ANNUAL REPORT 1999-2000
I am writing to you with some degree of optimism relating to the fortunes
of the Company, hoping that the 'PAST' is substantially behind us. This is
so even though the weight of the past still rests heavily on us and this
weight will not be lifted unless our long term debt is significantly
After almost three years of continuing losses, for the month of November
2000, the Company made a net profit from operations (after all interest and
"THIS SIGNALLED THAT THE WORST IS OVER".
However, we were reminded to continue to be conservative owing to the
events that took place in December, 2000 and January, 2001.
One was the shutting down of all factories in Delhi (basically implementing
the Supreme Court order that was applied on us in November 1996) which
affected our business because quite a lot of our chemical business
customers were in Delhi; the other was the dreadful earthquake that hit
certain parts of Gujarat causing havoc. While there has been much loss of
life and material and our Company has made reasonable donations to the
cause of relief of those affected, it has hit our business as the event has
temporarily upset the improving economy for chlor - caustic products. At
end February is the budget presentation by the Government of India and we
do not know the impact of this on our immediate future.
It is pleasing to note that the chemical operations are stable and, if the
market is not disturbed as described above, at 65% capacity utilization we
For two years our sugar business was adversely affected because of very low
recoveries. This position has been completely reversed this year indicating
a very much improved sugar operation. If it were not for the huge sugar
inventory carried by the country leading to very heavy interest expenses,
this business would be very profitable indeed. To ease the burden of
inventory, we are one of the few companies that has exported significant
Furthermore, in sugar, the regulatory environment is improving in favour of
the sugar economy and this is beneficial to us.
I must inform you of the significant changes that are being made to improve
1. The land on which our chemical and vegetable oil plant used to sit at
Najafgarh Road in Delhi, is likely to be sold. In the Supreme Court
hearings, when the plant was shut down, a realization of over Rs.300 crores
was being mooted by various people Involved. The reality is that the actual
realizable sum may not even exceed a fifth of this sum, Even so, to reduce
the interest burden and fulfil our obligation to the lending institutions,
this land will be sold. The resulting impact on profitability will exceed
Rs.10 crores per annum.
2. In the sugar business, our carbonation plant will be converted, at a
cost of about Rs. 14 crores, to a sulphitation process plant yielding about
Rs. 5 crore per annum. In due course we would like to qonvert this plant to
a sugar refinery.
3. In the sugar business, we are actively studying co-generation of power.
This has now become possible because the regulatory environment for power
allows the Company to be more sure of payment from the UPSEB.
4. In the chlor-caustic business, we are investing a further Rs. 9 crores,
to raise the production capacity to an average of 200 tons per day of
caustic soda, 180 tons per day of chlorine and other related products. This
investment has a very handsome rate of return.
5. Pricewaterhouse Coopers has been commissioned to study what could be the
best structure of Siel Limited for maximising shareholders value.
6. Detailed studies are being conducted to introduce Enterprise Resource
Planning into the Company as this system has the capability of
significantly improving management and also instituting excellent Corporate
7. And finally, kindly peruse the CORPORATE GOVERNANCE report enclosed with
the annual report which indicates compliance with the new SEBI guidelines
for Corporate Governance.
I must conclude by saying that, like you, I as a shareholder have suffered
acutely in receiving no dividends and having a very low share price. In a
year or so, if net profits accrue, we will surely improve on both fronts.
With warm regards,
February 7, 2001