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Modern Insulators Ltd.

BSE: 515008 Sector: Engineering
NSE: MODINSULAT ISIN Code: N.A.
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Modern Insulators Ltd. (MODINSULAT) - Director Report

Company director report

DIRECTORS' REPORT

The Members

Your Directors are pleased to present the 31st Annual Report of the Company togetherwith Audited Financial Statements for the year ended March 31 2016.

FINANCIAL RESULTS

Year ended 31.03.2016 Year ended 31.03.2015
Net Sales and Other Income 467.51 423.45
Profit before exceptional items & tax 27.07 13.96
Add: Exceptional Items 4.56 -
Profit before tax 31.63 13.96
Less: Tax expense (Deferred tax) 2.42 (2.68)
Profit for the year after tax 29.21 16.64
Balance Brought forward from previous year 213.82 197.18
Balance carried to Balance sheet 243.03 213.82

OPERATIONS

The overall performance of the Company has been satisfactory inspite of challengingbusiness environment.

The net turnover for the year has been ' 461.01 crores as against ' 417.93 crores inprevious year and profit before interest & depreciation ' 48.10 crores as against '42.00 Crores previous showing growth of 10% & 15% respectively.

During the year under review no amount from the profit was transferred to GeneralReserve. Keeping in view the need to conserve the Company's resources for meeting theenhanced working capital requirement and balancing the manufacturing equipments yourdirectors deemed it prudent not to recommend any dividend for the year.

Insulators Division

The division has achieved a net turnover of ' 322.47 crores during the year and profitbefore interest & depreciation of ' 41.42 crores as against ' 288.68 crores and '40.19 crores respectively of previous year. Various factors have contributed for sustainedperformance of the division interalia balancing of plant & machinery continuousefforts for production of better quality product manufacturing of higher value-addedInsulators. Company's vision to broaden the scope of manufacturing of all kinds of extrahigh voltage insulators for electrical equipments has borne fruits evident by theperformance of the company during the year under review.

Yarn Division

The turnover of this division has been ' 138.54 crores as against ' 129.25 crores inprevious year and profit before interest & depreciation has been ' 6.68 crores asagainst ' 1.81 crores in previous year.

EXPORTS

The company is one of the major exporters of H.T. Porcelain Insulators from India. TheCompany has achieved export turnover of ' 84 crores during the year under review ascompared to ' 55 crores in previous year showing an impressive growth of 52%. Inspite ofstiff competition from China and slowdown of global economy export has increased becauseof sustained quality and by tapping & revival of potential customers. The milestoneachievement of the company was approval from the FSK "The Russian utility"during the year. This will help to enhance business from Russian market. In addition thecompany possesses the ability to cater to the diverse needs of global customers and isconcentrating to strengthen its presence in all corners of global market. Your company isa regular supplier to all the major multinational OEMs for their world wide requirementsof quality Porcelain Insulators.

FUTURE PROSPECTS

Your Company continues to be a leader in the manufacture of Extra High VoltageInsulators in the country. Despite stiff competition buyers show interest in yourcompany's product for its quality & timely delivery and hence your directors areconfident of achieving better working results in the coming years. Your Company is havingwell equipped R & D laboratory recognized by Govt. of India Ministry of Science &Technology which takes care of the stringent quality requirements of customers and ensuresquality and reliability in each and every product manufactured. In-house R&Dactivities have a thrust on qualitative development to replace expensive input rawmaterial & to bring consistency in quality of the products under manufacture. Thefuture of the Insulator industry looks promising due to major thrust on power sectorreforms and speedy implementation of new power projects. Major Railway electrical projectsas well as dedicated freight corridor project will increase demand for Railway Insulators.

Your company has also put up the capacity of foundry to cater demand from varioussegments apart from fulfilling company's major captive requirement of SGI and aluminiumcastings. This will give further boost to the revenue of the Company in coming years.

AMALGAMATION OF MODERN TERRY TOWELS LIMITED WITH THE COMPANY

The Draft Rehabilitation Scheme submitted by Modern Terry Towels Limited for itsamalgamation with the Company has been circulated and pending for sanction by the Hon'bleBIFR.

