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Jocil Ltd.

BSE: 500561 Sector: Industrials
NSE: JOCIL ISIN Code: INE839G01010
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Jocil Ltd. (JOCIL) - Director Report

Company director report

Your Directors have pleasure in presenting the Thirty Ninth Annual Report together withthe Audited Statement of Accounts for the year ended 31st March 2017.

(Rs. in Lakhs)
2016-17 2015-16
1. FINANCIAL RESULTS
Gross Sales 40623.41 42443.14
Less : Excise Duty 3557.68 3746.94
Net Sales 37065.73 38696.20
Processing Charges 391.14 597.20
Other Income 463.55 502.39
Total Income 37920.42 39795.79
Profit for the year before Interest and Depreciation 1885.42 3646.55
Interest (160.01) (112.63)
Depreciation (706.80) (804.20)
Profit Before Tax 1018.61 2729.72
Provision for Current Tax (255.00) (1025.00)
Deferred Tax / (credit) 57.19 101.81
Excess provision of Income Tax made in earlier years 2.94
Profit After Tax 820.80 1809.47

The turnover of the company for the year at Rs. 410.15 crores is down by 5% over theprevious year's figure of Rs. 430.40 crores. The sales volume of soap noodles and fattyacids during the year dropped by about 17% as compared to the previous year. The increasein raw material prices without commensurate increase in selling prices and reduction insales volumes resulted in decline in Profit Before Interest and Depreciation to Rs.1885.42lakhs from Rs. 3646.55 lakhs which is about fifty percent of the previous year. Thevolumes have come down due to tepid growth in demand and intense competition in themarket. The Profit Before Tax (PBT) has come down to Rs. 10.19 crores as compared to Rs.27.30 crores in the previous year.

The appropriations from the profit are as detailed below.

(Rs. in Lakhs)

2016-17 2015-16
Profit after Tax (including comprehensive income) 955.68 1785.21
Balance brought forward from previous year 1652.19 1756.57
Profit for appropriations 2607.87 3541.78
APPROPRIATIONS
Dividend (accounted in the year of payment) 1154.55
Provision for Tax on distributed profits @ 20.35765% on dividend (accounted in the year of payment) 235.04
Transfer to General Reserve 200.00 500.00
Balance carried forward 2407.87 1652.19
TOTAL 2607.87 3541.78
Authorized Capital 1000.00 1000.00
Paid-up Capital 886.16 888.16
Reserves & Surplus 15931.29 14975.60

2. DIVIDEND

Considering the profitability of the Company the Board of Directors are pleased torecommend for the approval of the shareholders of the Company for payment of dividend forthe year ended 31-03-2017 at Rs. 3.00 per equity share of Rs. 10 each which aggregatesto Rs. 26643450 on the 8881150 equity shares of the Company. In the previous yearthe Company paid dividend at Rs. 7.00 per equity share of Rs.10 each on 8881150 sharesamounting to Rs.62168050.

3. OPERATIONS 2016-17 2015-16
MT MT
Production
(including processed on jobwork)
a) Fatty Acids 52134 61423
b) Toilet Soap & Soap products 26031 38605
c) Biomass Power-kwh 29562238 31797001
d) Wind Power-kwh 14064610 8189633
Sales
a) Fatty Acids 34822 36954
b) Toilet Soap & Soap products 21583 30866
c) Biomass Power-kwh 13959000 14557300
d) Wind Power-kwh 14064610 8189633

4. OUTLOOK

Fatty Acids and Soap

The demand for soap noodles which is a raw material for toilet soap was low during theyear reflecting weaker market conditions for Fast Moving Consumer (FMC) goods. Rising rawmaterial prices and intense price competition have largely impacted the margins. Thecompany is optimistic of picking up demand for fatty acids and soap products due toremoval of CST and uniform tax structure through out the country under GST regime –one country one tax and one market. Sales of fatty acids during the year is marginallylow because of subdued market conditions. The Company is pursuing new avenues to enlargeproduct range.

The company will continue to be in disadvantage position in the price sensitive marketIf the exemptions granted to the units located in the exempted areas before introductionof GST continue fully or partially under GST regime also.

Cost of raw-materials is a major component in total cost of production and thefluctuation in raw-material prices is a serious cause of concern to the Companyparticularly when the customers demand long term forward contracts while the same is notpossible with the raw-material suppliers. There is stiff competition from manufacturersparticularly from those having backward integration which gives them a cost advantage.Retention of high volume customers withstanding to the competition is considered veryimportant and all efforts are made to achieve the same by quoting attractive prices.Barring unforeseen circumstances the market is expected to improve in the coming months.

