Your Directors hereby present their 24th Annual Report together with theAudited Accounts of the Company for the year ended 31st March 2016.
| || ||Rs. in Lacs |
| ||Year Ended 31.03.2016 ||Year Ended 31.03.2015 |
|Net Sales and other Income ||49715 ||62673 |
|Operating Loss ||(173) ||(125) |
|Finance Cost ||1773 ||1790 |
|Cash Loss ||(1946) ||(1915) |
|Depreciation & Amortisation ||490 ||481 |
During the year under review the Company achieved Net Sales and Other Income of Rs.497.15 crores against Rs. 626.73 crores in the previous year. In the current fiscal theCompany's export business remained challenging as the prices of milk in the domesticmarket did not go down in tandem with the farmgate prices as it happened internationally.As a result of this situation the exports remained largely unviable during the year. TheCompany faced operating loss of Rs. 173 Lacs as against the operating loss of 7 125 Lacslast year.
Looking into the difficult market situation the Company revised its business strategywhere focus was given on the sale of domestic products portfolio. The Company launchedfresh dairy products like milk in sachets fermented milk products and Cheese in its ownbrand. The Company is doing its best efforts to increase the volumes of fresh dairyproducts.
During the quarter ending 30th June 2016 the Company has achieved NetSales and other Operating Income of 7122.39 Crores as against Rs. 136.75 Crores during thesame period last year.
The international market continues to be weak but the domestic market particularly forfresh dairy products like milk in sachets and fermented dairy products has good demand.
The country has received good monsoon this year and it is expected to have a positiveimpact on production and availability of milk.
As the members are aware that the Company has filed a Special Leave Petition with theHonble Supreme Court of India against the judgment of Honble Punjab &Haryana High Court challenging imposition of Milk Cess by the Govt of Haryana.
The Honble Supreme Court on 7th September 2012 directed an interimstay of the High Court judgment and order subject to the Company's depositing 50% of thecess levied and demanded by the Government of Haryana which has been deposited by theCompany with the Department within the stipulated time. Inspite of that the Companycontinues to receive demand notice from Semen Bank officer. Demand notice at the year endstands at Rs. 84.48 crores. The matter is yet to come up for hearing.
OPTIONALLY CONVERTIBLE DEBENTURES
In terms of the CDR rework package Optionally Convertible Debentures were allotted bythe Company to the lenders on 3rd April 2013 at a coupon rate of 0.001% and had an optionfor-conversion to the lenders within a period of 18 months.
The Company has offered a higher yield to the lenders in lieu of their conversionright. SBI has given its consent for increase in the interest rate from its existing levelof 0.001% to Coupon rate at 5 year G-Sec or 8.00% p.a. whichever is higher in lieu ofconversion. Accordingly resolution is put before the members in the ensuing Annual GeneralMeeting for its approval.
STATUS OF COMPANYS ACCOUNTS WITH LENDERS
In terms of CDR rework package the working capital requirement of the Company for theyear 2014-15 was assessed by the Lead Bank PNB. PNB sanctioned and released its part ofworking capital but other consortium members i.e. SBI and Canara Bank have not releasedtheir part of working capital limits inspite of the directions given by CDR EG vide letterdated 1st February 2016. During the year the lenders got the Techno EconomicViability (TEV) study of the Companys Corrective Action Plan (CAP) conducted from aleading consulting agency Dun & Bradstreet (D&B). The D&B has submitted itsreport to the lenders. Due to inordinate delay in sanctioning requisite funds as per CAPnon release of working capital by SBI and Canara Bank and losses suffered by the Companythe Company got in difficulties and was pushed into difficult position of NPA.
The Company is in discussions with the Lenders to find out a workable solution to getout of the present financial difficulties.
QUALITY FOOD SAFETY & ENVIRONMENT STANDARDS
From the very beginning the Companys focus has been to follow up best of theprocessing and management systems in the plant to comply with Good Management Practices(GMP) and Good Hygienic Practices (GHP).
Our Quality Management Systems Food Safety Systems and Environment Management Systemshave been certified by DNV Netherlands. The Companys Management Systems are ISO9001:2008 ISO 14001:2004 HACCP Certification and Food Safety Systems certification i.e.ISO:22000:2005 and ISO/TS 22002/1 certified besides the Companys operations havebeen approved by the best multinationals operating in the country.
