DIRECTORS REPORT Your Directors are pleased to present the thirty ninth Annual Report and the Company's audited financial statement for the financial year ended 31st March, 2015. RESULT OF OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS The company has added several new products this year and progressively moved to higher margins in each vertical. The company successfully widened the customer base and developed sales in new geographies. The Consolidated gross sales of the company grew by 11.8% from Rs.1,290.69 Crores to Rs.1,442.42 Crores and the Consolidated Net Profit increased by 38.4% compared to the previous year. CONSOLIDAT ED FINANCIAL STATEMENT In accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) - 21 on Consolidated Financial Statements, the auditedconsolidated financial statement is provided in the Annual Report. SUBSIDIARIES': The following are two subsidiaries of the company as on 31st March, 2015. a. M/s. Pennar Engineered Building Systems Limited b. M/s. Pennar Enviro Limited THE PERFORMANCE OF THE SUBSIDIARIES IS AS HEREUNDER: (a) M/s. Pennar Engineered Building Systems Limited (PEBSL) Your Company's subsidiary, M/s. Pennar Engineered Building Systems Limited (PEBSL), is among top five players in the Pre Engineered Building market. The company has achieved its highest turnover of Rs.485.57 crore and grew at 20.35 %. PEBSL recorded an EBIDTA of Rs.48.77 crore and a net profit of Rs.21.90 crore, representing 22.07% and 19.90% growth, respectively as compared to last year. The company's order book is at Rs.356.18 crore as on 30th June 2015. (b) M/s. Pennar Enviro Limited (PEL) The company has achieved a turnover of Rs.29.42 crore during the current year as against Rs.17.48 crore during the previous year. The order book position as on 31st March 2015 was Rs.26.80 crore. The new business segment dealing with Operation & Maintenance and Standard Plants have bagged several orders from prestigious clients. The Company has successfully commissioned a Sea Desalination Plant, ZLD (Zero Liquid Discharge) effluent treatment plant and Sewage Treatment plants of various capacities and Tertiary Treatment Plants. Work is in progress for a 6 MLD (Millions of liters per day) fully automatic DM (Demineralized Water) Plant at Mangalore. The company has received certification from Indian Institute of Toxicology Research, Lucknow for its RO (Reverse Osmosis) product which allows the use of the product for drinking applications. The financial position of each of the subsidiaries, as per the Companies Act, 2013 is annexed. The Policy for determining material subsidiaries may be accessed on the Company's website at the link: <http://www.pennarindia.com/policy-determining-material.html>. The information on subsidiaries pursuant to Section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure - A in Form AOC - 1. DIVIDEND, FIXED DEPOSITS AND GENERAL RESERVES: The company has undertaken capacity expansion and product diversification in Financial Year 2014-15 and shall continue the same for the Financial Year 2015-16. This will help the company to achieve margin and revenue growth in the coming years. The company is funding these activities through internal accruals. The company till date has not taken any term loan to fund these. Therefore your Directors are not recommending a dividend on equity shares. However the company has redeemed the second annual installment of 0.01% Cumulative Redeemable Preference shares of Rs.3.34/- each at Rs.1.67/- per share along with Dividend at 0.01% during the year 2014-15. Your Company has not accepted any fixed deposits and no amount has been carried to General Reserves during the year. CONTRACT AND ARRANGEMENT WITH RELATED PARTIES: All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had entered into contract / arrangement / transaction with material related party which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.pennarindia.com/policy-related-party-transactions>. html. The Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B in Form AOC-2. CREDIT RATING: CARE has reaffirmed the 'CARE A' (Single A) rating assigned to the long term bank facilities of the Company. This rating is applicable to facilities having tenure of more than one year. Instruments with 'CARE A' rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Further, CARE has also reaffirmed the 'CARE AT (A One) rating to short term bank facilities of the Company. This rating is applicable to facilities having a tenure up to one year. Instruments with 'CARE A1' rating are considered to have very strong degree of safety regarding timely payment of financial obligations and carry lowest credit risk. DIRECTORS RESPONSIBILITY STATEMENT: Your Directors state that: a) in the preparation of the annual accounts for the year ended 31st March, 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 31st March, 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. CORPORATE