MANAGEMENT DISCUSSION AND ANALYSIS REPORT ON FINANCIAL STATEMENTS
ON FINANCIAL STATEMENTS
To
The Members
M/s RNB Industries Limited.
Global Economic Condition:
In the year 2013-14, the global economy showed signs of revival after almost 4 years
since the onset of the financial crisis. The recovery this time was different as developed
economies consolidated while most emerging markets faced challenges to reviving growth. In
the process, the financial system has emerged stronger while fiscal balances in the
developed world are improving. The synchronised efforts of central banks and governments
continued with record low interest rates and monetary stimulus measures.
USA finally introduced a gradual taper of its stimulus which has so far not
destabilised global financial markets. The remarkable turnaround in their fiscal balance
due to steep expenditure cuts introduced earlier can once again be restored thus providing
a fillip to growth. While the housing sector has seen some credible recovery, the shale
gas boom has driven industrial growth and jobs. The European Union also made some recovery
though an uneven one. The north, led by Germany, had a solid year, reducing unemployment
and boosting living standards. Across the Mediterranean the pattern was more
disappointing, with Italy, Spain, Portugal and Greece all enduring a year of rising
unemployment, however, the numbers have started to improve.
Europe and the euro are not out of trouble, but the acute phase of their difficulties
may be past. The emerging and developing economies faced challenges to growth, with some
easing in the second half of 2013. Investment weakness continues to hamper the economy
with tightening of external funding and financial conditions. New investments have
stagnated amid an erosion of business sentiment, unfavourable global environment and weak
domestic demand. These economies were impacted by supply side constraints due to
structural and policy bottlenecks leading in turn to high inflation and volatile exchange
rates. In 2014, investment cycle is unlikely to pick up in a robust manner until business
sentiment improves and credible signs of domestic demand revival are seen. Growth was also
tepid in the Middle East and North Africa region (MENA) in 2013 due to lower buoyancy in
oil revenues, as the region saw a decline in oil production. In 2014-15, growth is
expected to strengthen as public spending on non-oil activity increases and oil production
recovers. On the other hand, the sub-Sahara Africa region registered a strong growth of
4.8% in 2013 underpinned by investments in natural resources and infrastructure. Growth is
projected to accelerate to about 5.5% in 2014 reflecting positive domestic supply-side
developments and the strengthening in global recovery. Global growth is expected to be
better in the current year, as the developed world consolidates further. In the advanced
economies, risks to economic activity associated with very low inflation have come to the
fore, especially in the euro area, where large output gaps have contributed to low
inflation. Emerging market economies will have to tackle inflationary pressures and
currency volatility in the short and medium-term as they attempt to revive growth. There
is a risk of continuing tight financial conditions leading to a higher cost of capital
leading to a further slowdown in investments. Also the recent geo-political risks may lead
to a renewed bout of increased risk aversion in global financial markets. Overview of
Indian Economy: The GDP growth of Indian economy was 4.7% in the year 2013-14. The economy
has remained challenged as growth has been below 5% in the last 7 quarters between Q1,
2012-2013 to Q4, 2013-2014. The only exception in this period was Q2, 2013- 2014 when GDP
grew by 5.2%. This slowdown has coincided with a decline in financial savings, low and
sluggish growth in fixed capital formation over successive quarters, persistently high
inflation, low business confidence and particularly inadequate structural policy measures
which have had a profound effect on potential growth. The year witnessed sustained high
inflation and a highly volatile exchange rate in the first half of the year. The
subsequent tightening of monetary policy effectively choked economic recovery.
Domestically, structural reforms did not proceed at the pace expected by markets, as
bottlenecks continued to hamper investment projects, particularly in the critical power
sector.
Since early September, external pressures have eased somewhat, in large part due to the
postponement of “tapering” by the US Federal Reserve, which helped to stabilize
global interest rates. This has led to a return of capital inflows. Simultaneously, the
RBI took a number of measures to boost reserves, while the government has acted to reduce
the current account deficit and shore up investor confidence. Indeed, the current account
deficit has shrunk quite remarkably from a high of 4.7% of GDP in 2012-13 to 1.7% in
2013-14. As a result, the INR has recovered, and asset prices have moved higher. With the
exception of agriculture, all the other sectors in the economy continued to remain weak in
2013-14. The industrial sector continued to lag and declined by 0.1%, a 22 year low. The
entrenched stagnation in economic growth over two year’s reflects a subdued
investment and consumption demand which has resulted in contraction in production of
manufacturing sector, capital goods and consumer durables in the current year. Also,
growth in services sector which is the largest contributor to GDP remained almost stagnant
at 6.2% in 2013-14 with growth decelerating in the trade, hotel, transport and
communication sector. The only sub-sector that recorded a strong growth of 12.9% was
financing, insurance and real estate. India’s earlier consumption-lead growth story
post 2008 continued to falter, with both private and government sector consumption
decelerating in 2013-14. Growth in government consumption, which sharply picked up in the
first quarter, remained subdued for the rest of the year as fiscal pressures intensified.
