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Morgan Industries Ltd.

BSE: 523564 Sector: Industrials
NSE: N.A. ISIN Code: INE701E01017
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Morgan Industries Ltd. (MORGANINDS) - Director Report

Company director report

To

The Members

Your Directors have pleasure in presenting their 26th Annual Report on thebusiness and operations of the Company and the accounts for the Financial Year ended March31 2015.

1. Performance of the Company

(Rs.. in Lakhs)

Particulars 2014-2015 2013-14
Gross Turnover 5227.68 4184.85
Cash Accruals/(Loss) (25.69) 96.39
Profit/(Loss) before tax (148.68) 11.59
Profit After Tax (123.97) 12.74
P & L A/c. balance c/f (461.96) (337.99)

2. State of Company's affair

The company is striving its best to increase its production levels in the factory andthe contract of M/s. Huntsman USA is a good beginning. The company is also obtaining jobcontracts to fill its available production capacity. Also trading activity is in the lineof focus of the company which would enable the company to minimize the loss and expectgrowth trends in the future towards profitability.

3. Change in the nature of business if any

There is no change in the nature of business of the company. The company continuesto engage itself in the production of tapes and participating in trading activities

4. Dividend

Due to inadequate profits the company has not proposed any dividend for the year.

5. Reserves

No amount is carried to Reserves.

6. Share Capital

There is no change in the Share capital of the company during the year.

7. Directors and Key Managerial Personnel

Shri. V. Balasubramanian & Shri. P.S. Bhaskaran Directors retire by rotation atthe forthcoming Annual General Meeting and being eligible offer themselves forreappointment. Board of Directors recommend their re-appointment in the forthcomingGeneral Meeting.

Smt. Sreelekha Mahadevan was appointed w.e.f. 30.03.2015 as an Additional Director(Woman)by the Board in its meeting on 30.03.2015 in the place of Shri. Ashok Mehta whoresigned w.e.f.30.10.2014. The company has received necessary deposits proposing her nameas an Independent Director for a period of five years in the forthcoming general meeting.Board of Directors recommends her appointment in the forthcoming general meeting.

Shri. T. Baskaran was appointed by the Board in its meeting on 04.10.2014 as ChiefFinancial Officer of the company w.e.f.04.10.2014.

Shri. K.Premnatha who was appointed as Company Secretary of the Company w.e.f.11.09.2014 had resigned and his resignation was accepted by the Board of Directors w.e.f.09.06.2015.

8. Particulars of Employees Not applicable

9. Meetings

During the year 9 Board Meetings and 6 Audit Committee Meetings were convened andheldthe details of which are given in the Corporate Governance Report. The interveninggap between the Meetings was within the period prescribed under the Companies Act 2013.

10. Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the ListingAgreement the Board has carried out an annual performance evaluation of its ownperformance the directors individually as well as the evaluation of the working of itsAudit Nomination & Remuneration and Compliance Committees. The manner in which theevaluation has been carried out has been explained in the Corporate Governance Report.

11. Declaration by an Independent Director(s)

A declaration by an Independent Director(s) that he/they meet the criteria ofindependence as provided in Section 149 of the Companies Act 2013 shall be enclosed as AnnexureIV.

12. Remuneration Policy

The Company's objective as regards Remuneration Policy is to attract and retainindividuals and motivate them for working at higher and skilled levels.

The Nomination and Remuneration Committee formulates the Remuneration Policy forDirectors Key Managerial Personnel and Senior Executives from time to time.

Non-Executive Director is not paid any remuneration including Sitting Fee. OnlyIndependent Directors are paid Sitting Fee as prescribed by the Board from time to time.

Remuneration of Executive Director Key Managerial Personnel (KMP) and SeniorExecutives are fixed by the Committee as per the needs of the time. The strategy is sodesigned to balance short term and long term strategy of the company. ExpertsSpecialists Qualified Key Managerial Personnel and Senior Executives are attracted andretained.

Also the relevant strategy provisions market trends and interest of Stake Holdersare reckoned while fixing * the remuneration.

