KRM INTERNATIONAL LIMITED
ANNUAL REPORT 2005-2006
We, the Board of Directors of your Company, are delighted to present this
17th Annual Report of the Company together with the Audited Statement of
Accounts for the year ended March 31, 2006.
(Rupees in Lakhs)
Particulars For the year For the previous
ended year ended
March 31, 2006 March 31, 2005
Gross Revenue 871.76 1240.51
Increase/(Decrease) in Stock 269.90 56.15
Expenditure before Depreciation 905.86 1479.41
Loss before Depreciation 304.00 182.75
Depreciation 36.26 39.12
Loss before Tax 340.26 221.87
Tax for earlier years - 2.57
Fringe Benefit Tax 2.18 -
Net Loss for the Period 342.44 224.44
FINANCIAL AND OPERATIONAL PERFORMANCE
The business continued to face pressure in 2005-06, both on top line and
profitability as in the previous year. In spite of our sincere efforts to
reduce the burn rate did not yield any material returns. The Gross receipts
during the year were Rs. 871.76 lakhs (Previous Year Rs. 1240.51 lakhs) as
against a total expenditure of Rs. 905.86 (Previous Year Rs. 1479.41 lakhs)
resulting in loss of Rs. 340.26 Lakhs (Previous Year Rs. 221.87 lakhs)
before Tax. The market situation during the year was not encouraging and
continued to remain sluggish, which is the major factor for the huge losses
during the year;
During the year, the company has implemented re-structuring entailing
disposal of surplus assets and clearance of dues to institutions/banks.
Company has already settled with IDBI & UCO Bank under OTS scheme approved
by them. Similarly, Company is in advance stage of negotiations with other
institution/bank and hope to settle their accounts on or before 31.3.2007.
M/s. Bipin Textile Processing Industries Limited is a Subsidiary of the
Company and Statements in terms of Sections 210 and 212 of the Companies
Act, 1956, are enclosed herewith for your perusal.
Due to operational losses, your Directors do not recommend any dividend for
distribution on equity share capital of the Company for the period ended
31st March 2006.
The Company has conscientiously monitored and managed its existing
qualities in the process of developmental works related to software
segment. However, as the business during the year was not quite substantial
in terms of quantity or price, no major expenditure has been incurred by
your Company in the direction of quality management.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
Your Company has a proper and adequate system of internal control to ensure
that the financial and other records are reliable, the assets and
properties are safeguarded and protected against loss from unauthorized use
or disposition and that transactions are authorized, recorded and reported
correctly. Efficiency, effectiveness, accuracy and reliability are the key
drivers. All purchases and expenses are guided by formal approval
mechanism. Also, dual control, segregation and access restrictions of all
these items are given high importance.
The internal control system is supplemented by extensive programme of
internal audits, review by management and documented policies, guidelines
and procedures. The internal control is designed to ensure that the
financial and other records are reliable for preparing financial statements
and other data and for maintaining accountability of assets.
All purchases and expenses are guided by formal approval mechanisms.
Officials are designated for approval upto specified limits to have
automatic and efficient cost control process.
Your Company also has an Audit Committee. The Audit Committee reviews
adequacy of internal control systems and the Internal Audit Reports and
compliance thereof. The Committee reviews the internal control system and
conduct of internal audits during the year.
Your Company has not accepted any fixed deposit from the public within the
meaning of Sections 3(1)(iii)(d) and 58A of the Companies Act, 1956 read
with the Companies (Acceptance of Deposit) Rules, 1975 made there under
and, as such, no amount of principal or interest was outstanding on the
date of the Balance Sheet and also on the date of this Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required by the Companies (Amendment) Act, 2000, your Directors declare
[i] in the preparation of the Balance Sheet, the applicable accounting
standards had been followed along with proper explanation relating to
material departures, wherever applicable;
[ii] the Directors had 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 state of affairs of the
Company at the end of the financial year;
[iii] the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
[iv] the Directors had prepared the annual accounts on a going concern
CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT (R & D), TECHNOLOGY
ABSORPTION, ADAPTATION, INNOVATION, FOREIGN EXCHANGE EARNINGS AND OUTGO
1] Conservation of energy
The operations of your Company are not energy-intensive. However, adequate
measures have been taken to reduce energy consumption by using energy-
efficient computer terminals and by purchase of energy-efficient equipments
incorporating the latest technology. Although it was beyond the Company's
financial capabilities to constantly evaluate new technologies and invest
in them, your Company has made reasonable efforts to make its building
structure and infrastructure therein more energy-efficient, which have
enhanced energy efficiency. As energy cost forms a very small part of the
total cost, the impact on cost is not material.
2] Research and Development (R&D)
A lot of planning on research and development of new series, designs,
frameworks, processes and methodologies have been undertaken during the
year by your Company, involving nil or minimum cost repercussions.
3] Technology absorption, adaptation and innovation
Your Company's technology focus is driven by the new economy business
trends that are testing enterprises today: best quality and long life at
cheapest cost. To meet this challenge, we believe in building niche
competencies by focusing on selected areas. To this, your Company continues
to invest in augmenting its state-of-the-art technological infrastructure
in footwear manufacturing.
