MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Industry Structure and Developments:

Our company with its quality policy based on international quality of Standard of ISO 9001:2008, maintained its quality and that has helped to sustain in the competitive market inspite of severe recession affecting our customers. By its wide range of contacts and efficient management, the company could retain its customers and manages efficiently in both Gases and Windmill sectors.

Opportunities:

The customer base is varied, demand in any of the sectors provide business opportunity which can be exploited. The implementation of the recently added project has resulted in high quality output, which has resulted in opening of new applications in auto parts and electronics industry

Threats:

Adverse Exchange Fluctuation may result in increase in Project cost and may result in additional borrowing and may affect the margin. Continuous increase in Interest rates on Bank Credit Facilities will affect the margin. Delay in implementation of Project due to Delay in statutory clearances, Shipment of imported plant & machinery may result in Project overrun.

Segment wise of Product wise Performance:

The Performance of the products manufactured by the company namely Industrial Gases are satisfactory and the only problem faced by the company is power interruption and power failures which are beyond our control. The over all working and performance of the Windmill is satisfactory.

Risks and Concerns:

Our main concern is, continuous competition from MNCs by reducing the price in the market, due to which the company has to reduce the price to retain its share in the market. Regarding the Windmill Power generation, it depends on the seasonal wind and accordingly Power is generated as and when the wind is good.

Internal Control Systems and their Adequacy:

The company maintains its adequate internal controls to have efficient operations. Also the company maintains all statutory rules, regulations, laws as applicable from time to time and protection of resources and assets.

Weakness:

The smallness of the Organisation undertaking an expansion at a different location immediately after the brsent expansion, resulting in huge debt exposes Financial Risk.

Strength:

Present strategy was to have a centralized production unit to get the benefit of larger scale of production and lower power tariff. Since the geographical sbrad of customer has increased and higher demand at longer distance and considering ever increasing transport cost the idea is to establish the additional production capacity plant nearer to the cluster of customers at the furthest marketing area. Accordingly SIPCOT Industrial area at Perundurai near Erode, T.N. has been chosen after detailed market survey. The advantage is twofold. One is we will be able to save in distribution expenses and also cater to the new customer of that area, which brsently being not serviced due to capacity constraint. Secondly, additional capacity for marketing to the extent of shifted customer to the new unit i.e. about 30 tpd will be available for the existing plant in Pondicherry, Chennai region and thus optimize distribution expenses for both the plant in addition to market capitalization.

The same Technology established and stabilized successfully has been duplicated in the Further Expansion. The strategy in marketing is to have a varied customer base across different sector so that there will not be a marked effect on our sales even if one or the other sector has reduced consumption for whatever the reason.

Another important aspect in the industrial gas market is customer satisfaction. In addition, it is a critical input for the customer's productivity. Thus managing the vacuum insulated transport tankers available for liquid distribution is very critical in terms of return for investment and also efficiency of delivery. To have instantaneous data on the location of these tankers, satellite monitoring facility has been incorporated.

The Company is also having expertise in Fabricating Storage Tanks which are cost effective and provide storage at competitive cost. As for the gaseous oxygen/nitrogen distribution, the strength is not only having huge cylinder population but also their efficient use. This is very important due to heavy investment done on cylinder. Thus cylinder wise and customer wise utilization is monitored continuously by special cylinder management software and it is giving very good results. Nearness to customer results in efficient Cylinder management.

Thus it is the combination of customer satisfaction, best utilization of available capital and human assets and continuously planning strategy for new development, we are always a step ahead of our competitors. And this is the reason; we have 55% of our market share from Government Organization both central and state on long term contract basis.

Material developments in human resources / Industrial relations front:

Being an ISO Company, training on all sectors are given to its employees periodically and motivated to work inline with the development of the industry. The willingness and commitment of the employees help the company to stand toll among its customer in quality and service. The Company has the total employee strength of 116.