Annual Report - TTK Prestige - 2010-2011

TTK PRESTIGE LIMITED

ANNUAL REPORT 2010-2011

DIRECTOR'S REPORT

Your Directors have pleasure in presenting their Fifty Fifth Annual Report,
together with the Audited Accounts of the Company, for the year ended
31st March 2011 as follows:

FINANCIAL RESULTS
(Rs. in lakhs)

2010-11 2009-10

Sales (inclusive of excise duty) 77558 51680

Other income 430 114

Profit before Extra-Ordinary item 12094 7143

Extra-Ordinary/exceptional income (59) 397

Profit/(Loss) before tax 12035 7540

Tax Provision 3660 2297

Net Profit/(Loss) 8375 5244

Transfer to General Reserve 838 524

Proposed Dividend (including tax) 1645 1320

Surplus carried to balance sheet 9292 3400



REVIEW OF PERFORMANCE:

The performance highlights are as follows:

* Sales grew by over 50%

* All time high absolute value growth - around Rs. 259 crores

* Profit before extra ordinary items increased by 69.31%.

* Profit after tax increased by 59.71%.

* The operating EBIDTA margin was 16.24% as compared to 14.74% in the
previous year. Margins improved due to a host of factors consisting of
price revision, operational efficiencies and economies of scale.

* The Company continues to be debt free except for deposits of Rs. 2.25
Crores. and carries free cash balance/liquid investment of around Rs. 76
Crores

* Earnings per Share (before extra-ordinary/exceptional items) rose to Rs.
74.46 from Rs. 42.98 - a growth of 73.24%

3 The ratio of Operating EBIDTA/Capital employed (including free cash
balance) in the Kitchen Segment rose to 67.3% from 65.02%.

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

AWARDS AND RECOGNITON

a) Corporate Excellence Award

Your company received the coveted Business Standard 'Star SME award for
2009-10'. Your company was selected as the Star SME company amongst several
contenders by a team of six Juries headed by Mr. K V Kamath, Chairman of
ICICI Business Standard. The award was given by the Honorable Prime
Minister of India on 25(th)March 2011.

The parameters and the process for selection of the Star SME were
described by the Jury as follows:

'The year 2009-10 was a year that surprised many - characterized as it was
by a strong growth which followed close on the heels of a sharp decline.
There were only a select few that grew robustly during the downturn and
while positioning themselves strongly take advantage of the growth
opportunity that followed. These are our Business Standard Award Winners
of 2009-10.

Given the uncertainty that characterized the last few years, Business
Standard chose to lay down, consistent growth of 20% each year over a three
year period matched by an equally robust financial performance in terms of
greater than 20% growth in profits during this period, as two key criteria
for the Business Standard Award in all the categories. All short-listed
Companies met these two criteria. The Jury spent considerable time
analyzing, assessing and emphasizing 'Sustainable Strategy' as an important
criteria being the key to the Company's future performance. A customer
centric approach with demonstrated innovation be it through product
offerings, marketing approaches or human resource development carried
significant weightage in the evaluation by the Jury. Finally, the jury
members were of the unanimous view that the core values of the Companies as
reflected in its Corporate Governance needed to be given due importance.'

Your Company met all the above stringent standards to be eligible for this
award.

b) Brand Awards/Recognitions

Your Company's brand 'Prestige' has been recognized by several leading
institutions:

a. Prestige continues to enjoy the recognition as 'Super Brand' in the
kitchen appliances segment.

b.
Your Company was voted India's most Trusted Kit chen Appliances Brand by a
consumer survey conducted by the Economic Times.

c. Your Company was also awarded the 'Master Brand' by the CMO Council.

c) Product Design Award

Your Company was recognized for its unique product design of Apple Pressure
Cooker and was awarded the 'Elle'Decor International Design Award for Best
Product Design', which is the biggest honour for product design in India.

d) Retail Awards/Recognitions

a. 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

b. Franchise Award for the category of Home Products/Furnishings/
Appliances by Franchise World.

c. Best Franchiser in the Home Category by Franchise Plus.

