Your Directors have immense pleasure in presenting the 38th Annual Report on thebusiness and operations of the Company together with Audited Statement of Accounts of yourCompanyforthefinancialyear ended the 31st March 2019.
1. FINANCIAL HIGHLIGHTS
(Rs. in Crores)
|PARTICULARS ||2018-2019 ||2017-2018 |
|Sales ||452.11 ||784.22 |
|Profit Before Interest Depreciation & Tax (PBDIT) ||(68.34) ||76.13 |
|Less : Interest & Finance Charges ||58.09 ||64.06 |
|Profit Before Depreciation & Tax (PBIT) ||(126.43) ||12.07 |
|Less : Depreciation ||10.60 ||7.75 |
|Profit Before Tax (PBT) ||(137.03) ||4.32 |
|Less : Provision for Current Tax /Deferred Tax ||(44.89) ||0.41 |
|Profit After Tax (PAT) ||(92.14) ||3.91 |
During the Period Company has incurred a loss of Rs. 92.14 crores. your Directors donot recommend any Dividend for the year under review.
There was no transfer to General Reserve during the year 2018-19.
3. BUSINESS AND OPERATIONS REVIEW
The company has an integrated manufacturing facility comprising of melting &casting to rolling to manufacture Copper and Cu alloys like Brass Phosphor Bronze LeadedBrass Cupro Nickel in the form of strips foils sheets ingots rods profiles bus barsand forward integrated products such as terminals connectors coin blanks key blanksetc.
Arcotech is continuing on its path to being an innovative process and system-orientedcompany to further consolidate and expand its presence in the value added forwardintegrated products and add OEM and tier 1 customers across industries such as electricalAutomobiles electronics and switchgear etc. Continuous effort by our engineers and R& D center is continuing to result in Arcotech achieving approvals of products inquick time with several OEMS.
Millions of people everyday use material processed by Arcotech in various forms and bynumerous manufacturers of Electronic Electrical/ Power Transmission Switchgear HTCables Auto Components Radiators Keys & Locks Zippers Sanitary fittings TorchesCoins and many more.
The Copper and Copper Alloy Industry continues from the ill effects of the InvertedDuty Structure the industry is facing from the signing of FTAs without adequateconsideration to the Industry the companies margins had contracted and the company had tomake timely investment decisions for a long term sustainable model. The company hastherefore implemented its vision to transform from a Semis company to a PrecisionComponent Company for supplying Value Added Items for the Indian Industry. During the yearunder review your Company has achieved gross sales of Rs. 452.11 Crores.The financials ofthe company has been affected on account of squaring off of long running orders whichincluded LD Charges from customers and suppliers.
The market situation in the intervening period had been challenging after thedisruption caused by the implementation of GST and demonetization. The closure of theVedanta Tuticorin plant had also impacted the material availability for 6 Months in thecomplete supply chain and pushed up the purchasing cost and lead time to procure thematerial. As the company has facedwithsignificanterosion of capital over the past yearthe company has requested for a restructuring package from its Secured Lenders under theRBI notification dated June 7th 2019.
The company is complying with all requirements for a restructuring as required by thesaid notification and expects the same to be implemented in the FY 19-20. Once therestructuring is complete the company expects that its Product Mix including its ForwardIntegrated products like Automotive Components and Electrical Parts would contribute torestoring its profitability and margins to existing levels.
4. DIRECTORS AND KEY MANEGERIAL PERSONNEL
In pursuance with the provisions of Companies Act 2013 Shri Radha Nath PattnayakWhole Time Director of the Company who retires by rotation at the ensuing Annual GeneralMeeting and being eligible offers himself for re- appointment. In terms of Regulation 36of SEBI (LODR) Regulations 2015 the details of the Director to be re- appointed arebeing provided in the notice of the ensuing Annual General Meeting.
The Board of the Company is constituted in accordance with the provisions of CompaniesAct 2013 and rules made there under and Regulation 17(1) of SEBI (LODR) Regulations2015.
