Ennore Coke Ltd Management Discussions

For the period ended 31st March, 2017.

The domestic metallurgical coke industry was suffering from the problems of low demand from steel plants on one hand and excessive dumping of met coke by China on the other hand. This year also continued with the same trend resulting in domestic met coke industry operating at around 25% capacity utilisation. Because of the excessive dumping of met coke by China at a price less than or equal to cost of coking coal had impacted the financial health of the domestic met coke manufactures. As a result many met coke producers stopped production. The total import of met coke to India in this year 2016-17 was around 4 MTPA while production by domestic merchant met coke producers was around 2.5 MTPA.

The year 2016 also saw the turnaround being scripted by putting the worst behind. The various safeguard measures granted to steel industry saw the domestic steel production rise which resulted in an increase in demand for met coke. Demand started picking up from mid of 2016-17. Imposition of Anti-Dumping Duty of USD 25.20 on met coke imported from china came as a major relief for the domestic merchant coke industry. The Anti-Dumping Duty provides protection against dumping from China for couple of years.

The Company is focused on manufacturing highest quality metallurgical coke from the existing plants by sourcing finest grade of coking coal across the world and by introducing operating practices across all the functions in delivering consistent quality products and services offering to the market. Coke is mainly consumed in Steel industry, Cement industry, furnaces for small castings and gas producers among others

Outlook

As you aware, the Company has been carrying huge debts. Total banking dues as on 31st March 2017 was Rs. 10328 lakhs. The accounts of the Company were downgraded as NPA by all the bankers concerned due to non-payment of interest and repayment of instalments by the Company for over a year. The Company is in the process of making an application for initiation of Corporate Insolvency process (CIP) for quick resolution of cases like the one faced by the Company.

The action of the Company is a sincere efforts to chalk out a durable and successful resolution plan in consultation with the Committee of Creditors and the future of the company depends on the outcome of resolution plan.

Opportunities & Threats

As per National Steel Policy 2017, the steel sector follows a sustainable path of development in respect of augmenting capacity to 300 Million tonnes. Government would give domestic steel a priority in all infrastructure projects undertaken by the Government and such measures are bound to increase demand for domestic steel. The increase demand for steel would result in an increase demand for met coke.

The threats lies in any sudden major policy shift arising from unpredictable global leadership. Any major policy changes in USA or any change in demand pattern in China can disturb the market. However the Industry is confident of a faster recovery to better days.

Risks & Concerns

The prospects of the met coke industry are correlated with the prospects of the steel industry. Any adverse market conditions like global recession, euro zone crisis and severe competition from old and established players are the main concerns of the Company. In addition to that timely availability of raw materials at a reasonable price is therefore critical for survival of the industry.

Outlook

Though the current outlook of coke industry is weak due to weak economic environment, the demand of coke in the year to come is expected to increase due to continuing Industrialization and growth in the steel sector in the country. The biggest opportunity lies in the growing middle class in India and its burgeoning demand.

Human Resources

Human Resources is a high priority area and the company strives towards creating a motivating work environment, empowering employees, providing growth opportunities and maintaining a congenial atmosphere with equal opportunities for all. The company conducts multiple competency development programmes to prepare its work force to effectively manage fast paced changes in the industry.

Internal Control Systems

The Company has developed adequate internal control measures commensurate to its size and business complexities. These are established to ensure accurate recording of financial and operational information, adherence to relevant statutes protecting unauthorized use of assets and ensuring compliance of corporate polices. The report of internal auditors is submitted to the Audit Committee, which further review the adequacy of the Internal Control System.

Managements Responsibility Statement

The Management is accountable for preparing the Companys financial statements and related information that appear in this annual report. It believes that these financial statements fairly reflect the form and substance of transactions, and reasonably represents the companys financial condition and results of operations in conformity with Indian General Accepted Accounting Principles.