Sahyadri Industries Ltd Management Discussions.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

ECONOMIC OVERVIEW:

GLOBAL ECONOMY:

News on the global front is positive with continued growth of 3.1 % in 2018, though it may gradually slow down little later.

Advanced economies are expected to grow at 2.2% in 2018 before easing to 2% as central banks gradually remove monetary stimulus. (Source World bank June report)

Emerging and developing economies are set to grow at 4.5% in 2018 before reaching 4.7% in 2019 as recovery in the commodity prices mature.

INDIAN ECONOMY

So far Indian economy is concerned , situation remain buoyant. As per World Economic Prospects 2018 report of UN (source Business standard) Indian economy is set to grow at 7.2 % in 2018 19 and 7.4% in 2019-20. India continues to be bright star on the economic growth front in percentage terms.

Overall confidence in India has increased due to policy initiatives taken by the Government one after another. Moody’s rating agency upgraded India’s local and foreign currency rating to BAA2 with stable outlook from Baa3 . India has substantially improved its rank by 30 positions to 100th rank in Ease of Doing Business Report in 2018. As per World Economic forum India’s rank in Global Competitiveness Index is 40 out of 137 in 2017-18 as against 71 out of 144 countries in 2014 15. Number of initiatives like Insolvency and Bankruptcy code, GST, push to infrastructure by giving infrastructure status to affordable housing, coastal connectivity, bank recapitalization, highway development (Bharatmala pariyojana), comprehensive reforms in FDI, higher allocation to rail and road sector in 2018 19 and reduction in corporate tax on companies with turnover of Rs 250 crore are various steps boosting business environment and sentiments. Overall things are looking up from economic point of view.

BUSINESS OVERVIEW

Your company operates mainly in two segments.

Building material division and windmill division.

BUILDING MATERIAL DIVISION

OVERALL ENVIRONMENT

Overall environment for building material division looks bright. Government plans to build 10 million houses for homeless by 2019. Pradhan mantri Awas yojana is a big boost to housing sector. There are separate schemes for rural and urban housing under the scheme including slum dwellers in urban areas. Credit linked subsidy scheme for lower income group and middle income group has created exponential opportunities.

Government’s plans to double farmers’ income by 2022 is quite ambitious and is going to provide much needed liquidity in rural market. National health protection scheme announced by Pradhan Mantri is also going to create need of substantial health care infrastructure.

SAHAYDRI

Sahyadri is well placed in the building material division to tap the above opportunities with plants in Maharastra, Tamilnadu, AP and Gujarat. Enough spare capacity are available.This division consists of asbestos cement corrugated sheets and at cement sheets/boards. Boards are made both by asbestos as also non asbestos ber. Each of these products has different application and constitutes a separate market.

Growth in building material division across the market was sluggish. However, inspite of lower exports , your company has been able to almost match last year sales.

Building division has been giving good bottom line mainly due to continued emphasis on initiatives taken earlier for cost cutting as also favourable external conditions like exchange rates, raw material rates etc. There was saving in interest costs too because of low term loans and tight control on working capital.

It is noted that there is scope for growth in home markets where enough spare capacity is available. Series of steps have been planned to utilize the same including emphasis on new applications.

WINDMILL DIVISION

Wind mill segment continued to contribute to overall business of the company. Top line was impacted due low winds as also due to sale of Tamilnadu windmill .

.FIFINANCIAL PERFORMANCE

Your company closed the year with turnover of Rs 278.50 crore including other income. It is little lesser than Rs 285.64 crore for previous year. However the bottom line improved drastically from Rs 317.14 lacs to Rs 2449.03 lacs. This was due to drastic cost saving measures implemented sometime back supported by external factors.

WAY FORWARD

During the year GST was implemented. More market is moving towards organized sector. With good rains and higher rural income we look forward for better growth in coming period. With increase in the steel prices cement sheets are still a best alternative from cost and durability point of view. It is also a low maintenance, corrosion free material. It is re and water resistant product. With increased demand for housing and government encouragement to low cost housing schemes there are strong prospects of

further growth.

RISKS AND CONCERNS

Company performance is largely dependent upon one product i.e asbestos cement sheets. Its performance depends upon rain and rural income.

However this risk is party addressed by steady income from at cement sheets with asbestos and non asbestos boards (both have different applications) as also exports. Exports are lesser compared to three years back. However market is on gradually looking up due to improvement in oil prices. Your company is also exploring other than gulf markets. Presently boards constitute about 20% of volume and we look forward to its growth.

Besides above windmill segment has been giving a steady income and profits.

Another risk is foreign exchange rate. With tightening of liberal monetary policies by US and other countries dollar may go up. However there is possibility of passing it to customers due to better rains, demand and market conditions

PERCEIVED RISK OF ASBESTOS

There is always a competing product lobby working for against asbestos industry. However industry has adopted safe production processes. Fully mechanized production process ensures no human intervention. India uses only white chrysotile ber which is comparatively safe for usage. Keeping these things in view even Supreme Court has rejected moves by competing lobbies. Further similar attempt was made with the National Human Rights Commission, on considering the merits the Commission decided in favour of the industrys contention. As such practically there is no risk of ban on industry.

Closure of some of mines is another risk. However company’s supplies are secured due to long and excellent relations with suppliers.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

Company has internal control systems commensurate with the size and risks of the company. Company follows tight internal control systems and practices on its flown through inbuilt controls in SAP. All checks and balances are controlled by SAP’s comprehensive systems. Moreover company’s accounts are audited by qualified statutory as also internal auditors. Audit committee reviews systems and controls from time to time.It ensures optimum utilization of resources, safeguarding of assets and compliance with all statutory provisions and regulations.

CORPORATE SOCIAL RESPONSIBILITY

However company continued to support dispensary work near Vijaywada plant. Your company also donated to rotary club for distance fieducation programme. -

HUMAN RESOURCES :

Your company lays great emphasis on human relations. Training programs were arranged from time to upskill employees. Policies are in place to support employees in their emergencies- medical or otherwise. Company recognizes importance of untiring efforts of employees to bring the company where it is. Directors put on record their appreciation of employees for hard work and dedication.

CAUTIONARY STATEMENT

It may be noted that statements in the management discussion and analysis report are forward looking within the meaning of applicable rules and regulations. Actual results may materially differ from those expressed either expressly or implied depending upon circumstances.