DIRECTORS' REPORT To the members of Simbhaoli Sugars Limited Your directors have pleasure in placing the directors' report together with management discussion and analysis report for the financial year ended on March 31, 2014. Management Discussion and Analysis International Sugar Industry As per latest production estimates of International Sugar Organisation (ISO), the World sugar production for year 2013-14, is expected to be 181.1 mmt (rv), reflecting a fall of over 3 mmt (rv) on the previous sugar year. This exceeds the consumption by nearly 4.4 mmt. Sugar year 2014-15 is expected to end as a balanced year or with small deficit after a surplus of three years with production at 176.7 mmt. There is a likely fall in production from Brazil, the EU, Ukraine and Mexico, which is offset by an expected surplus production in Thailand, India, Pakistan, China and Russia. The Brazilian Sugarcane Industry Association (UNICA) has projected a sugarcane crush of 580 mmt for the 2014-15 sugar year, reflecting a 2.84% reduction from sugarcane crushing of 597 mmt in 2013-14. The projection reflects a drop in agricultural yields resulting from the long period of drought and aged sugarcane. However, this is expected to be partially offset by higher sugar recovery. Balanced supply and demand situation, limited investment and weather uncertainties, can lead to an improvement in the year-on-year prices in 2014-15. However, with large carry over inventories, the probability of a sharp increase in prices is very much limited. The sugar prices in the year 2013-14 remained bearish, with a low of 14.70 c/lb in Jan 2014. However, the prices recovered back to 18 c/lb in Feb 2014 due to expected draught in Brazil. The current price structure reflects sluggish demand with limited volatility. The white sugar premium also remained low on account of ample supplies from existing as well as newly commissioned refineries. Indian Sugar Industry The economic conditions of the Indian sugar industry has deteriorated consistently over the past few years, due to continuous operational losses incurred by the sugar mills. The wide gap between the high cost of sugarcane and low realization from sugar, have severely impacted the financial condition of the sugar mills. The production has been consistently surpassing the domestic consumption and lower international prices are not providing enough opportunity for exports. India's sugar output for the year 2013-14 is estimated at 23.8 mmt (25.1 mmt in 2012-13), 5.18% lower, marking a second successive year of marginal decline. This has been mainly due to weather conditions in the key sugar producing regions i.e Maharashtra, Uttar Pradesh, Karnataka etc and higher diversion of sugarcane for alternate sweeteners. The exports remained limited for the year 2013-14, at 2.00 mmt (previous year 0.35 mmt). The major part of exports for the year 2013-14 took place from March 2014 onwards, on account of export related incentives announced by the Government of India to handle surplus stocks. Sugarcane The sugarcane production for the year 2013-14, is estimated at 336 mmt (previous year 339 mmt), and major part of it is consumed by sugar mills. The agricultural yields remained consistently lower year after year, on account of lack of investments in sugarcane development program by the farmers, industry and the Government. Likely drought conditions for 2014, may affect the sugarcane crop in rain fed irrigation areas for 2014-15, however, no significant change is expected in the sugarcane acreage. The fixation of sugarcane price continued to remain as the most debatable subject. For the year 2013-14 also, the States followed arbitrary sugarcane pricing policies, disregarding the economic ability of the mills. Particularly in the state of Uttar Pradesh, the state advised sugarcane price has been significantly higher than the fair and remunerative price announced by the central government. As a result of fixing excessively high sugarcane price, with no linkage between the sugar prices and sugarcane price, at the end of 2013-14 crushing season, sugarcane price arrears in most of the sugarcane producing states have been accumulated to over Rs 1200 billion. The highest arrears are reported in Uttar Pradesh, and become a subject matter of serious issue at government, industry and farmers level. A number of steps have been initiated by the Government, which only helped to mitigate the situation to a little extent. Scheme has been introduced for payment of sugarcane price arrears and banks have advanced Rs. 1,200 crore to the industry by the end of March 31, 2014, under a package aggregating Rs. 6600 crore announced by the Central Government to partially meet 2012-13 arrears. Following the recommendations of Rangarajan Committee on fixation of sugarcane price as a percentage of revenues of the sugar mills, the states of Maharashtra and Karnataka are in the process of introducing linkage of the sugarcane prices on the basis of the revenue-sharing. In these states, it is expected that the sugarcane prices will be equal to 70% of the ex-mill values of the sugar and its by-products. This much awaited step will give relief to the sugar industry in these states. However, the