MIRA
INFORM REPORT
|
Report Date : |
29.06.2012 |
IDENTIFICATION DETAILS
|
Name : |
VST INDUSTRIES LIMITED |
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Registered
Office : |
1-7-1063/1065, Azambad, |
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Country : |
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Financials (as
on) : |
31.03.2012 |
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Date of
Incorporation : |
10.11.1930 |
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Com. Reg. No.: |
01-000576 |
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Capital
Investment / Paid-up Capital : |
Rs. 154.419 Millions |
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CIN No.: [Company Identification
No.] |
L29150AP1930PLC000576 |
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TAN No.: [Tax Deduction &
Collection Account No.] |
HYDV00023C |
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Legal Form : |
A Public Limited Liability Company.
The Company’s Shares are Listed on the Stock Exchange. |
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Line of Business
: |
Manufacturer and Marketer of Cigarettes. |
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No. of Employees
: |
931 (Approximately) |
RATING & COMMENTS
|
MIRA’s Rating : |
A (67) |
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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Maximum Credit Limit : |
USD 11000000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is an old and well established, reputed company having fine
track. Financial position of the company appears to be sound. The company has
recorded a better growth in its sales turnover and profitability during the
year 2012. The share price of the company is overpriced in the market. Trade relations are reported to be praiseworthy. Business is active.
Payments are reported to be regular and as per commitments. The company can be considered better for business dealings at usual
trade terms and conditions. |
NOTES :
Any query related to this report can be made
on e-mail : infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – September 30, 2011
|
Country Name |
Previous Rating (30.09.2011) |
Current Rating (31.12.2011) |
|
|
A1 |
A1 |
|
Risk Category |
ECGC Classification |
|
Insignificant |
A1 |
|
Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
LOCATIONS
|
Registered Office : |
1-7-1063/1065, Azambad, |
|
Tel. No.: |
91-40-27610460/ 27615161/ 27617531 |
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Fax No.: |
91-40-27615336 |
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E-Mail : |
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|
Website : |
DIRECTORS
AS ON 14.07.2011
|
Name : |
Mr. R.V.K.M. Suryarau |
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Designation : |
Chairman |
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Name : |
Mr. Raymond S. Noronha |
|
Designation : |
Managing Director |
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|
Name : |
Mr. Devraj Lahiri (w.e.f. 1st August, 2011) |
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Designation : |
Whole time Director |
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|
Name : |
Mr. Peter G. Henriques |
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Designation : |
Non-Executive Director |
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Name : |
Mr. T. Lakshmanan |
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Designation : |
Non-Executive Director |
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Name : |
Mr. Milind A. Kharat |
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Designation : |
Non-Executive Director |
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Name : |
Mr. S. Thirumalai |
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Designation : |
Non-Executive Director |
KEY EXECUTIVES
|
Name : |
Mr. N. Sai Sankar |
|
Designation : |
Deputy Managing Director and Secretary |
MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN
AS ON 31.03.2012
|
Category
of Shareholders |
No. of Shares |
Percentage of
Holding |
|
(A) Shareholding of Promoter and Promoter Group |
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|
|
|
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|
4965902 |
32.16 |
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|
4965902 |
32.16 |
|
Total shareholding of Promoter and Promoter Group (A) |
4965902 |
32.16 |
|
(B) Public Shareholding |
|
|
|
|
|
|
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|
1609903 |
10.43 |
|
|
15720 |
0.10 |
|
|
765854 |
4.96 |
|
|
454307 |
2.94 |
|
|
2845784 |
18.43 |
|
|
|
|
|
|
4993853 |
32.34 |
|
|
|
|
|
|
2190448 |
14.19 |
|
|
224660 |
1.45 |
|
|
221273 |
1.43 |
|
NRI’s/ OCBs |
93268 |
0.60 |
|
Custodian |
119532 |
0.77 |
|
Trusts |
1551 |
0.01 |
|
|
6897 |
0.04 |
|
|
25 |
-- |
|
|
7630234 |
49.41 |
|
Total Public shareholding (B) |
10476018 |
67.84 |
|
Total (A)+(B) |
15441920 |
100.00 |
|
© Shares held by Custodians and against which Depository Receipts have
been issued |
-- |
-- |
|
|
-- |
-- |
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|
-- |
-- |
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|
-- |
-- |
|
Total (A)+(B)+(C) |
15441920 |
100.00 |
(1) Indian
Individual shareholders holding nominal
share capital up to Rs.0.100 millionBUSINESS DETAILS
|
Line of Business : |
Manufacturer and Marketer of Cigarettes. |
GENERAL INFORMATION
|
No. of Employees : |
931 (Approximately) |
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Bankers : |
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Banking
Relations : |
-- |
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Auditors : |
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Name : |
Lovelock and Lewes Chartered Accountants |
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Address : |
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Company having significant influence : |
British American
Tobacco Group |
CAPITAL STRUCTURE
AS ON 31.03.2011
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
|
|
|
|
|
5,00,00,000 |
Ordinary Shares |
Rs.10/- each |
Rs. 500.000 Millions |
|
50,00,000 |
Cumulative Redeemable Preference Shares |
Rs.100/- each |
Rs. 500.000 Millions |
|
|
|
|
|
|
|
Total |
|
Rs. 1000.000
Millions |
Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
|
|
|
|
|
1,54,41,920 |
Ordinary Shares |
Rs.10/- each |
Rs. 154.419 Millions |
|
|
|
|
|
There was no movement in number of Ordinary Shares during
the year.
