Directors' Report To The Members, The Directors have pleasure in presenting the 77th Annual Report together with Audited Annual Accounts of the Company for the Financial Year ended 31st March 2016. DIVIDEND Your Directors do not recommend dividend for the financial year 2015-16. MANAGEMENT DISCUSSION & ANALYSIS 1. This section includes discussion on the following matters within the limits set by the Company's Competitive position: (A) INDIAN ECONOMY Light Engineering Industries: The $41 bn Indian Capital Goods industry has seen production grow at just 1% CAGR (compound annual growth rate) over the last three years. Imports have grown at 10% CAGR over the last five years and the share of imports in the Indian Capital Goods market has increased from 34%in FY10 to 40% in FY15. Capacity utilization of domestic manufacturers is only 60-70% across sub-sectors. National Capital Goods Policy 2016 aims at increasing production of capital goods at CAGR of ~12.5% over FY15-25, growing share of exports from 27% to 40% of production and reducing import share from 40% to 20%. The India Meteorological Department (IMD) has predicted monsoon for 2016-17 at 106% of the Long Period Average (LPA) with a model error of 5%, no doubt it will have a positive effect on economy in many ways. Inflation will come down, growth will increase, agriculture productivity will improve and rural consumption will increase. A lower inflation will lead to low interest rates. Overall good rainfall will be useful for rice production and in turn will improve demand for Rice Milling Machinery. (B) INDUSTRY STRUCTURE AND DEVELOPMENT The main business of the company is to manufacture Food Processing Machineries especially for Rice Milling. With over a century of experience in Rice Milling, the company products are benchmark for the Rice Milling industry. The company also offers consolidated solutions for improving and modifying exiting mills as well as Turn Key solutions Rice Milling Projects. (C) OPPORTUNITIES AND THREATS The company is working to extend its sales network and market coverage to access all major rice pockets in India. It has improve market reach and enquiries level for its products. It has also helped to minimize dependency on traditional markets giving opportunity to address larger growing markets. The company through its continuous Research & Development activities has developed several new products in Cleaning, Polishing and Grading sections. Now with increased product range, company addresses complete mill business and customers gets one stop solution. The company has noticed a change in buying pattern wherein customers are giving preference to machinery with higher milling capacity and improved automation. The market trend also shows a shift from un-organized local suppliers to organized manufacturers. Both changes are favorable and improves customer acceptance for the company products. However continuous fall in rice price over last two years coupled with drop in exports has resulted in drop in investment plans by millers. It has lowered the overall market size for rice milling machinery and increased competition amongst manufacturers. Due to increased competition company has to face dilution of commercial policies by competitors resulting in inferior business terms in the market. (D) SEGMENT-WISE PERFORMANCE OR PRODUCT-WISE PERFORMANCE The company has maintained its leadership in traditional flagship products like Dandekar Cone Polishers, Paddy Sheller and Dandekar type Paddy Separator. The company has also progressed well on its New Product Development plan and generated 20% business through new products. The company has done major business in Polishing and Grading section. (E) OUTLOOK For Rice industry, Asia is expected to drive the 2016 global production recovery, spearheaded by an upturn in India. An expected above normal monsoon in 2016 is likely to boost rice production in the country. On the export side, the modest recovery in 2016 would reflect a general tightening of supplies, as various important rice origins have faced successive poor harvests. India, in particular, may witness a sharp contraction. It will have a mixed effect on rice milling machinery industry wherein investment budgets will be squeezed putting pressure on machinery prices. (F) RISK AND CONCERNS Risks of critical importance have been identified over a period of time. These risks are ranked on the basis of their impact on company's business and likelihood of their occurrence. A cross functional team takes stock of these risks and calls for necessary measures to mitigate the risks from the concerned risk owners. The risk owners then produce action plans for risk mitigation which is then evaluated by the team. New risks are added with the changes in economic and market scenarios and undergo the same process. Identified risks include: • Stagnating market growth: As domestic rice production lags a rise in consumption, overall stock levels are expected to de-cline. Production is highly dependent on rainfall and new crop is expected from 3rd quarter onward. A fall in exports due to ban by Iran on rice shipments from India will largely pull down India's rice exports. The government is also not expected to intervene in the export market, as its buffer stocks are well above minimum requirements. • Effect of inadequate rainfall and unfavorable weather conditions in last two years: Output of food-grain is reduced and has hampered the overall