dewan rubber industries ltd Directors report

DEWAN RUBBER INDUSTRIES LIMITED ANNUAL REPORT 2001-2002 DIRECTORS REPORT To. The Members. Your Directors present the 17th Annual Report together with the Audited Balance Sheet and Profit & Loss Account for the year ended 31st March, 2002. FINANCIAL RESULTS (Rs in Lakhs) 2001-2002 2000-2001 (12 Months) (9 Months) Sales & other income 4692.6 3675.9 Gross Profit (Loss) before interest & depreciation (813.7) (219.6) Interest 3504.7 2524.9 Depreciation 836.4 470.3 Profit / (Loss) before tax (4954.8) (3214.7) Prior period adjustments 7.7 460.1 Profit / (Loss) after tax (4962.5) (3674.8) Transfer from investment allowance reserve (utilized) - 80.1 Balance of Profit & Loss Account brought forward (12286.3) (8691.5) (Loss) carried forward to Balance Sheet (17248.8) (12286.3) DIVIDEND In view of the poor performance of the Company, your Directors are unable to recommend any dividend for the year 2001-2002. OPERATIONS The year under review continued to be a difficult one for the Company The company could achieve a turnover of Rs.46.92 Crores during the year as against the previous years turnover of Rs.36.76 Crones of nine months. The Company suffered net loss of Rs.49.54 Crores as compared to net loss of Rs.32.14 Crones during the last period. The low volume of sales continued due to non availability of adequate working capital facilities leading to under utilisation of the manufacture facilities. The management has been making its sincere efforts to arrange funds for revival/settlement of outstanding dues and has submitted proposals to Banks and Financial Institutions but the efforts of the management have not yet been materialised in arranging the funds. Your Directors are confident for the revival of the Company and are making sincere efforts to raise the required finances. REFERENCE TO BIFR As the members are aware that due to complete erosion of its entire net worth as on 31st March, 2001, a reference was made on 17.07.2001 to the Board for Industrial and Financial Reconstruction (BIFR) under proviso to sub section (1) of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 for determination of measures for the rehabilitation of the company. Proceedings before the BIFR have already been started and the BIFR in their hearing held on 30.07.2002 has appointed IFCI Ltd as the Operating Agency u/s 16(2) of the Act for conducting an inquiry into the Sickness of the Company and other related aspects by getting a Special Investigative Audit (SIA) of the Companys Accounts done by reputed firm of Chartered Accountants The Company is proposing to file an appeal against some of the directions contained in BIFRs Orders dated 30.07.2002. FIXED DEPOSITS The company has not invited/accepted any fresh deposit from public during the year ended 31st March, 2002 under section 58A of the Companies Act, 1956. DIRECTORS Since the last Annual General Meeting, the following changes have taken place in the Board of Directors of your Company. In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the company, Shri V.S. Dewan and Shin J.C. Dewan retire by rotation and being eligible offer themselves for re-appointment, Further, the nominations, of Shin A.K. Sharma and Shri Devender Singh have been drawn from the Board by the IFCI Ltd. and PICUP respectively. AUDITORS M/s Ashok & Co., Chartered Accountants, auditors of the company was to be retired at the ensuing Annual General Meeting. However, due to sudden sad demise of Sh. Ashok Kumar, Chartered Accountant. Proprietor of M/s Ashok & Co., the Board of Directors has appointed M/s Gupta Pramod & Co., Chartered Accountants, Meerut as auditors of the Company to fill the vacancy caused by the sudden death of the existing Auditor of the Company. M/s Gupta Pramod & Co. will be retiring at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. AUDITORS REPORT The notes to the accounts referred to in the Auditors Report are self- explanatory and therefore do not call for any further explanation. AUDIT COMMITTEE The Audit Committee was re-constituted an 30.10.2002 consisting of three members viz. S/Sh. S.K. Verma, V.S. Dewan and K.R. Gupta. Sh. V.S. Dewan is the Chairman of the Audit Committee. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement u/s 217(2AA) of the Companies Act,1956, with respect to directors responsibility statement, the Directors of your company confirm: i. That in the preparation of the annual accounts for the year ended 31st March, 2002, the applicable Accounting Standards have been followed and no material departures have been made from the same, ii. That they have selected such accounting policies and applied them consistently and credits judgments and estimates that are reasonable aril 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 and of the loss of the company for the year. iii. That they 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 iv. Since the net worth of the Company has been completely eroded as on 31.3.2001 and accordingly a reference was made before the Honble BIFR under provision to sub section (i) of Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985 for determination of measures for the rehabilitation of the Company, the accounts of the Company for the year ended 31st march, 2002 have been prepared on a going concern basis. LITIGATIONS Some creditors of the company have filed winding up petitions against the company in the High Court. Some of the auditor have also Initiated legal proceedings in various Courts/Tribunals for recovery of their dues. Your company is taking appropriate steps b defend the said proceedings and is also negotiating with the parties for sorting out the matters amicably and on terms favourable to the Company. OTHER INFORMATION Annexure to this report gives the information in respect of conservation of energy, technology absorption and Foreign Exchange earnings and outgo, 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 and forms a part of the Directors Report. None of the employees was in receipt of remuneration of Rs.2,00,000 or more per month and hence the provisions of section 217(2A) of the Companies Act, 1956 are not applicable. The equity shares of the company are presently listed with the Stock Exchanges at Kanpur, Delhi. Mumbai, Ahmedabad and Kolkata. The shareholders in their meeting held on 15.03.2001 had approved de-listing of equity shares of the company from stock exchanges at Ahmedabad and Kolkata The Annual listing fee amounting to Rs.5.62 lakhs is pending to the various stock exchanges In order to raise funds by issue of shares to increase the business activities of the Company, the Company increased its Authorised Capital from Rs.25 Crores to Rs.50 Crores during 1996. However, due to adverse capital market Conditions and present financial health of the Company, it is no longer appropriate for the Company to come out with an issue In the next few years and hence, it has been decided to reinstate me authorised capital of the Company from Rs.50.00 Crores to Rs.25.00 Crores. In the 11th Annual General meeting held on 27.03.1997, the Company declared dividend @ 20% prorate to its shareholders for the year 1995-96. The financial position of the Company deteriorated day by day and the Company could not make the payment of the Dividend within stipulated time. Since the liquidity position of the company has also been adversely affected due to continuous heavy losses in the subsequent years and the company has become Sick Industrial Company u/s 3(1)(o) of SICA, 1985, it has been decided to revoke dividend for the year 1995-96 subject to the approval of the shareholders in the ensuing Annual General Meeting. CORPORATE GOVERNANCE The Report on Corporate Governance is annexed as part of this report ACKNOWLEDGEMENT Your Directors appreciate the valuable co-operation extended by the Central and State Government Authorities and are grateful to the financial institutions and bankers for their continued assistance, guidance and support. Your Directors place on record their appreciation of the contribution made by the employees of the company at all levels, the shareholders, suppliers, dealers, customers and public for their support and confidence reposed in the management. For and on Behalf of the Board of Directors PLACE : MEERUT V.S. DEWAN DATED : 30.10.2002 CHAIRMAN ANNEXURE TO DIRECTORS REPORT PARTICULARS UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES 1988. A. CONSERVATION OF ENERGY Energy Conservation Measures taken a) Energy conservation is receiving high priority, and major steps towards energy conservation are being taken by the company on a continuous basis. 1. Closely monitors energy consuming equipments, company surrendered the sanctioned load of 3252 KVA over a period of three years and started the generation of power from its own generator sets. 2. Maintains close liaison between energy generating centres and consuming points. b) Additional investments and proposals being implemented for reduction of consumption of energy. The management endeavours to reduce consumption of energy and explanations / research in new areas for reduction in energy consumption. c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods. The measures taken above for reduction in energy consumption will help to reduce the dependency on State Supplied power and stabilization of production with the reduction in cost of production. d) Total energy consumption and energy consumption per unit of production as per Form A of the Annexure to the Rules FORM A FORM FOR THE DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSUMPTION OF ENERGY. A. POWER & FUEL CONSUMPTION 2001-02 2000-01 (12 Months) (9 Months) 