Details of shareholders holding more than 5% of Ordinary Shares:
|
Name of the
Shareholders |
No. Millions |
% holding |
No. Millions |
% holding |
|
Bright Star Investments Private Limited |
4.007 |
25.95 |
4.007 |
25.95 |
|
ITC Limited |
0.173 |
1.12 |
1.112 |
7.20 |
|
The Raleigh Investment Company Limited |
3.620 |
23.45 |
3.620 |
23.45 |
|
Tobacco Manufacturers ( |
1.279 |
8.28 |
1.279 |
8.28 |
FINANCIAL DATA
[all figures are
in Rupees Millions]
ABRIDGED BALANCE
SHEET
|
SOURCES OF FUNDS |
31.03.2012 |
31.03.2011 |
31.03.2010 |
|
|
SHAREHOLDERS FUNDS |
|
|
|
|
|
1] Share Capital |
154.419 |
154.419 |
154.419 |
|
|
2] Share Application Money |
0.000 |
0.000 |
0.000 |
|
|
3] Reserves & Surplus |
2747.502 |
2489.974 |
2319.383 |
|
|
4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
|
|
NETWORTH |
2901.921 |
2644.393 |
2473.802 |
|
|
LOAN FUNDS |
|
|
|
|
|
1] Secured Loans |
0.000 |
0.000 |
0.000 |
|
|
2] Unsecured Loans |
0.000 |
0.000 |
0.000 |
|
|
TOTAL BORROWING |
0.000 |
0.000 |
0.000 |
|
|
DEFERRED TAX LIABILITIES |
0.000 |
0.000 |
0.000 |
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|
|
|
|
|
|
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TOTAL |
2901.921 |
2644.393 |
2473.802 |
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|
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APPLICATION OF FUNDS |
|
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|
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|
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|
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FIXED ASSETS [Net Block] |
1634.066 |
1524.208 |
1325.920 |
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Capital work-in-progress |
1.243 |
0.664 |
68.079 |
|
|
|
|
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INVESTMENT |
2237.403 |
1709.923 |
1903.082 |
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|
DEFERREX TAX ASSETS |
115.347 |
138.820 |
125.292 |
|
|
|
|
|
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CURRENT ASSETS, LOANS & ADVANCES |
|
|
|
|
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|
Inventories |
2382.509
|
2355.697 |
1790.755
|
|
|
Sundry Debtors |
126.211
|
127.662 |
145.095
|
|
|
Cash & Bank Balances |
359.745
|
289.617 |
63.704
|
|
|
Other Current Assets |
15.725
|
9.593 |
1.611
|
|
|
Loans & Advances |
244.575
|
231.394 |
145.510
|
|
Total
Current Assets |
3128.765
|
3013.963 |
2146.675
|
|
|
Less : CURRENT
LIABILITIES & PROVISIONS |
|
|
|
|
|
|
Sundry Creditors |
470.279
|
319.909 |
1613.295
|
|
|
Other Current Liabilities |
2573.071
|
2612.629 |
941.752
|
|
|
Provisions |
1171.553
|
810.647 |
540.199
|
|
Total
Current Liabilities |
4214.903
|
3743.185 |
3095.246
|
|
|
Net Current Assets |
(1086.138)
|
(729.222) |
(948.571)
|
|
|
|
|
|
|
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|
MISCELLANEOUS EXPENSES |
0.000 |
0.000 |
0.000 |
|
|
|
|
|
|
|
|
TOTAL |
2901.921 |
2644.393 |
2473.802 |
|
PROFIT & LOSS
ACCOUNT
|
|
PARTICULARS |
31.03.2012 |
31.03.2011 |
31.03.2010 |
|
|
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SALES |
|
|
|
|
|
|
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Income |
6801.276 |
5784.322 |
4721.641 |
|
|
|
Other Income |
300.218 |
202.142 |
332.581 |
|
|
|
TOTAL (A) |
7101.494 |
5986.464 |
5054.222 |
|
|
|
|
|
|
|
|
Less |
EXPENSES |
|
|
|
|
|
|
|
Cost of Material Consumed |
3047.342 |
|
|
|
|
|
Changes in Inventories of Finished Goods and Work-in-progress |
34.446 |
(49.021) |
|
|
|
|
Employee Benefit Expenses |
619.538 |
605.970 |
|
|
|
|
Other Expenses |
1045.321 |
930.326 |
