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Hanung Toys & Textiles Ltd.

58888:hanun  |  IND:Others - Not Mentioned  |  ISIN code:INE648H01013  |  SECT:General

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You can view full text of the Director's Report for Hanung Toys & Textiles Ltd.
Director Report
Mar2013   Mar 2014 Mar2015
Dear Members,
The Directors have pleasure in presenting the 24th Annual Report of the
Company together with the standalone and consolidated audited
statements of Financial Accounts of the year ended March 31, 2014.

FINANCIAL HIGHLIGHTS:

The following table gives the financial highlights of your company on a
standalone basis according to the Indian Generally Accepted accounting
Principles (GAAP)

FINANCIAL RESULT (STANDALONE)                            (Rs. in Lacs)

Particulars                                        2013-14     2012-13

Net Sale & other Income                              50054      180557

Profit Before Interest, Depreciation & Tax         (36237)       31163

Financial Overheads                                  23062       16618

Depreciation                                          4480        6556

Net Profit/(Loss) Before Tax                       (63779)        7989

Provision for Tax

* Current                                                -        1685

* Deferred                                         (11963)        (84)

Tax for earlier years                               (2237)       (216)

Net Profit/(Loss) after Tax                        (49578)        6604

Appropriations

Proposed Dividends                                     Nil         532

Provision for Tax for Dividends                        Nil          86

Surplus carried forwards to Balance Sheet          (49578)        5986

Transfer to General Reserve                                       3500

Net Surplus carried forwards to Balance Sheet            -        2486

FINANCIAL RESULTS (Consolidated)

The following table gives the financial highlights of your company on a
consolidated basis according to the Indian Generally Accepted
Accounting Principles (GAAP)

                                                         (Rs. in Lacs)

Particulars                                       2013-14      2012-13

Net Sale & other Income                             50080       181480

Profit Before Interest, Depreciation & Tax        (35326)        28826

Financial Overheads                                 23063        16619

Depreciation                                         4481         6558

Net Profit Before Tax                             (62870)         5649

Provision for Tax

* Current                                               -         1685

* Deferred                                        (11963)         (84)

Tax for earlier years                              (2237)        (217)

Net Profit after tax before Minority interest     (48670)         4265

Minority interest in income/(loss)                      4            4

Net Profit after Tax & Minority Interest          (48666)         4269

Appropriations

Proposed Dividends                                      -          532

Provision for Tax for dividends                         -           86

Surplus carried forwards to Balance Sheet                         3651

Transfer to General Reserve                                       3500

Net Surplus carried forwards to Balance Sheet                      151

RESULTS OF THE OPERATION

The Indian Toys and Textiles Industry witnessed challenging times as a
results of low growth led by issues such as high fiscal deficit, high
inflation and worsening current account balance. The slowdown in the
global growth aggravated the sluggishness in the economy. Apart from
the un-favorable demand supply scenario the industry has been also
reeling under the pressure of rising input costs. The prices of key raw
materials have soared.

The gross sales and other income for the financial year under review
were Rs. 50054 lacs as against Rs. 180557 lacs for the previous
financial year. During the Year under review the Company has incurred
Losses after Tax of Rs. 49578 as against the Profit of Rs. 6604 lacs
for the previous year.

The Profit after Tax decreased due to increase in Finance Cost of the
Company during the year. The Company expects further to improve its
working in next year after implementation of Corporate Debt Restructure
mechanism.

DIVIDENDS

The Board of Directors has decided not to recommend any dividend due to
non availability by of profit during the year.

CORPORATE DEBT RESTRUCTURING

The Company had approached it''s lead banker and lender, i.e., Punjab
National Bank for restructuring of its debt under CDR mechanism, and
accordingly, the lead banker referred the matter to CDR Empowered Group
on 31st July, 2013. The case of the Company was admitted under CDR on
26th September, 2013, and the CDR scheme was discussed in CDR EG
meeting held on 21.04.2014, and was approved in the meeting held on
23rd May, 2014 and the same was informed to the Company. The Company
awaits confirmatory communication of the aforesaid approval. The
Company continues to reflect the charges executed in favour of its
lenders as were prior to restructuring and has accounted the financial
effect of debt restructuring in its books of account; the variances in
balances of lenders, if any, as are known on execution of restructuring
documentation will be accounted at the time of execution of
modification of charges.

The main feature of CDR mechanism is as below:

1. Cut off date is 31st march 2013.

2. Moratorium period will be 2 years and repayment is 8 years.

3. Rate of interest on term loan is reduced to 11%.

4. Rate of interest on working capital and FITL (Funded interest Term
Loan) is reduced to 10.50%.

5. Waiver of all liquidity damages and penal interest and penal charges
etc.

6. Promoter''s contribution Rs.8368 Lacs to be brought in within one
year.

7. Conversion of interest for initial 24 month into FITL (Funded
interest Term Loan) with repayment period of 6 years.

BUSINESS

The Company''s main operations consist of Manufacturing Toys and Home
Furnishings.

