Polar Industries Ltd Management Discussions

POLAR INDUSTRIES LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS 1. RESTRUCTURING OF SECURED DEBTS One Time Settlement (OTS) of all the secured debts of the Company was sanctioned at Rs. 32 Crores under Corporate Debt Restructuring (CDR) mechanism followed by individual sanction from the lenders. In the meanwhile, Asset Reconstruction Company (India) Ltd. (ARCIL) has acquired the debts of all the secured lenders except IIBI and have restructured the total secured debts of Rs.95,22 Crores as on 31.03.2008. As per ARCILs sanction, the Company allotted 30,74.300 equity shares at par for Rs.3.07 Crores to ARCIL and the balance debt of Rs. 59 Crores would be repaid over a period of 5 years between 2008-2013. The Company in spite of all efforts could not infuse working capital into the system on time. The Company unable to bring in required working capital pruned down its structure to almost half by closing down various divisions other than the core business of fans, with only one Fan unit remaining. The Company has received letters under Section 13(2) & 13(4) of the SARFAESI Act, 2002 from ARCIL. The Company has considered One Time Settlement of dues with ARCIL and the same is under discussion. 2. Consolidation of Manufacturing Units The Companys one manufacturing unit at Noida, is presently under the possession of ARCIL. The said unit was already seized by the UP Sales Tax Department. This has affected the Company resulting in generating low operational activities. 3. Opportunities & Threats Opportunities * The macro economic policies of the government and continuous emphasis on infrastructure activities have lead to the booming housing sector. * Urbanization & Rural Prosperity due to agro-revolution has improved the rural economy. Also, the aspiration level has improved by media and advertising, there is a vast scope of fans, as essential items in rural and semi -urban areas. * One of the major opportunities is Conversion from Unorganized sector. There is a shift in consumer mindset from low priced non-branded products to branded (value for money). * The small appliances market is growing vigorously and offers an equal opportunity to grow. * Polar has very strong Brand Recall, its Brand Identity and Brand Personality is well known and hence creating awareness for sub-brands of each product segment will not entail much time, effort and cost. Threats * A major threat for the branded fan manufacturers has been the lack of government regulations for curbing unscrupulous manufacturers producing and selling duplicate fans of renowned brands. This primarily should be the responsibility of the government to curb the development and growth of these manufacturers. * The most challenging and uphill task before the Company is to restructure its operations and regain lost market share from its close competitors. 4. Internal control systems & their adequacy The accounting and administrative controls established by the Company are appropriate to the size and nature of the business of the Company. The Company has adequate internal checks in day to day transactions and proper checks and balances in its accounting procedure and practice, to eliminate frauds. The Company has system of adequate audit to ensure that accounting and other allied records have been maintained properly. Budgets are prepared for each segment separately on monthly and yearly basis. Actual performances nowhere have been near to budget as the inflow of funds has never been in line with the budget. The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. The fixed assets of the Company are physically verified by the management at regular intervals. 5. Cautionary Statement Statements in the Management Discussion and Analysis may be forward looking statement which may be identified by the use of words in that direction or connoting the same. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include economic conditions affecting demand/supply and price conditions in the markets in which the Company operates, changes in government regulations, policies, tax laws and other statues and other incidental factors. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events. For and behalf of the Board of Directors sd/- Place: Kolkata Anil Kumar Agarwal Date : 14th August, 2012 Chairman & Managing Director