Hindustan Photo Films Manufacturing Company Ltd. के निदेशक की रिपोर्ट

Mar 31, 2011

The Hindustan Photo Films has completed 50 years of service to the Nation and has completed its Golden Jubilee. Your Directors present the fiftieth (50th) Annual Report on the working of the Company along with the audited accounts for the year ended 31st March 2011, report of the Statutory Auditors and the comments thereon by the Comptroller and Auditor General of India.

Corporate Performance

The audited financial data for the last ten years are summarized below along with the Cash flow statement for 2010-11.

Share Capital

The Authorised and Paid up Capital of the Company as on 31st March 2011 stood at 210 Crore sand Rs204.87 Crores respectively.

Fixed Deposit

No deposit has been received by the Company during the year under report.

Corporate Results

Production

The production during the year was 1.61 M.Sq.m valued at Rs. 4077.59 Lakhs as against 0.961 valued at Rs. 2625 Lakhs achieved during the previous year. The item wise production is given below:

(In Million Sq.m) 2010-11 2009-10 Cine Products — 0.004

X-Ray (Ind. Indl. X -Ray) 1.153 0.810

Graphic Arts 0.446 0.135*

Others (Miscellaneous)* 0.345 0.012

Total 1.944 0.961

-Includes job order production of 0.331 0.023

Though production in the current year shows an improved trend as compared to the previous years, the low volume of production is attributable to increased raw material cost and lack of orders due to stiff competition from MNCs in the domestic market. The Company continues to explore areas for diversifying its activities. The amount of Rs. 30 Crores received towards Working Capital as a part of the fund infusion for Revival was ploughed into operations fully and it has helped in the increased turnover.

Financial Data for the last ten

years Year ending 31st March

2002 2003 2004 2005 2006

Production 2978.36 2667.32 2746.66 1519.52 1536.95

Sales 2895.03 2697.80 2778.39 1738.56 1461.41

Net Profit/Loss 35371.86 38539.24 44302.47 49641.27 56090.18 Growth Rate (%)

-Turnover 13.89 -6.81 2.99 37.43 5.94

-Production 25.82 -10.44 2.97 -44.68 1.15

Net profit(As a % of)

-Turnover -1221.81 -1428.54 -1594.54 -2855.32 -3838.09

-Capital employed' -69.91 -79.77 -101.67 -124.68 -150.50

Networth - 161088.24 -199518.26 -243506.90 93148.16 -349138.34

Inter Corporate loan 3607.00. 3607.00 3607.00 3607.00 3607.00

Gross Block

(Excluding Capital WIP) 71504.98 71506.72 72062.52 72063.41 72063.70 Gross Block

(Including Capital WIP) 71513.18 71514.92 72062.52 72063.41 72063.70

Inventories 1683.23 1526.90 1415.02 1113.41 1201.94

Depreciation 3289.70 3288.33 3386.32 3354.04 3328.61

Interest 29024.34 33649.46 38835.10 44698.45 51595.13



2007 2008 2009 2010 2011

Production 1768.22 1761.53 2409.93 2549.80 3992.46

Sales 1459.64 1716.53 2618.48 2625.01 3718.32

Net Profit / Loss 65305.92 78949.15 89026.05 100921.51 115665.42 Growth Rate (%)

Turnover 0.14 17.62 52.54 0.25 41.64

- Production 15.05 0.38 36.81 5.80 56.55

Net profit (As a % of)

-Turnover 4475.03 4599.35 3399.91 3844.01 3110.69

- Capital employed* 192.51 269.87 338.11 418.00 552.81

Networth 414444.27 493093.42 582019.47 682840.98 798406.40

Inter Corporate loan 3607.00 3607.00 3607.00 3607.00 3607.00

Gross Block

(Excluding Capital WIP) 72.65.78 72078.91 71552.47 71566.57 71566.75

Gross Block

(Including Capital WIP) 72.65.78 72078.91 71552.47 71566.57 71566.75

Inventories 1617.27 1607.00 1411.14 13996.93 1541.50

Depreciation 3323.37 3315.40 321.61 3212.35 3166.17

Interest 60230.85 71820.89 83014.38 95498.84 111525.07

Turnover and Loss

During the year under review, the Company achieved a turnover of Rs. 37.18 Crores as against f 26.25 Crores in the previous year. The Company's . operations resulted in a net loss of X 1156.65 Crores for the year as compared to a net loss of Rs. 1009.21 Crores in the previous year. The operating loss during the year was X 11.84 Crores as against Rs. 13.46 Crores during the previous year. Low capacity utilisation and the prevailing market scenario besides heavy interest burden continue to be the major factors affecting the financial position of the Company. The Company adopted various strategies to improve its operations and effected cuts in its administrative expenses. These processes would be pursued vigorously to improve its financial position and bring down the operating loss further in the coming year.

MOU 2010-11

We are to inform that during the year 2010-11, the Company had entered into a MOU with the DHI, envisaging achievement of Production of X 77.84 Crores and Sales of X 73:51 Crores . Amidst various constraints, the Company has significantly achieved production and sales of Rs. 39.92 Crores and X 37.18 Crores respectively which is 56.55 % and 41.64 % growth over the previous year.

Polyester Base Medical X-Ray, Industrial X-Ray and Graphic Arts Films Plant The Plant has produced 1.50 M.sq.m of Films during the year under report as against 0.923 M.sq.m during the previous year. The performance of the Plant is expected to improve in the coming year.