growth in this sector. There is a significant reduction in Kharif output as well. • Steady growth of Chinese products contributed by both organized and un-organized Rice Mill Manufacturers. (G) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has adequate internal control systems to ensure operational efficiency, accuracy and promptness in financial reporting and compliance of various laws and regulations. The internal control system is supported by the internal audit process. An Internal Auditor has been appointed for this purpose. The Audit Committee of the Board reviews the Internal Audit Report and the adequacy and effectiveness of internal controls periodically. (H) COMPANY'S FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE During the financial year under review, your company has achieved turnover of Rs. 1051.12 Lacs (previous year Rs. 512.69 Lacs). The net loss is Rs. 419.14 Lacs (as against net loss after taxes Rs. 907.33 Lacs during FY 2014-15). (I) MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FORMAT, INCLUDING NUMBER OF PEOPLE EMPLOYED The Company seeks to recruit and retain quality industry professionals and provide them with a high performance environment. During the financial year, total workforce of the Company was 70 as compared to 95 in FY 2014-15. (J) ENVIRONMENT The Company has obtained certification of ISO 9001:2008, for the purpose of standardization. The Company takes due care in the selection and usage of appropriate material and methods in order to avoid violation of norms formulated to safeguard the environment. (K) CAUTIONARY STATEMENT Statements in this Report, particularly those which relate to Management Discussion and Analysis, describing the Company's objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. (L) LISTING FEES The annual listing fees for the year under review have been paid to BSE Limited, where your Company's shares are listed. (M) COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS As on 31st March 2016, the Company has no subsidiary company. The Board presents Audited standalone Financial Statements as prepared in compliance with the Accounting Standards and the Listing Regulations. 2. Disclosure of Accounting Treatment: There is no deviation in accounting treatment, since the Financial Statement has been prepared in line with Accounting Standards. PARTICULARS OF INFORMATION FORMING PART OF THE BOARD'S REPORT PURSUANT TO SECTION 134 OF THE COMPANIES ACT, 2013, RULE 8 OF THE COMPANIES (ACCOUNTS) RULES 2014 AND RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 EXTRACT OF ANNUAL RETURN: The details forming part of the extract of the Annual Return in Form MGT - 9 is annexed herewith as 'Annexure I' to this Report. NUMBER OF MEETINGS OF THE BOARD: During the year under review, Six Board Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirements of Section 134(5) of the Act, in respect of Directors' Responsibility Statement, your Directors state that: a) in the preparation of the annual financial statements for the year ended 31st March 2016, the applicable accounting standards have been followed along with the proper explanation relating to material departures; b) accounting policies as mentioned in Part-B to the Financial Statements have been selected and applied consistently. Further judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2016 and of the profit/loss of the Company for the year ended on that date; c) proper and sufficient care has been taken 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; d) the annual financial statements have been prepared on a going concern basis; e) proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; and f) proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. DECLARATION BY THE INDEPENDENT DIRECTORS The Company has received necessary declaration from all Independent Directors under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure requirements) Regulations, 2015 that they meet the criteria of independence as laid down. COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION: The Board had on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management Personnel and their remuneration. The policy is appended as 'Annexure II' to this Report. AUDITORS a. Statutory Auditors At the Annual General Meeting held on September 11th, 2014, M/s Joshi & Kulkarni, Chartered Accountants, Pune (Firm Reg. No. 115751W), were appointed as Statutory Auditors of the Company to hold office till the conclusion of the 80th Annual General Meeting to be held in the calendar year 2019. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s Joshi & Kulkarni, Chartered Accountants, Pune (Firm Reg. No. 115751W), as Statutory Auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. b. Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Mahesh Athavale, Practicing Company Secretary (Membership No. FCS 2412 CP No. 1488), to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as 'Annexure III'. c. Cost Auditor Being the manufacturers of Engineering Machinery pursuant to Chapter 85 of the Central Excise Tariff Act, 1985 the Company has appointed Harshad S. Deshpande, Cost Accountant (Membership No. 25054) Pune as Cost Auditor for maintenance of Cost records. EXPLANATION ON COMMENTS ON STATUTORY AUDITORS' AND SECRETARIAL AUDIT REPORT: There are no qualifications, reservations or adverse remarks or disclaimers made by M/s Joshi & Kulkarni, Statutory Auditors, in their Audit report and by Mr. Mahesh Athavale, Company Secretary in Practice, in his Secretarial Audit Report. However both the auditors had made observations regarding delay in transfer of un-claimed / un-paid dividend amount to IEPF and filing form INV 5. The members are informed that delay in transfer of un-claimed / un-paid dividend amount to IEPF was due to reconciliation issue with the bank, further form INV 5 is not filed as the same is yet to be notified by the Ministry of Corporate Affairs. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT UNDER SECTION 186: Your Company has not given any loan or guarantee or security or made any investment during the year PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUB-SECTION (1) OF SECTION 188: Pursuant to the provisions of Section 134 of the Companies Act, 2013, read with Rule 8 (2) of the Companies (Accounts) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with Related Parties have been done at arm's length and are in the ordinary course of business. Hence, no particulars are being provided in Form AOC-2. Related Party disclosures as per AS -18 have been provided in Note No. C-3 to the Financial Statements. STATE OF COMPANY'S AFFAIRS Discussion on state of Company's affairs has been covered in the Management Discussion and Analysis. AMOUNTS PROPOSED TO BE CARRIED TO RESERVES Particulars of the amounts proposed to be carried to reserves have been covered as part of the financial performance of the Company. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE DATE OF THE BALANCE SHEET AND THE DATE OF REPORT: There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report. RISK MANAGEMENT POLICY: The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company. CORPORATE SOCIAL RESPONSIBILITY (CSR): Pursuant to provisions of section 135 of the Companies Act, 2013 the Company was not required to constitute the Corporate Social Responsibility (CSR) Committee. BOARD EVALUATION Pursuant to provisions of the Companies Act, 2013 and rules thereunder, the Board has carried out performance evaluation of its own, its Committees and individual Directors. PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES: Company does not have any subsidiary during the financial year under review. CHANGE IN THE NATURE OF BUSINESS, IF ANY: There has been no change in the nature of business during the financial year under review. Director(s) proposed to be re-appointed at the ensuing Annual General Meeting The brief resumes and other details relating to Director(s) who is/are proposed to be appointed / re-appointed, as required to be disclosed under Regulation 36(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, form part of the Explanatory Statement to the Notice of the Annual General Meeting. DETAILS OF DEPOSITS WHICH ARE NOT IN COMPLIANCE WITH THE REQUIREMENTS OF CHAPTER V OF THE ACT: None DETAILS OF SIGNIFICIANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE: To the best of our knowledge, the Company has neither received nor is aware of any such order from Regulators, Courts or Tribunals during the year, which may impact the Going Concern Status or the Company's operations in future. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS The Company has in place adequate internal financial controls with reference to financial statements. Regular management oversight and rigorous periodic testing of internal controls makes the internal controls environment strong at the Company. The Audit Committee along with Management overseas results of the internal audit and reviews implementation on a regular basis. COMPOSITION OF AUDIT COMMITTEE: The composition of the Audit Committee has been mentioned in the Corporate Governance Report annexed to this Report. INFORMATION FORMING PART OF THE DIRECTORS' REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 The relevant information pursuant to Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed at 'Annexure V' to this report VIGIL MECHANISM The Company has formulated and implemented the Whistle Blower Policy / Vigil Mechanism ('the Policy'). This has provided a mechanism for directors and employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee any instance of unethical behavior, actual or suspected fraud or violation of the Company's code of conduct. The policy has also been uploaded on the Company's website. CASH FLOW A cash flow statement for the year ended 31st March 2016 is attached to the Balance Sheet. CORPORATE GOVERNANCE: In terms of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a report on the Corporate Governance, along with the certificate of compliance from the Auditors, forms part of the Annual Report. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 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 & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. There were no complaints received for sexual harassment during the year 2015-16 PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 197 READ WITH RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 Particulars of employees pursuant to section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report. ACKNOWLEDGMENTS Your Directors wish to place on record, their appreciation for the contribution made and support provided to the Company by the shareholders, employees and bankers, during the year under the report. For and on behalf of the Board of Directors Sd/- NIHAL G. KULKARNI CHAIRMAN Place: Pune Date: 24th May, 2016 |