KODAK INDIA LIMITED
ANNUAL REPORT 2000-2001
MANAGEMENT DISCUSSION & ANALYSIS
(a) Industry structure and developments:
Kodak India Limited manufactures, distributes and markets products for the
Imaging - Photographic Industry, which caters to the various sections of
society viz. photographers, both amateurs and professionals, Movie
Production Houses, Health Care Institutions, Hospitals, Professional
Laboratories etc. The Company is also providing Digital and Applied Imaging
Solutions to consumers.
The Company has been consolidating its position in the market in respect of
its products over the years. Prices of most photographic products are lower
than those prevailing a decade ago inspite of the substantial fall in the
value of the Rupee vis-a-vis the US Dollar over a period of time. These
lower prices to the customers have helped boost the overall size of the
market. In turn the Company has also improved its position in the market
Extensive use of computers, CDs, Digital products, Internet services will
also increase the demand for the Digital & Applied Imaging products of your
Company. Your Company, as a social obligation, has also launched a program
to familiarize and educate the rural consumers by providing training in
photography and also offering cameras at affordable rates to them.
The operating profit of the Company for the year under review was affected
by the depreciation in the value of Rupee against the US Dollar, especially
during the last quarter of the year under review. Your Company was not able
to neutralise this impact by price increase of the products marketed by the
Company due to the overall recessionary trend and severe competition.
Interest charge for the year under review was Rs.1.45 crores as against
Rs.3.12 crores on account of better working capital management. Inventory
at the end of the year was Rs.149.62 crores as against Rs.168.61 crores in
the previous year despite increase in Sales. Debtors at the end of the year
were Rs.52.09 crores as against Rs.57.29 crores in the previous year.
(c) Segment-wise operational performance:
The Company's activities broadly comprise of the following two segments.
This segment caters to the amateur photographic market. This is the largest
segment of the Company's business having sales of Rs.435.41 crores during
the year. Products offered under this category include several models of
cameras, films and processing products and services for the photographic
industry. Some of the popular products of this segment are Kodak GOLD and
MAX Colour Negative films, Kodak KROMA, KB-10 and KB-12 cameras. Recently
the Company has also launched new products like KZ cameras, Kodak Bundle of
Joy pack, Kodak Batteries, etc. These products are available over 50,000
retail outlets in the country. The Company also offers Quality Monitoring
Service - Kodak Express Programme in India over 850 outlets in over 300
towns. During the year 2001 the Company has also launched another program
viz. Kodak Photoshop Network Member Programme in over 5000 outlets across
the country. Performance of this segment depends upon the parity of the
Rupee against the US Dollar, general economic condition in the market place
and strategies of competitors. The Company is making all efforts to grow
its market share by extensive advertising and sales promotion schemes and
will continue to further establish its brand equity in the market place.
This segment of the Company's business had sales of Rs.298.08 crores during
the year. This segment offers products and services to various types of
In the Professional Photographic Industry, the Company is consolidating its
position by Digitisation strategy by increasing the LED Printer
installations which has resulted in good growth of enlargement paper
through the Prolab programme. Additionally, a strategic tie-up with ADOBE
PHOTOSHOP was also announced to market their Photoshop Elements software to
Sales of print films used in the Entertainment industry has gone up
substantially. Blockbusters like 'Lagaan', 'Dil Chahta Hai', 'Asoka' were
shot on Kodak film.
Health Imaging products continued to show good growth in Analog and
Mammography films. The Marketing programs conducted across India under KRES
(Kodak Radiology Education Services) continued to be widely appreciated by
the Radiologists' community.
Digital and Applied Imaging saw substantial sales growth in Digital
cameras. Some of the popular models introduced were MC3, DVC325, DC3400,
DC3200 as well as the new EASYSHARE system with DX3600 and DX3900 cameras.
The Company discontinued the business of CDs in keeping with Kodak's
Document Imaging secured a prestigious contract from M/s. CMC Ltd. to
facilitate the Census project initiated by the Govt. of India.
Kodak Service & Support (KSS) division was set up during the year in line
with Kodak's global service structure. KSS manages the back office service
administrative infrastructure, primarily focusing on helping the business
units improve customer response, problem resolution time, spare parts
availability and other critical elements that affect customer satisfaction.
The Company hopes to continue its growth trend. Much will depend on the
state of the economy and market conditions, including the parity of Indian
Rupee against the US Dollar. Any improvement in current sentiments and
performance of the economy would have a positive impact on the Company.
Various Marketing programmes, Sales Promotion Schemes and extensive
advertisement campaigns for brand building is expected to improve the
performance of the Company.
The Company continues to focus on better management of costs with a view to
maintain its competitiveness in the marketplace.
(e) Risks and concerns:
The Company depends on imports for most of its products and hence the
business is susceptible to the volatility of the exchange rate. The
continued depreciation of the Rupee against the US Dollar and our
inability, at times, to pass on this costs to customers is a concern for
Stiff competition in the market continues to have an impact on the product
pricing policies and the operating margins are under pressure.
Further, with the advent of digital products in several categories, focus
will have to be retained in both traditional and digital categories.
The Company has a well documented Risk Management System as well as Health
Safety and Environment policy in line with the Parent Company's policies
and procedures. Further, the Parent Company's representatives periodically
carry out an internal audit in these areas.
Key Executives have been provided adequate exposure to various aspects of
Risk Management and Health Safety and Environment Compliance.
The Company's manufacturing plants have been registered by Underwriters
Laboratories for ISO 14001 in addition of ISO 9002 certifications.
All the plants have reported 'zero' lost time due to accidents/injuries
during the year 2001.
(f) Internal Control systems and their adequacy:
The Company has a proper and adequate system of internal controls to ensure
that all assets are safeguarded and protected against loss from
unauthorized use or disposition, and that all transactions are authorized,
recorded and reported correctly. The Company regularly conducts internal
audits, using external and internal resources to monitor the effectiveness
of internal controls in the organization.
The Company has a well-defined organization structure and authority limits
and strictly adheres to corporate policy with respect to financial
reporting and budgeting functions for all operating business units and
The Audit Committee of the Board of Directors deals with significant
control issues raised by the internal and external auditors and instructs
further areas to be covered.
(g) Human Resources:
Human capital continues to be a vital resource for the company. Training
and development of our human resources continued to receive focused
attention. With continued emphasis on development of employees and
improving skills and productivity, several training programmes were
organized by the Company which covered every employee of the company. The
concerned managers/executives of the Company also attended training
programmes/seminars/exhibitions abroad which were conducted by the Parent
Company from time to time. The employee strength of the company as on 31st
December 2001 was 668.
PROJECTIONS Vs ACTUAL UTILISATION OF FUNDS (AS PER CLAUSE 43 OF THE LISTING
Projected utilisation of funds v/s actual utilisation (As per clause 43 of
the listing agreement)
(Rs. in Lakhs)
Particulars Projections Actual
1999-2001 As on
December 31, 2001
Normal capital expenditure
programmes for projects and
infrastructure 4275 3083
Augment long term resources
of the Company including
working capital requirements. 3000 4201
Issue Expenses 66 57
TOTAL 7341 7341
Based on market requirements, the Company has utilized funds received from
the rights issue towards planned capital expenditure. The balance has been
utilized to augment long-term resources of the Company including working