Report of the Directors
For the financial year ended March 31,2011
The Directors are pleased to present the Annual Report, together with
the audited Accounts of your Company for the financial year ended March
31, 2011.
Review of Performance
Financial results are summarized below:
(Rs. in Crores)
2010-11 2009-10
Net Sales 950.42 968.73
Other Operating Income 8.58 1.42
Profit/(Loss) from sale of real estate - 7.03
Total Income 959.00 977.18
Total Expenditure adjusted for increase/
decrease of stocks 858.72 853.41
Provision no longer required (1.91) (1.25)
Total Expenditure 856.81 852.16
Profit/(Loss) before Depreciation, Interest,
Exceptional Items and Taxation 102.19 125.02
Depreciation 24.53 24.13
Interest and Finance Cost 31.28 34.38
Profit/(Loss) before Exceptional Items
and Taxation 46.38 66.51
Exceptional Items 0.29 (97.37)
Profit/(Loss) before Taxation 46.09 163.88
Provision for Taxation 6.72 21.67
Profit/(Loss) after Taxation 39.37 142.21
Balance of Profit/ (Loss)brought forward
from previous year 38.06 0.08
Amount available for Appropriation 77.43 142.29
Which the Directors recommend for
appropriation as under:
-Proposed Dividend 3.63 3.63
-Taxon Proposed Dividend 0.59 0.60
-General Reserve 40.00 100.00
Balance carried forward to Balance Sheet 33.21 38.06
Net sales for the year were lower by 2 % over the previous financial
year. Profit before Depreciation, Interest and Taxation (PBDIT) before
exceptional items was accordingly lower by 18 % at Rs. 102.19 crores as
compared to Rs. 125.02 crores in the previous year. With depreciation
of Rs. 24.53 crores (previous year Rs. 24.13 crores) and a lower
interest charges of Rs. 31.28 crores (previous year Rs. 34.38 crores),
Profit before Exceptional Items and Taxation came to Rs. 46.38 crores
(previous year Rs. 66.51 crores). There being a minor charge of Rs.
0.29 crores in exceptional items this year - against a net gain of Rs.
97.37 crores in such items in the previous year, Profit after Taxation
stood at Rs. 39.37 crores for the year against the corresponding figure
of Rs. 142.21 crores in the previous year.
The year was a challenging one for operations - in terms of market
being sluggish and incidence of adverse costs from both input materials
and overheads. The operating results are indicative of these
adversities.
Dividend
Despite the operating results being lower than the previous years, your
Directors recommend a dividend of Rs. 0.50 per equity share on
7,26,87,260 fully paid up equity shares ofRs. 5/-each being 10% on the
paid up value of the equity shares of the Company for the year ended
31st March, 2011 (same as in previous year), which if approved at the
ensuing Annual General Meeting will be paid to all eligible members
whose names appear in the register of members on September 23,2011 or
appear as beneficial owners as per particulars furnished by the
Depositories on September 12,2011.
Operational Review
Batteries and Flashlights
Batteries went through a chequered history over the last 5 years,
triggered by significant price increases to offset material cost push.
There was stiff consumer resistance to these increases and demand
became erratic with a tendency of slow down. The sluggishness in the
general economy did not help matters.
The segment which suffered the maximum brunt from this impact was the
''D'' size segment, which was then the major product segment in batteries
and was relatively more expensive than other cylindrical batteries. In
fact, the consumer resistance manifested itself in, them refraining
from use of appliances powered by ''D'' size batteries. This virtually
obliterated ''D'' size incandescent flashlights, which were hitherto very
popular. Consumers changed over to flashlights with LED bulbs using
''AA'' batteries (more fully covered subsequently).
This trend of de-growth in ''D'' batteries continued in the current year
at a rate of 16%. Despite this, batteries grew in the overall - albeit
at a modest rate of 2.3%. This was due to growth in other battery
segments - led by ''AA'' and''AAA''.
