The Directors hereby present the Twenty Seventh Annual Report together with the auditedaccounts of the company for the year ended 31st March 2013.
The performance of the company for the year ended 31st March 2013 is as follows:
| || |
(Rs. in lakhs)
| || |
For the year ended
|Particulars ||31.03.2013 ||31.03.2012 |
|Gross Revenue ||57,084 ||57,905 |
|Net Revenue (excluding Excise Duty) ||50,435 ||52,502 |
|Total Expenditure ||43,756 ||44,139 |
|Operating Income ||6,679 ||8,363 |
|Other Income ||123 ||210 |
|Profit before Interest, Tax & Depreciation ||6,802 ||8,573 |
|Interest ||3,197 ||3,018 |
|Deferred Revenue Expenses ||417 ||417 |
|Depreciation ||1,925 ||2,144 |
|Profit before Tax & Exceptional item ||1,263 ||2,994 |
|Tax Expense ||305 ||726 |
|Profit after Tax/Net Profit ||958 ||2,268 |
|Balance of profit brought forward from last year ||8,316 ||7,476 |
|Amount Available for Appropriations ||9,274 ||9,744 |
|Appropriations: || || |
|Transfer to General Reserve ||200 ||400 |
|Dividend ||221 ||885 |
|Tax on Dividend ||38 ||143 |
|Balance Carried to Balance Sheet ||8,815 ||8,316 |
The Board recommends a dividend of 10% i.e. Rs. 1 per equity share, aggregating to Rs.221 lakhs (exclusive of tax on dividend) for the financial year 2012-2013.
TRANSFER TO GENERAL RESERVE
A sum of Rs. 200 lakhs has been transferred to the general reserve of the company forthe financial year 2012-2013.
The turnover of the company decreased by 4% from Rs. 52,502 lakhs in the financial year2011-2012 to Rs. 50,435 lakhs in the financial year 2012-2013. This was mainly due to thedepressed demand in the auto sector and consequent low offtake by the customers. TheEarnings before Interest, Tax and Depreciation (EBITDA) also decreased from Rs. 8,573lakhs in the financial year 2011-2012 to Rs. 6,802 lakhs in the financial year 2012-2013.The decrease can be attributed to increase in the cost of inputs and the unceasingpressure from customers to reduce prices in spite of spiraling material, power, labour andinterest costs. The unprecedented power cuts in Tamil Nadu had resulted in extensive useof diesel power to maintain production and this added to the manufacturing costsubstantially thereby leading to decreased EBITDA. To overcome the huge power cost, thecompany has installed a dedicated feeder line and purchases power through the exchange.
In spite of considerable efforts the exports reduced to Rs. 2,589 lakhs duringfinancial year 2012-2013 from Rs. 3,734 lakhs in the financial year 2011-2012. Thisdecrease was due to the recessionary conditions in the international markets.
The spares sales of the company during the financial year 2012-2013 was Rs. 3,048 lakhsas against that ofRs. 2,652 lakhs in the financial year 2011-2012.
The Profit After Tax (PAT) for 2012-2013 was substantially less than that of thefinancial year 2011-2012 by 58%. The Company's earning per share was Rs. 4.33 during thefinancial year 2012-2013.
Given that the situation in 2013-2014 is not likely to be any better as the economy hasshown no signs of revival till now, the company has launched a massive program to cutcosts, increase productivity and intensify marketing efforts. Efforts are also on tosecure better prices from the customers for the existing products due to rising costs.With the commissioning of the Bawal plant there has been a rearrangement of productionfacilities between plants to minimize costs. The operations at Gurgaon stand shifted toBawal. The operations of the Export Oriented Unit at Ambattur which was essentiallycatering to the requirements of Amtec has dried up and it is proposed to shift themachineries there to another export oriented unit at Maraimalai nagar. The rearrangementof facilities will help in streamlining production and lead to increased efficiency ofoperations. Efforts are on to streamline the supply chain and reduce/strengthen thesubcontractors and vendors.
The reduced turnover resulted in a very cautious approach with regard to capitalexpenditure in 2012-2013. The company spent only Rs. 734 lakhs in capital investments inthe financial year 2012-2013 as compared to Rs. 4,601 spent in the financial year2011-2012. The company continued its emphasis on R&D and spentRs. 1,013 lakhs onR&D in the financial year 2012-2013.
