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Andhra Sugars Ltd.

BSE: 590062 Sector: Others
NSE: ANDHRSUGAR ISIN Code: INE715B01013
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OPEN 570.60
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VOLUME 6103
52-Week high 625.30
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P/E 12.18
Mkt Cap.(Rs cr) 1,517
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OPEN 570.60
CLOSE 563.50
VOLUME 6103
52-Week high 625.30
52-Week low 199.15
P/E 12.18
Mkt Cap.(Rs cr) 1,517
Buy Price 558.85
Buy Qty 10.00
Sell Price 559.80
Sell Qty 15.00

Andhra Sugars Ltd. (ANDHRSUGAR) - Director Report

Company director report

To

The Shareholders

Your Directors have pleasure in presenting this SEVENTIETH ANNUAL REPORT along with theaudited Statement of Accounts for the year ending 31st March 2017.

Financial Results:

(Rupees in lakhs)

This Year Last Year
Sales
Other Income 97199.98 93098.30
2167.05 2222.22
99367.03 95320.52
Profit for the year 20385.84 12149.50
Depreciation 4420.43 4789.47
Profit after depreciation 15965.41 7360.03
Add: Excess provision of Income-tax credited back -- --
Add: Income Tax Refund received 4.54 90.41
Less: Short/(excess) Provision of Income Tax -- (187.97)
Less: Exceptional Item (Electricity FSA charges relating to earlier years)
Provision for Current Tax 3337.99 2750.00
Provision for Deferred Tax 2134.39 248.66
MAT Credit (1553.48) --
Profit after Tax 12051.05 4639.75
Add: Balance brought forward from last year 16297.63 13302.47
Less: Other Comprehensive Income (888.30) 1786.38
Profit available for appropriation 27460.38 19728.60
APPROPRIATIONS
Interim Equity Dividend 1355.35
Final Equity Dividend 813.21
Tax on Distributed Profits 262.41
Transfer to General Reserve 2000.00 1000.00
Balance carried forward to next year 25460.38 16297.63

PERFORMANCE:

Your Directors are glad to report that for the year 2016-17 your Company made a Profitof Rs. 159.65 Crores (before tax) against a Profit of Rs. 73.60 Crores made last yearwhich reflect impressive performance. The Net Profit (After Tax) was Rs. 120.51 Croresagainst Rs. 46.40 Crores made last year. This year has been the most significant one inthe annuals of your Company's history in view of the profit achieved being highest sinceinception.

DIVIDENDS:

Your Directors recommend a Dividend of Rs. 10 /- per Equity Share i.e. 100% (FaceValue Rs.10/-) for the year 2016-17. The outflow towards Dividend payment (including taxon distributable profits) would be Rs.32.33 Crores. CAPITAL & RESERVES: Authorised andPaid Up Capital: As on 31.3.2017 the Authorised Capital of the Company is Rs.30.00 Croresand the Paid-up Capital is Rs. 27.11 Crores.

Reserves:

With the transfer of Rs. 20.00 Crores during the year under report the total Reservesas on 31.3.2017 stands at Rs.409.48 Crores against Rs. 389.48 Crores on 31.3.2016.

REVIEW OF OPERATIONS: SUGAR UNITS:

The Sugar Units II and III crushed in aggregate 413655 M.T. of cane during the2016-17 season against 565781 M.T. crushed by Two Units last year. The crushing operationsand cane price paid to cane suppliers for the 2016-17 Season are:

SUGAR UNIT – II SUGAR UNIT – III
TADUVAI BHIMADOLE
Fin.Year Fin.Year Fin.Year Fin.Year
2016-17 2015-16 2016-17 2015-16
(A) Crushing details:
Total cane crushed (MT) 262759 362979 150896 246600
Total No. of days crushed 89 110 50 85
Total Sugar produced(MT) 27190 38440.69 14438 23683.34
Average Recovery 10.50% 10.59% 9.70% 9.60%
(B) Cane price:
Fair & Remunerative price (per M.T.) 2563.78 2542.00 2324.20 2300.00
Cane price paid (per M.T)* 2896.18 2602.00 2894.56 2360.00

• inclusive of Purchase Tax Incentive of Rs.60/- per M.T.

• Operations of Sugar Unit-I was suspended during the Season 2016-17.

• Recovery achieved at Sugar Unit - II has been the highest in the State.

• To encourage farmers to plant cane your Company opted to pay a cane pricehigher than the Fair Remunerative Price fixed by the Government.

