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Haryana Leather Chemicals Ltd.

BSE: 524080 Sector: Industrials
NSE: N.A. ISIN Code: INE681F01018
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NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 53.35
PREVIOUS CLOSE 50.85
VOLUME 3610
52-Week high 56.90
52-Week low 31.05
P/E 13.34
Mkt Cap.(Rs cr) 26
Buy Price 50.80
Buy Qty 200.00
Sell Price 52.95
Sell Qty 9.00
OPEN 53.35
CLOSE 50.85
VOLUME 3610
52-Week high 56.90
52-Week low 31.05
P/E 13.34
Mkt Cap.(Rs cr) 26
Buy Price 50.80
Buy Qty 200.00
Sell Price 52.95
Sell Qty 9.00

Haryana Leather Chemicals Ltd. (HARYANALEATHER) - Director Report

Company director report

Dear Shareholders

The Directors of Haryana Leather Chemicals Ltd. are pleased to present the 31 st AnnualReport and Audited Statement of the Company’s accounts for the year ended on 31stMarch 2016.

FINANCIAL RESULTS

A summary of the financial results for the year 2015-2016 is given below:

2015 -16 2014 - 15
(Rs. in Lacs) (Rs. in Lacs)
Sales Turnover (Net of Excise) 3972.16 4238.05
Gross Profit 423.01 357.94
Deductions:
Depreciation 113.09 134.01
Interest 13.31 20.74
Profit before tax 296.61 203.19
Less: Provision for Income Tax for the year 91.06 61.09
Less: Provision for taxation / FBT earlier year 0.00 1.39
Add: Provision for Income Tax written back 0.95
Less: Previous year’s adjustment 0.23 1.56
Less/(Add): Deferred tax liability 3.18 3.23
Profit after tax and available for appropriation 203.09 135.92
Less: Provision for dividend 39.27 34.36
Less: Provision for dividend tax 6.67 5.84
Less: Transfer to general reserve 35.00 23.41
Profit carried to balance sheet 122.15 72.31

OPERATIONS

The net profit from the operations during the year 2015-16 registered an increase of50% as compared to previous year’s profits. Inspite of recessionary trends in Indianleather industry the Company recorded a slight growth in domestic sales. Overall salesturnover is lower than last year by nearly 7% mainly due to drop in exports which are atRs.1252 lacs against previous year exports of Rs.1314 lacs.

DIRECTORS

The composition of the Board of Directors of the Company is furnished in the CorporateGovernance Report annexed to this report.

Pursuant to the provisions of the Articles of Association of the Company the Directors- Dr. K. S. V. Menon (DIN: 00920088) Mr. Massimo Medini (DIN: 00926147) and Lt. Gen.(Retd.) Harish Chandra Dutta (DIN: 00920009) retire by rotation at the forthcoming AnnualGeneral Meeting to be held on 23rd September 2016 and being eligible they offerthemselves for re-appointment.

STATUTORY AUDITORS

The statutory auditors of the Company M/s S. C. Dewan & Co. Chartered AccountantsPanchkula are retiring at the forthcoming Annual General Meeting and they are eligible forre-appointment offers themselves for the same. Their appointment if made will be inaccordance with section 139 and 142 of the Companies Act 2013 (hereinafter referred tothe "Act").

The Company has received letter from the Statutory Auditors consenting to there-appointment and a confirmation to the effect that their appointment would be withinthe prescribed limits and that they do not suffer from any disqualifications under Section141 of the Companies Act 2013 and the rules made thereunder.

Auditor’s report does not need any comments from the Directors.

PARTICULARS OF EMPLOYEES u/s 134(3) of the Companies Act 2013

The information required pursuant to Section 134 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofDirectors Key Managerial Personnel (KMP) and Employees of the Company are provided asfollows:

The Company did not employ any person drawing a remuneration of Rs. 500000.00 orabove for one month or part of the month or Rs. 6000000.00 or above for one year whoseparticulars are required to be mentioned u/s 197 of the Companies Act 2013.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s V. Jhawar & Co. a firm of Company Secretaries in Practice to undertakethe Secretarial Audit of the Company. The report on the Secretarial Audit carried out forthe year 2015-16 is annexed herewith as ‘Annexure-B’. The SecretarialAudit Report does not contain any qualification reservation adverse remark ordisclaimer.

