Vaishnavi Gold Ltd Management Discussions.

VAISHNAVI GOLD LIMITED (FORMERLY MASTER MULTI-TECH LIMITED) ANNUAL REPORT 2009-2010 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW: The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, guidelines issued by the Securities and Exchange Board of India (SEBI) and other statutory requirements. Our Management accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner the form and substance of transactions and reasonably present our state of affairs, profits and cash flows for the year. INDUSTRY STRUCTURE AND DEVELOPMENT: ECONOMIC OVERVIEW: GLOBAL ECONOMIC OVERVIEW: After a sharp, broad and synchronized global downturn in late 2008 and early 2009, a number of countries reported positive growth in 2009-10 consequently global growth is expected to rebound from a negative territory in 2009 to be projected 3.9% in 2010 and 4.3% in 2011. Interestingly, the growth is expected to be 5.1% in developing countries in 2010. INDIAN ECONOMIC OVERVIEW: The Indian economy grew 7.4% in 2009-10, compared with 6.7% in 2008-09, following a strong fiscal stimulus, monetary easing, imported consumer confidence return of risk appetite and large capital inflows. The real turnaround happened in the last quarter of 2009-10, when the economy grew 8.6% Indias gems and jewellery industry provides employment opportunities to 1.30 mn people directly or indirectly and comprises about 450,000 goldsmiths. The combination of skill and affordable cost makes the country unique For instance Indias wage rate is estimated at a tenth of the cost in developed markets. Branded jewellery is a relatively recent phenomenon, where jewellery is sold as fashion accessories or as everyday wear. A key driver was the introduction of certification of gold and diamonds, lifetime returns and buy-back schemes. The branded jewellery market is expected to grow a CAGR of 41% across 2009-2012. Exports: Gems and jewellery export increased 16% from USD 24.49 trillion in 2008-09 to USD 28.41 billion in 2009-10. The US and the UK accounted for 70% of this export and accounted from 13% of Indias total merchandise exports. Correspondingly, Indias manufacturing output grew 10.9% in 2009-10 against 2.9% in 2008-09. GLOBAL GEMS AND JEWELLERY INDUSTRY: The global gem and jewellery industry grew across the last decade owing to increasing demand from emerging global economies. Plain diamond jewellery accounted for the largest share of the global jewellery market followed by plain gold jewellery (marked by intensive design, wide design range and a price range that extends from affordable to exclusive). The US has been the largest gems and jewellery customer followed by China, India, the Middle East and Japan India and China are expected to develop as the largest consumer markets for traditional and branded jewellery Global Jewellery sales are expected to reach USD 230 tin by 2015 Gold jewellery exports grew 9.38% from USD 8.61 billion in 2008-09 to USD 9.42 billion in 2009-10 gold import was 739 tonnes in 2009-10 compared with 400 tonnes in 2008-09. Since gold jewellery accounted for 80% of the Indian jewellery market, a majority of the imported material was used in manufacture. GOVERNMENT INITIATIVES: * The Indian government encouraged the sectors growth through the following initiatives. * Permitted 100% foreign direct investment in gems and jewellery though the automatic route * Reduced import duty on platinum and exempted rough colored precious gems stones from customs duty, rough and semi-precious stones are also exempt from import duty. * Permitted the duty free import of consumables for metals (other than gold and platinum) up to 2% of freight on board value of exports. * Permitted duty free import entitlement for rejected jewellery up to 2% of freight on board value of exports. * Permitted the import of gold (18 carat and above) under the replenishment scheme. * Permitted the establishment of SEZs and gems and jewellery parks to promoted sectoral investment. * Abolished the import duty on polished diamonds in May 2007 INDUSTRY SWOT ANALYSIS: STRENGTHS: * Abundant availability of skilled cheap labor * India Dominates the Diamond Processing trade(11 out of 12diamonds are cut and polished) * Gold and Diamond Jewellery is expected to account for 82% of Total Gems and Jewellery market by 2015. * Low cost of production * Supporting Government industrial/EXIM Policy * A large number of Gem and Jewellery institutions provide a regular supply of trained man power with required skills and knowledge. WEAKNESS: * Low indigenous resources of rough diamonds and gold * Low labor productivity compared with Srilanka, China and Thailand, * Small firms lacking Technological and Export promotion expertise. * Removal of generalized system of preference will effect gold jewellery exports. OPPORTUNITIES: * Untapped reserves and Gems favourbale Government policies provide opportunities for Foreign direct investment in Mining and avenues for global companies to explore precious metals and stones in India. * Established capabilities across the value chain. * India is the attractive potential market in Gem and Jewellery sector. * Rising disposable incomes and aspirations . * Rising population of earning youth. THREATS: * Volatility in Gold prices * Infrastructure bottlenecks * Low Technological upgradition. * Chain and Malaysia emerging as potent competitors * Fragmented Industry structure with low transparency * Emergence of Policy and cutting centers like Angola, Namibia and Botswana. INTERNAL CONROL SYSTEMS AND THEIR ADEQUACY: The philosophy we have with regard to internal control systems and their adequacy has been formulation of effective systems and their strict implementation to ensure that assets and interests of the Company are safeguarded; checks and balances are in place to determine the accuracy and reliability of accounting data. The Company has a well defined organization structure with clear functional authority, limits for approval of all transactions. The Company has a strong reporting system, which evaluates and forewarns the management on issues related to compliance. Company updates its internal control system from time to time, enabling it to monitor employee adherence to internal procedures and external regulatory guidelines. FINANCIAL PERFORMANCE & OUTLOOK: In the Coming Financial Years, the Board will put its major thrust in developing domestic Jewellery Market, with its Innovative products and Schemes. The company will put efforts to make the best use of the Synergies resources available consequent to Merger. The company has recently opened its new retail Jewellery Show Room in Kukatpally Hyderabad with a Floor area of 4500 sqfts. The Company plans to Expand its chain of stores across India, beginning with South. HUMAN RESOURSES: Human wealth is the ultimate wealth in for any industry. The Company recognizes this fact and understands that employees are one of the most important sources for sustained growth of any business. Quality personnel delivering their optimum potential for the organization is the key differentiator. The Company maintained good relations with its employees and there was no unrest in the Company at any point of time.