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Keerthi Industries Ltd.

BSE: 518011 Sector: Industrials
NSE: N.A. ISIN Code: INE145L01012
BSE LIVE 15:40 | 17 Nov 186.10 7.00
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OPEN 177.00
PREVIOUS CLOSE 179.10
VOLUME 1987
52-Week high 214.00
52-Week low 103.00
P/E 8.07
Mkt Cap.(Rs cr) 149
Buy Price 0.00
Buy Qty 0.00
Sell Price 186.00
Sell Qty 20.00
OPEN 177.00
CLOSE 179.10
VOLUME 1987
52-Week high 214.00
52-Week low 103.00
P/E 8.07
Mkt Cap.(Rs cr) 149
Buy Price 0.00
Buy Qty 0.00
Sell Price 186.00
Sell Qty 20.00

Keerthi Industries Ltd. (KEERTHIINDUS) - Director Report

Company director report

TO

THE MEMBERS

Dear Members

Your Directors have pleasure in presenting their 34th Annual Report for theFinancial Year 2016-17 together with the Audited Balance Sheet as at 31stMarch 2017 and the Profit & Loss Account for the year ended on that date.

1. FINANCIAL RESULTS:

(Rs. In Lakhs)

 

 

Particulars 2016-17 2015-16
Net Operational Income 19220.74 18263.98
Other income 76.46 118.65
Profit before interest and depreciation 3313.78 4253.72
Less: Interest 493.14 618.01
Less: Depreciation 879.82 823.47
Profit/(Loss) before taxation 1940.82 2974.80
Less : Provision for taxation including deferred tax liability 608.98 973.57
Less: short provision of earlier years - 10.07
Net Profit/(Loss) after taxation 1331.85 1991.16

OPERATIONS:

In the Financial year 2016-17 the Company continued its strong growth momentum due toits ability to satisfy its customers and the rigor in following strong internal processes.

Revenue growth in the year remained high. The Operating profit get increased and thenet profit is also satisfactory.

The Overall revenue for the year 2016-2017 at Rs 19220.74 Lakhs is higher by 5.24% (Rs.18263.98 Lakhs in 2015-2016) operating profit at Rs. 1940.82 Lakhs is reduced by 34.76%(Rs. 2974.80 Lakhs in 2015-2016) and the net profit for the year at Rs. 1331.85 Lakhs isalso reduced by 33.11% (Rs. 1991.16 Lakhs in 20152016).

Cement Division: Production of Cement and Clinker were 485637 MTS and 440730 MTSrespectively during the twelve months ended 31st March 2017 as against were412284 MTS and 402841 MTS respectively during the previous year ended 31st March2016.

During the year under review 82% of the installed capacity of the Company was utilizedas against 69% during the previous year ended 31st March 2016.

Wind Power: The Company has generated 3111983 units as against 2817466 units duringthe previous year.

Electronic Division: The Company has produced 1796 sq. mts of Printed Circuit Boardsas against 2111 sq. mts during the previous year.

CURRENT YEAR OUTLOOK:

CEMENT DIVISION:

India's Cement Industry is a vital part of its economy providing employment to morethan a million people directly or indirectly. India is the second largest producer ofcement in the world. Some of the recent major government initiatives such as developmentof 98 smart cities are expected to provide a major boost to the sector.

The Indian cement industry has witnessed a massive capacity addition of overapproximately 197 million metric tons during last 7 years. This capacity addition isdisproportionately high in South India. During the same period South Indian cementcapacity alone has increased by approximately 78 million tons. This has resulted insignificant pressure on capacity utilization and price realization as well.

Until FY 2013-14 the Southern region (especially Andhra Pradesh) was facing demandissues due to political instability and delays in projects across the sectors. Howeverwith the split of Andhra Pradesh into two states which required the establishment of anew government in the new state of Telangana we expect demand to pick up and utilizationto improve on the back of fresh demand for housing urban and infrastructure developmentfrom the new states.

Cement demand in India is expected to increase due to government's push for largeinfrastructure projects leading to 45-50 million tonnes of cement needed in the nextthree to four years. In addition cement production in India is expected to touch 550600million tonnes (MT) in the next three to four year. Telangana is undertaking majorirrigation projects and Andhra Pradesh is committed to building a new capital city by FY2017-18 which give a major boost to cement industries in Southern India.

