Konndor Industries Ltd Management Discussions

Indian Paper Industry

The Indian paper industry is an integral part of the Nation’s economy and contributes to its growth and development. It is in this spirit that the Indian paper industry has continued to upgrade its capacities and technologies, in spite of huge challenges like shortage of raw material, highly capital intensive nature of the industry, threat of cheaper imports from Asian countries etc.

Indian Paper Industry is highly fragmented with many small & marginal players operating in various regions across India. Average capacity of these players is much lesser at 25,000-35,000 MTPA compared to large domestic (4,00,000 MTPA). High Capex requirement coupled with long gestation period makes it financially unviable for smaller players to further expand their capacities. Also, bulk quantities required by the consumers preferably from large suppliers results in lower bargaining power for these players.

The Indian paper industry currently has a turnover (net of taxes) of over Rs. 55,000 Crores and contributes over Rs. 5,500 crores to the national exchequer. Even more importantly it is providing employment opportunities to over 1.5 million people, mostly in rural areas.

Risk and concerns

The Company considers good Corporate Governance as a pre-requisite for meeting the needs and aspirations of its shareholders and other stake shareholders in the Company. As part of the Company’s efforts to strengthen Corporate Governance, the Board of Directors has formulated a Risk Management Policy, which puts in place a risk management structure with clear definition of roles and responsibilities, as well as a risk portfolio involving a continuous process of risk identification, risk assessment, control assessment and risk monitoring, review and communication. The Company aims to:

- Identify, access, monitor and manage existing as well as new risks in a planned and coordinated manner.

- Increase the effectiveness of the Company’s internal and external reporting structure.

- Develop and foster a "risk" culture within the organization that encourages all staff to identify risk and associated opportunities and respond to them with appropriate actions.

Internal Control System and their adequacy

Your Company remains committed to ensure an effective internal control environment and believes that internal control is one of the necessary element of the principle of governance.

Well established internal audit processes continuously monitor the adequacy and effectiveness of the internal control environment across your Company and the status of compliance with operating systems, internal policies and regulatory requirements.

The Company has adequate internal control systems for the business processes in respect of all operations, financial reporting, compliance with laws and regulations etc. which ensure optimal and efficient utilization of resources, safeguarding the assets and interests of the Company, the preparation of financial statements in accordance with accounting principles generally accepted (GAAP) in India.

Financial and Operative Performance

The financial and operative performances are already elaborated in Directors’ Report which is a part of this report.

Cautionary Statement

Statements in this Directors’ Report & Management Discussion and Analysis describes the Company’s outlook, projections, objectives, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.