DIRECTORS' REPORT TO THE MEMBERS Your Directors have pleasure in presenting the 11th Annual Report on the business and operation of the Company together with the audited accounts for the financial year ended 31st March, 2015. Review of Operations The Turnover from the operation of the company during the financial year ended 31st March 2015 amounted to Rs. 553 Million as compared to Rs. 353 Million during the previous year ended 31.03.2014. The Turnover of the company has increased by 56.82% from the previous year mainly on accounts of the Tooth paste Business of the contract manufacturing as well as company's own brand. Company has entered One Time Settlement with its lender banks for the outstanding dues & now the company has become debt free & all the charges created on the company's assets by banks has now been released and also the proceedings on the company in Debt Recovery tribunal has been withdrawn. Dividend The Directors hereby inform that in the financial year 2014-15, the Board of Directors has not recommended any dividend due to the acute financial distress faced by the Company. Subsidiary Company The Company has 3 subsidiaries as on March 31, 2015. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries. Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company's subsidiaries in Form AOC-1 is attached to the financial statements of the Company. Pursuant to the provisions of section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company. Directors and Key Managerial Personnel Mr. D S Grewal, Chairman, stepped down from the Board of the Company on 14th February, 2015. He was associated with the Company since its incorporation. Under his leadership as Chairman the Company was transformed into one of the India's largest oral care products manufacturer. The Board places on record its appreciation of the invaluable contribution and guidance provided by him. Pursuant to the provisions of Section 149 of the Act which, came into effect from April 1, 2014 Mr. C R Sharma and Mr. Amarjit Singh were appointed as independent directors at the annual general meeting of the Company held on December 29, 2014. Mr. P K Misra was appointed as an Independent Director with effect from March, 25, 2015 in the general meeting held through postal ballot. The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as independent director during the year. Mr. Vanamali Polavaram was appointed as the Non Executive Director at the annual general meeting of the Company held on December 29, 2014. He was further appointed as the chairman of the Company in the Board meeting held on February 14, 2015. Mrs. Kalyani Polavaram was appointed as the women Director of the Company at the annual general meeting of the Company held on December 29, 2014 As part of leadership development, Mr. Vishal Sarad Shah was appointed as Additional Director with effect from February 14, 2015. His appointment is to be confirmed by the members in the ensuing Annual General Meeting The term of Mr. Nikhil Nanda as the Managing Director of the Company expired on 17th April, 2015. The Board of Directors of the Company has appointed him as the managing Director of the Company in the board meeting held on July 02, 2015. However his appointment is subject to the approval of the members of the Company in the extra ordinary general meeting scheduled to be held on August 4, 2015. Mr. Mukul Pathak was appointed as an Additional Director, w.e.f 14.02.2015. His appointment as independent director is proposed to be confirmed by the members in the ensuing Annual General Meeting. Mr. Vanamali Polavaram, Non- Executive Director retires by rotation and being eligible has offered himself for re-appointment. During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company. Ms. Isha Sablok resigned from the post of Company Secretary & Compliance Officer of the Company with effect from April 13, 2015 and Mr. Dhiraj Kumar Jha was appointed as the Company Secretary & Compliance Officer with effect from the same date. Number of Meetings of the Board There were Five Board Meetings held during the Financial Year 2014-15. Detail of the same forms part of the Corporate Governance Report. Declaration of Independence by Directors Declaration given by Independent Directors meeting the criteria of Independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 is received and taken on record. Directors Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, 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 profit 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 fraud 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 were adequate and operating effectively. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and external consultants and the reviews performed by management and the relevant board committees, including the audit committee, the board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2014-15. Performance Evaluation of the Board, its Committees and Individual Directors The board of directors has carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by Securities and Exchange Board of India ("SEBI") under Clause 49 of the Listing Agreements ("Clause 49"). The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc. The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc. The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors was also discussed. Policy on Directors' Appointment and Remuneration Considering the requirement of skill set on the Board, eminent people having an independent standing in their respective field/ profession and who can effectively contribute to Company's