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UNICORN ORGANICS LIMITED

UNICORN ORGANICS

FOURTEENTH ANNUAL REPORT 1998

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UNICORN ORGANICS LIMITED

BOARD OF DIRECTORS ShriY.V.Pai, I.A.S. (Retd.,) Chairman (Nominee) Shri Bhanu C. Sanghani, Director Shri Bharat P. Raut, Director Shri D. Seetharamaiah, Director (Nominee) Shri Dwirek K. Raj, Director Shri G.V.S. Ramesh, Director (Nominee) upto 13.07.99 Shri Ramesh V. Shah, Director Shri Sanjay B. Sanghani, Director Shri Vinod A. Sanghani, Director upto 19.2.99 Shri Atul B. Sanghani, Managing Director ASST, COMPANY SECRETARY T.N. Kannan B.Com., A.C.S. AUDITORS Nataraja lyer& Co., Chartered Accountants 1-10-126, Ashoknagar, - 500 020 BANKERS State Bank of Commercial Branch, Secunderabad - 500 003. FINANCIAL INSTITUTIONS The Industrial Credit & Investment Corporation of India Ltd. Industrial Development Bank of India The Industrial Finance Corporation of India Ltd. Andhra Pradesh Industrial Development Corporation Ltd. LISTED WITH The Hyderabad Stock Exchange Ltd. The Stock Exchange, The Stock Exchange, REGISTRARS & SHARE TRANSFER AGENTS Karvy Consultants Limited 21, Avenue 4, Street No. 1, CONTENTS Banjara Hills, Notice of Meeting 2-3 Hyderabad - 500 034 Directors' Report 4-7 / REGISTERED OFFICE Auditors' Report 8-9 ^ 13/1, Rasulpura Balance Sheet 10 -AP.B. No. 2112 ^Secunderabad - 500 003 Profit & Loss Account 11 Schedule to Accounts 12-20 f PLANT Balance Sheet Abstract 21 804, Waddepally Village Warangal District Cash Flow Statement 22 Andhra Pradesh

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UNICORN ORGANICS LIMITED

NOTICE SPECIAL BUSINESS:

Notice is hereby given that the Fourteenth Annual 5) To consider and if thought fit, to pass with or General Meeting of the Members of the Company without modification, the following resolution as will be held on Thursday, the 30th September, 1999 an Ordinary Resolution. at Hotel Deccan Continental, Minister Road, "Resolved that pursuant to Section 198, 309, Secunderabad - 500 003. at 4.00 P.M. to transact Schedule XIII and other applicable provisions of the the following business. Companies Act, 1956, Shri Atul B. Sanghani be and is hereby re-appointed as Managing Director of the ORDINARY BUSINESS: Company for a period of 5 years with effect from 1) To receive, consider and adopt the Directors' 14.08.99 without any remuneration". Report, Audited Accounts of the Company for 6) To consider and if thought fit, to pass with or the year ended 31st December, 1998 and the without modification, the following resolution as Auditors' Report thereon. Special Resolution.

2) To consider the re-appointment of a Director in "Resolved that, pursuant to the provisions of Section place of Shri Ramesh V. Shah who retires by 293 and other applicable provisions of the rotation and being eligible, offers himself for Companies Aqt, 1956, the Board of Directors or any re-appointment. committee duly constituted be and is hereby authorised to sell, dispose off, lease and or shift the 3) To consider the re-appointment of a Director in unit/undertaking and or to do all such other acts that place of Shri Bharat P. Raut who retires by may deem fit by the Board of Directors, subject to rotation and being eligible, offers himself for approvals as may be required". re-appointment. "Further Resolved that the Board of Directors of the 4) To consider and if thought fit, to pass with or Company be and is hereby authorised to initiate without modification, the following resolution as action with various parties for the above purpose and a Special Resolution. to do all such acts and things as may be necessary for giving effect to the above resolution." "Resolved that, pursuant to the provision of Section 224 A and other applicable provisions, if any, of the Registered Office By order of the Board Companies Act, 1956, M/s. Nataraja Iyer and Co., 13/1, Rasulpura, Chartered Accountants, the retiring Auditors of the Secunderabad - 500 003. ATUL B. SANGHANI Date : 30th August, 1999. Managing Director Company, be and are hereby re-appointed as Auditors of the Company to hold office from the NOTES: conclusion of this meeting upto the conclusion of the next Annual General Meeting of the Company on a 1) A member entitled to attend and vote is entitled remuneration to be decided by the Board of Directors to appoint a proxy to attend and vote instead of in consultation with the Auditors". himself and the proxy need not be a member.