COST AUDITOR’S COMPLIANCE

The Central Government has directed that a cost audit of the Company should beconducted in the manner specified in MCA order 52/26/CAB-2010 Dt. 24-01-2012 by a CostAccountant within the meaning of the Cost and Works Accountants Act 1959.

However as per Companies (cost records and audit) Rules 2014 notified by Ministry ofCorporate Affairs cost audit is not applicable to the Company by virtue of its turnoverbeing less than the prescribed limits. Therefore the Board did not proceed with theappointment of cost auditor and cost audit for the year 2015-16.

The Company is properly maintaining its cost Record internally.

WOMAN DIRECTOR

In terms of Section 149 of the Act 2013 read with Rule 3 of the Companies (Appointmentand Qualification of Directors Rules 2014 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company is required to have a woman Director on itsBoard. Mrs. Sippy Jain is already appointed as the Whole time Director of the Company.

TRANSFER OF FUNDS TO INVESTOR EDUCATION AND PROTECTION FUND

The Company is distributing dividend to its shareholders since 2006 on recommendationof the shareholders of the Company. For the unclaimed dividend for the year 2007-2008amounting Rs. 183569.00 the Board has taken necessary steps to transfer the unpaid /unclaimed dividend of Equity Shareholders for the year 2007-2008 to the Investor Educationand Protection Fund (IEPF) of the Central Government established under section 124 and 125of the Companies Act 2013.

NOMINATION AND REMUNERATION POLICY

The Nomination and Remuneration Committee of Directors (NRC) reviews the composition ofthe Board of Directors of the Company to ensure that there is an appropriate mix ofabilities qualifications experience and diversity to serve the interests of allshareholders and the Company.

During the year in accordance with the requirements under Section 178 of the Act 2013and relevant clause of Listing Agreement the NRC formulated a Nomination and RemunerationPolicy to govern the terms of nomination / appointment and remuneration of

(i) Directors

(ii) Key Managerial Personnel (KMPs) and

(iii) Senior Management Personnel (SMPs) of the Company.

(iv) The same was approved The NRC also reviews succession planning of both SMPs andBoard. The Company’s approach in recent years is to have a greater component ofperformance linked remuneration for SMPs.

The process of appointing a Director / KMPs / SMPs is that when a vacancy arises oris expected the NRC will identify ascertain the integrity qualification appropriateexpertise and experience having regard to the skills that the candidate will bring to theBoard / Company and the balance of skills added to that of which the existing membershold.

The NRC will review the profile of persons and the most suitable person is eitherrecommended for appointment by the Board or is recommended to shareholders for theirelection. The NRC has discretion to decide whether qualification expertise and experiencepossessed by a person are sufficient / satisfactory for the concerned position.

NRC will ensure that any person(s) who is / are appointed or continues in theemployment of the Company as its executive chairman managing Director whole-timeDirector shall comply with the conditions as laid out under Schedule V to the Act 2013.

NRC will ensure that any appointment of a person as an independent Director of theCompany will be made in accordance with the provisions of Section 149 read with ScheduleIV of the Act 2013 along with any other applicable provisions and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

While every employee’s contract of employment stipulates that he will not discloseconfidential information about the employer’s affairs in order to bring aboutaccountability and transparency there should be a mechanism to enable employees to voicetheir concerns where they discover information which they believe shows seriousmalpractice impropriety abuse or wrong doing within the organization. The employeesshould be encouraged and assisted to raise concerns without any fear of victimizationsubsequent discrimination or disadvantage. If the employee has acted in good faith it doesnot matter if one is mistaken and the Company shall ensure protection from any harassmentor victimization of/against the disclosing employee.

The Company has adopted a Whistle Blower Policy which applies to all permanentemployees of the Company including those who are on probation and comes into effect fromApril 1 2014 to provide a formal mechanism to the Directors and employees to reporttheir concerns about unethical behaviour actual or suspected fraud or violation of theCompany’s Code of Conduct or ethics policy. The Policy provides for adequatesafeguards against victimization of employees who avail of the mechanism and also providesfor direct access to the Chairman of the Audit Committee. It is affirmed that no personnelof the Company has been denied access to the Audit Committee.

1. Policy and Procedure for disclosure enquiry and disciplinary action

1.1 Concerns which may be raised-illustrative list

A whole variety of issues could fall under malpractice impropriety abuse and wrongdoing some of which are listed below:

• Breach of any Policy or Manual or Code adopted by the Company.

