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Sree Sakthi Paper Mills Ltd.

BSE: 532701 Sector: Industrials
NSE: N.A. ISIN Code: INE266H01014
BSE 00:00 | 20 Apr 10.80 0.13
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NSE 05:30 | 01 Jan Sree Sakthi Paper Mills Ltd
OPEN 10.95
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VOLUME 3427
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52-Week low 3.27
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Sell Price 0.00
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OPEN 10.95
CLOSE 10.67
VOLUME 3427
52-Week high 11.65
52-Week low 3.27
P/E
Mkt Cap.(Rs cr) 18
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sree Sakthi Paper Mills Ltd. (SRSAKTHIPAPER) - Director Report

Company director report

Your Directors have pleasure in presenting their 26th Annual Report and theAudited Financial Statements of the Company for the year ended 31 st March 2017.

FINANCIAL PERFORMANCE

Brief Financial Highlights with comparison of previous financial year are as follows:

( Rs. Lacs)
Particulars For the year ended 31.03.2017 For the year ended 31.03.2016
Sales (Gross) 2400.67 10698.81
Less: Excise Duty 111.41 670.58
Sales (Net) 2289.26 10028.24
Operation Profit/Loss (1448.02) (497.32)
Interest and Finance 553.68 641.64
Depreciation 138.48 328.99
Profit Before Tax (2140.18) (1467.95)
Provision for Tax 0.00 0.00
Profit After Tax (3658.14) (1694.95)
Balance of Profit brought forward (2422.26) (727.31)
Amount available for appropriation (1235.88) (967.64)
Appropriation
General Reserve 0.00 0.00
Proposed Dividend & tax on Dividend 0.00 0.00
Retained profit carried to Balance Sheet 0.00 (1235.88)

OPERATIONAL PERFORMANCE

The company is engaged in the business of manufacturing Kraft paper and paper board.

In the year under review the Company has incurred net loss of Rs.3658.14 Lakhs asagainst the loss of Rs. 1694.95 Lakhs in the previous year. The total revenue of theCompany has decreased while comparing the previous year due to the closure of Kraft Paperunits I & II at Edayar.Duplex board unit at Chalakudy had been remaining closed since2015 and the Kraft Paper units I & II at Edayar were closed in pursuance of the orderof the Kerala State Pollution Control Board since 27th June 2016 and theentire manufacturing operations were discontinued. As a result of it the entire papermanufacturing operations were terminated for the remaining part of the year except forselling and realizing the remaining inventory of raw materials and finished goods stockstores spares and fixed assets.

Board had considered the feasibility report for resuming production activities butfound it not viable and there are other hurdles in operating the plant. Therefore Board ofDirectors at their meeting held on 23rd February 2017 have decided todiscontinue the paper operations and to sell off Land and Building at Chalakkudy andMachineries located at Edayar Factory and to diversify into "Logisticsbusiness". As a part of this diversification plans the Company has obtained specificpermission from Industries Department to change the business in to Dry Chill Cold Storage(Logistics Activity).

SUBSIDIARY COMPANIES

As of 31st March 2017 your Company has 3 subsidiaries viz. Sree Kailas Palchuram HydroPower Limited Sree Adisakthi Mukkuttathode Hydro Power Limited and JalashaayiAlamparathode Hydro Power Limited by virtue of the Company having control on the Board ofthese companies. Steps are being initiated to implement the project with the assistance ofGovernment / Private parties.Pursuant to the provisions of Section 129(3) of the Act astatement containing salient features of the financial statements of your Company'sSubsidiaries in Form AOC-1 is attached to the Financial Statements of your Company. Annualaccounts of the subsidiary companies and the related detailed information would be sent tothose shareholders seeking information in this regard at any point of time. Further annualaccounts of the subsidiary companies would be available for inspection by any shareholdersat the registered office of the company.

DIVIDEND & RESERVES

In view of loss your Directors decided not to recommend payment of dividend on theequity shares and non convertible cumulative Redeemable Preference Shares for thefinancial year under review. You Company has not transferred any amount to reserves duringthe Financial Year under review.

EXPORT PERFORMANCE

Your company's export of paper and paper boards during the year was NIL.

INDUSTRIAL RELATIONS

The industrial relations remained cordial and satisfactory during the year underreview.

