PROTCHEM INDUSTRIES (INDIA) LIMITED
ANNUAL REPORT 2005-2006
Your Directors have pleasure in submitting the Nineteenth Annual Report of
your Company together with Audited Accounts for the year ended 31st March
The summarized financial results of the Company for the year ended 31st
March 2006 areas follows:
Year ended Year ended
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
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.
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
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
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.
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
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.
Your Directors Shri T Krishnaswamy will be retiring by rotation at the
ensuing Annual General Meeting and being eligible, he is offering himself
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
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
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.
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
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
Dated : 10th August 2006
DISCLOSURE OF PARTICULARS PURSUANT To SEC 217(1)(E) OF TIDE COMPANIES ACT,
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
B. POWER & FUEL CONSUMPTION
S.No Description UM Year ended Year ended
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
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