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Ucal Fuel Systems Ltd

BSE: 500464 | NSE: UCALFUEL ISIN: INE139B01016
Market Cap: [Rs.Cr.] 219.33 Face Value: [Rs.] 10
Industry: Auto Ancillaries

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Director's Report
DIRECTORS

The Directors hereby present the Twenty Eighth Annual Report together with the audited accounts of the company for the year ended 31st March 2014.

FINANCIAL HIGHLIGHTS

The performance of the company for the year ended 31st March 2014 is as follows:

(Rs in lakhs)

For the year ended

Particulars 31.03.2014 31.03.2013
Gross Revenue 52,682 57,084
Net Revenue (excluding Excise Duty) 46,563 50,435
Total Expenditure 40,333 43,756
Operating Income 6,230 6,679
Other Income 100 123
Profit before Interest, Tax & Depreciation 6,330 6,802
Interest 2,983 3,197
Deferred Revenue Expenses 417 417
Depreciation 1,923 1,925
Profit before Tax & Exceptional item 1,007 1,263
Tax Expense 185 305
Profit after Tax/Net Profit 822 958
Balance of profit brought forward from last year 8,815 8,316
Amount Available for Appropriations 9,637 9,274
Appropriations:
Transfer to General Reserve 200 200
Dividend 221 221
Tax on Dividend 33 38
Balance Carried to Balance Sheet 9,183 8,815

DIVIDEND

The Board recommends a dividend of 10% i.e. Rs 1 per equity share, aggregating to Rs 221 lakhs (exclusive of tax on dividend) for the financial year 2013-2014.

TRANSFER TO GENERAL RESERVE

A sum of Rs 200 lakhs has been transferred to the general reserve of the company for the financial year 2013-2014.

PERFORMANCE

The turnover of the company decreased by 8% from Rs 50,435 lakhs in the financial year 2012-2013 to Rs 46,563 lakhs in the financial year 2013-2014. This was mainly because of the continued recessionary trend in the auto sector and consequent low off take by the customers. This decrease in turnover was in spite of the efforts put in by the management to identify new markets and new business. The Earnings before Interest, Tax and Depreciation (EBITDA) also decreased from Rs 6,802 lakhs in the financial year 2012-2013 to Rs 6,330 lakhs in the financial year 2013-2014. The decrease can be mainly attributed to the reduction in the volume of business and the high fixed expenditure cost.

In spite of considerable efforts the exports reduced to Rs 2,069 lakhs during the financial year 2013-2014 from Rs 2,589 lakhs in the financial year 2012-2013. This decrease is again a reflection of the global trends in the auto sector. The spares sales of the company during the financial year 2013-2014 was Rs 3,164 lakhs as against that of Rs 3,048 lakhs in the financial year 2012-2013 showing a marginal increase.

The Profit After Tax (PAT) for 2013-2014 was less than that of the financial year 2012-2013 by 14%. The Company's earning per share was Rs 3.72 during the financial year 2013-2014.

The economy continued its downward trend in 2013-2014 and the automobile segment did not show any signs of improvement. The company’s manufacturing plants worked at less than optimum capacity as the customer off take was low. However the company's efforts to cut costs through various new initiatives, close monitoring and control of projects and steps to increase productivity continued unabated during the financial year 2013-2014. Rearranging the production facilities did yield some savings in the form of increased efficiency of operations but that was not substantial enough to make up for the low off take and the constant demand by the customer for price discounts. The supply chain management continued to be a challenge in terms of price and quality.

The reduced turnover resulted in a limited capital expenditure in 2013-2014 keeping in mind the low demand in the automobile segment. The company continued its emphasis on updating its facilities and spent Rs 534 lakhs in capital investments in the financial year 2013-2014 as compared to Rs 734 lakhs spent in the financial year 2012-2013. The company strengthened its R&D by spending Rs 907 lakhs on R&D in the financial year 2013-2014 as against an amount of Rs 1,013 lakhs spent in the previous financial year.

DIRECTORS

Mr.R.Sundararaman stepped down as Joint Managing Director on 01.04.2014. The Board places on record its appreciation for the services rendered by him during his tenure. Mr.R.W.Khanna's nomination as director was withdrawn by Exim bank and he ceased to be Nominee Director with effect from 23.01.2014. In his place Exim Bank nominated Mr K.Ajit Kumar and he was appointed Nominee Director with effect from 23.01.2014. Subsequently Exim Bank withdrew his nomination too and he ceased to be Nominee Director with effect from 19.06.2014. The Board places on record its appreciation for the services rendered by Mr.R.W.Khanna and Mr.K.Ajit Kumar during their tenure as Directors. Mr. S.Muthukrishnan did not seek re-appointment at the previous Annual General Meeting.

