Your Directors have pleasure in presenting you the Twenty Fourth Annual Report togetherwith Audited Financial Statements for the year ended 3151 March 2017.
FINANCIAL PERFORMANCE OF THE COMPANY
|Particulars ||For the year ended 31/03/2017 ||For the year ended 31/03/2016 |
|Sales & Other Income ||29.84 ||29.52 |
|Profit/(Loss) before interest and Depreciation ||(1.40) ||(3.55) |
|Depreciation ||0.65 ||0.82 |
|Net Profit / (Loss) before Tax & Exceptional items ||(2.05) ||(4.37) |
|Exceptional Items & Extra - Ordinary Items ||- ||3.69 |
|Income Tax ||- ||- |
|Net Profit/(Loss) after Tax & Exceptional Items ||(2.05) ||(0.68) |
COMPANY'S PERFORMANCE AND OPERATIONS:
The Aqua Farm situated at Isakapalli was given on lease during July 2013 for sevenyears. Operating in volatile and uncertain environment at that time the company had giventhe farm on long term lease earned a gross income of Rs. 29.70 lakhs and incurred amarginal Net Loss of Rs. 2.05 lakhs.
DIVIDEND AND RESERVES
In view of considerable accumulated losses no dividend is declared and not transferredany amount to reserves.
Presently India is the second largest fish producing as well as aquaculture nation inthe world. India is also a major producer of fish through aquaculture and ranks second inthe world after China. Riding on a robust demand for its frozen shrimp and frozen fish ininternational markets India exported 11.34 Lakh MT of seafood worth an all-time high ofUS$ 5.78 billion in 2016-17 as against 9.46 Lakh tons and 4.69 billion dollars a yearearlier with USA and South East Asia continuing to be the major importers while thedemand from the European Union (EU) grew substantially during the period. Frozen shrimpmaintained its position as the top item of export accounting for 38.28 per cent inquantity and 64.50 per cent of the total earnings in dollar terms. Shrimp exportsincreased by 16.21 per cent in terms of quantity and 20.33 per cent in dollar terms.
Increased production of L. Vannamei diversification of aquaculture species sustainedmeasures to ensure quality and increase in infrastructure facilities for production ofvalue added products were largely responsible for India's positive growth in exports ofseafood as per informed Government Sources. Brackish water estuaries or river mouth isanother set of water bodies having the peculiarity of fluctuating salinity due to tidaleffects which have huge potential for both fish and shell fish culture. Valuable fish likesea bass pearl spot and shrimp could be cultured in large quantities. India has 1.24million ha of brackish water area spread over all maritime States / Union Territories(UTs) but hardly 15 % of brackish water areas are developed for commercial farming.
Achieving growth rate of about 8% annually on a sustainable basis over a period of fiveyears. This would be possible if production is targeted at 15 Million Tonnes by end of2019-20. A number of programmes and strategies for fisheries and aquaculture developmentin the country under the Blue Revolution has been developed keeping in view the objectivesidentified for the sector. Greater emphasis will be on infrastructure with an equallystrong focus on management and conservation of the resources. Low investment in the sectorcoupled with limited capabilities of fishers and fish farmers. Inadequate supply of seedfeed and genetic resources. Slow development and adoption of new and improved farmingtechnologies. Land and water related problems inadequate cold chain; market trade andsafety are the challenges to the sector.
The company in order to reduce the losses and having discontinued the farmingoperations the company had given the farm at Iskapally for a long term lease so that itcan be put to better use and to take off the farm's maintenance and other overheadexpenses of the company. The lessee had improved the infrastructure in farm and beencarrying on shrimp business successfully thereby reducing the infrastructure maintenancecosts to the Company except the statutory compliance costs. As there is an improvement inthe economy the promoters are exploring opportunities in various fields to revive thefortunes of the company.
The company does not have any subsidiary.
PARTICULARS REGARDING ENERGY CONSERVATION etc.:
The information relating to conservation of energy technology absorption and foreignexchange earnings and outgo pursuant to Section 134(3) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 is given in Annexure V to this Report.
