The Directors have pleasure in submitting the 19th Annual Report of
the Company together with the audited annual accounts showing the
financial position of the Company for the year ended on March 31, 2008.
1. Financial results
Rs in million
Increase over 2007-08 2006-07
Sales turnover (after deduction of 16.88% 17,665.15 15,114.33
excise duty amount of Rs 1,768.43
million for 2007-08 and Rs 1,908.99
million for 2006-07)
Other income 74.10 43.54
Profit for the year before interest,
depreciation / amortisation, taxation
and exceptional items 12.47% 1,249.00 1,110.55
- Depreciation / amortisation 139.88 100.25
- Interest and discounting charges 370.51 324.19
Profit before exceptional items, taxation, share
of associatesnet loss and minority interest 738.60 686.11
Add/(Less): Exceptional items (net) 347.87 38.45
Profit before taxation for the year 67.75% 1,086.48 647.66
- Provision for taxation 180.86 167.14
Net profit after taxation for the year 88.47% 905.61 480.52
Less: Share of associate net loss Rs 12.99 16.99 1.34
million (-) and minority interests
Rs 4.00 million (Rs 1.34 million )
Net profit after taxation and share of 888.62 481.86
associates net loss and minority interests
Adjusting therein (debit)/credit
- Balance of profit brought forward 602.99 459.03
from previous year
Amount available for appropriations 1,491.62 940.89
Increase over 2007-08 2006-07
16.46% 17,102.90 14,686.03
8.98% 1,172.74 1,076.11
64.90% 1,025.96 622.18
85.92% 854.73 459.73
Appropriations made by the Board of Directors:
- General reserve (250.00) (200.00)
- Dividends :
- Interim dividend on equity shares (48.50) (36.38)
- Interim dividend on 5.40%
preference shares-prorata - (18.20)
- Proposed dividend on equity shares (129.34) (64.67)
- Income tax on dividends (30.23) (18.65)
- Leaving balance of profit carried
to balance sheet 1,033.54 602.99
Earnings per equity share (EPS)
- Basic 78.21% 27.48 15.42
- Diluted 84.43% 27.48 14.90
80.04% 26.43 14.68
85.86% 26.43 14.22
Consolidated results include the results of Petroleum Specialities Pte.
Ltd., Singapore (PSPL) and Poweroil Speciality Products FZE, Sharjah,
wholly owned subsidiaries (WOS) of the Company; Quantum Apar Speciality
Oils Pty. Ltd., subsidiary of PSPL, Apar ChemateK Lubricants Ltd., a
joint venture Company and Uniflex Cables Ltd., an associate Company.
a. Your Company paid an interim dividend at Rs 1.50 (15%) per share on
32,336,031 equity shares of the face value of Rs 10 each, amounting to
Rs 48.50 million for the financial year 2007-08.
The members are requested to confirm the above interim dividend at the
ensuing Annual General Meeting (AGM) of the Company.
b. Final dividend
Considering the improved financial results achieved during the year
under review as compared to the previous year, the Board of Directors
recommended the final dividend for the financial year 2007-08 on
32,336,031 equity shares of the face value of Rs 10 each, fully paid at
Rs 2.00 (20%) per share.
c. Special dividend
To celebrate the completion of 50 years of the Apar Group, the Board of
Directors recommended a special golden jubilee dividend on 32,336,031
equity shares at Rs 2.00 (20%) per share.
This final dividend and special dividend amounting to Rs 129.34 million
are payable after declaration by shareholders at the ensuing Annual
General Meeting (AGM) and you are requested to declare the same.
3. Sale of polymer business
During the year under review, the Company sold its polymer business to
Eliokem India Private Limited as a going concern on slump-sale basis.
The agreement for sale was approved by the shareholders of the Company
by postal ballot. The sale was completed and consideration of Rs 1,110
million was received on February 15, 2008. Post- completion adjustments
relating to net current assets contemplated in the agreement on the
basis of audited accounts of the unit, the adjusted amount of
consideration was Rs 923.1 million as on the date of sale and mutual
agreement. The pre-tax profit of Rs 82.5 million on the aforesaid sale
and net tax credit of Rs 10.2 million from deferred tax account,
arising consequent to the said sale are included in the financial
accounts for the year under report.
