chemcel biotech ltd Directors report

CHEMCEL BIO-TECH LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT Dear Members Your Directors are pleased to present herewith the Sixteenth Annual Report on the business and operations of the Company together with Audited Statement of Accounts for the year ended 31st March 2011. The highlights for the year under review are follows: - 1. FINANCIAL INFORMATION: The performance of the Company during the period under review is summarized below: PARTICULARS 2010-2011 2009-2010 Net Sales 5022.16 4576.40 Other Income 0.16 - Interest and Financial charges 120.94 98.90 Depreciation 7.83 8.88 Profit/(Loss) before taxes 114.94 178.52 Provision for taxes 28.16 41.24 Profit/(Loss) carried to Balance 86.78 137.12 Sheet During the year under review, your Company has achieved a gross turnover of of Rs. 5022.16 Lacs as against Rs. 4576.40 Lacs in 2009-10. The Operational performance of the Company is discussed under Management Discussion and Analysis Report. 2. DIVIDEND Your Directors considered it prudent to conserve the resources of the Company to sustain its future growth and as such have not recommended any dividend for the current financial year. Your Directors have proposed to transfer an amount of Rs.86,78,000/- to the General Reserve out of the profits of the company for the year 2010-2011 3. Status of implementation of Project: At the Present market conditions extraction of Bio Diesel by importing Bio crude oil and start operation is unviable. Management Analysis and study revealed that exporters of Biodiesel crude acquired the technology for conversion of Crude into finished biodiesel. With this operation they are able to find their own conversion to be more remunerative than exports. In addition to this they are encouraged by the respective governments for generating additional employment channel. With this development the availability of crude Bio Diesel oil is bleak. These reasons are convincing us to decide to dispense with the proposed project of Biodiesel which is not at all feasible under the circumstances. Majority of Advances given to farmers for supply of seed returned the money due to non remunerative prices for supply of Jatropha seed and their inclination towards going for commercial crops due to assured availability of water with new projects now coming in.. Efforts are initiated to recover the balance amounts from farmers . Also efforts are intiated with the machinery suppliers who are convinced to refund the advances made for machinery supplies. Our Biodiesel plant site at Kondapalli, measuring 2260.40 Sq yards located at Plot no.260A, R.S.No.110, 110/1A, Kondapalli village, Ibrahimpatnam mandal, Krishna dist, is not sufficient for accommodating any future enhancement of capacities as and when necessitates any future plans for installing Agro products plant as well. For expanding in the existing site, the possibilities are remote as all the borders are locked by roads and existing adjoining Government owned factories. In view of this the Board felt to dispose of this land along with the building and structures and utilize the funds for the expansion and growth of the existing Agro based business. As the abondonment of Bio Diesel business is against to the Prospectus issued by the company, change in the project and change in utilization of funds requires the approval of shareholders. In view of the above, Board recommended for the approval of share holders for abandoning the proposal of Biodiesel plant in this AGM and the fund earmarked for the said purpose can be utilized for the general corporate purpose of your company 4. CONSOLIDATED FINANCIAL STATEMENTS: Your Directors have pleasure in attaching the consolidated financial statements pursuant to Clause 41 of the Listing Agreement entered into with the Stock Exchange. These statements were prepared in accordance with the Accounting Standard 21 prescribed by the Institute of Chartered Accountants of India in this regard. The company has no branches. The Auditors Report to the Board of Directors does not contain any qualifications. 5. MATERIAL DEVELOPMENTS * Convened Extra Ordinary General Meeting on 14th day of February 2011 for purpose of Increasing Authorized share capital of the company from 30 Crores to 35 Crores. * issued and allotted 20,00,000 Equity shares of Rs 10/- each on preferential basis pursuant to section 81(1A) of the Companies Act, 1956 to Europlus One Realty Pvt Ltd not exceeding. * Issued 40,00,000 warrants convertible into equity shares on preferential basis pursuant to section 81(1A) of the Companies Act, 1956 to Nuvant Equity Private Limited and Vaishnavi Securities Limited. 6. FIXED DEPOSITS The Company has not accepted any fixed deposits from the public within the meaning of section 58A of the Companies Act, 1956. 7. SUBSIDIARY COMPANY: The statement pursuant to Section 212 of the Companies Act, 1956, containing details of subsidiary of the Company forms part of the Annual Report. The name of the Subsidiary Company is Jetro Petro Biotech Private Limited. 