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Coromandel Agro Products and Oils Ltd.

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Coromandel Agro Products and Oils Ltd. (COROMANDELAGRO) - Director Report

Company director report

FOR THE YEAR ENDED MARCH 31 2016

Dear Shareholders

Your Directors have pleasure in presenting the 40th Annual Report of theCompany together with the Audited Statement of Accounts for the year ended 31st March2016.

FINANCIAL RESULTS

Summary of Financial performance of the Company for the Financial Year 2015-16 isdepicted below:

Particulars Year Ended 31-03-2016 Year Ended 31-03-2015
Rs. Rs.
Revenue from operations 1411779157 1313478932
Other income 8523274 7493877
Operating Expenditure 1384736576 1287747236
Profit before Interest Depreciation &
Tax 35565855 33225573
Depreciation 9117199 9328319
Interest 18452221 23701682
Profit before tax 7996435 195572
Provision for income tax
i) Current year Tax (4200000) -
ii) Deferred Tax 1790893 1247379
Profit after tax 5587328 1442951
Profit/ (Loss) Brought forward from
previous years 86096919 84653968
Profit/ (Loss) Carry forward to Balance
Sheet 90495712 86096919
Earnings per share (Basic/ Diluted) 7.07 1.83

STATE OF AFFAIRS OF THE COMPANY AND FUTURE OUTLOOK:

The Company passed through a critical phase during the year under review in view ofrecession in the global economy which resulted to prevail cotton linters export pricesand edible oil prices at low level. Cotton crop severely failed due to draught conditionsin the cotton growing area especially in Andhra and Telangana Regions. Failure of cropresulted to fall in processing volumes of cotton seed from 70438 MT to 64957 MT duringthe year under review.

Further Government of India announced higher Minimum Support Price for Cotton kapaswhich caused substantial increase in cottonseed prices. Tamilnadu wind power turbine didnot generate power as per the estimates because of bad weather conditions during the yearunder review.

As the weather forecast given by the experts is very positive in cotton growing areaswhich may yield better volumes and improve the availability of cottonseed your Directorsare optimistic in utilizing the full production capacities to ensure better workingresults in the ensuing years.

EXPORT AND FOREIGN EXCHANGE EARNINGS:

Your Directors wish to inform that the Company has exported 1727.875 MT of CottonLinters worth Rs. 425.78 lakhs during the year under review as against 3985.480 MT worthRs. 805.84 lakhs in the previous year. The company has not exported Cottonseed Hullsduring the year (exports of Cotton Seed Hulls during the previous year was 1020.240 M.T.Worth Rs. 103.58 lakhs).

EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in form MGT-9 as requiredunder Section 92 of the Companies Act 2013 is included in this Report as Annexure - I andforms an integral part of this Report.

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Mr. Maddi Lakshmaiah (DIN- 00013387) and Mr. Maddi Venkateswara Rao (DIN- 00013393)retire by rotation under Article 122 of the Articles of Association of the Company andbeing eligible offer themselves for reappointment as Directors. The Board recommendstheir reappointment.

NUMBER OF BOARD MEETINGS:

During the Financial Year 2015-16 Four (4) Meetings of the Board of Directors of theCompany were held viz 30th May 2015 14th August 2015 13thNovember 2015 and 10th February 2016 with a gap not exceeding a period of120 days as prescribed under the Act.

DIRECTORS RESPONSIBILITY STATEMENT:

In conformity with the provisions under Section 134 (3) (c) which is introduced by theCompanies Act 2013 your directors confirm that:-

• in the preparation of the annual accounts for the year ended March 31 2016 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed and there are no material departures from the same;

• b) the Directors have selected sound accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 31 2016 andof the profit of the Company for the year ended on that date :

c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities

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

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

f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS:

During the year under review one meeting of Independent Directors was held on 10thFebruary 2016 in compliance with the requirements of Schedule IV of the Companies Act2013.

