Patels Airtemp (India) Ltd Management Discussions.

ECONOMIC OUTLOOK

The Indian economy is growing strongly and remains a bright spot in the global landscape. Indias overall economic outlook remains positive, although growth will slow temporarily as a result of disruptions to consumption anc business activity from the recent withdrawal of high-denomination banknotes from circulation. But the nations expansion will pick up again as economic reforms kick in, said the International Monetary Fund (IMF) in its latest assessment. Growth is being at 6.6 percent for fiscal year i.e. 2016-2017 and at 7.2 percent in the following year as per the said report.

Global economic activity is picking up with a long-awaited cyclical recovery in investment, manufacturing, and trade, according to IMF, World Economic Outlook. World growth is expected to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018. Stronger activity, expectations of more robust global demand, reduced deflationary pressures, and optimistic financial markets are all upside developments. But structural impediments to a stronger recovery and a balance of risks that remains tilted to the downside, especially over the medium term, remain important challenges. In economic examines how changes in external conditions may affect the pace of income convergence between advanced and emerging market and developing economies. Overall, economic outlook being stresses the need for credible strategies in advanced economies and emerging market and developing ones to tackle a number of common challenges in an integrated global economy.

FINANCIAL AND OPERATIONAL PERFORMANCE

Your Company is operating in single segment namely engineering fabrication. Therefore, Company has been reporting Standalone Results. This discussion, therefore, covers the financial results and other developments during April 2016 to March 2017, in respect of the Company.

The Company has earned revenue from operations (gross) of Rs.148.61 crores during the year ended on 31st March, 2017 as against Rs.137.66 crores earned during the previous year ended on 31st March, 2016, giving a rise of 7.95 % as compared to previous year.

Out of the revenue from operations of Rs.148.61 crores earned by the Company during the year under review, Rs.143.75 crores represents sale of products (Domestic & Export), Rs.1.65 crores represents sale of Services (Processing Charges) and Rs.3.21 crores represents other operating revenues. The Company has also earned other income of Rs.50.71 lakhs during the year under review as against Rs.45.78 lakhs earned during the previous year.

Although tough economic conditions continued in the year under review, your Company was able to record significant improvement in performance owing to growth in the areas of Manufacturing of Industrial Machineries and fabrication. Manufacturing of Industrial Machineries and fabrication having different products maintained its performance while protective coatings continued to face tough market demand conditions.

The Company has earned the Profit before Tax of Rs.12.20 crores during the year ended on 31st March, 2017 as compared to Rs.11.09 crores earned during the previous year ended on 31st March, 2016, showing a rise of 10 %. The Company has earned Net Profit of Rs.7.87 crores for the year ended on 31st March, 2017 after making Provision for Tax Expenses of Rs.4.34 crores and other adjustments, as compared to Net Profit of Rs.7.15 crores earned by the Company during the previous year ended on 31st March, 2016, a rise of 10.07 %.

INDUSTRY STRUCTURE AND DEVELOPMENT

The Company is engaged in the manufacture and sale of extensive range of Heat Exchangers such as Shell & Tube Type, Finned Tube Type and Air Cooled Heat Exchangers, Pressure Vessels, Air-conditioning and Refrigeration equipments and Turnkey HVAC Projects in India & marketing of equipments even outside India. All these products are supplied to leading Industrial Sections like Power Projects, Refineries, Fertilizers, Cements, Petrochemicals, Pharmaceuticals, Textile and Chemical Industries.

With the highly innovative environment, the Company could sustain its sales even in highly cut-thought competition and the prevailing market conditions.

PRODUCT - WISE PERFORMANCE

The Company is operating in one segment i.e. engineering fabrication having different products, such as Heat Exchangers, Air Cooled Heat Exchangers, Pressure Vessels, Air-conditioning & Refrigeration Equipments, Turnkey HVAC projects and other Misc. products, the turnover of which are given in Notes on Accounts portion of the Annual Report. Your company has decided to stick to high value added engineering products. These products are regularly procured by the Industrial Process Plants/Units. These products has ASME "U"/ "U2"/ "S" Stamp authorization, it is expected to improve profitability of the company in the future. For updating Heat Transfer Technology, Company has become member of HTRI (Heat Transfer Research, Inc, U.S.A.).

