APEEJAY TEA LIMITED
(Formerly AFT Industries Limited)
ANNUAL REPORT 2006-2007
Your Directors present their Thirtieth Annual Report together with the
Audited Accounts for the year ended March 31, 2007.
Rs. in Lakhs Rs. in Lakhs
Profit/(Loss) before Taxation 51.98 (690.41)
Provision for Taxation :
Current Tax (net) 20.97 7.91
Deferred Tax (credit) 22.56 23.87
Fringe Benefit Tax (27.00) (32.71)
Profit/(Loss) after Taxation 68.51 (691.34)
Transfer from General Reserve - 691.34
Balance Carried Forward to Profit & Loss Account 68.51 -
Your Company has made a profit of Rs. 68.51 Lakhs after considering the
fringe benefit tax amount of Rs. 27 Lakhs during the year under review as
against the losses it has been making since 2003. During the year, the
production has decreased to 120.83 Lakh kgs as against 135.34 lakh kgs of
the previous year mainly because of demerger of Kharjan as mentioned below.
This resulted in a 1.70% decrease in the sales revenue of your Company from
Rs. 9418 lakhs in the previous year to Rs. 9256 lakhs in the current year.
However, the focus on quality was maintained and costs were controlled
stringently. The Company saw its realizations increase substantially from
Rs. 71.58 per kg to Rs. 78.90 per kg, which has been an encouraging factor
for us to continue on this quality focus and cost control path.
The Gauhati High Court has sanctioned the scheme of arrangement filed by
the Company and thereby one of the Company's units i.e. Kharjan Tea Estate
has been demerged into Kharjan Tea Estates Private Limited. The new Company
continues under the umbrella of the Apeejay Surrendra Group. The results of
the current year show the effect of the demerger.
It is expected that the Company will perform better this year as there is a
better balance between supply and demand and an improvement in prices is
expected. The Company continues to invest in modernization of factories,
uprooting/replanting programmes and to improve agricultural practices in
order to produce best quality of tea in the most cost effective manner.
This will improve the long term viability of the Company. The company has
set a target yield of 2220 kgs per hectare by the year 2010 and all inputs
are geared to achieve this level of productivity.
The Company has so far concentrated on selling bulk tea in auctions. With
the view to add value, your Company launched Mahamantra' brand in
November, 2006 in a few states which has received a good response. The
Company is also gearing up to launch other brands by the end of the current
financial year. By entering the retail market with consumer packs with a
differentiated set of values for the consumer, the Company intends to reach
the masses. It also intends to tie up with the organized retail chains to
help in reaching the huge Indian market.
As per Section 212 of the Companies Act, 1956, the Reports and Accounts
relating to the Company's subsidiary, in which the control of the Company
is intended to be temporary, have been annexed to the Accounts.
Your Company is fully aware of responsibility towards its own employees,
their dependants and the local community within which the tea estates are
situated and to the people of Assam in general. Tea is labour intensive and
our driving objective has been to improve living and working conditions of
our large workforce and their dependents in a phased manner.
Your Company regularly and on a continuing basis undertakes various social
welfare projects for improving the quality of life of the people through
sustainable social and economic development projects.
As regards the Auditors' observation for ratification of the managerial
remuneration, the approval of the shareholder is being sought in the
ensuing Annual General Meeting.
In accordance with Article 91 of the Articles of Association of the
Company, Mr. Jit Paul and Mr. Karan Paul, retire by rotation at the
forthcoming Annual General Meeting and being eligible, offer themselves for
Certificate of the Auditors of your Company regarding compliance of the
conditions of Corporate Governance as stipulated in Clause 49 of the
listing agreement with Stock Exchanges is enclosed. A declaration issued by
the Managing Director of the Company as stipulated in Clause 49(I)(D) of
the listing agreement with Stock Exchanges is enclosed.
This report also includes elsewhere a text of the Management Discussion and
DEMATERIALISATION OF SECURITIES
As directed by the Bombay Stock Exchange, about 21.60% of the shares have
been dematerialized as on 31 March, 2007.
PARTICULARS OF EMPLOYEES
Information as required under Section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975, as amended,
is given in the Annexure forming part of this Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirements of Section 217 (2AA) of the Companies Act,
1956, your directors hereby confirm that:
* In the preparation of the Annual Accounts for the year ended March 31,
2007, the applicable accounting standards have been followed and there are
no material departures;
* The Directors have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the Financial Year ended March 31, 2007 and the
profit of the Company for that period;
* The Directors have taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
* The Directors have prepared the annual accounts on a going concern basis.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
The particulars of Conservation of Energy, Technology absorption and
Foreign Exchange earnings and outgo in terms of Section 217(1)(e) is
provided in an annexure to the report.
