THE MEMBERS OF
NITTA GELATIN INDIA LIMITED
Your Directors have pleasure in presenting the 41st Annual Report andaudited financial statements for the year ended 31st March 2017.
(Rs. in Crores)
|Particulars ||For the year ended 31st March 2017 ||For the year ended 31st March 2016 |
|Sales (including export incentives and net of Excise Duty & VAT) ||330.26 ||358.57 |
|Other Income ||4.40 ||2.42 |
|TOTAL ||334.66 ||360.99 |
|Gross Profit before Depreciation ||38.26 ||35.85 |
|Deducting therefrom: || || |
|Depreciation ||10.51 ||9.43 |
|Provision for Tax - || || |
|- Current Tax ||10.14 ||10.11 |
|- MAT Credit Entitlement ||- ||(1.98) |
|- Deferred Tax ||1.33 ||1.13 |
|- Prior years ||(1.23) ||0.48 |
|Profit after Tax ||17.51 ||16.68 |
|Profit brought forward from previous year ||20.91 ||13.91 |
|Adjustments for asset having no remaining useful life ||- ||- |
|Balance Profit available for appropriation Appropriations : ||38.42 ||30.59 |
|Proposed dividend on Optionally Convertible Preference Shares ||-* ||0.79 |
|Proposed final dividend on equity shares ||-* ||2.27 |
|Tax on dividend ||-* ||0.62 |
|Transfer to General Reserve ||6.00 ||6.00 |
|Balance profit carried forward to next year ||32.42 ||20.91 |
|Earnings per share (Rs.) || || |
|Basic ||19.28 ||17.33 |
|Diluted ||19.28 ||16.79 |
* Proposed dividend on preference and equity shares and tax on dividend has not beenrecognised as a distribution of profit in the current year's accounts in accordance withthe revised accounting standard-4 Contingencies and Events occurring after theBalance Sheet Date' (effective from 01.04.2016)
The Board has subject to approval of the members at the ensuing Annual GeneralMeeting recommended a dividend @ 5.4029% p.a. for the year ended 31st March 2017 on the929412 Optionally Convertible Preference Shares of face value of Rs. 170/- each.
Considering the Company's performance and financial position for the year under reviewthe Board has also recommended a dividend of Rs. 2.5 per share i.e. 25% of the face valueof Rs. 10/- per share on the Equity Capital for the year ended 31st March 2017 subjectto approval of the members at the ensuing Annual General Meeting.
Together with corporate tax on dividend the total outflow on account of dividend willbe Rs. 375.93 lakhs (including Rs. 102.74 lakhs on preference shares(Rs. 94.88 lakhs inthe financial year 2015-16) vis--vis Rs. 368.07 lakhs paid for the financial year2015-16.
During the year unclaimed dividend of Rs. 2.53 lakhs pertaining to the year ended 31stMarch 2009 was transferred to the Investor Education & Protection Fund after givingdue notice to the members.
The Authorised Share Capital of your Company is Rupees Thirty Five Crores Eighty lakhsand Forty only (comprising of two crores Equity Shares of Rs. 10/- each and 929412Optionally Convertible (non-cumulative) Preference Shares (OCPS) of Rs. 170/- each). NittaGelatin Inc. (NGI) Japan had not exercised the option to convert the OCPS shares intoEquity Shares at the end of 18 months from date of its allotment as per terms of theissue.
An amount of Rs. 600.00 lakhs is transferred to General Reserve during the year.Reserves as on 31.03.2017 comprises of Security Premium Reserve of Rs. 2895.90 lakhsCapital Investment subsidy of Rs. 15.00 lakhs Special Export Reserve of Rs. 79.00 lakhsGeneral Reserve of Rs. 7836.64 lakhs Hedge Equalisation Reserve of Rs. 633.76 lakhs andcredit balance in the Profit and Loss Account of Rs. 3242.13 Lakhs aggregating to Rs.14702.43 lakhs.
PARTICULARS OF LOANS GUARANTEES & INVESTMENTS
Corporate Guarantee for an amount of Rs. 300 lakhs was provided against a term loan ofRs. 300.00 lakhs sanctioned to Reva Proteins Ltd. (RPL) by M/s. Kerala State IndustrialDevelopment Corporation Ltd. during the year.
Details in respect of other loans guarantees and investments covered under theprovision of Section 186 of the Companies Act 2013 are given in the notes on accounts forthe financial year ended 31st March 2017
The gross revenue from operations of your Company during the year under review was Rs.341.91 crores; though there has been an increase in the unit sales realization in the caseof all our products during the year increase in sales volumes could not be achieved dueto various extraneous factors.
