Emtex Industries India Ltd Directors Report

EMTEX INDUSTRIES (INDIA) LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT To, The Members, Emtex Industries (India) Limited Your Directors present herewith the Twenty Ninth Annual Report together with Audited Statements of Accounts of the company for the year ended 31st March 2011. FINANCIAL PERFORMANCE Year ended Year ended 31.03.2011 31.03.2010 Sales and other Income 1545.29 2267.41 Gross Profit / (Loss) (224.32) 13.68 Less: Depreciation 78.61 88.82 Net Profit / (Loss) before Tax (302.93) (75.14) Provision for Tax 0.00 0.00 Net Profit / (Loss) After Tax (302.93) (75.14) Less: Prior period adjustments/Extra Ordinary Items 0.07 1.06 (303.00) (76.20) Add: Profit B/f from previous year (22764.09) (22687.89) Profit/(Loss) available for appropriation (23067.09) (22764.09) APPROPRIATION - - Balance carried forward to the Balance Sheet (23067.09) (22764.09) DIVIDEND: In view of the losses, your Directors regret their inability to recommend payment of any Dividend on the Equity Shares and Preference Shares for the year ended 31st March 2011. BIFR: On the reference made to the Honble Board for Industrial and Financial Reconstruction (BIFR) in 2002, the Board had declared your company sick under Section 3 (1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985, vide its order of 4th January 2006. The Company submitted a One Time Settlement (OTS) offer cum Draft Rehabilitation Proposal (DRP) for settlement of existing loans and rehabilitation of the unit. The offer has been accepted by the Operating Agency (OA), IFCI Ltd., Bank of Nova Scotia and Punjab National Bank. They have also been paid in full and final settlement. The Redeemable Preference Shares subscribed by UTI, long overdue for redemption, were also taken on assignment by M/s. Invent Assets Securitization and Reconstruction Private Limited. Dena Bank, IndusInd Bank and ARCIL, to whom our dues to State Bank of India were assigned, communicated their willingness to accept the offer through M/s. Pegasus Assets Reconstruction Pvt. Ltd. who manages this portfolio. But, in the absence of approval by the remaining secured creditors, the OTS/DRP has not been fully implemented.BIFR has again advised the Company to submit a revised DRP for considering rehabilitation of the unit. When the OTS-cum-DRP is implemented, the company plans to raise Working Capital and funds for essential Capex, to enable the Company to revive operations in full swing and to generate profit over a period of time. OPERATIONS: There was no improvement in the business operations and turnover during the year, which is difficult without infusion of working capital funds. The company is managing its operations with job work for third parties. When the revised rehabilitation cum OTS proposal is submitted to BIFR and got approved and implemented as mentioned above, working capital facilities can be mobilized. Thereafter, the operational capability and efficiency of the unit would improve significantly. TEXTILE DIVISION: The operations of textile division are now confined to job works. The demand for fabrics is now picking up in spite the overall slackness in the economy. There has been qualitative improvement in the products, reduction in the cost of operations to the extent possible. CHEMICAL DIVISION: QUIMICA: Our chemical division is out of operations for the past couple of years. The prices of essential raw materials like Phenol remain high, making economic operation of our Chemical Division impossible. We can consider revival of operations only when we are able to generate at least cash profit. FUTURE OUTLOOK: Textiles being an essential item of the necessities of daily life and considering the changing life styles demands can only go up. Moreover, your company has been specialized in cotton textiles, which are in great demand. Cotton textile is also preferred world over and the demand is insatiable. As your company is catering to this segment, the potential for growth is plenty. But we should be able to effectively tap the opportunities and grow. It is also a known fact that the industry earns substantial foreign exchange for the country and provides employment to millions of Indians directly and manifold others indirectly, apart from contributing substantially to the exchequer, at the Central, State or local levels. In spite of the difficulties being faced by the company now, we are determined to go forward and withstand the vicissitude so as to consolidate on our strengths and win over the hurdles. We are taking every effort in this direction and hope to come out as winners the implementation of the OTS cum Rehabilitation Plan with the approval of the Honble BIFR. DIRECTORS: During the year Mr. V. S. Nair, Nominee Director of IFCI has resigned from the Board of Directors consequent to settlement of companys dues to IFCI, the Board of Directors placed on records its gratitude and appreciation for the valuable guidance he has provided to the Company. Mr. Sunder Rangan and Mr. Ganesh Khemka, Directors of the Company retire by rotation at the forthcoming Annual General Meeting and being eligible, offers themselves for re-appointment. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirements under section 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, it is hereby confirmed: (i) that in the preparation of the annual accounts for the financial year ended 31st March, 2011, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; (ii) that your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the loss of your Company for the year under review; (iii) that your Directors 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 your Company and for preventing and detecting fraud and other irregularities; (iv) that your Directors have prepared the accounts for the financial year ended 31st March, 2011 on a Going Concern basis. AUDITORS M/s. N. G. Jain & Co., Chartered Accountants, Auditors of the Company holds office until the conclusion of the ensuing Annual General Meeting and being eligible, offered themselves for reappointment. The Company has received a letter from them to the effect that their appointment if made would be within the prescribed limits u/s 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such appointment within the meaning of Section 226 of the Companies Act, 1956. PARTICULARS OF EMPLOYEES Your Company has no employee whose remuneration details are required to be provided under the purview of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rule, 1975. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE ORNINGS AND OUTGO The particulars as required to be disclosed pursuant to Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosures of particulars in the report of Board of Directors) rules, 1988 are given in the Annexure 1 forming part of this report ACKNOWLEDGEMENT: Your Directors take this opportunity to express their sincere gratitude to the Operating Agency, IFCI and all banks and institutional lenders for their support to the company and its rehabilitation plans and look forward to receiving their continued encouragement. Our business associates, creditors, suppliers and customers have shown great forbearance during our difficult times and we sincerely thank them. The Directors are also pleased to record their appreciation to the employees at all levels for their devotion and commitment and acknowledge their valuable contribution. For and on behalf of the Board Shivprakash Makharia Chairman Place : Mumbai Dated : 22nd July, 2011. 1. ANNEXURE TO THE DIRECTORS REPORT FORM - A Form of Disclosure of particulars with respect to Conservation of Energy POWER AND FUEL CONSUMPTION: 1. ELECTRICITY 2010-2011 2009-2010 (a) Purchases Unit 2153860 2719600 Total Amount (Rs.) 1,18,46,763 1,31,52,080 Rate / Unit 5.50 4.84 (b) Own Generation Unit 5911 15537 Total Amount (Rs.) 26304 76,752 Rate / Unit 4.40 4.94 2. STEAM COAL Quantity (in Tons) 6337.79 6113.87 Total cost (Rs.) 2,97,05,259 2,83,09,631 Average Rate (Per Ton) 4687 4630 3. URNACE OIL Quantity (in Tons) Nil Nil Total cost (Rs.) Nil Nil Average Rate (Per Kltrs) Nil Nil 4. OTHERS/INTERNAL GENERATION Nil Nil B. CONSUMPTION PER THOUSAND METERS / M.T. OF PRODUCTION 5. Electricity Coal 2010-11 2009-10 2010-11 2009-10 FABRICS 1.58 1.53 0.52 0.7 CHEMICALS 0 0 Nil Nil Note: Since the Companys operations involve low consumption of energy, the Company has no comments to offer under para A (a) to (c) of Rule 2 of the Companies (Disclosure of Particulars in Report of Board of Directors) Rules 1988. FORM - B: Form of Disclosure of Particulars with respect to absorption RESEARCH AND DEVELOPMENT 2010-11 2009-10 Specific Area in which R&D carried out by the Company Nil Nil Benefits derived as a result of above R&D Nil Nil Future Plan of Action Nil Nil Expenditure on R&D Nil Nil TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION Efforts, in brief, made towards technology absorption, adaptation and innovation NA NA Benefits derived as a result of above efforts e.g. product improvement, cost reduction, Product development, import substitution, etc. NA NA Imported Technology NA NA FORM - C: FOREIGN EXCHANGE EARNING AND OUTGO 1. EARNINGS Rs.94.37 lacs (P.Y.Rs. 1.42 Lacs FOB) 2. OUTGO: Rs.0.40 lacs (P.Y.Rs. 4.48 lacs) For and on behalf of the Board Shivprakash Makharia Chairman Place : Mumbai Date : 22nd July, 2011 MANAGEMENT DISCUSSION AND ANALYSIS REPORT The Union Government has been extending support to Textile Industry, in view of its importance in the overall context of