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Innoventive Industries Ltd.

BSE: 533402 Sector: Metals & Mining
NSE: INNOIND ISIN Code: INE549I01011
BSE 00:00 | 04 Mar Innoventive Industries Ltd
NSE 05:30 | 01 Jan Innoventive Industries Ltd
OPEN 14.90
PREVIOUS CLOSE 14.70
VOLUME 6525
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52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 88
Buy Price 14.00
Buy Qty 200.00
Sell Price 14.80
Sell Qty 1000.00
OPEN 14.90
CLOSE 14.70
VOLUME 6525
52-Week high 14.90
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 88
Buy Price 14.00
Buy Qty 200.00
Sell Price 14.80
Sell Qty 1000.00

Innoventive Industries Ltd. (INNOIND) - Director Report

Company director report

To

The Members

Innoventive Industries Limited

Pune

We are delighted to present the report on our business and operations for the yearended 31st March 2016. Following are the financial highlights of the yearunder review:

1. FINANCIAL HIGHLIGHTS:

Particulars Year Ended March 31 2016 (Rs in Lacs except per share data) Year Ended March 31 2015 (Rs in Lacs except per share data)
Turnover / Income (Gross) 36863.43 37162.23
Turnover / Income (Net) 33521.52 34196.96
Other Income 388.29 370.64
Total Expenditures (Including Interest & Depreciation) 51402.75 57084.52
Profit Before Tax (17492.94) (22516.94)
Provision for Tax
Current
Deferred
MAT (Credit) - (455.54)
Tax for Earlier Period 4.23 (713.11)
Profit After Tax (17497.17) (21348.29)
Balance Brought forward from last year (49122.04) (27773.78)
Profit Available for Appropriation - -
Reversal - -
Proposed Dividend on Equity Shares - -
Dividend Distribution Tax - -
Surplus Carried over to Balance sheet (66619.26) (49122.04)
EPS (Face value - 10/- per equity share) (29.34) (35.79)

Note: Figures of previous year have been regrouped wherever necessary.

2. SUBSIDIARY COMPANIES:

In accordance with the Companies Act 2013 Accounting Standards AS-21 on ConsolidatedFinancial Statements and AS-27 on Financial Reporting of Interests in Joint Ventures andas prescribed by Regulation 33 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 the Audited ConsolidatedFinancial Statements are provided in this Annual Report.

In accordance with section 129(3) of the Companies Act 2013 a statement containingsalient features of the financial statements of the each of subsidiary and joint venturein Form AOC1 is provided as Annexure "A" to this report. The financialstatements of the subsidiaries are kept for inspection by the shareholders at theRegistered Office of the Company.

In accordance with third proviso to section 136(1) of the Companies Act 2013 theannual report and financial statements of each of the subsidiary companies have also beenplaced on the website of the Company ww.innoventive.in.

3. SUBSIDIARIES AND STEP-DOWN SUBSIDIARIES

The business of your Company is spread across various engineering sectors through itssubsidiaries as detailed below:

• Sankalp Engineering & Services Private Limited

• Sankalp Americas INC. (Closed w.e.f. 28th December 2015)

• Sankalp Middle East FZE

• Innovative Technomics Private Limited

• Saicon Steels Private Limited

• Seven Star Electrodes Private Limited

• Arihant Steel and Metal Wires Private Limited

• Arihant Auto Components Private Limited

• Innoventive Americas INC

• Salem Steel NA LLC

4. OPERATIONS

In spite of challenging year with respect to demand and financial position of companythe company was able to maintain its operational levels and achieved Gross Sales of Rs.368.63 Cr. against Rs. 371.62. in the previous year.

