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Your Directors presents herewith the 84th Annual Report on the business &operations of the Company along with the Audited Statement of Accounts for the financialyear ended 31st March 2016.
FINANCIAL RESULTS AND APPROPRIATIONS
2. OPERATING PERFORMANCE
In facade of dynamic market conditions wherein the first half being quite subdued incomparison to other half which witnessed upward trend in sugar pricing your Company hasdelivered top line growth and performed ahead of underlying sugar season 2015-16prima-facie due to supply of good quality of sugarcane culminating into higher recoveriesand expedited sales. A detailed analysis of the Company's operations future expectationsand business environment has been given in the Management Discussion & Analysis Reportwhich is made an integral part of this Report and marked as Annexure "A".
3. FINANCIAL PERFORMANCE 2015-16
The Company had recorded Total Revenue of ' 116799.64 lacs (includingotherincome aggregating to ' 212.98 lacs) during the financial year ended 31stMarch 2016. The Revenue from Operations (Gross) of the Company for the year 2015-16 stoodat ' 121501.26 lacs. The Profit before Finance Costs Tax Depreciation andAmortisation for the year under review stood at ' 14142.04 lacs representing12.11% of the total revenue. The increase in PBIDT of the Company during the period underreview is mainly attributed to better sugar sales realisation.
There is no change in the nature of business of the Company. There were no significantor material orders passed by regulators courts or tribunals impacting the Company'soperation in future.
In view of continuing losses the Board does not propose to carry any amount toReserves.
There were no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year i.e. 31st March 2016 anddate of this report.
4. RESEARCH & DEVELOPMENT
During the year under review the Company has undertaken Research & Developmentinitiatives with an intention to improve the sugar recovery ratio and to educate the canegrowers to cultivate improved variety of sugarcane and to otherwise increase the sucrosecontents in their produce.
In view of the losses/accumulated losses the Board of Directors do not recommend anydividend for the year under review.
6. SHARE CAPITAL
During the year there were no changes in either the Equity Share capital of the Companyor the Preference Share Capital of the Company as the paid up Equity Share Capital as on31st March 2016 stood at ' 2604.43 lacs and whereas the paid up Preference ShareCapital of the Company stood at ' 5000.00 lacs. However in terms of authorisationprovided by the shareholders in their general meeting and subsequent to in - principleapproval of both the Stock Exchanges your Company had preferred an application forreduction of capital to the tune of ' 6400/- only before the Hon'ble High Court atAllahabad Lucknow Bench and the Hon'ble Court vide its order dated 28.05.2015 has allowedthe said capital reduction.
7. SCHEME OF ARRANGEMENT
The Board of Directors at its meeting held on March 13 2015 had consented to theComposite Scheme of Arrangement subject to approval of Shareholders Lenders CreditorsHon'ble High Court SEBI CCI and other regulatory authorities in order to rearrange itsbusiness activities to achieve the Business alignment as per market dynamics and variantcapital needs of each business as well as ability to recognise the true value of assetsin the books which have significantly appreciated over time and thereby improving thefinancial position and key ratios of the businesses. Both the Stock Exchange i.e. NSE andBSE upon confirmation from SEBI has issued their observation letters. The CCI has alsogiven their consent to the Scheme. The Company as required has taken steps for approval ofthe same by filing the Scheme before the Hon'ble High Court at Allahabad. The matter ispending.
8. CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreement read with Regulation 34 of the SEBI(LODR) Regulations 2015 with effect from 01.12.2015 the Management Discussion &Analysis Report the Report on Corporate Governance Declaration of Whole-time Director onCode of Conduct and Auditors' Certificate on compliance of conditions of CorporateGovernance form integral part of this Report and are annexed to this Report as Annexure"A" "B" "C" and "D" respectively.
