APS - STAR INDUSTRIES LIMITED
AMALGAMATION OF STAR INDUSTRIAL & TEXTILE ENTERPRISES LTD. WITH THIS
The Directors, while presenting the 37th Annual Report together with the
audited statements and annual accounts for the period ended 30.6,1995,
would like to draw the attention of the members to the fact that this is
the first annual report of the company after the erstwhile Star Industrial
& Textile Enterprises Ltd. has got amalgamated with this Company, pursuant
to the orders passed by the BIFR at its hearing on 6th March 1995, giving
effect to its amalgamation from 01.03.1994. As a consequence, the working
results of the amalgamated company for the 15 months period have been
incorporated in this Company's financial results. Also, the assets and
liabilities of the amalgamated company, as revalued and restated, that have
been taken over by our company w.e.f. 1.3.1994, have been so given effect
In view of the amalgamation and the entries emanating from the
consolidation of the accounts and the complexities involved thereto, the
accounting year of the Company has been changed to cover the period of 15
months from 1.4.94 to 30.6.95. This necessarily entailed delay in
presentation of the accounts.
Whereas the Company's turnover has marginally dropped by 4% as compared to
the previous year on an annualised basis, there has been a loss of Rs.9.24
crores in the 15 months period ending 30.06.1995 compared to the net profit
of Rs. 4.71 crores in the previous year. The main reasons for this
extraordinary loss situation are :
a. The period of ambivalence of over one year due to the delay in the
formal sanctioning of the amalgamation scheme, resulting in the inability
of this Company to take the benefit of synergical operations with the
amalgamated company as per the projections set out, and thus the losses
that were inevitably incurred by the amalgamated company (SITEL) affecting
the overall working results.
b. Non receipt of timely and adequate working capital as contemplated under
the sanctioned scheme, despite vigourous follow up and non-release of the
Company's own funds held as margin for an unexpired guarantee.
c. The losses of approximately Rs.6 crores, including production losses,
that the Company's' Baroda Unit had to suffer due to the unprecedented
floods on 06.09.1994, when the waters from the Ajwa Dam situated 20 kms
away, were released at night time, without any prior warning or
information from the concerned authorities, resulting in the flooding of
the basement of the Baroda factory, and thereby the finished goods,
components and various factory utilities getting badly damaged. Further,
the plague situation in Surat, which is a major market for the inserts
manufactured at our Baroda unit, also caused loss in sales.
d. The overall liquidity crunch in the money market, making the industry
as a whole suffer for several months, with many customers deferring
delivery of products, as a result of which the Company being forced to
resort to market borrowings at high additional interest costs, to keep
e. The efforts of the Company to mobilize shareholders funds through the
Odd-lot issue to the shareholders' of the amalgamated company (erstwhile
SITEL) getting a serious jolt, owing to the collapse of investors
confidence in the stock market following the M.S. Shoes debacle.
f. Non-receipt of no-objection certificate from the Bankers of the
amalgamated Company (SITEL) for disposal of surplus and non-productive
lease premises at the time when the Company was getting a reasonably good
compensation for the same.
In the context of the losses therefore, the Directors are not position to
recommend any dividend for this year.
ODD LOTS ISSUE FOR NON-MARKETABLE LOTS OF SITEL SHAREHOLDING
Subsequent to amalgamation, over 50,000 shareholders of erstwhile SITEL
have joined the family of APS share holders. Their shares having been
converted in the ratio of 16:1, and consequently most of SITEL
shareholders ending up with odd number of equity shares of our Company,
your Directors decided to allow them to apply for additional shares, so as
to enable them to make their holding into marketable lots of 50 or 100
shares, and the Company obtained the permission from SEBI for such an Odd
Lots issue. While granting this permission, SEBI did not allow the
promoters to subscribe to shares under this issue and the Company
therefore offered shares on firm allotment basis without right of
redemption to all other SITEL shareholders. In the context of this gesture
in the interest of small shareholders, the Company and its merchant bankers
were expecting to mobilize any where from Rs. 9 crores to Rs. 15 crores.
