DIAMOND AGRO INDUSTRIES LIMITED ANNUAL REPORT 2003-2004 DIRECTORS' REPORT TO THE MEMBERS Yours directors have great pleasure in presenting their Eleventh Annual Report along with Audited statement of the Account for the year ended 31st March 2004. FINANCIAL RESULTS The Company has finished its Ninth full year of operation & during the year produced 17319.604 MT of Vanaspati & Refined oil compared to Last year's production which was 24065.719 MT. The net Loss amounts to Rs.130.02 Lacs as compared to last year's loss of Rs. 102.70 Lacs. Financial position for the year under operation are summarised below. (Rs. In Lacs) 2003-2004 2002-2003 Sales & other Income 7862.34 10341.73 Total Expenditure 7810.74 10198.85 Financial Charges 99.91 156.53 Depreciation 81.71 89.04 Net Loss for the year 130.02 102.70 DIVIDEND In view of the operational results of the company your directors are unable to recommend any dividend for the year 2003-2004. The Equity Shares of the Company are listed on Delhi, Bombay, Ludhiana and Madras Stock Exchanges and Company has not paid listing fee to the Stock Exchanges due to continuing losses. In view of this it has been decided to delist the company's equity shares from Delhi , Ludhiana and Madras stock Exchanges . FIXED DEPOSITS The Company has not accepted any fixed deposits from the public. OPERATIONS The Company has completed eighth full year of production. The Brand name "Akash" for vanaspati & Refined oil is well recognized in the market. DIRECTORS Sh. A.P. Mathur, Sh. Yogesh Goel & Sh S.K. Sharma Directors retire by rotation in accordance with provision of the Companies Act, 1956 & Article of Association of the company & being eligible offer themselves for reappointment. The Nomination of Mr.V.K. Joy as nominee was withdrawn by IFCI & in his place IFCI has nominated Sh. Balbir Singh DGM (Law) as Director. Further during the year Sh. Vinay Aggarwal was appointed as additional director. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under section 217(2AA) of the companies Act 1956 with respect to Directors Responsibility Statement, it is hereby confirmed: - That in the preparation of the annual accounts for the financial year ended 31st March, 2004, the applicable accounting standards had been followed along with proper explanation relating to material departures. - That the directors had selected such accounting policies and applied them consistently and made judgement 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 financial year and of the profit of the company for the year under review ; - That the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1.956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; - That the directors had prepared the account for the financial year ended 31st March 2004 on a going concern basis. AUDIT COMMITTEE The Audit Committee Provides direction to the Audit and it monitors the quality of the Audit. the Audit Committee was constituted by the board of Director at its Meeting held on 22/7/2000 and it comprised of Dr.B.B. Goel as Chairman and Shri Ashok Sharma (PSIDC) and Sh.V.K. Joy as members and Audit Committee acted as per the provisions of the Companies act, 1956, As IFCI has withdrawn the nomination of Sh.V.K. Joy, the Audit Committee was reconstituted with induction of Sh. Vinay Aggarwal, director along with Dr.B.B. Goel and Sh. Ashok Sharma as members. Dr.B.B. Goel is Chairman of the Audit Committee. AUDITORS & THEIR REPORT M/s Kapil Kumar & Co., Chartered Accountants, Auditors of the Company hold office until the conclusion of the ensuing Annul General Meeting & they have conveyed their acceptance to continue for the financial year 2004- 2005. In view of this your directors recommend the appointment of M/s Kapil Kumar & Co. Chartered Accountants as Statutory Auditor of the Company for the year 2065-2005 to hold office until the conclusion of next Annual General Meeting. The report of Auditors is self explanatory. DISCLOSURE OF PARTICULARS As required by the companies(Disclosure of Particulars in the Report of Board of Directors) Rules 1988, the relevant information and data is given in Annexure-I to this report. As required under the provisions of section 217(2A) of the Companies Act,1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in Annexure-II hereto forming part of this report. INDUSTRIAL RELATIONS The Industrial relations have been cordial during the period under review. ACKNOWLEDGEMENTS Yours Directors take this opportunity to express their deep sense of gratitude to The Industrial Finance Corporation of India Limited, Bureau of Indian Standards, Punjab State Industrial Development Corporation Limited, Punjab National Bank, & Jammu & Kashmir Bank Ltd., Govt. of Punjab and local authorities for their continued guidance and support. For and on behalf of the Board. Sd/- Date : 29/7/2004 S.K. Sharma Place : Chandigarh (Chairman) ANNEXURE TO DIRECTOR'S REPORT ANNEXURE - 1 INFORMATION AS PER SECTION 217(1) (e) READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2004. I. CONSERVATION OF ENERGY; a) The Company had carried out insulation of all pipe lines to save energy. b) Over Capacity motors were replaced with required motors. c) Electrical Audit was being done to enable management to supervise the energy consumption. The aforesaid steps have resulted into reduction in power & fuel consumption. MARCH, 2004 MARCH, 2003 POWER AND FUEL CONSUMPTION 1. Electricity a) Purchased Units (KWH) 19.56 19.70 Total Amount (Rs. Lacs) 84.98 77.57 b) Own Generation Through Diesel Generation Units (KWH) 