Your Directors present the Twenty-Eighth Annual Report on the business and operationsof the Company together with the Financial Statements for the year ended 31st March 2015.
1. FINANCIAL HIGHLIGHTS
The financial performance of the Company for the financial year ended 31st March 2015is summarized below: -
(Rs. in Lacs)
|Particulars ||Financial Year ||Financial Year |
| ||2014-15 ||2013-14 |
|Gross Income ||12209.81 ||12389.14 |
|Profit/(Loss) before Interest and Depreciation ||(62.23) ||181.93 |
|Less: Interest ||318.83 ||314.95 |
|Profit/(Loss) before Depreciation ||(381.06) ||(133.02) |
|Less: Depreciation ||58.75 ||79.39 |
|Profit/(Loss) for the year ||(439.81) ||(212.41) |
|Less : Taxes / (Benefits) ||- ||- |
|Net Profit/(Loss) for the year after Tax ||(439.81) ||(212.41) |
Your Company's Gross income has decreased by 179.33 lacs to 12209.81 lacs as againstthe Gross income of 12389.14 lacs in the corresponding previous year. The Company hasposted a loss of 62.23 lacs before Interest and Depreciation as compared to a profit of181.93 lacs in the corresponding previous year. The Company incurred Net Loss of 439.81Lacs during the year as against a loss of 212.41 Lacs in the corresponding previous year.The reason for the loss is mainly the increase in raw material cost and poor realisationof the finished Product Ethyl Acetate. The Company is looking out for avenues to obtainthe raw material at cheaper rates and explore new products with a view to reduce thedependence on one product.
Your Directors do not recommend any Dividend for the year.
3. FIXED DEPOSITS
Your Company has not accepted any Public Deposits under Chapter V of Companies Act2013.
Mr. S. Mohan retires by rotation at the ensuing Annual General Meeting and beingeligible offer himself for re-appointment. The Board of Directors recommends hisre-appointment. Shri Rajendra V. Shah and Dr. S. B. Chandalia resigned as Directors duringthe year. The Board has placed on record its appreciation for the contributions made byShri Rajendra V. Shah and Dr. S. B. Chandalia during their respective tenures on theBoard.
Shri Devendra J. Shrimanker and Shri Shyam C. Balsekar continue to be Non- ExecutiveIndependent Directors. They were appointed for a term of five consecutive years and shallnot be liable to retire by rotation. Their appointment was considered by the shareholdersfor a term upto five consecutive years at the previous Annual General Meeting held on 13thAugust 2014. Declaration of independence as per section 149(7) was received from the saiddirectors.
Further as per section 149(1) read along with rule 3 of the Companies (Appointment andQualification of Directors) Rules 2014 including any statutory modification (includingany statutory modification(s) or re-enactment(s) thereof for the time being in force) theCompany is required to appoint a Woman Director on the board of the Company. Ms. AzizaKhatri has been appointed as Additional Director w.e.f 13th February 2015 to hold officeup to the date of forthcoming Annual General Meeting. Being eligible Ms. Khatri offeredherself to be appointed as the Independent Director of your Company.
The details of training and familiarization programmes and Annual Board Evaluationprocess for Directors have been provided under the Corporate Governance Report.
The policy on Director's appointment and remuneration including criteria fordetermining qualifications positive attributes independence of Director and alsoremuneration for Key Managerial Personnel and other employees forms part of CorporateGovernance Report of this Annual Report.
Ms. Aziza Khatri Non- Executive Independent Director in accordance with above saidprovisions is required to be appointed for a term of five consecutive years and shall notbe liable to retire by rotation. Her appointment be considered by the shareholders for aterm upto five consecutive years.
The Company has received consent from the director to be appointed as independentdirector for a consecutive term of five years. Declaration of independence as per section149(7) is also received from Ms. Khatri. Notice under Section 160 of the Companies Act2013 have been received from Member proposing her candidatures as an Independent Directorof the Company.
Your directors recommend appointment of Ms. Aziza Khatri as Independent directors ofthe Company.
5. Particulars of Loans Guarantees or Investments Under Section 186
The Company has not made any loan given any guarantee or made any investment as perSection 186 of the Companies Act 2013.
6. Extract of Annual Return
The extract of the Annual Return in the prescribed Form MGT 9 is annexed.
