MIRZA INTERNATIONAL LIMITED
ANNUAL REPORT 2011-2012
The Directors of the Company hereby present the Thirty Third Annual Report
together with Audited Accounts of the company for the year ended 31st
The financial performance of the Company for the year ended March 31, 2012
is summarised below:
(Rs. in Crores)
Total Revenue 556.85 485.69
Earning before Finance Costs, Depreciation
and Amortisation Expenses & Taxes 87.82 84.16
Less: Finance Costs 27.20 17.43
Depreciation & Amortisation 15.27 13.13
Add: Extra Ordinary Items-
(Profit on sale of investment 6.21 -
in Associate Company)
(Profit on sale of one unit) - 3.89
Profit before Tax 51.56 57.49
Less: Provision for Taxes 16.25 18.30
Profit after Tax 35.31 39.19
Add: Balance in Profit & Loss A/c 91.12 61.34
Transfer to General Reserve 4.00 4.00
Proposed Dividend- Equity Shares 4.64 4.64
Dividend on Tax 0.75 0.77
Closing Balance 117.04 91.12
PERFORMANCE OF THE COMPANY
FY 2011-12 was the challenging year for your Company as global economy in
general,and Euro Zone in particular, witnessed lower economic growth
coupled with rising inflation fueled by higher interest rates and higher
oil prices. Company`s margin were impacted due to higher cost of major
input items like raw hide and chemicals and also on account of increased
cost of finance. But despite such stringent external challenges, your
Company performed reasonably well and the highlights of the performance are
* The revenue from operations increased by 15% to Rs.556.85 Crores.
* The EBITDA increased to Rs.87.82 Crores as against Rs. 84.16 Crores in
the last year.
* Export increased by 16% to Rs. 362.22 Crores.
* The revenue from Domestic Market increased by 22% to Rs. 145.02 Crores.
* The Profit before Tax decreased by 12 % to Rs. 51.56 Crores.
* The Cash Profit decreased by 5% to Rs. 50.24 Crores.
* The Net Profit decreased by 11% to Rs. 35.31 Crores.
Considering the shareholders aspirations and keeping in view the ongoing
expansion plan of the Company, Directors have recommended a dividend of
Rs.0.50 (25%) per Equity Shares of Rs. 2/- each for the year ended 31st
March, 2012. The said dividend, if approved, will absorb Rs. 5.39 Crores
(including Rs. 0.75 Crores towards dividend tax).
As stated in our previous report, the plan to enhance the existing
production capacities are at advanced stage of implementation. The
production at newly set up ultra modern Shoe Unit of Greater Noida was
started and capacities at other Shoe Unit are also being enhanced as
planned. This will further augument the overall production volume and also
effeciency levels to improve profitability.
DISINVESTMENT IN MIRZA (UK) LTD.
During the year 2011-12, the Company has disinvested its entire stake in
Mirza (UK) Ltd. and earned net gain of Rs. 6.21 Crores.
MANAGEMENT DISCUSSION AND ANALYSIS
Industry Structure and Developments
In India, Leather Industry occupies a valuable place among all the
industries of the economy. This sector is known for its high export
earnings and generation of employment opportunities to about 2.5 million
people of the country. The Government policies on leather and leather
export products started changing from 1974 and priorities were given for
export of value added goods. From the year 1991 onwards only finished
leather were exported and export of raw or semi finished leather was
banned. Many tanners started setting up factories for manufacturing leather
products after 1991-92 like shoe uppers, shoes, garments and leather goods.
Similarly many shoe and garment manufacturers began to seek backward
linkage, by taking on lease or setting up tanneries. This is a unique
development in India, a tanner becoming product maker and the product
sector setting up tanneries or leasing out tanneries. At the same, as
incentive to the exporters, the import duties on capital goods have been
reduced. Until 2002, the leather sector was reserved for small scale sector
and this may have prevented Foreign Direct Investment (FDI) in this sector.
Today, the Indian Leather Industry is the second largest producer of
footwear and leather garments in the world with growing domestic market for
footwear and leather articles which shall lead to further growth and
development of the sector.
Export of Leather and Leather products have registered a positive growth in
rupee as well as in dollar terms. As per officially notified DGCI&S export
data, export of leather and leather products for the first eleven month of
2011-12 i.e. April, 11-February, 12 touched US$ 4508.21 mn as against the
export of US$ 3558.23 mn during the same period in previous year.
