DHUNSERI PETROCHEM AND TEA LIMITED
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting the Ninety Sixth Annual Report
of your Company together with the Audited Statement of Accounts for the
year ended 31st March 2012.
FINANCIAL RESULTS (Rs. in lacs)
Turnover and other income 2,00,453 1,70,306
Profit before interest and depreciation 13,326 25,115
Interest 4,122 2,589
Profit before depreciation 9,204 22,526
Profit for the year 5,903 19,412
Provision for tax
- Current tax 719 3,789
- Deferred tax 526 2,884
- Adjustments of earlier years (291) 8
Profit after tax 4,949 12,731
Amount brought forward from previous year 4,903 20,317
Amount available for appropriation 9,852 33,048
Transfer to General Reserve 495 26,306
Dividend proposed on equity shares
(Current year @ Rs.4.50/- and previous year
@ Rs.4.50/- per share of Rs.10/- each) 1,576 1,577
Tax on dividend 256 262
Balance carried to Balance Sheet 7,525 4,903
Your Directors recommended a dividend @ Rs.4.50/- per equity share of
Rs.10/- each for the year ended 31st March 2012, maintaining the last
year's rate, subject to the approval of the shareholders at the ensuing
Annual General Meeting.
Performance Petrochem Division
The PET plant at Haldia operated at 105% capacity utilisation.
The production of PET resin increased from 2,00,981 MT in 2010-11 to
2,08,975 MT in 2011-12.
Although the plant operated in excess of 100% capacity utilisation the
margins remained under pressure throughout the year. Further the unexpected
and steep decline in the value of Indian Rupee against other foreign
currencies also affected the bottomline.
Your Directors take satisfaction to inform you that all the term loans
pertaining to the first PET project of the Company have been fully repaid
in the financial year 2011-12. The pledge of 53,04,700 shares in the
Company held by Dhunseri Investments Ltd., provided as a security in
respect of the aforesaid term loans, have since been released on 3rd April
As reported in last year's Directors' Report in respect to the unfortunate
incidence of fire due to electrical short circuit in the raw materials
godown at Haldia plant on 14th March 2011, your Directors wish to inform
you that the claims under the 'Stock Policy' towards destruction of raw
materials & packing materials and reimbursement of expenses aggregating to
Rs. 51.82 crores have been settled by the insurance company to the tune of
Rs. 36.26 crores (net of salvage of Rs. 5.32 crores) in the current year.
The shortfall on this account amounting to Rs. 10.24 crores has been
charged off in the books of accounts for the year ended 31st March 2012.
Further, during the current year your Company restored to operation some
fire damaged fixed assets valuing Rs. 2.89 crores in the books and as on
31st March 2012 is carrying Rs. 9.82 crores in the books of accounts
towards amount receivable from insurance company on account of loss
incurred on damage/ destruction of fixed assets & spares under 'Industrial
All Risk' (IAR) policy. Your Company expects to receive the claim amount
under IAR policy shortly.
Crop in Assam was affected due to early close of season due to no rain from
end September 2011 till first week of April 2012 resulting in severe
drought. There was increased pest activity due to very unfavourable weather
The production of your Company increased from 103.03 lac kgs tea made to
134.81 lac kgs tea made mainly due to addition from new bought leaf
factories. However, price realisation was substantially lower due to poor
market condition for medium quality teas especially from new bought leaf
factories where quality parameters could not be stabilised in the first
year. Orthodox market was also substantially lower by Rs. 20/- due to fall
in prices of orthodox teas as compared with Rs. 17.16 lower for our teas.
The existing plant is running at full capacity utilisation and is expected
to operate likewise in the coming year.
The project for expansion of the PET plant capacity in Haldia to 4,10,000
TPA from 2,00,000 TPA is progressing satisfactorily. Mechanical completion
is expected to be achieved around middle of May 2012. Start up of trial run
is expected around middle of June 2012. Delay in the project completion is
due to delay in civil construction caused by heavy rains during
With this the capacity of the Company's total production will increase to
around 3,50,000 tonnes for the financial year 2012-13. The Company
appointed marketing representatives in various international markets and is
gearing up to meet marketing challenges to sell enhanced production.
As already reported in the last report, your Company plans to produce and
market barrier resins using M&G's state of the art BicoPET technology,
after carrying out necessary modifications in the existing plant. All the
equipments for this purpose have been procured. The erection of these
equipments will be done after the commissioning of the new plant. After the
erection of the plant and machinery, the commissioning will be synchronised
with the maintenance shutdown of the existing plant.
Tea garden received some useful rain in the second week of April (after
prolonged drought for the past six months) and now crop prospects appears
to be good from the month of May 2012 onwards. Your Company mitigated the
ill effect of drought to a large extent by continuous use of sprinkler
irrigation. Some gardens in South Bank also suffered this year due to less
rainfall upto February 2012 where irrigation facilities are provided only
for newly planted tea areas.
Continued emphasis given on manufacturing quality teas yielded favourable
results in some gardens. However, all the gardens have been brought under
similar manufacturing process to improve the quality as well as grade mix
and there should be substantial improvement in overall quality of teas to
be produced by the Company in the Season 2012.
Company's packet tea brands LAL GHORA and KALA GHORA continued to receive
good response from consumers due to overall improvement in quality and also
packaging which helped in achieving the targeted sale quantity and it is
expected that there should be substantial increase in sale quantity in
2012-13 as the trend shows for the month of April 2012.
The tea market is expected to remain good during the year and difference in
prices would be maintained for quality teas.
The Company has sold and handed over one tea factory in Assam and
negotiation for another tea factory is under progress and expected to be
The operations of the remaining two bought leaf factories are being
stabilised and is expected to achieve the targeted quantity of 3 mn kg tea
made depending on availability of quality green leaf at competitive rates
in the area. A new factory at Hatijan Tea Estate is being constructed
having an annual capacity of 1.5 mn kg production and commercial production
will start from the first week of May 2012.
Further subsequent to the end of financial year 2011-12, the Company has
entered into an agreement for sale of one of the tea estates namely Namsang
Tea Estate, having around 5% of the production of the Company, at a
consideration of Rs. 28.29 crores.
