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BIRLA ERICSSON OPTICAL LIMITEDANNUAL REPORT 2007-08
BOARD OF DIRECTORS
MR.R.S.LODHA Chairman
MR.JANNE SJODEN[ALTERNATE MR.S.K.DAGA]
MR.MAGNUS KREUGER[ALTERNATE MR.DINESH CHANDA]
MR.R.C.TAPURIAH
MR.H.V.LODHA
MR.A.P.DADOO
DR.ARAVIND SRINIVASAN
MR.B.R.NAHAR
MR.D.R.BANSAL Managing Director
AUDIT COMMITTEEMR.A.P.DADOO ChairmanDR.ARAVIND SRINIVASANMR.B.R.NAHAR
PRESIDENTMR.Y.S.LODHA
AUDITORSV.SANKAR AIYAR & Co.Chartered Accountants
SOLICITORSINTERNATIONAL TRADE LAW CONSULTANTS
BANKERSSTATE BANK OF INDIA
REGISTERED OFFICEUDYOG VIHAR,P.O. CHORHATA,REWA-486 006 (M.P.)
BIRLA ERICSSON
NoticeNOTICE is hereby given that the Sixteenth Annual General Meeting of the shareholders of the Company will be held atthe Registered Office of the Company at Udyog Vihar, P.O.Chorhata, Rewa (M.P.) on Thursday, the 14th August, 2008at 11.30 A.M. to transact the following business :-
Ordinary Business:
1. To receive, consider and adopt the audited Balance Sheet of the Company as at 31st March, 2008,Profit and Loss Account for the year ended on that date, and the Reports of the Directors and theAuditors thereon.
2. To appoint a Director in place of Mr.Janne Sjoden, who retires by rotation and being eligible, offershimself for re-appointment.
3. To appoint a Director in place of Mr.R.C.Tapuriah, who retires by rotation and being eligible, offershimself for re-appointment.
4. To appoint Auditors to hold Office from the conclusion of this Meeting until the conclusion of the nextAnnual General Meeting of the Company, on such remuneration and reimbursement of out-of-pocketexpenses as the Board may decide, based on the recommendation of the Audit Committee.
Special Business:
5. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as aOrdinary Resolution:
“RESOLVED that Mr.H.V.Lodha, a Director of the Company, who holds such office upto the date ofthis Annual General Meeting pursuant to Section 260 of the Companies Act, 1956 and Article 96 of theArticles of Association of the Company, be and is hereby appointed as a Director of the Company,liable to retire by rotation.”
Registered Office: By Order of the BoardUdyog Vihar,P.O.Chorhata,Rewa -486 006 (M.P.) Dinesh Kumar SonthaliaMay 7, 2008 General Manager (Commercial) & Secretary
NOTES FOR SHAREHOLDERS’ ATTENTION:
(a) The relevant Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, in respectof the Special Business to be transacted at the meeting is annexed hereto.
(b) A SHAREHOLDER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINTA PROXY TO ATTEND AND VOTE ON A POLL INSTEAD OF HIMSELF AND SUCH PROXY NEEDNOT BE A SHAREHOLDER OF THE COMPANY. THE PROXY IN ORDER TO BE EFFECTIVE, MUSTBE RECEIVED BY THE COMPANY AT ITS REGISTERED OFFICE NOT LESS THAN 48 HOURSBEFORE THE COMMENCEMENT OF THE ANNUAL GENEREAL MEETING.
(c) The Register of Beneficial Owners, Register of Shareholders and Share Transfer Books of the Companyshall remain closed from Friday, the 8th August, 2008 to Thursday, the 14th August, 2008 ( both daysinclusive).
(d) Shareholders are requested to notify immediately the changes, if any, in their registered addressesalong with PINCODE Number –
� to their Depository Participants in respect of equity shares held in electronic form (Demat Account);and
� to the Company or its Registrar and Share Transfer Agents viz. M/s Intime Spectrum RegistryLimited (Unit: Birla Ericsson Optical Ltd.), C-13, Pannalal Silk Mills Compound, L.B.S.Marg,Bhandup (W), Mumbai-400 038 in respect of equity shares held in physical form.
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BIRLA ERICSSON
(e) Shareholders are requested to note that dividends which remain unclaimed/unencashed for a periodof 7 years from the date of transfer to the Unpaid Dividend Account, will be transferred by the Companyto Investor Education & Protection Fund (IEPF) pursuant to the provisions of Section(s) 205A and205C of the Companies Act, 1956. Further, under the provisions of Section 205C of the CompaniesAct, 1956, no claims by the shareholders shall lie against the IEPF or the Company for the unclaimeddividend transferred to IEPF and no payments shall be made in respect of any such claims. Shareholderswho have so far not encashed their dividend warrants for the financial year(s) ended 31st March, 2001and 2002, are therefore requested to seek issuance of demand draft in lieu of unencashed/unclaimeddividend warrant(s) by writing to the Company’s Registrar and Share Transfer Agents viz. IntimeSpectrum Registry Limited.
(f) Additional information pursuant to Clause 49 of the Listing Agreement(s) with Stock Exchanges, onDirectors recommended for appointment or re-appointment at the forthcoming Annual General Meeting,are given in the Annexure to the Notice.
(g) Shareholders/Proxies are requested to deposit the Attendance Slip duly filled in and signed for attendingthe Meeting. In case of joint holders attending the Meeting, only such joint holder who is higher in theorder of names will be entitled to vote. Corporate Shareholders intending to send their authorizedrepresentatives to attend the meeting are requested to send a certified copy of the Board Resolutionauthorizing their representative to attend and vote on their behalf at the Annual General Meeting.
ANNEXURE TO NOTICE
EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956
The following explanatory statement set out material facts relating to the Special Business of the accompanyingNotice dated 7th May, 2008.
ITEM NO.5Mr.H.V.Lodha was appointed as an additional director of the Company by the Board of Directors on 29th October,2007. In accordance with Section 260 of the Companies Act, 1956 and Article 96 of the Articles of Associationof the Company, he holds such office upto the date of the ensuing Annual General Meeting. The Company hasreceived the required notice in writing alongwith requisite deposit from a shareholder pursuant to Section 257of the Companies Act, 1956, proposing the candidature of Mr.H.V.Lodha for the office of Director.
The Board is of the unanimous view that vast expertise, knowledge, experience and qualification of Mr.H.V.Lodhawill be of immense benefit to the Company and, therefore, recommends the resolution for the approval of theshareholders.
Save and except Mr.H.V.Lodha and his father Mr.R.S.Lodha, none of the other Directors of the Company is, inany way, concerned or interested in the said resolution.
Registered Office: By Order of the BoardUdyog Vihar,P.O.Chorhata,Rewa - 486 006 (M.P.) Dinesh Kumar SonthaliaMay 7, 2008 General Manager (Commercial) & Secretary
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BIRLA ERICSSON
ANNEXURE TO NOTICEDetails of Directors seeking appointment or re-appointment at the ensuing Annual General Meeting scheduled to be held on 14th August, 2008
Name
Date of Birth
Date of Appointment
Expertise in specificfunctional areas
List of outsideDirectorship held
Chairman/Memberof the Committee ofthe Board of Directorsof the Company
Chairman/Member ofthe Committee of theBoard of Directors ofother PublicCompanies
Shareholding (bothown or held by/for otherpersons on a beneficialbasis), if any, in the paidup equity share capitalof the company
Relationship betweenDirectors of theCompany
Mr.H.V.Lodha
13.02.1967
29.10.2007
An eminent Chartered Accountant and aPartner of M/s Lodha & Co., CharteredAccountants. He has served variouscommittees and working groups set up byFederation of Indian Chambers ofCommerce and Industry (FICCI); IndianChambers of Commerce, Kolkata;Department of Company Affairs,Government of India; Rserve Bank of India;apart from being a member of theAccounting Standards Board set up by theInstitute of Chartered Accountants of Indiaand alternate member of the NationalAdvisory Committee on AccountingStandards set up by Government of India.He has handled professional advisoryassignments in various fields and has beeninvolved in various Trusts, Educational andCultural Institutions.
1. Alfred Herbert (India) Ltd.2. Birla Corporation Ltd.3. Fenner (India) Ltd.4. Hindustan Gum & Chemicals Ltd.5. OCL (India) Ltd.6. Punjab Produce Holdings Ltd.7. Sicpa India Ltd.8. Universal Cables Ltd.9. Vindhya Telelinks Ltd.
–
Chairman - Audit Committee ofSicpa India Ltd.
- Share Transfer &Shareholders’/Investors’Grievance Committee ofBirla Corporation Ltd.
Member - Audit Committee ofFenner (India) Ltd.,OCL (India) Ltd. & PunjabProduce Holdings Ltd.
- Share Transfer &Shareholders’/Investors’Grievance Committee ofUniversal Cables sLtd.
NIL
Son of Shri R.S.Lodha, Chairman of theCompany
Mr.Janne Sjoden
04.11.1944
01.08.1994
Company Executive withrich business andManagement experience.
–
–
–
NIL
No
Mr.R.C.Tapuriah
15.06.1942
29.07.2001
Industrialist with wide experience inBusiness and Industry.
1. Alfred Herbert (India) Ltd.2. Adorn Investments Ltd.3. Vindhya Telelinks Ltd.4. Bhagwati Pressing Company Ltd.5. Calcutta Investment Company Ltd.6. Maxworth Industrial Services Ltd.7. New India Retailing & Investment Ltd.8. United Investment Company Ltd.9. Northern Oxygen Ltd.
–
Chairman - Audit Committee andShare Transfer-cum-Investors GrievanceCommittee of New IndiaRetailing & Investment Ltd.
NIL
No
Note : Number of other Directorships held by the Directors, as mentioned above, do not include alternate directorships and directorships held in foreign companies, Section 25 companies andIndian private limited companies besides trustee/membership of managing Committees of various trusts and other bodies, and are based on the latest declarations received from the Directors.The details of Committee Membership/Chairmanship is in accordance with revised clause 49 of the Listing Agreements and reflects the Membership/Chairmanship of the Audit Committee andShareholders/Investors’ Grievance Committee alone of all other Public Limited Companies.
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Directors’ ReportTO THE SHAREHOLDERS
Your Directors have pleasure in presenting their Sixteenth Annual Report, together with the Audited Financial Statementsof the Company for the year ended 31st March, 2008.
ACCOUNTS & FINANCIAL MATTERS 2007-08 2006-07
(Rs. in lacs) (Rs. in lacs)
Turnover (Gross) 14361.08 5899.19
Other Income 450.80 517.21
14811.88 6416.40
The year’s working shows a
Gross Profit (after Interest) of - 465.39 285.87
Less : Depreciation/Amortisation 359.65 373.77
Profit/(Loss) before Tax 105.74 (87.90)
Provision for Tax
– Current Tax (adjustment for earlier years) 4.03 (2.66)
– Deferred Tax (Credit) – (27.66)
– Fringe Benefit Tax 8.30 5.50
Profit/(Loss) after Tax 93.41 (63.08)
Profit Brought Forward from Previous Year 228.54 291.62
Balance carried to Balance Sheet 321.95 228.54
Your Directors regret their inability to recommend any dividend for the year under consideration.
GENERAL & CORPORATE MATTERSDuring the year under review, the Company has exhibited improved performance primarily due to higher sales volumewith a favourable product mix and a reasonable level of exports in both Optical Fibre Cable and traditional Jelly FilledTelephone Cable (JFTC). Despite all the challenges in the market place, the gross turnover for the year under reviewincreased to Rs.14361.08 lacs as compared to Rs.5899.19 lacs and your Company earned a gross profit (after interest)of Rs.465.39 lacs as compared to Rs.285.87 lacs during the previous year. This is noteworthy considering extremevolatility and unrelenting upward bias in the prices of commodity raw-materials where the significant part of the increasecould not be passed on to the customers. Further, the year witnessed sharp appreciation of Indian Rupee vis-à-vis USDollar which disturbed the price parity of imported finished products vis-à-vis locally produced products putting pressureon margins.
During the year under review, the market generally grew on expected lines particularly in Optical Fibre Cable businesswhich witnessed healthy volume growth and regular order flow from various telecom operators including Ribbon typeOF Cable orders from BSNL. Your Company has also successfully executed a large order for Optical Fibre Cable forgas pipelines infrastructure project under deemed export besides certain prestigious export orders from South EastAsia, Europe and Middle East regions. The Company also secured an Order worth approx. Rs.23.62 crores from BSNLagainst annual tender for JFTC and supplied the stipulated quantity of materials within the delivery schedule. YourCompany has also successfully launched a variety of new products in Copper Cable business and executed orderworth Rs.3.50 crores in a new market segment of specialty cables to the potential users and intermediaries.
Your Company’s continuous efforts in improving the product portfolio and spreading the customer base are some of thekey factors for a better sales performance as compared to the previous year.
The telecommunication industry is undergoing profound changes often forcing the service providers to revisit theirtraditional business models. As a measure to retain subscribers and to adapt to this complex environment, the fixedline operators aim to bring new competitiveness by betting on improved comprehensive broadband bundled services
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and high speed optical fibre in the last mile. Your Company is therefore proactively equipping itself for manufacturing avariety of Optical Fibre Cables as per evolving industry standards with the business aims of unlocking new opportunitiesand all with optimal investments and maximum revenue generations. In addition to this, under the fast changing businessdynamics, your Company has taken a strategic decision to participate in turnkey projects which eventually will lead toadditional revenue opportunities by cross-marketing its business to the customers. The Company has also initiated theprocess of augmenting substantially the production capacity of Ribbon type Optical Fibre Cable with the latest state-of-the art machinery which is expected to be fully operational by third quarter of the ensuing financial year.
With the huge planned investments in wireless infrastructure by the telecom operators, the Company is also graduallydiversifying its products range in Copper Cables and launched a variety of new products including Structured Cables,Specialty Communication and data Cables, etc. in order to reduce dependence on traditional JFTC. All the above effortswill bring immense business opportunities in the coming years and will enhance the overall returns with optimal utilizationof production facilities.
Alongside, the Company will continue to pursue its ongoing structural reforms targeted to become one of the lowestcost producers by implementing the tenets of lean manufacturing, customer-oriented product planning and development,growth in customer base, quality assurance exceeding customer expectations and profit oriented business managementin order to stay competitive in the matured domestic and international market places.
Your Directors are happy to report that the IS/ISO 9001:2000 quality management system certification granted to theCompany by the Bureau of Indian Standards has been renewed for a further period of three years which indicates theCompany’s commitment in meeting global quality standards.
