REPORT OF THE DIRECTORS Your Directors present herewith the Forty-fifth Annual Report on the performance of the Company along with the Audited Balance Sheet and Statement of Profit and Loss for the Financial Year ended 31st March, 2015. DIVIDEND In view of the accumulated losses, the Directors are unable to recommend any dividend for the year ended 31st March, 2015. OPERATIONS: The Turnover of NPK Mixtures, Straight fertilizers and Trading activities was Rs.5189.56 lakhs as compared to Rs.7871.75 lakhs in the previous year. The Single Super Phosphate plant near Chennai could not be operated during the year in view of inadequate working capital. The company during the last five years has been starved of working capital necessitating borrowing from outside the banking sector at exorbitant rate of interest thus increasing the debt burden leading further to liquidity crunch. The Board of Directors of your company has been on the look out for a prospective investor who could have a long term interest and involvement in the progress of the company and has at last been able to identify Gemini Group headed by Mr.Jinnah Rafiq who after long deliberation and negotiation has agreed to come to the rescue of the company which otherwise would have faced the ultimate liquidation. The new investor has so far funded over Rs.9.01 crores and agreed to restart and run the super phosphate factory at no cost to the company by investing around Rs.200.00 lakhs and availing working capital facilities to the tune of Rs.15.00 crores from banks and financial institutions thus enabling the company to retain the valuable assigned land of about 40 acres which otherwise would have been taken over by the State Government. All this joint endeavours of the company and the new investor have been towards reviving the company’s operations through increasing productivity and profitability of the operations besides getting the factory operational once again. The investor promised to bail out the company from all its financial problems at the earliest possible time. This step forward would require the consent of the members for which enabling resolutions are being proposed at the ensuing Annual General Meeting. FUTURE PROSPECTS: Gemini Fertilizers have restarted the Single Super Phosphate Plant since 1st June 2015 under a lease agreement, injecting the necessary fixed and working capital to the tune of R.200.00 lakhs and availing working capital facilities of Rs. 15.00 Crores from banks. With respect to production and sale of NPK Mixtures and other products, the Company is planning to increase the quantum of sales by effective utilization of the available infrastructure facilities and with the involvement of M/s.Gemini Fertilizers, who promised to meet the need based working capital requirement of the company from time to time and bail out from the present financial difficulties faced by the company. INDUSTRY OUTLOOK Fertilisers are an essential component of modern agriculture. The balanced use of Chemical fertilizers is important not only for increasing the agricultural productivity but also for sustaining soil fertlility. The consumption NPK ratio also has changed over a period of time. During 2008-09 the consumtion of NPK ratio was 4.6:2.0:01 which has changed to 8.2:3.2:01 during 2012-13.Hence it is expected that the consumption of fertilizers will show an increased trend. Further, the demand for NPK Mixtures is also likely to pick up with the Nutrient Based Subsidy Scheme in vogue. This will help all fertilizer companies to get benefited, since the level playing field has been created by the Government.Your company is planning to improve its sales with better distribution facilities available and by leveraging the “Horse Brand”. DIRECTORS: Dr.Easo John, Mr.Chetan Vijay Pagariya & Mr.K.Santhanam due their personal problems have resigned from the Board with effect from 30th December 2014 & 30th August 2015 respectively. The Board places on record the services rendered by the said Independent Directors during their tenure of office. Mr.Dilip Machado who was appointed as an Additional Director(Independent Director) on 31st March 2015 has to be reappointed as Independent Director of the company for five years, as per the provisions of the New Companies Act 2013. This item is included in the agenda of the ensuing 45th Annual General Meeting. Mr.D.Gunasekaran who was appointed as an Additional Director(Independent Director) on 30th October 2015 has to be reappointed as Independent Director of the company for five years, as per the provisions of the New Companies Act 2013. This item is included in the agenda of the ensuing 45th Annual General Meeting. The Company has received necessary declaration from each Independent Directors of the Company under Section 149(7) of the Companies Act, 2013 that each of them meets with the criteria of their Independence as laid down in Section 149(6). Mr.Pradip D. Kothari was reappointed as a Director of the Company without any remuneration on 21.09.2015 and is eligible to be reappointed as a Director of the company for five years, as per the provisions of the Companies Act 2013. This item is included in the agenda of the ensuing 45th Annual General Meeting. BOARD MEETINGS: During the year 5 Board Meetings and 2 Audit Committee Meetings were held, the details of which are given in the Corporate Governance Report. The intervening gap between two meetings was within the period as prescribed