Annual Report - VIP Industries - 2009-2010

VIP INDUSTRIES LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Members

Your Directors are pleased to present the 43rd Annual Report together with
the Audited Accounts of your Company for the financial year ended 31st
March 2010.



FINANCIAL RESULTS:

(Rs. in Lacs)

Year Ended Year Ended
31.03.2010 31.03.2009

Sales, Income from Operations & Other Income 636,78 532,25

Gross Profit 95,68 46,77

Interest 7,96 12,82

Depreciation 17,28 14,07

Profit Before Tax & Extra-ordinary Items 70,44 19,88

Extra-ordinary Items 9,39 10,44

Tax Provision (Net of Deferred Tax)
including Fringe Benefit Tax and 11,00 53
Income Tax for prior years

Profit After Tax 50,05 8,91

Profit brought forward from Previous Year 32,51 27,90

Profit available for Appropriation 82,56 36,81

Appropriations:

Interim and Proposed Dividend 14,13 2,82

Corporate Tax on Dividend 2,40 48

General Reserve 29,92 1,00

Balance carried to Balance Sheet 36,11 32,51

82,56 36,81

OVERALL PERFORMANCE AND OUTLOOK:

Income from Operations & Other Income during the financial year ended 31st
March 2010 was at Rs. 636,78 Lacs as against Rs.532,25 Lacs representing an
increase of approximately 20% over the corresponding period of previous
year. Profit after Tax for the year under review amounted to Rs. 50,05 Lacs
after considering the Extra-ordinary Items of Rs. 9,39 Lacs (previous year
Rs. 10,44 Lacs) as against Rs. 8,91 Lacs in the previous year representing
an increase of more than 461% over the previous year. The increase in
profits during the year under review was on account of increased sales,
better margins, reduction in input costs, interest costs and overall
efficiency in operations at all levels. With the surge in demand coupled
with better marriage season, softening of key raw material prices and the
stimulus package offered by the Government helped your Company in improving
the margins significantly during the year under review.

As on 31st March 2010, the Reserves and Surplus of your Company was at
Rs.143,90 Lacs.

The outlook for the current year is encouraging.

A detailed analysis of the operations of your Company during the year
tinder report are included in the Management Discussion and Analysis
Report, forming part of this Annual Report.

DIVIDEND:

Your Directors are pleased to recommend for your consideration, a final
dividend of Rs.3/- (Rupees Three Only) per equity share (previous year
Re.1/- per equity share) for the financial year 2009-10. Your Company had
paid in February 2010, an interim dividend of Rs. 2/- (Rupees Two Only) per
equity share (previous year Nil) for the financial year 2009-10.
Accordingly, the total dividend declared by your Company for the financial
year 2009-10, is Rs.5/- (Rupees Five Only) per equity share (previous year
Re.1/- per equity share).

EXPORTS AND INTERNATIONAL OPERATIONS:

Exports for the year ended 31st March 2010 was at Rs.47,02 Lacs as against
Rs.64,54 Lacs in the previous year, a drop of approximately 27% over the
previous year. The global economy has still not shown a sign of robust
recovery and your Company has also felt the pressure in certain countries
including European markets. Despite this, exports to Middle East countries
were steady. Your Company is expecting that with the introduction of its
new range, it will be able to gain market share in the coming years,

CARLTON TRAVEL GOODS LIMITED:

