Annual Report - TTK Prestige - 2009-2010

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Your Directors have pleasure in presenting their Fifty Fourth Annual
Report, together with the Audited Accounts of the Company, for the year
ended 31st March 2010 as follows:



FINANCIAL RESULTS

(Rupees in lakhs)
2009-10 2008-09

Sales (inclusive of excise duty) 51680 41621
Other income 114 50
Profit before Extra-Ordinary item 7143 2900
Extra-Ordinary income 397 0
Profit/(Loss) before tax 7540 2900
Tax Provision 2296 662
Net Profit/(Loss) 5244 2238
Transfer to General Reserve 524 224
Proposed Dividend (including tax) 1320 662
Surplus carried to balance sheet 3400 1352

REVIEW OF PERFORMANCE :

The performance highlights are as follows :

* Sales grew by over 24%.

* All time high absolute value growth - in excess of Rs.100 crores.

* Profit before extra ordinary items increased by 146%.

* Profit after tax increased by 160%.

* The operating EBIDTA margin was 14.74% as compared to 9.16% in the
previous year. This sharp improvement was due to a combination of factors
consisting of operational efficiencies, comparatively lower input prices
and economies of scale.

* The Company has become debt free except for deposits of Rs.2.80 Crores.
and carries free cash balance of more than Rs.30 Crores.

* Earnings per Share (before extra-ordinary items) rose to Rs.42.98 from
Rs.19.77 - a growth of 117.4%.

* The ratio of Operating EBIDTA/Capital employed (including free cash
balance) in the Kitchen Segment rose to 65.02% from 43.39%.

* Commercial production of Appliances started in Unit 2 at Uttarakhand
during March 2010.

A detailed analysis is provided under the section Management's Discussion
and Analysis' forming part of this Director's Report.

AWARDS AND RECOGNITON

Having broad based the business to cover the entire kitchen, your Company's
brand Prestige continues to enjoy the recognition as Super Brand' in the
kitchen appliances segment. Your Company received the Retailer of the
year' award from Asia Retail Congress for the year in recognition of your
Company's successful establishment and operation of Prestige Smart Kitchen
Retail Network across India.

SIGNIFICANT NEW LAUNCHES :

Your Company has been regularly introducing newer models and products in
all its categories. However a few new launches are worth specific mention.

Microwave Pressure Cookers: This product is innovated, designed and
developed entirely through in-house R&D efforts. This is made of special
food-grade and heat resistant plastic and is meant for use in a micro-wave
oven for pressure cooking. Besides the usual health and taste benefits of
pressure cooking this product offers the added advantage of cooking to a
set time, thus saving energy. Your Company is the first to produce a
Microwave Pressure Cooker in India and is the world's first CE marked
Microwave Pressure Cooker. Your Company has applied for worldwide patents
for this product. Given the wide penetration of microwave oven in the
international markets and the growing domestic market for microwave ovens
this product is expected to have demand worldwide. A soft-launch has been
made in March 2010.

Apple Range of Inner-lid Pressure Cookers: Your Company made a foray into
inner-lid range of pressure cookers with its unique handi' shaped designs
during 2005-06. Your Company is gradually building a sizable presence in
the inner-lid markets in the North and East. In order to make further
penetration in this large sized market your Company has come up with a
unique apple shaped range of inner-lid pressure cookers in various colours
and finishes. Applications have been made for registering the design for
this product and its components. This product was launched during the last
week of March 2010 in select markets and has received significant response.

Fresh Range of Induction Cook Tops: Your Company has introduced Induction
Stoves which work on electricity but there are no hot surfaces or flame.
After initial launch and studying the market your Company has now come with
a fresh improved range of Induction Stoves and this product category will
be aggressively marketed in FY 2010-11. These stoves transmit heat through
induction coils and the cooking time is reduced significantly thus saving
energy. It is a handy appliance in the light of shortage in cooking gas
supplies and has appeal even in rural markets due to availability of
subsidized electricity.

Induction Compatible Pressure Cookers and Cookware: Since the use of
Induction Tops is becoming popular it has given rise to development of
Pressure Cookers and Cookware with induction friendly base which can be
used on conventional heat sources as well as induction tops. Your Company
has specially designed products in this category which are manufactured
using special purpose imported machinery.

