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COVENTRY SPRING AND ENGINEERING COMPANY LIMITED
ANNUAL REPORT 2004-2005
DIRECTORS' REPORT
Your Directors present the 53rd Annual Report and the Audited Accounts of
the Company for the year ended 31st March, 2005.
FINANCIAL RESULTS:
Current year Previous year
(12 months) (Rs.) (6 months) (Rs.)
Gross Turnover 14,11,75,825 5,73,98,348
Gross Profit/(Loss) before
Depreciation and Tax (2,71,95,464) (2,95,81,350)
Less : Depreciation on Fixed Assets 53,93,414 28,06,233
Net Profit/(Loss) (3,25,88,878) (3,23,87,583)
APPROPRIATION:
Balance Loss Carried Forward 13,15,89,108 9,90,00,229
YEAR IN RETROSPECT:
As reported in last Annual Report the company is in grave financial crisis.
The crisis has further deepened due to absolute non-cooperation of our bank
and other financial institutions. The Company in spite of having orders to
the tune of 20 Crores is unable to fulfill them as it does not have the
funds to procure raw materials for the purpose of production. Further the
company's domestic as well as export turnover has gone down during the year
under review.
The Company in order to implement certain restructuring measures were
forced to extend the Financial Year 2002-2003 by Six Months for which
approval was taken from Registrar of Companies and hence the Annual Report
and the Audited Accounts of the company were presented for 18 Month Ended
30th September, 2003. The AGM of that period was held on 31st March 2004
for which approval was taken from Registrar of Companies. In order to
revert back to the earlier accounting period of April to March, the Company
has presented its Annual Report and the Audited Accounts of the Company for
the Financial Year 2003-2004 for Six Month Ended 31st March, 2004.
The 51st and 52nd Annual General Meeting of the Company was adjourned Sine
die by the Chairman after adoption of the Audited Balance Sheet of the
Company and the Profit & Loss Account for the year ended 30.09.2003 and
31.03.2004 respectively and the Report of Board of Directors and Auditors
thereon.
Although the Company has developed new parties and products over the years,
lack of adequate Cash Reserves due to continued losses and denial of
further Cash Assistance by Banks and Financial Institutions hampered the
Company's prospect of posting a higher turnover and consequent improvement
of its profitability. Cost control measures continued unabated as can be
reflected in the enclosed financial statements, but were of little help in
the light of the Company's falling turnover.
FUTURE OUTLOOK:
The Company has been incurring losses continuously for the last five years
and the financial position of the company is going from bad to worse. The
Company has received takeover notice u/s 29 of State Financial Corporation
Act from SICOM Ltd and recall notice from State Bank of India as the
Company could not pay their dues on time. Further the Company is finding it
difficult to service the high rate of the interest being charged by SICOM
and State Bank of India. In view of the above it was decided to sell off
the Nagpur unit along with goodwill as a going concern and appropriate the
proceeds so received to pay off the dues of SICOM and State Bank of India.
It was also been decided to sell the surplus land at Howrah to augment to
working capital requirement of the Company. The Board is satisfied that it
would be in the interest of the Company and its shareholders to sell the
said undertakings as mentioned above and had proceeded accordingly by
passing an ordinary resolution through Postal Ballet, for approval of the
shareholders, the results of which were declared in the Extra-Ordinary
General Meeting held on 15th December, 2003. The Company could not proceed
with the above mentioned sale as certain legal proceedings are pending
before the Honorable High Court in Kolkata. The matter is being pursued to
reach an early solution. On the other the Company is all geared to take on
recession, and has Orders in hand worth Rs.20 Crores approximately and
stands a good chance to turn around, but needs a life line in the form of
additional finance from banks and institutions. The Company has taken up
the matter with the authorities concerned and is confident of posting a
better performance provided adequate finance are made available on a urgent
basis.
REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR):
The Company, had, become potentially sick and applied to the Board for
Industrial and Financial Reconstruction in Form 'C' as per the Provision of
section 23(I)a(i) of the the Sick Industrial Companies (Special Provision)
Act, 1985 and also as per the Provision of Rule 36(I)(i) of the Board for
Industrial and Financial Reconstruction Regulation, 1987, on 27.05.2004.
And since now as per the Audited Accounts of the Company for the year ended
31.03.2005, the Company's book shows accumulated losses of
Rs.13,15,89,108/-, thereby eroding the entire NETWORTH of your company and
it has thus now become mandatory to make a reference to Board for
Industrial and Financial Reconstruction (BIFR) for determination of the
measures which shall be adopted with respect to the Company as per the
provisions of Section 15 of the Sick Industrial Companies (Special
Provisions) Act, 1985.
CORPORATE GOVERNANCE REPORT:
The Corporate Governance Report and Management Discussion & Analysis is
enclosed herewith and forms a part of this report duly certified by the
Auditors as required under clause 49 of the Listing Agreement.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
confirm the following in respect of the Audited annual accounts for the
year ended 31st March, 2005
i) that in preparation of annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures, if any.
ii) that such accounting policies as mentioned in the Schedules to the
Accounts have been selected and applied consistently and judgements and
estimates that are reasonable and prudent made so as to give a true and
fair view of the state of affairs of the Company for the year ended 31st
March, 2005 and of the Loss of the Company for that period.
iii) that proper and sufficient care has been taken 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 irregularities.
iv) that the annual accounts have been prepared on a going concern basis.
