Polar Industries Ltd Share Price directors Report
POLAR INDUSTRIES LIMITED
ANNUAL REPORT 2011-2012
DIRECTORS REPORT
To
The Members,
Directors of the company have pleasure in submitting the 29th Annual Report
of the Company together with Audited Accounts for the period ended 31st
March 2012. A brief summary of financial results and other operational
aspects are being detailed herein as under:
FINANCIAL RESULTS
Particulars 31st March 31st March
2012 2011
(Rs. In Lacs)
Total Income 120.87 152.30
Profit/(Loss) before Depreciation,
Interest & Tax (465.31) (69.69)
Less: Depreciation 12.84 14.56
Interest 80.40 32.76
Principal Amount of Loan &
Interest Written Back - 501.54
Profit/(Loss) before Tax (558.56) (117.01)
Less: Provision for Taxation
- Current Tax -
- Fringe Benefit Tax -
Profit/(Loss) after Tax (558.56) (117.01)
Transfer from Debenture Redemption Reserve -
Profit/(Loss) brought forward from
previous period (14328.53) (14712.57)
Loss carried forward (14887.09) (14328.03)
to Balance Sheet
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.
DIRECTORATE
In accordance with the provisions of Article 98(1) of the Articles of
Association of the Company, Mr. Sunil Agarwal will retire by rotation in
the ensuing Annual General Meeting of the Company and being eligible,
offers himself for re appointment. The Board recommends his re appointment.
Mr. Shashank Prashad who had been appointed as Director in the last Annual
General Meeting held on 28th September, 2011 after ceasing to be Additional
Director resigned from the Directorship of the Company w.e.f. 14th January,
2012.
Mr. Uday Chand Kungilwar resigned from the Directorship of the Company
w.e.f. 25th January, 2012.
In order to Broad Base the Board of Directors and to meet up with the
requirement of section 252 of the Companies Act, 1956, Mr Kishan Lal
Sharma, was appointed as an Additional Director in the category of non-
executive director of the Company w.e.f. 24th January, 2012 & holds office
upto the ensuing Annual General Meeting of the Company. The Company has
received notice from a member pursuant to Section 257(1) of the Companies
Act, 1956 signifying his intention to propose the candidature of Mr. Kishan
Lal Sharma for the office of Director. The Board recommends for the
appointment of Mr. Kishan Lal Sharma as a candidate for the office of
Director liable to retire by rotation.
Mr. Anil Kumar Agarwals tenure as the Chairman & Managing Director of the
Company expires on 31.03.2012. The Company in its Board Meeting held on
14th November, 2011 has reappointed him as the Chairman & Managing Director
of the Company for a period of 3 years w.e.f. 01.04.2012 subject to the
approval of the Shareholders in the ensuing Annual General Meeting of the
Company. The Notice convening the Annual General Meeting contains the
Ordinary Resolution along with the Explanatory Statement to that effect.
The Board recommends his re appointment.
The brief resume details relating to directors who are to be appointed/ re-
appointed are furnished in the Corporate Governance Report which forms part
of separate section of Annual Report.
AUDITORS
M/s. Singhi & Co., Chartered Accountants, (FRN 302049E) Statutory Auditors
of the Company retire at the conclusion of the ensuing Annual General
Meeting, and being eligible, offer themselves for re-appointment as
Statutory Auditor of the Company. A certificate, required under Section
224(1B) of the Companies Act, 1956 to the effect that, the reappointment,
if made, shall be within the limits specified in the said section, has been
obtained from them.
AUDITORS OBSERVATIONS
The company has been legally advised that as the company replaced the debt
represented by the debentures by a Memorandum of Understanding entered into
with the so-called Debenture Holder (references to Debenture Holder below
are, therefore, only for ease of reference), the said MoU amounted to
replacement of the debt acknowledged by the debentures by a new contractual
debt, the terms of which were incorporated in the MoU. Such new terms were
neither incorporated on the debenture certificate, nor done with the
concurrence of the debenture trustee. Hence, the debentures have
effectively been replaced by a new contractual debt, which is not a
security as defined in sec. 2(45AA) of the Securities Contract Regulation
Act, and hence, not a debenture as defined in sec. 2 (12) of the
Companies Act.
In any case the disqualification of Directors u/s 274(1) (g) of the
Companies Act, 1956 is for a maximum period of 5 years. Two Directors of
our Company attracted disqualification on 31.03.2006. Hence the period of 5
years expires on 31.03.2011.