7. Details of Directors or Key Managerial Personnel Appointed / Resigned During TheYear
The following table shows the Directors and Key Managerial Personnel appointed /resigned during the year.
|Name ||Designation ||Appointment / reappointment/resigned ||Effective from |
|Shri Rajendra V. Shah ||Non- Executive Director ||Resigned ||29.05.2014 |
|Ms. Swarna Gunware ||Company Secretary ||Appointment ||29.05.2014 |
|Ms. Aziza Khatri ||Additional Director ||Appointment ||13.02.2015 |
|Dr. Sampatraj B. Chandalia ||Non-Executive Director ||Resigned ||13.02.2015 |
|Shri Sunil Y. Raghav ||Chief Financial Officer ||Appointment ||13.02.2015 |
8. Material changes & commitments between end of financial year and this report.
There have been no material changes & commitments between end of financial year andthis report.
9. Number of Meetings
During the year four Board Meetings were convened and held the details of which aregiven in the Corporate Governance Report.
10. Prevention of Insider 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 persons of the Companyas per SEBI (Prohibition of Insider Trading) Regulations 2015.
11. Significant & Material Orders Passed By Regulator Or Courts Or TribunalsImpacting Going Concern Status And Companies Operations In Future
There have been no significant & material orders passed by regulator / courts /tribunals impacting going concern status and companies operations in future.
M/s. Desai Saksena & Associates Chartered Accountants Mumbai have been appointedas Statutory Auditors of the Company at previous Annual General Meeting held on 13thAugust 2014 for a term of four consecutive years from the financial year 2014-15 to thefinancial year 2017-2018.However according to section 139 of the Companies Act 2013 readwith Rule 3 of the Companies (Audit and Auditors) rules 2014 requires the Company toratify the auditors appointment every year at every Annual General Meeting. The Companyseeks the same at the ensuing Annual General Meeting.
The Company has received a written consent to such ratification certificate thatratification if made shall be in accordance with the conditions as prescribed and thatthey satisfy the criteria as provided in section 141 of the Companies Act 2013.
13. COST RECORDS
M/s. B.J.D. Nanabhoy & Co. as Cost Auditors Cost Accountants carried out the costaudit for applicable business during the year. The Board of Directors has appointed M/s.B.J.D. Nanabhoy & Co. Cost Accountants for the financial year 2015-16.
The Company has received a written consent from M/s. B.J.D. Nanabhoy & Co. Costaccountants to such appointment certificate that appointment if made shall be inaccordance with the conditions as prescribed and that they satisfy the criteria asprovided in section 141 of the Companies Act 2013. For the year 2014-15 the Cost AuditReport will be filed in due course before the due date.
14. SECRETARIAL AUDITOR
Pursuant to section 204 of the Companies Act 2013 read with rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) rules 2014 the Company appointedM/s KS and Associates (Membership No. 5732) Company Secretaries a firm of Companysecretary in practice to undertake the Secretarial Audit of the Company.
During the year Secretarial Audit was carried out for the financial year 2014-15. Thedetailed report on the Secretarial Audit are appended as an Annexure to this Report.
Your Company's assets continue to be adequately insured against the risk of fire riotand earthquake among other things. In addition to the above adequate coverage has beentaken to cover the public liability and product liability claims.
16. FOREIGN EXCHANGE MANAGEMENT
The Company's exposure to foreign exchange risk comprises the risk of foreign currencyversus the local currency. As the Company's Export Sales are more than its Imports of RawMaterial the foreign exchange risk is naturally hedged. However the Company takesforward contract for export or import on selective basis.
17. Corporate Social Responsibility
According to section 135 of the Companies Act 2013 read with rules of Companies(Corporate Social Responsibility Policy) rules 2014 the Company is not required to frameCorporate Social Responsibility Committee and Corporate Social responsibility Policy.
18. Risk Management
Pursuant to Clause 49 of the listing Agreement the Company has formed Risk ManagementPolicy u/s 134(3)(n) of Companies Act 2013 r/w clause 49 (vi) of listing agreement. Thecopy of Risk Management Policy is uploaded in the website of the Company www.pentokey.com.The Company has also constituted a Risk Management Committee. The details of Committee andits terms of reference are set out in the Corporate Governance Report forming part of theBoards Report.
19. Vigil Mechanisim / Whistle Blowing Policy
As per Clause 49 (II) (F) of the Listing Agreement the Board has established a VigilMechanism for directors and employees to report concerns about unethical behaviour actualor suspected fraud and violation of the company's code of conduct or ethics policy.
