balaji galvanising industries ltd Management discussions

MANAGEMENT DISCUSSION

Pursuant to Clause 49 of the Listing Agreement, the Management Discussion and Analysis Report covering the performance and outlook of the Company is given below:

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Steel Industry is considered to be the backbone of engineering industry serving Automotive, Agricultural, Mining and Earthmoving Equipment Industry and almost all downstream engineering industry. The FY 2013-14 was challenging with lower growth in industrial production mainly due to continuing high rate of inflation and depreciation of the rupee. These factors had an adverse impact on the economy resulting in lower GDP growth rate. Rising input costs, slow pace of industrial production, infrastructure development and the impact of global slowdown constrained the performance of the industry. All most all sectors registered lower growth rate during FY 2013-14. Hence, it affects the steel industry as well.

OPPORTUNITIES AND THREATS:

• The biggest opportunity before Indian Steel sector is that there is enormous scope for increasing consumption of steel in almost all sectors in India.

• The global economy is reviving from slowdown and would offer better business opportunities in near future. Further, stable government placed in India would indicate positive growth signal for an Indian Industry though in near term some short term challenges. Likely increase in the Government spending towards various infrastructure sectors would create a rise in the demand in several sectors of the economy, of which the company would be a beneficiary. Planning Commission, Government of India, has also emphasized on infrastructure development to achieve GDP growth and this would open new opportunities for the business.

• The Steel sector was one of the primary vehicles of economic development in Independent India. India is endowed with essential raw materials such as iron ore and coal. The Industry has widespread forward and backward linkages with rest of the economy. The Industry has passed through various phases of changing domestic and external policy environment. The Industry as a whole has responded to the emerging compulsions of the changing times. It has survived well with its impressive array of achievements.

• The Companys core competence in manufacturing of galvanized wires and other products find easy demand due to dearth of such capacities and only few units are coming up due to pollution norms. This brings the advantages in maintaining its leadership in local markets and the markets for such specialty products.

• With capacities to be fully utilized and measures being taken to further improve on the same, the production is slated to grow resulting in improved revenues.

THREATS

• The higher inflation rate resulting in higher interest rate and hike in commodity prices may adversely affect your Companys financial performance.

• Technological changes often force the Industry structure to change. For a developing country like India where capital itself is costly, technological obsolescence is a major threat.

• With a high component of fixed overhead expenses as compared to the low production level the overall expenditure increased proportionately.

• Due to shortage of electricity, the Company has to depend on alternate sources of energy.

• Scanty financial resources also place pressure on further growth in capacity.

Risks & Concerns

Your Company continuously monitors and revisits the risks associated with its business. It has institutionalized the procedure for identifying, minimizing and mitigating risks and the same are reviewed periodically. The Companys Structured Risk Management Process attempts to provide confidence to the stakeholders that the Companys risks are known and well managed. The risk management framework ensures compliance with the requirements of amended clause 49 of listing agreement.

Risk Management comprises three key components which are as below:

(i) Risk identification

(ii) Risk assessment and mitigation

(iii) Risk monitoring and assurance

Your Company has identified the following aspects as the major risks for its operations:

(i) Economic Risk

(ii) Foreign Exchange Risk

(iii) Industrial Risk

The risk mitigation plans are reviewed regularly by the Audit Committee of your Company.

Companys Performance

Please refer the Directors Report on performance review.

Internal Control System

The Companys comprehensive and effective Internal Control System ensures smooth business operations, meticulously recording of all transaction details and ensuring regulatory compliance and protecting the Companys assets from loss or misuse. The Company has adequate internal control system and well laid-down policies and procedures for all its operations and financial functions. The objectives of these procedures are to ensure that all its assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly. The adequacy of internal control systems are reviewed by the Audit Committee of the Board in its periodical meetings.

Forward-Looking Statement

This Report contains forward-looking statements that involve risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

	By the Order of the Board
	For Balaji Galvanising Industries Ltd.
Date : 14th day of August, 2014	Shiv Bhagwan Bagaria
Place : Secunderabad	Chairman