The market share positions of the major players remained unaltered
during the year under review despite the various market changes taking
place with your Company being at 50% (Company estimate).
The last 5 years had also seen rapid changes in the flashlights market.
This segment also experienced major price impacts being passed on due
to cost push. Combined with higher battery prices (as explained
earlier), this led to strong consumer reaction. In addressing that,
your Company started introducing a range of value-for-money, smart and
efficient flashlights using ''LED'' as the light source option (as
opposed to the then prevalent incandescent bulbs). These flashlights
mostly used ''AA'' batteries (as opposed to ''D'' batteries earlier).
Initially introduced as a value offer, this segment eventually became
the standard and thereafter evolved as life-style products - in
multifarious styling & colour, across the aesthetic range and at
several price points - both premium and popular.
From the Company''s perspective, this measure is positive. The earlier
flashlights using incandescent bulbs (mainly brass flashlights) were
profitable and were good for consumption of ''D'' size batteries but
remained for long period of in-use with consumers. The new LED torches
are equally profitable and displays much lower in-use period and is
good for battery consumption (mainly''AA'').
These new generation flashlights took the consumers'' fancy as these
were introduced about 3 years back. The first 2 years saw significant
growth in flashlights sales jumping from a level of 12.82 million units
in 2007-08 to 27.03 million units in 2009-10, a growth of more than 110
% in 2 years.
However this trend could not be sustained during the current year and
sales volumes suffered a decline of 6.6% - albeit on a much broader
base. This somewhat unexpected reversal took place mainly on account of
sudden influx of look-alike gray market products in the market. Counter
measures have been put in place to reverse this trend.
Your Company''s share of the organized flashlights market remained at
76% (Company estimate).
It is also worthwhile to mention that input costs rose during the
current year as compared to the previous year. The adverse impact came
not only from zinc, but also other major materials used for
manufacture. The adverse impact was to some extent neutralized by an
overall stronger Rupee. Part of the net adverse impact was recovered
from the market, yet it left a dent in the margin of about 1.5% of net
sales value.
The manufacturing operations of your Company continued to focus on
total quality management, safety, energy conservation and cost control.
This helped your Company in achieving efficiency in the manufacturing
function.
Operations at the manufacturing facilities at Cossipore - Kolkata and
Hyderabad continued to remain suspended. This had no impact on the
operations of the Company, as supplies to the market were met by other
units. Separations with workmen were fully completed at both these
facilities subsequent to completion of the year under review. Hence,
both these facilities are now closed.
Lighting Products
The Company started marketing of compact fluorescent lamps (CFL) and
General Lighting Service (GLS) lamps in the recent past. These products
have found excellent fit to the brand ''Eveready'' and Powercell''. The
Company is distributing these products through its existing
distribution channel, primarily comprising of groceries and general
merchants. This is tangibly different from the usual electrical trade.
This has given the advantage of a quick entry to this market - but has
the obvious disadvantage of not being amenable to the scale of the
electrical trade.
Net sales for the current year stood at Rs. 91.38 crores - at the same
level as the previous year atRs. 91.54 crores.
This can be ascribed to the fact that the Company consciously
restricted sales of CFL bulbs to a few geographies (UP and Bihar) where
the phenomenon of returned products was found to be on the rise - and
beyond accepted levels. This market traditionally works on warranties
and if returns are higher than the accepted norm, it is essentially due
to the poor quality of power, on which the Company has little control.
This step was necessary to avoid impairment to profitability. However,
sales have now stabilized on this revised orientation and the position
is expected to improve hereafter.
Packet Tea
The packet tea business continued with its steady performance through
leveraging of the distribution network of the Company. Current share of
the market stands at 1 - 5 per cent in the various markets of the
country. Focus is currently being given to make the business
profitable. As a compromise, some marginal turnover was sacrificed.
Sales turnover for the current year stood at Rs. 73.34 crores - at a
marginal decline against that of the previous year atRs. 75.94 crores.