In respect of Auditors Observations regarding debt acquired by ARCIL
without prejudice to the contentions of the company as to legality of
ARCILs actions, ARCIL has enforced security interest on one of the
companys property, effect of which has been given in this account. The
right of ARCIL, if any, to recall the loan or demand any other payment is
equivalent to rights of an unsecured creditor, which is no different from
the rights of the original lenders from whom these loans were acquired by
ARCIL. The loans/debts were reportedly acquired by ARCIL in year 2008, and
the company has been carrying on business since then. In the opinion of the
Board, there is no significant change in circumstances that impairs or
affects the ability of the company to carry on its business.
In respect of Auditors Observation regarding sale of residential property
by ARCIL it may be noted that the required information is pending from
ARCIL w.r.t. the sale consideration of Companys residential property
situated at A-8 Maharani Bagh, New Delhi - 110 065 the Company has
considered a minimum reserve price of Rs. 27.50 crores for the purpose of
provisional adjustment in the books of accounts.
In respect of Auditors observations regarding valuation of finished goods
stock for Rs. 86,40,825 pertaining to the discontinued business segment and
non provision of interest, demurrages etc. on the goods lying in the custom
bonded warehouse it may be noted that the Company is taking necessary steps
to liquidate the same at best resalable value
In respect of Auditors observations regarding the account has been
prepared on going concern basis, it may be noted that the management feels
that due to likely impact on the restructuring, induction of working
capital and future profitability on the net worth, the Company will be able
to revive itself.
In respect of Auditors Observations regarding non-provision and non-
ascertainment of interest/penalties on various outstanding statutory dues
it may be noted that the Company will provide the said liabilities if the
same arises in future in the books of accounts.
Regarding mortgage of property in favor of a corporative bank as a
collateral security for obtaining loan by a body corporate for which share
holder approval not obtained by the company, the Company is of the opinion
that the mortgage created was an equitable mortgage and the provision of
section 293(1)(a) of the Companies Act, 1956 requiring approval of the
shareholders of the Company is not attracted when an equitable mortgage is
created on a companies property, for the same does not amount to disposal
of undertaking of the Company. Hence the Shareholders approval was not
taken.
In respect of Auditors observation that in accordance with the
explanations given to them and considering their observations in vi above,
the Companys accounts read together with notes thereon, do not give the
information required by the Companies Act, 1956, in the manner so required
and not give a true and fair view in conformity with the accounting
principles generally accepted in India; it may be noted that mentioned
above is the point wise explanation to all the Auditors observation raised
in pt. no. (vi) of the Auditors Report which goes on to explain that the
Companys accounts read together with the notes thereon, do give the
information required by the Companies Act, 1956, in the manner so required
and do give a true and fair view in conformity with the accounting
principles generally accepted in India.
In respect of Auditors Observation regarding non filing of Return of
Deposits it may be noted that the Company has discontinued accepting
deposit from the public since long and all the remaining amount to be
transferred to the Investor Education & Protection Fund account has been
transferred in the last year itself and therefore nothing as on date is due
to be transferred to the Investors Education and Protection Fund.
In respect of Auditors Observation regarding the Company having no
internal audit system during the year, it may be noted that there were no
such major activities in the company in the year concerned which might call
for conducting internal audit in a major scale, the company do have
internal audit, commensurate with the size and activity of the company.
In respect of Auditors Observation regarding Company not regular in
depositing undisputed statutory dues, it may be noted that the Company
despite of its best efforts, due to cash crunch, was not regular in payment
of statutory dues. The Company is taking steps to pay undisputed
outstanding statutory dues which are due for more than six months, out of
the fresh funds to be infused.
The other notes to the accounts referred to in the Auditors Report are
self-explanatory.
COST AUDIT
The Company has made an application to the Advisor Cost, Govt. of India,
Ministry of Corporate Affairs, Cost Audit Branch, praying for exemption
from maintaining the Cost records and for conducting of Cost Audit for the
year 2009-10 and 2010-11 due to low operational activities of the Company.
Central Governments relief to the same is awaited.
Seeing through the companys continued low operational activities the
company will also apply for exemption from conducting Cost Audit from the
year 2011-12 and onwards.
In the above view and also because of the Companys low operational
activities the Company has taken a call of not appointing Cost Auditor for
the Financial Year 2012-2013.
SHARE CAPITAL
The Final Listing approval for allotment of 30,74,300 equity shares to
Asset Reconstruction Company (India) Ltd. (ARCIL) as a part settlement
towards restructuring the total secured debts of the Company by ARCIL from
Bombay Stock Exchange Limited and National Stock Exchange of India Limited
is awaited.
