MANAGEMENT DISCUSSION AND ANALYSIS 

Economic Overview:

Global growth rate remained moderate at around 3.5%, with uneven prospects. While growth in emerging market and developing economies is lower, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries. Most advanced economies were much stronger. Complex economic dynamics that affected global activity in 2014 are still shaping the outlook: medium and long-term trends, global shocks and many country or region specific factors.

With an upward of 7% growth, the domestic market swelled to the positive policy actions, increased foreign investments, reducing account deficit and inflation has reflected an improved confidence and rising economy in the global landscape.

Through competitive market and varying input cost the year was challenging yet rewarding.

The operating context for the year was challenging, given the backdrop of a market slowdown, a volatile input cost environment and heightened competitive intensity. Your Company's performance for the year 2014-15 has to be viewed in the context of aforesaid economic and market environment.

Business Overview:

As localization been the recent buzzword of modern business, customers of all sizes is faced with a key challenge: the need to identify local competent partners/suppliers who can provide solutions under single roof. Customers are increasingly concerned about how to secure and manage the right local partners/suppliers to de-risk themselves from various economic dynamics, not to mention an increasing number of companies with little or no background in the business.

In contrast, Delta Magnets group (DMG) successful completion of three decades of existence emphasizes our commitment and strong position in the magnets industry.

DMG comprises of Delta Magnets Limited, Nashik (DML) along with its two subsidiaries namely MMG India Private Limited, Chennai & Nashik (MMG (I)) and MagDev Limited, UK (MagDev). While DML manufactures ceramic magnets which are used mainly in the automotive sector, MMG(I) manufactures soft ferrites which serves the electronic and automotive sector and MagDev being a distribution house deals in various kinds of magnets and magnet materials which caters to various industries including electronics, retail, non-conventional energy, aerospace and automotive.

Your Company is one of the pioneers in providing solutions to customers - from consumers and small businesses to the largest global organizations- more combrhensive and efficiently than any other company. Our company's key strength is to provide complete solutions to customers under a single roof.

In our core businesses - hard ferrites, soft ferrites, trading - we utilize our market leadership positions to identify and convert new growth opportunities. As the industry matures, we pair new technologies with our core solutions to deliver integrated solutions that address evolving customer needs.

During the year DMG achieved some key milestones to shape a robust future for the company. A new MMG unit was successfully commissioned and is now operational as per plan in Nashik with increased capacity and new Machineries. DML, Nashik shifted to a new systematic location in the same factory and also acquired TS and ISO certification. TS Certification is mandatory for all automobile part suppliers. Positive audit reports from many major auto part companies were received during the fiscal year. MMG Coiling unit, Chennai shifted to a new location and obtained ISO certificate. In addition to these improvements we established a joint agreement with one of the largest manufacturers of Rare earth magnets in China and Soft ferrites in UK.

As the threat landscape evolves and customers shift to adapt to new technologies, we are investing in future growth areas that will help to reduce cost and improve efficiency to meet the customer's expectation. Your Company leverages internal R&D, expansion, acquisitions and partnerships to accelerate its long-term strategy.

Financial & Operational Performance:

Net Sales

For the fiscal year under review, DMG recorded consolidated net sales of Rs. 559,877 thousands. This was Rs. 54,050 thousands or 11% higher than the brvious fiscal year and reflected such factors as moderate global growth, led by strengthening of the US economy, the moderate growth in automobile industry, electronics and passive component industry.

Turning on an individual business segments performance, results were buoyed by an increased sales of soft ferrites Rs. 8,827 thousands or 6% year on year to Rs. 153,938 thousands,sales of hard ferrites Rs. 31,004 thousands or 11% year on year to Rs. 305,364 thousands and value added services sales 10,543 thousands or 11% year on year to Rs. 110,841 thousands due to our initiatives to improve our share of business from key accounts as well as new customers and new markets.

Operating Costs and Selling & Administrative Expenses

Operating costs increased Rs. 61,234 thousands, or 13% up compared with the brvious fiscal year to Rs. 529,200 thousands, largely reflecting increased usage in the production/output as well as the hike in raw material costs & power/fuel costs. In spite of the results of efforts towards cost controls, the operating costs to net sales ratio higher by 2.01% from 92.52% in brvious fiscal year to 94.53% majorly due initial operating cost of MMG new unit.