business and Policy decisions are considered by Nomination and Remuneration Committee for appointment as an Independent Director on the Board. The Committee considers ethical standards of integrity, qualification, expertise and experience of the person for appointment as Director and is not disqualified under Companies Act, 2013 and rules made thereunder and accordingly recommend to the Board his/her appointment. Remuneration to Whole-Time Director is governed under the relevant provisions of Companies Act, 2013 and rules made thereunder. Independent/ Non-Executive Directors are paid sitting fees for attending the meetings of the Board/Committees thereof. The Company's policy on Directors remuneration is given in Corporate Governance Report which forms part of this Annual Report. The Board considers the Nomination and Remuneration Committee's recommendation and takes appropriate decision. Internal financial control systems and their adequacy The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report. Disclosure on Audit Committee The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report. Auditors' report and secretarial auditors' report The Auditors, M/s S. N Dhawan & Co., Chartered Accountants, (FRN: 000050N) have been appointed as Statutory Auditors of the Company by the Board of directors on 05th May, 2015 subsequent to the casual vacancy occurred in the office pursuant to resignation of M/s Haribhakti & Co. LLP, and subject to the approval of members of the Company in the general meeting fixed to be held on 4th August, 2015. Their appointment if approved by the members of the Company will be valid till the conclusion of the ensuing Annual General Meeting. The Company has received confirmation from M/s S. N. Dhawan & Co., Chartered Accountants to the effect that their re-appointment, if made, would be within the prescribed limits under Section 141(3) (g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. Auditors' Report and Secretarial Auditors' Report The Auditors, M/s S. N Dhawan & Co., Chartered Accountants, have been appointed as Statutory Auditors of the Company by the Board of directors on 05th May, 2015 subsequent to the casual vacancy occurred in the office pursuant to resignation of M/s Haribhakti & Co. LLP, and subject to the approval of members of the Company in the general meeting fixed to be held on 4th August, 2015. Their appointment if approved by the members of the Company will be valid till the conclusion of the ensuing Annual General Meeting. The Company has received confirmation from M/s S. N Dhawan & Co., Chartered Accountants to the effect that their re-appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. Auditor's Qualification and Managements Representation i) The Holding Company has entered into "One Time Settlement" (OTS) of dues with its lender banks. As a result, the lenders have agreed to waive the principal amount on term loan facilities amounting to Rs. 30,82,89,217 and such amount is credited to Capital Reserve which is not in accordance with the Accounting Standard (AS) 5 on "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies". Further, the said treatment is not in line with the opinion of the Expert Advisory Committee of the Institute of Chartered Accountants of India on accounting treatment of waiver of loan. Had the said waiver of principal amount of loan been credited to the Statement of Profit and Loss instead of the credit in Capital Reserve Account, the loss for the year amounting to Rs. 22,17,68,216 would result in profit of Rs. 8,65,21,001 and balance in the Statement of Profit & Loss under the head 'Reserves & Surplus' would have been surplus of Rs. 5,71,90,166 instead of deficit of Rs. 25,10,99,051 as stated. The amount attributed towards the waiver of term loan which was earlier used by the company for procuring various capital assets, hence was in the nature of capital receipt, which has also been affirmed in various judicial pronouncements, thus relying on the same and with a view to present the true & fair view of the financial statement such waiver amount has been directly credited to the capital reserve a/c. ii. In earlier years the Holding Company had acquired substantial tangible fixed assets to carry out contract manufacturing for a major customer. Such major customer has not renewed/terminated the contract resulting in some idle fixed assets. This and other internal factors indicate that the part of tangible fixed assets comprising plant & machinery which have carried in the books at a written down value of Rs 31,86,11,888 (Previous year Rs. 35,43,87,177) may be impaired. However, the management has not carried out any testing for impairment as required by Accounting Standard (AS) 28 "Impairment of Assets". Therefore, we are unable to comment on the necessity or otherwise to provide for impairment loss in respect of these tangible assets as required by AS 28. The effect of the non provision of impairment loss, if any, cannot be quantified. One of the major customers of the Company has wrongfully decided not to renew / terminate the contracts across all the business segments due to which certain assets got idle. However, in order to safeguard the interest of the shareholders, the Company has been pursuing litigation and has sought specific performance of the contract as well against these arbitrary and unjust acts of the multinational company. Hence, as the matter is sub-judice the management cannot even consider the impairment as that would impact upon the litigation. However, the Company is rapidly growing its tooth brush and tooth paste business