CHANGES AMONG DIRECTORS AND KEY MANAGERIAL PERSONNEL:
Re-Appointment of Non-Executive Director in 23nd Annual General Meeting:
During the year Smt. Bommidala Anitha (DIN: 00112766) Non-executive Woman Directorre-appointed as Director in 23nd Annual General Meeting.
Retire by Rotation:
In accordance with the provisions of Section 152 of the Companies Act 2013 read withthe Articles of Association of the Company Smt. Bommidala Anitha (DIN: 00112766)Nonexecutive Woman Director liable to retire' by rotation at the forthcoming AnnualGeneral Meeting and being eligible offers herself for re-appointment as Director. TheBoard recommends her appointment.
Reappointment of Independent Directors:
Independent Director Sri Nellore Dolendra Prasad (DIN:01816366) has submitteddeclaration confirming that he continued to meet the criteria of independence asprescribed under Section 149(6) of the Companies Act 2013 and SEBI (LODR) Regulations2015 and his tenure to be completed at the forthcoming AGM the board based on theperformance evaluation of independent directors as per recommendation of the Nominationand Remuneration Committee. The Board recommends him for second term of five consecutiveyears.
Independent Director Sri Tunuguntla Rama Krishna (DIN:02324865) has submitteddeclaration confirming that he continued to meet the criteria of independence asprescribed under Section 149(6) of the Companies Act 2013 and SEBI (LODR) Regulations2015 and his tenure to be completed at the fourth coming AGM the board based on theperformance evaluation of independent directors as per recommendation of the Nominationand Remuneration Committee. The Board recommends him for second term of five consecutiveyears.
Board and Committee Meetings:
The Board met 5 times during the financial year 2016-17 the details of which are givenin the Corporate Governance Report.
Committees of the Board
The details of all the Committees along with their composition terms of reference andmeetings held during the year are provided in the "Report on CorporateGovernance" forming part of this Annual Report.
Board evaluation of its own performance:
In accordance with the provisions of Section 134 of the Act and of the SEBI (LODR)Regulations2015 the Board has carried out an evaluation of its own performance theperformance of Committees of the Board namely Audit Committee Risk ManagementCommittee Stakeholders Relationship Committee and Nomination and Remuneration Committeeand also the directors individually. The manner in which the evaluation was carried outand the process adopted has been mentioned in the Corporate Governance Report.
Policy for selection and appointment of Directors Senior Management and theirremuneration:
The Board on the recommendation of the Nomination & Remuneration Committee hasframed a policy for selection and appointment of Directors Senior Management and theirremuneration and also framed the criteria for determining experience qualificationspositive attributes and independence of directors.
Declaration Given by Independent Directors:
All the Independent Directors viz. Sri Tunuguntla Rama
Krishna (DIN:02324865) and Sri Nellore Dolendra Prasad (DIN:01816366) have submitteddeclarations confirming that they continued to meet the criteria of independence asprescribed under Section 149(6) of the Companies Act 2013 and SEBI (LODR) Regulations2015.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF COMPANIES ACT2013.
During the financial year 2016-17 the Company has not given any guarantees/loan ormade any investments. However during the year the company has repaid an amount of Rs.2.85 Lakhs due as on 31st March 2016 but received Rs. 10.50 Lakhs interestfree loan during the year out of which Rs. 5.50 Lakhs was repaid to Mr. Bommidala RamaKrishna Managing Director leaving a balance of Rs. 5.00 lakhs payable as at 31st March2017.
PARTICULARS OF EMPLOYEES:
The information required pursuant to Section 197 of the Companies Act 2013 read withRule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is given in Annexure VII to the Board of Directors report.
AUDITORS AND AUDITOR'S REPORT
The Shareholders at the 23'" Annual General Meeting held on 14"1September 2016 have appointed M/s Garlapati & Co. Chartered Accountants (FirmRegn.No:000892S) as Statutory Auditors of the Company to hold office until the conclusionof 24th Annual General Meeting. M/s Garlapati & Co. being the statutoryauditor from inception liable for retirement as per Sec. 133 of Companies Act 2013.