All the Independent Directors of the Company have declared that they meet the criteriaof Independence in terms of Section 149(6) of the Companies Act 2013 and that there is nochange in status of Independence

AUDIT COMMITTEE:

(a) BRIEF DESCRIPTION OF TERMS OF REFERENCE:

The Terms of Reference of this committee cover the matters specified for AuditCommittee under Section 177 of the Companies Act 2013 and as follows:

a. Oversight of the Company s financial reporting process and the disclosure of itsfinancial information to ensure that the financial statement is correct sufficient andcredible.

b. Recommending the appointment and removal of external auditor fixation of audit feeand also approval for payment for any other services.

c. Reviewing with management the annual financial statements before submission to theBoard focussing primarily on:

- Any changes in accounting policies and practices

- Major accounting entries based on exercise of judgment by management

- Qualifications in draft Auditors Report

- Significant adjustments arising out of audit

- The going concern assumption

- Compliance with stock exchange and legal requirements concerning financial statements

- Any related party transactions i.e. transactions of the company of material naturewith promoters or the management their subsidiaries or relatives etc. that may havepotential conflict with the interests of the Company at large.

d. Reviewing with the management external and internal auditors and the adequacy ofinternal control systems.

e. Reviewing the adequacy of internal audit function including the structure of theinternal audit department staffing and seniority of the official heading the departmentreporting structure coverage and frequency of internal audit.

f. Discussion with internal auditors of any significant findings and follow up thereon.

g. Reviewing the findings of any internal investigations by the internal auditors intomatters where there is suspected fraud or irregularity or a failure of internal controlsystems of a material nature and reporting the matter to the Board.

h. Discussion with external auditors before the audit commences the nature and scopeof audit as well as have post audit discussion to ascertain any area of concern.

i. Reviewing the Company s financial and risk management policies.

j. Other matters as assigned/specified by the Board from time to time.

(b) COMPOSITION MEETINGS AND ATTENDANCE DURING THE YEAR:

As on 31st March 2016 The Audit Committee comprises of Three Independentcum Non-Executive Directors. The committee comprises as follows:

Directors Chairman/ Member Category
Mr.Vadlamani Venkata Subramanya Ravi Chairman I & N.E.D
Mrs. Rallabhandi Lakshmi Sarada Member I & N.E.D
Mr. Lakkaraju Shyama Prasad Member I & N.E.D

During the year the Audit Committee was constituted under Section 177 of the CompaniesAct 2013 and its meetings were held four times during the year ended march 31 2016.These were held on 30th May 2015 13th August 2015 12thNovember 2015 and 09th February 2016.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION:

The current policy is to have an appropriate mix of executive and independent directorsto maintain the independence of the Board and separate its functions of governance andmanagement. As on March 31 2016 the Board consists of six members three of whom areindependent directors. The Board periodically evaluates the need for change in itscomposition and size.

The policy of the Company on directors appointment and remuneration including criteriafor determining qualifications positive attributes independence of a director and othermatters provided under Sub-section (3) of section 178 of the Companies Act 2013 adoptedby the Board is recommended by the Nomination and Remuneration Committee. We affirm thatthe remuneration paid to the directors is as per the terms laid out in the nomination andremuneration policy of the Company.

NOMINATION AND REMUNERATION COMMITTEE:

(a) TERMS OF REFERENCE :

The Company had constituted the Nomination and Remuneration Committee under Section 178of the Companies Act 2013. The broad terms of reference are to determine and recommend toBoard Compensation payable to Executive Directors appraisal of the performance of theManaging Directors / Whole-time Directors and to determine and advise the Board for thepayment of annual commission/compensation to the Non-Executive Director and to recommendto the Board appointment/ reappointment and removal of Directors. To frame criteria fordetermining qualifications positive attributes and Independence of Directors and tocreate an evaluation framework for Independent Directors and the Board.

(b) COMPOSITION MEETINGS AND ATTENDANCE DURING THE YEAR :

The Nomination and Remuneration Committee comprises of total three Non-ExecutiveDirectors cum Independent Directors and it meets twice in a year.

The committee comprises as follows:

Directors Chairman/ Member Category
Mr.Vadlamani Venkata Subramanya Ravi Chairman I & N.E.D
Mrs. Rallabhandi Lakshmi Sarada Member I & N.E.D
Mr. Lakkaraju Shyama Prasad Member I & N.E.D

The Committee held two meetings during the year ended March 31 2016. These were heldon 13th August 2015 and 09th February 2016.

(c) SELECTION AND EVALUATION OF DIRECTORS:

The Board has based on recommendations of the Nomination and Remuneration Committeelaid down following policies:

1. Policy for Determining Qualifications Positive Attributes and Independence of aDirector

2. Policy for Board & Independent Directors Evaluation

(d) PERFORMANCE EVALUATION OF BOARD COMMITTEES AND DIRECTORS:

Based on the criteria laid down in the Policy for evaluation of Board and IndependentDirectors the Board carried out the annual performance evaluation of Board Committees andthe Independent Directors whereas at a separate meeting Independent Directors evaluatedthe performance of Executive Directors Board as a whole and of the Chairman. Nominationand Remuneration Committee also evaluated individual directors performance.

i) As per the said Policy evaluation criteria for evaluation Board inter alia covers:Composition in light of business complexities and statutory requirements; establishment ofvision mission objectives and values for the Company; laying down strategic road map forthe Company & annual plans; growth attained by the Company; providing leadership anddirections to the Company and employees; effectiveness in ensuring statutory compliancesand discharging its duties / responsibilities towards all stakeholders; Identificationmonitoring & mitigation of significant corporate risks; composition of variouscommittees laying down terms of reference and reviewing committee s working etc.

ii) Performance evaluation criteria for Executive Directors inter alia include: levelof skill knowledge and core competence; performance and achievement vis--vis budget andoperating plans; effectiveness towards ensuring statutory compliances; dischargingduties/responsibilities towards all stakeholders; reviewing/monitoring Executivemanagement performance adherence to ethical standards of integrity & probity;employment of strategic perception and business acumen in critical matters etc.

iii) Performance of Independent Directors is evaluated based on: objectivity &constructivity while exercising duties; providing independent judgment on strategyperformance risk management and Board s deliberations; devotion of sufficient time forinformed decision making; exercising duties in bona fide manner; safeguarding interests ofall stakeholders particularly minority shareholders; upholding ethical standards ofintegrity & probity; updating knowledge of the Company & its external environmentetc.

iv) Committees of the Board are evaluated for their performance based on: effectivenessin discharging duties and functions conferred; setting up and implementation of variouspolicies procedures and plans effective use of Committee s powers as per terms ofreference periodicity of meetings attendance and participation of committee members;providing strategic guidance to the Board on various matters coming under committee spurview etc.

(e) REMUNERATION POLICY FOR DIRECTORS:

The Committee has formulated Policy for Remuneration of Directors Key ManagementPerson and other employees. As per the Policy remuneration to Non-executive IndependentDirectors include:

a. Sitting Fees for attending meetings of the Board as well as Committees of the Boardas decided by the Board within the limits prescribed under the Companies Act. b.Travelling and other expenses they incur for attending to the Company s affairs includingattending Committee and Board Meetings of the Company.

• REMUNERATION TO EXECUTIVE DIRECTORS:

The appointment and remuneration of Executive Directors including Managing DirectorJoint Managing Director and Whole Time Director is governed by the recommendation of theRemuneration and Nomination Committee resolutions passed by the Board of Directors andShareholders of the Company. The remuneration package of Managing Director Joint ManagingDirector and Whole Time Director comprises of salary perquisites allowances and otherretirement benefits as approved by the shareholders at the General Meetings of theCompany.

• REMUNERATION TO NON-EXECUTIVE DIRECTORS:

The Non-Executive Directors are paid remuneration by way of Sitting Fees. The Non-Executive Directors are paid sitting fees for each meeting of the Board and Committee ofDirectors attended by them.

REPORT ON CORPORATE GOVERNANCE:

Your Directors are pleased to inform that as per SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 Corporate Governance Report with auditorscertificate thereon shall not be mandatory for the Company.

VIGIL MECHANISM:

The Company has set up vigil mechanism to enable the employees and Directors to reportgenuine concerns and irregularities if any in the Company noticed by them. The WhistleBlower Policy/ vigil mechanism has been posted on the Website of the Company(www.capol.in)

PARTICULARS OF LOAN GUARANTEES AND INVESTMENTS UNDER SECTION 186

There were no Loans Guarantees Investments and securities given/made/provided by theCompany during the Year.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

All related party transactions that were entered during the financial year were on anarm s length basis and were in the ordinary course of business. There are no related partytransactions made by the Company which may have a potential conflict with the interest ofthe Company at large and thus disclosure in Form AOC-2 is not required and the Details ofTransactions with the related parties were mentioned in the Notes forming part of theAccounts.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS OF THE COMPANY.

