New Page 7Sustaining the business differently
Dear Members,
The Board of Directors have pleasure in presenting herewith their 73rdAnnual Report together with the Audited Accounts of the Company for the year ended 31stDecember, 2010.
Operations and Financial Results
The order intake for the year under review, though comparatively lower against theprevious year, showed the Company’s ability to sustain volumes with small and mediumsize orders without any large value order contributing to the cause. With the EquipmentDivision continuing to surge ahead in the domestic market, the Process Technology Divisionhaving a steady flow of orders though narrowly missing out on a few large value orders andthe order inflow from the Principals slowing down, the total order intake for the yearunder review was Rs. 9,052.87 M
(2009:Rs. 9,799.41 M). Despite the healthy order backlog at the commencement of theyear, the sales revenues, mainly due to the spill over of deliveries quarter on quarterended up with a drop of about 6% at Rs. 8,360.34 M (2009:Rs. 8,875.73 M). With exchangegain and interest from loan almost doubling the other income, the total income for theyear was at Rs. 8,592.33 M (2009:Rs. 8,996.86 M). As a result of the lower sales revenuesand the rising input prices cutting across the margins, the growth in profitability couldnot be sustained. The financial performance of the Company for the year 2010 was asunder:-
| | (Rs. in million) |
| Particulars | 2010 | 2009 |
| Gross profit for the year after meeting all operating expenses but before depreciation, interest and taxation | 1,790.49 | 2,006.42 |
| Less; | | |
| a) Interest | 5.30 | 5.25 |
| b) Depreciation | 127.10 | 129.57 |
| 132.40 | 134.82 |
| Profit before tax | 1,658.09 | 1,871.60 |
| Less: Provision for taxation | | |
| a) Income tax | 620.25 | 653.79 |
| b) Deferred tax | (49.47) | (24.94) |
| c) Prior period tax (reversal)/expense | 6.00 | 4.00 |
| d) Wealth tax | 0.10 | 0.10 |
| e) Fringe Benefit tax | | 5.26 |
| 576.88 | 638.21 |
| Profit after taxation | 1,081.21 | 1,233.39 |
| Profit and loss account balance brought forward | 1,880.07 | 1,301.85 |
| Profit available for appropriation | 2,961.28 | 2,535.24 |
Dividend
The Board of Directors of the Company recommend a dividend of Rs. 30/- per equity sharefor the year ended 31st December, 2010 which together with the dividend distribution taxwill absorb an amount of Rs. 633.54 M (net) (2009:Rs. 531.17 M) out of the distributablesurplus.
Appropriations
After setting aside the amount of Rs. 633.54 M (net) (2009:Rs. 531.17 M) for dividendincluding dividend distribution tax and after transferring an amount of Rs.109.00 M(2009:Rs.124.00M) to General Reserve, the balance amount of Rs. 2,218.74 M (2009:Rs.1,880.07 M) is being retained in the Profit and Loss account.
Foreign Exchange Earnings and Outgo
Despite the orders from the Principals on a slow track, the two major export orderssecured during the previous year boosted the export turnover during the year under reviewto Rs. 2,609.15 M (2009: Rs. 2,415.76 M) managing a growth of about 8% over the previousyear.
Details of foreign exchange spent and earned are given in Schedule 15 forming part ofthe Accounts under Note Nos.20(ix) and 20(x) respectively.
Prospects
The jitters caused by inflation and rising interest rates coupled with the uncertaintyover policy reforms could lead to a hold on investment decisions thereby pulling down theperformance of the manufacturing sector. On the other hand announcement of new projectscontinues unabated which could trigger the movement of investment cycle thereby creatingbusiness opportunities for the Company to move in the direction it had set for itself.This together with a resounding order backlog at the beginning of the year and thecomponents business looking up, provides scope for improvement in the sales revenues forthe current year. However, since a sizeable amount of the Company’s business isderived from Projects, the timing of the receipt of fresh orders executable during theyear together with the scheduled implementation of the orders on hand would assume muchsignificance for the Company to meet the targets set for 2011 and thereon. Overall, theCompany is optimistic of a steady growth in its performance during the current yearbarring unforeseen contingencies.
