PENTAFOUR PRODUCTS LIMITED
ANNUAL REPORT 1999-2000
Your Directors' are pleased to present the Sixteenth Annual Report and the
Audited Accounts for the financial year ended 31st March 2000.
Reserves and Surplus
The reserves and surplus of the company stood at Rs. 11,344.09 lakhs as at
31st March 2000.
The performance during the year under review has been significantly lower.
Scarcity of adequate working capital, low productivity, continuing
recession in the auto and electronics market have been the reasons for the
significant drop in the revenues and accumulation of losses during the
period. The delay in tie up of funds which was envisaged at the
commencement of the year has resulted in considerable loss of potential
business opportunities in the auto and electronics (copper clad laminates)
segment. However operations in the chemicals division stabilised during the
second half of the year. These events have to a large extent led to under
utilization of plant capacities and low productivity levels resulting in
higher losses during the year. With the entry of multinationals with large
capital outlay, lowering of import tariffs and the unhealthy competition
from the unorganized sector, the electronics & air conditioning market is
undergoing a transition. The company has a minor presence in these segments
and given the scenario above it has been consciously decided to cease
operations in, these areas in the current year and focus in areas where the
company has its inherent strength. The company would hitherto focus all its
resources in consolidating its existing presence in auto components,
chemicals and electronics (copper clad laminates) in the years ahead.
In addition to decline in normal business operations,modernisation of the
existing plants, manpower rationalisation and the much desired commencement
of commercial production in the copper clad laminates plant could not be
achieved during the year due to the delay in the tie up of short term and
long term resources. Concentration of large investments in the copper clad
laminates project and the delay in achieving commercial production has
deprived the other performing and profit making divisions of the much
required working capital & capital investments for modernisation.
Recognising the need to provide requisite impetus for achieving higher
levels of performance, the board has identified the three segments where it
has inherent strength, namely, auto components, chemicals and electronics
(copper clad laminates) as core areas for growth. A detailed study of the
steps required to achieve this objective is in progress; suitable remedial
measures including manpower rationalisation would be identified and
implemented during the current year. Positive results from these remedial
measures would gradually accrue and this enhance performance and
profitability in a couple of years.
Consent of the members of the company was accorded to the board at the
previous annual general meeting to raise resources from tune to time not
exceeding US $50 million by issue of appropriate securities as determined
by the Board to liquidate its existing high cost borrowing, modernisation
and meet its working capital requirements. The board is pleased to state
that the company has identified a group of high net worth overseas bodies
corporate and has in, principle tied up foreign investments viz.; initial
issue of securities aggregating to US $ 25 million, finer details of the
investments are in the process of being finalised. The investment by the
group of foreign investors in the securities proposed to be issued by the
company, though initially limited to infusion of funds, is in the imminent
future expected to culminate into a long term strategic business
As a corollary to the decision by the foreign investors to strategically
associate with the company and became business partners in the long run,
they have appointed Bower Cotton, London, United Kingdom, a solicitors firm
of international repute with a business standing of over 175 years, to
advise and assist the present and prospective investors who have evinced
interest In investing in the company. Consequently, they have nominated Mr.
Paul Francis Simms, Solicitor & Senior Partner, Bower Cotton to represent
the investors as Director on the board of the company. The board places on
record its appreciation for the assistance and advice being rendered by Mr.
Paul Francis Simms in the financial and business restructuring of the
Amidst the delay in tying up the requisite. funds to liquidate the existing
high cost borrowings, as earlier indicated in our previous report, the
banks & financial institutions who had recalled the facilities and advances
besides initiating judicial proceedings have further obtained orders for
possession of the secured properties of the company. However, in light of
the strategic tie up and the imminent disbursement of funds by the foreign
investors, the banks and financial institutions have at the request of the
company consented to defer legal proceedings /possession of assets of the
company. Negotiations are under way with the banks and financial
institutions for one time settlement of dues; the process would be
completed before the end of the current year. Significant concessions and
savings in interest costs are expected to accrue as d result of this
exercise, appropriate adjustments have been made in the financial
statements to reflect these changes; the liabilities have been accordingly
reinstated. The Company could not replenish adequate cash flow for timely
redemption of redeemable preference shares.
In the backdrop of the above developments and the strategic financial and
business restructuring now in progress, the board is confident of improved
performance and profitability In the years ahead.
The Directors do not recommend dividend in view of minimal operations and
negative performance for the year under review.
Dr. Jewan Prakash Raina and Mr. S. Krishnamoorthy, Directors, retire by
rotation and being eligible offer themselves for re-appointment.
Mr. V. Ramakrishnan, Managing Director, whose term expires on 22nd,October
2000 has been re-appointed as Managing Director, subject to the consent of
the members, at the meeting of the Board of Directors of the company held
on 29th September 2000.
The Board recommends approval by members of the re-appointment of Mr, V.
Ramakrishnan, as Managing Director of the company on the existing terms and
conditions and subject to the provisions contained in Schedule XIII to the
Companies Act, 1956 set out in detail in the notice to the members.
