Decolight Ceramics Ltd Management Discussions

Financial Highlights

Highlights are as under:-

(Rs. In lacs)

The business performance of the company was seriously affected owing to the volume of operations remained very low level due to financial difficulties. The production was restricted to only one kiln during the year under review. Production facilities remained closed mostly due to working capital difficulties. Plant efficiency has been consistently decreasing due to old machineries and technologies. Fixed expenses, interest charges and other expenses remained thus unabsorbed leading to incurring losses as given above.

Segment information

The company is operating in one segment namely "Tiles and other building material, as given in the financial statement. The major and material activities of the company are restricted to only one geographical segment i.e. India, hence the secondary segment disclosure is not applicable.

Vitrified Tiles: The total size of the Indian ceramic industry is expected to be around Rs. 15000 Cr and out of this vitrified tiles segment is expected to constitute the size of Rs. 5500 Cr. The production capacity of vitrified tiles continued to remain 6,22,500 sq mtrs per day contributed by about 83 units . On global front, the consumption per head of ceramic tiles, which includes vitrified tiles, comes to 3 to 4 sq mtr in Europe, 1.8 sq mtr in China and 0.45 sq mtr in India. The demand for vitrified tiles is driven by the developments and growth in construction, realty, housing and infrastructure sectors.

Vitrified Tiles: The size of the Vitrified Tiles segment is expected to constitute about 35% of the ceramic industry. With Vitrified Tiles, the size of the ceramic tiles market has increased considerably. It is expected that vitrified tiles segment will capture the bulk of the market gradually, replacing the conventional floor and wall tiles segment. These tiles are light and have the added advantage of being offered in designer looks as compared to mosaic tiles, which are heavier and more expensive to transport. The per capita consumption of ceramic tiles in India is very less as compared to the other countries. Therefore, the vitrified tiles segment is likely to maintain its growth momentum as the invaluable aura and elegance of vitrified tiles flooring is distinctly visible and this attraction has stimulated the growth of the vitrified tiles segment and the segment is growing at a faster rate.

Presently the companys plant is closed and the companys commercial banker has taken over symbolic possession of the companys plant and properties including collateral securities. The managements efforts are on to find out suitable investors so as to resume the operations of the company and to clear the dues of the bank.

Opportunity and threats

Due to the ongoing financial difficulties, presently the Companys plant is closed. Opportunities available in the industry in which the company is placed can be ceased only after inducting sufficient funds for which the management efforts are on including finding out potential and willing investors to take the company on track.

Risks & Concerns

The ceramics industry is a highly energy intensive sector. Petroleum and raw material products together form the most critical component in the production of the industry. Higher input costs due to the cascading effect of inflation vis-a-vis manufacturing sector may contribute to shrinking of margins.

The ceramic industry has been modernizing continuously, by newer innovations in product design, quality etc. However, in order to make the Ceramic Industry domestically and globally competitive, initiatives in the national and international level for constant technological and quality up gradations must emerge.

The ceramic industry is suffering from labour issues and non-availability of skilled man power and to overcome this automation needs to be done for which capital infusion is needed. H owever, the increasi ng i nterest rate environment can put pressure on margin and cash flows in addition to deferring corporate capex plans.

The structure of Indian ceramics industry is highly fragmented with very few large players and a large number of SMEs who face problems of poor economies of scale.

Internal Control

The company has an adequate internal control system commensurate with the size of the company and nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services.

Internal Audit

Looking to the small volume of business operations carried out by the company during the year and critical financial position of the company, no internal audits were carried out during 2013-14.

Cautionary Statement

The statement in this report may be forward looking within the meaning of applicable laws or regulations. These statements are made on certain assumptions and expectations of future events. Actual results could however differ materially from those stated above . The Company and its Board of Directors assume no responsibility in respect of the forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information and events.