Carlton Travel Goods Limited (CTGL), the wholly owned subsidiary of your
Company which sells and distributes brand 'Carlton' in UK and European
markets has not done well and incurred losses, both operationally as well
as on currency translated losses in the year 2008-09. Your Company has
intensified its FOCLIS on the same and has carried out major restructuring
and continues to maintain a clear focus on the said business to turnaround
the same. In the year 2008 09, CTGL opened mono brand retail stores in
high-end Malls to give the brand its much needed premium visibility.
However, due to the global recession setting in, at the same time, these
stores started incurring losses. Considering the slow recovery in global
economic scenario, your Company decided and was able to close down all
these stores during the year under review. Also, looking at the
recessionary trend continuing in most parts of Europe, your Company has
withdrawn the expansion plans in some small European countries which will
significantly cut down the costs. These initiatives will arrest the
operational losses for the future. In terms of the currency translation,
Great Britain Pound (GBP) had shown signs of recovery against the US dollar
during the year under review but then slipped in the last two months to
reach almost the year beginning levels, However, CTGL could still recover
approximately 4,50,000 GBP on account of realized/unrealized gains during
the year under review. The acceptability of the brand 'Carlton' is
improving both in UK and European markets because of its premium product
category and your Company is confident of 'the brand performing well in
future. Your Company also feels that the GBP will show some signs of
recovery against the US dollar which will bring down the currency
translation losses. However, CTGL is also working out alternative plans to
mitigate currency risks going forward.

RESEARCH & DEVELOPMENT:

The Research and Development (R&D) centre of your Company is actively
engaged in upgradation of technologies, processes and development of
quality products towards ensuring technological leadership for your Company
in the years to come.

The R&D centre continues to be recognized by the Department of Scientific &
Industrial Research of the Government of India.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirements Under Section 217(2AA) of the Companies Act,
1956, with respect to the Directors' Responsibility Statement, it is hereby
confirmed:

(i) that in the preparation of the annual accounts for the financial year
ended 31st March, 2010, the applicable Accounting Standards have been
followed along with proper explanation relating to material departures, if
any;

(ii) that your Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of your
Company at the end of the financial year and of the profits of your Company
for the year under review;

(iii) that your Directors 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 your
Company and for preventing and detecting fraud and other irregularities,

(iv) that your Directors have prepared the accounts for the financial year
ended 31st March, 2010 on a 'Going Concern' basis.

MANAGEMENT DISCUSSION & ANALYSIS REPORT AND REPORT ON CORPORATE GOVERNANCE:

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges,
the Management Discussion and Analysis Report, the Report on Corporate
Governance and the Certificate in respect of compliance of requirements of
Corporate Governance, are annexed to this Report and form part of this
Annual Report.

SUBSIDIARIES:

In terms of the approval granted by the Central Government under Section
212(8) of the Companies Act, 1956, copies of the Balance Sheet, the Profit
and Loss Account, the Report of the Board of Directors and the Auditors of
Carlton Travel Goods Limited and Blow Plast Retail Limited, have not been
attached with the Balance Sheet of your Company.

However, the Consolidated Financial Statements of your Company, which
include the financial results of Carlton Travel Goods Limited and Blow
Plast Retail Limited, are included in this Annual Report, Further, a
statement containing the particulars prescribed under the terms of the said
exemption for Carlton Travel Goods Limited and Blow Plast Retail Limited
are also enclosed. Copies of the relevant audited accounts of Carlton
Travel Goods Limited and Blow Plast Retail Limited can also be sought by
any shareholder on making a written request to the Secretarial Department,
at the Registered Office of your Company in this regard. The annual
accounts of Carlton Travel Goods Limited and Blow Plast Retail Limited are
also available for inspection by any shareholder at the Registered Office
of your Company and at the respective Head Offices of Carlton Travel Goods
Limited and Blow Plast Retail Limited.

INSURANCE:

All the assets of your Company, including Plant & Machinery, Buildings,
Equipments etc. have been adequately insured.

DEPOSITORIES:

Your Company's shares are tradable compulsorily in electronic form and your
Company has established connectivity with both the depositories, i.e.
National Securities Depository Limited (NSDL) and Central Depository
Services (India) Limited (CDSL).

PUBLIC DEPOSITS:

Your Company had not received instructions from 54 depositors for repayment
of deposits amounting to Rs.8,36,000/- (Rupees Eight Lacs Thirty Six
Thousand Only) as at 31st March, 2010. Since then, no deposits have been
repaid.

