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AEC (India) Ltd.

BSE: 523080 Sector: Infrastructure
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AEC (India) Ltd. (AEC) - Director Report

Company director report

AEC (INDIA) LIMITED DIRECTORS' REPORT To, The Shareholders of AEC (INDIA) LIMITED. The Directors have pleasure in placing before you the 14th Annual Report and the Audited Accounts of the Company for the 18 months period ended 30th September, 1998. 2.Take over bid On 5th of June 1998, there was a Take-over bid lodged on your company, by a Delhi based company, M/s Peacock Chemicals Pvt. Ltd. The Prevailing recession in the India market, shattering of the Korean economy as well as the complete recession in South East Asian markets, no doubt had an impact on the working of our company also. It was probably because of the tightness of the funds on one hand and a full knowledge of the potential of your company on the other hand, which tempted M/s Peacock Chemicals Pvt. Ltd. to lodge a take over bid. I am pleased to inform you that the matter was immediately referred to the Hon'ble High Court of Delhi and after over 2 months of legal deliberations, the Hon'ble High Court of Delhi has given a verdict absolutely in your company's favour and has highlighted in its 25 page judgement that M/s Peacock Chemicals Pvt. Ltd. have attempted by fraudulent means to grab the company, and the same has been rejected. Now that as the judgement has been clearly given in favour of your company, the company is now trying to come out of the hardships and is now on the revival path. Performance of the Company As is known to you, the overall business scenario in the country has been totally depressing, for over one year now. There has been no expansion in the industrial sector nor has there been any major growth, as such it has had an impact on your company, which is primarily related in the construction activities. With the recession in the country as well as a worldwide recession, the growth / expansion of the existing units as well as the new projects have been practically shelved by the private and public sectors. Accordingly one of the Group company's project for setting up of P.E. Tarpaulin project for which AEC (India) Ltd. was awarded a turnkey contract for Rs.22.60 crores, could not take off last year. This was primarily on account of Equity not coming in from the Korean collaborator because of the economic recession in Korea. Your company which had a contracted plan of executing over Rs.30 crores worth of projects in the year concluded, therefore has been able to do a turn over of only Rs. 11.42 crores in Engineering and Construction Division, with a Net profit of Rs.49.90 lacs and Rs. 2.75 crores in Healthcare Division, with a Net Loss of Rs.209.39 lacs, totalling a turn over of Rs.14.17 crores for the Company as a whole, with a loss of Rs.159.49 lacs. Healthcare Division of the Company also has undergone a lean period clubbed with no exports to the South Korean market, which was considered to be a major buyer. The tight financial conditions followed by a lay off at the plant from June onwards on account of the Take over bid, has resulted in a complete set back for this Division. Although l regret to inform that the year which has concluded has not been a healthy year for your company, primarily on account of recession followed by take over bid lodged on your company, but keeping in view of our inherent strength in Engineering and construction and a positive thought being given to develop a package for revival of the Noida Unit, we are confident to come out of the lean period and bounce back into profits in near future . Engineering & Construction Division I am pleased to inform you that your Engineering and Construction Division has been short listed as one of the few companies in the country for executing jobs under World Bank, Asian Development Bank, OECF Japanese funding, German aid etc. for carrying out jobs all over the country. Your company's this Division has expanded and has picked up jobs worth Rs.15 crores for Chennai Metropolitan Water Supply and Sewerage Board which is a World Bank aided project. Also jobs at Karamsana in Rajasthan of Rs.9 crores has been picked up, which is funded by the German Govt., as well as another job at Mathura of U P Jal Nigam of approx. Rs.5 crores has been received. I am pleased to inform you that the total unexecuted order being as on date with the Engineering and Construction Division is over Rs.50 crores. A complete thrust is being given in this front and we are in the process of enhancing our operations on account of the technical know-how and pre-qualification which your company possess. Another arena which is being exploited in our construction activity is that of taking up good value jobs of offering complete Turn key package for setting up industrial units for different clients, be it in the field of Textiles, Petrochemicals, Healthcare, Foods, Tele communication or any other industry. Your company is fully geared up with offering concept to commissioning services in the shape of identifying projects, collaborator, tying up finance and funds, undertaking setting up of industry on a turn key basis, organising all the clearance and approvals from the various government departments and handing over of the units to the clients. This type of service, all under one roof, is being pursued both in the domestic as well as in the international markets. Few of the discussions are at an advance stage and there are major chances that your company may bag some assignments in foreign countries for setting up projects for the clients on the basis mentioned above. 5. Noida Plant In order to revamp the entire system as well as to bring your company back into the profitability, it has been decided to change the business activity at Noida plant. After having detailed discussions with the Bankers of this Division. as well as with certain consultants. 3 alternatives to revive the Noida Plant, have been proposed. The same are: 1. To sell the entire unit including land and building to some national or international group. Reduce the liabilities by paying off the Banks, Institutions, other agencies and concentrating on Engineering & Construction activity. 2. To sell the plant and equipment of the Healthcare Products to a buyer and utilise the land, building and utilities for setting up any other manufacturing activity. One of the potential buyers has been identified. Negotiations with the party are under way. 3. To offer the land, building and utilities to any multinational for them to set up their plant at Noida in joint venture with your company. All the above 3 possibilities are being pursued and very soon a solution to this would be found out. We are very confident that we shall be able to revive business at our Noida plant in the months to follow thereby improving the health of the company. 6. Dividend Due to losses incurred by the Company, your Directors are unable to recommend payment of any dividend during the current year. 7. Directors 7.1 ILFS Venture Capital Fund Ltd. (Formerly Credit capital Venture Fund (India) Ltd.) who have been holding 2,50,000 Equity Shares in the Company and in terms of shareholders agreement, have withdrawn the nomination of Shri Rahul D.Shah as their Nominee Director on the Board of the Company. 7.2 In accordance with the provisions of Section 255 of the Companies act, 1956 and the Company's Articles of Association, Shri Vasantal D.Mehta and Shri Satish Sabnis Directors of the company retire by rotation and being eligible have sought re-appointment. 8. Auditors: The Auditors, M/s V.V. Kale & Co. Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment. They have furnished a certificate to the effect that the re-appointment, if made, will be in accordance with sub-section (lB) of Section 224 of the Companies Act, 1956. 9. Fixed Deposits During the period under report, your company has not accepted any deposit within the meaning of Section 58(A) of the Companies Act, 1956 and the rules made thereunder. 9 10. Particulars of Employees Information in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, are annexed and forms part of this report. 11. Particulars of Conservation of Energy, Technology absorption and Foreign Exchange Earnings and outgo. a) Since during the period under report, the Health Care Products Unit of the Company has not functioned to the optimum capacity, still every effort has been made to conserve the energy during the manufacturing process. b) Technology Absorption The Company has successfully completed the technology absorption process. However, continuous efforts were made to improve the productivity and remove all the bottlenecks in the process. c) Information as per Section 217(1)(e) read with Companies Disclosure of particulars in the Report of Board of Directors Rules 1988 are given below: Foreign Exchange Earning: Rs.262.72 lacs Foreign Exchange used: Rs. 8.76 lacs 12. Acknowledgement The Directors express their appreciation for the dedicated and committed hard work of the company's personnel at all levels Your Directors also wish to thank the company's bankers, financial institutions, shareholders and business associates for their continued support and cc,- operation. For and on behalf of the Board PLACE: NEW DELHI (R.D. APTE) DATE : 28.11.98 Chairman Managing Director