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Carnation Industries Ltd.

BSE: 530609 Sector: Engineering
NSE: N.A. ISIN Code: INE081B01010
BSE LIVE 14:57 | 17 Nov 41.50 -0.90
(-2.12%)
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42.00

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43.40

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41.50

NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 42.00
PREVIOUS CLOSE 42.40
VOLUME 9392
52-Week high 78.00
52-Week low 38.50
P/E
Mkt Cap.(Rs cr) 14
Buy Price 41.50
Buy Qty 256.00
Sell Price 42.00
Sell Qty 188.00
OPEN 42.00
CLOSE 42.40
VOLUME 9392
52-Week high 78.00
52-Week low 38.50
P/E
Mkt Cap.(Rs cr) 14
Buy Price 41.50
Buy Qty 256.00
Sell Price 42.00
Sell Qty 188.00

Carnation Industries Ltd. (CARNATIONINDS) - Director Report

Company director report

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your Directors are pleased to present the 34th Annual Report and the Audited FinancialStatement of the Company for the financial year ended 31st March 2017.

FINANCIAL PERFORMANCE

Financial Results of the Company for the year 2017 along with figures for the previousyear are as follows:

(Rs. in Lacs)
For Year ended 31.3.2017 For Year ended 31.03.2016
Revenue from operation and other operating revenue:
Export Sales (Net of Freight) 7732.91 9383.38
Domestic Sales (Net of Central 76.29 44.62
Excise and Vat)
Export Incentives 326.17 386.02
Other Income 383.42 136.84
8518.79 9950.86
Profit before Finance Costs 652.48 985.47
Depreciation & Amortisation and Tax
Finance Costs 516.30 546.24
Depreciation & Amortisation 119.55 138.15
Profit/(Loss) before Tax 16.63 301.08
Provision forTax
- Current 3.17 71.00
— Deferred (8 20) (4 05)
- Tax for Earlier Years - 0.35
Profit/(Loss) after Tax 21.66 233.78
Surplus brought forward from previous year 610.59 405.94
Available Surplus/ (Deficit) for Appropriation 632.25 639.72
Proposed Dividend 13.83 24.20
Dividend Distribution Tax 2.81 4.93
Surplus/(Deficit) carried to Balance Sheet 632.25 610.59

FINANCIAL REVIEW

During the financial year ended 31st March 2017 the Company has achieved total revenuefrom operations (net) of Rs. 8518.79 lacs against Rs. 9950.86 lacs in the previous year.The profit before Finance Cost Depreciation & Amortization and Tax is Rs. 652.48 lacsagainst Rs. 985.47 lacs in the previous year. The profit before tax was Rs. 16.63 lacsagainst Rs. 301.08 lacs in F.Y. 2015-2016. The profit aftertax is Rs. 21.66 lacs againstRs. 233.78 lacs in F.Y. 2015-2016.

There was no change in the nature of business of the Company during the financial yearended 31st March 2017.

MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENT

The Iron and Steel Industry worldwide has remained steady however there is a trend ofprotectionism within each country. India is protecting the steel producers by way ofduties and minimum import price levied on the importers resulting in domestic prices ofiron and steel moving up by 10% to 13%. Similarly USA has initiated anti-dumpinginquiries into import of most type of steel. European Union is investigating India andChina for dumping castings into Europe. Even though the demand is there these protectivemeasures have cautioned both the exporters in India and importers overseas resulting inshort term orders and avoidance of keeping large stocks.

OPPORTUNITIES AND THREAT

The international threats are the Non-Tariff barriers including the overseas Governmentprotecting their domestic products and finding ways to levy higher duties on imports.However your Company takes all measures in keeping itself well protected by way of legaland financial advice from the counsels and private lawyers. The steep fall in US dollarhas made a major impact in the last quarter of the last financial year. However as pereconomists it is expected to remain steady at the current levels for the rest of the year.

The anti-dumping investigation against Indian castings by the European Union couldaffect business in that region from September’17 onwards but our Company has joinedthe group of exporters and hired Senior European lawyers and an Indian firm to come out ofthis in a strong manner. Besides this the fact that China is also being investigated andthat they may land up with higher duties than India could be a boon for Indian exports andourselves.

