DIRECTORS' REPORT TO THE MEMBERS, The Directors hereby present their Twenty Second Annual Report together with Audited Statement of Accounts for the year ended March 31, 2015. OVERVIEW OF THE ECONOMY The industry growth was muted due to economic slowdown and decrease in spending across the board. With gradual improvement in the economy and growth drivers such as changing lifestyles, increasing organized retail and government spending on education in place, the paper and board consumption is bound to increase. However, increased supply in domestic market due to new capacities and cheaper imports from Asean countries at zero duty are likely to pose some challenges in the short term. The Government envisages GDP growth to accelerate to 8% in FY 16 driven by strengthening macroeconomic fundamentals and implementation of policy reforms recently announced. Reforms currently underway such as GST implementation, Amendment to Land Acquisition Bill, Labour Reforms, etc. are expected to provide the requisite thrust for growth in the medium-term. FINANCIAL PERFORMANCE The Company's sales during the year increased to Rs. 724.96 Crore (up 34%) from Rs. 540.53 Crore in the previous year. The Operating Profit (PBIDT) stood at Rs. 36.10 Crore, however, the Company recorded a loss of Rs. 17.17 Crore as a result of higher interest and depreciation burden arising from commissioning of Company's new project (Rs. 330 Crore) at Sarigam, Gujarat, slower ramp up of production and severe cost increase. Total production at 219,907 tonnes and Sales at 218,455 tonnes represented an increase of 29% and 28% respectively over the previous year. Overall capacity utilization (including new plant) was 87%. The work on Sarigam Project is completed and Company has already commenced production in the previous year itself. As on March 31, 2015, the Company has incurred capital expenditure of approximately Rs. 330 Crore EXPORTS The Company continued to fare well in export markets. During the year, the exports increased to Rs. 66.08 Crore (up 47%) from Rs. 45.06 Crore in the previous year. MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year and the date of the report. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS There were 4 (Four) meetings of the Board of Directors of the Company during the financial year 2014-15. DIVIDEND In view of the loss, the Directors of the Company have not recommended any dividend for the financial year 2014-15. DIRECTORS & KEY MANGERIAL PERSONNEL In accordance with provisions of Section 152 of the Companies Act, 2013, Smt. Reena Agarwal, Executive Director retires by rotation at the forthcoming Annual General Meeting and being eligible, offers herself for re-appointment. During the financial year 2014-15, Smt. Reena Agarwal was appointed as an Additional Director of your Company at the meeting of the Board of Directors held on August 8, 2014 and her appointment as the Executive Director was approved by the shareholders at the Annual General Meeting held on September 20, 2014. Pursuant to the provisions of Section 149 of the Act, which came into effect from April 1, 2014, the Members approved the appointment of Shri S N Chaturvedi, Shri P Kumar and Shri C R Radhakrishnan as Independent Directors for a term of five years at the Annual General Meeting held on September 20, 2014. Shri R N Agarwal has been re-appointed as the Managing Director of the Company with effect from August 1, 2015 for a further period of three years. The resolution seeking approval of the Members for re-appointment of Shri R N Agarwal has been incorporated in the notice of the forthcoming Annual General Meeting of the Company. Key Managerial Personnel: Pursuant to the provisions of Section 203 of the Act, which came into effect from April 1, 2014, the appointments of Shri R N Agarwal, Chairman & Managing Director, Shri Raunak Agarwal, Whole Time Director, Shri Gopal Uchil, Chief Financial Officer and Ms. Hemali Shah, Company Secretary & Compliance Officer were formalized as the "Key Managerial Personnel" of the Company. During the year, the Company also appointed Shri R H K Sinha as the President & CEO, in the category of Key Managerial Personnel of the Company with effect from November 14, 2014. Ms. Hemali Shah resigned as the Company Secretary & Compliance Officer of the Company, with effect from February 28, 2015. Shri R H K Sinha also resigned as the President & CEO of the Company with effect from May 31, 2015. The Board expresses it gratitude to Shri R H K Sinha and Ms. Hemali Shah for the services rendered by them during their tenure with the Company. Ms. Pooja Daftary has been appointed as the Company Secretary & Compliance Officer with effect from March 1, 2015 and is designated as "Key Managerial Personnel" of the Company. DECLARATION FROM INDEPENDENT DIRECTORS Shri S N Chaturvedi, Shri P Kumar and Shri C R Radhakrishnan, Independent Directors, have submitted a declaration that each of them meets the criteria of independence as provided in subsection (6) of Section 149 of the Act and that there has been no change in the circumstances which may affect their status as Independent Directors during the year. In the opinion of the Board, the Independent Directors possess appropriate balance of skills, experience and knowledge, as required. AUDIT COMMITTEE OF THE BOARD OF DIRECTORS The Composition of the Audit Committee has been detailed in the Corporate Governance Report. VIGIL MECHANISM In accordance with the provisions of Section 177(9) of the Act and Clause 49 of the Listing Agreement, the Company has adopted a Whistle Blower Policy ("Vigil Mechanism") to provide a mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct. The Policy prescribes adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been so