CENTRAL GOVERNMENT APPROVAL UNDER SECTION 211 AND 212 OF THE COMPANIES ACT,
1956:

On an application made by your Company under Section 211 of the Companies
Act, 1956, the Central Government vide its letter No. 46/13/201 O-CL-111
dated 8th February, 2010 exempted your Company from giving disclosure of
quantitative details in compliance of Schedule VI to the Companies Act,
1956 in this Annual Report.

On an application made by your Company under Section 212(8) of the
Companies Act, 1956, the Central Government vide its letter No. 47/20/2010-
CL-111 dated 25th March, 2010, exempted your Company from attaching a copy
of the Balance Sheet and the Profit and Loss Account of the Subsidiary
Companies and other documents to be attached under Section 212(1) to the
Annual Report of your Company. Accordingly, the said documents are not
being attached with the Balance Sheet of your Company. A gist of the
financial performance of the Subsidiary Companies is contained in this
Report. The annual accounts of the Subsidiary Companies are open for
inspection by any shareholder and your Company will make available these
documents/details upon request by any shareholder of your Company or to any
investor of its Subsidiary Companies who may be interested in obtaining the
same. Further, the annual accounts of the Subsidiary Companies will also be
kept open for inspection by any shareholder at the Registered Office of
your Company and at the respective Head Offices of the subsidiary
Companies.

DIRECTORS:

Ms. Radhika Piramal was appointed as an Executive Director of your Company
with effect from 13th July, 2009. She has been appointed as the Managing
Director of your Company for a period from 1st May, 2010 to 12th July 2012
(both days inclusive). The necessary approval of the Shareholders is being
sought in the ensuing Annual General Meeting to the appointment and payment
of remuneration to Ms. Radhika Piramal as the Managing Director of your
Company.

Mr. Nirmal Gangwal was appointed as an Additional Director of your Company
with effect from 29th April, 2010 and holds office till the conclusion of
the ensuing Annual General Meeting. The approval of Shareholders is being
sought to the appointment of Mr. Nirmal Gangwal as a Director of your
Company.

Mr. Sudhir Jatia has resigned as the Managing Director of your Company with
effect from 30th April, 2010. Mr. Jatia will continue to act as a Non-
Executive Director of your Company.

Mr. D.K. Poddar and Mr. Vijay Kalantri, Directors retire by rotation and
being eligible, offer themselves for re-appointment. Pursuant to Clause 49
of the Listing Agreement, details of Directors retiring by rotation is
provided as a part of the Notice of the ensuing Annual General Meeting.

AUDITORS:

M/s. M.L. Bhuwania & Co., Chartered Accountants, retire at the ensuing
Annual General Meeting and being eligible, have expressed their willingness
to continue, if so appointed. As required under the provisions of Section
224 of the Companies Act, 1956, your Company has obtained a written
certificate from the Auditors proposed to be re-appointed to the effect
that their re-appointment, if made, would be in conformity with the limits
specified in the said Section.

A proposal seeking their re-appointment is provided as a part of the Notice
of the ensuing Annual General Meeting.

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

Information as required in terms of the provisions of Section 217(1)(e) of
the Companies Act, 1956, read with the Companies (Disclosure of Particulars
in the Report of the Board of Directors) Rules, 1988, in respect of
conservation of energy, technology absorption and foreign exchange earnings
and outgo is annexed herewith and forms part of this Report as Annexure
(A).

PARTICULARS OF EMPLOYEES & EMPLOYEE STOCK OPTION SCHEME:

Information as per Section 217(2A) of the Companies Act, 1956 ('the Act')
read with the Companies (Particulars of Employees) Rules, 1975. As per the
provisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts are
being sent to the shareholders of your Company excluding the statement on
particulars of employees under Section 217(2A) of the Act. Any shareholder
interested in obtaining a copy of the said statement may write to the
Secretarial Department at the Registered Office of your Company, During the
year under review, no fresh stock options have been granted by your
Company. Accordingly, no new equity shares have been allotted under the
Employees Stock Option Scheme Of your Company. Hence, no disclosure under
the Securities and Exchange Board of India (Employees Stock Option Scheme
and Employees Stock Purchase Scheme) Guidelines, 1999 has been made during
the year under review.

