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reducing risk, enhancing value
Hindustan Sanitaryware & Industries Limited Annual Report 2004-05
FORWARD-LOOKING STATEMENT
In this Annual Report we have disclosed
forward-looking information to enable
investors to comprehend our prospects and
take informed investment decisions. This
report and other statements - written and
oral - that we periodically make contain
forward-looking statements that set out
anticipated results based on the
management’s plans and assumptions. We
have tried wherever possible to identify
such statements by using words such as
‘anticipate’, ‘estimate’, ‘expects’, ‘projects’,
‘intends’, ‘plans’, ‘believes’, and words of
similar substance in connection with any
discussion of future performance.
We cannot guarantee that these forward
looking statements will be realized,
although we believe we have been prudent
in assumptions. The achievement of results
is subject to risks, uncertainties and even
inaccurate assumptions. Should known or
unknown risks or uncertainties materialize,
or should underlying assumptions prove
inaccurate, actual results could vary
materially from those anticipated, estimated
or projected. Readers should bear this in
mind.
We undertake no obligation to publicly
update any forward-looking statements,
whether as a result of new information,
future events or otherwise.
CONTENTS
Our Identity 3 Our Performance 4 Chairman’s Review 6 Managing Director’s Review 16 Management Discussion and Analysis 21 Building
Products Division 29 Container Glass Division 37 Risk Management 49 4-Year Financial Summary 54 Ratios and Ratio Analysis 56 Board
of Directors 58 Responsibility Statements 61 Directors’ Report 63 Corporate Governance 70 Financial Section 76 A PRODUCTinfo@trisyscom.com
1
Knowledge is of no value unless you put it into practice.
-Anton Chekov
A number of observers have debated what it takes to enhance valuein a sustainable way for the widest number of stakeholders.
This is our response.
Value-creation goes beyond products and processes; it extends to values, mindset and philosophy.
It is not limited to select processes, but an organisation-wide culture.
It is not a one-off initiative, but an unceasing obsession.
It is not focusing on just the last mile, but the extra mile.
2
3
Business: HSIL enjoys a visible presence in twobusinesses – building products andcontainer glass. The company’s buildingproducts are retailed under the brandnames of ‘Hindware’ and ‘Raasi’ andcontainer glass products are sold directly toinstitutional customers under the ‘AGI’brand.
Presence: HSIL enjoys a 36% market share of India’sorganised sanitaryware business and a 13%share of India’s container glass business.
Operations:HSIL’s operations are spread across threemanufacturing facilities — Bahadurgarh(Haryana) and Bibinagar (Andhra Pradesh)for its building products and Hyderabad(Andhra Pradesh) for container glassproducts – which provide operationalflexibility and a proximate access to its
principal markets. The company issupported by four regional offices, fourarea offices and a distribution networkcomprising 925 dealers and approximately12,000 retail outlets.
Track record:HSIL stands for product quality andinnovation. It has been a profitablebusiness entity since 1962, and has paiddividends every year in its existence (exceptone). Its revenues and profits haveimproved consistently – at a CAGR ofabout 13% and 10% respectively in the fiveyears leading to 2004-05.
Listing: HSIL’s shares are listed on the Mumbaiand the National stock exchanges. Thecompany’s market capitalisation was Rs 221 cr on 31st March, 2005 (BSE). Thepromoters hold approximately 65% of thecompany’s equity.
Hindustan Sanitaryware &Industries Limitedis one of the two largest sanitarywaremanufacturers and one of the larger containerglass manufacturers in India.
Our identity
Our performance
In our numbers• 8.54% growth in revenue
• 18.25% increase in EBIDTA
• 152 basis point growth in EBIDTA margin
• 19.23% rise in cash flow
• 24.09% growth in profit after current year tax(excluding exceptional income and tax thereon)
Inside our operations• 112% capacity utilisation at the Bibinagar plant
• Rs 73 cr container glass unit modernisation successfullycommercialised
• 19 new products introduced in the sanitaryware segment of thebuilding products division
• 28 new products launched by the container glass division
• 8% reduction in power consumption per unit of output in thecontainer glass division
Revenue (Rs/cr) EBIDTA (Rs/cr) PAT (Rs/cr)
*Excluding exceptional income and tax thereon
5
in 2004-05
In the Boardroom• Rs 18 cr repayment of debt
• 154 basis point reduction in theaverage debt cost
• 55% proposed dividend to equityshareholders
• A bonus issue in the ratio of 2:3 inOctober 2004
In the domestic markets• 24% increase in the offtake of buildingproducts (by value)
• Introduced its range of stainless steel kitchensinks in India
• Introduced its own range of faucets under the‘Hindware’ brand to complement itsinternational products
• First year of launch of the internationallyrenowned Keramag brand
In the internationalbusiness space• 27% growth in exports
• Seven new markets addressed
Adjusted EPS (Rs) Adjusted book value (Rs)
* Adjusted for split (Rs.10 each to Rs.5 each in2003-04) and bonus issue (2:3 in 2004-05)
*Adjusted for split (Rs.10 each to Rs.5 each in2003-04) and bonus issue (2:3 in 2004-05)
** Excluding exceptional income and tax thereon
Adjusted DPS*** (Rs)
*Adjusted for split (Rs.10 each to Rs.5 each in2003-04) and bonus issue (2:3 in 2004-05)
***Dividend per share
0.17 2.96 8.20** 10.17
2001-02* 2002-03* 2003-04* 2004-05
46.08 48.54 57.74 59.67
2001-02* 2002-03* 2003-04* 2004-05
0.15 0.45 1.50 2.75
2001-02* 2002-03* 2003-04* 2004-05
6
Chairman’s statementHow does Hindustan Sanitaryware & Industries Limitedreconcile the existence of two diverse businesses in aworld that is beginning to swear by core competence?
THIS IS A QUESTION THAT I AM OFTEN ASKED THESE DAYS BY ANALYSTS AND SHAREHOLDERS.
I think the answer lies in the fact that we have run both these businesses with an unmistakable perspective to enhance value.
The result is that even though we were not the biggest when we entered each of these businesses, we are today one of the twolargest sanitaryware manufacturers and one of the largest container glass manufacturers in India. Our Building Products Divisionis not only the most profitable in India, but also had the biggest growth rate in comparison to our competitors.
The result is evident: during the year under review, we reported record numbers for the company:
• Revenue at Rs. 331.56 cr
• EBIDTA at Rs. 60.68 cr
• Gross profit at Rs. 49.79 cr
• Profit before tax at Rs. 28.97 cr
7
Significance of value creationIt might be simplistic to ascribe the scaleand quality of this performance simply to arebound in the Indian economy. It wouldbe realistic to trace their origin to India’saccelerating liberalisation and theintegration into global economy, becausethese two developments changed a numberof business realities in India. Primarily they:
• increased disposable incomes
• created a new generation of consumers
• created an aspiration for better lifestyles
• increased competition among productmanufacturers
• evolved businesses from the cost-plus tothe revenue-minus model
AchievementsIn response to these paradigm-changingdevelopments, HSIL enlarged itsproduction scale, widened its productrange, introduced value-added varieties andreduced costs.
In addition to this,
• We leveraged the value of our quality bymarketing products in the internationalmarkets, thereby helping us enhance theutilisation of our assets. Today, exportsaccount for 14.27% of our company’srevenue
• We leveraged the strength in ourdistribution network by bringing the bestinternational products into India, therebyproviding a wider choice. Today,outsourced products account for 30.17% ofour building products division’s revenue
• We extended the range of our productsfrom the value-for-money to the value-
added, thereby providing a product to suitevery pocket. Today, our building products’range extends from Rs. 125 to Rs. 100,000per unit
• We enhanced the proportion of our highvalue-added products, thereby enhancingour return on invested capital. Today, theproportion of value-added productsaccounts for nearly 12% of our buildingproducts division’s revenue compared to5% three years ago
• We acquired complementary plants andbrands at modest costs, therebystrengthening the value of our business.Today, our capital cost across bothbusinesses is one of the lowest in India
• We entered a complementary high marginand high growth sector of kitchenproducts, making it convenient for theconsumer to buy both products from asingle retail outlet. Over the coming years,revenue from these outsourced products isexpected to account for about 10% of ourbuilding products division’s revenue
• We did all this at progressively lower costof capital. Even though our debt-equityratio increased from 1.08x to 1.53x (2004-05), our interest cover strengthened from4.36x to 5.57x (2004-05) and our weightedaverage cost of debt reduced by 154 basispoints to 7.59%
Shareholder value creationDuring the year under review, HSILshareholders experienced a significantincrease in their value of shareholdings.HSIL stock price increased from Rs. 63.30(adjusted for 2:3 bonus) as on 31st March,2004 to Rs. 118.05 as on 31st March, 2005,
resulting in an appreciation of 86.49%(excluding Rs. 2.50 dividend per pre-bonusshare). This compares extremely favourablyto a 16.14% increase in Sensex during thesame period.
Outlook We are optimistic about our prospects for anumber of reasons:
• India’s GDP growth at 7% over the nexttwo years is expected to make it the fastestgrowing economy, second only to China
• India’s existing housing shortage of over22.5 million dwelling units is expected to beaddressed more now than ever before
• An increase in the construction of mallsand shopping complexes – an estimated600 such malls, covering an estimated areaof 100 mn sq ft over the next five years –will trigger a bigger demand for buildingproducts
• A booming tourism will increase theavailability of hotel rooms, driving thedemand for building products
• Closure of international sanitarywarecapacity of around 5-6 million units isexpected to be sourced from low-costdeveloping economies
HSIL expects to capitalise on theseopportunities and grow its turnover andbottomline significantly over the comingyears.
R.K. Somany
Chairman
8
‘Value creation’
Product range
is not just about increasing realisations...
9
In a world where few people possess the luxury of shopping for diverse products fromdifferent locations, we define success by the extent to which we can cater to all these differentcustomer needs (pertaining especially to bathrooms) from a single point. And by being able tointegrate the customer’s different requirements into a single comprehensive solution.
Over the years, we have done so across both our divisions through the following initiatives:
Building products • Bathroom solutions: Evolution from a squatting pan manufacturer into a completebathroom solutions provider covering EWCs, wash basins, pedestals, bidets, bathtubs,whirlpools, shower enclosures and faucets among others
• Entire customer range: Evolution from a middle market product provider to the completeconsumer range: Raasi (low-end), Hindware and Hindware Art (mid level), Hindware Italiancollection (upper middle and upper categories) and Keramag /Grohe (top end)
• Manufacture and outsourcing: Reinforcement of a proprietary product range with thecontinued international outsourcing of the ‘Keramag’ and ‘Grohe’ brands, as well as showersolutions and bathtubs, resulting in the delivery of complete bathroom solutions
• Ongoing additions: Addition of 19 new products to its existing product portfolio and theintroduction of Hindware faucets, completing the Hindware range; entry into the newbusiness segment of kitchen sinks in 2004-05
Container glass • Choice: The ability to manufacture three colour types – flint (colourless), green and amber
• Increasing range: The introduction of 28 products in 2004-05 to its existing 356 productportfolio
• Result: Customers across both our divisions have access to more than 6,000 SKUscomprising products across the entire respective value chains
...but providing every customer with acomplete solution.
10
‘Value creation’
Outperforming the industry
is not just about staying ahead of the times...
11
In a world where consumer preferences evolve every few weeks, we define success by thespeed and extent to which we can proactively address these changes, capture a larger share ofthe market and stay consistently ahead of our competition.
Over the years, our initiatives in this direction have comprised the following:
• Strengthening our competitive edge: By intelligently increasing our scale to achieve thelowest capital cost per unit in the industry. Enabling us to grow our profits in good times andbad
• Improving product quality: By continuously making products better, costs lower andproductivity higher. Enhancing the company’s competitive edge
• Expanding our product basket: By proactively catering to emerging consumer preferences.Replacing product push with a distinctive consumer pull
• Strengthening our visibility: By creating a pan-India presence through a wide and deepdistribution network. Facilitating the placement of the right product in the right place at theright time — every time
• Capitalising on emerging opportunities: By capitalising on value-enhancing acquisitionopportunities in the Indian industry. Thereby strengthening our competitive edge andenhancing our profitability
Result: Our building products’ growth of more than 20 per cent outperformed the industryaverage of about 12 per cent; our container glass division raised its market share in 2004-05.In doing so, the company retained its position as being among India’s top two buildingproducts players and one of the largest container glass manufacturers.
...but in doing so, staying ahead of thecompetition as well.
12
‘Value creation’
Operational excellence
is not just about increasing production...
13
In a world where there are just too many brands and too many products offering me-tooconveniences, we define effectiveness in being able to introduce products that address allconsumer needs at the most affordable price.
Over the years, we have done so across both our businesses through a number of initiatives:
Building products
• Internal re-engineering: The use of state-of-the-art technology to shrink manufacturing cycletime by more than 50% over the years and enhancing productivity from 3800 units per day to4150 units per day at no additional cost at one of our manufacturing facilities
• Greater efficiency: A prudent management of process parameters to rationalise powerconsumption
• Precise manufacture: Accurate designing and productisation through the introduction ofProEngineer, Pro-Design and other sophisticated software, reducing the concept tocommissioning time for a new product from 20 weeks to 14 weeks
• Onward investment: An expansion of the Bibinagar capacity by 6000 TPA at an investmentof approximately Rs 26 cr to reduce the marginal cost of production
Container glass
• Research and integration: The integration of research with in-house mould-making to shrinkproduct creation time from 75 days to a mere 30 days
• Better products: The creation of the largest and the quickest six-colour printing facility
• Cheaper manufacture: A leveraging of the Rs 73-cr modernisation programme to reduce themelting cost by 19%
Result: These initiatives rationalised manufacturing costs from 65.93% of income in 2003-04to 63.39% in 2004-05 despite higher fuel prices.
...but at the same time decreasingcosts of production.
14
‘Value creation’
People productivity
is not just about getting people to work harder...
15
In a world where intellectual capital is now being respected as the most precious of allresources, we believe that people investments are the only investments not subject to the lawof diminishing returns. In view of this, we have invested in our people through the followinginitiatives:
• Associations: Partnership with NIS Sparta, Asia’s largest training institute, to provideperformance enhancement solutions; retainership of reputed human resource consultanciesfor an accurate employee job evaluation, identification of productivity constraints, preparationof employee profiles and the identification of capability gaps leading to customised training
• Training investments: Increase in internal training from 2,252 person days in 2003-04 to2,309 person days in 2004-05 (despite an operational disruption for 62 days at theBahadurgarh facility); the provision of external training to employees in renowned institutions;an increase in training expenses from Rs 6.63 lakhs in 2003-04 to Rs 18.71 lakhs in 2004-05
• Transparency: A documented performance appraisal and a transparent promotion policyadequately communicated to all employees, enhancing confidence
• Recognitions: The creation of a Chairman’s Club, an award-based incentive to inspiresuperior performance
Result: Per person productivity was at an all-time high across both businesses; per personrevenue grew from Rs 13.99 lakhs in 2003-04 to Rs 14.03 lakhs in 2004-05; per person profitgrew from Rs 1.26 lakhs in 2003-04 to Rs 1.37 lakhs in 2004-05.
...but about enhancing their skills so that they lead their respective businesses.
16
"A number of business-enhancing initiatives takenin 2004-05 will enable usto touch Rs 500 crturnover by 2007"Mr. Sandip Somany, Joint Managing Director, reviews the performance of the company for
2004-05 and charts out an exciting road map
17
Q QHow would you rate theperformance of the companyin 2004-05?
It was an excellent year. Our revenue grew8.54% to Rs 331 cr, PBT by 35% to Rs 28.97cr and EBIDTA margin by 152 basis points to20.42%. If I could encapsulate the reason forthis in one line, it would be this: we adhered toa policy based on value, not volume. The resultis this: the sanitaryware industry recorded agrowth of only 12%, we grew by 24%; thecontainer glass division witnessed a stableperformance. As a result, our net profit of Rs19.03 cr for 2004-05 was a record andsignificantly higher than our previous best.What is more heartening is that we reported aprofitability at the operating level that wassignificantly higher by more than 33% overour closest competitor.
How would you rate theperformance of the buildingproducts division?
We witnessed a significant improvement in itsperformance during the year under review as aresult of the following initiatives:
• The successful marketing of outsourcedinternational brands like ‘Keramag’ and ‘Grohe’to brand-enhancing clients like the Taj Groupof Hotels, the Marriott Group, the SaharaGroup, the Atrium Mall in Mumbai as well asUnitech and ATS Greens among others
• A successful branding strategy, whichincreased Hindware revenues from Rs 81.99 crin 2003-04 to Rs 93.58 cr in 2004-05
As a result, building products revenues grew bymore than 24% over the previous year andPBIT from Rs 19.98 cr in 2003-04 to Rs 26.96cr in 2004-05.
18
Q Q QWhat was the strategy forgrowth in India?
The Indian construction sector hasexperienced robust growth, a direct andindirect impact of favourable governmentpolicies leading to enhanced literacy,increasing commercial significance, rapidurbanisation and large housing andcommercial construction.
Interestingly, this demand has not beenconcentrated in the metros and other majorcities, but is emerging from the hithertosmaller cities and towns; creating a hugegrowth potential. We proactively studiedthe potential areas, selected the high growthregions and increased our visibility in them.In doing so, we strengthened ourdistribution network by 201dealers/sub-dealers, increased our ad-spend andintroduced a large product range, therebyproviding the customer with a product tosuit every need. As a result, our marketshare in the domestic business spaceincreased significantly.
What were the highlights ofthe performance of thecompany’s container glassdivision?
The new furnace that we commissioned inSeptember 2004 has turned out to be theinflection point in our division’s history fora number of reasons: its technology isenabling us to significantly reduce powercost and melting costs; it has encouraged usto venture into new product developmentin the areas of packaged food and beer; ithas provided us with the necessaryflexibility to cater to the domestic andinternational markets seamlessly. In short,we strengthened our brand, the benefits ofwhich will be perceived in the comingyears.
What initiatives did thecompany embark upon in2004-05, which will havelong-term growthimplications?
In the container glass division, we clearlystrengthened our market presence with thesuccessful implementation of ourmodernisation and upgradationprogramme; for instance, the improvedinfrastructure gave us just the inspiration tomove to a wider product range: wedeveloped 28 new products in 2004-05,specifically targeted at the packaged foodand liquor segments. The results wereimmediate: contribution from the foodssegment and the liquor industry grewsignificantly during 2004-05.
In the building products division, our focuswas more on the marketplace: wedistributed our existing products wider anddeeper, introduced new products,outsourced new product ranges frominternational majors and created synergisticbut completely new business streams likekitchen sinks and Hindware faucets,replenishing our income with younger andfaster growing revenue streams.
19
Q Q QOne question here: what isthe synergy betweenbathroom products and thekitchen segment?
It was an interesting observation thatenabled us to chance upon thisopportunity: since a majority of thekitchenware (sinks, chimney and hobs) issold at building product showrooms, werecognised our advantage – a nationwidedistribution network of around 5000 stores.We moved into kitchen sinks for anotherreason: there are only a few brands in Indiacatering to this segment. During the currentyear, we expect to enter into thedistribution of kitchen hobs and chimneys,enlargening our synergistic presence.
What factors are expectedto drive business growth?
A significant capacity shutdown hastranspired among US and Europeanbuilding product manufacturers, promptingthem to increasingly outsource from lowcost developing countries. To capitalise onthis trend, we have taken two steps: forgedlong-term supply alliances with Europeanmajors and are in the process of expandingour building products capacity.
Within India, there is a perceptiblemovement towards improved lifestyles,resulting in a greater investment inbathrooms. Besides, the creation ofadditional hotel rooms to meet the growingtourist demand is driving the demand forinternational brands, prompting us to forgeoutsourcing alliances with internationalmajors and provide complete bathroomsolutions in India.
What initiatives has thecompany taken to enhanceshareholder value?
Over the years, even as our functionalobjective was to manufacture and marketquality products, our primary responsibilitywas to enhance shareholder value. We havedone exceedingly well in the latter.Consider this: Rs 1000 invested in 2002-03would have grown to Rs 10,667 as on 31stMarch, 2005 (including dividends).
We rewarded our shareholders in 2004-05with a bonus issue in the ratio of 2:3. Indoing so, bonuses now account for close to52% of the total equity capital of thecompany. Besides, we increased theliquidity in our listed shares through a splitin their face value and announced anincreased dividend on the enhanced sharecapital. On the overall, we expect to rewardour shareholders by growing from a Rs 331-cr topline company in 2004-05 toRs 500 cr by 2007.
20
21
Managementdiscussion andanalysis2004-05 vs 2003-04
The financial year 2004-05 was another record one for thecompany:
• Revenue touched Rs. 331 cr, a growth of 8.54% over theprevious fiscal
• Exports were Rs. 42.39 cr, a growth of 27% over theprevious fiscal
• EBIDTA was Rs. 60.68 cr, an increase of 18.25% over theprevious fiscal
• EBIDTA margin grew by 152 basis points to 20.42%
• Cash profit grew by 19.23% to Rs. 39.85 cr
• Profit after tax was Rs. 19.03 cr, an increase of 24% overthe previous financial year
Revenues
Growing revenues only reflect the increasing acceptance of anorganisation’s brand. At HSIL, revenue increased 8.54% toRs. 331 cr in 2004-05 derived from the following:
• Revenue increase in the building products division
• Larger exports from both divisions
112
Building products
Rs. /cr
Container glass
2001-022001-02 2002-03 2003-04 2004-05
99
118
135 137
168 169162
22
2001-02 2002-03 2003-04 2004-05
7
20
33
42
Export turnover (Rs./cr)
Building products division
The division’s revenues increased from Rs. 137 cr in 2003-04to Rs 169 cr in 2004-05; it increased from 45% of thecompany’s revenues in 2003-04 to 51% in 2004-05, facilitatedby:
• A big improvement in revenue from the allied productsdivision
• A significant increase in the acceptance of the international‘Keramag’ and ‘Grohe’ brands
• The introduction of ‘Hindware’ faucets
• An extension into kitchen sinks
Revenue break-up (Rs./cr)
Revenues 2001-02 2002-03 2003-04 2004-05
Manufacturing revenue 96.37 96.46 108.51 123.06
Outsourced products revenue 15.92 21.75 28.96 46.31
An analysis of the revenue of the building products divisionreveals that outsourced products revenue grew by about threetimes across four years on account of an increasing thrusttowards the outsourcing of products for resale. In 2004-05 thecompany launched kitchen sinks and ‘Hindware’ faucets,which were outsourced from dedicated vendors. Besides, thecompany launched its top-end international brand, Keramag,which was outsourced from world leaders in the productsegment. This revenue stream is only expected to increase inthe coming years, with the company forging alliances withreputed international brands for outsourcing other bathroomproducts.
Container glass division
Revenue from the container glass division declined 3.79%over 2003-04, primarily on account of production dislocationdue to the modernisation and upgradation programme.
Exports
The company’s exports increased 27% over the previous fiscalwith both divisions contributing significantly to this revenuestream. In the container glass division, an increasingrequirement from quality conscious markets of US, Europeand neighbouring developing economies strengthened exports.The building products division exported its ‘Hindware’product range to developed and developing economies.
CostsPrudent cost management enabled the company to cap itsexpenses in an environment of rising oil prices.
How every rupee earned was utilised (%)
Segments (Percentage of total income)
2003-04 2004-05
Raw material and goods purchased for resale 24 28
Stores and spares 4 4
Power and fuel 20 19
Employee costs 13 11
Other manufacturing expenses 5 6Administrative and selling expenses 14 13
Interest 5 3
Depreciation 7 7
Tax 2 3
Profit 6 6
23
Raw materials and goods purchased for resale
This expense head increased 43% from Rs. 62.40 cr to Rs.89.35 cr in 2004-05.
Goods purchased for resale: The growth in input costs wasprimarily on account of the increase in outsourcing activity inthe building products division, which resulted from a largerquantum of outsourced products comprising kitchen sinks,faucets and international brands (Grohe and Keramag).
Raw materials: Raw material expenses increased by about 20%over the previous year on account of the following:
• Increased production by more than 50 mn bottles in 2004-05in the container glass division
• Increased volumes in the Bibinagar plant of the buildingproducts division
Power and fuel
In 2004-05, energy consumption increased with the increase inoperations thereby increasing the energy bill for the companyby about Rs. 7 cr.
HSIL prudently subscribed to the equity of APGPGL (co-operative power major), which enabled it to address 50 %and 41% of its total 2004-05 electricity consumption inBibinagar and Container Glass division respectively. The ratescharged by APGPGL were substantially cheaper than thosecharged by the power utilities.
Besides, the company took a number of initiatives to reduceits power costs at both its business divisions during the yearunder review.
Sanitaryware
• Utilisation of waste heat in the operational process, reducingits dependence on LPG
• Switch from LPG to RLNG at the Bahadurgarh unit,reducing cost of fuel by more than 90 paise per 1000 kcal
Container glass
Commissioning of a new furnace in September 2004 facilitateda 19% decline in melting cost, an annualised saving of Rs. 3 cr,the full impact of which is expected to be reflected from2005-06 onwards.
Employee costs
The company entered into a wage agreement across itsBahadurgarh and Bibinagar units, linking the latter toemployee productivity. Employee cost as a proportion of total
income declined from 12.80% in 2003-04 to 11.21% in 2004-05.
Other cost-cutting initiatives
The company embarked on the following cost-cuttinginitiatives across its divisions:
Sanitaryware
• A decline in mould weight
• A decline in the weight of some products without affectingproduct quality and durability
• A reduction of in-process wastage through improvedcollection and reuse
• A decline in breakage incidence due to stringent control
Container glass
• A decline in the melting cost
• Weight reduction of bottles through design innovation
• Increase in the speed of bottle-forming leading to higherproductivity
MarginsDespite increasing input costs, the company strengthened itsEBIDTA margins from 18.90% in 2003-04 to 20.42% in2004-05 and net margin from 5.65% in 2003-04 to 6.41% in2004-05 through the following initiatives:
• Higher realisations
• Improved product-mix
• Larger volumes
• Stringent cost control
2001-02 2002-03 2003-04 2004-05
20.9419.23 18.90
20.42
EBIDTA margin (%)
24
Own fundsEquity capital: The company’s equity share capital comprised187,10,203 equity shares of face value of Rs. 5 each. Thiscomprised of 51.88% shares issued as bonus shares throughthe capitalisation of free reserves. The company issued bonusshares in October 2004 in the ratio 2:3, which increased theequity share capital during the year. The promoters hold closeto 65% of the total subscribed and paid-up capital of thecompany as on 31st March, 2005.
Reserves: Reserves represented cumulative earnings used forreinvestment into the business. Reserves declined marginallyfrom Rs. 102.41 cr in 2003-04 to Rs. 102.28 cr in 2004-05 dueto the impairment of assets at the Raasi manufacturing unit.Of the total reserves, Rs. 13.44 cr comprised capital reserveswhile free reserves stood at Rs. 88.84 cr towards the close of2004-05, accounting for 87% of the total reserves.
Reserves (excluding revaluation reserves)
During the last decade, the company invested Rs. 312 cr intoits business, of which 55% was financed through internalaccruals. This consistent plough-back translated into animproved return on net worth from 6.13% in 2002-03 to17.13% in 2004-05.
Loan fundsLoans comprised a significant part of the company’s employedcapital.
Over the years, the company expanded its operational scale,increasing its debt liability. This enabled it to strengthen itsbusiness model and create the following virtuous cycle:marketing of quality products, improved realisations, costcutting, increased profitability, enhanced ploughback andprogressive loan repayment. This enhanced the company’sfinancial stability (reflected in a declining debt-equity ratiofrom 1.91 in 2001-02 to 1.08 in 2003-04) which enabled it toleverage the same for its expansion projects.
In 2004-05, external debt increased by Rs 55 cr primarily as aresult of the funding of the Rs 73-cr investment in amodernisation and upgradation program at its container glassdivision (commissioned in September 2004). As a result, theproportion of debt increased from 45.76% of the total capitalemployed in 2003-04 to around 54.21% as on 31st March,2005.
The company rationalised its secured loan portfolio,replacing high coupon debentures in favour of low cost termloans from banks. Unsecured loans comprised deferred salestax credits and low cost trade deposits from dealers. Being anA1+ company (rated by ICRA), the company leveraged theuse of low cost commercial paper to meet its working capitalrequirements.
In 2004-05, the company undertook the following torationalise the cost of debt :
• Repaid borrowed funds worth Rs. 18 cr (Rs. 22 cr in 2003-04)
• Repaid debentures worth Rs. 13 cr with a coupon rateof 13.50%
• Swapped dear funds from institutions with lower costoptions from commercial banks
• Reduced the coupon rate on working capital loans by 566basis points through the issue of commercial paper
As a result, interest declined from Rs. 11.77 cr to Rs. 10.89 cr;average debt cost declined from 9.13% in 2003-04 to 7.59% in2004-05; interest cover strengthened from 4.36 in 2003-04 to5.57 in 2004-05.
2001-02 2002-03 2003-04 2004-05
80.6185.20
102.41 102.28
(Rs./cr)
25
Interest cover (times)
Capital employed In a capital-intensive business, the company’s fiscal efficiencyis gauged by its ability to report a return that is higher thanwhat investors would ordinarily have derived out of aninvestment in alternative instruments.
Over the years, HSIL sweated both man and machineintelligently, moving towards enhanced output, niche needs,complementary items and value-added products, creating avirtuous cycle of growth and profits. So, while profitabilitygrew by 35% during the year under review, capital employedincreased by 24% (from Rs. 254 cr as on 31st March, 2004 toRs. 315 cr as on 31st March, 2005). More importantly, the fullbenefit of this investment will be derived only in the years tocome. This increase in employed capital is due to theinvestment in the container glass division, reflected in thenumbers. The employed capital in this division have grownfrom Rs. 128 cr in 2003-04 to Rs. 197 cr in 2004-05.
Fixed assetsHSIL consistently invested in its productive assets, reflectedin a more than four-fold increase in gross block over the lastdecade.
2001-02 2002-03 2003-04 2004-05
1.95
2.59
4.36
5.57
HSIL consistently invested in its productiveassets, reflected in a more than four-foldincrease in gross block over the last decade.
2001-02 2002-03 2003-04 2004-05
1.13
1.40
1.98
1.67*
(Rs./cr)Fixed asset-turnover ratio
*The full benefit of Container Glass Capex to be realised from2005-06 onwards
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Building products: What commenced as a single productionfacility is now a two-plant operation. In 2004-05, the companyinvested Rs. 7.32 cr in its gross block; it created new castingspace at its Bahadurgarh and Bibinagar units, increasingcapacity utilisation. Presently, the company is increasing thecapacity of its Bibinagar unit by 50%, which is estimated toadd Rs. 26 cr to its gross block in 2005-06.
Container glass: The company completed the Rs. 73-crmodernisation process at its container glass unit in Hyderabadduring the year under review, commissioned in September2004.
Working capitalIn the company’s business, working capital is critical for anumber of reasons:
• To maintain a large inventory of finished goods to cater todiverse requirements across geographies and to carry a largenumber of SKUs.
• To maintain a large stock of raw materials and large volumesof packaging material due to seasonal availability
• To maintain a sufficient buffer stock to address the lead timebetween international orders and stocking
The company strengthened its working capital management bymaintaining a prudent mix of products in both its businessdivisions: one which provides the volumes along with a fastercash inflow and the other which is primarily value-added.
