To the Members
The Directors have pleasure in presenting the 24th Annual Report and AuditedAccounts of the Company for the year ended 31st March 2017.
| || ||(Rs. in Lac) |
| ||2016-17 ||2015-16 |
|Revenue from Operations ||20995 ||18898 |
|Profit before Finance Cost and Depreciation (PBIDT) ||687 ||1516 |
|Profit before Depreciation and Tax (PBDT) ||571 ||1454 |
|Profit before Tax (PBT) ||255 ||1152 |
|Profit after Tax (PAT) ||169 ||750 |
|Surplus brought forward ||1533 ||1448 |
|Total amount available for appropriation ||1702 ||2198 |
|APPROPRIATIONS: || || |
|Capital Redemption Reserve ||108 ||100 |
|General Reserve ||45 ||300 |
|Dividend (Incl. Tax) ||- ||265 |
|Surplus carried forward ||1549 ||1533 |
The Directors have not recommended any dividend for the financial year 2016-17 onequity shares.
The Revenue from operations increased to Rs 20995 Lac during the year as compared toRs 18898 Lac in the previous year clocking a growth of 11% however the profitabilityhas been impacted due to unprecedented high procurement prices of milk which has subduedthe contributions from our consumer products as the Company could not pass on theincreases to the consumer due to stiff competition. The Company was able to develop amarket for Umang Dairy Bulk products including SMP and Ghee and were also able to sell ata price allowing us to make good gross margins. The Company kept investing behind retaildistribution expansion and up-gradation of distribution infrastructure as well as manpowerto help us gain significant volumes in consumer products. We also launched three newproducts and tested waters in North East & North Bengal markets to fine tune ouroffering. All the three products UHT Milk Canned Paneer & Cow Ghee had a very goodacceptance among the consumers and expect to gain wider and deeper distribution coupledwith awareness building measures leading to significant volume and market share gains. Wealso entered the Horeca segment by launching our range of Butter. We propose to add a fewmore products to get this segment to give us good returns in future.
Company has been able to retain its market share in Dairy Creamer segment with itsbrands WHITE MAGIK DAIRY TOP & MILK STAR. Dairy Top continues to maintain itsleadership in the mid segment of dairy creamers. Single serve sachets of 3 and 5 gms ofWhite Magik have found greater acceptance by Hospitality HORECA segment and Institutionalbuyers like Jet Airways Indian Railways and Defence Services.
Company maintained its leadership position in Pre-Mix for tea and coffee vendingmachines. Company also added Hershey's as a customer to its institutional clients and alsomaintained good relations and business with other significant clients like Coca ColaFuture group etc.
LIQUID MILK PLANT
Your Company operates and manages a facility owned by another Company to process andpack Liquid Milk in poly pouches for Mother Dairy under a long term agreement. Capacityutilization stays at 90.02%.
During the year Company collaborated with M/s. LVP Foods Pvt. Ltd. to start contractmanufacturing facility of curd/chhach at the Gajraula site. Operation under this facilitycommenced on 5th April 2017.
Indian Dairy Industry
The organised Indian dairy market is Rs. 99000 crores. It has grown by 13% in 2016over 2015. According to reliable data it is highly fragmented. For organised playersgrowth will be driven by consumers switching to packaged milk. Milk is India'ssinglelargest agricultural commodity in value terms and is more than the combined value ofpaddy and wheat put together. The per capita availability of milk has increasedthree-folds from 112 grams per day in 1970-1971 to 337 grams per day in 2016.
This trend is expected to continue in the coming years. As per research agenciesduring the period 2015E-2020E the organised segment is expected to grow at a CAGR of19.6% as compared to 13.3% for the unorganised segment. This would result in the organisedsegment accounting for 26% of the total market in 2020. The number of registered unitsmanufacturing dairy products in India has increased by about 23% between 2010-11 and2014-15.
According to market research sales of value-added dairy products including lassi andbuttermilk have been steadily growing. Volumes of health-based dairy drinks increased by30% in June 2016 over June 2014. The store base for dairy drinks also increased by 60% inthe same period compared to 10% for soft drinks.