The Board of Directors comprises of seven NonExecutive Directors having experience invaried fields and a Whole-time Director. Out of seven NonExecutive Directors five of themare Independent Directors and one being Nominee Director. Mr. Chandra Shekhar Nopany hadrelinquished the office of Managing Director w.e.f. 30.06.2015. The Board has filled upthe vacancy by appointing Mr. Chand Bihari Patodia as Whole-time Director of the Companyand which was duly assented to by the shareholders of the Company at their Annual GeneralMeeting held on 14.09.2015.
Mr. Chandra Shekhar Nopany will retire by rotation at the ensuing Annual GeneralMeeting and being eligible has offers himself for re-appointment as Director of theCompany. He is proposed to be re-appointed as Director and will be liable to retire byrotation.
The Independent Directors have confirmed and declared that they are not disqualified toact as an Independent Directors in compliance with the provisions of Section 149 of theCompanies Act 2013 read with SEBI (LODR) Regulations 2015 and the Board is also of theopinion that Independent Directors fulfil all the conditions specified in the CompaniesAct 2013 read with SEBI (LODR) Regulations 2015 to making them eligible to act asIndependent Director.
Other information on the Directors including required particulars of Directors retiringby rotation is provided in the Report of Corporate Governance annexed to this Report as Annexure"B".
10. KEY MANAGERIAL PERSONNEL
During the period under review Mr. Chandra Shekhar Nopany had relinquished his positionas Managing Director and in compliance with Section 203 of the Companies Act 2013 Mr.Chand Bihari Patodia has been appointed as Whole-time Director of the Company and as suchthe following three persons were designated as Key Managerial Personnel of the Companyviz:
a Mr. Chand Bihari Patodia Whole-time Director
b. Mr. Dilip Patodia President and Chief Financial Officer
c. Mr. Anand Sharma Company Secretary
All Directors Key Managerial Personnel and Senior Management of the Company haveconfirmed compliance with the Code of Conduct & Ethics applicable to Directors &employees of the Company and a declaration to the said effect by the Wholetime Director ismade part of Corporate Governance Report which forms part of this report. The Code isavailable on the Company's website at the weblinkhttp://birla-sugar.com/Assets/Oudh/Oudh-Sugar- Code-of-Conduct.pdf. All Directors haveconfirmed compliance with the provisions of Section 164 of the Companies Act 2013.
11. ANNUAL EVALUATION OF BOARD'S PERFORMANCE
I n pursuance of the provisions of the Companies Act 2013 and according to Regulationof 25(3) of the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 the Performance Evaluation Criteria has been laid downfor effective evaluation of performance of the Board of Directors the Committees thereofand individual Directors including the Chairman of the Board. Based on the criteria set bythe Nomination and Remuneration Committee the Board at its meeting critically adjudgedthe performance of the Independent Directors as well as has also carried out an annualperformance evaluation of its own performance the Directors individually as well as theevaluation of the working of its Committees. The manner in which the evaluation has beencarried out has been explained in the Corporate Governance Report. Again a meeting of theIndependent Directors is required to be held to evaluate the performance of theNon-Independent Directors. Accordingly a meeting of Independent Directors was heldwherein the performance of the Non-Independent Directors including the Chairman wasevaluated.
12. FAMILIARISATION PROGRAMME
Periodic presentations are made a the Board Meetings on business performance updates& business strategy of the Company.
13. AUDIT COMMITTEE
The Audit Committee was constituted on 25.08.2000 and the Committee now comprises ofMr. Anand Ashvin Dalal Mr. Nirad Kant Bagla Mr. Yashwant Kumar Daga Mr. Rohit KumarDhoot and Mr. Chand Bihari Patodia. The Company Secretary acts as the Secretary to theCommittee and the Chief Financial
Officer is a permanent invitee to the meetings. During the year there were no instanceswhere Board has not accepted the recommendation of Audit Committee.
The details of the terms of reference number and dates of meetings held attendance ofthe Directors and remuneration paid to them are separately provided in the CorporateGovernance Report.
