DIRECTORS' REPORT Dear Members, Your Directors have the pleasure of presenting before you the 22nd Annual Report of your Company along with the Audited Accounts of the Company for the financial year ended 31st March 2015. OPERATIONS: During the year under review, the Revenue from operations of your company increased to Rs. 26652.00 lacs from Rs. 21036.74 lacs registering a growth of 26.69%. The export during the year has been at Rs. 24.21 Crs, considering our imports, we continue to be a net importer. During the year there have been no major expansion in the installed capacities and we have been in a position to consolidate our production activities with the expanded capacities carried out last year. However due to delay in the monsoons the sale of fertiliser during Kharif season in the first half of the year was significantly affected. We could however partially mitigate the same during the Rabi season and the overall sale of fertilisers have been to the extent of about 48,000 MT having a capacity utilisation of about 48% contributing Rs.48.46 Crs to the overall revenue. FUTURE OUTLOOK: As was indicated last year, with the consistent shift in the manufacturing base of Dyes and Dye-intermediates from the western countries to the Asian countries, the market has been witnessing accelerated demand more so with the Indian Products having an edge over those of China on account of various socio economic factors. To keep pace with the aforesaid situation we have during the year taken steps to expand by way of forward integration into manufacture of Reactive dyes, in this regard we have already acquired an additional plot of land in the same MIDC Industrial Area Lote Parshuram, bearing plot No.B-97 for a total consideration of Rs. 2.29 Crs including stamp duty & registration charges. The Plot admeasures 11,951 sq. Mts. and has an existing built up area of 2080 sq. Mts. It is proposed to setup a Reactive Dyes plant on the plot with an initial capacity of 3000 MT per annum comprising 3 parallel lines of 1000 MTs each. It is also proposed to set up 2 additional intermediate plants comprising of an H-Acid plant of 750 MT p.a. capacity and a VS plant of 1000 MT p.a. capacity mainly to take care of the captive requirements of the Dye plant. This would ensure that our existing market of Dye Intermediate is in no way disturbed on account of the forward integration. The capital cost for this expansion has been estimated at around Rs.52 Crs and is proposed to be funded by way of an Initial Public Offering (IPO). To provide an exit route to IFCI Venture Capital Fund Ltd. who currently have a holding of 11.72 % in the company, they are offering 20,26,589 shares by way of an offer for sale (OFS) along with the IPO. The said Public Offer totally amounting to around Rs.75.00 Crs is in the advanced stage, and is proposed to be opened for subscription shortly. In addition to the aforesaid expansion it is proposed to set up a plant for the manufacture of Potassium Sulphate with an installed capacity of 10,000 MTs p.a. Apart from a chemical Reagent, Potassium Sulphate finds application as a Potassic fertiliser typically for Horticulture, Floriculture, etc. in this regard we are in the process of acquiring one more plot of land in the same MIDC Industrial Area Lote Parshuram, bearing plot No.D-18 for a total consideration of Rs. 2.65 Crs. The Plot admeasures 20,134 sq. Mts. and has an existing built up area of 2534 sq. Mts. The plot is being acquired from M/s Ray International Pvt. Ltd. and necessary MOU in this regard has already been entered into. The Total project cost has been estimated at Rs. 19.05 Crs and is proposed to be funded by way of a term loan of Rs. 12.50 Crs from the Bank and the balance by way of internal accruals. The external credit rating of your company has further improved from the earlier "BBB & A3+" rating to "BBB+ and A3+", by CARE, which has been as a result of our performance and financial discipline. In order to strengthen our Project Implementation and Operational fronts we have appointed Mr. R. K. Sahni as Vice President - Projects, to take charge not only of our ongoing expansion projects but also to have better operational control of our expanding fertiliser Division. The year ahead will be challenging, not only by expanding into Dyes and Potassium Sulphate, but also getting the shares of the company listed on the stock Exchange, which calls for much larger discipline in terms of SEBI & ROC compliances. This would call for further strengthening our administrative fronts, which albeit would pave the way for an accelerated growth in the future. RISKS & CONCERNS: After successfully overcoming the impact of the global meltdown resulting in economic slowdown prevailing in the country during the 2012-13 period we had a satisfactory performance last year, though due to the delay in the