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Narmada Gelatines Ltd.

BSE: 526739 Sector: Industrials
NSE: SHAWGELTIN ISIN Code: INE869A01010
BSE LIVE 09:24 | 24 Nov 169.70 7.55
(4.66%)
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164.95

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170.00

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164.95

NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 164.95
PREVIOUS CLOSE 162.15
VOLUME 600
52-Week high 179.80
52-Week low 112.00
P/E 14.99
Mkt Cap.(Rs cr) 103
Buy Price 162.15
Buy Qty 10.00
Sell Price 169.70
Sell Qty 9.00
OPEN 164.95
CLOSE 162.15
VOLUME 600
52-Week high 179.80
52-Week low 112.00
P/E 14.99
Mkt Cap.(Rs cr) 103
Buy Price 162.15
Buy Qty 10.00
Sell Price 169.70
Sell Qty 9.00

Narmada Gelatines Ltd. (SHAWGELTIN) - Director Report

Company director report

The directors have pleasure in presenting the 56th annual report of your company andthe audited accounts for the financial year ended 31st march 2017.

Financial highlights Lacs
Year ended 31st march 2017 Year ended 31st march 2016
Profit before tax 548.70 1298.35
Provision for taxation:
Current 179.44 460.61
Deferred (37.30) 9.04
Profit after tax 406.56 828.70
Balance brought forward from last year 7698.94 7244.34
Amount available for appropriation 8105.50 8073.05
Less: appropriations:
Transfer to general reserve 40.66 82.87
Proposed dividend on equity shares 241.98 241.98
Tax on proposed dividends 49.26 49.26
Balance carried forward 7773.60 7698.94

Economy overview

India’s economic growth in 2016 dropped to 6.5% from 7.2% in the previous year.The economic activity slowed down primarily due to the temporary negative consumptioninduced by cash shortage and payment disruptions due to demonetization.

The growth in agriculture industry and services is estimated to moderate to 5.2 percent in 2016-17 from 7.4 per cent in the last fiscal. The growth rate of industry sectordeclined in 2016-17 mainly on account of contraction in mining & quarrying andmoderation of growth in manufacturing sector. The services sector led by publicadministration defence and other services recorded an overall growth of 7 per cent in2016-17. Despite of slowdown during the year 2016-17 the long-term growth story of indiaremains robust mainly due to the government’s initiatives such as relaxation in fdinorms coupled with the structural reforms such as goods & service tax (gst). Fdiflows ease of doing business an improved business environment revival in aggregatedemand and a supportive global trade environment will be essential for sustaining themomentum. Gst will help to curtail the cascading effect of multiple taxes and enablefaster movement of goods across the country.

The prospects for indian economy for the year 2017-18 need to be assessed in the lightof emerging global and domestic developments. Indications are that global economic growthis gradually picking up. On the other hand the increasing global prices of oil and otherkey commodities may exercise an upward pressure on the value of imports. Domestic demandis expected to get a boost from accommodative monetary policy and the unleashing ofdomestic trade and consumption as the economy gets remonetised to the required levels.

Operating performance

During the year under review your company recorded a turnover of 121.28 crs ascompared to 140.73 crs in the previous year. The decline in turnover was primarily due tolower price realisation on gelatin products although volumes remained flat year on year.Profit before tax declined to 5.49 crores as compared to 12.98 crores in 2015-16 onaccount of lower price realisation and increase in raw material input costs.

Dividends

Despite a difficult year your directors recommend a dividend of 4.00 per equity share(last year 4.00 per equity share) for the financial year ended march 31 2017. The totaloutflow on account of the proposed dividend including dividend distribution tax will be291.24 lacs (previous year 291.24 lacs).

The dividend on equity shares if approved at the ensuing annual general meeting willbe paid to members whose names appear in the register of members as on 13th september2017 and to members whose names appear on that date as beneficial owners as furnished bynational securities depository limited (nsdl) and central depository services (india)limited (cdsl).

Transfer to reserves

It is proposed to transfer an amount of 40.66 lacs (being 10% of the net profits forthe year) to the general reserve.

