The Directors take pleasure in presenting the Forty Second Annual
Report together with Audited Statements of Accounts for the year ended
31st March 2011.
Financial Results
(Rupees in million)
2010-11 2009-10
Gross Turnover 24883 20240
Turnover, Net of Excise 23538 19322
Profit Before Tax 3975 3289
Current Years Tax 942 423
Profit After Current Years Tax 3033 2866
Deferred Tax (6) (25)
Profit After Current and Deferred Tax 3039 2891
Add: Prior Year Tax Provision
written back - 44
Profit After Tax 3039 2935
Profit Brought Forward 1006 779
Profit available for appropriation 4045 3714
Appropriations
Proposed Dividend on Equity Shares 886 759
Tax on Dividend 143 126
Transfer to Debenture Redemption Reserve 42 323
Transfer to General Reserve 1900 1500
Total 2971 2708
Balance Carried to Balance Sheet 1074 1006
4045 3714
Financial Performance
The Operating Profit and Net Profit, for the year at Rs 4945 million
and Rs 3039 million increased by 20% and 5% respectively. Income Tax
for the current year at Rs 942 million is higher than Rs 423 million in
the last year, due to completion of the first five year tax holiday
period for 3 manufacturing units located in Himachal Pradesh.
Due to the improvement in the economic conditions in India, as
evidenced by the strong GDP growth, sales growth was higher than last
few years trend. The economic revival in the developed markets in the
world also resulted in growth in exports, particularly in the second
half of the year.
However, there has been an increase in the input costs, largely in the
last quarter, due to firming up of commodity prices and that has put
pressure on margins particularly of Industrial Products.
The stable Indian Rupee and cost control measures taken by the Company
have helped to maintain the profitability at levels similar to that of
the previous year.
The exchange rate of Indian Rupee was at Rs 44.40 to a USD in March
2011 as compared to Rs 44.97 to a USD in March 2010. Accordingly there
was a nominal credit of Rs 1.99 million to carrying cost of depreciable
assets and Rs 8.05 million was credited to the Foreign Exchange
Monetary Item Translation Account. Out of the said Foreign Currency
Monetary Item Translation Account, Rs 1.07 Million has been amortised
in the current year.
After deferred tax of Rs 34 million and prior years tax provision
written back of Rs 2 million
After deferred tax of Rs 140 million and prior years tax provision
written back of Rs 4 million
After deferred tax of Rs 18 million and prior years tax provision
written back of Rs nil.
After deferred tax reversal of Rs 25 million and prior years tax
provision written back of Rs 44 million.
After deferred tax reversal of Rs 6 million and before exceptional item
of Rs 250 million. $ Excludes exceptional item of Rs 250 million
Dividend
The Directors recommend a dividend of Rs 1.75 per equity share of Rs 1
each out of the current years profit, on 506.1 million equity shares
of Rs 1 each (previous year @ Rs 1.50 per equity share including Rs
0.50 per equity share as Golden Jubilee Special Dividend), amounting
to Rs 886 million (previous year Rs 759.2 million). In accordance with
the terms of issue of Foreign Currency Convertible Bonds (FCCBs),
shares alloted on conversion of FCCBs will also be entitled to
Dividend, where request for conversion is received before the book
closure for payment of dividend for the financial year 2010-11. The
dividend for the current year will be free of tax in the hands of
shareholders. The dividend payout amount has grown at a CAGR of 23.68 %
during the last 5 years.
Term Finance
The Company had borrowed USD 17 million through an ECB Term loan
amounting to Rs 796.2 million, repayable in 3 annual installments.
During the year the Company has repaid the 2nd of the 3 annual
installments amounting to USD 5.67 million equivalent to Rs 241.18
million.
Capital Expenditure
The overall expenditure during the year was Rs 1235.68 million. Out of
this approximately Rs 711.72 million was spent on fixed assets for
various manufacturing units, offices, laboratories and warehouses and
on information technology. The expenditure on the Synthetic Elastomer
Project was approximately Rs 458.59 million.
Investment in Subsidiaries
During the year, Investment of Rs 131.73 million was made in overseas
subsidiaries.
Synthetic Elastomer Project
The Company has started the construction of the Synthetic Elastomer
Plant. Civil work at site has commenced and Company is targeting
completion in the first half of the next financial year.
The total amount spent on this project is Rs 3106.61 million.
Manufacturing Plants
Health, Safety and Environment activities continued during the year
bringing greater focus on safety and environment at all manufacturing
units.