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UNICORN ORGAN1CS LIMITED

2) The proxy form duly executed and stamped 14.08.99. In view of cessation of Operations of the should be deposited at the Registered Office of Company, Shri Atul B. Sanghani, did not draw any the Company not later than 48 hours before the remuneration from 1 st April, 99. As per the Provisions time of the Meeting. of the Companis Act, 1956, members approval is required for re-appointment of Managing Director. 3) Explanatory statement pursuant to Section 173 Hence the resolution is placed before for your (2) of the Companies Act, 1956 is annexed approval. herewith. None of the Directors is interested in the above 4) The Register of Members and Share Transfer resolution except Shri Atul B. Sanghani, Bhanu C. Books of the Company were closed from Sanghani and Sanjay B. Sanghani. 30/06/99 to 02/07/99 (both days inclusive). ITEM NO. 6 5) Shareholders desiring any information as regards the accounts are requested to write to The Company has suspended its Operations as there the Company atleast 10 days before the meeting is no viability during the current year. Management so as to enable the Management to keep the is exploring various avenues including shifting of Unit information ready. for which your approval is required as per the provisions of the Companies Act, 1956. Board EXPLANATORY STATEMENT PURSUANT TO recommends the above resolutions for your approval. SECTION 173(2) OFTHE COMPANIES ACT, 1956. None of the Directors is interested in the above ITEM NO. 5 resolution. Shri Atul B. Sanghani was appointed as Managing Director of the Company for a period of 5 years which Registered Office By order of the Board expires on 13th August, 1999.The Board of Directors 13/1, Rasulpura, have considered his re-appointment as Managing Secunderabad - 500 003. ATUL B. SANGHANI Director for a period of another 5 years w.e.f. Date : 30th August, 1999. Managing Director

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UNICORN ORGANICS LIMITED

DIRECTOR'S REPORT However, the erosion in operating profits is mitigated to a significant extent by a differential price increase To obtained by the Company from certain major The Members customers to the tune of Rs. 104 lakhs towards the Your Directors hereby present the 14th Annual Report increase in the cost of starch. of your Company together with the Audited Accounts The Company has once again made a cash loss of for the year ended 31 st December, 1998. Rs. 35.16 lakhs during the year as against 1997, the FINANCIAL RESULTS one year of recovery in which the Company had Rs. in Lakhs made a cash profit of Rs. 16.42 lakhs. The heavy net 1998 1997 loss of Rs. 96.07 lakhs has taken the accumulated Gross Receipts 2276.11 1530.17 losses as on 31 st December, 1998 to Rs. 773 lakhs, Profit before depreciation a level which hardly leaves uneroded net worth of and interest 69.29 122.63 Rs. 284 lakhs. Less: Interest 104.45 106.21 CURRENT YEAR SCENARIO Cash Profit/(Loss) (35.16) 16.42 Less: Depreciation 57.98 57.06 The negative impact of lower volumes as a result of Misc. Expenses written off 2.93 2.93 geographical shift in Sorbitol demand is being felt Net Loss (96.07) (43.57) much more during the current year. Moreover, the low price of Sorbitol is persisting alongwith wide PAST PERFORMANCE fluctuations in me price of the main raw materials i.e. Your Directors are to inform that the Expansion starch. Based on the present prices of Starch and Programme has been completed as envisaged Sorbitol, the Company is pushed into a situation of during the year and could achieve a Production of negative margin.The present scenario is of distress 9070 MT registering an increase of 67% over the sale by Sorbitol manufacturers. With huge excess previous year. In value terms, the Company's capacity of Sorbitol, there are no prospects in the Turnover of Sorbitol has increased by 58%. near term of even a semblance of a parity being The growth in value terms is lower than the growth restored between the price of starch and price of in terms of volume because of a massive 30% fall in Sorbitol. the price of Sorbitol. At the industry level, the huge The Company does not have the financial strength excess of Sorbitol capacity over the Sorbitol demand to absorb the heavy losses caused by low volumes, has led to a fierce price war which is unabating. negative margins and heavy fixed costs. Your Moreover, the Company's plant at warangal has Directors regretfully record that the Company has always been at a freight cost disadvantage for the temporarily suspended further production of Sorbitol demand from the customers based in Western India. from April, 1999. Several alternatives are being The impact of this disadvantage on the Company's explored to rehabilitate the company. fortunes has become much sharper in view of a As informed in the previous Annual General Meeting, geographical shift in the Sorbitol demand during the your Directors have approached the Financial year. A customer unit in South has closed down its Institutions for a One Time Settlement of the operations and all new toothpaste plants consuming Institutional loans. However, the Lead Financial large quantity of Sorbitol have been setup during the Institution ICICI Ltd., failed to obtain the concurrence year in Western India. The higher freight cost burden of IDBI and IFCI Ltd., on the terms of one time and lower than full capacity volumes have severely settlement of the Institutional debts. Recently, in April, hit the performance of the Company. 1999, ICICI has re-called the Loan Amount and The collective impact of all these negative factors on accordingly approached the High Court of Mumbai. the Company's earnings would have been fatal.

