Your Directors present the Fourteenth Annual Report of your Company,
together with the Audited Accounts for the year ended 31st March 2006.
Your Companys performance during the year as compared with that of the
previous year is summarized below:
(Rs. in Lakhs)
Export Sales 16,846.95 9,590.07
Domestic Sales 679.24 884.88
Total Sales 17,526.19 10,474.95
Add : Other Income 715.11 591.03
Total Income 18,241.30 11,065.98
Less: Materials & Manufacturing Expenses 13,585.31 8,021.15
Less: Value Addition Cost 3,888.37 2,237.38
Profit Before Depreciation &
Amortization Expenses 767.62 807.45
Less : Depreciation & Amortization Expenses 604.01 425.78
Profit Before Tax 163.61 381.67
During the year under review, the cost of steel and copper wires
increased substantially. These are basic raw materials used by your
Company. Your Company has taken various measures to address these
competitive challenges by way of in sourcing, improving productivity,
re-organizing operations and talking to customers.
Your Company has so far been offering fixed price contracts to its
customers as desired by them. Steep rise in the price of Steel and
Copper during last year was not anticipated while booking these orders.
This has resulted in significant increase in cost of production and
consequent lower operating margins.
Your Company has taken various measures to address these issues. These
include insourcing of components and where possible, renegotiating the
contracts with the customers.
The Profitability was also adversely affected due to increase in supply
chain cost to meet the increased off take of our customers. These costs
are now under control.
The weakening of Euro also affected our Profitability. We have taken
steps to hedge against currency fluctuation to minimize such effects.
The steps as mentioned above along with focus on further improving
productivity, streamlining operations and other cost out measures will
result in improved operating margins.
Your Board is confident of sustaining the growth momentum as your
Company has already embarked on additional business programs required
by our customers.
INCREASE IN SHARE CAPITAL
During the year under review, your Company raised equity through
preferential allotments on private placement basis based on members
approval at the Extra-Ordinary General Meetings held on 7th April, 2005
and 20th January, 2006 the details of which are given below:
a) Allotted 8,49,382 equity shares of Rs. 10/- each at an issue price
of Rs. 180/- (Incl. Premium) per share and 8,54,900 optionally
convertible warrants at Rs. 180/-per warrant (Rs. 18/- paid on
allotment & balance of Rs. 162/- per warrant is payable on conversion)
to M/s. Aeneas Evolution Portfolio Limited.
b) Allotted 11,25,000 equity shares of Rs. 10/- each at a price of Rs.
214/- per share (incl. Premium) in the aggregate to Foreign
Institutional Investors viz., M/s. T. Rowe Price International Inc.,
(i.e 4,25,000 shares) and M/s. Lloyd George Investment Management
(Bermuda) Limited (i.e 7,00,000 shares).
Consequent to above, the number of paid-up equity shares increased from
1,19,00,000 shares to 1,38,74,382 shares as of March 31, 2006.
The Company has not utilized the funds raised by way of Preferential
Allotments for purposes other than those stated in the Notice convening
Extra-ordinary General Meetings.
Based on the confidence in the performance of your Company in the
coming years, your Directors are pleased to recommend a dividend of Rs
1.50 per share on 1,38,74,382 equity shares of the Company in respect
of the financial year 2005-2006.
TRANSFER TO RESERVES
The Company proposes to transfer Rs 406.07 Lakhs to the Reserves and
the Reserves after the transfer at the end of the year 31st March, 2006
is Rs 5,823.56 Lakhs as against the Total Reserves of Rs. 2,209.59
Lakhs as at 31st March, 2005.
QUALITY AND ENVIRONMENT
Your Directors are pleased to inform you that during the year your
Company continued to work on live APQP (Advanced Product Quality
Planning) processes for different Programs in the automotive industry.
This ensures an effective advance failure mode analysis to ensure that
Quality gets built into the Design as well as Process.
