Essen Speciality Films Ltd Management Discussions

You should read the following discussion and analysis of financial condition and results of operations together with our financial statements included in this Red hearing Prospectus. The following discussion relates to our Company and is based on our restated financial statements. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards and other applicable provisions of the Companies Act. Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be "Forward looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factors.

BUSINESS OVERVIEW

We are a manufacturer and exporter of specialized plastic products in the home improvement and home furnishing industry, to renowned multinational modern trade retailers, such as IKEA, Walmart, Kmart, Bed Bath & Beyond,

Rusta, Runsven, Kohls, Kroger etc. Our Company has been recognized as a ‘two star export house by Ministry of Commerce & Industry, Government of India. We have also been exclusive global supplier of IKEA for certain of our products, since incorporation. We were awarded with the awards of ‘Best Supplier of the Year, twice by IKEA. We operate a fully-integrated, sustainable and technologically advanced manufacturing unit, which has been certified to be compliant with the requirements of ISO 9001:2015. Our Company is part of the Rajoo Group, which is headed by our promoter group company and Group Company, Rajoo Engineers Limited ("REL"). Our Company is promoted by one of the Promoters of REL, namely Khushboo Chandrakant Doshi. REL is global player in plastic extrusion machinery, catering to 70 countries across the globe. REL designs, manufactures and services mono to seven layer upward and downward blown film line for barrier and non-barrier applications along with extrusion coating and lamination line, mono to five layer sheet extrusion system for barrier and non-barrier sheet along with multi-station thermoforms. REL has played a major role in advancement of technology to fulfil the challenging market need and thus become a leading manufacturer and exporter of specialized plastic products in the home improvement and home furnishing industry. Our Company was incorporated on August 14, 2002 as ‘Essen Speciality Films Private Limited, a private limited company under the Companies Act, 1956, pursuant to a certificate of incorporation issued by the Assistant Registrar of Companies, Gujarat, Dadra and Nagar Haveli. Subsequently, our Company was converted into a public limited company pursuant to a resolution passed by our Shareholders at an extraordinary general meeting held on December 31, 2022 and consequently the name of our Company was changed to ‘Essen Speciality Films Limited and a fresh certificate of incorporation dated January 3, 2023 was issued by the Registrar of Companies, Gujarat at Ahmedabad. Our Company commenced its business operations in the Financial Year ended March 31, 2003 by manufacturing desk-mats. Thereafter, in 2007, our Company expanded its product portfolio by manufacturing expanded polystyrene foam disposables and commenced its commercial production on September 20, 2008. Subsequently, we further expanded our operations by manufacturing dining table mats, coasters, yoga mats and inner shoe soles through compression molding process in the year 2014; and artificial plants through injection molding process in the year 2018.

FACTORS AFFECTING OUR RESULT OF OPERATIONS

Except as otherwise stated in this Prospectus, the following important factors could cause actual results to differ materially from the expectations include, among others:

Regulatory Framework

We have obtained all regulatory permissions which are necessary to run our business, Further, some of the approvals are granted for fixed periods of time and need renewals, which are obtained in the course of business, however, there may be change in statutory regulations at any time which cannot be predicted by us. There can be no assurance that the change in regulations will not impact our operations in the future.

Ability of Management

Our success depends on the continued services and performance of the members of our management team and other key employees. Competition for senior management in the industry is intense, and we may not be able to retain our existing senior management or attract and retain new senior management in the future. The loss of the services of our Promoters could seriously impair our ability to continue to manage and expand our business. Further, the loss of any other member of our senior management or other key personnel may adversely affect our business, results of operations and financial condition.

