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Directors Report of Eastern Treads Ltd.

Mar 31, 2015

Dear Member,

The Directors have pleasure in presenting the Annual Report along with the audited statements of account of your Company for the financial year ended 31st March, 2015.

Financial Highlights

The performance of your Company has been satisfactory. The following table shows the operational results of the Company for the year 2014-15 as compared to that of the previous year.

RS. in lakhs

Year ended

31/03/2015 31/03/2014

Revenue from Operations 8,761.27 8,924.72

Other Income 107.42 32.62

Total Revenue 8,868.69 8,957.34

Exceptional Income 104.06 0.00

Expenditure 8,481.98 8,547.98

Profit before Interest, Depreciation 490.77 409.36 and Tax

Financial Cost 154.46 82.59

Depreciation and Amortization 94.57 79.09

Profit before Tax 241.74 247.68

Profit after Tax 157.59 164.09

Operations

Your Company reported satisfactory performance during the financial year. Even though revenue has been declined by 0.99% due to the general market trend, PBIDT has improved by 19.89%. However, the Profit Before Tax and Net Profit after Tax have dropped by 2.39% and 3.96% respectively.

During the year, the key raw materials prices have been dropped from its peak level. However the hike in other input costs has impacted on the margins. The availability of inventory at lower prices has negatively impacted on inventory valuation and profitability. Due to this sharp dip in prices the procurement of our products were deferred by our dealers and forced the Company to offer discounts and reduction in prices. We have managed this challenge by putting all efforts to save operations cost to the possible extent.

Prospects

Our brand reputation together with quality product portfolio facilitated us to get strong customer support and better acceptance from domestic and international markets. With comprehensive range products that can excel in all weather and road conditions, Eastern brand has been recognized as a premier tyre retreading solution provider and market leader in this industry.

With our brand image and healthy networks we are focusing to further deepen our customer base and to magnify our global presence through better market penetration by providing tyre retreading solutions and services to our end users through own and franchise tyre service centers. As tyre retreading has emerged as a part of overall tyre management program and fiscally viable option for fleet owners, with more than two decades of expertise in providing retreading solutions, with Eastern brand, we are confident inaccomplishing our forecasts.

Dividend

Subject to the approval of the members in the Annual General Meeting, a dividend payment of 5% per equity share (face value 10 per equity share) for the year 2014-15 will be paid on or after 28th July 2015, to those whose names appear in the Register of Members / beneficial owners at the close of business hours on Wednesday, 22nd July 2015.

Deposits

The Company has not accepted any fixed deposits during the year to which the provisions of Section 73 of the Companies Act, 2013 are applicable.

Board of Directors & Key Managerial Personnel

Mr. Naiju Joseph, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offer himself for reappointment. Mrs. Shereen Navaz was appointed as an Additional Director at the Board Meeting held on 31/03/2015 and holds office up to the date of the ensuing Annual General Meeting, and being eligible, offer herself for appointment. Company received a notice in writing from a member, pursuant to the provisions of Section 160 of the Companies Act, 2013 signifying his intention to propose the candidature of Mrs. Shereen Navaz for the office of Director. Mr. M.S. Ranganathan, Mr. M.S. Sebastian and Mr. K.S. Neelacanta Iyer were appointed as Director liable to retire by rotation and are eligible to continue as Independent Directors to hold office for a term up to 31st March, 2019. The Board recommends their appointments.

Mr. M.E. Mohamed, Managing Director, Mr. Rajesh S., Chief Financial Officer and CS. Baiju T., Company Secretary are the Whole-time Key Managerial Personnel of the Company as on 31st March 2015. As per the terms of appointment of Mr. M.E. Mohamed as Managing Director as approved by the shareholders at the AGM held on 28th September, 2011he can continue as Managing Director till 25th August, 2016. However as per the requirement of the Schedule V Part I (c) of the Companies Act, 2013 if a Managing or Whole-time Director has attained the age of 70 years then his appointment/continuation needs to be approved by a special resolution passed by the Company in General Meeting otherwise Central Government approval is required. Mr. M.E. Mohamed, has attained the age of seventy years in September, 2012. Being the Managing Director of the Company, he was appointed as Whole-time Key Managerial Personnel of the Company subject to the approval of shareholders. Your Board recommends his continuation as Managing Director till the original period of appointment on the existing terms and conditions including the remuneration and perquisites.

