wep peripherals ltd share price Management discussions
WEP PERIPHERALS LIMITED
ANNUAL REPORT 2007-2008
MANAGEMENT DISCUSSION AND ANALYSIS
As a matter of better Corporate Governance and transparency, a detailed
Managements Discussions and Analysis Report for the year under review as
stipulated under Clause 49 of the Listing Agreement, is presented below:
a) Operating and Financial Review and Prospectus:
During the year under review, EBITDA of the Company increased from Rs.55.67
mn in the previous year to Rs.80.54 mn for the relevant business. While the
revenue degrew by 24%, the profit before tax increased from (0.2%) to 1.44%
primarily due to improved margins.
b) Financial Overview:
The financial statements have been prepared in compliance with the norms
prescribed by the Accounting Standards of ICAI and the Generally Accepted
Accounting Principles (GAAP) practiced in India.
i) Share Capital:
The Authorised Share Capital of the company is Rs.300 mn. divided into
27,000,000 Equity shares of Rs.10/- each and 3,000,000 Preference shares of
Rs.10/- each. The paid-up share capital of the Company as on the balance
sheet date is Rs.19.57 mn. The reduction in the Equity share capital is due
to the split of shares consequent to the demerger.
ii) Reserves and Surplus:
During the year under review, Capital Reserve of Rs.11.94 mn was adjusted
against the General Reserve due to the Demerger of the Solutions business.
The addition to Securities Premium of Rs.0.72 mn comprises of premium
received on allotment of equity shares on exercise under ESOP Schemes.
iii) Secured Loan:
To meet the Companys working capital requirement, the company has utilized
Rs.23.70 mn from its sanctioned working capital limits. The company is well
placed to meet any short-term exigencies for cash.
The Company had also utilized Rs.86.20 mn of long-term loan for the
expansion of its manufacturing facilities at Baddi and Mysore.
iv) Addition to Fixed Assets:
During the year under review, the Company invested Rs.122.33 mn on fixed
assets.
v) Inventories:
Inventories mainly comprises of finished goods, stock in process and raw
materials. For the year ended March 31, 2008 the total inventory value was
Rs.286.76 mn.
vi) Debtors:
Sundry Debtors (net of provision) for the year was Rs.191.55 mn.
vii) Sales and Expenditure:
Net Sales for the financial year 2007-08 was Rs.1,754.11 mn. The ratio of
Earning before Interest, Tax and Depreciation to sales is at 4.60% and the
Earning per share is Rs.10.62.
viii) In the Finance Act, 2005, the Government of India imposed an
additional income tax on companies called as Fringe Benefit Tax (FBT). As
per this Act, Companies are deemed to have provided fringe benefits to the
employees if certain expenses are incurred. During the year under review,
your Company had provided Rs.3.2mn for FBT.
ix) Profit and Appropriation of Profit:
The Profit of Rs.20.66 mn for the year ended March 31, 2008 is appropriated
as follows:
Interim Dividend : Rs.1.96 mn.
Dividend Distribution Tax : Rs.0.33 mn.
c) Risks and their Mitigants:
Foreign Exchange Risks:
The Company imports a number of peripheral products and parts for
manufacturing and trading. Huge fluctuation in the currency exchange rate
could adversely affect the price competitiveness of its products.
Mitigants:
The Company has a defined policy for managing its foreign exchange
exposure. The Company tracks the foreign exchange markets closely and takes
appropriate hedging decisions from time to time.
Acquisition risks:
The Company is actively evaluating acquisitions. In the event of Company
going in for an acquisition the Company would be faced with integration
issues, managing the morale of the new work force, reducing overlaps and
other related issues.
Mitigants:
The Company has a comprehensive due diligence review process covering
aspects of marketing, financial, legal, human and cultural issues before
deciding on acquisitions.
In the two acquisitions made so far, the Company has acquired substantial
working knowledge and experience in managing all aspects of take-over and
acquisitions.
Receivable Risk:
With the slow down the possibility of large distributors and IT majors
delaying payments become more real. Some of these could be our customers.
Mitigants:
The Company is carefully monitoring and controlling the financial exposure
to those customers whom it considers a credit risk.
Inventory obsolescence risk:
The Company deals with the products, which have raw materials and parts
with long lead times for supply. Change in the technology could render some
of these raw materials and parts obsolete.
Mitigants:
The Company is conscious of these risks and tracks and monitors its
inventory at regular intervals to minimize obsolescence. The Company has
laid down norms for adequately providing for these inventories in its
financial accounts.