TO THE SHARE HOLDERS
Your Directors have pleasure in presenting the fifty seventh Annual Report along withthe Audited Accounts of the Company for the financial year ended 31st March 2017.
Detailed information on the performance of your Company appears in the Annual Report. Adiscussion on the operations of the Company is given in the sections titled 'Year inReview' and 'New Frontiers'. Some of the statutory disclosures however appear in thisReport. Read along with the other sections this would provide a comprehensive overview ofthe Company's performance and plans.
The financial performance of the Company for the year ended 31st March 2017 issummarised below:
| || ||(Rs in million) |
|Particulars ||2016-2017 ||2015-2016 |
|Total Income ||3500.41 ||3508.83 |
|Profit before Depreciation Finance Cost Tax and Exceptional items ||512.15 ||540.90 |
|Depreciation and Amortisation expenses ||204.32 ||210.08 |
|Finance Costs ||32.67 ||107.55 |
|Exceptional items ||184.17 ||- |
|Profit before Tax ||90.99 ||223.27 |
|Tax expenses ||96.21 ||(53.39) |
|Profit for the year ||187.20 ||169.88 |
|Other Comprehensive income for the year net of tax ||1.49 ||(20.60) |
|Total Comprehensive income for the year ||188.69 ||149.28 |
Ongoing technological upgradation in the Formaldehyde plant at Ankleshwar and a focuson value added products in Vishakhapatnam are expected to improve the performance of thechemicals business of the Company. During the year under review however sluggish marketconditions coupled with high volatility in raw material prices kept margins under pressurein the division.
In the solar power segment generation continues to be good. The Government howeverhas changed the pricing of Renewable Energy Certificates (RECs) which has compelled theCompany to write down the value of unsold RECs in its books. A case is pending in theSupreme Court of India challenging the order of the Central Electricity RegulatoryCommission. In the meantime trading of RECs remains suspended.
A brief description of the operations of the subsidiaries of the Company appears laterin this report.
MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments have occurred after the close of the financial year2016-17 till the date of this Report which affect the financial position of the Company.
The Board of Directors recommends for consideration of the shareholders at the AnnualGeneral Meeting a Dividend @ 30% (Rs. 1.50 per share) on Equity Shares of Rs. 5/- eachfor the financial year ended 31stMarch 2017.
Credit Analysis & Research Limited (CARE) has revised the credit rating for thelong-term bank facilities of the Company to CARE A+ (Single A Plus) from the existingrating of CARE AA- (Double A Minus).
CARE has reaffirmed the existing CARE A1+ (A One Plus) ratings for the short-term bankfacilities and Commercial Paper.
CONSOLIDATED FINANCIAL STATEMENT
As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 andprovisions of the Companies Act 2013 the audited Consolidated Financial Statement forthe year ended 31st March 2017 has been annexed with the Annual Report.
During the year under review the Company has not accepted any deposits from the publicand that as at the end of the year there were no outstanding deposits under Section 73 ofthe Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014.
INTERNAL FINANCIAL CONTROL
The Company has in place adequate internal financial controls with respect to financialstatements. The policies and procedures adopted by the Company ensure prevention anddetection of frauds and errors accuracy and completeness of the records and timelypreparation of reliable financial statements. No reportable material weakness in thedesign or operation was observed during the year.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year at the 56th AGM of the Company the shareholders approved theappointment of Shri S. V. Kanoria (DIN: 02097441) as a Director with effect from 1st April2016 and also as a Wholetime Director of the Company for a period of three years witheffect from that date.
Smt. Madhuvanti Kanoria (DIN: 00142146) retires by rotation at the ensuing AGM underthe applicable provisions of the Companies Act 2013 and being eligible offers herselffor appointment as a Director of the Company.
None of the Directors of the Company is disqualified for being appointed as a Directoras specified in Section 164(2) of the Companies Act 2013.
Additional information pursuant to SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("Listing Regulations 2015") in respect ofDirector seeking re-appointment is given in the AGM Notice of the Company.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received declaration from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under the CompaniesAct 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.
The Company has framed the criteria for performance evaluation of IndependentDirectors the Board the Board Committees and other individual Directors. Criteria forperformance evaluation of the Chairman & Managing Director Executive Director andNon-Independent Director have also been framed.
The criteria for performance evaluation of Directors among others includes factors suchas preparation participation engagement personality and conduct value additionstrategic planning and vision team spirit and consensus building leadership qualityunderstanding and focus on key business issues independent thinking and judgment qualityof analysis experience and business wisdom management qualities awareness motivationintegrity ethics and receptivity. The criteria for evaluating the Board'sfunctioning/effectiveness inter alia includes its structure strategic review businessperformance review internal controls process and procedures.