However, as a result of the general collapse of the stock market and the
conditions prevailing then, the Company could only enlist a very modest
response of Rs. 2.67 crores. The objective of the Company to mobilize the
shareholders in making their holdings marketable has largely remained
CAPITAL OF THE COMPANY
The shareholders of erstwhile SITEL having joined the Company, the shares
of SITEL have been exchanged in the ratio of 16 shares of SITEL : 1 share
of this Company. SITEL also had 11% cumulative preference shares and the
said shares together with the accumulated unpaid dividend have also been
convened into the equity shares of this Company at a price of Rs.60/- per
share (with premium of Rs. 50/- per share). The share capital with the
above changes and also with the Odd Lots issue now stands at Rs.11.51
crores and with the reserves of Rs. 38.21 crores, and the quasi equity of
Rs. 8.94 crores, the net worth is Rs. 58.66 crores.
SALE OF NON-PRODUCTIVE ASSETS
The shareholders may recall the main purpose of amalgamation, which was to
save on costs and take advantage of the synergistic operations of both the
companies. In consonance with the objective, the Company has decided to
dispose off unproductive assets of the Company. Accordingly, the Company
has disposed off the R&D plant at Dombivli, with the R&D activities being
shifted to the Baroda unit of the Company. The Company has also decided to
dispose off the lease rights for 2 flats out of the total 3 flats of the
Company at the Bombay Corporate Office. One of the flats is the original
flat of this Company, i.e. APS, while the other flat proposed to be
disposed off is of the erstwhile SITEL, which has been charged as a
security. The Company has offered the proceeds to be received from this
flat of erstwhile SITEL to be paid to the bankers of SITEL, and are
awaiting NOC from the Banks for its sale.
CURRENT OPERATIONS, RESTRUCTURING & MODIFYING THE AMALGAMATION SCHEME
During the current year too, the Company's operations have continued to
stagnate and have been far from the optimum level, this too despite the
excellent order book position both in the domestic and the high value
export market. The Company has suffered from lack of working capital funds
even for minimum carry-on operations, particularly at the erstwhile SITEL
units at Dombivili and Nasik. As a result of this, the overall production
came down to a monthly average of Rs. 1.60 crores, of which the share of
the erstwhile SITEL units remained just about 15%. Drastic measures had
therefore to be taken by the Company's management to redress this situation
in the context of the worst ever liquidity crisis that the industry in
general has seen during the last 12 months.
The Company has therefore initiated several measures of restructuring
including financial re-engineering. In view of the fact that the Dombivli
unit of the company has been the major cause of losses, your Board of
Directors have decided to close down the unit with effect from 1st March,
1996. Only when adequate working capital funds are available to that unit
in one lot and commensurate with optimum working of the units based at a
reasonably high level of capacity utilisation, will the unit be re-started.
By this measure, the drain on the liquidity of the other units of the
Company, whose production in turn was getting affected, has been stopped.
Other measures of financial re-engineering have now started benefiting the
Company, and irrespective of the virtual closure of SITEL units, the
monthly average production and turnover of the Company have increased to
Rs. 2.25 crores in the current quarter from January to March' 96, as
against Rs. 1.60 crores per month in the previous 6 months. Your Directors
also propose to augment the performance of Unit IV of erstwhile SITEL at
Nasik producing Nickel Perforated Screens.
Its comparatively small requirement of working capital funds and its high
value addition because of export orders, would benefit the Company.
Your Directors have also taken the decision that the 4 units of the Company
would here onwards function as independent and separate profit centres,
with all collections and expenses attributable to each directly being so
accounted, and with each Chief Executive or Unit- in-Charge being
responsible for their overall performance. The Corporate Office at Bombay
is therefore being shrunk to cater to only the overall management functions
of Policy Formulation, Financial Control and export administration.