MANAGEMENTS' DISCUSSION AND ANALYSIS

A. ECONOMY /INDUSTRY SCENARIO

Financial year 2009-10 started with a lot of apprehensions as the global as
well as Indian economy was suffering from the impact of immediate
recessionary past. The situation improved during second half of 2009-10.
The Indian economy grew by 7.1% as compared to 6.7% in the previous year.
Some of the key domestic markets were affected due to deficit rainfall as
well as local social and political disturbances. Exports from India were
significantly affected due to continuing recessionary trends in Western
countries. Against this backdrop your Company was able to achieve a growth
of 26% in the domestic market, which more than compensated for the drop in
export sales.

Your Company operates in the kitchen appliances segment with a wide range
of product categories consisting of Pressure Cookers, Non-stick Cookware,
Gas Stoves and Domestic Kitchen Electrical Appliances. Pressure Cooker is
the key product category of your Company. The market for Pressure Cookers
is shared amongst organized national branded players, regional players and
unorganized players. Till the last couple of years, the share of the
unorganized players was very large. The market is gradually shifting to
branded players and the current market share of the organized brands is
slightly more than 50% of the total market. In the other product categories
also the market structure is similar but the share and role of regional
brands and unorganized players are very significant.

B. OPPORTUNITIES, THREATS AND COMPANY'S RESPONSE

Your Company's growth is steadily built on its core strengths of brand,
manufacturing, design, distribution, sourcing and service capabilities.

The strategy to focus on the Total Kitchen Solution' has been creating new
opportunities for your Company to expand its product base. This in turn is
creating opportunities for expanding the market base. Your Company's focus
on offering new improved products both in the traditional product category
as well as new product category is opening up opportunities in North and
East markets where your Company is yet to become dominant.

Products like Induction Cook Tops, Induction compatible range of pressure
cookers and cookware, Apple range of Inner-lid pressure cookers, Microwave
Pressure Cookers etc are a few examples of products which are designed to
enable your Company to penetrate into all geographies and income segments.

The Government scheme for rural employment guarantee is creating purchasing
power in semi- urban and rural markets which in itself is providing
opportunities for growth.

Taking advantage of all the above opportunities requires a focused
attention on various distributional channels consisting of direct dealers,
authorized redistributors, large format stores, institutions and exclusive
retail network. Your Company is continuously increasing its distribution
width and enjoys a good franchise with the entire distribution network.

Your Company's retail formats Prestige Smart Kitchen', Prestige Kitchen
Boutique' and Prestige Life Style Store' are well supporting your
Company's vision of dominating the kitchen.

The threat in the domestic market continues from the unorganized players
and regional brands who compete with unviable low pricing strategies. Your
Company has been adopting the strategy of continuously offering innovative,
newer and improved products as well as marketing strategies to stay above
competition whether organized or unorganized. With the result your Company
is growing at a faster rate than the general industry average.

As regards export opportunities it appears that the export markets are
gradually coming out of recession and somegrowth can be expected from
exports in the future. Further the Company's launch of Microwave Pressure
Cookers is likely to offer export opportunities. Your Company's export
strategy will continue to be tactical balancing the needs of domestic
market, comparative margins and optimum capacity utilization.

C. ANALYSIS OF PERFORMANCE :

1. Kitchen Appliances :

The products include Pressure Cookers, Non-stick Cookware, Kitchen
Electrical Appliances and Gas Stoves. The turnover of these product
categories is given in the following table:

(In Rupees Lakhs)
2009-10 2008-09
Domestic Export Total Domestic Export Total

Pressure Cookers 22515 1551 24066 20061 1973 22034
Non-stick
Cookware 8714 11 8725 6311 45 6356
Kitchen Electric
Appliances 10372 - 10372 7096 - 7096
Gas Stoves 6106 - 6106 3999 - 3999
Others 2362 49 2411 2133 3 2136
Total 50069 1611 51680 39600 2021 41621

a. Domestic Sales registered a growth of 26.4% while exports declined by
20% due to economic crisis in Middle East and Sri Lanka.

b. The traditional product categories, namely, Pressure cookers and
Cookware registered a growth of over 12% and 37% respectively in domestic
market.

c. The growth in non-traditional product lines like gas stoves and kitchen
electrical appliances has been very impressive at 46% and 53% respectively.

d. The growth is driven predominantly by volume expansion and introduction
of new models and products. With respect to certain product categories the
growth can also be attributed to sales mix consisting more of value added
items and improved market penetration.

e. Operating EBIDTA/ Gross Sales ratio improved significantly from 9.16% to
14.74%. Material consumption as percentage of gross sales dropped by 2
percentage points and the other overheads by 3.6%.The composite margin of
your Company is the average of the margins of the Pressure Cookers and
Cookware category on the one hand and Stoves & Kitchen Electrical
appliances category on the other. Thus various operating ratios are unique
to your Company and are not strictly comparable to other players whose
composition of business is not similar to your Company.