8. STATUTORY DISCLOSURES: CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION: In view of the nature of activities that are being carried on by your Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption, respectively are not applicable to your Company. Your company is being a manufacturer of pesticides and insecticides requires minimal energy consumption and every endeavor has been made to ensure the optimal use of energy, avoid wastage and conserve as far as possible. FOREING EXCHANGE EARNINGS AND OUTGOINGS Rs. In Lakhs 1. Total Foreign Exchange earned Nil 2. Total Foreign Exchange utilized Nil RESEARCH AND DEVELOPMENT During the year No amount was spent as Capital / Recurring Expenses towards the Research and Development. 9. DIRECTORS * In accordance with the requirements of the Companies Act, 1956 and the Articles of Association of the Company, Shri P Narasimha Murthy retires by rotation and being eligible offer him selves for re-appointment. * Appointment of Mr. K T Vijaya Kumar as Managing Director of the Company for period of Two(2) years with effect from 1st February 2011 * Appointment of Mr. K C S Prasad as Whole Time Director of the Company for period of Two (2) years with effect from 1st February 2011 * Mr D Sankar resigned from office of Director with effect from 11th day of April 2011 and Board appreciated for the services rendered by D Sankar during his tenure as a Director. 10. AUDITORS Sri T. Nehru, Chartered Accountant, Vijayawada, the Statutory Auditor of the Company, retires at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. 11. AUDIT COMMITTEE In accordance with Clause 49 of the Listing Agreement, the company has constituted an Audit Committee, which consists of Two Independent and Non Executive Directors one Independent Executive Director of the company Viz. Mr P.Narasimha Murthy, Dr K.Srihari Rao and Mr Ch.V.Vara Prasad Rao. The Audit committee functions in terms of the role and powers delegated by the Board of Directors keeping in view of the Provisions of Clause 49 of Listing Agreement and Section 292A of the Companies Act 1956. 12. PARTICULARS OF EMPLOYEES There are no employees in the organization coming under the provisions of section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended. 13. DIRECTORS RESPONSIBILITY STATEMENT In accordance with sub-section (2AA) of section 217 of the Companies Act, 1956, the Directors of the Company state: a. That in the preparation of the accounts for the financial year ended 31st March 2011, the applicable accounting standards have been followed along with proper explanation relating to material departures. b. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review. c. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities. d. That the Directors have prepared the accounts for the financial year ended 31st March 2011 on a going concern basis. 14. CORPORATE GOVERNANCE A separate report on corporate governance along with Auditors Certificate on its compliance is attached to this report. 15. MANAGEMENT DISCUSSION AND ANALYSIS REPORT A Separate Report of Management Discussion and Analysis as required under the Provisions of listing agreement attached to this report. 16. ACKNOWLEDGEMENTS: Your Directors wish to express their appreciation for the cooperation and continued support received from the Companys Bankers. Your Directors also take this opportunity to place on record their appreciation for the dedicated services rendered by the executives, managers, officers, employees and workers for the dedication and sense of commitment shown by the employees at all levels and their contribution towards the performance of the Company. By Order of the Board Sd/- Place : VIJAYAWADA K. Balakrishna Rao Date : 19.08.2011 Non Executive Chairman. MANAGEMENT DISCUSSION AND ANALYSIS a. Industry Over view: With more new projects coming in for preserving in unutilised water going waste into the sea, huge acreages are going to be covered under assured irrigation. The projects are being completed to make available surplus water in full to the land leftover for irrigation. This has changed the entire economical status of the farmers and their purchasing capacities. The land value has gone up multifolded which indicates profitability for cultivating water dependant crops like Paddy, Sugarcance and other commercial crops. This will help the Agrochemical Industry to increase their sales multifolded to meet the growing demand with huge additional acreages coming under assured irrigation through new projects in the coming years. This will help your company to increase the sales on line with the industry. To encash this opportunity, your Company will concentrate more on Agrobased products with the additional funds coming into the system as working capital from the funds earmarked for Biodiesel working capital. Reasons for abandoning Biodiesel project: At the Present market conditions extraction of Bio Diesel by importing Bio crude oil and start operation is un viable. Management Analysis and study revealed that exporters of Biodiesel crude acquired the technology for convertion of Crude into finished biodiesel. With this operation they are able to find their own convertion to be more remunerative than exports. In addition to this they are encouraged by the respective governments for generating additional exployment channel. With this development the availability of crude Bio Diesel oil is bleak. These reasons are convincing us to decide to dispense with the proposed project of Biodiesel which is not at all feasible under the circumstances. Majority of Advances given to farmers for supply of seed returned the money due to non remunerative