Vaishnavi Gold Ltd Directors Report.

VAISHNAVI GOLD LIMITED (FORMERLY MASTER MULTI-TECH LIMITED) ANNUAL REPORT 2009-2010 DIRECTORS REPORT Your Directors have pleasure in presenting the TENTH ANNUAL REPORT together with the Audited Accounts of the company for the financial year ended 31st March, 2010. AMALGAMATION OF ERSTWHILE TANMAI JEWELS PVT LTD WITH THE COMPANY: The Scheme of Amalgamation of erstwhile Tanmai Jewels Private Limited (TJPL) with your Company (formerly known as Master Multi-Tech Limited) with effect from 1st April, 2008 (appointed date) was sanctioned by Honble High Court of Andhra Pradesh at Hyderabad wide its order dated 13th July, 2010. Further, the name of your Company was changed from MASTER MULTI-TECH LTD to VAISHNAVI GOLD LTD with effect from 21st September, 2010 and a fresh Certificate of Incorporation was issued by the Registrar of Companies, Hyderabad, Andhra Pradesh. The amalgamation has enabled creation of an integrated Corporate Structure for Development of Gold Business of the Company, achieving economies of scale, operational and managerial efficiency and enhanced resource mobilization capacity required for growth. It would also result in uniform management philosophy, utilization of common pool of talent, flexibility in funding expansion plans and achieving better cash flows substantially enhancing shareholders value. It would also result in better utilization of resources and capital and would not only create a stronger base for future growth of the Gold business but would also result in creating a better and healthier balance sheet facilitating increasing the share holders Value. The amalgamation also enhances the competitive strength of the Company to participate vigorously in high growth opportunities available in the Gold Sector. Consequent upon the said amalgamation, the shareholders of erstwhile Tanmai Jewels Private Ltd. as on 15th October, 2010, were allotted 10498500 Equity shares by the Company, as per exchange ratio provided in the sanctioned Scheme. FINANCIAL RESULTS: The performance of the company for the financial year ended 31st March 2010 is summarized below. (Rs. In Lakhs) PARTICULARS 2009-10 2008-09 (12 Months) (11 Months) Gross Revenue 17300.78 13926.59 Total Expenditure 16533.02 13060.70 Profit before Financial 767.76 866.59 Charges, Depreciation and Taxation Less:Financial Charges 337.11 252.52 Depreciation 116.17 64.95 Profit/(Loss) before Tax 314.48 548.43 (PBT) & Extra Ordinary Item Add:Extra Ordinary Item 0.00 32.96 Profit/(Loss) before Tax (PBT) 314.48 581.39 Less:Provision for Current Tax 87.59 69.21 Fringe Benefit Tax 0.00 3.02 Deferred Tax Liability/(Asset) 12.73 90.88 Profit/(Loss) after Tax 214.13 418.27 Less:Provision for Dividend 92.00 0.00 Balance carried to Balance Sheet 122.13 418.27 PERFORMANCE: The Income from Operations stood at Rs. 17300.78 Lakhs as against Rs.13926.59 Lakhs for the corresponding previous year. The Company posted Profit before tax of 314.48 Lakhs as against Rs. 548.43 Lakhs (including extra ordinary income of Rs.32.96 Lakhs) for the previous year and Profit after Tax of Rs. 214.43. Lakhs as against Rs. 418.27 Lakhs for the corresponding period. FUTURE OUTLOOK: In the Coming Financial Years, the Board will put its major thrust in developing domestic Jewellery Market, with its Innovative products and Schemes. The company will put efforts to make the best use of the Synergies resources available consequent to Merger. The company has recently opened its new retail Jewellery Show Room in Kukatpally Hyderabad with a Floor area of 4500 sqfts. The Company plans to Expand its chain of stores acorss India, beginning with South. DIVIDEND: Your Directors recommend 5% dividend on each Equity share of Rs 10/- Each for the financial year 2009-2010. FIXED DEPOSITS: The company has neither accepted nor renewed any deposits falling within the provisions of Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975 from the public during the financial year. DIRECTORS: During the Year Mr. Ch. Raghu, Mr. B. Chandrasekhara Rao, Mr. B. Ramakrishna, M. Satyanarayana, Mr. D. Murali. Mr. K. Sandeep were resigned from the Board as Directors Since Last AGM. And Mrs. K. Srivalli, Mr. N. Venkata Subbarao were appointed as Directors w.e.f. 15.05.2010 and Further Mr. M.J.V.V.D. Prakash, Mrs M. Jyothsna Lakshmi & K. Narsi Reddy were appointed as Directors w.e.f. 15.10.2010. Upon Merger of Tanmai Jewels Pvt. Ltd. with the Company then Mr. Ch. Raghu, resigned from the office of the Director as on 15.10.2010 and Mr. M.J.V.V.D. Prakash was appointed as Managing Director in accordance with the provisions of Section 269 read with Schedule XIII of the Act, for a period of 5 years with a remuneration of Rs 50000/- Per Month and Mrs. M. Jyothsna Lakshmi appointed as Executive Director with a Remuneration of Rs.50000/- Per Month w.e.f 15.10.2010 for a period of 5 Years. AUDITORS: M/s P.S. Nagaraju & Co, Chartered Accountant, Hyderabad, retire at the conclusion of ensuing Annual General Meeting & being eligible, offer himself for re-appointment. He has furnished a certificate stating that his re-appointment, if made, will be within the limits laid down under Section 224(1 B) of the Companies Act, 1956. The Board recommends his re- appointment for the FY2010-11 PARTICULARS OF EMPLOYEES: There are no employees whose particulars are required to be furnished under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of