Annual Report - Century Enka - 2009-2010

CENTURY ENKA LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Shareholders

We have great pleasure in presenting the 44th Annual Report and Audited
Statements of Accounts of the Company for the year ended 31st March, 2010.
The performance has improved significantly. The revival of demand in Nylon
Tyre Cord Fabrics (NTCF) and the efforts made by your Company in improving
efficiencies in all areas of operations including working capital
management resulting in lower interest cost and foreign currency risk
management, have contributed greatly towards the improved performance. We
trust you will be quite satisfied with the performance of your Company.



FINANCIAL RESULTS

Rs./Crores

This Year Previous Year

Sales/Income from Operations
(Less Excise Duty) 1,230.87 1,162.33

Profit before Depreciation,
Interest, Exceptional Items
and Tax 224.37 109.00

Add/(Less):

Depreciation (61.06) (59.10)

Interest (Net) (7.41) (23.82)

Taxation (Net) (52.38) (5.96)

Voluntary Retirement
compensation (3.36) (3.50)

Net Profit 100.16 16.62

Add: Balance brought forward
from previous year 116.29 113.10

Profit available for
appropriation 216.45 129.72

Less: Dividend 13.11 10.03

Tax on Dividend 2.18 1.70

General Reserve 15.00 1.70

Balance carried forward to
next year 186.16 116.29

DIVIDEND

We recommend a dividend on 2,18,50,589 fully paid equity shares of Rs.10/-
each (including 8,00,000 equity shares allotted on 27th January, 2010 and
10,00,000 equity shares allotted on 3rd May, 2010 on conversion of equal
number of preferential warrants) at the rate of Rs. 6/- (Rupees six) per
equity share for the year ended 31st March, 2010 (previous year Rs. 5/-
(Rupees five) per equity share on 2,00,50,589 equity shares.

COURSE OF BUSINESS AND OUTLOOK

As required under Corporate Governance, the Management's Discussion and
Analysis Report which is forming a part of this report is a reflection of
the current state of business. It also deals with opportunities and threats
faced by your Company and the future outlook.

The main raw material of the Company are crude oil derivatives. The
fluctuation in their prices are not in line with the movement in crude oil
prices. The volatility and high raw material prices may affect margins of
the Company.

The mid-term outlook is fairly good and the long term outlook remains
positive as the Indian economy is growing steadily.

ISSUE OF PREFERENTIAL WARRANTS TO PROMOTERS

Pursuant to Special Resolution passed by the shareholders by Postal Ballot
and the result of which was announced on 9th December, 2009, your Company
has allotted 18,00,000 preferential warrants to promoters of the Company
viz. Century Textiles and Industries Limited and TGS Investment and Trade
Pvt. Ltd. on 17th December, 2009 at a price of Rs. 189.16 per warrant in
compliance with the provisions of Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR
Regulations) entitling the holder one equity share of Rs. 10/each face
value on conversion of each preferential warrant. Your Company received
Rs.8.51 crores from the promoters on 17th December, 2009 towards 25%
upfront of warrant amount on allotment of warrants. The promoters have
exercised their rights by converting 8,00,000 preferential warrants on 27th
January, 2010 and 10,00,000 preferential warrants on 3rd May, 2010 into
equal number of equity shares and paid Rs. 11.35 crores and Rs. 14.19
crores being the balance 75% of the warrant amount on the respective
conversion dates.

EXPANSION AND MODERNISATION

Your Company has undertaken expansion of Nylon Tyre Cord Fabric (NTCF)
capacity by 7,500 tons per annum including NTCF dipping at Bharuch and
Nylon Polymerisation capacity of 21,000 tons per annum at Mahad. In
addition to this it has decided to modernise some of its old machineries at
Pune and Mahad and also to add some new equipment to enhance value chain of
its existing products. The orders for critical equipment for NTCF expansion
have already been placed. Expansion of NTCF and dipping facilities are
likely to be completed in the fourth quarter of the financial year 2010-11.

Your Company has also decided to install 6.6 MW gas based power generating
set at Pune and 3.3 MW LNG based power generating set at Bharuch. The power
generating sets are expected to be commissioned in the fourth quarter of
the financial year 2010-11.

The total capital expenditure on above will involve about Rs.350 crores
(Rupees three hundred and fifty crores).

HUMAN RESOURCE DEVELOPMENT AND ENVIRONMENT

The report on Management's Discussion and Analysis includes its
observations on human relations, approach to human resource development,
safety, health and environment.

