Your Directors have pleasure in presenting the 26th Annual Report on the business andoperations of the Company and the audited standalone and consolidated Ind AS financialstatements for the financial year ended 31 st March 2019 along with comparatives.
Financial Summary and Highlights
The following table shows the operational results of the Company for the year 2018-19as compared to that of the previous year.
| || ||(र in lakhs) |
| ||Standalone ||Consolidated |
| ||Year ended ||Year ended |
| ||31/03/19 ||31/03/18 ||31/03/19 |
|Revenue from Operations ||9745.88 ||9539.36 ||9745.88 |
|Other Income ||47.63 ||22.32 ||47.03 |
|Total Revenue ||9793.51 ||9561.68 ||9792.91 |
|Expenditure ||9358.04 ||9271.80 ||9367.19 |
|Profit before Interest Depreciation Exceptional items and Tax ||435.47 ||289.88 ||425.72 |
|Depreciation/Amortisation/ Impairment ||263.32 ||210.67 ||264.30 |
|Profit (loss) before Finance Costs Exceptional items and Tax ||172.15 ||79.21 ||161.42 |
|Financial Cost ||361.33 ||326.92 ||361.60 |
|Profit (loss) before Exceptional items and Tax Expense ||(-)189.18 ||(-)247 .71 ||(-)200 .18 |
|Exceptional items ||0.00 ||0.00 ||0.00 |
|Profit (Loss) before Tax ||(-)189.18 ||(-)247 .71 ||(-)200 .18 |
|Tax Expense (Current & Deferred) ||(-)18.41 ||(-)18 .32 ||(-)18.66 |
|Profit (Loss) for the year ||(-)170.77 ||(-)229 .39 ||(-)181 .52 |
|Other comprehensive income/ (loss) (net of tax expenses) ||(-)19.84 ||(-)6.51 ||(-)19.84 |
|Total comprehensive (loss)/income for the period ||(-)190.61 ||(-)235 .90 ||(-)201 .36 |
During the year the Company managed its revenue growthdespite the mid-year disruptioncreated by the floods in Kerala which created logistics issues and adversely affectedoperations. The revenue has improved by 2.43% when compared to the previous year. Grossproduct margins improved by ~300 basis points to 29.5%. PBIDT has improved by 50.23%. Keyraw material prices were volatile in nature and this unpredictability impacted margins. Wehave taken steps to integrate production and enhance efficiencies and aggregated theproduction facility for conventional tread rubber and bonding gum to our own facility.
Your Company continue to judiciously expand volumes across all our sales channels whichwill help us deliver stronger volume by increasing utilization of our production facilityin coming years. Exports are beginning to see a meaningful uptick with increased sales. Asthe capacity utilization increases we expect higher contribution margin andprofitability. The operations are exhaustively discussed in Management Discussionand Analysis' forming part of the annual report.
The logistics sector has always been the backbone for growth in India. However roadtransportation in India is largely unorganised and fragmented with a large number ofplayers operating from different parts of India. Apart from a few leading players most ofthe transporters are scattered and operate within their regional limits. Inability tooptimise transportation routes empty return loads lack of information and transparencyin pricing are some of the llengeskey cha faced by the stakeholders in this industry.Transport system was facing a number of challenges including inefficiency corruptiontheft of merchandise delays in transit and high cost of transportation. Despite thesechallenges this sector is crucial for economic and social development. The success oflogistic business is depends on its capability to offer cost effective flexible andefficient services for transportation and applying information technology in B2B and B2Clogistic space will address these challenges.
The logistics startups providing digital marketplace to the spectrum oflogistics can capitalise this opportunity and change the industry through technology.Recently there has been increased investments in logistics startups providing a digitalmarketplace in the business to business (B2B) space. The Company has invested and hold 55%shareholding of Shipnext Solutions Private Limited a logistics startup. Shipnextis engaged in the development of IT software and aims to bring the material transportationsector in India into the foray of information technology by bringing transporters andcustomers on a single technological platform. It is in the process of providing anintelligent platform for interaction between transporters and customers to fix the pricesbeforehand and proceed with the shipment. By this it can bridge the gap betweentransporters customers and all others involved in this industry by bringing them togetherinto a common platform for continuous interaction which helps the transporters to operatewithout geographical limits and obtain complete information on the opportunities availablethat will enable them to plan and optimise their trips. It helps customers to obtain thebest possible rates for their shipments with real time tracking of shipments ensure fastand safe delivery and prompt release of payment to the transporters.
Shipnext has completed the development of first phase of application and are in theprocess of aggregation and incorporation transporters' and customers' data into theapplication. By investing in Shipnext the business of our Company will be benefited as theend consumers of the two business are the same and we will get an aggregated platform ofour consumers to market our products as well.
In view of the loss incurred during the year the Board of Directors of your companyhas decided not to transfer any amount to the reserves for the year under review.
In view of loss incurred during the year under review and losses of earlier years yourDirectors do not recommend any dividend during the year under review.
Material Changes and Commitments
There have been no material changes and commitments which affect the financialposition of the company which have occurred between the end of the financial year to whichthe financial statements relate and the date of this Report
Capital and Debt Structure
About 34.61% of the paid up equity share capital of the Company are held by a largenumber of public shareholders. The category-wise shareholdings are reported in the"Ex nnual Return" forming part of the annual report. Yourtract of A Companyhas neither issued any shares with differential voting rights nor has granted any stockoptions or sweat equity. None of the Directors or the Key Managerial Personnel of theCompany holds instruments convertible into equity shares of the Company.