Mr. Rishabh Saraf Non executive Non Independent director of the Company resigned fromthe board of the Company during the year under review.
Change in Key Managerial Personnel:
a) During the Year Shri Akshaya Kumar Biswal resigned as the Chief Financial Officer(KMP) of the Company w.e.f 27th September 2018.
5. BOARD DIVERSITY AND POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION
The Company believes that building a diverse and inclusive culture is integral to itssuccess. A diverse Board among others will enhance the quality of decisions by utilizingdifferent skills qualifications professional experience and knowledge of the Boardmembers necessary for achieving sustainable and balanced development. Accordingly theBoard has adopted a policy on Nomination Remuneration and Board Diversitywhich sets out the criteria for determining qualifications positive attributes andindependence of a Director. The detailed policy is available on the Companys websiteat http://www.arcotech.in/New14/NOMINATION.pdf and http://www.arcotech.in/ New14/Policy-on-Board-Diversity.pdf is also provided in the Corporate Governance Report whichforms part of this Report.
Annual Board Evaluation and Familiarisation Programme for Independent Directors
The statement pursuant to the provisions of the Companies Act 2013 and Regulation17(10) SEBI(LODR) Regulations 2015 indicating the manner in which formal annualevaluation of the Directors the Board and the Board level Committees are given in thereport on Corporate Governance which forms part of this Annual Report. A note on the f am i l i a r i s a t i o n p r o g r a m m e a d o p t e d b y t h e C o m p a n y i s a va i l a b l e a t C o m p a n y s w e b s i tehttp://www.arcotech.in/New14/Familiarisation-programmes-for-Independent-Directors.pdf
Declaration by Independent Directors
The company has received necessary declaration from each independent director undersection 149(7) of the Companies Act 2013 that he/ she meets the criteria of independencelaid down in section 149(6) of the Companies Act 2013 and Reg.16(1)(b) and Reg. 25 ofSEBI (LODR) Regulations 2015. The Independent Directors have also code ofconduct.confirmed
6. AUDITORS AND AUDITORS REPORT
M/s. Amit Joshi & Associates (FRN:004898N) Chartered AccountantsStatutory Auditorof the Company were appointed in the 35th Annual General Meeting held on 28thSeptember2016 to hold office until the conclusion of 40th Annual General Meeting (AGM) ofthe Company.
The Notes on financial statement referred to in the Auditors Report areself-explanatory and do not call for any further comments.
7. COST AUDITOR
The Board of your Company has appointed M/s S S Chug & Co. Cost Accountantsregistration no. 101595 for conducting the audit of cost records of the Company for thefinancial year 2019-20.
8. SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT
The Board of your Company has appointed M/s A. Upadhyaya & AssociatesCompanySecretariesCertificateof
Practice no. 4729 for conducting the secretarial audit of the Company for the financialyear 2019-20. The secretarial auditors report for the financial year 2018-19 isattached and self-explanatory and donot call for any further comments.
9. REPORTING OF FRAUDS BY AUDITORS
During the Year under review none of the Auditors have reported to the AuditCommittee or to the Board under section 143(12) of the Companies Act2013any instancesof fraud committed against the Company by its officers or employees.
10. NUMBER OF MEETINGS OF THE BOARD
During the year under review there were total 6 (Six) meetings of the Board wereconvened and held the details of which are given in the Report on Corporate Governancewhich is a forming part of this report. The intervening gap between the meetings waswithin the period prescribed under the Companies Act 2013 and Reg.17(2) of SEBI (LODR)Regulations 2015.
The Composition and function of Audit Committee of the Board of Directors of theCompany is disclosed in the Report on Corporate Governance which is forming part of thisreport.
11. VIGIL MECHANISM
The Company has a established vigil mechanism which incorporates a whistle blowerpolicy in terms of the listing agreement for directors and employees to report theirgenuine concerns. The objective of the policy is to create a window for any person whoobserves an unethical behavior actual or suspected fraud or violation of Companyscode of conduct. Protected disclosures can be made by the whistle blower through an emailor phone or a letter to the chairman of the audit committee. The policy can be assessedfrom the Companys website http://www. arcotech.in/ New14/WHISTLEBLOWERPOLICY.pdf.
