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Modi Industries Ltd.

BSE: 507210 Sector: Agri and agri inputs
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Modi Industries Ltd. (MODIINDS) - Director Report

Company director report

To

The Members

The Directors of your Company hereby present the 81st Annual Report togetherwith the Audited Financial Statement of the Company along with Auditors’ Reportthereon for the year ended on 31st March 2015.The working results of the year aresummarized as under:

(Rs. in Lac)

DESCRIPTION Standalone Consolidated
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
31.03.2015 31.03.2014 31.03.2015 31.03.2014
REVENUE FROM OPERATIONS (NET OF EXCISE DUTY) 33779.84 30131.86 33779.84 30131.86
OTHER INCOME 640.33 722.30 642.51 724.39
TOTAL REVENUE 34420.17 30854.16 34422.35 30856.25
LOSS BEFORE DEPRECIATION FINANCE COSTS AND EXCEPTIONAL ITEM 841.19 1994.81 840.14 1993.71
ADD:
Finance Costs 1228.39 1767.84 1228.39 1767.84
Depreciation 435.92 527.27 435.92 527.27
1664.31 2295.11 1664.31 2295.11
LOSS BEFORE EXCEPTIONAL ITEM & TAX 2505.50 4289.92 2504.45 4288.82
Exceptional items - - - -
Tax Expenses (Net) - - 0.28 0.31
LOSS FOR THE PERIOD 2505.50 4289.92 2504.73 4289.13

DIVIDEND:

Directors regret their inability in view of the losses to recommend any dividend forthe year.

PERFORMANCE OF THE UNITS FOR THE YEAR UNDER REPORT:

(a) SUGAR UNIT:The cane crushing in the year under review was 62.84 lacs qtls.as against 62.05 lacs qtls. in last year.Sugar recovery in the year under review increasedfrom 9.138% to 9.469%.Market sentiment during the financial year remained bearish owing tothe continued mismatch between supply and demand of sugar affecting salesrealization.Further during the year U.P. Government has fixed very high State AdvisedCane price.

(b) DISTILLERY UNIT:During the year under review the production of Spirit(RS/ENA) was 4328 Kl. as compared to last year 4109 Kl.

In the year under review there was significant improvement in production of IndianMade Foreign Liquor (IMFL) which has contributed in improvement in profit of the unit.

(c) ELECTRODE UNIT : In terms of bottom line we are slightly better incomparison with the previous year however contribution percentage is declined.Due to thesevere competition from the global as well as domestic competitors Modi Arc was forced tocompromise on the margins to retain the business.The pressure on the margins wasparticularly high in general purpose welding electrodes and the solid wire business.

(d) GAS UNIT: The sales and profitability of the unit were satisfactory underthe prevailing circumstances.

(e) PAINT UNIT:The unit registered slight decrease this year in comparison tolast year.We are better in terms of EBIDT as compared to last year.

FIXED DEPOSITS:

The deposits of 1187 depositors amounting to Rs. 75.41 Lac including interest thereontill the date of maturity was claimed but remained unpaid as on 31st March 2015.Howeverthe Company made attempts in the past to make payment to all depositors but could notsucceed in certain cases since the depositors were not traceable at the recordedaddresses with the Company as were provided by the depositors themselves.

The deposits of 160 depositors amounting to Rs. 9.72 Lac including interest thereontill the date of maturity remained unclaimed as on 31st March 2015.

During the year under review Company has paid Rs. 0.87 Lac to 8 depositors towardstheir deposits this includes interest upto the date of maturity as per the conditionslaid down in the scheme of acceptance of public deposits and Company has also reconciledthe books of accounts.Company has not accepted any fresh deposits during the year underreview The Company is a sick industrial Company as declared by the Hon’ble BIFR videtheir order dated 14th March 1991 in terms of Section 3(1)(o) of SICA.Therehabilitation scheme of the Company is still pending and the payment to depositors willbe made as per final orders of Hon’ble BIFR/AAIFR.

