Annual Report - Oil Country Tubular - 2009-2010

OIL COUNTRY TUBULAR LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Members,

The Directors have pleasure in presenting the Twenty Fourth Annual Report
on the Business of the Company and the Audited Statements of Accounts for
the year ended 31st March, 2010 and Auditors report thereon.



OPERATIONS

The Company achieved a turnover of Rs.334.73 Crores inclusive of Rs.226
Crores of Exports as against previous year turnover of Rs.422 Crores
inclusive of Rs.209 Crores of Exports. The turnover has been less than that
of the previous year due to global recessionary conditions and logistic
issues for 2-3 Months. The profitability has marginally improved over the
previous year by varying the product mix and the lower cost of raw
materials. The Order Book position as on 31st March, 2010 is Rs.82.22
Crores with an additional orders worth Rs.100 Crores in pipeline. The
orders on hand are mostly for Export market.

FINANCIAL RESULTS:

2009-2010 2008-2009
(Rs. in Lakhs) (Rs. in Lakhs)

1. Gross Income 33473.02 42209.11
2. Profit Before Interest and Depreciation 10608.65 10074.96
3. Finance Charges 173.38 215.81
4. Gross Profit 10435.27 9859.15
5. Provision for Depreciation 698.63 747.89
6. Net Profit before tax 9736.64 9111.26
7. Provisions For Tax 4153.07 2617.47
8. Net Profit after tax 5583.57 6493.79
9. Balance of Profit brought forward 220.62 3004.07
10. Balance available for appropriation 5804.19 9497.86
11. Proposed Dividend on Equity Shares 885.79 664.34
12. Tax on proposed Dividend 150.54 112.90
13. Transfer to General Reserves 4500.00 8500.00
14. Surplus Carried to Balance Sheet 267.86 220.62

Dividend

The Board of Directors of the Company are pleased to recommend dividend of
Rs.2/- for each Equity Share of Rs. 10/- each on the Equity Share Capital
of the Company for the Financial Year ended 31st March, 2010 subject to
approval of the Shareholders in the Annual General Meeting.

PROSPECTS:

The Oil and Exploration Activities, which were reduced drastically due to
global meltdown and recession during the year 2009-10 has shown signs of
recovery in the last 2-3 Months, as there has been significant increase in
the rig count during the last 3-4 Months and the activities are increasing
further, resulting in further increase in the Rig Count. Also, the
inventory levels of Oil Country Tubular Goods (OCTGs.) which were very high
during the year 2009 are almost depleted and the operators have initiated
procurement action for the Tubulars required for operations during the
current financial year (2010-11). The Company has also penetrated into the
USA Market where the demand for Oil Country Tubular Goods is to the tune of
Six Million Tonnes. The Company has successfully implemented its expansion
plans of Casing manufacturing capacity to 150,000 MT p.a., to meet the
increased demand of Tubulars in the Domestic and Global Market. The
Seamless Pipe Plant setup by United Seamless Tubulaar Pvt. Ltd is expected
to go on stream and stabilize production by July/ August, 2010 and will be
a source of supply of Green pipes of required quality and at competitive
price to the Company. The prospects for the Company for the year 2010-11
are bright and the Company is expected to achieve a turnover of Rs.400 to
425 Crores with improved capacity utilization and increased profitability.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

As required by Clause 49 of the Listing Agreements with Stock Exchanges,
the Management discussion and Analysis Report is enclosed as a part of this
report (Annexure-I).

LISTING WITH STOCK EXCHANGES:

The Company confirms that it has paid the Annual Listing Fees for the year
2010-2011 to NSE and BSE, where the Company's Shares are listed.

DEMATERIALISATION OF SHARES:

80.29% of the company's paid up Equity Share Capital is in dematerialized
form as on March 31st, 2010 and balance 19.71% is in physical form.

The Company's Registrars are M/s XL Softech Systems Ltd., 3 Sagar Society,
Road No.2, Banjara Hills, Hyderabad-500 034 (A.P).

