Shakti Pumps (India) Ltd Management Discussions.

Global economic review and outlook

Following a robust growth of 3.8% in 2017 and in the first half of 2018, the global economy slowed significantly in the second half of 2018, reflecting a confluence of factors affecting major economies like the failure of the Brexit negotiations, tightened financial conditions, geopolitical tension and higher crude oil costs. Owing to this, the global economy growth in 2018 was estimated at 3.6%.

Crude prices remained volatile since August 2018 as a result of multiple factors including the American policy pertaining to Iranian exports and softening global demand. Oil prices dropped from a four year peak of USD 81 per barrel in October 2018 to USD 61 per barrel in February 2019. While advanced economies are showing signs of a slowdown, emerging economies like India and China are expected to fuel the worlds economic growth engines.

Global growth is expected to remain at 3.2% in 2019 while bounce back to 3.5% in 2020. The unwinding of the US fiscal stimulus and the fading of the favourable spill-overs from US demand to trading partners will be offset by a pickup in growth in emerging markets and developing economies. Global oil supply is expected to increase gradually, lowering oil prices to USD 68.76 a barrel in 2019 and to ~USD 60 a barrel in 2023.

Global economic growth over six years

Year 2015 2016 2017 (E) 2018 (E) 2019 (P) 2020 (P)
Real GDP growth (%) 3.2 3.1 3.8 3.6 3.2 3.5

(Source: World Economic Outlook, July 2019; E: Estimated; P: Projected)

Indian economic overview

India retained its position as the sixth-largest economy and the fastest-growing trillion-dollar economy through a major part of the year under review (except in the last quarter of 2018-19). After growing 7.2% in 2017-18, the Indian economy is estimated to have grown 6.8% in 2018-19 as per the Central

Statistics Office release,

The principal developments during the year under review comprised a sustained increase in per capita incomes, decline in national inflation, steadying interest rates and weakened consumer sentiment from the second half of the financial year. The weaker sentiment was on account of a large non-banking financial company announcing its inability to address liabilities. This affected credit expansion, financial markets and consumer sentiment, which in turn resulted in slower GDP growth that declined to 5.8% by the fourth quarter of 2018-19, the slowest growth in a single quarter in years.

In 2018, the country attracted ~USD 42 billion in FDI Investment Report 2019. Driven by strong policy reforms, India witnessed a 23-notch jump to a record 77th position in the World Banks latest report on the ‘Ease of Doing Business that captured the performance of 190 countries. The commencement of the US-China trade war opened up new opportunities for India, particularly in the agro sector.

Inflation (including food and energy prices) was estimated at 2.6% on an annual basis, one of the lowest in years and well below the Reserve Bank2019. of Indias medium-term target of 4%. The rupee rebounded after touching a low of Rs. 74.45 to a dollar to close the financial year at Rs. 69.44. During the fiscal under review, the Indian Government continued to invest deeper in digitisation, renewable energy capacity generation and infrastructure building.

Key government initiatives

The Indian government continued to take initiatives to strengthen the national economy.

Bank recapitalisation scheme

In addition to infusing Rs. 2.1 lacs cr in public sector units, the Indian Government announced a capital infusion of Rs. 41,000 cr to boost creditasper for a strong impetus to the economy in 2018-19. The Budget 2019-20 mandated that the Union Government will infuse Rs. 70,000 cr to strengthen and enhance their lending capacity.

(Source: Hindu Business Line)

Expanding infrastructure

Indias proposed expenditure of Rs. 5.97 trillion (USD 89.7 billion) towards infrastructural development In Union Budget 2018-19 is expected to strengthen the national economy. As of November 2018, total length of road building projects awarded under Bharatmala Pariyojana (including residual NHDP works) was 6,460 kms for a total cost of Rs. 1.52 trillion (USD 21.07 billion). The Government has announced an investment of Rs. 10,000,000 cr (USD 1.5 trillion) in infrastructure over the next five years in

Budget 2019-20. (Source: IBEF)

Ujjwala Yojana and Saubhagya Yojana

With the help of this initiative, the Government has transformed the lives of many rural families, dramatically improving the ease of their living by providing electricity and clean cooking the World facility to all willing rural families by 2022.

