karam chand thapar brothers coal sales ltd Management discussions

KARAM CHAND THAPAR AND BROTHERS (COAL SALES) LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS BHARAT WESTFALIA DIVISION The turnover of this Division for the current year under review is Rs. 1757 lakhs as against Rs. 626 Lacs in the last year. Out of the order for 6 chair lifts as reported last year, 5 have already been supplied and the 6th one has also been supplied in the current year. We are hopping to receive further orders of such systems. Meanwhile, efforts are on to secure collaboration with a foreign company for manufacture of equipment which has ready market in the steel industry. COAL SALES DIVISION : This Division has maintained steady performance in the year under review and it is expected in the year 2006-07 it will continue to perform satisfatorily. PRODUCE EXCHANGE DIVISION: This Division aimed to increase its volume of Paper Sale in the year under review and successfully posted a turnover of Rs. 128 Crores against Rs. 102 Crores of 2004-05. The initial months had shown good result but in the latter period of the year the market slumped due to increased cost of paper which was not accepted by the market and had to be absorbed by the Distributor. Also our principal, BILT has started a multi-branding scheme which in turn has let to their appointing many new Distributors. Therefore competition has become intense and margins have failed. In addition, BILT has discountinued manufacturing NSS which has greatly impacted our bottom line in upcountry markets. However, efforts are nevertheless being made to achieve better result in the current year. TICIL DIVISION : TEHRI PROJECT: HPP Civil Work for the first phase 1000 MW underground powerhouses in 3 packages awarded to the Company has been successfully completed during the year. The Board is pleased to inform you that your Company has constructed one of the largest underground powerhouse in Asia which has started generating power effective from 18th July, 2006. First power generating unit of 250 MW has been formally commissioned by the Union Power Minister, Mr. Sushil Kumar Shinde on 30th July, 2006. Other three Units of 250 MW will be successively commissioned by December 2006. The value of work done by your Company upto 31st March, 2006 has exceeded 277% of original contract value of the HPP work. M/s Tehri Hydro Development Corporation (THDC) has awarded some preparatory additional work related to phase II for 1000 MW Pump Storage plan, which we hope, will be completed by March, 2007. The total estimated value of the work till completion will be about Rs.700 Crores, which includes original HPP civil work, additional work and part of PSP work as awarded until now. The dispute (in regard to Rebate under Clause 34 of the Contract) was referred to Arbitration and is in advanced stage of the arbitration proceedings. There are several other claims relating to HPP work, which are under settle through various processes like THDC Corporate Office, Special Committee formed by CMD of THDC and the DRB. The Company is hopeful of favourable decisions in these claims. PYKARA PROJECT: Preparation of final bill is under progress. OTHER PROJECTS: Various claims relating to Kangan Project, Salal Project and Diversion Tunnel work at Tehri are in progress before the Arbitrators and Courts. Opening up of the power sector and infrastructure projects is presenting many new opportunities in the Country and your Company is well poised to explore the avenues. The Company further proposed to leverage its expertise in such infrastructure and hydro power projects and is proactive in its efforts to participate in such projects in different parts of the Country.