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Suditi Industries Ltd.

BSE: 521113 | NSE: | Series: NA | ISIN: INE691D01012 | SECTOR: Textiles - Hosiery & Knitwear

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Annual Report

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Director’s Report

The Directors have pleasure in presenting the Sixteenth Annual Report of the Company together with the Audited Balance Sheet as at 31st March, 2007 and the Profit and Loss Account for the year ended on that date. Financial Results: (Rs.in Lacs) Current Year Previous Year Ended Ended 31.03.2007 31.03.2006 Local Sales 2131.09 2175.37 Other Income 83.04 74.96 Profit/fLoss) before Interest 220.16 216.45 and Depreciation Interest 12.54 4.14 Profit(Loss) after Interest 207.62 212.31 Depreciation 33.31 135.38 ProfiV(Loss) before Tax 174.31 76.93 Provision for Tax Profit/(Loss) after Tax 174.31 76.93 before extraordinary items Extra Ordinary Items 138.55 215.16 Net Profit / (Loss) 312.86 292.09 Add: Brought forward from (2188.16) (2480.25) the previous year Transfer from General Reserve Amount available for 312.86 292.09 appropriation (Loss) Balance carried to (1875.30) (2188.16) Balance Sheet (Loss) Dividend: In view of accumulated losses, your Directors regret for their inability to recommend payment of any dividend on the Equity Shares for the year ended 31St March, 2007. Operations: The Company continue to register significant improvement in the performance since past few years. These improvements are now visible in all aspects of the operations and because of this the company is able to register a profit of Rs.312.86 lacs in comparison to Rs. 292.09 lacs profit recorded in the previous year. Even though these profits inciude substantial amount of write back of Institutional outstanding due to one time settlement of their dues, still there is considerable improvement in the profit from the operational levels, it is noteworthy to mention that company is able to achieve this remarkable progress inspite of the fact that company is still engaged primarily on job work activities. During the year the company has commenced its garment manufacturing activities and there are still some teething trouble in terms of capacity utilization levels, quality control & rejection levels. The unit is slowly but steadily progressing to achieve the economy in the scale of operations. However. the current year financial results are adversely affected to some extent due to the initial operational burden of the Garment unit. Barring the performance of Garment unit, the operations of the process/knitting units are satistactory. Till now the Company continued to lay its emphasis on local customers as part of its survival strategy. In view of implementation of GATT and the quota free trade, the time has now become ripe for shifting its focus more on export activities. To have better growth and better profitability, the company is now concentrating more on the promotion of its Garment activities. However, due to working capital constraints & other teething trouble, the company is yet to take full advantage of this new opportunities. The company is hopeful of achieving its export targets during the current year as the unit has achieved necessary compliance standards in line with the requirement of the various overseas buyers. During the year under review the company has liquidated the liabilities of SBI Commercial and Internationa! Bank Ltd., and the entire consortium of banks has discharged the company and its Guarantors from the liabilities. However, there is delay in the payment of installment amounts to SASF as per the terms of Negotiated Settlement of its dues. But the company is permitted to liquidate the liabilities ! by March 31st, 2008 with interest @8% per annum on the remaining balance. The Company has made necessary arrangements to clear the SASF dues before the year end. Further, in respect of EPCG License matter with Jt.DGFT. Mumbai, the company is still pursuing with Jt.DGFT, Mumbai, to assess the EPCG License obligations as per the directions issued by the Addl.DGFT, New Delhi, vide their order dt.03.02.2006. The company has made certain additions to fixed assets to ensure smooth functioning of the process house. Apart from this, the company is also planning to make necessary stand by arrangement to save the unit from the power shortage situation prevailing in the unit. The company continues to improve its performance through various cost saving measures, product development and better utilization of its manpower & other resources. While the situation in the process house is extremely satisfactory, the conditions in the Garment unit is yet to become very economical and profitable. The customers confidence level and order position are very encouraging and rewarding for the benefit of the unit. The trend is likely to continue in view of boom conditions prevailing in the Textile sector The company proposes to undertake the programme of modernization particularly in the area of quality control & inspection. The Company has identified certain key areas in the garment unit for further strengthening and control. The programme designed would help the company to strengthen the garment units in terms of improving productivity, quality control & inspection as also to reduce the rejection levels. ISO 9001-2000: During the year company had conducted Annual Audit from AQSR in respect of compliance under ISO 9001-2000. Based on this, the Company has now obtained certification for another 3 years. The company has also renewed its certification in respect of OEKOTEX standard 100. Export Sales: During the year under review the companys garment unit has commenced its production and the unit was having lot of initial teething trouble. Because of this the company in order to ensure that the export productions are undertaken under complete satisfactory conditions, has taken a decision to defer the execution of export orders by another few months. Since the workers are totally fresh and under training in-house, the productivity levels are yet to achieve the targeted scale. Because of this the company did not execute any export order. Therefore there are no export activities reflected in the performance for the year under review. However, the company in the meantime has taken some initiatives particularly in completing the necessary inspection & approval of various compliance standards as per the requirement of export buyers. This would enable the company to become a source for their requirement and to get orders directly from these buyers on continuous basis. In view of the good market conditions and the units technical competence, the company do not anticipate any difficulty in achieving export sales as per the target during the