With regard to payment of public fixed deposits as per Section 74 of the CompaniesAct 2013 deposits accepted before the commencement of the Act (i.e. 1stApril 2014) shall be repaid within one year from the commencement of the Act.The Companyhas filed a petition with the Company Law Board on 31st March 2015 seekingextension of time for repayment of public fixed deposits. The matter is still pending fordisposal with the Company Law Board.

DEBENTURES:

Debentures worth Rs.537.32 Lac are due for payment as on 31st March 2015.The Companywill repay to debenture-holders as per final orders of Hon’ble BIFR/AAIFR that may bepassed.

DIRECTORS’ RESPONSIBILITY STATEMENT:

Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 inrespect of all units of the Company {excluding Balance Sheet of Steel Unit - refer Note27(4) of Annual Accounts} it is hereby confirmed: (i) that in the preparation of theannual accounts the applicable accounting standards have been followed and whereverrequired proper explanations relating to material departures have been given; (ii) thatthe Directors have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of thelosses of the Company for that period; (iii) that the Directors have taken proper andsufficient care for the maintenance of adequate accounting records in accordance with theprovisions of the Act for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities; (iv) that the annual accounts have been preparedon a going concern basis.

(v) that the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

(vi) that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

DIRECTORS:

In accordance with the provisions of Section 152 of the Companies Act 2013 and theArticle 95 of the Company’s Articles of Association Shri Krishan Kumar Modi(holdingDIN-00029407) and Shri Santosh Kumar Aggarwal (holding DIN-00064755) both the Directorsare due to retire by rotation this year and being eligible offer themselves forre-appointment. The Board has recommended to re-appoint the Directors retiring byrotation. During the year under review no Director has resigned from the Board ofDirectors.

KEY MANAGERIAL PERSONNEL (KMP):

In pursuance of the compliance of Section 203 of the Companies Act 2013 the followingpersons have been designated as Whole Time Key Managerial Personnel of the Company:-

1. Shri Mahendra Kumar Modi - Managing Director

2. Shri Umesh Kumar Modi- Managing Director

3. Shri N P Bansal – Chief Financial Officer

4. Shri V P Gupta – Company Secretary

During the year under review no whole time KMP has resigned from the Company.

SUBSIDIARY COMPANIES:

The Company have two subsidiaries namely Your Investment (India) Limited and OwnInvestment (India) Limited.

In compliance with the Rule 8(1) of the Companies (Accounts) Rules 2014 theperformance and financial position of both the subsidiaries are as under:

(i) Your Investment (India) Limited – The Company registered a profit of Rs. 0.49Lac during the year under review (Previous Year- Profit of Rs. 0.54 Lac).

(ii) Own Investment (India) Limited- The Company registered a profit ofRs. 0.29 Lacduring the year under review (Previous Year- Profit of Rs. 0.26 Lac).

The annual accounts of the Subsidiary Companies and the related detailed informationshall be made available to the shareholders of the holding and Subsidiary Companiesseeking such information.The annual accounts of the Subsidiary Companies shall be kept forinspection by any shareholders at Registered Office of the holding Company and of theSubsidiary Companies concerned.

CONSOLIDATED FINANCIAL STATEMENTS:

In compliance with the Accounting Standards 21 and 23 issued by the Institute ofChartered Accountants of India and pursuant to the Listing Agreement with the StockExchanges the consolidated financial statements form a part of this Annual Report.

STOCK EXCHANGE LISTING:

The Securities of the Company are/were listed with U.P. Stock Exchange Limited* Kanpuras a Regional Stock Exchange and Delhi Stock Exchange Limited** New Delhi.

* SEBI has issued exit order of UPSE on 09th June 2015. **SEBI hasderecognized the DSE on 19th November 2014.

Therefore both the above Stock Exchanges have not demanded the Annual Listing Fees fromthe Company hence Company has not paid the same.

SEBI vide its circular No. CIR/MRD/DSA/5/2015 Dated 17th April 2015provides that the exclusively listed Companies which fail to obtain listing in any othernationwide stock exchange will cease to be a listed Company and will be moved tothe dissemination board by the existing stock exchange.