The Company's current tea production is 13.5 mn kg and is expected to reach
20 mn kg in the next 2/3 years if negotiations to acquire tea gardens
The construction work of 'Dhunseri IT Park' at Bantala is progressing
gradually. In respect of the first phase having a built up area of 3,70,000
sq. ft., the construction is expected to be completed in the last quarter
of financial year 2012-13.
Barring unforeseen circumstances, the Company's performance for the coming
year is expected to be satisfactory.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings/
The particulars as prescribed under Section 217(1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of Particulars in the Report of
the Board of Directors) Rules, 1988 are attached as an annexure to this
Disclosure Under Sec 217(2A) of the Companies Act, 1956:
The particulars of employees whose salary exceed the limits as prescribed
under Section 217(2A) of the Companies Act, 1956 are given as an annexure
to this report.
M/s Lovelock & Lewes, Chartered Accountants, retire on the conclusion of
this Annual General Meeting, and being eligible, offer themselves for
With regard to the observations of the auditors in paragraph 4 of Auditors'
Report, the relevant notes to accounts are self explanatory.
As already informed in the last report, the Central Government had accorded
its approval u/s 259 of the Companies Act, 1956 to increase the maximum
number of Directors of the Company from 12(Twelve) to 18 (Eighteen),
subject to the condition that the increase in the number of Directors had
to be effected within 19th September 2011, failing which the approval would
Since the Company has not affected the increase in the number of Directors
by 19th September 2011, the approval lapsed. Hence the maximum number of
directors of the Company has come down to 12(Twelve) again.
During the year Mr. S. K. Pai ceased to be a Director of the Company
consequent to the withdrawal of nomination by IDBI Bank Limited following
the full repayment of its term loan. The Board of Directors wish to place
on record their sincerest appreciation for the contribution made by Mr. S.
K. Pai during his tenure.
Further, during the year the tenure of Mr. B. K. Biyani as the Executive
Director (Corporate) of the Company ended on 31st March 2012 and
simultaneously he has resigned from the post of Director with effect from
close of 31st March, 2012. The Board of Directors wish to place on record
their sincerest appreciation for the contribution made by Mr. B. K. Biyani
during his tenure. Mr. R. K. Sharma, has been appointed as a Director of
your Company in the casual vacancy created by the resignation of Mr. B. K.
Biyani with effect from 1st April 2012. Mr. R. K. Sharma shall hold office
till the term Mr. B. K. Biyani would have held office.
Mr. A. Bagaria, Mr. R. N. Bhardwaj and Mr. Y. F. Lombard, Directors of your
Company will retire at this Annual General Meeting by rotation, and being
eligible, offer themselves for reappointment. The Board recommends their
reappointment as Directors of your Company.
The tenure of Mr. M. Dhanuka as the Vice Chairman & Executive Director has
ceased on 31st March 2012. He is proposed to be reappointed as the Vice
Chairman & Managing Director of the Company with effect from 1st April
2012. Your Directors recommend approval of his reappointment as the Vice
Chairman & Managing Director of the Company. The particulars required for
reappointment as the Vice Chairman & Managing Director are contained in the
Notice for the Annual General Meeting of the Company.
The tenure of Mr. B.Chattopadhyay as the Executive Director & CEO ceased on
31st March 2012. He is proposed to be reappointed as the Managing Director
& CEO of the Company with effect from 1st April 2012. Your Directors
recommend approval of his reappointment as the Managing Director & CEO of
the Company. The particulars required for reappointment as the Managing
Director & CEO are contained in the Notice for the Annual General Meeting
of the Company.
Mr. R. K. Sharma is presently the CFO of the Company. He is proposed to be
appointed as the Executive Director (Finance) of the Company, liable to
retire by rotation, with effect from 1st April 2012. Your Directors
recommend the approval of his appointment as the Executive Director
(Finance) of the Company, liable to retire by rotation. The particulars
required for appointment as the Executive Director (Finance), liable to
retire by rotation are contained in the Notice for the Annual General
Meeting of the Company.
Mr. D.P.Jindal has been appointed as the Additional Director of your
Company with effect from 2nd May, 2012. In terms of Section 260 of the
Companies Act, 1956 he shall hold office only upto the date of this Annual
General Meeting. The required notice pursuant to provisions of Section 257
of the Companies Act, 1956 has been received from a member proposing his
appointment as a Director of your Company, liable to retire by rotation.
Your Directors recommend approval of his appointment as a Director of your
Company, liable to retire by rotation. The particulars required for
appointment as Director are contained in the Notice for the Annual General
Meeting of the Company.
The Company has not accepted any deposits from the public. However the
Companies (Acceptance of Deposits) Rules, 1975 were complied with in view
of the deposits being accepted from the employees of the Company. All
deposits which matured during the year were repaid.
1) Egyptian Indian Polyester Company S.A.E (EIPET):
EIPET's project in Egypt is progressing satisfactorily. Start up of trial
run is expected to be achieved by fourth quarter of financial year 2012-13.
2) Dowamara Tea Company Private Ltd. (DTCPL): Dowamara Tea factory
belonging to Dowamara Tea Company Private Limited (DTCPL), which is a
wholly -owned subsidiary of the Company, produced 5.25 lac kgs during the
year ended 31st March 2012. DTCPL suffered a loss of 1112.64 lacs during
the current year.
3) Dhunseri Petrochem & Tea Pte Ltd. (DPTPL):
Your Directors wish to inform you that a wholly owned subsidiary has been
incorporated in Singapore on 28th December, 2011 under the name and style
of Dhunseri Petrochem & Tea Pte Ltd. for the purpose of transferring the
investment of the Company in Egyptian Indian Polyester Company
S.A.E.(EIPET) to the aforesaid subsidiary in Singapore.
Upon receipt of the approvals and other statutory permissions, the
investment of the Company in EIPET would be transferred to DPTPL.
Ministry of Corporate Affairs has granted general exemption to the
companies under Section 212 of the Companies Act, 1956, from attaching the
reports and accounts of the subsidiary company, subject to fulfillment of
certain conditions, which amongst others include the consent of the Board
of Directors for not attaching the annual accounts of the subsidiary.
Accordingly, the Board of Directors of the Company, at its meeting held on
2nd May 2012, has consented for not attaching the annual accounts of the
subsidiaries viz, M/s Egyptian Indian Polyester Company S.A.E. and Dowamara
Tea Company Private Ltd. with the accounts of the Company.