GOVERNANCE: The Company is committed to maintain the highest standard of corporate governance and adhere to the corporate governance requirements set out by Securities Exchange Board of India. The Report on corporate governance as stipulated under the Listing Agreement is annexed herewith as Annexure - C. The requisite certificate from Ms. Srivani Tyarla, Practicing Company Secretary confirming compliance with the conditions of corporate governance is annexed herewith as Annexure - D. CORPORATE SOCIAL RESPONSIBILITY (CSR): In terms of section 135 and Schedule VII of the Companies Act, 2013, and the rules made there under the Board of Directors of your Company has constituted a CSR Committee. The Committee comprises of two Independent Directors and two Executive Directors. The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken, which has been approved by the Board. Your company has formed a foundation named 'Pennar Foundation' for undertaking some CSR activities. The Annual Report on CSR activities is annexed herewith as Annexure - E. NOMINATION AND REMUNERATION POLICY: The Nomination and Remuneration Committee of the Company identifies the persons, who are qualified to become Directors of the Company / who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal. The Committee also carries out evaluation of every Director's performance. The Committee has formulated the criteria for determining qualifications, attributes, independence of the Directors and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and other employees. RISK MANAGEMENT: Pursuant to section 134 (3) (n) of the Companies Act, 2013 and Clause 49 of the listing agreement, the company has formulated a policy on risk management. At present, the company has not identified any element of risk which may threaten the existence of the company. INTERNAL FINANCIAL CONTROLS: The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL: None of the directors of the company are disqualified under the provisions of the Act or under the Listing Agreement with the Stock Exchanges. Mr. Nrupender Rao, and Mr. Ravi Chachra who retire by rotation and being eligible offer themselves for re-appointment. Your Board recommends their appointment. Mr. J Ramu Rao, Non-Executive Director of the company was designated as Non-Executive Independent Director of the Company under Section 149 of the Companies Act, 2013 at the meeting of the Board of Directors held on 30th September, 2014. Mr. Nrupender Rao, Mr. Aditya Rao and Mr. K Lavanya Kumar were re-appointed at the meeting of Board of Directors held on 11th February, 2015 as Executive Chairman, Vice-Chairman & Managing Director and Whole-Time Director. Their appointments have to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends their appointment. The Board of Directors appointed Ms. Sita Vanka as Additional Independent Director of the Company at its meeting held on 11th February, 2015. Her appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends her appointment. Pursuant to the provisions of Clause 49 of the Listing Agreement, brief particulars of the directors who are proposed to be appointed/ re-appointed are provided as an annexure to the notice convening the Annual General Meeting. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges. Mr. C Parthasarathy, Non-Executive Independent Directors of the company resigned from the office of directorship on 29th January, 2015 the same was taken note by the Board of Directors at its meeting held 11th February, 2015. Your Board places on record their deep appreciation for the contribution made by him during his tenure as Director. The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non-executive directors and executive directors. The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: <http://www.pennarindia.com/policy->familiarization-programme.html The Board of Directors at its meeting held on 13th May, 2015 appointed the following as Key Managerial Personnel of the Company: Mr. J S Krishna Prasad as Chief Financial Officer Mr. Mirza Mohammed Ali Baig as Company Secretary STATUTORY AUDITORS: Pursuant to the provisions of section 139 of the Act and the rules framed thereunder, M/s. Rambabu & Co., Chartered Accountants, were appointed as statutory auditors of the company from the conclusion of the 38th Annual General Meeting of the company held on 30th September, 2014 till the conclusion of the 41st Annual General Meeting to be held in the year 2017, subject to ratification of their appointment at every 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. The Auditors' Report does not contain any qualification, reservation or adverse remark. COST AUDITORS: The Cost Audit Report for the year ended 31st March, 2014 was reviewed by the Audit Committee at its meeting held on 5th August, 2014 and has been filed with Registrar of Companies on 18th September, 2014. The Cost Audit for the year