UBE INDUSTRIES LIMITED
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting their Annual Report together
with the Audited Accounts of your company for the year ended 31 March 2012.
During the financial year, your company has resumed operations in its
Projects Construction and Contracts Divisions and Engineering Division
apart from existing operations of infrastructure contracts and capital EPC,
ENGG & consultancy contracts.
FINANCIAL RESULTS For the year ended For the year ended
31 March 2012 31 March 2011
Income 22002114-00$ 1,81,68,550-00
Expenditure 12809983-00** 1,81,62,860-00*
Gross Profit (-9192131-00) 5690-00
Depreciation 9210298-00 9210298-00
Provision for Tax 0 0
PATD -18167-00 (-9204598-00)
Net Profit -18167-00 (-9204598-00)
Reserves & Surplus 90994189-00 9,10,12,356-00
*Inclusive of the expenditure pertaining to the cleaning and over oiling of
the plant and machinery of the company to revive the operations of the
** Inclusive of the expenditure pertaining to the cleaning and over oiling
of the plant and machinery pertaining to the welding division to revive the
operations of the company.
$ The progress and income generated in the operations of the infrastructure
development division and Projects division was not accounted as the result
of the non approval as on 31 March 2012 by the respective clients according
to the contract between the clients and the company.
Your company has revived its operations which were stalled due to a problem
caused by the Department of Industries, Government of Andhra Pradesh.
As you are fully aware that the operations of the divisions of the company
after de-merger of its four divisions will be functioning as independent
companies, however, the proposed planning has been shown below.
Projects Division: This Division will be functioned as UBE Projects
Limited. The company was incorporated on 4th September 2006 vide
incorporation/corporate identity no U 45101 AP 2007 PLC 051055 2006-2007
with the Registrar of Companies, Hyderabad, with main activities as EPC and
Turnkey Projects including fabrication. The existing land and buildings of
your company will be transferred to the division as per the scheme of de-
Engineering Division: This Division will be functioned as UBE Tools
Limited. The company was incorporated on 8th September 2006 vide
incorporation/corporate identity no U 74999 AP 2006 PLC 051086 2006-2007
with the Registrar of Companies, Hyderabad, with main activities as
manufacturing the Special Purpose Machines, Tooling Systems and other light
Engineering activities. This division is proposing to acquire the land and
construct the buildings; however, soon after the approval of de-merger
scheme, till the construction of buildings for operations,the division will
be functioned in rented premises.
Welding Division: This Division will be functioned as UBE Weldproducts
Limited. The company was incorporated on 28th August 2006 vide
incorporation/corporate identity no U 31909 AP PLC 050993 2006-2007 with
the Registrar of Companies, Hyderabad, with main activities as Manufacture
of Welding Consumables and Equipment. This division is proposing to acquire
the land and construct the buildings; however, soon after the approval of
de-merger scheme, till the construction of buildings for operations, the
division will be functioned in rented premises.
Automotive Division: This Division will be functioned as UBE Automotive
Limited. The company was incorporated on 4th September 2006 vide
incorporation/corporate identity no U63011 AP 2006 PLC 051054 2006-2007
with the Registrar of Companies, Hyderabad, with main activities as
assembly of Low Cost People Car.
Your company is in the process of initiating the operations of the
division, has been negotiating for the Technical Cooperation for long term
association with M/s. Zastava Automobili of Belgrade for the manufacturing
of their model Koral. Memorandum of Understanding is being executed with
them during the next financial year.
Your company is also exploring the Technical Cooperation for long term
association with few other reputed companies from Europe, USA and
Australia, for Automotive Division. On completion of the de-merger Scheme,
your company will become as a Holding Company for the four companies and
continue to be Engineering Company (without manufacturing activities in the
field of Turn Key Projects and Integrated Consultancy Company, and
Infrastructure Development Company including Marketing and Trading Company.
NOTES ON SUBSIDIARY COMPANIES
Your company has no subsidiary companies of now; however, your company is
proposing to acquire the controlling equity in UBE Automotive Limited, UBE
Projects Limited, UBE Tools Limited and UBE Weldproducts Limited, on
approval of de-merger scheme, by Honorable High Court of Andhra Pradesh.
Once the acquisition is complete, these companies will become as the
subsidiary companies to your company.
Your company has initiated certain infrastructure projects with the
Governments and Private corporate, one such project has been executed the
Memorandum of Understanding with the Government of Gujarath and others are
in pipeline, the same will be initiated as an SPV, which will become as the
Subsidiary Companies to your company.
Considering the long term interest of the Members and as a matter of
prudence it is proposed to plough back profits to build up own resources,
your Directors, therefore, have not recommended payment of cash dividend
for the period ended 31 March 2012.