Remuneration for Employees Workers and Workmen

Remuneration for these categories is based on the performance levels skilled levelsthe performance of the company as well as price levels prevailing. The annual review is aregular feature and employees are awarded accordingly.

Post-Retirement benefits of the Managing Director and Employees are Provident FundGratuity and other payables according to then existing conditions.

The Contracts of employment with the Executive Director and regular employees providefor compensation of up to 3 month's pay or advance notice of similar period. There is noregular system of granting of loans to Directors KMP and employees of the Company.

DETAILS PERTAINING TO REMUNERATION AS REQUIRED UNDER SECTION 197(12) OF THE COMPANIESACT 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIALPERSONNEL) RULES 2014

(i) The percentage increase in remuneration of each Director Chief Financial Officerand Company Secretary during the Financial Year 2014-15 ratio of the remuneration of eachDirector to the median remuneration of the employees of the Company for the financial year2014-15 and the comparison of remuneration of each Key Management Personnel (KMP) againstthe performance of the Company are as under:-

S.No. Name of Director/KMP and Designation Remuneration of Director/KMP for Financial Year 2014-15 (ff.in lakhs) % increase in remuneration in the Financial Year 2014-15 Ratio of remuneration of each Director/to median remuneration of employees
1 Ashok Balasubramanian* Managing Director 1141980.00 Nil 5.24
2 P.S. Bhaskaran Executive Director 618350.00 51.25 2.84
3 T. Baskaran* Officiating Chief Financial Officer 816000.00 Nil 3.75

* - The above remuneration represents cost to the Company.

i) The median remuneration of employees of the Company during the financial year:Rs..2.18 lakhs.

ii) Percentage increase in the median remuneration of employees in the financial year:11.305%.

iii) Number of permanent employees on the rolls of Company in the financial year: 57.

iv) Variations in the market capitalization of the Company price earning ratio as atthe closing date of the current financial year and previous financial year: Nil.

The Company's shares are not quoted on any stock exchange.

v) The key parameters for any variable component of remuneration availed by thedirectors: .

The Non-Executive Directors are paid only sitting fees for attending the meetings ofthe Board and Committee thereof. The remuneration of Executive Directors are notconsisting of variable component except commission based on the provisions of theCompanies Act 2013.

(vi) Ratio of the remuneration of the highest paid director to that of the employee whois not a director but receive remuneration in excess of the highest paid director duringthe year: 0.57:1

(vii) Affirmation that the remuneration is as per the Remuneration Policy of theCompany: The Company affirms that remuneration is as per the Remuneration Policy of theCompany.

(viii) Employed throughout the year ended March 31 2015 with remuneration aggregatingto not less than Rs..6000000 per annum: None.

(ix) Employed for part of the year ended March 31 2015 with remuneration aggregatingto not less than Rs..500000 per month: None.

13. Details of Subsidiary/Joint Ventures/Associate Companies

The Company is an Associate company of Morgan Asia Limited.

14. Auditors

M/s. R. Subramanian & Co. Chartered Accountants Chennai were appointed as thestatutory Auditors of the company in the 25th AGM held on 30.10.2014 upto theconclusion of 28th AGM to be held in the year 2017 subject to ratification oftheir appointment at every AGM.

Accordingly the Board of Directors place before the shareholders as an OrdinaryResolution the ratification of appointment (yearly) of M/s. R. Subramanian & Co.Chartered Accountants Chennai who being eligible offer themselves for reappointment.