The District Administration of Trichur District where one of the plants of the Companyis situated has ordered reduction in drawal of water by 80% for the period commencingFebruary 2017 and until the onset of monsoon as a fall out of deficient monsoon. This hasaffected the operations of Ossein Division of the Company in the IVth quarter impactingrevenue. Though the Company could manage to sustain the operations of Gelatin plant byway of procurements from the local Ossein manufacturers the disruption in operations hasimpacted the operational results of the Company in the said quarter. During the year thebusiness model of Reva Proteins Ltd. a subsidiary of the Company was changed from a jobprocessor of the Company to an independent manufacturer and seller with the resultantfall in revenue.
With all the domestic Gelatin plants in full scale operation during the year and theresultant heavy demand for crushed bone the quality and cost of supplies could not meetthe export specifications for Ossein and Limed Ossein. This has led to a reduction inexport volumes of Ossein / Limed Ossein by 30% during the year. The sales of CollagenPeptide witnessed a decline due to want of raw material fish protein- on account ofregulatory issues / clearances. In the domestic market the unduly long delay in grantingnew product approvals by the regulatory authorities has resulted in poor offtake ofCollagen Peptide. Despite the reduction in volumes as explained above the total salesturnover could be maintained with improvement in unit sales realization on all theproducts and the higher volume of Gelatin sales achieved during the year.
The improvement in USD / INR exchange rates during 2016-17 as compared to 2014-15 hasalso contributed to improved sales realisation on exports.
The increase in price of crushed animal bone apart from its poor quality as explainedabove was not conducive for the profitability of the Company. Crushed bone prices haveincreased by 4.21% during 2016-17 as compared to the previous fiscal. In the backdrop ofthe aforesaid adversities your Company exercised close monitoring and strict control overeach significant element of cost and achievedappreciablesavings.Inrespectofutilities theusage of LNG was significantly substituted by firewood and at the same time efficiency ofwood fired boilers has improved. There was significant reduction in power cost also as aresult of various cost control measures in both the Divisions of the Company. Aided alsoby the decline in the price of LNG and firewood these measures have helped us to achievean overall cost reduction of around Rs. 2.58 crores for utilities in comparison to Rs.6.08 crores achieved in FY 2015-16. Significant savings were also made in factory andAdministration overheads by keeping a tight vigil on each item of expenditure andestablishing appropriate controls. With regard to finance cost Company could effectivelyleverage low cost foreign currency loans and achieve almost a one third reductionamounting to Rs. 2.34 crores.
The sales mix during the year was such that the Company could achieve a reduction inselling expenses such as freight charges on productsdiscountandcommissiononsalesetc.aggregating to Rs. 0.85 crores during the year underreview. As a result of the above the operations of the Company for the year 2016-17 hasresulted in a pre-tax profit of Rs. 27.75 crores as against Rs. 26.43 crores during2015-16 inspite of drop in revenue following change in the business model of subsidiaryCompany RPL and disruption in operations in Ossein Division in Q4 of the financial year.
The products of your Company continued to enjoy robust market demand during the yearunder review. The entire sale of Ossein / Limed Ossein 52.30% of the total sale ofGelatin and 51.80% of Collagen Peptide was through exports. Your Company has arrangementswith our overseas promoter Nitta Gelatin Inc. Japan to leverage their expertise andmarket insights in servicing our customers in a pro-active manner in line with the globalstandards of NITTA Group.
The major production facilities of your Company are the Ossein Plant at KorattyTrichur District and Gelatin / Peptide Plant at Kakkanad Ernakulam District Kerala. Allthe factories owned by the Company are being operated in strict compliance with theapplicable standards / norms prescribed by the Statutory authorities including the StatePollution Control Board. The Kadukutty Panchayat in Trichur District did not renew thefactory licence for our Ossein Plant at Koratty for the year. Though the Kerala StateTribunal for Local Self Government Institutions has remanded back to the adjudicatingauthorities for a review of the orders Panchayat has not reversed their original decisionand we have moved the matter before the High Court of Kerala. The Court has ordered statusquo in the matter till final disposal of the writ petition filed by the Company. Therecent review of the effluent management system at Ossein Division by the NationalEnvironmental Engineering Research Institute (NEERI) has confirmed the efficacy of thesystem on the basis of which the Pollution Control Board has renewed the Consent toOperate upto 30.06.2018. Based on expert legal advice the earlier court verdicts and thefacts of the situation as explained above the Company expects a favourable resolution ofthe matter.
