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Organic Coatings Ltd.

BSE: 531157 Sector: Industrials
NSE: N.A. ISIN Code: INE412E01011
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VOLUME 500
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P/E 38.46
Mkt Cap.(Rs cr) 15
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VOLUME 500
52-Week high 25.50
52-Week low 10.45
P/E 38.46
Mkt Cap.(Rs cr) 15
Buy Price 0.00
Buy Qty 0.00
Sell Price 20.00
Sell Qty 500.00

Organic Coatings Ltd. (ORGANICCOATINGS) - Director Report

Company director report

To

The Members

Your directors submit 51st annual report of Organic Coatings Limited (the Company orOCL) along with the audited financial statements for the financial year ended March 312016.

1. Financial Results

The Company's financial performance for the year ended March 31 2016 is summarizedbelow:

2015 16 2014 15
(Rs. in Lacs) (Rs. in Lacs)
Revenue from operations 4100.88 4694.64
Operating expenditure 3940.25 4474.12
Profit before Interest Depreciation & Tax 160.63 220.52
Less: Finance Cost 141.96 194.21
Profit after Finance Cost 18.67 26.31
Less: Depreciation 139.85 140.76
(Loss) / Profit for the year before tax (121.18) (114.45)
Excess Depreciation of earlier years written back 0.00 (2.11)
(Loss) / Profit before tax (121.18) (112.34)
Less: Prior year's Income Tax 0.00 0.06
(Loss) / Profit after tax (121.18) (112.40)

2. Company's performance and state of affairs of the company

* Revenue from operations (net) decreased by 10.71% to Rs. 4069.39 Lacs from Rs.4557.18 Lacs in the previous year.

* PBDIT decreased by 27.16 % to Rs. 160.63 Lacs for the year ended 31st March 2016compared to previous year Rs. 220.52 Lacs.

* Net loss increased by 7.82% to Rs. 121.18 Lacs for the year compared to loss of Rs.112.40 Lacs in the previous year.

There are no material changes and commitments have occurred after the close of thefinancial year till the date of this report which affect the financial position of theCompany. The Company's arrangement for Marketing and Distribution Agreement with M/s.Heidelberg India Pvt. Ltd. for exclusive Marketing and Distribution in India of itsproducts viz. all Sheetfed products which includes Low Segment Mid Segment Higher EndSegment Inks Spot Color Inks Specialty Inks UV Inks & Coatings and Water-based Inks& Coatings is gradually having positive impact on the sales of the Company.

3. Dividend and transfer to reserves

In view of the loss the Board of Directors is unable to recommend any dividend and noamount is transferred to

Reserves for the financial year 2015-16.

4. Management discussion and analysis statement and corporate governance report

The statement on management discussion and analysis and report on corporate governanceforms part of the annual report is provided in Annexure I.

A certificate of the auditors of the Company Soman Uday & Co. CharteredAccountants confirming compliance of the conditions of corporate governance is annexed.

5. Directors' responsibility statement

Your Directors state 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 and there are no material departures from the same;

b) They have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at March 31 2016 and of the loss of the Companyfor the year ended on that date;

c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

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

e) Proper internal financial controls laid down by the Directors were followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

f) Proper systems to ensure compliance with the provisions of all applicable laws werein place and that such system are adequate and operating effectively.

6. Contracts and arrangements with related parties

All contracts/arrangements/transactions entered by the Company during the financialyear with related parties were in ordinary course of business and on arms length basis andthat the provisions of Section 188 of the Companies Act 2013 are not attracted. Thusdisclosure in Form AOC-2 is not required.

Your Directors draw attention of the members to note 30 to the financial statementwhich sets out related party disclosures.

7. Corporate social responsibility (CSR)

The provisions relating to Corporate Social Responsibility (CSR) under section 135 ofthe Companies Act 2013 are not applicable to the Company.

8. Risk management

The Risk Management Policy has been framed implemented and monitored. Major riskidentified by the businesses and functions are systematically monitored through mitigatingactions on continuing basis.

The development and implementation of Risk Management Policy has been covered inManagement Discussion & Analysis which forms part of this report.

9. Internal financial controls

The Company has in place adequate internal financial controls with reference to thefinancial statements. During the year such controls were tested and no reportable materialweakness in the design or operation was observed.

10. Directors and key managerial personnel

In accordance with the provisions of the Act and Articles of Association of the CompanyMr. Manoj V. Mehta retires by rotation and being eligible offers himself forre-appointment at the ensuing annual general meeting.

