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Directors Report of Lotus Chocolate Company Ltd.

Mar 31, 2014

To the Members,

The Directors are pleased to present the 25th Annual Report together with the audited accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS Rs. in lakhs Year Year ended ended 2014 2013

Income 5680.47 4700.05

Gross Profit before

Interest & Depreciation (162.15) (49.61)

Interest (40.65) (52.54)

Depreciation (66.50) (51.28)

Profit/(loss) for the year (269.30) (153.43)

Loss brought forward from previous year (2887.88) (2734.45)

Loss carried forward To Balance Sheet (3157.18) (2887.88)

PERFORMANCE

Lotus has achieved a sales turnover at Rs.5630 Lakhs for the financial year ended 31.03.2014 representing a growth rate of 21.21% over the preceding year. However, the company could not turn the corner as the hike in the input cost has affected the bottom line. Further, stiff competition has resulted in erosion of prices and margins of the products. The management is addressing this area of concern as major initiatives are planned during the current fiscal year. Your company''s performance has been led through modest investments in your brands, products, innovation initiatives, expansion into new product categories and managing operating costs through cost efficiency measures.

BUSINESS PLAN

During the year the company has exported Cocoa butter and work has been initiated for opening up avenues for considerable volumes in the domestic market, focusing on large national players.

During the year under review, the Company withstood heavy competition, reflecting strong consumer demand for all its products and services.

The most significant impact will be the cost escalation on the prime inputs, high escalation in the cost of power/steam generation and heavy power cuts had a cascading impact on product competitiveness.

A passionate commitment to serve a larger segment of customers is the core of your company''s business strategy.

Going forward the Company''s relentless endeavor to create new benchmarks in sustainable business practices will lend it a unique source of competitive advantage in an increasingly challenging socio- economic environment.

FSSC CERTIFICATION

Your company''s manufacturing factory located at Narsapur, Medak District has been certified to the latest version of FSSC 22000:2010 ( Food Safety Standard Certification by TUV NORD).

This Certification indicates our commitment in a sustainable manner, in meeting global quality, environment, health and safety standards. This is a milestone in our quest for quality.

RESEARCH AND DEVELOPMENT

1. The introduction of medicinal and organic ingredients in the manufacturing of chocolates had lead to a new trend and development in the country, which will be adapted by major manufacturers to remain active in the market. Keeping this in view, emphasis has been given by R & D team of flavor manufacturers specific. Development of Choco- pie enrobing mass and biscuit cream for reputed indigenous and MNC firms are under process.

2. Work on innovative consumer range of products is under progress. Adequate exposure and training are being imparted to the team in relevant areas for better understanding of the process, process controls and product needs.

PARTICULARS OF EMPLOYEES

During the year under review, none of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

PARTICULARS REGARDING ENERGY CONSERVATION ETC.

The particulars required under Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are annexed to this Report.

DEPOSITS

The Company has not accepted any deposit during the year under review.

BOARD OF DIRECTORS

In accordance with the provisions of Section 152 of the Companies Act 2013 directors Shri.Abhijeet Pai and Shri.G V P Raju retire by rotation at the Annual General Meeting and being eligible offer themselves for reappointment. Shri Ganpath Subramanya Ram and Shri Dilip Mangesh Kalelkar was reappointed as Whole Time Directors of the Company.

AUDITORS REPORT

The observations made in the Auditor''s Report, read together with the relevant notes thereon are self explanatory and hence, do not call for any comments.

AUDITORS

M/s S R Mohan & Company, Chartered Accountants Hyderabad, Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting. The Company has received a letter from them to the effect that their appointment,if made, would be within the prescribed limits under Section 141(3)(g) of Companies Act, 2013. Accordingly the said Auditors are reappointed as Statutory Auditors of the Company at the ensuing Annual General Meeting till the conclusion of 28th Annual General Meeting to be held in the year 2017 (subject to ratification of their appointment by the members at every AGM held after this AGM).

Listing Arrangements

The Company''s shares are listed on BSE LIMITED.

The Company has paid up to date annual listing fee of the Stock Exchange.

Public Deposits

During the year under review the Company has not accepted any public deposits.

Insurance

Adequate Insurance cover has been taken for properties of the Company including Buildings, Computers, Office Equipments, Vehicles, etc.

Management''s Discussion and Analysis Report Management''s Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, now section 134 of Companies Act 2013, with respect to Directors'' Responsibility Statement, it is hereby confirmed that-

The Board submits as under :

- that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

- that the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

- that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- that the directors had prepared the annual accounts on a going concern basis Corporate Governance The Company is committed to maintain the highest standards of Corporate Governance. Your Directors affirmed to the requirements set out in the Listing Agreement with the Stock Exchanges and have implemented all the stipulations prescribed. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges forms part of the Annual Report. The requisite certificate from the Practising Company Secretary, Rakhi Agarwal from Rakhi Agarwal & Associates, confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is annexed to this Report. A Cash Flow Statement for the Financial Year 2013-14 of the Company is attached to the Balance Sheet.