On the basis of the criteria framed a process was followed by the Board for evaluatingthe performance of individual Directors its own performance and its Committees. TheNomination and Remuneration Committee also evaluated the performance of every individualDirector. The Independent Directors in their separate Meeting also carried out theperformance evaluation of the Chairman & Managing Director Executive Director andother non-independent Director as well as the Board of the Company. The Directorsexpressed overall satisfaction on the performance and functioning of the Board itsCommittees and the Directors.
The details of programmes to familiarise the Independent Directors with the Companytheir roles rights responsibilities in the Company nature of the industry in which theCompany operates business model/procedures/processes of the Company etc. through variousprogrammes are put on the website of the Company and can be accessed at the link: http://www.kanoriachem.com/images/FamPro.pdf.
NUMBER OF MEETINGS OF BOARD OF DIRECTORS
During the Financial Year 2016-17 the Company held four Meetings of the Board ofDirectors. The details of the Meetings and attendance of each of the Directors thereat areprovided in the Report on Corporate Governance forming part of the Annual Report. Themaximum gap between any two consecutive Board Meetings did not exceed 120 days.
The Audit Committee of the Company comprises of Shri Amitav Kothari Shri H. K. Khaitanand Prof. S. L. Rao Independent Directors and Shri R. V. Kanoria Chairman &Managing Director of the Company. Shri Amitav Kothari is the Chairman of the Committee.The terms of reference of the Committee have been provided in the Corporate GovernanceReport.
STAKEHOLDERS' RELATIONSHIP COMMITTEE
The Stakeholders Relationship Committee of the Company comprises of Shri H. K. Khaitanand Shri Amitav Kothari Independent Directors and Shri S. V. Kanoria Wholetime Directorof the Company. Shri H. K. Khaitan is the Chairman of the Committee. The terms ofreference of the Committee have been provided in the Corporate Governance Report.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee of the Company comprises of Prof. S. L. RaoShri H. K. Khaitan Shri Ravinder Nath and Shri G. Parthasarathy Independent Directorsand Shri R. V. Kanoria Chairman & Managing Director of the Company. Prof. S. L. Raois the Chairman of the Committee. The terms of reference of the Committee have beenprovided in the Corporate Governance Report.
The Board of Directors of the Company based on the recommendation of the Nominationand Remuneration Committee has formulated the Nomination and Remuneration Policy whichcontains the matters with regard to criteria for appointment of Directors and determiningDirectors' independence and policy on remuneration for Directors Senior ManagerialPersonnel and other employees and the same may be accessed at the Company's website atthe link: http://www.kanoriachem.com/images/NomRemPol.pdf.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Corporate Social Responsibility Committee of the Company comprises of Smt.Madhuvanti Kanoria Shri R. V. Kanoria Managing Director and Shri H. K. Khaitan anIndependent Director. Smt. Madhuvanti Kanoria is the Chairperson of the Committee. Theterms of reference of the Committee have been provided in the Corporate Governance Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company acts as a good Corporate Citizen and as its philosophy always strive toconduct its business in inclusive sustainable socially responsible ethical manner andto continuously work towards improving quality of life of the communities. The Company hasin place a Corporate Social Responsibility Policy (CSR Policy) indicating the activitiesto be undertaken by the Company. The Corporate Social Responsibility Policy of the Companyenables it to continue to make responsible contribution towards welfare of the society.
Initially the Company has identified the following focus areas of engagement:
Promoting education including special education and employment enhancingvocational skills especially among children women elderly and the differently abled andlivelihood enhancement projects.
Empowering women setting up homes and hostels for women and orphans; setting upold age homes day care centres and such other facilities for senior citizens.
The Company may also undertake other need based initiatives in compliance with ScheduleVII to the Companies Act 2013.
The CSR Policy may be accessed on the Company's website at the link:http://www.kanoriachem.com/images/CSRPol.pdf.
During the year the Company has spent Rs. 2.31 million on the CSR activities.
The Annual Report on the CSR activities pursuant to Rule 8 of the Companies (CorporateSocial Responsibility Policy) Rules 2014 is provided as Annexure to this Report.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis is a part of the Annual Report.
APAG Holding AG ("APAG") Switzerland and Pipri Limited are the wholly ownedsubsidiaries of the Company. Kanoria Africa Textiles Plc Ethiopia is a subsidiary of theCompany. During the year APAG formed APAG Elektronik S. De R.L. De C.V. Mexico and APAGServices S. De R.L. De C.V. Mexico with its 100% shareholding. APAG Elektronik AG APAGElektronik s.r.o CoSyst Control Systems GmbH APAG Elektronik LLC APAG Elektronik S. DeR.L. De C.V and APAG Services S. De R.L. De C.V. the wholly owned subsidiaries of APAGHolding AG are the step-down subsidiaries of the Company.
