Vaswani Industries Ltd Management Discussions.

There is no change in business sector of the company and Management Discussion and Analysis continues on similar lines from year to year. Consumption of steel is an indicator of economic development of a country. Steel continues to have a stronghold in traditional sectors such as construction, housing and ground transportation, special steels are increasingly used in engineering industries such as power generation, petrochemicals and fertilizers. Your company is engaged in integrated business of manufacture of sponge iron, steel billets & ingots and power generation at Sondra village in Raipur (Chhattisgarh).

OPPORTUNITIES AND THREATS

Over last year, there is no significant change in opportunities & threats.

OPPORTUNITIES

Growth in the steel demand has strong correlation with growth in GDP of nation. The Indian economy was expected to grow at spectacular growth rates of GDP; but unfortunately the same is not happening. The demand for sponge iron in medium term is becoming healthy due to closure of many sponge iron plants for want of iron ore supply to them. Steel through induction furnace route is on the verge of reduction. Consequently merchant sponge iron suppliers will be under pressure on account of market demand. The company, therefore, has vision to shift focus to steel making from its own sponge.

The important policy measures which have been taken over the years for the growth and development of the Indian iron and steel sector are as under:-

(i) Currently, import duty on steel items from existing 5% to 10%. The import duty on raw materials like melting scrap, coking coal, met coke is NIL and between 2 to 5 percent for other raw materials such as Zinc, Iron Ore and Ferro Alloys. There is no export duty on any steel item. Government has rightly imposed ad-valorem export duty of 30 per cent on iron ore lumps in order to conserve the mineral for long term requirement of the domestic steel industry.

(ii) GST has brought uniform effect at the National level Excise duty for steel is currently at 12 percent.

(iii) To ensure sufficient domestic availability and curb the rising price of hot-rolled coils in the domestic market, its imports have been freed by the government.

(iv) The National Steel Policy 2005 continues to be updated to provide a roadmap for Indian Steel Industrys long term growth prospects in view of fast-changing nature of operations, structure and dynamics.

(v) For ensuring quality of steel several items have been brought under a quality control order issued by the Government. The matter to bring more steel items under this order is under examination.

(vi) In order to obtain full picture of the pattern of rural steel consumption in the country, an all India survey was commissioned by the Ministry of Steel. The survey work was coordinated by Joint Plant Committee, Kolkata and the field work was carried out by IMRB International, a leading market research organization. The study report was examined by a high-level Committee appointed by the Ministry of Steel for devising roadmap for implementation of the recommendations of the study, which have submitted its report to Ministry of Steel. Further action as per recommendations of this committee is being taken.

THREATS

Cost of Iron ore and coal i.e. the basic raw material has a direct impact on the profitability. Iron ore prices has increased substantially and availability of the required grade has suffered to a great extent due to various restrictions imposed by the authorities. Coal Indias new coal distribution policy and consequent Fuel Supply Agreement has disrupted coal linkages forcing producers to procure more e-auction coal. Coal India has also increased the price of coal substantially.

The cost of iron ore and coal constitute more than 80% of cost of production. Profitability of the company depends on market price of these raw materials vis-a-vis price of sponge iron. The only way to substantially reduce the cost of iron ore and coal is to have captive mines for these raw materials. The coal block which is under development will meet most of the coal requirements. Delay in starting the mining operations is only due to external factors. Further, the coal linkage has been discontinued forcing the company to procure the required coal through e-auctions of coal India and overseas markets at high cost. The company does not have any iron ore mine.

SEGMENT-WISE PERFORMANCE

The company has four segment iron & steel, power, real estate and fabrics. The necessary disclosures have been made as per accounting standard 17 on segment reporting in the notes to accounts.

OUTLOOK

The outlook of the company is broadly described in Vision and Mission statements of the Company. Options of shifting focus to steel making, separate power plant at pit head of coal block etc. remain in focus to optimize the revenue in future.

