DIRECTORS' REPORT To the Members Your Directors present the Forty-Eighth Annual Report on the business and operations of the Company for the year ended 31st March, 2013. DIVIDEND In respect of the year under review, i.e., the year 2012-2013, in the absence of profits your Directors do not propose to declare any dividend. OPERATIONS During the year, the Company was able to achieve gross revenue of Rs. 20.32 crores as against Rs. 85.48 crores in the previous year. Sales of lighting products comprises of domestic sales and export sales. The Company has undertaken an exercise including creating SPVs (Special Purpose Vehicles) for effective and consolidated recovery of various assets and minimizing the impact on the operations or financial stability of the Company. However, such exercise needs an approval from lenders, shareholders and stakeholders in view of the uncertainty about the impact of any changes to the plans drawn up and timing of implementation, the Company and the management cannot ascertain the final outcome at this juncture. DOMESTIC SALES The Company's sales suffered significantly for want of working capital and delayed recoveries from markets. EXPORT SALES The Export Sales was to the tune of Rs. 4.41 Crores for the year under review as compared to Rs. 10.45 crores in the previous year. Your Company intends to increase contract manufacturing and exports sales. RESEARCH AND DEVELOPMENT Asian Technology Center (ATC), the design and development center of the Company is based in Pune, Maharashtra. This R&D center is ISO-9001:2008 compliant and has developed products conforming to global standards. ATC understands the importance of innovating and customizing the existing products in minimum possible time frame. The expertise in developing full functional prototypes helps to reduce the design cycles and achieve faster time to market. Global practices of 'NPI' (New Product Introduction) and 'TOT' Transfer of Technology) are being followed for conducting Research & Development activities. The team at ATC consisting more than 20 engineers and 5 support staff has more than 100 man-years of experience of working together among them. Major milestone of the R&D unit are as follows: 1) POC samples of LED products are developed using standard component available in the market. 2) Completion of pilot batch of Line Monitoring and Controllers for an overseas company in the field of Power Control and Management. The product involves 4-5 multilayer boards, its integration with IP cabinet, testing and basic functioning. 3) The sample batch quantities have been put in place for the coming year. 4) Some new projects regarding the Line monitoring devices are now into NPI. 5) Modified Samples of High Voltage loop management System, whose POC had been evaluated and approved have been sent for evaluation to customer. FINANCE The enclosed statement forming part of the report gives details such as Financial Position at a glance, Distribution of Income etc. Your directors wish to bring the following to your attention: The Company has a debt burden which its established sources of income and assets cannot service or repay. A detailed exercise had been carried out with the help of professional agencies and secured creditors in pursuance of establishing the viability. The reports inter alia conclude as under: # The unit is viable and business is feasible. # The Company needs equity infusion and debt restructuring or repayment at a discount. # The present realisable values of assets have eroded significantly # The new initiatives taken for development and production of identified products on contract basis make the enterprise viable. The above clearly indicates need for fresh fund raising and the debt restructuring. The relevant notes have been carried elsewhere in this report. The Company had filed a proposal with the Corporate Debt Restructuring (CDR) cell for the restructuring of its Bank Liabilities under consortium. The CDR proposal submitted by the Company was approved by the CDR Empowered Group Committee (CDR-EG) at its meeting held in March 2012. However, since the process consequent to such approval could not be completed, the concerned Banks did not execute the master restructuring agreement, therefore the CDR proposal has lapsed. Now the Company has approached/is in the process of approaching individual Banks for settlement of their dues under One Time Settlement (OTS) basis. CAPITAL EXPENDITURE As at 31st March, 2013, the gross fixed assets stood at Rs. 9960.75 lacs and the net fixed assets at Rs. 2800.60 lacs. Additions to fixed assets during the year Amt Rs. 6.65 Lacs and deductions to the fixed assets during the year amt Rs. 6.34 Lacs. INVENTORIES, RECEIVABLES AND CURRENT ASSETS The management has done a detailed analysis of its current assets as reported in the previous year. For the reasons explained below, the board is of the opinion that the realizable value of assets has gone down significantly: Inventories: The inventories include a large portion of products meant for oil division which has ceased to be operative and hence not realizable. Also a large volume of components, WIP remained unutilized for such products. Receivables: The Company has disputed export receivables from M/s Westinghouse Lighting Corporation where a lawsuit has been lost and also other cases where quality counter claims and customers' reorganization have delayed recoveries. On domestic front, large number of debtors have raised counter claims. Coupled with a reduced turnover, this has made recoveries more difficult. The Company has issued legal notices in over 200 cases. Advances: In many cases, the Company had advanced certain amounts for long term business contracts. The reconciliation for the individual parties is under process and once confirmed suitable action for recovery shall be taken. In view of the above, current assets as stated above are not at realizable values as stated in the Balance Sheet REGISTERED OFFICE Pursuant to the approval of members by way of Special Resolution passed at