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Company director report

BLUE BIRD (INDIA) LIMITED ANNUAL REPORT 2010-2011 DIRECTOR'S REPORT TO, THE MEMBERS OF BLUE BIRD (INDIA) LIMITED Your Directors hove pleasure in presenting the 12th Annual Report of the Company together with the Audited Statements of Account for the year ended March 31, 2011. FINANCIAL RESULTS The Financial position of the Company as on the date of the Balance Sheet is as follows: (Rs. in Lacs) Particulars Year ended Year ended March 31, March 31, 2011 2010 Sales & Operating Income 1080.83 43,059.71 Operating Profits (PBDIT) 31969.14 489.13 Less: Depreciation 751.77 747.39 Less: Interest 8816.75 7,782.12 Profit/(Loss) before Tax (41537.66) (8,040.38) Less: Income Tax - (2,741.67) (Including Deferred Tax and Fringe Benefit Tax) Net Profit/(Loss) for the year (41537.66) (5,298.71) Balance brought forward from previous year 3226.45 8,477.89 Less/Add: Prior Period Adjustments - 47.27 Distributable Profits (38311.21) 3,226.45 Appropriated as under: Balance carried forward (38311.21) 3,226.45 The management in order to depict the factual position of the company and on the basis of the reports of the Technical and Production Director has reduced realizable value of the finished goods at 40% of net realizable value and raw materials, components, stores and spares are valued at 60% of purchase price and based on the case to case appraisal, written off debtors worth Rs. 142.89 Crores in addition to the provisions as made in the previous year. Due to the above the accumulated loss of the company is now Rs. 38311.2 lacs resulting in the erosion of the entire net worth of the company of Rs. 11944.89 Lacs. As per the provisions of Section (3)(ga) of the Sick Industrial Companies (Special Provisions) Act 1985 the company has to report the said erosion of the net worth to the authorities as stated in said act. The Company has proposed the resolution for the approval of the members, for making the reference to the Board under the provisions of the Sick Industrial Companies (Special Provisions) Act 1985 for the approval of a revival scheme of the company, under the said act. DIVIDEND AND BOOK CLOSURE In view of the loss for the current year, the Board does not recommend any dividend for the year under review. The Register of members and the Share Transfer Books of the Company shall remain closed from Wednesday, September 21st, 2011 to Friday, September 30th, 2011 (both days inclusive) as per the requirements of Clause 16 of the Listing Agreements with Stock Exchanges. EXTERNAL RATINGS There are no ratings assigned as on the date of the report. MATERIAL CHANGES AND EVENTS AFTER BALANCE SHEET DATE. As mentioned in Note No. 11 of Schedule 21(B) due to cash loss and delay in recovery of dues from the customers, the Company faced a cash crunch resulting into default in payment to lenders and other creditors. The Company had submitted a Corporate Debt Restructuring (CDR) proposal to CDR Cell of Reserve Bank of India, seeking extension of time for repayment & seeking certain other concessions. The proposal was admitted by CDR cell on March 30, 2010. The said CDR proposal was approved by the CDR cell of RBI as on January 28, 2011. The implementation of the CDR cell is not yet been done, pending sanction of few banks to be received for the said CDR proposal. As stated in Financial review, the company is now a sick company and its net worth has been totally eroded. BOARD OF DIRECTORS The Board of Directors at its meeting held on 30th June 2011 recommended the reappointment of Mr. Niranjan Phadke and Mr. Satish Bhagwat, Directors of the Company who are liable to retire by rotation during the year and being eligible have offered themselves for reappointment. The Board seek your approval for their re-appointments. Brief particulars & expertise of the directors to be appointed/re-appointed and their other directorship and committee membership have been given in the Corporate Governance report. STATUTORY DISCLOSURES None of the Directors of the Company is disqualified to be appointed as Director under the provisions of Section 274(1)(g) of the Companies Act, 1956. The Directors have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement with Stock Exchanges. DIRECTORS RESPONSIBILITY STATEMENT In terms of Section 217(2AA) of the Companies Act, 1956 in relation to the Financial Statements for the year ended March 31, 2011, the Board of Directors state that: a) The applicable Accounting Standards have been followed in the preparation of the financial statements and there are no material departures from the said standards; b) Reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied, so as to give true and fair view of the state of affairs of the Company as at March 31, 2011 and of the loss for the year ended on that date; c) 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. d) The financial statements have been prepared on a going concern basis since they are confident of successful implementation of approved CDR proposal and successful settlement with the parties issuing notices under section 433 & 434 of the Companies Act, 1956. AUDITORS M/s. Shoshank Patki & Associates, Chartered Accountants, were appointed as the Auditors of the Company at the previous Annual General Meeting. However, M/s Shashank Patki & Associates, Chartered Accountants resigned from the post of the Auditors as on 12th February 2011. The Company has now appointed M/s. Khandelwal Gandhi & Associates as Chartered Accountants in the meeting of the Board, of Directors held on 9th June 2011 M/s. Khandelwal Gandhi & Associates Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment as Auditors. The Audit Committee at its meeting held on 9th June 2011 has recommended their re-appointment. In terms of the provisions of section 224 (1B) of the Companies Act, 1956 M/s. Khandelwal Gandhi & Associates, Chartered Accountants have furnished a certificate that their appointment, if made, will be within the limits prescribed under section 224 (IB) of the Companies Act, 1956. AUDITORS' REPORT (QUALIFICATIONS/COMMENTS) Management perception of Audit Qualifications. 