CORPORATE GOVERNANCEPursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, the Management Discussion & Analysis,Report on Corporate Governance and a certification by the Managing Director (CEO) confirming compliance by all theBoard members and senior management personnel with Company’s Code of Conduct are made a part of the AnnualReport. A certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance isgiven in Annexure, which is attached hereto and forms part of the Directors’ Report.
DIRECTORS’ RESPONSIBILITY STATEMENTAs required under Section 217 (2AA) of the Companies Act, 1956, your Directors to the best of their knowledge andbelief and according to the information and explanation obtained by them, state that;
� In the preparation of the Annual Accounts for the year ended 31st March, 2008, the applicable accounting standardshave been followed;
� The Company has selected such accounting policies, applied them consistently, made judgements and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at theend of the financial year 2007-08 and of the profit for the year ended 31st March, 2008;
� Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordancewith the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventingand detecting fraud and other irregularities; and
� The attached annual Statement of Accounts for the year ended 31st March, 2008 have been prepared on a ‘goingconcern’ basis.
INDUSTRIAL RELATIONSIndustrial relations remained cordial through out the year. The Board wishes to place on record its sincere appreciationof the contribution made by the employees at all levels.
The Company continues to accord a very high priority to both industrial safety and environmental protection and theseare on going process at the Company’s plant and facilities. As a recognition of these objectives, the IS/ISO 14001:2004Environmental Management Systems Certification accorded to the Company by the Bureau of Indian Standards hasbeen renewed for its entire range of activities.
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DIRECTORSMr.H.V.Lodha was appointed as Additional Director of the Company during the year. He holds such office upto the dateof the ensuing Annual General Meeting and, being eligible, is proposed to be appointed as Director.
Mr.S.K.Daga and Mr.Dinesh Chanda acted as Alternate Directors to Mr.Janne Sjoden and Mr.Mangnus Kreugerrespectively during the year except on vacation of office u/s 313(2) of the Companies Act, 1956 and until re-appointmentthereafter.
Mr.Janne Sjoden and Mr.R.C.Tapuriah retire from the Board by rotation at the ensuing Annual General Meeting and,being eligible, offer themselves for re-appointment.
AUDITORSMessrs V.Sankar Aiyar & Co., Chartered Accountants, retire as Auditors of the Company and, being eligible, offerthemselves for re-appointment.
Messrs D.Sabyasachi & Co., Cost Accountants, have been appointed as Cost Auditors for Cost Audit in respect ofCables.
PARTICULARS OF EMPLOYEESParticulars of employees in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read withthe Companies (Particulars of Employees) Rules, 1975, as amended, are not given, as none of the employees qualifyfor such disclosure.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGOAs required under Section 217(1)(e) of the Companies Act, 1956 and the Rules made therein, the concerned particularsrelating to Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo are given in Annexure,which is attached hereto and forms part of the Directors’ Report.
ACKNOWLEDGEMENTThe Board desires to place on record its grateful appreciation for the excellent assistance and co-operation receivedfrom the State Government and continued support extended to the Company by the bankers, investors, suppliers andesteemed customers and other business associates. The Board also wishes to place on record its appreciation of thevaluable technical assistance, guidance and support received from Ericsson Network Technologies AB, Sweden. TheCompany has also received valuable assistance from the Indian co-promoter companies, viz. Universal Cables Limitedand Vindhya Telelinks Limited.
Yours faithfully,
R.S.Lodha Chairman
R.C.Tapuriah
H.V.Lodha
A.P.Dadoo Directors
B.R.Nahar
Dinesh Chanda Alternate Director(Alternat to Mr.Magnus Kreuger)
D.R.Bansal Managing Director
New Delhi, May 7, 2008
BIRLA ERICSSON
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ANNEXUREPARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGSAND OUTGO AS PER SECTION 217(1)(E) OF THE COMPANIES ACT,1956 AND THE RULES MADE THEREIN ANDFORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2008.
(A) CONSERVATION OF ENERGYThe Company’s operations do not involve substantial consumption of energy in comparison to the cost of production.Nevertheless, the Company has been making concerted efforts on improving the efficiency of energy use by adoptingavailable energy saving technologies which helped in containing the energy cost. Some of the steps taken in this directionduring the year are described below :� Installation and use of energy efficient lighting in the plant and energy saving devices for street lights within factory
premises.� Proper maintenance of all machinery & other equipments and timely replacement of worn out components besides
maximum utilization of available resources by bringing awareness amongst employees/workers.� Engineering changes on continual basis to take advantage of the lowest cost energy source in most significant
processes.� Consistent quality power supply to critical production machinery through UPS system resulting in improved power
factor, reduced dependence on captive power and avoidance of uninformed power outages.
(B) TECHNOLOGY ABSORPTIONI Research and Development(R&D).
1. Specific areas in which R&D (a) Innovate and improve process capability, attain global benchmarkscarried out by the Company with considerable focus on the operational excellence.
(b) Design and development of products as per emerging technicalstandards in the industry and new fibre optic network architecture inbroadband access fixed networks.
(c) Fine tuning of design parameters based on indepth discussions andevaluation of customers feedback on product quality for enhancedvariety of applications.
(d) Continually work to bolster its structure to fulfill the aim of being aleader in high quality product design that has cutting edge feel to it.
2. Benefits derived as a result (a) Enhanced flexibility and agile manufacturing for meeting unique needsof customers, marked improvement in productivity and overalloperating efficiencies besides consistency/stability in products qualityand shortened delivery times.
(b) Leveraging the core technological expertise that the Company hasacquired over the years in order to stimulate demand by developingand offering innovative high quality new products and services.
(c) Alignment of products meeting enhanced applications by modifyingtechnical specifications and manufacturing processes.
3. Future plan of action Continuation of the ongoing efforts to be globally competitive and excel inthe core business activities by focusing on customer orientation,technological capability, innovation and renovation of products, designcapabilities and quality.
4. Expenditure on R & D R & D Expenditure have not been accounted for separately.
II Technology absorption, adaptation and innovation.1. Efforts, in brief, made towards (a) Company has an ongoing access to the international technology
technology absorption, adaptation from its technical collaborator and absorbs and adapts theand innovation technologies on a continuous basis to meet its specific needs from
time to time.(b) Analysing feedback from end users to improve quality of products.
2. Benefits derived as a result of (a) Embraced innovation and R&D based excellence for productivitythe above efforts, e.g. product and new market development, upgraded technologies andimprovement, cost reduction, production processes, the efficiency of supply chain and creationproduct development, import of new products with dynamic product quality and reliability.substitution, etc. (b) Integration of human and technical resources to enhance workforce
performance and satisfaction. As a result, the engineering staff is verykeenly harnessing the best of technology products.
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(c) Unmatched understanding of customer needs and a detailedknowledge of available solutions. As a result, the Company has beenable to expand its business reach apart from becoming morecompetitive.
3. In case of imported technology (importedduring the last 5 years reckoned from thebeginning of the financial year), followinginformation may be furnished -(a) Technology imported : Nil(b) Year of Import : Not Applicable(c) Has technology been absorbed ? : Not Applicable
If not fully absorbed, areas wherethis has not taken place, reasonstherefore and future plans of action
(C) FOREIGN EXCHANGE EARNINGS AND OUTGOEarnings : Rs. 1033.30 LacsOutgo : Rs. 7961.40 Lacs
Yours faithfully,
New Delhi, May 7, 2008
R.S.Lodha Chairman
R.C.Tapuriah
H.V.Lodha
A.P.Dadoo
B.R.Nahar
Dinesh Chanda Alternate Director(Alternat to Mr.Magnus Kreuger)
D.R.Bansal Managing Director
Directors
CERTIFICATE OF COMPLIANCE WITH THE CODE OF CONDUCTAs provided under Clause 49 of the Listing Agreement relating to Corporate Governance with the Stock Exchanges, all theBoard Members and the Senior Management Personnel of the Company have affirmed compliance with the Company’s Codeof Conduct during the financial year 2007-08.
For Birla Ericsson Optical Limited
D.R.BansalNew Delhi, May 7, 2008 Managing Director
AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCETO THE SHAREHOLDERS OF BIRLA ERICSSON OPTICAL LIMITED1. We have examined the compliance of conditions of corporate governance by Birla Ericsson Optical Limited for the year
ended on 31st March 2008, as stipulated in Clause 49 of the listing agreement of the Company with stock exchanges.2. The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited
to review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditionsof the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.
3. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Companyhas complied with the conditions of Corporate Governance as stipulated in the above mentioned listing agreement.
4. We state that in respect of investor grievances, the Registrar and Share Transfer Agents of the Company has maintainedthe relevant records and certified that as on 31st March 2008 there were no investor grievances pending against the Companyfor a period exceeding one month.
5. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiencyor effectiveness with which the management has conducted the affairs of the Company.
For V. Sankar Aiyar & Co.Chartered Accountants
R.RaghuramanPlace : New Delhi PartnerDate : May 7, 2008 Membership No. 81350
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Management Discussionand AnalysisINDUSTRY STRUCTURE AND DEVELOPMENTSThe Company’s operations are classified into Telecom Cables comprising primarily Optical Fibre Cables (OFC) and Polyethylene InsulatedJelly Filled Telephone Cables (JFTC).
The OFC is used in long distance networks and generally forms the backbone of all telecom networks. It is also used in local area networksrequiring high speed connectivity and high bandwidth. A large deployment of OFC in the entire network is on the anvil primarily due tothe Fibre-To-The-Home access network implementation which is stated to take-off during the current year with renewed thrust andmomentum.
The JFTC is predominantly used in the subscriber access telecom networks and broadband services. The bulk of demand for JFTC inIndia is attributable to the expansion of the wire line telecom networks by the public & private operators besides regular replacement ofold copper cables and deployment of high speed access network to make them broadband enabled. The wide-spread adoption of WLLand continued thrust on mobile telephony in India has hit demand for JFTC in a fundamental way. However, marked acceleration in thetake-up of broadband services in India is likely to mean some recovery in demand for copper telecom cables, as provision of broadbandconnection via DSL over copper pairs requires good quality access lines.
OVERALL REVIEWBusiness Review and OutlookWith more than 270 Million connections, Indian telecommunication industry (the third largest in the world and the second largest amongthe emerging economies of Asia) has emerged as one of the key sectors responsible for India’s resurgent economic growth. TheGovernment’s focus has been on network expansion, rural telephony, broadband coverage, R&D and on providing an enabling environmentfor the competitive growth of this sector. The Liberalisation and infusion of competition in the sector has created an impressive forwardmomentum in India resulting in massive investment in wireless technology with entities like BSNL, Bharti, Reliance, Idea and Vodafone,vying with each other for substantial investments, whereas the fixed line network market is undergoing a gradual transition stage. TheCompany, traditionally dependent on the two state owned players like BSNL/MTNL has slowly moved away from the traditional PIJF Cablebusiness to new niche markets and has reoriented its marketing strategies to adopt customer centric approach.
Jelly Filled Telephone Cables (JFTC)The Company registered a better sales volume mainly on account of supplies worth Rs.23.62 crores to BSNL against the annual tenderof JFTC Cables. As reported in the earlier years, the Company has been reinventing its business model of copper cable in tandem withbusiness changes and during this year, it has successfully executed order worth Rs.3.50 crores in a new segment of specialty cables tocertain renowned customers in India. The upgradation in the production facilities and the capability of producing different variant of coppercables as well as the ability to cater to the stepped-up demand for such products has enabled the Company to spread the customer basefor a better sales performance compared to the previous year. With the reduced dependence on traditional JFTC cable and the revenueearned from other products including wide range of Optical Fibre Cables, your Company has positioned itself to emerge as a winner froma dynamic versatile business scenario. All these efforts aimed at countering the ripple effects of the erratic procurement pattern in JFTCbusiness shall eventually derisk the revenue model of the Company and are expected to improve the operating results in the years aheadthrough optimum use of production facilities.
Optical Fibre Cables (OFC)The significant increase in revenue from OFC business at Rs.97.62 crores (as compared to the previous year Rs.28.03 crores) is mainlyattributable to continuous flow of orders throughout the year from various telecom operators including Ribbon type Optical Fibre Cableorder from BSNL thereby increasing the overall market share in India. In addition to the above, your Company concentrated to a greatextent on exports/deemed exports which helped in achieving significant growth in revenue coupled with improved profitability.
However, the level of profitability is constrained by the import of OFC by telecom service providers specifically the private players. Theimprovement in quality or perception about the quality of OFC manufactured by Indian players will be the key determinant of the abilityof the Company to hike prices and improve their profitability. In this scenario, your Company will make all the efforts to further improvethe market share and profitability by maintaining its high standard of quality service and competitive pricing.
The Company’s strong emphasis on export of OFC by leveraging its technical expertise, world class production facilities and industrial& corporate brands has yielded rich dividend resulting in robust and highest ever export turnover of Rs.1033.30 lacs during the year underreview. The Company is on constant look out for export opportunities and shall revisit the issue in current year despite the temporaryaberration in the exchange rate dampening the export competitiveness of India as a whole.
Under the fast changing business scenario with the customers demanding for a one stop solution for their projects, it is imperative forany telecom operator to envisage a turnkey solution for their telecommunication cable network requirement. Keeping this in view, theCompany has taken a strategic decision to participate in turnkey projects which eventually will lead to additional revenue opportunitiesby cross-marketing its business to the customers besides helping in retention of the customers under the changed business environment.Company’s proposal to foray into providing integrated turnkey solution for telecommunication cables will also enhance the business throughvalue addition.
The demand for Optical Fibre Cable is growing in line with the estimates driven mainly because of renewed thrust by the Governmentas well as private telecom operators for investment in expansion of overlay access network, national long distance network and city accessnetwork for rollout of broadband. Since liberalization of telecommunication sector in India, new private sector operators have investedheavily in networks creation that have expanded coverage to a large percentage of the population. Neverthless, the capacity of these
BIRLA ERICSSON
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networks is often modest, many only handle mobile voice services. Many telecom operators are, therefore beginning to deploy technologiesthat will offer broadband access at a local level including via W-CDMA, HSDPA and WiMax but a critical aspect of promoting wideravailability of broadband is ensuring that a national fibre optic infrastructure is in place and that is affordable. With the envisage upgradeof these networks to 2.5 G and 3 G, however, national backbone requirements for augmenting the broadband capacity is expected toincrease rapidly which augers well for demand of optical fibre cables in the foreseeable future.
