Annual Report - Dunlop - 2009-2010

DUNLOP INDIA LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Your Directors present the 83rd Annual Report of the Company together with
the audited accounts for the financial year ended 31st March, 2010.



SUMMARIZED FINANCIAL RESULTS
Rs. in Lacs
2009-10 2008-09

Sales & other Income 18070.21 18300.73
Profit before Depreciation, Interest & Tax 563.47 975.31
Financial Charges 281.47 701.90
Depreciation 140.72 135.94
Profit before exceptional Items 141.28 137.47
Exceptional Item - (55.51)
Prior Period Adjustment (14.57) 54.27
Profit before Tax 126.71 136.23
Profit after Tax 126.71 136.23

OPERATIONS:

During the period, the plants were opened and production is getting
stabilized.

DIVIDEND:

Your Directors have decided to retain the internal accruals and therefore
do not recommend any dividend for the financial year 2009-10.

PUBLIC DEPOSIT:

During the year under review, the Company paid fixed deposit of
Rs.1,04,000/-. Fixed Deposits matured up to September, 2000 but not paid up
to 31st March, 2010 amount to Rs. 8,92,14,000/-.

DIRECTORS:

During the year under review, Mr. Damodar Prasad Dani, resigned from the
Directorship w.e.f. 4th November, 2009. Mr. Damodar Prasad Dani also ceased
to be the Executive Director and CEO of the Company w.e.f. 4th November,
2009. The Board placed on record its deep appreciation for the valuable
services rendered by Mr. D.P. Dani.

Mr. Rakesh Kumar Budhiraja was appointed as Additional Director of the
Company w.e.f. 28th December, 2009 by the Board, who will hold Office upto
the date of the 83'0 Annual General Meeting and is eligible for re-
appointment. Mr. Rakesh Kumar Budhiraja was also appointed as the Executive
Director (being the Whole-time Director) and CEO of the Company for 3 years
w.e.f. 28th December, 2009 till 27th December, 2012.

In accordance with Article 103 of the Articles of Association of your
Company and the applicable provisions of the Companies Act, 1956, Mr. Pawan
Kumar Ruia and Mr. Ram Krishen Sadhu will retire from the Board by rotation
at the 83rd Annual General Meeting and being eligible, offer themselves for
re-appointment.

AUDITORS:

M/s. K.N. Gutgutia & Co., Chartered Accountants, Kolkata, Auditors of your
Company, will hold office until the conclusion of 83rd Annual General
Meeting and being eligible, offer themselves for reappointment. The Company
has received a letter from them to the effect that their re-appointment, if
made, would be within the prescribed limits under Section 224(1B) of the
Companies Act, 1956.

INFORMATION PURSUANT TO SECTION 217 OF THE COMPANIES ACT, 1956:

The Statement pursuant to 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 and Particulars of Employees as required under
Section 217(2A) of the Companies Act, 1956 reac with the Companies
(Particulars of Employees) Rules, 1975 are attached to this Report.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, your Board of Directors hereby confirm:

i) That in the preparation of the Accounts for the Financial Year ended
31st March, 2010, the applicable Accounting Standard; have been followed
and proper explanations have been provided for material departures,
wherever applicable;

ii) That the Board of Directors have selected such Accounting Policies and
applied them consistently and made judgement; and estimates that were
reasonable and prudent so as to givs 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 the year under review;

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

iv) That the Accounts for the Financial Year ended 31st March 2010 have
been prepared on a 'going concern' basis.

CORPORATE GOVERNANCE:

In accordance with the Provisions under Clause 49 of the Listing Agreement
with the Stock Exchange, a separate Report on Corporate Governance along
with the Auditors' Certificate on its compliance an, Management Discussion
and Analysis Report are annexed to the Report.

PERSONNEL:

The Management of the Company and its Unions have cordial an healthy
relationship. After a tripartite meeting in November, 200 between the
Unions, Management and the Labour Minister, th Management has lifted the
suspension of operations at its Sahagar Plant.

At the Ambattur Factory, the Union and the Management have entere into a
Memorandum of Settlement for a period of three years an thereafter, the
Plant has opened in October, 2009.

ACKNOWLEDGEMENT:

Your Directors placed on record their appreciation to the Government of
West Bengal and Tamil Nadu for providing support from time/time for the
revival of Dunlop, its Bankers and Employees and above all to its
Shareholders.

SUBSIDIARY COMPANIES:

As required under Section 212 of the Companies Act, 1956, the Report and
Accounts of the Subsidiaries of your Company, M/s. Wizi Advertising Private
Limited and M/s. Ebony Commercials Private Limited are attached.

For and on behalf of the Boa

Place: Kolkata Pawan Kumar Ruia
Date : 22nd April, 2010 Chairman

ANNEXURE TO THE DIRECTORS' REPORT DATED 22ND APRIL, 2010 PURSUANT TO
SECTION 217(3) OF THE COMPANIES ACT, 1956:

Reference is made to the comments of the Auditors in respect of certain
records and information. In this regard, attention is drawn to Note 4(d),
11 and 12 of Schedule 19B to the Accounts, which are self explanatory.

