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Protchem Industries (India) Ltd.

BSE: 524117 Sector: Industrials
NSE: N.A. ISIN Code: INE819D01019
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Protchem Industries (India) Ltd. (PROTCHEMINDSI) - Director Report

Company director report

PROTCHEM INDUSTRIES (INDIA) LIMITED ANNUAL REPORT 2005-2006 DIRECTOR'S REPORT Your Directors have pleasure in submitting the Nineteenth Annual Report of your Company together with Audited Accounts for the year ended 31st March 2006 FINANCIAL RESULTS The summarized financial results of the Company for the year ended 31st March 2006 areas follows: Year ended Year ended 31.03.2006 31.03.2005 Profit / loss before Interest & Depreciation -190.21 -165.25 Less: Interest 6.72 19.53 Profit / loss before Depreciation -196.13 -184.78 Depreciation 118.76 158.12 Less: Preliminary and deferred revenue expenditure written off 22.19 22.19 Previous year expenses Nil 1.02 Net profit / loss for the year -337.88 -366.11 Net profit / loss brought forward -1321.83 -955.72 Net profit / loss carried forward -1659.72 -1321.83 DIVIDEND In view of the losses incurred during the year, your Board of Directors are not recommending any dividend for the year ended 31st March 2006. MANAGEMENT DISCUSSION AND ANALYSIS A. Industry Structure and Developments: Your Company is in the business of manufacturing and marketing Amino Acids and its value added derivatives. It has an Amino Acid manufacturing Plant at Pondicherry which is an 100% EOU and Derivatives manufacturing plant at Madhuranthagam. It is the only manufacturer of Amino Acids in India and one among. the very few manufacturers of Amino Acids in the World. B. Performance: The sales turnover for the year ended 31st March 2006 is Rs 241.22 lakhs as against Rs. 316.54 lakhs during the previous year. Your Company has incurred a net loss of Rs. 337.88 lakhs as against a loss of Rs. 365.09 lakhs incurred during the previous year. The total accumulated losses incurred by the Company as on 31st March 2006 amounts to Rs 1659.72 as against Rs 1321.83 lakhs as at the end of the previous years. The net worth of the Company is fully eroded and the Company has become a Sick Industrial Company within the meaning of clause (o) of sub-section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. The Company has made a reference to Board for Industrial and Financial Restructuring (BIFR) for formulating a suitable rehabilitation package and the application made by the Company is under process. The Company has received a notice from IDBI under Securitisation and Reconstruction of Financial Assets and Securitisation of Interest Act, 2002, for taking over the assets of the Company provided as security for the loan taken from them. The Company has received a notice from EXIM Bank under Securitisation and Reconstruction of Financial Assets and Securitisation of Interest Act, 2002, for taking over the assets of the Company provided as security for the loan taken from them. The Company is not in a financial position to meet its debt obligations in full, pending debt restructuring. C. SEGMENTWISE AND PRODUCTWISE PERFORMANCE: Amino Acid Division (AAD) The turnover of AAD at Pondicherry was Rs 1.86 Crores during the year ended 31st March 2006 a against Rs.2.31 Crones during the previous year. The manufacturing operations of AAD at Pondicherry was closed with effect from 12th December 2005 in order to cut down further losses arising out of financial crunch and unhelpful attitude of the workmen at the factory who wire found to raising unreasonable demands. The Company continues to face severe working capital inadequacy which is affecting the daily operations. The working capital has considerably eroded over a period of several yearn due to sub-optimal operations of its production facilities and payment towards committed fixed overheads. The promoters have time and again infused funds for the day-to-day operations which has enabled the Company to keep its operations going to a limited extent. The Company awaits a suitable restructuring of its corporate debt in order to become viable. Protein Speciality Division (PSD) Your Company manufactures active Pharma ingredients and Amino Acid Derivatives at its PSD Plant at Madhuranthagam. The turnover of PSD was Rs.0.55 Crores during the year ended 31st March 2006 as against Rs. 0.95 Crones during the previous year. Interest & Other financial obligations The high interest burden and sub-optimal operations of its plant at Pondicherry has been the main contributor factor for erosion of its net- worth and working capital. Your Company has now reached a stage where its operations are not viable with the high interest burden and low price realization for its products at the overseas market. D. CONCERNS Being an 100% EOU, your company is susceptible to International competition and the ever changing demand supply dynamics. High interest burden and competition from other Asian countries are affecting the operation of the Company adversely. E. OUT LOOK The operations of the Company could be improved upon infusion of funds to meet its working capital requirements. F . INTERNAL CONTROL SYSTEMS Your Company has a proper and adequate system of Internal Controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition. HUMAN RESOURCES AND INDUSTRIAL RELATIONS Your Company has a team of well qualified and experienced technical, financial and administrative staff to cater to its business requirements. However, workers at the Pondicherry Plant are non-coperative. EXPLANATION TO QUALIFICATION / OBSERVATIONS IN AUDIT REPORT With regard to the various qualifications / observations in the Audit Report, your Directors wish to state as follows: 1. The Company was not able to remit the employers contribution towards Provident Fund and ESI contributions due to working capital problems. The Company has represented to tine appropriate authorities its difficulties and has requested for extension of time for making the remittances due. 2. An amount of Rs 1.50 lakhs is disputed and is outstanding for more than six months with regard to sales tax and the matter is under appeal. 