DIRECTORS' REPORT Dear Shareholders, Your Directors are pleased to present the Twenty Fifth Annual Report together with the Audited Statement of Accounts of the Company for the financial year ended March 31, 2015. State of Company's Affairs Your Directors wish to inform you that during the current financial year ended March 31, 2015, the sales and other income of the Company were Rs. 11,467.13 lacs and during the previous year it was Rs. 38,331.97 lacs. The Net Profit before tax stood at Rs. 108.28 lacs as against Rs. 59.18 lacs in the previous year. The Net Profit after tax stood at Rs. 96.82 lacs as against Rs. 61.13 lacs in the previous year. The decline in the performance was partially due to promoters' dispute and partially due to volatile economical environment. However, the management expects that the performance will improve form the current financial year onwards. Dividend Due to reduced profits and in order to conserve the financial resources for future growth plans of the Company, the Directors do not recommend any dividend. IPO Fund Utilization The details of IPO proceeds which have been utilized by the Company are as given under. The Company has utilized major portion of IPO proceeds for expansion as and when the correct opportunity and favorable market conditions were available. However, insignificant portion of the proceeds allocated for the expansion is left unutilized and the management of your Company has infused those funds in to financial instruments for the investment purpose. The management has taken this step considering the fact that as and when the Company will require funds for expansion the requisite funds will be transferred from investment to expansion and till the time the shareholders money will fetch good returns which will be further helpful in future expansion and new projects of the Company. Directors and Key Managerial Personnel Your Board comprises of 6 Directors including 3 Independent Directors. Definition of 'Independence' of Directors is derived from Clause 49 of the Listing Agreement with Stock Exchanges and Section 149(6) of the Companies Act, 2013. Based on the confirmation / disclosures received from the Directors under section 149(7) of the Companies Act 2013 and on evaluation of the relationships disclosed, the Non-Executive Directors - Mr. Anant Upadhyay, Ms. Neetam Singh and Mr. Kevin Shah are considered as Independent Directors, who are not liable to retire by rotation. APPOINTMENT Mr. Anant Upadhyay was appointed as an Additional Director of the Company on August 21, 2014 and appointed as an Independent Director in the Annual General Meeting held on December 30, 2014. Ms. Neetam Singh was appointed as an Additional Director of the Company on September 19, 2014 and appointed as an Independent Director in the Annual General Meeting held on December 30, 2014. Mr. Kevin Shah was appointed as an Additional Director of the Company on November 25, 2014 and appointed as an Independent Director in the Annual General Meeting held on December 30, 2014. The above referred appointments as Independent Directors made in the Annual General Meeting held on December 30, 2014 was for a specific tenure in accordance with Section 149 of the Companies Act, 2013 ("the Act") and Clause 49 of the Listing Agreement. Mr. Kundan Tanawade was appointed as Company Secretary and Compliance Officer of the Company w.e.f. October 27, 2014. CESSATION Mr. Naresh Manchanda, Independent Director was appointed on September 19, 2014 and had resigned from the Company w.e.f. November 15, 2014. The Board placed on record its deep appreciation for the valuable guidance and advice given by Mr. Naresh Manchanda, during his tenure as an Independent Director of the Company. Ms. Rajni Ahuja, the Company Secretary and Compliance Officer of the Company had resigned w.e.f August 15, 2014. Mr. Navneet Goenka is Chief Financial Officer of the Company. As per provisions of the Companies Act, 2013 requisite forms have been filed with RoC. In compliance with the requirements of Section 203 of the Companies Act, 2013, Mr. Nandlal Goenka, Chairman, Mr. Navneet Goenka, Managing Director & CFO, Mr. Nitin Goenka, Managing Director and Mr. Kundan Tanawade, Company Secretary & Compliance Officer of the Company were nominated as Key Managerial personnel. Directors' Responsibility Statement Your Directors state that: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed along with proper explanation relating to material departures; b) the Directors 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 as at March 31, 2015 and of the profit of the Company for the year ended on that date; c) 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; d) the Directors have prepared the annual accounts on a 'going concern' basis; e) 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 f) 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. Subsidiary Company and Consolidated Financials In compliance with Section 129 of the Act, a statement containing requisite details including performance and financial position of each of the subsidiary company is annexed to this report. In accordance with Accounting Standard AS 21 - Consolidated Financial Statements read with Accounting Standard AS 23 -Accounting