Your company continues to record high priority in its contribution to socio
economic development particularly in the areas of Rural Health, education
etc., among the villages in the vicinity of the plant.
ENERGY TECHNOLOGY AND FOREIGN EXCHANGE
Information on conservation of energy, technology absorption and foreign
exchange earning/out go, as required to be disclosed in terms of 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 annexed
hereto and forms part of this report.
RESEARCH AND DEVELOPMENT
Your company is proposing to establish a Central Research Center in the
areas of Material Sciences and Engineering.
M/s. C V S Balachandra Rao & Co, auditors of your Company, who are retiring
at the Twenty Seventh Annual General Meeting and being eligible to offer
themselves for reappointment. Your Directors recommend that the appointment
of M/s. C V S Balachandra Rao & Co, Chartered Accountants as Auditors of
the company and recommend that authority be given to the Board of Directors
to fix up the remuneration.
Your company has constituted an Audit Committee to meet the requirements
under the provisions of Sections 292A of the Companies Act, 1956 and the
listing agreement with the stock exchanges. The committee is chaired by Mr
S Rahmatullah has taken over as the Chairman of the committee, who has 47
years of wide experience in the field of Secretarial Services, Teaching and
CORPORATE GOVERNANCE REPORT
A report on Corporate Governance Report and Management Discussions &
Analysis Report is annexed separately as part of the report.
CASH FLOW STATEMENT
A cash flow statement for the year's operation is appended.
Your company has not accepted any fixed deposits under the provisions of
Section 58(a) of the Companies Act, 1956 hence not applicable to the
All properties are insurable in the interest of the company including
buildings, plant and machinery and stocks have been adequately insured. As
required under Public Liability Insurance Act. 1991, your company has taken
necessary insurance coverage.
Mr. M Chandramouli and Mr. M S Rajaneesh Chandra retire by rotation and
being eligible to offer themselves for reappointment.
Your company has planned to develop ancillary companies wherein the
products of ancillary Companies will be used in the products of your
Employee relations remained cordial at your company. Your Directors take
this opportunity to record their appreciation for the out standing
contribution of all employees of your company. Particulars of employees is
required to be furnished in terms of the rules framed under Section 217
(2A) of the Companies Act, 1956 as amended by the Companies (Amendment)
During the period, there were no employees drawing remuneration of more
than Rs.12,00,000/- or more per annum or Rs 1,00,000/- per month,
therefore, no particulars of employees. Towards the foreign travel by the
executives if any during the year are reimbursed in INR as equivalent to
the exchange rate prevailing the time of travel.
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION ETC.
In accordance with the provisions of Section 217 (1) (e) of the Companies
Act, 1956, the required information relating to Conservation of Energy,
Technology Absorption and Foreign Exchange earnings and outgo is annexed.
DIRECTORS' RESPONSIBILITY STATEMENT AS PER SECTION 217(2AA) OF THE
COMPANIES ACT, 1956
Responsibilities in relation to financial statements:
The financial statements have been prepared in conformity, in all material
respects, with the generally accepted accounting principles in India and
the accounting standards prescribed by ICAI in a consistent manner and
supported by reasonable and prudent judgments and estimates. The Directors
believe that the financial statements reflect true and fair view of the
financial position as on 31.03.2012.
The financial statements have been audited by M/s. C V S Balchandra Rao &
Co, Chartered Accountants in accordance with generally accepted auditing
standards which include an assessment of the systems of internal controls
and tests of transactions to the extent considered necessary by them to
support their opinion.
In the opinion of the Directors, the Company has started the operation in
the main business activities, Manufacturing of Welding Consumable and
Equipment, Design, Fabrication, Erection and Commissioning of Process
Plants (EPC and Heavy Fabrication), Design, Manufacture, Erect ion and
Commissioning of Special Purpose Machine Tools and Tooling Systems, and
Infrastructure Development and accordingly it is considered appropriate to
prepare the financial statements on the basis of going concern. Maintenance
of accounting records and internal controls
The company has taken proper and sufficient care for the maintenance of
adequate accounting records as required by the Statute.
Directors have overall responsibility for the Company's internal control
system which is designed to provide a reasonable assurance for safeguarding
of assets, reliability of financial records and for preventing and
detecting fraud and other irregularities.
The system of internal control is monitored by internal audit function,
which encompasses the examination and evaluation of the adequacy and
effectiveness of the system of internal control and quality of performance
in carrying out assigned responsibilities. Internal Audit Department
interacts with all levels of management and the Statutory Auditors, and
reports significant issued to the Audit Committee of the Board.
Audit Committee supervises financial reporting process through review of
accounting and reporting practices, financial and accounting controls and
financial statements. Audit Committee also periodically interacts with
internal and statutory auditors to ensure quality and veracity of
Internal Auditors and Statutory Auditors have full and free access to all
the information and records as considered necessary to carry out their
responsibilities. All the issues raised by them have been suitably acted
upon and followed up.