f. Your Company continues to maintain strict control over working capital
management and in fact further improved the inventory and receivables
turnover ratios. This has enabled your Company to generate significant free
cash flows as detailed elsewhere in this report.

g. Many new products and models were introduced during the year to make the
range contemporary and competitive. Towards the end of the financial year
your Company launched a new range of Induction Cook Tops, a whole new range
of Pressure Cookers and Cookware with induction compatible base, Microwave
Pressure Cookers and Apple Range of inner lid' pressure cookers.

h. The Prestige Smart Kitchen retail net work was consolidated and
improvised as per plans. While new outlets were opened, some trimming was
also done by discontinuing a few non-viable outlets. The number of outlets
as at 31.3.2010 was 228. The network now covers 19 States and 136 towns.

i. The number of outlets of Prestige Kitchen Boutique' and Prestige Life
Style' continues at 9 and 2 respectively. The performance of these outlets
are satisfactory and this network will be expanded step by step as the
nature of these outlets is one of delivery of service rather than sale of
appliances in packed form.

2. Properties & Investment :

As mentioned in the last report your Company granted possession to the
Developer for the purpose of development towards the end of the financial
year 2007-08. Pending receipt of the necessary sanctions large portions of
old structures have been demolished leaving a part of the structure for
administrative and business requirements.

The original plan was to develop a Mall which would give recurring income
stream of rentals. Due to change in market conditions the developer has
suggested a mixed development of residential and office space. The
developer has informed us that they are in the advanced stage of getting
sanctions for the revised plans and that the construction can commence
during the first half of the financial year 2010-11. Based on the revised
plans for development the company expects to have both lump sum as well as
recurring rent as and when the project is complete. The developer has
estimated that the project can be completed within a period of 30 months
from the date of commencement of construction.

D. OUTLOOK

Both global and Indian economies are on the path of recovery. However,
persistent high level of inflation in the long run can impact the
disposable income and hence the purchasing power. However, the overall
market sentiment is positive and your Company expects to maintain its
growth rates aided by the new range of products, barring unforeseen
circumstances.

E. RISKS AND CONCERNS

The overall inflationary trend in general and the food inflation in
particular are causes of concern. The significant and steady increase of
key metal prices is a matter of concern which may have some impact on
margins of your Company if it is not in a position to pass on the increase
in input costs to the customers. However, with improved efficiencies and
economies of scale your Company is hopeful of maintaining a healthy margin
and return on capital employed. Your Company will not compromise on the
objective of improving market share and dominance for the sake of short-
term profits.

F. RISK MANAGEMENT

Your Company has a risk identification and management frame work
appropriate to the size of your Company and the environment under which it
operates.

The risks are identified in relation to the following areas:

a. Business risks - arising out of general economy, government policy,
industry to which the Company belongs , markets in which the company
operates and life-cycle of company's products.

b. Strategic Risks - arising out of policies relating to company's
marketing, manufacturing, expansion of market/capacity, technology , new
products and human resource and industrial relations.

c. Safety of Properties including intellectual properties and People.

d. Operational and Transactional Risks including foreign currency risks.

e. Statutory Compliances and legal and contractual obligations.

f. Financial Reporting.

g. Frauds and Misappropriation.

h. Information technology systems including disaster recovery.

Reasonable internal control, internal audit and safety audit systems are in
place to mitigate or minimize risks in the areas c' to h'. The other two
areas relating to Business and Strategy are assessed and addressed through
periodical business review meetings.

Your Company is working towards putting in place an improved dynamic
process for identification of key risks and evaluation of risks as low,
medium and high in the critical areas so as to devise risk mitigation plans
without losing much time.

G. FINANCES

Your Company has generated Post tax operational free cash flows of more
than Rs.60 Crores during 2009-10, out of which Rs.18 crores have been
applied to discharge borrowings from Banks. After spending significant
amounts on capital expenditure your Company carries a free cash balance of
Rs.30 crores besides normal operating cash float of Rs. 11 Crores. Your
Company continues to maintain unutilized funded credit lines of Rs.30
crores. Thus your Company has adequate cash resources to aggressively look
for further long-term investments in the kitchen appliances segment.

H. INVESTMENTS

There was no change in investments during the year.

I. INTERNAL CONTROL SYSTEMS

Your Company is continuously improving the internal control systems in all
the areas of operation. Your Company uses both internal and external
agencies for internal audit on a continuous basis. Based on audit feedback
the systems are updated. Your Company is effectively using SAP processes
and this has lead to further improvements in the internal control systems.