State of UP is yet to initiate any such corrective measure. Industry is confident that adaptation of revenue-sharing formula will bring long term sustainability in the sugar sector. Sugar Year 2014-15 The probability of El Nino weather phenomenon developing in 2014 exceeds 70%, raising the prospects of bringing drought conditions across the globe. In India also, El Nino might have negative impact on south-west monsoon affecting the production of summer crops such as rice, sugarcane and oilseeds. Further, government support and import-export policy will be the key drivers in the sugar year 2014-15. With the sugarcane plantation already made, the domestic sugar output is expected to be higher at 24 mmt, reflecting a surplus inventory of over 6.67 mmt at the end of year. Price Trend Sugar prices in the domestic markets remained range bound during the year with little volatility on account of sufficient supplies and lack of exports. The prices, however reflected some improvement in the month of March 2014 due to likely weather related issues, increase in international prices, reduced selling pressure on mills during end of the crushing period, and export supported by Government incentive. The increased prices could not sustain after March 2014, on account of selling pressure on the millers for creating additional liquidity for payment of sugarcane price arrears, and reduction in the physical exports. The graph shows the sugar price movement in Delhi region during the year. Government Policies Union and state governments have continued to pursue their partially restrictive policies on sugar sector. Additional policy related decisions taken during the year under review are: (i) April 2013: Permitted to procure sugar for public distribution system from the open market. Agreed to provide fixed subsidy of Rs. 18.50 per kg to the states. (ii) November 2013: UP State Government did not increase the State Advised Price for sugarcane for the sugar season 2013-14 and fixed it at Rs 280 (payable in two instalments of Rs 260 and Rs 20) per quintal. Also provided benefits such as remission of society commission, purchase tax and entry tax aggregating Rs. 11.03 per quintal for 2013-14. State has also promised to provide a direct contribution of Rs. 9 per quintal of sugarcane, which is awaited. (iii) December 2013: The interest subvention for the working capital loans to the sugar mills for paying outstanding sugarcane dues for 2012-13, under 'Scheme for Extending Financial Assistance to Sugar Undertakings'. (iv)February 2014: The fair and remunerative price of sugarcane is fixed at Rs. 220 per quintal for sugar season 2014-15. (v) February 2014: Export subsidy at the rate of Rs 3,300 per mt for export of raw sugar or resultant refined sugar during specified period. Ethanol Sector Union Government (GOI) continued with its 5% ethanol blending program (EBP) for the year 2013-14. However, the program has not met the targets for this year as well, and against the requirement of 105 crore liters of ethanol for 5% EBP, the oil companies have contracted just 62 crore liters by March 31, 2014. The uncertain policies of oil companies in tendering and lifting the ethanol, has led to unstable ethanol production and supply by the mills. India has about 340 distilleries, with an annual installed capacity of around 350 crore liters of bulk alcohol. Majority of these distilleries produce alcohol using sugarcane molasses as raw material. The alcohol is used for potable, industrial and EBP purposes. The demand of alcohol is increasing while the production remained largely constant on account of inadequate availability of molasses. Simbhaoli Sugars Limited Business description: Operating capacities Simbhaoli group has three business complexes located at Simbhaoli (Western Uttar Pradesh), Chilwaria (Eastern Uttar Pradesh) and Brijnathpur (Western Uttar Pradesh), having an aggregate crushing capacity of 19,500 TCD and refining capacity of 3,00,000 mt raw sugar annually. @Simbhaoli Power Private Limited, subsidiary company The sugar businesses are integrated with alcohol and power. The co-generation units of Simbhaoli Power Private Limited (SPL), a subsidiary company, located within the Simbhaoli and Chilwaria complexes are capable to generate bio-mass based power aggregating to 72 mwh and supplying the power for the captive consumption to the sugar plants of the SSL. The surplus power of SPL is being supplied to the UP State grid under the power purchase agreements. Simbhaoli Spirits Limited, a wholly owned subsidiary company is capable to produce 90 Kl/day of potable alcohol and ethanol. Branding The sugar division of the Company continued to expand its sugar brand, 'Trust' in the natural sweetener segment. It has developed sales and marketing infrastructure for distribution through modern retail and wholesale trade channels. The market area of newly introduced 'Sipp' fruit drink mix has been further expanded during the year. Sunehra, the mineral sugar, was re-positioned riding on the good health platform with a premium pricing strategy. Trust branded sugar sachets enjoy the volume leadership in the industry. Appropriate brand communication investment was also carried out