Uniflex Cables Ltd merged Directors Report

UNIFLEX CABLES LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT To The Members, Your Directors hereunder present the Twenty First Annual Report of the Company together with the Audited Annual Accounts showing the financial position of the Company for the year ended 31st March, 2011. A. FINANCIAL RESULTS: (Rs. In Lacs) Particulars 31-Mar-11 31-Mar-10 (Stand alone) (Stand alone) Operating Profit/Loss) (649.08) (912.58) Less: Interest & Finance Charges 1544.99 1220.41 (Loss) / Profit before Depreciation (2194.07) (2132.99) & Tax Less: Depreciation 631.20 612.83 (Loss)/ Profit before Tax (2825.27) (2745.82) Less: Provision for FBT 0.00 0.00 (Loss)/ Profit after Tax (2825.27) (2745.82) Deficit brought forward from (7369.46) (4623.64) previous year Total Loss carried forwarded (10194.73) (7369.46) Consolidated Net Loss of the Company after tax was at Rs. 2937.99 Lacs includes the loss of M/s Marine Cables & Wires Private Limited (Wholly Owned Subsidiary of the Co.) incurred during the year under review. In view of the losses incurred by the Company, your Directors do not recommend any dividend for the year. B. REVIEW OF OPERATIONS: During the year under review, the Company has achieved Sales Turnover (net of excise) of Rs. 31127.28 Lacs as against Rs. 18061.85 Lacs for the financial year ended 31st March, 2010 which is quite substantial, but this was not sufficient to break-even and Company has incurred a Net Loss of Rs. 2825.27 Lacs before tax as against a loss of Rs. 2745.82 Lacs for the previous year ended 31.03.2010. The various steps taken for improving the operations were reflected in higher sales turnover and reduced operating loss in year under review. C. SUBMISSION OF DRAFT REHABILITATION SCHEME (DRS) FOR APPROVAL TO THE BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR) ENVISAGING AMALGAMATION OF THE COMPANY WITH APAR INDUSTRIES LTD., THE HOLDING CO. (AIL). Pursuant to the reference made by the Company in accordance with the provisions of Sick Industrial Companies (Special Provisions) Act 1985 (SICA) to the Board for Industrial & Financial Re-construction (BIFR), the Company has been declared as Sick Industrial Company by BIFR vide its order dated October 26, 2010 and directed the Company to file a fully tied up Draft Rehabilitation Scheme (DRS) for its revival to Syndicate Bank who has been appointed as Operating Agency (OA) to examine the DRS. After having preliminary discussion with the management of AIL, the Holding Company, the Company has submitted DRS to OA which include proposal for amalgamation of the Company with AIL with cut-off-date as 31st March 2010 for expeditious revival. In the opinion of the Management of the Company and also its Holding Company, the above option is most suitable for expeditious revival of the Company as there is blink possibility of its revival independently. The Company is pursuing the matter with BIFR for early approval of the said Rehabilitation Proposal submitted by the Company. The Company is also proposing appropriate Resolution in the notice to the members to take the approval of its shareholders in the ensuing Annual General Meeting (AGM) for the same. D. PROPOSAL FOR AMALGAMATION OF MARINE CABLES & WIRES PVT. LIMITED (MCWPL) - A WHOLLY OWNED SUBSIDIARY OF THE COMPANY - WITH APAR INDUSTRIES LTD. (AIL), THE PARENT COMPANY. As reported last year, M/s Marine Cables & Wires Pvt. Limited (MCWPL), a Wholly Owned Subsidiary of the Company, which was doing job works for the Company, has also been declared as Sick Industrial Company by BIFR and directed MCWPL to submit a Draft Rehabilitation Scheme (DRS) for its revival. The Management of your Company had discussion on the matter with the management of AIL and also with MCWPL with regard to revival of MCWPL. As directed by BIFR, MCWPL has already submitted a Draft Rehabilitation Scheme (DRS) proposing Amalgamation of MCWPL with AIL for consideration and sanction by BIFR. Syndicate Bank, Mumbai has been appointed as Operating Agency (OA) by BIFR to monitor/ review and submit the final Rehabilitation Proposal. The OA is taking necessary steps in the matter as directed by BIFR. E. SHARE CAPITAL: During the year, under review there was no change in the issued and paid up share capital of the Company which stood at Rs. 2498.04 lacs divided into 249,80,366 number of equity shares of Rs. 10/- each fully paid. F. LISTING: The Companys equity shares are listed on the Bombay Stock Exchange Ltd. (BSE), Mumbai. G. FUTURE OUTLOOK: The business environment for Cable industry is still challenging but showing signs of industrial and infrastructure growth. However, the Industry is having excess capacity compared to demand currently. The future outlook in terms of investment in the infrastructure sector, particularly power, is also good. This indicates that demand for the cable business should improve further. We are optimistic that Financial year 2011-12 will be a better year than earlier Financial years. The industry has significantly expanded its capacity resulting in a price war like situation with reduction in prices and margins, though demand is at a higher level. It is expected that margins will also slowly improve and in the next 1-2 years should come back to the pre-2008 level. The recovery in margins has been slow due to significant overcapacity in the industry. Our Company