4. Employee stock option scheme
Members approval was obtained at the Annual General Meeting held on
August 9, 2007 for introduction of the employees stock option scheme
and it has been implemented by the Company. The options were granted to
employees in accordance with the Securities and Exchange Board of India
(Employees Stock Option Scheme and Employees Stock Purchase Scheme)
Guidelines, 1999 (the SEBI Guidelines). The Employees Stock
Compensation Committee, constituted in accordance with the SEBI
Guidelines, administers and monitors the scheme.
The disclosures stipulated under the SEBI Guidelines are given below:
a. Options granted 175,150
b. Exercise price Rs 207.05 per option
c. Options vested Nil
d. Options exercised Nil
e. The total number of shares arising as a result of exercise of
f. Options lapsed Nil
g. Variation in terms of options See note 1 below
h. Money realised by exercise of options Nil
i. Total number of options in force 175,150
j. Employee-wise details of options granted to:
i. Senior management personnel / Directors
(a) Shri H.N. Shah 7,500
(b) Shri V.A. Gore 4,000
(c) Dr N. K. Thingalaya 4,000
(d) Shri F.B. Virani 4,000
ii. Any other employee who received a grant in any one year of options
amounting to 5% or more of options granted during that year. Nil
iii. Identified employees who were granted options, during any one
year, equal to or exceeding 1% of the issued capital (excluding
outstanding warrants and conversions) of the Company at the time of
k. Diluted earnings per share (EPS) pursuant to the issue of shares on
exercise of options calculated in accordance with Accounting Standard
(AS) 20 earnings per share Rs 26.43
1) 175,150 options at the exercise price of Rs 259.75 granted on
January 23, 2008 were cancelled on May 27, 2008. The cancellation
became necessary due to a substantial reduction in the price of shares
in the secondary market and simultaneously, the above detailed options
were granted. The confirmation of the shareholders for the said
cancellation and subsequent grant will be sought at the forthcoming
Annual General Meeting.
2) As the exercise of options would be made at the market-linked price
of Rs 207.05, the issuance of equity shares pursuant to the exercise of
options will not affect the profit and loss account of the Company.
3) The Company received a certificate from the auditors of the Company
that the scheme has been implemented in accordance with the SEBI
Guidelines and the resolution passed at the Annual General Meeting held
on August 9, 2007. The certificate would be placed at the Annual
General meeting for inspection by members.
5. Management discussion and analysis
(a) Industry structure, development, opportunities, threats, outlook
and risk and concerns Currently, the Company has two business
divisions, each of which has significant market share position in its
Based on the end customer, 75% of the Companys revenues would come
from the power sector. The government of India prepares a five-year
plan through the Central Electricity Authority, based on which, the
expansion and execution of projects for the power sector are
undertaken. The Eleventh Plan for the years 2007-12 provides the total
outlay for the transmission and distribution sector at Rs 1,730,000
million. Considering this level of spending, the conductor requirement
will be about 2.1 million mtpa over the Eleventh Five-Year Plan against
the current requirement of 250,000 mtpa.
Similarly, in the case of transformer oils, the requirement of the
first fill (oil initially filled when the transformer is first
commissioned) will be at 900 million litres over the Eleventh Five-Year
Plan, as against a current requirement of 110 million litres per annum.
These numbers indicate that there will be strong demand for the
The risks lie in the fact that due to various reasons, the power sector
in India has fallen behind the implementation plans. This is due to a
plethora of reasons, which include lack of clarity on account of the
generation and transmission projects for private players, financial
closures and other government-related delays.
Due to such risk factors it can be expected that the Eleventh Plan
which is a five-year plan, may stretch in its implementation to seven
years or so. However, it is quite certain that these outlays in the
power sector are necessary to keep the current growth momentum of the
country and the probability of execution, though delayed, will be very
Other important concerns beyond the control of the industry are
inflation on account of unprecedented rise in prices of crude oil and
the consequent increase in costs of commodities.
(i) Transformer oil and specialty oils division
The division is progressing well in terms of its strategic initiatives.
Its market share in the power transformer side of the business
continues to remain strong. Based on the global approvals from
Siemens, ABB and Areva for new generation, transformer oils which
specify new stringent corrosive sulphur standards, the Company and/or
its subsidiaries are able to supply against orders from over 35
Risks and concerns
The rapid increase in prices of base oils and the consequential steep
increase in the prices of the divisions products is the main concern.
