mahendra petrochemicals ltd share price Directors report

MAHENDRA PETROCHEMICALS LIMITED ANNUAL REPORT 2003-2004 DIRECTORS REPORT To, The Members, MAHENDRA PETROCHEMICALS LIMITED Your Directors have pleasure in presenting the 17th Annual Report together with Audited Annual Accounts of the Company for the Year ended on 30th September 2004. FINANCIAL RESULTS: (Rs. in lacs) Current Year Previous Year (2003-2004) (2002-2003) Profit Before Financial Charges Depreciation & Taxation 665.56 375.97 Less : Financial Charges 88.18 10.93 Depreciation 359.08 447.26 328.00 338.93 Profit Before Taxation 218.30 37.04 Less : Provision for Taxation 0.00 0.00 Profit after Taxation 218.30 37.04 Add: Extra Ordinary & Prior Period Items and rectification of errors 635.97 0.00 Net Profit 854.27 37.04 Add : Opening Balance of Profit & Loss Account (6852.56) (6889.60) Profit available for Appropriation (5998.29) (6852.56) APPROPRIATIONS: Transfer to Debenture Redemption Reserve 5.25 0.00 Balance Carried forward to Balance Sheet (5998.29) 0.00 OPERATIONS: The turnover and other receipts of the Company for the year under review has resulted to Rs.135.36 Crore as compared to Rs.109.12 Crore for the previous year The Profit/(Loss) before Depreciation, Financial Charges and Taxation has been Rs.665.56 Lac as compared to Rs.375.97 Lac during the previous year and profit/(loss) after financial charges. depreciation and taxation but before including income from extraordinary & prior period items and rectification of errors was Rs.218.30 Lac as compared to Rs.37.04 Lac during the previous year. The Net profit for the year after tax and inclusion of income from extraordinary & prior period items and rectification of errors has resulted to Rs.854.27 lacs. The interest en unsettled loan funds has not been provided during the year under consideration due to the fact that a rehabilitation scheme has been proposed by the Company for the repayment at overdue and irregular secured and unsecured loans without overdue interest/interest at a negotiable rate of interest and interest provided upto the last year are more than sufficient to meet the proposed interest. The polyester Industry in India and globally has been suffering mainly on account of over supply of POY/PFY/ Polyester Chips couple with lower realisation due to unhealthy competition from south east Asian countries. There was a sharp decline in the Price of POY worldwide without commensurate reduction in the cost of raw material as a result there was an unprecedented squeeze in the margin of POY. The selling pressure has resulted into a decline in price level at global markets. This has adversely affected the profitability of the Company. Certainly the results reflect severe recessionary trend prevailing in Textile Industry since last few years. Oversupply situation couple with more emphasize on globalization have squeezed margins not only of your company but almost of every leading house in the filed of textiles. PRODUCTIVITY: During the year the Company geared up its manufacturing system to handle the frequent change over in denier of the yarn and to speed up response to the market demands as well as to obtain maximum production out of the existing production activity and balancing the production capacity of the Company as well as disposing off idle and non usable equipments. DIVIDEND: As there ar a no divisible profits during the year under review your directors are unable to recommend any dividend. REFERENCE TO BIFR FOR RESTRUCTURING OF DEBT: The Company is a Sick Industrial Company as defined in the Sick Industrial Companies (Special Provisions) Act. 1985. The Company has filed a reference before the Board for Industrial and Financial Construction of India (BIFR), March has been registered and pursuant to said reference the Company has been declared a SICK Company, consequently a rehabilitation scheme is under finalisation in consultation with operating agency IDBI and secured fenders. The Company has proposed repayment of principle to IFCI and Bank of Baroda with overdue interest at the negotiable rate of interest on simple interest basis from the date of default and only principle in case of other lenders with no overdue interest However effect of the said repayment proposal has not been given in the annual accounts due to pending approval from respective lenders as well as the BIFR. The Company has also proposed to reschedule the repayment period of secured as well as unsecured loan in the said rehabilitation scheme. However the BIFR has ordered the Operating Agency to proceed for the change of management of the Company and in response to this the Company has appealed to the Appellate Authority for Industrial & Financial Reconstruction (AAIFR) against the said order vide appeal no. 236/04 and the subject matter has been stayed till the next hearing vide AAIFR order dated 02-12-2004. DEPOSITS: During the year under review, your Company has not accepted / renewed any deposit, which is covered under the provisions contained in Section 58A of the Companies Act. 1956, from the public. DIRECTORS: Shri M.K. Arya, director of the Company. who retires by rotation and being eligible, offer himself for re-appointment. The IFCI limited has withdrawn the Nomination of Director from the Board w.e.f. 08-06-2004 and again w.e.f. 15-09-2004 Shri Nagpati V Brat was appointed as Nominee Director of the Company on behalf of IFCI Ltd. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The information as required under the provisions contained in Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, with respect to conservation of energy. technology absorption and foreign exchange earnings/outgo is as per Annexwe A enclosed herewith and forming part of this Report. PARTICULARS OF EMPLOYEES: During the year under review. since there was no employee in receipt of remuneration upto and more than the limits prescribed under the provisions contained in Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules. 1975, the information under those provisions is not required to be given. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to the Directors Responsibility Statement, it is hereby confirmed: a) That in the preparation of the Annual Accounts. the applicable Accounting Standards have been followed and that no material departures have been made from the same subject to notes on accounts; b) That the directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review; c) That the directors have taken proper and sufficient care for 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: d) That the directors have prepared the annual accounts on a going concern basis. AUDITORS: The Auditors of the Company. M/s. R. Choudhary & Associates, Chartered Accountants. Ahmedabad retires at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a Certificate from the said Auditors to the effect that their reappointment, if made, would be within the limits prescribed under Section 224(18) of the Companies Act, 1956. The Notes to the Accounts referred in the Auditors Report are self- explanatory and therefore do not call for any further explanation. COST AUDITORS: Pursuant to the directives of the Central Government under the provisions of section 2338 of the Companies Act, 1956 the Company has appointed M/s N.D. Birla & Company to conduct the Audit of the Cost Records of the Company. PARTICULARS OF LISTING OF SECURITIES: The shares of the Company are listed on the Ahmedabad Stock Exchange. The Bombay Stock Exchange, The Delhi Stock Exchange Association Limited, The Calcutta Stock Exchange Association Limited and The Madras Stock Exchange Limited. The Annual Listing fee of The Delhi Stock Exchange Association Limited, The Calcutta Stock Exchange Association Limited and The Madras Stock Exchange Limited are in arrears. INDUSTRIAL RELATIONS: The relations between the employees and the management continue to remain cordial during the year under review. The Directors hereby place on record their appreciation for the efficient and loyal services rendered by the employees of the Company at all levels. CORPORATE GOVERNANCE: In term of Clause 49 of the Listing Agreement with the Stock Exchange a report on the Corporate Governance along with the Auditors Statement on its Compliance is appended as annexure B to this report. APPRECIATION: Your Directors wish to express their deep sense of appreciation to all the employees of the Company for their excellent support and co-operation in achieving the organizational goals during the year under review. Your Directors also wish to acknowledge the co-operation and assistance received from the valued customers, suppliers. Banks, Financial Institutions and various Governments. Semi-Government and other Authorities. Last but not least, your Directors would like to place on record their appreciation to all the shareholders for their continued confidence in the Company. FOR AND ON BEHALF OF THE BOARD Date : 03.03.2005 M.K. ARYA Place: Ahmedabad CHAIRMAN MANAGEMENT DISCUSSION & ANALYSIS: a) TEXTILE BUSINESS/INDUSTRY OUTLOOK Recently Abolition of Import Quota System under the Multi Fibre Agreement with effect from January 2005 and favorable government encouragement to the Industry by way of forming export friendly policies, whether it is 80% reduction in excise duty on Polyester Filament Yarn (PFY) to 16% or reduction in Import Duty on Textile Machinery from 20% to 10% or option to avail of exemption route or pay 8% excise duty with CENVAT credit etc. are few explicit favors from the government to the Industry, which will definitely provide Indian Exporters a strong foundation to