During FY 2015-16 we worked towards optimum operational efficiencies of our processes.We reduced our production costs and focused more on the manufacture of value addedproducts. There is improvement in operational efficiencies and benefits delivered fromcost reduction enable the company to achieve better results. Total expenditure afterproviding for depreciation for the year was Rs. 514.02 Cr. as against Rs. 570.84 Cr. inprevious year. Profit Before taxation stood at Rs. (174.92) Cr. as compared to the lastyear Rs. (225.16) Cr. After providing for taxation the net profit of the Company for theyear under review was placed at Rs. (174.97) Cr. as against Rs. (213.48) Cr. in theprevious year.

Due to favorable market conditions and on account of better realization company’sLoss after tax during the year under review had decreased due to moderate levels of RawMaterial prices throughout the year and also due to better realization value for thecompany’s products.

5. DIVIDEND & RESERVES

In view of the Losses and your company being in CDR process it is necessary to optimizeuse of resources to improve the situation of company. Your Directors have not recommendedany dividend for financial year ended 31st March 2016.

During the year under review no transfer is proposed to the General reserve.

6. MANAGEMENT DISCUSSION AND ANALYSIS

Discussion on the state of Company’s affairs is forming part of the ManagementDiscussion and analysis Report (MD&A). MD&A for the year under review asstipulated under SEBI Listing Regulations is presented in a separate section forming partof this Annual Report.

7. FIXED DEPOSITS

Your Company has not accepted any public deposits during the year under review.

8. PARTICULARS OF LOANS GUARANTEES & INVESTMENTS

Particulars of Loans Guarantees & Investments made during the year as requiredunder the provisions of Section 186 of the Companies Act 2013 (Hereinafter "TheAct") are given in the notes of Standalone Financial Statements.

Also pursuant to Schedule V of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirement) Regulations 2015 particulars of Loans/Advancesgiven to Subsidiaries have been disclosed in the notes to the Standalone FinancialStatements.

9. CORPORATE SOCIAL RESPONCIBILITY (CSR)

Your Company is committed to improve the quality of life of the work force and theirfamilies and also the community. Further the Company believes that undertaking activitiesin such a manner that help overall development of the society.

With the enactment of Companies Act 20 13 the Corporate Social Responsibility Policy.The net average Loss for the Last three years i.e. (12-13/ 13-14/ 14-15) is 274.36 Cr. andthe details of CSR activities undertaken by the company are given in Annexure"B". The CSR Policy is available on Companies website www.innoventive.in.

10. CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of Corporate Governance andadheres to the Corporate Governance requirements as stipulated by Securities and ExchangeBoard of India(SEBI).

The report on Corporate Governance as prescribed in Schedule V (C) of the SEBI ListingRegulations forms an integral part of this Annual Report.

The requisite certificate from the Secretarial Auditors of the Company P.C.Dhamane& Associates Company Secretaries Pune confirming compliance with the conditions ofCorporate Governance alongwith a declaration signed by the Chairman & ManagingDirector stating that the members of the Board of Directors and Senior Managementpersonnel have affirmed compliance with the respective codes of conduct of the Board ofDirectors and Senior Management is attached to the report on Corporate Governance.

1. DIRECTORS

Confirmation of Appointment:

Mr. Ravindra Katre (DIN 00035125) retires by rotation at the forthcoming Annual GeneralMeeting and being eligible offer himself for reappointment in terms of the Articles ofAssociation of the Company.

Appointment of Independent Directors:

During the year Mr. Rajendra Gaikwad (DIN 06791356) was appointed as additionalDirector on the Board of Directors of the Company in the category of Non-executiveDirector with effect from 8th February 2016.

The Company has received a notice pursuant to Section 160 of the Companies Act 2013in writing proposing his candidature for the office of the Director of the Company at theforthcoming Annual General Meeting.

Brief Profile of Directors seeking appointment has been given in the ExplanatoryStatement to the Notice of the ensuing Annual General Meeting. The Company has receivedForm DIR-8 from all Directors pursuant to Section 164(2) and Rule 14(1) of Companies(Appointment and Qualification of Directors) Rules 2014.

