MILK SPECIALITIES LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT Dear Members, Your Directors have pleasure in presenting the 20th Annual Report together with Audited Accounts for the year ended 31st March, 2012. 1. FINANCIAL RESULTS (Rs. in Lacs) particulars current year PREVIOUS YEAR (2011-2012) (2010-11) Sales and Other income 4774.31 5803.98 Increase/Decrease in the stock (28.98) (265.05) Expenditure before Financial Charges and Depreciation 4104.36 4869.07 Finance Cost 533.90 507.04 Profit/(Loss) Before Depreciation 107.07 182.41 Depreciation 113.26 112.87 Provision for Income Tax : 17.00 22.00 Net Profit/(Loss) for the year : (23.19) 47.54 Deferred Tax (18.22) (20.42) FIXED DEPOSITS: The Company has not accepted any fixed deposits during the year under review. DIRECTORS: Mr. Anoop Kumar Sud and Mrs. Sukhwinder Kaur would retire as Directors at the forthcoming 20th Annual General Meeting of the Company. Being eligible, they have offered themselves for reappointment. The Board recommends their appointment. AUDITORS: M/s S. Kumar Gupta & Associates, Chartered Accountants are the present Auditors of Company. In terms of the provisions of Section 224 of the Companies Act, 1956, they would retire at the forthcoming 20th Annual General Meeting of the Company. Being eligible, they have offered themselves for re-appointment. The Board recommends their re-appointment as Auditors of the Company for the Financial Year 2012-2013.The notes on Financial Statements referred to in the Auditor Report are self explanatory and do not call for any further comments. CORPORATE GOVERNANCE: Auditors certificate on Compliance with the conditions of Corporate Governance and separate report on Corporate Governance and Management Discussion & Analysis are enclosed separately in this Annual Report. FOREIGN EXCHANGE EARNINGS AND OUTGO RS. NIL LISTING OF SHARES: The equity shares of the Company are listed at the Stock Exchanges of Mumbai, Delhi, Ahmedabad and Ludhiana. However, the trading of the Shares of your Company are currently suspended in all the Stock Exchanges. The Company had filed applications for voluntary delisting of its shares from the Stock Exchanges of Delhi, Ahmedabad and Ludhiana but the same were subject to their confirmation. DIRECTORS' RESPONSIBILITY STATEMENT: pursuant to section 217 (2aa) of the companies act, 1956, it is stated:- i) That in the preparation of the Annual Accounts, the applicable Accounting Standards had been followed alongwith proper explanation relating to material departures. ii) That the Directors had selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fare 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 that period. iii) That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the Provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities. iv) That the Directors had prepared the Annual Accounts on a going concern basis. PARTICULARS OF EMPLOYEES: The information required under Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 is nil. PARTICULARS REGARDING ENERGY CONSERVATION ETC. The information required as per Section 217 (1 )(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in Directors' Report) Rules, 1988 are given as Annexure-1 forming part of this Directors' Report. RESEARCH AND DEVELOPMENT AND TECHNOLOGY ABSORPTION: The Company has not incurred any Expenditure on Research and Development. The Company has not adopted or installed any new technology for the manufacturing of its products. However, Pursuant to the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988, Form B is enclosed as Annexure - 2 which forms an integral part of this Director's Report. ACKNOWLEDGEMENTS Your Directors record their appreciation and thanks for the support and assurance the Company has received from Banks, Central and State Governments, Raw Material suppliers and Customers of the Company, the dedicated employees and all other who are continuing to assist your Company! For and on behalf of the Board of Directors of M/s Milk Specialities Limited Dated: 03-09-2012 (JAGJEET SINGH) (CHARAN SINGH) Place: Chandigarh MANAGING DIRECTOR DIRECTOR Annexure-I STATEMENT ANNEXED TO AND FORMING PART OF DIRECTORS' REPORT FOR THE YEAR ENDED 31st MARCH 2012 PURSUANT TO COMPANIES (DISCLOSURE OF PARTICULARS IN REPORT OF DIRECTORS) RULES.1988 A. CONSERVATION OF ENERGY Total energy consumption per unit is given below: FORM 'A' A. POWER & FUEL CURRENT YEAR PREVIOUS YEAR CONSUMPTION 2011-12 2010-11 1. ELECTRICITY a) Purchased Units 1753750 1976120 Total Amount (Rs.in lacs) 106.93 112.00 Rate/Unit (Rs.) 6.10 5.67 b) Own Generation 48501 81623 Total Amount (Rs. in lacs) 5.30 8.60 Cost/Unit (Rs.) 10.94 10.54 2. HUSK Quantity (In. M.T.) 2637 2899 Total Coster in lacs) 112.60 114.18 Rate/Unit (Rs.Per M.T.) 4270.64 3938.48 B. CONSUMPTION PER UNIT OF