The growth of the telecom sector is dependent on the extent of rural tele-connectivity even though efforts are being made under theUniversal Service Obligation Fund (USFO) to provide support for increasing wireless network in rural and remote areas. The widespreadaccess to broadband services is critical for moving the country towards a knowledge based society. Recognizing the potential of ubiquitousBroadband services in growth of GDP and enhancement in quality of life through societal applications, Government and telecom regulatoryauthority in India have initiated policy measures to accelerate the growth of broadband services which would largely be dependant onreliable fiber based network expansion by the service providers. Amid this backdrop Fibre-To-The-Home (FTTH) has established a strongposition as an economically viable and technologically advanced broadband architecture option. Your Company is therefore, stronglybanking on the Broadband revolution in India and making sustained efforts to move on to higher value added businesses by offeringinnovative passive products in the last mile connectivity as a potential growth area.
Financial Review(a) The gross sales increased to Rs.14361.08 lacs as compared to Rs.5899.19 lacs, an increase of approx. 143% over the previous
year primarily led by substantial higher sales of OFC both in value and volume coupled with a reasonable PIJF sale to BSNL.(b) As a result of its efficient treasury operations, the Company is able to maintain its aggregate other income to Rs.450.80 lacs, but at
a little lower level as in previous year.(c) The raw material consumption and other charges were higher as compared to previous year by 132% due to substantial increase
in production level.(d) The financial charges increased from Rs.32.33 lacs in previous year to Rs.61.63 lacs mainly due to higher utilization of Bank
Guarantees etc.(e) Despite of worldwide rising trends in all the major inputs, the company has been able to achieve gross profit after interest but before
depreciation of Rs.465.39 lacs.(f) The interest cost for the year has increased to Rs.202.28 lacs as against Rs.37.54 lacs in the previous year primarily due to availment
of higher working capital limits including EPC/post shipment on account of higher volumes.(g) Operating and general expenses increase due to higher volume of business.(h) There was no change in the capital structure during the year. The increase in Reserves & Surplus of Rs.73.50 lacs is because of
the net profit in the current year by Rs.93.41 lacs after adjusting Rs.19.91 lacs on account of Transitional liability to comply with newAS-15.
(i) The additions to the fixed assets of Rs.384.95 lacs during the year mainly comprise of installation of balancing equipments,upgradation of certain machinery, etc. with the aim of nurturing and expanding the range of newly launched products.
(j) For detailed information on the financial performance with respect to operational performance, a reference may please be made tothe financial statements.
OPPORTUNITIES AND THREATS� The demand for telecom cables is directly linked to expansion in telecommunication networks. The telecommunication sector
particularly mobile telecommunications is expected to witness stupendous growth in the years to come. Although, there has beena sharp expansion in the telecom network in the country, the continued thrust of the Government for development of high qualitytelecom infrastructure is mainly ascribed to :� Increase in demand for telecommunications services from both urban and rural areas due to strong GDP growth and increases
in per capita incomes;� Increased use of information technology, the mass roll out of broad band and rapid penetration of digital services;� Initiatives of telecom operators and other service providers to modernise telecom infrastructure to derive myriad benefits of
“e economy” and growing usage of data, internet and other value added services.� Empowerment of rural population by achieving accelerated growth in rural teledensity and aspiration of bridging the gap between
rural and urban teledensity from present 25:1 to 5:1 by 2010.� The government has committed to provide the necessary support and encouragement, including suitable fiscal incentives to the
telecom service providers utilizing indigenous equipment under the National Telecom Policy, 1999. This policy statement onimplementation may give the required impetus to the telecom cable manufacturers in the country.
� The ongoing Government funded project with an outlay of approx.Rs.980 Crores (revised escalated estimated project cost of approx.Rs.3076 Crores) for shifting wireless operations of defence services onto an alternative exclusive Optical Fibre Cable network forreleasing additional spectrum to cellular telecommunication service providers shall translate into higher off take for OFC by BSNLduring next few years. In addition to this, large investments planned by the telecom operators in networks and coverage, as well asenhancements of existing access and distribution networks may improve the demand prospects and increased price realization forOFC.
� The demand for JFTC is likely to remain subdued owing to extension of USO Fund subsidy support for shared wireless infrastructurein rural and remote areas on the pretext of expeditious roll-out of mobile networks in the most cost effective manner. While a limitedavailability of electromagnetic spectrum will have a direct adverse impact on the quality of services, the high cost of incrementalspectrum will put a barrier on the growth of such wireless technologies. In addition to this, non-availability of reliable power in ruralpockets which is essentially required for success of mobile infrastructure may lead to continued preference for wireline networks insuch areas in the near term. These policy decisions, however, pose no threat to OFC demand because of inherent advantages ofhigh bandwidth scalability in multi-protocol OFC Network.
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� The uncovered and non-refundable cost of various state levies and lack of required infrastructural support could be a set back inthe Company’s ability to export its products in the intensely competitive global environment.
� The competition policy and transparency in government procurement being proposed at certain world forums, if accepted by theGovernment without reservation and level playing field to domestic producers, may adversely impact the indigenous industry.
� Telecom Sector is impacted substantially by government policies and investment. While no reversal in the planned investment isenvisaged, prices and demand are definitely subject to changes in policies on tendering and indenting. The recent proposal mootedin certain quarters of the Government for unbundling of all fibre/copper long distance infrastructures may have an adverse impacton the growth of OFC business.
RISKS AND CONCERNSTechnological(a) The consumption of JFTC per DEL is expected to remain low due to increasing telephone density and large scale deployment of
wireless technology as compared to JFTC in access networks in India(b) As against opting for Optical Fibre for broadband rollout plans, the BSNL’s strategy of endorsing “ADSL modems” as a means to its
broad-band connectivity may impact demand of OFC in access network and Fibre -To-The-Home applications.(c) The Competition within the OFC business is becoming fierce due to emerging new technologies and frequent new product
introductions in optical fibre arena by certain integrated overseas players that command competitive prices and preference in themarket place.
FinancialFinancial risks would include, interalia, low capacity utilization, unremunerative prices, delay in finalisation of tender and orders by thetwo main consumers viz. BSNL & MTNL, highly concentrated customers base, shorter delivery schedule and liquidated damages, foreignexchange exposure and related exchange rates variation, commodity price including adverse movements in prices of raw-materials,warranty and security, current or future litigations, working capital management and interest rate, contingent liabilities, etc. In additionthe credit risks could increase, if the financial condition of Company’s customers decline. The Company regularly identifies and monitorsthe financial risks as well as potential business threats and develops appropriate risk mitigation plans. The Company’s crisis managementcapability is also reasonably honed to protect its reputation with its stakeholders.
INTERNAL CONTROL SYSTEMSThe Company’s system of financial, operational and compliance control and risk management is embedded in the business process bywhich the Company pursues its objectives. The established system also provides a reasonable assurance on the efficiencies of operations,safety of assets besides orderly and legitimate conduct of Company’s business in the circumstances which may reasonably be foreseen.The Company has a defined organization structure, authority levels delegated powers, internal procedures, rules and guidelines forconducting business transactions.
The Company has taken giant leaps to leverage information technology for business value and to create capabilities for the future byupgrading its existing information technology systems. The new Enterprise Resource Planning (ERP) model which has becomesubstantially operational by March, 2008, shall facilitate SAP based transaction capability across the Company, giving way to advancedreal time MIS systems besides effective support to the business and on risk mitigation and compliance.
The Company has engaged a firm of Chartered Accountants for internal auditing, who besides conducting periodic audits, independentlyreviews and strengthens the control measures. The Internal Auditors regularly brief the Management and the Audit Committee on theirfindings and also on the steps to be taken with regard to deviations, if any.
ENVIRONMENT & SAFETYThe Company successfully continued with the implementation of industrial safety, quality and environmental protection measures andthese are on going processes at the Company’s plant and facilities. As a recognition of these objectives, the entire range of activities ofthe Company continue to remain certified to the requirement of international standard IS/ISO 14001:2004 by the Bureau of IndianStandards.
INDUSTRIAL RELATIONS & HUMAN RESOURCE DEVELOPMENTThe Company sees its relationship with its employees as critical to the future and believes that every employee needs to possess apartfrom competence, capacity and capabilities, sustainable values, current and contemporary which would make him useful, relevant andcompetitive in managing the change constructively for overall growth of the organisation. To this end, the Company’s approach and effortsare directed towards creating a congenial work atmosphere for individual growth, creativity and greater dedicated participation inorganisational development. The Company lays significant emphasis in employees training to ensure that core skills are passed on andnurtured within its workforce to face the challenges in the competitive business environment and achieve the desired Goals. Steps havealso been taken to create a sense of belongingness in the minds of employees which in term gives maximum contribution per employee.
The Company is committed to maintain good industrial relations through active participation of workers, regular meetings and discussionson all legitimate and legally tenable issues. During the year, a new wage settlement (Agreement) was also executed between the Companyand the Workers’ Union for a period of three years from its effective date of 1st June, 2007. The Company employed 166 number ofpermanent employees on its Roll as on 31st March, 2008.
CAUTIONARY STATEMENTStatements in the Management’s Discussion & Analysis Report which seek to describe the Company’s objectives, projections, estimates,expectations and predictions may be considered to be “forward-looking statements” as of the date of this report and are stated as requiredby applicable laws and regulations. Actual performance and results could differ materially from those expressed or implied and theCompany owes no obligation to publicly update these forward looking statements to reflect subsequent events or circumstances. Marketdata and product analysis contained in this Report has been obtained from internal Company reports and industry publications, but theiraccuracy and completeness are not guaranteed and their reliability cannot be assured.
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Report onCorporate GovernanceThe detailed Corporate Governance Report pursuant to Clause 49 of the Listing Agreement with the stock exchangesis set out below :
1. COMPANY’S PHILOSOPHY ON CODE OF GOVERNANCE :The Company’s Philosophy on Corporate Governance envisages the attainment of corporate excellence by providinggreater customer satisfaction, high employee morale and commitment, enhanced shareholder value and sensitivity tosocietal concerns by maintaining equilibrium between the aspirations of owners, employees, customers and otherstakeholders. The Company believes that the governance process should ensure economic prosperity and long termvalue creation for the enterprise and its shareholders by applying implicit principles of independence, transparency,accountability and responsibility, fairness, investor protection, better compliance with statutory laws & regulations andsocietal concerns. The Company also respects the inalienable rights of its investors and other stakeholders to informationon the performance of the Company based on highest professional, ethical and financial reporting standards.
2. BOARD OF DIRECTORS :The present strength of the Board of Directors is nine (9), out of which four (4) are Independent Non-Executive Directors.The remaining five (5) Directors comprises of one Non-Executive Chairman, one Non-Executive Director, one ManagingDirector being nominees of Indian Promoters and two Non-Executive Directors representing Foreign Promoter Companyas their nominees in accordance with the rights enshrined in the Joint Venture Agreement and Articles of Association ofthe Company. The constitution of the Board confirms compliance in respect of appointing independent directors in termsof Clause 49 of the Listing Agreement.During the financial year ended 31st March, 2008, four Board Meetings were held as per Statutory requirements on 23rd
May, 2007, 23rd July, 2007, 29th October, 2007 and 29th January, 2008. The maximum time gap between any two meetingswas not more than four months.The following table gives the composition and category of the Directors on the Board, their attendance at the BoardMeetings during the year and at the last Annual General Meeting, as also the number of Directorships and CommitteeMemberships/Chairmanships held by them in other companies :-
Name of the Director Category Attendance No. of other Directorships and CommitteeParticulars Memberships/Chairmanships
Board Last Other Committee CommitteeMeetings AGM Directorships Memberships Chairmanships
Mr.R.S.Lodha Non-Executive 4 No 11 None NoneChairman
Mr.Janne Sjoden Non-Executive 1 No None None NoneMr.Magnus Kreuger Non-Executive 1 No None None NoneMr.R.C.Tapuriah Independent 4 No 9 None 2
Non-ExecutiveMr.H.V.Lodha Non-Executive 2 No 9 4 2(w.e.from 29-10-2007)Mr.A.P.Dadoo Independent 2 Yes None None None
Non-ExecutiveDr.Aravind Srinivasan Independent 3 No None None None
Non-ExecutiveMr.B.R.Nahar Independent 4 No 3 1 None
Non-ExecutiveMr.D.R.Bansal Managing Director 4 Yes 2 2 NoneMr.S.K.Daga Non-Executive 2 No 9 1 4(Alternate toMr.Janne Sjoden)Mr.Dinesh Chanda Non-Executive 3 No 1 None None(Alternate toMr.Magnus Kreuger)
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Notes :(i) Number of other Directorships held by the Directors, as mentioned above, do not include alternate directorships and
directorships held in foreign companies, Section 25 companies and Indian private limited companies besides trustee/membership of managing Committees of various trusts and other bodies, and are based on the latest declarationsreceived from the Directors. The details of Committee Membership/Chairmanship is in accordance with revisedclause 49 of the Listing Agreements and reflects the Membership/Chairmanship of the Audit Committee andShareholders/Investors’ Grievance Committee alone of all other Public Limited Companies.
(ii) The requirement that a Director shall not be a member of more than10 Committees and Chairman of more than 5Committees across all Companies in which he is a Director, has been complied with while constituting the Committeeof Directors.
(iii) Disclosure of the number of equity shares of the Company held by non-executive directors as on 31st March, 2008 -(a) Mr.A.P.Dadoo – 600(b) Mr.S.K.Daga (Alternate director) – 2000
(iv) None of the directors on the Board of the Company enjoys any relationship with other directors of the Companyexcept Mr.H.V.Lodha, who is the son of Mr.R.S.Lodha, Chairman of the Company.
All material information are circulated to the directors before the meeting or placed at the meeting including minimuminformation as required under Annexure-IA of Clause 49 of the Listing Agreement(s). This enable the Board to dischargeits responsibilities effectively and take informed decisions. The compliance report of all laws applicable to the Companyas prepared and compiled by the Compliance Officer is circulated to all the Directors alongwith the Agenda and placed/reviewed in each Board Meeting.The Board has laid down a Code of Conduct for all Board Members and Senior Management Personnel of the Companyand the same has been posted on the website of the Company. For the year under review, all Directors and SeniorManagement Personnel of the Company have confirmed their adherence to the provisions of the said Code.A brief resume and the profile of Directors retiring by rotation eligible for appointment or re-appointment at the ensuingAnnual General Meeting (AGM) of the Company are given in the Notice of AGM, annexed to this Annual Report.