The Independent Directors of the Company have furnished necessary declarations to theCompany under Section 149(7) of the Act confirming that they meet with the criteria ofIndependence as prescribed for Independent Directors under Section 149(6) of the Act andRegulation 16(b) of the SEBI Listing Regulations.

Following directors stepped down from the Board of the Company:

Mr. Ravindra Katre step down from the Board as Whole Time Director of the Company witheffect from 9th October 2015 and continued to be Director of the company. TheBoard placed on record its appreciation for the valuable services rendered andcontribution made by Mr. Ravindra Katre during his tenure as Whole Time Director of theCompany.

Mr. Pradeep Tupe steps down from the Board as Nonexecutive Independent Director of theCompany with effect from 1st April 2016. The Board placed on record itsappreciation for the valuable services rendered and contribution made by Mr. Pradeep Tupeduring his tenure as Director of the Company.

Formal Annual Evaluation:

The Board evaluates the performance of the Board its Committees and all individualDirectors including Independent Directors every year. All the Non-executive andIndependent Directors on the Board of the Company are eminent personalities having wideexperience in the field of business industry and administration. Their presence on theBoard is advantageous and fruitful in taking business decisions.

Familiarization Programme:

Whenever new Non-executive and Independent Directors are inducted in the Board they areintroduced to our Company's culture through appropriate orientation session and they arealso introduced to our organization structure our business constitution boardprocedures our major risks and management strategy.

The details regarding familiarization program have been uploaded on the website of theCompany at www.innoventive.in

At present your Company has 2 (Two) Non-Executive Directors who are IndependentDirectors pursuant to the provisions of the ‘SEBI Listing Regulations’. Pursuantto Section 149 of the Companies Act 2013 every listed company shall have at leastone-third of its total strength of the Board of Directors as Independent Directors. Basedon the present composition of the Board of Directors and the number of IndependentDirectors the Company complies with this requirement.

1. BOARD COMMITTEES

The Board of Directors of your Company had already constituted various committees incompliance with the provisions of Companies Act 2013 and Listing Agreement (applicabletill November 30 2015)/ SEBI Listing Regulations (applicable from December 1 2015) viz.Audit committee Nomination and Remuneration Committee Stake holders RelationshipCommittee and CSR Committee.

Under review in compliance with the provisions of ‘SEBI ListingRegulations’ the Board had also constituted the risk management committee.

All the decisions pertaining to the Constitution of committees appointment of membersand fixing of terms of reference role of the committees are taken by the Board ofDirectors.

Details of the role and composition of these committees including the number ofmeetings held during the financial year and attendance at meetings are provided in theCorporate Governance Section of Annual Report.

2. MEETINGS

A calendar of Board Meetings Annual General Meetings and Committee Meetings isprepared and circulated in advance to the Directors of your Company.

The Board of Directors of the Company duly met 10 times during the financial year2015-16. The dates of such meetings were 23rd May 2015 12th June 2015 02nd July 201520th July 2015 14th August 2015 07th September 2015 09th October 2015 02nd November2015 14th November 2015 08th February 2016. The maximum time gap between any twoconsecutive meetings did not exceed one hundred and twenty days.

3. FAMILIARISATION PROGRAMME OF INDEPENDENT DIRETORS

In compliance with the requirements of SEBI listing regulations the Company has put inplace a familiarization program for Independent Directors to familiarize them with theirrole rights and responsibility as Directors the operations of the Company businessoverview etc. The details of the familiarization program are explained in the CorporateGovernance Report and the same is also available on the website of the Company.

4. PERFORMANCE EVALUATION

Pursuant to provisions of Section 134(3)(p)149(8) and Schedule IV of the CompaniesAct 2013 and Regulation 17 of the SEBI Listing Regulations Annual Evaluation ofperformance of Directors as well as that of the Audit Committee Nomination andRemuneration Committee and Stakeholders Relationship Committee has been carried out.

