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The Members of CEAT Limited
The Directors present their fifty-fourth report, together with the audited accounts for the year ended March 31, 2013.
With deep and profound sorrow, the Board of Directors record that Dr. R. P. Goenka, Chairman, ceased to be a Director of the Company due to his sad demise on April 14, 2013.The Directors place on record their sincere appreciation for the invaluable guidance provided by Dr. Goenka to the Company during his tenure as the Chairman of the Company.
In view of the improved performance of the Company during the year under review, the Board of Directors are pleased to recommend a dividend of Rs. 4.00 per equity share of face value of Rs. 10/- each (i.e. 40 per cent) for the financial year ended March 31, 2013.
The Indian economy registered a modest growth of 5 per cent in FY 2013 in terms of Gross Domestic Product (GDP). This was attributable mainly to weakening industrial growth in the context of tight monetary policy through most of the year and continued uncertainty in the global economy.
The global automobile industry witnessed a slump in demand which impacted the tyre industry as well.
Volumes across almost all segments either declined or remained flat. The demand from Original Equipment Manufacturers (OEM) as well as the Replacement Market was sluggish given the reduction in demand of automobiles and unsold inventory.
On the other hand, decline in input costs helped improve margins during the year under review. Almost all major raw materials witnessed a steady decline over the year.
The Company registered a growth of 9.1 per cent in turnover from Rs. 4,435.4 crores in the year 2011-12 to Rs. 4,836.7 crores in 2012-13. Manufacturing operations at the radial plant at Halol, near Baroda in Gujarat ramped up to 80 per cent capacity utilisation by Q4 of the year under review thereby improving the financial performance of the Company.
A favourable product mix towards categories of motorcycle, scooter, passenger car, utility vehicles and last mile tyres contributed positively to the bottom line.
In spite of a shrinking OEM market, the Company's performance in this segment was impressive with a 37 per cent volume growth posted against last year.
During 2012-13, prices of key raw materials like Natural Rubber and Synthetic Rubber fell by 8 to 10 per cent and helped increase profits for the Company.
The operating margins of the Company improved by 3.2 per cent with the operating profit increasing from Rs. 246.8 crores in the year 2011-12 to Rs. 424.5 crores in the year 2012-13. Net Profit increased from Rs. 7.5 crores in 2011-12 to Rs. 106.4 crores in 2012-13.
The Company also expanded its product portfolio with the 'CZAR' range of Utility Vehicle tyres being a key development. An advertising campaign was launched for this new product range while the successful motorcycle tyre 'Be Idiotsafe' campaign also continued.
The tyre industry in India is passing through a challenging phase much like the overall economy. Such a drastic fall in the sales of commercial vehicles during the year under review has not been witnessed in a long time. In the short term, therefore, the outlook for tyre industry is not a very optimistic one. The tyre industry's growth is expected to be in sync with the GDP growth. However, replacement demand from vehicle sales over the past two years can provide an opportunity.
The Company expects tyre demand to revive over medium term.
A weakening Rupee and high interest rates are currently the areas of concern for the tyre industry, but are expected to improve during the course of the year ahead. With the stable forecast of raw material prices, the Company expects a positive year ahead.
JOINT VENTURE IN SRI LANKA
Associated CEAT Holdings Company Private Limited (ACHL), the Company's investment arm in Sri Lanka, operates 3 (three) manufacturing plants owned by its joint venture company CEAT-Kelani Holding Company Private Limited.
During the year under review, ACHL has registered a revenue of LKR 4,569.3 million (Rs. 191.9 crores) as compared to LKR 4,357.4 million (Rs. 185.3 crores) in 2011-12, a growth of 4.9 per cent. Profit after tax has grown by 48.3 per cent to LKR 468.98 million (Rs. 19.7 crores) as compared to LKR 316.21 million (Rs. 13.4 crores) in 2011-12. The joint venture continues to enjoy the overall market leadership in all categories of tyres in Sri Lanka.
With a view to service the growing market in Sri Lanka, the Company's joint venture is expanding its capacity from 16,000 radial tyres per month to 28,000 radial tyres per month.
ACHL has been consistently paying dividends and for the year 2012-13 the Company received Rs. 5.7 crores as dividend from ACHL.
JOINT VENTURE IN BANGLADESH
The Company is setting up a green field facility for manufacture of automotive bias tyres in Bangladesh with an initial capacity of 65 MT per day by investing USD 55 million. The capacity of the said plant will be scaled to 110 MT per day in due course with an additional investment of USD 15 million. This plant, which is the first major investment for tyre manufacturing in Bangladesh, is expected to become operational by early 2015.
