DIRECTORS' REPORT To The Members Your directors are pleased to present the 29th (Twenty Ninth) Annual Report together with Audited Statement of Accounts of your Company for the year ended 31st March 2015 . DIVIDEND AND RESERVES Your directors have not recommended payment of dividend as the Net Profit after Tax earned during the year under review is marginal. Your Company has not transferred any amount of Profit & Loss account to any reserve . OPERATIONS REVIEW During the year under review, your Company earned a Net Profit after Tax, albeit at reduced levels as compared to FY 2013-14. Revenue from Operations during the year under review stood at Rs 98608.68 lacs as compared to Rs. 101956.88 lacs during FY 2013-14, a reduction of 3 . 3%. A significant reduction was witnessed in the price of feedstock used by the Company - during the period from August 2014 to January 2015 - on account of the unprecedented fall in the price of Crude Oil . However, this benefit could not be realized as sluggish market conditions, coupled with an oversupply situation, resulted in a drop in the Company's product prices which was greater than the fall in feedstock prices The consequential impact on margins, together with inventory valuation losses, resulted in a reduction in profits . Despite sluggish market conditions, your Company was successful in improving sales of Chips, Polyester Films and Engineering Plastics - in quantitative terms - by 11%, 1. 8% and 21% respectively. In order to mitigate the adverse effect of sluggish market conditions and an oversupply scenario, the Company sustained its focus towards increasing the proportion of Value Added & Specialty products in its portfolio aligned with its strategic objective. Sales of Value Added & Specialty Films contributed about 15% of the total sales volume of Polyester Films in FY 2014-15 . In the Engineering Plastics segment, the Company maintained its aggressive growth strategy, registering a compounded annual growth rate - in quantitative terms - of 35% over the last three years. This was significantly higher than the industry growth rate. During the year under review, the Company achieved a quantitative growth of 21% over the previous year in sales of Engineering Plastics products, primarily on account of a healthy growth of about 60% in sales of Engineering Plastics for OFC application Consequently, Gross Revenue from sales of Engineering Plastics products increased from Rs . 16191.16 lacs in FY 2013-14 to Rs . 19406.17 lacs in FY 201415, translating to a growth of 20% Continuous growth ahead of industry helped the Company in securing the Plasticon Gold Award for the "Fastest Growing Enterprise - Processing (Engineering Polymers)" at the Plastindia Exhibition in February 2015. Various initiatives taken over the last five years - supported by capacity expansions - have resulted in Net Sales of the Company growing at a CAGR of 17 . 9% pa, from Rs . 39537.10 lacs in FY2009-10 to Rs . 89626.76 lacs in FY2014-15. During the year under review, capacity utilization in Polyester Films was about 77%, with production marginally higher at 43788 MT as compared to 42846 MT during the year 2013-14 . Interest and financial expenses during the year under review were 4 .14% of Net Sales, with overall leveraging at prudent levels of 1. 55 . Details on operations, a view on the outlook for the current year and various strategies (internal and external) adopted by the Management are provided in the 'Management Discussion & Analysis Report' which forms an integral part of this Annual Report. EXPENDITURE ON PLANT & MACHINERIES AND PROJECTS UNDER IMPEMENTATION Your Company is continuously concerned about ongoing global environmental issues and accordingly commissioned a Bio-mass (Rice Husk) fuelled Thermic Fluid Heater of 10 MKCal capacity -during the year under review - to enhance its Thermal Energy generation capacity whilst reducing dependence on Furnace Oil and also achieving savings in the process In addition to the existing UPS of 7950 KVA, a rotary type UPS of 1670 KVA has also been commissioned to improve quality and reliability of operations Aligned with the strategic objective of increasing the proportion of Value Added & Specialty products, the Company is in the process of modifying its Film Line # 1 by installing a Twin Screw Extruder and Primary Scanner for measuring Thickness . With this modification, Film Line # 1 will be able to produce various Specialty Films with reduced conversion cost and wastage . The modification is likely to be completed by August 2015. To exploit opportunities likely to be created in the Optical Fiber Cable segment upon implementation of Digital India program of the Government of India, the Company is likely to commission two 24 cubic meters SSP dryers to enhance its Solid State Polymerization (SSP) capacity by 1800 TPA during the year 2015-16 . Your Company continues to make investments towards modernization, technical upgradation and debottlenecking initiatives in all the business segments . During the year