Research and Development

Specific Areas in which R&D was carried out by this Company,

R&D activities were carried out on New Product,

Development, Product/Process Improvement, Technology Up gradation, Import Substitution , Cost Reduction and Production Trouble Shooting works.

Benefits derived as a result of the above R&D,

Company's requirements with respect to 13 Specialty Chemicals were met by manufacturing the same at Organic Synthesis Unit resulting in cost savings of Rs 30.88 Lakhs.

Following products, for which Plant Trials are in progress, will soon be commercialized.

- Graphic Arts Red Laser Scanner Film /Image Setter Film

- Inkjet Paper

- Subbing of polyesterX- ray Base

- Digital X-ray Film

- Medical Imaging Film (Panchromatic)

- Laser Printer Film

- Acid Violet dye and KF 508 dye (import substitution)

Future Plan of Action

Future R&D program covers Development / implementation of know-how For the following:

a) Improvement/Cost reduction on the following products:

1. Medical X-ray Film

2. Graphic Arts Red Laser Film/Image Setter Film

3. Industrial X-ray Film

4. Medical X-ray (Ortho) Film

5. Processing Chemicals Developer and Fixer

b) Developmental Work on following Products

1. Low Speed Industrial X-ray Film (IRF 100 and IRF50)

2. Indigenization and Manufacturing of Fine Chemicals

3. Acid Violet Dye(import Substitution) for Graphic Arts Gel backing

4. KF 508 Dye (Import Substitution) for Graphic Arts Products

5. Silkscreen Printing Film

6. Thermal Imaging Film

7. Thermal Paper

c) Non Silver Digital Imaging Technology

New Product for Non Silver Digital Imaging Technology works in association with M/s Techno Imaging Systems (P) Ltd., Mumbai, progressed well and the Company could generate job order revenue of several lakhs rupees

Production trial of Non Silver Screen printing Film was successfully carried out and Non-Silver Medical Imaging Film production trial will be taken in association with M/s Technova

R&D Expenditure ( In lakhs)

a) Capital : Nil

b) Recurring : 83.12

c) Total : 83.12

d) Total R&D expenditure as

a % of total turnover 2.24%

Technology absorption, adaptation and Innovation:

Information regarding imported technology - Collaboration agreement if any - Technology import

- Year of import V Nil

- Has technology been fully absorbed I

- If not fully absorbed, areas where it J has not taken place, reasons therefore

Quality Assurance

HPF an ISO 9001:2000 Company has now been accredited with ISO 9001:2008 certification by the British Certifications INC under JAS-ANZ and has taken various steps to maintain the quality standard of its products.

The Quality Assurance Department checks all incoming raw materials and packing materials for their suitability for use in production. Raw materials from new sources are also developed. Annual vendor rating analysis are carried out to study the performance of suppliers of raw materials, chemicals and packing materials. Sensitivity of the fresh and aged photographic goods are measured. All finished goods are checked by QA as a first customer to see that no defective material is passed on to the customer. QA has addressed the concern of the customer at the point of usage. Analysis on production/rejection performance are done and circulated to production division, as feedback information.

QA guides Production in online corrective and preventive action, to realise quality target. Statistical sampling plans are being suggested for new products. QA carries out the task of updating testing methods and revising specifications for existing products and drawing specifications for new products. QA has Radiographic testing facilities, facilities for testing of waste water, drinking water and process water.

To keep track of performance of our products in the market customer complaint details are studied periodically. The quality performance index was within the target level of 6 sigma.

Energy Conservation Electrical Energy conservation

The power factor was always maintained well above 0.95 by power capacitors according to the requirement. Energy efficient copper chokes were installed and maintained. Heater and lighting loads were regulated. Power transformers were utilised to the optimum level. Preventive maintenance schedule was strictly followed to improve efficiency of motors and other equipments. Optimum utilization of process equipment was made based on production schedule. The cold storage compressor was effectively operated with the help of Automatic Control Circuit. The Plant operations were sustained with reduced level of maximum demand. Street lights and security lights were effectively utilised with the help of timer circuits.

Thermal Energy Conservation

Combustion control in Boiler and in Hot Water Generator was maintained at reduced level of excess air. The blow down level was optimized by monitoring the feed water and blow down water quality. The Boilers and Hot water generator operation was optimized by staggered production schedules. Strict follow-up of preventive maintenance activities was done.

As a result of the above measures, savings to the tune of Rs. 22 Lakhs was achieved.

Personnel

The total number of permanent employees as on 31st March 2011 stood at 731. Based on the order of the Supreme Court and approval of DHI vide Order No. 19(10)/2009-PE.III 20th Oct 2010, 56 persons working as casual workers/ NMRs were appointed as regular employees.

The representation of SC and ST categories in the total employees' strength was as follows:

Representation of SC category : 130(17.78%) Representation of ST category : 42(5.75%)

The Company continued to follow the reservation policies in respect of scheduled caste and scheduled tribe communities in accordance with the directives issued by the Government of India from time to time.

The total strength of ex-servicemen employed by the Company as on 31st March 2011 stood at 16 representing 2.19 % of the total strength. The number of physically handicapped employees stood at 22 as on 31st March 2011 consisting of 3 blind, 9 or the handicapped and 10 deaf and dumb employees.

With the trend of manpower rationalization continuing, 45 persons have been relieved on VRS during the year and the available manpower is being put to the best possible use.

Training and Development

The Company has a full-fledged Training and Development Department to take care of the training needs of the employees. Internal training programmes were conducted.