the Annual General Meeting held on 29th December, 2012 the registered office of the Company has been shifted from D-11, Road No.28, Wagle Industrial Estate, Thane - 400604 to 107, Sumer Kendra Building, P.B. Marg, Behind Mahindra Towes, Worli. Mumbai - 400 018. SHARE CAPITAL During the year under review, the paid up share capital of the Company was increased consequent upon the allotment of 41,80,057 equity shares to Asian Electronics Limited, Employees Welfare Trust, 2009 under Employees Stock Option Scheme 2009. SUBSIDIARY COMPANIES The Company has effective from 1st October, 2009 transferred the following Divisions to two 100% subsidiaries (SPVs) as under: a. Business of ESCO Division, i.e. financing of Projects / Products to customers on energy saving basis, and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer, on a going concern basis. The name of this 100% subsidiary is AEL ESCO PRIVATE LIMITED. b. Business of Projects Division, i.e. State Electricity Board Projects and all activities related thereto together with all related assets, liabilities and entitlements at book values as at the time of transfer on a going concern basis. The name of this 100% subsidiary is AEL PROJECTS PRIVATE LIMITED. The Accounts for the year ended 31st March, 2010 to 31st March, 2013 have incorporated all these transactions at the book values at the time of transfer the difference between the book values of identified assets and liabilities of ESCO Division amounting to Rs. 5174.34 Lacs and of Project Division amounting to Rs. 1129.15 Lacs are shown as investment in those subsidiaries. Pending approval of secured / unsecured lenders, the Company has, for the time being, shown the said investments under Investment Suspense Account read with Note 10 of the Accounts as on 31st March, 2013. On account of transfer of these two Divisions to two separate subsidiaries, the Company has also prepared Consolidated Balance Sheet and Profit & Loss Account which forms part of the Annual Reports for the financial years 2009-2010 to 2012-13. ACCOUNTS The accompanying Financial Statements of the Company have been prepared on a going concern basis. In preparation of these accounts, the Accounting Standards made applicable by the Institute of Chartered Accountants of India, have been followed. We have selected appropriate accounting policies which have been applied consistently and have made judgments and estimates that are reasonable and prudent so as to ensure that the accounts give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the loss of the Company for the year ended on that date. We have taken proper and sufficient care for maintenance of appropriate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities. AUDITORS' REPORT As regards observations contained in Auditors' Report dated 30th May, 2013, regarding transfer of related loans and debentures of ESCO and Project Divisions to wholly owned subsidiaries, Stock Options granted to Directors and Employees, litigations initiated by LIC Mutual Fund, Bank of India and other Banks for recovery of their dues and diminution in the value of investments, old / unsalable stocks, sundry debtors and loans and advances the following explanation of the Management may be noted: OTHER CLARIFICATIONS The boards of directors have advised a detailed scrutiny of accounts and nature of liability appearing under the head Statutory Dues and have the following explanation: a) VAT/Central Sales Tax Amount payable as on 31st March, 2013 is Rs. 675.50 Lacs. There is a refund due of over Rs. 300 lacs to be adjusted against the demand. For the balance amount an application is being made by the Company for payment in installments. b) Tax Deducted at Source: Amount payable as on 31st March, 2013 is Rs. 127.68 Lacs. There is a refund due of Rs. 163.65 Lacs and the department is advised to adjust the same. c) Custom Duty and Service Tax: Amount payable as on 31st March, 2013 is Nil However, accounting reconciliation is pending. d) Provident Fund: Amount payable as on 31st March, 2013 is Rs. 9.38 Lacs. However same has been paid before June, 2013. EROSION OF NET WORTH The accumulated losses of the Company as at 31st March, 2013 amounting to 215.09 Crores have resulted in erosion of more than fifty percent of its peak net worth of 234.14 Crores during the immediately preceding four financial years. The Board is already seized of the situation arising on account of erosion of net worth and is taking the necessary steps including discussions with the lenders and a package of financial restructuring under the OTS mechanism which is under consideration with the secured lenders, for details regarding reasons of erosion and steps taken and proposed to be taken by the management please refer to the explanatory statement pursuant to section 173(2) of the Companies Act, 1956 forming part of the notice of 48th Annual General Meeting. In terms of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985, if the accumulated losses of an industrial Company, as at the end of any financial year have resulted in erosion of fifty percent or more of its peak net worth during the immediately preceding four financial years, that Company falls under the category of potentially sick Industrial Company and therefore the fact is required to be reported to Board of Industrial and Financial Restructuring (BIFR) within 60 days from the date of finalization of the audited accounts which is the date of this Annual General Meeting, the same is required be considered by the shareholders at the General Meeting. PARTICULARS OF THE EMPLOYEES None of the Employees were drawing salary of Rs. 60,00,000/- or more per annum, if employed throughout the year or Rs. 5,00,000/- or more per month, if employed for part of the year. DIRECTORS 1. Retirement by Rotation : Mr. Rajesh Mehta was appointed as an Additional Director with effect from June 1, 2011. He was also appointed whole time director of the Company, designated as Executive Director & Joint Chief Executive Officer (Technology & Finance) for a period of