Directors' Report To The Members of Praj Industries Limited, Your Directors are pleased to present the 30th Annual Report and the Audited Financial Statements for the year ended 31st March, 2016. State of Company's Affairs Please refer Management Discussion & Analysis (Annexure 1) dealing with the state of Company's affairs at length. Dividend The Board of Directors declared an Interim Dividend of Rs. 1.62 (81%) per equity share of Face Value of Rs. 2/- during the Financial Year 2015 - 2016. The dividend pay-out was Rs. 346. 959 Mn including dividend distribution tax. Your Directors are of the opinion that the said Interim Dividend be treated as Final Dividend for the Financial Year 2015 -2016. Reserves The Company proposes to carry Rs. 67 Mn to Reserves. Credit Rating a) CRISIL has reaffirmed "A1+" rating to the Company's short-term banking facilities which signifies that the degree of safety regarding timely payment of instruments is very strong. b) CRISIL has also reaffirmed its rating of the Company's long-term bank facilities to 'AA/Stable'. The "AA" rating signifies high safety with regard to timely payment of long-term financial obligations. Subsidiaries During the year, your Company acquired balance 20% stake in its subsidiary Company viz. Praj HiPurity Systems Limited thus completing 100% acquisition and making Praj HiPurity Systems Limited a Wholly Owned Subsidiary of your Company. Praj Engineering & Infra Ltd. (Formerly, Pacecon Engineering Projects Ltd.), India, Praj HiPurity Systems Ltd., India, Praj Americas Inc., U.S.A., Praj Far East Co. Ltd., Thailand, Praj Industries (Africa) (Pty.) Ltd., South Africa, Praj Far East Philippines Ltd. Inc., The Philippines, Praj Sur America S.R.L., Argentina and Praj Industries (Namibia) Pty. Ltd., Namibia continue to be subsidiaries of your Company. Consolidated Financial Statements of the Company, which include the results of the said Subsidiary Companies, are included in this Annual Report. Further, a statement containing the particulars for each of the Company's subsidiaries is also enclosed. Copies of Annual Accounts and related detailed information of all the subsidiaries can also be sought by any member of the Company or its Subsidiaries by making a written request to the Company Secretary at the Registered Office of the Company in this regard. The Annual Accounts of the Subsidiary Companies are also available for inspection at the Company's and/or the concerned Subsidiary's Registered Office. The Company has formulated a policy for determining 'material' subsidiaries and such policy is hosted on the Company's website i.e. <http://www.praj.net/policies.html> Further, a statement containing salient features of the financial statements of our subsidiaries in the prescribed format AOC-1 is appended as Annexure 7 to the Board's Report. The statement also provides the details of performance, financial position of each of the subsidiaries. Corporate Governance Pursuant to the provisions of Regulation 34(3) and 53(f), read with Schedule V of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis Report (Annexure 1), Report on Corporate Governance and Compliance Certificate on Corporate Governance (Annexure 3), Business Responsibility Report (Annexure 10) are annexed to this report. Directors Mr. Daljit Mirchandani (DIN : 00022951) was appointed as Additional Director in the Board Meeting held on 28th May, 2015. Subsequently, he was appointed as Non Executive - Non Independent Director, liable to retire by rotation in the Annual General Meeting held on 6th August, 2015. Mr. Gajanan Nabar, Director (DIN: 00714569) retired by rotation as Director of the Company on 6th August, 2015 and being willing and eligible, was re-appointed as Director of the Company. Ms. Parimal Chaudhari, Director (DIN: 00724911) will retire by rotation at the ensuing Annual General Meeting and, being eligible, has offered herself for reappointment. The members in the Annual General Meeting held on 6th August, 2015, granted their approval for extension of the term of contract of Mr. Pramod Chaudhari to act as Executive Chairman of the Company for a further period of two years with effect from 1st August, 2015 on the same terms and conditions including remuneration. The re-appointment of Mr. Gajanan Nabar as CEO & Managing Director ( DIN: 00714569) was approved by the members in the 29th Annual General Meeting held on 6th August, 2015, for a period of three years with effect from 1st August, 2014. Composition of Audit, Nomination & Remuneration Committee For details, kindly refer the Corporate Governance Report annexed to this Report (Annexure 3). Declaration from Independent Directors The Independent Directors have submitted their annual declaration to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 read with rules framed there under. Auditors a) Internal Auditors The Internal Auditors, Khare Deshmukh & Co., Chartered Accountants, Pune have