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Punsumi India Ltd.

BSE: 517049 Sector: Engineering
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Punsumi India Ltd. (PUNSUMI) - Director Report

Company director report

PUNSUMI INDIA LIMITED ANNUAL REPORT 2000-2001 DIRECTORS' REPORT Your Directors take pleasure in presenting the Fourteenth Report and Audited Accounts for the period (18 months) ended 31 March 2001. MANAGEMENT DISCUSSION & ANALYSIS (MD&A) Operations (Financial Review) The company achieved Gross Sales of Rs.1020.83 Lakhs during the period under review (previous year: Rs.788.30 Lakhs) This increase In sales was achieved despite crippling working capital constraints and the fact that sales and production had plummeted to an all time low in January 2000 to Rs.29.55 lakhs (due to lack of production). The Kuwait Projects Co. (Holding), Kuwait (KIPCO) was approached for emergency help in February 2000 With KIPCO's investment of USD 1,00,000 (received in March 2000) the company managed to increase production to a peak of 7 million pcs in June 2000. For comparison, the average monthly sale between 1, October 1999 and 31 March 2000 was 3.17 Million pcs (average value: Rs.52.01 Lakhs) and the monthly average sale between 1, April 2000 and 31 March 2001 was 4.16 million pcs (average value: 60.27 Lakhs). Further, the company has managed to increase its average monthly sale in terms of quantity and value since 1, April 2001. This has been made possible despite the persisting tight liquidity and non-availability of conventional banking facilities. It is also noteworthy that through its cost cutting measures the company has managed to limit its loss for the current 18 months period ending 31, March 2001 to Rs.847.69 Lakhs against a loss of Rs.902.24 lakhs for the previous year (12 months). Future Outlook Your company is registered with BIFR and a Rehabilitation Scheme was sanctioned by BIFR on 9, December 1999, according to which the company was to make one time settlement (OTS) payment to Financial Institutions and other lenders by 28, Feb. 2000. The Rehabilitation Scheme was to be funded partly by Kuwait Projects Co. (Holding), Kuwait (KIPCO) (US$ 1.5 Million) and the balance through fresh loans. The company despite its best efforts could not obtain the required funds and the payment to the Financial Institutions and others is still pending. However, the company is now renegotiating with the Financial Institutions and other secured creditors for a fresh OTS scheme with KIPCO having agreed in principle to provide all the required funds subject of course, to a satisfactory OTS with the Financial Institutions and other secured creditors. The entire OTS process is expected to be completed soon, after which a new scheme for rehabilitation is expected to be forwarded to BIFR for its final approval. Once the proposed funds are inducted into the working capital your company will once again be on a fast growth track. Though, the general slowdown in the industrial production continued in the first three months of the current financial year, the electronics sector is now showing promising signs with the CTV sector recording a growth of 18% in July 2001 The monsoon has been by and large good all over the country raising expectation of good agricultural production which in turn is expected to boost industrial growth in the remaining months of the financial year. Industry Structure and Developments The electronic component industry continues to suffer due to lacunae in the import duty structure which were expected to be removed in the last national budget but were not. Sustained efforts are on to get the anomalies of considerably higher import duties on inputs than on the finished product removed. Another serious obstacle to the growth of the electronic component industry is the high incidence of import duty on capital goods. There is practically no local production of the sophisticated machines and other equipment needed to produce electronic components. The high tariff of 25% on import of capital goods renders new projects/expansion uncompetitive esp. when compared to imports of electronic components from countries like China. These matters have once again been brought to the attention of the Finance Minister recently who has promised to remove these lacunae - some immediately and some in the next budget. Under these circumstances the industry has also requested the Finance Ministry not to prepone the NIL duty regime on electronic components to March 2003 from the originally scheduled date of March 2005 committed with the WTO. Opportunities and Threats India's production of electronic components pales in comparison to even small countries like Singapore, Taiwan, Malaysia and now China. India can not possibly achieve the ambitious targets set for the growth of PCs, Telecommunication etc. if there is no matching growth in the local production of electronic components obviously. there exists enormous opportunity for growth in the field of electronic components. The threats emanate from the ability of countries like China to achieve substantial reductions in costs of production due to clear and focussed policies resulting in an efficient infrastructure, practical labour laws, much lower cost of capital etc. These together lead to fast turn-around times, something India still does not seem to appreciate. Your company, with a balanced production capacity of 20 Million pcs per month is well placed to exploit the damaged-supply gap in the Indian market (elcos). Despite the problems cited above, Punsumi has developed a strong technology base and flexible and highly productive manufacturing systems to offer competitive and high quality products. We further plan to boost the production of large can size capacitors and high voltage capacitors for which the production capacity has been languishing due to lack of materials. Risks and Concerns The reforms process which begain a decade back has certainly dismantled the license regime but there is little improvement in the complicated and cumbersome procedures still operative in the revenue departments of the Govt. These work to nullify the benefits of liberalisation. While an imported air consignment can be cleared in less than two hours in countries like Japan, South Korea and even in China, it takes at least two days in India. Revenue department formalities associated with Exports still cause delays and involve avoidable expenditure. These are only a few examples A lot needs to be done to remove such invisible