Pursuant to the provisions of Sections 139 141 and 142 and other applicableprovisions if any of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 (including any statutory amendment(s) or reenactments) thereof forthe time being in force) The Board of Directors have recommended the appointment of M/s.Kurapati Subba Rao & Co. Chartered Accountants (Registration No. 001618S) asAuditors of the Company to hold office for a period of five years from the conclusion ofensuing AGM until the conclusion of 29th Annual General Meeting of the Companyin the Calendar Year 2022 and that their remuneration be fixed by the Audit Committee inaddition to the reimbursement of service tax and actual out of pocket expenses incurred inconnection with the audit of accounts of the Company for the financial year ending 31stMarch 2018 and thereafter each year from time to time.
EXPLANATION FOR AUDITORS EMPHASIS OF MATTER:
(a) Regarding Non- Agriculture Tax there was no demand from the concerned department.However the company had shown the amount as contingent liability under notes on account.
(b) Regarding the preparation of accounts ongoing concern basis the notes inIndependent audit report is self explanatory and the company had given the farm on longterm lease and got steady income and been able to meet its operational expenses.
The Board as required under Sec. 138 of Companies Act 2013 in consultation withAudit Committee had re-appointed M/s. Jonnalagadda & Associates Chartered Accountants(Firm Regn. No:01358S) as internal auditors.
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed M/s K. Srinivasa Rao & Co Company Secretaries as the SecretarialAuditors to undertake the Secretarial Audit of the Company. The Report of the SecretarialAudit is given in Annexure-lll to this Report. There were no qualifications reservationsor adverse remarks given by Secretarial Auditor except the following
1. Non compliance of section 203 of the Companies Act 2013 and regulation 6 of SEBI(LODR) Regulations 2015 in respect of non appointment of the Company Secretary
2. Non compliance of section 203(4) regarding non appointment of CFO by the board within a period of six months from the date i.e. 25.01.2016 of such vacancy.
Board Clarification on Secretarial Auditor qualifications:
The Board has made utmost effort for appointment of the Company Secretary & ChiefFinancial Officer asKMPsbutnot able to appoint them due to lack of suitability of theCandidates to the profile of the Company in terms of work location job profile andremuneration and we hope that the positions are to be filled in the near future.
The Company has put in place a mechanism to identify assess monitor and mitigatevarious risks to its key business objectives. Major risks identified by the business andfunctions are systematically addressed through mitigating actions on a continuing basis.The Company has formulated a Risk Management Policy which is also available on theCompany's website atwww.bkvindustries.com
INTERNAL FINANCIAL CONTROLS:
The Company has adequate Internal Financial Controls with proper checks to ensure thattransactions are properly authorized recorded and reported apart from safeguarding itsassets. These systems are reviewed and improved on a regular basis. It has a comprehensivebudgetary control system to monitor revenue and expenditure against approved budget on anongoing basis.
The internal auditors of the Company review the controls across the key processes andsubmits reports periodically to the Management and significant observations are alsopresented to the Audit Committee for review. Follow up mechanism is in place to monitorthe implementation of the various recommendations.
CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES:
Section 135 of the Companies Act 2013 provides the threshold limit for applicabilityof the CSR to a Company i.e. (a) net worth of the Company to be '500 crore or more; or (b)turnover of the company to be '1000 crore or more; or (c) net profit of the company to be'5 crore or more. As the Company does not fall under any of the threshold limits givenabove the provisions of Section 135 are not applicable to the Company.
All contracts/arrangements/transactions entered into during the financial year with therelated parties were on arm's length basis and were in the ordinary course of business.Section 188(1) of the Companies Act 2013 exempts related party transactions that are inthe ordinary course of business and are on arm's length basis.The Board of Directors andthe Audit Committee have also approved the said related party transactions.