3. AUDIT COMMITTEE :The Audit Committee was formed during the financial year 2000-01 and has been re-constituted over the years as perlegal requirements from time to time. The existing Audit Committee consists of three Independent Non-Executive Directorsas specified below :-(i) Mr.A.P.Dadoo : Chairman (Independent Non-Executive Director)(ii) Dr.Aravind Srinivasan : Member (Independent Non-Executive Director)(iii) Mr.B.R.Nahar : Member (Independent Non-Executive Director)The constitution and composition of the Audit Committee also meets with the requirements of Section 292A of theCompanies Act, 1956.All the members of the Audit Committee are financially literate and having insight to interpret and understand financialstatements.The Secretary of the Company as appointed within the meaning of Section 383A of the Companies Act, 1956 acts as theSecretary to the Audit Committee.The functioning and terms of reference of the Audit Committee including the role, powers and duties, quorum for meetingand frequency of meetings are in accordance with Clause 49(II) of the Listing Agreement with Stock Exchanges besidescomplying with the requirements of Section 292 A of the Companies Act, 1956. The terms of reference of the AuditCommittee include, interalia, -(i) Oversight of the Company’s financial reporting process and the disclosure of its financial information.(ii) Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the
statutory auditor and the fixation of audit fees and also approval of payment for any other services rendered by thestatutory auditors.
(iii) Reviewing, with the management, the annual and quarterly financial statements before submission to the board forapproval.
(iv) Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal controlsystems.
(v) Discussion with internal auditors any significant findings and follow up thereon.(vi) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected
fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board.(vii) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post
audit discussion to ascertain any area of concern.(viii) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders
(in case of non payment of declared dividends) and creditors.
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(ix) To review mandatorily the following information –(a) Management discussion and analysis of financial condition and results of operations;(b) Statement of significant related party transactions (as defined by the audit committee), submitted by management;(c) Management letters/letters of internal control weaknesses issued by the statutory auditors;(d) Internal audit reports relating to internal control weaknesses; and(e) The appointment, removal and terms of remuneration of the Chief internal auditor shall be subject to review by
the Audit Committee.During the financial year ended 31st March, 2008, four Audit Committee Meetings were held on 23rd May, 2007, 23rd July,2007, 29th October,2007 and 29th January, 2008. Dr.Aravind Srinivasan attended three meetings and Mr.A.P.Dadoo andMr.B.R.Nahar attended all four meetings. The necessary quorum was present at all these meetings. While the StatutoryAuditors were present in all meetings, the Internal Auditors and the Cost Auditors of the Company attended three andone meeting respectively. President and other invited executives also attended the meetings to answer and clarify theissues raised at the meetings.
4. REMUNERATION COMMITTEE :The Remuneration Committee constituted in pursuance of the provisions of the Listing Agreement and Schedule XIII tothe Companies Act, 1956, comprises of all three Independent Non-Executive Directors viz. Dr.Aravind Srinivasan asChairman with Mr.A.P.Dadoo and Mr.B.R.Nahar, as its members.
The terms of reference of the Remuneration Committee are as per the guidelines of the Central Government/ListingAgreement with Stock Exchanges.
During the financial year ended on 31st March, 2008, Remuneration Committee met only once on 23rd May, 2007 whichwas attended by all the members. The Committee approved the remuneration package of Mr.D.R.Bansal on his re-appointment as Managing Director for a period of (3) three years from 8th August, 2007 to 7th August, 2010.
At present, the Company does not have any policy for payment of remuneration to non-executive directors including non-executive independent directors except by way of sitting fees for each meeting of the Board or a Committee thereofattended by any such Director. While the sitting fees for attending the Board Meeting and Share Transfer-Cum-InvestorGrievance Committee Meeting have been kept unchanged at the level of Rs.5000/- and Rs.2000/- respectively throughoutthe year, the sitting fes payable for attending the Meeting(s) of Audit and Remuneration Committee were increased fromRs.2000/- per meeting to Rs.5000/- per meeting by the Board of Directors in their meeting held on 29th October, 2007with effect from next Audit and Remuneration Committee Meeting(s). The details of remuneration paid to Directors/ ManagingDirector for the financial year ended 31st March, 2008, are set out below :
(a) Non-Executive Directors :
Name of the Director Sitting Fees (Rs. in lacs)
Mr.R.S.Lodha 0.20
Mr.Janne Sjoden 0.05
Mr.Magnus Kreuger 0.05
Mr.R.C.Tapuriah 0.20
Mr.H.V.Lodha 0.10
Mr.A.P.Dadoo 0.27
Dr.Aravind Srinivasan 0.26
Mr.B.R.Nahar 0.37
Mr.S.K.Daga 0.10
Mr.Dinesh Chanda 0.15
(b) Managing Director : (Rs. in lacs)
Name Salary Perquisites, etc. Sitting Fees Total
Mr.D.R.Bansal 9.56 1.91 0.24 11.71
Notes :(i) Sitting fees includes fees paid for attending Committee Meetings.(ii) All appointments are non-contractual except that of the Managing Director which is for three years with effect
from 8th August, 2007. The re-appointment of the Managing Director is conditional upon and subject to terminationby three calendar months notice in writing on either side but no severance fees of any other kind is payable.
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(iii) The Managing Director’s remuneration is exclusive of contribution to gratuity fund and provisions for pensionand leave encashment benefits which are based on actuarial valuation done on an overall company basis andhence not precisely ascertained.
(iv) As per the terms of agreement, for the purpose of Gratuity, Pension and other benefits, the services of theManaging Director will be considered continuous service with the Company from the date he joined the serviceof sister concern(s) or this Company in any capacity from time to time. However, in case of gratuity, anybenefit already obtained from such sister concern(s) of the Company is deducted from the final amount payable.
(v) Presently, the Company does not have any scheme for grant of Stock Options to its Directors, Managing Directoror other employees.
(vi) None of the employees is related to any of the Directors of the Company.
5. SHARE TRANSFER-CUM-INVESTORS’ GRIEVANCE COMMITTEE :The Share Transfer-cum-Investors’ Grievance Committee constituted by the Board comprises of Mr.A.P.Dadoo, anIndependent non-executive director as Chairman and Mr.B.R.Nahar an Independent non-executive director withMr.D.R.Bansal, Managing Director as its members. Mr.Dinesh Kumar Sonthalia, General Manager (Commercial) & Secretaryof the Company has been designated as the Compliance Officer.The Committee acts in accordance with the terms of reference specified by the Board from time to time which, interalia,include overseeing and reviewing all matters connected with investors’ complaints and redressal mechanism besidesapproval or authorizations for issue of duplicate share certificate, share transfer/transmission/refusal of transfer/consolidation/sub-division/dematerialisation or rematerialisation, etc. as per applicable statutory and regulatory provisions.During the year ended 31st March, 2008 two meetings of the Committee were held on 23rd May, 2007 and 29th October,2007 which were attended by all the members.During the year under review, 33 complaints (excluding those correspondences which are not in the nature of complaints)were received from shareholders and investors, directly or through regulatory authorities. All the complaints have beenattended/resolved to the satisfaction of complainants during the year except in cases which are constrained by disputesor legal impediments or other sub-judice matters, if any. No request for share transfer was pending for approval as on31st March, 2008.
6. GENERAL BODY MEETINGS :Location and time where General Body Meetings were held in last three years are given below :
Financial Year Type of Meeting Date Time Venue of the Meeting
2004-05 AGM 19th July, 2005 11.30 A.M.
2005-06 AGM 12th July, 2006 11.30 A.M.
2006-07 AGM 18th July, 2007 11.30 A.M.
All the resolutions set out in the respective notices of the above mentioned meetings were passed by the members asordinary resolutions except one special resolution concerning re-appointment of Mr.D.R.Bansal as Managing Directorwhich was passed on show of hands. No Special Resolutions were put through Postal Ballot in any of the above meetings.No Special Resolution requiring a Postal Ballot is being proposed at the ensuing Annual General Meeting.
7. DISCLOSURES :(a) There are no materially significant related party transactions entered into by the Company with its Promoters, Directors
or Management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Companyat large. A statement in summary form of transactions with the related parties during the year in the ordinary courseof business is disclosed in Note B.10 of Schedule-13 to the financial statements in the Annual Report.
(b) The Company has complied with the requirements of Stock Exchanges, Securities and Exchange Board of Indiaand other statutory authorities on matter relating to capital markets during the last three years and consequently nopenalties or strictures have been imposed on the Company by these authorities.
(c) The Company has generally complied with all the mandatory requirements as specified in the revised Clause 49 tothe extent these apply and extend to the Company.
(d) While preparation of the financial statements during the year under review, no accounting treatment which was differentfrom that prescribed in the Accounting Standards was followed. The significant accounting policies applied inpreparation and presentation of financial statements have been set out in Schedule-13 forming part of the financialstatements.
(e) The Company has laid down procedures to inform the Board Members about the risk assessment and minimizationprocedures covering the entire gamut of business operations of the Company. These procedures are periodicallyreviewed to ensure that executive management controls risks by means of a properly defined framework.
(f) The designated Senior Management Personnel of the Company have disclosed to the Board that no material, financialand commercial transactions have been made during the year under review in which they have personal interest,which may have a potential conflict with the interest of the Company at large.
Registered Office of theCompany at :Udyog Vihar, P.O.Chorhata,Rewa (M.P.) - 486 006
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(g) The CEO (Managing Director) and the CFO [General Manager (Commercial) & Secretary] have furnished a dulysigned Certificate to the Board for the year ended 31st March, 2008 in accordance with the provisions of revisedClause 49.V of the Listing Agreement and the same has been placed in the Board Meeting held on 7th May, 2008.
(h) In accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992,as amended, Mr.Y.S.Lodha, President has been designated as the Compliance Officer of the Company under theCompany’s Code of Conduct for Prevention of Insider Trading. He is responsible for adherence to the Code by theCompany and its designated employees. The Company also adheres to the disclosure practices for Prevention ofInsider Trading as specified in the aforesaid SEBI Regulations.
(i) The Company has presently not adopted the non-mandatory requirements in regard to maintenance of Non-ExecutiveChairman’s office, tenure of independent directors, sending half-yearly declaration of financial performance to eachhousehold of shareholders, training of Board Members, Mechanism for evaluating non-executive Board Membersand establishment of whistle Blower policy, etc. However, a Remuneration Committee consisting of non-executiveindependent directors has been constituted by the Board.
8. MEANS OF COMMUNICATION :(a) Quarterly Results :
Quarterly results are taken on record by the Board of Directors and submitted to the Stock Exchanges as perrequirements of the Listing Agreements.
(b) Newspapers wherein results are normally published :English Newspaper – Financial Express (all editions)Vernacular Newspaper – Dainik Jagran (Rewa edition)
(c) Any website, where displayed : www.birlaericsson.comIn addition, as required by SEBI and the listing agreement, the Company has been regularly filing the required financialand other information on the Electronic Data Information Filing and Retrieval (EDIFAR) website www.sebiedifar.nicmaintained by SEBI/National Informatics Centre.
(d) Whether it also displays official news releases : No(e) The presentations made to institutional investors or to the analysis : NIL
9. GENERAL SHAREHOLDER INFORMATION :9.1 Annual General Meeting :
� Date and Time : 14th August, 2008 at 11.30 A.M.� Venue : Registered Office of the Company at
Udyog Vihar, P.O.Chorhata, Rewa (M.P.)–486 0069.2 Financial Calendar (2008-09) :
(tentative)Annual General Meeting - : 14th August, 2008Quarterly Results -Quarter ending June 30, 2008 : Last week of July, 2008Quarter ending September 30, 2008 : Last week of October, 2008Quarter ending December 31, 2008 : Last week of January, 2009Quarter ending March 31, 2009 : Last week of April, 2009
9.3 Book Closure date(s) : Friday, the 8th August, 2008 to Thursday, the 14th August,2008 (both days inclusive)
9.4 Dividend Payment date : Not Applicable
9.5 Listing on Stock Exchanges : (a) Bombay Stock Exchange Ltd.(BSE),Phiroze Jeejeebhoy Towers,Dalal Street, Fort, Mumbai-400 001
(b) National Stock Exchange of India Ltd.(NSE)Exchange Plaza,Plot No.C/1, G.Block,Bandra-Kurla Complex,Bandra East, Mumbai-400 051
The Company has timely paid the Annual listing fees for the financial year 2007-08 to BSE & NSE.
9.6 Stock Code – Physical : BSE, Mumbai – 500060NSE, Mumbai – BIRLAERIC EQ
Demat ISIN Number for NSDL & CDSL : INE800A01015
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9.7 Market Price Data :Monthly high and low quotations of shares and Volume of Equity Shares traded on Bombay Stock Exchange Ltd.,Mumbai (BSE) and National Stock Exchange of India Ltd, Mumbai (NSE) are as follows :
Month BSE NSE
High Low Monthly High Low Monthly(in Rs.) (in Rs.) Volume (in Rs.) (in Rs.) Volume
(in Nos.) (in Nos.)
April, 2007 22.00 17.10 247594 21.60 15.60 238334May, 2007 24.30 19.00 857472 24.75 19.10 853451June, 2007 22.30 18.75 402438 24.90 17.05 464627July, 2007 24.10 19.25 765592 24.00 18.10 677453August, 2007 21.60 16.55 500955 21.60 18.20 410499September, 2007 24.40 19.75 1258380 24.40 19.55 1150892October, 2007 23.50 18.05 629362 23.25 18.80 598642November, 2007 29.50 19.50 1717416 28.80 19.10 1535138December, 2007 32.55 24.20 1159983 32.35 24.05 579436January, 2008 35.85 21.00 1003597 35.80 20.75 450783February, 2008 24.75 19.05 252866 24.75 19.80 164951March, 2008 20.75 12.75 392001 21.70 13.75 175093
9.8. Share price performance in comparison to broad-based indices - BSE Sensex :
9.9 Registrar and Share Transfer Agents : M/s Intime Spectrum Registry Ltd.C-13, Pannalal Silk Mills Compound,LBS Marg, Bhandup (West), Mumbai - 400 078Phone : +91-22-25963838Fax : +91-22-25946969Email : [email protected]
9.10 Share Transfer System :The trading in Company’s Equity Shares on the stock exchanges is permitted only in dematerialised form for allclasses of investors as per notification issued by the Securities and Exchange Board of India (SEBI).All transactions in connection with transfer, transmission, etc. are processed by the Registrar and Share TransferAgents of the Company on fortnightly basis and the same are placed before the Committee of Directors/Committeeof Officers, as the case may be, for approval at regular interval. With a view to expediting the process of sharetransfer in physical segment, the Board of Directors has delegated the authority to a Committee of Officers forapproving transfer upto 1000 equity shares in each request. A summary of transfer/transmission of equity shares soapproved by the Committee of Officers is placed at every Board Meeting. The average time taken for processingShare Transfer requests in physical form including despatch of Share Certificates is generally three weeks on receiptof duly completed documents in all respects. The request for dematerialisation of equity shares is generally confirmed/rejected within an average period of 15 days. The Company obtains from a Company Secretary in practice half-yearly certificate of compliance with the share transfer formalities as required under Clause 47(c) of the ListingAgreement with stock exchanges and files a copy of the certificate with the stock exchanges.The Company’s representatives visit the office of the Registrar and Share Transfer Agents from time to time to monitor,supervise and ensure that there are no delays or lapses in the system.
