MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Industry Structure and Development:

The Indian economy during the FY 2014-15 registered a GDP growth of 7.4%. The FY 2014-15 had growth of 3.6% for the Indian construction sector faster than 1.6% growth of last year. Due to change in governments and major focus on infrastructure development the construction sector is on high. The outlook for the construction is likely to improve for construction companies in the coming years. The government is making pertinent efforts to remove bottlenecks that are delaying infrastructure projects in India and with the Make in India initiative the infrastructure development will mark a major growth in the sector.

Indian Tile Industry:

The Indian tile industry has been strong in the past several years and has reported a growth around healthy 15% per annum. Investments in the last 5 years have aggregated over Rs.6000 crores. The overall size of the Indian ceramics tile industry is approximately Rs.18,000 crore (FY15). The production during 2014-15 stood at approx 600 million square meters. India ranks in the top 3 list of countries in terms of tile production in the world. With proper planning and better quality control, the exports contribution is likely to increase significantly.

The Indian tile industry is divided into organized and unorganized sector. The organized sector comprises of approximately 14 players. The current size of the organized sector is about Rs 7,200 Crores. The unorganized sector accounts for nearly 60% of the total industry bearing testimony of the growth potential of this sector.

Industry Outlook:

The long term outlook for Indian construction sector continues to remain encouraging. The demand for both residential and commercial spaces remains unstinted. This is fuelled by the projected growth for the hospitality, retail and aviation sectors as well. The realty sector continues to be the primary driving force and the consumers' brferences are being aligned towards pronominal value additions, with rising disposable incomes and the ever increasing urbanization. The long term prospects are also affirmative envisaging the government initiatives for enhancing the infrastructural facilities in rural and semi urban areas across the country.

The ceramic industry in the country is growing and the prospects are bright as the use of ceramics in infrastructure and automobile sectors is increasing. Boom in housing sector coupled by the government policies fuelling strong growth in housing sector; Retail boom in the Indian economy has also influenced the demand for higher end products.

However, in the near term, companies in the sector could witness challenges on account of sluggishness of new order inflows, executive concerns surrounding their current order books, elongated working capital cycle and resultant increase in debt levels, as reported  by ICRA Ltd.

The competition offered by the unorganized players of the industry is a major impediment as well. The ever increasing operating costs, supply of natural gas and its prices, availability and procurement of raw materials whose prices again tend to be volatile, foreign exchange risks, gaps in working capital cycles and availability of skilled labour for ensuring quality of the output are the menacing aspects affecting the industry.

Company Outlook:

The recent incident had an impact on the whole town of Yanam with several people depending on the Company being thrown out of balance. Your company is in the process of exploring options for recommencing the plant operations in phases and is awaiting settlement of claim by the insurance company.

Your company had established a firm footing in the area, penetrating into various aspects of the society with its activities and is absolutely optimistic about bouncing back to its original standing. This is hence considered to be a temporary phase in the history of the Company.

Internal Control Systems:

Your Company has in place proper and adequate systems of internal controls commensurate with its size and the nature of its operations comprising authority levels and powers, supervision, checks and balances, policies, procedures and internal audit. The internal control system provides reasonable assurance that the transactions are properly recorded and are executed in accordance with proper management authorization and that the assets are safeguarded against loss from unauthorized use or disposition and that the accounting records are adequate for brparation of financial statements and other financial information. The system is reviewed and updated on an on-going basis. The Company is continuously upgrading its internal control systems by various measures such as strengthening of Information Technology, infrastructure, use of external management services and adoption of various recommendations of Audit Committee.

Human Resources and Industrial relations:

Your Company believes that human resource is the most important asset of the organization and lays importance on competence and commitment of human capital for its growth. Accordingly, the HR interventions are aimed at strengthening the service ethic amongst the staff and helping them to realise their full potential. An enabling environment that fosters continuous learning and innovation remains a key focus area of your company.

Your company hopes to resolve the strained labour relations and the matters pending before the industrial tribunal in the near future. Skilled and committed workforces in the plant who had left the company are willing to rejoin once the plant re-commences its operations.

Business Review and Financial Performance

During the year under review, your company's performance was very badly affected as there was no production due to labour unrest which dragged the Company's bottom line further.