The Directors of your company have pleasure in presenting the Thirty-fourth Annual
Report together with the Audited accounts of the Company for the year ended 31st March,
The financial performance of the Company for the year ended March 31, 2013 is
||(Rs in crores)
|Earning before Finance Costs, Depreciation and amortisation expenses & Taxes
|Less: Finance Costs
|Depreciation & Amortisation
|Add: Extra-Ordinary Items-
|(Profit on sale of investment in Associate Company)
|Profit before Tax
|Less: Provision for Taxes
|Profit after Tax
|Add: Balance in Profit & Loss A/c
|Transfer to General Reserves
|Dividend on Equity Shares
|Tax on Dividend
PERFORMANCE OF THE COMPANY:
Your Directors are pleased to inform the improved performance of your Company for the
financial year ended on March 31, 2013 and the following highlights evidence the
performance during the said period:
The revenue from operations increased by 16%.
The EBITDA increased to Rs 115.88 Crores as against Rs 87.82 Crores in the last
Export increased to Rs 428.29 Crores from Rs 362.22 Crores, showing growth of
Revenue from Domestic Market increased to Rs 154.57 Crores from 145.37 Crores
showing a growth of 6%.
Profit before tax increased to Rs 64.39 Crores from Rs 51.56 Crores, showing a
growth of 25%.
Cash Profit increased to Rs 63.36 Crores from Rs 50.58 Crores, showing increase
Net profit increased to Rs 43.44 Crores from Rs 35.31 Crores, showing increase
Considering the shareholders aspirations, the Board of Directors has recommended a
Dividend of Rs 0.50 (25%) per Equity share of Rs 2/- each for the year ended 31st March,
2013. The said dividend, if approved, will absorb Rs 5.43 Crores (including Dividend
MANAGEMENT DISCUSSION AND ANALYSIS
Industry Structure and Developments
Leather Industry has a special place in the economy of the country. The leather
industry is spread in different segments, namely, tanning & finishing, footwear &
footwear components, leather garments, leather goods including saddlery & harness,
Today, Leather Industry is considered among major contributory in India`s growth
factors. It acts as catalyst to reduce Fiscal deficit of the country by emerging as one of
the biggest forex earner along with providing employment opportunities to skilled / semi
skilled young Indian population. The leather industry is an employment generating sector,
providing jobs to 2.5 million people, mostly from the weaker sections of the society. The
down stream industries of leather sector such as shoes, garments and leather goods
factories have provided large employment opportunities for women. Woman employment is
predominant in leather products sector with about 30% share.
Government of India, keeping in view the importance of Industry in India`s growth
policy, banned the export of raw or semi finished leather in 1991-92 and allowed only
finished leather for export resulting into conversion of tanner to product maker thus
creating actual creation of wealth both for Industry and producer. During this year also,
Finance Minister, while presenting Union Budget, reduced duty on import of specified
machineries for manufacture of leather & leather goods from 7.5 % to 5% showing their
sign of concern for further development of leather Industry.
India achieved an export performance close to US $ 5 billion mark for the first time in
2012-13 and hopeful to achieve positive growth this year too. The provisional data for the
period April-May 2013 vis-a-vis April-May 2012 available with Council for Leather Exports
(CLE) indicates that our export have performed quite well showing a positive growth of
about 9.5% during this period.
Opportunities and Threats
Sky is the limit for opportunity. The changes across the countries have shown that
India has a huge window of opportunities to move up the ladder in leather market as
developed economies face financial crunches and labour shortages. China is seeing
structural changes with local governments increasing minimum wages, especially in export
belt concentrated around southern China, as well as encouraging move to develop high tech
manufacturing sectors like electronics, telecommunications etc. which can pay higher wages
to workers. This has added the pressure for labour intensive industries such as leather
products. Thus, labour arbitrage provides a significant opportunity for migration of
capacities to India, provided FDI is actively facilitated. Also, Buyers across the
developed world are seeking to develop the alternate sourcing locations as part of their
risk management strategies. India can create large capacities to match this demand.
Various favorable factors are
abundant scope to supply finished leather to multinationals setting up shops in
growing fashion consciousness globally and in domestic market;
large raw material base;
rising potential in the domestic market;
export / production capacity of Indian exporters;
Government support to industry;
use of e-commerce in direct marketing and use of information technology and
support softwares for efficient production cycle;
ready availability of highly skilled and cheap manpower.