The Company has, to a large measure, adapted to these conditions.
However, stability in the prices of base oils will increase earning
(ii) Conductor division
The conductor industry expects good growth in the Indian market on
account of projected investments in the power transmission &
distribution sector. The industrys major customer in India viz. the
Powergrid Corporation of India (PGCIL) announced its plans for the
Five- Year Plan (2007-12) and the trend is encouraging.
The flow of tenders from PGCIL during the year was hampered due to
problems relating to counter guarantee required by the World Bank. We
understand that this is resolved now and we expect significant tender
flows from PGCIL during FY08-09.
Due to lower domestic demand and severe consequent competition, the
margins during the year were under pressure. However, with the revival
of PGCILs business, normal margins are expected in future. The export
business gives lower margin due to higher freight, logistic costs and a
The Companys Nalagarh plant was commissioned during the year under
report. It was however, not fully loaded till December 2007 for the
lack of orders. However, in the fourth quarter, the capacity
utilisation was improved to 70%. The Company expanded Nalagarh plants
production capacity to avail the benefits of incentives of income tax,
sales tax and excise duty.
Risks and concerns
The conductor division follows prudent risk management guidelines by
hedging its principal raw material (aluminium).
(2) Results of operations
Margins from the manufacturing activities during the year under review
were Rs 1,172.74 million, as against Rs 1,076.11 million in the
(i) Transformer and other speciality oils division
This division contributed 44% of the Companys revenue, which grew
during the year from Rs 6,681.80 million to Rs 7,528.22 million. The
consequent growth of the operating margin was from Rs 523.36 million to
Rs 674.40 million, representing an increase of 29%. The division also
earned a one- time gain of Rs 303.69 million by the sale of development
rights of its Mahul land to a developer.
There were frequent and major increases in the price of base oils
during the year. However, the Company successfully managed to handle
these volatile times with a focus on improving its customer profile and
selling more high- performance value-added products.
The divisions overseas business grew from Rs 1,585.67 million to Rs
2,378.35 million during the year, representing a growth of 49.99%.
During the year, the division commenced production of the Agip brand
automotive lubricants with the license and technical know-how of ENI-
Spa of Italy and marketed the same through a 50:50 joint venture
company, viz. Apar ChemateK Lubricants Limited. The turnover of the
said product in FY 2007-08 was Rs 13.78 million and is expected to
increase substantially in the current year.
The Companys wholly owned subsidiary in Singapore deals mainly in
transformer oils and white oils through its subsidiaries and joint
ventures in Australia, South Africa and Turkey. Its consolidated profit
(after tax) during the year under report was Rs 51.58 million, against
Rs 23.62 million in the preceding year.
(ii) Conductor division
During the year under review, the conductor division achieved a higher
volume of production and turnover. The revenue of conductors was at Rs
7,823.45 million, as against Rs 6,534.47 million in the previous year,
representing growth of 19%. Physical exports of conductors during the
year were Rs 4,368.18 million, as against Rs 1,515.44 million in the
previous year, indicating a growth of 188%. Operating profit for the
segment was squeezed due to acute competition in the domestic market
and delay of PGCIL tenders.
The conductor business had an order book of Rs 706 crores as on April
(iii) Polymers division
The gross revenue of the polymers division up to February 15, 2008
(date of sale of the unit) was Rs 1,883.50 million, against Rs 1,520.80
million in the previous year.
(c) Internal control systems and their adequacy
The Company established adequate internal control systems (ICS) in
respect of major areas of operations of all the divisions of the
Company. The ICS are aimed at promoting operational efficiencies and
achieving saving in cost and overheads in all business operations. The
Company has acquired SAP (System Application & Product), a world-class
business process integration software solution which is implemented at
all business units from January 1, 2008. The system will be fully
operative in the current year.
For tightening as well as more effective internal control systems and
risk management, the Company continued the engagement of M/s KPMG India
Pvt. Ltd., Chartered Accountants, as internal auditors of the Company.
The system-cum-intemal-audit reports of the internal auditors are
discussed at the Audit Committee Meetings and appropriate corrective
steps have been taken.
