Farmax India Ltd

BSE: 590094 | NSE: FARMAXIND | ISIN: INE890I01035 
Market Cap: [Rs.Cr.] 42.46 | Face Value: [Rs.] 1
Industry: Food - Processing - Indian

Director's Report


The Shareholders,

The Directors present the 18 Annual Report of the Company together with its AuditedProfit and Loss Account for the year ended 31 March, 2013 and Balance Sheet as on thatdate.

Financial Results

Key aspects of your Company's consolidated financial performance and standalonefinancial results for the year 2012-13 are tabulated below:

Business Performance:

(Rs in Millions)

Particulars Consolidated Results Standalone Results
2012-13 2011-12 2012-13 2011-12
Sales and other income 523.35 933.99 522.97 931.78
Total Expenditure other than Depreciation 737.94 909.43 737.57 908.55
Gross Profit before Depreciation and Tax (214.59) 24.56 (214.60) 23.23
Depreciation 25.38 47.59 25.38 47.59
Profit/ Loss Before Tax (239.97) (23.03) (239.98) (24.36)
Exceptional Items 1197.60 -- 1025.94 --
Provision for Tax 7.23 (5.98) 7.23 (5.98)
Profit/ Loss after tax (1444.80) (17.05) (1273.15) (18.38)
Surplus/Loss brought forward from previous year 45.68 62.73 43.40 61.79
Balance available for appropriations (1399.12) 45.68 (1229.75) 43.40
Appropriations: -- -- -- --
Balance Carried to Balance Sheet (1399.12) 45.68 (1229.75) 43.40

Consolidated Financial Results:

The Company has recorded a turnover of Rs. 519.24 Millions as against Rs. 914.24Millions in the previous year. During the year under review the consolidated loss aftertax incurred by the Company is Rs. 1444.80 Millions as against Rs. 17.05 Millions in theprevious financial year.

The Audited Consolidated Financial Statements, based on the financial statementsreceived from subsidiary of the Company, as approved by their respective Board ofDirectors have been prepared in accordance with Accounting Standard (AS) 21 ConsolidatedFinancial Statements, Accounting Standard (AS) 23 Accounting for Investments in Associatesand Accounting Standard (AS) 27 Financial Reporting of interest in Joint Ventures inconsolidated financial statement notified under Section 211 (3C) of the Companies Act,1956 read with the Companies (Accounting Standards) Rules, 2006 (as amended). The saidconsolidated financial statements form part of this Annual Report and Accounts.

Standalone Financial Results:

On standalone basis, your Company has registered revenue of Rs. 519.24 Millions ascompared to Rs. 914.24 Millions in the previous year. During the year under review the netloss of the Company stood at Rs. 1273.15 Millions as against Rs. 18.39 Millions in theprevious financial year.

Dividend on Equity Shares:

Keeping in view the losses incurred by the Company, your Directors have decided not torecommend any dividend for the year under review.

Fixed Deposits:

Your Company does not accept or hold any fixed deposits within the meaning of Section58A of the Companies Act, 1956 and the rules made there under and as such, no amount onaccount of principal or interest on fixed deposits was outstanding as on date of theBalance Sheet.

Fixed Deposits with Euram Bank:

a. In 2010 the Company made a GDR Issue of an amount of USD 71.91 mn and deposited theproceeds in a Bank Account with European American Investment Bank AG, Vienna (EURAM Bank).Advisors to the Company who planned and coordinated various functions during to the GDRIssue obtained operational control of our Bank Accounts with EURAM Bank ostensibly to makepayments to the intermediaries of the GDR Issue. We were eventually informed that controlof the Bank Accounts passed on to one Vintage FZE (now known as Alta Vista InternationalFZE). The Company later discovered that without its knowledge or approval, amountsaggregating USD 15.60 mn were transferred from the Company's Vienna Bank Account to theBank Account of Company's wholly-owned subsidiary in the UAE (FZE). Further, the Companyalso discovered that a nearly identical amount was transferred from FZE's Bank Account toentities with which neither the Company nor the FZE has any business relationship. When wemade inquiries with Vintage FZE, the company promised to return the funds, but we have notreceived any funds so far. Pending recovery by FZE and their onward remittance back to theCompany, these amounts have been shown by the FZE as "Amounts payable to Farmax IndiaLimited" on the Liabilities side and the "amounts receivable fromsuppliers" on the assets side. Reflecting this treatment, the Company also showedthis amount as receivable from FZE. Despite repeated efforts, FZE is unable to recover anyof these monies so far and is planning to initiate legal action to recover the funds.However, in line with the prudential accounting principles, in the Statements of Accountsfor the year March 31, 2013, these amounts have been written off by FZE without prejudiceto the right to recover these amounts. If, eventually, for any unlikely reason, theseamounts remain unrecovered, the amounts receivable by the Company from the FZE would alsobecome unrecoverable. Therefore, following prudential accounting principles, the Companyhas also written off the amount receivable from its wholly-owned UAE subsidiary.Notwithstanding this accounting treatment, based on legal opinion, the Company isconfident of recovering the amounts.

