Chairman’s Statement AT 129th AGM – 30th SEPTEMBER, 2019
On behalf of the Board of Directors and on my own behalf, I extend a very warm welcome to each one of you to the 129th Annual General Meeting of your Company. I thank you for your presence here today and for your continued support.
I would like to brief you on the economic scenario and on your Company’s performance during the year 2018-19.
THE MACRO SCENE
The economy of India is characterized as a developing market economy. It is the world’s fifth-largest economy by nominal GDP and the third-largest by purchasing power parity. According to the IMF, on a per capita income basis, India ranked 142nd by GDP and 119th by GDP per capita in 2018 (source wikipedia).
The long-term growth perspective of the Indian economy remains positive due to its young population and corresponding low dependency ratio, healthy savings and investment rates, and its increasing integration into the global economy.
As a major fiscal booster, the government significantly slashed effective corporate tax on September 20, 2019 for domestic companies. New domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 per cent without claiming any incentives.
Tax concessions will encourage investments to bolster ‘Make in India’, boost employment and economic activity, leading to higher revenue.
During the year 2018-19, your Company recorded a profit of Rs. 1.99 crores against a loss of Rs. 35.54 crores during last year. Let me now take you through the performance of different businesses of your Company during financial year 2018-19:
The Textile Division of the Company is located at Hisar in Haryana with a capacity of 1, 14,096 Spindles. During the year under review, the Profit Before Tax (PBT) increased to Rs. 38.66 crores in financial Year 2018-19 as compared to Rs. 15.51 crores in the previous financial year 2017-18. During the year, the profitability of the Textile Division was higher primarily due to increase in margin on account of increase in yarn prices, higher export market demand and rupee depreciation etc. The said Textile Division of the Company has been demerged as a going concern with effect from appointed date of April 1, 2019 into DCM Nouvelle Limited as per the order of Hon’ble National Company Law Tribunal (NCLT) dated May 1, 2019 which become effective w.e.f. May 13, 2019 upon filing the certified true copy of the order with Registrar of Companies, NCT of Delhi & Haryana.
The Engineering Division is supplying castings across all segments in the automotive market: cars, multi-utility vehicles, tractors, light commercial vehicles, heavy commercial vehicles and earth moving equipment.
During the year, the Division achieved total dispatch of 46,615 MT (previous year 40,957 MT). The Engineering Division continued to make losses because of lower volume due to production constraints primarily on account of IR issues, besides low demand in the last quarter of the year, and decline in margin because of higher rejection and increased input cost.
The current auto slowdown which you are all aware of has been extremely detrimental to the Division resulting in significant loss of sales volume. The labour actions have led to continued problems of high rejections and low productivity.
However, the Division continues to focus on cost optimization and better productivity across all areas of operations.
After putting in significant amount over the years, the Company has been unable to support this Division without inducting a strategic partner and reorganizing the operations and financials of the Division. Thus, it is proposed to spin off this business as going concern to provide for entry of strategic investor and for restructuring of the Company so that the operations can be revived and thereby ensure that payments to banks and creditors are also restructured for orderly payout.
Accordingly, the Board of Directors in its meeting held on May 29, 2019 have recommended for the approval of shareholders for slump sale of the Engineering Business into DCM Tools & Dies Limited, a wholly owned subsidiary of the Company. A resolution in this respect has been included in the AGM Notice for seeking approval of members of the Company.
The IT Division of the Company is an established service provider for managed IT Services globally. The Division has over a decade’s experience in IT Infrastructure services specializing in networking, analytics, cloud, and digital technologies. During the year under review, the sales and other income of the Division was Rs. 44.27 crores (previous year Rs. 44.98 crores) and Profit before Tax (PBT) was Rs 2.25 crores (Previous year Rs. 1.63 crores).
Fresh investments have been made in building sales bandwidth and acquiring tools for further expanding the services business. This should help to provide the desired impetus, especially to the offshore business in future.
Pursuant to the approval given by the Board in its meeting held on September 16, 2019, the said IT business has been transferred/ vested with DCM Infotech Limited as going concern, a wholly owned subsidiary of the Company w.e.f. September 16, 2019. This will facilitate to explore the opportunity to attract private equity/strategic partner(s) to achieve the desired growth and unlock the value of this business.