to spread brand awareness, and consumer trials. International trading The Company expanded its export operations by introducing large grain size sugar to Canada. Further, the Company has introduced white refined sugar in 2 kg retail packs for Hong Kong and Pacific island markets and this volume is expected to increase significantly. Trust branded sugar has also been introduced to other destinations viz. Mauritius, Seychelles, Bahrain and Kuwait. During the year, the Company has exported 6,400 MT of refined sugar under the advance authorisation scheme (AAS) and open general license (OGL). There is a pending obligation of 17,897 mt under AAS. Possibilities of import of raw sugar from Brazil and purchase of domestic raw sugar from Maharashtra and Karnataka for refining are being explored for higher capacity utilization and improved price realization. Human resources The Company has a committed and motivated work force. It upholds the fundamental principles of human and workplace rights in all its businesses. A number of employees' participation and welfare programs have been initiated during the year. Keeping the philosophy of continuous training and job improvements, the Company has imparted 640 man days of training (previous year 1980 man days) to its employees during this year. The relation between the management and employees continued to remain cordial at all the locations. During the year, the manpower cost has increased on account of new recruitments, general inflation and increased allocation for retirement benefits. SWOT The areas of operations of the Company and its subsidiary companies are well diversified, with multi products and services spanning over a number of geographical locations. Each of the business segments has its own strengths and weaknesses and is subject to a variety of opportunities and threats. The group has the following SWOT attributes broadly: Strengths 1. Sugar units are located in the sugarcane-rich Indian state of Uttar Pradesh 2. Well irrigated sugarcane area, which is not much dependant on weather pattern 3. Integrated facilities to produce white sugar using sugarcane and refining of raw sugar 4. High quality of sugar; attracting premium in domestic and global markets 5. Producing all varieties of sugars including pharmaceutical-grade and Specialty sugars 6. Presence in branded and packaged segment which has large growth Weaknesses 1. Cyclical nature of the industry. Sugarcane production is subject to natural and economic cycles 2. Highly leveraged with high interest and fixed costs 3. Brijnathpur sugar unit is not an integrated sugar complex Opportunities 1. To command high sugarcane recovery and yield 2. To improve sugarcane productivity and quality by varietal change and development program 3. Flexibility to refine raw sugar for improving capacity utilisation 4. Growth in technology consultancy business through a subsidiary company, Integrated Casetech Consultants Pvt Ltd in India and overseas 5. Possibilities to expand power generation business and increase in operating days 6. Regular exports on account of quality, brands and product mix Threats 1. Adversities in agro-climatic conditions may impact 2. Volatile commodities markets have a bearing on international and domestic operations 3. Highly regulated environment 4. Un-hedged positions in sugar and currencies 5. Lack of parity between cost of production and sale values of sugar resulting in unpaid sugarcane price position. Quality management system The sugar units of the Company are compliant to internationally recognized quality, environment and food safety standards ISO 9001:2008, ISO 14001:2004 and FSSC 22000:2011 certified. These management systems are applied to develop a systematic work culture that emphasizes process ownership across all levels of the organization. Other concepts like quality circles, task forces, and committee assignments etc are in operation for many years in the Company. Internal control system The evaluation of internal financial controls and risk management systems is a continuous process for any organization. The Company has adequate systems of internal control commensurate to its size and nature of business to safeguard the assets against loss and from any unwarranted use. All transactions are authorized, recorded and reported correctly. Internal audit and checks are carried out regularly at various units, projects and activities centers to ensure the adequacy of control system and its monitoring. The internal control procedures and information flow is transparent, predetermined and regulated. During the year, certain incidences of financial irregularities, and breach of fiduciary responsibilities have been reported in the sugar businesses of the Company, which have been appropriately dealt with in accordance with corporate governance policies of the Company. At the same time, the review functions of the business affairs have been further strengthened. Steps have been initiated to implement stringent control and reporting measures including structured information system into all areas of its business operations. It is ensured that such incidences should not re-occur. The details of such incidence and the financial impact