Further, all business segments prepare their annual budget, which are
reviewed along with the performance at regular intervals.
(d) Development of human resources
The Company promotes an open and transparent working environment to
enhance teamwork and focus on the business. It places immense
importance on the development of Human Resource (HR). It updates its HR
policy in line with the changing HR culture in the industry as a whole.
In order to foster excellence and reward those employees who perform
well, the Company practices performance / production-linked incentive
schemes and introduced the employees stock option scheme referred to in
paragraph 4 above. The main objective of the scheme is to create and
maintain optimum performance levels and a profit-driven culture as well
as improve productivity.
The Company also takes adequate steps for in-house training of
employees and maintaining a safe and healthy environment for workers
working within the factory premises.
(e) Cautionary statement
The statements made in the Management discussion and analysis section,
describing the Companys goals, expectations, or predictions, etc. are
forward-looking in view of the management. The actual performance of
the Company is dependent on several external factors beyond the control
of the management viz. growth of the Indian economy, continuation of
industrial reforms, fluctuations in the value of rupee in the foreign
exchange market, applicable laws/ regulations, tax structure, domestic
/ international industry scenario, movement in international prices of
raw materials, economic developments within the country, etc.
6. Expansion / development plan
(a) Transformer and other speciality oils division
Following the installation of additional storage facilities and
balancing equipment in a phased manner at the Rabale unit, the division
would be in a strategically advantageous position to increase its
production. Efforts are continuously made to increase the overseas
sales by exploring the international market.
(b) Acquisition of management control of Uniflex Cables Ltd.
During the year under review, your Company entered into a share
purchase and shareholders agreement with the promoters of Uniflex
Cables Limited, (UCL) an existing body corporate, listed on the BSE to
acquire the management control of UCL. The business and objects of UCL
are similar to that of the Company and its operations are complementary
to the Companys existing business. The existing promoters of UCL will
continue as minority shareholders of UCL.
UCL is engaged in the business of manufacture of PVC / elastomeric
cables with an installed capacity of 2,300 km pa. Elastomeric cables
are used by defence, the ship-building industry, railways, offshore
platforms, the mining industry, nuclear power plants, etc. XLPE cables
are used by the chemical and fertiliser industries, underground
cabling, etc. Fluoroplastic cables are used by defence, the chemical
and metallurgical industries, the oil exploration industry, telephone
exchanges, the electronics industry, in aircraft wiring, etc. UCL has
diversified into telephone cables. UCL also manufactures optical fibre
cables and jelly-filled telephone cables in collaboration with
UCLs client base includes core industries such as defence, railways,
ONGC, nuclear power plants, shipbuilding, etc.
The details and status of the acquisition/ investments in UCL are as
Mode of acquisition
1. Purchase of 4,081,000 equity shares of Rs 10 each fully paid from
the promoters of UCL at Rs 48.50 per share- Purchase consideration and
acquired equity shares are presently deposited in the ESCROW account
and will be released upon completion of open-offer formalities under
the SEBI regulation.
2 Purchase of 2,950,000 warrants and 2,926,800 fully convertible
debentures (FCDs) of UCL from ADM Maculus Fund. They have since been
converted into 5,876,800 equity shares of Rs 10 each, fully paid. Cost
to Company per share was Rs 48.50.
3. Allotment by UCL of 4,000,000 equity warrants at a price of Rs 42.50
per warrant under preferential allotment. Each warrant is convertible
into one share of UCL. Of this, 1,400,000 warrants have been converted
into an equal number of equity shares during the year. Balance warrants
are convertible on or before September 26, 2009.
4. Acquisition through open offer. Open offer is to acquire up to
4,996,075 equity shares of the face value of Rs 10 each, representing
20% of the voting paid-up equity share capital of UCL from the existing
shareholders of UCL, at a price of Rs 48.50 per share, pursuant to
regulations 10 and 12 of the SEBI Take- over Regulations. The public
announcement for the purpose was made on February 13, 2008 and offer
opened on June 25, 2008 and closes on July 14, 2008.
As on the date of this report, the Company acquired 7,276,800 equity
shares of Rs 10 each, representing 29.13% of fully diluted equity share
capital with voting rights. On completion of the open offer, assuming
full acceptance of the offer and conversion of the existing equity
warrants, your Company will hold about 65% in the fully diluted paid-up
equity share capital of UCL.