In 2004-05, the company’s net current assets increased byabout Rs. 29 cr attributed to:
• Increase in operations at the container glass divisionfollowing the commissioning of the upgradation andmodernisation program at its plant
• Increase in outsourced business in the building productsdivision, resulting in the stocking of a larger quantum ofoutsourced products and a higher receivable at the year-end
InventoryAt HSIL, inventory management is a critical driver of workingcapital efficiency for an important reason: in the company’sbusiness (especially building products), products need to bemanufactured/outsourced and stocked in anticipation ofdemand. This necessitates carrying an inventory of rawmaterial and finished goods.
• Building products: With outsourcing on the rise, morethan 19.63% of the inventory comprised finished goodsprocured for resale. To control this working capital block, thecompany made a reasonable estimation of the quantumdemanded (based on market indents) before placing orders.
• Container glass division: The division’s primary rawmaterial (cullets and quartz sand) was procured fromproximate sources. The company maintained an inventory ofthese essential inputs to cover a production equivalent to twomonths. For the other inputs, it entered into long termagreements with vendors, which enabled it to maintain only
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the minimum inventory to ensure uninterrupted production.
In 2004-05, inventory increased by more than Rs. 15.67 cr ontwo counts:
• Building products division: Increased stock of goodspurchased for resale with an increasing thrust towardsoutsourced products
• Container glass division: A temporary spurt in finishedgoods inventory due to VAT and MRP-related issues
DebtorsIn a business where an average working day generates aturnover of around Rs. 1 cr., the company must sell with acertainty that its debtors will remit proceeds on schedule. Anydisruption in inflow can inflate working capital requirementsand, in turn, drive up the cost of funds for the company.
At HSIL, debtors accounted for 22% of the capital employedby the company in its business. The safety of these debtorswas reflected in a low provision for doubtful debts at Rs. 4.85cr of the total debtors outstanding at the end of the financialyear under review. This safety of sale transpired for a numberof reasons:
• Building products: This division increased its cash and carrycomponent to more than 70% of sales in north and east India,
and more than 50% in south and west India.
• Container glass: About 98.5% of the company’s productswere marketed directly to reputed brand-enhancinginstitutions like Coke, Glaxo Smithkline, Pepsi and Pfizeramong others, partly insulating the company from thepossibility of a debtors’ default. More importantly, thecompany enjoyed a more than 25-year business relation withthese clients, reducing the possibility of the creation ofdoubtful receivables.
Loans and advancesLoans and advances declined from Rs. 15.05 cr at the close of2003-04 to Rs. 14.22 cr at the end of 2004-05 on account ofrecovery of loans from corporate bodies. This was marginallyoffset due to an increase in deposits with governmentauthorities and the payment of advance income tax.
CreditorsThe company sourced material from quality suppliers forwhich advances and even prompt payments needed to bemade. Thanks to a better negotiation, the company extendedits creditors’ cycle from 62 days (as on 31st March, 2004) to71 days (as on 31st March, 2005), increasing working capitalefficiency.
The company extended its creditors’ cyclefrom 62 days (as on 31st March, 2004) to 71days (as on 31st March, 2005), increasingworking capital efficiency.
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29
Building products division Highlights, 2004-05
• Grew at a rate significantly higher than the industry average
• Revenue growth of 24% over the previous year
• Growth in PBIT by 35% over 2003-04
Segment-wise performance
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2001-02 2002-03 2003-04 2004-05
24,214
21,35322,790 22,152
Production (tpa)
Inside our plant
A brief insight into how we performed over the years
2001-02 2002-03 2003-04 2004-05*
* The operations at the Bahadurgarh plant were disrupted for a 62-dayperiod due to IR issues.
93.13
82.1387.65 85.20
Capacity utilisation (%)
2001-02 2002-03 2003-04 2004-05
112 118
137
169
Revenue (Rs cr)
In the marketplace
2001-02 2002-03 2003-04 2004-05
31 32 3436
Estimated market share (%)*
2001-02 2002-03 2003-04 2004-05
18.22
14.43
19.98
26.96
Segmantal profit (Rs. in crores)
In our contribution
2001-02 2002-03 2003-04 2004-05
48.13 49.37
45.93
35.74
Capital employed as % of total capital employed
* Excluding unorganised sector
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Road ahead• Projected increase in productivity at thecompany’s plants
• Projected improvement in the manufacturingprocess reducing fuel consumption
• Projected improvement in capacity utilisation
INDUSTRY OVERVIEW
Operations
Productive assets
Details Capacity (TPA)
Bahadurgarh 14,000
Bibinagar 12,000*
* Being increased to 18,000 tpa
At the building products division, the company consistentlyincreased production and reduced costs through the followinginitiatives:
• Alteration in the input mix
• Reduced wastage
• Out-contracting of certain jobs
• Reduction in mould weight
• Use of waste heat in the operational process
• Increase in casting capacity
• Switch in fuel from LPG to RLNG in Bahadurgarh fromApril 2004
Results: Increasing operational efficiency as evidenced byreduction of power & fuel costs.
2001-02 2002-03 2003-04 2004-05
Power and fuel cost as % of net sales 17.70 22.37 20.43 15.87
Quality
At the building products division, a quality obsession enabledthe company to command a premium in the marketplacethrough the following initiatives:
• Backward integration ensuring a consistent supply of qualityraw materials
• Use of state-of-the-art equipment for efficient manufacture
• Incorporation of accurate designs through sophisticatedCAD, ProEngineer, ProDesigner and solid state software
For consistent quality, the company maintained an on-going
vigil across all its process, systems and products through thefollowing initiatives:
• Every material batch entering the company was tested toensure that it conformed to specifications
• Nearly 50 in-process tests were carried out across theproduction line to ensure that the customer got more thanwhat he was paying for
• The end product was tested through a series of 18 qualitytests for consistent product delivery
• The company commissioned foot-grinding machines forimproving the product finish, especially for exports
The company made brand-enhancing supplies to Unitech,L&T, Reliance, Bengal Ambuja, NCC Matyas and DLFGroup, among others. Hearteningly, a demand pull becameincreasingly evident: the proportion of cash sales increasedacross all four regions and the company’s quality parameterswere established as better than the industry benchmarks in thefollowing ways:
• The industry water absorption standard was 0.5% ; the HSILstandard was 0.1%
• The industry strength standard was 600 kg/sq cm; the HSILstandard was 900 kg/sq cm
• The industry pinhole standard was two; the HSIL standardwas zero
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Keramag and Grohe
Hindware Italian collection
Hindware Art
Hindware
Raasi
Innovation
At HSIL, innovation encompasses the introduction of newproducts in existing product segments and improvement inexisting processes, facilitated by the following initiatives:
• A state-of-the-art R&D facility, the first such laboratory inIndia, recognised by the Ministry of Science and Technology,Government of India
• The commissioning of a pilot plant for testing all processesaccurately before being commercialised
• Maintenance of a library of more than 3000 titles, providinga ready reference for international standards
• Management of the R&D department by seven technicalexperts
Product development
The building products division commercialised around fiftynew products in five years and launched seven products in2004-05, including three colour variants. Its recent productinnovations comprised:
Waterless urinal in ceramic body: This first-of-its-kindproduct possesses the capability to save more than 1.50 lakhlitres of water annually per urinal, finding favour with brand-enhancing buyers and large government and public bodies.
Senso urinal: This system automatically flushes out theexcreants on sensing the removal of the human body.
Dual flushing system: This system helps annually save35,000 litres of water per bathroom
Largest ceramic wash basin Medusa launched in India.
Process improvement
Modifications in kiln and process parameters helped increasethe production capacity from 3,800 pieces per day to 4,150pieces per day at one of the plants.
MarketingSince the products were sold primarily through a distributionnetwork, an elaborate marketing strategy was institutionalisedwith two basic principles: a clear branding strategy thatsegregated products according to the target audience and thecreation of an infrastructure for the exclusive marketing ofeach brand.
Brand positioning
At HSIL, products have been divided into three categories –‘Raasi’, ‘Hindware’ and ‘Keramag/Grohe’ -- to distinctivelyservice different consumer preferences.
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Raasi brand: Comprising 60 products in 13 colours, cateringto the lowest, price sensitive end of the market, competingdirectly with Johnson Pedder and Swastik Sanitaryware.
Hindware brand: Single largest brand and revenue earner.Positioned at middle-class consumers. Commanded anapproximate 30% premium over the Raasi brand. Competeddirectly with the Cera and Parryware brands. Categorised intothe following sub-categories:
• Hindware: Comprised more than 200 products in 15colours. Comprised conventional products that cater toconsumers belonging to the middle-class.
• Hindware Art: Comprised a range of 25 products targetedat the middle and upper middle segments. The productscommanded a 50% premium over the basic Hindwareproducts.
• Hindware Italian collection: Imported from reputedinternational manufacturers. Targeted at the upper middle-class and the upper class consumers. Competed withinternational brands such as American Standard, Duravit,Toto, Kohler and Jacob Delafon among others.
Keramag brand: An alliance with US$1.5 bn Sanitec Group,resulting in an access to 10 leading European buildingproducts brands.Sourced products from Keramag, Germany.Keramag range comprised top-end sanitaryware and bathtubs.
Grohe brand: Marketing alliance with Grohe, the largestfaucet manufacturer in the world. Marketed a premium rangeof high-quality designer faucets. Enjoyed an exclusivemarketing right for this brand in India.
Marketing divisions
In line with this branding strategy, the marketing function atHSIL was divided into three segments, which enhanced clarityand strategy, leading to an improved market share.
1. Hindware division
This division marketed the Hindware and the Raasi brandsthrough the company’s extensive distribution network.
Highlights, 2004-05
• Growth of 13.79% compared to the average industry growthof 12%
• Increase in institutional sales by 40% over 2003-04
• Revenue growth of approximately 200% from HindwareItalian Collection and Hindware Art products
• Launch of 25 new products in two years (14 in 2004-05)through the Hindware Art and Hindware Italian Collectionranges
• Launch of faucets under the Hindware brand in South India
• Proposed national roll-out of Hindware faucets in 2005-06
Demand drivers
Hindware brand
• Increasing demand for housing units in the metros and otherleading cities due to the decline in interest rates, easy access offunds, increasing nuclear families and a significant reduction inthe average age for the purchase of a house from the mid-40sto the early 30s
• Rise of suburbia in all large cities; shift towards suburbia or
Hindware Arcades
Objective: To showcase the entire range of'Hindware Products' under one roof, making itconvenient for referrals and first-time customers toselect products.
The company assisted franchisees with thedesigning and interiors of the showroom, providedthe latest concepts for proper merchandising of theproducts and also facilitated in providing propervisibility to the brand.
The company’s first ‘ARCADE’ is coming up atHyderabad to be followed by one at Chennai. In
2005-06, HSIL plans to set up four ARCADES.
Hindware Boutiques
Objective: Better visibility of ‘Hindware’ products.
HSIL assisted dealers in a number of ways:identification of the architect, providing supportduring construction design and interiors,facilitating stylish merchandising, branding andsupport for enhancing visibility.
In 2004-05, 11 HSIL boutiques were inaugurated,generating around 4% of segmental revenues.
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more space and better living conditions. Whitefield inBangalore; Nerul, Koparkhairane, Khargar in Navi Mumbai;Rajarhat in Kolkata; Pashan Sus Road in Pune as well asGurgaon and Greater Noida in the National Capital Region
Raasi brand
• Increasing rural literacy, creating an awareness for improvedsanitation facilities
• Increasing impetus by the government on the creation ofdwelling units in rural areas
2. Keramag and Grohe divisions
These international products were launched in 2004-05catering to the niche upper-end of the market. The Keramagrange provided international sanitaryware and bathtubs whilethe Grohe product portfolio comprised a large range ofdesigner faucets.
Highlights, 2004-05
• First year of launch in India for Keramag products
• Appointment of around 50 new dealers
• Introduction of around 105 new SKUs in 2004-05
• Successful marketing of products to large hotel chains andreputed malls, among others
Demand drivers
• Number of operational malls in India was 25 in 2003 which is expected to grow to over 220 by 2006-end(cumulative estimated space of 40 mn sq ft) and 600 by 2010(100 mn sq ft)
• Expansion in the accommodation facilities at the five-starhotels to cater to the increase in the inflow of internationaltravellers
• Huge addition in commercial space, especially with the
increasing outsourcing of IT services from developedcountries
• Individual construction of homes and bungalows and high-end apartments
3. Allied products division
This division marketed PVC cisterns, bathtubs, kitchenwareand other accessories. All these products were outsourced bythe company from dedicated vendors.
Highlights, 2004-05
• Launch of the steel enameled bath tub for the first time inIndia
• Launch of the kitchen sink using the 3 Step deep drawtechnology for the first time in India
• Successful marketing of products to brand enhancingcustomers like Park Hotel (Delhi), Mantri Housing(Bangalore) and Bengal Silver Spring (Kolkata), among others
Demand drivers
• The housing boom is expected to provide impetus to thissegment
• The entry into the kitchen segment with kitchen sinks isexpected to significantly drive the growth of this segment
• The company is working towards forging alliances withinternational leaders in the manufacture of shower panels,enclosures and bathtubs, which is expected to strengthengrowth
Distribution
To enhance its visibility in a competitive marketplace, thecompany strengthened its distribution network through thefollowing initiatives:
Quality benchmarks
• Both the company’s sanitaryware manufacturing plants were certified ISO 9001:2000, ISO 14001andOHSAS 18001
• The division was awarded the QAS (Australian Watermark Certification)
• The division was approved by a European authority for the development of a range of specialisedproducts for the under-privileged
• The division was certified by CT Laboratories, Israel, for superior quality
• Increase in authorised dealers – by 91 in 2003-04 and 201 in2004-05
• Increase in retail display space by 35,840 sq. ft
• Introduction of the concept of Hindware Arcades andHindware Boutiques
• Introduction of C&F agents into the distribution network atstrategic locations to shrink delivery time and holding time atthe dealer’s end, improving his profitability
• Introduction of an incentivised structure for retail sellers
• Identification of 20 towns with significant potential
Result: Increase in market share from 34% in 2003-04 to 36%in 2004-05.
Outlook
The growth of the building products division is directly relatedto the growth of the housing sector. In the light of thehousing sector boom, the future for the company’s buildingproducts appears promising due to the following:
• An existing dwelling unit shortage in India of more than 22.5million units, necessitating the setting up of more than fivemillion houses a year to meet the shortage
• The setting up of the National Urban Renewal Mission withan estimated outlay of Rs 1,20,000 cr over the next five years
• The setting up of about 15 lakh homes for the weakersections with a total outlay of Rs. 2,500 cr under the aegis ofthe Indira Awas Yojana.
• Aggressive Rs. 165 cr housing loan disbursement by banksper day - the affordability of housing loans, both interms of interest rates and longer maturityperiods driving growth in the housingsector
• Tax sops for house loans andinterest thereon are providingsignificant growth to India’s housingsector
• More than 600 malls proposed andworld-class healthcare facilitiesproposed across India
• Increased tourism has created ashortage of hotel rooms across allcategories
• India’s growth as an IT and ITES outsourcing destination isdriving the demand for commercial space. For every 1,00,000sq ft occupied by companies in the IT-ITES sectors, it isestimated that there is an immediate demand for 7,00,000 sq ftof residential property
• Huge additional housing demand is emerging with theincreasing trend towards nuclear families
• The emergence of suburbs around the metros and othermajor cities is also expected to drive growth significantly
• The purchasing age for houses has declined significantly andthe increased disposable income in the hands of the youngergeneration has increased their aspiration, fuelling demand forvalue-added products
• Opening up of the construction sector to foreign investmentis expected to be a significant growth driver
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36
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Containerglassdivision Highlights, 2004-05
• Accounted for 48% of the company’s turnover (54% in 2003-04)
• Increase in export revenue
• Introduction of 28 new products to cater to thegrowing needs of the packaged food and liquorindustries in India
• Commissioning of a Rs. 73-cr state-of-the-art ‘deeprefiner’ energy efficient and environment-friendlyfurnace, making the company the second largestmanufacturer of container glass in India
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Increasing production (cr bottles)
Regular de-bottlenecking, balancing of equipment coupledwith aggressive modernisation enabled the division to reportan increase in production every year since 2002-03.
The industry scenario
Market share in volume and value terms of packaging
options available in the country*
*Excludes the unorganised sector
The Indian packaging industry went through a revolutionsince economic reforms commenced in the early Nineties. Theentry of several multinationals in India’s consumer goodssector vastly increased the number of products but reducedthe scope for differentiation. With a confusing choice onoffer, better packaging emerged as a potent, attention-grabbing weapon in a competitive marketplace. In turn, thisopened up opportunities for diverse packaging options andbetter prospects for companies like ours.
India’s Rs. 13,000-Rs. 15,000 crore packaging market wasdriven by economic growth, enhanced spending power andincreased consumption. An indication of its vast potential liesin this statistic: India accounts for a sixth of the world’spopulation but a mere one per cent of the global packagingmarket and around four per cent of the Asia-Pacific.
India is South Asia’s largest producer of container glass. It isalso the second most cost-effective base for the manufactureof container glass in Southeast Asia (average grade productioncost estimated at US$205 per tonne compared to theIndonesian benchmark of US$200 per tonne).
Capacity distribution
Zone-wise capacity distribution
Source: Company estimates
The installed melting capacity of container glass in India wasestimated at 4325 tons per day. North India possessed thehighest installed melting capacity (1645 tons per day), partlyattributed to the high liquor and soft drink consumption inDelhi, Punjab and Haryana as well as the location of a largenumber of pharmaceutical manufacturers in that region. WestIndia comes second with a share of 25% followed by SouthIndia with a share of 22%, followed by the East with a shareof 15%.
2002-03 2003-04 2004-05
51.07 55.21 60.51
Installed meltingcapacity
(tonnes per day)
North 1645
South 950
West 1081
East 649
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22
25
15
Flexible packaging 2850
Rigid plastics 2400
Printed cartons 2300
Glass containers 1500
Metal cans 1000
Caps and closures 800
Labels 400
Others 1800
Approximatemarketby value(Rs cr)22
18
17
12
8
6
3
14
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Zone-wise consumption (%)
Source: Company estimates
North India did not just produce the largest quantity ofcontainer glass among regions in the country; it also accountedfor the largest consumption (48%). A high consumption onthe one hand coupled with a lower installed capacity indicatedgrowing ‘imports’ from the excess-supply regions of west,east and south India. Interestingly, an excess of production
over consumption was the least pronounced in south India(2%), where your company’s plant is based, indicating supplyand pricing stability for manufacturers. Besides, theconsumption of glass was higher in the south across the statesof Tamil Nadu, Karnataka, Kerala and Andhra Pradesh, partlydue to an increasing demand for quality products.
Container glass consumers (%)
Source: Industry estimates, AIGMF and Asian Glas
North
South
West
East
48
23
19
10
Liquor
Soft drinks
Pharmaceuticals
Food and dairy
Others
40
17
29
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Increasing relevance of container glass in India • Glass is 100% recyclable many times over, without any loss in quantity
• Glass provides a more aesthetic solution than plastic packaging
• Glass is chemically inert, does not react with the packaged contents, increases shelf life and preservesnutritional value / taste (glass retains cola fizz longer than PET bottles)
• Coloured glass filters harmful ultraviolet rays, protecting the contents
• Glass is impermeable, non-porous, odourless and hygienic
• Glass is transparent; its ‘see through’ facility influences customer choice
• Glass can store a larger range of products (packaged food, soft drinks, medicines and liquor amongothers) than most packaging materials
• Glass provides varied and dynamic labelling options (applied ceramic, heat transfer, shrink labelling andengraving)
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Segment-wise analysis
1) FMCG (packaged foods)
Overview The Indian fast moving consumer goods (FMCG) industry(Rs. 48,000 cr estimated) grew 1.4% in 2004 and 4.4% overthe five-year period leading to 2004-05 (source AC NielsenIndia).
The demand for FMCG products – relatively lower shelf lifeproducts like biscuits, toothpaste and skin creams - was adirect reflection of economic growth, higher per capitadisposable incomes, growing affluence and a ‘young’population (in the rural sector, it figures right below debtrepayment and agricultural expenditure).
The AC Nielsen Retail and Shopper Trends 2004 surveyindicated that Indian shoppers spend an average Rs. 2500 amonth on food, groceries and personal care items. SinceHSIL’s container glass division manufactured flint bottles forpackaged food (ketchup, pickles, coffee, mayonnaise andhoney among others), growth prospects appear attractive.
Demand drivers
Large and growing population: India, with a population ofover a billion, is the second most populous country in theworld. Varied consumption patterns, different climaticconditions, diverse needs and aspirations make it one of themost attractive FMCG markets.
Economic growth: GDP growth was on the higher side forthe past couple of years (8.1% in 2003-04 and 6.9% in 2004-05). An increased exposure to television and overseas travelalso ensured a steady offtake of FMCG products.
Malls: A burgeoning ‘mall culture’ provided FMCG producerswith an attractive offtake option and increasing volumes forglass container manufacturers.
Wider choice: FMCG manufacturers introduced new variantsof existing brands to enhance their market share. An ACNielsen report indicated that 48% of Indian shoppers ‘love totry new things,’ resulting in an increasing demand for a largervariety of bottles.
Exports: Indian food is being exported in a bigger way than
Industry segment Industry annual Evolving market place trends Brand-enhancing
growth rate (per cent) customers
FMCG (packaged food) 4 • Increasing preference for packaged foods • GlaxoSmithKline• Increasing promotion of health drinks • Tiffany Foods
• Heinz
Soft drinks 4 – 5 • Growing product penetration through the • Coca-Cola introduction of bottles at Rs. 5 – 6 price points • PepsiCo• Growing advertising and promotion increasing consumption
Pharmaceuticals 6 • Product patent regime will encourage global • Pfizer manufacturers to set up manufacturing facilities in India
• Tax-exempt locations will catalyse the creation of manufacturing facilities
Liquor 8 • Gradual softening of government regulations • McDowells’ • Change in the deep-rooted social conditioning • Shaw Wallaceagainst alcohol • Seagrams
• United Breweries
The container glass division of HSIL catered to the packaged food, soft drinks, pharmaceuticals and liquor industries.
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before. For instance, the company reported a higher exportincome due to higher sales of flint jar bottles used for foodproducts in USA and Europe.
Product range
The company manufactured flint bottles and jars withcapacities from 100 gm to 3000 gm.
Threats
Higher disposable incomes are driving consumers to allocatefunds for other purchases (agricultural equipment in ruralareas and lifestyle products / mobile phones in urban),resulting in a declining ‘share of the wallet.’ Since these areone-time in nature, aggressive advertising and penetration areexpected to drive a rebound in FMCG offtake.
Outlook
To increase penetration across rural India (71% of thepopulation), more products across low price points (Rs. 0.50,Re 1, Rs. 2 and Rs. 5) are being introduced. The total averagemonthly expenditure of US$50 for Indian shoppers is amongthe lowest in the region (only half of what the Chineseconsumers spend on groceries and personal care items), ascenario that is soon expected to correct. Also, with anincreasing preference for Indian food among both expatriates
and foreigners, the export of food products from India shouldincrease.
2. Pharmaceuticals
Overview
The Indian pharmaceutical sector consumed around 29% ofIndia’s container glass production during the year underreview.
Andhra Pradesh, where your company is based, accounted fora third of the total national production of pharmaceuticals. Italso accounted for over 50% of the production of bulk drugson account of available infrastructure (chemical feedstock), anadvantage that is expected to sustain.
These figures are expected to increase as India emerges as aglobal sourcing hub for generic players. Moreover, with anannual growth rate of more than 20%, Andhra Pradesh is fastemerging as the pharmaceutical capital of India (source: AndhraPradesh government website).
Demand drivers
Large and growing population: India’s population of over abillion provided pharmaceutical manufacturers with a largeand growing market, marked by a range of diseases andailments.
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Global sourcing hub: India represented an outsourcingopportunity for multinational pharmaceutical players onaccount of its low cost structure, availability of skilled(scientific and technical) manpower and compliance withproduct and process patents. This is expected to drive thedemand for bottles.
Increasing exports: A large number of India’s manufacturingoutfits were globally certified (USFDA and EUCOS amongothers) even as its share was hardly 1.2% of the US$325billion global pharma market, a situation that could correctand benefit container glass manufacturers.
Product range
The company manufactured pharmaceutical bottles ranging incapacities from 15 ml to 500 ml.
Threats
The Indian pharmaceutical market moved to the option ofusing plastic bottles as an alternative to glass bottles. However,increasing prices of crude, the basic feedstock for plasticmanufacturing increased significantly, making it economicallyunviable to utilise this alternative as a complete replacementfor glass bottles.
Outlook
A changing outlook in the pharmaceuticalindustry is expected to invite foreignplayers to set up manufacturing facilitiesin India (Sandoz set up amanufacturing base in Maharashtra)
for domestic sales or exports, driving the offtake of glasscontainers.
3. Soft drinks
Overview
The annual per capita consumption of soft drinks in India wasestimated at nine 8-ounce servings. This under-penetration hasbegun to correct: the production of aerated soft drinks inIndia almost doubled from 5670 million bottles in 1998-99 to11,040 million bottles in 2003-04. It is estimated that thelargest concentration was in south and west India.
Andhra Pradesh was the largest consumer of soft drinks inIndia. It is estimated that out of over 100 soft drink plantslocated in the country, nearly 10 are located in AndhraPradesh, including the country’s largest Coca-Cola bottlingfacility.
Until a couple of years ago, the marketing strategy for India’ssoft drinks industry revolved around introducing products atlower price points. This generated higher returns fromincremental consumers who were inducted into the categoryand neglected existing customers who could afford to paymore. However, this equation has changed today on accountof declining margins and lesser top-end customers, a reasonwhy higher priced products – cans and PET bottles – wereintroduced.
Coca-Cola and PepsiCo accounted for the two mostprominent players in India. The company’s containerglass division catered to the requirements of boththese multinational giants.
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Demand drivers
Climatic conditions: The tropical Indian weather is a softdrink demand driver.
Availability: The Indian soft drink industry was facilitated byan extensive distribution network, which ensured thatconsumers were never far from a soft drinks vendor. This,coupled with attractive packaging and availability at low pricepoints (Rs. six), induced purchase.
Growing population: The soft drink industry’s primary targetsegment comprised youth below 25 years (estimated at 540million out of a population of one billion), driving consumeraccretion and increasing the per capita consumption.
Increasing advertising: The promotion of soft drinks aslifestyle products and enlistment of sports / film personalitiesto endorse products induced a larger number of people toconsume soft drinks.
Premium image: Soft drink consumption continued to beperceived as being ‘with the times’, driving offtake.
Product range
The company’s container glass division manufactured 200 mland 300 ml capacity soft drink bottles, covering the completeneeds of the soft drinks industry.
Threats
Over the years there has been an inherent shift from thetraditional glass bottles to PET bottles. However, the spiralingcrude prices and a cost benefit analysis for popular rangesmake this alternative less appealing.
Outlook
The Indian rural market accounts for 71% of India’spopulation, 41% of its middle class and 58% of its disposableincome. To accelerate consumption, soft drink majorsintroduced products at lower price points (Rs. 6). As a result,the per capita consumption in rural India has doubled in justtwo years and expected to increase further.
4. Liquor
Overview
At Rs. 25,000 cr, the Indian liquor industry continued to retainits position as the second largest contributor to the nationalexchequer (source: All India Distillers Association). The company’s
glass container division was appropriately located; AndhraPradesh continued to be the largest liquor consuming state inIndia.
The domestic industry gradually opened up with the softeningof the government stance: quantitative restrictions were lifted,import duties were gradually reduced and domestic regulationsbegan to get simplified. These initiatives attracted foreignplayers, facing a slowdown in their developed markets. ARabobank International report estimated that by end-2005, thetotal supply of liquor in the world would be close to 282 mnhl while consumption would be only about 198 mn hl. In thisscenario, India is expected to be an attractive destination forinternational brewers and distillers. Moreover, only anestimated 10 million people consume alcohol in India out of apopulation of a billion, an under-penetration that is soonexpected to correct. (Source:Rabobank International Report)
There were two principal spirit segments in India: branded,which constituted an annual offtake of around 70 millioncases, while ‘country liquor’ (unbranded and low-priced)registered sales of around 200 million cases per annum. Thebranded segment, addressed by the company, is estimated togrow at a healthy pace over the medium term.
The top of
the pyramid is
represented by
premium/branded liquor.
The Indian alcohol market
The following diagram highlights the Indian alcohol market.While the base of the pyramid denotes a large population baseconsuming low-priced whisky and country liquor the top ofthe pyramid is reserved for the rich populace consumingpremium/branded liquor.
The base of the pyramid is
dominated by low-priced whiskey.
The whiskey segment comprises
nearly 60% of the total liquor market.
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45
Demand drivers
Increasing government de-regulation: : The Indian spiritssector was regulated with government control extending tomanufacture, sales, transport and advertising. However, apartial de-control began to become a reality, marked by thegradual entry of foreign brewers into the country. Moreover,the government intended to encourage new investments inwine production to discourage the consumption of hard liquorand imports on the one hand, while supporting employmentand boosting farm incomes on the other (source: The EconomicTimes, 25 April 2005). These initiatives are expected to growper capita consumption and the demand for bottles.
Growing consumption: Indian made foreign liquor (whiskey,rum, brandy, gin and vodka) was an important component ofthe Indian potable alcohol market, comprising sales of 97million cases per annum; country liquor accounted for 160million cases per annum, beer 85 million cases per year anddomestic wine 300,000 cases per annum. As populationincreases and lifestyles change, consumption is expected toincrease further (Source: All India Distillers Association).
Changing social stance: India’s traditional conditioningagainst alcohol gradually evolved as western lifestyles,highlighted through media and overseas travel, becameincreasingly acceptable. Besides, with the depiction of drinkingin popular cinema no longer an unacceptable taboo, socialdrinking continued to rise, driving the consumption of liquorand bottles.
Product range
The container glass division of HSIL manufactures flint andamber glass bottles for the liquor segment. The productsranged from 60 ml to 1000 ml, covering the entire range.
Threats
Because of increasing bottle prices, some principal liquordistillers prefer to re-use bottles. This accounted for a lowcapacity utilisation among container glass facilities, which a
ban on re-use in some states helped redress. The Indianalcohol industry also suffered from long receivables. Goingahead, an increasing per capita consumption and overalleconomic growth are expected to accelerate offtake andreceivables.
Outlook
India’s principal liquor consuming segment – men between 20and 59 – is estimated at around 23% of the total population(nearly 233 million individuals) and expected to grow by 3.4%annually to around 260 million by 2006. This will make theIndian market one of the most attractive ones for incominginternational labels. As a result, competition is expected tointensify, the market will expand and so will the need forliquor bottles (source: Rabobank International Report).
1. Strengthening our business through…
Core manufacturing competence
At the company’s glass division, the principal manufacturingresponsibility was cost reduction, customised production andspeedy productisation, helping customers capture a largershare of their markets and in doing so, enabling the companyto do the same.
The division’s competence was reflected in the following:
• Range: Ability to manufacture bottle varieties ranging from15 ml to 3000 ml, an assortment that comprehensivelycovered the entire range of the container glass industry. As aresult, the company was among the best equipped to capitaliseon any upturn in the demand for bottles in the country.
