Your Directors present herewith the 3rd Annual Report on the business & operationsof the Company along with the Audited Statement of Accounts for the financial year ended31st March 2017.
2. SCHEME OF ARRANGEMENT
The Composite Scheme of Arrangement between Upper Ganges Sugar & Industries LtdThe Oudh Sugar Mills Ltd Palash Securities Ltd Allahabad Canning Ltd Ganges SecuritiesLtd Cinnatolliah Tea Ltd Vaishali Sugar & Energy Ltd Magadh Sugar & Energy Ltdand Avadh Sugar & Energy Ltd and their respective shareholders and creditors hasreceived requisite approvals of regulatory authorities including Hon'ble High Court SEBICCI and finally by National Company Law Tribunal Allahabad Bench on March 2 2017. TheScheme envisaged Birla Group of Sugar Companies to re-arrange itsbusinessactivitiestoachievetheBusinessalignment as per market dynamics and variantcapital needs of each business as well as to house geographically in separate entities itssugar investments tea and food processing businesses. Pursuant to the said Scheme thesugar business operations in the State of Bihar becomes part of the Company viz; NewSwadeshi Sugar Mills Narkatiaganj Bharat Sugar Mills Sidhwalia and Hasanpur Sugar Mills.
3. FINANCIAL RESULTS
| || ||(Rs. in lacs) |
| ||Year ended 31st March 2017 ||Year ended 31st March 2016 |
|Revenue from Operations (Gross) ||71939.86 || |
|Profit before Finance Costs Tax Depreciation and Amortization ||16056.85 ||(1.10) |
|Less: || || |
|Depreciation & Amortization Expenses ||1969.59 || |
|Finance Costs ||3878.50 || |
| ||5848.09 || |
|Profit/(Loss) Before Tax ||10208.76 ||(1.10) |
|Less: || || |
|Provision for Tax ||1880.00 || |
|- Deferred Tax || || |
|Charge/(Credit) ||2457.15 || |
| ||4337.15 || |
| || ||(Rs. in lacs) |
| ||Year ended 31st March 2017 ||Year ended 31st March 2016 |
|Profit/(Loss) After Tax ||5871.61 ||(1.10) |
|Less: Balance as per last financial year ||(1.58) ||(0.48) |
|Less : Impact of Scheme related to earlier period ||(3281.07) || |
| ||(3282.65) || |
|Balance carried to Balance Sheet ||2588.96 || |
4. OPERATING PERFORMANCE
In facade of dynamic market conditions wherein the long awaited resurgence in the sugarindustry had begun during first half though quite subdued in comparison to other halfwhich witnessed upward trend in sugar pricing your Company has delivered top line growthand performed ahead of underlying Sugar Season 2016-17 prima-facie due to supply of goodquality of sugarcane culminating into higher recoveries and expedited sales. A detailedanalysis of the Company's operations future expectations and business environment hasbeen given in the Management Discussion & Analysis Report which is made an integralpart of this Report and marked as "Annexure A".
5. FINANCIAL PERFORMANCE 2016-17
The Company recorded Total Revenue of Rs. 68306.41 lacs (including other incomeaggregating to Rs. 148.88 lacs) during the financial year ended 31st March 2017. TheRevenue from Operations (Gross) of the Company for the year 2016-17 stood at Rs. 71939.86lacs. The Profit before Finance Costs Tax Depreciation and Amortisation for the yearunder review stood at Rs. 16056.85 lacs representing 23.50 % of the total revenue.
There is no change in the nature of business of the Company. There were no significantorders passed by regulators courts or tribunals impacting the Company's operation infuture.
There were no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year i.e. 31st March 2017 anddate of this report.
Your Company had adopted a dividend policy that balances the dual objectives ofappropriately rewarding Members through dividends and retaining capital in order tomaintain a healthy capital adequacy ratio to support long term growth of your Company.Consistent with this policy your Board has recommended Cumulative dividend on 12 %Non-convertible Cumulative Redeemable Preference Shares for the financial year 2014-15 to2016-17 aggregating to Rs. 347 lakhs and dividend of Rs. 2/- on Equity Shares 20%) for thefinancial year 2016-17 to the Members of your Company. The proposal is subject to theapproval of the Members at the 3rd Annual General Meeting (AGM) of your Company scheduledto be held on August 1 2017. The dividend together with the dividend distribution taxwill entail a cash outflow ofRs. 658 lakhs (previous year Rs. Nil).
7. PUBLIC DEPOSITS
The Company has not accepted any deposits from the public and as such there are nooutstanding fixed deposits in terms of Companies (Acceptance of Deposit Rules) 2014.
