pentafour solec technology ltd Directors report

PENTAFOUR SOLEC TECHNOLOGY LIMITED ANNUAL REPORT 2002-2003 DIRECTORS REPORT TO THE MEMBERS Your Directors have pleasure in presenting the Tenth Annual Report of the company and the audited statement of accounts for the period ended March 31, 2003. SUMMARISED FINANCIAL RESULTS (Rupees in lakhs) Period ended Period ended Mar. 31,2003 Dec. 31,2001 Sales/ Income 16.30 95.27 Profit/(Loss) before interest, depreciation & tax (318.07) (501.69) Profit/(Loss) before depreciation & tax (753.85) (979.83) Depreciation 291.17 291.15 Profit/(Loss) before tax (1045.03) (1270.98) Provision for tax Nil Nil Profit/(Loss) after tax (1045.03) (1270.98) Add : Surplus/(Deficit) brought forward from previous year (1028.90) 242.08 Surplus/( Deficit) carried forward (2073.93) 1028.90 RESERVES & SURPLUS The unadjusted reserves and surplus of the company stood at Rs.155 lakhs as at March 31, 2003; the accumulated loss has exceeded the entire gross net worth (paid up equity share capital plus reserves and surplus) of the company. BUSINESS REVIEW The company filed its application with the Board for Industrial & Financial Reconstruction (BIFR) and the same was registered as Case No.346/2002. The company is formulating a detailed scheme for consideration by the Board for Industrial and Financial Reconstruction for rehabilitation, restructuring and revival of the business operations of the company. The operations at the Plant remained suspended throughout the period, due to the delay in tie up of funds operations could not be revived. The loss suffered by the company in the preceding financial years and delay in infusion of envisaged funds during the year has resulted in severe cash crunch. The net loss posted during the year has been comparatively higher due to diminution in value of inventory and slump sales, the high incidence of interest and financial charges associated with the Cell Line (Phase II) with no corresponding revenue accruing on the investments made on this backward integration. The performance of the company during the period under review should be viewed in the backdrop of these events. The banks and financial institutions have recalled the facilities and advances besides initiating judicial and recovery proceedings against the immovable properties of the company. The absence of adequate working capital has resulted in delay in settlement/payment of employee related dues including provident fund and other statutory dues. However, periodic payments are being made to reduce the outstandings. As a measure of austerity the company has thoroughly reviewed its manpower requirements and has retained the services of only those which are presently essential. Negotiation and crystallization of liabilities with banks and financial institutions would be initiated. Significant concessions, reduction in liabilities and savings in interest costs are expected to accrue as a result of this exercise, appropriate adjustments have been made in the financial statements to reflect these changes, the liabilities have been accordingly reinstated. FUTURE OUTLOOK Your directors propose to seek rescheduling the repayment of term loans and other concessions in the interest on term loan and working capital loans from the financial institutions and banks. With the industry showing signs of recovery your directors are confident of turning around from the sickness and achieving positive net worth within the next five years. There has been an upward trend in global awareness and appreciation for the need to harness energy through environment friendly non-conventional methods. Worldwide, significant research and development activities are underway in the field of solar photo voltaic. With the infrastructure industry registering positive growth rates the solar photo voltaic segment is poised for accelerated growth. The Projected growth in world demand for SPV by European Photo voltaic Industry Association (EPIA) has been encouraging. The current estimates are approx. 225 MW in year 2003, 550 MW in year 2005 and 1800 MW in 2010. The global installed capacity for solar photo voltaic is 225 MW. While the domestic installed capacity is 20 MW. The company has an installed capacity of 3 MW. Adequate steps are being taken not only to restructure and revive the operations of the company but also embark upon upgradation of the existing facilities besides exercising strict control over cost, adopting austerity measures and reducing the employees strength. With the proposed package for rehabilitation of your company and support from bankers and financial institutions, your directors are optimistic of achieving better performance. Your directors are confident that the company will be in a position to meet the challenges of the future with the support of its bankers and financial institutions. The future of the company would largely depend on the rehabilitation package and anticipated infusion of adequate working capital. At the annual general meeting of the company held on June 29, 2001 members of the company have accorded their consent in terms of section 293 (1)(a) of the Companies Act, 1956 and other applicable provisions to empower the Board to carry out such restructuring of its business operations, in the process may sell, lease or otherwise dispose off its assets as they may deem fit. The members of the company at the previous annual general meeting held on June 29,2001 have accorded their consent to the board