The Board has considered the declarations given by Independent Directors under Sub-Section 6 of Section 149 and the Company''s policy on directors'' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director. The Board has further evaluated its own performance and that of its committees and individual directors. None of the Directors is disqualified under Section 164 of the Companies Act, 2013.

Directors'' Responsibility Statement

Pursuant to the requirement of Sub-Section 5 of Section 134 of the Companies Act, 2013, your Directors confirm that:-

(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and that there are no material departures.

(b) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that year.

(c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities.

(d) prepared the Annual Accounts on a going concern basis.

(e) had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Auditors & Audit Observations

M/s. JVR & Associates, Chartered Accountants, Kochi-16, were reappointed as the Auditors of the Company at the previous Annual General Meeting to hold office for a period of three consecutive years. The proposal to ratify their appointment in compliance with the provisions of Section 139 of the Companies Act, 2013 has been placed before the Members. Necessary certificate has been obtained from the Auditors as per Section 139 (1) of the Companies Act, 2013. The Auditor''s observations are suitably explained in notes to the Accounts and are self-explanatory.

Cost Audit Report

The Company has submitted the Cost Audit Report for the year 2013-14 to the Central Government within the due date. Even though M/s. K.A. Felix & Co., Cost Accountants, Cochin were appointed to carry out the cost audit in respect of the Company for the financial year 2014-15, pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 the Cost Audit Report is not mandatorily applicable to our Company for the financial year 2014-15, hence no such audit has been carried out doing the year.

Secretarial Audit Report

A qualified Practicing Company Secretary carries out secretarial audit and provides a report on the compliance of the applicable Acts, Laws, Rules, Regulations, Guidelines, Listing Agreement, Standards, etc. as stipulated by the provisions of Section 204 of the Companies Act 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. The Secretarial Audit Report forms part of this report as Annexure - A. The findings of the audit have been satisfactory.

Public Shareholding

After giving enough opportunities and sending various reminder notices requesting the shareholders holding partly paid shares to pay the allotment money due, your Directors at their meeting held on 13th August 2014 has forfeited 3,63,900 equity shares in the capital of the company for non-payment of allotment money of RS. 5/- per share in compliance with the provisions of Listing Agreement, Articles of Association of the Company read with Regulation 29 of Schedule I of Table A of the Companies Act, 1956 and Regulation 28 of Table F of the Companies Act, 2013. Notices of such forfeiture were also given to the defaulting Equity Shareholders. Subsequently the Board has annulled the forfeiture of the 3400 Equity shares, as this shareholders have later paid the amount due, with interest and other charges to make the shares fully paid. Bombay Stock Exchange has approved the forfeiture as well as the annulment of forfeiture of equity shares.

Listing and Dematerialisation

Initially the equity shares of the Company are listed on the Bombay Stock Exchange, Cochin Stock Exchange and Madras Stock Exchange. However the Company opted to voluntary delist form Madras Stock Exchange (MSE) and it was approved by MSE with effect from 23/02/2015 and the recognition to Cochin Stock Exchange was withdrawn by SEBI with effect from 23/12/2014. The facility to demat the shares is made available with both the depositories in India, NSDL and CDSL to give a choice to shareholders in selecting depository participant. Your Directors earnestly request you to convert your holdings to dematerialised form and derive the benefits of holding the shares in electronic form.

Extract of Annual Return

The details regarding extract of Annual Return in Form No: MGT-9 pursuant to Section 92 of Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules,2014, is annexed herewith as Annexure - B.

Related Party Transactions:

There were no materially significant related party transactions which could have potential conflict with the interests of the Company. Transactions with related parties are in the ordinary course of business on arm''s length and are periodically placed before the Audit Committee and Board for its approvals and the particulars of contracts entered during the year, in Form AOC-2 is enclosed as Annexure-C.

The Board of Directors of the Company has, on the recommendation of the Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules thereunder and the Listing Agreement. This Policy was considered and approved by the Board, which has been uploaded on the website of the Company.

