DIRECTORS' REPORT The Directors have pleasure in presenting the Annual Report and Audited Accounts of Harrisons Malayalam Limited for the year ended March 31, 2015 2. Dividend The Directors have not recommended dividend for the year ended March 31, 2015 in view of the losses incurred by the Company. 3. Performance During the year under review, the Company's revenue from operations decreased by 10% over previous year to reach Rs. 326.64 crore. Including other income and income from discontinued operations, total income decreased by 13.8% from Rs 386.86 crore to Rs. 334.36 crore. Loss incurred by the Company was Rs 35.26crore. Tea: Tea harvested from own gardens at 12068 MT was higher by 5% over the previous year. Together with bought leaf operations, the total production was 16523 MT against 15978 MT in the previous year, higher by 545 MT. Tea prices in FY 2014-15 witnessed a downward trend with prices hovering at Rs. 90-95 levels. The average price realized in 14-15 at Rs 96.29 per kg was lower by Rs 15.41 as compared with that of the previous year. The South Indian auctions, in which the Company is a major player, registered a drop in auction price by Rs 13.03 per kg. Exports volumes were in line with last year. Tea prices during April - June 2015 have more or less stabilized and is averaging at Rs 104 per kg. Rubber: The initiatives of the accelerated replanting carried out in Rubber plantations have started to yield results. Rubber harvested from own gardens was 4638 MT, higher by 7% over the previous year of 4351 MT. The total rubber production including bought operations at 9568 MT was higher than the previous year production of 8280 MT by 1288 MT. On the price front, it was a free fall for rubber. Average prices which were ruling at Rs 189 per kg steadily declined with every quarter passing and finally ended at Rs 115 in March 2015. The average price realized during 14-15 was Rs 149.72 per kg, lower by Rs 45.21 when compared with the previous year. Majority of the small growers stopped tapping of trees in view of the very low prices. The State Government's initiative to arrest the price fall has not yielded the desired result. Rubber Tree income for the season 2014-15 could not be accounted as felling of rubber trees could not be carried out due to the ban order issued by the Special Officer appointed by the Government of Kerala. 140 hectares in Kumbazha Rubber Estate encroached by trespassers, continue to remain untapped. During July 2012, consent of members through Postal Ballot was obtained for transfer of the Projects Division of the Company to HML Engineering Company Limited. As the management is evaluating various options available, operations of the Projects Division have been considered as that of Discontinuing Operations and accordingly dealt with in the accounts. [Note No. 45 may be referred to]. Update on HML Land Matters The Company has been in the news -- in the print media citing land law violations amongst other allegations. We would like all our stakeholders to know that the Company legitimately holds all its lands with valid title deeds and necessary approvals. The Company and its predecessors have been in absolute possession and enjoyment of these lands for over 100 years. All these lands are subjected to payment of Land Tax, (which the Company has been paying), and would never fall under the Kerala Land Conservancy Act. The petition filed by the Kerala Government seeking to declare the Company's land as Government land was dismissed by the Hon'ble High Court of Kerala. Despite this, the Revenue Department of Government of Kerala has been continuing with its proceedings against the Company. The Special Officer, appointed by the Government under the Kerala Land Conservancy Act, had issued orders banning the felling of rubber trees, which is a normal agricultural operation in the rubber plantations and constitutes a major source of income for the Company. The Company's petition challenging the ban order has been heard by the Hon'ble High Court and is reserved for judgment. Apprehending hasty actions, the Company had filed a Writ Petition seeking directions to the Special Officer to adjudicate on the issue of his jurisdiction under the Kerala Land Conservancy Act. The Hon'ble High Court has stayed all further proceedings under the Kerala Land Conservancy Act. All operations of your company are within the framework of law and all its lands are supported by valid title deeds. The Company is confident that it will be able to establish the truth in the Court of law. 4. Listing The Equity Shares of the Company continue to remain listed on BSE Limited, National Stock Exchange of India Limited and Cochin Stock Exchange Limited. 5. Fixed Deposits The Company does not have any Fixed Deposit as on March 31, 2015. 6. Particulars of Loans, Guarantees or Investments In terms of the provisions of Section 186(11) of the Companies Act, 2013, the provisions of Section 186(4) requiring disclosure in the financial statements of the full particulars of loans given, investments made or guarantees given or securities provided and purpose thereof, is not applicable to the Company. 7. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Information relating to conservation of energy, research & development, technology absorption and foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 is given in Annexure, forming a part of this Report. (Annexure A) 8. Corporate Governance A report on Management Discussion and Analysis is attached here with (Annexure B). A separate Report on Corporate Governance (Annexure C) along with Additional Shareholder Information (Annexure D) as prescribed under the Listing Agreement executed with the Stock Exchanges is annexed as a part of this Report along with the practicing Company Secretary's Certificate. 