SUBSIDIARIES

By a general circular (No. 2/2011 dated February 8, 2011), the Ministry
of Corporate Affairs, Government of India, under Section 212(8) of the
Companies Act,1956, has permitted companies not to attach copies of the
balance sheets and profit & loss Accounts, Directors'' Reports,
Auditors'' Reports, and other documents of all their subsidiaries, to
the Accounts of the Company. The company has acted accordingly.

However, Annual accounts of the subsidiary companies and the related
detailed information are available at any time to shareholder of the
parent company and subsidiary companies and to statutory authorities.
On request, these documents will be made available for inspection at
the company''s corporate office.

The Hanung (Shanghai) Limited and Cody Direct Corp, are subsidiary of
the companies within meaning of Section 4 of Companies Act 1956.

MANAGEMENT DISCUSSION AND ANALYSIS

A Management Discussion and Analysis Report, highlighting the
Performance and Prospects of the Company''s energy and environment
segments including details if subsidiaries catering to the respective
business, is attached.

CORPORATE GOVERNANCE

Report on Corporate Governance as required under Clause-49 of the
Listing Agreement with the Stock Exchanges, forms part of the Annual
Report. A Certificate from the Auditors of the Company M/s Rohtas &
Hans, Chartered Accountants, confirming compliance with the conditions
of Corporate Governance as stipulated under the aforesaid Clause-49,
forms part to the Annual Report.

LISTING OF STOCK EXCHANGES

The company''s equity shares are listed on two stock exchanges- National
Stock Exchange of India Ltd (NSE), and Bombay Stock Exchange Ltd (BSE).

PUBLIC DEPOSITS

The Company had no unpaid / unclaimed deposit(s) as on March 31, 2013.
It has not accepted any fixed deposits during the year.

EMPLOYEE STRENGTH

The total numbers of permanents employees on the rolls of the company
was 1350 as on March 31, 2014.

PARTICULARS UNDER SECTION 217 OF THE COMPANIES ACT, 1956

A statement of the particulars under Section 217(1) of the Companies
Act, 1956 (the Act), read with the Companies (Disclosure of Particulars
in the Report of the Board of Directors) Rules, 1988, is annexes and
forms part of this Report.

DIRECTORS

There are Four Directors on the Board of Directors of the Company.

During the Year Mr. Sita Ram Goel and Col. S.K. Jain has resigned from
the Board. The Board appreciated the services provided by Mr. Sita Ram
Goel and Col. S.K. Jain.

Prior to coming into force of section 149 of the Companies Act 2013,
two of the Company''s Directors, Mr. R.K. Pandey and Mr. C.S. Batra were
categorized as independent directors in terms of the definition
contained in the equity listing agreement.

The Provisions of Section 149(4) of the Companies Act, 2013 pertaining
to the appointment of independent directors have been notified by the
Ministry of Corporate affairs with effect from April 1,2014. Pursuant
to the coming into force of Section 149 of the Companies Act 2013 from
1st April 2014, The Company has reassessed the status of its Directors
with a view to determining their qualifying for classification as
independent Directors in terms of Section 149(6) of the Companies Act
2013. Accordingly, R.K. Pandey and Mr. C.S. Batra fulfil the criteria
laid out in section 149(6) of the Companies Act 2013 in this regard.

Section 149(10) of the Companies Act 2013 restricts the tenure of
independent Director to two terms of up to ten years with a single term
not exceeding five years, which shall be effective from April 1st 2014.
The revised clause 49 of the Listing Agreement also contain the same
provisions.

Mr. R.K. Pandey, and Mr. C.S. Batra, are liable to retire by rotation
at the ensuring Annual General Meeting and being eligible, offer
themselves for appointment as independent Directors pursuant to the
Provisions of the Companies Act 2013 to hold the office for a period
upto March 2019.

Additional Information and brief profile, as stipulated under the
equity listing agreement for each of the above directors seeking
re-appointment/appointment is annexed to the notice of the AGM.

Further, the business items relating to re-appointment/appointment of
above directors have been included in the Notice of the AGM.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Board of Directors of the Company confirms that:

1) The Director have 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 for the state of affairs of
the Company as at March 31st 2014 and of the profit of the Company for
the year ended on that date;

2) That the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other
irregularities;

3) The annual accounts for the year ended March 31, 2014 have been
prepared on a ''going concern'' basis. and

4) Proper systems are in place to ensure compliance of all laws
applicable to the Company

STATUTORY AUDITOR

In term of office of M/s Rohtas & Hans, as statutory auditors of the
Company will expire with the conclusion of forthcoming annual general
meeting of the Company. M/s Rohtas & Hans, has been statutory auditors
since long of Company.

The Board of Directors of the Company have subject to approval of the
members decided to make change in the statutory auditors. This change
is in order to comply with the condition of as mentioned in CDR Package
as approved by CDR Cell. A special notice from Hanung Furnishing pvt
Ltd. has been received proposing a resolution in the forthcoming annual
general meeting for appointment of M/s AMRG & Associates, Auditor of
the Company in place of M/s Rohtas & Hans being the retiring auditor.

