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Pentafour Products Ltd.

BSE: 500328 Sector: Engineering
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Pentafour Products Ltd. (PENTFRPROD) - Director Report

Company director report

PENTAFOUR PRODUCTS LIMITED ANNUAL REPORT 1999-2000 DIRECTORS' REPORT Your Directors' are pleased to present the Sixteenth Annual Report and the Audited Accounts for the financial year ended 31st March 2000. Reserves and Surplus The reserves and surplus of the company stood at Rs. 11,344.09 lakhs as at 31st March 2000. Business Review The performance during the year under review has been significantly lower. Scarcity of adequate working capital, low productivity, continuing recession in the auto and electronics market have been the reasons for the significant drop in the revenues and accumulation of losses during the period. The delay in tie up of funds which was envisaged at the commencement of the year has resulted in considerable loss of potential business opportunities in the auto and electronics (copper clad laminates) segment. However operations in the chemicals division stabilised during the second half of the year. These events have to a large extent led to under utilization of plant capacities and low productivity levels resulting in higher losses during the year. With the entry of multinationals with large capital outlay, lowering of import tariffs and the unhealthy competition from the unorganized sector, the electronics & air conditioning market is undergoing a transition. The company has a minor presence in these segments and given the scenario above it has been consciously decided to cease operations in, these areas in the current year and focus in areas where the company has its inherent strength. The company would hitherto focus all its resources in consolidating its existing presence in auto components, chemicals and electronics (copper clad laminates) in the years ahead. In addition to decline in normal business operations,modernisation of the existing plants, manpower rationalisation and the much desired commencement of commercial production in the copper clad laminates plant could not be achieved during the year due to the delay in the tie up of short term and long term resources. Concentration of large investments in the copper clad laminates project and the delay in achieving commercial production has deprived the other performing and profit making divisions of the much required working capital & capital investments for modernisation. Recognising the need to provide requisite impetus for achieving higher levels of performance, the board has identified the three segments where it has inherent strength, namely, auto components, chemicals and electronics (copper clad laminates) as core areas for growth. A detailed study of the steps required to achieve this objective is in progress; suitable remedial measures including manpower rationalisation would be identified and implemented during the current year. Positive results from these remedial measures would gradually accrue and this enhance performance and profitability in a couple of years. Consent of the members of the company was accorded to the board at the previous annual general meeting to raise resources from tune to time not exceeding US $50 million by issue of appropriate securities as determined by the Board to liquidate its existing high cost borrowing, modernisation and meet its working capital requirements. The board is pleased to state that the company has identified a group of high net worth overseas bodies corporate and has in, principle tied up foreign investments viz.; initial issue of securities aggregating to US $ 25 million, finer details of the investments are in the process of being finalised. The investment by the group of foreign investors in the securities proposed to be issued by the company, though initially limited to infusion of funds, is in the imminent future expected to culminate into a long term strategic business partnership. As a corollary to the decision by the foreign investors to strategically associate with the company and became business partners in the long run, they have appointed Bower Cotton, London, United Kingdom, a solicitors firm of international repute with a business standing of over 175 years, to advise and assist the present and prospective investors who have evinced interest In investing in the company. Consequently, they have nominated Mr. Paul Francis Simms, Solicitor & Senior Partner, Bower Cotton to represent the investors as Director on the board of the company. The board places on record its appreciation for the assistance and advice being rendered by Mr. Paul Francis Simms in the financial and business restructuring of the company. Amidst the delay in tying up the requisite. funds to liquidate the existing high cost borrowings, as earlier indicated in our previous report, the banks & financial institutions who had recalled the facilities and advances besides initiating judicial proceedings have further obtained orders for possession of the secured properties of the company. However, in light of the strategic tie up and the imminent disbursement of funds by the foreign investors, the banks and financial institutions have at the request of the company consented to defer legal proceedings /possession of assets of the company. Negotiations are under way with the banks and financial institutions for one time settlement of dues; the process would be completed before the end of the current year. Significant concessions and savings in interest costs are expected to accrue as d result of this exercise, appropriate adjustments have been made in the financial statements to reflect these changes; the liabilities have been accordingly reinstated. The Company could not replenish adequate cash flow for timely redemption of redeemable preference shares. In the backdrop of the above developments and the strategic financial and business restructuring now in progress, the board is confident of improved performance and profitability In the years ahead. Dividend The Directors do not recommend dividend in view of minimal operations and negative performance for the year under review. Directors Dr. Jewan Prakash Raina and Mr. S. Krishnamoorthy, Directors, retire by rotation and being eligible offer themselves for re-appointment. Mr. V. Ramakrishnan, Managing Director, whose term expires on 22nd,October 2000 has been re-appointed as Managing Director, subject to the consent of the members, at the meeting of the Board of Directors of the company held on 29th September 2000. The Board recommends approval