Further, MIL also recognized growing trend among youth for branded products and our
marketing team is catering to this opportunity being reflected by our incremental
Threats, Risks & Concerns
Along with numerous opportunities, there also exists threats to the Industry from
several factors which if remain ignorant can damage the Industry as a whole. Major of
amongst them are:
the resurgence of the recession in the Europe, being a major and traditional
market for us, is a cause of concern for the industry;
entry of Multinationals in domestic market;
stricter international standards;
major part of industry is unorganized;
lack of skilled labour;
non-tariff barriers - developing countries are resorting to more and more
non-tariff barriers indirectly;
high inflation coupled with higher commodities and raw hide prices;
rising interest rates.
MIL is also exposed to above risks and have to follow its Risk Management Policy by
hedging the risks associated with exchange rates fluctuations. To meet working capital
requirements and to fund the capital expenditure plans, MIL borrows fund from Banks and
hence is exposed to upward movement in interest rates.
In order to benchmark Indian Leather Industry against the best practices of
international leather Industry, major factors limiting the growth of firms in the leather
industry need to be addressed. The decisive factors are: access to capital, high per
capita cost, availability of skilled labour, taxation and regulations, stable currency,
global competition and high employee cost. At the macro level, the key constraints of the
leather industry, particularly in its shift to a high value chain segment, is quality of
raw materials, absence of an institutional mechanism for design, inability of Indian
producers to build the brand despite a huge domestic markets and technology gaps. There is
a need for huge capacity addition to meet future demand but currently there is a quantity,
quality and qualification mismatch.
India has developed itself into one of the major leather, footwear and leather goods
producing country in the globe with the largest livestock, positive investment framework
and excellent industrial infrastructure. India is the second largest shoe producer of the
world with advantage of product cost.
Segment wise Performance
The Company`s business segments are primarily Shoe Division and Tannery Division.
During the year under review, the Shoe Division revenue was Rs 557.31 Crores as against Rs
491.14 Crores in the previous year and Tannery Division revenue was Rs 169.53 Crores as
against Rs 144.03 crores in the previous year.
Internal control systems and their adequacy
MIL has established adequate internal control procedures, commensurate with the nature
of its business and size of its operations. To provide reasonable assurance that assets
are safeguarded against loss or damage and that accounting records are reliable for
preparing financial statement, management maintain a system of accounting and controls,
including an internal audit process. Internal control are evaluated by the internal Audit
Department and supported by Management reviews. All audit observations and follow up
actions there on are tracked for resolution by the internal Audit function and reported to
MIL recognizes human resources as its main asset and it is our constant endeavor to
induct more and more number of intellectual and skilled labour in the Organization.
Various Human Resources Policies are framed and implemented for the development of the
employees as well as the organization. The Company has a strength of about 2518 employees
as on March 31, 2013.
Corporate Social Responsibility
MIL is committed to high standards of Corporate Social Responsibility (CSR). The
Company believes that business growth should propel community growth and create value for
all stakeholders. The Company focuses on inclusive growth by fostering social capital
through health. MIL has established by funding AZAD MULTISPECIALITY HOSPITAL AND RESEARCH
CENTRE LTD (A Non Profit Organization, registered under Section 25 of the Companies Act,
1956) and has undertaken several initiatives focused on improving health care access to
the community. The Camp for Free Eye Check up and operations for IOL (Intra Ocular Lens)
was conducted successfully, providing great relief to poor masses of the nearby villages.
MIRZA FOUNDATION, a Society registered under the Act, is designed to promote and support
employment and local economic development through vocational training, and development of
soft skills. A Vocational Training Institute is being run by the MIRZA FOUNDATION,
providing skill education to unemployed youths, mostly belonging to Scheduled Castes and
Other Backward Class, who are being absorbed in Units situated in nearby areas, thus,
improving socio-economic condition and environmental development.
The company has not accepted any deposits from the public within the meaning of Section
58A of the Companies Act, 1956 during the year under review.
During the year under review, the exports amounted to Rs 428.29 Crores as against Rs
362.22 Crores in the previous year showing a growth of 18.24%
MIL has penetrated into the best of international fashion markets and is today a
respected quality statement in its sphere of operations. Company`s flagship brand
`REDTAPE` enjoys customer`s admiration and confidence and is one of the highest selling
brand in Men`s footwear market.
Keeping in view the lifestyles changes (rising middle class population, increasing
investment in supermarkets, hypermarkets and organized retail sector, resulting in greater
demand for sophisticated and attractive quality products), your Company is also marketing
the apparels and leather accessories under the Brand `REDTAPE` through its own Retail
outlets and franchisees Retail shops. Visitor`s list of www.redtape.com is also increasing
day by day resulting into increase of domestic turnover beyond Rs 100 crores. MIL has 72
retails outlets of REDTAPE across the country which is scheduled to increase upto 150 over
a period of 3 years across India.