Accordingly, the Audited Statements of Accounts, the reports of Board of
Directors and Auditors of the subsidiary companies have not been annexed.
The annual accounts of the subsidiary companies and the related detailed
information shall be made available to the shareholders of the Company and
subsidiary companies seeking such information at any point of time.
Shareholders who wish to have a hard copy of the full reports and accounts
of the subsidiaries will be provided the same on receipt of written request
from them. These documents will also be available for inspection by any
shareholder at the registered office of the Company and that of the
subsidiaries on any working day during business hours, except on Saturdays.
As required under the listing agreement with the stock exchanges, the
audited consolidated financial statements of your Company are also attached
and form a part of the Company's annual report. However, the consolidated
financial statements do not include the operations of Dhunseri Petrochem &
Tea Pte Ltd. as the first financial year of the said Company will end only
on 31st March 2013.
Your Company is under the purview of Cost Audit as per Section 233B of the
Companies Act, 1956 in respect of manufacture of Tea. Further with effect
from financial year 2012-13 Poly Ethylene Terephthalate (PET) resin has
also been covered for Cost Audit. M/s Mani & Co., Cost Accountants, have
been appointed as Cost Auditors of the Company.
Directors' Responsibility Statement Pursuant to Section 217 (2AA) of the
Companies Act, 1956
Pursuant to the requirement under Section 217 (2AA) of the Companies Act,
1956, with respect to Directors' Responsibility Statement, it is hereby
(i) That in the preparation of the annual accounts, the applicable
accounting standards were followed, except as specified in Para 4 of
Auditors' Report. Proper explanation relating to material departures, have
been clarified in note no. 35 in the notes to accounts which is self
(ii) That the Directors selected such accounting policies and applied them
consistently except as specified in note no. 38 in notes to accounts 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 profit and loss of the Company for that
(iii) That the Directors took proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the Company's assets and for
preventing and detecting fraud and other irregularities;
(iv) That the Directors prepared the annual accounts on a going concern
Corporate Governance and Management Discussion and Analysis Reports:
Corporate Governance and Management Discussion and Analysis Reports are set
out as separate annexure to this report.
Corporate Social Responsibility
Your Company understands that the expectations of society from industry is
constantly changing and is conscious of its social responsibilities. It has
continued with its welfare activities for development in the fields of
education, health, culture and other welfare measures and to improve the
general standard of living.
Your Directors have decided that 1% of the profits of the Company would be
used towards CSR activities, with a maximum ceiling of 11 crore including
contributions to Dhanuka Dhunseri Foundation Trust (DDFT). As reported in
the last year's report, DDFT acts as the vehicle through which the CSR
activities of the Company are carried out across the various parts of the
country. The Trust was formed in 1972 for various charitable objectives. It
is involved in various philanthropic activities like building schools,
colleges and girls hostel, providing free medicines through dispensaries
and grants to charitable institutes.
As already informed in the last report, the Petrochem division of the
Company holds quality certifications from renowned national and
international agencies like the USFDA, EC, Japanese and Canadian Food and
Health Bodies and ITRC and is also ISO 9001:2008, ISO 14001: 2004 and BS
OHSAS 18001: 2007 certified.
Further during the year the Petrochem division of the Company has received
SA 8000: 2008 certification (i.e. Certificate of Social Accountability)
from TUV NORD for its plant at Haldia in respect of manufacture and sale of
PET resin in International and domestic markets.
As informed in the last report, your Company was already having the ISO
22000:2005 certification for Dilli & Santi Tea Estates. Further during the
year your Company has also received the ISO 22000:2005 certifications from
DNV Business Assurance in respect of Food Safety System for the following
i) Bahadur Tea Estate
ii) Bahipookri Tea Estate
iii) Bettybari Tea Estate
iv) Dhunseri Tea Estate
v) Khagorijan Tea Estate
vi) Namsang Tea Estate (agreement for sale executed)
vii) Orang Tea Estate
Your Directors have the pleasure to inform you that the following awards
have been received:
Second Best Exporter Award: The Company's Petrochem division has received
the second best exporter award for the year 2009-10 in the product category
of Plastic Polymers by The Plastics Export Promotion Council, Mumbai.
Environment, Health and Safety
Health and safety has always been a matter of major concern and importance.
Your Company continuously strives to ensure that our operations are safe.
The Company recognises the importance of managing its environmental impact.
These are matters of priority and therefore caring for the environment and
responsible disposal of wastes are some of the ongoing initiatives
undertaken by the Company.
Utilisation of Proceeds from Preferential Issue
Erstwhile SAPL had made an allotment of equity shares, warrants and FCCBs
in 2007-08. Consequently, during 2007-08, erstwhile SAPL raised Rs.
7,416.23 lacs by preferential allotment of equity shares and equity share
warrants and Rs. 7,864.00 lacs from the issue of the FCCBs. The FCCB
proceeds as at 31st March 2012 (as reduced by redemption in 2009-10) is
Rs. 2949 lacs.
The money raised out of such issue was to be utilised for:
i) Equity participation in overseas subsidiaries
ii) Retirement of high cost borrowings
iii) Other business purposes, including working capital requirements
The amount raised by issue of equity shares, equity share warrants and
FCCB's have been fully utilised towards equity participation/issue related
expenses in the overseas project in Egypt.
CRISIL EQUITIES GRADING
Your Directors inform that CRISIL vide its independent equity research
report dated 16th February, 2012 has assigned a CRISIL fundamental grade of
3/5 (pronounced three on five) to the Company. The grade indicated that the
Company's fundamentals were 'good', relative to other listed equity
securities in India. CRISIL has assigned a valuation grade of 5/5,
indicating that the stock has a strong upside as compared to the market
price of Rs.122/- (as on 16th February, 2012). CRISIL's fair value of the
Company's stock was Rs. 243/-.
Credit Rating by Credit Analysis & Research Ltd. (Care)
Your Directors inform that CARE has reaffirmed the Credit rating of CARE A
+ (Single A plus) assigned to long term bank facilities of the Company and
CARE A1+ (A One plus) assigned to short term facilities of the Company. At
the same time CARE has reaffirmed the Credit rating of CARE A1+ (A One
plus) assigned to the Short Term Debt (STD) programme (including Commercial
Paper) of the Company for a maturity upto six months.