15. Auditor's Report

Auditor's qualification and replies thereof:

Auditor's Qualification Replies by the Company
1. Regarding non-receipt of confirmation of the closing balances/not reconciling balances as on 31.3.2015 in respect of debit and credit balances including ‘Net balances' consequent to adjustments of various debit and credit balances in different accounts relating to trade payables trade receivables loans and advances unsecured loans creditors other liabilities and group company accounts. The adjustment if any which may be required consequent to receipt of confirmation/completion of reconciliation is unascertainable at this stage and not provided for as the quantum is not ascertainable at this stage. Despite determined efforts to analyze debtors/creditors and other reconciliation aspects the company is facing severe constraints in identifying relevant records especially after the aftermath of cyclone which has seriously bashed the factory (Regd. Office). The first priority however is to locate the relevant records and ascertain if they are unaffected/ washed away or destroyed thereof.
2. a) Regarding non capitalization/non adjustment of amount of Rs.. 17.91 crores kept under capital work-inprogress (CWIP) suitably for more than 3 years and consequently non-provision of depreciation on the assets which would have otherwise suffered depreciation in the normal course had the same capitalized or the impact thereof had the same been written-off either fully or partly. As regards relocating the machineries in Puducherry it may be mentioned that the company is in the advanced stage of negotiation for which shareholders permission for the sale of vacant land is currently sought. The decision regarding allocation of expenditure depreciation etc. would be finalized after the relocation of machinery and sale of land which will reflect the correct status as well as profit and loss thereof.
b) No impairment test has been done in respect of this capital work-in-progress and in respect of other fixed assets. The impact on account of depreciation/ impairment loss is unascertainable and has not been provided for as per Accounting Standard 28. The Management is confident to realise the value in full and accordingly no provision towards impairment is required to be considered at this stage.
3. Regarding Non Compliance of Accounting Standard - 2 with regard to valuation of inventories and non- reconciliation of physical inventories with financial records. The closing stock have not been valued at cost or Net Realisable value whichever is lower. The valuation of stock has been noted for corrective action.
Reconciliation of physical and financial figures is in progress.
As per Accounting Standard 2 (Inventory Valuation) no provision has been considered in the accounts towards obsolescence on account of non/slow moving items of stock. A technical team has been formed to identify the slow moving and obsolete items.

16. Disclosure about Cost Audit

Cost Audit is not applicable to the company.

17. Secretarial Audit Report

In terms of Section 204 of the Act and Rules made there under M/s. S. Dhanapal&Associates Practising Company Secretaries Chennai have been appointed SecretarialAuditors of the Company. The report of the Secretarial Auditors is enclosed as AnnexureV to this report.

The report is self-explanatory and no comments are felt necessary.

18. Internal Audit & Controls

The Company has appointed M/s. K.S.& Co. Chartered Accountants Chennai asits Internal Auditor. During the year the Company continued to implement theirsuggestions and recommendations to improve the systems control. Their scope of workincludes review of processes for safeguarding the assets of the Company review ofoperational efficiency effectiveness of systems and processes and assessing the internalcontrol strengths in all areas. Internal Auditor's findings were discussed with theprocess owners and suitable corrective action taken to improve efficiency.

19. Issue of employee stock options

The Company has not issued any employee stock options.

20. Vigil Mechanism

In pursuant to the provisions of Section 177(9) & (10) of the Companies Act 2013a Vigil Mechanism for directors and employees to report genuine concerns has beenestablished. The Vigil Mechanism Policy has been uploaded on the website of the Company atwww.morganchennai.com .

21. Risk management policy

During the year company has constituted a Risk Management Committee comprising ofShri.A.Sangaiah Shri.C.V.Kumar Shri.B.Jagadeesh and Shri.P.S.Bhaskaran. Shri. P.S.Bhaskaran heads the committee.

22. Extract Of Annual Return

As required pursuant to Section 92(3) of the Companies Act2013 and rule 12(1) ofthe Companies (Management and Administration) Rules 2014 an extract of annual return inMGT 9 as a part of this Annual Report is enclosed as ANNEXURE I.

23. Material changes and commitments if any affecting the financial position of thecompany which have occurred between the end of the financial year of the company to whichthe financial statements relate and the date of the report.

There are no material changes.

24. Details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future

There are no such events.

25. Details in respect of adequacy of internal financial controls with reference to theFinancial Statements

Adequate financial controls are in place. However improvement in the system as thatare necessary are being addressed.

26. Deposits

The Company has not accepted/invited any deposit from the public during the year.

