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Directors Report of Premier Explosives Ltd.

Mar 31, 2015

Dear Members

The directors are pleased to present the 35th annual report including the audited financial statements of your company for the year ended 31st March, 2015.

1. Financial summary (Rs. in lakhs)

Profitability 2014-15 2013-14

Sales 14899.45 14471.03

Other operating revenue 49.71 69.35

Other income 74.04 140.67

Revenue 15023.20 14681.05

EBIDTA 1328.38 1766.87

% to Revenue 9% 12%

Profit before tax 762.23 1295.50

% to Revenue 5% 9%

Profit after tax 532.05 921.31

% to Revenue 4% 6% Diluted EPS (Rs.) 6.10 11.17

Appropriations 31.03.15 31.03.14

Opening balance of surplus 3286.17 2828.89

Depreciation due to revision in estimated useful lives of fixed assets (66.66) -

Profit for the year 532.05 921.31

Total available for appropriations 3751.56 3750.20

Proposed dividend (177.17) (225.68)

Dividend tax on the above (36.07) (38.35)

Dividend paid for earlier year (13.50) -

Dividend tax paid on the above (2.30) -

Transfer to general reserve (150.00) (200.00)

Closing balance of surplus 3372.52 3286.17

2. State of affairs

Your company's sales grew to Rs. 14899 lakhs from Rs. 14471 lakhs, an increase of 3% over previous year. Gross profit decreased by 25% from Rs. 1767 lakhs to Rs. 1328 lakhs. Profit before tax has decreased 41% from Rs. 1295 lakhs to Rs. 762 lakhs. Net profit for the year came down by 42% to Rs. 532 lakhs from Rs. 921 lakhs. Basic EPS has decreased to Rs. 6.10 from Rs. 11.25 for the previous year.

3. Operations

Production of explosives increased to 24,066 tonnes from previous year's 20,703 tonnes.

Production of detonators decreased to 42.20 million pieces from 53.27 million pieces a year ago due to lower demand from mining and infrastructure industries, caused by unseasonal / long rains, restrictions on movement of explosives during elections, etc.

These factors together with severe competition has resulted in un-remunerative prices for accessories like detonators and detonating fuse.

Defense products contribution has been satisfactory and the company expects a decent growth with improved order book on hand.

Operations & maintenance contracts at Sriharikota and Jagdalpur have been satisfactory. Contract at Jagdalpur has been extended by five years, i.e. from April 2015 till April 2020.

Windmill generated 13.67 lakh units of power compared to 19.84 lakh units during the previous year, a decline of 31%. Previous year 2013-14 was exceptionally good year for wind power generation but weather dynamics were not favorable in 2014-15.

4. Capital expenditure

During the year the company incurred a net capital expenditure of Rs. 398.53 lakhs including land development at new site and balancing equipment and incremental assets at the existing sites.

5. Dividend

Your directors recommend a dividend of Rs. 2.00 per share for the year ended 31st March, 2015 on the amount of paid up share capital as on record date for dividend. The dividend, if approved and declared at the forthcoming annual general meeting, would result in a cash outlaw of Rs. 177.17 lakhs towards dividend and Rs. 36.07 lakhs towards tax on dividend, totaling to Rs. 213.24 lakhs.

6. Share capital and reserves

a) Share capital

Equity share capital has increased from Rs. 835.86 lakhs as on 31.03.2014 to Rs. 885.86 lakhs as on 31.03.2015 upon allotment of 5,00,000 equity shares against an equivalent number of warrants.

b) Securitas premium

Securitas premium account has gone up by Rs. 258.85 lakhs with receipt of premium @ Rs. 51.77 per share on allotment of 5,00,000 equity shares referred above.

c) Transfer to general reserve

Your directors propose to transfer an amount of Rs. 150 lakhs (previous year Rs. 200 lakhs) from the current year profit to general reserve.

d) Total reserves as at 31st March, 2015

Including the share premium received on allotment of equity shares mentioned above and net of the proposed dividend and tax thereon, total reserves and surplus as on 31st March, 2015 increased to Rs. 5305 lakhs from last year's Rs. 4810 lakhs.

7. Utilization of proceeds from preferential issue of share warrants

During 2013-14 and 2014-15 your company issued a total of 7,31,000 equity shares of Rs. 10 each at a premium of Rs. 51.77 per share and received a total of Rs. 451.54 lakhs. The amount so received was utilized for working capital and fixed assets, being objects of the issue.

