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Chaman Lal Setia Exports Ltd.

BSE: 530307 | NSE: | Series: NA | ISIN: INE419D01026 | SECTOR: Food Processing

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Annual Report

For Year :
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Director’s Report

ANNUAL REPORT 2005-2006 DIRECTOR'S REPORT To The Members, Yours Director have pleasure in presenting the 121 Annual Report together with the Audited Accounts of the Company for the year ended 31st March 2006. 1. RICE BUSINESS Performance At A Glance Particulars Amount (in Lacs) Amount (in Lacs) Y .E. 31.03.2006 Y.E 31.03.2005 Export turnover 3372.29 4330.65 Domestic turnover 4673.62 3523.43 Profit before Intt. & Depreciation 448.78 508.12 Interest 128.80 217.16 Provision for Depreciation 89.80 83.80 Profit before Tax 230.18 207.16 Provision for Tax 64.00 71.74 Profit after Tax 166.18 135.42 Proposed Dividend 185.59 312.01 Transfer To General Reserve 16.61 13.54 Carried to Balance Sheet 12.60 43.11 Current Assets 4443.03 5824.32 Current Liabilities 1698.24 3291.52 Working Capital 2744.79 2532.80 Capital Employed 3361.78 3112.49 EPS 1.80 1.54 Book Value 23.82 23.80 Highlights of Performance: During the year the export of Company decreased to a large extent due to the adverse factors i.e. fall in the value of dollar & cut throat competition in export market. but domestic sales increased tremendously in the year under consideration .This was the result of the efforts put in by management last year viz attraction packing, bradning & standardisation of quality of rice creating of new markets. Overall sales and profitability increased at a steady pace. 2. Deposits The Company has not accepted any deposits failing within the purview of Sec 58A of the Companies Act 1956 and no deposits were overdue as on 31.03.06 3. Personnel Relations with work force of the Company have remained cordial, through out the Year. 4. Directors Sh Sukarn Setia, Raghav Pashawaria & Vijay Setia all Director of the Company retires by rotation at the Annual General Meeting and being Eligible offers themselves for re-election. 5. Statement u/s 217 (1) (e) of the Companies Act The requirements for disclosure of particular with respect to conservation of energy are not applicable to the company. A statement giving details of technology absorption, foreign exchange earning and outgo in accordance with the above provisions is annexed here to as Annexure 'A' and form parts of this report. 6. Particulars of employees The Company has no employee of the category specified in sub section (2A) of section 217 of the Companies Act 1956. 7. Auditors' Report The notes on accounts referred to in the Auditor's Report are self- explanatory and therefore do not call for any further Comments. 8. Auditors M/s Rajesh Kapoor & Co, Chartered Accountants retire at the conclusion of the forthcoming Annual General meeting and are available for re- appointment. A written certificate u/s 224(1)(B) has been obtained to this effect. 9. Dividend During the year ended March 31, 2006 your Company's working results have improved on both front i.e. sale & profit in view of the Management Thrust on Cost reduction in all areas of Company's operations, productivity improvement, improvement in the quality of yield and innovation of new products viz Pesticide Residue Free Rice, Smoked Rice Diabetic free rice 's cardaman rice etc. Therefore keeping in view the shareholders aspirations, yours directors, recommend a dividend of 20% on pro-rata basis subject to adjustment of 100% of amount due to partly paid shareholders towards their balance of call money due. 10. Director's Responsibility Pursuant to section 217 (2AA) of the Companies Act 2000 the directors confirm that: (i) In the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; (ii) Appropriate accounting policies have been selected and applied Consistently, and have made judgements and estimates that are reasonable and prudent so as to give a true & fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for the said period. (iii) Proper and sufficient care has been 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 have been prepared on a going concern basis. 11. Statutory Disclosures None of the directors of your company is disqualified as per the Provisions of Section 274 (1) (g) of the Companies Act, 1956. Your directors have made necessary disclosures as required under various provisions of the Act and clause 49 of the Listing Agreement. The information given under Section 217 (1) (e) of the Companies Act, 1956 to be read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 as amended is enclosed as Annexure 'A'. None of the employees of your company is drawing remuneration exceeding the limits laid down under provisions of Section 217(2A) of the Companies Act, 1956 to be read with Companies (Particulars of Employees) Rules, 1975 as amended. 12. Corporate Governance Chaman Lal Setia Exports Ltd has rooted itself in Values. Nurtured by ethics, transparency and Corporate Governance, Your Company is all set to branch out further and grow stronger. It is these values and guidelines that will give a firm foundation for the future growth. The Company has implemented the new requirement code of corporate governance as required by Clause 49 of the listing Agreement. 