8. SHARE CAPITAL
In accordance with the Composite Scheme of Arrangement on merger of residual UpperGanges Sugar & Industries Ltd and residual The Oudh Sugar Mills Ltd the AuthorizedShare Capital of the Company which at the time of incorporation was Rs. 500000/- (RupeesFive lacs) divided into 50000 (fifty thousand) Equity Shares of Rs. 10/- each has becomeRs. 301000000/-(Rupees Thirty crore and ten lacs) divided into 15100000 (One CroreFiftyone Lac) Equity Shares of Rs. 10/- (Rupees ten) each and 1500000 (Fifteen Lac)Preference Shares of Rs. 100/- each.
9. SUBSIDIARY COMPANIES
The Company does not have any subsidiary. However the Company has formulated a policyfor determining material subsidiaries in line with the requirement of SEBI (LODR)Regulations 2015. The said Policy is being disclosed on the Company's website at theweblinkhttp://birla-sugar.com/Assets/Magadh/Magadh-Sugar-Policy-for-Determining-Material-Subsidiaries.pdf
10. HUMAN RESOURCES
The Company continued to create a productive learning and caring environment byimplementing robust and comprehensive HR processes fair transparent performanceevaluation and taking new initiatives to further align its Human Resource policies to meetthe growing needs of its business.
The Board of Directors comprises of six Non-Executive Directors having experience invaried fields and a Whole time Director. Out of six Non-Executive Directors five of themDirectors and one Promoter Director. Mr Chandra Shekhar Nopany is the Chairperson of theCompany.
Mr. Chandra Shekhar Nopany will retire by rotation at the ensuing Annual GeneralMeeting and being eligible has offered himself for re-appointment as Director of theCompany. He is proposed to be re-appointed as Director and will be liable to retire byrotation.
Pursuant to the applicable provisions of the Companies Act 2013 the Board of Directorsof the Company at its meeting held on 14th March 2017 appointed Mr. Yashwant Kumar DagaMr Padam Kumar Khaitan Mr Ishwari Prosad Singh Roy Mrs Shashi Sharma and Mr Raj KumarBagri as Additional Directors and accordingly they would hold the office upto the date ofthe ensuing Annual General Meeting. The Company has received notices in writing underSection 160 of the Companies Act 2013 from members proposing the candidature of Mr.Yashwant Kumar Daga Mr Padam Kumar Khaitan Mr Ishwari Prosad Singh Roy Mrs ShashiSharma and Mr Raj Kumar Bagri respectively. The Board of Directors at its meeting held on14th March 2017 designated Mr. Yashwant Kumar Daga Mr Padam Kumar Khaitan Mr IshwariProsad Singh Roy Mrs Shashi Sharma and Mr Raj Kumar Bagri as independent directors. TheBoard of Directors recommended to the shareholders for their appointment for a period offive consecutive years with effect from the date of the ensuing Annual General Meeting.
Other information on the Directors including required particulars of Directors retiringby rotation is provided Annexure to the Notice.
12. KEY MANAGERIAL PERSONNEL
The Board of Directors of the Company at its meeting held on March 30 2017 hadappointed following persons as Key Managerial Personnel of the Company viz:
a. Mr. Chandra Mohan Whole time Director
b. Mr. Sunil Choraria Chief Financial Officer
c. Mr. S Subramanian Company Secretary
All Directors Key Managerial Personnel and Senior Management of the Company haveconfirmed compliance with the Code of Conduct applicable to Directors & employees ofthe Company and a declaration to the said effect by the Wholetime Director is made part ofCorporate Governance Report which forms part of this report. The Code is available on theCompany's website at the weblinkhttp://birla-sugar.com/Assets/Magadh/Magadh-Sugar-Code-of-Conduct.pdf. All Directors haveconfirmed compliance with the provisions of Section 164 of the Companies Act 2013.
13. FAMILIARISATION PROGRAMME
Periodic presentations are made at the Board Meetings on business performance updates& business strategy of the Company.
14. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure I".
15. REMUNERATION POLICY
The Board has framed a policy for selection and appointment of Directors SeniorManagement and their remuneration. The Remuneration Policy as adopted by the Board ofDirectors is attached as Annexure "E" to this Report. The Committee hasalso framed criteria for performance evaluation of every Director and accordingly hascarried out the performance evaluation.
16. CORPORATE SOCIAL RESPONSIBILITY POLICY
The Company continues to spend to support local initiatives to improve infrastructureas well as support in other corporate social responsibilities. The disclosure requirementwith respect to CSR spends are not applicable to the Company in view of inadequateprofits/losses during the three immediately preceding financial years. The CSR Policy asapproved by the Board is available on Company's website at the weblink http://birla-sugar.com/Assets/Magadh/Magadh-Sugar-CSR-Policy.pdf.