are given elsewhere in this report. The Company has, in consultation with its internal auditors, re-formulated the scope, functioning, periodicity and methodology for conducting the internal control procedures and internal audit function. Risk assessment and mitigation policy SSL has adopted a system based approach for risk management, with clear objectives of identification, evaluation, monitoring and minimization of the identifiable risks. Policies have been formulated for controlling the risks and taking mitigation measures on proactive basis. The management reviews the risk management framework periodically to identify the major business risks as applicable to the businesses of the Company and works out their mitigation strategies. Environmental Compliance The Company has been operating in compliance with the norms laid down by the state Pollution control authorities. Further, with reference to the alcohol operations of the Company, the mechanism to control the effluent treatment at zero discharge levels is in place in line with the prevailing policies being pursued by regulators and industry. Technology initiatives and energy conservation methods The Company has adopted various technology initiatives and energy conservation methods for efficient operations. The measures taken during the year are described in detail in the Annexure forming part of this report. Corporate social responsibility (CSR) The Company has a corporate social responsibility (CSR) policy indicating the guidelines for social welfare activities to be undertaken. Various CSR initiatives are undertaken directly by the Company and through Simbhaoli India Foundation (SIF), a non-profitable institution established by the Company. It is implementing programs in the fields of education, healthcare, clean water, social welfare, village infrastructure development in reserved areas of its sugar mills. The Company, on its own, is meeting its social responsibility obligations by encouraging cleaner surroundings, improving village level infrastructure, unclogged drains and to learn the value of good hygiene and sanitation. The employees are important stakeholders in the SIF, and have contributed to set-up its corpus fund. During the year, SIF has participated in the fund raising activities for the foundation, carried out health based initiatives for employees and farmers, organized a blood donation camp, and provided a service ambulance for local use at one of the sugar unit area. The Company is disseminating information on its CSR policies, activities and progress to all their stakeholders and the public at large through its website, annual reports, and other communication media. It is proposed to constitute a committee of directors to review the activities under its CSR policy. Secretarial Audit The Company follows and adheres to the compliances under the provisions of the Companies Act, listing agreements with stock exchange(s), SEBI regulations, Reserve Bank of India notifications and other statutory/regulatory authorities as applicable from time to time. It has a team of professionals, who are handling the statutory requirements under the said provisions and also following the principles of transparency, accountability, corporate citizenship and environment consciousness in the best interest of its stakeholders. It is proposed to engage the Secretarial Auditors of the Company under the provisions of the Companies Act, 2013. Information technology The information technology system of the Company is operating on SAP based enterprise resource planning (ERP) environment, optimizing the performance of its businesses as well as the business network. During the year, initiatives have been taken to bring operations of newly formed subsidiary/joint venture companies also into SAP environment. All the business units of the Company are now integrated through SAP modules. Insurance claim on loss of raw sugar A vessel carrying 22,500 MT of raw sugar had sunk in July 2009 and the cargo insurance company repudiated the claim of Rs 47.80 crore. The Company has initiated legal proceedings against the insurer in India and vessel owner in London. In a negotiated settlement in London legal proceedings, the Company received part compensation towards the cost of raw sugar and associated expenses from the vessel owner. However, the Company is continuing to pursue the ongoing legal proceedings against the cargo insurer for balance claim of Rs. 7.69 crore and interest thereon. Business Restructuring The Indian sugar industry, particularly operating in the state of Uttar Pradesh, has been facing financial difficulties on account of higher sugarcane prices, lower realization of sugar high fixed costs and finance charges. Having recognized the need and in order to save the beleaguered sugar industry, the Central and State Governments, have taken various measures, including same sugarcane price for 2013-14 sugar season as that of last year, benefits in the form of remission of society commission, purchase tax and entry tax in the UP state, and subvention on interest cost on specified loans. Creation of linkage between sugar price and sugar realizations is also under consideration as a long term measure to