ANNEXURE - B :
a) Overview :
Year 2011-12, witnessed frequent fluctuation in the prices of old ship in theinternational market and also heavy dollar exchange rate fluctuations. This has adverselyaffected the profit margins of the company. However, the prices in Iron and steel industryare gradually getting stabilized, but the company has trade liabilities in foreigncurrency and depreciation in value of Indian Rupee vis-a-vis US Dollar remains aconcerning area for the company even in the current year. The management is exercisingcaution in purchase of ships for breaking to optimize the profit margin and minimize thepossibilities of losses, if so happens.
Whenever, there is no immediate payment liability against old ship purchased forbreaking, the surplus funds available with the Company are given as loan on short termbasis and also invested in the market for earning interest/short term capital gain. TheCompany is hopeful that the Company can earn reasonable return on this loans/investment.
Surplus funds are also invested in new avenues of earnings in the form of partnershipwith other entities like in Real Estate and Construction firms etc. At present the Companyhas partnership with M/s Jai Maa Durge Associates (with 50% share). The firm has purchased2.038 hectare, Approximately. 2,20,000 Sq.Ft. of land. The management is hopeful that theCompany can earn reasonable return on this investment.
b) Segmental Review :
The Company is engaged in the ship breaking activities and value of single purchase isvery large. The company effect sale from above and occasionally the company have surplusfund, which the company advance to other companies and earn interest. However the incomefrom such activities are not substantial and the main activities of the Company continueto be that of ship breaking only and there is no other segmental business for the Company.
c) Review of operation :
As has been stated in the out-look, due to continuous availability of old ships in theinternational market, the company's ship breaking unit at Alang Ship Breaking Yard,Bhavnagar is fully operational through out the year and sales turnover in ship breakingactivities has seen a substantial increase. Now the market has stabilized and taking intoaccount the market standing of the company in Ship Breaking Market, it is hoped that theturnover and the profitability will see a considerable increase in the current financialyear.
d) Financial Review and Analysis :
(Rs. in Lacs)
| ||2011-12 ||2010-11 |
|Gross Turnover ||9286.77 ||6423.27 |
|Net Turnover ||9286.77 ||6423.27 |
|Other income ||1030.07 ||542.09 |
|Total Expenditure ||9635.96 ||6332.79 |
|Operating Profit (PBIDT) ||680.88 ||632.16 |
|Interest ||39.98 ||70.12 |
|Gross Profit (PBDT) ||640.90 ||562.04 |
|Depreciation ||7.28 ||7.79 |
|Profit before tax ||633.62 ||554.25 |
|Provision for current Tax ||205.75 ||175.44 |
|Deferred tax ||1.25 ||3.83 |
|Net Profit after Tax ||426.62 ||374.98 |
e) Cash Flow Analysis :
| ||2011-12 ||2010-11 |
|- Profit after Tax but before Depriciation ||435.15 ||386.60 |
|- (Increase)/Decrease in Net Working Capital ||747.30 ||(1010.15) |
|- Net Cash Flow from Operating Activities ||1182.45 ||(623.55) |
|- Payment for Acquisition of Assets (Net) ||(1.67) ||(5.79) |
|- Cash Outflow from Financing Activities ||(1171.53) ||316.49 |
|- Net Cash lnform/(Outflow) ||9.25 ||(312.85) |
f) Risk Management :
The Company is exposed to the risk from the market fluctuations of foreign exchange aswell as the fluctuation in the price of iron and steel. The Company's raw material is oldship, which is purchased from the international market on credit ranging upto 180 days to360 days. The Company is adopting policy of full hedging or covering the foreign exchangerequirement, the Company is regularly monitoring the foreign exchange movement andsuitable remedial measures are taken as and when felt necessary.
Though the Company is employing such measures, the Company is still exposed to the riskof any heavy foreign exchange fluctuation.
Likewise the Company's finished products are mainly re-rollable scrap generated fromship breaking and the price of the same is linked to the market rate for iron and steel.Any up and down in the price of the iron and steel will affect the profitability of theCompany. However taking into account, the price fluctuations already affected during theyear 2011-12, further major down / up ward trend in the price of iron and steel is notexpected.
In addition to the above, the Company is also exposed to the risk of fluctuation in thereal estate and construction market as the Company has invested some of its surplus fundsin partnership firm engaged in such business. However the Directors considering their pastexperience, is confident that the Company will not face any major set back in this area.
ANNEXURE - C : Directors' Responsibility Statement
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 withrespect to the Directors' Responsibility Statement, it is hereby confirmed :
a) The financial statements have been prepared in conformity, in all material respects,with the Generally Accepted Accounting Principles in India and the Accounting Standardsprescribed by the Institute of Chartered Accountants of India in a consistent manner andsupported by reasonable and prudent judgments and estimates. The Directors believe thatthe financial statements reflect true and fair view of the financial position as on31.03.2012 and of the results of operations for the year ended 31.03.2012.
The financial statements have been audited by M/s. Jain Seth & Co., in accordancewith generally accepted auditing standards, which include an assessment of the systems ofinternal controls and tests of transactions to the extent considered necessary by them tosupport their opinion.
b) that the Directors had selected such Accounting policies and applied them and madejudgments and estimates that were reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit or loss of the Company for the year under review.
c) that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records as required by virtue of statutes.
Directors have overall responsibility for the Company's internal control system, whichis designed to provide a reasonable assurance for safeguarding of assets, reliability offinancial records and for preventing and detecting fraud and other irregularities.
d) In the opinion of the Directors, the Company will be in a position to carry on itsexisting commercial ship breaking business and accordingly it is considered appropriate toprepare the financial statements on the basis of going concern.
e) The system of internal control is monitored by the internal audit function, whichencompasses the examination and evaluation of the adequacy and effectiveness of the systemof internal control and quality of performance in carrying out assigned responsibilities.Internal Audit Department interacts with all levels of management and the StatutoryAuditors, and reports significant issues to the Audit Committee of the Board.
Proper systems are in place to ensure compliance of all laws applicable to the Company.