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9.11 (a) Distribution of Shareholding as on 31st March, 2008 :
No.of Equity Shares Number of % of Number of % ofheld Shareholders shareholders shares held shareholding
1 – 500 31851 92.38 4585024 15.28
501 – 1000 1479 4.29 1262533 4.21
1001 – 2000 580 1.68 908256 3.03
2001 – 3000 197 0.57 509751 1.70
3001 – 4000 75 0.22 273781 0.91
4001 – 5000 115 0.34 555445 1.85
5001 – 10000 113 0.33 826537 2.76
10001 and above 67 0.19 21078673 70.26
GRAND TOTAL 34477 100.00 30000000 100.00
Physical Mode 13569 39.36 21570733 71.90
Electronic Mode 20908 60.64 8429267 28.10
(b) Category of Shareholders as on 31st March, 2008 :
Category Number of % of No.of % ofShare- share- shares held shareholdingholders holders
Indian Promoter & Promoter Group 33 0.10 11655943 38.85
Foreign Promoter 1 – 8250000 27.50
Resident Individuals & Corporates 34214 99.24 9753635 32.51
Financial Institutions/Banks/Mutual Funds 8 0.02 3520 0.01
NRI’s 143 0.41 95410 0.32
Society 6 0.02 91240 0.31
Clearing Member 72 0.21 150252 0.50
GRAND TOTAL 34477 100.00 30000000 100.00
9.12 Dematerialisation of Shares and liquidity : 8429267 equity shares representing 28.10% of the total EquityCapital of the Company are held in a dematerialised form with National Securities Depository Limited (NSDL)and Central Depository Services(India) Limited(CDSL) as on 31st March,2008.Company’s shares are reasonably liquid and are quite actively traded on the Bombay Stock ExchangeLtd.(BSE) and National Stock Exchange of India Ltd.(NSE). Relevant data for the approximate average dailyturnover in terms of volume for the financial year 2007-08 is given below :
BSE NSE BSE+NSE
36604 29080 65684
The Secretarial Audit Report from a Company Secretary in practice confirming that the total issued capital of theCompany is in aggregate with the total number of equity shares in physical form and the total number ofdematerialized equity shares held with NSDL and CDSL, is placed before the Board on a quarterly basis. Acopy of the Audit Report is submitted to the stock exchanges where the equity shares of the Company arelisted.
9.13 Outstanding GDRs/ADRs/ Warrants or any Convertible instruments, Conversion date and likely Impacton equity : The Company has not issued any of these instruments so far.
9.14 Plant Locations : Udyog Vihar Industrial Area, P.O. Chorhata, Rewa (M.P.)- 4860069.15 Address for Correspondence :
M/s Intime Spectrum Registry Ltd., Share Department,C-13, Pannalal Silk Mills Compound, Birla Ericsson Optical Ltd.,LBS Marg, Bhandup West, Mumbai - 400 078, Udyog Vihar, P.O. Chorhata, Rewa(M.P.)-486 006,Phone : +91-22-25963838,Fax:+91-22-25946969 Phone : +91-7662-400580, Fax : +91-7662-400680Email : [email protected] Email : [email protected] or
OR
BIRLA ERICSSON
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Auditors’ ReportTO THE SHAREHOLDERS OF BIRLA ERICSSON OPTICAL LIMITED
1. We have audited the attached Balance Sheet of Birla Ericsson Optical Limited as at 31st March, 2008 and also the Profitand Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.
2. We conducted the audit in accordance with auditing standards generally accepted in India. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bythe management, as well as evaluating the overall financial statement presentation. We believe that our audit providesa reasonable basis of our opinion.
3. We report that :-(i) we have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary
for the purposes of our audit;(ii) in our opinion, proper books of account as required by law have been kept by the Company, so far as appears
from our examination of these books;(iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement
with the books of Account;(iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report
comply with the accounting standards referred to in Section 211 (3C) of the Companies Act, 1956 to the extentapplicable;
(v) on the basis of written representation received from the directors and taken on record by the Board of Directors,we report that none of the directors are, prima facie, disqualified under Section 274(1)(g) of the Companies Act,1956 from being appointed as director of the Company as on 31st March, 2008.
(vi) in our opinion and to the best of our information and according to the explanations given to us, the said accountsread with the notes thereon, give the information required by the Companies Act, 1956 in the manner so requiredand give a true and fair view in conformity with the accounting principles generally accepted in India :(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2008;(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and(c) in the case of cash flow statement, of the cash flows for the year ended on that date.
4. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Department of Company Affairs,Government of India in terms of Section 227 (4A) of the Companies Act, 1956, and on the basis of such checksas we considered appropriate and according to the information and explanations given to us, we further report onthe matters specified in paragraphs 4 and 5 of the said Order as under :i (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation
of fixed assets.(b) The management has physically verified the fixed assets at the year end. No material discrepancies were
noticed on such verification.(c) Since there is no substantial disposal of fixed assets during the year, the preparation of financial statements
on a going concern basis is not affected on this account.ii (a) The stock of raw materials, stores, spare parts and packing materials, except stock in transit, have been
physically verified by the management at reasonable intervals.(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable
and adequate in relation to the size of the Company and the nature of its business.(c) In our opinion, the Company is maintaining proper records of inventory and no material discrepancies were
noticed on physical verification.iii (a) As informed, the Company has not granted any loans, secured or unsecured to companies, firms or other
parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore, theprovisions of clause 4(iii) (b), (c) and (d) of the Order are not applicable to the Company.
(b) As informed, the Company has not taken any loans, secured or unsecured to companies, firms or other partiescovered in the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisionsof clause 4(iii) (f) and (g) of the Order are not applicable to the Company.
iv In our opinion and according to the information and explanations given to us, there are adequate internal controlsystem commensurate with the size of the Company and the nature of its business, for the purchase of inventory
BIRLA ERICSSON
17
and fixed assets and for the sale of goods. To the best of our knowledge, no major weaknesses in internal controlsystem were either reported or noticed by us during the course of our audit.
v According to the information given to us, there are no contracts or arrangements during the year that need to beentered into a register in pursuance of section 301 of the Companies Act, 1956.
vi The Company has not accepted any deposits from the public in terms of sections 58A and 58AA or any otherrelevant provisions of the Act and the rules made there under.
vii A firm of Chartered Accountants has carried out internal audit during the year. Internal audit system of the Companyis commensurate with its size and nature of its business;
viii We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules made by theCentral Government for the maintenance of cost records under clause (d) of sub-section (1) of section 209 of theCompanies Act, 1956 and are of opinion that prima facie, the prescribed accounts and records have been maintained.We have not, however, made a detailed examination of the records with a view to determine whether they areaccurate and complete.
ix (a) The Company is regular in depositing the undisputed statutory dues including provident fund, investor educationand protection fund, income-tax, sales-tax, wealth-tax, service-tax, custom duty, excise duty, cess and othermaterial statutory dues as applicable with the appropriate authorities though there has been a slight delay ina few cases. No undisputed amounts payable in respect thereof were outstanding at the year end for a periodof more than six months from the date they become payable.
(b) There are no amounts in respect of sales-tax, income-tax, customs duty, wealth-tax, service-tax, excise dutyand cess that have not been deposited with the appropriate authorities on account of any dispute, other thanthose mentioned below :-
Name of the Statute Nature of dues Amount Period to Forum where dispute(Rs.in Lacs) which relates is pending
Central Excise Act, 1944 Excise Duty 0.09 F.Y. 1997-98 Central Excise ServiceTax Appellate Tribunal(CESTAT) New Delhi.
Madhya Pradesh Entry Entry Tax 97.41 F.Y. 2007-08 High Court of MadhyaTax Act, 1976 Pradesh, Jabalpur.
x The Company has no accumulated losses at the end of the financial year. The Company has not incurred cashlosses in the current year.
xi On the basis of the verification of records and information and explanations given to us, the Company has notdefaulted in repayment of dues to financial institutions or banks. The Company has not issued any debenturesduring the year.
xii The Company has not granted loans and advances on the basis of security by way of pledge of shares, debenturesand other securities.
xiii The Company does not carry on the business of a chit fund.xiv The Company is not dealing or trading in shares, securities, debentures and other investments.xv According to information and explanations given to us, the Company has not given guarantees for loans taken by
others from banks or financial institutions.xvi According to the records of the Company, no term loans have been taken during the year.xvii According to the information and explanations given to us, the Cash Flow statement examined by us and on an
overall examination of the balance sheet of the company, we report that funds raised on short-term basis have notbeen used for long term investment.
xviii During the year, the Company has not made any preferential allotment of shares to parties and companies coveredin the Register maintained under section 301 of the Act.
xix The Company has neither issued nor had any outstanding debenture during the year.xx Since there were no public issue of securities during the year, verification of the end use of money does not arise.xxi Based on the audit procedure performed and the representation obtained from the management, we report that no
case of fraud on or by the Company has been noticed or reported during the year under audit.
For V. Sankar Aiyar & Co.Chartered Accountants
R.RaghuramanPlace : New Delhi PartnerDated : May 7, 2008 Membership no. 81350
BIRLA ERICSSON
18
BALANCE SHEET AS AT 31ST MARCH, 2008As at As at
31.03.2008 31.03.2007Schedule Rs.in lacs Rs.in lacs Rs.in lacs
SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare Capital 1 3000.00 3000.00Reserves and Surplus 2 3922.40 3848.90LOAN FUNDSSecured Loans 3 2054.55 1316.64Unsecured Loans 4 2328.60 2328.60
Total 11305.55 10494.14
APPLICATION OF FUNDS
FIXED ASSETS 5Gross Block 10215.26 10032.54Less : Depreciation/Amortisation 7437.39 7249.95Net Block 2777.87 2782.59Capital Work-in-progress 19.40 12.63
2797.27 2795.22
INVESTMENTS 6 1406.19 1456.19
CURRENT ASSETS, LOANS AND ADVANCES 7Inventories 3592.46 2097.37Sundry Debtors 2890.49 987.84Cash and Bank Balances 1474.88 3980.38Other Current Assets 144.27 100.89Loans and Advances 756.19 527.08
8858.29 7693.56
LESS : CURRENT LIABILITIES AND PROVISIONS 8Current Liabilities 1636.60 1298.94Provisions 119.60 151.89
1756.20 1450.83
NET CURRENT ASSETS 7102.09 6242.73
Total 11305.55 10494.14
ACCOUNTING POLICIES & NOTES ON ACCOUNTS 13
As per our attached report of even date
For V. Sankar Aiyar & Co.Chartered Accountants
R. RaghuramanPartnerMembership No.81350
New Delhi, May 7, 2008
R.S.Lodha ChairmanR.C.TapuriahH.V.LodhaA.P.Dadoo DirectorsB.R.Nahar
Dinesh Chanda Alternate Director(Alternat to Mr.Magnus Kreuger)D.R.Bansal Managing DirectorDinesh Kumar Sonthalia General Manager
(Commerical) & SecretaryNew Delhi, May 7, 2008
BIRLA ERICSSON
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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008
2007-08 2006-07
Schedule Rs.in lacs Rs.in lacs
INCOMESales (Gross) 9 14361.08 5899.19Less : Excise Duty on Sales 1609.73 685.56
Net Sales 12751.35 5213.63Other Income 10 450.80 517.21
Total 13202.15 5730.84
EXPENDITUREManufacturing and Other Expenses 11 12472.85 5375.10Interest and Financial Charges 12 263.91 69.87
Total 12736.76 5444.97
PROFIT BEFORE DEPRECIATION/AMORTISATION 465.39 285.87
Depreciation/Amortisation 359.65 373.77
PROFIT/(LOSS) BEFORE TAX 105.74 (87.90)Provision for Tax– Current Tax (adjustment for earlier years) 4.03 (2.66)– Deferred Tax (Credit) – (27.66)– Fringe Benefit Tax 8.30 5.50
PROFIT/(LOSS) AFTER TAX 93.41 (63.08)
Profit Brought Forward from Previous Year 228.54 291.62
BALANCE CARRIED TO BALANCE SHEET 321.95 228.54
Number of Equity Shares outstanding 30000000 30000000
(Face Value Rs.10/- each)
Basic & Diluted Earnings Per Share (Rs.) 0.31 (0.21)
ACCOUNTING POLICIES & NOTES ON ACCOUNTS 13
As per our attached report of even date
For V. Sankar Aiyar & Co.Chartered Accountants
R. RaghuramanPartnerMembership No.81350
New Delhi, May 7, 2008
R.S.Lodha ChairmanR.C.TapuriahH.V.LodhaA.P.Dadoo DirectorsB.R.Nahar
Dinesh Chanda Alternate Director(Alternat to Mr.Magnus Kreuger)D.R.Bansal Managing DirectorDinesh Kumar Sonthalia General Manager
(Commerical) & SecretaryNew Delhi, May 7, 2008
BIRLA ERICSSON
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SCHEDULES ANNEXED TO AND FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2008 AND PROFITAND LOSS ACCOUNT FOR THE YEAR ENDED ON THAT DATE
As at As at31.03.2008 31.03.2007
Rs.in lacs Rs.in lacs Rs.in lacs
SCHEDULE 1 : SHARE CAPITALAuthorised
4,25,00,000 Equity Shares of Rs.10/- each 4250.00 4250.00
75,00,000 Preference Shares of Rs.10/- each 750.00 750.00
5000.00 5000.00Issued, Subscribed & fully Paid-up
3,00,00,000 Equity Shares of Rs.10/- each 3000.00 3000.00
Total 3000.00 3000.00
SCHEDULE 2 : RESERVES & SURPLUSCapital Reserve
As per last account 15.00 15.00Securities Premium Account
As per last account 2000.00 2000.00General Reserve
As per last account 1605.36Less : Transitional liability as per revised AS-15 19.91
1585.45 1605.36
Profit and Loss Account 321.95 228.54
Total 3922.40 3848.90
SCHEDULE 3 : SECURED LOANSInterest Free Sales Tax Loan
From MPSIDC Ltd. 346.87 716.59
Working Capital LoansFrom Bank
Export Packing Credit/Post-shipment Credit 111.64 –Cash Credit Facilities 1353.28 –Overdraft against Term/Fixed Deposit 242.76 600.05
Total 2054.55 1316.64
Notes : (a) Repayment of Sales Tax Loan due within next twelve months Rs.346.87 lacs (Rs.369.71 lacs).(b) Sales Tax Loans are as per Scheme of State Government and for administration of these Loans, Madhya
Pradesh State Industrial Development Corporation Limited (MPSIDC Ltd.) has been nominated by the StateGovernment. As per the governing scheme, the deferred Sales Tax Loan/Liability subsists upto a period often years commencing from the expiry of each financial year and is payable thereafter within 30 days in oneinstalment.