8. Deposits

During the year the company has repaid all the fixed deposits in terms of Section 74 of the Companies Act, 2013 and has not accepted any new deposits.

9. Material changes after end of the financial year

a) Voluntary retirement scheme

With a view to rationalize the human resources the company has agreed for retirement of 56 employees in 2015-16 which will have a onetime cost of Rs. 369.56 lakhs.

b) Industrial licenses

Your company has received industrial licenses for manufacture of various defense products, namely, Mob dispersion devices, Ammunition of 40mm and above caliber, Rockets and missiles, Mines related to Defense, Bombs, Flexible liner shape charge, Explosives reacting armor, Single base propellant, Military fuses of all types including filling and assembling, Munitions of 20 mm and above caliber including felling and assembling.

Your company is taking necessary steps to obtain technology to ups and to prepare business plans in respective of a few of the above products.

Your company also received industrial licenses for capacity expansion of Site mixed explosives and Cartridge explosives. Related new or expansion plants would be set up at an opportune time.

10. Future outlook

Recent coal mining auctions, amendment of mining regulations, relaxation of foreign direct investment in construction sector and general improvement in economy are expected to result in increased demand for commercial explosives and accessories.

'Make in India' imitative, accelerated issuance of defense licenses, encouragement of private sector for defense production, revised defense procurement and offset policies, etc. would help the company in scaling up military explosives business.

11. Board maters

A. Directors' responsibility statement pursuant to section 134 of the Companies Act, 2013

Your directors conform that

a) the applicable accounting standards have been followed;

b) the accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2015 and of the profit of the company for the year ended on that date;

c) proper and sufficient care has been taken 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;

d) the annual accounts have been prepared on a going concern basis;

e) adequate internal financial controls have been laid down, have been followed and have been operating effectively;

f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and those systems have been adequate and operating effectively.

B. Declaration of independent directors

All the independent directors confirmed that they have met the criteria of independence as required u/s 149 of the Companies Act, 2013.

C. Training of directors

During the year, both independent and non- independent directors were provided a technical session by a senior practicing company secretary regarding provisions of the Companies Act, 2013.

D. Board meetings

During the financial year 2014-15 there were 4 Board meetings held on 24th May, 2014, 13th August 2014, 06th November, 2014 and 07th February, 2015.

E. Board evaluation

Criteria and other details of Board evaluation has been provided in the Annexure -1 Report on Corporate Governance.

F. Change in directors

a) Mr. K. Chalil had retired as Director upon reaching Superannuation on 30th of September, 2014 and the company places on record its appreciation of the valuable services rendered by him during his tenure as director.

b) Filling the above casual vacancy, the Board has appointed Colonel Vikram Mahajan (Retd.) as Additional Director on 06th of November, 2014, to hold office until the conclusion of this Annual General Meeting and being eligible offers himself for re-appointment as Director.

The Board recommends reappointment of Colonel Vikram Mahajan (Retd.) as a Director.

G. Rotation of director

Dr. N.V. Srinivasa Rao will retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment.

The Board recommends reappointing him as a Director.

H. Company's policy on appointment and remuneration of directors

Criteria for appointment of directors and policy on directors' remuneration are given at paras 2.7 and 4.5 of the Report on corporate governance, Annexure-1.

I. Formal annual evaluation by the Board

The Board has evaluated its own performance and of individual directors. The details as required u/s 134(3) (p) of the Companies Act, 2013, are mentioned in the Annexure 1: Report on Corporate Governance.

12. Company Secretary & Compliance Offer

Mr. Avinash Kumar Singh resigned on 20th March, 2015 as Company Secretary & Compliance Offer. Subsequently, the Board has appointed Ms. K. Vijayashree in that position on 20th May, 2015.

13. Auditors

a) Independent auditors

The Independent auditors M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants (Firm's Registration Number: 0022835) have been appointed as Statutory Auditors of the Company at the Annual General Meeting held on 13th of August, 2014 to hold office until the conclusion of the Annual General meeting to be held in the year 2019 subject to ratification of their appointment at every AGM.

Accordingly, the reappointment is placed for ratification by the members at this Annual General Meeting.