Ability to manage logistics and transportation needs

Apart from in-house transportation facility we rely on third party transportation and other logistic facilities at every stage of our business activity including for procurement of products from our suppliers and for transportation from our factory to our customers and other markets. Since the cost of our goods also carried by third party transporters is typically much higher than the consideration paid for transportation, it may be difficult for us to recover damages for damaged, delayed or lost goods. Our operations and profitability are dependent upon the availability of transportation and other logistic facilities in a time and cost-efficient manner. Accordingly, our business is vulnerable to increased transportation costs, transportation strikes and lock-outs, shortage of labour, delays and disruption of transportation services for events such as weather-related problems and accidents. Further, global supply chains can be impacted with the increase in the fees of shipping routes putting cost pressures. Further, movement of goods encounters additional risks such as accidents, pilferage, spoilage or shrinkage may adversely affect our operations, results of operations and financial condition. Although we have not experienced any material logistics and transport related disruptions in the past, any prolonged disruption or unavailability of such facilities in a timely manner could result in delays or non-supply or may require us to look for alternative sources which may not be cost-effective, thereby adversely affecting our operations, results of operations, cash flows and financial condition.

Market & Economic conditions

India is one of the largest economies and is growing at a rapid pace. But in this globalised economy, all the businesses face an uncertain level of volatility from unexpected global events which ranges from global pandemics to wars, to weather changes to supply chain disruption, which may change the economic dynamics and the purchasing capability of the end customers. At the time of market slowdown, the demand falls which has adverse impact on our business.

Competition

We operate in a competitive atmosphere. Our competition varies by market, geographic areas and type of products. Our Company may face stiff competition from domestic as well as global market as the dynamic changes. Some of our competitors may have greater resources than those available to us. While service quality, technical ability, performance records, etc are key factors in client decisions among competitors, however, price& quality are the deciding factor in most cases. Further, this industry is fragmented with many small and medium sized companies and entities, which manufactures some of these products at various levels, which may adversely affect our business operation and financial condition. Further, there are no entry barriers in this industry and any expansion in capacity of existing manufacturers would further intensify competition. Moreover, as we seek to diversify into new geographical areas, new territories, new emerging markets, we face competition from competitors that have a pan- India presence and also from competitors that have a strong presence in regional markets. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect competition to intensify as technological advances and consolidations continue. These competitive factors may force us to reduce rates, and to pursue new market opportunities. Increased competition could result in reduced demand for our products, increased expenses, reduced margins and loss of market share. Failure to compete successfully against current or future competitors could harm our business, operating cash flows and financial condition.

COVID-19 Pandemic

Since the onset of the COVID-19 pandemic in March 2020, our Companys operations have been affected as our employees faced the threat of getting infected. In 2020, cases of the novel corona virus started rapidly increasing in India, which led the government of India to impose a nationwide lockdown. The spread of Covid-19 and its recent developments have had and might continue to have repercussions across local, national and global economies. To prevent the spread of Covid-19 and to comply with the restrictions, we had to temporarily suspend our operations in order to follow the Governments norms. We continuously monitored the economic conditions and have outlined sufficient measures to combat the pandemic situation at our business premises. Once the lockdown was lifted, our operations restarted in full swing. Initially we did find a little hiccup in finding workers but because of our enterprising organization, we were able to source quality workforce and we were able to train them and we restarted our operations. After lifting the lockdown and resuming our operations the demand in our industry abruptly increased from the different sectors and we attained the highest production during the partial year 2020-21 and FY 2021-22. The demand after pandemic ultimately nullified the impact of shutdown during COVID 19 pandemic. The future impact of COVID-19 or any other severe communicable disease on our business and results of operations depends on several factors including those discussed in the chapter "Risk Factors" beginning on Page No. 25 We are continuing to closely monitor the economic conditions and the effect of COVID- 19 and have outlined certain measures to combat the pandemic situation and to minimize the impact on our business.