has further de-bottlenecked its capacity in the Elastomeric and Power cable divisions making certain idle facilities suitable for Power Cables besides addition of few new types of equipment. The capacity of fiber optic cables is also being enhanced by upgrading existing equipments and addition of new machinery. Several measures have been taken to improve process, productivity and quality with new equipments and manpower training. The last year has seen a major improvement in Companys sales performance as a consequence of these actions. We expect to continue with this momentum resulting in a better performance in Financial year 2011-12, both in terms of sales and profitability with an objective to break even. If the pricing environment improves due to stronger than expected demand, the performance of the Company may further benefit. H. CORPORATE GOVERNANCE: Your Directors fully endorse the principles of Corporate Governance and to implement the same as per requirements of Clause 49 of the Listing Agreement. The Management Discussion & Analysis and Corporate Governance Report are attached to this report. I. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with regard to the Directors responsibility statement, it is hereby confirmed that: i. In the preparation of the annual accounts for the financial year ended March 31, 2011, the applicable accounting standards were followed along with proper explanations relating to material departures, if any. ii. Appropriate accounting policies were selected and applied them consistently and made judgment 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 the financial year and of the loss of the Company for the financial year for that period. iii. Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv. The annual accounts were prepared on a going concern basis. J. DEPOSITS: Your Company has not accepted any fixed deposit from public within the meaning of Section 58-A of the Companies Act and rules made there under. K. BOARD OF DIRECTORS: i) Shri S. K. Kinra has been appointed as a Special Director by the Board for Industrial & Financial Reconstruction (BIFR) New Delhi on the Board and other committees of the Board of Directors of the Company w.e.f. 3rd January, 2011. ii) Dr. Narendra D. Desai and Shri H. N. Shah, the Directors of the Company, retire by rotation at the ensuing Annual General Meeting (AGM) of the Company and being eligible, offer themselves for re-appointment. Appropriate resolutions for approval of the members for the re- appointment of Dr. Narendra D. Desai and Shri H. N. Shah as Directors of the Company have been proposed in the notice to the Members for the ensuing Annual General Meeting. The Board recommends their appointment / re-appointment. L. PARTICULARS OF EMPLOYEES: There are no employees whose remuneration was in excess of the limits prescribed under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended. M. AUDITORS: The Auditors, M/s. Rashmi Zaveri & Co. Chartered Accountants, are retiring at the ensuing Annual General Meeting and they are not seeking re- appoinment. The Audit Committee at their meeting held on 26th May, 2011 have recommended the name of M/s Sharp & Tannan, Chartered Accountants, to be appointed as Statutory Auditors of the Company in place of retiring Auditors. The Company has received nessesary certificate u/s 224(1B) of the Companies Act from M/s Sharp & Tannan, Chartered Accountants. The Board recommends the appointment of M/s Sharp & Tannan as Statutory Auditors of the Company by the shareholders at the ensuing Annual General Meeting. N. AUDITORS REPORT: The observations contained in the Auditors Report are self-explanatory and therefore, no further comments are required separately. O. OTHER INFORMATION: a) The Company has been granted exemption for the year ended March 31, 2011 by the Ministry of Corporate Affairs vide its letter dated 28th January, 2011 from attaching to its balance sheet, the annual report of the Companys wholly owned subsidiary viz. M/s Marine Cables & Wires Pvt. Limited. As required in terms of the exemption, a statement containing brief financial details of the said subsidiary for the year ended 31st March, 2011 are included in the annual report of the Company. b) Attached to and forming part of this report are the following: i) Particulars relating to conservation of energy, technology absorption and foreign exchange earning and outgo. ii) Report on Corporate Governance and Auditors Certificate regarding compliance of the conditions of Corporate Governance. P. ACKNOWLEDGMENT: Your Directors would like to express their gratitude for the support, assistance and co-operation received from the Bankers, Apar Industries Ltd. (AIL), the Holding Company, Government Authorities, Customers, Vendors and Shareholders of the Company. Your Directors also wish to place on record their appreciation for the dedicated services rendered by the loyal employees of the Company in the difficult time. FOR AND ON BEHALF OF THE BOARD (DR. N. D. DESAI) CHAIRMAN Place: Mumbai. Date : 26th May, 2011. ANNEXURE TO THE DIRECTORS REPORT Information as per Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31st March, 2011. Conservation of Energy - FORM - A a. Energy Conservation measures taken. 1. Replaced LDO with Gas for steam generation from boilers to save energy cost as well as use cleaner fuel. 2. Replaced traditional copper chokes with electronic ballasts to reduce energy consumption. 