1. Regarding verification and valuation of Inventories. The Company has incurred cash Loss during the year and is facing shortage of manpower in the company, as all th# qualified staff has left the company The management will take the necessary steps to improve the internal control system/internal audit after the implementation of the CDR proposal. 2. Regarding Credit Assessment of Debtors and recovery of Debtors. As stated above the Company is facing acute shortage of recovery staff and due to the peculiar nature of note book and book publishers, the previous debts are recovered when new goods are supplied. Since the Company is not able to manufacture and supply fresh stock, debtors are not paying old dues. In order to arrive at correct picture the Company has written off Debts worth Rs. 142.89 crores in addition to the provisions as made in the Previous Year and have initiated legal action against them. 3. Regarding Reasonableness of Internal Audit System. As stated above the Company is facing shortage of qualified staff and after implementation of CDR, the Company will take corrective steps. 4. Regards to Accounts preparation on a going concern basis. The Management feels that after implementation of CDR, infusion of fresh capital and proposed BIFR rehabilitation scheme, the Company will turn round the comer and become viable once again. Therefore, as per the Management view the Company is still a going concern. Also the Company is in negotiations with creditors for extension of time and reduction of payables and cases filed against the Company u/s.433 and 434 of the Companies Act, 1956 will be withdrawn. 5. Writing off of Debtors. Please refer Note. 2 above. 6. Significant Accounting Policies regarding Inventories. The Company's Technical and Production Directors conducted physical stock verification and valuation of inventories in the form of Raw material, Components, Stores and Spares, WIP and Finished Goods. Based on form, status and realisability of inventory, price of these are reduced. a. As regards to Raw material by 40% b. As regards to Finished Goods by 60% AUDIT COMMITTEE The details of the Audit Committee are given separately in the Corporate Governance Report. PUBLIC DEPOSITS During the year under review, the Company has not accepted any deposits under Section 58A of the Companies Act, 1956. EMPLOYEES STOCK OPTIONS The Company has not issued / granted any Employees stock options to its employees. PARTICULARS OF EMPLOYEES Since there are no employees drawing remuneration in excess of the limits as stated in under the provisions of Section 217(2A) of the Companies Act, 1956, no Information is given relating to the same. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS & OUTGO A statement containing the necessary information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed to this report as Annexure I. BUY BACK OF SHARES: The Company has not done any Buy Back of Shares during the year under review. APPRECIATION Your Directors appreciate the trust reposed by various stakeholders of the Company. The Directors are also grateful and pleased to place on record their appreciation for the continuous and excellent support, guidance and cooperation extended by the Company's Business Associates, Registrar & Transfer Agent, Bankers, Financial Institutions, various Government Regulatory Bodies, Stock Exchanges, Depositories, and Employees. For & On Behalf of the Board of Directors Place: Pune Nitin Sontakk Date : June 30, 2011 Chairman & Managing Director ANNEXURE I Particulars required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988. I. CONSERVATION OF ENERGY: (a) Energy conservation measures taken during the year The manufacturing facilities of the Company located at Pune and Bangalore are designed in such a way to cater to the conservation of energy (light, ventilation) at its best. Since there are no sewage effluents the water discharged from the units are used for landscaping and gardening. (b) Additional investments and proposals, if any, being implemented for cost reduction of consumption of energy-Nil (c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods. Energy conservation measures continue to reduce the production cost per unit with reference to energy consumption. Reduction in input power requirement. (d) Total energy consumption and energy consumption per unit as per Form A of Annexure to the rules: NOT APPLICABLE. II. TECHNOLOGY ABSORPTION: Efforts made in technology absorption as per Form-B of the Annexure to the Rules - NOT APPLICABLE 1. Research and Development (R & D): a. Specific areas in which R&D is carried out by the Company - NA b. Benefits derived as a result of the above R & D - NA. c. Future plan of action - NA d. Expenditure on R & D - Nil 2. Technology Absorption, Adaptation & Innovation a. Efforts, in brief, made towards technology absorption, adaptation and innovation - NA b. Benefits derived as a result of the above efforts - NA c. Information in case of imported technology (imported during the last five years reckoned from the beginning of the financial year) - NA III. FOREIGN EXCHANGE EARNING AND OUTGO: - The information on Foreign Exchange earnings and outgo is contained in note nos.21, 22, 23 and 24 of Schedule 21 (B)-Notes to Accounts' forming part of the Accounts. MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW: Blue Bird (India) Limited