DIRECTORS' REPORT Your Directors have pleasure in presenting their Eighty Third annual report and the audited financial statements for the year ended March 31, 2015. Dividend In view of loss incurred during the year under review, your Directors do not recommend any dividend for the current Financial Year. (Previous period Nil) Operations The Company continues to be the leading sugar and ethanol manufacturing company in India with its fourteen sugar plants having an aggregate sugarcane crushing capacity of 1,36,000 TCD, six distilleries having aggregate capacity to produce Industrial Alcohol of 800 kilolitres per day and fourteen co-generation plants having a total power generation capacity of 449 MW. During the year, the operations at all the sugar, distillery and co-generation plants were satisfactory. Sugar During the year ended March 31, 2015 the Company crushed 12.107 MMT of sugarcane. The average recovery of sugar from sugarcane was at 9.38% as against 9.20% in the previous period. During the year the Company produced 11,37,815 MT sugar and 6,14,634 MT molasses. During the year the Company sold 12,39,186 MT of sugar and 33,684 MT of molasses as against 16,30,924 MT of sugar and 53,883 MT of molasses during the previous period. Distillery During the year Industrial Alcohol / Ethanol production was 1,25,463 KL as against 2,54,764 KL in the previous period. Alcohol / Ethanol sale during the year was at 1,09,389 KL as against 2,25,678 KL during the previous period. Power The operations of power generation were smooth at all the fourteen plants. While most of the power generated by us continued to be used for captive consumption to run our plants, the surplus power was sold to the Uttar Pradesh state grid. During the year Power generation was at 7,78,057 MW as against to 16,15,638 MW in the previous period. The Company exported 3,29,277 MW of power during the year as against 7,02,371 MW during the previous period. Bagasse boards The Company also owns two Medium Density Fibre (MDF) Board manufacturing plants having capacity of 1,20,000 MT per annum and one Particle Board (PB) manufacturing plant having capacity of 35,000 MT per annum. The operations at all plants of board division were suspended due to non-availability of adequate quantity of sugarcane bagasse at affordable prices and inadequate demand of the products in the market. Change in name of the Company The name of the Company was changed from Bajaj Hindusthan Limited to Bajaj Hindusthan Sugar Limited with effect from January 30, 2015 pursuant to approval received from the Registrar of Companies, Uttar Pradesh and issue of fresh certificate of incorporation upon change of name. Debt restructuring The sugar industry has been adversely affected over past few years due to prolonged mismatch between high raw material (cane) procurement cost and finished goods (Sugar) realisations, non settlement of subsidy claims etc. There was considerable financial pressure on the Company and, in particular on its cash flows as a result of which the Company was finding it difficult to service the debt obligations. At the request of the Company, Lenders of the Company comprising of 15 banks formed a Joint Lenders' Forum (JLF) in accordance with the Framework for Revitalising Distressed Assets in the Economy dated January 30, 2014 and the Guidelines on Joint Lenders' Forum (JLF) and Corrective Action Plan (CAP) dated February 26, 2014 issued by the Reserve Bank of India (RBI). The JLF approved the corrective action plan and decided to restructure the account independent of the CDR mechanism. A detailed Techno-Economic Viability (TEV) study was conducted and the JLF finalised the Restructuring Scheme which was subject to evaluation by an Independent Evaluation Committee (IEC). The salient features of the Scheme are as follows: - Cut-off date (COD) - July 31, 2014. - Outstanding Term loans to be restructured and to be repaid in 31 structured quarterly instalments after moratorium period of 2 years. - Outstanding Working capital loans to be converted into Working Capital Term Loan (WCTL) and to be repaid in 31 structured quarterly instalments after moratorium period of 2 years. - Outstanding Foreign currency loan from IFC, Washington to be funded by the lenders for prepayment and to be repaid in 31 structured quarterly instalments after moratorium period of 2 years. - Funding for interest on restructured Term Loans and WCTL from August 01, 2014 to July 31, 2016 will be provided by the lenders. 