CHANGES IN NATURE OF BUSINESS

During the year the Company has received closure notice from Kerala State PollutionControl Board. In pursuance of this order the entire paper manufacturing business wasdiscontinued. After reviewing the various possibilities to resume production the boardfound that there are no prospects for re-opening of the units. Therefore the Board ofDirectors has decided to change the Business activity from Kraft paper manufacturing toDry Chill Cold Storage (Logistics Business). The Company has got approval from Governmentof Kerala to establish Dry Chill Cold Storage (Logistics Business).

Your company has undertaken the implementation of Dry Chill Cold Storage (LogisticsBusiness) and planning to establish 2 lakhs sq. ft Warehousing space during the currentfinancial Year. Your company has also initiated discussions with select MNCs for rentingthe warehousing space.

MATERIAL CHANGES AND COMMITMENTS OCCURRED BETWEEN THE DATE OF BALANCE SHEET AND THEDATE OF AUDIT REPORT

As mentioned above the operations of the paper manufacturing units of the Companyremain closed. The only option available to the Company was to dispose the fixed assets.Subsequently the sale of land & Building belonging to the Company situated atChalakudy was successfully completed in September 2017. Your Board is putting all theefforts to sell the Plant and Machinery located at Edayar Unit since only after theremoval of such plant and machinerythe company would be able to set up Logistics park inthe Edayar land. To change the business activity into logistics the Company has alreadyobtained approval from Industries Department. Accordingly the Company has altered itsmain object clause of the Memorandum of Association by adding a new clause so as to enablethe Company to carry on the Logistics Business. The name of the Company is also desired tobe changed to reflect the true nature of the business.

FINANCE

A). Deposits

The Company has not accepted deposit from the public falling within the ambit ofSection 73 of the Companies Act 2013 and The Companies (Acceptance of Deposits) Rules2014.

B) . Particulars of Loans Guarantees or Investments

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.

C) Commitments

The Company has raised share capital by an amount of Rs. 1(one) Crore by way ofallotment of 10 lakhs 11.25% Non Convertible Cumulative Redeemable Preference Shares ofRs. 10/- each to the Promoter Directors to redeem the existing preference share capital ofthe Company issued to KSIDC during June Quarter 2017.AII the repayment and interestcommitments were metas per terms of arrangement with the Banks. In the current financialyear the Company has obtained Unsecured loans from Directors to the extent of Rs. 2026.08lakhs.

INTERNAL CONTROL SYSTEM

Your Company has adequate internal control and internal check system commensurate withsize of the organization. Audit Committee periodically reviews the Internal FinancialControl and Risk Assessment System of the Company. During the year Internal FinancialControls were tested and no material weaknesses in the design or operating effectivenesswere observed.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Board of the Company comprises of nine experienced directors from diverse areas whichenables the Board to provide effective leadership to the Company. Composition of the Boardis in conformity with the provisions of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulation 2015.

During the financial year Mr. A.R.K. Rao and Mr. Deveshwar Kumar Kapila IndependentDirectors of the Company resigned from the Board. In order to fulfill the requirement ofIndependent Directors by complying with SEBI (LODR) Regulations 2015 he Board ofDirectors of the Company have appointed Mr. G.Raghavan (DIN- 03630043) and Mr.N.Subramanian (DIN-03602858 ) as Additional Directors (Independent) of the Company witheffect from 23rd February 2017 to hold office for a period of five consecutiveyears not liable to retire by rotation subject to consent by the Members of the Companyat the ensuing Annual General Meeting("AGM").

Mr. T.S. Anantharaman Director of the Company has also resigned from the Board on 24thDecember 2016.

Mr. Venkata Mangeswara Rao Varrey was appointed as Whole Time Director in operations ofthe Company for a period of one year w.e.f. 25.11.2015 to 24.11.2016. The Company has notreceived any notice from a member proposing his name for the office of Director withnecessary deposit in accordance with the provisions of Companies Act 2013. Therefore hiswhole time Directorship has ended by 24.11.2016.

Kerala State Industrial Development Corporation Ltd. (KSIDC) has appointed Mr.K.Aravindakshan (DIN: 03622038) as Nominee Director on the Board of our Company in the placeof Mr. K.G.Ajithkumar w.e.f 09.07.2016. KSIDC has also withdrawn the nomination of Mr. K.Aravindakashan w.e.f. 18.03.2017.

