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Sangam Health Care Products Ltd.

BSE: 531625 Sector: Health care
NSE: N.A. ISIN Code: INE431E01011
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Sangam Health Care Products Ltd. (SANGAMHEALTH) - Director Report

Company director report

Dear Shareholders

We have pleasure in presenting the 21st Annual Report on the business andoperations of Company and Financial Results for the year ended 31st March 2015.

1. FINANCIAL RESULTS

As per the requirements Section 134 of the Companies Act 2013 and Rule 8(5) (i) ofCompanies (Accounts) Rules 2014 the summarized Financial Results of the Company aregiven hereunder:

(Rs. in lakhs)

Particulars 2014-2015 2013-14
Total Income 2992 3098
Increase/(Decrease) in stocks (445.87) 114.61
Total Expenditure before Finance cost & Depreciation 2116.88 2294.28
Finance cost 545.82 551.86
Depreciation 151.23 172.25
Profit/(Loss) before Taxation 178.53 (34.61)
Provision for tax 0 0
Profit/(Loss) after Taxation 178.53 (34.61)

2. OPERATIONS AND BUSINESS OUTLOOK:

During the year under review the Company recorded a total income of Rs. 2992 lakhs anda net profit of Rs. 178.53 lakhs against income of Rs. 3098 lakhs and a net loss ofRs.34.61 lakhs in the previous year. Company is adopting a very cautious approach towardsits business in view of the risk involved in this business and the probable of NonPerforming Assets (NPAs) are taken seriously to increase the level of profit.

As our company is maintaining the high quality medical products still in the marketthe demand for our medical products is high. It is observed that now a day the Healthproviders have realized the importance of delivery of quality products; they are demandingthe best quality medical disposables in their hospitals.

Our Company has been continuously working on quality up gradation of the productsimplementation of innovative techniques for product development cost reduction and toincrease its productivity. In this way we are able to create a good impression of ourproducts in the market.

3. OPEN OFFER :

During the year Addepalli Bala Gopal Devara Konda Venkata Subramanya SharmaGhanakota Ramana and Ghanakota Padma (PAC’s) announced open offer to the shareholdersof the Company pursuant to SEBI (Substantial Acquisition of Shares and Takeovers)Regulations 2011 for acquisition of 3863782 equity shares of M/s Sangam Health CareProducts Limited representing 26% of the total equity share of the Company at a price ofRs. 0.50 of face value of Rs.10/- of fully paid-up equity shares

SEBI vide reference no.CFD/DCR2/OW/33792/2014 dated 28.11.2014 approved/given commentsfor the open offer for acquisition of 3863782 equity shares of M/s Sangam Health CareProducts Limited by Addepalli Bala Gopal along with PAC’s at a price of Rs.0.50/- pershare. Only one shareholder holding 1000 equity shares of Rs.10/ fully paid up wastendered his shares in the open offer.

On completion of Open Offer Addepalli Bala Gopal along with PAC’s acquired9755240 Equity Shares of Rs.10 each constituting 64.65% of post issue paid up capital ofthe Company. Accordingly Promoters holds 64.65% Equity Share and Voting Capital of theCompany as on date.

4. PRODUCT DEVELOPMENT AND COST REDUCTION:

To reduce the cost of production continuously we are undertaking developmentalactivities on product performance and improvement reduction in consumption of BasicPolymers replacing existing Polymers with latest generation & alternate polymersetc. All these activities together resulted in reduced cost of production.

To reduce the consumption of energy and its high cost alternative sources of energyare being contemplated and because of this our company is operating on a regular basiswithout any interruption.

At present all these activities are on ongoing basis and when completed shall bring inreduction in cost of production and also performance development of the main productrange. We hope that in the coming years we can produce quality products with less cost.

In view of the Research and Developmental activities carried out by the R&D Team ofyour company a number of new infusion sets have been successfully launched. All the newproducts listed earlier have been commercialized and are being marketed on regular basis.The sales volumes of each of all these new products are increasing month after month.

5. REVOCATION OF SUSPENSION OF COMPANY’S SCRIP

Revocation of suspension of the Company’s Shares in BSE Limited is in progress.

6. NEW PRODUCTS

Based on Market feedback and research your company has embarked on development of newMedical disposables which are currently not produced & marketed by the Company. Someof the products like urine collections burrette yankur suction set launched and same areundergoing trails in development stage.

7. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS:

As per the requirements Section 134 (3) (l) of the Companies Act2013we want todeclare that there are no significant material changes and commitments affectingfinancial position of the company between 31st March 2015 and the date of Board’sReport.