The National Green Tribunal(NGT) has passed an order dtd 27.02.17 disposing differentapplications moved before that honorable forum challenging the operations of the companyas violative of the environmental regulations in force. The NGT while disposing of theapplication has concluded that on the analysis of the entire facts and materials thatthere is no material to establish that the industry has discharged sludge along with thetreated liquid effluent into the Chalakkudy river.
The sludge generated by the industry is non-hazardous and non-toxic.
The effluent treatment plant is functioning efficiently and as of now the discharge ofthe treated effluent from the ETP to the Chalakudy river has no adverse impact on theriver water or the ground water. However NGT by applying the precautionaryprincipletoavoidanypossibilityofcausingpollution to both air and water in theenvironmentdirected the Company to instal certain equipment to reinforce the effluenttreatment process and technologies besides methods which help recycling of treatedeffluent and minimize the discharge into the river. The order also gave directions to theKerala Pollution Control Board (KPCB) for enforcing the standards. The Order has detailedprescriptions for implementation in a time-bound manner. Whereas there are certaindirections which need a relook on a factual as well as practical consideration of theissues involved the Company has filed a Petition before the Hon'ble Tribunal for a reviewof such directions which is pending consideration
During the year rating agency CRISIL has reaffirmed the rating of CRISIL A-/ butoutlook was revised from "Stable"to "Negative" for Long
Term Instruments and maintained "CRISIL A2+" rating for short terminstruments. The change in outlook was following the disruptions in operation in OsseinDivision as a result of the restrictions imposed by the District Administration for drawalof water for process requirements from the Chalakkudy river
AWARDS & ACCOLADES
During the year your Company was awarded the top export award in Ossein& Gelatinpanel instituted by CAPEXIL for the years 2013 -14 and 2014-15.
The following prestigious certifications are retained by your Company:-(a) EuropeanDirectorate for the Quality of Medicines & Health (EDQM) Certificate for GelatinDivision (b) HACCP Certificate for Ossein Division and Gelatin Division for food safety.
(c) ISO 14001:2004 for Gelatin Division for Environment Management System (d) ISO 9001:2008 for Quality Management System of the Company.
(e) FSSC Certification for Food Safety Management System for Gelatin Division (f) Halal/ Kosher Certification for Gelatin and Collagen Peptide (g) NABL Accreditation forin-house laboratory Besides the Company has newly acquired yet another prestigiousrecognition / certification namely: (h) OSHAS Certification by NVTQC for OccupationalHealth and Safety Standards.
HEALTH SAFETY AND ENVIRONMENT
Compliance with relevant regulations and effective management of the related issues isan integral part of the Company's philosophy and your Company stands committed tocontinually improve on these objectives. The Company year on year increases its focus onimproving matters relating to Health Safety and Environment.
1. Health and Safety
The Company is committed to promoting the health and safety of its employees. Inaddition to the Head (Safety) for the Company each of the plants of the Company is havinga Safety Officer and Safety Committees which include representation from workmen. TheCommittees meet regularly to review issues impacting plant safety and employee health.Regular health checkup of the employees is carried out through reputed hospitals. Varioustraining programmes are conducted at the plant on health and safety issues includingemergency preparedness work safety first-aid etc. The Company is augmenting resourcesto further strengthen the level of safety at its plants. Our Gelatin factory has receivedthe OSHAS certification during the year while for the Ossein factory this is at anadvanced stage which is a testimony to the Company's commitment in this area.
The Company continuously endeavors to improve on environmental management and throughall activities demonstrate its commitment to protecting the environment. The factories ofthe Company are equipped with modern effluent treatment plants for treating anddischarging treated water with parameters well within the norms laid down by the PollutionControl authorities. The emissions from the boilers and generator stacks are regularlymonitored for compliance. With the commissioning of two biogas generators at its Osseinplant substantial portion of the raw effluent from the production process is now beingconverted into biogas used for meeting the Company's energy requirements. Diffused Airfloatation System for effective grease removal Primary Treatment System Reinforcement andETP Automation for sound effluent management system introduction of Activated CarbonSystem in Fresh Water Treatment Plant for improving the water quality and improving theprocess stability introduction of chemical mixing times for Water Treatment Systeminstrumentation system for turbidity control and better chlorination addition of two JetAerators in ETP System and commissioning of multi grade Sand Filters before finaldischarge point of treated water are some of the initiatives carried out during the yearto ensure protection of the environment and sustainability of operations.