M/s. Price Waterhouse, Chartered Accountants, Auditors of the Company,
retire at the conclusion of the forthcoming Annual General Meeting and,
being eligible, offer themselves for re-appointment.
Your Directors wish to place on record their grateful appreciation for the
excellent support and co-operation received from all stakeholders, Banks,
Financial Institutions and Investors, Government Authorities, Stock
Exchanges, Reserve Bank of India, Central and State Governments. Your
directors also wish to place on record their deep appreciation of the
dedication and contributions made by employees at all levels and look
forward to their continued support in the future as well.
For and on behalf of the Board
Kolkata DEEPAK ATAL KARAN PAUL
June 22, 2007 Managing Director Director
Information pursuant to Section 217 (1) (e) of the Companies Act, 1956 and
forming part of the Directors' Report for the year ended March 31, 2007.
I. Conservation of Energy
1. Energy conservation measures undertaken.
2. Additional Investments and proposals, if any, being implemented for
reduction of consumption of energy.
3. Impact of measures at (1) and (2) above for reduction of energy
consumption and consequent impact on the cost of production of goods.
Form - A
Year ended Year ended
A. Power and Fuel Consumption : 31.03.2007 31.03.2006
Units 60,42,386 72,89,467
Total Amount (Rs.) 4,24,88,745 4,94,94,412
Rate / Unit (Rs.) 7.03 6.79
b) Own Generation Through Diesel Generator
Units 42,33,545 52,39,868
Unit/Ltr. of Diesel Oil 3.01 2.96
Cost/Unit (Rs.) 11.59 11.00
ii) Coal (Specify H.P. and
R.O.M. used in Budlapara Factory)
Quantity (Tonnes) 1,095 1,147
Total Amount (Rs.) 35,31,816 34,22,816
Average Rate (Rs.) 3,226 2,984
iii) Furnace Oil
Quantity (K.Ltrs.) 134.30 48.28
Total Amount (Rs.) 36,29,582 9,64,603
Average Rate (Rs.) 27,026 19,980
Quantity (Cu.m.) 1,08,83,996 1,24,47,066
Total Amount (Rs.) 2,34,14,129 2,60,10,899
Average Rate (Rs.) 2.15 2.09
B. Consumption per Unit of Production
Product - Tea (Kgs.) 1,23,57,314 1,38,55,896
Electricity (Unit) 0.83 0.90
Furnace Oil (Ltrs.) 0.04 0.03
Coal (Kgs.) 0.74 0.81
Gas (Cu.m.) 0.88 0.90
Energy cost reduction programme undertaken after the energy audit.
Optimisation of power utilisation after energy audit and installation of
fully efficient driers.
Energy conservation measures are likely to save the energy cost.
II. Form for disclosures of particulars with respect to absorption:
Research and Development (R & D):
1. Specific area in which } The Company is a
R & D carried out by the Company : } member of Tea Research
Association, and has
2. Benefits as a result contributed
of the above R & D : } Rs. 14.53 Lakhs as
3. Future plan of action : } the year. The thrust
of the Company
4. Expenditure on Research } remains on
and Development : improvement of
and quality by
efficient operation and
automation of process.
Technology Absorption, Adaptation and Innovation:
1. Efforts, in brief, made towards technology absorption, adaptation and
We are continuing to replace the existing machinery with modern machines
for better output and better control over production procedures.
2. Benefits derived as a result of above efforts, e.g. product improvement,
cost reduction, product development, import substitution, etc.
There has been an overall improvement in the productivity and quality of
3. In case of imported technology (imported during the last 5 years
reckoned from the beginning of the Financial Year), following information
may be furnished:
(a) Technology imported: Colour Sorting Machines were imported from Japan.
(b) Year of Import : 2001-2002
(c) Has technology been fully absorbed? Yes, the machines were put to use
during the year of import.
(d) If not fully absorbed, areas where this has not taken place, reasons
therefor, and future plans of action - Not applicable as the machines are
III. Foreign Exchange Earnings and Outgo:
Earnings and Outgo of Foreign Exchange as detailed in Notes 19.7 in
Schedule 17 to the Accounts were as under :
Rs. in lakhs Rs. in lakhs
Foreign Exchange Earnings : 1054.18 293.09
Foreign Exchange Outgo : 160.83 208.34
Net Earnings/(Outgo) : 893.35 84.75
For and on behalf of the Board
Kolkata DEEPAK ATAL KARAN PAUL
June 22, 2007 Managing Director Director
MANAGEMENT DISCUSSION AND ANALYSIS
Industry Structure and Developments
The year 2006-07 continued to justify the predicted trend of a general
firming of tea markets both domestic and international. Similar to stock
out situations like previous years seem to further substantiate the fact.