The Listing criteria of nationwide stock exchanges are generally out side the presentstatus/situation of the Company because your Company is a sick industrial Company asdeclared by the Hon’ble BIFR vide their order dated 14th March 1991 interms of Section 3(1)(o) of SICA.The rehabilitation scheme of the Company is stillpending.Company has huge losses and negative net-worth.

U.P. Stock Exchange Limited Kanpur as a Regional Stock Exchange of the Company hasreferred the Company to the Dissemination Board of National Stock Exchange of IndiaLimited (NSE) and NSE has also confirmed by its Circular Ref. No. 07/2015 (Download Ref.No. NSE/CML/29461) dated 16th April 2015 to its members.

Therefore your Company is now shifted as per above SEBI Circular in the category ofunlisted Company. Further rules and regulation if any are awaited for these types ofCompanies.

MANAGEMENT DISCUSSION & ANALYSIS REPORT:

In terms of old Clause 49 of the Listing Agreement with the Stock Exchanges ManagementDiscussion & Analysis Report (MD&AR) forms part of this report and is attached asAnnexure-‘A’.

CORPORATE GOVERNANCE:

Since applicability of revised Clause 49 of the listing agreement is not mandatory forthe Company with effect from 1st October 2014 vide SEBI circular No CIR/CFD/POLICYCELL/7/2014 Dated 15th September 2014 the Corporate Governance Report for theyear under review is prepared on the basis of old Clause 49 of the listing agreement.

All Board Members and Senior Management Personnel have affirmed compliance with theCode of Conduct for the year under review. The report on the Corporate Governance togetherwith the Auditors’ Certificate thereon forms part of this Report and is attached asAnnexure-‘B’.

EXTRACT OF ANNUAL RETURN:

Pursuant to section 92(3) of the Companies Act 2013 (‘the Act’) and rule12(1) of the Companies (Management and Administration) Rules 2014 the required extractof Annual Return in prescribed form MGT-9 is attached as Annexure-‘C’ with thisBoard Report.

MATERIAL CHANGES AND COMMITMENTS:

No material changes or commitments affecting the financial position of the Companyoccurred between the end of the financial year to which the financial statements relatesand the date of the report except the Company has declared lay off in its SugarUnit w.e.f. 17th June 2015 and still continuing till the date of this report.

NUMBER OF BOARD AND COMMITTEE MEETINGS:

The details of the number of meetings of the Board and its Committees held during theFinancial Year 2014-15 are given in report on Corporate Governance attached as mentionedabove.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

The provisions relating to Corporate Social Responsibility under the Companies Act2013 is not applicable to the Company in view of losses etc. hence no CSR Committee isconstituted.

BUSINESS RESPONSIBILITY REPORTING:

The Business Responsibility Reporting as required by the Clause 55 of the ListingAgreement with the Stock Exchanges is not applicable to the Company for the financial yearunder review.

WHISTLE BLOWER POLICY:

The Company has a Whistle Blower Policy including vigil mechanism to report genuineconcerns of grievances providing direct access to the Chairperson of the Audit Committeein appropriate and exceptional cases. The Whistle Blower Policy has been posted on thewebsite of the Company (www.modiindustries.net).

INTERNAL FINANCIAL CONTROL:

The Company has in place adequate internal financial controls with reference tofinancial statements.During the year such controls were tested and no material weaknesswas observed by the internal auditors of the Company.

ANNUAL EVALUATION:

The Board has carried out the Annual Performance Evaluation of its own its Committeesand individual Directors based on the Performance Evaluation Report submitted by theNomination & Remuneration Committee as per Performance Evaluation Policy of theCompany.

NOMINATION & REMUNERATION POLICY:

Nomination & Remuneration Policy of the Company as formulated and approved byNomination and Remuneration Committee in its meeting held on 14th August 2014governs Directors’ appointment including criteria for determining theirqualifications positive attributes their independence and remuneration for theDirectors KMPs and other employees. The Nomination and Remuneration Policy is attached asAnnexure-‘D’ with this Board Report.