3. Replacement of street light and plant fitting of 120W with HPMV fittings to reduce energy consumption. b. Additional investments and proposals, if any, being implemented for reductions of consumption of power: 1. Installation of additional air ventilators in the plant to reduce energy consumption. 2. Replacement of Eddy current motors with AC drives and motors to reduce energy savings. c. Impact of the measures at (a) and (b) above for reduction of energy consumption and subsequent impact on the cost of production of goods: i. Electrical energy optimization ii. Improved Equipment efficiency iii. Improved Productivity d. Total energy consumption and energy consumption per unit of production as per Form-A in respect of industries specified in the schedule thereto: Not applicable. FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION, RESEARCH AND DEVELOPMENT (R & D) - FORM - B 1. Specific areas in which R & D is carried out by the Company: - HT cables curing process, speciality elastomer compounds, thin wall elastomer cables, Optical Fiber Cables for under water application for Navy. 2. Benefits derived as a result of the above R&D: - Commercial orders received for under water cables and thin wall elastomer cables and its successful execution is opening up good opportunities during next year. 3. Future plan of action: - To continue to perfect the technology and absorb it in the above mentioned areas towards cost reduction and widening the business in similar areas of application. - To explore business opportunities in composite cables, high temperature cables, data logging cables. 4. Expenditure on R & D: - Expenditure on R & D has not been accounted for separately. Technology absorption, adaptation and innovation: 1. Efforts in brief, made towards technology absorption, adaptation and innovation: Technical know - how on thin wall cables is now fully absorbed. Development of Fire survival building wires, Fire survival Fiber optic cables, Fire survival cables for fire alarm systems has been initiated. 2. Benefits derived as a result of the above efforts e.g. product improvement, cost reduction, product developments, import substitution etc.: a) Commercial orders have been received for Chemically Cured Cross Linked Cables, Optical Fiber Cables for Defense applications viz. Tactical OFC, Sonar and Mine sweeping cables. b) Elastomer Cables compounds which was in-house developed has reduced cost to make the product more competitive in competitive market situation. c) Trial order for Tactical Optical Fiber Cables received. 3. Imported Technology: Nil FOREIGN EXCHANGE EARNINGS AND OUTGO - FORM C (Rs. in Lacs) a) Foreign Exchange Earnings: 8627.12 b) Foreign Exchange outgo: i) On Import of Raw Material 13429.90 ii) On Import of Capital Goods - iii) On Expenditure 442.51 MANAGEMENT DISCUSSION AND ANALYSIS Forward-Looking Statements: This report contains forward looking statements that covers expectations and projections about the future, including statements about the Companys strategy for growth, product development, market scenario, expenditures and financial results. 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 fully. The Companys 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. Overall review: The Company is manufacturing Electrical & Telecommunication cables and markets its cable under the brand name UNICAB and UNIFLEX. The power cable industry showed sign of recovery in demand in the domestic market despite continued global recessionary trends and commodity raw material price volatility. The demand for elastomer cable also has been improving due to increased focus on Windmill, Steel and Mining sector. The demand in international market was generally stagnant. The Multinational cable manufacturers are looking to enter Indian cable market and looking for tie- up with domestic manufacturers. The demand of the telecommunication cables remained subdued due to wireless technologies getting higher preference and has also not been showing any major improvement, though its outlook remains positive in terms of Fiber optic cable demand. Opportunities and Threats: The Indian power sector is currently dominated by State/ Central utilities. The installed generation capacity in the country at present is about 1,60,000 MW and is growing. India still is a power deficient country with a significant energy shortage. As our countrys Annual GDP continues to grow at close to about 9%, energy requirement is also bound to grow rapidly. To bridge this deficit and to cater to future demand, the country needs additional power generation capacity of approx. 