DIRECTORS' REPORT: To The Members, Your Directors present the Audited Accounts of the company for the year ended 31st March, 2012. DIVIDEND: In view of the company being sick, the Directors do not recommend any dividend. Operations: As reported earlier, no bank support has been available after Sept 2008 and despite the company having made an offer along with the co-promoter to the lenders, a settlement has not been arrived at. Hence no financial infusion has taken place in the company. Despite no working capital and no bank support in terms of L/C discounting facilities etc., operations have continued on the strength of a very limited portfolio of customers who are willing to pay either 100% advance or fund the purchase of raw materials. While sales in quantity terms decreased by 8%, value increased by 2%. Exports including deemed exports increased by 53% in quantity and 30% in value terms. Domestic sales including job work declined by 37% in quantity terms and 28% in value terms. Despite a low capacity utilization of 16%, on account of no working capital and no bank support, there was a positive EBIDTA OF Rs. 42.42 lacs despite a negative foreign exchange fluctuation of Rs. 68.37 lacs as a result of a weakening rupee. As reported earlier, the focus has been only on the production of value added products. More value added products can be developed once there are no financial constraints which can take the company into a positive direction. Metallized paper with improved barriers can be a product for the future. Metallized paper - a promising product for the future: As reported last year, the Ministry of Environment and Forests banned the use of plastics for packaging of Pan Masala, Gutka and tobacco products effective 1st March 2011. This positively impacted the company in the first quarter of this financial year as metallized paper sales increased significantly during this period. Subsequently, however, aluminium foil was imported from China and that became the major product of usage in that segment since it has a better barrier than metallized paper. Despite this, as the world and India get more environmentally conscious, metalllized paper with improved barriers can be an environmentally friendly packaging material for the future. Some more developments will have to be carried out in terms of the improvement of the moisture and oxygen barriers which are critical for packaging. If success is achieved on the barrier front, metallized paper could be a promising product for the company in future. Raw material prices: Polyester film along with paper is one of the major raw materials. Polyester film prices which were at skyrocketing levels of Rs. 229/kg. in October 2010, dropped to levels of Rs. 117/kg. in April 2011 and remained at a price of around Rs. 100 till March 2012. Exports: With no bank support and no L/C discounting facility available, only limited selective export orders were taken from customers who are able to pay in advance. Clubbed together, - exports (direct and deemed) increased by 53% in quantity terms and 30% in value terms. There was a compression in value because of a sharp decline in the raw material - polyester film price during the year as against the previous year. Product development: The company has been working on improving the barriers of metallized paper as also working on some value added coated products as the future of the company depends on high value niche products. Turn around strategy and outlook: The company has been able to convince one of its major customers to invest and participate in the rehabilitation of the company. However, the offer made by the company along with this co-promoter has not been acceptable to the bankers as they are looking at a higher offer. The EBIDTA positive financial performance not withstanding a low capacity utilization because of severe working capital constraints is an indicator that with a financial infusion and a Debt Rehabilitation Scheme based on an OTS being in place, the company would be in a position to turn around financially. Status of reference to BIFR As reported earlier, the company is a Sick Industrial Company within the section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985. A reference was filed with BIFR under Section 15(1) of the said Act by the company on 7th June, 2004 and registered by BIFR on 21st June, 2004. The Hon'ble BIFR in its order dated 5.9.2006 had declared the Company sick and appointed the State Bank of India as the operating agency. A rehabilitation scheme was filed by the company in June 2009 based on a One Time Settlement with the secured lenders backed by a strategic investor. The OTS offer made by the company with backing from a strategic investor had not been acceptable to the lenders, as a result of which a fully tied up Debt Resolution Scheme could not be put in place. The Hon'ble BIFR in its order dtd 22.4.2010 had directed the Operating Agency to issue an advertisement for Change of Management as per their guidelines and had directed the Operating Agency to submit its report and a Draft Rehabilitation Scheme, if it emerges, within 4 months. As per the Hon'ble BIFR's guidelines, the existing promoters could also submit their fully tied up Draft Revival proposal with or without a co-promoter with proof of their financial resources for rehabilitation. As per their guidelines, other things being equal, the proposal from the existing promoters would still get a preference over others. The company had made a bid within the stipulated period in July 2010 along with a co-promoter with proof of the financial resources of the co-promoter. The offer was not accepted by the lenders on 3.9.2010. The Hon'ble BIFR in its order dtd 3.3.2011 had directed the Operating Agency to reissue another advertisement for Change of Management as per their new guidelines and had directed the Operating Agency to submit its report and a Draft Rehabilitation Scheme, if it emerges, in 2 months from the date of closing of bid/offer. The Hon'ble BIFR also directed SBI (OA) to examine the proposal of the Japanese firm that had offered to raise funds for the company. Though an offer was received from the Japanese firm, their proposal was turned down by the lenders. The company had again submitted a Debt Revival Scheme (DRS) within the stipulated period along with a co-promoter. This offer was also not accepted by the lenders. The Hon'ble BIFR in its order dtd 17.8.2011 had indicated that the company is working and the products that they are manufacturing are now having a good market potential and that the company employs about 151 workers, whose livelihood is dependant on the company's survival. Hence the bench gave one more opportunity to the company to settle its