Industrial Relations

By and large, the Industrial Relation scenario remained cordial. The Industrial Relations Committee comprising of Management and Trade Unions representatives met and discussed from time to time to resolve various industrial problems.

Environment

For maintaining ecological balance, the Company has done some conservation programmes. Effluent treatment and disposal systems have been fine-tuned in compliance with all the statutory rules and regulations. During the year under report, the Company has spent Rs. 5.57 Lakhs in this regard.

Insurance

Assets of the Company were generally insured.

Implementation of official language

The Company continued to take effective steps for implementation of the provisions of the Official Language Act and the instructions received from the Central Government in this regard from time to time.

Development of Ancillaries

During the year under report, the Company purchased materials to the tune of rs. 195.03 Lakhs from Ancillary and SSI Units for its production requirements.

Contribution to Exchequer

During the year under review, the contribution made by the Company to the Exchequer - both central and State has been of the order of rs. 572.73 Lakhs by way of Sales tax, Octopi, Customs duty and Excise duty etc.

Vigilance Activities

Vigilance Department continued to keep strict vigil within the Organization. The Department was engaged in activities like investigation of complaints from various sources, conducted surprise inspections and detailed inspections of transactions. To improve Vigilance administration and to ensure transparency all open/limited tenders were put on the website of the company. Purchase Manual and Marketing Manual was updated in accordance with CVC guidelines. A compendium of vigilance guidelines framed by Chief Vigilance Officer has been forwarded to Head of Departments for adherence. Interactive sessions on vigilance with Head of Departments were also conducted by CVO. Deficiencies with regard to systems and procedures were pointed out for necessary remedial actions. The practice of opening of tenders in the presence of trade representatives was introduced to bring out more transparency in the organizational transactions. The department recommended for introduction of Electronic Fund transfer and e-tendering. Vigilance Awareness Week was observed from 25.10.10 to 01.11.10 in a befitting manner.

RTI Act

The Company has implemented the provisions of the RTI Act 2005 and has nominated the following officials:

Public Information Officer:

Mr. A.B. Kumar Assistant Public Information Officer:

Ms. M. Gita Appellate Authority :

Mr. P. Jagadeeswaran, CMD

All applications and first appeals received under RTI during the year 2010-11, have been addressed.

Particulars of Employees

Information as per Sub-section 2(A) of Section 217 of the Companies Act 1956, read with Companies (Particulars of Employees) Rules 1975, and forming part of Directors' Report for the year ended 31st March 2011- Nil.

Directors

Shri. P. Jagadeeswaran, Director (Finance) continued to hold additional charge of the post of Chairman-cum-Managing Director- HPp.

Audit Committee

As on 31.3.2011, the Audit Committee comprised of the following members: Shri R.Subburathinam Independent Dir Chairman Shri Gautam Basil Independent Dir Member

Shri G.R.Sundaravadivel Nominee Dir Member Shri Shashank Goel Part time Govt. Dir Member

Shri. Shashank Goel, Government Director resigned from the Board of the Company with effect from 24.3.2011.

Directors' Responsibility Statement

As per requirements of Section 217 (2AA) of the Companies Amendment Act 2000, your Directors hereby declare that:

i. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

ii. The Directors have 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 31st March 2011 and of the profit or loss of the Company for that period.

iii. The Directors have 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. The Directors have prepared the annual accounts on a going concern basis.

Auditors

M/s. Padmanabhan Prakash & Co., Chartered Accountants, Chennai have been appointed by the Government of India as Auditors of the Company for the financial year 2010-11.

Corporate Governance

In compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges, the following are annexed to this report:-

- The Management Discussion and Analysis Report

- A report on Corporate Governance

- The Certificate of the Auditors on Corporate

Governance

Status before BIFR / AAIFR / Revival

Consequent upon recommendations of BIFR and AAIFR for winding up of HPF, in the year 2005, the Unions, Officers Association and the Company had approached the Madras High Court and has obtained a stay on further proceedings of BIFR and AAIFR. In the meanwhile, with the approval of the Government, a Revised Revival Strategy for HPF was drawn up by Consultants, M/s Ernst & Young. The Ministry of Heavy Industries, after consideration of the report had forwarded the same to the BRPSE in Apr 2008.

The Revival proposal of HPF has been considered by BRPSE and recommended for approval to the Govt. A CCEA note was circulated by DHI and the recommendations were put up to the Cabinet for consideration. The Cabinet secretariat has reviewed the note and referred it to a committee of Secretaries for their views. The Company now awaits final nod of the Cabinet to the Restructuring Proposal, as approved by BRPSE.

The Company has entered into a MOU with the Govt, for the year 2011-12 involving production/ sales target ofRs. 81.50 Crores each. In anticipation of Revival, the Company is committed to achieve these targets in the coming year.

Acknowledgement

Your Directors wish to place on record their sincere thanks to the Government of India, particularly the Department of Heavy Industry, the Bankers, valued customers, for their co- operation and support. Your Company sincerely appreciates the valuable services rendered by the employees of the Company. Their efforts and support for the cause of revival was commendable.

For and on behalf of the Board of Directors

S. Girish Kumar Chairman-cum-Managing Director

---

Mar 31, 2010

The Directors present the Forty Ninth Annual Report on the working of the Company along with the audited accounts for the year ended 31st March 2010, report of the Statutory Auditors and the comments thereon by the Comptroller and Auditor General of India.

Corporate Performance

The audited financial data for the last ten years are summarised below along with the Cash flow statement for 2009-10.