shackles if the industry is to match the dynamism of a country like China. Adequacy of Internal Control The company has adequate internal control systems commensurate with its size and the nature of its business. Share Capital During the period your company has allotted 4,34,900 equity shares of Rs.10 each at par to Kuwait Projects Co. (Holding) by way of preferential allotment. Human Resource Developments and Employee Relations Your company is quite conscious about Human Resource Development and attaches high value to various HRD programmes. Your Directors are pleased to report that the employee relations remained cordial during the period and the in-house activities of training, evolutions, reward and promotions continued though scaled down due to financial constraints, throughout the period under review. Information pursuant to provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (particulars of employees) Rules, 1975, as amended is set out in Annexure-1 and forms part of this Report. SUBSIDIARY COMPANY The Annual Accounts of the Subsidiary - Punsumi Engineers Limited for the year ended 30 Sep. 2000 are appended in the detailed report pursuant to the provisions of Section 212 of the Companies Act, 1956. DIRECTORS Changes The following changes have taken place since the last Annual General Meeting: Shri. Puneet Bhargava was appointed as Whole Time Director in the last Annual General Meeting of the Company. Nomination of Shri. Jawahar I Mehta was withdrawn by IDBI. Nomination of Shri Deepak Ghosh was withdrawn by IFCI Limited and Shri. E.V. Nair was nominated in his place. Col. B.K. Rai is retiring by rotation at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment. Directors Responsibility Statement As required under Section 217 (2AA) of the Companies Act, 1956 your Directors state:- - That in preparation of the Annual Accounts for the period (18 months) ended 31 March 2001, the applicable accounting standards have been followed alongwith proper explanations relating to material departures; - That the Directors have selected such accounting policies and applied them consistently and made judgements 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 Accounting Period and of the Profit or Loss of the company for the period under review. - That 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; - That the Accounts for the period (18 months) ended 31 March 2001 have been prepared on a going concern basis. AUDITORS & AUDITORS REPORTS M/s. Doogar & Associates, Chartered Accountants Auditors of the company retire at the conclusion of forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. The company has received certificate from the Auditors to the effect that their re-appointment, if made would be within the prescribed limits under Section 224 (1) of the Companies Act, 1956. The notes to the accounts referred to in the Auditors Report are self-explanatory and therefore, do not call for further explanation. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS / OUTGO. Information in accordance with Section 217 (1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988 is set out in Annexure - 2 forming part of this report. LISTING FEES Your company has not paid the listing fees of the Jaipur Stock Exchange due to liquidity problems faced by it. COMPLIANCE CERTIFICATE A certificate from the Auditors of the company regarding compliance of conditions of Corporate Governance as stipulated under clause 49 of the Listing Agreement is attached to this report as Annexure-3. CAUTIONARY STATEMENT The views and futuristic statements contained in this report are the perception of management and subject to certain risks and uncertainty that could cause actual results to differ materially from those reflected in such statements. Readers should carefully review the other information in this Annual Report. The company undertakes no obligation to publicity update or revise any of these futuristic statements, whether as a result of new information or future events. ACKNOWLEDGEMENTS Your Directors express their sincere appreciation for the cooperation and help received from the Financial Institutions, Banks and Government Agencies. The Directors are also thankful to KIPCO for extending the timely help without which it would have been impossible to sustain production and sales. The Directors further thank KIPCO for agreeing in principle to invest in Punsumi and arrange all funds required for the restructuring of the company. Your Directors also wish to place on record their appreciation for the contribution made by employees at all levels during the period under review. For and on behalf of the Board V.K. Bhargava Puneet Bhargava Chairman & Director Managing Director Place: Bhiwadi Date : 31 AUG, 2001 ANNEXURE TO THE DIRECTORS' REPORT (Information as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988.) A) CONSERVATION OF ENERGY The Management gives significant importance to conservation of energy and during the period has taken several measures for reduction in consumption of energy. The details of power consumed during the period are as per below: Current Annualised Previous Reduction Period Year (18 Months) Electricity Purchased No of Units consumed - 16,18,470 10,78,980 12,07,890 -10.67% Electricity generated from D.G. set No of Units consumed 47,103 31,402 42,173 -25.54% Form A is not applicable to the company as it does not fall under the list of Industries specified in the schedule to Rule 2. B) TECHNOLOGY ABSORPTION i) RESEARCH & DEVELOPMENT (R&D): The company gives top priority to its R & D activities and undertakes on a continuous basis activities related to development of new products, new designs, cost reduction, improvements in quality as well as design and development of machinery for manufacture of ELCOS. During the period the company has developed an Ageing and Testing machine and has been, recognized for its efforts by a National Award. ii) TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATION: The company is known for its ability to adopt technology changes and adapt them in its products and processes. The company keeps itself updated with all latest technological innovations related to its field. C) FOREIGN EXCHANGE EARNINGS & OUTGO (Amount in Rupees) Current Period Previous Year (18 Months) - Total Foreign exchange used 3,46,65,854 2,82.91.853 - Total Foreign exchange earned 59,92,096 50,90.903 For and on behalf of the Board V.K. Bhargava Puneet Bhargava Chairman & Director Managing Director Place: Bhiwadi Date : 31 AUG, 2001