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Renowned Auto Products Mfrs Ltd.

BSE: 505167 Sector: Auto
NSE: N.A. ISIN Code: N.A.
BSE 05:30 | 01 Jan Renowned Auto Products Mfrs Ltd
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Renowned Auto Products Mfrs Ltd. (RENOWNEDAUTO) - Director Report

Company director report

RENOWNED AUTO PRODUCTS MANUFACTURES LIMITED ANNUAL REPORT 2008-2009 DIRECTOR'S REPORT To The members of Renowned Auto Products Mfrs. Limited Your Directors have pleasure in presenting the 31st Annual Report and the Audited Accounts of the Company for the year ended 31st March 2009. FINANCIAL RESULTS The financial highlights are as follows: (Rupees In lakhs) 01.04.08 01.04.07 To To 31.03.09 31.03.08 Turnover 10,688.43 8,426.00 Prof & (Loss) before Interest & Depreciation (694.42) 8.80 Interest & Finance Charges 8.84 10.29 Profit (Loss) after Interest & before Depreciation (703.26) (1.49) Depreciation 175.49 91.18 Profit Before Tax (878.75) (92.67) Fringe Benefits Tax/Deferred Tax Liability/Asset (202.83) 9.98 Profit for the period under review (1,081.58) (82.69) Loss brought forward 1,328.53 1,245.84 Loss carried forward 2,410.11 1,328.53 The Directors report that in 2008-09 though there has been increase in sales by about 27% (approx) the Company has incurred a loss to the tune of Rs.879 lakhs. This is mainly on account of increase in Raw Material prices. Significant improvements are being made in the manufacturing area, by adopting Lean and Six Sigma methodology. Lean events are conducted to identify and remove bottlenecks in production flow. The company added fixed assets to the tune of Rs. 752.74 lakhs mostly as Plant and Machinery, to augment production capabilities and ensure better cost control for improved profitability. INDIAN MARKET CONDITIONS Indian Automobile Industry witnessed a growth of about 3.32 percent in April-March 2009 when compared to April - March 2008. DOMESTIC SALES The cumulative growth of the Passenger Vehicles segment during April - March 2009 was 6.75 percent over Previous Year. Passenger Cars grew by 9.62 percent, Utility Vehicles was down by 9.03 percent and Multi Purpose Vehicles were up by 5.79 percent in FY 2008-09. For the Passenger Vehicle segment expected Growth is 17% in 2009-10 and 94% 2014-15 with respect to Year 2007-08 Vehicle production. India has been identified as a Hub for Small Car Manufacturing for both Domestic and Export Requirement. Following are the Vehicle production Plan and Investment Plan for the Major Global Car Manufacturers in India. Passenger Car Segment: Hyundai: * Increased their capacity to 600,000 cars per annum. They introduced their Global Launch Car 110 and 120 last year. Nissan * Ashok Leyland and Nissan Motor Co., Ltd., signed a binding Master Co- Operation Agreement (MCA) for the formation of three joint venture companies supporting the Light Commercial Vehicle (LCV) business at a investment of USD 500mn. Investment got slight delayed by one Year due to Global Economic down trend. Tata Motors * The earlier plan of setting up a New plant to manufacture Rs. 1,00,000/- car in West Bengal with an investment of US$ 240million was suspended and New Plant at Sanad in Gujarat State is under progress. The Production is expected to commence from Dec 2009. Interim Plant at Pant Nagar has started producing Nano Car at the rate of 200 Cars per Day. Toyota * Target of 200,000 units capacity p.a. Start of Production expected by end 2010 & they are already looking at the small segment. General Motors * Additional Capacity to manufacture 150,000 cars p.a. from their Green Field Plant at Pune. Started producing M200 Spark car from Q3 2008 onwards and they are planning to launch M300 Global Mini Car in Q4 2009 from their Pune Plant. Mahindra & Mahindra: Constructing their new Commercial Vehicle plant in Pune with capacity of 100,000 Vehicles per year. First Vehicle to roll out in Q4, 2009. Nissan-Renault * Due to Economic Down trend Renault postpone their 50:50 JV, to make 400,000 cars a year with an investment of over US $ 1 billion. * Now only Nissan is investing as per their Plan to start their A segment compact Car from May 2010. New capacity would be around 250,000 Cars per Annum. VW: * Investing 400 