hotline glass ltd Directors report

HOTLINE GLASS LIMITED ANNUAL REPORT 2006 DIRECTORS REPORT To, The Members Hotline Glass Limited Your Directors are pleased to present the Fifteenth Annual Report together with the Audited Statement of Accounts of the company for the year ended 31st December 2006. FINANCIAL RESULTS (Rs. In Lacs) Particulars Year ended Year ended 31st December 2006 31st March 2006 Sales and Other Income 843 6420 Profit/(Loss) before Depreciation & Financial Expenses (10196) 571 Financial Expenses 1052 291 Cash Profit / (Cash Loss) (11248) 280 Depreciation & Misc. Exp. w. off 808 495 Net Profit/(Loss) before tax (12056) (215) Income Tax: Tax Including FBT: 2 13 Deferred Tax: (1241) (57) Net Profit/(Loss) After Tax (10817) (171) DIRECTORS RESPONSIBILITY STATEMENT Pursuant to sub section (2AA) of section 217 of the Companies Act, 1956 the Board of Directors of the company hereby state and confirm that: (i) In the preparation of Annual Accounts for the year ended 31st December 2006, the applicable accounting standards have been followed. (ii) The financial statements do give a true and fair view of the state of affairs of the company for the financial year ended 31s, December 2006 and your directors have selected and applied the consistent accounting policies and the judgment and estimates made therein are reasonable and prudent. (iii) 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 have been ensured. (iv) The Annual Accounts for the year ended 31st December 2006 have been prepared on a going concern basis. OPERATIONS As you are aware, Company has been facing problems and incurring losses due to faulty Government policy of allowing import of Colour picture tubes under Free Trade Agreement (FTA) with Thailand, at concessional rate of duty since September 2004 and at zero duty since September 2006. Due to this policy Hotline CPT Limited, the only buyer, has incurred huge losses. Hotline CPT Limited was not able to arrange for funds also which resulted in total stoppage of production and their demand for funnels. During the current period Company also received letter from Stressed Asset Stabilization Fund revoking One Time Settlement scheme. Due to this, the Company had to provide entire amount of simple interest on IDBI loan. Your company was initially producing Black and White tube Glass Parts. However, due to shift in demand from Black & white to Colour TV, for survival of the company, it had to convert the plant from Black & white Glass Parts to Colour Funnel Plant. This entailed an expenditure of approx. Rs. 20 crores. Despite requesting Banks and Institutions, no funding was provided by them and the conversion had to be done through internal resources. As the funnels were supplied to Hotline CPT Limited, a company promoted by your company, the company could survive. CPT manufacturers prefer to buy both Panel & Funnel for tube from one source. It is pertinent to note that in whole value chain from colour glass to colour picture tubes to Colour TV the maximum value addition is in Colour Glass (Panel & Funnel). Because of the competitive nature of the TV industry, on account of emerging new technologies, government policy of allowing imports of Colour Picture Tubes at zero duty, it became imperative for the company to venture into Colour Panel Project. By implementing this project your company could have emerged as profit making and customer centric company. Although the technology for manufacturing Glass Panels was scarce, your company could tie up with LG Philips U.K. for plant and technology. Your company appointed SREI Capital Market fox arranging funds for panel project who could arrange only a small part of the total loan requirement. Despite best efforts funds for the project could not be arranged and the company had to make necessary provision for impairment of assets. Company had invested Rs. 27 crores in promoting Hotline CPT Limited. Due to adverse government policy Hotline CPT Limited lost its entire net worth. The Company is also registered with BIFR. In view of this a provision of 50% is made in the investment. Further a sum of Rs.46.84 crores are recoverable from Hotline CPT Limited. Considering the fact that Hotline CPT Limited has made continuous losses and is unable to pay its debts a provision of 40% is considered necessary by the Board. As a result of continuous losses, the entire net worth of the Company has been eroded and Company has become a Sick Industrial Company with in the meaning of Section 3(1)(a) of Sick Industrial Companies Act, 1985. The