Directors' report Dear Members 1. The directors submit annual report of Orient Refractories Limited ( "the Company" or "ORL") along with the audited financial statements for the financial year ended 31 March, 2015. 2. Dividend Based on the Company's performance, the directors are pleased to recommend for approval of the members a final dividend of Rs.1.40 per share for the financial year 2014-15. The final dividend on equity shares, if approved by the members would involve a cash outflow of Rs. 2,024.39 Lacs (inclusive of tax of Rs. 342.44 Lacs). 3. Transfer to reserves The Company proposes to transfer Rs. 600.00 Lacs to the general reserve out of the amount available for appropriation and a surplus amount of Rs. 7,441.31 Lacs is proposed to be retained in the statement of profit and loss. 4. Company's performance There was high expectation from the new government on reforms and industrial growth. The economy, shown some sign of recovery but there was a gap in industrial expectation and actual growth. Business sentiments suggest a sort of let down in hope. Despite of above, your Company has performed well and the sale for the year under review increased by 11.90 % as compared to previous year 2013-14.During the year 2014-15,your Company has achieved total revenue of Rs. 45,668.24 Lacs (previous year Rs. 40,760.54 Lacs), profit before tax is Rs. 7,962.72 Lacs (previous year Rs. 7,958.48 Lacs). During the first quarter for 2015-16,the sales is Rs. 10,963.73 Lacs (previous year Rs. 10,806.40 Lacs) increased by 1.46% as compared to quarter ending June, 2014. 5. Material changes and commitments affecting financial position between the end of the financial year and date of report There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of the report. 6. Human resources The Company treats its "human resources" as one of its most important assets. The Company continuously invest in attraction, retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. The Company thrust is on the promotion of talent internally through job rotation and job enlargement. The Company's health and safety policy commits to provide a healthy and safe work environment to all employees. The Company's initiative creates a culture of fitness in the organization by helping to build a fraternity of health and fitness conscious employees. The Company's performance driven culture helps and motivates employees to excel in their respective areas and progress within the organization. 7. Subsidiary company The Company does not have any subsidiary. 8. 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 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. 9. Directors and key managerial personnel Mr. Shri Gopal Rajgarhia, Vice Chairman, Executive Director stepped down from the board of the Company on 9 April, 2015. Mr. Rajgarhia is one of the founder members of the Company and has played a seminal role in shaping ORL's destiny. The board places on record its gratitude for the services rendered by him during his long association with the Company. Mr. Subhash Chander Sarin, Technical Advisor, Executive Director resigned with effect from 30 April, 2015. The board places on record its appreciation for his efforts in driving delivery and quality excellence for the Company. Mr. Michael John Williams, Non-Executive Director resigned with effect from 11 March, 2015. The board places on record its appreciation for the services rendered by him during his tenure with the Company. The Company recognizes and embraces the importance of a diverse board in its success. ORL believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill, regional and industry experience, cultural and geographical background, age, ethnicity, race and gender, which will help us retain our competitive advantage. As part of board diversity, Dr. Vijay Sharma and Mr. Gurdeep Singh were appointed as additional independent directors with effect from 12 November, 2014. Mr. Erwin Jankovits was also appointed as additional director with effect from 11 February, 2015. Mr. Gurdeep Singh resigned from the board on 9 February, 2015 due to personal reasons. The board places on record its appreciation for the services rendered by Mr. Gurdeep Singh during his brief tenure with the Company. Mr. Rama Shanker Bajoria was appointed as an independent director by the members of the Company at the annual general meeting held on 26 September, 2014 for a term of one year. He will retire at the ensuing annual general meeting of the Company. It is proposed to appoint Mr.Rama Shanker Bajoria as independent director on the board of the Company, for a term of five years i.e. from the date of this 5th annual general meeting to the date of 10th annual general meeting and shall not be liable to retire by rotation. Dr. Vijay Sharma who was appointed as an additional independent director on 12 November, 2014 will retire at the ensuing annual general meeting of the Company in terms of provisions of Section 161 of the Companies Act, 2013, unless re-appointed. In due compliance with the provisions of Section 149 of the Companies Act, 2013, it is proposed to appoint Dr. Vijay Sharma as independent director on the board of the Company, to hold office for 5 years from the date of his initial appointment i.e. 12 November 2014 till 11 November,2019 and he shall not be liable to retire by rotation. Mr. Erwin Jankovits was appointed as an additional director on 11 February,2015 and he will retire at the ensuing annual general meeting of the Company. The board proposes him to appoint as director of the Company. Mr. Parmod Sagar 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. The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act, 2013, that he meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and clause 49 of the listing agreement. The resolutions seeking approval of the members for the appointment of Dr. Vijay Sharma, Mr. Rama Shanker Bajoria and Mr. Erwin Jankovits have been incorporated in the notice of the forthcoming annual general meeting of the Company along with brief details about them. The Company has received separate notices under Section 160 of the Act along with the requisite deposit proposing the appointments of Dr. Vijay Sharma, Mr. Rama Shanker Bajoria and Mr. Erwin Jankovits. Pursuant to the provisions of Section 203 of the Act, which came into effect from 1 April, 2014, the appointments of Mr. Parmod Sagar, Managing Director, Mr. Subhash Chander Sarin, Executive Director, Mr. Sanjeev Bhardwaj, Chief Financial Officer and Mr. Sanjay Kumar, Company Secretary as key managerial personnel of the Company were formalised. 