While the Company continues to invest in expansion of its capacities and for enhancingthe effectiveness of its factories, a sizeable capital expenditure is proposed for thecurrent year mainly for a new manufacturing facility at Pune which is under execution andfor sprucing up the facility at its other manufacturing sites besides development ofinfrastructure to achieve optimum productivity.
Conservation of Energy
Energy conservation is being pursued with considerable focus and commitment by theManagement. The Company is in the process of replacing the roofs of its factories with FRPsheets which would provide sufficient natural light during the day dispensing with theneed for electrical lights. The factories are also being equipped with turbo ventilatorsfor maintaining fresh air at ambient temperature all the time. The lighting system at allplaces carry energy efficient fittings to reduce energy consumption. The evaporativecooling system with insulated roof in place of airconditioners is helping the Company toreduce the load on the power infrastructure. Awareness on power savings has been spreadthroughout the Company by way of appropriate signboards at prominent locations. Besides,the provision of power factor panels in the circuit has not only ensured quality power forthe factory sites but has also led to considerable savings in the energy bills. Effortsare continued to monitor the power consumption with a view not only to generate savings inthe energy bills but also to reduce the wastage of energy in all forms.
Absorption Of Technology
The Company has been periodically introducing newer models of decanters, separators andheat exchangers while phasing out their older models for a variety of applications withsuitable technological inputs from the Principals. During the last five years, technologyabsorption in respect of separators, heat exchangers and decanters for a variety ofapplications has been successful leading to indigenisation of certain high value criticalcomponents.
Employees
Information as per Section 217(2A) of the Companies Act, 1956, read with Companies(Particulars of Employees) Rules, 1975, as amended from time to time, forms part of thisReport. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act,1956, the Report and Accounts are being sent to all shareholders of the Company excludingthe information relating to the statement of particulars of employees. Any shareholderinterested in obtaining such particulars may inspect the same at the Registered Office ofthe Company or write to the Company Secretary for a copy.
Employee relations continue to be cordial.
Directors
M/s. Kewal Handa and Giuseppe Falciola retire by rotation, and being eligible, offerthemselves for re-election.
Mr. Nish Patel resigned from the Board with effect from 28th April, 2010 as he wantedto devote a considerable time and attention to his functions at Sweden. The Board place onrecord their warm appreciation of the contribution made by Mr. Nish Patel during histenure as a member of the Board both in executive and non-executive capacities.
Mr. Peter Leifland was appointed as an Additional Director with effect from the closeof the 72nd Annual General Meeting on 28th April, 2010. As an Additional Director, heholds office upto the date of the ensuing Annual General Meeting and being eligible,offers himself for appointment as Director afresh.
Directors’ Responsibility Statement
In accordance with the requirements of Section 217(2AA) of the Companies Act, 1956, theBoard of Directors confirm that:-
In the preparation of the annual accounts for the year ended 31st December, 2010, theapplicable accounting standards had been followed along with proper explanation relatingto material departures;
The accounting policies, which have been selected, have been applied consistently andjudgments and estimates made are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st December, 2010 and of the Profit of theCompany for the year ended on that date;
Proper and sufficient care have been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
The annual accounts for the year ended 31st December, 2010 have been prepared on agoing concern basis.
Auditors
The Auditors, M/s. S. R. Batliboi & Associates, Chartered Accountants, retire, areeligible for re-appointment and have expressed their willingness to serve, ifre-appointed.
Corporate Governance
In terms of the Listing Agreement, Management Discussion and Analysis Report is annexedand forms part of the Annual Report. A report on Corporate Governance along with theAuditors’ Certificate on its compliance is also annexed forming part of the AnnualReport.
Acknowledgement
The Board places on record their appreciation of the contribution of employees at alllevels, customers, suppliers and all other stakeholders towards the performance of theCompany during the year under review.
For and on behalf of the Board of Directors,
Giuseppe Falciola
Chairman
Place : Pune
Dated : 23rd February, 2011