8. CHANGE IN THE NATURE OF BUSINESS:

As per the requirements Rule 8 (5) (ii) of Companies (Accounts) Rules 2014 we want todeclare that there is no significant change in the nature of business of the companyduring the last financial year.

9. SHARE CAPITAL AND CLASSIFICATION OF COMPANY:

The authorized capital of the Company as on 31st March 2015 was Rs.150000000/- divided into 15000000 equity shares of Rs. 10/- each.

The Subscribed Issued and Paid-up capital of the Company as on 31st March2015 was Rs. 148607000/- divided into 14860700 equity shares of Rs. 10/- each.

10. DIVIDEND

Our directors express their inability to recommend any dividend for the financial year2014-2015.

11. FIXED DEPOSITS:

Your Company has not accepted/invited any deposits from the public for the year underreview as per Section 73 of the Companies Act 2013 and the rules made there under.

12. DIRECTORS AND KEY MANAGERIAL PERSONNEL

A. RETIREMENT BY ROTATION

Pursuant to provisions of the Companies Act 2013 Mr. Basawaraj Nagabusappa Sajjan(DIN: 05209651) Director will retire at the ensuing Annual General Meeting and beingeligible offers himself for reappointment. The Board recommends his re-appointment.

B. APPOINTMENT

i) Mr. Venkata Subramanya Sharma Devarakonda (DIN: 07067129) was appointed as anAdditional Director by the Board of Directors on the Board Meeting held on 25th March2015 who shall hold office till the date of this Annual General Meeting. A memberproposed his candidature for appointment at the ensuing Annual General Meeting.

In terms of the Companies Act 2013 Mr. Venkata Subramanya Sharma Devarakonda (DIN:07067129) is proposed to be appointed as Ordinary Director liable to retire byrotation with effect from the date of this Meeting.

Brief resume of the Directors retiring by rotation and Director nature of theirexpertise in specific functional areas and names of companies in which they holddirectorships as stipulated under clause 49 of the listing agreement with the StockExchange are given as Annexure to the Notice.

ii) Mrs. Ramana Ganakota (DIN: 07067685) was appointed as an Additional Directorby the Board of Directors in the Board Meeting held on 25th March 2015 who shall holdoffice till the date of this Annual General Meeting. A member proposed her candidature forappointment at the ensuing Annual General Meeting.

In terms of the Companies Act 2013 Mrs. Ramana Ganakota (DIN: 07067685) isproposed to be appointed as Ordinary Director liable to retire by rotation with effectfrom the date of this Meeting.

Brief resume of the Directors retiring by rotation and Director nature of theirexpertise in specific functional areas and names of companies in which they holddirectorships as stipulated under clause 49 of the listing agreement with the StockExchange are given as Annexure to the Notice.

iii) Mrs. Padma Ghanakota (DIN: 07078176) was appointed as an AdditionalDirector by the Board of Directors in the Board Meeting held on 25th March 2015 whoshall hold office till the date of this Annual General Meeting. A member proposed hercandidature for appointment at the ensuing Annual General Meeting.

In terms of the Companies Act 2013 Mrs. Padma Ghanakota (DIN: 07078176) isproposed to be appointed as Ordinary Director liable to retire by rotation with effectfrom the date of this Meeting.

Brief resume of the Directors retiring by rotation and Director nature of theirexpertise in specific functional areas and names of companies in which they holddirectorships as stipulated under clause 49 of the listing agreement with the StockExchange are given as Annexure to the Notice.

iv) Mr. Bala Gopal Addepalli (DIN: 01712903) was appointed as an AdditionalDirector by the Board of Directors in the Board Meeting held on 9th February 2015 whoshall hold office till the date of this Annual General Meeting. A member proposed hiscandidature for appointment at the ensuing Annual General Meeting.

In terms of the Companies Act 2013 Mr. Bala Gopal Addepalli (DIN: 01712903) isproposed to be appointed as Ordinary Director liable to retire by rotation with effectfrom the date of this Meeting.

Brief resume of the Directors retiring by rotation and Director nature of theirexpertise in specific functional areas and names of companies in which they holddirectorships as stipulated under clause 49 of the listing agreement with the StockExchange are given as Annexure to the Notice.

Mr. Bala Gopal Addepalli was appointed as Managing Director (MD) w.e.f. 9th February2015.

Mr. V. Satish Kumar was appointed as Chief Financial Officer (CFO) w.e.f. 9th February2015.

C. CESSATION

During the year under review Mr. L. S. Patil filed DIR -11 with Register of companiesHyderabad (ROC) for the resignation from the directorship of the Company w.e.f 28thFebruary 2015. However the same was not accepted by the board of directors.