The Board in its meeting held on 30th August 2014 appointed Mr.Ram Ramamurthy as Additional Director with immediate effect. His appointment will be confirmed at the ensuing Annual General Meeting of the company. Subject to the approval of the shareholders and Central Government, the Board also appointed Mr.Ram Ramamurthy as Whole time Director for a period of two years with effect from 4th September 2014. Apppropriate resolutions for his appointment and remuneration have been set out in the Notice convening the Annual General Meeting.

Mr.S. Natarajan retires by rotation and being eligible offers himself for reappointment. However in terms of Section 149 of the Companies Act 2013, Mr.S.Natarajan, Dr.V.Sumantran and Dr.M.S.Ananth are seeking appointment as Independent Directors for a consecutive term of five years from the conclusion of this Annual General Meeting.

Brief resume/details of Directors who are to be appointed/reappointed as mentioned herein has been furnished along with the explanatory statement in the Notice convening the Annual General Meeting.

Padma Vibhushan Dr. V. Krishnamurthy continues to guide the management in all areas and the Board is grateful to him for his continued guidance and support.

AUDITORS

The statutory auditors of the company M/s. G Balu Associates, Chartered Accountants, Chennai, will retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The necessary resolutions in this regard will be passed at the ensuing Annual General Meeting. The company has received a certificate from the auditors to the effect that their reappointment if made will be in accordance with the provisions of the Companies Act, 2013. The auditors have also confirmed that they hold a Peer Review Certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Mr. V. Kalyanaraman was appointed cost auditor of the company for the financial years 2013-2014 and 2014-2015. The cost audit report for the financial year 2013-2014 will be filed within the due date. The company has however come out of the purview of cost audit for the year 2014-2015.

AUDIT COMMITTEE

Dr.V.Sumantran was appointed member of the audit committee on 11.08.2014. Mr. S.Natarajan, Dr. M.S. Ananth and Mr. Jayakar Krishnamurthy continue to be the other members of the Audit Committee. Mr. S.Natarajan continues as Chairman of the Audit committee. The committee met five times during the year.

SUBSIDIARY COMPANIES

The company has two wholly owned subsidiaries.

Ucal Polymer Industries Limited (UPIL) - UPIL continues to perform well and support the company by expanding its scope of supply of plastic and rubber components to the company. The turnover for the financial year 2013-2014 was Rs 2,598 lakhs compared to that of Rs 2,357 lakhs in the financial year 2012-2013. The net profit after tax was higher at Rs 248 lakhs in the financial year 2013-2014 thereby recording an increase of 9% as against Rs 228 lakhs in the financial year 2012-2013. This has been achieved mainly due to the introduction of new products and improved efficiency of operations. A dividend of 20% has been declared by UPIL. UPIL's objective of expanding its customer profile beyond UCAL Fuel Systems Limited (UFSL) is proceeding at a rather slow pace but its attempts to diversify its product portfolio has succeeded to a large extent in the financial year 2013-14.

Amtec Precision Products Inc, USA (Amtec) - The turnover of Amtec was Rs 17,561 lakhs during the financial year 2013-2014 up from Rs 14,832 lakhs in the financial year 2012-2013 thereby recording an increase of 18% in rupee terms. In US dollar terms, the turnover was $ 37.51 million during financial year 2013-2014 compared to $ 29.01 million in the financial year 2012-2013 showing an increase of 9%. Amtec has earned a cash profit of Rs 400 lakhs during the financial year 2013-2014. The company's growth has been reasonable considering the fact that the global auto industry had not really picked up in 2013-2014. Amtec's efforts to gain entry into original equipment manufacturers and Tier 1 suppliers by obtaining minority certification did not materialize to the extent expected in the financial year 2013-2014. This is in spite of the fact that Amtec enjoys a high credibility amongst its customers. Capacity utilization continues to be low and in addition Amtec has not been able to take advantage of low cost sourcing from India. The employee costs continues to be high and an increase in the customer portfolio seems to be the only solution to increase profitability.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31st March 2014 of the company and its subsidiaries together with the auditor's report thereon is enclosed. The statement pursuant to Section 212 of the Companies Act, 1956 relating to the subsidiary companies forms a part of the accounts. A summary of the key financials of the company's subsidiaries is also included in the Annual Report.

The consolidated results of the company and its subsidiaries show that a net profit after tax of Rs 685 lakhs has been achieved during the financial year 2013-2014 as against that of Rs 598 lakhs in the financial year 2012-2013. Efforts are on to improve the overall performance of the company and its subsidiaries in all respects.