12. SUBSIDIARY & JOINT VENTURE
The Company has framed a policy for Determining material Subsidiaries. There is nosubsidiary of the company and joint Venture as on 31st march 2019.
13. DIRECTORS RESPONSIBILITY STATEMENT UNDER SECTION 134(3)(C) OF THE COMPANIESACT 2013
The Board of Directors hereby confirms in terms of Section 134(5) of the CompaniesAct 2013:
a) That in the preparation of the Annual Accounts the applicable Accounting Standardshave been followed along with proper explanation relating to material departures if any;
b) That appropriate accounting policies have been selected and applied consistentlyand made judgments and estimates that are reasonable and prudent have been made so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit or loss of the
c) 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.
d) That the Annual Accounts have been prepared on a going concern basis.
e) That the Directors have laid down internal financial controls to be followed by thecompany and such internal financial controls are adequate and are operating effectively.
f) That the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
14. EXTRACT OF ANNUAL RETURN
In accordance with the provisions of section 134(3)(a) of the Companies Act 2013 anextract of the Annual Return in Form MGT-9 is given as Annexure-B of this report.
The equity shares of your Company are listed with the BSE Ltd and National StockExchange Ltd.
16. FIXED DEPOSITS
During the Year under review your Company has not accepted any fixed deposit withinthe meaning of Section 73 and 74 of the Companies Act 2013 read with Companies(Acceptance of Deposits) Rules 2014.
17. STATUTORY STATEMENTS
A. Conservation of energy and technology absorption
The information relating to Conservation of Energy and Technology Absorption asrequired to be disclosed under Section 134(3)(m) of the Companies Act 2013 read withRule 8(3) of the Companies (Accounts) Rules 2014 is annexed herewith as Annexure -A -FormA.
B. Foreign Exchange Earnings and outgo
During the year under review your Company has dealt with foreign exchange earning andoutgo pursuant to Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 is annexed herewith as Annexure - A-Form B.
C. Particulars of Employees
Information in accordance with the provisions of Section 197 of the Companies Act 2013read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended regarding employees is given in the Annexure to theDirectors Report.
Disclosures regarding ratio of the remuneration of each Director to the medianemployees remuneration and other details in terms of Section 197(12) of theCompanies Act 2013 read with Rule 5(2) & (3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are as under:-
i) The Ratio of the remuneration of Directors to the Median remuneration of theemployees of the Company for the year 2018-19:
Executive Director: Mr. RN Pattanayak 16.59:1
ii) The percentage increase in remuneration of each Director CFO and CS in thefinancial
There was no increase in the remuneration of any of the Director CFO and CS.
iii) The percentage increase in the median remuneration of employees in the financialyear:11.64%
iv) The number of permanent employees on the rolls of Company: 95 employees as on31.03.2019
v) Variations in the market capitalization of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year and percentageincrease over decrease in the market quotations of the shares of the Company in comparisonto the rate of previous year.
|Particulars ||As at 31st March 2019 ||As at 31st March 2018 ||Variation (%) |
|Closing Share Price ||5.60 (Face Value of Rs.2) ||33.50 (Face Value of Rs.2) ||-27.9 |
|Market Capitalization (Rs in Crores) (Market Value per share *No. of Outstanding Shares) ||58.8 ||351.75 ||-292.95 |
|P/E ratio (Market Value per share/EPS) ||(0.64) ||90.54 ||-91.18 |
personnel in the last financial year and its comparison with the percentile increase inthe managerial remuneration and justification thereof and point out if there are anyexceptional circumstances for increase in the managerial remuneration: NIL
vii) Comparison of the each remuneration of the Key Managerial personnel against theperformance of the Company:
| ||WTD ||CFO* ||CS |
|Remuneration in FY 18 (Rs in Cr.) ||0.42 ||0.12 ||0.12 |
|Revenue (Rs in Cr.) || ||452.11 || |
|Remuneration as % of revenue ||0.093% ||0.026% ||0.026% |
|Profit before Tax (PBT) (Rs in Cr.) || ||(137.03) || |
|Remuneration (as % of PBT) ||0.30% ||0.08% ||0.08% |
*a)During the Year Shri Akshaya Kumar Biswal resigned as the Chief Financial OfficerCompany w.e.f 27th September 2018.