employment generation, foreign exchange earnings and tax revenue for the Government. The industry directly employs over 35 million people and contributes 14% of total industrial production of the country. The industry has earned 17% of Indias foreign exchange earnings. The employment potential of this sector is so vast that it is estimated to provide additional employment to 6.5 million people during the Eleventh Five Year Plan. It is heartening that budgetary provision for Technology Up-gradation Fund (TUF) has been increased and the DEPB Scheme has also been extended up to March, 2011. But, there is an element of suspense in the ad hoc-ism, which needs to be addressed by the Union Govt. Governmental support, encouragement and concerted efforts by the Industry are called for to register steady increase, both in domestic production and share in international trade which presently is at a low level. PERFORMANCE OVERVIEW: The company was not able to exploit the business opportunities, as working capital limits with banks remained frozen for the past few years. The revised DRP cum OTS submitted to Operating Agency on 17/12/2009 is taken as the basis for settling the dues of the company. DIVISION-WISE PERFORMANCE: The company has only two divisions, namely Textiles and Chemicals. The performance of the divisions is discussed below: TEXTILE DIVISION: The company has been striving to improve the productivity and optimization of stenter-wise utilisation of plant capacity. Effective steps are also being taken for cost reduction. Positive results would surely emerge especially with settlement of dues of secured creditors as discussed above and availing of working capital to improve the liquidity position. We also will reenter exports arena once adequate working capital is tied up, without which we will not be able to stick to exacting production schedules of overseas buyers. CHEMICAL DIVISION: QUIMICA: As stated we felt it prudent to close down the operations of this division until situations improve. COMPANY PROSPECTS The company has been in the business of textile trade and processing for the past three decades, thus gaining very valuable experience and expertise. The company is well equipped with all required machineries to process all kinds of fabrics and has expertise to meet most demanding specifications according to changing fashions in textile fabrics. But, absence of working capital stands in the way of exploiting them. Once the OTS is implemented and working capital is availed of, the operations would start generating profit with the help and involvement of our skilled and competent people. The companys products are still in demand in the international market and therefore the brand equity of the company remains unaffected. OPPORTUNITIES The Union Government has taken a series of measures to support the textile sector in the country. Your company has good processing facilities, though requiring up-gradation and is committed to avail of opportunities for development of business. With Govt.s support, we are sure to go ahead taking advantage of every opportunity, subject to removal of the hindrances stated above and getting required support from the Govt., BIFR, lenders and banks. RISK MANAGEMENT The Company is subject to usual vagaries of international business risks, exchange fluctuation, influence of other internal and external factors affecting any business in general. FOREIGN CURRENCY RISKS The Company has plans to do direct exports after the OTS is implemented. The exports are usually in US$, which currency, of late is showing wide fluctuation. We shall take a median rate for fixing the prices, situation permitting and thus cover the risk to a great extent. We do not import any raw material / consumables. Hence, foreign currency fluctuation risk is limited to the foreign currency transactions relating to exports. DOMESTIC COMPETITION The Company faces competition from both organized and unorganized sectors. As domestic sales are very low, it is not considered a serious issue. The contacts and relation with overseas clients of yester years are maintained and it would be only a question of time and efforts to revive them and restart business. TECHNOLOGICAL UPGRADATION The company has not been able to take advantages of Technological Up- gradation schemes, as it has been a sick unit with all limits frozen by banks and financial institutions. When these financial constraints are removed and its revised DRP is implemented, the company hopes to make investment to upgrade its machineries over a period of time. CAUTIONARY STATEMENT Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be considered as Forward Looking Statements within the meaning of the applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied.