Kinetic Motor Company Ltd Merged Management Discussions

KINETIC MOTOR COMPANY LIMITED ANNUAL REPORT 2009-2010 MANAGEMENT DISCUSSION AND ANALYSIS Business Restructuring: After transfering its 2-wheeler business related assets to a Mahindra group company (Mahindra Two Wheelers Limited) as part of its business restructuring, in November, 2008, the Company has been evaluating different avenues for newer businesses. Recently it has succeeded in commencing the trading and marketing of Postal Soleckshaw - a power driven light-duty 3- wheeler carrier, intended to be used by postal services. The Company expects the concept of Postal Soleckshaw to get accepted well in the market. The Company also aims to undertake further developmental work, for exploring newer applications of the concept. Financial Restructuring: After utilizing the funds available from the sale of two-wheeler business related assets, for settling secured lenders and various other liabilities, during the year under review the Company has continued the process of settlement of unsecured creditors. During the year, 8,71,795 6% Compulsorily Convertible Cumulative Preference Shares of Rs.39 each, were converted into equity shares of Rs. 10 each, at a premium of Rs.29 each. Further, during the year, the Company issued and allotted 56 lac Optionally Convertible Cumulative Preference Shares (OCCPS) of Rs.14.20 each, through preferential allotment, in terms of the SEBI DIP Guidelines. Out of these, 18 lac OCCPS were converted into equity shares of Rs.10 each, at a premium of Rs.4.20 each. Research & Development And Technology Absorption: During the period under review, the Company has not acquired new technology, and there were no research and development activities undertaken by the Company. Industry Overview: The Company has a strategic investment, in terms of holding of 20% equity of Mahindra Two Wheelers Limited (MTWL). MTWL operates in the fast growing market of two wheelers, and manufactures two wheelers at the well established Pithampur factory. MTWL has earlier launched two new models / variants of scooters last year reached a monthly sales level of about 16000-17,000 numbers in the scooter segment. MTWL achieved a yoy growth of over 50% as compared to the industry growth of about 28%, as reported in SIAM (Jan, 2011). MTWL recently also announced their plans of an aggressive foray into motorcycles and have entered the large-potential market segment of motor- cycles by launching a new motorcycle, the 110 cc Stallio. Opportunities, threats, risks and concerns: The Company, having sold its assets relating to two wheeler business in November, 2008, as mentioned above, is cautiously optimistic regarding the future prospects and opportunities for its associate - MTWL - in the long term. The concept Postal Soleckshaw is still in its infant stage, and needs to meet the rigors of the real life situations, for its future success. Outlook: After having sold its assets relating to two wheeler business in November, 2008, and after paying off its secured debts and substantially reducing its other liabilities, and after embarking upon the new business of trading and marketing of Postal Soleckshaw, the Company is now evaluating different avenues for further newer businesses. Company remains optimistic that the investment made in Mahindra Two Wheelers Limited, in terms of 20% equity stake will appreciate in coming years and create value for the shareholders of the Company. Financial performance vis-a-vis Operational performance: Sales and Other Income: Sales and other income in the period under review were Rs. 7.62 crores as against Rs. 34.22 crores in the previous period, due to discontinuance of two-wheeler business. Margin: The company reported a net loss of Rs.6.05 crores in the period under review as against net profit of Rs. 97.63 crores in the previous period. The loss is due to discontinuation of two-wheeler business. Interest Cost: Interest cost in the period under review was Rs. 0.12 crores as against Rs. 0.36 crores in the previous period. Inventory: Inventory for the period under review was Rs. 0.60 crores as against Rs. 0.67 crores in the previous period. Debtors: Debtors for the period under review were Rs. 1.34 Crores as against Rs. 6.08 crores in the previous period. Internal Control System: Your Company has adequate internal control system commensurate with its size and nature of business for ensuring efficiency of operations and protection of companys assets. With a view to ensure better internal control systems, the companys Audit Committee periodically reviews compliance with Companys policies, procedures and laws. Human Resource Development: During the period under review, most of the employees were transferred to Mahindra Two Wheelers Limited. Throughout the period under review, the relationship with the remaining employees has been cordial. Cautionary Statement: This Management & Discussion Analysis Report contains forward looking statements, based on Companys projections, estimates and perceptions about socio-economic conditions, government policies etc. The Company does not guarantee their accuracy, and cautions that circumstance beyond control of the Management may affect the actual working.