Macro economic and policy uncertaintities, persisting inflation, tight liquidity
conditions and high interest rates adversely impacted business environment in India in the
year 2013-14. While the Company continued to focus on maximizing the domestic
opportunities, it also strengthened its presence in the select overseas markets amidst
strong competitive pressures. The core sectors such as infrastructure, power, minerals
& metals, defence, oil & gas which hold business prospects for the Company, await
policy decisions and structural reforms. Speedy resolution of issues, in these sectors, is
important for boosting the Company’s prospects. The reform initiatives and their
rigorous implementation by the new government is expected to remove the bottlenecks,
presently impeding the economic growth in India.
HUMAN RESOURCE DEVELOPMENT:
Talent acquisition and retention remain the focus areas to augment the journey of
internationalization to create a multicultural work force and for strengthening leadership
cadre with appropriate domain competencies. The Company has a strong committed work force
nurtured and backed up by its professional culture coupled with innovative HR process
aimed at strategic alignment with the business objectives. Top performing employees are
periodically identified and put through a six-step leadership development process. The
Company’s in house Project Management Institute in Baroda hosts several programs on
project execution excellence to complete projects in time and within cost.
OVERALL OUTLOOK
Looking at your company as a whole the management feels that there are several areas
requiring focus. Investment of time and resources in key areas in the infrastructure trade
can yield sustained long term growth at reasonable rates. The Company’s focus is
primarily on incubating and developing such growth initiatives that impact overall
strength of the organization and set it on firm ground for growth in the future.
The real estate sector witnessed a sharp decline in the absorption rate in the FY
2012-13. The sentiment of buyers during the year was cautious. New launches moderated
during the year due to lower demand and regulatory hurdles. In the coming year the sector
is expected to execute projects and foresees increase in sales across the market due to
expected lowering of interest rates, improving affordability resulting in uptick in this
sector.
RISKS AND CONCERN
The construction industry everywhere faces problems and challenges. However, in
developing countries like India, these difficulties and challenges are present alongside a
general situation of socio-economic stress, chronic resource shortages and institutional
weaknesses. Compared with many other industries, the construction industry is subject to
more risks due to the unique features of construction activities such as long gestation
period, delays due to external factors, complicated approval and supervision processes,
uncertain environment, extended working capital, design variations, coordination delays
between project participants, shortage of unskilled/semi-skilled & skilled labour,
land acquisition problem, occurrence of disputes, local political agitation and price
inflation of construction inputs. These risks pertain to contractors, clients, even
government bodies, subcontractors, suppliers and external issues. We endeavor to work from
the feasibility phase onwards to address potential risks in time and also deploy people
with construction and management knowledge from the inception to make sound preparation
for carrying out safe, efficient and quality construction activities. To minimize risk,
your company chooses its projects prudently, diversifies in various sectors, expands in
geographies and strategically deploys men, machinery and capital. Your company is also
undertaking fast-track short duration projects to avoid the risk associated with long
gestation projects. It has put in place risk management policies, which is periodically
reviewed and revamped by the Audit Committees well as Board of Director.
Share Capital
There has been no increase in the Equity Share Capital of the Company during the year
under review.
CAUTIONARY STSTEMENT
Statements in this management discussion and analysis describing the Company’s
objectives, projections, estimates and expectations may be ‘forward looking
statements’ within the meaning of applicable laws and regulations. Actual results may
differ substantially or materially from those expressed or implied. Important developments
that could affect the Company’s operations include a downtrend in the industry global
or domestic or both, significant changes in political and economic environment in India ,
Government regulations, tax regimes applicable statues, litigations, labour relations and
interest costs.
Auditors Certificate regarding compliance with the conditions of Corporate Governance
under clause 49 of the Listing agreement.
To
The Members
RNB Industries Limited
We have examined the compliance conditions of Corporate Governance by Bio Whitegold
Industries Limited for the year ended 31st March’ 2014 as stipulated in clause 49 of
the listing agreement of the said Company with stock exchanges.
The Compliance conditions of Corporate Governance are the responsibility of the
management. Our examination was limited to the procedures and implementation thereof,
adopted by the Company for ensuring the compliance of the conditions of Corporate
Governance. It is neither an Audit nor an expression of opinion on the financial statement
of the Company.
In our opinion and to the best of our information and according to the explanations
given to us, we certify that the Company has complied with conditions of Corporate
Governance as stipulated in the above-mentioned Listing agreement.
We state that no investor grievance is pending for a period of exceeding one month as
per the records maintained by the Shareholders’ grievance Committee.
We further state that such compliance is neither an assurance as to the future validity
of the Company nor the efficiency and effectiveness by which the management has conducted
the affairs of the Company.
|
Ashish Kumar Mukhopadhyay |
|
CHARTERED ACCOUNTANT |
| Date: 31.05.2014 |
|
+91-9892691696
