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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 Seventeenth Annual Report of the Company together with the Audited Balance Sheet as at 31st March, 2008 and the Profit and Loss Account for the year ended on that date. Financial Results: (Rs.in Lacs) Current Year Previous Year Ended Ended 31.03.2008 31.03.2007 Export Sales 176.42 Local Sales 2189.85 2131.09 Other Income 69.74 83.04 Profit/(Loss) before Interest (102.97) 220.16 and Depreciation Interest 44.34 12.54 Profit(Loss) after Interest (147.31) 207.62 Depreciation 44.76 33.31 Profit/(Loss) before Tax (192.07) 174.31 Provision for Tax Profit/(Loss) after Tax (192.07) 174.31 before extra ordinary items Extra Ordinary Items 2538.02 138.55 Net Profit / (Loss) 2345.95 312.86 Add: Brought forward from (1875.30) (2188.16) the previous year Transfer from General Reserve Amount available for 2345.95 312.86 appropriation (Loss) Balance carried to 470.65 (1875.30) Balance Sheet (Loss) Dividend In view of insufficient operational profit, your Directors regret for their inability to recommend payment of any dividend on the Equity Shares for the year ended 31st March, 2008. Operations: The overall improvement observed in the performance in the last few years is maintained during the year under review despite the turbulent market conditions particularly in the currency exchange rates. However, the Garment operations continue to incur operational losses due to low productivity, as the operations are yet to stabilize as per projected standards. Added to this during the year under review the exchange rates were highly unfavourable for Garments Exporters which has affected the process of stabilization to a large extent. Even though the Company has registered a growth of 11% in the sales there is a setback in the operational profit because of losses in garment operations. Further, there were damages due to a major fire occurred at our Plant located at C-3/B, TTC Indl.Area, Pawne Village, Navi Mumbai, during the month of Nov.2007. The Company has made a provision of Rs.117.50 lacs towards the losses due to fire. However, the Company has made necessary claim with the New India Assurance Co.Ltd., and the amount of claim would be dealt with appropriately in the books once the amount of claim is approved and sanctioned by the Insurance company. These factors were also partly responsible for the adverse performance of both the garment and process house during the year under review. Apart from this the productivity at the garment unit continued to remain below the expected levels and the Company continues to incur substantial expenditure towards development of skills of the garment workers to improve the productivity. The conditions are expected to improve during the current year which will help the Company to increase the productivity as per the projections. However, after many years the Company has recorded positive networth due to write back of interest provisions and the balance principal amount after completing the payment of dues as per the negotiated terms of settlement with SASF (Industrial Development Bank of India). The Company is yet to complete the assessment of EPCG License obligations with Jt.DGFT Mumbai, as per the directions issued by Add.DGFT, New Delhi, vide their order dt.3.2.2006. The Company is still pursuing with Jt.DGFT, Mumbai, to expedite the matter as early as possible. Export Sales: During the year under review the company could commence its export activities from the Garment unit, even though the export performance is not as per the projected levels. The lower level of exports is mainly due to delay in complying with various International norms and standards as well as obtaining approvals from various certifying authorities in respect of compliance standards. These approvals are essential to execute orders from reputed buying houses/brands in USA and Europe. Further unfavorable exchange rate conditions also remained a major hurdle for exporters as the real unit value realization has come down drastically due to fall in rupee exchange rates with US$. The Company is pursuing the customers in Europe etc. to execute contracts in Euro or other stronger currencies as the US$ continues to remain volatile. The Company has taken some important steps to obtain certification from some of the reputed authorities in order to ensure that necessary compliance conditions required by the International Brands/Customers are followed. This has helped the Company to obtain orders from Belgium, Italy, Spain etc. apart from USA. The Companys samples are approved by various buyers for quality parameters. Further the company is regularly exploring the various avenues available to expand its export base by actively participating in various Exhibitions, Fairs or Expositions as well as by directly promoting the sales through E-Commerce or by visiting at the buyers & buying agents location in the overseas countries by the Companys Directors and Senior Managerial Personals. These measures are expected to generate more orders with better value addition. The Company is hopeful of improving its export performance in the current year barring any unforeseen circumstances and market conditions. The capacity constraints are now almost removed and company plans to export atleast 50% of the production capacity of the garment unit. Expansion: The company continues modernization and upgradation of its processing facilities to ensure better productivity with minimum cost. The Company is in the process of removing some of the old Dyeing machines and replacing it with more technically advanced machines. Company proposes to complete this programme by the year end. In addition to this the Company intends to improve the quality testing & control facilities of the Garment unit significantly as the buyers follow very strict and rigid quality norms. Apart from these, the Company does not intend to undertake any other expansion programme immediately. However, in view of certain environmental regulations and rules enforced by the Local Bodies, Pollution Control Board etc, the Company may have to relocate its present activities from Navi Mumbai to some other suitable location in the Thane District in the next few years. The Company is in the process of taking necessary steps in this regard and appropriate decision will be taken accordingly in the due course. Increase in Share Capital: The company intends to raise finance by issue of shares on such terms and at such prices as may be decided at the appropriate time. Hence it is necessary to increase the authorized capital to facilitate the issue of fresh shares. Accordingly the Board has taken decision to increase the authorized capital from Rs.10 Crores to Rs.18 Crores subject to the approval of members in the general meeting. This will enable the company to augment resources for the relocation modernization activities. 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 Ltd., in the demat form. Depository System: The Company continues to maintain its connectivity with National Securities Depository Ltd., & Central Depository Services (I) Ltd. The ISIN No.is INE691D01012. Sizable portion of the issued capital is yet to be dematerialized and, the members are advised to dematerialize their holding immediately. De-listing : The Company continues to remain listed with Stock Exchange, Mumbai and is anticipating delisting approval from Delhi and Calcutta Stock Exchanges at the earliest. Industrial Relations: Industrial relations with the labourers at the Companys plant at MIDC, TTC Industrial Area, Pawne Village, Navi Mumbai, continue to remain 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 :he 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 Pavan .Agarwal and Shri Vivek Gangwal, Directors, would retire by rotation, and being eligible, offers themselves for re-appointment. Further the contract executed with Managing Director is due for renewal on 1st August,2008. The remuneration committee in its meeting held on 30th April 2008, has recommended to the Board the re-appointment as well as the terms and condition of the re-appointment of the Managing Director. Accordingly Board accorded its consent to renew the contract for a further period of 5 years subject to the approval of member in the forthcoming AGM as per the terms set out in the notice calling the Seventeenth Annual General Meeting. 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 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 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 V. J. Talati as the Cost Auditor to audit the cost records maintained by the company for the year 2007-08 as per the direction received from the Central Govt., in respect of conducting the audit of cost records maintained by the company. Auditors: Messrs Chaturvedi & Company, Chartered Accountants, retire at the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment. Going Concern Concept: In view of steady improvement in the performance and also due to write back of excess provision and balance principal amount on account of liquidating the liabilities as per the negotiated terms of settlement SASF(IDBI), the Companys networth which was negative till last year has now become positive and there are no accumulated losses to reckon with in the books. In view of this, Company is a going concern and accordingly the accounts are maintained as per the Going Concern Concept. The Companys Reference with Board for Industrial & Financial Reconstruction (BIFR): In view of the various rehabilitation measures taken the Company has successfully wiped out all its accumulated losses The Company therefore is no more a sick Company as declared by BIFR vide their order dt.10th Aug.2006. Accordingly, the Company would be making the necessary application before the Honourable BIFR to revoke aforestated order declaring the company as a Sick unit. 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 : 30.06.2008 Chairman & Managing Director

Director’s Report