To The Shareholders
Your Directors are pleased to present the 28th Annual Report and the Audited FinancialStatements for the financial year ended 31st March 2017.
| || ||(Rs. in Lakhs) |
| ||Current Year ||Previous Year |
|Financial Results ||2016-2017 ||2015-2016 |
|Net Sales & Other Income ||8032.97 ||7302.97 |
|Profit before Interest & Depreciation ||1093.42 ||1104.31 |
|Interest ||437.41 ||512.27 |
|Depreciation ||396.60 ||432.99 |
|Profit / (Loss) before tax ||259.33 ||159.05 |
|Less : Provision for Tax (Net) DTA / (DTL) ||(94.48) ||(86.71) |
|Profit / (Loss) After Tax ||164.85 ||72.34 |
|Balance bought forward from last year ||2687.40 ||2565.15 |
|Balance available for Appropriation ||Nil ||Nil |
|Appropriations : || || |
|Add : Income Tax Refund for AY 11-12 ||0.00 ||49.94 |
|Less : Short Provision etc. in FY 15-16 ||(6.35) ||00.00 |
|Corporate Dividend Tax ||Nil ||Nil |
|General Reserve ||Nil ||Nil |
|Balance Carried Forward ||2845.90 ||2687.40 |
|Balance profit carried forward to next year ||2845.90 ||2687.40 |
Operational Performance/ State of Company's Affairs
During the year under review total income of the Company was Rs. 8032.97 Lakhs ascompared to Rs. 7302.97 Lakhs during previous year registering an increase of 10%. Thecompany stopped manufacturing and marketing of one low-margin products. The Company postednet profit of Rs. 164.85 lakhs as against Rs. 72.34 lakhs in the previous year. Inaddition to operating level the company's performance improved substantially primarilyon account of reduction in prices of raw materials and overall improvement in plantproductivity and efficiencies.
A detailed overview has been provided under Management Discussion and Analysis Report.
During the year under review there was no change in the Share Capital Structure.
In view of inadequate profits Directors do not recommend any dividend.
During the year under the review entire net profit of Rs. 164.85 lakhs has beencarried forward to the next year as surplus.
During the year under review your Company neither accepted nor renewed any fixeddeposits falling within the ambit under provisions of Section 73 of the Companies Act2013 and The Companies (Acceptance of Deposits) Rules 2014.
HUMAN RESOURCE DEVELOPMENT (HRD) & INDUSTRIAL RELATIONS :
The Company continues to have cordial and harmonious relations with its employees. YourDirectors place on record their appreciation for the commitment dedication and hard workput in by the employees of the Company during testing times.
The Company is implementing revised HRD program for developing better labourrelationships. The company has adopted new policies to recruit develop and retain skilledmanpower. With an aim to expand product range and operations the Company has made severalnew appointments to its existing team in various departments.
QUALITY SAFETY & ENVIRONMENT :
The Company has appointed an experienced and accomplished professional to head theQuality Assurance function. Under his supervision the quality team is actively engaged inoverhauling quality systems and procedures to improve regulatory compliance. The companyhas also initiated efforts to register its products in regulated markets. The company istaking steps in the right direction to resume its supplies to regulated markets.
The company is working continuously to reduce waste generation and environmental load.In addition the company is engaging and training employees to continuously improveworking practices to meet zero accident level.
RESEARCH AND DEVELOPMENT (R&D) :
R&D investment was higher in FY 2016-17 in comparison to the previous financialyear. However as the company's financial performance is improving the company isincreasing its R&D spends in the next financial year to develop new products andimprove processes of existing products.
LISTING OF SHARES :
Consequent upon de recognization by SEBI of Regional Stock Exchanges at PuneHyderabad and Ahmedabad where company's shares were listed trading in the equity sharesadmitted in "Permitted to Trade" category with BSE was discontinued w.e.f. 08thMarch 2017.
However the company has maintained its status as a Listed Company in view oflisting of its shares with Metropolitan Stock Exchange of India Limited (MSEI) w.e.f 10thOctober 2016. The Company is also planning to list its shares on BSE at an early date.