Your Company believes that 'people' are the most prized asset for the
success of any organisation. Your Directors wish to express their
appreciation to all the employees for their exemplary contributions and
excellent team spirit. Their dedicated efforts, enthusiasm and commitment
have played a pivotal role in the growth of the Company.
The Directors wish to place on record their sincere appreciation for the
whole-hearted support received from Axis Bank, Allahabad Bank, Bank of
Baroda, Bank of India, Canara Bank, Deutsche Bank, Development Credit Bank,
DBS Bank Limited, Export-Import Bank of India, HSBC Limited, HDFC Bank
Limited, ICICI Bank Limited, IDBI Bank Limited, International Finance
Corporation, Washington, Punjab National Bank, State Bank of India, State
Bank of Travancore, Syndicate Bank, Standard Chartered Bank, United Bank of
India, West Bengal Industrial Development Corporation Ltd, Tea Board,
Haldia Development Authority, Office of the District Magistrate of East
Midnapore, West Bengal Pollution Control Board, West Bengal State
Electricity Board, Ministry of Environment & Forest, Government of West
Bengal, Government of Assam, Government of Egypt, Governorate of Suez,
General Authority for Investment and Free Zones (GAFI), Egyptian
Petrochemicals Holding Company (ECHEM), Engineering for the Petroleum and
Process Industries(ENPPI), Ahli United Bank (Egypt) S.A.E, Commercial
International Bank (Egypt) S.A.E, Egypt, the customers, suppliers,
shareholders and all others associated with the Company.
For and on behalf of The Board of Directors
Place: Kolkata C.K. Dhanuka
Date : 2nd May, 2012 Executive Chairman
Annexure to the Directors' Report
Information Pursuant to Section 217(1)(e) 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.
A. Conservation of Energy:
Your Company attaches priority to conservation of energy. The activities of
the Company in this direction are:
a. Energy conservation measures taken: Petrochem Division
1. Installation of LED based low voltage, low wattage lights in FGS.
2. Installation of turbo ventilators in FGS to replace electrical motor
driven exhaust fans.
Vibratory fluidised bed dryer has been installed in all the gardens and
manufacturing has been stabilised with improvement in quality.
b. Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:
Investments and proposals presently under consideration are:
1. Stoppage of existing MEG unloading pumps for installation of new Cross
country MEG pipe line.
2. Replacement of conventional tube lights with energy efficient for office
3. Replacement of conventional street lights with LED type.
New gas burners have been installed in two factories for efficient use of
gas. Initial results have shown savings on energy. However, final
assessment will be made after continuous use of the same in the peak
Installation of santoor in all the gardens will reduce the percentage of
reprocessing thereby improving the quality and reduction in non-
c. Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:
The proposed energy conservation measures are expected to yield an annual
cost savings of:
1. Rs.4.52 lacs on account of stoppage of MEG unloading pumps for cross
country MEG pipeline.
2. Rs.1.33 lacs on account of Replacement of conventional tube lights with
energy efficient for office areas.
3. Rs.1.15 lacs on account of replacement of conventional street lights
The energy conservation measures have resulted in saving of approx 4-5% in
both gas and electricity consumption and will also save on maintenance
costs in future. Its full impact will be visible in the year 2012-13.
Form for disclosure of particulars with respect to conservation of energy
Current year ended Previous year ended
A. POWER & FUEL CONSUMPTION 31st March 2012 31st March 2011
a) Purchased units (lacs KWH) 78.59 60.80
Total Amount (Rs.lacs) 568.20 397.16
Rate/Unit (Rs./KWH) 7.23 6.53
b) Own Generation
i) Through Diesel Generator
Units (lacs KWH) 20.60 13.03
Units per ltr. of diesel oil 2.75 2.74
Cost/unit (Rs./KWH) 13.86 13.44
ii) Through F O generator units
(lacs KWH) 61.29 154.52
Units per kg of furnace oil (KWH) 4.69 4.46
Cost/unit (Rs./KWH) 7.62 5.94
iii) Through gas generator units (lacs KWH) 13.14 16.29
Units per S cum of gas 3.82 5.29
Cost/unit (Rs./KWH) 2.32 1.55
iv) Through turbine generator
units (lacs KWH) 514.03 368.15
Units per MT of coal 908.15 773.78
Cost/Unit (Rs./KWH) 4.83 4.82
2. Coal (Note 1&2)
Quantity (MT) 44,907.56 28,973.53
Total cost (Rs. lacs) 1,938.42 1,025.99
Average rate (Rs./MT) 4,316.48 3,541.11
3. Furnace Oil (for heating)
Quantity (MT) 911.54 2,633.95
Total cost (Rs. lacs) 315.14 696.85
Average rate (Rs./MT) 34,572.53 26,456.64
Quantity (lacs S cum) 34.32 25.93
Total cost (Rs. lacs) 282.84 187.75
Average rate (Rs./S cum) 8.24 7.24
Standard Current year ended Previous year ended
(if any) 31st March 2012 31st March 2011
B. CONSUMPTION PER
UNIT OF PRODUCTION
Tea produced (lac kgs.) 134.66 102.83
Electricity (KWH) 1.00 0.83 0.87
Coal (kg.) (Margherita
and Khasi coal) 1.00 0.43 0.49
Gas (S cum) 0.25 0.25
Product- Poly Ethylene
PET produced (MT) 2,08,975 2,00,981
Electricity (KWH/MT) 273.00 275.70 260.14
Furnace oil (Kg/MT) 86.00 4.36 13.11
Coal (Kg /MT) (steam
coal/ROM coal) 187.25 118.96
1) Quality of coal- a) Petrochem division: Imported Indonesian coal/steam
and ROM coal; b) Tea division: Margherita and Khasi coal.
2) Where used- a) Petrochem division: In coal-fired HTM heaters for process
heating; b) Tea division: In coal-fired heaters.
3) In Petrochem division, process heating was done primarily by coal and in
case of emergency by FO during the year. In Tea division process heating
was done by coal in North Bank gardens and gas in South Bank gardens.
