Report of the Directors' & Management Discussion and Analysis Report To the Shareholders, The Directors have pleasure in presenting the Annual Report together with the Audited Financial Statements for the financial year ended 31st March, 2016. Economic Environment The year under review (2015-16) was characterized by slow growth across the Globe. The global economy grew at 3.1% in the year 2015, the weakest pace since 2009. Except USA, almost all the developed, developing and emerging economies witnessed degrowth during 2015-16 as compared to 2014-15. The increase in the interest rate by USA resulted in currency depreciation across the globe except in Japan. In the backdrop of the troubled world economies impacted by global slowdown and collapsing commodity prices,India remained a somewhat positive story. India too had its share of woes resulted from poor monsoons but benefitted from softening commodity including crude oil prices and inflation was controlled. Spirit, Liquor and Spirituous Beverages: There are two divisions under Spirit, Liquor and Spirituous Beverages Segment: (1) Distillery and (2) India Made Indian Liquor. Your Company operates a grain-based distillery in West Bengal at Noorpur. The state of the art plant, based on 'multi-pressure-distillation' process is capable of distilling alcohol from multiple feed stocks. The Distillery division of the Company completed the modernization project "Conversion of 50 KL per day Molassess Distillery into Grain Distillery" within the stipulated time and cost. The commercial production of the mordernized unit started from 14th January, 2016. The operation is yet to stabilize fully. The grain distillery along with CO2 plant operated at optimum capacity during the current year. In September 2015, West Bengal State Excise removed the spirit removal fees which were imposed in 2013. Competition in the Distillery space in West Bengal is set to increase due to the planned commissioning of a new distillery plant during the current financial year. The excess spirit production capacity in India continues to put pressure on the distillery division due to import of cheaper molasses/grain based ENA from other states of India. India Made Indian Liquor segment (IMIL) continue to face tremendous competition due to excess capacity created by the new bottling plants. During 2015-16, overall growth of IMIL in West Bengal was only 2.5% due to poor monsoon and very low level of Industrial activity resulting in lower disposable income in the hand of consumers. Excess capacity created in the market place resulted in high retailer schemes and increased logistics costs, as a result of door delivery facilities and thus putting pressures on the margins. Increased credit to the vendors is impacting the cash flow. Your Company is trying to maximize the capacity utilization and setting up the plants under contract manufacturing where our market share is low. During the year under review, your Company has commenced a third party bottling facility at Purulia (West Bengal). Marine: Marine exports have registered 14 % degrowth in revenue during the year under review. Degrowth is due to the steep fall in shrimp prices. The tie-up arrangement in Andhra Pradesh started in the second quarter of the year under review but due to delay in getting the regulatory approvals from the exporting countries, export volumes were significantly lower as compared to the budget. The operation at Andhra Pradesh reported cash loss in the year under review. During the current year (2016-17), your Company has planned to increase the export volume and focus on improving margin. Exports from Indonesia and Ecuador are posing serious competition to shrimp exporting Indian Companies. Indian Currency has depreciated by 7% during the year under review but this did not give your Company any competitive edge due to the much larger currency depreciation in most of our competiting countries. Economic turbulence in many of our exporting countries is also impacting the sales as prawn consumption is considered to be a luxury item. Marine feed turnover has increased by 11% during the year under review but operating margins reduced due to the inability in passing the higher input cost to the farmers. Risk in the form ofunsecured credit continued. Sales of Marine domestic food business have grown by 12% during the year under review. This business as yet is not cash positive. During the year under review, your Company has availed 7.5 million US$ ECB loan from HDFC Bank, Bahrain for financing the modernization project at Distillery division. During the year under review, India Ratings and Research (IND-Ra) has upgraded your Company's Long Term issuer rating to 'IND A+' from 'IND A'. OUTLOOK, OPPORTUNITIES, THREATS AND CONCERNS The current financial year will again be a year of challenges both for exports and domestic businesses. Excess distillery capacity in India will continue to pose serious competition