current year. The company would be mainly targeting the exports market of Europe, UK, apart from USA and the activities will be confined mainly on Knitted Cotton/Blended Apparels, Made- ups etc. The Company is planning to achieve atleast export of one lac pieces per month on full scale utilization of capacity levels. Expansion: The company has completed its first phase of expansion by starting commercial production in the garment unit from October 2006. Further, the company is also planning to add some additional equipments to the unit to enhance its production, quality control activities. The unit is designed to achieve production level of around 4000 pieces per day. However, the capacity may vary substantially depending upon the nature, style & design of the product. The company would be taking up further enhancements in the Garment production capacity only after complete stabilization and satisfactory functioning of the present unit. However, the company would continue its modernization & upgradation of its processing house to augment and enhance its production activities to ensure better economy in the scale of operations. Fixed Assets: The Companys fixed assets are maintained in good condition and are adequately insured. Investments: The Company continues to hold investment of 2880 Nos. of equity shares of IDBI in the demat form. Depository System: The company continues to have its connectivity with NSDL & Central Depository Services (I) Ltd. The ISIN No.is INE691D01012. Still considerable portion of the issued capital is not dematerialized and, the members are advised to dematerialize their holding immediately. De-listing: The Company had already delisted its shares from Ahmedabad Stock Exchange and is anticipating similar approval from Delhi and Culcutta Stock Exchanges. The company continue to remain listed with Stock Exchange Mumbai. Industrial Relations: Industrial relations with the labourers at the Companys plant at MIDC, TTC Industrial Area. Pawne Village, Navi Mumbai, continue to be healthy and cordial. Personnel: The statement showing the requisite information in compliance with the provisions of Section 217 (2A) of the Companies Act, 1956 is not furnished herewith, as there are no employees covered by that section. Deposits: The Company has not accepted any deposits within the meaning of Section 58A of Companies Act, 1956 and the rules made thereunder. Energy, Technology and Foreign Exchange: The particulars relating to conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo as required under Section 217 (1) (e) of the Companies Act, 1956 is given in the Annexure forming part of this report. Directors: In accordance with the provisions of the Companies Act 1956 and the Articles of Association of the Company Shri A.lndu Sekhar Rao and Shri Sushilkumar Kasliwal, Directors j would retire by rotation, and being eligible, offers j themselves for re-appointment. Directors Responsibility Statement: The Directors hereby confirm:- i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii) that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable ano 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 that period. iii) 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, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and iv) that the Directors have prepared the annual accounts on a going concern basis. Corporate Governance: A separate section on Corporate Governance and a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, form part of the Annual Report. Cost Audit: The Company has appointed M/s.Vijay Talati & Associates as the cost auditor to audit the cost records maintained by the company for the year 2006-07 as per the direction received from the Central Govt., in respect of conducting the audit of cost records maintained by the company. Auditors/Auditors Remark: Messrs.Chaturvedi & Company, Chartered Accountants, retire at the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment. Your Directors have noted the observation of the auditors and wish to comment/clarify on the important observations as follows: a) In view of steady and continuous improvement in the performance, the Company is in the process of wiping out all its accumulated losses. Hence the accounts are prepared on the concept of going concern basis despite erosion of networth of the company. b) The Company has already received back substantial amount of advances paid to M/s. Harsh EOU Estates Pvt. Ltd., a company covered in the register maintained under section 301 of the Companies Act 1956 and the balance amount would be received in due course as per mutually agreed terms. Hence no interest is provided on the advances as per the policy decision followed in the earlier years. Going Concern Concept: The company continues to register significant improvement in the performance and gradually the company has turned to become a profit making organization. This has also been reflected in the annual accounts since last 2 years. Further the Companys Garment unit has also started its commercial production and it is anticipated that Garment exports would commence very soon. In view of all this company is anticipating further remarkable improvement in the performance from this year onwards. In addition to this, as per the programme the company has liquidated all banks liabilities and the remaining part of institutional (SASF) liabiiities would be liquidated during the current year. All these measures will help the company to wipe out its accumulated losses and register positive growth in the performance. Accordingly the company continue to follow the decision taken in the previous years to maintain the accounts on the concept of going concern basis. The Companys Reference with Board for Industrial & Financial Reconstruction (BIFR): The Board has declared the Company vide their order dt.10th August, 2006, as Sick unit and directed to make necessary rehabilitation proposal. However, in the meantime, the Company has on its own taken the necessary rehabilitation measures and the outcome of these measures are very encouraging. The company is hopeful of coming out of sickness by March, 2008. Appreciation: Your Company and its Directors wish to place on record their appreciation for the support received from different Central and State Government Departments and Agencies, Stressed Asset Stabilization Fund (SASF), M/s. The New India Assurance Company Ltd., and Companys bankers, Customers and Vendors. Your Directors also wish to place on record their deep sense of appreciation to all the employees of the Company for their outstanding contribution towards the operations of the Company. For and on behalf of the Board of Directors Place: Mumbai ANAND AGARWAL Date : 02.07.2007 Chairman & Managing Director

Director’s Report