Your Company has been awarded TS-16949 Certification, the new process
based Quality System which will translate the Quality Model from Design
of Product and Process to all elements of the Organization. During the
year, your Company has been awarded ISO 14001 Certification for
compliance of Environmental Management System requirements.
Mr. T Igarashi and Mr. Keiichi Igarashi, Directors retire by rotation
at the forthcoming Annual General Meeting and being eligible, offer
themselves for re-appointment.
The brief resume/details relating to Directors who are to be
re-appointed as stipulated under Clause 49(IV)(G) of the Listing
Agreement executed with the Stock Exchanges are furnished in the Report
on Corporate Governance.
DIRECTORS RESPONSIBILITY STATEMENT
In compliance of Section 217(2AA) of the Companies Act, 1956 your
directors, on the basis of information made available to them, confirm
a) In the preparation of the annual accounts, for the year 2005-06 the
applicable Accounting Standards have been followed and there are no
b) they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give true and fair view of the state of affairs of the
Company as at 31st March 2006 and of the profit of the Company for the
year ended on that date;
c) Proper care has been taken for maintenance of adequate accounting
records for safeguarding the assets of the Company and detecting fraud
and other irregularities;
d) The accounts are prepared on a going concern basis.
During the year under review, your Company has not invited or accepted
any deposits from the public under Section 58A of the Companies Act,
1956 and Rules made thereunder.
IGARASHI TECHNOLOGIES PRIVATE LIMITED-SUBSIDIARY COMPANY
The Company is engaged in the business of designing Product and Process
Technology of motor sub ssemblies, motors and motor systems. The first
indigenously designed Motor for an Engine application is likely to
capture a significant Global market share. Many new motors for Domestic
applications have been designed and they are being launched
progressively. The Company in its first full year of operation recorded
Net Sales of Rs. 116.89 Lakhs and Net Profit of Rs. 26.43 Lakhs. The
Company has worked on various product and process development manily
for Igarashi Group and will soon commence Engineering and Technolgy
work for clients other than Igarashi Group.
As required by Accounting Standards, the financial statements of your
Company reflecting the Consolidation of Accounts of the Company along
with Igarashi Technologies Private Limited (Subsidiary Company) are
annexed to this report.
A Report on Corporate Governance along with a certificate from the
Auditors of the Company regarding compliance of the requirements of
Corporate Governance pursuant to Clause 49 of the Listing Agreement
with the Stock Exchanges are annexed hereto.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report of the Company for year under
review as required under Clause 49 of the Listing Agreement with the
Stock Exchanges, is given as a separate Statement in the Annual Report.
M/s. Sharp & Tannan, Auditors of the Company retire at the ensuing
Annual General meeting and being eligible, offer themselves for
re-appointment. Members are requested to appoint Auditors for the
current year and authorize the Board to fix their remuneration.
As required under the provisions of Section 224 of the Companies Act,
1956, the Company has obtained a written Certificate from the above
Auditors proposed to be re-appointed to the effect that their
re-appointment, if made, would be inconformity with the limits
specified in the said section.
World over employees stock options schemes have been used as a
successful tool to reward those employees who are performing well,
encourage performance improvement, retain talent, align employee
interest with those of the organisations and to motivate talented human
resources for the Company. It is therefore proposed to introduce
Employees Stock Options Scheme for the employees of the Company,
including eligible Directors, to be decided by the Board of Directors
of the Company/Compensation Committee constituted by the Board of
Directors. The proposed scheme will strictly adhere to the norms,
guidelines and regulations prescribed from time to time by the
Securities Exchange Board of India and other regulatory requirements.
During the year under review, your Company has divested 50% of its
investment in Igarashi Brush Cards Private Limited and earned Income of
Rs. 650 Lakhs.
INCOME TAX DEMAND
The Assistant Commissioner of Income Tax, Company Circle II (3),
Chennai has issued a notice demanding Rs. 77.44 Lakhs for the
assessment year 2003-04 in connection with computation/method of
calculation of Income Assessable under the Income Tax Act, 1961. The
said demand is subject of appeal before the prescribed authorities.