In accordance with the Articles of Association of the company, Mr.S.Muthukrishnanretires by rotation at the forthcoming Annual General Meeting. Mr. S. Muthukrishnan hadinformed the board of his intention not to seek reappointment at the ensuing AnnualGeneral Meeting due to health reasons. Consequently no resolution is placed for hisreappointment in the current Annual General Meeting. Mr.S.Muthukrishnan is the founderdirector of UCAL Fuel Systems Limited. It was under his leadership that UCAL Fuel SystemsLimited developed into a world class supplier of auto components. The foundations laid byhim have sustained the company in the most difficult times. The Board is grateful to Mr.S.Muthukrishnan for his leadership and guidance through the years.
Dr.V.Sumantran also retires by rotation at the ensuing Annual General Meeting and beingeligible offers himself for reappointment. Brief resume/details of Dr.V.Sumantran who isto be reappointed as mentioned herein has been furnished in the Notice convening theAnnual General Meeting.
The Board is grateful to Padma Vibhushan Dr. V. Krishnamurthy who spends a considerableportion of his time with the company, guiding it in all areas.
The statutory auditors of the company M/s. G Balu Associates, Chartered Accountants,Chennai, will retire at the conclusion of the ensuing Annual General Meeting and beingeligible offer themselves for reappointment. The necessary resolutions in this regard willbe passed at the ensuing Annual General Meeting. The company has received a certificatefrom the auditors to the effect that their reappointment if made will be in accordancewith the provisions of Section 224(IB) of the Companies Act, 1956. The auditors have alsoconfirmed that they hold a Peer Review Certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India. Mr. V. Kalyanaraman was appointed as costauditor for financial year 2012-2013. The company will be filing the cost audit report forthe year ended 31st March 2013 before the due date of 30th September 2013. Based on therecommendations of audit committee the Board has reappointed Mr. V. Kalyanaraman as costauditor of the company for the financial years 2013-2014 and 2014-2015.
Mr. S.Natarajan, Dr. M.S. Ananth and Mr. Jayakar Krishnamurthy continue to be themembers of the Audit Committee. Mr. S.Natarajan continues as Chairman of the Auditcommittee. The committee met 4 times during the year.
The company has two wholly owned subsidiaries.
Ucal Polymer Industries Limited (UPIL) UPIL continues to be a steady supplier tothe company of plastic and rubber components. The turnover for the financial year2012-2013 was Rs. 2,357 lakhs compared to that of Rs. 2,347 lakhs in the financial year2011-2012. The net profit after tax was higher at Rs. 228 lakhs in the financial year2012-2013 thereby recording an increase of 44% as against Rs. 159 lakhs in the financialyear 2011-2012. This has been achieved mainly due to the rationalization of operations andvendors. A dividend of 10% has been declared by UPIL. The dividend remains modest as thecompany is planning to invest in revamping its facilities in the current year. One mainconcern is to expand the customer profile beyond UCAL Fuel Systems Limited and efforts areon in this direction. The company is also attempting to diversify its product portfolio toemerge as one of the leading suppliers of sophisticated and precision products of rubberand plastic.
Amtec Precision Products Inc, USA (Amtec) The turnover of Amtec was Rs. 14,832lakhs during the financial year 2012-13 down from Rs. 15,716 lakhs in the financial year2011-2012 thereby recording a decrease of 6%. Amtec has earned a cash profit of Rs. 175lakhs during the financial year 2012-2013. The company has not shown the desired growthdue to the stagnating US economy. The molded product division was shifted nearer to theprecision product division during the year. This has led to increased supervision andreduced costs. During the year Amtec obtained a minority certification in US which opensnew possibilities of securing orders. The minority certification will immensely help Amtecto gain entry into original equipment manufacturers and Tier 1 suppliers as there is amandate for these companies to award a certain percentage of their business to minoritysuppliers. Also with the US economy picking up there is every possibility that Amtec willpost better results in 2013-2014. Rising employee costs is also a concern at Amtec whichwill get evened out only if the customer portfolio increases.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31 st March 2013 of thecompany and its subsidiaries together with the auditor's report thereon is enclosed. Thestatement pursuant to Section 212 of the Companies Act, 1956 relating to the subsidiarycompanies forms a part of the accounts. A summary of the key financials of the company'ssubsidiaries is also included in the Annual Report.
The consolidated results of the company and its subsidiaries show that a net profitafter tax ofRs. 598 lakhs has been achieved during the financial year 2012-2013 as againstthat ofRs. 2,392 lakhs in the financial year 2011-2012. The economic recession was feltboth in the domestic operations and in Amtec. The expected increase in customer off takedid not materialize and there was a time lag in cutting down costs corresponding to thecustomer off take which has led to reduced profits. This situation of low demand is beingused by the company and Amtec to streamline their operations and costs and diversify theirproduct mix.
