sarita synthetics and industries ltd Directors report

SARITA SYNTHETICS AND INDUSTRIES LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT To The Members, Your Directors are pleased to present Eighteenth Annual Report for the year ended March 31, 2011. (Rs. In lakhs) FINANCIAL RESULTS 2010-2011 2009-2010 Sales 3349.14 1605.42 Other Income 30.42 83.98 Misc. Exp. Written Off Operational Loss for the year (793.95) (1120.47) Deferred Tax Credit 38.68 143.39 Deferred Tax Liability 0 121.80 Less: Provision for tax - - Profit/Loss after Tax 621.47 1423.43 Balance carried to Balance Sheet (16862.04) (17483.52) DIVIDEND In view of losses, your Directors do not recommend dividend for the year, under review. OPERATIONS The Company has registered a total turnover of 3349.14 lakhs during the year against 1605.42 lakhs in the year 2009-10 representing a growth of 52.06% and incurred an operational loss of 793.95 lakhs against 1120.47 lakhs in the previous year. After adjusting the interest waivers, the company earned PAT of Rs 621.47 lakhs as against Rs 1423.43 lakhs in the previous year. The company is making all out efforts and leaving no stone unturned to improve the operations during the current year to reach the break-even level. OUTLOOK FOR THE FUTURE The revival of the company hinges on the sympathetic and positive outlook of the major lenders i.e. SASF (IDBI) and Exim Bank for settlement of the dues to them. The company has been in discussion with them for OTS of its dues. Unless the lenders take a sympathetic view and sanction substantial concessions and bring the debts to a sustainable level, the revival of the company will be very difficult. The company is planning to approach bankers for working capital for its operations once the settlement with institutions are over. The company is also searching for an investor for infusing funds in the company for increasing the viability of the company.. CORPORATE GOVERNANCE As required under Clause 49 of the Listing Agreement with the Stock Exchange, a Report on Corporate Governance together with Auditors Certification on Corporate Governance is appended to the Annual Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report pursuant to Clause 49 of the Listing Agreement is annexed. DEMATERIALISATION OF SHARES Your Companys shares are traded in Dematerial-ized mode. As at 31.03.2011,86.70% are in dema-terialized form. DIRECTORS Smt G Saraswathi, Chairperson and Promoter of the Company passed away on July 9,2011 and ceased to be Director of your Company. Pursuant to Section 262 of the Companies Act, 1956 and Article 99 of the Articles of Association of the Company, Sri Kotla Chandrasekhara Rao was appointed as Director w.e.f. 02.08.2011 in the casual vacancy caused by the demise of Smt G Saraswathi. Sri Kotla Chandrasekhara Rao hold office upto November 28, 2012. However, it is proposed to appoint Sri Kotla Chandrasekhara Rao at the ensuing Annual General Meeting. In terms of Section 260 of the Companies Act, 1956, Sri YBVR Murthy was appointed as Additional Director on the Board w.e.f. 02.08.2011. He holds office until the date of the ensuing Annual General Meeting. Notices have been received from members, pursuant to Section 257 of the Companies Act, 1956, together with the prescribed deposit, proposing the appointments of Sri Kotla Chandrasekhara Rao and Sri YBVR Murthy as Directors. AUDITORS Messers Balaji Associates, Chartered Accountants retire at the ensuing Annual General Meeting and, being eligible, offers themselves for re- appointment. COST AUDIT Your Company has appointed Bojanapalli & Associates as Cost Auditor pursuant to Section 209(1) (d) of the Companies Act, 1956 for the year 2010-11. DEPOSITS The Company has not accepted any fixed deposits during the period under review. PARTICULARS OF EMPLOYEE Particulars of employees required to be disclosed pursuant to the provisions of Section 217 (2A) of the Companies Act, 1956 may be treated as NIL. INDUSTRIAL RELATIONS The Industrial Relations continued to be cordial and your Directors wish to place on record their appreciation for the contribution of the workers and officers of the Company at all levels. CONSERVATION OF ENERGY. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO Pursuant to Section 217(1) (e) read with the Companies [Disclosure of Particulars in the Report of Directors] Rules, 1988 is given in the Annexure being a part of this report. FOREIGN SUBSIDIARY Statement under Section 212(5) (d) of the Companies Act, 1956 is enclosed in respect to the Companys Foreign Subsidiary M/s.Savitry Textiles [Nepal] Private Limited. Consolidated Financial statements as required as per Accounting Standard 21 have not been prepared for the following reasons: The Company has a Foreign subsidiary viz.,M/ s.Savitry Textiles [Nepal] Private Limited, Kathmandu and as the Company could not fructify the project, the management is exploring the possibilities for disinvestments. As the control is intended to be temporary and the subsidiary is being held exclusively for disposal in the near future and also not in operation, the consolidation has not been done in view of Clause 11(a) of AS 21. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm in respect of the audited annua! accounts for the year ended March 31, 2011 that: 1. in the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures; 2. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are 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; 3. 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 safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and 4. The directors have prepared the annual accounts on a going concern basis. AUDITORS OBSERVATIONS: Reference is invited to the following notes on account under schedule V i) As stated in Note No.I (4) of Schedule-V, the non-confirmation in respect of Sundry Debtors, Loans and Advances and other receivables and payables and the consequent extent of realiasabiiity. ii) Excise duty relatable to closing stock of finished goods is not included and is accounted on removal. However, there is no impact on profit or loss of the Company. iii) As stated in note No.II(1) of Schedule-V, the company has not made provision towards disputed amounts including interest and penalties payable to Sales Tax, Central Sales Tax and Central Excise & Customs and APEPDCL etc. amounting to Rs.834 Lakhs (excluding Bank Guarantees and Corporate Guarantees iv) As stated in Note No. II 19 of Schedule-V, the company has not made provision for interest on interest, Over-due interest and penal interest payable to Banks and Financial Institutions. We are unable to quantify the amount and other consequences i.e. going concern. v) As stated in Note No. I (3) and N0.II(16) of Schedule-V.the Company has not followed the Accounting Standard AS 21 and AS 13 consolidation of accounts. REPLIES TO AUDITORS OBSERVATIONS: i) The debtors have been individually evaluated and those which are considered good are taken into account. ii) The Central Exice on finished goods was not considered because we are not able to confirm with certainty whether the stocks will be sold in local market under DTA or there exists possibilities for clearing such goods for export. However, in respect of domestic clearances, the Central Excise duty on Finished goods is being paid as and when the goods are dared. iii) Since the matter is in sub-judice, the company has not made any provision. However the company has disclosed the same as a contingent liability in notes farming part of accounts. iv) The company has been in discussion with lenders for settlement of its dues. In view of this, the company has not provided for over due and/or penal interest. v) The company has a Foreign subsidiary viz., M/s. Savitry Textiles [Nepal] Private Limited, Kathmandu. The company could not fructify the project. As the control is intended to be a temporary one only and the subsidiary is being held exclusively for disposal in the near future and more over it is also not in operation, the consolidation has not been done in view of Clause 11 (a) of AS 21 ACKNOWLEDGEMENTS Your Directors wish to place on record their gratitude to the Government of Andhra Pradesh and Government of India, Financial Institutions, Bankers, for their continued co-operation and support. Also Board sincerely acknowledges assistance given by the business associates and shareholders for their faith and confidence in the Company. For and on behalf of the Board for Sarita Synthetics and Ind. Ltd. [G Eswara Rao] Chairman and Managing Director Place: Rajam Date : 16.08.2011 ANNEXURE TO THE DIRECTORS REPORT FORM-A Form for disclosure of particulars with respect to conservation of energy A. POWER AND FUEL CONSUMPTION: 2010-11 2009-10 a) Electricity: a) Purchased: 6381251 4891606 b) Units (KWH) Amount Rs. 26832388 17997921 Rate/Unit (Rs.) 4.20 3.68 c) Own Generation: 1) Through diesel generation Units (KWH) 314511 56429 units per Ltr. Diesel Oil 3.54 2.81 Cost/Unit (Rs.) 12.59 4.15 B) POWER/FUEL COST PER UNIT OF PRODUCTION 2010-11 2009-10 Products TEX GREY TEX GREY Units Consumed - 6695762 - 4948035 Cost Rs. - 30791676 - 18232081 Production Kgs./Mtr. - 5632852 - 4229195 Cost Per Mtr./Kgs. Rs. - 5.47 Per Mtr - 4.31 per Mtr. Form - B Form for disclosure of particulars with respect to Absorption of Technology RESEARCH AND DEVOLOPMENT (R&D) 1. Specific areas in which R&D carried out by the company i) NIL ii) NIL 2. Benefits derived as a result of the above R&D i) NA ii) NA 3. Future Plan of action