The Company provided corporate guarantees to the bankers of UCL for
facilities sanctioned to UCL.
a) Mr Richard Owen Pyvis, who was a Nominee Director of M/s Shinny
Limited, ceased to be a Director by resignation w.e.f. May 11, 2007 and
in his place, Ms Josephine Price was appointed Director w.e.f. May 30,
2007, in the casual vacancy of Mr Richard Owen Pyvis. Mr Gary Ng Jit
Meng is an Alternate Director to Ms Josephine Price.
b) Mr M. M. Patel, Director (Polymers) ceased to be a Whole time
Director on the sale of the polymer business w.e.f. October 31, 2007
and as Director w.e.f. March 13, 2008 on resignation.
c) Shri M. N. Kamat, Nominee Director of the Industrial Development
Bank of India Ltd. (IDBI) ceased to be Director of the Company with
effect from April 29, 2008 upon withdrawal of his nomination by IDBI.
d) Shri C. N. Desai, Dr N. K. Thingalaya and Shri F. B. Virani,
Directors, will retire by rotation at the ensuing Annual General
Meeting of the Company and being eligible, offer themselves for
reappointment. The Board recommends the re-appointment of these
8. Directors responsibility statement Pursuant to the requirement
under Section 217(2AA) of the Companies Act, 1956, with regard to the
Directors responsibility statement, it is hereby confirmed that:
i. In the preparation of the annual accounts for the financial year
ended March 31, 2008, the applicable accounting standards were followed
along with proper explanation relating to material departures, if any.
ii. Appropriate accounting policies were selected and applied
consistently and judgments and estimates made 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 financial year under review.
iii. Proper and sufficient care was taken 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.
iv. The annual accounts were prepared on a going concern basis.
9. Corporate Governance
Pursuant to Clause 49 of the Listing Agreement with the stock exchanges
with regard to the Corporate Governance code, the points, which are
required to be covered under the head Management discussion and
analysis are covered above vide paragraph five.
The notes to the accounts referred to in the attached Auditors Report
are self explanatory and therefore, do not call for any further
comments or explanations.
M/s Price WaterHouse (PW), Chartered Accountants, Mumbai, statutory
auditors of the Company will be retiring at the ensuing Annual General
Meeting, and being eligible, offer themselves for reappointment. The
Audit Committee of the Directors at its meeting held on June 26, 2008
recommended to continue the appointment of M/s PW as statutory auditors
of the Company for the financial year 2008-09.
11. Other information
a. Attached to and forming part of this report are the following:
(i) Particulars relating to conservation of energy, technology
absorption and foreign exchange earnings and outgo.
(ii) Information in respect of certain Directors / employees.
(iii) Report on Corporate Governance and auditors certificate
regarding compliance of the conditions of Corporate Governance.
b. The Company was granted exemption for the year ended March 31, 2008
by the Ministry of Corporate Affairs vide its letter dated June 25,
2008 (Exemption Letter), from attaching its Balance Sheet, the annual
report of the Companys wholly owned foreign subsidiaries viz.
Petroleum Specialities Pte. Ltd., Singapore as well as its subsidiary,
Quantum Apar Speciality Oils Pty. Ltd., Australia and Poweroil
Speciality Products FZE, Sharjah. As per the terms of the exemption, a
statement containing brief financial details of the said subsidiaries
for the year ended March 31 , 2008 are included in the annual report.
The annual accounts of the said subsidiaries and the related
information will be made available to any member of the Company seeking
such information at any point of time, and are also available for
inspection by any member of the Company at its registered office.
c. As on March 31, 2008, the aggregate fixed deposits of Rs 0.175
million were due for repayment but remained unclaimed. Letters have
been sent to such depositor to claim the amounts due to them.
Your Directors wish to place on record their sincere appreciation for
the continuous co-operation, support and assistance provided by
stakeholders, financial institutions, banks, government bodies,
technical collaborators, customers, dealers and suppliers of the
Company. Your Directors also wish to place on record their appreciation
for the dedicated services rendered by the loyal employees of the
For and on behalf of the Board
Place : Mumbai K.N. Desai V.A. Gore
Date : June 26, 2008 Managing Director Director