DIRECTORS' REPORT MANAGEMENT DISCUSSION & ANALYSIS REPORT To The Members, Your Directors present their Report on the business and operations of your Company for the year ended 31st, December, 2011. After transfering its 2-wheeler business related assets to a Mahindra group company (Mahindra Two Wheelers Limited) as part of its business restructuring, in November, 2008, Kinetic Motor Company Limited (KMCL) has been in discussions with Kinetic Engineering Limited (KEL) management for a proposal to amalgamate KMCL into KEL. Your Board of Directors also, in their meeting held on 9th December, 2011 have passed the resolution and approved the Scheme of Amalgamation for merging KMCL with the KEL. Both, KEL and KMCL are engaged in the Automotives Business. The amalgamation will enable achievement of the potential of Automotive Business including participation of investors, strategic partners, lenders and other stakeholders in such Business. The Merger will also help streamlining of the activities of the respective companies and reduce managerial overlaps; and augmenting shareholders' value besides aligning interests of shareholders in a single entity. MANAGEMENT DISCUSSION & ANALYSIS REPORT Business Restructuring After transfering its 2-wheeler business related assets to a Mahindra group company (Mahindra Two Wheelers Limited) as part of its business restructuring, in November, 2008, the Company has been evaluating different avenues for newer businesses. However , Company has also been in discussions with KEL for a possible Amalgamation with KEL and Board of Directors of both the Companies have approved the Scheme of Amalgamation of KMCL with KEL. The appointed date for Amalgamation is fixed as 1st January, 2012. The Companies have made the applications to Stock Exchanges for approval to the Scheme of Amalgamation , which is awaited till the date of this report. Post Stock Exchange approvals, the Scheme would be filed with the honourable Bombay High Court for its sanction. Financial Restructuring After utilizing the funds available from the sale of two-wheeler business related assets, for settling secured lenders and various other liabilities, Company had continued the process of settlement of unsecured creditors to the maximum extent during the period under review. During the period under review, the Company had converted 38 lac Optionally Convertible Cumulative Preference Shares (OCCPS) of Rs. 14.20 each into equity shares of Rs. 10 each, at a premium of Rs. 4.20 each. Further during the period , 50,09,090 Optionally Convertible Cumulative Preference Shares of Rs. 22 each were issued on 23.08.2011 and 1,03,00000 New Redeemable Preference Shares of Rs. 10/- were issued on 23.08.2012 and allotted by the Board on 14.11.2011. Research & Development And Technology Absorption During the period under review, the Company has not acquired new technology, and there were no research and development activities undertaken by the Company. Industry Overview The Company has made a strategic investment in the 20% equity of Mahindra Two Wheelers Limited (MTWL). MTWL operates in the area of two wheelers and manufactures two wheelers at the well established Pithampur factory. After launching new models and variants of scooters in last two years, MTWL has recently entered the large-potential market segment of motor-cycles. In scooters segment, MTWL has reached a monthly sales level of 20000 nos., as reported in SIAM. Opportunities, threats, risks and concerns The Company, having sold its assets relating to two wheeler business in November, 2008, as mentioned above, is cautiously optimistic regarding the future prospects and opportunities for its associate- MTWL- in the long term. Outlook After having sold its assets relating to two wheeler business in November, 2008, and after paying off its secured debts and substantially reducing its other liabilities, Company has now planned to get it merged with Kinetic Engineering Limited and to generate sizable wealth for its shareholders. Company remains optimistic that the investment made in Mahindra Two Wheelers Limited, in terms of 20% equity stake will appreciate in coming years and create value for the shareholders of the Company. Financial performance vis-a-vis Operational performance: Sales and Other Income Sales and other income in the period under review were Rs. 5.69 crores as against Rs. 7.62 crores in the previous period, due to discontinuance of two-wheeler business. Margin The company reported a net loss of Rs. 1.48 crores in the period under review as against net loss of Rs. 6.05 crores in the previous period. Interest Cost Interest cost in the period under review was Rs. 0.07 crores as against Rs. 0.12 crores in the previous period. Inventory Inventory for the period under review was Rs. 0.04 crores as against Rs. 0.60 crores in the previous period. Debtors Debtors for the period under review were Rs. 0.58 Crores as against Rs. 1.34 crores in the previous period Internal Control System Your Company has adequate internal control system commensurate with its size and nature of business for ensuring efficiency of operations and protection of company's assets. With a view to ensure better internal control systems, the company's Audit Committee periodically reviews compliance with Company's policies, procedures and laws. Human Resource Development Most of the employees were transferred to Mahindra Two Wheelers Limited. Relationship with the remaining employees has been cordial, during the period under review. Cautionary Statement This 'Management & Discussion Analysis Report' contains 'forward looking statements, based on Company's projections,estimates and perceptions about socio-economic conditions, government policies etc. The Company does not guarantee their accuracy, and cautions that circumstance beyond control of the Management may affect the actual working. FOREIGN EXCHANGE EARNINGS AND OUTGO There are no foreign exchange earnings and outgo during the period. CONSERVATION OF ENERGY The present level of energy consumption of the Company is very insignificant. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors confirm that : 1. In preparation of the accounts for the period under review, your company has followed the applicable accounting standards. 2. Appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st December, 2011 and of the loss of the Company for the period ended on that date. 3. 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. 4. The Annual Accounts for the period under review have been prepared on a 'Going Concern' basis. CORPORATE GOVERNANCE The Company is implementing Corporate Governance code as per the Listing Agreement with Stock Exchanges. A separate Report on Corporate Governance is given as Annexure to the Directors' Report. PARTICULARS OF EMPLOYEES Particulars of Employees as required under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 are contained in a Statement forming part of this Report. However, as per the provisions of Section 219(1)(b)(vi) of the Companies Act, 1956, the Report and Annual Accounts are being sent to the shareholders of the Company, excluding the particulars of employees. Any shareholder interested in obtaining a copy of the said Statement may write to the Company. DIRECTORS Mr. R. J. Kabra & Mr. S. R. Kotecha are liable for retirement by rotation at the ensuing AGM of the Company, and they are eligible for reappointment. Information as required under Clause 49 of the Listing Agreement, is provided in the annexure to this report. AUDITORS The Auditors M/s Lakhani & Co, Chartered Accountants, hold their office until the conclusion of the ensuing AGM, and have furnished a certificate in terms of Sec. 224(1) of the Companies Act, 1956, about their eligibility. FIXED DEPOSITS The company has not accepted any fixed deposit from public during the period under review. By Order of the Board of Directors For KINETIC MOTOR COMPANY LIMITED A. H. FIRODIA Chairman Pune : February 29, 2012 |