conducted internal audits periodically and submitted their reports to the Audit Committee. Their reports have been reviewed by the Statutory Auditors and the Audit Committee. b) Statutory Auditors The members, in the 29th Annual General Meeting held 6th August, 2015, appointed M/s P.G. Bhagwat, Chartered Accountants, Pune as Statutory Auditors of the Company for a period of five years with effect from the conclusion of 29th Annual General Meeting held on 6th August 2015. Pursuant to the provisions of Section 139 of the Companies Act, 2013 read with Rule 3(7) of the Companies (Audit and Auditors) Rules, 2014 the appointment of Statutory Auditors for the Financial Year 2016-17 needs to be ratified by the members. The letter received from M/s P. G. Bhagwat also states that their appointment, if made, is as per eligibility required to be confirmed under Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014. Your Directors seek ratification from the members for the appointment of M/s P.G. Bhagwat, Chartered Accountants, Pune, as the Statutory Auditors of your Company from the conclusion of the ensuing Annual General Meeting till the conclusion of the 31st Annual General Meeting of the Company. c) Cost Auditors Your Company has appointed Dhananjay V. Joshi & Associates, Cost Accountants as Cost Auditors of the Company for the Financial Year 2016-17 at the remuneration as set out in item No. 4 of the explanatory statement which is subject to the ratification of members in the ensuing Annual General Meeting. d) Secretarial Auditors M/s KANJ & Associates, Pune, were appointed to conduct the secretarial audit of the Company for the Financial Year 2015-16, as required under Section 204 of the Companies Act, 2013 read with rules framed there under. The Secretarial Audit Report for Financial Year 2015-16 forms part of the Annual Report as Annexure 6. The Board has appointed KANJ & Associates, Pune, as Secretarial Auditors of the Company for the Financial Year 2016-17. Material changes and commitments, if any, affecting the financial position of the Company occurred between the end of the Financial Year to which these financial statements relate and the date of the report No material changes and commitments affecting the financial position of the Company occurred from the end of the Financial Year 2015-16 till the date of this report. Further there was no change in the nature of business of the Company. Statement concerning development and implementation of Risk Management policy of the Company In accordance with the provisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board adopted Risk Management Policy and initiated necessary steps for framing, implementing and monitoring the risk management plan for the Company. The main objective of this policy is to ensure sustainable business growth and to promote a pro-active approach in identifying, reporting, evaluating and mitigating risks associated with the business. The policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today's challenging and competitive environment, strategies for mitigating inherent risks associated with business and for accomplishing the growth plans of the Company are imperative. The common risks inter alia are risks emanating from; Regulations, Competition, Business, Technology Obsolescence, Investments, Retention of talent, Finance, Politics and Fidelity. As a matter of policy, these risks are assessed and appropriate steps are taken to mitigate the same. The Risk Management Policy is also hosted on the Company's website i.e. <http://www.praj.net/policies.html> During the year, the Board of Directors has merged Risk Management Committee (which was formed pursuant to the provisions of erstwhile Clause 49 of the Listing Agreement) into Audit Committee and the role and responsibilities of Risk Management Committee are assigned to the Audit Committee. However, pursuant to Regulation 21(5) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, (which came into effect from 1st December, 2015) constitution of Risk Management Committee is not applicable to your Company. The Company has instituted adequate Internal Controls and processes to have a cohesive view of risks, optimal risk mitigation responses and efficient management of internal control and assurance activities. In the opinion of the Board, there are no risks which may threaten the existence of the Company. Internal Financial Controls The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. Directors and KMP The Company's remuneration policy for KMPs is directed towards rewarding performance based on review of achievements periodically. The remuneration policy is in consonance with the existing industry practice. The said policy is available on Company's website i.e. <http://www.praj.net/policies.html> and is also attached as Annexure 8 to this report. ESOP During the year, your Company allotted 5,07,330 shares on exercise of options under