Significant Developments after March 31,2023 that may affect our Future Results of Operations

The Directors confirm that there have been no other events or circumstances since the date of the last financial statements as disclosed in the Prospectus which materially or adversely affect or is likely to affect the business or profitability of our Company or the value of our assets, or our ability to pay liabilities within next twelve months.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation of Financial Statements:

The restated summary statement of assets and liabilities of the Company as at March 31 2023, March 31, 2022, 2021 and the related restated summary statement of profits and loss and cash flows for the period/year ended

March 31, 2023, March 31, 2022, 2021 (herein collectively referred to as ("Restated Summary Statements") have been compiled by the management from the audited Financial Statements for the period/year ended March 31 2023, March 31, 2022, 2021. Restated Summary Statements have been prepared to comply in all material respects with the provisions of Part I of Chapter III of the Companies Act, 2013 (the "Act") read with Companies (Prospectus and Allotment of Securities) Rules, 2014, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("ICDR Regulations") issued by SEBI and Guidance note on Reports in Companies Prospectuses (Revised 2019) ("Guidance Note"). Restated Summary Statements have been prepared specifically for inclusion in the offer document to be filed by the Company with the NSE in connection with its proposed IPO. The Companys management has recast the Financial Statements in the form required by Schedule III of the Companies Act, 2013 for the purpose of restated Summary Statements. The Restated Financial Statements are prepared and presented under the historical cost convention and evaluated on a going-concern basis using the accrual system of accounting in accordance with the accounting principles generally accepted in India (Indian GAAP) and the requirements of the Companies Act, including the Accounting Standards as prescribed by the Section 133 of the Companies Act, 2013 ("the Act") read with Rule 7 of Companies (Accounts) Rules, 2014. All assets and liabilities have been classified as current and non-current as per normal operating cycle of the Company and other criteria set out in the Schedule III of the Companies Act, 2013. b) Use of Estimates:

The preparation of the Financial Statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the period/year. The Management believes that the estimates used in preparation of the Financial Statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.

c) Impairment of Assets:

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is the higher of an assets net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arms length transaction between knowledgeable, willing parties, less the costs of disposal. An impairment loss is charged to the Statement of Profit and Loss in the period/year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of the recoverable value. d) Provisions and Contingent Liabilities:

Provision involving substantial degree of estimation in measurement is recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the Financial Statements. e) Cash and Cash Equivalents:

Cash and cash equivalents comprises Cash-in-Hand, Short-term Deposits and Balance in Current Accounts with Banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. f) Inventories:

Inventories comprises of Stock- in-trade (Spares & Components).

Closing Stock is valued at Cost or Net Realisable Value whichever is lower. Cost of Stock-in-trade comprises of cost of purchase and other costs incurred in bringing them to their respective present location and condition. g) Revenue Recognition:

Revenue from sale of goods net of returns is recognized on dispatch or appropriation of goods in accordance with the terms of sale and is inclusive of excise duty as and when applicable, Price escalation claims are recognized to the extent there is reasonable certainty of its realization. h) Other Income:

Interest income is accounted on accrual basis. Income other than interest income is accounted for when right to receive such income is established. i) Earnings per Share:

Basic earnings per share is computed by dividing the profit/ (loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity share outstanding during the period. Diluted earnings per share is computed by dividing the profit/ (loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. j) Taxation & Deferred Tax:

Income taxes are accounted for in accordance with Accounting Standard (AS-22) "Accounting for taxes on income", notified under Companies (Accounting Standard) Rules, 2014. Income tax comprises of both current and deferred tax.

Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.

The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.

Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.

k) Segment Reporting:

The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".

