annual report fy 2007-08 - hnggroup.net directors report.pdf · capital under sections 391 to 394...

22 | Hindusthan National Glass & Industries Limited

Directors’ ReportWe take pleasure in presenting the 62nd Annual Report on the business and operations of your Company, together with the audited

accounts for the year ended March 31, 2008.

Financial highlights

OperationsPursuant to the scheme of amalgamation and reorganisation of

capital under Sections 391 to 394 of the Companies Act, 1956,

(Scheme) with effect from April 1, 2006, Ace Glass Containers

Limited (AGCL) has been merged with your Company.

Consequent to this, the performance of the previous year is not

comparable with the current year. However, even on comparable

basis (without considering the impact of the merger), your

Company has performed well, achieving a 21% growth in revenue

(previous year 25%). PBIT and PBT have also shown a growth of

34% and 78%, respectively (previous year 40% and 70%).

Your Company is entitled, pursuant to sanctioning of the scheme,

Rs in lac

Year ended 31.3.2008 Year ended 31.3.2007

Gross sales (including excise duty) 1,14,834 59,540

Profit before interest, depreciation and tax 21,467 10,325

Interest and finance charges 2,347 1,910

Profit before depreciation and tax 19,120 8,415

Depreciation 7,013 3,312

Profit before tax 12,107 5,103

Provision for tax 37 1,524

Provision for deferred tax (2,664) 191

Tax for earlier year (1,300) (3,927) (36) 1,679

Profit after tax 16,034 3,424

Balance brought forward from previous year 706 907

Amount available for appropriation 16,740 4,331

Appropriation

General reserve 14,850 3,500

Proposed dividend 699 110

Tax on dividend 119 15,668 15 3,625

Balance carried forward to next year 1,072 706

Hindusthan National Glass & Industries Limited | 23

for the tax benefit under Section 72A of the Income Tax Act, 1961;

the tax charges in this year have accordingly been worked out.

Dividend

In view of the robust growth in the performance of your Company,

the Directors recommend a dividend of 40% i.e. Rs 4 per equity

share for the current year.

Amalgamation

A scheme of amalgamation of Ace Glass Containers Limited with

your Company was sanctioned by the Hon’ble High Courts of

Delhi and Calcutta on March 19, 2008 and April 7, 2008

respectively. The Order of the Hon’ble High Courts were filed with

the respective Registrar of Companies on April 28, 2008. As a

result of the said amalgamation, your Company has achieved

synergy in its operations coupled with more financial leverage.

In terms of Scheme of Amalgamation, 2141448 shares and

4282897 shares (totalling to 6424345 shares) would be allotted

to HNG Trust and Ceramic Decorators Limited respectively. Out

of 4282897 shares allotted to Ceramic Decorators Limited,

1606087 shares are to be under lock-in for a period of 3 years

from the date of their listing at the Bombay Stock Exchange. It

may be mentioned that pursuant to the Scheme of

Amalgamation, 1368872 shares are allotted to Ace Trust.

It is imperative to mention that your Company is beneficiary of

both the above Trusts. In terms of an undertaking given to the

Bombay Stock Exchange, your Company is required to make

disclosures pertaining to utilisation of proceeds of shares allotted

to the above said Trusts until they are extinguished.

Review

During the year, your Company acquired the assets of a glass

container plant located at Neemrana, revamped it and

commenced commercial production from March 2008. The

capital expenditure was financed through long-term borrowings

and internal accruals.

Future outlookThe Indian economy has continued to show a robust growth

during the financial year 2007-08 and the same trend is expected

to continue. Growing disposable income coupled with a change

in the demographic pattern of the population will create more

demand for packaged goods, creating better opportunities for

the Company. The growth in beer, pharmaceutical, food, liquor

and other high-end sectors will drive the growth in the revenue

and profitability of the Company. Your Company continues to

maintain a commanding market share and is equipped to grow

with the expanding market.

DirectorsShri R. K. Daga, Shri Dipankar Chatterji and Shri C. K. Somany,

retire by rotation from the Board of Directors of the Company at

the ensuing Annual General Meeting, and being eligible, have

offered themselves for re-appointment.