and has also entered into a contract with a big customer in the FMCG market and is also adding product categories to its own brand. Report of the secretarial auditor is given as an annexure which forms part of this report. Particulars of loans, guarantees and investments The particulars of loans, guarantees and investments have been disclosed in the financial statements. Contracts/Arrangements with Related Parties All the related party transactions are done on Arm's length basis. The Company presents a Statement of all related party transactions before the Audit Committee on a quarterly basis specifying the nature, value and terms and conditions of transaction. Transactions with related parties are conducted in a transparent manner with the interest of the Company as utmost priority. Details of such transactions are given in the accompanying Financial Statements. The Company's policy on Related Party Transactions is available at our website www. svendgaard.com. Risk Management The Board of the Company has formed a risk management committee to frame, implement and monitor the risk management plan for the Company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Company has robust systems for Risk Assessment and mitigation which is reviewed periodically. The Company's risk identification and assessment process is dynamic and hence it has been able to identify, monitor and mitigate the most relevant strategic and operational risks, both during periods of accelerated growth and recessionary pressures. Extract of Annual Return As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure III in the prescribed Form MGT-9, which forms part of this report. Corporate Social Responsibility The Provision of CSR as required by the Companies Act 2013 is not applicable to the company, as the company does not meet the basic criteria of the applicability of the relevant provision. However, the Company is committed to operate and grow in a socially responsible way. With Safety, health and environment protection high on its corporate agenda, JHS is committed to conduct business with a strong environment conscience, so as to ensure sustainable development, safe work places and enrichment of life of employees, clients and the community. Particulars of employees The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: Internal Auditor Foreign exchange earnings and outgo In compliance with the provisions of Section 138 of the Companies Act, 2013 M/s VSD & Associates were appointed as Internal Auditors for the Financial Year 2014-15 to conduct the internal audit of the functions and activities of the Company. They have submitted their Report to the Chairman of the Audit Committee and this was further reviewed by the Management and taken on record. Disclosure Requirements As per Clause 49 of the listing agreements entered into with the stock exchanges, corporate governance report with practicing Company Secretary certificate thereon and management discussion and analysis are attached, which form part of this report. As per Clause 55 of the listing agreements entered into with the stock exchanges, a business responsibility report is attached and forms part of this annual report. Details of the familiarization programme of the independent directors are available on the website of the Company (www. svendgaard.com). Policy for determining material subsidiaries of the Company is available on the website of the Company (www.svendgaard. com). Policy on dealing with related party transactions is available on the website of the Company (www.svendgaard.com). The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and the revised Clause 49 of the Listing Agreements with stock exchanges (www.svendgaard com). Particulars of loans, guarantees and investments The particulars of loans, guarantees and investments have been disclosed in the financial statements. Deposits from Public The Company has not accepted any deposits during the year under report nor did any deposits remain unpaid or unclaimed at the end of the year. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Please refer Annexure B Material Changes and Commitments During the year ended 31.03.2015 Company has entered in to One Time Settlement (OTS) of dues with its lender banks to clear all the outstanding loans and interest thereon. As per the terms of the OTS the company was required to pay 23.50 Crores as the OTS amount before 30.06.2015. As on the date of the signing of the result the company has made the entire payments as per the terms of the OTS agreed with the banks & consequently the banks has also issued no dues certificates to the company, consequently the bank has released the charges on the assets of the company and withdrawn the proceedings from the debt recovery tribunal. Acknowledgements Your Directors place on record their gratitude and express their earnest appreciation for the valuable efforts of every employee of the organization without which the Company would not have been able to undertake the challenging targets in all areas of operations. We are fortunate to have such a team whose endeavors have laid a strong foundation for the success of the organization as a whole. Your Directors acknowledge the exemplary contribution made by the employees of the Company. The Directors value the trust shown by the shareholders in their ability to manage the Company. We expect that with the ongoing encouragement and support of our shareholders, we shall be successful in achieving the desired objectives in the near future. By and on behalf of the Board Nikhil Nanda Managing Director DIN:00051501 |