Pursuant to the provisions of Section 149 of the act Mr. Sudhir Sathe Mr. Vinay Jogand Ms. Ashwini Lad were appointed as Independent Directors at the Annual General Meetingof the Company held on 30th September 2014. Mr. Sudhir Sathe was re-appointed as anIndependent Director of the Company at the Annual General Meeting held on 15th September2015. They have submitted a declaration that each of them meets the criteria ofindependence as provided in Section 149(6) of the Companies Act 2013 and there has beenno change in the circumstances which may affect their status as Independent Directorduring the year.

Pursuant to the provisions of Section 203 of the act the key managerial personnel ofthe Company are Mr. R. K. Shah Vice Chairman & Managing Director Mr. Abhay R. ShahJoint Managing Director Mr. Manoj V. Mehta and Mr.

Ajay R. Shah Wholetime Directors and Mr. Parvej Mansuri Chief Financial Officer andMr. Sudhir R. Shah Company Secretary. There has been no change in the key managerialpersonnel during the year.

11. Meetings of the Board

Seven meetings of the Board of Directors were held during the year. For furtherdetails please refer to report on Corporate Governance attached to this Annual Report.

12. Board evaluation

The Company has devised a policy for performance in relation to Independent DirectorsBoard Committees which includes criteria for performance evaluation of the Non-Executiveand Executive Directors.

The detailed programs for familiarization of Independent Directors with the Companytheir roles rights and responsibilities in the Company nature of the industry in whichthe Company operates business model of the Company are being shared and discussed.

In a separate meeting of Independent Directors' performance of non-independentdirectors performance of the board as a whole and performance of the chairman wasevaluated taking into account the view of executive directors and non-executivedirectors. The same was discussed in the board meeting that followed the meeting of theindependent directors at which the performance of the Board its committees and individualdirectors was also discussed. Performance evaluation of independent directors was done bythe entire board excluding the independent director being evaluated.

13. Policy on directors' appointment and remuneration and other details

The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors Key Managerial Personnel and Senior Management of the Company.This policy also lays down criteria for selection and appointment of Board Members keepingin mind the relevant provisions of the Companies Act 2013 read with specific rules. Thedetails of this policy is explained in the Corporate Governance Report.

14. Internal financial control systems and adequacy

The details in respect of internal financial control systems and their adequacy areincluded in the management discussion and analysis which forms part of this report.

15. Audit Committee

The details pertaining to composition of audit committee are included in the corporategovernance report which forms part of this report.

16. Auditors and auditors' report

Statutory Auditors

M/s. Soman Uday & Co Chartered Accountants Statutory Auditors of the Company holdthe office till the conclusion of ensuing Annual General Meeting and are eligible forre-appointment. The Company has received a letter from M/s. Soman Uday & Co. to theeffect that their re-appointment if made would be within the prescribed limits underSection 141 (3)(g) of the Companies Act 2013 and they are not disqualified forre-appointment.

The Auditors' Report does not contain any qualification reservation or adverse remark.

Secretarial Auditor

The Board has appointed D.Kothari & Associates Practicing Company Secretary toconduct the Secretarial Audit. The Secretarial Audit report for the financial year endedMarch 31 2016 is annexed herewith and marked as Annexure II to this report. TheSecretarial Audit Report does not contain any qualification reservation or adverseremark.

17. Vigil mechanism

The Vigil Mechanism of the Company which also includes Whistle Blower Policy includesan ethics and compliance task force comprising senior executives of the Company. Protecteddisclosures can be made by Whistle Blower through an email or letter to the Chairman ofthe Audit Committee. No person has been denied access to the Audit Committee.

18. Particulars of loans given investments made Guarantees given and securitiesprovided

The Company has not given any loans or made any investments or provided guarantees u/s186 of the Companies Act 2013.

19. Conservation of energy technology absorption and foreign exchange earnings andoutgo.

The particulars related to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the act are provided inAnnexure III to this report.

20. Extract of annual return

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

21. Particulars of employees and related disclosures

Disclosures with respect to the remuneration of Directors KMPs and employees asrequired under Section 197 of the Companies Act 2013 read with Rule 5(1) of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in Annexure Vto this report.

The Company does not have any employee whose particulars are required to be disclosedin terms of the provisions of Section 197(12) of the act read with Rule 5(2) and 5(3) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 hencefurnishing of the same does not arise

22. General

Your Directors take that no disclosure or reporting 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 to differential rights as to dividend voting or otherwise.