Fixed depositsYour Company has not accepted any deposits from the public

within the meaning of Section 58A of the Companies Act, 1956.

Consolidated financial statementsConsolidated financial statements prepared in accordance with

Accounting Standard 21, read with Accounting Standard 23 and

issued by the Institute of Chartered Accountants of India, forms

an integral part of the Annual Report and accounts.

DerivativeThe Company has challenged the validity and legality of a

derivative transaction with Kotak Mahindra Bank Limited. The

matter is sub-judice. Based on the legal advice received, the

contract is void and not tenable. The loss in respect of the said

transaction is indeterminable.

Auditors reportThe Auditors Report read along with Notes on Accounts is self-

explanatory and therefore, does not call for any further comment

under Section 217(3) of the Companies Act, 1956.


Listing on stock exchangesThe Equity Shares of the Company continue to be listed on the

Bombay Stock Exchange Ltd., and the Calcutta Stock Exchange

Association Ltd. The annual listing fees for the year 2007-08 have

been paid to these exchanges.

AuditorsM/s Lodha & Company, Chartered Accountants, statutory

auditor of the Company retire at the conclusion of the ensuing

Annual General Meeting and have confirmed their eligibility and

willingness to accept the office of the statutory auditor, if re-

appointed.

M/s Singhi & Company, Chartered Accountants, have confirmed

their eligibility and willingness to accept the office of the Branch

Auditors of the Company’s units located at Nashik, Pondicherry

and Rishikesh, if appointed.

Directors’ responsibility statement pursuantto Section 217(2AA) of the Companies Act,1956The Directors hereby confirm:

i) that in the preparation of the annual accounts, the applicable

accounting standards had been followed along with proper

explanations related to material departures;

ii) that the Directors had selected such accounting policies and

applied them consistently and made judgments and

estimates that are reasonable and prudent so as to give a

true and fair view of the state of affairs of the Company at the

end of the financial year ended on March 31, 2008 and of the

profit of the Company for the year ended on March 31, 2008;

iii) that the Directors had taken proper and sufficient care for the

maintenance of adequate accounting records in accordance

with the provisions of this Act for safeguarding the assets of

the Company and for preventing and detecting fraud and

other irregularities;

iv) that the Directors had prepared the annual accounts on a

‘going concern’ basis.

Corporate GovernanceThe report on Corporate Governance along with the Certificate

of the auditors M/s Lodha & Co., Chartered Accountants,

confirming the compliance of conditions of Corporate

Governance as stipulated under Clause 49 of the Listing

Agreement entered by the Company with the stock exchanges

forms an integral part of the Annual Report.

Subsidiary companiesParticulars relating to the existing subsidiary companies as

required under Section 212 of the Companies Act, 1956, are

annexed hereto and forms an integral part of the Annual Report.

The consolidated financial statements presented by the

Company include the financial information of its subsidiaries.

ExportDuring the current financial year, direct export turnover was

Rs 4032 lac, compared with Rs 2203 lac achieved during the

preceding year.

Industrial relations and personnelThe Company has taken significant steps towards strengthening

human resource and developing the human resource system,

during the year under review. Industrial relations in the Company

continued to remain cordial and peaceful except for some labour

unrest at the Nashik unit, which has since been resolved.

Statement of employees Statement of particulars of employees as required under Section

217(2A) of the Companies Act, 1956, and rules framed

thereunder forms an integral part of this report.

Conservation of energy, technology absorptionand foreign exchange earning and outgoThe statement containing the required particulars under Section

217(1)(e) of the Companies Act, 1956, read with the Companies

(Disclosure of Particulars in the Report of Board of Directors)

Rules, 1988, are annexed hereto and forms an integral part of

this report.

AcknowledgmentsThe Directors commend the continued commitment and

dedication of the employees at all levels. The Directors also wish

to acknowledge efforts of all the other stakeholders for their

valuable sustained support and encouragement. It is this unity of

purpose that breeds success and your Directors look forward to

receiving similar support and encouragement from the larger

HNGIL family in the years ahead.

For and on behalf of the Board

Kolkata C.K. Somany

June 25, 2008 Chairman


Directors’ ReportAnnexure to theInformation pursuant to Section 217(1)(e) read with Companies (Disclosure of Particulars in the Report of Board

of Directors) Rules, 1988 and forming a part of the Directors’ Report for the year ended March 31, 2008.