LISTING:
The Company is listed with the Stock Exchanges at Ahmedabad, Delhi, Kolkata
and Mumbai.
FIXED DEPOSITS:
Fixed Deposits are within the limits prescribed by the Companies
(Acceptance of Deposit) Rules, 1975 and all deposits which matured during
the year have been either paid off or renewed.
PERSONNEL & INDUSTRIAL RELATIONS:
Your Company continues to accord top priority to Human Resources
Development, by imparting proper training to its Supervisory and Managerial
Staff. The staff and managers are encouraged to attend seminars and
training workshops organised by Trade Bodies and Institutes.
The Company maintained good industrial relations in all the units of the
Company.
INSURANCE:
The Assets of the Company are adequately insured.
DIRECTORS:
Sri S.Das retires by rotation and is eligible for reappointment.
STATUTORY INFORMATION:
Information in accordance with Sub-Section (2A) of Section 217 of the
Companies Act, 1956, read with the Companies (Particulars of Employees)
Rules, 1975, as amended, have not been given since there were no employees
whose particulars are required to be included in the report. Information
pursuant to Sub-Section 1(e) of Section 217 of the Companies act, 1956,
read with the Companies (Disclosure of Particulars in the Report of the
Board of Directors) Rules, 1988 is given in Annexure '1' to this report.
AUDITORS:
The observations made by the Auditors in their Report are self-explanatory.
There are, therefore, no further comments necessary under Section 217A(3)
of the Companies Act, 1956. M/s.S.S.Kothari & Co., Chartered Accountants,
the retiring Auditors of the Company, being eligible offer themselves for
reappointment.
ACKNOWLEDGEMENT:
Your Directors wish to place on record their grateful thanks to the Staff &
Employees, Customers, Suppliers & various Government Agencies for their
valuable assistance and for the trust and confidence reposed in the Company
by the Shareholders.
For & On behalf of the board
A. M. BAFNA S. Das
DIRECTOR DIRECTOR
Place : Kolkata
Dated : October 29, 2005
ANNEXURE '1' TO DIRECTORS' REPORT
Information pursuant to Section 217 (1)(e) of the Companies Act, 1956 reap
with the Companies (Disclosure of particulars in the report of Board of
Directors) Rules, 1988 and forming part of the Directors' report for the
year ended 31st March, 2005.
A. CONSERVATION OF ENERGY:
The company has been giving utmost emphasis and high priority to energy
conservation. Optimum use of energy is ensured by close monitoring of
energy consuming equipments, optimum use of power and close liaison between
energy centre and consuming points and also through constant development of
furnace design and replacing inefficient ones with energy efficient
designs, in addition to
1) Reduced idle running of equipments.
2) Using a suitable blend of HSD & LDO for Diesel Generating Sets.
3) Replacement of Electric Driven machine with Pneumatic devices.
4) Realigning of existing machines to ensure proper flow of work.
The Company shall continue with its efforts to reduction of energy
consumption.
Particulars of total energy consumption and energy consumption per unit of
production as per Form 'A'
2004-2005 2003-2004
(A) POWER & FUEL CONSUMPTION:
1. ELECTRICITY:
a) Purchased
Units (Kwh) (In lacs) 18.90 9.10
Total Amount (Rs. lacs) 87.47 42.55
Rate per unit (Rs.) 4.63 4.68
b) Own Generation (D.G.Sets)
Units (Kwh) (In lacs) 0.33 0.15
Total Amount (Rs. lacs) 5.15 2.06
Rate per unit (Rs.) 15.61 13.73
2. COAL
Total Tonnes - -
Total Cost (Rs.) - -
Average Tonnes - -
3. FURNACE OIL AND OTHER OIL
Quantity (KL) 782.621 432.060
Total Cost (Rs.lacs) 121.16 59.32
Average / Kilo Ltrs. (Rs.) 15481.70 13729.57
4. OTHERS / INTERNAL GENERATION:
Quantity (Tonnes) - -
Total Cost (Rs. lacs) - -
Average / Tonnes (Rs.) - -
(B) CONSUMPTION PER UNIT OF PRODUCTION:
(I) PRODUCT (Spring & Piston Rods)
Electricity Units 1.28 2.46
Coal Kgs. - -
Furnace & Other Oil (Lts.) 0.52 1.14
* Including Demand Charges
B. TECHNOLOGY ABSORPTION
(Disclosure of particulars with respect to Technology Absorption, Research
& Development)
RESEARCH AND DEVELOPMENT (R & D):
1. Specific areas in which R&D carried out by the Company:
* Development of new products / designs / processes / methods / tools,
improvement of systems in existing products/ process.