OVERVIEW OF THE COMPANY AND ITS PROJECT

Vaswani Industries Ltd. was incorporated under the Companies Act, 1956 on July 22, 2003 with the Registrar of Companies, Madhya Pradesh and Chhattisgarh and obtained Certificate of Business Commencement on February 10, 2004. The company was established with the object of manufacturing of Sponge Iron, Steel Billets and captive Power Generation. We are presently engaged in integrated business of manufacturing Sponge Iron, Steel Billets & Ingots and power generation. The company belongs to Vaswani Group of companies which has interest in iron & steel of over past two decades. The developments of the Company are as under:

(i) Our company has manufacturing facilities in an industrial area at Sondra village, 14 km from Raipur railway station. Our company installed first kiln of 1x100 TPD sponge iron in the year 2004-05 and over the period of time enhanced the total capacity of sponge iron to 3 x 100 TPD.

(ii) Has installed three Induction Furnaces with a capacity of 36000 MT for manufacturing of Steel Billets & Ingots utilizing in-house production of Sponge Iron.

(iii) Your company started selling power in 2009. Power generation capacity enhanced to 11.5 MW (9 MW from WHRB and 2.50 MW from Coal) during the year 2010-2011.

Since inception your company has responded to changing economic conditions and new market opportunities through periodic restructuring. We firmly believe in benchmark product quality, customer centric approach, people focus, ethical business practices and good corporate citizenship. Company draw its strength from an age old tradition of reliable customer service and quality products.

FINANCIAL PERFORMANCE OF THE COMPANY

o Sales

The total sales of current year 2017-18 is Rs. 23732.38 lacs as compared to Rs. 25551.05 lacs in previous year 2016-17. The sales volume has decreased by 7.12% as compared to previous year. o Consumed Material Cost

The material cost during the current year 2017-18 is Rs 15285.51 Lacs as compared to Rs 16090.76 Lacs in previous year 2016 - 2017. The raw material consumption has decreased by 5.00% as compared to previous year. o Manufacturing Expenses

Manufacturing expenses during the current year 2017-18 is Rs. 3585.23 Lacs where as during the previous year 2016-17 is Rs. 3358.09 Lacs. These expenses have increased by 6.76% as compared to previous year. o Employees Remuneration & Benefits

Employees Remuneration & benefits during the current year 2017-18 is Rs. 360.62 Lacs as compared to Rs. 337.25 Lacs in previous year 2016-17. These expenses have increased by 6.93% as compared to previous year. o Administrative & Other Expenses

Administrative & Other Expenses during the current year 2017-18 is Rs. 383.86 Lacs as compared to Rs. 322.69 Lacs in previous year 2016 - 2017. These expenses have increased by 18.95% as compared to previous year. o Depreciation

Depreciation during the current year 2017 - 2018 was Rs.539.32 Lacs as compared to Rs.574.47 Lacs the previous year 2016 - 2017. During the current year it has decreased by 6.12%. o Profit after tax

The current year Profit after tax is Rs. 450.77 Lacs as compared to previous year 2016-17 was Rs. 176.98 Lacs. During the current year there is growth of 154.23% in profit.

COMPETITION

The Company faces stiff competition from medium and large well-established players. The Company is smaller in size compared to the market leaders. However with capital expenditure in the upgradation of project of the company, it intends to face competition more confidently.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly, applicable statutes, the Code of Conduct and Corporate policies are duly complied with. The Company has an Audit Committee with majority of Independent Directors as members to maintain the objectivity. The Internal Audit Program is designed in consultation with the Statutory Auditors to ensure accuracy and reliability of accounting data and is monitored by the Audit Committee. Audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of the said recommendations. The Companys internal audit team also carries out extensive audits throughout the year, across all functional areas.

PERSONNEL

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.

CAUTIONARY STATEMENT

Statements made herein describing the Companys expectations or predictions are "forward-looking statements". The actual results may differ from those expected or predicted. Prime factors that may make a difference to the Companys performance include market conditions, input costs, govt. regulations, economic development within/outside country etc.