Industry structure and developments

Gelatin finds use in industries such as food and beverages pharmaceutical andcosmetics. However cultural and religious barriers in india and scepticism on the use ofgelatin derived from animals across the world are factors which inhibit the overall marketgrowth. Growing regulatory issues primarily in the food industry are also challenges fordomestic gelatin manufacturers.

Global gelatin market is expected to grow at a cagr of 8.25% during the forecast period2015 to 2022. Increasing use in nutraceuticals recognition of preventive healthcaregrowing demand for technical textile and utilization of functional food are the majorfactors driving the market growth. Pharmaceutical applications are expected to witnessfastest growth on account of rapidly expanding usage of hydrocolloids in production oftablets and capsules. However food security concerns and threat of vegan gelatinsubstitutes are some of the factors hindering the market growth.

Opportunities and threats outlook risks and concerns

India continues to be categorised as "negligible risk" under bsecategorisation. With increasing level of awareness on environmental hazards the stateauthorities are upgrading pollution control norms regularly and the industry is nowrequired to address the issue of environment with more commitment. Your company continuesto take all necessary steps to comply with pollution control norms.

Difficulty in sourcing good quality raw material and rise in raw material prices areareas of concern. The import of poor quality gelatin into india is a matter of healthconcern and affects proper price realisation for the gelatin produced by the domesticmanufacturers.

Furthermore availability of cheap raw materials in eu usa etc has pushed down thegelatine prices globally which has affected the pricing in the domestic market. Largequantities of gelatin are being imported into india at prices lower than the domesticprices which is a major concern for the industry.

The availability of good quality crushed bones at a reasonable cost is critical for thecompetitiveness of the domestic ossein and gelatin industry. The government has allowedimports of crushed bones and the quality of the imported bones is far superior. This mayhelp to reduce the raw material prices in india and also help to improve the quality ofgelatin.

The growth of the market for food gelatin is driven by the end-use industries such asconfectionary nutritional drinks and bakery. Although the market is growing it is facingdifferent challenges that include low acceptance from strict vegetarians and religiousgroups.

While your company is taking all actions to improve product mix yield and productivityalong with cost reduction measures the price realisation for gelatin and consequently themargins are constantly facing downward pressure. The prima facie indications from thegovernment to replace the gelatin capsules by hydroxypropylmethyl cellulose (hpmc) is amajor challenge being faced by the industry over the past year. The matter is still underconsideration by an expert committee and if implemented it will have a huge impact on thegelatin industry in the country.

Furthermore the drop in oil prices has affected the exports of capsules to the africancountries and russia thereby affecting the domestic demand of gelatin. Cheaper importslower demand in the domestic market and higher raw material prices are likely to impactmargins and have an adverse impact on the performance of your company at least in theshort term.

Segment-wise or product-wise performance

Gelatin ossein and the by-product di-calcium phosphate broadly form part of oneproduct group and hence are considered as single business segment. However based ongeographical spread reportable segments have been identified as exports sales anddomestic sales. The segment revenue information is given separately in notes on accountsunder the disclosure as required under accounting standard (as 17) - segment reporting andforms part of the directors’ report.

Internal financial control and its adequacy

The company has designed and implemented a process driven framework for internalfinancial controls within the meaning of the explanation to section 134(5)(e) of thecompanies act 2013. Based on the framework of internal financial controls and compliancesystems established and maintained by the company work performed by the internalstatutory and secretarial auditors including audit of the internal financial controlsover financial reporting by the statutoryauditors and the reviews performed by managementand the relevant board committees including the audit committee the board is of theopinion that the company’s internal financial controls were adequate and effectiveduring the financial year 2016-17 and commensurate with the nature and size of itsbusiness operations and operating effectively and no material weakness exists. The companyhas a process in place to continuously monitor the same and identify gaps if any andimplement new and/or improved controls wherever the effect of such gaps would have amaterial effect on the

Company’s operations.