4] Foreign Exchange Earnings/Expenditure
Foreign exchange earned and spent (on capital as well as revenue items)
during the financial year ended March 31, 2006 is given below:
(Rs. In Lakhs)
Foreign exchange earnings 325.26 1,113.26
Foreign exchange outgo for
1. Foreign Travel 5.43 13.07
2. Agency Commission 11.38 36.32
PARTICULARS OF EMPLOYEES
The Directors wish to place on record their appreciation of the devoted
services rendered by the employees of the Company at all levels. Your
Company has not employed any person covered within Section 217(2A) of the
Companies Act, 1956 read with Companies (Particulars of Employees) Rules,
1975 as amended up to date.
M/s. Sharma & Pagaria, Chattered Accountants, the present Statutory
Auditors, retire at the conclusion of this Annual General Meeting, and have
expressed their willingness to continue in office, if re-appointed. Your
Directors propose their reappointment for the current year for the approval
of members since the proposal is in the best interest of the Company.
Mr. Sunil Kumar Modi, Director, retires by rotation at the ensuing Annual
General Meeting and being eligible, offers himself for re-appointment. The
constitution of the Board of Directors of the company has remained same as
that of last year.
REPLIES TO QUALIFICATION REMARKS IN THE AUDITORS REPORT FIXED ASSETS
The Company has taken steps to update its Fixed Assets Register for the
previous years and is in the process of completing the same with details of
their location and placing of identification marks during the current year.
The Company has taken steps to standardise its Stock Records, as per the
instructions of Auditors, which will present day-to-day stock, consumption
of stock as well as the rate of inventory.
The Company has updated the cost records to the extent possible in
compliance of the provisions of Section 209(1)(d) of the Companies Act,
1956 and has been compiling information required therefor and also been
setting out documentation in this regard.
REGISTER OF COMPANIES AND FIRMS IN WHICH DIRECTORS ARE INTERESTED
The Company has taken sincere steps to update this Register and hope to
complete the process positively before March 2007.
INTERNAL AUDIT SYSTEM
As regards paragraph 7, in respect of absence of Internal Audit System,
your Directors wish to state that there are necessary internal control
procedures prevailing within the Company as already covered elsewhere in
this Report, and further, considering the volume and nature of transactions
carried out, your Directors feel that the present systems and procedures
are self-sufficient for exercising proper controls.
DISQUALIFICATION OF DIRECTORS
The Company has already settled with IDBI & UCO Bank under OTS scheme
approved by them and got substantial relief. On similar lines, Management
of your Company is negotiating with Karnataka State Financial Corporation
for certain relief in servicing the debts due to them including, but not
limited to, extension of period for redemption of Debentures held by the
Institution and also for concessions both in Interest & Principle under
OTS. Company hope that the matter would be settled on or before March,
2007. Hence, if the Company succeeds in getting such approval, the Company
will not be deemed to have defaulted in redemption of Debentures in
consequence of which your Directors wish to state that they will not be
disqualified to act as Directors under Section 274 (1) (g).
As regards Note No. A1 of Schedule 18, dealing with 'The Company has
prepared its accounts on the principle of Going-Concern Basis', it may be
stated that the Company is trying to seize business opportunities in
international trade and turnaround the Company on the back of substantially
lower interest burden.
As regards Note No. B7 of Schedule 18 regarding defraud by a third party of
Rs. 10.00 Lakhs, your Directors state that the Company has not made
provision for the same as they consider it to be a recoverable amount. The
Company has taken active steps, including legal, in this regard and hopeful
of recovering the amount.
As regards other observations of Auditors, your Directors wish to state
that the Auditors' Report to the Shareholders read with relevant
explanations in the Notes to the Audited Annual Accounts for the year
ending 31st March 2006 as referred to in the Auditors' Report are self-
explanatory and therefore, do not call for any further comments or
LISTING OF SHARES OF THE COMPANY
Your Company's shares continue to be listed at Kolkata, Mumbai and
Bangalore Stock Exchanges, and the Company has made timely payment of
Compliance Certificate on Corporate Governance as per clause 49 of the
Compliance Certificate as per clause 49 of the Listing Agreement has been
obtained from a practicing Company Secretary and the same has been annexed
to our report for the perusal of members.
Reply to Qualifications on Corporate Governance report as per clause 49
1. Informally had made efforts to have efficient and financially
literate/professional persons on board, but because of the financial
problems and increasing losses for the past 8 years no positive response
was there. We are thinking of issuing an advertisement in news paper to
have independent directors before March, 2007.
2. As soon as the independent directors are available on the Board, Audit &
Remuneration Committees & Share Holders' Grievances Committee will be
3. Composition of subsidiary company's Board of Directors will also be
subsequently reconstituted by appointment of independent persons as
The statements made above describing the Company's projections, estimates,
expectations or predictions may be `forward-looking statements' within the
meaning of applicable securities laws and regulations. Actual results could
differ materially from those expressed or implied.
Your directors acknowledge with a deep sense of gratitude the continued
support extended by investors, customers, business associates, bankers,
stock exchanges, Financial Institutions, vendors, regulatory and
Your directors also place on record their delight for the contribution of
all employees of the Company in recording an overall performance.
For and on behalf of the Board of Directors of
KRM INTERNATIONAL LIMITED,
Bangalore SHASHI MODI
October 30, 2006 Chairman