CORPORATE GOVERNANCE :
The Company has complied with the mandatory requirements of the code of CorporateGovernance as detailed in clause 17 to 27 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
Corporate Governance Report is enclosed as a part of the Annual Report along with thecertificate from the Statutory Auditors M/s. Ashok Madgundi & Co CharteredAccountants Solapur confirming compliance of the code of Corporate Governance asstipulated Para E of schedule V of the Securities and Exchange Board of India (Listingobligations and Disclosure requirements) Regulations 2015.
MANAGEMENT DISCUSSION AND ANALYSIS
Business of the Company and Future Outlook:
The company continues to be driven by focus on improving profitability. The company'sproduct portfolio rationalization and marketing focus on high margin products hasdelivered good results at the profitability level in the current financial year. Productportfolio rationalization had a good effect on sales the impact on operating margin andbottom line is improved in the current financial year compared to the previous year.
The company has also had successes in reducing cost through process and operationalimprovement. The company's measures to reduce operating costs under taken on an ongoingbasis in the current FY 2016- 17 have directly contributed to the bottom line. The companyis increasing its efforts to work on cost reduction and is seeing good progress in thisdirection.
With the improvement in the company's financial performance the company is expectingreduction in its cost of capital. Given no significant plans to raise additional debt thecompany shall be able to improve its profitability.
The company is actively pursuing three key avenues for not only boosting growth insales but also more importantly accelerating growth in profitability:
1. Volume Push: The addition of new customers over FY 2016-17 will enable the companyto achieve significant volume growth of key products going forward. Any incremental volumegrowth over FY 2016-17 will contribute directly to the bottom line thus taking thecompany in the direction of higher profitability.
2. Regulated Markets: The company is poised to apply to European Directorate forQuality of Medicines (EDQM) for Certificate of Suitability (COS) for its key products.Upon successful approval from EDQM the company shall be able to open up new markets likeEU and allied markets such as Turkey and some Middle Eastern countries. The access tothese markets will result in realization of higher margins due to premium pricing dynamicsof these markets.
3. New Products: The company is developing several new products to be launched throughinvestments in internal as well as external R&D. Although the product pipeline has thepotential to boost sales in the short to medium term they are more likely to provide arobust base for long term growth of the company.
Opportunities & Threats :
The Company registering its products in several countries (ROW Markets) directly andthrough our reputed customers. Within a year we able to get more business for exports
The Company may have threats of China imported products and also fluctuation in Foreignexchange (USD)
Internal Control Systems :
The Company has adequate internal control procedures commensurate with the size of thecompany and the nature of its business with regard to purchases of inventory fixed assetsand with regard to the sale of goods. However to improve these systems the company isplanning to implement a suitable ERP system.
Financial Performance :
The Financial results and performance for the year are elaborated above in this Report.
Cautionary Statement :
Certain statements estimates and expectations stated in this Management Discussion andAnalysis are based on the current perceptions data and information available with theCompany and may be 'forward - looking statements' within the meaning of applicablesecurities laws and regulations.
They reflect the company's current views of future events which are subject to risksand uncertainties Important factors such as change in the competition scenario in theCompany's areas of operations economic conditions affecting demand/supply and pricessituation in the domestic and international market changes in government regulations taxlaws and other incidental factors may cause actual results to be materially different. Thecompany assumes no responsibility to publicly amend modify or revise any forward lookingstatements on the basis of any subsequent development information or events.
Company's applications for waiver of excess remuneration paid to Mr. E. PurushothamManaging Director for the financial years from 2010-11 to 2013-14 are still pending withthe Central Government. The Company is hopeful of receiving approval of the governmentduring the financial year.
Mrs. E. Vaishnavi is retiring by rotation and being eligible offers herself forreappointment. You are requested to appoint her.
As required under the SEBI Regulations particulars of Directors seeking reappointmentat the ensuing
Annual General Meeting have been given under Corporate Governance Report.
None of the Directors are disqualified from being appointed as Directors as specifiedin Section 164 of the Companies Act 2013.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149 (6) of the Companies Act 2013.
