21ST DIRECTORS' REPORT FOR THE YEAR ENDED 31ST MARCH, 2006.
Your Directors have pleasure in presenting the Twenty First Annual Report
together with the Audited Accounts of the Company for the financial year ended
31st March, 2006.
The summarized financial results for the year ended 31st March 2006 and for the
previous year ended 31st March, 2005 are as under:
(Rs. in lacs)
Year ended Year ended
Sates, Job Work &
Service Charges 3938.79 5151.24
Other Income 245.76 325.41
Profit before Interest,
Depreciation &Taxation 576.28 1096.73
i) Interest & Financial
Charges 94.49 98.92
ii) Depreciation 213.24 206.03
Profit before tax 268.55 791.78
i. Provision for income tax 139.43 171.44
ii. Provision for Fringe benefit tax 17.11 -
iii. Provision for wealth tax 1.69 1.92
iv. Provision for deferred tax charge - 1.54
v. Short provision for income
tax for earlier year 15.00 -
- Provision for deferred tax assets 88.36 -
- Excess provision for Income
Tax for earlier year - 0.31
Net Profit 183.68 617.19
Review of Operations
During the year under review, the performance of the core activities of the
Company i.e. manufacturing and supply of packaging, printing and allied machines
came under severe pressure due to intense competition from the unorganized
sector, hardening of prices in the export market and lack of demand for
Innovation and introduction of machines having unique features and facilities
have been an ongoing process in the Company. Though the Company develops and
manufactures packaging machines of different design and utility according to the
market demand and customers' requirements, but tough domestic market conditions
have forced the Company to sell its superior quality products at low prices
resulting in lower margins and reduced net value addition as well as lower
The activities of the Company with regard to acceptance and execution of
contracting job in the oil & natural gas sector could not garner any significant
orders from the overseas market mainly due to disturbing trend in the
middle-east countries including Iraq.
With the situation in Iraq showing no sign of improvement, the Company as a
strategy has shifted its focus to the domestic oil & natural gas sector and is
working closely with some established and renowned organization. The efforts of
the Company are positive and encouraging.
Absence of any significant contribution from its other activities including
general contracting job, higher overheads had an adverse impact on the over all
turnover and profitability of the Company.
During the year under review, the Company achieved a turnover of Rs.4184.55 lacs
including other income of Rs.245.76 lacs as compared to Rs.5476.65 lacs
including Rs.325.41 lacs of the previous financial year ended 31.3.2005. The Net
Profit for the year ended March, 2006 was Rs.183.68 lacs as against Net Profit
of Rs.617.19 lacs of the previous financial year ended March, 2005.
The Board on a careful consideration of the over all situation is not in a
position to recommend any dividend for the financial year under review.
The operational performance of the Company has been comprehensively covered in
the Management Discussion and Analysis Report and the same is deemed to be a
part of this Directors' Report.
Scheme of Arrangement
Considering the current and future business prospects of the Company vis-a-vis
the industry trend and other factors both financial and business prudence, the
Board of Directors of your Company at their meeting held on May 20, 2006 has in
principle approved Scheme of Arrangement subject to the necessary approvals of
Shareholders, Creditors and sanction of the Hon'ble High Court of Delhi
inter-alia involving the following:
(a) amalgamation of Flex Securities Limited (the wholly owned subsidiary) with
Flex Engineering Limited.
(b) amalgamation of Flex Engineering Limited (post amalgamation of Flex
Securities Limited with Flex Engineering Limited) and FCL Technologies &
Products Limited with Flex Industries Limited.
Upon the Scheme becoming effective, and in consideration of the amalgamation of
the Company (post amalgamation of Flex Securities Limited with the Company) into
Flex Industries Limited (FIL), FIL shall issue and allot to the shareholders of
the Company, 2(two) equity shares credited as fully paid up in FIL for every
3(three) equity shares held by them in the Company on such date fixed as record
date after the Effective Date as the Board of Directors of FIL may determine.
For the purpose of such allotment fractional entitlements, if any; shall be
rounded off to the nearest figure. The equity shares so issued to the
shareholders of the Company shall rank pari-passu with the existing shares of
The merger will result in pooling of resources of all the companies and the
merged entity will emerge as a single entity providing end-to-end solutions in
packaging industry. It will unlock and enhance value for the shareholders.
The Hon'ble High Court of Delhi has convened the meetings of the Shareholders
and Creditors on 101, August, 2006 for their approval.
The Annual Accounts for the financial year ended March, 2006 along with reports
of Auditors and Directors of Flex Securities Limited, the Wholly Owned
Subsidiary of your Company are attached together with the statement under
Section 212 of the Companies Act, 1956.
