India Foils Ltd merged Directors Report

INDIA FOILS LIMITED ANNUAL REPORT 2008-2009 DIRECTORS REPORT The Directors hereby present the 47th Annual Report of your Company together with the statement of audited accounts for the financial year ended 31st March, 2009. Financial Results: Rs. In crores. Year ended March 31st 2009 2008 Turnover (Gross) 109.04 192.66 Profit/(Loss) before interest, tax, depreciation, amortization and extraordinary items (119.41) 3.58 Less: Interest 15.59 19.93 Profit/(Loss) before tax, depreciation and amortization (135.00) (16.35) Less: Depreciation 13.77 14.35 Amortization - 1.22 Profit/(Loss) before tax and extraordinary items (148.77) (31.92) Add: Extraordinary items - 4.03 Profit/(Loss) before tax (148.77) (27.88) Less: Current Tax - - Fringe benefit tax 0.05 0.08 Profit/(Loss) after tax (148.82) (27.96) OPERATIONAL PERFORMANCE: On overall basis your Company witnessed decrease in production of foil from 7098 M.T. in the previous year to 3892 M.T. in the current year. Accordingly Gross Turnover has also decreased from 192.66 crores to 109.04 crores in the current year. Overall loss of the Company has increased to Rs. 148.82 crores from Rs.27.96 crores in the previous year. The accumulated losses of the Company as at March 31, 2009 are more than fifty percent of its networth and it has also incurred cash losses during the financial year ended on that date and in the immediately preceding financial year. DIVIDEND AND TRANSFER TO RESERVES: In view of the losses, the Board of Directors do not recommend any dividend. No amount is proposed to be transferred to reserves. FUTURE OUTLOOK: Though the financial results of the Company for the year under review is not encouraging, the fundamentals of the business remain strong. Looking forward, your Directors foresee significant improvement in the business and bottom line of your Company in view of the business and the financial restructuring that has taken place during the year. The Madras Aluminum Company Limited (MALCO), the earlier parent Company joined hands with Ess Dee Aluminum Limited (EDAL) for revival of your Company through a Rehabilitation Scheme which was sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) vide Order dated 18th August, 2008. Through the Scheme, infusion of substantial funds has taken place in the Company thereby making your company secured debt free and which will enable the company to become more competitive and profitable in the years to come. EDAL has become the majority stakeholder in the company with a holding of 89.44% and therefore your company is now a subsidiary company of EDAL. Your Company has filed a MDRS with BIFR for merger of the company with Ess Dee Aluiminium Limited and the same awaits BIFR Approval. Your Company has also reopened its Hoera Plant with effect from 27th April, 2009 and the operations at Hoera Unit will recommence in a phased manner. FINANCIAL YEAR: The reporting for the current period is for 12 months i.e. from 1st April, 2008 to 31st March, 2009. CAPITAL RESTRUCTURING: Pursuant to the scheme of rehabilitation approved by the Honble BIFR under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) the Authorised Share Capital of the Company as on 31st March, 2009 stood at Rs.336,40,00,000 divided into 80,00,00,000 Equity shares of Re.1/ each and 256,40,000 Preference shares of Rs.100/- each. During the year pursuant to the said scheme, the face value of the existing paid up Equity shares were reduced to Re.1/- each from Rs. 10/- each and as a result the existing paid up equity share capital was reduced from Rs.28,34,73,630/- to Rs.283,47,363/- and further the following additional new equity and preference shares were issued: (i) Issue of Equity Shares 13,60,00,000 Equity Shares of Re.1/- each. (ii) Issue of Preference Shares (a) 0.01% Redeemable Optionally Convertible Non Cumulative Preference shares of 12,50,000 of Rs.100/- each. (b) 0.01% Redeemable Non Convertible Non Cumulative Preference shares of 1,39,53,423 of Rs.100/- each. (c) 0.01% Redeemable Non Convertible Non Cumulative Preference shares of 96,28,115 of Rs.100/- each. With the issue of shares as above M/s Ess Dee Aluminium Limited has become majority stakeholder in the company and thereby your company has become a subsidiary of Ess Dee Aluminium Limited. In pursuance to the above the present paid up equity share capital of the company as on 31st March, 2009 stood at 16,43,47,363 of Re.1/- each and 248,31,538 Preference shares of Rs.100/- each. DIRECTORS The following Directors of the company resigned from the Board on 19th of November, 2008 Mr. Sandeep Agrawal - CEO & Director Mr. R Kannan - Director Mr. Deb Bandhyopadhyay - Director In their place, the following new Directors were inducted as Additional Directors of the company with effect from 19th of November, 2008; Mr. Sudip Dutta - Chairman Mr. Soumitra N. Barari - Whole Time Director Mr. Gautam Mukherjee - Director Mr. Madan Mohan Jain - Director At the board meeting held on 15th January, 2009 Mr. Soumitra N. Barari was appointed as the Whole Time Director of the Company w.e.f 1st December, 2008 pursuant to section 269 and other applicable provisions of the Companies Act, 1956, subject to shareholders approval at the Annual General Meeting of the company. The company has also received notices under section 