Your Directors present the Thirtieth Annual Report on the business and operations ofthe Company together with the Financial Statements for the year ended 31st March 2017.
1. Financial Highlights
The financial performance of the Company for the financial year ended 31st March 2017is summarised below: -
(? in Lacs)
|Particulars ||Financial Year 2016-2017 ||Financial Year 2015-2016 |
|Income from Operations ||105.31 ||8561.18 |
|Exceptional Item - Profit on Sale of Property Plant and Equipment ||1449.45 ||7.74 |
|Profit/(Loss) before Interest and Depreciation ||1296.48 ||(319.15) |
|Less: Interest ||219.35 ||348.31 |
|Profit/(Loss) before Depreciation ||1077.13 ||(667.46) |
|Less: Depreciation ||63.11 ||62.43 |
|Profit/(Loss) for the year ||1014.02 ||(729.89) |
|Less : Current Tax Expense including Deferred Tax ||53.00 ||163.85 |
|Net Profit/(Loss) for the year after Tax ||961.02 ||(893.74) |
Your Company's Income from Operations has been decreased by ' 8455.87 Lacs to ' 105.31Lacs as against the Income from Operations of ' 8561.18 Lacs in the correspondingprevious year. The Company has posted a profit of ' 1296.48 Lacs before Interest andDepreciation as compared to a loss of ' 319.15 Lacs in the corresponding previous year.The Company earned Net profit of ' 961.02 Lacs during the year as against a loss of '893.74 Lacs in the corresponding previous year. The reason for the profit is mainly due toprofit on Sale of Part Assets located at Lote Parshuram Tal. Khed Dist. Ratnagiri.
Several initiatives such as launching of new products substantial improvements inquality and service cost reduction etc. were taken in the past. However the performanceof the Unit did not improve. With a view to focus and improve the efficiency of businessand to reduce the overall debt burden the Company's Board of Directors at its meetingheld on Monday 8th August 2016 after evaluating the feasibility of various optionsrecommended to Shareholders' for their approval via Postal Ballot the assignment of itslease hold land and sell / dispose of its part machinery including utilities in themanufacturing unit situated at D1/1MIDC Lote Parshuram Tal. Khed Dist. RatnagiriMaharashtra on "as is where is" and "as it is" basis to any person(s)and/or entity(ies).
The Agreements for sale / Assignment of the Leasehold Land Factory Building and partof Plant and Machinery were executed on 31st March 2017 with Gharda Chemicals Limited.
The Company has undertaken trading activities in accordance with the object clause ofMemorandum of Association and obtained a separate registration for different premisesbeing used as Sales office.
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.
4. Board of Directors
Shri 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 Devendra J. Shrimanker Shri Shyam C. Balsekar and Ms. Prajakta Shidhore continueto be Non-Executive Independent Directors. They were appointed for a term of fiveconsecutive years and shall not be liable to retire by rotation. Their appointment wasconsidered by the shareholders for a term upto five consecutive years at the AnnualGeneral Meeting. Declaration of independency as per Section 149 (7) of the Act wasreceived from the said directors.
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.
5. Remuneration to Directors
The disclosure on the details of remuneration to director and other Key ManagerialPersonnel pursuant to Section 197 read with Rule 5(1) and Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of thereport.
6. 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.
7. Extract of Annual Return
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.
8. 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/ |
|Effective from |
|Mr. S Mohan ||Whole-time Director changed to |
|Re-designation ||08.08.2016 |
|Ms. Prajakta M. Shidhore ||Independent NonExecutive Director ||Appointment ||30.05.2016 |
|Mr. Balachandran Nair M.N. ||Chief Executive Officer ||Appointment ||01.02.2017 |
9. 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.
10. Number of Meetings
During the year four Board Meetings were convened and held the details of which aregiven in the Corporate Governance Report. Details of the meetings and the attendancerecord of the Directors are in the Corporate Governance section of the Annual Report.