Share Capital

The Authorised and Paid up Capital of the Company as on 31st March 2010 stood at 1 210 Crores and I 204.87 Crores respectively.

Fixed Deposit

No deposit has been received by the Company during the year under report.

Production

The production during the year was 0.961 M.Sq.m valued at X 2549.80 Lakhs as against 0.956 M.Sq.m valued at Rs. 2409.93 Lakhs achieved during the previous year. The itemwise production is given below:

(In Million Sq.m)

2009-10 2008-09



Cine Products 0.004 0.010

X-Ray (Incl. Indl. X-Ray) 0.810 0.802

Graphic Arts 0.135* 0.135

Others (Miscellaneous)* 0.012 0.009

Total 0.961 0.956

*Includes job order production of 0.023 0.005

Though production in the current year shows an improved trend as compared to the previous years, the iow volume of production is attributable to lack of timely and adequate working capital, increased raw material cost and lack of orders due to stiff competition from MNCs in the domestic market. Government support was sought for continuous operation of the plants and increasing production and an amount of Z 30 Crores was received during Feb 2010 towards Working Capital as part of Revival Fund infusion and to meet pending orders. The Company continues to explore areas for diversifying its activities.

Turnover and Loss

During the year under review, the Company achieved a turnover of Z 26.25 Crores as against Rs. 26.18 Crores in the previous year. The Companys operations resulted in a net loss of Rs. 1009.22 Crores for the year as compared to a net loss of Rs. 890.26 Crores in the previous year. The operating loss during the year was Rs. 13.46 Crores as against Rs. 13.73 Crores during the previous year. Low capacity utilisation and the prevailing market scenario besides heavy interest burden continue to be the major factors affecting the financial position of the Company. The Company adopted various strategies to improve its operations and effected cuts in its administrative expenses. These processes would be pursued vigorously to improve its financial position and bring down the operating loss further in the coming year.

MOU 2009-10

We are glad to inform that during the year 2009-10, the Company had entered into a MOU with the DHI, envisaging achievement of Production and Sales of X 26 Crores each. Amidst various constraints, the Company has successfully achieved / surpassed these targets significantly and achieved production and sales of X 26.16 Crores and t 26.25 Crores respectively.

New Product

A new product Red Laser Scanner Film was launched recently. In order to have a foothold in the SAARC market where Sri Lanka is the leading player and Export hub, a party has been identified to market the same.

Exports

In spite of overall recession across the Globe and Financial Meltdown during the year the Company continued to receive numerous enquiries for Export of its Products to Overseas buyers. These kind of bulk enquiries certify the existence of significant export market for our products which could be tapped. Sensing the necessity to be in the overseas market for our long term survival, the Company established contact with a Chinese party for export of its products to China mainly for Industrial X-ray films. Based on trial order, it is found that the Quality was found acceptable to the customers of China. Promotion of regular exports through this party is understudy.

The Company continues to strive to expand its Overseas Business in spite of deterring factors like price and supply constraints affecting our export efforts.

Polyester Base Medical X-Ray, Industrial X-Ray and Graphic Arts Films Plant

The Plant has produced 0.923 M.sq.m of Films during the year under report as against 0.937 M.sq.m during the previous year. The performance of the Plant is expected to improve in the coming year.

Research and Development

Specific Areas in which R&D was carried out by this Company

R&D activities were carried out on New Product Development, Product/Process Improvement, Technology Up gradation, Import Substitution, Cost Reduction and Production Trouble Shooting works.

Benefits derived as a result of the above R&D

Companys requirements with respect to 10 Specialty Chemicals were met by manufacturing the same at Organic Synthesis Unit resulting in cost savings of Rs. 29 Lakhs.

The following products were commercialized with know-how developed at R&D.

- Industrial x-ray with further low coating weight

- Medical x-ray (Blue) on a large scale with low coating weight.

Following products, for which Plant Trials are in progress, will soon be commercialized.

- Graphic Arts Red Laser Scanner Film/Image Setter Film

- Inkjet Paper

- Polyester Subbed Base

- Digital X-ray Film

- Medical Imaging Film (Panchromatic)

- Laser Printer Film

Future Plan of Action

Future R&D program covers Development / implementation of know-how for the following:

a) Improvement/Cost reduction on the following products:

1. Medical X-ray Film

2. Graphic Arts Red Laser Film/Image Setter Film

3. Industrial X-ray Film

4. Medical X-ray (Ortho) Film

b) Developmental Work on following Products

1. Low Speed Industrial X-ray Film

2. Indigenization and Manufacturing of Fine Chemicals

3. Acid Violet Dye(lmport Substitution) for Graphic Arts Gel backing

4. KF 508 Dye (import Substitution) for Graphic Arts Products

5. Sslk Screen Printing Film

6. Thermal Imaging Film

7. Thermal Paper

c) Nan Silver Digital Imaging Technology

New Projects for >Mon Silver Digital imaging Technology works In association with M/s Technova Imaging Systems (P) Ltd., Mumbai, progressed well and the Company could generate job order revenue from the same.

Based on the R&D Coater trials of Non Silver Digital imaging Film for Textile Printing, the Technology has been transferred from R&D to Production and Commercialized. Fine tuning works of Non Silver Medical Imaging Film and Screen Printing Film are in progress.

