coventry spring engineering co ltd Directors report

COVENTRY SPRING AND ENGINEERING COMPANY LIMITED ANNUAL REPORT 2004-2005 DIRECTORS REPORT Your Directors present the 53rd Annual Report and the Audited Accounts of the Company for the year ended 31st March, 2005. FINANCIAL RESULTS: Current year Previous year (12 months) (Rs.) (6 months) (Rs.) Gross Turnover 14,11,75,825 5,73,98,348 Gross Profit/(Loss) before Depreciation and Tax (2,71,95,464) (2,95,81,350) Less : Depreciation on Fixed Assets 53,93,414 28,06,233 Net Profit/(Loss) (3,25,88,878) (3,23,87,583) APPROPRIATION: Balance Loss Carried Forward 13,15,89,108 9,90,00,229 YEAR IN RETROSPECT: As reported in last Annual Report the company is in grave financial crisis. The crisis has further deepened due to absolute non-cooperation of our bank and other financial institutions. The Company in spite of having orders to the tune of 20 Crores is unable to fulfill them as it does not have the funds to procure raw materials for the purpose of production. Further the companys domestic as well as export turnover has gone down during the year under review. The Company in order to implement certain restructuring measures were forced to extend the Financial Year 2002-2003 by Six Months for which approval was taken from Registrar of Companies and hence the Annual Report and the Audited Accounts of the company were presented for 18 Month Ended 30th September, 2003. The AGM of that period was held on 31st March 2004 for which approval was taken from Registrar of Companies. In order to revert back to the earlier accounting period of April to March, the Company has presented its Annual Report and the Audited Accounts of the Company for the Financial Year 2003-2004 for Six Month Ended 31st March, 2004. The 51st and 52nd Annual General Meeting of the Company was adjourned Sine die by the Chairman after adoption of the Audited Balance Sheet of the Company and the Profit & Loss Account for the year ended 30.09.2003 and 31.03.2004 respectively and the Report of Board of Directors and Auditors thereon. Although the Company has developed new parties and products over the years, lack of adequate Cash Reserves due to continued losses and denial of further Cash Assistance by Banks and Financial Institutions hampered the Companys prospect of posting a higher turnover and consequent improvement of its profitability. Cost control measures continued unabated as can be reflected in the enclosed financial statements, but were of little help in the light of the Companys falling turnover. FUTURE OUTLOOK: The Company has been incurring losses continuously for the last five years and the financial position of the company is going from bad to worse. The Company has received takeover notice u/s 29 of State Financial Corporation Act from SICOM Ltd and recall notice from State Bank of India as the Company could not pay their dues on time. Further the Company is finding it difficult to service the high rate of the interest being charged by SICOM and State Bank of India. In view of the above it was decided to sell off the Nagpur unit along with goodwill as a going concern and appropriate the proceeds so received to pay off the dues of SICOM and State Bank of India. It was also been decided to sell the surplus land at Howrah to augment to working capital requirement of the Company. The Board is satisfied that it would be in the interest of the Company and its shareholders to sell the said undertakings as mentioned above and had proceeded accordingly by passing an ordinary resolution through Postal Ballet, for approval of the shareholders, the results of which were declared in the Extra-Ordinary General Meeting held on 15th December, 2003. The Company could not proceed with the above mentioned sale as certain legal proceedings are pending before the Honorable High Court in Kolkata. The matter is being pursued to reach an early solution. On the other the Company is all geared to take on recession, and has Orders in hand worth Rs.20 Crores approximately and stands a good chance to turn around, but needs a life line in the form of additional finance from banks and institutions. The Company has taken up the matter with the authorities concerned and is confident of posting a better performance provided adequate finance are made available on a urgent basis. REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR): The Company, had, become potentially sick and applied to the Board for Industrial and Financial Reconstruction in Form C as per the Provision of section 23(I)a(i) of the the Sick Industrial Companies (Special Provision) Act, 1985 and also as per the Provision of Rule 36(I)(i) of the Board for Industrial and Financial Reconstruction Regulation, 1987, on 27.05.2004. And since now as per the Audited Accounts of the Company for the year ended 31.03.2005, the Companys book shows accumulated losses of Rs.13,15,89,108/-, thereby eroding the entire NETWORTH of your company and it has thus now become mandatory to make a reference to Board for Industrial and Financial Reconstruction (BIFR) for determination of the measures which shall be adopted with respect to the Company as per the provisions of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. CORPORATE GOVERNANCE REPORT: The Corporate Governance Report and Management Discussion & Analysis is enclosed herewith and forms a part of this report duly certified by the Auditors as required under clause 49 of the Listing Agreement. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm the following in respect of the Audited annual accounts for the year ended 31st March, 2005 i) that in preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any. ii) that such accounting policies as mentioned in the Schedules to the Accounts have been selected and applied consistently and judgements and estimates that are reasonable and prudent made so as to give a true and fair view of the state of affairs of the Company for the year ended 31st March, 2005 and of the Loss of the Company for that period. iii) that 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 irregularities. iv) that the annual accounts have been prepared on a going concern basis. LISTING: The Company is listed with the Stock Exchanges at Ahmedabad, Delhi, Kolkata and Mumbai. FIXED DEPOSITS: Fixed Deposits are within the limits prescribed by the Companies (Acceptance of Deposit) Rules, 1975 and all deposits which matured during the year have been either paid off or renewed. PERSONNEL & INDUSTRIAL RELATIONS: Your Company continues to accord top priority to Human Resources Development, by imparting proper training to its Supervisory and Managerial Staff. The staff and managers are encouraged to attend seminars and training workshops organised by Trade Bodies and Institutes. The Company maintained good industrial relations in all the units of the Company. INSURANCE: The Assets of the Company are adequately insured. DIRECTORS: Sri S.Das retires by rotation and is eligible for reappointment. STATUTORY INFORMATION: Information in accordance with Sub-Section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, have not been given since there were no employees whose particulars are required to be included in the report. Information pursuant to Sub-Section 1(e) of Section 217 of the Companies act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given in Annexure 1 to this report. AUDITORS: The observations made by the Auditors in their Report are self-explanatory. There are, therefore, no further comments necessary under Section 217A(3) of the Companies Act, 1956. M/s.S.S.Kothari & Co., Chartered Accountants, the retiring Auditors of the Company, being eligible offer themselves for reappointment. ACKNOWLEDGEMENT: Your Directors wish to place on record their grateful thanks to the Staff & Employees, Customers, Suppliers & various Government Agencies for their valuable assistance and for the trust and confidence reposed in the Company by the Shareholders. For & On behalf of the board A. M. BAFNA S. Das DIRECTOR DIRECTOR Place : Kolkata Dated : October 29, 2005 ANNEXURE 1 TO DIRECTORS REPORT Information pursuant to Section 217 (1)(e) of the Companies Act, 1956 reap with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988 and forming part of the Directors report for the year ended 31st March, 2005. A. CONSERVATION OF ENERGY: The company has been giving utmost emphasis and high priority to energy conservation. Optimum use of energy is ensured by close monitoring of energy consuming equipments, optimum use of power and close liaison between energy centre and consuming points and also through constant development of furnace design and replacing inefficient ones with energy efficient designs, in addition to 1) Reduced idle running of equipments. 2) Using a suitable blend of HSD & LDO for Diesel Generating Sets. 3) Replacement of Electric Driven machine with Pneumatic devices. 4) Realigning of existing machines to ensure proper flow of work. The Company shall continue with its efforts to reduction of energy consumption. Particulars of total energy consumption and energy consumption per unit of production as per Form A 2004-2005 2003-2004 (A) POWER & FUEL CONSUMPTION: 1. ELECTRICITY: a) Purchased Units (Kwh) (In lacs) 18.90 9.10 Total Amount (Rs. lacs) 87.47 42.55 Rate per unit (Rs.) 4.63 4.68 b) Own Generation (D.G.Sets) Units (Kwh) (In lacs) 0.33 0.15 Total Amount (Rs. lacs) 5.15 2.06 Rate per unit (Rs.) 15.61 13.73 2. COAL Total Tonnes - - Total Cost (Rs.) - - Average Tonnes - - 3. FURNACE OIL AND OTHER OIL Quantity (KL) 782.621 432.060 Total Cost (Rs.lacs) 121.16 59.32 Average / Kilo Ltrs. (Rs.) 15481.70 13729.57 4. OTHERS / INTERNAL GENERATION: Quantity (Tonnes) - - Total Cost (Rs. lacs) - - Average / Tonnes (Rs.) - - (B) CONSUMPTION PER UNIT OF PRODUCTION: (I) PRODUCT (Spring & Piston Rods) Electricity Units 1.28 2.46 Coal Kgs. - - Furnace & Other Oil (Lts.) 0.52 1.14 * Including Demand Charges B. TECHNOLOGY ABSORPTION (Disclosure of particulars with respect to Technology Absorption, Research & Development) RESEARCH AND DEVELOPMENT (R & D): 1. Specific areas in which R&D carried out by the Company: * Development of new products / designs / processes / methods / tools, improvement of systems in existing products/ process. * Testing & Certification of existing products for conformity to new Indian/International standards. * Development of components in conjunction with OEMs. 2. Benefits derived as a result of above R & D: * Indigenisation / Import substitution * Cost reduction / Improved utilisation of material & energy. * Technological upgradation. * Enhancement in quality and service to the customers. * Development of new designs in products and processes. * Maintaining market leadership / Preparedness to counter competition in the changed liberalised environment. * Reducing machine breakdown time. * Reduction in environmental pollution. 3. Future Plan of Action: * Continuation of the present work in R&D for introduction of new products and processes, improvement in the existing products and processes in various areas in which the Company is operating. * Faster introduction of new products and processes. * Strengthening infrastructure for R&D. * Improving interaction with research / educational institutions. 