Annual Evaluation of performance of Independent Directors was carried out by the entireBoard and Evaluation of performance of Non-Independent Directors was carried out by theIndependent Directors.

5. INDEPENDENT DIRECTORS MEETING

During the year under review the Independent Directors of the Company met on February08 2016 inter-alia to discuss:

1. Evaluation of performance of Non-Independent Directors and the Board of Directors ofthe Company as a whole.

2. Evaluation of performance of the Chairman of the Company taking into account theviews of Executive and Non- Executive Directors.

3. Evaluation of the quality content and timelines of flow of information between theManagement and the Board that is necessary for the Board to effectively and reasonablyperform its duties.

6. REMUNERATION POLICY FOR DIRECTORS KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENTEMPLOYEES

The Nomination and Remuneration Committee has laid down the policy for remuneration ofDirectors Key managerial personnel and Senior Management in the nomination andremuneration policy recommended by it and approved by the Board of Directors.

7. RELATED PARTY TRANSACTIONS:

All related party transactions entered during the year were in the ordinary course ofbusiness and on an arm’s length basis.

The related party transactions attracting compliance under Section 177 of the CompaniesAct 2013 and / or erstwhile Clause 49 of the Listing Agreement / Regulation 23 of theSEBI Listing Regulations were placed before the Audit Committee for approval.

There are no transactions to be reported in Form AOC- 2 which is attached to theBoard’s Report as Annexure"C" in terms of Section 134 of the Act read withRule 8 of the Companies (Accounts) Rules 2014. There were no related party transactionswhich were placed for prior omnibus approval of the Audit Committee.

A statement of all related party transactions entered was presented before the AuditCommittee on a quarterly basis specifying the nature value and any other related termsand conditions of the transactions.

Further the details of the transactions with related parties are provided in theCompany’s financial statements in accordance with the Accounting Standards.

The related party transactions policy approved by the Board of Directors of the Companyhas been uploaded on the website of the Company.

8. DIRECTORS’ RESPONCIBILITY STATEMENT:

Pursuant to the requirement under section 134(5) of the Companies Act 2013 withrespect to the Directors’ Responsibility Statement it is hereby confirmed that:

1. in the preparation of the annual financial statements for the financial year endedon 31st March 2015 the applicable accounting standards have been followed along withproper explanation relating to material departures; if any

2. that the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year as at 31st March 2016 and of the Loss of the Company for the year ended onthat date;

3. that 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;

4. that the Directors have prepared the accounts for the financial year ended 31stMarch 2016 on a `Going Concern basis’.

5. that the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively. However in view of the uncertainties involved your Auditors have given aqualified opinion in their report in this regard without quantifying the impact. Otherthan this your Auditors have opined that the Company has in all material respectsmaintained adequate internal financial controls over financial reporting and that theywere operating effectively.

6. that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.

9. PARTICULARS OF EMPLOYEES AND OTHER ADDITIONAL INFORMATION:

Disclosures with respect to the remuneration of Directors and employees as requiredunder Section 197 of Companies Act 2013 and Rule 5 (1) Companies (Appointment andRemuneration of Managerial Personnel rules 2014)has been appended as Annexure"D" to this Report.

The information as required under Rule 5 (2) of the Companies (Appointment andRemuneration of Managerial Personnel rules 2014) will be provided upon request by anymember of the Company. In terms of Section 136 (1) of the Companies Act 2013 the Reportand the Accounts are being sent to the members excluding the said Annexure. Any memberinterested in obtaining copy of the same may write to the Company Secretary at theRegistered Office of the Company.

10. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGSAND OUTGO

The information relating to the Conservation of Energy Technology Absorption andForeign Exchange Earnings and Outgo stipulated under section 134(3)(m) of the CompaniesAct 2013 read with and as required to be disclosed under the Companies (Accounts) Rules2014 is given in Annexure "E" forming part of this Report.

