PUNSUMI INDIA LIMITED
ANNUAL REPORT 2000-2001
Your Directors take pleasure in presenting the Fourteenth Report and
Audited Accounts for the period (18 months) ended 31 March 2001.
MANAGEMENT DISCUSSION & ANALYSIS (MD&A)
Operations (Financial Review)
The company achieved Gross Sales of Rs.1020.83 Lakhs during the period
under review (previous year: Rs.788.30 Lakhs) This increase In sales was
achieved despite crippling working capital constraints and the fact that
sales and production had plummeted to an all time low in January 2000 to
Rs.29.55 lakhs (due to lack of production). The Kuwait Projects Co.
(Holding), Kuwait (KIPCO) was approached for emergency help in February
2000 With KIPCO's investment of USD 1,00,000 (received in March 2000) the
company managed to increase production to a peak of 7 million pcs in June
For comparison, the average monthly sale between 1, October 1999 and 31
March 2000 was 3.17 Million pcs (average value: Rs.52.01 Lakhs) and the
monthly average sale between 1, April 2000 and 31 March 2001 was 4.16
million pcs (average value: 60.27 Lakhs). Further, the company has managed
to increase its average monthly sale in terms of quantity and value since
1, April 2001. This has been made possible despite the persisting tight
liquidity and non-availability of conventional banking facilities.
It is also noteworthy that through its cost cutting measures the company
has managed to limit its loss for the current 18 months period ending 31,
March 2001 to Rs.847.69 Lakhs against a loss of Rs.902.24 lakhs for the
previous year (12 months).
Your company is registered with BIFR and a Rehabilitation Scheme was
sanctioned by BIFR on 9, December 1999, according to which the company was
to make one time settlement (OTS) payment to Financial Institutions and
other lenders by 28, Feb. 2000. The Rehabilitation Scheme was to be funded
partly by Kuwait Projects Co. (Holding), Kuwait (KIPCO) (US$ 1.5 Million)
and the balance through fresh loans. The company despite its best efforts
could not obtain the required funds and the payment to the Financial
Institutions and others is still pending. However, the company is now
renegotiating with the Financial Institutions and other secured creditors
for a fresh OTS scheme with KIPCO having agreed in principle to provide all
the required funds subject of course, to a satisfactory OTS with the
Financial Institutions and other secured creditors. The entire OTS process
is expected to be completed soon, after which a new scheme for
rehabilitation is expected to be forwarded to BIFR for its final approval.
Once the proposed funds are inducted into the working capital your company
will once again be on a fast growth track. Though, the general slowdown in
the industrial production continued in the first three months of the
current financial year, the electronics sector is now showing promising
signs with the CTV sector recording a growth of 18% in July 2001 The
monsoon has been by and large good all over the country raising expectation
of good agricultural production which in turn is expected to boost
industrial growth in the remaining months of the financial year.
Industry Structure and Developments
The electronic component industry continues to suffer due to lacunae in the
import duty structure which were expected to be removed in the last
national budget but were not. Sustained efforts are on to get the anomalies
of considerably higher import duties on inputs than on the finished product
removed. Another serious obstacle to the growth of the electronic component
industry is the high incidence of import duty on capital goods.
There is practically no local production of the sophisticated machines and
other equipment needed to produce electronic components. The high tariff of
25% on import of capital goods renders new projects/expansion uncompetitive
esp. when compared to imports of electronic components from countries like
China. These matters have once again been brought to the attention of the
Finance Minister recently who has promised to remove these lacunae - some
immediately and some in the next budget. Under these circumstances the
industry has also requested the Finance Ministry not to prepone the NIL
duty regime on electronic components to March 2003 from the originally
scheduled date of March 2005 committed with the WTO.
Opportunities and Threats
India's production of electronic components pales in comparison to even
small countries like Singapore, Taiwan, Malaysia and now China. India can
not possibly achieve the ambitious targets set for the growth of PCs,
Telecommunication etc. if there is no matching growth in the local
production of electronic components obviously. there exists enormous
opportunity for growth in the field of electronic components.
The threats emanate from the ability of countries like China to achieve
substantial reductions in costs of production due to clear and focussed
policies resulting in an efficient infrastructure, practical labour laws,
much lower cost of capital etc. These together lead to fast turn-around
times, something India still does not seem to appreciate.
Your company, with a balanced production capacity of 20 Million pcs per
month is well placed to exploit the damaged-supply gap in the Indian market
(elcos). Despite the problems cited above, Punsumi has developed a strong
technology base and flexible and highly productive manufacturing systems to
offer competitive and high quality products. We further plan to boost the
production of large can size capacitors and high voltage capacitors for
which the production capacity has been languishing due to lack of
Risks and Concerns
The reforms process which begain a decade back has certainly dismantled the
license regime but there is little improvement in the complicated and
cumbersome procedures still operative in the revenue departments of the
These work to nullify the benefits of liberalisation. While an imported air
consignment can be cleared in less than two hours in countries like Japan,
South Korea and even in China, it takes at least two days in India. Revenue
department formalities associated with Exports still cause delays and
involve avoidable expenditure. These are only a few examples A lot needs to
be done to remove such invisible shackles if the industry is to match the
dynamism of a country like China.