Opportunities, Threats, Risks & Concerns
Among the major producers of finished leather in the world, the Indian
Leather Industry has a long tradition of supplying high quality leather for
the global market. Indian tanning industry produces over 2 billion square
feet of leather per annum. There has been emphasis by Government on its
planned development, aimed at optimum utilisation of available raw
materials for maximising the returns, particularly from exports. The
exports of leather and leather products gained momentum during the past two
decades. The Industry has the tanning capacity to fulfill 10% of global
leather requirements. Your Company is one of the fastest growing Company
among the Leather Industry of India. Our brand REDTAPE has its recognition
in major Countries of EU, USA etc. We further believe that there is lot of
opportunities in Leather Industries thanks to the Foreign Trade Policy, of
Govt. of India as inducting leather sector as a `Focus Sector`. Further,
growing fashion consciousness globally and growing international and
domestic markets for leather products also enhances the business
opportunities for this Industry. This is where the opportunities lies for
The Leather and Footwear Sector has been identified by the Government as
one of the areas where India could be globally competitive. The Department
of Industrial Policy & Promotion (DIPP), Government of India, as part of
the Industrial Leather Development Programme (ILDP) has notified Mega
Cluster Development Scheme and has allocated an amount of Rs. 600 Crores to
support the leather industry by establishing new Greenfield clusters at
various parts of the country to create world class infrastructure and
assist the entrepreneurs to set up units with modern infrastructure, latest
technology. The Scheme would enhance the competitiveness by increased
productivity and by higher unit value realizations. The Hon`ble Union
Minister for Commerce, Industry and Textiles announced the Annual
supplement 2012-13 to the Foreign Trade Policy 2009-14, incorporating a
number of further incentives made available to Leather Industry and to
reduce transaction cost to the exporters and augmenting foreign currency
inflow to banks which in turn would facilitate their foreign currency loans
Threats, risks & concerns
Apart from numerous opportunities for this sectors, there also lies
challenges, risks & concerns. The performance of global competitors in
leather and leather products indicates that there are at least 5 countries
viz, China, Indonesia, Thailand, Vietnam and Brazil, which are more
competitive than India. The weakening of the Eurozone is also a matter of
concern for Export Industry though it had not adversly effected us yet.
Fast Changing fashion trends are difficult to adapt for the Indian Leather
Industry. The major international footwear brands have commenced operations
in India realizing that Indian Market is likely to emerge as one of the
largest market in the World in the next few decades. FDI approvals are
being given in single/multi brand Retail operations. Besides above, the
challenges on account of higher commodity prices, high inflation in general
and rising interest rates are the factors of threat to Indian Players. The
lingering recessionary trends in our traditional market of Europe threatens
to significantly affect our export growth this year (2012-13) and hence,
there is need to provide additional support to the industry immediately so
as to cope-up with the challenging times ahead.
MIL is subject to risks arising from interest rate fluctuations. MIL
borrows funds in the domestic market to meet the long-term and short-term
funding requirements for its operations and funding its growth initiatives.
A majority of the MIL`s borrowings are floating rate debt and hence are
exposed to upward movement in interest rates.
Changes in the rupee value in foreign exchange market may have a negative
impact on MIL`s operations and financial conditions. As such, exchange rate
fluctuation is also a area of concern for us and we have to enter into
forward contracts in order to hedge the risk associated with this market.
Segment wise Performance
The Company`s business segment is primarily Shoe Division and Tannery
Division. During the year under review, the Shoe Division revenue was
Rs.494.32 Crores and Tannery Division revenue was Rs. 144.24 Crores.
Indian Economy is estimated to grow by 6.9 %. The GDP is expected to be
about 7.6 % for the next financial year 2012-13. The slowdown in the rate
of investments and the poor performance by the industrial sector were the
major factors for the decline in the rate of GDP of the country. Inflation
slowly marked in December 2011 and January 2012 after sustained
inflationary pressures over the last two years. Food prices increase were
pushing inflation initially, but core inflation has been the main component
of overall inflation since September 2010. While food prices fell in
December and January, core inflation still remained elevated. Monetary
policy was tightened by the Reserve Bank of India (RBI) to control
inflation and curb inflationary expectations. The growth rate of investment
in the economy is estimated to have registered a significant decline during
the current year. The year witnessed a sharp increase in interest rates
that resulted in higher costs of borrowings, and other rising costs
affecting profitability and, thereby, internal accruals that could be used
to finance investment.
Internal Control System and Their Adequacy
The Company has proper internal control system as required by the norms of
the Industry it belongs to and it consistently monitors them to have better
management and control over the working and performance of the company. The
Internal Audit of the same is duly conducted and reviewed by the Statutory
Auditors and the Audit committee.
The Company`s organisational structure has well defined Risk Management
Policy. The Key Managerial Personnels are responsible to formulate, assess
and review the key risk factors and accordingly generate the risk
management policies for present and future performance.
The Company recognizes human resources as its strength and welfare of the
work force is one of its key consideration to look upon. Various Human
Resource Policies are framed and implemented for the development of the
employees as well as the organisation. The Company has a staff strength of
about 2611 employees consisting of persons well qualified and trained in
their respective fields.