13. Dematerialisation of Shares The Company has agreements with both National Securities Depository Ltd and Central Depository Services Ltd. whereby the Shareholders have an option to dematerialise their shares with either of the depositories. Now the company's shares are traded compulsorily in demat form under ISIN code INE419D01018. 14. Social Objectives Company is not only a Profit Oriented Unit, but also meeting its Commitment & Responsibility towards the society by undertaking the following measures: a) Development of new technique whereby rice could be made Pesticide Residue Free. b) Development of low cost water filters for poor segment of the society. The Company has named the new invention after the name of its Brand as Begum Water Filter. c) Project for tackling problem of wastewater logging and treatment of sanitary discharge in villages is under process. d) Development of diabetic rice for diabetic patients. e) Zero Energy cool chamber development of more cost effective more users friendly cooling system at a very nominal cost. 15. Delisting of Shares The share of the Company are listed on Mumbai Stock Exchange Limited and listing fees has been paid timely. 16. Pollution Free Environment: -Company's Slogan During the Year Company has distributed free of cost plants of Neem & Jamun for plantation. As such company has prepared a nursery plants of Neem, Jamun etc. Further the Company has also used the Neem as bio pesticide for controlling infestation. To further accomplish Company's motive of pollution free environment Company is trying hard in making Bio Compost from waste and rejects of paddy to overcome the problem of waste. The Company's research & development Deptt. is also trying to stablize rice bran for human consumption. The Company's research work for paddy steeping to desired level of moisture without using excess water is still under trial. Appreciation The Board of directors thanks company's customers, public in general, shareholders, bankers and suppliers. The Board also places on record its appreciation of the services rendered by staff at all levels and look forward to their valued co-operation and contribution in meeting the future challenges. FOR & ON BEHALF OF BOARD CHAMAN LAL SETIA Chairman Place : Amritsar Dated : 18-08-2006 ANNEXURE - A Particulars as required under Companies (Disclosure of particulars in the Report of Board of Directors) Rule 1988 and forming part of the Director's Report for the year ended 31.03.2006 A. CONSERVATION OF ENERGY Maharani Zero Energy cool chamber has been developed by the Company to save Consumption of Electricity to a great extent. This system is of great help for common farmers whereby 30 to 35% wastage of vegetables / fruits can be saved resulting in a huge saving of the Country which otherwise are wasted due to sudden ripping due to high temperatures and humid atmosphere conditions. B. TECHNOLOGY ABSORPTION (i) Research And Development(R&D) 1. Various R&D initiatives were undertaken which have resulted in : a) Development of Pesticide Residue Free aged Basmati rice; b) Development of Smoked Basmati Rice; c) Development of quick cooking Brown Rice; d) Development of Sugar Free Rice; e) Use of neem as Bio-pesticide; f) Improvement in Parboiling for improvement in quality parameters; g) Use of Plastic Buckets in parboiling plant thus reducing cost; h) Development of Bhatti Sella for the first time in India; i) Development of Fragrance Rice. j) Reducing broken in paddy with very high sun checks under process. k) Rice bran stabilization for human consumption under process. l) Making bio-compost from waste and reject of paddy under process. m) Cool Chamber system. 2. Future plan of action The Company will try to assist any R&D Unit of any academy / University in this line. 3. Expenditure on R & D. Wages, salaries, stores, spares & consumable used for R&D activities have been. debited to Respective Heads. (ii) Technology absorption, adoption and innovation. The Company has completely indigenous technology & has not imported any technology from abroad. C. EFFLUENT TREATMENT Your Company has developed a 'no cost' water treatment system for its Parboiled Unit. D. ELIMINATION OF PESTICIDE RESIDUE: - Aged rice is preferred for eating & cooking quality. But aging requires one & more years of storage and for safe storage, pesticides fumigants are invariable used to preserve the rice. These are highly toxic and even its residues are health hazards. Even recently some soft drinks have been found to contain pesticides residue contents. As per norms of WHO these pesticides are to be phased out for human health & environment concerns and it is remarkable achievement of the company that it has developed a technology of aged rice without fumigation & pesticide usage resulting thereby a healthy and tasty rice for your health & family. E. SMOKED BASMATI RICE: - The company has yet another development to its credit that it has developed a new quality of rice called 'Smoked Basmati Rice' which is monopoly of few millers in the world. F. DIABETIC FREE RICE:- Company has succeeded in developing a new variety of rice which is called 'Rice for Diabetic people'.These rice are, with moderate G.I Our claim for diabetic free rice has been upheld by department of Nutrition & diabetic of P.S.G college of Arts and Science (An ISO 9001 2000 certified institute also accredited at the 5 star level by NAAC) after tow simultaneous research's. G. LIGHT