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. () - Director Report
Company director report
Your Directors present herewith the 84th Annual Report on the business & operationsof the Company along with the Audited Statement of Accounts for the financial year ended31st March 2016.
2. FINANCIAL RESULTS AND APPROPRIATIONS
(' in lacs)
3. OPERATING PERFORMANCE
In facade of dynamic market conditions wherein the first half being quite subdued incomparison to other half which witnessed upward trend in sugar pricing your Company hasdelivered top line growth and performed ahead of underlying sugar season 2015-16prima-facie due to supply of good quality of sugarcane culminating into higher recoveriesand expedited sales. A detailed analysis of the Company's operations future expectationsand business environment has been given in the Management Discussion & Analysis Reportwhich is made an integral part of this Report and marked as Annexure "A".
4. FINANCIAL PERFORMANCE 2015-16
The Company had recorded Total Revenue of ' 84109.49 lacs (including otherincome aggregating to ' 379.94 lacs) during the financial year ended 31st March2016. The Revenue from Operations (Gross) of the Company for the year 2015-16 stood at '87697.16 lacs. The Profit before Finance Costs Tax Depreciation and Amortisation forthe year under review stood at ' 7976.30 lacs representing 9.48% of the totalrevenue. The increase in PBIDT of the Company during the period under review is mainlyattributed to better sugar sales realisation.
There is no change in the nature of business of the Company. There were no significantor material orders passed by regulators courts or tribunals impacting the Company'soperation in future.
In view of continuing losses the Board does not propose to carry any amount toReserves.
There were no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year i.e. 31st March 2016 anddate of this report.
5. RESEARCH & DEVELOPMENT
During the year under review the Company has undertaken Research & Developmentinitiatives with an intention to improve the sugar recovery ratio and to educate the canegrowers to cultivate improved variety of sugarcane and to otherwise increase the sucrosecontents in their produce.
In view of the losses/accumulated losses the Board of Directors do not recommend anydividend for the year under review.
7. SHARE CAPITAL
During the year there were no changes in either the Equity Share Capital of the Companyor the Preference Share Capital of the Company as the paid up Equity Share Capital as on31st March 2016 stood at ' 1155.73 lacs and whereas the paid up Preference ShareCapital of the Company stood at ' 3000.00 lacs.
8. SCHEME OF ARRANGEMENT
The Board of Directors at its meeting held on March 13 2015 has consented to theComposite Scheme of Arrangement subject to approval of Shareholders Lenders CreditorsHon'ble High Court SEBI CCI and other regulatory authorities in order to rearrange itsbusiness activities to achieve the Business alignment as per market dynamics and variantcapital needs of each business as well as ability to recognise the true value of assetsin the books which have significantly appreciated over time and thereby improving thefinancial position and key ratios of the businesses. The Stock Exchange i.e. NSE and BSEand CSE upon confirmation from SEBI have issued their observation letters. The CCI hasalso given their consent to the Scheme. The Company as required has taken steps forapproval of the same by filing the Scheme before the Hon'ble High Court at Allahabad. Thematter is pending.
9. CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreement read with Regulation 34 of the SEBI(LODR) Regulations 2015 w.e.f. 1.12.2015 the Management Discussion & Analysis Reportthe Report on Corporate Governance Declaration of Whole-time Director on Code of Conductand Auditors' Certificate on compliance of conditions of Corporate Governance form anintegral part of this Report and are annexed to this Report as Annexure "A""B" "C" and "D" respectively.
The Board of Directors comprises of seven NonExecutive Directors having experience invaried fields and a Whole-time Director. Out of seven NonExecutive Directors five of themare Independent Directors.
Mrs. Nandini Nopany will retire by rotation at the ensuing Annual General Meeting andbeing eligible has offered herself for re-appointment as Director of the Company. She isproposed to be re-appointed as Director and will be liable to retire by rotation.
The Independent Directors have confirmed and declared that they are not disqualified toact as an Independent Directors in compliance with the provisions of Section 149 of theCompanies Act 2013 read with SEBI (LODR) Regulations 2015 and the Board is also of theopinion that Independent Directors fulfils all the conditions specified in the CompaniesAct 2013 read with SEBI (LODR) Regulations 2015 to making them eligible to act asIndependent Director.
Other information on the Directors including required particulars of Directors retiringby rotation is provided in the Report of Corporate Governance annexed to this Report as Annexure"B".