27. Particulars of loans guarantees or investments under Section 186 Details of Loans:

Date of making loan Details of Borrower Amount Purpose for which the loan is to be utilized by the recipient Time period for which it is given Date of BR Date of SR (if reqd) Rate of Interest Security
1 31.03.15 Megasearch Consultancy Private Limited 102004
2 31.03.15 Morgan Waste Management Technologies Limited 2677

Details of lnvestments:-NIL

Date of investment Details of Investee Amount Purpose for which the proceeds from investment is proposed to be utilized by the recipient Date of BR Date of SR (if reqd) Expected rate of return

Details of Guarantee/Security Provided'.NIL

Date of providing security/ guarantee Details of recipient Amount Purpose for which the security/guarantee is proposed to be utilized by the recipient Date of BR Date of SR (if any) Commission

28. Particulars of contracts or arrangements with related parties

The particulars of every contract or arrangement entered into by the Company withrelated parties referred to in sub-section (1) of Section 188 of the Companies Act 2013including certain arm's length transactions under third proviso thereto shall be disclosedin Form No. AOC-2 as Annexure II.

29. Corporate Governance

Your company as far as feasible complied with the requirements of Corporate Governanceas required under SEBI. A report on Corporate Governance in this regard is made as part ofthis Annual Report and a certificate from the practising company secretaries regardingcompliance of conditions of corporate governance is attached to this report as AnnexureVI.

30. Management Discussion And Analysis Report

The Management Discussion and Analysis Report forms part of this Annual Report for theyear ended 31st March 2015 as Annexure VII.

31. The Sexual Harassment Of Women At Workplace (Prevention Prohibition And Redressal)Act 2013

The company has adopted a policy for prevention of Sexual Harassment of Women at theworkplace and has set up Committee for implementation of said policy.

Your directors further state that there were no cases filed pursuant to SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

32. Conservation of energy technology absorption and foreign exchange earnings andoutgo - NIL

The details of conservation of energy technology absorption foreign exchange earningsand outgo are as follows:

a) Conservation of energy

(i) the steps taken or impact on conservation of energy
(ii) the steps taken by the company for utilizing alternate sources of energy
(iii) the capital investment on energy conservation equipment's

(b) Technology absorption

(i) the efforts made towards technology absorption
(ii) the benefits derived like product improvement cost reduction product development or import substitution
(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-
(a) the details of technology imported
(b) the year of import;
(c) whether the technology been fully absorbed
(d) if not fully absorbed areas where absorption has not taken place and the reasons thereof
(iv) the expenditure incurred on Research and Development

(c) Foreign exchange earnings and Outgo

During the yearthe total foreign exchange used was Rs..2336 lakhs towards purchase ofraw materials and the total foreign exchange earned was NIL.

33. Corporate Social Responsibility (CSR)

As the company does not fall under the provisions of the Companies Act 2013 withrespect to CSR the company has not opted for CSR policy.

34. Human Resources

The industrial relations have continued to be cordial.

35. Directors' Responsibility Statement

The Directors' Responsibility Statement referred to in clause (c) of sub-section (3) ofSection 134 of the Companies Act 2013 shall state that:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had 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 at the end of the financial year and ofthe loss of the company for that period;

(c) the directors had 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 had prepared the annual accounts on a going concern basis; and

(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 systems were adequate and operating effectively.

36. Transfer of Amounts to Investor Education and Protection Fund

Your Company did not have any funds lying unpaid or unclaimed for a period of sevenyears. Therefore there wqre no funds which were required to be transferred to InvestorEducation and Protection Fund (IEPF).

37. Listing With Stock Exchanges

Annual Listing Fees for the year 2015-2016 to BSE where the Company's Shares arelisted are yet to be paid.

Acknowledgements

An acknowledgement to all with whose help cooperation and hard work the Company isable to achieve the results.

For and on behalf of the Board of Directors

Morgan Industries Limited

Sd/- Sd /-
Ashok Balasubramanian P.S. Bhaskaran
Managing Director Executive Director
DIN: 00010789 DIN: 05143879
Place: Chennai
Date: 14/12/2015