Form for disclosure of particulars with respect to absorption
Research and Development (R&D)
Research and Development is spread across the business of the Petrochem
division. Constant development efforts are made to increase efficiency and
for cost reduction
1. Specific areas in which R&D was carried out by the Company-
The following R&D activities were conducted during the financial year 2011-
12 to achieve significant development in quality and to make the product
compliance to changing international criteria.
In continuation to the R&D activities pertaining to the replacement of
heavy metal cobalt from the range of product, DPTL with its intense study,
trail and review could be able to eliminate cobalt completely from the
product with effect from August 2011. Subsequently EU had banned the use of
cobalt in food grade packaging material in January 2012. DPTL is the only
PET manufacturing unit in India who took the initiative in making the PET
cobalt free. Most of the domestic customers catering their product to EU
would be able to sell their product. The transition of PET with cobalt to
zero cobalt was very smooth and had no adverse impact on gloss and tinge of
the downstream product.
2. Benefits derived as a result of the above R&D-
ASPET brand PET is more environmental friendly with no heavy metal cobalt
as its ingredient. The product is fully in compliance with EU regulations.
Further due to elimination of cobalt the Company could save Rs. 1.20 crore
3. Future plan of action-
To extend the same facility and implementing the above for products with
4. Expenditure on R&D:
a. Capital: Rs.33.88 lacs
b. Recurring: Nil
c. Total: Rs.33.88 lacs
d. Total R&D expenditure as a percentage of total turnover:
The R&D is integrated to the production and quality control process of the
Company and as a result cannot be segregated.
The benefits are consequently synergised and not allocated in terms of
The Company subscribes to Tea Research Associations, which does R&D work
for its tea industry and their expert advice is also being obtained through
visits by their Advisory Officers to the garden from time to time.
Gramin Krishi Unnayan Prakalpa is implemented for agricultural development
as well as overall improvement of socio-economic improvement of the area
through various tea associations.
Technology absorption, adaptation and innovation
1. Efforts, in brief, made towards technology absorption, adaptation and
Material procurement for required modification of existing plant to produce
barrier PET was completed and modification job would be done at nearest
opportunity. The new plant erection is in full swing to meet the target
date of completion. With the commissioning of new plant, company could be
able to double its production with Haldia production facility.
Indigenously developed technologies for the improvement of production both
in field and factory were adopted and required modifications and
innovations were done on continuous basis.
Garden started using JCB for uprooting tea bushes with good results in both
quality and speed of work. This reduced the involvement of manual workers
without increasing the overall cost of uprooting and replanting.
2. Benefits derived as a result of the above efforts, e.g, product
improvement, cost reduction, product development, import substitution etc.
The adaptation and absorption of the technology knowhow will make the
organisation capable to meet demands for Barrier PET which is currently
being imported. With new plant commissioning, more flexibility for
availability of different and specialised grade PET would be available.
Benefits in the tea division included reducing the cost of production and
improvement in product quality.
3. In case of imported technology (imported during the last five years,
reckoned from the beginning of the financial year), the following
information may be furnished:
(a) Technology imported - licensing agreement for import of technology in
connection with the production of Barrier PET was signed in the FY 2010-11.
(b) Year of import - agreement signed in 2010-11 and implementation of the
modifications in the existing plant are underway.
(c) Has technology been fully absorbed- In project stage.
(d) If not fully absorbed, areas where this has not taken place, reasons
therefore and future plans of action - project progress is as planned.
Would be completed as per target.
Foreign exchange earnings and outgo:
1. Earnings in foreign exchange- Rs. 54,889 lacs
2. Foreign exchange outgo- Rs. 84,241 lacs
Information on foreign exchange earnings and outgo is contained in Note no.
48, 49 and 50 to the Accounts.
Activities Relating to Exports:
Your Company's product (bottle grade PET resins), produced in Haldia plant,
is exported to 37 countries currently. Your Company exported 67,182 MT in
2011-12. The export quantity is reduced due to strong domestic demand.
There are no exports in respect to tea.
Initiatives taken to increase exports: Our export sales strategy remains
similar to last financial year. Your Company reduced sales channels and
contacted end-users directly, developing good relationships with them for
long-term business, achieving better bottomline and better brand visibility
in the market. Direct contact with customers helps understand customer-
specific needs, guides them for appropriate products and provides them with
customised services to strengthen relationships. Due to GSP benefit
reinstated to USA with effect from October 2011, your Company has restarted
exporting to the US and switched majority of business to European Union &
Latin American Markets.
Development of new export markets for products and services:
Your Company targeted strong and regular customers in Europe, USA & Latin
America in view of future capacity expansion and working closely with them
to enhance their business and became a part of their business process. Your
Company has been marketing specialty resin as per technology license
agreement with M&G, Italy for producing and marketing M&G's proprietary
oxygen and passive gas barrier technologies in association with M&G's
proprietary 'BicoPET' technology for specialty resin production. The same
product is successfully being tested in India at different locations for
various suitable applications and development work is under process.
Your Company's plan for 2012-13 is based on current global supply demand.
The Company's focus is on the market which will give optimum returns and
employing experienced sales professionals in the respective market for
better follow ups and customer services.
Management discussion and analysis
Polyethylene terephthalate (PET) is a versatile plastic used as a packaging
material for beverages, food, personal and home care, pharmaceuticals,
consumer and industrial products. The material gained global acceptance as
a preferred packaging material on account of hygiene, strength, lightness,
durability, inertness, economy, attractiveness and freshness-retention.
Global food and health-safety agencies approved PET as perfectly safe for
food and beverage packaging.
The result is that PET consumption increased significantly in the last 15
years over other alternative packaging materials (aluminium, glass, paper
and others). This is best reflected in global
PET demand increase for beverage packaging, which grew at a CAGR of 7.5% in
15 years compared with 2.2% for aluminium and 1.5% for glass. As a result,
the product is establishing its superiority and deepening its penetration
across products, sectors and countries (Source: SBA CCI, Euromonitor, IVL
Global PET resin industry
The global PET resin industry grew at a 6% CAGR in the five years leading
to 2011-12. The industry experienced an oversupply; global capacity
utilisation was placed at 79% in 2011, which is expected to improve to 84%
in 2015 (Source: Crisil Research). Global PET packaging consumption is
expected to grow 5.1% annually to 19.1 MT by 2017 with an estimated value
of USD 43.7 bn. Asia is expected to account for 29.4% of the world's PET
packaging consumption. (Source: Pira International).