There are no significant and material orders passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company

AMOUNTS TRANSFERRED TO RESERVES

The Board of the company has decided/proposed not to carry any amount to its reserves.

EQUITY DIVIDEND

Your Board of Directors are pleased to recommend payment of dividend on equity sharesat 12.50% (Rs.1.25 per equity share). If approved at the ensuing 40th AnnualGeneral Meeting the total amount of dividend outgo (including dividend tax) will beRs.11.89 Lakhs for the financial year ended 31st March 2016.

AUDITORS

A. Statutory Auditors:

At the Annual General Meeting held on August 14 2015 M/s. A. Ramachandra Rao &Co. Chartered Accountants (Firm Registration No. 002857S) were appointed as statutoryauditors of the Company to hold office till the conclusion of the Annual General Meetingto be held in the calendar year 2017. In terms of the first proviso to Section 139 of theCompanies Act 2013 the appointment of the auditors shall be placed for ratification atevery Annual General Meeting. Accordingly the appointment of M/s. A. Ramachandra Rao& Co. Chartered Accountants as statutory auditors of the Company is placed forratification by the shareholders.

The Statutory Auditors of the Company have not reported any fraud as specified underthe second proviso of Section 143(12) of the Companies Act 2013 (including any statutorymodification(s) or re-enactment(s) for the time being in force).

The Auditors Report for fiscal 2016 does not contain any qualification reservation oradverse remark. The Auditors Report is enclosed with the financial statements in thisAnnual Report.

B. Secretarial Auditors:

Pursuant to provisions of Section 204 of the Companies Act 2013 read with Rule 9 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has engaged services of M/s. K. Srinivasa Rao & Co Company Secretaries inPractice Guntur to conduct the Secretarial Audit of the Company for the financial yearended March 31 2016. The detailed reports on the Secretarial Standards and SecretarialAudit in Form MR- 3 are appended as an Annexure III to this Report. There were noqualifications reservations or adverse remarks given by Secretarial Auditors of theCompany except non-compliance of section 203 of the Companies Act 2013 in respect toappointment the Company Secretary as Key Managerial Person and non-dematerialization ofequity shares.

The Board has made utmost effort for appointment of the Company Secretary as KMP butunable to appoint a Company Secretary due to lack of suitability of the Candidate to theprofile of the Company in terms of work location job profile and remuneration. TheCompany will be entering an agreement with the leading Depository Participants/Depositaries for dematerialization of equity shares of the Company. The dematerializationwill be completed soon.

C. Cost Auditors:

The Board of Directors of your Company on the recommendations made by the AuditCommittee at its meeting held on 25th May 2016 has approved the appointment ofM/s. Jithendra Kumar & Co Cost Accountants (Firm Registration No. 103347) Vijayawadaas the Cost Auditor of your Company to conduct the audit of cost records for the financialyear 2016-17. The remuneration proposed to be paid to the Cost Auditor subject to yourratification at the ensuing Annual General Meeting would not exceed Rs. 20000/- (Rupeestwenty thousands only) excluding taxes and out of pocket expenses if any.

Your Company has received consent from M/s. Jithendra Kumar & Co Cost Accountantsto act as the Cost Auditor for conducting audit of the cost records for the financial year2016-17 along with a certificate confirming their independence and arm s lengthrelationship.

MATERIAL CHANGES AND COMMITMENTS BETWEEN THE END OF FINANCIAL YEAR AND THE DATE OF THEREPORT

There are no material changes since 31st March 2015 and until the date of this report.