|
|
|
|
TOTAL (B) |
4746.647 |
4389.717 |
3896.058 |
|
|
|
|
|
|
|
|
Less |
PROFIT
BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C) |
2354.847 |
1596.747 |
1158.164 |
|
|
|
|
|
|
|
|
|
Less |
FINANCIAL
EXPENSES (D) |
0.000 |
0.000 |
0.000 |
|
|
|
|
|
|
|
|
|
|
PROFIT
BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E) |
2354.847 |
1596.747 |
1158.164 |
|
|
|
|
|
|
|
|
|
Less/ Add |
DEPRECIATION/
AMORTISATION (F) |
248.266 |
244.165 |
178.651 |
|
|
|
|
|
|
|
|
|
|
PROFIT BEFORE
TAX AND EXCEPTIONAL ITEM |
2106.581 |
1352.582 |
979.513 |
|
|
|
|
|
|
|
|
|
|
EXCEPTIONAL ITEM |
0.000 |
0.000 |
(124.100) |
|
|
|
|
|
|
|
|
|
|
PROFIT BEFORE
TAX (E-F) (G) |
2106.581 |
1352.582 |
855.413 |
|
|
|
|
|
|
|
|
|
Less |
TAX (I) |
681.495 |
402.477 |
234.906 |
|
|
|
|
|
|
|
|
|
|
PROFIT AFTER TAX
(G-I) (J) |
1425.086 |
950.105 |
620.507 |
|
|
|
|
|
|
|
|
|
Add |
|
|
|
820.048 |
|
|
|
|
|
|
|
|
|
Less |
APPROPRIATIONS |
|
|
|
|
|
|
|
Transfer to General Reserve |
|
|
62.500 |
|
|
|
Dividend |
|
|
540.199 |
|
|
BALANCE CARRIED
TO THE B/S |
N.A. |
N.A. |
837.856 |
|
|
|
|
|
|
|
|
|
|
EARNINGS IN
FOREIGN CURRENCY |
|
|
|
|
|
|
|
FOB Value of Exports |
1557.495 |
1504.029 |
1549.866 |
|
|
TOTAL EARNINGS |
1557.495 |
1504.029 |
1549.866 |
|
|
|
|
|
|
|
|
|
|
IMPORTS |
|
|
|
|
|
|
|
Raw Materials |
84.590 |
85.672 |
45.040 |
|
|
|
Stores & Spares |
5.885 |
5.970 |
10.826 |
|
|
|
Capital Goods |
261.312 |
242.029 |
201.592 |
|
|
TOTAL IMPORTS |
351.787 |
333.671 |
257.458 |
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share (Rs.) |
92.29 |
61.53 |
40.18 |
|
KEY RATIOS
|
PARTICULARS |
|
31.03.2012 |
31.03.2011 |
31.03.2010 |
|
PAT / Total Income |
(%) |
20.07 |
15.87 |
12.28
|
|
|
|
|
|
|
|
Net Profit Margin (PBT/Sales) |
(%) |
30.97 |
23.38 |
18.12
|
|
|
|
|
|
|
|
Return on Total Assets (PBT/Total Assets} |
(%) |
44.23 |
29.80 |
24.63
|
|
|
|
|
|
|
|
Return on Investment (ROI) (PBT/Networth) |
|
0.73 |
0.51 |
0.35
|
|
|
|
|
|
|
|
Debt Equity Ratio (Total Liability/Networth) |
|
1.45 |
1.42 |
1.25
|
|
|
|
|
|
|
|
Current Ratio (Current Asset/Current Liability) |
|
0.74 |
0.81 |
0.70
|
LOCAL AGENCY FURTHER INFORMATION
|
Check List by Info Agents |
Available in
Report (Yes / No) |
|
1. Year of Establishment |
Yes |
|
2. Locality of the firm |
Yes |
|
3. Constructions of the firm |
Yes |
|
4. Premises details |
No |
|
5. Type of Business |
Yes |
|
6. Line of Business |
Yes |
|
7. Promoter’s background |
No |
|
8. No. of Employees |
Yes |
|
9. Name of person contacted |
No |
|
10. Designation of contact person |
No |
|
11. Turnover of firm for last three years |
Yes |
|
12. Profitability for last three years |
Yes |
|
13. Reasons for variation <> 20% |
-- |
|
14. Estimation for coming financial year |
No |
|
15. Capital in the business |
Yes |
|
16. Details of sister concerns |
Yes |
|
17. Major suppliers |
No |
|
18. Major customers |
No |
|
19. Payments terms |
No |
|
20. Export / Import details |
No |
|
21. Market information |
-- |
|
22. Litigations that the firm / promoter involved |
-- |
|
23. Banking Details |
Yes |
|
24. Banking facility details |
No |
|
25. Conduct of the banking account |
-- |
|
26. Buyer visit details |
-- |
|
27. Financials, if provided |
Yes |
|
28. Incorporation details, if applicable |
Yes |
|
29. Last accounts filed at ROC |
Yes |
|
30. Major Shareholders, if available |
Yes |
INDUSTRY STRUCTURE
AND DEVELOPMENT
The Union Budget presented in February 2011, did not propose any changes
in the excise rates, which was a welcome relief for the industry and the
Company. The industry as a result had a marginal growth in volumes of around