D. EVALUATION OF THE BOARD’S PERFORMANCE

During the year the Board adopted a formal performance evaluation policy forevaluating its performance and as well as that of its Committees and individual Directorsincluding the Chairman of the Board.

The exercise was carried out through a structured evaluation process covering variousaspects of the Board’s functioning such as composition of the Board & committeesexperience & competencies performance of specific duties & obligations etc.Separate exercise was carried out to evaluate the performance of individual Directorsincluding the Board Chairman who were evaluated on parameters such as attendancecontribution at the meetings and otherwise independent judgment etc.

The evaluation of the Independent Directors and that of the Chairman was carried out bythe entire Board excluding the Director being evaluated and the evaluation ofNon-Independent Directors was carried out by the Independent Directors. A separate meetingof Independent Directors was also held during the year wherein the performance ofChairman Board and Executive Directors was evaluated.

The Directors were satisfied with the evaluation results which reflected the overallengagement of the Board and its Committees with the Company.

E. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management’s Discussion and Analysis Report for the year under review asstipulated under Clause 49 of the Listing Agreement is presented in a separate sectionforming part of the Annual Report. (Annexure I).

F. 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 is attached to this report as Annexure II.

G. DECLARATION BY INDEPENDENT DIRECTORS

As per the requirements Section 134 (3) (d) of the Companies Act 2013 we want toinform you that the Company has received necessary declaration from each IndependentDirector of the Company under Section 149(7) of the Companies Act 2013 that theIndependent Directors of the Company meet with the criteria of their Independence laiddown in Section 149(6).

H. CONSTITUTION & RECONSTITUTION OF COMMITTEES:

As per the requirements Section 177(8) of the Companies Act 2013 and revised Clause-49 of the listing Agreement we want to inform you that the company has constituted Auditcommittee Nomination & Remuneration Committee. Stakeholders Relationship Committeew.e.f. February 9 2015

13. AUDITORS & AUDITORS’ REPORT

A. STATUTORY AUDITORS

The shareholders at their 20th Annual General Meeting (AGM) held on 30thSeptember 2014 approved the re-appointment of M/s. Jayant & Sadashiv CharteredAccountants Hyderabad (Firm Registration No : 001297S) as statutory auditors of theCompany to hold office from the conclusion of the 20th AGM up to theconclusion of the 23rd AGM.

In terms of first proviso of Section 139 of the Companies Act 2013 the appointment ofthe auditors is subject to ratification by the shareholders at every subsequent AGM.Accordingly the statutory auditors M/s. Jayant & Sadashiv Chartered Accountantshave confirmed their eligibility under Section 141 of the Companies Act 2013 Rule 4 ofthe Companies (Audit and Auditors) Rules 2014 and Clause 41(I)(h) of the ListingAgreement.

The Audit Committee and the Board of Directors recommend the appointment of M/s. Jayant& Sadashiv Chartered Accountants as statutory auditors of the Com- pany from theconclusion of the 20th AGM till the conclusion of the 23rd AGMsubject to rectification by the shareholders.. The Statutory Auditors’ Report doesnot contain any reservation qualification or adverse remark.

The Statutory Audit report for the financial year 2014-15 is annexed herewith as AnnexureIII to this Report

B. SECRETARIAL AUDITOR

During the year the Company has appointed R&A Associates Hyderabad as SecretarialAuditor. The Secretarial Audit report for the financial year 2014-15 is annexed herewithas Annexure IV to this Report.

The Secretarial Audit Report contains following qualification and reply by management.

Scretarial Auditor Observation Reply by management
1. Delay in appointment of Managing Director and CFO The Board is reforming the existing internal control systems of the
2. Non compliance with provision of Section 180(1)(c) Company in order to ensure foremost compliance of the
3. Delay in submission of information to BSE Limited. applicable rules laws and regulations.
4. Connectivity with Central Depository Services Limited (CDSL) only As on March 31 2015 Companies shareholders are 649 and trading of share were suspended on 10th September 2001 due to this company not obtained connectivity with NSDL
5. Non appointmen t of Independent Director Management is in the process of indentifying appropriate candidates to be appointed as Independent Director & Company Secretary

C. COST AUDITOR

During the year under review the Company was not required to maintain cost records andget them audited by Cost Auditor.

14. TRANSFERS TO RESERVES

The Company has not transferred any amount to the reserves in the financial year

15. 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) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made 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 profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) 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

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

16. INDUSTRIAL RELATIONS

The Management and Labour relations were very cordial and harmonious and continued toremain cordial at all levels during the year under review.