The Ministry of Corporate Affairs vide its General Circular No. 2/2011 dated February8,2011 has granted a general exemption subject to certain conditions to holding companiesfrom complying with the provisions of Section 212(1) of the Act which requires theattaching of the balance sheet, profit and loss statement and other documents of itssubsidiary companies to its Annual Report. The Board in its meeting held on 2nd September2013 passed the necessary resolution for complying with all the conditions regarding thecirculation of the Annual Report of the company without attaching all the documents of thesubsidiary companies referred to in Section 212(1) of the Act. Accordingly, the saiddocuments are not being included in this Annual Report. The annual accounts, reports andother documents of the subsidiary companies will be available for inspection duringbusiness hours, by any shareholder of the company at the registered office of the companyand also at the registered office of the concerned subsidiary. The annual accounts,reports and other documents of the subsidiary companies will be despatched to theshareholders upon receipt of a request from them.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, theDirectors confirm that,
(a) In the preparation of the annual accounts, the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(b) Such accounting policies have been selected and applied consistently and suchjudgments and estimates have been made that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the company at the end of the financial year31st March 2013 and of the profit of the company for the year ended 31st March 2013;
(c) Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(d) The annual accounts have been prepared on a "going concern" basis.
The company has not accepted any fixed deposits from the public during the financialyear 2012-2013 and there is no outstanding fixed deposit as on date.
Particulars of employees as required under sub-section (2A) of Section 217 of theCompanies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 form apart of this report. In terms of section 219(l)(b)(iv) of the Companies Act 1956, theAnnual Report and accounts are being sent to the shareholders of the company excluding thestatement of particulars of employees under section 217(2A) of the Companies Act 1956. Thestatement will be available for inspection by the shareholders at the registered office ofthe company during business hours. Any shareholder interested in obtaining such statementmay write to the Company Secretary at the registered office of the company.
ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
Information required under Section 217(1) (e) of the Companies Act 1956 read with theCompanies (Disclosure of Particulars in the report of the Board of Directors) rules 1988,on energy conservation, technology absorption, foreign exchange earnings and outgo, isgiven in Annexure-A and forms an integral part of this report.
The Company adheres to all the requirements of the code of corporate governance asstipulated in clause 49 of the listing agreement with the stock exchanges as well as tothe standards set by the Securities and Exchange Board of India. A report on corporategovernance along with certification of the chairman and managing director and the chieffinancial officer is attached in Annexure-B. A certificate from the auditors of thecompany regarding compliance of the conditions of corporate governance as stipulated byclause 49 of the listing agreement is attached in Annexure-C. The Management Discussionand Analysis Report is attached in Annexure-D.
The Board acknowledges with gratitude the support, cooperation and assistance of allits stakeholders: - the customers, the bankers, the suppliers and vendors, thegovernmental agencies, the employees and more importantly the shareholders.
| ||For and on behalf of the Board |
|Place : Chennai ||JAYAKAR KRISHNAMURTHY |
|Date : 02.09.2013 ||Chairman and Managing Director |
ANNEXURE-A TO THE DIRECTORS' REPORT
A. CONSERVATION OF ENERGY
a. Energy conservation measures undertaken
Energy saving projects implemented during the financial year 2012-2013 include a) thevacuum pump machines installed for serving gasoline test equipments for testing finishedproducts, were connected to cooling water closed loop system wherein water at a specifiedpressure was circulated by using water pumps powered by electric motor attached toindividual vacuum pump. The improvement was done to save electric energy by eliminatingelectric motor driven pumps in the system, b) The new compressor was connected to a PLCbased control system which would automatically switch off the compressor based on constantset output air pressure and requirement of air in work area, c) machine accessories likehydraulic power pack, Scrubber used in pressure die casting and shot blasting, oil mistextraction system from CNC machines were interlocked with PLC timer based network toswitch off automatically when the main machine is idle, d) The company also installed afeeder line in three plants in Maraimalai nagar and purchased power through the powerexchange instead of using diesel for power generation, e) The wind mills continue togenerate power commensurate to their capacity.
b. Additional investments and proposals if any being implemented for energyconservation
During the financial year 2013-2014, the company proposes to provide lid over themelting furnace attached to die casting machines to reduce heat loss from the molten metaland to provide CFL bulbs in the lighting area in shop floor. The wind mills are beingevaluated for upgradation. The company is also proposing to install solar panels whereverpossible. Changeover to gas in place of electric power is also being done on a continuousbasis wherever possible.
c. Impact of the measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods
The measures undertaken to conserve energy have resulted in an annual savings ofRs. 30lakhs. The proposed measures are estimated to result in an annual savings of more than Rs.150 lakhs.
d. Total Energy consumption and energy consumption per unit of production.