SEGMENT-WISE PERFORMANCE

The Management reviewed the disclosure requirement of segment wise reporting and is ofthe view that since the Company manufactures Castings & M. S. products which aresubject to same risk and returns hence there is one primary segment in terms of AS-17 aseparate disclosure on reporting by business segments is not required. The analysis ofgeographical segments is based on the areas in which the Company operates.

FUTURE OUTLOOK

Your Company has a good order booking position and the orders are evenly spread acrossthe regions of Middle East Europe and North America. Your Company is steadily movingtowards new products required in the domestic and exports markets. Your Company has beenable to renew contracts in several US City projects besides the Gulf projects.

RISKS AND CONCERN

Being predominantly in export your Company’s revenue is always subject to risksof exchange fluctuations. The Company has adopted a comprehensive risk management reviewsystem and risk management policy which identify evaluate business risks andopportunities and wherein it actitively hedges its foreign exchange exposures withindefined parameters through use of hedging instruments such as forward contracts. Themanagement identifies elements of risks which may threaten the existence of the Companyand have developed and implemented risk management system for mitigating the same. Thematter of concern however remains shortage of skilled labour resulting in higher labourcost. In order to overcome this problem your Company is laying stress on in-house trainingand skill development besides retention of the skilled workers.

Some Overseas Customers are taking longer credit period for the payments and theManagement is monitoring the same very closely. The risk management system of the Companyis reviewed by the Audit Committee and the Board of Directors on a regular basis.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Internal Financial Control System

The Company has proper and adequate Internal Financial Controls which ensures that allassets are safeguarded and protected and that the transactions are authorized recordedand reported correctly. The Internal Auditors independently evaluate the adequacy ofinternal controls. Independence of the audit and compliance is ensured by direct reportingto the Audit Committee of the Board.

Adequacy of Internal Financial Controls with reference to the financial statements.

To ensure effective Internal Financial Controls the Company has laid down the followingmeasures:

1. All legal and statutory compliances are ensured on a monthly basis.

2. Transactions are pre-approved at the levels designated by the Management and this isaudited & reviewed periodically.

3. Transaction audits are conducted periodically to ensure accuracy of financialreporting safeguard and protection of all the assets. Stock audit is conducted on anannual basis at all locations. Fixed Asset Verification is done on an annual basis at alllocations.

4. The Company’s Books of Accounts are maintained in Oracle (ERP) and transactionsare executed through Oracle (ERP) setups to ensure correctness/ effectiveness of alltransactions integrity and reliability of reporting.

5. The Company has in place a well-defined Whistle Blower Policy.

6. Compliance of secretarial functions is ensured by way of Secretarial Audit.

7. Proper and adequate cost records are maintained as prescribed under the Companies(Cost Record and Audit) Amendment Rules 2014.

Your Company’s Statutory Auditors have in their report confirmed the adequacy ofthe internal control procedures.

EXPANSION AND NEW PROJECT

Your Company has expanded into steel fabrication for the domestic and internationalmarkets and is getting serious inquiries and orders.

There has also been a major addition in development and approval of water distributionproducts and your Company shall be increasing sale of these in the domestic andinternational markets.

Your Company has received the approval of BIS for IS9523 fittings. This is asignificant step for promotion of our goods in the domestic market.

HUMAN RESOURCES DEVELOPMENT

Your Company continued to have cordial and harmonious relations with its employees atall levels during the period under review. The operations of the Company across functionshave been strengthened through induction of appropriately qualified and experiencedpersonnel. Management of your Company strongly focuses on the performance of the Managers.The Board acknowledges its thanks to all the shop floor personnel and other employees formaking significant contribution to your Company.

Your Company has conducted several training programs for its employees to improve theirworking. Besides this the training programs have been conducted for improving safety andhealth standards of the employees.

DIVIDEND

Your Directors have recommended a dividend of 4% ( Re. 0.40 per Equity Share of Rs.10each) for the financial year ended March 312017 subject to the approval of theshareholders at the ensuing Annual General Meeting of the Company. The dividend togetherwith the dividend tax will entail a cash outlay of Rs. 16.64 lacs. The dividend will bepaid to members whose names appear in the Register of Members as on 15th September 2017;in respect of shares held in dematerialized form it will be paid to members whose namesare furnished by National Securities Depository Limited and Central Depository Services(India) Limited as beneficial owners as on that date.

POLLUTION CONTROL MEASURES

The pollution control measures installed in the units of the Company are in operationin accordance with the norms specified by the West Bengal Pollution Control Board.