million euro in a new plant in Pune. Operations are to start in Dec 2009 having the Plant Capacity of 100K cars per Annum. Honda Investing US $ 250million in a new plant in Rajasthan with capacity of 60,000 car per year First car to roll out in 2009. FIAT: * Restarted their Ranjan Gaon, Pune Plant having the Plant Capacity of 100K cars per Annum. Ford * Plans to invest US$ 500 million including the expansion of Ford India's current manufacturing facility in Chennai, India. Commercial Vehicle Segment The Commercial Vehicles segment has been heavily affected and there is very serious Down Trend. In Medium & Heavy Commercial Vehicles it was (33.16) percent and Light Commercial Vehicles it was (7.10) percent compared to Previous Year 2 and 3 Wheeler Segment Two Wheelers had a marginal Growth of 2.60 percent and Three Wheelers sales dropped by 4.13 percent during April 08- March 09 compared to the corresponding period previous year. EXPORTS Automobile Exports registered a substantial growth of 23.61 percent during April- March 2009 over the same period during the previous year. TENNECO'S ALIGNMENT WITH MARKET Nissan, has awarded Development and Supply of Strut and Rear Shocks for their A Segment Compact Car. Tenneco met all the project Milestones on time and expecting the start of Mass production from May 2010. Tata Motors, have awarded our Company their New Indica Vista and Tata Nano small Car. Tenneco successfully supported the development activity and started Mass production from Aug 2008 for Tata New Indica Vista at Pune and Dec 2008 for Tata Nano from their Interim Plant at PantNagar due to the issue at Singur Plant construction. For Toyota India Small Car, Company has been awarded to develop and start Mass production for Strut and Rear Shocks. Start of Mass Production is expected around Oct 2010. Mahindra & Mahindra, have awarded Company Xylo, LTV and U 202 vehicles for Development and is starting Mass production for Strut and Rear Shocks. Present Status * Company has successfully supported Development and Started Mass Production for Xylo from Dec 2008. * Development for LTV is under progress and Start of mass production is expected around Oct 2009 from their newly built Pune Plant. * Development started from July 2009 for recently awarded U202 Business. Ford India, has awarded our Company their 8517 project for the development and Supply of mass production. FUTURE PROSPECTS Tata Motors Successful launch of Indica Vista and Nano. Tata team interested to send RFQ for commercial Vehicles and Crossover Vehicle too. Volvo Trucks They are interested to work with Company for Heavy Duty Trucks and Trailers. We are in the preliminary stage to receive their RFQ. Diamler India They have sent the RFQ for their upcoming Heavy duty Commercial Vehicles and we have submitted the Quotation too. Ford India Atter successful support for 8517 project, we started getting all the new RFQ's from Ford India and currently we are working for 2 RFQs. In the last four years the Company's product mix has changed gradually from 2- wheel Shocks to 4-wheel Shocks and Struts. In 4-wheeler applications for the last four years we have been awarded the deveiopment and supply of Rear Shocks and Front Struts for the above mentioned platforms from various customers. Apart form the above the company is working on various new platforms with various Global Customers like Renault-Nissan JV, Maruti Suzuki, Nissan, Ford and Reva Electric Car in passenger car segment. Also we are working for the Heavy Duty application shocks for the customer like, Taco Hendrickson, Mahindra Internationals, Ashok Leyland -Nissan JV, Volvo and Diamler India. For the two wheeler market as we do not have the technology for Front Fork we had constraint to approach. Tenneco acquired M/s Marzocchi an Italian Two wheeler Front fork and Rear shocks manufacturing company. With this Tenneco now has very good business opportunity with Two wheeler Manufacturing Original Equipment Manufacturers (OEMs) like TVS Motors, Royal Enfield Motors for Two wheeler Market also. Tenneco expects substantial business from the above-mentioned customers. The company has successfully obtained very prestigious business from new OEMs and we booked business that Triple our revenue