Federal-Mogul Goetze (India) Ltd Management Discussions.

(a) Industry structures and developments

Automotive Industry, globally, as well as in India, is one of the key sectors of the economy. Demographically and economically, Indias automotive industry is well-positioned for growth, servicing both domestic demand and, increasingly, export opportunities.Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and acts as one of the drivers of economic growth.

The auto industry is highly competitive, consisting of organized as well as unorganized sectors and is highly fragmented with a significant number of small and medium-sized companies because of which the business rules are changing to meet the tough competition prevailing in the industry. Innovation, technological upgradation and cost saving hold the key to success to meet the expectations of the exigent competitive circumstances. The Indian auto component industry has been navigating through a period of challenges.

During the financial year 2016-17, the combination of factors like low inflation levels and low interest rates coupled with the new launches of passenger vehicles pushed the automobile industry on the path of growth. Further, the Government had also launched several other initiatives such as "Ease of doing Business, "Start up India" " Smart Cities," " Skill India," " Digital India," etc. , that would support India s economic development. A predicted increase in Indias working-age population is likely to help stimulate the burgeoning market for private vehicles. Rising prosperity, easier access to finance and increasing affordability are expected to see four-wheelers gaining volumes, although two wheelers will remain the primary choice for the majority of purchasers, buoyed by greater appetite from rural areas, the youth market and women.

(b) Opportunities and Threats

The parent company continues to support the Company with its technical expertise. With widely recognized brands, superior technology, strong distribution network and a committed team of employees, the Company is well positioned to take advantage of the opportunities and withstand the market challenges. The Company strives to create sustainable profitable growth by using superior technology and maintaining product quality and offering wide range of products at competitive prices, which will give it a competitive edge in the market.

In order to fight the increasing pollution, the government has announced the implementation of Bharat Standard (BS)- VI by April 1,2020. BS-VI is an equivalent of Euro-VI norms being followed globally. Your Company perceives this as a significant opportunity and has already started development work with some OEMs in India on new engine projects. Federal-Mogul is currently producing many of the Euro-VI engine parts in Europe and for comparable engine standards in North America. In India your Company expects to be prepared to supply the products meeting, BS-VI before the deadline fixed by the government.

The Company competes with many independent manufacturers and ices of raw materials and other inputs.

distributors of component parts. Management continues to develop and execute initiatives to meet the challenges of the industry and to achieve its strategy for sustainable global profitable growth. There are limited sets of customers in our business, that is, the automobile manufacturers. Competition is intense, as we compete with suppliers both in the organized and unorganized segments. Technical edge, specialization, innovation and networking will determine the success of the Company in this competitive environment. Further, the policies of the Government play key role in the development of the automobile sector. Your Company has been employing the practices to proactively map the impact of its activities on its performance and profitability from economic environment and social perspectives.

(c) Segment wise or product wise performance

The Company deals principally in only one segment i.e. automotive components. Therefore, segment-wise performance is not applicable. The Company manufactures as well as trades in the automotive components. The Company is inter alia engaged in the manufacturing and sale of Pistons, Piston rings, Pins, valve seats and guides. The product wise performance is as under :

Rs. In lacs
Details of finished goods sold 31st March 2017 31st March 2016
Pistons, Piston rings and pistons pins* 125,518.80 127,590.17
Valve train and Structural components 9,790.42 9,052.89
Details of traded goods sold
Gasket 1,588.75 1,391.93
Engine bearings 613.52 745.32
Spark plugs 512.07 1,751.84
Liners 1,062.19 426.72
Brakelining 263.36 722.85
Others 709.03 1,282.91

(d) Outlook

The Management expects a moderate growth in the automobile industry during the year 2017-18. The Indian Meteorological Department has forecasted normal monsoon, which is a critical factor for the overall economic growth, including the automobile sector. Focus of the Government on the investment in infrastructure sector and its development and low interest rates are expected to give boost to the automobile sector. However, the increased cost of technology and increased raw material prices are likely to impact the growth of the automobile sector. Therefore, its going to be a mixed year for the auto component industry ahead.

The Company will endeavor to revitalize in near future as consumers regain confidence and vehicle demand increases. To remain competitive in the challenging and demanding environment, the benchmark has to be high in anticipation of the stated and unstated need of the customers and markets.

(e) Risks and concern

The Company operates in an environment, which is affected by various risks, some of which are controllable while some are outside the control of the Company. However, the Company has been taking appropriate measures to mitigate these risks on a continuous basis. Some of the risks that are potentially significant in nature and need careful monitoring are listed hereunder:

Raw material prices: Our profitability and cost effectiveness may be affected due to change in the price of row materials and other inputs.

Foreign Currency Risks: Exchange rate fluctuations may have an adverse impact on the Company

Technical Intensive Industry: The automobile industry is a technical intensive industry and thus faced with a constant demand for new designs, knowledge of nascent technology to meet market requirements.

Cyclical nature of the Industry: The Companys growth is linked to those of the automobile Industry, which is cyclical in nature. The demand for automobiles has a significant impact on the demand and prices of the products manufactured by the Company. A fall in the demand and / or prices would adversely impact the financial performance of the Company.

Increasing competition: Increasing competition in the auto equipment sector, may put some pressure on the market share.

Excess/ short capacity: Estimation of optimal manufacturing capacities for our products is critical to our operations. Should we for any reason, not invest in capacity expansion in near future could result in stagnation in our sales. Conversely, in the event we over-estimate the future demand or due to general lowering of the customer demand due to recession, we may have excessive capacity, resulting in under utilization of assets and/or sale of surplus products at lower margin, which could have material adverse effect on the financial results of the company.

