Indian Acrylics Ltd Management Discussions.

Management Discussion and Analysis Report for the year under review as stipulated under Regulation 34(2) (e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is presented as under.

a) Acrylic Fiber Industry Global and Indian Perspective:

During the year under review, the Industry witnessed better demand of Acrylic Fibre (AF). The raw materials as well as energy prices kept increasing during the first half of the current year. The prices of raw material fell in the second half of the current year.

As far as production of Acrylic Fibre in India is concerned, the domestic production of Acrylic Fibre was higher by 14% during the current financial year. The total production of Acrylic Fibre in India during 2018-19 is estimated to be 0.097 Million MT compared to 0.086 Million MT in the year before that.

Export of Acrylic Fibre from India in quantitative terms have gone up by 30% during the financial year 2018-19. While the total export of Acrylic Fibre from India was 0.0019 Million MT during 2017-18. The same has increased to 0.0026 Million Ton in financial year 2018-19.

Domestic Industry continue to face problems due to Acrylic Tow and tops exported as sub standard product or Synthetic Waste (Acrylic Soft Waste) by certain producers from Peru, Thailand, Balarussia and dumped in India at much lower prices. The Forum of Acrylic Fibre (FAFM) has taken up with the Govt. to take stringent measures to curb this practice as well as for levy of anti dumping duty on dumped Acrylic Fibre imports.

Acrylonitrile (ACN), a crude oil derivative, is the principal raw material for manufacture of Acrylic Fiber. Normally, it is influenced by crude oil prices, though the same is also impacted by its demand-supply balance as well as demand for propylene (an input for ACN) from competing end uses and its availability. While supply of Acrylonitrile was tight due to unplanned shutdowns in the first half of the year with very high prices. This has improved in the second half of the year and thereafter prices of ACN drop considerably

There is no other major change in the world capacities of Acrylic Fibre during the year.

b) Business Outlook:

Indias economic growth is expected to grow at 7.3 per cent in the fiscal year 2018-19, and 7.5 per cent in the following two years, attributing it to an upswing in consumption and investment. It is expected that India will continue to be the fastest growing major economy in the world. Its growth outlook is still robust. In comparison to other emerging markets Indian economy position is quite impressive as it has managed to deliver growth slightly above its potential despite temporary setbacks.

It is predicted that feed stocks as well as Acrylonitrile Prices will continue to remain strong in the first half of F.Y. 2019-20. Thereafter, if new capacity of ACN come into production in China as scheduled for 2019, then supply as well as prices likely to moderate. In the back drop of strong feed stocks, it is predicted that Acrylic Fibre demand will sustain or grow moderately in the near term.

In order to grow the business and to strengthen the top and bottom lines, your Company is creating more yarn manufacturing capacity. The total Spindles in production are 43992 at the end of the year. Work on installation of 10000 more spindles is now in progress. Out of these 6500 spindles has been completed and these spindles are running now under trial production and balance 3500 spindles in progress. These spindles along with all other facilities required for production of dyed acrylic yarns will be coming into production during first half of the current year 2019-20. These facilities shall further help in increasing the demand of acrylic fibre as well as in making more diversified and broad based customer base in both domestic as well as export markets.

Internal Control Systems and Their Adequacy:

Your Company has a well-designed Internal Audit programme and dedicated team for independent review of all systems, procedures and financial controls of the Company to bring in the best industry practices, compliance with internal systems & procedures and statuary laws. The Companys overall internal control system is adequate given size and nature of operations. All important issues are regularly presented to the Audit committee of the Company. Senior management of your Company places emphasis on taking proper actions on the significant issues, findings and recommendations of internal audit, and systems are strengthened appropriately.

Internal Financial Controls: The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

c) Management Perception Of Risk & Concerns:

Risk Management

The Risk Management Committee ensures compliance of all the fiscal, industrial, labour and environments laws by using adequate internal control measures and through regular monitoring by the respective departmental heads in the company.

The following table gives the key risks faced by the Company, and the steps taken to mitigate the same:

Key Risks Impact on IAL Mitigation
Global Economic Scenario Spending on clothing have shown strong correlations with GDP Growth. Uncertain economic outlook in China can impact the consumer spending on clothing and thereby constrain the demand growth of acrylic bre. - Well diversi ed customer base across different geographical locations and across different end uses of bre
- Target newer markets which might provide counter-cyclical support
Adverse change in Govt Policy Any sudden action by the Government to allow duty free imports of acrylic bre in India under free trade agreements without corresponding reduction in the duties on raw materials can impact the company as there are no local producers and company is dependent on imports for its main raw materials - Increasing exports share in the turnover of the company by investing in newer markets development
Currency Volatility Volatility in currency exchange movements resulting in sudden transaction and translation exposure - Currency hedging policy and practices in place
- Hedging strategy monitored by risk management committee through regular reviews.
Crude Oil volatility Volatility in crude oil prices resulting in sudden spurt or plunge of raw materials prices - Increasing value added products in the product mix.
- Inventory exposure monitored by risk management committee through regular reviews
Dumping of bre Large scale dumping by certain countries in India can impact the domestic sales - Investing in the energy saving, alternate fuels and new products by in-house R & D.
- Increasing exports sales by developing the new export markets

As such, the Company is monitoring and taking steps to mitigate the risks, if any, which may threaten the existence of the Company.

Cautionary Statement:

Statements in this report on Management Discussion and Analysis describing the Companys Objectives, projections, estimates, expectations or predictions may be "forward looking" within the meaning of applicable Securities laws and regulations. Actual results could differ materially from those expressed or implied

On Behalf of the Board of Directors
Place : Chandigarh ALOK GOYAL R.K. GARG
DIN-08049515 DIN-00034827