Oil Country Tubular Ltd Management Discussions.

a) Structure and Developments, Opportunities and Threats, Performance, Outlook, Risks and Concerns:

The revenue from Operations during the current Financial Year 2018-19 is? 2538.51 Lakhs as against? 1067.10 Lakhs during the previous year. Physical Exports during the year has been Rs. 1093.44 Lakhs as against? 719.00 Lakhs during the previous year. With the demand for crude oil expected to rise from the present average of 64 USD/ barrel, an increase in drilling and exploration will continue leading to an increase in the number of active rigs which is presently at 2213 worldwide, with 121 rigs active in India, in addition to workover rigs. The increase in the drilling and exploration activities will have a positive impact on the Company products, namely, Casing, Tubing and Drill Pipe.

India is the 3rd largest consumer of oil in the World and the oil imports constitute about 84% of Indias total domestic oil consumption. With the demand for oil and gas continuing to increase every year, India aims to reduce the oil and gas imports from 84% to 62% by 2022.

To facilitate ease of doing business in India and to attract Foreign Investments in the Oil and Gas sector, Government of India introduced Hydrocarbon Exploration & Licensing Policy which provides a uniform licensing system to explore and produce all hydrocarbons such as oil, gas, coal bed methane, shale oil/ gas under a single licensing framework encouraging private and global oil companies in participating in the oil and gas exploration program.

ONGC has raised its drilling activities in recent years, thereby increasing the requirement of the tubular products.

The revised Steel Policy issued by Ministry of Steel, provides preference to domestically manufactured Iron and Steel Products which includes seamless pipes covering casing, tubing and drill pipes, in Government procurement agencies, thereby providing a safeguard to the domestic manufacturers.

During the past few years, the Company has been facing Working Capital constraints which led to lost opportunities. The Company is discussing with the Banks for the resolution of the Working Capital issues and expects to have a resolution by second quarter of 2019, and thereon, the Company will be in a position to actively participate in the growing market for the Products. SBI has filed in NCLT and the petition is not admitted as of today as both SBI and Company are discussing on a resolution.

To reduce the liabilities, finance cost, and augment the working capital, the Board approved the asset sale of Processing Plant 2 and obtained the approval of the shareholders. The sale is expected to be completed during the year.

The Industry faces the risk of Countries getting into protectionist economy using trade barriers, political uncertainty and geopolitical tensions in the Middle East. Raw material prices have tendency to fluctuate as per the economic conditions leading to an impact on the margins of the Company. Any slowdown in the economy will have a negative impact on the Oil and Gas exploration and drilling, leading to lower demand forthe Tubulars and Drilling products. b) Internal Control Systems and their Adequacy:

Management has put in place effective Internal Control Systems to provide reasonable assurance for:

• Safeguarding Assets and their usage.

• Maintenance of Proper Accounting Records and

• Adequacy and Reliability of the information used for carrying on Business Operations.

Key elements of the Internal Control Systems are as follows:

(i) Existence of Authority Manuals and periodical updating of the same for all Functions.

(ii) Existence of clearly defined organizational structure and authority.

(iii) Existence of corporate policies for Financial Reporting and Accounting.

(iv) Existence of Management information system updated from time to time as may be required.

(v) Existence of Annual Budgets and Long Term Business Plans.

(vi) Existence of Internal Audit System.

(vii) Periodical review of opportunities and risk factors depending on the Global / Domestic Scenario and to undertake measures as may be necessary.

The Company has appointed an Independent Auditor to ensure compliance and effectiveness of the Internal Control Systems in place.

The Audit Committee is regularly reviewing the Internal Audit Reports for the auditing carried out in all the key areas of the operations. Additionally the Audit Committee approves all the audit plans and reports for significant issues raised by the Internal and External Auditors. Regular reports on the business development, future plans and projections are given to the Board of Directors. Internal Audit Reports are regularly circulated for perusal of Senior Management for appropriate action as required.

Normal forseeable risks of the Companys assets are adequately covered by comprehensive insurance. Risk assessments, inspections and safety audits are carried out periodically. c) Financial and Operational Performance:

The Highlights of Financial Operational Performance are given below:

(Rs. in Lakhs)
S.No. Particulars 2018-19 2017-18
1 Sales / income from operations 2538.50 1067.09
2 Other Income 272.03 58.59
3 Sub-total 2810.53 1125.68
4 Total Expenditure (Before interest) 9749.82 4689.96
5 Profit/(Loss) Before Interest, Tax and Exceptional Items (6939.28) (3564.27)
6 Earnings before Interest, Depreciation and Tax (4802.67) (1401.14)
7 Profit/(Loss) After Tax and Exceptional Items (8300.30) (3698.32)
8 No. of Months Receivables (Receivables / Sales X 12) 0.38 1.32
9 Current Ratio (Current Assets / Current Liabilities) 0.43 0.57

d) Human Resources Development and Industrial Relations:

The Company has constituted an Internal Complaint Committee (ICC) in pursuant to the provisions of Companies Act, 2013 for prevention, prohibition and redressal of complaints/grievances on the sexual harassment of women at work places. The Company continued the welfare activities for the employees, which include Medical Care, Group Insurance, and Canteen Facility. To enrich the skills of employees and enrich their experience, the Company arranges, Practical Training Courses by Internal and External Faculty.

e) Cautionary Statement:

Statements in the Management Discussion and Analysis and Directors Report describing the Companys strengths, strategies, projections and estimates, are forward-looking statements and progressive within the meaning of applicable laws and regulations. Actual results may vary from those expressed or implied, depending upon economic conditions, Government Policies and other incidental factors. Readers are cautioned not to place undue reliance on the forward looking statements.

By Order of the Board of Directors
For Oil Country Tubular Limited
Place: Hyderabad K SURYANARAYANA
Date : 08.08.2019 Chairman