AMALGAMATION OF MODERN DENIM LIMITED WITH THE COMPANY

The Board of Directors of the Company has made a proposal to Modern Denim Limited forits amalgamation into your Company under the aegis of BIFR with an object to carry onbusiness of both the companies more efficientely economically conveniently andadvantageously as both the Companies are under the same management. The merger wouldresult in consolidation of two companies which would facilitate savings in theadministrative costs and would also be benficial for the Company in terms of saving inIncome Tax under the provisions of Section 72A of the Income Tax Act 1961.

DEMERGER OF YARN DIVISION OF THE COMPANY As reported earlier a scheme of Demergerunder section 391 to 394 of the Companies Act 1956 has been filed before the High Courtof Rajasthan at Jaipur to demerge the Yarn Division of the Company and the same is underconsideration for approval of Hon'ble High Court. The demerger would result in benefit tothe shareholders creditors employees and general public. PARTICULARS OF LOANSGUARANTEES OR INVESTMENTS The Company has not given any guarantees covered under theprovisions of Section 186 of the Companies Act 2013. The details of the loans andinvestments made by Company are given in the notes to the Financial Statements.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In accordance with the provisions of section 188 of the Companies Act 2013 and rulesmade thereunder all related party transactions that were entered into during thefinancial year were on arm's length basis and were in the ordinary course of business thedetails of which are included in the notes forming part of the financial statements. Therewere no materially significant related party transactions which may have a potentialconflict with the interests of the Company at large. Accordingly information in FormAOC-2 is not required.

CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Companyfor the year ended 31st March 2016 are prepared in Compliance with applicable provisionsof the Companies Act 2013 Accounting Standards and SEBI (LODR) Regulations 2015 andforms an integral part of this report.

SUBSIDIARY JOINT VENTURES AND ASSOCIATE COMPANIES The Company has one SubsidiaryCompany i.e. Motile Power Trade Pvt. Ltd. and does not have any Joint Ventures &Associate Companies during the year. The Statement containing salient features of thefinancial statement of its Subsidiary Company is attached with the Audited FinancialStatements in Form AOC-1.

CORPORATE SOCIAL RESPONSIBILITY

As required under section 135 of the Companies Act 2013 the Company has formed a CSRCommittee consisting of the following members.

Name of the Member Designation
Shri Sachin Ranka Chairman & Managing Director
Shri R. Raniwala Independent Director
Shri H.L. Sharma Executive Director

The Committee met 2 times during the financial year ended 31st March 2016. All membersof the Committee attended the meetings of the CSR Committee.

During the year Company has undertaken various projects in the area of ruraldevelopment promoting health care and education etc. These projects are in accordancewith schedule VII of the Companies Act 2013 and the Company's CSR Policy. The report onCSR activities as required under the Companies (Corporate Social Responsibility Policy)Rules 2014 is annexed as Annexure-A to the Board's Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year under review Smt. Meenu Sachetiwho was appointed as an Additional Director by the Board of Directors in their meetingheld on 20th March 2015 has been subsequently appointed as Director liable to retire byrotation in the Annual General Meeting of the Company held on 22nd September 2015.

During the year Shri D.B. Deshpande Executive Director of the Company whose termexpires on 31st March 2016 has been reappointed by the Board of Directors for a period ofone year from 01.04.2016 with remuneration. Appropriate resolution for the re-appointmentand payment of remuneration of Shri D.B Deshpande is being moved at the ensuing AnnualGeneral Meeting which the Board recommends for your approval.

In accordance with the provisions of Section 152 of the Companies Act 2013 Shri H.L.Sharma Executive Director retires by rotation and being eligible offers himself forre-appointment.

The Company has received declarations from all the Independent directors of the Companythat they meet the criteria of independence as laid down under section 149(6) of theCompanies Act 2013 and the SEBI (Listing Obligation and Disclosure Requirements)Regulations 2015.

There was no change in the Key Managerial Personnel during the year. NOMINATON ANDREMUNERATION POLICY Pursuant to the provisions of section 178 of the Companies Act 2013read with rules made there under the Board has constituted a Nomination &Remuneration Committee. The Board on the recommendation of the Nomination &Remuneration Committee has framed a policy i.e. Nomination & Remuneration Policy forselection and appointment of Directors senior managerial personnel and theirremuneration.

The Executive/whole time/Managing Director Key managerial personnel and otheremployees shall be of requisite qualification high integrity and have relevant expertiseand experience.