The Board recommends ratification of their re-appointment.

b) Internal auditors

M/s M. Venkata Ratnam & Associates, Chartered Accountants were the internal auditors for the year 2014-15 and they being eligible, the Board has re- appointed them for the year 2015-16.

c) Cost auditors

M/s S. S. Zanwar & Associates, Cost Accountants were cost auditors for 2014-15 and they being eligible, the Board has re-appointed them for the year 2015-16 and their remuneration is subject to the ratification of shareholders in the ensuing annual general meeting. The Board recommends ratification of their remuneration.

d) Secretarial auditor

Mr. K.V. Chalama Reddy, a practicing company secretary, was the secretarial auditor for the financial year 2014-15 and he being eligible, the Board has re- appointed him for the year 2015-16.

14. Independent auditors' report

Independent Auditors' report contains a matter of emphasis that managerial remuneration of the Chairman & Managing Director exceeded the limit prescribed under provisions of the Companies Act, 2013. The company is taking necessary steps to obtain the Central Government approval required in this respect.

15. Ratings

ICRA has maintained the long-term credit rating at '(ICRA) A- (Stable)' and short-term credit rating at '(ICRA)A2 '.

Dun & Bradstreet allotted D&B D-U-N-S® NUMBER: 65- 063-6121 to the company and assigned the rating '4A2 Condition: Good'.

16. Management discussion and analysis

A report on management discussion and analysis is placed as a separate section in the annual report.

17. Corporate governance

Pursuant to clause 49 of the listing agreement with the stock exchange, a detailed report is given at Annexure-1 along with the auditors' certificate in the Annexure-2 and CEO and CFO certificate in the Annexure-3.

18. Secretarial audit report

Pursuant to section 204 of the Companies Act, 2013, every listed company shall annex the secretarial audit report with the Board's report. Secretarial Audit Report contains an observation that the Remunerator paid to the Chairman and Managing Director, for the year 2014-15 is in excess of the limits prescribed under Section 197 read with Schedule V of the Companies Act, 2013 by Rs. 40,90,981. The Company is taking necessary steps to obtain the Central Government approval required in respect of the aforesaid amount. The secretarial audit report is attached as Annexure-4.

19. Conservation of energy, technology absorption and foreign exchange earnings and outgo

Information required under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in Annexure- 5 to this Report.

20. Particulars of loans, guarantees or investments in terms of section 186 of the Companies Act, 2013 Your company

a) has not given any loan to any person or other body corporate other than usual advances for supply of materials and services

b) has not given any guarantee or provide security in connection with a loan to any other body corporate or person and

c) has not acquired the securities of any other body corporate by way of subscription, purchase or otherwise, exceeding sixty percent, of its paid-up share capital, free reserve and securities premium account or one hundred percent of its free reserves and securities premium account whichever is more.

21. Particulars of contracts or arrangements with related parts

Contracts or arrangements with related parts referred in section 188(1) of the Companies Act, 2013 have been at arm's length and the particulars are reported in the Annexure - 6.

22. Risk management policy

Your company recognizes Risk Management as a very important part of business and has kept in place necessary policies, procedures and mechanisms. The company proactively identifies monitors and takes precautionary and mitigation measures in respect of various risks that threaten the operations and resources of the company.

In accordance with Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee and formulated a policy on the Risk Management. Details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report.

The Risk Management Policy of the company is available at the link htp://www.pelgel.com/prm.htm.

23. Vigil mechanism policy

Pursuant to the provisions of Section 177 (9) and (10) of the Companies Act, 2013 a Whistle Blower policy has been established. The policy is available at the website link htp://www.pelgel.com/pwb.htm.

24. Corporate social responsibility (CSR) actives

During the year your company has spent an amount of Rs. 29.70 lakhs on CSR actives, against the minimum mandatory amount of Rs. 29.63 lakhs, being 2% of average profit for the last three years.

Details of CSR actives are given in Annexure - 7.

25. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Nirbhaya Act)

There are 107 women employees in your company as on 31st March, 2015 and your company has formulated an ant harassment policy to ensure safe working environment. Your company also has set up an Internal Complaint Committee to redress complaints of women employees.

Details of awareness programmes and complaints are listed in Annexure - 8.

26. Disclosure of significant and material orders passed by regulators etc. under Rule 8(5)(vii) of the Companies (Accounts) Rules 2014

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

27. Disclosure of internal financial control systems and their adequacy Rule 8(5)(viii) of the Companies (Accounts) Rules 2014

The company has in place adequate internal financial controls with reference to financial statements through

- reviews of operations by Board and committees

- vetting of various reports by management

- periodical internal audits

- setting and implementing financial policies

- checks and balances in the ERP system and other measures.