ACKNOWLEDGEMENT

Yours Directors place on record the appreciation for the sincere efforts and hard work put in by the employees of the Company in its operations. The Directors acknowledge the support and co - operation received from Banks and other Governmental Agencies.

The Directors express their gratitude to the shareholders of the Company for the confidence and faith reposed in the management.

For and on behalf of the Board

P.Ananth Pai GS.Ram Director Whole Time Director Place : Hyderabad Date : August 20, 2014


Mar 31, 2013

To the Members,

The Directors are pleased to present the 24th Annual Report together with the audited accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS

Rs.in lakhs

Year Year ended ended 2013 2012

Income 4700.05 5569.16

Gross Profit before

Interest & Depreciation (49.61) 21.27

Interest (52.54) (179.90)

Depreciation (51.28) (49.51)

Profit/(loss) for the year (153.43) (208.14)

Loss brought forward from previous year (2734.45) (2526.31)

Loss carried forward to Balance Sheet (2887.88) (2734.45)

PERFORMANCE

Lotus has achieved a sales turnover at Rs..4645 Lakhs for the period ended 31.03.2013. The Company continued to follow its policy offering value to the customers with sales prices just below inflation. The management is addressing this area of concern as major initiatives are planned during the current fiscal year. Your company''s performance has been led through modest investments in our brands, products, innovation initiatives, expansion into new product categories and an uphill task in managing operating costs through cost efficiency measures.

BUSINESS PLAN

The Company has entered into an agreement with Bharti Wal-Mart for co-brand of chocolate products and the Company is planning to launch pure milk chocolate under the brand Milk Chocolate Chuckles.

During the year under review the Company withstood heavy competition, reflecting strong consumer demand for all its products and services.

The most significant impact will be the cost escalation on the prime inputs, higher escalation on the cost of power/steam generation and heavy power cut (almost three days in a week) had a cumulative devastating impact on product competitiveness.

Indeed a passionate commitment to serve a larger segment of customers is the core of your company''s business strategy.

Going forward the Company''s relentless endeavour to create new benchmarks in sustainable business practices will lend it a unique source of competitive advantage in an increasingly challenging social-economic environment.

FSSC CERTIFICATION

Your company''s manufacturing factory located at Narsapur, Medak District has been certified to the latest version of FSSC 22000:2010 (Food Safety Standard Certification by TUV NORD). This Certification indicates our commitment in a sustainable manner, in meeting global quality, environment, health and safety standards. This is a milestone in our quest for quality.

RESEARCH AND DEVELOPMENT

During current financial year, empahasis has been given by R & D, to cater the needs of MNC Buyers.

1. By working closely with R&D team of flavor manufacturers specific, nature identical flavours are developed to boost the organoleptic characters of the consumer product and thus developed Milk Chocolate, Cashew Delight, Milkee Delight and Choco Pearls to reputed MNC and have gone into commercial production. Development of Choco-Pie enrobing mass and biscuit cream for reputed indigenous and MNC firms is under progress.

2. Our R&D progress has opened a new business avenue with one of the business giants like Bharathi Wal- Mart and could reach company''s esteemed customers'' specific needs and retained their trust in our business outlook and openness.

3. Work on innovative consumer range of products is under progress. Adequate exposure and training are being imparted to the team in relevant areas for better understanding the process, process controls and product needs.

PARTICULARS OF EMPLOYEES

During the year under review, none of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

PARTICULARS REGARDING ENERGY CONSERVATION ETC.

The particulars required under Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are annexed to this Report.

DEPOSITS

The Company has not accepted any deposit during the year under review.

BOARD OF DIRECTORS

Shri P Prakash Pai and Shri P Anantha Pai , Directors retire by rotation at the 24th Annual General Meeting and being eligible, offer themselves for reappointment.

AUDITORS

M/s S R Mohan & Company, Chartered Accountants, Hyderabad, Statutory Auditors of your Company hold office until the conclusion of the 24th Annual General Meeting and are being proposed for re-appointment. The Company has received a certificate from them to the effect that their appointment, if made would be within the limits prescribed under Section 224(1) of the Companies Act, 1956.

DIRECTORS RESPONSIBILITY STATEMENT

The Board submits as under : that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; that the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

- that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

that the directors had prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENT

Yours Directors place on record the appreciation for the sincere efforts and hard work put in by the employees of the Company in its operations. The Directors acknowledge the support and co - operation received from Banks and other Governmental Agencies.