employees) Rules, 1975, and as amended from time to time as remuneration of none of the employees is in excess of Rs.2,00,000/- per month, if employed for the part of year or Rs.24,00,000/- per annum during the financial year 2009-10 . DIRECTORS RESPONSIBILITY STATEMENT: The Directors of your Company hereby report: (i) that in the preparation of Annual Accounts for the financial year ended 31st March, 2010, the applicable accounting standards have been followed along with the proper explanation relating to material departures, if any, there from; (ii) that 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 the financial year and of the profit and loss of the company for that period: (iii) that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities (iv) that the directors have prepared the annual accounts on a going concern basis. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: The details regarding Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo as required by section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of the particulars in the report of the Board of Directors) Rules, 1988 are given as Annexure A and forms part of this report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: Management Discussion and Analysis Report, pursuant to Clause 49 of the Listing Agreement forms part of this Report and is annexed hereto. CORPORATE GOVERNANCE: The Company has implemented the procedures and adopted practices in conformity with the Code of Corporate Governance enunciated in Clause 49 of the Listing Agreement with the Stock Exchanges. A separate report on Corporate Governance is annexed herewith, as a part of the Annual Report along with the Auditors Certificate on its compliance. LISTING: Your Companys shares are presently listed on the Stock Exchanges of Ahmedabad, Calcutta and Pune. ACKNOWLEDGEMENTS: Your directors acknowledge the continued support from its management and staff. Your Directors also wish to thank its customers, vendors, banks, service providers as well as regulatory and government authorities for their support and cooperation. By Order of the Board of Directors For Vaishnavi Gold Limited Sd/- Sd/- M.J.V.V.D. Prakash M. Jyothsna lakshmi Managing Director Executive Director Place: Hyderabad Date : 04.12.2010 Annexure-A: INFORMATION UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988. A. CONSERVATION OF ENERGY: i. The Company is not a manufacturing unit and hence not power intensive. However it is very careful in using the power to reduce the cost of maintenance and conserve the resources. ii. The Company has not made any additional investments and has not proposed any amount for reduction of consumption of energy. iii. There is no impact of the measures at (i) and (ii) above for reduction of energy consumption and consequent impact on the cost of production of goods. iv. Disclosure under Form A is not applicable to the Company. B. TECHNOLOGY ABSORPTION: FORM-B: (Disclosure of particulars with respect to technology Absorption) i) Research and Development (R&D): Specific areas in which R&D carried out by the Company : NIL Benefits derived as a result of the above : NIL Future plan of action : NIL Expenditure on R & D : NIL ii) Technology absorption, adaptation and innovation : NIL C) FOREIGN EXCHANGE EARNINGS AND OUTGO: Activities relating to exports and initiatives taken to increase export products, services and export plans: NIL Foreign Exchange earnings and outgo: (on receipts and payments basis) Particulars 2009-10 2008-09 Foreign Exchange Earnings Nil Nil Foreign Exchange Outgo Nil Nil By Order of the Board of Directors For Vaishnavi Gold Limited Sd/- Sd/- Place: Hyderabad M.J.V.V.D. Prakash M. Jyothsna lakshmi Date : 04.12.2010 Managing Director Executive Director MANAGEMENT DISCUSSION & ANALYSIS: OVERVIEW: The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, guidelines issued by the Securities and Exchange Board of India (SEBI) and other statutory requirements. Our Management accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner the form and substance of transactions and reasonably present our state of affairs, profits and cash flows for the year. INDUSTRY STRUCTURE AND DEVELOPMENT: ECONOMIC OVERVIEW: GLOBAL ECONOMIC OVERVIEW: After a sharp, broad and synchronized global downturn in late 2008 and early 2009, a number of countries reported positive growth in 2009-10 consequently global growth is expected to rebound from a negative territory in 2009 to be projected 3.9% in 2010 and 4.3% in 2011. Interestingly, the growth is expected to be 5.1% in developing countries in 2010. INDIAN ECONOMIC OVERVIEW: The Indian economy grew 7.4% in 2009-10, compared with 6.7% in 2008-09, following a strong fiscal stimulus, monetary easing, imported consumer confidence return of risk appetite and large capital inflows. The real turnaround happened in the last quarter of 2009-10, when the economy grew 8.6% Indias gems and jewellery industry provides employment opportunities to 1.30 mn people directly or indirectly and comprises about 450,000 goldsmiths. The combination of skill and affordable cost makes the country unique For instance Indias wage rate is estimated at a tenth of the cost in developed markets. Branded jewellery is a relatively recent phenomenon, where jewellery is sold as fashion accessories or as everyday wear. A key driver was the introduction of certification of gold and diamonds, lifetime