In case of appointment of Independent Directors the committee shall satisfy itselfwith regard to the independence of the Directors and also ensure that the candidateidentified for appointment as an Independent Director is not disqualified for appointmentunder Section 149 and 164 of the Companies Act 2013.

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing

Obligations and Disclosure Requirements) Regulation 2015 the Board has carried outthe evaluation of its own performance the Directors Individually as well as theevaluation of the working of its Audit Committee Nomination & Remuneration CommitteeStakeholders Relationship Committee and Corporate Social Responsibility Committee.Standard parameters were prepared after taking into consideration various aspects of theBoard functioning such as adequacy of the composition of the Board and its CommitteesBoard culture execution and performance of specific duties obligations and governanceetc.

A separate exercise was carried out to evaluate the performance of Individual Directorsincluding the Chairman of the Company who were evaluated on parameters such as level ofengagement and contribution independence of judgment safeguarding the interest of theCompany and its minority shareholders etc. The performance evaluation of the IndependentDirectors was carried out by the entire Board and the performance evaluation of theChairman and the Non Independent Directors of the Company was carried out by theIndependent Directors who have expressed their satisfaction with the evaluation process.

NUMBER OF BOARD MEETINGS

The Board meets regular intervals to discuss and decide on business strategies andpolicies and review the financial performance of the Company. The notice and detailedagenda alongwith other material information are sent in advance separately to eachDirectors.

In the Financial Year 2015-16 the Board met four times. The Meetings were held on 29thJune 2015 22nd September 2015 28th December 2015 and 19th March 2016. Theintervening gap between the meetings was within the period prescribed under section 173 ofthe Companies Act 2013.

AUDIT COMMITTEE

Audit Committee of the Board of Directors is entrusted with the responsibility tosupervise the Company's internal controls and financial reporting process. Thecomposition quorum powers role and scope are in accordance with Section 177 of theCompanies Act 2013 and the provisions of Regulation 18 of the Listing Regulation. Allmembers of the Audit Committee are financially literate and bring in expertise in thefields of Finance Taxation and Economics etc. Shri R. Raniwala Non-ExecutiveIndependent Director is the Chairperson of the Audit Committee. The other members of theAudit Committee include Shri S.B.L. Jain and Shri H.L. Sharma.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has an effective internalcontrol and risk-mitigation system which are constantly assessed and strengthened withnew/revised standard operating procedures. The Company's internal control system iscommensurate with its size scale and complexities of its operations. The main thrust ofinternal audit is to test and review controls appraisal of risks and business processesbesides benchmarking controls with best practices in the industry. The Audit Committee ofthe Board of Directors actively reviews the adequacy and effectiveness of the internalcontrol systems and suggests improvements to strengthen the same.

The Company is also initiating action for strengthening the systems and procedures toensure effective Internal Financial Controls in accordance with Section 134 (5) (e) of theCompanies Act 2013. An internal audit process is in place under the overall supervisionof the Audit Committee of the Board. Qualified and experienced professionals are engagedto ensure effective and independent evaluation of the internal financial controls.

The Audit Committee of the Board of Directors Statutory Auditors and the BusinessHeads are periodically apprised of the internal audit findings and corrective actions arebeing taken.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors

At the Annual General Meeting held on September 27 2014 B.L. Verma & Co.Chartered Accountants (Firm Registration No. 001064C) were appointed as Statutory Auditorsof the Company to hold office till the

conclusion of the 32nd Annual General Meeting to be held in the calendar year 2017subject to ratification by members at every consequent Annual General Meeting. Accordinglyappointment of B.L. Verma & Co. Chartered Accountants as statutory auditors of theCompany is placed for ratification by the shareholders.

The observations made in the Auditors' Report read together with relevant notes thereonare self explanatory and hence do not call for any further comments under Section 134 ofthe Companies Act 2013.

Secretarial Auditors

JAKS & Associates Company Secretaries was appointed to conduct the secretarialaudit of the Company for the Financial Year 2015-16 as required under Section 204 of theCompanies Act 2013 and Rules thereunder. The secretarial audit report is annexed herewithas Annexure-B to the Board's Report.