For and on behalf of the Board

Place: Kolkata Pawan Kumar Rule
Date : 22nd April, 2010 Chairman

Statement of 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 forming part of the Directors' Report for the
year ended 31st March, 2010.

A. Conservation of Energy and Technology Absorption:

Your Company has taken steps to improve efficiency by reduction of Boiler
Blowdown time, controlling consumption of coal by installing Belt Wigher,
installation of new Capacitors to improve power factor and replacement of
standard lighting set by energy efficient lighting system.

B. Foreign Exchange Earnings and Outgo:

Earnings - Rs. 18.63 Lacs
Outgo - Rs. 1.72 Lacs

For and on behalf of the Board

Place: Kolkata Pawan Kumar Rule
Date : 22nd April, 2010 Chairman

FORM-A

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY:

31.03.2010 31.03.2009
Unit Total Total
A. Power and Fuel Consumption:

1. Electricity

a) Purchased

Unit MWH 5007.14 4664.55
Total Amount RS/LAOS 308.43 265.02
Rate/Unit RS/KWH 6.16 5.68
b) Own Generation
(i) Diesel Gen Unit MWH 13.59 1.15
Unit/Ltr of D. Oil KWH/LTR 3.18 2.80
Cost/Unit RS/KWH 35.02 12.37
(ii) F. Oil Gen, Unit MWH NA NA
Unit/Kg. of F. Oil KWH/KG NA NA
Cost/Unit RS/KWH NA NA
2. Coal
Qty TON 1619.50 3823.41
Total Cost RS/LACS 72.88 169.04
Average Rate RS/TON 4500.15 4421.28

3. a) Furnace Oil (Generator)
Qty TON NA NA
Total Amount RS/LACS NA NA
Average Rate RS/KG NA NA
b) Furnace Oil (Boiler)
Qty TON 148.50 Nil
Total Amount RS/LACS 45.26 Nil
Average Rate RS/KG 30.48 Nil
4. Others/Int. Gen (D. Oil)
Qty K. LTR 47.55 23.69
Total Amount RS/LACS 16.91 8.44
Rate/Unit RS/LTR 35.56 35.60

B. Consumption/Ton
of Production:

Purchased MWH 5007.14 4664.55
Generated MWH 13.59 1.15
Electricity KWH/TON 3759.07 3542.67
F. Oil (Elec. Gen) Qty TON NA NA
F. Oil (Elec. Gen) KG/TON NA NA
F. Oil (Steam Gen) Qty TON 148.50 Nil
F. Oil (Steam. Gen) KG/TON Nil Nil
Coal (Steam Gen) Qty TON 1619.50 3823.41
Coal (Steam Gen) KG/TON 2696.83 5215.00
D. Oil (Elec. Gen) Qty KLTR 47.55 23.69
D. Oil (Elec. Gen) Qty LTR/TON Nil Nil

MANAGEMENT DISCUSSION AND ANALYSIS

In terms of Clause 49 (V) of the Listing Agreement with the Stock
Exchanges, a Report on Management Discussion & Analysis is attached to this
Annual Report.

1. Economic Review:

Indian economy has shown a lot of resilience to the recessionary conditions
prevailing world wide in the last year. It showed good GDP growth compared
to the negative growth in the other countries due to the timely stimulus
packages given by the Government. Driven by the estimated growth of 8.4% in
the fourth quarter, the economy is expected to grow at 7.1% in the last
concluded 2009-10 fiscal year. GDP growth is estimated to be 9.2% during
2010-11. The better performance will be mainly contributed by the growth of
4% in the agriculture, up from negative growth of 0.2% last fiscal year and
improvement in the service sector growth to 9.3% from 8.1% in 2009-10.
However, there is a major concern on the inflation which has gone upto 9.9%
in March, 2010. While the food inflation shows scant sign of abating,
inflation in manufactured products (7.13%) & Fuel & Power (12.71%) is now
significantly higher than years ago. The contribution of the non food
inflation to overall inflation is now almost 50% up from almost zero a few
months ago. RBI is expected to tighten its monetary policies and Government
will attempt to increase food supply from buffer stocks & exit from the
excessive accommodative fiscal stance to bring down the inflation.

The investment cycle is gaining strength and more money will be raised from
the non banking source and from the equity market during the current
financial year. In view of the trend observed in the latter part of 2009,
Infrastructure spending will continue to be the top priority of the
Government. It is unlikely that the banks will increase interest rate
because of the excess liquidity in the system. Expected GDP growth of 9.2%
during 2010-11, lower inflation & higher investment in industry &
infrastructure bodes well for the Tyre Industry.