11. AUDITORS

At the 23rd Annual General Meeting held on 15th July 2015 BharatJ. Rughani & Co. Chartered Accountants Mumbai were appointed as Auditors of theCompany to hold office for the period of five years i.e. from the conclusion of 23rdAnnual General Meeting till the conclusion of 28th Annual General Meeting andRule 3(7) of Companies (Audit and Auditors) Rules 2014 states that appointment of theAuditor shall be subject to ratification by member at every Annual General Meeting tillthe expiry of the term of the Auditor.

At the 24th AGM held on 23rd November 2015 the shareholders hadratified the appointment of M/s Bharat J. Rughani Chartered Accountants Mumbai for theperiod covering their second year of appointment viz. from the conclusion of last AGMheld on 23rd November 2015 until the conclusion of Annual General Meeting to bein the in the financial year 2016-17.

The said appointment of M/s Bharat J. Rughani Chartered Accountants Mumbai coveringtheir third year of appointment viz from the conclusion of the ensuing AGM in financialyear 2016-17 until the conclusion of the next Annual General Meeting to the held in thefinancial year 2017-18 has to be ratified by Members at the forthcoming AGM andaccordingly the said proposal is being placed for members’ ratification.

As required under Section 139 of the Companies Act 2013 the Company has obtained awritten consent from the Auditors to such continued appointment and also a certificatefrom them to the effect that their appointment if ratified would be in accordance withthe conditions prescribed under the Companies Act 2013 and the Rules made thereunder asmay be applicable.

The Directors recommend ratification of their appointment from the conclusion ofensuing Annual General Meeting till the conclusion of next Annual General Meeting.

12. BOARD’S RESPONSES TO OBSERVATIONS QUALIFICATIONS AND ADVERSE REMARKS INAUDITORS REPORT

The Statutory Auditors (Auditors) have qualified their opinion in relation to thefollowing matters appearing in the Financial Statements for the year ended March 31 2016.The Board’s responses to the qualifications and other observations or adverse remarksmade by the Auditors in their Report on the Standalone Financial Statements for the yearended March 312016 Consolidated Financial Statements for the year ended March 312016and in their CARO Report on these Financial Statements are given below.

The Statutory Auditors have qualified their opinion in relation to the mattersspecified in Notes of the financial statements for the year ended March 31 2016(Financial Statements). The Board’s responses to the qualifications and otherobservations or adverse remarks are as follows.

Auditor’s observations ‘Qualified Opinion’ of the Auditor’s reportto the standalone financial statements:

A. The Company has not made following provisions:

I. Stock of slow and/non -moving of stores raw materials semi-finished and finishedgoods valued at 1900 lacs approximately;

II. Debts and loans/advances due from subsidiary amounting to 3494.81 lacs and1420.50 respectively

III. Debts and Loans /advances due from other parties amounting to 1437.44 lacs and4749.57 lacs

B. The company has investments in subsidiaries whose net worth has beensubstantially eroded or is negative which has casted material uncertainty in thecontinuance of the business of these subsidiaries. However the diminution in the value ofinvestment in these subsidiaries aggregating to 1979 lacs is not provided for.

C. There are unreconciled net bank balances aggregating 492.47 lacs for a periodexceeding one year which will impact the financial position. We are unable to comment onthe ultimate loss which may realize on reconciliation of these balances.

We are unable to comment on ultimate loss which may arise on realization of thesebalances. Had the above amounts been fully provided for in the year ended March 31 2016the loss would have been higher by 15473.79 Lacs with consequent impact on net worth ason that date.

Board’s Response (Pointwise) to audit qualifications on standalone financialstatements:

A. The company is making various products for export and domestic market. The Companyhas to maintain delivery on time and hence sometimes it results into longer cycles. Beinga auto component Supplier we are under obligation to keep stock as spare parts for alonger time. We are fairly compensated in price and customers are taking entireresponsibility of buying the products. Accordingly the Company is of the view that noprovision for slow / Non-moving stock is required.

