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Arvind International Ltd.

BSE: 524760 Sector: Industrials
NSE: N.A. ISIN Code: INE512C01012
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Arvind International Ltd. (ARVINDINTL) - Director Report

Company director report

ARVIND INTERNATIONAL LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT To, The Members, Arvind International Ltd. Dear Members, Your Directors have the pleasure in presenting the Twenty First Annual Report on the business and operations of your Company, together with the Audited Financial Statements for the year ended 31st March, 2012. FINANCIAL PERFORMANCE: The performance of the Company, on standalone basis, for the financial year ended 31st March, 2012 is summarized as below: Particulars (Rs. In Thousands) Year Ended 31.03.2012 31.03.2011 Turnover/Income from Operations 785541 1173905 Other Income 7708 1382 Total Income 793249 1175287 Less: Expenditure 756673 1143600 Less: Depreciation 5042 5069 Less: Interest 18572 17072 Profit/(Loss) Before Tax 12962 9546 Less: Provision for Tax (Incl. FBT) 2900 1850 Profit/(Loss) before Deferred Tax Adjustments 10062 7696 (Add)/Less: Deferred Tax 921 1.00 Profit/(Loss) After Taxation 9141 7697 Prior Period Adjustments (5280) (6400) Extraordinary items 0.00 0.00 Profit/(Loss) after Extraordinary items 3862 1297 Profit/(Loss) brought forward from previous year (21007) (22304) Balance Carried over to Balance Sheet (17145) (21007) During the year under review your company maintained growth in terms of Performance in manufacturing sector. The financial year under review has resulted into recovery of previous year losses which has been possible due to better product mix, focused marketing efforts and strategical plans of the management. It also started trading activity to increase the top line and to strengthen the bottom line so that the company is able to become stronger in years to come. Due to sleek and cess margin the company is gradually coming out of trading activity and not focusing on the same. The operational performance of the Company has been comprehensively covered in the Management Discussion and Analysis Report which forms a part of this Directors' Report. DIVIDEND: The Board of Directors did not recommend any dividend for the year under review as there are carry forward losses. RIGHT ISSUE: During the year under review, the company has issued 84,12,540 Equity shares of Rs.10/- each for cash at a price of Rs. 13.50 each including a premium of Rs 3.50 per Equity Shares aggregating to an amount of Rs.1135.69 Lacs to the equity shareholders of the company on rights basis and it was fully subscribed and hence successful. The above shares were duly listed on BSE and also admitted to the depository System of National Security Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL). PUBLIC DEPOSITS: The Company has not accepted any Deposit within the meaning of Section 58A of the Companies Act, 1956. DIRECTORS: In accordance with the provisions of Section 255, 256 of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Manish Lohia retires by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re-appointment. The Board recommends their reappointment. None of the Directors of the Company are disqualified for being appointed as Directors as specified in Sec.274(1)(g) of the Companies Act, 1956. A brief resume of expertise and details of other directorships of appointed/reappointed Directors is attached along with Notice of the ensuing Annual General Meeting. DIRECTORS RESPONSIBILITY STATEMENT: In terms of section 217 (2AA) read with section 292A of the Companies Act, 1956, we the Directors of Arvind International Limited, state in respect of financial year 2011-12 that: i) In the preparation of 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 the affairs of the Company as at 31st March, 2012 and of the profit of the Company for the year ended on that date. iii) 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) The directors have prepared the annual accounts on a going concern basis. AUDITORS: M/s. N.C. Banerjee & Co., Chartered Accountants the Auditors of the Company retire at the end of the ensuing Annual general meeting and are eligible for re-appointment. The Company has received the Certificate from them that their re-appointment, if made, would be within the limits prescribed u/s. 224 (1B) of the Companies Act, 1956. The Board recommends their Re-appointment. AUDITORS' REPORT: The Notes to the Accounts which to be read with the Auditors' Report are self explanatory and therefore do not call for any further clarifications under section 217(3) of the Companies Act, 1956. PARTICULARS OF CONSERVATION OF ENERGY, ABSORPTION OF TECHNOLOGY AND FOREIGN EXCHANGE EARNING AND OUTGO: The information related to conservation of energy, as required under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 is annexed and forms part of this report. PARTICULARS OF EMPLOYEES: Disclosure about particulars of employees in relation to sub section (2A) of section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, and forming part of Director's report for the year ended March 31, 2012 is not applicable to this company as there was no employee drawing remuneration in excess of Prescribed in this regard. CASH FLOW STATEMENT: As required under Clause 32 of the Listing Agreement with the Stock Exchanges in India, a Cash Flow Statement, as prepared in accordance with the Accounting Standard on Cash Flow Statement (AS-3) issued by the Institute of Chartered Accountant of India, is given along with Balance Sheet and Profit and Loss Account. LISTING: The Securities of your Company