1. Power: a) Purchased : Units (Lakhs) 20.82 21.94 Total Amount (Rs.in Lakhs) 96.77 105.17 Rate/Unit (RS.) 4.65 4.79 b) Own Generating Through Diesel Generator 166.06 113.62 (Units in Lakhs) Units per litre of Diesel Oil 3.45 3.40 Cost/Unit (Rs.) 3.59 4.18 2. Coal Quantity (Tonnes) - - Total Cost (Rs. in Lakhs) - - Average Rate/Tonnes - - 3. Furnace Oil Quantity (Kilo Litre) 388.45 351.75 Total Amount (Rs. in Lakhs) 41.02 32.61 Average Rate (Rs./litre) 10.56 9.27 B. CONSUMPTION PER UNIT OF PRODUCTION: There is no specific standard for the per unit consumption of electricity, as the consumption per unit depends on the production, and product mix, as the energy consumption per unit varies in accordance with the change in product mix FORM B 1. RESEARCH & DEVELOPMENT: i) Specific areas in which R&D carried out by the Company: The company has installed proper laboratories at its various plants for the better study of its products quality. ii) Benefits derived as a result of the above R&D : Reduction in cost of out-put, improvement of quality, better marketability. iii) Future Plan of Action: The above activities shall continue and more efforts in this direction will be made. iv) Expenditure on R&D: No System of separate maintenance of R&D records has yet developed. The expenditure is merged with various other heads of expenses. 2. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION i) The efforts In brief towards technology absorption, adaptation and innovation The plants are based on indigenous technology. Every effort is made to know the latest development in technology in India as well as abroad. ii) Benefits derived as a result of the above efforts e.g. Output improvement, cost reduction, product development, Import substitution. It has helped the company to improve the quality of products according to the need of the market. iii) Details of Imported Technology : NOT APPLICABLE 3. FOREIGN EXCHANGE USED AND EARNED 2001-02 2000-01 (12 Months) (9 Months) (Rs. in lakhs) (Rs. in lakhs) i) Foreign Exchange earned including Direct and indirect Exports 3437.37 2460.06 il) Foreign Exchange used 52.75 28.93 For and on behalf of the Board of Directors PLACE : MEERUT (V.S. DEWAN) DATED : 30.10.2002 CHAIRMAN MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry trends and aspirations There is good demand of Companys products in domestic as well as International market which will pick up in future. We confirm to maintain quality product maintaining consistency in quality and meeting critical and technical requirements of customers We serve the industry with high standard of products. Segmentwise or productwise performance For the financial information about the primary business segment, please refer to relevant Note of Schedule forming part of Annual Accounts for the year ended 31st March, 2002. Disclosure on financial performance with respect to operational performance The details of the financial performance of the Company are appearing in the Balance Sheet. Profit & Loss Account and other Financial Statements appearing separately. Material Development There is a continuous focus on enhancing productivity in all facet of our operations and efforts are being made to revive the operations in the closed Tyre /Tube Unit of the Company Opportunity, threads and outlook Your Company has good opportunities for future growth due to: * Products of high standards; * Better services to customers; * Introduction of new products as per requirement of the customers; * Pressure of competition from domestic market, * Possible change in fiscal monetary and economic policies of the Govt. which can affect cost of production The management is managing these risks by following prudent business and risk management practices. Risk and Concerns The companys products sale is largely dependent on several factors affecting the market for which the management is taking necessary steps to grab the market. By managing its operations on an optimal cost basis risk mitigation strategy has been laid out for various scanrio. Apart from nominal risk as are applicable in industrial undertakings, the Company does no, foresee any other area of concern Compliance of safety requirement and norms placed by different Government Agencies are given top priority. Internal Control System and their adequacy The system of internal control comprises of control established in order to provide assurance of: a) Safeguarding assets against unauthorised use or disposition; and b) Maintenance of proper Accounting Records and reliability of Financial information used within business. The internal control is supplemented by a periodic internal audit. Material Development in HRD/IR Front The Company continued with its emphasis on developing its Human Resources. As on 31.03.2002, the total number of employees on the roll of the Company was 488.