Conservation of Energy, Technology Absorption, Foreign Exchange Inflow & Outflow

In pursuit of continual improvement towards energy conservation and compliance with environmental regulations, efforts have been taken to utilise the energy most efficiently and to nurture and preserve the environment. The Company has taken all possible efforts to conserve energy and absorb latest technology. The information required under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, regarding Conservation of Energy, Technology Absorption, Foreign Exchange Inflow and Outflow are given in Annexure - D to this report.

Corporate Governance

Your Company has been complying with the principles of good Corporate Governance over the years and is committed to the highest standards of compliance. The Company has complied with the Corporate Governance requirements, as stipulated under Clause 49 of the Listing Agreement. A report on Corporate Governance along with a certificate from the Auditors of the Company confirming the compliance is annexed as Annexure - E and forms part of this Report. As required under Clause 49 of the listing agreement with stock exchange the Management Discussion and Analysis Report is annexed as Annexure - F and forms part of this Report.

Personnel

None of the employees is in receipt of remuneration in excess of the limit laid down under Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company and Directors are annexed as Annexure - G and forms part of this Report.

Corporate Social Responsibility

Company has generally taken corporate social responsibility initiatives. However the present financial position of the Company does not mandate the implementation of corporate social responsibility activities pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013. The Company will constitute a CSR Committee, develop CSR policy and implement the CSR initiatives whenever it is applicable to the Company.

Vigil Mechanism

In pursuant to the provisions of Section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for Directors and Employees to report genuine concerns has been established. The Vigil Mechanism Policy has been uploaded on the website of the Company.

Particulars of Loans, Guarantees or Investments

Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement. Company has availed Line of Credit facility offered by IDBI Bank Ltd. to the extent of RS. 750 Lakhs in the form of Bill discounting facility to the Company''s approved vendors supplying Raw materials to the Company and has guaranteed for its repayment. Towards the business development the Company has provided RS. 15 Lakhs in the form of loan to one of our franchisee, CIO Tyres Private Limited, after complying with the provisions of Section 186 of the Companies Act, 2013.

Development and Implementation of Risk Management Policy

Company has developed and implemented a risk management policy, and a committee of the Board named as Risk Management Committee has been formed by the Board to address and evaluate various risks impacting the Company and a report on risk management is provided in this Annual Report in Management Discussion and Analysis.

Adequacy of Internal Financial Controls with reference to the Financial Statements

The Company has implemented and evaluated the Internal Financial Controls which provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes and policies, safeguarding of assets, prevention and detection of frauds, accuracy and completeness of accounting records. The Directors and Management confirm that the Internal Financial Controls (IFC) are adequate with respect to the operations of the Company.

The Company Secretary has been appointed as the Internal Auditor with a dedicated internal audit team. The internal audit reports were reviewed periodically by Audit Committee as well as by the Board. Further, the Board annually reviews the effectiveness of the Company''s internal control system.

Material changes and commitments

No Material changes and commitments, affecting the financial position of the Company has been occurred between the end of the financial year 2014-15 and till the date of this report.

Statutory Orders

No Significant and material orders were passed by Courts, Tribunals and other Regulatory Authorities affecting the going concern status of the Company''s operations.

Disclosure under the Sexual Harassment of Women at the work place (Prevention, Prohibition and Redressal) Act, 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the work place (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has not received any Complaint under this policy during the year 2014-15.

Acknowledgement

Your Directors wish to take this opportunity to place on record their gratitude and sincere appreciation for the timely and valuable assistance and support received from Bankers, Share Transfer Agents, Auditors, Customers, Suppliers and Regulatory Authorities. The Board values and appreciates the valuable committed services of the employees towards performance of your Company, without which it would not have been possible to achieve all round progress and growth. Your Directors are thankful to the shareholders for their continued patronage.

For and on behalf of the Board of Directors

Kochi Navas M. Meeran 29/04/2015 Chairman


Mar 31, 2013

Dear Member,

The Directors have pleasure in presenting the Annual Report along with the audited statements of accounts of your Company for the financial year ended 31st March, 2013.

Financial Highlights

The performance of your Company has been satisfactory. The following table shows the operational results of the Company for the year 2012-13 as compared to that of the previous year.