Your Company in pursuit of human development, continuously impart training
to its employees culminating in functional as well as behavioural
competency and create an healthy environment for work place and
performance.

The Directors place on record their appreciation for workmen, staff and
management in bringing improvement at all levels in factories and offices
of the Company and effective response to changing environment.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS
AND OUTGO

Energy conservation measures, progress made in technology absorption and
foreign exchange earnings and outgo, as required by the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
are set out in a separate statement attached hereto and forming part of the
report.

CORPORATE GOVERNANCE

Your Company reaffirm its commitment to Corporate Governance and is fully
compliant with the conditions of Corporate Governance stipulated in Clause
49 of the Listing Agreement with Stock Exchanges. A separate section on
compliance with the conditions of Corporate Governance and a Certificate
from the firm of practising Company Secretaries dated 3rd May, 2010 in this
regard is annexed hereto and forms a part of the Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956
and on the basis of explanation and compliance certificate given by the
executives of the Company, and subject to disclosures in the Annual
Accounts and also on the basis of discussions with the Statutory Auditors
of the Company from time to time, we state as under:

i) That in the preparation of the annual accounts, the applicable
accounting standards had been followed;

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 and of the profit of the Company
for that period;

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

iv) That the directors had prepared the annual accounts on a going concern
basis.

DIRECTORS

Your Directors inform with grief the sad demise of Mr. V. Dixit on 14th
October, 2009 who had been associated with your Company as Director since
26th June, 1990. He was very valuable provider of matured advice. Your
Directors place on record their appreciation for the valuable services
rendered by Mr. V. Dixit.

Mr. S.K. Jain has been appointed as a Director of the Company w.e.f. 11th
November, 2009 to fill up the casual vacancy caused by the death of Mr. V.
Dixit. Mr. S.K. Jain will hold office upto the date of the ensuing AGM in
which Mr. V. Dixit would have retired by rotation had he not died.

Notice has been received under Section 257 of the Companies Act, 1956 from
a Member of the Company signifying Mr. S.K. Jain, who has filled the casual
vacancy caused by the death of Mr. V. Dixit as a candidate for the office
of the Director.

Mr. G.M. Singhvi, Whole-time Director of your Company whose tenure of 3
years comes to an end on 15th May, 2010 has been reappointed by the Board
of Directors in its Meeting on 3rd May, 2010 for a period of 3 years,
commencing from 16th May, 2010 subject to approval of the shareholders of
the Company at the forthcoming Annual General Meeting.

In accordance with Articles of Association of the Company, Mr. B.K. Birla,
Director of the Company will retire by rotation and being eligible, offer
himself for reappointment.

AUDITORS

Messrs. Price Waterhouse, the Auditors of the Company will retire from the
office of the Auditors and being eligible offer themselves for
reappointment. Their remuneration for the current year is to be fixed by
you.

COST AUDITORS

The Cost Accounts Records maintained by your Company for both the products
- Polyester and Nylon are subject to yearly audit by qualified Cost
Auditors. Your Company has appointed M/s. N.I. Mehta & Co., a firm of Cost
Auditors for conducting the audit of such records for the financial year
2009-10.

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Section 217 (2A) of the Companies Act, 1956
read with the Companies (Particulars of Employees) Rules, 1975 as amended,
the names and other particulars of employees are set out in the Annexure to
the Directors' Report. However, as per the provisions of Section
219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid
information is being sent to all members of the Company. Any member, who is
interested in obtaining such particulars about employees may write to the
Company Secretary at Registered Office of the Company.

For and on behalf of the Board of Directors

R.A. Shah }
G.M. Singhvi } Directors

Place: Mumbai
Date : May 03, 2010

ANNEXURE TO THE DIRECTORS' REPORT

(Additional information given in terms of Notification 1029 of 31.12.1988
issued by the Department of Company affairs)

(A) CONSERVATION OF ENERGY

The Company continuously pursue the process of energy conservation through
improved operational and maintenance practices

a) Energy Conservation measures taken

1. Optimisation in compressed air consumption and pressure in spinning /
winding and draw warper machines.

2. Recycling of tertiary treated water in place of raw water.

3. Partitions in various areas to reduce air conditioning load.

4. Optimisation of air handling units and ducting to reduce air flow and
cooling load.

5. Optimisation of vacuum system in spinning/winding machines.

6. Bypassing of feed roll drive on draw winders and texturising machines.

7. Stoppage of one cooling tower pump by optimising cooling water
consumption.

8. New centrifugal compressor in place of existing reciprocating
compressors.

9. Replacement of rewound motors by energy efficient motors.

b) Additional Investment and Proposals, if any, being implemented for
conservation of Energy.