Mr. Akhilesh Agarwal has also been appointed as additional director at the BoardMeeting held on 24th June 2017. In accordance with the Companies 2013 hewould hold office of Director upto the ensuing Annual General Meeting. In this regard theCompany has received request in writing from a member of the company proposing Mr.Akhilesh Agarwal's candidature for appointment as Non-executive Director of the Company inaccordance with the provisions of Section 160 and all other applicable provisions of theCompanies Act 2013.

In terms of Article 83 of the Articles of Association of the Company Mr. S. Giridharand Mrs. E Kamalam Director retire on rotation and being eligible offer themselves forre-appointment.

KEY MANAGERIAL PERSONNEL (KMP)

The details of the Key Managerial Personnel of the Company appointed pursuant tosection to section 203 of the Companies Act 2013 are as follows;

SI.No Name Designation With effect from To
1 14-08-2015 13-08-2016
Dr S.Rajkumar Managing Director 14-08-2016 13-08-2017
14-08-2017 13-08-2018
2 Mr. R.Ponnambalam Company Secretary 09-10-2013
3 Ms. Usha Venugopal Chief Financial officer 01-09-2014 11-04-2016
4 Ms. Deepa Praveen Chief Financial officer 19-05-2016 25-09-2016
5 Mr. V.N. Sridharan Chief Financial officer 12-11-2016

NUMBER OF MEETINGS OF THE BOARD OF DIRETORS

The Board of Directors met Eight (8) times during the financial year on 18thMay 2016 30th May 2016 13th June 2016 09th July2016 14th August 2016 12th November 2017 06thFebruary 2017 and 23rd February 2017. The provisions of Companies Act 2013and listing regulations were adhered to while considering the time gap of 120 days betweentwo meetings.

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Regulations) Regulation 2015the Board has carried out an annual performanceevaluation of its own performance the directors individually as well as the evaluation ofthe working of its Committee. The manner in which the evaluation has been carriedout hasbeen explained in the Governance Report.

REMUNERATION TO DIRECTORS

The Remuneration paid to the Executive Directors and the Sitting Fees paid to theNon-Executive and lndependent Directors are disclosed in the Extract to the Annual Returni.e Annexure V to the Board's Report.

BOARD COMMITTEES

Board Committees plays a vital role in improving the Board effectiveness in areas wheremore focused and discussions are required. Board has constituted the following Committeesin accordance with the provisions of Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and its compositions are as follows:

(i) Audit Committee

Mr. N Subramanian - Chairman

Mr. G Raghavan - Member

Mr. U.G.Bhat - Member

(ii) Nomination and Remuneration Committee

Mr. G Raghavan - Chairman

Mr. N Subramanian - Member

Mr. U.G.Bhat-Member

(iii) Shareholders Relationship Committee

Mr. S. Rajkumar - Chairman

Mr. U.G. Bhat - Member

Mr. S. Giridhar - Member

(iv) Corporate Social Responsibility Committee

Mr. S. Rajkumar

Mr. A Padmabanbhan

Mr. G Raghavan

REMUNERATION POLICY

The Company's remuneration policy is directed towardsrewarding performance based onreview of achievements periodically. The remuneration policy is in consonance with theexisting industry practice.

RISK MANAGEMENT POLICY

The Company has formulated a Risk Management Policy to identify assess monitor andmitigate various risks to the Company. Identified risks and the mitigation plans arediscussed at the meetings of the Audit Committee and the Board of Directors of theCompany.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

Your Board has constituted a CSR Committee consisting of the above mentioned threemembers. CSR policy is also framed and annexed. But during the year the profit asdetermined in Section 135 (5) of the Companies Act 2013 is less than the threshold limit.Hence no requirement to spend under the CSR policy.

AUDITORS

M/s Balan & Co. Chartered Accountants the present Auditors of the Company wereappointed as Statutory Auditors of the Company since incorporation and re-appointed atevery AGM thereafter. M/s Balan & Co. Cochin have been in office for more than 10years and in compliance with the provisions of the Act the Company will have to appoint anew auditor in their place.

At the Meeting held on 27th September 2017 the Board of Directorsrecommended the appointment of M/s. KPR & Co Cochin as the Statutory Auditor of theCompany in place of M/s. Balan & Co to hold office from the conclusion of this AGMuntil the conclusion of 31st AGM of the Company subject to ratification by theMembers at every AGM till the 30th AGM.

Replies of Management to Audit Queries:

The reply to the queries of Statutory Auditor on Annual Accounts for the F.Y. 2016-17are annexed to this report.

PARTICULARS UNDER SECTION 134

Conservation of Energy Technology Absorption

Statement of particulars under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of The Companies (Accounts) Rules 2014 is annexed as Annexure -I

Particulars of Employees

None of the employees of the company are coming under the provisions of section 197(12)of the Companies Act 2103 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014.

CORPORATE GOVERNANCE

Your Company is committed to good corporate governance aligned with the best corporatepractices. A separate Report on Corporate Governance in Annexure-VI along withAuditor's Certificate on Compliance with the conditions of Corporate Governance isprovided as a part of this Annual Report besides the Management Discussion and Analysis.

EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT 9 of the Company Is annexed as Annexure V tothis Report.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were onan arm's length basls and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large. All Related Party Transactions are placed before theAudit Committee for approval. Further prior approval of the Shareholders of the company atthe Annual General Meeting dated 30 December 2016 has been taken for the business relatedtransactions entered into with the Related Parties during the year. Particulars ofcontract or arrangements with related parties are annexed in Form AOC 2 as AnnexureIII.

SECRETARIAL AUDITOR

The Board has appointed Miss. Sreevidya Narsimhan Practising Company Secretary toconduct Secretarial Audit for the financial year 2016-17. The Secretarial Audit Report forthe financial year ended March 31 2017 is annexed here with marked as Annexure IV tothis Report.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

In accordance with Section 177 of the Companies Act 2013 and Regulation 22 of SEBI(LODR) Regulation 2015 the Company has constituted a Whistle Blower Policy/ VigilMechanism to establish a vigil mech anism for the directors and employees to report genuine concerns in such manner as may be prescribed and to report to the managementinstances of unethical behavior actual or suspected fraud or violation of the Company'scode of conduct. The details of the Whistle B lower Policy have been posted on the websiteof the Company.

SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT2013

Your Company has in place an Anti-Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The Internal Complaints Committee ("ICC") has been set upto redress the complaints received regarding sexual harassment. All employees are coveredunder this policy. During the financial year 2016-17 there were no cases reported underSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under 134(3) (c) of the Companies Act 2013 Directorsreport that:

1. In the preparation of the annual accounts for the financial year ended 31st March2017 the applicable accounting standards had been followed along with proper explanationrelating to material departures.

2. The directors had selected such accounting policies and applied them consistentlyand made judgment and estimates that were 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 the year under review.

3. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safe guarding theassets of the company and for preventing and detecting fraud and other irregularities.

4. The directors had prepared the Annual Accounts for the financial year ended 31stMarch 2017 on a ‘going concern' basis.

5. That proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.

6. The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

ACKNOWLEDGEMENT

The Board places on record its appreciation for the co- operation and support receivedfrom shareholders customers suppliers employees government authorities and banks.

By and on behalf of the Board of Directors

Sd/- Sd/-
Cochin -16 S.Rajkumar N.Subramanian
Date:27/09/2017 Managing Director Director

Annexure -I

ANNEXURES TO THE DIRECTORS' REPORT DISCLOSURE OF PARTICULARS WITH RESPECT TOCONSERVATION OF ENERGY

(A) CONSERVATION OF ENERGY

(i) Energy conservation measures taken:

At Kraft Paper Units

During the year your Company has not taken any energy conservation measures as themanufacturing units were forced to close down in June 2016.

At Duplex Board Unit - NIL (The factory remained closed)

(ii) Additional Investments and proposals if any being implemented for reduction ofconsumption of energy; NIL

(B) Technology absorption

(i) The efforts made towards technology absorption : NIL

(ii) Benefits derived Production improvement : NIL

Cost Reduction : NIL

Product development or import substitution : NIL

(iii) Imported Technology : NIL

(iv) Expenditure incurred on Research & Development: NIL

(C) Foreign exchange earnings and outgo:

2016-17 2015-16
Earnings in Foreign Exchange: NIL NIL
Expenditure in Foreign Exchange: NIL NIL

Annexure III

FORM NO. AOC -2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014.

