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DEV FASTENERS LIMITED
ANNUAL REPORT 2001-2002
DIRECTORS' REPORT
1. Your directors are pleased to present the revised twelth annual report
along with the audited accounts of the company for the period (18 months)
ended 30 September 2002.
2. As the shareholders are aware, the board of directors had approved the
accounts for 18 months period ending on 30th sep 2002, at the board meeting
held on 11th November 2002. At the same meeting, the directors had also
decided to appoint an outside agency to investigate some entries in the
accounts of the company for the period under review, in view of certain
critical remarks in the Audit Report. A preliminary report was received on
30th December 2002, which indicated that the accounts approved at the Board
meeting held on 11th November 2002 and circulated to the shareholders did
not present a true and fair view of the affairs of the company as on 30th
September 2002. In view of this report, your directors withdrew the
resolution relating to adoption of accounts and the Director's report at
the Annual General Meeting held on 30th December 2002.
3. The investigation audit has brought out several areas of improper
accounting and mismanagement in the past, particularly in the following
areas
a. The closing stock was consistently overstated and was not in accordance
with the generally accepted accounting standards
b. Sales returns of the previous years were not accounted properly in the
respective years.
c. Expenses under various heads, more specifically - Business Development,
Repairs & Maintenance are not commensurate with the size and nature of the
business of the company.
4. The present Board of Directors, which was completly re-cast in August
2002, have therefore decided to rectify the accounts and present the true
picture which is as follows
FINANCIAL PERFORMANCE
2001-02 2000-01
(18 months) (12 months)
Rs. lacs Rs. lacs
Sales and other income 1475.95 1079.93
Loss before interest and
Depreciation 94.61 265.71
Interest 402.97 302.58
Depreciation 144.10 95.81
Loss for the year 641.68 664.10
Adjustments relating to
Previous year 529.73
Loss brought forward 1463.84 799.74
Loss carried forward 2630.78 1463.84
5. OPERATIONS
The performance of the Company during the period was affected significantly
because of shortage of working capital funds resulting in lower production
and sales. The impact of the huge losses incurred by the Company in the
past years has depleted working capital resources completely resulting in
severe cashflow constraints. In view of this, the company faced problems in
production and supplies to regular customers.
6. MAJOR DEVELOPMENTS
The year under review saw several developments in the company which are
given below.
a. In March 2002, your directors arranged for a strategic investor to
invest in the company, subject to the approval of the lending banks and
IDBI. Accordingly the investor brought in the first instalment of Rs.68
lacs into the company and also appointed four directors, Mr.C.S.Venugopal,
Mr.A.B.S.Reddy, Mr.K.P.C.Rao and Mr.S.Venugopal on the board of the company
on 2nd May 2002.
b. However, all the four directors appointed by the investor resigned from
the board on 25th July 2002.
c. The Managing Director, Mr. N.G.Krishnan also resigned on 25 july 2002.
Around the same time two other directors, Mr.P.N.Devarajan and Mr.
V.Gopalan also resigned.
d. It became imperative, therefore for the company to appoint new directors
on the Board. Accordingly, Mr. N.Chandrasekaran and Mr.Vepa Sadasivam were
appointed as additional directors on 7th August 2002. They have been re-
appointed in the Annual General meeting held on 30th December 2002.
e. Mr.D.R.Jawahar, I D B I nominee on the Board also resigned effective
13th September 2002.
f. In view of the fact that the bank accounts were overdrawn beyond the
sanctioned limit, the bankers to the company, Indian Bank and State Bank of
Travancore decided not to allow any further operations in the accounts till
they were regularized. This meant that the company was unable to purchase
any raw materials and hence production was stopped in the factory from end
Sept'02.
g. As on 30th September 2002, the accumulated losses have exceeded the
networth and hence the company has become a sick company. The company has
made reference to the BIFR under SICA and BIFR registration is awaited.
h. The Hon'ble Chennai High Court had issued a winding up order in June'02
on a petition filed by one of the creditors and had stayed the operation of
the order Nov'02. On an application by the company that reference has been
made BIFR, the Hon'ble court was pleased to stay the order till the
application is heard/ disposed of by BIFR.