INDUSTRIAL RELATIONS:

Industrial relations remained cordial throughout the year under review.

ACKNOWLEDGEMENT:

Your Directors record their gratitude to the Financial Institutions, Banks
and other Government departments for their continued assistance and co-
operation extended to your Company during the year under report, Your
Directors also wish to place on record, their appreciation for the
dedicated services of the employees of your Company at all levels.

On behalf of the Board of Directors

DILIP G. PIRAMAL
Chairman

Place : Mumbai
Date : 29th April, 2010

ANNEXURE (A):

DISCLOSURES OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY
TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO AS REQUIRED
UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD
OF DIRECTORS) RULES, 1988:

(A) CONSERVATION OF ENERGY:

a) Energy conservation measures taken.

- Reduction in power consumption in Haridwar plant on SP 400 ton machine by
replacing traditional contractor control heating system by SSR type PID
controlled heating system.

- In Frame Bending department in Haridwar plant, reconditioning of one of
the ovens in order to balance heating load in different zones.

- In Vacuum Forming area in Haridwar plant, separate air reservoir provided
to reduce frequent loading unloading of compressor.

- A detailed case study of high power consumption machines was carried out
to increase power efficiency of each machine thereby reducing power
consumption.

- Vane pump of Nessei 600T machine interfaced with AC drive resulting in
reduction of power consumption.

- On SP 400 Injection Moulding Machine in Haridwar, PLC controller
installed in place of old traditional contractor electrical panel.

- Introduced new sealing mechanism and temperature control to reduce
wastage of oil.

- In one of the Injection Moulding Machine in Haridwar, imported hydraulic
gear pump system replaced by indigenized vane pumps resulting into
significant cost reduction.

b) Additional Proposals:

- PID controller for heating system on imported machines.

- Installation of Automatic Power Factor Correction (APFC) panel in Unit 11
at Haridwar.

- Next level of energy audits to further reduce consumption of energy.

- Incorporation of Time Switches at Sinnar.

- To increase efficiency of Barell-II of extrusion machines to reduce power
consumption.

- Replacement of continuous running motor with energy efficient motors.

- Replace wonderpack vacuum forming machines with Illig machines to reduce
power consumption.

- Additionally 1 (One) submersible pump to be installed in place of
existing old centrifugal pump at IMD.

- Pump House for cold well location at Sinnar.

- Deployment of Robot in double injection machines to reduce cycle time
thereby reducing power consumption.

- New generation air compressor at Nashik and Sinnar.

- Energy Saving in Lighting Circuit of Soft Luggage Warehouse at Sinnar.

c) Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods.

Expected energy saving with above proposals would be approximately Rs.50
Lacs per annum.

d) Total energy consumption and energy consumption per unit of production.

Form 'A' of the Annexure to the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, is not applicable to your
Company.

(B) TECHNOLOGY ABSORPTION:

a) Research and Development (R&D):

i) Specific areas in which R&D carried out by your Company:

- Development of double texture designs for foamed luggage.

- Development of high end textures on Shell moulds.

- Single piece flow in Assembly process and Injection moulding in addition
to Frame bending.

- High quality mould making in-house with the latest computer software.

- Process developed for international class trolly manufacturing set up.

- Aesthetic improvements

- Critical dimensions in press components, moulded components, shell and
aluminum frame controlled and monitored by using Statistical Process
Control tools.

- Twin layer extrusion implemented for polycarbonate and ABS sheets, with
the induction of the state of the art vacuum forming machine for
polycarbonate, ABS and other polymers.

- Development of negative forming technology for vacuum formed shells.

