BANJARA CEMENTS LIMITED
Your Directors hold present the 13th Annual Audited Accounts of the
Company for the financial year ended 31st March,1999.
Cement industry during the year 1998-99 has gone bad to worse. The cost of
inputs have up while realisation per tonne has done due to slackness in
demand. The excess monsoon during the year has added to the problems as the
demand has further weakened and moisture in coke fines and raw material
resulted in higher cost of procurement and production. The operations have
thus resulted in a low turnover of Rs 130.42 lakhs and a net loss of
The fuel of VSK in coke fines which are by products in Steel and Pig iron
units. As the units also were in recesssion they has either cut down
production drastically or closed down completely. This resulted in scarcity
of fuel and steap increase in cost. The landed cost shot up from Rs 2000
six months ago to Rs 2,750 per MT. Added to this moisture content shot up
from 10% to 25% due to heavy monsoon and on dry basis the cost went up
still higher. Due to scarcity and their own financial problems in the
steel plants the quality of coke fines was poorer with calorific value
almost halved in certain cases. Thus consumption of fuel per tonne of
cement went up steeply.
EXCESS CAPACITY IN SURROUNDING AREA
With the commissioning of 2.5 million plant of Larsen and Toubro just 2 km
away from the plant and the new plants of Nagarjuna Constructions Co, ltd,
in a radius of 30 km has added to the glut in the cement capacity in
the area. Zauri Agro also commissioned addittional capacity of 1.2 million
tonnes in the near vicinity. In view of such large excess capacity four
VSK plants in the area have shut down operations.
TERM LOANS RESCHDEULEMET AND CONSEQUENT INCREASE IN INTEREST:
The term lending institutions had rescheduled the term loans and the funded
the overdue interest in view of the inability of the Company to repay..
Though APIDC and APSFC had done the funding and reschedulement the
interest on delayed payment of 5%. Together it will workout to 24.5%. In
a depressed economy and recession in cement industry servicing high capital
at such interest is not viable. Specifically in VSK mini cement plants
which are facing addittional problems like high fuel distributions and
sales cost while realisation is atleast lower by 20% compared to major
Your units enjoys rebate of 25% being in backward area. However the power
bills are to be paid in full and the Government reiburses the 25% to the
Company subsequently through APSFC. The subsidy amount reimbursed is
adjusted by APFSC against the interest dues propotionately to the term
lending institutions. Through the rebated is taken into account in the
profit and loss account an amount of Rs 34 lakhs is still reimbursed by
the Govt of A.P.. Thus the cash flows are short by this amount for the
Payment of addittional consumptionn of Rs 10.73 lakhs to APSEB also
depelted the cash availability to the Company.
Though UCO Bank a term lending institutions was party to the
reschedulement they have still not given their approval for
reschedulement. They have also not extended any working capital limits to
the company, though proposal was submitted long time ago. This has
hampered the operations of the Company.
EFFECT OF POOR PERFORMANCE AND LACK OF WORKING CAPITAL
The expenditure in the current year exceeded the revenue. Due to weak
demand and recession in the company the sales necessarily have done on
credit. Due to lack of working capital cement could not be sold on credit
resulting in poorer sales and realisation. Cash crunch in the company
became acute and payment of electricity bill for September month could
not be made. In realisation to this APSEB has demanded an addittional
consumption deposit of Rs 16.10 lakhs out of which only Rs 10.75 lakhs
could be paid.
The rest was over due . In view of the cash flows problems the
addittional consumption deposit for Oct 98 and power bill for September
could not be paid and was overdue. APSEB had declined to the same to the
factory on 27-10-98.
COST OF PRODUCTION AND SALE PRICE IN OCTOBER:
The power of fuel per bag of cement alone works out to Rs 60 and Excise
duty amounts to Rs 30 other costs like salaries & wages overheads
consumables raw materials , spares sales and administrative expenses,
packing materials etc are extra. Thus the ex-factory price of Rs 75 did not
cover even the power fuel and taxes.
The management was awaiting for the market conditions availability and
cost of fuel to improve to restart the factory . Meanwhile the term
lending institutions viz APIDC , ASFC and UCO Bank had in surprise move
on 9th January, 1999 and seized the factory along with all the assets for
on payment of overdue interest.
The following interest were paid to these financial institutions during
the year 1998-99.
APIDC Rs 6,81,230
APSFC Rs 5,38,380
UCO Bank Rs 2,80,740
Inspite of various difficulties the above interest amount are paid. However
the institutions did not consider these adequate and decided to seize the
unit under SFC Act. Though the Company represented to APIDC for release of
the unit to start operations in March when cement assets whose net value
improving APIDC did not lift the seizure.
Thus the Company assets net value (not realised) as on 31-12-98 was Rs 5.69
crore and were seized by the term lending institutions for delay in
payment of interest. Therefore no further operations were possible when
the market for cement improved in March 99.
Bring R.Lokaranjan retires at this Annual General Meeting and being
eligible himself for re-appointment. Shri Mohan Humnabadkar submitted this
resignation to the Board of Directors on 10-07-199 on his personal
grounds. The Board places on record their appreciation for the valuable
services rendered by Mr Mohan Humnabadkar.
Messrs Mogili Sridhar & Co Chartered Accountants retires at the conclusion
of this Annual General Meeting and are eligible under section 224 (1-B) of
the Companies Act,1956.
Your Company has not accepted the Deposits from the Public during the year
In pursuance of Section 217(2A) of the Companies Act,1956 none of the
employees of the Company drawing the remuneration exceeding Rs 60,000
per annum or 50,000/-per annum. or part thereof.
Your Directors place on record their appreciation for the services
rendered by the employees. The relation between the management and the
workers has been cordial throughout the year.
ENERGY CONSERVATION , TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:
INFORMATION ON ENERGY CONSERVATION , TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE OUTGO IS ANNEXED HEREWITH:
The Company has drawn up a Y2K preparedness programmed and the same is
expected to be completed by November,1999.
Yours Directors wish to express their thanks for the guidance and
assistance received from various departments of State and Central
Governments and APIDC, ASFC and UCO Bank. Your Directors also like to thank
the shareholders who stood with the Company.
For and on behalf of the Board
Place: Reg Office: Hyderabad
Date : 30-08-1999.