Operating Income

Taking into account the aforementioned factors, operating income dropped Rs. 7,184 thousands or 19%, compared with the brvious year to Rs. 30,677 thousands. This is largely reflected the hike in raw material costs and jump in Employee cost. In similarly, the operating income margin dropped by 2% from 5% in the brvious fiscal to 7%. This is brdominantly due to the additional operating cost of new facility at Nashik, which will be stabilized in the subsequent year.

Net Income

During the fiscal year under review, the interest cost has been increased by 18% as compared to brvious fiscal year due to increase in long-term & short-term borrowings for MMG new unit. Further, the debrciation for the current fiscal year decreased over the brvious year due to change in debrciation basis/estimates as per new company act.

Accounting for all of the aforementioned factors, net income for the fiscal year under review amounted to Rs. 12,259 thousands, dropped byRs.10,937 thousands or 0.47 times compared with the brvious fiscal year.

Financial Condition:

Cash Flows

Cash and Cash Equivalents as of March 31, 2015 stood at Rs. 50,552 thousands, higher than the brvious fiscal year of Rs. 29,173 thousands.

Major operating activities included foreign exchange fluctuation and increase/decrease of current assets and current liabilities in ordinary course of business.

Important investing activities included investments in fixed assets& capital work in progress for the MMG new unit.

Assets, Liabilities and Net Assets: Asset

Total assets stood at Rs. 762,498 thousands as on March 31, 2015, Increase of Rs. 184,824 thousands compared with the brvious fiscal year. While fixed assets increased Rs. 145,777 thousands year on year as compared to brvious year mainly due to addition of MMG new unit, other non-current assets increased Rs. 4,367 thousands year on year as compared to brvious year because of increase in long-term loans & advances. Current assets climbed by Rs. 34,679 thousands largely reflecting increase in trade receivable and inventories.

Liabilities

Total liabilities stood at Rs. 406,402 thousands as on March 31, 2015, an increase of Rs. 151,554 thousands compared with the brvious fiscal year end. Mainly because of increase of long-term &short-term borrowings for MMG new unit & trade payables.

Net Asset

Net assets stood at Rs. 356,096 thousands, an increase of Rs. 33,270 thousands year on year. This is brdominantly due to the increase/decrease of current assets, current liabilities and increase in long-term &short-term borrowings for MMG new unit.

Internal Controls and Systems:

All up-gradation of the ERP system pertaining to commercial activities is complete in all the three companies. Qualified internal audit firms in all three units audit the accounting system.

All the three companies are ISO-9001-2008 certified and undergo audits by the certifying bodies periodically. The senior management team conducts periodical Management Review Meetings (MRMs) to examine implementation of Quality System. We are making our position stronger by identifying new customers with higher margin, improving internal efficiency, in house Research and Development, and better customer satisfaction.

The Audit Committee and the Board of Directors review the operations and financial performance quarterly.

Human Resources:

Your Company's Human Resource agenda for the year was focused on strengthening four key areas: building a robust and diverse talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement and strengthening employee relations further through progressive people practices at the shop floor.

Your Company apbrciates the human values and believes in developing people through work. Span of Management has been defined & crystallised to achieve organisational goals. Pools of talented people in all functions are in place to discharge their duties effectively & efficiently. Training & evaluation system is in place to enhance & hone skills at all levels. All HODs impart training to their departmental personnel on the training day every week. External Trainers are also invited for imparting training. Good HR practices are put in place to boost the morale of the people.

Delta Magnets and MMG (India) have internal unions. MagDev does not have any union. The total employee strength as on 31 March 2015 stood at 207, up from 175 in the brvious year.

Outlook and Forecast for the Fiscal Year Ended 31st March 2015:

Global economic indicators are expected to improve, led by positive prospects in advanced economies. Despite a strengthening external demand, uncertainty continues to loom large on the economic horizon of some emerging economies owing to domestic fragilities. The global economic climate continues to be volatile, uncertain and prone to geo-political risks.