- Research on 'no break polymer blends' by using latest generation
polymers.

ii) Benefits derived as a result of above R&D:

- Overall product development cycles have reduced significantly.

- World class finishes and designs in hard and soft luggage products.

- Aesthetically better looking products are developed with innovative
designs & textures.

- Development of innovative luggage manufacturing techniques like shuttle
conveyors, Special Process Machines, etc.

- Increased customer value proposition with reference to function,
aesthetics and design and product performance.

- Reduction in raw material cost.

- Ultra light vertical upright developed which is a key customer
requirement.

iii) Future plan of action:

- Strengthening of testing and research laboratory on polymeric materials,
blends and finishes.

- Innovation in adhesive & textile technology for smarter world class
interiors.

- Further development of new materials and processes.

- To develop new processes - in mould decoration, double moulding and soft
touch.

- Developing new luggage with innovation in extrusion technology.

iv) Expenditure on R&D:

Amount (Rs. in Lacs)

Capital -
Recurring 2,24
Total 2,24
R & D expenditure as a percentage of total turnover 0.3%

b) Technology Absorption, Adaption and Innovation:

i) Efforts taken for technology absorption, adaption and innovation:

Technology absorption from:

- Internet

- Technical Journals

- Rigorous computer aided stress analysis and flow predictions continued as
a system.

- Training of personnel on powerful CAD/CAM tool&

- National and International exhibitions / seminars.

- Joint projects with major raw material suppliers to develop innovative
technology.,

- Concurrent engineering using state of the art hardware & software use
continued.

- Application of standardization techniques.

- Prominent institutes, 'research centers.

- Large mould manufacturing faster due to innovative technologies and
capacity enhancement.

- Training on safety & poka yoke in tools and process to avoid accidents.

ii) Benefits derived as a result of the above efforts:

- Development center for the French luggage manufacturing company - Delsey.

- Indigenization of PC & ABS products at low cost.

- International quality large moulds specific to customer requirements.

- Effective utilization of polymers.

- Excellent hinge quality.

- Thickness reduction in ABS and PP luggages - Value for money

- Reduction in variety of components resulting in cost saving.

- Cactus - Lightest weight luggage in its class developed.

iii) Information regarding technology imported during last 5 years.

- Latest generation vacuum forming machine, twin barrel moulding machines
and a battery of hi-tech moulds have been inducted at the manufacturing
location.

- Twin extruder additional set up for polycarbonate and ABS sheets.

- Technical collaboration with Delsey S.A., France for manufacturing a few
of their premium range suitcases and briefcases

- Your Company has acquired the plant & machinery of the erstwhile Carlton
International, UK and has absorbed the technology towards manufacturing of
quality products at its facilities in India.

(C) FOREIGN EXCHANGE EARNINGS AND OUTGO:

Total foreign exchange used and earned during the year:

Amount (Rs. in Lacs)

Used 140,37
Earned 49,88

On behalf of the Board of Directors

DILIP G. PIRAMAL
Chairman
Place : Mumbai
Date : 29th April, 2010

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A. INDUSTRY STRUCTURE AND DEVELOPMENT:

LUGGAGE:

Domestic Markets:

The year under review saw a strong recovery in the demand across all
segments after a recessionary previous year which had led to major setbacks
in the global economy. The GDP growth rate is estimated at around 6.5% for
the year with the last quarter showing a significant jump. The Economists
project that India as a country is back on the growth track and in the next
few years, the GDP growth will be somewhere between 8.5%-10%. This will
significantly support the Companies in attaining much stronger all round
growth. The stock markets also recovered significantly during the year.
However, the Global recovery is still far from being satisfactory. Interest
rates in India are again showing signs of hardening to curb the
inflationary pressure. Travel Industry is also showing signs of recovery.