M/s. National Environmental Engineering Research Institute (NEERI) a constituentlaboratory of the Council of Scientific & Industrial Research Govt. of Indiaconducted a plant visit for assessment of implementation status of their ownrecommendations in May 2016 and observed that the Company has complied with theimplementation of all the recommendations of NEERI excepting one recommendation i.e.cleaning of weeds along the banks of Chalakudy river due to want of approval fromKadukutty Grama Panchayat for carrying out the activity. They have also observed thatbased on the physio chemical analysis of various effluent samples of ETP the finaltreated effluent being discharged into Chalakudy river conforms to the discharge Standardsstipulated by the KSPCB for M/s. NGIL and also the CPCB General Standards for Discharge.
The Company continuously endeavors to improve on environmental management and throughall activities demonstrate its commitment to protecting the environment. The factories ofthe Company are equipped with effective effluent treatment plants for treating anddischarging treated water with parameters well with in the norms laid down by thePollution Control authorities. The emissions from the boilers and generator stacks areregularly monitored for compliance. With the commissioning of two biogas generators at ourOssein plant substantial portion of the raw effluent from the production process is nowbeing converted into biogas used for meeting our energy requirements. Water recycling andwater reuse are being regularly pursued and improved upon by the Company with specifictargets. In connection with the renewal of the Consent To Operate our Ossein plant M/s.National Environmental Engineering Research Institute (NEERI) a constituent laboratory ofthe Council of Scientific & Industrial Research Govt. of India conducted a detailedstudy of the pollution status with respect to the air water and solid waste generatedfrom the Ossein plant and confirmed the efficacy of such systems. However with a view tofurther enhance the infrastructure for environment management water conservation ambientair quality etc. the Company has mobilized Rs. 15.80 crores through the issue ofOptionally Convertible (non-cumulative) Preference Shares. With the completion of thisinvestment your Company will be equipped with state-of-the-art facilities for managementof environment and hence the health and safety of the employees and the local community atlarge.
The ambient air quality in our Ossein plant is being monitored on a continuous basis toconform to the regulations relating to ambient air quality standards. Out of the totalplot area of approximately 153900 sq. meters about 10000 sq. meters of land around theboundary of Gelatin Division and about 38000 sq. meters of land in Ossein Division havebeen developed and maintained as green area.
These steps are expected to go a long way in furthering our efforts to protect thenature and environment around our plant.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company has formulated a well structured Policy aimed at providing focus anddirection to the various activities on CSR. The Company is committed to identifying andsupporting programmes aimed at:
Empowerment of the disadvantaged / weaker sections of the society through educationskill development and the like;
Provision of access to basic necessities like healthcare drinking water&sanitation;
Supporting environmental and ecological balance through afforestation soilconservation conservation of flora and similar programmes;
Promotion of sports through training of sports persons;
Rural development projects;
Total CSR expenditure incurred by your Company during the year was Rs. 21.42 lakhswhich was higher than the statutory requirement of 2% of the average profit for the lastthree years.
A CSR Committee has been constituted to act in an advisory capacity to the Board andManagement with respect to policies and strategies that affect the Company's role as asocially responsible organization.
The CSR Committee ensures that the implementation and monitoring of the projects are incompliance with the CSR objectives and Policy of the Company.
The CSR Policy can be accessed on the
Company's website www.gelatin.in. The CSR projects undertaken by the Company are inaccordance with Schedule VII of the Companies Act 2013. Annual Report on CSR activitiesis annexed herewith as Annexure I.
POLICY FOR DETERMINING MATERIAL SUBSIDIARIES
In view of the change in the definition of material subsidiary Reva Proteins Limitedwhich was a material subsidiary hitherto was not a material subsidiary as per the LODRRegulations 2015.
In accordance with LODR Regulations the Company's policy on materiality ofsubsidiaries specifying the criteria for determining the Material Subsidiaries isavailable in the Company website www.gelatin.in. There has been no change in the nature ofbusiness of subsidiaries during the year under review. However the business model of RevaProteins Ltd one of the subsidiaries was changed from a job processor of the Company to anindependent manufacturer and seller during the year.
As per the above criteria the Company has no material subsidiary as of today
BAMNI PROTEINS LIMITED
The annual production during the year in this subsidiary company was 2524 MT of Osseinand 5885 MT of Di Calcium Phosphate as against 2349 MT of Ossein and 5508 MT of Di-CalciumPhosphate during the previous year.
The operation of this subsidiary for the year under review has resulted in a post-taxprofit of Rs. 69.14 Lakhs (pre-tax profit of Rs. 107.14 lakhs) as against a post taxprofit of Rs. 128.75 lakhs (pretax profit of Rs. 112.31 lakhs) during the previousfinancial year.
