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Modern Dairies Ltd.

BSE: 519287 Sector: Agri and agri inputs
NSE: N.A. ISIN Code: INE617B01011
BSE 00:00 | 26 Apr 6.94 -0.36
(-4.93%)
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NSE 05:30 | 01 Jan Modern Dairies Ltd
OPEN 6.95
PREVIOUS CLOSE 7.30
VOLUME 8911
52-Week high 24.65
52-Week low 6.32
P/E
Mkt Cap.(Rs cr) 16
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 6.95
CLOSE 7.30
VOLUME 8911
52-Week high 24.65
52-Week low 6.32
P/E
Mkt Cap.(Rs cr) 16
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Modern Dairies Ltd. (MODERNDAIRIES) - Director Report

Company director report

Dear Members

Your Directors hereby present their 25th Annual Report together with theAudited Accounts of the Company for the year ended 31st March 2017.

FINANCIALS

Rs. in Lacs

Year Ended Year Ended
31.03.2017 31.03.2016
Net Sales and other Income 45772 49715
Operating Loss (554) (173)
Finance Cost 296 1773
Cash Loss (850) (1946)
Depreciation & Amortisation 486 490
Loss for the year (1336) (2424)

PERFORMANCE

During the year under review the Company achieved Net Sales and Other Income of Rs.457.72 crores against

Rs. 497.15 crores in the previous year. In the current fiscal the demand for milk& milk products remained strong and the prices of milk also remained high. The pricesof milk in sachets & other Fresh Dairy products and Cheese did not go up in tandemwith the milk prices increase as a result the margins on these products remained underpressure. On the other hand the international market continued to be unviable for Indianmanufacturers. This year the company's export turnover was only Rs. 4.57 crores as againstRs. 24.89 crores last year. The Company faced operating loss of Rs. 554 Lacs as againstthe operating loss of Rs. 173 Lacs last year. 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. To promote the sale of Fresh Milk and Fermented Milk Products the team is puttingin best efforts to increase its presence in the market and improve distribution whichwill result into higher sales volumes and contribution. The quality of the products isappreciated.

CURRENT OPERATIONS

At present the company's operations are mainly focused on sale of Fresh Dairy Productslike milk in sachets and fermented dairy products i.e. Dahi Lassi and Chach & Cheese.The team is continuously striving to improve the operations and performance through saleof these products in the Modern Dairies Brand. With the improved spending power of theconsumers the domestic market particularly for fresh dairy products has good demand. Theprices of raw milk in India are strong and the international prices for dairy productsremain subdued rendering the export market unviable for Indian Manufacturers. With normalrainfall expected during this year the production and availability of milk is alsoexpected to be good.

MILK CESS

As the members are aware that the Company has filed a Special Leave Petition with theHon'ble Supreme Court of India against the judgment of Hon'ble Punjab & Haryana HighCourt challenging imposition of Milk Cess by the Govt. of Haryana. The Hon'ble SupremeCourt on 7th September 2012 directed an interim stay of the High Court judgment andorder subject to the Company's depositing 50% of the cess levied and demanded by theGovernment of Haryana which has been deposited by the Company with the Department withinthe stipulated time. Inspite of that the Company continues to receive demand notice fromSemen Bank officer. Demand notice at the year end stands at Rs. 108.42 Crores. The matteris yet to come up for hearing.

PLEDGE OF PROMOTER SHAREHOLDING

During the year the entire shareholding of promoter and promoter group aggregating to10654779 shares being 45.69 % of the entire share capital of the Company were pledged infavour of Punjab National Bank and other consortium members.

STATUS OF COMPANY'S ACCOUNTS WITH LENDERS

Due to inordinate delay by the lenders in release of the need based working capital andnon-sanctioning of restructuring proposal the accounts of the Company became NPA with thelenders but the Company continues to be on the CDR platform. The Company has submittedits proposal with the lenders which they are yet to decide leading to uncertainty withregard to the amount and time of any repayment falling due which are both crucial toidentify the quantum of liability and its nature whether current or otherwise. The Companybased on the opinion has not provided for such interest and shown the total debts payableas on the balance sheet date under the head long term borrowings instead of showing othercurrent liabilities (also refer note 35-37 of Balance Sheet). The Company is in discussionwith the Lenders to resolve the issue regarding the restructuring of its debts.

QUALITY FOOD SAFETY & ENVIRONMENT STANDARDS

From the very beginning the Company's 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 Company's Management Systems are ISO9001:2008 ISO 14001: 2004 HACCP Certification and Food Safety Systems certification i.e.ISO:22000:2005 and ISO/TS22002/1 certifiedbesides the Company's operations have beenapproved by the best multinationals operating in the country.