PRODUCTION The Company produces various products I.e. Pure Ghee, Skimmed Milk Powder and Pouched Packed Liquid Milk and use different sources of energy therefore, it is not feasible to arrive at the energy consumption per unit for each source of energy for each product as prescribed. For and on behalf of the Board of Directors of M/s Milk Specialities Limited Dated: 03-09-2012 (JAGJEET SINGH) (CHARAN SINGH) Place: Chandigarh MANAGING DIRECTOR DIRECTOR Annexure-2 FORM B FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION Research and Development (R & D) 1. Specific areas in which R&D carried out by the Company N.A. 2. Benefits derived as a result of the above R&D N.A. 3. Future plan of action N.A. 4. Expenditure on R&D: N.A. a) Capital N.A. b) Recurring N.A. c) Total N.A. d) Total R&D expenditure as a percentage of total turnover N.A. Technology absorption, adaptation and innovation 1. Efforts, in brief, made towards technology absorption, adaptation and innovation N.A. 2. Benefits derived as a result of the above efforts, e.g. product Improvement, cost reduction, product development, import Substitution, etc. N.A. 3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the Financial year), following information may be furnished : N.A. a) Technology imported N.A. b) Year of import N.A. c) Has technology been fully absorbed? N.A. d) If not fully absorbed, areas where this has not taken place, reasons thereof and future plans of action. N.A. MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL PERFORMANCE During the year under review, the Company has achieved a turnover of Rs.4773.55 lacs with a Net Loss of Rs. 6.19 lacs against the previous year Sales Turnover of' Rs. 5692.62 lacs and Net Profit of' Rs. 69.54 lacs. INDUSTRY STRUCTURE & DEVELOPMENTS With the liberalization of the Indian economy in 1991, the Dairy sector too was de-licensed which was earlier dominated by the Cooperative Sector. Indian Dairy Industries is heading towards an accelerated & positive momentum with accelerated growth in milk production by over two & half times in the two decades. India has emerged as the largest producer of milk in the world. The Company is a manufacturer of varieties of Dairy Products such as Pure Ghee, Milk Powder, Pasteurized Milk etc. and is marketing its products under the brand name 'MILKTIME'. The Company is committed to provide Pure, Fresh & unadulterated Milk to the society at large. OPPORTUNITIES & THREATS The opportunities for the products of the Company are enormous because of essential nature and application to varieties of uses. With the rising health consciousness among the people, demand for the products of Company will further increase. The expected rise in urban population and their purchasing power would be a boom to Indian Dairy. At present only few cities and towns are served by the organized milk sector in India. This leaves the organized sector with huge untapped market. As your Company is also operating in the liquid milk market, there exists a vast opportunity for increasing the share in the liquid milk market. There are large numbers of Milk Dairies operating in the unorganized Sector producing Dairy products with adulterated and unhealthy Milk. Since these products are cheap, they cause strain on the marketing and pricing policies of the Company. OUTLOOK Considering the growth potential in the Liquid market, your Company has drawn plans to increase its market share in the existing markets and to enter into new markets by providing Fresh and unadulterated Milk. RISK & CONCERN The real risk and concern to the Company is the fluctuation in prices of Raw Milk not directly related to the selling prices in the market. Dairy Industry is dependent upon the assured supply of quality Raw Milk at competitive & predictable prices. Fluctuation in Raw Milk prices and deficiency in rain falls due to adverse climatic conditions present a business risk. Milk is highly perishable commodity. There exists an inherent risk due to delay in transport bottlenecks and breakdown of Machinery. SEGMENT WISE OR PRODUCT WISE PERFORMANCE The Company deals with only one segment i.e. Milk and Milk products. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company ensures existence of adequate internal control and procedure at various levels in the Company commensurate with the size of the Company and the nature of its business for the purchases of Stores, Raw Materials including components Plant & Machinery, Equipments and other Assets, and for the sale of goods. HUMAN RESOURCES DEVELOPMENT & INDUSTRIAL RELATION The current strength of the manpower is 54 besides employing worker on contract basis. Industrial relation at the plant during the year were cordial. 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, plan 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.