In accordance with the provisions of the Companies Act, 1956 and the Article of
Association of the Company, Mr. Q.N. Salam, Mr. Shahid Ahmad Mirza, and Mr. Tauseef Ahmad
Mirza, Directors of the Company, are to retire by rotation at the ensuing Annual General
Meeting of the Company and being eligible, offer themselves for re-appointment and your
directors have recommended for the same.
AUDITORS & AUDITORS` REPORT
M/s Khamesra Bhatia & Mehrotra, Chartered Accountants (Firm Registration No.
001410C), Auditors of the Company will retire at the conclusion of the forthcoming Annual
General Meeting and are recommended by the Board of Directors for reappointment.
Certificate from the said Auditors has been obtained to the effect that their
reappointment, if made, would be within the limits specified under Section 224 (IB) of the
Companies Act, 1956.
The Auditors` Report to the members on the accounts of the Company for the year ended
31st March, 2013 does not contain any qualification.
As per the government directives, the Company`s cost records in respect of PVC/TPR Sole
and Rubber Sole for the year ended 31st March, 2013 are being audited by Cost Auditor, Mr.
A.K. Srivastava, Cost Accountant (Membership No. 10467) who was appointed by the Board
with the approval of Central Government. Cost Audit Report for the FY 2011-12 was filled
on 11.04.2013, with in stipulated time. The Cost Audit Report for the F.Y. 2012-13 shall
also be filed within prescribed time.
PARTICULARS OF EMPLOYEES
A statement of Particulars of employees as specified under Section 217(2A) of the
Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended, is set out in the Annexure forming part of the Directors` Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO
The Particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956 read
with Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988
are set out in Annexure forming part of the Directors Report.
DIRECTOR 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 annual accounts for the financial year ended 31st
March, 2013 applicable accounting standards have been followed along with proper
explanation relating to material departures.
ii. That the Directors had 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 of the Company for that period.
iii. That the Directors had taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of this Act for safeguarding
the assets of the Company and for preventing and detecting fraud and other irregularities.
iv. That the Directors had prepared the annual accounts for the financial year ended
31st March, 2013 on a `going concern basis`.
Your Directors take this opportunity to express their gratitude to the bankers,
employees, suppliers and the Shareholders and various government departments for their
support and co-operation.
For and on behalf of the Board
|Place : Kanpur
|Date : 30th July, 2013
ANNEXURES TO THE DIRECTORS` REPORT
STATEMENT AS REQUIRED UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH THE
COMPANIES ACT (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES,
Conservation of Energy:
Energy Conservation measures taken during the year:
Major energy conservation measures carried out during the year 2012-13 have been:-
1. Energy efficient motors were provided in place of old one resulting to saving in
2. Installation of new types of Tanning Drums and Paddles for the process of Wet Blue
and Dying, to reduce power and water consumption.
3. Installation of new Power Factor Control Panel to improve the Power Factor to reduce
the power consumption.
4. Steam leak reduction-steam leakage survey was carried out across the factories.
Identified source of leakages and arrested.
5. Use of Compact Fluoresent Lamps(CFL) in place of the conventional lighting to reduce
Research and Development (R&D)
Research and Technology and innovation continue to be one of the key focus area to
drive growth. In addition to developing new design, pattern and styles of Companys`
product it also works on building new capabilities. To support this, Company avails
services of qualified and experienced professionals/consultants.
Technology Absorption, Adaptation and Innovation
The Company develops in-house Technology and is not dependent on any outside
Foreign Exchange Earnings and outgo
During the year, the foreign exchange earned was Rs 428.29 Crores mainly on account of
exports. The foreign exchange outgo was Rs 5.63 Crores.
STATEMENT OF PARTICULARS UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH THE
COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 FORMING PART OF THE DIRECTORS` REPORT FOR
THE YEAR ENDED 31ST MARCH, 2013.
||Gross Remuneration Rs
||Date of Commencement of employment
||Particulars of Previous Employment
|Mr. Rashid Ahmed Mirza
||Diploma in Leather Technology, London
|Mr. Shahid Ahmad Mirza
||Diploma in Leather Goods Technology U.K.
|Mr. Tauseef Ahmad Mirza
||Diploma in Shoe Technology London.
|Mr. Tasneef Ahmad Mirza
||Degree in Leather Technology, London
1. All appointments are made on the contractual basis.
2. Mr. Rashid Ahmed Mirza, Mr. Shahid Ahmad Mirza, Mr. Tauseef Ahmad Mirza, and Mr.
Tasneef Ahmad Mirza being brothers and sons of Mr. Irshad Mirza, Chairman (Executive) of
the Company, are related to each other within the meaning of Companies Act, 1956.
3. Remuneration includes salary and Perquisites as per rules of the Company and
recorded under the Income Tax Act, 1961.
||For and on behalf of the Board
|Place : Kanpur
|Date : 30th July, 2013