70% of the Funding for interest on restructured loans proposed to be converted into equity shares at a price determined by SEBI guidelines and balance 30% shall be repaid in 19 structured quarterly instalments starting from quarter ending September 30, 2016. - Promoters contribution of Rs. 200 crore to be funded in a phased manner. - Pledge of entire promoter's holding of the Company in favour of lenders. - Personal guarantee/corporate guarantee from promoter/promoter group entity. A Master Restructuring Agreement (MRA) was executed in this regard on December 30, 2014 between the Company and JLF Lenders. In terms of the Restructuring Scheme, the restructured facilities have been secured on first pari passu charge basis on all current assets and all movable and immovable fixed assets of the Company. The said facilities are further secured by personal/corporate guarantee from promoter/promoter group. Out of the committed amount of Rs. 200 crore, an amount of Rs. 175 crore has been brought by the promoters as unsecured loan. FITL aggregating to Rs. 386.10 crore have been converted to equity shares. The Restructuring gives your Company critical support to tide over the present difficult business environment. The decision of the banks to consider and approve the Restructuring Scheme also reflects the faith these institutions have in the long term business model of the Company. Changes in capital structure During the year 17,08,41,266 fully paid-up equity shares of face value Rs. 1/- each at a premium of Rs. 20.77 per equity share were allotted upon conversion of Funded Interest Term Loan (FITL) aggregating to Rs. 3,71,92,14,361 to JLF Lenders pursuant to the Restructuring Scheme under JLF route. Consequent to the allotment of the equity shares as aforesaid, the paid-up equity share capital of the Company stands increased from Rs. 63,93,99,91 1 divided into 63,93,99,911 equity shares of face value Rs. 1/- each to Rs. 81,02,41,177 divided into 81,02,41,177 equity shares of face value Rs. 1/- each, resulting into shareholding of promoters as on March 31, 2015 at 36.40% as compared to 46.13% as on March 31, 2014. Listing of securities The Company's equity shares are listed on the BSE Limited and The National Stock Exchange of India Limited. The Annual Listing fees to each of these Stock Exchanges have been paid by the Company. Employees stock option The validity of "Employees Stock Option Plan 2006" expired on July 16, 2014. The information required to be disclosed in terms of the provisions of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is enclosed as per "Annexure I" to this report. Management Discussion and Analysis Management Discussion and Analysis Report is presented in a separate section forming part of this Annual Report. Subsidiary and Associate Companies As on March 31, 2015, the Company had the following Subsidiaries and Associates, all of them are presently unlisted: Subsidiaries: 1. Bajaj Aviation Private Limited (BAPL) -(Holding 100%). 2. Bajaj Power Generation Private Limited (BPGPL) -(Holding 100%). 3. Bajaj Hindusthan (Singapore) Private Limited (BHSPL) - (Holding 100%). 4. PT. Batu Bumi Persada, Indonesia - (step down subsidiary being 99.00% subsidiary of BHSPL). 5. PT. Jangkar Prima, Indonesia - (step down subsidiary being 99.88% subsidiary of BHSPL). Associates: 1. Bajaj Ebiz Private Limited - (Holding 49.50%). 2. Lalitpur Power Generation Company Limited (LPGCL) - (Holding 20.97%). Performance and financial positions of subsidiaries and associates a) Bajaj Hindusthan (Singapore) Private Limited: BHSPL through its two subsidiaries in Indonesia, continued to hold coal mines in Indonesia which are in process of being developed. b) Bajaj Aviation Private Limited: BAPL continued to provide Air Transport Services through Air Craft -Falcon LX 2000. In addition to this, the Company also leased out its Helicopter - Bell 407 to another Company providing Air - Transportation Services. c) Bajaj Power Generation Private Limited: Uttar Pradesh Power Corporation Limited (UPPCL) had granted permission to change the location of the Company's 1980 MW (3 x 660 MW) power project from Bargarh, district Chitrakoot to Mirchwara, district Lalitpur, subject to receipt of approval from Uttar Pradesh Electricity Regulatory Commission. The Company is in the process of obtaining requisite approvals for shifting its project. d) Lalitpur Power Generation Company Limited: The project work on 1980 MW (3 x 660 MW) super critical thermal power project at Lalitpur, (Uttar Pradesh) being implemented through LPGCL has progressed satisfactorily. LPGCL has obtained all the major clearances/approvals including Environment Clearance, Pollution Clearance, Stack Height Clearance, Defense Clearance, Boiler License, Factory License, License for storage of petroleum products, Consent to Operate for Unit 1 (660 MW) etc. LPGCL has signed MoU with Central Coalfields Limited (CCL) on April 