Dr. Renu Vig was appointed as an Additional Director (Non-Executive IndependentDirector) on the Board of Directors of the Company w.e.f. 1st July 2015 andwas regularized in the last Annual General Meeting of the Company held on 28thSeptember 2015.
Mr. Ashwani Kumar Aggarwal Executive Director of the Company shall retire by rotationat the ensuing Annual General Meeting and being eligible has offered himself forreappointment.
During the year four Board Meetings were convened and held the details of which aregiven in the Corporate Governance Report
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received the necessary declaration from each Independent Director inaccordance with Section 149(7) of the Companies Act 2013 that they meet the criteria ofindependence as laid out in Sub Section (6) of Section 149 of the Companies Act 2013 andSEBI (Listing Obligation and disclosure Requirement) Regulations 2015.
BOARD DIVERSITY AND REMUNERATION POLICY
The Company has a policy for formation of the Board to have Executive Directors andIndependent Directors of diverse background to maintain the independence of the Board. Ason 31st March 2016 the Board consists of eight members out of which two areExecutive Directors two Nominee Directors and four are independent directors. The Boardperiodically evaluates the need for change in its composition and size.
We affirm that the remuneration paid to the Directors is as per the terms approved bythe Nomination and Remuneration Committee of the Company.
In the 22nd Annual General meeting held on 24th September 2014M/s. Walker Chandiok & Co LLP Chartered Accountants were appointed as StatutoryAuditors of the Company to hold office till the conclusion of AGM to be held in the year2019 subject to the ratification by the members at every Annual General Meeting. M/s.Walker Chandiok & Co LLP Statutory Auditors have tendered their resignation videletter dated 23rd August 2016.
Your management puts on record its sincere appreciations for the work done by M/s.Walker Chandiok & Co LLP during their term.
The Audit Committee and the Board of Directors recommends the appointment of M/s.Aaryaa & Associates Chartered Accountants as the Statutory Auditors of the Companywho shall hold office for a term of three consecutive years till the conclusion of 27thAnnual General Meeting in accordance with the provisions of the Companies Act 2013. M/s.Aaryaa & Associates Chartered Accountants have expressed their willingness to act asStatutory Auditors of the Company if appointed and have confirmed their eligibility. Inthis regard attention of the members is invited to item no. 3 of the Notice convening theforthcoming Annual General Meeting.
The Board of Directors have approved the appointment and remuneration of M/s. AggarwalVimal & Associates as Cost Auditors of the Company to conduct the cost audit for theyear 2016-17 on the recommendations of the Audit Committee subject to the ratification ofthe remuneration by the Shareholders.
The Board has appointed M/s. Sharma Sarin & Associates Company Secretaries toconduct Secretarial Audit for the Financial Year 2015-16. The Secretarial Audit Report inForm MR-3 for the Financial Year ended 31st March 2016 is annexed herewith asAnnexure A to this report.
All the comments of the Statutory Auditors on the Annual accounts are self explanatoryand require no further explanation.
The Company recognises the risk is an internal and unavoidable component of businessand is committed to managing the risk in a proactive and efficient manner
The Company has formulated Risk Management Policy to identify and then manage threats /risks that could have impact on the goals and objectives of the Company.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
MDL (Modern Dairies Limited) has aligned its current system of internal financialcontrol with the requirement of Companies Act 2013.
MDLs internal controls commensurate with its size and nature of its operations.These have been designed to provide reasonable assurance with regard to recording andproviding reliable financial and operational information complying with applicablestatues safeguarding assets from unauthorized use executing transactions with properauthorization and ensuring compliance of corporate policies.
The management assessed the effectiveness of the Companys internal control overfinancial reporting (as defined in Clause 17 of SEBI Regulations 2015) as of 31stMarch 2016. The assessment involved self review and external audit.
Walker Chandiok & Co. LLP the Statutory Auditors of MDL has audited the financialstatements included in this annual report and has issued an attestation report on ourinternal control over financial reporting (as defined in Section 143).
The Audit Committee reviews reports submitted by the management and audit reportssubmitted by internal auditors and Statutory Auditors. Suggestions for improvement areconsidered and the Audit Committee follows up on corrective action.
