Pacific Industries Ltd Management Discussions.
The Management of Pacific Industries Limited is pleased to present the Management Discussion and Analysis Report, which lucidly explains the Companys business, industry structure, opportunities and concerns, performance of the Company with respect to the operations and other relevant information. Management Discussion and Analysis forms a part of the compliance report on Corporate Governance.
Pacific Industries Limited has evolved through a simple thought way back in 1989 - the thought that the country deserves nothing short of the best when it comes to marbles and granites. Glancing at the past trends, makes the Company proud of the fact that it has managed to live up to the promise of providing our clients with high quality products and services that have constantly surpassed their expectations, and helped us create an enviable position over time. Building up on our modest inception, Pacific Industries Limited has grown tremendously in terms of quality, volume and variety, striving even further for the best.
Pacific Industries Limited is equipped to deal with a massive capacity to cater marble and granite processing needs, providing a wide spectrum of multiple colors to choose from.
INDUSTRY OVERVIEW OF INDIAN ECONOMY AND COMPANY OUTLOOK
India has witnessed a major economic reform in terms of tax regime with introduction of Goods & Service Tax (GST) from 1st July, 2017. This tax regime, being at the nascent stage, is expected to result in improvement in logistics and faster movements of goods on one side and indirect tax reforms on the other side. The revitalisation of global economy continued during the financial year 2018-19 and the global economy ended with a lower benchmark owing to fears of trade work between developed economics. Inspite of global tremors, the financial year concluded on a better footing having the positive impact on the industry in varied ways. The investors confidence in this volatile environment was reflected by being bullish and taking an advantage of the correction phase of capital markets during the year under review. And thus, the business growth has experienced good flow. Infrastructure, high end architectures coupled with real estate development is a must for maintaining such sustained growth and hence is on the highest priority of the Government making it to be the focal point for our economy. Increasing per Capita income resulting due to all round economic high per capita spending affects the sale and off take of our products and we foresee a prosperous future ahead. The Industry strike witnessed during the year for reduction of GST Tax rates had a positive end with demand and purchases being rebounded.
ECONOMIC OVERVIEW (2018-19)
The Indian Economy has turned around dramatically with the real GDP growth rate of 7%, making India one of the fastest growing large economies in the world. This is witnessed with the World Bank commentaries recognising India as one of the global player. The growth in the next financial year is expected to boom between 8 to 8.5% with predictions for a double digit rate seeming feasible.
The policies of the Narendra Modi Government to transform India through MAKE IN INDIA and SKILL INDIA initiatives has yielded results with the country transformation of emerging as the business hotspot and Foreign Investment destination.
Global Granite Industry
Granite industry is considered one of the oldest industries in the world; existing as far back as Ancient Egypt. Granite stones due to its amenability for taking mirror like polish, high compressive strength, longevity and aesthetics, finds applications in decoration in building and other places.
Being a product dependent upon availability of natural resources, production of Stone is concentrated among few countries. China, India, Brazil, Iran, Turkey and Italy altogether accounted for 70% of the global extraction of stones. World stone export market sized $23 billion.
Major competition for India as a granite exporter comes from China & Brazil. Some of the big concerns in the Natural stone industry are weaker demand of USA and Europe, sharp devaluation of currencies of some of the producing countries and increasing popularity of engineered stones.
Pacific Industries Limited (PIL) is a 100% EOU whose main plant s are located at Village Bedla, Udaipur and, Kempalinganhalli, Bangalore. The promoters have been active in granite processing and trading for the last 30 years. Over 95% of the turnover comes from exports. The companys major exports destinations are USA, Europe, Indonesia, Vietnam, Middle-east countries, etc. The Company is also importing the Granite from Italy.
The Company has been received the Star Export House Certification from Ministry of Commerce and Industry.
Company is establishing a new Production line for Artificial quartz slab production.
OPPORTUNITIES AND THREATS
There are diverse opportunities in Marble & Granite industry due to large scale investment in Infrastructure, modern day architecture, interior designing, construction reforms and real estate activities. The constant growth of the Industry has escalated the demand for marbles and granites substantially both in domestic and international markets.