11, 2014 for supply of 3.39 million tonnes per annum (MTPA) of domestic Coal for 2 Units of 660 MW each. This MoU has been extended up to March 31, 2016 and under this MoU, Company has already started receiving coal for start-up of Unit 1. LPGCL has also signed two Fuel supply agreement (FSA) for supply of imported coal with PT. Kresna group, Indonesia and PT. Jangkar Prima, Indonesia for 4 MTPA each. Unit 1 of 660 MW has been synchronised successfully. Construction work of other two units (of 660 MW each) is also in advanced stages of completion. During the year, cost of the Project was revised to Rs. 17,295 crore (including working capital margin) due to change in existing scope of the project, additional work as mandated by Government which was not envisaged earlier, escalation in IDC and soft cost etc. The Project is being funded by the Consortium of lenders in debt equity ratio of 75:25 i.e. debt of Rs. 12,972 crore, including ECB borrowing for USD 150 Million (i.e. Rs. 929 crore) and Equity of Rs. 4,323 crore. Till date, Lenders have disbursed total term loan amounting to Rs. 10,251.33 crore, consisting of rupee term loan amount to Rs. 9,322.33 crore and ECB loan amounting to US$ 150 million. e) Bajaj Ebiz Private Limited: Bajaj Ebiz did not carry out any business during the year. Pursuant to the provisions of Section 129 of the Companies Act, 2013 and Rule 5 of the Companies (Accounts) Rules 2014, statement containing the salient features of the financial statements of its subsidiaries/ associate companies in the manner prescribed under the Companies Act, 2013 is given as Annexure to the Consolidated Financial Statements. Consolidated financial statements In compliance with Section 129(3) of the Companies Act, 2013 and Rules made thereunder, Accounting Standards 21, 23 and 27 of Companies (Accounting Standards) Rules, 2006 and pursuant to the listing agreement with the stock exchanges, the Consolidated Financial Statements form part of this Annual Report. Consolidated Financial Statements presented by your Company include financial information about its aforesaid subsidiaries and associates. The standalone financial statements of BHSL as well as its aforesaid subsidiaries and its associates will be available on the website of the Company (www.bajajhindusthan.com). Directors and Key Managerial Personnel Cessation Mr. Shishir Bajaj (DIN: 00017612), Chairman & Managing Director and Mr. D.S. Mehta (DIN: 00038366), Independent Director resigned from the Company on October 17, 2014. Mr. Manoj Maheshwari (DIN: 02581704), Director & Group CFO and Dr. Sanjeev Kumar (DIN: 00364416), Executive Director of the Company resigned with effect from March 30, 2015. The Board placed on record its appreciation for the valuable services rendered by the aforesaid directors. Retirement by rotation Mr. Ashok Kumar Gupta (DIN: 02608184), Director of the Company will retire by rotation and being eligible offers himself for re-appointment. Appointment of Mr. Ashok Kumar Gupta is in compliance with the provisions of Section 164(2) of the Companies Act, 2013. Appointment and re-designation Mr. Kushagra Bajaj (DIN: 00017575), was re-designated as Chairman & Managing Director of the Company with effect from October 18, 2014. Mrs. Kiran Anuj was appointed as Additional (woman) Director with effect from March 30, 2015 in accordance with Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. In terms of the provisions of the Companies Act, 2013 and Articles of Association of the Company, Mrs. Kiran Anuj would hold office as Additional Director only up to the date of the 83rd Annual General Meeting of the Company. The Company has received notice from a member pursuant to Section 160 of the Companies Act, 2013, proposing the appointment of Mrs. Kiran Anuj as Director of the Company. The Board of Directors recommends the appointment of Mrs. Kiran Anuj as Director of the Company. Appointment of Independent Directors The shareholders at the Annual General Meeting held on August 12, 2014 appointed Mr. M.L. Apte (DIN: 00003656), Mr. R.V. Ruia (DIN: 00035853) Mr. Alok Krishna Agarwal (DIN: 00127273) and Mr. D.K. Shukla (DIN: 00025409) as Independent Directors as per Section 149 of the Companies Act, 2013 for a term up to March 31, 2019. The Independent Directors have submitted the declaration of Independence pursuant to Section 149(7) of the Companies Act, 2013, stating that they meet the criteria of Independence as provided in sub section (6) of section 149. The profile of the Independent Directors forms part of the Corporate Governance Report. Changes in Key Managerial Personnel Pursuant to the provisions of the Companies Act, 2013 the Company have Chairman & Managing