This mechanism also provide for adequate safeguards against victimization ofdirector(s) /employee(s) who avail of the mechanism and also provides for direct access tothe Chairman of the Audit Committee in exceptional cases.
The copy of Whistle Blower Policy is uploaded on the website of the Companywww.pentokey.com
20. INDUSTRIAL RELATIONS
The Company maintains harmonious and cordial relations with its workers and staffwhich enabled it to achieve this performance level on all fronts.
21. DIRECTORS RESPONSIBILITY STATEMENT
The Directors confirm that:
in the preparation of the annual financial statements for the year ended 31stMarch 2015 the applicable accounting standards have been followed along with properexplanation relating to material departures;
they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe loss of the Company for that period;
the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the company and for preventing and detecting fraud and other irregularities;
the directors had prepared the annual accounts on a Going Concern Basis; and
the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively and
the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
22. CORPORATE GOVERNANCE
Your Company believes in transparency and has always maintained a very high level ofcorporate governance.
Your Company is in compliance with the governance requirements provided under the newlaw. In line with the requirements of new law your Company has constituted new BoardCommittees. Your Company has in place all the statutory Committees required under the law.Details of Board Committees along with their terms of reference composition and meetingsof the Board and Board Committees held during the year are provided in the CorporateGovernance Report.
During the year your Company has adopted new policies in line with new governancerequirements. These policies are available on the website of the Company.
The extract of Annual Return in Form MGT 9 as required under Section 92(3) and Rule 12of the Companies (Management and Administration) Rules 2014 is appended as an Annexure tothis Report.
A separate report on Corporate Governance is provided together with a Certificate fromthe Statutory Auditors of the Company regarding compliance of conditions of CorporateGovernance as stipulated under Clause 49 of the Equity Listing Agreement with the StockExchange(s). A Certificate of the Whole-time Director and CFO of the Company in terms ofsub-clause IX of Clause 49 of Equity Listing Agreement inter alia confirming thecorrectness of the financial statements and cash flow statements adequacy of the internalcontrol measures and reporting of matters to the Audit Committee is also annexed.
23. Related Party Transactions
In line with the requirements of the Companies Act 2013 and Equity Listing Agreementyour Company has formulated a Policy on Related Party Transactions which is also availableon Company's website. The Policy intends to ensure that proper reporting approval anddisclosure processes are in place for all transactions between the Company and RelatedParties.
This Policy specifically deals with the review and approval of Material Related PartyTransactions keeping in mind the potential or actual conflicts of interest that may arisebecause of entering into these transactions. All Related Party Transactions are placedbefore the Audit Committee for review and approval. Prior omnibus approval is obtained forRelated Party Transactions on a quarterly basis for transactions which are of repetitivenature and / or entered in the Ordinary Course of Business and are at Arm's Length. AllRelated Party Transactions are subjected to independent review by a reputed accountingfirm to establish compliance with the requirements of Related Party Transactions under theCompanies Act 2013 and Equity Listing Agreement.
All Related Party Transactions entered during the year were in Ordinary Course of theBusiness and on Arm's Length basis and forms part to the Notes to Accounts in Note No. 31.No Material Related Party Transactions i.e. transactions exceeding ten percent of theannual consolidated turnover as per the last audited financial statements were enteredduring the year by your Company. Accordingly the disclosure of Related Party Transactionsas required under Section 134(3) (h) of the Companies Act 2013 in Form AOC 2 is notapplicable.
24. Prevention of Sexual Harassment at Workplace
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 ('Act') and Rules made thereunder your Company hasconstituted Internal Complaints Committees (ICC). There has been no compliant received onSexual Harassment during the year under review.
25. Conservation of Energy & Technology Absorption And Foreign Exchange EarningsAnd Outgo
Information pursuant to Section 134 the Companies Act 2014 read with Companies(Accounts) rules 2014 forms part of this report.
26. MANAGEMENT DISCUSSION AND ANALYSIS
The year witnessed a marked slowdown in global growth. Emerging markets werecharacterised by a sharp fall in growth rates especially in China. Europe and Japancontinued to be under pressure all through the year while US showed tepid signs ofimprovement.
During the year under review prices of raw material namely Acetic Acid & Alcoholwere volatile. The price fluctuation in Acetic Acid was further aggravated due to foreignexchange fluctuations. The increase in the cost of raw material was not fully absorbed inthe price of our finished product namely Ethyl Acetate due to slowdown in demand in theuser industry in domestic & international market and also because of surplusproduction capacity of Ethyl Acetate within India. With consistent quality and widercustomer base across the user industries your company has been able to maintainproduction level inspite of the industry slowdown and other various challenges posed inthe market.