The Company is making full efforts for recovery of debts and loans & advances. Wehave received commitments to get the money back or equivalent value materials from themover a period of time. We are also having postdated cheques of some of the parties. Basedon the efforts and steps taken by the company we are of the view that the said debts andloans & advances fully recoverable and no provision is required in respect thereof.

B. The management believes the diminution in the value of investment if any thatexists is only temporary and that sufficient efforts are being undertaken to revive thesubsidiaries in the forceable future so as to recover the carrying value.

C. The company entered into Master Restructuring Agreement dated 28th September 2014with banks under the

Corporate Debt Restructuring Scheme ("CDR") pursuant to which certain fundswere to be released to the company. However the said scheme hadn’t been implementedby certain bankers resulting in un-reconciled balances. Accordingly the balancespertaining to fund non-fund based and term loans of certain banks are subject toreconciliation of such pending items. The company and the Lead Bank has appointed aspecial auditor to reconcile the balances of the said banks.

Auditor’s observations ‘Qualified Opinion’ of the Auditor’s reportto the consolidated financial statements:

A. The group has not made following provisions

I. Stock of slow and/non -moving of stores raw materials semi-finished and finishedgoods valued at 1900 lacs approximately;

II. Debts and Loans /advances due from parties amounting to 1437.44 lacs and 4749.57lacs

III. Loans and Advances lacs made to various parties by the following subsidiaries :

Particulars Amount (Rs in Lacs)
Sevenstar Electrodes Private Limited 983.03
Innovative Technomics Private Limited 160.00
Arihant Steel & Metal Wire Private Limited 48.13
Total 1191.16

B. There are unreconciled net bank balances aggregating 492.47 lacs for a periodexceeding one year which will impact the financial position. We are unable to comment onthe ultimate loss which may realize on reconciliation of these balances.

C. In respect of the subsidiaries of the Holding Company the other auditor(s) whoaudited the financial statements / financial information of the subsidiaries has reportedfor non-provisioning of loans and advances. The details whereof are as follows:

Name of Subsidiary Amount (Rs in Lacs)
Arihant Auto Components Private Limited 164.80
Arihant Steel & Metal Wire Private Limited 75.70
Total 240.5

We are unable to comment on ultimate loss which may arise on realization of thesebalances. Had the above amounts been fully provided for in the year ended March 31 2016the loss would have been higher by 10011.14 lacs with consequent impact on net worth ason that date.

D. In respect of Innovative Technomics Private Limited subsidiary of the HoldingCompany the other auditor(s) who audited the financial statements / financial informationof the subsidiaries has reported that the Company has not carried out an independentevaluation and has not accounted for any potential liability on account of gratuitypayable which constitutes a departure from the Accounting Standard 15 "EmployeeBenefits" referred to in section 133 of the Act read together with rule 7 of theCompanies (Accounts) Rules 2014. Since no actuarial valuation is carried out thepotential impact on the financial statements cannot be quantified

E. In respect of Arihant Auto Components Private Limited Arihant Steel & MetalWire Private Limited Saicon Steels Private Limited Seven Star Electrodes Private Limitedand Sankalp Engineering and Services Private Limited the auditors who audited thefinancial statements have reported that the Company’s net worth has beenfully/substantially eroded and the conditions indicate as existence of materialuncertainty that may cast a doubt about company’s ability to continue as a goingconcern. However the financial statements have been prepared on a going concern basis.

Above qualification is also contained in the audit report issued on the consolidatedfinancial statement.

Board’s Response (Pointwise) to audit qualification on consolidated financialstatements:

A. The company is making various products for export and domestic market. The Companyhas to maintain delivery on time and hence sometimes it results into longer cycles. Beinga auto component Supplier we are under obligation to keep stock as spare parts for alonger time. We are fairly compensated in price and customers are taking entireresponsibility of buying the products. Accordingly the Company is of the view that noprovision for slow / Non-moving stock is required.

