Satguru Agro Industries Ltd Directors Report.

SATGURU AGRO INDUSTRIES LTD Your Directors have pleasure in presenting the 23rd Annual Report along with the audited accounts of the Company for the year ended 30th September, 2003. 1. FINANCIAL PERFORMANCE: The financial performance of the Company for the year under report is as under: ( Lacs) Current Previous Year Period Total Income 2020.31 7181.89 Profit/(Loss) before interest and depreciation (560.20) 659.59 Interest 1032.31 913.01 Depreciation 274.04 315.77 Profit/(Loss) for the year (1866.55) (569.19) Provision for Deferred Tax 495.56 -- Profit/(Loss) after Taxation (1370.99) (569.19) 2. DIVIDEND: Due to loss during the year, your Directors do not recommend any dividend for the period under review. 3. OPERATIONS: Since the accounts for the previous financial year (FY 2001-02) was prepared for a period of 18 months and the current year (FY 2002-03) accounts are for 12 months, the figures of the current year are not comparable with that of previous period. The plant of the company was shut for a period of 4 months till January,2003 during the current financial year. The promoters have infused Rs.400 lacs as equity and restarted the plant. Due to the working capital constraints, the plant was running at a capacity of 45% annualized. The turnover of the company for the year was lower at Rs.2020.31 lacs as compared to annualized turnover of Rs.4787.92 lacs (Rs.7181.89 lacs) for the period ended 30.9.2002. The company has incurred loss of Rs.1866.55 lacs during the year as compared to loss of Rs.569.19 lass for the year ended 30.9.2002. The main reasons for losses were: a) Lower turnover due to shut down of plant for a period of 4 months and lower capacity utilization thereafter. b) Lower average sales realization and lower margin on Newsprint. c) Higher raw materials consumption due to usage of non-conventional grades of waste paper due to working capital constraints coupled with continued higher international prices of raw materials, payment of detention & demurrage charges and auction of materials by port authorities. d) Payment of minimum demand charges to MSEB even during shut down of plant. e) Use of high cost coal as fuel in place of bagasse due to funds constraints. f) Higher interest cost. 4. DEBT RESTRUCTURING & FUNDING FOR FORWARD INTEGRATION PROJECT: As reported earlier, the company has submitted debt restructuring and fresh funding proposal, for forward integration project to manufacture multi-wall paper bags, to the consortium bankers in August,2002. The consortium bankers appointed M/s. Bhide Associates, consultant for conducting Techno Economic Viability (TEV) study of the company. The report was submitted to the bankers in the month of January,2003. The findings of this study found the unit to be viable after implementation of Multi-wall Paper Sack Project and it could be rehabilitated with infusion of funds and restructuring. Based on this report the banks decided to go ahead to restructure the debts and sanction fresh loans during the consortium meeting held on 5h March 2003. The lead Bank of the consortium had already sanctioned their share of the loan and restructuring of debts in the month of March, 2003. The two co-operative banks in the consortium had also restructured their debts and issued sanction letters to that effect. The sanctions from Central Bank of India and Bank of India were under process. Meanwhile, as per the stipulation laid by the bankers, the promoters were required to bring contribution of Rs.400 lacs. The promoters brought in this fund in the form of equity and restarted operations from 24th January2003. During the consortium meeting held in the month of October,2003, the consortium bankers decided to refer the case to the Corporate Debt Restructuring (CDR) cell formed by RBI. The company submitted proposal in December,2003 and case was taken up for hearing in January,2004. During the CDR meeting, due to lack of consensus amongst the bankers, the case had to be withdrawn. The company is in the process of working out alternative options to complete the forward integration project and strengthening working capital position by infusion of equity from private sources/ funding from banks/financial institutions. 5. REFERENCE TO BIFR: Based on the opinion obtained from the statutory auditors of the company, the net worth of the company as on 30.9.2003 is fully eroded. The company has to make mandatory reference to BIFR as per Section 15 of the Sick Industrial Companies (Special Provisions) Act. 1985. 6. DIRECTORS In accordance with the provisions of Article 65 of the Article of Association of the company, Mr.Ramkumar Sunkara, will retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer himself for reappointment. 5. AUDITORS: M/s I.V.Shah & Co., Chartered Accountants, Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Members are requested to appoint the Auditors and fix their remuneration. As regards remarks in the Auditors Report, the notes, wherever referred to, are self-explanatory. 6. PERSONNEL: As required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, the name and other particulars of the employees are set out in the Annexure to the Directors Report. However as per the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the report and the accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the General Manager (Finance) at the Registered Office of the Company. 7. INFORMATION UNDER SECTION 217 (1)(e) 7.1 Conservation of Energy: With a view to conserve the energy and resources, your company continues take all the possible measures and has accordingly formed a team of experts to study requirements of power, fuel, energy and natural resources and consumption thereof and suggest methods by which the same can be saved. Based on the feedback and suggestions received from the team, the management has taken following steps, illustratively, as a part of continuous efforts to reduce and save energy: a) Time and Motion study of production activity. b) Improved House-keeping c) Awareness in the employees for conservation of energy d) Optimum use of Natural Resources 7.2 Technology Absorption: No new technology has been absorbed during the year. 7.3 Foreign Exchange Earnings and Out-go: Particulars of Foreign Exchange Earnings and Out-go have been given in Note No. 14 & 15 in Schedule S to the Accounts. 8. Directors Responsibility Statement in terms of Section 217(2AA) of the Companies Act, 1956 Your Directors have: a. followed in the preparation of the annual accounts, the applicable accounting standards with proper explanation relating to material departure; b. selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the loss of your Company for that period. c. taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and d. prepared the annual accounts on a going concern basis. 9. APPRECIATION: The Directors wish to thank various Government Departments and the Companys Bankers for all the help they extended to the Company. Your Directors also deeply acknowledge the continued trust and confidence that our customers and suppliers have placed in this Company. The Directors also wish to place on record their deep appreciation for the services rendered by the Officers, Staff and workers of the Company at all levels and for their dedication and loyalty.