for Investments in Associates, and Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures, the audited Consolidated Financial Statements are provided in the Annual Report. Board Evaluation Pursuant to the provisions of companies Act, 2013 and clause 49 of the Listing Agreement, the Board has carried out annual performance evaluation of its own performance, the directors individually as well the evaluation of the working of its Audit, Nomination & Remuneration and Stakeholders Grievance committee. The manner in which the evaluation has been carried out has been explained in Corporate Governance Report. Remuneration Policy The Nomination & Remuneration Committee framed a policy for selection and appointment of Directors including determining qualifications and independence of a Director, Key Managerial Personnel, Senior Management Personnel and their remuneration as part of its charter and other matters provided under Section 178(3) of the Companies Act, 2013. The salient features of the Remuneration Policy are stated in the Corporate Governance Report. Deposits and Unclaimed Dividend During the year under review, your company has not accepted any public deposit under Chapter V of the Companies Act, 2013. There were no funds required to be transferred to Investor Education and Protection fund, in respect of unclaimed dividend. Number of Meetings of the Board The Board met eight times in financial year 2014-2015, on May 19, 2014, August 21, 2014, September 19, 2014, October 31, 2014, November 14, 2014, November 25, 2014, November 29, 2014 and February 13, 2015. The maximum interval between any two meetings did not exceed 120 days. Details of Committees of the Board The Company has following Committee of the Board: 1. Audit Committee 2. Nomination and Remuneration Committee 3. Stakeholders Grievance Committee 1. Audit Committee The Audit Committee comprises independent directors namely Mr. Kevin Shah, Mr. Anant Upadhyay and Ms. Neetam Singh. Mr. Kevin Shah - Chairman. Mr. Anant Upadhyay - Member. Ms. Neetam Singh - Member. All the recommendations made by the committee were accepted by the Board. 2. Nomination and Remuneration Committee The Nomination and Remuneration Committee comprises independent directors namely Ms. Neetam Singh, Mr. Kevin Shah and Mr. Anant Upadhyay. Ms. Neetam Singh - Chairperson Mr. Kevin Shah - Member. Mr. Anant Upadhyay - Member. All the recommendations made by the committee were accepted by the Board. 3. Stakeholders Grievance Committee The Stakeholders Grievance Committee comprises independent directors namely Mr. Anant Upadhyay, Mr. Kevin Shah and Ms. Neetam Singh. Mr. Anant Upadhyay - Chairman. Mr. Kevin Shah - Member. Ms. Neetam Singh - Member. All the recommendations made by the committee were accepted by the Board. The details of the meetings held and attendance of the members of the above committees of the Board are provided in the Corporate Governance report. Statutory Auditors M/s. B. Khosla & Co., Chartered Accountants and M/s. RSVA & Co., Chartered Accountants, Joint Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment. The proposal for their re-appointment is included in the notice for Annual General Meeting sent herewith. Auditors' Report In respect of the observations made by Auditors in their report, your Directors wish to state that the replies in that respect have been given in the Directors Report in a separate section. Secretarial Auditor The Board has appointed Mr. Vishal N. Manseta, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed to this Report. Secretarial Audit Report In respect of the observations made by Secretarial Auditor in his report, your Directors wish to state that the replies in that respect have been given in the Directors Report in a separate section. 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. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material. Members are requested to refer Note 32 to the financial statement which sets out related party disclosures. Extract of Annual Return The extract of Annual Return in Form MGT-9 as required under Section 92(3) of the Act read with Companies (Management & Administration) Rules, 2014 is annexed to this report as on March 31, 2015. Sexual Harassment Your Directors further state that during the year under review, there were no cases filed pursuant to the sexual harassment at workplace. Material Changes and Commitments, affecting the financial position of the Company There have been no material changes and commitments, affecting the financial position of the Company which occurred between the end of the financial year to which the financial statements relate and the date of this report. Details of significant and material orders passed by the regulators/ courts/ tribunals impacting the going concern status and the Company's operations in future There are no significant material orders passed by the Regulators/ Courts/ Tribunals which would impact the going concern status of the Company and its future operations. Corporate Social Responsibility The provisions related to Corporate Social Responsibility as mentioned in the Act are not applicable to the company. Risk Management Policy The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Company's management