Subsidiaries & Consolidated Financial Statements
Your Company has 80% of the controlling stake in Novener SAS, France
which in turn controls Uniross SA, a French Company, which along with
its subsidiaries, is engaged in the manufacturing and marketing of
rechargeable batteries and allied products, having presence in various
parts of the world and particularly strong in Europe. The above
subsidiary was acquired 2 years back with a view to gain access to
other geographies, where the Company has no presence - in particular,
Europe, South East Asia and parts of Africa. Uniross was facing serious
financial difficulties at that time and it was thought that it could be
quickly nursed back to sustainable profitability.
During the year under review, Uniross SA continued to fare poorly.
Unfortunately, the continuing dim economic situation prevailing in
Europe and overall sluggish demand of the rechargeable category world
over, has not allowed the quick turn around that was expected. It
currently continues to be loss making. However, through a major
restructuring exercise, significant elements of costs have now been
pared. It is now expected that with the revised cost structure, Uniross
should be able to return to modest profitability during the next 1 - 2
years. Original aspiration of growth can be pursued only after that is
achieved.
Uniross'' operations to your Company meant an addition ofRs. 129.45
crores in net sales (previous year Rs. 135.43 crores) and adding a net
loss of Rs. 52.36 crores (previous year Rs. 14.98 crores), including
exceptional costs of Rs. 18.05 crores (previous year - nil). The effect
of this is available in the Consolidated Accounts attached to this
Report.
The consolidated financial statements have been prepared in accordance
with Accounting Standard 21 (AS-21) issued by the Institute of
Chartered Accountants of India and include the financial numbers of
your Company''s subsidiaries, for the year under review. As required by
Clause 32 of the Listing Agreement with the Stock Exchanges, the
Audited Financial Statements together with the Auditor''s Report thereon
are annexed and form part of this Annual Report.
The consolidated accounts presented under this Annual Report include
the financial numbers of your Company''s subsidiaries, for the year
under review.
AStatement containing the details of the Subsidiary Companies are
attached in the Annual Report.
In accordance with the General Circular issued by the Ministry of
Corporate Affairs, Government of India, the accounts of the applicable
subsidiary companies and the related detailed information, as required
under section 212 (1) of the Companies Act, 1956 are not attached. Hard
copy of the Annual Accounts of the applicable subsidiary companies and
the related other information shall be made available to the members
seeking such information and shall also be kept open for inspection at
the Registered Office of the Company and of the subsidiaries concerned
during working hours, upto the date of the Annual General Meeting.
Prospects
As mentioned at the outset, the year was a challenging one for
operations.
Both batteries and flashlights went through some major changes in the
recent past. In case of batteries, it was an unprecedented de-growth of
an important segment (''D'') and a major shift in product mix. For
flashlights, on the other hand, it was a case of very significant
growth fuelled by new generation products and then a quiet period
during the current year.
Batteries have now settled down to a stable level which seem
sustainable and supported by historical statistics. In fact the major
segments in batteries - viz. ''AA and ''AAA'' - together comprising more
than 70 % of the market in terms of volume, are growing at a rate
higher than historical trends. This is being brought down by the
continuing de-growth of the ''D'' segment. However, this latter segment
is now gone down to such low level that it should now stop having much
impact on the overall market. The outlook - even in the near-term thus
appears to be brighter than what was seen in the current year.
For the long term, battery business is linked to fundamental demand
driven by device population. As India gets economically more developed,
device penetration into households will increase in line with the rest
of the world, boosting battery growth. It needs to be borne in mind
that India remains one of the lowest per capita battery consuming
nations - and hence with a potential for major improvement.
Flashlights recorded very significant growth in the previous 2 years -
but cooled down during the current year with a moderate slow-down,
albeit on a significantly larger base. The market is susceptible to
gray operations of unorganized players bringing copy-cat models to the
market - usually without payment of taxes and duties. The current year
saw significant impact from this phenomenon. The only way to sidestep
this problem is to keep bringing new models which are creative and
innovative. This is a continuous process and hopefully efforts in this
regard will mitigate this undesirable market phenomenon.