11. 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.
12. 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.
13. Statutory Auditors
M/s. Desai Saksena & Associates Chartered Accountants (Firm's Registration Number:102358W) Mumbai have been appointed as Statutory Auditors of the Company at an AnnualGeneral Meeting held on 13th August 2014 for a term of four consecutive years from thefinancial year 2014-15 to the financial year 2017-2018. However according to section 139of the Companies Act 2013 read with Rule 3 of the Companies (Audit and Auditors) rules2014 requires the Company to ratify the auditors appointment every year at every AnnualGeneral Meeting. The Company seeks 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 satisfies the criteria as provided in section 141 of the Companies Act 2013. TheAudit Report for the financial year ended 31st March 2017 is attached herewith. The AuditReport does not contain any adverse remark.
14. Cost Records
M/s. B.J.D. Nanabhoy & Co. Cost Accountants were appointed for the financial year2016-17 to carry out a cost audit. However the Company had shut down its manufacturingoperations on 8th February 2016 and since then no operations were carried out at theCompany's manufacturing facility. In view of the same the Company requested for exemptionfrom Cost Audit and filing of Cost Audit report to the Cost Audit Branch Ministry ofCorporate Affairs. The Appointment has been cancelled.
15. 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 appointedMr. A.M. Bhat Practicing Company Secretary (Membership No. 1560) to undertake theSecretarial Audit Report of the Company.
During the year Secretarial Audit has been carried out for the financial year 2016-17.The Secretarial Audit Report for the financial year ended 31st March 2017 is attachedherewith. The Secretarial Audit Report does not contain any qualification reservation oradverse remark.
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.
17. Foreign Exchange Management
There were no foreign exchange transactions taken place in the Company during the yearunder review except product registration expenses of ' 9.47 Lacs.
18. 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.
19. Risk Management
The Board has formed a risk management policy in compliance with the provisions of theCompanies Act 2013. The copy of Risk Management Policy is uploaded in the website of theCompany www.pentokey.com. It has constituted a Risk Management Committee. The details ofCommittee and its terms of reference are set out in the Corporate Governance Reportforming part of the Board's Report. Elements of risks to the Company are given in theManagement Discussion & Analysis section of the Annual Report under the headingRisks & Concerns'.
20. Vigil Mechanisim / Whistle Blowing Policy
Your Company has adopted a Vigil Mechanism for directors and employees to reportconcerns about unethical behaviour actual or suspected fraud and violation of thecompany's code of conduct or ethics policy.
This mechanism also provides for adequate safeguards against victimization ofdirector(s)/employee(s) who avail of the mechanism and also provide 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 Company www.pentokey.com .
21. Industrial Relationships
The Company maintains harmonious and cordial relations with its staff.
22. Directors Responsibility Statement
The Board has laid down Internal Financial Controls within the meaning of theexplanation to Section 134(5)(e) ("IFC") of the Act. The Board believes theCompany has sound IFC commensurate with the nature and size of its business. Business ishowever dynamic. IFC are not static and evolve over time as the business technology andenvironment changes in response to competition industry practices legislationregulation and current economic conditions.
Pursuant to the provisions contained in Section 134(5) of the Companies Act 2013 yourDirectors confirm that:
i n the preparation of the annual financial statements for the year ended 31stMarch 2017 the applicable accounting standards have been followed along with properexplanation relating to material departures;
the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit 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.
The shares of your Company are listed at the BSE Limited and the Ahmedabad StockExchange (ASE). The applicable annual listing fees have been paid to BSE Limited beforether due date. The Company has initiated the process to delist its shares from ASE.