• Fraud and corruption (e.g. receiving bribes).

• Health and safety risks including risks to the public as well as otheremployees e.g. faulty electrical equipment).

• Any sort of financial malpractice.

• Abuse of power (e.g. Bullying/harassment).

• any unlawful act including failure to comply with legal or statutory obligationfor and on behalf of the Company.

• Any other unethical or improper conduct.

1.2 Concerns - how to raise/whom to disclose

The concern should be disclosed through letter e-mail telephone fax or any othermethod to any of the following persons who shall comprise the Corporate ComplianceCommittee headed by the Managing Director & Chairman reporting directly to the AuditCommittee of the Board.

The Corporate Compliance Committee comprises the Managing Director & Chairman theExecutive Director & Company Secretary the CEO and the HR.

All relevant information regarding the concern should be disclosed not later than 1year from the date on which the employee came to know of the concern. Upon receipt of thedisclosure the member of the Compliance Committee receiving the same shall furnish a copyto the Managing Director & Chairman who shall decide which member shall be responsiblefor the investigation.

1.3 Procedure for investigation

• Obtain full details and clarifications of the complaint.

• Consider the involvement of the Company’s Auditors or any other externalinvestigation agency or person.

• Fully investigate into the allegation with the assistance where appropriate ofother individuals/bodies.

• Prepare a detailed written report and submit the same to the ComplianceCommittee not later than 30 days from the date of disclosure of the concern.

Based on the findings in the written report and after conduct of such furtherinvestigation as it may deem fit the Compliance Committee shall take a decision in thematter not later than 30 days from the date of the written report. If the complaint isshown to be justified then they shall invoke disciplinary or other appropriate actionagainst the defaulting employee.

A copy of all decisions of the Compliance Committee shall be placed before the AuditCommittee at the meeting held immediately after such final decision.

The employee making the disclosure as well as all other persons involved in theinvestigation and the members of the Compliance Committee shall not make public theConcern disclosed except with the prior written permission of the Audit Committee exceptwhere the employee is called upon to disclose this by any judicial process.

FIXED DEPOSIT

The Company has not accepted/renewed any fixed deposits during the period under review.

CORPORATE GOVERNANCE

The Company has taken the requisite steps to comply with the recommendations concerningCorporate Governance.

A separate statement on Corporate Governance together with a certificate on thecompliance of conditions of corporate governance as stipulated under SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 has been obtained from theStatutory Auditors of the Company and the same has been given below as Annexure.

DIRECTORS’ RESPONSIBILITY STATEMENT AS PER SECTION 134(5) OF THE COMPANIES ACT2013.

The Board of Directors acknowledge the responsibility for ensuring compliances with theprovisions of section 134(3)(c) read with section 134(5) of the Companies Act 2013 in thepreparation of Annual Accounts for the financial year ended on 31st March 2016.

The Board of Directors of the Company confirms that:

a. During the preparing of the annual accounts the applicable accounting standardshave been followed and no material departure has taken place.

b. The selected accounting policies were applied consistently and the Directors madejudgments and estimates that are reasonable and prudent so as to give an accurate view ofthe state of affairs of the Company as on March 31 2016 and of the profit of the Companyfor the year ended on that date.

c. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.

d. Annual accounts have been prepared on an ongoing concern basis.

e. The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Related Party Transactions

All related party transactions that were entered into during the financial year were onan arm’s length basis and were in the ordinary course of business. There are nomaterially significant related party transactions made by the Company with Related Partieswhich may have a potential conflict with the interest of the Company at large. All RelatedParty Transactions are placed before the Audit Committee as also the Board for approval.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT-9 is annexureherewith in the Annual Report.

QUALITY CONTROL

The Company has successfully implemented the latest guidelines on Restricted Substancesapplicable to leather industry and exports of Company’s products. Various initiativesunder Company’s "Green -Trek" project have been widely recognized by thecustomers. "Green - Trek" concept ensures internal screening that is wellcalibrated with external testing by international laboratories and has secured the Companyfrom any unforeseen inclusion of any banned substance as defined under REACH(Registration Evaluation and Authorization of Chemicals).

ISO 9001:2008 and ISO 14001:2004 system have enabled our Company to ensure very tightquality control so that variances are minimized to lowest levels. Improved coordinationbetween quality control and production department secondary checks on time sensitive rawmaterial and batch size optimization yielded improved quality standards and reducedre-processing time. These areas will continue to drive future improvements in qualitystandards.