B. TECHNOLOGY ABSORPTION
RESEARCH AND DEVELOPMENT
1. Specific areas in which R&D is carried out by the company
Product Development to suit the customer requirements for their vehicle/engineupgrades, new product launches using current technologies. Examples: development ofcarburettors, secondary air valves, multi-point fuel injection system parts, oil andvacuum pumps for new vehicles/upgrades to customers.
Support product development with the required theoretical and virtual simulationcapability to meet the customer requirements, enhance the in-house competency.
Performance improvement of existing products through technology upgradation.
Reducing the import content in the product, cost reduction through valueengineering efforts.
Development of new technologies in pumps, engine fuel management system for twowheelers.
Development of technologies for products to be used in defence sector.
Development of technologies for engineering and testing services.
2. Benefits derived out of R&D
Product development for new applications and new customers.
Technology readiness for the organization to meet the market challenges.
Demonstration of technical capability giving rise to new business opportunities.
Product cost reduction through validation of parts from new sources, valueengineering.
Customers for new developments in appreciation of the R&D skill sets,support system.
Improvements in manufacturing process and quality control.
3. Future Plans
To develop multiple product technology options in view of the future emissionregulations, market trends and develop products in fuel management system, engine controlsand offer value proposition solutions to the customers.
To study the requirements in product improvement / new designs for better fueleconomy such as variable flow oil pump, non-parasitic vacuum pump.
To explore avenues for the products / services in the non-automotive segment.
|4. Expenditure on R&D || |
|Particulars ||Rs. in Lakhs |
|a. Capital ||22.94 |
|b. Revenue (Recurring) (includes amount transferred to Deferred revenue expenses) ||990.08 |
|c. Total ||1,013.02 |
|d. Total R&D expenditure as a percentage of total turnover ||2% |
TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
1. Efforts made in brief towards technology absorbtion, adaptation and innovation
The company has not gone in for any technology partner other than Mikuni Corporationand Orbital Australia Proprietary Limited for carburettors/air suction valves and twostroke direct injection/four stroke port injection system respectively. The company hasfully absorbed the technology in the areas of carburettors and air suction valves and iscontinuously working to adapt this technical knowhow for new customers, new applicationsand product improvements through its own indigenous innovative efforts. The technologyabsorption relating to two stroke direct injection system/four stroke port injectionsystem is also complete. The innovations and expansions in the pump segment has beenmainly due to the company's own initiative. The company is also exploring other avenues ofexploiting the knowledge gained through Orbital.
The new developments through indigenous efforts include
Constant Depression (CD) carburettor for the executive segment (125cc engine)motorcycles of two major two-wheeler manufacturers.
Air Suction Valve for entry segment (lOOcc engine) motorcycle for a majortwo-wheeler manufacturer.
Variable Depression (VD) carburettor for a new customer application (200ccengine) for their three-wheeler segment with gasoline engine, LPG and CNG version withgasoline back-up.
Carburettor for the utility engine segment for the domestic and export market.
Throttle body assembly and delivery pipe assembly for the entry level passengercar segment for a four-wheeler manufacturer to suit their packaging and performancerequirement.
Oil pump for 1.3 ltr diesel engine for a four-wheeler passenger car manufacturerfor their export requirement.
2. Benefits derived as a result of the above efforts
The ability to meet the challenging performance and emission targets throughinnovative features in the product which has resulted in the customers approaching for newdevelopments.
Through its wide range of products, the company will be able to penetrate intonewer markets and segments.
Entry into new areas like defence, engineering services thereby increasing theproduct range.
Securing Export orders.
3. In case of imported technology (imported during the last five years reckoned fromthe beginning of the financial year) the following information may be furnished
(a) Technology imported - technology has been imported in the areas of pumps,carburettors and direct injection systems
(b) Year of import 2006-2007 to 2009-2010
(c) Has technology been fully absorbed - Yes
(d) If not fully absorbed areas where it has not taken place, reasons therefor andfuture plan of action-Not applicable
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
The earnings of foreign exchange were on account of export of carburettors, MPFI partsand pumps during the year. The foreign exchange outgo was mainly on account of purchase ofcomponents, capital goods and foreign travel. During the financial year 2012-2013, thetotal foreign exchange outgo was Rs. 4,500 Lakhs while the foreign exchange earned was Rs.2,589 Lakhs resulting in a net foreign exchange outgo ofRs. 1,911 Lakhs.
| ||For and on behalf of the Board |
|Place : Chennai ||JAYAKAR KRISHNAMURTHY |
|Date : 02.09.2013 ||Chairman and Managing Director |