• Cost management: Even as input costs increased 7%, thecompany’s per tonne production cost increased by a marginal0.03% in 2004-05 through the following initiatives:
• Backward integration into quartz crushing increasedthe captive availability of quality sand from 50% in 2003-04 to 70% in 2004-05
The container glass division of HSIL manufacturesflint and amber glass bottles for the liquor segment.The products ranged from 60 ml to 1000 ml, coveringthe entire range.
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• Subscription to the equity of APGPGL (co-operativepower major) enabled the company to source 41% of itstotal electricity consumption in 2004-05 which wassubstantially cheaper than that charged by utilities
• The ‘deep refiner’ technology of the new furnacecommissioned in September 2004 facilitated a 19% declinein melting cost, an annualised saving of Rs. 3 cr (full effectfrom 2005-06)
2. Strengthening our business through…
Sustaining quality
Quality continued to be an obsession in view of increasinglydemanding consumer requirements.
This quality obsession was reflected in the virtual eliminationof customer claims, facilitated by automatic inspectionmachines, electronic temperature controls and motor drives aswell as application of SQC techniques. Over time, this highquality standard translated into the following:
• Diverse brand-enhancing customers: The company’squality commitment is reflected in its diverse industrialclientele: pharmaceuticals, soft drinks, food and liquorrepresented by some of the most visible brands like Coca-Cola, Pepsi, Pfizer, GlaxoSmithKline, Hindustan Lever (HLL),Shaw Wallace, McDowells and Seagram, among others
• Global benchmarking: The company’s exports increasedby 39% over that in the last financial year. It exportedcontainers to USA, Europe, Africa, Sri Lanka, Middle Eastand Bangladesh.
3. Strengthening our business through…
Innovation
An ongoing research initiative enabled the company tointroduce a wider array of innovative products at just the righttime.
The company’s principal advantages comprised the following:
"Achieve customer satisfaction by being a quality-conscious organisation through sound systems andpractices and total employee involvement." - Quality Policy
Our quality objectives
• To manufacture quality products, deliver in time at acceptable prices to customers
• To be a cost-effective and profitable organisation
• To be transparent in all activities
• To upgrade our technology by focusing on continuous improvement
• To continuously train and upgrade employee skills
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• Large portfolio: The company possesses a portfolio ofmore than 350 products with proven capabilities, makingonward development quick and effective
• Qualified team: The company has invested in a dedicatedresearch and development team
• Proprietary software: The company’s use of customisedsoftware has shrunk the time from concept tocommercialisation from 75 days to a mere 30
In 2004-05, the division introduced 28 new products cateringto the growing packaged foods (Horlicks, mayonnaise, pickles,ketchup, health drinks, coffee and honey), pharmaceutical andgeneral consumer segments. Products launched in thecontainer glass division across three years leading to 2004-05comprised 37% of the revenue during the year under review.
4. Strengthening our business through…
Customer satisfaction
In a competitive world, it is not only important to make theright product; it is also important to deliver just when thecustomer needs it, manage his inventory and help grow hisbusiness.
The company achieved this objective through the followinginitiatives:
• Proximity: The company sold 74% of its production withina radius of 500 kms (between two to 24 hours of deliverytime) from its manufacturing facility in Hyderabad
• Delivery frequency: On an average, the companyaccelerated its delivery frequency from 2 batches per day to 5per day for local customers
• Direct sales: The company generally made sales directly tocustomers, which saved marketing-distribution costs as well asintermediary margins, enhancing the customer’s price-valueproposition
As a result, the company’s high service commitmenttranslated into a just-in-time inventory for a number of itscustomers.
Catching the right trend
The company responded to a sharp rise in theexport of food products from south India with theintroduction of flint jars (200 ml to 1500 ml).
These products, used in the export of material tothe United States and Europe, emerged as the rightproducts at the right time.
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49
Riskmanagement Every business is marked by risks, some within and some outsideits control, making an institutionalised approach to riskmanagement necessary.
HSIL’s risk management approach is derived not from thedirective of a handful of individuals but an organisation-wideculture, supported by effective processes.
Over the years, this translated into business decisions thatbalanced risk and reward, ensuring that the Company’s revenue-generating initiatives remained consistent with the risks taken.
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1) Brand risk
The building products business is largely addressed by India’sunorganised sector. To create a sustainable business over thelong term it is essential to create a brand recall in the mind ofthe consumer, challenging in a price-sensitive environment.
Risk mitigation
The company’ products have been essentially sold under the‘Hindware’ brand over the last 15 years, clearly establishing thebrand in the mind of consumers. With the migration from thegeneric to upper-end branded products, the companyproactively segregated its niche products under appropriatesub-brands, enhancing brand clarity. The brand pull isreflected in an increasing quantum of products beingpurchased on a cash and carry basis by its dealer networkacross India.
2) Distribution risk
Being consumer products, it is essential to reach products tocustomers to capitalise on the emerging demand from theinteriors.
Risk mitigation
The company’s distribution network comprises more than 925authorised dealers and 12,000 sub-dealers spread across India.The company has taken the following initiatives to strengthenits pan-Indian distribution network:
• The addition of more than 200 authorised dealers (of whichalmost all were exclusive) in 2004-05
• An increase in retail space available to the company’sproducts - approximately 56,000 sq ft in 2003-04 andapproximately 92,000 sq ft in 2004-05
• The initiation of the Hindware Arcade and HindwareBoutique to enhance visibility
The strong dealer network enabled the company grow itsmarket share substantially over the past four years.
3) Geographical risk
Excessive sales concentration in a particular region may be arisk in the event of the unexpected.
Risk mitigation
HSIL’s dealer network was prudently dispersed acrossgeographies. These dealers have been identified based on theirlocation and market potential with the objective to minimiseany geographic overlap among them. Besides, the company’splant locations in the north and south provided it with theflexibility to cater effectively to the emerging demand fromthese regions. The company also exported products to anumber of international markets.
4) Dealer concentration risk
The dependence on a handful of dealers for a large chunk ofrevenues could be a big risk in the event of dealer attrition.
Risk mitigation
HSIL has continuously increased its dealer network: from 631in 2002-03 to 925 in 2004-05, enabling the company to growits turnover from Rs. 118 cr to Rs. 169 cr over the period.More than 50% of the company’s dealers enjoyed more than adecade’s relationship with the company. Nearly 10% ofrevenues comprised direct sales to institutional and high-valueclients. Also, the company places products in retail storesoutside the company’s distribution network, thereby de-riskingthe business from probable dealer attrition.
5) Import risk
Offtake could be affected by the entry of superiorinternational brands.
Building products division
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Risk mitigation
At HSIL, we do not consider this as a risk, but a favourabledevelopment because these brands have created an awarenessfor aesthetic products and trendy bathrooms. As a result, theRs. 40 cr top-end market is growing rapidly. Based on theimmense potential, the company has entered into an alliancewith Keramag and Grohe and also created the ‘HindwareItalian collection’ — its own brand. Thereby providing Indiancustomers imported products at the right place, right time andin desired quantities.
6) Product innovation risk
An inability to innovate in the face of changing lifestyles couldinvite competition.
Risk mitigation
At HSIL, product innovation has been a constant. In 2004-05alone the company commercialised more than 19 newsanitaryware products and introduced around fifty domesticand international products over five years. To de-risk thebusiness from a downturn, HSIL entered into the supply ofbath-tubs, shower systems, enclosures and kitchen sinks.Besides, the company also introduced faucets being marketedunder the Hindware brand – increasing revenue streams forthe company.
7) Finance risk
In a capital-intensive business, the lack of an access to a largequantum of low-cost funds could stagger the timely andbudgeted completion of capital projects.
Risk mitigation
HSIL rationalised this risk in the most effective manner: thecompany invested increasingly in strengthening the businessmodel, ensuring that every additional rupee invested generateda higher return. So while the capital employed in the businessincreased by 24% over the previous year, the profitability(before tax) increased by about 35%. Further, it reduced itsaverage cost of debt in 2003-04 and 2004-05, leading to alower interest. It swapped dear-cost loans with low couponoptions in 2004-05.
In doing so, the company reduced the average cost of debtfrom 9.13% in 2003-04 to 7.59% in 2004-05 and strengthened
interest cover from 4.36x to 5.37x.
8) Quality risk
An inconsistent product quality could lead to a loss inreputation, customer attrition and a decline in profitability.
Risk mitigation
At HSIL, quality management is not confined to a specificdepartment or activity; it has been institutionalised into everypractice and process across the organisation. This has beenreinforced through the selection of cutting-edge technologies,ongoing employee training, enhanced automation to minimiseerrors arising out a human interface and a rigorous compliancewith a prescribed documented sequence of actions for everyfunction.
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Container glassdivision1) Economy risk
Slowdown in GDP growth could impact the offtake ofcontainer glass, stagger revenues and impact profitability.
Risk mitigation
GDP growth for 2004-05 was 6.9% and is estimated at 7% for2005-06, making it (along with China) one of the fastestgrowing economies.
Year 2001-02 2002-03 2003-04 2004-05
Real GDP 5.8 4.0 8.1 6.9growth (per cent)
Container glass 5.7 7.7 8.5 6.0industry growth (per cent)
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2) Raw material risk
Raw material inflation could affect profitability.
Risk mitigation
The company optimsed its raw material mix. The companywidened its vendors’ base for raw materials covered by longterm delivery contracts. The company also entered into anagreement with soda ash suppliers to contain the sharpincrease in price. These initiatives capped raw material priceincrease to a mere 3.60% per tonne in 2004-05.
3) Customer risk
An excessive dependence on any one customer / group ofcustomers might have an adverse impact on the profitability ofthe division in case of a slowdown for demand from them.
Risk mitigation
Over the years, the division has prudently evolved a strategyto counter over-dependence from its top-five customers witha view to enhance its income from across a larger base ofcustomers, reflected below. A significant increase in exportsalso helped mitigate this risk.
Year Percentage contribution of top five
customers to total turnover
2002-03 49.62
2003-04 44.17
2004-05 34.04
4) Quality risk
The manufacturing of product to high quality standard iscritical to success in the container glass industry.
Risk mitigation
The company has strengthened its quality through the use ofcutting-edge technology, progressive backward integration andthe use of specialised equipment (electronic temperaturecontrols, motor devices and an automatic inspection machine)to measure and deliver quality manufacture across all
production lines. As a result, brand-enhancing customers likeCoca-Cola, Pepsi, Pfizer, GlaxoSmithKline, Hindustan Lever ,Shaw Wallace, McDowells and United Breweries increased theofftake even as customer claims on account of productrejection was virtually eliminated.
5) Product substitution risk
PET bottles and cans compete intensely with container glassin India’s packaging sector.
Risk mitigation
Although a substitution has transpired, a large number ofproduct categories still (and are likely to) favour glasspackaging because the latter is chemically inert,impermeable, non-porous, hygienic, odourless anddoes not react with the packaged contents.Returnable glass bottles drive impulse purchases,which provide an impetus for using glassbottles in place of PET bottles.
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4 year financial summary
2001-02 2002-03 2003-04 2004-05
Share capital
Equity capital 561.34 561.34 561.34 935.55
561.34 561.34 561.34 935.55
Reserve and surplus 5859.22 6318.19 8039.72 8400.80
Share premium 2201.48 2201.48 2201.48 1827.28
Revaluation reserve 2442.86 2390.60 0.00 0.00
10503.56 10910.27 10241.20 10228.08
Secured loans 15257.78 12997.14 7331.47 9463.40
Unsecured loans 1087.67 1165.36 4289.98 7609.81
16345.45 14162.50 11621.45 17073.21
Deferred tax liability 2618.51 2797.35 2967.27 3256.70
TOTAL 30028.86 28431.46 25391.26 31493.54
Gross block 29409.53 30538.95 28910.28 33638.57
Less: depreciation 10601.93 12436.70 13458.63 13745.95
Net block 18807.60 18102.25 15451.65 19892.62
Capital work-in-progress 87.22 107.22 1313.56 134.42
Investments 305.63 497.96 2365.93 2355.75
Current assets
Inventories 8030.73 7723.84 5959.15 7526.53
Sundry debtors 5469.70 5939.54 5160.21 7068.14
Cash & bank balances 613.97 368.24 506.99 1075.99
Loans & advances 944.21 1404.20 1505.23 1422.08
Other current assets 5.20 52.66 63.44 98.00
15063.81 15488.48 13195.02 17190.74
Current liabilities
Sundry creditors 3686.35 3732.05 4611.52 5791.45
Provisions 199.34 274.16 893.91 1134.79
other liabilities 418.85 1799.73 1443.29 1153.75
4304.54 5805.94 6948.72 8079.99
Net current assets (working capital) 10759.27 9682.54 6246.30 9110.75
Misc expenses 69.14 41.49 13.82 0.00
TOTAL 30028.86 28431.46 25391.26 31493.54
(Rs. in lacs)
55
2001-02 2002-03 2003-04 2004-05
Gross turnover 21170.32 25310.21 30546.61 33155.66
Less: Excise duty 2648.57 3001.76 3395.12 3444.33
Net turnover 18521.75 22308.45 27151.49 29711.33
Other income 320.89 278.70 234.90 354.40
Stock variation -329.50 -405.14 -1727.17 1380.22
Total income 18513.14 22182.01 25659.22 31445.95
Goods purchased for resale 1276.52 1629.71 2171.34 3984.69
Power & fuel 3707.86 4947.98 5108.58 5846.65
Manufacturing, administrative and other exp. 7066.53 8566.55 9963.99 12020.56
Employee cost 2583.82 2748.48 3283.47 3525.62
Total expenses 14634.73 17892.72 20527.38 25377.52
EBIDTA 3878.41 4289.29 5131.84 6068.43
Interest 1988.48 1654.73 1177.54 1089.24
Gross profit 1889.93 2634.56 3954.30 4979.19
Depreciation and amortisation 1695.64 1826.39 1808.67 2081.80
PBT before exceptional items 194.29 808.17 2145.63 2897.39
Tax 162.10 253.84 611.71 993.91
PAT 32.19 554.33 1533.92 1903.48
Exceptional items(net of tax) 0.00 0.00 221.10 0.00
profit including exceptional items 32.19 554.33 1755.02 1903.48
Previous year tax 4.24 0.38 -294.68 -9.12
Profit for the year 27.95 553.95 2,049.70 1,912.60
(Rs. in lacs)
56
Ratios and Ratio Analysis2001-02 2002-03 2003-04 2004-05
Networth (Eq cap+res-misc exps) 8552.90 9039.52 10788.72 11163.63
Capital employed (net worth+loans+deff.tax) 27516.86 25999.37 25377.44 31493.54
Avg capital employed 27516.86 26758.12 25688.41 28435.49
Avg loan fund 16345.45 15253.98 12891.98 14347.33
Cash accruals 1727.83 2380.72 3342.59 3985.28
Net domestic turnover 17861.15 20307.96 23824.92 25472.16
Export turnover 660.60 2000.49 3326.57 4239.17
Exceptional items 0.00 0.00 299.31 0.00
Dividend % 5.00 15.00 50.00 55.00
Market price (Rs.) 21.00 18.75 105.50 116.00
Total dividend payout (incl dividend tax) 28.07 94.98 316.61 581.77
Retained earning -0.12 458.97 1733.09 1330.83
(Rs. in lacs)
BALANCE SHEET 2001-02 2002-03 2003-04 2004-05
Return on networth-% 0.33 6.13 19.00 17.13
Return on average capital employed -% 7.33 8.25 12.56 10.56
Debt equity ratio 1.91 1.57 1.08 1.53
Debtors cycle (days) 94 86 62 78
Creditors cycle (days) 73 61 62 71
Inventory cycle (gross sales) 138 111 71 83
Net current assets turnover (days) 212 158 84 112
Turnover/net current assets 1.72 2.30 4.35 3.26
Turnover/inventory 2.64 3.28 5.13 4.41
Turnover/capital employed 0.77 0.97 1.20 1.05
Turnover/Net block 1.13 1.40 1.98 1.67
Net Block/Capital employed 0.68 0.70 0.61 0.63
Working capital/Capital employed 0.39 0.37 0.25 0.29
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(Figures in %)
PROFIT & LOSS ACCOUNT 2001-02 2002-03 2003-04 2004-05
REVENUE
Domestic sales/Turnover 96.43 91.03 87.75 85.73
Export sales/Turnover 3.57 8.97 12.25 14.27
Excise/Turnover 14.30 13.46 12.50 11.59
MARGINS - (basis - turnover)
EBDITA margin 20.94 19.23 18.90 20.42
Gross profit margin 10.20 11.81 14.56 16.76
Pre tax profit margin 1.05 3.62 7.90 9.75
PAT Margin 0.17 2.48 5.65 6.41
EXPENSES
Goods purchased for resale/Total expenses 8.72 9.11 10.58 15.70
Power/Total expenses 25.34 27.65 24.89 23.04
Manufacturing,adm exps/Total expenses 48.29 47.88 48.54 47.37
Employee cost/Total expenses 17.66 15.36 16.00 13.89
Interest cover-times 1.95 2.59 4.36 5.57
Cost of debt 12.17 10.85 9.13 7.59
PER SHARE DATA
EPS (Face value Rs.5/-) (Rs.) 0.17 2.96 8.20 10.17
EPS (after earlier yr tax adjustment) (Rs.) 0.15 2.96 10.95 10.22
CEPS (Face value Rs.5/-) (Rs.) 9.23 12.72 17.87 21.30
CEPS (after earlier yr tax adjustment) (Rs.) 9.21 12.72 20.62 21.35
Book value (Rs.) 46.08 48.54 57.74 59.67
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The Board of Directors
1
2 3 4
5 6
7 8
59
R.K. SOMANY
Chairman & Managing Director, a Fellow of theInstitute of Management, U.K., a Fellow ofInstitute of Materials, Minerals and MiningU.K., a Life Fellow of the All IndiaManagement Association, Member Emeritus ofthe American Ceramic Society, immediate past-president of the Associated Chambers ofCommerce and Industry of India(ASSOCHAM), the President of the Employers’Federation of India and now Chairman ofCouncil of Indian Employers.
Associated with the Company since 01.10.1965 andDirector since 09.01.1988
SANDIP SOMANY
Joint Managing Director, a Commercegraduate and a diploma holder in CeramicManufacturing Technology from the US.
Associated with the Company since 01.10.1985and Director since 11.11.1994
1
2
BINAY KUMAR
Director, is the Chairman of Benaras HouseLtd.
Director since 27.09.1996
3
N.G. KHAITAN
Director, is a Partner with Khaitan andCompany, one of the first law firms of India.
Director since 29.06.1996
S.B. BUDHIRAJA
Director, ex-M.D. of Indian Oxygen Ltd.and ex-Director of Indian Oil CorporationLtd.
Director since 30.10.2003
5
6
G.L. SULTANIA
Executive Director, and Company Secretary .
Associated with the Company since 15.11.1971 andDirector since 9.01.1988
7
V.K. BHANDARI
Director, is a banker by profession andformer General Manager of Central Bankof India.
Director since 17.01.2004
4
ASHOK JAIPURIA
Director, is the Chairman and ManagingDirector of Cosmo Films Ltd. andChairman of Cosmo Ferrites Ltd.
Director since 15.05.2004
8
60
Office:
• 2nd Floor, Tewari House, 11-B/8, Main Pusa Road, New Delhi - 110 005, Tel: (+91-11) 25854656/57, 25819142, 25750027
Fax: (+91-11) 25785278. E-mail: delhi@del.hindware.co.in
• Ceramic Division-II, 304, 3rd Floor, Ashoka Bhoopal Chambers, Sardar Patel Road, Secunderabad - 500 003.
Tel: (+91-40) 2784 8416, 2784 8417. Fax: (+91-40) 2784 8418. E-mail: marketing.hyd@hindware.co.in
• 14 Vaswani Mansions, 2nd Floor, Dinshaw Vachha Road, Back Bay Reclamation, Mumbai - 400 020.
Tel: (+91-22) 22044766, 22022247, 22829301 Telefax: (+91-22) 2202 2247
Works:
• Bahadurgarh - 124 507, Jhajjar, Haryana. Ph.: (01276) 210 485 (3 Lines) , 212226 (3 Lines) Gram: HINSAN. Fax: (01276) 210 138
• Varadanagar, Sanatnagar, Hyderabad - 500 018. Ph.: (040) 2383 1771-75. Gram: GLASS HOUSE. Fax: (040) 2383 1787
• Somanypuram, Brahmanapally, Bibinagar - 508 216, Andhra Pradesh. Ph.: (08685) 278362/63/75. Fax: (08685) 278362
Your management has prepared and is responsible for theaccompanying financial statements. These statements have beenprepared in conformity with generally accepted accountingprinciples appropriate in the circumstances and necessarily includesome amounts based on management’s estimates and judgments.
The Company’s accounting systems include internal controlsdesigned to provide sufficient assurance of the reliability of itsfinancial records and the proper safeguarding and use of its assets.Such controls are based on established policies and procedures, andare implemented by trained, skilled personnel with an appropriatesegregation of duties. The Company’s internal auditors whoconduct regular and extensive internal audits complement theinternal controls. The Company’s policies and procedures prescribethat the Company and all employees are to maintain the highestethical standards and that its business practices are to be conductedin a manner above reproach.
The Company’s independent auditors Messers Walker, Chandiok &Co., have audited the financial statements. Its audit was conductedin accordance with the generally accepted auditing standards asindicated in their report.
The Company Law requires the Board of Directors to prepare the
financial statements for each year in a manner that presents a trueand fair view of the state of affairs of the Company as reflected inthe balance sheet and the profit and loss account. In preparing these financial statements, the Directors are requiredto: • select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have beenfollowed, subject to any material departures disclosed andexplained in the financial statements;
The Board of Directors has exercised its responsibility for theaccuracy of the financial statements through its audit committee,composed solely of non-executive Directors; the audit committeemeets periodically with the management, the internal auditors andthe independent auditors, to review internal accounting control,auditing and financial reporting matters. The independent auditorsand the internal auditors have full and free access to the auditcommittee.
Sandip Somany
Joint Managing Director
61
Directors’ ResponsibilityStatement
HINDUSTAN SANITARYWARE & INDUSTRIES LIMITED
Registered Office: 2, Red Cross Place, Kolkata -700 001Phone: 2248 7406-7 • FAX: (91) (33)2248 7045 • E-MAIL: hindware@somanyent.com
62
Company Secretary'sResponsibility Statement
The Company Secretary confirms that the Company has:
• Maintained all the books of accounts and statutory registers
• Filed all Forms and Returns and furnished all necessary
particulars to the Registrar of Companies and / or Authorities as
required under the Companies Act, 1956.
• Registered all the charges created in favour of Financial
Institutions, Banks and others with the Registrar of Companies
within the prescribed time.
• Issued all Notices required to be given for the Board Meetings
and General Meetings as per the Companies Act, 1956.
• Effected share transfers and despatched the certificates within the
time limits prescribed by various authorities.
• Not exceeded the borrowing powers.
The Company has also complied with the regulations prescribed by
the SEBI and other statutory authorities and also all the statutory
requirements under the Companies Act, 1956, and other applicable
statutes in force.
G. L. Sultania
Executive Director and Secretary
HINDUSTAN SANITARYWARE & INDUSTRIES LIMITED
Registered Office: 2, Red Cross Place, Kolkata -700 001Phone: 2248 7406-7 • FAX: (91) (33)2248 7045 • E-MAIL: hindware@somanyent.com
Office:
• 2nd Floor, Tewari House, 11-B/8, Main Pusa Road, New Delhi - 110 005, Tel: (+91-11) 25854656/57, 25819142, 25750027
Fax: (+91-11) 25785278. E-mail: delhi@del.hindware.co.in
• Ceramic Division-II, 304, 3rd Floor, Ashoka Bhoopal Chambers, Sardar Patel Road, Secunderabad - 500 003.
Tel: (+91-40) 2784 8416, 2784 8417. Fax: (+91-40) 2784 8418. E-mail: marketing.hyd@hindware.co.in
• 14 Vaswani Mansions, 2nd Floor, Dinshaw Vachha Road, Back Bay Reclamation, Mumbai - 400 020.
Tel: (+91-22) 22044766, 22022247, 22829301 Telefax: (+91-22) 2202 2247
Works:
• Bahadurgarh - 124 507, Jhajjar, Haryana. Ph.: (01276) 210 485 (3 Lines) , 212226 (3 Lines) Gram: HINSAN. Fax: (01276) 210 138
• Varadanagar, Sanatnagar, Hyderabad - 500 018. Ph.: (040) 2383 1771-75. Gram: GLASS HOUSE. Fax: (040) 2383 1787
• Somanypuram, Brahmanapally, Bibinagar - 508 216, Andhra Pradesh. Ph.: (08685) 278362/63/75. Fax: (08685) 278362
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Performance review
Your company reported a good performance during the year underreview, reflected in a 8.54% increase in gross sales to Rs. 331.56 cr,reflected in the following factors:
• A 24% growth in building products division’s revenue to Rs. 153.51 cr
• Growth in international shipments; exports as a proportion of the
company’s revenue increased from 12.25% in 2003-04 to 14.27% in2004-05.
During the year under review your company reported an increase inits EBIDTA margin by 152 basis points to 20.42%, a Rs. 9.37 crincrease in EBIDTA (growth of 18.25% over 2003-04) and thehighest EBIDTA in its existence at Rs. 60.68 cr.
Concurrently, your company reduced its interest outflow by 7.50%despite a 46.91% increase in debt, rationalised its average cost of
Directors’ Report
Your Directors are happy to present the forty-fifth Annual Report and audited financial statements of your company for the year-ended 31stMarch, 2005.
Financial resultsRs./lakhs (0.1 million)
Parameters Year ended 31.03.2005 Year ended 31.03.2004
Gross sales 331,56 305,47
Operating profit (EBIDTA) 60,68 51,32
Less: Interest 10,89 11,78
Gross profit 49,79 39,54
Less: Depreciation 20,82 18,09
Net profit before income tax 28,97 21,46
Less: Provision for income tax 9,94 6,12
Profit after tax 19,03 15,34
Extraordinary income (net of tax) - 2,21
PAT after extraordinary income 19,03 17,55
Previous year income tax (9) (2,95)
Net profit after income tax 19,12 20,50
Balance brought forward 13,68 1,35
Provision for debenture redemption reserve written back 6,67 1,25
Available for appropriation 39,48 23,10
Proposed dividend on equity shares 5,15 2,81
Corporate dividend tax 67 36
Transferred to debenture redemption reserve - 3,25
Transferred to general reserve 3,00 3,00
Balance carried forward 30,66 13,68
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debt by 154 basis points and strengthened its interest cover from4.36x to 5.57x.
As a result, profit before tax grew 35% to Rs. 28.97 cr and profitafter tax grew 24% to Rs. 19.03 cr in 2004-05.
Corporate highlightsYour company primarily focused on strengthening its businessmodel. For this your company embarked on the followinginitiatives:
• Moved up the value chain in existing products
• Introduced international brands for the upper end of the market
• Entered new business segments
• Aggressively marketed in new markets
As a result, both business divisions reported an improvedperformance.
Building products division
Revenue from the building products division grew 24% and profitsincreased 35% over the previous fiscal. This growth was primarilyachieved through the following initiatives:
Consolidation in existing markets: Your company aggressively marketedits products in South India, which enabled it to achieve significantgrowth in this market. Besides, your company achieved a healthygrowth in revenue derived from other regions as well.
New products: Your company introduced several new products,launched new colour shades to meet emerging demand; it alsolaunched the ‘Hindware’ faucets in select Indian locations.
International products: Your company launched new ranges under theoutsourced ‘Grohe’ and ‘Keramag’ international brands.
New business segment: Your company made a lateral extension byentering the kitchen segment by launching stainless steel kitchensinks, which have been well received in the market.
The brand segregation of your company’s building product rangewas a success for the following reasons:
• It led to the precise identification of gaps in the value chain
• It translated into the outsourcing of top-of-the-line products ofinternational repute
• It resulted in an accurate marketing strategy based on the targetmarket
This enabled your company to effectively cover the entire valuechain and emerge as a one-stop-solution for building products inIndia.
Container glass division
Revenue from the container glass division declined 3.79% over
2003-04, primarily on account of production dislocation due to themodernisation and upgradation programme. During the year thedivision installed a state-of-the-art, energy-efficient andenvironment-friendly furnace that has the capability to runproduction in all three colors – flint, amber and green. Yourcompany also launched many new products in 2004-05 backed by astrong demand from the pharmaceutical and packaged foodsegments.
Division-wise review
Building products division
The building products division grew by 24% in 2004-05,outperforming the industry growth of 12%. This was backed by a10.22% growth in average realisation.
The unit at Bibinagar operated at 112% capacity, significantly higherthan its rated capacity of 12,000 tpa. This enabled your company tomatch all its export commitments and more than 97% of itsdomestic order commitments despite adverse conditions at itsBahadurgarh plant.
The company introduced two new business segments — stainlesssteel sinks for kitchens and ‘Hindware’ faucets in the buildingproducts division — to capture a larger share of the customer’swallet. These revenue streams expect to contribute about 15% tothe division’s sales over the next three years.
The fortunes of this division ride India’s housing growth andincreasing prosperity. Over the last few years, India’s GDP hasgrown annually at more than five per cent and India is now thesecond fastest growing economy in the world. Over the last threeyears, the division’s revenue grew at a CAGR of over 15.49%,outperforming the industry average of 10%.
This scenario is expected to improve dramatically. Presently, thecountry faces a shortfall of about 22.5 million dwelling units. Toshrink this deficit, the government has earmarked funds andintroduced a number of favourable policies: it opened theconstruction sector to international players, which is expected toaccelerate large scale construction of housing units and commercialcomplexes, driving the demand for building products.
The market is also expected to expand significantly at the bottomend. For instance, an increasing awareness by the government andother agencies towards improved rural sanitation is expected toincrease demand in the value-for-money range. The increasingprosperity of the Indian population in line with the growingeconomy, the early working of the younger generation and an easyaccess to financing the purchase of a house are expected to growthe demand for your company’s products.
In response to this emerging environment, your company is addinga number of items – captive and outsourced — to its product
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basket relevant to all consumer segments.
Container glass division
This division reported a marginal decline in sales of 2.78% in 2004-05. Even as India’s GDP grew 6.9% in 2004-05, the domesticcontainer glass industry registered a growth of 6.0%.
The latent opportunities for the demand of glass containers isevident from the fact that India’s per capita consumption at 0.4 kgis among the lowest in the world, as opposed to 3.5 kg in China and14 kg in Japan.
The container glass division primarily caters to four broadsegments: FMCG (packaged food), pharmaceuticals, beer and liquorand soft drinks. Robust demand is expected from packaged food onaccount of increasing disposable income, growing preference forpackaged food and manufacturers looking at introducing innovativepackaging.
The Indian liquor industry is positioned for attractive growth due toa softening in the government’s stand on licenses, growing industryconsolidation and the entry of foreign brewers. With a view toincrease consumption, soft drink brands are looking at increasingtheir exposure in rural India (71% of the population) andintroducing products across lower price points (Rs. 6).