28. Extracts of annual return and other disclosures under the Companies (Appointment & Remunerator) Rules, 2014

Extract of Annual Return in form no. MGT-9 as per Section 92(3) of the Companies Act, 2013 and Rule 12 (1) of the Company (Management & Administrator) Rules, 2014 is annexed hereto and forms part of this report as Annexure- 9.

29. Remunerator of directors and employees and related disclosures Remunerator is paid to directors and employees in accordance with the remuneration policy of the company and applicable statutory provisions.

Particulars required u/s 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remunerator of Managerial Personnel) Rules, 2014 are given as Annexure - 10.

30. Listing on stock exchange

Your Company's shares are listed on the Bombay stock exchange. During the year under review, your company's share price had moved between a maximum of Rs. 329.70 and a minimum of Rs. 70.30. The price closed at Rs. 240.80 on 31st March 2015, an increase of 209% over the price of Rs. 78.00 on 31st March, 2014.

The strength of shareholders has increased from 5,895 on 31.03.2014 to 8,811 on 31.03.2015.

31. Asia Pacific Entrepreneurship Award to Dr. A.N.Gupta

The Board is pleased to inform you that Dr. A.N.Gupta, Chairman and Managing Director of the company, has been conferred the Asia Pacific Entrepreneurship Award in Outstanding category on 21st March, 2015.

32. Industrial relations

Your directors thank all the employees for their cooperation and the contribution towards harmonious relationship and progress of the company.

33. Acknowledgements

Your directors place on record their appreciation of the continued support and cooperation from all employees, customers, suppliers, financial institutions, banks, regulatory authorities and other business associates.

Secunderabad Dr. A.N. Gupta

11.08.2015 Chairman & Managing Director


Mar 31, 2013

Dear Members

The directors are pleased to present the 33rd annual report together with the audited accounts of the company for the year ended 31st March, 2013.

1. Financial performance

(Rs. in lakhs)

2012-13 2011-12

Gross sales 11941.73 11569.18

Excise duty (1058.13) (834.58)

Net sales 10883.60 10734.60

Other operating revenue 56.50 96.93

Other income 206.47 169.89

Net revenue 11146.57 11001.42

Gross profit 1175.04 1908.54

Finance costs (179.89) (101.62)

Depreciation (214.50) (186.66)

Exceptional items(net) (37.06) 39.20

Profit before tax 743.59 1659.46

Provision for tax (209.67) (465.36)

Profit after tax 533.92 1194.10

EPS (Rs.) 6.57 14.69

Net worth 4,845.68 4549.43

Book value per share (Rs.) 59.62 55.98

Your company has achieved a marginal increase in sales revenue at Rs.10884 lakhs for the year 2012-13 compared to Rs. 10735 lakhs in the previous year.

However, production of high-margin detonators being affected by accident, gross profit decreased from Rs. 1909 lakhs to Rs.1175 lakhs and profit before tax from Rs.1659 lakhs to Rs.744 lakhs.

Net profit for the year stood at Rs.534 lakhs, as against Rs.1194 lakhs for the previous year, resulting in a lower EPS at Rs.6.57 coming down from Rs.14.69 for the previous year.

2. Dividend

Your directors recommend a dividend of Rs.2.50 per share for the year ended 31st March, 2013 on the amount of paid up share capital.

3. Reserves

Total reserves as on 31st March, 2013, after providing for dividend for the year, stood at Rs. 4033lakhs, representing an increase of 8% from last year''s Rs.3737 lakhs.

Book value increased from Rs.55.98 per share to Rs.59.62, after providing for the proposed dividend of Rs.2.50 and corporate dividend tax of Re.0.43 per share.

4. Deposits

There were no deposits at the end of the year which were due but not paid.

5. Credit rating

ICRA has maintained the long-term credit rating at ''(ICRA)A-(Stable)'' and short-term rating at ''(ICRA)A2 ''.

6. Accident at detonators plant

There was an unfortunate accident on 16th July, 2012 in ASA section of detonators plant at our Peddakandukuru premises. Apart from damage to assets and stocks, we lost production of about 30 million detonators in the financial year.

Sadly, two of our workers lost their lives.

We analysed the root-cause of the accident and after a thorough debate replaced the highly sensitive chemical ASA with a safer one, NHN. So far this chemical has been tested only at lab scale and no one has attempted to use it at commercial scale, but your company took it as a challenge and started production of NHN detonator after meeting the applicable regulatory requirements. You will be pleased to note the innovative detonator has been accepted by the market as a quality product.

