Falcon Tyres Ltd Directors Report.

Report Of The Directors

Your Directors have pleasure in presenting the Annual Report and Audited Accounts of the Company for the eighteen months ended 31st March, 2014.

Your Company has achieved a net standalone turnover of Rs. 1198.66 crores during the period as against Rs. 905.96 crores in the previous year with Profit before Tax at Rs.3.99 crores excluding exceptional item and Profit after Tax at Rs. 3.97 crores. The loss of Rs. 0.02 crores is related to exceptional item on account of sale of shares of Chamundi Plasto Sacks Private Limited as the Company was not able to get the leverage of the consolidation.

Sl.No. Particulars For the Period ended 31-Mar-14 For the year ended 30-Sep-12
i) Revenue from operations 119,866.37 90,595.66
ii) Other Income 947.64 951.39
iii) Total Revenue 120,814.01 91,547.05
iv) Profit before Interest, Depreciation and Taxation (EBIDTA) 7,661.37 7,378.97
v) Interest 4,793.80 4,055.09
vi) Depreciation 2,468.47 1,805.52
vii) Profit before Taxation and Exceptional Item 399.10 1,518.36
viii) Exceptional Items 1.61 6,697.28
ix) Profit before Taxation (PBT) 397.49 -5,178.92
x) Tax including Deferred Tax 0 719.57
xi) Profit After Taxation (PAT) 397.49 -5,898.49
xii) Profit brought forward from previous year -3,818.35 2,080.14
xiii) Amount available for Appropriation -3,420.86 -3,818.35
xiv) Appropriations
Transfer to General Reserve
Proposed Dividend
Corporate Dividend Tax
xv) Balance carried to Balance Sheet -3,420.86 -3,818.35

Some Key Performance ratios on standalone basis are furnished below

Description UOM For the period ended 31-Mar-14 For the year ended 30-Sep-12 Last 10 Years Average
EBITDA/Revenue From Operations % 6.39 8.27 7.49
Profit Before Tax & Exceptional Item/Revenue From Operations % 0.33 1.68 3.35
Profit After Tax/Revenue From Operations % 0.33 -6.51 1.22
Return On Capital Employed % 4.85 -1.78 1.83
Earnings Per Share At A Face Value Of Rs. 5/- Per Share Rs. 0.51 -7.61 2.27

STANDALONE PERFORMANCE

Your Company has achieved a net turnover of Rs. 1198.66 crores for the eighteen month period compared to Rs. 905.96 crores for the year ended 30th Sep’2012. Profit before Interest, Depreciation, Taxes and exceptional item stood at Rs. 76.61 crores as against the previous year figure of Rs. 73.79 crores. The Profit after exceptional item but before Tax is Rs. 3.97 crores as against the previous year loss of Rs. 51.79 crores. Profit after Tax is Rs. 3.97 crores as against the previous year loss of Rs. 58.98 crores. During the period under review the operational profit increased due to softening Natural Rubber prices and ideal product mix.

Production of Tyres and Tubes, during the period under review stood at 41722.43 MT as against 35440 MT in the previous year. The Company continued to partner with Original Equipment Manufacturers and has kept pace by developing Tyres for newer models. Production in MT is slightly down due to change in product mix, increase in value added products like Tubeless Tyres, PCR Tyres, etc.

Your Company continued to maintain its leadership position in Export market segment in the Current year. The pressure in replacement market demand is due to sluggish market conditions and cut-throat competition.

EXPANSION

Your Directors are happy to inform you that the expansion of the Company at Mysore has been completed and the production from the expansion plant has started in second Quarter of 2012 and the process of ramp up of production capacities are taken up by your Company.

CUSTOMERS FIRST

Your Company adopted policy of "Customers First" and we continued to be associated with major Automobile Companies (OEM’s) and enjoying the privileged position with all the OEM’s. The most conservative OEM’s also recognizes our Quality and Services and we are potential supplier for them.