14. STAKEHOLDERS' RELATIONSHIP COMMITTEE
The Investors Grievance Committee was constituted on 25.08.2000 and was renamed asStakeholders' Relationship Committee w.e.f. 13.05.2014 to comply with the requirements ofthe Companies Act 2013 and the Listing regulations. The Committee now comprises of Mr.Nirad Kant Bagla Mr. Yashwant Kumar Daga and Ms. Shashi Sharma. The Company Secretaryacts as the Secretary to the Committee. The details of the terms of reference number anddates of meetings held attendance of the Directors and remuneration paid to them areseparately provided in the Corporate Governance Report.
15. NOMINATION AND REMUNERATION COMMITTEE
The Remuneration Committee was constituted on 02.09.2002 and was renamed as Nominationand Remuneration Committee w.e.f. 13.05.2014 to comply with the requirements of theCompanies Act 2013 and the Listing regulations. The Committee now comprises of Mr. RohitKumar Dhoot Mr. Anand Dalal and Mr. Nirad Kant Bagla. The Company Secretary acts as theSecretary to the Committee. The details of the terms of reference number and dates ofmeetings held attendance of the Directors and remuneration paid to them are separatelyprovided in the Corporate Governance Report.
16. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Corporate Social Responsibility Committee was constituted on 13.05.2014 and theCommittee now comprises of Mr. Chandra Shekhar Nopany Mr. Chand Bihari Patodia and Mr.Yashwant Kumar Daga. The Company Secretary acts as the Secretary to the Committee. Thedetails of the terms of reference number and dates of meetings held attendance of theDirectors and remuneration paid to them are separately provided in the CorporateGovernance Report.
17. INTERNAL COMPLAINTS COMMITTEE
An Internal Complaints Committee was constituted by the Company in terms of SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. TheAct aims at protecting women's right to gender equality life and liberty at workplace toencourage women participation at work. The Committee meets all the criteria including itscomposition mentioned in the Act and relevant Rules. One complaint was received by theCommittee during the year under review and the same has been disposed off completely.
18. HUMAN RESOURCES
The Company continued to create a productive learning and caring environment byimplementing robust and comprehensive HR processes fair transparent performanceevaluation and taking new initiatives to further align its Human Resource policies to meetthe growing needs of its business.
19. REMUNERATION POLICY
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy as adopted by the Board of Directors is attached as Annexure"E" to this Report. The Committee has also framed criteria for performanceevaluation of every Director and accordingly has carried out the performance evaluation.
20. CORPORATE SOCIAL RESPONSIBILITY POLICY
The Company continues to spend to support local initiatives to improve infrastructureas well as support in other corporate social responsibilities. The disclosure requirementwith respect to CSR spends are not applicable to the Company in view of inadequateprofits/losses during the three immediately preceding financial years. The CSR Policy asapproved by the Board is available on Company's website at the weblink http://birla-sugar.com/Assets/Oudh/Oudh-Sugar-CSR-Policy.pdf.
A calendar of Meeting is prepared and circulated in advance to the Directors. The Boardevaluates all the decisions on a collective consensus basis amongst the Directors. Theintervening gap between the Meetings was within the period prescribed under the CompaniesAct 2013. During the financial year ended 31st March 2016 7 (seven) Meetings of theBoard of Directors of the Company were held. The details of the Board Meetings held duringthe F.Y. 2015-16 have been furnished in the Corporate Governance Report forming a part ofthis Annual Report.
The Independent Directors of the Company have had a separate meeting on 22nd March2016 to review the performance and evaluation of Non Independent Directors and Board as awhole Chairperson and assess the quality quantity and timeliness of flow of informationfrom the Company management to the Directors.
22. DIRECTORS' RESPONSIBILITY STATEMENT
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(3)(c) of the Companies Act 2013:
a. that in the preparation of the annual financial statements for the year ended March31 2016 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;
b. that such accounting policies as mentioned in Note 2.1 of the Notes to the FinancialStatements have been selected and applied consistently and judgement and estimates havebeen made that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at March 31 2016 and of the profit of the Company for theyear ended on that date;
c. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d. that the annual financial statements have been prepared on a going concern basis;
e. that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.
f. that systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.