4. Expenditure on R & D (Amount in Rupees): 2004-05 2003-04 (a) Capital - - (b) Recurring 554928 290501 (c) Total 554928 290501 (d) Total R&D Expenditure as a percentage of total turnover 0.39% 0.51% TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION: 1. Efforts in brief, made towards technology absorption, adaptation and Innovation * Training of personnel for exposure to the latest products/designs & manufacturing technologies. * Participating in national/International conferences, seminars and exhibitions. * Evaluation/adaptation/modification of imported designs/technologies to suit indigenous requirements, alternative materials/components. * Analysing feedback from users to improve products & services. 2. Benefits derived as a result of the above efforts: * Improvement in existing processes and product quality, performance, productivity, safety, product reliability and serviceability. * Cost reduction. * Import substitution * Introduction of new products with indigenous know-how. * Saving in Foreign Exchange. 3. The Company has not hitherto imported any technology. The Company has entered into a Technical Agreement with Rejna SpA, Italy to keep abreast with the latest innovations and upgrade technology to improve its competitive edge in India as well as in the export markets. No induction of technology from the technical partner has been made as yet. C. FOREIGN EXCHANGE EARNINGS AND OUTGO: i) The company is continuously exploring avenues to increase exports. Efforts are being made to develop new market and consolidate the existing ones by developing products conforming to international standards. ii) Total Foreign Exchange earned and used: Used : Rs. 65554 Earned : Rs. 8471319 Management Discussion & Analysis: a. Industry Structure & Development: Your Company has been one of the pioneers in manufacturing of springs for the last fifty years. The company supplies its products not only to the automobile sector but is also one of the leading suppliers to Indian Railways. Further with the globalization coming in the industry shall have the international area open to itself. b. Opportunity & Threats: Over the period of the last fifty years the company has developed recognition. and goodwill in the market and demand from its customers is showing an upwards trend. Your company has order in hand worth Rs 20 Crores approximately which has come not only from existing customers but many new customers have shown interest in developing new products. The company has substantial presence in the foreign markets. The company has struggled in recent times to fulfill its orders in due time due to financial constraints and hence new competitors are queing up to take our place. Even our export. orders have been suspended due to non- fulfillment of their orders in time. However the company feels that once the financial constraints are over the company can overcome such competition with ease due to the quality and rates the company offers. c. Performance: The company has suffered a fall in turnover in the current year, although our order position has not suffered. Due to the financial constraints executing of entire orders is not possible at the present moment. d. Outlook: The company has taken certain positive steps in order to overcome the financial crisis which it finds itself in. Once the financial affairs are sorted out the company can look forward in increasing both its production and sales. e. Risks & Concerns: The risks involved in the pricing of quality raw materials which are increasing drastically. With tough competitors in the market it may not be feasible to pass on the entire increase to the customers. This may effect the profitability of the company. The inability of the Company to execute existing orders due to shortage of working capital has caused the company to lose both domestic and export orders. f. Internal Control systems and their Adequacy: The company has internal control systems and procedures commensurate with its size and nature of business. The internal control systems are supported by internal audit carried out by a professional audit firm. The adequacy and effectiveness of the internal control, as well as compliance with the laid down systems, policies and accounting standard are comprehensively monitored by the Auditors. g. Human Resources: The company continues to accord top priority to human resources development, by imparting proper training to its supervisory and managerial staff. The company is putting efforts to make its appraisal system more effective to cater to the financial and career aspiration of employees to increase the organisational effectiveness. The company maintained good industrial relations in all units of the company. h. Cautionary Statement: Statements in this report on Managements Discussion and Analysis describing the companys objectives, projections, estimates, expectations or predictions maybe forward looking statements within the meaning of applicable laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied. Important factors that could make a difference to the companys operation include global and domestic demand supply conditions, finished goods prices, raw material cost and availability, Government policies and regulations with which the company has business links and other factors such as litigation and industrial relations. The company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent development, information or events.