(Rs. in lakhs) Year ended

31.03.2013 31.03.2012

Revenue from Operations 6499.80 8503.87

Other Income 3.81 3.85

Total Income 6503.61 8507.72

Expenditure 6236.50 8275.03

Profit before Interest, Depreciation and Tax 267.11 232.69

Financial Cost 58.41 75.13

Depreciation and Amortization 58.52 56.59

Profit before tax 150.18 100.97

Prof it after tax 106.52 106.31

Operations

Your Company reported satisfactory working performance during financial year ended 31st March 2013. Even though your Company has reported a dip in revenue by 23.57%, the Profit before Tax has improved by 48.74%. The revenue has come down from Rs. 8503.87 Lakhs to Rs. 6499.80 Lakhs, however. Profit before tax has increased from Rs. 100.97 Lakhs to Rs. 150.18 Lakhs. The Net Profit after Tax amounted to Rs. 106.52 Lakhs as againstRs. 106.31 Lakhs during the previous year.

Despite the downcast growth of the economy, this spectacular achievement was made possible by cost effective production, better utilisation of plant efficiency, and working capital management. Your Company will continue its efforts to grow further by doing its tasks in a better way than what we have done in the past.

Dividend

In view of the inadequacy of profit, your Directors are not in a position to recommend any dividend.

Current Scenario

Even though the business in general is going through a critical situation, the tyre retreading industry shows healthy signs due to its cost advantage. As the increasing numbers of vehicles on roads has driven the replacement tyre market and around 85% of the tyre demand is for replacement, the evolution in Tyre retreading industry is more significant. The financial benefit due to the wide price gap between the retread and new tyre makes retreading more remarkable and has detrimental impact on replacement demand for new tyres. In addition to the cost benefit, other factors like logistic network, improvement in quality of roads, overloading norms, increasing level of radialisation etc. helped retreading industry to grow.

The changes in consumer behaviour due to economic benefits and advancement in technology and manufacturing systems helped the retreading to emerge as a part of overall tyre management program and the retreading holds out as an economically viable option for fleet owners. Hence, your Company is optimistic about its development prospects.

The Company has gone through a challenging year which has showed volatility in raw material prices. Even though we strive to save cost in all areas of production to offer better competitive price, as the rubber price has declined from its peak level the volatile market conditions has forced the company to offer further reduction in price to its finished goods, which resulted in revenue dip. However, other input costs like labour, power and other raw materials continued its increasing trend and has affected the profitability. Despite the challenges, continuous improvement in production process, cutting edge technology, good customer care, vendor development and better utilization of resources helped the Company to manage the situation.

Your Company has grown over the years and is widely recognized as a world class manufacturer of tyre retreading materials. Now Eastern Treads has a brand image closely associated with Tyre retreading industry and the Company is arming towards a bright future.

Marketing Strategy

Your Company is one of the market leaders in the production of tyre retreading materials and has proven to the market that we are firmly committed to supply quality products. We provide premium quality retreading products that can offer better value and more strength by producing reliable retreads that have good characteristics in mileage, heat dispersion and traction. Our extensive product portfolio with Eastern brand consisting tread rubber, procured tread rubber and other retreading materials are today sold through our domestic and international business networks.

Over the years we built our Eastern brand and recognition as a premier tyre retreading solution provider. Your Company has earned reputation as a specialist in producing comprehensive range of tyre retreading materials that can excel in all weather and road conditions. This facilitated the Company to get acceptance with major retreading companies and Road Transport Corporations. Our strong network and brand presence have enabled us to grapple the challenges in the industry and supported to our growth. Now we emphasis to further intensify our customer base by better market penetration in existing as well as new geographies, to further deepen our consumer relationship and to establish a long standing association with them by providing total tyre retreading solutions that create great intrinsic worth.

Since the tyre replacement market is sizeable as well as stable, with well performing products and more than 20 years of manufacturing experience in retreading industry now we are on the move to capture our market share around the globe and we will continue our onward march more aggressively, offering premium range retreading materials to our domestic as well as international consumers.

