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Orissa Industries Ltd.

BSE: 502260 Sector: Engineering
NSE: N.A. ISIN Code: N.A.
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Orissa Industries Ltd. (ORISSAINDS) - Director Report

Company director report

ORISSA INDUSTRIES LIMITED ANNUAL REPORT 2007-2008 DIRECTOR'S REPORT Your Directors have pleasure in presenting the Annual Report and the Audited Balance Sheet as at 31st March, 2008 & the Profit and Loss Account for the year ended 31st March, 2008 and Auditors' report thereon. Financial Results: (Rs. In lac) 2007-08 2006-07 Sales& other income 1496.02 1708.53 Interest 142.09 176.44 Profit & loss (-) before Depreciation & taxes (2011.13) (1879.09) Depreciation 35.09 33.72 Fringe benefit Tax 10.79 14.45 (Provision) 45.88 48.17 Net profit/ (Loss) (2057.01) (1842.78) Deficit from Pr. year (12530.05) (10687.27) Balance carried forward (14587.06) (12530.05) Audit report The remarks made in the Auditors Report are self explanatory & do not require any further classification. General Review: The losses of Lathikata unit are mounting due to underutilisatian of capacity which is contributing to the deterioration of the financial position of the company. After grueling efforts on the part of management it has been possible to chalk out a revival plan involving de-merger of Lathikata unit and merge the same with Shashwat International Limited, a company promoted by Mr. Ravin Jhunjhunwala. The fixed assets of Lathikata unit have been valued by an approved valuer. The reports have been examined by the Monitoring Agency, IDBI. The proposal of de-merger in the form of a Draft Modified Rehabilitaion Scheme has been examined by Hon'ble BIFR and was circulated to all the parties as well as advertised in the newspapers as per the standard procedures adopted by it. The hearing of the Draft Modified Rehabilitation Scheme was made on the 27th March, 2008 and has been duly approved. The de-merger has been approved with effect from 1st October, 2008. Towards the consideration of de-merger Shashwat International Limited will pay Rs. 58 crores and allot 2,00,000 shares of Rs. 10 each at a premium of Rs. 50 each to the shareholders of Orissa Industries Limited. It may be noted that Rs. 39 crores has already been paid by Shashwat International Limited to Orissa Industries Limited. But, as certain formalities are remaining to be completed the necessary effect in respect of transfer of the assets and liabilities could not be given effect to in the accounts for the year ending on the 31st March, 2008. Steps are being taken to take appropriate decision in the matter. Your directors are constantly examining and monitoring the revival of the company for which support and goodwill of bankers, workers, creditors and Hon'ble BIFR are forthcoming without which it would have restulted in a lot of chaotic situation. The promoters have beerf supporting the survivasl of the unit against all odds. Directors' Responsibility Statement: Pursuant to sub-sec (2AA) of sec 217 of the Companies Act, 1956, basedbn the representation received from the operating management, directors state: * That in the preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures. * That the directors have selected such accounting policies in consultation with the statutory auditors and applied them consistently and made judgments and estimates that are 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 loss of the company for the financial year. * That the directors have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956and confirm that there are adequate systems and controls for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities. * That the Annual Accounts have been prepared on a going concern basis. Conservation of Energy, Technology and foreign exchange earning & outgo A. Cost effective measures have been taken to conserve energy, to upgrade state of the art technology. The detail including foreign exchange earning & outgo is available in the schedules & notes on accounts. B. Research & Technology 1. Due to liquidity crunch, limited R&D work is carried out by the company to upgrade the exiting products which include the following area of activities * High Alumina Bricks * Clay body products * Effective utilization of siliceous Talbasta * Development of low BD insulation Bricks * Improvement in castable strength * Effective utilization of G.P. waste in making refractory bricks 2. Benefits derived as a result of aforesaid activities. * Longer refractory life * Cost reduction * Achieving special thermal properties of high alumina bricks * Clay body product for low temp. appliction etc. 3. Technology Imported : Nil 4. Expenditure on R&D : Detail has been provided in Schedule & notes on Audited Accounts 2007-08. Corporate Governance & Management discussion and analysis report: Enclosed vide Annexure-A to Directors' report. Employees: None of the employees falls under the purview of sec.217 (2A) of the companies Act, 1956 read with the companies (Particulars of employees) Rules 1975. Directors: Shri Praveen Reehl retires by rotation and being eligible, offers himself for re-appointment Auditors: Auditors M/S. H. NAIK & Co, Chartered Accountants, retire at the conclusion of this Annual General Meeting and being eligible, offer themselves for re- appointment. Acknowledgment: The Directors take this opportunity to thank the Government, Banks, Financial Institutions and employees of the company for their continued support towards the revival efforts of your company. For and on behalf of the Board of Directors Dated: 24th July, 2008 Prof. S.C. Kuchhal Kolkata (Chairman) MANAGEMENT DISCUSSION AND ANALYSIS Industry structure and developments Fortunes of your company are- directly linked to the performance of steel industry as it is the largest consumer of refractory products. There is strong forecast of demand of steel in the country in days to come. Multinational companies like Arcelor Mittal, Sterlite group and POSCO and many industrial houses have announced plans to set-up steel plants in India. You will be glad to know that most of these units are being located in the State of Jharkhand and Orissa. The other consumers of refractory products are Cement, Copper, Glass, Aluminum & Petro-chemical industries, etc. poised for substantial growth and are pushing the demand of refractory products in India. The export front also presents a positive outlook. All these factors will have. a very positive impact on the growth of refractory industry. Your company has two manufacturing units in the State of Orissa - one in Lathikata near Rourkela and the other in Barang near Cuttack. Besides Rourkela Steel Plant, a number of other steel manufacturing units have come up in last 2-3 years in the State of Orissa. As already stated elsewhere, the States of Orissa and Jharkhand have recently attracted a number of industrial houses of India and overseas multinational companies to set up steel plants in these mineral rich states. The capacity of steel making is likely to go up by over 35 million tons in these two states. Our company hopes to take advantage of the strategic location of its units to encash the boom in steel industry. You will be glad to note that with''the strong brand image enjoyed by your company and quality of its products and the plans in place, the company is hopeful of an early revival. SWOT Analysis: Strength of the company lies in the fact that its products are of international standard and the demand has been increased substantially due to increased steel production in India. The company has also strategically located near the steel manufacturing units which is a big advantage. The company also enjoys a strong brand image. Weakness lies in working capital constraints, high manpower costs and delay in getting approval in respect of relief and concessions duly approved by BIFR. Further the market is now dominated by buyers. Opportunity lies in the fact that the market is increasing day by day and growth India story coupled with cost reduction measures already taken by the company. The threat is competition and lot of consolidation and reorganization that are taking place in refractory industry. The rising input cost is also cause of concern. However, your directors are hopeful in making revival of the organization. Internal control system and their adequacy There is proper internal audit system in the company. The company has always placed a lot of emphasis on a strong internal control system commensurate with the size and nature of its business. The internal control system has been reviewed from time to time by the Audit Committee at Board level.