under the Companies Act, 2013. BOARD EVALUATION: Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit Committee. Pursuance to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a Separate Meeting of Independent Directors was held during the year, in which the Independent Directors evaluated the performance of the Non- Independent Directors, the Board as a whole and the Chairman of the Company. RESPONSIBILITY STATEMENT: The Directors confirm that:- a) In the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same; b) They 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 at the end of the Financial Year and of the Profit or Loss of the Company for that period. c) There is a system for internal financial control and management. In addition, the new investor viz. M/s.Gemini Fertilizers have nominated an experienced professional to exercise strict financial discipline. d) To the best of their knowledge and information, they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and e) They have prepared the annual accounts on a going concern basis. LISTING The Company has since received In-Principle approval from the Bombay Stock Exchange for revoking the suspension in trading of equity shares of the Company. Certain formalities are to be completed for getting the shares re-listed, subsequent to the receipt of this in-principle approval. The Company is in the process of fulfilling the terms and conditions and it is expected that the listing of shares will take place shortly during the financial year 2016-17. SHARE CAPITAL: The paid up equity share capital as on 31st March 2015 was Rs.624.19 lakhs. The company has not issued any shares with differential voting rights nor granted stock options nor sweat equity. DEPOSITS: The Company has not accepted any public deposit during the year. RELATED PARTY TRANSACTIONS: There were no ‘material’ contracts or arrangements or transactions which were not at arm’s length basis and therefore disclosure in form AOC-2 is not required. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE AND OUTGO The information as required under Sec.134(3)(M) of the Companies Act, 2013 read with Companies Account Rules, 2014 (Annexure - A). EXTRACT OF ANNUAL RETURN: As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in MGT-9 is annexed with this Report as Annexure – B MANAGEMENT DISCUSSION AND ANALYSIS & CORPORATE GOVERNANCE: Your Company has complied with the requirements of the code of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange. A detailed report on Corporate Governance together with certification of the Chairman and Managing Director is attached and forms part of the Annual Report (Annexures – C & D). Further as required under Section 134(3)(c) of the Companies Act, 2013, the Directors’ Responsibility Statement is also attached to this Report. AUDITORS: The Auditors, M/s.B.B.Naidu & Co., Chartered Accountants, Chennai, retire at the ensuing Annual General Meeting and have confirmed their inability to continue in the office and therefore do not opt for reappointment. M/s. N. Ganesan Associates, Chartered Accountants, have consented to act as auditors of the company for a period of 5 years from the conclusion of this AGM till the conclusion of the 50th AGM. This item is included in the Agenda of Notice. Their appoint is subject to the provisions of section 139 and other applicable provisions if any of the Companies Act 2013 and the rules made there under. A certificate as per rule 4(1) of Companies (Audit and Auditors) 2014 has been obtained. AUDIT QUALIFICATION: With regard to the observations in the Report of the Statutory Auditors, the Board replies are as follows: As explained in Note no.3.2 and 3.3 to the Accounts, State Bank of India & HDFC Bank have referred the matter of recovery of the dues to Debt Recovery Tribunal(DRT), Chennai and pending adjudication of the matter, the quantum of interest is not ascertainable at present and therefore not considered in the Accounts. With regard to the Sale Agreement relating to the company’s property in Kothari Buildings, the same is subject to the approval of the shareholders at the ensuing Annual General Meeting and this is included as item no.7 in the Notice of the Annual General Meeting. It is to be noted that possession of part of the property has been handed over on 1st April 2015. The accounts adjustments of future rentals are being addressed during the current financial year as and when the property was occupied. Likewise a Lease Agreement of the Fertilizer Factory was necessitated to restart the operations on continuous basis. Such operation of the Fertilizer Factory is a condition precedent to retention of the assigned land. This was paramount in the interest of the company and the lessee has taken upon itself the entire running of the factory (which was hitherto not operative for the last 2 years) including infusion of the working capital, payment of the entire work force including supervisory staff, maintenance of plant & machinery which are more than 40 years old. This relieved the company of funding requirements and interest cost thereon and this has arrested the losses which were incurred by the company in the past. The subsidy to be received by the lessee will also be ploud back into the business as working capital. More importantly the product manufactured at the factory will be sold in the name of Horse Brand belonging to Kotharis and through the network of dealers of the