multi arc india ltd share price Directors report

MULTI-ARC INDIA LIMITED ANNUAL REPORT 2008-2009 DIRECTORS REPORT Dear Shareholders, The Directors of Multi-Arc India Ltd. take pleasure in presenting their 22nd Annual Report on the Business and Operations of your company together with Audited Accounts for the year ended 31st March 2009. FINANCIAL RESULTS Performance of the Company for the financial year ended on 31st March, 2009 is summarized below: (Rs. in Lakhs) A B C D Income Coating Charges 2004.94 3299.54 1121.30 2100.45 Other Income 86.45 218.22 57.24 218.22 Total 2091.39 3517.76 1178.54 2318.67 Total Expenditure 1862.70 2420.85 1253.62 1536.54 Profit before finance cost, 228.69 1096.91 (75.08) 782.13 depreciation and tax (Operating Profit) Finance Cost 321.14 469.21 77.30 224.77 Depreciation Cost 241.07 321.49 195.73 301.70 Misc. Exp W/off 0.12 0.12 000.00 000.00 Tax 9.55 33.83 2.73 27.85 Extra-ordinary Item 328.10 0.00 328.10 0.00 Deferred Tax Liability 5.09 1.292 000.00 0.08 Net Profit/(Loss) for the (15.09) 259.33 (22.74) 227.80 year Balance brought forward from (2055.60) 231.493 (2093.82) (2321.63) last year Balance carried forward to the (2070.69) (2055.60) (2116.56) (2093.82) Balance Sheet A = Consolidated Year Ended 31.03.2009 B = Consolidated Year Ended 31.03.2008 C = Standalone Year Ended 31.03.2009 D = Standalone Year Ended 31.03.2008 OPERATIONS REVIEW During the year under review, due to recessionary trend in gold economy and various industrial segments, the gross revenue and profits of the company are at lower level. During the last quarter, the company has introduced a new black DLC (Diamond Like Carbon) Coating which is being well received in the market and has a lower demand for Working Capital. The Company is in process of completing the restructuring. DIVIDEND In view of the current financial position of the company your Directors express their inability to recommend the declaration of Dividend for the year ended 31st March 2009. OUTLOOK FOR 2009-10 The future outlook remains cautions though some sectors in economy are posting the signs of improvement. In order to address future challenges, the Management is looking at rationalization of production facility, man power, disposal of surplus assets, introduction of new coatings where use of expensive, raw material is less or almost absent. SUBSIDIARY The working results of the subsidiary Company Multi Arc Coatings & Straps Ltd. reflected in the consolidated accounts forming of part of the Annual Report. MANAGEMENTS DISCUSSION AND ANALYSIS REPORT Managements Discussion and Analysis Report for the year under review, as stipulated under clause 49 of the Listing Agreement with the Stock Exchanges, is presented as a separate section forming part of the Annual Report. CORPORATE GOVERNANCE The Company, being a value driven organization, believes in coherent and self-regulatory approach in the conduct of its business to achieve the highest levels of good corporate governance practices. Your Directors adhere to the requirement of Corporate Governance as stipulated by SEBI. Report on Corporate Governance as stipulated under clause 49 of the Listing Agreement of the Stock Exchanges forms part of the Annual Report and is attached as Annexure B to this report. Certificate from the Auditors of the Company Mr.J.C. Bhatt, Chartered Accountant confirming compliance of the conditions of Corporate Governance as stipulated in Clause 49 is also attached and forms a part of Annexure B. HUMAN RESOURCES Employee relations were a little less cordial during year under review because of delays in paying wages. Your Directors place on record their appreciation to all the employees for their commendable understanding despite all odds and constraints. The provision of section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 is annexed to the Directors Report. FIXED DEPOSITS During the period under review, the Company has not received any deposits from the public pursuant to Section 58-A of the Companies Act, 1956. DIRECTORS Mr. Peter D. Flood, Mr.K. Ravindranath retire by rotation at the Annual General Meeting and being eligible, offer themselves for re-appointment. Mr. Duane Decara has been appointed as Additional Director from 31st July 2009 and holds the office till the ensuing Annual General Meeting. Brief resume of the Directors proposed to be re-appointed nature of their expertise in special functional areas and the number of Companies in which they hold directorship and membership/chairmanship of the Board Committees, as stipulated under clause 49 of the Listing Agreement with the Stock Exchange is provided in the Notice and Explanatory statement of the Annual General Meeting. Mr. Lincoln Schomer was appointed as Additional Director on 01.10.2008 and resigned on 31st July 2009. Mr. Umesh Gala and Dr. Yancy Riddle resigned as Directors of the Company with effect from 31st July 2009. The Board,places on record its appreciation for the valuable services rendered by the Directors during their tenure of the office. 