far, denied access to the Audit Committee. PROCEDURE FOR NOMINATION AND APPOINTMENT OF DIRECTORS The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board based on the industry and strategy of the Company. Board Composition Analysis reflects in-depth understanding of the Company, including its strategies, environment, operations, financial condition and compliance requirements. The Nomination and Remuneration Committee conducts a gap analysis to refresh the Board on a periodic basis, including each time a Director's appointment or re-appointment is envisaged. The Committee is also responsible for reviewing and vetting the CVs of potential candidates vis-a-vis the required competencies and meeting potential candidates prior to making recommendations for their nomination to the Board. At the time of appointment, specific requirements for the position, including expert knowledge expected, is communicated to the appointee. CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES AND INDEPENDENCE OF A DIRECTOR The Nomination and Remuneration Committee has formulated the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Clause 49 of the Listing Agreement. Independence: In accordance with the above criteria, a Director will be considered as an 'Independent Director' if he/ she meets with the criteria for 'Independent Director' as laid down in the Act and Clause 49 of the Listing Agreement. Qualifications: A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, age and gender. It is also ensured that the Board has an appropriate blend of functional and industry expertise. While recommending the appointment of a Director, the Nomination and Remuneration Committee considers the manner in which the function and domain expertise of the individual will contribute to the overall skill-domain mix of the Board. Positive Attributes: In addition to the duties as prescribed under the Act, the Directors on the Board of the Company are also expected to demonstrate high standards of ethical behavior, strong inter-personal and communication skills and soundness of judgment. Independent Directors are also expected to abide by the 'Code for Independent Directors' as outlined in Schedule IV to the Act. REMUNERATION POLICY The Board of Directors has formulated a policy which lays down the framework in relation to remuneration of Directors, Key Managerial and Senior Managerial Personnel of the Company pursuant to the provisions of the Act and Clause 49 of the Listing Agreement. It is affirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is as per the Remuneration Policy of the Company. The Remuneration Policy of the Company has been annexed as Annexure 1. EVALUATION OF THE BOARD'S PERFORMANCE During the year, the Board adopted a formal mechanism for evaluating its performance and as well as that of its Committees and individual Directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects of the Board functioning such as composition of the Board & Committees, experience and competencies, performance of specific duties and obligations, governance issues etc. Separate exercise was carried out to evaluate the performance of individual Directors including the Chairman who were evaluated on parameters such as attendance, contribution at the meetings and otherwise, independent judgment, safeguarding of minority shareholders interest, etc. The evaluation of the Independent Directors was carried out by the entire Board and that of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expresses its satisfaction with the evaluation process. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and belief, confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures; (ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period; (iii) they 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 frauds and other irregularities; (iv) they have prepared the annual accounts on a going concern basis; (v) they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; (vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has an adequate system of internal controls to ensure that all the assets are safeguarded and are productive. Necessary checks and balances are in place to ensure that transactions are adequately authorized and reported correctly. The Internal Auditors of the Company conduct Audits of various departments to ensure that the necessary controls are in place. The Audit Committee of the Board reviews these and the Company takes corrective actions whenever needed. DETAILS OF SUBSIDIARIES / JOINT VENTURES / ASSOCIATES The Company does not have any subsidiary/ joint ventures/ associates. EXTRACT OF ANNUAL RETURN As required under sub Section (3) of Section 92 of the Act, the extract of annual return is enclosed, which forms part of the Directors' Report as Annexure 2. AUDITORS (1) Statutory Auditors: Messrs Chaturvedi & Partners, Chartered Accountants, the Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and being eligible for re-appointment, they have furnished certificates of their eligibility for re-appointment as required under Companies Act, 2013. Members are requested to consider their re-appointment and authorize the Board of Directors to fix their remuneration. The Auditors' Report for the financial year ended March 31, 2015 does not contain any qualification, reservation or adverse remark. (2) Secretarial Auditors: Pursuant to provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed Messrs Parikh & Associates, Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the year ended March 31, 2015. The Secretarial Audit Report is annexed as Annexure 3. The Secretarial Audit Report for the financial year ended March 31, 2015 does not contain any qualification, reservation or adverse remark. The reasons for unspent amount of CSR expenditure is explained in the Report on Corporate Social Responsibility Activities forming part of this Directors' Report. (3) Cost Auditors: Pursuant to the provisions of Section 148 of the Act read with Companies (Audit and Auditors) Rules, 2014, Messrs N. Ritesh & Associates, Cost Accountants, Mumbai have been appointed to conduct Cost Audits for all the units of the Company for the year ending March 31, 2016 The due date for filing of the Cost Audit Report for the financial year 2013-14 was September 30, 2014. The Company has filed the Report with the Ministry of Corporate Affairs on the due date i.e. September 30, 2014. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) (m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed as Annexure 4. PARTICULARS OF EMPLOYEES & RELATED DISCLOSURES The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 (1) and Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure 5. DEPOSITS FROM PUBLIC The Company has not accepted any deposits from public. The Company has repaid all the deposits outstanding as on March 31, 2014 as stipulated under the provisions of Companies Act, 2013. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORY/ JUDICIAL AUTHORITY There are no significant or material orders passed by any regulator or court that would impact the going concern status of the Company and its future operations. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has not made any investments during the year. The Company has not given any loans or guarantees or provided any security during the year. RELATED PARTY TRANSACTIONS Particulars of 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 given in Form AOC-2 and the same forms part of this report as Annexure 6. All Related Party Transactions are placed before the Audit Committee and the Board for necessary approval. The Company has adopted a Related Party Transactions Policy and the same is uploaded on the Company's website at the web link: <http://www.nrail.com/company_policies.html>. RISK MANAGEMENT The Company has adopted a Risk Management Policy in accordance with the provisions of the Act and Clause 49 of the Listing Agreement. It establishes various levels of accountability and overview within the Company, while vesting identified managers with responsibility for each significant risk. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve this key objective, the policy provides for a structured and disciplined approach to Risk Management. In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: regulations, competition, business risk, technology obsolescence, investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk, etc. As a matter of policy, these risks are regularly assessed and appropriate steps are taken to mitigate the same. CORPORATE SOCIAL RESPONSIBILITY The Board has constituted a Corporate Social Responsibility Committee which has formulated and recommended to the Board, a Corporate Social Responsibility Policy and the activities to be undertaken by the Company. The policy and the plan has been approved by the Board. As part of CSR initiatives, your Company has during the financial year 2014-15 undertaken projects in areas of promoting education, preventive health care and sanitation, environmental sustainability and measures for benefits of villagers in rural areas of Vapi. These projects are in accordance with Schedule VII of the Companies Act, 2013. The Company has spent Rs. 10.89 lakhs towards the CSR projects during the financial year 2014-15. The average net profit of the Company computed as per Section 198 of the Act, for the immediately preceding three financial years was Rs. 789.38 lakhs. Hence, the Company was required to spend Rs. 15.78 lakhs on CSR activities during the Financial Year 2014-15, being 2% of the average net profits of the three immediately preceding financial years. The Company has an unspent amount of Rs. 4.88 lakhs in its CSR spend for the current year, which will be spent in the coming year. The Report on CSR activities is annexed as Annexure 7. POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaint Committee is set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under the policy. No complaint was received from any employee during the financial year 2014-15 and hence no such complaint was outstanding as on March 31, 2015 for redressal. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS As required by Clause 49 of the Listing Agreement with the Stock Exchange, the Corporate Governance Report, Management Discussion and Analysis Report, and the Auditor's Certificate regarding compliance with conditions of Corporate Governance, forms part of the Annual Report. HUMAN RESOURCE The Company's human resources continue to be its biggest asset. The team has remained as committed as ever and produced results that are considered significant. Quality, quick delivery and focus on resolving customer issues are the hallmark of the team performance. There is a strong focus on TEAM spirit, during the year. Employee relations continue to be cordial. APPRECIATION Your Company is grateful to its valued customers for their continuous co-operation and patronizing its products. Sincere appreciation is also due to Financial Institutions and Banks for their continuous co-operation and assistance in meeting the financial requirements of the Company. Your Company would also like to thank its employees, vendors and other service providers for their confidence reposed and cooperation extended to the Company. Last but not the least, your Directors wish to place on record their warm appreciation for your continuous support and encouragement. On behalf of the Board of Directors R N AGARWAL CHAIRMAN & MANAGING DIRECTOR Place : Mumbai, date : August 4, 2015 |