I. Conservation of energy

Energy conservation measures taken:

1. Two IS machines were upgraded for maintaining the draw at the optimum level of the furnace for better energy efficiency.

2. Use of VFD in return Cullet Conveyor, in Cullet Yard, reject Cullet Conveyor in Cold End, thereby saving electrical energy.

3. Providing chute in sand silos and cullet silos, eliminating feeding conveyors, thereby saving electrical energy and also

eliminating dusting issues.

Form A

Disclosure of particulars with respect to conservation of energy

Particulars Unit Year ended 2007-08 Year ended 2006-07

A. Power and fuel consumption

1. Electricity

a) Purchased unit 000 KWH 1,52,102 69,273

Total amount Rs lac 5,424.10 2,385.49

Average rate/unit Rs 3.57 3.44

b) Own generation

Through diesel/H.P.S oil generation

By generator unit 000 KWH 17,531 55,255

Units per litre of oil 4.31 4.04


c) Own generation (through L.D.O.)

By generator unit 000 KWH 15,490 678

Units per litre of oil 3.73 3.00


d) Own generation (through LNG)

Unit KWH 4,25,44,484 93,86,050

Units per litre of MMBTU of LNG Rs lac 106.64 104.94


2. F-Oil / RFO

Quantity KL 51,809 29,159


Average rate/unit Rs 19,025 15,903


Particulars Unit Year ended 2007-08 Year ended 2006-07

3. L.N.G.

Quantity MMBTU 17,12,334 13,29,208


Average rate/unit Rs 234 222

4. i) L.P.G.

Quantity MT 8,421 3,926



ii) L.D.O.

Quantity KL 7.54 279

Total amount Rs lac 2.29 82.06


iii) H.S.D.

Quantity KL 1,477 113

Total amount Rs lac 425.29 34.82


iv) H.P.S. oil

Quantity KL 20,882 13,060



B. Consumption per unit of production

Electricity KWH 329 351

L.P.G. KG 12.18 10.24

L.D.O. LTR 0.01 0.73

F-Oil/RFO/Equv.Oil LTR 74.94 76.07

LNG MMBTU 2.48 3.47

H.S.D LTR 2.14 0.29

H.P.S. LTR 30.20 34.07


Form B

II. Technology absorption

A. Research and Development (R&D)

Research & Development continues to remain a focal point

in our efforts towards improvement. Energy consumption

and absorption have been principal areas of action. As the

Company does not have any exclusive R&D facilities, it

carries out its developmental activities for process innovation

and product development as a part of its business process.

Recently, the Company has set-up a separate technical wing

to focus on the technology development area with respect to

process and products.

B. Technology absorption, adaptation and innovation

Enumerated below are steps taken by the Company towards

technology absorption, adaptation and innovation:

Specific areas of development

� Setting up of a totally computerised, on-line oxygen

monitoring and control system in one furnace leading to fuel

saving and reduction in NOx levels

� With spiralling price hikes in fuels and soda ash, the only

way to counter cost-increase is by increasing the forming

speeds. Various measures/decisions were taken to achieve

the said objective:

a) Installation of the latest pantographic baffle mechanism

to reduce down-time.

b) Installation of two-way air operated funnel mechanisms to

reduce down-time.

c) Blow-side vacuum installed to improve body finish.

� Light-weighting continues to be our effort line to remain

competitive with other packing alternatives. The Company

has commercialised the NNPB process for achieving this

target

� Installation of a servo shear mechanism has reduced the

consumption of compressed air and minimised the shear

cutting trouble at high speeds to reduce defects like shear

cutting mark, thus improving the quality of the product

� Installed graphodical shear spray bar to reduce the

consumption of RO water

� Vacuum pump has been installed in all the IS machines for

improving air compression at the Rishikesh plant

C. Future plans of action

Your Company continues to work on such implementations

as stated earlier and after successful implementation of one

line at a particular plant, the same system are implemented

at various lines across different plants. The reduction in

energy cost through better technology and process

development remains our focal point.

