KAMDHENU ISPAT LIMITED - Securities and Exchange Board of India

of excise duty was 8% thereafter upto February 2005 the rate of excise duty was 12% and surcharge there on & from
1st March 2005 the rate of excise duty was 16% and surcharge thereon.
Personnel Expenses
Personnel expenses consist of salaries, wages, overtime and bonus, contribution to employee benefit schemes,
employee welfare charges and staff recruitment and training. Personnel expenses have come down from 1.04% of
the total expenditure in 2001 fiscal to 0.77% in fiscal 2005. Increased automation and improved production techniques
have led to economies of scale and, consequently, reduced our manpower requirements per ton of output.
Administrative and Other Expenses
With the increased scale of operations of the company, administrative and other expenses have gone up from 38.06
lacs in 2001 to 65.59 lacs in 2005 i.e increase of 73% over the stated period. However, in percentage terms, they
have come down from 0.92% of the total expenditure in 2001 fiscal to constituted 0.53% of the total expenditure in
2005.
Due to fact that the company has its operations spread at diverse locations all across the country, administrative and
other expenses consist majorly of “postage, telephone & telegram” and “rent ,rates, taxes and fees”. Put together,
they accounted for 68.49% and 58.46% of the total administrative expenses in 2001 and 2005 fiscal respectively.
Individually, “postage, telephone & telegram” accounted for 49.17% and 40.46% of the total administrative expenses
in 2001 and 2005 fiscal. Reduction in STD call rates has been the main reason for reduction of this expenditure.
“Rent ,rates, taxes and fees” which accounted for 19.29% of the administrative expense in 2001 has more or
less remained static at 18.00% in 2005 fiscal.
Selling and Distribution Expenses
Selling and distribution expenses consist largely of transportation costs, commissions paid to our stockists / dealers
and advertising costs in electronic and print media. Transportation costs, commissions and advertising accounted
for 21.32%, 11.66% and 64.53% respectively, of selling and distribution expenses in fiscal 2005. To further consolidate
on the strong brand image which the company already enjoys, the company has increased its expenditure on
advertising from 14.62 lacs in 2001 to 121.02 lacs in 2005. Total selling and distribution expenses have gone up from
61.92 lacs in 2001 to 187.53 lacs in 2005. In percentage terms, though, the selling and distribution expenses
accounted for 1.50% of total expenditure in 2005 have increased only marginally since the beginning of fiscal 2001
from 1.19%.
Financial Expenses
Interest and finance charges represent expenses incurred in respect of our Term Loans and Working Capital Loans
other charges incurred by us in respect of our banking arrangements. The financial expenses have come down from
0.69 % of the total expenditure in 2001 to 0.48 % in 2005 fiscal.The reduction in interest and finance charges is partly
attributable to general reduction of interest rates in India (the ten-year yield on government debt securities declined
from 10.36% on April 2, 2001 to 7.16% on May 17, 2005). We have used structured finance solutions that reduce our
financing costs to the minimum.
Depreciation
Our company provides depreciation on its fixed assets on straight-line method at the rate prescribed under Schedule
XIV of the companies Act,1956 on pro-rata & actual shift working basis. Our depreciation expense when expressed
as a percentage of expenses for fiscal 2005 is 0.59% .
Taxation
Provision for income tax accounted for 0.73% of net sales, in fiscal 2005. Tax liability for the five month period
ended August 31, 2005 is based upon the profits upto the stated period and will be accordingly adjusted at the year
end.
Provision for current tax is made after taking into consideration benefits admissible under the provision of income tax
Act, 1961. Deferred tax resulting from “timing difference” between book profit and taxable profit is accounted for
using the tax rates and laws that have been enacted or substantively enacted as on the dare of balance sheet. The
deferred tax liability is recognized and carried forward only to the extent that there is a reasonable certainty that the
same will be realized in future.
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