23. AUDITORS AUDIT QUALIFICATIONS AND BOARD'S EXPLANATIONS
Messrs S R Batliboi & Co LLP Chartered Accountants hold office as Auditors of theCompany till the conclusion of ensuing Annual General Meeting and being eligible offeredthemselves for reappointment. According to the certificate submitted to the Company by thesaid firm of Auditors the said re-appointment if made by the Shareholders will be wellwithin the limits prescribed in Section 141 of the Companies Act 2013.
The Board on the recommendation of the Audit Committee proposed that Messrs S RBatliboi & Co LLP Chartered Accountants be re-appointed as the Statutory Auditors ofthe Company for a period beginning the conclusion of the ensuing Annual General Meeting ofthe Company and ending on the conclusion of the Annual General Meeting to be held nextthereafter.
The remarks/observations made by the Statutory Auditors in their report are selfexplanatory and does not require any further clarifications/ explanation. However theStatutory Auditors have commented regarding carrying Deferred Tax Asset (DTA) (net) of '12810.10 lacs (after reversal of ' 94.81 lacs during the year) up to March 312016. The Company has not recognised any further DTA during the current financial year asa matter of prudence. Further the Company has earned profits during the current yearconsequent to improved realisation and sugar yields. In view of above the management iscertain that the Company would be in a position to generate positive cash flows andprofitability and is certain that there would be sufficient taxable income in future toclaim the above tax credit.
Pursuant to Section 1 48 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the cost audit records maintained by the Companyin respect of its Sugar activity is required to be audited. Your Directors have on therecommendation of the Audit Committee appointed Messrs D Radhakrishnan &
Co Cost Accountants as the Cost Auditors to audit the cost accounts of the Companyfor the financial year 2016-17. As required under the Companies Act 2013 theremuneration payable to the cost auditor is required to be placed before the Members in ageneral meeting for their ratification.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hadappointed Messrs Vinod Kothari & Co. Practising Company Secretaries to undertake theSecretarial Audit of the Company for the financial year 2015-16. The Secretarial AuditReport is annexed herewith as "Annexure F" and which is self explanatory.
24. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
The Company has following wholly owned subsidiaries one step down subsidiary and onejoint venture company as per detail given below:
i. Hargaon Investment & Trading Company Limited
ii. Champaran Marketing Company Limited
iii. OSM Investment & Trading Company Limited
iv. Hargaon Properties Limited - step down subsidiary
v. Palash Securities Limited
vi. Allahabad Canning Limited
vii. Vaishali Sugar & Energy Limited
viii. Avadh Sugar & Energy Limited-A Joint Venture Company
The Annual Accounts of the subsidiary companies will be made available for inspectionby any shareholder at the Registered Office of the Company and would also be available onthe Company's website at the weblink www.birla-sugar.com. Furthermore a hard copy of thedetailed accounts of the subsidiaries would be furnished to any shareholder on demand atany point of time.
The Company has also formulated a policy for determining material subsidiaries in linewith the requirement of Listing Agreement. The said Policy is being disclosed on theCompany's website at the weblink http://www.birla-sugar.com/Assets/Oudh/Oudh_-_Policy_on_Determining_Material_ Subsidiaries.pdf.
25. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company prepared in accordance withrelevant Accounting Standards (AS) viz. AS 21 AS 23 and AS 27 issued by the Institute ofChartered Accountants of India form part of this Annual Report.
The salient features of the financial statement of its subsidiaries are also providedin a separate statement being "Annexure G" and made part of this Report.
26. PUBLIC DEPOSITS
The Company has not accepted any deposits from the public and as such there are nooutstanding fixed deposits in terms of Companies (Acceptance of Deposit Rules) 2014.
27. INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Investor Education and Protection Fund (Uploading ofInformation regarding unpaid and unclaimed amounts lying with Companies) Rules 2012 theCompany has uploaded the details of unpaid and unclaimed amounts lying with the Company ason the date of the last Annual General Meeting held on 14th September 2015 on the websiteof the Company www.birla-sugar.com as also on the website of the Ministry of CorporateAffairs www.mca.gov.in.