CONSERVATION OF ENERGY/TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO :

The information required to be given pursuant to Section 134 (3) (m) of the CompaniesAct 2013 read with Rule 8 (3) of the Companies (Accounts) Rules 2014 for the year endedMarch 31 2016 is given here below and forms part of the Director s Report (Annexure II)

PARTICULARS OF EMPLOYEES:

The information required under Section 197(12) of the Companies Act 2013 read withRule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 forms part of this Report in Annexure -IV. The above information is not being sentalong with this Report to the Members of the Company as per the provision of Section 136of the Companies Act 2013. Members who are interested in obtaining these particulars maywrite to the Managing Director at the Registered Office of the Company. The aforesaidAnnexure is also available for inspection by Members at the Registered Office of theCompany 21 days before the 40th Annual General Meeting and up to the date of the AnnualGeneral Meeting during the business hours on working days.

There were no employees in the Company as per Rule 5(2) of Chapter XIII the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014.

HUMAN RESOURCES:

Your Company firmly believes that employees are the most valuable assets and keyplayers of business success and sustained growth. Various employee benefits recreationaland team building programs are conducted to enhance employee skills motivation as also tofoster team spirit. Company also conducts in-house training programs to develop leadershipas well as technical/functional capabilities in order to meet future talent requirements.Industrial relations were cordial throughout the year.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The provisions of section 135 of the Act read with Companies (Corporate SocialResponsibility Policy) Rules 2014 are not applicable to the Company.

RISK MANAGEMENT:

During the year According to the Section 134 (3) (n) of the Act the company had laiddown a policy for management of risk. The risk management framework defines the riskmanagement approach of the Company and also includes the periodical review of such risks.The board periodically discusses the significant business risks identified by themanagement and the mitigation measures to address such risks.

INTERNAL CONTROL SYSTEM AND COMPLIANCE FRAME WORK :

The Company has an Internal Control System commensurate with size scale andcomplexity of its operations. The internal financial controls are adequate and areoperating effectively so as to ensure orderly and efficient conduct of businessoperations.

The Internal Control System of the Company has been designed to provide for:

• Accurate recording of transactions with internal checks and prompt reporting.

• Adherence to applicable Accounting Standards and Policies.

• Compliance with applicable statutes policies and management policies andprocedures.

• Effective use of resources and safeguarding of assets.

The Company has appointed Mr. P.L. Ranganadh and Mr. J.V.Kiran Kumar as InternalAuditors of the Company. The Audit Committee in consultation with the Internal Auditorsformulates the Scope functioning periodicity and methodology for conducting the internalaudit. The internal auditors carryout audit covering inter alia monitoring andevaluating the efficacy and adequacy of internal control systems in the Company itscompliance with operating systems accounting procedures and policies at all locations andsubmit their periodical internal audit reports to the Audit Committee. The internalauditors have expressed that the internal control system in the Company is effective. TheBoard has also put in place requisite legal compliance framework to ensure compliance ofall the applicable laws and that such systems are adequate and operating effectively.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:

As per the requirement of the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 ( Act ) and Rules made there under your Companyhas constituted Internal Complaints Committees (ICC). During the year Your Company hasnot received any complaints on Sexual Harassment under the Act.

PUBLIC DEPOSITS:

During the year under review your Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014 (including any statutory modification(s) orre-enactment(s) for the time being in force).

REGISTRAR S AND SHARE TRANSFER AGENTS:

Registrar and Share Transfer Agents of the Company are M/s Big share Services PrivateLimited 306 3rd Floor Right Wing Amrutha Ville Opp. Yashodha Hospital Raj BhavanRoad Somajiguda Hyderabad 500 082.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF:

Pursuant to the provisions of section 124 of the Companies Act 2013 the declareddividends which remained un paid or unclaimed for a period of seven years have beentransferred by the company to the Investor Education and Protection Fund (IEPF)established by the Central Government.

The following are the details of dividends paid by the Company and respective due datesfor transfer of unclaimed dividend to IEPF.

Dividend Year Date of Declaration of Dividend Due date for transfer to IEPF
2008-09 30-07-2009 31-08-2016
2009-10 14-07-2010 15-08-2017
2010-11 06-08-2011 07-09-2018
2012-13 05-08-2013 06-09-2020
2013-14 11-08-2014 12-09-2021

ACKNOWLEDGMENT:

The Directors express their sincere appreciation to the valued shareholders bankersand clients for their support.

By Order of the Board of Directors
Sd/-
(Maddi Lakshmaiah)
Place : CHILAKALURIPET Chairman
Date : May 25 2016. (DIN:00013387)

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