PRESENT POSITION AND FUTURE OUTLOOK
At present the bank accounts are not operational. IDBI and State Bank of
Travancore have initiated recovery proceedings before the Debt Recovery
Tribunal. Your directors are in discussions with the lead bankers, Indian
Bank to arrive at a solution so that limited manufacturing operations can
start with a view to resume supplies to important customers of the company
and to enhance the prospect of attracting a stracgic investor.
The Directors do not recommend Dividend for the period (18 months) ended 30
September, 2002, in view of the loss incurred by the Company.
DIRECTORS RESPONSIBILITY STATEMENT
In compliance with Section 217 (2AA) of the Companies Act, 1956, the
Directors confirm that:
.in the preparation of annual accounts the applicable Accounting Standards
have been followed:
.approporiate accounting policies have been selected and applied
consistently and have 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 as at 30th September, 2002 and of the losses of the Company for the
period (18 months) ended on that date;
.proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the aforesaid Act
for safeguarding the assets of the Company; and for prevention and
detection of fraud and other irregularities;
the Annual Accounts have been prepared on a going concern basis.
AUDITORS
M/s. Revathi & Latha, Chartered Accountants, Chennai who retire at the end
of this Annual General Meeting, have already been appointed in the Annual
General meeting held on 30th Dec '2002.
DIRECTOR'S RESPONSES TO AUDITOR'S QUALIFICATIONS
(i) With reference to point no. 5 of Annexure to the Auditor's report,
reference is drawn to point no: (vii)(a) to the Notes to the Accounts.
(ii) With reference to point no 10 and 14 of the Annexure to the Auditor's
report, the present management has taken necessary steps to ensure better
internal control measures and proper documentation of all receipts and
issues at the factory.
(iii) With reference to point no. 15 of Annexure to the Auditor's report,
the present Board of Directors are taking necessary steps to appoint an
Internal Auditor.
(iv) With reference to point no 19 of Annexure to the Auditor's report, it
has been brought to the notice of the management that most of the expenses
accounted under Business Development and some of the expenses various
other heads have, not been actually incurred for the purpose stated. It is
suspected that these expenses are not legitimate in the normal course of
business and therefore, action against the previous management is being
contemplated.
(v) With reference to point no: 20 of Annexure to the Auditor's report, the
company has made an application to Board for Industrial & Financial
Reconstruction under Sec 15(1) of the said Act.
CORPORATE GOVERNANCE
A detailed report on this subject forms part of this Report.
INDUSTRIAL RELATIONS
The illegal strike resorted to by the workmen during the last accounting
year continued until the first week of May 2001. The production levels
stabilised subsequently. Your Company continues to maintain harmonious and
cordial relations with its workers.
PARTICULARS OF STATUTORY STATEMENTS
(a) Particulars of Employees: No employee of the Company was paid
remuneration in excess of limits prescribed under Section 217 (2A) of the
Companies Act, 1956, read with the relevant Rules as amended.
(b) Statement pursuant to Section 217 (1) (e) of the Companies Act 1956
read with Companies (Disclosure of Particulars in the Report of the Board
of Directors) Rules 1988 is given in the annexure forming part of this
Report.
(c) The Company has not accepted any deposits which come under the purview
of Section 58A of the Companies' Act, 1956.
ACKNOWLEDGMENT
The Board of Directors would like to thank the customers, Financial
Institutions, Banks, Vendors/ Contractors and the shareholders for their
continued support. The Board would also take this opportunity to commend
the employees of the Company at all levels for their continued commitment
during these difficult times.
(By Order of the Board)
For Dev Fasteners Limited
Place: Chennai Capt. S. Prabhala
Date : 01.02.2003 Chairman
Annexure - 1
Information as required under Section 217 (1) (e) of the Companies Act,
1956:
A) CONSERVATION OF ENERGY.
a) Measures taken:
1. Effective relining and maintenance of furnace to avoid heat loss,
utilisation of full capacity of furnaces by proper co-ordination of load
and improvement of power factor.