Shortage of crop in Kenya and instability in Sri Lankan production scenario
and increase in the domestic off take of approximately 3% during 2006-07
led to a definite increase in the demand of tea, which was thought to be
somewhat stagnating earlier. Opening of Indian sector to big organsied
players and overseas investments are bound to have a positive impact of the
overall tea trading scenario.
Clarity in the market brought about by the Tea Board Regulations and VAT
implementation are also reasons for an overall improvement in the market
Opportunities, Threats, Risks and Concerns
The Tea Board of India has launched a vigorous advertisement campaign to
promote tea drinking among Indians as a health drink. The demand for tea is
growing annually and the preference for branded tea is gradually
increasing. The Company has so far concentrated on selling by auction and
direct sales but with the changing scenario, it has launched its
Mahamantra' brand in November, 2006 in certain states. The Company is also
gearing up to launch other brands by the end of the current financial year.
By entering the retail market with consumer packs with a differentiated set
of values for the consumer, the Company intends to reach the masses. It
also intends to tie up with the organized retail chains to help in reaching
the huge Indian market both urban and rural. Though the export figures show
almost the same volume, captive supplies to overseas brand is poised to
increase. Subtle change in the grade mix will also add value to exports.
Some of the risk factors faced constantly at the gardens are competition
from bought leaf factories, high labour cost, increasing cost of power,
fuel and other inputs, bandhs and disruptions due to civil unrest and lack
of infrastructure development.
Your Company currently operates in the Domestic market segment mainly.
Direct exports have reduced due to major international clients opening up
their own procurement branches in India. We continue to be a major supplier
to all such clients.
Efforts to continuously upgrade quality of our produce, giving thrust to
marketability and consumer satisfaction and ensuring best realization
remain our prime objective. Our thrust has been on Crop and Quality
oriented Pruning Cycle. Already our investment in the factories have
improved quality and productivity considerably. Monitoring of uprooting/
replanting, labour productivity overheads and socioeconomic factors
prevalent at the plantations continues to be the area of core
Internal Control Systems and their Adequacy
Messrs. Lodha & Co., Chartered Accountants, Internal Auditors of the
Company conduct regular internal audit and check the various internal
control measures implemented by the Company on a regular basis during their
visits to the various gardens and factories and submit regular reports to
the management. The Audit Committee of the Board also provides guidance on
various matters of internal control and audit.
Financial and Operating Performance
The Company made a profit of Rs. 68.51 Lakhs after taking into
consideration fringe benefit tax of Rs. 27 Lakhs as compared to the net
loss of Rs. 691.34 Lakhs of previous year. Stringent cost control,
monitoring of the working capital cycle, etc and measures to increase
production have been adopted by the Company. Notwithstanding the above, the
Company has continued to produce highest quality of teas during the year
ended under review.
Industrial Relations and Human Resource Development
During the Financial year 2006-07, the Industrial Relations and Human
Resource Management have been excellent. The encouraging relations have
been achieved due to high degree of involvement and dedication of employees
at all levels. Several initiatives have been taken during the year to
promote and develop the skills and competencies of the employees.
The focus during the year has been on communication as well as training and
development. A number of training programmes have been imparted to enhance
the technical and behavioural skills of employees covering topics like
Legal Procedural Issues under various relevant statutes, Stress Monitoring
and Management, Change Management, Negotiation Skills, Business
Communication & Presentation Skills, IR & Discipline at workplace, Time
Management, Ethics Policy, Motivation & Personality Development and
Performance Review & Mentoring. Employee motivation and encouragement is of
paramount importance and in view of the same Employee Of The Period
Scheme' has been relaunched with vigour in a modified format. Employees are
adjudged and nominated for this scheme based on their extraordinary
performance and receive a cash award along with a certificate as a
testimonial of their contribution to the Company. The Long Service award
function in the gardens was attended by all executives and their spouses.
There is a constant endeavour to develop processes with an objective of
continuous improvement and a culture of process excellence.
Any statement made in the Management Discussion and Analysis Report
relating to Company's objectives, projections, outlook, expectations,
estimates, etc. may constitute 'forward looking statements' within the
meaning of applicable laws and regulations. Actual results may differ from
such expectations, projections, etc. whether expressed or implied. Several
factors could make a significant difference to the Company's operations
which include climatic conditions, economic conditions affecting
demand/supply, Government regulations, tax laws, other statutes and such
other incidental factors.