(c) Sales Tax Loans are secured by way of hypothecation of Company’s all movable plant and machinery, spares,tools and accessories and other movable fixed assets, both present & future, ranking subsequent andsubservient to the charges created in favour of State Bank of India and are further secured by way of jointmortgage (on residual charge basis) created by deposit of title deeds of all immovable properties of theCompany.
(d) Overdraft from Bank against Term/Fixed Deposit receipts are secured by way of pledge of term/fixed depositreceipts of Rs.265.00 lacs (Rs.1000.00 lacs).
(e) Working Capital Loans/Credit facilities (fund and non-fund based) from State Bank of India are secured byway of hypothecation of stock of Inventories, cash and other current assets, book debts, outstanding moneys,receivables, claims, bills, invoices, documents, contracts, etc., both present and future, and are further securedby way of hypothecation of all moveable fixed assets, both present and future, and first charge created byway of joint mortgage by deposit of title deeds of all immovable properties of the Company.
BIRLA ERICSSON
21
As at As at31.03.2008 31.03.2007Rs.in lacs Rs.in lacs
SCHEDULE 4 : UNSECURED LOANSInterest Free Sales Tax Loan*
From MPSIDC Ltd. 2328.60 2328.60
Total 2328.60 2328.60(*Refer Note No. (b) of Schedule 3)
SCHEDULE 5 : FIXED ASSETSNature of Fixed Assets Gross Block (at cost) Depreciation/Amortisation Net Block
As at Additions Deductions As at Upto Provided Deductions Upto As at As at01.04.07 during during the 31.03.08 31.03.07 during during the 31.03.08 31.03.08 31.03.07
the year year the year year
LEASEHOLD LAND 24.35 – – 24.35 5.45 0.43 – 5.88 18.47 18.90
BUILDINGS 1016.62 9.63 – 1026.25 327.58 28.47 – 356.05 670.20 689.04
PLANT & MACHINERY 8909.32 332.49 192.47 9049.34 6864.25 322.04 165.39 7020.90 2028.44 2045.07
FURNITURE 57.60 6.57 0.08 64.09 36.46 3.63 0.05 40.04 24.05 21.14
VEHICLES 24.65 19.26 9.68 34.23 16.21 2.81 6.77 12.25 21.98 8.44
INTANGIBLES – 17.00 – 17.00 – 2.27 – 2.27 14.73 –(Software)
TOTAL 10032.54 384.95 202.23 10215.26 7249.95 359.65 172.21 7437.39 2777.87 2782.59
CAPITAL WORK-IN-PROGRESS [includes intangible assets of Rs.Nil (Rs.8.13 lacs)] 19.40 12.63
GRAND TOTAL 2797.27 2795.22
PREVIOUS YEAR 9928.85 166.29 62.60 10032.54 6922.11 373.77 45.93 7249.95 2795.22 –
As at As at31.03.2008 31.03.2007Rs.in lacs Rs.in lacs
SCHEDULE 6 : INVESTMENTSA. Long Term –Trade :
Quoted, fully paid-up11,07,407 Equity Shares (11,07,407) of Rs.10/- each of Universal Cables Ltd. 1404.04 1404.04
280 Equity Shares (280) of Rs.10/- each of Birla Corporation Ltd. 0.13 0.13
100 Equity Shares (100) of Rs.10/- each of Vindhya Telelinks Ltd. 0.06 0.06
Unquoted, fully paid-up9,800 Equity Shares (9,800) of Rs.10/- each of Universal Telelinks Pvt. Ltd. 0.98 0.98
9,800 Equity Shares (9,800) of Rs.10/- each of Universal Electricals Pvt. Ltd. 0.98 0.98
B. Current -Other than Trade :Unquoted, fully paid-up
– Units (5,00,000) of Rs.10/- each of Grindlays Fixed Maturity Plus Plan-I-A-Growth – 50.00
Total 1406.19 1456.19
(a) Aggregate of Unquoted Investments – At Book Value 1.96 51.96
(b) Aggregate of Quoted Investments – At Book Value 1404.23 1404.23
– At Market Value 798.00 977.92
BIRLA ERICSSON
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As at As at31.03.2008 31.03.2007
Rs.in lacs Rs.in lacs Rs.in lacs
SCHEDULE 7 : CURRENT ASSETS, LOANS & ADVANCESA. Current Assets :
1. InventoriesStores, Spares & Packing Materials 330.95 233.60
Raw Materials (including materials in transit) 1830.05 1437.25
Traded Goods 2.02 1.37
Finished Goods 34.40 –Material under Process 1287.38 420.84
Scrap Materials 107.66 4.31
3592.46 2097.37
2. Sundry Debtors(Unsecured, Considered Good)
Over six months 164.98 80.56
Other Debts 2725.51 907.28
2890.49 987.84
3. Cash & Bank BalanceCash on hand 2.35 3.52
Cheques/drafts on hand 260.37 27.13
Balances with Scheduled Banks on-
– Cash Credit Accounts – 6.57
– Current/Collection Accounts 1.66 19.91
– Term/Fixed Deposit Accounts 1195.12 3900.79
[including Rs.1195.12 lacs (Rs.2695.00 lacs)
in margin money/lien accounts]
– Unclaimed Dividend Accounts 15.38 22.46[including fixed deposits of Rs.15.10 lacs (Rs.22.10 Lacs)]
1474.88 3980.38
4. Other Current Assets(Unsecured, Considered Good)
Interest Receivable on Deposits & Others 144.27 100.89
Total – A 8102.10 7166.48
B. Loans & Advances :(Unsecured, Considered Good)
Loans/Deposits with Bodies Corporate – 100.00
Loans to Employees 7.00 5.89
Advances recoverable in cash or in kind or for value to be received
– Balances with Central Excise Authorities 352.70 233.38
– Advance for Gratuity 2.83 –
– Others 343.08 119.58
Deposits with Government and other Authorities 46.36 58.37
Advance Income Tax (Net of Provisions) 4.22 9.86
Total – B 756.19 527.08
Total – A & B 8858.29 7693.56
BIRLA ERICSSON
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SCHEDULE 8 : CURRENT LIABILITIES AND PROVISIONSA. Current Liabilities :
Acceptances 304.22 171.73
Sundry Creditors :
MSMED Act # 2.19 –
Small Scale Industrial Undertakings – 148.88
Others 1215.61 940.62
Other Liabilities 99.20 15.25
Unclaimed Dividends* 15.38 22.46
(* Investor Education and Protection Fund shall be credited by the unclaimed
amounts when due pursuant to Sections 205A and 205C of the
Companies Act, 1956.)
Total – A 1636.60 1298.94
B. Provisions :Leave Encashment 64.67 59.31
Company’s Pension Scheme 54.93 92.58
Total – B 119.60 151.89
Total – A & B 1756.20 1450.83
# Pursuant to amendments to Schedule VI to the Companies Act.1956 vide Notification No. GSR 713(E) Dt.Nov 16,2007 the amountdue to Micro, Small and Medium Enterprises only have been disclosed as against the earlier disclosure requirement of amount due toSmall Scale Industrial undertaking.
As at As at31.03.2008 31.03.2007Rs.in lacs Rs.in lacs
2007-08 2006-07Rs.in lacs Rs.in lacs Rs.in lacs
SCHEDULE 9 : SALESFinished Goods [including Exports Rs.1033.30 lacs(Rs.863.02 lacs)] 14188.38 5624.29
Less : Claims, Deductions, etc. 56.47 3.55
14131.91 5620.74
Miscellaneous & Others 229.17 278.45
Total 14361.08 5899.19
SCHEDULE 10 : OTHER INCOMEDividend Income– On Long term Investments 26.59 0.51Profit on Redemption of Current Investment 5.46 80.60Interest on Deposits & Others (Gross) 305.59 304.63[Tax deducted at source Rs.3.88 lacs (Rs.11.73 lacs)]
Rent Received 4.80 4.80Processing Charges Received 12.76 4.29Profit on Disposal of Fixed Assets 0.44 7.63Unspent liabilities/Sundry balances (Net) written back 17.10 99.71Exchange Rate Fluctuation (Net) 41.18 –Miscellaneous Income 36.88 15.04
Total 450.80 517.21
BIRLA ERICSSON
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SCHEDULE 11 : MANUFACTURING AND OTHER EXPENSES1. Raw Material Consumption and other charges :
Raw Materials consumed :
Opening Stock 1437.25 681.63
Purchases 12214.96 4733.50
13652.21 5415.13
Less : Sales/Claims 17.80 41.53
13634.41 5373.60
Less : Closing Stock 1830.05 1437.25
11804.36 3936.35
Cost of Traded Goods Sold :
Opening Stock 1.37 68.17
Purchases 0.65 0.95
2.02 69.12
Less : Closing Stock 2.02 1.37
– 67.75
Stores Consumption 74.38 49.02Packing Expenses 238.38 119.80Processing and Testing Charges 40.09 48.02Power & Fuel 281.52 172.08
Repairs & Maintenance of :
Machinery 183.67 92.54
Buildings 10.93 10.20
Others 0.31 0.31
194.91 103.05
12633.64 4496.07
Decrease/(Increase) in Stocks :
Closing Stocks
Finished 34.40 –
Process 1287.38 420.84
Scrap 107.66 4.31
1429.44 425.15
Less : Opening Stocks
Process 420.84 616.16
Scrap 4.31 22.30
425.15 638.46
(1004.29) 213.31
11629.35 4709.38
2. Personnel Cost :Salaries, Wages, Bonus, etc. 427.25 315.17
Contribution to Provident and Other Funds 39.56 48.54
Welfare Expenses 42.30 40.35
509.11 404.06
2007-08 2006-07Rs.in lacs Rs.in lacs Rs.in lacs
BIRLA ERICSSON
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SCHEDULE 11 : MANUFACTURING AND OTHER EXPENSES (Contd.)3. Operating and General Expenses :
Rent 3.22 2.99Rates & Taxes
Excise Duty on stocks & samples 23.29 (2.50)Others 13.00 11.67
36.29 9.17
Insurance 14.73 17.90Commission on Sales 10.07 4.76Freight and Transportation (Net) 40.79 32.45Travelling and Conveyance 81.89 64.82Donations and Contributions 1.40 0.22Exchange Rate Fluctuation – 5.88Loss on Disposal of Fixed Assets 18.50 2.67Miscellaneous Expenses 107.33 97.42
314.22 238.284. Managerial Remuneration :
To Managing DirectorSalary 8.54 11.68Sitting Fees 0.24 0.26Contribution to Provident Fund 1.02 1.40Perquisites 1.91 3.06
11.71 16.40Directors’ Sitting Fees 1.75 1.40
13.46 17.80(a) Consequent to inadequacy of profit for the year as computed in accordance with
Section 349 and 350 of the Companies Act, 1956, no commission is payable tothe Managing Director.
(b) The Managing Director’s remuneration is exclusive of provisions for gratuity liability,pension and leave encashment benefits, which are based on actuarial valuationsdone on an overall company basis.
5. Auditors’ Remuneration :(i) Statutory Auditors -
Audit Fees 4.00 3.00Tax Audit Fees 0.50 0.30For Certification, etc. 1.50 1.35Reimbursement of Expenses 0.41 0.37
6.41 5.02(ii) Cost Auditors -
Audit Fees 0.30 0.25Supervision Fees – 0.10Reimbursement of Expenses – 0.21
0.30 0.56 6.71 5.58
Total - 1 to 5 12472.85 5375.10
SCHEDULE 12 : INTEREST & FINANCIAL CHARGESInterest
On Fixed Loans 28.59 30.23On Others 173.69 7.31
202.28 37.54Financial Charges 61.63 32.33
Total 263.91 69.87
2007-08 2006-07Rs.in lacs Rs.in lacs Rs.in lacs
BIRLA ERICSSON
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SCHEDULE 13 : ACCOUNTING POLICIES & NOTES ON ACCOUNTS
A. SIGNIFICANT ACCOUNTING POLICIES :
(1) Basis of Accounting :The financial statements of the Company are prepared and presented under the historical cost convention and comply inall material respects with the applicable accounting standards as notified by the Central Government vide the Companies(Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956. All income & expenditure areaccounted for on accrual basis except certain Insurance Claims, which are recognised on acceptance basis, as and whenthe amount whereof can be ascertained with reasonable certainty.
(2) Use of Estimates :The preparation and presentation of financial statements requires estimates and assumptions to be made that affect thereported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues andexpenses during the reporting period. Difference between the actual result and estimates are recognised in the period inwhich the results are known/materialised.
(3) Revenue Recognition :Revenue from the sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyerwhich coincides with despatch of goods to customers. Revenue to the extent of Price Variation disputes, if any, which aresubjected to resolution through arbitration is recognized based on interim relief granted by a Court and/or after receipt ofrevenue in execution of the final award in favour of the Company, as the case may be.Interest income is recognised on time proportion basis. Dividend income is recognised when the right to receive paymentis established.Duty drawback is accounted in the year of export.