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 that: (i) In preparation of the annual accounts, the applicable accounting standards have been followed along with a proper explanation relating to any material departures from the same. (ii) The Directors have selected such accounting policies, applied them consistently, and made judgment 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 profit or loss of the Company for the year ended on that date. The Directors 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 asset of the Company and for preventing and detecting fraud and other irregularities; and (iii) The Directors have prepared the annual accounts on a going concern basis. CONSOLIDATED FINANCIAL STATEMENT In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements, your Directors provide the audited Consolidated Financial Statement in the Annual Report. REMARKS IN AUDITORS REPORT Due to the continued liquidity crunch, investment in subsidiary, there have been delays in payment of statutory dues, employee related dues and Banks. Due to senior management attention focused in crisis Management there has been lapses in internal control system. The same will be corrected in the current ensuing year. The Management taking effective steps for resolving the liquidity crunch which will resolve all the issues and lead to improvement in gross revenue and profitability. AUDITORS M/s. J.C. Bhatt., Chartered Accountants, Statutory Auditors of the Company retire at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO This information pursuant to 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 is given in Annexure A to this report. ACKNOWLEDGEMENT Your Directors wish to place on record their deep appreciation for the whole hearted and sincere co-operation and guidance received from all Institutions, Financial Creditors. Your Directors also wish to extend their sincere thanks to all the customers, shareholders and vendors for their continuous support and to the employees for their unstinting co-operation and support extended to the management in achieving the desired performance from time to time. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS ASHOK K. JANI Executive Chairman Place: Mumbai Date : 30th July 2009 ANNEXURE A TO THE DIRECTORS REPORT STATEMENT UNDER SECTION 217(1)(e) READ WITH COMPANYS (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE PERIOD ENDED MARCH 31, 2009. A. CONSERVATION OF ENERGY (a) Energy Conservation measures taken.: The power factor for the period under review has been sustained at unity through continuous and closely monitoring by internal teams formed at coating center. (b) Additional Investment and proposal being implemented for reduction of energy consumption.: In Umargam the Chilling Plant and Compressor has been changed with a lower rating but with same required output. This has resulted reducing total power consumption. Further, the coating process has also been modified wherever necessary, which has resulted in, reduced power consumption in a number of operations at the coating center. (c) Impact of measurement at (a) and (b) above for reduction of energy consumption and the consequent impact on the cost.: The impact of (a) and (b) has resulted into conservation of energy and savings in total power bill has been lower than previous period even though the number of articles coated have been more (current year 8,60,458 units, previous year 20,49,252 units). (d) Total energy consumption per unit of production as per FORM A: Our industry is not listed among the industries which should furnish the information in FORM A and therefore your Company is exempted from production of goods furnishing the information under this clause. B. TECHNOLOGY ABSORPTION: Efforts made in technology absorption as per FORM B are as under: FORM B Form of disclosure with respect to absorption of technology and research and development (R&D). 1. Specific areas in which R&D was carried out by your Company.: The development of Coating on writing Pen parts such as pen clips and barrels has been completed and the commercialization of the same has been initiated. Development of Coating on Sewing Needles has been completed and commercialization is under way. 2. Benefit derived as a result of the above R&D: The commercialization of Pen parts coating will help the company to cater to non-horological sector, which has huge potential. Coating on sewing needles will enable company to venture in the non-gold sector of the market and will reduce companys dependence on gold coating. 3. Future plan of action: Our Company is the process of developing coating for machine (automobile) components. D L C Coatings are being developed for use in medical applications. Besides a number of similar developments are taking place with various agencies of the Government and also IISc Bangalore, IIT, Chennai, IIT Mumbai. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 1. Efforts, in brief, made towards technology absorption, adaptation and innovation: The coating processes have been modified for aesthetic coatings (gold coatings). Some new cathode designs are also under trials. 2. Benefits derived as a result of the above efforts, e.g. product improvement, cost reduction, reducing product development import substitution, etc.: The modification in the aesthetic coating process has helped the Company to reduce the consumption of gold and the reduce operational cost and save precious national resource. New cathode design will improve the product quality and reduce process rejection. 