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UNICORN ORGANICS LIMITED

The H'ble Court of Mumbai appointed Court AUDITORS Receiver, High Court, Mumbai, to take possession M/s.Nataraja Iyer & Co., Chartered Accountants, of the Properties of the Company. retire at the ensuing Annual General Meeting and DIRECTORS are eligible for reappointment. Shri Bharat P. Raut retires by rotation and being REPLIES TO AUDITOR'S REPORT eligible, offers himself for reappointment. The Auditors have, in their Report, commented on Shri Ramesh V.Shah retires by rotation and being the need for strengthening the internal audit system. eligible, offers himself for reappointment. The Company has during the year initiated suitable The term of appointment of Shri Atul B.Sanghani as measures for strengthening the internal audit system Managing Director expires on 13th August, 1999 and and adequate steps are progressively being taken the Board of Directors have considered and to improvise the same in all the areas of the re-appointed Shri Atul B.Sanghani as Managing Company's Operations. Director and your appoval is sought for as per the As regards Auditors' qualifications regarding non resolution. provision of overdue interest and penal interest on During the year, Shri Vinod A Sanghani, due to his overdue principal claimed by the Institutions other pre occupations, resigned as Director of the amounting to Rs.79.36 lacs, the Directors inform that Company. The Board wishes to place on record its the Company has approached Financial Institutions appreciation of the services rendered by Shri Vinod for waiver. This amount has been treated as being in A Sanghani during his tenure as Director of the the nature of contingent liability since it is expected Company. to be waived by the Financial Institutions once the Institution's Account is settled. Accordingly no During the year, ICICI Ltd., has withdrawn the provisions has been made but referred to in para 83 nomination of Shri G.V.S. Ramesh as Director. to the Notes on Accounts. The Board wishes to place on record its appreciation of the valuable services rendered by Shri G.V.S. Y2K PREPARENDNESS Ramesh during his tenure as Director of the The Company undertakes to comply with Y2K Company. compliance by November 1999 and do not forsee PERSONNEL any risk in operations/process of the Company. The Company would be taking outside agency/inhouse Particulars of Employees pursuant to the Provisions technical help for Y2K compliance. of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules ACKNOWLEDGEMENTS 1975, are nil. Your Directors thank State Bank of India, Financial ENERGY CONSERVATION Institutions, Central and State Government Agencies for their support during the year under review. Your The information required under Section 217(i)(e) of Directors appreciate the continued support extended the Companies Act, 1956 read with the Companies by the workers and the staff members at all levels. (Disclosure of Particulars in the Report of the Board Your Directors also thank the Shareholders who of Directors) Rules, 1988 with respect to these stood with the management in difficult times. matters is appended hereto and forms part of this Report. for and on behalf of the Board DEPOSITS Place : Secunderabad Y.V. PAI The Company has not accepted any deposits from Date : 30th August, 1999 Chairman the Public during the year.

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UNICORN ORGANICS LIMITED

STATEMENT SHOWING THE PARTICULARS OF MEASURES ADOPTED BY THE COMPANY FOR CONSERVATION OF ENERGYJECHNOLOGY ABSORPTION ETC., IN PURSUANCE OFTHE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988. 1. CONSERVATION OF ENERGY: a) ENERGY CONSERVATION MEASURES TAKEN: 1) The system for energy recovery from the evaporator condensate was commissioned and has resulted in substantial saving of fresh water requirement and energy consumption. b) ADDITIONAL INVESTMENTS AND PROPOSALS, IF ANY, BEING IMPLEMENTED FOR REDUCTION OF CONSUMPTION OF ENERGY: The Company has taken action for installation of D.G.Set of 750 KVA for Captive power generation and has plans to recover the energy from the gas for steam generation, with a view to conserve energy. c) IMPACT OF THE MEASURES AT (a) AND (b) ABOVE: With the commissioning of the system for energy recovery from the evaporator condensate, the consumption of electricity per unit of Sorbitol production has come down to 290KWH from 357KWH in 1997, thus resulting in a saving of about 10%. d) TOTAL ENERGY CONSUMPTION AND CONSUMPTION PER UNIT OF PRODUCTION: A. POWER AND FUEL CONSUMPTION: Current Year Previous Year 1998 1997 Electricity a) Purchased Units in KWH 23,91,387 18,27,130 Total amount paid 92,08,076 69,17,632 Rate per Unit Rs.3.85 Rs.3.79 b) Own generation through Diesel Generator Units in KWH 2,37,600 1,12,212 Cost per unit Rs.2.88 Rs.3.29 c) Through steam turbine generator Unit per Itr of fuel/gas N.A. N.A Cost per unit N.A. N.A 2. Coal (Specify Quality and where Used) D"Grade D" Grade Used in Boiler Used in Boiler 3. Furnace oil Quantity (K.ltrs) 1152 KL 105KL Total amount 70,53,405 6,35,642 (part of the year) 4. Others/internal generation (please give details) N.A. N.A B. CONSUMPTION PER UNIT IN PRODUCTION Products 1998 1997 i) Sorbitol Electricity 290 KWH 357 KWH Coal N.A. 567 KGS ii) Mannitol Electricity N.A. N.A. Coal N.A. N.A.

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