R&D Expenditure (Rs. In lakhs)

a) Capital Nil

b) Recurring : 78.47

c) Total : 78.47

d) Total R&D expenditure as a % of total turnover : 2.99%

Technology absorption, adaptation and innovation:

information regarding imported technology =* Collaboration agreement if any - Technology import =* Year of import NIL

- Has technology been fully absorbed

- If not fully absorbed,, areas where it has not taken place, reasons therefore

Quality Assurance

HPF is an ISO 9001:2000 Company and has taken various steps to maintain the quality standard of its products.

The Quality Assurance Department checks all incoming raw materials and packing materials for their suitability for use in production. Raw materials from new sources are also developed. Annual vendor rating analysis are carried out to study the performance of suppliers of raw materials, chemicals and packing materials. Sensitivity of the fresh and aged photographic goods are measured. All finished goods are checked by QA as a first customer to see that no defective material is passed on to the customer. QA has addressed the concern of the customer at the point of usage. Analysis on production/rejection performance are done and circulated to production division, as feedback information.

QA guides Production in online corrective and preventive action, to realise quality target. Statistical sampling plans are being suggested for new products. QA carries out the task of updating testing methods and revising specifications for existing products and drawing specifications for new products. QA has Radiographic testing facilities, facilities for testing of waste water, drinking water and process water.

To keep track of performance of our products in the market, customer complaint details are studied periodically. The quality performance index was within the target level of 6 sigma.

Energy Conservation

Energy conservation measures adopted during the previous year were continued for the year 2009-10 viz;

An independent Energy Audit cell has been constituted to look after Energy conservation activities. Maximum demand was reduced to the barest minimum level. The power factor was always maintained well above 0.90 by power capacitors according to the requirement. Preventive maintenance schedule was implemented. Optimization of process equipment based on staggered production schedule. Introduction of low capacity compressor for limited in process operation and effective operation of lighting system. Automatic power controllers were installed at Main plant Substation and at Ambattur plant. Rebate of approximately Z 2 lakhs was obtained in the energy bill for maintaining Power factor above 0.9.

As a result of the above measures, savings to the tune of f 60 Lakhs was achieved.

Personnel

The total number of permanent employees as on 31st March 2010 stood at 736. The representation of SC and ST categories in the total employees strength was as follows:

Representation of SC category : 122 (16.58%) Representation of ST category : 43(5.84%)

The Company continued to follow the reservation policies in respect of scheduled caste and scheduled tribe communities in accordance with the directives issued by the Government of India from time to time.

The total strength of ex-servicemen employed by the Company as on 31st March 2010 stood at 17 representing 2.31% of the total strength. The number of physically handicapped employees stood at 24 as on 31st March 2010 consisting of 3 blind, 11 ortho-handicapped and 10 deaf and dumb employees.

With the trend of manpower rationalization continuing, 68 persons have been relieved on VRS during the year and the available manpower is being put to the best possible use.

Training and Development

The Company has a full-fledged Training and Development Department to take care of the training needs of the employees. Internal training programmes were conducted.

Industrial Relations

By and large, the Industrial Relation scenario remained cordial. The Industrial Relations Committee comprising of Management and Trade Unions representatives met and discussed from time to time to resolve various industrial problems.

Environment

For maintaining ecological balance, the Company has done some conservation programmes. Effluent treatment and disposal systems have been fine- tuned in compliance with all the statutory rules and regulations. During the year under report, the Company has spent Rs. 7 Lakhs in this regard.

Insurance

Assets of the Company were generally insured.

Implementation of official language

The Company continued to take effective steps for implementation of the provisions of the Official Language Act and the instructions received from the Central Government in this regard from time to time.

Development of Ancillaries

During the year under report, the Company purchased materials to the tune of Rs. 121.23 Lakhs from Ancillary and SSI Units for its production requirements.

Contribution to Exchequer

During the year under review, the contribution made by the Company to the Exchequer - both central and State has been of the order of Rs. 498.12 Lakhs by way of Sales tax, Octroi, Customs duty and Excise duty etc.

Vigilance Activities

Vigilance Department continued to keep strict vigil within the Organization. The Department was engaged in activities like investigation of complaints from various sources, conducted surprise inspections and detailed inspections of transactions. To improve Vigilance administration and to ensure transparencies all open/limited tenders were put on the website of the Company. Vendors list was updated periodically. Purchase manual was updated in accordance with CVC guidelines and a Marketing Manual is being put in place. Deficiencies with regard to systems and procedures were pointed out for necessary remedial actions. The practice of opening of tenders in the presence of trade representatives was introduced to bring out more transparency in the organizational transactions. The department recommended for introduction of Electronic Fund transfer and e- tendering. Vigilance Awareness Week was observed from 3.11.09 to 7.11.09 in a befitting manner.

RTI Act

The Company has implemented the provisions of the RTI Act 2005 and has nominated the following officials:

Public Information Officer : Mr. A.B. Kumar

Assistant PIO : Ms. M. Gita

Appellate Authority: Mr. P. Jagadeeswaran, CMD

All applications and first appeals received under RTI during the year 2009-10, have been addressed.

Particulars of Employees

Information as per Sub-section 2(A) of Section 217 of the Companies Act 1956, read with Companies (Particulars of Employees) Rules 1975, and forming part of Directors Report for the year ended 31st March 2010-Nil.

Directors

Shri. P. Jagadeeswaran, Director (Finance) continues to hold additional charge of the post of Chairman-cum-Managing Director-HPF. There was no change in the Board of Directors during the year 2009-10.