in next 2 to 3 Years. This is very significant measure of our success in this Industry. With this we upgraded our Hosur Plant Line A and Line B inline with European standard of manufacturing capabilities. There will be a Line C which we plan to install in Year 2009 inline with Customer Launch Plan. The company is receiving a huge number of Requests for Quotation (RFQ) from OEMs both in India and overseas. This positive indication provides confidence and opportunity to grow business. Converting the above RFQs to orders would ensure revenue growth in the medium to long term. The Company has plans to improve business in 2 Wheeler with the help of Tenneco Europe and with the Technical know-how from Marzocchi - Italy the company expects to improve its business in this segments. Quotation submitted for Suzuki Motors Spain and Yamaha Motors for Front Fork and Rear Shocks. As done in 2008-09 the Company would work closely with Tenneco Europe and North America to enhance exports. Exports shall continue to be a major thrust area and the quantum of orders received is increasing both in Export Aftermarket and in OE Business. The company has given a big thrust to the after-market. We serve more than 500 Distributors and Retailers including NAPA, TEMOT Autoteile, ADI, Advance Auto Parts O'reilly Automotive, Kwik-fit Europe, Uni-Select and Pep Boys and major new product and new brand launches are planned in current and future years to enhance market share and volumes. We are developing advanced technologies and targeting growth markets including expanding our presence in the Heavy duty Commercial and Speciality Vehicle Market for both Shock Absorbers and Elastomer products. In 2006-07 the Government of India had taken a number of initiatives like Automotive Mission Plan (AMP) launched by Prime Minister Dr. Manmohan Singh for Heavy Industry and Public Enterprises for the benefit of Indian auto industry and also announced India as a major small car hub and as result of this both Indian and Global OEM's expanding their existing facilities and Installing new plants for the manufacture of Passenger vehicles and Commercial vehicles and Two & Three wheelers. Major Expansions happening in Hyundai, Maruti Suzuki, FIAT, TKML, TATA Motors, Honda Motors for passenger vehicles and new entry has been made by OEM's NISSAN, VOLKSWAGEN, Mahindra International etc. The Company is planning to become a major base of shock and struts manufacturer for the small cars, Heavy-duty application and two wheelers segments. SCHEME OF ARRANGEMENT As the Shareholders are aware the Company for sometime had under consideration a Scheme of Arrangement for reduction of Share Capital of the Company. In this regard the Company had approached you for the sanction of the Scheme in December 2008. Consequent to your approval the Company has filed a Petition in the Hon'ble High Court of Judicature, Madras and the matter is pending before the High Court. Based on the order further action would be taken. DIRECTORS Mr. Abhijit Mukherjee was appointed as an Additional Director w.e.f. 25.11.08. His re-election as Director liable to retire by rotation is being sought at the forthcoming Annual General Meeting. Ms. Shweta Dubey Alternate Director of Mr. Hari Nair has resigned w.e.f. 19.7.09. Mr. Hari Nair retires by rotation at the ensuing Annual General Meeting of the Company, and being eligible offers himself for reappointment. Mr. Ravichandran, Mr. Michael John Charlton, Mr. Horace Vincent draa continue to be Directors. The application of appointment of Mr. Michael John Charlton as Managing Director is pending with the Government. Mr. Rajarshi Chakrabarti continues to be the Alternate Director for Mr. Horace Vincent Draa. AUDITORS M/s Haribhakti & Co., Chartered Accountants, retire as statutory auditors at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The declaration under Sec 224 (1B) has been received from M/s. Haribhakti & Co. in relation to their proposed reappointment. AUDIT COMMITTEE The Audit Committee members are Mr. Abhijit Mukherjee, Mr. Horace Vincent Draa, Mr. Ravichandran and Mr. Hari Nair. The Committee has appointed Mr. Abhijit Mukherjee as its Chairman. ACQUISITION OF COMPANY'S EQUITY SHARES BY HOLDING COMPANY UNDER ITS LETTER