DIRECTOR'S REPORT Dear Shareholders, Your Directors are pleased to present the Nineteenth Annual Report along with the Audited Accounts of the Company for the year ended 30th June 2010. CANE AND SUGAR POLICY Government policies continued to influence the performance of the Sugar Industry. The domestic Sugar market-entered into the scarcity phase due to sharp decline in production. Increased cane payment arrears and confusion in SAP & FRP, in UP had created restlessness among farmers and persuaded them to shift to other crops. Most of the mills had to face a shortage of cane, resulting in the short sugar season, which eventually lead to an early closure of the current season. Moreover, there had also been a significant drop in recovery %. Recent sugar scenario forced Government of India to review sugar industry policy comprehensively and the process is on. Unless both the State and Central Governments revise the policy realistically in terms of Cane price, and Import/Export of Sugar, the growth of this industry will be jeopardized. The country will face large cane payment arrears with consequent effect on the fortunes of farmers. The salient features effecting the sugar cane availability / recovery are as under: Sugarcane Area Sugarcane acreage in the major producing states, declined sharply due to the cultivators diversifying to other better cash crops last years. Moreover, cane plantation in UP during current year, had reported an increase of 15-20% in area because the farmers got very remunerative price during the season 2009-10. Recovery % There has been a significant drop in recovery percentage. Reports state that in U.P., the average recovery % declined was 0.75% to 0.95 % in the season 2009-10. The lower recoveries have been mainly on account of the late rains. Recent Development in Government Policies The current shortfall in sugar production and depletion of stocks has pushed sugar prices to record levels in the short span of time. Recently, the government had put limits on the amount of sugar that can be stocked by traders to avoid hoarding. Levy obligation was doubled from 10% to 20% to protect PDS supply while levy sugar prices remained unrevised for over six years. However vide notification No GSR.527.E/ Ess. Comm./Sugar dated 21.06.2010 the Central Govt, has revised the Levy Sugar prices for the production of 2009-10. Duty-free raw sugar import facility was extended till end of 2010 besides opening duty-free white sugar imports for all. Further, bulk users of sugar were subjected to unrealistic inventory norms for holding domestic sugar that has forcibly moved them to imported sugar offering greater flexibility. Inventory and turnover norms were rigidly enforced on sugar traders followed by frequent raids. The concept of Statutory Minimum Price (SMP) has been changed to Fair and Remunerative Price (FRP) for sugarcane from 200910 season. Such FRP takes certain additional factors into consideration over SMP, namely, reasonable margins for the growers of sugarcane on account of risk and profits. FRP was conceptually intended to be total compensation and hence the sole mandatory price for cane, restraining States from announcing higher SAP. However, the Centre bowing to political pressures had to make a quick retreat and remove the ban on SAP. Dual cane pricing would thus continue to daunt the industry with its deleterious impact. FRP for 2009-10 season was fixed at Rs. 129.84 per quintal linked to 9.5% of sugar recovery with a premium of Rs. 1.37 for every 0.1% increase in the recovery. FRP has been hiked to Rs. 139.12 for 2010-11 sugar season with premium of Rs. 1.46 for every 0.1 % increase for recovery in excess of 9.5%. ISO CERTIFICATION Your company continues to hold the ISO: 9001:2000 certification, which was obtained during the year 2001-2002, from M/s NQA Quality Systems Register Ltd. in collaboration with JAS-ANZ-a joint accreditation system of Australia & New Zealand. CEO/CFO Certification Mr. M.P. Singh, Managing Director and Mr. Sachin Gupta, Chief Financial Officer, have furnished a certificate relating to financial statements, internal controls and systems as per the format prescribed under Clause 49 of the Listing Agreement. DIRECTORS Mr.R.K. Gupta, Mrs Shashi Rani and Mr RPS Malik, Directors of the Company, will retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. Your Directors recommend the reappointment of Mr.R.K. Gupta, Mrs Shashi Rani and Mr. RPS Malik, Directors of the company. FIXED DEPOSITS The Company had not accepted any Fixed Deposits from the public during the period from July 2009 to June 2010. Further, there is no amount outstanding on the part of the company towards Fixed Deposits payment. DIVIDEND Your directors do not recommend any dividend for the year ended on 30th June 2010 (Last Year: Nil). CREDIT RATING The ICRA Limited vide their letter dated 19.04.2010 has allocated' LC' rating for the Working Capital Limtis for a sum of Rs 26.50 Crores. APPLICABILITY OF THE PROVISIONS OF SECTION 23 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 provides that at the end of any financial year, if accumulated losses of an industrial Company result in