Based on its evaluations (as defined in Section 177 of Companies Act 2013 and Clause18 of SEBI Regulations 2015) the Audit Committee has concluded that as of 31st March2016 the internal financial controls were adequate and operating effectively.
MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING FINANCIAL POSITION OF THE COMPANY
There are no adverse material changes or commitments occurring after 31st March 2016which may affect the financial position of the Company.
Your Company did not invite or accept any fixed deposit pursuant to provisions ofChapter 5 of the Companies Act 2013 during the year.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Loans guarantees and investments covered under section 186 of the Companies Act 2013form part of the Notes to the Financial Statements provided in this Annual Report.
RELATED PARTY TRANSACTIONS
All contracts or arrangements entered into by the Company with Related Parties havebeen done at an arm's length and are in the ordinary course of business. Related Partydisclosures as per AS-18 have been provided in the Notes to the Financial Statement.
CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION & ANALYSIS
A separate report on Corporate Governance and Management Discussion & Analysis isattached to this report.
Harmonious employee relations prevailed throughout the year. Your Directors place onrecord their appreciation for all categories of employees for their hard work anddedication.
There were no employees employed throughout the financial year or part thereof drawingremuneration as prescribed under Rule 5 of Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014.
EXTRACT OF ANNUAL RETURN
The extract of annual return as provided under section 92(3) is annexed herewith asannexure B.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO.
The information on conservation of energy technology absorption foreign exchangeearnings and outgo as per section 134(3)(m) of the Companies Act 2013 read with Rule 8of the Companies (Accounts) Rules 2014 is given in the Annexure C: andforms part of this report.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to section 134(5) of the Companies Act 2013 your Directors confirm that:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed
(b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st March 2016 and of the lossof the Company for the year;
(c) they have 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 annual accounts are prepared on a going concern basis;
(e) they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively.
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
Your Directors wish to place on record their sincere appreciation for the continuedsupport from its business associates and stakeholders of the Company.
| ||For & on behalf of the Board |
|Place: Chandigarh ||Krishan Kumar Goyal |
|Date: 31st August 2016 ||Chairman & Mg. Director |
| ||DIN:00482035 |
ANNEXURE C to Directors Report
Information as per section 134(3)(m) of the Companies Act 2013 read with Rule 8 ofCompanies (Accounts) Rules 2014 and forming part of the Directors Report for theyear ended 31st March 2016
A) POWER AND FUEL CONSUMPTION
| ||Current year ||Previous Year |
| ||2015-16 ||2014-15 |
|POWER || || |
|a) Electricity Power || || |
|Purchase Units (Kwh) ||13897380 ||18275880 |
|Total Amount Rs. ||106325115 ||139498662 |
|Rate per Unit Rs. ||7.65 ||7.63 |
|b) Other Generation . || || |
|Through Diesel Generator || || |
|Unit (Kwh) ||250260 ||125490 |
|Total Amount Rs. ||3604159 ||2358747 |
|Unit per litre of Diesel Oil ||3.29 ||3.08 |
|Cost / Unit Rs. ||14.40 ||18.80 |
|FUEL || || |
|Quantity (MT) ||18608 ||27316 |
|Total Amount Rs. ||68153818 ||101955969 |
|Rate / Unit Rs. per MT ||3662.61 ||3732.46 |
B) CONSUMPTION PER UNIT OF PRODUCTION
Products: Liquid Milk Skimmed Milk Powder Whole Milk Powder Dairy Whitener PureGhee Butter Casein WPC Lactose etc.
|Unit per 1000 kgs. of milk processed || || |
|Electricity (kwh) ||119.66 ||96.71 |
|Fuel Quantity (Kgs.) ||155.17 ||129.46 |
As the Company manufactures several products it is impracticable to apportion theutilities to different products. However consumption of electricity and fuel has beengiven per thousand kgs. of milk processed.
1. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION
The Company is regularly working on the continual improvement of its products lookingat its customers / market requirements.
2. FOREIGN EXCHANGE EARNINGS AND OUTGO
Particulars with regard to Foreign Exchange earnings and outgo appear on the relevantnote of the Balance Sheet.
| ||For & on behalf of the Board |
| ||Krishan Kumar Goyal |
|Place : Chandigarh ||Chairman & Mg. Director |
|Dated : 31st August 2016 ||DIN:00482035 |