Biomass Power Plant

The performance of the Biomass Power Plant is satisfactory even though the generationand export of power to AP Transco are marginally low as compared to the previous year.However the Govt. of A.P. has discontinued the tariff support of Rs.1.50 per unit to theBiomass Power Plant Developers from 1-4-2016 which has been in practice since November2012. Despite Power Purchase Agreements for 20 years with APSPDCL purchase of power frombiomass power plants was stopped by the Government from 9-6-2017 affecting the veryexistence of the power plants. Low demand and high frequency in the grid is the reasongiven for stoppage. However power purchase was resumed from 18-07-2017 on therepresentation made by Biomass Energy Developers Association explaining that biomass poweris a renewable source of energy and requires to be prioritized over other sources ofenergy.

Wind Energy Generators (WEG)

Power generation during the year from the four Wind Energy Generators (WEGs) of 6.3 MWcapacity has considerably increased as compared to the last few years. During the year thepower generation from all the four WEGs is 140.64 lakh units as compared to previous year81.90 lakh units. Thanks to the Indian Wind Power Association for its continued efforts inseeking ‘must run’ status to WEGs to reduce back down time the back down ofWEGs for want of evacuation facilities has come down during the year from 29.27% ofmachine available hours to 8.58%.

5. FINANCE AND STATUTORY COMPLIANCES

The Company availed working capital facilities under consortium arrangement from AndhraBank and State Bank of India and the accounts are in order. The short term borrowings fromHDFC Bank were repaid as per the repayment schedule. The company complied with all thelegal requirements and there are no outstanding statutory dues as on 31st March 2017.

During the year there have been no significant and material orders passed by theregulators or courts or tribunals impacting the going concern status and company’soperations in future.

6. CREDIT RATING

The Credit Rating Agency CARE reaffirmed the credit rating of working capitalfacilities availed from the banks ‘CARE A+’ (adequate degree of safety regardingtimely servicing of financial obligations) for long term facilities ‘CARE A1’(strong degree of safety regarding timely payment of financial obligations) for short termfacilities and ‘CARE A1 (FD)’ (Strong degree of safety regarding timely paymentof financial obligations) for Fixed Deposits accepted by the Company.

7. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013.

The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. A Committee has been set up to redress the complaints receivedregarding sexual harassment. During the year the Company has not received any complaintson sexual harassment of women at the workplace.

8. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established vigil mechanism as required under Sec. 177(10) of theCompanies Act 2013 for directors and employees to report genuine concerns as prescribedin the policy. The policy provides adequate safeguards against victimization of personswho use such mechanism and makes provision for direct access to the Chairperson of theAudit Committee in appropriate or exceptional cases.

9. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

a) Shri J. Murali Mohan Managing Director of the Company will be completing hispresent term of office by 15th February 2018. The Nomination and Remuneration Committeeand the Board of Directors have recommended for his reappointment for a further period ofthree years.

b) In accordance with the provisions of the Companies Act 2013 and Articles ofAssociation of the Company at the ensuing Annual General Meeting Shri MullapudiMrutyumjaya Prasad Director retires by rotation and being eligible offers himself forre-appointment.

c) The Company held five Board Meetings during the year. Board Meeting dates andattendance particulars are available in the report on Corporate Governance.

d) The Company has received declarations from all the five Independent Directorsconfirming that he / she meets the criteria of independence as provided under subsection 6of Sec. 149 of the Companies Act 2013 at the first meeting of the Board in which he / sheparticipated as a Director and thereafter at the first meeting of the Board in everyfinancial year or whenever there is any change in the circumstances which may affect his /her status as an Independent Director.

e) The Audit Committee consists of three Non-Executive Directors of which 2 areIndependent Directors.

Shri V.S. Raju Independent Director is the Chairman of the Audit Committee. Theremaining two members are Shri Mullapudi Thimmaraja Non-Executive Director and ShriSubbarao V. Tipirneni Independent Director. The Board accepted all the recommendations ofthe Audit Committee during the year. f) Shri J. Murali Mohan Managing Director and ShriP. Kesavulu Reddy President & Secretary are the Key Managerial Personnel appointedunder Sec. 203 of the Companies Act 2013.

10. AUDITORS

M/s.Brahmayya & Co. Chartered Accountants Guntur are retiring at the conclusionof this Annual General Meeting and as per the provisions of the Companies Act 2013 theBoard of Directors proposed to appoint M/s. Chevuturi Associates Chartered AccountantsVijayawada as Auditors for a period of five years i.e. up to the conclusion of 44th AnnualGeneral Meeting subject to ratification at every Annual General Meeting by theshareholders.