2. Overall Review, Industry Structure & Developments:

Tyre industry is expected to attain turnover of Rs. 25,000 crores during
2009-2010 against Rs. 22,500 crores last year showing growth of 11%. Truck
tyre constitutes around 65% of the total turnover. The truck tyre industry
is estimated to show a growth of 15% in volume during 2009-2010 compared to
2 % deacceleration in 2008-09. The growth in demand has been mainly due to
the pick up in economic activity, the revival in demand of the commercial
vehicle and additional tax benefit given to the users of vehicles. Truck
tyre industry volume are expected to be 147 lac tyres during 2009-2010
compared to 128.39 lakh tyres during 2008-09. India's share in the global
tyre industry has improved from 2.8% in 2005 to 5% in 2009 due to CAGR
growth of 8.6% in India compared to negative growth all over the globe.

Though there has been an increase in the radialization of truck tyres from
2% in 2005 to 10% in the current year, Biased tyres continue to be in
demand in the local markets, the Asian Countries and Middle East Countries.
We expect Truck Tyre Industry to grow to approx. 10% in the coming years in
the Biased tyre segment.

We are confident that our customers will repose faith in our product and we
shall be able to regain reasonable market share in the short-term.

There has been slow down in the infrastructure activities including mining
activities and road construction. Your company is manufacturing Off the
Road tyres for the above usage. Revival in Demand has already started and
is expected to pick up due to the huge fund allocation on infrastructure
developments and mining activities. Dunlop has taken up development
activities to manufacture the industrial tyres for usage in the Backhoe
loaders and dumpers, which has a huge demand. We have given tyres for test
trials and will be launching the same after successful report in the next 3
months. We are making efforts to widen our range in the OTR segments. This
will allow the company to exploit the future opportunity.

During the year, your company has also taken up development activities in
the truck tyres and is proposing to launch truck tyre in the Economy range.
The company is also positioning its MAHAAN TYRE as a premier truck tyre in
the industry. The company has also done various development activities for
cost cutting, better operating efficiency, higher productivity and
enriching its product mix.

The company has made an application for obtaining the BIS Certification for
all truck tyres manufactured in the company. We are expecting to get the
certification shortly. This will give confidence to the customers that our
plant products are at par with the industry, inspite of aged Plants.

The company's focus in the current year will remain in marketing the truck
tyres in the domestic replacement market and exports to the Asian Countries
and Middle East.

3. Strengths, Opportunities, Challenges & Concerns:

Dunlop's major strength has been its long-standing brand recall, being the
first tyre company in Asia started in 1936. Customers still ask for the
specific products produced from its own factory inspite of change in the
technology. It has a advantage of skilled committed work force and multi
locational manufacturing facilities.

The truck tyre demand is at its peak in the current year and company do not
forsee any problem in marketing its tyres inspite of fact that Dunlop was
out of tyre market for last 7 years.

Dunlop will face the competition because of increased shift in demand from
cross Ply to radial tyres, manufacture of multi exle vehicles using radials
tyres and truck and buses above 15 years of life going off the road.
Substantial addition of Truck Radial capacities in future can create demand
supply mismatch and reduce pricing power.

Rubber prices continues to be very volatile and increased from Rs. 95/- in
April '09 to Rs. 165/- in April '10. Companies have increased their prices
in the month of November '09 and March '10. However, they are facing the
stiff resistance from the transporter for the further increase. This may
dent the profitability of the tyre company in future. Dunlop is doing some
in-house development to reduce and rationalize the rubber consumption with
other products.

4. Economic Risk:

There is always an economic risk in any business including tyre industry.
It can be due to slow down in the economy, development of infrastructure,
rise in interest rate, changes in tax and other fiscal policies, shortage
of rubber world wide & increase in Petro Prices.

5. Segment-wise/product-wise performance and dis-cussion on the financial
performance with respect to operational performance:

Your company carried out the refurbishment of plants and trial runs during
last fiscal. The production in all major rubber product categories like
OTR, truck, farm tyres and industrial products is closed to stabilization.
Your company is also trading in tyres by outsourcing and conversion.

The financial performance of your company with respect to its operational
performance is being shown separately.

6. Adequacy of Internal Control Systems:

Your company is in the process of laying down defined organizational
structure, documented policy guidelines, defined authority matrix and
internal control, to ensure efficiency of operations, compliance with
internal policies and applicable laws and regulations. It has adequate
internal control systems which are subject to periodic internal audits and
management reviews.

7. Human Resources & Industrial Relations:

Dunlop is in the process of laying down the recruitment policy to attract
and retain the best talent and laying down defined organizations structure
for succession planning. Dunlop is setting up performance based culture
where the best performers gets rewarded it will create a healthy
competition amongst the peer group & provide openings for higher growth.
The Company is focusing on bringing the young talent by recruitment from
Engineering and Management Colleges. Industrial relations continues to be
cordial, peaceful and healthy with the present work force.

CAUTIONARY STATEMENT:

Statements in the Management Discussion & Analysis describing the company's
focal objectives, expectations or anticipations may be forward looking
within the meaning of applicable securities, laws and regulations. Actual
result may differ materially from the expectations. Important factors that
could influence the company's operations include global and domestic supply
and demand condition affecting the selling prices of products, input
availability and prices, changes in Government regulations/tax laws,
economic developments within the country and factors such as litigation and
industrial relations.