0.88 4.05 Units Per Liter of Diesel Oil 2.87 2.78 2. Coal (Specify quantity and where used) N.A N.A 3. Furnace Oil N.A N.A 4. Other Internal Generation i) De-oiled Rice Husk (for Boiler) (Quantity) M.T 6431.050 7882.50 Total Cost (Rs. Lacs) 100.98 146.74 Rate/Unit (Rs.) 1570.30 1862.00 ii) Diesel & others (Rs. Lacs) 10.78 46.19 Quantity Liters 54880 259535 Average Rate (Rs.) 19.65 17.80 5. Consumption per Unit (M.T.) Of production (Vanaspati & Refined Oil) & Solvent Extraction oil i. Production (Tonnes) 17319.604 24065.719 ii. Electricity (Unit) P.T 118.03 98.67 iii. Diesel & Others (liters) 3.17 10.78 iv. Coal N.A N.A v. *De-oiled Rice Husk (kg) 371.32 327.54 II. Technology Absorption Research & Development The Company has improved its processing mix by in house research Technology Absorption, Adaption and Innovation: The Company has been able to improve the quality of Vanaspati and Refined Oil by in house development work done in the Laboratory. The Company has no technical collaboration with any foreign party. III. Foreign Exchange Earnings & Outgo: There were no Foreign Exchange payment during the year. For and on behalf of the Board. Sd/- Date : 29/7/2004 S.K. Sharma Place : Chandigarh (Chairman) MANAGEMENT DISCUSSION AND ANALYSIS REPORT The management of Diamond Agro Industries Ltd. is pleased to present its analysis report for the year 2003-2004. INTRODUCTION: The company is engaged in the production and manufacturing of edible oil products including Vanaspati and Refined oils under its brand name "AKASH". INDUSTRY OUTLOOK: Unluckily due to radical changes in the duty structure and with so many changes both at national and international levels, the vanaspati Industry has faced lot of problems in the recent years the factors directly or indirectly responsible are as follows 1. After The Finance Act (of 2001) duty structure for vanaspati & Edible oils Industry has seen many changes and subsequently during the years the duty structures has seen many changes quite often. 2. Then in the international market, the rates of oil has changed so frequently that along with the fluctuating rate of Duty it is difficult to plan the production and the cash flow. The import of oil is necessary to maintain the quality as there is no other local oil available compatible with the CPO (Crude Palm Oil) which is imported. 3. There is no long term credit available for import of oil which necessitate more of working capital fund. 4. Then an excise duty of Rs. 1250/- per tonne has also been imposed during this budget 2003 on vanaspati & refined oil whereas the price realization is much lesser than the amount of excise duty imposed & thus making margins very low. 5. The company has to incur extra expenditure on freight etc as the port is at quite a distance from factory site. This along with the increased custom duty has a multiplied effect in lowering the margins. Hence these are the factors which are directly responsible for the losses which are mainly due to inconsistent policies of the Govt. towards vanaspati industries. OPERATIONAL AND FINANCIAL PERFORMANCE Financial performance : 2003-2004 2002-2003 (Rs. in lacs) Sales 78.62 103.41 EBIDTA (-) 130.01 (-) 102.69 Trading activities During the year sales were 16838.759 MT including 10928.758 of Vanaspati & 5909.801 of Refind oil. There is 25% decline in sale volume of vanaspati & 50% decline sales volume of Refind oil due to lower demand factor. The Company continued its efforts in encouraging its sales volume despite lower demand and sales volume. Distribution network: The sales is through dealers network who market both bulk & retail packs of the company. INTERNAL CONTROL SYSTEMS The Company ensures existence of adequate internal control through documented policy and procedures to be followed by the executives at various levels in the organization. While operating managers ensure compliance within their areas, internal audit carries out audit test on the selected samples and report noncompliance weaknesses, if any, through internal audit reports of the respective Department. With the objective of improving the systems and removing bottlenecks, if any, periodic systems review is carried out and Policies and Procedure Manuals are continually reviewed and amended Opportunities and threats Economic liberation, rapid urbanisation , rising consumer awareness, attitudes habits and their prosperity has made the market more competitive. Besides maintaining the quality standards, company has to ensure the quantitative terms of the sale and the fluctuating market of imported oils along with the quite often changing Government policies in terms of custom duty continue to worry the management including other factors. Risks & Concerns Basically the vanaspati industry and Government has to work hand in for the growth of the industry as till today due to unsynchronized Development (in Government policies) and radical changes in duty structure, the industry despite its ample sqope of developments is not able to grow. Cautionary Statement The report may contain certain statements that the Company believes are, or may be considered to be "forward looking statements" that describe our objectives, plants or goals. All these forward looking statements are subject to certain risks and uncertainties, including but not limited to, Government action, economic development, risks inherent in the Company's growth strategy and other factors that could cause the actual results to differ materially from those contemplated by the relevant forward looking statements.