BESCO LIMITED ANNUAL REPORT 2002-2003 DIRECTOR`S REPORT Dear Shareholders Your Directors have the pleasure in presenting their report together with the Audited Accounts for the year ended 30th September, 2003. FINANCIAL RESULTS (Rs. in Lacs) 2002-03 2001-02 Profit before interest, depreciation and tax 733.19 611.50 Less Interest 147.09 183.53 Depreciation 215.03 362.12 206.36 389.89 Profit before tax 371.07 221.61 Provision for tax (29.50) (18.95) Provision for tax (Deferred) (17.17) 74.33 Tax Relating to earlier Years (.94) - Profit after tax 323.46 276.99 Add : Balance Brought 257.80 67.12 Forward from previous year Amount available for appropriation : 581.26 344.11 Proposed Dividend 54.50 54.50 Tax on proposed dividend 7.15 6.81 Transfer to General Reserve 300.00 25.00 Surplus carried forward to next year 219.61 257.80 DIVIDEND Your Directors are pleased to recommend a dividend of Rs.1.25 per equity share subject to approval of the shareholders at the ensuing Annual General Meeting. MANAGEMENT DISCUSSION AND ANALYSIS OPERATION DURING THE YEAR RAILWAY PRODUCT DIVISION The overall performance considering the highly competitive environment and substantial increase in price of raw materials & input cost has been satisfactory. the company's operating results would have been better had there not been substantial increase in the price of steel. Efforts are being made to achieve higher capacity utilisation by tapping both domestic a international markets so as to obtain better profitability. The sustairted efforts in increasing production, productivity and ensuring economy in administration and other functional areas of the company resulted in considerable saving in cost & increase in operational, efficiency. Your Directors are pleased to inform that first phase of railway siding work at Baruipur has been completed within time. Directors place sincere thanks & appreciation to the Railways. FOOD AND FLAVOUR BUSINESS The overall performance of the division considering the highly competitive environment needs improvements, efforts are being made to find work for processing facilities. Company is also exploring possibilities of strategic tie up including setting up of distribution network for the products. REAL ESTATE DIVISION In view of enthusiastic demand the company has developed another plot of land at Kolkata for residential fiats construction and by the end of the accounting year 50% of the flat under development had been sold. The response has been encouraging. ROLLED PRODUCT DIVISION The Company has been continuously attempting to improve employee skills & productivity, Industrial relation generally remained cordial & satisfactory. However one section of Workers union went on a strike in the division. Negotiation with the labour is on and settlement is expected to be concluded on this issue very soon. INFOTECH DIVISION Directors are pleased to inform that the Company has diversified its business into infotech taking up assignment of networking solution for UTP(Copper), Fibre optic and wireless components. FUTURE OUTLOOK In order to retain its market share Indian Railways need to invest substantially in rolling stock particularly in Wagons and it is hoped that Railway will step up its procurement of Wagons and future outlook seems to be good. However much depends upon Government Policy. EXPORT In the era of globalisation your company has made tremendous efforts to obtain Export orders. Your Directors pleased to inform that in the coming years your company is expected to obtain orders from abroad. RESEARCH & DEVELOPMENT Your company's entrepreneurial drive has always been the inspiration for developing new products and advanced and new application of existing products. Your company`s research facilities continue to enjoy the recognition by the Government of India, Department of innence and Technology. Your company accords highest priority to Research & Development and believes that innovation and technology are the foundations of growth. During the year the R & D centre continued to make regular improvements and innovations ire the manufacturing process, product design & product department. ENVIRONMENT SAFETY, ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO In order to conserve energy & natural resources the company has taken constant efforts to conserve energy natural resources and reduce consumption of power, Fuel, oil, water and other energy sources by way of following Optimization of lighting fixture in the plant and administrative area. Energy saving in utility by proper machine planning. Close monitoring of fuel consumption. Emphasis on non-conventional energy sources. Creating overall awareness to avoid wastage of water and power when not in use. Particulars required U/S. 217(l)(e) of the Companies Act 1956 read with companies (Disclosure of particulars in report of the Board of Directors) Rules 1988 is given Annexure-A to this report., CORPORATE GOVERNANCE In the statutory requirement with regards to corporate Governance were fully implemented. The report on corporate governance has been included separately in the annual report and forms part of the Directors report. Your Company shall ensure that the the provisions are addressed in letter and spirit. The Auditors has also certified your company`s compliance with the said code. DIRECTORS Shri A.V. lyengar and Sri M.S. Gujral, Directors of the Company will retire by rotation at the forthcoming Annual General Meeting and being eligible offer themselves for reappointment. Sri Prabir Chakraborty and Sri sidharth Tantia were appointed as Additional Directors on your Company's Board of Directors with effect from 26.09.2003 and 04.06.2004 respectively. They ceases to be a Director on the date of the ensuing Annual General Meeting. Notice under Section 257 of the Company's Act.1956 have been received in respect of their appointment as Directors on the Board. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 217 (2A) of the Companies Act' 1956. The Director/s confirm that they have taken ail reasonable steps as are required, to ensure that in the preparation of the annual accounts for the year ended 30.09.2003. i) The applicable accounting standards have been followed and in case of material departures, the proper explanation have been given in the accounts and notes thereon. ii) They have selected such accounting policies and the same were applied consistently, and made judgements and estimates that are reasonable and prudent so as to give a true B fair view of the state of affairs of the company at the end of the financial year and the profit of the company for that period. iii) They have taken proper & sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956, for safeguarding the assets of your company and for preventing and detecting fraud other irregularities. iv) The annual accounts were prepared on a going concern basis your company's statutory Auditors M/S. Singhi & Co., Chartered Accountants have audited the financial statements in accordance with generally accepted auditing standards and practices as indicated in their report. AUDITORS M/S. Singhi & co., Auditors of the company will retire at the forthcoming Annual General Meeting and being eligible offer themselves for re- appointment. HUMAN RESOURCES MANAGEMENT Your company recognize that the key strength of the company is its people. To unleash the value, which an individual has the potential to add we decided to empower them by encouraging them to participate in the management. ACKNOWLEDGMENT Your Directors wish to place on record their appreciation for the continued assistance and co-operation extended to the company by the Government, Financial Institutions and Banks, Employees, shareholders and all others who are continuing their assistance to your company. for and on behalf of the Board O.P. TANTIA Registered Office Managing Director 7B & C, `POONAM' 5/2, Russel Street, Kolkata - 700 071 4th June, 2004 ANNEXURE - A TO THE DIRECTOR'S REPORT ANNEXURE TO AND FORMING PART OF REPORT OF BOARD OF DIRECTORS AS PER THE COMPANIES (DISCLOSURE PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988. FORM `B' (AS PER RULE-2) FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION A. RESEARCH AND DEVELOPMENT (R&D) i) Specified areas in which RED carried out: a) Optimisation of gating and risering techniques for austenitic castings to achieve high soundness. b) Development of different designs of self steered bogies for railway wagons. c) New types of Wagons developed. d) Plant Certification under (SO 9001 for all Divisions of the Company. e) Evaluation of Wagons by Adams Rail. f) Development of Aluminium Hopper for Wagons. ii) Benefits derived as a result of the above R & D: a) Improvement in product output. b) Cost optimization. C) Improvement in market share. ii) Future Plan of action: a) Development of new designs for multi purpose efficient wagons and other sub-assemblies. b) Application of FEM for design evaluation/optimisation. c) Application of Vehicle Dynamics Analysis and Simulation by Computers for design optimisation. d) Widening research and design scope of Besco CAD Wing towards various engineering activities for outside customer. e) Development of Special Wagons for commercial. f) Development of Specific components for Wagon for enduring long service life. g) Development of Couplers for passenger coaches. h) Development of universal Couplers for Locomotive. i) Wagon Components for U.S. Application. j) Patenting all Proprietory Designs. iv) Expenditure on R & D : (Rs. in Lacs) a) Capital b) Recurring i) Salaries 18.50 ii) New Products Development 9.70 c) Total 28.20 d) Total R&D expenditure as a % of total turnover 0.34 B. TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION 1. Efforts, in brief made towards technology absorption, adaptation and innovation: Have continued to introduce new items in the Product Line. 2. Benefits derived as a result of the above efforts: Efficient utilisation of Capacity & Resources, savings in foreign exchange. 3. Further information in case of Technology imported during the last 5 years a) Technology imported : 1. Rubber to metal bonded components. b) Year of Import : 1. 1998-1999 c) Has technology been fully absorbed : 1. Under implementation. 2. Long life Elastomeric Pads trial order received from Railway.