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Nitco Ltd.

BSE: 532722 Sector: Consumer
NSE: NITCO ISIN Code: INE858F01012
BSE LIVE 15:53 | 22 Sep 90.05 -6.30
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NSE 15:57 | 22 Sep 90.15 -6.35
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OPEN 96.35
PREVIOUS CLOSE 96.35
VOLUME 96547
52-Week high 109.50
52-Week low 42.50
P/E
Mkt Cap.(Rs cr) 493
Buy Price 0.00
Buy Qty 0.00
Sell Price 90.05
Sell Qty 2.00
OPEN 96.35
CLOSE 96.35
VOLUME 96547
52-Week high 109.50
52-Week low 42.50
P/E
Mkt Cap.(Rs cr) 493
Buy Price 0.00
Buy Qty 0.00
Sell Price 90.05
Sell Qty 2.00

Nitco Ltd. (NITCO) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the 50th Annual Report with theaudited statement of accounts of the Company for the year ended March 312016.

Financial results

The highlights of the financial results for the year ended March 31 2016 are asfollows:

Rs. in crores
For the year ended March 31

Standalone

Consolidated

2016 2015 2016 2015
Gross Sales 851.61 902.61 861.11 914.31
Net Revenue 780.21 826.99 788.70 837.43
Profit /(Loss) before interest depreciation and tax (3.74) (15.81) 20.02 4.17
Interest & Financial Charges (Net) (5.19) (42.17) (12.07) (50.31)
Depreciation (51.31) (62.27) (62.54) (69.78)
Exceptional Items (2.53) (6.97) (2.53) -
Profit/(loss) before tax (62.77) (127.22) (57.12) (115.91)
Provision for tax - - (1.20) (2.30)
Profit/(loss) after tax (62.77) (127.22) (58.32) (118.22)
Minority interest - - (1.85) (1.11)
Balance brought forward from previous year (497.91) (370.69) (498.40) (377.68)
Balance carried forward (560.58) (497.91) (558.58) (498.40)

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 few years.

Despite several challenges faced by the Company the Company was able to achieve a netrevenue of Rs. 780.21 crore a decrease of 5.66% over last year. Due to several stepstaken by the Company and tight control on costs and the strong brand equity enjoyed by theCompany EBITDA losses reduced from Rs. 15.81 crore (FY 201415) to Rs. 3.74 crore in FY2015-16. At a consolidated level the Company has achieved a positive EBITDA of Rs. 20.02Crore (previous year Rs. 4.17 crore). The management is confident that the strategy nowbeing pursued by the Company is appropriate for achieving the 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 Pvt. Ltd.

As a part of the business strategy your Company had acquired 51% equity stake in NewVardhman Vitrified 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 which commenced production during the last quarter of FY 2012-13.The entire production of this plant is marketed by the Company under its brand name. Withthis arrangement Company's dependence on China for tiles sourcing has significantlyreduced. NVVPL in its third full year of operation has achieved net turnover of Rs.167.58 crore EBITDA of Rs. 23.08 crore and Profit Before Tax of Rs. 4.98 crore. TheCompany is regular in servicing its commitment to its lenders and has repaid term loaninstallments of Rs. 35.88 crore since commencement of its operation.

During the current financial year NVVPL has carried out an extension of the existingplant to produce Glazed Vitrified Tiles with a capacity of 1.8 million sq.mtrs. The plantcommenced manufacture of GVT during last quarter of FY 2015-16. The entire project wasfunded from internal accruals.

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 Bankswhich was however not released by them. As per the approved CDR package certain non coreassets of the Company were to be disposed of which could not materialize due to adversemarket conditions. Consequently the Company defaulted on its obligation to its lenders andall CDR lenders have classified the Company's debts as Non Performing Asset (NPA).Consequently due to failure of the package the Company has exited from CDR mechanism.Thirteen Lenders aggregating approximately 86% of overall CDR debts of the Company haveassigned their debts to an Asset Reconstruction Company (ARC) as on March 312016.