DEPOSITS
The Companys Public deposit scheme closed long back. There was no failure
to make repayments of Fixed Deposits on maturity and the interest due
thereon in terms of the conditions of the Companys erstwhile schemes.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A detailed report on Management Discussion and Analysis is provided as a
separate chapter in the Annual Report.
DIVIDEND
In view of the huge losses incurred by the Company in the previous years,
your Directors express regret for not declaring any dividend for the year
under review.
COMPLIANCE OF ALL LAWS
The Company has devised a proper system to ensure compliance of all laws
applicable to the Company.
CORPORATE GOVERNANCE
The Code of Corporate Governance has already been implemented as per the
listing agreements and a separate note on Corporate Governance has been
given. The certificate of the Auditors, M/s. Singhi & Co. regarding
compliance of conditions of Corporate Governance as stipulated under Clause
49 of the Listing Agreement with the Stock Exchange in India is annexed
along with this report.
The Chairman & Managing Director has certified to the Board w.r.t financial
reporting, in the manner required under the Clause 49 of the Listing
Agreement concerning the annual financial statement.
CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS
AND OUTGO
The particulars required under Section 217(1)(e) of the Companies Act, 1956
read with the Companies (Disclosure of Particulars in the Report of the
Board of Director) Rules, 1988 are set out in Annexure-I forming part of
this Report.
PARTICULARS OF EMPLOYEES
Information in accordance with the provisions of Section 217(2A) of the
Companies Act, 1956, read with the Companies (Particulars of Employees)
Rules, 2011, as amended, regarding employees is given as Annexure II to the
Directors Report.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Sub-section (2AA) of section 217 of the Companies Act, 1956,
the Board of Directors of the Company hereby state and confirm that:
i) in the preparation of annual accounts, the applicable Accounting
Standards have been followed along with proper explanation relating to
material departures;
ii) the directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of financial year and the profit and loss of the Company
for that period;
iii) the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with provisions of
the Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
iv) the directors have prepared the annual accounts on a going concern
basis.
ACKNOWLEDGEMENTS
Your Directors take this opportunity to thank all investors, business
partners, clients, banks, regulatory foreign authorities and Stock
Exchanges for their continuous support.
For and on behalf of the Board
Registered office: Sd/-
18, Rabindra Sarani Anil Kumar Agarwal
Poddar Court Building, Chairman & Managing Director
Kolkata - 700 001
Dated: 14th day of August, 2012
Annexure I
TO THE DIRECTORS REPORT
Information required under the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988, for the period ended March
31, 2012.
FORM-A
Conservation of Energy
The Companys operations involve low energy consumption. Wherever possible,
energy conservation measures have already been implemented and there are no
major areas where further energy conservation measures can be taken.
However, efforts to conserve and optimize the use of energy through
improved operational methods and other means will continue.
FORM-B
Form of disclosure of particulars with respect to Absorption of Technology
Research & Development (R&D).
Research & Development (R&D)
1. Specific areas in which R&D carried out by the Company:
The R&D efforts of the Company are directed towards quality control,
improvements/up-gradation of existing production methods and development of
new products.
2. Benefits derived as result of the above R&D:
Improvement in product quality, reduction in consumption of raw materials
with cost effectiveness, development of new models.
3. Future Plan of Action:
To continue with the above line of action.
4. Expenditure on Research and Development
(Rs. in lacs)
Particulars 12 months Period 12 months Period
ended 2011-12 ended 2010-11
A. Capital (Deferred) - -
B. Recurring - -
C. Total - -
D. Total R & D expenditure as
a percentage of total turnover - -
Technology absorption, adaptation and innovation
1. Efforts in brief, made towards technology absorption, adaptation and
innovation.
There is constant endeavor to achieve consistent end product performance
with less & less material consumption
2. Benefits derived as a result of the above efforts eg. product
improvement, cost reduction, product development, import substitution etc
Company has been able to produce products at a reduced cost.
3. In case of imported technology (imported during the last five years
reckoned from the beginning of the financial year) following information
may be furnished.
a) Technology imported
b) Year of Import
c) Has technology been fully absorbed?
d) If not fully absorbed, areas where this has not taken place, reasons
thereof and future plans & action.
Not applicable as the Company has indigenous technology.
MANAGEMENT DISCUSSIONS & ANALYSIS REPORT
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