The Company has decided to implement the project as a joint venture and accordingly, has signed a Joint Venture (JV) agreement with A.K. Khan & Company Limited (AKK), one of the leading business groups of Bangladesh and CEAT
Bangladesh Limited, the JV Company, during the year under review. While the Company will hold 70 per cent shareholding of the JV Company, AKK will hold the balance. The Company has also signed the Technology, Trademark and Name License Agreement with the JV Company whereunder, it will provide the technology and operational support to the JV Company. Once the plant becomes operational, the JV Company will be in a position to cater to the growing domestic market of Bangladesh and South East Asia as well.
The JV Company has already commenced seed marketing of the 'CEAT' branded tyres in the domestic market.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
A statement giving details of conservation of energy, technology absorption, foreign exchange earnings and outgo, in accordance with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is annexed hereto and forms part of this report.
CEAT believes that its employees are a valuable asset and core strength of the Company. The Company continued its focus on developing and nurturing talent and encouraging innovation and excellence.
The Company has adopted Total Quality Management and initiated several measures for strengthening employee relations through progressive people practices at the shop floor and initiatives towards increased productivity. Labour relations remained cordial during the year under review.
In terms of Section 217 (2A) of the Companies Act, 1956 ("the Act") read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees of the Company, are required to be set out in this Report. However, as per provisions of Section 219 (1) (b) (iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company. Those members who are desirous of obtaining full information are requested to write to the Company.
The Ministry of Corporate Affairs has vide General Circular No. 2/2011 dated February 8, 2011 granted general exemption from attaching the accounts and financial statements of subsidiary companies as provided under Section 212 (8) of the Act, provided conditions specified in the said circular are fulfilled. The Company has fully complied with all the conditions mentioned in the above circular. Therefore, the Annual Accounts of the wholly owned subsidiary of the Company i.e. Associated CEAT Holdings Company (Private) Limited (ACHL) and those of the subsidiary company i.e. CEAT Bangladesh Limited (CBL) have not been annexed to this Report. However, the same are available for inspection at the Registered Office of the Company and also at the Registered Office of ACHL and CBL. Any member desirous of obtaining the same may request the Company in writing.
The Company has no overdue deposits, other than the unclaimed deposits of Rs. 3.07 Crores from 844 depositors as at the end of the year under review.
Mr. Paras K. Chowdhary, was appointed as the Whole-time Director for a period of one year with effect from April 1, 2012. Accordingly, the term of Mr. Chowdhary as the Whole-time Director has expired on March 31, 2013. He however, continues to be a Director on the Board of Directors of the Company.
In terms of Article 172 of the Articles of Association of the Company, Mr. Arnab Banerjee was appointed as an Additional Director on the Board of Directors. He would therefore hold office upto the date of the ensuing Annual General Meeting. A Notice has been received under Section 257 of the Act from a member proposing the name of Mr. Banerjee as Director.
Mr. Banerjee has also been appointed as Whole-time Director designated as Executive Director-Operations of the Company, for a period of 5 (five) years with effect from May 7, 2013.
In accordance with the Act, and Articles of Association, Mr. H. V. Goenka, Mr. Hari L. Mundra and Mr. Atul C. Choksey retire by rotation and being eligible offer themselves for re-appointment.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 217 (2AA) of the Act, your Directors, to the best of their knowledge and belief, confirm that:
i) the applicable Accounting Standards have been followed in the preparation of the annual accounts.
ii) such accounting policies have been selected and applied consistently and such judgements and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company in the Balance Sheet as at March 31, 2013 and of the Statement of Profit and Loss for the said financial year viz. April 1, 2012 to March 31, 2013.
iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
iv) the annual accounts have been prepared on a going concern basis.
A report on Corporate Governance, along with a certificate from the Statutory Auditors of the Company, regarding the compliance of conditions of Corporate Governance, as also the Management Discussion and Analysis Report, as stipulated under Clause 49 of the Listing Agreement, are annexed to this Report.
Messrs S. R. Batliboi & Associates LLP, Statutory Auditors of the Company, retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.
The Board has, subject to the approval of the Central Government, appointed Messrs N. I. Mehta & Co., Cost Accountants, as Cost Auditors of the Company for FY 2013-14.
Your Directors place on record their appreciation for the continued support and co-operation received from the employees, customers, suppliers, dealers, financial institutions, banks and members towards conducting the business of the Company during the year under review.
On behalf of the Board of Directors
H. V. Goenka
Date: July 18, 2013