protchem industries india ltd Management discussions

PROTCHEM INDUSTRIES (INDIA) LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS A. Industry Structure and Developments: Your Company is in the business of manufacturing and marketing Amino Acids and its value added derivatives. It has an Amino Acid manufacturing Plant at Pondicherry which is an 100% EOU and Derivatives manufacturing plant at Madhuranthagam. It is the only manufacturer of Amino Acids in India and one among. the very few manufacturers of Amino Acids in the World. B. Performance: The sales turnover for the year ended 31st March 2006 is Rs 241.22 lakhs as against Rs. 316.54 lakhs during the previous year. Your Company has incurred a net loss of Rs. 337.88 lakhs as against a loss of Rs. 365.09 lakhs incurred during the previous year. The total accumulated losses incurred by the Company as on 31st March 2006 amounts to Rs 1659.72 as against Rs 1321.83 lakhs as at the end of the previous years. The net worth of the Company is fully eroded and the Company has become a Sick Industrial Company within the meaning of clause (o) of sub-section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. The Company has made a reference to Board for Industrial and Financial Restructuring (BIFR) for formulating a suitable rehabilitation package and the application made by the Company is under process. The Company has received a notice from IDBI under Securitisation and Reconstruction of Financial Assets and Securitisation of Interest Act, 2002, for taking over the assets of the Company provided as security for the loan taken from them. The Company has received a notice from EXIM Bank under Securitisation and Reconstruction of Financial Assets and Securitisation of Interest Act, 2002, for taking over the assets of the Company provided as security for the loan taken from them. The Company is not in a financial position to meet its debt obligations in full, pending debt restructuring. C. SEGMENTWISE AND PRODUCTWISE PERFORMANCE: Amino Acid Division (AAD) The turnover of AAD at Pondicherry was Rs 1.86 Crores during the year ended 31st March 2006 a against Rs.2.31 Crones during the previous year. The manufacturing operations of AAD at Pondicherry was closed with effect from 12th December 2005 in order to cut down further losses arising out of financial crunch and unhelpful attitude of the workmen at the factory who wire found to raising unreasonable demands. The Company continues to face severe working capital inadequacy which is affecting the daily operations. The working capital has considerably eroded over a period of several yearn due to sub-optimal operations of its production facilities and payment towards committed fixed overheads. The promoters have time and again infused funds for the day-to-day operations which has enabled the Company to keep its operations going to a limited extent. The Company awaits a suitable restructuring of its corporate debt in order to become viable. Protein Speciality Division (PSD) Your Company manufactures active Pharma ingredients and Amino Acid Derivatives at its PSD Plant at Madhuranthagam. The turnover of PSD was Rs.0.55 Crores during the year ended 31st March 2006 as against Rs. 0.95 Crones during the previous year. Interest & Other financial obligations The high interest burden and sub-optimal operations of its plant at Pondicherry has been the main contributor factor for erosion of its net- worth and working capital. Your Company has now reached a stage where its operations are not viable with the high interest burden and low price realization for its products at the overseas market. D. CONCERNS Being an 100% EOU, your company is susceptible to International competition and the ever changing demand supply dynamics. High interest burden and competition from other Asian countries are affecting the operation of the Company adversely. E. OUT LOOK The operations of the Company could be improved upon infusion of funds to meet its working capital requirements. F . INTERNAL CONTROL SYSTEMS Your Company has a proper and adequate system of Internal Controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition. HUMAN RESOURCES AND INDUSTRIAL RELATIONS Your Company has a team of well qualified and experienced technical, financial and administrative staff to cater to its business requirements. However, workers at the Pondicherry Plant are non-coperative.