Mr. Paul Francis Simms who was appointed as Director on the Board with
effect from 20th April 2000 retires at this Annual General Meeting and is
eligible for re-appointment. The company has received notice under section
257 of the Companies Act, 1956 from a member proposing the candidature of
Mr. Paul Francis Simms as Director.
Messrs. R. Swaminathan & Co, Chartered Accountants, Chennai hold office
until the conclusion of this Annual General Meeting. The company has
received a letter from R. Swaminathan & Co to the effect that their
appointment, if made would be within the limits prescribed under section
224(1B) of the Companies Act, 1956 and thus eligible for re- appointment.
Messrs. S. Viswanathan, Chartered Accountants, Chennai have expressed
their inability to act as auditors due to their other official commitments.
Year 2000 Compliance
The Year 2000 transition was smooth without any disruption to the
operations of any of the Divisions of the company.
Dematerialisation of shares
The Securities and Exchange Board of India, vide circular dated 29th May
2000 directed the company for compulsory dematerialisation of shares of the
company by all class of investors with effect from 30th October 2000. 1n
order to conform to the requirements of the Depositories Act, 1996, it is
necessary to introduce a new article in the Articles of Association of the
company, However the company has approached SEBI and sought time to go in
for compulsory dematerialisation effective 1st April 2001. Necessary
resolutions for alteration/ amending the Articles of Association is placed
before the members for their consent.
As per the amended provisions of the Listing agreement it will be mandatory
for your company to implement corporate governance during the financial
year 2001-2002. Necessary steps will be taken to ensure the implementation
of the same before the prescribed date.
The aggregate amount of deposits from public as at 31st March 2000 is
Rs.3.95 crones, which includes a deposit of Rs.2 crores from an
institution. Of the above, unclaimed deposits amount to Rs.0.06 crores,
deposits matured and remaining outstanding for repayment aggregates to
Rs.3.70 crores. On account of the recurring losses and tight liquidity
condition, there has been a delay in repayment of the deposits. The Company
continues to progressively repay deposits in a scheduled manner. The Board
records its grateful appreciation for the understanding shown by the
deposit holders. The Board has taken a decision to repay the matured
deposits in full as and when the funds are in place. The company has
discontinued acceptance/ renewal of deposits.
The particulars of employees under section 217(2A) of the Companies Act,
1956 read with Companies (Particulars of employees) Rules 1975 forms part
of this Report. However as per the provision of section 219(1)(b)(iv) of
the Companies Act, 1956 the report and accounts are being sent to the
shareholders of the company excluding the statement of particulars of
employees under section 217(2A) of the Act. Any shareholder interested in
obtaining a copy of the said statement may write to the registered office
of the company.
The relations with the staff and workers union continue to remain cordial
Conservation of Energy Technology, Absorption and Foreign Exchange
The thrust on energy conservation continued though energy consumption at
the Company's factories is not a major cost factor. Energy consumption
devices have been installed where appropriate and steps taken to conserve
energy from time, to time.
The statement in Form B pursuant to section 217(1)(e) of the Companies Act,
1956 read with Companies (Disclosure of particulars in the Report of the
Board of Directors) Rules 1988 is given in the annexure forming part of
Your directors wish to place on record their gratitude to the various
government departments of the Central and State Governments, Financial
Institutions and Banks for their valuable co-operation and assistance.
Your directors also wish to place on record their appreciation of the whole
hearted and continued support extended by. the shareholders and investors
who have always been a source of strength to the company.
Your directors are sure that the share holders would like to join them in
conveying their appreciation to all ranks of Company's employees for their
dedicated service during the difficult period which the company is going
On behalf of the Board
Chennai Chairman &
27.11.2000 Managing Director
ANNEXVRE TO DIRECTORS' REPORT
Disclosure of Particulars with respect to Technology Absorption
Research and Development (R & D)
1. Specific areas in which R & D is carried out by the Company :
The Company has in-house R & D Departments in Auto, Chemical and
Electronics Divisions. The R & D efforts are directed towards quality
control, improvement / upgradation of existing products and development of
2. Benefit derived as a result of the above R&D :
improvement in quality, cost effectiveness and realisation of higher levels
3. Future plan of action :
Consolidation of the results achieved, pursue, Improvements in the above
areas to achieve international quality standards.
4. Expenditure on R & D
(Rs. in thousands)
a) Capital Rs. 232 (1999-Rs. 575)
b) Recurring Rs. 137 (1999-Rs.1174)
c) Total Rs. 369 (1999-Rs. 1749)
d) Total R & D expenditure as a
percentage of total turnover 0.06% (1999 - 0.14%)
Technology absorption, adaptation and innovation
1. Efforts, in brief, made towards technology absorption, adaptation
Training and retraining of the existing personnel and the new personnel is
being practised to ensure that the technology absorption is complete and
transferred to new generation technical personnel.
In the process of absorbing technology from M/s. Nationwide Circuit
2. Benefit derived as a result of the above efforts etc. product
improvement, cost reduction, product development, import substitution, etc.
Achieving higher purity level and cost reduction in core business
Particulars of Imported Technology
a) Technology imported
b) Year of Import
c) Has technology been fully absorbed
During the year 1999 - 2000 there was no import of technology.
d) If not fully absorbed, dress where this has not taken place, reasons
therefore, and future plans of action.