Director, Company Secretary and Chief Financial Officer as Key Managerial Personnel. Details of changes in KMPs during the year are given below: Board evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and other Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. Induction and training of Board members The process followed by the Company for induction and training to Board members has been explained in the Corporate Governance Report. Directors' responsibility statement Pursuant to the requirement of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, your Directors confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) the directors had selected such accounting policies and applied them consistently and made judgements 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 the financial year and of loss of the Company for that period; (iii) the directors had 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 had prepared the annual accounts on a going concern basis; (v) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Auditors and auditors' report Auditors and their report As per Section 139(2) of the Companies Act, 2013, an audit firm shall appoint or re-appoint for two terms of five consecutive years. At the last Annual General Meeting held on August 12, 2014, M/s. Chaturvedi & Shah, Chartered Accountants (Firm Registration No.101720W) were appointed for the remaining one year of their first term as Auditors of the Company. First term of M/s. Chaturvedi & Shah, Chartered Accountants, existing Statutory Auditors will end at the conclusion of the ensuing (83rd) Annual General Meeting. On recommendation of the Audit Committee, the Board of Directors recommends to the shareholders the re-appointment of M/s. Chaturvedi & Shah as Auditors of the Company for a further period of 5 consecutive years up to the conclusion of the 88th Annual General Meeting. The Statutory Auditors have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and they are not disqualified for re-appointment. The Statutory Audit Report does not contain any qualification, adverse remark or disclaimer made by the Statutory Auditor. The reservations made by the Statutory Auditors under para "Emphasis of Matter" alongwith notes no. 36(I)(a)(iv), 40 and 42 are self explanatory and do not call for any further information and explanation or comments under Section 134(3)(f) of the Companies Act, 2013. Cost auditors and their report Pursuant to the directives of the Central Government under the provisions of Section 148 of Companies Act, 2013, M/s. B.J.D. Nanabhoy & Co., Cost Accountants, Mumbai (Firm Registration No. 000011) were appointed as the Cost Auditors of the Company. The cost auditors have submitted the Cost Audit Reports to the Central Government within the time limit of 180 days from the end of the extended financial year of 18 months ended on March 31, 2014 for the following products: Secretarial auditors and their report Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Anant B Khamankar & Co., Company Secretaries were appointed as Secretarial Auditor of the Company. The Secretarial Audit Report is annexed as "Annexure II" and forms part of this report. The report does not contain any qualification, reservation or adverse remark or disclaimer. Public deposits The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. Deposits unclaimed at the end of the year was nil. Particulars of loans, guarantees or investments Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in "Annexure III" and forms part of this report. Audit committee The Company constituted Audit Committee as required under Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Composition of Audit committee is given in Corporate Governance Report. There is no such instance during the year under review where the Board had not accepted any recommendation of the Audit Committee. Related party transactions The details of transactions entered into with the Related Parties are enclosed in Form no. AOC 2 is annexed herewith as "Annexure IV" and forms part of this report. Internal financial control The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of business, including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of fraud and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. Extract of Annual Return The details forming part of the extract of the Annual Return in Form MGT 9 is annexed herewith as "Annexure V" and forms part of this report. Corporate Social Responsibility As required under Section 135 of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility (CSR) Committee. As per recommendation of the CSR Committee, the Board at its meeting held on September 25, 2014 approved the CSR Policy