onset of monsoon our fertiliser division was impacted due to lower offtake of fertilisers during the first half of the year, however we could make progress in the division during the second half of the year. Never the less we will still continue with factors such as the vagaries of unpredictable Monsoons, the impact of a volatile FE market, the dependence on Government policies and decisions all of which ultimately impact the overall performance of the industry. These are all factors which are beyond the control of the private enterprise and would continue to be a challenge. DIVIDEND: To preserve the resources for ongoing expansion requirement, your directors do not recommend any dividend. SHARE CAPITAL: The paid up equity capital as on March 31, 2015 was Rs.2070.76 Lacs. The company has not issued any shares during the year or granted stock options or sweat equity. FINANCE: Cash and cash equivalents as at March 31, 2015 was Rs.319.14 lacs. The company continues to focus on judicious management of its working capital. Receivables, inventories and other working capital parameters were kept under strict check through continuous monitoring. ACCEPTANCE OF DEPOSIT: Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014. PARTICULARS OF LOANS. GUARANTEES OR INVESTMENTS: There are no instances of loans, guarantees or investments under section 186 of the Companies Act, 2013. The details of the investments made by company is given in the notes to the financial statements. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is defined in the Internal Audit Manual. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board & to the Chairman & Managing Director. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES: As part of its initiatives under "corporate social responsibility" (CSR), the company has formed a CSR Committee comprising of Mr. Punit Makharia Managing Director (Chairman), Mr. Dinesh Modi independent Director (Member) and Mr. Gautam Makharia Joint Managing Director (Member). As per the section 135 of the Companies Act, 2013, the average profitability of the previous three years for CSR purposes amounts to Rs. 15,32,000/- @ 2%. The Company has not spent any significant amount during the year due to the amount being small and would not form any significant contribution for the said purpose. The management has however decided to carry forward the said amount, to be spent for CSR purposes along with the funds available for the next year. CONSERVATION OF ENERGY. TECHNOLOGY ABSORTION & FOREIGN EXCHANGE EARNING AND OUTGO: Particulars, as prescribed under section 134 (3) (m) of the Companies Act, 2013, read with the Companies (Disclosure of particulars in report of Board of Directors) Rules 1988 or any other law as may be applicable are given in Annexure 'A' enclosed. INDUSTRIAL RELATIONS: During the year under review, your Company enjoyed cordial relationship with workers and employees at all levels. DIRECTORS: The Board of Directors of the Company, at present, comprises in all 6 Directors, who have wide and varied experience in different disciplines of corporate functioning. The present composition of the Board includes one Managing Director, one Joint Managing Director, one Nominee Director and three Independent Non Executive Directors. Directors Mr. Punit Makharia & Mr. Gautam Makharia retire by rotation and, being eligible, offer themselves for re appointment. The Directors recommend Mr. Punit Makharia & Mr. Gautam Makharia for re-appointment. As per the provisions of the Companies Act, 2013, Independent Directors are required to be appointed for a term of upto five consecutive years and shall not be liable to retire by rotation. Accordingly, all the three Independent Directors have been appointed as independent directors under section 149 of the Companies Act, 2013 as on 28* July, 2014 for a term of two years. All independent directors have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013. None of the Directors resigned during the financial year 2014 - 2015. MEETINGS During the year six Board Meetings and four Audit Committee Meetings were convened and held. The details of which are given below. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. MEETING OF BOARD OF DIRECTORS: There were six meeting of the Board of directors during the year. The following are the meetings of the date of Board meeting 27th June, 2014, 17th July, 2014, 22nd September, 2014, 26th September, 2014, 22nd December, 2014 & 27th February 2015. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. AUDIT COMMITTEE OF THE BOARD OF DIRECTORS: The Audit committee comprises of Mr. Ramakant Nayak (Chairman), Mr. Dinesh Modi (Member) both independent Directors and Mr. Punit Makharia (Member), Managing Director of the Company. There were four meetings of the Audit Committee during the year. The following are the meetings of the date of Audit Committee 17th July, 2014, 22nd September, 2014, 22nd December, 2014 & 27th February 2015. The Company Secretary acts as the Secretary of the Audit Committee. NOMINATION AND REMUNERATION COMMITTEE AND STAKEHOLDERS RELATIONSHIP COMMITTEE: The Nomination and Remuneration Committee comprises of Mr. Nirmal Kedia (Chairman), Mr. Ramakant Nayak (Member) and Mr. Dinesh Modi (Member) all Independent Directors of the Company. There was one meeting of Nomination and Remuneration Committee during the year on 27th February, 2015. The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The policy relating to the remuneration for the directors, key managerial personnel and other employees is disclosed as Annexure 'B'. The Company Secretary acts as the Secretary of the Audit Committee. STAKEHOLDERS' RELATIONSHIP COMMITTEE: The Stakeholders Relationship Committee comprises of Mr. Dinesh Modi (Chairman), Mr. Ramakant Nayak (Member) and Mr. Nirmal Kedia (Member) all Independent Directors of the Company. There was no meeting of Stakeholders Committee during the year. The Company Secretary acts as the Secretary of the Audit Committee. DIRECTOR DISQUALIFICATION: None of the directors of the Company is disqualified as per the provision of section 164(2) of the Companies Act, 2013 or any other law as may be applicable, as on 31st March 2015. HUMAN RESOURCES: None of the employees of the Company had drawn remuneration in excess of the limits prescribed 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 or any other law as may be applicable. DIRECTORS' RESPONSIBILITY STATEMENT: Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that: (a) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) that the Directors have selected such accounting policies and applied them consistently and have 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 31st March 2015 and of the profit of the Company for the year ended 31st March 2015; (c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 or any other law as may be applicable for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) That the annual accounts have been prepared on a "going concern" basis. (e) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate & operating effectively. RELATED PARTY TRANSACTIONS: All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of the business. There are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large. Particulars, of contracts, arrangements with related parties referred in sub section (1) of section 188 of the companies act, 2013 are given in Annexure 'C enclosed. SUBSIDIARY COMPANIES: The Company does not have any subsidiary. AUDITORS: M/s. Jajodia & Company, Chartered Accountants, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their re-appointment, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013 and that they are not disqualified for reappointment. SECRETARIAL AUDIT: Pursuant to provisions of section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the company has appointed M/s. Dipika Biyani, a Company Secretary in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as" Annexure D" COST AUDITOR: Pursuant to the provisions of Section 148 of the Companies Act, 2013 and above mentioned Cost Audit Order, the Board of Directors in their meeting held on May 05, 2015 has re-appointed Mr. Dilip Bathija, Practicing Cost Accountant, as the Cost Auditor for the Financial Year 2015-16 to conduct audit of its cost accounting records relating to products namely fertilisers & all related products. AUDITOR'S REPORT/ SECRETARIAL AUDIT REPORT: The observation made in the Auditors' Report read together with relevant notes thereon are self explanatory and hence, do not call for any further comments under Section 134 of the Companies Act, 2013. As required under section 204 (1) of the Companies Act, 2013 the Company has obtained a secretarial audit report. The observation made in the Secretarial Auditor Report are self explanatory and hence, do not call for any further comments. EXTRACT OF ANNUAL RETURN: The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as " Annexure 'E'. ACKNOWLEDGEMENT: The Board of Directors places on record its sincere appreciation of the Company's valued customers in India and abroad for the support and confidence reposed by them in the company and looks forward to the continuance of this mutual supportive relationship in the future. The Board expresses its gratitude to the Bankers, Government Authorities, Investors and other stakeholders for their continued support and guidance. The Directors wish to place on record their appreciation of the dedicated services rendered by the staff and officers. By Order of the Board For Shree Pushkar Chemicals & Fertilisers Ltd. Sd/- Punit Makharia Chairman & Managing Director DIN:01430764 Dated: 05/05/2015 Place: Mumbai |