Sakthi Sugars

ANNUAL REPORT 2005-2006
 
 DIRECTORS' REPORT
 
 To the Members
 
 Your Directors are pleased to present their Annual Report together with the 
 audited  financial  accounts of the Company for the year  ended  30th  June 
 2006.
 
                                                              (Rs. in lakhs)
 FINANCIAL RESULTS FOR THE YEAR ENDED 30TH JUNE 2006
 
 Profit before interest and depreciation	                           19225.88
 
 Less:	Interest charges	                       8390.17
 	Depreciation on Fixed Assets	               1218.85
 	Prior year adjustments	                         88.82	    9697.84
 
                                                                     9528.04
 
 Add:	Previous year's credit balance in 
 Profit and loss Account b/f	                        202.46
 	Excess provision reversed	                  3.79	     206.25
 
                                                                     9734.29
 
 Less:	Dividend on Preference shares	                600.00
 	Proposed Dividend on Equity Shares	        470.60
 	Tax on Dividend	                                150.15
 	Transfer to General Reserve	               2750.00
 	Transfer to Preference shares 
         Redemption Reserve	                       1100.00
 	Transfer to Debenture Redemption Reserve       1292.00
 			                                            6362.75
 	Surplus carried over		                            3371.54
 
 The  Company  has prepaid all the financial assistances  and  redeemed  the 
 preference   shares  and  debentures  covered  under  the  Corporate   Debt 
 Restructuring Scheme by availing term loans at a lesser rate of interest.
 
 DIVIDEND
 
 There has been substantial improvement in the performance and profitability 
 during  the  year under review. Your Directors had at its meeting  held  on 
 18.9.2006  recommended interim dividend at 12.50% on  12,00,000  Redeemable 
 Cumulative  Preference Shares of Rs.100 each for the financial years  2002-
 03, 2003-04, 2004-05 and 2005-06 and for the current year upto the date  of 
 redemption.
 
 The Directors are pleased to recommend dividend at 15% on Equity Shares  of 
 the Company for the financial year ended 30.6.2006.
 
 SUGAR DIVISION 
 
 The  quantum of cane crushed at various units of the Company for  the  year 
 2005-2006 is as under:
 
 Sakthi Nagar Unit        19,31,879 tonnes	
 Sivaganga Unit            6,14,584 tonnes
 Dhenkanat  Unit           2,00,453 tonnes 
 
 Your Directors wish to inform that Sakthi Nagar Sugar Unit has achieved the 
 highest  level of cane crush and broken the historical records in terms  of 
 cane  crush  and sugar production ever done in a single  factory  in  Tamil 
 Nadu.  During the year under review 2,60,880 tonnes of sugar  was  produced 
 out of cane crush and 86,822 tonnes out of raw sugar refining. The  Company 
 exported 88,747 tonnes of sugar during the year. Favourable working results 
 were achieved due to economical sugar prices and higher production.
 
 In  the  current year, the Central Government announced ban  on  export  of 
 sugar in the month of July 2006 and coupled with increased production,  the 
 sugar  prices  have  moved down. The sugar production  is  excepted  to  be 
 higher in the current year.
 
 DISTILLERY DIVISION
 
 During the year under review, 274.40 lakh litres of industrial alcohol  was 
 produced at Sakthi Nagar Unit and 19.63 lakh litres at Dhenkanal Unit.
 
 In the current year 350 lakh litres of industrial alcohol is expected to be 
 produced.
 
 ETHANOL PLANT
 
 During  the  year  under review, 21.80 lakh  litres  of  Anhydrous  Alcohol 
 (Ethanol)  was  produced and 21.12 lakh litres was sold  to  oil  companies 
 viz., Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd 
 and Indian Oil Corporation.
 
 SOYA DIVISION
 
 51,182  tonnes of Soyabean have been crushed in the Soya plant  during  the 
 year under review, of which 45,785 tonnes were on job contract basis.  This 
 division exported products worth Rs.1097.70 lakhs to various countries.
 
 CO-GENERATION PLANT
 
 The  32MW Co-Generation plant at Sakthi Nagar Sugar Unit generated  2674.04 
 lakh units of power and evacuated 1939.69 lakh units of power to the  State 
 Grid  of  Tamil Nadu Electricity Board. The performance of  the  plant  was 
 satisfactory.
 
 The  2MW Incidental Co-generation plant at Sivaganga Sugar  Unit  generated 
 and  transferred  to State Grid 25.54 lakh units of power during  the  year 
 under review.
 
 BEVERAGE DIVISION
 
 As  the Beverage plant at Sivaganga has not been commissioned for  want  of 
 necessary approval from the State Government, alternative plans for putting 
 the assets to effective use are being considered.
 
