Eastern Gases Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

The incumbent government is in a full swing to bring the economy back on its feet. The government has signaled that in the days to come, the market realities will come thick and fast, giving the economy a much needed respite from subdued prices and subsidy. It is estimated that the subsidy from subsidized LPG cylinder and Kerosene it is only a matter of time that the economy is given a "bitter medicine", which will have a ripple effect on regions and markets. The global economy saw some major turmoil in the last fiscal impacting the developed and developing nations with equal vigour. Due to the global slump, the international crude markets continued to see a supply glut which prevailed all through the fiscal fuelling further challenges for the natural gas markets. The Indian energy basket mix also took a hit with regards to the natural gass share though benefitting the overall governmental exchequer with reduced energy prices. Indian GDP remained the silver lining in the global economic arena with a commendable growth of around 7.6%. Your Company Eastern Gases Limited has been able to stand the test of these turmoils and was buoyant to sustain its market share in overall energy basket in the highly competitive energy market.

The report, "Changing Business Landscape and New Set of Challenges & Opportunities in LPG market in India", conceived by Infra Insights is rightly timed and designed to provide an in-depth assessment of key elements such as: Changes in the historic subsidy regime in LPG segment, Impact of domestic LPG price recovery on end-user market, New set of opportunities & challenges for Oil Marketing Companies and Parallel Marketing Companies in LPG and outlook on likely changes in the overall LPG business landscape in India. The contents of the report are elaborate and the framework as such is designed not only for the LPG import and retail & marketing companies but also for the companies involved in the manufacturing of the LPG cylinders, Bulk LPG storage, Kit manufacturers and OEMs. LPG industry is not new to India and dates back to 1950s. In India, the LPG industry is quite extensive and there are players across the LPG value chain, such as: LPG importers and import terminal operators, LPG storage tank manufacturing players, LPG suppliers & distributors catering to: Domestic, Industrial, Commercial and Transport, LPG cylinder manufacturers and LPG kit manufacturers. .

LPG is present in all the four key end-consumer segments: Domestic, Industrial, Commercial and Transport. With the growth and economic development in the country, an increase in the energy/fuel consumption of the consumer segment is inevitable. With the rise in the energy requirement of the country, there is definitely an opportunity for the LPG industry to scale-up and increase its penetration in the consumer base

MARKET SIZE

Backed by new oil fields, domestic oil output is anticipated to grow to 1 MBPD by FY17. With India developing gas-fired power stations, consumption is up more than 160 per cent since 1995. Gas consumption is likely to expand at a CAGR of 21 per

cent during FY08-17.Domestic production accounts for more than three-quarters of the countrys total gas consumption. India increasingly relies on imported LNG; the country was the Fourth-largest LNG importer in 2016, accounting for 5.5 per cent of global imports. Indias LNG imports are forecasted to increase at a CAGR of 33 per cent during 2012-17.

State-owned ONGC dominates the upstream segment (exploration and production), accounting for approximately 60 per cent of the countrys total oil output (FY17).

IOCL operates 11,214 km network of crude, gas and product pipelines, with a capacity of 1.6 MBPD of oil and 10 million metric standard cubic metre per day (MMSCMD) of gas. This is around 30 per cent of the nations total pipeline network. IOCL is the largest company, operating 10 out of 22 Indian refineries, with a combined capacity of 1.3 MBPD and thus dominate the LPG Retailing and Distribution segment.

FINANCIAL PERFORMANCE REVIEW OF THE COMPANY

The year 2016-17 has turned out to be challenging year. Total sales stood from 26776.90 lakhs to 25415.57 lakhs, net profit before tax from 447.28 lakhs to 96.70 lakhs. Company large sum was stuck with clients of the company which landed company into such position.

1. Share Capital - The company has authorised share capital of Rs. 1808 lakhs of face value Rs.10/- The paid up share capital is Rs.1500 lakhs. Further company has made a preferential issuance of convertible debentures during the year. Company expect to receive full amount of debentures by FY 19.

2. Reserve and Surplus-Total accumulated profit as on 31-03-2017 is Rs. 1921.28 lakh.

3. Fixed Assets - During the year under review, total additions to the gross block of assets was Rs. 60.37 lakhs

4. Investments in Capital Market- The Company has not made any fresh investment in capital market during the year.

SEGMENTWISE OR PRODUCTWISE PERFORMANCE

The same is not mandatory for Small and Medium Sized Companies.

DISCLOSURE BY THE MANAGEMENT

Your Board has received confirmation from its managerial staff that they had no personal interest in any material, financial and commercial transactions of the company.

INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT

The Company has an in-house team in internal audit department and also availed services of external firms of consultants and chartered accountants to help the Company to strengthen the internal audit and risk management functions.

CAUTIONARY STATEMENT

Statement in this report, particularly those which relate to Management Discussion and Analysis, description of companys objective, estimates and expectations may constitute forward looking statements within the meaning of applicable laws or regulations. Actual results might differ materially from those either. The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in the future.

RISK MANAGEMENT

The Company has a risk management framework in place under which the management identifies and monitors business risks on a continuous basis and initiates appropriate risk mitigation steps as and when required. The Company periodically place before the Board the risk assessment and minimization procedures being followed by the company and steps taken by it to mitigate those risks through a properly defined framework.

For EASTERN GASES LIMITED