The PET packaging markets have evolved over the years, with demand shifting
from Europe and the US to Asia-Pacific. West Europe and North America
accounted for about 24% and 28% respectively of the global PET packaging
demand in 2007; they are expected to account for about 17% and 21% of the
demand respectively by 2017. On the other hand, Asia-Pacific demand is
likely to increase from 25% to 34% during the period (Source: Pira
Global PET resin demand by geography
Expected demand Proportion of Increase in 2011
in 2012 world total ('000 tonnes) %
North America 3,774 22.1 95 2.6
South America 1,469 8.2 112 8.3
Middle East/Africa 2,033 11.2 171 9.2
West Europe 3,001 17.8 35 1.2
East Europe 1,057 6.1 37 3.6
Asia/ Pacific 6,364 34.6 615 10.7
Total 17,698 100.0 1,047 6.4
(Source: PCI PET packaging)
Global PET resin demand by industry
Expected demand Proportion of Increase in 2011
in 2012 world total ('000 tonnes) %
Carbonated soft drinks 5,293 29.9 207 4.1
Water 4,609 26.0 292 6.8
Other drinks 3,581 20.2 310 9.5
Food 1,757 9.9 90 5.4
Non-food 1,052 5.9 100 10.5
Sheet 2,801 15.8 198 7.6
RPET -1,395 -7.9 -132 10.5
Total 17,698 100.0 1,065 6.4
(Source: PCI PET packaging)
Indian PET resin industry
The Indian packaging industry (USD 15 billion) grew at a 15% CAGR in the
five years leading to 2011-12; the industry is expected to grow to USD 40
billion by 2015 (Source: Assocham), driven by a huge consumption growth for
products like milk, food, beverages, food grains and pharmaceuticals as
well as a packaging shift from the conventional to PET. Demand for PET from
within India grew at a compounded 35% in FY06-11 even as the country's per
capita PET consumption remained at a low 0.3 kg (global average 2.3 kg)
(Source: Crisil Research).
PET demand in India's packaging industry
(tonnes) last year
2006-07 147,918 49%
2007-08 177,424 20%
2008-09 243,508 37%
2009-10 309,233 27%
2010-11 408,723 32%
2011-12 500,000 22%
PET demand drivers in India:
* Rising population: India's population rose by 181 million to 1.21 billion
people over 10 years ending 2011 (Source: Census).
Youth: Almost 65% of Indians between the age group of 20-60 years are
employed, leading to higher disposable incomes in the hands of the youth
with aspirations for a better lifestyle. An estimated 70 million
individuals will enter the workforce over the next five years. (Source: The
* Increasing disposable income: The average employee remuneration grew
10.8% in 2010-11; per capita income is estimated to rise 14.3% to Rs.60,972
in 2011-12 (Source: Deccan Herald).
* Urbanisation: According to the United Nations, India is the world's
fastest-urbanising country. Nearly 30% of India's population live in urban
locations; almost 40% could be living in urban areas by 2030 (Source:
Segment-wise or product-wise performance
During the year under review, the Company's PET sales revenue increased 26%
to Rs. 1,78,559 lacs in 2011-12. The Company's domestic sales grew 35% to
Rs. 1,22,078 lacs, accounting for 68% of the total PET sales. Exports grew
9% to Rs. 56,481 lacs, accounting for 32% of the total PET sales. Domestic
sales were higher given the increased demand in the sub-continent coupled
with attractive margins.
The Company undertook improvements in its existing plant and focused on
commissioning its upcoming Haldia (2,10,000 TPA by June 2012) and Egypt
plants (4,20,000 TPA by Q4 FY 2012-13). The Egypt plant will cater to the
growing PET demand in Africa, the Middle East and Europe, whereas the
Indian expansion will cater primarily to the Asian market (including India)
and some demand of Europe and the US.
The Company optimised its existing resources and appointed marketing
representatives to market the material coming out of the expanded capacity.
The outlook for this division is positive as the global PET resin industry
is expected to grow at a compounded 5% in 5 years whereas Indian
consumption is expected to grow at a compounded 18-20% during the period
(Source: Crisil Research). The packaging industry in India, a major
consumer of PET resins, is expected to grow at a compounded rate of 15% to
USD 40 billion by 2015 (Source: Chairman of Indian Institute of Packaging).
The global tea industry is largely dominated by India, the world's second-
largest producer and largest consumer. India offers a wide tea range (CTC,
orthodox, green tea) compared with other tea exporting countries. The
country's tea industry accounts for 30% of the world production, 25% of
global consumption and provides employment to over 35 lac workers across
1,500 tea estates. The Indian tea industry faces competition from China,
Sri Lanka, Kenya and Vietnam.
India's tea production increased from 966.4 mn kg in 2010 to 988.33 mn kg
in 2011. Assam (509 mn kg of tea in 2011) contributed to over 50% of this
production (Source: Tea Board).
India's tea consumption has increased from 837 mn kg in 2010 to 856 mn kg
in 2011, growing at 3% annually compared with a 2.2% production growth,
leading to a domestic deficit of 55 mn kg (Source: Tea Board).
India's tea exports declined from 193.3 mn kg in 2010 to 186.7 mn kg in
2011, given the sharp decline (24%) in exports during January-April 2011.
Tea exports stood at Rs. 2,595 crores in 2011 compared with Rs. 2,786
crores in 2010 (Source: Tea Board).
India's tea imports declined from 20.04 mn kg in 2010 to 18.6 mn kg in
2011. Imports declined from Rs. 214.44 crores in 2010 to Rs. 172.69
crores in 2011 (Source: Tea Board)
The country's tea yield per hectare is more or less stagnant in the last
few years. India's yield per hectare in 2009, 2010 and 2011 stood at 1,662
mn kg, 1,662.9 mn kg and 1,697 mn kg respectively (Source: Sharekhan
Tea demand drivers
* Preference: India is the world's largest tea consumer, accounting for
nearly 25% of the global tea production (Source: Assocham).
* Health benefits: Tea is perceived as a health drink, helps to combat
cardise ailments, controls cholesterol, protects the skin, keeps cancer at
bay, strengthens bones and teeth and contains no calories, fat or salt.