DIRECTORS:

Dr.T.S. Sethurathnam and Shri. K.V. Ravindra Reddy retire on rotationmW
being eligible offer themselves for reappointment. Your Directors recommend
reappointment as proposed in the Notice for the Annual General Meeting.

THE DIRECTOR'S RESPONSIBILITY STATEMENT (UNDER SECTION 217 (2AA) OF
COMPANIES ACT, 1956)

To the best of their knowledge and belief and according to the information
and explanations obtained by them, your Directors make the following
Statement in terms of Section 217 (2AA) of the Companies Act, 1956.

1. That in the preparation of the Annual Accounts for the year ended 31st
March, 2010 the applicable Accounting Standards have been followed along
with proper explanation relating to material departures, if any.

2. That such accounting policies as mentioned in Notes on Accounts have
been selected and applied consistently and judgments and estimates that are
reasonable and prudent made so as to give a true and fair view of the State
of affairs of the Company at the Financial year 31st March, 2010 and of the
profit of the Company for that year.

3. That proper and sufficient care has been taken for 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.

4. That the Annual Accounts for the year ended 31st March, 2010 have been
prepared on a going concern basis.

AUDITORS:

The Auditors of the Company, M/s C K S Associates, Chartered Accountants,
Hyderabad retire at the ensuing Annual General Meeting and are eligible for
reappointment.

Auditors' observations are suitably explained in notes to the Accounts and
are self-explanatory.

CORPORATE GOVERNANCE:

Your Company is committed to maintain standards of good corporate
governance and has taken adequate steps to adhere to all the stipulations
laid down in Clause 49 of the Listing Agreement. Report on Corporate
Govemance along with the Certificate of the Auditors M/s C K S Associates
confirming compliance of corrtions of Corporate Governance form part of the
Annual Report.

(Annexure-II)

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

Information required under Section 217 (1) (e) of the Companies Act, 1956
read with Companies (Disclosure of particulars in Directors' Report) Rules
1988 is given in the Annexure forming part of this report (Annexure-III).

PERSONNEL:

The Company had 3 persons who were in receipt of remuneration of not less
than Rs.24,00,000 during the year ended 31st March, 2010 or not less than
Rs. 2,00,000 per month during any part of the said year.

However, as per the provision of Section 219 (1)(b)(IV) of the Companies
Act, 1956, the Director's Report and Accounts are being sent to all the
Shareholders excluding the statement of particulars of employees. Any
shareholder interested in obtaining a copy of the statement may write to
the Company Secretary of the Company.

During the year under review, relationship with the employees is cordial.

ACKOWLEDGEMENT:

Directors take this opportunity to express their thanks to various
departments of the Central and State Government, ONGC, Oil India Limited,
Multinational Companies operating in India and Abroad for Oil and Gas
Exploration Activities, Financial Institutions, Bankers, Material
Suppliers, Customers and Shareholders for their continued support and
guidance.

The Directors wish to place on record their appreciation for the dedicated
efforts put in by the employees of the Company at all levels.

Regd Office: For and on behalf of the Board Directors
108, Kanchenjunga
King Koti Road K. SURYANARAYANA
Chairman
Hyderabad-500 001
Date: 24.04.2010

ANNEXURE I

Management discussion and analysis report:

a) Industry Structure and Developments, Opportunities and Threats,
Performance, outlook, Risks and Concerns:

Due to the Recessionary Conditions in the International Market and steep
dip in the crude oil prices to a low of nearly 30 USD/ barrel from a high
of 149 USD/ barrel and also the gas prices too hitting low levels, the
drilling and exploration activities for oil and gas took a very big hit as
they were not economical at such low crude oil and gas prices. Despite the
bleak economic conditions and the logistics problems, the Company achieved
a turnover of Rs.334.73 Crores in the current year (2009-10) and has been
able to marginally improve the profitability due to the product mix and the
lower cost of raw materials. The exports during the year 2009-10 are to the
tune of Rs.226 Crores.

