The Directors of Haryana Leather Chemicals Ltd. are pleased to present the 32nd AnnualReport and Audited Statement of the Company's accounts for the year ended on 31st March2017.
A summary of the financial results for the year 2016-2017 is given below:
| ||2016 - 17 ||2015 - 16 |
| ||(Rs. in Lacs) ||(Rs. in Lacs) |
|Sales Turnover (Net of Excise) ||3905.42 ||3972.16 |
|Gross Profit ||403.26 ||423.01 |
|Deductions: || || |
|Depreciation ||104.80 ||113.09 |
|Interest ||2.88 ||13.31 |
|Profit before tax ||295.58 ||296.61 |
|Less: Provision for Income Tax for the year ||91.86 ||91.06 |
|Less: Provision for taxation / FBT earlier year ||0.00 ||0.00 |
|Add: Provision for Income Tax written back ||1.12 ||0.95 |
|Less: Previous year's adjustment ||2.33 ||0.23 |
|Less/(Add): Deferred tax liability ||4.64 ||3.18 |
|Profit after tax and available for appropriation ||200.28 ||203.09 |
|Less: Provision for dividend ||39.27 ||39.27 |
|Less: Provision for dividend tax ||7.99 ||6.67 |
|Less: Transfer to general reserve ||32.00 ||35.00 |
|Profit Carried to Balance Sheet ||121.02 ||122.15 |
The net profit from the operations during the year 2016-17 remain same as last year ascompared to previous year's profits. Inspite of recessionary trends in Indian leatherindustry. Overall sales turnover is lower than last year mainly due to drop in domesticsale.
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- Mr. Pradeep Behl (DIN: 00703855) Mr. Marco Medini (DIN: 06709885) and Mr. Vijay KumarGarg (DIN: 00236460) retire by rotation at the forthcoming Annual General Meeting to beheld on 23rd September 2017 and being eligible they offer themselves for re-appointment.
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 not eligiblefor re-appointment instead M/s. AKR & Associates Chartered Accountants (FirmRegistration No. 021179N) offers themselves for the appointment as Statutory Auditors ofthe Company. Their appointment if made will be in accordance with section 139 and 142 ofthe Companies Act 2013 (hereinafter referred to the "Act").
The Company has received letter from the Statutory Auditors consenting to theappointment and a confirmation to the effect that their appointment would be within theprescribed limits and that they do not suffer from any disqualifications under Section 141of 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. 500000.00or above for one month or part of the month or Rs. 6000000.00 or above for one yearwhose particulars are required to be mentioned u/s 197 of the Companies Act 2013.
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 2016-17 is annexed herewith as Annexure-B'. The Secretarial AuditReport does not contain any qualification reservation adverse remark or disclaimer.
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 2016-17.
The Company is properly maintaining its cost Record internally.
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 2008-2009amounting Rs. 219355.00 the Board has taken necessary steps to transfer the unpaid /unclaimed dividend of Equity Shareholders for the year 2008-2009 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 theCompany.
(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 adequate safeguardsagainst victimization of employees who avail of the mechanism and also provides for directaccess to the Chairman of the Audit Committee. It is affirmed that no personnel of theCompany has been denied access to the Audit Committee.
1. Policy and Procedure for disclosure enquiry and disciplinary action 1.1 Concernswhich 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.
3 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 shallbe placed before the Audit Committee at the meeting held immediately after such finaldecision.
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.
The Company has not accepted/renewed any fixed deposits during the period under review.
The Company has taken the requisite steps to comply with the recommendations concerningCorporate Governance. A separate statement on Corporate Governance together with acertificate on the compliance of conditions of corporate governance as stipulated underSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 has been obtainedfrom the Statutory Auditors of the Company and the same has been given below as Annexure.
DIRECTORS' RESPONSIBILITY STATEMENT AS PER SECTION 134(5) OF THE COMPANIES ACT 2013.
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 2017.
The Board of Directors of the Company confirms that: a. During the preparing of theannual accounts the applicable accounting standards have been followed and no materialdeparture has taken place. b. The selected accounting policies were applied consistentlyand the Directors made judgments and estimates that are reasonable and prudent so as togive an accurate view of the state of affairs of the Company as on March 31 2017 and ofthe profit of the Company for the year ended on that date. c. Proper and sufficient carehas been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities. d. Annual accounts have beenprepared on an ongoing concern basis. e. The Directors have devised proper systems toensure compliance with the provisions of all applicable laws and that such systems wereadequate 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 no materiallysignificant related party transactions made by the Company with Related Parties which mayhave a potential conflict with the interest of the Company at large. All Related PartyTransactions 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.