UDAN

This Scheme is directed at providing air connectivity to smaller Indian cities, enabling the common citizens to avail the option of travelling by air. A number of airports are likely to be constructed under this scheme.

The Insolvency and Bankruptcy code (Amendment), Ordinance 2018

Passed in June 2018, the ordinance provides significant relief to home-buyers by recognising their status as financial creditors. The major beneficiary of the ordinance would be the MSMEs, since it empowers the Indian Government to provide the MSMEs with a special dispensation under the code.

(Source: PIB)

Pradhan Mantri Kisan Samman Nidhi

In February 2019, the Indian

Government announced the Pradhan Mantri Kisan Samman Nidhi, a scheme promising an annual assured income of Rs. 6,000 (USD 84.5) for any farmer owning upto 2 hectares of farmland. The budget for the fiscal year 2020 allocated Rs. 75,000 cr for the scheme, benefiting ~120 million land-owning farmer households. (Source: PIB)

Direct Benefit Transfer

The Direct Benefit Transfer initiative re-engineered the cash disbursement process in welfare schemes through simpler and faster flow of information/ funds to ensure accurate targeting of beneficiaries, de-duplication and reduction of fraud. In 2018-19 alone, this scheme is estimated to have transferred more than Rs. 3,00,000 cr and the gains to have accrued since implementation of the scheme (upto March 2019) is estimated at Rs. 1,41,677.56 cr.

(Source: www.dbtbharat.gov.in)

Indian agriculture sector

The Indian agricultural sector is the second largest in the world followed by that of the USA.

Even as some pockets of the countrys agricultural sector remain prosperous and profitable, there are other pockets that need attention.

This is reflected in the growing incidence of farmers falling into debt traps and committing suicide: every successive government has tried to implement schemes to save the debt ridden farmers but they have never been able to achieve much success. The sugar coated promises made to the farmers have never provided the farmers with much help. Bankruptcy, indebtedness and farming-related issues are the major causes of suicides among farmers/cultivators. In 2016, around 6,351 farmer suicides were recorded. In February 2019, Maharashtra state government identified around 14 suicide-prone districts.

Agriculture grew 1.76% every year during 1998-04 but bounced back after 2004 with agricultural growth rate accelerating to more than double to 3.84% per annum between 2004-05 and 2012-13 (growth rates are based on the old GDP series). This revival was led by higher credit availability to agriculture, rise in farm investment and MSP policies. The increase in the MSP (2004-09) may have partially fuelled food inflation, but also led to higher farmer incomes and an unprecedented increase in labor wages since the 1980s.

As against a growth rate of farmer incomes at 5.52% per annum between 2004-05 and 2011-12, incomes of all farmers declined at 1.36% per annum between 2011-12 and 2015-16 - the period after 2011-12 being the longest where farmers have seen a decline in growth in real income year after year. Agricultural growth rebounded to more than 6.3% in 2016-17 and 5% in 2017-18.

At this point, the crisis in Indian agriculture is not driven by a collapse of agricultural output but by economic policies followed in the last few decades that made low inflation the objective of fiscal and monetary policies.

Interestingly, whereas farmers distress was earlier the result of a disruption in production or weather-induced factors, there is now a growing incidence of it even the monsoons are normal.

Indian agriculture overview

Doubling of farms: The number of farms in India has more than doubled from 71 million in 1970-71 to 145 million in 2015-16, while the average farm size more than halved from 2.28 hectares (ha) to 1.08 hectare.

Between 1970-71 and 2010-11, the number of farms increased by 194% (rural population increased 189%) as farm tracts kept getting divided across relatives and succeeding generations.

Global warming impact

Global surface air temperature may increase by 4.0–5.8C in the next few decades. Western and Central India could witness 15 more dry days each year. Livelihood and food security of Indians could be at risk.

Global population increasing

Global population could increase to 9.7 billion people by 2050, compared to todays 7.5 billion. At the same time, crop yields, mainly grain and corn, could decrease by 50% over the next 35 years due to altered climatic conditions. It is worth noting that nearly 795 million people globally still dont have enough to eat on a regular basis.

