REPORT OF DIRECTORS Your Directors have pleasure in presenting herewith their Thirtieth Annual Report on the activities of your Company during the year ended 31 March 2014. As notified by MCA Circular No. 1/19/2013-CL-V dated 04.04.2014, the Company has followed PERFORMANCE As reported in the previous year, your Company embarked upon commercializing Solar Based Equipment and Project business as part of diversification measure. During the year under review, • the recessionary trend in overall business continued to prevail in the market created complex environment to capture the business. • stiff competition in Solar Based Equipment and Project Business and delay of payment of subsidy from Ministry of New and Renewable Energy resulted in lower cash flow and gross margin. • the Solar Based Equipment and Project Business recorded turnover of Rs 24.87 Crores as compared to Rs 15.06 Crores in the previous year. • in the Networking Products Space, the turnover increased to Rs 42.89 Crores from Rs 34.53 Crores of previous year. Details on segmental revenue and performance are furnished in Para 16 of Note 26 on 'Additional Notes' to Accounts. • the turnover of the Company increased to Rs 67.76 Crores from Rs 49.59 Crores resulting in 36.65% growth over that of the previous year. • stiff competition coupled with increased cost due to high inflation resulted in operating loss of Rs 8.85 Crores as against Rs 9.77 Crores loss of the previous year. • accumulated losses stood at Rs 38.50 Crores for the year ended 31st March 2014 as against Rs 27.14 Crores last year. • trade receivables increased to Rs 25.04 Crores from Rs 19.03 Crores and this is due to increase in working capital on account of Solar Based Equipment and Project Business. • provision has been made for an estimated amount of Rs 2.65 Crores (previous year- Rs 5.00 Crores) in respect of certain items of non/slow-moving inventory, based on Generally Accepted Accounting Practices and estimates by the company; • continuous efforts are being made to use slow/non moving stocks to manufacture other products or dispose off in a conducive manner. Carrying amount of inventory reduced to Rs 14.53 Crores as against Rs 15.70 Crores of previous year. • after considering the above, the Net Operating Results show a loss of Rs 11.50 Crores as against Rs.14.77 Crores of the previous year; DIVIDEND Whilst your Directors understand the sentiments of the Investors, the financials of the year that has passed, constrained the Board to state that the dividend is not recommended. However, the Directors will strive hard to bring the Company back to dividend track before long and the improving performance of the Company is hoped to continue to facilitate consideration of dividend in the days to come. PROSPECTS & OUTLOOK The Company is continuously trying to turn around into profitable business by taking adequate steps to increase the volume of business and gross margin and control overhead costs. FINANCE During the year under review, • your Company incurred an operational loss of Rs 8.85 Crores, excluding the provision of Rs 2.65 Crores towards slow-moving items of inventory; • deleting the component of 'depreciation' of Rs 2.40 Crores included in the above, the registered cash loss stood at Rs 6.45 Crores; • to augment the Solar Based Equipment and Project business in the market which is predominated by Government Undertakings and to increase the liquidity, the Company availed drop down overdraft facility from State Bank of India to the tune of Rs 20 Crores. •finance costs increased to Rs 1.42 Crores from Rs 0.22 Crores of the previous year due to factoring and interest expenses. • stringent austerity measures, already in place, continued unabated, in order to minimize the impact of expenditure on the financial results; Your Directors place on record their sincere appreciation of the timely co-operation, guidance, assistance and whole-hearted support received from your Company's employees, bankers and Canbank Factors Limited. RIGHTS ISSUE Considering the fund needs and keeping in mind the lengthy association of the large number of Shareholders, your Board has proposed to raise funds by way of Rights Issue and details JOINT VENTURE As reported in prior year/s, the activities in the JV company viz., RAD-MRO Manufacturing Private Limited, Bangalore, were suspended from November 2007. The Company still awaits procedural completion of requisite legal formalities, soon after which, further actions for (members voluntary) winding-up of this JV Company will be initiated. Efforts are being taken to expedite the same. In the meanwhile, this JV Company continues to register revenue by way of Interest Income (on Fixed Deposit/s with the Bank) which earning is adequate to meet its outgo commitments (by way of professional charges and connected expenses) for completion of the presently-pending activities, and also leave behind a nominal surplus, thereby retaining positive Net Worth in the Company. Such financials are detailed in Para 17 of Note 26 II on 'additional notes to accounts'. HUMAN RESOURCES & INDUSTRIAL RELATIONS Your Company recognizes the critical significance of competent and experienced employees. Team MRO-TEK continued to stand by the Company during tiring and tough times and your Board places its appreciation for these relentless efforts, untiring dedication and sense of belongingness exhibited by the employees at all levels. Your Company focuses on long term Human Resource planning aimed at managing change more efficiently, grooming internal talent for future roles and also driving efficiency within the organization. During the year under review, there were no employees in the Company drawing a remuneration in excess of Rs 5 lacs per month or Rs 60 lacs per annum, as stipulated under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975. There was no complaint lodged by any woman employee under Sexual Harassment of Women (Prevention, Prohibition and Redressal) Act, 2013, with the Company during the period under report. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY The Company continued to maintain, high standards of internal control designed to provide adequate assurance on the efficiency of operations and security of its assets. The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid-down systems and policies are comprehensively and frequently monitored by your Company's management at all levels of the organization. The Audit Committee, which meets at-least four times a year, actively reviews internal control systems as well as financial disclosures with adequate participation, inputs from the Statutory, Internal and Corporate Secretarial Auditors. CONSERVATION OF ENERGY Your Company is duly certified under ISO 14001:2004 (Environment Management System). Every possible effort is made / introduced to conserve and avoid wastage of energy. Adequate facilities have been installed for rain water harvesting, recycling of used water, solar-powered energy and maximum usage of natural lighting and ventilation, and thus implementing Go Green Policy in its total spirit. RESEARCH & DEVELOPMENT The ever changing technology in the space of Networking Products casts a continuing responsibility on the role of R&D division in your Company. Efforts continue to introduce and promote Company's own patentable products. Efforts also continue to maximize utilization of the R&D unit's expertise and technological skills, in finding state-of-the-art solutions, to provide more effective and revolutionary solutions, for all segments of Networking Products Industry. During the year an amount of Rs NIL (Prev. year- Rs.0.01 Crores) was incurred towards Capital Expenditure in this division. On revenue account, an amount of Rs 1.98 Crores (Prev. year- Rs. 2.63 Crores) has been expended and absorbed in these accounts, in accordance with the applicable Accounting Standards. TECHNOLOGY ABSORPTION The in-house technical and commercial teams consistently engage themselves in their endeavor to indigenize technology and components, as well as implementation of value-engineering and cost-saving methods. FOREIGN EXCHANGE EARNINGS AND OUTGO Full details of foreign exchange earnings and expenditure are furnished under para 12 and 13 of Note 26 II on 'additional notes to accounts'. However, following are exhibited: Earning - Rs 14,69,859/- Outgo - Rs 20,48,09,063/- CORPORATE GOVERNANCE A detailed compliance note on Corporate Governance, as required under the provisions in the listing agreement with the Stock Exchanges, together with the certificate of Statutory Auditors thereon, is attached to this report. MANAGEMENT DISCUSSION AND ANALYSIS As requisite and appropriate Management Discussion & Analysis is covered under this Report itself, a separate note on the same is not being furnished. DIRECTORS Mr N. Sivaram, an Independent Director, retires by rotation at this meeting, and being eligible, offer himself for re-appointment as an Independent Director fulfilling the requirements as per the new Companies Act, 2013. His reappointment is proposed under Special Business. Due to advancing age, Mr. R. Rajagopalan offered to step down from the office of Director during the year. Furthermore, due to professional commitment, Mr. A. Murali stepped down from the Board. Mr. G. Ramkumar, who was appointed as an Additional Director, holds office up to the date of this Meeting; as his term of office has come to an end and due to his other commitments, he has signified his intention not to seek appointment at the Annual General Meeting. Your Board places on record its deep appreciation for the significant contribution and support extended by the outgoing Directors. Mr. N. K. Rajasekharan, a senior professional in the technology segment was inducted in to the Board in place of Mr. R. Rajagopalan and your Board is confident that the Company stands to benefit significantly from the rich experience and in depth knowledge of Mr. N. K. Rajasekharan. Your Board proposes to appoint Mr. K. Rajamani, a senior Technical Professional as an Independent Director. Mr. S. Narayanan, Chairman and Managing Director and Mr. H. Nandi, Managing Director, retire by rotation, as per the new Companies Act, 2013 and being eligible, offer themselves for re-appointment. AUDIT COMMITTEE The Audit Committee continued to discharge its functions under the applicable laws during the year under report. AUDITORS Messrs Narayanan, Patil & Ramesh, Chartered Accountants, Bangalore, Auditors of the Company retire at the end of forthcoming Annual General Meeting and have decided not to seek appointment. Based on the proposal from a Shareholder and on the recommendation of the Audit Committee and in line with the provisions of the Companies Act, 2013, the Board recommends the appointment of Messrs NSVM & Associates, Chartered Accountants, Bangalore as Auditors to hold office up to the date of the next Annual General Meeting. PARTICULARS OF EMPLOYEES There was no employee drawing remuneration in excess of the limits prescribed under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975. There was no complaint lodged by any woman employee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with the Company during the period under report. ACKNOWLEDGEMENTS Your Directors place on record their sincere gratitude to the steadfast patronage of the valued Customers and Vendors. Your Directors also place on record, their sincere appreciation of the dedication and commitment of the employees at all levels. Your Directors wish to register their acknowledgement and appreciation for the timely support and co-operation being extended by the Banks and all their officials. DIRECTORS' RESPONSIBILITY STATEMENT As required under Section 217(2AA) of Companies Act, 1956, your Directors hereby confirm that • in the preparation of these annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same; •they have selected such accounting policies and applied them consistently and 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 at the end of the financial year and of the profits for that period; •they have taken proper and sufficient care 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; • they have prepared annual accounts on a 'going concern' basis. for & on behalf of the Board of Directors S. Narayanan Chairman & Managing Director Place : Bangalore Date : 18th August 2014 |