The Electronic Automotive segment operating under the APAG group has shown healthygrowth in profitability. During the year the business demonstrated its first returns frominvestments made in growth in focus on quality and in strategic steps to remain in linewith trends in the automotive industry. Given the single source business model for allcustomer projects this business had strong sales driven by the performance of theEuropean OEMs in the European and American markets for their higher-end vehicles. Theorder books are full for the next three years. There is a usual gestation period of 1-3years between when a contract is signed and sales begin. The year was also strong for suchfuture sales. New customers were added and apart from its existing customers BMWRolls-Royce Mini Audi Bentley Lamborghini & Bugatti the components manufacturedby this business will soon be found in Alfa Romeo Volvo Cadillac and Jaguar/Land Rover.In preparation for this growth the project to build second phase of production facilitiesin the Czech Republic is under way. The plan is to focus on "concept lighting"division of the business. This is a long term niche focus that will have value even withpotentially quick changes happening towards autonomous driving.
Kanoria Africa Textiles plc continued to be under severe pressure and despite improvedproduction and quality continued to make significant losses. Though Ethiopia promises tobe a major garmenting exporter as a result of the initiatives of the Government ofEthiopia this industry is yet to take off. World class garment export parks have beencreated and substantial investment is coming into the country for garmenting. The demandfor denim fabrics produced by Kanoria Africa Textiles plc as well as margins on thesefabrics is expected to increase once these fabrics are converted to garments withinEthiopia itself. Ethiopia enjoys the provisions of African Growth & Opportunity Act(AGOA) wherein it has duty free access to both US as well as European markets. It isexpected that Kanoria Africa Textiles plc will continue to make losses also during theyear 2017-18.
A report on the performance and financial position of the subsidiaries of the Companyas per the Companies Act 2013 is provided in the Annual Report and hence the same isnot repeated here for the sake of brevity.
The Policy for determining Material Subsidiaries as approved by the Board may beaccessed on the Company's website at the link:http://www.kanoriachem.com/images/MatSub.pdf.
PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN AND SECURITIES PROVIDED
Details of loans given investments made guarantees given and securities provided ascovered under the provisions of Section 186 of the Companies Act 2013 are given in theNote Nos. 31 and 35 of the Standalone Financial Statements.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
All contracts / arrangements / transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on arm's lengthbasis. None of the transactions with any of the related parties were in conflict with theCompany's interest. The Company had not entered into any transaction with related partiesduring the year which could be considered material in terms of materiality threshold forthe related party transactions.
The Policy on Related Party Transactions as approved by the Board may be accessed onthe Company's website at the link: http://www.kanoriachem.com/images/RelPar.pdf.
The Company promotes ethical behaviour in all its business activities and has put inplace a mechanism of reporting illegal or unethical behaviour. In compliance with theprovisions of Section 177(9) of the Companies Act 2013 and the Listing Regulations 2015the Company has in place a Whistle Blower Policy for its Directors and Employees to reportconcerns about unethical behaviour actual or suspected fraud or violation of applicablelaws and regulations and the Company's Codes of Conduct. The reportable matters may bereported to the Audit Committee through the Nodal Officer and in exceptional cases mayalso be reported to the Chairman of the Audit Committee. The confidentiality of thosereporting violations is maintained and they are not subjected to any discriminatorypractice. During the year under review no employee was denied access to the AuditCommittee.
The Whistle Blower Policy may be accessed on the Company's website at the link:http://www.kanoriachem.com/images/WhiBlo.pdf.
The Company adheres to good governance practices. Corporate Governance at KCI extendsto all stakeholders and is embodied in every business decision. The Company places primeimportance on reliable financial information integrity transparency empowerment andcompliance with the law in letter and spirit. While Management Discussion and AnalysisReport that is an annexure to the Directors' Report appears in the Section titled Year inReview in the Annual Report the Corporate Governance Report and the Certificate from theAuditors of the Company confirming compliance of the conditions of Corporate Governanceare annexed hereto and form a part of the Directors' Report.
There is a conscious effort to ensure that the values enshrined in the Codes of Conductfor the Directors and Senior Management Personnel and the Employees respectively arefollowed in true spirit across all levels of the Company.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return of the Company as on the financial year ended 31st March2017 is given in Form no. MGT- 9 as an Annexure to this Report.
AUDITORS AND AUDITORS' REPORT
As per the provisions of Section 139 of the Companies Act 2013 the term of M/s.Singhi & Company Chartered Accountants the current Statutory Auditors of theCompany will end at the conclusion of the ensuing 57th Annual General Meeting of theCompany.