MANAGEMENTS' DISCUSSION AND ANALYSIS

A. ECONOMY/INDUSTRY SCENARIO

Financial year 2010-11 witnessed high inflationary trend throughout the
year though the rate of growth of inflation dropped towards the fag end of

the last quarter of the financial year. Interest rates also hardened during
the last quarter. The high inflation especially with respect to basic
items of consumption did have an impact on spending power of the consuming
public.

Against the above backdrop, your company registered a growth of 50%.

Your Company operates in the kitchen appliances segment with a wide range
of product categories. The product categories consist of Pressure Cookers,
Non-stick Cookware, Gas Stoves and Domestic Kitchen Electrical Appliances.
The market for Pressure Cookers is shared amongst organized national
branded players, regional players and unorganized players. Over the years,
the share of the unorganized players has been gradually coming down as
there has been a shift in the consumer preference to reliable branded
players. The market for organized brands is estimated at more than 60% of
the total market. The share of unorganized players is greater for Non-stick
cookware as compared to pressure cookers. For the rest of the product
categories, the market structure is fragmented and the share and the role
of regional brands and unorganized players continue to be 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.

Over the last few years your company has been quite successful in extending
Prestige brand over several product categories used in the kitchen. This
has been made possible by continuous offering of quality upgraded products
well differentiated from the products of other players. The strategy of
focusing on Total Kitchen Solutions has been creating newer and newer
opportunities every year and the company is continuously expanding its
product as well as consumer base across several geographies.

The recently introduced range of products like Induction Cook Tops,
Induction compatible cookers and cookware, Apple range of inner lid
pressure cookers, Microwave pressure cookers and value added Gas Stoves
have been well received in the market.

The Indian economy is growing between 8-9% over the last few years and this
growth is expected to be maintained. The private consumption expenditure
growth which is estimated at 8.8% in 2010-11 is expected to register an
overall growth of 7.5% in 2011-12. This growth is expected to be maintained
notwithstanding the inflationary pressures. This coupled with rural
employment guarantee scheme which has provided adequate purchasing power in
the hands of consumers and is expected to result in larger consumer spends
in the coming years.

Keeping the above factors in mind, your Company has adopted a new Vision 'A
Prestige in every Indian Kitchen'. Your Company will continue to be guided
by its core values

- Quality consumer products at affordable prices

- Trust, Transparency, Knowledge and 'Prestige' in whatever we do

- Fairness in dealings with every stakeholder

- Respect for Environment

Your Company is aware of its core strength of distribution and is
continuously expanding its distribution network to focus on all channels
consisting of direct dealers, authorized redistributors, large format
stores, institutions, Multilevel marketing and exclusive Prestige Smart
Kitchen retail network.

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 continuously monitoring the situation and will continue to
have dynamic set of strategies to deal with such situations.

Your Company's export strategy will 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 Rs. Lakhs)

2010-11 2009-10

Domestic Export Total Domestic Export Total

Pressure Cookers 29192 2498 31690 22515 1551 24066
(including
microwave pressure
cookers)

Non-stick Cookware 15354 45 15399 8714 11 8725

Kitchen Electric 19292 - 19292 10372 - 10372
Appliances

Gas Stoves 8085 - 8085 6106 - 6106

Others 3027 65 3092 2362 49 2411

Total 74950 2608 77558 50069 1611 51680

a. Domestic Sales registered a growth of 49.69% while exports registered a
growth of 61.8%.

b. The traditional product categories, namely, Pressure cookers and
Cookware registered a growth of approx 30% and 76% respectively in domestic
market.

c. The growth in non-traditional product lines like gas stoves and kitchen
electrical appliances has been very impressive at 32% and 82% 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 14.74%
to 16.24%. The overheads as a percentage of gross sales dropped by 3
percentage points. 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
and in fact further improved the working capital to turnover ratios. This
has enabled your Company to generate significant free cash flows as
detailed elsewhere in this report.

g. Towards the fag end of the last year your Company launched a host of
products consisting of well differentiated Induction cook tops, Induction
compatible pressure cookers and cookware, Microwave Pressure Cookers and
Apple range of inner lid pressure cookers. All these product categories
were very well received during the financial year under report. Your
Company also introduced several new variants in the Appliances segment. The
total of new SKUs introduced during the year under report was around 67.

h. Your company continues to consolidate and expand Prestige Smart Kitchen
retail net work. The net addition during the financial year was 51 and the
number of outlets as at 31.3.2011 was 279. The network now covers 19 States
and 153 towns.