1. Optimisation of compressors for low pressure applications.

2. Replacement of existing chillers with energy efficient chillers

3. Installation of vapor absorption chillerto recover process waste heat.

4. Use of vacuum pump in place of steam ejector in Dryer.

c) Impact of Measures at (a) and (b) above for reduction of energy
consumption and on the cost of production of goods

The above measures have resulted in reduction in consumption of electricity
and fuel oils with consequent reduction in the cost of production.

d) Total energy consumption and energy consumption per unit of production
as per prescribed Form -A given hereafter.

(B) TECHNOLOGY ABSORPTION

Efforts made in technology absorption as per Form - B

a) Research & Development (R & D)

(I) Specific areas in which R & D is carried out by the company

1. Productivity enhancement of spinning machines and draw winder machines.

2. Development of new products.

3. Further development in indigenous spin finish to replace imported spin
finish.

4. Installation of pearl mill to recycle residual titanium dioxide

5. Modifications in spin pack assembly to improve its performance

6. Modification in yarn path to improve spinning machine performance

7. Modifications in packing to improve quality.

8. Development of fully drawn yarn with alternate rout on POY Nylon
Spinning machines

9. Modification of creel and tangling on draw warper to accommodate more
ends.

10. Further development and indigenisation of spares through local vendors

11. Installation of creep speed logic on spinning machines to reduce waste.

12. Modifications in filters to replace old candle filter with disposable
filter.

(II) Benefits derived as a result of the above R&D

1. Reduction in operating and maintenance cost.

2. Improvement in quality, customer satisfaction and enlargement of market
base.

3. Better quality resulting greater customer satisfaction.

(III) Future Plan of Action

1. Productivity enhancement of spinning machines and draw winder machines.

2. Development of new products.

(IV) Expenditure on R & D Rs. Crores

2009-10 2008-09

1. Capital (See Note Below)

2. Recurring 1.05 1.37

3. Total 1.05 1.37

4. Total R & D expenditure
as a Percentage of total
turnover 0.09% 0.11

Note: The Company has spent Rs.0.48 Crores (2009-10) & Rs. 1.94 Crores
(2008-09) and shown as normal capital expenditure, although it is also used
for R & D activities.

b) Technology Absorption, Adaptation & Innovation

(i) Efforts in brief, made towards technology absorption, adaptation &
innovation

1. Adoption of technology for usage of bagasse briquette in oil fired heat
transfer media.

2. Retrofitting to existing spinning winding and draw winder machines for
productivity increase.

(ii) Benefits derived as a result of above efforts

1. Flexibility of fuel use in heat transfer media.

2. Improvement in capacity utilisation.

(iii) Future Plan of Action

1. Adoption of technology for air texturising process.

(iv) Information regarding imported technology

[Imported during the last 5 years (from the beginning of the financial
year)]

1. Technology Imported : NIL

2. Year of Import : Not applicable

3. Has the technology
been fully absorbed : Not applicable

(C) FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to exports, initiatives taken to increase exports,
development of new export markets for products and services and export
plans:

The Company continuously explore export market for its various products,
but have not been able to identify lucrative market so far. The realization
in the domestic market is much more rewarding. However, in the process, the
Company has supplied some of its products to 100% E.O.U units, which are
considered as deemed exports.

2. Total foreign exchange used and earned is contained in Schedule I item
17(c),(d),(e) and (f) in notes on Accounts.

(PURSUANT TO SECTION 217 (1) (e) OF THE COMPANIES ACT, 1956)

FORM - A (SEE RULE 2)

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

Current Previous
Year Year

A. POWER AND FUEL CONSUMPTION 2009-10 2008-09

1. ELECTRICITY

(a) Purchased

Units (KWH) 61934866 72034450

Total Amount (Rs. in Lacs) 3488.85 3560.56

Rate per Unit (Rs.) 5.63 4.94

(b) Own Generation

Through diesel generators

Units (KWH) 136967127 116162887

Units per Litre of fuel oil 4.51 4.35

Cost per unit (Rs.) 4.99 5.28

(c) F.O./L.D.O.
(For Own Generation)

Quantity (Kgs) 30400041 26698994

Total Amount (Rs. in Lacs) 6830.73 6137.15

Rate/Unit (Rs.) 22.47 22.99

2. FURNACE OIL/Solid Biomass

Briquettes

(a) F.O./L.D.O.
(For Steam Generation)

Quantity (Kgs) 5292673 6700106

Total Amount (Rs. in Lacs) 1174.69 1645.10

Rate/Unit (Rs.) 22.19 24.55

(b) Solid Biomass Briquettes
(for Steam Gen.)