Reference to BIFR

The net worth of the Company has been fully eroded and a reference filed under section15(1) of the Sick Industrial Companies (Special Provisions) Act 1985 before the Hon'bleBoard For Industrial and Financial Reconstruction (BIFR) has been duly registered withBIFR vide their letter dated May 12 2015. As the Company is registered with BIFR and theuncertainty on the ultimate outflow the Company has not provided for unpaid interest tothe respective Banks from the date the account has become a non performing asset with therespective banks.

Credit Rating

The last Credit Rating issued to the Company by CARE Limited was on October 01 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 2016.

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 be interestedin obtaining the same. The annual accounts of the subsidiary companies will also be keptfor inspection by any member at the Company's Registered Office and Corporate Office andthat of the respective subsidiary companies.

Internal Control Systems

(i) Internal Control Systems and their adequacy

The Company has in place adequate internal controls commensurate with the size of theCompany and nature of its business and the same were operating effectively throughout theyear. Internal Audit is carried out by external auditors and periodically covers all areasof business. The Internal Auditors evaluates the efficacy and adequacy of internal controlsystem its compliance with operating systems and policies of the Company and accountingprocedures at all the locations of the Company. Based on the report of the InternalAuditors process owners undertake corrective action in their respective areas and therebystrengthen the controls. Significant audit observations and corrective actions thereon areplaced before the Audit Committee of the Board.

(ii) Internal Controls over Financial Reporting

The Company has in place adequate internal financial controls commensurate with sizeand complexity of its operations. During the year such controls were tested and noreportable material weakness in the design or operations were observed. The Company haspolicies and procedures in place for ensuring proper and efficient conduct of itsbusiness the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timely preparationof reliable financial information.

Directors Rs. Responsibility Statement

The Directors confirm that:

a) In the preparation of the annual accounts for the year ended March 31 2016 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 2016 and of the loss ofthe Company for the year ended March 312016;

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 annual 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

Consequent to the assignment of loans by Punjab National Bank (PNB) to JMFARC Mr.Rakesh Kumar Nominee Director resigned from the Board of Directors of the Company onDecember 08 2015. In accordance with the provisions of the Act Mr. Rohan Talwar retiresby rotation and being eligible offers his candidature for reappointment as Director.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under section 149(6)of the Companies Act 2013. The Company has devised a Policy for performance evaluation ofIndependent Directors Board Committees and other individual Directors which includecriteria for performance evaluation of the non-executive directors and executivedirectors.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Regulation 17 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 a structuredquestionnaire was prepared after taking into consideration the various aspects of theBoard's functioning composition of the Board and its Committees culture execution andperformance 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 Kumar Goyal Chief Executive Officer
3. Mr. Bhaskar Borkar Chief Financial Officer
4. #Mr. Rohit Darji Asst. Company Secretary & Compliance Officer
5. *Mr. Puneet Motwani Company Secretary & Compliance Officer

# Ceased to be the Asst. Company Secretary & Compliance Officer w.e.f. February 152016

* Appointed as the Company Secretary & Compliance Officer w.e.f. February 15 2016

Corporate Governance

Pursuant to Regulation 34 read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a detailed report on Corporate Governanceforms a part of this Annual Report. A certificate from the auditors of the Companyconfirming compliance with the conditions of Corporate Governance as stipulated underRegulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is given in a separate statement which forms part of this Annual Report.

Management Discussion and Analysis

Management Discussion and Analysis on matters related to business performance asstipulated in Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is given in a separate statement which forms part of this AnnualReport.

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 newcontract/arrangement/transaction with related parties which could be considered materialin accordance with the policy of the Company on materiality of related party transactions.

Material related party transactions which are at arm's length 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.mtco . in/investors/nitco-policy.aspx. Your Directors draw attention ofthe members to Note 31&32 to the standalone financial statement which sets out relatedparty disclosures.

Transfer To Investor Education And Protection Fund (IEPF)

The Company has transferred Rs. 0.27 Lacs to Investor Education & Protection Fund(IEPF) during the year under review.

Corporate Social Responsibility

In view of losses being incurred by the Company the provisions of Corporate SocialResponsibility 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.

Public Deposits

The Company has neither accepted nor renewed any deposit from the public within themeaning of Section 73 and 74 of the Companies Act 2013 read with Companies (Acceptance ofDeposits) Rules 2014 during the year ended March 312016.

Auditors

At the Company's 48th Annual general meeting (AGM) held on September 19 2014 M/s A.Husein Noumanali & Co. Chartered Accountants Mumbai were appointed as the Company'sStatutory

Auditors from the conclusion of the 48th AGM till the conclusion of the 51st AGM(subject to ratification of re-appointment by the members at every AGM held after the AGMin which the appointment was made) of the Company on a remuneration as may be agreed uponby the Board of Directors and the 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 registration of reference filed u/s 15(1) of theSick Industrial Companies (Special Provision) Act 1985 before the Hon'ble Board forIndustrial & Financial Reconstructions has not provided for interest on financingFacilities amount to Rs. 19694.75 Lacs (previous year Rs. 10739.55 Lacs) for the yearended March 31 2016. Had the same been provided the loss for the year ended March 312016 would have increased by Rs. 19694.75 Lacs (previous year Rs. 10739.55 Lacs) andcorresponding bank liabilities would have increased by Rs. 19694.75 Lacs (previous yearRs. 10739.55 Lacs) as at March 31 2016 and net worth of the Company would have beenlower by Rs. 19694.75 Lacs (previous year Rs. 10739.55 Lacs)."

With the erosion of its entire net worth and its reference filed under section 15(1) ofthe Sick Industrial Companies (Special Provisions) Act 1985 before the Hon'ble Board ForIndustrial and Financial Reconstruction (BIFR) was registered with BIFR vide their letterdated May 12 2015. In view of the above position the Company has not provided for unpaidinterest after the date the loans have been classified as NPA with the respective Banks inview of the 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 FY 201516. The Secretarial Audit Report for thefinancial year ended March 312016 is annexed herewith marked as Annexure V to thisReport. The Secretarial Audit Report does not contain any qualification reservation oradverse 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 theFY 2015-16.

Audit Committee

The Audit Committee comprises Independent Directors namely Mr. Pradeep Saxena(Chairman) Mr. Sharath Bolar and Mr. 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://www.mtco . i n/inves tors/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 Note 3 11 12 & 17 to the standalonefinancial 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 (form MGT-9) of the Company is annexed herewith as Annexure IVto this Report.

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 BanksLenders ARC various Government Authorities Shareholders Business Associates DealersCustomers and Investors during the year.

For and on behalf of the Board Vivek Talwar

Chairman & Managing Director DIN 00043180 Mumbai May 30 2016.

ANNEXURE I

Particulars as per the Companies (Accounts) Rules 2014.

A) Conservation of Energy

The company's manufacturing operations are energy intensive. The concern for moreefficient utilization and conservation of energy has remained not only in the domain ofthe top management but has also percolated to the shop floor. Continuous improvements inthe manufacturing processes and practices are carried out with one of the objectives ofenergy conservation.

B) Technology Absorption

The state of the art Marble processing plant commenced operations during financial year2011-12. Major equipments have been imported from leading equipment manufacturers likeBreton (Italy) Omis (Italy) Fraccarole E Balzan SPA (Italy) and Matec (Italy). Thecompany's technicians have been imparted training in maintenance of these equipments bysupplier's technicians. Technology has been fully absorbed.

C) Foreign exchange earnings and outgo

The information on foreign exchange earnings and outgo is furnished in the Note 27& 28 to the Standalone Financial Statement.

For and on behalf of the Board

Vivek Talwar

Chairman & Managing Director

DIN 00043180

Mumbai

May 30 2016.