The total Luggage industry is estimated at Rs. 3100 Crores and is estimated
to be growing at a healthy rate of around 15% per annum with unbranded
luggage growing faster than branded luggage. With overall economy doing
better and with increased travel, the category has shown good turnaround as
compared to the last year.

Due to continued inflationary pressures, value price segments continue to
do better as compared to other price segments. Further, with rural economy
relatively less impacted due to overall recession, the demand mainly for
value offerings continued to be buoyant. These factors have helped the
unorganised market estimated at Rs. 2150 Crores grow at a healthy rate. The
number of Chinese imported labels has remained more or less the same.

The total market size for the organized sector has remained around Rs. 950
Crores. The number of major players remained more or less the same with
your Company maintaining its leadership position. In the organized segment,
while both the price segments - value segments (below Rs, 3000) and premium
segment (over Rs. 3000) have grown, the value segment has grown faster at
23%, Premium segment has grown by 14 % over last year.

The modern organized retail segment has shown signs of recovery. The pace
of expansion has improved with opening of new departmental stores and
hypermarkets. The store level profitability has been the focus of the
players in this segment. From a consumer point of view, hypermarkets and
departmental stores are becoming more and more important for luggage
purchase. There is an increased focus from hypermarkets and departmental
stores towards Private labels and in-store brands.

While soft luggage segment continues to grow faster than hard luggage,
there are signs of revival in hard luggage category. This is mainly due to
multiple successful launches in premium, light weight and stylish ranges in
polycarbonate etc. Within soft luggage segment, business satchels and
backpacks are the fastest growing segments, driven by the increasing
penetration of laptop usage in professional office use.

International Markets:

During the year under review, the market growth was negative, The
International market has registered a decline for the second consecutive
year. This is excluding the US markets where your Company has a limited
presence. Under these challenging environment, your Company still
registered growth in the UK market. However, your Company's sales in Europe
suffered during the year. The Middle East market and the Asia Pacific
market still remained good for your Company.

The impact of the recession was most felt on the mono brand retail stores
as the same became highly unprofitable. Your Company's aggressive foray
into retail market took a beating and as a result, the retail expansion
plan in the International market had to be revisited during the year. In
fact your Company closed down all the retail shops of its wholly owned
subsidiary, Carlton Travel Goods Limited (CTGL) in UK and Europe as the
recovery of these stores looked difficult in the next two-three years. The
'Carlton' brand however continues to establish and grow in several markets.

CTGL has introduced a complete new range of products during the latter part
of 2009-10 which has been well received in the market. However, the sales
growth due to these new products will take place only in 2010-11.

The UK market performed well registering a growth of about 3% in very
difficult conditions. The entry into 15 stores of the premium department
store chain, 'House of Fraser' helped improve the brand image and the
overall turnover. Keeping up with the digital age, Carlton started selling
its products to UK consumers through their website.

The closure of retail stores will help improve profitability of the
subsidiary in the next year. The cost control measures started in the
previous year continued and helped cut losses in these tough times. Due to
the external factors, the performance during the year was not as per our
expectations but the brand continues to have good future potential.

For future, focus is on cost control, building operational efficiencies and
improving the profitability of the International business. To achieve this,
several decisions are being taken viz, cut down international warehousing,
defer expansion plan in small European countries and transition to direct
sales to distributors from the factories. The focus on product development
and marketing will remain in order to continue to build the Carlton brand.

MOULDED FURNITURE:

The year under review witnessed the furniture market remaining stagnant.
Like the luggage market, the furniture market also has a huge unorganized
market which is growing very fast every year, Your Company has a very small
presence in the organized market which is mainly because of its high prices
but persistently managing the quality standards. Your Company's brand
'Moderna' is considered as a premium brand in the Industry. Because of it
being accepted in the premium category, your Company has seen an
opportunity in this business and continues to focus towards its growth.