Global pump sector overview

Pumps are basically used to supply and transport various forms of liquid depending on the pump type and the material of which the pump is made. The water-pumps are classified as Centrifugal

Pump, Diaphragm Pump, Reciprocating Pump and Rotary Pump. In 2018, the global revenue for water-pumps stood at USD 13 billion and is expected to grow at a CAGR of 2.6% during the period 2019-25. Recently, there has been a rise in the demand for energy efficient pumps across different sector such as building services, oil and gas and other energy intensive sectors combined with increasing urbanisation globally. In the last several years, the global market for water pumps has developed steadily, with an average growth rate of 0.14%. China was the largest supplier of water-pumps with a market share of 26.77% in 2017. Europe was the second largest supplier of water pumps, enjoying nearly 21.31% of global production in 2017.

(Source: Globenewswire,

Techsciresearch, Maximize Market Research)

Outlook

The demand for water-pumps is expected to increase due to the increasing need for industrial wastewater treatment. The increased infrastructural developments in the emerging nations of the Asia

Pacific region could have a positive impact on the water-pumps market .The development of the industrial sector, especially in the power, energy and agricultural sectors, could increase the demand for water-pumps, as could the growth of the oil andrefinery sector .

Moreover, the growing dependency on groundwater, instead of the monsoons, for irrigation and agricultural purposes in developing nations like India indicates an increase in the demand for water-pumps in the agricultural sector. Several global government initiatives for recycling wastewater to reduce water pollution also indicate a demand growth for water-pumps. The need to consume clean water to maintain a healthy and disease-free lifestyle, the construction of water recycling industries, and rising demand for solar water-pumps points to widening opportunities for water-pump players.xpected to drive the The Asia Pacific region is expected to maintain its water pump dominance, catalysed by infrastructure developments across developing countries. North America is expected to provide significant opportunities for the water-pump market. Increasing household and domestic activities in developed nations like Canada and the U.S. are anticipated to drive the regions market growth. USAs government initiatives are to recycle wastewater which is likely to drive the North American water-pumps market. (Source: Zion)

Key growth drivers

Water pumps are one of the most important mechanical devices with end-users across several industries and households. Government efforts to improve water infrastructure, water supply and sanitation in some countries are expected to drive the demand for water pumps in those nations. Increase in the utilisation of water pumps in the oil and gas sector can be attributed to the rise in demand for energy. New technologies in water pumps now enable the efficient separation of liquid and gas. The demand for water pumps from the power generation sector is expected to gain traction, particularly due to increased investments in the power and energy sectors in emerging economies.

Economic growth and infrastructure development in emerging countries of theAsia-Pacific are market for water pumps.

International Solar Alliance

International Solar Alliance (ISA) is an alliance of 121 solar resource rich countries lying fully or partially between the Tropics of Cancer and Capricorn. ISA was launched by the Indian Prime Minister Mr. Narendra Modi and the then President of France Mr. Franois Hollande in 2015.

The objective of the International Solar Alliance is to provide a dedicated platform for cooperation among solar resource-rich countries and global stakeholders, including bilateral and multilateral organisations, corporates and industries to achieve a common goal. This goal is directed towards increasing the use of solar energy in meeting the energy needs of ISA member countries in a safe, convenient, affordable, equitable and sustainable manner. Through this initiative, the countries intend to mobilise more than USD 1,000 billion for investments by 2030.

An important ISA focus comprises investments in solar pumps India, Bangladesh, Sudan, Uganda, Senegal, and Mauritius, among others. Through this programme, members would also be able to implement the project effectively from in-built monitoring mechanisms and develop large number of local employment opportunities.

The Indian pumps sector

The Indian pumps industry is an important contributor to the countrys growth due to the role of pumps as the primary equipment in almost every sphere of the economy, including infrastructure and agriculture. The pump industry had a turnover of about Rs. 200 billion in 2018 and is expected to grow at 10% annually. The Indian pumps segment has registered rapid growth in the past few years mainly due to declining groundwater levels, rapid urbanisation and improving infrastructure. The offtake of submersible pumps in the water and wastewater treatment segment alone was estimated at nearly 50% market share in 2019.