Apart from being safer in production, these new detonators are eco-friendly also, containing no element of lead.

This innovative initiative has consumed a lot of our time and we had to forego some of our revenues in 2012-13.

However, we are happy to inform you that production of detonators has already reached normal level in the first two months of 2013-14.

7. Operations

Owing to the accident, we lost production of about 30 million detonators.

Production of bulk explosives increased to 15,380 tons from previous year''s 14,984 tons, helped by new orders in some locations, though at other locations some old contracts ended or renewals came late.

Packaged explosives plant, commenced in the second half of the year, had stabilized and started yielding revenues.

There had been remarkable improvement in defence and allied products assuaging the other negative impacts to some extent.

Operations & maintenance contracts have given steady streams of revenues.

Windmill at Pushpathur generated 16..41 lakh units of power compared to 16.12 lakh during the previous year.

8. Future outlook

General economic conditions, environmental issues, slowdown in infrastructure projects, etc. are the concerns that can impact the demand for explosives. However, early indications for 2013-14 have been positive so far and your company has been taking necessary steps to achieve better performance during 2013-14.

In June 2013, Ministry of Defence promulgated the Defence Procurement Procedure 2013 aimed at developing a robust indigenous defence sector and creating level playing field between the private and public sectors.

The changes in new policy include simplification of "Buy & Make (Indian)" Procedure, clear definition of indigenous content, finalization of Defence Items List for clarity on licensing, doing away with requirement of licensing for dual-use items (with civil as well as military applications), etc.

The new policy would help in your company''s ambitions to build up defence product capabilities. Premier has already entered defence production sector in a significant way and today it is a niche player in the missile / rocket field and is one amongst a handful of companies with its competence to design and develop the rocket motors. Having been working with many defence entities for about a decade, Premier looks forward to contribute its bit towards strengthening the national defence and security.

9. Statutory auditors

M/s P.V.R.K. Nageswara Rao & Co., Chartered Accountants, Hyderabad retire at the forthcoming annual general meeting and being eligible offer themselves for reappointment.

10. Auditors'' report

Auditors'' report contains a matter of emphasis and a qualification.

Matter of emphasis is about our interests injoint ventures. The company has made full provisions against the investments in joint ventures. As the accounts of these joint ventures are not available, the company''s share of assets and liabilities and income and expenditure could not be given. There is no impact on the profit for the year due to non-disclosure of these details.

Qualification is about the requirement of approval of Central Government for the remuneration paid to Chairman & Managing Director. His remuneration, for a period of three years, had been approved by the shareholders in the Annual General Meeting held on 31st July, 2010, subject to the approval of Central Government, if required. In view of satisfactory financial performance, approval of the Central Government had not been required for the managerial remuneration paid during the years 2010-11 and 2011-12. However, during the year 2012-13 there was an accident in the detonators plant and the operations had been adversely affected. Consequential inadequacy of profit resulted in the managerial remuneration being in excess of the amount payable in terms of sections 198 and 309 read with schedule XIII of the Companies Act, 1956. The company is taking necessary steps to obtain the approval of Central Government.

11. Directors

Mr. P.R.Tripathi and Dr. (Mrs.) Kailash Gupta retire by rotation at the ensuing annual general meeting and being eligible offer themselves for reappointment.

12. Directors'' responsibility statement pursuant to section 217 (2AA) of Companies Act, 1956

Your directors confirm that

a) the applicable accounting standards have been followed;

b) the accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2013 and of the profit of the company for the year ended on that date;

c) proper and sufficient care has been taken 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;

d) the annual accounts have been prepared on a going concern basis.

13. Management discussion and analysis

A report on management discussion and analysis is placed at Annexure-1.

14. Corporate governance

Pursuant to clause 49 of the listing agreement with the stock exchange, a detailed report is given at Annexure-2 along with the auditors'' certificate in the Annexure-3 and CEO & CFO certificate in the Annexure-4.

15. Conservation of energy, technology absorption and foreign exchange earnings and outgo

Information pursuant to section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure-5.

16. Particulars of employees

In accordance with the provisions of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975, particulars of employees of the company are furnished in the Annexure-6.

17. Green initiatives

Your company is installing a new 250KW solar PV plant during the year 2013-14, at Peddakandukuru premises, to ensure uninterrupted production in the power starved state of Andhra Pradesh.