4%; however, the Company was able to beat the general industry trend and grow
volumes by 12% when compared to same period last year.
Financial year 2011-12 was one of the best years in terms of volume
growth. Filter volumes now cover virtually 98% of the Company's volume. The
increase in VAT rates across states continued with more states increasing the
VAT rates during the current financial year. Two key states e.g.
During the financial year 2011-12, increase in VAT rates were affected
in 17 states ranging from 0.75% to 11.5%. Stable tobacco prices and higher
foreign exchange volatility were the other highlights for the current financial
year.
Industry Issues
Change in graphic health warning which was to be made effective 1st
November, 2010 was deferred to the financial year 2011-12 as the law was
amended to make it compulsory for cigarette companies to change graphic health
warnings every twenty-four months instead of every twelve months. The new
graphic health warnings have
come into effect from 1st December, 2011.
Apart from legacy taxation issues, the industry had to address fewer
legal cases.
SEGMENT WISE
PERFORMANCE
The Company considers tobacco and related products as the primary
segment for reporting. Geographical segments considered for disclosure mainly
consist of sales within
The Company's brands were stable during 2011-12, with most brands
gaining volumes. The Company's filter brands performed well with all key brands
showing gains over the previous year. Brands like special extra filter, moments
and charms
The growth in volume of most of the brands has to be viewed in contrast
to steep increases in VAT in different states during the year including the key
states where the Company operates.
The Company continued its strategic thrust of launching new brands in
value for- money segments in markets which provide opportunities as these
continue to help grow the volumes.
Market Scenario
During the year the cigarette volumes stood at 762 mns up by 12% when
compared to 2010-11. The value realisations were higher at Rs. 14350.000
Millions, up by 16.4% when compared to Rs. 12300.000 Millions during the
previous year.
Competition has intensified with many brands now available at different
price points where the Company's brands are present. This is apart from the
Company's brands having to face the non-duty paid cigarettes which are
available across markets in
Leaf Tobacco
The Company has recorded leaf export turnover of Rs. 1540.000 Millions,
in the year 2011-12, despite glut in the international market and volatility in
exchange rate. The situation which was similar last year did not show any
improvement and in fact it worse nedduring the current financial year. Latest
statistics reveal that Indian tobacco exports are lower when compared to same
period last year.
The focus on developing niche varieties of tobacco continued. Besides
help develop the backward regions, it has
also helped in improving the Company's profitability. The oriental
project continues with improved agronomic practices.
It is gratifying to learn that theCompany's farmers continue to grow
tobacco with lowest pesticide residue levels and low TSNAs (Tobacco Specific
Nitrosamaines) that are well within international standards.
The Company's leaf tobacco function continues to be certified by
Registro Italiano Navale,
The Company is committed to encourage education to children in the
tobacco growing areas by way of creating infrastructure for school buildings
and spreading awareness in the villages to curb child labour.
