DIRECTORS' REPORT FOR THE YEAR ENDED MARCH 31, 2015 Dear Shareholders, Your Directors have pleasure in presenting the 39th Annual Report of the Company together with the Audited Statement of Accounts for the year ended 31st March 2015. STATE OF COMPANY'S AFFAIRS AND FUTURE OUTLOOK : The Company passed through a critical phase during the year under review in view of recession in the global economy, which resulted in steep fall in edible oil and cotton linter international market prices, especially in U.S.A and China. Bi-furcation of united Andhra Pradesh into two states i.e Telangana and Andhra Pradesh caused an additional burden of interstate Sales Tax on the goods brought from Telangana to Andhra Pradesh ginners and in turn they passed on proportionate burden even on cotton seeds also. Further, the Government of India announced higher minimum support price for cotton procurement which caused substantial increase in cotton seed prices. Due to carried over accumulated stocks, hike in raw material prices, the interest cost is higher when it is compared to that of previous year. In spite of various adverse factors, the Company in the year under review processed 70437.741 MT of cotton seed as against 64,324 MT in the previous year. Due to hike in raw material prices, the Company earned this year only a net profit before tax of Rs. 1.96 Lakhs as against Rs. 145.84 Lakhs in the previous year. EXPORT AND FOREIGN EXCHANGE EARNINGS : Your Directors wish to inform that the Company has exported 3,985.480MT of Cotton Linters worth Rs. 805.84 lakhs during the year under review as against 3,814.234 MT worth Rs. 845.26 lakhs in the previous year. The company also exported 1,020.240 M.T of Cottonseed Hulls worth Rs. 103.58 lakhs during the year under review as against 1,063.233 M.T. Worth Rs. 102.09 lakhs in the previous year. PROSPECTS : As the weather forecast given by the experts is very positive in cotton growing areas, which may yield better volumes and further the prices yield to cotton growers we highly remunerative during the previous crop year, the acreage under cotton cultivation may also likely to go up and thereby the availability of raw material may also get improved and as such your Directors are optimistic in utilizing the full production capacities to ensure better working results in the ensuing years. EXTRACT OF ANNUAL RETURN : The details forming part of the extract of the Annual Return in form MGT-9 as required under Section 92 of the Companies Act, 2013 is included in this Report as Annexure - I and forms an integral part of this Report. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL : Mr. Maddi Venkateswara Rao (DIN- 00013393) and Mr. Maddi Lakshmaiah (DIN- 00013387), retire by rotation under Article 122 of the Articles of Association of the Company and being eligible, offer themselves for reappointment as Directors. The Board recommends their reappointment. Mr. Lakkaraju Shyama Prasad (DIN: 07151102) and Mrs. Rallabhandi Lakshmi Sarada (DIN: 07140433) were appointed as Additional Directors during the year, whose term of office expires at this Annual General Meeting, they being eligible offer themselves for reappointment. Separate notices under the various provisions of Companies Act, 2013 have been received from the members of the Company proposing the aforesaid appointments. The Board considers that that Mrs. Rallabhandi Lakshmi Sarada and Mr. Lakkaraju Shyama Prasad, fulfills the conditions specified in the Companies Act, 2013 for appointment as an Independent Directors of the Company. The Board recommends their reappointment. Mr. Maddi Venkateswara Rao, Managing Director tendered his resignation for the post of Managing Director as he got tied up with other activities and businesses and requested the Board to relieve from Managing Director duties. Board accepted and relieved him from his duties w.e.f 1st April, 2015 and Board also promoted Mr. Maddi Ramesh, Executive Director, as Managing Director with effect from 01st April, 2015. NUMBER OF BOARD MEETINGS : During the Financial Year 2014-15, Six (6) Meetings of the Board of Directors of the Company were held viz 30th April, 2014, 30th May, 2014, 11th August, 2014, 14th November, 2014, 13th February, 2015 and 19th March, 2015, with a gap between not exceeding the period of 120 days as prescribed under the Act. DIRECTORS RESPONSIBILITY STATEMENT : In conformity with the provisions under Section 134 (3) (c) which is introduced by the Companies Act, 2013 your directors confirm that:- a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgements 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 profit of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts on a 'going concern' basis; e) the 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 f) 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. STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS : During the year under review, one meeting of Independent Directors was held on 19th March, 2015 in compliance with the requirements of Schedule IV of the Companies Act, 2013. All the Independent Directors of the Company have declared that they meet the criteria of Independence in terms of Section 149(6) of the Companies Act, 2013 and that there is no change in status of Independence AUDIT COMMITTEE: (a) BRIEF DESCRIPTION OF TERMS OF REFERENCE : The Terms of Reference of this committee cover the matters specified for Audit Committee under Section 177 of the Companies Act, 2013, and as follows: a. Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. b. Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for any other services. c. Reviewing with management the annual financial statements before submission to the Board, focussing primarily on: - Any changes in accounting policies and practices - Major accounting entries based on exercise of judgment by management - Qualifications in draft Auditors' Report - Significant adjustments arising out of audit - The going concern assumption - Compliance with stock exchange and legal requirements concerning financial statements - Any related party transactions i.e. transactions of the company of material nature, with promoters or the management, their subsidiaries or relatives etc., that may have potential conflict with the interests of the Company at large. d. Reviewing with the management, external and internal auditors, and the adequacy of internal control systems. e. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. f. Discussion with internal auditors of any significant findings and follow up there on. g. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. h. Discussion with external auditors, before the audit commences, the nature and scope of audit as well as have post audit discussion to ascertain any area of concern. i. Reviewing the Company's financial and risk management policies. j. Other matters as assigned/specified by the Board from time to time. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION : The current policy is to have an appropriate mix of executive and independent directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2015, the Board consists of six members, three of whom are independent directors. The Board periodically evaluates the need for change in its composition and size. The policy of the Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of section 178 of the Companies Act, 2013, adopted by the Board is recommended by the Nomination and Remuneration Committee. We affirm that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company. NOMINATION AND REMUNERATION COMMITTEE : (a) TERMS OF REFERENCE : The Company had constituted the Nomination and Remuneration Committee under Section 178 of the Companies Act, 2013. The broad terms of reference are to determine and recommend to Board, Compensation payable to Executive Directors, appraisal of the performance of the Managing Directors / Whole-time Directors and to determine and advise the Board for the payment of annual commission/compensation to the Non-Executive Director and to recommend to the Board appointment/ reappointment and removal of Directors. To frame criteria for determining qualifications, positive attributes and Independence of Directors and to create an evaluation framework for Independent Directors and the Board. (c) SELECTION AND EVALUATION OF DIRECTORS : The Board has based on recommendations of the Nomination and Remuneration Committee, laid down following policies: 1. Policy for Determining Qualifications, Positive Attributes and Independence of a Director 2. Policy for Board & Independent Directors' Evaluation (d) PERFORMANCE EVALUATION OF BOARD, COMMITTEES AND DIRECTORS : Based on the criteria laid down in the Policy for evaluation of Board and Independent Directors, the Board carried out the annual performance evaluation of Board Committees and the Independent Directors, whereas at a separate meeting, Independent Directors evaluated the performance of Executive Directors, Board as a whole and of the Chairman. Nomination and Remuneration Committee also evaluated individual directors' performance. i) As per the said Policy, evaluation criteria for evaluation Board inter alia covers: Composition in light of business complexities and statutory requirements; establishment of vision, mission, objectives and values for the Company; laying down strategic road map for the Company & annual plans; growth attained by the Company; providing leadership and directions to the Company and employees; effectiveness in ensuring statutory compliances and discharging its duties / responsibilities towards all stakeholders; Identification, monitoring & mitigation of significant corporate risks; composition of various committees, laying down terms of reference and reviewing committee's working etc. ii) Performance evaluation criteria for Executive Directors inter alia include: level of skill, knowledge and core competence; performance and achievement vis-a-vis budget and operating plans; Effectiveness towards ensuring statutory compliances; discharging duties/responsibilities towards all stakeholders; reviewing/monitoring Executive management performance, adherence to ethical standards of integrity & probity; employment of strategic perception and business acumen in critical matters etc. iii) Performance of Independent Directors is evaluated based on: objectivity & constructivity while exercising duties; providing independent judgment on strategy, performance, risk management and Board's deliberations; devotion of sufficient time for informed decision making; exercising duties in bona fide manner; safeguarding interests of all stakeholders, particularly minority shareholders; upholding ethical standards of integrity & probity; updating knowledge of the Company & its external environment etc., iv)Committees of the Board are evaluated for their performance based on: effectiveness in discharging duties and functions conferred; setting up and implementation of