Audit Committee

As on 31.3.2010, the Audit Committee comprised of the following members:

R.Subburathinam Chairman Independent Dir

Gautam Basu Member Independent Dir

G.R.Sundaravadivel Member Nominee Dir

ShashankGoel Member Govt. Director

Directors Responsibility Statement

As per requirements of Section 217 (2AA) of the Companies Amendment Act 2000, your Directors hereby declare that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

(ii) The Directors have 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 31st March 2010 and of the profit or loss of the Company for that period.

(iii) The Directors have 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) The Directors have prepared the annual accounts on a going concern basis.

Auditors

M/s. Padmanabhan Prakash & Co., Chartered Accountants, Chennai have been appointed by the Government of India as Auditors of the Company for the financial year 2009-10.

Corporate Governance

In compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges, the following are annexed to this report:-

The Management Discussion and Analysis Report

A report on Corporate Governance The Certificate of the Auditors on Corporate Governance Status before BiFR / AAIFR / Revival

Consequent upon recommendations of BIFR and AASFR for winding up of HPF,, in the year 2005, the Unions,. Officers Association and the Company had approached the Madras High Court and has obtained a stay on further proceedings of BiFR and AAIFR. In the meanwhile, with the approval of the Government, a Revised Revival Strategy for HPF was drawn up by Consultants, M./s Ernst & Young. The Ministry of Heavy industries, after consideration of the report had forwarded the same to the BRPSB in Apr 2008.

The year 2009-10 happened to be a landmark year for HPF with the BRPSF having given its clearance to the proposal with favourable recommendations to the Government for adoption of the same. Based on BRPSE recommendations on HPFs Restructuring Package, the DHI is now in the process of putting up the CCEA proposal for approval. Also based on BRPSE recommendations, the Govt, had released Working Capital of 7 30 Crores to HPF that forms a part of the Revival proposal. The Company now awaits final nod of the Cabinet to the Restructuring Proposal, as approved by BRPSE.

With the said Working Capital, the Company has entered into a MO Li with the Govt, for the year 2010-11 involving sales target of f 73.50 Crores and production target of Rs. 77.84 Crores. In anticipation of Revival, the Company is committed to achieve these targets in the coming year.

Acknowledgement

Your Directors wish to place on record their sincere thanks to the Government of India, particularly the Department of Heavy Industry, the Bankers, valued customers, for their co-operation and support. Your Company sincerely appreciates the valuable services rendered by the employees of the Company. Their efforts and support for the cause of revival was commendable.

For and on behalf of the Board of Directors

P.Jagadeeswaran Chairman-cum-Managing Director (Addl.Ch)

---

Mar 31, 2009

The Directors present the Forty Eighth Annual Report on the working of the Company along with the audited accounts for the year ended 31st March 2009, report of the Statutory Auditors and the comments thereon by the Comptroller and Auditor General of India.

Corporate Performance

The audited financial data for the last ten years are summarised below along with the Cash flow statement for 2008-09.

Share Capital

The Authorised and Paid up Capital of the Company as on 31st March 2009 stood at Rs. 210 Crores and Rs.203.87 Crores respectively.

Fixed Deposit

No deposit has been received by the Company during the year under report

Corporate Results Production

The production during the year was 0.956 M.Sq.m valued at Rs. 2409.93 Lakhs as against 0.546 M.Sq.m valued at Rs. 1761.53 Lakhs achieved during the previous year. The itemwise production is given below:

(In Million Sq.m) 2008-09 2007-08

Cine Products 0.010 0.009

X-Ray (Incl. Indl. X-Ray) 0.802 0.371

Graphic Arts 0.135 0.125

Paper Products -- 0.006

Others (Miscellaneous) 6.009* 0.035

TOTAL 0.956 0.546

*Includes job order production of 0.005 --

Though production in the current year shows an improved trend as compared to the previous years, the low volume of production is attributable to lack of timely and adequate working capital, increased raw material cost and lack of orders due to stiff competition from MNCs in the domestic market. Government support has been sought for continuous operation of the plants and increasing production. The Company continues to explore areas for diversifying its activities.

Turnover and Loss

During the year under review, the Company achieved a turnover of Rs. 2618.48 Lakhs as against Rs. 1716.53 Lakhs in the previous year. The Companys operations resulted in a net loss of Rs. 89026.05 Lakhs for the year as compared to a net loss of Rs 78949.15 Lakhs in the previous year. The operating loss during the year was Rs. 1373.08 Lakhs as against Rs. 1731.69 Lakhs during the previous year. Low capacity utilisation and the prevailing market scenario besides heavy interest burden continue to be the major factors affecting the financial position of the Company. The Company adopted various strategies to improve its operations and effected cuts in its administrative expenses. These processes would be pursued vigorously to improve its financial position and bring down the operating loss further in the coming year.

MOU 2008-09

We are glad to inform that during the year 2008- 09, the Company had entered into a MOU with the DHI, envisaging achievement of Production and Sales of Rs. 19 Crores and Rs. 20 Crores respectively. Amidst various constraints, the Company has successfully achieved / surpassed these targets significantly and achieved production and sales of Rs. 23.83 Crores and Rs. 26.18 Crores respectively. The Company has achieved other parameters of the MOU also to the extent possible.

Exports

Inspite of flow of significant export enquiries, the Company could not convert these enquiries into confirmed orders due to price and supply constraints. The Company is in contact with M/s. Projects and Equipment Corpn. Ltd., a Gol undertaking, to explore the possibility of exporting the products through their International contacts. The Company requires Market Development Assistance from the Govt, for promotion of exports.

