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Nitco Ltd.

BSE: 532722 Sector: Consumer
NSE: NITCO ISIN Code: INE858F01012
BSE LIVE 15:51 | 21 Aug 65.40 -3.50
(-5.08%)
OPEN

69.00

HIGH

70.55

LOW

65.10

NSE 15:59 | 21 Aug 65.30 -4.05
(-5.84%)
OPEN

68.85

HIGH

70.45

LOW

64.20

OPEN 69.00
PREVIOUS CLOSE 68.90
VOLUME 50011
52-Week high 90.30
52-Week low 42.50
P/E
Mkt Cap.(Rs cr) 358
Buy Price 0.00
Buy Qty 0.00
Sell Price 65.40
Sell Qty 125.00
OPEN 69.00
CLOSE 68.90
VOLUME 50011
52-Week high 90.30
52-Week low 42.50
P/E
Mkt Cap.(Rs cr) 358
Buy Price 0.00
Buy Qty 0.00
Sell Price 65.40
Sell Qty 125.00

Nitco Ltd. (NITCO) - Chairman Speech

Company chairman speech

Dear members

Your Directors are pleased to present the Annual Report with the audited statement ofaccounts of the Company for the year ended March 31 2015.

FINANCIAL RESULTS

The highlights of the financial results for the year ended March 31 2015 are asfollows:

(Rs. in crore)

Standalone consolidated
For the year ended March 31 2015 2014 2015 2014
Gross Sales 902.61 841. 91 914.31 861.91
Net Revenue 826.99 761.17 837.43 778.58
Profit /(Loss) before interest depreciation and tax (15.81) (25.55) 4.17 (11.83)
Interest & Financial Charges (Net) (42.17) (143.69) (50.31) (150.05)
Depreciation (62.27) (41.99) (69.78) (47.43)
Exceptional Items (6.97) - - -
Profit/(loss) before tax (127.22) (211.23) (115.91) (209.31)
Provision for tax - - (2.30) (1.57)
Profit/(loss) after tax (127.22) (211.23) (118.22) (210.88)
Minority interest - - (1.11) (0.18)
Balance brought forward from previous year (370.69) (159.46) (377.68) (166.62)
Balance carried forward (497.91) (370.69) (498.39) (377.68)

Review of operation

The Company's business model until FY 2011-12 was predominantly based on outsourcingof tiles from China. Due to sharp depreciation of Indian Rupee against US Dollar duringlater part of 2011 this model based on imports suddenly became unviable. The Companythereafter took steps to shift the business model to local outsourcing/ joint venturearrangement. This sudden change in the model has taken a toll on the financial performanceof the Company during the last three years.

Despite the several challenges faced by the Company the Company during the yearincreased its net operating revenue from Rs. 761.17 crore to Rs. 826.99 crore an increaseof 8.65% which reflects the strong brand equity enjoyed by the Company. Due to severalsteps taken by the Company and tight control on costs EBITDA losses reduced to Rs. 15.81crore from Rs. 25.55 crore. At a consolidated level the Company has achieved for thefirst time during last three years a positive EBITDA of Rs. 4.17 Crore. The management isconfident that the strategy now being pursued by the Company is appropriate for achievingthe desired result.

Considering the brand equity enjoyed by the Company and the performance of the Companyduring the current year in a tough environment and several steps taken for improving theperformance of the Company the management is hopeful of a turnaround in near future. Themanagement therefore believes it is appropriate to prepare the financial statement on agoing concern basis.

Joint Venture with New Vardhman Vitrified Tiles Pvt. Ltd.

As a part of the business strategy your Company had acquired 51% equity stake in NewVardhman Vitrified Tiles Pvt. Ltd (NVVPL) during FY 2011-12. The said company had set up aplant near Morbi Gujarat for manufacturing 8 million sq. mtrs (approximately) ofvitrified and wall tiles. The plant commenced production towards the end of the FY2012-13. The production of this plant is marketed by the Company under its brand name.With this arrangement Company's dependence on China for tiles sourcing has significantlyreduced. NVVPL in its second full year of operation has achieved net turnover of Rs.170.43 crore EBITDA of Rs. 20.15 crore and Profit Before Tax of Rs. 4.55 crore. TheCompany is regular in servicing its commitment to its lenders and has repaid term loaninstallments of Rs. 23 crore since commencement of its operation. The Company is in theprocess of enhancing its capacity by another 2 million sq meter and production is expectedto commence during the first half of FY 2015-16.

Corporate Debt Restructuring

The Company's debts were restructured under Corporate Debt Restructuring (CDR)mechanism effective April 2012. The CDR package included fresh funding commitment by Banksof Rs. 177 crore (both fund and non-fund) which the Banks failed to release. As per theapproved CDR package certain non core assets of the Company were to be disposed of whichcould not materialize due to adverse market conditions. During the year FY 2014-15 eightlenders having exposure of approximately 40% of the total CDR debt have assigned theirdebts in favour of JM Financial Assets Reconstruction Co. Pvt. Ltd. Consequently CDREmpowered Group has approved the exit of the Company from CDR mechanism.