Consolidated Financial Statement
In accordance with Accounting Standard 21 - Consolidated Financial Statements
read with Accounting Standard 23 - on accounting for investments in Associates,
your Directors have pleasure in attaching the Consolidated Financial Statement,
which form part of this Annual Report & Accounts. The Consolidated Financial
Statement has been prepared on the basis of financial statements received from
the Subsidiary & Associate company, as approved by their respective Board of
During the year under review the Company has not accepted or renewed any fixed
deposit. As at 31st March, 2006 your Company had outstanding fixed deposit of
Rs.0.18 lacs having matured for repayment and the same has not been claimed by
the concerned depositors despite necessary intimations. There has been no delay
in making repayment of fixed deposits on maturity on fulfilment of the terms and
conditions of your Company's scheme.
With effect from April 4, 2006 Mr. Sandeep Gupta has been nominated by IFCI
Limited on the Board of the Company in place of Mr. B.N. Nayak.
Your Directors while, welcoming Mr. Sandeep Gupta also take this opportunity to
place on record their sincere appreciation for the valuable services rendered by
Mr. B.N. Nayak during his tenure as Director on the Board.
In accordance with the provisions of the Companies Act, 1956 and Articles of
Association of the Company Mr.G.N. Gupta, Mr. Ajay Tandon and Mr. Pradeep Tyle,
Directors of the Company retire by rotation at the ensuing Annual General
Meeting and being eligible offer themselves for re-appointment.
Brief resume of the Directors seeking re-appointment at this Annual General
Meeting, nature of their expertise in specific functional areas and the name of
the public limited companies in which they hold the office of Director and the
Chairmanship/Membership of the Committees of the Board and their shareholding in
the Company, as stipulated under Clause 49 of the Listing Agreement with the
Stock Exchanges, are given as Annexure to the Notice convening the 21st Annual
General Meeting elsewhere in the Annual Report.
None of the Directors of your Company is disqualified as per provisions of
Section 274(1)(g) of the Companies Act, 1956. Your Directors have made necessary
disclosures as required under various provisions of the Companies Act, 1956 and
Clause 49 of the Listing Agreement.
The Securities & Exchange Board of India (SEBI) stipulated Corporate Governance
standards for listed companies through Clause 49 of the Listing Agreement of the
Stock Exchanges. SEBI, through Circulars dated 29th October, 2004 and 29th
March, 2005 has revised the existing Clause 49 and has mandated listed companies
to comply with revised Clause 49 by 31st December, 2005. Accordingly, your
Company has already put in place systems and procedures and is fully compliant
with revised Clause 49 of the Listing Agreement entered into with Stock
Exchanges. A separate report on Corporate Governance along with the Auditors'
Certificate on its compliance by the Company is included as a part of the Annual
Directors' Responsibility Statement
On the basis of the compliance certificates received from the executives of the
Company, subject to the disclosure in the Annual Accounts and also on the basis
of discussion with the Statutory/ Internal Auditors of the Company, from time to
time, we state as under:
1. That in preparation of the Annual Accounts for the financial year ended 31st
March, 2006, the applicable accounting standards have been followed and that
there have been no material departures.
2. That the Directors have selected such accounting policies and applied them
consistently and made judgement 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 financial year and of the profit of the Company for the year under
3. 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.
4. That the Directors have prepared the Accounts on a going concern basis.
The Company's Internal Auditors have conducted periodic audit to provide
reasonable assurance that the Company's established policies and procedures have
been followed. The Audit Committee constituted by the Board reviews the internal
control and financial reporting issues with Internal Auditors.
Auditors & Audit
M/s. Vijay Sehgal & Co., Chartered Accountants, Delhi, Statutory Auditors of the
Company, retire at the forthcoming Annual General Meeting and being eligible
offer themselves for re-appointment. Your Company has also received a
certificate from M/s. Vijay Sehgal & Co., Chartered Accountants to the effect
that the appointment, if made, would be within the limits as prescribed under
Section 224(1B) of the Companies Act, 1956.
The observations of the Auditors and the relevant notes on the Accounts are
self-explanatory and therefore do not call for any further comments.
Particulars of Employees
Particulars of employees as required u/s 217 (2A) of the Companies Act, 1956
read with Companies (Particulars of Employees) Rules, 1975 is given in Annexure
A forming part of this Report.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and
Information under Section 217(1)(e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,
1988 is given in Annexure'B' forming part of this Report.
Personnel relations with all employees remained cordial and harmonious through
out the year. Your Directors wish to place on record their sincere appreciation
for the devoted services of all employees of the Company.
Your Directors take this opportunity to thank and acknowledge the co-operation
and assistance received from various agencies of the Central Government,
Government of Uttar Pradesh, Financial Institutions, Banks and Customers during
the year under review. The Board also wishes to place on record their deep
appreciation for the continued support of the Shareholders of the Company.
Signed on : 27th July, 2006