Form for Disclosure of particulars of contracts/arrangements entered into by thecompany with related parties referred to in sub section (1) of section 188 of theCompanies Act 2013 including certain arms length transaction under third proviso thereto.

Financial Year 2016-17

1. Details of contracts or arrangements or transactions not at Arm's length basis.

SL. No. Particulars Details
1 Name (s) of the related party & nature of relationship Nil
Nature of contracts/arrangements/transaction Nil
Duration of the contracts/arrangements/transaction Nil
Salient terms of the contracts or arrangements or transaction including the value if any Nil
Justification for entering into such contracts or arrangements or transactions' Nil
Date of approval by the Board Nil
Amount paid as advances if any Nil
Date on which the special resolution was passed in General meeting as required under first proviso to section 188 Nil

2. Details of contracts or arrangements or transactions at Arm's length basis.

SL. No. Particulars Details
1 Name (s) of the related party & nature of relationship Dr. S .Raikumar Managing Director
Nature of contracts/arrangements/transaction Lease Building - Rent Remuneration and unsecured Loan
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction Including the value if any Rent - Rs. 1.23 Lakhs Remuneration - Rs. 5.90 Lakhs Unsecured Loan - Rs. 922.01 Lakhs
2 Name (s) of the related party & nature of relationship S. Subramoniam Director
Nature of contracts/arrangements/transaction Lease Building - Rent
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Rs. 2.08 Lakhs
3 Name (s) of the related party & nature of relationship A. Padmanabhan Whole Time Director
Nature of contracts/arrangements/transaction Lease Building - Rent Remuneration and Unsecured Loan
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Rent - Rs.0.24 Lakhs
Remuneration - Rs. 8.00 Lakhs
Unsecured Loan - Rs. 43.13 Lakhs
Sale of fixed assets - Rs. 3.00 Lakhs
4 Name (s) of the related party & nature of relationship A. Ganesh Relative of Director
Nature of contracts/arrangements/transaction Lease Building - Rent
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any 2.76 Lakhs
5 Name (s) of the related party & nature of relationship S Giridhar Director
Nature of contracts/arrangements/transaction Unsecured Loan
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Rs.208.75 Lakhs
6 Name (s) of the related party & nature of relationship Shri Kailash Logistics Limited Company in which Directors hold more than 2% interests Shri Kailash Logistics Ltd was related party till 30.12.2016)
Nature of contracts/arrangements/transaction Lease Building - Rent and Freight Services
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Freight Services- Rs. 68.95 Lakhs Unsecured Loan- Rs. 712.00 lakhs
7 Name (s) of the related party & nature of relationship Sree Sakthi Constructions and Infrastructure Limited. Company in which Directors hold more than 2% interest
Nature of contracts/arrangements/transaction Civil Works
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Rs. 18.67 Lakhs
8 Name (s) of the related party & nature of relationship Maharaj Continental Trades Limited Company in which Directors hold more than 2% interest
Nature of contracts/arrangements/transaction Commission & Unsecured loan
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Sales Commission - Rs. 30.31 Lakhs
Unsecured Loan - Rs. 116.85 lakhs
9 Name (s) of the related party & nature of relationship Sree Giri Packagings Limited Company in which Directors hold more than 2% interest
Nature of contracts/arrangements/transaction Purchase of Raw Materials & Sale of goods
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Purchase of raw materials - Rs. 400.85 Lakhs
Sale of goods - Rs. 15.66 lakhs
10 Name (s) of the related party & nature of relationship Verizon Industrial Aids Limited Company in which Directors hold more than 2% interest
Nature of contracts/arrangements/transaction Purchase of Raw Materials
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Rs. 191.94 Lakhs
11 Name (s) of the related party & nature of relationship Carto Packs Firm of which Mr. S Rajkumar is the Managing Partner.
Nature of contracts/arrangements/transaction Purchase of Raw Material and Sale of Paper
Duration of the contracts/arrangements/transaction Annual
Salient terms of the contracts or arrangements or transaction including the value if any Sale of Finished goods - Rs. 48.88 Lakhs
12 Date of approval by the Board 18th May 2016
13 Amount paid as advances if any Nil
14 Date on which the special resolution was passed in general meeting (if any) 30th December 2016