under review, the Company undertook Business Improvement initiatives towards controlling costs, improving quality and operating efficiency. Your Company would continue to focus on Business Improvement initiatives to further improve operating efficiencies and reduce costs . CORPORATE GOVERNANCE The Company has complied with the mandatory provisions of Corporate Governance as prescribed in the Listing Agreement with the Stock Exchanges A separate report on Corporate Governance, which forms part of this Board's Report is included as a part of the Annual Report along with the Practicing Company Secretary's Certificate on its compliance . MANAGEMENT DISCUSSION AND ANALYSIS The Management's Discussion and Analysis Report on performance, state of affairs of the company, risk management system, industry trends and other material changes and commitments, if any, affecting the financial position of the company forms an integral part of this Report . SUBSIDIARY COMPANIES In accordance with Section 129(3) of the Companies Act, 2013, a statement containing salient features of the financial statements of the subsidiary companies in Form AOC-1 is provided as part of this Annual Report . In accordance with Section 136 of the Companies Act, 2013, the Annual Report of the Company containing audited standalone and consolidated financial statements including all other documents required to be attached thereto and financial statements of subsidiaries have been uploaded on the website of the Company at www.esterindustries.com . Further the financial statement of the Subsidiary Company shall be made available to the members of the Company on their request Such Annual Accounts are also kept for inspection by any member at the Corporate Office and Registered Office of the Company on business hours on all working days except Saturday till the date of AGM . The Board has formulated a Policy on Material Subsidiaries to set out the criteria to determine "Material Subsidiaries" in accordance with provision of Clause 49 of the Listing Agreement The policy can be accessed on Company website at the following link - <http://www.esterindustries.com/ester_cms/userfiles/file/policies/> Policy_on_material_subsidiary.pdf PUBLIC DEPOSIT The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on public deposits was outstanding at the end of financial year 2014-15 . DIRECTORS AND KEY MANAGERIAL PERSONNEL Mr. Arvind Kumar Singhania has been appointed as Whole-time Director from 21st May 2014 till 31st March 2017 by the Board in the meeting held on 21st May, 2014 and by the Shareholders in the AGM held on 22nd September, 2014 In the Board Meeting held on 11th February, 2015, he has been appointed as Managing Director of the company for the remaining tenure viz from 11th February, 2015 till 31st March 2017 and designated as Chairman & CEO by the Board of Directors and the appointment was approved by the Shareholder through Postal Ballot . Mrs . Archana Singhania was appointed as Additional Director (Non-Executive) of your Company at the meeting of the Board of Directors held on 4th August, 2014 and subsequently appointed as a NonExecutive Director by the shareholders at the AGM held on 22nd September, 2014 . In the last Annual General Meeting of the Company held on 22nd September, 2014, Mr. V. B. Haribhakti, Mr. M . S. Ramachandran, Mr. Dinesh Kothari, Mr. P. S . Dasgupta, Mr. Anand Chand Burman, Mr. Ashok Newatia were appointed as Independent Directors to hold office till 31st March, 2019 in accordance with the requirement of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement . During the year Mr. V. B . Haribhakti has resigned from the directorship of the Company. He was also the Chairman of the Audit Committee and Nomination & Remuneration Committee Your Directors record appreciation for the services and guidance rendered by him. Mr Sandeep Dinodia, Chartered Accountant was appointed as the Additional Director of the Company w. e . f. 25th May, 2015 in the capacity of Independent Director He has also been appointed as the Chairman of Audit Committee A resolution proposing his appointment as Independent Director to hold office up to 5 (five) consecutive years up to 31st March, 2020 forms part of the Notice of the forthcoming AGM In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr Pradeep Rustagi will retire by rotation at the forthcoming AGM of Company and being eligible, offer themselves for re-election Mr Arvind Kumar Singhania, Chairman & Managing Director (designated as Chairman & CEO), Mr. Pradeep Kumar Rustagi, Executive Director & CFO and Mr Diwaker Dinesh, Company Secretary are the Key Managerial Personnel of your Company in accordance with the provisions of Section 2(51) read with 203 of the Companies Act, 2013 and rules made thereunder DECLARATION OF INDEPENDENCE Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149 and other applicable provisions, if any, of Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Clause 49 of the Listing Agreement. COMPOSITION AND MEETING OF THE BOARD AND