A calendar of Meeting is prepared and circulated in advance to the Directors. The Boardevaluates all the decisions on a collective consensus basis amongst the Directors. Theintervening gap between the Meetings was within the period prescribed under the CompaniesAct 2013. During the financial year ended 31st March 2017 7 (seven) Meetings of theBoard of Directors of the Company were held. The details of the Board Meetings held duringthe F.Y. 2016-17 have been furnished in the Corporate Governance Report forming a part ofthis Annual Report.
18. AUDIT COMMITTEE
The Audit Committee was constituted on March 14 2017 and the Committee now comprisesof Mr. Raj Kumar Bagri Mr Yashwant Kumar Daga Mr. Ishwari Prosad Singh Royand Mrs Shashi Sharma. The Company Secretary acts as the Secretary to the Committee andthe Chief Financial Officer is a permanent invitee to the meetings. During the year therewere no instances where Board has not accepted the recommendation of Audit Committee.
The details of the terms of reference number and dates of meetings held attendance ofthe Directors and remuneration paid to them are separately provided in the CorporateGovernance Report.
19. STAKEHOLDERS' RELATIONSHIP COMMITTEE
The Stakeholders' Relationship Committee was constituted on March 14 2017 and nowcomprises of Mr. Raj Kumar Bagri Mr Yashwant Kumar Daga and Mr Padam Kumar Khaitan. TheCompany Secretary acts as the Secretary to the Committee. The details of the terms ofreference number and dates of meetings held attendance of the Directors and remunerationpaid to them are separately provided in the Corporate Governance Report.
20. NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee was constituted on March 14 2017 and nowcomprises of Mr. Yashwant Kumar Daga Mr Padam Kumar Khaitan Mr Ishwari Prosad Singh Royand Mr Raj Kumar Bagri. The Company Secretary acts as the Secretary to the Committee. Thedetails of the terms of reference number and dates of meetings held attendance of theDirectors and remuneration paid to them are separately provided in the CorporateGovernance Report.
21. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Corporate Social Responsibility Committee was constituted on March 14 2017 and theCommittee now comprises of Mr Chandra Shekhar Nopany Mr. Padam Kumar Khaitan and MrChandra Mohan. The Company Secretary acts as the Secretary to the Committee. The detailsof the terms of reference number and dates of meetings held attendance of the Directorsand remuneration paid to them are separately provided in the Corporate Governance Report.
22. INTERNAL COMPLAINTS COMMITTEE
An Internal Complaints Committee was constituted by the Company in terms of SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. TheAct aims at protecting women's right to gender equality life and liberty at workplace toencourage women participation at work. The Committee meets all the criteria including itscomposition mentioned in the Act and relevant Rules. No complaint has been received by theCommittee during the year under review.
23. LOANS GUARANTEE AND INVESTMENTS
It is the Company's policy not to give any loans directly or indirectly to any person(other than to employees under contractual obligations) or to other body corporate orperson. In compliance with section 186 of the Companies Act 2013 loans to employees bearapplicable interest rates. During the year under review the Company has not made anyinvestment in securities of other body corporate. The details of Investments Loans andGuarantees covered under the provisions of Section 186 of the Companies Act 2013 aregiven in the notes 15 to the Financial Statements.
24. RELATED PARTY CONTRACTS / ARRANGEMENTS
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There were nomaterially significant transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large. Accordingly no transaction are being reported inForm AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts)Rules 2014. However the Directors draw attention of the members to Note 32 to thefinancial statement which sets out related party disclosures
The Company has developed a Related Party Transactions Policy for purpose ofidentification and monitoring of such transactions and accordingly any or all RelatedParty Transactions are placed before the Audit Committee as also the Board for approvalincluding providing prior omnibus approval by the Audit Committee for the transactionswhich are of a foreseen and repetitive nature.
25. RISK MANAGEMENT
In line with the new regulatory requirements the Company has formally framed a RiskManagement Policy to identify and assess the key risk areasmonitorandreportthecomplianceandeffectiveness of the same. A Risk Management Committeethough not mandatory has been constituted comprising of Mr. Chandra Mohan Whole timeDirector Mr. Chand Bihari Patodia Group President Mrs. Shalini SharmaIndependent Director and Sunil Choraria Chief Financial Officer to oversee the riskmanagement process in the Company with an objective to review the major risks which effectthe Company from both the external and the internal environment perspective. Appropriateactions have been initiated to either mitigate partially mitigate transfer or accept therisk (if need be) and monitor the risks on a regular basis.