 DEPOSITS
 
 At the end of the financial year 460 deposits amounting to Rs. 110.16 Lakhs 
 which  were  due for repayment remained unclaimed on their  due  dates.  Of 
 these, 246 deposits totaling Rs. 71.61 lakhs have since been repaid.
 
 FUTURE OUT LOOK
 
 The  Directors are pleased to mention that crushing capacity of sugar  cane 
 is being enhanced by 5000 TCD. This is being done by expanding the existing 
 7500 TCD plant at Sakthinagar to 9000 TCD and by setting up a new plant  at 
 Erode District with the capacity of 3500 TCD.
 
 Three  new co-generation plants with an aggregate capacity of 85 MW PH  are 
 under  implementation at Sakthinagar, Sivaganga and at the new sugar  plant 
 premises.  These  projects are funded by issue of FCCB  and  from  internal 
 accruals/borrowings.
 
 With the commissioning of the co-generation projects under  implementation, 
 the  company  will  be de-risking to a great extent  the  adverse  cyclical 
 effects  that  are prevalent in the sugar industry. The prospects  for  the 
 future are expected to be bright.
 
 ISSUE OF FCCB
 
 For the purpose of funding the projects with respect to expansion of  sugar 
 and  co-generation  facilities,  the Company had  issued  Foreign  Currency 
 Convertible Bonds (FCCB) aggregating to US$ 60 million in two trenches with 
 a  tenor of 3 years (US $ 20 million) and 5 years (US $ 40 million).  These 
 bonds  are  listed in the Singapore Stock Exchange. These are  Zero  coupon 
 bonds  and  are convertible at pre determined prices with  automatic  reset 
 mechanism at the option of the Investors.
 
 DIRECTORS
 
 Your  Directors regret to report the demise of Sri D Periyasamy Gounder  on 
 2.4.2006.  He was a Director of the Company since inception. The  Board  of 
 Directors  wishes  to  place on record its  appreciation  of  the  services 
 rendered by him during the tenure of his office as Director.
 
 Sri  K  K  Ramasamy Gounder, Director passed away on 22.4.2006.  He  was  a 
 Director  of the Company since inception. The Board of Directors wishes  to 
 place on record its appreciation of the services rendered by him during the 
 tenure of his office as Director.
 
 The  following Directors retire by rotation at the ensuing  Annual  General 
 Meeting and are eligible for reappointment.
 
 Sri P K Chandran
 Sri M Srinivaasan
 Sri G G Gurumurthy
 
 DIRECTORS' RESPONSIBILITY STATEMENT
 
 Pursuant to requirements under Section 217(2AA) of the Companies Act,  1956 
 with   respect  to  Directors'  responsibility  statement,  it  is   hereby 
 confirmed:
 
 a)  that in the preparation of the annual accounts for the  financial  year 
 ended  30.6.2006  the applicable accounting standards have  been  followed, 
 except  Accounting  Standard  22 regarding provision for  Deferred  Tax  in 
 respect of which a stay has been obtained from Madras High Court.
  
 b)  that 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 and of the profit of the  company 
 for the year under review.
 
 c)  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, safeguarding the assets of the Company and 
 for preventing and detecting fraud and other irregularities and
 
 d)  that the Directors have prepared the annual accounts on a going concern 
 basis.
 
 AUDIT COMMITTEE
 
 The Audit Committee comprising of Sri M Pandi, Sri V K Swaminathan, Sri P K 
 Chandran  and Sri M Balasubramaniam was reconstituted and at present Sri  C 
 Rangamani,  Sri  M  Balasubramaniam, and Sri M Pandi  are  members  of  the 
 Committee.
 
 SUBSIDIARY COMPANIES
 
 Sakthi  Auto Component Limited (SACL), the wholly owned subsidiary  of  the 
 company,  had  acquired  51.83% of the equity  capital  of  Bonomi  Belgium 
 Ventiel India Private Limited (BBVIPL). By virtue of acquisition of shares, 
 BBVIPL became the subsidiary of the Company. The name of BBVIPL was changed 
 to Sakthi Auto Ancillary Private Limited.
 
 As  required  under  Section 212 of the Companies  Act  1956,  the  Audited 
 Statement of Accounts for the year ended 30.6.2006 of Sakthi Auto Component 
 Limited and Sakthi Auto Ancillary Private Limited together with the Reports 
 of the Directors and Auditors and also the statement under the said section 
 are attached.
 
 CORPORATE GOVERNANCE
 
 Pursuant  to  clause  49 of the Listing Agreement, a  Report  on  Corporate 
 Governance along with Auditors Certificate of its compliance is included as 
 part of the Annual Report.
 