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility has always been a priority for the Company.
It works and always takes into consideration its social responsibilities.
The Company has always contributed to the development of the socio-economic
environment by conducting several camps, fares, rallies etc. One of the
group company Azad Multispeciality Hospitals and Research Centre Limited is
now a Company registered under Section 25 of the Companies Act 1956 which
is specifically for the charitable and religious purposes. Mirza
Foundation, a society registered for social and charitable welfare purposes
is another part of the Company which contributes to the CSR by providing
medical relief and provide vocational training to the poor and needy
section of the Society.
As part of environment sustainability and compliance of the green
initiative taken up by the Ministry of Corporate Affairs, the Company has
started sending the annual report and other communications with the
shareholders through electronic mode.
The Company has not accepted any deposits from public within the meaning of
Section 58A of the Companies Act, 1956 during the year under the review.
During the year under review, the exports amounted to Rs 362.22 Crores as
against Rs. 312.38 Crores in the previous year showing the growth of 16%.
We are standing on the threshold of a retail revolution and witnessing a
fast changing retail landscape. The Indian footwear market too is set to
experience the phenomenal growth. There is a huge Domestic Demand for the
footwear. It is all about India`s `Emerging Story`- the Indian customer has
aspiration for acquiring the `Best Product` and this has fuelled the growth
of consumption in India and it will continue to propel. The enlightened
customer wants to buy good products, understand what comfort is,
understands what quality is and has ability to pay for it. That is changing
landscape of the Indian retail today.
MIL has entered and is successful in making a good position in the domestic
Fashion Market. The Company is striving to meet the best standards for its
product not only at national level but also in the International market.
Company`s brand `REDTAPE` has now acquired a remarkable place in minds of
its customers. The Brand not only provides Footwear for men but has now
developed a range of leather shoes for ladies, kids and citizens of various
age groups. The Company has 70 retail outlets of REDTAPE and has planned to
achieve a target of about 150 stores over a period of 3 years across India.
The online store of the brand i.e. www.redtape.com are also getting a huge
response from its customers.
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, Mr. Tasneef Ahmad Mirza, Mr. P.N.
Kapoor, Mr. Sudhindra Jain, Directors of the Company, retire by rotation at
the ensuing Annual General Meeting of the Company and being eligible, offer
themselves for re-appointment and your directors recommended the same.
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 being eligible offer themselves for
The Company has received letters from them to the effect that their
reappointment, if made, would be within the prescribed limits under Section
224(1B) of the Companies Act, 1956 and that they are not disqualified for
reappointment within the meaning of Section 226 of the said Act.
Auditors in their Report have not made any adverse observation and hence
does not call for any further comments.
As per the governments directives, the Company`s cost records in respect of
PVC/ TPR Sole and Rubber Sole for the year ended 31st March, 2012 are being
audited by Mr. A. K. Srivastava, Cost Accountant (M. No. 10467) who was
appointed by the Board with the approval of the Central Government. Cost
Audit Report for the F.Y. 2010-11 was filed on 26.09.2011. The Cost Audit
Report for the F.Y. 2011-12 shall be filed within 180 days from the
commencement of the F.Y. 2012-13.
PARTICULARS OF EMPLOYEES
A statement of Particular 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
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS &
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` RESPONSIBILITY STATEMENT
Pursuant to the requirement under section 217(2AA) of the Companies Act,
1956 with respect to Directors` Responsibility Statement, it is hereby
i) That in the preparation of the annual accounts for the financial year
ended 31st March, 2012, applicable accounting standards had 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, 2012 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 unstinted support and the confidence they have placed
in their ability to make MIL a great success.
For and on behalf of the Board
Place : Kanpur IRSHAD MIRZA
Date : July 28, 2012 Chairman
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, 1988
Conservation of Energy:
Energy Conservation measures taken during the year:
Major energy conservation measures carried out during the year 2011-12 have
1) Energy efficient motors were provided in place of old one.
2) Saving of power cost by installing solar energy lighting system for
entire boundary wall of Greater Noida Unit.
3) Old asbestos sheets of Tannery Units were replaced by Transparent Fibre
Sheet thereby needs of electricity for lighting was eliminated.
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 power consumption.
6) Conservation of energy by using bricks made of fly ash in place of clay
to get better insulation properties.
7) Replacement of old small sized Tanning Drums with highly energy
efficient big size Tanning Drums. 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 company`s 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
Foreign Exchange Earnings and Outgo:
During the year, the foreign exchange earned was Rs. 362.22 Crores mainly
on account of exports. The foreign exchange outgo was Rs. 4.74 Crores.