Raw Materials

As a relief to the industry the prices of key raw materials like natural and synthetic rubber softened of from its peak level. However, prices of other inputs have increased due its supply deficit. Import of raw materials became inevitable in view of wide gap between domestic production and consumption. Imports became expensive as inflation remained above manageable level. Since this industry is highly raw material intensive, the volatility in input costs has affected the profitability of the Company.

Your Company has managed the situation by developing reliable, efficient and sustainable raw material supply sources of national and International level. The Company has maintained good relationship with all of its suppliers by working closely with them through which the raw material procurement system has functioned effectively.

Quality

The Company is always keen on maintaining quality and productivity. Your Company has built its brand with its commitment to total quality management. The products are tested at every stage of manufacturing to ensure that the very best is made available to the market that meets the exact customer requirement. The Company''s policy of best manufacturing practices has been bestowed with various quality certifications and accreditations to its credit.

To cater for the different needs of the market our research and development team is committed to understand the customer demands and to develop products that make value and satisfaction to the customers. This made the Company to keep its competitive edge in the market by producing products which can provide superior performance, safety, and comfort, under different and extreme road conditions. In addition to give high quality products we provide after sale services and expert technological assistance aiming to serve complete service to our customers.

Public Shareholding

Your Directors request to the Shareholders, who have not yet paid their allotment money, to pay the same at the earliest and make the shares fully paid.

Listing and Dematerialisation

The equity shares of the Company are listed on the Bombay Stock Exchange, Cochin Stock Exchange and Madras Stock Exchange. The facility to demat the shares is made available with both the depositories in India, NSDL and CDSL to give a choice to shareholders in selecting depository participant. Your Directors earnestly request you to convert your holdings to dematerialized form and derive the benefits of holding the shares in electronic form.

Fixed Deposits

The Company has not accepted any fixed deposits during the year to which the provisions of Section 58A of the Companies Act, 1956 are applicable.

Conservation of Energy, Technology Absorption, Foreign Exchange Inflow and Outflow

In pursuit of continual improvement towards energy conservation and compliance with environmental regulations, efforts have been taken to utilise the energy most efficiently and to nurture and preserve the environment. The Company has taken all possible efforts to conserve energy and absorb latest technology. The information required under Section 217(1) (e) of the Companies Act,1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding Conservation of Energy,. Technology Absorption, Foreign Exchange Inflow and Outflow are given in Annexure "A" to this report.

Corporate Governance

The Company''s Equity Shares are listed with Bombay Stock Exchange, Cochin Stock Exchange and Madras Stock Exchange. Your Company has been complying with the principles of good Corporate Governance over the years and is committed to the highest standards of compliance. The Company has complied with the Corporate Governance requirements, as stipulated under Clause 49 of the Listing Agreement.

A separate section on Corporate Governance along with a certificate from the Auditors of the Company confirming the compliance is annexed as Annexure "B"and forms part of this Report.

The Report on Management Discussion and Analysis is forming part of Director''s Report and is given in Annexure "C".

Auditors

M/s. JVR & Associates, Chartered Accountants, Kochi-16, were re-appointed as the Auditors of the Company at the previous Annual General Meeting. They hold office until the conclusion of the ensuing Annual General Meeting. They are eligible for re-appointment and the proposal has been placed before the Members. Necessary certificate has been obtained from the Auditors as per Section 224 (1B) of the Companies Act, 1956.

Cost Compliance Certificate

Pursuant to the provisions of the Companies (Cost Accounting Records) Rules, 2011 within 180 days from the close of the financial year, our Company has to submit a Compliance Report duly certified by a Cost Accountant to the Central Government. The Board has Appointed M/s. K.A Felix & Co., Cost Accountants, Cochin to issue the Compliance Report on the Cost Records maintained by the Company and the Compliance Report for the year ended on 31-03-2013 has been approved by the Board of Directors. The due date for filing the Cost Compliance Report is 27th September, 2013.The audit of the Cost Accounts maintained by the Company has been made mandatory for the financial year commencing on or after 1st April 2013 through an auditor with qualification prescribed in Section 233 B (1) of the Companies Act, 1956. Subject to the approval of Central Government, the Board has appointed M/s. K.A Felix & Co., Cost Accountants, Cochin as Cost Auditors for conducting Cost Audit for the Financial Year ending 31st March, 2014.