9. Subsidiary Companies As at March 31, 2015 the Company had three wholly owned subsidiary companies, namely HML Engineering Company Limited, Enchanting Plantations Limited (EPL) and Harmony Plantations Limited (HPL). As EPL and HPL were incorporated specifically to facilitate the Composite Scheme of Arrangement and Amalgamation, the investments held by the Company in these companies are treated as current investments, and hence have not been considered in the consolidation of financial statements. As per sub section (3) of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements and performance of the Company's subsidiaries for the year ended March 31, 2015, is included as per the prescribed format in this Annual Report. The Annual Accounts of these subsidiaries are uploaded on the website of the Company. The Annual Accounts of these subsidiaries and the related detailed information will be made available to any Member of the Company seeking such information at any point of time and are also available for inspection by any Member at the Registered Office of the Company. 10. Consolidated Financial Statements In accordance with Section 129(3) of the companies Act, 2013 and Clause 32 of the Listing Agreement entered into with the Stock Exchanges, the Consolidated Financial Statements of the Company including the financial details of all the subsidiary companies of the Company, forms part of this Annual Report. The Consolidated Financial Statements have been prepared in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India. 11. Directors In terms of the provisions of Section 152 of the Companies Act, 2013 and article 105 of the Articles of Association of the Company, Mr. P Rajagopalan retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for reappointment. The Board appointed Mr. Sachin Nandgaonkar as a Director of the Company in the casual vacancy caused by the resignation of Mr. Ajit Singh Chouhan. The Board records its appreciation of the contribution and guidance provided by Mr. Chouhan during his association with the Company. Further the Board appointed Mr. Kaushik Roy as an Additional Director w.e.f. February 16, 2015. Pursuant to Section 161 of the Companies Act, 2013 Mr. Kaushik Roy holds office up to the date of the ensuing Annual General Meeting and is eligible for appointment as a Director of the Company. The Company has received a Notice from a Member of the Company under Section 160 of the Companies Act, 2013 proposing the name of Mr. Kaushik Roy as a Director, liable to retire by rotation. The resolution seeking the shareholders' approval for the appointment of Mr. Kaushik Roy is contained in the Notice convening the Annual General Meeting. In the last Annual General Meeting of the Company held on September 26, 2014, Mr. N Dharmaraj was appointed as Whole Time Director for the period August 8, 2014 to December 31, 2015. Further, the Board at its meeting held on August 11, 2015 has extended the tenure of Mr. N. Dharmaraj from January 1, 2016 to September 30, 2016 subject to the approval of the shareholders in the forthcoming Annual General Meeting. The resolution seeking the shareholders' approval for the appointment of Mr. Dharmaraj is contained in the Notice convening the Annual General Meeting. In compliance with Clause 49 VIII (E) of the Listing Agreement, brief resume of all the Directors proposed to be appointed / re-appointed are attached along with the Notice to the ensuing Annual General Meeting. The Board of Directors recommend to the Members the appointment of Mr. Kaushik Roy as a Director and re-appointment of Mr. P Rajagopalan and Mr. N Dharmaraj as a Director and Whole Time Director respectively. Five meetings of the Board of Directors were held during the year. 11.1 Declaration by Independent Directors Pursuant to sub section (6) of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Independent Directors of the Company viz. Mr. G Momen, Mr. Haigreve Khaitan, Mr. J M Kothary and Ms. Sucharita Basu have given declaration to the Company that they qualify the criteria of independence as required under the Act. 11.2 Board Evaluation The Board has carried out an annual evaluation of its own performance, the directors and also committees of the Board based on the guideline formulated by the Nomination & Remuneration Committee. Board composition, quality and timely flow of information, frequency of meetings, and level of participation in discussions were some of the parameters considered during the evaluation process. Further, the Independent Directors of the Company met once during the year to review the performance of the Non-executive directors, Chairman of the Company and performance of the Board as a whole. 11.3 Policy on Remuneration to Directors, KMP and Senior Management Personnel The Board based on the recommendation of the Nomination and Remuneration Committee has formulated a policy on remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The policy covers the appointment, including criteria for determining qualification, positive attributes, independence and remuneration of its Directors, Key Managerial Personnel and Senior Management Personnel. The Nomination and Remuneration Policy is annexed as Annexure E to this report. 12. Auditors Messrs Price Waterhouse, Chartered Accountants, Statutory Auditors of the Company were re-appointed as auditors to hold office from the conclusion of the Thirty-seventh Annual General Meeting held on September 26, 2014 till the conclusion of the Fortieth Annual General Meeting to be held in 2017, subject to ratification by the Members at the Thirty-eight and Thirty-ninth AGM of the Company. Accordingly, the Notice convening the Thirty-eighth AGM includes a resolution seeking such ratification by the members of the said re-appointment of the Auditors. The Company has received a letter from the Statutory Auditors to the effect that the ratification of their re-appointment, if made at the forthcoming Annual General Meeting, would be in accordance with the limits prescribed under 141(3)(g) of the Companies Act, 2013. 13. Cost Audit Messrs. Shome & Banerjee, Cost Accountants were appointed as Cost Auditors of the Company for conducting Cost Audit for the year ended March 31, 2015. The Central Government has duly approved their appointment. Cost Audit Report and the Compliance Report for the year ended March 31, 2014 were filed with the Central Government on September 25, 2014. The due date for filing the Cost Audit Report was September 27, 2014. 