B. OPPORTUNITIES AND THREATS:

LUGGAGE:

We believe that economy will continue to do better leading to healthy
growth in both domestic and international travel. Such environmental
conditions will offer many exciting and interesting opportunities to the
organization. The organization has identified several opportunities
including launching more products in lightweight polycarbonate bags,
lightweight soft luggage, office satchels and backpacks, across all brands
and at all price points.

We expect aggressive competition from both organized and unorganized
players to continue, as branded players increase their advertising spend
and unorganized players continue to exert price pressure that limit the
price increases branded players may charge in order to stay competitive,
However, with a robust product portfolio for each of the brands in your
Company's portfolio, your Company is well poised to meet all challenges
coming from competition in the market.

Increasing pressure on input costs is likely to put pressure on the margins
in both hard luggage and soft luggage, which may not be entirely recovered
through any price increases. Raw material (plastic and aluminum) costs in
hard luggage have increased significantly in the first few months of 2010,
as have higher labour costs in China for soft luggage. The USD may show
signs of weakness against the Indian Rupee, however your Company feels that
this positive effect on import costs would be countered by the likely
appreciation of the Chinese currency against the dollar which would
increase costs of finished goods from China.

MOULDED FURNITURE:

This business has a huge potential to grow. The refurbishment of the sports
facility, mainly stadiums, in the country and the concentration towards
Computer literacy in schools across the country, creates ample scope for
growth in this business. There are no major threats to your Company as it
enjoys a small market share of the furniture business.

C. SEGMENT/PRODUCT WISE PERFORMANCE:

LUGGAGE:

Due to the persistent efforts in the last financial year, your Company has
been able to grow all brands in the portfolio. Your Company did much better
than the industry by clocking a robust growth in top line sales and
continues to maintain leadership position in the organized segment.

Your Company with the combined portfolio of Delsey, VIP Aristocrat, Skybags
and Alfa, promises to be a formidable offering with presence across all
major price segments of the market. Your Company has invested significantly
towards brand building activity for 'VIP' and 'Aristocrat'.

'VIP' continued to use Shahid Kapoor in its TV commercials and other
branding communications. For VIP your Company also invested to highlight
unique and relevant innovations like 'Water and stain resistant bags'
through various branding initiatives. Your Company also invested on branded
media properties such as 'VIP City Tour' during cricket matches on TV, Jet
security tags and conveyor belts at all prominent airports in the country.

For Aristocrat brand, your Company has signed well-known film actress,
Bipasha Basu as the brand ambassador. Your Company believes that this will
help modernize the brand. Further your Company has invested in improving
the in-store branding across key multi-brand outlets across the country.

Your Company has been able to capitalize on faster growths in value
segments and hypermarket segments. Consistent efforts in Alfa and Skybags
brands have helped in doing so.

With new launches and through various promotion initiatives in Canteen
Stores Department (CSD) during last year across all the brands, your
Company has been able to further strengthen its position especially in the
soft luggage segment.

Delsey and VIP have contributed and grown in the premium segment.

Your Company strengthened its distribution hold by significantly increasing
its market presence through opening of new shops for all brands across the
country, These counters will contribute significantly in the coming years.

MOULDED FURNITURE:

With the renewed focus on this business, the business showed a growth of
over 20% during the year. Over and above the same, your Company has changed
the highly credit oriented business to a cash and carry model which has
severely de-risked the business. Your Company continued to get good
Institutional orders during the year. During the year, your Company also
worked on the network expansion and is very buoyant with the response from
the trade.

D. OUTLOOK:

LUGGAGE:

Having identified the threats, opportunities and its strengths, the task at
hand for your Company is to gain market share from the competition,
especially in the premium and mass popular segment.

Your Company has put in place a robust plan to offer strongly
differentiated/innovative products at aggressive prices offered through
well diversified and covered distribution channel to counter competition at
all levels. At the premium end, 'Delsey' and 'VIP' brands would be the
focus area and in the mass popular and economy segment, 'Aristocrat' and
'Alfa' brands would be in offering. Growth in the fast growing hypermarket
channel is through the promotion of the 'Skybags' brand.