In the context of the problems encountered in the functioning of the
amalgamation scheme, the Company has approached the BIFR through the
Operating Agency IDBI. The IDBI, after examining thoroughly the Company's
case, has made its report to the BIFR, outlining the difficulties and
recommending modification of the scheme, immediate release of working
capital funds for the SITEL units, sale of surplus non-productive assets
and restructuring of debt, besides induction of promoters & external funds.
The BIFR in turn after a Review Hearing has ordered the Company and the
Operating Agency IDBI to speedily rework the amalgamation scheme and put it
up for its reconsideration. This re-working would involve revised estimate
of the cost of the working of the scheme, including capital expenditure and
means of financing, through internal accruals, benefits under Section 72 A,
external financing and the contributions by the banks and financial
institutions. It is hoped with the co-operation of the operating agency,
and the Banks, an agreed modified scheme would be in place for submission
before the Hon'ble Bench at its hearing in July 96. It is fervently hoped
that the banks of SITEL will then come forward to release working capital
funds, in particular those required for the Dombivli works of erstwhile
With all the measures of financial re-engineering initiated by the
Company's' management and the re-working of the amalgamation scheme, your
Directors are sanguine of coming back to a break - even position in the
forthcoming financial year beginning July 1996.
The consortium of the original bankers of APS, consisting of Bank of India
and United Bank of India, have shown due consideration to the problems
encountered by the Company during the last 1/2 years and it hoped that the
said Banks would further actively support the Company in its efforts of
overall financial restructuring. With this support and the necessary
measures being taken by the Management for inducting external funds, the
Company is confident, in the background of its order book position, to
start generating internal accruals in 1997 and regain its past
profitability records of the years 1989 to 1994.
Your Directors are happy to inform you that the efforts made for building
strategic alliances with other parties in India and abroad, will also bring
advantages that will be reflected in the working results of the future. All
the above will go a long way in strenthening the financial structure of the
In view of the immense techno-economic benefits accruing to your Company
out of the development of the export market, particularly in USA and
Europe, the Company received permission from the Commerce Ministry and the
RBI to set up a wholly owned overseas subsidiary having its registered
office in London (U.K). The Company has so far contributed approx. Rs. 1.59
crores towards the equity capital of this subsidiary.
SUBSIDIARY - STAR OF GUJARAT TEXTILE MILLS LTD. (SOGTM)
The performance of the Subsidiary has been steadily improving. Statements
pursuant to Section 212 of the Companies Act, 1956 relating to the
Subsidiary Company are given separately. The operating agency, M/s.
Industrial Reconstruction Bank of India (IRBI), has prepared a draft scheme
for consideration of BIFR that involves substantive realization through
sale of surplus land. The Gujarat High Court having cleared a long pending
case favourably and this would make the new scheme for the units
BANKS AND FINANCIAL INSTITUTIONS
The Directors are thankful to IDBI, in its capacity as both the prime
financial institution and as the Operating Agency of BIFR. The Directors
are also thankful to Bank of India, Bank of Baroda, United Bank of India,
Canara Bank, Syndicate Bank, State Bank of India, Exim Bank of India,
Export Credit Guarantee Corpn., Karnataka State Industrial Investment &
Development Corpn. Ltd, SICOM Ltd, and also the private financing companies
for the support received from them.
The Company's tradition of harmonious industrial relations with its staff
and workmen continue and it has received fullest cooperation from its
employees. The Company believes that it is only the dedicated efforts of
employees that can lead to customer satisfaction.
During the year under review as a result of the amalgamation, all the
Directors of the erstwhile SITEL went out of office as from 20-3-95. Mr.
D.M. Popat from the Board of SITEL, joined the Board of the Company as from
20-2-95. Adm. Ravi Sawhney joined the Board of the Company as from 27-6-95.