Prospects are promising in the Lighting Products business - both in the
CFL and GLS segments. Challenges remain with regard to handling of
warranties and competitive pricing - but these are being met. This
business remains a key focus area for the Company and an avenue for
growth.
Packet tea will add to the turnover. Focus is currently on to improve
profitability of this business.
As explained earlier, the Company''s cost structure is sensitive to zinc
and exchange rate of the Indian Rupee and overall inflationary trends.
At the present moment, zinc remains stable at current levels - barring
some very recent softness. Predictions on Rupee seem to indicate that
it will appreciate against the dollar. So it appears that the impact of
these 2 factors may off- set each other on the cost of the Company.
There is no sign yet of the inflationary trend decelerating. Also,
other commodities used as input materials are also showing increasing
trends. These may continue to impact margins negatively. Efforts are
being made to recover a part of the adverse impact from the market - to
the extent practicable.
Finance
Tight control was kept over the finances of your Company, with emphasis
on reduction of debt. This along with strict management of working
capital helped your Company save interest charges.
Your Company met its financial commitments in servicing debt and
repayments thereof in a timely manner. Capital expenditure programme
was fully met.
A transfer of Rs. 40 crores was made to the General Reserves out of the
amount available for appropriation. After providing for the proposed
dividend and Dividend Distribution Tax, profits left to be carried
forward was at Rs. 33.21 crores.
Employee Relations
One of your Company''s key strengths is its people. Relations with
employees remained cordial and satisfactory. Your Board would like to
place on record its appreciation of employees for their contributions
to the business.
Your Company believes in a system of Human Resource Management which
rewards merit based performance and playing an active role in improving
employee skills. Actions during the year under review were supportive
of this policy.
A statement of particulars of employees as required under section 217
(2A) of the Companies Act, 1956 forms a part of this report as a
separate Annexure. In terms of section 219 (1)(b)(iv) of the Act, this
Report is being sent to all Members without the said annexure. Any
member interested in taking inspection or obtaining a copy of the
statement may contact the Secretary of the Company at its Registered
Office during working hours, till the date of the Annual General
Meeting.
Update
Consequent to the trial proceedings before the Chief Judicial
Magistrate, Bhopal, on the modified criminal charges framed under the
directions of the Supreme Court that commenced in September 1997,
having been concluded, a curative petition filed by the Union of India,
against the said directions of the Supreme Court had been filed and
been dismissed. The State of Madhya Pradesh and the Union of India have
filed necessary revisions of the criminal charges framed and have also
filed appeals against the order of the Chief Judicial Magistrate,
Bhopal, in the Sessions Court, Bhopal. The Company has also filed its
appeal. As per the views and advice of the legal counsel, it is
believed that the findings against the Company are likely to fail
ultimately.
The Union of India has also filed a curative petition against the
Company amongst others including the erstwhile foreign holding company,
with regard to enhancement of compensation, claimed earlier by the
Union of India from the foreign holding company as well as certain
rehabilitation costs. As per the views and advice of the legal counsel
it is believed that the said petition is devoid of any merit.
Cost Auditors
As per the Order of the Central Government and in pursuance of Section
233B of the Companies Act, 1956, your Company carries out an audit of
the cost accounts of the Company relating to dry cell batteries. The
due date for filing of the Cost Audit Report with the Ministry of
Corporate Affairs for the financial year ended 31st March, 2010 was
September 27, 2010 and the same was filed on the said due date. The
Board, has upon the recommendation of the Audit Committee reappointed
M/s.Mani & Co., Cost Accountants, Registration No. 00004, Ashoka, 111
Southern Avenue, Kolkata - 700 029, (being eligible for the
reappointment), to audit the cost accounts of the Company relating to
dry cell batteries, for the financial year ending 31st March, 2012,
subject to the approval of the Central Government.