The Indian pharmaceutical industry has been another success story:India has been widely recognised as an outsourcing base for anincreasing number of multinational players. Besides, global playersare also setting up manufacturing facilities in India to capitalise onthe country’s low cost structure and high availability of skilledprofessionals.
Modernisation and expansion
Building products division
The building products division is expanding its Bibinagar plantcapacity from 12,000 tpa to 18,000 tpa at an investment ofapproximately Rs. 26 cr in the financial year 2005-06.
Container glass division
The container glass division underwent a considerable capitalexpansion during the year under review through the introduction ofa new state-of-the-art furnace in September 2004. Through thecommissioning of the new ‘deep refiner’ furnace, the division’senhanced flexibility is reflected in the following: wider range, lowercosts and quicker response to market opportunities. It is among thethree plants in India to provide a unique flexibility to switch thecolour of the end product without hampering productivity. Thedivision also commissioned automatic inspection machines,electronic temperature controls and motors for better qualitycontrol leading to lower rejects.
ExportsYour company’s exports grew 27% in 2004-05 comprising 14.27%
of net sales due to an increasing acceptance of products in theinternational market. While exports from the building productsdivision grew to the quality conscious markets of Europe andAustralia, the container glass division capitalised on the growingexport potential of packaged food products.
Financial strengthYour company’s improved performance allowed it to strengthen itsfinancial position. The introduction of value-added products on theone hand and consistent cost-cutting on the other helped it improveEBIDTA margins by 152 basis points to 20.42% in 2004-05.Despite a 46.91% increase in debt (resulting from capitalexpenditure for modernisation and upgradation programme at thecontainer glass division), your company reduced its interest outflowby 7.50%, rationalised its average cost of debt by 154 basis pointsand strengthened its interest cover from 4.36x to 5.57x.
The principal cost-cutting initiatives comprised:
Building products division
Conversion of LPG to re-gassified liquefied natural gas (RLNG)in April 2004
Recovery and utilisation of waste heat generated from themanufacturing process
Process de-bottlenecking to enhance capacity utilisation
Increasing casting capacity to improve productivity and coverfixed costs better
Container glass division
Backward integration into quartz crushing to increase the captivesand availability
Timely investment in the equity of APGPGL (co-operative powermajor), reducing your company’s power bill
Commissioning of a new furnace to reduce melting cost
These initiatives rationalised manufacturing costs from 65.93% ofincome in 2003-04 to 63.39% in 2004-05 despite higher fuel prices.Besides, your company swapped high cost loans with low-couponalternatives, reducing the average cost of funds by 154 basis points.
PeopleYour company continued to strengthen it people skills during 2004-05 through the following initiatives:
Your company engaged the services of NIS Sparta, the biggesttraining institute in Asia to provide competency mapping andperformance enhancement solutions for the field force. Result: 99%of the national-level targets were achieved; in the South allemployees reached their budgeted target for 2004-05.
Your company engaged the services of reputed consultants toconduct a precise job evaluation of the company’s employees andsuggest process de-bottlenecking initiatives.
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Your company incentivised superior performance through aChairman’s Club concept, which provided a cash reward and a paidholiday for employees surpassing their budgeted targets. Result: Inthe building products division, nine members entered this elite clubin 2004-05 (two in 2003-04).
Your company faced a 62-day strike at its Bahadurgarh plant, whichadversely impacted the production and profitability of the buildingproducts division. A three-year wage agreement as per the termslaid down by your company was entered into between the labourunions and your company. Subsequently, operations were restoredin the last quarter of 2004-05.
Your company also entered into a five-year wage agreement withthe employees at its Bibinagar unit in June 2004. As per the termsof the agreement, wage increase of employees has been linkeddirectly to their productivity, ensuring sustainable growth over themedium term.
OutlookSince both business divisions address improved lifestyles, the long-term prospects appear optimistic.
Building products division
The fortunes of this division are linked to the growing constructionof dwelling houses and commercial complexes. With an increasingthrust on the housing sector by the government (throughfavourable policies) and by the commercial world (throughcustomised loans), the demand for building products is expected toincrease significantly. Specific contributors to growth among otherswill be:
An increase in the construction of malls and shopping complexes– an estimated 600 such malls, covering an estimated area of 100mn sq ft over the next five years – will trigger a bigger demand forbuilding products
India’s existing housing shortage of over 22.5 million dwellingunits is expected to be addressed more now than ever before
Besides, the increasing importance of India in global trade hasaccelerated the construction of commercial complexes and alliedinfrastructure, which augurs well for your company.
The replacement segment, which was practically non-existentearlier, has started to pick up due to rising income levels coupledwith the fact that value-added products are sold to this segment is apositive development for your company.
A growing economy (estimated to grow at about 7% p.a. over thenext few years) has translated into greater prosperity, reflected inincreasing renovation, growing the opportunities for your company.
Container glass division
A growing economy, increasing per capita income, rising aspirationsand a ‘young’ and growing Indian middle class is increasingpurchasing propensity. This is encouraging FMCG and liquorcompanies to increase their packaging solutions. Moreover,increasing rural promotions by soft drinks manufacturers along withthe availability of products at affordable price points is expandingthe consumer base. These initiatives and developments are expectedto generate a larger revenue, increased margins and higherprofitability for your company.
Government policyThe government’s policy continues to be favourable to the housingsector, including the recent liberalisation of the foreign directinvestment norms. The liberal sops and incentives for boosting thehousing sector continue to fuel growth of the building productssegment.
Bonus sharesDuring the year under review your company issued bonus equityshares in the ratio of 2:3 i.e., two new fully paid-up equity shares offace value Rs. 5 each were issued and allotted to the shareholdersfor every three equity shares of face value Rs. 5 each, held onJanuary 6, 2005 (the "Record Date"). The paid-up equity sharecapital after the bonus issue stands at Rs. 9.35 cr.
DividendKeeping in mind the improved performance of your company, theBoard of Directors has recommended a dividend of Rs. 2.75 pershare (dividend rate of 55%) on equity shares, subject to approvalof shareholders. The proposed dividend is on an increased numberof shares after the 2:3 bonus issue, which translates into a dividendof Rs. 4.58 per share (dividend rate of 91.67%) on a pre-bonusbase.
De-listingThe company’s equity shares were de-listed from The CalcuttaStock Exchange Association Limited, as confirmed vide their letterdated 14.1.2005, pursuant to the resolution passed by theshareholders at their Annual General Meeting held on 29.9.2003.However, the company’s equity shares continue to be listed at theNational Stock Exchange of India Limited and the Stock Exchangeof Mumbai, having nationwide terminals.
EnvironmentThe company realises the implication of environmental protectionand cautiously works to sustain growth while keeping theenvironment in mind. All three plants are ISO 14001 certified.
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Conservation of energy, technology absorptionand exchange earnings and outgoParticulars required u/s 217 (1) (e) of Companies Act, 1956 readwith Company (Disclosure of particulars in the Report of the Boardof Directors) Rules, 1988 are attached to this report as Annexure ‘A’.
Auditors M/S Walker, Chandiok & Co., Chartered Accountants, retire at theensuing Annual General Meeting and offer themselves for re-appointment. The notes to the accounts, referred to in the Auditors’Report, are self explanatory and, therefore, do not call for anyfurther comments on the Auditors’ Report under Section 217 (3) ofthe Companies Act, 1956, except for the following:
Raasi division
The company had closed the manufacturing operations of the RaasiCeramic Division w.e.f. April 2001 on account of refurbishmentand comprehensive repairs of kilns. However, based on thetechnical evaluation of the assets of the said division, themanagement has decided not to restart the operations andaccordingly assets of the division are impaired.
The Institute of Chartered Accountants of India has introducedAccounting Standard 28 to recognise impairment of assets. TheAccounting Standard became effective for accounting periodscommencing on or after 01.04.2004. All the assets of the RaasiCeramic Division have been recognised for impairment as perabove Accounting Standard and accordingly the impairment loss ofRs.15,12,25,901 as computed under the provisions of the Standard,has been adjusted against the opening balance of revenue reservesas recommended by the Standard. Consequent to the above,deferred tax amount of Rs. 5,42,52,292 has been written back to theProfit and Loss Appropriation account out of the amount alreadyprovided for in the earlier years in compliance with AccountingStandard 22 of ICAI.
DirectorsMr. Binay Kumar and Mr. S.B. Budhiraja retire by rotation at theensuing Annual General Meeting and being eligible, offerthemselves for re-appointment.
Corporate GovernanceA Report on Corporate Governance along with Managementdiscussion & analysis, as prescribed by the Listing Agreement,would form an integral part of the Annual Report 2004-05.
Subsidiary companyAs required under Section 212 of the Companies Act, 1956, theAnnual Report and Accounts of company’s subsidiary, AGI
Glasspack Limited, for the year-ended 31.03.2005 have beenattached.
Directors’ responsibility statementi) In the preparation of annual accounts for the year-ended
March 31, 2005, applicable accounting standards have beenfollowed;
ii) We have selected such accounting policies and applied themconsistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of thestate of affairs of the company at the end of financial year2004-05 and of the profit of the company for that period;
iii) We have taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with theprovisions of the Companies Act, for safeguarding the assetsof the company and for preventing and detecting fraud andother irregularities; and
iv) We have prepared the annual accounts on a going concernbasis.
Particulars of employeesInformation as required by Section 217 (2A) of the Companies Act,1956, read with Companies (Particulars of Employees) Rules, 1975,in respect of the company’s employees, has been given in anAnnexure to the report. However, as per provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the reports and accountsare being sent to all shareholders of the company, excluding thestatement of the particulars of employees under Section 217 (2A) ofthe Act. Any shareholder interested in obtaining a copy of the saidstatement may write to the Company Secretary at the RegisteredOffice of the company.
AppreciationYour Directors wish to convey their appreciation for the co-operation and assistance received from the government, thefinancial institutions, bankers and stakeholders of the company.Your Directors also express their appreciation of the dedication ofemployees in working cohesively to achieve company goals. Welook forward to receiving the continued patronage of all yourcompany’s business partners to attain greater heights over theforeseeable future.
For and on behalf of the Board
New Delhi R. K. Somany
Dated: 26th May, 2005 Chairman and Managing Director
ANNEXURE ‘A’Information as per section 217 (1) (e) of the Companies Act, 1956read with the Companies (Disclosure of particulars in the report ofBoard of Directors) Rules, 1988 and forming part of the Directors’Report for the year ended 31st March, 2005.
Conservation of Energya) Energy conservation is an on-going activity in the unit and it is
closely monitored to a specific programme for reduction.
b) The Company reviews various proposals for reduction inconsumption of energy, mainly by way of replacement of existingequipments by modern & energy efficient equipments.
c) Total Consumption and Energy Consumption per unit ofproduction in respect of Glass Division as per form ‘A’ is enclosedherewith.
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Annxure to the
Directors’ Report
2004-05 2003-04
1 A) Electricity (Purchased)
Units (KWH) 16564538 11158825
Total Amount 65595570 33987663
Rate / Unit 3.96 3.05
B) Own Generation
Units (KWH) 20542800 31231069
Units per LT of Fuel Oils 4.14 4.63
Rate / Unit 3.05 2.63
C) Total (A+B)
Units (KWH) 37107338 42389894
Total Amount 126177478 116217885
Rate / Unit 3.40 2.74
2. FUELS (COAL, HSD, LDO, LPG & LSHS)
Quantity (in MT) 37144.32 35749.17
Value Rs. 346853720 281894746
Unit Rate 9338.00 7885.35
Consumption per unit of Production
Glass Bottles production pieces in lacs 6050.70 5520.92
Electricity (KWH) 6132.73 7678.05
FUELS (COAL, HSD, LDO, LPG & LSHS) 6138.85 6475.22
Form ‘A’ENERGY CONSUMPTION & CONSUMPTION PER UNIT OF PRODUCTION
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STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 (3) OF THE COMPANIES ACT, 1956
AGI Glasspack Limited
The Accounts of the company were closed on 31st March, 2005. Hindustan Sanitaryware & Industries Limited held 43,01,200 fully paid-upequity shares of Rs. 10 each of the company, constituting 100% of its share capital as on 31st March, 2005.
The company has earned a net loss of Rs.56,654 after provision for income tax of Rs.NIL from which the carried forward profit ofRs.41,341 was set off and the balance sum of Rs.(15,313) was carried to the balance sheet.
For and on behalf of the Board
New Delhi R.K. Somany
Dated: 26th May, 2005 Chairman and Managing Director
Form ‘B’
1. Research & Development
The Bahadurgarh Unit has a Research & Development Centre,which is operational with the specialised cell to analyze problemsand adopt new technology in order to improve the quality.
During the year a sum of Rs. 14.21 Lacs was incurred on thisaccount (Previous year Rs. 13.94 Lacs).
2. Technology Absorption, Adaptation and Innovation
Efforts towards technology adaptation and innovation are beingmade in the process to achieve cost reduction, productimprovement etc.
3. Foreign Exchange Earnings and Outgo
The Company has exported its products directly during the periodunder review. The Company has imported certain Spare Parts,Components, Raw Material, Capital Goods, etc. as per detail given:
2004-05 2003-04
(Rs.lacs) (Rs.lacs)
Earnings in Foreign Exchange 1989.85 1768.31
Expenditure in Foreign Exchange:
a) Raw Material, Spare Parts & Others 3056.89 1442.41
b) Capital Equipments 1650.29 786.19
For and on behalf of the Board
New Delhi R.K. Somany
Dated: 26th May, 2005 Chairman and Managing Director
Executive Directors
Name Date of Designation No. of Meetings No. of No. of Memberships
Appointment held during the Meetings in Board of other
Financial Year attended companies (*)
Mr. R.K. Somany January 9, 1988 Chairman & Managing Director 5 5 3
Mr. Sandip Somany December 1,1994 Joint Managing Director 5 4 3
Mr. G.L. Sultania January 9, 1988 Executive Director & Secretary 5 5 13
Independent Non-Executive Directors
Name Date of Designation No. of Meetings No. of No. of Memberships
Appointment held during the Meetings in Board of other
Financial Year attended companies (*)
Mr. Binay Kumar September 12, 1997 Director 5 5 6
Mr. N.G. Khaitan September 27, 1996 Director 5 5 12
Mr. S.B. Budhiraja # July 24, 2004 Director 5 5 5
Mr. V.K. Bhandari # July 24, 2004 Director 5 5 1
Mr. Ashok Jaipuria # July 24, 2004 Director 5 3 2
# They were appointed Additional Directors on 30th October 2003, 17th January 2004 and 15th May 2004 respectively and were appointedregular Directors at the AGM held on 24th July 2004.
A Report On
Corporate Governance
1. Company PhilosophyThe company’s philosophy of Corporate Governance stems fromits belief that all actions and strategies should be consistent with thewelfare of its shareholders. Your company is committed totransparency in all its dealings and places great emphasis onaccountability leading to management reliability and business ethics.
2. Board of DirectorsAs on 31st March, 2005, the Board comprised of a Chairman andManaging Director, two Executive Directors and five Non-
Executive Directors, aggregating to a total of eight members.
During the year five board meetings were held on 15th May, 2004,24th July, 2004, 28th October, 2004, 18th January, 2005 and 24thMarch, 2005 and the gap between two Board meetings was notmore than three months.
There are no nominee directors on the Board. Mr. R.K. Somany,the Managing Director, is also the Chairman of the Board. Thecomposition of the Board of Directors and the meetings attendedby them are as follows:
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(*) Exclude Directorship in Private Limited Companies andoverseas corporations, memberships of Managing Committees ofvarious chambers / bodies and Alternate Directorships
Not Independent Directors - 3 (38%)Independent Directors - 5 (62%)
The company declares that none of the directors of company aremembers of more than 10 Board Committees or Chairmen of morethan five Board committees across all companies.
3. Audit Committee
a) Terms of reference
To oversee the company's financial reporting process and disclosureof its financial information, to recommend the appointment ofstatutory auditors and fixation of the audit fee, to review anddiscuss with the auditors the internal control systems, the scope ofaudit including observations of the auditors and adequacy ofinternal control systems, major accounting policies and practices, toadopt Accounting Standards and comply with various requirementsconcerning financial statements, if any, and to review the company'squarterly and annual financial statements before submission to theBoard of Directors.
During the year, four Audit Committee meetings were held on 15thMay 2004, 28th October 2004, 18th January 2005 and 24th March2005. The Minutes of the Audit Committee are circulated to theBoard, discussed and taken note of.
b) Composition
The committee consists of four Independent Non-ExecutiveDirectors as on date. The composition and the details of attendanceare as under:
Name of Member Status No of Meetings
attended
Mr. V.K. Bhandari Chairman 4
Mr. Binay Kumar Member 4
Mr. N. G. Khaitan Member 4
Mr. S.B. Budhiraja Member 4
Mr. G. L. Sultania Secretary 4
4. Shareholders’/Investors’ GrievanceCommittee
a) Terms of reference
The company has constituted a Shareholders’ Grievance Committeeto expeditiously redress shareholders’ complaints and grievances, ifany.
b) Composition
The Shareholders’ Grievance Committee comprises of three Non-Executive Directors and one Executive Director. During the year,
the committee had three meetings on 15th May 2004, 28th October2004 and 18th January 2005 and the attendance of members was asfollows:
Name of Member Status No of Meetings
attended
Mr. S.B. Budhiraja Chairman 3
Mr. N. G. Khaitan Member 3
Mr. V.K. Bhandari Member 3
Mr. G. L. Sultania Member 3
Mr. G.L. Sultania, Company Secretary, is also the ComplianceOfficer of the company. During the year under review, thecompany received 184 letters / complaints from shareholders,which were mainly about the enquiry on split/sub-division of sharesand bonus shares issued during the year, and they werereplied/resolved to the satisfaction of Shareholders.
5. Share Transfer Committee
a) Terms of reference
The company has constituted a Share Transfer Committee toconsider and process various requests for transfer of shares, issue ofduplicate shares, split/consolidation of shares and thereupon theissue of fresh share certificates, transmissions or transposition ofshares.
b) Composition
The Share Transfer Committee comprises of one Executive Directorand two executives of the company. During the year, the committeehad 12 meetings for approval of transfer of shares lodged with thecompany and the attendance of members was as follows:
Name of Member Status No of Meetings
attended
Mr. G. L. Sultania Executive director 12
Mr. N. Goenka Dy. General Manager (Finance) 11
Mr. S. Banerjee Investor Relations Manager 12
As on date, no requests for transfer of shares are pending.
6. Remuneration Committee
(a) Remuneration Policy:
Remuneration of employees largely consists of basic remuneration,perquisites and performance incentives. The remuneration packagesare governed by industry pattern, qualifications and experience. Thecompany has a very vibrant HR Policy and during the year therewas no major talent drain.
The company, in future, proposes to move towards more incentive-based flexible remuneration packages. The company has not got any
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7. General Body MeetingsThe last three general body meetings were held at SomanyConference Hall of Merchant’s Chamber of Commerce, 15B,Hemant Basu Sarani, Kolkata – 700 001 as under:
Financial Year Date Time
2003-4 July 24,2004 11-00 A.M.
2002-3 September 29,2003 11-30 A.M.
2001-2 September 20,2002 11-00 A.M.
No special resolutions were required to be put through postal ballotlast year.
Attendence of Directors at the AGM during the last financial year:
Date Attended by
July 24, 2004 Mr. R. K. Somany, Mr. Sandip Somany, Mr. N.G. Khaitan, Mr. Binay Kumar, Mr. S.B. Budhiraja, Mr. V.K. Bhandari & Mr. G. L. Sultania.
8. Disclosures(i) During the year there were no transactions of a material naturewith the Directors or the management or relatives that had potentialconflict with the interests of the company, or its subsidiaries.
(ii) During the last three years, there were no instances of non-compliance on any matter related to the capital markets.
9. Means of Communication(i) Quarterly results are published in prominent daily newspapers.
(ii) Management’s discussion and analysis forms an integral part ofthe Directors’ Report.
(iii) Company data is also provided on www.sebiedifar.nic.in, inconformance with Clause 51 of the Listing Agreement.
10. General Shareholders Information(i) The Annual General Meeting is proposed to be held on 24thAugust, 2005 at 11.30 A.M. at Somany Conference Hall ofMerchant's Chamber of Commerce, 15B, Hemant Basu Sarani,Kolkata - 700 001.
(ii) Financial Calendar
Annual results of previous year End May
Mailing of Annual Reports End July
First Quarterly results End July
Annual General Meeting End August
Payment of Dividend 29th August, 2005
Second Quarterly Results End October
Third Quarterly Results End January
stock options schemes for its employees.
(b) Composition:
The company has constituted Remuneration Committee under the Chairmanship of Mr. S.B. Budhiraja. Mr. N.G. Khaitan and Mr. V.K.Bhandari are members and Mr. G.L. Sultania as Secretary of the Committee. During the financial year two meetings were held on 15th May,2004 and 18th January, 2005. All the members attended these meetings.
Remuneration paid to directors during 2004-5 (Amount in Rs.)
Name Salary & Perks Sitting fee Commission Total
(for the year 2003-04)
Mr R K Somany* 42,23,800 – 75,82,091 1,18,05,891
Mr Sandip Somany* 37,36,914 – 75,82,091 1,13,19,005
Mr G L Sultania* 36,91,316 – 20,45,140 57,36,456
Mr Binay Kumar – 16,500 8,36,102 8,52,602
Mr N G Khaitan – 21,500 8,36,102 8,57,602
Mr V K Bhandari – 21,500 1,71,332 1,92,832
Mr S B Budhiraja – 21,500 3,51,802 3,73,302
Mr Ashok Jaipuria – – – –
Mr S S Kanoria $ – – 4,84,300 4,84,300
1,16,52,030 81,000 1,98,88,960 3,16,21,990
(*) Wholetime Directors are not entitled for sitting fee.Mr. Ashok Jaipuria, foregoes his entitlement for a sitting fee.$ Proportionate commission was paid up to his directorship dtd 30.10.2003 in the company.
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(vii) Market Price Data for each calendar month during the last financial year.
Months NSE BSE
2004 -5 High Low High Low
April,04 140.00 106.50 138.90 109.00
May,04 140.00 98.35 139.55 97.20
June,04 106.30 77.75 102.90 76.30
July,04 109.00 83.05 106.00 83.50
August,04 135.00 106.25 135.00 106.90
September,04 147.45 125.00 147.00 124.55
October,04 183.50 137.00 185.95 137.15
November,04 181.00 163.00 179.90 162.10
December,04 194.00 161.00 192.80 160.50
January, 05 193.00 *96.00 191.95 *95.60
February, 05 121.50 99.75 119.80 100.00
March,05 135.00 99.00 135.00 95.00
* Ex-Bonus
(viii) Market Price Data in comparison to the BSE index
Months BSE BSE Index
2004 -5 High Low High Low
April,04 138.90 109.00 5979.25 5599.12
May,04 139.55 97.20 5772.64 4227.50
June,04 102.90 76.30 5012.52 4613.94
July,04 106.00 83.50 5200.85 4723.04
August,04 135.00 106.90 5269.22 5022.29
September,04 147.00 124.55 5638.79 5178.57
October,04 185.95 137.15 5803.82 5558.14
November,04 179.90 162.10 6248.43 5649.03
December,04 192.80 160.50 6617.15 6176.09
January, 05 191.95 *95.60 6696.31 6069.33
February, 05 119.80 100.00 6721.08 6508.33
March,05 135.00 95.00 6954.86 6321.31
* Ex-Bonus
(iii) Date of Book Closure - 16th August, 2005 to 24th August,2005 (both days inclusive).
(iv) Dividend payment date - latest by 29th August, 2005
(v) Listing on Stock Exchanges
National Stock Exchange of India Limited (NSE) and The StockExchange, Mumbai (BSE).
The equity shares were delisted from The Calcutta Stock Exchange
Association Ltd, w.e.f. 9th December, 2004, pursuant to resolutionpassed by shareholders at their Annual General Meeting held on29th September, 2003.
(vi) Stock Code
NSE - HINDSANIT, BSE - 500187,
ISIN allotted for company’s equity shares of Rs. 5 each: INE 415A 01020.
73
(xiii) Dematerialisation of shares
As on 31st March, 2005, 7236921 equity shares of Rs.5 each, comprising 38.68% of total shares were held in demat form and 11473282equity shares of Rs.5 each, comprising 61.32% (including 10025288 comprising 53.58% of the promoters’ holding) of the total shares, areheld in physical form.
(xiv) Outstanding GDR's/ADR's/Warrant or any convertible instruments, conversion date and any likely impact on the equity:
there were no outstanding GDRs/ADRs/warrants or any convertible instrument on 31st March, 2005.
(ix) Share Transfer Agent for Both Demat Segment
& Physical Segment
Maheshwari Datamatics Private Limited 6, Mango Lane, Kolkata - 700 001.Phone No. (033) 2243 5809/ 5029, Fax No. (033) 2248 4787E-Mail : mdpl@cal.vsnl.net.in
(x) Share Transfer System
The company's shares are traded on stock exchanges in compulsory demat mode. Shares in physical mode are lodged with the Share transferregistrar, which are transferred, subject to the exercise of option under the compulsory transfer-cum-demat procedures. Share certificates areeither held in demat form or returned in physical form within the time prescribed by the authorities.
(xi) Distribution of shareholding as on 31st March, 2005 :
Shareholders Shares
From To Number % of total No. of Shares % of total shares
001 500 8354 86.24 1376498 7.36
501 1000 758 7.83 552499 2.95
1001 2000 288 2.97 433688 2.32
2001 3000 90 0.93 227109 1.22
3001 4000 60 0.62 210166 1.12
4001 5000 28 0.29 131083 0.70
5001 10000 44 0.45 301552 1.61
10001 Above 65 0.67 15477608 82.72
Total 9687 100.00 18710203 100.00
(xii) Categorisation of shareholding as on 31st March, 2005
Category No. of Shareholders No. of Shares % of Shareholding
Domestic Companies 401 773882 4.14
Financial Institutions/Banks 10 156927 0.84
Mutual Funds 4 923410 4.93
Foreign Institutional Investors & Foreign Companies 5 1365090 7.30
Non-Residents Indians 104 23404 0.12
Promoters, Directors and Relatives 13 12268833 65.57
General Public 9150 3198657 17.10
Total 9687 18710203 100.00
74
(xv) Plant Locations
SANITARYWARE DIVISIONS
A. Bahadurgarh – 124507, District Jhajjar, Haryana
B. Somanypuram, Brahmanapally, Bibinagar – 508 126, Andhra Pradesh
GLASS DIVISION
Varadanagar, Kukatpally, Sanathnagar, Hyderabad – 500 018, Andhra Pradesh.
(xvi) Address for correspondence
2, Red Cross Place,Kolkata - 700 001Phone : 91 - 33 -2248 7406/07Fax : 91 - 33 - 2248 7045E-mail : hindware@somanyent.com
Auditors’ certificate on compliance with the conditions of corporate governance under clause 49 of the listing agreement
To the members of Hindustan Sanitaryware & Industries Limited
We have examined the compliance of conditions of corporate governance by Hindustan Sanitaryware & Industries Limited ("the Company")for the year ended on 31 March 2005, as stipulated in clause 49 of the listing agreement of the Company with the stock exchanges.
The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to proceduresand implementation thereof, adopted by the Company, for ensuring the compliance of the conditions of corporate governance. It is neitheran audit nor an expression of opinion on the financial statements of the Company.
In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has compliedwith the conditions of corporate governance as stipulated in the abovementioned listing agreement.
We state that no investor grievances are pending for a period of exceeding one month except where disputed or sub-judice, as per therecords maintained by the Shareholders/Investors Grievance Committee.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectivenesswith which the management has conducted the affairs of the Company.
For Walker, Chandiok & Co
Chartered Accountants
Vinod Chandiok
Place : New Delhi PartnerDated : 26 May 2005 Membership No. 10093
75
Auditors’ Certificate
76
FinancialSection
Hindustan Sanitaryware & Industries Limited
77
1. We have audited the attached Balance Sheet of Hindustan
Sanitaryware & Industries Limited (the ‘Company’) as at 31
March 2005, and also the Profit and Loss Account and Cash
Flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those Standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003 as
amended by the Companies (Auditor’s Report) (Amendment)
Order, 2004 (the ‘Order’) issued by the Central Government of
India in terms of sub-section (4A) of section 227 of the
Companies Act, 1956, (the ‘Act’), we give in the Annexure a
statement on the matters specified in paragraphs 4 and 5 of the
said Order.
4. Further to our comments in the Annexure referred to above, we
report that:
(a) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law
have been kept by the Company so far as appears from our
examination of those books;
(c) The Balance Sheet, Profit and Loss Account and Cash Flow
Statement dealt with by this report are in agreement with the
books of account;
(d) In our opinion and to the best of our information and
according to the explanations given to us, the financial
statements, read together with the notes thereon, comply
with the accounting standards referred to in sub-section (3C)
of section 211 of the Act, give the information required by
the Act in the manner so required and give a true and fair
view in conformity with the accounting principles generally
accepted in India, in the case of:
i) the Balance Sheet, of the state of affairs of the Company
as at 31 March 2005;
ii) the Profit and Loss Account, of the profit for the year
ended on that date; and
iii) the Cash Flow Statement, of the cash flows for the year
ended on that date;
(e) On the basis of the written representations received from the
directors, as on 31 March 2005 and taken on record by the
Board of Directors, we report that none of the directors is
disqualified as on 31 March 2005 from being appointed as a
director in terms of clause (g) of sub-section (1) of section 274
of the Act.
For Walker, Chandiok & CoChartered Accountants
Vinod Chandiok
Place: New Delhi Partner
Date: 26 May 2005 Membership No.10093
Auditors’ ReportTO THE MEMBERS OF HINDUSTAN SANITARYWARE & INDUSTRIES LIMITED
78
In terms of the information and explanations given to us and the
books and records examined by us in the normal course of audit, we
report that:
i) (a) The Company is maintaining proper records showing full
particulars including quantitative details and situation of
fixed assets.
(b) Fixed assets were physically verified by the management
during the year in accordance with a planned program
which, in our opinion, is reasonable having regard to the
size of the Company and the nature of its assets. As
informed, no material discrepancies were noticed on such
verification.
(c) In our opinion, a substantial part of fixed assets have not
been disposed off during the year.
ii) (a) Inventory, except goods in transit and those lying with
outside parties, has been physically verified by the
management during the year. In our opinion, the
frequency of verification is reasonable.
(b) The procedures of physical verification of inventories
followed by the management are reasonable and adequate
in relation to the size of the Company and the nature of its
business.
(c) The Company is maintaining proper records of inventory
and no material discrepancies were noticed on physical
verification.
iii) The Company has not granted or taken any loans, secured or
unsecured to/ from companies, firms or other parties covered
in the register maintained under section 301 of the Act.
Accordingly, the provisions of clauses 4(iii)(b), 4(iii)(c),
4(iii)(d), 4(iii)(f) and 4(iii)(g) of the Order are not applicable to
the Company.
iv) In our opinion, there are adequate internal control systems
commensurate with the size of the Company and the nature of
its business, for the purchase of inventory, fixed assets and for
the sale of goods and services. During the course of our audit,
no major weakness has been noticed in the internal controls in
respect of these areas.
v) We are of the opinion that the Company has not entered into
contracts or arrangements referred to in section 301 of the Act.