11. COST AUDITORS

M/s. Narasimha Murthy & Co. Cost Accountants Hyderabad are conducting the costaudit for applicable products during the year. They are eligible for re-appointment asCost Auditors for the year 2017-18.

12. SECRETARIAL AUDIT

M/s.Nekkanti S.R.V.V.S. Narayana & Co. Company Secretaries Hyderabad wereappointed as Auditors for secretarial audit for the year 2016-17 under Sec. 204 of theCompanies Act 2013 and they have submitted their report.

13. The information required to be included in the Board of Directors Report under theCompanies Act 2013 and Rules made there under is annexed and forms part of this report asdetailed below.

Sl.No. Particulars Section Rule Annexure No.
1 Extract of the Annual Return – Form MGT-9. Companies (Management and Administration) Rules 2014 134 (3) (a) & 92 (3) 1
2 Company policy on Directors appointment and remuneration etc. provided under sub-sections (3) and (4) of Section 178 134 (3) (e) 12 (1) 2
3 Particulars of loans guarantees or investments under Sec. 186 134 (3) (g) 3
4 Particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 in Form AOC -2. Companies (Accounts) Rules 2014 134 (3) (h) 4
5 Conservation of energy technology absorption and Foreign Exchange earnings and outgo. 134 (3) (m) 8(2) 5
Companies (Accounts) Rules 2014 8 (3) (A)
(B) & (C)
6 Risk management policy for the company including identification therein of elements of risk if any.
134 (3) (n) 6
7 Corporate Social Responsibility policy and initiatives taken during the year . Companies (Corporate Social Responsibility policy) Rules 2014 134 (3) (o) 7
8 Statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and Individual Directors. Companies (Accounts) Rules 2014 134 (3) (p) 8 (1) 8
9 Financial summary or highlights. Companies (Accounts) Rules 2014 134 (3) (q) 8 (4) 9
8 (5) (i)
10 Details relating to deposits covered under chapter V of the Act. Companies (Accounts) Rules 2014 134 (3) (q) 10
11 Ratio of the remuneration of each Director to the median employee’s remuneration and such other details. Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 197 (12) 8 (5) (v) & (vi) 11
12 Particulars of employees in receipt of remuneration not less than Rs. five lakhs per month or Rs. sixty lakhs per year etc. Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 197 (12) 5 (1) 12
13 Secretarial Audit Report in Form MR-3. 204 (1) 5 (2) 13
Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 9 (1)

14. INFORMTION UNDER LISTING REGULATIONS.

The Company is committed to maintain the standards of Corporate Governance prescribedunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations). The information required to be included in the Annual Report under ScheduleV of the Listing Regulations are as follows.

Sl.No. Particulars Para Annexure
1 Related Party Disclosures A 14
2 Management Discussion and Analysis Report B 15
3 Report on Corporate Governance C 16
4 Declaration by the Managing Director that all Board Members and Senior Management Personnel affirmed their compliance to the Code of Conduct. D 17
5 Compliance Certificate from Auditors on Corporate Governance E 18
6 Disclosures with respect to Demat Suspense Account / Unclaimed Suspense Account F 19

The Company is having a policy to deal with Related Party Transactions and the same maybe viewed in the Company’s website www.jocil.in . Please see Note No. 34 on Accountsfor disclosures in compliance with the Accounting Standards on "Related PartyDisclosures."

15. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors’ Responsibility Statement it is hereby confirmed that Pursuantto the requirement under Section 134(3)(c) of the Companies Act 2013 with respect toDirectors’ Responsibility Statement it is hereby confirmed that

a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the company for that period;

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

d) the Directors had prepared the annual accounts on a going concern basis; and

e) the Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively and Explanation : For the purpose of this clause the term ‘internalfinancial controls’ means the policies and procedures adopted by the company forensuring the orderly and efficient conduct of its business including adherence tocompany’s policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information.

f) the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

16. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of theCompany for their sustained efforts and valuable contribution to the performance of theCompany during the year.

17. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted andsincere cooperation the Company received from various departments of Central and StateGovernments Bankers Auditors Dealers and Suppliers of the Company. The Directors alsowould like to express their grateful appreciation for the guidance and cooperationreceived from the Holding Company M/s. The Andhra Sugars Limited Tanuku.

Dokiparru NARENDRANATH CHOWDARY
12 August 2017. Chairman.