The Company is making full efforts for recovery of debts and loans & advances. Wehave received commitments to get the money back or equivalent value materials from themover a period of time. We are also having postdated cheques of some of the parties. Basedon the efforts and steps taken by the company we are of the view that the said debts andloans & advances fully recoverable and no provision is required in respect thereof.

B. The company entered into Master Restructuring Agreement dated 28th September 2014with banks under the Corporate Debt Restructuring Scheme ("CDR") pursuant towhich certain funds were to be released to the company. However the said schemehadn’t been implemented by certain bankers resulting in un-reconciled balances.Accordingly the balances pertaining to fund non-fund based and term loans of certainbanks are subject to reconciliation of such pending items. The company and the Lead Bankhas appointed a special auditor to reconcile the balances of the said banks.

C. The Company is making full efforts for recovery of debts and loans & advances.We have received commitments to get the money back or equivalent value materials from themover a period of time.

D. The necessary provision for gratuity payable has been made in the financialstatement; however the independent evaluation shall be carried out in the currentfinancial statement.

E. The Companies are implementing various long-term measures to improve their productoffering and enhancing customer base. The Companies have undertaken a comprehensive reviewof its current network to maximize profitability and improve efficiency in theiroperations.

In view of the above the Company’s financial statements have been prepared on agoing concern basis

13. COST AUDIT

Pursuant to section 148 of Companies Act 2013 read with The Companies (Cost Recordsand Audit) Amendment Rules 2014 the cost audit records maintained by the Company isrequired to be audited. Your Directors had on the recommendation of Audit Committee;appointed Mr. A. J. Paranjape Cost Accountants Pune for conducting the cost audit of theCompany for Financial Year 2016-17 on the remuneration of Rs. 300000/- plus service taxat the applicable rates and reimbursement of out of pocket expenses.

As required under the Companies Act 2013 the remuneration payable to the cost Auditorsis required to be ratified by the members of the company. Accordingly resolution seekingmembers ratification for remuneration to be paid to cost Auditors is included in thenotice convening Annual General Meeting.

14. SECRETARIAL AUDIT REPORT

Pursuant to provisions of section 204 of the Companies Act 2013 the Board hadappointed P. C. Dhamane & Associates Company secretaries Pune to undertakeSecretarial Audit of the Company for the Financial Year 2015-16. The Secretarial AuditReport is annexed herewith as Annexure "F". The Secretarial Audit Report doesnot contain any qualification reservation adverse remark or disclaimer.

15. RISK MANAGEMENT

Pursuant to the requirement of section 134(3)(n) of Companies Act 2013_the Company hasalready in place a Risk Management Policy.

The business risk framework defines the risk management approach across the enterpriseat various levels including documentation and reporting. The framework has different riskmodels which help in identifying risks trend exposure and potential impact analysis at aCompany level.

Pursuant to requirement of Clause 49 of the Listing Agreement the Company hasvoluntarily constituted a Risk Management Committee and implemented a risk managementpolicy for the company. The Board has been addressing various risks impacting the Companyincluding identification therein of elements of risk if any which in the opinion of theBoard may threaten the existence of the company. The Board and the Audit Committee of theCompany periodically review and evaluate the risk management system of the Company so thatthe management controls the risks through properly defined network.

16. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has Internal Control Systems commensurate with the size scale andcomplexity of its operations. The Internal Auditors appointed by Company monitors andevaluates the efficacy and adequacy of internal control systems in the Company itscompliance with operating systems accounting procedures and policies within the Company.

Based on the report of internal audit function process owners undertake correctiveaction in their respective areas and thereby strengthen the controls. Significantobservations and corrective actions thereon are presented to the Audit Committee from timeto time.

17. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate internal financial controls commensurate with thesize scale and complexity of its operations. The Company has policies and procedures inplace for ensuring proper and efficient conduct of its business the safeguarding of itsassets the prevention and detection of frauds and errors the accuracy and completenessof the accounting records and the timely preparation of reliable financial information.The Company has adopted accounting policies which are in line with the AccountingStandards and the Companies Act 2013.

18. VIGIL MECHANISM

In pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013and provisions of Listing Agreement a Vigil Mechanism for directors and employees toreport genuine concerns has been established. The Vigil Mechanism Policy has been uploadedon the website of the Company at www.innoventive.in

19. OBLIGATIIOS OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE(PREVENTION PROHOBITION AND REDRESSAL) ACT 2013

In terms of provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 the Company has formulated a Policy to preventSexual Harassment of Women at Workplace. During the year under review there were no casesfiled pursuant to the Sexual Harassment of women at Workplace (Prevention Prohibition andRedressal) Act 2013.

20. REPORTING OF FRAUDS

There have been no instances of fraud reported by the Statutory Auditors under Section143(12) of the Act and Rules framed thereunder either to the Company or to the CentralGovernment.

21. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/COURTS IF ANY

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

22. MATERIAL CHANGES AND COMMITMENTS/ EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIALSTATEMENTS:

There have been no material changes and commitments except following if any affectingthe financial position of the Company which have occurred between the end of the financialyear of the Company to which the Financial Statements relate and the date of this Report.

a. The debt restructuring scheme of Company was approved by CDR-EG in 2014. As per therestructuring scheme various reliefs on debt servicing were granted including sanction ofadditional debt of Rs 60 Crore which was subject to compliance of various conditions bythe company/promoter.

However as part of this the Company was expected to get additional working capital andrecoveries from bank for the operations which Company has failed to get the same fromsome of the Banks and Company was not able to introduce investors for strategic andfinancial investment in. However So far decision from CDR-EG is pending regarding thefailure of CDR Scheme.

b. Company has incorporated a Wholly Owned Subsidiary namely Innoventive Americas Inc("IAI") in the United States of America for the acquisition of Salem Steel NALLC in 2012. IIL has already acquired 85% stake in Salem Steel NA LLC through IAI (WhollyOwned Subsidiary of IIL) and is in the process of acquisition of Balance stake. For thesaid Balance acquisition total agreed amount of consideration paid by IIL through IAI isas per the amended agreement is USD 531230.

23. EXTRACT OF ANNUAL RETURN

An extract of the Annual return as on 31st March 2016 pursuant to the Section 92(3)of the Companies Act 2013 in Form MGT-9 is annexed hereto as Annexure "G".

24. PERSONNEL / INDUSTRIAL RELATIONS

The Company maintained cordial and harmonious relations at all levels at the officesand plants of the Company and its subsidiaries throughout the year under review.

25. PARTICULARS OF REMUNERATION RATIO OF THE DIRECTORS / KEY MANAGERIAL PERSONNEL (KMP)/ EMPLOYEES

The prescribed particulars of Employees required under Section 134(3)(q) and Section197 read with Rule 5 of The Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is annexed herewith as Annexure "E" and forms part ofthis report.

26. CAUTIONARY STATEMENT

Your Company has taken due caution while preparing this Annual Report (‘theReport’). The Report may contain futuristic or forward looking statements which themanagement believes to be true to the best of their knowledge. However actual results maydiffer from those mentioned in the Report.

27. ACKNOWLEDGEMENT

Your Directors express their grateful thanks and appreciation for the assistance andco-operation received from the bankers government authorities Financial Institutionsand business associates during the year under review. Your Directors also wish to place onrecord their appreciation for the excellent performance and contribution of the employeesto the Company’s progress during the year under review.

The Directors also take this opportunity to express its deep gratitude for thecontinued co-operation and support received from its valued shareholders.

For and on behalf of the Board of Directors
Innoventive Industries Limited
Place: Pune Chandu Chavan
Date:13th August 2016 Chairman & Managing Director
DIN00035213