Accordingly, the provisions of clause 4(v) of the Order are not
applicable to the Company.
vi) The Company has not accepted any deposits from the public
and accordingly, the provisions of clause 4(vi) of the Order are
not applicable to the Company.
vii) In our opinion, the Company has an internal audit system
commensurate with its size and the nature of its business.
viii) To the best of our knowledge, the Central Government has
not prescribed maintenance of cost records under clause (d) of
sub-section (1) of section 209 of the Companies Act, 1956 for
the products of the Company and accordingly, the provisions
of clause 4(viii) of the Order are not applicable to the
Company.
ix) (a) The Company is regular in depositing the undisputed
statutory dues including provident fund, investor
education & protection fund, employees’ state insurance,
income-tax, sales-tax, wealth-tax, service-tax, custom duty,
excise duty, cess and other material statutory dues as
applicable with the appropriate authorities. No
undisputed amounts payable in respect of income-tax,
wealth-tax, service-tax, sales-tax, customs duty and excise
duty were outstanding, at the year end for a period of more
than six months from the date they became payable.
(b) According to the information and explanations given to
us, following dues of excise duty and sales tax have not
been deposited on account of disputes;
Auditors’ ReportAnnexure to the
TO THE MEMBERS OF HINDUSTAN SANITARYWARE & INDUSTRIES LIMITED ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2005.
Hindustan Sanitaryware & Industries Limited
79
x) The Company has no accumulated losses at the end of the
financial year and it has not incurred cash losses in the current
and immediately preceding financial year.
xi) The Company has not defaulted in repayment of dues to any
financial institutions, bank or to debenture holders during the
year.
xii) The Company has not granted any loans and advances on the
basis of security by way of pledge of shares, debentures and
other securities and accordingly, the provisions of clause 4(xii)
of the Order are not applicable to the Company.
xiii) The Company is not a chit fund or a nidhi/ mutual benefit
fund/ society. Accordingly, the provisions of clause 4 (xiii) of
the Order are not applicable to the Company.
xiv) In our opinion, the company is not dealing in or trading in
shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order are
not applicable to the Company.
xv) The Company has not given any guarantees for loans taken by
others from banks or financial institutions. Accordingly, the
provisions of clause 4 (xv) of the Order are not applicable to
the Company.
xvi) In our opinion, the Company has applied the term loans for
the purpose for which the loans were obtained.
xvii) Based on an overall examination of the balance sheet and cash
flow statement of the Company, we report that no funds raised
on short-term basis have been used for long-term investment
(excludes permanent working capital).
xviii) The Company has not made any preferential allotment of
shares to parties or companies covered in the register
maintained under section 301 of the Act. Accordingly, the
provisions of clause 4(xviii) of the Order are not applicable to
the Company.
xix) In respect of debentures issued by the Company and
outstanding during the year, the securities were created by the
Company at the time these debentures were issued.
xx) The Company has not raised any money by public issues
during the year. Accordingly, the provisions of clause 4(xx) of
the Order are not applicable to the Company.
xxi) Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and
as per the information and explanations given by the
management, we report that no fraud on or by the Company
has been noticed or reported during the period covered by our
audit.
For Walker, Chandiok & CoChartered Accountants
Vinod Chandiok
Place: New Delhi Partner
Date: 26 May 2005 Membership No.10093
Name of Nature of dues Amount Period to which Forum where
the Statute (Rs.) the amount relates dispute is pending
The Central Excise Act,1944
Duty demanded on 2,88,912 June 1995 to Customs Excise and Gold
differential rate of Excise duty July 1995 Appellate Tribunal
Duty demanded on non-inclusion 1,26,14,808 July 2000 to Writ petition pending
of cost of packing materials July 2001 with Hon’ble High Court
(supplied by customers) of Hyderabad
in assessable value
Duty demanded on wrongful 3,24,161 February 2004 Assistant Commissioner
credit of Cenvat (Appeals), excise and customs
Delhi Sales Tax Act, 1975
Sales tax demand due to non 70,63,135 1998-99 to 2003-04 Commissioner (Appeals), sales tax.
submission of statutory forms Of this demand Rs. 4,04,372 has
been deposited by the Company.
80
Balance sheet as at 31 March 2005
The schedules referred to above form an integral part of the financial statementsOn behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
This is the balance sheet referred to in our report of even date.For Walker, Chandiok & Co
Chartered Accountants
Place : New Delhi Vinod ChandiokDate : 26 May 2005 Partner
Membership No. 10093
(Amount in Rs.)
Schedule 2005 2004
SOURCES OF FUNDS
Shareholders' fund
Share Capital 1 9,35,54,840 5,61,34,435
Reserves and surplus 2 102,28,08,090 102,41,19,747
111,63,62,930 108,02,54,182
Loan funds
Secured 3 94,53,89,326 73,31,47,621
Unsecured 4 76,19,31,999 42,89,97,600
170,73,21,325 116,21,45,221
Deferred tax liability (net) 32,56,70,084 29,67,27,000
(Refer note 11 on Schedule 21)
314,93,54,339 253,91,26,403
APPLICATION OF FUNDS
Fixed assets 5
Gross block 336,38,57,392 289,10,27,763
Less: Depreciation 137,45,95,010 134,58,63,097
Net block 198,92,62,382 154,51,64,666
Capital work-in-progress (including spares) 1,34,41,972 13,13,55,668
200,27,04,354 167,65,20,334
Investments 6 23,55,75,418 23,65,92,896
Current assets, loans and advances
Inventories 7 75,26,53,182 59,59,14,898
Sundry debtors 8 70,68,13,584 51,60,20,679
Cash and bank balances 9 10,75,98,210 5,06,99,427
Other current assets 10 97,99,963 63,44,777
Loans and advances 11 14,22,08,458 15,05,22,893
171,90,73,397 131,95,02,674
Less:
Current liabilities and provisions 12
Liabilities 69,45,19,632 60,54,81,347
Provisions 11,34,79,198 8,93,91,011
80,79,98,830 69,48,72,358
Net current assets 91,10,74,567 62,46,30,316
Miscellaneous expenditure 13 – 13,82,857
(To the extent not written off or adjusted)
314,93,54,339 253,91,26,403
Significant accounting policies 20
Notes to the financial statements 21
Hindustan Sanitaryware & Industries Limited
81
Profit and loss account for the year ended 31 March 2005
The schedules referred to above form an integral part of the financial statementsOn behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
This is the profit and loss account referred to in our report of even date.For Walker, Chandiok & Co
Chartered Accountants
Place :New Delhi Vinod ChandiokDate :26 May 2005 Partner
Membership No. 10093
(Amount in Rs.)
Schedule 2005 2004
INCOME
Gross sales 14 331,55,66,095 305,46,60,987 Less: Excise duty 34,44,33,226 33,95,11,718 Net sales 297,11,32,869 271,51,49,269 Other income 15 3,54,40,245 2,34,90,280 Increase/(Decrease) in stocks 16 13,80,21,692 (17,27,17,438)
314,45,94,806 256,59,22,111
EXPENDITURE
Goods purchased for resale 39,84,69,268 21,71,34,476 Personnel cost 17 35,25,62,482 32,83,46,643 Manufacturing, administrative and other expenses 18 178,67,20,784 150,72,57,406
253,77,52,534 205,27,38,525
Profit before interest, depreciation, amortisation, 60,68,42,272 51,31,83,586 exceptional items and tax
Interest 19 10,89,24,105 11,77,54,087 Depreciation & amortisation 5 20,81,79,670 18,08,67,289 Profit before tax and exceptional items 28,97,38,497 21,45,62,210
Exceptional items
Interest on income tax refunds – 1,10,72,750 Profit on sale of land and building – 1,88,58,903 Profit before tax 28,97,38,497 24,44,93,863
Income tax expense- Provision for Current tax 1,61,95,562 5,20,00,000 - Provision for Deferred tax 8,31,95,376 1,69,91,900 Profit after tax 19,03,47,559 17,55,01,963
Income tax for earlier years- Current tax 9,12,128 74,67,865 - Deferred tax – 2,20,00,000 - Transferred from Debenture redemption reserve on debentures redeemed 6,66,63,834 1,25,00,000
25,79,23,521 21,74,69,828
Balance transferred from last year 13,68,39,329 1,35,30,673 Balance available for appropriation 39,47,62,850 23,10,00,501
APPROPRIATIONS
Transferred to debenture redemption reserve – 3,25,00,000 Transferred to general reserve 3,00,00,000 3,00,00,000 Proposed dividend on equity shares 5,14,53,058 2,80,65,305 Tax on dividend 67,24,272 35,95,867 Balance carried to balance sheet 30,65,85,520 13,68,39,329
39,47,62,850 23,10,00,501
Basic and diluted earnings per share before tax earlier years 10.17 9.38 Basic and diluted earnings per share after tax earlier years 10.22 10.96 (Refer note 12 on Schedule 21)Significant accounting policies 20Notes to the financial statements 21
82
Schedules forming part of the financial statements
1. Share capital (Amount in Rs.)
As at 31 March 2005 2004
Authorised
3,00,00,000 (previous year 2,96,00,000) Equity shares of Rs. 5 each. 15,00,00,000 14,80,00,000
Nil (previous year 15,000) 9.5% Cumulative redeemable preference shares of Rs. 100 each. – 15,00,000
Nil (previous year 5,000) Preference shares of Rs. 100 each. – 5,00,000
15,00,00,000 15,00,00,000
Issued
1,87,11,733 (previous year 1,12,27,652) Equity shares of Rs. 5 each. 9,35,58,665 5,61,38,260
9,35,58,665 5,61,38,260
Subscribed and paid-up*
1,87,10,203 (previous year 1,12,26,122) Equity shares of Rs. 5 each fully paid up. 9,35,51,015 5,61,30,610
Add: Forfeited shares 3,825 3,825
9,35,54,840 5,61,34,435
* Of the above shares, 97,07,455 (previous year 22,23,374) Equity shares of Rs. 5 each were allotted as fully paid-up by way of bonus shares bycapitalisation of revenue reserves, 1,35,000 (previous year 1,35,000) Equity shares of Rs. 5 each fully paid-up were issued to the equity shareholders ofthe erstwhile The Associated Glass Industries Limited pursuant to the scheme of amalgamation and 7,31,290 (previous year 7,31,290) Equity sharesof Rs. 5 each fully paid-up were issued to the equity shareholders of the erstwhile Krishna Ceramics Limited pursuant to the scheme of amalgamation.
2. Reserves and surplus (Amount in Rs.)
As at 31 March 2005 2004
i) Capital reserve
a) On account of amalgamation of erstwhile Krishna Ceramics Limited 3,32,529 3,32,529b) Forfeited amount of debentures 19,96,905 19,96,905c) Forfeited amount of upfront payment for naked warrants 97,50,000 97,50,000
1,20,79,434 1,20,79,434ii) Debenture redemption reserve
As per last year 18,75,00,000 16,75,00,000Add: Transferred from profit & loss account – 3,25,00,000
18,75,00,000 20,00,00,000Less: Transferred to profit & loss account 6,66,63,834 1,25,00,000
12,08,36,166 18,75,00,000iii) Central subsidy reserve
As per last year 25,00,000 25,00,000iv) Share premium account
As per last year 22,01,48,029 22,01,48,029Less: Capitalized during the year 3,74,20,405 –
18,27,27,624 22,01,48,029 v) General reserve
As per last year 46,35,52,955 43,47,08,900 Add: Transferred from profit & loss account 3,00,00,000 3,00,00,000
49,35,52,955 46,47,08,900 Less: Trade mark amortisation – 11,55,945 Less: Impairment of fixed assets (net of deferred tax) 9,69,73,609 –
(refer note 3 on schedule 21)39,65,79,346 46,35,52,955
vi) Capital redemption reserve
As per last year 15,00,000 15,00,000vii) Revaluation reserve
As per last year – 23,90,59,501Less: Adjustment of revaluation reversed – 23,90,59,501
– –viii) Profit and loss account
Surplus in profit and loss account 30,65,85,520 13,68,39,329102,28,08,090 102,41,19,747
Hindustan Sanitaryware & Industries Limited
83
Schedules forming part of the financial statements
3. Secured loans (Amount in Rs.)
As at 31 March 2005 2004
From banks on cash credit accounts 67,85,908 27,59,19,686
(Secured by hypothecation of stocks and book debts and further secured by
second charge on all the fixed assets of the Company, except Raasi division)
External Commercial Borrowing (ECB), short term loan 10,58,85,890 –
(Secured by hypothecation of stocks and book debts and further secured by
second charge on all the fixed assets of the Company, except Raasi division)
Term loans from financial institutions 1,25,00,000 # 6,25,00,000 #
(Under project finance participation scheme)
# (Secured by way of hypothecation of the whole of moveable plant & machinery,
machinery spares, tools and accessories and other moveable assets (except assets of the
Company's Raasi Ceramic Division exclusively hypothecated to Unit Trust of India and
vehicles hypothecated to banks and bodies corporate), both present and future, subject to
prior charges created and/ or to be created in favour of bankers of the company in respect
of stocks of raw materials, semi finished & finished goods and further secured by
mortgage by way of deposit of title deeds of immovable properties of the company,
ranking pari-passu with the security created in favour of debentureholders)
(Term loans of Rs. 125 lacs (Previous year Rs. 500 lacs) are payable within one year)
Term loans from banks 56,00,00,000 $ 10,00,000 #
$ (Secured by way of hypothecation of the whole of fixed assets including moveable plant &
machinery, machinery spares, tools and accessories (both present and future) pertaining to
the Glass division of the Company and further secured by mortgage by way of deposit of
title deeds of immovable properties of the Glass division of the Company,
ranking pari-passu with the security created in favour of debentureholders)
(Term loans of Rs. 1887.50 lacs (Previous year Rs. Nil) are payable within one year)
7,00,000--13.25% Non-convertible redeemable debentures** 4,66,69,000 7,00,00,000
Of the face value of Rs.100 each issued in favour of Unit Trust of India on private
placement basis. These debentures are redeemable in three equal annual instalments
from 7th December, 2004 onwards at par.
15,00,000--13.50% Non-convertible redeemable debentures** 7,50,00,000 12,50,00,000
Of the face value of Rs.100 each issued in favour of Central Bank of India on private
placement basis. 7,50,000 debentures are redeemable in three equal annual instalments
from 9th May, 2003 onwards at par and 7,50,000 debentures are redeemable in three
equal annual installments from 19th July, 2004 onwards at par.
10,00,000--13.50% Non-convertible redeemable debentures* 6,66,70,000 10,00,00,000
Of the face value of Rs.100 each issued in favour of Unit Trust of India on private
placement basis. These debentures are redeemable in three equal annual
instalments from 12th August, 2004 onwards at par.
8,00,000--13.50% Non-convertible redeemable debentures** 5,33,33,333 8,00,00,000
Of the face value of Rs. 100 each issued in favour of Canara Bank on private
placement basis. These debentures are redeemable in three equal annual
instalments from 19th July, 2004 onwards at par.
Finance lease loan for computers – 6,16,054
(Secured against computers taken on lease)
Car finance loans from banks and bodies corporate 1,85,45,195 1,81,11,881
(Secured by hypothecation of vehicles financed out of proceeds of loans)
[Amount payable within one year Rs. 90,19,137 (previous year Rs. 79,31,412)]
94,53,89,326 73,31,47,621
84
Schedules forming part of the financial statements
4. Unsecured loans (Amount in Rs.)
As at 31 March 2005 2004
Trade deposits from dealers 4,95,07,756 4,46,44,841
Interest accrued and due on above 27,80,274 30,55,307
From banks:
– Commercial paper 55,00,00,000 25,00,00,000
– Supplier bills discounted 49,91,770 2,07,36,794
– Export bills discounted 9,51,009 –
Deferred sales tax credit 15,37,01,190 11,05,60,658
76,19,31,999 42,89,97,600
Notes:
1. Maximum amount outstanding on commercial paper during the year Rs. 5500 lacs (previous year Rs. 6000 lacs)
2. The amount of deferred sales tax credit is subject to assessment by sales tax authorities.
3. As per agreement with Commercial Tax Department, Hyderabad deferred sales tax credit relating to the Glass Division amounting to
Rs. 9,62,26,578 (previous year Rs. 6,74,98,215) is secured against the moveable and immovable properties of the Company. However, this
charge is pending registration with the Registrar of Companies, West Bengal.
* 13.5% Non convertible redeemable debentures issued in favour of Unit Trust of India are secured by way of first exclusive charge on the
fixed assets of the Company's Raasi Ceramic division.
** Other non convertible redeemable debenture are secured by first legal mortgage on the assets at Indrad, Gujrat and further secured by way of
hypothecation of the whole of moveable plant and machinery, machine spares, tools and accessories and other moveable (except assets of
company's Raasi Ceramic division exclusively hypothecated to Unit Trust of India and vehicles hypothecated to banks and bodies corporates)
both present and future, subject to prior charges created and/ or to be created in favour of bankers of the company in respect of stocks of
semi-finished and finished goods and further secured by mortgage by way of deposit of title deeds of immovable properties of the Company,
except Raasi division.
These charges will rank pari-passu with the security created in favour of financial institutions/banks for the term loans.
Debentures of Rs. 1333 lacs (previous year Rs. 1333 lacs) are payable within one year.
3. Secured loans (Contd.)
Hindustan Sanitaryware & Industries Limited
85
Schedules forming part of the financial statements
5.
Fix
ed
ass
ets
(Am
ount
in R
s.)
Gro
ss B
lock
Dep
reci
atio
n/
Am
orti
sati
onN
et B
lock
As
atA
dd
itio
nSa
les/
Imp
airm
ent
Rev
ersa
l of
A
s at
Up
to
For
th
e Sa
les/
Imp
airm
ent
Rev
ersa
l of
Up
to
As
atA
s at
Par
ticu
lars
01.4
.200
4d
uri
ng
Ad
just
men
tR
eval
uat
ion
31.3
.200
531
.3.2
004
year
Ad
just
men
tR
eval
uat
ion
31.3
.200
531
.3.2
005
31.3
.200
4
the
year
Inta
ng
ible
Trad
e M
ark
3,00,0
0,000
––
––
3,00,0
0,000
1,50,4
1,096
30
,00,00
0–
––
1,80,4
1,096
1,19,5
8,904
1,4
9,58,9
04
Tan
gib
le
Land
4,22,5
7,410
62
,61,00
8 –
––
4,85,1
8,418
–
––
––
–4,8
5,18,4
18
4,22,5
7,410
Build
ing
43,26
,98,31
3 6,5
8,66,2
72–
4,81,1
8,388
–45
,04,46
,197
10,64
,50,08
71,0
8,04,6
93–
92,07
,539
–10
,80,47
,241
34,23
,98,95
6 32
,62,48
,226
Plan
t & M
achi
nery
226,0
3,44,9
6770
,87,79
,920
2,97,3
0,133
24,87
,13,13
6–
269,0
6,81,6
1811
6,55,0
8,021
17,72
,44,17
42,7
9,87,2
4413
,71,19
,176
–11
7,76,4
5,773
151,3
0,35,8
4510
9,48,3
6,946
Vehi
cles
5,01,4
9,745
1,34,8
4,158
49,70
,426
––
5,86,6
3,477
2,01,8
1,916
87,98
,300
39,62
,928
––
2,50,1
7,288
3,36,4
6,189
2,99,6
7,829
Offi
ce E
quip
men
ts2,3
3,78,2
5816
,67,35
91,3
4,720
6,91,8
88–
2,42,1
9,009
80,70
,895
11,91
,652
37,47
12,6
2,734
–89
,62,34
21,5
2,56,6
671,5
3,07,3
63
Com
pute
rs
3,46,0
9,140
72
,37,88
5 1,4
6,740
7,0
8,895
–
4,09,9
1,390
2,15,8
1,460
58
,79,53
7 1,3
5,537
4,9
5,554
–2,6
8,29,9
061,4
1,61,4
84
1,30,2
7,680
Furn
iture
& F
ixtur
es1,7
5,89,9
30
30,65
,522
–3,1
8,169
–2,0
3,37,2
8390
,29,62
2 12
,61,31
4–
2,39,5
72–
1,00,5
1,364
1,02,8
5,919
85
,60,30
8
Tot
al28
9,10
,27,
763
80,6
3,62
,124
3,
49,8
2,01
9 29
,85,
50,4
76–
336,
38,5
7,39
213
4,58
,63,
097
20,8
1,79
,670
3,
21,2
3,18
0 14
,73,
24,5
75–
137,
45,9
5,01
019
8,92
,62,
382
154,
51,6
4,66
6
Prev
ious
Yea
r30
5,38,9
5,437
15
,92,88
,468
1,08,3
9,576
–31
,13,16
,566
289,1
0,27,7
6312
4,36,7
0,090
18
,08,67
,289
64,17
,216
–7,2
2,57,0
66
134,5
8,63,0
9715
4,51,6
4,666
Cap
ital
wor
k in
pro
gre
ss1,3
4,41,9
7213
,13,55
,668
Not
es:
1.Add
ition
s to
Plan
t and
Mac
hine
ry in
clude
fore
ign e
xcha
nge
fluct
uatio
n (n
et) a
mou
ntin
g to
Rs.
14,46
,742
(pre
viou
s yea
r Rs.
14,60
,142)
2.The
asse
ts im
paire
d du
ring
the
year
hav
e be
en re
tired
from
activ
e us
e.
86
Schedules forming part of the financial statements
6. Investments (Amount in Rs.)
As at 31 March 2005 2004
(Non-Trade unless otherwise stated)
i) Government securities*
Unquoted:
Indira Vikas Patra – 2,000
National Savings Certificates 83,100 58,100
ii) Fully paid-up equity shares of Rs.10 each
Quoted:
Nil (previous year 23,800) Jaypee Hotels Limited** – 9,80,690
125 (previous year 125) Neycer India Limited 938 938
50 (previous year 50) Swastik Sanitarywares Limited 1,050 1,050
459 (previous year 11,500) Jindal Vijaynagar Steels Limited**# 1,15,250 1,25,250
93 (previous year Nil) Jindal Vijaynagar Steels Limited (Warrants)# – –
(Trade) Unquoted:
Subsidiary company
43,01,200 (previous year 43,00,000) AGI Glasspack Limited 12,80,14,500 12,80,02,500
Others
8,04,000 (previous year 8,04,000) Andhra Pradesh Gas Power Generation Ltd. 10,73,60,580 10,73,60,580
Nil (previous year 1,55,250) O-Furo Private Limited – 15,52,500
23,55,75,418 23,80,83,608
Less: Provision for difference in market value and cost of current investments – 14,90,712
23,55,75,418 23,65,92,896
Aggregate Amount of 2005 2004
Cost price Market Price Cost price Market Price
Quoted Investments 1,17,238 1,85,662 11,07,928 4,24,416
Unquoted Investments 23,54,58,180 – 23,69,75,680 –
23,55,75,418 1,85,662 23,80,83,608 4,24,416
Notes:
* Deposited with government departments.
** Represents current investments. All other investments are long term investments.
# The new equity shares and warrants were received by the Company consequent to the merger of Jindal Vijaynagar Steels Ltd. with Jindal Iron
and Steel Company Limited and renamed as Jindal Vijaynagar Steels Ltd. These warrants were issued for Rs. Nil and carry an option of
converting into equity shares of the merged entity at a later date.
7. Inventories (Amount in Rs.)
As at 31 March 2005 2004
(As taken, valued and certified by the management)
Stores, spares and packing materials 11,62,68,535 10,14,51,984
Raw materials and components 5,64,82,923 3,57,31,128
Stock-in-process 2,54,25,211 2,09,86,369
Goods in transit* 4,56,215 1,73,07,969
Finished goods including goods purchased for sale 55,40,20,298 42,04,37,448
75,26,53,182 59,59,14,898
*includes raw material & components Rs. Nil (previous year Rs. 1,66,54,582), stores & spares Rs.Nil (previous year Rs. 6,49,562) and finished
goods Rs. 4,56,215 (previous year Rs. 3,825)
Hindustan Sanitaryware & Industries Limited
87
Schedules forming part of the financial statements
8. Sundry debtors (Amount in Rs.)
As at 31 March 2005 2004
(Unsecured unless otherwise stated)
Debts outstanding for a period exceeding six months:
- Considered doubtful 4,62,90,271 4,24,11,775
- Considered good 5,08,36,116 5,06,90,951
- Considered good- secured 49,29,425 46,09,609
Other debts:
- Considered doubtful 22,78,041 8,75,482
- Considered good 63,32,27,050 44,52,05,500
- Considered good- secured 1,78,20,993 1,55,14,619
75,53,81,896 55,93,07,936
Less: Provision for doubtful debts 4,85,68,312 4,32,87,257
70,68,13,584 51,60,20,679
9. Cash and bank balanceAs at 31 March 2005 2004
Cash-in-hand 23,42,142 13,19,124
Remittance-in-transit 3,42,49,824 1,26,00,103
Balances with scheduled banks:
- In current accounts 1,67,18,303 43,78,041
- In cash-credit accounts 1,03,19,546 76,51,236
- In fixed deposit accounts 4,15,92,347 2,32,49,421
[Rs. 2,15,92,347 (Previous year Rs. 2,32,49,421) are pledged with banks as margin money]
- In unpaid dividend accounts 22,33,348 13,58,702
With post office in savings bank account (pledged) 1,42,700 1,42,800
10,75,98,210 5,06,99,427
10. Other current assetsAs at 31 March 2005 2004
Interest accrued but not due on loans and deposits 1,06,38,271 71,98,067
Tax deducted at source recoverable 14,982 –
Less: Provision for interest doubtful of recovery 8,53,290 8,53,290
97,99,963 63,44,777
11. Loans and advancesAs at 31 March 2005 2004
(Unsecured, considered good except where otherwise stated)
Loans to Bodies Corporate (including Rs. 20,00,000 previous year Rs. 20,00,000 24,25,000 3,27,25,000
considered doubtful of recovery)
Advance recoverable in cash or in kind or for value to be received or pending for
adjustments (including Rs. 3,00,000 previous year Rs. 3,00,000 considered doubtful of recovery) 6,46,42,390 6,34,15,440
Balance with excise/sales tax authorities 75,20,045 1,00,90,182
Deposits (including Rs. 6,08,000 previous year Rs. 6,08,000 considered doubtful of recovery) 2,28,78,802 1,74,57,555
Advance payment of income tax and tax deducted at source 4,77,88,921 2,97,42,716
14,52,55,158 15,34,30,893
Less: Provision for doubtful loans & advances 30,46,700 29,08,000
(including Rs. 1,38,700 (previous year Rs. Nil )against Post office saving accounts
pledged with Excise authorities)
14,22,08,458 15,05,22,893
88
Schedules forming part of the financial statements
12. Current liabilities and provisions (Amount in Rs.)
As at 31 March 2005 2004
Current liabilities
Acceptances 7,09,48,247 10,93,12,115
Sundry creditors for goods, services and expenses 47,79,35,747 35,18,39,933
Interest accrued but not due on loans/debentures 59,68,176 71,33,258
Advance against sales/orders 4,03,74,709 4,54,51,353
Investor education & protection fund**
Unclaimed Dividend 22,33,348 13,58,702
Payable to preference shareholders 2,518 2,518
Payable to debentureholders – 2,31,565
Other liabilities* 9,70,56,887 9,01,51,903
69,45,19,632 60,54,81,347
Provisions
Retirement benefits 77,30,873 2,75,75,009
Taxation 4,75,70,995 3,01,54,830
Proposed dividend 5,14,53,058 2,80,65,305
Tax on dividend 67,24,272 35,95,867
11,34,79,198 8,93,91,011
80,79,98,830 69,48,72,358
* Including excise duty payable Rs. 7,24,44,038 ( previous year Rs. 6,99,51,694) on finished goods lying at Company's bonded ware houses.
**Not due for deposit
13. Miscellaneous expenditure
As at 31 March 2005 2004
(To the extent not written off or adjusted)
Voluntary retirement scheme
As per last year 13,82,857 41,48,574
Less: Written off during the year 13,82,857 27,65,717
– 13,82,857
14. Gross sales (Net of returns)
For the year ended 31 March 2005 2004
Domestic
Sanitaryware & fittings and glassware 287,60,61,519 271,20,87,102
Scrap and other sales 1,55,87,108 99,16,865
Export
Sanitaryware & fittings and glassware 42,39,17,468 33,26,57,020
[including deemed export Rs. 18,43,21,217 (previous year Rs. 12,14,70,250)]
331,55,66,095 305,46,60,987
(Amount in Rs.)
(Amount in Rs.)
Hindustan Sanitaryware & Industries Limited
89
Schedules forming part of the financial statements
16. Increase/(decrease) in stocks(Amount in Rs.)
For the year ended 31 March 2005 2004
Opening stocks
Finished goods including goods purchased for resale 42,04,37,448 58,75,92,069
Stock-in-process 2,09,86,369 2,65,49,186
44,14,23,817 61,41,41,255
Less: Closing stocks
Finished goods including goods purchased for resale 55,40,20,298 42,04,37,448
Stock-in-process 2,54,25,211 2,09,86,369
57,94,45,509 44,14,23,817
13,80,21,692 (17,27,17,438)
17. Personnel cost (Amount in Rs.)
For the year ended 31 March 2005 2004
Salaries, wages & bonus 30,47,52,521 26,25,72,177
Contribution to provident and other funds 2,66,37,399 4,85,82,965
Staff and labour welfare expenses 2,11,72,562 1,71,91,501
35,25,62,482 32,83,46,643
15. Other income (Amount in Rs.)
For the year ended 31 March 2005 2004
Rent received 96,093 2,40,719
Dividend received 1,377 –
Interest received (gross) [Tax Deducted at Source Rs. 1,59,657 (previous year Rs.13,40,970)] 58,05,078 92,81,198
Profit on fixed assets sold/ discarded (net) 12,62,293 11,39,987
Profit on sale of long term Investments 1,18,188 –
Insurance claims received 9,19,101 2,21,855
Reversal of provision for diminution in the value of Investment 14,90,712 –
Sundry balances and liabilities no longer required written back (net) 1,48,46,435 61,69,856
Miscellaneous receipts 1,09,00,968 64,36,665
3,54,40,245 2,34,90,280
90
18. Manufacturing, administrative and other expenses (Amount in Rs.)
For the year ended 31 March 2005 2004
Raw material and components consumed 49,49,90,925 40,69,03,824
Stores and spares consumed 11,25,79,944 10,89,31,107
Excise duty 28,17,372 (2,47,88,641)
Packing materials consumed 12,55,93,197 10,94,17,762
Power and fuel(net) 58,46,65,109 51,08,58,195
Repairs to:
- Buildings 54,30,716 51,30,421
- Plant and machinery(excluding stores consumption) 2,22,97,042 1,89,90,174
- Other assets 29,53,490 32,30,318
Rent, lease rent (including hire charges) 64,39,282 58,59,277
Rates and taxes 39,46,043 46,28,020
Directors fees 81,000 38,000
Expenditure on ceramic and applied research centre 14,21,336 13,94,406
Insurance 1,14,87,918 96,52,828
Travelling and conveyance 4,11,27,477 3,02,68,161
Discount 9,04,77,356 8,07,73,087
Commission on sales 1,91,10,670 2,28,67,833
Expenses on exports 5,47,81,827 5,38,72,040
Advertisement and publicity 3,15,26,610 2,42,70,833
Other selling and distribution expenses 11,14,56,147 7,13,75,330
Provision for doubtful debts and advances 54,19,755 1,33,67,078
Charity and donation 3,81,073 10,45,616
Foreign exchange fluctuation(net) 5,75,966 1,01,894
Prior period adjustments (net) 5,45,666 5,81,446
Loss on sale of investments 7,76,250 5,02,000
Provision for diminution in the value of current investments - 6,58,494
Bad debts written off 42,14,619 17,16,406
Miscellaneous expenses 5,16,23,994 4,56,11,497
178,67,20,784 150,72,57,406
19. Interest (Amount in Rs.)
For the year ended 31 March 2005 2004
- On term loans 1,92,27,413 1,66,05,917
- On debentures 4,08,18,428 5,08,76,974
- Others* 4,88,78,264 5,02,71,196
10,89,24,105 11,77,54,087
* Includes Rs. 2,34,68,999 (previous year Rs. 2,71,88,474) paid on account of discounting charges of commercial paper.
