Birla Machining & Toolings Ltd merged Management Discussions

BIRLA MACHINING AND TOOLINGS LIMITED (FORMERLY DAGGER FORST TOOLS LIMITED) ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS a) Economy and Market Trends: Global and Indian Economy After witnessing a sharp downturn in 2008 and 2009, the global economy had started recovering with positive quarterly growth in US, Germany, France, etc. But the recent downgrading of US rating and the fears of extremely high national debt in Italy, Greece, Portugal and Spain makes the Western outlook cautious. But Indian economy being mostly domestic-growth driven is not likely to be affected much. In fact if the material prices drop because of negative Western growth it could be beneficial for India in terms of lowering cost of import and could bring down the inflation rate. As per the data released by International Monetary Fund (IMF), World GDP grew by 5.0 per cent in 2010. In financial year 2011, Indias economic performance was powered by a rebound in agricultural and service sector. The economy grew by 8.6 in financial year 2011. About the Company As already mentioned in the Directors Report, the Board of Directors of the Company in their meeting held on April 29,2011 approved the Scheme of Amalgamation of the Company and Birla AccuCast Limited with Birla Precision Technologies Limited (the Transferee Company) subject to the approval of shareholders of the Company and other regulatory authorities. It is proposed to realign businesses of above three Companies from a perspective of fund-raising, future growth and increase in intrinsic value of shareholders of the merged/consolidated Company. Therefore, with a view to facilitate the aforesaid decision, it is proposed to amalgamate Birla AccuCast Limited, Birla Machining & Toolings Limited with Birla Precision Technologies Limited. The Company has received No Objection to the proposed Scheme from Bombay Stock Exchange Limited. The appointed date of the Scheme of Amalgamation is I st April, 2010 subject to approval of the High Court of Judicature at Bombay. b) Opportunities/Future Outlook: It is predicted that emerging economies like India would continue to register reasonable growth in the coming decade as the Indian economy is characterized on strong fundamentals. The Company is very closely monitoring the changes in the market conditions, and making all efforts to position itself, at the right time and at the right place. From the proposed Amalgamation, the Company expects to achieve the synergy of Machining Business that exists between three entities to the best advantage of all stakeholders and also to achieve cost savings from more focused operational efforts, simplification of business processes, improved procurement and the elimination of duplication. c) Segment-wise Performance: The segment wise performance in detail is given in Note 13 of Schedule 19 to the audited accounts of the Company as available in this Annual Report. d) Threats/Risks & Concerns: Normal business risk is associated with machining industry, such as need for continuous technological up-gradation to meet customers high expectations and stringent quality requirements. Increase in input costs, changes in tax structure, change in interest rates, change in government policies/ laws of land, development and stability of Indian economy against the negative external and internal forces may also impact the overall performance of the Company. Profitability may be affected on account of competition from existing and prospective manufacturers of the Companys products. Further, as the Company proposes to amalgamate (discussed above), the delay in Government approvals may also affect the performance of the Company. All these risks are continuously reviewed by the management and acted upon. e) Internal Control Systems and their adequacy: Your Company continues to remain committed to maintain high standards of internal control designed to provide adequate assurance on the efficiency of operations and security of its assets. The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid down systems and policies are comprehensively and frequently monitored by your Companys management at all levels of the organization. f) Human Resources and Industrial Relations: Your Company continues to lay emphasis on qualitative growth of its human resources by providing congenial and constructive work environment, in consonance with its belief that the real strength of its organization lies in its employees. Industrial relations were cordial and satisfactory throughout the financial year. g) Financial highlights: a. Sales and Other Income The income during the financial year 2010-11 was Rs.211.10 Lacs against Rs. 545.93 Lacs during the last financial year 2009-10. b. Profit/Loss During the financial year 2010-11 the Company has incurred a loss of Rs. 34.81 Lacs as against loss of Rs. 1609.41 Lacs before Tax in the financial year 2009-10. However, after taking into consideration tax adjustment the net loss of the Company during the year 2010-11 was Rs 36.37 Lacs against net loss of Rs 1727.64 Lacs for the year 2009-10. Forward Looking Statements Statements in this report on Managements Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. Forward-looking statements are based on certain assumptions and expectations of future events and the Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The important factors that could make difference to the Companys operations includes the economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, change in Government regulations, tax Saws and other statutory and numerous incidental factors. The Company assumes no responsibility to publicly amend or revise the forward-looking statements or any loss to the investors in the shares of the Company making investments relying on such forward-looking statements.