DIRECTORS' REPORT TO THE MEMBERS, The Directors have pleasure in presenting before you the 20th Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, 2015. REVIEW OF OPERATIONS: Performance during the financial year 2014-15 Your Directors are pleased to report that during the year under review, the Company crushed 7.14 Lakh Tonnes of Sugar cane and 7.91 Lakh Quintals of Sugar was produced with an average recovery of 11.07%. The Company registered a gross turnover of Rs. 23,836 Lakhs for the year ended 31st March, 2015 against Rs. 20,312 Lakhs for the year ended 31 st March, 2014. The growth of 17.35% in gross turnover was mainly due to high sale volume of sugar. The Company incurred loss of Rs. 1552.74 before Interest, Depreciation and Exceptional Item due to fall down of lsugar price for the year 2014-15 compaared to the loss of Rs. 1144.18 Lakhs for the year 2013-14 and net loss of Rs. 6237.71 Lakhs compared to the loss of Rs. 2287.30 Lakhs. Prospects for the financial year 2015-16: The excess inventory of sugar over the demand will lead to further decline in Sugar selling prices leading to erosion of viability of Sugar business. Recently, the Central Government announced measures as under which will encourage the Sugar Industry to get better prices for Ethanol. (i) Export incentive of Rs. 4,000 per Tone to encourage export of Raw Sugar from the Country. (ii) Replaced the policy of procurement of Ethanol by Oil producing Companies from Tender method to fixed price. (iii) Removal of 12.5% Excise Duty on Ethanol from crushing season 2015-16. 2. RESERVES: Due to inadequate profits, no amount has been transferred to Reserves. 3. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS: Under the Scheme of Amalgamation between GSR Sugars Private Limited and Gayatri Sugars Limited, the Company had allotted 66,10,210 6% Cumulative optionally convertible Preference Shares of Rs.10/- each and the same were due for redemption on April 1, 2015. The company has approached the members to vary the terms of 66,10,210 6% cumulative optionally convertible Preference shares and accordingly the Preference shareholders have approved the waiver of arrears of preference dividend on 66,10,210 6% cumulative optionally convertible Preference shares of Rs.10/- each till 01.04.2015 and changed the nomenclature of 66,10,210 6% cumulative optionally convertible Preference shares to 6% 66,10,210 cumulative redeemable Preference shares. 4. CHANGE IN THE NATURE OF BUSINESS, IF ANY: During the period under review and the date of Board's Report there was no change in the nature of Business. 5. DIVIDEND: As the Company incurred losses during the year under review, the Directors could not recommend dividend on Preference Shares and also on Equity Shares. 6. UN PAID / UN CLAIMED DIVIDEND: There is no Un paid / Un claimed Dividend. 7. BOARD MEETINGS: The Board of Directors duly met 5 (five) times on 26.05.2014, 11.08.2014, 12.11.2014, 13.02.2015 and 27.03.2015 in respect of which meetings, proper notices were given and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose. 8. DIRECTORS AND KEY MANANGERIAL PERSONNEL: During the year under review, the Company has appointed Mr. J.N. Karamchetti as Independent Director for term of 5 years (first term) and Mr. T.R. Rajagopalan and Mr. S. Venkata Swamy for a term of 5 years (Second term) by way of special resolution as per the provisions of Section 149 of the Companies Act, 2013. Mr. P Maruthi Babu has resigned from the post of Director of the Company w.e.f. 11.08.2014. Pursuant to the provisions of section 152 of the Companies Act, 2013 and in accordance with the provisions of Articles of Association of the Company, Sri. T.V. Sandeep Kumar Reddy (DIN: 00005573), Director of the Company, is liable to retire by rotation and being eligible, offers himself for re-appointment. Mr. B. Sankara Rao has resigned from the post of Compliance officer of the Company w.e.f 20.07.2015 and consequently Ms. Munmun Baid was appointed as Company Secretary cum Compliance Officer of the Company. 9. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS The Company has received a declaration from Sri. S Venkata Swamy, Sri. T R Rajagopalan and Sri. J N Karamchetti, Independent directors of the company to the effect that they are meeting the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013. 10. COMMITTEES OF BOARD Pursuant to requirement under Companies Act, 2013 and Listing Agreement, the Board of Directors has constituted various committees of Board such as Audit Committee, Nomination and Remuneration Committee, Risk Management Committee and Stakeholders Relationship Committee. The details of Composition and terms of reference of these committees are mentioned in the Corporate Governance Report. 11. VIGIL MECHANISM: Vigil Mechanism Policy has been established by the Company for directors and employees to report instances of unethical behaviour, actual or suspected, fraud or violation of Company's code of conduct or ethics policy, and genuine concerns pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013. The same has been placed on the website of the Company. 12. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE Your Company has constituted a committee known as "Internal Complaints Committee" to protect the women employees from sexual harassment, with the following members: 1. Mrs. Sarita Reddy, Executive Director as Presiding Officer. 2. V.R. Prasad, Chief Financial Officer, Member 3. S.Murali Krishna, Purchase Manager, Member 4. Leena Joseph Member, NGO 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. 13. DIRECTOR'S RESPONSIBILITY STATEMENT: In pursuance of section 134 (5) of the Companies Act, 2013, the Directors hereby confirm that: (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 and loss 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; and (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. (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. 14. INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES / ASSOCIATES/ JOINT VENTURES: There are no Companies which have become or ceased to be its Subsidiaries, Joint Venture or Associate Companies during the year. 15. EXTRACT OF ANNUAL RETURN: As required pursuant to 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 provided as Annexure- I. 16. STATUTORY AUDITORS: M/s Deloitte Haskins & Sells (Firm's Registration No. 008072S) Statutory Auditors of the company retire at the ensuing annual general meeting and are eligible for reappointment. As required under the provisions of Section 139 of the Companies Act, 2013, the Company has received a written consent from the auditors to their re-appointment and a certificate to the effect that their re-appointment, if made, would be in accordance with the Companies Act, 2013 and the rules framed there under and that they have satisfied the criteria provided in Section 141 of the Companies Act, 2013. The Board recommends the re-appointment of M/s Deloitte Haskins & Sells, as the statutory auditors of the Company from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting. 17. SECRETARIAL AUDIT: Pursuant to the provisions of Section 134(3)(f) & Section 204 of the Companies Act, 2013, Secretarial audit report as provided by Mr. Y. Koteswara Rao Practicing Company Secretary is annexed to this Report as Annexure -II. 18. QUALIFICATIONS IN AUDIT REPORTS: Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made— (a) Explanation Regarding Statutory Auditors Report: The Board has duly reviewed the Statutory Auditor's Report on the Financial Statements for the year ended March 31, 2015 and has noted that the same does not have any reservation, qualification or adverse remarks. (b) Explanation Regarding Secretarial Audit Report: The Board has duly reviewed the Secretarial Audit Report on the Compliances according to the provisons of section 204 of the Companies Act 2013, and the same does not have any reservation, qualifications or adverse remarks. 19. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO: The required information as per Sec. 134 (3) (m) of the Companies Act 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014 is provided hereunder: A. Conservation of Energy: i.) The steps taken or impact on conservation of energy: ii.) Step taken by the Company for utilizing alternate source of energy: Condensate juice heaters were modified for heating of raw juice by passing through hot water into condensate heaters. iii.) Capital investment on energy conservation equipments: During the year, there was no investment on energy conservation equipment. B. Technology Absorption: i.) Efforts made towards Technology Absorption: 1. Installation of fan less cooling towers. 2. Installation of automation for mill and boiler F.D. Fans. ii.) The benefit derived like product improvement, cost reduction, product development or import substitution, etc. Cost reduction of around Rs. 25 Lakhs out of above. iii.) Details of Technology imported during the last 3 years reckoned from the beginning of the financial year: During the period of last three years, there was no import of Technology. iv) Expenditure incurred on Research & Development: There was no expenditure incurred on Research and Development. C. Foreign Exchange Earnings and Out Go: Foreign Exchange Earnings : NIL Foreign Exchange Outgo : NIL 20. DETAILS RELATING TO DEPOSITS, COVERING THE FOLLOWING: Your Company has not accepted any deposits falling within the meaning of Sec. 73, 74 & 76 of the Companies Act, 2013 read with the Rule 8(V) of Companies (Accounts) Rules 2014, during the financial year under review. 21. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS: i). Demand of Rs.1,38,81,669/- was raised by the Commissioner of Customs, Central Excise & Service Tax, Hyderabad-1 Commissionarate, being the amount equal to 10% or 5% of the value of Exempted goods i.e Electricity sold by the company for the period Nov-2006 to Dec-2010 in the case of Kamareddy Unit and for the period Mar-2006 to Mar-2012 in the case of Nizamsagar Unit. Electricity is not an exempted product and as such the provision of rule 6(1), 6(2) and 6(3) of CCR 2004 are not applicable. The CENVAT credit availed on common inputs and utilised in the production of Electricity is required to be reversed to the extent of such inputs / input services utilised in generation of Electricity. Since the company reversed the CENVAT credit to the extent of such value utilised in electricity generation, the demand under rule 6(1), 6(2) & 6(3) of the CCR, 2004 is not sustainable in law in the light of the judicial decisions by various h'ble tribunals. The requirement of pre deposit of the balance dues is waived and stay against recovery is granted during the pendency of the appeal by the Customs, Excise & Service Tax Appellate Tribunal (CEASTAT), Bangalore. ii) A demand for Rs. 22,14,159/- for Financial Year 2011-12 & 2012-13 was raised by the Commercial Tax Officer (Audit), Secunderabad Division, Hyderabad, being ITC restrictions on Coal & VAT payable on Harvesting Machine receipts. Steam coal was used for generation power which was used for manufacturing of Distillery Products and eligible for availment of input tax credit. As sugar cane is not liable for tax as per entry 50 of Sch-1 of APVAT Act, 2005 the activity of harvesting of sugar cane is not liable to tax. Stay order was granted for 50% of the disputed tax till the disposal of the case and balance 50 % was paid on 26.03.2014. 22. DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS: The Company's internal control system is aimed at proper utilisation and safeguarding of the Company's resources and promoting operational efficiency. The internal audit process reviews the in-system checks, covering significant operational areas regularly. The Company's Audit Committee is responsible for reviewing the Audit Report submitted by the Internal Auditors. Suggestions for improvements are considered and the Audit Committee follows up on the implementation of corrective actions. The Audit Committee also invites the Statutory and Internal Auditors for regular meetings to ascertain their views on the adequacy of internal control systems and keeps the Board of Directors informed of its observations from time to time. 23. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: As required by clause 49 of the listing agreement with the Stock Exchange, a detailed Management Discussion and Analysis Report is presented in the corporate governance forming part of the Annual Report. 24. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS: LOANS: The Company has not given any loans during the year under review. INVESTMENTS: The Company has not made any investments during the period under review. 25. STATUTORY COMPLIANCE: The Company has complied with the required provisions relating to statutory compliance with regard to the affairs of the Company in all respects. 26. RISK MANAGEMENT POLICY: Your Company follows a comprehensive system of Risk Management. Your Company has adopted a procedure for assessment and minimization of probable risks. It ensures that all the risks are timely defined and mitigated in accordance with the well structured risk management process. 27. CORPORATE SOCIAL RESPONSIBILTY POLICY: Section 135 of the Companies Act, 2013 relating to Corporate Social Responsibility is not applicable and hence the Company need not adopt any Corporate Social Responsibility Policy but the Company is involved in some of the social activities like organizing health camps, providing drinking water facility and fumigation in the nearby villages of the factories. 28. RELATED PARTY TRANSACTIONS: Your Company has formulated a policy on related party transactions which has been placed on the website of the company i.e. www.gayatrisugars.com The details of Related Party Transactions are annexed in Form AOC-2 as Annexure -III. 29. FORMAL ANNUAL EVALUATION: As per section 149 of the Companies Act, 2013 read with clause VII (1) of the schedule IV and rules made there under, the independent directors of the company had a meeting on 13.02.2015 without attendance of non-independent directors and members of management. In the meeting the following matters were taken up: (a) Review of the performance of non-independent directors and the Board as a whole; (b) Review of the performance of the Chairperson of the company, taking into account the views of Executive directors and Non-Executive Directors; (c) Assessing the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. The meeting also reviewed and evaluated the performance of non-independent directors. The Company has 3 (three) non-independent directors namely: i.) Smt. T. Indira Subbarami Reddy - Director ii.) Smt. T. Sarita Reddy - Whole-Time Director iii.) Sri. T. V. Sandeep Kumar Reddy - Director. The meeting recognized the significant contribution made by the non- independent directors. The meeting also reviewed and evaluated the performance of the Board as whole in terms of the following aspects: ? Preparedness for Board/Committee meetings. ? Attendance at the Board/Committee meetings. ? Monitoring the effectiveness of the company's governance practices. ? Ensuring a transparent board nomination process with the diversity of experience, knowledge, perspective in the Board. ? Ensuring the integrity of the company's accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for financial and operational control and compliance with the law and relevant standards. Evaluation by Board: The Board has carried out the annual performance evaluation of its own performance, the Directors individually (excluding the director being evaluated) as well as the evaluation of the working of its Committees. A structured questionnaire was prepared after taking into consideration various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, effectiveness in developing Corporate governance structure to fulfill its responsibilities, execution and performance of specific duties etc. The Board decided that the performance of individual directors, its own performance and working of the committees is excellent. 30. DISCLOSURE ABOUT COST AUDIT: As per section 148 of the Companies Act, 2013 and rule 14 of the Companies (Audit and Auditors) Rules, 2014, Company requires to appoint a Cost Auditors. The Board of directors and the Audit Committee of the Board has approved the appointment of M/s Narasimha Murthy & Co., as Cost Auditor to audit the cost records of Sugar, Power and Distillery division of the Company for the financial year 2015-16 the same has been proposed to the shareholders for approval. 31. RATIO OF REMUNERATION TO EACH DIRECTOR: 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: 32. LISTING WITH STOCK EXCHANGES: The Company confirms that it has paid the Annual Listing Fees for the year 2015-2016 to Bombay Stock Exchange where the Company's Shares are listed. 33. CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION: As required by clause 49 of the listing agreement with the Stock Exchange, a detailed Corporate Governance Report is presented in a separate section forming part of the this report as Annexure -IV. 34. EMPLOYEE RELATIONS: Your Directors are pleased to record their sincere appreciation of the contribution by the staff at all levels in the improved performance of the Company. 35. ACKNOWLEDGEMENTS: Your Directors wish to place on record their appreciation of the contribution made by the employees at all levels, to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation of Business Constituents, Banks and other Financial Institutions and Shareholders of the Company like for their continued support for the growth of the Company. For and on behalf of the Board T. Sarita Reddy Executive Director T.V. Sandeep Kumar Reddy Vice Chairman V R Prasad Chief Financial Officer Munmun Baid Company Secretary & Compliance Officer Place: Hyderabad Date : 14th August, 2015 |