RESULTS OF OUR OPERATIONS

	For the year ended
	31st	% of Total	31st
Particulars				% of	31st March
	March		March			% of Total
				Total	2021
	2023		2022
INCOME
Revenue from Operations	11,861.18	98.45%	11,743.58	99.04%	9,577.70	98.94%
Other Income	186.91	1.55%	113.59	0.96%	103.08	1.06%
Total Income (A)	12,048.09	100.00%	11,857.17	100.00%	9,680.78	100.00%
EXPENDITURE
Cost of raw materials consumed	8,225.50	68.27%	8,555.72	72.16%	5,883.01	60.77%
Purchase stock in trade	-	0.00%	0.23	0.00%	4.69	0.05%
Changes in inventories of work-in-
	(881.03)	-7.31%	(593.93)	-5.01%	(230.64)	-2.38%
progress and finished goods
Employee benefits expense	1,273.08	10.57%	1,308.46	11.04%	966.38	9.98%
Finance costs	261.52	2.17%	284.28	2.40%	100.64	1.04%
Depreciation and Amortization
	374.32	3.11%	394.69	3.33%	625.07	6.46%
expense
Other expenses	1,362.89	11.31%	1,220.78	10.30%	1,096.04	11.32%
Total Expenses (B)	10,616.28	88.12%	11,170.23	94.21%	8,445.19	87.24%
Profit before tax	1,431.81	11.88%	686.94	5.79%	1,235.60	12.76%
Tax expense:
(i) Current tax	351.95	2.92%	178.27	1.50%	398.72	4.12%
(ii) Deferred tax	(257.37)	-2.14%	(8.23)	-0.07%	(76.85)	-0.79%
Total Tax Expense	94.58	0.79%	170.04	1.43%	321.87	3.32%
Profit for the year	1,337.23	11.10%	516.90	4.36%	913.73	9.44%

Main Components of our Profit and Loss Account

Income

Our total income comprises of revenue from operations and other income.

Revenue from Operations

Our revenue from operation as a percentage of our total income was 98.45%, 99.04%, 98.94% for the Financial Years ended March 31, 2023 and March 31, 2022, March 31, 2021.

Other Income

It is the income earned from discounts, interest income, rental income, exchange fluctuation, etc.

Expenditure

Our total expenditure primarily consists of cost of raw materials consumed, direct expenses, changes in inventories of work-in-progress and finished goods, employee benefit expenses, finance costs and Other Expenses.

Employee Benefit Expenses

Our employee benefits expense comprises of salary and allowances, Contribution to PF, ESIC, Directors remuneration, gratuity and staff welfare expenses. Finance costs

Our Finance cost expenses comprises of interest on borrowings, interest on delayed payment of taxes, other borrowing costs, etc.

Other Expenses

Other expenses primarily include remuneration to Auditor, solar plant maintenance expense, communication expenses, insurance, stationary & printing expenses, legal and professional charges, repairs and maintenance expenses, miscellaneous expenses, sales and promotion expenses, security charges, travelling expenses and rates & taxes, etc.

Provision for Tax

The provision for current taxation is computed in accordance with relevant tax regulation. Deferred tax is recognized on timing differences between the accounting and the taxable income for the year and quantified using the tax rates and laws enacted or subsequently enacted as on balance sheet date. Deferred tax assets are recognized and carried forward to the extent that there is a virtual certainly that sufficient future taxable income will be available against which such deferred tax assets can be realized in future.

Fiscal 2023 compared with fiscal 2022

Income

The total income of our company is 12,048.09 lacs total income for Fiscal year 2023 against fiscal year 2022 was 11,857.17 lacs. An increase of 1.61% in total income. This was due to increase in business from new customers viz. Wallmart (USA), Shurtape (USA), K-Mart (Australia) etc. in addition to IKEA.

Expenditure

Cost of raw materials consumed

In Fiscal 2023, our Company incurred cost for raw materials consumed 8,225.50 lacs against 8,555.72 lacs expenses in fiscal 2022. A decrease of 3.86%. This was merely due to decrease in raw material prices during fiscal 2023.

Purchase cost

In Fiscal 2023 has not incurred any purchase cost, while in 2022 incurred purchase cost of 0.23 lacs .A decrease of 100.00%. This was mainly because of high value of some bought out items supplied to the customer in Fiscal 2022. There were no such specific orders of bought out items from the Customers in the current Fiscal 2023.

Employee Benefit Expenses

In Fiscal 2023 our Company incurred for employee benefit expenses 1273.08 lacs against 1,308.46 lacs expenses in fiscal 2022. A decrease of 2.70%. This was due to resultant decrease in manpower requirement following process atomization implemented by the Company during fiscal 2023.