are listed at Bombay Stock Exchange Limited and Calcutta Stock Exchange Limited. The Company has paid the Annual Listing Fees to both the Stock Exchanges up to date and has been generally regular in complying with the provisions of the Listing Agreements. INFORMATION TECHNOLOGY: Your Company believes that Information Technology is the backbone of any industry in today's business world. The Company has taken it as a tool to improve productivity, efficiency and reliability. As such, a Customized ERP Module called 'IN SYNC' has already been developed & substantially implemented at manufacturing facilities and offices of the Company, and the same has been working successfully. CORPORATE GOVERNANCE AND COMPLIANCE CERTIFICATE: As required under Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report forms a part of this Annual Report. The Company is in full compliance with the requirements and disclosures that has to be made in this regard. A Certificate from the Statutory Auditors of the Company confirming compliance of the Corporate Governance is appended to this Report on Corporate Governance. INDUSTRIAL RELATIONS: Arvind International Ltd. believes in building teams across the business and functions with the aim to share knowledge and experience. Cross functional team work with clear objectives to solve the issues and create value for the Company. The Company fosters to open dialogue among the employees with the belief that the people, who communicate continuously and openly, build trust and mutual respect. ACKNOWLEDGEMENT: The Directors would like to express their appreciation for the assistance and co-operation received from the, Banks and Government Authorities. The Directors are also thankful to the Shareholders for their continued support to the Company. The Company maintained healthy, cordial and harmonious industrial relations at all level. Despite competition, the enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the fore-front of the industry. Your Company continued to receive co-operation & unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your company will continue in its endeavour to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumers interests. For and on Behalf of the Board of Directors Arvind Bajoria Managing Director Place: Kolkata Dated: 6th June, 2012 ANNEXURE TO DIRECTORS' REPORT: Information under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended 31st March, 2012. A. CONSERVATION OF ENERGY: (a) Energy Conservation measures taken: The Company is making continuous efforts to improve energy efficiency by close monitoring of additional parameters resulting in general improvement in energy consumption across business. (b) The manufacturing units of the Company are well planned and adequately equipped for ensuring optimum energy utilization. (c) Additional investments and proposals are being implemented for reduction of consumption of energy. The efforts to conserve energy on other areas are in progress. (d) Impact of above measures: More efficient utilization of power & reduction in energy consumption. (e) Total energy consumption and energy consumption per unit of production: As per Form 'A' annexed. B. TECHNOLOGY ABSORPTION: (a) Efforts made in technology absorption: As per Form 'B' annexed. C. FOREIGN EXCHANGE EARNING AND OUTGO: (a) Total foreign exchange earned and used: (Rs. In Thousand) Current Year Previous year Total foreign exchange earnings NIL NIL Total foreign exchange outgo NIL NIL Total Value of Import 12576 6625.92 FORM-A FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSUMPTION OF ENERGY: PARTICULARS Current Year Previous Year (2011-12) (2010-11) A. POWER AND FUEL CONSUMPTION: 1. ELECTRICITY: (a) Purchased - Unit (in thousand) 162.53 133.56 - Total Amount (Rs. In thousand) 914.25 681.69 - Rate (Rs./Unit) 5.63 5.10 (b) Own Generation - Cost (Rs./Unit) 9.33 8.59 B. CONSUMPTION PER UNIT OF PRODUCTION: 1. ELECTRICITY (UNIT/KG) - PRODUCT - P.U. Foam 0.17 0.22 FORM-B: FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION, RESEARCH AND DEVELOPMENT (R & D): The future course of action for carrying out research & development will be as under: 1. SPECIFIC AREAS IN WHICH R&D PROPOSED TO BE CARRIED OUT BY COMPANY: The R & D activities of the company have been directed towards improvement in the existing product range as well as to develop new products. Continuous efforts have been made to achieve the above. 2. BENEFITS DERIVED: With the introduction of R& D activities, the Company has been able to improve the quality of its products, reduce the cost and has improved environmental conditions. 3. FUTURE PLAN OF ACTION: With the object of attainment of better future and growth, new products will be developed and launched. 4. EXPENDITURE ON R & D: (a) Capital (if any) : (b) Total R&D Expenditure as a Percentage of total turnover : N.A. TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION: 1. EFFORTS MADE: Continuous efforts are made for improvement in the existing production process and products. 2. BENEFITS: The Company has been able to improve the quality of its products. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion & Analysis Report has been included in adherence to the spirit enunciated in the code of Corporate Governance approved by the Securities and Exchange Board of India. The report Contains forward looking statements identified by words 'Plans', 'Expects', 'Will', 'Believes', 'Projects', 'Estimates' and so on. These statements are based on the assessment of the current environment which may vary due to economic and other developments in the universal arena, in the month to come. Since these are based on certain assumptions and expectations of future events, the Company cannot guarantee that these are accurate or will be realised. INDUSTRY STRUCTURE AND DEVELOPMENTS: In past few years the Polyurethane industry in India was believed to be in its infancy but due to the changing dimensions of the corporate giants and their expansion plans, the whole of the PU Foam industry is moving gradually to a boom in India. Although this industry is characterized by the fact that the per capita consumption is among the lowest in the world, as compared to developed and developing countries, but the recent steps taken in liberalizing the Indian economy and overall improvement in business environment has given a positive impetus to the PU Foam industry. Also the high growth phase of the Indian economy has reflected a steady improvement in infrastructure thereby creating an ample demand of products of the PU Foam Industry and this industry is registering double digit growth. India will consume 1 kg of polyurethane (PU) per capita by 2020 at 1200,000 tpa, as per a conservative estimate by the chairman of the Indian Polyurethane Association (IPUA). Current per capita PU consumption in India is about 200 grams. The 1 kg per capita target will be possible, depending mainly on easing bureaucracy by the government that will speed up some of the processes and make it easy to set up factories and help to build infrastructure, as well as initiatives by the industry. At annual consumption levels of 180,000 tons of Polyurethane (PU) in 2007, India has just about 1.5% share of the global PU consumption of 11.25 min tons. In the last few years PU has grown at over 15% pa, and is expected to continue to be robust at an average rate of 15%. PU consumption in 2012 could reach more than 350,000 tons. Recent government reforms of the banking sector in India allow an environment where people feel more confident about investing. There is a classic trend in India's rising wealth and it's distribution, where availability of wealth is not only because of foreign investment, but mainly because of domestic entrepreneurs and businesses that are creating their own wealth within the economy. Increased consumer spending power of India's evolving middle class is fuelling the demand growth for foam products. India has a population of over one billion people, of which it is estimated less than 10% sleep on foam based mattress. Hence there exists a good growth potential growth for PU foam in India. However, the dominance of natural bedding products, at times subsidized or protected by import duties on substitute materials, has also hindered the market penetration of PU foams at times. The Indian bedding market is substantial and dominated by low cost coin (coconut fibre), latex and cotton mattresses, but people are increasingly looking to upgrade to higher quality products made from or incorporating PU foam. As their wealth increases, the comfort of PU foam mattresses is also becoming increasingly important along with rising standards of living in India. The company is also diversifying and focusing on other segment and is investing in spring mattress making machine. COMPANY'S PERFORMANCE AND OUTLOOK: The Company's products find wide usage in varied industries like automobile, garments, mattresses, electronics, packaging, leather, shoes, transport, furniture, hospitality etc. The booming Indian economy, the growth of the infrastructure segment, the increased amount of disposable income in the hands of the consumers had added to the demand picking up, creating in its wake bigger markets, volumes and realizations. The Company is constantly striving to provide quality products. The Company's products have been well established in the market over the years and our brand 'Arvind' has a substantial recall value, creating an edge over other competitors. The Company is planning and endeavoring to increase its sales by implementing better policies. Your Company's endeavor to provide high quality products aiming to grant full value of money to the customer, are expected to take place. The Company has taken measures expected to yield positive results in the coming financial years. With the increased production capacity, the future outlook of the company should be considered very positive leading to expanded top line. The profitability however, will have to reckon with several factors such as competition in the domestic and export market, exchange rate fluctuations and overall global economic developments within and outside the country. From the last few years company has taken a number of initiatives to re-structure and re-engineer the operations to enable the company to compete better in the profound competitive regime. The strength of the brand, the enhanced product range, excellent distribution network, loyalty of customers and consumers, the booming market conditions all such factors are expected to act as synergies having potential of propelling the working of the Company in the years to come by. MARKETING AND PROSPECTS: Proximity of the Company's manufacturing units to the most potential market in the northern part of the country greatly helped the company to compete effectively with other established producers of the country. The company is now focusing its attention to the fast growing segment of low-value items with higher demand in volumes and better margin prospects. With this view, the Company has introduced two new products in last year are Ecstasy and Desire, the demands of which is expected to grow further. The Company has also installed some advance equipment for production of value added products like Fire retardant Foam, Peeled