The company’s internal control system comprises audit and compliance ofobservations made by the internal auditor. The internal auditor independently evaluatesthe adequacy of internal controls and concurrently audits the majority of the transactionsin value terms. Independence of audit and compliance is ensured by direct reporting ofinternal auditor to the audit committee. Statutory and internal auditors undertakerigorous testing of the control environment of the company.

Fixed deposits

During the year under review the company did not accept any fixed deposits from thepublic as defined under chapter v of the companies act 2013. There were no amountsoutstanding on account of principal and interest on deposits from public as on 31st march2017. The company has no deposits which are not in compliance with the provisions ofchapter v of the companiesact 2013 and the companies (acceptance of deposit) rules 2014.

Particulars of loans guarantees or investments

Details of loans guarantees and investments covered under the provisions of section186 of the companies act 2013 are given in the notes to the financial statements.

Corporate social responsibility (csr)

The company recognises the need and importance of a focused and inclusive social andeconomic development especially of the industry and community in which it operates.Corporate social responsibility (csr) committee recommends to the board the activities tobe undertaken by the company for approval. As part of the initiatives the company hasundertaken csr projects in the areas of protection of environment promotion of educationlivelihood promoting health care including preventive health care providing watersanitation and rural development. During the year 2016-17 the company spent 40.17 lacs oncsr activities. The annual report on csr activities and a brief outline of the csr policyof the company is annexed to this report asannexure - i.

Risk management

The company has in place a risk management framework to identify evaluate businessrisks and opportunities and seeks to create transparency minimize adverse impact on thebusiness objectives and enhance the company’s competitive advantage. The riskmanagement committee is entrusted with the responsibility to assist the board inoverseeing the risks associated with the business and risk mitigating measures to be takenby the company. The details of the risk management committee its terms of reference keybusiness risks identified and mitigation plans are set out in the corporate governancereport.

Vigil mechanism

As per the provisions of section 177(9) of the companiesact 2013 (‘act’)the company is required to establish an effective vigil mechanism for directors andemployees to report genuine concerns. The company has a whistle-blower policy in place toencourage and facilitate employees to report concerns about unethical behaviouractual/suspected frauds and violation of company’s code of conduct or ethics policy.The policy provides for adequate safeguards against victimisation of persons who avail thesame and provides for direct access to the chairperson of the audit committee. The auditcommittee of the company oversees the implementation of the whistle-blower policy. Thecompany has disclosed information about the establishment of the whistle blower policy onits website www.narmadagelatines.com and in the corporate governance report

Subsidiaries joint ventures andassociate companies

The company does not have any subsidiary joint ventures or associate companies.

Directors and key managerial personnel

In accordance with the provisions of section 152 of the companies act 2013 andarticle 115 of the articles of association of the company mr. Sanjeev jain retires byrotation at the ensuing annual general meeting of the company and being eligible hasoffered himself for reappointment. The board of directors recommends his reappointment.

The company has received declarations from all the independent directors of the companyconfirming that they meet with the criteria of independence as prescribed under section149(6) of the companies act 2013 and regulation 25 of the sebi (listing obligations anddisclosure requirements) regulations 2015.

All the appointments of the directors of the company are in compliance with theprovisions of section 164(2) of the companies act 2013 read with rule 14(1) of companies(appointment and qualification of directors) rules 2014. Attention of shareholders isinvited to the relevant items of the notice of theannual general meeting and the notesthereto. Brief resume of the director proposed to be reappointed nature of his expertisein specific functional areas and names of companies in which he holds directorship andmembership/ chairmanship of committees of the board as stipulated under regulation 36 ofthe sebi (listing obligations and disclosure requirements) regulations 2015 are given inthe section on corporate governance in thisannual report.

Ms. Priya gupta resigned as the chief financial officer of the company w.e.f. 1st may2017. The company is in the process of filling in the vacancy arising.