10. Training of independent directors Every new independent director of the board familiarized with the strategy, operations and functions of the Company, the executive directors / senior managerial personnel make presentations to the inductees about the Company's strategy, operations, product and service offerings, markets, organization structure, finance, human resources, technology, quality, facilities and risk management. Further, at the time of appointment of an independent director, the Company issues a formal letter of appointment outlining his role, function, duties and responsibilities as a director. The letter of appointments are available on our website, <http://www.orientrefractories.com/corporate_announcements.htm> 11. Number of meetings of the board Four meetings of the board were held during the year. For details of the meetings of the board, please refer to the corporate governance report, which forms part of this report. 12. Board evaluation The board of directors has carried out an annual evaluation, based on the criteria and framework adopted by the board, 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 policy on evaluation of performance of board of directors is available on the website of the Company. 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 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 nonexecutive 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. 13. Policy on directors' appointment and remuneration and other details The current policy is to have an appropriate mix of executive and independent directors to maintain the independence of the board and separate its functions of governance and management. As on date, the board consists of 6 members, one of whom is executive or whole-time director, five are non-executive including two independent directors. The board periodically evaluates the need for change in its composition and size. The policy of the Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub section (3) of Section 178 of the Companies Act, 2013, adopted by the board. The policy is available on the website of the Company. The Company affirm that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company. 14. Internal financial control system and their adequacy 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 weakness in the design or operation were observed. 15. Internal audit & controls The Company continues to engage M/s. Chaturvedi & Partners, Chartered Accountants as its internal auditor. During the year, the Company continued to implement their suggestions and recommendations to improve the control environment. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. Internal auditors' findings are discussed with the process owners and suitable corrective actions taken as per the directions of audit committee on an ongoing basis to improve efficiency in operations. 16. Audit committee The details pertaining to composition of audit committee are included in the corporate governance report, which forms part of this report. 17. Statutory auditors Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Deloitte Haskins & Sells, Chartered Accountants, were appointed as statutory auditors of the Company from the conclusion of the fourth annual general meeting of the Company held on 26 September, 2014 till the conclusion of the ninth annual general meeting to be held in the year 2019, subject to ratification of their appointment at every annual general meeting. In this regard, the Company has received a certificate from the auditors to the effect that if they are re-appointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. 18. Secretarial auditors Mr. Naresh Verma (FCS-5403) of M/s. Naresh Verma & Associates, Company Secretaries, was appointed to conduct the secretarial audits of the Company for the financial year 2014-15, as required under Section 204 of the Companies Act, 2013 and rules thereunder. The board has appointed Mr. Naresh Verma (FCS-5403) of M/s. Naresh Verma & Associates, Company Secretaries, as secretarial auditors of the Company for the financial year 2015-16. 19. Cost auditors M/s K G Goyal & Associates, Cost Accountants has appointed as the cost auditor of the Company for refractory products for the financial year 2015-16. The cost audit report for the financial year 2014-15 relating to the above products will be filed within the stipulated period of 180 days from the close of the financial year. The Section 148 (3) of Companies Act, 2013 requires that the remuneration of cost auditors shall require the ratification of members and accordingly the appropriate resolution has been included in the notice convening the 5th annual general meeting. The directors recommend the approval of resolution for fixation of remuneration of cost auditors for the financial year 201516. 20. Auditors' report and secretarial auditors' report The statutory auditors' report and secretarial auditors' report are self- explanatory and does not contain any qualifications, reservations or adverse remarks. The observations by secretarial auditors' regarding shortfall in corporate social responsibility expenditure and constitution of board, are explained elsewhere in this report. Report of the secretarial auditor is given as an Annexure-A which forms part of this report. 21. Risk management During the year, the directors have constituted a risk management committee which has been entrusted with the responsibility to assist the board in (a) Overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. 