revive the industry. However, the timings quantum and process of implementation of these initiatives, have fallen short of expectations. Your Company has incurred losses for last three consecutive years, resulting in financial stress, liquidity constrains, and consequent erosion of its net worth. Recognizing the problem, and for de-risking its businesses and improving its financial position, the Company has been taking a number of measures, including business restructuring of its operating divisions and transferring them into special purpose companies and planned growth in the operations of such SPVs with disinvestments. In this direction, during the year, the Board of directors has approved a Scheme of Amalgamation with Simbhaoli Spirits Limited (SISPL), providing for its amalgamation with SISPL pursuant to Sections 391 to 394 and other applicable provisions of the Companies Act, 1956 (the Scheme). The proposed amalgamation would result in integration of operations, cost savings, improvement in financial strength and flexibility for the merged entity, which would maximise overall shareholders' value, and will improve the competitive position. The Scheme is subject to the requisite approvals, and will be implemented after the sanction of the Hon'ble High Court of judicature at Allahabad. Scheme envisages transfer and vesting of the entire business and undertakings of the Company in SISPL, without any further act and deed. SISPL, after the implementation of the Scheme will be listed with the same stock exchanges as that of the Company subject to the approval of the SEBI. Pending sanction of the Scheme, no financial impact of the Scheme has been considered in the financial statements for the Financial Year 2013-14. Your directors are confident that expected outcome of business restructuring exercises being undertaken by the Company, favorable measures by the Government, and impact of the proposed Scheme, will bring financial viability in the business of the Company. Therefore, the financial statements for the year 2013-14 have been prepared on a going concern basis. In the event, the Company is not able to achieve the results of the above measures; requisite steps as applicable to the sick companies will be initiated under the prevailing laws. Operations of Subsidiary/ Associate companies I. Simbhaoli Spirits Limited (SISPL), a wholly owned subsidiary of SSL, is operating a potable distillery at Simbhaoli. It has 90 kld capacity to manufacture rectified spirit, and 60 kld capacity to manufacture extra neutral alcohol and ethanol. It has a bottling capacity at Simbhaoli and contract bottling capacities in 7 states. It is one of the regular suppliers to canteen and stores department of armed forces for its certain brands. The gross revenues earned by SISPL during the year have been Rs 94.64 crore with a pre-tax loss of Rs 14.99 crore. The plans are drawn to restructure the business, its markets and product range in the manner that the business can be revived in short term. During the year, the State environment authorities withheld the annual consent for the year 2014 and distillation operations have been suspended with effect from Feb 20, 2014. This has been followed by a proceeding before the bench of National Green Tribunal, New Delhi (NGT). The Company has been complying with environmental control measures as applicable to it in the past. Based on the legal advices, the management is confident to obtain a favorable order from the NGT and thereafter resuming the distillation operations. II. Simbhaoli Power Private Limited (SPL) is a 51% subsidiary, with a joint venture (JV) with Sindicatum Captive Energy Singapore Pte Limited (SCES). During the year, SPL has expanded the power generation capacity from 54 mw to 72 mw. It has a plan to further expand Simbhaoli cogeneration plant by 28 mw from existing 34 mw to 62 mw with a total project cost of Rs 144 crore. The proposed expansion will make the power generation to 100 mw. The gross revenues earned by the Company during the year have been Rs 40.82 crore with a pre-tax loss of Rs 28.56 crore. In the previous year, the Company had transferred the Power business at an aggregate consideration of Rs. 15,978.62 lacs as per Business Transfer Agreement (BTA). At the year end, the BTA consideration outstanding of Rs.11,204.33 lacs (previous year Rs. 15,466.58 lacs) will be discharged in the manner as prescribed in Note 4 of the financial statements. The outstanding consideration payable has been disclosed under other current assets and other non-current assets. Subsequent to year end an amount of Rs. 833 lacs has been utilized towards subscription of equity shares/ Cumulative Convertible Debentures and amount of Rs. 4,000 lacs has been received in cash. The management is hopeful that the entire liability will be discharged by SPL in the manner as agreed in the JV. III. Integrated Casetech Consultants Private Limited (ICCPL) is an 85% subsidiary, and the technology vertical of SSL, earned gross revenues of Rs 44.03 crore with a pre-tax profit of Rs 2.14 crore for the year 2013-14. During the year, the services of certain directors/senior executives of ICCPL have been terminated on account of managerial