11. KEY MANAGERIAL PERSONNEL
The following three persons are designated as Key Managerial Personnel of the Companyviz:
a. Mr. Bal Kishore Malpani Whole-time Director
b. Mr. Shiv Kumar Maheshwari Chief Financial Officer
c. Mr. Santosh Kumar Poddar Company Secretary
All Directors Key Managerial Personnel and Senior Management of the Company haveconfirmed compliance with the Code of Conduct & Ethics applicable to Directors &employees of the Company and a declaration to the said effect by the Wholetime Director ismade part of Corporate Governance Report which forms part of this report. The Code isavailable on the Company's website at the weblink
12. ANNUAL EVALUATION OF BOARD'S PERFORMANCE
I n pursuance of the provisions of the Companies Act 2013 and according to Regulationof 25(3) of the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 the Performance Evaluation Criteria has been laid downfor effective evaluation of performance of the Board of Directors the Committees thereofand individual Directors including the Chairman of the Board. Based on the criteria set bythe Nomination and remuneration Committee the Board at its meeting critically adjudgedthe performance of the Independent Directors as well as has also carried out an annualperformance evaluation of its own performance the Directors individually as well as theevaluation of the working of its Committees. The manner in which the evaluation has beencarried out has been explained in the Corporate Governance Report. Again a meeting of theIndependent Directors is required to be held to evaluate the performance of theNon-Independent Directors. Accordingly a meeting of Independent Directors was heldwherein the performance of the Non-Independent Directors including the Chairman wasevaluated.
13. FAMILIARISATION PROGRAMME
Periodic presentations are made at the Board Meetings on business performance updates& business strategy of the Company.
14. AUDIT COMMITTEE
The Audit Committee was constituted on 11.09.2000 and the Committee now comprises ofMr. Ishwari Prosad Singh Roy Mr. Pradeep Kumar Singhi and Mr. Bal Kishore Malpani. TheCompany Secretary acts as the Secretary to the Committee and the Chief Financial Officeris a permanent invitee to the meetings. During the year there were no instances whereBoard has not accepted the recommendation of Audit Committee.
The details of the terms of reference number and dates of meetings held attendance ofthe Directors and remuneration paid to them are separately provided in the CorporateGovernance Report.
15. STAKEHOLDERS' RELATIONSHIP COMMITTEE
The Investors Grievance Committee was constituted on 11.09.2000 and was renamed asStakeholders' Relationship Committee w.e.f. 15.05.2014 to comply with the requirements ofthe Companies Act 2013 and the Listing regulations. The Committee now comprises of Mr.Chandra Shekhar Nopany Mr. Ishwari Prosad Singh Roy Mr. Gaurav Swarup and Mr. BalKishore Malpani. The Company Secretary acts as the Secretary to the Committee. The detailsof the terms of reference number and dates of meetings held attendance of the Directorsand remuneration paid to them are separately provided in the Corporate Governance Report.
16. NOMINATION AND REMUNERATION COMMITTEE
The Remuneration Committee was constituted on 30.07.2002 and was renamed as Nominationand Remuneration Committee w.e.f. 15.05.2014 to comply with the requirements of theCompanies Act 2013 and the Listing regulations. The Committee now comprises of Mr. IshwariProsad Singh Roy Mr. Gaurav Swarup Mr. Padam Kumar Khaitan and Mr. Bal Kishore Malpani.The Company Secretary acts as the Secretary to the Committee. The details of the terms ofreference number and dates of meetings held attendance of the Directors and remunerationpaid to them are separately provided in the Corporate Governance Report.
17. INTERNAL COMPLAINTS COMMITTEE
An Internal Complaints Committee was constituted by the Company in terms of SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. TheAct aims at protecting women's right to gender equality life and liberty at workplace toencourage women participation at work. The Committee meets all the criteria including itscomposition mentioned in the Act and relevant Rules. No complaint has been received by thecommittee during the year under review.
18. REMUNERATION POLICY
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy as adopted by the Board of Directors is attached as Annexure"E" to this Report. The Committee has also framed criteria for performanceevaluation of every Director and accordingly has carried out the performance evaluation.
A calendar of Meeting is prepared and circulated in advance to the Directors. The Boardevaluates all the decisions on a collective consensus basis amongst the Directors. Theintervening gap between the Meetings was within the period prescribed under the CompaniesAct 2013. During the financial year ended 31st March 2016 8 (eight) Meetings of theBoard of Directors of the Company were held. The details of the Board Meetings held duringthe F.Y. 2015-16 have been furnished in the Corporate Governance Report forming a part ofthis Annual Report.