OF OFFER As the members are aware, the equity shares of the company were originally listed at Madras Stock Exchange. The company's holding company Hydraulics Private Limited (now Tenneco RC India Private Limited) issued a Letter of Offer dated 29th August 2000 to the shareholders of the company to buy their equity shareholdings. Consequent to the increase in shares held by the holding company, the Company sought and obtained consent from Madras Stock Exchange for de- listing the shares with effect from 27th August 2001. In April 2009 another offer at the rate of Rs.10 per share was made for purchase of shares by Promoters. as per the direction of Hon'ble High Court of Judicature, Madras. As on date the Holding Company hods in all 17,429,203 equity shares (over 98%) in the capital of `he Company. DIRECTORS' RESPONSIBILITY STATEMENT The Board wishes to state that: 1. In the preparation of the annual accounts, for the year ended 31st March 2009, the applicable Accounting Standards have been followed and that there are no material departures. 2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2009 and of the profits of the Company for the year ended on that date. 3. The Directors have taken proper and sufficient care for the maintenance of adequate records in accordance with the provisions of Companies Act 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 year ended 31st March 2009, on going concern basis. AUDITOR'S REPORT TO THE SHAREHOLDERS In point 2(a) the Auditors have stated that the inventory with sub contractors have not been verified. In this regard the Directors wish to state that Physical verification of Subcontractor's end is an ongoing exercise and continuing process. A round of verification has been done as on 4th April 2009 and necessary provisions have been made for any probable differences in stock after a detailed reconciliation/negotiation with the sub contractors. In Point No 2(c), 7 of the Annexure to the Auditors Report the Auditors have suggested that the existing internal control procedures and the scope of Internal Audit systems need to be strengthened to make it commensurate with the size and nature of business. In this regard, Directors wish to state that the scope and procedures will continue to be strengthened in accordance with Tenneco's own standards and statutory requirements. This together with the implementation of SAP a well known ERP package will greatly strengthen the Internal control procedures. In point No 9 of the Annexure to the Auditors report, the Auditors have pointed out that the Company has been regular in the Deposit of Statutory dues except for an amount of Rs. 672,176/- on account of Sales Tax. In this regard the Director's wish to state that the Company has filed an appeal against concerned authorities and the Company would take necessary action based on the outcome of the appeal. PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956 Details of the employees receiving the remuneration of Rs.2 lakhs per month or 24 lakhs p.a. during the year is attached (Annexure C) The particulars required under Section 217(1)(e) of the Companies Act, 1956 are given in Annexure to this report. EXPORTS AND IMPORTS The value of imports on CIF basis in 2008-09 was Rs.1,292.61 lakhs. The FOB earnings in foreign exchange were at Rs. 673.80 lakhs and expenditure in foreign currency were Rs. 8.08 lakhs. ACKNOWLEDGEMENT The Board of Directors place on record their appreciation for the cooperation extended by the Company's Employees, Customers, Suppliers and its Banker's. For and on behalf of the Board Date : 25th August, 2009 Abhijit Mukherjee Rajarshi Chakrabarti Place: Bangalore Director Director ANNEXURE TO REPORT OF DIRECTORS Information under Section 217(1) (e) of the Companies (Disclosure of particulars in the report of the Directors) Rules 1988 and forming part of the Directors' Report. FORM-A 01.04.2008 01.04.2007 to to 31.03.2009 31.03.2008 1. Power & Fuel Consumption i) Electricity a) Purchased Units (KWH) 1,695,995 2,024,191 Total amount (Rs.) 8,089,956 9,395,993 Rate/Unit (Rs.) 4.785 4.64 b) Own Generation through Diesel Generators: Units (KWH) 497690.5 163,010 Units per litre of Diesel 2.82 3.34 Cost of Diesel per KWH (Rs.) 12.79 10.20 ii) Furnace Oil Quantity (K. Litres) Nil Nil Total Amount (Rs.) Nil Nil Average Rate (Rs.) Nil Nil Note: Diesel consumed for preheating Painting plant is 113,536 litres (P.Y. 192,483 litres) valued at Rs. 4,083,889/(P.Y. Rs. 6,573,420/-) not included in the above. 