MH MILLS AND INDUSTRIES LIMITED
ANNUAL REPORT 2006-2008
Your Directors have pleasure in placing before you their Report on the
affairs of the Company which are for the period comprising of Eighteen
Months period from 1st October 2006 to 31st March, 2008 (18 months). The
figures are not comparable for the previous period which were for 12
For the period For the period
1st October 2006 1st April 2005 to
to 31st March, 2008 30th September
(18 months) 2006 (12 months)
(Rs. In lacs) (Rs. In lacs)
Sales Revenue 6985.80 6459.65
Gross Profit/(Loss) (Before
Extra-ordinary items & Tax) (575.64) (589.16)
Less: Interest (Net) 32.19 4.25
Depreciation & Amortization Expenses 494.00 693.53
Extra-ordinary items - -
Net Profit/(Loss) After
Extra Ordinary Items (1101.83) 6594.95
Add: Balance of Profit &
Loss A/c. of Previous Year (7229.55) (14860.15)
Add: Loss of Packaging Division - (416.15)
Less: Loss of Packaging
Division transferred - (1451.79)
for appropriations - (7229.55)
Transfer to Debenture
Redemption Reserve NIL NIL
Transfer to General Reserve NIL NIL
Proposed Dividend NIL NIL
Tax on Distributed Profits NIL NIL
Balance carried to Balance Sheet (8331.38) (7229.55)
IMPLEMENTATION SCHEME OF ARRANGEMENT SANCTIONED BY HON'BLE HIGH COURT OF
During the year, the Company undertook following major initiatives to
implements the scheme of arrangement approved by the Hon. High Court of
Demerger of Packaging Division:
The Packaging division of the Company has been demerged and vested into a
separate company formed for the purpose viz M.H. Packaging (India) Ltd and
the assets and liabilities pertaining to the said division have been
transferred to this separate company.
Reduction and Reorganisation of share capital:
The paid up share capital of the Company has been reduced by 50%, as on
record date fixed by the Board of Directors in consultation with Bombay
Stock Exchange Limited i.e. 19th September, 2006, be reducing number of
shares from 121,33,669 to 60,66,835. (face value of Rs. 10/- each). The
Reduced Capital is listed on Bombay Stock Exchange Limited w.e.f. 24th
Equity Infusion by Promoters:
The promoters have infused Rs. 2.01 Crs by 15th July, 2006 and Rs. 1.49 Crs
by 31st March, 2007 as an additional equity A per the approved Scheme of
Arrangement. The Company has allotted 20,10,000 Equity shares on 29/09/2006
and 14,90,000 equity shares on 19/06/2007 to the promoters as per Scheme of
Conversion of secured debt into 0.01% Coupon Optionally Convertible
Preference Shares (OCRPS):
On 29th September, 2006, the Company has allotted 0.01% OCRPS of Rs. 100
each totaling to Rs. 5.27 Crs to Secured Lenders.
Distribution of Fixed Deposit Amount:
The company has distributed Rs. 4.77 crores, which was lying in fixed
deposit amongst the lenders as per the Scheme.
Sale of Polymer Division:
As per the scheme of arrangement with the lenders approved by the Hon. High
Court of Gujarat, Polymer Division is to be sold out by 31st December, 2006
in consultation with ARCIL/ lenders. Monitoring Committee in their meeting
dated January 17, 2007 has approved sale of Polymer Division. The sale deed
was executed on 22nd February, 2007. The Company has received consideration
of Rs. 3.25 Crores. As per the Scheme Company has distributed Rs. 1.05
crores amongst the lenders.
Efforts of Promoters/Promoters Group:
The promoters /promoters group /such other investors has agreed to infuse
further Rs. 5 crores by way of equity shares. The company has called extra
ordinary general meeting of shareholders on 12th July, 2008 for
preferential allotment of equity shares to promoters /promoters group /such
other investors subject to approval of Arcil/ lenders and the Bombay Stock
Exchange Limited. The Bank of Baroda has not given their consent in the
matter. The approval from The Bombay Stock Exchange is also awaited. The
promoters/Promoters Group has already infused Rs. 3.62 Crores.
In view of losses suffered by the company during the period under review
and due to carried forward losses of earlier years, the Board is unable to
recommend any dividend on Equity Shares of the company.
YEAR IN RETROSPECT:
The Financial performance performance of the Company was adversely affected
due to upward trend in cotton prices, rise in crude oil prices and stiff
competition in the market. The price of dyes and chemicals also increased
during the year under review. Due to working capital constraints own
production activity was curtailed and more job work activity was done to
recover maximum fixed costs Product-mix of own production was also improved
with more value addition during the year. The company has invested Rs.25.89
lacs on account of capital investment during the year under review.
