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Modern Terry Towels Ltd.

BSE: 500283 Sector: Industrials
NSE: MODERNWOOL ISIN Code: N.A.
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Modern Terry Towels Ltd. (MODERNWOOL) - Director Report

Company director report

DIRECTORS

The Members,

Your Directors have pleasure in presenting Annual Report and audited accounts for theyear ended on 31st March, 2012.

I. FINANCIAL RESULTS

(Rs. in crores)
Year ended 31.03.2012 Period ended 31.03.2011
(12 months) (18 months)
Gross Profit / (Loss) before Depreciation (2.21) (5.69)
Depreciation 8.17 15.96
Net Profit / (Loss) for the year (10.38) (21.65)
Exceptional Items 16.44 11.84
Net profit / (Loss) for the year after exceptional items 6.06 (9.81)

2. OPERATIONS

The extremely depressed conditions prevailing in Global and domestic markets affectedadversely the "Terry Towel" industry and consequently the company faced amultitude of challenges on the operating and market front due to over supplies and declingselling prices. Further Company is also operating at low capacity utilization due toshortage of working capital. The stiff increase in input cost like power and fuel, wagesetc. could not pass on to customers. Combined effects of these factors resulted intoerosion of profit margin. In the light of such external adverse conditions, with betterinternal control, the erosion of profit margins, to some extent, could be minimised.During the year under review, the turnover was Rs. 44 crores as compared to about Rs. 60crores in the previous year on annualize basis despite difficult business conditions. TheCompany has suffered a gross loss of about T 2.21 crores during the year under review.Your directors are unable to declare any dividend during the year under review due toinadequacy of profits.

3. EXPORTS & FUTURE PROSPECTS

Though for last few years, the Towel Industry is suffering from sluggish demand, poorsales realisation and escalation in input cost, your Company is hopeful to increase thevolumes to sustain the market. Continuous efforts towards increase in customers net workhas already started yielding results as the Company is now able to get direct enquiresfrom world's renowned leading chain stores. With the impending recovery in the globaleconomy, export performance is likely to improve in future in which case the Companystands to benefit significantly. The Company will also be benefited on sanction ofamalgamation scheme under the aegis of BIFR. The Company is now heading towards a recoveryphase and is in process of optimizing the capacity utilization. The long term outlook ofyour Company appears promising as in domestic market the consumption has increased andwill multiply with coming up of new retail chains like Big Bazar, Reliance retail, AVBirala, Bharti, Spencer etc.

4. SETTLEMENT OF DEBTS & SANCTION OF REVIVAL SCHEME BY HON'BLE BIFR BY WAY OFSCHEME OF AMALGAMATION

The Company has settled all the secured creditors. Settlement made during the yearunder review has resulted into write back of principal and interest which has beenincluded in the exceptional items shown under the financial statements. As reported in thelast report, your Directors has decided to merge the Company with Modern InsulatorsLimited by a scheme of merger /amalgamation under the provisions of Sick IndustrialCompanies (Special Provisions) Act, 1985 to achieve the scale, size, integration andenhance financial strength alongwith flexibility to future growth opportunities subject toapproval of Hon'ble BIFR by taking deemed date of amalgamation as 1/1/2008. Revival Schemeis still under consideration for circulation and thereafter for sanction by Hon'ble BIFR.

5. PUBLIC FIXED DEPOSIT

In view of petition filed by the Company, the Hon'ble Company Law Board has passed anorder on 17/4/2002 that "The repayment of fixed deposits shall be made by the Companyin accordance with "revival scheme" as and when approved by BIFR under theprovision of SICA". However payments on compassionate ground are continued to be madeas per the decision of the committee formed by Hon'ble Company Law Board for this purpose.

6. DIRECTORS

Shri H. L. Sharma and Shri P. K. Rao are liable to retire by rotation and beingeligible, offers themselves for re-appointment. Appropriate resolutions for there-appointment of the aforesaid Directors are being moved at the ensuing Annual GeneralMeeting, which the Board recommends for your approval.