erosion of 50% or more of its peak net worth during the immediately preceding four financial years, such Company shall, within a period of sixty days from the date of f inalisation of the duly audited accounts of the Company for the relevant financial year report the fact of such erosion to the shareholders. According to the above provision, your company has already filed Form - C with the BIFR in the year 2002-2003. REFERENCE TO BIFR It is observed that as per Audited Accounts of the Company as on June, 2010, the accumulated losses have exceeded the net worth of the Company and it has become necessary to report the erosion in the net worth of the Company to BIFR under Sick Industrial Companies (Special Provision) Act.1985. Necessary resolution authorizing the Board of Directors to present before BIFR, is included in the Notice convening the Annual General Meeting of the Company. The main reasons of losses are as under: 1. The Company was continuously incurring losses, due to higher SAP announced by the State Government from year to year. 2. Lower recovery in the region. 3. Unviable capacity of 3500 TCD of the Plant. 4. Curtailment of Reserved Cane area and Lower allotment of cane by the state Government. Thus, as per the current financial the Company is a sick company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985. AUDITORS, THEIR APPOINTMENT AND AUDITORS REPORT The auditors, M/s. G. K. Nigam & Associates, Chartered Accountants, retire at the conclusion of the ensuina Annual General Meeting and offer themselves for re-appointment. The necessary certificate required under Section 224(1B) of the Companies Act, 1956 has been obtained from them. The Notes to the Accounts referred to in the Auditors Report are self explanatory and therefore do not call for any other explanation. The Company's 100% net worth has been eroded; hence the company is a Sick Company within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985. COST AUDITORS Pursuant to the directives of the Central Government under the provisions of section 233B of the Companies Act 1956, M/s M.K.Singhal & Co. Cost Accountants, have been appointed to conduct cost audit. CONSERVATION OF ENERGY, FOREIGN EXCHANGE, ETC The Plant was set up with most modern equipment in order to minimize energy consumption and increase profitability. Captive power generation and generation of steam from bagasse also provide cost reduction in energy consumption. High-pressure boiler along with double effect Evaporators, Vapour Bleeding and Vapour Lime Juice Heaters are some of energy saving measures. Details of energy conservation and research and development activities undertaken by the Company along with the information's in accordance with the provisions of Section 217(1) (e) of Companies Act, 1956 read with the Company's disclosure of particulars in the Report of Board of Directors Rules, 1998 are given in Annexure 'A' to this Director's Report. Expenditure/Income in Foreign Currency is Rs. NIL for the year 2009-2010 (Last Year- NIL). MANAGEMENT ANALYSIS AND PERCEPTION A separate report is appended herewith. CORPORATE GOVERNANCE REPORT The Board of Directors supports the broad principles of Corporate Governance. The report on Corporate Governance as stipulated in clause 49 of the Listing Agreement of the Stock Exchanges for the year ended 30th June 2010 and Auditor's Certificate along with Corporate Governance are appended herewith. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors confirm that: a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to any material departures. b) appropriate accounting policies have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the State of Affairs or the Company at the end of the financial year and of the Profit and Loss of the company for that period. c) Proper and sufficient care has been 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. d) The annual accounts have been prepared on a 'going concern' basis. HUMAN RESOURCES Your Directors feel pleasure to inform that the industrial relations remained cordial during the year. Your Directors acknowledge with gratitude the co-operation and assistance received from all executives, staff and workmen of the Company. The information as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of the Employees) Rules, 1975 (as amended) in respect of employees of the Company is given in Annexure 'B' and forms part of this report. ACKNOWLEDGEMENTS Your Directors express their sincere acknowledgement to the Company's stakeholders, Financial Institutions viz. IDBI/ SASF, IFCI, Standard Chartered Bank and Bankers viz. State Bank of India, Punjab & Sind Bank and Oriental Bank of Commerce and various departments of Government of Uttar Pradesh and Government of India for their continued support extended to the Company at all times. Your Directors also record their appreciation for the relentless and dedicated efforts provided by the employees at all levels and look forward to their continued support for the growth of your company. For and on behalf of the Board of Directors of VENUS SUGAR LIMITED Sd/- (Rajeev Kumar Gupta) Director PLACE: NEW DELHI DATED: 30th August, 2010 |