viii) The key parameters for any variable component of remuneration availed by theDirectors: There is no such variable component
ix) The ratio of the remuneration of the highest paid director to that of the employeeswho are not Directors but receive remuneration in excess of the highest paid directorduring the year: NONE
x) The Remuneration is as per the remuneration policy of the Company.
18. CORPORATE GOVERNANCE
A separate report on Board of Directors of the Company on Corporate Governance isincluded in the Annual Report and the Certificate from M/s A. Upadhyaya & AssociatesPracticing Company Secretary confirming compliance with the conditions of CorporateGovernance as stipulated in Schedule V of SEBI (LODR) Regulations 2015 is attached tothe report on Corporate Governance.
19. COMPLIANCE WITH SECRETARIAL STANDARD
Secretarial Standard 1: Meetings of the Board of Directors and Secretarial Standard2: General Meetings as applicable have been complied by the company.
20. RISK MANAGEMENT POLICY
The company has in place a mechanism to identify assess monitor and mitigate variousrisks to key business objectives. Major risks identifiedby the businesses and functionsare systematically addressed through mitigating actions on a continuing basis. These arediscussed at the meetings of the board of directors of the Company.
The companys internal control systems are commensurate with the nature of itsbusiness and the size and complexity of its operations. These are routinely tested andcertified by statutory as well as internal auditors.
21. CORPORATE SOCIAL RESPONSIBILITY
The Company has been committed towards the society at large. A separate note on thepolicy is a part of this report. The Company has duly formulated CSR policy in place.Policy can be assessed from the Company Website http:// www.arcotech.in/New14/CSR.pdf.
22. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186
The company has not given any loan guarantee or investments under section 186 of theCompanies Act 2013
23. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY.
There have been no material changes and commitments if any affecting the financialposition of the Company which have occurred between the end of the financial year of theCompany to which the financial statements relate and the date of the report.
RELATED PARTY TRANSACTIONS
All related party transactions entered by the company during the financial year were inthe ordinary course of business and at arms length basis which were not material innature. All related party transactions were entered with the prior approval of the AuditCommittee and periodically placed before the Board for review. The details of thetransactions with related party are provided in the companys financial statements inaccordance with the Accounting Standard. The disclosure of Related Party Transactions inForm AOC 2 is attached.
The Policy on the Related Party Transactions is available on the Companys websiteat http://www.arcotech.in/ New14/Policy-on-Materiality-of-and-dealing-with-Related-Party-Transaction.pdf.
24. MANAGEMENT DISCUSSION AND ANALYSIS
(a) Industry Scenario & Future Challenges
During the year Industrial Output of the economy has been sluggish due to several headwinds resulting from high fuel prices uncertainty before general elections liquiditycrunch and higher interest rates in macroeconomic concerns. During the year a riskanalysis assessment was conducted and no major risks were noticed which may threaten theexistence of the Company.
(b) Human Resources / Industrial Relations
Your Company acknowledges the commitment competence and dedication of its employees atall areas of business. The Company is committed to nurture enhance and retain best talentthrough investment in its people to upgrade their technical domain and leadershipcapability. To retain leadership position the Company continuously innovates andcustomizes its Human Resource (HR) strategy to meet changing employee need. The Companyhas taken initiative for safety of employees and implemented regular safety auditimparted machine safety training wearing protective equipments.
(c) Adequacy of Internal Controls
The company has a proper and adequate system of internal controls to ensure that allassets are safeguarded and protected against loss from unauthorized use or disposition andthat all transactions are authorized recorded and reported correctly. IndependentInternal auditors conduct audit covering a wide range of operational matters and ensurecompliance with specified standards.
(d) Operating Performance Future Outlook etc.
The foregoing paragraphs under the head - Financial Results Operations and FutureOutlook have discussed and analyzed other requisite issues mentioned in SEBI (LODR)Regulations 2015.
(e) Opportunities and Threats
Government focus on Non-ferrous Industry and implementation of GST will give boost tononferrous industry. However Govt. will have to take adequate steps to provide levelplaying field to Indian Non- ferrous Manufacturers by taking mitigant steps to nullify theimpact of inverted duty effect.
(h) SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS
The significant changes in the key financial ratio of the Company which are more than25% as compared to the previous year are as given below-
|SR. No Particulars ||2018-19 ||2017-18 ||Changes (in %) ||l |
|i) Interest Coverage Ratio ||(1.24) ||1.06 ||(216.52) ||Due to reduction in EBIT. |
|ii) Operating Profit Margin ||(0.17) ||0.10 ||(267.92) ||Profit Margin was affected due to increase in Raw material cost (RM to Sales Ratio FY 2017-18 Vs. 2018- 19: "0.83 Vs. 1.03") and reduction in turnover. |
| || || || ||Profit Margin was affected due to Following: |
| || || || ||a) Reduction in turnover by 41%. |
|iii) Net Profit Margin ||(0.20) ||0.01 ||(4081.62) ||b) Increase in Raw material cost (RM to Sales Ratio FY 2017-18 Vs. 2018-19: "0.83 Vs. 1.03")and |
| || || || ||c) Finance cost was not decreased as same proportion of revenue (Changes in sale Vs. Finance Cost: "0.41 Vs. 0.15") |
| || || || ||Profit Margin was affected due to Following: |
| || || || ||a) Reduction in turnover by 41%. |
| || || || ||b) Increase in Raw material cost (RM to Sales Ratio FY 2017-18 Vs. 2018-19: "0.83 Vs. 1.03") and |
|iv) Change in Return to Net worth ||(0.57) ||0.02 ||(3420.934) ||c) Finance cost was not decreased as same proportion of revenue (Changes in sale Vs. Finance Cost: "0.41 Vs. 0.15") |
25. DISCLOSURE AS PER THE SEXUAL HARRASMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013
The company has a policy on prohibition prevention and redressal of Sexual Harassmentof women at workplace and Matters connected therewith or incidental thereto covering allthe aspects as contained under "The Sexual Harassment of women at workplace(Prohibition Prevention and Redressal) Act 2013". During the financial year2018-19 no complaint was received under the policy.
26. INTERNAL FINANCIAL CONTROL
The Company has adequate internal control systems and procedures designed toeffectively control the operations at ItscorporateofficeHeadoffice plants. The internalcontrol systems are designed to ensure that the financial and other records are reliablefor the preparation of financial statements and for maintaining assets. The Company haswell designed Standard Operating Procedures.
Independent Internal Auditors conduct audit covering a wide range of operationalmatters and ensure compliance with specified standards. Planned periodic reviews arecarried out by Audit are reviewed by the top management and by the Audit Committee of theBoard of Directors.
Based on the deliberations with Statutory Auditors to ascertain their views on thefinancial the Financial Reporting System and Compliance to Accounting Policies andProcedures the Audit Committee was satisfied with the adequacy and effectiveness of theInternal Controls and Systems followed by the Company.
Your Directors place on record their deep appreciation to employees at all levels fortheir hard work dedication and commitment. The enthusiasm and unstinting efforts of theemployees have enabled the Company to remain at the forefront of the Industry. YourCompany looks upon them as partners in its progress and has shared with them the rewardsof growth. Directors also take this opportunity to thank all Investors Banker ClientsVendors Companies Government authorities and Stock Exchange(s) for their continuedsupport.
| ||On behalf of the Board |
| ||For Arcotech Limited |
|Place: New Delhi ||(Arvind Kumar Saraf) |
| ||Chairman |
|Date: 13th August 2019 ||DIN: 00057323 |