AUDIT COMMITTEE The details of the composition of Board of Directors and Audit Committee and number of Board and Audit Committee meetings held during the year are given in the Corporate Governance Report which forms part of this Report . AUDITORS AND AUDIT REPORT Statutory Audit During the year M/s . S. R. Batliboi & Associates LLP, Chartered Accountants had expressed their unwillingness to be considered for reappointment as Statutory Auditors of the Company in the 28th AGM held on 22nd September, 2014 . At the recommendation of Audit Committee and the Board, M/s S R Batliboi & Company LLP, Chartered Accountants, was appointed as Statutory Auditors by the Shareholders to hold office from 28th AGM till 31st AGM subject to the ratification by the Shareholders every year. The appointment is accordingly proposed in the Notice of AGM for ratification by the Shareholders . The Auditors' Report read together with Annexures do not contain any qualification of significant nature and do not call for any explanation/clarification. Cost Audit The Board of Directors had appointed M/s Sanjay Gupta & Associates, Cost Accountants, as the Cost Auditor of your Company for the financial year 2014-15 to conduct the audit of the cost records of your Company. The Cost Auditor has submitted the report of the Audit Committee and the Board. There are no qualifications, reservation or adverse remark made by the auditor in the report . In accordance with the Section 148 and other applicable provisions, if any, of the Companies Act, 2013 and rules made thereunder, the Board of Directors of your Company has appointed M/s R J Goel & Co ., Cost Accountants as the Cost Auditor for the financial year 201516 on the recommendations made by the Audit Committee. In terms of Section 148 of the Companies Act, 2013 and rules made thereunder, a resolution seeking your ratification of the remuneration of M/s . R.J . Goel & Co. is provided in the Notice of AGM . Secretarial Audit The Board, during the year, appointed M/s Sanjay Grover & Associates, Company Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st March, 2015 .The Report of M/s Sanjay Grover & Associates in terms of Section 204 of the Act is provided in the "Annexure-A" forming part of this Report. There are no qualifications, reservation or adverse remark made by the auditor in the report . DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134(3)(C) of the Companies Act, 2013 with respect to the Directors' Responsibility Statement, the Directors confirm that: - 1. in the preparation of the annual accounts for the Financial Year ended 31st March 2015, the applicable Accounting Standards have been followed along with proper explanation relating to material departure, if any. 2 they have selected appropriate accounting policies and applied them consistently and made judgment and estimates that were reasonable and prudent, so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year and of the Profit and Loss of the Company for the year under review; 3. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and 4 they have prepared the accounts of the Company for the financial year ended 31st March 2015 on a going concern basis . 5. proper internal financial controls laid down by them were followed by the Company and that such internal financial controls are adequate and were operating effectively; and 6 they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. INTERNAL CONTROLS Your company has put in place adequate internal financial controls . The systems and procedures adopted by the company ensure the orderly and efficient conduct of its business and adherence to the Company's policies, prevention and detection of frauds and errors, accuracy and completeness of records and the timely preparation of reliable financial information . Your company operates in SAP, an ERP system, and has many of its accounting records stored in an electronic form and backed up periodically. The ERP system is configured to ensure that all transactions are integrated seamlessly with the underlying books of accounts . Management periodically reviews the financial performance of your Company against the approved plans across various parameters and takes necessary actions, wherever necessary. The Company's Internal Auditors have conducted periodic audits to evaluate the adequacy & effectiveness of financial and operating internal controls, to report significant findings to the Audit Committee of the Board and to provide reasonable assurance that the Company's established systems, policies and procedures have been followed The Audit Committee constituted by the Board reviews the internal controls and financial reporting issues with Internal Auditors on a regular basis . Compliance with laws and regulations is also monitored through a well laid down framework which requires individual functions to confirm and report statutory compliances on all laws and regulations concerning their respective functions This gets integrated with the overall compliance reporting on all laws