REVA PROTEINS LIMITED
At Reva Proteins Ltd. owing to restrictions in the quantum of discharge of treatedeffluent there has been considerable under utilization of capacity. The common treatedeffluent discharge pipeline currently being set up by M/s. Narmada Cleantech Limited whichwas expected to be commissioned during mid 2015-16 has been delayed further. Thecommissioning and high pressure testing of the effluent pipeline got completed in January2017 and the clearance of the consent to authorize andoperateforRevaplantbytheGujaratStatePollution Control Board is in progress. Arising out ofthe above the financial year 2016-17 witnessed a net loss of Rs. 779.04 lakhs and a cashloss of Rs. 521.69 lakhs as against a net loss of Rs. 941.17 lakhs and a cash loss of Rs.684.59 lakhs during the previous financial year. The annual production during 2016-17 was1909 MT of Ossein and 1095 MT of Limed Ossein as against 1554 MT of Ossein and 632 MT ofLimed Ossein during the previous year. Taking into consideration the techno-commercialviability of the project once the pipeline is made available for Company's operations postthe clearance by the Gujarat State Pollution Control Board expected by the end of Quarter1 of 2017-18 your Company has proactively undertaken a comprehensive scheme for revivalof the subsidiary by way of capital investments and capital restricting / rescheduling ofexisting term loans. It is expected that this subsidiary can achieve a turnaround inoperations within a short time once the pipeline is made available for usage.
In accordance with Section 129(3) of the Companies Act 2013 the Company has prepareda consolidated financial statement of the Company and all its subsidiary companies whichis forming part of the Annual Report.
The statement containing the salient features of the financial statement of both thesubsidiaries under first proviso to sub-section (3) of section 129 of the Act in form AOCI is attached as Annexure II.
In accordance with fourth proviso of Section 136(1) of the Companies Act 2013 theAnnual Report of the Company containing therein its standalone and consolidated financialstatements has been uploaded on the website of the Company www. gelatin.in. Further asper the fourth proviso of the said section the annual accounts of the subsidiarycompanies and the related detailed information have also been uploaded on the website ofthe Company www.gelatin.in. Annual accounts of the subsidiary companies and relateddetailed information shall be made available to the shareholders of the Company andsubsidiary companies seeking such information at any point of time. The annual accounts ofthe subsidiary companies shall also be available for inspection by any shareholder at theRegistered Office of the Company and subsidiary companies concerned. Hard copy of detailsof accounts of subsidiaries shall be furnished to any shareholder on demand. Furtherpursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants ofIndia consolidated financial statements presented by the Company include the financialinformation of its subsidiaries.
STATUTORY AUDITOR'S REPORT
Emphasis of Matter on the accounts of the Company referred to in the Auditor's Reportis explained in detail in Note No. 2.11.2 of the Notes forming part of accounts for theyear and hence no further comments are necessary.
SECRETARIAL AUDITORS' REPORT
EXPLANATION TO OBSERVATIONS OF AUDIT
As prescribed under Section 204(1) of the Act the Company has received the SecretarialAudit Report. The observations made therein and the corresponding explanations are givenbelow:
|Sl No Observation ||Our explanation |
|1 As per Regulation 24 (3) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 the minutes of the meetings of the Board of Directors of the unlisted subsidiary shall be placed at the meeting of the Board of Directors of the listed entity. On examination of the Board minutes of Nitta Gelatin India Limited : ||We were regular in placing the minutes of Reva Proteins Ltd till such time it was material subsidiary. There was irregularity thereafter. |
|Minutes of Reva Proteins Ltd (subsidiary) has placed only at the 1st Board Meeting during the Financial Year i.e. on 06.05.2016 and Minutes of Bamni Proteins Limited (Subsidiary) has not placed before the Board Meetings of Nitta. Kindly adopt a system of placing the Board Minutes of subsidiaries in the Board Meeting of Nitta as per the mandate of Regulation 24 (3) of LODR. ||Hereafter the minutes of the meetings of Subsidiary companies shall be placed before the Board meeting of the Holding company. |
|2 As per Standard 6.4 of the Secretarial Standard 1 (SS-1) meetings of Board of Directors "Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention if any shall be recorded in the Minutes of such Meeting". The Board has approved a circular resolution for authorization to Directors for migrating to GST on 10.01.2017. On analysis of the minutes of next Board meeting held on 06-02-2017 it is observed that there is inadequate compliance of Standard 6.4 in as much as the text of the resolution has not been recorded in the minutes as envisaged by the Standards 6.4. ||Noted. Henceforth the regulatory provision shall be conformed in entirety. |
|3. The Company has paid additional fee of Rs.12000 to the Ministry with respect to modification of sanctioned credit facilities by SBI and HDFC bank. The cases with respect to delay in Charge filing with Bankers (i.e. SBI and HDFC) were found to be repetitive in nature when we compared the same with the last two financial years. This matter needs to be discussed with Bankers whenever new credit facilities sanctioned or existing credit facilities get renewed so that cases of such nature were not further get repeated. ||This happens with respect to additional documentation in the context of creation of Collateral Security and also renewal of existing facilities. We shall discuss with Bankers and find ways to avoid the delay in filing. |
