DIRECTORS' REPORT Dear Share Holders : 1. Your Directors are pleased to present before you the 72nd Annual Report and the Audited Statement of Accounts for the year ended 31st March, 2016 :- 2. PERFORMANCE The sales and other income of the company has improved from Rs. 534 crores to Rs. 568 crores despite there being a demand compression for some finished goods used by the FMCG sector which was adversely affected from poor rural demand due to consecutive droughts in the Country. The Earnings before Interest, tax and Depreciation came in at Rs. 63.07 crores 65.55) which after interest of Rs. 15.28 crores 17.77 crores) and depreciation of Rs. 12.11 crores 13.29 crores) resulted in Net profit before tax at Rs. 35.68 crores 34.49 crores). The availability of basic raw material being maize remains a concern throughout the year due to consecutive droughts in the major maize producing states of the country. The availability of the basic raw material at higher price did impact the operating margin of the Company. 3. FUTURE PROSPECTUS With the prediction of good monsoon in the current year, we expect that raw material position will become comfortable from the months of October/Nomber of the running year i.e. when the kharif crop (major crop of maize) comes in the market. We are putting our conscious efforts to show an overall improvement in Key operational parameters with constant focus on maintaining operational efficiency and optimum product mix. 4. MANAGEMENT DISCUSSION AND ANALYSIS As per Clause 49 of the Listing Agreement with the Bombay Stock Exchange, Management's discussion and analysis report is annexed herewith marked as 'Annexure A' and forms a part of this report. 5. CORPORATE GOVERNANCE Your company is fully committed to the philosophy of transparency and believes in conducting its business with due compliance of all the applicable laws, rules and regulations. In compliance with the requirements of Clause 49 of the Listing Agreement with the Stock Exchange, the Company has duly implemented the system of Corporate Governance. The report on Corporate Governance as stipulated under the Listing agreement is annexed herewith marked as 'Annexure B' to this report. 6. DIVIDEND The Company has declared and paid Interim Dividend @50% (i.e. Rs. 5/- per share) in March 2016. The directors have decided to maintain the dividend at the same rate of 50% (i.e. Rs. 5/- per share) for the FY 2015-16 as declared for the previous financial year 2014-15. 7. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134 (3c) of the Companies Act, 2013, the Directors state that: (i) in the preparation of the Annual Accounts for the financial year ended 31st March, 2016, the applicable Accounting Standards have been followed along with proper explanations relating to material departures; (ii) 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 at the end of the financial year and of the profit of the company for the year so ended; (iii) 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; (iv) the Directors have prepared the Annual Accounts for the financial Year ended 31st March, 2016 on a 'going concern' basis; (v) 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 (vi) 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. 8. DEPOSITS All the deposits have been accepted/ renewed / repaid as per the provisions of the Act. The company had no unclaimed / unpaid deposits on 31/03/2016. 9. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS (a) The Vijoy Steel & General Mills Company Ltd., Phagwara: The Company has incurred operational loss for the year under reference due to lower productivity. It expects to improve upon its performance during the running year. (b) Scott Industries Ltd., Phagwara: The Company has shut down its operations. Most of its assets have been already disposed off and efforts are on to realize the dues from its old customers. (c) Sukhjit Mega Food Park & Infra Ltd., Phagwara : The Company has been incorporated as an SPV for setting up the Mega Food Park in Punjab, which has been approved by the Ministry of Food Processing Industries (MoFPI), Govt. of India, New Delhi under its Mega Food Park Scheme. The Project is in the initial stages of getting various Govt. consents/approvals and will be in a position to take effective steps for commissioning during the year under reference. There has been no material change in the nature of business of the Subsidiaries. As required under the Listing Agreement with the Bombay Stock Exchange, Consolidated Financial Statements of the Company and its subsidiaries are attached, which have been prepared in accordance with the relevant Accounting Standard(s) as prescribed under the Companies Act, 2013. In pursuance to the general circular issued by the Ministry of Corporate Affairs, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. A statement containing the requisite financial details of the company's subsidiaries for the financial year ended 31st March, 2016 is annexed to the consolidated results in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any shareholder of the Company who may be interested in seeking such information and are also available for inspection by any shareholder of the Company at the registered office of the Company. The Company shall furnish a copy of details of annual accounts of subsidiaries to any shareholder on demand. 