3) Issue of shares (including sweat equity shares) to employees of the Company.

4) The Company does not have any subsidiaries hence the question of receivingremuneration or commission by the Managing Directors or Whole Time Directors of theCompany from the subsidiaries does not arise.

5) No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operation in the 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.

23. Acknowledgement

Your Directors would like to express the sincere appreciation for the assistance andco-operation received from Shareholders Bank of Maharashtra Government Authorities andother Business constituents during the year under review.

Your Directors would also like to appreciate the commitment displayed by the humanresources of the Company.

Place : Mumbai On behalf of the Board of Directors
Date : May 21 2016
R. K. Shah
Vice Chairman & Managing Director
(DIN 00011746)
Abhay R. Shah
Joint Managing Director
(DIN 00016497)

ANNEXURE II TO THE DIRECTORS REPORT

Form No. MR-3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31st MARCH 2016

[Pursuant to section 204(1) of the Companies Act 2013 and rule No.9 of the Companies(Appointment and

Remuneration of Managerial Personnel) Rules 2014]

To

The Members

Organic Coatings Limited

Unit No. 405 Atlanta Estate Premises Co Op Soc. Ltd. Vith Bhatti Near VirwaniIndustrial Estate Goregaon (East) Mumbai 400 063.

We have conducted the secretarial audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by Organic Coatings Limited(hereinafter called the "Company"). Secretarial Audit was conducted in a mannerthat provided us a reasonable basis for evaluating the corporate conducts/statutorycompliances and expressing our opinion thereon.

Based on our verification of the Company's books papers minute books forms andreturns filed and other records maintained by the company and also the informationprovided by the Company its officers agents and authorized representatives during theconduct of secretarial audit we hereby report that in our opinion the company hasduring the audit period covering the financial year ended on 31st March 2016 compliedwith the statutory provisions listed hereunder and also that the Company has properBoard-processes and compliance-mechanism in place to the extent in the manner and subjectto the reporting made hereinafter:

We have examined the books papers minute books forms and returns filed and otherrecords maintained by the Company for the financial year ended on 31st March 2016according to the provisions of:

(i) The Companies Act 2013 (the Act) and the rules made thereunder;

(ii) The Securities Contracts (Regulation) Act 1956 ('SCRA') and the rules madethereunder;

(iii) The Depositories Act 1996 and the Regulations and Bye-laws framed thereunder;

(iv) Foreign Exchange Management Act 1999 and the rules and regulations madethereunder to the extent of Foreign Direct Investment Overseas Direct Investment andExternal Commercial Borrowings;

(v) The following Regulations and Guidelines prescribed under the Securities andExchange Board of India Act 1992 ('SEBI Act'):-

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares andTakeovers) Regulations 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading)Regulations 2015; We have also examined compliance with the applicable clauses of thefollowing: (i) Secretarial Standards issued by The Institute of Company Secretaries ofIndia.

(ii) The Listing Agreement entered into by the Company with BSE Limited read with SEBI(LODR) Regulations 2015.

To the best of our understanding we are of the view that during the period underreview the Company has complied with the provisions of the Acts Rules RegulationsGuidelines Standards etc. mentioned above.

We further report that

having regard to the compliance system prevailing in the Company and on examination ofthe relevant documents and records in pursuance thereof on test-check basis the Companyhas complied with the following laws applicable specifically to the Company:

1. Industries (Development and Regulation) Act 1951

2. The Factories Act 1948

3. Water (Prevention and Control of Pollution) Act 1974

4. Water (Prevention and Control of Pollution) Cess Act 1977

5. Indian Boilers Act 1923;

6. Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013;

7. Information Technology Act 2000; and

8. Standards of Weights and Measures Act 1976.

We further report that

The Board of Directors of the Company is duly constituted with proper balance ofExecutive Directors Non-Executive Directors and Independent Directors.

Adequate notice is given to all the Directors to schedule the Board Meetings agendaand detailed notes on agenda are sent at least seven days in advance and a system existsfor seeking and obtaining further information and clarifications on the agenda itemsbefore the meeting and for meaningful participation at the meeting.

Majority decisions are carried through while the dissenting members' views if any arecaptured and recorded as part of the minutes.