Polyester Base Medical X-Ray, Industrial X-Ray and Graphic Arts Films Plant

The Plant has produced 0.937 M.sq.m of Films during the year under report as against 0.371 M.sq.m during the previous year. The performance of the Plant is expected to improve in the coming year.

Research and Development

During the year, the Department of Scientific and Industrial Research under the Ministry of Science & Technology has accorded extension of recognition to R&D for a further period of 3 years upto March 2012.

Specific Areas in which R&D was carried out by this Company

R&D activities were carried out on New Product Development, Product/Process Improvement, Technology Upgradation, Import Substitution and Cost Reduction and Production Trouble Shooting works

Benefits derived as a result of the above R&D

Companys requirements with respect to 11 Speciality Chemicals were met by manufacturing the same at Organic Synthesis Unit resulting in cost savings of Rs. 43 Lakhs. The following products were commercialized with know-how developed at R&D.

- Industrial x-ray with further low coating weight

- Medical x-ray (Blue) on a large scale with low coating weight.

Following products, for which plant trials are in progress, will soon be commercialized.

- Graphic Arts Red Laser Scanner Film/ Image Setter Film

- Inkjet Paper

- Polyester Subbed Base

- Digital X-ray Film

- Medical Imaging Film (Panchromatic)

- Laser Printer Film

Future Plan of Action

Future R&D programme covers development / implementation of know-how for the following:

a) Improvement/cost reduction on the following products

1. Medical X-ray Film

2. Graphic Arts Red Laser Film/Image Setter

Film

3. Industrial X-ray Film

4. Medical X-ray (Ortho) Film

b) Developmental Work on following Products

1. Low speed Industrial X-ray Film

2. Indigenization and manufacturing of Fine Chemicals

3. Acid Violet Dye(lmport Substitution)

4. KF 508 Dye (Import Substitution) for Graphic Arts Film

5. Silk Screen Printing Film

6. Thermal Imaging Film

7. Thermal Paper

c) Non Silver Digital Imaging Technology

New Projects for Non Silver Digital Imaging Technology works are in progress in association with M/s Technova Imaging Systems (P) Ltd., Mumbai.

R&D Expenditure (Rs. In lakhs)

a) Capital : Nil

b) Recurring : 76.11

c) Total : 76.11

d) Total R&D expenditure as a % of total turnover : 2.92%

Technology absorption, adaptation and Innovation: Information regarding imported technology

- Collaboration agreement if any

- Technology import

- Year of import

- Has technology been fully absorbed NIL

- If not fully absorbed, areas where it has not taken place, reasons therefore _

Quality Assurance

HPF is an ISO 9001:2000 Company and has taken various steps to maintain the quality standard of its products.

The Quality Assurance Department checks all incoming raw materials and packing materials for their suitability for use in production. Raw materials from new sources are also developed. Annual vendor rating analysis are carried out to study the performance of suppliers of raw materials, chemicals and packing materials. The sensitivity of the fresh and aged photographic goods are measured. All the finished goods are checked by QA as a first customer to see that no defective material is passed on to the customer. QA has addressed the concern of the customer at the point of usage. Analysis on production/rejection performance are done and circulated to production division, as feedback information.

QA guides Production to do online corrective and preventive action, to realise quality target. Statistical sampling plans are being suggested for new products. QA is carrying out the task of updating testing methods and revising specifications for existing products and drawing specifications for new products. QA has Radiographic testing facilities, facilities for testing of waste water, drinking water and process water.

To keep track of performance of our products in the market, customer complaint details are studied periodically. During 2008-09, the overall customer complaint on the sales volume was 0.07%. The quality performance index was 4.70 sigma against the target of 6 sigma.

Energy Conservation

The energy conservation measures adopted during the previous year were continued for the year 2008- 09 viz;

Electrical Energy conservation

The power factor was always maintained well above 0.95 by power capacitors according to the requirement. Energy efficient copper chokes were installed and maintained. Heater and lighting loads were regulated. Power transformers were utilised to the optimum level. Preventive maintenance schedule was strictly followed to improve efficiency of motors and other equipments. Optimum utilization of process equipment was made based on production schedule. The cold storage compressor was effectively operated with the help of Automatic Control Circuit. The Plant operations were sustained with reduced level of maximum demand. Street lights and security lights were effectively utilised with the help of timer circuits. Low capacity compressor was put into service in Main Plant for preservation of the in-process material.

Thermal Energy Conservation

Combustion control in Boiler and in Hot Water Generator was maintained at reduced level of excess air. The blow down level was optimized by monitoring the feed water and blow down water quality. The Boilers and Hot water generator operation was optimised by staggered production schedules. Strict follow-up of preventive maintenance activities was done.

As a result of the above measures, savings to the tune of Rs. 24 Lakhs was achieved.

Future Plans:

Steps have been taken for installation of energy efficient refrigeration/air compressor system at Main Plant.

Personnel

The total number of permanent employees as on 31st March 2009 stood at 812. The representation of SC and ST categories in the total employees strength was as follows:

Representation of SC category : 133 (16.38%)

Representation of ST category : 44 (5.42%)

The Company continued to follow the reservation policies in respect of scheduled caste and scheduled tribe communities in accordance with the directives issued by the Government of India from time to time.

The total strength of ex-servicemen employed by the Company as on 31st March 2009 stood at 26 representing 3.20 % of the total strength. The number of physically handicapped employees stood at 30 as on 31st March 2009 consisting of 4 blind, 15 ortho-handicapped and 11 deaf and dumb employees.