Board of Directors

Mr. K.S. Neelcanta Iyer retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Board recommends his re-appointment.

None of the Directors is disqualified under Section 274(1) (g) of the Companies Act, 1956.

Directors'' Responsibility Statement

Pursuant to the requirement of Sub-Section 2AA of Section 217 of the Companies Act, 1956, your Directors confirm that-

(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and that there are no material departures;

(b) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that year;

(c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

(d) prepared the Annual Accounts on a going concern basis.

Secretarial Audit

As directed by Securities and Exchange Board of India (SEBI), Reconciliation of Share Capital Audit is being carried out at the specified periodicity by a Practicing Company Secretary. The findings of this Audit have been satisfactory.

Personnel

None of the employees is in receipt of remuneration in excess of the limit laid down under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of employees) Rules, 1975.

Human Resource Development and Industrial Relations

In a competitive economy, the proper utilisation of human resources plays a crucial role. Towards this your Company took various initiatives for human resource development and has maintained healthy and harmonious industrial relations at all locations. Your Company organized various training programs to encourage the professional development. This active process of learning made the employees competent and motivated. Your Company has recruited high quality human resource, the solid foundation on which the company can build itself up. With this solid foundation your Company is now looking for a global reach.

Acknowledgement

Your Directors wish to take this opportunity to place on record their gratitude and sincere appreciation for the timely and valuable assistance and support received from Bankers, Share Transfer Agents, Customers, Suppliers, Regulatory Authorities. The Board values and appreciates the valuable committed services of the employees towards performance of your Company, without which it would not have been possible to achieve all round progress and growth. Your Directors are thankful to the shareholders for their continued patronage.

For and on behalf of the Board of Directors

Kochi Navas M Meeran

29.04.2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the Annual Report along with the audited statements of accounts of your Company for the financial year ended 31st March, 2012.

Financial Highlights

The performance of your Company has been satisfactory. The following table shows the operational results of the Company for the year 2011-12 as compared to that of the previous year.

(Rs. in lakhs)

Year ended

31.03.2012 31.03.2011

Revenue from Operations 8532.88 6666.32

Other Income 3.85 6.95

Total Income 8536.73 6673.27

Total Expenditure 8304.04 6443.69

Profit before Interest, Depreciation and Tax 232.69 229.58

Financial Cost 75.13 47.32

Depreciation and Amortization 56.59 54.36

Profit before tax 100.97 127.90

Profit after tax 106.31 127.91

Operations

Your Company has reported a revenue growth of 28 % during financial year ended 31st March 2012.The revenue has improved from Rs. 6666.32 Lakhs to Rs. 8532.88 Lakhs and the Profit before Interest, Depreciation And Tax amounted to Rs. 232.69 Lakhs as against Rs. 229.58 Lakhs during the previous year, registering an increase of 1.35%. However the net profit for the year fell by 16.89% as compared to the previous year. The Net Profit after Tax amounted to 106.31 Lakhs as against Rs. 127.91 Lakhs during the previous year.

The growth in revenue is remarkable, but the margin has shrunk due to the surge in input costs. This fall in net profit was on account of other factors, like volatility in raw material prices, increased debt, higher interest and depreciation charges, unavailability of trained labour forces, rupee depreciation Etc.

To face these challenges several steps had been taken, which helped the Company to manage and maintain the profitability. The Company is working hard to avoid such situations in coming years and will continue its efforts to ensure its growth, without compromise by aggressive marketing initiatives.

Dividend

In view of the inadequacy of profit, your Directors are not in a position to recommend any dividend.

Current Scenario

The tyre retreading industry shows a healthy growth rate and your company is optimistic about its development prospects mainly due to the constant and rapid growth of transport industry and the cost saving factor to vehicle owners by using retreaded tyres.

The increasing tyre price due to the supply deficit in rubber resulted in increased retreading. Other factors like growing industrialization, logistic network, improvement in quality of roads, overloading norms, increasing level of radialisation etc. push retreading.

The financial benefit of retreading compared to the replacement cost demands retreading in all type of vehicles and it makes more attractive in case of commercial vehicle segment. Hence retreading holds out as an economically viable option for fleet owners and it has detrimental impact on replacement demand for tyres.