Your Directors wish to thank the Central Government, Government of Andhra
Pradesh, Financial Institutions and the Company's Bankers for a variety of
help and regular encouragement to the company. Your Directors gratefully
acknowledge the trust and confidence you as esteemed shareholders have
placed in the company at all times. Your Directors also wish to place on
record their appreciation of the dedicated services rendered by all the
officers, staff and workers of the company at all levels and for their
unfailing loyalty and sense of belonging which constituted the hall mark of
For and on behalf of the Board
Place: Hyderabad S. Vijaya Bhaskar
Date : 31 August 2012 Managing Director
INFORMATION AS PER SECTION 217 (1) (E) READ WITH COMPANIES (DISCLOSURE OF
PARTICULARS IN THE REPORT OF DIRECTORS) RULES 1988 AND FORMING PART OF THE
DIRECTORS REPORT FOR THE YEAR ENDED 31 MARCH 2011
CONSERVATION OF ENERGY
Energy Consumption & Cost Reduction Steps taken to reduce the energy
consumption & reduce the cost of production Energy audits are been
performed and all the relevant steps are adopted.
Technology imported during the last Five years
Technology Imported Year of Import Status
None - -
FOREIGN EXCHANGE EARNINGS/OUTGO
1. Exports & Foreign Exchange earnings - Nil
2. Imports/expenditure in foreign currency - Nil
MANAGEMENT DISCUSSION AND ANALYSIS
Global Economic Condition
The 21st century is seeing a fundamental reshaping of the way business,
society and government operate. In recent times, the economic crisis and
its repercussions have accelerated the shift of economic power from the
developed to the emerging nations and exposed a fragile world with limited
capacity to respond to systemic risks. As a consequence, the global
economic growth has stymied and likely to traverse in an uncertain zone for
some years to come.
The major challenges besetting the world economy are managing the shift in
balance of power from the developed to emerging economies, increasing
competition for securing natural resources, improving productivity in the
wake of growing skill mismatches, non-inclusive growth in the emerging
economies and above all, a looming economic uncertainty and socio-
political fragility. Today the global economy is awaiting a movement where
governments define new ways of relating to each other, operate in new frame
works and business models, while coping with the ever-evolving challenges.
A more thoughtful analysis reveals that global rebalancing needs to be a
long-term, collaborative process. It must encompass those excluded from the
fruits of global prosperity and encourage those who have prospered to
continue doing so in a sustainable manner. The recent economic crisis and
socio-political tensions demonstrated that systemic risks can no longer be
tidily contained and addressed in a single ecosystem but require a-multi
disciplinary, multi-stakeholder efforts to improve the global economic
system's overall resilience.
Investment from developed economies has typically flown into emerging
markets, which offer more dramatic growth and strong returns. However, some
of these markets are associated with high volatility and socio-political
tensions, giving rise to new set of investment risks. In addition, growing
consumption demand in emerging markets is driving up commodity prices, both
crude oil and other raw materials which is expected to impede the global
economic recovery in the medium term.
Overview of Indian Economy
The Indian economy witnessed a higher growth in GDP of 8.5% for the year
2010-2011 over a growth of 8% in 2009-2010. A strong rebound in agriculture
and continued momentum in some sectors of manufacturing and construction
enabled the economy to achieve a higher growth in 2010-2011. Economic
growth was supported on the demand side by private consumption during the
year, and accelerated investment in the first three quarters of 2010-2011.
Consumer durables, automobile sector and engineering goods shored up the
overall industrial sector performance. In 2011-2012, the projected growth
rate is in the range of 8% to 8.5%.
Aided by its young demographic profile, India is regarded as one of the
youngest economies in the world with considerable opportunities as a
consumer market and a manufacturing hub. To achieve a sustainable growth,
the country needs to push forward critical governance reforms and
innovative public-private partnerships to deliver rapid and inclusive
growth and an enabling environment for upgrading infrastructure.
It is encouraging that infrastructure has been the focal point of the
Government's budget proposals for 2011-2012, accounting for a record 49% of
total plan allocation. In order to strengthen public-private partnerships
it has proposed additional avenues for financing infrastructure projects.
However, the resilience of the economy would continue to get tested in the
medium term by the challenges thrown up by a struggling world economy and
domestic pressures of inflation and increasing interest rates.
Construction and turnkey projects business scenario
Construction industry registered a higher growth of 8.1% for the year 2010-
2011 led by an increased level of activities of industrial and
infrastructure construction segments. The growth trends is likely to
sustain through the next year on the back of renewed thrust on
infrastructure. The real estate and IteS facility construction has gained
traction, despite stringent regulations and financing issues. Increasing
award of public-private projects in airports and Ports sectors, besides the
conventional Roads & Bridges sector have also triggered the growth.