systems, organisational structures, processes, standards, code of conduct and behaviors govern how the company conducts the business and manages associated risks. The Company has introduced several improvements to Integrated Enterprise Risk Management, Internal Controls Management and Assurance Frameworks and processes to drive a common integrated view of risks, optimal risk mitigation responses and efficient management of internal control and assurance activities. Internal Financial Controls The Company has in place adequate internal financial controls and internal audit procedures with regard to financial statements, to commensurate with the size of the business. During the year, no reportable material weakness or cases of fraud were observed. Share Capital The paid up equity share capital of the Company as on March 31, 2015 was Rs. 31,70,00,000/- During the year under review, the Company has not issued shares with differential voting rights and sweat equity shares. Vigil Mechanism The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Agreement, includes intimation to the senior executives of the Company in case any threat or misconduct or unethical behavior or violation of company's code of conduct or ethics policy is observed. Protected disclosures can be made by a whistle blower through an e-mail or dedicated telephone line or a letter to the senior executives or to the Chairman of the Audit Committee. Corporate Governance As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by your Company, together with a certificate from Mr. Vishal N. Manseta, Practising Company Secretary on compliance with Clause 49 of the Listing Agreement with Stock Exchanges is given in this annual report. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES The prescribed particulars of employees required under section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached and form part of this report. Green Initiatives Electronic copies of the Annual Report 2014-15 and Notice of the 25thAnnual General Meeting are sent to all members whose email addresses are registered with the Company/Depository Participant(s). For members who have not registered their email addresses are requested to register their email ids with their DPs in order to co-operate with the company in implementation of green initiative; and help to protect the environment. 1) Regarding Auditors Observation on recoverability of long outstanding Trade Receivables, There have been defaults in payment obligations by the trade receivables on due date and recoveries from them are not significant, due to economic slowdown especially in diamond sector and also on account of dispute amongst promoters. However, a settlement agreement was executed between the promoters with help of court mediation on 18th March 2014, post which the management has started taking all the initiatives to revive Company's operations. Nonetheless, the Trade receivables amounting to Rs.3,61,66,47,379/- have confirmed the balances by way of confirmations directly sent to auditors and/or Company. Looking at the past record regarding recovery from Trade receivables, the management is of the opinion that trade receivables outstanding for more than 6 months from the date they are due for payments are good and recoverable and therefore no provision is required to be made against these Trade Receivables 2) Regarding auditors observation on Inventory valuation wherein the determination of estimated net realizable value and specification identification which involves technical judgment of the management has been relied upon by auditors: The management is of the opinion that the inventories are properly valued. 3) Regarding auditors' observation wherein they have referred to Note No. 37(a) of notes on Financial statements wherein the management has confirmed that no financial adjustment is required to be made in the financial statements for the terms & conditions of the settlement agreement executed and on account of various disputes, allegations and legal actions. The above note is self explanatory and the management is of the view that no financial adjustment is required to be made in the financial statements since the promoters have already arrived at the settlement with the help of court mediation vide settlement agreement executed on March 18, 2014; the terms & conditions of which have been partially executed. 4) Regarding auditors' observation wherein they have referred to Note No. 37(b) of notes on Financial statements; and have mentioned that factors such as non-realization of debtors, decrease in sales, non-payment of statutory dues and taxes, overdue creditors, defaults in repayment of loans and interest etc, indicate the liquidity crunch faced by the company. The company expects faster debtors realization in near future. Moreover, with the formation of Joint Lenders Forum (JLF) by consortium of bankers in accordance with RBI guidelines, additional credit facilities are sanctioned / to be sanctioned by the consortium bankers, in order to enable the company to meet its working capital requirements and revive its operations. 