Your Companys Customer Delphi,USA along with its U.S Subsidiaries had
filed voluntary petition on October 08, 2005 for re-organization relief
under Chapter 11 of title 11 of the United States Code, 11 U.S.C before
Bankruptcy Court at New York, USA. Since, your Company is a key
supplier, all dues outstanding on petition date have been paid and
after petition date the supplies to Delphi, USA and payments continue
Your Company continues to focus on improving employee skills and
productivity through appropriate Human Resources Development
The Board of Directors wishes to place on record their sincere
appreciation to all the employees of the Company for their dedication,
commitment and loyalty to the Company.
None of the employees received remuneration during the year in excess
of limits set out inder Section 217(2A) of the Companies Act, 1956 read
with the Companies (Particulars of Employees) Rules, 1975.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
The information required to be furnished pursuant to Section 217(1)(e)
of the Companies Act, 1956 read with the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988, is
appended hereto and forms part of this Report.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of expenditure and earnings in foreign currency are given
in the prescribed format as an annexure to this Report.
The shares of your Company continued to be listed at National Stock
Exchange, Bombay Stock Exchange and Madras Stock Exchange. Listing fee
has already been paid for the financial year 2006-07. Further, Annual
Custody Fee has also been paid to NSDL and CDSL.
The Board places on record its sincere appreciation for the continued
support from the relevant Government Authorities, Promoter Companies,
Shareholders, Suppliers, Customers, Employees and other business
associates, for the strong support.
For and on behalf of the Board of Directors
Place : Chennai K.K Nohria
Date : 14th June, 2006 Chairman
ANNEXURE TO THE DIRECTORS REPORT
A. CONSERVATION OF ENERGY
a. Energy Conservation Measures Taken:
* Implemented Waste Heat Recovery Process by Vapor Absorption Machine
to run Air Conditioners which replaces 701 Tones utilizing waste fuel
(exhaust) gases from Captive Generators;
* Additional variable frequent drives with Microprocessor Controlled
Screw Compressors to reduce Power Consumption;
* Air Conditioners upgraded to Energy Efficient scroll compressor units
has become mostly operational;
* Additional investments and proposals, if any, implemented for
reduction of Consumption of energy:
* On going investments on implementing energy conservation on areas in
B. TECHNOLOGY ABSORPTION
Technology, absorption, adaptation and innovation
a. Efforts, in brief, made towards technology absorption, adaptation
and innovation :
Developed new products at India
Established Technology center for motors in India by working with
collaborators for new applications of DC Motors.
Working with Suppliers of Equipment and Machinery for improved
productivity machinery for Process Technology up-gradation
Understanding of new Hi-Technology and more efficient manufacturing
processes for component making resulting in quality improvement and
b. Benefits derived as a result of the above efforts:
Opening up of new global market opportunities
Lower cost of materials, parts and manufacture Better quality of
c. Expenditure on New Product Development
Total Program Expenditure 303.20
Less : Amortized Expenditure 4.18
Net Expenditure 299.02
d. Information regarding imported technology during the last 5 Years:
a. Technology imported : Permanent Magnet DC Micro motors Technology
b. Year of Import : 1993-94
c. Status : Absorbed
d. If not fully absorbed : Not Applicable
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
a. Activities relating to Exports; initiatives taken to increase
exports; development of new export markets for products & export plans:
As the Company is 100% export oriented, refer para on Company Business
Growth/Strategy of the Management Discussion Analysis Report of the
b. Total Foreign exchange used and earned: 2005-06 2004-05
Total Foreign Exchange earned 16,845.75 8,144.99
Total Foreign Exchange used 11,646.53 6,268.19
(Excludes payments for capital goods: Rs.1,742.50 lakhs (Previous Year:
For and on behalf of the Board of Directors
Place : Chennai K.K Nohria
Date : 14th June, 2006 Chairman