OPPORTUNITIES AND THREATS
i. Private Indian dairies backed by private equity and public funds are increasinglylooking at aggressively expanding the network of their small format parlours to push salesof value added products that ensure better profit margins through modern retail trade asmom-and-pop stores seem less appealing.
ii. Introduction of government schemes for milk producers & start-ups has helpedthem to purchase more cattle and start their dairy farms rather than working for someoneor simply selling milk. Now they can derive various products from milk and sell them inthe market to earn more revenue.
iii. Organisation of the dairy sector by creating private societies in villages hashelped the producers to get a fair value of their produce. Many of the unfair tradepractices have decreased and small-scale milk producers whose production went unnoticedearlier are now in records.
iv. With rising disposable incomes and bourgeoning proportion of working women therewill be greater consumption of ready-to-eat branded Value added Dairy Products likecheese table butter flavoured milk UHT milk shrikhand paneer buttermilk etc.
i. Climate change and scarcity of water is a major threat to the dairy industry. Thewater supply is not sustainable and there is no alternative to water. Milk productioncould go down by 3 million tonnes over the next three years as the average temperaturesrise creating problems of water and availability of green and dry fodder for the cattle.
ii. Labour cost in rural areas has also increased significantly due to MNREGA. Costs ofkeeping and maintaining bovine is very high whereas MNREGA provides easy earning to therural population.
iii. With several state governments banning cow slaughter cattle breeding in India isset to see changes. The cost-benefit economics of cow breeding may prompt farmers to turnto the more financially viable option of buffalo breeding.
iv. Competition between organised and un-organised sectors is resulting in unhealthybusiness practices/lowering values (quality/service/ethics).
The current milk production in India as of now is 150 Million tonnes 90% of it comesfrom rural areas and of this almost 80% comes from unorganised and backyard farms. Thecontribution of private co-operative societies is up to 28 million tonnes which serves20% of the total Indian population. This trend is likely to change with the influx ofserious players who start with a herd size of 50-60 animals and after setting their housein order they graduate and add up more animals depending upon their investment prowess.With the introduction of commercial measures to increase dairy production promptly likeAutomated Milk Collection System computerised milk testing equipments the next decade islikely to see at least 40% of milk production coming from organized and semi-organisedfarms. Milk production is expected to increase to 180 million tonnes by 2022. On anaverage this will be a rate hike by 6 million tonnes per year which was 3 million tonnesearlier.
EXPANSION AND MODERNIZATION PLANS
Company wishes to become a significant player in Dairy & Foods space.
Besides modernization of Plant and R&D facilities Company is planning to expandproduction facility of Drying Plant from present 4.5 lac litres per day to 5.5 lac litresper day. The Company is planning to invest resources behind expanding distribution of therecently launched products cow ghee canned paneer UHT Milk to gain critical volumes andgain Market Share.
Company is also working on a slew of new value added products which are in variousstages of development at the R&D. These products will also improve the gross marginprofile of the company.
RISKS & CONCERNS
(i) The milk availability has been low in the captive area of Umang dairies collectionbelt this year leading to exceptionally high prices of milk putting undue stress on theprofitability. If this trend continues in 2017-18 the profitability will remain understress.
(ii) Inadequate milk availability may also lead to unaddressed market demand which maylead to revenue loss as has been the case in the year 2016-17.
RAW MATERIAL SECURITY
Company is sanguine about the fact that to sustain a value added product portfolio itis highly imperative to have captive milk bank where milk is collected direct from thefarmers. As it is Company is one of the few ones who have more than two decades oldvillage level collection system under which milk is collected from nearly 500 villagescomprising of about 18000 farmers.
The company plans to increase its collection from VLC system to increase itscontribution to the total milk collection. The company plans to start new collectioncentres and reach out to more no of villages & farmers to achieve the same. Theactivity will start this year and may end by next year June. We also have empanelledhighly reliable and big contractors who can supply milk to us on short notice and theirquality is as good as VLC milk. This is to address the need of milk in case of any surgein demand.
HUMAN RESOURCE MANAGEMENT/ INDUSTRIAL RELATIONS
The Company recognizes the contribution and importance of its employees in today'shighly competitive environment and has been systematically developing their skills andempowering its employees. People are encouraged to take on new roles and expand theirhorizons. Training needs at different levels are identified through Performance AppraisalSystem and need based training programmes are regularly organized for all level ofemployees. In order to encourage leadership and problem solving qualities among workmenthe Company has helped establish Quality Circles. A number of job rotations are done toenhance employees' skills as well as to enrich their work experience.
Industrial Relations remained cordial throughout the year under review.
INTERNAL CONTROL SYSTEM
Internal audit by corporate audit team consisting of Chartered Accountants as well asan external firm of Chartered Accountants is in place and carries out their job atpredetermined frequency. Their task is to audit internal control systems financialtransactions and statutory compliances. Findings/ audit reports along with the actiontaken reports are reviewed by the Audit Committee. The Audit Committee also reviews theeffectiveness of Company's internal controls and regularly monitors implementation ofaudit recommendations.
The Company has in place adequate internal controls commensurate with the size andnature of its operations.
EXTRACT OF ANNUAL RETURN
An extract of the Annual Return as on 31st March 2017 in the prescribed formMGT -9 is attached as Annexure-1 to this Report and forms part of it
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The particulars of loans guarantees or securities and investments covered under theprovisions of Section 186 of the Companies Act 2013 are given in the financialstatements.
RELATED PARTY TRANSACTIONS
During the financial year ended 31st March 2017 all the contracts or arrangements ortransactions entered into by the Company with the Related Parties were in the ordinarycourse of business and on arm's length basis and were in compliance with the applicableprovisions of the Companies Act 2013 and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015.
Further the Company has not entered into any contract or arrangement or transactionwith the Related Parties which could be considered material in accordance with the Policyof the Company on materiality of Related Party Transactions. In view of the abovedisclosure in FORM AOC-2 is not applicable.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Shri D. B. Doda retires by rotation and being eligible offers himself forre-appointment at the ensuing AGM.
All the Independent Directors of the Company have given requisite declarations thatthey meet the criteria of independence as provided in Section 149(6) of the Companies Act2013 and also Regulation 16(1)(b) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
Shri N. C. Baheti ceased to be Manager under Companies Act 2013 on 10thMay 2017.
Shri Diwan Singh is the Chief Financial Officer of the Company w.e.f. 28thMarch 2017 consequent upon cessation of Shri Gaurav Jain.
CORPORATE SOCIAL RESPONSIBILITY
The Company has framed Corporate Social Responsibility (CSR) Policy in accordance withthe provisions of the Companies Act 2013 and rules made thereunder.
A detailed report on Company's CSR activities along with the annual report on the CSRactivities undertaken by the Company during the financial year under review in theprescribed format is annexed to this Report as Annexure-2.
(a) Statutory Auditors and their Report
M/s Lodha & Co. Chartered Accountants were appointed as Statutory Auditors of theCompany for a term of 3 (three) consecutive years to hold office from conclusion of the21st Annual General Meeting (AGM) held in the year 2014 till the conclusion of the 24thAGM of the Company to be held in the year 2017 being the maximum permissible term sincethe said firm had been auditors for more than ten consecutive years before commencement ofthe Companies Act 2013. Accordingly the term of M/s Lodha & Co. will end at theforthcoming AGM and the said firm will therefore not be eligible for re-appointment asthe Auditors of the Company at the said AGM. The Board of Directors wish to place onrecord its appreciation of the service rendered by M/s Lodha & Co. The observations ofthe auditors in their report on accounts and the Financial Statements read with therelevant notes are self-explanatory.
M/s Singhi & Co. Chartered Accountants are proposed to be appointed as Auditorsof the Company to hold the office from the conclusion of the 24th AGM to beheld in the year 2017 until the conclusion of 29th AGM to be held in the year2022 subject to the approval of the Members at the AGM to be held in the year 2017 andfurther subject to ratification of the appointment by the members at the respective AGMs.M/s Singhi & Co. Chartered Accountants have confirmed that their appointment ifmade would be in accordance with Section 141 of the Companies Act 2013 & pursuant tothe Companies (Audit and Auditors) Rules 2014 there are no pending proceedings against thefirm relating to professional matters of conduct before the Institute of CharteredAccountants of India or before any competent authority or any court & they are holdingvalid Peer Review Certificate issued by the Peer Review Board of the Institute ofChartered Accountants of India.
(b) Secretarial Auditor and Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors appointed Shri Namo Narain Agarwal Company Secretary in Practice as SecretarialAuditor to carry out Secretarial Audit of the Company for the financial year 2016-17. TheReport given by him for the said financial year in the prescribed format is annexed tothis Report as Annexure-3. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.
(c) Cost Auditor and Cost Audit Report
The Cost audit for the year ended 31st March 2017 is being conducted by M/sSanjay Kumar Garg & Associates Cost Accountants and the report will be submitted tothe Ministry of Corporate Affairs Government of India.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
The Company was forced to temporarily shut down its plant at Gajraula w.e.f. 28thApril 2017 since the Hon'ble National Green Tribunal ("NGT") after inspection(though Umang Dairies was not inspected at that time) ordered closure of certain units ofGajraula including that of the Company for suspected disposal of effluents till propereffluent treatment and disposal was ensured. Upon submission NGT later passed an orderpermitting the operations at our plant at Gajraula which were resumed thereat w.e.f. 16thMay 2017.
Umang Dairies Gajraula is equipped with a state-of-the-art effluent treatment plan withRO and has a "zero liquid discharge" operation status.
There were no other significant and material orders passed by the Regulators or Courtsor Tribunals which would impact the going concern status of the Company and its futureoperations.
The Company is environmentally conscious and operates its plant in Gajraula (U.P.)with zero discharge and is in compliance with all applicable environmental norms and lawsincluding previous consents from NGT and State Pollution Control Board.
CONSERVATION OF ENERGY ETC.
The details as required under Section 134(3)(m) read with the Companies (Accounts)Rules 2014 is annexed to this Report as Annexure-4 and forms part of it.