SUBSIDIARY

During the previous year, the Company has disposed off the entire share holding of Chamundi Plasto Sacks Private Limited (CPSPL). Hence, CPSPL no longer remain subsidiary of your Company. Falcon Tyres Rubber Pvt. Ltd. has become subsidiary of the Company w.e.f. 23.01.2013. The Financial position and performance of the subsidiary during the year as follow:

Particulars For the year ended 31/03/2014 Falcon Tyres Rubber Private Limited
Capital 1.00
Reserves (0.21)
Total Assets 325.79
Total Liabilities 325.79
Investments Nil
Turnover Nil
EBIDTA (0.02)
EBDT (0.02)
Profit Before Taxation (0.02)
Provision for taxation including Deferred Tax Nil
Profit after Taxation (0.02)
Proposed Dividend including corporate div tax Nil

Pursuant to Accounting Standard -21 (AS -21) prescribed by the Institute of Chartered Accountants of India / Companies (Accounting Standards) Rule 2006, the accounts of the subsidiary company are consolidated with the accounts of the Company and Consolidated Accounts forms part of this report

As per general circulation No. 2/2011 and Notification No. 51/12/2007CL-III dated 08/02/2011, the account of the subsidiary Company has not been attached to the accounts of your Company

The copy of the Annual Report of the Subsidiary Company will be made available to shareholders on request and will also be kept for inspection by any shareholder at the registered office of your company and it’s subsidiary company.

APPROPRIATIONS DIVIDEND

To conserve the resources for future expansion needs, your Directors do not propose any dividend for the year under review.

QUALITY MANAGEMENT SYSTEM

Your Company continued to be accredited with certifications by MIs TUV, 5UDD, South Asia Pvt. Ltd., with respect to the following’:

• IS0 9001:2008 & ISO I T516949: 2009 for Quality Management System, valid till May, 2016,

• ISO 14001:2004 & OHSAS 18001:2007 for Environment, Occupational Health & Safety Assessment Series Management Systems and are valid till September 2014 and September 2015 respectively.

• Your Company has started the process of TPM and the implementation of the same is under progress.

DIRECTORS

In accordance with the provisions of the Companies Act, 2013 and the Company’s Articles of Association, Mr. Pawan Kumar Ruia & Mr. Ashok Kumar Agarwal, the Directors of the Company will retire by rotation on the conclusion of this meeting and being eligible & offer themselves for re-appointment.

Mr. S.Badrinarayan, Mr. Ashok Gupta, Kamal Jiwrajka and Mr. Sunil Bhansali have resigned w.e.f. 19-Feb-2014, 23-Dec-2013, 13-Nov-2013 and 16-Nov-2012 respectively as Director. The Board place on record it’s appreciation for the contribution made by them during their tenure.

Mr. A.K.Jain, Mr. K.N.Prithviraj & Mr. Prakash P. Mallya who were appointed as Independent Directors on the board have resigned w.e.f. 14-May-2014, 31-Mar-2014 and 31-Mar-2014 respectively. The Board place on record it’s appreciation for the contribution made by them during their tenure.

Mr. Dipak Das, Mrs. Baishali Roy and Mr. Rupendra Nath Kumar have been appointed as Independent Director w.e.f. 14-05-2014. None of the Director is disqualified under section 274(1)(g)

AUDITORS

M/s. K.N. Gutgutia & Co., Chartered Accountants, auditors of the Company, resigned as auditors of the company during the year. M/s Gora & Company, Chartered Accountants, Registration No. 327183E has been appointed as auditors of the company in the Extraordinary General meeting of the company held on 16th August, 2014. They confirmed that the said appointment would be in conformity with the provisions of Section 139 of the Companies Act, 2013 and rules framed there under.

COST AUDIT

Complying with the Provision of Section 233(B) of the Companies Act, 1956, the Board of Directors have appointed Mr. T.L. Sangameswaran, Cost Accountant, Mysore, to carry out Audit of the Cost Accounts of the Company relating to the manufacture of Tyres & Tubes for the period ended 31st March, 2014 in compliance with the Central Government Order in this regard and the cost audit report will be submitted to the Ministry of Corporate Affairs, Government of India.

FIXED DEPOSITS

During the year under review, your Company has neither invited nor accepted any deposits from the public.

PARTICULARS OF EMPLOYMENT

As required under the provisions of Sec. 217(2A) of the Companies Act, 1956, read with the Rules framed there-under, a statement of particulars of the employees has been annexed to this report and included as Annexure-I.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Sec. 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, is furnished in Annexure-II.

INDUSTRIAL RELATIONS

The Company maintained harmonious and cordial Industrial Relations during the period under review. A regular system of holding bi-parte discussion with the recognized Union regarding the issue of common interest of all employees was adopted.