company. Taking into account all the factors and circumstances into consideration, the management is of the firm view that the agreement with Gemini Fertilizers is prima facie in the best interest of the company. This arrangement is also subject to the approval of the shareholders at the ensuing AGM and it is included as an item no.6 in the Notice of AGM. The restarting of the Fertilizer Factory by the lessee was only in June 2015 and has no bearing on the financials of the company for the year ended 31st March 2015. The Investor has taken upon itself the running of the factory only to save the company of further losses and acts in close co-operation and in consultation and directions of the Chairman and Managing Director including Board of Directors of the company and does not excise any powers of management on its own. The Additional Security of the factory plant & machinery land in favour of the lessee is only to meet any eventuality for which specific approval of the Board as required has been obtained. With regard to the land at Coonoor which was originally intended to be sold to a party pursuant to which a Sale Agreement was made and the prospective buyer did not register the Sale Deed within the stipulated period of time, pursuant to which the company entered into a Fresh Agreement with the new buyers i.e., the lessee and the sale deed has been registered in favour of the investor. The comments of the Auditor regarding preparation of accounts on the basis of going concern is not properly addressed and not based on happening of future events. The Board of Directors is confident that with the operation of the Fertilizer Factory and the continuing profits on other trading activities would ensure a regular cash flows to the company and with the continued commitments of the Investor to settle the secured and unsecured creditors and to meet any future contingency of funds, the company will continue to be in operation and generate sufficient cash flow to meet its commitments and in view of the foregoing, the preparation of accounts on the basis of going concern is both relevant and appropriate. The scale of operations of the company has significantly improved all around during the financial year now belying the apprehension expressed by the auditor. With regard to the various legal cases, the company, based on legal opinion is confident of successfully contesting the cases and does not anticipate any significant cash outflows in the future affecting the going concern concept in preparation of accounts. The disclosures made in the financial notes in this regard are complete. In summary, the Management makes it clear that none of the observations of the Statutory Auditors have any material impact on the financials for the year ended 31st March 2015 as well as the Balance Sheet as on that date which in the opinion of the management are true and fair. COST AUDIT: During the year and review there was no production of Single Super Phosphate(SSP) and hence the applicability of Cost Audit does not arise. SECRETARIAL AUDIT: 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 Ms.A. Satyadevi, Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is attached vide Annexure – E. Apart from certain technical irregularities mentioned in the Secretarial Audit Report, the Board would reply to certain other observations made in the said report. With regard to the share application money, the company could not comply with all the requirements of SEBI, with regard to listing of shares and hence the Board decided to refund the application money and the company has refunded Rs.55 lakhs so far. With regard to the borrowings, these were within the limits at the time of availing the facilities and the apparent excess is due to the accrued interest outstanding as on the balance sheet date. With regard to the proposed sale of the company’s property, the sale deed would be registered only upon the approval of the shareholders at the ensuing Annual General Meeting as explained in financial note no.8.2 to the audited accounts. Regarding the additional security pertaining to the proposed sale of the company’s property, such security will be provided when the necessity arises after obtaining the approval of the shareholders. With regard to the amount yet to be transferred to the Investor Education and Protection Fund, financial note no.7.1 is self explanatory. PARTICULARS OF EMPLOYEES: There is no employee, particulars of whom are to be furnished under Sec.197 of the Companies Act, 2013. EVENTS AFTER THE BALANCE SHEET DATE (i)Winding up Petition: Certain creditors and ex-employees have filed winding up petitions against this company and the company is taking adequate legal steps to challenge the same and the directors are of the opinion that they come out of the cases successfully. (ii) Other matters: The Company has initiated criminal proceedings with the Central Crime Branch, Chennai, for certain irregularities and fraud committed by the former Executive Director of the Company. ACKNOWLEDGEMENT: Your Directors place on record their appreciation of the valuable support and help of M/s.Gemini Fertilizers both in management and financial matters, Financial Institutions, Government authorities, Banks and Employees. The cooperation and the forbearance of the members are gratefully acknowledged. (on behalf of the Board of Directors) Pradip D. Kothari Chairman and Managing Director Place: Chennai Date: 29.02.2016 |