MANAGEMENT DISCUSSION AND ANALYSIS REPORT

OVERVIEW

Sarda Plywood Industries Limited is a pioneer in the Indian Plywood Industry and one of the first few manufacturers to venture into producing a wide range of plywood products. Its plywood products are sold under DURO range of brands across the nation and have a strong brdominance in the market because of best quality and constant upgradation through research and development. The Company also owns a bought leaf tea processing factory in Assam.

SEGMENTWISE PERFORMANCE

Plywood

The global recession and/or slow down has adversely affected the Indian manufacturing sector. Signs of recovery are not clearly visible and it is expected that growth in the housing and infrastructure sector will not gain momentum in the days ahead. Consequently, the demand for plywood and allied products is not expected to grow quickly. Other than above factors, there is no significant threat to the industry and/or Company from any product and/or sector.

During the year 2014-15, segment revenue increased from Rs. 162.20 Crore to Rs.178.05 Crore i.e. a growth of 10%. The Company has earned segment profit before tax and interest of Rs. 5.53 Crore as against segment loss before tax and interest of Rs.1.90 Crore in the brceding financial year.

Since the major portion of the raw materials is imported by the Company, volatile foreign exchange rate and availability of Raw Materials is a matter of concern and all possible efforts are taken to minimize these risks.

Tea

Tea Industry is doing much better as compared to brvious year with revival of demand for CTC tea and increased sales realization leading to higher operating margins.

Segment revenue during the year was Rs. 24.81 crore as against Rs. 20.67 Crore in the brceding financial year rebrsenting a growth of 20%. Segment profit before tax and interest increased from Rs. (0.12) Crore loss to Rs. 0.78 Crore profit. Outlook for the tea industry is expected to remain positive in the days ahead.

Tea industry is directly dependent on weather conditions. Although demand for Tea has increased, there is no improvement in raw material availability. Lower availability and high cost of raw materials is a matter of concern.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate system of internal control to safeguard and protect from loss, unauthorized use or disposition of its assets. All the transactions are properly authorized, recorded and reported to the Management. The Company is following all the applicable Accounting Standards for properly maintaining the books of accounts and reporting financial statements. The Audit Committee of the Company also periodically reviews internal controls and takes remidal measures whenever necessary.

OPPORTUNITIES & THREATS

Opportunities

The opportunities observed are based on the trends noticed in past couple of years, which continues to be relevant. Some of the key ones are as follows:

• Domestic market to get boosted due to Government focus on "Digital India" and "make in India"

• The Company is looking forward to the expansion of the market in the upcoming areas of the country.

• Company has sufficient spare capacity to cater the increase demand of its products (if any).

Threats

• Raw Materials: Timber is a sensitive product as far as environmental policy is concerned world over, the availability of timber depends on the licenses given by local authorities. Any delay or problem in issuing licenses by the Governments of the countries from where timber is imported may affect the availability of raw material. The availability of raw material i.e. green leaf depends upon the weather conditions and as such it varies every year. Also prices vary depending upon availability of green leafs

• Forex Risk: Since a major portion of raw material is imported, fluctuation in forex rate is also a risk to business.

• Credit Risk: Company's products are sold on credit and as such credit risk is an inherent risk to the business.

• Cost of Capital Risk: the Company has substantial borrowings, both term loan and working capital loan from banks, an increase in interest rates will affect profitability

BUSINESS RISK MANAGEMENT

Although the company has long been following the principle of risk minimization as is the norm in every industry it has now become a compulsion.

Therefore, in accordance with Clause 49 of the Listing Agreement the Board members were informed about risk assessment and minimization procedures after which the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the Company.

The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues.

In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, Raw Material, Investments, retention of talent and expansion of facilities.

Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk, forex risk, credit risk, insurable risk, cost of capital risk, risk from substitute products.

FINANCIAL PERFORMANCE

During the year under review, the gross turnover of the Company has increased from Rs. 200.57 Crores to Rs. 222.58 Crore registering a growth of 11%. The Company has incurred a net loss of Rs. 0.49 Crores as against a net loss of Rs. 6.47 Crores in the brceding financial year. In view of loss incurred by the Company, the Board of Directors did not recommend any dividend.

HUMAN RESOURCES MANAGEMENT & HEALTH, SAFETY AND ENVIRONMENT

The well disciplined workforce which has served the Company for three decades lies at the very foundation of the Company's major achievements and shall well continue for the years to come. The management has always imparted training at periodic intervals. Decisions on recruitment, career development, training, promotion, rewards and other employment related issues are made solely on the ground of individual ability, achievement, expertise and conduct and these principals are operated on a non-discriminatory basis. The permanent manpower strength as on 31st March, 2015 was 745

We have made further progress on Health and Safety both in terms of safe working practices and the reporting performance by implementation of standards for vehicles and machine safety, ergonomics initiatives, wearing protective equipments, regular safety audits etc. Also managing environment impact is a matter of priority and therefore continuous care for the environment, responsible disposal of wastes and development of local co-operatives are engaged into.

CAUTIONARY STATEMENT

Statement in the "Management Discussion and Analysis" section describing the Company's objectives, projections, estimates, expectations or brdictions may be 'forward looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulation, tax regimes, economic developments within India and other factors such as any litigation and/or labour negotiations.