RISK MANAGEMENT POLICY:

The Company has taken out various policies to cover risk against Plant & MachineryBuilding Godowns Computers Vehicles Cash in hand/in transit and to reduce thefinancial risk etc.. Various units of the Company also identify the elements of risk &requirement of policies if any related to their units and submits report periodically tothe Board.

PARTICULARS OF LOAN GUARANTEES OR INVESTMENTS:

Details of loan(s) guarantees and investments are given in the notes to FinancialStatements.

RELATED PARTY DISCLOSURE:

The related party transactions that were entered into during the financial year weregenerally on an arm’s length basis.These transactions were generally in the nature ofordinary course of business as per very old set up and structure of the Company. There areno materially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large. Further there was only one materialrelated party transaction (as defined in revised clause 49 of the Listing Agreement) withthe related party i.e. SBEC Sugar Ltd for purchase of Sugar/ Sugar cane seeds and sale ofSugar/Sugar cane etc. in the ordinary course of business and also at arm’s lengthbasis. Since the revised Clause 49 of the Listing Agreement is not applicable to theCompany no policy has been formulated for dealing with related party transactions.Therefore approval of the shareholders was not taken for this transaction. All relatedparty transactions are generally placed before the Audit Committee and Board of Directorsfor their approval on quarterly basis. Prior omnibus approval is also obtained during theyear for the related party transactions which are of a foreseen and repetitive in naturegenerally.

The prescribed Form AOC-2 for one material transaction with SBEC Sugar Ltd. asmentioned above is enclosed as Annexure - E and forms part of this Report. Yourdirectors draw attention of members to Note no. 27(38) to the standalone financialstatements which sets out related party disclosures.

PERSONNEL:

Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is applicable on listed Companies while your Company has ceased to be a listedCompany in view of SEBI circular No. CIR/MRD/DSA/5/2015 Dated 17th April2015. Your Company has been forwarded by UPSE to the dissemination board of the NSE.Following details are given optionally as a better transparent corporate practice: TheCompany had 948 employees as on 31.03.2015. As per Rule 5(2) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 none of the employee was in receiptof remuneration of Rs. 60.00 Lac or more per annum throughout the year or

Rs. 5.00 Lac per month for the part of the year. Further none of the employees is inreceipt of remuneration which is in excess of the remuneration drawn by Managing Directoror Whole-time Director or any manager of the Company and holds by himself or along withhis/ her spouse and dependent children not less than 2% of equity shares of the Company.

a. Pursuant to the Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 the information required to be disclosed by everyListed Companies in its Board Report are as follows:-

Name of Director/ KMP and Designation Remuneration of Directors/ KMPs for FY 2014-15 % age increase in Remuneration in FY 2014-15 Ratio of Remuneration of each Director to the median Remuneration of employee Comparison of the Remuneration of the KMP against the performance of the Company
Shri Mahendra Kumar Modi – Managing Director* Rs. 1800000 NIL 7.83 # Loss before and after tax of the Company decreased by 41.60% in FY 2014-15.
Shri N. P. Bansal – Chief Financial Officer ** Rs. 2858232 N.A.** N.A.
Shri V. P. Gupta - Company Secretary*** Rs. 921402 N.A.*** N.A.

* The remuneration is within permissible limits as approved by MCA. There is noincrease in remuneration during the year. # Ratio calculated on basic salary.

** Appointed also as CFO (KMP) w.e.f. 14th August 2014 remuneration taken as above isfor full year. Hence no increase is granted to him as a CFO.

*** Appointed also as CS (KMP) w.e.f. 14th August 2014 remuneration paid tohim is w.e.f. 13th June 2014 which includes EPF and Medical Reimbursement. Hejoined the Company w.e.f. 13th June 2014. Hence no increase is granted to himas a CS.

b. The Median remuneration (based on basic salary) of employees of the Company duringthe financial year 2014-15 was Rs. 136836/-.

