Financial Year - GMM Pfaudler Ltd

OUTLOOK:Demand for Company’s product and services have shownencouraging signs as reflected by the increase in orderintake during first quarter of the financial year 2011-12.The backlog as at end June 2011 increased by 48% to ` 1,258million as compared to the same time in the year 2010-11.Additional focus is being given on the Non Glassline businesswhich includes Tailor Made products, Proprietary Productsand Mavag’s high end products. With customers increasinginvestment in new projects and capacity enhancement, theNon Glassline Alloy products is expected to improve thebusiness environment of the Company.RISKS AND CONCERNS:The Company’s export business in the current year hasbeen impacted by the global recession. Some of the globaleconomies are yet to recover from the slowdown anduncertainty still persists due to inflation, withdrawal of thestimulus packages and rising interest rates. This may alsohave an impact on Company’s future exports business.We have market risk exposure to foreign exchange ratesmainly on account of exports and investments in foreignsubsidiary Companies. Due to unprecedented volatility inalmost all major foreign currencies the export realizationsare subjected to the exchange fluctuation risk.The Company’s surplus funds are invested in fixed depositswith banks and in different mutual funds. Income fromthese investments has market risk exposure to the extentof interest rates fluctuations, short term debt and the equitymarket.The Company is impacted during summer period by GujaratState’s difficult power supply situation leading to cuts andload shedding. Further, the power tariffs in Gujarat State areone of the highest in India. Continuous rise in the oil pricein India and abroad has the effect of increasing the cost ofelectricity. All these factors affect output and profitability.Company’s investment in the natural gas furnace will helpovercome the bottleneck caused by the power supplysituation.Finally, the Company’s primary raw material is steel. It hadshown some signs of rise, especially stainless andother alloy steels. Certain orders with long manufacturingcycle time may be exposed to the risk of material pricevolatility.The Company has a Risk Management Policy frameworkin place for continuous identification, assessment andmeasurement of all significant risks. These are reviewedat periodical intervals and the management takes specificaction towards minimization and control of areas of riskconsidering various parameters.INTERNAL CONTROL SYSTEMS AND THEIRADEQUACY:The Company works with an established framework ofinternal controls. Policies have been laid down for operation,approval and control of expenditure. Investment decisionsinvolving capital expenditure are subject to formal detailedappraisal and review by approved levels of authority. Capitaland Revenue expenditure are monitored and controlled withreference to pre-approved budgets and forecasts.A firm of Chartered Accountants that has establishedreputation in the country ensures adequacy of the internalcontrol systems, adherence to Company’s policies andprocedures, ensure statutory and other compliances throughperiodical checks and internal audit.The Audit Committee and the Board of the Companyperiodically review the reports submitted by the InternalAuditors and corrective steps taken by the Company.The Company had carried out a review of its internal controlprocedures and developed a frame work with the help ofan outside Consultant. This is being regularly reviewed tostrengthen the control in various business processes.As the Company manufactures certain equipment which areclassified as ‘Dual Use’ equipment, the Company has putin place ‘Know Your Customer’ procedure and a system ofcontrols to ensure that the entire process from handling ofenquiries to dispatch and service is carefully monitored andcontrolled to prevent unauthorized use or diversion of ourproduct.HUMAN RESOURCES & INDUSTRIAL RELATIONS:The Company firmly believes that its employees arekey to driving performance and developing competitiveadvantage. The emphasis has been on proper recruitmentof talent and empowerment while devoting resources fortheir continuous development. The Company nurtures thestrong performance driven culture and maintains its focuson development of human resources with insight into areasof performance Management System, Talent Planning andReward & Recognition with an objective of maintainingharmonious relations with employees. Training workshopsand seminars are regularly conducted for workers, staffand managers of the Company with a view to attract andretain talent. The Company has maintained an amicablerelationship with the Union.On March 31, 2011 the Company’s total permanent employeestrength was 362 against 309 as on March 31, 2010.CAUTIONARY NOTE:Certain statements in the “Management discussion andAnalysis” section may be ‘forward-looking’. Such ‘forwardlooking’statements are subject to risks and uncertaintiesand therefore actual results could be different from what theDirectors envisage in terms of the future performance andoutlook.9