5) Regarding auditors' observation wherein they have referred to Note No. 37(C) of notes on Financial statements, wherein the management has confirmed that it has provided interest wherever banks have not applied or have reversed the interest on loan. Any difference on account of interest and penal interest shall be accounted for as and when the interest is charged or settled by the banks. In case of one bank, interest to the tune of Rs. 1,49,61,987 has been charged in excess against which company has made representation to the bank. The management is very much confident that the same will be decided in the favour of the Company and therefore no provision for the same has been made in the financial statements for the year ended March 31, 2015. The above note is self explanatory; and the management is of the view that it has in its best judgment accounted for all probable interest liability; and difference, if any, will be accounted for as and when the interest is charged or settled by the bank. 6) Observations by the auditors made in point no. vii (a) & (b) of the Annexure to Auditors Report: The management states that the company is committed to pay all its outstanding undisputed statutory dues. Regarding the disputed outstanding taxes, the Company is confident that it will be able to get favorable orders. 7) Regarding observation made by the Auditors at Point No. (ix) of the Annexure to Auditors Report: Certain factors such as promoters dispute, slow debtors realization, inadequate inventory levels, global economic slow down, highly volatile foreign exchange rates and significant weakening of rupee against the dollar had material impact on the liquidity position of the Company, due to which there was default in payment of a few bank debts obligations. Some of the overdue outstanding debts had already been repaid during FY 2014-15 and in case of continuing defaults; some of the debts have been repaid during the FY 2015-16. The company is committed towards honoring all its debt obligations. SECRETARIAL AUDITORS REMARKS AND MANAGEMENTS REPLIES THEREUPON 1) Auditors Observation made on delay in payment of statutory dues Though there is a delay in payment of statutory dues, the management states that the company is committed to pay all its outstanding statutory dues. 2) Regarding auditors observation that the composition of the Board of the company was not in compliance with the provisions of listing agreement and the Companies Act, 2013 till September 19, 2014. The Board states that the non-compliance was for a particular period of time owing to certain external factors. Since September 19, 2014, the Board and its Committees are duly constituted. 3) Regarding auditors' observation made on non-compliance of clause 41 of the Listing Agreement. Due to resignation of the statutory auditors at the beginning of the financial year; and also in absence of the audit committee, the company could not submit to stock exchanges financial results for the quarters ended March 31, 2014 and June 30, 2014 in time. The non-compliances were regularized subsequently on appointment of statutory auditors and constitution of audit committee in the month of September 2014. As on date the company is complaint with the respective provisions of the Listing Agreement. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Conservation of Energy: The Company has taken adequate measures to conserve energy. The company is into diamond and jewellery business where the operations are not energy intensive. We regularly evaluate and use new energy efficient technologies and make necessary investment in these equipments to make our infrastructure more energy efficient, whenever required. Technology Absorption, Adoption and Innovation Since the company's products are designed and not mechanically developed, technology absorption or innovations are not of material significance. Research and Development The nature of the business of the company is categorically end user business of large size diamonds and high end jewellery wherein research and development expense are more in the nature of designing rather than development of new technology. Foreign Exchange Earnings and Outgo The information regarding foreign exchange earnings and outgo is contained in note no. 29 & 30 of notes on Financial Statements. GENERAL Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Re-appointment of an independent director for a second term of five years. 2. Neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from any of its subsidiaries. 3. There were no companies which have become or ceased to be Subsidiaries, Joint Ventures or associate companies during the year 4. There was no change in nature of business. 5. There were no loans, guarantees or investments by the Company under Section 186 of the Act. Acknowledgement Your Directors place on record their gratitude to Central Government, State Governments, Financial Institutions and Company's Bankers for assistance, co-operation and encouragement they extended to the Company. The Directors are also grateful to the valued customers, esteemed shareholders, dedicated employees and public at large for their patronage and confidence reposed in the company. On behalf of the Board of Directors For Goenka Diamond and Jewels Limited NANDLAL GOENKA CHAIRMAN NAVNEET GOENKA VICE CHAIRMAN & MANAGING DIRECTOR Place: Mumbai Date: August 14, 2015 |