EXPORT OPERATIONS

The Company continues to struggle with export growth targets in the backdrop of a hugerecession in Company’s main export market of China. Although the Company continues tomaintain its dealer and customer base but volumes have declined as most of them arerunning at much lower capacity. China will still remain the biggest export opportunity andthe Company is maintaining its close ties with regular interaction with dealers for futuregrowth. It is difficult to predict future prospects due to prevailing economic complexityin China.

Company’s new initiatives in some African countries have been successful withsignificant growth prospects. Exports to neighboring countries mainly Pakistan andBangladesh have remained stable. Lifting of sanctions in Iran may also bring new exportopportunities and the Company has made sufficient inroads into that market with samplingand demonstrations.

To build further momentum in exports the Company had applied for ‘Star ExportStatus’ which has been granted by the DGFT Ministry of Commerce & IndustryGovt of India vide Certificate No. A/1877 in accordance with the provisions of theForeign Trade Policy 2015-2020.

TECHNOLOGY DEVELOPMENT

The investments made in past two years on adopting new technologies for materialhandling and dosing system has drastically improved the production and process efficiency.SCADA based data logging and localized automation systems have significantly reducedchances of rejection or re-processing of batches resulting in more transparent productionmanagement.

The Company has finalized some designs for improved technology in packing and fillingsystems which will result in de-skilling of some production operations. These systems willbe implemented in FY 16-17.

The technology for production of Di-Sulphone Syntan is fully stabilized at plant level.The feedback from the seed marketing activity of PVC additives is being analyzed in detailand a plan for product modification is being finalized in consultation with a foreignexpert.

DIVIDEND

Even though there was a drop in sales revenue as compared to last year considering theprofitability the Directors are pleased to recommend the dividend @ 8% this year.

PERSONNEL & INDUSTRIAL RELATION

The workers of the Company participated actively in various modernization projects. Thestaff and workers have enthusiastically adopted various new production technologies andmanagement systems. Company’s relations with its workforce continue to enjoy mutualtrust and cordiality.

The management has maintained the practice of rewarding performance through yearlybonus and/or tenure extensions to ensure development and stability of the talent pool.

ENVIRONMENT & POLLUTION CONTROL MEASURES

In view of the urgency arising out of new statutory regulations relating to monitoringof waste water parameters the Company took some bold initiatives and designed a newsystem of treating waste water. The scheme has been approved by the state authorities.This new system is based on vacuum evaporation that allows reclaiming the water out of thewaste streams using minimum thermal energy-qualifying for a Zero Discharge concept.

The key objectives defined in ISO 14001:2004 for improving the working environment haveyielded huge improvements in housekeeping safety and security of Company’s strategicassets.

ACKNOWLEDGEMENT

The Directors extend their most sincere thanks to all employees for their support ineasy adoption of new production systems and technologies. Company’s suppliersdealers service providers and technical consultants have continued their whole heartedsupport and the Directors deeply appreciate their role. The Directors are thankful to theesteemed shareholders for their continued support and the confidence reposed in theCompany and its management.

For and on behalf of the Board of Directors of Haryana Leather Chemicals Limited

Place : Gurgaon NARENDRA KUMAR JAIN PANKAJ JAIN
Date : 4th August 2016

Chairman

Managing Director-cum-Vice Chairman

ANNEXURE-A

INFORMATION AS PER SECTION 134(3) OF THE COMPANIES ACT 2013 READ WITH RULE 8 OF THECOMPANIES (ACCOUNTS) RULES 2014 and FORMING PART OF THE DIRECTORS’ REPORT FOR THEYEAR ENDED 31st MARCH 2016.