Continuous improvement plans in the manufacturing units resulted in 400
plus Kaizens leading to productivity and process improvement.
Manufacturing capacity of insulation tapes, Fevikwik and Fevicol were
enhanced.
Technology and automation projects initiated and completed on various
lines like Fevigum, Fevicol, M-seal, insulation tapes, Fevikwik and
various industrial products.
Foreign Currency Convertible Bonds (FCCB)
Of the USD 40 million raised through issue of zero coupon Foreign
Currency Convertible Bonds in 2007-2008, bonds aggregating USD 37.2
million were outstanding as on March 2011. The bond holders are
entitled to convert their holdings into Equity shares anytime on or
after 16th January 2008 upto 1st December 2012.
Fixed Deposits
Your Company has not accepted any fixed deposits during the year
2010-11.
Subsidiaries - Overseas Subsidiaries
During the year, Pidilite Industries Trading (Shanghai) Company Limited
was incorporated in China as a wholly owned subsidiary of Pidilite
International Pte. Ltd., Singapore (which is a wholly owned subsidiary
of the Company).
The business in USA reported a 11.4% growth in sales. This growth
together with improvement in operating margins helped the subsidiary to
post cash profits as compared to cash losses last year.
While the subsidiary in Brazil, reported a 10.5% growth in sales, due
to increase in input costs, the unit incurred losses from operations.
The operations in Bangladesh continued to gain strength with increased
market penetration. The unit reported a profit after tax in its first
full year of operations. Though the operations in Thailand reported
higher cash profits than in the previous year, sales growth was lower
than expected. Post tax losses were at levels similar to last year.
Performance of the subsidiary in Dubai was impacted by adverse
conditions in the markets serviced by the subsidiary.
Operations and performance of the subsidiaries in Egypt were disturbed
due to political developments in the country and neighboring areas.
Due to the reasons mentioned above the overseas operations made a
nominal cash loss. The net loss before tax was higher than the previous
year. Total revenue from overseas subsidiaries for the year stood at
Rs 3021 million, up by 11.4% over the previous year. The total
investment in overseas subsidiaries as on 31st March 2011 stands at Rs
2578 million
A statement pursuant to Section 212 of the Companies Act, 1956,
relating to subsidiaries in India and abroad, is attached hereto.
Consolidated Accounts
In accordance with the requirements of Accounting Standards AS 21 (read
with AS 23) issued by the Institute of Chartered Accountants of India,
the Consolidated Accounts of the Company and its subsidiaries are
annexed to this Annual Report. Additionally, a statement giving
prescribed particulars of information, in aggregate for each
subsidiary, is attached.
In terms of the General Circular No. 2/2011 dated 08.02.2011, issued by
the Government of India, Ministry of Corporate Affairs, the Annual
Reports of the Subsidiary Companies are not annexed to this Report.
Members desiring to have a copy of audited Annual Accounts and the
related detailed information of the above subsidiaries may write to the
Company Secretary at the Registered Office of the Company and they will
be provided with the same upon such a request. Annual Accounts of these
subsidiary Companies will also be kept for inspection of the Members at
the Registered Office of the Company as well as at the Registered
Office of the subsidiary companies.
Directors
In accordance with the Articles of Association of the Company, Shri B K
Parekh, Shri S K Parekh, Shri A N Parekh and Shri Bharat Puri,
Directors of the Company, retire by rotation and being eligible, offer
themselves for re-appointment.
Directors Responsibility Statement
Your Directors confirm that:
In the preparation of the Annual Accounts, the applicable accounting
standards have been followed;
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 at the end of the financial year ended 31st March 2011 and
of the profit of the Company for the year ended on that date;
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; and
The Directors have prepared the Annual Accounts on a going concern
basis.
Corporate Governance
Reports on Corporate Governance and Management Discussion and Analysis,
in accordance with Clause 49 of the Listing Agreements with Stock
Exchanges, along with a certificate from M/s. M M Sheth & Co,
Practising Company Secretaries, are given separately in this Annual
Report.
Auditors
Members are requested to re-appoint M/s. Haribhakti & Co, Chartered
Accountants, as Auditors of the Company and also for its branches/C & F
depots/depots, for the current financial year and to fix their
remuneration.
Cost Auditor
The Company has received the approval of the Central Government for the
appointment of M/s. V J Talati & Co. as Cost Auditor to conduct cost
audit for the financial year 2011-12.