Mr.E.A.K. Faizullabhoy and Mr.PaulGuenther Zoller resigned from the Board
of the Company as from 20-2-95. Mr.S.N. Talwar, joined as Director on the
Board of the Company as from 17-12-94.
Your Directors put on record the services rendered by Mr. E.A.K.
Faizullabhoy and Mr. Paul-Guenther Zoller.
After the 37th Annual General Meeting of the Company held on 31st January,
1996, all concerned Directors of the Company stand reappointed.
PARTICULARS OF EMPLOYEES
As required under the provisions of Section 217 (2A) of the Companies Act,
1956 read with the Companies (particulars of employees) Rules 1975, the
names and other particulars of the employees of the Company who were in
receipt of remuneration not less than Rs. 3,75,000 during the financial
year under review or Rs. 25,000 per month, are set out in the statement
appended hereto and that appendix forms an integral part of this Report
None in the statement annexed hereto except the Managing Director and a
Wholetime Director are related to any of the Directors of the company.
ENERGY, TECHNOLOGY, FOREIGN EXCHANGE
Disclosure of particulars with respect to conservation of energy,
technology absorption and foreign exchange earnings and outgo as required
under the companies (disclosure of particulars in the Board of Directors'
Report) Rules, 1988, is annexed hereto.
In view of the losses, no amount has been transferred to general reserves.
Total deposits of Rs. 0.11 crores from the depositors remained unpaid as
on 30.6.1995. The same yet remains unclaimed.
The properties of the Company are adequately insured against such risk as
fire, riot, strike, earthquake and malicious damages. The Company has also
taken an insurance cover for flood risk.
M/s. Nanubhai & Co., Chartered Accountants, Bombay, Auditors of the
Company, retire at the conclusion of this Meeting. They are eligible for
re-appointment until the conclusion of the next Annual General Meeting.
As regards the comments of the Auditors in their report, the notes on
accounts are largely self-explanatory.
Your Directors would like to place on record their appreciation and thanks
to all its well wishers more particulary the shareholders, the Company's
customers and suppliers, the State and the Central Govt. and their various
offices, auditors, solicitors and employees of the company for their
practical, pragmatic and positive approach, and for providing their
valuable assistance, support and co-operation to the Company.
DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY TECHNOLOGY
ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO AS REQUIRED UNDER THE
COMPANIES (DISCLOSURE OF PARTICULARS IN THE BOARD OF DIRECTORS REPORT)
I. CONSERVATION OF ENERGY
a) The Company has taken several steps / measures for conservation of
energy like : -
i) Reduction in wastage of light and compressed air.
ii) Upgrading technology.
iii) Overhauling of major equipments at a fixed time periodically.
iv) Reduction in idle time of machines.
b) Additional investments and proposals if any being implemented for
reduction of consumption of energy.
The Dombivli unit is proposing to install a voltage stabilizer unit in the
main supply so as to accurately monitor the input voltage to the plant.
c) Impact of measures at (a) and (b) for reduction of energy consumption
and consequent impact on the cost of production of goods.
As a result of above steps energy saving upto 5 to 6% is achieved.
d) As per Form 'A'
FORM - A
DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY
[A] POWER & FUEL CONSUMPTION
a) Purchased Units 5,766,684 5,077,688
Total Amount Rs. 16,779,199 14,226,918
Rate/Unit Rs. 2.91 2.80
b) Own Generation through Diesel Generator
Units 39,456 26,350
Units per litre of diesel oil (KWH) 3.08 2.40
Cost per unit Rs. (only diesel) N.A. N.A.
2 3 & 4 Coal furnace oil and others N.A. N.A.
