k r m international ltd share price Directors report

KRM INTERNATIONAL LIMITED ANNUAL REPORT 2005-2006 DIRECTORS REPORT Dear Members, We, the Board of Directors of your Company, are delighted to present this 17th Annual Report of the Company together with the Audited Statement of Accounts for the year ended March 31, 2006. FINANCIAL HIGHLIGHTS (Rupees in Lakhs) Particulars For the year For the previous ended year ended March 31, 2006 March 31, 2005 Gross Revenue 871.76 1240.51 Increase/(Decrease) in Stock 269.90 56.15 Expenditure before Depreciation 905.86 1479.41 Loss before Depreciation 304.00 182.75 Depreciation 36.26 39.12 Loss before Tax 340.26 221.87 Tax for earlier years - 2.57 Fringe Benefit Tax 2.18 - Net Loss for the Period 342.44 224.44 FINANCIAL AND OPERATIONAL PERFORMANCE The business continued to face pressure in 2005-06, both on top line and profitability as in the previous year. In spite of our sincere efforts to reduce the burn rate did not yield any material returns. The Gross receipts during the year were Rs. 871.76 lakhs (Previous Year Rs. 1240.51 lakhs) as against a total expenditure of Rs. 905.86 (Previous Year Rs. 1479.41 lakhs) resulting in loss of Rs. 340.26 Lakhs (Previous Year Rs. 221.87 lakhs) before Tax. The market situation during the year was not encouraging and continued to remain sluggish, which is the major factor for the huge losses during the year; During the year, the company has implemented re-structuring entailing disposal of surplus assets and clearance of dues to institutions/banks. Company has already settled with IDBI & UCO Bank under OTS scheme approved by them. Similarly, Company is in advance stage of negotiations with other institution/bank and hope to settle their accounts on or before 31.3.2007. SUBSIDIARY M/s. Bipin Textile Processing Industries Limited is a Subsidiary of the Company and Statements in terms of Sections 210 and 212 of the Companies Act, 1956, are enclosed herewith for your perusal. DIVIDEND Due to operational losses, your Directors do not recommend any dividend for distribution on equity share capital of the Company for the period ended 31st March 2006. QUALITY MANAGEMENT The Company has conscientiously monitored and managed its existing qualities in the process of developmental works related to software segment. However, as the business during the year was not quite substantial in terms of quantity or price, no major expenditure has been incurred by your Company in the direction of quality management. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY Your Company has a proper and adequate system of internal control to ensure that the financial and other records are reliable, the assets and properties are safeguarded and protected against loss from unauthorized use or disposition and that transactions are authorized, recorded and reported correctly. Efficiency, effectiveness, accuracy and reliability are the key drivers. All purchases and expenses are guided by formal approval mechanism. Also, dual control, segregation and access restrictions of all these items are given high importance. The internal control system is supplemented by extensive programme of internal audits, review by management and documented policies, guidelines and procedures. The internal control 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. All purchases and expenses are guided by formal approval mechanisms. Officials are designated for approval upto specified limits to have automatic and efficient cost control process. Your Company also has an Audit Committee. The Audit Committee reviews adequacy of internal control systems and the Internal Audit Reports and compliance thereof. The Committee reviews the internal control system and conduct of internal audits during the year. FIXED DEPOSITS Your Company has not accepted any fixed deposit from the public within the meaning of Sections 3(1)(iii)(d) and 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposit) Rules, 1975 made there under and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet and also on the date of this Report. DIRECTORS RESPONSIBILITY STATEMENT As required by the Companies (Amendment) Act, 2000, your Directors declare that: [i] in the preparation of the Balance Sheet, the applicable accounting standards had been followed along with proper explanation relating to material departures, wherever applicable; [ii] the Directors had 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 state of affairs of the Company at the end of the financial year; [iii] the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; [iv] the Directors had prepared the annual accounts on a going concern basis. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT (R & D), TECHNOLOGY ABSORPTION, ADAPTATION, INNOVATION, FOREIGN EXCHANGE EARNINGS AND OUTGO 1] Conservation of energy The operations of your Company are not energy-intensive. However, adequate measures have been taken to reduce energy consumption by using energy- efficient computer terminals and by purchase of energy-efficient equipments incorporating the latest technology. Although it was beyond the Companys financial capabilities to constantly evaluate new technologies and invest in them, your Company has made reasonable efforts to make its building structure and infrastructure therein more energy-efficient, which have enhanced energy efficiency. As energy cost forms a very small part of the total cost, the impact on cost is not material. 2] Research and Development (R&D) A lot of planning on research and development of new series, designs, frameworks, processes and methodologies have been undertaken during the year by your Company, involving nil or minimum cost repercussions. 3] Technology absorption, adaptation and innovation Your Companys technology focus is driven by the new economy business trends that are testing enterprises today: best quality and long life at cheapest cost. To meet this challenge, we believe in building niche competencies by focusing on selected areas. To this, your Company continues to invest in augmenting its state-of-the-art technological infrastructure in footwear manufacturing. 