The observations in Secretarial Audit Report which pertains mainly listing agreementrequirements stock exchange compliances etc. It is clarified that the company will takenecessary action on approval of amalgamation scheme of Modern Terry Towels Limited withthe Company by Hon'ble BIFR and ensures that all the provisions will be complied with thefullest extent.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act 2013 and The Companies(Cost Records and Audit) Rules 2014 as amended from time to time the Company hasappointed Rajesh & Company Cost Accountants Jaipur (Firm Registration No. 000031) toundertake the Cost Audit of the Company.

As required under the Companies Act 2013 a resolution seeking members Approval forthe remuneration payable to the Cost Auditors forms part of the Notice convening AnnualGeneral Meeting for their Ratification. EXTRACT OF ANNUAL RETURN

The extracts of the Annual Return in prescribed format (MGT-9) as per the provisions ofsections 92 of the Companies Act 2013 is annexed as Annexure-C to the Board's Report.

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 will be provided upon request. In terms of Section 136 of the Act thereports and accounts are being sent to the members and others entitled thereto excludingthe information on employees' particulars which is available for inspection by the membersat the Registered office of the company during business hours on working days of theCompany up to the date of ensuing Annual General Meeting. If any member is interested ininspecting the same such member may write to the Company Secretary in advance.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Theinformation on conservation of energy technology absorption and foreign exchange earningsand outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read with Rule 8of The Companies (Accounts) Rules 2014 is annexed as Annexure-D to the Board Report.

BUSINESS RISK MANAGEMENT

The Company has formally adopted Risk Management Policy for framing implementing andmonitoring the risk management plan of the Company. The main objective of the policy is toensure sustainable business growth with stability and to promote a pro-active approach inreporting evaluating and resolving risks associated with the business. The policyestablishes a structured and disciplined approach to Risk Management. In the challengingand competitive environment strategies for mitigating inherent risks in accomplishing thegrowth plans of the Company are imperative. The common risks of the Company inter alia arefinancial risk human resource

risk technology obsolescence regulatory risk and strategic risk etc. As a matter ofpolicy these risks are assessed and appropriate steps are taken to mitigate the same.

CODE OF CONDUCT

In compliance of SEBI (Listing Obligations and Disclosure Requirements) Regulation2015 and the Companies Act 2013 the Company has framed and adopted a Code of Conduct andEthics. The Code is applicable to the Board of Directors Key Managerial Personnel and allother employees in the course of day to day business operations of the Company. The Codelays down the standard procedure of business conduct which is expected to be followed bythe Directors Key Managerial Personnel and all other designated employees of the Companyin their business dealings and in particular on matters relating to integrity in the workplace in business practices and in dealing with stakeholders.

VIGIL MECHANISM

The Company has formulated and implemented the Whistle Blower Policy/ Vigil Mechanism.This has provided a mechanism for directors and employees of the Company and other personsdealing with the Company to report genuine concern about unethical behavior actual orsuspected fraud and violation of the Company's code of conduct and ethics. The Company hasalso provided adequate safeguards against victimization of employees and Directors whoexpress their concerns.

ENVIRONMENT AND SAFETY

The Company is conscious for environmentally clean and safe operations to ensure safetyof all concerned compliances of environmental regulations and preservation of naturalresources.

The Company has zero tolerance towards sexual harassment at the workplace and has aproper management system for prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules made thereunder. Duringthe Financial Year 2015-16 the Company has not received any complaints of sexualharassment.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act 2013 the directors would

like to state that:

(a) In the preparation of the annual accounts the applicable accounting standards havebeen followed alongwith proper explanation relating to material departures;

(b) The directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;

(c) The directors 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 directors have prepared the annual accounts on a going concern basis;

(e) 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) The directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such system were adequate and operating effectively.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under the Provisions of Companies Act 2013.

2. Issue of equity shares with differential rights as to dividend voting or otherwise.

3. No material changes and commitments affecting the financial position of the Companyoccurred between the end of the financial year to which this financial statement relateand the date of this report.

4. No significant or material orders were passed by the regulators or Courts orTribunals which impact the going concern status and Company's Operations in future.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the contribution made bythe employees at all levels. Your Directors also wish to thanks its Members BankersState Government Local Bodies Customers and Suppliers for their continuous cooperationand assistance.

ON BEHALF OF THE BOARD
Place: Mumbai (Sachin Ranka)
Date : 25th June 2016 Chairman & Managing Director
DIN 00335534