b. As for the remaining amount of USD 56.6 million (equivalent to Rs. 2515.62 millionas per the exchange rates prevalent at the time) on deposit with EURAM Bank, the Company,in August 2012, received a letter from EURAM Bank claiming that the remaining amount hadbeen seized to repay a third party loan to the same Vintage FZE (now known as Alta VistaInternational FZE) pursuant to a Pledge Agreement alleged to have been executed by theCompany with EURAM Bank. The Company did not authorize or execute any such PledgeAgreement and was not aware of any loan from Euram Bank to Vintage FZE. The Company hasretained legal counsel in Austria to initiate legal action to recover the amount EURAMBank seized to satisfy the third party loan. Pending the recovery of the amounts andwithout prejudice to its rights, the Company decided to write off the amounts, in linewith the prudential accounting principles. Accordingly, in the previous year, the balanceof USD 56.60 million (equivalent to Rs. 2515.62 million as per the exchange ratesprevalent at the time) on deposit with EURAM Bank was written off with a correspondingdecrease in the securities premium account. Notwithstanding this accounting treatment,based on legal opinion, the Company is confident of recovering the amounts.

Corporate Governance:

As required by Clause 49 of the listing agreement, a separate report on CorporateGovernance together with a certificate of Statutory Auditors of the Company forms part ofthis report as per Annexure III.

Formation of Various Committees:

Details of various committees constituted by the Board of Directors as per theprovisions of Clause 49 of the Listing Agreement and Companies Act, 1956 are given in theCorporate Governance Report annexed and forming part of this report.


Pursuant to the requirements of the Companies Act, 1956 and Articles of Association ofthe Company, Mr. A V Rama Raju, Director of the Company retire by rotation at the ensuingAnnual General Meeting and being eligible, offer himself for re-appointment.

Increase in Share Capital:

During the year under review the Company has issues 150.00 Million Equity Shares of Re.1/- each at an Issue Price of Rs. 1.44/- each to Promoters and other on preferentialbasis. Issued Capital of the Company is increased from Rs. 260.64 Million to Rs. 410.64Million, thus the Subscribed and Paid-up Capital of the Company is increased from Rs.258.30 Million to Rs. 408.30 Million.

Employee Stock Option Scheme:

Farmax has introduced Employees Stock Option Scheme-2009 (Farmax ESOS 2009) to enablethe employees of the Company to participate in the future growth and financial successesof the Company. As per the ESOS scheme 80% of the options have been granted and vestedduring 2009-2010 and the balance 20% of options vesting & exercise period is stilldue.

Directors' Responsibility Statement:

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, withrespect to Directors' Responsibility Statement, the Board of Directors of the Companyhereby confirms that:

1. In preparation of the annual accounts for the financial year ended 31 March, 2013,the applicable accounting standards have been followed;

2. The Board of Directors of the Company have selected appropriate accounting policiesand applied them consistently and made judgments and estimates that are reasonable andprudent, so as to give a true and fair view of the state of affairs of the Company as at31 March, 2013 and of the profit and cash flow of the Company for the year ended on thatdate;

3. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956 for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities;

4. The annual accounts have been prepared on a going concern basis.

Subsidiary Company:

Your Company has a subsidiary in the name of Farmax International FZE in UAE floatedfor the purpose of the expansion of the business of the Company and its products in theoverseas market. The Subsidiary has also contributed to the overall growth in the businessof the Company.

The Consolidated Financial Result of the subsidiary is also presented along with theCompany's financials.

The Ministry of Corporate Affairs vide its General Circular No: 2/2011 dated 8thFebruary, 2011 exempted the Holding Companies from attaching Annual Reports of SubsidiaryCompanies with the Balance Sheet of the Holding Company as per Section 212(8) of theCompanies Act, 1956. In view of the same, the individual Annual Reports of SubsidiaryCompanies are not attached with the Balance Sheet of your Company.

A statement showing brief financial details of the Subsidiaries as per the requirementsof aforesaid General Circular is included in the Annual Report.

Shareholders interested in obtaining the statement of Company's interest in thesubsidiaries or stand-alone financial statements of the Subsidiary Companies may obtain itby writing to the Company Secretary of the Company. The same are also available forinspection by any member at the registered office of the Company.


No employee was in receipt of remuneration exceeding the limits prescribed undersection 217 (2A) of the Companies Act, 1956 and the rules framed there under, as amendedfrom time to time.

Corporate Social Responsibility:

Integrating the social, economic and environmental agenda in the fabric of its businessand operations is the main agenda of your Company. This requires the business, to identifythe relevant impact areas and define strategies that drive consumer preference, and inparallel, address these issues i.e. strategies that do well by doing good. The reasons forgrowing the business sustainably are compelling and your Company sees no conflict betweenpromoting sustainable development and business growth.

Your Company's vision is to increase the positive impact in the social agenda byimproving health and well being, reduce the environmental impact from greenhouse gases,water and waste and work towards prosperity of India and business by enhancing livelihoodsamongst farmers through sustainable sourcing and expanding our small distributor model.