4] Foreign Exchange Earnings/Expenditure Foreign exchange earned and spent (on capital as well as revenue items) during the financial year ended March 31, 2006 is given below: (Rs. In Lakhs) 31.03.2006 31.03.2005 Foreign exchange earnings 325.26 1,113.26 Foreign exchange outgo for 1. Foreign Travel 5.43 13.07 2. Agency Commission 11.38 36.32 PARTICULARS OF EMPLOYEES The Directors wish to place on record their appreciation of the devoted services rendered by the employees of the Company at all levels. Your Company has not employed any person covered within Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended up to date. AUDITORS M/s. Sharma & Pagaria, Chattered Accountants, the present Statutory Auditors, retire at the conclusion of this Annual General Meeting, and have expressed their willingness to continue in office, if re-appointed. Your Directors propose their reappointment for the current year for the approval of members since the proposal is in the best interest of the Company. DIRECTORS Mr. Sunil Kumar Modi, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The constitution of the Board of Directors of the company has remained same as that of last year. REPLIES TO QUALIFICATION REMARKS IN THE AUDITORS REPORT FIXED ASSETS REGISTER The Company has taken steps to update its Fixed Assets Register for the previous years and is in the process of completing the same with details of their location and placing of identification marks during the current year. STOCK RECORDS The Company has taken steps to standardise its Stock Records, as per the instructions of Auditors, which will present day-to-day stock, consumption of stock as well as the rate of inventory. COST RECORDS The Company has updated the cost records to the extent possible in compliance of the provisions of Section 209(1)(d) of the Companies Act, 1956 and has been compiling information required therefor and also been setting out documentation in this regard. REGISTER OF COMPANIES AND FIRMS IN WHICH DIRECTORS ARE INTERESTED The Company has taken sincere steps to update this Register and hope to complete the process positively before March 2007. INTERNAL AUDIT SYSTEM As regards paragraph 7, in respect of absence of Internal Audit System, your Directors wish to state that there are necessary internal control procedures prevailing within the Company as already covered elsewhere in this Report, and further, considering the volume and nature of transactions carried out, your Directors feel that the present systems and procedures are self-sufficient for exercising proper controls. DISQUALIFICATION OF DIRECTORS The Company has already settled with IDBI & UCO Bank under OTS scheme approved by them and got substantial relief. On similar lines, Management of your Company is negotiating with Karnataka State Financial Corporation for certain relief in servicing the debts due to them including, but not limited to, extension of period for redemption of Debentures held by the Institution and also for concessions both in Interest & Principle under OTS. Company hope that the matter would be settled on or before March, 2007. Hence, if the Company succeeds in getting such approval, the Company will not be deemed to have defaulted in redemption of Debentures in consequence of which your Directors wish to state that they will not be disqualified to act as Directors under Section 274 (1) (g). As regards Note No. A1 of Schedule 18, dealing with The Company has prepared its accounts on the principle of Going-Concern Basis, it may be stated that the Company is trying to seize business opportunities in international trade and turnaround the Company on the back of substantially lower interest burden. As regards Note No. B7 of Schedule 18 regarding defraud by a third party of Rs. 10.00 Lakhs, your Directors state that the Company has not made provision for the same as they consider it to be a recoverable amount. The Company has taken active steps, including legal, in this regard and hopeful of recovering the amount. As regards other observations of Auditors, your Directors wish to state that the Auditors Report to the Shareholders read with relevant explanations in the Notes to the Audited Annual Accounts for the year ending 31st March 2006 as referred to in the Auditors Report are self- explanatory and therefore, do not call for any further comments or explanations. LISTING OF SHARES OF THE COMPANY Your Companys shares continue to be listed at Kolkata, Mumbai and Bangalore Stock Exchanges, and the Company has made timely payment of listing fee. Compliance Certificate on Corporate Governance as per clause 49 of the Listing Agreement Compliance Certificate as per clause 49 of the Listing Agreement has been obtained from a practicing Company Secretary and the same has been annexed to our report for the perusal of members. Reply to Qualifications on Corporate Governance report as per clause 49 1. Informally had made efforts to have efficient and financially literate/professional persons on board, but because of the financial problems and increasing losses for the past 8 years no positive response was there. We are thinking of issuing an advertisement in news paper to have independent directors before March, 2007. 2. As soon as the independent directors are available on the Board, Audit & Remuneration Committees & Share Holders Grievances Committee will be reconstituted. 3. Composition of subsidiary companys Board of Directors will also be subsequently reconstituted by appointment of independent persons as Additional Directors. CAUTIONARY STATEMENT The statements made above describing the Companys projections, estimates, expectations or predictions may be `forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. ACKNOWLEDGMENT Your directors acknowledge with a deep sense of gratitude the continued support extended by investors, customers, business associates, bankers, stock exchanges, Financial Institutions, vendors, regulatory and governmental authorities. Your directors also place on record their delight for the contribution of all employees of the Company in recording an overall performance. For and on behalf of the Board of Directors of KRM INTERNATIONAL LIMITED, Bangalore SHASHI MODI October 30, 2006 Chairman