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Jocil Ltd.

BSE: 500561 Sector: Industrials
NSE: JOCIL ISIN Code: INE839G01010
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Jocil Ltd. (JOCIL) - Director Report

Company director report

DIRECTORS

Your Directors have pleasure in presenting the Thirty Fifth Annual Report together withthe Audited Statement of Accounts for the year ended 31st March 2013.

(Rs. in Lakhs)
2012-13 2011-12
1. FINANCIAL RESULTS
Gross Sales 45346.36 43014.76
Less: Excise Duty 5160.22 4228.64
Net Sales 40186.14 38786.12
Processing Charges 578.60 360.82
Other Income 162.80 258.42
Total Income 40927.54 39405.36
Profit before Interest and Depreciation (PBID) 3677.97 3090.75
Interest (382.13) (342.11)
Depreciation (1001.38) (888.22)
Profit before Tax (PBT) 2294.46 1860.42
Provision for Current Tax (850.00) (600.00)
Deferred Tax (Provision) / Withdrawal 18.63 (10.05)
Excess/(Short) provision of Income Tax made in earlier years (1.03) -
Profit after Tax 1462.06 1250.37

During the year the turnover of the company has increased marginally from Rs. 430.15crores to Rs. 453.46 crores recording a 5.42% growth over the previous year. The ProfitBefore Interest and Depreciation (PBID) of Rs. 36.78 crores and Profit Before Tax (PBT) ofRs. 22.94 crores during the year have grown by 19.00% and 23.33% respectively over theprevious year. The performance of the company during the first half of the financial yearwas significantly better than that of the corresponding period in the previous year.However, during the second half of the financial year the Company experienced unfavourableconditions due to decline in prices, slump in market conditions and severe competition. Asa result, the production, sales and operations were adversely affected and consequentlythe overall outcome for the financial year 2012-13 was only marginally better than theprevious year.

The income for the year also includes Rs.213.52 lakhs received from AP Transco for thepower supplied in earlier years towards rate difference. An increase in revenue by Rs.77.75 lakhs was achieved from wind mills due to improved wind velocity over the previousyear.

The appropriations from the profit are as detailed below :

(Rs. in Lakhs)
2012-13 2011-12
Profit after Tax 1462.06 1250.37
Balance brought forward from previous year 1035.50 1745.28
Profit for appropriations 2497.56 2995.65
APPROPRIATIONS
Dividend 532.87 444.06
Provision for Tax on distributed profits @ 16.995% 90.56 72.03
Transfer to General Reserve 500.00 1444.06
Balance carried forward 1374.13 1035.50
Total 2497.56 2995.65
Authorised Capital 1000.00 1000.00
Paid up Capital 888.16 888.16
Reserves & Surplus 12697.54 11858.91

2. DIVIDEND

Considering the profitability of the Company, the Board of Directors are pleased torecommend for the approval of the shareholders of the Company for payment of dividend forthe year ended 31-3-2013, at Rs. 6/- per equity share of Rs.10 each, which aggregates toRs. 5,32,86,900/- on the 88,81,150 equity shares of the Company. In the previous year, theCompany paid dividend at Rs.5/- per equity share of Rs. 10 each on 88,81,150 sharesamounting to Rs.4,44,05,750.

3. OPERATIONS 2012-13 2011-12
MT MT
Production
(including processed on jobwork)
a) Fatty Acids 51179 49710
b) Toilet Soap 7346 7472
c) Soap Products 43967 40077
d) Glycerine 3735 2300
e) Industrial Oxygen (cubic meters) 464432 424554
f) Biomass Power (kWh] 25799840 20246932
g) Wind Power (kWh) 16418310 13676554
Sales
a) Fatty Acids 23095 23364
b) Toilet Soap 2034 2259
c) Soap Products 36633 35727
d) Glycerine 3679 2322
e) Industrial Oxygen (cubic meters) 457681 408072
f) Biomass Power (kWh) 7831000 3561300
g) Wind Power (kWh) 16418310 13676554

4. OUTLOOK

Fatty Acids and Soap

In the last annual report the members were informed that the company commissioned newequipment under expansion cum modernization programme implementing latest technology andincreasing plant capacities. However, the production figures for the year underconsideration could not be improved over the previous year due to unfavourable marketconditions. Yet, the investment in new upgraded plant and machinery helped the company tosustain the bottom lines through reduced processing costs and improved efficiency.

