

AtulShah

Proprietor

Memb.No.:033137

Mumbai

Dated: 30.05.2013