The gross capital formation for 2010-2011 is lower at 7.6% as against 13.8%
achieved in 2009-2010. The Core industries registered a lower growth of
5.8% in 2010-2011, largely due to supply side constraints. The sluggish
growth for the past 2-3 years in the Core sector is dampening the fresh
investment decisions. Similarly the industrial sector saw an erratic growth
trend during the year, thereby delaying new capex decisions. It is expected
that with supply side constraints easing, the confidence will re-emerge for
undertaking fresh capacity addition projects.
Investments in Power sector are expected to be good over the next 5 years.
While there is some slippage in achieving the targeted capacity additions
during the 11th plan, major capacity additions in the thermal power segment
have been planned during 12th five year plan, with special thrust to super
critical technology. The sector, however, needs to tackle environmental and
social issues expeditiously, besides trying up fuel sources so as to
achieve the targeted growth in capacity.
Sustained economic growth in India on the backdrop of slow recovery
internationally, will continue to attract global EPC players to the
country. Low cost Chinese power plant equipment manufacturers, armed with
tariff protection and shorter delivery schedules, pose a major challenge to
domestic power equipment manufacturers. On the cost front, input prices are
expected to rise further. The ability of businesses to hand competition
will depend upon success of technology tie ups, pre-bid alliances, cost
leadership and execution excellence.
Order prospects for infrastructure, power, fertilizer, water and roads
largely depend upon the government's ability to implement policy decision
and finance large scale projects. Power projects and new projects in
minerals and metals sector face hurdles due to issues such as land
acquisition, coal linkages and environmental clearances.
With increasing proportion of large sized Engineering, Procurement &
Construction (EPC) orders under execution, meeting stiff delivery schedules
set by demanding customers will require smart contracts management and
close project monitoring to achieve sales targets.
The year 2010-2011 saw sustained increase in the process of major inputs
and raw materials. Considering the huge need for domestic infrastructure,
there could be some imbalance in the demand and supply scenario leading to
increasing costs and pressure on margins.
Growth Strategies & thrust Areas
Ensuring cost competitiveness, timely execution of projects within cost
estimates, managing volatility, control over working capital, achieving
operational efficiency, improved supply chain management will be the key
success factor for the projects and product businesses to achieve the
desired growth in the medium term. The major strategies for growth are
New Business structure rollout
The company has embarked upon bidding and successful in getting the
Ahmadabad Parking Station Projects and initiation of the same will emerge
as an excellent order position. Upon implementation of the same, a new era
of infrastructure development will emerge
With the re-structure framework and formation of subsidiary companies (SC)
has successfully commenced the planning sector with completion of the
changes in policies and processes pursuant to formation of subsidiary
companies (SC s) and the new structure is effective in third quarter of the
financial year 2012. The new SC structure is expected to facilitate
scalable, high impact organizational structure in the near future. The
formation of SCs would empower business to harness sector opportunities,
enhance competitiveness, attract talent, create leadership band width,
increase accountability and strengthen performance culture.
On the international front, the company vision to establish an electrode
manufacturing unit at Malta and Hydro Power project at Georgia will begin
the International vision of the company.
Thrust Areas of Project Businesses
The SC in project business will focus on expanding customer base,
strengthening business development efforts, better key account management,
cost leadership, improved capacity utilization; technological tie ups to
acquire capability to bid for high-end projects and forays into new
business segments and geographies.
PCC Division has plans to acquire new capabilities in areas of EPC for
chemical plants, process plants and pharmaceutical plants. Business
development initiatives will be strengthened to establish the SC and EPC
players in Chemical plants, process plants and pharmaceutical plants.
Infrastructure division will enhance engineering the design band width to
increase the proportion of high-end Design and Build jobs. Tie-ups are
envisaged with leading international players for high rise construction
technology and formwork. 'Green Building' capacity will be developed
considering futuristic market trends.
Thrust Areas of Product Businesses
Welding Division businesses will work on enhancement of operational
efficiencies, cost competitiveness and better supply chain management.
Various initiatives are underway to strengthen product range in Electrical
and Automation AC. The AC will promote integrated solutions to gain
Engineering Division business (SPMs, Tools & Tooling Systems, Industrial
Machinery) will strengthen the product range in initiatives are planned for
improving the capacity utilization and vendor development.
Human Resource Development
Attracting and retaining talent with requisite competencies, especially for
the emerging businesses and focus on training and development to improve
productivity are key thrust areas for businesses to strengthen competitive
advantage. Various initiatives have been planned for career planning,
employee engagement, competency building and succession planning.