Your Company continues to concentrate on cost reduction measures in all areas ofproduction and distribution to protect and improve its profitability. Despite of fewadverse conditions your Directors are hopeful that the performance of the company wouldachieve another level of milestone in producing the cement.

ELECTRONIC DIVISION:

At present the PCB industries in India consists of single sided double sided &multi-layered PCBs. Keerthi (Electronic Division) is engaged in manufacturing of Flexibleand Rigid Flex double sided & multi-layer PCBs. The major market for our company forthis division comes from the Healthcare and Defense Sectors. During the year 2016-17 thesegment wise contributions to the total PCB business is as under:

Segment Contribution (In Rs.) %
Automobile 224117 0.28
Defense 4858965 6.07
Health Care 69909145 87.28
Consumer Electronics 5105313 6.37
Total 80097540 100.00

Further PCB industry is witnessing sizeable growth in the consumer electronics sector.In the coming years the market in these segments is expected to grow around 40% to 50% ascompare to the current scenario. Your company intends to reap benefits from this growthand accordingly the turnover of PCB business may increase further.

The improvement shown in the sales turnover of electronics division is satisfactory.Development V of prototypes for new customers in the high-end automobile segment was doneduring the year. The division expects to improve its customer base in the automobilesegment in the years to come. Supply of PCBs for Konkurs missile program is completed forthe existing requirements and development of flexi cables for Invar missile program isunderway. The division is exploring further opportunities in the defense sector to improvebusiness in the near future.

SUGAR DIVISION:

In view of the adverse market for sugar industry and since there is no progress in thedivision in particular effective steps could not be taken for furtherance of thebusiness.

2. DIRECTORS:

a) The Company's Board of Directors have been constituted in compliance with theprovisions of Companies Act read with the SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015 ("SEBI (LODR) Regulation". The Composition ofthe Board is as under:

1. Smt. J. Triveni Executive Chairperson & Whole-time Director

2. Sri. J. S. Rao Managing Director & CFO

3. Sri. J. Sivaram Prasad Independent Director

4. Sri. K. Harishchandra Prasad Independent Director

5. Sri. E. Siva Sankaram Independent Director

6. Sri. Boddu Venkata Subbaiah Independent Director

b) In accordance with the provisions of Companies Act 2013 Smt. J. Triveni ExecutiveChairperson & Whole-time Director of the Company would retire by rotation and beingeligible offer herself for re-appointment. The Board of Directors recommends herre-appointment at the ensuing Annual General Meeting.

c) As required under Section 134 (3) (d) of the Companies Act 2013 All independentdirectors have given declarations to the Company that they meet the criteria ofindependence as laid down under section 149 (6) of the Companies Act 2013.

d) Other Disclosure Board Evaluation

Pursuant to Section 178 (2) of the Companies Act 2013 the Nomination and RemunerationCommittee has evaluated the performance of individual Directors in its duly convenedmeeting. Pursuant to Section 134 (3) (p) of the Companies Act 2013 and Regulation 4 (2)(f) (ii) (9) of the ("SEBI (LODR) Regulation the Board has carried out an evaluationof its own performance as well as the evaluation of the Committees of the Board. Themanner in which the evaluation has been carried out has been explained in the CorporateGovernance Report.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. Remuneration Policy is stated in the Corporate Governance Report.

Meetings

During the year Five (5) Board Meetings and

Five (5) Audit Committee Meetings were convened and held. The details of which aregiven in the Corporate Governance Report. The intervening gap between the Meetings waswithin the period prescribed under the Companies Act 2013.

3. DETAILS OF WHOLE-TIME KEY MANAGERIAL PERSONAL (KMP)

During the period under review Sri. J. S. Rao Managing Director Smt. J. TriveniExecutive Chairperson & Whole-time Director Sri. Y. Venkateswara Rao Chief FinancialOfficer and Mr. Rajesh Kumar Yadav Company Secretary & Compliance Officer are theWhole-Time Key Managerial Personal of the Company.