WEIGHT TILES:- The Research & Development wing of the Company have been able to achieve a remarkable thing by developing lightweight tiles made from Rice Husks. Which can be used in multi stored building while construction. These tiles are light in weight and company foresee a good prospect of this innovative product along with elimination of Hazardous waste of rice. H. CARDAMOM FLAVOUR RICE:- The Company has yet another mile stone achieved to its credit by developing a different quality of rice called 'Cardamom Flavour rice'. This special rice has started giving its results by creating a Niche for its quality in middle East and Europe etc. Management Discussion and Analyses 1. Economic Environment & Rice Industry:- With 8% GDP growth foreign exchange of $ 165 billion (Appox), FDI almost 8 billion and an over 20% rise In export, the Indian Economy is clearly on a strong growth path. Although rising inflation and heavy increase in oil prices are the matters of concern. The performance of rice Industry is largely dependent on monsoon. Due to drought prevailed in the past in some areas, uneconomical rice prices, many rice Industries went through a period of recession. The minimum prices for paddy and rice of a few qualities is fixed by central govt. and some levies are also levied on rice Industry. 2. Outlook-Global Rice Industry:- Gradual changes in economy are already visible with strong rural and urban growth and an end to down trading which strongly hampered market growth earlier. The implementation of VAT has also been a key to this changing scenario. It has enabled higher levels of compliance, transparency and reduced tax evasion. Going forward a thrust on innovation and enhances focus on branding, increased advertisement spent, focus on globalization and improved penetration levels are all going to be the key to drive growth. During the year under review your company has tried to do all these while maintaining the growth rate in addition to introducing new products company is also performing well in social sector by developing light weight tiles, eliminating pesticides residues introducing low cost water filter for common people. Opportunities & Threats: - Opportunities: 1. The Company has developed a unique product i.e. Pesticide Residue Free Aged Basmati Rice which is absolutely free from any pesticide residue. This product of the company can be called triumph card for the future. As it is well known now that some of very popular food items have been found having pesticide residue content. But as far as our company is concerned, our product is now pesticide residue free and this is perhaps unique in the world. Its sale is increasing day by day. 2. Yet another development for which we can boast of is Smoked Rice having something-unique taste and flavour. This rice is now also picking up particularly in Saudi etc. 3. The company's novel product Bhatti Sella that was introduced three years before is selling at a premium in the rice market. This rice has the qualities like taste, aroma, easy cooking and longer preservation period. 4. Quick cooking brown rice developed by the company is very useful for large function at a big level and its sale is picking up especially in Saudi Area. 5. Yet another product of the company introduced last year is for Diabetic People who avoid normal rice. This rice developed by the company contains low quantity of sugar as compared to the normal rice available in the market. This will also prove a backbone in the profitability and sales of the company in the coming year. 6. CARDAMOM FLAVOUR RICE:- The Company has yet another milestone achieved to its credit by developing a different quality of rice called 'Cardamom Flavour rice'. This special rice has started giving its results by creating a Niche for its quality in middle East and Europe etc. All these factor have largely contributed to increase in sales of the company both in domestic market as well as export market. 7. The Steam plant at Amritsar unit has been installed and ready for production and cater the need of steam rice especially for Saudi Arab. 8. The Company is in process of having a corporate office at Delhi to give a boost of its Export and domestic Sale. 9. The fixed cost can be brought down substantially with increased production as the Company has the total Infrastructure at its both the units which has also led to increase in profitability. The Company has considerably reduced the financial cost by making a prudence use of funds and still hopeful for further decrease in financial expenses. Threats: - Under performance of world economy, global recession and unfavorable & deficit monsoon change in govt.policy are the threats which can depress the prices and the demand for rice. This risk can be mitigated largely due to the concept that Food Industry has lesser elasticity of demand as compared to the other products. Further the business wisdom and technological aspirations inherent in the management team can be quiet helpful to overcome such difficulties. As the company is mainly dependent upon Agriculture which totally depends upon the quality of rains in India, the poor rainfall can adversally affect the costing of the Company and consequent price realisation. But the Company has developed its procurement market through out India and if in any region the rainfall is lesser the Company can buy its raw material from the another region. Risks and Concerns The unprecedented nature of Rice Industry and volatile prices are areas of concern for which the company's focus to make cost of production internationally competitive and reduces interest cost by more & more utilising its own resources and cutting other cost through technological upgradation and computerisation of company's operations. The protectionist measures initiated by other countries may close down the window for exports. However the company's focus is also on the domestic market. In case of Sugar free Rice Company's claim proved to be correct by Dept. of Nutertion and dietetics of P.S.G College of Arts and Science. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The company continued to lay emphasis on strengthening and improving internal supervision and control. The Company has a proper and adequate system of Internal controls to provide reachable assurance that all assets are safeguarded and protected against loss from unauthorized use or disposition, and that transaction are authorized, recorded and reported correctly. The internal control system provides for well-documented policies, guidelines autorization and approval procedures. Management information system (MIS) is the backbone of yours company's control mechanism. Well-conceived annual planning and effective budgetary control ensures adequate control on all the expenditures of the company. An extensive programme of Internal Audit by the internal audit department and periodic review by the Management further supplement the Company's internal control systems. In the line with the International trend, planning and conduct of internal audit is oriented towards review of control in the management of risks and opportunity in the Company's activity. The Internal Auditors report significant audit observations, periodically at regular intervals to the Audit Committee that comprises of three independent Directors. The Committee met regularity during the financial year and reviewed audit observation and followed up implementation of corrective actions. The Audit committee also met the company's Statutory Auditors to ascertain their views on the adequacy of Internal Control System in the Company. FINANCIAL PERFORMANCE: Despite difficult market scenario, erratic monsoon, tight money market and other factors viz fall in exchange rate company maintained its record of profitability and earned Rs 320 lacs as cash profit as compared to 291 lacs last year. During the year company's sale record a growth from 7854 lacs to 8046 lacs and EPS increased to Rs. 1.80 from Rs 1.54. INDUSTRIAL RELATIONS & HUMAN RESOURCE MANAGEMENT- Like Like any high performance organization, your company firmly believes that success of the company comes from good Human Resources. Employees are considered as important assets and key to its success. HRD always strives for sourcing and developing high caliber employees, providing them relevant training for enhancement of their competence and facilitating their assessment process through an effective performance Management System (PMS). Company aims to remain lean and dynamic in a continuing de layed structure. Training and development initiatives aim at bridging the gap between existing skills and desired skills of the employees in line with organisational needs. Extensive training inputs aim at building up competence amid commitment to employees through understanding and utilizing new technology, hands on job training, inter functional knowledge, furtherance of safety awareness and training in behavioural area etc. During the year company has incurred Rs. 3.53 lacs on the training of its employees and Rs 52.34 lacs on staff welfare & other provisions for the benefit of employees. Employee relation continued to be satisfactory. The number of persons directly employed by the company was above 130 as on 31st March 2006.. The company continued with the existing welfare schemes for the benefits of its employees. The Provident Fund, Bonus, Promotion, Gratuity and other fringe benefits were bestowed upon all the confirm employees of the company to motivate them for attaining the ultimate goals of the company. In addition to these benefits Group Insurance. Medical Insurance and Retrenchment Compensation were also assured for the employees of the company. In addition to these ultimate benefits, employees are also provided with better working environment, first aid medical facilities, conveyance facility and computerised environment. CAUTIONARY STATEMENT: Statement in this report on Management's Discussion and analysis describing the company's objectives, projections, estimates, expectations or predictions may be 'forward looking statements' are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied important factors that could make a difference to the Company's operations include economic conditions affecting global and domestic demand supply, finished goods prices in the domestic and overseas markets in which the Company operates, raw material cost and availability, changes in Government regulations, tax regimes, economic developments within India and other factors such as litigation and Industrial relations. The company assumes no responsibility to publicly amend, modify ore revise any forward looking statements on the basis of any subsequent developments information or events.

Director’s Report