(4) Fixed Assets :Fixed Assets are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and anydirectly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions,improvements, renewals and insurance spares (determined on the basis of irregular use) are capitalised and expenditurefor repairs and maintenance are charged to the Profit and Loss Account. When assets are sold or discarded their cost andaccumulated depreciation are removed from the accounts and any gain or loss resulting from their disposal is included inthe Profit and Loss Account.
(5) Depreciation :Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner prescribed in ScheduleXIV to the Companies Act, 1956 on pro-rata basis from the month the assets are put to use except in case of new projectwhere it is provided for the period of use. Depreciation on sale of assets is provided upto the month prior to the month inwhich the assets are sold or disposed off. Depreciation on incremental cost arising on account of translation of foreigncurrency liabilities for acquisition of fixed assets and capitalised insurance spares is amortised over the residual life of therespective assets. Premium on leasehold land is amortised over the period of the lease.An intangible asset is measured at cost and amortised so as to reflect the pattern in which the assets economic benefitsare consumed. The useful life has been estimated as five years.
(6) Impairment :The carrying amount of the fixed assets is reviewed at each Balance Sheet date for impairment whenever events or changesin circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognisedin the financial statement when the carrying amount of fixed assets exceeds the assessed estimated recoverable amount.The recoverable amount is the greater of assets’ net selling price or its value in use. An impairment loss is reversed if therehas been change in recoverable amount and such loss either no longer exists or has decreased. Impairment loss/reversalthereof is adjusted to the carrying value of the respective assets.
(7) Investments :(a) Long Term Investments are stated at cost, less any provision for permanent diminution in value.(b) Current Investments are stated at lower of cost and fair value.
(8) Inventories :Inventories except scrap materials are valued at lower of cost or net realisable value. Scrap materials are valued at netrealisable value. Cost is computed on the weighted average basis and is net of cenvat/vat. Cost of finished goods andmaterial under process is determined by taking direct materials, labour cost and related manufacturing overheads includingdepreciation based on normal operating capacity. Finished goods and scrap materials also include excise duty. Provisionis made for cost of obsolescence and other anticipated losses, whenever considered necessary.
(9) Foreign Currency Transactions :(a) Transactions in foreign currencies are accounted for at the exchange rate prevailing on the date of the transaction.
Foreign currency monetary assets and liabilities at the year end are translated using closing exchange rates exceptthose covered by forward exchange contracts which are translated at contracted rates, where the difference betweenthe contracted rate and spot rate on the date of the transaction is dealt with in the Profit and Loss Account over thelife of the contract.
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(b) The exchange difference arising on settlement of monetary items or on reporting, these items at rates different fromrates at which these were initially recorded/reported by previous financial statement are recognised as income/expensesin the period in which they arise.
(c) In case of forward exchange contracts, the premium or discount arising at the inception of such contracts is amortisedas income or expense over the life of contract as well as exchange difference on such contract, i.e. difference betweenthe exchange rate at the reporting/settlement date and the exchange rate on the date of inception/the last reportingdate, is accounted for as income/expense for the period.
(10) Retirement Benefits :The Company makes regular contributions to recognised Provident Fund/Family Pension Fund and also to duly constitutedand approved Superannuation Fund, which are charged to revenue. Gratuity, Pension and Leave Encashment benefitspayable as per Company’s schemes are charged to Profit and Loss Account on the basis of actuarial valuation made atthe end of each financial year by independent actuaries. Ex-gratia or other amount disbursed on account of selectiveemployees separation scheme are charged to Profit and Loss Account. Actuarial gains and losses comprise experienceadjustments and effects of changes in actuarial assumptions are recognized in the Profit and Loss Account in the year inwhich they arise.
(11) Interest on Borrowings :Borrowings cost is charged to the Profit and Loss Account for the year in which it is incurred except for capital assetswhich is capitalised till the date of commercial use of the asset.
(12) Government Grants :Government Grant of the nature of project subsidy is credited to Capital Reserve. Other Government Grants are creditedto the Profit and Loss Account as deduction from the related expenses.
(13) Taxes on Income :Tax expense for the relevant period comprises of current, deferred and fringe benefit tax. Current income tax and fringebenefit tax are measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act,1961. Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincingevidence that the Company will pay normal income tax during the specified period. In the year in which the MAT creditbecomes eligible to be recognized as an asset in accordance with the recommendations contained in Guidance Note issuedby the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Profit and LossAccount and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writesdown the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect thatCompany will pay normal income tax during the specified period.Deferred tax is recognised, subject to consideration of prudence, on all timing differences between taxable income andaccounting income that originate in one period and are capable of being reversed in one or more subsequent periods.Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation are recognised only whenthere is virtual certainty of realisation of such assets.
(14) Contingent Liabilities & Provisions :A disclosure for a contingent liability is made after careful evaluation of the facts and legal aspects of the matter involved,when there is a possible or present obligation that may, but probably will not require an outflow of resources. When thereis possible or present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosureis made. Provisions are recognised when the Company has a legal/constructive obligation and on management discretionas a result of a past event, for which it is probable that an outflow of resources will be required to settle the obligation andin respect of which a reliable estimate can be made.
(15) Cash and Cash equivalents :Cash and Cash equivalent in the cash flow statement comprises cash at bank and in hand and short-term investmentswith an original maturity of three months or less.
B. NOTES ON ACCOUNTS :
(1) Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advance) Rs.748.81lacs (Rs.24.46 lacs).
(2) Contingent liabilities not provided for :(a) Claims against the Company not acknowledged as debt Rs.0.09 lac (Rs.4.17 lacs).(b) Appeal preferred by the Income Tax Department against appellate decisions in favour of the Company, wherein should
the ultimate decision be unfavourable to the Company, the liability/demand is estimated to be Rs.11.67 lacs (Rs.16.81lacs).
(c) Unredeemed Bank Guarantees Rs.1694.19 lacs (Rs.1603.64 lacs).
(d) Unredeemed Bonds given to Customs/Central Excise Authorities Rs.864.55 lacs (Rs.520.02 lacs). There is, however,no default to date.
(3) The Company has filed a Law Suit against a supplier and its agent relating to the validity and existence of an allegedAgreement before a competent Court which is already seized of the said Suit. The supplier in order to over reach the saidLaw Suit has initiated an arbitration claiming recovery of value of the unsupplied goods for the period from October, 2002to September, 2006 aggregating to Rs.4534.04 lacs (value 31.03.2008) [Rs.4190.36 lacs (value 31.03.2007)]. The said
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arbitration proceedings have been stayed by the Order of the competent Court. The Company has been legally advisedthat the said claim against the Company is unsustainable and there is no likelihood of any liability arising against theCompany.
(4) During the year, the company has implemented SAP System under ERP platform. Accordingly, the material consumptionand inventory amounts calculated by ERP systems were analysed and the impact of change on comparison with physicalverification of stocks, the consumption prepared under the legacy system have been appropriately dealt with in the accounts.The inventories of raw materials and stores and spares are now valued based on moving weighted average instead ofaverage weighted price followed prior to implementation of ERP systems. Had the earlier mode of computation of valuinginventories of raw material and spares & stores been followed, inventories would have been lower by Rs.5.69 lacs.
(5) Disclosure of Derivative Instruments and Unhedged Foreign Currency Exposure :(a) No Hedging Contracts are outstanding at the Balance Sheet Date.(b) Particulars of Unhedged Foreign Currency Exposure as at the Balance Sheet Date
Particulars Currency March 31, 2008 March 31, 2007
Acceptances USD 756958 384282
Sundry Creditors (For Raw Materials) USD – 1434307GBP – 625
Advance Recoverable USD 90499 45148
Sundry Debtors USD 35931 –
(6) In the opinion of the Management, the decline in the market value of quoted investments at the year end is temporary andhence does not call for any provision there against.
(7) (a) The Company has initiated the process of obtaining confirmation from suppliers who have registered under the Micro,Small & Medium Enterprises Development Act, 2006 (MSMED Act, 2006). Based on the information available withthe Company, the balance due to Micro & Small Enterprises is Rs.2.19 lacs (Rs.148.88 lacs). The provision for interestamounting to Rs.0.08 lac (Rs.Nil) has been made on delayed payments as per provisions of Micro, Small & MediumEnterprises Development Act, 2006.
(b) The Small Scale Industrial Undertakings (as defined and certified by the management) to whom the Company owessums and which are outstanding for more than 30 days are Jeet Engineering Works, Ajex and Turner India Ltd.,Nagman Instruments and Electronics (P) Ltd.
(8) Employee Benefits(a) The Company has, with effect from 1st April, 2007, adopted Accounting Standards AS-15, Employees Benefits (Revised
2005). Consequently, the additional liability with respect to certain employee benefits based on actuarial valuationsas at 1st April,2007, amounting to Rs.19.91 lacs has been adjusted against General Reserve in accordance withtransitional provision of the Standard.
(b) Company’s contribution to defined contribution schemes such as Government administered Provident/Family PensionFund and approved Superannuation Fund are charged to the Profit and Loss Account as incurred as the Companyhas no further obligations beyond its contributions. The Company’s defined benefit plans include the approved fundedGratuity scheme which is administered through Group Gratuity scheme with Life Insurance Corporation of India andnon-funded schemes viz. Leave Encashment and Pension (applicable only to certain categories of employees). Suchdefined benefits are provided for in the Profit and Loss Account based on valuations, as at the Balance Sheet date,made by independent actuaries.
(c) Contributions to Provident/Family Pension and Superannuation Funds is recognised as an expense and included inPersonnel Cost (refer Schedule 11) in the Profit and Loss Account. Disclosures for defined benefit plans based onactuarial reports as on 31st March, 2008 are summarised below.
Changes in the present value of obligations : (Rs. in lacs)
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Present value of Obligation in the beginning of the year 61.06 103.82 95.71Interest Cost 3.62 8.21 7.32Current Service Cost 16.30 7.63 –Benefit paid (2.76) (2.25) (2.79)Actuarial (Gain)/Loss on obligations (12.01) (13.48) (45.31)Increase/(Decrease) in short term leave liability (1.54) – –
Present value of obligation at the end of the year 64.67 103.93 54.93
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Changes in the present value of plan assets are as follows :
(Rs. in lacs)
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Fair value of Plan Assets at the beginning of the year – 89.62 –
Expected Return on Plan Assets – 7.10 –
Contribution – 13.70 –
Benefits paid (2.76) (2.25) (2.79)
Actuarial Gain/(Loss) on Plan Assets – (0.37) –
Amount payable on full & final settlement – (1.04) –
Fair Value of Plan Assets at the end of the year – 106.76 –
Fair Value of Plan Assets :
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Fair value of Plan Assets at the beginning of the year – 89.62 –
Actuarial Return on Plan Assets – 6.73 –
Contribution – 13.70 –
Benefits paid (2.76) (2.25) (2.79)
Amount payable on full & final settlement – (1.04) –
Fair value of Plan Assets at the end of year – 106.76 –
Present value of Obligation at the end of the year 64.67 103.93 (54.93)
Funded Status (64.67) 2.83 (54.93)
Actuarial Gain/Loss recognized :
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Actuarial Gain/Loss on obligations 12.01 13.48 45.31
Actuarial Gain/Loss on plan assets – (0.37) –
Total (Gain)/Loss for the year (12.01) (13.11) (45.31)
Actuarial (Gain)/Loss recognized in the year (12.01) (13.11) (45.31)
Unrecognized Actuarial (Gain)/Loss at theend of the year – – –
Amount to be recognized in the Balance Sheet
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Present value of obligation at the end of the year 64.67 103.93 54.93
Fair value of the plan assets at the end of the year – 106.76 –
Funded Status 64.67 (2.83) 54.93
Unrecognized Actuarial (Gain)/Loss at theend of the year – – –
Net Asset/(Liability) recognized in the Balance Sheet (64.67) 2.83 (54.93)
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Expenses recognized in the Profit and Loss Account
(Rs. in lacs)
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Current service cost 16.30 7.63 –Interest cost 3.63 8.21 7.32Expected return on plan assets – (6.73) –Actuarial (Gain)/Loss recognized in the year (12.01) (13.48) (45.31)Impact of changes in Short term leave liability (1.54) – –Impact of variation in actual and expected return on plan assets – (0.81) –Amount payable on full & final settlement – 1.04 –Insurance cost paid by the company – 0.50 –
Expenses recognized in the Profit and Loss Account 6.38 (3.64) (37.99)
Actual return on plan assets – (6.73) –
Key Assumptions for Actuarial valuation
Leave encashment Gratuity Pension2007-08 2007-08 2007-08
Mortality Table LIC 1994-96 LIC 1994-96 LIC 1994-96Ultimate Ultimate Ultimate
Attrition Rate 5.00 % p.a. 5.00 % p.a. N.A.Imputed rate of Interest 8.00 % p.a. 8.00 % p.a. 8.00% p.a.Salary rise 7.50 % p.a. 7.50 % p.a. N.A.Return on plan assets N.A. 9.15 % p.a. N.A.Remaining working life 19.80 Years 18.53 Years N.A.
This being the first year of implementation of AS-15(Revised 2005), previous year figures have not been disclosed. (9) There is no reportable segment as per the Provisions of Accounting Standard (AS-17) Segment Reporting, as the entire
operations of the Company relate to one business segment of “Wire & Cables”.(10) Disclosures in respect of related parties as defined in Accounting Standard (AS-18), with whom transactions were carried
out in the ordinary course of business during the year are given below :
Associate Bodies Corporate (Associates) : Universal Cables Ltd. (UCL)Vindhya Telelinks Ltd. (VTL)Ericsson Network Technologies AB, Sweden (ENT)(formerly Ericsson Cables AB)
Key Management Personnel : Mr.D.R.Bansal, Managing Director(Rs. in lacs)
2007-08 2006-07
(a) Nature of Transaction with Associates :Transaction during the year� Purchase of Fixed Asset 8.17 27.57
[ENT Rs.8.17 lacs]� Purchase of Raw Materials/Consumables & Traded Goods 3179.28 960.79
[UCL Rs.1409.70 lacs,VTL Rs.1700.68 lacs, ENT Rs.68.90 lacs]� Sale of Fixed Assets 12.30 24.36
[VTL Rs.12.30 lacs]� Sale of Finished Goods – 3.09� Sale of Raw Materials/Consumables 96.76 44.82
[VTL Rs.89.64 lacs, UCL Rs.7.12 lacs]� Processing & Other Charges 3.59 17.38
[VTL Rs.3.59 lacs]� Processing & Other Income 12.76 4.29
[VTL Rs.12.76 lacs]� Rent Paid 1.20 1.60
[UCL Rs.0.20 lac, VTL Rs.1.00 lac]� Rent Received 4.80 4.80
[UCL Rs.4.80 lacs]
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(Rs. in lacs)
2007-08 2006-07
� Interest paid on unsecured loans – 0.65
� Interest received on unsecured loans 22.38 55.01[UCL Rs.11.48 lacs, VTL Rs.10.90 lacs]
� Unsecured Loans Taken – 225.00
� Unsecured Loans Given 2775.00 1050.00[UCL Rs.700.00 lacs, VTL Rs.2075.00 lacs]
Balance Outstanding at the year end
� Outstanding Payable 316.12 –
� Outstanding Receivable 21.18 –
� Equity Investment 1404.10 1404.10
(b) Remuneration paid to the Key Management Personnel is disclosed in the Schedule 11 annexed to the Profit andLoss Account. Balance outstanding (payable) at the year end Rs.Nil (Rs.Nil).