the Employee Stock Option Plan 2005 Grant IV & Employee Stock Option Plan 2011 Grant I. Consequent to the above, the Issued, Subscribed and Paid - up Share Capital of your Company increased from 177,465,079 shares 354.930 Mn) as on 31st March, 2015 to 177,972,409 shares 355.945 Mn) as on 31st March, 2016. Vigil Mechanism / Whistle Blower Policy In order to ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the Company has adopted a Vigil Mechanism/Whistle Blower Policy. This policy is explained in Corporate Governance Report and is also posted on the website of Company at <http://www.praj>. net/policies.html Details of policy developed and implemented by the Company on its Corporate Social Responsibility initiatives Kindly refer Annexure 2 to this Report. Particulars of Loans, Guarantees or Investments made under Section 186 of the Companies Act, 2013 Loans, Guarantees and Investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report. (Please refer Note No.11 to the Standalone Financial Statements). Contracts and arrangements 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. Such transactions form part of the notes to the financial statements provided in this Annual Report. (Please refer Note No.29 to the Standalone Financial Statements). During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions which is available on the Company's website at the link: <http://www.praj.net/policies.html> The summary of related party transactions is given below; FORM AOC-2 (Pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014) Form for disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto 1. Details of contracts or arrangements or transactions not at arm's length basis; N.A. as there were no transactions during the year which were not at arm's length. 2. Details of material contracts or arrangement or transactions at arm's length basis; During the Financial Year 2015-16, all the transactions entered into with related parties were at arm's length. However, these transactions were not material. Performance Evaluation Regulation 4 (2) (f) (ii) (9) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. Also, the Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its Committees and individual Directors. In addition, Schedule IV to the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the Director being evaluated. The Board works with the Nomination & Remuneration Committee to lay down the evaluation criteria for the performance of Executive / Non-Executive / Independent Directors. Independent Directors have three key roles — governance, control and guidance. Some of the performance indicators based on which the Independent Directors are evaluated include: a) Ability to contribute to and monitor the Company's Corporate Governance practices. b) Ability to contribute by introducing international best practices to address top-management issues. c) Active participation in long-term strategic planning. d) Commitment to the fulfillment of a Directors' obligations and fiduciary responsibilities; these include participation in the Board and the Committee Meetings. In pursuance of above, the Company has devised a policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors. The evaluation of all the Directors, Committees and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as collated by the Nomination & Remuneration Committee. Explanation or comments on qualifications, reservations or adverse remarks or disclaimers made by the Statutory Auditors and the Secretarial Auditors in their reports There were no qualifications, reservations or adverse remarks made by the Statutory Auditors or Secretarial Auditors in their report. Extract of Annual Return The extract of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 in prescribed Form MGT-9 is as per Annexure 5 to this report. Number of Board Meetings conducted during the year under review The Board met six times during the Financial Year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. Directors' Responsibility Statement In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submits its responsibility Statement: — (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 at the end of the Financial Year and of the profit of the Company for that period; (c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act 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 applicable laws and that such systems were adequate and operating effectively. Details in respect of frauds reported by auditors under sub-section (12) of Section 143 other than those which are reportable to the Central Government. During the year under consideration, there were no such instances. Deposits The Company has neither accepted nor renewed any deposits during the year under review and also did not have any outstanding deposits at the end of the year. Remuneration ratio of the Directors/Key Managerial Personnel (KMP)/Employees