SAFETY

Your Company has a well-defined Safety Management System. Continuous endeavour is made to create safety awareness among the employees. As part of this, forums like Works Committee, Plant Safety Committee are functioning for taking up necessary preventive and corrective actions wherever required and to create awareness among the employees on Safety and Health. Your Company has also appointed a team consisting of Senior Executive & Employees of the Company to monitor the safety aspect of the plant and all employees were advised to participate actively on the safety related issues. Safety Day has been observed in the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company is pro-active to its Corporate Social Responsibility. The following are few of the activities organized by your Company during the period under review:

i) Ganesh Festival: Like every year this year also the Company has joined hands with the employees to celebrate the Ganesh Festival, which is one of the biggest festival in Karnataka and observed rituals and festivity with equal fervor.

ii) May Day Celebration: 1st May of the year is being observed as workers day. Your Company also joins hands with Employees and their family in observing the day where the Company sponsored various sports and cultural activities. Winner of the sports event were rewarded with the prizes and sweets distributed.

iii) Green Revolution: The Company has developed a green belt in and around the Company premises for better environment. During the year the Company has planted more than 1000 plants.

iv) Training to School, College Students: Your Company is regularly providing training to engineering students and management trainees of various institutes and colleges.

v) Sports Prize Sponsorship: During the year the Company has sponsored prizes of sports in local community.

vi) Merit Award: The Meritorious and excellence In sports cash award to the children of the Employees has been distributed during the period.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Sec. 217 (2AA) of the Companies Act, 1956, with respect to Director’s Responsibility Statement, it is hereby confirmed:

i) That in the preparation of the accounts for the period ended 31st March, 2014 the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2014 and of the profit or loss of the Company for the period ended on the date;

iii) That the 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 the Company and for preventing and detecting fraud and other irregularities;

iv) That the Directors have prepared the accounts for the period ended 31st March, 2014 on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management’s Discussion and Analysis is given separately and forms part of this Annual Report

CORPORATE GOVERNANCE

The report of Board of Directors of the Company on Corporate Governance is given as a separate section titled "Corporate Governance Report" which forms part of this Annual Report.

Certificate of the Statutory Auditors of the Company regarding compliance with the Corporate Governance requirement as stipulated in clause 49 of the Listing Agreement with the stock exchange is annexed with the Corporate Governance Report.

APPRECIATION &ACKNOWLEDGMENT

Your Directors acknowledge the continued support and co-operation from the Financial Institutions, Banks, Customers, Vendors, Dealers and Government Authorities during the period under review.

Further your Directors thank the Shareholders for their continued confidence reposed on the Management / Board of the Company. The Board also places on record its appreciation for the devoted and dedicated contribution made by the employees at all levels in achieving these results.

On behalf of the Board of Directors
Place: Kolkata Ashok Kr. Agarwal Dipak Das
Date: 29-Aug-2014 Director Director

ANNEXURE - I

Statement of particulars of employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forming part of the Directors Report for the period ended March 31, 2014.

SI. No Name of the Employee Designation Remuneration (Rs.) Qualification and Experience Date of Commencement of Employment Age Last Employment held
1. Mr. Pawan Kumar Ruia Executive Chairman 11,16,62,400 B.Com (Hons), AICWA, FCA, LL.B, AASM, MIIA (USA) 30 Years 01.04.2007 55

ANNEXURE- II

Statement Pursuant to Sec.217 (1) (e) of the Companies Act, 1956

A. CONSERVATION OF ENERGY

a) Energy conservation/ Modification measures

1) Platten heating line steam condensate was separated and brought directly to Boiler. Earlier it was getting mixed with bladder condensate which was getting contaminated and wasted.

2) Fan less cooling tower of capacity 200TR has been provided which is savings upto 125 KWH per day

3) Reduced tube lights from two to one at all offices and non productive areas.

4) 125 KVA Capacitor bank has been installed for LT4 panel to improve Power factor. Power factor improved from 0.975 to 0.985.

5) Periodic energy audit and corrective actions are being taken to improve the efficiency

b) Impact of measures taken

1) Savings in fuel consumption

2) Savings in electric power consumption

3) Savings in water consumption

c) Additional investments/modifications proposed

1) Introduction of additional capacitors for improving the Power Factor.