Together with the existing windmill and rooftop solar PV plant, the company would henceforth produce a lot more of green power than the grid-power it consumes.

Your company has been sending electronic documents to the shareholders and thus reducing the paper consumption to an extent.

We reiterate our request to the relevant shareholders to register their email id''s with their depository participants.

E-communication Registration Form (Annexure-7) has been enclosed for this purpose.

18. Research and development

Your company pursues applied research to be able to produce new products and also to produce the old products better.

As mentioned earlier, NHN detonator is one of the products that resulted from our R&D pursuits.

During the year we also produced a unique solid propellant for a prestigious missile program, meeting all the technical parameters.

This year we saw our collaboration with University of Gulbarga yielding the first Ph.D.

The research scholar who worked at Premier''s research centre as part of his doctorate program got the degree for his thesis "Synthesis, characterization and studies of some important noble metal and metal oxide nano- particles as energy materials" under the supervision of two of our directors.

19. Industrial relations

Your directors thank all the employees for their cooperation and the contribution towards harmonious relationship and progress of the company.

20. Acknowledgements

Your directors place on record their appreciation of the continued support and cooperation from all employees, customers, suppliers, financial institutions, banks, regulatory authorities and other business associates.

For and on behalf of the Board

Secunderabad Dr. A.N. Gupta

29.05.2013 Chairman & Managing Director


Mar 31, 2012

The directors are pleased to present the 32nd annual report together with the audited accounts of the company for the year ended 31st March, 2012.

A summary of the results is given below:

1. Financial performance

(Rs. in lakhs)

2011-12 2010-11

Gross revenue 11836.00 10391.68

Excise duty (834.58) (748.99)

Net revenue 11001.42 9642.69

Gross profit 1908.54 1807.39

Finance costs (101.62) (125.79)

Depreciation (186.66) (176.61)

Exceptional items (net) 39.20 -

Profit before tax 1659.46 1504.99

Provision for tax (465.36) (503.46)

Profit after tax 1194.10 1001.53

Earnings per share(Rs.) 14.69 12.33

Dividend per share (Rs.) 2.50 2.00

(subject to approval of the shareholders)

Total shareholders' funds 4549.43 3591.32

Book value per share (Rs.) 55.98 44.19

Your company has achieved a growth of 14% in gross revenue at Rs.11836 lakhs for the year ended 31st March, 2012 compared to Rs. 10392 lakhs in the previous year. Most of the increase has been contributed by accessories while there has been satisfactory growth in other products also. Exports increased from Rs.542 lakhs to Rs.760 lakhs, recording a growth of 40%.

In line with top line, gross profit increased from Rs. 1807 lakhs to Rs.1909 lakhs and profit before tax from Rs.1505 lakhs to Rs.1659 lakhs.

Net profit for the year stood at Rs.1194 lakhs, as against Rs.1002 lakhs for the previous year, resulting in the EPS reaching Rs.14.69 from Rs.12.33 for the previous year.

Book value increased from Rs.44.19 per share to Rs.55.98, after providing for proposed dividend of Rs.2.50 and corporate dividend tax of Rs.0.40 per share.

2. Operations

In the explosives & accessories division, some products have fared well while others could not. Production of detonators increased to 65 million numbers from 48 million last year. However, production of bulk explosives declined to 14,984 tons from previous year's 16,544 tons. Operations & maintenance contracts have been carried out at SHAR,Sriharikota, SFC,Jagdalpur and ARDE, Pune to the satisfaction of our principals.

Windmill at Pushpathur produced 16.12 lakh units of power compared to 14.70 lakh during the previous year.

3. Dividend

In view of higher net profit, your directors recommend a dividend of Rs.2.50 per share for the year ended 31st March, 2012 on the amount of paid up share capital. This is 25% higher than the previous year's dividend of Rs.2.00 per share.

4. Reserves

Total reserves as on 31st March, 2012, after providing for dividend for the year, stood at Rs.3737 lakhs, representing an increase of 34% from last year's Rs.2779 lakhs.

5. Future outlook

Despite some concerns about environmental impact, increasing need for power is expected to result in expanded mining activity which would create higher demand for the company's products.

Revenues from defence explosives are expected to increase after having commissioned the expansion project in March, 2012, as Government has allocated larger funds for defence procurement.