The company has switch over to zero duty option for excise duty; the
turnover during the current year is without excise duty.
'SICK UNIT' UNDER BIFR:
Your Company has been declared 'SICK UNIT' under Section 3(1)(o) the Sick
Industrial Companies (Special Provisions) Act, 1985. The Company is in
process of Rehabilitation Scheme in consultation with operating Agency.
SALES AND EXPORTS:
Sales and operating income of the Company for the Period under the review
i.e. 1st October 2006 to 31st March 2008 was 67.61 Crores. As against for
the 12 months period 1st October 2005 to 30th September 2006 64.59 Crores.
The Company is putting all its honest efforts vigorously to increase the
sales by selling higher value addition fabrics. The figures in the report
are not strictly comparable due to the previous period of 12 months.
OUTLOOK FOR THE CURRENT YEAR:
The current Budget had given concessions and relief in the Excise duty.
Government of India had planned more than double allocation of fund for
Technology Up-gradation Fund (TUF) scheme. However due to continuous
increase in cost of cotton, dyes and chemicals and crude oil prices, the
Composite Textile sector is facing tough time to compete with unorganized
To compete with unorganized sector had become most difficult task for the
composite units in the textile industry. There has been differential
treatment given to the unorganized sector to protect them from composite
Mills. The Government has announced Packaged Incentives Scheme for the
textiles and rationalizes the duty structure so that composite mills can
compete with the unorganized sectors effectively.
Though the scheme like TUF is announced by Ministry of Textile the overall
situation for the Composite Textile sector has remained very tough and this
privileged sector is in soup due to thin margin of profit.
The Company has not accepted or renewed any Fixed Deposit during the period
under review and there are no outstanding deposits.
Shri Manoj K. Shah, the Director of the Company retire by rotation at the
ensuring Annual General Meeting and being eligible offer themselves for re-
Shri Indrakant Trikamlal, the Director of the Company and Shri Kirit C.
Shah, the Director of the Company has resigned from the Board. The Board of
Directors has taken note of valuable services rendered by Shri Indrakant
Trikamlal and Shri Kirit C. Shah during the tenure of their directorship.
Shri Kunal Y. Shah has joined the Board as an additional director of the
company until the conclusion of the next Annual General Meeting.
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
1) In the preparation of the accounts for the financial year ended 31st
March 2008 the applicable accounting standards have been followed along
with proper explanation relating to material departures.
2) The Directors have selected such accounting policies and applied them
consistently and made judgments 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 or loss of the
company for the year under review.
3) The Directors have taken 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.
4) The Directors have prepared the accounts for the financial year ended
31st March, 2008 on a going concern basis.
120th YEAR FOR THE COMPANY:
The Company has received the prestigious National Record Certificate from
Limca Book of Records for 'the oldest continuously managed family business
is that of MH Mills & Industries Limited at Ahmedabad which started
operations in 1888 under founder Achratlal Harilal with a labour force of
400 and has completed 119 years on September 5, 2007.
The importance of corporate governance lies in its contribution both to
business prosperity and to accountability. Directors support basic tenets
of corporate governance as the prudent exercise of management's rights in
the best interest of all stakeholders in a company in particular its
shareholders, creditors, the state and its employees. The Company has
implemented the requirements of clause 49 of the Listing Agreement. The
separate report for the same is given here with.
The Company has taken Standard Fire and Special Perils Policy (Material
Damage) for the entire Textile unit. The All the Assets of the Company are
well covered under to roof of Insurance.
Your Company has taken various steps to reduce water and Air pollution in
and around Mills premises. The Company's officials conduct the
Environmental Audit on Regular basis to keep the surrounding eco friendly.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNING AND OUTGO:
Information as required under Section 217(1) (e) of the Companies Act, 1956
read with the Companies (Disclosure of Particulars in the report of Board
of directors) Rules, 1988 in set out in the Annexure forming part of this
PARTICULARS OF EMPLOYEES:
The Company had none of the employees falling under Section 217(2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
The auditors of the company M/s. Talati & Talati, Chartered Accountants,
Ahmedabad retire at the ensuing Annual General Meeting and are eligible for
re-appointment. M/s. Talati & Talati has shown his willingness to work as
the Statutory Auditor of the company for the financial year.
In order to have better system of accounting and record Keeping your
Company avails services of Professional Chartered Accountant Firm M/s.
Jitendra Shah & Associates.
Pursuant to Sec. 233(1B) of Companies Act 1956 your company has been
covered to Mandatory Cost Audit. For which with the Approval of Central
Government (Ministry Corporate Affairs) M/s. Kiran J. Mehta & Co. (Cost
Accountants) has been appointed as cost auditors of the Company.