The changes in consumer behavior due to climb in tyre price resulted in growth and technological advancement in retreading industry. The economic benefits of retreading will continue to grow and tyre retreading will emerge as a part of overall tyre management programme.

The Company has gone through a challenging year which has showed volatility in raw material prices and increased input costs which affected the profitability. Despite the challenges, high performance, cutting edge technology, and good customer care, appropriate price revisions, new vendor development and the introduction of new value added products helped the Company to manage the situation.

Your Company has grown over the years and is widely recognized as a world class manufacturer of tyre retreading materials. Now Eastern Treads has a brand image closely associated with tyre retreading industry and the long term prospective of your Company seems to be bright.

Marketing Strategy

Your Company is one of the market leaders in the production of tyre retreading materials. As a leader in the industry, we provide quality retreading products that can offer better value and more strength by producing reliable retreads that have good characteristics in mileage, heat dispersion and traction. Our extensive product portfolio with Eastern brand consisting tread rubber, procured tread rubber and other retreading materials are today sold through our large business network.

We built our Eastern brand over 19 years and have developed a vast marketing network in the country and now we look to further deepen our customer relationship by introducing products that create better value for customers. This strong network and brand presence have facilitated us to face the challenges in the industry and contributed to our growth. We always make every effort to exceed the customer expectations and works to establish a long term professional relationship with them. Now we focus to further intensify our customer base by better market penetration in existing as well as new geographies, through our dealer network and through a team of dedicated marketing professionals by directly contacting the individual fleet owners.

As a premier tyre retreading solution provider, your Company has earned a reputation as a specialist in producing full range of tyre retreading materials that can excel in all weather and road conditions. This facilitated the Company to get acceptance with major retreading companies and Road Transport Corporations.

Our recently released diamond quality products offer significant benefits like durability, mileage and safety in all challenging conditions and some of the products are creating new trend in the industry

Since internationally the replacement market is sizeable as well as stable, with 19 years of manufacturing experience now we are on the move to capture our market share around the globe to reach our ambitious growth plans.

Raw Materials

The new year has begun with a peak in price of natural rubber due to supply crunch, and it created a record in daily trade price. All other raw material prices have also raised beyond expectations. Initially there was a rising concern about the availability of natural rubber due to climatic and other conditions. Natural Rubber continued its high price in the first quarter due to strong surge in demand. Thereafter the price of natural rubber has softened from its peak level with fall in international prices. However prices of synthetic rubber and other raw materials continued its high rate due its supply deficit. Imports become expensive as rupee devalued significantly. Since this industry is highly raw material intensive, the volatility in input costs has affected the profitability of the Company.

The market trends indicate that it is not possible to ensure non-volatile supplies of natural rubber due to the wide gap between the production and demand and synthetic rubber will also become expensive due to the increase in the price of petroleum products in the international market combined with the rupee depreciation.

Your Company has managed the situation by developing reliable and efficient raw material supply sources at national and International level, through which the raw material procurement system is functioning effectively.

Quality

The Company is always keen on maintaining quality and productivity. Your Company has built its brand with its commitment to total quality management. Our products are tested at every stage of manufacturing to ensure the quality that can meet the exact customer requirement. Our policy of best manufacturing practices has been bestowed with various quality certifications and accreditations to its credit which includes FACT MKK Nair Memorial Productivity Award for excellent performance and ISO 9001-2008.

We are committed to understand the customer requirements and to develop products that create value for customers. Our research and development team has focused on our customer needs, which helped the Company to keep its competitive edge in the market by producing products which can provide superior performance, safety, and comfort, under different and extreme road conditions, from village roads to newly constructed national highways, from extreme cold to hot and wet conditions prevailing in different geographical parts of the country. Providing after sale services and technological assistance to the customers by committed professionals and experts is another initiative of the Company to provide quality services.

The newly commissioned effluent treatment system, which meets ISO standards, helped the Company to keep an eco friendly and safety environment to our workforce.

Public Shareholding

Your Directors request to the shareholders, who have not yet paid their allotment money, to pay the same at the earliest and make the shares fully paid.