FUTURE OUTLOOK

Indias economic growth is gradually improving since 2014. The favorable policy as well as executive reforms by the Government to support strong and sustainable growth, prudent fiscal regime and calibrated monetary easing that reigned in inflation has helped to strengthen macroeconomic stability. In particular, the upcoming implementation of the Goods and Services Tax (GST), which has been in the making for over a decade, will help raise Indias medium-term growth to above 8 percent, as it will enhance the efficiency of production and movement of goods and services across Indian states. The lower crude oil prices have also helped to reduce current account deficit, improve fiscal positions, and lower inflation. This, in turn, has helped boost economic activities in India. Driven by these positive developments, the country has emerged as the worlds fastest growing major economy. The Governments endeavour to drive a bigger as well as a cleaner GDP is expected to augur well for the economy in the medium and long terms.

OPPORTUNITIES

Export in the developed countries like USA, Canada & Europe and other countries like Nigeria, Indonesia, Zambia etc. is to be developed and it is expected to provide large impetus to engineering exports to these countries after obtaining the ASME "U"/ "U2"/ "S" and "N & NPT" Stamp Authorisation. Your company is preparing itself to meet the increased demand in the years to come through efficient production management system which will enable to minimize the risk of raw materials price fluctuations.

RISK FACTORS

Risk is an integral part of every business and your company always tries to deliver superior shareholder value by achieving an appropriate trade-off between risk and returns. Our risk management strategy is based on a clear understanding of various risks i.e. operational risk, marketing risk involved, systematic risk assessment and taking steps to overcome risks and continuous monitoring.

The industry is facing stiff competition from big players who are producing on large scale production and have the advantage of economies in cost, facing challenges from cheaper imports and the industry is also facing risks from unorganized sector particularly from the marketing in the state and nearby states which have major thrust on Airconditioning and Refrigerator parts. However, Your Company does not foresee any risk due to its concentration on quality commitment for better products and prompt after sales and service. The Government of Indias measures to curb cheaper imports imposing anti dumping duties and other restrictions will give much needed relief to the domestic industry.

QUALITY CONTROL

The Company features its achievements to adherence to strict quality standards. This has been achieved through our efforts to strike the balance between resources and technology to develop products at same level in excellence with international standards. The quality standard is taken care from the initial stage of production to ensure high end product quality.

INTERNAL CONTROL SYSTEM

The Company has adequate internal control system in operation commensurate with the size and nature of its business for enduring efficiency of operation and protection of Companys assets. The Audit Committee formed by the company review on periodical basis the compliance with the Companys policies, procedures and prevailing laws. INDUSTRIAL RELATION & HUMAN RESOURCES

To praise the sophisticated production process, we have a team of experienced workers who are skilled and trained to get best out of it. Regular orientation programs are being conducted by the company wherein workers are directly exposed to the experts, which keep them with the latest technology and development.

The Companys philosophy is to provide to its employees friendly working environment and a performance oriented work culture. The company believes that human resources are important asset for giving Company a competitive edge in a competitive environment.

To enrich the skills of employees and enrich their experience, the Company arranges, Practical Training Courses by Internal and External Faculty.

CAUTIONARY STATEMENT

The statement given in this report, describing the Companys objectives, estimates and expectations and future plans may contribute towards forward looking statement within the meaning of applicable laws and/or regulations. Actual performance may differ materially from those either expressed or implied. Some statements in this discussion describing the projections, estimates, expectations or outlook may be forward looking. Actual results may, however, differ materially from those stated on account of various factors such as changes in government regulations, tax regimes, economic developments, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints.