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Southern Gas Ltd.

BSE: 509910 Sector: Industrials
NSE: N.A. ISIN Code: N.A.
BSE 05:30 | 01 Jan Southern Gas Ltd
NSE 05:30 | 01 Jan Southern Gas Ltd

Southern Gas Ltd. (SOUTHERNGAS) - Director Report

Company director report

Dear Members

Your Directors place before you the 53rd Annual Report of the Companytogether with statement of Accounts for the Financial year ended March 31 2017.

1. FINANCIAL HIGHLIGHTS

Rs. in Lakhs
Particulars 2016-2017 2015-2016
Income
Revenue from Operations 2937.02 2747.81
Other Income 38.60 31.16
Expenses 2728.37 2456.43
Profit Before Depreciation & Taxation 247.25 322.54
Less:
Depreciation 164.02 166.41
Profit Before Tax (PBT) 83.23 156.13
Less:
Provision for Taxation
Current tax 45.90 58.11
Deferred Tax (22.38) (4.64)
Profit after Tax (PAT) 59.71 102.66

2. OPERATIONS:

Revenue from operations for the year ended 31st March 2017 was Rs. 2937.02Lakhs compared to Rs.2747.81 lakhs for the year ended 31st March 2016. Duringthe year under review though theRevenue from operations increased the Profit before taxdecreased from Rs.156.13 to Rs. 83.23 due to the major reason that there was a suddenbreakdown of Company's manufacturing Plant at Cochin and the plant was shut down for threemonths and no manufacturing activity was carried out for that period. The Company incurredheavy expenditure on repairing of the plant to bring it back into operation. Furtherduring the Shutdown period the Company purchased material from outside suppliers at highercost and sold the same at market prices in order to retain the market share and not tolose the customers.

3. DIVIDEND AND TRANSFER TO GENERAL RESERVE:

Your Directors recommend a Dividend of 35 percent (Rs.35/- per equity share). [Previousyear 35 percent (Rs.35/- per equity share)].

The company proposes to transfer Rs 20 lakhs to the general reserve out of the amountavailable for appropriation.

4. SHARE CAPITAL

The paid-up Equity Share Capital as at March 31 2017 stood at Rs 2250000/- Duringthe year under review the Company has not issued any further shares.

5. DEPOSITS FROM PUBLIC:

The Company has not accepted any deposits from public in the past or during the year.

6. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

In accordance with the provisions of Section 152 of the Companies Act 2013 and theArticles of Association of the Company Mr.Gautam V. PaiKakode (DIN 02395512) retires byrotation at the forthcoming Annual General Meeting and being eligible offers himself forre-appointment.

The Board of Directors re-appointed Mr.Gautam V. PaiKakode (DIN 02395512) as ManagingDirector and Key Managerial Personnel of the Company for a further period of three yearseffective from February 1 2017 subject to the approval of the Shareholders at the ensuingAnnual General Meeting. A Special Resolution to this effect is included as part of theNotice convening the forthcoming Fifty Third Annual General Meeting for Shareholders'approval. Brief resume of the Managing Director proposed for re-appointment together withother relevant details form part of the Notice of the ensuing Annual General meeting.

During the year under review Mr Gautam V. PaiKakode Managing Director of the Companywas reappointed as a KMP. Also Mr.Shashikanth R. Devaramani and Mr.AniketKarmali wereappointed as Chief Financial Officer (KMP) and Company Secretary (KMP) of the Companyrespectively on February 10 2017 and March 27 2017.

7. MEETINGS OF THE BOARD OF DIRECTORS:

During the year under review five Board meetings were held i.e. on 26thMay 2016 5th August 2016 4th November 2016 28thJanuary 2017 and 10th February 2017.

8. INDEPENDENT DIRECTORS DECLARATION:

The Company has received declarations pursuant to Section 149(7) of the Companies Act2013 from all the Independent Directors of the Company confirming that they meet thecriteria of independence as prescribed under sub-section (6) of Section 149 of theCompanies Act 2013 in respect of their position as an "Independent Director" ofThe Southern Gas Limited.

9. INDEPENDENT DIRECTORS MEETING:

During the year under review the Independent Directors met on February 10 2017 interalia to discuss:

• Evaluation of performance of Non-Independent Directors and the Board ofDirectors as a whole;

• Evaluation of performance of the Managing Director taking into account theviews of the all other Directors; and

• Evaluation of the quality content and timeliness of flow of information betweenthe Management and the Board that is necessary for the Board to effectively and reasonablyperform its duties.

All the Independent Directors were present for this Meeting.

10. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has an effective internal control and risk-mitigation system which areconstantly assessed and strengthened with new / revised standard operating procedures. TheCompany's internal control system is commensurate with its size scale and complexities ofits operations. The internal and operational audit is entrusted to the senior managementofficials. The main thrust of internal audit is to test and review controls appraisal ofrisks and business processes besides benchmarking controls with best practices in theindustry.

The Audit Committee of the Board of Directors actively reviews the adequacy andeffectiveness of the internal control systems and suggests improvements to strengthen thesame. The Company has a robust Management Information System which is an integral part ofthe control mechanism.

The Audit Committee of the Board of Directors Statutory Auditors and the BusinessHeads are periodically apprised of the internal audit findings and corrective actiontaken. Audit plays a key role in providing assurance to the Board of Directors.Significant audit observations and corrective action taken by the management are presentedto the Audit Committee of the Board. To maintain its objectivity and independence theInternal Audit function reports to the Chairman of the Audit Committee.

11. STATUTORY AUDITORS:

At the Annual General Meeting held on September 24 2015 M/s Varma and VarmaChartered Accountants (Firm Registration No 004532S) were appointed as statutory auditorsof the Company to hold office subject to ratification of appointment at every AnnualGeneral Meeting until the conclusion of the Fifty Third Annual General Meeting of theCompany to be held in the year 2017. The term of office of the incumbent auditors isexpiring at the ensuing Annual General Meeting in terms of Section 139(2) of the CompaniesAct 2013.

Accordingly as per the requirements of Section 139(2) of the Companies Act 2013(‘the Act') the Board of Directors on the recommendation of the Audit Committee hasproposed to appoint M/s Lorence& Shankar Chartered Accountants (Firm Registration No.112761W) as statutory auditors for a period of 5 years commencing from the conclusion ofthe 53rdAGM till the conclusion of the 58thAGM subject toratification by shareholders every year as may be applicable in place ofretiringauditorsM/s Varma and Varma Chartered Accountants.The proposed auditorsM/s Lorence&Shankar Chartered Accountants have consented to the said appointment and have confirmedtheir eligibility in terms of provisions of Section 141 and other relevant provisions ofthe Act.

The Notes on Financial Statements referred to in the Auditors Reports areself-explanatory and do not call for any comments and explanation.

During the year under review the Auditors have not reported any matter under Section143 (12) of the Act therefore no detail is required to be disclosed under Section 134(3)(ca) of the Act.

12. SECRETARIAL AUDIT:

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the rulesthereunder the Board of Directors of the Company appointed CS KritikaSatardekarPracticing Company Secretary to conduct the Secretarial Audit of the Company. TheSecretarial Audit Report for the financial year ended March 31 2017 forms a part of thisAnnual Report. The same is self-explanatory and requires no comments.

13. COMMITTES:

The Board of Directors have constituted Board Committees to deal with specific areasand activities which concern the Company and need a closer review. The Board Committeesare formed with approval of the Board and function under their respective Charters. TheseBoard Committees play an important role in overall management of day-to-day affairs andgovernance of the Company. The Board Committees meet at regular interval takes necessarysteps to perform its duties entrusted by the Board. To ensure good governance the Minutesof the Committee Meetings are placed before the Board for their noting.

The Board has currently the following Committees:

(A) AUDIT COMMITTEE:

The Company complies with section 177 of the Companies Act 2013 as well as requirementunder the listing regulations pertaining to the Audit Committee.

Terms of Reference

The Audit Committee inter alia performs the functions of approving Annual InternalAudit Plan review of financial reporting system internal control systems discussion onquarterly half-yearly and annual financial results interaction with Statutory andInternal Auditors one-on-one meeting with Statutory and Internal Auditors recommendationfor the appointment of Statutory and cost Auditors and their remuneration recommendationfor the appointment and remuneration of Internal Auditors review of Business RiskManagement Plan review of Forex Policy Management Discussion & Analysis review ofInternal Audit Reports significant related party transactions. The Board has framed theAudit Committee Charter for the purpose of effective compliance of Section 177 of theCompanies Act 2013 and Regulation 18 of the SEBI (LODR) Regulations 2015. In fulfillingthe above role the Audit Committee has powers to investigate any activity within itsterms of reference to seek information from employees and to obtain outside legal andprofessional advice.

Composition names of members and Chairperson its meetings and attendance:

The Audit Committee met four times during the financial year 2016-17 on 26thMay 2016 5th August 2016 4th November 2016 10thFebruary 2017.

The composition and attendance of each member at the meeting of the Audit Committee isgiven below:

Name of the Director Position Category Meetings Held Meetings attended
Mr.Ranganath N. Prabhu Chairman Independent Director 4 4
Mr.Shripad P. Patnekar Member Independent Director 4 4
Mr.Gautam V. PaiKakode Member Managing Director 4 4

(B) NOMINATION AND REMUNERATION COMMITTEE:

The Nomination and Remuneration Committee of the Company is constituted in line withthe provisions of Regulation 19(1) & (2) of the Listing Regulations read with Section178 of the Companies Act 2013.

Terms of Reference:

The Board has framed the Nominationand Remuneration Committee Charter which ensureseffective compliance of Section 178 of the Companies Act 2013 and Regulation 19(1) &(2) of the Listing Regulations. The Board has clearly defined terms of reference for theNomination and Remuneration Committee which are as follows:

• Reviewing the overall compensation policy service agreements and otheremployment conditions of Managing/Whole-time Director (s) and Senior Management (one levelbelow the Board);

• To help in determining the appropriate size diversity and composition of theBoard;

• To recommend to the Board appointment/reappointment and removal of Directors;

• To frame criteria for determining qualifications positive attributes andindependence of Directors;

• To recommend to the Board remuneration payable to the Directors(while fixing theremuneration to Executive Director (s) the restrictions contained in the Companies Act2013 is to be considered.

• To create an evaluation framework for Independent Directors and the Board;

• To provide necessary reports to the Chairman after the evaluation process iscompleted by the Directors;

• To assist in developing a succession plan for the Board;

• To assist the Board in fulfilling responsibilities entrusted from time-to-time;

• Delegation of any of its powers to any Member of the Committee or the ComplianceOfficer.

Composition names of members and Chairperson its meetings and attendance:

The Nomination and Remuneration Committee met two times during the financial year2016-17 on 4th November 2016 and 10th February 2017.

The composition and attendance of each member at the meeting of the Nomination andRemuneration Committee is given below:

Name of the Director Position Category Meetings Held Meetings Attended
Mr.Ranganath N. Prabhu Chairman Independent Director 2 2
Mr.Shripad P. Patnekar Member Independent Director 2 2
Mr.Jayendra V. Gaitonde Member Independent Director 2 2

(C) STAKEHOLDERS RELATIONSHIP COMMITTEE:

The Stakeholders Relationship Committee met only once during the financial year 2016-17on 5th August 2016.

Terms of reference:

The Committee is empowered to consider and approve the physical transfer/transmission/transposition of shares issue of new/duplicate share certificates and oversees andreviews all matters connected with securities transfer. The Committee also specificallylooks into the redressal of shareholders' and investors' complaints/ grievances pertainingto transfer/transmission of shares non-receipt of share certificates non-receipt ofannual report and non-receipt of dividend warrants etc.

The composition of the Committee and the attendance details of the members are givenbelow:

Name of the Director Position Category Meetings Held Meetings Attended
Mr.Jayendra V. Gaitonde Chairman Independent Director 1 1
Mr Shripad P. Patnekar Member Independent Director 1 1
Mr.Motilal S. Keny Member Non-Executive 1 1

During the year under review the Company did not receive any complaints from theShareholders and investors.

14. CODE OF CONDUCT:

In terms of Regulation 17(5) of the Listing Regulations the Company has adopted theCode of Conduct for the Board Members and Senior Management of the Company which has beenposted on the Company's website www.southerngasindia.com Requisite annual affirmations ofcompliance with the code have been made by the Directors and Senior Management of theCompany.

15. RELATED PARTY TRANSACTIONS:

All Related Party Transactions (RPT) are done on an arm's length basis and in theordinary course of business and therefore the provisions of Section 188 of the CompaniesAct 2013 are not attracted. All RPTs are placed before the Audit Committee as well as theBoard.

All RPTs entered during the year under review by the Company are in ordinary course ofbusiness and on arm's length basis. No material RPTs were entered during the financialyear. Accordingly the disclosure required under Section 134(3) (h) of the Companies Act2013 in Form AOC-2 is not applicable.

By virtue of Regulation 15(2) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 the provisions of Regulation23 pertaining to RPTs are not applicable to the Company.

16. VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has established a vigil mechanism and accordingly framed a Whistle BlowerPolicy. The policy enables the employees to report to the management instances ofunethical behaviour actual or suspected fraud or violation of Company's Code of Conduct.Further the mechanism adopted by the Company encourages the Whistle Blower to reportgenuine concerns or grievances and provide for adequate safeguards against victimizationof Whistle Blower who avails of such mechanism and also provides for direct access to theChairman of the Audit Committee in exceptional cases. The functioning of vigil mechanismis reviewed by the Audit Committee from time to time. None of the Whistle blowers has beendenied access to the Audit Committee of the Board. The Whistle Blower Policy of theCompany is available on the website of the Company www.southerngasindia.com.

17. REMUNERATION AND NOMINATION POLICY:

The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors Key Managerial Personnel of the Company. This policy also laysdown criteria for selection and appointment of Board Members.

A) Remuneration to Non-Executive Directors:

The Non-Executive Directors are paid remuneration by way of Sitting Fees. TheNon-Executive Directors are paid sitting fees for each meeting of the Board or Committeeof Directors attended by them. The total amount of sitting fees paid during the FinancialYear 2016-17 was Rs.75000/. The Non-Executive Independent Directors do not have anymaterial pecuniary relationship or transactions with the Company.

B) Remuneration to Executive Directors:

The appointment and remuneration of Executive Directors including Managing Director andWhole-time Director is governed by the recommendation of the Nomination and RemunerationCommittee resolutions passed by the Board of Directors and shareholders of the Company.Payment of Remuneration to Executive Directors is governed by the respective Agreementsexecuted between them and the Company. The remuneration package of the Managing Directorand Whole-time Directors comprises of salary perquisites allowances and contributions toProvident and other Retirement Benefit Funds as approved by the Shareholders at theGeneral Meetings.

Annual increments are linked to performance and are decided by the Nomination andRemuneration Committee and recommended to the Board for approval thereof.

The remuneration policy is directed towards rewarding performance based on review ofachievements. It is aimed at attracting and retaining high calibre talent.

Presently the Company does not have a scheme for grant of stock options or performancelinked incentives for its Directors.

18. EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in Form MGT-9 as requiredunder Section 92 of the Companies Act 2013 is included in this Report as Annexure‘A' and forms an integral part of this Report.

19. BOARD EVALUATION:

Pursuant to the provisions of the Companies Act 2013 structured evaluation process wascarried out coveringvarious aspects of the Board's functioning composition of the Boardand its Committees culture execution and performance of specific duties obligations andgovernance.

A separate exercise was carried out to evaluate the performance of individual Directorsincluding the Managing Director who were evaluated on parameters such as level ofengagement and contribution independence of judgement safeguarding the interest of theCompany and its minority shareholders etc. The performance evaluation of the IndependentDirectors was carried out by the entire Board. The performance evaluation of the Chairmanand the Non-Independent Directors was carried out by the Independent Directors. Based onthese criteria the performance of the Board various Board Committees Chairman andIndividual Directors (including Independent Directors) was found to be satisfactory.

20. RISK MANAGEMENT:

During the year under review the Company engaged some senior officials of the Companyto identify and evaluate elements of business risk. Consequently a revised robust BusinessRisk Management framework is in place. The risk management framework defines the riskmanagement approach of the Company and includes periodic review of such risks and alsodocumentation mitigating controls and reporting mechanism of such risks. Some of therisks that the Company is exposed to are:

Financial Risks

The Company's policy to actively manage its foreign exchange risk within the frameworklaid down by the Company's forex policy approved by the Board.

Given the interest rate fluctuations the Company has adopted a prudent andconservative risk mitigation strategy to minimize interest costs.

Commodity Price Risks

The Company is exposed to the risk of price fluctuation of raw materials as well asfinished goods. The Company proactively manages these risks through forward bookinginventory management and proactive vendor development practices. The Company's reputationfor quality product differentiation and service coupled with existence of powerful brandimage with robust marketing network mitigates the impact of price risk on finished goods.