two years with effect from 1st June, 2011 Mr. Mehta's appointment as Director was approved by the shareholders at the 46th Annual General Meeting (AGM) held on 22nd September, 2011. His appointment as whole time director, designated as Executive Director & Joint Chief Executive Officer (Technology & Finance) and the terms and conditions thereof were also approved by the shareholders at the said AGM Mr. Rajesh Mehta tendered his resignation as Executive Director & Joint Chief Executive Officer (Technology & Finance) w.e.f 14th February, 2013, He also conveyed his intention to continue as a non-executive director liable to retire by rotation, The same was approved by the Board at their meeting held on 14th February, 2013. Therefore in accordance with the provisions of the Articles of Association of the Company and the provisions of Companies Act, 1956, Mr. Rajesh Mehta retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment. The Board recommends his re-appointment. 2. Appointment Of Director : Pursuant to the provisions of Section 260 of the Act and Article No. 161 of the Articles of Association, Mr. Hardik Shah was appointed as Additional Director with effect from 6th March, 2013 and holds office up to the date of the forthcoming Annual General Meeting. The Company has received notice from a member proposing his appointment as Director. 3. Resignation : Mr. James Mitropoulos has resigned from the post of Director w.e.f. 1st January, 2013. The same was accepted by the Board of Directors of the company at their meeting held on 14th February, 2013. The Board of directors places on record their appreciation for the valuable services rendered by Mr. James Mitropoulos during the tenure of his office. AUDITORS M/s. Sorab S. Engineer & Co., Chartered Accountants who are the statutory auditors of the Company, hold office until the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The members are requested to consider appointment of Statutory Auditors to hold the office till conclusion next Annual General Meeting. The Company also proposes to appoint branch auditors for the same period. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC. Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Out-go as required to be disclosed pursuant to Section 217 [1] (e) of the Companies Act, 1956, read with Companies [Disclosures of Particulars in the Report of Board of Directors] Rules, 1988 is given in the Annexure forming part of this Report. IMPLEMENTATION OF "GREEN INITIATIVE IN CORPORATE GOVERNANCE" INTRODUCED BY THE MINISTRY OF CORPORATE AFFAIRS Your Company" s products are designed for energy efficiency and it was therefore a natural decision for the Company to whole-heartedly support the Green Initiative in Corporate Governance introduced by the Ministry of Corporate Affairs in April 2011. The Company therefore proposes to send all notices / documents / communications including annual reports in electronic form to email addresses of shareholders registered with Depository Participants (DPs) and made available by the Depositories. Shareholders are therefore requested to keep their email address updated with the DPs at all times so that the above documents always reach them at the email account of their choice. As regards shareholders whose email IDs are not available with the Company, physical copies of such documents will be sent. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement, it is hereby confirmed: (i) that in the preparation of the annual accounts for the financial year ended 31st March, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures; (ii) that the directors have selected the accounting policies and applied them consistently and made judgments and estimates that were 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 year under review; (iii) that the directors have 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 the Company and for preventing and detecting fraud and other irregularities; (iv) that the directors have prepared the accounts for the financial year ended 31st March, 2013 on 'going concern' basis. PUBLIC DEPOSITS During the year under review, the Company had not invited any fixed deposits. The total outstanding Fixed deposits as on 31st March, 2013 were Rs. 3.49 Crores (831 depositors). Out of which Rs. 0.91 Crores (203 depositors) were not matured up to 31st March, 2013. Unpaid deposits as on 31st March 2013 are Rs.2.58 Crores (628 depositors). The Company has applied for extension for repayment of fixed deposits from the Central Government pursuant to rule 2 of the Companies (Application for Extension of Time under sub section (8) of Section 58A) Rules, 1979 which is under process with the concerned ministry. CORPORATE GOVERNANCE A separate report on Corporate Governance along with Auditor's certificate on its compliance is attached as an annexure to this report. DEPOSITORY SYSTEM As the members are aware, the Company's shares are compulsorily tradable in electronic form. As on 31st March, 2013, 98.97% of the Company's total paid-up capital representing 3,92,25,919 shares are in dematerialized form. In view of the numerous advantages offered by the Depository system, Members holding shares in physical mode are requested to avail of the facility of dematerialization of the Company's shares with either of the Depositories. ACKNOWLEDGEMENTS Your Directors take this opportunity to thank the Financial Institutions, Banks, Central & State Government authorities, Regulatory authorities, Stock Exchanges and the Stakeholders for their continuous co-operation and support to the Company. Your Directors also thank customers, vendors and investors for their faith and support. Your Directors also place on record their deep sense of appreciation of the contribution made by employees at all levels. Their continuous support and their competence, hard work, team spirit and solidarity will make all the difference to the business of your Company On behalf of the Board of Directors Place: Mumbai Date: 9th July, 2013 Arun B. Shah Executive Chairman |