 MANAGEMENT'S ANALYTICAL REPORT
 
 Management's Analytical Report as required under Listing Agreement is given 
 in the section on Corporate Governance.
 
 AUDITORS
 
 M/s P N Raghavendra Rao & Co., Statutory Auditors of the Company, retire at 
 the  conclusion  of  the Annual General Meeting and are  eligible  for  re-
 appointment.  A  certificate under section 224(1B) has been  obtained  from 
 them.
 
 COST AUDIT
 
 With the approval of the Central Government, the Company has appointed  M/s 
 STR & Associates, Cost Accountants, to audit the cost accounts relating  to 
 Sugar Units and Industrial Alcohol units for the year 2005-06.
 
 CONSERVATION OF ENERGY
 
 a)  Energy Conservation measures taken:
 
 1)  Planetary  gear  box is installed in one of the mills  as  against  the 
 conventional gear trains.
 
 2) Reduction of power consumption in mills by improving and stabilizing the 
 cane preparations.
 
 b)  Additional  investments and proposals, if any,  being  implemented  for 
 reduction of consumption of energy:
 
 Digital stepless Auto feeding control system was installed.
 
 c)  Impact  of the measures at (a) and (b) above for  reduction  of  energy 
 consumption and consequent impact on the cost of production of goods:
 
 There is saving in power consumption to the extent of 300 KWH
 
 Particulars  regarding  consumption of energy,  research  and  development, 
 technology  absorption  and foreign exchange earnings and outgo  have  been 
 provided in Annexure -1 to the Report.
 
 PARTICULARS OF EMPLOYEES
 
 Particulars  of  employees  as  required under  section  217  (2A)  of  the 
 Company's Act 1956 read with the Companies (particulars of employees) Rules 
 1975 and forming part of this report have been provided in Annexure - 2  to 
 the Report.
 
 AUDITORS REPORT
 
 With reference to Auditors remarks, your Directors wish to state as under:
 
 a)  On  account  of  stressed funds position in the  earlier  part  of  the 
 financial year, some of the statutory dues could not be paid in time.  With 
 the improvement in the financial position, arrears of undisputed dues  have 
 since been paid.
 
 b) In the Madras High Court, a Writ Petition has been filed challenging the 
 provision of deferred tax and a stay has been obtained.
 
 ACKNOWLEDGMENT
 
 Your  Directors wish to place on record their appreciation of the  valuable 
 assistance  and  co-operation extended by the shareholders,  cane  growers, 
 commercial  banks, financial institutions and Government authorities.  They 
 also wish to appreciate the dedicated services rendered by officers,  staff 
 and workers of the Company.
 
                                         By Order of the Board
 
 Place: Coimbatore	      	        N Mahalingam
 Date : 24th October 2006      		Chairman
 
 ANNEXURE  -  1 TO THE DIRECTORS' REPORT FOR THE FINANCIAL YEAR  ENDED  30TH 
 JUNE 2006 
 
 ENERGY CONSERVATION MEASURES - FORM A
 
 Disclosure of Particulars with respect to conservation of energy
 
 A. POWER AND FUEL CONSUMPTION 
 
                                                 CURRENT YEAR  PREVIOUS YEAR
 
 1. ELECTRICITY
 
 a. Purchased
 
 Units	                                             5635373	    3539486
 Total Amount (Rs. in lakhs)	                      285.55	     202.23
 Rate/Unit (Rs.)	                                        5.07	       5.71
 
 b. Own Generation
 
 i. Through Diesel Generator - Units	              304760	     154671
 Diesel Oil (Ltrs)	                               97881	      54611
 Total Consumption Value (Rs. in lakhs)	               32.39	      14.97
 Units per Ltr of Diesel Oil	                        3.11	       2.83
 Cost/Unit (Rs.)	                                       10.63	       9.68
 
 ii. Through Steam Turbine/Generator - Units	    79189180	   45983556
 Units per Ltr of Fuel Oil/Gas	                       78.46	      66.32
                                                    per tonne      per tonne 
                                                     of steam 	   of steam
 Cost/Unit                                                  *              *
 
 2. COAL
 
 Quantity (Tonnes)	                           15370.220	  13303.120
 Total Cost (Rs. in lakhs)	                      407.11	     288.38
 Average Rate per Tonne (Rs.)	                     2648.69	    2167.76
 
 3. FURNACE OIL
 
 Quantity (KL)	                                     263.190	    576.600
 Total Cost (Rs. in lakhs)	                       56.08	      91.01
 Average Rate per Ltr (Rs.)	                       21.31	      15.78
 