7. AUDITORS

M/s. J. T. Shah & Co., Chartered Accountants, Ahmedabad retires at the forthcomingAnnual General Meeting. Your Directors recommend their reappointment as Auditor of theCompany for the year 2012-13. The observations made by the Auditors are self explanatoryand have been dealt with in the notes forming part of the financial statements and henceneed no further clarifications.

8. INDSUTRIAL RELATIONS & PARTICULARS OF EMPLOYEES

Your Directors sincerely appreciate the workers, staff and officers for putting intheir best efforts. The Company has enjoyed healthy and cordial industrial relationsthroughout the period under review. There is no employee getting remuneration asprescribed under Section 217 (2 A) of the Companies Act, 1956 read with Companies(Particulars of Employees) Rules, 1975 as amended.

9. DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956, the Board ofDirectors of the Company hereby state and confirm that :-

i) in the preparation of the Annual Accounts, the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

ii) the Directors have .selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit or loss of the Company for the year under review;

iii) the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities

iv) the Directors have prepared the annual accounts on a going concern basis.

10. PARTICULARS OF ENERGY CONSERVATION. TECHNOLOGY ABSORPTION AND FOREIGN EXCHNAGEOUTGO

The statement of particulars relating to energy conservation, technology absorption andforeign exchange earnings and outgo as required in accordance with Section 217 (1) (e) ofthe Companies Act, 1956 read with Rule 2 (A), 2(B) and 2 (C) of the Companies (Disclosuresof particulars in the report of Board of Directors) Rules, 1988 is annexed hereto andforms part of this report.

11. CONSTITUTION OF AUDIT COMMITTEE

The Board of Directors has constituted the Audit Committee of Directors to exercisepowers and discharge functions as stipulated in section 292A of the Companies Act, 1956.The present Audit Committee consists of member directors as follows:-

Shri H. L. Sharma, Chairman

Shri B.L. Khanna, Special Director, BIFR (From 22/03/2012)

Shri P.K. Rao

12. ACKNOWLEDGEMENTS

The Board places on record its sincere thanks and gratitude for the assistance andcontinued co-operation that the Company has been receiving from Financial Institutions,working capital bankers and Central as well as State Government. Your Directors sincerelyappreciate the commitment and dedication of employees of all levels.

ON BEHALF OF THE BOARD
Place : Mumbai (SACHIN RANKA)
Date ; 29th June, 2012 Chairman & Managing Director

ANNEXURE TO THE DIRECTORS' REPORT

Information as per Section 217 (l)(e) read with the Companies (Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988.

1. ENERGY CONSERVATION:

The Company is making all efforts for conservation of energy. To reduce the energycost, periodical reviews and studies are under taken from time to time.

Current Year (12months) Previous Period (18 months)
A. Power & Fuel Consumption
1 Electricity
a) Purchased (units in lacs) 112.41 210.67
Total Amount (Rs. in lacs) 758.01 1304.66
Rate/Unit (Rs.) 6.74 6.19
b) Own Generation: (through Diesel Generator)
Unit in lacs 0.08 0.05
Unit/ Litres of Diesel Oil 1.70 1.55
Cost/Unit (Rs.) 9.61 19.77
2 Lignite / Coal
Quantity (MT) 5687.44 9956.40
Total cost (Rs. in lacs) 230.41 408.23
Rate/Unit (Rs. /Kg) 4.05 4.10
B. Consumption per unit of Production :
Electricity (Kwh./KG) 7.67 7.07
Lignite/Coal (KG/KG) 4.03 3.34

2. TECHNOLOGY ABSORPTION:

Your company is having research and development cell headed by a senior and experiencedtextile technologist. The section is keeping continuous watch on the quality of theproducts at various stages. This section also keeps a regular track on latest advancementon the spinning and finishing technology in order to keep pace with the demand of newproducts.

3. FOREIGN EXCHANGE EARNINGS AND OUTGO:

The company has earned foreign exchange of Rs. 392.48 Lacs at FOB price against anoutgo of Rs. 60.20 Lacs during the year ended on 31st March 2012.