Foam, etc which will bring a change in the customer's profile. OPPORTUNITIES, THREATS, RISK & CONCERN: Due to change in business policies the Company is facing various risks internally and externally. India as a country with enormous potential, hence new foreign and domestic investments in the polyurethane industry will accelerate competition through higher growth, and measures by Indian government to encourage investments. The external business risks include fluctuation in raw material prices, entry of new manufacturers, introduction of advanced technology by existing manufacturers of Polyurethane products and shortage in the flow of raw material. The internal risk consists of operational efficiency and ability to withstand marketing competition. Foam production in India is still fragmented and localized, with many small players, while transport infrastructure and distances involved makes it difficult for regional producers to expand. The market still requires a lot of development in terms of appropriate products, logistics and technical and marketing expertise. Standards in foam production vary widely among the small players, and need to be regulated. PU foam mattresses in India are generally restricted to low and medium density foams that contains lots of fillers. Indian PU market is very price sensitive in relation to alternative, value added products, hence better understanding of the technical issues around efficient, consistent production of good quality foams is also required. The main threat is from the unorganized sectors comprising of low grade products which leads to quality problems in the domestic market these are the key risk factors which PU industries has to tackle in the future. SWOT ANALYSIS: 1. STRENGTHS: * The Company has most strategically located plant with varied and advanced production techniques being adopted. * The Company's products have been very well established in the market over the years having their reach to every class of customers. * The Company has an excellent customer base and an efficient Dealer/ Distribution network. 2. WEAKNESS: The products of the Company are raw material intensive, constituting about 80% of its cost of production, so the profitability of the company depends mostly on the movement of the prices and availability of the raw material. 3. OPPORTUNITIES: * Due to expansion of the manufacturing base of the company, there will be substantial increase in demand of Company's products. * There are opportunities to explore geographical insights of the country. * There are opportunities to increase distribution network for better penetration. * There are opportunities to increase sale of different range of products manufactured by the company by way of association/tie-ups with retail outlets, super market, retail stores, marts etc. 4. THREATS: * The cost of Marketing, Advertising and after sale services are on an increasing trend. * Due to stiff competition, prices are continuously reducing and if the costs are not controlled then it may prove to be a threat and margins will be under pressure. * There are no entry barriers and hence, the new manufacturers may pose a threat to the Company in short and medium term by fragmenting the market that company has created. * The company is also dependent on imported raw material. Due to increased amount of competition, the company is open not only to normal risks of price fluctuation but also in fluctuations of exchange rates and other related items. * Negative changes in Govt. Policies. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY: The company is in the process of designing and putting in place new internal control system for all the key departments including production, purchase, finance with specific thrust on material wastage, environmental issues and regular compliances at all levels. The Company has expanded its system to other departments with recruitment of managerial cadre personnel more exhaustive reporting and rigorous follow up actions where any signs of shortcomings. Further internal Audit system will also be placed and proposed to be carried to check the implementation of the internal system. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: The Financial Statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS: In order to achieve substantial growth, Arvind International Limited manages a lean organization structure. The Company has an experienced and motivated team of professionals. For the benefit of the Company, it is necessary to empower the skills of their personnel. Looking to this, the Company provides appropriate training and conducting development programmes to improve the skills and efficiency of their employees. The Company's human resource activities are focused on building talent to meet future challenges. SOCIAL RESPONSIBILITY: The Company is conscious of its obligation towards health safety and environment to meet the norms of local pollution control. CAUTIONARY STATEMENT: Statement in the management, discussions and analysis describing the company objectives, projections, estimates and exceptions may be 'Forward Looking Statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to company operations include economic condition affecting demand/supply and price conditions in the domestic and overseas market in which the company operates changes in the government regulations, tax laws and other statutes and other incidental factors. FUTURE OUTLOOK: Company has made a right issue to expand its business which will enable the company to have more money and to avail the emerging opportunities in PU Industries.

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