Krishna Engineering Works Ltd Management Discussions

Industry Structure and Developments

Engineering industry primarily deals with the design, manufacture and operation of structures, machines or devices. Main core operations carried on by our company is in casting & forging sector. The Indian casting and forging industry is broadly classified into four sectors -large, medium, small and tiny. A major portion of this industry is made up of small and medium units / enterprises (SMEs). The industry is comprised of about 200 organised and 1000 odd un-organised forging units in the country which are mainly spread across Pune, Chennai, Delhi and Ludhiana. The forging industry depends heavily on the automobile industry which accounts for roughly 70% of the total forging production while the balance is sold to non-auto companies like valves, power sector, earth moving, mining & oil field equipment, engineering, capital goods, etc. Steel forms a major part of input of the forging industry.

OPPORTUNITIES AND THREATS

The industry needs to improve the efficiency of logistics by developing new methods for working more effectively with suppliers, sponsoring efforts to shape information technology and standards to meet the manufacturing needs of the forging industry.

RISKS AND CONCERNS

Technology development and application

• find and deploy strategically significant technologies

• die design/modeling

• energy efficient/environmentally responsible

• cooperate to make process environmental asset

• pollution prevention

• reduce or eliminate forging die lubrication

• reduce energy consumption

• induction heating/combustion advancements

• waste treatment/recycling

• renewable energy and environmental protection

• leverage resources/share knowledge/protect IPRs

• enlist suppliers/fair compensation at each stage

• information exchange/technology deployment

• Unify support for Industry Vision

• process improvement + productivity = profitability

• electronic product design/process technology

• net-shape/materials utilization

• decrease per-unit energy, die, and labor costs

• uniform standards for electronic commerce

• customers

• basic skills of workforce

• generate political/legislative support

• new information exchange/teaching technologies

• new forging technologies

• meet customers future needs

• changes in existing markets

• globalization/realistic projections for demand

• new products/markets

• value-added services

• competing materials/processes

• emerging technologies

• global market opportunities

• reestablish an improved public perception

• rewards based on performance

• drive education/consider trends affecting workforce

• management staff/strategies

OUTLOOK

The market potential continues to grow for the forging industry. Looking at the overall long term picture, the industry seems well poised to maintain a remarkable growth rate. Forging industry would shift into higher gear to cater to: Expected surge in global demand Galloping surge in the domestic automotive sector Upcoming projects in Energy - especially nuclear application.

The production of forgings for the non-automotive sector is on the rise, to give it a more widespread portfolio. Identified drivers of growth in the non-auto sector are Aerospace, Energy, Oil & Gas and Heavy engine parts. Internal Control Systems and their adequacy The Company has an adequate system of internal controls implemented by the management towards achieving efficiency in operations, optimum utilization of resources and effective monitoring thereof and compliance with applicable laws.

The system is continuously reinforced with analysis of data to strengthen it to meet the changing requirements.

HUMAN RESOURCES/INDUSTRIAL RELATIONS

Your company strongly believes that people are its assets and they are key to drive competitive advantage. Recognizing the importance of Human Resource , all efforts have been put by your company to ensure that best talent is recruited and retained. Overall industrial relations remained cordial during the year.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include change in Government regulations, tax laws, economic & political developments within and outside the country and such other factors.