Board evaluation

The nomination & remuneration committee and the board have laid down the manner inwhich formal annual evaluation of the performance of the board committees chairman andindividual directors has to be made. Pursuant to the provisions of the companies act 2013and sebi (listing obligations and disclosure requirements) regulations 2015 the boardhas carried out an annual performance evaluation of the directors individually as well asthe evaluation of the working of its audit nomination & remuneration and othercommittees. In addition the board has also carried out a review of the board’sperformance as a whole. The manner in which the evaluation has been carried out is coveredin the corporate governance report. The board of directors noted the evaluation results ascollated by the nomination and remuneration committee.

Policy on directors’appointment and remuneration

The policy of the company is to have an appropriate number of executive and independentdirectors on the board.

The policy of the company on directors’ appointment and remuneration etc. Asrequired under section 178 of the companies act 2013 is available on the company’swebsite (www.narmadagelatines.com) and in the corporate governance report. There has beenno change in the policy since the last financial year. The remuneration paid to thedirectors is as per the terms laid down in the nomination & remuneration policy of thecompany.

Meetings

During the financial year under review four board meetings and five audit committeemeetings were convened and held the details of which are given in the corporategovernance report. The intervening gap between two meetings was within the periodprescribed under the companiesact 2013.

Directors’ responsibility statement

Pursuant to the requirement of section 134(3)(c) of the companiesact 2013 thedirectors hereby confirm that: a. In the preparation of the annual financial statementsfor the year ended march 31 2017 the applicable accounting standards have been followedalong with proper explanation relating to material departures if any; b. Appropriateaccounting policies have been selected and applied consistently and judgements andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the company as at march 31 2017 and of the profit of the company for theyear ended on that date; c. Proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with the provisions of the companies act2013 for safeguarding the assets of the company and for preventing and detecting fraud andother irregularities; d. The annual financial statements have been prepared on a goingconcern basis; e. Proper internal financial controls have been followed and that suchfinancial controls are adequate and are operating effectively; and f. Proper systems toensure compliance with the provisions of all applicable laws are in place and wereadequate and operating effectively.

Related party transactions

All related party transactions that were entered into during the financial year were onan arm’s length basis and were in the ordinary course of business. There are nomaterially 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.

Particulars of contracts or arrangements with related parties referred to in section188(1) of the companies act 2013 in form aoc-2 are set out in the note 31(e) of notes tofinancial statements forming part of the annual report.

None of the directors have any pecuniary relationships or transactions with the companyor vice versa.

Statutory auditors And audit Report

As per section 139 of the companies act 2013 and the companies (audit andauditors)rules 2014 it is mandatory to rotate the statutory auditors on the completion of term asspecified. M/s t.r. Chadha & co. Llp chartered accountants statutory auditors of thecompany hold office until the conclusion of ensuing annual general meeting and shallretire thereafter.

The audit committee of the company in its meeting held on 23 rd may 2017 has proposedand the board has recommended the appointment of lodha and company mumbai charteredaccountants (firm registration no.301051e) as the statutory auditors of the company. M/slodha & company chartered accountants shall be appointed for the period from theconclusion of 56th annual general meeting of the company till the conclusion of 61stannual general meeting to be held in 2022 subject to the approval of the shareholders ofthe company.

Pursuant to section 139 and 141 of the companies act 2013 and relevant rulesprescribed there under the company has received a certificate dated april 20 2017 fromm/s lodha & company chartered accountants to the effect that their appointment ifmade would be within the limits laid down by the act and as per the term provided underthe act and they are not disqualified for such appointment under the provisions ofapplicable laws and also that there are no pending proceedings against them or any oftheir partners pending with respect to professional matter of conduct before theinstitute of chartered accountants of india or before any competent authority or anycourt.

The current statutory auditors m/s t.r. Chadha & co. Llp chartered accountantshave submitted their report on the financial statements of the company for the financialyear 2016-17 which forms part of the annual report 2016-17. The notes on financialstatements referred to in the auditors’ report for the year 2016-17 areself-explanatory. There are no observations qualifications reservations or adverseremarks of the auditors in their audit reports that may call for any explanation from thedirectors.

