Sudar Industries Ltd Management Discussions

SUDAR INDUSTRIES IS ENGAGED IN THE FOLLOWING BUSINESS VERTICALS WHICH HAS CONTRIBUTED TO THE GROWTH OF THE COMPANY:

Apparels

Performance Highlights:

Despite tough business conditions and a recessionary economy, your company’s achieved sales of Rs. 53,111.36 Lacs on Apparel business, with a growth of 49.19%

High ended fine Chemicals Company providing intermediate products for the Pharmaceuticals Industry and the Agro Chemical Industry.

Chemicals

Performance Highlights:

Your company’s total chemical business registered sales of Rs. 31,797.34 Lacs with a growth of 294%

Proposal to trade in Iron Ore, Minerals and Agro commodities

In its proposal to trade in Iron Ore Minerals and Agro commodities, your company is seeing a lot of potentiality and the company can benefit substantially in the coming years.

Consolidated Revenues:

Total consolidated revenues registered a growth of 110.72%, up from Rs. 43,678.92 Lacs to Rs. 92,040.78 Lacs The key drivers for this growth were:

• ?Revenues from Apparels registered growth of 49.19% from Rs. 35,599.22 Lacs to Rs.53,111.36 Lacs The revenue witnessed a surge of Rs. 17,515.78 Lacs.

• ?Revenues from sales of Advanced Intermediates in the chemical business registered growth of 294% from Rs. 8,079.70 Lacs to Rs. 31,797.34 Lacs. The revenue witnessed an increase of Rs. 23,717.64 Lacs.

• ?Revenues from Dubai subsidiary is Rs. 7,132.08 Lacs.

Global economy:

The global economy went through yet another year of challenges in 2013-14. The global gross domestic product (GDP) grew at a slower pace due to debt and fiscal issues affecting the global trade,.

Indian economy:

India’s economic growth decelerated with a growth of 4.7% in 2013-14. This scenario came into being due to deceleration in credit flows, infrastructural bottlenecks, high inputs costs, slowdown in consumer expenditure, subdued business confidenceue d to the elections which contributed to the industrial slowdown. The government did not bring about any policy changes due to the elections scenario.

Review of Operations of the Company:

Backed by strategic and operational initiatives, Sudar has a strong presence across the manufacturing and marketing of Apparels and Chemicals. Both these market segments demonstrate growth trends with rising volume and value. The business is systematically organized with an identifieddar’s business strategy includes gaining volume and market share in every business segment it enters.

SIL’s strength lies in developing process efficiencies, adopting global scale manufacturing and using cost effective networks. Sudar aims to repeat its success and emerge as a major player in regulated markets. In line with this objective, the long term growth strategies include:

• ?manage cost efficiently in a regulative manufacturing environment.

• ?Globalize and penetrate through setting up of subsidiaries in Singapore, UAE and London.

Threats and Challenges:

SIL is present in a competitive market with challenges from big and the small players in the industry. Due to this, the price sensitivities get tested where reliance is placed more on volume based business. This threat, however, does not affect Sudar because of its control over raw material sourcing. The company is a dominant player and has been able to control quality, save timelines, manage costs and deliver at a short notice. SIL enjoys a pricing power with an ability to get the price lower andyet manage to get higher returns than other competitors.

The key strengths of the company include its manufacturing infrastructure and the ability to deal successfully in a complex market situation. All strengths have been tested from the perspective plan to manufacture and reach the market place. Sudar strategy lies in manufacturing facilities and the marketing infrastructure. Thecompanyhasworkedonitsspeedtomarketabilities and is quick to convert product approvals into invoices. Besides, the company possesses unmatched strengths like its experienced competencies with the ability to anticipate market requirements, supportive documentations and document so as to meet regulatory norms and execute plans within cost and time budgets.

Internal control:

SIL has a well defined internal control system which is adequately monitored. Checks and balances and control systems have been established to ensure that assets are safeguarded, utilized with proper authorization and recorded in the books of account.

There is a proper definition of roles and responsibilities across the organization to ensure information flow and monitoring. These are supplemented by internal audit carried out by the firm of chartered accountants. The companyhas ng of three directors, two of them are independent directors. This committee reviews the internal audit reports, statutory audit reports, the quarterly and annual financial statements and discusses all significant audit observations and undertakes follow up actions arising from them.

Company Strategies:

The Company’s strategy of strengthening the current investingin the future revolves around (a) Human Resources, business and (b) Compliance and (c) Analysis of opportunity and risks matrixes.

Human Resource Strategy:

The Human Resources (HR) function is instrumental in creating and developing human capital in alignment with the Company’s vision. Talent management with particular focus on grooming, learning and development and employee engagement have been the key focus areas in the Company’s objective. The human resources strategy enabled the company to attract, integrate, develop and retain the best talent required for driving business growth. The sustained strategic focus to enhance employee capability, improve efficiency and groom future leaders have helped SIL maintain its benchmark in the garment industry.

Compliance:

to vigorously pursue its commitment in adhering to the highest standards of compliance The compliance TheCompany function in the Company plays a pivotal role in ensuring that the overall business of the Company is conducted in accordance with the regulatory prescriptions. The compliance function facilitates improvement in the compliance culture in the Company through various enablers like dissemination of regulatory changes and spreading compliance knowledge through training, newsletters and other means of communication and direct interaction. The company regularly monitors the changes inn pertaining to employment, labor and immigration laws to ensure total compliance. The key areas where SIL needs to introduce new policies or modify the existing policies to remain compliant are identified and acted upon.

Opportunities and Risks:

The large size of the addressable global market, with relatively low current level of penetration suggests significant headroom for future growth. The Company has positioned itself well for the growth in business with an aligned strategy, structure and capabilities. In a year in which the Textile sector in the county has faced increasing strain from tight liquidity conditions, hardening interest rates, slowdown in capital expenditure, rising delinquencies and high incidence of assets being structured, the company has reported a strong performance, sustained by its fundamental strengths. The Chemical Industry is also showing a lot of promises with its high end products. With the two business segments of the company, there is tremendous potential for growth.

Financial highlights:

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and generally accepted accounting principles (GAAP) in India. The management accepts the responsibility for the integrity and objectivity of these financial statements and the basis for the various estimates and judgments used in preparing the financial statements.

During the year, the Company has achieved a net turnover of Rs. 92,730 Lacs. The Company has posted a strong topline performance with Profit before tax of Rs. 6,538 Lacs and net profit after tax of Rs. 4,565 Lacs.

Outlook:

Sudar has set ambitious goals for the coming year 2014 -15 in expectation of an upward trend in the global economy. The senior leadership team has set in motion a set of strategic initiatives to enhance revenue and profitability.

The focus will be expanding markets, portfolio profitability will be analyzed on a continuous basis. By implementing these strategies, Sudar aims to increase revenues and margins higher than the industry average. The company is targeting to emergeas cash flow positive, eliminate leverage and enhance shareholder returns.

Caution Statement:

Investors are cautioned that this discussion contains statements that involve risks and uncertainties. Some of the words that are used are intended to identify forward looking statements. The Company assumes no responsibility to amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. Besides, the Company cannot guarantee that these assumptions and expectations are accurate or will be realized and actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements.