murablack india ltd Management discussions

MURABLACK INDIA LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS ANNEXURE-I MANAGEMENT DISCUSSIONS AND ANALYSIS As you are aware, your Company was declared as a sick unit under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 by the Board for Industrial Finance and Reconstruction (BIFR) on 31st March 2000. BIFR had appointed Industrial Development Bank of India (IDBI) as the operating agency to look into the revival of the Company. BIFR has recommended winding up of the Company vide its letter no 383/99/BI dated 19th June 2003. The said BIFR recommendation to Bombay High Court to wind up your company has been assigned number as Company Petition No. 758 of 2004 (in BIFR case 382 of 1999).The matter will now come up for hearing in the usual course for appointment of official liquidator. The Directors of your Company, once again take this opportunity to explain the various steps taken for revival of your company: * Your Company was successful in securing an international arbitration award in its favour at the London Court of International Arbitration (LCIA). The LCI Aaward has completely extinguished the balance payment of SFr 5.871 Million payable under the second (ranch and also directed the collaborators to pay damages of SFR 3,158,200 and interest thereon till the date they make such payment. Additionally legal fees of sterling pound 225,000 were also awarded. However, till date the damages etc., as awarded, could not be recovered from the collaborators as they have reported bankruptcy under the Swiss Laws. * During the year under review CEGATE has dismissed our appeal filed against the Commissioners order no. 04A/PS-34/2002/M-III dated 27th March, 2002 adjudicating duty amount payable of Rs.197,096,699 (amount of interest not ascertainable) the amount of differential duty, interest and penalties payable amounting to Rs.464,054,965 (amount of interest not ascertainable). We are exploring various options to make representation to the higher Government authorities in the matter. * The entire dues of ICICI were settled amicably through a One-Time Settlement (OTS). * Canara Bank had accepted the Companys OTS proposal and according to the terms and conditions of the said consent terms Rs.52,00,000 Lakhs has already been paid to Canara Bank till date. However, for non-payment of further amounts under the OTS proposal, the same has been withdrawn by the Canara Bank. * Subsequent to the closure of the plant operations at Tarapur in the month of April 2000, all the workers and the employees have been paid their final dues as per law. * Your Company has made several unsuccessful efforts to settle IDBI dues. The likelihood of reviving your company has hinged upon IDBI accepting a settlement proposal. We are quoting extracts from the proceedings of BIFR hearing held on 18th of September 2002, which endorses the efforts committed by the Directors of your Company to ensure revival: The bench noted that the Company had failed because of the technical reasons. The Plant and Machinery which was imported was defective. The Promoters did their best to obtain relief and went for arbitration. However, before they could execute the award issued in their favor, the other party (the collaborator) went into liquidation. It was required that the Banks and FIs take a hard look at the options available and take a pragmatic view. The Paint supplied is technically defective. The recovery prospects would be negligible if the Company went into liquidation. OTS at 87% of the distress sale value of the assets on which Government agencies such as Income Tax and others also have a claim cannot be considered as totally unreasonable, especially when the borrower was not a willful defaulter. * Subsequent to the declaration of the Company as a Sick unit, the promoters continue to infuse funds from their personal resources, for holding on operations, securing your Companys assets and for making financial settlements. FUTURE OUTLOOK: In view of the foregoing paragraphs, the management feels that on the grant of the expected relief and concessions from financial institutions and the government, the activities may be revived. CAUTIONARY STATEMENT: Statement in the Managements Discussion and Analysis Report detailing the companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. These statements being based on certain assumptions and expectation of future events, actual results can differ materially from those expressed or implied. Important factors that could make a difference to the companys operations include economic conditions affecting global and domestic demand-supply conditions, finished goods prices, changes in Government regulations and tax regime etc. The Company assumes no responsibility in respect of forward-looking statements, which may be revised or modified in future on the basis of subsequent developments, information or events.