(f) Adequacy of Internal Control Systems

The Company has an Audit committee headed by a non-executive independent director, inter-alia, to oversee the Companys financial reporting process, disclosure of financial information, performance of statutory and internal auditors, functions, internal control systems, related party transactions, investigation relating to suspected fraud or failure of internal audit control, to name a few, as well as other areas requiring mandatory review as per provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 with the stock exchanges. The powers of the Audit Committee, inter-alia, include seeking information from any employee, directing the Companys internal Audit function, obtaining outside legal or other professional advice and investigating any activity of the Company within the Committees terms of reference. The Company has a well-defined internal control system, which aims at protection of Companys resources, efficiency of operations, compliances with the legal obligations and Companys policies and procedures.

(g) Discussion on financial performance with respect to operational performance.

The required information forms part of in the Boards Report and the members may refer the same.

(h) Material developments in Human Resources / Industrial Relations front, including number of people employed

During the year under review, the training and development of employees remained priority of the Management and in this direction, several assessment and development programmes were conducted for high potentials and young talents. Additionally, focus for the year also remained on building leadership and functional capabilities of the employees. The Management Introduced psychometric assessments for evaluating right fitment for the job for the new recruits. The Company also conducted business simulation workshops and leadership programs for Plant Managers and High Potential employees. In addition to this, your Company Introduced Learning Advisory Councils for aligning training needs of the employees with business challenges and priorities.

The total number of salaried and hourly employees as at March 31,2017 stood at 3947.

CONSOLIDATED ACCOUNTS

The Consolidated Financial Statements of the Company for the financial year 201617, are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Consolidated Financial Statements have been prepared on the basis of Audited Financial Statements of the Company and its subsidiary company, as approved by their respective Board of Directors.

ABRIDGED FINANCIAL STATEMENTS

In terms of the provisions of regulation 36 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and section 136 of the Companies Act, 2013, the Board of directors has decided to circulate the abridged annual report containing the salient features of the balance sheet and statement of profit and loss account to the shareholders for the financial year ending on March 31,2017. Full version of the annual report will be available on Companys website www.federalmogulgoetzeindia.net and will also be made available to investors upon request.

In support of the green initiative of the Ministry of Corporate Affairs, the Company has also decided to send all future communications, including the annual report through email to those shareholders, who have registered their email id with their depository participant/Companys registrar and share transfer agent. In case any shareholder wishes to receive a printed copy of such communications, he/she may send a request to the Company, which will send a printed copy of the communication to the shareholder.

AUDITORS AND AUDITORS REPORT

At the 60 th AGM of the Company, M/s. Walker Chandiok & Co., LLP Chartered Accountants, (Firm Registration No. 001076N/N500013), New Delhi were appointed as the Statutory Auditors to hold office till the conclusion of the 62nd AGM of the Company subject to the ratification by members at every AGM.

As per section 139 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014, your directors propose before the shareholders the appointment of M/s Walker, Chandiok & Co., LLP, Chartered Accountants, (Firm Registration No. 001076N/N500013), as the statutory auditors of the Company from the conclusion of the forthcoming AGM till the conclusion of the AGM to be held in the calendar year 2022, subject to ratification of such appointment by the shareholders in every AGM held during the period. The written consent to such appointment and a certificate from M/s Walker, Chandiok & Co., LLP, Chartered Accountants, (Firm Registration No. 001076N/N500013), have been received to the effect that the appointment is in accordance with the conditions prescribed under Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and they satisfy the criteria specified under Section 141 of the Companies Act, 2013 read with Rule 4 of Companies (Audit & Auditors) Rules 2014.

The Board has duly examined the Statutory Auditors Report to the accounts, which is self-explanatory.

COST AUDITORS

The Board, on the recommendation of the Audit Committee has approved the appointment of M/s. Sanjay Gupta & Associates, Cost Accountants, as Cost Auditor, for the financial year ending March 31, 2018. The Cost Auditors will submit their report for the financial year ending 31st March 2017 on or before the due date.

In accordance with the provisions of Section 148 of the Companies Act, 2013 read with rules made thereunder, since the remuneration payable to the Cost Auditors is required to be ratified by the shareholders, the Board recommends the same for approval by shareholders at the forthcoming AGM.

SECRETARIAL AUDITORS

The Company had appointed M/s. Deepika Gera, Company Secretaries, New Delhi, to conduct its Secretarial Audit for the financial year ended March 31, 2017. The Secretarial Auditors have submitted their report, confirming compliance by the Company of all the provisions of applicable corporate laws. The Report does not contain any qualification, reservation or adverse remark. The Secretarial Audit Report is annexed as Annexure-8 to this report. The Board has reappointed M/s. Deepika Gera, Company Secretaries, New Delhi, as Secretarial Auditor of the Company for FY 2017-18.

CORPORATE GOVERNANCE REPORT

The Company is committed to good corporate governance practices. The Board endeavors to adhere to the standards set out by the Securities and Exchange Board of India (SEBI), corporate governance practices and, accordingly, has implemented all the major stipulations prescribed.

A detailed corporate governance report in line with the requirements of Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015 regarding the corporate governance practices followed by the Company and a certificate of compliance from Mr. Surinder Vashishtha, Proprietor of Surinder Vashishtha & Associates, Company Secretary, forms part of this Report as Annexure-9.