ENCHANTE JEWELLERY LIMITED
ANNUAL REPORT 2004-2005
To the Members,
Your Directors are pleased to present the Nineteenth Annual Report together
with the Audited Accounts for the year ended 31st March 2005.
FINANCIAL RESULTS (Rs. in Lacs)
Year ended Year ended
Net Sales (including labour charges) 92.82 58.83
Gross Profit 19.01 13.85
Depreciation 63.01 65.16
Interest 0.20 0.64
Net Profit/(Loss) before prior
period adjustments - (97.45)
Net Profit/(Loss) before Impairment loss (89.65) -
Impairment loss (476.57) -
Net Profit/(Loss) (566.22) (97.45)
Net Deficit Carried to Balance Sheet 1226.34 666.12
As a result of loss during the year under review, your Directors are not
recommending any dividend.
During the year under review, the Company achieved a turnover of Rs. 92.82
Lacs as compared to Rs. 58.83 Lacs during the previous year.
The Company's sales are hampered due to the following factors:
1. Paucity of working capital. The company's operations were severely
constrained by the State Bank of India's failure to disburse the sanctioned
working capital during the crucial stage of project implementation in
1995-96. The company's working capital requirements were duly appraised and
assessed by SBICAPS. The State Bank of India subsequently conducted an
independent appraisal of the project and assessed the working capital
requirements of the project. The State Bank of India sanctioned a working
capital loan of Rs.525 lacs. The State Bank of India disbursed only Rs.200
lacs of the sanctioned working capital loan. In the absence of adequate
working capital, the company struggled to ramp up operations and its plans
received a severe setback. The Company has exhausted its working capital
and this has had an adverse impact on sales.
2. State Bank of India. The Company has tried its best to resolve the
matter with the State Bank of India in order to salvage the project. The
Bank led the Company to believe that it would resolve the matter if the
Company were to demonstrate its resolve to enter into a settlement by
making payments to the Bank. The Company deposited an amount in excess of
over Rs.200 lacs with the bank, by depleting its working capital, which was
to no avail as the bank did not live upto its representations. After
exhausting its resources, in the year 2001-02, the Company roped in a
strategic investor for the purposes of settling the matter with the SBI.
The SBI negotiated the terms of the settlement with the investor and the
Company, and arrived at an agreement on the amount and modalities of the
Thereafter the SBI spent approximately two years processing the paperwork
and after acting on the settlement, backed out of the agreed settlement at
the last moment. The Company's operations during the two years that the
bank took in processing the paperwork were in limbo. The execution of the
agreed settlement would have brought in fresh investment, cleaned up the
Company's balance sheet, altered the ownership pattern, affected the
management structure, had an impact on the company's future plans, etc.
During the period that the Company's operations were in limbo, the
Company's working capital continued to bleed to sustain its work force and
infrastructure. By the time the SBI reneged on the agreed settlement, the
Company's operations had shrunk considerably and the Company did not have
the requisite working capital to ramp up operations. Owing to such
malafides and glaring acts of commissions, omissions and arbitrariness
attributable to SBI, the Company has sustained huge losses. The matter has
been referred to legal counsel for advice / opinion as to a suitable course
/ remedy by the Company.
The SBI invited the company in 2004 to negeoiate a fresh one time
settlement with the Bank. The Company entered into discussion with the Bank
without prejudice to its principled stand that a settlement had been
entered into in FY 2002/03, the said settlement was acted upon by all
parties and the bank is estopped from going back on the agreed settlement
and that the company reserves the right to hold the Bank accountable for
the consequences of reneging on the agreed settlement. The Company has
pointed out the benefits to the different stakeholders if a fresh one time
settlement is completed:
1. Benefits to the Bank. Due to the pending issue with the DGFT and the
Haryana Sales Tax Department, as brought out in the Techno Economic
Viability Study, carried out by an agency appointed by the Bank, the
chances of the Bank recovering any amount through litigation appear bleak.
The Bank's on going litigation with the Company is currently mired in BIFR
and will in probability multiply with the company resorting to litigation
over every outstanding issue including failure of the Bank to disburse
sanctioned working capital, failure to complete an agreed settlement,
breach of trust etc. Entering into a fresh one time settlement will bring
an end to all litigation
2. Benefits to the Company. The Company's operations are at a standstill. A
fresh one time settlement with the bank would enable the company to raise
the much needed working capital and take steps to revive the company. The
Company touched a turnover in excess of Rs. 80 Crores and employed over a
hundred people in financial year 1997-98. The Company has the potential to
reach such heights once again if it is able to resolve the issue of Working
3. Benefits to the Country. The revival of the company will add impetus to
the economy. The Indian economy is on a growth trajectory and India has the
potential to emerge as the manufacturing centre for the global economy. The
revival of the company will have a positive spin off on employment, the
local economy, exports, etc.
4. Benefits to the minority shareholders. Thousands of small retail
investors invested their hard earned earnings in the Company's public
issue. The failure of the Bank to disburse the sanctioned working capital
is singularly responsible for the company's sickness. The Company's
sickness has wiped out the small investor. The Company's revival will
enable the small investor to recover his capital as well as earn a return
on his investment.