26. INTERNAL FINANCIAL CONTROLS
The Company has laid down internal financial control's through a combination of Entitylevel controls Process level controls and IT General controls inter-alia to ensureorderly and efficient conduct of business including adherence to the Company's policiesand procedures accuracy and completeness of accounting records and timely preparation andreporting of reliable financial statements/information safeguarding of assets preventionand detection of frauds and errors. The evaluations of these internal financial controlswere done through the internal audit process and were also reviewed by the StatutoryAuditors. Based on their view of these reported evaluations the directors confirm thatfor the preparation of financial statements for the financial year ended March 31 2017the applicable Accounting Standards have been followed and the internal financial controlsare generally found to be adequate and were operating effectively & that nosignificant deficiencies were noticed.
27. WHISTLE BLOWER / VIGIL MECHANISM
The Company has established a vigil mechanism and adopted whistle blower policypursuant to which whistle blowers can report concerns about unethical behaviour actual orsuspected fraud or violation of the Company's code of conduct or ethics policy. Themechanism provides adequate safeguards against victimisation of persons who use thismechanism. The brief detail about this mechanism may be accessed on the Company's websiteat the weblink http://www.birla-sugar.com/Assets/Magadh/Magadh-Sugar-Whistle-Blower-Policy.pdf.
28. CORPORATE GOVERNANCE
Pursuant to Regulation 34 of the SEBI (LODR) Regulations 2015 the Management Discussion& Analysis Report the Report on Corporate Governance and Declaration of Whole timeDirector on Code of Conduct form integral part of this Report and are annexed to thisReport as "Annexure B" respectively.
29. RESEARCH & DEVELOPMENT
During the year under review the Company has undertaken Research & Developmentinitiatives with an intention to improve the sugar recovery ratio and to educate the canegrowers to cultivate improved variety of sugarcane and to otherwise increase the sucrosecontents in their produce.
30. AUDITORS AUDIT QUALIFICATIONS AND BOARD'S EXPLANATIONS STATUTORY AUDITORS
Messrs S R Batliboi & Co LLP Chartered Accountants hold office as Auditors of theCompany till the conclusion of ensuing Annual General Meeting.
The Board on the recommendation of the Audit Committee proposed that Messrs Singhi& Co. Chartered Accountants (Firm registration number 302049E) be appointed as theStatutory Auditors of the Company for a period of five consecutive years from theconclusion of the ensuing 3rd Annual General Meeting of the Company till the conclusion ofthe 8th Annual General Meeting subject to the approval of the shareholders of theCompamy.
The remarks/observations made by the Statutory Auditors in their report are selfexplanatory and does not require any further clarifications/ explanation.
Pursuant to Section 148 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the cost audit records maintained by the Companyin respect of its Sugar activity is required to be audited. Your Directors have on therecommendation of the Audit Committee appointed M/s D Radhakrishnan & Co. CostAccountants as the Cost Auditors to audit the cost accounts of the Company for thefinancial year 2017-18. As required under the Companies Act 2013 the remunerationpayable to the cost auditor is required to be placed before the Members in a generalmeeting for their ratification.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 has carried out MessrsVinod Kothari & Co. Practising Company Secretaries the Secretarial Audit of theCompany for the financial year 2016-17. The Secretarial Audit Report is annexed herewithas "Annexure F" and which is self explanatory.
31. INVESTOR EDUCATION AND PROTECTION FUND
The provisions pertaining to Investor Education and Protection Fund (Uploading ofInformation regarding unpaid and unclaimed amounts lying with Companies) Rules 2012 theCompany are not applicable to your company.
32. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS &OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of The Companies (Accounts) Rules 2014 is annexed herewith as "AnnexureG."
33. PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is attached as a separate "Annexure H" and forms anintegral part of this Report.
34. 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(3)(c) of the Companies Act 2013:
a. that in the preparation of the annual financial statements for the year ended March31 2017 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;
b. that such accounting policies as mentioned in Note 2.1 of the Notes to the FinancialStatements have been selected and applied consistently and judgement and estimates havebeen made that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at March 31 2017 and of the loss of the Company for the yearended on that date;
c. sufficient care has been taken thatproperand 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 were in place and that the financialcontrols were adequate and were operating effectively.
f. that systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.
35. CEO/CFO CERTIFICATION
Mr. Chandra Mohan the Whole time Director and
Mr. Sunil Choraria Chief Financial Officer have submitted certificates to the Board ascontemplated under Regulation 17(8) of the SEBI (LODR) Regulations 2015.
Your Directors take this opportunity of recording their appreciation of theshareholders financial institutions bankers suppliers and cane growers for extendingtheir support to the Company. Your Directors are also grateful to various ministries inthe Central Government and State Government of Bihar the Sugar Directorate and the SugarDevelopment Fund for their continued support to the Company. The Directors also recognisethe valuable contribution made by the employees at all levels towards Company's progress.
| ||For and on behalf of the Board |
|Kolkata ||Chandra Shekhar Nopany |
|Dated 24th May 2017 ||Chairperson |