Carnation Industries Ltd.
|BSE: 530609||Sector: Engineering|
|NSE: N.A.||ISIN Code: INE081B01010|
|BSE LIVE 15:40 | 22 Sep||46.65||
|NSE 05:30 | 01 Jan||Stock Is Not Traded.|
Carnation Industries Ltd. (CARNATIONINDS) - Director Report
Company director report
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Your Directors are pleased to present the 33rd Annual Report and the Audited FinancialStatement of the Company for the financial year ended 31st March 2016.
(Rs. in Lacs)
During the financial year ended 31st March 2016 the Company has achieved total revenuefrom operations (net) of Rs.9950.86 lacs against Rs.9920.66 lacs in the previous year. Theprofit before Finance Cost Depreciation & Amortisation and Tax was Rs.985.47 lacsagainst Rs.993.17 lacs in the previous year. The profit before tax was Rs.301.08 lacsagainst Rs.177.09 lacs in 2014-2015. The profit after tax was Rs.233.78 lacs againstRs.140.25 lacs in 2014-2015.
There was no change in the nature of business of the Company during the financial yearended 31st March 2016.
MANAGEMENT DISCUSSION AND ANALYSIS
INDUSTRY STRUCTURE AND DEVELOPMENT
The Iron and Steel Industry worldwide may have slowed down primarily due to slow downin China however the infrastructure projects in the Gulf & USA continue to remainsteady. Europe does show signs of a slowdown but Germany and UK are retaining theirproject work though at a slightly lower pace.
OPPORTUNITIES AND THREAT
A steady US Dollar gives your Company an opportunity to grow further in the exportmarkets coupled with this is the steady raw material prices.
International threats of wars and refugee crisis could weaken Euro and the growthprospects in Europe. Falling economy in China is resulting in Chinese Companies droppingtheir prices in international market and getting more competitive.
A sluggish domestic market leads to foundries within India competing against each otherin the global market thereby increasing the inter-se competition and affecting pricing.
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.
In the current fiscal year we expect to strengthen our presence in the North Americanmarkets by addition of newer products. We also have plans to do steady business in theGulf market. This should enable us to maintain our turnover. The US Dollar and Euro areexpected to remain steady in a narrow range and market volumes are expected to maintainsteady overall. Domestic market is looking up with the focus of the Government on RoadsInfrastructure and Railways besides the continuing agricultural industry demands.
RISKS AND CONCERN
Being predominantly in export your Companys revenue is always subject to risksof exchange fluctuations. The Company has adopted a comprehensive risk management reviewsystem wherein it actitively hedges its foreign exchange exposures within definedparameters through use of hedging instruments such as forward contracts. The managementidentifies elements of risks which may threaten the existence of the Company and havedeveloped and implemented risk management system for mitigating the same. The matter ofconcern however remains shortage of skilled labour resulting in higher labour cost. Inorder to overcome this problem your Company is laying stress on in-house training andskill 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.
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. Non-complianceif any is seriously taken by the management and corrective actions are taken immediately.
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 Assets Verification is done on an annual basis at alllocations.
4. The Companys Books of Accounts are maintained in Oracle (ERP) and transactionsare executed through Oracle (ERP) setups to ensure corrections / 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 Companys Statutory Auditors have in their report confirmed the adequacy ofthe internal control procedures.
EXPANSION AND NEW PROJECT
Your Company continues to upgrade its process and products. In the current year themanagement plans to consolidate on all the production facilities and develop morevalue-added products bringing in better realization.
A series of new products are being developed for the North American markets and theCompany has received international certification for several of its new products whichshall lead to growth in turnover.
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.
Your Directors have recommended a dividend of 7% ( Re. 0.70 per Equity Share of Rs.10each) for the financial year ended March 312016 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.29.13 lacs. The dividend will bepaid to members whose names appear in the Register of Members as on 21st September 2016in 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 fulloperation as required under the statutes.
SUBSIDIARY AND ASSOCIATE COMPANIES
The Company does not have any Subsidiary or Associate Companies.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year under review Mr. Debajyoti Chakrabarti resigned as Director of theCompany. The Board places on record its appreciation for the valuable contributions madeby Mr. Debajyoti Chakrabarti.
