LML Ltd Management Discussions

(a) Macro-economic Developments and overall review

The world economies are still facing effect of the crisis which started in 2008. Complex forces that effected global activity are still shaping the outlook. The problem of recession, un-employment, industrial slow down and exchange rate swings triggered by actual and expected changes in monetary policies continued with different degrees of intensity in various countries including those in the European Union.

The Indian economy continues to suffer from anemic sluggishness in manufacturing adversely affecting industrial activity. The current economic environment represents a mixed scenario with inflation showing some signs of easing, but weak rural demand coupled with high interest rates are putting pressure on economic growth. Untimely rains and difficult weather conditions have affected the rural sector adversely. The GDP growth of Indian economy was approx. 7.4% in FY- 2014-15 compared to 6.9% in FY-2013-14, mostly driven by some improved economic fundamentals and revision of GDP methodology calculation. The growth estimated for current year of about 8% is due to the expectation that monsoon will be favourable which itself is uncertain phenomena, as agriculture remains vulnerable to monsoon shocks. Over the years, the volatility of monsoon outcome has, in fact, increased undermining the accuracy of forecasting.

Revival of the economy will inter-alia depend upon increase in infrastructure investment, reduction in interest rates, increase in employment etc. so as to give a fillip to boost domestic demand.

(b) Two wheeler Industry in India

The Indian automobile market can be divided into various segments viz. motorized two-wheelers (motorcycles, geared and gearless (CVT) scooters and mopeds), three wheelers, commercial vehicles (light, medium and heavy), passenger cars, utility vehicles (UVs) and tractors.

A total of 15.90 million two-wheelers were sold in India in FY- 2014-15, a growth of 7% over the previous year. The slow growth was on account of the overall slowdown in the Indian economy and specially in rural economy and high interest rates. Motorcycles accounted for around 67% of the total two wheelers sold and reported nominal growth of around 2%. The gearless scooters (CVT) segment did well logging growth rate of around 25% in the earlier part of the year and aggregate share of 28% of the two wheeler market.

The revival of the 2-wheeler industry is highly dependent upon the revival of Indian economy and more so the rural economy.

Domestic Sales

	2012-13 (April 2012- March 2013)	2013-14 (April 2013 –March 2014)			2014-15 (April 2014–March 2015)
Industry Structure	Sale in Mn.	Sale in Mn.	Growth % Over 2012-13	Category Share % of 13-14	Sale in Mn.	Growth % Over 2013-14	Category Share % of 14-15
Scooters	2.923	3.602	23	24	4.503	25	28
Motorcycles	10.085	10.479	4	71	10.708	2	67
Mopeds	0.788	0.722	-	5	0.687	-5	4
Total	13.797	14.803	7	100	15.898	7	100

Export Sales

	2012-13 (April 2012- March 2013)	2013-14 (April 2013 –March 2014)			2014-15 (April 2014–March 2015)
Industry Structure	Sale in Mn.	Sale in Mn.	Growth % Over 2012-13	Category Share % of 13-14	Sale in Mn.	Growth % Over 2013-14	Category Share % of 14-15
Scooters	0.091	0.093	2	4.47	0.196	111	8
Motorcycles	1.866	1.982	6	95.20	2.259	14	92
Mopeds	0.003	0.007	133	0.34	0.008	14	0
Total	1.960	2.082	6	100	2.463	18	100

(c) Company Performance

Company’s performance during the year was adversely affected inter alia due to global recessionary conditions and specially political and economic condition prevailing in African and developed economies as well as week domestic demand.

(d) Opportunities and Threats

LML stands for the highest standards of technical expertise, product innovation and has one of the finest R & D capabilities, particularly relating to designing, rapid proto-typing, CAD - CAM, tooling and industrialization. It is harnessing these strengths and its vast experience in the two-wheeler business coupled with a aggressive business strategy for its revival and turnaround. The Company is perhaps the first in the world to obtain Euro III certification for its 2-stroke vehicles and subsequent to restart, it has also received the upgraded ISO 9001-2008 certification from DNV.

(e) Outlook

As stated elsewhere in this report the Company has been working for its revival including development of new products including those having state of the art technology.

(f) Performance Review

Due to various reasons and problems the Company could not leverage its rich technological strengths during the year under review and the sales volume was 38086 units in financial year 2014-15 as compared to 51835 units in financial year 2013-14..

(g) Financial Review

Revenues - Gross Sales and Other Income during the year was Rs. 212.58 crores as compared to Rs. 273.73 crores in the previous financial year 2013-14.

Operating Profit/Loss – The Company reported a net Operating Loss during the year of Rs 25.46 crores as compared to net operating loss of Rs. 17.76 crore in the previous financial year 2013-14.

Interest – Interest was Rs 43.02 crores during the year as compared to Rs. 40.13 crores in the previous financial year 2013-14.

Depreciation, Amortization & Impairment of Fixed Assets – Depreciation, Amortization & Impairment of Fixed Assets during the year was at Rs 12.61crores as compared to Rs. 14.94 crores in the previous financial year 2013-14.

Loss before tax - The Company reported a loss before tax and exceptional items during the year of Rs 81.09 crores as compared to Rs. 72.83 crores in the previous financial year 2013-14.

Share Capital – Company’s Paid-up Equity Share Capital is Rs. 81.98 crores as on 31.03.2015.

(h) Human Resources

Your Company treats human resource a very important asset. Your Company continuously invest in attraction, retention and development of talent on an ongoing basis.