|4 As per the provisions of the Foreign Exchange Management Act 1999 ECB Return (ECB-2) should be filed within seven working days from the end of each month. On analysis it is found that (i) ECB Return for the month of April 2016 has been filed on 14th June 2016 with a delay of 28 days (ii) ECB Return for the month of May 2016 has been filed on 14th June 2016 with a delay of 4 days (iii) ECB Return for the month of July 2016 has been filed on 10th August 2016 with a delay of 1 day (iv) ECB Return for the month of October 2016 has been filed on 22nd November 2016 with a delay of 11 days and (v) ECB Return for the month of November 2016 has been filed on 15th December 2016 with a delay of 5 days. ||The Returns are physically filed with the Authorised Dealer well within the statutory prescription of seven days while an endorsement is obtained subsequent thereto. We shall henceforth endeavor to obtain the endorsement in such a way that it is within the statutory time limit for filing the document. |
|5 The production of gelatin exceeds the limit as per FSSA Li- cense for the last two years 2015-16 and 2016-17 and hence found to be repetitive in nature without amending the license accordingly for the enhancement of the permissible quantity of gelatin . This is evident as per examination of Annual Re- turn in Form D1 filed under Regulation 2.1.13 of the FSSA 2006 and the total gelatin production comes about 3824 MT and 4003 MT respectively which are in excess of the limit of 3650 MT per year. The Company is advised to increase the licensed limit accordingly. ||The forthcoming renewal of the license shall take care of the requirement. |
The Collaborators of your Company continue to be the relentless source of support andguidance for the Company in each of its key initiatives. Their patronage in areas offinancial support product development marketing quality improvement and training ofpersonnel has contributed significantly to the growth of the Company. NGI Japan has notonly subscribed to the Optionally Convertible Preference Shares for an amount of Rs. 1580lakhs issued by the Company in full but also provided term loan assistance to the Companyat attractive rates of interest. NGI Inc. Japan has provided guidance and considerablefinancial support for the scheme of revival of the subsidiary Reva Proteins Ltd. KeralaState Industrial Development Corporation Ltd. the other promoter is also equallysupportive to each and every development concerning your Company.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The information as required under Section 134(3) (m) of the Companies Act 2013 readwith Rule 8(3) of the Companies (Accounts) Rules 2014 is attached as Annexure III.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to remuneration and other details as required under section197(12) of the Act read with Rule 5(1) of The Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided in the Annual Report as Annexure IVto this report.
The Annual Report excluding the details of employees receiving remuneration in excessof the limits prescribed under section 197 of the Act 2013 read with Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is being sentto the shareholders of the Company in terms of first proviso to Section 136(1) of the Act2013. The annexure is available for inspection at the Registered Office of the Companyduring business hours and any shareholder interested in obtaining a copy of the saidannexure may write to the Company Secretary at the Registered Office of the Company.
INTERNAL CONTROL SYSTEM
ADEQUACY OF INTERNAL CONTROL SYSTEMS
The Company has in place well defined and adequate internal controls commensurate withthe size of the Company and the same were operating effectively throughout the year. Theinternal control systems operate through well documented Standard Operating Procedurespolicies and process guidelines. These are designed to ensure that transactions areconducted and authorized within defined authority limit commensurate with the level ofresponsibility for each functional area. The Company's accounting and reporting guidelinesensure that transactions are recorded and reported in conformity with the generallyaccepted accounting principles.
The Company has engaged a professional firm of Accountants with long years ofexperience to carry out the internal audit function. The Company has not placed anylimitation on the scope and authority of the internal audit function. The internal auditfunction evaluates the efficacy and adequacy of internal control systems its compliancewith operating systems and policies of the Company and accounting procedures at alllocations of the Company. To maintain its objectivity effectiveness and independenceinternal audit is being carried out on a quarterly basis and reports thereon along withthe remarks of the process owners on each of the observations of audit are placed beforethe Audit Committee of the Board. The Audit Committee reviews each of the internal auditreports as a separate item of agenda along with the internal / statutory auditors and themanagement representatives wherein the Committee gives their advice / suggestions on theaudit points. Based on the report of the internal audit as well as the observations of theAudit Committee the process owners undertake requisite corrective action in theirrespective areas thereby further strengthening the control systems. Action Taken Reportsare also reviewed by the Audit Committee for each actionable item. The minutes of theAudit Committee are reviewed by the Board of Directors.