various policies, procedures and plans, effective use of Committee's powers as per terms of reference, periodicity of meetings, attendance and participation of committee members; providing strategic guidance to the Board on various matters coming under committee's purview etc., (e) REMUNERATION POLICY FOR DIRECTORS : The Committee has formulated Policy for Remuneration of Directors, KMP & other employees. As per the Policy, remuneration to Non-executive Independent Directors include : a. Sitting Fees for attending meetings of the Board as well as Committees of the Board as decided by the Board within the limits prescribed under the Companies Act. b. Travelling and other expenses they incur for attending to the Company's affairs, including attending Committee and Board Meetings of the Company. • REMUNERATION TO EXECUTIVE DIRECTORS : The appointment and remuneration of Executive Directors including Managing Director, Joint Managing Director and Whole Time Director is governed by the recommendation of the Remuneration and Nomination Committee, resolutions passed by the Board of Directors and Shareholders of the Company. The remuneration package of Managing Director, Joint Managing Director and Whole Time Director comprises of salary, perquisites, allowances and other retirement benefits as approved by the shareholders at the General Meetings of the Company. • REMUNERATION TO NON-EXECUTIVE DIRECTORS : The Non-Executive Directors are paid remuneration by way of Sitting Fees. The Non- Executive Directors are paid sitting fees for each meeting of the Board and Committee of Directors attended by them. REPORT ON CORPORATE GOVERNANCE : Your Directors are pleased to inform that as per SEBI Amended Circular No. CIR/CFD/POLICY CELL/7/2014 dated September 15, 2014, compliance with the provisions of Clause 49 of Listing Agreement shall not be mandatory for the Company. VIGIL MECHANISM: The Company has set up vigil mechanism to enable the employees and Directors to report genuine concerns and irregularities, if any in the Company, noticed by them. The Whistle Blower Policy/ vigil mechanism has been posted on the Website of the Company (www.mlgroup.com) PARTICULARS OF LOAN, GUARANTEES AND INVESTMENTS UNDER SECTION 186 There were no Loans, Guarantees, Investments and securities given/made/provided by the Company during the Year. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES All related party transactions that were entered during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company which may have a potential conflict with the interest of the Company at large and thus disclosure in Form AOC-2 is not required and the Details of Transactions with the related parties were mentioned in the Notes forming part of the Accounts. Significant And Material Orders Passed By The Regulators Or Courts Or Tribunals Impacting The Going Concern Status Of The Company. There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company AMOUNTS TRANSFERRED TO RESERVES The Board of the company has decided/proposed not to carry any amount to its reserves. EQUITY DIVIDEND During the year under review, the Company has not declared any Interim/final Dividend. AUDITORS A. STATUTORY AUDITORS : M/s. A. Ramachandra Rao & Co. Chartered Accountants (Firm Registration No. 002857S), were appointed as Statutory Auditors of your Company at the last Annual General Meeting held on 11th August, 2014 for a term of one year and they are eligible for reappointment for two more years as per Section 139 of the Companies, Act 2013. The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. B. SECRETARIAL AUDITORS : Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of M/s. K. Srinivasa Rao & Co, Company Secretaries in Practice, Guntur to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2015. The detailed reports on the Secretarial Standards and Secretarial Audit in Form MR- 3 are appended as an Annexure III to this Report. There were no qualifications, reservations or adverse remarks given by Secretarial Auditors of the Company except non-compliance of section 203 of the Companies Act, 2013 in respect to appointment the Company Secretary as Key Managerial Person, non-dematerialization of equity shares, non-appointment of Registrars and Share Transfer Agents and non-compliance of section 108 of the Companies Act, 2013 in respect to voting through electronic means for AGM 2013-14. The Board has made utmost effort for appointment of the Company Secretary as KMP but not able to appoint a Company Secretary due to lack of suitability of the Candidate to the profile of the Company in terms of work location, job profile and remuneration. The Paid-up Share Capital of the Company is Rs. 79,00,000/- (Rupees Seventy Nine Lakhs only) consisting of 7,90,000 (Seven Lakhs Ninety Thousands Only) equity shares of Rs. 10/- (Rupees Ten) each. Total membership of the Company is 310 (Three Hundred and Ten) Only. The Company has not appointed the Registrars and Share Transfer Agents (RTA) due to low capital and membership base. The Company has been maintaining this function through in-house department. Due to non appointment of RTA/ Depositories, the Company has not provided the voting through electronic means for the annual general meeting 2013-14. The Company is going to enter the agreement with the leading Registrar and Transfer Agents i.e. M/s. Bigshare Services Private Limited. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE END OF FINANCIAL YEAR AND THE DATE OF THE REPORT There are no material changes since 31st March 2015 and until the date of this report. CONSERVATION OF ENERGY/TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO : The information required to be given pursuant to Section 134 (3) (m) of the Companies Act, 2013, read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 for the year ended March 31, 2015 is given here below and forms part of the Director's Report (Annexure - II) PARTICULARS OF EMPLOYEES : The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report in Annexure -IV. The above information is not being sent along with this Report to the Members of the Company as per the provision of Section 136 of the Companies Act, 2013. Members who are interested in obtaining these particulars may write to the Managing Director at the Registered Office of the Company. The aforesaid Annexure is also available for inspection by Members at the Registered Office of the Company, 21 days before the 39th Annual General Meeting and up to the date of the Annual General Meeting during the business hours on working days. There were no employees in the Company as per Rule 5(2) of Chapter XIII, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. HUMAN RESOURCES : Your Company firmly believes that employees are the most valuable assets and key players of business success and sustained growth. Various employee benefits, recreational and team building programs are conducted to enhance employee skills, motivation as also to foster team spirit. Company also conducts in-house training programs to develop leadership as well as technical/functional capabilities in order to meet future talent requirements. Industrial relations were cordial throughout the year. CORPORATE SOCIAL RESPONSIBILITY (CSR) Your Directors are pleased to inform that the provisions of section 135 of the Act, read with Companies (Corporate Social Responsibility Policy) Rules, 2014 are not applicable to the Company. RISK MANAGEMENT : During the year, According to the Section 134 (3) (n) of the Act, the company had laid down a policy for management of risk. The risk management framework defines the risk management approach of the Company and also includes the periodical review of such risks. The board periodically discusses the significant business risks identified by the management and the mitigation measures to address such risks. INTERNAL CONTROL SYSTEM AND COMPLIANCE FRAMEWORK : The Company has an Internal Control System, commensurate with size, scale and complexity of its operations. The internal financial controls are adequate and are operating effectively so as to ensure orderly and efficient conduct of business operations. The Internal Control System of the Company has been designed to provide for: ? Accurate recording of transactions with internal checks and prompt reporting. ? Adherence to applicable Accounting Standards and Policies. ? Compliance with applicable statutes, policies and management policies and procedures. ? Effective use of resources and safeguarding of assets. The Company has appointed Mr. P.L. Ranganadh and Ms. Ganga Bhavani, as Internal Auditors of the Company. The Audit Committee in consultation with the Internal Auditors formulates the Scope, functioning, periodicity and methodology for conducting the internal audit. The internal auditors carryout audit, covering inter alia, monitoring and evaluating the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations and submit their periodical internal audit reports to the Audit Committee, process owners undertake necessary actions in their respective areas. The internal auditors have expressed that the internal control system in the Company is effective. The Board has also put in place requisite legal compliance framework to ensure compliance of all the applicable laws and that such systems are adequate and operating effectively. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE : As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 ('Act') and Rules made there under, your Company has constituted Internal Complaints Committees (ICC). The Company has designated the external independent member as a Chairperson for each of the Committees which was beyond the requirements of law. No complaints were received in this regard during the year. FIXED DEPOSITS : Your Company has not accepted any Fixed Deposits from the Public, except some unsecured Loans brought by Promoter Directors and as such no amount on account of Principal or interest on Public Deposits was outstanding as on the date of Balance Sheet. REGISTRAR'S AND SHARE TRANSFER AGENTS : Your Registrar and Share Transfer Agents of the Company M/s Big share Services Private Limited, 306, 3rd Floor, Rigt Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda,Hyderabad - 500 082. CASH FLOW ANALYSIS : In conformity with the provisions of Clause 32 of the Listing agreement the Cash Flow Statement for the year ended 31.03.2015 is annexed hereto. TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF : Pursuant to the provisions of section 124 of the companies Act, 2013, the declared dividends which remained un paid or unclaimed for a period of seven years, have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government. ACKNOWLEDGMENT : The Directors express their sincere appreciation to the valued shareholders, bankers and clients for their support. By Order of the Board of Directors Sd/-(Maddi Lakshmaiah) Chairman (DIN:00013387) Place : CHILAKALURIPET Date : May 30, 2015. |