We further report that

a. the Company has complied with the requirements under the Equity Listing Agreementsentered into with Bombay Stock Exchange Ltd. Mumbai and SEBI (LODR) Regulations 2015.

b. the Company has complied with the provisions of the Securities and Exchange Board ofIndia (Substantial Acquisition of Shares and Takeovers) Regulations 2011 including theprovisions with regard to disclosures and maintenance of records required under the saidRegulations;

c. the Company has complied with the provisions of the Securities and Exchange Board ofIndia (Prohibition of Insider Trading) Regulations 2015 including the provisions withregard to disclosures and maintenance of records required under the said Regulations;

We further report that:

There are adequate systems and processes in the Company commensurate with the size andoperations of the Company to monitor and ensure compliance with applicable laws rulesregulations and guidelines.

This report is to be read with our letter of even date which is annexed as Annexure andforms integral part of this report.

For D.Kothari And Associates

Company Secretaries

Dhanraj Kothari

Proprietor

FCS No. : 4930 CP No. : 4675

Place : Mumbai

Date : 21st May 2016

ANNEXURE

To

The Members

Organic Coatings Limited

Unit No. 405 Atlanta Estate Premises Co Op Soc. Ltd. Vith Bhatti Near VirwaniIndustrial Estate Goregaon (East) Mumbai 400 063.

Our report of even date is to be read along with this letter.

1. Maintenance of secretarial record is the responsibility of the management of thecompany. Our responsibility is to express an opinion on these secretarial records based onour audit.

2. We have followed the audit practices and processes as were appropriate to obtainreasonable assurance about the correctness of the contents of the Secretarial records. Theverification was done on test basis to ensure that correct facts are reflected insecretarial records. We believe that the processes and practices we followed provide areasonable basis for our opinion.

3. We have not verified the correctness and appropriateness of financial records andBooks of Accounts of the company.

4. Where ever required we have obtained the Management representation about thecompliance of laws rules and regulations and happening of events etc.

5. The compliance of the provisions of Corporate and other applicable laws rulesregulations standards is the responsibility of management. Our examination was limited tothe verification of procedures on test basis.

6. The Secretarial Audit report is neither an assurance as to the future viability ofthe company nor of the efficacy or effectiveness with which the management has conductedthe affairs of the company.

For D.Kothari And Associates

Company Secretaries

Dhanraj Kothari Proprietor

FCS No. : 4930 CP No. : 4675

Place : Mumbai

Date : 21st May 2016

ANNEXURE III TO THE DIRECTORS REPORT

Particulars of energy conservation technology absorption and foreign exchange earningsand outgo required under Companies (Accounts) Rules 2014

A. Conservation of energy

The company's operations do not involve substantial consumption of energy in comparisonto the cost of production. Wherever possible energy conservation measures have beenimplemented.

B. Technology absorption

The Company has neither purchased any technology domestically nor imported anytechnology. Hence the question of furnishing the information regarding technologyabsorption does not arise.

(i) The revenue expenditure incurred on Research and Development is Rs. 18866/-.

C. Foreign Exchange earnings and Outgo

The company has earned Rs. 65.74 Lacs in Foreign Exchange & used Rs. 329.87 Lacs ofForeign Exchange.

ANNEXURE V

INFORMATION PURSUANT TO SECTION 197(12) OF THE COMPANIES ACT 2013 READ WITH RULE 5(1)OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES 2014

1. Ratio of the remuneration of each Director/KMP to the median remuneration of all theEmployees of the company for the financial year.

Median remuneration of all the employees of the Company for the Financial Year 2015-16 Rs. 162900
The percentage increase in the median remuneration of employees in the Financial Year 7.95%
The number of permanent employees on the rolls of Company as on 31st March 2016 63

 

Name of Director Ratio of remuneration to median remuneration of all employees % increase in remuneration in the Financial Year 2015-16
Non-Executive Directors
Mr. Sudhir Sathe 245.55 NA
Mr. Vinay Jog 245.55 NA
Ms. Ashwini Lad 233.27 NA
Executive Directors
Mr. R. K. Shah 1146.39 6.52
Mr. Abhay R. Shah 1051.48 6.42
Mr. Ajay R. Shah 632.32 6.66
Mr. Manoj V. Mehta 632.32 6.66
Key Managerial Personnel
Mr. Pravej G. Mansuri 665.65 7.11
Mr. Sudhir Shah 239.38 3.17

Notes:

1. The ratio of remuneration to median remuneration is based on remuneration paidduring the period 1st April 2015 to 31st March 2016.