Your Company's strength and capability in hard luggage gives it a head
start over competition in tapping the trend of consumers in the premium
segment moving to hard luggage. Your Company now also has a full-fledged
capacity to produce polycarbonate products and is already exploring
possibilities of launching products with differentiated textures and styles
at competitive price points.

In the soft luggage category, your Company has identified faster growing
sub-categories within soft luggage and has planned launches accordingly
during the year, Your Company believes that this will help to modernize the
brands along with giving additional growth for the brands.

In Canteen Strores Department too, your Company plans to introduce new
range of products and gain market share from competitors. Also steps are
being under taken to build visibility for the brands and highlight their
key differentiators.

Your Company believes that its underlying core strength is in the quality
of its products, strength of distribution and the trust of its brands with
consumers across India. Accordingly, your Company is dedicated to investing
higher spends on advertising and promotion, continued distribution
expansion and stringent efforts in quality control to deliver superior
customer satisfaction.

MOULDED FURNITURE:

Your Company's renewed focus on this segment will certainly help to
register good growth in this segment in next few years. Your Company is
working on the initiatives like network expansion, introduction of new
products, addition of new territories which will surely help the business
to grow at a rapid pace. Since the market share is very miniscule, the
opportunity to grow at a good two digit number is highly realistic.

E. RISKS AND CONCERNS:

As the share of business is drifting towards soft luggage, your Company's
dependence on China for producing soft luggage posses threat for the
business. However, because of large scale efficiencies, most of the global
luggage players are dependent on China for their soft luggage requirement,
Any appreciation in Chinese currency may have adverse effect on the
business.

For hard luggage, the prices of major raw materials like plastic and
Aluminium plays a significant role in terms of the demand. The hard luggage
prices are somehow price sensitive and beyond certain level, an increase in
the selling prices does affect the demand.

F. INTERNAL CONTROL SYSTEMS:

Your Company has an independent Internal Audit Department and have designed
such disclosure controls and procedures that material information relating
to your Company including its subsidiaries is known to the management
immediately. Your Company has designed internal control systems over
financial reporting to provide reasonable assurance regarding reliability
of the statements arid the preparation of the financial statement for
external purpose is made in accordance with the generally accepted
accounting principles. The effectiveness of your Company's disclosure,
controls and procedures is evaluated from time to time. All significant
changes in accounting policies during the year, have been disclosed in the
notes to the financial statement.

G. FINANCIAL PERFORMANCE:

SALES:

The Sales and Other Income of your Company for the year ended 31st March,
2010 was at Rs, 636,78 Lacs (Previous Year Rs 532,25 Lacs). The
consolidated Sales and Other Income for the year under review was Rs.671,24
Lacs (Previous Year Rs 576,39 Lacs).

EXPENDITURE:

Your Company continued its focus on cost management initiatives.

PROFIT:

Profit After Tax for the year under review was Rs.50,05 Lacs (Previous year
Rs.8,91 Lacs). The consolidated Profit after Tax for the year under review
was Rs.48,38 Lacs as against previous year's net loss of Rs. 1,44 Lacs.

H. HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS:

During the year under review, your Company focused on effective execution
of plan through its qualified workforce and achieved its targets as
planned. Through a structured recruitment & training process, your Company
identified and trained both external and internal talent to improve its
capability across the organization, These efforts have yielded results in
all the sections of the business.

Various initiatives and other employee development programs implemented
throughout the year along with external market conditions have helped your
Company in lowering the employee attrition as compared to the last year.

Your Company also continued its effort to build its middle management
talent by hiring from various business management schools. An amicable
settlement was signed with the Union at its Nashik and Sinnar plants on the
7th July, 2009 for a period of 31/2 years. The relationship with the Union
at the plant locations has been cordial, professional and productive while
collectively agreeing to the deliverables of your Company's business goals.
The employee strength as on 31st March, 2010 was 1645.