Schedules forming part of the financial statements
Hindustan Sanitaryware & Industries Limited
91
20. Significant Accounting Policies
Schedules forming part of the financial statements
1. Basis of preparation
The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the
Institute of Chartered Accountants of India (‘ICAI’) and the relevant provisions of the Companies Act, 1956 (the ‘Act’). The financial
statements have been prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently
applied by the Company and are consistent with those used in the previous year.
2. Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date
of financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively
in the current and future periods.
3. Revenue recognition
Revenue from sale of goods is recognised when the significant risks and rewards in respect of ownership of the goods are transferred
to the customer and is stated inclusive of excise duty, net of trade discounts, sales return and sales tax wherever applicable.
4. Export benefit/incentive
Benefit under the advance license scheme and duty free replenishment certificate are accounted for at the time of purchase of imported
raw materials or sale of the license.
5. Fixed assets
Tangible
a) Fixed assets are stated at cost or revalued amount (gross block) less accumulated depreciation and adjusted for impairment amount.
Cost comprises the purchase price (net of Cenvat credit availed) and any attributable cost of bringing the asset to its working
condition for its intended use.
b) Expenditure on account of modification/ alteration in plant and machinery/ building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is capitalised.
Intangible
a) Trade marks are stated at cost less accumulated amortisation.
6. Depreciation/amortisation
Depreciation on fixed assets has been provided on straight line method at the rates and in the manner prescribed under schedule XIV
(“schedule”) to the Companies Act, 1956 except the following:
i. on assets acquired and put to use on or before 1 July 1987 in the glass division and registered office of the Company and on vehicles
acquired till date in all the divisions of the Company, depreciation is provided on written down value method at the rates and in the
manner prescribed in the schedule;
ii. on furnaces (included in plant and machinery) having a cost of Rs. 51,75,54,861 used in the glass division, depreciation is provided
on straight line method, as technically assessed from time to time, based on expected useful lives of the furnaces. The rate presently
being 16.21% p.a. which is the rate as prescribed in the schedule;
iii. trademarks acquired in respect of Raasi Ceramic Division are being amortised over a period of ten years;
iv. cost of leasehold improvements (included in furniture and fixture) is depreciated over the period of lease.
7. Investments
Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other
investments are classified as long-term investments.
Current investments are valued at the lower of cost and fair value.
Long-term investments are stated at cost. Provision is made for diminution in the value of long-term investments to recognise a decline,
if any, other than temporary in nature.
Profit /Loss on sale of investments are computed with reference to their average cost.
92
Schedules forming part of the financial statements
20. Significant Accounting Policies (Contd.)
8. Inventories
a) Inventories are valued as follows:
Stores and spares, packing materials, raw materials including components - At lower of cost and net realisable value. However,
materials and other items held for use in the production of inventories are not written down below cost if the finished products in
which they will be incorporated are expected to be sold at or above cost.
Work- in-process - at cost upto estimated stage of completion.
Finished goods and goods purchased for resale - At lower of cost and net realisable value.
b) Cost of inventories is ascertained on the following basis:
Raw materials, stores and spare parts and packing materials - On weighted average basis.
Finished goods purchased for resale - On First-In-First-Out basis.
Cost of manufactured finished goods and stock in process comprise material, labour and other related production overheads
including depreciation.
9. Foreign currency transactions
Foreign currency transactions are recorded at the exchange rates prevailing on the date of transaction. Differences arising out of foreign
currency transactions settled during the year are recognised in the profit and loss account, except those relating to acquisition of fixed
assets, which are adjusted to the carrying amount of the related fixed assets.
Monetary items outstanding at the balance sheet date and denominated in foreign currencies are restated at the exchange rates prevailing
at the end of the year. Differences arising on such restatement are recognised in the profit and loss account except those relating to
acquisition of fixed assets, which are adjusted to the carrying amount of the related fixed assets.
The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange
rates change, except those relating to acquisition of fixed assets, which are adjusted to the carrying amount of the related fixed assets.
Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.
10. Taxes on income
Tax expense comprises both current and deferred taxes.
Current tax is determined as the amount of tax payable in respect of taxable income for the year.
Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable/virtual
certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.
11. Research and development
Research and development expenditure is charged to profit and loss account except capital expenditure, which is added to the cost of
respective fixed assets in the year in which it is incurred.
12. Retirement benefits
Provident Fund is administered by trustees of independently constituted trust recognised by income-tax authorities. Company’s
contribution to provident fund is recognised in profit and loss account.
Provision for earned leave entitlement and gratuity of employees is made on the basis of actuarial valuation as at the balance sheet date.
The gratuity fund is administered by trustees of independently constituted trust recognised by income-tax authorities. The Company
makes contribution to Birla Sun Life Insurance Company Limited (BSL) of an amount payable, through the trust, which is charged to the
profit and loss account.
13. Miscellaneous expenditure
Amounts paid under voluntary retirement scheme are amortised over a period of five years from the date of payment.
Hindustan Sanitaryware & Industries Limited
93
Schedules forming part of the financial statements
21. Notes to the financial statements (Contd.)
21. Notes to the financial statements
14. Earnings per share
Basic and diluted earnings per share is calculated by dividing net profit for the year attributable to equity shareholders by weighted
average number of equity shares outstanding during the year.
15. Leases
Lease rentals in respect of assets taken under operating lease are charged to the profit and loss account on accrual basis.
Assets taken on finance lease are accounted for as assets of the Company. Lease rentals payable are apportioned between principal and
interest using the internal rate of return method and finance charge is recognised accordingly.
16. Contingent liabilities
Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as
debts are provided or disclosed as contingent liabilities. In respect of statutory matters, contingent liabilities are provided or disclosed
only for those demand(s) that are contested by the Company.
(Amount in Rs.)2005 2004
1. Estimated amount of contracts remaining to be executed on capital account and 3,69,20,557 12,85,70,567not provided for (Net of advances).
2. Contingent liabilities not provided for in respect of:a) Demands raised by the excise authorities against which appeals have been filed. 1,32,27,881 1,44,47,042b) Demands made by the sales tax authorities against which appeals have been filed. 70,63,135 50,76,607c) Bank guarantees outstanding. 7,14,93,120 1,40,39,500d) The Company is jointly and severally liable alongwith sureties for guarantees given – 20,00,000
to sales tax department on behalf of a third party.e) Claims against the Company not acknowledged as debts. 1,26,91,342 5,92,706f) Obligation under EPCG scheme, to the extent of custom duty saved on import 12,43,05,346 4,71,40,507
of capital goods.
3. The Company has closed the manufacturing operations in the Raasi Ceramic Division w.e.f. 07 April 2001. However, based on the technical
evaluation of the assets of the said division and disproportionate cost involved, the management has reassessed the business plan of the division
and decided not to restart the operations and accordingly assets of the division are impaired. The Company has recognised an impairment loss
(net of deferred tax liability) of Rs. 9,69,73,609 as at 01 April 2004 in accordance with the Accounting Standard (AS) 28 “impairment of assets”.
As assessed by the Company, there are no further impairment in the value of the assets as at 31 March 2005.
4. Pending negotiation of wage agreement with the labour union at one of the plants, the Company has made an estimated provision of
Rs. 61,39,472 (previous year Rs. 25,80,000) towards increase in wages and benefits, the actual liability of which will be determined on settlement
of the aforesaid agreement.
5. The accounts of some customers are pending reconciliation/confirmation and the same have been taken as per balances appearing in the books.
Any differences arising on account of such reconciliations, which are not likely to be material, will be accounted for as and when these
reconciliations are completed.
94
Schedules forming part of the financial statements
21. Notes to the financial statements (Contd.)
(Amount in Rs.)
2005 2004
Directors commission payable 2,45,79,289 1,98,88,960
7. Sundry creditors for goods include Rs. 27,68,022 (Previous year Rs. 21,07,155) payable to small scale industrial undertakings to the extent suchparties have been identified from the available documents/ information. No amounts are outstanding for more than 30 days.
8. Miscellaneous expenses include payments to auditors for:
2005 2004
a) Audit fee 5,53,500 5,40,000
b) Tax audit fee 82,650 81,000
c) Certification, etc. – 20,000
d) Reimbursement of expenses 85,199 1,01,533
(including service tax wherever applicable).
7,21,349 7,42,533
9. Loans and advances include Rs. 41,39,094 (previous year Rs. 2,92,41,850) on account of advances given for purchase of capital goods.
10. Interest expense for the year includes an amount of Rs. Nil (previous year Rs. 5,14,800) on account of loss on exchange fluctuation on foreignexchange borrowings.
6. Sundry creditors/ other liabilities include:
(Amount in Rs.)
11. Deferred tax liability (net)
Major components of deferred tax assets and liabilities are as given below:
2005 2004
a) Unabsorbed depreciation 217.69 –
b) Expenditure debited to profit and loss account but allowable for tax 20.61 37.97purposes in subsequent years
c) Provision for doubtful debts, loans and advances 176.61 174.13
d) Depreciation (3671.61) (3179.37)
Deferred tax liability (net) (3256.70) (2967.27)*
* Including Rs. 542.52 lacs written back on assets impaired during 2004-05 adjusted against the opening general reserves.
(Rs. in lacs)
Hindustan Sanitaryware & Industries Limited
95
Schedules forming part of the financial statements
21. Notes to the financial statements (Contd.)
12. Earnings per share
2005 2004
Profit attributable to equity shareholders before tax, earlier years
Profit after tax 19,03,47,559 17,55,01,963Profit attributable to equity shareholders after tax, earlier years
Profit after tax 19,03,47,559 17,55,01,963Add: Tax credit for earlier years:
Current tax 9,12,128 74,67,865Deferred tax – 2,20,00,000
19,12,59,687 20,49,69,828
Weighted average number of shares outstanding at the beginning and the end of the year 1,87,10,203 1,87,10,203Nominal value per share (Rs) 5 5Earnings per share (Rs), basic and dilutedBefore tax for earlier years 10.17 9.38*After tax for earlier years 10.22 10.96*
* In accordance with Accounting Standard (AS) 20 “Earnings per share”, issued by the Institute of Chartered Accountants of India, the EPSof previous year, being the earliest reporting period is adjusted on account of bonus share issued during the current year.
(Amount in Rs.)
13. Related party transactions
a) Name of related parties and description of relationship:
(i) Subsidiary – AGI Glasspack Limited.
(ii) Key management personnel and their relatives
(Name of the relatives of key management personnel with whom the Company had transactions during the year are listed below).
Mr R K Somany Mr Sandip Somany Mr G L Sultania
Mr Sandip Somany (son) Mr R K Somany (father)
b) Entities where significant influence is exercised by key management personnel and/ or their relatives having transactions with the Company:
(i) Textool Mercantiles Private Limited
(ii) SR Continental Limited
(iii) SPL Limited
(iv) Bigoo Investments Limited
(v) Paco Exports Limited
(vi) New Delhi Industrial Promotors and Investors Limited
(vii) Soma Investments Limited
96
Schedules forming part of the financial statements
21. Notes to the financial statements (Contd.)
14. Payments to directors
2005 2004
a) Salary 85,82,570 74,70,813
b) Contribution to provident fund 10,29,908 8,96,497
c) Gratuity 4,67,457 3,93,973
d) Leave encashment 7,07,966 2,69,475
e) Commission 2,45,79,289 1,98,88,960
f) Monetary value of perquisites 8,64,129 5,56,285
g) Directors’ sitting fee 81,000 38,000
Total 3,63,12,319 2,95,14,003
(Amount in Rs.)
Year ended
31 March 2005
Profit before tax as per profit and loss account 28,97,38,497
Add:
Directors’ remuneration including directors’ fee 3,63,12,319
Provision for doubtful debts / advances (net) 57,52,185
Loss on sale of investments 7,76,250
Less:
Profit /appreciation in the value of investments 16,08,900
Bad debts written off 3,32,430
Profit on sale of assets 12,62,293
Net profit for the year in accordance with section 309 (5) of the Companies Act, 1956: 32,93,75,628
Related party disclosures (Amount in Rs.)
Other parties which
Key Management significantly influence/
Particulars Subsidiary Joint Venture Personnel and are influenced
their Relatives by the company
(either individually
or otherwise)
2005 2004 2005 2004 2005 2004 2005 2004
A a) Purchase of Raw Material, – – – – – – 1,62,130 –Stores, Spares and Packing material
b) Sale of Raw Material and components, Stores, Spares, – – – 1,12,985 – – 50,405 2,240packing material and finished goods
c) Rent Paid – – – – – – 31,684 –d) Capital Contribution in
AGI Glasspack Ltd. – 12,75,00,000 – – – – – –e) Investments made 12,000 – – – – – – –f) Balance Outstanding
at the year end:- Receivable – – 4,65,453 4,65,453 – – 9,387 –- Payable – – – – – – 3,771 –
B Directors Remuneration – – – – 3,29,37,563 2,67,96,366 – –Balance Outstanding at the year end-payable – – – – 2,12,85,533 1,72,09,322 – –
Hindustan Sanitaryware & Industries Limited
97
Year ended
31 March, 2005
i) Commission payable to whole-time directors
a) Chairman & Managing Director 94,04,523
(Restricted to the overall salary specified under
Schedule XIII of the Companies Act, 1956, being 10% of net profit as calculated above)
b) Joint Managing Director 94,04,523
(Restricted to the overall salary specified under
Schedule XIII of the Companies Act, 1956)
c) Executive Director & Secretary 24,76,487
(Restricted to the overall salary specified under
Schedule XIII of the Companies Act, 1956)
ii) Commission payable to non-whole-time directors 32,93,756
(Restricted to 1% per annum of net profit)
Schedules forming part of the financial statements
21. Notes to the financial statements (Contd.)(Amount in Rs.)
15. Particulars relating to foreign exchange
a) Value of imports calculated on C.I.F. basis
2005 2004
Raw materials and components 11,95,11,542 7,26,64,642
Spares 4,81,76,246 1,49,21,908
Capital goods 16,50,28,650 7,86,18,961
Goods purchased for resale 9,19,42,861 3,55,54,119
Total 42,46,59,299 20,17,59,630
(Amount in Rs.)
b) Expenditure in foreign currency
2005 2004
Commission on exports 1,12,86,136 1,38,03,604
Travelling 54,64,761 43,18,247
Consultancy fee (net of tax) 1,61,63,560 10,19,368
Design and drawing (net of tax) 1,28,33,976 17,51,621
Others 3,09,660 2,07,556
Total 4,60,58,093 2,11,00,396
c) Dividend for the year 2003-2004 remitted in foreign currency Rs.19,23,995 (previous year Rs. 5,77,199) to one shareholder, namely,Twyfords Holdings Limited U.K. on 7,69,598 equity shares of Rs. 5 each (previous year 3,84,799 shares of Rs. 10 each).
d) Earnings in foreign exchange
2005 2004
FOB value of export of goods 19,89,84,593 17,68,30,798
Total 19,89,84,593 17,68,30,798
98
Schedules forming part of the financial statements
21. Notes to the financial statements (Contd.)
17. Expenditure on ceramic and applied research centre comprise
2005 2004
Salaries, wages and bonus 12,27,461 11,67,915
Contribution to provident and other funds 1,12,370 99,896
Stores and spares consumed 81,505 1,26,595
Total 14,21,336 13,94,406
(Amount in Rs.)
e) Value of imported and indigenous raw materials, stores and spares consumed
Raw material and components:
2005 2004
(Rs.) % (Rs.) %
Imported 14,26,18,359 14 9,27,38,614 23
Indigenous 35,23,72,566 86 31,41,65,210 77
Total 49,49,90,925 100 40,69,03,824 100
Stores and spare parts consumed:
2005 2004
(Rs.) % (Rs.) %
Imported 2,97,69,620 26 2,99,99,107 27
Indigenous 8,28,10,324 74 7,89,32,000 73
Total 11,25,79,944 100 10,89,31,107 100
16. Raw material and components consumed
2005 2004
Description Qty. (M.T.) Amount Qty. (M.T.) Amount
(Rs.) (Rs.)
Clays 18,435 3,48,86,053 18,517 2,97,40,309
Soda Ash 14,155 16,26,00,060 12,563 10,53,81,428
Culets 50,052 12,22,38,119 52,017 12,76,44,164
Quartz/Feldsper 8,460 1,07,44,331 6,775 84,65,906
Others/Silica Sand 40,388 16,45,22,362 35,080 13,56,72,017
Total 49,49,90,925 40,69,03,824
(Amount in Rs.)
Hindustan Sanitaryware & Industries Limited
99
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1. I
nsta
lled
capa
city
has
bee
n ce
rtifi
ed b
y th
e m
anag
emne
t, w
hich
the
audi
tors
hav
e re
lied
on w
ithou
t ver
ifica
tion,
as
this
is a
tech
nica
l mat
ter.
2. A
ctua
l pro
duct
ion
incl
udes
pro
duct
ion
for
capt
ive
cons
umpt
ion.
3. S
anita
ryw
ares
& g
lass
bot
tles
sale
s qu
antit
y in
clud
es f
ree
repl
acem
ents
, bre
akag
es, s
ampl
es, e
tc.,t
he q
uant
ity w
here
of h
as n
ot b
een
sepe
rate
ly d
eter
min
ed.
4. V
alue
of
purc
hase
s, sa
les
& s
tock
s of
san
itary
war
es &
fitt
ings
incl
udes
the
valu
e of
fitt
ing
item
s. In
vie
w o
f pr
actic
al d
iffic
ultie
s, th
e qu
antit
ativ
e de
tails
of
fittin
gs it
ems
have
not
bee
n in
clud
ed a
bove
.5.
Pre
viou
s ye
ar's
fig
ures
are
giv
en in
bra
cket
s.
20.
Prev
ious
yea
r fig
ures
hav
e be
en r
egro
uped
/ re
cast
whe
reve
r co
nsid
ered
nec
essa
ry to
mak
e th
em c
ompa
rabl
e w
ith th
ose
of th
e cu
rren
t yea
r.
18.
Part
icu
lars
in
resp
ect
of
go
od
s m
an
ufa
ctu
red
/tr
ad
ed
For
and
on b
ehal
f of
the
Boa
rd o
f D
irect
ors
G.L
. S
ult
an
iaS
an
dip
So
man
yR
.K.
So
man
yE
xecu
tive
Dire
ctor
& S
ecre
tary
Join
t Man
agin
g D
irect
orC
hairm
an &
Man
agin
g D
irect
or
Fo
r W
alk
er,
Ch
an
dio
k &
Co
Cha
rter
ed A
ccou
ntan
ts
Plac
e : N
ew D
elhi
Vin
od
Ch
an
dio
kD
ate
: 26
May
200
5Pa
rtne
r M
embe
rshi
p N
o. 1
0093
Schedules forming part of the financial statements21.
No
tes
to t
he f
inan
cia
l st
ate
men
ts (
Con
td.)
19.
In th
e op
inio
n of
the
boar
d of
dire
ctor
s, cu
rren
t ass
ets,
loan
s an
d ad
vanc
es h
ave
a va
lue
on r
ealis
atio
n in
the
ordi
nary
cou
rse
of th
e bu
sine
ss a
t lea
st e
qual
to th
e am
ount
s at
whi
ch th
ey a
re s
tate
d an
d pr
ovis
ion
for
all k
now
n lia
bilit
ies
has
been
mad
e.
(Am
ount
in R
s.)
100
Balance Sheet Abstract and Company’s General Profile
Public Issue
2 4 5 3 9
N I L
3 7 4 2 0
Bonus Issue
Right IssueN I L
Private Placement
3 1 0 3
Registration No. State Code
Balance Sheet Date
I. Registration Details
II. Capital Raised during the year (Amount in Rs. Thousands)
Total Liabilities3 1 4 9 3 5 4
III. Position of mobilisation and deployment of funds (Amount in Rs. Thousands)
2 0 0 5
2 1
Total Assets3 1 4 9 3 5 4
Paid-up CapitalSources of Funds
9 3 5 5 5Reserves and Surplus
1 0 2 2 8 0 8
Secured Loans9 4 5 3 8 9
Unsecured Loans7 6 1 9 3 2
Net Fixed AssetsApplication of Funds
2 0 0 2 7 0 4Investment
2 3 5 5 7 5
Net Current Assets9 1 1 0 7 5
Miscellaneous ExpenditureN I L
6 9 1 0 1 0 0 0
S A N I T A R Y W A R E S
Accumulated LossesN I L
Deferred Tax Liabilities3 2 5 6 7 0
N I L
IV. Performance of Company (Amount in Rs. Thousands)
Item Code No. (ITC Code)
Product Description
7 0 1 0 9 0 0 0
G L A S S B O T T L E S
Item Code No. (ITC Code)
Product Description
V. Generic Names of Two Principal Products of the Company
Net Turnover (including other income)3 0 0 6 5 7 3
Total Expenditure
2 7 1 6 8 3 5
Profit before Tax2 8 9 7 3 8
Profit after Current Year Tax1 9 0 3 4 8
Basic and diluted earning per share (Rs.)1 0 . 1 7
Dividend (%)5 5
G.L. Sultania Sandip Somany R.K. Somany
Executive Director & Secretary Joint Managing Director Chairman & Managing Director
Place : New DelhiDate : 26 May 2005
Hindustan Sanitaryware & Industries Limited
101
Cash Flow Statement for the year ended 31 March 2005
(Amount in Rs. ’000)
2005 2004
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before tax and Exceptional items 2,89,738 2,14,562
Adjustments for:
Depreciation / amortisation 2,08,179 1,80,867
Miscellaneous expenditure 1,382 2,766
Profit / Loss on fixed assets discarded/sold(net) (1,262) (1,140)
Interest expense 1,08,924 1,17,754
Dividend 1 –
Interest income (5,805) (9,281)
Profit on sale of investments (118) –
Reversal of diminution in the value of current investments (1,491) 658
Provision for doubtful debts and advances 5,419 13,127
Loss on sale of investments 776 502
Exceptional items
Interest on income tax refund – 11,073
Operating profit before working capital changes 6,05,743 5,30,888
Adjustments for :
Inventories (1,56,738) 1,76,469
Trade/ other receivable (1,99,369) 14,334
Trade/ other payables 69,484 92,572
Direct taxes refunds/ (paid ) (15,928) 17,313
Net cash from operating activities 3,03,192 8,31,576
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets including Capital work-in-progress (6,88,448) (2,79,922)
Proceeds from sale of fixed assets 4,121 23,311
Purchase of investments (37) (1,88,456)
Sale proceeds of investments 1,887 498
Interest received 2,365 8,202
Dividend received 1 –
Loans & advances recovered 30,300 5,275
Net cash used in investing activities (6,49,811) (4,31,092)
102
Cash Flow Statement for the year ended 31 March 2005 (Contd.)
(Amount in Rs. ’000)
2005 2004
C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long term borrowings (net) 4,18,630 (1,67,253)
Proceeds from short term borrowings (net) 1,26,821 (1,05,764)
Interest paid (1,10,364) (1,20,127)
Dividend paid (27,191) (8,552)
Taxes on Dividend (3,596) (1,079)
Net cash from financing activities 4,04,300 (4,02,775)
NET INCREASE CASH AND CASH EQUIVALENT 57,681 (2,291)
Cash and cash equivalents at the beginning 25,949 28,240
Cash and cash equivalents at the close 83,630 25,949
Note:
Cash and cash equivalents include:
Cash and cheques in hand and remittances in transit 36,592 13,919
Balances with banks 47,038 12,029
Cash and cash equivalents 83,630 25,948
Balances in Fixed Deposits account (pledged) 21,592 23,249
Balances in Unpaid dividend accounts 2,233 1,359
Balances with Post office saving bank account (pledged) 143 143
Balance with banks not considered cash equivalents 23,968 24,751
Cash and bank balances as per balance sheet 1,07,598 50,699
On behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
This is the cash flow statement referred to in our report of even dateFor Walker, Chandiok & Co
Chartered Accountants
Place : New Delhi Vinod ChandiokDate : 26 May 2005 Partner
Membership No. 10093
Hindustan Sanitaryware & Industries Limited
103
We have audited the attached consolidated balance sheet of
Hindustan Sanitaryware & Industries Limited (“the Company”) its
subsidiary AGI Glasspack Limited collectively referred to as “the
Group” as at 31 March 2005 and also the consolidated profit and loss
account and the consolidated cash flow statement for the year ended
on that date annexed thereto. These financial statements are the
responsibility of the Group’s management and have been prepared
by the management on the basis of separate financial statements and
other financial information regarding components. Our responsibility
is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with auditing standards
generally accepted in India. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
We did not audit the financial statements of the subsidiary, whose
financial statement reflect total assets of Rs. 12,78,40,501 as at 31
March 2005, the total revenue of Rs. 27,452 and cash flows
amounting to Rs.12,098 for the year then ended. These financial
statements and other financial information have been audited by
other auditor whose report has been furnished to us, and our opinion
is based solely on the report of other auditors.
We report that the consolidated financial statements have been
prepared by Group’s management in accordance with the
requirements of Accounting Standard 21 “Consolidated financial
statements”, issued by the Institute of Chartered Accountants of
India.
Based on our audit and on consideration of report of other auditor
on separate financial statements and on the other financial
information of the component, and to the best of our information
and according to the explanations given to us, we are of the opinion
that the attached consolidated financial statements, read together
with the notes thereon, give a true and fair view in conformity with
the accounting principles generally accepted in India; in case of:
(a) the consolidated balance sheet, of the state of affairs of the
Group as at 31 March 2005;
(b) the consolidated profit and loss account, of the profit for the year
ended on that date; and
(c) the consolidated cash flow statement, of the cash flows for the
year ended on that date.
For Walker, Chandiok & CoChartered Accountants
Vinod Chandiok
Place: New Delhi Partner
Date: 26 May 2005 Membership No.10093
Consolidated Auditors’ ReportTO THE BOARD OF DIRECTORS OF HINDUSTAN SANITARYWARE & INDUSTRIES LIMITED
104
Consolidated Balance sheet as at 31 March 2005
The schedules referred to above form an integral part of the financial statementsOn behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
This is the consolidated balance sheet referred to in our report of even dateFor Walker, Chandiok & Co
Chartered Accountants
Place : New Delhi Vinod ChandiokDate : 26 May 2005 Partner
Membership No. 10093
(Amount in Rs.)
Schedule 2005 2004
SOURCES OF FUNDS
Shareholders' fund
Share Capital 1 9,35,54,840 5,61,34,435
Reserves and surplus 2 102,27,90,277 102,41,33,064
111,63,45,117 108,02,67,499
Minority Interest – 37,524
Loan funds
Secured 3 94,53,89,326 73,31,47,621
Unsecured 4 76,19,31,999 42,89,97,600
170,73,21,325 116,21,45,221
Deferred tax liability (net) (Refer note 11 on Schedule 21) 32,56,70,084 29,67,27,000
314,93,36,526 253,91,77,244
APPLICATION OF FUNDS
Fixed assets 5
Gross block 349,14,38,519 301,85,82,890
Less: Depreciation 137,46,06,637 134,58,74,724
Net block 211,68,31,882 167,27,08,166
Capital work-in-progress (including spares) 1,34,41,972 13,13,55,668
213,02,73,854 180,40,63,834
Investments 6 10,77,70,549 10,88,21,039
Current assets, loans and advances
Inventories 7 75,26,53,182 59,59,14,898
Sundry debtors 8 70,68,13,584 51,60,20,679
Cash and bank balances 9 10,76,54,233 5,07,67,548
Other current assets 10 97,99,963 63,44,777
Loans and advances 11 14,23,22,312 15,05,32,893
171,92,43,274 131,95,80,795
Less:
Current liabilities and provisions 12
Liabilities 69,46,24,139 60,54,85,549
Provisions 11,34,83,198 8,93,95,011
80,81,07,337 69,48,80,560
Net current assets 91,11,35,937 62,47,00,235
Miscellaneous expenditure (To the extent not written off or adjusted) 13 1,56,186 15,92,136
314,93,36,526 253,91,77,244
Significant accounting policies 20
Notes to the financial statements 21
Hindustan Sanitaryware & Industries Limited
105
Consolidated Profit and loss account for the year ended 31 March 2005
The schedules referred to above form an integral part of the financial statementsOn behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
This is the consolidated profit and loss account referred to in our report of even dateFor Walker, Chandiok & Co
Chartered Accountants
Place : New Delhi Vinod ChandiokDate : 26 May 2005 Partner
Membership No. 10093
(Amount in Rs.)