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Key Managerial PersonnelSenior Management and their remuneration and evaluation criteria for performanceevaluation of Independent Directors. The Nomination and Remuneration Policy and evaluationcriteria of Independent Directors have been provided under Corporate Governance Report.
Board Evaluation :
Pursuant to applicable provisions of the Companies Act 2013 and the ListingRegulations 2015 Remuneration and Nomination Committee has formulated frameworkcontaining the criteria for performance evaluation of the Board of Directors includingIndependent Directors Key Managerial Personnel and Committees of the Board on the basisof which they have been evaluated.
The Independent Directors had met separately on 11th February 2017 without thepresence of Non- Independent Directors and the members of management and discussed theperformance evaluation of the Board Members.
Audit Committee :
Composition of Audit Committee and terms of reference are given in the CorporateGovernance Report.
Details in Respect of Adequacy of Internal Financial Controls with reference to theFinancial Statements:
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. To maintain its objectivity and independence the InternalAuditor reports to the Chairman of the Audit Committee of the Board.
Directors' Responsibility Statement :
Pursuant to the requirement under Section 134 (5) of the Companies Act 2013 (the"Act") with respect to Directors' Responsibility Statement it is herebyconfirmed that:
(a) in the preparation of the annual accounts for the financial year ended 31st March2017 the applicable accounting standards have been followed along with proper explanationrelating to material departures;
(b) the Directors have 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 ended31st March 2017 and of the profit and loss of the company for the year ended on thatdate;
(c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the Directors have prepared the annual accounts on a going concern basis; and
(e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively.
(f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
Meeting of Board and Committees of Directors
During the year 5 Board Meetings and 4 Audit Committee Meetings were convened and held.The details of the same along with other Committee's of Board are given in the CorporateGovernance Report. The intervening gap between the Meetings was within the periodprescribed under the Companies Act 2013.
Approval of Resolution through Postal Ballot:- Not Applicable
As per provisions of Section 139 (2) of the Companies Act 2013 maximum tenure of M/s.Ashok Madgundi & Co.; Chartered Accountants Solapur Statutory Auditors of thecompany is coming to an end at the ensuing Annual General Meeting. Therefore it isproposed to appoint N. R. Waghchaure & Associates Chartered Accountants Solapur asnew auditor in place of Ashok Madgundi & Co. The Audit Committee has recommendedappointment of N. R. Waghchaure & Associates who have given their consent anddeclaration that they are not disqualified to act as Auditors of the Company under theprovisions of the Act.
Members are requested to consider appointment of N. R. Waghchaure & Associates.Chartered Accountants Solapur as the Statutory Auditors of the Company from theconclusion of 28th Annual General Meeting till the conclusion of 33rd Annual GeneralMeeting.
The observations made in the Auditors' Report are self-explanatory and do not call forany further comments under Section134 (3) (f) of the Companies Act 2013.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. H. R. Thakur Practicing Company Secretary Mumbai to undertake theSecretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewithas "Annexure I". The findings of Secretarial Audit were satisfactory.
For Financial Year 2016-2017 the Company had re-appointed M/s. Shrinivas Diddi andAssociates Cost Accountants Solapur for conducting cost audit. Cost audit report hasbeen filed with MCA. Members are requested to confirm the appointment and remuneration ofthe Cost Auditor for the Financial Year 2017-18.
Particulars of Employees
The information required pursuant to Section 197 read with Rule 5 (1) of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is given below.