and regulations for the purpose of review and monitoring by the Board . CODE OF CONDUCT The Code of Conduct, as adopted by the Board of Directors, is applicable to all Directors and senior management of the Company. They have affirmed compliance with the Code of Conduct. A declaration to this effect duly signed by Mr. Arvind Kumar Singhania, Chairman & CEO is enclosed as a part of the Corporate Governance Report which forms part of this report. A copy of the Code of Conduct is available on the Company's website viz www.esterindustries.com The Code of Conduct is based on the fundamental principles of good corporate governance and corporate citizenship The Code covers the Company's commitment to sustainable development, concern for occupational health, safety and environment, a gender friendly workplace, transparency, auditability and legal compliance . CHANGES IN CAPITAL During the financial year 2014-15 the following changes were effected in the Share Capital of your Company:- 1. Scheme of Amalgamation- Pursuant to Scheme of Amalgamation between the Company and Sriyam Impex Private Limited (SIPL), 9972703 Equity Shares of Rs 5/- each were issued to the Shareholders of SIPL and 1,02,22,650 held by SIPL in the Company were cancelled. 2. Preferential Allotment to Non-Promoter entity - 2,07,50,000 Warrant of Rs . 10 .10/- each convertible into Equity Shares of Rs . 5/- at a premium of Rs . 5 .10/- were issued to a Non-Promoter entity The said warrants have been converted into Equity Shares in the Board Meeting held on 25th May, 2015. LISTING OF SECURITIES Your Company's Equity Shares are currently listed with Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE) .The Company has paid the listing fees to BSE and NSE for the financial year 2015-16 . EXTRACT OF ANNUAL RETURNS The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as "Annexure - B". PARTICULARS OF LOANS, INVESTMENTS AND GUARANTEES The particulars of the loan, if any (along with the purpose of utilization by recipient of loan) and investments covered under Section 186 of the Companies Act, 2013 are provided in Notes 12, 13 to financial statements. The Company has not issued any guarantee or provided any security as covered under Section 186 of the Companies Act, 2013 . CORPORATE SOCIAL RESPONSIBILITY Pursuant to Section 135 of the Companies Act, 2013 and rule made thereunder, the Board of Directors has constituted a Corporate Social Responsibility (CSR) Committee. The details of the Composition of the Committee is set out in Corporate Governance Report which forms part of this report The Committee has adopted a Corporate Social Responsibility Policy Brief outline of the CSR Policy of the Company are set out in "Annexure -C" of this report as prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014 The policy is available on the website of the Company viz . www.esterindustries.com As per Section 135(5) of the Act, the Company needs to ensure that at least 2% of average net profit of preceding three financial years is spent on CSR activities as mentioned in CSR Policy However, due to losses incurred in past and average of preceding three financial years (2011-12, 2012-13 and 2013-14) being a loss, the Company has not incurred amount on CSR activities during financial year 2014-15. PERFORMANCE EVALUATION The Company has devised a Policy for performance evaluation of all the Directors, Board as a whole and Committees of the Board . An annual evaluation was carried out of the performance of the Board, Board committees, all the directors and Chairperson pursuant to the provisions of the Companies Act, 2013 and the requirements of Clause 49 of the Listing Agreement . During the year the following evaluation process was adopted - 1 Independent Directors at their separate meeting without the presence of Non-Independent Director, had reviewed the performance of the Chairperson, Non-Independent Directors and the Board While evaluation the performance of the Chairman, the views of executive directors and non-executive directors were also taken into account . 2. Nomination and Remuneration Committee carried out the evaluation of every Director's performance The Committee, while doing so, considered the outcome of meeting of Independent Directors; 3 The Board had evaluated its own performance, performance of its Committees and each Director While conducting the evaluation, the Board considered and discussed the outcome of the separate meeting of Independent Directors and the meeting of Nomination & Remuneration Committee The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc. The process of evaluation was based on the criteria prescribed in the Policy on Performance Evaluation The Policy is uploaded on Company's website and the same can be accessed at the following link <http://www.esterindustries.com/ester_cms/userfiles/file/policies/> Performance_Evaluation_Policy.pdf POLICY AND DISCOSURE RELATING TO THE NOMINATION AND REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNELS AND OTHER EMPLOYEES The Nomination and Remuneration Committee has framed a Nomination and Remuneration policy for determining criteria selection and appointment of Directors, Key Managerial Personnel, Senior Management Personnel including determining qualifications, positive attributes, independence of a Director and other matters provided under Section 178(3) of the Companies Act, 2013 The salient aspects covered in the Nomination and Remuneration Policy, covering the policy on appointment and remuneration of Directors and other matters have been outlined in the Corporate Governance Report which forms part of this Report. The information required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in "Annexure - D" of this report The same is open for inspection at the Registered Office of your Company at all working days except Saturday, till the date of AGM . RISK MANAGEMENT SYSTEM As per the requirements of Clause 49 of the Listing Agreement, the Board of the Company has formed a risk management committee of directors to frame, implement and monitor the risk management plan for the Company. The details of the Composition of the Committee is set out in Corporate Governance Report which forms part of this report The Company has framed a Risk Management Policy covering risk management process, governance and execution of same. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis . RELATED PARTY TRANSACTIONS All contracts or arrangements with related parties, entered into or modified during the financial year, were on an arm's length basis and in the ordinary course of business . All such contracts or arrangements, wherever required, have been approved by the Audit Committee and the Board However no material contracts or arrangements with related parties were entered into during the year under review Accordingly, no transactions are being reported in Form No AOC-2 provided in "Annexure - E" pursuant to Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 . The details of the related party transactions as required under Accounting Standard - 18 are set out in Note 34 to the standalone financial statements forming part of this Annual Report. The Policy on Related Party Transactions, can be accessed on the Company website at <http://www.esterindustries.com/ester_cms/userfiles/file/policies/> Related_Party_Transactions_Policy.pdf CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as prescribed under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014 is set out in the "Annexure - F" forming part of this report VIGIL MECHANISM The Company has formulated Vigil Mechanism/Whistle Blower Policy with a view to provide a mechanism for employees of the Company to raise concerns of suspected frauds, any violations of legal/regulatory requirements or code of conduct/policy of the Company, incorrect or misrepresentation of any financial statements and reports, etc. The purpose of this Policy is to encourage employees and directors who have concerns about suspected misconduct to come forward and express these concerns without fear of punishment or unfair treatment The policy aims to provide an avenue for employees and directors to raise concerns and reassure them that they will be protected from reprisals or victimization for whistle blowing in good faith . The practice of the Whistle Blower Policy is overseen by the Audit Committee of the Board and no employee has been denied access to the Committee The Policy can be accessed on the Company website at following link - <http://www.esterindustries.com/ester_cms/userfiles/file/policies/> Whistle_blower_policy.pdf INFORMATION REQUIRED UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013 In terms of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder, it is mandatory to review status of sexual harassment related complaints in the Annual Report There were no incidents of sexual harassment reported in the Company. For protection against sexual harassment, Company has formed an internal complaints committee to which employees can write in their complaints The Company has a Prevention of Sexual Harassment Policy which has laid down a process for dealing with such issues . DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS There are no significant/material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of your Company and its operations in future . ACKNOWLEDGEMENT Your Directors acknowledge the cooperation and assistance received from various departments of the Central & State Government, banks and Non-banking finance companies. Directors also express their gratitude and thanks to Customers, Suppliers and other Business Associates for their continued co-operation and patronage . Your Directors wish to place on record their appreciation of the sincere services rendered by the workmen, staff and executives of the Company at all levels ensuring successful management of the Company Your Directors also thank the shareholders for their continued support . For and on behalf of the Board Sd/- Arvind Kumar Singhania Chairman & CEO New Delhi 27th July 2015 |