Hyderabad Flextech Director Report

The Directors present their 17th Annual Report for the year 2008-09(9

Months) together with the Balance Sheet as at 31st March, 2009 and the

Profit & Loss Account for the year ended on that date.



1. FINANCIAL RESULTS :



(Rs.lakhs)

2008-09 2007-08

(9 Months) (15 Months)



Operational Income 227.98 235.40

Other Income 14.43 104.50

Total Income 242.41 339.90

Operating Profit/(Loss) 6.29 (26.33)

Depreciation & Interest 93.81 159.78

Profit/(Loss) for the year (87.52) (100.22)



2. OPERATIONS:



During the year under review, the company has recorded an operational

income of Rs. 227.98 lacs (for 9 months as against the income of Rs.

235.40 lacs for 2007-08 15 months). However, your company has suffered

a loss of Rs 87.52 lacs on its operations for (he year under review

against the loss of Rs. 100.22 lacs for 2007-08. Further, the Export

market is still not encouraging due to stiffer competition in the

international market. The domestic sales have contributed Rs 69.80 lacs

in the total sales for the year under review.



3. DIRECTORS:



In accordance with the provisions of Companies Act, 1956 and the

Companys Articles of Association, Dr.Abid Hussian and Sri J.S.Krishna

Murthy retire by rotation and, being eligible, offer themselves for

re-appointment.



4. DIRECTORS RESPONSIBILITY STATEMENT:



Pursuant to the requirement under Section 217(2AA) of the Companies

Act. 1956. with respect to Directors Responsibility Statement, it is

hereby confirmed:



(i) That in the preparation of the accounts for the financial year

ended 31st March, 2009, the applicable accounting standards have been

followed along with proper explanation relating to material departures;



(ii) That the Directors have selected such accounting policies and

applied them consistently and made judgments and estimates that were

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

loss of the company for the year under review.



(iii) That the 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

the Company and for preventing and detecting fraud and other

irregularities; and



(iv) That the Directors have prepared the accounts for the financial

year ended 31st March. 2009 on a going concern basis.



5. MERGER WITH M/s KEERTHI INDUSTRIES LIMITED:



As you are aware, your Company is in the process implementing scheme of

merger with M/ s. Keerthi Industries Limited (the transferee company).

The merger petition is pending before the Honble High Court of Andhra

Pradesh for its approval.



6. REPLY TO AUDITORS QUALIFICATIONS: STATUTORY PAYMENTS - PF, TDS &

ESI:



Regarding delay in payment of PF, TDS & ESI contributions your

Directors would like to inform you that the payments were delayed due

to liquidity issues. Further, the payments to the aforesaid Departments

are paid for the year under review.



The company has extended unsecured loan Rs. 9.00 lacs to M/s. Hyderabad

Bottling Company Ltd. (HBCL), where some of the Directors of the

company are the majoriy, for its urgent requirements. In fact, HBCL has

invested an amount oi Rs. 268.34 lacs in the 9% redeemable preference

shares issued by the company in the year 2001 on which the company has

not been able to pay any dividend so far. In view of the above, your

Directors are of the opinion that the small loan extended to HBCL is

not pejudicial to the interest of the company.



Compliance of AS-15



As regards the Auditors qualification in the compliance of AS-15 your

directors would like to clarify that the company is in the process of

merging with M/s. Keerthi Industries Ltd and the effective date of

merger is taken as 1st April. 2007. The compliance will be ensured in

the merged entity during the current year (Post merger).



7. AUDITORS:



M/s.Brahmayya & Co., Chartered Accountants. Hyderabad, the present

Auditors, retire at the ensuing Annual General Meeting, and are

eligible for re-appointment.



8. PERSONNEL:



Employer-Employee relations remained cordial during the year under

review. Your Directors place on record their sincere appreciation of

the contribution made by the employees of the Company at all levels. As

regards, information pursuant to Section 217(2AA) of the Companies Ae(,

1956 read with Companies (Particulars of Employees) Rules. 1975 (as

amended), there are no employees governed by the said provisions.



9. ADDITIONAL INFORMATION:



Information pursuant to Section 217(e)&(2A) of the Companies Act, 1956

read with Companies (Disclosure of Particulars in the Report of Board

of Directors) Rules. 1988 is annexed herewith.



10. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:



Industry Structure and Developments:



Your Company is one of the few companies specialized in manufacturing

flexible printed circuit boards in India. The flexible PCBs being sold

by the Company in India is an import substitute. The PCB industry

purely depends on electronic industry. The Electronic Industry is

looking up and doing well giving a scope for PCB industiy to expand.



Opportunities and Threats:



Spreading into domestic market, as an import substitute is a major

opportunity for the Company. However due to fall in exports, there is a

constraint on DTA eligibility. Therefore, the Company would have to

make DTA sales by paying full Excise Duty, which is an additional

burden on the margins. The company has been following this system

through out the year under review.



Segment or product-wise performance:



Segment or product-wise performance is not required to be given as the

Company has only one business segment and one product during the

financial year under review.



Outlook:



The company is expecting to improve its prospects by concentrating on

the domestic sales, which are encouraging comparatively.



Risks and concerns:



The machinery being Fourteen years old, requires thorough overhauling

and replacement of certain high cost spares. Further, to be more cost

effective, the plant needs to be modernized to match the latent

technology.



Internal control systems and their adequacy:



The company has adequate internal control systems. Further, the Company

also has independent internal auditors, who conduct periodical audit

and their report is taken into account by the Management as well as the

Statutory Auditors.



Financial/operational performance:



This has been already discussed elsewhere in this Report.



Human Resources/Industrial Relations:



The company enjoys very cordial industrial relations and there is very

low employee/labour turnover in the company. You will be happy to note

that ever since the inception of the Company, there were no strikes,

lockouts, lay- offs, retrenchments, etc.



11. ACKNOWLEDGEMENTS:



Your Directors take this opportunity to thank all the Central and State

Government authorities, the Department of Electronics, the Central

Excise and Customs officials and officials of STPI for their whole

hearted co- operation. Your Directors place on record their

appreciation for the valuable support given by State Bank of India.





On behalf of the Board



J.S. Rao J. Triveni

Managing Director Director



Place : Hyderabad

Date : 2nd September, 2009