Multi Arc India Ltd Management Discussions

MULTI-ARC INDIA LIMITED ANNUAL REPORT 2008-2009 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS Our company is in the business of surface enhancement. This is a high-tech Research and Development oriented business. Our business is multi-product, multi-location hence tight operational management of the logistic cost, Rationalization of Human Resources, Gold cost and effective use of assets is essential to meet the customers demand and faster turned around of their material. The Industry is moving towards supply of coated product rather than either supplying uncoated products or providing coating services. In this respect, our acquiring of Bharuch Plant through our subsidiary has proved very effective. To overcome the slow down in economy, we have increased and shifted our customer base from unorganized to organized segment improving gold recovery, to manage the increase in Gold cost and introduction of new black DLC (Diamond Like Carbon) Coating. OPPORTUNITIES AND THREATS (a) In Aesthetic coatings enormous opportunities exist both in gold coated products and non-gold products. Company continuously works hand in hand with the Industrial manufacturers and successfully develops new applications. In Wear Coatings new technologies are coming in internationally and our company has successfully tied-up arrangements to bring these new path breaking technologies to our country. In the changing industry scenario and to meet quick turnaround requirement of customers, Company has implemented its plans to establish additional Coating Centres. (b) Aesthetic coating business can be affected by high price of gold. However, impact of this has been mitigated by gold cost linked pricing with major customers. Company is also making progress in successful application of non-gold coating business. SEGMENT-WISE PERFORMANCE The Company has only single segment namely surface enhancement, therefore, disclosure of segment-wise performance is not required. OUTLOOK The Global economy and Indian economy are facing recessionary trends and a slow down. There are signs of improvement in some sectors. The increase in Gold price is a threat and would affect our margins. The poor quality unorganized sector is trying to enter the Coating business. These would post some problem in the short term, but the lack of quality and technology will not seriously on the part of unorganized sector will have no impact on our performance, as we mainly cater to organized Players who have a strong quality control and expect strong commitments to deliveries. Besides the growth of rural market will also provide growth opportunity, The increase of Gold price has paradoxical impact to the business whereby the margins will be squeezed but market-size will grow. Many applications which were conventionally Electro plating would use our technology. The business will be driven by strong technological development and managing Gold cost. The Decorative coatings of other colours which do not involve Gold also become very important. RISKS AND CONCERNS Our company is exposed to external and internal risks. External risks arise out of nature of demand, entry of new manufacturers, expansion of capacity by existing players, international companies entering India, technological obsolescence, rising price of raw materials, etc. These risks are continuously being monitored and are sought to be mitigated by tie-up for new technologies, acquiring new capacities, establishing new Coating Centers near to customer locations and achieving backward and forward integration. Internal risks are being mitigated by continuous productivity improvements, developing new applications through our R&D efforts in collaboration with customers and Government Agencies. Employees are motivated and prepared for higher responsibilities to successfully manage new businesses through training and empowerment and to mitigate risks arising from attrition. INTERNAL CONTROL SYSTEMS The company is committed to maintaining an effective system of internal control for facilitating an accurate, reliable and speedy compilation of financial information for safeguarding the assets and interest of the Company and ensuring compliance with laws and regulations. The Audit Committee consists of independent Directors from our Board of Directors. HUMAN RESOURCES Our Company has always believed that Human Resource is the most important capital of the company, and as a continuous process has been striving to value-add to this asset by various measures. CAUTIONARY STATEMENT Statements in the Management Discussion and Analysis describing the Companys position and expectation may be forward looking statements within the meaning of applicable securities laws and regulations. Actual performance could differ from those express or implied. Important factors that could make a difference to the Companys operations include, interalia, economic condition affecting demand/supply and price conditions in the market in which the company operates, especially the price of raw material (Gold), changes in government regulations, other statutes and incidental factors that are beyond the control of the Management.