of directors of the company for raising resources by way of offer, issue and allotment of securities in the aggregate not exceeding US Dollars 15 million or equivalent in Indian rupees (excluding the sums raised by way of premium). Due to the prevailing tight monetary conditions in the domestic and international markets the board deemed it fit not to act on the consent accorded by the members for raising resources. Efforts are underway to identify strategic investment(s) and the board would act on the said resolution at the appropriate juncture. DIVIDEND Considering the losses suffered by the company, the directors do not recommended any dividend for the period ended March 31, 2003. DIRECTORS Mr. V. Ramakrishnan, Director, retires by rotation and being eligible offers himself for re-appointment. AUDITORS Messrs. R. Swaminathan & Co. Chartered Accountants, Chennai, hold office until the conclusion of the ensuing annual general meeting. The company has received a letter from M/s. R. Swaminathan & Co., Chartered Accountants, Chennai to the effect that their appointment, if made, would be within the limits prescribed under section 224 (1) of the Companies Act, 1956 and are thus eligible for re-appointment. AUDITORS REPORT With regard to the remarks in the Auditors Report, the relevant financial notes are self explanatory and in the opinion of the management, do not call for further elucidation. PUBLIC DEPOSITS The company has not accepted any deposits from the public. DIRECTORS RESPONSIBILITY STATEMENT The directors hereby state that in the preparation of the annual accounts, the applicable accounting standards have been followed except accounting standards 6, 17, 18, 20 & 22; that the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent 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 or loss of the company for that period; that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; that the directors have prepared the annual accounts on a going concern basis. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING / OUTGO The thrust on energy conservation continued though energy consumption of the companys factory is not a major cost factor. Energy consumption devices have been installed where appropriate and steps taken to conserve energy time to time. The statement in Form B pursuant to 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 is disclosed in the annexure forming part of this report. PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) There were no employees drawing remuneration during the period in excess of limits prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. CORPORATE GOVERNANCE A report on Corporate Governance is annexed to this report. ACKNOWLEDGMENTS Your directors wish to record their deep sense of gratitude to the Central and State Governments, Financial Institutions, Banks, customers, suppliers and members for their continued support and assistance. Your directors also wish to place on record their deep sense of appreciation for the devoted services of the executives, staff and workers of the company. for and on behalf of the Board V. Ramakrishnan Chairman Place: Chennai Dated: August, 21, 2003 Statement of particulars of conservation of energy, technology absorption, foreign exchange earningsand outgo pursuant to section 217 (1) (e) read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. FORM - B DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION. Research and Development (R&D) 1. Specific areas in which R & D is carried out by the Company. R&D efforts are directed towards quality control improvement/upgradation of existing products and development of new products. 2. Benefit derived as a result of the above R&D: Improvement in quality, cost effectiveness and realisation of higher levels of production. 3. Future plan of action: Consolidate the results achieved, pursue improvements in the above areas to achieve international quality standards. 4. Expenditure on R & D a) Capital Nil (2001 - Nil) b) Recurring Rs. 9,450 (2001-Rs. 1,47,855) c) Total Rs. 9,450 (2001-Rs. 1,47,855) d) Total R&D expenditure as a percentage of total turnover 0.58% (2001-1.55%) Technology absorption, adaptation and innovation 1. Efforts, in brief, made towards technology absorption, adaptation and innovation. Training and retraining of the existing personnel and the new personnel is being practised to ensure that technology absorption is complete and transferred to new generation technical personnel. 2. Benefit derived as a result of the above efforts etc. product improvement, cost reduction, product development, import substitution, etc. Absorption of the state-of-the art technology and reduction. Particulars of Imported Technology a) Technology imported From Solec International Inc.,USA b) Year of Import 1993-94 and 1997-98 c) Has technology been fully absorbed Partially absorbed. d) If not fully absorbed, areas where this has not taken place, reasons thereof and future plans of action: Technology for manufacture of modules absorbed, solar cells in progress. Foreign Exchange Earnings and Out Go 1. Activities relating to exports, Firm tie-up with collaborators initiatives taken to increase for buy-back of P.V. modules. development of new export markets for products and services and export plans 2. Total foreign exchange (a) used Rs. Nil (2001 - Rs. Nil) (b) earned Rs. Nil(2001 - Rs. Nil) for and on behalf of the Board V. Ramakrishnan Chairman Place: Chennai Dated: August 21, 2003