2) Replacement of reciprocating compressor by energy efficient screw compressor in phased manner.

3) To install separate compressor for instrument air

d) Impact of proposed measures

1) Savings in Power, water and fuel Cost

2) Energy saving and quality improvement

3) Improvement in power factor and energy saving

Disclosure of Particulars with respect to Conservation of Energy

POWER AND FUEL CONSUMPTION

FORM A

Description For the period ended March 31, 2014 For the year ended September 30, 2012
1. ELECTRICITY
a. Purchased:
- Total Units 20141880 16434240
- Total Amount (Rs.in lakhs) 1264.37 993.57
- Rate per unit (Rs.) 6.28 6.05
b. Own Generation:
- Units Generated 5169742 2462207
- Total Diesel/Coal Cost (Rs.Lacs) 396.30 192.39
- Cost per unit (Rs.) 7.67 7.81
2. FUEL
a) Biomass, Coal & Others - Quantity (M.T.) 41147.12 26565
- Total Cost (Rs.Lacs) 1831.96 1301.38
- Fuel Rate per Kg. (Rs.) 4.45 4.90
- Fuel Cost/Kg. on Production (Rs.) 4.48 3.68
3. CONSUMPTION PER KG.OF -
- Production of Tyre & Tube:
- Electricity (Units/Kg.) 0.607 0.539
- Coal & Other Fuels (Kgs../Kg.) 0.986 0.758

FORM B

B. TECHNOLOGY ABSORPTION:

1. Research & Development:

a) Got HMSI’s approval for the supply of tubeless tyres for scooter and Motorcycle for their high volume vehicles after rigorous and exhaustive plant audit.

b) Developed 3 new tractor tyres size and approved by OEM.

c) New tread compound developed for better grip and low rolling resistance for 2 Wheeler tyres.

d) Developed polyster tyres for Replacement Market -2 Wheeler segment for better performance and dimensional Rigidity.

e) Better control measures implemented in tread extrusion in plant to have optimal material consumption.

f) Developed in-house compound specifications adapting to the dynamic material sources without compromising on Product performance.

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

a) Improvement in the Products range.

b) Meet the New Market requirement (OEMs & Replacement).

c) Improved quality with consistent performance.

3. Future Plan of action:

a) Machine / process flexibility need further improvement for more and quick product change.

B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1) Efforts in brief made towards technology absorption, adoption and innovation:

a) New Products and new patterns developed and are approved by OEMs.

b) SRI interaction w.r.t. Testing and approval from HGA for OEMs on existing & new upcoming vehicle model.

c) Cost optimization to balance bottom line by learning New Technology/Products through attending Conference/Customer meet etc.

2) Benefits derived as a result of the above efforts:

a) Enhanced market share with OEMs and Exports.

b) Eco Friendly Technology.

3) In case of imported technology (Imported during last 5 years reckoned from the beginning of the financial year) the following information may be furnished.

a) Technology imported ??Not Applicable

b) Year of import ??Not Applicable

c) Has technology been fully absorbed ??Not Applicable

d) If Not fully absorbed areas where this has not been taken place, reasons therefore and future plans for action ??Not Applicable

C. FOREIGH EXCHANGE EARNINGS AND OUTGO

Foreign Exchange earned and used:

Rs. In Lacs

Particulars 2012-14 2011-12
i) Foreign Exchange Earned 11927.18 7159.49
ii) Foreign Exchange used 9386.92 10860.13

Statement pursuant to Section 212 of the Companies Act, 1956 relating to Holding Company’s Interest In the Subsidiary Companies

Financial year of the Subsidiary ended on 31- Mar- 14
1. (a) Number of shares held by Falcon Tyres Limited at the end of the above date 9990
(b) Extent of Interest on above date 100%
2. Net aggregate amount of the Subsidiary Company’s Profit/ (Loss) so far it concerns members of the Holding Company and
(a) is not dealt in the Company’s account
(i) for the financial year ended March 31, 2014 NIL
(ii) for the previous financial year since it become a subsidiary NIL
(b) is dealt in the Company’s account
(i) for the financial year ended March 31, 2014 -0.02 Lakhs
(ii) for the previous financial year since it become a subsidiary -0.01 Lakhs