c. The percentage increase in the median remuneration (based on basic salary) ofemployees in the financial year 2014-15 was 5.27%. d. Variations in the marketcapitalization of the Company price earnings ratio as at the closing date of the currentfinancial year and previous financial year and percentage increase over decrease in themarket quotations of the shares of the Company in comparison to the rate at which theCompany came out with the last public offer in case of listed Companies and in case ofunlisted Companies the variations in the net worth of the Company as at the close of thecurrent financial year and previous financial year; Company’s shares are not beingtraded since long time in the stock exchanges where the shares are/were listed hence nodetails are available. e. Average percentile increase already made in the salaries ofemployees other than the managerial personnel in the last financial year and itscomparison with the percentile increase in the managerial remuneration and justificationthereof and point out if there are any exceptional circumstances for increase in themanagerial remuneration: Since Company is a sick industrial Company and in view of lossesnominal increase was made in the managerial remuneration while no increase is approved bythe MCA in the remuneration of Managing Director. f. The key parameters for anyvariable component of remuneration availed by the directors: No variable component ofremuneration was availed by the Directors of the Company. g. The ratio of theremuneration of the highest paid Director to that of the employees who are not Directorsbut receive remuneration in excess of the highest paid Director during the year: Thehighest paid Director in the Company is Shri Mahendra Kumar Modi with annual remunerationof Rs. 18 Lac as per MCA/Central Govt. approval. The ratio of remuneration of employeesreceiving in excess to that is as follows:-

S.No. Name of Employees Ratio to highest paid Director
1. Shri Amber Jaitley 1.08
2. Shri N. P. Bansal 1.59
3. Shri Pradyot Mukerji (left job w.e.f. 08-01-2015) 3.05

h. It is hereby affirmed that the remuneration paid is as per the Remuneration Policyof the Company.

AUDITORS AND THEIR REPORTS:

STATUTORY AUDITOR:

M/s. P.R. Mehra & Co. Chartered Accountants (FRN 000051N) who are StatutoryAuditors of the Company to hold office up to the conclusion of the ensuing Annual GeneralMeeting and are recommended for re-appointment to audit the accounts of the Company forthe financial year 2015–16. As required under the provisions of Section 139 of theCompanies Act 2013 the Company has obtained written confirmation from M/s. P.R. Mehra& Co. that their appointment if made would be in conformity with the limitsspecified in the said section. The appointment of auditors has to be done by an OrdinaryResolution.

With reference to the qualifications contained in the Auditors’ Report theDirectors wish to state that the Notes referred to by the auditors in their report areself-explanatory and hence do not call for any further comments.

COST AUDITORS:

As per the requirement of the Central Government and pursuant to the provisions ofSection 148 of the Companies Act 2013 read with the Companies (Cost Records and Audit)Rules 2014 as amended from time to time your Company has to get done audit of costrecords relating to Sugar Distillery & Electrode Units for the financial year2015–16.

The Board of Directors on the recommendation of Audit Committee have appointed M/s.M.K. Singhal & Co. Cost Accountants (Firm’s Regn. No. 00074) of Modinagar asCost Auditors to conduct the audit of Cost Accounts maintained by Sugar Distillery andElectrode units of the Company at a total remuneration of Rs. 92500/- (including allexpenses) plus applicable Service Tax payable to them for the financial year 2015-16.Members approval for the remuneration payable to the Cost Auditors has to be obtained byan Ordinary Resolution.

The Cost Audit Report for the audited accounts for the financial year ended 31st March2014 was filed by the Cost Auditors with respect to the Sugar Industrial Alcohol Paint& Varnishes Organic and Inorganic Chemicals and Metallurgy of ferrous and non ferrousmetals the products of units of the Company on 13th September 2014.

SECRETARIAL AUDITORS:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and Rules madethereunder the Company had appointed Shri R. K. Gupta Practicing Company Secretary (FCSNo. 726 CP No. 3139) of Kanpur as Secretarial Auditors of the Company. Shri R. K. Guptahas submitted his Secretarial Audit Report for the Financial Year 2014-15 which isattached herewith as Annexure–‘F’.

With reference to the observations contained in the Secretarial Auditors Report theDirectors wish to state that the Notes on Accounts are self-explanatory and hence do notcall for any further comments.