In accordance with the provisions of the Companies Act 2013 and as per the Articles ofAssociation of the Company Mr. Ravindra Prakash Sehgal (DIN 00119477) Managing Directorwill retire by rotation at the ensuing Annual General Meeting and being eligible offershimself for reappointment. The Board of Directors at its meeting held on 27th May 2016approved the re-appointment of Mr. Arun Kumar Bose (DIN 00131295) as the Whole timeDirector of the Company for a further period of three years with effect from 1.4.2016. Mr.Arun Kumar Bose is subject to retirement by rotation.
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 appointment/re-appointment of the above Directors with a viewto avail their valuable advices and wise counsel. A brief profile of the above Directorsseeking appointment/re-appointment required under Regulation 34 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 is given in the Notice of AGM.
Dr. Sephali Roy ( DIN 07151823) appointed on 9.4.2015 continues as the Women Directoron the Companys 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 34 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 dutiesresponsibilities. The familiarisation programme is available on the companyswebsite: www.carnationindustries.com
ANNUAL EVALUATION OF BOARDS PERFORMANCE
Pursuant to the provisions of the Companies Act 2013 and Regulation 34 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carriedout an annual performance evaluation of its own performance that of its Committees andindividual 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 on26.5.2015 12.8.2015 12.11.2015 and 12.2.2016. 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:
Appointed w.e.f. 9.4.2015
**Ceased to be a Director w.e.f. 27.10.2015
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 withcomposition meetings held and attended during the year under review are provided below:
During the financial year ended 31st March 2016 four Audit Committee meetings wereheld on 26.5.2015 30.7.2015 12.11.2015 and 12.2.2016. The composition number ofmeetings held and the attendance of the members at these meetings are as follows:
* Ceased to be a Member w.e.f. 27.10.2015.
Appointed w.e.f. 12.11.2015.
NOMINATION AND REMUNERATION COMMITTEE
During the year ended 31st March 2016 two meetings were held on 26.5.2015 and12.2.2016.
The compositon number of meetings held and the attendance of the members at thesemeetings are as follows:
*Ceased to be a Chairman and Member w.e.f. 27.10.2015 **Appointed w.e.f. 12.11.2015.
STAKEHOLDERS RELATIONSHIP COMMITTEE
During the financial year ended 31st March 2016 two Committee meetings were held on8.7.2015 and 12.2.2016. The compositon number of meetings held and the attendence of themembers at these meetings are as follows:
MEETING OF INDEPENDENT DIRECTORS
During the year under review a meeting of Independent Directors was held on 29thMarch 2016 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 Companys management andthe Board of Directors of the Company.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors Responsibility Statement it is hereby confirmed that:
i) In the preparation of the annual accounts for the year ended 31st March 2016 theapplicable accounting standards read with the requirements set out under Schedule III tothe Companies Act 2013 have been followed and there are 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 31st March 2016 and of the profitof the 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.
During the financial year 2015-16 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. 2015-2016.
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.
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 to be disclosed under the Act are provided in "Annexure-A" to this report.
RELATED PARTY TRANSACTIONS
During the financial year 2015-16 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 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 2015-16 there were no transactionswith related party which qualify as material transactions under the Listing Agreement.Accordingly the disclosure required under Section 134(3)(h) of the Act read with Rule8(2) of the Companies (Accounts) Rules 2014 in Form AOC-2 is not applicable to yourCompany.
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 ofDirectors at its meeting held on 13th November 2014 formulated the Remuneration Policy ofthe Company. 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:
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 thisreport.
Further none of the employees of the Company are in receipt of remuneration exceedingthe limits prescribed under Rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014.
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.
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 and on the recommendation of the AuditCommittee has recommended for the ratification of the Members the appointment of M/s Jain& Bagaria from the conclusion of the ensuing AGM till the conclusion of the 34th AGM.Appropriate resolution in respect of the above is appearing in the Notice convening the33rd AGM of the Company.
In this regard the Company has received a certificate from the Auditors to the effectthat if they are re-appointed it would be in accordance with the provisions of Section141 of the Companies Act 2013.
There are no reservations qualifications or adverse remarks contained inAuditors Report attached to the Balance Sheet as at 31st March 2016.
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.
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. The Secretarial Audit Report does not contain any qualificationreservation or adverse remark.
LOANS GUARANTEES AND INVESTMENTS
The Company has not lent out any money or made any investment or provided any guaranteeduring the year under review.
SIGNIFICANT MATERIAL ORDERS PASSED BY REGULATORS /COURT
There are no significant material orders passed by the regulator/court which wouldimpact 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.
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 website at its weblink:
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 2016 the Company has not received anycomplaints pertaining to sexual harassment.
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.