The Board of Directors of the Company at its Meeting held on 30th May 2017 on therecommendation of the Audit Committee has made its recommendation for the appointment ofM/s. Jitendra K Agarwal & Associates Chartered Accountants (Firm Registration No.318086E) as the Statutory Auditors of the Company at the ensuing 57th Annual GeneralMeeting ("AGM") to hold office as such for a term of 5 years commencing fromthe conclusion of the 57th AGM till the conclusion of the 62nd AGM. M/s. Jitendra KAgarwal & Associates have consented and confirmed their eligibility for appointment asthe Auditors of the Company.
The Auditors' Report given by M/s. Singhi & Co. does not contain any qualificationreservation adverse remark or disclaimer.
During the year under review the Auditors have not reported any matter under Section143 (12) of the Companies Act 2013 therefore no detail is required to be disclosed underSection 134 (3) (ca) of the Act.
Pursuant to Section 148 of the Companies Act 2013 the Board has on therecommendation of the Audit Committee approved the appointment of M/s N. D. Birla &Co. Cost Accountants (Firm Registration No. 000028) Ahmedabad as the Cost Auditors forconducting the audit of the cost records of the Company for the financial year ending on31st March 2018 at a remuneration of Rs. 145000/- (Rupees One Lakh Forty Five Thousandonly) plus applicable taxes and reimbursement of travelling and out of pocket expenses tobe incurred in the course of cost audit.
Pursuant to Section 204 of the Companies Act 2013 and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Board had appointed M/s VinodKothari & Co. Practising Company Secretaries (UIN: P1996WB042300) to conductSecretarial Audit of the Company for the financial year 2016-17. The Secretarial AuditReport for the financial year 2016-17 is provided as an Annexure to this Report. TheReport does not contain any qualification reservation adverse remark or disclaimer.
The Company's management systems organizational structures processes codes ofconduct together form the basis of risk management system that governs and managesassociated risks.The Risk Management Committee of the Company assesses the significantrisks that might impact the achievement of the Company's objectives and develops riskmanagement strategies to mitigate/minimise identified risks and designs appropriate riskmanagement procedures.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO
As required under Section 134 of the Companies Act 2013 and the rules framedthereunder the statement containing necessary information in respect of conservation ofenergy technology absorption foreign exchange earnings and outgo is provided in theAnnexure to this Report.
EMPLOYEES INFORMATION AND RELATED DISCLOSURES
As required under Section 197(12) of the Companies Act 2013 read with the Rules 5(1)5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 disclosures of remuneration and other details/particulars of the Directorsand employees of the Company are provided in the Annexure to this Report.
SAFETY AND ENVIRONMENT
The Company is committed to sustainable development and a safe workplace. Its approachto environment management is guided by the principle of provision of safe workingenvironment through continuous up-gradation of technologies prevention of pollution andconservation of resources and recycling waste.
As a result of its sustained compliance to Health Safety Environment and Qualitystandards the Company's Alco Chemical Divisions at Ankleshwar and Vishakhapatnam are ISO9001 14001 and OHSAS 18001 certified.
The Company has a documented Health & Safety Policy that is displayed andcommunicated to all employees at plant locations. With the view to achieve a 'ZeroAccidents' status the Company has developed health and safety procedures as well assafety targets and objectives.
The Company also lays thrust on renewable energy sources and solar energy.
HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS
The Company's human resource development is founded on a strong set of values. Thepolicies seek to instil spirit of trust transparency and dignity among all employees. TheCompany continues to provide ongoing training to its employees at different levels.
Industrial relations with the employees and workers across all locations of the Companycontinued to be cordial during the year.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(5) of the Companies Act 2013:
a) that in the preparation of the annual financial statements for the year ended 31stMarch 2017 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;
b) that such accounting policies have been selected and applied consistently andjudgement and estimates have been made that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company as at 31st March 2017 and ofthe profit of the Company for the year ended on that date;
c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities:
d) that the annual financial statements have been prepared on a going concern basis;
e) that proper internal financial controls to be followed by the Company have been laiddown and that the financial controls are adequate and are operating effectively; and
f) that proper systems have been devised to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
During the year under review no case was filed pursuant to the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS /
COURTS / TRIBUNALS
During the year under review no significant or material orders were passed by theRegulators or Courts or Tribunals which impact the going concern status and Company'soperations in future.
Your Directors acknowledge with gratitude the commitment and dedication of theemployees for their untiring personal efforts as well as their collective contributions atall levels that have led to the growth and success of the Company. The Directors wouldlike to thank other stakeholders including lenders and business associates who havecontinued to provide support and encouragement.
| ||For and on behalf of the Board |
|Registered Office || |
|'Park Plaza' || |
|71 Park Street ||R. V. Kanoria |
|Kolkata 700 016 ||Chairman & Managing Director |
|Date: 30"' May 2017 ||DIN:00003792 |