Schedule 2005 2004
INCOME
Gross sales 14 331,55,66,095 305,46,60,987 Less: Excise duty 34,44,33,226 33,95,11,718 Net sales 297,11,32,869 271,51,49,269 Other income 15 3,54,67,697 2,36,42,277 Increase/(Decrease) in stocks 16 13,80,21,692 (17,27,17,438)
314,46,22,258 256,60,74,108
EXPENDITURE
Goods purchased for resale 39,84,69,268 21,71,34,476 Personnel cost 17 35,25,62,482 32,83,46,643 Manufacturing, administrative and other expenses 18 178,68,04,890 150,73,24,588
253,78,36,640 205,28,05,707
Profit before interest, depreciation, amortisation, 60,67,85,618 51,32,68,401 exceptional items and tax
Interest 19 10,89,24,105 11,77,54,087 Depreciation & amortisation 5 20,81,79,670 18,08,78,916
Profit before tax and exceptional items 28,96,81,843 21,46,35,398
Exceptional items
Interest on income tax refunds – 1,10,72,750 Profit on sale of land and building – 1,88,58,903
Profit before tax 28,96,81,843 24,45,67,051
Income tax expense– Provision for Current tax 1,61,95,562 5,20,04,000 – Provision for Deferred tax 8,31,95,376 1,69,91,900
Profit after tax 19,02,90,905 17,55,71,151
Minority Interest – 7 Profit After Minority Interest 19,02,90,905 17,55,71,144
Pre acquisition Profit – 55,864 19,02,90,905 17,55,15,280
Income tax for earlier years – Current tax 9,12,128 74,67,865 – Deferred tax – 2,20,00,000 Transferred from Debenture redemption reserve on debentures redeemed 6,66,63,834 1,25,00,000
25,78,66,867 21,74,83,145
Balance transferred from last year 13,68,52,646 1,35,30,673 Balance available for appropriation 39,47,19,513 23,10,13,818
APPROPRIATIONS
Transferred to debenture redemption reserve – 3,25,00,000 Transferred to general reserve 3,00,00,000 3,00,00,000 Proposed dividend on equity shares 5,14,53,058 2,80,65,305 Tax on dividend 67,24,272 35,95,867 Balance carried to balance sheet 30,65,42,183 13,68,52,646
39,47,19,513 23,10,13,818
Basic and diluted earnings per share before tax earlier years 10.17 9.38 Basic and diluted earnings per share after tax earlier years 10.22 10.96(Refer note 13 on Schedule 21)
Significant accounting policies 20Notes to the financial statements 21
106
Schedules forming part of the Consolidated financial statements
1. Share capital (Amount in Rs.)
As at 31 March 2005 2004
Authorised
3,00,00,000 (previous year 2,96,00,000) Equity shares of Rs. 5 each. 15,00,00,000 14,80,00,000
Nil (previous year 15,000) 9.5% Cumulative redeemable preference shares of Rs. 100 each. – 15,00,000
Nil (previous year 5,000) Preference shares of Rs.100 each. – 5,00,000
15,00,00,000 15,00,00,000
Issued
1,87,11,733 (previous year 1,12,27,652) Equity shares of Rs. 5 each. 9,35,58,665 5,61,38,260
9,35,58,665 5,61,38,260
Subscribed and paid-up*
1,87,10,203 (previous year 1,12,26,122) Equity shares of Rs. 5 each fully paid up. 9,35,51,015 5,61,30,610
Add: Forfeited shares 3,825 3,825
9,35,54,840 5,61,34,435
* Of the above shares, 97,07,455 (previous year 22,23,374) Equity shares of Rs. 5 each were allotted as fully paid-up by way of bonus shares bycapitalisation of revenue reserves, 1,35,000 (previous year 1,35,000) Equity shares of Rs. 5 each fully paid-up were issued to the equity shareholdersof the erstwhile The Associated Glass Industries Limited pursuant to the scheme of amalgamation and 7,31,290 (previous year 7,31,290) Equityshares of Rs. 5 each fully paid-up were issued to the equity shareholders of the erstwhile Krishna Ceramics Limited pursuant to the scheme ofamalgamation.
2. Reserves and surplus (Amount in Rs.)
As at 31 March 2005 2004
i) Capital reserve
a) On account of amalgamation of erstwhile Krishna Ceramics Limited 3,32,529 3,32,529 b) Forfeited amount of debentures 19,96,905 19,96,905 c) Forfeited amount of upfront payment for naked warrants 97,50,000 97,50,000 d) Profit on Acquisition of shares 25,524 –
1,21,04,958 1,20,79,434 ii) Debenture redemption reserve
As per last year 18,75,00,000 16,75,00,000 Add: Transferred from profit & loss account – 3,25,00,000
18,75,00,000 20,00,00,000 Less: Transferred to profit & loss account 6,66,63,834 1,25,00,000
12,08,36,166 18,75,00,000 iii) Central subsidy reserve
As per last year 25,00,000 25,00,000 iv) Share premium account
As per last year 22,01,48,029 22,01,48,029 Less: Capitalized during the year 3,74,20,405 –
18,27,27,624 22,01,48,029 v) General reserve
As per last year 46,35,52,955 43,47,08,900 Add: Transferred from profit & loss account 3,00,00,000 3,00,00,000
49,35,52,955 46,47,08,900 Less: Trade mark amortisation – 11,55,945 Less: Impairment of fixed assets (net of deferred tax) 9,69,73,609 – (refer note 3 on schedule 21)
39,65,79,346 46,35,52,955 vi) Capital redemption reserve
As per last year 15,00,000 15,00,000 vii) Revaluation reserve
As per last year – 23,90,59,501 Less: Adjustment of revaluation reversed – 23,90,59,501
– – viii) Profit and loss account
Surplus in profit and loss account 30,65,42,183 13,68,52,646102,27,90,277 102,41,33,064
Hindustan Sanitaryware & Industries Limited
107
Schedules forming part of the Consolidated financial statements
3. Secured loans (Amount in Rs.)
As at 31 March 2005 2004
From banks on cash credit accounts 67,85,908 27,59,19,686
(Secured by hypothecation of stocks and book debts and further secured by
second charge on all the fixed assets of the Company, except Raasi division)
External Commercial Borrowing (ECB), short term loan 10,58,85,890 –
(Secured by hypothecation of stocks and book debts and further secured by
second charge on all the fixed assets of the Company, except Raasi division)
Term loans from financial institutions 1,25,00,000 # 6,25,00,000#
(Under project finance participation scheme)
# (Secured by way of hypothecation of the whole of moveable plant & machinery,
machinery spares, tools and accessories and other moveable assets (except assets
of the company's Raasi Ceramic Division exclusively hypothecated to Unit Trust of
India and vehicles hypothecated to banks and bodies corporate), both present and
future, subject to prior charges created and/ or to be created in favour of bankers
of the company in respect of stocks of raw materials, semi finished & finished
goods and further secured by mortgage by way of deposit of title deeds of
immovable properties of the company, ranking pari-passu with the security
created in favour of debentureholders)
(Term loans of Rs. 125 lacs (Previous year Rs. 500 lacs) are payable within one year)
Term loans from banks 56,00,00,000 $ 10,00,000#
$ (Secured by way of hypothecation of the whole of fixed assets including
moveable plant & machinery, machinery spares, tools and accessories (both present
and future) pertaining to the Glass division of the Company and further secured by
mortgage by way of deposit of title deeds of immovable properties of the Glass division
of the Company, ranking pari-passu with the security created in favour of debentureholders)
(Term loans of Rs. 1887.50 lacs (Previous year Rs. Nil) are payable within one year)
7,00,000 -- 13.25% Non-convertible redeemable debentures** 4,66,69,000 7,00,00,000
Of the face value of Rs. 100 each issued in favour of Unit Trust of India on private
placement basis. These debentures are redeemable in three equal annual instalments
from 7th December, 2004 onwards at par.
15,00,000 -- 13.50% Non-convertible redeemable debentures** 7,50,00,000 12,50,00,000
Of the face value of Rs.100 each issued in favour of Central Bank of India on
private placement basis. 7,50,000 debentures are redeemable in three equal annual
instalments from 9th May, 2003 onwards at par and 7,50,000 debentures are
redeemable in three equal annual instalments from 19th July, 2004 onwards at par.
10,00,000 -- 13.50% Non-convertible redeemable debentures* 6,66,70,000 10,00,00,000
Of the face value of Rs. 100 each issued in favour of Unit Trust of India on private
placement basis. These debentures are redeemable in three equal annual
instalments from 12th August, 2004 onwards at par.
8,00,000 -- 13.50% Non-convertible redeemable debentures** 5,33,33,333 8,00,00,000
Of the face value of Rs.100 each issued in favour of Canara Bank on private
placement basis. These debentures are redeemable in three equal annual
instalments from 19th July, 2004 onwards at par.
Finance lease loan for computers – 6,16,054
(Secured against computers taken on lease)
Car finance loans from banks and bodies corporate 1,85,45,195 1,81,11,881
(Secured by hypothecation of vehicles financed out of proceeds of loans)
[Amount payable within one year Rs. 90,19,137 (previous year Rs. 79,31,412)]
94,53,89,326 73,31,47,621
108
4. Unsecured loans (Amount in Rs.)
As at 31 March 2005 2004
Trade deposits from dealers 4,95,07,756 4,46,44,841
Interest accrued and due on above 27,80,274 30,55,307
From banks:
– Commercial paper 55,00,00,000 25,00,00,000
– Supplier bills discounted 49,91,770 2,07,36,794
– Export bills discounted 9,51,009 –
Deferred sales tax credit 15,37,01,190 11,05,60,658
76,19,31,999 42,89,97,600
Notes:
1. Maximum amount outstanding on commercial paper during the year Rs. 5500 lacs (previous year Rs. 6000 lacs)
2. The amount of deferred sales tax credit is subject to assessment by sales tax authorities.
3. As per agreement with Commercial Tax Department, Hyderabad deferred sales tax credit relating to the Glass Division amounting to
Rs. 9,62,26,578 (previous year Rs. 6,74,98,215) is secured against the moveable and immovable properties of the Company. However, this
charge is pending registration with the Registrar of Companies, West Bengal.
* 13.5% Non convertible redeemable debentures issued in favour of Unit Trust of India are secured by way of first exclusive charge on the
fixed assets of the company's Raasi Ceramic division.
** Other non convertible redeemable debenture are secured by first legal mortgage on the assets at Indrad, Gujrat and further secured by way of
hypothecation of the whole of moveable plant and machinery, machine spares, tools and accessories and other moveable (except assets of
company's Raasi Ceramic division exclusively hypothecated to Unit Trust of India and vehicles hypothecated to banks and bodies corporates)
both present and future, subject to prior charges created and/ or to be created in favour of bankers of the company in respect of stocks of
semi-finished and finished goods and further secured by mortgage by way of deposit of title deeds of immovable properties of the Company,
except Raasi division.
These charges will rank pari-passu with the security created in favour of financial institutions/banks for the term loans.
Debentures of Rs. 1333 lacs (previous year Rs. 1333 lacs) are payable within one year.
3. Secured loans (Contd.)
Schedules forming part of the Consolidated financial statements
Hindustan Sanitaryware & Industries Limited
109
Schedules forming part of the Consolidated financial statements
5.
Fix
ed
ass
ets
(Am
ount
in R
s.)
Gro
ss B
lock
Dep
reci
atio
n/
Am
orti
sati
onN
et B
lock
Par
ticu
lars
As
atA
dd
itio
nSa
les/
Imp
airm
ent
Rev
ersa
l of
A
s at
Up
to
For
th
e Sa
les/
Imp
airm
ent
Rev
ersa
l of
Up
to
As
atA
s at
01.4
.200
4d
uri
ng
Ad
just
men
tR
eval
uat
ion
31.3
.200
531
.3.2
004
year
Ad
just
men
tR
eval
uat
ion
31.3
.200
531
.3.2
005
31.3
.200
4
the
year
Inta
ng
ible
Ass
ets
Trad
e M
ark
3,00,0
0,000
–
––
–3,0
0,00,0
00
1,50,4
1,096
30
,00,00
0 –
––
1,80,4
1,096
1,19,5
8,904
1,4
9,58,9
04
Goo
dwill
11,62
7 –
––
–11
,627
11,62
7 –
––
–11
,627
––
Tan
gib
le A
sset
s
Land
16,98
,00,91
0 62
,87,00
8 –
––
17,60
,87,91
8 –
––
––
–17
,60,87
,918
16,98
,00,91
0
Build
ing
43,26
,98,31
3 6,5
8,66,2
72
– 4,8
1,18,3
88
–45
,04,46
,197
10,64
,50,08
7 1,0
8,04,6
93
–92
,07,53
9 –
10,80
,47,24
1 34
,23,98
,956
32,62
,48,22
6
Plan
t & M
achi
nery
22
6,03,4
4,967
70
,87,79
,919
2,97,3
0,133
24
,87,13
,136
–26
9,06,8
1,617
11
6,55,0
8,021
17
,72,44
,174
2,79,8
7,244
13
,71,19
,176
–11
7,76,4
5,775
15
1,30,3
5,842
10
9,48,3
6,946
Vehi
cles
5,0
1,49,7
45
1,34,8
4,158
49
,70,42
6 –
–5,8
6,63,4
77
2,01,8
1,916
87
,98,30
0 39
,62,92
8 –
–2,5
0,17,2
88
3,36,4
6,189
2,9
9,67,8
29
Offi
ce E
quip
men
ts
2,33,7
8,258
16
,67,35
9 1,3
4,720
6,9
1,888
–
2,42,1
9,009
80
,70,89
5 11
,91,65
2 37
,471
2,62,7
34
–89
,62,34
2 1,5
2,56,6
67
1,53,0
7,363
Com
pute
rs
3,46,0
9,140
72
,37,88
5 1,4
6,740
7,0
8,895
–
4,09,9
1,390
2,1
5,81,4
60
58,79
,537
1,35,5
39
4,95,5
54
–2,6
8,29,9
04
1,41,6
1,486
1,3
0,27,6
80
Furn
iture
& F
ixtur
es
1,75,8
9,930
30
,65,52
3 –
3,18,1
69
–2,0
3,37,2
84
90,29
,622
12,61
,314
–2,3
9,572
–
1,00,5
1,364
1,0
2,85,9
20
85,60
,308
Tot
al30
1,85
,82,
890
80,6
3,88
,124
3,49
,82,
019
29,8
5,50
,476
–
349,
14,3
8,51
9 13
4,58
,74,
724
20,8
1,79
,670
3,21
,23,
182
14,7
3,24
,575
–
137,
46,0
6,63
7 21
1,68
,31,
882
167,
27,0
8,16
6
Prev
ious
yea
r 30
5,65,0
6,995
28
,68,43
,595
1,34,5
1,134
–
31,13
,16,56
6 30
1,85,8
2,890
12
4,46,8
9,002
18
,08,78
,916
74,36
,128
–7,2
2,57,0
66
134,5
8,74,7
24
167,2
7,08,1
66
Cap
ital
wor
k in
pro
gre
ss1,
34,4
1,97
2 13
,13,
55,6
68
Not
es:
1.Ad
ditio
ns to
Plan
t and
Mac
hine
ry in
clude
fore
ign e
xcha
nge
fluct
uatio
n (n
et) a
mou
ntin
g to
Rs.
14,46
,742
(pre
viou
s yea
r Rs.
14,60
,142)
2.Th
e as
sets
impa
ired
durin
g th
e ye
ar h
ave
been
retir
ed fr
om ac
tive
use.
110
6. Investments (Amount in Rs.)
As at 31 March 2005 2004
(Non-Trade unless otherwise stated)
i) Government securities*
Unquoted:
Indira Vikas Patra – 2,000
National Savings Certificates 83,100 58,100
ii) Fully paid-up equity shares of Rs.10 each
Quoted:
Nil (previous year 23,800) Jaypee Hotels Limited** – 9,80,690
125 (previous year 125) Neycer India Limited 938 938
50 (previous year 50) Swastik Sanitarywares Limited 1,050 1,050
459 (previous year 11,500) Jindal Vijaynagar Steels Limited**# 1,15,250 1,25,250
93 (previous year Nil) Jindal Vijaynagar Steels Limited (Warrants)# – –
Unquoted:
Trade
8,04,000 (previous year 8,04,000) Andhra Pradesh Gas Power Generation Ltd. 10,73,60,580 10,73,60,580
Nil (previous year 1,55,250) O-Furo Private Limited – 15,52,500
iii) Mutual Funds
Quoted:
4,917 (previous year 6,027) HDFC equity fund- Dividend Plan 89,631 1,10,643
11,667 (previous year 11,667) HDFC MIP- LT- QD 1,20,000 1,20,000
10,77,70,549 11,03,11,751
Less: Provision for difference in market value and cost of current investments – 14,90,712
10,77,70,549 10,88,21,039
Aggregate Amount of 2005 2004
Cost price Market Price Cost price Market Price
Quoted Investments 3,26,869 4,17,866 11,07,928 6,66,761
Unquoted Investments 10,74,43,680 – 10,92,03,823 –
10,77,70,549 4,17,866 11,03,11,751 6,66,761
Notes:
* Deposited with government departments.** Represents current investments. All other investments are long term investments.# The new equity shares and warrants were received by the Company consequent to the merger of Jindal Vijaynagar Steels Ltd. with Jindal Ironand Steel Company Limited and renamed as Jindal Vijaynagar Steels Ltd. These warrants were issued for Rs. Nil and carry an option ofconverting into equity shares of the merged entity at a later date.
7. Inventories (Amount in Rs.)
As at 31 March 2005 2004
(As taken, valued and certified by the management)
Stores, spares and packing materials 11,62,68,535 10,14,51,984
Raw materials and components 5,64,82,923 3,57,31,128
Stock-in-process 2,54,25,211 2,09,86,369
Goods in transit* 4,56,215 1,73,07,969
Finished goods including goods purchased for sale 55,40,20,298 42,04,37,448
75,26,53,182 59,59,14,898
*includes raw material & components Rs. Nil (previous year Rs. 1,66,54,582), stores & spares Rs. Nil (previous year Rs. 6,49,562) and finished
goods Rs. 4,56,215 (previous year Rs. 3,825)
Schedules forming part of the Consolidated financial statements
Hindustan Sanitaryware & Industries Limited
111
8. Sundry debtors (Amount in Rs.)
As at 31 March 2005 2004
(Unsecured unless otherwise stated)
Debts outstanding for a period exceeding six months:
– Considered doubtful 4,62,90,271 4,24,11,775
– Considered good 5,08,36,116 5,06,90,951
– Considered good- secured 49,29,425 46,09,609
Other debts:
– Considered doubtful 22,78,041 8,75,482
– Considered good 63,32,27,050 44,52,05,500
– Considered good- secured 1,78,20,993 1,55,14,619
75,53,81,896 55,93,07,936
Less: Provision for doubtful debts 4,85,68,312 4,32,87,257
70,68,13,584 51,60,20,679
9. Cash and bank balance
As at 31 March 2005 2004
Cash-in-hand 23,43,922 13,20,904
Remittance-in-transit 3,42,49,824 1,26,00,103
Balances with scheduled banks:
– In current accounts 1,67,72,546 44,44,382
– In cash-credit accounts 1,03,19,546 76,51,236
– In fixed deposit accounts 4,15,92,347 2,32,49,421
[Rs. 2,15,92,347 (previous year Rs. 2,32,49,421) are pledged with Banks as margin money]
– In unpaid dividend accounts 22,33,348 13,58,702
With post office in savings bank account (pledged) 1,42,700 1,42,800
10,76,54,233 5,07,67,548
10. Other current assets
As at 31 March 2005 2004
Interest accrued but not due on loans and deposits 1,06,38,271 71,98,067
Tax deducted at source recoverable 14,982 –
Less: Provision for interest doubtful of recovery 8,53,290 8,53,290
97,99,963 63,44,777
11. Loans and advances
As at 31 March 2005 2004
(Unsecured, considered good except where otherwise stated)
Loans to Bodies Corporate (including Rs. 20,00,000 previous year Rs. 20,00,000 24,25,000 3,27,25,000
considered doubtful of recovery)
Advance recoverable in cash or in kind or for value to be received or pending for adjustments
(including Rs. 3,00,000 previous year Rs. 3,00,000 considered doubtful of recovery) 6,47,52,390 6,34,15,440
Balance with excise/sales tax authorities 75,20,045 1,00,90,182
Deposits (including Rs. 6,08,000 previous year Rs. 6,08,000 considered doubtful of recovery) 2,28,78,802 1,74,67,555
Advance payment of income tax and tax deducted at source 4,77,92,775 2,97,42,716
14,53,69,012 15,34,40,893
Less: Provision for doubtful loans & advances 30,46,700 29,08,000
(including Rs. 1,38,700 (previous year Rs. Nil) against Post office saving accounts
pledged with Excise authorities)
14,23,22,312 15,05,32,893
Schedules forming part of the Consolidated financial statements
112
12. Current liabilities and provisions (Amount in Rs.)
As at 31 March 2005 2004
Current liabilities
Acceptances 7,09,48,247 10,93,12,115
Sundry creditors for goods, services and expenses 47,80,40,254 35,18,44,135
Interest accrued but not due on loans/debentures 59,68,176 71,33,258
Advance against sales/orders 4,03,74,709 4,54,51,353
Investor education & protection fund**
Unclaimed Dividend 22,33,348 13,58,702
Payable to preference shareholders 2,518 2,518
Payable to debentureholders – 2,31,565
Other liabilities* 9,70,56,887 9,01,51,903
69,46,24,139 60,54,85,549
Provisions
Retirement benefits 77,30,873 2,75,75,009
Taxation 4,75,74,995 3,01,58,830
Proposed dividend 5,14,53,058 2,80,65,305
Tax on dividend 67,24,272 35,95,867
11,34,83,198 8,93,95,011
80,81,07,337 69,48,80,560
* Including excise duty payable Rs. 7,24,44,038 (previous year Rs. 6,99,51,694) on finished goods lying at company's bonded ware houses.
**Not due for deposit
13. Miscellaneous expenditure
As at 31 March 2005 2004
(To the extent not written off or adjusted)
Voluntary retirement scheme 13,82,857 41,48,574
Less: Written off during the year 13,82,857 27,65,717
– 13,82,857
Preliminary Expenses 2,09,279 2,62,372
Less: Written off during the year 53,093 53,093
1,56,186 2,09,279
1,56,186 15,92,136
14. Gross sales (Net of returns)
For the year ended 31 March 2005 2004
Domestic
Sanitaryware & fittings and glassware 287,60,61,519 271,20,87,102
Scrap and other sales 1,55,87,108 99,16,865
Export
Sanitaryware & fittings and glassware 42,39,17,468 33,26,57,020
[including deemed export Rs. 18,43,21,217 (previous year Rs. 12,14,70,250)]
331,55,66,095 305,46,60,987
(Amount in Rs.)
(Amount in Rs.)
Schedules forming part of the Consolidated financial statements
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16. Increase/(decrease) in stocks (Amount in Rs.)
For the year ended 31 March 2005 2004
Opening stocks
Finished goods including goods purchased for resale 42,04,37,448 58,75,92,069
Stock-in-process 2,09,86,369 2,65,49,186
44,14,23,817 61,41,41,255
Less: Closing stocks
Finished goods including goods purchased for resale 55,40,20,298 42,04,37,448
Stock-in-process 2,54,25,211 2,09,86,369
57,94,45,509 44,14,23,817
13,80,21,692 (17,27,17,438)
17. Personnel cost (Amount in Rs.)
For the year ended 31 March 2005 2004
Salaries, wages & bonus 30,47,52,521 26,25,72,177
Contribution to provident and other funds 2,66,37,399 4,85,82,965
Staff and labour welfare expenses 2,11,72,562 1,71,91,501
35,25,62,482 32,83,46,643
15. Other income(Amount in Rs.)
For the year ended 31 March 2005 2004
Rent received 96,093 2,40,719
Dividend received 24,803 71,457
Interest received (gross) [Tax Deducted at Source Rs. 1,59,657 (previous year Rs. 13,40,970)] 58,05,078 92,81,198
Profit on fixed assets sold/ discarded (net) 12,62,293 11,39,987
Profit on sale of long term investments 1,22,214 80,540
Insurance claims received 9,19,101 2,21,855
Reversal of provision for diminution in the value of Investment 14,90,712 –
Sundry balances and liabilities no longer required written back (net) 1,48,46,435 61,69,856
Miscellaneous receipts 1,09,00,968 64,36,665
3,54,67,697 2,36,42,277
Schedules forming part of the Consolidated financial statements
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Schedules forming part of the Consolidated financial statements
18. Manufacturing, administrative and other expenses (Amount in Rs.)
For the year ended 31 March 2005 2004
Raw material and components consumed 49,49,90,925 40,69,03,824
Stores and spares consumed 11,25,79,944 10,89,31,107
Excise duty 28,17,372 (2,47,88,641)
Packing materials consumed 12,55,93,197 10,94,17,762
Power and fuel(net) 58,46,65,109 51,08,62,746
Repairs to:
- Buildings 54,30,716 51,30,421
- Plant and machinery(excluding stores consumption) 2,22,97,042 1,89,90,174
- Other assets 29,53,490 32,30,318
Rent, lease rent (including hire charges) 64,39,282 58,59,277
Rates and taxes 39,62,128 46,29,040
Directors fees 81,000 38,000
Expenditure on ceramic and applied research centre 14,21,336 13,94,406
Insurance 1,14,87,918 96,52,828
Travelling and conveyance 4,11,27,477 3,02,68,161
Discount 9,04,77,356 8,07,73,087
Commission on sales 1,91,10,670 2,28,67,833
Expenses on exports 5,47,81,827 5,38,72,040
Advertisement and publicity 3,15,26,610 2,42,70,833
Other selling and distribution expenses 11,14,56,147 7,13,75,330
Provision for doubtful debts and advances 57,52,185 1,33,67,078
Charity and donation 3,81,073 10,45,616
Foreign exchange fluctuation(net) 5,75,966 1,01,894
Prior period adjustments (net) 5,45,666 5,81,446
Loss on sale of investments 7,76,250 5,02,000
Provision for diminution in the value of current investments - 6,58,494
Bad debts written off 38,82,189 17,16,406
Miscellaneous expenses 5,16,92,015 4,56,73,108
178,68,04,890 150,73,24,588
19. Interest (Amount in Rs.)
For the year ended 31 March 2005 2004
- On term loans 1,92,27,413 1,66,05,917
- On debentures 4,08,18,428 5,08,76,974
- Others* 4,88,78,264 5,02,71,196
10,89,24,105 11,77,54,087
* Includes Rs. 2,34,68,999 (previous year Rs. 2,71,88,474) paid on account of discounting charges of commercial paper.
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Schedules forming part of the Consolidated financial statements
20. Significant Accounting Policies
1. Basis of preparation
The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the Instituteof Chartered Accountants of India (‘ICAI’) and the relevant provisions of the Companies Act, 1956 (the ‘Act’). The financial statements havebeen prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Groupand are consistent with those used in the previous year.
2. Principles of consolidation
The consolidated financial statements include the financial statements of Hindustan Sanitaryware & Industries Limited, the Parent Companyand its subsidiary namely, AGI Glasspack Limited (collectively referred to as ‘the Group’).
The consolidated financial statements have been combined on a line by line basis by adding the book values of the like items of the assets,liabilities, income and expenses after eliminating intra-group transactions and resulting unrealised profits in full. The amounts shown in respectof reserves comprise the amount of the relevant reserves as per the balance sheet of the Parent Company and its share in the post-acquisitionincrease in the relevant reserves of the consolidated entity.
The excess/ deficit of cost to the Parent Company of its investment over its portion of equity in the consolidated entity at the respective dateson which the investment in such entity was made is recognised in the financial statements as goodwill/ capital reserves. The Parent Company’sportion of equity in such entities is determined on the basis of book value of assets and liabilities as per the financial statements of the entity ason date of investment.
The consolidated financial statements are presented, to the extent possible, in the same format as that adopted by the Parent Company for itsseparate financial statements.
3. Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of financialstatements. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in the current andfuture periods.
4. Revenue recognition
Revenue from sale of goods is recognised when the significant risks and rewards in respect of ownership of the goods are transferred to thecustomer and is stated inclusive of excise duty, net of trade discounts, sales return and sales tax wherever applicable.
5. Export benefit/incentive
Benefit under the advance license scheme is accounted for at the time of purchase of imported raw materials.
6. Fixed assets
Tangible
a) Fixed assets are stated at cost or revalued amount (gross block) less accumulated depreciation and adjusted for impairment loss/gain. Costcomprises the purchase price (net of Cenvat credit availed) and any attributable cost of bringing the asset to its working condition for itsintended use.
b) Expenditure on account of modification/ alteration in plant and machinery/ building, which increases the future benefit from the existingasset beyond its previous assessed standard of performance, is capitalised.
Intangible
a) Trade marks are stated at cost less accumulated amortisation.
7. Depreciation/ amortisation
Depreciation on fixed assets has been provided on straight line method at the rates and in the manner prescribed under schedule XIV to theCompanies Act, 1956 except the following:
i. on assets acquired and put to use on or before 1 July 1987 in the glass division and registered office of the Parent Company and on vehiclesacquired till date in all the divisions of the Group, depreciation is provided on written down value method at the rates and in the mannerprescribed in the Schedule;
ii. on furnaces (included in plant and machinery) having a cost of Rs. 51,75,54,861 used in the glass division of the Parent Company,depreciation is provided on straight line method, as technically assessed from time to time, based on expected useful lives of the furnaces.The rate presently being 16.21% p.a. which is the rate as prescribed in the Schedule;
iii. trademarks acquired in respect of Raasi Ceramic Division of the Parent Company are amortised over a period of ten years;
iv. cost of leasehold improvements (included in furniture and fixture) is depreciated over the period of lease.
116
8. Investments
Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All otherinvestments are classified as long-term investments.
Current investments are valued at the lower of cost and fair value.
Long-term investments are stated at cost. Provision is made for diminution in the value of long-term investments to recognise a decline, if any,other than temporary in nature.
Profit /Loss on sale of investments are computed with reference to their average cost.
9. Inventories
a) Inventories are valued as follows:Stores and spares, packing materials, raw materials including components - At lower of cost and net realisable value. However, materialsand other items held for use in the production of inventories are not written down below cost if the finished products in which they willbe incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis.
Work- in-process - at cost upto estimated stage of completion.
Finished goods and goods purchased for resale - At lower of cost and net realisable value.
b) Cost of inventories is ascertained on the following basis:
Raw materials, stores and spare parts and packing materials - On weighted average basis.
Finished goods purchased for resale - On First-In-First-Out basis.
Cost of manufactured finished goods and stock in process comprise material, labour and other related production overheads includingdepreciation.
10. Foreign currency transactions
Foreign currency transactions are recorded at the exchange rates prevailing on the date of transaction. Differences arising out of foreign currencytransactions settled during the year are recognised in the profit and loss account, except those relating to acquisition of fixed assets, which areadjusted to the carrying amount of the related fixed assets.
Monetary items outstanding at the balance sheet date and denominated in foreign currencies are restated at the exchange rates prevailing at theend of the year. Differences arising on such restatement are recognised in the profit and loss account except those relating to acquisition of fixedassets, which are adjusted to the carrying amount of the related fixed assets.
The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract.Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange rates change, exceptthose relating to acquisition of fixed assets, which are adjusted to the carrying amount of the related fixed assets. Any profit or loss arising oncancellation or renewal of forward exchange contract is recognised as income or as expense for the year.
11. Taxes on income
Tax expense comprises both current and deferred taxes.
Current tax is determined as the amount of tax payable in respect of taxable income for the year.
Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year andreversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enactedat the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable/virtual certainty that sufficient futuretaxable income will be available against which such deferred tax assets can be realised.
12. Research and development
Research and development expenditure is charged to profit and loss account except capital expenditure, which is added to the cost of respectivefixed assets in the year in which it is incurred.
13. Retirement benefits
Provident Fund is administered by trustees of independently constituted trust recognised by income-tax authorities. The Group’s contributionto provident fund is recognised in profit and loss account.
Provision for earned leave entitlement and gratuity of employees is made on the basis of actuarial valuation as at the balance sheet date. Thegratuity fund is administered by trustees of independently constituted trust recognised by income-tax authorities. The Group makes contributionto Birla Sun Life Insurance Company Limited (BSL) of an amount payable, through the trust, which is charged to the profit and loss account.
14. Miscellaneous expenditure
Amounts paid under voluntary retirement scheme are amortised over a period of five years from the date of payment.
20. Significant Accounting Policies (Contd.)
Schedules forming part of the Consolidated financial statements
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117
15. Earnings per share
Basic and diluted earnings per share is calculated by dividing net profit for the year attributable to equity shareholders by weighted averagenumber of equity shares outstanding during the year.
16. Leases
Lease rentals in respect of assets taken under operating lease are charged to the profit and loss account on accrual basis.
Assets taken on finance lease are accounted for as assets of the Group. Lease rentals payable are apportioned between principal and interestusing the internal rate of return method and finance charge is recognised accordingly.
17. Contingent liabilities
Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Group not acknowledged as debts areprovided or disclosed as contingent liabilities. In respect of statutory matters, contingent liabilities are provided or disclosed only for thosedemand(s) that are contested by the Group.