POWER GENERATION :

During the year under report the Co-generation Unit at Taduvai generated 12392800Units of Power.

PERFORMANCE OF CHEMICAL DIVISION:

During the year under report the Caustic Soda Division at Saggonda achieved turnover ofRs.429.95 Crores. The Profit after depreciation achieved this year was higher at Rs.122.53Crores against Rs. 77.56 Crores last year. Aspirin Division also made a profit of Rs.9.09Crores as against 4.04 Crores.

WIND POWER UNITS:

The Power generated at Ramagiri Wind Mills during this year is Units 2025074.

The Power generation at the Tamil Nadu Wind Mills during the year under report is33385481 Units. This Power is being fed into the Tamil Nadu State Electricity Boardgrid.

PROJECTS:

During the Year under report your Company commissioned a 33 MW Coal Based CaptiveGeneration Plant at Saggonda. Power generated will be utilized by the Chemical Plantslocated at Saggonda.

Your Company is operating a 400 TPD Caustic Soda Plant at Saggonda. Keeping in view theincreasing requirement of the end user industry a 100 TPD Caustic Soda Plant is being setup at Saggonda. The proposed 100 TPD Plant is based on the latest 6th Generation MembraneTechnology. This process has the lower production cost simple operations EnergyEfficient & Environmental friendly.

Salt and Power constitute two main inputs for production of Caustic Soda. The Saltrequirement will be sourced from the existing vendors. Power needed will be available fromthe 33 MW Captive Power Plant that has been set up on site at Saggonda. The total cost ofthis Plant is estimated to be Rs.80.00 Crores which will be met by Internal Accruals. Withthis expansion the total capacity of Caustic Soda Plant would be 500 TPD.

The existing 300 TPD Hydrochloric Acid Plant is being expanded to 800 TPD in order toutilize Chlorine that will become available from the Caustic Soda Plant.

A 100 TPD Sodium Hypochlorite Plant is being set up at Jawaharlal Nehru Pharmacity atParawada near Visakhapatnam. The two major Raw Materials Sodium Hydroxide and Chlorinegas required for the production of this product will be sourced from our Plants atSaggonda. Bought out components have been procured. Major Civil works Fabrication ofprocess equipment and main storage tanks main Process Plant & MCC Office BuildingChlorine Cylinders shed DG Chilling Unit and Stores and maintenance shed Fabrication andErection of Pipe racks have been completed. Erection of Process Equipment is in process.This Project is expected to be commissioned during the current Financial Year.

To meet the International clients requirement capacity of Aspirin Plant has beenexpanded to 2000 TPA.

DEMATERIALISATION OF EQUITY SHARES:

As of 31st March 2017 Equity Shares representing 45.18% of the Share Capital have beendematerialised.

AUDITORS:

The existing Statutory Auditors M/s Brahmayya & Co. Chartered AccountantsVijayawada will retire upon conclusion of the ensuing 70th Annual General Meeting incompliance with the provisions relating to mandatory rotation of Auditors under the Act.

Based on the recommendations of the Audit Committee and subject to the approval of theMembers at the ensuing 70th Annual General Meeting the Board of Directors have approvedthe appointment of M/s. K.S.Rao & Co. Chartered Accountants Hyderabad (FirmRegistration No.003109S) as the Statutory Auditor of the Company to hold office from theconclusion of the ensuing 70th Annual General Meeting until the conclusion of the 75thAnnual General Meeting.

COST AUDITORS:

For the 2016-17 M/s Narasimha Murthy & Co. Cost Accountants Hyderabad were theCost Auditors of the Company for the products which are subject to Cost Audit. For theyear ended 2017-18 your Board of Directors have approved the appointment of Ms. NarasimhaMurthy & Co. Hyderabad as Cost Auditors and recommend to Shareholders to ratify theremuneration of Rs.500000/- as fixed by the Board.

CORPORATE GOVERNANCE:

As per the amended provisions of the Listing Agreement a Report on CorporateGovernance along with Management Discussion and Analysis forming part of the Directors'Report is annexed.

COMPLIANCE CERTIFICATE OF THE AUDITORS:

The Statutory Auditors have certified that the Company has complied with the conditionsof Corporate Governance as stipulated in the Listing Agreement with the Stock Exchangesand the same is annexed to the Report of Directors.

AUDIT COMMITTEE:

Audit Committee comprises of 3 non Whole-time Independent Directors Sri A. Ranga RaoDr. P. Kotaiah and Sri V.S. Raju. Sri A. Ranga Rao is the Chairman of this Committee.