* Testing & Certification of existing products for conformity to new
Indian/International standards.
* Development of components in conjunction with OEM's.
2. Benefits derived as a result of above R & D:
* Indigenisation / Import substitution
* Cost reduction / Improved utilisation of material & energy.
* Technological upgradation.
* Enhancement in quality and service to the customers.
* Development of new designs in products and processes.
* Maintaining market leadership / Preparedness to counter competition in
the changed liberalised environment.
* Reducing machine breakdown time.
* Reduction in environmental pollution.
3. Future Plan of Action:
* Continuation of the present work in R&D for introduction of new products
and processes, improvement in the existing products and processes in
various areas in which the Company is operating.
* Faster introduction of new products and processes.
* Strengthening infrastructure for R&D.
* Improving interaction with research / educational institutions.
4. Expenditure on R & D (Amount in Rupees):
2004-05 2003-04
(a) Capital - -
(b) Recurring 554928 290501
(c) Total 554928 290501
(d) Total R&D Expenditure as
a percentage of total turnover 0.39% 0.51%
TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:
1. Efforts in brief, made towards technology absorption, adaptation and
Innovation
* Training of personnel for exposure to the latest products/designs &
manufacturing technologies.
* Participating in national/International conferences, seminars and
exhibitions.
* Evaluation/adaptation/modification of imported designs/technologies to
suit indigenous requirements, alternative materials/components.
* Analysing feedback from users to improve products & services.
2. Benefits derived as a result of the above efforts:
* Improvement in existing processes and product quality, performance,
productivity, safety, product reliability and serviceability.
* Cost reduction.
* Import substitution
* Introduction of new products with indigenous know-how.
* Saving in Foreign Exchange.
3. The Company has not hitherto imported any technology. The Company has
entered into a Technical Agreement with Rejna SpA, Italy to keep abreast
with the latest innovations and upgrade technology to improve its
competitive edge in India as well as in the export markets. No induction of
technology from the technical partner has been made as yet.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO:
i) The company is continuously exploring avenues to increase exports.
Efforts are being made to develop new market and consolidate the existing
ones by developing products conforming to international standards.
ii) Total Foreign Exchange earned and used:
Used : Rs. 65554
Earned : Rs. 8471319
Management Discussion & Analysis:
a. Industry Structure & Development:
Your Company has been one of the pioneers in manufacturing of springs for
the last fifty years. The company supplies its products not only to the
automobile sector but is also one of the leading suppliers to Indian
Railways. Further with the globalization coming in the industry shall have
the international area open to itself.
b. Opportunity & Threats:
Over the period of the last fifty years the company has developed
recognition. and goodwill in the market and demand from its customers is
showing an upwards trend. Your company has order in hand worth Rs 20 Crores
approximately which has come not only from existing customers but many new
customers have shown interest in developing new products. The company has
substantial presence in the foreign markets.
The company has struggled in recent times to fulfill its orders in due time
due to financial constraints and hence new competitors are queing up to
take our place. Even our export. orders have been suspended due to non-
fulfillment of their orders in time. However the company feels that once
the financial constraints are over the company can overcome such
competition with ease due to the quality and rates the company offers.
c. Performance:
The company has suffered a fall in turnover in the current year, although
our order position has not suffered. Due to the financial constraints
executing of entire orders is not possible at the present moment.
d. Outlook:
The company has taken certain positive steps in order to overcome the
financial crisis which it finds itself in. Once the financial affairs are
sorted out the company can look forward in increasing both its production
and sales.
e. Risks & Concerns:
The risks involved in the pricing of quality raw materials which are
increasing drastically. With tough competitors in the market it may not be
feasible to pass on the entire increase to the customers. This may effect
the profitability of the company. The inability of the Company to execute
existing orders due to shortage of working capital has caused the company
to lose both domestic and export orders.
f. Internal Control systems and their Adequacy:
The company has internal control systems and procedures commensurate with
its size and nature of business. The internal control systems are supported
by internal audit carried out by a professional audit firm. The adequacy
and effectiveness of the internal control, as well as compliance with the
laid down systems, policies and accounting standard are comprehensively
monitored by the Auditors.
g. Human Resources:
The company continues to accord top priority to human resources
development, by imparting proper training to its supervisory and managerial
staff. The company is putting efforts to make its appraisal system more
effective to cater to the financial and career aspiration of employees to
increase the organisational effectiveness. The company maintained good
industrial relations in all units of the company.
h. Cautionary Statement:
Statements in this report on Management's Discussion and Analysis
describing the company's objectives, projections, estimates, expectations
or predictions maybe forward looking statements within the meaning of
applicable laws or regulations. These statements are based on certain
assumptions and expectations of future events. Actual results could however
differ materially from those expressed or implied. Important factors that
could make a difference to the company's operation include global and
domestic demand supply conditions, finished goods prices, raw material cost
and availability, Government policies and regulations with which the
company has business links and other factors such as litigation and
industrial relations.
The company assumes no responsibility in respect of forward looking
statements herein which may undergo changes in future on the basis of
subsequent development, information or events.
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