20. CORPORATE SOCIAL RESPONSIBILITY
The Company continues to spend to support local initiatives to improve infrastructureas well as support in other corporate social responsibilities. The disclosure requirementwith respect to CSR spends are not applicable to the Company in view of inadequateprofits/losses during the three immediately preceding financial years. The Company hasconstituted the Corporate Social Responsibility Committee on 13.05.2016 to comply with therequirements of the Companies Act 2013.
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 statements in terms ofSection 134(3)(c) of the Companies Act 2013:
a. that in the preparation of the annual financial statements for the year ended March31 2016 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;
b. that such accounting policies as mentioned in Note 2.1 of the Notes to the FinancialStatements have been selected and applied consistently and judgement and estimates havebeen made that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at March 31 2016 and of the profit of the Company for theyear ended on that date;
c. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d. that the annual financial statements have been prepared on a going concern basis;
e. that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.
f. that systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.
22. RISK MANAGEMENT
In line with the new regulatory requirements the Company has formally framed a RiskManagement Policy to identify and assess the key risk areas monitor and report thecompliance and effectiveness of the same. A Risk Management Committee has already been inplace to oversee the risk management process in the Company. The committee has reviewedthe major risks which effect the Company from both the external and the internalenvironment perspective. Appropriate actions have been initiated to mitigate partiallymitigate transfer or accept the risk (if need be) and monitor the risks on a regularbasis.
23. INTERNAL FINANCIAL CONTROLS
The Company has laid down internal financial control's through a combination of Entitylevel controls Process level controls and IT General controls inter-alia to ensureorderly and efficient conduct of business including adherence to the Company's policiesand procedures accuracy and completeness of accounting records and timely preparation andreporting of reliable financial statements / information safeguarding of assetsprevention and detection of frauds and errors. The evaluations of these internal financialcontrols were done through the internal audit process and were also reviewed by theStatutory Auditors. Based on the review of these reported evaluations the Directorsconfirm that for the preparation of financial accounts for the financial year ended March31 2016 the applicable Accounting Standards have been followed and the internalfinancial controls are generally found to be adequate and were operating effectively &that no significant deficiencies were noticed.
24. WHISTLE BLOWER / VIGIL MECHANISM
The Company has established a vigil mechanism and adopted whistle blower policypursuant to which whistle blowers can report concerns about unethical behaviour actual orsuspected fraud or violation of the Company's code of conduct or ethics policy. Themechanism provides adequate safeguards against victimisation of persons who use thismechanism. The brief detail about this mechanism may be accessed on the Company's websiteat the weblink http://birla-sugar.com/Assets/UpperGanges/Upper-Ganges-Whistle-Blower-Policy-2507.pdf.
25. HUMAN RESOURCES
The Company continued to create a productive learning and caring environment byimplementing robust and comprehensive HR processes fair transparent performanceevaluation and taking new initiatives to further align its Human Resource policies to meetthe growing needs of its business.
26. AUDITORS AUDIT QUALIFICATIONS AND BOARD'S EXPLANATIONS
Messrs S R Batliboi & Co LLP Chartered Accountants hold office as Auditors of theCompany till the conclusion of ensuing Annual General Meeting and being eligible offeredthemselves for reappointment. According to the certificate submitted to the Company by thesaid firm of Auditors the said re-appointment if made by the Shareholders will be wellwithin the limits prescribed in Section 141 of the Companies Act 2013.
The Board on the recommendation of the Audit Committee proposed that Messrs S RBatliboi & Co LLP Chartered Accountants be re-appointed as the Statutory Auditors ofthe Company for a period beginning the conclusion of the ensuing Annual General Meeting ofthe Company and ending on the conclusion of the Annual General Meeting to be held nextthereafter.
The remarks/observations made by the Statutory Auditors in their report are selfexplanatory and does not require any further clarifications/ explanation. However theStatutory Auditors have commented regarding carrying Deferred Tax Asset (DTA) (net) of '7017.61 lacs (after reversal of ' 199.75 lacs during the year) up to March 312016. The Company has not recognised any further DTA during the current financial year asa matter of prudence. Further the Company has earned profits during the current yearconsequent to improved realisation and sugar yields. In view of above the management iscertain that the Company would be in a position to generate positive cash flows andprofitability and is certain that there would be sufficient taxable income in future toclaim the above tax credit.
