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Blue Blends (India) Ltd.

BSE: 502761 | NSE: BLUEBLENDS | Series: NA | ISIN: INE113O01014 | SECTOR: Textiles - Processing

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Annual Report

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Director’s Report

The Directors present herewith the 26th Annual Report together with the Audited Accounts of the Company for the year ended 31st March,2007. FINANCIAL RESULTS: (Rs. in lakhs) 2006-2007 2005-2006 Sales & Service Charges : 12,129.67 14,971.23 (including excise duty) Profit/(Loss) before Interest, : 748.14 1,893.73 Depreciation & tax Less: Interest : 305.33 96.07 Less : Depreciation : 672.53 660.09 Profit / (Loss) before exceptional : (229.72) 1,137.57 items and taxes Add : Exceptional Items : 440.71 8,546.88 Profit / (Loss) before Tax : 210.99 9,684.45 Less : Provision for Tax-Fringe : 2.75 3.17 Benefit Tax Profit / (Loss) after Tax : 208.24 9,681.28 Add:Excess provision for : 5.00 - diminution in value of investment Less : Prior period expenses : 8.89 - Profit / (Loss) for the year : 204.35 9,681.28 Add : Transferred from Debenture : 375.00 214.60 Redemption Reserve Add: Profit/(Loss) brought forward : (13,179.05) (23,074.93) from previous year Total : (12,599.70) (13,179.05) Appropriations a. Transferred to General Reserve : - - b. Balance carried to Balance Sheet: (12,599.70) (13,179.05) DIVIDEND In view of the accumulated loss the Board of Directors does not recommend any dividend on Equity or Preference Shares. OPERATIONS During the year under review the turnover was recorded at Rs 121.30 crores as against Rs.149.71 crores in the previous year which is down by about nineteen percent due to sluggish demand. The Company recorded loss (excluding exceptional item of Rs. 4.41 crores) of Rupees 2.29 crores as against profit (excluding exceptional items of Rupees 85.47 crores) of Rs.11.37 crores in the previous year. During the year under review, the paid-up capital of the Company was increased due to allotment of shares to Financial Institution. The Company has submitted a petition before the Honble High Court, Bombay for utilization of Share/Securities Premium Account against loss appearing in the Profit & Loss Account of the Company and the matter is pending. FINANCIAL RESTRUCTURING The Company has already successfully completed financial restructuring with almost ninety percent of its lenders and financial commitments are being honored as per the agreed terms. REFERENCE TO BIFR / AAIFR The Company has been declared a Sick Industrial Company by Board for Industrial and Financial Reconstruction (BIFR) under section 17(3) of Sick Industrial Companies (Special Provisions) Act,1985 vide their Order dated 29 March 2006. The Company has appealed against the said Order before AAIFR for setting it aside to the extent of appointment of Operating Agency instead of permitting the Company to submit a scheme u/s 17(2) of SICA to make its networth exceed the accumulated losses on its own within a reasonable time. The said appeal is admitted with stay on the operation of the Order of the BIFR dated 29/03/2006 and is pending before AAIFR. AUDITORS QUALIFICATION The Auditors qualification in para 7 of their report is self- explanatory. With regard to their qualification in para 7 of their report, your attention is drawn to Note No.4 of Schedule W, which is self explanatory. CURRENT YEAR The sales and other income for the first three months ended on 30th June,2007 of the current year is at Rs.29.02 crores as against Rs.29.59 crores during the period ended on 30th June,2006 in the previous year. SUBSIDIARY COMPANY The reports and Accounts of Blue Blends Equity Ltd. for the year ended on 31st March,2007 are annexed to this Report. FIXED DEPOSITS During the year the Company has neither invited nor accepted or renewed any Fixed Deposit. The company has paid all the claimed fixed deposits and fixed deposits remaining unclaimed for a period of seven years from the date of maturity have been transferred to the Investor Education and Protection Fund pursuant to the Provisions of Section 205C of the Companies Act,1956 and Investor Education and Protection Fund (awareness & Protection of Investors) Rules,2001. DIRECTORS Mr.K.S.Varadhan, retires by rotation and being eligible, offers himself for re- appointment. Mr.Y.V.Ramesh Naidu was nominated as Director of the Company by IFCI in place of Mr.D.K.Jain with effect from 31 July,2007. Mr.K.Parthasarathy was appointed as an Additional Director of the Company on 31st July,2007 and he holds the office as such director up to the conclusion of the ensuing Annual General Meeting. The Company has received notice in writing with requisite security deposit under Section 257 of the Companies Act 1956 from some shareholder proposing the candidature of Mr. K. Parthasarathy as director of the Company. The Resolution for appointment of Mr. K. Parthasarathy as Director is contained in the notice of the ensuing Annual General Meeting of the members of the Company. Mr.Bipin Gandhi ceased to be a director of the company due to his sad demise on 29.06.2007. The Board of Directors places on record its condolence on the sad demise of Mr. Gandhi. Mr.O.K.Jain, IFCI Nominee ceased to be director of the Company with effect from 31s1 July,2007 due to withdrawal of his nomination by IFCI. /he Board of Directors place on records its deep appreciation for the valuable support and co-operation extended to the company by the outgoing Directors during the tenure of their office DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement under section 217 (2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, it is hereby confirmed: i) That in the preparation of the accounts for the financial year ended 31st March,2007 the applicable accounting standards have been followed along with proper explanation relating to material