2. Re-use of treated effluent resulting in reduction in water consumption
3. Capacitors have been used for upgrading the power factor
4. Use of thermic fluid systems instead of electrical heating.
b) Additional investment and proposals, if any, for reduction of
consumption of energy:
The Company is taking steps for reducing energy consumption on a continuous
basis by adoption of energy efficient practices.
B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:
a) Specific areas:
(i) Development of new cold forged fasteners leading to import
substitution.
(ii) Surface engineering of tools to ensure consistent productivity
improvement.
(iii) Development of products for export markets with focus on value
addition.
(iv) The Company from the beginning has implemented various quality
management systems to produce 'Quality Products' conforming to
International Standards. This has enabled the Company to meet the stringent
ISO 9002 Standards.
(v) The Company has not taken any foreign technology. However, some senior
Company personnel were sent abroad to USA, UK, Taiwan and japan. They
underwent training in operation and maintenance of the machines.
(vi) Improvement to Total Quality Management Systems.
b) Benefits derived as a result of the above efforts:
(i) Improvement in productivity
(ii) Import substitution of fasteners
c) Future plans of action:
To continuously upgrade process, technology, productivity and improvement
in overall performance, added cost effectiveness and import substitution.
Expenditure on R & D:
Expenditure on R & D, though incurred, has not been quantified as research
and development expenses.
C. Foreign Exchange Earnings & Outgo
a. Foreign Exchange Outgo :
Revenue Expenditure Rs. 48.14 lakhs
b. Foreign Exchange earnings: Nil
(By Order of the Board)
For Dev Fasteners Limited
Place: Chennai Capt. S. Prabhala
Date : 01.02.2003 Chairman
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
FASTENERS INDUSTRY
TRENDS AND DEVELOPMENT
Your Company, in the current period, has registered a sales performance of
Rs. 1245.38 Lacs while the Fasteners industry has generally witnessed a
stagnant market scanario. Competitive environment demands efficient
processes, contemporary technology, skill upgradation and expanded service
network to serve the customer at his doorstep. Your Company is on the look-
out for a strategic investor to infuse funds, with a view to revive the
operations in full swing as well as put in place a comprehensive system to
meet future requirements and ensure cost effective total solution to our
Customers.
BUSINESS REVIEW
Business overview: The performance of the Company during the period was
affected significantly because of shortage of working capital funds
resulting in lower production and sales. The impact of the losses incurred
by the company in the past years made it difficult for the company to raise
any funds in the form of additional borrowings. In view of the cash flow
constraint, your company was unable to supply fasteners to its customers on
schedule resulting in cancellation of some order.
Your directors are taking step to find a strategic investor who will bring
in additional funds in the form of equity so that liquidity position will
improve.
Information Technology: Like any other industry,, in the fasteners'
industry as well, service to customers and ready availability of spare
parts are essential. Your Company is according to taking necessary steps
towards this objective.
Human resources: Your Company attaches significant importance to continuous
upgrading of human resources for sustaining highest level of customer
satisfaction and maximising share holder value. It has an organization
commensurate with the above objective. Your company has a competency based
performance and potential appraisal system to identify managerial Talents
for ensuring appropriate rewards for excellent performance.
The training and development efforts of the company is directed towards
building multi skills and ensuring a strong work force with high levels of
attitudinal and cultural values to meet the challenges in the coming years.
INTERNATION CONTROL SYSTEM AND THEIR AEQUACY
It has been brought to the notice of the present management, by the special
audit report that there are no adequate internal control measures
commensurate with the size of the company.
Taking note of the report, the present management is taking necessary steps
to have adequate internal control for the company. The current period when
there is no production at the factory is being fully utilised to ensure
that adequate internal control system is in place immediately.
(By Order of the Board)
For Dev Fasteners Limited
Place: Chennai Capt. S. Prahhala
Date : 01.02.2003 Chairman
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