3. The cash flow of the Company was adversely affected over a period of several years due to sharp fall in product prices in the overseas markets. In view of this the Company could not make payment of interest and scheduled repayment of principal to the Financial Institutions. 4. The Company has not appointed an Internal Auditor in view of the continuing funds shortage. 5. Stay has been granted by the High Court of Madras against levy of fringe benefit taxes, also due to loses made, the Company has not provided for Fringe Benefit Tax. CORPORATE GOVERNANCE REPORT Your Company has, to the extent practically feasible given the financial constraints which it is facing, generally complied with the requirements of Corporate Governance Code prescribed by SEBI. A report on Corporate Governance for the year ended 31st March 2006 is annexed to this report. DIRECTORS Your Directors Shri T Krishnaswamy will be retiring by rotation at the ensuing Annual General Meeting and being eligible, he is offering himself for reappointment. The Board of Directors of your Company have appointed Shri A K Ramamoorthy as an Additional Director on the Board of the Company in order to broadbase the Board to comply with the requirements of Clause 49 of the Listing Agreement. He. shall be holding office only up to the ensuing 19th AGM: The Company has received a notice from a shareholder under section 257 of the Companies Act, 1956, proposing the appointment of Shri A.K. Ramamoorthy as a Director on the Board of the Company liable for retirement by rotation. The Board of Directors of your Company have re-appointed Shri T K Mohan as the Managing Director of the Company for a further period of five years. The re-appointment of Shri T K Mohan as Managing Director and the remuneration payable to him shall be subject to the appointment of shareholders. AUDITORS The Auditors of your Company M/s. Rao Narayan Associates, Chartered Accountants, Chennai shall be retiring at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. A letter has been received from them in this regard. If appointed, the re- appointment, will be in accordance with the provisions of the Companies Act 1956. PERSONNEL None of the employees of the Company are drawing remuneration in excess of the limits prescribed under section 217 (2A) of the Companies Act, 1956. CONSERVATION OF ENERGY, ETC., As required under the provisions of sec 217(1)(e) of the Companies Act, 1955 information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo is annexed hereto. DIRECTORS RESPONSIBILITY STATEMENT AS REQUIRED U/S 217 (2AA) OF THE COMPANIES ACT, 1956 Based on the information furnished by the management and the report of the Auditors your Directors State that 1. In the preparation of the annual accounts, the applicable accounting standards has been followed along with proper explanation relating to material departures, if any. 2. The Directors had selected such accounting polices and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs the Company at the end of the financial year and of the profit or loss of the Company for that period. 3. The directors had taken proper and sufficient care for the maintenace of adequate accounting records accordance with the provision of the Companies, Act, 1956 for safe guarding the assets of the company and for preventing and detecting fraud or other irregularities. 4. The Directors had prepared the Annual Accounts on a going concern basis. ACKNOWLEDGEMENT Your Directors take this opportunity to place on record, their gratitude for the co-operation extended, assistance and guidance provided by the Government of India, Government of the Union Territory of Pondicherry the Financial Institutions, led by the INDUSTRIAL DEVELOPMENT BANK OF INDIA, EXPORT IMPORT BANK OF INDIA, CANARA BANK, UCO BANK, Investors, Suppliers and Customers. Your Directors also wish to place on record, their appreciation of the dedicated services rendered by the employee of the Company at all levels. For and behalf of the Board of Directors A.K. Ramamoorthy Director T. Krishnaswamy Director Chennai Dated : 10th August 2006 DISCLOSURE OF PARTICULARS PURSUANT To SEC 217(1)(E) OF TIDE COMPANIES ACT, 1956. A. CONSERVATION OF ENERGY The energy conservation was given top priority during the year. The Audit Committee of Directors closely monitor the consumption per unit of production and also the measures adopted to minimise the energy consumption. B. POWER & FUEL CONSUMPTION S.No Description UM Year ended Year ended 31.03.2006 31.03.2005 1 Electricity a. Purchased: Units Kwh 348660 272660 Total amount Rs. 1568974 1102526 Rate / unit Rs. 4.50 4.04 b. Own generation: i. Through diesel generator Units Kwh Nil NIL Unit per litre of diesel oil Kwh Nil NIL Cost per unit Rs. Nil NIL ii. Through steam turbine generator Nil Nil 2. Coal Nil Nil 3. Furnace oil: Quantity Kl 299935 323131 Total amount Rs. 3866159 3886387 Average rate Rs. 12.890 12.027 4. Others/internal generation Nil Nil 5. Consumption per unit of production: Electricity Kwh/MT 1390.42 1203.20 Furnace oil Kl/MT 1.19 1.42 Coal Nil Nil Others Nil Nil C. FOREIGN EXCHANGE EARNINGS : Rs. 185,49,388 2,37,16,946 FOREIGN EXCHANGE OUTGO : Rs. Nil 15,68,646