A resolution proposing appointment of M/s AMRG & Associates and Saxena,
as the statutory auditor of the company pursuant to section 139 of the
companies act 2013 forms part of the notice.

M/s Rohtas & Hans, over many year have successfully met the challenge
that the size and scale of the company''s operations pose for auditor
and have maintained highest level of governance, rigour and quality in
their audit. The Board of Directors on record its appreciation for the
services rendered by M/s Rohtas & Hans as statutory auditor of the
Company

AUDITORS QUALIFICATION SYSTEM ON ACCOUNTS

A. Observations in the Auditors'' Report are dealt within Notes to
Accounts at appropriate places and being self- explanatory, need no
further explanation.

B. The Auditors in their report to the members, have given qualified
opinion and response of your directors with respect to it is as follow:

i. Company has a subsidiary Hanung (Shanghai) Ltd. in China. Since the
purpose of opening a company in China is not fulfilled and has incurred
continuous loss since its inception, the board of director has decided
to windup the company so that further loss to be minimize. The process
of winding up of the company has been initiated and it will take some
time to complete the formalities. The effect of investment made in
Hanung (Shanghai) Ltd. has been accounted after the completing the
winding up process.

ii. Deferred tax assets of Rs. 10522 lacs are recognized on the
principle of going concern and based on the future projection of
taxable income as per TEV study done by Dun & Bradstreet Information
Services India Pvt. Ltd. Since it is only one quarter passed from the
date of closing of financial year, it''s too early to establish any
negative performance of the company. The Directors are confident of
the future business performance and growth of the company. The company
has filed its income tax return for the assessment year 2012-13 on 31st
January 2014. The company had also filed a petition with Hon''able
Income tax Settlement Commission on 19.02.2014 in respect of income for
the years ended March 31, 2011 to March 31, 2013, which was admitted
vide its order dated 29.04.2014. The Company had discharged due and
admitted liability of income tax based on favourable response from the
Hon''ble Settlement Commission and further liability expected is
dependent on outcome of disposal of the case by the Hon''ble Settlement
Commission.

C. The Auditors in their annexure to audit report, have point out some
opinion and response of your directors with respect to it is as follow:

i. Point no. 2 (c) of annexure to the audit report regarding slow
moving inventory of Rs. 27269.26 lacs due to cancellation of export
orders. The directors of the company are trying hard to realize the
said inventory and are in the opinion to fully realizable over a period
of 2-3 years.

ii. Point no. 9 of annexure to the audit report regarding Statutory
dues; the company in general has been regular in remitting the
statutory dues in time. The management has taken steps to avoid delays
and as a matter of internal control also, statutory dues are being
monitored for timely remittances. Since the company is facing
financial crisis, all the pending statutory dues will be paid during
the current financial year.

CODE OF CONDUCT COMPLIANCE

Pursuant to clause 49 of the Listing agreement entered with the Bombay
Stock Exchange Limited and the National Stock Exchange of India
Limited, the declaration signed by the Managing Director affirming
compliance with the code of Conduct by the Director''s and senior
management personnel, for the financial year 2013-2014 is annexed and
forms part of the Directors and Corporate Governance Report.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

By the terms of 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, the Particulars of conservation of energy,
technology absorption, foreign exchange earnings and outgo are set out
as an Annexure to this Report.

CAUTIONARY STATEMENT

Statements made in the Report, including those stated under the caption
"Management Discussion and Analysis" describing the Company''s plans,
projections and explanations may constitute "forwards looking
statement" within the meaning of applicable laws and regulations.
Actual results may differ materially from those either expressed or
implied.

REGISTRAR AND SHARE TRANSFER AGENT

M/s Karvy Computershare Private Limited, Hyderabad, is the Registrar
and Share Transfer Agent of the company. Details of the depository
system and listing shares are given in a part of the "Additional
Shareholders Information", which forms a part of the Corporate
Governance Report and is attached with the Annual Accounts.

COST AUDITOR

In terms of the provisions of The Companies Act, The Board of Directors
of your company have on the recommendation of the Audit Committee,
Appointed M/s Chandra Sharma & Co. Vaishali, Ghaziabad as Cost Auditor
to conduct the cost audit of your company for the financial year ending
31st March 2015 subject to the approval of the Central Government.

The Audit Committee has received a certificate from the Cost Auditor
certifying their independence and arm''s length relationship with the
company.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their sincere thanks to
the Company''s clients, vendors, investors, and bankers for their
continued support to the Company during the year. The Directors wish to
place on record their appreciation of the contributions made by
employees at all levels.

We thank the Government of India, State Government and other Government
agencies for their support and look forward to their continued support
in future.

                                                 By order of the Board
                                  For Hanung Toys and Textiles Limited

Place : Noida                                       Ashok Kumar Bansal
Date :30th September, 2014                       Chairman-cum-Managing
                                                              Director

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