The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and Companies (Particulars of Employees) Rules, 1975, in respect of employees of the Company and Directors is furnished hereunder: on Normalized remuneration for Financial Year 2015-16. *** Mr. Daljit Mirchandani was appointed as Director w.e.f. 28.05.2015. The median remuneration of employees of the Company during the Financial Year was Rs. 0.792 Mn. In the Financial Year, there was an increase of 9.4% in the median remuneration of employees. There were 978 permanent employees on the rolls of Company as on 31st March, 2016. Relationship between average increase in remuneration and Company performance: The Profit before Tax for the Financial Year ended 31st March, 2016 increased by 15.4% whereas the increase in median remuneration was 9.4%. The average increase in median remuneration was in line with the industry standards. Comparison of Remuneration of the Key Managerial Personnel(s) against the performance of the Company: The total normalized remuneration of Key Managerial Personnel reduced by 0.7% from Rs. 96.138 Mn in 2014-15 to Rs. 95.481 Mn in 2015-16 whereas the Profit Before Tax increased by 15.4 % to Rs. 786.769 Mn in 2015-16 (Rs.681.592 Mn in 2014-15). Variations in the market capitalisation of the Company: The market capitalisation as on 31st March, 2016 was Rs.15,875.139 Mn (Rs.11,073.821Mn as on 31st March, 2015) Price Earnings ratio of the Company was 22.54 as on 31st March, 2016 and was 15.29 as at 31st March, 2015. Percent increase over/ decrease in the market quotations of the shares of the Company as compared to the rate at which the Company came out with the last public offer in the year- The Company had come out with initial public offer (IPO) in January, 1994. An amount of Rs.4/- invested in one equity share of the said IPO would be worth Rs.89.20 as on 31st March, 2016 indicating a Compounded Annual Growth Rate of 15%. This is excluding the dividend accrued thereon. Average percentage increase made in the salaries of employees other than the managerial personnel in the last Financial Year i.e. 201516 was around 10 % whereas the managerial remuneration for the same Financial Year reduced by 0.7%. The key parameters for the variable component of remuneration paid to the Directors are considered by the Board of Directors based on the recommendations of Nomination and Remuneration Committee as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees. The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year - Not Applicable; It is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees. Particulars of employees The information required pursuant to Section 197 read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is given in Annexure 9 to this Report. "Group" for SEBI Takeover Regulations: For the purpose of Regulation 2 (1) (t) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, persons constituting 'Group' as defined in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 are -Mr. Pramod Chaudhari, Ms. Parimal Chaudhari, Moriyaset Trust, Mr. Parth Chaudhari, P-Cube Enterprises Private Limited, Turtle Communication, Fusiontech Ventures Private Limited, Plutus Properties LLP and Parimal and Pramod Chaudhari Family Discretionary Trust. 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 No such events occurred during the Financial Year 2015-16. Prevention of Sexual Harassment Policy The Company has in place Prevention of Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. Your Directors state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Energy Conservation, Technology Absorption, Adaptation, Innovation: While Praj's operations are not very energy intensive, Praj has been making efforts to reduce its energy and water foot print by implementing solar power system and water recycle and reuse system in its various facilities. Sustainability remains at the core of all solutions offered by your Company. During the year, Your Company has -1. filed 33 new patents 2. commissioned first plant based on novel Ecosmart technology in Europe 3. introduced new sustainable technologies which contributed 10% to the order intake There is progress on the 2nd Generation ethanol technology and your Company is making headway in installing a 12 MT 2nd Generation Integrated Bolt-On "Smart Bio Refinery" Demo Plant in Maharashtra. This will be a multi-feed, multi-product facility complete with integrated effluent treatment system. Your Company has retained its status as a net forex earner consecutively for past 19 years. Acknowledgements Your Directors wish to place on record their appreciation towards all associates including Customers, Collaborators, Government Agencies, Financial Institutions, Bankers, Suppliers, Shareholders, Auditors, Employees and others who have reposed their confidence in the Company. For and on behalf of the Board of Directors Pramod Chaudhari Executive Chairman Place: Mumbai Date: 20th May, 2016 |