DIRECTORS AND KMP:

Appointment of Sri Mullapudi Narendranath Sri Mullapudi Thimmaraja and Sri P. AchutaRamayya as Joint Managing Directors for a further period of 5 years with effect from1.1.2018 is being placed for the approval of Shareholders at the ensuing 70th AnnualGeneral Meeting.

Directors Sri Mullapudi Narendranath and Sri P. Achuta Ramayya retire by rotation atthe ensuring 70th Annual General Meeting and being eligible offer themselves forre-appointment.

Statements of declaration as per Section 149(6) of the Companies Act 2013 have beengiven by the Independent Directors.

Dr. B.B. Ramaiah Chairman & Managing Director Sri M. Palachandra CompanySecretary and Sri P.V.S. Viswanadha Kumar General Manager (Finance) & Dy. Secretaryhas been designated as Key Managerial Personnel. Compliance under Companies Act 2013Pursuant to Sec.134 of the Companies Act 2013 read with Companies (Accounts) Rules 2014your company has complied with the compliance requirement the details of which areenumerated hereunder.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirements of Section 134(1)(c) of the Companies Act 2013 and on thebasis of explanation and compliance certificate given by the executives of the Companyand subject to disclosures in the Annual Accounts and also on the basis of discussionswith the Statutory Auditors of the Company from time to time we state as under :

a) that in the preparation of the annual accounts the applicable accounting standardshad been followed along with proper explanation relating to material departure;

b) that the directors selected such accounting policies and applied them consistentlyand made judgments and estimates that they are reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company at the end of the financial year andof the profit of the Company for that period;

c) that the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

d) that the Directors have got prepared the annual accounts on a going concern basis;

e) that the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

f) that the Directors got devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

BOARD MEETINGS:

The Board of Directors met 6 times during the financial year 2016-17 on 6-4-201630-5-2016 27-7-2016 10-8-2016 7-11-2016 and 4-2-2017.

INDEPENDENT DIRECTORS MEETING:

A Meeting of Independent Directors was held on 22nd May 2017. The IndependentDirectors have evaluated the performance of the Non-independent Directors the Board as awhole and Chairman of the Board. The Board was briefed by Lead Independent Director on thedeliberations made at the Independent Directors Meeting.

FAMILARISATION PROGRAMME:

Your Company through a Policy has in place a familiarisation programme to all theDirectors with a view to update them on the Company's Policies and Procedures. IndependentDirectors make a periodical visit to plants to keep themselves abrest of the plantoperations. Respective Plant Heads interact with the Independent Directors and explain tothem about the various processes and operations.

FORMAL ANNUAL EVALUATION OF THE BOARD

The Board evaluated its own performance and that of its Committees and Directors interms of : Measured and appropriate contribution by the Directors to the discussions onthe Agenda Items - Each Director exercising the responsibilities in a bonafide manner.

- Understanding of the Company's business strategic plans and other key issues.

- Special Skills and expertise of each Director contributing to the Board's overalleffectiveness. - Respecting the confidentiality of the Company's business information andBoard's deliberations.

- Satisfactory attendance and active participation of each Director at the meetings ofthe Board and Committee. The Board members were of the opinion that the Board as a wholeand the Directors have performed effectively as per the terms of the above parameters. Therespective Committee performed as per its terms of reference. VIGIL MECHANISM: As a partof Vigil Mechanism a Whistle Blower Policy has been established and approved by theBoard. This Policy envisages reporting of wrong doing or un-ethical activities observed byEmployees at any level directly to the Chiarman of the Audit Committee or to the Chairman& Managing Director. The matter reported is investigated and if the wrong doer isfound guilty disciplinary action will be initiated depending upon the materiality of theun-ethical doings. During the year under report there has been no instances which requiredreporting.

NOMINATION AND REMUNERATION COMMITTEE :

As required by the Provisions of the Companies Act 2013 and listing Agreement aNomination and Remuneration Committee comprising of Independent Directors Sri V.S. Raju(Chairman) Sri P.A.Chowdary and Sri A. Ranga Rao was constituted by the Board.

This Nomination and Remuneration Committee has formulated Nomination and RemunerationPolicy which has been approved by the Board. This Nomination & Remuneration Policy haslaid down criteria and terms and conditions with regard to identifying persons who arequalified to become Directors (Executive and Non-Executive) and persons who may beappointed in Senior Management and Key Managerial positions and to determine theirremuneration based on the Company's size and financial position and trends and practiceson remuneration prevailing in the industry. Appointment of Managing Director / Whole-timeDirector / KMP and Functional Heads are placed before Nomination and RemunerationCommittee for its consideration and recommendation to the Board.

CORPORATE SOCIAL RESPONSIBILITY (CSR) :

As required by the Provisions of the Companies Act 2013 a Corporate SocialResponsibility (CSR) Committee has been constituted by the Board of the Company with Dr.B.B.Ramaih Chairman & Managing Director Sri P.Narendranath Chowdary ManagingDirector Sri Mullapudi Thimmaraja Joint Managing Director and Sri V.S. Raju IndependentDirector as members of the Committee.

This Committee has formulated a CSR Policy which has been approved by the Board.

This Policy envisages CSR Activities to be taken up amount of expenditure to beincurred and monitoring of CSR Activities from time to time.

This Policy aims to achieve the CSR objectives by undertaking one or more of theactivities to be in alignment with Schedule VII of the Companies Act 2013 either on a ownor through any Trust / Society or any other recognized Agency.

As per the provisions of Section 135(5) of the Companies Act 2013 company shouldspend in every Financial Year at least 2% of the average net profits of the company madeduring the three immediately preceding Financial Years. In pursuance of its CorporateSocial Responsibility Policy the company gives preference to the local area and areasaround it where it operates or any other permissible location for spending the amountearmarked for Corporate Social Responsibility activities.

Accordingly for achieving its CSR objectives through implementation of meaningful andsustainable CSR programmes your Company would allocate at least 2% of its average NetProfits calculated as per Section 198 of the Companies Act 2013 as its Annual CSR Budgetin each Financial Year.

From the Annual CSR Budget allocation a provision is made towards the expenditure tobe incurred on identified areas for undertaking CSR activities on a year to year basis.

Allocation of the Annual Budget for CSR activities in any given year would be as perthe provisions of the Companies Act 2013 and rules made thereunder as amended from timeto time. Any unspent / unutilised CSR allocation of a particular year will be carriedforward to the next year i.e. the CSR budget will be non-lapsable in nature.

As required by Rule 8 of the Companies (CSR Policy) Rules 2013 a Report on CSRActivities and the amount of expenditure incurred are annexured to this Report.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS :

The Company has duly complied with the Provisions of Section 186 of the Companies Act2013 with regard to Loans Guarantees or Investments the details of which as applicableare provided in the Notes to Balance Sheet.

RISK MANAGEMENT POLICY:

The company has framed a Risk Management Policy which envisages the following

• Identification of areas of Risk

• Assessing the impact of Risks

• Steps taken to mitigating the Risk

The Major Segments of operations of the Company are Sugar and Chlor Alkali.

The major aspects of concern for the Sugar Sector are:

1) Lack of Harvesting Labour

2) Power to operate the irrigation requirements

3) Proper Cane Varieties that give good Cane and Sugar yield and that are suitable formechanical harvesting.

To get around the 1st aspect the Company has embarked upon locating the right CaneHarvester suited to our Grower Farm sizes. The 2nd aspect is being taken care of bysetting up a Solar Powered Pumping System at our R & D Farm so that our Growers couldultimately be provided the right guidance in this aspect. The 3rd aspect is being met bythe Cane Breeding Programme undertaken by the Company.

Chlor Alkali segment is power intensive where Power constitute a major input cost.Restricted power supply and increased power cost have become a cause of concern. Tomitigate this impact a Solar Power Plant has been commissioned at Kovvur. At Saggonda a33 MW Coal Based Power Plant has been commissioned. This would improve the poweravailability to the Chemical Plants at Saggonda.

INDUSTRIAL RELATIONS:

The relations with your Company's employees continue to be cordial and harmoniousduring the year under report.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE POLICY:

The Company has in place a Prevention of Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 (Act.) An Internal Compliance Committee (ICC) has been set up toredress the complaints received regarding sexual harassment. All employees are coveredunder this Policy. As on the date of this report there were no complaints received by theICC.

SAFETY HEALTH AND ENVIRONMENT:

Safety Occupational Health and Environment Protection continue to be accorded highpriority.

EXTRACT OF ANNUAL RETURN :

As required by Section 92 (3) of the Companies Act 2013 and relevant rules an Extractof Annual Return in MGT9 is annexured as a part of this Annual Report.

RELATED PARTY TRANSACTIONS:

There is no transaction with Related Party which requires disclosure under Section134(3)(h) of the Companies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules2014.