Affordability: Nearly 90% of Indian households are regular tea drinkers,
the beverage being cheap and affordable.
* National drink: Indian Government finalised to declare tea as the
national beverage with effect from 17th April 2013.
Segment-wise or product-wise performance
The Company suffered on account of severe drought and major pest attacks in
its gardens during 2011-12, leading to crop loss and decrease in revenues.
Notwithstanding this, overall tea production increased from 10.29 mn kg in
2010-11 to 13.48 mn kg in 201112 due to the Company's acquisition of bought
leaf factories. Average tea realisation decreased from Rs. 134.07 per kg
to Rs. 113.38 per kg mainly on account of tea made in bought leaf
factories. The new factory at Hatijan tea estate is expected to be
commissioned shortly having a capacity of 1.5 mn kg. The Company sold one
bought leaf factory during the year under review and another bought leaf
factory is at the final stage of negotiations for sale due to non-
availability of sufficient quantity of good quality green leaf.
The Indian tea industry (six lac hectares under cultivation) is expected to
report a CAGR of 15%, its turnover increasing from Rs. 19,500 crores to
Rs. 33,000 crores by 2015. Volume-wise, production is expected to reach
1,000 mn kgs in 2012. As tea consumption grows faster than production, tea
prices are expected to progressively strengthen (Source: Assocham).
Risks and concerns
Risks and opportunities are inseparable components of the Company's
business. The Company's Directors and management keeps this in mind when
taking decisions to ensure that stakeholders are not adversely affected.
The Company's Risk Management Committee, comprising various departmental
heads, meets regularly to assess and minimise risks without losing
opportunities. These have been discussed in details in the risk management
section in this annual report.
Internal control systems and their adequacy
The Company introduced internal control systems to ensure that all assets
are safeguarded and protected against loss and that transactions are
recorded and reported correctly. The internal control system is
commensurate with the size and nature of the Company's business. The
systems are regularly reviewed for effectiveness. The Managing Director &
CEO, Executive Director (Finance) and Senior V. P. (COO-Tea division) of
the Company oversee the entire internal control system. The Company ensures
control through Oracle, E-Business Suite and ERP.
Discussion on financial performance with respect to operational performance
This has been covered in the Director's Report specifically under the
section on financial results and performance. The financial review for the
year has also been separately covered in this annual report.
Material developments in human resources/industrial relations front,
including number of people employed
The Company emphasises training and development for optimum results. The
Company strives to maintain healthy industrial relations across its various
locations and employees in both the petrochem and tea divisions. The actual
number of persons employed by the Company as on 31st March 2012 was 6,179.
Revenue from operations increased by 24.18% from Rs.1,593.95 crore in 2010-
11 to Rs. 1,979.45 crore
Net profit declined by 61.13% from Rs. 127.31 crore in 2010-11 to
EBIDTA declined by 46.94% from Rs.251.15 crore in 2010-11 to Rs.133.26
Interest coverage declined from 9.70 in 2010-11 to 3.23
Profit before tax (PBT) declined by 69.59% from Rs.194.12 crore in 2010-11
to Rs. 59.03 crore
The revenue from operations registered a growth of 24.18% from Rs.
1,593.95 crore in 2010-11 to Rs. 1,979.45 crore in 2011-12 primarily due
to rise in prices of polyester chips.
Other incomes declined from Rs. 109.11 crore in 2010-11 to Rs. 25.08
crore in 2011-12 since the other incomes in the previous years included
insurance claims and profit on sale of long-term non-trade investments.
Cost of raw materials: This increased by 36.02% from 1,146.93 crore in
2010-11 to Rs. 1,560.11 crore in 2011-12 largely driven by increase in
prices of major raw materials Purified Terepthalic Acid (PTA) and
Monoethylene Glycol (MEG).
Employee costs: This increased by 12.45% from Rs. 48.30 crore in 2010-11
to Rs. 54.31 crore in 2011-12.
Power and fuel costs: This increased by 18.45 % from Rs. 53.17 crore in
2010-11 to Rs. 62.98 crore in 2011-12 primarily on account of inflated
Foreign exchange loss: The Company faced a loss of Rs. 33.54 crore in
2011-12 on account of raw material imports and outstanding current
liability in foreign currency.
Finance costs: This increased by 59.20% from Rs. 25.89 crore in 2010-11 to
Rs. 41.22 crore in 2011-12 primarily on account of higher foreign exchange
difference and increase in interest on net working capital.
Depreciation: This increased by 6% from Rs. 31.14 crores in 2010-11 to
Rs. 33 crores in 2011-12 due to capital expenditure including for
replacement of assets damaged by fire.
Reserves grew by 4.58% from Rs. 680.42 crore as on 31st March 2011 to
Capital employed: The capital employed in the Company increased by 5.88%
from Rs. 1,075.97 crore as on 31st March 2011 to Rs. 1,139.24 crore as on
31st March 2012 (excluding the capital employed amounting to Rs. 350.41
crore for plant under construction) due to increase in reserves and debt
Networth: The net worth of the Company increased by 4.36% from Rs. 715.45
crore as on 31st March 2011 to Rs. 746.61 crore as on 31st March 2012 on
account of profit generated during the year.
Return on capital employed declined by 1164 bps from 23.34% in 2010-11 to
Long term borrowings: The Company's long-term borrowings increased from
Rs. 96.02 crore as on 31st March 2011 to Rs. 350.29 crore as on 31st March
2012 primarily to fund the expansion project at Haldia. The debt equity
ratio of the Company as on 31st March 2012 was at 0.47.
Gross block: The gross block of the Company increased by 4.21% from Rs.
793.68 crore as on 31st March 2011 to Rs. 827.07 crore as on 31st March
2012. This increase in gross block is due to acquisition of land for new
plant expansion and general upgradation and upkeep of existing plant.
Environment, Health and Safety management
The Company invested in a clean manufacturing technology resulting in low
emissions and a positive environmental impact. The Petrochem Division of
the Company was certified with SA 8000:2008 from TUV NORD for maintaining
workers' rights, workplace conditions, and management systems. This is in
addition to the ISO 9001, ISO 14001 and OHSAS 18001 certifications already
Dhunseri has always been committed to the highest environmental and safety
standards which is reflected in complete compliance of such regulations.