by members of the re-appointment of Mr, V. Ramakrishnan, as Managing Director of the company on the existing terms and conditions and subject to the provisions contained in Schedule XIII to the Companies Act, 1956 set out in detail in the notice to the members. Mr. Paul Francis Simms who was appointed as Director on the Board with effect from 20th April 2000 retires at this Annual General Meeting and is eligible for re-appointment. The company has received notice under section 257 of the Companies Act, 1956 from a member proposing the candidature of Mr. Paul Francis Simms as Director. Auditors Messrs. R. Swaminathan & Co, Chartered Accountants, Chennai hold office until the conclusion of this Annual General Meeting. The company has received a letter from R. Swaminathan & Co to the effect that their appointment, if made would be within the limits prescribed under section 224(1B) of the Companies Act, 1956 and thus eligible for re- appointment. Messrs. S. Viswanathan, Chartered Accountants, Chennai have expressed their inability to act as auditors due to their other official commitments. Year 2000 Compliance The Year 2000 transition was smooth without any disruption to the operations of any of the Divisions of the company. Dematerialisation of shares The Securities and Exchange Board of India, vide circular dated 29th May 2000 directed the company for compulsory dematerialisation of shares of the company by all class of investors with effect from 30th October 2000. 1n order to conform to the requirements of the Depositories Act, 1996, it is necessary to introduce a new article in the Articles of Association of the company, However the company has approached SEBI and sought time to go in for compulsory dematerialisation effective 1st April 2001. Necessary resolutions for alteration/ amending the Articles of Association is placed before the members for their consent. Corporate Governance As per the amended provisions of the Listing agreement it will be mandatory for your company to implement corporate governance during the financial year 2001-2002. Necessary steps will be taken to ensure the implementation of the same before the prescribed date. Public Deposits The aggregate amount of deposits from public as at 31st March 2000 is Rs.3.95 crones, which includes a deposit of Rs.2 crores from an institution. Of the above, unclaimed deposits amount to Rs.0.06 crores, deposits matured and remaining outstanding for repayment aggregates to Rs.3.70 crores. On account of the recurring losses and tight liquidity condition, there has been a delay in repayment of the deposits. The Company continues to progressively repay deposits in a scheduled manner. The Board records its grateful appreciation for the understanding shown by the deposit holders. The Board has taken a decision to repay the matured deposits in full as and when the funds are in place. The company has discontinued acceptance/ renewal of deposits. Personnel The particulars of employees under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of employees) Rules 1975 forms part of this Report. However as per the provision of section 219(1)(b)(iv) of the Companies Act, 1956 the report and accounts are being sent to the shareholders of the company excluding the statement of particulars of employees under section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the said statement may write to the registered office of the company. The relations with the staff and workers union continue to remain cordial and harmonious. Conservation of Energy Technology, Absorption and Foreign Exchange Earnings/Outgo The thrust on energy conservation continued though energy consumption at the Company's factories is not a major cost factor. Energy consumption devices have been installed where appropriate and steps taken to conserve energy from time, to time. The statement in Form B pursuant to section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of the Board of Directors) Rules 1988 is given in the annexure forming part of this report. Acknowledgements Your directors wish to place on record their gratitude to the various government departments of the Central and State Governments, Financial Institutions and Banks for their valuable co-operation and assistance. Your directors also wish to place on record their appreciation of the whole hearted and continued support extended by. the shareholders and investors who have always been a source of strength to the company. Your directors are sure that the share holders would like to join them in conveying their appreciation to all ranks of Company's employees for their dedicated service during the difficult period which the company is going through. On behalf of the Board V. RAMAKRISHNAN Chennai Chairman & 27.11.2000 Managing Director ANNEXVRE TO DIRECTORS' REPORT FORM B Disclosure of Particulars with respect to Technology Absorption Research and Development (R & D) 1. Specific areas in which R & D is carried out by the Company : The Company has in-house R & D Departments in Auto, Chemical and Electronics Divisions. The R & D efforts are directed towards quality control, improvement / upgradation of existing products and development of new products. 2. Benefit derived as a result of the above R&D : improvement in quality, cost effectiveness and realisation of higher levels of production. 3. Future plan of action : Consolidation of the results achieved, pursue, Improvements in the above areas to achieve international quality standards. 4. Expenditure on R & D (Rs. in thousands) a) Capital Rs. 232 (1999-Rs. 575) b) Recurring Rs. 137 (1999-Rs.1174) c) Total Rs. 369 (1999-Rs. 1749) d) Total R & D expenditure as a percentage of total turnover 0.06% (1999 - 0.14%) Technology absorption, adaptation and innovation 1. Efforts, in brief, made towards technology absorption, adaptation and innovation. Training and retraining of the existing personnel and the new personnel is being practised to ensure that the technology absorption is complete and transferred to new generation technical personnel. In the process of absorbing technology from M/s. Nationwide Circuit Products (NCP). 2. Benefit derived as a result of the above efforts etc. product improvement, cost reduction, product development, import substitution, etc. Achieving higher purity level and cost reduction in core business activities. Particulars of Imported Technology a) Technology imported b) Year of Import c) Has technology been fully absorbed During the year 1999 - 2000 there was no import of technology. d) If not fully absorbed, dress where this has not taken place, reasons therefore, and future plans of action.