As per the amended Clause 49 of the Listing Agreement with Stock Exchanges, the company is required to lay down procedure for business risk assessment and minimization, which is to be periodically reviewed by the Board.
Presently the operations of the company are mainly manufacturing of underground mining machinery and its spares. A detailed identification of the business risks in this segment is to be done in consultation with the concerned departments in the company. Each of the business risk should be evaluated in detail and reviewed periodically. However, only for the purpose of reference and further discussions, few of the business risks of the above business sector, its management and minimization procedures are detailed below. They are only indicative for further discussions :
The main raw materials of our machines are steel plates, hydraulic & electrical parts. Steel prices for the last few years are fluctuating violently affecting the cost of the machine. To minimize this risk, the company works out the annual requirement of the steel plates and places orders when the prices are favourable.
Majority of the hydraulic & electrical parts are imported from various countries. There is only single supplier for many of these items, fluctuation in foreign currency is involved and also lead time for delivery of the items is very high. To avoid the long delivery period, company at the beginning of the year estimates the annual requirment and place orders under staggered delivery system.
To avoid effect of foreign currency fluctuation, the company is also taking forward cover and advise of foreign exchange agencies such as Vadilal Enterprises Ltd., Meklai Financial and Commercial Services Ltd. etc. and some of the foreign banks. requirement and place orders under staggered delivery system.
In case of hydraulic & electrical parts, the company is required to obtain DGMS approval also.
At present apart from the Government, only steel, cement and power industry are allowed to have their own coal mines and that too for captive consumption only. The company has been supplying machines only for the underground mines. Now the company has plans to make machines for the open cast mines also. In effect, any change in coal mine regulations can affect the company’s performance.
The company is mainly depending only on one customer i.e. Coal India Ltd. and its subsidiaries for supply of machines and spares. However, the company has also plans to enhance the product range and find out private contractors to whom the Coal India is planning to give the coal mines on lease. The company is also in the process of introducing new technology, which will significantly contribute in top line and bottom line of the financial operations of the company.
At present there are two private players and one of the public sector companies is also likely join on competition to company’s products. However, the company is constantly endeavouring to keep pace with the latest developments in the industry and are gradually strengthening our position to enhance our market share by introducing new products, appointing new distributors, extensive geographical coverage etc.