This commenced with the selection of advanced technology from Germany,
complying with international environmental standards and marked by no
The various initiatives undertaken by the Company in these areas are:
* Created a dedicated Environmental Cell to review related activities,
report shortcomings and undertake various improvement steps
* Continuous monitoring of effluent treatment and water discharge to keep
it well below the norms
* Invested in rainwater harvesting, afforestation drive and vermi-compost
* Installed roof top extractor and modified control circuit for ventilation
fans at Haldia plant
* Installed ventilator fans at all tea factories to circulate fresh air
These initiatives improved water and energy consumption efficiency on the
one hand and reduced hazardous gases and waste on the other.
The Company undertook the following initiatives towards maintaining and
improving the health of the employees:
* Protected employee health by establishing a well-equipped occupational
health centre with a qualified doctor
* Free medical check-ups for all employees
* Regular training for all employees Tea division
* Medical camps are organised with the help of specialist doctors
* Free distribution of chemically-treated mosquito nets to workers
* Provided a water filtration plant with iron filtration for potable water
supply to workers
Dhunseri is committed to employee safety through the following initiatives:
* Safety audit through internal team and external agencies
* Regular safety rounds
* Periodic inspection of breathing apparatus and personal protective
* Developed a fire handling system at plant by installing a 16,000 m3 water
reservoir, procuring additional fire tenders and installing sprinklers in
raw material warehouse
Corporate Social Responsibility:
The Company carried out various CSR activities across the country through
Dhanuka Dhunseri Foundation (DDF). DDF was established in 1972 and focuses
on four major philanthropic areas:
* Promoting education by building schools and colleges and providing
assistance for their maintenance
* Empowering the girl child through education and other initiatives
* Improving healthcare by distributing free medicines and setting up
dispensaries and providing assistance to charitable hospitals
* Focusing on community development through donations
The Foundation regularly provides financial assistance in association with
various organisations to carry out CSR activities in these areas. During
the year, the Foundation undertook initiatives to provide primary education
to 352 children and medical treatment to 58,250 patients. We are currently
building a new girls hostel in Kolkata to accommodate 400 girls with a
built-up area of 70,000 sq. ft.
Building plans have been submitted to Kolkata Municipal Corporation and the
construction work will begin once the plan is sanctioned.
In 2011-12, we contributed a sum of Rs. 0.61 crores towards CSR
A downturn in the economy or select sectors (petrochem or tea) could
adversely impact revenues
Mitigation - Petrochem
* The PET industry in India is expected to grow at a compounded rate of 18-
20% during the next five years
* The global consumption of PET packaging is expected to grow 5.1% annually
during the next five years
* The Indian packaging industry (USD 15 billion), the primary consumer of
PET in India, grew at a CAGR of 15% in five years and is expected to reach
USD 40 billion by 2015 which is likely to boost PET demand
Mitigation - Tea
The country's rising population and increased tea preference is likely to
sustain domestic consumption
* India's tea industry turnover is expected to grow from Rs. 19,500 crores
to Rs. 33,000 crores by 2015
An inability to manufacture quality products could lead to poor
realisations and brand diminution
Mitigation - Petrochem
* The Company's robust and tested German technology enables it to
manufacture top quality products for demanding clients
* The Company regularly undertakes plant maintenance and upgradation to
ensure that the end product is of acceptable quality
* The Company maintains strict quality control checks and ensures that the
two major raw materials - PTA and MEG are procured from quality vendors
* The Company's ISO 9001:2008 certifications has been a result of all the
above. Substantial revenues were derived from longstanding customers
Mitigation - Tea
* The Company's research and development is engaged with TRA and UPASI Tea
Research Foundation to enhance yield and quality
* Installed cooling driers, enclosed withering trough and humidation plant,
which are likely to improve processed tea quality
* Provided adequate labour training regarding tea plucking to enhance tea
* Installed machines to enhance quality and minimise tea reprocessing of
secondary grades for overall improvement in quality
* Nine gardens with factories are ISO 22000:2005-certified for food safety
Inability of the Company to maintain the quality of its existing plant may
hamper its efficiency, resulting in production losses
Asset Quality Risk:-
* The Company undertakes predictive plant maintenance activities regularly
to ensure higher plant uptime and asset utilisation resulting in increased
Mitigation - Tea
* Automation of factories to improve productivity and also overcome
shortage of workers resulting in lower cost of production
Inability of the Company to manufacture products at a lower cost could lead
to a loss in market share
Mitigation - Petrochem
* The Company operates at a high capacity utilisation level of 105%, which
* MEG pipelines from the port to the plant will reduce logistics cost
* The upcoming 10 MW coal-based power plant in Haldia will reduce energy
* Optimum utilisation of resources at the Haldia plant 1 and 2 will reduce
Mitigation - Tea
* Plant automation and efficient use of machineries will reduce operating
* Increasing yield per hectare at the gardens will help in reducing cost
once new plantation comes into full bearing
Inability of the Company to efficiently market products could lead to
unsold stock and lower capacity utilisation
Mitigation - Petrochem
* The Company recruited specialised representatives across regions to
market products globally following expansion
* The Company's brand ASPET is respected across around 40 countries; none
of the countries to which products were exported accounted for more than
eight per cent of revenues in 2011-12
Mitigation - Tea
* The Company appointed famous cine actor Hema Malini to promote its
package tea/branded tea sales in Rajasthan
* The Company created a wide distribution network to cover each district in
Rajasthan for its packet tea sale
* The Company's tea brands are very popular in Rajasthan due to quality of
tea as well as packaging
Use of outdated technology will result in inefficiency in the production
process resulting in lower margins
Mitigation - Petrochem
* Our existing plant at Haldia, expansion at Haldia and new plant in Egypt
has been equipped with the latest PET manufacturing German technology
* The Company associated with M&G (Italy) to provide BicoPET technology to
manufacture barrier grade PET resins to store products with higher shelf-
Mitigation - Tea
* The Company upgraded its factories with new drying machines, humidation
plant, enclosed withering trough, monorail system, online sorting
machineries and automated most of the operations to enhance factory
* The Company regularly invests in replacing machines with modern equipment
and upgrading processes to improve tea quality
The Company invested in factory automation processes to reduce downtime and
enable higher capacity utilisation levels
Inability of the Company to maintain plant o