There are no materially significant related party transactions with the promotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large.The policy on dealing with RelatedParty Transactions as approved by the Board is available at the investors section of theCompany's website at www.bkvindustries.com
The particulars of contracts/arrangements entered into by the Company with relatedparties as required to be disclosed are given in AOC-2 as Annexure IV to this Report.
During the year your company followed best corporate governance practices and the samewill be continued in forthcoming years also.
MANAGEMENT DISCUSSION AND ANALYSIS:
The Management Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34 of the SEBI (LODR) 2015 Regulations in given Corporate GovernanceReport which is the part of this Annual Report.
TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND:
The company has not declared any dividend till date from inception therefore there wereno funds which were required to be transferred to Investor Education and Protection Fund(IEPF).
Vigil Mechanism &Whistle Blower Policy
The Company has a vigil mechanism and a whistle blower policy. The same has been postedon the Company's website and the details of the same are given in the Corporate GovernanceReport.
EXTRACT OF THE ANNUAL RETURN
The details of the extract of the Annual Return in Form MGT-9 are given in Annexure-VIto this Report.
As per the requirement of SEBI Listing Regulations the Company declares that itssecurities are listed on the Stock Exchanges of Mumbai & Kolkata.The company confirmsthat it has paid annual listing fees to the Stock Exchanges of Mumbai & Kolkata forthe year 2016-2017.
DIRECTOR'S RESPONSIBILITY STATEMENT:
Pursuant to the provisions contained in Section 134(3) of the Companies Act 2013 yourDirectors to the best of their knowledge and belief and according to information andexplanations obtained from the management confirm that:
In the preparation of the annual accounts for the financial year ended March 31 2017the applicable accounting standards have been followed and there are no materialdepartures from the same;
The Directors have selected such accounting policies and applied them consistently andmade judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 312017 and of the cash flowsand loss of the Company for the year ended on that date;
The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
The Directors have prepared the Annual Accounts on a going concern basis.
The Directors have laid down proper internal financial controls to be followed by theCompany relevant to its nature of operations and such controls are adequate and operatingeffectively.
The Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems are adequate and operating effectively.
Your Directors state that no disclosure is required in respect of the following itemsas there were no transactions on these items during the year under review:
1. Details relating to deposits covered under Chapter V of the Companies Act 2013.
2. Issue of equity shares with differential rights as to dividend voting or otherwise.
3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme.
4. No orders were passed by the Regulators or Courts or Tribunals which impact thegoing concern status and the Company's operations in future.
Material Changes and commitments if any affecting the financial position of thecompany which has occurred between the end of the financial year of the company to whichthe financial statements relate and the date of the report:
No Material Changes and commitments affecting the financial position of the companyoccurred for a period to which the financial statements relate and the date of the report
PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:
As per requirement of The Sexual Harassment of Women at Workplace (Preventionprohibition & Redressal) Act 2013 and Rules made there under your company hasconstituted internal Complaints Committee (ICC). During the year there was no complaintsreceived under this Act.
MANAGEMENT DISCUSSION AND ANALYSIS
A. INDUSTRY STRUCTURE DEVELOPMENT AND OUTLOOK.
Presently India is the second largest fish producing and second largest aquaculturenation in the world. India is also a major producer of fish through aquaculture and rankssecond in the world after China. Riding on a robust demand for its frozen shrimp andfrozen fish in international markets India exported 11.34 Lakh MT of seafood worth anall-time high of US$ 5.78 billion in 2016-17 as against 9.46 Lakh tons and 4.69 billiondollars a year earlier with USA and South East Asia continuing to be the major importerswhile the demand from the European Union (EU) grew substantially during the period. Frozenshrimp maintained its position as the top item of export accounting for 38.28 per cent inquantity and 64.50 per cent of the total earnings in dollar terms. Shrimp exportsincreased by 16.21 per cent in terms of quantity and 20.33 per cent in dollar terms.