The growth of the submersible pumps market is influenced by various factors ranging from growing government investments in desalination, water and wastewater treatment projects to an increasing number of onshore and offshore oil exploration and production activities. Besides, water pumps are being increasingly used in industrialisation, construction and agriculture to transport water from one point to another. This market is being catalysed by depleting ground water and rising infrastructure investments Centrifugal pumps are mainly used for pumping water in the industrial and residential properties. These are also used in the agriculture sector, municipal water and wastewater plants, power generation plants, petroleum, and chemical industries among others. The market of the Indian pumps industry is fragmented and characterised by the presence of a few large players and a large number of small- and mid-sized players. The market is competitive, the large Indian vendors competing directly with global players through a wide distribution channel. In terms of product pricing, small regional players, with their comparatively low prices, threaten large domestic and global players. Only some of the larger players possess the capability of serving the industrial sector. The unorganised small players account for nearly half the supply to the price-sensitive agricultural and domestic segments. The principal pump manufacturing clusters are located in Coimbatore, Ahmedabad and Rajkot. Indias pumps and valves output is exported to more than 100 countries [est]. In the year 2017-18, domestic pumps (for liquids) worth Rs. 61.27 billion were exported.

(Source: Indian Infrastructure)

Outlook

India holds out immense potential for the growth the pumps industry. The governments increased focus on water management, the Make in India initiative and renewed investments in expanding national infrastructure indicate that the Indian pumps market could cross USD 3.2 billion by 2023.

(Source: Indian infrastructure)

Opportunities

The Indian pumps market holds out immense potential marked by rapid urbanisation and growing dependence on underground water due to monsoonal irregularity.

Agriculture accounts for a significant share in the countrys water-pumps market. This demand is complemented by the industrial sector where power plants, chemical manufacturing and water & wastewater treatment represent prime application areas. Rapid penetration of desalination plants in the industrial sector is consequently boosting the demand for water-pumps in this segment. Alongside the water treatment industry, water-pumps are gaining traction in the power sector. According to the Planning Commission of India, the government intends to enhance thermal power capacity by about 72,000 MW during the 12th Five Year Plan. Magnetic drive based water-pumps, EPC (Engineering, Procurement and Construction) based water-pumps, and mobile phones used as remote controllers for operating water-pumps are innovative introductions in India.

The Swachh Bharat Abhiyan or Clean India Mission could widen the Indian pumps market. The government plans to build around 110 million toilets across India -the highest toilet building program ever. The Rs. 20,000 cr National Mission for Clean Ganga is another prominent government initiative comprising nearly 288 projects, which could strengthen the demand for industrial pumps.

(Source:Techschi Research; The Guardian; The Hindu; Times of India)

The solar pumps overview

Solar pumps offer an effective way to strengthen Indias agriculture through the moderation of conventional energy choices (diesel). In India, the energy cost for pumping water can be up to 30% of the total farm expense, so switching to solar pumps represent a cheaper and convenient option. Through solar water-pumps, India can enhance solar energy awareness, which could potentially and annually save approximately USD 6 billion in electricity and diesel subsidies. With the government offering subsidised schemes to enhance solar pump affordability, the solar irrigation market is growing steadily. As solar irrigation solutions become available in un-electrified and remote areas, it could trigger the next xible agricultural revolution.

The KUSUM Scheme offers incremental revenue opportunities for farmers, making it possible for them to market their excess power to the state electricity grid. India announced a target to install 1 million solar pumps by 2021, strengthening the competitiveness of the countrys agriculture sector. A probable decline in the cost of solar pumps could enhance affordability and applications. In 2017, western India contributed the highest revenue share of the solar pumps market. North India is expected to emerge as the fastest growing region, catalyzed by larger solar pump installation targets announced by the state government.

Competitiveness in this market depends ontechnology,performance, applications (on-grid and off-grid), AC and DC technologies, product quality, efficiency, reliability and durability. A synchronised solar pumping system where all components such as pump, motor, controller, panel, structure etc. function harmoniously at desired parameters would enjoy a competitive edge as an ideal solar pumping system. The global opportunity is also widening for this product with an opportunity to expand into Africa. Morocco intends to install more than 1,00,000 solar pumps by 2020 while major donors and development agencies have piloted and assessed solar pumping solutions in Benin, Ethiopia, Kenya, Malawi and Zambia, among others.