Further, the World is indeed becoming a Global city. Your company believes that niche opportunities exist in the Global arena which, if exploited, would yield positive results. The company has accordingly built a business model tapping these opportunities and is also aligning its strategies to utilise opportunities in the domestic market. Your company deals in special range of Granite & Marbles having exquisite textures, designs and colours for which the overseas and domestic markets, both are very demanding. Presently, it is one of the few companies which offer all natural stone products under one roof to the buyers. The demand for top quality natural stone products is also increasing in the domestic market The availability of manufactured stone products as an alternative to natural stones is also likely to affect the performance of the company.
Your Company has the necessary expertise and flexibility to quickly adapt to the changing market condition and capture the growth in sales leading to growth for the Company.
Indias economy is well placed to grow at a robust pace over the next five years owing to strong domestic consumption and increase in government spending on infrastructure. The implementation analysis and review of Goods & Service Tax (GST) mechanism will further simplify the supply chain and improve the operating environment and will act as an additional driver of consolidation at all levels market.
The Company is alert and in touch with the ground realities of the business dynamics and is confident of increasing its market share in all the spheres emerging as a leader in its segment.
The overall business outlook for the Company is promising with improvement in the economic environment. Efforts towards optimisation and higher operational efficiencies are continuing.
The Company examines the possibilities of expansion and shall make investments when attractive opportunities arise.
THREATS AND RISK MANAGEMENT
The current economic environment, in combination with significant growth ambitions of the Company, carries with it an evolving set of risks. Your Company recognizes that these risks need to be managed to protect customers, employees, shareholders and other stakeholders to achieve our business objectives. In line with this, your Company has put in place a detailed Risk Management Policy which identifies the various types of risks at all levels of the Company. Early risk identification along with appropriate measures has enabled the Company to mitigate all threats which may arise from time to time. Also, the possibility of occurrence of the risk event and the magnitude of their consequences on the organization is determined and used to prioritize risk management.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has a sound internal control system, which ensures that (a) its financial reports are reliable, (b) its operations are effective and efficient, and (c) its activities comply with applicable laws and regulations. The internal control systems are further supplemented by internal audit carried out by an independent Chartered Accountant and periodical review by the Management. The Internal Audit process is designed to review the adequacy of internal control checks in the system and covers all the significant areas of the Companys operations.
The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of the internal control systems and tracks the implementation of corrective actions. Significant audit observations and corrective actions taken by the Management are presented to the Audit Committee. To maintain its objectivity and independence, the Internal Audit reports are submitted to the Chairman of the Audit Committee. Audit Committee plays a key role in providing assurance to the Board of Directors.
Your Company believes that as a responsible corporate citizen, it must address the needs of underprivileged and committed to serving them. The Company is keen to fulfill its social responsibility by being actively involved in a variety of public services projects. We encourage collaboration with various NGOs to support in CSR activities at group level.
The Company believes in making the optimum utilization of all the available resources, to achieve this, human power is highly important and thus the Company time over has been taking newer and effective initiatives for improving the human resource strength and creating a conducive and healthy work atmosphere.
The Company consider its Human Resource as the most valuable resource which has to be nurtured well and equipped to meet the challenges posed by the dynamics of business developments. The Company continuously provide training to its employees both in-house as well as through reputed Institutes. The staffs are highly motivated due to good work culture, training, remuneration packages and the values, which the Company maintains. The Board of Directors would like to record their appreciation of the efficient and loyal service rendered by the Companys employees.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.
Due to the challenges of the environment and the strategic drive to integrate and transform, the organization financial performance was become weak as compared to previous year.
On a Standalone basis, the Company has recorded total Turnover during the year 2018-19 is Rs. 10347.24 Lacs as compared to year 2017-18 was Rs. 6819.59 Lacs in the previous year. Whereas the Net Profit is Rs.130.17 Lacs as compared to year 2017-18 was Rs. 83.37 Lacs.
Statement in this Managements Discussion and Analysis detailing the Companys objectives, projections, estimates, estimates, expectations or predictions are forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations.
By Order of the Board
Chairman & Managing Director