J. DEVELOPMENTS IN HUMAN RESOURCES

The direct employment strength stood at 913 as compared to 877 in the
previous year. Your Company has a structured policy in training and
development.

CAPITAL EXPENDITURE & EXPANSION PLANS

Your Company incurred a capital expenditure of around Rs.10 crores during
the year under report including investments in the New Unit 2 of
Uttarakhand. Your Company has plans for a normal capital expenditure of
Rs.10 Crores during 2010-11 and is also looking for further investments in
fresh capacities taking into account the possible increase in demand in the
coming years.

DIRECTORS

Mr. Ajay I Thakore, Dr. (Mrs.) Vandana R. Walvekar and Mr. T T Raghunathan
retire by rotation and are eligible for re-election. The information on
these retiring Directors is provided in the Notice calling the Annual
General Meeting.

FIXED DEPOSIT

The Public Deposits aggregated to Rs.279.92 lakhs as on 31st March 2010.
There were no unclaimed deposits which remained unpaid as on that date.

DIVIDEND

Your directors recommend payment of a dividend of Rs.10/- per share for the
financial year 2009-10.

FUTURISTIC STATEMENTS

This Directors Report and the Management Discussion and Analysis included
therein may contain certain statements, which are futuristic in nature.
Such statements represent the intentions of the Management and the efforts
being put in by them to realize certain goals. The success in realizing
these goals depends on various factors both internal and external.
Therefore, the investors are requested to make their own independent
judgments by taking into account all relevant factors before taking any
investment decision.

CORPORATE GOVERNANCE

Report on Corporate Governance is separately presented as part of the
Annual Report. Management Discussion and Analysis is included in this
Directors' Report in the preceding sections.

EMPLOYEES

The particulars as required under Sec.217 (2A) of the Companies Act, 1956
are given in the Annexure to this report.

AUDITORS

M/s. S. Viswanathan, Chartered Accountants retire at the ensuing Annual
General Meeting and are eligible for re-appointment.

LISTING

Your Companys shares are listed in the Bombay Stock Exchange and National
Stock Exchange and the listing fees for these two exchanges have been paid.

ANNULMENT OF FORFEITED EQUITY SHARES

During the year 2008-09 your Board of Directors after giving due notices
forfeited 28600 shares for non-payment of call money. During the current
financial year 2009-10, your Board of Directors have annulled forfeiture
relating to 100 shares after receipt of allotment money with interest.

FOREIGN EXCHANGE EARNINGS

The details of foreign exchange earnings and outflow are given in the
annexure to this Report.

CONSERVATION OF ENERGY AND RESEARCH AND DEVELOPMENT

The measures related to conservation of energy, etc., are covered in the
annexure to this Report pursuant to Section 217(1) (e) of the Companies
Act, 1956.

DIRECTORS' RESPONSIBILITY STATEMENT

As required by Sec 217(2AA) of the Companies Act, 1956 your Directors
confirm

1. that in the preparation of the annual accounts, the applicable
accounting standards have been followed, along with proper explanation
relating to material departures;

2. that they 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 of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for that period;

3. that they 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; and

4. that they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

Your Directors deeply appreciate and acknowledge the significant and
continued co-operation given to your Company by the Bankers, Financial
Institutions and the employees of the Company.

For and on behalf of the Board

Place : Bengaluru (T.T. JAGANNATHAN)
Dated : 4th May, 2010 Chairman

Registered Office:
Plot No.38,
SIPCOT Industrial Complex,
HOSUR 635 126
Tamil Nadu.

Information as per Section 217(1) (e) of the Companies Act, 1956 read with
Companies (Disclosure of Particulars in the report of the Board of
Directors) Rules, 1988 for the year ended 31st March 2010.

A. CONSERVATION OF ENERGY AS PER FORM A - Not Applicable.

B. PARTICULARS AS PER FROM B - RESEARCH & DEVELOPMENT

Constant efforts are made to improve the quality of the product and upgrade
the Manufacturing Process of all the products of the Company. During the
year your Company has filed two patent and three design applications.

C. FOREIGN EXCHANGE EARNINGS & OUTFLOW

1) Inflow
Export of Goods (FOB) - Rs. 1610.16 lakhs

2) Outflow
Import of Goods & Others - Rs. 4666.46 lakhs

Registered Office: For and on behalf of the Board
Plot No. 38,
SIPCOT Industrial Complex,
HOSUR 635 126 (T.T. JAGANNATHAN)
Tamil Nadu Chairman

Place : Bengaluru
Dated : 4th May, 2010