SUBSIDIARY AND ASSOCIATE COMPANIES

The Company does not have any Subsidiary or Associate Companies.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Ramesh Chandra Jha Chairman of the Company expired on 13.8.2016. The Board whilecondoling the death of Mr. Jha places on record its appreciation for the valuablecontributions rendered by him.

In accordance with the provisions of the Companies Act 2013 and as per the Articles ofAssociation of the Company Mr. Suvobrata Saha (DIN 00131180) Jt. Managing Director willretire by rotation at the ensuing Annual General Meeting and being eligible offershimself for reappointment.

None of the Directors of the Company are disqualified for being appointed/re-appointedas Directors as specified in Section 164 of the Companies Act 2013.

The Board recommends the re-appointment of the above named Director with a view toavail his valuable advice and wise counsel. A brief profile of the Director seekingre-appointment required under Regulation 34 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and Secretarial Standard -2 is given in theNotice of AGM.

WOMEN DIRECTOR

Dr. Sephali Roy (DIN 07151823) appointed on 9.4.2015 continues as the Women Director onthe Company’s Board in conformity with the requirement of Section 149(1) of theCompanies Act 2013 and Regulation 17 of the Listing Regulations.

DECLARATION OF INDEPENDENCE

Your Company has received declaration from the Independent Directors as prescribedunder Section 149(7) of the Companies Act 2013 that they meet the criteria ofindependence as provided in Section 149(6) of the Act read with Schedules and Rules issuedthereunder as well as Regulation 16(1) (b) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

FAMILIARIZATION PROGRAMME UNDERTAKEN FOR INDEPENDENT DIRECTORS

The Independent Directors are familiarised with the Company their roles rightsresponsibilities in the Company nature of the industry in which the Company operatesbusiness model of the Company etc. On appointment the Independent Director is issued aLetter of Appointment setting out in detail the terms of appointment duties andresponsibilities. The familiarisation programme is available on the Company’swebsite: www.carnationindustries.com

ANNUAL EVALUATION OF BOARD’S PERFORMANCE

Pursuant to the provisions of Section 134 149 and Section 178 of the Companies Act2013 read with Rules framed thereunder and provision of Schedule IV of the Act as well asthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board hascarried out an annual performance evaluation of its own performance that of itsCommittees and individual Directors.

A separate exercise was carried out to evaluate the performance of individualDirectors including the Chairman of the Board on parameters such as level of engagementand contribution independence of judgement safeguarding the interest of the Company andits minority shareholders etc. The performance evaluation of the Non IndependentDirectors and Board as a whole was also carried out by the Independent Directors.

NUMBER OF MEETINGS OF THE BOARD

During the Financial Year four meetings of the Board of Directors were held on27.5.201611.8.2016 11.11.2016 and 10.2.2017. The intervening gap between the Boardmeetings was within the period prescribed under the Companies Act 2013 and the ListingRegulations.

The composition number of meetings held and the attendance of the members at thesemeetings are as follows:

Name of the Directors Category of Directorship No. of Board Meeting Held During 2016-2017 No. of Meetings Attended
Mr. Ramesh Chandra Jha* Independent Director 2** 1
Mr. Ravindra Prakash Sehgal Managing Director 4 4
Mr. Suvobrata Saha Joint Managing 4 3
Director
Mr. Arun Kumar Bose Whole-time Director 4 4
Mr. Manoj Bose Independent Director 4
Dr. Sephali Roy Independent Director 4 4

*Expired on 13.8.2016 - He was the Chairman of the Board Audit Committee andStakeholders Relationship Committee.

** During his tenure two meetings were held.

COMMITTEES OF THE BOARD

The Company has constituted /re-constituted the Audit Committee Nomination andRemuneration Committee and Stakeholders’ Relationship Committee in accordance withthe requirements of

Companies Act 2013. Details of all the above Committees along with composition andmeetings held during the year under review are provided below:

AUDIT COMMITTEE

During the financial year ended 31st March 2017 four Audit Committee meetings wereheld on 27.5.2016 11.8.2016 11.11.2016 and 10.2.2017. The composition number ofmeetings held and the attendance of the members at these meetings are as follows:

Name of the Member No. of Meetings Held No. of Meetings Attended
Mr. Ramesh Chandra Jha* 2** 1
Dr. Sephali Roy 4 4
Mr. Manoj Bose 4 4
Mr. Ravindra Prakash Sehgal 4 3
Mr. Suvobrata Saha 4 1

* Expired on 13.8.2016

** During his tenure two meetings were held.

NOMINATION AND REMUNERATION COMMITTEE

During the financial year ended 31st March 2017 one meeting was held on 27.5.2016. Thecomposition number of meeting held and the attendance of the members at this meeting isas follows:

Name of the Member No. of Meeting Held No. of Meeting Attended
Dr. Sephali Roy Chairman 1 1
Mr. Manoj Bose 1 1
Mr. Ramesh Chandra Jha* 1 1

* Expired on 13.8.2016

STAKEHOLDERS’ RELATIONSHIP COMMITTEE

During the financial year ended 31st March 2017 no meeting of the Stakeholders’Relationship Committee was held. The details of the members of this Committee is givenbelow:

Name of the Member

Mr. Manoj Bose Chairman

Mr. Ravindra Prakash Sehgal

MEETING OF INDEPENDENT DIRECTORS

During the year under review a meeting of Independent Directors was held on 10thFebruary 2017 wherein the performance of the Non-Independent Directors and the Board as awhole was reviewed. The Independent Directors at their meeting also assessed the qualityquantity and timeliness of flow of information between the Company’s management andthe Board of Directors of the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) and Section 134(5) of the CompaniesAct 2013 with respect to Directors’ Responsibility Statement the Directors to thebest of their knowledge hereby state and confirm that:

i) In the preparation of the annual accounts for the year ended March 312017 theapplicable accounting standards read with the requirements set out under Schedule III tothe Companies Act 2013 have been followed and there were no material departures from thesame;

ii) The Directors have selected such accounting policies and applied them consistentlyand made judgments 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 profit ofthe Company for the year ended on that date;

iii) 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;

iv) The Directors have prepared the annual accounts of the Company on a "goingconcern" basis;

v) Proper internal financial controls laid down by the Directors were followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

vi) Proper systems to ensure compliance with the provisions of all applicable laws arein place and that such systems are adequate and operating effectively.

TRANSFER TO RESERVES

The Company did not transfer any amount to reserves.

PUBLIC DEPOSITS

During the financial year 2016-17 your Company has not accepted any deposits withinthe meaning of Sections 73 and 74 of the Companies Act 2013 read together with theCompanies (Acceptance of Deposits) Rules 2014.

CHANGES IN SHARE CAPITAL

There was no change in the share capital of the Company for the F.Y. 2016-2017.

MATERIAL CHANGES AND COMMITMENTS AFTER THE BALANCE SHEET DATE

There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of the report.

CORPORATE GOVERNANCE

Your Company complies with the provisions relating to Corporate Governance to theextent applicable to it. Pursuant to Regulation 15(2) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 your Company is exempted from Para C ofSchedule V which requires disclosures to be made in the section on Corporate Governance ofthe Annual Report. Para D of Schedule V relating to declaration by CEO on compliance withthe Code of Conduct and Para E of Schedule V relating to Compliance Certificate onCorporate Governance. In view thereof the Corporate Governance report declaration by CEOon Code of Conduct and Compliance Certificate has not been included in this Annual Report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND RESEARCH AND DEVELOPMENT

The information relating to conservation of energy technology absorption and foreignexchange earnings and outgo as per Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 are provided in "Annexure -A" tothis report.

RELATED PARTY TRANSACTIONS

During the financial year 2016-17 your Company has entered into a contract withrelated party as defined under Section 2(76) of the Companies Act 2013 read withCompanies (Specification of Definition Details) Rules 2014 and which are in the ordinarycourse of business and on arms’ length basis and in accordance with the provisions ofthe Companies Act 2013. During the financial year 2016-17 there were no transactionswith related party which qualify as material transactions under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. Accordingly the disclosurerequired under Section 134(3)(h) of the Act read with Rule 8(2) of the Companies(Accounts) Rules 2014 in Form AOC-2 is not applicable to your Company.

DISCLOSURES RELATING TO REMUNERATION OF DIRECTORS KEY MANAGERIAL PERSONNEL ANDPARTICULAR OF EMPLOYEES

In accordance with Section 178 and other applicable provisions if any of theCompanies Act 2013 read with Rules issued thereunder and Regulation 34 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board of Directorsat its meeting held on 13th November 2014 formulated the Remuneration Policy of theCompany. The Remuneration Policy of the Company is being set out as "Annexure-B"to this report and this has also been uploaded on the website at its weblink:www.carnationindustries.com

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is set out as "Annexure-C" to this report.

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 astatement showing the names and other particulars of top ten employees are provided in theAnnual Report.

Having regard to the provisions of the first proviso to Section 136(1) of the Act andas advised the Annual Report excluding the aforesaid information shall be sent to themembers of the Company. The said information is available for inspection at the registeredoffice of the Company during working hours and any member interested in obtaining suchinformation may write to the Company Secretary and the same shall be furnished on request.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 inaccordance with Section 92(3) of the Companies Act 2013 read with the Companies(Management and Administration) Rules 2014 are set out herewith as "Annexure -D" to this Report.

STATUTORY AUDITORS

The Auditors M/s. Jain & Bagaria Chartered Accountants Statutory Auditors of theCompany were appointed at the 31st AGM to hold office till the conclusion of the 34thAGM. The Board in terms of Section 139 of the Act on the recommendation of the AuditCommittee has recommended for the appointment of M/s Jain Saraogi & Co. CharteredAccountants from the conclusion of the ensuing AGM till the conclusion of the 39th AGM.Appropriate resolution in respect of the above is appearing in the Notice convening the34th AGM of the Company.

In this regard the Company has received a certificate from the Auditors to the effectthat if they are appointed it would be in accordance with the provisions of Section 141of the Companies Act 2013.

There are no reservations qualifications or adverse remarks contained inAuditors’ Report attached to the Balance Sheet as at 31st March 2017.

COST AUDITOR

Ministry of Corporate Affairs notification on 31.12.2014 under the Companies (CostRecords and Audit) Amendment Rules 2014 has exempted your Company being an exportoriented company from the purview of Cost Audit.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 your Companyhad appointed M/s MKB & Associates Practicing Company Secretaries to conduct theSecretarial Audit of your Company. The Secretarial Audit Report is annexed herewith as"Annexure- E" to this report.

With respect to the observation made by the Secretarial Auditors in MR-3 the membersare hereby informed that consequent upon the sudden demise of Mr. Ramesh Chandra Jha aNon-Executive (Independent) Director the Company is at present left with only twoNon-Executive independent Directors on its Board. The Company is looking for a suitableperson to be appointed as NonExecutive Director of the Company and the Committee will bereconstituted accordingly.

LOANS GUARANTEES AND INVESTMENTS

The Company has not lent out any money or made any investment or provided any guaranteeduring the year under review as covered under the provisions of Section 186 of theCompanies Act 2013.

SIGNIFICANT MATERIAL ORDERS PASSED BY REGULATORS / COURT / TRIBUNALS IMPACTING THEGOING CONCERN STATUS AND COMPANY’S OPERATIONS IN FUTURE

There are no significant material orders passed by the regulators/court/tribunals whichwould impact the going concern status of the Company and its future operations.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility is not applicable to your Company pursuant to Section135 of the Companies Act 2013.

VIGIL MECHANISM

Your Company has formulated a Whistle Blower Policy pursuant to the provisions ofSection 177(10) of the Companies Act 2013 and Regulation 22 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. The policy provides for aframework and process whereby employees can raise their issue against any kind ofharassment victimization or any other unfair practice being adopted against them. TheWhistle Blower Policy has been uploaded on the Company’s website :www.carnationindustries.com

STOCK EXCHANGE

The Equity Shares of the Company are listed with BSE Limited and The Calcutta StockExchange Limited.

POLICY ON PREVENTION OF SEXUAL HARASSMENT

The Company has adopted a policy on Prevention of Sexual Harassment of Women atWorkplace in accordance with The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013. During the financial year ended 31st March 2017 theCompany has not received any complaints pertaining to sexual harassment.

ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation and thanks to the BanksFinancial Institutions various Government Authorities for their valuable assistance andco-operation and for the trust and confidence reposed in the Company by the Customers andShareholders.

Your Directors also thank the Executives Staff and Workforce of the Company for theirefficient and dedicated services.

On Behalf of the Board of Director
R. P. Sehgal
(Managing Director)
Place: Kolkata Suvobrata Saha
Date: 11th August 2017 (Jt. Managing Director)