2. Consumption per Unit of Production Shock Absorbers Shock Absorbers Units (in nos) 2,024,126 2,133,373 Electricity 1.08 1.03 Furnace Oil Nil Nil For and on behalf of the Board Place: Bangalore Date : 25th August 2009 Abhijit Mukherjee Rajarshi Chakrabarti Director Director FORM B 1. Specific areas in which Research and Development, were carried out by the Company: (i) New Product Development (ii) Constant design updating (iii) Low cost Shock (iv) Value Engineering (v) Global valve technology (vi) Standardization (vii) Product Testing & Evaluation (viii) Ride tuning trials (ix) Special proto samples (x) Alignment with Tenneco (xi) Localization of parts (xii) Program Management (xiii) 3D drawing and analysis (xiv) Finite Element Analysis (xv) Sintered parts 2. Benefit derived as a result of the above Research and Development (i) Cost Reduction (ii) Adherence to time line by following NPIS (iii) Technical know how of the Engineers (iv) Reduced field complaints and enhanced customer acceptance (v) Product Quality Improvement (vi) Customer's Satisfaction (vii) Award of new Global Business (viii) Competitive Advantage (ix) Smooth launch of products in market 3. Future Plan of Action i) Development of new varieties of gas filled Struts and Shock absorbers with 'Global Valve' for better performance. Improvement in product quality, Technology up gradation & modernization ii) FEA software iii) Training of Engineers in Europe at different Technical centres. iv) Enhancing the testing capability by installing Noise Testing facility v) Design and development of Full Module for Strut. vi) Installation of additional Catia stations for 3D drawings vii) Localization of the remaining components such as oil, rebound bumper etc viii) Launch of Low cost Shock in market ix) Installation of R&D test machine at Bawal plant x) Installation GPDM 4. Expenditure in R & D a) Capital Expenditure Nil b) Recurring expenses for the year Rs. 78,27,871 c) Total Expenditure Rs. 78,27,871 d) Total R & D expenditure as percentage of total turnover 0.73% 5. Technology Absorption, Adoption & Innovation: 1. Efforts in brief made towards technology absorption, adoption and innovation. a) Three new test machines have been installed in R&D to validate the parts as per customer's requirement in India. With these facilities 80% of the testing are being done locally. Customers often witness these tests. b) NPIS is being followed for all new OE products c) Ride Tuning truck has been made ready to do Ride tuning trial at customer's end. Several Tuning trials have been done using this truck at Customer end. Customers are very happy with this facility. This has given edge over the competition This truck is equipped with all the requisite facilities like Dynamometer, Work bench, Gas filling arrangement, Drilling machine, Riveting machine, Modular assembly fixture etc. d) Introduction of Global valve for new projects. e) DWO system being followed in Proto cell and CAD department 2. Benefits derived as a result of the above efforts (e.g. product improvement, cost reduction, product development, import substitution, etc) a) We have won new businesses from Global customer such as Toyota, Suzuki, Nissan, Ford. b) Improvement on quality and reliability c) Customer Satisfaction d) Capability of Indian Engineers e) Standardization of the product. f) Products at competitive price. g) Timely supply of proto samples to customer 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: 3.1. a) Imported Technology: Banded piston designed Struts and Shock Absorber, Gas charged Struts and Shock Absorbers, Direct sealed over Struts and Shock Absorbers. b) Year of import 2002-04 c) Has the technology been fully absorbed Yes 3.2 a) Imported Technology : Global valve for Strut and Shocks b) Year of import 2007-2008 c) Has the technology been fully absorbed Yes. Maruti YV4 (Ritz) product is with this technology. launched This has given very good ride and handling comfort. Positive feedback from market.