The Company's quality control systems have ensured systematic redressal of qualityissues and feedback from the customer base to their full satisfaction. ISO 9001:2008 andISO 14001:2004 system are regularly audited internally and externally and have ensuredvery tight quality control and variances to the customer are minimized. The addition ofnew automatic titration platform has significantly reduced laboratory response time ofimportant quality tests.
The Company continues to update guidelines on Restricted Substances (RS) applicable toleather industry from time to time. Company's "Green -Trek" ethos have beenwidely recognized by the customers. Under "Green -Trek Firewall" conceptinternal screening calibrated with external testing has eliminated any possible inclusionof banned substances listed under REACH (Registration Evaluation and Authorization ofChemicals).
The export continues to show downward trends without any significant sign of revival inCompany's main export market of China. The Company through sustained contact has ensuredmaintenance of dealer and customer base but the volumes have remained sluggish as mostcustomers are running at lower capacities. The Company is maintaining its close ties withdealers to learn from market trends for future growth. The immigrant problem and tensionbetween Russia and Turkey has seriously affected leather trade in this leather belt ofSyria Turkey Russia which is closely interconnected. Further sales promotioneffort in this belt has been suspended due to safety concern of marketing personnel.
African countries business has been stable with improved satisfaction level of thedealers and the users. The Company has also identified few growth prospects in KenyaTanzania and Morocco. Exports to neighboring countries mainly Pakistan and Bangladeshhave also remained stable. In Iran inspite of a good start last year the local electionsmade business deals tougher. But based on new communications from dealers and the usersthe prospects for the coming year are promising. The Company is committed to expand itssampling and demonstration exercise in Iran.
To Company successfully maintains Star Export Status' granted by the DGFTMinistry of Commerce & Industry Govt. of India vide Certificate No. A/1877 as perForeign Trade Policy 2015-2020.
The Company has fully stabilized on new technologies on material handling and storagefor liquids resulting in improved safety and process efficiency. During the year variousprevailing technologies on powder handling were evaluated for a spill-proof and fullycontained transfer of powder raw materials during process and final bagging. Based ondiscussions and presentations from powder handling Companies a vacuum based technologyhas been shortlisted for phase-wise implantation in the year 2017-18.
In the context of powder properties from Spray Dryers the Company undertook aconsulting project on "Computational Fluid Dynamics" (CFD) jointly with IITPatna and IIT Mumbai. Senior professors and CFD experts from both these institutescollected base data for evaluation and also visited the plant to evaluate processconditions. Their suggestions supported by CFD analyses report and Scan ElectronMicroscopic ( SEM) Images have shown the direction for optimizing the process conditionsof Spray Dried powder products.
Though there was drop in sales revenue as compared to last year but considering theprofitability the Directors are pleased to recommend dividend @8% this year also.
PERSONNEL & INDUSTRIAL RELATION
The year saw exemplary collaboration between managers and workers of the Company inadapting variousprocess improvements and modernization projects. There is completecordiality between management and its workforce based on mutual trust. The practice ofrewarding performance bonus has been maintained.
One of the Senior Managers of the Company Mr. Ramesh Goyal (General Manager-Engineering) was found indulging in tampering of Company's EDP structure and stealing ofproprietary technical and commercial data.
The Company has initiated legal proceeding against Mr. Ramesh Goyal for data theftunder IT Act - section 66.
ENVIRONMENT & POLLUTION CONTROL MEASURES
The Company has successfully transitioned to ZLD (Zero Liquid Discharge) amonumental step towards water conservation. The Company is first of its kind in the Indianlandscape of Leather Chemical production. This water reclaim system is based on MechanicalVapor Recompression (MVR) technology using vacuum evaporation and condensation forreclaiming distilled water out of the waste streams.
Environmental Policy outlined under ISO 14001:2004 for improving the workingenvironment continues to yield improvements in housekeeping safety and security at workplace.
The Directors extend their most sincere thanks to all employees for their support ineasy adoption of new production systems technologies and environmental policy. Company'ssuppliers dealers service providers and technical consultants have continued theirwhole hearted support and the Directors deeply appreciate their role. The Directors arethankful to the esteemed shareholders for their continued support and the confidencereposed in the Company and its management.
| ||For and on behalf of the Board of Directors of Haryana Leather Chemicals Limited |
|Place : Gurugram ||NARENDRA KUMAR JAIN ||PANKAJ JAIN |
|Date : 8th August 2017 ||Chairman ||Managing Director-cum-Vice Chairman |