SECRETARIAL AUDIT REPORT :

As required by Provisions of Companies Act 2013 Secretarial Audit Report has providedby Nekkanti SRVV Satyanarayana & Co. Hyderabad Company Secretaries in practice isannexured to this Report.

PARTICULARS OF EMPLOYEES:

Information in accordance with the provisions of the Companies Act 2013 read with therelevant Rules made thereunder regarding employees is annexed as Annexure "A"forming part of this Report.

RATIO OF REMUNERATION OF EACH DIRECTOR :

Details of ratio of Remuneration of each Director to the median employees remunerationis enclosed.

Significant and Material Orders Passed by the Regulators or Courts or Tribunalsimpacting the Going Concern status of the Company There are no significant and materialorders passed by the Regulators or Courts or Tribunals which would impact the goingconcern status of the Company.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO:

Information pursuant to Section 134 of the Companies Act 2013 read with relevant rulesis given in Annexure "B" forming part of this Report.

FIXED DEPOSITS:

As required by the Companies Act 2013 the details of Fixed Deposits as on 31.3.2017 isgiven hereunder.

2016-17 2015-16
(a) Accepted during the year. 216920000 395565000
(b) Remained unpaid or unclaimed as at the end of the year. 4860000 5295000
(c) Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so number of such cases and the total amount involved. NO NO
i) at the beginning of the year NOT APPLICABLE NOT APPLICABLE
ii) maximum during the year -do- -do-
iii) at the end of the year -do- -do-
(d) Details of deposits which are not in compliance with the requirements of Chapter V of the Act. NIL NIL

CONSOLIDATED ACCOUNTS:

In accordance with the Accounting standards consolidated financial statements of theCompany and its Subsidiaries form part of the Report and Accounts. These consolidatedstatements have been prepared on the basis of audited results received from the SubsidiaryCompanies as approved by their respective Boards.

The Accounts of the Subsidiary Companies for the year 2016-17 have not been attached tothe Company's Accounts. However Shareholders desirous of obtaining the Annual Accounts ofthe Subsidiaries may obtain them upon request. The Annual Report and the Accounts of theSubsidiary Companies will be kept for inspection at the Company's Registered Office aswell as at the offices of your Subsidiary Companies.

SUBSIDIARIES AND ASSOCIATE: JOCIL LIMITED:

For the Financial Year ending 31.3.2017 your subsidiary Company JOCIL Ltd. posted aprofit of Rs.1018.61 lakhs (before taxation) against Rs. 2729.72 lakhs (before taxation)last year. Board of Directors of this Company has recommended a Dividend of Rs.3/- perShare to Shareholders for the Financial Year 2016-17.

THE ANDHRA FARM CHEMICALS CORPORATION LIMITED:

The Company incurred a loss (before Tax) of Rs.71.46 lakhs against the loss of Rs.59.90 lakhs last year.

HINDUSTAN ALLIED CHEMICALS LIMITED:

The Directors are on the look out for a suitable project to be taken up by the Company.

THE ANDHRA PETROCHEMICALS LIMITED:

The Company achieved sales of Rs.37043.04 lakhs against Rs. 37580.83 lakhs and incurreda loss (before Tax) of Rs. 1090.47 lakhs against the loss of Rs. 2630.43 lakhs last year.

INTERNAL CONTROL SYSTEM:

Your Company conducts a review of the financial and operating controls of the variousUnits. The Internal Control System of your Company is commensurate with its size andnature of business. The Board has also laid down a policy on Internal Financial Control asrequired by the provisions of the Companies Act 2013. The same has been posted onCompany's Website.

LISTING ON STOCK EXCHANGE:

Company's Equity Shares are listed on National Stock Exchange and Annual Listing Feefor the Financial Year 2016-17 has been paid.

AWARD

Your Directors are happy to inform that The Institute of Cost Accountants of India(ICMA) has conferred " FIRST PRIZE " to " The Andhra Sugars Limited forExcellance in Cost Management " for the Year 2016 under Private - Manufacturing -Medium Category.

Your Company has received Certificate of Appreciation from Commissioner of CentralExcise and Service Tax in recognition of the best practices and contribution in revenue tothe ex-chequer during the year 2016.

ACKNOWLEDGEMENT:

Your Directors wish to place on record their appreciation for the co-operation extendedby the State and Central Government authorities Financial Institutions and Banks. Theyalso express their appreciation to the employees at all levels for the successful workingof the Company.

For and on behalf of the Board
TANUKU Dr. B.B.RAMAIAH
28.07.2017 Chairman & Managing Director