The Directors express their gratitude to the shareholders of the Company for the confidence and faith reposed in the management.

For and on behalf of the Board

Sd/- Sd/-

P.Anantha Pai GS.Ram

Director Whole Time Director

Place : Hyderabad

Date : 19th August, 2013


Mar 31, 2012

The Directors are pleased to present the 23rd Annual Report together with the audited accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS

Rs in lakhs

Year ended Year ended 2012 2011

Income 5569.16 3902.54

Gross Profit before Interest & Depreciation 21.27 (337.13)

Interest (179.90) (81.79)

Depreciation (49.51) (50.67)

Profit/(loss) for the year (208.14) (469.59)

Loss brought forward from previous year (2526.31) (2039.57) Loss carried forward

To Balance Sheet (2734.45) (2526.31)

PERFORMANCE

Lotus has achieved a sales turnover at Rs.5569.16 Lakhs for the period ended 31.03.2012. The Company continued to follow its policy of offering value to the customers with sales prices just below inflation. The Management is addressing this area of concern as major initiatives are planned during the current fiscal year. Your company's performance has been led through modest investments in our brands, products, innovation initiatives, expansion into new product categories and an uphill task in managing operating costs through cost efficiency measures.

BUSINESS PLAN

During the year under review the Company withstood heavy competition, reflecting strong consumer demand for all its products and services.

The most significant impact will be the cost escalation on the prime inputs, higher escalation on the cost of power/ steam generation, had a cumulative devastating impact on the product competitiveness.

Indeed a passionate commitment to serve a larger segment of customers is the core of your company's business strategy.

Going forward the Companys' relentless endeavour to create new benchmarks in sustainable business practices will lend it an unique source of competitive advantage in an increasingly challenging socio- economic environment.

ISO CERTIFICATION

Your company's manufacturing factory located at Narsapur, Medak District has been certified to the latest version of IS 22000 (FSMS- Standard for Food Safety Management System) by Llyods, a leading International Certification Company.

This certification indicates our commitment in a sustainable manner, in meeting global quality, environment, health and safety standards. This is a milestone in our quest for quality.

The Company is planning for FSSAI Certification which covers even PAS 220 and the same will be completed before 2012.

RESEARCH AND DEVELOPMENT Efforts made on the process front:

1. It is our constant investment and innovation in our basic approach, by adding quality and originality to the products/creations.

2. The Company is able to manage the stiff competition and retained the esteemed customers within its fold and also increase processing capacity.

3. Further new products will be introduced later part of this year. To achieve this, the Company is making innovative energies to harness skills, raising performance and leadership qualities.

4. We work closely with our clients own food technologies, ensuring quality performance and stability under the most rigorous industrial processing conditions.

5. The Company is earnestly focusing on installing a full fledged chocolate and confectionary laboratory scale machinery to fabricate tailor made products to our prestigious customers.

PARTICULARS OF EMPLOYEES

During the year under review, none of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

PARTICULARS REGARDING ENERGY CONSERVATION ETC.

The particulars required under Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are annexed to this Report.

DEPOSITS

The Company has not accepted any deposit during the year under review.

BOARD OF DIRECTORS

Smt.Ashwini Pai has withdrawn as Whole Time Director, further continues as a Director who retires by rotation at the 23rd Annual General Meeting and being eligible offers herself for reappointment.

AUDITORS

M/s S R Mohan & Company, Chartered Accountants, Hyderabad, Statutory Auditors of your Company hold office until the conclusion of the 23rd Annual General Meeting and are being proposed for re-appointment. The Company has received a certificate from them to the effect that their appointment if made would be within the limits prescribed under Section 224(1) of the Companies Act, 1956.

DIRECTORS RESPONSIBILITY STATEMENT The Board submits as under :

- that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

- that the directors had selected such accounting policies and applied them consistently and made judgements and

estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

- that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- that the directors had prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENT

Yours Directors place on record the appreciation for the sincere efforts and hard work put in by the employees of the Company in its operations. The Directors acknowledge the support and co - operation received from Banks and other Governmental Agencies.

The Directors express their gratitude to the shareholders of the Company for the confidence and faith reposed in the management.

For and on behalf of the Board

Sd- Sd-

P.Anantha Pai G.S.Ram

Director Whole Time Director

Place : Hyderabad

Date : 20.08.2012


Mar 31, 2010

The Directors present the 21st Annual Report together with the audited accounts for the year ended 31st March, 2010.