 4. FIREWOOD
 
 Quantity (Tonnes)	                           29775.690	  40047.510
 Total Cost (Rs. in lakhs)	                      298.68	     414.75
 Average Rate per Tonne (Rs.)	                     1003.10	    1035.64
 
 * Own steam was used
 
 5. OTHERS/INTERNAL GENERATION			
 
 a. Bagasse (MT)	                                      246612	      99222
 Total Cost	                                 Own Bagasse    Own Bagasse 
                                                      is used	    is used
 Rate/Unit (Rs.)	                                           -	          -
 
 b. Bio Gas
 
 Quantity (Cu. Mtr)	                            12842244	   11338379
 Total Cost	                                           Generated out of
 	                                                Distillery Effluent
 Rate/Unit (Rs.)	                                           -	          -
 
 c. Paddy Husks
 
 Quantity (Tonnes)	                             372.760	    951.480
 Total Cost (Rs. in lakhs)	                        5.76	      17.01
 Rate/Unit (Rs.)	                                     1545.23	    1787.74
 
 d. Coconut Shell Chips
 
 Quantity (Tonnes)	                             996.350	    798.855
 Total Cost (Rs. in lakhs)	                       21.51	      18.28
 Rate/Unit (Rs.)	                                     2158.88	    2287.77
 
 B. CONSUMPTION PER UNIT OF PRODUCTION 
 
                                      CURRENT YEAR             PREVIOUS YEAR
 
 Products (with details)	  Sugar	  Alcohol    Soya   Sugar   Alcohol    Soya
 Unit		           Qtl.	    Ltrs.    Mts.    Qtl.     Ltrs.    Mts.
 
 Electricity (Units)	  21.20	     0.20  440.36   15.53      0.22  323.81
 Furnace Oil (Ltrs)	      -	     0.01    2.93	-      0.02    3.37
 Coal (Tonnes)	              -	        -   0.093    0.01	  -   0.040
 Others : Bio-gas (Cu.Mtrs)    -	     0.41	-	-      0.34	  -
 
 
 FORM B
 
 Disclosure of particulars with respect to technology absorption
 
 RESEARCH AND DEVELOPMENT (R & D)
 
 1) Specific areas in which R & D carried out by the Company
 
 a)   Sugarcane  Varietal  Trials  conducted  under  Coordinated   Agronomic 
 Experiments.
 
 b) Multiplication of new sugarcane varieties like 86V96, 86VI5 & 83823.
 
 2) Benefits derived as a result of the above R & D
 
 Increase in yield in planted and ratoon crops between 4-5 MTs per acre.
 
 3) Future plan of action
 		
 To advocate pocket manuring.
 
 4) Expenditure on Research and Development
 
 			        (Rs. in lakhs)
 
 Capital	                                     -
 Recurring	                          5.89
 Total	                                  5.89
 Total R&D expenditure as a 
 percentage of total turnover	          0.01
 
 TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
 
 Efforts  in  brief,  made towards  technology  absorption,  adaptation  and 
 innovation
 
 Rotary  Juice  screen was installed in A-Mill for straining  the  juice  to 
 reduce the bagacillo content in juice.
 
 Benefits   derived  as  a  result  of  the  above  efforts,  e.g.   product 
 improvement, cost reduction, product development, import substitution, etc.
 
 Installation of Rotary Juice screen has resulted in reduction of  bagacillo 
 content in juice thereby improvement in juice clarification system.
 
 In  case of imported technology (imported during the last 5 years  reckoned 
 from  the  beginning of the financial year) following  information  may  be 
 furnished
 
 a) Technology imported                       ]
 b) Year of Import                            ]
 c) Has technology been fully absorbed?	     ]    Not Applicable
 d) If not fully absorbed, areas where this   ]
 has not taken place, reasons therefor        ]
 and future plans of action                   ]
 
 a)  Activities relating to exports; initiatives taken to increase  exports; 
 development  of  new export markets for products and services;  and  export 
 plans;
 
 The  Company  has exported sugar and soya products valued at  Rs.  18067.62 
 lakhs during the year under review.
 
 b) Total foreign exchange earned and used:
 
                                                              (Rs. in lakhs)
 
 Foreign Exchange earned during the year on 
 account of export of sugar and soya products		           12966.69
 Foreign Exchange Outgo:
 
 1. Others:
 a) Subscription and Membership	                       0.70
 b) Consultancy Charges and others	              15.11
 c) Foreign Travel	                              11.51
 d) FCCB expenses	                             931.90
                                                        		     959.22
 
 2. Imports:
 a) Purchase of Raw Sugar	                    6045.39
 b) Spares & Others	                              13.44
 c) Capital Goods	                             244.62
 
                                                                     6303.45
 
 Total	                                                            7262.67