Listing and Dematerialisation

The equity shares of the Company are listed on the Bombay Stock Exchange, Cochin Stock Exchange and Madras Stock Exchange. The facility to demat the shares are made available with both the depositories in India, NSDLand CDSL to give a choice to shareholders in selecting depository participant. Your Directors earnestly request you to convert your holdings to dematerialised form and derive the benefits of holding the shares in electronic form.

Fixed Deposits

The Company has not accepted any fixed deposits during the year to which the provisions of Section 58A of the Companies Act, 1956 are applicable.

Conservation of Energy, Technology Absorption, Foreign Exchange Inflow and Outflow

The Company has taken all possible efforts to conserve energy and absorb latest technology. The information required under Section 217(1) (e) of the Companies Act,1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding Conservation of Energy* Technology Absorption, Foreign Exchange Inflow and Outflow are given in Annexure"A" to this report.

Corporate Governance

Your Company has been complying with the principles of good Corporate Governance over the years and is committed to the highest standards of compliance. The Company has complied with the Corporate Governance requirements, as stipulated under Clause49 of the Listing Agreement.

A separate section on Corporate Governance along with a certificate from the Auditors of the Company confirming the compliance is annexed as Annexure"B" and forms part of this Report.

Management Discussion and Analysis Statement

Report on Management Discussion and Analysis is given in Annexure "C" forming part of this report.

Auditors

M/s. JVR & Associates, Chartered Accountants, Kochi-16, were reappointed as the Auditors of the Company at the previous Annual General Meeting. They hold office until the conclusion of the ensuing Annual General Meeting. They are eligible and recommended for re-appointment. Certificate from the Auditors has been received to the effect that their re-appointment, if made, would be in accordance with Section 224 (1B) of the Companies Act, 1956.

Board of Directors

Mr. Navas M. Meeran and Mr. Naiju Joseph retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Board recommends their reappointment.

None of the Directors is disqualified under Section 274(1) (g) of the Companies Act, 1956.

The Board expresses its deep grief on the demise of our founder Chairman, Mr. M.E Meeran. He died on 8th September 2011, leaving behind an illustrious entrepreneurial career. He was associated with the Company from the days of its inception and had successfully steered the Company out of several compelling adversities. His efforts and contributions made the Company a competitive and reputed leader in the industry.

Directors' Responsibility Statement

Pursuant to the requirement of Sub-Section 2AA of Section 217 of the Companies Act, 1956, your Directors confirm that:-

(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and that there are no material departures;

(b) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that year;

(c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

(d) prepared the Annual Accounts on a going concern basis.

Secretarial Audit

As directed by Securities and Exchange Board of India (SEBI), Reconciliation of Share Capital Secretarial Audit is being carried out at the specified periodicity by a Practising Company Secretary. The findings of the Secretarial Audit have been satisfactory.

Personnel

None of the employees is in receipt of remuneration in excess of the limit laid down under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of employees) Rules, 1975.

Human Resource Development and Industrial Relations

Your Company continues to take various initiatives for the development of its human resources and has maintained healthy and harmonious industrial relations at all locations.

The Company conducts programs such as TQM for the workmen and technicians to enhance pride in being an employee of the Company and also to create team synergy. This will boost their morale and productivity.

Your Company organised various training programmes, sponsored the employees for training programmes / seminars / conference organised by reputed professional institutions to upgrade the skill and knowledge of the employees in different operational areas and for all round growth of our employees. This made the employees competent and motivated. Your Company has recruited high quality human resource, the solid foundation on which the Company can build itself up. With this solid foundation of talented professionals your Company is now looking for a global reach.

Acknowledgement

Your Directors wish to take this opportunity to place on record their gratitude and sincere appreciation for the timely and valuable assistance and support received from Bankers, Share Transfer Agents, Customers, Suppliers, Regulatory Authorities. The Board values and appreciates the valuable committed services of the employees towards performance of your Company, without which it would not have been possible to achieve all round progress and growth. Your Directors are thankful to the shareholders for their continued patronage.

For and on behalf of the Board

Kochi Navas M. Meeran M.E. Mohamed

29.05.2012 Chairman Managing Director

 
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