2. Properties & Investment:

The shareholders are aware that pursuant to shifting of factory operations
to other places, the land at Dooravaninagar Bangalore became surplus and it
was decided to develop the same instead of selling it outright. The company
has handed over the development to Rajmata Realtors (Salarpuria) for
developing an office cum residential complex. All necessary sanctions and
approvals have been received and the preparations for construction have
just begun.

D. OUTLOOK

While increase in the level of real private consumption is encouraging, the
persistent inflationary trend can somewhat affect the disposable income.
Given the wide product range and efforts to increase the width and depth of
distribution, your Company expects to sustain a reasonable growth rate.

E. RISKS AND CONCERNS

The overall inflationary trend and steady increase in key metal prices
are matters of concern. However your Company is continuously improving its
efficiencies and is hopeful of maintaining healthy margins and return on
capital employed. Your company will not compromise on the objective of
growth and improving market share 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.

Risks are being identified in relation to business strategy, operations and
transactions, statutory legal compliance, financial reporting, information
technology System and overall internal control frame work.

Your company has engaged the services of independent professional
management auditors for advising the company on a continuous basis on
contemporary risk management framework appropriate to the size and
operations of the Company. They will also carry out risk audit on a
periodical basis.

G. FINANCES

Your Company has generated Post-tax free cash flows of more than Rs. 80
Crores. As the shareholders are aware the Company is in the process of
expanding its capacities and is also setting up new capacities. The free
cash flows generated will be utilized to fund such capital expenditure. As
the overall capital expenditure outlay will be in excess of Rs. 200 crores
covering financial years 2010-11 and 2011-12 your Company will resort to
temporary borrowing during the financial year 2011-12.

H. INVESTMENTS

The Company had invested surplus funds in debt mutual funds to the tune of
Rs. 22 crores. However, the same will be liquidated from time to time and
deployed for meeting capital expenditure. Other than this there is no
change in Investments.

I. INTERNAL CONTROL SYSTEMS

Your Company has further strengthened the internal control and internal
audit systems by engaging services of management audit firms who will focus
on risk management processes, operational efficiencies and improved
utilization of SAP processes.

J. DEVELOPMENTS IN HUMAN RESOURCES

Given the rapid growth of the Company and proposed expansions, the Company
requires a more focused approach for HR development. Therefore the Company
has engaged the services of an outside expert to develop HR strategies for
the next 3 years which will cover the entire gamut of recruitment,
development, succession planning and employee compensation.

Long term settlement for the Hosur factory has expired on 31(st)March 2011
and negotiations are going on for a fresh settlement.

The direct employment strength stood at 995 as compared to 913 in the
previous year.

CAPITAL EXPENDITURE & EXPANSION PLANS

Your Company has developed an overall capital expenditure plan covering
financial years 2010-11 and 2011-12. The overall outlay is over Rs. 200
crores out of which a sum of Rs. 32 crores has been spent during the year
2010-11. The balance will be incurred in the year 2011-12 and 2012-13. The
capital expenditure outlay will cover expansion of capacities at Kinnathu
Kidavu village near Coimbatore and Roorkee in Uttarakhand as well as
establishment of fresh capacities in western India.

DIRECTORS

Mr. R. Srinivasan, Dr. (Mrs) Latha Jagannathan and Mr. K. Shankaran
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. 224.56 lakhs as on 31(st)March 2011.
There were no unclaimed deposits which remained unpaid as on that date.

DIVIDEND

Your directors recommend payment of a dividend of Rs. 12.50 per share for
the financial year 2010-11.

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 reappointment.

LISTING

Your Company's 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 2010-11, your Board of Directors have annulled forfeiture of
1200 shares.

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

(T.T. JAGANNATHAN)
Executive Chairman

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

Place: Bengaluru
Dated: 4th May, 2011

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 31(st)March 2011.

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.

C. FOREIGN EXCHANGE EARNINGS & OUTFLOW

1) Inflow Export of Goods (FOB) - Rs. 2606.86 lakhs

2) Outflow Import of Goods & Others - Rs. 11492.90 lakhs