The Bank's failure to disburse the sanctioned working capital is
responsible for the company's sickness. This failure to disburse sanctioned
working capital has been noted, documented and commented upon by
independent tribunals as well as an agency appointed by BIFR, a quasi-
judicial body, in accordance with the due process of law. The absence of a
lenders liability law, the deliberate contempt shown by the Bank to the
principles of justice and fair play, the refusal by officials of the bank
to work in accordance with the letter and sprite of the laws that led to
the founding of Public Sector Banks and the Bank's refusal to work in
accordance with the letter and spirit of laws that were enacted to help
revive sick companies leaves the company with very little options vis-a-vis
the continuing defaults of the Bank. The company will continue to pursue
the Bank to amicably resolve all outstanding matters and will leave no
stone unturned in its endeavor to secure the future of the Company.
APPOINTMENT OF AUDITORS:
M/s Anuj Kumar Gupta & Co., Chartered Accountants, Auditors of the company
retire at the conclusion of the ensuing Annual General Meeting and being
eligible, offer themselves for reappointment.
Mr. Shanti Swarup Bhatia and Mr. Uttam Kejriwal, Directors of the Company
retire by rotation at the forthcoming Annual General Meeting and being
eligible offer themselves for reappointment. Mr. Paramjit Singh, Director
of the company has expired. The Board places on record its appreciation of
the valuable services rendered by him.
The Company has not accepted any Fixed Deposits from public during the year
PARTICULARS OF EMPLOYEES:
During the year under review, none of the Company's employee was in receipt
of remuneration as prescribed under Section 217(2A) of the Companies Act,
1956 read with the Companies (Particulars of Employees) Rules, 1975.
The observations of the Auditors as referred in the Auditors' Report are
suitably explained in notes to the accounts. With regard to para (vii) of
the Auditor's Report, your Directors have to state that they have explained
the Company's stand vis-a-vis the statement in the section titled FUTURE
OUTLOOK. Further, regarding para 9(a) of the annexure to the Auditor's
Report, on account of financial constraints the company has not been
regular depositing its dues. The directors are working to complete the
settlement with the bank, which will enable the company to raise resources.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AN
A. Conservation of Energy:
The energy conservation is anon going activity in the Company and wherever
necessary energy conservation measures have been implemented. The efforts
to conserve and optimise the use of energy through improved operational
methods and other means will continue.
B. Technology absorption:
(a) Research & Development (R&D) : During the year under review, no R & D
activities have been carried out by the Company.
(b) Technology Absorption, Adaptation and Innovation: The Company has not
entered into any technical foreign collaboration agreement. The technical
know-how received alongwith the imported machinery in 1995 has been fully
C. Foreign exchange earnings and outgo:
Foreign exchange earnings (FOB basis) - Nil
Foreign exchange outgo - Nil
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956 with respect to Directors Responsibilities Statement, it is hereby
i. that in the preparation of the annual accounts for the financial year
ended 31st March, 2005, the applicable accounting standards had been
followed along with proper explanation relating to material departures;
ii. that the directors had selected such accounting policies and applied
them consistently and made judgments and estimates that were reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for the year under review;
iii. that the directors had taken proper and sufficient care for the
maintenance of adequate Accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
iv. that the directors had prepared the accounts for the financial year
ended 31st March, 2005 on a 'going concern' basis.
Pursuant to clause 49 to the Listing Agreement the Report on Corporate
Governance is given in the annexure to the Directors Report.
Your Directors wish to place on record their appreciation of the services
rendered by the employees of the Company. The Board also gratefully
acknowledges the continued support extended by customers and the
shareholders of the company.
By order of the Board
Place : Gurgaon
Date : 23rd August, 2005
MANAGEMENT DISCUSSION AND ANALYSIS
The Company is engaged in the manufacturing and selling of gold and diamond
Jewellery. The Company has established its brand and has built up
considerable goodwill in the market for its branded Jewellery.
Economy and Business Outlook:
The Jewellery business in India is a Rs. 50,000 Crore business on account
of the role Jewellery plays in our culture, heritage, traditions etc. As
the size of our economy grows and the purchasing power of the Indian people
increases, the potential of the Jewellery business will continue to
Risk and Concern:
The principle difficulty faced by the company has been the paucity of
working capital on account of the default of the State Bank of India in
releasing the sanctioned and fully tied up working capital. The Company has
explained in detail the situation pertaining to the settlement with the
bank in the section FUTURE OUTLOOK in the Director report.
Internal Control Systems and its Adequacy:
The company has put in place necessary internal audit system commensurate
with its operations. Periodical checks are conducted and necessary remedial
measures are adopted.
Human Resources/Industrial Relations:
The industrial relations in the manufacturing units of the Company
continued to be cordial. The Company's workforce is being encouraged to
adapt to the fast changing environment and acquire necessary skills and
update their knowledge.
Pollution and Environment Control:
The Company has always paid highest importance to ensure that the
environment remains relatively pollution free. The work force is
continuously trained and coached in safety and are provided appropriate
Adequate pollution control facilities are installed at the plants as per
guidelines of pollution control authority and are run as per set norms.
Statements in the Management Discussion and Analysis describing the
Company's objectives, projection, estimates, expectations maybe 'forward-
looking statements' within the meaning of applicable securities law and
regulations. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to the Company's
operations, include, among others, economic conditions affection
demand/supply and price conditions in the domestic market in which Company
operates mainly, changes in Government regulation, tax law and other
statutes and incidental factors.