Quantity (Kgs) 1080310 2598162

Total Amount (Rs. in Lacs) 41.08 121.43

Rate/Unit (Rs.) 3.80 4.67

STEAM (COST PER TON)

Units (TON) 142166 161794

Units per Ton of fuel 21.72 24.15

Cost per unit (Rs.) 855 1092

3. STEAM - Purchsed

Units (TON) 37401 -

Cost per unit (Rs.) 1236 -

4. NITROGEN

Units (NM 3) 3302583 3135169

Total Amount (Rs. in Lacs) 78.26 78.57

Cost per unit (Rs.) 2.37 2.51

B. ENERGY CONSUMPTION PER UNIT Current Previous
OF PRODUCTION Year Year
2009-10 2008-09

PRODUCTS (With Details) UNIT

1. ELECTRICITY (Kwh/Ton of Product)

(a) Synthetic Textile Yarns 1701 1580

(b) Industrial Yarn/Fabric 3444 3684

(c) Polyester Chips 127 114

2. Furnace Oil
(Kgs/Tons of Product - for
Steam Generation)

(a) Synthetic Textile Yarns 45 59

(b) Industrial Yarn/Fabric 99 122

(c) Polyester Chips 52 65

3. Solid Biomass Briquettes
(Kgs/Ton of Product - for Steam
Generation)

(a) Synthetic Textile Yarns 6 14

(b) Industrial Yarn / Fabric 25 68

(c) Polyester Chips 7 14

4. Steam - Purchased

(Steam Tons/Ton of Product)

(a) Synthetic Textile Yarns 0.3 -

(b) Industrial Yarn / Fabric 0.8 -

(c) Polyester Chips 0.1 -

5. NITROGEN (NM3/Ton of Product)

(a) Synthetic Textile Yarns 34 31

(b) Industrial Yarn/Fabric 31 40

(c) Polyester Chips 6 6

Notes:

1. Furnace Oil consumption per Ton of Production is not comparable with
previous year as company in the current year started purchase of steam from
third party instead of using furnace oil for generation of steam.

2. Previous years figures have been regrouped and rearranged, wherever
necessary.

MANAGEMENT DISCUSSION AND ANALYSIS

1. OVERALL REVIEW

At the beginning of the year, the Management sincerely believed that the
worst was over and it should be able to give a better performance during
the year. Today, we are happy to report that, with the revival of the
Indian economy and the efforts made by your Company, the performance has
improved significantly. The stimulus package declared by the Government of
India helped in stimulating the demand in the first quarter of 2009-10.
Commodity prices and specifically petroleum derivative prices fell sharply
and so did the raw material prices. The revival of automobile and tyre
industry to which the fortune of our business is linked, saw a robust
revival in demand for Nylon Tyre Cord Fabric. Proactive treasury and
working capital management helped the Company in reducing foreign currency
risk and interest cost. In addition to this, there was a general
improvement in plant efficiency, particularly in the areas of raw material
usuage and energy conservation.

2. INDUSTRY STRUCTURE & DEVELOPMENT

In a growing economy with huge domestic market, the outlook for development
of almost all industries is good. The projected and sustainable higher
growth rate of the Indian economy in the coming years augers well for both
synthetic textile yarn and tyre cord fabric. Higher growth rate of the
economy stimulates and increases the purchasing power of common man for
textiles benefiting the synthetic yarn business. Similarly, it also
increases the demand for commercial vehicle tyres wherein Nylon Tyre Cord
Fabric is used as reinforcement material.

The sharp increasing trend in raw material and energy cost shown in Exhibit
1,2,3 & 4 below is however a cause of concern. Industry may not be able to
entirely pass on the steep increase in raw material and furnace oil prices
to the consumers and this may adversely impact margins.