The Ministry of Corporate Affairs vide its General Circular No. 2/2011 dated February 8, 2011 has granted a general exemption subject to certain conditions to holding companies from complying with the provisions of Section 212(1) of the Companies Act, 1956 which requires the attaching of the balance sheet, profit and loss statement and other documents of its subsidiary companies to its Annual Report. The Board in its meeting held on 30th August 2014 passed the necessary resolution for complying with all the conditions regarding the circulation of the annual report of the company without attaching all the documents of the subsidiary companies referred to in Section 212(1) of the Companies Act, 1956. Accordingly, the said documents are not being included in this Annual Report. The annual accounts, reports and other documents of the subsidiary companies will be available for inspection during business hours, by any shareholder of the company at the registered office of the company and also at the registered office of the concerned subsidiary. The annual accounts, reports and other documents of the subsidiary companies will be despatched to the shareholders upon receipt of a request from them.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956 , the Directors confirm that,

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) Such accounting policies have been selected and applied consistently and such judgments and estimates have been made 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 31st March 2014 and of the profit of the company for the year ended 31st March 2014;

(c) Proper and sufficient care has been taken 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;

(d) The annual accounts have been prepared on a "going concern" basis.

FIXED DEPOSITS

The company has not accepted any fixed deposits from the public during the financial year 2013-2014 and there is no outstanding fixed deposit as on date.

PERSONNEL

Particulars of employees as required under sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 form a part of this report. In terms of section 219(1)(b)(iv) of the Companies Act 1956, the Annual Report and accounts are being sent to the shareholders of the company excluding the statement of particulars of employees under section 217(2A) of the Companies Act 1956. The statement will be available for inspection by the shareholders at the registered office of the company during business hours. Any shareholder interested in obtaining such statement may write to the Company Secretary at the registered office of the company.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information required under Section 217(1) (e) of the Companies Act 1956 read with the Companies (Disclosure of Particulars in the report of the Board of Directors) rules 1988, on energy conservation, technology absorption, foreign exchange earnings and outgo, is given in Annexure-A and forms an integral part of this report.

CORPORATE GOVERNANCE

The Company adheres to all the requirements of the code of corporate governance as stipulated in clause 49 of the listing agreement with the stock exchanges as well as to the standards set by the Securities and Exchange Board of India. A report on corporate governance along with certification of the chairman and managing director and the chief financial officer is attached in Annexure-B. A certificate from the auditors of the company regarding compliance of the conditions of corporate governance as stipulated by clause 49 of the listing agreement is attached in Annexure-C. The Management Discussion and Analysis Report is attached in Annexure-D.

ACKNOWLEDGEMENT

The Board acknowledges with gratitude the support of its employees, customers and bankers, the cooperation of its vendors and suppliers and the assistance of governmental agencies. The Board is particularly grateful to the shareholders for continuing to repose their confidence in the company.

For and on behalf of the Board
Place : Chennai JAYAKAR KRISHNAMURTHY
Date : 30.08.2014 Chairman and Managing Director

ANNEXURE-A TO THE DIRECTORS’ REPORT

A. CONSERVATION OF ENERGY

a. Energy conservation measures undertaken

The company is continuously engaged in energy conservation activities. During the year 2013-2014, the company commissioned the separate high tension cable feeder line directly from the electricity board sub station to the manufacturing locations at plant 1, plant 6 and plant 8. This has benefited the company by way of savings in energy cost and has helped the company avail purchase of third party power through the feeder line at competitive rates per unit, as otherwise the company would have had to generate the power required by running captive gensets during power cuts and load shedding. The hydraulic pump motor in the die casting machines were made to cut off with a timer based circuit when there is no work in the die casting machine due to certain interruptions thereby resulting in considerable savings in energy costs. The same was horizontally deployed on machines working with power pack and scrubber unit. CFL lights were introduced in the main manufacturing areas where general lighting was provided. The company continues to generate energy through its windmills.

b. Additional investments and proposals if any being implemented for energy conservation

In the current financial year 2014-2015, there is a proposal to implement controlled heating and melting of aluminum alloy in the furnace used for pressure die casting machines which can bring considerable savings in cost. The process of phasing out old outdated machines and replacing them with energy efficient ones is continuing. The company is on the exercise of optimizing the plant power load to meet the demand and has also reduced peak hour load. The company is planning an energy audit this financial year to identify areas and various methods of energy conservation. Activities like solar panel installations are proposed to be carried out after a detailed energy audit.

c. Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods

The measures undertaken to conserve energy have resulted in an annual savings of Rs 16.32 lakhs. The proposed measures are estimated to result in an annual savings of more than Rs 60 lakhs. d. Total Energy consumption and energy consumption per unit of production.

Not applicable.

B. TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT

1. Specific areas in which R&D is carried out by the company

• Development of technology and products for the automotive, aerospace and defence segments.

• Development of the existing products for existing and new customer requirements to suit their Vehicle / Engine upgrades.