i) NIL ii) NIL 4. Expenditure on R & D (in Rs.) a) Capital Expenditure NIL b) Recurring Expenditure NIL c) Total NIL d) Total R&D Expenditure as a Percentage of Total Turnover NIL TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION 1. Efforts in brief made towards absorption, adoption and innovation i) NIL ii) NIL 2. Benefits, derived as a result of the above efforts i) NA ii) NA 3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year) the following information may be furnished: a) Technology Imported NIL b) Year of Import NA c) Has Technology been fully absorbed NA d) If not fully absorbed, areas where this has not taken place, reasons thereof and future plans of action. NA 4. FOREIGN EXCHANGE EARNING AND OUTGO (Rs in 000s) 2010-11 2009-10 1. Foreign Exchange earnings a) On Account of Exports (FOB basis) Nill - b) On Account of advances from Customers - - 2. Foreign Exchange outgo a) On account of travel (Others) - - b) Raw Material - - c) Stores, Spares & Chemicals & others 2553.19 5650.58 d) Commission on Exports - - e) Repayment of Loan & Interest - - By Order of the Board of Directors for Sarita Synthetics and Ind. Ltd Sd/- (G. ESWARA RAO) Chairman and Managing Director Place: Rajam Dated: 16-8-2011 MANAGEMENT DISCUSSION & ANALYSIS Industry Structure and Developments The company is having quality certification of ISO 9002. The Core business of the Company is manufacture of Cotton Woven Grey Fabric. Your Company has been constantly endeavoring to meet the e challenges of the Textile Industry. Opportunities and Threats Generally the removal quota system has thrown open vast opportunities for the textile sector, However, the severe financial constraints faced by the company due to working capital and other financial problems and also the continued losses, the company has not been in a position to undertake periodical capacity maintenance programme to keep the assets in a fit condition even though the company had installed state of the art machineries. The result is that the productivity gets gradually reduced year after year. This in turn has its impact on its orders and profitability. Division Wise Performance There are three divisions in the factory Tex. Yarn division, Polyester weaving Division and cotton weaving division. Texturising - Installed Capacity - 8972 MT Polyester Weaving - Installed Capacity - 94 LMT Cotton Weaving -Installed Capacity - 113 LMT The polyester weaving division is not in operation. The above machines in other divisions could not be put to optimum use during the year due to lack of working capital limits and other factors. Companys Foreign Subsidiary The Companys joint venture project in Nepal could not be implemented due to preconditions set by financial institutions and hence the company is exploring various alternatives like disinvestments of our stake in the joint venture project. This position was stated in the last balance sheet and the same has not changed since then. Out Look The revival of the company hinges on the sympathetic and positive outlook of the majorjenders Le. SASF (IDBI) and Exim Bank for settlement of the dues to them..The company has been in discussion with them for OTS of its dues. Unless the lenders take a sympathetic view and sanction substantial concessions and bring the debts to a sustainable level, the revival of the company will be very difficult. The company is planning to approach bankers for working capital for its operations once the settlement with institutions are over. The company is also searching for an investor for infusing funds in the company for increasing the viability of the company.. Risks and Concerns The regime of quota in textile industry is done away with. Many new challenges will test the companys ability to grow in the competitive International Market. Financial Results The Company has registered a total turnover of 3349.14 lakhs during the year against 1605.42 lakhs in the year 2009-10 representing a growth of 52.06% and incurred an operational loss of 793.95 lakhs against 1120.47 lakhs in the previous year. After adjusting the interest waivers, the company earned PAT of Rs 621.47 lakhs as against Rs 1423.43 lakhs in the previous year. The company is making all out efforts and leaving no stone unturned to improve the operations during the current year to reach the breakeven level. Human Resources /Industrial Relations Your company continued its good record of industrial relations with its employees / workers. Your Company has dedicated man power at all levels. Internal Control Systems and Their Adequacy Your companys Internal Auditors and Audit Committee provide strong and independent internal checks. Internal audit findings and recommendations are reviewed by the top management and the Audit Committee.