Conservation of Energy, Technology Absorption, etc.
The particulars under 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, are attached to this Report as
Annexure I .
Industry Structure and Development
There is no material change in the industry structure as was reported
last year
The Company operates under two major business segments i.e. Branded
Consumer & Bazaar Products and Speciality Industrial Chemicals.
Products such as Adhesives, Sealants, Art Materials, Construction and
Paint Chemicals are covered under branded Consumer & Bazaar Products
segment. These products are widely used by carpenters, painters,
plumbers, mechanics, households, students, offices, etc.
Speciality Industrial Chemicals segment covers products such as
Industrial Adhesives, Synthetic Resins, Organic Pigments, Pigment
Preparations, Surfactants, etc. and caters to various industries like
packaging, textiles, paints, printing inks, paper, leather, etc.
In both the above business segments, there are a few medium to large
companies with national presence, and a large number of small size
companies that are active regionally. There is growing presence of
multinationals in many of the segments in which the Company operates.
The share of imports is less than 10 % of domestic volumes in most of
the product segments.
The Other segment largely covers manufacture and sale of VAM. As
mentioned earlier, due to global demand supply situation it was viable
to import VAM rather than manufacture in-house and accordingly the
plant remained shut last year. Going forward, in the near future,
import of VAM is likely to remain more viable. The Company is exploring
alternate products which can be manufactured in the same plant.
Current Year Outlook
During the current year, due to the inflationary pressures, the Reserve
Bank of India has been steadily increasing interest rates. This is
expected to adversely impact overall economic growth and therefore
could impact the demand for the Companys products, thereby impacting
the sales growth.
Due to the steep increase in commodity prices, input costs have gone up
sharply. Though the Company does pass on these increases by way of
price increases, this could impact margins as there is a lag between
the cost increase and the price increase.
The Companys major subsidiaries are in USA, Brazil, UAE, Thailand,
Egypt and Bangladesh. While all the units are expected to show improved
performance, the business in Brazil is vulnerable to high inflation and
slow down in growth rate. The operations in Egypt and U.A.E. could be
impacted by the local political situation.
Outlook on Opportunities, Threats, Risks and Concerns
Stable economic growth in India will provide an opportunity to the
Company to grow its business and introduce differentiated products for
meeting customer expectations. The improving global economy will
facilitate growth of export oriented products.
Increasing interest rates could slow down economic demand thereby
impacting Companys sales in the current year. In addition input costs
increases are likely to put pressure on margins in the short term.
Though the Company has strengthened its management structure in the
overseas subsidiaries, due to the political uncertainties in some
countries and the small size of the overseas operations, the
performance in these units could be impacted by local events.
Internal Control Systems and their adequacy
The Company has adequate internal control procedures commensurate with
its size and nature of business.
The Company has appointed Internal Auditors who audit the adequacy and
effectiveness of internal controls laid down by the management and
suggest improvements.
For overseas subsidiaries, this is being done by their Statutory
Auditors.
The Audit Committee of the Board of Directors periodically reviews the
audit plans, internal audit reports, and adequacy of internal controls
and risks management.
Human Resources
The Company continues to place significant importance on its Human
Resources and enjoys cordial relations at all levels.
A New Performance & Potential Management System, branded as PILglobin
has been launched. This process is likely to provide a steady stream of
talent across the Company with clear career plans to occupy key jobs.
Further to improve the operational efficiency, the Company has also
initiated automation of all its HR processes.
The total number of employees as on 31st March 2011 was 4130.
A statement of particulars pursuant to Section 217(2A) of the Companies
Act, 1956 read with the Companies (Particulars of Employees) Rules,
1975, forms part of this Report as Annexure II. As per the provisions
of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report,
together with Accounts, is being sent to the Shareholders of the
Company, excluding the statement of particulars of employees under
Section 217(2A) of the Act. Members desiring to have a copy of the same
may write to the Company Secretary at the Registered Office of the
Company and they will be provided with the same upon such a request.
Appreciation
Your Directors wish to place on record their appreciation of the
contribution made by employees at all levels to the continued growth
and prosperity of your Company. Your Directors also wish to place on
record their appreciation for the shareholders, dealers, distributors,
consumers, banks and other financial institutions for their continued
support.
FOR AND ON BEHALF OF THE BOARD
Mumbai
Date: 19th May 2011 B K PAREKH
CHAIRMAN
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