Sri. Y. Venkateswara Rao CFO has resigned from the office of CFO w.e.f. 30-07-2016and Sri. J. S. Rao the Managing Director has been appointed as Managing Director &CFO w.e.f. 28-01-2017

4. DIVIDEND:

Your Directors regret their inability to recommend any dividend on Equity Shares sincethere are arrears of dividend on 9% Cumulative Redeemable Preference Shares. In view ofthe said dividend arrears on Cumulative Preference shares Company has inadequate profitto declare dividend on Equity shares this year.

However your Board has recommended payment of final dividend on 9% CumulativeRedeemable Preference Shares for the financial year 2016-17 as follows:

No of 9% Cumulative Preference Share Per share (in Rs.) Total amount of Dividend entitle to receive Dividend Per share (In Rs.)
500000 70/- 3150000 6.30/-
538440 100/- 4845960 7.70/-
1038440 7995960

Your Board has also recommended to pay all the arrears of dividend amounting Rs.113894820/- upto the Financial Year 2015-16 on 9% Cumulative Redeemable PreferenceShares out of current year profits and accumulated profits of the previous years which isavailable for distribution of dividend which are tabulated as under:

No of 9% Cumulative Preference Share Date of allotment Date upto which remain unpaid Arrears of Dividend entitle to be received @9% (In Rs.)
1. 500000 31-03-2001 31-03-2016 45498082
2. 270100 31-10-2002 31-03-2016 32634000
3. 268340 31-06-2001 31-03-2016 35762738
Total 1038440 113894820

5. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS OF THE COMPANY:

During the period under review there are no significant and material orders passed bythe Regulators or Courts or Tribunals which would impact the going concern status and theCompany's future operations.

6. DEMAT OF SHARES:

The Equity Shares of your Company have been admitted by CDSL/NSDL fordematerialization. All the Shareholders whose shares are in physical mode are requested todematerialize their share holding through their depository participants so that it willimprove the liquidity of our stock. The Board pleased to inform that in compliance withRegulation 39 of the Listing Regulation entered with Bombay Stock Exchange Limited theunclaimed equity shares were dematerialized and the same are lying in the DEMAT suspenseaccount. Shareholders are requested to claim their shares in DEMAT form by submittingtheir claims to the Company/RTA.

7. DIRECTORS' RESPONSIBILITY STATEMENT:

In pursuance of Section 134(5) of the Companies Act 2013 your directors confirm:

(a) That the directors in the preparation of the annual accounts the applicableaccounting standards have been followed along with proper explanations relating tomaterial departures.

(b) That the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are 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 and of the profit and loss of the Company for that period.

(c) That the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and deleting fraud and otherirregularities.

(d) That the directors had prepared the annual accounts on the going concern basis.

(e) That the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

(f) That the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

8. PUBLIC DEPOSITS:

Your Company has not accepted any deposits within the meaning of Section 73 or 74 ofthe Companies Act 2013 and Companies (Acceptance of Deposits) Rules 2014.

9. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

The company has not given any loans or guarantees covered under the provisions ofSection 186 of the Companies Act 2013.

10. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. To maintain its objectivity and independence the InternalAuditor reports to the Chairman of the Audit Committee of the Board & to theChairperson & Managing Director.

The Internal Audit Department monitors and evaluates the efficacy and adequacy ofinternal control system in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company. Based on the report of internalaudit function process owners undertake corrective action in their respective areas andthereby strengthen the controls. Significant audit observations and recommendations alongwith corrective actions thereon are presented to the Audit Committee of the Board.

11. INTERNAL FINANCIAL CONTROL:

The Company has in place adequate internal financial control commensurate with thesize scale and complexity of its operations. During the year such controls were testedand no reportable material weakness in the design or operations were observed. The Companyhas policies and procedures in place for ensuring proper and efficient conduct of itsbusiness the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timely preparationof reliable financial information.

The Company has adopted accounting policies which are in line with the AccountingStandards and the Act. These are in accordance with generally accepted accountingprinciples in India. The Company has a robust financial closure certification mechanismfor certifying adherence to various accounting policies accuracy of provisions and otherestimates.