Public Deposits
Your Company does not have any public deposit scheme and has repaid all
Fixed Deposits that have matured and were claimed by depositors under
the earlier scheme. Rs. 0.72 Lakhs as claimed and paid, however, remain
un-encashed by the depositors as on March 31,2011.
Exports and Foreign Exchange Earnings and Outgo
During the year under review, your Company exported batteries totaling
to a value of Rs. 2,494.07 Lakhs (2009-10 : Rs. 2553.54 Lakhs) and
flashlights totaling to a value of Rs. 643.10 Lakhs (2009-10 : Rs.
471.81 Lakhs).
Rs. Lakhs
31.03.2011 31.03.2010
Foreign Exchange Earnings 1,728.18 1792.56
Foreign Exchange Outgo 13,918.81 13,836.18
Conservation of Energy and Technology Absorption
Astatement giving details of conservation of energy and technology
absorption in accordance with the Companies (Disclosure of Particulars
in the Report of the Board of Directors) Rules, 1988, is annexed.
Directors'' Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
state as follows:
1. That in the preparation of the annual accounts for the financial
year ended March, 31,2011, the applicable accounting standards had been
followed with no material departures;
2. That the Directors had 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 at the end of the financial year and of the
profit or loss of the Company for that period;
3. 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;
4. That the Directors had prepared the annual accounts on a going
concern basis.
Directors
Mr. D. Khaitan, stepped down as Executive Vice Chairman and Managing
Director of the Company effective from the close of working hours of
August 10,2011. Mr. Khaitan, however, will continue as the Vice
Chairman of the Board.
Mr. D. Khaitan had been re-appointed as Executive Vice Chairman &
Managing Director for a further period of three years effective June 1,
2011. Consequent to his stepping down and acceptance of the same by the
Board, Mr. D. Khaitan''s re-appointment for the period June 1,2011 to
August 10, 2011, only, is subject to the approval of the shareholders
at the forthcoming Annual General Meeting.
Mr. Amritanshu Khaitan was appointed as Additional Director by the
Board effective August 10, 2011. In terms of Article 116(1) of the
Articles of Association of the Company, Mr. Amritanshu Khaitan holds
office until the forthcoming Annual General Meeting. Notice in writing
under Section 257(1) of the Companies Act, 1956 has been received from
a Member signifying his intention to propose Mr. Amritanshu Khaitan for
election to the office of Director. The above re-appointment of Mr.
Amritanshu Khaitan is subject to the approval of the shareholders at
the forthcoming Annual General Meeting.
Mr. S. Saha has been re-appointed as Wholetime Director for a further
period of three years effective March 22,2011.
Mr. Amritanshu Khaitan has been appointed as Wholetime Director for a
period of three years effective August 10,2011.
The above appointment and re-appointments of the executive directors
are subject to the approval of the shareholders at the forthcoming
Annual General Meeting.
In accordance with the Articles of Association, Mr.B. M. Khaitan, Mr.
B. Mitter, Mr. D. Khaitan and Mr. V Bhandari will retire by rotation
at the forthcoming Annual General Meeting, and being eligible, offer
themselves for re-appointment.
On a Reference Application made by the Central Government to the
Company Law Board (CLB) under Section 408 of the Companies Act, 1956,
the CLB, by an order dated December 20,2004 directed the Central
Government to appoint three Directors on the Company''s Board for three
years. As the CLB''s order suffers from various legal infirmities, the
Company, based on legal advice, has challenged this order of the CLB
before the High Court at Calcutta, which has, by an interim order,
stayed the operation of the CLB''s order. The stay is continuing.
Auditors
Messrs. Deloitte Haskins & Sells retire as Auditors at the conclusion
of theforthcomingAnnual General Meeting and, being eligible, offer
themselves for re-appointment.
Management Discussion and Analysis Report and Report on Corporate
Governance
As required in terms of the Listing Agreement with Stock Exchanges a
Management Discussion and Analysis Report and a Report on Corporate
Governance are annexed.
For and on behalf of the Board
Kolkata B. M. Khaitan
August 10,2011 Chairman
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