3. In case of imported technology (imported during last 5 years reckoned from the beginning of the financial year), following information may be furnished. a. Technology imported Nil b. Years Nil c. Has technology been fully absorbed Nil C. FOREIGN EXCHANGE EARNING AND OUTGO. Foreign Exchange outgo is in terms of traveling abroad and import of capital goods, raw materials and components. The Company coats few imported tools which improves its life by 10% resulting into corresponding foreign exchange savings coupled with reduction in the consumption of imported High Speed Steel, raw materials used for the manufacture of tools. a. Activities relating to exports initiative taken to increase exports, development of new export markets for product and service and export plans.: Ours is a service industry and therefore export opportunities are minimum. However, your Company is making efforts to export the expertise. b. Total Foreign Exchange used and earned: i. Used Rs. Nil (Previous year Rs.2,99,985) ii. Earned Rs. Nil (Previous year Rs.32,48,575) MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS Our company is in the business of surface enhancement. This is a high-tech Research and Development oriented business. Our business is multi-product, multi-location hence tight operational management of the logistic cost, Rationalization of Human Resources, Gold cost and effective use of assets is essential to meet the customers demand and faster turned around of their material. The Industry is moving towards supply of coated product rather than either supplying uncoated products or providing coating services. In this respect, our acquiring of Bharuch Plant through our subsidiary has proved very effective. To overcome the slow down in economy, we have increased and shifted our customer base from unorganized to organized segment improving gold recovery, to manage the increase in Gold cost and introduction of new black DLC (Diamond Like Carbon) Coating. OPPORTUNITIES AND THREATS (a) In Aesthetic coatings enormous opportunities exist both in gold coated products and non-gold products. Company continuously works hand in hand with the Industrial manufacturers and successfully develops new applications. In Wear Coatings new technologies are coming in internationally and our company has successfully tied-up arrangements to bring these new path breaking technologies to our country. In the changing industry scenario and to meet quick turnaround requirement of customers, Company has implemented its plans to establish additional Coating Centres. (b) Aesthetic coating business can be affected by high price of gold. However, impact of this has been mitigated by gold cost linked pricing with major customers. Company is also making progress in successful application of non-gold coating business. SEGMENT-WISE PERFORMANCE The Company has only single segment namely surface enhancement, therefore, disclosure of segment-wise performance is not required. OUTLOOK The Global economy and Indian economy are facing recessionary trends and a slow down. There are signs of improvement in some sectors. The increase in Gold price is a threat and would affect our margins. The poor quality unorganized sector is trying to enter the Coating business. These would post some problem in the short term, but the lack of quality and technology will not seriously on the part of unorganized sector will have no impact on our performance, as we mainly cater to organized Players who have a strong quality control and expect strong commitments to deliveries. Besides the growth of rural market will also provide growth opportunity, The increase of Gold price has paradoxical impact to the business whereby the margins will be squeezed but market-size will grow. Many applications which were conventionally Electro plating would use our technology. The business will be driven by strong technological development and managing Gold cost. The Decorative coatings of other colours which do not involve Gold also become very important. RISKS AND CONCERNS Our company is exposed to external and internal risks. External risks arise out of nature of demand, entry of new manufacturers, expansion of capacity by existing players, international companies entering India, technological obsolescence, rising price of raw materials, etc. These risks are continuously being monitored and are sought to be mitigated by tie-up for new technologies, acquiring new capacities, establishing new Coating Centers near to customer locations and achieving backward and forward integration. Internal risks are being mitigated by continuous productivity improvements, developing new applications through our R&D efforts in collaboration with customers and Government Agencies. Employees are motivated and prepared for higher responsibilities to successfully manage new businesses through training and empowerment and to mitigate risks arising from attrition. INTERNAL CONTROL SYSTEMS The company is committed to maintaining an effective system of internal control for facilitating an accurate, reliable and speedy compilation of financial information for safeguarding the assets and interest of the Company and ensuring compliance with laws and regulations. The Audit Committee consists of independent Directors from our Board of Directors. HUMAN RESOURCES Our Company has always believed that Human Resource is the most important capital of the company, and as a continuous process has been striving to value-add to this asset by various measures. CAUTIONARY STATEMENT Statements in the Management Discussion and Analysis describing the Companys position and expectation may be forward looking statements within the meaning of applicable securities laws and regulations. Actual performance could differ from those express or implied. Important factors that could make a difference to the Companys operations include, interalia, economic condition affecting demand/supply and price conditions in the market in which the company operates, especially the price of raw material (Gold), changes in government regulations, other statutes and incidental factors that are beyond the control of the Management.