With the trend of manpower rationalization continuing, 42 persons have been relieved on VRS during the year and the available manpower is being put to the best possible use.

Training and Development

The Company has a full-fledged Training and Development Department to take care of the training needs of the employees. Internal training programmes were conducted.

Industrial Relations

By and large, the industrial relations scenario remained cordial. The Industrial Relations Committee comprising of Management and Trade Unions representatives met and discussed from time to time to resolve various industrial problems.

Environment

For maintaining ecological balance, the Company has done various afforestation programmes. Effluent treatment and disposal systems have been fine-tuned in compliance with all the statutory rules and regulations. During the year under report, the Company has spent Rs.2.91 Lakhs in this regard.

insurance

Assets of the Company were generally insured.

Implementation of official language

The Company continued to take effective steps for implementation of the provisions of the Official Language Act and the instructions received from the Central Government in this regard from time to time.

Development of Ancillaries

During the year under report, the Company purchased materials to the tune of Rs. 161.91 Lakhs from Ancillary and SSI Units for its production requirements.

Contribution to Exchequer

During the year under review, the contribution made by the Company to the Exchequer - both central and State has been of the order of 478.92 Lakhs by way of Sales tax, Octroi, Customs duty and Excise duty etc.

Vigilance Activities

Vigilance Department continued to keep strict vigil within the Organisation. The Department was engaged in activities like investigation of complaints from various sources, conducted surprise inspections and detailed inspections of transactions. To improve Vigilance administration and to ensure transparency all open/limited tenders were put on the website of the company. Vendors list was updated periodically. Purchase manual was updated in accordance with CVC guidelines and a Marketing Manual is being put in place. Deficiencies with regard to systems and procedures were pointed out for necessary remedial actions. The practice of opening of tenders in the presence of trade representatives was introduced to bring out more transparency in the organizational transactions. The department recommended forintroduction of Electronic Fund transfer and e-tendering. Vigilance Awareness Week was observed from 3.11.08 to 7.11.08 in a befitting manner. Sensitisation" programme on vigilance conducted by CVO was attended by Senior Officers.

RTI Act

The Company has implemented the provisions of the RTI Act 2005 and has nominated the following officials:

PIO : Mr. A.B. Kumar

APIO : Ms. M. Gita

Appellate Authority: Mr. P. Jagadeeswaran, CMD

All applications and first appeals received under RTI during the year 2008-09, have been addressed

Particulars of Employees

Information as per Sub-section 2(A) of Section 217 of the Companies Act 1956, read with Companies (Particulars of Employees) Rules 1975, and forming part of Directors Report for the year ended 31st March 2009-Nil.

Directors

Shri. P. Jagadeeswaran, Director (Finance) continues to hold additional charge of the post of Chairman-cum-Managing Director-HPF.

Shri. Shashank Goel, Director, Department of Heavy Industry, Government of India joined the Board on 15th May 2008 in place of Shri. Munshi Ram, Deputy Secretary, DHL Shri. G.R. Sundaravadivel, Nominee Director-SUUTI joined the Board on 16th Apr 2008 in place of Shri. V.H. Ramakrishnan. In compliance with SEBI guidelines Shri. Gautam Basu and Shri R. Subburathinam were inducted into the Board as Independent Directors w.e.f. 12th Sep 2008.

The Board places on record its gratitude for the co-operation and valuable guidance rendered by the outgoing Directors.

Audit Committee

With the induction of Independent Directors on the Board, the Audit Committee was reconstituted and comprised of the following members as on 31.3.2009:

R.Subburathinam Chairman Independent Dir

Gautam Basu Member Independent Dir

G.R.Sundaravadivel Member Nominee Dir Shashank Goel Member Govt. Director

Directors Responsibility Statement

As per requirements of Section 217 (2AA) of the Companies Amendment Act 2000, your Directors hereby declare that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures.

(ii) The Directors have 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 31st March 2009 and of the profit or loss of the Company for that period.

(iii) The Directors have 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) The Directors have prepared the annual accounts on a going concern basis.

Auditors

M/s. Padmanabhan Prakash & Co., Chartered Accountants, Chennai have been appointed by the Government of India as Auditors of the Company for the financial year 2008-09.

Corporate Governance

In compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchanges, the following are annexed to this report:-

The Management Discussion and Analysis Report

A report on Corporate Governance

The Certificate of the Auditors on Corporate Governance

Status before BIFR / AAIFR / Revival

Consequent upon recommendations of BIFR and AAIFR for winding up of HPF, the Company has approached the Madras High Court and has obtained a stay on further proceedings of BIFR and AAIFR. In the meanwhile, with the approval of the Government, a Revised Revival Plan formulated by Consultants, M/s Ernst & Young was duly considered by the Ministry of Heavy Industries and Public Enterprises and has been forwarded to the Board for Reconstruction of Public Sector Enterprises (BRPSE). The Revised Revival Plan is presently under consideration of the BRPSE and the Government is likely to take a final decision on HPF, based on recommendations of the BRPSE.

Acknowledgement

Your Directors wish to place on record their sincere thanks to the Government of India, particularly the Department of Heavy Industry, the Bankers, valued customers, for their co-operation and support. Your Company sincerely appreciates the valuable services rendered by the employees of the Company. Their efforts and support for the cause of revival was commendable.

For and on behalf of the Board of Directors

P.Jagadeeswaran Chairman-cum-Managing Director

(Addl.Ch)