Adequacy of Internal Control
The company has adequate internal control systems commensurate with its
size and the nature of its business.
During the period your company has allotted 4,34,900 equity shares of Rs.10
each at par to Kuwait Projects Co. (Holding) by way of preferential
Human Resource Developments and Employee Relations
Your company is quite conscious about Human Resource Development and
attaches high value to various HRD programmes. Your Directors are pleased
to report that the employee relations remained cordial during the period
and the in-house activities of training, evolutions, reward and promotions
continued though scaled down due to financial constraints, throughout the
period under review.
Information pursuant to provisions of Section 217(2A) of the Companies Act,
1956 read with the Companies (particulars of employees) Rules, 1975, as
amended is set out in Annexure-1 and forms part of this Report.
The Annual Accounts of the Subsidiary - Punsumi Engineers Limited for the
year ended 30 Sep. 2000 are appended in the detailed report pursuant to the
provisions of Section 212 of the Companies Act, 1956.
The following changes have taken place since the last Annual General
Shri. Puneet Bhargava was appointed as Whole Time Director in the last
Annual General Meeting of the Company. Nomination of Shri. Jawahar I Mehta
was withdrawn by IDBI. Nomination of Shri Deepak Ghosh was withdrawn by
IFCI Limited and Shri. E.V. Nair was nominated in his place. Col. B.K. Rai
is retiring by rotation at the forthcoming Annual General Meeting and being
eligible offers himself for re-appointment.
Directors Responsibility Statement
As required under Section 217 (2AA) of the Companies Act, 1956 your
- That in preparation of the Annual Accounts for the period (18 months)
ended 31 March 2001, the applicable accounting standards have been followed
alongwith proper explanations relating to material departures;
- That the Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that were 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 Accounting Period and of the Profit or Loss
of the company for the period under review.
- That the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
company and for preventing and detecting fraud and other irregularities;
- That the Accounts for the period (18 months) ended 31 March 2001 have
been prepared on a going concern basis.
AUDITORS & AUDITORS REPORTS
M/s. Doogar & Associates, Chartered Accountants Auditors of the company
retire at the conclusion of forthcoming Annual General Meeting and being
eligible, offer themselves for re-appointment. The company has received
certificate from the Auditors to the effect that their re-appointment, if
made would be within the prescribed limits under Section 224 (1) of the
Companies Act, 1956. The notes to the accounts referred to in the Auditors
Report are self-explanatory and therefore, do not call for further
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
Information in accordance with Section 217 (1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of particulars in the report of
the Board of Directors) Rules, 1988 is set out in Annexure - 2 forming part
of this report.
Your company has not paid the listing fees of the Jaipur Stock Exchange due
to liquidity problems faced by it.
A certificate from the Auditors of the company regarding compliance of
conditions of Corporate Governance as stipulated under clause 49 of the
Listing Agreement is attached to this report as Annexure-3.
The views and futuristic statements contained in this report are the
perception of management and subject to certain risks and uncertainty that
could cause actual results to differ materially from those reflected in
such statements. Readers should carefully review the other information in
this Annual Report. The company undertakes no obligation to publicity
update or revise any of these futuristic statements, whether as a result of
new information or future events.
Your Directors express their sincere appreciation for the cooperation and
help received from the Financial Institutions, Banks and Government
Agencies. The Directors are also thankful to KIPCO for extending the timely
help without which it would have been impossible to sustain production and
sales. The Directors further thank KIPCO for agreeing in principle to
invest in Punsumi and arrange all funds required for the restructuring of
the company. Your Directors also wish to place on record their appreciation
for the contribution made by employees at all levels during the period
For and on behalf of the Board
V.K. Bhargava Puneet Bhargava
Chairman & Director
Date : 31 AUG, 2001
ANNEXURE TO THE DIRECTORS' REPORT
(Information as per the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules 1988.)
A) CONSERVATION OF ENERGY
The Management gives significant importance to conservation of energy and
during the period has taken several measures for reduction in consumption
of energy. The details of power consumed during the period are as per
Current Annualised Previous Reduction
No of Units consumed - 16,18,470 10,78,980 12,07,890 -10.67%
Electricity generated from
No of Units consumed 47,103 31,402 42,173 -25.54%
Form A is not applicable to the company as it does not fall under the list
of Industries specified in the schedule to Rule 2.
B) TECHNOLOGY ABSORPTION
i) RESEARCH & DEVELOPMENT (R&D):
The company gives top priority to its R & D activities and undertakes on a
continuous basis activities related to development of new products, new
designs, cost reduction, improvements in quality as well as design and
development of machinery for manufacture of ELCOS. During the period the
company has developed an Ageing and Testing machine and has been,
recognized for its efforts by a National Award.
ii) TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION:
The company is known for its ability to adopt technology changes and adapt
them in its products and processes. The company keeps itself updated with
all latest technological innovations related to its field.
C) FOREIGN EXCHANGE EARNINGS & OUTGO
(Amount in Rupees)
Current Period Previous Year
- Total Foreign
exchange used 3,46,65,854 2,82.91.853
- Total Foreign
exchange earned 59,92,096 50,90.903
For and on behalf of the Board
V.K. Bhargava Puneet Bhargava
Chairman & Director
Date : 31 AUG, 2001