2. Relationship between average increase in remuneration and companyperformance:

The average increase in remuneration during Financial Year 2015-16 was 10.33% ascompared with previous financial year. Net revenues of the Company during the financialyear of Rs. 40.69 Crores were at par to that of the previous year at Rs. 45.57 Crores. Thetotal employee cost for the financial year ended 31st March 2016 was Rs. 2.02 Croreagainst Rs. 2.35 Crores for the financial year ended 31st March 2015. The total employeecost as a percentage of net revenues was 4.96% (last year 5.15%). The performance of theCompany was under pressure due to the challenges it faced during the year. These areexplained in detail in the operations and performance section of this report.

Average increase in remuneration is guided by factors like inflation normal salaryrevisions external competitiveness and talent retention.

Whilst the Company has a strong focus on cost employee cost being one of the key areasfor cost monitoring and control the results of any structural initiatives needs to bemeasured over a long-term horizon and cannot be strictly compared with annual performanceindicators.

Besides employee costs other significant internal and external factors impactingperformance of the Company are explained in detail in the Management Discussion &Analysis Report.

3. Comparison of the remuneration of the KMP against the performance of theCompany:

Aggregate remuneration of KMP in Financial Year 2015-16 (Rs.) 8553842
Revenue (Rs.) 406939511
Remuneration of KMPs (as % of revenue) 2.10%
Profit/(Loss) before Tax (PBT) (Rs.) (12118854)
Remuneration of KMPs (as % of PBT) (70.58%)

4. Variations in the market capitalization of the Company price earnings ratioas at the closing date of the current financial year and previous financial year andpercentage increase over decrease in the market quotations of the shares of the Company incomparison to the rate at which the Company came out with the last public offer:

Description Rs. in Crores
1 Market Cap variation
Mcap at 31st March 2016 7.94
Mcap at 31st March 2015 7.30
Variation in Mcap in FY 2016 (%) 8.77%
2 Price-to-Earnings Ratio
PE as at 31st March 2016 (Mkt Price/EPS) (1.57)
- PE as at 31st March 2015 (Mkt Price/EPS) (1.46)
- Variation in PE in FY 2016 (%) (7.53%)
3 % Increase/Decrease from last Public Offer
FPO price per share (1995) Rs. 30
Market price as at 31st March 2016 Rs. 10.35 per share
% decrease from last FPO Rs. 19.65 per share

5. Average percentage increase already made in the salaries of employees otherthan the managerial personnel in the last financial year and its comparison with thepercentage increase in the managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in the managerial remuneration:

Average percentage increase in salary of the Company's employees was 10.33%. The totalmanagerial remuneration for the financial year 2015-16 was Rs. 8553842 as against Rs.9715011 during the previous year.

The increase in managerial remuneration was due to re-appointments of Vice Chairman& Managing Director Joint Managing Director and two Whole time Directors w.e.f. 1stOctober 2014 on the new terms and conditions approved by the shareholders and otheremployees increments are based on the recommendation of respective heads of the Company.

6. Comparison of the each remuneration of the KMP against the performance of theCompany:

KEY MANAGERIAL PERSONNEL
Particulars R. K. Shah (VC&MD) Abhay R. Shah (Jt.MD) Ajay R. Shah (WD) Manoj Mehta (WD) Parvej Mansuri (CFO) Sudhir Shah (CS)
Remuneration in FY 15-16 (Rs.) 2306130 2099814 1296676 1311085 1150655 389482
Revenue (Rs.)

406939511

Remuneration as % of Revenue 0.57 0.52 0.32 0.32 0.28 0.10
Profit/(Loss) Before Tax (PBT)

(12118854)

Remuneration as % of PBT 19.03 17.33 10.70 10.82 9.49 3.21

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

There is no variable component in the remuneration of Vice Chairman & ManagingDirector Joint Managing Director and two Whole time Directors and hence not applicable.

Remuneration to NEDs involve sitting fees for attending meetings of theBoard/Committees based on the attendance and contribution towards governance practices anddischarging fiduciary duties.

8. The ratio of the remuneration of the highest paid director to that of theemployees who are not directors but receive remuneration in excess of the highest paiddirector during the year:

Not applicable since no employee of the Company receives remuneration in excess of thehighest paid director i.e. Vice Chairman & MD.

9. Remuneration is as per the remuneration policy of the Company

It is hereby affirmed that the remuneration paid is as per the policy for remunerationof Directors Key PersonnelManager and other employees.