28. INTERNAL FINANCIAL CONTROLS
The Company has laid down internal financial control's through a combination of Entitylevel controls Process level controls and IT General controls inter-alia to ensureorderly and efficient conduct of business including adherence to the Company's policiesand procedures accuracy and completeness of accounting records and timely preparation andreporting of reliable financial statements / information safeguarding of assetsprevention and detection of frauds and errors. The evaluations of these internal financialcontrols were done through the internal audit process and were also reviewed by theStatutory Auditors. Based on the review of these reported evaluations the Directorsconfirm that for the preparation of financial accounts for the financial year ended March31 2016 the applicable Accounting Standards have been followed and the internalfinancial controls are generally found to be adequate and were operating effectively &that no significant deficiencies were noticed.
29. RISK MANAGEMENT
In line with the new regulatory requirements the Company has formally framed a RiskManagement Policy to identify and assess the key risk areas monitor and report thecompliance and effectiveness of the same. A Risk Management Committee has already been inplace to oversee the risk management process in the Company. The committee has reviewedthe major risks which effect the Company from both the external and the internalenvironment perspective. Appropriate actions have been initiated to either mitigatepartially mitigate transfer or accept the risk (if need be) and monitor the risks on aregular basis.
30. WHISTLE BLOWER / VIGIL MECHANISM
The Company has established a vigil mechanism and adopted whistle blower policypursuant to which whistle blowers can report concerns about unethical behaviour actual orsuspected fraud or violation of the Company's code of conduct or ethics policy. Themechanism provides adequate safeguards against victimisation of persons who use thismechanism. The brief detail about this mechanism may be accessed on the Company's websiteat the weblink http://birla-sugar.com/Assets/ Oudh/Oudh-Sugar-Whistle-Blower-Policy.pdf.
31. LOANS GUARANTEE AND INVESTMENTS
It is the Company's policy not to give any loans directly or indirectly to any person(other than to employees under contractual obligations) or to other body corporate orperson. In compliance with section 186 of the Companies Act 2013 loans to employees bearapplicable interest rates. During the year under review the Company has not made anyinvestment in securities of other body corporate. The details of Investments Loans andGuarantees covered under the provisions of Section 186 of the Companies Act 2013 aregiven in the notes to the Standalone Financial Statements.
32. RELATED PARTY CONTRACTS / ARRANGEMENTS
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There were nomaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large.
Accordingly no transaction are being reported in Form AOC-2 in terms of Section 134 ofthe Act read with Rule 8 of the Companies (Accounts) Rules 2014. However the Directorsdraw attention of the members to Note 33 to the standalone financial statement which setsout related party disclosures
All Related Party Transactions are placed before the Audit Committee as also the Boardfor approval. Prior omnibus approval of the Audit Committee is obtained for thetransactions which are of a foreseen and repetitive nature. The Company has developed aRelated Party Transactions Policy for purpose of identification and monitoring of suchtransactions.
33. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS &OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of The Companies (Accounts) Rules 2014 is annexed herewith as "AnnexureH".
34. PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is attached as a separate "Annexure I" and forms anintegral part of this Report.
35. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure J".
36. CEO/CFO CERTIFICATION
Mr. Chand Bihari Patodia the Whole-time Director and Mr. Dilip Patodia President(Finance) & Chief Financial Officer have submitted certificates to the Board ascontemplated under Reg 17(8) of the SEBI (LODR) Regulations 2015.
Your Directors take this opportunity of recording their appreciation of theshareholders financial institutions bankers suppliers and cane growers for extendingtheir support to the Company. Your Directors are also grateful to various ministries inthe Central Government and State Governments of Uttar Pradesh and Bihar the SugarDirectorate and the Sugar Development Fund for their continued support to the Company. TheDirectors also recognise the valuable contribution made by the employees at all levelstowards Company's progress.