24. Corporate Governance
Your Company believes in transparency and has always maintained a very high level ofcorporate governance. The paid up Equity Share Capital and Net Worth as per last auditedBalance Sheet as at 31st March 2016 of our company is ' 627.26 Lacs and ' (421.09) Lacsrespectively. In view of the same and pursuant to clause 15 (2) (a) of SEBI (LODR)Regulations 2015 the compliance with the Corporate Governance provisions as specified inRegulations 17 to 27 and clauses (b) to (i) of sub-regulation (2) of Regulation 46 andpara C D and E of Schedule V of SEBI (LODR) Regulations. 2015 shall not apply to ourcompany.
However as a matter of good Corporate Governance practice a detailed report on theCorporate Governance system and practices of the Company forming part of this report isgiven as a separate section of the Annual report.
The Compliance certificate from the Statutory Auditors regarding compliance ofconditions of Corporate Governance as stipulated in under part E of Schedule V of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is enclosed herewith.
Your Company is in compliance with the governance requirements provided under the newlaw. 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.
25. Related Party Transactions
In line with the requirements of the Companies Act 2013 and Listing Regulations yourCompany has formulated a Policy on Related Party Transactions which is also available onCompany'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 on a quarterly basis for transactionswhich are of repetitive nature and / or entered in the Ordinary Course of Business and areat Arm's Length. All Related Party Transactions are subjected to independent review by areputed accounting firm to establish compliance with the requirements of Related PartyTransactions under the Companies Act 2013 and Listing Regulations.
Information on transactions with related parties pursuant to section 134(3)(h) of theAct read with rule 8(2) of the Companies (Accounts) Rules 2014 are given in Form AOC-2and the same forms part of this report.
26. Subsidiaries and Associates
The Board does not have any Subsidiaries and Associates therefore details under FormAOC 1 is not applicable.
27. 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 yourCompany has constituted Internal Complaints Committee (ICC). There has been no complaintreceived on Sexual Harassment during the year under review.
28. 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 is given in Annexure -I which forms part of this report.
29. Management Discussions and Analysis
Overall performance of the business of the Company was affected due to volatile pricesof raw material namely Acetic Acid & Alcohol. The price fluctuation in Acetic Acid wasfurther aggravated due to foreign exchange fluctuations. The increase in the cost of rawmaterial was not fully absorbed in the price of finished product namely Ethyl Acetate dueto slowdown in demand in the user industry in domestic & international market and alsobecause of surplus production capacity of Ethyl Acetate within India. It was difficult forthe company to maintain production level due to industry slowdown and other variouschallenges posed in the market.
Based on the Technical Economic Viability (TEV) report on the feasibility of theoperations and with a view to focus and improve the efficiency of business and to reducethe overall debt burden the Management has decided to close the operations of the plantlocated at D1/1 MIDC Lote Parshuram Tal. Khed Dist. Ratnagiri Maharashtra. After theapproval of Shareholders' via postal ballot the Company approved the assignment of itslease hold land and sell / dispose of its machinery including utilities in themanufacturing unit.
Opportunities and Threats
Prices of raw material namely Acetic Acid & Alcohol were volatile. With a view toreduce dependence on one product namely Ethyl Acetate the Company is exploringpossibilities in trading of chemicals and has executed Leave & License Agreement toopen sales office. License from Central Excise for trading of various chemicals locallyand for import of various chemicals has been received.
Segment wise and Product wise performance
As the manufacturing unit is closed there was no segment wise or product wiseperformance.
Risks and Concerns
In today's challenging and competitive environment strategies for mitigating inherentrisks in accomplishing the growth plans of the Company are imperative. The main risksinter alia include strategic risk operational risk financial risk and compliances &legal risk.
Rising input prices are the major risk of the Company. Since the Company has stoppedthe production it has to develop from the start.
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 contributed greatly to the Company.
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.
Your Directors would like to express their sincere appreciation for assistance and co-operation received from the vendors and stakeholders Banks Central and State Governmentauthorities Customers and other business associates who have extended their valuablesustained support and encouragement during the year under review. It will be the Company'sendeavour 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
DIN: 03184356 DIN: 00385083
Date: 5th June 2017