Opportunities and Threats
The expanded capacities coupled with consistent production quality sustained andaggressive marketing would help the Company to increase the exports in the next few years.Your Company is focused to increase the geographic reach of the products and expects toshow substantially higher growth.
The flexibility in the plant to either "make" or "buy"intermediates helps in optimization of resources. Hence the focus will be to ensure thatthe present advantage and flexibility in usage of feedstock perpetuates in our long-termvision.
With a view to reduce our dependence on one product namely Ethyl Acetate we areexploring possibilities of producing other chemical derivatives using Acetaldehyde asfeedstock as well as entering into new product.
Since the availability and price of Ethanol which is by-product of Sugar largelydepends upon the performance of Sugar Industry any fluctuation in the agro-climaticconditions would affect the availability and price of Ethanol. The increased demand by OilMarketing Companies (OMCs) will further tighten the supply and pricing of Ethanol.
Segment wise and Product wise performance
The Company operates only in one Business segment i.e. Chemicals. During the year underreview the production of intermediate product namely Acetic Acid was not competitive dueto the market prices. Your Company therefore purchased the Acetic Acid from market insteadof producing the same from Ethanol or Acetaldehyde. As a result of this production ofAcetaldehyde which is an intermediate product for Acetic Acid was also low. Acetaldehydewas produced only to the extent of demand from customers. Your Company could sourceEthanol from various distilleries at market prices due to improved production of Sugar andEthanol within the State of Maharashtra.
Your Company maintained its production capacity to 24000 TPA. Ethyl Acetate productionwas marginally lower at 18640 MT for 2014-15 as against 22008 MT in FY 2013-14 due toadverse market scenario as well as Ethyl Acetate plant could not run for one & halfmonth (Oct 14 & half of Nov 14) due to non availability of SDS at reasonable price.The Company has sustained the production equivalent to last year even in sluggish marketseconomic slowdown and political uncertainties.
Risks and Concerns
In view of the Government of India's mandatory policy for Ethanol Blending Programmeprice of Ethanol which is an important feedstock for the chemicals manufactured by theCompany has increased sharply. Rising input prices amidst inflationary market conditioncoupled with the weakening of Rupee against US Dollar has pushed up the feedstock prices.
Internal Control System
Your Company has adequate internal control system including suitable procedurescommensurate with its size and the nature of the business. The internal control systemprovides for all documented policies guidelines authorization and approval procedures.Internal Audit is being carried out throughout the year in areas such as IncomeExpenditure Financial Accounting and Statutory Compliances. The primary objective of suchaudit is to test the adequacy and effectiveness of all internal controls laid down by theManagement and to suggest improvements.
The employees of the Company including officers and workers contributed greatly to theimproved performance of the Company. Your company expects same commitment and contributionfrom the employees during the years to come to enable it to achieve the targeted growth.
Disclosures with respect to the remuneration of Directors and employees as requiredunder Section 197 of Companies Act 2013 and Rule 5 (1) Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 has been appended as Annexure to thisReport.
Details of employee remuneration as required under provisions of Section 197 of theCompanies Act 2013 and Rule 5(2) & 5(3) of Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are available at the Registered Office of the Companyduring from 10 a.m. to 1 p.m. on working days except Saturdays Sundays and other publicholidays upto the date of Annual General Meeting (AGM).
Certain statement in the management discussion and analysis may be forward lookingwithin the meaning of applicable securities laws and regulations and actual results maydiffer materially from those expressed or implied. Factors that would make differences toCompany's operations include competition price realization changes in governmentpolicies and regulations tax regimes economic development and other incidental factors.
Your Directors wish to place on record their sincere appreciation to the devotedemployees at all levels for their hard work dedication and commitment. The enthusiasm andunstinting efforts of the employees have enabled the Company to remain at the forefront ofthe industry.
Your Directors would like to express their sincere appreciation for assistance andco-operation received from the vendors and stakeholders Banks Central and StateGovernment authorities Customers and other business associates who have extended theirvaluable sustained support and encouragement during the year under review. It will be theCompany's endeavour to build and nurture the strong links with its stakeholders.
|For and on behalf of the Board of Directors || |
|For Pentokey Organy (India) Limited || |
|S. Mohan ||Devendra J. Shrimanker |
|Whole-time Director ||Director |
Place : Mumbai
Date : 19th May 2015