Speedy Multimode Management Discussions

SPEEDY MULTIMODES LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS Financial Results: Sr. Particulars For the Financial No. Period Ending Year Ending 31st March, 31st December, 2008 2006 [15 months] [12 months] [Rs. In Lakhs] 1. Income from Operation 10289.37 4497.82 and Other Income 2. Profit before Interest, 3774.42 866.41 Depreciation and Tax 3. Interest 215.04 169.71 4. Depreciation 300.62 158.29 5. Profit before Taxation 3258.76 538.41 Provision for Taxation 6. Current Tax 1031.65 60.41 7. Deferred Tax 147.56 200.17 8. Fringe Benefit Tax 9.34 4.30 9. Profit after Tax 2070.21 273.52 10. Profit brought forward 20.03 2.05 from previous year 11. Tax adjustment 104.88 -1.66 12. Prior Period Expenses 69.83 0.00 13. Dividend 364.50 91.10 14. Proposed Final Dividend 91.20 15. Tax On Dividend 74.74 12.78 16. Transfer to General Reserve 250.00 150.00 17. Profit carried to Balance Sheet 1344.85 20.03 Year in Retrospect: The total income for the financial year under review was Rs.10289.37 Lacs as against Rs.4497.82 Lacs for the previous year registering an increase of 83% on an annualized basis. The profit before tax of Rs.3258.76 Lacs and the profit after tax of Rs.2070.21 Lacs reflect an improvement of by 384.20% and 505.50% respectively on an annualized basis. The financial statements under review have been drawn up for a period of 15 months, commencing from 1st January 2007 to 31st March 2008, as the accounting year of the company has been changed from the calendar year to the financial year. Strategic Acquisitions and Alliances: Your company aims to provide end to end logistics solution. As a first step towards achieving the objective, your company has acquired the following companies belonging to the promoters of the group. These acquisitions have also the merit of enhancing Corporate governance by avoiding conflicts of interest. Sr Name of the Company Stake Areas of Specialization No. of the Company 1. Oceanglobe Container 100% Repair, Refurbishment of Dry Services (I) Pvt Ltd Van Containers and Cleaning, Testing & Repairing of ISO Tank Containers. 2. Smithocean Reefer 100% Repairing & Maintenance of Container Services Pvt refrigerated containers. Ltd. 3. Total Carriers Private 100% Transportation of ODC and Limited heavy lifts. Management Discussion and Analysis Industry Background: JN port continues to be Indias pre-eminent port with over 55% of the containers flowing through the port. The port however, is facing capacity constraints. The original aggregate built up capacity of the three terminals operating at the JN Port is reported to be 3.6 Million TEUS per annum. In the financial year 2008, by handling over 4 MN TEUS, JN Port has already surpassed the built up capacity. The Port is projected to handle 4.4 Million TEUS in the current financial year. In the middle of 2006, JN Port had called for Expressions of Interest to develop the 4Th Terminal. Due to delays in decision making process in the Government, the project which was expected to commence operations by 2010, is now likely to start two years later. In the meanwhile, the JN Port is improving efficiencies in vessel and container turnaround to enhance capacity. The recent success attained by Mundra Port and the rapid industrialization in Tamil Nadu is expected to increase the market share of these ports, even as in absolute terms JN port will continue to experience rapid growth. Opportunities and threats: Despite the slow down in the world trade owing to oil shock, our economy has experienced a only a minor slowing down. The Economic Advisor to the Prime Minister stated recently that the economy will grow at 7.8% in the current fiscal instead of at the budgeted 9 %. Therefore, opportunities for growth in CFS related activities and other logistics services are expected to be good in the coming years. Both JNP and the Government of India continue to be liberal in allowing new CFS to enter the business. The combined capacity of all the CFS operating in the area is far in excess of demand for container handling from JN Port. This puts pressure on the existing CFS operators to reduce their rates. However, your companys Tariff is fixed by TAMP. These rates are far lower than the rates charged by other CFS, which ensures that your company remains insulated from the margin pressures arising from lower realization. Outlook: The growth witnessed in FY 2008 is expected to continue through FY 2009. JN port is seized of the problem of rising demand even as the infrastructure remains the same. The 4th Terminal is now at-least 3-4 years away. JN port has initiated several measures to improve efficiencies which are expected to take care of additional demand. Risks and Concerns: TAMP processed the application made by your company and passed an order on 23rd July 2007 whereby, i) your company was ordered to stop charging Additional Transportation Charges of Rs.1000 per TEU, and ii) to return to the trade the amount of overcharging on account of Additional Transportation Charges as determined by TAMP. Additional Transportation Charges were being recovered in terms of the agreement between all CFS operators and the trade to offset the additional costs incurred in transportation on account of the strict implementation of the ban on overloading. Your company had approached the Mumbai High Court against the TAMP order. Initially, the matter came up for hearing before a single judge bench. Later the case was transferred to a two judge division bench. The High Court agreed to take up the case provided your company would set aside 15% of Tariff collected in to a separate Bank Account, which your company has adhered to. The High Court has after a brief hearing, remanded the case back to TAMP, while keeping all our arguments and contentions open, as the case has not been heard and disposed off on merits. Investments: Your company had entered into a Shareholders Agreement with the promoters of Rangara Industries Limited, a crane operator of repute for over 3 decades. Initially, your company had agreed to purchase 40% of Rangara Industries Limited. There was an express understanding that eventually 51% of the shares would be taken over by SML. This intention was also clearly stated in the Shareholders Agreement. In the event, however, the structure and pricing of the transaction to take the shareholding of SML to 51%, could not be settled to mutual satisfaction. It was decided that your company would end its relationship with Rangara Industries Limited. It has been mutually decided that the shares worth Rs.6.20 crores lying with your company will be returned to the promoters of Rangara upon return of the amount of Rs. 6.20 crores. Internal control systems and adequacy: In keeping with the size and complexity of its growing range of activities, your company has put in place, financial and operating guidelines to regulate internal management and reporting. Your Company has also made adequate investments in Information Technology to provide an integrated system connecting, operations, accounting and communication with customers and vendors.