DIRECTORS

Consequent upon the winding up of BIFR Mr. Mohan Lal Sharma ceased to be a Director onthe Company's Board w.e.f. 1st December 2016.

The nomination of Mr. Satish Kumar Dua was withdrawn by PNB and consequently he ceasedto be a Director w.e.f 13th February 2017. Your directors place on record their highappreciation for the contribution made by Mr. Satish Kumar Dua and Mr. Mohan LalSharma during their tenure as Director of the Company. Mr. Sanjeev Kumar Bajaj wasappointed as the Nominee Director of Punjab National Bank on Company's Board w.e.f 27thMay 2017.

Mr. Krishan Kumar Goyal Chairman & Managing Director of the Company shall retireby rotation at the ensuing Annual General Meeting and being eligible has offered himselffor reappointment.

The terms of Mr. Krishan Kumar Goyal Chairman & Managing Director and Mr. AshwaniKumar Aggarwal Executive Director of the Company are up to 31st March 2017. The Board ofDirectors on the recommendation of the Nomination and Remuneration Committee hasre-appointed Mr. Krishan Kumar Goyal Chairman & Managing Director and Mr. AshwaniKumar Aggarwal Executive Director of the Company for a period of 3 (three) years witheffect from 1st April 2017 subject to approval of shareholders.

BOARD MEETINGS

During the year five 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 Subsection (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 2017 the Board consists of six members out of which two are ExecutiveDirectors and four are independent directors.

The Board periodically 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.

AUDITORS

In the 24th Annual General meeting held on 30th September 2016 M/s. Aaryaa& Associates Chartered Accountants were appointed as Statutory Auditors of theCompany to hold office till the conclusion of 27th AGM to be held in the year 2019subject to the ratification by the members at every Annual General Meeting. Accordinglythe matter of ratification of the appointment of M/s. Aaryaa & Associates CharteredAccountants as statutory auditors of the Company for the FY 2017-18 shall be placedbefore the members. The Statutory Auditors have confirmed their eligibility to the effectthat their appointment if made would be within the prescribed limits under the CompaniesAct 2013 and that they are not disqualified.

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 2017-18 on the recommendations of the Audit Committee subject to the ratification ofthe remuneration by the Shareholders. The Board has appointed M/s. B.K. Gupta &Associates Company Secretaries to conduct Secretarial Audit for the Financial Year2017-18. The Secretarial Audit Report in Form MR-3 for the Financial Year ended 31stMarch 2017 is annexed herewith as Annexure ‘A' to this report.

AUDITOR'S REPORT

All the comments of the Statutory Auditors on the Annual accounts are self explanatoryand require no further explanation.

RISK MANAGEMENT

The Company recognises that risk is an internal and unavoidable component of businessand is committed to managing the risk in a proactive and efficient manner. The Company hasformulated Risk Management Policy to identify and then manage threats / risks that couldhave 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.

MDL's internal controls commensurate with its size and nature of its operations. Thesehave been designed to provide reasonable assurance with regard to recording and providingreliable financial and operational information complying with applicable statuessafeguarding assets from unauthorized use executing transactions with properauthorization and ensuring compliance of corporate policies.

The management assessed the effectiveness of the Company's internal control overfinancial reporting (as defined in Clause 17 of SEBI Regulations 2015) as of 31stMarch 2017. The assessment involved self review and external audit.

M/s. Aaryaa & Associates Chartered Accountants the Statutory Auditors of MDL hasaudited the financial statements included in this annual report and has issued anattestation report on our internal control over financial reporting (as defined in Section143) 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 itsevaluations (as defined in Section 177 of Companies Act 2013 and Clause 18 of SEBIRegulations 2015) the Audit Committee has concluded that as of 31st March 2017 theinternal 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 2017which may affect the financial position of the Company.

FIXED DEPOSITS

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 is attached to this report.

HUMAN RESOURCES

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' and forms partof 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 had beenfollowed:-(b) they have 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 as at 31st March 2017 and of the loss ofthe Company for the year; (c) they have taken proper and sufficientcare for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother 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 and that suchinternal financial controls are adequate and were operating effectively; (f) they havedevised proper systems to ensure compliance with the provisions of all applicable laws andthat such systems were adequate and operating effectively.

APPRECIATION

Your Directors wish to place on record their sincere appreciation for the continuedsupport from its business associates and stakeholders of the Company.

For and on behalf of the Board
Place: Chandigarh Krishan Kumar Goyal
Date: 27th May 2017 Chairman & Mg. Director
DIN: 00482035