Notes : (i) Significant Related Party Transactions with associates during the year 2007-08 have been disclosed in brackets underthe appropriate Nature of Transaction head.
(ii) Under the renewed Technical Collaboration Agreement with Ericsson Network Technologies AB, Sweden, no royaltyor lumpsum fees is payable.
(iii) No amount has been provided as doubtful debt or advance/written off or written back in the year in respect of debtsdue from/to above related parties.
(iv) Transactions relating to reimbursement of expenses to/from related parties have not been considered in the abovedisclosures.
(11) (a) Pursuant to Accounting Standard (AS-22) “Accounting for Taxes on Income”, the Component and classification ofdeferred tax liability and deferred tax assets on account of timing differences are given below :
As at As at31.03.2008 31.03.2007Rs. in lacs Rs. in lacs
(i) Deferred Tax Liability– Depreciation 362.02 398.33
Total (i) 362.02 398.33
(ii) Deferred Tax Assets– Unabsorbed Depreciation 349.31 386.84– Expenses allowable for tax purpose when paid 12.71 11.49
Total (ii) 362.02 398.33
Net Deferred Tax Liability (i-ii) Nil Nil
(b) The Deferred Tax Assets in respect of carry forward unabsorbed depreciation amounting to Rs.349.31 lacs (Rs.386.84lacs) has been recognised considering the possible reversal of deferred tax liabilities in future years.
(12) Additional information as required under Part-II of Schedule VI to the Companies Act, 1956 to the extent relevant.(a) (i) Capacity and Production :
Product Unit Licensed/ Installed Capacity ActualRegistered (as certified by ProductionCapacity* the management)
31st March 31st March 31st March 2008 2007 2008 2007 2007-08 2006-07
(a) Optical Fibre Cables KMs 36414 36414 39984 36414 23672 6726(Metal Free/Armoured/Aerial)
(b) Jelly FilledTelephone Cables CKMs 4325000 4325000 4027000 4325000 325805 250597
(c) Insulated Cables,Cords & Flexes Mtrs 50000000 50000000 50000000 50000000 1580028 13388
* Capacity for which Memorandum filed pursuant to Scheme of delicensing vide Notification No.477(E) dated 25th July, 1991, as
amended.
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(ii) Stock of Finished Goods :
Product 2007-08 2006-07Opening Stock Closing Stock Opening Stock Closing Stock
Unit Qty. Value Qty. Value Qty. Value Qty. ValueRs.in Rs.in Rs.in Rs.inlacs lacs lacs lacs
(a) Optical Fibre Cables KMs – – 51 17.25 – – – –
(b) Insulated Cables,Cords & Flexes Mtrs – – 111048 17.15 – – – –
(iii) Gross Sales (net of claims, deductions, etc.) :
Product Unit 2007-08 2006-07
Qty. Value Qty. ValueRs. in lacs Rs. in lacs
(a) Optical Fibre Cables KMs 23620 9761.98 6726 2802.98
(b) Jelly Filled Telephone Cables CKMs 325697 4040.35 250597 2810.74
(c) Insulated Cables, Cords & Flexes Mtrs 1468980 329.58 13388 7.02
(d) Other Sales 229.17 – 278.45
Total 14361.08 5899.19
Notes : (i) Other sales include sale of Traded Goods Rs. Nil (Rs.77.67 lacs). In view of various items of traded goods,itemwise quantities of purchases, sales and stocks have not been given.
(ii) Differences in quantitative tally, if any, represent samples and claims.
(iii) In accordance with Accounting Standard (AS) 9 Revenue Recognition, excise duty on sales amounting toRs.1609.73 lacs (Rs.685.56 lacs) has been reduced from Gross sales in the Profit and Loss Account and exciseduty on increase in stocks amounting to Rs.16.42 lacs has been considered as expenses (Rs.2.50 lacs as incomeon decrease in stocks) in Schedule 11 of the financial statements.
(b) Raw Materials Consumed :
Unit Quantity Value (Rs. in lacs)
2007-08 2006-07 2007-08 2006-07
(i) Optical Fibre KMs 713866 189881 3316.99 1005.43(Singlemode/Multimode/NZDS)
(ii) Copper MTs 809 328 2667.51 1051.98
(iii) Polyethylene MTs 2524 1023 1795.83 650.25
(iv) Others 4024.03 1228.69
Total 11804.36 3936.35
(c) Value of imported and indigenous Raw Materials and Spare Parts consumed and percentage thereof (as certified bythe Management) :
2007-08 2006-07
Value % to Value % toRs. in lacs Total Rs. in lacs Total
(i) Raw Materials :Imported 6331.43 53.64 2397.61 60.91Indigenous 5472.93 46.36 1538.74 39.09
Total 11804.36 100.00 3936.35 100.00(ii) Spare Parts*
Imported 42.83 23.75 53.28 50.89Indigenous 137.49 76.25 51.42 49.11
Total 180.32 100.00 104.70 100.00
*Included under Stores Consumption and Repairs & Maintenance of Machinery.
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Signatures to Schedules 1 to 13
As per our attached report of even date
For V. Sankar Aiyar & Co.Chartered Accountants
R. RaghuramanPartnerMembership No.81350
New Delhi, May 7, 2008
R.S.Lodha ChairmanR.C.TapuriahH.V.LodhaA.P.Dadoo DirectorsB.R.Nahar
Dinesh Chanda Alternate Director(Alternat to Mr.Magnus Kreuger)D.R.Bansal Managing DirectorDinesh Kumar Sonthalia General Manager
(Commerical) & SecretaryNew Delhi, May 7, 2008
2007-08 2006-07Rs. in lacs Rs. in lacs
(d) Value of imports on CIF basis (as certified by the Management) :Raw Materials 7691.84 3146.38Spare Parts (including components) 49.75 23.00Capital Goods 170.91 90.31
(e) Expenditure in Foreign Currency (on payment basis) :Interest 28.59 38.73Travelling 6.30 4.16Others 14.01 4.52
(f) Earnings in Foreign Currency :Export of Goods on F.O.B. Basis 1018.19 862.72(based on exchange rate prevailing on bill of lading date)
(13) Figures of previous year have been shown in brackets and regrouped/reclassified wherever necessary.
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CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2008
2007-08 2006-07
Rs. in lacs Rs. in lacs Rs. in lacs Rs. in lacs
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit/(Loss) before tax 105.74 (87.90)
Adjustments for :
Depreciation/Amortisation 359.65 373.77
(Profit)/Loss on disposal of fixed assets (Net) 18.06 (4.96)
(Profit) on sale of current investments (5.46) (80.60)
Interest income (305.59) (304.63)
Dividend income (26.59) (0.51)
Interest expense 202.28 242.35 37.54 20.61
Operating Profit /(Loss) before working capital changes 348.09 (67.29)
Movement in working capital :
(increase) in sundry debtors (2002.65) (180.98)
(increase) in inventories (1495.09) (459.34)
(Increase)/Decrease in loans and advances (234.75) 151.22
Increase in current liabilities and provisions 292.54 (3439.95) 749.99 260.89
Cash generated from/(used in) operations : (3091.86) 193.60
Direct taxes (paid) (6.69) (17.90)
Net cash from/(used in) operating activities (3098.55) 175.70
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets (391.72) (178.92)
Proceeds from sale of fixed assets 11.96 21.63
Purchase of investments – (560.00)
Sale of investments 55.46 1065.60
Deposits with bodies corporate & others 100.00 250.00
Interest received 262.21 229.09
Dividend received 26.59 0.51
Fixed deposits with banks placed (100.00) (7024.78)
Fixed deposits with banks encashed 2805.67 5595.21
Net cash from/(used in) investing activities 2770.17 (601.66)
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CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2008 (Contd.)
2007-08 2006-07
Rs.in lacs Rs.in lacs Rs.in lacs Rs.in lacs
As per our attached report of even date
For V. Sankar Aiyar & Co.Chartered Accountants
R. RaghuramanPartnerMembership No.81350
New Delhi, May 7, 2008
R.S.Lodha ChairmanR.C.TapuriahH.V.LodhaA.P.Dadoo DirectorsB.R.Nahar
Dinesh Chanda Alternate Director(Alternat to Mr.Magnus Kreuger)D.R.Bansal Managing DirectorDinesh Kumar Sonthalia General Manager
(Commerical) & SecretaryNew Delhi, May 7, 2008
C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds of short term borrowings 1107.63 156.38
(Repayment) of long term borrowings (369.72) (368.35)
Interest paid (202.28) (45.99)
Dividend paid (7.08) (6.77)
Net cash from/ (used in) financing activities 528.55 (264.73)
Net (decrease) in cash and cash equivalents 200.17 (690.69)
Cash and cash equivalents at the beginning of the year 79.59 770.28
Cash and cash equivalents at the end of the year 279.76 79.59
Components of cash and cash equivalents as at 31st March
Cash and cheques on hand 262.72 30.65
With scheduled banks- on current accounts/dividend accounts
– on deposits accounts * 17.04 42.37
– cash credit account – 6.57
279.76 79.59
(a) * Represents short term investments in fixed deposits with an original maturity of three months or less.
(b) The Cash Flow Statement has been prepared under the ‘Indirect method’ as set out in Accounting Standard-3 onCash Flow Statements issued by the Institute of Chartered Accountants of India.
(c) Negative figures have been shown in brackets.
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BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILEI Registration Details
Registration No. State Code
Balance Sheet Date
Date Month Year
II Capital raised during the year (Amount in Rs.Thousands)Public Issue Rights Issue Bonus Issue Private Placement
III Position of Mobilisation and Deployment of Funds (Amounts in Rs.Thousands)Total Liabilities Total Assets
Sources of Funds Paid-up Capital Reserves & Surplus
Secured Loans Unsecured Loans
Net Deferred Tax Liability
Application of Funds Net Fixed Assets Investments
Net Current Assets Miscellaneous Expenditure
Accumulated Losses
IV Performance of Company (Amount in Rs.Thousands)Net Sales Other Income
Total Expenditure + - Profit/(Loss) before Tax
+ - Profit/(Loss) after Tax
Earnings per Share in Rupees Dividend rate %
V Generic Names of Principal Products/Services of Company (as per monetary terms)
Item Code No.(ITC Code)
and
Product Description
Item Code No.(ITC Code)
Product Description
Item Code No.(ITC Code)
Product Description
1 0 – 0 7 1 9 0
N I L N I L N I L N I L
1 3 0 6 1 7 5 1 3 0 6 1 7 5
3 0 0 0 0 0 3 9 2 2 4 0
2 0 5 4 5 5 2 3 2 8 6 0
N I L
2 7 9 7 2 7 1 4 0 6 1 9
7 1 0 2 0 9 N I L
N I L
1 2 7 5 1 3 5 4 5 0 8 0
1 3 0 9 6 4 1 1 0 5 7 4
0 . 3 1 N I L
9 3 4 1
C A B L E S
8 5 4 4 4 9 . 3 0
3 1 0 3
1 0
8 5 4 4 7 0 . 9 0
9 0 0 1 1 0 . 0 0
8 5 4 4 4 9 . 9 0
O P T I C A L F I B R E C A B L E S
I N S U L A T E D C A B L E S , C O R D S
2 0 0 8
√
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J E L L Y F I L L E D T E L E P H O N E
& F L E X S
Regstered Folio No.
DP ID*
Client ID*
No. of Shares held
DP ID*
Client ID*
Registered Folio
No.
AffixRevenueStamp of
ThirtyPaise
Member's/ Proxy's Signature(To be signed at the time of handing over this slip)
FORM OF PROXYBIRLA ERICSSON OPTICAL LIMITED
Regd. Office: Udyog Vihar, P.O.Chorhata, Rewa -486 006 (M.P.)
I/We_____________________________________________________________________________________________
of ______________________________________________________________________________ in the district of
_____________________________________ being a member/members of the above named Company, hereby appoint
Mr./Mrs.__________________________________________ of ____________________________________ in the
district of ____________________ or failing him/her Mr./Mrs. __________________________________________ of
________________________________________________ in the district of _________________________________as my/our proxy to vote for me/us and on my/our behalf at the Sixteenth Annual General Meeting of the Company to be held
on Thursday, the 14th August, 2008, and at any adjournment thereof.
Signed this ________ day of _______________,2008.
Signature ___________ ____________
* Applicable for members holding shares in dematerialised form.
1. This proxy form must be deposited at the Registered Office of the Company, not less than 48 hours before the timefor holding the Meeting. Unless otherwise instructed, the proxy will vote as he/she thinks fit.
2. Members who hold shares in the dematerialised form are requested to quote their DPID and Client ID for identification.Tear here
BIRLA ERICSSON OPTICAL LIMITEDRegd. Office: Udyog Vihar, P.O.Chorhata, Rewa -486 006 (M.P.)
ATTENDANCE SLIPTo be handed over at the entrance of the Meeting Hall
Full name of theMember attending : ____________________________________________________________________Full name of theFirst joint-holder : ____________________________________________________________________
(To be filled in if first named joint-holder does not attend the Meeting)
Name of Proxy : ____________________________________________________________________ (To be filled in if Proxy Form has been duly deposited with the Company)
I hereby record my presence at the SIXTEENTH ANNUAL GENERAL MEETING being held at the Registered Office of theCompany on Thursday, the 14th August, 2008.
* Applicable for members holding shares in dematerialised form.
Note: Persons attending the Annual General Meeting are requested to bring their copies of Annual Report.