Increased production of L. Vannamei diversification of aquaculture species sustainedmeasures to ensure quality and increase in infrastructure facilities for production ofvalue added products were largely responsible for India's positive growth in exports ofseafood informed the Government Sources. Brackish water estuaries or river mouth isanother set of water bodies having the peculiarity of fluctuating salinity due to tidaleffects which have huge potential for both fish and shell fish culture. Valuable fish likesea bass pearl spot and shrimp could be cultured in large quantities. India has 1.24million ha of brackish water area spread over all maritime States / Union Territories(UTs) but hardly 15 % of brackish water areas are developed for commercial farming.
B. OPPORTUNITIES AND THREATS:
Achieving growth rate of about 8% annually on a sustainable basis over a period of fiveyears. This would be possible if production is targeted at 15 Million Tonnes by end of2019-20. A number of programs and strategies for fisheries and aquaculture development inthe country under the Blue Revolution has been developed keeping in view the objectivesidentified for the sector. Greater emphasis will be on infrastructure with an equallystrong focus on management and conservation of the resources. There are othermultidimensional challenges which can hamper the development of the aquaculture sector.The Indian climate can interfere with production also as a consequence of climate change.Monsoon rains reduce the salinity of coastal waters every year which requires shrimpspecies that can handle salinity changes. Simultaneously the production costs foraquaculture are increasing worldwide due to increasing feed prices. Moreover in Indiathere is a lack of awareness about long-term sustainability with regard to fisheries andaquaculture.
In certain areas fish catches already declining. Other areas suffer from an inadequatewater supply due to depleting water sources mainly caused by irrigation for agricultureand the contamination of water resources used. New cage based aquaculture may involvemajor environmental sustainability risks. The expansion of fresh- and brackish wateraquaculture production can have major environmental consequences. The location of newaquaculture production can have consequences for water quality through the use ofantibiotics quality and quantity of feed but also long-term consequences with regard towater flows or reduction of forests or agriculture land. Antibiotics are a concern mainlybecause of a lack of awareness amongst farmers. Feed companies assure as well that they donot use antibiotics.
Another important bottleneck in the Indian aquaculture industry is the production andprocessing chain. Processing has not kept upto the increase in production. Processingplants obtain their machinery from abroad (US China Vietnam). Only 30% of the total fishproduction is processed and there are currently EU-certified processing plants. Poorinfrastructure (ports and roads) and storage facilities limit access to consumer marketfor producers. This in combination with the climatological circumstances leads to foodwaste. Possible opportunities with regard to the development of (cold) chain managementexist here. When looking at the fishery sector in a broad sense cold chain components arelimited. Cold chain systems mainly exist for the export market and are insufficientlydeveloped for the domestic market. They block ice plants which provide ice for
transport (although tube ice flake ice and slurry ice are more and more available aswell) and few available cold storages. These storages have few freezers available thatstore at -40 degree Celsius because of energy costs. Retail suppliers do not have thecapacity to invest in cold chain storage. Secondly existing unorganized markets areunhygienic which leads to health and safety concerns. Additionally cold chain systemssuffer from a low awareness especially in more remote areas. Finally climate issueshinder market access. During the monsoon season up to 30% of the catch is lostpost-harvest. However the present government had seized of all these matters and focusingon removing these bottlenecks where ever possible.
RISKS AND CONCERNS:
Pursuant to SEBI Listing Regulations the Company had since constituted a RiskManagement Committee. The details of the Committee its terms of reference are given inthe corporate governance report. The methodology for risk management primarily involvesmapping of risks with strategy assessing the risks on its importance identifyingde-risking measures and assigning it to risk owners and continuously monitoring the statusof the risks. The risks were categorized into strategy & planning operations andcompliance and the risks associated with each risk category was further classified andidentified as 'critical' 'major' and 'moderate'.
The company does not foresee any critical / major risk as it had given its farm onlong term lease expiring only at the end of first quarter 2020 and the lessee is meetingtheir commitments as per the lease agreement. The maintenance and compliance expenses ofthe company are taken care through the lease income hence the company does not foreseeany major risk for its operations in the short and medium term.
The management periodically reviews the risk management framework to identify the majorbusiness risks as applicable to the Company and works out their mitigation strategy.