For India, economic activity is expected to improve modestly, driven by global economic revival and moderation in inflation. Upside brssures on inflation and consumption, hinge on the vagaries of the monsoon and the pace of revival of the investment climate will determine to a very large extent India's economic performance, going forward.

Electronic and Auto markets are expected to grow; however, uncertain global economic environment, inflation and competitive intensity continue to pose challenges. While the near term conditions pose a challenge for the economy, the medium to longer term secular trends based on rising incomes, aspirations, low consumption levels, etc. are positive and an opportunity for your Company, in particular.

Moving forward, Your Company is projecting net sales of Rs. 720,000 thousands approximate in the fiscal year ending March 31st, 2016, with the addition of new unit. From a profit perspective, Operating Income (EBIDTA) is expected to be around Rs. 50,400 thousands with Net income Rs. 36,000 thousands.

Business and Other Risks:

DMG operates in global and domestic markets and our products are used in a diverse range of applications in different industries/sectors. For this reason, a variety of factors may materially impact the Group's operations. Some of the major businesses and other risks are described below. Statements concerning the future rebrsent the judgment of DMG as of March 2015.

1. Major Raw Material Price Fluctuations

Many of the DMG products use rare earth materials, mining materials, and petrochemical products as raw materials. The purchase prices of these are susceptible to fluctuations in the market for other raw materials, crude oil prices and export regulations in producing countries. This may increase procurement cost or make it difficult to procure the necessary quantities. These factors may exert a material impact on performance.

2. Exchange Rate Fluctuations

Due to products exports and raw material imports usually denominated in US dollars, GBP and at times in other currencies, exchange rate fluctuations may exert a material impact on the performance of the Group. DMG pursues measures to attenuate the risk from exchange rate fluctuations, but cannot guarantee that exchange rate fluctuations will not affect performance.

3. Acquisitions, Joint Ventures and Strategic Alliances

DMG may acquire outside companies, establish joint ventures and implement strategic alliances in order to develop new technologies and products and raise competitiveness. These complex initiatives involve integration of businesses, technologies, products and personnel that require time and expense. Failure to implement these initiatives as planned may exert a material impact on Group's operations. The success of any business alliance is determined in part by factors beyond the Group's control, including alliance partner decision, capabilities and market trends. Implementation of these initiatives may cause the Group to incur acquisition- related expenses. In addition, the Group cannot guarantee that it will succeed in integrating acquired business or that its initiatives will achieve all or part of the initial objectives.

4. Potential Risk in Overseas Activities

DMG produces and sells products in Asia, the United States, Europe and other regions. Exposure to political and socio-economic risks in these markets may exert a material impact on the financial position and performance of the Group.

5. Public Regulations

DMGs business activities are subject to various regulations in the countries in which it operates. The regulations include legal obligations related to foreign investment, trade, competition, intellectual properties, taxes, exchange rates, the environment and recycling. Specific changes to these or any regulation could restrict operations, increase cost and exert a material impact on the Group's performance.

6. Financial Risk

DMG holds equities and marketable securities. A decrease in the value of these marketable securities may exert a material impact on the financial position and performance of the Group. In addition, long-term procurement of funds from the capital market exposes the Group to risk associated with the interest rate fluctuation and credit.

7. Competition Risk

The industry in which we operate is highly competitive. We compete with major international magnet companies that, like us, operate in multiple geographic areas, as well as regional, local and private label manufacturers and other value competitors. If we are unable to compete effectively, we may be unable to gain or maintain share of sales or gross margins in the global market or in various local markets. This may have a material adverse impact on our revenues and profit margins.

8. A portion of our workforce belongs to unions. Failure to successfully renew collective bargaining agreements, or strikes or work stoppages could cause our business to suffer.

Many of our employees are covered by collective bargaining agreements. These agreements expire on various dates. Strikes or work stoppages and interruptions could occur if we are unable to renew these agreements on satisfactory terms, which could adversely impact our operating results. The terms and conditions of existing or renegotiated agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency.

Cautionary Statement:

Statement in the "Management Discussion and Analysis" describing the Company's objectives, estimates, expectations or projections may be 'forward looking statements' within the meaning of applicable laws and regulations. Actual results could differ materially from those exbrssed or implied.