20. Significant Accounting Policies (Contd.)
21. Notes to the Consolidated Financial Statements
Schedules forming part of the Consolidated financial statements
(Amount in Rs.)
2005 2004
1. Estimated amount of contracts remaining to be executed on capital account and 3,69,20,557 12,85,70,567
not provided for (net of advances).
2. Contingent liabilities not provided for in respect of:
a) Demands raised by the excise authorities against which appeals have been filed. 1,32,27,881 1,44,47,042
b) Demands made by the sales tax authorities against which appeals have been filed. 70,63,135 50,76,607
c) Bank guarantees outstanding. 7,14,93,120 1,40,39,500
d) The Group is jointly and severally liable alongwith sureties for guarantees given – 20,00,000
to sales tax department on behalf of a third party.
e) Claims against the Group not acknowledged as debts. 1,26,91,342 5,92,706
f) Obligation under EPCG scheme, to the extent of custom duty saved on import 12,43,05,346 4,71,40,507
of capital goods.
3. The Parent Company has closed the manufacturing operations in the Raasi Ceramic Division w.e.f. 07 April 2001. However, based on thetechnical evaluation of the assets of the said division and disproportionate cost involved, the management has reassessed the business plan ofthe division and decided not to restart the operations and accordingly assets of the division are impaired. The Parent Company has recognisedan impairment loss (net of deferred tax liability) of Rs. 9,69,73,609 as at 01 April 2004 in accordance with the Accounting Standard (AS) 28"impairment of assets". As assessed by the Group, there are no further impairment in the value of the assets as at 31 March 2005.
4. Pending negotiation of wage agreement with the labour union at one of the plants, the Parent Company has made an estimated provision of Rs.61,39,472 (previous year Rs. 25,80,000) towards increase in wages and benefits, the actual liability of which will be determined on settlement ofthe aforesaid agreement.
5. The accounts of some customers are pending reconciliation/confirmation and the same have been taken as per balances appearing in the books.Any differences arising on account of such reconciliations, which are not likely to be material, will be accounted for as and when thesereconciliations are completed.
(Amount in Rs.)
2005 2004
Directors commission payable 2,45,79,289 1,98,88,960
6. Sundry creditors/ other liabilities include:
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21. Notes to the Consolidated Financial Statements (Contd.)
Schedules forming part of the Consolidated financial statements
11. Deferred tax liability (net)
Major components of deferred tax assets and liabilities are as given below:
2005 2004
a) Expenditure debited to profit and loss account but allowable for tax 20.61 37.97purposes in subsequent years
b) Provision for doubtful debts, loans and advances 176.61 174.13
c) Depreciation (3453.92) (3179.37)
Deferred tax liability (net) (3256.70) (2967.27)*
* Including Rs. 542.52 lacs written back on assets impaired during 2004-05 adjusted against the opening general reserves.
12. Segment Reporting
Identification of segment:
The group’s operating business are organised and managed separately according to the nature of the products and services provided, with eachsegment representing a strategic business unit that offers different products and serves different markets. The group has accordingly identifiedtwo primary business segments, i.e. sanitaryware and glassware.
The activities of the company are primarily limited within Indian territories having no variation in risk and returns. Consequently, informationin respect of geographical segment is not given.
Unallocated items:
The corporate and other segment includes general corporate income and expense items, which are not allocated to any business segment.
(Rs. in lacs)
7. Sundry creditors for goods include Rs. 27,68,022 (Previous year Rs. 21,07,155) payable to small scale industrial undertakings to the extent suchparties have been identified from the available documents/ information. No amounts are outstanding for more than 30 days.
8. Miscellaneous expenses include payments to auditors for:
2005 2004
a) Audit fee 5,53,500 5,40,000
b) Tax audit fee 82,650 81,000
c) Certification, etc. – 20,000
d) Reimbursement of expenses 85,199 1,01,533
(including service tax wherever applicable).
7,21,349 7,42,533
9. Loans and advances include Rs. 41,39,094 (previous year Rs. 2,92,41,850) on account of advances given for purchase of capital goods.
10. Interest expense for the year includes an amount of Rs. Nil (previous year Rs. 5,14,800) on account of loss on exchange fluctuation on foreignexchange borrowings.
(Amount in Rs.)
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119
21. Notes to the Consolidated Financial Statements (Contd.)
Schedules forming part of the Consolidated financial statements
Information about primary business segments is given below:
(Figures in parentheses are for the previous year). (Amount in Rs.)
Year ended 31 March 2005
Reportable segments
Particulars Sanitaryware Glassware Total
Segment revenue
External sales (Net) 153,50,86,877 143,60,45,992 297,11,32,869
(123,80,09,406) (147,71,39,863) (271,51,49,269)
Other income 1,53,34,511 1,44,00,828 2,97,35,339
(93,93,188) (81,31,081) (1,75,24,269)
Segment results 26,96,77,421 17,28,57,458 44,25,34,879
(19,98,51,030) (19,19,44,564) (39,17,95,594)
Unallocated corporate expenses (net) 4,39,28,931
(5,94,06,109)
Interest 10,89,24,105
(11,77,54,087)
Income tax (including deferred tax) 9,93,90,938
(6,89,95,900)
Exceptional Income –
(2,99,31,653)
Profit after tax and exceptional items 19,02,90,905
(17,55,71,151)
Other information:
Segment assets 143,64,08,116 233,11,16,481 376,75,24,597
(141,46,03,365) (161,07,69,154) (302,53,72,519)
Unallocated corporate assets 18,97,63,080
(19,94,41,913)
Total assets 395,72,87,677
(322,48,14,432)
Segment liabilities 31,08,26,818 35,95,10,211 67,03,37,029
(25,19,78,384) (32,92,01,490) (58,11,79,874)
Unallocated corporate liabilities 217,07,61,717
(156,49,21,671)
Total liabilities(excluding shareholders fund) 284,10,98,746
(214,61,01,545)
Capital expenditure 8,03,06,142 60,79,89,392 68,82,95,534
(4,24,65,582) (23,72,55,101) (27,97,20,683)
Depreciation 5,99,56,712 14,79,73,554 20,79,30,266
(6,85,29,761) (11,20,62,977) (18,05,92,738)
Other non-cash expenses
– Provision for diminution in value of current investments –
(6,58,494)
– Provision for doubtful debts and advances (net) 57,52,185
(1,33,67,078)
– Voluntary retirement compensation written off 13,82,857
(27,65,717)
– Deferred Revenue Expenditure written off 53,093
(53,093)
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21. Notes to the Consolidated Financial Statements (Contd.)
Schedules forming part of the Consolidated financial statements
13. Earnings per share
2005 2004
Profit attributable to equity shareholders before tax, earlier years
Profit after tax 19,02,90,905 17,55,15,280Profit attributable to equity shareholders after tax, earlier years
Profit after tax 19,02,90,905 17,55,15,280Add: Tax credit for earlier years:
Current tax 9,12,128 74,67,865Deferred tax – 2,20,00,000
19,12,03,033 20,49,83,145
Weighted average number of shares outstanding at the beginning and 1,87,10,203 1,87,10,203the end of the year
Nominal value per share (Rs) 5 5Earnings per share (Rs), basic and diluted
Before tax for earlier years 10.17 9.38*After tax for earlier years 10.22 10.96*
* In accordance with Accounting Standard (AS) 20 “Earnings per share”, issued by the Institute of Chartered Accountants of India, the EPSof previous year, being the earliest reporting period is adjusted on account of bonus share issued during the current year.
(Amount in Rs.)
14. Related party transactions
a) Name of related parties and description of relationship:
(i) Key management personnel and their relatives
(Name of the relatives of key management personnel with whom the Group had transactions during the year are listed below).Mr R K Somany Mr Sandip Somany Mr G L SultaniaMr Sandip Somany (son) Mr R K Somany (father)
b) Entities where significant influence is exercised by key management personnel and/or their relatives having transactions with the Group:(i) Textool Mercantiles Private Limited (v) Paco Exports Limited(ii) SR Continental Limited (vi) New Delhi Industrial Promotors and Investors Limited(iii) SPL Limited (vii) Soma Investments Limited(iv) Bigoo Investments Limited
Related party disclosures (Amount in Rs.)
Other parties which
Key Management significantly influence/
Particulars Joint Venture Personnel and are influenced
their Relatives by the company
(either individually
or otherwise)
2005 2004 2005 2004 2005 2004
A a) Purchase of Raw Material, Stores, – – – 1,62,130 –Spares and Packing material
b) Sale of Raw Material and components, Stores, Spares, packing – 1,12,985 – – 50,405 2,240material and finished goods
c) Rent Paid – – – – 31,684 –
d) Investments made – – – – –
e) Balance Outstanding at the year end:
- Receivable 4,65,453 4,65,453 – – 9,387 –
- Payable – – – – 3,771 –
B Directors Remuneration – – 3,29,37,563 2,67,96,366 – –
Balance Outstanding at the year end-payable – – 2,12,85,533 1,72,09,322 – –
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121
21. Notes to the Consolidated Financial Statements (Contd.)
Schedules forming part of the Consolidated financial statements
16. Expenditure on ceramic and applied research centre comprise
2005 2004
Salaries, wages and bonus 12,27,461 11,67,915
Contribution to provident and other funds 1,12,370 99,896
Stores and spares consumed 81,505 1,26,595
Total 14,21,336 13,94,406
(Amount in Rs.)
17. In the opinion of the board of directors, current assets, loans and advances have a value on realisation in the ordinary course of the business atleast equal to the amounts at which they are stated and provision for all known liabilities has been made.
18. The subsidiary company namely AGI Glasspack Limited is incorporated in India and 100% of its share capital is held by the Parent Company.
19. Previous year figures have been regrouped /recast wherever considered necessary to make them comparable with those of the current year.
For and on behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
For Walker, Chandiok & CoChartered Accountants
Place : New Delhi Vinod ChandiokDate : 26 May 2005 Partner
Membership No. 10093
(Amount in Rs.)15. Payments to directors of Parent Company
2005 2004
a) Salary 85,82,570 74,70,813
b) Contribution to provident fund 10,29,908 8,96,497
c) Gratuity 4,67,457 3,93,973
d) Leave encashment 7,07,966 2,69,475
e) Commission 2,45,79,289 1,98,88,960
f) Monetary value of perquisites 8,64,129 5,56,285
g) Directors’ sitting fee 81,000 38,000
Total 3,63,12,319 2,95,14,003
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(Amount in Rs. ’000)
2005 2004
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before tax and Exceptional items 2,89,682 2,14,635
Adjustments for:
Depreciation / amortisation 2,08,180 1,80,878
Miscellaneous expenditure 1,436 2,819
Profit / Loss on fixed assets discarded/ sold(net) (1,262) (1,140)
Interest expense 1,08,924 1,17,754
Dividend income (25) (71)
Interest income (5,805) (9,281)
Reversal of provision for diminution in the value of current investments (1,491) 658
Provision for doubtful debts and advances 5,419 13,127
Loss on sale of investments(net) 654 421
Exceptional items
Interest on income tax refund – 11,073
Operating profit before working capital changes 6,05,712 5,30,873
Adjustments for :
Inventories (1,56,738) 1,76,818
Trade/Other receivable (1,99,470) 14,787
Trade/Other payables 69,573 72,420
Direct taxes refunds/ (paid ) (15,932) 17,343
Net cash from operating activities 3,03,145 8,12,241
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets including Capital work-in-progress (6,88,474) (4,07,478)
Proceeds from sale of fixed assets 4,121 24,858
Purchase of investments (25) (61,629)
Sale proceeds of investments 1,912 579
Interest received 2,365 8,245
Dividend received 25 71
Loans & advances recovered 30,300 5,275
Net cash used in investing activities (6,49,776) (4,30,079)
Consolidated Cash Flow Statement for the year ended 31 March 2005
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123
(Amount in Rs. ’000)
2005 2004
C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long term loans (net) 4,18,630 (1,67,254)
Proceeds from short term borrowings (net) 1,26,821 (87,399)
Interest paid (1,10,364) (1,20,127)
Dividend paid (27,191) (8,552)
Taxes on Dividend (3,596) (1,079)
Net cash from financing activities 4,04,300 (3,84,411)
NET INCREASE IN CASH AND CASH EQUIVALENT 57,669 (2,249)
Cash and cash equivalents at the beginning 26,017 28,266
Cash and cash equivalents at the close 83,686 26,017
Note:
Cash and cash equivalents include:
Cash and cheques in hand and remittances in transit 36,594 13,921
Balances with banks 47,092 12,095
Cash and cash equivalents 83,686 26,016
Balances in Fixed Deposits account (pledged) 21,592 23,249
Balances in Unpaid dividend accounts 2,233 1,359
Balances with Post office saving bank account (pledged) 143 143
Balance with banks not considered cash equivalents 23,968 24,751
Cash and bank balances as per balance sheet 1,07,654 50,767
Consolidated Cash Flow Statement for the year ended 31 March 2005
On behalf of the Board of Directors
G.L. Sultania Sandip Somany R.K. SomanyExecutive Director & Secretary Joint Managing Director Chairman & Managing Director
This is the consolidated cash flow statement referred to in our report of even dateFor Walker, Chandiok & Co
Chartered Accountants
Place :New Delhi Vinod ChandiokDate :26 May 2005 Partner
Membership No. 10093
124
Dear Members,Your Directors present the Eighth Annual Report together withAudited Accounts of the Company for the year ended 31st March,2005.
Financial Results
RupeesProfit/(Loss) for the year (56,653.59)Add: Balance brought forward from previous year 41,340.60Balance carried to Balance Sheet (15,312.99)
Dividend
In view of losses, your Directors do not recommend any dividend forthe year under review.
Fixed Deposits
The Company has not accepted any Fixed Deposit within the meaningof section 58A of the Companies Act, 1956 during the year ended 31stMarch, 2005.
Auditors’ Report
The Report of the Auditors read together with the Notes on Accountis self explanatory and therefore does not call for any further commentsu/s 217 of the Companies Act, 1956.
Directors
Shri S. K. Dokania, Director of the Company retire by rotation at theensuing Annual General Meeting and being eligible offer himself for re-appointment.
Auditors
M/s. Choudhari Pramod & Co., Chartered Accountants, Auditors ofthe Company retire at the ensuing Annual General Meeting and beingeligible, expressed their willingness to continue in office, if re-appointed.
Particulars of Employees
The Company had no employee in the category specified under Section217(2A) of the Companies Act, 1956 hence no statement.
Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings and Outgo
The provisions of Section 217(1)(e) of the Companies Act, 1956 are notapplicable to the Company, as the Company does not carry on anymanufacturing activity. There was no foreign exchange earning andoutgo during the year.
Directors’ Responsibility Statement
Pursuant to sub-section (2AA) of Section 217 of the CompaniesAct,1956, the Board of Directors of the Company hereby state andconfirm that:
(i) in the preparation of the Annual Accounts, the applicableaccounting standards have been followed along with properexplanation relating to material departures;
(ii) the Directors have selected such accounting policies and appliedthem consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the stateof the affairs of the Company at the end of the financial year andof the profit or loss of the Company for that period;
(iii) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance withthe provisions of the Companies Act,1956 for safeguarding theassets of the Company and for preventing and detecting fraud andother irregularities;
(iv) the Directors have prepared the annual accounts on a goingconcern basis.
For and on behalf of the Board
Place: Kolkata (N.Goenka) ( A.K.Dokania)
Dated: 13th May, 2005 Director Director
Directors’ Report
AGI GLASSPACK LIMITED
To the Members ofAGI Glasspack Limited
1. We have audited the attached Balance Sheet of AGI GLASSPACKLIMITED as at 31st March 2005 and the Profit and Loss Accountfor the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financialstatements based on our audit.
2. We conducted our auditing in accordance with auditing standardsgenerally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statement. An auditalso includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluatingthe overall financial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) (Amendment)Order, 2004 issued by the Central Government of India in terms ofsub-section (4A) of section 227 of the Companies Act, 1956 and onthe basis of such checks as we consider appropriate and accordingto the information and explanations given to us, we enclose in theAnnexure a statement on the matters specified in paragraph 4 and
5 of the said order.
4. Further to our comments in the Annexure referred to above, wereport that :
1. We have obtained all the information and explanations, whichto the best of our knowledge and belief were necessary for the purpose of our audit.
2. In our opinion proper books of accounts as required by lawhave been kept by the Company so for as appears from ourexamination of such books.
3. The Balance Sheet and Profit & Loss account are in agreementwith the Books of Accounts.
4. In our opinion, the Profit & Loss Account and the BalanceSheet deal with by this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956.
5. On the basis of written representation received from thedirectors, as on 31st March, 2005 and taken on record by theBoard of Directors, we report that none of the Directors isdisqualified as on 31st March, 2005 from being appointed as aDirectors in terms of clause (g) of sub-section (1) of section274 of the Companies Act, 1956.
Auditors’ Report
AGI GLASSPACK LIMITED
125
6. In our opinion and to the best of our information andaccording to the explanation given to us the said accounts givethe information required by the Companies Act, 1956 in themanner as required and give a true and fair view in conformitywith the accounting principles generally accepted in India.
a) In the case of Balance Sheet, of the state of affairs of theCompany as at 31st March 2005; and
b) In the case of Profit & Loss Account of the loss for theperiod ended on that date.
For Choudhari Pramod & Co.
Chartered Accountants
Kolkata V. Sharma
Date : 13th day of May, 2005 PartnerMembership No. 60135
Annexure referred to in paragraph 3 of our report of even date to the members of AGI GLASSPACK LIMITED
i) The Company is maintaining proper records showing fullparticulars including quantitative details and situation of fixedassets. Fixed assets have been physically verified by themanagement during the year and there have been no materialdiscrepancies. There have been no substantial disposal of fixedassets during the year.
ii) The Company does not have any inventory.
iii) a) As inform to us, the Company has not granted any loanssecured or unsecured to companies, firms or other partiescovered in the register maintained under section 301 of theCompanies Act, 1956.
b) As inform to us, the Company has not taken loans secured orunsecured from companies, firms or other parties covered inthe register maintained under section 301 of the CompaniesAct, 1956.
iv) The Company has adequate internal control procedurescommensurate with the size of Company and the nature of itsbusiness. Further during the course of our audit, we have neithercome across nor have we have been informed of any continuingfailure to correct major weakness in internal controls.
v) Based on the audit procedure applied by us and according to theinformation and explanations provided by the managements, theCompany does not have such transactions which is need to beentered into the register maintained under section 301 of theCompanies Act, 1956.
vi) The Company has not accepted any deposits from public underSection 58A, 58AA or any other relevant provisions of the Act,and rules framed thereunder.
vii) In our opinion, the Company has an internal audit systemcommensurate with the size of the Company and the nature of itsbusiness.
viii) The Central Government has not prescribed maintenance of costrecords under section 209(1)(d) of the Companies Act, 1956 forthe Company.
ix) a) According to the records of the Company, the Company isregular in depositing undisputed statutory dues applicable tothe Company among Provident Fund, Investor Education andProtection Fund, Employee’s State Insurance, Income Tax,Sales Tax, Customs duty and excise duty, cess and otherstatutory dues with appropriate authorities. According to theinformation and explanations given to us, there are noundisputed amounts payable in respect of income tax, wealthtax, service tax, sales tax, custom duty and excise duty whichhave remained outstanding as at 31st March, 2005 for a periodof more than six months from the date they became payable.
b) According to the records of the Company, there are no dues ofsales tax, wealth tax, custom duty, excise duty and cess, whichhave not been deposited on account of any dispute other thandispute.
x) The Company has accumulated losses at the year end of thefinancial year but it does not exceed fifty percent of it net worthand it has incurred cash losses in the current financial year but nocash loss is incurred in the immediately preceding such financialyear.
xi) Based on the audit procedure and on the information andexplanations provided by the management, the Company has notborrowed any loan from financial institution or bank or debentureholders.
xii) According to the information and explanations given to us andbased on the documents and records produced to us, theCompany has not granted any loans and advances on the basis ofsecurity by way of pledge of shares, debentures and othersecurities.
xiii) In our opinion and according to the information and explanationsgiven to us, the nature of the activities of the Company does notattract any special statute applicable to chit fund and nidhi/mutualfund/societies.
xiv) In our opinion the Company is not a dealer or trader in shares,securities and other investments.
xv) According to the information and explanations given to us, theCompany has not given any guarantee for loans taken by itssubsidiaries and associates from bank or financial institutions.
xvi) Based on information and explanations given to us by themanagement, no term’s loans has taken from any banks orFinancial Institution.
xvii) We have been informed by management that no funds have beenraised on short-term basis during the year which have been usedfor long term investment or on long term basis which have beenused for short term investment.
xviii)The Company has not made any preferential allotment of sharesto the parties and companies covered in the Register maintainedunder section 301 of the Act during the year.
xix) The Company did not have any outstanding debentures during theyear.
xx) The Company has not raised any money through a public issueduring the year.
xxi) Based upon the audit procedures performed and information andexplanations given by the management, we report that no fraud onor by the Company has been noticed or reported during the courseof our audit.
For Choudhari Pramod & Co.
Chartered Accountants
Kolkata V. Sharma
Date : 13th day of May, 2005 PartnerMembership No. 60135
Annexure to Auditors’ Report
126
(Amount in Rs.)
2005 2004
SOURCES OF FUNDS
Shareholders' Funds
Share Capital 1 4,30,12,000.00 4,30,12,000.00
Reserves & Surplus 2 8,50,00,000.00 8,50,41,340.60
Total 12,80,12,000.00 12,80,53,340.60
APPLICATION OF FUNDS
Fixed Assets
Land 12,75,69,500.00 12,75,43,500.00
Investments 3 2,09,631.23 2,30,642.92
Current Assets, Loans and Advances
Cash & Bank Balances 4 56,022.78 68,120.68
Loans & Advances 5 1,13,854.00 10,000.00
1,69,876.78 78,120.68
Less:- Current Liabilities and Provisions
Current Liabilities 6 1,04,507.00 4,202.00
Provisions 7 4,000.00 4,000.00
1,08,507.00 8,202.00
Net Current Assets 61,369.78 69,918.68
Miscellaneous Expenditure
(To the extent not written off and/or adjusted)
Preliminary Expenses 1,56,186.00 2,09,279.00
Profit & Loss Account 15,312.99 –
Total 12,80,12,000.00 12,80,53,340.60
Notes on Accounts 8
Balance Sheet as at 31 March 2005
The Schedules referred to above form an integral part of the Balance Sheet.
This is the Balance Sheet referred to in our report of even date.
For Choudhari Pramod & Co. On behalf of the Board of DirectorsChartered Accountants
(V. Sharma) N. Goenka A. K. DokaniaPartner Director DirectorMembership No. 6013512 Crooked Lane, 1st Floor, Suite 2AKolkata 700 069
Dated: 13th day of May, 2005
AGI GLASSPACK LIMITED
AGI GLASSPACK LIMITED
127
(Amount in Rs.)
Schedule 2005 2004
INCOME
Dividend 23,425.90 71,457.68
Profit on sale of Investments 4,026.31 80,539.55
27,452.21 1,51,997.23
EXPENSES
Electricity & Water Charges 9,464.00 4,551.00
Bank Charges 285.00 980.00
Filing Fees 2,000.00 4,000.00
Audit Fees 2,755.00 2,700.00
Charges General – 300.00
Printing & Stationary 58.80 538.00
Rates & Taxes 16,085.00 1,020.00
Security Transaction Tax 38.00 –
Legal & Professional 327.00 –
Preliminary Expenses written off 53,093.00 53,093.00
84,105.80 67,182.00
Profit/(Loss) before Taxation (56,653.59) 84,815.23
Less: Provision for Taxation – 4,000.00
Profit/(Loss) after Taxation (56,653.59) 80,815.23
Balance brought forward from previous year 41,340.60 (39,474.63)
Balance carried to Balance Sheet (15,312.99) 41,340.60
Notes on Accounts 8
Profit and Loss Account for the year ended 31 March 2005
The Schedules referred to above form an integral part of the Profit and Loss Account.
This is the Profit and Loss Account referred to in our report of even date.
For Choudhari Pramod & Co. On behalf of the Board of DirectorsChartered Accountants
(V. Sharma) N. Goenka A. K. DokaniaPartner Director DirectorMembership No. 6013512 Crooked Lane, 1st Floor, Suite 2AKolkata 700 069
Dated: 13th day of May, 2005
128
Schedules forming part of the financial statements
AGI GLASSPACK LIMITED
1. Share Capital
(Amount in Rs.)
As at 31 March 2005 2004
Authorised
5000000 Equity Shares of Rs.10/- each 5,00,00,000.00 5,00,00,000.00Issued, Subscribed & Paid up
4301200 Equity Shares of Rs.10/- each fully paid up in cash 4,30,12,000.00 4,30,12,000.004,30,12,000.00 4,30,12,000.00
2. Reserves and Surplus
Share Premium Account 8,50,00,000.00 8,50,00,000.00Profit & Loss Account – 41,340.60
8,50,00,000.00 8,50,41,340.60
4. Cash and Bank Balances
Cash in hand (As Certified by the Management) 1,780.00 1,780.00Balance with Scheduled Banks-In Current Accounts 54,242.78 66,340.68
56,022.78 68,120.68
5. Loans and Advances
Advances (Recoverable in cash or in kind or for value to be received or pending adjustment)Advances 1,00,000.00 –Security Deposit 10,000.00 10,000.00Advance Income Tax 3,854.00 –
1,13,854.00 10,000.00
6. Current Liabilities
Liabilities for Expenses 4,257.00 4,202.00Sundry Creditor 1,00,250.00 –
1,04,507.00 4,202.00
7. Provisions
-For Income Tax 4,000.00 4,000.004,000.00 4,000.00
8. Significant Accounting Policies and Notes on Accounts
1. Significant Accounting Policies
a) The Company adopts accrual basis of Accounting in preparation of accounts. All expenses and income to the extentconsidered payable and receivable respectively, unless stated otherwise, are accounted for on Mercantile basis.
b) In terms of Accounting Standard-13 issued by Institute of Chartered Accountants of India, the investments in securities are valued at cost.
c) Fixed Assets are stated at cost.
d) Provision for the Income Tax is made on estimate to arise onthe results for the year at current rates of tax in accordance with the Income Tax Act,1961.
2. Notes on Accounts
a) The entire paid-up Equity Share Capital of the Company is
held by Hindustan Sanitaryware & Industries Limited, the holding company and its nominees.
b) Previous year's figure have been regrouped /rearranged, wherever considered necessary.
Signature to Schedules "1" to "8"In terms of our Report of even date
For Choudhari Pramod & Co.
Chartered Accountants
(V. Sharma) N. Goenka A. K. Dokania
Partner Director DirectorMembership No. 6013512 Crooked Lane, 1st Floor, Suite 2AKolkata 700 069Dated: 13th day of May, 2005
3. Investments (At Cost)
Mutual Fund
4916.825 (Previous year 6026.617) HDFC Equity Fund - Dividend Plan 89,631.23 1,10,642.9211666.796 (Previous year 11666.796) HDFC MIP - LT - QD 1,20,000.00 1,20,000.00
2,09,631.23 2,30,642.92
NAV of Quoted Mutual Fund 2,32,203.68 2,42,345.28
AGI GLASSPACK LIMITED
129
Balance Sheet Abstract and Company’s General Business Profile
Public Issue
2 1 - 8 5 4 3 9
N I L
N I L
Bonus Issue
Right Issue
N I L
Secured LoanN I L
Unsecured Loan
N I L
Private Placement
3 1 0 3
Registration No. State Code
Balance Sheet Date
I. Registration Details
II. Capital Raised during the year (Amount in Rs. Thousands)
Total Liabilities
1 2 8 1 2 1
III. Position of mobilisation and deployment of funds (Amount in Rs. Thousands)
2 0 0 5
2 1
Total Assets
1 2 8 1 2 1
Paid-up CapitalSources of Funds
4 3 0 1 2Reserves and Surplus
8 5 0 0 0
Net Fixed AssetsApplication of Funds
1 2 7 5 7 0
Investment
2 1 0
Net Current Assets
6 1
Miscellaneous Expenditure
1 5 6
N. A.
N. A.
Accumulated Losses
1 5
N I L
IV. Performance of Company (Amount in Rs. Thousands)
Item Code No. (ITC Code)
Product/Service Description
V. Generic Names of Two Principal Products/Services of the Company
Net Turnover
2 7
Total Expenditure
8 4Profit / (Loss) before Tax
( 5 7 )Profit / (Loss) after Tax
( 5 7 )
Earning per share
N I L
Dividend (%)
N I L
Place: Kolkata N. Goenka A. K. DokaniaDated: 13th day of May, 2005 Director Director
130
Corporate InformationMARKETING OFFICE
New Delhi:
Tewari House, 2nd Floor,11-B/8, Main Pusa Road,New Delhi-110005.Tel.: (+91-11) 2585 4656/57,
2581 9142, 2575 0027.Fax: (+91-11) 2578 5278 Email: delhi@hindware.co.in
REGIONAL OFFICES
Kolkata:
2,Red Cross Place, Kolkata 700001.Tel.: (+91-33) 2248 7406, 2248 7407.Email: hsikolsale@somanyent.comhindware@somanyent.com
Mumbai:
14, Vaswani Mansions, 2nd Floor,Dinshaw Wachha Road, BackbayReclamation,Mumbai 400020.Tel.: (+91-22) 2204 4766.Fax.: (+91-22) 2202 2247.Email: mumbai@hindware.co.in
Secunderabad:304, Ashoka Bhoopal Chambers,Sardar Patel Road,Secunderabad 500003.
Tel.: (+91-40) 2784 8416,27848417, 27848419.
Fax: (+91-40) 2784 8418.Email: marketing.hyd@hindware.co.in
Bangalore:
Unit No. 9/2, Dhondusa Complex3rd Floor, Residency RoadRichmond CircleBangalore 560 025.Tele/fax: (+91-80) 5113 6377.Email: bangalore@hindware.co.in
Chennai:
MKM Chambers (Annexe), First floor,154 & 155, Kodambakam High Road,Chennai 600 034.Tel: (+91-44) 2822 0912.Email: chennai@hindware.co.in
Ernakulam
Palaparambil Building, Kaloor,Kadavandra Road, Ernakulam 682020.Tel.: (+91-0484) 2207016.
BANKERS
Central Bank of IndiaAndhra BankCanara Bank
AUDITORS
Walker, Chandiok & Co.
REGISTERED OFFICE
2, Red Cross Place, Kolkata 700001.
WORKS
Sanitaryware Division
Bahadurgarh-124 507Distt. Jhajjar,HaryanaTel.: (+91-1276) 230485/86/87,232226/7/8.Fax: (+91-1276) 230138Email: somany.hindware@hindware.co.in
Somanypuram, Brahmanapally, Bibinagar,Distt. Nalgonda, Andhra Pradesh 508 126.Tel.: (+91-8685) 278375,278378.Fax: (+91-8685) 278362.
AGI Glaspac
Glass Factory Road, off Motinagar, P.B. No. 1930,Sanathnagar P.O., Hyderabad 500018Tel.: (+91-40) 2383 1771(5 lines)Fax: (+91-40) 2383 1787Email:gnrl@agi-glaspac.com
131
132
What lies behind us andwhat lies before us are
tiny matters compared towhat lies within us.
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