FINANCIAL RESULTS

Rs in lakhs

Year Year ended ended 2010 2009

Income 3076.44 2723.04

Gross Profit before Interest & Depreciation 213.32 266.74

Interest (56.91) (7.43)

Depreciation (46.79) (92.68)

Profit/(loss) for the year 109.61 166.63

Loss brought forward from previous year (2149.19) (2315.81)

Loss carried forward to

Balance Sheet (2039.57) (2149.18)

Loss carried forward to Balance Sheet is Rs 2039.57 lakhs.

PERFORMANCE

Lotus sales turnover at Rs.3076.44 Lakhs was up 12.98 % over last year. The Company continued to follow its policy of offering value to the customers with sales prices just below inflation. The Companys volumes however remain stagnates as the capacity available was just sufficient to meet the existing market presence. The Management is addressing this area of concern as major initiatives are planned during the current fiscal year. Your companys performance has been led through modest investments in our brands , products, innovation initiatives, expansion into new product categories and an upheard task in managing operating costs through cost efficiency measures.

In the current year the actual production was 5885.66 MT as against 6988.06 MT during the previous year giving a moderate dip of 18.73%.

Concerted efforts have contributed to increase in revenue by 12.98% over previous year to Rs.3076.44 lakhs and record a net profit of Rs. 109.61 lakhs.

Your company has achieved these results despite significant increase in input costs, particularly cocoa beans, sugar, oils and fats coupled with aggressive pricing in the trade and industry.

Despite stiff competition your company stabilized and held its market share, even though 2009 was a challenging year, your company continues to operate with minimum trade pipelines selling as per the market demands and maintaining a very efficient supply chain.

BUSINESS PLAN

The promoters who acquired the business in the year 2008 has acknowledged for their understanding of common needs and robust business model. During the year the company sustained focus on generating consumer insights, innovation and renovation while continuing it on going efforts to strengthen capabilities, augment equipment capacities that continue to delight the consumers and help it to leverage its trusted brands.

Further new chocolate products will be introduced later this year.

We envisage a pan India performance by the end of this fiscal, towards this, have opened up all the markets of North India. Further we have concluded an agreement with the reputed Oil Company i.e Bharat Petroleum Corporation Limited(BPCL) for distribution of our consumer brand chocolates through their strong network.

ISO CERTIFICATION

Your companys manufacturing factory located at Narsapur, Medak District has been certified to the latest version of IS 22000 (FSMS- Standard for Food Safety Management System) by Llyods, a leading International Certification Company.

This certification indicates our commitment in meeting in a sustainable manner, global quality, environment, health and safety standards. This is a milestone in our quest for quality.

Our Company has been rated by CRISIL as SME III.

RESEARCH AND DEVELOPMENT

The research and development (R & D) function has led a significant role to play in supporting the

performance of the Company this year. Their major area of contribution lay in fuelling innovation through a number of new product development, culminating in the launch of various new products during the year.

The management intends to create the function of Innovation by engaging best leveraging external expertise to value add to our R&D programme with a view to building the medium and long term pipelines.

BIFR

A reference in terms of Section 15(1) of the Sick Industrial Companies(Special Provisions) Act, 1985 has been done and registered with the Board of Industrial and Financial Reconstrution (BIFR) for determination of the measures which shall be adopted with respect to the Company, further the company is awaiting for the hearing of the same.

PARTICULARS OF EMPLOYEES

During the year under review, none of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

PARTICULARS REGARDING ENERGY CONSERVATION ETC.

The particulars required under Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are annexed to this Report.

DEPOSITS

The Company has not accepted any deposit during the year under review.

BOARD OF DIRECTORS

Shri Prakash Pai and Shri Anantha Pai, Directors retires by rotation at the 21st Annual General Meeting and being eligible offers themselves for reappointment.

AUDITORS

M/s S R Mohan & Company, Chartered Accountants, Hyderabad, Statutory Auditors of your Company hold office until the conclusion of the

21st Annual General Meeting and are being proposed for re-appointment. The Company has received a certificate from them to the effect that their appointment if made would be within the limits prescribed under Section 224(1) of the Companies Act, 1956.

DIRECTORS RESPONSIBILITY STATEMENT

The Board submits as under:

- that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

- that the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

- that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- that the directors had prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENT

Yours Directors place on record the appreciation for the sincere efforts and hard work put in by the employees of the Company in its operations. The Directors acknowledge the support and co - operation received from Banks and other Governmental Agencies.

The Directors express their gratitude to the shareholders of the Company for the confidence and faith reposed in the management.

For and on behalf the Board

Sd/- Sd/- P.Anantha Pai G.S.Ram Director Whole time Director Place : Hyderabad Date : 13.08.2010

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