Reference to BIFR

Due to significant losses incurred during last three financial years the net worth ofthe Company has been fully eroded and being a mandatory requirement the Company had fileda reference u/s 15(1) of Sick Industrial Companies (Special Provisions) Act 1985 beforethe Hon'ble Board for Industrial & Financial Reconstruction (BIFR). The abovereference has been duly registered vide BIFR order dated 12th May 2015. As the Company isregistered with BIFR the Company has not provided for unpaid interest to the respectiveBanks from the date the account has become a non performing asset with the respectivebanks.

Credit Rating

The last Credit Rating issued to the Company by CARE Limited was on 1st October 2012.However the credit rating is under suspension at present as the Company was underCorporate Debt Restructuring and now under BIFR.

Dividend

In view of the losses incurred during the year your Board is not able to recommend anydividend for the financial year ended March 31 2015.

Subsidiary Companies and Consolidated Financial Statements

In accordance with the Companies Act 2013 and Accounting Standard (AS-21) onconsolidated financial Statement the audited consolidated financial statement is providedin the Annual Report.

The Statement required under Section 129(3) of the Companies Act 2013 in respect ofthe subsidiary companies is provided in Annexure II of this report.

The annual accounts of the subsidiary companies and the related detailed informationwill be made available to any member of the Company / its subsidiaries who may beinterested in obtaining the same. The annual accounts of the subsidiary companies willalso be kept for inspection by any member at the Company's Registered Office and CorporateOffice and that of the respective subsidiary companies.

DirectorS' Responsibility Statement

The Directors confirm that:

a) In the preparation of the annual accounts for the year ended March 31 2015 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed with proper explanation relating to material departures;

b) Appropriate accounting policies have been selected and applied consistently and havemade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company as on March 31 2015 and of the loss ofthe Company for the year ended March 31 2015;

c) Proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) The a nnual accounts have been prepared on a going concern basis.

e) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

Directors

Mr Vishal Malik Independent Director resigned from the Board of Directors of theCompany on June 23 2014 due to his preoccupation. The Board wishes to place on record itsappreciation of the valuable contribution made by Mr Vishal Malik during his tenure as aDirector.

During the year under review the members approved the appointment of Shri PradeepSaxena as Independent Director who is not liable to retire by rotation. The members havealso re-appointed Shri Vivek Talwar as the Managing Director for period of three yearseffective April 1 2014.

The Board pursuant to the provisions of Section 149 and 152 of the Companies Act 2013and subject to the approval of shareholders in the ensuing Annual General Meeting hasappointed Mr Sharath Bolar and Mrs. Bharti Dhar as Independent Directors for a period notexceeding 5 years and not liable to retire by rotation.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed both under the Actand Clause 49 of the Listing Agreement. The Company has devised a Policy for performanceevaluation of Independent Directors Board Committees and other individual Directorswhich include criteria for performance evaluation of the nonexecutive directors andexecutive directors.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the ListingAgreement a structured questionnaire was prepared after taking into consideration thevarious aspects of the Board's functioning composition of the Board and its Committeesculture execution and performance of specific duties obligation and governance.

The performance evaluation of the Independent Directors was completed. The performanceevaluation of the Chairman and the Non-Independent Directors was carried out by theIndependent Directors.

Key Managerial Personnel

The Company has following Key Managerial Personnel:

Sr. No. Name of the person Designation
1. Mr. Vivek Talwar Chairman & Managing Director
2. Mr. Ashok Goyal Chief Executive Officer
3. Mr. B. G. Borkar Chief Financial Officer
4. Mr. Rohit Darji Asst. Company Sceretary & Compliance Officer

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges a detailedreport on Corporate Governance forms a part of this Annual Report. A certificate from theauditors of the Company confirming compliance with the conditions of Corporate Governanceas stipulated under Clause 49 of the Listing Agreement is attached to this Report.

Management Discussion and Analysis

Management Discussion and Analysis on matters related to business performance asstipulated in Clause 49 of the Listing Agreement with the Stock Exchanges is given in aseparate statement which forms part of the Annual Report.

Contracts and Arrangements With Related Parties

All contracts / arrangements / transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis. During the year the Company had not entered into any new contract / arrangement /transaction with related parties which could be considered material in accordance with thepolicy of the Company on materiality of related party transactions.

Material related party transactions which are at arm's lenght are disclosed in formAOC-2 annexed as Annexure III.

The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at thelink: http://www.nitco.in/investors/nitco-policy.aspx

Your Directors draw attention of the members to Note 32 to the financial statementwhich sets out related party disclosures.

Transfer To Investor Education And Protection Fund (IEPF)

The Company has during the year under review transferred a sum of Rs. 24720/- toInvestor Education and Protection Fund in compliance with the provisions of Section 205Cof the Companies Act 1956. The said amount represents dividend due for refund whichremained unpaid/ unclaimed by the shareholders of the Company for a period exceeding 7years from its due date of payment.

Corporate Social Responsibility

In view of losses being incurred by the Company the provisions of Corporate SocialResponsibilities under the Act is not applicable.

