RED HERRING PROSPECTUS Dated August 24 ... - Globus Spirits

Depreciation
Depreciation is marginally higher in FY 2006-07 at Rs 273.83 lakhs as compared to Rs 205.37
lakhs in FY 2005-06 due to additions in fixed assets (largely plant and machinery worth Rs. 822
lakhs) to support enhanced production.
Profit after Tax (PAT)
PAT in the FY 2006-07 was Rs. 865.52 lakhs as compared to Rs. 523.88 lakhs in FY 2005-06, a
65.21% rise. Besides contribution from a higher turnover in the year under context, more than
proportionate growth in PAT is explained by reasons quoted for a higher PBIDTA above.
INFORMATION REQUIRED AS PER CLAUSE 6.10.5.5. OF SEBI DIP GUIDELINES
1. Unusual or infrequent events or transactions:
The various events / transactions that could fall in this category are strike / lockout due to
issues related to industrial relations and/or political intervention, political unrest leading to
bandhs/chakka jam etc.; major natural calamity like earthquakes, floods etc., accidents
like fire/major equipment like boiler/turbine breakdown.
There have been no events, which may be called “unusual” or “infrequent”.
2. Significant economic changes that materially affected or are likely to affect
income from continuing operations:
• The only major cause for qualification under this category could be drastic change /
principal shift in the policy of the Central / State governments imposing complete
prohibition of sale of liquor in the State.
• It is however observed that this action on part of any Government would be untenable
looking at the contribution to the revenues from this industry. In fact, States cannot
even contemplate taking away this major source of revenue from them. The country
has witnessed some states first enforcing prohibition and later relaxing/withdrawing it.
3. Known trends or uncertainties that has had or is expected to have a material
impact on sales, revenue or income from continuing operations:
• As this industry is essentially dependent on agri-product input as raw material, all
trends / uncertainties related to agricultural production have an impact on all of the
above. This, at best, can only be forecast using the traditional tools available largely
with the Government sector.
• Besides, changes in Government policy regarding opening up of the market economy
can have significant, though short term, impact on sales, revenue and income.
• The Company, with the help of technology, has mitigated the above wherever possible,
like being able to process a variety of agri raw materials in the event of crop failures in
one or two commodities.
• Similarly, constant interaction with the Government representatives and their overt
dependence on the revenues from this Industry in the State is the only mitigating
factor for uncertainties related to policy.
4. Future changes in relationship between costs and revenues, in case of events
such as future increase in labour or material costs or prices that will cause a
material change are known:
• The structure of the business is such that any such change, as it happens, has a
proportionate relationship to the price of the end product. This leads to a fair amount of
consistency in earning ratios. In fact, the main reason for this is the non-alternative
nature of this product i.e., there is no replacement for potable alcohol as an intoxicant
or a life style consumer product.
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