12. RELATED PARTY TRANSACTIONS:

All transactions entered by the Company with related party were in the ordinary courseof the business. The Audit Committee granted approval of the same. There were nomaterially significant transactions with Related Parties during the financial year 2016-17which were in conflict with the interest of the Company.

During the year your Company has entered into following Related Party Transactions asper Section 188 (1) of the Companies Act 2013:

Date of transaction Nature of Transactions Amount (In Rs.) Legal Framework Legal Require ments Date of Approval obtained
01-04-2016 The Company has taken on lease the Guest House owned by Sri. Chetan Anand B Son-in-law of Managing Director and Executive Chairperson of the Company Rs 25000/- p.m. (Rs. 3.00 Lakhs p.a) plus annual enhancement @5% every year in rent payable Regulation 23 (2) of SEBI Listing Regulation and Sec-188 (1) (c) of Companies Act 2013 Prior Approval of Audit Committee Approval of Board Ratified by the Audit Committee meeting held on 13-08-2016 Ratified by the Board of Directors on its meeting held on 13-08-2016

13. COST AUDITORS:

Cost Audit records have been maintained by the company for the F.Y.2016-17. Pursuant tothe directives of the Central Government and provisions of Section 148 of the CompaniesAct 2013 qualified Cost Auditors have been appointed to conduct the cost audit for theF.Y. 2017-18.

14. AUDITORS:

In terms of the provisions of Section 139 (2) of Companies Act 2013 (the"Act") no listed company can appoint or re-appoint an audit firm as auditor formore than two terms of five consecutive years (i.e. 10 years maximum).

The Current Auditor M/ s. K.S. Rao & Co Chartered Accountants Hyderabad(Registration No.: 003109S) is serving in the company for more than 10 years.

However the Act has prescribed a transition period of 3 years to comply with theaforesaid rotation requirement. Accordingly the Company had on its 31st AGMheld on 9th August 2014 appointed M/s. K.S. Rao as Statutory Auditor for thesaid transition period to hold office till 34th AGM.

Now the transition period is expired and the Board of Directors and the AuditCommittee on its respective meeting held on 29.05.2017 recommends the appointment ofM/s. Brahmayya & Co. Chartered Accountants Hyderabad (Firm Registration No.:000513S) as the Statutory Auditor for 5 consecutive years i.e. from the conclusion of thisAGM until the conclusion of the 39th AGM of the Company subject toratification by the Members at every AGM held after this AGM till the 39th AGM.

15. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES:

Your Company has duly constituted CSR Committee on 29-05-2014.

The Annual Report on CSR activities is annexed herewith as: (Annexure III)

16. SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hadappointed M/s VCSR & Associates Company Secretaries in Whole-time Practice to carryout Secretarial Audit for the financial year 2016-2017. The Secretarial Audit report isannexed herewith as "(Annexure IV)" & "(Annexure IV.I)"

17. EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as "(Annexure V)".

18. DISCLOSURE AS PER SECTION 197(12)

Refer "(Annexure VI)".

19. HEALTH AND SAFETY/ INDUSTRIAL RELATIONS:

The company continues to accord high priority to health and safety of employees atmanufacturing locations. During the year under review the company conducted safetytraining programmes for increasing disaster preparedness and awareness among all employeesat the plants. Training programmes and mock drills for safety awareness were alsoconducted for all employees at the plants. Safety Day was observed with safety competitionprogrammes with aim to imbibe safety awareness among the employees at the plant.

During the year under review your Company enjoyed cordial relationship with workersand employees at all levels.

20. ADDITIONAL INFORMATION:

Information pursuant to Section 134 (3) (m) of the Companies Act 2013 is annexedherewith as (Annexure II) which is detailed in Form A and Form B.

21. RISK MANAGEMENT:

Pursuant to section 134 (3) (n) of the Companies Act 2013 & Regulation 21 of theListing Regulation the company has constituted a risk management committee on is BoardMeeting held on 29th May 2015. The details of the committee and its terms ofreference are set out in the corporate governance report forming part of the Boardsreport.

At present the company has not identified any element of risk which may threaten theexistence of the company.

22. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS REPORTS

The Corporate Governance and Management Discussion & Analysis Report which form anintegral part of this Report are discussed separately together with the Certificate fromthe Practicing Company Secretary of the Company regarding compliance with the requirementsof Corporate Governance as stipulated SEBI (LODR) Regulations 2015.

23. ACKNOWLEDGEMENTS:

Your Directors are thankful to Canara Bank MID Corporate Branch Somajiguda AndhraBank SCF Branch and Indian Bank Main Branch Koti for their continued support during theyear under review and acknowledge with gratitude the help extended by the CentralGovernment and Government of Telangana & Andhra Pradesh. Your directors also wish toplace on record their appreciation of the services rendered and co-operation extended bythe Workmen Staff Dealers Customers and other concerned.

By Order of the Board of Directors

Sd/-
Place: Hyderabad (J. Triveni)
Date: 29-05-2017 Executive Chairperson
DIN: 00029107

(Annexure II)

Information pursuant to Section 134 (3) (m) of the Companies Act 2013

FORM - A

Form for disclosure of particulars with respect to conservation of energy.

Particulars

Current Year

Previous year

A. Power and Fuel Consumption: Cement Electronic Division Wind Power Cement Electronic Division Wind Power
i
a) Purchased Units (Nos) 43088955 506808 NIL 38634720 538195 NIL
Amount (Rs.) 274230970 4333081 NIL 239387065 4381312 NIL
Rate/unit (Rs.) 6.36 8.54 NIL 6.20 8.14 NIL
b) Own Generation:
i) Through Diesel Generator Units (Nos.) 13792 6054 NIL 7620 5022 NIL
Units per Ltr. of Diesel Oil 3.00 3.02 NIL 2.75 3.14 NIL
Cost/Unit ('Rs.) 18.21 19.90 NIL 18.60 17.25 NIL
ii) Through Steam Turbine/ Generator: NIL NIL NIL NIL NIL NIL
Units (Nos.) NIL NIL NIL NIL NIL NIL
Units per Ltr. Of Fuel Oil Gas NIL NIL NIL NIL NIL NIL
Cost/Unit (Rs.) NIL NIL NIL NIL NIL NIL
2 Coal
Quantity (M.T.) 78791 NIL NIL 76250 NIL NIL
Total Cost (Rs.) 378785358 NIL NIL 350705136 NIL NIL
Average Rate/M.T. (Rs.) 4807 NIL NIL 4599 NIL NIL
3 Furnace Oil NIL NIL NIL NIL NIL NIL
4 Others/Internal Generation NIL NIL NIL NIL NIL NIL
B. Consumption per unit production:
Electricity (Units) 88.73 285.51 NIL 93.71 254.92 NIL
Furnace Oil NIL NIL NIL NIL NIL NIL
Coal 0.18 NIL NIL 0.19 NIL NIL
Others (Specify) NIL NIL NIL NIL NIL NIL

FORM - B

Form for disclosure of particulars with respect to Technology Absorption:

Research and Development (R&D):

1. Specific areas in which R&D carried out by the Company NIL
2. Benefits derived as a result of the above R&D NIL
3. Future Plan of Action
4. Expenditure on R&D NIL
a) Capital
b) Recurring
c) Total
d) Total R&D expenditure as a percentage of total turnover
Technology absorption adoption and innovation
1 Efforts in brief made towards innovation NIL
2 Benefits derived as a result of the above efforts e.g. product improvement cost reduction production development import substitution etc. NIL
3 In case of imported technology (Imported during the last 5 years reckoned from the beginning of the financial Year) the following information may be furnished NIL
a) Technology
b) Been imported
c) Year of import
d) Has technology been fully absorbed
e) If not fully absorbed reasons therefore and future plans of action
Foreign Exchange Earnings & Outgo:
i) Activities relating to exports initiatives taken to increase exports development of new export markets for products and services and export plans
1). Total foreign exchange outgo and earned
a) Foreign Exchange Outgo Rs. 907.34 Lakhs
b) Foreign Exchange Earned Rs. 17.62 Lakhs
By Order of the Board of Directors
Sd/-
Place: Hyderabad (J. Triveni)
Date: 29-05-2017 Executive Chairperson
DIN: 00029107