Non Performance Explanation Letter to Bank

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RSL:IDBI:44:14-15
April 22, 2014

The Deputy General Manager
Industrial Development Bank of India
44 Shakespeare Sarani
Kolkata – 700 017

Kind Attn. :  Shri S. C. Saha


Sub :   Request for modification in the Sanctioned Scheme of BIFR

Dear Sir

Kindly refer to your letter No. IDBI KBO. NO. /CFD.RSL dated 16th April, 2014.

1.    As you are aware, a long-term viability of the Company was considered in the Joint Meeting of Banks and Financial Institutions on 29th October, 2013.  IDBI had submitted its report vide letter No. IDBI:KBO:NO:432:CFD dt. 18th November, 2013 to BIFR, confirming the long-term viability of the Company. 
 
2.    We would like to inform you that the Government of India has reduced the Customs Duty with effect from 9th January, 2014 on import of Plyboard from 25% ad valorem to 20% ad valorem and also abolished the Special Additional Duty of 4%.  The combined impact of both these measures is that the import duty which used to be 50.8% has now come down to 39.2%, causing a net reduction of 7.7% Import Duty.  You will kindly appreciate that due to reduction in the import duty, the landed cost of imported Plyboard in Indian Market has become substantially cheaper.

3.    You may also kindly be aware that there is substantial appreciation in the exchange rate of Indian Rupee vs. US Dollar.   The prevailing exchange rate of US Dollar to Rupee in the first week of October, 2013 when we had submitted our Projections used to be USD 1 = Rs.65.66 which has now come down to USD
1 = Rs. 59.50.  Therefore, the change in the exchange rate during the last six months has made the imported Plyboard cheaper by about 5%.

4.    Diesel prices have been revised by Rs. 2.16 per litre of diesel in two installments effective from 16th December, 2013 and 1st January, 2014.  You will kindly appreciate that Plyboard and its major raw materials being voluminous items, freight constitutes a significant part of cost of sales.

5.    While presenting the Interim Budget in the Lok Sabha on 3rd February, 2014, the Hon’ble Finance Minister had declared that Excise Duty on “wood-free particle and fibre board” would be reduced from 16% ad valorem to 8% ad valorem.  Wood-free particle board being a competitive product to Company’s product, specially in the pre-laminated range, it is likely to result into pressure on the selling prices of Plyboard.

Contd….. P/2



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6.    All these factors may result into lower selling prices of our products, as considered in our Projections submitted to you in October, 2013.  We have, therefore, considered an average reduction of about Rs. 500/- per MT.  You will kindly appreciate that it would not be possible on our part to anticipate all these factors, as the factors are emanated either from Government Policies or from Macro Economic / International prevailing situation.  Moreover, the impact of these factors is quite significant which, we realise, would be better if the same factors are built into the Projections.

7.    Apart from the aforesaid adverse developments, there have certain favourable developments also for the Company, which are given below  :

a)            We had in our Projections for the year 2013-14 considered a sale of 19200 MT and in fact, we have actually exceeded our earlier targets, as the actual sale has stood at 19480 MT, showing a growth of 13% over the sales achieved during the year 2012-13.  In the backdrop of 13% volume growth, as achieved by the Company during 2013-14, as compared to immediately preceding year, we have considered 7% growth in our Projections for the year 2014-15.

b)            During the year 2013-14, there have been substantial savings achieved in consumption of various raw materials and other elements of cost as a percentage of sale value which is given in Annexure-A. These savings achieved by the Company have definitely reduced the overall cost of production and sales which has been in-built in the Projections, as submitted to you.

8.    As desired by you, we are enclosing herewith a statement as Annexure-B showing the amount of carried forward losses and unabsorbed depreciation which would entitle us to create substantial amount of deferred tax assets.  We will get the same certified by a practicing Chartered Accountant in due course of time.

We hope, the aforesaid information will serve your purpose. Should you require any further information, we shall be pleased to submit the same.

Thanking you

Yours faithfully
For ROCKET SALES LTD.



NEETU SINGH
MANAGING DIRECTOR

Encl. As above


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