10. CONTINGENT LIABILITY Disputed Liabilities, not provided as expense in the accounts, comprise of Rs. 27.18 Crores. The amount mainly includes Rs. 24.94 Crores as disputed Central Excise Duty (excluding penalty and interest) demand raised by the Central Excise Department since 01/04/1997 alleging the sale of Maize Starch as that of Modified Starch. Since the matter is subjudice, the Department has continuously been issuing the show cause notices against the differential duty. However, pertinent to mention that the product has been repeatedly got tested by the Department from its Central Revenue Laboratory where it has been clearly held to be Maize Starch. So the demand is totally baseless and without any substance. The company has been manufacturing Maize Starch by following the standard Wet Milling Process for the last many decades and the product is sold and accepted by the market as Maize Starch, so the company does not foresee any liability to crystallize on this account. Other items include show cause notice concerning demand of Rs.1.19 crores on exempted goods and the case is pending before the Commissioner, Central Excise and Rs. 1.05 Crores wrongly levied for R&C measures by A.P. Northern Power Distribution Company Ltd., Nizamabad against exemption enjoyed by the unit, the matter is pending before the Hon'ble High Court of Andhra Pradesh. 11. PARTICULARS OF REMUNERATION TO DIRECTORS AND DISCLOSURES In terms of the provisions of section 197 (12) of The Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of Directors/KMP are set out in the 'Annexure C' to the Directors' Report. However, in view of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the detail of the employees who are in receipt of remuneration over Rs.60.00 Lacs p.a. if employed throughout the year or Rs. 5.00 Lacs p.m. if employed for a part of the year during 2014-15 12. DIRECTORS (a) In accordance with the provisions of the Act, Shri V.K. Sardana retires by rotation and being eligible, the Board recommends their reappointment. (b) The Company has received declarations from all the independent directors of the company confirming that they meet the criteria of independence as prescribed in subsection (6) of Section 149 of the Companies Act, 2013 and clause 49 of the listing agreement with stock exchange. (c) Based on evaluation criteria laid down under the Nomination and Remuneration Policy of the Company, framed in accordance with the provisions of section 178 of the Companies Act, 2013, the Nomination & Remuneration Committee rates the performance of the board and its committees which, inter-alia, includes evaluation of leadership abilities, contribution to corporate objectives & plans, regular monitoring, effective decision making ability, attendance and contribution at Board and Committee meetings etc. 13. INTERNAL FINANCIAL CONTROLS Internal financial control systems of your company ensure the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals and compliance with all the applicable laws & regulations. The Internal & External Auditors of the Company also measures the effectiveness of internal controls through periodical checks and ensure that company has an effective internal control system duly commensurate with its size and nature of business. The management reviews the systems periodically to systematically improve business processes in regard to its effectiveness and efficiency. 14. VIGIL MECHANISM Pursuant to Section 177 of the Companies Act, 2013 & rules made there under and Clause 49 of the Listing Agreement with the Stock Exchange, the Company has established a vigil mechanism, which also incorporates a Whistle Blower Policy, for Directors and employees to report genuine concerns and also its commitment to open communication & the best practices of Corporate Governance. Whistle Blower Policy of the Company stands placed on the Company's website at the link: <http://sukhjitgroup.com/whistle_blower_policy.html>. 15. AUDIT COMMITTEE The Board has constituted Audit Committee of the Company with Sh. V.P. Kapahi as Chairman and Shri S.K. Anand, Shri K.K. Sardana and Shri S.C. Jindal as its members. All the recommendations made by the Audit Committee were accepted by the Board. 16. CORPORATE SOCIAL RESPONSIBILITY (CSR) The report on Corporate Social Responsibility activities conducted during the financial year 2015-16 is annexed herewith marked as 'Annexure D' to this report. 17. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES The Company has not entered into any material transaction with its Promoters, Directors, Key Managerial Personnel or their Relatives which could have potential conflict with the interest of the Company. Their salaries/ remuneration have been fixed after due consideration by the Nomination and Remuneration Committee / Board / Shareholders as per applicable provisions of the Act. However, the transactions with subsidiary Companies are incurred after due appraisal and approval at Director's level / Audit Committee, which are in the ordinary course of business and are at per arm's length price, in terms of AS-18 and given as per Point No. 6 of the Notes to Accounts forming part of the Annual Report. Policy on related party transactions of the company stands placed on the Company's website at the link: <http://sukhjitgroup.com/Policy_dealing.html> 18. MEETINGS OF THE BOARD The Board of Directors held six meetings during the year under reference and details thereof appear in report on Corporate Governance of the Annual report. 19. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED Particulars of loans given and Investments made are provided in the standalone financial statement. The Company has given /provided some small Guarantees/ Securities to the Govt. / other Departments in the ordinary course of business. However, there is no third party Guarantee/ security given / provided by the Company. 20. EXTRACT OF ANNUAL RETURN Extract of the Annual Return of the Company is annexed herewith as 'Annexure E' to this report. 21. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Conservation of Energy (a) Steps taken or impact on conservation of energy: The Company has been taking necessary steps to conserve / save energy by installing / replacing the equipments as ongoing process, where feasible, after due technical appraisal and energy audits. The main areas addressed during the year include: (i) Oversized hydro cyclones have been replaced appropriately thereby reducing size of motors each from 30HP to 20HP. (ii) Steeping process has been re-augmented thereby reducing the steeping time to 40 hours from earlier 55 to 60 hours, thus reducing the number of circulation pumps with consequent reduction in power and steam. (iii) Installed perpetual ventilators on the roofs in replacement of exhaust fans resulting in saving of power used by fans / electric lights earlier and harvesting of sun light as well. (iv) Optimized water consumption by recycling or reusing process water thereby reducing power load for withdrawal of ground water with due conservation of water resources. (b) Steps taken by the company for utilizing alternate sources of energy: Steps are already afoot for generating power from the agricultural waste. Company is considering various steps for utilizing alternate sources of energy like generating power from Bio fuel gas / solar. The Company is already producing Bio fuel gas from its effluent waste, which is being used for drying some of its products and partly for generating steam thereby replacing use of furnace oil and coal and reducing carbon foot print. (c) The capital investment on energy conservation equipments : During the year, the Company has made capital Investment of Rs.36.39 lacs, on account of energy conservation equipments at its Phagwara (Pb.) and Nizamabad (Telangana) units. Technology Absorption The Company has not entered into any technical collaboration agreement. It has not acquired any technical know-how from any foreign source so far. Research & Development Research & Development programme already carried out by the Company has started bearing fruits and Maize growing has started gaining ground in the State of Punjab. Procurement of Maize from the State is increasing year over year. Expenditure on R & D The Company has spent Rs. 63.24 lacs during the year under reference 59.02 lacs during previous year) in pursuit of improving the quality of products line, developing new products and improving their application. Foreign Exchange Earnings and Outgo The Foreign Exchange Earnings of the Company have been Rs. 741.50 lacs 438.68 lacs during previous year) on a F.O.B. Basis. The Company has imported capital goods of Rs.256.66 lacs Nil during previous year), Spare parts, components and consumables of Rs. 40.54 (Rs.31.19 Lacs during previous year) on a C.I.F. basis and incurred foreign traveling exp. of Rs. Nil 2.90 lacs during previous year). 22. AUDITORS AND AUDITORS' REPORT Statutory Auditors : M/s. Y. K. Sud & Company, Chartered Accountants, the retiring Auditors of the Company, have confirmed their eligibility to be re-appointed as Statutory Auditors of the Company at the ensuing Annual General Meeting. The Board of Directors recommend the re-appointment of M/s. Y. K. Sud & Company, Chartered Accountants as Auditors of the Company to hold Office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting. The Auditors' report does not have any qualification, reservation or adverse remark. Cost Auditors : The Board of Directors recommends, subject to the approval of the Central Government, the re-appointment of M/s Khushwinder Kumar & Associates, Cost Accountants, as Cost Auditors of the Company for the financial year 2016-17. The Cost Audit Report for the financial year ended 31st, march 2016 is due to be filed with the Ministry of Corporate affairs on or before the September, 2016 and the cost audit report for the financial year ended 31/03/2015 was duly filled on 29/09/2015. Secretarial Auditors : The Board has appointed M/s Dinesh Gupta & Co., Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit report for the financial year ended March 31, 2016 is annexed herewith marked as 'Annexure F' to this report. The Board of Directors have re-appointed M/s Dinesh Gupta & Co., Practicing Company Secretaries, as Secretarial Auditors for the financial year 2016-17. The Secretarial Audit report does not contain any qualification, reservation or adverse remark. 23. ACKNOWLEDGEMENT Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the bankers, authorities, customers, members and other business associates. They place on record their deep sense of appreciation for the committed services of the executives, staff and workers of the Company for its success. Yours truly, For and on behalf of the Board, Sd/- S.K. ANAND Chairman Dated : 25th May, 2016 |