INTERNAL CONTROL SYSTEMS ANDTHEIR ADEQUACY:
The Company has well-established processes and defined the roles and responsibilitiesfor people at various levels. The control mechanism also involves well documentedpolicies authorization guidelines commensurate with the level of responsibility specificto the respective businesses. Adherence to these processes is ensured through frequentinternal audits. The internal audits conducted are reviewed by the Audit Committee andrequisite guidelines and procedures augment the internal controls. The internal controlsystem is
designed to ensure that financial and other records are reliable for preparingfinancial statements and other information which ensures that all transactions areproperly reported and classified in the financial records. However the Company had givenits farm on long term lease and did not carry any other business operations during theyear 2016-17 and the lease will be completed only by the end of first quarter of 2020.
D. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECTTO OPERATIONAL PERFORMANCE:
The financial statements are prepared in compliance with the requirements of theCompanies Act 2013 and Generally Accepted Accounting Principles in India. The managementaccepts the responsibility of integrity and objectivity of the financial statements andthe basis for various estimates and the judgments used in preparing the financialstatements. During March 2013 the company entered into a lease agreement of its Farm fora period of 84 months with effect from July 2013 as the promoters have decided to meetwith lease income the fixed expenses and statutory compliance costs. The company isexploring profitable business opportunities as and when the economy provides to improvethe financial performance of the company. With these steps the company could performreasonably and ended up with a net loss of Rs. 2.05 Lakhs after providing the depreciationfor Rs. 0.65 Lakhs and bad advance of Rs. 1.82 Lakhs.
|Particulars ||Rs. In Lakhs |
|Farm Lease Income ||29.70 |
|EBIDTA ||(-)1.40 |
E. DEVELOPMENTS IN HUMAN RESOURCES:
In a challenging and competitive environment the Company believes that people are thekey to success and continues to focus on people capabilities by leveraging technology andcreating a learning environment. During the year under review there were no cases filedpursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.
F. CAUTIONARY STATEMENT:
The management discussion and analysis report containing your Company'sobjectivesprojections estimates and expectation may constitute certain statements which areforward looking within the meaning of applicable laws and regulations. Actual results maydiffer materially from those expressed or implied in the statement. As the company hadgiven its farm assets on long term lease and that being the only source of income for thecompany changes in the government regulations compliance frame work tax laws and otherfactors may affect the future earnings of the company. The Company cannot guarantee theaccuracy of the assumptions and perceived performance of the Company in future.
DISCLOSURE OF ACCOUNTINGTREATMENT:
Where in the preparation of financial statements during the year there was no differenttreatment from that prescribed in an accounting standard followed.
DELISTING OF SHARES:
Company's Ordinary Equity shares are originally listed in the Stock Exchanges of Mumbai(BSE) and four other Stock Exchanges at New Delhi Kolkata Chennai and Hyderabad. Theshares of the company are compulsorily traded in dematerialized form. The Board consideredthat continued listing on all stock exchanges was not necessary and therefore decided tode-list from Delhi Kolkata & Chennai stock exchanges in pursuance of specialresolutions passed in the 14"' Annual General Meeting held on 28th September 2007& 21st Annual General Meeting held on 13th September 2014.However the company was informed by Madras Stock Exchange Limited Hyderabad StockExchange Limited The Delhi Stock Exchange Association Limited that SEBI had derecognizedthe above Stock Exchanges. The Kolkata Stock Exchange Limited is yet to notify to thecompany about derecognition by SEBI.
PERSONAL RELATIONS AND APPRECIATION:
The Directors gratefully acknowledge all stakeholders of the Company viz. lesseemembers employees Stock exchanges and banks for their support during the year. Yourdirectors hereby place on record their appreciation for the services rendered by the staffof the Company for their hard work dedication and commitment.
| ||By order of the Board of Directors |
| ||BOMMIDALA RAMA KRISHNA |
| ||Managing Director |
| ||DIN:00105030 |
|Place: Guntur || |
|Date: 29.05.2017 || |