Annual Report-FY 2011-12 - Timex Group India

Organized retail in India is still in the nascent stage and watches need a very high service led customer interface to close thetransaction with the customer. High rentals and unavailability of skilled sales staff is a big challenge that the industry isfacing. Unorganized sector also poses a big challenge to the organized watch retailers. Counterfeiting is a major issue thatbrands in the mass market and economy watch segment face in the country. Watches as an instrument for time keeping deviceis facing threat from increasing penetration and use of mobile phones.INDIA AS A MANUFACTURING HUB: STRENGTHS & OPPORTUNITIESIndia is one of the few countries that have watch manufacturing capabilities. Competitive Prices and Quality of products, increasedentry of new brands and rising cost of sourcing from China, accounts for increased opportunities for making India the manufacturingbase of time-keeping devices. Allotting SEZ’s, promoting skill development amongst labor and infrastructural development couldbe a boon as it would also mean availability of raw materials such as stainless steel, metals at a relatively lower prices.External FactorsAlthough labor wage in China is increasing, the component of wage in total cost of a watch being less, shifting of manufacturingfrom China to India will take time. India imports most of the raw material used in watch component manufacturing such asstainless steel, leather and synthetics.Internal FactorsThe capacity of the existing manufacturers is not enough even to cater to the requirement of existing watch companies. It willrequire huge investments to ramp up capacities to cater to global demand. Achieving the required quality standards with thecurrent set up is a great challenge for the current manufacturersAt Timex, a concentrated global sourcing initiative is in place with the world looking to develop a sustainable vendor base inIndia. Higher lead time is required to cater to global needs from a single location. There is a need to diversify production riskamongst different locations.GOVERNMENT POLICYYour Company has been actively involved with the “All India Federation of Horological Industries” (AIFHI), an apex bodyof Horological Industry in India. Your Company together with AIFHI has been taking up issues concerning the WatchIndustry and your Company in particular, with the various government agencies. With the active participation by majority ofbrands in the Category, AIFHI has released a white paper on the industry, highlighting the key issues for which a change inGovernment Policy is recommended and taken up with the respective authorities for the overall growth of the industry. Weshall continue our efforts to represent the interests of the Industry and your own Organisation.FINANCEThe Company does not hold any fixed deposits from the public, shareholders & employees. There were no overdue /unclaimed deposits as on 31 March 2012.During the year under review, the Company made payment aggregating to Rs. 41.96 Crore by way of Central, State and localsales taxes and duties as against Rs. 32.58 Crore in the previous year.Your Company is paying dividend on its Preference Shares at the agreed coupon rate.SEGMENT WISE REPORTINGThe segment wise information for watches and other activities are provided in the Notes to the Accounts.INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACYYour Company has endeavoured to continuously improve the internal controls both relating to financial reporting and operations.Your Company has well established procedures for internal control, which are commensurate with its size and operations.The internal control mechanism comprises of a well-defined organization, who undertake time bound audits and report theirfindings to the Audit Committee, documented policy guidelines, predetermined authority levels and processes.The systems and operations are regularly reviewed by the Audit Committee to ensure and review their effectiveness andimplementation. The Statutory Auditors of the Company also attend these meetings and convey their views on the adequacyof internal control systems as well as financial disclosures. The Audit Committee also issues directives for enhancement inscope and coverage of specific areas, wherever felt necessary.HUMAN RESOURCES“Human Resources” continues to be a major thrust area in your Company, which is highly critical for business expansion andgrowth. Your Company provide a challenging work environment that encourages meritocracy at all levels and has believed inan environment that fosters accomplishment, ownership, creativity and mutual respect. Over the last few years, your company10