ended 31st March 2015 is in progress and the Cost Audit Report will be filed with the Ministry of Corporate Affairs within the stipulated time. The Board of Directors at its meeting held on 13th May, 2015 appointed M/s. DZR & Co., Cost Accountants, Hyderabad - 500 007 as Cost auditors of the company for the year ending 31st March, 2016. AUDITOR TO CONDUCT SECRETARIAL AUDIT The Board has appointed Ms. Srivani Tyarla, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended 31st March, 2015 is annexed herewith as Annexure - F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. AUDIT COMMITTEE: The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report. VIGIL MECHANISM/WHISTLE BLOWER POLICY: Pursuant to Section 177 of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014, the Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report. The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: <http://www>. pennarindia.com/vigil-mechanism.html MEETINGS OF THE BOARD: Five meetings of the Board of Directors were held during the year. For further details, please refer the same in Corporate Governance report in this Annual Report. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED: Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement. CHANGE IN THE NATURE OF BUSINESS, IF ANY: There is no material change in the nature of business affecting the financial position of the Company for the year ended 31st March, 2015. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure - G. EXTRACT OF ANNUAL RETURN: Extract of Annual Return of the Company is annexed herewith as Annexure H. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES The information required under section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and the Statement under Section 134 of the Companies Act 2013 read with Rule 5 (2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure - I. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013: The Company has in place an Internal Complaints Committee which has been set up to redress complaints regarding sexual harassment. The following is the summary of sexual harassment complaints received and disposed off during the year: i) No. of complaints received : nil ii) No. of complaints disposed off: nil LIQUIDITY: The company has undertaken number of steps to maintain strong liquidity levels. The company's consolidated net debt level is at Rs.137.76 crore. Your Company continues to focus on generating strong cash flows to meet its future growth plans. The Company is comfortable with its current liquidity position. LISTING OF EQUITY SHARES: The Company's equity shares are listed at the Bombay Stock Exchange Limited, National Stock Exchange of India Limited and Metropolitan Stock Exchange of India Limited. The Company's 0.01% Cumulative Redeemable Preference Shares are listed at Bombay Stock Exchange Limited. DEMATERIALISATION OF SHARES: 98.50% of the company's paid-up Equity Share Capital is in dematerialized form as on 31st March, 2015 and balance 1.50 % is in physical form. 84.97% of the company's paid-up 0.01% Cumulative Redeemable Preference Share Capital is in dematerialized form as on 31st March, 2015 and balance 15.03% is in physical form. REDEMPTION OF 0.01% CUMULATIVE REDEEMABLE PREFERENCE SHARES: The company has redeemed the second annual installment of 1,66,49,119 Cumulative Redeemable Preference Shares of H3.34/-each at a rate of H1.67/- per share as per the terms and conditions of the 'Scheme of Reconstruction and Arrangement' sanctioned by the High Court of Andhra Pradesh. MANAGING DIRECTOR CERTIFICATION PURSUANT TO CLAUSE 49(IX) OF THE LISTING AGREEMENT: The Vice-Chairman & Managing Director certification pursuant to clause 49(V) of the listing agreement is annexed herewith as Annexure-J. PERSONNEL / INDUSTRIAL RELATIONS: The Company maintained cordial and harmonious relations at all levels at the offices and plants of the Company and its subsidiaries throughout the year under review. THE DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE: In terms of sub rule 5(vii) of Rule 8 of Companies (Accounts) Rules, 2014, there are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. MANAGEMENT DISCUSSION AND ANALYSIS: Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion & Analysis enclosed as Annexure-K. APPRECIATION: Your directors take this opportunity to express their appreciation for the co-operation to all the suppliers and customers who have been associated with the Company as partners. The Directors would also like to take this opportunity to thank the financial institutions, banks, regulatory and government authorities as well as the shareholders for their continued co-operation and support. The directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company. We look forward to further support. By Order of the Board for Pennar Industries Limited Nrupender Rao Executive Chairman Place : Hyderabad Date : 12.08.2015 |