14. Secretarial Audit Secretarial Audit of the secretarial and related records of the Company was conducted during the year by SVJS & Associates, Company Secretaries and a copy of the secretarial audit report is annexed as Annexure F, which forms part of this report. 15. Corporate Social Responsibility In accordance with Section 135 of the Act and the rules made thereunder, the Company has formulated a Corporate Social Responsibility Policy, a brief outline of which along with the required disclosures are annexed as a part of this Report. (Annexure G). A detailed section on the activities of the Company in this behalf during the year is disclosed in a separate section titled 'Corporate Social Responsibilities' which forms a part of this report. 16. Whistle Blower Policy Pursuant to Section 177 of the Companies Act, 2013 and the rules made thereunder and the Listing Agreement with the Stock Exchanges, the Company has established a Whistle Blower Policy (Vigil Mechanism) for directors and employees to report genuine concerns about any instance of any irregularity, unethical practice and/or misconduct. The policy has been uploaded in the Company's website www.hml.co.in 17. Related Parties Transactions There was no materially significant transaction with the Company's Promoters, Directors, Management or their relatives that could have had a potential conflict with the interests of the Company. 18. Anti-Sexual Harassment Policy The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 covering all employees of the Company. Internal complaints committee set up for the purpose did not receive any complaint for redressal during the year. 19. Extract of Annual Return An extract of the Annual Return as required to be attached is annexed as Annexure H and forms a part of this report. 20. Risk Management The Company has constituted a Risk Management Committee. The details of the committee and its terms of reference are set out in the Corporate Governance Report. The Company has also adopted a Risk Management Policy in accordance with the provisions of the Act and Clause 49 of the Listing Agreement. 21. Awards & Achievement During the year Wentworth Tea factory of the Company has received the CII, Southern Region, Environment, Health and Safety Award. Achoor, Arrapetta and Sentinel Rock estates have been honoured by the local Grama Panchayats for the commitment towards the environment. Waste management, plastic segregation and plastic free zones are the commendable initiatives taken up by the estates. Your Company's tea estates has received various National and International accreditions such as ISO, Trustea, Rainforest Alliance, TGLIA, UTZ and Ethical Tea Partnership for its sustainable efforts for conservation and protection of environment. Company's Kumbazha and Nagamallay rubber factories received the CII, Southern Region, Environment, Health and Safety Award during 2014-15.Kumbazha Centrifuge Latex Factory has bagged the Kerala State Pollution Control Board's Award for the third consecutive year for its sustained efforts in controlling Pollution and Environment Protection. 22. Particulars of Employees The information as required in accordance with Section 134 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure I and forms a part of this report. The information required under Rule 5(i) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure J and forms a part of this report. 23. Prospects Plantation business is largely influenced by external factors like weather and volatility of primary markets. The company continues to be a strong player in the South Indian plantation industry and hopes to enlarge its operations through processing, purchased raw material and trading in both tea and rubber. Sustained efforts to improve labour productivity should to some extent alleviate escalating labour cost - a major concern for all South Indian plantations. Realizations from both tea and rubber are expected to improve in view of the Company's continued focus on product quality,coupled with encouraging market outlook for tea in the next twelve months. Financial Year 15-16 is expected to be significantly better in terms of performance, as initiatives started earlier make positive contributions. 24. Directors' Responsibility Statement The Board of Directors would like to affirm that the Financial Statements of the Company for the year under review conform in their entirety to the requirements of the Companies Act, 2013. In terms of clause (c) of sub-section (3) and sub-section (5) of Section 134 of the Companies Act, 2013, the Directors of the Company hereby state and confirm that: 1. In the preparation of annual accounts for the financial year ended March 31, 2015, the applicable accounting standards have been followed, along with proper explanation relating to material departures; 2. The Directors had selected such accounting policies and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the loss for the period from April 1, 2014 to March 31, 2015; 3. The Directors had 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; 4. The Directors had prepared the annual accounts for the financial year ended March 31, 2015 on a going concern basis; 5. Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and 6. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 25. Industrial Relations Industrial relation in the Company, during the year, continued to be cordial. A section on the Company's Human Resource Initiatives is a part of the Management Discussion & Analysis forming part of this report. Acknowledgements The Board wishes to place on record its sincere appreciation for the continued assistance and support extended to the Company by its customers, vendors, bankers, Government authorities and employees. Your Directors are also grateful for your continued encouragement and support. On behalf of the Board of Directors Sachin Nandgaonkar Director Kaushik Roy Director Place : Mumbai Date : August 11, 2015 |