Disclosures required with respect to Section 197(12) of the Companies Act 2013:-
The ratio of the remuneration of each director to the median employee's remuneration(MRE) and such other details in terms of Section 197(12) read with Rule 5 (1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
a. The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
|Name of the Directors ||Ratio to median remuneration |
|Non- exective Directors || |
|Mrs. E. Vaishnavi ||Nil |
|Mr. J.H. Ranade ||Nil |
|Dr. K. Ramaswamy ||Nil |
|Mr. K. R. Dhole ||Nil |
|Exective Directors || |
|Mr. E. Purushotham ||49.50:1 |
|Mr. E. Swapnil ||21.22:1 |
*Sitting fees paid to Non Executive Directors not considered as remuneration.
b. The percentage increase in remuneration of each director chief executive officerchief financial officer company secretary in the financial year:
|Directors Chief Executive officer Chief Financial Officer & Company Secretary ||% Increase in remuneration in Financial Year |
|Mr. E. Purushotham ||- |
|Mr. E. Swapnil ||- |
c. The percentage increase in the median remuneration of employees in the financialyear: 17.39%
d. The number of permanent employees on the rolls of Company: 182
e. Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:
The average annual increase of employees other than managerial personnel was around7.96% . Increase in the managerial remuneration for the year was NIL.
f. Affirmation that the remuneration is as per the remuneration policy of the Company:The Company affirms remuneration is as per the remuneration policy of the Company.
The information required pursuant to Section 197 read with Rule 5 (2) and 5 (3) of TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is notapplicable as the Company had no employees who were in receipt of remuneration of not lessthan Rs. 10200000/- per annum if employed for full year or not less than Rs.850000/- per month during any part of the Financial Year .
Corporate Social Responsibility (CSR)
The Company has adopted CSR Policy upon recommendations of CSR Committee as perprovisions of the Act. In view of past losses Company was not required to spend on CSRduring the financial year 2016-2017.
The Annual Report on CSR activities forming part of this Board's report is annexedherewith as Annexure- II.
Highlights of the CSR Policy :
In the initial period Company will operate CSR Policy in the areas of educationhealthcare sanitation and hygiene. Arising from this the focus areas that have emergedare Education Health care Sustainable livelihood and espousing social causes projectsshall be identified and adopted as per the activities included and amended from time totime in Schedule VII of the Companies Act 2013.
Code of Ethics / Vigil Mechanism / Whistle Blower Policy
The Company has a vigil mechanism named Whistle Blower Policy to deal with instances offraud and mismanagement if any. The objective of the Policy is to explain and encouragethe directors and employees to raise any concern about the Company's operations andworking environment including possible breaches of Company's policies and standards orvalues or any laws within the country or elsewhere without fear of adverse managerialaction being taken against such employees.
Particulars of Loans Guarantees or Investments
Company did not give any loans guarantees and make any Investment covered under theprovisions of Section 186 of the Companies Act 2013.
Related Party Transactions :
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 during the financialyear with Promoters Directors Key Managerial Personnel or other designated persons whichmay have a potential conflict with the interest of the Company at large.
All Related Party Transactions are placed before the Audit Committee as also the Boardfor approval.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
As required by the Companies (Accounts) Rules 2014 the relevant informationpertaining to conservation of energy technology absorption foreign exchange earnings andoutgoings respectively is given in the Annexure III to this report.
Risk Management Policy
The Company is aware of the risks associated with the business. It regularly analysesand takes corrective actions for managing / mitigating the same. Your Company's Riskmanagement framework ensures compliance with the provisions of Regulation 21 of Securitiesand Exchange board of India (Listing obligations and disclosure requirements) Regulations2015.
A detailed Report on Corporate Governance is given as a part of Annual Report. TheCompany is in full compliance with the requirements and disclosures that have to be madein this regard. The Certificate of the compliance with Corporate Governance requirementsby the Company issued by the Statutory Auditors attached to the Report on CorporateGovernance.
Extract of the Annual Return
Pursuant to section 92 (3) of the Companies Act 2013 the extract of the annual returnin Form No. MGT 9 forms part of this Board's report and is enclosed as Annexure- IV.
No significant or material orders were passed by the regulators or courts which impactthe going concern status of the Company's operations in future.
The Board wishes to place on record its appreciation of sincere efforts put in by theemployees of the Company in helping it reach its current growth levels. Your Directorsplace on record their appreciation for the support and assistance received from theinvestors customers vendors bankers financial institutions business associatesregulatory and governmental authorities.
| ||For & on behalf of the Board |
|Place : Solapur ||(E. Purushotham) |
|Date : 11th May 2017 ||Chairman & Managing Director |