misconducts by misappropriating the resources and breach of fiduciary duties by them. Appropriate legal proceedings have been initiated to recover direct and indirect losses incurred and necessary injunctions have been obtained. The internal control procedures have been further strengthened so that such incidences should not re-occur. IV. Uniworld Sugars Private Limited (USL) is a joint venture company having a 1,000 tpd (300,000 mt per annum) sugar refinery near Kandla Port, Gujarat. The share capital has been subscribed equally by the Company and ED & F Man, UK along with their affiliates. The refinery project though substantially completed, is expected to capitalized with a total cost of Rs 270 crore. The commercial operations will commence in early 2014-15. V. Simbhaoli Global Commodities DMCC, Dubai, is the wholly owned subsidiary. During this year, no major business activities were carried out and the gross revenue earned is Rs 1.43 Lacs with a pre-tax loss of Rs 6.29 Lacs. OPERATIONS The commencement of 2013-14 crushing season in the sugar plants was delayed on account of disagreement with the state government on fixation of sugarcane price based upon economic viability. However, the number of days of operations for the year remained in line with previous year. The sugarcane crushing at Simbhaoli sugar plant has been higher by 2.1%. The average sugar recovery has been marginally higher over the previous year on account of improvement in sugarcane management. During the year, 22.2 lacs qtl (Previous year 21.5 lacs qtl) of white sugar was produced and 23.15 lacs qtl (previous year 22.86 lacs qtl) of sugar from both sugarcane and refining of raw sugar, was sold at an average price realization of Rs 3170 per qtl (previous year, Rs 3340 per qtl). The average realization of sugar was lower by Rs 170 per qtl on account of depressed market scenario. FINANCIAL RESULTS, ANALYSIS AND REVIEW A summary of the stand alone financial results of the Company for the year ended March 31, 2014 is stated as under. During the year, the business of the Company has been affected adversely on account of delay in start of the sugar plants, high sugarcane prices, low sugar prices, and high finance and other fixed costs. In view of the absence of distributable profits, and substantial carried forward business losses, the directors express their inability to recommend any dividend for the year. The Company is implementing a Scheme of Amalgamation with Simbhaoli Spirits Limited, having appointed date as March 31, 2014 (the Scheme). The financial figures of the amalgamated entity after implementation of the Scheme will significantly vary particularly with reference to the share capital structure, reserves and surplus, and net worth. The impact of these changes pending final approval of the Scheme has not been considered in these accounts and therefore, not commented. The following is summary of financial review for the year: Share Capital: There was no movement in share capital during the year. Reserves and Surplus: The following movement has taken place during the year: (i) Revaluation reserve: Deduction of Rs. 37.42 lacs, (previous year Rs. 57.05 lacs) being amount transferred to Profit and Loss Account. (ii) Capital grant in aid: Increased by Rs. 112.89 lacs, Rs 120 lacs received during the year on account of Bio-gas Engine set up in Brijnathpur Ethanol Unit and adjustments for amount utilised during the year, Rs 7.11 lacs. (iii) Share option account: Rs 37.11 lacs transferred to P&L account. Pending completion of restructuring under the Scheme, the Net worth of the Company shows a negative balance of Rs 163.46 crore (previous year Rs 8 crore positive). However, on implementation of the Scheme, the net worth will turn into positive. Long term borrowings: Long term borrowings have reduced by Rs. 64.68 crore during the year. Against this, Rs 46.38 (net) has been repaid to the lenders, (previous year Rs. 62.34 lacs). The loan accounts of the Company remained regular with the lending banks. Short term borrowings: Unsecured short term borrowings have increased by Rs 459.83 crore (net) principally on account of re-classification of agri loan liabilities due to certain banks from Current liabilities to Short term borrowings. Fixed assets: Addition to the fixed assets aggregating Rs 16.10 crore (previous year Rs 15.52 crore) includes the following: i) Rs. 6.48 crore for setting up Biogas engine at Brijnathpur ethanol division ii) Rs. 7.02 crore for setting up Zero mill house at Chilwaria Sugar division iii) Rs. 2.60 crore on account of miscellaneous assets The Company has deducted Rs. 2.83 crore (previous year Rs 183.6 crore) from fixed assets: i) Diesel generating sets of Rs. 73.21 lacs, ii) Components of the boiler of Rs 31.38 lacs, and iii) Rs. 1.75 crore on account of miscellaneous assets. Inventories: : Inventory amounting to Rs 456.60 crore (previous year Rs 544.16 crore) includes finished goods, raw material, process stocks, and store items. The sugar at the year end is valued at net realizable value of Rs 3,231 per qtl (previous year Rs 3,233 per qtl). Sundry debtors: Sundry debtors (net) amounting to Rs. 65 crore (previous year, Rs. 74.03 crore), are considered good