257 of the Companies Act, 1956 from members of the company with requisite deposits signifying their intention to propose the appointment of Mr. Sudip Dutta, Mr. Soumitra N. Barari, Mr. Gautam Mukherjee and Mr Madan Mohan Jain as Directors of the Company. ICICI Bank, the then Monitoring Agency, withdrew Mr. Ashok Alladi as their Nominee Director from the Board of Directors of our company from 12.01.2009. BIFR has appointed Mr.K. Raghuraman as a Special Director with effect from 31.03.2009. By order dated 2nd June, 2009 BIFR has appointed Kotak Mahindra Bank Limited as the Monitoring Agency in place of ICICI Bank Limited. The above appointments/re-appointments form a part of the Notice of the Annual General Meeting and the resolutions are recommended for your approval. Profiles of the newly appointed Directors as required under clause 49 of the Listing Agreement are given in the Notice calling the Annual General Meeting. CORPORATE GOVERNANCE: A separate section on corporate governance as well as certificate from Auditors of the Company regarding compliance to Corporate Governance as stipulated under Clause 49 of the Listing Agreements with stock exchanges forms part of this Annual Report. AUDITORS REPORT: With reference to the observations /qualifications of the Auditors in their report, the Board of Directors of the Company submit that the notes on accounts referred to in the Auditors Report are self explanatory and therefore do not require any further comments under section 217(3) of the Companies Act, 1956. (lets refer to the relevant note and also add a line as to what it states.) AUDITORS: M/s M.P. Chitale & Co, Chartered Accountants, the Statutory Auditors of the company retire at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. They have confirmed that the reappointment, if made, will be in accordance with the provisions of sub-section (1B) of section 224 of the Companies Act, 1956. The Audit Committee and the Board of Directors recommend their re-appointment at the ensuing Annual General Meeting. PUBLIC DEPOSITS: The Company has not accepted any Deposits from the Public during the financial year 2008-09. As at 31st March, 2009 principle fixed deposit outstanding with the Company stood at Rs. 1.71 lacs. PARTICULARS OF TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING & OUTGO: Information as prescribed 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, viz., a report on the conservation of energy, technology absorption, foreign exchange earnings and outgo, is given in the Annexure A attached hereto and forms part of this Directors Report. PARTICULARS OF EMPLOYEES: The Company has no employee whose remuneration is more than the limit specified in Section 217 (2A) of the Companies Act, 1956 as amended, read with the Companies (Particulars of Employees) Rules, 1975. DIRECTORS RESPONSIBILITY STATEMENT: The Directors confirm that: i) in the preparation of annual accounts, the applicable accounting standards have been followed, other than those reported by the statutory auditors and for which appropriate disclosures have been made in the financial statements. ii) they 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 the Company as at 31st March, 2009 and of the loss of the Company for that period. iii) 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. iv) they have prepared the annual accounts on a going concern basis. LISTING: Your Companys shares have been listed with effect from 19th June, 2009 at The Bombay Stock Exchange, The National Stock Exchange and thereafter at The Calcutta Stock Exchange. The company awaits listing of the shares issued to the promoters of the company pursuant to rehabilitation scheme for which necessary application has been made . ACKNOWLEDGEMENT: The Directors acknowledge the co-operation received from the employees. The Directors acknowledge with gratitude the cooperation and assistance received from the State Government, Financial Institutions, Banks, Shareholders and others during the year under review. On behalf of the Board Place: Mumbai Sudip Dutta Date: 31st October, 2009 Chairman ANNEXURE A TO DIRECTORS REPORT Companies (Disclosure of Particulars in The Report of The Board of Directors) Rules, 1988 MANAGEMENT DISCUSSION AND ANALYSIS The core business of the Company is manufacturing and marketing of aluminium foils. The management discussion and analysis is given hereunder: INDUSTRY STRUCTURE & DEVELOPMENT: Aluminium Industries in India is one of the leading industries in the Indian economy. The growth of the aluminum Metal industry in India would be sustained by the diversification and exploration of new horizons for the industry. India has huge deposits of natural resources in form of minerals like copper, chromite, iron ore, manganese, bauxite, gold, etc. The India aluminum industry falls under the category of non iron based which include the production of copper, tin, brass, lead, zinc, aluminum, and manganese. The main operations of the Indian aluminum industry is mining of ores, refining of the ore, casting, alloying, sheet, and rolling into foils. For the sustenance of the growth the aluminum industry in India has to develop research and development units to assist the production and improve on the quality measures to keep a stringent quality control. The Indian aluminum Metal Industries