3. THREATS

Raw material prices have out paced the rise in crude oil prices, more on
account of supply side shortfall. In July 2008 just before the global
recession took effect, crude oil was at all time high at $140 per barrel
and raw material prices were also at peak - PTA at $1165 per ton, MEG at
$1065 per ton and Caprolactum at $2590 per ton. In March 2010, crude oil
was trading at $83 per barrel, however, raw material were at a high of -
PTA at $980 per ton, MEG at $930 per ton and Caprolactum at $2520 per ton.
Caprolactum price trend is highly disturbing.

4. OPPORTUNITIES

Indian economy is on a higher growth trajectory with low per capita
consumption base, a large domestic consumer base, a healthy ratio of young
population, emerging middle-class and rising income levels etc. These are
signs of good growth opportunities and augur well for the industry.

5. COMPANY OUTLOOK

The prices of raw material, fuel oil and other commodities increased
significantly in the last quarter of 2009-10 and the upward trend is still
continuing (Refer Exhibit 1 to Exhibit 4 herein above). Although the main
raw material of the Company are crude oil derivatives, the movement in
price is not in line with the movement in crude oil prices. Volatility and
high raw material prices may affect margins of the Company in the current
year.

To ensure that it may not affect the future outlook of the Company in a
significant way, it has undertaken a capital expenditure programme to
increase Nylon Tyre Cord Fabric capacity by 7500 tons / annum including
Dipping at Bharuch plant, installation of Nylon Polymerisation capacity of
21000 tons / annum at Mahad and raising the production of Nylon Textile
Yarn at a level ranging between 19000 tons / annum to 23000 tons / annum,
converting part of the polyester chips capacity into Fully Drawn Yarn and
add value to Polyester POY production by increasing draw warping capacity.
All these projects will be completed within 18 months in a phased manner.

The mid-term outlook is fairly good and long-term outlook remains positive
as the Indian economy is growing steadily at good growth rate.

6. RISK MANAGEMENT

The risk management policy is periodically examined and updated. The focus
shifts from one area to another area depending upon the prevailing
situation. During the year under review, highest importance was given to
the management of foreign currency exchange rate fluctuation risk. The
Company is now following a policy of hedging foreign currency exposure at
the earliest within the permissible RBI guidelines.

In the area of energy cost management, the Company is running the risk of
consuming high cost furnace oil.

Special attention is being given to energy conservation and use of green
bio-mass fuels i.e. baggas, briquettes etc. in furnaces and installing new
generating capacity where natural gas will be used in place of furnace oil.

Installation of Nylon Tyre Cord Fabric dipping capacity, which would
materialize towards the end of 2010-11, will reduce market led business
risks.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Professional firms of Chartered Accountants consistently review the
adequacy of the control systems and suggest improvements for the orderly
conduct of business, overall adherence to management policies and
applicable laws & regulations. They have expressed their satisfaction about
the adequacy of the control systems and the manner in which your Company is
updating / upgrading its systems and procedures. The control systems in
technical and other non financial areas have been fairly aligned with
Management Information Systems (MIS) to make MIS more efficient and result
oriented.

The Audit Committee of Directors, in its periodical meetings, reviews the
adequacy and effectiveness of internal control systems and procedures and
suggests areas of improvements, as appropriate.

In order to improve easy accessibility to old records, the Company has
undertaken an exercise to develop new control system in the area of fixed
assets record keeping and verification thereof. The Company is quite
satisfied by the progress made in this respect.

8. INFORMATION TECHNOLOGY

The Company always endeavours to use the latest and make appropriate
advances in the area of information technology to maximise advantages for
its business needs. Continuing this policy, the Company has upgraded its
hardware and software during the year, to meet latest technology
requirements.

Hardware upgradation has improved the response time to users and has
strengthened failover safety measures.

Software upgradation has enabled the Company to effectively harness modern
networking technology. This has helped the Company to improve its business
processes efficiency and allow users to respond to business needs on real
time basis.

The Company has also set up remote Disaster Recovery Site to manage
business operations in case of major natural calamities.

System access controls are being augmented to minimise risk of unauthorised
intrusion in the business systems.

The Company is in the process of consolidating and integrating its
Information Technology Systems on a single instance database, giving
selected users unified view to entire business processes like logistics,
marketing and manufacturing.

9. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE

Highlights (Rs. Crores)

2009-10 2008-09 Change

Sale (after Excise Duty) 1327.03 1162.33 14%

Profit before depreciation,
Interest, Exchange Fluctuation,
Exceptional Items and Tax 229.98 131.71 75%

Depreciation (61.06) (59.10) 3%

Interest Expenditure (10.84) (25.66) -69%

Interest Income 3.43 1.84 86%

Impact of Foreign Currency rate
Fluctuation (Net) (5.61) (22.71) -75%

Exceptional Item- VRS (3.36) (3.50) -4%

Taxation (Net) (52.38) (5.96) 779%

Net Profit 100.16 16.62 503%

Earning Per Share (in Rs) 49.61 8.29 498%

Cash Earning Per Share (in Rs) 79.85 37.77 111%

Sales: In the previous financial year 2008-09 sales to tyre companies were
lower during the second half of the year due to recession in the Automobile
Industry and general downturn in the Indian economy. During the year under
review, there was a robust revival in the demand from tyre companies.
Consequently, sales are higher.

Profit before depreciation, interest, exchange fluctuation, exceptional
items and tax: Due to procurement of raw material at competitive price and
other auxiliary materials including fuel oil, debottlenecking of various
manufacturing facilities and utilities, energy conservation and lower raw
material consumption ratios, the operating margins were better.

Impact of foreign currency rate fluctuation (Net):

During the year, the Company has followed the policy of hedging its foreign
currency exposure risk at the earliest. Consequently, the negative impact
has reduced to Rs.5.61 crores as against the negative impact of Rs.22.71
crores in the previous financial year wherein the Company was pursuing the
policy of keeping foreign risk open. Out of the total negative impact of
Rs.5.61 crores, Rs.3.28 crores is on account of the premium paid on hedging
foreign currency exposure and the balance amount is on account of Marked to
Market (MTM) on outstanding foreign currency exposure as on 31st March,
2010.

10. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company recognises that it can make a differential impact on its
performance significantly through its employees. The Company, therefore,
looks at employees as a 'human capital' and nurtures it through various
development and welfare initiatives.

During the year, number of developmental activities ranging from
behavioural training to exposure to latest trends in technology for staff
and officers were organized. Emphasis was laid on young engineers and in
the area of man-management skills. Performance and knowledge are core
values for the Company. The performance review system has also been
restructured wherein the focus is now more on competency building through
training and development. Good performance continue to be rewarded at all
levels. This has resulted into high motivation levels and a favourable work
environment. It is also reflected in the participation of large number of
employees in the Suggestion Scheme reintroduced to encourage innovation and
meritocracy. Job rotation, multi-skilling and cost efficiency continue to
be key areas, inviting management attention and focused efforts.

Industrial relations continue to be cordial. Regular communication meetings
are held with the workmen representatives to exchange views and address
mutual issues. It is worthy to note that not a single man-day has been lost
during the year on account of labour relations at any of the manufacturing
plants of the Company during the year.

The strength of permanent employees as on 31st March, 2010 is 1591 Nos. (as
on 31st March, 2009 1609 Nos.).

11. SAFETY, HEALTH & ENVIRONMENT

In addition to discharging its legal obligation, the Company looks at
Safety, Health & Environment as its corporate social responsibility and
provides help towards extinguishing of fire in neighbouring localities as
and when required and also organises training workshops for employees in
industries located in adjoining areas.

SAFETY

The Company accords high priority to safety of employees. High level of
employee self awareness is created through training, safety related
competitions and mock drills. The Bharuch plant achieved the target of
zero accident' during the year and also bagged the rotating shield of
Gujarat Safety Council for achieving Lowest Disabling Index. The Council
also carried out a Safety Audit and its recommendations have been
implemented.

HEALTH

A special drive was organized at Pune to create awareness regarding Swine
Flue. A medical camp for tribals from Bharuch area regarding genetic
disorder was also organized by the Company. A free medical health checkup
for orphans & young children, free vaccination programme for pregnant
ladies and medical camp on eye diseases was organized for the rural
population near Bharuch plant. Vaccination programmes were also conducted
at Mahad & Bharuch.

ENVIRONMENT

The Bharuch plant has switched over to bio-fuel for steam boilers and HTM
Heaters which has reduced sulphur dioxide emissions in the flue gases. Also
the fly ash produced by this system is eco-friendly. Use of renewable fuels
such as briquette has directly contributed to reduction of air pollution
from use of fossil fuel at Pune.