PRODUCTION AND
PLANT MODERNISATION
In pursuance of ongoing modernization plan of Primary and Secondary
Manufacturing Departments to improve productivity and quality, contemporary
technology has been put in place.
During the year, a total of 147 technicians (116 Mechanical and 31
Electrical) have been trained by reputed training institute and Original
Equipment Manufacturers as part of skills upgradation.
HUMAN RESOURCE
DEVELOPMENT
The Company's Human Resource Management focus continues to be in making
available a talent pool, for meeting challenges in the competitive market
place, which is increasingly becoming complex. Development plans have been
drawn up for key managers to shoulder higher responsibilities as well as to
enhance their job effectiveness.
As on 31st March, 2012, the Company had strength of 931 employees, with
296 management staff and 635 workmen.
The Company was able to successfully manage the entire ERP system by
developing an in-house team. All routine business issues as well as
improvements in existing systems have been undertaken by the team. This team
interacts with managers of the operating teams and works continuously to help
improve the overall business processes. The Company has also developed adequate
skills to manage issues arising out of facilities management and networking
which are the other limbs of the IT infrastructure.
INTERNAL CONTROL
SYSTEMS
The Company remains committed to improve effectiveness of internal
control systems and processes which would help in increasing the efficiency of
operations and provide security of its assets.
The internal audit process in the Company captures the control
environment prevalent in the organization. Over a period of three years, the
entire business process of the Company is reviewed through a systems audit
process which helps review the systems on a continuous basis. The objective is
to identify potential risk areas and come up with a comprehensive mitigation
plan.
The Audit Committee of your Board met four times during the year. Review
of audit observations covering the operations, consideration of accounts on a
quarterly basis and monitoring the implementation of audit recommendations were
some of the key areas of focus which were dealt with by the Committee. The
Statutory Auditors/System Auditors were invited to attend all the Audit
Committee meetings and make presentations covering their observation on
adequacy of internal controls and the steps required to bridge gaps, if any.
The self-evaluation system which was put in place on internal controls
is being reviewed continuously to improve its effectiveness.
Risk Management
Risk Management is monitored by a Committee comprising members from
various functions. The Committee meets periodically to identify the potential
risks as well as to take adequate steps for mitigating the risks which have
been identified. A comprehensive note covering various aspects is reported to
the Board every quarter.
DIRECTORS
Directors retiring by rotation In accordance with Article 93 of the
Articles of Association of the Company, Mr. Peter G. Henriques and Mr. Milind
A. Kharat retire from the Board and being eligible; offer themselves, for re
election. The Board recommends their re-appointment.
Mr. Peter G.
Henriques
Mr. Peter G. Henriques was appointed at the Annual General Meeting held
on 16th July, 2010. He is now due to retire by rotation at the forthcoming
Annual General Meeting and being eligible, offers himself for re-appointment.
Mr. Henriques holds Bachelor of Arts degrees in History and International
Relations from
Mr. Henriques has been in the tobacco industry for 20 years and is
currently positioned in B.A.T. Marketing (
Mr. Milind A.
Kharat
Mr. Milind A. Kharat was appointed at the Annual General Meeting held on
16th July, 2009. He is now due to retire by rotation at the forthcoming Annual
General Meeting and being eligible, offers himself for re-appointment.
Mr. Kharat is a Post Graduate in Economics, a Bachelor of Law and a
Fellow of Insurance Institute of India (FIII). He has rich experience of more
than three decades in the General Insurance Industry. He was the Chief
Metropolitan Magistrate appointed by Government of Maharashtra. He made
significant contributions for revision of
Agriculture Insurance Company of India Limited.
Mr. Kharat neither holds any shares in the Company nor is related to any
other Director of the Company.
Directors
Appointment
Mr. Devraj Lahiri
Mr. Devraj Lahiri has been appointed as Director and Whole time Director
of the Company with effect from 1st August, 2011, at the Board
Meeting held on 14th July, 2011, to hold office for a period of five years with
effect from 1st August, 2011 to 31st July, 2016 (both days inclusive). Mr.
Devraj Lahiri is a Commerce graduate from
Mr. Devraj Lahiri neither holds any shares in the Company nor is related
to any other Director of the Company.
Mr. Raymond S.
Noronha
Mr. Raymond S. Noronha was appointed as Managing Director on the Board
of your Company with effect from 1st November, 1998 and is due to retire on 2nd
September, 2012. The Board of Directors at its meeting held on 17th April, 2012
recommended for the approval of the Members, the appointment of Mr. Raymond S.
