| D. RISKS AND CONCERNS |
| CEMENT |
| Although cement demand is expected to grow with economic growth, large capacity additions may create surplus capacity in the short term. Any unexpected slow down in the economic activity or deferment of large infrastructure projects will aggravate the situation and affect margin adversely. |
| Cement Industry is heavily dependent on coal for its fuel requirement. While cement capacity is increasing continuously whereas the allotment of coal against linkages is decreasing. As a result, Cement Industry’s fuel cost is increasing due to purchase of coal from open market, E-auction or import of coal. |
| Similarly, short supply of Railway Wagons is also a major bottleneck, affecting outward movement of cement and inward movement of raw materials like gypsum, coal etc. Alternate Road Transport, only add to the inward and outward transport costs. |
| TYRE |
| The volatility in all major raw material prices and the inverted duty structure between tyres and natural rubber puts further pressure on the Industry’s revenue and profitability. |
| RAYON & TRANSPARENT PAPER |
| The revenue is likely to be impacted due to increased competition and rising input costs in both VFY & TP segments. Exports are likely to be affected due to subdued demand. |
| HEAVY CHEMICALS |
| Steep increase in power cost caused by rise in price of coal is a major concern as power constitutes around 65% of cost of production in Caustic Soda Industry. |
| E. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY |
| The Company has proper and adequate systems of internal control, to safeguard all assets against loss from unauthorized use or disposition. These systems also ensure that all transactions are authorized, recorded and reported correctly. Regular internal audits and checks are carried out to provide assurance that adequate systems are in place and that the responsibilities at various levels are discharged effectively. The Management continuously reviews the internal control systems and procedures to obtain comfort regarding orderly and efficient conduct of business. The review includes overseeing adherence to management policies, safeguarding the assets of the Company as well as ensuring the preparation of timely and accurate financial information. The emphasis on internal control prevails across functions and processes, covering the entire gamut of activities including finance, supply chain, sales and distribution, marketing and the like. A strong system of internal audit supported by Internal and External Auditors and effective & comprehensive reviews by the Audit Committee have strengthened the internal control within the organization. |
| F. MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS |
| Measures for safety of employees, training, welfare and development continue to get high priority at all levels, which are reflected in the improved quality and efficiency. Industrial relations have been cordial during the year under review except Spun Pipes Section, where the factory continues to be under suspension of work since 2nd May, 2008. |