For the Financial Year 2015-16 Company has appointed Shri Amar Nath Jaiswal PracticingCompany Secretary (ACS No. 19000 CP No. 14629) of New Delhi as Secretarial Auditor ofthe Company.

INTERNAL AUDITORS:

Pursuant to Section 138 of the Companies Act 2013 Board has appointed InternalAuditors namely M/s. Sarat Jain & Associates Chartered Accountants (Firm Regn. No.014793C) of New Delhi for Sugar & Distillery Units & M/s. Makkar & Co.Chartered Accountants (Firm Regn. No. 005958C) of Delhi for MD Office Electrode Paint& Gas Units of the Company for the financial year 2015-16 as recommended by the AuditCommittee of the Company.

CONSERVATION OF ENERGY:

The Company is a sick industrial unit within the meaning of Section 3(1)(o) of the SickIndustrial Companies (Special Provisions) Act 1985 vide BIFR order dated 14th March1991.

Since long no modernization of Plant & Machinery of the Units of the Company couldbe undertaken due to huge losses in the Company and non-availability of funds fromBanks/Financial Institutions. However the Management is making possible efforts for theconservation of energy.

Company has implemented energy conservation measures for saving of quantitativeconsumption of power & fuel etc. Company has replaced some old lighting system withLED etc. adoption of more star rated electronic equipments timely repairing &maintenance of electronic items. As a result of this Sugar Unit of the CompanyElectricity KWH PMT in production reduced this year to 272.77 from 277.04 last year.

During the year under review total expenses on power and fuel were Rs. 467.93 lac (inprevious year Rs. 461.72 lac).

TECHNOLOGY ABSORPTION:

Requisite information in prescribed form is given in Annexure-‘G’ to thisreport.

FOREIGN EXCHANGE EARNINGS AND OUTGO:

Your Company earned during the year Foreign Exchange of Rs. 35.24 Lac (previous year– Rs. NIL) while Foreign Exchange outgo during the year amounted to Rs. 348.01 Lac(previous year - Rs. 56.13 Lac).

POLLUTION CONTROL:

Relevant and necessary effluent treatment measures for control of water air andenvironmental pollution are in place and steps have been taken to further strengthen andconsolidate pollution control measures.

LABOUR RELATIONS:

The labour management relations generally remained harmonious.

GENERAL:

The Company became a sick industrial Company within the meaning of Section 3(1)(o) ofSick Industrial Companies (Special Provisions) Act 1985 (SICA) due to erosion of its networth and the Company was declared a sick industrial Company by BIFR vide its order dated14th March 1991. The rehabilitation scheme of the Company as submitted by theIDBI the Operating Agency (OA) to BIFR is still pending. BIFR had passed an order dated 28thOctober 2013 issuing show cause notice for winding up of the Company against whichappeals have been filed before AAIFR. Matter is stayed by AAIFR and final orders are stillpending.

In view of this no impact is foreseen on the going concern status of the Company andthe Company’s operations in future. The matter is pending before the Hon’bleBIFR/AAIFR.

No complaint during the year under review was received by the Company under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

CAUTIONARY STATEMENT:

The statement in the Director’s report and MD & AR detailing theCompany’s objectives and expectations may contain ‘forward lookingstatements’ within the meaning of applicable securities laws and regulations. Theactual results inter-alia may differ materially from those expressed or implied dependingupon changes in global and Indian demand-supply conditions as well as changes ingovernment regulations tax regimes economic and market developments movements.

ACKNOWLEDGMENT:

The Directors wish to thank the Central Government Government of Uttar PradeshFinancial Institutions and the Company’s Bankers for all the help and encouragementthey extended to the Company. Your Directors gratefully acknowledge the continued trustand confidence; you have placed in the Company. The Directors also wish to place on recordtheir deep appreciation for the services rendered by the officers staff and workers ofthe Company at all levels and for their dedication and loyalty.

For & on behalf of the Board
Mahendra Kumar Modi Umesh Kumar Modi
Delhi (DIN-00014594) (DIN-00002757)
14th August 2015 Managing Director Managing Director