of the Company. Report on CSR Activities/Initiatives is enclosed as "Annexure VI" and forms part of this report. Policies Policy for determining material subsidiary During the year ended March 31, 2015, the Company does not have any material listed/unlisted subsidiary companies as defined in Clause 49 of the Listing Agreement. The Company has framed a policy for determining "material subsidiary" and the same is available on the Company's website at www. bajajhindusthan.com/investorcorner-policies.php Policy on remuneration and other aspects of directors and KMP The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of director and appointment of Directors, Key Managerial Personnel and Senior Management and their remuneration. The detailed remuneration policy is placed on Company's website at www.bajajhindusthan com/investorcorner-policies.php Vigil mechanism/Whistle blower policy The Company has formulated a Vigil Mechanism/Whistle Blower Policy in accordance with Section 177(9) of the Companies Act, 2013 and Clause 49 of the Listing agreement. The details of the Vigil Mechanism/Whistle Blower Policy are provided in the Corporate Governance Report and also posted on the website of the Company at www.bajajhindusthan.com/investorcorner-policies php Risk management policy The Company has a Risk Management Policy to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimise adverse impact on the business objectives and enhance the Company's competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business. Related party transaction policy Policy on dealing with Related Party Transactions as approved by the Board is uploaded on the Company's website at www.bajajhindusthan.com/investorcorner- < policies.php Corporate Social Responsibility (CSR) policy Contents of Corporate Social Responsibility Policy in the Board's report are given in the Report on CSR Activities in "Annexure VI" and on the Company's website at www.bajajhindusthan.com/investorcorner-policies.php Anti sexual harassment policy The Company has in place an Anti Sexual Harassment Policy in line with the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Committee has been set up to redress the complaints received regarding sexual harassment at workplace. All employees including trainees are covered under this policy. The following is the summary of sexual harassment complaints received and disposed off during the current financial year. Number of Complaints received: Nil Number of Complaints disposed off: Nil Significant and material orders passed by the regulators or courts or tribunals No significant or material order passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. Particulars of employees and related disclosures As required under the provision of Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company are set out in "Annexure VII" and forms part of this report. Transfer of amounts to investor education and protection fund The amounts of dividend, sum of matured fixed deposits, sum of interest on matured deposits, etc. which has remained unpaid or unclaimed for 7 years have been transferred to the Investor Education and Protection Fund within time stipulated by law on respective due dates in accordance with the provisions of Section 124(5) of the Companies Act, 2013. Conservation of energy, technology absorption and foreign exchange earnings and outgo The relevant particulars regarding the above is given in "Annexure VIII" and forms part of this report. Corporate governance The Company has vigorously striven to follow the best corporate governance practices aimed at building trust among the key stakeholders, shareholders, employees, customers, suppliers (including farmers) and other stakeholders on four key elements of corporate governance - transparency, fairness, disclosure and accountability. As per Clause 49 of the listing agreement, a separate section on Corporate Governance practices followed by the Company, together with a certificate from the Company's Auditors conforming compliance forms part of this Report. Acknowledgements Industrial relations have been cordial at all the plants of the Company. The Directors express their appreciation for the sincere co-operation and assistance of Central and State Government authorities, bankers, customers and suppliers and business associates. Your Directors also wish to place on record their deep sense of appreciation for the committed services by your Company's employees. Your Directors acknowledge with gratitude the encouragement and support extended by our valued shareholders. For and on behalf of the Board of Directors Kushagra Bajaj Chairman & Managing Director (DIN: 00017575) Place : Mumbai, date : July 08, 2015 |