D. Expenditure on R&D

During the year, expenditure incurred on research and

development are as enumerated below: (Rs in lac)

2007-08

a. Capital –

b. Recurring 7.91

c. Total 7.91

d. Total R&D expenditure as a percentage

of the turnover Negligible

III. Foreign exchange earnings and outgo:Your Company is constantly looking for foreign markets and

at present it has a strategic presence in the overseas markets

of Bangladesh, USA, South Africa, Kenya, Australia and

Hong Kong, to name a few. The foreign exchange earning

and outgo of the Company is as enumerated below.

(Rs in lac)

2007-08 2006-07

(i) Earnings in foreign exchange

(excluding indirect exports of

Rs 3,009.80 lac; previous year

Rs 969.98 lac and exports to

Nepal Rs 169.19 lac; previous

year Rs 114.40 lac) 4,032.46 2,203.03

(ii) Expenditure incurred in foreign

exchange:

1. Raw materials 5,698.52 4,335.33

2. Capital goods 1,939.26 3,231.02

3. Components, spare parts &

repairs 1,497.50 895.57

4. Other expenses 272.24 169.45


Kolkata C.K. Somany



To whom it may concern

The Board of Directors, at its meeting held on October 31, 2005 had appointed Mr Sanjay Somany (Managing Director), Mr Mukul

Somany (Joint Managing Director) as Chief Executive Officers (CEO) of the Company for a period of five years. Further, the Board of

Directors, at its meeting held on June 25, 2008 has appointed Mr R. R. Soni, Senior President as the Chief Financial Officer (CFO) of

the Company.

Pursuant to Clause 49 of the Listing Agreement we, Sanjay Somany, Mukul Somany and R. R. Soni, hereby certify to the Board of

Directors of Hindusthan National Glass & Industries Limited that:

(a) We have reviewed the financial statements and the cash flow statement for the year 2007-08 and that to the best of our knowledge

and belief:

(i) These statements do not contain any materially untrue statements or omit any material fact or contain statements that might

be misleading;

(ii) These statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting

standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions entered into, by the Company during the year 2007-08, which

are fraudulent, illegal or violative of the Company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting and have evaluated the

effectiveness of internal control systems of the Company pertaining to financial reporting. We have disclosed to the auditors and

the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps

they have taken or propose to take to rectify these deficiencies.

(d) We have indicated to the auditors and the Audit Committee:

(i) Significant changes in internal control over financial reporting during the year 2007-08;

(ii) Significant changes in accounting policies during the year 2007-08 and that the same have been disclosed in the notes to the

financial statements; and

(iii) Instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an

employee having a significant role in the Company’s internal control system over financial reporting.

R. R. Soni Mukul Somany Sanjay Somany

Senior President Joint Managing Director Managing Director

Chief Financial Officer (Chief Executive Officer) (Chief Executive Officer)


Particulars of Employees In Terms of Section 217(2A) of

the Companies Act, 1956

Sl. Name Age Qualification Date of & Designation Gross Last Employment

No. (Years) Experience in Appointment (Nature of Remuneration held

years Duties) (Rs) (Designation)

1 Mr Sanjay Somany 49 B. Com. 01.10.2000 Managing Director 1,13,33,918/- Glass Equipment

Dip. In Diesel Engg. (To Manage the (India) Ltd.

28 years affairs of the (Managing

Company on day Director)

to day basis)

2 Mr Mukul Somany 42 B. Com (Hons.) 01.04.1985 Jt. Managing Director 1,10,40,000/- None

21 years (To manage the

affairs of the

Company on day to

day basis)

3 Mr R R Soni* 49 B. Com., FCA 13.08.2007 Sr. President & 17,19,328/- Grasim

26 years Chief Financial Industries Ltd.

Officer Sr. Vice President

* Employed for part of the year and was in receipt of remuneration at the rate of not less than Rs 2,00,000/- per month.

Notes:

1. Remuneration includes Salary, Commission, and contribution to P.F, Gratuity and other facilities.

2. Mr C.K.Somany is related to both Mr Sanjay Somany and Mr Mukul Somany and both of them are also related to each other.

3. All appointments of the above employees are contractual.


Sd/-

Kolkata C. K. Somany


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