departure; ii) That the Directors have selected such accounting policies and applied them consistently and made judgment 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 or loss of the Company for the year under review, iii) That the Directors have taken proper and sufficient care for the maintenance of adequate 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) That the Directors have prepared the accounts for the financial year ended 31st March,2007 on a going concern basis. PERSONNEL The information as required under Section 217(2A) of the Companies Act,1956 read with the Companies (Particulars of Employees) Rules, 1975 are given in the Annexure to this Report. The relation with the employees remained cordial throughout the year. The Directors wish to place on record their thanks for all the support and co-operation received from the employees at all levels. LISTING FEES The Company has paid up to date listing fees to BSE and NSE. The company has paid the arrears of listing fees up to the year 2004-05 to Madras Stock Exchange under one time settlement scheme and the listing fees for the subsequent years is not paid. The payment of listing fees to The Stock Exchange, Ahmedabad and Delhi Stock Exchange remains unpaid. The application of the company for de-listing of the Companys securities from the Madras Stock Exchange, The Stock Exchange Ahmedabad and Delhi Stock Exchange is pending. CORPORATE GOVERNANCE In terms of clause 49 of the Listing Agreement with the Stock Exchanges a report on the Corporate Governance is appended as annexure to this report. AUDIT COMMITTEE The company has constituted an audit committee of Directors as required under Section 292A of the Companies Act, 1956. Some of the terms of reference of audit committee are to review the financial reporting process and to examine accountancy, taxation, and disclosure aspect of significant transactions. AUDITORS M/s. P.C. Surana & Co., Chartered Accountants, Mumbai hold the office as Auditors of the Company till the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The appointment of M/s. P.C.Surana & Co. as auditors of the Company is proposed to be made by Special Resolution since more than twenty five percent of the subscribed share capital of the Company is held by Banks/Financial Institutions. The Board of Directors recommends the resolution. COST AUDIT Pursuant to the directives of the Central Government under the provisions of Section 233 B of the Companies Act,1956 qualified Cost Auditors have been appointed to conduct cost audit relating to textile products manufactured by the Company. PARTICULARS UNDER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956. As required 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, the relevant information is given below: A. CONSERVATION OF ENERGY; a) Energy Conservation Measures Taken. Energy conservation remains one of the most important areas of plants performance and is being continuously monitored. Some of the measures taken are : i. Separate energy meters have been installed for effectively monitoring the section wise energy consumption. ii. Additional capacitor banks have been installed in different section. iii. We have made optimum use of electrical motors and day light resources at plant. b) Additional investments and proposals, if any being implemented for reduction in consumption of energy: Re-sizing of the motors is being done to run the motors at full load conditions. c) Impact of measures at (a) and (b) above for reduction in energy and consequent impact on the cost of production of goods; Energy conservation measures have led to reduction in the cost of production d) Total energy consumption and energy consumption per unit of production as per Form A of the Annexure in respect of industries specified in the schedule thereto. 2006-07 2005-06 1. Electricity a) Purchased Units (in000) 17,615 18,671 Total Amount (Rs. In lakhs) 677.39 687.30 Rate/Unit (Rs.) 3.85 3.68 b) Generated Units (in 000) 40.15 38.24 Total diesel Consumed 13.50 13.34 (Ltrs. In 000) Total amount (Rs. In lakhs) 3.37 4.26 Rate/Unit (Rs.) 8.40 11.15 2. Steam Generated a) From Lignite (inOOO kgs) 24,921 28,074 Total Lignite Consumption 6,904 8,326 (in 000 kgs) Total Fire Wood Consumption 262.26 0 (in 000 kgs) Total Steam Coal Consumption 8.68 0 (inOOO kgs) Amount incurred (Rs. in lakhs) 122.80 131.30 Rate/kgs (Rs.) 0.49 0.47 B. TECHNOLOGY ABSORPTION : a) Research and Development : The Company is regularly getting its products tested by Ahmedabad Textile Industry Association (ATIRA), one of the premier textile research body at Ahmedabad and the product is constantly improved based on reports given by ATIRA. The Company is also sending its delegates from time to time to participate in the seminars and conferences organized by ATIRA to share information pertaining to research and development and innovations in the textile products. The executive of the Company also visited exhibitions at Paris and other European countries to adopt the latest designs. Such participations enable the Company to absorb and adopt the latest available innovations in the industry. The Company is not using imported technology in the manufacturing process. C) Foreign Exchange Earnings and Outgo Activities relating to exports, initiatives taken to increase export, development of new export markets for products and services and exports plants. Your Company is taking proper steps to exploit export opportunities. Foreign Exchange Earnings were Rs. Nil (previous year Rs.Nil) as against the outgo of Rs.179.64 Lakhs (previous year Rs.505.56 lacs). ACKNOWLEDGEMENT . Your Directors acknowledge with gratitude, the co-operation and assistance given by the Financial Institutions, Bankers and Customers of the Company during the year under review. For and on behalf of the board Anand Arya Place : Mumbai. Chairman & Managing Director Dated : 13th August 2007

Director’s Report