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 together form the Orient Management System that governs how the Company conducts the business and manages associated risks. The policy is available on the website of the Company. 22. Particulars of loans, guarantees and investments The particulars of loans, guarantees and investments have been disclosed in the financial statements. 23. Transactions with related parties None of the transactions with related parties falls under the scope of Section 188(1) of the Act. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure B in Form AOC-2 and the same forms part of this report. 24. Corporate social responsibility (CSR) The corporate social responsibility committee has formulated and recommended to the board, a corporate social responsibility policy indicating the activities to be undertaken by the Company, which has been approved by the board. The policy is available on the website of the Company. The Company has policy to spend the money for development work in Bhiwadi, Rajasthan on health, environment, safety, women empowerment and education of poor child and girls by adopting nearby villages, schools etc. During the year, the Company has spent Rs. 39.17 Lacs out of the total contribution amount of Rs.124.00 Lacs for the year ended 31 March, 2015 in accordance with Section 135 read with schedule VII of the Companies Act, 2013 to various trusts and social organisations. The contributions have been made towards promoting education, sanitation, medical and society welfare activities. The annual report on CSR activities is annexed herewith marked as Annexure C. The Company will identify the areas in local vicinity where the remaining amount of Rs. 84.83 Lacs in year 2014-15 will be contributed along with the CSR contribution for the year 2015-16 as per the Companies Act, 2013. 25. Extract of annual return As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure D in the prescribed Form MGT-9, which forms part of this report. 26. Particulars of employees and related disclosures In terms 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, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the annual report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as Annexure E to this report. 27. Conservation of energy, research and development, technology absorption, foreign exchange earnings and outgo The particulars as prescribed under sub-section(3)(m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, are enclosed as Annexure F to this report. 28. Transfer of amounts to investor education and protection fund The Company did not have any funds lying unpaid or unclaimed for a period of seven years. Therefore there were no funds which were required to be transferred to investor education and protection fund (IEPF). Pursuant to the provisions of the Investor Education Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has already filed the necessary form and uploaded the details of unpaid and unclaimed amounts lying with the Company, as on the date of last annual general meeting (i.e. 26 September, 2014), with the Ministry of Corporate Affairs. 29. Listing with stock exchanges The Company confirms that it has paid the annual listing fees for the year 2015-2016 to NSE and BSE where the Company's shares are listed. 30. Deposits from public The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet. 31. Employees' stock options The Company doesn't have any stock option scheme for its employees or directors. 32. Significant and material orders There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. 33. Sexual harassment of women at workplace There were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 during the year under review. 34. Disclosure requirements As per clause 49 of the listing agreements entered into with the stock exchanges, corporate governance report with auditors' certificate thereon and management discussion and analysis are attached, which form part of this report. Policy on dealing with related party transactions is available on the website of the Company (URL: <http://www.orientrefractories.com/policies.htm>). Policy on corporate social responsibility is available on the website of the Company (URL: <http://www.orientrefractories.com/policies.htm>). Policy on remuneration and nomination of directors, key managerial personals and other employees of the Company is available on the website of the Company (URL: <http://www.orientrefractories.com/policies.htm>). Policy for evaluation of the performance of the board of directors is available on the website of the Company (URL: <http://www.orientrefractories.com/policies.htm>). Code of conduct for board members, independent directors, senior management personnel and other employees of the Company is available on the website of the Company.(URL:<http://www.orientrefractories.com/code_of_conduct.htm>) Code of internal procedures and conduct for regulating, monitoring and reporting of trading by insiders is available on the website of the Company. (URL: <http://www.orientrefractories.com/policies.htm>). 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 .The policy is available on the web site of the Company. (URL: <http://www.orientrefractories.com/policies.htm>). 35. Acknowledgments We thank our customers, vendors, investors and bankers for their continued support during the year. We place on record our appreciation of the contribution made by our employees at all levels. Our consistent growth was made possible by their hard work, solidarity, cooperation and support. We thank the governments of various countries where we have our operations. We also thank the Government of India, particularly the Ministry of Commerce, the Ministry of Finance, the Ministry of Corporate Affairs, the Customs and Excise Departments, the Income Tax Department, the Reserve Bank of India, the State Governments and other government agencies for their support and look forward to their continued support in the future for Orient Refractories Limited Dr. Vijay Sharma Chairman New Delhi 27 July, 2015 |