Noronha as a Non- Executive Director of the Company with effect from 3rd
September, 2012. Appropriate resolution seeking the approval to the appointment
is appearing in the Notice convening the 81st Annual General Meeting of your
Company.
Mr. Noronha is a B.A. (Hons.) from St. Stephen's College,
Mr. Noronha neither holds any shares in the Company nor is related to
any other Director of the Company.
TAXATION
i. Income Tax
a. Financial
Services Business
It may be recalled that the Company had diversified into Financial
Services Business and Foods Business in the early nineties. Subsequently in the
year 1998-99, the Company incurred a total loss of Rs. 386.700 Millions in the
financial services business of which Rs. 297.000 Millions was claimed as loss
under the head 'Income from Business' and Rs. 89.700 Millions was claimed as a
capital loss under the provisions of the Income Tax Act.
The Income Tax Appellate Tribunal allowed the entire amount of Rs.
386.700 Millions as a capital loss. It may be noted that the department had
treated the entire loss as a 'Speculation Loss.' The Company has filed an appeal
before the Hon'ble High Court of Andhra Pradesh which has been admitted. The
matter is yet to be heard. Further in connection with its divestment from the
Foods Business in the financial year 1999-00, the Company had incurred a total
loss of Rs. 536.800 Millions, of which Rs. 441.800 Millions was claimed as a
loss under the head 'Income from Business' and Rs. 95.000 Millions was claimed
as a capital loss under the provisions of the Income Tax Act. The Income Tax
Department has disallowed the entire amount excepting Rs. 57.000 Millions which
was allowed as a capital loss. The Commissioner of Income Tax (Appeals) further
allowed Rs. 112.400 Millions out of the balance amount of Rs. 479.800 Millions,
on appeal before him and the same was upheld by the Income Tax Appellate
Tribunal. Your Company has preferred an appeal against the above order and the
matter is now before the Hon'ble High Court of Andhra Pradesh.
Consequent to the above orders, the Income Tax Department had issued
consequential orders under Section 154 of the Income Tax Act demanding Rs.
288.600 Millions (revised) which was paid by the Company.
b. North East
You would recall that pursuant to the withdrawal of exemption
notification for manufacture of cigarettes in the North Eastern region in terms
of Supreme Court judgement of 19th September, 2005, the Company had paid an
amount of Rs. 312.000 Millions towards principal and provided an amount of Rs.
126.900 Millions towards interest.
In the income tax return filed by the Company for the relevant year,
this amount was considered as an allowable expenditure in the assessment for
the year 2006-07. However, subsequently the Income Tax department has sent a
demand notice seeking payment of Rs. 193.000 Millions being tax payable along
with interest which was paid by the Company. The Company will contest the same.
c. Subsidiary
Company
During the financial year 1998-99, the Company's erstwhile subsidiary
had received financial assets worth of Rs.120.000 Millions against a future liability
of Rs. 520.000 Millions. This was settled on 31st March, 1999 for an
immediate payment of Rs. 125.000 Millions. The settlement was not accepted
during the assessment proceedings and accordingly disallowed by the Income Tax
authorities. On appeal before the Commissioner of Income Tax (Appeals), the
matter was held in favour of the Company's subsidiary. However, the Income Tax
Tribunal while holding the matter against the Company's subsidiary held that
the ratification of the said settlement agreement by the Board did not relate
to 31st March, 1999 and consequently the liability to pay Rs. 125.000 Millions
did not arise in the financial year 1998-99 and therefore not allowable as a
deduction for the year. The tax liability on this is Rs. 42.000 Millions apart
from interest.
The Company's subsidiary preferred an appeal against the above order
before the Hon'ble High Court of Andhra Pradesh, which a judgement in the
Company's favour. A Caveat has however been filed by the Company in Supreme
Court by way of abundant caution.
ii. Luxury Tax
As mentioned in last year's Report, a Contempt Petition has been filed
in the Hon'ble Supreme Court by the Commercial Tax Officer, on behalf of the
Government of Andhra Pradesh against the Managing Director of the Company
alleging contempt of the Hon'ble Supreme Court's judgement dated 20th January,
2005 which had set aside levy of Luxury Tax. The Department has alleged that
your Company has failed to pay an amount of Rs. 348.600 Millions being the
Luxury Tax collected from customers by the Company after passing of the interim
order dated 1st June, 1999 but not paid to the State Government of Andhra
Pradesh which is in violation of the said judgement dated 20th January, 2005.