to the Company on account of duty free spirit imports to West Bengal. IMIL segment will continue to have pressure on sales and margin due to stiff competition. Marine exports will continue to have margin pressure due to competition from South East Asian and Latin American countries. The high level of raw material prices and exchange fluctuations will continue to weigh on Marine exports. The capacity expansion in our distillery division will result in cost optimization and your Company will endeavor to perform better as compared to the previous year. Consolidation in the IMIL space has started and it may create an opportunity for your Company. We expect additional sales volume from our Andhra Pradesh Marine plant during the current year. In the past your Company has made significant capital expenditures and any shortfall in the planned returns will exert pressures on the Balance Sheet and Cash Flow. Your company is continuing its efforts to attain further efficiencies by process improvement and reduction of wastages in all the divisions and ensuring optimal use of human resources on all fronts. RISK MANAGEMENT The Board has adopted a risk management policy whereby a proper framework is set up to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company's competitive advantage. Your Company has constituted a Risk Management Committee for reviewing the risk management plans and ensuring its effectiveness. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICHTHE FINANCIAL STATEMENTS RELATEANDTHE DATE OF THE REPORT No material changes and commitments have occurred after the close of the financial year till the date of this report, which affect the financial position of the Company. DIVIDEND In order to conserve resources for the proposed capital investments, your Directors have decided not to recommend any dividend for the financial year under review. TRANSFER TO RESERVE The company does not propose to transfer any amount to Reserve. NUMBER OF BOARD MEETINGS During the year ended 31st March, 2016, six meetings of the Board were held. EXTRACTS OFANNUALRETURN The extracts of the Annual Return for the financial year 2015-16 as stipulated in MGT -9 pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014 is given in Annexure I which forms part of this Report. DIRECTORS Mr. Amitabha Kumar Nag retires by rotation and being eligible, offers himself for re-appointment. The details about his qualification, other directorships etc. as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are provided in the explanatory statement under Section 102 of the Companies Act, 2013 separately and annexed to the Notice. Dr. Lakshmishri Roy was inducted as an Independent Director to the Board of Directors of IFB Agro Industries Limited on 31st March, 2015 for a term of one year expiring on 31st March, 2016. On 29th March, 2016 the Board of Directors, based on report of performance evaluation approved the continuation of office of the Director by re-appointment of Dr. Lakshmishri Roy as an Independent Director pursuant to Sections 149 and 152, read with Schedule IV and any other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Qualification of Directors) Rules, 2014 and as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, for the second term of three years subject to the approval by the members of the Company at the ensuing Annual General Meeting. Dr. Lakshmishri Roy is a Graduate in Pharmacy from KMIPS, Rourkela, Sambhalpur University in the year 1994. She was awarded Gold Medal by Governor of Orissa for her outstanding performance in B.Pharm. She completed her M.Tech, (Life Sciences and Biotechnology) from Jadavpur University in the year 1998. She obtained her Ph.D from IIT Kharagpur in the field of Agricultural and Food Engineering in the year 2013. The Company has received a notice in writing from a member of the Company proposing her candidature for the office of Independent Director with requisite deposit. Mr. Indranil Goho was appointed as an Additional Director of the Company with effect from 23rd September, 2015. The Board has also appointed him as Joint Managing Director with effect from the same date for a period of three years, subject to the approval by the members at the ensuing Annual General Meeting. Mr. Indranil Goho is a qualified Chartered Accountant and a Cost Accountant. He has 21 years of experience in finance, accounts, taxation, sales and marketing. Mr Goho worked as consultant with Singhi Management and Financial Consultants, Mumbai and Ernst & Young, Kolkata during his initial years. Since the year 2003, Mr Goho worked with IFB Industries Limited at senior positions. Mr Goho joined IFB Agro Industries Limited in April, 2012 as President and Chief Operating Officer. The Company has received a notice in writing from a member of the Company proposing his candidature for the office of Director with requisite deposit. Appropriate resolutions seeking the appointment / reappointment of Directors are appearing in the Notice convening the ensuing Annual General Meeting of the Company. KEY MANAGERIAL PERSONNEL The Board appointed. Mr Indranil Goho, as "Joint Managing Director" of the Company with effect from September 23, 2015 on recommendation ofNomination and Remuneration Committee subject to approval by the members in this Annual General Meeting. DECLARATION BY INDEPENDENT DIRECTORS All the Independent Directors have given declaration to the Company stating their independence pursuant to Section 149(6) of the CompaniesAct, 2013 and the same have been placed and noted by the Board in its meeting held on 14th May, 2016. ANNUAL EVALUATION OF BOARD'S PERFORMANCE According to Regulation 25(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Schedule IV of the Companies Act, 2013, a meeting of the Independent Directors was held to review the performance of the Non-Independent Directors and the Board as a whole. Accordingly, a meeting of Independent Directors was held on 29th March, 2016 wherein the performance of the Non-Independent Directors, Chairman and the Board as a whole was evaluated. Further the same was discussed in the Board meeting that followed the meeting of the Independent Directors, at which the performance of the Board, its committees and individual Directors was also discussed. Performance evaluation of Independent Directors was done by the entire Board, excluding the Independent Director being evaluated. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(5) of the Companies Act 2013 , your Directors state that: a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b. The Directors had selected such accounting policies and applied them 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 at the end of the financial year and of the profit of the Company for that period; c. 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; d. The Directors had prepared the annual accounts on a going concern basis; e. 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 f. 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. REMUNERATION POLICY A Nomination and Remuneration Policy has been formulated pursuant to the provisions of Section 178 and other applicable provisions of the Companies Act, 2013 and rules thereto and Clause 49 of the Listing Agreement stating therein the Company's policy on Directors'/Key Managerial Personnel/other employees appointment and remuneration by the Nomination and Remuneration Committee and approved by the Board ofDirectors. The said policy may be referred to, at the Company's official website at <http://www.ifbagro.in/pdf/nomination-and->remuneration/policy.pdf. DEPOSITS Your Company has not accepted any deposit from the public / members under Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules, 2014 during the year. REMUNERATION RATIO OF THE DIRECTORS / KEY MANAGERIAL PERSONNEL (KMP) /EMPLOYEES The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Companies (Particulars of Employees) Rules, 1975, in respect of employees of the Company and Directors is given in Annexure II which forms part ofthis Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has not given any loans, guarantees or made any investments exceeding sixty per cent of its paid-up share capital, free reserves and securities premium account or one hundred per cent of its free reserves and securities premium account, whichever is more, as prescribed in Section 186 of the Companies Act, 2013. 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 have been reviewed and approved by the Audit Committee. 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 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014. Your Company's Policy on Related Party Transactions, as adopted by your Board, can be accessed on the corporate website at <http://www.ifbagro.in/pdf/Policy-on-Related-Party-Transactions.pdf> ENERGY, TECHNOLOGY & FOREIGN EXCHANGE As required under Section 134(3) (m) of the Companies Act, 2013, read with rules made there under, the information relating to Conservation of Energy, Technology Absorption and Foreign Exchange earnings & outgo is given in Annexure III which forms a part of this Report. SUBSIDIARY/ASSOCIATES/JOINT VENTURE COMPANIES The Company does not have any subsidiary/associate/joint venture company for the year ended 31st March, 2016. HUMAN RESOURCES For the development of the human resources, number of training programmes were organized during the year. Internal personnel as well outside faculty members undertook these programmes. Your Company plans to organize more such training programmes for the overall development of its people. Total number of employees in the Company stood at 376 as on 31st March, 2016 as against 328 as on 31st March, 2015. WEBSITE OF THE COMPANY The Company maintains a website www.ifbagro.in where detailed information of the Company and its products are provided. AUDIT COMMITTEE The composition