Auditors & Auditors' Report:

Your Company's Statutory Auditors, M/s. Bhaskara Rao & Associates, CharteredAccountants retire at the conclusion of the ensuing Annual General Meeting. The StatutoryAuditors have confirmed their eligibility and willingness to accept the office onre-appointment. The necessary resolution seeking your approval for reappointment ofStatutory Auditors has been incorporated in the Notice Convening the Annual GeneralMeeting.

The Board has duly reviewed the Statutory Auditors' Report on the Accounts. Theobservations and comments, appearing in the Auditors' Report are self-explanatory and donot call for any further explanation / clarification by the Board of Directors underSection 217(3) of the Companies Act, 1956.

Management Discussion and Analysis:

The Management Discussion and Analysis Report for the year under review, as stipulatedunder Clause 49 of the Listing Agreement is presented in a separate section forming partof this report as per Annexure II.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

The information, in accordance with the provisions of Section 217(1)(e) of theCompanies Act, 1956, read with the Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988, regarding conservation of energy, technology absorptionand foreign exchange earnings and outgoings, are attached as Annexure- I to this Report.

Trade Relations:

Your Directors wish to thank the Retailers, Wholesalers, Distributors, Suppliers ofGoods & Services, Clearing & Forwarding Agents and all other business associatesand acknowledge their efficiency and continued support in promoting such healthy growth inthe Company's business.

Human Resources:

Your Company continuously invests in people development, identifying and groomingmanagement talent and has a culture of harnessing people power to the maximum.


Your Directors wish to express their sincere appreciation to the Central Government,the State Governments, bankers and the business associates for their excellent support andlook forward to continued support in future. Your Directors wish to place on record theirappreciation to the employees at all levels for their hard work, dedication andcommitment, which has enabled the Company to progress.

On behalf of the Board of Directors
of M/s. Farmax India Limited
Date: 27.06.2013 M. Srinivasa Reddy
Place: Hyderabad Managing Director

Annexure to Directors’ Report for the year ended 31st March, 2013

Annexure- I

A. Power & Fuel Consumption

2012-13 2011-12
1. Electricity
(a) Purchased
Units (KWH) 848130 696231
Total Amount (Rs.) 61,88,326 35,64,203
Rate/Unit (Rs.) 7.30 5.12
(b) Own Generation
i. Through Diesel Generator
Units (KWH) 44889 79496
Total Amount (Rs.) 21,33,275 35,83,680
Rate/Unit (Rs.) 47.52 45.08
ii. Through Steam/Turbine Generator N.A. N.A.
2. Coal (Specific Quality and where used) N.A N.A
3. Furnace Oil (Rs.) 57,70,036 69,82,473
4. Others/Internal Generation N.A. N.A.

B. Consumption per unit of production

KWH/ Tonnes
2012-13 2011-12
Electricity 41.78 62.16


Since Company’s operations involve low energy consumption, the Company has nocomments to offer under Para Assignment (a) to (c) of Rule 2 of the Companies (Disclosureof Particulars in the Report of the Board of Directors) Rules, 1988.

I. Research & Development

1. Specific areas in which R&D carried out by the Company:

During the Financial Year, the Company continued its Research and Development thrustfor improvement of its existing products, process and import substitution. Research workis also being done for the development of new products.

2. Benefits derived as a result of the above R&D:

R & D efforts have helped bringing about an improvement in processes and haveresulted in cost reduction and import substitution.

3. Future Plan of Action:

Emphasis will continue to be laid on the existing products and new products.


1. Efforts, in brief, made towards technology absorption, adaption and innovation:Continued implementation of QC/QA procedures of natural products; new products andprocesses were successfully adapted on commercial scale to utilize local raw materials andmachinery; Technical Services for reliability, quality, cost savings and technologytransfer from overseas.

2. Benefits derived as a result of above efforts e.g. product improvement, costreduction, product development, import substitution, etc. All the above efforts resultedin improving process efficiencies, consistent quality of our products, introduction of newproducts and import substitution and successful absorption of technology.


Foreign Exchange earnings Rs. 0.98 Million
Foreign Exchange Outgo Rs. 1.09 Million


On behalf of the Board of Directors
of M/s. Farmax India Limited
Date: 27.06.2013 M. Srinivasa Reddy
Place: Hyderabad Managing Director
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

M Srinivasa Reddy , Chairman & Managing Director

I Srinivasa Raju , Director

A V Rama Raju , Director

Omkareswar Ganganboina , Director

Company Head Office / Quarters:

Survey No 658 Bowrampet Villag,
Qutubullapur Mandal,
Ranga Reddy,
Andhra Pradesh-501505
Phone : Andhra Pradesh- / Andhra Pradesh-
Fax : Andhra Pradesh- / Andhra Pradesh-
E-mail :
Web :


Big Share Services Pvt Ltd
3rd Flr 306 Rightwin,Amrutha Ville,Somajiguda,Hyderabad-500082

Fund Holding
Scheme Name No. of Shares
Better Investment Avenue

Check whether Taxed / Tax free investment avenue is better for you

  Taxed Avenue Tax-Free Avenue
Investment amount (Rs.)  
Tenure of Investment (years)  
Interest earned (% p.a)
Compounded every
Your tax bracket (%)