returns and buy-back schemes. The branded jewellery market is expected to grow a CAGR of 41% across 2009-2012. Exports: Gems and jewellery export increased 16% from USD 24.49 trillion in 2008-09 to USD 28.41 billion in 2009-10. The US and the UK accounted for 70% of this export and accounted from 13% of Indias total merchandise exports. Correspondingly, Indias manufacturing output grew 10.9% in 2009-10 against 2.9% in 2008-09. GLOBAL GEMS AND JEWELLERY INDUSTRY: The global gem and jewellery industry grew across the last decade owing to increasing demand from emerging global economies. Plain diamond jewellery accounted for the largest share of the global jewellery market followed by plain gold jewellery (marked by intensive design, wide design range and a price range that extends from affordable to exclusive). The US has been the largest gems and jewellery customer followed by China, India, the Middle East and Japan India and China are expected to develop as the largest consumer markets for traditional and branded jewellery Global Jewellery sales are expected to reach USD 230 tin by 2015 Gold jewellery exports grew 9.38% from USD 8.61 billion in 2008-09 to USD 9.42 billion in 2009-10 gold import was 739 tonnes in 2009-10 compared with 400 tonnes in 2008-09. Since gold jewellery accounted for 80% of the Indian jewellery market, a majority of the imported material was used in manufacture. GOVERNMENT INITIATIVES: * The Indian government encouraged the sectors growth through the following initiatives. * Permitted 100% foreign direct investment in gems and jewellery though the automatic route * Reduced import duty on platinum and exempted rough colored precious gems stones from customs duty, rough and semi-precious stones are also exempt from import duty. * Permitted the duty free import of consumables for metals (other than gold and platinum) up to 2% of freight on board value of exports. * Permitted duty free import entitlement for rejected jewellery up to 2% of freight on board value of exports. * Permitted the import of gold (18 carat and above) under the replenishment scheme. * Permitted the establishment of SEZs and gems and jewellery parks to promoted sectoral investment. * Abolished the import duty on polished diamonds in May 2007 INDUSTRY SWOT ANALYSIS: STRENGTHS: * Abundant availability of skilled cheap labor * India Dominates the Diamond Processing trade(11 out of 12diamonds are cut and polished) * Gold and Diamond Jewellery is expected to account for 82% of Total Gems and Jewellery market by 2015. * Low cost of production * Supporting Government industrial/EXIM Policy * A large number of Gem and Jewellery institutions provide a regular supply of trained man power with required skills and knowledge. WEAKNESS: * Low indigenous resources of rough diamonds and gold * Low labor productivity compared with Srilanka, China and Thailand, * Small firms lacking Technological and Export promotion expertise. * Removal of generalized system of preference will effect gold jewellery exports. OPPORTUNITIES: * Untapped reserves and Gems favourbale Government policies provide opportunities for Foreign direct investment in Mining and avenues for global companies to explore precious metals and stones in India. * Established capabilities across the value chain. * India is the attractive potential market in Gem and Jewellery sector. * Rising disposable incomes and aspirations . * Rising population of earning youth. THREATS: * Volatility in Gold prices * Infrastructure bottlenecks * Low Technological upgradition. * Chain and Malaysia emerging as potent competitors * Fragmented Industry structure with low transparency * Emergence of Policy and cutting centers like Angola, Namibia and Botswana. INTERNAL CONROL SYSTEMS AND THEIR ADEQUACY: The philosophy we have with regard to internal control systems and their adequacy has been formulation of effective systems and their strict implementation to ensure that assets and interests of the Company are safeguarded; checks and balances are in place to determine the accuracy and reliability of accounting data. The Company has a well defined organization structure with clear functional authority, limits for approval of all transactions. The Company has a strong reporting system, which evaluates and forewarns the management on issues related to compliance. Company updates its internal control system from time to time, enabling it to monitor employee adherence to internal procedures and external regulatory guidelines. FINANCIAL PERFORMANCE & OUTLOOK: In the Coming Financial Years, the Board will put its major thrust in developing domestic Jewellery Market, with its Innovative products and Schemes. The company will put efforts to make the best use of the Synergies resources available consequent to Merger. The company has recently opened its new retail Jewellery Show Room in Kukatpally Hyderabad with a Floor area of 4500 sqfts. The Company plans to Expand its chain of stores across India, beginning with South. HUMAN RESOURSES: Human wealth is the ultimate wealth in for any industry. The Company recognizes this fact and understands that employees are one of the most important sources for sustained growth of any business. Quality personnel delivering their optimum potential for the organization is the key differentiator. The Company maintained good relations with its employees and there was no unrest in the Company at any point of time.