sector in the previous decade experienced substantial success among the other industries. The Indian aluminum industry is developing fast and the advancement in its technologies is boosting the growth even faster. The utilization of both international and domestic resources was significant in the rapid development of the Indian aluminum industry. This rapid development has made the Indian aluminum industry prominent among the investors. The Indian aluminum industry has a bright future as it can become one of the largest players in the global aluminum market as in India the consumption is fairly low, the industry may use the surplus production to cater the international need for aluminum which is used all over the world for its several applications. OPPORTUNITIES AND STRENGTHS: Your company has realigned itself on the requirements of the market especially in the value added sector . The company is now focusing on the direct pharmaceuticals market instead of taking the distributor route .This has not only enhanced average realisation of the products but also contributed to cash flow. Positioning itself as a cost plus manufacturer IFL has been able to steer clear of the vagaries of the erratic nature of the LME. In the international arena the ties with Bangladesh pharma majors has been reestablished and value added exports to the middle east and west Africa have also revived the inherent strength of your company in the pharmaceutical segment has been utilised by using 100% dc foilstock which has given it a substantial advantage over competition . RISKS & CONCERNS: Like other non ferrous companies your company has also faced the problems associated with the downturn in the marketplace. With the rising crude costs all petroleum based products associated with the manufacturing process have been north bound. This has had an effect on the cost incurred in the processes. While your company has continuously been in touch with the customers regarding realisation of the increased cost base but with the given market scenario this is taking its own time. Also a long term pricing mechanism is not feasible in the given scenario. However your company has taken measures in energy efficiency and put energy audits as well teams to work on recovery improvement which will be the main drivers to reduce cost. OUTLOOK: Your Company has shown resilience time and again by fighting against all odds and marching ahead at every step. The accelerated growth of the Pharmaceutical sector would create additional demands and your Company is geared up to convert new opportunities into successful businesses going forward. External factors would continue to play an important role but through effective risk management processes, it would be possible to steer ahead in turbulent times, based on your Companys high level of engagement and commitment both internally as well as externally. Your Company has joined hands with Ess Dee Aluminium Limited for its revival and accordingly submitted a modified draft rehabilitation scheme to BIFR. INTERNAL CONTROL & SYSTEMS AND THEIR ADEQUACY: Your Company has appropriate internal control systems and procedures in place with regard to effective utilization of resources, efficiency in operation, financial reporting and compliance with various rules and regulations. The internal control system is designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets and further supplemented by extensive audits conducted by the Auditors. Regular audits are conducted to review the adequacy and effectiveness of the internal controls and suggest improvement, if any, for strengthening the existing system. ENVIRONMENT & SAFETY: Safety and Environment Management continues to be one of the key result areas for your company. The Company is committed to providing a safe and healthy workplace for all of its employees including contract workmen. Appropriate training is provided to all of its employees and associates to minimize the risk. The company has adopted a Framework of Standards aligned to ISO 9001 standards. IFL is committed to the environmental improvement of its products. The Company will continue to devote significant resources to control air and water pollutants, to dispose of wastes and to provide risk free environment around the work place and in the neighbourhood. Concern for environment and safety are integral to IFLs business and part of business ethos. INDUSTRIAL RELATIONS & HUMAN RESOURCE MANAGEMENT: The Company constantly endeavors to attract and recruit the best talent and to retain, nurture and groom to meet its current and future challenges. It places utmost importance to the quality of its human resources. As on March 31, 2009 the Company had 442 employees. It places great emphasis on the training and development of employees at all levels and seeks to achieve closer alignment between their objectives and the strategic objective of business through intensive communication of the corporate strategic objectives to all employees. The Industrial Relations continue to be peaceful and cordial. The Directors wish to acknowledge the efforts of all the employees. CAUTIONARY STATEMENT: Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be forward- looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws, labour policies and other statutes and other incidental factors.