There has been severe competition in some of the recent tenders and the company decided to withdraw from participation. Your company is taking necessary steps, like focusing on exports, to create alternative income streams for maintaining healthy growth.

6. Deposits

There were no deposits at the end of the year which were due but not paid.

7. Credit rating

During the year ICRA has upgraded the long-term credit rating from 'LBBB (Stable)' to '(ICRA)A-(Stable)' and short-term rating from 'A2' to '(ICRA)A2 '.

Further improving balance sheet is expected to lead to better rating in coming years.

8. Green initiatives

This year also, windmill and rooftop solar PV plant produced more green power (around 16 lakh units) than the grid power (around 13 lakh units) drawn by the company.

Following the "Green Initiative for Corporate Governance", your company has sent notices and documents to the shareholders by electronic means, thus reducing the paper consumption to an extent.

Your company appreciates the shareholders for wholeheartedly agreeing for electronic communication.

Shareholders, who have not yet registered their email id's, are once again requested to send the E-communication Registration Form to their depository participants or to the company, to make this green initiative 100% successful.

9. Statutory auditors

M/s P.V.R.K. Nageswara Rao & Co., Chartered Accountants, Hyderabad retire at the forthcoming annual general meeting and being eligible offer themselves for reappointment.

10. Auditors' report

Auditors have made an observation in their report pertaining to note no. 31.2.16 of Notes on accounts. This note is self explanatory.

11. Directors

Dr. Haridwar Singh and Mr. Anilkumar Mehta will retire by rotation at the ensuing annual general meeting and being eligible offer themselves for reappointment.

12. Directors' responsibility statement pursuant to section 217 (2AA) of Companies Act, 1956

Your directors confirm that

i) the applicable accounting standards have been followed;

ii) the accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2012 and of the profit of the company for the year ended on that date;

iii) proper and sufficient care has been taken 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;

iv) the annual accounts have been prepared on a going concern basis.

13. Management discussion and analysis

A report on management discussion and analysis is placed at Annexure-1.

14. Corporate governance

Pursuant to clause 49 of the listing agreement with the stock exchange, a detailed report is given at Annexure-2 along with the auditors' certificate in the Annexure-3 and CEO & CFO certificate in the Annexure-4.

15. Conservation of energy, technology absorption and foreign exchange earnings and outgo

Information pursuant to section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure-5.

16. Particulars of employees

In accordance with the provisions of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975, particulars of employees are furnished in the Annexure-6.

17. Industrial relations

Your directors thank all the employees for their cooperation and the contribution towards harmonious relationship and progress of the company.

18. Acknowledgements

Your directors place on record their appreciation of the continued support and cooperation from all employees, customers, suppliers, financial institutions, banks, regulatory authorities and other business associates.

For and on behalf of the Board

Secunderabad Dr. A.N. Gupta

23.05.2012 Chairman & Managing Director


Mar 31, 2011

The directors are pleased to present the 31st annual report together with the audited accounts of the company for the year ended 31st March, 2011.

A summary of the results is given below:

1. Financial performance

(Rs. lacs)

2010-11 2009-10

Gross revenue 10391.68 9668.94

Excise duty (748.99) (606.50)

Net revenue 9642.69 9062.44

Gross profit 1821.80 2340.36

Financial costs (140.21) (153.24)

Depreciation (176.61) (147.65)

Profit before exceptional

items and tax 1504.98 2039.47

Exceptional items:

Write-offs / provisions relating

to joint ventures - (740.97)

Profit after exceptional items &

before tax 1504.98 1298.50

Provision for tax (including

deferred tax) (503.46) (704.18)

Profit after tax 1001.52 594.32

Profit brought forward 1452.07 1147.21

Profit available for appropriation 2453.59 1741.53

Appropriations

- Dividend (162.51) (162.48)

- Dividend tax (26.36) (26.98)

- General Reserve (250.00) (100.00)

Balance carried forward 2014.72 1452.07

Earning per share (Rs.)3 12.33 7.32

Your company has recorded a growth of 7% in gross revenue at Rs.10392 lacs for the year ended 31st March, 2011 compared to Rs. 9669 lacs in the previous year. Increase in sales from defence products and from Neyveli and Jagdalpur divisions exceeded the shortfall in detonators division and overall there had been a net increase in sales. Exports also increased from Rs.419 lacs to Rs.542 lacs.

However, gross profit decreased from Rs. 2340 lacs to Rs.1822 lacs due to lower production of detonators on account of longer than normal monsoon and due to higher employee cost.