Pursuant to Section 148 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the cost audit records maintained by the Companyin respect of its Sugar activity is required to be audited. Your Directors have on therecommendation of the Audit Committee appointed Mr. Som Nath Mukherjee Cost Accountantas the Cost Auditor to audit the cost accounts of the Company for the financial year2016-17. As required under the Companies Act 2013 the remuneration payable to the costauditor is required to be placed before the Members in a general meeting for theirratification.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hadappointed Messrs Vinod Kothari & Co. Practising Company Secretaries to undertake theSecretarial Audit of the Company for the financial year 2015-16. The Secretarial AuditReport is annexed herewith as Annexure "F" and which is self explanatory.
27. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
The Company has following wholly owned subsidiaries and one joint venture company asper detail given below:
i. Uttar Pradesh Trading Company Limited
ii. Ganges Securities Limited
iii. Cinnatolliah Tea Limited
iv. Magadh Sugar & Energy Limited
v. Avadh Sugar & Energy Limited- A Joint Venture Company
The Annual Accounts of the subsidiary companies will be made available for inspectionby any shareholder at the Registered Office of the Company and would also be available onthe Company's website at the weblink www.birla-sugar.com.Furthermore a hard copy of the detailed accounts of the subsidiaries would be furnishedto any shareholder on demand at any point of time.
The Company has also formulated a policy for determining material subsidiaries in linewith the requirement of Listing Agreement. The said Policy is being disclosed on theCompany's website at the weblink http://www.birla-sugar.com/Assets/UpperGanges/Upper - Policy to determin Material Subsidiary.pdf.
28. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company prepared in accordance withrelevant Accounting Standards (AS) viz. AS 21 AS 23 and AS 27 issued by the Institute ofChartered Accountants of India form part of this Annual Report.
The salient features of the financial statement of its subsidiaries are also providedin a separate statement being Annexure "G" and made part of this Report.
29. PUBLIC DEPOSITS
The Company has not accepted any deposits from the public and as such there are nooutstanding fixed deposits in terms of Companies (Acceptance of Deposit Rules) 2014.
30. INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Investor Education and Protection Fund (Uploading ofInformation regarding unpaid and unclaimed amounts lying with Companies) Rules 2012 theCompany has uploaded the details of unpaid and unclaimed amounts lying with the Company ason the date of the last Annual General Meeting held on 12th September 2015 on the websiteof the Company www.birla-sugar.com as also onthe website of the Ministry of Corporate Affairs www.mca.gov.in.
31. LOANS GUARANTEE AND INVESTMENTS
It is the Company's policy not to give any loans directly or indirectly to any person(other than to employees under contractual obligations) or to other body corporate orperson. In compliance with section 186 of the Companies Act 2013 loans to employees bearapplicable interest rates. During the year under review the Company has not made anyinvestment in securities of other body corporate. The details of Investments Loans andGuarantees covered under the provisions of Section 186 of the Companies Act 2013 aregiven in the notes to the Standalone Financial Statements.
32. RELATED PARTY CONTRACTS / ARRANGEMENTS
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 with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large. Accordingly no transaction are beingreported in Form AOC-2 in terms of Section 134 of the Act read with Rule 8 of theCompanies (Accounts) Rules 2014. However the Directors draw attention of the members toNote 33 to the standalone financial statement which sets out related party disclosures.
All Related Party Transactions are placed before the Audit Committee as also the Boardfor approval. Prior omnibus approval of the Audit Committee is obtained for thetransactions which are of a foreseen and repetitive nature. The Company has developed aRelated Party Transactions Policy for purpose of identification and monitoring of suchtransactions.
33. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS &OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of The Companies (Accounts) Rules 2014 is annexed herewith as "AnnexureH".
34. PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is attached as a separate "Annexure I" and forms anintegral part of this Report.
35. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure J".
35. CEO/CFO CERTIFICATION
Mr. Bal Kishore Malpani the Whole-time Director and Mr. Shiv Kumar Maheshwari ChiefFinancial Officer have submitted certificates to the Board as contemplated under Reg 17(8)of the SEBI (LODR) Regulations 2015.
Your Directors take this opportunity of recording their appreciation of theshareholders financial institutions bankers suppliers and cane growers for extendingtheir support to the Company. Your Directors are also grateful to various ministries inthe Central Government and State Governments of Uttar Pradesh and Bihar the SugarDirectorate and the Sugar Development Fund for their continued support to the Company. TheDirectors also recognise the valuable contribution made by the employees at all levelstowards Company's progress.