Samtel Color Ltd Management Discussions

Market & Outlook

Even though, the world major economy(ies) are in recession trend however, the Indian Economy is consistently registering growth of more than 5% over the last couple of years. It is expected that the steady economic growth will continue to provide consumers with higher disposable income, which would result in surge in the demand for consumer appliances. The ever growing Indian Middle Class is a major contributor to the growth of Indian economy. They are instrumental in driving the demand for various consumer electronic devices including televisions.

In addition to the Indian Middle Class, a majority of Indian population lives in villages and small towns, where the standard of living and disposable income is lower than that of the population living in Metros and Tier I & II Cities. The level of penetration of electronic industries in villages and small towns are quite low (well below world average) due to various factors including level of disposalable income and availability of electricity. Over a period of time with the efforts of the Government the issue of availability of electricity and other infrastructure have greatly improved along side the quantum of income. This will provide opportunities for companies to expand their reach.

The volume in Indian consumer durable segment includes large chunk of color televisions (traditional CRT based Televisions) and panel based televisions.

The Indian television market is highly under penetrated compared to other Counties and world average. As per the data of Economic Intelligence Unit, 2013 the penetration of color television is only in 179 per 1000 population.

Demand for CRT based televisions is still there amongst populations living in villages and small towns and the same will continue to be there for some more years. However, due to unfriendly business scenario all the manufacturers in the organized sector into manufacturing color picture tube based televisions have either discontinued or scaled down the manufacturing over the last 2/3 years. This has resulted in shutting off of manufacturing process of color picture tubes as well, a vital component in the manufacturing of CRTs.

Most of the color televisions being manufactured in India at current juncture are primarily by unorganized sector and they depend heavily on imported equipments and parts coming from China, Thailand etc or equipments & parts retrieved from old televisions sets.

The market for CRT Color TV in India was in the range of 13/15 million units till 3/4 years back. At present, only in India, the population of total CRT TV sets would be in the range of 100 millions in numbers.

Typically, the life of a CRT Color TV is approximately 8000 hours, which can safely be translated in to a life of 7/8 years.

The market scenario drastically changed with the advent of new technologies and LCD TVs made a in road into the households in India, However, despite growing demand of LCD based televisions, CRT based televisions are still being in demand in India and they are continued to be bought & sold. With the absence of organized players, the manufacturing, refurbishing of CRT based Color TV has become a cottage industry, with unorganized players in the market with very small exposures and limited resources. Primarily, these players are dealing with old TV sets, wherein the old TV sets are being purchased, the picture tubes get reconditioned/refurbished and few parts being replaced. This process makes the old TV set as good as new with a life of approximately 7/8 years again. At present, the TV market for refurbishing of old TVs appears to be about 2.5 million (in numbers) per annum, primarily of 14" picture tubes. In the absence of organized player the market is yet to be fully explored/ exploited.

The Company intends to step into this market and fill up the vacuum created due to the absence of organized player(s) subject approval of Statutory Authorities and all Stakeholders.

Financial & Operational Results

As reported in earlier year, on account of continuous losses, the net-worth of the company was fully eroded at the end of the financial year 31^st March, 2012. Accordingly, Company made a reference to the Board for Industrial and Financial Reconstruction (BIFR) as required under the provisions of section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Hon’ble BIFR vide its Order dated 03.12.2014 has declared the Company as a Sick Industrial Company u/s 3 (l)(o) of SICA and has also appointed ICICI Bank Limited as Operating Agency.

The process for revival/rehabilitation of the company is underway in line with prescribed procedure and rules under SICA. The Draft Rehabilitation Scheme is under preparation and the same will be submitted to the Operating Agency and BIFR shortly.

The total revenue generated by the Company during the year under review was Rs. 317.19 lacs as compared to Rs. 157.64 lacs of the previous financial year.

Internal Control Systems and their Adequacy

The Company has an adequate system of internal control relating to purchase of stores, raw materials including components, plant & machinery, equipment and other similar assets and for the sale of goods commensurate with the size of the Company and nature of its business.

M/s. SRKA AND COMPANY, Gurgaon, has been appointed as the Internal Auditor of the Company.

Human Resource Development/Industrial Relations

Due to decline in demands for the products of the Company and resultant financial constraints, the Company had to close all its production facilities and had declared lock out in its production units. The Company is making every effort to maintain cordial industrial relations.

Cautionary Statements

Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company’s actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements.

The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.