Vishal Exports Overseas Ltd Management Discussions

VISHAL EXPORTS OVERSEAS LIMITED ANNUAL REPORT 2008-2009 MANAGEMENT DISCUSSION AND ANALYSIS 1. BACKGROUND: The Management Discussion and Analysis sets out the developments in the business environment and the Companys performance since our last report. This analysis supplements the Directors Report and the Audited Financial Statements forming part of this Annual Report. 2. INDUSTRY STRUCTURE: Ferro Alloy Industry was established to cater the needs of global steel industry. Ferro alloys are used as additives and deoxidizing agents in steel manufacture. Steel producers use Ferro manganese, Silico manganese and Ferro silicon, while stainless steel units use ferro chrome and charge chrome. At present there is surplus capacity in the country. Strong growth in steel and stainless steel is expected in the near future with generally healthy economic conditions over the next few years. And it is expected that the excess capacity will be absorbed and further growth is anticipated in Ferro Alloys Industry. 3. OPERATIONS, OPPORTUNITIES & THREATS: OPERATIONS: This has been dealt with in the Directors Report. OPPORTUNITIES: Indias natural resources and geographical position is exceptionally well positioned o t benefit from the growing demand for steel making raw materials. The Ferro alloys industry also thrives with the increase d demand for steel. THREATS: The manufacture of Ferro alloys is highly power-intensive, and therefore the cost of power is critical to the competitiveness. On an average, 50% of the total cost per tonne of Ferro alloys is accounted for by power. This is the only major threat that the industry is facing and in order to be competitive on a global scale, it is necessary to have stable power supply at a remunerative price. 4. SEGMENT-WISE PERFORMANCE OR PRODUCT-WISE PERFORMANCE: The Company has only one business segment i.e., Ferro Alloys. 5. OUTLOOK: Long term outlook of your company appears to be encouraging because of the following reasons: a) Your Company is participating in a Power Plant of 65 MW being set up at Village Jagannathpur, Sirpur Kaghaznagar Mandal, Adilabad District in the State of Andhra Pradesh by Mis. Karthik Rukmini Alloys & Energy Ltd., in association with Group companies and this would enable your Company to draw the required power at a comparatively lower price than that of the price being charged by CPDC of AP Limited. b) Your company had promoted 445 MW Natural Gas Power Project of M/s. Konaseema Gas Power Limited and 20 MW Hydro Electric Power Project of M/s. Orissa Power Consortium Limited from which your company is expected to benefit from its investments, as the above two projects are on trial runs. 6. RISKS & CONCERNS: The following are the risks and concerns that your company may face in future: a) Delay in setting up of power plant; Management has taken several steps to implement the Project, including land procurement, water allocation, fuel supply, Governmental clearances including environmental clearances etc., to speed up the implementation. b) Increase in power cuts imposed by CPDC of AP Limited; may also affect the profitability of the company. The power plant which is under implementation will ensure assured availability of power at an affordable cost. 7. INTERNAL CONTROL SYSTEMS AND ADEQUACY: The Company has sound internal control system, which ensures that all the assets are protected against loss from unauthorized use and all the transactions are recorded and reported correctly. The internal control system is supplemented by an extensive programme of internal audits and reviews by Management. The internal control systems are designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets. Further, reliance of all internal control functions and its entire gamut of activities are covered by independent audit, conducted by separate internal auditors, whose findings are reviewed regularly by the Audit Committee and Management of the Company. 8. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: This has been dealt with in the Directors Report. 9. HUMAN RESOURCE DEVELOPMENT: Human capital is one of the key elements of your Company. The Company has employed 148 employees who are highly motivated and have been contributing towards the growth of the Company. The companys human resource policies are aimed at motivating its employees to deliver high quality performance and reward talent with adequate compensation and accelerated career growth opportunities. Company believes that an on-going learning process is vital for growth in the fast changing business environment and for this purpose Company has been conducting various training programmes, motivation programmes for improving the knowledge levels of the employees at all levels. 10. INDUSTRIAL RELATIONS: This has been dealt with in the Directors Report Cautionary Statement: Certain statements made in the Management Discussion and Analysis Report relating to the Companys objectives, projections, outlook, expectations, estimates, etc. may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections, etc., whether expressed or implied. Several factors could make a significant difference to the Companys operations. These include climatic conditions, economic conditions affecting demand and supply, Government Regulations and taxation, natural calamities etc. over which the Company does not have any control. for and on behalf of the Board Sd/- Dr. M.V.V.S. MURTHI Chairman Place: Hyderabad Date : 27.07.2009