Gujarat Apollo Industries Ltd Management Discussions.

The year that was

FY 2018-19 witnessed a steady growth. The market sentiments were cautiously optimistic. Your Company achieved a moderate success during the year and managed to maintain its market share in the Crushing and Screening business.

Your Company, while focusing on the Crushing and screening equipment business, has initiated the process of identifying new products related to material handling. The diversification process takes cognizance of the companys core strength in engineering, R & D & manufacturing. The highlights of FY 2018-19, in brief are as follows.

Financials

The Companys financial results can be summed up as under:

1. Total Revenue from operations of the Company is Rs. 2,983.16 Lakhs.

2. Profit Before exceptional items & Tax of the Company is Rs. 936.70 Lakhs.

3. Profit/Loss after Tax is Rs. 625.46 Lakhs.

4. Basic and Diluted Earnings per Share is Rs. 4.94.

Diversification

Your company is also looking at other areas of diversification – special purpose machines for other sectors. Such diversification will support the growth and higher utilization of resources.

The management has and will always continue to strive in protecting the interests of all the stakeholders thereby justifying the trust and confidence reposed on them by the stakeholders. The management has always adopted an unbiased attitude in all its actions and has consistently followed the practice of transparency. The management firmly believes in profit sharing and has made sincere efforts to fulfill the expectations of the stakeholders.

Your Company is always alive to the market conditions and with a combination of R&D, dedicated efforts and manufacturing expertise managed to obtain maximum mileage in a difficult environment. Taking cognizance of this difficult period, in the year under review, the Company relied on market money as well as on the internal accruals.

The detailed Management discussion and analysis report, industry wise, economy wise, product wise and in general is as follows:-

Industry Structure:

India continues to be one of the fastest developing countries. International companies are looking at India for growth. But for the trying economic conditions in many parts of the globe, India would have witnessed a far higher level of investments. Large global Corporations have plans to invest billions of dollars in several mega projects in India over the next few years which augur well for the growth in demand.

The Crushing & Screening market segment in India is a part of Mining Sector and is experiencing a challenging environment. Passing of the Mines and Minerals (Development and Regulation) (MMDR) Amendment Ordinance, 2015 is a significant step in revival of the hitherto stagnant mining sector in the country.

Your company through a combination of in house R & D, technology tie-up and excellent manufacturing practices, is confident of improving its market share in this segment.

MAIN FOCUS AREAS AND APPLICATIONS:

The Companys major source of business is from mining and manufacturing sector and the growth of the company is therefore directly proportional to the growth in the mining and manufacturing segment. The Crushing & Screening equipment business has a wider market application and is not restricted to road construction alone.

OPPORTUNITIES, THREATS, RISKS AND CONCERNS:

Opportunities:-

• Customers are looking for quality Crushing and Screening equipment at affordable prices and your company is in a position to fit well in this segment with its market reputation.

• With lower raw material costs, the overall cost of the equipment are lower as compared to Gulf and African countries, which helps to gain market share in national and international markets.

• Expansion of products: cone crushers, coal crushers and bucket crushers.

Threats, Risks and Concerns:-

• Global Financial market is volatile. With lower growth in international trade, the Indian economy is likely to remain challenged. This may result in foreign players exercising caution in the entry and investment in India as a whole and mining segment in particular.

• Competition will be severe as there are quite a few local players catering to the price sensitive customers with low prices. This will lead to price pressures and the Company may not be in a position to realize higher prices for its products and services.

Outlook:

The Company sees a moderate outlook in the coming years for Crushing and Screening business on its own. The addition of new products with proven technology will improve the top and bottom line of the company. With the existing cash balances, the Company can mobilize the funds and venture in diversified business activities outside of mining equipment business. With favorable Government policies, the overall market looks positive. With the Government committing itself to infrastructure in general and construction in particular, the demands for the Companys products are likely to see a good growth in the coming years.

Internal Control Systems and their Adequacies:

The Company maintains effective and adequate internal control systems. The Internal Control is formed as such to avoid unnecessary losses and to ensure proper record of transactions, reliable financial reporting, safeguarding of assets and adherence to management policies. The Internal Control system is adequately equipped so as to suggest proper changes that are required in the system to improve performance and eliminate waste.

An Independent firm of Chartered Accountants regularly carries out the internal audit of the Company. Internal audit of the Company is carried out at periodic intervals. The Officers responsible for their functions regularly submit their comments on report and share the steps they have taken to rectify the defects.

Your Company continues to be an ISO 9001 certified Company by TUV India Private Limited (TUV NORD) recognized for the production, quality control and standards. Your Company has qualified for BS OHSAS 18001:2007 certificate by TUV NORD for maintaining standards for Design, Manufacture, Installation and Servicing of crushing and screening plants.

Human Resources:

Your Company is technology-driven and has its own HR policy, which focuses on qualitative & transparent recruitment, training & development, performance appraisal, employee welfare etc. The Company believes that the development of employees is the prime responsibility of an organization and its employees are key contributors to the success of its business. The Company believes that its human resources are the key to maintain its leading position in the industry. The Company provides competitive compensation packages combined with a good working culture and environment to attract and retain talented personnel.

The Company seeks to establish and maintain an environment that supports its business processes and ensures that employee performance is evaluated against the achievement of objectives, which are in line with its long-term goals. All employees are provided with KRAs and an opportunity to discuss their performance, plan their development and make self-appraisals.

Comments on Financial Performance with respect to Operational Performance:

During the Financial year under review, the Net Turnover of the Company has decreased to Rs. 2,983.16 lakhs as compared to Rs. 6,838.75 lakhs in the previous financial year mainly due to the end of supply agreement of some components. The profits of the Company have decreased as compared to the previous financial year due to reduced turnover and previous year having one-time other income. The Profit after Tax is at Rs. 625.46 lakhs in the current year as compared to Rs. 1,036.82 lakhs in the previous year. Due to competitive pressures and a stagnant market, the Company could not improve on the price realization as expected.

Details of any change in Return on Net Worth as compared to immediately previous financial year along with detail explanation thereof.

During the year under consideration there is reduction in the overall return on net worth after tax which is Rs 625.46 Lakhs as compared to Rs 1036.82 Lakhs in 2017-18. The main reason in decrease is due to the income on sale of investment of Rs 1231 Lakhs in 2017-18. However, apart of this there is better profitability from the regular business operation and expecting to improve further in the current year.

Cautionary Statement:

Statements in the Management Discussion & Analysis describing the Companys objectives, projections, estimates, expectations, predictions etc. may be "Forward statement" within the meaning of applicable laws and regulations. Actual results, performance or achievements may vary with those expressed or implied, depending upon the economic conditions, Government policies and other incidental/ unforeseeable factors. Important factors that could influence the Companys operations include input availability and prices, demand and pricing of finished goods in the Companys principal markets, changes in Government regulations, tax laws, economic developments within the Country and other incidental factors.