The Company has successfully completed the implementation of its expansion
plan to increase manufacturing capacity to 150,000 MT per year. With the
drilling going more deeper, the need for high grade materials is on the
rise and to meet the increased demand for the high grade materials, the
Company has embarked upon setting up of a second Heat Treatment Facility
within its existing premises.

The oil exploration activities have shown signs of recovery during the last
quarter of year 2009-10 with the increase in the crude oil prices to the
range of 80 USD/ Barrel from a low of nearly 30 USD/ barrel. The pricing is
also on the rise for the gas. The number of rigs being deployed is on the
rise and the Operators are coming back to start their shelved drilling
programs and there are good signs of procurement actions being initiated by
the Operators for the Oil Country Tubular Goods. signaling the path to
recovery and upward trend in the oil exploration activities world over. The
Company's order book position as on March 31, 2010 is Rs.82.22 Crores, with
additional orders worth Rs.100 Crores in pipeline. The orders on hand are
mostly for Export market.

With increase in capacity utilization, availability of Green Pipes at
competitive prices, improved logistics due to availability of Green Pipes
in close vicinity, the Company expects further improvement in the turnover
and its profitability.

Considering the present market conditions, the Company has targeted a
turnover of Rs.400 to 425 Crores during the financial year 2010-11.

b) Internal Control Systems and their Adequacy:

The Internal Control Systems comprises of exercising Controls at various
stages and are established in order to provide reasonable assurance for:

i) Safeguarding Assets and their usage.

ii) Maintenance of Proper Accounting Records and;

iii) Adequacy and Reliability of the information used for carrying on
Business Operations.

The Key elements of the system are as follows:

a) Existence of Authority Manuals and periodical updating of the same for
all Functions.

b) Existence of Clearly Defined organizational Structure and Authority.

c) Existence of corporate Polices for Financial Reporting and Accounting.

d) Existence of Management Information System updated from time to time as
may be required.

e) Existence of Annual Budgets and Long Term Business Plans.

f) Existence of Internal Audit System.

g) Periodical Review of Opportunities and Risk Factors depending on the
Global/ Domestic Scenario and to undertake Measures as may be necessary.

The Audit Committee is regularly reviewing the Internal Audit Reports for
the Auditing carried out in all the key areas of the operations.
Additionally the Audit Commitee approves all the audit plans and reports
for significant issues raised by the Internal and External Auditors.
Regular reports on the business development, future plans and projections
are given to the Board of Directors. Internal Audit Reports are regularly
circulated for perusal of Senior Management and appropriate action as
required.

Normal foreseeable risks of the Company's assets are adequately covered by
comprehensive insurance. Risk assessments, Inspections and Safety Audits
are carried out periodically.

c) Financial and Operational Performance:

The Highlights of Financial Operational Performance are given below:

(Rs. in (Rs. in
Lakhs) Lakhs)
2009-10 2008-09

1. Sales/ Income from Operations 33216.22 42037.27

2. Other Income 256.80 171.84

3. Sub-total 33473.02 42209.11

4. Total Expenditure (Before Interest) 23563.00 32882.04

5. Profit before interest, Tax and Exceptional Item 9910.02 9327.07

6. Operating Margin 29.83% 22.19%

7. Profit after Tax 5583.57 6493.79

8. Return on Average Capital Employed % 64.25 87.46
(before interest and Tax)

9. No of Months Receivables 1.47 0.78
(Receivables/ Sales x 12)

10. Current Ratio (Current Assets/ Current 1.53 1.36
Liabilities)

11. Borrowings: Equity Ratio (TL/ Equity) 0.00 0.00

d) Human Resources Development and Industrial Relations:

The Company is maintaining good employee relations and no man-days are lost
during the year. The Company continued the welfare activities for the
employees, which include Medical Care, Group Insurance, Canteen Facility
and Transport Facility. To enrich the skills of employees and enrich their
experience, the Company arranges, Practical Training Courses by Internal
and External Faculty.

For and on behalf of the Board Directors

Place: Hyderabad K. SURYANARAYANA

Date : 24.04.2010 Chairman