QUALIFICATIONS IN THE AUDIT REPORT:
The Auditors of the Company have qualified their Report on following
grounds, and explanation of the Board, is provided in respect of each of
such qualification. The Auditors have made certain observations in annexure
to their Report at para No. (ix), (xi). In respect of dues of Gujarat
Government Sales Tax, Water Cess and Municipal Tax and textile committee
cess. The Company has approached concern Government agencies for relief and
concessions as per applicable norms of textiles 'Sick Unit' and the Company
is confident that above dues will be settled in its favour. The Statutory
Liabilities will be covered under Rehabilitation Scheme.
Our relations with employees continued to remain cordial during the period
under review Your Directors express their appreciation for devoted services
of the employees at all level; and immense contribution made by them
towards efficient operations of the Company. Your Directors also wishes to
place on record sincere thanks to the Management of Asset Reconstruction
company Limited (ARCIL), SASF of IDBI and Bank of Baroda for approving the
scheme of compromise and debt Restructuring and other lenders and Textile
Labour Association, Government Departments for their continued cooperation
REGISTERED OFFICE: ON BEHALF OF THE BOARD
Saraspur, Ahmedabad. BIREN PARIKH
DATED: 07/07/2008 CHAIRMAN
ANNEXURE TO DIRECTORS' REPORT
Information as per Section 217 (1)(e) of the Companies Act, 1956 read with
Companies (Disclosures of particulars in the report of Board of Directors)
Rules, 1988 and forming part of the Directors' report for the period
1/10/2006 to 31/03/2008.
A. CONSERVATION OF ENERGY:
Energy conservation measures taken:
1. Inverters for variable speed introduced and boiler fans & process
machine fans under considerations.
2. Diffused aeration in ETP is under consideration to save power of blower.
3. Measures taken in past are continued and maintained to their efficiency.
Period 1-10-2006 to 31-03-2008 1-10-2005 to 30-09-2006
Particulars Textile Polymer Textile Polymer
Unit Unit Unit Unit
A. Power & Fuel
1 (a) Electricity:
(i) Purchase Unit (KWH) 28208540 22338720 228942
(ii) Total amount (Rs.) 121013535 96012937 1262869
(iii) Rate/Unit (Rs.) 4.29 4.29 5.52
(b) Own Generation:
D G Set (KWH) 0 0 65072
Unit per liter
of Diesel Oil 0 0 3.19
(ii) Through Steam
Turbine Generator Unit NA NA
(iii) Own Generation
Plant KWH 0 678400
Unit per liter of fuel 0 4.10
2. Coal/Lignite &
Saw Dust 20713 12978
(ii) Total Cost (Rs.) 30615981 18496614
(iii) Average Rate
(Rs./Tones) 1478 1425
3. Diesel Oil
(i) Quantity (Ltrs) 0 5743 20375
(ii) Total Cost (Rs.) 0 162857 715039
(iii) Average Rate (Rs.) 0 28.36 35.09
4. Furnace Oil:
(i) Quantity in (Ltrs) 0 163890
(ii) Total Cost (Rs.) 0 2643813
(iii) Average Rate (Rs./Ltr) 0 16.13
5. Other internal
B. CONSUMPTION PER UNIT
1. Electricity (KWH)
Cloth (Per Mtr) 1.10 1.08
Yarn (per kg.) 5.86 5.76
2 Furnace-OR (Litre)
Cloth (per mtr)
- Yam Yam per kg.
3. Coal Lignite
Cloth (per Mtr.) 0.89 0.86
Yarn per kg. 0.78 0.76
4. Texturised Yarn
5. A Electricity
unit (kg.) 228942
7. Films (Kgs.)
C. TECHNOLOGICAL ABSORPTION:
RESEARCH & DEVELOPMENT (R & D):
1. To upgrade the quality of packing, we have installed new inspection cum
packing machine for this checking heavy weight quality fabric.
2. Benefits derived:
i) Centre to selvedge dye pick up variation are reduced to not by which the
SST Packing is improved up to 84% with the introduction of CPD machines.
ii) Folding materials handling and labour cost is reduced with the
introduction of new inspection cum packing machines.
TECHNOLOGY ABSORPTION, ADOPTION & INNOVATION:
During the year no new technology was developed or adopted by the Company.
1. Foreign exchange earning and outgo activities in relation to export etc.
(i) Efforts of the Company are being made to increase exports.
(ii) Total Foreign Exchange used Rs. 15.88 lacs.
(iii) Total Foreign Exchange earned Rs. 0 lacs.
