DIC INDIA LIMITED
ANNUAL REPORT 2006
From the Chairman
The year gone by was a remarkable year for India. For the fourth year in
succession, year end estimates of GDP growth have exceeded initial
expectation and is expected to grow at 9.2% in 2006-07. A consensus has now
been built up that India can be a manufacturing hub for global companies.
The stock market has scaled new peaks year after year since 2003, with the
BSE and NSE indices crossing the 14,000 and 4,000 mark, respectively. The
foreign exchange reserves reached a new high of US$ 200 billion. However,
increase of Crude oil price reacted very negatively. The crude oil price
went up by nearly 235 per cent in 39 months. Thereafter, it cooled down a
bit. Inflation increased significantly from 4.24% in 2005-06 to 6.11% in
2006-07. due to a shortcoming on the supply side which was accompanied by
buoyant growth of money and credit. The robust export performance could not
contain the node deficit clue to impact of soaring oil prices, although
service exports helped to ameliorate the impact on the current account.
During the year under review, the Company gained further market share in
the Publication and the News Inks Segment. It in expected that in the
coming years there would be a substantial growth in the News Inks business
and in anticipation the Company has made and continues to make major
capital investments in Noida for the News Colours Project and in Ahmedabad
for the News Black Project.
In the above scenario, your Company's overall net sales increased from
Rs.2,785.55 million to Rs.3,394.96 million leading to an increase in
operating profit of the Company by 15%. However, due to rising interest
rates, PBT and PAT took a hit with Pre-tax profit at Rs.145.38 million
compared to Rs.147.17 million earned in the previous year. Similarly, the
post tax profit was Rs.99.86 million in 2006 compared to Rs.101.34 million
in the current year.
The operation of the Company's wholly owned subsidiary, DIC Coatings India
Limited was also adversely affected due to increase in raw material cost.
DIC Coatings has started its relationship with one of the major customers
in the container business. To counter the increased raw materials cost. DIC
Coatings undertook and completed its price increase activity. The Company
increased its sales bum Rs.335.37 million in 2005 to Rs.373.20 million
during the year. Through a series of measures aimed at improving
profitability, the Company was able to register a growth of almost 32.33%
in Profit before tax which was at Rs.46.37 million as against Rs.35.04
million registered during the last year. Likewise, profit after tax, also
registered a ,significant growth of 35.43% increasing to Rs.30.20 million
as against Rs.22.30 million in the previous year.
The Board has approved the merger of its other subsidiary. Rohit (Printing
Inks & Paints) Industries Private Limited with itself.
Future growth in the Printing Inks business will call for greater
investments and keeping a balance between shareholders' expectations and
retention for growth, your Board has recommended maintaining dividend at
Rs.3.50 per share.
The Printing Ink Industry in India is going through a phase of re-alignment
and a number of manufacturers are making an effort to enter the Indian
Market. Some of them have already set up their outfits in India. In order
to meet the challenge, it has become essential for your Company to ensure
that its products are competitive in terms of quality and price compared to
other international and domestic manufacturers. It is also equally-
important to ensure that the Company is in a position to offer et wide
range of high technology products commensurate with the technological
developments in Graphic Arts. In the background of the above, the Board has
approved the issue of rights shares, within the price band of Rs.210 -
Rs.230 per share, in the ratio of 1:3 i.e. one equity share for every three
equity shares held by shareholders to augment its capital requirement,
details of which have been fully given in the Annual Report.
It is the earnest endeavour of the Company to attain higher levels of
internal efficiency to counter the pressures put by external forces. The
Company would lay further focus on improving the operating margins through
better productivity and greater focus on logistics. It is also anticipated
that the expected demand growth in the domestic market will lead to better
business prospects for the Company. With the continued support from the
Parent Group, the Company's efforts to upgrade the technology and equipment
will enable the Company to put itself in a stronger position to face
challenges of the future.
To conclude, I would like to say that your trust and faith in the Company
have been our great strengths. With the future of the Company safe and
secure in the hands of a very efficient team, I am confident, we will all
be a part of the growth story of the Company in the years to come.
As I had undergone a surgery a little while ago, I will need a little more
time to recover fully and hence will not be able to attend this AGM in
person, but hope to see you all soon with the fruits of good performance
J N Sapru
18th April, 2007