100,000 MW during the next five years. Apart from capacity shortage, the power sector in the country is having problems of high transmission and distribution losses, power pilferage and concessional tariff for certain sectors. Several power generation projects are coming up in private sector. Many private Discoms are strengthening power distribution network leading to higher demand for cables. Govt. impetus towards renewable energy projects is opening several opportunities. All these measures will give a boost to power sector in the country which will provide good opportunities for business growth in the power cable segment. The telecommunication cable sector continues to witness tough times due to over capacity besides slow down in decision making at lead telecom operator BSNL due to certain contract award anomalies in the past. The capacity utilization rates across companies are at low and uneconomical levels. The surplus capacity relating to demand, has led to lower realizations, making the business operations for Jelly Filled Telecom Cable (JFTC) un- remunerative. Therefore the Company has decided to exit this business. There is likely to be good demand for Fiber optic cables coming up at BSNL. With the proposed introduction of 3G services by the Telecom operators, there is expected to be good demand for Fiber optic cables in private sector also. There is severe competition in this sector, which has taken its toll on revenues and profits of all major fiber optic cable manufacturing companies. Threats: Since the Company largely depends on projects and tenders and any slow-down in the same mainly in core sector, could effect companys growth. There is significant excess capacity in the industry both in power cables and in telecom cables, therefore prices are expected to remain under pressure. Similarly in its Telecom Division major orders come from internet service providers and its procurement may effect due to technological advancement in wireless technology. The volatility in the International Metal prices in optical fiber prices (post earth quake in Japan) and in polymer raw material prices may affect business performance. Outlook: The demand for electrical cable is likely to be emerging stronger as economy is already showing signs of good growth. The Government is continuing with plans to create significant additional power capacity, giving major boost to power generation & distribution sector. The distribution of power is getting better streamlined for improving its efficiency. Similarly further investment by large industrial houses in various infrastructure and mining projects gaining momentum, it will also drive the demand of electrical cables significantly. The demand for Fiber Optic cables is also likely to show improvement due to Govt. deciding to create a country wide parallel telecom infrastructure for Defense services. Higher penetration of broadband services and also introduction of 3G services, all resulting in increased demand for fiber optic cables. Internal Control Systems and their Adequacy: The Management shall ensure compliances of Indian GAAP and adherence thereto in its entirety. Uniflexs internal controls is strengthened to ensure that all assets are safeguarded and protected against loss from un-authorized use and that transactions are authorized, recorded and reported correctly. The internal control systems is supplemented by an extensive program of internal audits, reviews by management and documented policies, guidelines and procedures. The management has continued the engagement of M/s. KPMG, a Chartered Accountants Firm, as Internal Auditors of the Company. Internal audit findings and recommendations are reviewed by the top Management at the level by the Audit Committee of the Board and corrective measures if necessary, are taken by the Management in due course. Financial Performance with respect to Operational Performance: The Financial Statements have been prepared in compliance with the requirements of the Companies Act and the Accounting Standards issued by the Institute of Chartered Accountants of India. Sales (net of excise] for the financial year 2010-11 stood at Rs. 31127.28 Lacs substantially higher as against Rs. 18061.85 Lacs in the previous financial year 20092010. However, Company has shown loss before depreciation to the tune of Rs. 2194.07 Lacs due to margins under pressure as against loss of Rs. 2132.99 Lacs in the previous year. Reserves and Surplus: There is no change in the figures of Reserve and Surplus for the year under review which stand at Rs. 4409.70 lacs for the year ended 31st March, 2011. Fixed Assets: During the year, there is an addition of Rs. 458.85 lacs in fixed assets. Inventories: Inventories stood at Rs. 5241.05 Lacs as at 31-03-2011 as against Rs.5191.88 Lacs as at the end of previous year. The inventories do not include any obsolete and unserviceable items. Sundry Debtors: Sundry debtors increased to Rs. 5903.14 Lacs as at 3103-2011 as against Rs.4820.94 Lacs as at 31-03-2010 due to increase in sales turnover during current year. These debtors are considered good and realizable. Cash and Bank Balances: Cash Bank and Bank Deposits with scheduled banks stood at Rs. 1082.88 Lacs as on 31-03-2011. Loans and Advances: Loans and Advances as on 31-03-2011 stood at Rs. 2366.99 Lacs representing advances paid for raw materials, stores and services, loans and advances to employees, advance taxes, unutilized modvat, export entitlement benefit and Sundry Deposit etc. Current Liabilities: Current liabilities amounting to Rs. 5819.33 Lacs includes creditors and advance received from customers and other liabilities. Provisions: During the year the Company made provisions for excise duty and others to the tune of Rs. 282.60 Lacs. Human Resources: Uniflex has a good mix of experience and young among its employees. Apar Industries Ltd. (AIL), the Holding Company, has deputed some of its Officials at Uniflex. Medical check ups are done for all the Staff & Workers at factory on regular basis and facilities are also provided for check up of their family members.