is a Note Books manufacturing company. The Company's revenues are from manufacture and sale of branded Note Books, Drawing Books, Publication, Trading in Stationery Items, construction business. The Construction business has been stopped by the company and only the project on hand is being completed. INDUSTRY ANALYSIS: The Printing Industry has been growing at a CAGR 11% during the previous years. The demand for Stationary and books are seasonal on nature, so activities in printing industry vary accordingly. The presence of unorganized sector in printing Industry in the market has mode the business activity very challenging and there is cut throat competition. MARKET SCENARIO: The study Products, Books and Stationeries, are exclusively used by students and office. Due to higher allocation of budget provision towards education by the Union Government and adoption of 'The Right to Education Act, 2009 there is more focus on education by the state governments. MARKET FORECAST: Printing and stationary industry will grow rapidly based on past trends. SCHOOL BOOKS AND STATIONERY MARKET: * Students irrespective of their age extensively consume books and stationery items. The demand for books and stationery items hence will largely depend on expenditure by house hold in education. Urban areas are expected to have more number of Middle and High Income Group households as there are better employment opportunities and there is good earning But due to inflation the cost are also risen which may dampen the industry. GOVERNMENT EXPENDITURE ON EDUCATION: There has been a consistent increase in government spending towards social sector which also includes education. Expenditure on social services as a percentage of total expenditure has increased from 19.9% in 2004-05 to 23.8% in 2009-10. RIGHT TO EDUCATION ACT, 2009: Government of India, in an attempt to facilitate percolation of education to every strata of society, has mulled an act called Right to Education Act which endeavors to provide free and compulsory education to all children in the age group between 6-14 years. This new law makes it a duty for all state governments and local bodies to see to it that every child gets education in a school in his/her neighborhood. The implementation is likely to benefit a huge number of children across the country. The implementation of this act is bound to increase the need for education related items particularly books and stationery. DEMAND SUPPLY FORECAST: Demand Forecast-School Books and Stationery: The demand for school books and stationery items is expected to remain strong during next 10 years. The organized players will be able to witness growth than unorganised players but the said unorgqnized players are also going to give tough competition in the organized sector as the cost will be higher for the organized sector due to inflationary pressures. FINANCIAL REVIEW: During the year, the Company could not recover the dues from its customers in time despite art efforts by the management. The Company is facing severe cash crunch due to which the company has not been able to pay its dues to the banks. The Company had submitted a Corporate debt restructuring programme to the Bank and the management is happy to inform that the same was approved by the Corporate Debt restructuring cell of the Reserve Bank of India. The said CDR package will be implemented after the compliance and necessary sanction which are awaited from the bank and is in process. In the meanwhile the production process in the company has come to a grinding halt and the company has lost huge market due to non production, as there was no finance available for doing the production of goods. The Company will also be filing an application with Board of Industrial and Financial Reconstruction under Sick Industries Regulations Act, as the net worth of the company is completely eroded and management is hopeful that the company will be revived. There are various petitions as filed by creditors and lenders for winding up and the Hon. High court has passed the order for the winding up of the company. The company is working to prefer appeals to Hon. Division Bench / Hon. Supreme Court. Also after registering with the BIFR the order from BIFR will be served on the Court, wherein the winding up proceedings will stop. RISK AND CONCERNS: The Company is facing the most important risk of financial crunch and the management is taking all the efforts to get the investors to pump money in the company in order to come out of the tight situation. INTERNAL CONTROL: The Company has internal control systems since its inception. Management has realized a need to review and reorganize the entire internal control procedures and has initiated efforts in that direction. HUMAN RESOURCES: Due to cash-crunch the Company was not in a position to pay salaries in time, resulting into substantial employees leaving the job. Company is in the process of restructuring its manpower at all the levels in such a manner that it con achieve the best results at the optimum costs. ENVIRONMENT, OCCUPATIONAL HEALTH & SAFETY: The Company has taken all measures for Non-Pollution of environment. The Company is using Papers manufactured from Non-wood products. Water Based Inks are used for Printing. If is Company's endeavour to protect environment and propagate health & safety measure amongst its employees. CAUTIONARY STATEMENT: The statement made in this report describing the Company's projections, expectations and estimations may be a forward looking statement within the meaning of applicable securities laws and regulations. Actual results may differ from those expressed or implied in this report due to the influence of external and internal factors which ore beyond the control of the Company.