Risk and Concern

Changes in macro economic factors like inflation energy cost interest rate worldtrade exchange rate etc. also play an important role in our industry thereby affectingthe operations of business. Any adverse change in the above may affect the performance ofyour Company. Your Company periodically reviews the risk associated with the business andtakes steps to mitigate and minimize the impact of risk.

Internal control framework

Your Company conducts its business with integrity and high standards of ethicalbehavior and in compliance with the laws and regulations that govern its business. YourCompany has a well established framework of internal controls in operation includingsuitable monitoring procedures. In addition to the external audit the financial andoperating controls of your Company at various locations are reviewed by Internal Auditorswho report their observations to the Audit Committee of the Board.

Public Deposits

The Company has neither accepted nor renewed any deposit from the public within themeaning of Section 58A and 58AA of the Companies Act 1956 read with Companies (Acceptanceof Deposits) Rules 1975 during the year ended 31st March 2015.

Auditors

The present auditors of the Company M/s. A. Husein Noumanali & Co. CharteredAccountants retire at the conclusion of the Annual General Meeting and being eligibleoffer themselves for re-appointment. Your Directors recommend their reappointment. TheCompany has received their written consent and certificate from the statutory auditors tothe effect that their re-appointment if made would be within the limits prescribed undersection 141(3)(g) of the Companies Act 2013 and that they are not disqualified forre-appointment within the meaning of Section 141(3) of the said Act. They furtherconfirmed that they are not providing any non-audit services under section 144 of the saidAct. The Board commends their re-appointment as statutory auditors.

AuditorS' Report

The Board has duly examined the statutory auditor's report to accounts andclarifications wherever necessary have been included in the Notes to Accounts section ofthe Annual Report.

With regards to the observations from the Statutory Auditors in their report onStandalone Financials of the Company your directors would like to state that:

"The Company on the basis of the application filed u/s 15(1) of the SickIndustrial Companies (Special Provision) Act 1985 before the Hon'ble Board for Industrial& Financial Reconstructions has not provided for interest on financing facilitiesamount to Rs. 107.40 crore for the year ended March 312015. Had the same been providedthe loss for the year ended March 31 2015 would have increased by Rs. 107.40 crore andcorresponding liabilities would have increased by Rs. 107.40 crore as at March312015."

Since the net worth of the Company has been fully eroded and being mandatoryrequirement a reference was filed under section 15(1) of the Sick Industrial Companies(Special Provisions) Act 1985 before the Hon'ble Board For Industrial and FinancialReconstruction (BIFR) and the same was registered with BIFR vide their letter dated 12thMay 2015. In view of the above position the Company has not provided for unpaid interestafter the date the loans have been classified as NPA with the respective Banks in view ofthe uncertainties with regard to the ultimate outflow.

Secretarial Audit

The Board appointed M/s Mayur More & Associates Practising Company Secretary toconduct Secretarial audit for the financial year FY 2014-15. The Secretarial Audit Reportfor the financial year ended March 31 2015 is annexed herewith marked as Annexure V tothis Report. The Secretarial Audit Report does not contain any qualification reservationor adverse remark.

Cost Audit

The Board has appointed M/s. R.K. Bhandari & Co Cost Accountants as cost auditorfor conducting the audit of cost records of the Company for the applicable segment for thefinancial year FY 2014-15.

Audit Committee

The Audit Committee comprises Independent Directors namely Shri Pradeep Saxena(Chairman) Shri Sharath Bolar and Shri Vivek Talwar as other members.

Vigil Mechanism

The Policy on vigil mechanism and whistle blower policy may be accessed on theCompany's website at the link: http://nitco. in/investors/nitco-policy.aspx

Meetings of the Board

Four meetings of the Board of Directors were held during the year For further detailsplease refer report on Corporate Governance.

Particulars of Loans given Investments made Guarantees given and Securities provided

Particulars of loans given investments made guarantees given and securities providedalong with the purpose for which the loan or guarantee or security is proposed to beutilized by the recipient are provided in the standalone financial statement (Please referto Note 3 11 12 13 and 37 to the standalone financial statement).

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act is annexedherewith as Annexure I.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure IV to thisReport.

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules are provided in the Annual Report. Havingregard to the provisions of the first proviso to Section 136(1) of the Act and as advisedthe Annual Report excluding the aforesaid information is being sent to the members of theCompany. The said information is available for inspection at the registered office of theCompany during working hours and any member interested in obtaining such information maywrite to the Compliance Officer and the same will be furnished on request. The AnnualReport is being sent electronically to all those members who have registered their emailaddresses and is available on the Company's website.

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 Chapter V of the Act.

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

3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme save and except ESOS referred to in this Report.

4. The Managing Director of the Company does not receive any remuneration or commissionfrom any of its subsidiaries.

5. 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.

Your Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.

Appreciation and acknowledgement

Your Directors acknowledges with gratitude and wish to place on record their deepappreciation of continued support and cooperation received by the Company from the Banksvarious Government Authorities Shareholders Bankers Lenders Business AssociatesDealers Customers and Investors during the year.

For and on behalf of the Board

Vivek Talwar

Chairman & Managing Director

Mumbai May 29 2015 Place: Mumbai