A) CONSERVATION OF ENERGY

Total energy consumption and energy consumption per unit of production as per Form A ofthe Annexure to this rule is as under:

Form - A

Current Year Previous Year
2015 -16 2014-15
1. Power and Fuel Consumption
a) Electricity Purchased (KWH) 359257 386796
Total Amount (Rs.) 3635941 3530735
Rate / Unit (Rs.) 10.12 9.12
b) Own Generation
Through Diesel Generator
Unit (KWH) 49523 67003
Units / Ltr. of Diesel Oil 2.67 2.64
Cost / Unit (Rs.) 18.73 19.98
Coal
Quantity
Total Cost
Average Cost
Furnace Oil / HSD
Oil Quantity (K. Ltrs.) 137.24 154.06
Total Cost (Rs.) 6862000 8202154
Average Rate (Rs. / K. Ltr.) 50000 53239.99
Others / Internal Generation
Quantity
Total Cost
Rate Unit
2. Consumption per Unit of Production
Production (MT) 4329.98 4520.27
Electricity (KWH / MT) 94.40 100.17
Furnace / HSD Oil (Ltr. / MT) 31.69 34.08
Coal
Others

B) TECHNOLOGY ABSORPTION

a) Research & Development (R & D)

1. Specific area in which R & D was carried out:

A new system of dispersion of PUD was tested to bring consistency in colour andappearance of the end product. It was found that higher disperser speeds were notnecessary and by reducing batch size the control of transparency in dispersion is moreprecise. Based on pilot trials the new process of pre-polymer uptake has been adoptedwith full success.

The Company has adopted new SCADA software for more detailed logging of processparticularly in wet end production area. By adopting analog dial gauges and comparingreadings with digital meters the temperature control has become more precise across allreactors. Logging of additional parameters for trend charts has also become possible dueto the new software.

The Company tested a new system of valve bag filling for powder products. Based on theobservations made during initial trials additional work is to be carried out in future.This may also lead to some major changes in orientation of production machinery.

Due to urgency to qualify for Zero Liquid Discharge (ZLD) of waste water the Companyundertook research and development of a Vacuum Evaporator based on "Mechanical VaporRecompression" principals. This new system allows reclaiming the water out of thewaste water streams using minimum thermal energy. The new ZLD scheme has been approved bythe state authorities.

2. Benefits derived as a result of above R&D.

The new PUD dispersion technology has significantly improved batch to batch consistencyand reduced reprocessing time. The product quality now conforms to best internationalstandards and the PUD range can compete with the top international brands.

Through the new SCADA software remote monitoring of processes has been made possible.The senior managers can remotely view the process data and intervene instantly. Thelogging of entire process history has increased accountability of production supervisorswhich was not earlier possible.

The Vapour Compression system of effluent water has yielded back more than 90% waterand heat of the waste water. As the ground water is depleting around the factory areathis technology is of immense importance for long term sustainability of the Company.

3. Future Plan of Action:

The Company plans to review various testing methods of incoming and outgoing materialsand adopt more advanced and automated quality testing parameters. Presently highly skilledchemists perform these tests through manual titrations. The new generations ofauto-titrator are under consideration and the Company plans to invest around Rs 25 lacs inimporting the required capital equipment.

The Company will undertake research to automate the weighing and filling process ofpacking containers. For this a new technology using PLC based weight - controllers will betested. If successful the new controllers will be deployed wherever liquid finishedproducts are packed in drums.

The range of PVC additives launched a year ago has yielded very encouraging feedbackduring trials & test. To give additional thrust it is felt that processes like PVCfusion film casting and extrusion be simulated at lab scale for deeper understanding ofcustomer’s compounds and their behavior with Company’s additives. This willrequire research and a foreign consultant has been appointed to guide the research team inthis project.

4. R &D expenditure
a. Capital 0.00
b. Recurring : 68.63
c. Total : 68.63
d. Total R&D Expenditure : 1.73%

As percentage of total turnover

C) TECHNOLOGY ABSORPTION ADAPTATION & INNOVATION

(As per form B of annexure to this rule)

a. All indigenously developed technologies have been commercialized. The technology of"Polymeric Fatliquor" has been partially commercialized and test marketing ofsmall lots has begun using the pilot plant.

b. All previously imported technologies have been fully absorbed and commercialized.

D) FOREIGN EXCHANGE EARNINGS & OUTGO

a. The Company’s foreign exchange earnings from the exports (Inclusive of foreignexchange fluctuations) were Rs. 1252.79 lacs.

b. The expenditure in foreign exchange during the financial year under review isRs.162.54 lacs. This is related to payment towards raw materials import of capital goodspayment of overseas travel of Directors & Employees.

For and on behalf of the Board of Directors of Haryana Leather Chemicals Limited

Place : Gurgaon NARENDRA KUMAR JAIN PANKAJ JAIN
Date : 4th August 2016

Chairman

Managing Director-cum-Vice Chairman