meet international challenges and to compete with our main competitors China, Korea and Taiwan. b) HUMAN RESOURCE/INDUSTRIAL RELATIONS: Your Company has been successfully maintaining the cordial and peaceful relationship with the employees at all levels, which has been possible with the outstanding support of employees and outsiders both. Your Directors also wish to acknowledge the co-operation and assistance received from the valued customers, suppliers, Banks, Financial Institutions and various Governments, Semi-Government and other Authorities. c) INTERNAL CONTROL SYSTEMS; The Company has adequate internal Control System commensurate with the size of the Company and the nature of its business. d) MANUFACTURING EXCELLENCY; To compete in and face the Market Challenges our management is taking all the necessary steps to limit the cost and putting entire attention over the quality of product to meet the global standards. e) CAUTIONARY NOTE: Certain statements in the Management Discussion & Analysis section may be forward looking and are stated as required by the applicable laws & regulations. Many factors may affect the actual results, which could be different from what the directors envisage in term of future performance and outlook. f) FINANCIAL PERFORMANCE (Rs. in lac) Particulars 2003-2004 2002-2003 2001-2002 INCOME Sales 13535.97 10911.58 11444.08 Other Income 9.06 0.10 0.45 13545.03 10911.68 11444.53 Less :- Excies & Custom Duty Expenses 3228.56 1096.56 872.90 10316.47 9815.12 10571.63 EXPENDITURE: Materials & Overheads (+/- Stock Adj.) 9650.91 9439.15 10089.68 PROFIT BEFORE INTEREST, DEPRECIATION, TAXATION 665.56 375.97 481.95 Less :- Financial Charges 88.18 10.93 723.42 GROSS PROFIT 577.38 365.04 (241.47) Less :- Depreciation 359.08 328.00 346.65 Less :- Provision for Taxation 0.00 0.00 0.00 218.30 37.04 (588.12) Add : Extra Ordinary, Prior Period adjustments and Rectification of Errors 635.97 0.00 0.00 NET PROFIT 854.27 37.04 (588.12) APPROPRIATIONS: Opening Balance (6852.56) (6889.60) (6301.48) Transfer to Debenture Redemption Reserve 5.25 0.00 0.00 Closing Balance (6003.54) (6852.56) (6889.60) 854.27 37.04 (588.12) EARNING PER SHARE 4.65 0.20 SOURCES & APPLICATION OF FUNDS Particulars 2003-2004 2002-2003 2001-2002 SOURCE OF FUNDS Shareholders Funds 1792.15 1792.15 1792.15 Reserves & Surplus 1506.16 1500.91 1500.91 3298.31 3293.06 3293.06 Loan Funds 6032.81 6697.86 6725.97 Funds Employed 9331.12 9990.92 10019.03 APPLICATION OF FUNDS: Fixed Assets (Gross) 6412.32 6255.54 5847.85 Depreciation 4309.72 3950.64 3722.02 Fixed Assets (Net) 2102.60 2304.90 2125.83 Investments 0.00 3.75 3.75 Current Assets(Net) 1210.04 803.27 961.91 Defered Tax Liability 0.00 0.00 0.00 Misc Expenses 14.94 26.44 37.95 Profit & Loss A/C 6003.54 6852.56 6889.59 Net Assets Employed 9331.12 9990.92 10019.03 ANNEXURE A TO THE DIRECTORS REPORT Particulars of Conservation of Energy, Technology Absorption and foreign exchange earnings and outgo in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 forming part of the Directors Report for the year ended 30th September, 2004. I. CONSERVATION OF ENERGY: (a) Energy Conservation Measures Taken Conservation of energy has always been an area of priority in the Companys operations. The Company is focusing on installation of energy efficient machinery and processes, however the Company is facing funds constraints. FORM A DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY POWER & FUEL CONSUMPTION: 1. Electricity: Current Year Previous Year 2003-04 2002-03 a) Purchased Units (in lacs) Nil Nil Total Amounts (Rs. lacs) Nil Nil Rates/Unit (Rs . lacs) Nil Nil b) Own Generation: 1. (Through Diesel Generator) Diesel Consumed (ltrs.) 3959045 3498456 Total Amount Rs. 71286228 53816251 Cost/Ltr. (Rs.) 18.00 15.38 2. Coal Lignites & Fire Wood Nil Nil 3. Furnace Oil Nil Nil 4. Others (Internal Generation): Nil Nil FORM B II. RESEARCH & DEVELOPMENT: The Company has no specific Research and Development department. However, the Company has a quality Control Department to keep a check and maintain the quality of different products manufactured. III. TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION: The Company strives to keep itself updated with all latest technological innovations by way of constant communications and consulting experts. Sincere efforts are being made to reduce cost and to improve performance, quality as well as efficiency. But due to funds constraints the Company is not able to implement and adopt costlier technologies and innovations. FOREIGN EXCHANGE EARNINGS/OUTGO: (Rs. In Lakh) Current Year Previous Year. 2003-04 2002-03 Foreign Exchange Earnings: 33.71 0.00 Foreign Exchange Outgoings: 166.88 6.54 BY ORDER OF THE BOARD FOR MAHENDRA PETROCHEMICALS LIMITED M.K. ARVA CHAIRMAN Date : 03.03.2005 Place: Ahmedabad.