prices for supply of Jatropha seed and their inclination towards going for more commercial crops due to assured availability of water with new projects now coming in.. Efforts are initiated to recover the balance amounts from farmers . Also efforts are intiated with the machinery suppliers who are convinced to refund the advances made for machinery supplies. Our Biodiesel plant site at Kondapalli, measuring 2260.40 Sq yards located at Plot no.260A, R.S.No.110, 110/1A, Kondapalli village, Ibrahimpatnam mandal, Krishna dist, is not sufficient for accommodating any future enhancement of capacities as and when necessitates any future plans for installing Agro products plant as well. For expanding the existing site, the possibilities are remote as all the borders are locked by roads and existing adjoining Government owned factories. In view of this the Board felt to dispose of this land along with the building and structures and utilize the funds for the expansion and growth of the existing Agro based business. As the abondonment of Bio Diesel business is against to the Prospectus issued by the company, change in the project and change in utilization of funds requires the approval of shareholders. In view of the above, Board recommended for the approval of share holders for abandoning the proposal of Biodiesel plant in this AGM and the fund earmarked for the said purpose can be utilized for the general corporate purpose of your company b. Company Profile The Company being promoted by experienced professionals having associated with the agro chemicals industry for over three decades, is a premier manufacturer engaged in the manufacturing of agro-chemicals and bio products. The companys main products are in three forms viz., Liquids, granules and dusts. The Company is engaged in the manufacturing of agro- chemicals and bio products. The Companys Registered office and factory are located in their own premises at JRD Tata Industrial estate, Kanuru, Vijayawada, The total area of the plot of land is about 1849.02 sq.yards. The Company has two RCC buildings with 3 floors in each building constructed on the plot and all the necessary plant & Machinery & other infrastructure, having spare capacity to meet the future expansions. c. Opportunities With new areas coming under cultivation in a massive way due to Government taking up new projects for preserving water hither to going waste into the sea, the prospects for the sale of agrobased products will increase multifolded in the coming years. This is giving us an opportunity to increase our concentration to meet the additional demand being created by the additional huge acreages coming under cultivation. Your company is planning to increase products range putting more stress on bio products which are yielding more margins. d. Threats, Risks & Concerns Unhealthy competition amongst the manufacturers will force to reduce the margins particularly in agrochemicals. As this is mainly an agro based industry, the behavior of monsoon plays an active role with scanty or excessive rains causing drought/floods and affecting the sales. Remunerative prices to farmers, who is our ultimate consumer, for their produce will also play a vital role in our prospects as their purchasing capacity will be affected. e. Segment Wise Performance: The Company is involved in manufacture of Agro Chemicals and bio- fertilizers. As the Company is doing business in Agrobased products only, segment wise analysis of performance is not required. f. Outlook However, the difficulties ahead of us should not stop us from putting efforts. There is a huge market potential for agrochemicals in India. We believe that the Government from time to time would announce policies and will support a significant and stable market. Further strengthening of the policy guidelines, hastening the policy implementation, initiatives by the state governments, will help us in achieving our mission. g. Discussion on financial performance with respect to operational performance During the year under review the Company has achieved a turnover of Rs. 5022.16 Lakhs as against Rs. 4576.40 Lakhs in the previous year. The Company has earned a Net Profit of Rs. 86.78 Lakhs as against Rs.137.12 Lakhs in the previous year. The Company has made a provision of Rs.28.16 Lakhs for income tax, under consideration. An amount of Rs.137.12 Lakhs from the profits were made to the General Reserve. The Earning per share (EPS) of the Company as on 31.03.2011 was Rs 0.32/- . h. Material developments in Human Resources/Industrial Relations front The Company recognizes the importance and contribution of its employees to the growth and development of the Company. The Company continued to maintain cordial relations with employees and staff. Cautionary Statement Statements in the management discussion and analysis describing the Companys objectives, projections, estimates, expectations may be considered to be forward looking statements and actual results could differ materially from those expressed or implied. Factors which could make a significant difference to the Companys operations include demand supply conditions, market prices, input component costs and availability, monsoon and natural calamities, changes in government regulations and tax laws besides other factors such as litigation, over which the Company may not have any control.