An amount of Rs. 298.100 Millions has also been claimed as interest thereon @
24% per annum. The Company and the Managing Director have both filed separate
counter affidavits strenuously denying that there has been any contempt on
their part of the said judgement of the Hon'ble Supreme Court. The contempt
case charges against the Managing Director of the Company were dismissed by
Hon'ble Supreme Court. As far as the case against the Company is concerned,
there have been no further developments during the year, though the case was
listed a couple of times. The case is likely to be posted for final hearing in
July, 2012.
iii. Entry Tax
As mentioned in last year's Report, several High Courts in the country
including those of Andhra Pradesh, Kerala, Tamilnadu and Assam have struck down
the levy of Entry Tax on the ground that it is violative of Article 301 and not
saved under Article 304(b) of the Constitution, as it is not compensatory in
the manner required in terms of the Supreme Court judgement in the case of M/s.
Jindal Stainless Limited. Thereafter, several states such as Uttar Pradesh,
The Hon'ble Supreme Court by its Order dated 18th December, 2008 in the
batch of cases headed by Jai Prakash Associates vs the State of
iv. Excise
a. Wrapping
Materials
As mentioned in last year's Report, the Customs, Excise and Service Tax
Appellate Tribunal, Bangalore by its Order dated 8th October, 2004 had allowed
the Company's appeal and set aside the demand of the Excise Department for an
amount of Rs. 36.200 Millions (including penalty and interest @ 24%) on the
ground that Gay Wrappers (printed paper used for wrapping cigarette packets)
had been manufactured and consumed by the Company without payment of duty
during the period April 1996 to March 2002. An appeal against the said Order
has been filed by the Excise Department and is presently pending in the Hon'ble
Supreme Court. In the meantime, the Hon'ble Supreme Court by its Order dated
27th November, 2008 has remanded various other similar appeals pertaining to
other manufacturers back to their respective Tribunals for re-adjudication in
the light of individual facts of each case. Notices for subsequent periods have
also been received by the Company which have been kept pending awaiting the
decision of the Hon'ble Supreme Court.
b. Cigarette
manufacture in North Eastern states
As mentioned in last year's Report, the Excise Department had demanded a
sum of Rs. 58.500 Millions from two of the Company's former contract
manufacturers, by way of interest on the principal amount of Rs. 312.000
Millions repaid to the Excise Department, consequent upon the judgement of the
Hon'ble Supreme Court dated 19th September, 2005. The two contract
manufacturers had filed Writ Petitions challenging the said demands in the
Hon'ble Guwahati High Court and obtained Interim Orders staying partial
recovery until final disposal. Against the said Interim Order, the Department
had filed appeals in the Hon'ble Supreme Court. By its Order dated 15th April,
2009 the Hon'ble Supreme Court has requested the Hon'ble High Court to dispose
off the Writ Petitions within a period of two months from the date of
communication of theOrder. A Single Member Bench disallowed the writ petitions and
upheld levy of interest. Against the judgement, the contract manufacturers
filed appeals before the Division Bench, which passed interim orders staying
the judgement of the Single Bench. Final hearing has been completed and the
appeals were reserved for judgement. The matter was again listed for hearing on
27th March, 2012 for further final hearing and adjourned to the last week of
April 2012.
c. Tobacco Refuse
The Company has received show cause notices demanding recovery of duty
on cut tobacco used in the manufacture of tobacco refuse together with interest
and penalty from January 2005 to November 2009.
The Company has now received a demand for Rs. 102.200 Millions being
excise duty and penalty for the period up to 30th November, 2009. Interest is
payable separately till the date of payment. The Company's appeal before CESAT
was heard favourably and a stay with complete waiver of pre deposit has been
granted in the interim as prayed for by the Company. The Company continues to
receive show cause notices for subsequent periods.
v. Service Tax
The Company has received show cause notices from the Excise Department
seeking to deny CENVAT credit availed on service tax paid by various service
providers on the ground that the same are not in relation to the manufacture of
final products. They are pending adjudication at various levels. Total amount
involved is approximately Rs. 39.000 Millions with equivalent penalty and
interest thereon.