MANAGEMENT DISCUSSION AND ANALYSIS:
Readers are cautioned that this discussion and analysis contains forward-
looking statements that involve risks and uncertainties. When used in this
discussion, the words 'anticipate', 'believe', 'estimate','intend','will',
and 'expected' and other similar expressions as they relate to the Company
or its business are intended to identify such forward-looking statements.
The Company undertakes no obligation to publicity update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Actual results, performances or achievements and risks
and opportunities could differ materially from those expressed or implied
in such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements that speak only as of
their date. The following discussion and analysis should be read in
conjunction with the Company's financial statements included herein and the
The Company's principal businesses consist of manufacturing and marketing
of Ready Garments fabric, bottom weights fabric, Twills and Polyester
cotton and Cotton yarn. The yarn manufactured is partly sold and partly
required for captive consumption by the Company, In the high inflation
scenario, the company has made serious efforts to curtail various costs.
FINANCIAL PERFORMANCE AND REVIEW:
The total Sales and other Income for the period ended 31st March, 2008 (18
Months) were Rs. 6985.80 lacs as compared to Rs. 6459.65 lacs for previous
year ended 30th September, 2006 and are not comparable. The company sells
Yarn partly in the domestic market and partly for the captive consumption
The depreciation for the period under review is Rs. 493.07 lacs 18 months
period on 31st March, 2008 as compared to Rs. 495.43 lacs for the previous
year ended on 30th September, 2006. During the current financial period
which is for 18 months period ending 31st March, 2008 (18 Months) the
Company has reported Net Loss of Rs.10.30 Cores as compared to Net Loss of
Rs.12.87 Cores in the previous, financial year ended 30th September, 2006
Raw Material, Dyes and Chemicals:
The Company's main raw material Cotton have continued shown its uptrend
trend during the year under review. The price of Dyes and chemicals has
also increased substantially which has also affected the profit margins of
Textile division The Textile division of the Company is engaged in
manufacturing high quality Cotton and blended fabrics and polyester and
cotton yarn for the domestic market. Other prominent products include
Cotton and Blended shirting, Trousering material, Long Cloth, Sarees, dress
material and a wide range of Lawns, structured fabric etc.
The Company enjoys a unique position in the Rubia segment. The Company's
chief strength is its amazingly rich and fancy colour palette. In a
business where shades reign supreme, the Voiles Division boasts of its
incredibly large shade collection offering perfect blends for diverse
tastes, each bearing the same stamp of quality and excellence. The ability
to supply a huge range of colours in a variety of high quality products
with rigid adherence to delivery deadline has been the key to Company's
sustained growth and performance over past few years.
In addition, the Company has an countrywide distribution network resulting
into an unprecedented reach and deeper penetration into hitherto unexpiored
markets. Constant product innovation and upgradation has always been the
Company's top priorities, which has resulted into a huge product basket.
Among the latest ones are Anti-microbial fabrics, Aroma finish and
structured voiles etc.
With the capacity expansion in the processing department, the Company has
made headway into the Dress material segment, Cotton and Blended Shirting
and Bottomweight Fabrics to reap in higher turnovers and market presence in
the coming years.
The Company is having all required capabilities and infrastructure for
manufacturing wide range of fabrics. The Company has focused on product
developments, which has helped it in enhancing its product/ customer mix
and achieve better realizations. The Company has a dedicated R & D team
comprising of textile professionals Including international consultants
working on ongoing product development.
Recent development includes products with count ranges from 16s to 2/100s,
fibres containing cotton, polyesters blends etc., twill fabric. With
significant efforts, company could come out with unique and differentiated
products such as PU coated, slubbly, sulphur, dyed, yarn dyed, blotch
printing and combinations weaves. The Company has launched innovative and
latest finishes in all the fabrics ranges.
INTERNAL CONTROL SYSTEMS:
The company has well defined and institutionalized business processes with
effective control systems to ensure that assets and interests of the
Company are safeguard.
The Company has a appointed Core Management Team which is responsible for
preparation of the Performance Plan which are reviewed on monthly basis and
compared with the actual, performance achieved so as to take immediate
corrective actions, wherever necessary and are discussed to take corrective
measures and achieve the projections. Considering the size and nature of
operations of the company, the overall control systems are adequate to meet
the need and the purpose.
The company has internal audit carried out by a firm of Chartered
Accountant who monitors the system in various areas of the internal control
system and compliance. The Company has an External audit firm which
monitors business processes and risks associated with them.
DEVELOPMENTS ON HUMAN RESOURCES AND INDUSTRIAL RELATIONS:
The period under review has continued to reduce labour force through
payment of VRS and gratuity as per the Scheme. The Company values its human
resources and believes in unlimited potential of each employee.
Industrial relations were cordial in all the divisions of the Company
without any disruptions of manufacturing activities.