secured debts. The company was also asked to show cause as to why the company should not be wound up keeping in view that the dues of the secured lenders had not been settled and the proposals submitted by the company had not been accepted by the secured lenders. The company had submitted its reply to the show cause notice for winding up on 27.10.2011. The Hon'ble BIFR in its order dtd 29.12.2011 after considering the material on records and the submissions made, observed that the bench was convinced that the company was making sincere efforts for its revival. The board observed that the company was employing about 151 workers whose livelihood depended on the company's survival. Hence, the Bench gave one more opportunity to the company to settle its secured creditors and kept the SCN for winding up of the company in abeyance till the next date of hearing. The company had already informed the Hon'ble Board that the strategic financial investors identified by the company earlier, who were willing to support the efforts of the company had withdrawn as the OTS settlement offers made with their support were not acceptable to the secured lenders. The company therefore, made renewed efforts to identify a new strategic / financial investor and made an offer along with a co-promoter, who is also a major customer of the company on 1.3.12 which the lenders again turned down in the hearing held on 6.3.12. Despite having identified a co-promoter who is willing to participate in the Rehabilitation of the company, as a result of no settlement with the lenders, the Hon'ble BIFR has formed an opinion about the winding up of the company under Section 20(1) of SICA vide their order dtd 20.7.2012. Since the Hon'ble BIFR does not have the power to wind up, they would be communicating their opinion to the Hon'ble High Court of Uttarakhand in which State our plant facility is located. Being an operating company with a reasonable turnover despite no bank support and no working capital, the company is in the process of filing an appeal before the Hon'ble AAIFR against the order of the Hon'ble BIFR. Personnel: As reported earlier, during the period of sickness of the company, there has been a heavy exodus of management and supervisory personnel. We have been doing our best to retain the core team. After 1st April 2005, till date - a period of over 7 years, only two increments were granted to the management and supervisory staff. Despite this, some of the employees have demonstrated great determination and loyalty during this very very turbulent period in the history of the company. Retention of the core management and supervisory team is critical for the company's operations. FIXED DEPOSITS The company has not accepted/renewed any deposits during the year. DIRECTORS' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA) OF THE COMPANIES ACT, 1956: As required under Section 217(2AA), which was introduced by the Companies (Amendment) Act, 2000 your Directors confirm that: I. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; II. 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 or loss of the Company for that period; III. 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. The Directors have prepared the annual accounts 'on going concern basis'. V. These financial results of the company have been audited by M/s Lodha & Co. Chartered Accountants. A reference may be made to their report dated 30.08.2012 to the members together with Annexure 'A' thereto containing information as per requirement under the Companies ( Auditor's Report ) Order, 2003 attached with these annual accounts. CORPORATE GOVERNANCE The Company has complied with the mandatory provisions of Corporate Governance as prescribed in the Listing Agreement with the Stock Exchanges. A separate report on Corporate Governance is included as a part of the annual report along with the Auditors' Report on this compliance. AUDITORS' REPORT: Your directors wish to comment on the following remarks made by the auditors in their report under Companies Auditors' Report Order, 2003 as under: 1. Regarding non maintenance of inventory and valuation thereof: Company is maintaining full item wise details of finished goods, raw material, stores and spares and in the opinion of management, valuations are fair. Other comments of the auditors in their report have suitably been explained in the relevant notes on accounts, which are self explanatory and do not call for any further comments from the Directors. LISTING OF SECURITIES: Trading in shares of the company has been suspended at Bombay Stock Exchange w.e.f. 24.02.2011 due to certain non-compliances. Pursuant to special resolution passed at previous Annual General Meeting held on 28.09.2010 the company has filed application for voluntary delisting on 15.3.2011 with stock exchanges at Uttar Pradesh, Kolkata, Ahmedabad and Delhi. The same is pending at respective stock exchanges. The securities of the company shall continue to be listed on the stock exchange having nation wide trading terminal vis Bombay Stock Exchange, Mumbai, and therefore as per the SEBI (Delisting of Equity Shares) Regulations 2009, issued by the Securities and Exchange Board of India, no exit opportunity need to be given to the shareholders of the Company. DIRECTORS Shri Anil Sharma, Director retires by rotation as required under the Companies Act, 1956 and being eligible, offers himself for re-appointment. PICUP appointed Mr. D K Sharma as Nominee Director on the Board of Directors vide their letter no. Sec/Board/3795 dtd 15.12.2011. Formalities of his appointment are in process. AUDITORS M/s Lodha & Co. Chartered Accountants, auditors of the Company, retire at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUT GO: Information in accordance with clause (e) of subsection (1) of section 217 of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended 31st March, 2012 is given in Annexure A to this Report. COST AUDIT COMPLIANCE The company is in the process of appointing Cost Auditors. PERSONNEL: There was no employee in the Company drawing remuneration more than the limits prescribed under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. ACKNOWLEDGEMENTS: The Directors wish to place on record their appreciation of the dedication, commitment and loyalty of the employees who have stood by the company in its most difficult hour in embattled, warlike conditions despite having to face personal financial pressures. The Directors also wish to record their appreciation of the support and understanding displayed by the Company's Bankers and Financial Institutions. On Behalf of the Board of Directors Sd/- Madhukar Jalan Managing Director Sd/- R. R. Malhotra Executive Director New Delhi Dated 30.8.12 |