Finance Costs

The finance costs for the fiscal 2023 was 261.52 lacs while it was 284.28 lacs for fiscal 2022. This decrease of 8.01% was because of more efficient utilisation of non-fund based financial facilities instead of fund based financial facilities from banks resulting into lower interest cost.

Other Expenses

In fiscal 2023, our other expenses were 1,362.89 lacs and 1,220.78 lacs in fiscal 2022. An increase of 11.64% was due to increase in some manufacturing expenses as well as clearing & forwarding expenses specifically related to the increased business from new customers.

Profit/ (Loss) before Tax

Our Company had reported a profit before tax for the Fiscal 2023 of 1,431.81 lacs against profit before tax of

686.94 lacs in Fiscal 2022, an increase of 108.43% was mainly due to the improved gross margins because of decrease in raw material prices to the pre-covid levels. The Companys focus on cost optimisation in other operating areas also helped to improve the PBT.

Profit/ (Loss) after Tax

Profit after tax for the Fiscal 2023 was at 1,337.23 lacs against profit after tax of 516.90 lacs in fiscal 2022, an increase of 158.70%. in PAT was mainly due to the improved operating margins and decrease of 275.37 lakhs in deferred tax liabilities during Fiscal 2023.

Fiscal 2022 compared with fiscal 2021

Income

The total income of our company for fiscal year 2022 was 11,857.17 lacs against 9,680.78 lacs total income for Fiscal year 2021. An increase of 22.48% in total income. This was due to increase in new business from new customers viz. Wallmart (USA), Shurtape (USA), K-Mart (Australia) etc. in addition to IKEA.

Expenditure

Cost of raw materials consumed

In Fiscal 2022, our Company incurred cost for raw materials consumed 8,555.72 lacs against 5,883.01 lacs expenses in fiscal 2021. An increase of 45.43%. This was due to proportionate increase in Sales value during the comparative corresponding period.

Purchase cost

In Fiscal 2022, our Company incurred purchase cost of 0.23 lacs against 4.69 lacs expenses in fiscal 2021. A decrease of 95.10%. This was mainly because of high value of some bought out items supplied to the customer in Fiscal 2021. There were no such major specific orders of bought out items from the Customers in the current Fiscal 2022.

Employee Benefit Expenses

In Fiscal 2022, our Company incurred for employee benefit expenses 1,308.46 lacs against 966.38 lacs expenses in fiscal 2021. An increase of 35.40%. This was due to lower manpower availability during Fiscal 2021 because of outbreak of Covid19. Also, the Company announced salary increments during the Fiscal 2022. Because of these two reasons, the employee benefit expenses remained high during Fiscal 2022 as compared to Fiscal 2021.

Finance Costs

The finance costs for the fiscal 2022 was 284.28 lacs while it was 100.64 lacs for fiscal 2021. This increase of 182.47% was because of the higher utilisation of working capital as the working capital cycle got stretched dueto increase in the value and period of inventory holding due to disrupted supply chain globally. The Company hadto increase its inventory holding level due to increase in the procurement lead time and also the inventory value got increased following sharp increase in the prices of materials.

Other Expenses

In fiscal 2022, our other expenses were 1,220.78 lacs and 1,096.04 lacs in fiscal 2021. An increase of 11.38% was due to increase in sales volume during Fiscal 2022 leading to proportionate increase in variable expenses.

However, the other expenses in terms of percentage to the sales has come down to 10.40% for Fiscal 2022 from 11.44% during Fiscal 2021.

Profit/ (Loss) before Tax

Our Company had reported a profit before tax for the Fiscal 2022 of 686.94 lacs against profit before tax of

1,235.60 lacs in Fiscal 2021, a 44.40% decrease. The PBT % to Sales remained at 5.79% during Fiscal 2022 as against 12.76% during Fiscal 2021. The fall in PBT was mainly due to sharp increase in Raw Material Consumption Cost during Fiscal 2022. The raw material consumption during Fiscal 2022 increase due to unprecedented sharp rises in prices of raw materials during the period. The raw material consumption to sales increased to 67.15% during Fiscal 2022 from 58.44% during Fiscal 2021. However, the raw material prices have stabilised to a large extent during current Fiscal 2023 and the Raw Material cost is back on track.

Profit/ (Loss) after Tax

Profit after tax for the Fiscal 2022 was at 516.90 lacs against profit after tax of 913.73 lacs in fiscal 2021, a 43.43% decrease. The fall in PAT was mainly due to sharp increase in Raw Material Consumption Cost during Fiscal 2022. The raw material consumption during Fiscal 2022 increase due to unprecedented sharp rises in prices of raw materials during the period. The raw material consumption to sales increased to 67.15% during Fiscal 2022 from 58.44% during Fiscal 2021.

Cash Flows

(Amount in lacs)

		For the period ended
Particulars		31st March,	31st March,
	31st March 2023
		2022	2021
Net Cash from Operating Activities	2,527.20	(690.18)	852.25
Net Cash from Investing Activities	(309.03)	(268.05)	(1,589.56)
Net Cash used in Financing Activities	(2,187.13)	757.37	797.49

Cash Flows from Operating Activities

Net cash from operating activities for the period ended 31st March 2023 was 2,527.20 lacs as compared to the Profit Before Tax at 1,431.81 lacs. Net cash from operating activities for the period ended March 31, 2022 was at (690.18) lacs as compared to the Profit Before Tax at 686.94 lacs, while for period ended March 31, 2021, net cash from operating activities was at 852.25 lacs as compared to the Profit Before Tax at 1235.60 lakhs.

Cash Flows from Investment Activities

Net cash from investing activities for the period ended 31st March 2023 was (309.03) lacs. This was due to addition in moulds and machineries as well as increase in fixed deposits held as margin against non-fund based facilities. Net cash from investing activities for fiscal 2022 was at (268.05) lacs due to Capex in civil construction, and addition in plant & machineries, while for fiscal 2021, net cash from investing activities was at

(1,589.56) lacs due to major capex of (842.93 lakhs) in plant & machineries and increase in term deposits of

(757.62 lakhs).

Cash Flows from Financing Activities

Net cash from financing activities for the period ended 31st March 2023 was (2,187.13) lacs.Net cash from financing activities for fiscal 2022 was at 757.37 lacs due to availment and utilisation of additional working capital financial facilities from banks during Fiscal 2022., while for fiscal 2021, net cash from financing activities was at 797.49 lacs also due to lacs due to availment and utilisation of additional working capital financial facilities from banks during Fiscal 2021.

OTHER MATTERS

1. Unusual or infrequent events or transactions

Except as described in this Prospectus, during the periods under review there have been notransactions or events, which in our best judgment, would be considered unusual or infrequent.

2. Significant economic changes that materially affected or are likely to affect income from continuing Operations

Other than as described in the Section titled "Financial Information" and chapter titled "Managements

Discussion and Analysis of Financial Conditions and Results of Operations", beginning on Page 150 and 192 respectively of this Prospectus , to our knowledge there are no significant economic changesthat materially affected or are likely to affect income from continuing Operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations

Other than as described in the chapter titled "Risk Factors" and "Managements Discussion and Analysis of Financial Conditions and Result of Operations", beginning on Page 25 and 192 respectively of this Prospectus , best to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.

4. Future relationship between Costs and Income

Other than as described in the chapter titled "Risk Factors" beginning on Page 25 of this Prospectus , best to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

5. Competition Conditions

The industry in we are operating faces competition from organized as well as unorganized players in the domestic market as well as in the international market. We have a number of competitors who manufacture and supply products, which are similar to the products supplied by us. Even with a diversified product portfolio, quality approach and modern technology used in our products, we may have to face competitive pressures. We believe the principal elements of competition in our industry are price, quality, timely delivery and reliability. We compete against our competitors by establishing ourselves as a top solution provider of engineering services for engineering systems, built on automotive chassis and allied areas with industry expertise, which enables us to provide our clients with appropriate customized products suitable to their needs and market requirements.