(Source: Businesswire, Economic Times, 6Wresearch, Synergy Solar World)

Advantages

• Simple and reliable

• Easy installation and unattended operation

• One-time investment and negligible maintenance

• No diesel or other fuel spills or costs

• Mobility option

• No dependence on erratic grid electricity

• Better crop yields due to daytime water availability

• Facilitates multiple crop and multi-season cultivation

• Can be connected to a drip and sprinkler irrigation system

• Environment-friendly

Disadvantages

• The pump does not work at night in areas without a grid

Shakti Pumps competitive advantage

Shakti Pumps has been a sectoral thought leader and first-mover across the last couple of decades first in the manufacture of stainless steel pumps, then in the manufacture of all components for these pumps, in the extension of these pumps to the solar equivalent and thereafter to the manufacture of all supporting digital sub-products to complete the solution. The result is that the Company is an extensively integrated company, leveraging its engineering excellence to create complete product eco-systems that enhance sub-product dependence, enhance quality and enhance the capture of the largest slice of the value-chain. Steady progress in power electronics and PV panel efficiencies would widen the scope of solar energy applications leading to the development of integrated systems that can handle an array of domestic applications. Similarly improvements in efficiency of panels, pumps and controllers could optimise costs and enhance efficiency.

Besides, the Company has been an active player in the global water pumps sector with a rich experience of engaging in more than 125 countries.

KUSUM Yojana

The Indian government sanctioned the Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM) for farmers welfare. The objective of this scheme is to add solar and other renewable power plants in the country. The scheme aims to add solar and renewable capacity of 25,750 MW by 2022 with Central financial support of Rs. 34,422 cr.

Even though the five-year KUSUM was announced in March 2019, more than 2,50,000 solar pumps have already been installed under various government schemes. Though there were a few pilot projects which got implemented last year, major part of KUSUM scheme will be implemented from current financial year.

KUSUM will address all Indian States with state-wise allocations to be in the later part of 2019.

The scheme can potentially save about 27 million tonnes of CO2 emission per annum. One component of the scheme on standalone solar pumps could result in a saving of 1.2 billion litres of diesel per annum in addition to related savings in foreign exchange following a reduction in the import of crude oil. The scheme is likely to generate employment opportunity equivalent to 6.31 lacs job per year.

Energy Efficiency Services

Limited and Indias solar pumps sector

• A joint venture of NTPC Limited, Power

Finance Corporation, Rural Electrification

Corporation and Powergrid

• Set up under the Ministry of Power to facilitate implementation of energy efficiency projects Seeks to unlock the energy efficiency market that can potentially result in energy savings of up to 20% of current consumption by way of innovative business and implementation models

• Engaged in solarising Indias water-pumps, a viable alternative to power requirements of farmers during the day

• The solution will make it possible for farmers to receive considerable monthly revenue by selling excess power to the grid across 25 years

• EESL plans to form a Farmers Cooperative Society for better operations

• Replacing an estimated 2.27 cr pump sets used in Indias agriculture sector with energy-efficient pump sets could result in an annual saving of energy 4,600 cr kWh and GHG emission reduction of 4.5 cr tonnes of CO2 annually

The Companys review

Shakti Pumps is Indias leading manufacturer of energy- efficient submersible pumps for the agriculture, domestic and horticulture sectors. The Company went into business in 1982 and is now a recognised brand inside and outside of India. The Company is respected for perpetually transforming its personality: from cast iron submersible pumps to stainless steel to the solar variety.

Shakti Pumps pioneered the manufacture of 100% submersible stainless steel pumps and motors. Over the years, the Company has emerged as the second largest such pump manufacturer in the world.

Financial review

Profit and loss account analysis

Gross revenues

Gross revenues increased by 25% to Rs. 54,645 lacs in 2018-19, compared with Rs. 43,660 lacs reported in 2017-18.

Operating profit

Operating profit (EBITDA) increased by 15% amounting to Rs. 9,297 lacs in during 2018-19 from Rs. 8,093 lacs in 2017-18.

Depreciation

Depreciation for the year under review stood at Rs. 1,504 lacs, compared with Rs. 1,395 lacs recorded in the previous year, up by 8% on a Y-o-Y basis.

Finance costs

Finance costs for the year under review decreased by 27% from Rs. 1,401 lacs in FY18 to Rs. 1,781 lacs in FY19.

Net profit

Net profit for the year under review stood at Rs. 4,507 lacs compared with Rs. 3,411 lacs in the previous year.