and realisable. Provisions are generally made for all debtors outstanding for over 360 days subject to their scope of realization, industry trend and management's perception. Debtors are at 7.53% (previous year 8.12%) of gross revenues, representing an outstanding of 27 days (previous year 30 days). Cash and Bank Balance: Cash and bank balance of Rs 34.31 crore (previous year Rs 83.33 crore) includes fixed deposits of Rs 25.82 crore out of which Rs 22.30 crore are pledged with banks for securing certain loans, letters of credit, guarantees and other facilities. Other Current Assets: Other current assets of Rs 153.08 crore (previous year Rs 162.68 crore), comprise a receivable of Rs 134.74 crore (previous year Rs 145.23 crore) against slump sale of Power business of the Company to Simbhaoli Power Private Limited. A part of this has been realized subsequent to the end of financial year. Trade payables, other current liabilities, and provisions: Trade payables at Rs 453.58 crore (previous year Rs 868.15 crore) are reduced by Rs 414.57 crore, on account of reclassification of agri loan liabilities to short term unsecured borrowings. The liability includes amount payable against sugarcane supply, other raw materials, stores and services. The other current liabilities of Rs 152.77 crore (previous year Rs 112.0 crore) reflects amount payable against finance charges and other miscellaneous liabilities. There is no significant movement under the head short term provisions during the year. Sales and other income: Sales and other income (net of excise) is Rs. 863.90 crore (previous year Rs. 901.98 crore). The segment wise allocation of revenues for the year 201314 and for preceding two accounting years is as under: The other income of Rs 28.12 crore (previous year Rs 17.04 crore) comprises interest, rent, dividend from subsidiary companies, foreign exchange fluctuation and miscellaneous earnings. Raw Material Consumption: Sugarcane, molasses and raw sugar are the principal raw materials purchased by the Company. There has been a reduction of Rs 50.10 crore in raw material consumption on account of lower raw sugar procured and consumed during the year and accounting of benefits announced by the State Government related to sugarcane price. Employees cost: The employee cost at Rs 46.77 crore (previous year Rs 43.52 crore), has increased by Rs 3.25 crore on account of higher provisions for retirement benefits and general increments. Finance cost: Finance costs of Rs 141.81 crore (previous year Rs 111.98 crore) has increased by Rs 29.83 crore on account of resetting of rate of interest on certain loans for current as well as previous years and high utilization of working capital limits. Other Expenses: Other expenses at Rs 82.75 crore are showing a reduction of Rs 26.73 crore, on account of overall cost reduction measures implemented by the Company. Extraordinary Expenditure and Event: During the year, based upon the findings of internal enquiries and investigations, a shortage of finished goods amounting to Rs. 10.58 crore has been detected in the Simbhaoli and Brijnathpur sugar units of the Company. Following its internal policies, the Company has initiated requisite legal actions including termination of employment of certain senior executives for misappropriation of the Company's assets, financial irregularities and breach of fiduciary duties committed by them. The resultant loss to the Company has been written off in the books of accounts; though, steps have been initiated for recovery of direct and indirect losses caused by such mis-appropriation. Accounting policies The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act/ 2013 Act, as applicable. The financial statements have been prepared on accrual basis under the historical cost convention method as modified to include the revaluation / business valuation of certain fixed assets as indicated in Notes to account. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year. The Board of Directors of the Company accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates/ judgments used in preparation of these statements. The estimates and/or judgments have been made on a consistent, reasonable and prudent basis to reflect true and fair view of the state of the affairs of the Company. Debt servicing and public deposits The Company has been able to meet its obligations towards the lenders for principal and interest, in terms with the respective letter of sanctions/approvals. The Company does not have any public deposits. AUDITORS' REPORT The comments on the statement of account referred to in the report of the auditors are self-explanatory and explained in the appropriate notes to accounts. DIRECTORS At the forthcoming 77th Annual General Meeting (AGM) of the Company, Mr. Sanjay Tapriya, Director on the Board of the Company, is retiring by rotation and is being eligible, has offered himself for re-appointment. During the year, Justice C K Mahajan and Mr S N Misra have been appointed as additional directors on the Board of the Company to broad base the composition of the Board. Mr. Mahajan is an independent director and Mr. Misra is designated as Group Technical Advisor. Their brief profiles are given