17. CORPORATE GOVERNANCE

A separate report on Corporate Governance is enclosed as a part of this Annual Report.A certificate from the Auditors of the Company regarding compliance with CorporateGovernance norms stipulated under Clause 49 of the Listing Agreement is annexed to theReport on Corporate Governance. Annexure V

18. DECLARATION FOR CODE OF CONDUCT:

Pursuant to Clause 49 of the Listing Agreement the declaration signed by the ManagingDirector affirming compliance of the Code of Conduct by the Directors and SeniorManagement personnel of the Company for the financial year 2014-2015 is annexed and formspart of the Corporate Governance Report Annexure VI

19. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

The information required pursuant to Section 197(12) of Companies Act 2013 read withRule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 in respect of the employees of the Company will be provided upon request. In termsof Section 136 of the Act the Report and Accounts are being sent to the members andothers entitled thereto excluding the information on employees’ particulars which isavailable for inspection by the members at the Registered Office of the Company duringbusiness hours on working days of the Company up to the date of the ensuing Annual GeneralMeeting. If any member is interested in obtaining a copy thereof such member may write toCompany in this regard.

No employee was in receipt of remuneration in excess of the limits prescribed underRule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 and hence the disclosure as required under Rules 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is not required.

20. RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onarm’s length basis and were in the ordinary course of business. There are 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.

The Policy on materiality of related party transactions as approved by the Board.

Your Directors draw attention of the members to Notes no.24 to the financial statementwhich sets out related party disclosures.

21. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186:

The Company has not made any loan given guarantee provided security or madeinvestments pursuant to the provisions of Section 186 of Companies Act 2013.

22. DISCLOSURES:

A. EXTRACT OF ANNUAL RETURN

Extract of Annual Return of the Company is annexed herewith as Annexure VII tothis Report.

B. COMPOSITION OF AUDIT COMMITTEE

The Audit Committee comprises Mr. Khushwant Singh (Chairman) Mr. Pradyut Waghray andMr. Bala Gopal Addepalli as members.

All the recommendations made by the Audit Committee were accepted by the Board.

C. VIGIL MECHANISM

The Company has implemented a vigil mechanism policy to deal with instance of fraud andmismanagement if any. It provides for the directors and employees to report genuineconcerns and provides adequate safeguards against victimization of persons who use suchmechanism.

There were no complaints received during the year 2014-15.

D. NUMBER OF BOARD MEETINGS

The Board of Directors of the Company met 7(Seven) times during the year. For furtherdetails please refer report on Corporate Governance.

E. LISTING

The equity share of the Company is listed with Bombay Stock Exchange (BSE). Company hasnot paid listing fees to BSE Limited.

23. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO:

The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo is annexed herewith as Annexure VIII

24. GENERAL

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

a. The Company has no subsidiaries joint ventures or associate companies.

b. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company’s operations in future.

25. SAFETY AND ENVIRONMENTAL PROTECTION

The Production process of our Company is totally non-hazardous. There are no effluentsin production. Very limited water is used in the manufacturing operations of the companyeven then a major portion of the process waste is recycled. The little wastage left ifany does not pose any harm to the environment. However your Company as a matter ofpolicy has been adhering on highest priority to the safety of its employees as well as theenvironment and carrying out periodic audits and reviews to ensure total protection.

26. POLICY ON SEXUAL HARASSMENT:

The Company has adopted policy on Prevention of Sexual Harassment of Employees atworkplace in accordance with The Sexual harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

During the year under review the Company has not received any complaints pertaining tosexual harassment.

27. CORPORATE SOCIAL RESPONSIBILITY:

The company was not required to constitute a CSR Committee as the company has not metany of the thresholds mentioned in Section 135 of the Companies Act 2013 during thefinancial year under review. Hence reporting about policy on Corporate Socialresponsibility and the initiatives taken are not applicable to the company.

28. ACKNOWLEDGEMENTS:

The Directors thank the Company’s Bankers namely State Bank of Hyderabad StateBank of Mysore and officials of concerned Government Departments for their co-operationand continued support to the Company.

The Board would also like to express their sincere appreciation and thanks to all theemployees and workers of the Company for their wholehearted co-operation in improving theworking of the Company.

The Directors also thank the Consignee Agents Distributors Stockists DealersSuppli- ers/Vendors and Technical Collaborators for the support and co-operation extendedby them in the growth of the Company.

Your directors express sincere gratitude to the shareholders for their continuedsupport

On behalf of the Board of Directors

For Sangam Health Care Products Ltd

(Bala Gopal Addepalli)

Chairman

Place: Secunderabad

Dated: 14th August 2015