Secretarial audit

Pursuant to the provisions of section 204 of the companies act 2013 and the companies(appointment and remuneration of managerial personnel) rules 2014 the company hasappointed dr. Asim kumar chattopadhyay company secretary in practice to undertake thesecretarial audit of the company. The secretarial audit report is annexed to this reportas annexure - ii. The secretarial audit report does not contain any qualificationsreservations or adverse remarks.

Transfer of unpaid and unclaimed amounts to iepf

Pursuant to the provisions of section 124 of the companies

Act 2013 the declared dividends and interest on debentures which remained unpaid orunclaimed for a period of 7 years have been transferred by the company to the investoreducation and protection fund (iepf) established by the central government pursuant tosection 125 of the said act. During the financial year 2016-17 the company hastransferred to the investor education and protection fund unclaimed dividends as detailedin the corporate governance report.

The company has uploaded the details of unpaid and unclaimed amounts lying with thecompany as on 22nd september 2016 (date of last annual general meeting) on the website ofthe ministry of corporateaffairs.

Significant and material order passed by the regulators

There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and the company’s operations in future.

Corporate governance report

The report on corporate governance as stipulated under the sebi (listing obligationsand disclosure requirements) regulations 2015 forms part of the annual report. Thewhole-time director’s declaration regarding compliance with the company’s codeof business conduct and ethics for directors and management personnel forms part of thecorporate governance report.as required by the sebi (listing obligations and disclosurerequirements) regulations 2015 the auditors’ certificate on corporate governancefor the year ended 31st march 2017 issued by t.r. Chadha & co llp is annexed tothis report.

Energy conservation technology absorption and foreign exchange earnings and outgo

The particulars relating to energy conservation technology absorption foreignexchange earnings and outgo as required to be disclosed under section 134(3)(m) of thecompanies act 2013 read with rule 8(3) of the companies (accounts) rules 2014 is annexedto this report asannexure - iii.

Extract ofannual return

In accordance with the section 134(3)(a) of the companies act 2013 an extract of theannual return in form mgt-9 is annexed to this report asannexure - iv.

Particulars of employees

None of the employees of the company is in receipt of remuneration exceeding the limitsprescribed under section 197(12) of the companies act 2013 read with rule 5(2) and 5(3)of the companies (appointment and remuneration of managerial personnel) rules 2014.

Disclosures pertaining to remuneration and other details in respect of directors andemployees of the company as required under section 197(12) of the companies act 2013 readwith rule 5(1) of the companies (appointment and remuneration of managerial personnel)rules 2014 is annexed to this report as annexure - v.

Disclosure under the sexual harassment of women at workplace (prevention prohibitionand redressal) act 2013

All the employees in the company are considered equal. There is no discriminationbetween individuals at any point on the basis of race colour gender religion originsexual orientation or age. Every individual is expected to treat his/her colleagues withrespect and dignity. The company has in place a policy for prevention of sexual harassmentat workplace. This anti-sexual harassment policy of the company is in line with therequirements of the sexual harassment of women at the workplace (prevention prohibition& redressal) act 2013. All employees (permanent contractual temporary and trainees)are covered under this policy. An internal complaints committee is in place to redresscomplaints received regarding sexual harassment. No complaint was received by the companyduring the financial year ended 31st march 2017.

Material changes and commitments affecting the financial position of the company

There have been no material changes and commitments affecting the financial position ofthe company which have occurred between the end of the financial year of the company towhich the financial statements relate and the date of this report.

Human resources / industrial relations

The company’s human resources agenda continues to remain focused on thedevelopment of its employees building capabilities in the organization and progressiveemployee relations policies.

The company has over 500 employees. Industrial relations remained cordial throughoutthe year. Your directors place on record their sincere appreciation of the significantcontributions made and the continued support extended by all employees at all levels tothe company’s operations during the year.

Acknowledgement

Your directors take this opportunity to thank the central and the state governmentsstatutory authorities bankers vendors and business associates and all the stakeholdersfor their continued interest and valued support.

For and on behalf of the board
Ravindra k. Raje Ashok k. Kapur
Director Whole-time director
Place: jabalpur
Date: 23 rd may 2017