[B] ELECTRICITY CONSUMPTION PER UNIT OF PRODUCTION
Sr. PRODUCT / ITEM
1. Ring Frame
a) Top Arms 5.0009 4.1471
b) Top apron guiding devices 0.8507 0.7054
c) Antifriction Top Rollers/Arbours 1.3410 1.0539
d) Antifriction Center Spindle Inserts 1.7929 1.5420
2. Antifriction Jockey Pulleys 1.6964 1.4210
3. Speed Frame
a) Top Arms 6.2076 5.1477
b) Top apron guiding devices 0.8113 0.6728
c) Antifriction Top Rollers/Arbours 1.6258 1.5424
d) Antifriction Center Spindle Inserts 2.2562 2.4809
4. Bottom roller Bearings 1.2464 1.0591
5. Antifriction Assemblies for water
pumps for Automobiles 1.9175 1.5101
6. Spindle Upper Parts 2.6400 2.2600
7. Fluted Rollers 9.4781 9.6320
8. Ring & Speed Frames * 219.3132 153.2069
9. Jet Dyeing * 3,218.9516 2,843.5200
10. Nickel Screens * 69.2107 34.4137
* The higher consumption is due to reduced production and lower capacity
II. TECHNOLOGY ABSORPTION
As per Form 'B' as under :
FORM - B
1. RESEARCH & DEVELOPMENT (R&D)
i) Specific areas in which R&D carried out by the Company.
a) Existing processes are updated and new processes in manufacturing
introduced to improve quality
b) Development work done in order to achieve better quality and ISO 9000
c) New Drafting components have been designed and developed in order to
take care of quality of Yarn produced in textile mills. The improved
designs are under trial runs in various applications in spinning industry.
The initial report is encouraging.
d) New product developed to take care of imports.
ii) Benefits derived as a result of above R&D.
Improvement in quality and after sales service, saving in foreign exchange,
participating in global market, saving in foreign exchange, etc.
iii) The company has consolidated the recently developed Dyeing machine for
This machine has been well accepted in the domestic market.
iv) Future plan of action
We shall continue our efforts to develop new products to capture Indian as
well as global market and Improve quality or existing products.
Rs. in Lac
v) Expenditure on R&D
a) Capital -- --
b) Recurring 163.26 183.63
c) Total 163.26 183.63
d) Total R&D expenditure as a
percentage of total turnover 4.33 5.91
2. TECHNOLOGY ABSORPTION, ADOPTION & INNOVATION
i) Efforts in brief, made towards technology absorption, adoption and
In view of existing technical collaboration with SKF-TMC GmbH, Germany,
company can produce textile components to meet different varieties of
machinery manufacturers. With the help of available know-how and technology
upgradation agreement existing with M/s. Gesellschaft Fuer Technologie
Transfer GmbH company can produce all design of Drafting components.
ii) Benefits derived as a result of above efforts :
Import substitution, cost reduction, improvement of product and quality
iii) Information regarding technology imported during the last five years :
Sr. Technology Imported Year of Has Technology If technology not fully
No. Import been fully absorbed the reasons
absorbed thereof and future plan
1.Spindle Inserts HF-21, 1989-90 Yes
HZ-21 and HC-21 1990-91
HF-1, HZ-1 1992-93 Currently under
HF-3 series 1991-92 - do -
4.Spindle Inserts 1992-93 - do - Technology absorption
HF/HZ-4 series for is a on going process
Heavy Duty Spindles
5.Spindle Inserts 1991-92 Yes
HF/HZ-5 series of
Two for One Twister
and Heavy Duty Spindles
3. FOREIGN EXCHANGE EARNINGS AND OUTGO
a) Activities relating to exports sincere and substantial efforts
undertaken to increase export of company's products. Introduction of new
products and quality product would boost up world wide export market.
b) Total foreign exchange used and earned 1994-95 Rs in lacs
i) Used 650.79 842.58
ii) Earned 524.18 568.50
for and on behalf of
BOARD OF DIRECTORS
SURESH M. MEHTA
CHAIRMAN & MANAGING DIRECTOR
Place : Mumbai,
Dated : 12th June, 1996.