Regulatory Risks

The Company is exposed to risks attached to various statutes and regulations includingthe Competition Act. The Company is mitigating these risks through regular review of legalcompliances carried out through internal as well as external compliance audits.

Human Resources Risks

Retaining the existing talent pool and attracting new talent are major risks. TheCompany has initiated various measures including rolling out strategic talent managementsystem training and integration of learning and development activities.

21. 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 statement in terms ofSection 134 (3) (c) of the Companies Act 2013:

• That in the preparation of the Annual Accounts for the year ended March 312017; the applicable Accounting Standards have been followed along with proper explanationrelating to material departures if any.

• That the Directors have 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 as at March 31 2017 andof the profits of the Company for the year ended on that date.

• That the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities.

• That the Directors have prepared the Annual Accounts on a going concern basis.

• That the Directors have laid down internal financial controls to be followed andthat such internal controls are adequate and are operating effectively.

• That the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

22. CORPORATE GOVERNANCE:

By virtue of Regulation 15(2) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 the corporate governanceprovisions are not applicable to the Company.

23. ENVIRONMENT AND SAFETY:

The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy requires conduct of operations in such a manner so as toensure safety of all concerned compliances environmental regulations and preservation ofnatural resources.

24. DISCLOSURES UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013:

As required by the Sexual Harassment of Women at Workplace (Prevention Prohibition&Redressal) Act 2013 the Company has formulated and implemented a policy onprevention of sexual harassment at workplace with a mechanism of lodging complaints. Itsredressal is placed on the internet for the benefit of employees. During the year underreview no complaints were reported to the Board.

25. HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company takes pride in the commitment competence and dedication shown by itsemployees in all areas of business.

The Company has structured induction process at all locations and managementdevelopment programs to upgrade skill of managers. Objective appraisal systems based onKey Result Areas are in place for senior management staff.

The Company is committed to nurturing enhancing and retaining top talent throughsuperior Learning & Organisational Development. This is a part of Corporate HRfunction and is a critical pillar to support the organisation's growth and sustainabilityin the long run.

26. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

During the year under review there were no employees who were in receipt ofremuneration exceeding Rs 1.02 Crore per annum nor in receipt of remuneration exceedingRs 8.50 Lacs per month as prescribed under Rule 5(2) of the Companies (Appointment andRemuneration) Rules 2014.

The information required under Section 197 (12) of the Companies Act 2013 read withCompanies (appointment and Remuneration of Managerial Personnel) Rules 2014 and formingpart of the Directors' Report for the year ended March 31 2017 is given in Annexure B tothis Report.

27. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

During the year under review there were no transactions attracting provisions ofSection 186 of the Companies Act 2013.

28. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo pursuant to Section 134 (3) (m) of the Companies Act 2013 read withrule 8(3) of the Companies (accounts) Rules 2014 is annexed herewith as Annexure – Cto this Report.

29. MISCELLANEOUS:

• There were no qualifications reservations or adverse remarks made by theAuditors in their report.

• The provisions of CSR are not applicable to the Company.

• There are no significant and material orders passed against the Company by anyregulating authority or court or tribunal affecting the going concern status and Company'soperation in future.

• The company does not have any subsidiary company.

30. CAUTIONARY STATEMENT

Statements in the Directors' Report & Management Discussion and Analysis describingthe Company's objectives projections estimates expectations or predictions may be‘forward-looking statements' within the meaning of applicable securities laws andregulations. Actual results could differ materially from those expressed or implied.Important factors that could make the difference to the Company's operations include rawmaterial availability and its prices cyclical demand and pricing in the Company'sprinciple markets changes in Government regulations Tax regimes economic developmentswithin India and the countries in which the Company conducts business and other ancillaryfactors.

31. APPRECIATION / ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation of the excellent performanceof the employees at all levels but for whose hard work and support your Company'sachievements would not have been possible. Your Directors also wish to thank companyclients vendors investors agents suppliers and bankers for their continued support andfaith reposed in the Company.

FOR AND ON BEHALF OF THE BOARD
GAUTAM V PAI KAKODE MOTILAL S. KENY
MANAGING DIRECTOR DIRECTOR
GOA MAY 26 2017 DIN NO.02395512 DIN: 06813111