INTERNAL CONTROLS OF FINANCIAL REPORTING
The Company has in place adequate financial controls commensurate with the size scaleand complexity of its operations. During the year such controls were tested and noreportable material weakness in the design on 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.
The Company has adopted accounting policies which are in line with the AccountingStandards and the Act. They are in accordance with the generally accepted accountingprinciples in India. Changes in policies if required are made in consultation with theauditors and are approved by the Audit Committee. The Board is of the view thatappropriate procedures and controls are operating effectively and monitoring proceduresare in place.
RESPONSIBILITY STATEMENT OF DIRECTORS
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134 of the Companies Act 2013: a) that in the preparation of the annual accountsfor the year ended 31st March 2017 the applicable Accounting Standards have beenfollowed along with proper explanation relating to material departures if any; b) thatthey had selected such accounting policies as mentioned in Note 1 of the notes to theFinancial Statements and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as at 31st March 2017 and of the profit of the Company for the year ended onthat date; c) that they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; d) that they had prepared the annual accounts on a going concernbasis; e) that proper internal financial controls laid down by the Directors were followedby the Company and such internal financial controls are adequate and were operatingeffectively; and f) that they had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions which is in line withthe relevant provisions of the Companies Act and as well as SEBI (LODR) Regulations. Thesaid policy as approved by the Board is available in the Company website www.gelatin.in.As per the said policy prior omnibus approval of the Audit Committee is obtained on aquarterly basis for all the Related Party Transactions which are of a foreseen andrepetitive nature. All Related Party Transactions actually taken place are subsequentlyreviewed by the Audit Committee on a quarterly basis in comparison with the conditions ofomnibus approval and are recommended to the Board for approval. Additionally materialRelated Party Transactions foreseen in the year ahead were got approved by the membersalso. Particulars of contracts of arrangements with Related Parties referred to in subsection 1 of Section 188 read with Rule 8(2) of the (Companies Accounts) Rules 2014 areattached in Form No. AOC 2 as Annexure V.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review as stipulated underSEBI (LODR) Regulations is presented in a separate section forming part of this AnnualReport.
The Company has complied with the corporate governance requirements under the CompaniesAct 2013 and as stipulated under the SEBI (LODR) Regulations. A separate section oncorporate governance under the Regulation along with a certificate from PractisingCompany Secretary confirming the compliance is annexed and forms part of the AnnualReport
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance with theprovisions of Schedule III of the Companies Act 2013 and Accounting Standards 21 27 andother applicable Accounting Standards issued by the Institute of Chartered Accountants ofIndia and the provisions of the SEBI (LODR) Regulations and form part of the AnnualReport.
Mr.P.HKurianIASwhowasaDirectorandChairman of the Company with effect from 14.10.2013ceased to hold office on 27.09.2016 consequent on the
Kerala State Industrial Development Corporation Limited (KSIDC) vide their letter dated27.09.2016 nominating Mr. Paul Antony IAS Additional Chief Secretary (Industries andPower) Govt. of Kerala as a Director of the Company. Your Directors extend a warm welcometo Mr. Paul Antony as member of the Board. The Board also places on record theappreciation for the valuable guidance and support extended by Mr. P.H. Kurian IAS duringhis tenure as Director and Chairman. Mr. Takeo Yamaki Director(operations) resigned fromthe service of the company consequent on his being reverted to the service of NGI Japan.He was replaced by Dr. Shinya Takahashi who was appointed as Director(Technical) at theBoard meeting held on 09.05.2017. The terms and conditions of appointment are to beconfirmed at the forthcoming Annual General Meeting of the company. Similarly Mr. RaymondMerz Director nominee of NGI Japan was replaced and Mr. Koichi Ogata President NGIJapan was appointed in casual vacancy at the Board meeting dated 09.05.2017. Mr. HiroshiNitta was appointed as Alternate Director to Mr. Koichi Ogata. The Board extended a warmwelcome to the incoming directors.
KEY MANAGERIAL PERSONNEL
Rule 8(5)(iii) of Companies (Accounts) Rules 2014 prescribes that Report of Directorsshould contain details of Directors and Key Managerial Personnel. Therefore in additionto the details of Directors hereinabove given it is brought to the notice of shareholdersthat Mr. P. Sahasranaman and Mr G. Rajeshkurup continue as Chief Financial Officer (CFO)and Company Secretary respectively.