Board of Directors have made an opinion that a reference should be filed at the earliest before Honable BIFR for the purpose of revival of the Company. DIVIDEND In view of losses in the current year your directors are not recommending any dividend. FUTURE PROSPECTS The CPT Industry witnessed sharp decline in the prices as a result of Governments policy to include Colour TV and Colour Picture Tubes in Early Harvest Scheme of Free Trade Agreement (FTA) with Thailand. Under the FTA, TV and tubes can now be imported at Zero duty. As your company is manufacturing glass parts for Colour Picture Tubes and there is good demand for Colour Picture Tubes in India, once the Government policy is corrected, the Company operations can revive. CORPORATE GOVERNANCE A separate section on Corporate Governance and a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, form part of the Annual Report. FIXED DEPOSIT The company has not accepted any fixed deposit from the public during the year. LISTING At present the shares of company are listed on The Stock Exchange, Mumbai. The company has paid the listing fees of The Stock Exchange, Mumbai for the year 2006-2007. The company has completed all the formalities for de- listing from Calcutta and Madhya Pradesh Stock Exchange. DIRECTORS Mr. D. C. Mathur retires by rotation and being eligible; offer himself for reappointment at the ensuing Annual General Meeting. During the year ended 31.12.2006 Mr. Sanjiv Narayan, Mr. Anuj Gupta, Mr. M.P. Rajan, Mr. G.L. Modi & Mr. Ram K. Gupta resigned from the Board. On 13th January 2007 Mr. Anuj Gupta and Mr. Rajneesh Malhotra were appointed as additional Director and Mr. V.N. Masaldan resigned w.e.f. 14th January 2007. Brief resume of the Directors appointed / reappointed, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, are given in Corporate Governance Report forming part of the Annual Report. AUDITORS M/s. S. S. Kothari Mehta & Co., Chartered Accountants, Delhi, Statutory Auditors of the Company retire as Auditors of the Company at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. The Audit Committee of directors at its meeting held has recommended continuing the appointment of M/s. S. S. Kothari Mehta & Co. as statutory auditors of the Company. OBSERVATION OF AUDITORS The observations of Auditors are self explanatory and / or have been suitably explained in the notes to the Accounts. PARTICULAR OF EMPLOYEES None of the employees is covered under section 217 (2A) of the Companies Act, 1956 and rules framed there under. INFORMATION OF ENERGY CONSERVATION, TECHNOLOGY ABSORBTION AND FOREIGN EXCHANGE EARNINGS AND OUTFLOW As per annexure. ACKNOWLEDGEMENT Your directors wish to place on record their sincere appreciation for continuous co-operation, support and assistance provided by shareholder, banks, government bodies, customers, dealers and suppliers of the company. Your directors also wish to place on record their appreciation for the dedicated services rendered by the employees of the Company. FOR AND ON BEHALF OF BOARD OF DIRECTORS Sd/- ANIL GUPTA CHAIRMAN & MANAGING DIRECTOR PLACE : NEW DELHI DATE : 16TH FEBRUARY, 2007 INFORMATION ON ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTFLOW POWER & FUEL CONSUMPTION CURRENT YEAR PREV.YEAR 1. ELECTRICITY a. Purchased Units (KWH) 1023750 4741650 Total Amount (Rs. in lacs) 68.82 222.68 Rate / Unit (Rs.) 6.72 4.70 b. Own Generation (Through Diesel Generator) Units (KWH) 18700 1274860 Units per Ltr. of Diesel Oil 4.88 3.69 Cost / Unit (Rs.) 7.68 8.14 2. H.S.D. FOR FURNACE Quantity (K.L.) 9.300 157.037 Total Cost (Rs. in lacs) 2.55 43.12 Rate / Unit (Rs. per K.L.) 27453.62 27458.42 3. F.O. / L.D.O. FOR FURNACE Quantity (K.L.) 162.578 1850.051 Total Cost (Rs. in lacs) 29.36 326.82 Rate / Unit (Rs. per K.L.) 18059.49 17665.52 4. PROPANE Quantity (M.T.) 112.82 433.658 Total Cost (Rs. in lacs) 34.21 133.94 Rate / Unit (Rs. per M.T.) 30323.68 30887.22 CONSUMPTION PER UNIT OF PRODUCTION PRODUCT - GLASS PARTS PANEL / FUNNEL STANDARDS THIS PREVIOUS (IF ANY) YEAR YEAR - ELECTRICITY N.A. 0.00 KWH 5.81 KWH - H.S.D. & L.D.O. N.A. 0.00 LTR 2.09 LTR - PROPANE N.A. 0.00 KG 0.42 KG B. RESEARCH & DEVELOPMENT The company has strong Research & Development base. However due to very limited operations during the year there has been no significant change in the production techniques. C. FOREIGN EXCHANGE EARNING / OUTFLOW Total foreign exchange outflow by Company during the period is Rs. 26.09 lacs for import of Raw Materials. MANAGEMENT Management discussion and Analysis Report - Industry Structure and Development - The business of the company is directly related to the business of TV Industry. The company is producing Glass parts for Colour Picture Tubes. The business of the company is dependent upon the working of Hotline CPT Ltd to whom it has been supplying Glass Parts. - Opportunities and Threats - Lower penetration level in domestic market creates good opportunity for the company as demand for TV is expected to go up with the rural electrification. The expected increase in demand, especially in rural area, is an opportunity for the company to manufacture Glass Parts for Colour TV. The company is facing threat due to lowering of duties on Colour Picture Tubes under Free Trade Agreement with Thailand. As per the Free Trade Agreement the rate of Import duty has gone down to 0% w.e.f. September 2006. This has seriously affected the working of Hotline CPT Ltd, which in turns has adversely affected the business of our company. Further non availability of funds to Hotline CPT Ltd has hampered the production of Hotline CPT and its operations have come to a grinding halt. Due to this there is no demand from Hotline CPT Limited - Segment wise or Product wise performance - The Company has been engaged in the production of Glass Parts for Television Picture Tube and in trading of Picture Tube Parts. The segment wise results are discussed in detail in notes to accounts. - Outlook - Though the outlook of TV Industry appears to be a good in long run, non availability of funds to Hotline CPT Ltd and government policy of allowing Import for Colour Picture Tube at zero duty under Free Trade Agreement from Thailand has seriously affected the business of the Company. Despite best efforts from the Company, funds are not provided by Banks, Institutions for Panel Project. The company has also tried for financing from private funds. However till date the financial closure could not be done. In the absence of funding it is doubtful if the panel project could be started. Accordingly necessary provision is made in accounts for impairment of plant, as per accounting standards. - Risks and Concerns - The biggest risk for the company is stoppage of production of Hotline CPT Ltd., which has been caused by lowering of prices of Colour Picture Tubes due the Free Trade Agreement with Thailand. It has been informed that Hotline CPT Ltd. tried for funds to run its operation. However even after making detail study, no bank provided need base funds to Hotline CPT Ltd. This resulted in stoppage of the production of Hotline CPT Ltd. As there is no demand of Hotline CPT Ltd., the production of Hotline Glass Ltd. is also stopped. - Internal Control Systems and their adequacy - The Company has internal control system and procedures commensurate with its size and nature of business. The internal control systems are supported by internal audit carried out internally. The adequacy and effectiveness of the internal control, as well as compliance with the laid down systems and policies are comprehensively monitored by the internal auditors. The Internal Audit Reports of the Internal Auditors are discussed at the Audit Committee Meetings and appropriate corrective steps have been taken. - Discussions on financial performance with respect to operational performance - During the year under review, the company have incurred a net loss before tax of Rs.120.56 Crores as against net loss before tax of Rs. 2.15 Crores in the year,2005-2006. The losses are high due to low volume of production caused by low demand. Further the company has made provisions for impairment of Glass Panel Equipments, investment in Hotline CPT Limited and for the amount recoverable from Hotline CPT Limited as explained in the notes to accounts. - Material developments in Human Resources / Industrial Relations front, including number of people employed - Your Company believes in employees involvement in achieving the organizational objectives and focused its efforts to upgrade the skills of its workforce to take up the challenges in present cutthroat competition. Your company is conscious and committed in providing equal opportunities to the employees to excel in their work and advance themselves in their career depending on their abilities. The company provides in-house training to its employees and maintaining safety and healthy environment for workers working within the factory premises. The company employs 346 workers. As a result of sound Human Resources policies the industrial as well as labour relations have been good and cordial.