below: (i) Justice Mahajan(Retd.), M.A. LL.B. has practiced in Delhi High Court, Supreme Court, Subordinate Courts and other Tribunals in Delhi, apart from High Courts of Himachal Pradesh and Punjab and Haryana in Civil, Service and Company matters. He was appointed as an Additional Judge of the Delhi High Court and then became permanent Judge. (ii) Mr. S N Misra, is B. Sc. from Gorakhpur University, A.N.S.I. from National Sugar Institute, Kanpur. He worked in Simbhaoli Sugars Limited (SSL) for about 22 years and then joined Bajaj Hindustan Ltd., and Balrampur Chini Mill Group. He rejoined the Company at the Board level last year. The directors welcome Mr. Misra and Justice Mahajan on the Board of the Company. During the year, the services of Dr G S C Rao, the then Whole Time Director and Group Chief Executive Officer were terminated as whole time director and considering his resignation, he ceased to be a director on the Board of the Company with effect from Sept 11, 2013. SUBSIDIARY COMPANIES The Company has four subsidiary Companies, viz. Simbhaoli Spirits Limited, Simbhaoli Power Private Limited, Integrated Casetech Consultants Private Limited, and Simbhaoli Global Commodities DMCC, Dubai. The consolidated financial statements presented by the Company include financial information of its subsidiary companies prepared in compliance with applicable accounting standards. As per the general exemption granted by Ministry of Corporate Affairs, from attaching the balance sheet of subsidiary company (s) with the balance sheet of the holding company, statement showing the financial parameters is forming part of this annual report. The Company also confirms that the annual accounts of the subsidiary companies and the related detailed information will be made available to any investor at the corporate/registered office of the Company and that of the subsidiary company. EMPLOYEE STOCK OPTION SCHEME Under Simbhaoli Sugars Limited-Employee Stock Option Scheme 2007, all the balance stock options have lapsed on expiry of vesting period. No fresh stock options have been introduced during the year. CORPORATE GOVERNANCE The report on corporate governance along-with certificate from the practicing company secretary and certificate from Chairman, Managing Directors, and Chief Financial Officer form part of this annual report. LISTING OF SECURITIES The equity shares of the Company are listed with Bombay Stock Exchange Limited and National Stock Exchange of India Limited. FOREIGN EXCHANGE EARNINGS AND OUTGO During the year, Foreign exchange aggregating to Rs 19.91 crore (previous year Rs. 27.07 crore) was earned by the Company against the export and no amount was spent in foreign currency. RESEARCH AND DEVELOPMENT The details relating to Research and Development activities carried out by the Company are stated in Annexure of this Report. CONSERVATION OF ENERGY Details of steps taken for conserving the energy are stated in Annexure to this report. PARTICULARS OF EMPLOYEES None of the employees are being paid the remuneration, as required to be disclosed under the relevant provisions of the Companies Act, 1956/2013 and rules made there under. AUDITORS The Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, New Delhi, retire at the ensuing annual general meeting of the Company and, being eligible, offers themselves for re-appointment. You are requested to re-appoint them for the next three financial years 2014-15, 2015-16 and 201617 and empower the Board to fix their remuneration based on the actual cost incurred on time scale basis. The aforesaid appointment shall be subject to the ratification each year by the shareholders of the Company. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, read with the Rules made there under, with respect to the Directors' responsibility statement, it is hereby confirmed: (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 as on March 31, 2014 and of the profit and loss of the Company for the year ended on that date; (c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and the transitional provisions under Companies Act, 2013 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 the applicable laws and that such systems were adequate and operating effectively. CAUTIONARY STATEMENT Certain statements in this report may be forward looking and represent intention of the management. Actual results may differ materially due to a number of risks or uncertainties associated with the business. Investors/stakeholders, therefore, are advised to make their own judgments before taking any investment, business decisions. ACKNOWLEDGEMENT The Board of Directors acknowledge the continued assistance and guidance provided by the Government of India, State Government of Uttar Pradesh, lender banks and institutions and the co-operation and assistance received from all executives, staff and workmen of the Company. The Directors also wish to emphatically state their gratitude to the Indian Sugar Mills Association, farmers, suppliers and all other concerned persons who have continued their valuable support to your Company. For and on behalf of the Board of Directors Simbhaoli Sugars Limited Gurmit Singh Mann Chairman New Delhi May 27, 2014 |