The recession in European markets in recent times has adversely affected the businessprospects of some of our major customers and as a result their offtake has come down.Stearic Acid and Soap Noodles markets were also disturbed by new entrants offering theirproducts at low rates to get an entry into the market but these prices may not prevail forlong and are expected to settle at a reasonable level. The overall market conditions areexpected to improve soon from the slow down since October, 2012.

Biomass Power Plant

The extremely bleak power scenario at present had never been experienced in the past.Yet, we were able to carry out our operations normally only because of BiomassCogeneration Captive Power Plant. The industry is not allowed to draw extra power even atadditional cost since 7th November 2012 after the introduction of Revised Restriction andControl (R&C) measures by Andhra Pradesh Electricity Regulatory Commission (APERC).The company obtained No Objection Certificate (NOC) for purchase of power under OpenAccess from third parties as and when required to meet the exigencies. The capacityutilization of Biomass Power Plant has improved considerably during the year to 60% overthe previous year at 47%, due to the extra efforts put in to procure biomass fuels. Sincethe continuous running of power plant is very essential, biomass fuels are being purchasedat a higher cost.

During the year the company has received Rs.213.52 lakhs from Andhra Pradesh PowerCoordination Committee towards differential tariff amount for the power exported duringthe period 1 st April 2004 to 31st March 2011 as per the interim orders of the Hon'bleAppellate Tribunal for Electricity (ATE) dt. 1-2-2012. The ATE passed final ordersdt.20-12-2012 giving directions to APERC to finalise the tariff which is yet to becomplied with.

Wind Energy Generators (WEGs)

Power generation from the four wind energy generators (WEGs) of the Company aggregatingto 6.3 Mw capacity has improved during the current year to 164.18 lakh units as againstthe previous year at 136.77 lakh units because of improved wind velocity. In the last twoyears power generation from the wind mills was much lower than expected due to prolongedwinter season and low wind velocity.

Wind energy is a boon to the power starved Tamil Nadu State Government. Yet, the TamilNadu Electricity Generation and Distribution Corporation Limited (TANGEDCO) has beendelaying payments for power supplied to it for more than a year. As on 31st March, 2013,Rs.450.33 lakhs is due for payment by TANGEDCO. Indian Wind Power Association in which theCompany is a Member, took up the issue and the Appellate Tribunal for Electricity (ATE)directed TANGEDCO to pay interest at 12% per annum on delayed payments. Inspite of theseOrders TANGEDCO pays neither the interest nor the principal in time which is causingproblems to the industry.

Credit Rating

The Credit Rating Agency CARE reaffirmed the credit rating of the Company 'CARE A+'(adequate degree of safety regarding timely servicing of financial obligations) for longterm facilities and 'CARE Al' (strong degree of safety regarding timely payment offinancial obligations) for short term facilities from banks.

5. CONSERVATION OF ENERGY & ENVIRONMENTAL SAFETY

a) New Electrolyzer with improved technology installed, to save on electricity inproducing hydrogen gas.

b) Fatty Acid Distillation Plants 5 & 6 interconnected, to reduce steam consumptionfor vacuum creation.

c) Water Vapour in Splitting Plant 2 & 3 condensed to water, to recover heat and toreuse the same water.

d) Vapor Liquid Separator system adopted in Batch Neutralisation and Drying Plant, toimprove production of Noodles.

e) Power Control Panel Room (Power House-1) air-cooled with Air Handling Unit, toreduce heat emissions of panel and to avoid premature failure of changeover switches &breakers.

6. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year under review, the Company earned foreign exchange equivalent to Rs.1,30,50,778 (previous year - Rs.2,18,08,672/-). The exports have come down because ofcompetition from countries like Malaysia and Indonesia for supply of similar products. TheCompany imported raw materials and equipment during the year resulting in foreign exchangeoutgo equivalent to Rs. 43,58,19,914 (previous year Rs. 54,25,70,176/-).

7. FINANCE

The Company availed working capital facilities under consortium arrangement from AndhraBank and State Bank of India and the accounts are in order. The Company complied with allthe legal requirements and there are no outstanding statutory dues as on 31st March, 2013.

8. FIXED DEPOSITS

The Company has accepted Fixed Deposits from the public and shareholders during theyear under review. There are no matured and unclaimed deposit as on 31st March 2013.

9. DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and Articles ofAssociation of the Company, Shri M. Gopalakrishna, I.A.S. (Retd.), Shri Subbarao VTipirneni and Shri K.Srinivasa Rao, Directors, retire by rotation at the ensuing AnnualGeneral Meeting and being eligible, offer themselves for reappointment.

Shri R Venkateswara Rao was appointed as Additional Director of the Company with effectfrom 29th September 2012 in accordance with Section 260 of the Companies Act, 1956, readwith Article 113 of the Articles of Association of the Company. He will be holding officeuntil the date of the forthcoming Annual General Meeting.

10. AUDITORS

M/s.Brahmayya & Co., Chartered Accountants, Guntur retire at the ensuing AnnualGeneral Meeting and are eligible for reappointment.

11. COST AUDITORS

Cost Audit of the Cost Accounting Records maintained by the Company in respect of theproducts Fatty Acids and Electricity is required for the year 2012-13. Accordingly forconducting the cost audit, M/s. Narasimha Murthy & Co., Cost Accountants, Hyderabadwere appointed as Cost Auditors for both the products.

12. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of theCompany for their sustained efforts and valuable contribution to the performance of theCompany during the year. The Statement of Particulars of Employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules,1975 is annexed to and forms part of this report.

13. CORPORATE GOVERNANCE

The Company is committed to maintain the standards of Corporate Governance prescribedby the Securities and Exchange Board of India (SEBI) codified in Clause 49 of the ListingAgreement with Stock Exchanges. Report on Corporate Governance and Management Discussionand Analysis (MD & A) Report along with Compliance Certificate from Auditors onCorporate Governance are set out as separate Annexures to this report.

14. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, withrespect to Directors' Responsibility Statement, it is hereby confirmed that

a) in the preparation of the annual accounts for the year ended March 31, 2013, theapplicable Accounting Standards read with requirements set out under Schedule VI to theCompanies Act, 1956, have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31, 2013 and of the profit ofthe Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and

d) the Directors have prepared the annual accounts of the Company on a 'going concern'basis.

15. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted andsincere cooperation the Company received from various departments of Central and StateGovernments, Bankers, Auditors, Dealers and Suppliers of the Company. The Directors alsowould like to express their grateful appreciation for the guidance and cooperationreceived from the Holding Company, M/s. The Andhra Sugars Limited, Tanuku.

For and on behalf of the Board of Directors
Hyderabad, P NARENDRANATH CHOWDARY
25th May, 2013 Chairman

ANNEXURE TO THE DIRECTORS' REPORT

Particulars of Employees as required by Sub-Section 2-A of Section 217 read with theCompanies (Particulars of Employees) Rules, 1975 and forming part of the Directors' Reportfor the year ended 31 -03-2013.

Name Age Years Designation Gross Remuneration Net Remuneration Qualification Experience Years Commencement of employment with the Last Employment held
Rs. Rs. Company
J. Murali Mohan 63 Managing Director 97,54,542 44,73,462 B.Tech., (Chemical Engineering) M.B.A. 34 16-02-1990 Marketing Manager, I.T.C. Ltd., (ILTD Division)

Notes :

1) Gross remuneration comprises salary, allowances, monetary value of perquisites,commission, provision for leave encashment, gratuity and the Company's contribution toprovident and superannuation funds.

2) Net remuneration is after tax and is exclusive of Company's contribution toprovident, superannuation and gratuity funds, leave encashment and monetary value ofnon-cash perquisites.

3) The Appointment is governed by the provisions of Sec.269 read with schedule XIII ofthe Companies Act 1956.

FORM-B

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

Research and Development (R & D)

1. Specific areas in which R&D carried out by the Company: New grades of StearicAcid and quality of Glycerine.

2. Benefits derived as a result of the above R&D: Customers requirement andsatisfaction.

3. Future Plan of action :

To improve the quality of Fatty Acids, Stearic Acid and Soap Noodles.

4. Expenditure on R & D :

(Rs. in Lakhs)
2012-13 2011-12
a) Capital 2.06 1.44
b) Recurring 49.82 49.22
Total 51.88 50.66
Total R&D expenditure as a percentage of turnover 0.13 0.12

Technology Absorption, Adaptation and Innovation

1. Efforts in brief, made towards technology absorption, adaptation and innovation:

The Company maintains contacts with technical experts in the field of Toilet Soap,Fatty Acids and Energy.

2. Benefits derived as a result of the above efforts:

Improved capability & productivity to meet the customer requirements in acompetitive market.

3. Imported Technology: Nil.