THE CIGARETTES AND
OTHER TOBACCO PRODUCTS (PROHIBITION OF ADVERTISEMENT AND REGULATION OF TRADE
AND COMMERCE, PRODUCTION, SUPPLY AND DISTRIBUTION) ACT, 2003 (COTPA)
i. Some of the provisions of COTPA have come into force with effect from
1st May, 2004. These include ban on advertising in print and visual media, ban
on outdoor advertising, regulation of in-store advertising, prohibition of sale
of cigarettes to persons below the age of 18 years.
ii. The tobacco industry has been told to print the prescribed graphic
health warnings on all its product packing. The Cigarettes and Other Tobacco
Products (Packaging and Labelling) Rules, 2006 (COTPR) had originally
prescribed pictorial warnings along with health messages and sign of skull and
cross bones. However, due to vociferous objections from various sections of the
industry and public, a Committee of a Group of Ministers (GoM) was constituted
to relook at the warnings. Based on their recommendations, a new set of
labelling requirements has been prescribed under the COTP Rules which were
published on 16th March, 2008. However, these have again been
modified based on representations made. The revised implementation date as
originally envisaged from 30th November, 2008 has been deferred and
the pictorial warnings fully came into effect from 31st May, 2009
and were further revised with effect from 1st December, 2011.
iii. In the meantime, some Tobacco manufacturers had challenged various
provisions of COTPA and Rules made there under in different High Courts across
the country. The Union Government filed Transfer Petitions in the Hon'ble
Supreme Court seeking to transfer 31 pending Writ Petitions from various High
Courts to the Hon'ble Supreme Court. On 18th November, 2008 all the
Transfer Petitions were allowed and the Writ Petitions have thus been moved to
the Hon'ble Supreme Court, for final adjudication.
iv. The Company had also filed a Writ Petition in the Hon'ble High Court
of Andhra Pradesh challenging COTPR and the Amendment Rules 2008, on the
grounds inter alia that they are ultra vires of COTPA and therefore the
Notifications issued there under (including those seeking implementation of
graphic health warnings) should be quashed. The said Writ Petition was admitted
on17th October, 2008 but no interim orders were passed by the
v. A ban on smoking in public places as envisaged under COTPA, came into
effect on 2nd October, 2008, under which smoking has been banned in virtually
all public places including courts, public buildings, restaurants, bars, cinema
halls etc. A batch of writ petitions challenging this was filed in the Hon'ble
Delhi High Court and transferred to the Hon'ble Supreme Court, which came up
for admission on 29th September, 2008. While the Hon'ble Supreme Court admitted
the Transfer Petitions it declined to grant interim relief prayed for by the
petitioners seeking to postpone implementation of the ban on smoking in public
places.
AMALGAMATION OF VST
DISTRIBUTION, STORAGE & LEASING COMPANY PRIVATE LIMITED (DSL) WITH THE
COMPANY
Pursuant
to the scheme of amalgamation of erstwhile wholly owned subsidiary, DSL with
the Company, the assets and liabilities of the erstwhile DSL were transferred
to and vested in the Company with effect from 1st April, 2010. The amalgamation
was accounted for under the 'pooling of interest' method prescribed by the
Accounting Standard on amalgamation during the year ended 31st March, 2011.
CONTINGENT
LIABILITIES:
Claims against the Company not acknowledged as debts Rs. 318.808
Millions (2011 – Rs. 390.777 Millions). These comprise -
(i) Tax demands disputed by the Company relating to
disallowances/additions of fiscal benefits, pending before various judicial
forums, aggregating to Rs. 317.471 Millions (2011 – Rs. 389.440 Millions).
(ii) Other matters relating to labour cases, etc. aggregating to Rs.
1.337 Millions (2011 – Rs. 1.337 Millions).
FIXED ASSETS:
Tangible assets
·
Land
·
Buildings Freehold
·
Leasehold Property
·
Plant and Equipments
·
Furniture and Fixtures
·
Motor Vehicle
·
Office Equipment
Intangible assets
·
Goodwill and Trade Marks
·
Computer Software
·
Time Share Rights
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No available
information exist that suggest that subject or any of its principals have been
formally charged or convicted by a competent governmental authority for any
financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs. 56.92 |
|
|
1 |
Rs. 88.91 |
|
Euro |
1 |
Rs. 71.25 |
INFORMATION DETAILS
|
Report Prepared
by : |
BVA |
SCORE & RATING EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
7 |
|
PAID-UP CAPITAL |
1~10 |
7 |
|
OPERATING SCALE |
1~10 |
8 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
8 |
|
--PROFITABILIRY |
1~10 |
8 |
|
--LIQUIDITY |
1~10 |
7 |
|
--LEVERAGE |
1~10 |
7 |
|
--RESERVES |
1~10 |
8 |
|
--CREDIT LINES |
1~10 |
7 |
|
--MARGINS |
-5~5 |
- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
67 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.