• Development of products to address the automotive and non-automotive segment with the domain area on air-fuel management, exhaust management and pumps.

• Continuous performance improvement of the existing products with various additions of features through upgradation of technology.

• Enhancing the In-house competency with the required theoretical and virtual simulation capability to meet the customer requirements.

• Reducing the import content in the product and cost reduction through value engineering efforts.

2. Benefits derived out of R&D

• Enhancing the product range to suit various requirements from the customer.

• Product development for new applications and new customers.

• Product and Technology readiness for the organization to meet the market challenges.

• Demonstration of technical capability has given rise to new business opportunities.

• Product cost reduction through validation of parts from new sources and value engineering.

• Customers are approaching the company for new developments in appreciation of the R&D skill sets, support system.

• Improvements in manufacturing process and quality.

• Building knowledge capital within the organization.

3. Future Plans

• To develop products and technologies in view of the future emission regulations and market trends in the domain area of air-fuel management system, exhaust management system and pumps.

• To study the requirements in product improvement / new designs addressing the environmental factors.

• To explore the products / services with the existing technology.

• To explore opportunities on the engineering services and for the defence research organization.

• To explore opportunities in the non-automotive segment.

4. Expenditure on R&D

Particulars Rs in Lakhs
a. Capital 43.28
b. Revenue (Recurring) (includes amount transferred to
Deferred revenue expenses) 863.96
c. Total 907.24
d. Total R&D expenditure as a percentage of total turnover 1.94%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts made in brief towards technology absorbtion, adaptation and innovation

The company has fully absorbed the technologies in the areas of carburettors, air suction valves, two stroke direct injection system, four stroke port injection system and pumps and is continuously improving them to adapt them to new customers preferences and new applications through innovative features in these products. The product range and new customer additions have been mainly due to the company's initiative and focus on R&D. The company is proposing to enter into the testing and engineering services segment with Orbital Australia PTY Limited and the defence segment with Jahagirdar Aero Products. The technology absorption in both these segments is likely to commence this financial year. The company is constantly exploring new technology options keeping in view the market trends and environment regulations.

The new developments through indigenous efforts include

• Constant Depression (CD) carburettor for the executive segment (125cc engine) and premium segment (500cc engine) motorcycles of 2 major Two-Wheeler manufacturers.

• Air Suction Valve for (110cc engine) scooter for a major Two-Wheeler manufacturer.

• Variable Depression (VD) carburettor for scooter application (110cc engine) for a major Two-Wheeler manufacturer.

• Variable Depression (VD) carburettor for the upgraded engines of a major 3-Wheeler manufacturer.

• Vacuum pump for 1.1, 1.4, 1.6 L diesel engine for a major passenger car manufacturer.

2. Benefits derived as a result of the above efforts

• The company has been able to provide an engineering solution to meet the challenging performance and emission targets through innovative features in the product.

• The company has been able to approach the customer with new products with superior price performance for various applications.

• The company has widened its product portfolio thereby accessing new markets and segments.

• The company has been able to enter into engineering services that will also help in the development of new technologies.

• The company has been able to enter into aerospace, defence and other non-automotive markets.

3. In case of imported technology (imported during the last five years reckoned from the beginning of the financial year) the following information may be furnished

(a) Technology imported - technology has been imported in the areas of pumps, carburettors and direct injection systems (b) Year of import 2006–2007 to 2009–2010 (c) Has technology been fully absorbed - Yes (d) If not fully absorbed areas where it has not taken place, reasons therefor and future plan of action–Not applicable

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

The earnings of foreign exchange were on account of export of carburettors, MPFI parts and pumps during the year. The foreign exchange outgo was mainly on account of purchase of components, capital goods and foreign travel. During the financial year 2013-2014, the total foreign exchange outgo was Rs 3,646 lakhs while the foreign exchange earned was

Rs 2,069 lakhs resulting in a net foreign exchange outgo of Rs 1,577 lakhs.

For and on behalf of the Board
Place : Chennai JAYAKAR KRISHNAMURTHY
Date : 30.08.2014 Chairman and Managing Director
   
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Jayakar Krishnamurthy , Chairman & Managing Director

V Sumantran , Director

S Natrajan , Director

M S Ananth , Director


Company Head Office / Quarters:

Raheja Towers 177 Anna Salai,
Delta Wing-Unit 705,
Chennai,
Tamil Nadu-600002
Phone : Tamil Nadu-91-044-42208111 / Tamil Nadu-
Fax : Tamil Nadu-91-044-28605020 / Tamil Nadu-
E-mail : investor@ucalfuel.co.in
Web : http://www.ucalfuel.com

Registrars:

Integrated Enterprises (I) Ltd
Kences Tower,2nd Floor No 1,Ramakrishna Street,Chennai - 600 017

 
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