As per Section 134(3)(P) of the Act 2013 there has to be furnished to the shareholdersas part of the Directors' Report a statement indicating the manner in which formal annualevaluation was made by the Board of their performance. Similarly the IndependentDirectors as part of their mandate under Schedule VI of the Act need to make an evaluationof performance of the constituents of the Board apart from their self evaluation. TheBoard at their meeting dt. 06.02.2017 had occasion to deliberate on the Guidance Note onBoard Evaluation issued by Securities Exchange Board of India(SEBI) dated 05.01.2017 andapproved a Questionnaire for evaluation that captures the salient points discussed in thesaid Note. The questionnaire for evaluation (both self and peer)are to be filled inconsolidated and discussed with the Chairman. The evaluation by the Independent Directorshaving been undertaken at their meeting dated 11.04.2017 the Board of Directors tooundertook their evaluation and took into record that the Independent Directors have therequisite qualification expertise and track record for performing their duties asenvisaged under Law and they add value in the decision making process of the Board.
The Board of Directors met 4 (Four) times during the financial year 2016-17. Thedetails of the Board meetings and the attendance of the Directors are provided in theCorporate Governance Report. The intervening time gap between the two consecutive meetingswas within the period prescribed under the Companies Act 2013.
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee has Mrs. Radha Unni as Chairperson with Mr. A. K. Nair Mr. K. L.Kumar and Dr. K. Cherian Varghese as members.
More details on the Committee are given in the Corporate Governance Report.
The Company has established a vigil mechanism for Directors and employees to reportgenuine concerns while providing for adequate safeguards against victimisation; providingdirect access to chairperson of Audit Committee the details regarding which have alsobeen given in the Company's official website.
DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013.
Your Company has always believed in providing a safe and harassment free workplace forevery individual working and associating with the company through various interventionsand practices. The Company always endeavors to create and provide an environment that isfree from discrimination and harassment including sexual harassment.
A four member Internal Complaints Committee (ICC) is constituted with three ladyemployees and one lady NGO member. ICC is responsible for redressal of complaints relatingto sexual harassment as envisaged under the provisions of Act and Rules. Hitherto nocomplaints were received by ICC.
PREVENTION OF INDISER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider Trading with a viewto regulate trading in securities by the Directors and designated employees of theCompany. The Code requires pre-clearance for dealing in the Company's shares and prohibitsthe purchase or sale of Company shares by the Directors and the designated employees whilein possession of unpublished price sensitive information in relation to the Company andduring the period when the Trading Window is closed. The Board is responsible forimplementation of the Code.
M/s Varma & Varma Statutory Auditors completed their term of office within themeaning of Section 139 of the Companies Act2013 consequent whereof M/s. Walker Chandiok& Co LLP was on recommendation by the Audit Committee at their meeting dated06.02.2017 appointed as Statutory Auditors of the Company for a period of five yearssubject to yearly ratification by the Board of Directors who held their meeting laterduring that day. This appointment which is confirmed by the Audit-firm as meeting all thequalifications and eligibility prescribed under the Companies Act 2013 applicable Rulesand the provisions of SEBI (LODR) Regulations has now to have the approval of theshareholders at the forthcoming Annual General Meeting of the Company.
Pursuant to the provisions of the Section 204 of the Companies Act 2013 and TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Mr. Abhilash Nediyalil Abraham. (CP No. 14524
M No. 22601) Company Secretary in practice to undertake the Secretarial Audit of theCompany. The Secretarial Audit Report is annexed herewith as Annexure VI.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT 9 are annexedherewith as Annexure VII.
Your Directors place on record its sincere appreciation for the support and assistanceextended by the State Government and M/s. Kerala State Industrial Development CorporationLtd. They also take this opportunity to extend their whole hearted gratitude to M/s. NittaGelatin Inc. Japan for their timely and valuable guidance and inspiration. Your Boardplace on record its sincere appreciation for the significant contributions made byemployees across the Company through their dedication and commitment. On this occasionyour Board thanks all the customers suppliers bankers and other associates for theirunstinted co-operation. Your Directors are also thankful to the esteemed shareholders fortheir continued patronage and the confidence reposed on the Company and its management.
| ||For and on behalf of the Board of Directors |
|Kochi ||PAUL ANTONY IAS |
|09.05.2017 ||CHAIRMAN |
| ||(DIN: 02239492) |