PARTICULARS OF REMUNERATION
Disclosure of the ratio of the remuneration of each director to the median employee'sremuneration and other requisite details pursuant to Section 197 (12) of the CompaniesAct 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended is annexed to this Report as Annexure-5.Further Particulars of Employees pursuant to Rule 5(2) & (3) of the above Rules formpart of this Report However in terms of provisions of Section 136 of the said Act theReport and Accounts are being sent to all the members of the Company and others entitledthereto excluding the said particulars of employees. Any member interested in obtainingsuch particulars may write to the Company Secretary. The said information is available forinspection at the Registered Office of the Company during working hours.
Corporate Governance-including details pertaining to Board Meetings Nomination andRemuneration Policy Performance Evaluation Risk Management Audit Committee and VigilMechanism:
Your Company reaffirms its commitment to the highest standards of corporate governancepractices. Pursuant to Regulation 34 (3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a Management Discussion and Analysis CorporateGovernance Report and Auditors Certificate regarding compliance of conditions of CorporateGovernance are made a part of this Report.
The Corporate Governance Report which forms part of this Report also covers thefollowing:
a) Particulars of the Four Board Meetings held during the financial year under review.
b) Policy on Nomination and Remuneration of Directors Key Managerial Personnel andSenior Management including inter alia the criteria for performance evaluation ofDirectors.
c) The manner in which formal annual evaluation has been made by the Board of its ownperformance and that of its Committees and individual Directors.
d) The details with respect to composition of Audit Committee and establishment ofVigil Mechanism.
e) Details regarding Risk Management.
The Company has not taken any deposits from the public.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134(3)(c) of the Companies Act 2013 your Directors statethat:-
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(b) the accounting policies have been selected and applied consistently and judgmentsand estimates made are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year and of the profit of theCompany for that period;
(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the said Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) the annual accounts have been prepared on a going concern basis;
(e) the internal financial controls to be followed by the Company have been laid downand that such internal financial controls are adequate and were operating effectively; and
(f) the proper systems to ensure compliance with the provisions of all applicable lawshave been devised and that such systems were adequate and operating effectively.
Management Discussion and Analysis Report contains forward looking statements which maybe identified by the use of words in that direction or connoting the same. All statementsthat address expectations or projections about the future including but not limited tostatements about the Company's strategy for growth product development market positionexpenditures and financial results are forward looking statements.
These are based on certain assumptions and expectations of future events. The Companycannot guarantee that these assumptions and expectations are accurate or will be realized.The Company's actual results performance or achievement could thus differ materially fromthose projected in any such forward looking statements. The Company assumes noresponsibility to publicly amend modify or revise such forward looking statements on thebasis of any subsequent development information or events.
The Directors wish to thank its Customers Shareholders Banks Dealers Suppliers andGovernment Authorities for their continued support.
The Board also places on record its sincere appreciation of the hard work put in bythe employees at all levels during the period under report.
| || |
On behalf of the Board of Directors
|Place : New Delhi ||D.B. DODA ||R.C. Periwal |
|Date : 26th May 2017 ||(Director) ||(Director) |
ANNEXURE - 4
PARTICULARS OF CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS & OUTGO IN TERMS OF SECTION 134 (3) (M) OF THE COMPANIES ACT 2013 READ WITHCOMPANIES (AccOuNTs) Rules 2014
A) CONSERVATION OF ENERGY:
1. These steps taken on conservation/alternate source of energy
a. Motor Replacement in Exhaust Fan 60HP in place of 75HP. 30000 KWH saved per annum.
b. Alfa Dryer Root Blower replaced with existing one highly efficiently 7.5 HP insteadof 20 HP with same parameter. 60000 KWH saved per annum.
c. Nichrome Machine Servo System provided in place of CBC unit power saved 9000 KWHper annum.
d. 10 HP VFD provided in LMP CIP Circuit for supply pump to control water flow andsaved power 21900 KWH per annum.
B) TECHNOLOGY ABSORPTION ADAPTION AND INNOVATION:-
Following projects have been initiated completed and in partly completed duringFinancial Year 2016-17:
1. ETP flow meter :
DO meter placed on ETP to check aeration health.
2. Drying Plant :
New Paneer packing Machine commissioned for Paneer dicing.
c) Research & Development
The Company spent ' 2.66 Lac on R&D during the year.
In our R & D Wing we are working on development of new products to enhance ourProduct Basket in the market and also improving quality and cost reduction in existingproduct basket.
During the year R&D team is working on some new products like:
a) Gulab Jamun
c) Other Misc items
D) Foreign Exchange Earnings and Outgo
| ||(Rs. in Lac) |
|Foreign Exchange earned ||330.78 |
|Foreign Exchange used ||46.88 |