After making provisions relating to joint ventures (current year: nil, previous year: Rs.741 lacs), net profit for the year stood at Rs.1001 lacs, as against Rs.594 lacs for the previous year.

EPS for the current year is Rs.12.33 compared to Rs.7.32 for the previous year

2. Operations

a) Bulk explosives - production at 16,544 tons was slightly lower than previous years 16,959 tons. Higher production at Neyveli compensated the decrease in other units.

b) Detonators - prolonged monsoon had brought down the production volume to 48 million pieces from 68 million in previous year.

c) Operations & Management contracts at Sriharikota and Jagdalpur generated steady income streams.

d) Windmill at Pushpathur produced 14.70 lac units of power.

3. Future outlook

Having the economic crisis behind, the countrys economy is on growth path again. This assures the company a promising performance in the coming years.

Private sector participation is being encouraged in defence supplies and the company plans to enhance its presence in this arena.

4. Dividend

Your directors are glad to recommend a dividend of Rs.2.00 per share for the year ended 31st March, 2011 on the amount of paid up share capital.

5. Reserves

The total reserves as on 31st March, 2011, subject to declaration of dividend for the year, stood at about Rs.2779 lacs, representing an increase of 39% from last years Rs.2,000 lacs.

6. Deposits

There were no deposits at the end of the year which were due but not paid.

7. Dues to financial institutions

There were no delays in payment of interest and principal amounts to financial institutions during the financial year.

With full repayment of term loan from Export Import Bank of India during the year, there were no term loans outstanding at the end of the year.

8. Credit rating

During the year ICRA has upgraded the long-term credit rating from LBBB to LBBB+(Stable) and short-term rating from A3+ to A2.

This rating is expected to improve further with a more strengthened balance sheet now.

9. Change of registered office

During the year your company has constructed a new office building and shifted the registered office to the new premises on 12th February, 2011.

10. Green initiatives

- As mentioned in the previous report, your company has commissioned a 0.80 MW windmill in September 2010. In February 2011, a 20 KW rooftop solar PV plant was installed at the new office building. With these green initiatives, the quantum of power added to the grid (around 15 lac units) is more than that drawn by the company from the grid (around 12 lac units). Thus the companys manufacturing and operations, in net effect, are carbon-positive.

- As part of "Green Initiative for Corporate Governance", recently, the government has allowed companies to send notices and documents to their shareholders electronically to facilitate paperless communication.

This will ensure prompt communication and avoid loss of documents in transit.

Hence, shareholders are requested to register their email ids with their depository participants or with the company.

11. Statutory auditors

M/s P.V.R.K. Nageswara Rao & Co., Chartered Accountants, Hyderabad retire at the forthcoming annual general meeting and being eligible offer themselves for reappointment.

12. Auditors report

Auditors have made an observation in their report pertaining to note no. 20 of Notes to Accounts (Schedule 27). This note is self explanatory.

13. Directors

Dr. A. Venkataraman and Mr. K. Ramarao will retire by rotation at the ensuing annual general meeting and being eligible offer themselves for reappointment.

14. Directors responsibility statement pursuant to section 217 (2AA) of Companies Act, 1956

Your directors confirm that

i) the applicable accounting standards have been followed;

ii) the accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2011 and of the profit of the company for the year ended on that date;

iii) proper and sufficient care has been taken 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;

iv) the annual accounts have been prepared on a going concern basis.

15. Management discussion and analysis

A report on Management Discussion and Analysis is placed at Annexure-1.

16. Corporate governance

Pursuant to clause 49 of the listing agreement with the stock exchange, a detailed report is given at Annexure-2 along with the auditors certificate in the Annexure-3 and CEO & CFO certificate in the Annexure-4.

17. Conservation of energy, technology absorption and foreign exchange earnings and outgo

Information pursuant to section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure-5.

18. Particulars of employees

In accordance with the provisions of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975, particulars of employees of the company are furnished in the Annexure-6.

19. Industrial relations

Your directors thank all the employees for their cooperation and the contribution towards harmonious relationship and progress of the company.

20. Acknowledgement

Your directors place on record their appreciation of the continued support and cooperation from all employees, customers, suppliers, financial institutions, banks, regulatory authorities and other business associates.

For and on behalf of the Board

Secunderabad A.N. Gupta

19.05.2011 Chairman & Managing Director



 
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