Further, the Company holds substantial real estate assets at various places in India and the Company shall henceforth focus on the development and management of these assets so as to drive long term annuity value for the shareholders. The current market capitalization does not represent the true value and thus exclusive focus on this will help to expedite the monetization of the assets and bridge the gap between intrinsic value and market capitalization.
Given this financial background, the Board of Directors of your Company does not recommend any dividend for FY 2017-18.
Mr. Chandra Mohan, Mr. L Lakshman and Dr. Raghupati Singhania, Independent Director(s) of the Company resigned on August 7, 2018, June 29, 2019 and July 10, 2019 respectively from the directorship of the Company.
Mr. Narendra Pal Chawla, Nominee Director of Life Insurance Corporation of India (LIC) resigned on December 11, 2018 from the directorship of the Company. Mr. K S Nangyal has been nominated by LIC as its Nominee Director w.e.f. January 11, 2019.
The Board placed on record its sincere appreciation and thanks for the valuable contributions made by Mr. Chandra Mohan, Mr. L Lakshman and Dr. Raghupati Singhania, as Independent Directors of the Company and Mr. Narendra Pal Chawla as Nominee Director of LIC .
During the year under review, Mr. Sushil Kapoor was re-appointed as Whole -Time Director and designated as Executive Director (Engineering Business) of the Company for a further period of 3 year with effect from January 15, 2019 to January 14, 2022. His re-appointment is subject to approval of members of the Company. Accordingly, a suitable resolution for seeking approval of members of the Company for his re-appointment as Whole-Time Director, designated as Executive Director (Engineering Business) of the Company has been included in the Notice of ensuing 129th AGM of the Company.
Mr. Sumant Bharat Ram, Chief Executive & Financial Officer (CE&FO) of the Company has resigned and ceased to be CE&FO of the Company with effect from March 31, 2019. The Board of Directors of the Company have appointed him as an additional director of the Company with effect from April 1, 2019 and he holds office upto the date of ensuing 129th AGM of the Company.
Mr. Sumant Bharat Ram has been appointed as Whole-Time Director of Purearth Infrastructure Limited (Purearth), a Joint Venture Company w.e.f. April 1, 2019. Due to his increasing involvement in his capacity as Whole Time Director of Purearth, Mr. Sumant Bharat Ram has resigned on August 21, 2019 from the Board of Directors of the Company.
Mr. Ravi Vira Gupta, Mr. Bipin Maira, Prof. Sudhir Kumar Jain and Dr. Meenakshi Nayar were appointed as independent director(s) of the Company for a period of five (5) years with effect from August 4, 2014 upto August 3, 2019. The Board of Directors of the Company in their meeting held on May 29, 2019 have re-appointed them as independent directors of the Company for a second term of five (5) years with effect from August 4, 2019 subject to approval of shareholders of the Company by special resolution. Necessary resolution(s) have been included in the Notice of ensuing 129th AGM of the Company.
However, due to pre occupation with other professional activities related to ‘Not for- profit venture’, Dr. Meenakshi Nayar, Independent Director of the Company resigned on August 6, 2019 from the Board of the Directors of the Company. The Board placed on record its sincere appreciation and thanks for the valuable contributions made by Dr. Meenakshi Nayar as Independent Director of the Company.
I, Dr. Vinay Bharat Ram, retire by rotation and being eligible offer myself for re-appointment. Accordingly, necessary resolution seeking approval of members for my appointment as director of the Company, liable to retire by rotation, has been included in the Notice of this Annual General Meeting of the Company.
Mr. Jitendra Tuli, Non-Executive Director of the Company has been appointed as Independent Director of the Company for a period of five (5) years with effect from August 12, 2019 upto August 11, 2024, subject to approval of shareholders of the Company.
On behalf of your Company’s Board, I record our thanks to all our banks, financial institutions, stakeholders, business associates and the Central and State Governments for their co-operation and support.
I would like to place on record the sincerity, hard work, commitment and dedication of our employees. Let me express our deepest gratitude to each one of you, our shareholders. I look forward to your ongoing support.
Speech by Dr. Vinay Bharat Ram, Chairman & Managing Director, at the 129th Annual General Meeting of DCM Limited held on Monday, the 30th day of September, 2019, at New Delhi.