Balance Sheet analysis

Net worth: The Companys net worth stood at Rs. 29,039 lacs as on March 31, 2019, increasing by 14%, compared with Rs. 25,363 lacs as on March 31, 2018. The net worth comprised paid-up equity share capital amounting to Rs. 1,838 lacs as on March 31, 2019 (1,83,80,156 equity shares of Rs. 10 each fully paid up). The Companys reserves and surplus stood at Rs. 27,201.28 lacs.

Loan profile: Short-term loan funds stood at Rs. 15,693 lacs compared to the previous years Rs. 9,567 lacs, while long-term borrowings stood at Rs. 2,135 lacs. The Companys total debt as on March 31, 2019 stood at Rs. 17,828 lacs compared to the previous years level of Rs. 11,031 lacs.

Total assets: The Companys total assets increased to Rs. 58,340 lacs in 2018-19 from Rs. 45,745 lacs in 2017-18, representing an increase of 28%.

Inventories

Inventories were Rs. 13,557 lacs as on March 31, 2019 compared to Rs. 11,614 lacs on March 31, 2018.

Trade receivables

Sundry debtors of the Company stood at Rs. 18,054 lacs at the close of FY19, compared to Rs. 14,334 lacs at the close of the previous year.

Trade payables

Trade payables stood at Rs. 7,214 lacs as on March 31, 2019, compared with Rs. 4,980 lacs in the previous year.

Key ratios

Particulars

2018-19

2017-18

EBITDA/Turnover(%) 17.52% 19.05%
EBITDA/Net interest ratio 6.58 7.65
Debt-equity ratio 0.61 0.43
Return on equity (%) 15.52% 13.45%
Book value per share (Rs.) 157.99 137.99
Earnings per share (Rs.) 24.52 18.56

Risk management

Competition risk Mitigation
Increased competition may affect the Companys profit margins. The Companys qualitative consistency ensures that it is able to address the different needs of customers in a competitive marketplace.
Manufacturing risk Mitigation
The Indian pump market mainly depends on the agricultural sector, due to the unpredictability of the monsoon. So irregularity of monsoon may lead to demand fluctuation in the market which will ultimately lead to underutilisation of capacity. The Company has a presence in 100 countries and 13 States in India. It also has a wide product portfolio and fungible production facilities.
Technological risk Mitigation
Decline in quality of the product could lead to reduction in demand. Shakti Pumps utilises state-of-the-art technology and robotics to guarantee the manufacture of superior quality products marked by increased precision, accuracy and performance.
Inflation risk Mitigation
The increase in the cost of critical inputs could affect the profitability of the Company. The Company strategically hedges against risks by buying right quantity at right price.
Liquidity risk Mitigation
If the Company is not able to sell the product efficiently then this will lead to reduction in the liquidity of the Company. The Company monitors and controls liquidity regularly and maintains a minimum requirement at all times.
Brand risk Mitigation
Inefficient marketing campaigns could lead to a decline in brand value. The Company invests regularly in promotional initiatives to enhance its brand value all over the world.
Currency risk Mitigation
An undervaluation of the rupee can affect the Companys export revenues. The Company hedges itself by using financial instruments that help minimise foreign exchange fluctuation risks to a large extent.

Internal control systems and their adequacy

The Company has a proper and adequate internal control system to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition and those transactions are authorised, recorded and reported correctly. The internal control is exercised through documented policies, guidelines and procedures. It is supplemented by an extensive program of internal audits conducted by in-house internal audit department. The audit observations and corrective action taken thereon are periodically reviewed by the audit committee to ensure effectiveness of the internal control system. The internal control is designed to ensure that the financial and other records are reliable for preparing financial maintaining accountability of persons.

Human resources

The Company believes in working as a team to meet targets and hence puts emphasis on providing equal opportunities to all employees. The Company believes in creating a meritocracy and as such uses a balanced scorecard method to appraise the performance of its workforce. The Company believes in the potential of young professionals and challenges them to accept and deliver additional responsibilities. The Company reinforces the capabilities of its workforce numerous in-house training programmes and job-specific training drills. As ofMarch 31, 2019, the Company had 642 employees on its payroll.

Cautionary statement

The information and opinion expressed in this report and as well as the Directors Report describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the infrastructure spend in the country, significant changes in political and economic environment in India, volatility in the prices of major raw materials and its availability, tax laws, exchange rate fluctuations, interest and other costs.