and terms of reference of the Audit Committee has been furnished in the Corporate Governance Report forming part of this Annual Report. There has been no instance where the Board has not accepted the recommendations of the Audit Committee. VIGIL MECHANISM In pursuant to the provisions of Sections 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for Directors and employees to report genuine concerns has been established. The said policy may be referred to, at the Company's official website at the weblink <http://www.ifbagro.in/pdf/Whistle-Blower-Policy.pdf>. INTERNAL CONTROL SYSTEMS Your Company has in place adequate internal control procedures which is commensurate with the size and nature of business. Detailed procedural manuals are in place to ensure that all the assets are safeguarded, protected against loss and all transactions are authorized, recorded and reported correctly. Further such controls have been tested during the year and no reportable material weakness in the design or operation was observed. Nonetheless your Company recognizes that any internal financial control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an ongoing basis. LISTING WITH STOCK EXCHANGES Your Company is listed with the Bombay Stock Exchange Limited and National Stock Exchange of India Limited and the Company has paid the listing fees to each of the said Exchanges. CORPORATE SOCIAL RESPONSIBILITY (CSR) In terms of Section 135 and Schedule VII of Companies Act, 2013, the Board of Directors of your Company have constituted a CSR Committee. The Committee comprises of Independent Directors and Executive Director. The brief outline of the corporate social responsibility (CSR) policy of the Company and the initiative undertaken by the Company on CSR activities during the year are set out in Annexure IV of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.The said policy may be referred to, at the Company's official website at <http://www.ifbagro.in>. Your Company has identified the activities and accordingly projects mainly relating to a) eradicating hunger, malnutrition and sanitation and b) promoting education were undertaken in line with the CSR policy. The necessary budget outlay were assigned to the aforesaid projects. However, due to multiyear project and certain procedural delay at the implementation level, the Company could not spend the allocated budget outlay. The Company made an expenditure of Rs. 21.40 lacs against the stipulated amount of Rs. 71.54 lacs. CORPORATE GOVERNANCE Your Company attaches considerable significance to good Corporate Governance as an important step towards building investor confidence, improving investors' protection and maximizing long-term stakeholders value. The certificate of the Auditors, M/s Walker Chandiok & Co LLP ( Firm registration No. 001076N/N500013), Chartered Accountants confirming compliance of conditions of Corporate Governance as stipulated under Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part ofthis Annual Report. STATUTORY AUDITORS TheAuditors of the Company M/s. Walker, Chandiok & Co LLP, Chartered Accountants (Firm Registration No. 001076N/N500013) have been appointed at the Annual General Meeting on 30th July, 2014 for a term of 3 years. The Company has received consent of the Auditors for continuation of office for the current year. Their appointment to the office is subject to the ratification by the members at the each Annual General Meeting. The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. SECRETARIAL AUDITOR The provisions of Section 204 read with Section 134(3) of the Companies Act, 2013 mandates Secretarial Audit of the Company to be done from the financial year commencing on or after 1st April 2014 by a Company Secretary in Practice. The Board in its meeting held on 29* March, 2016, appointed Mr. Jitendra Patnaik, Practising Company Secretary (Certificate of Practice No. 3102) as the Secretarial Auditor for the financial year ending 31st March, 2016. The Secretarial Auditors' Report for the financial year ending 31st March 2016 is given in Annexure V, which forms part of this report. ACKNOWLEDGEMENT Your Directors express their sincere thanks and place on record their deep appreciation for the patronage extended by the shareholders, valued customers, employees, bankers, government authorities and the investors for their support and confidence in the Company. Cautionary Statement: Statement in the Directors' Report and Management Discussion & Analysis Report describing the Company's expectations may be forward-looking within the meaning of applicable securities laws & regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company's operation include global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their costs, changes in government policies and tax laws. On behalf of the Board Bikram Nag Joint Executive Chairman Arup Kumar Banerjee Vice Chairman and Managing Director Kolkata, 14th May, 2016 |