As per the terms of issue (as varied) the outstanding Zero Coupon RedeemablePreference Shares are liable to be redeemed at the rate of Rupees One Crore every year ina phased manner. The Company has the opti on to stretch the redemption until 9 th February2029 being the date of expiry of 20 (twenty) years from the date of the originalallotment of Preference Shares viz. 9th February 2009.
While the first tranche of redemption of Rupees One Crore was made in FY 2016-17; noredemption was made in FY 2017-18 and FY 2018-19. The Board of Directors at its meetingheld on 14 th February 2019 approved the proposal to convert 900000 OutstandingRedeemable Preference Shares of र100/- each aggregating to र900 Lakhs intoEquity Shares of र10/- each by issue of equity shares through Preferential Allotmentroute to the Preference Shareholders; as consented by them on that date.
The Preferential allotment proposed shall be for such number of shares and at suchissue price per equity share as may be discovered in accordance with the provisions ofSection 62(1)(c) of Companies Act 2013 read with Rule 13 of Companies (Share Capital andDebentures) Rules 2014 the applicable provisions of Rule 14 of Companies (Prospectus andAllotment of Securities) Rules 2014 and in compliance of Chapter V of SEBI (Issue ofCapital and Disclosure Requirements) Regul 2018ations and SEBI (Substantial Acquisitionsof Shares and Takeovers) Regulations 2011; for a value not exceeding र900 Lakhssubject to obtaining Equity shareholders' approval and other regulatory approvals as maybe required. The Outstanding Redeemable Preference Shares shall upon approval of Equityshareholders be treated as Convertible Preference Shares with effect from the date ofEquity Shareholders approval till the date of the completion of the conversion.
Considering that Kerala State Industrial Development Corporation (KSIDC) is also aPromoter Shareholder the Board has expressed the need to obtain their consent prior toproceeding with the Equity Shareholders' Approval. Company is in the process of gettingapproval from KSIDC to take further steps for the proposed conversion of PreferenceShares.
Directors and Key Managerial Personnel
Mr. M.E. Mohamed Managing Director Mr. Mohammed Sherif Shah Chief Financial Officerand CS. Baiju T. Company Secretary are the Whole-time Key Managerial Personnel of theCompany. Mr. Rajesh S. resigned from the office Chief Executive Officer with effect from11th November 2018.
Mr. K.V Rajagopalan Nair Nominee Director vacated from the office of director of thecompany with effect from 13 th September 2018. Kerala State Industrial DevelopmentCorporation Limited has nominated Mr. Rajesh Jacob (DIN: 06443594) as their nominee in theBoard in this vacancy and as recommended by Nomination and Remuneration Committee theBoard at its meeting held on 9 th November 2018 appointed him as additional director inthe category of Nominee Director. As recommended by Nomination and Remuneration Committeethe Board recommends the appointment of the Nominee Director till such date uponwithdrawal by KSIDC. Mr. Navas M Meeran (DIN: 00128692) Chairman retires by rotation atthe ensuing Annual General Meeting and being eligible offer himself for re-appointment.The Board recommends his appointment. None of the Directors is disqualified under Section164 of the Companies Act 2013.
Mr. K.S. Neelacanta Iyer (DIN: 00328870) Mr. M.S. Ranganathan (DIN: 00254692) Mrs.Rani Joseph (DIN: 07423144) are the Independent Directors of the Company. As the initialperiod of office of Independent Director expired on 31 st March 2019 Mr. K.S. anta Iyerand Mr. M.S. Ranganathan have vacated the office ofNeelac Independent Directors witheffect from 01/04/2019. The Board at its meeting held on 09/05/2019 appointed them asadditional directors in the category of Independent director and in the intermittentvacancy of Independent Directors. Mrs. Rani Joseph (DIN: 07423144) was appointed as anadditional director in the category of Independent director. As recommended by Nominationand Remuneration Committee the Board recommends the appointment of the above IndependentDirectors for a term of 5 years with effect from 9th May 2019 to 8th May 2024.
Declaration by Independent Directors and statement on compliance of code of conduct
The Board has considered the declarations given by independent directors under Section149 (7) stating that they meet the criteria of independence complied with the Code forIndependent Directors and that they are not aware of any circumstance or situation whichexist or may be reasonably anticipated that could impair or impact their ability todischarge their duti es objective independent judgment and without any external influenceand are independentwith an of the management.
Four Board meetings were held during the year. Details of Board meetings are includedin Corporate Governance Report.
Committees of the Board
The Company is having five Board Committees Audit Committee Nomination andRemuneration Committee Stakeholders Relationship Committee Risk Management Committee andShare Trans fer Committee. Details of all the committees along with their main termscomposition and meetings held during the year under review are provided in the Report onCorporate Governance a part of this Annual Report. The Board has accepted allrecommendations of the Audit Committee during the year under review.
The Board has annually evaluated the performance of the Board its committees andindividual directors. The Board evaluated the performance of Non-executive and IndependentDirectors. All the Directors are eminent personalities having wide experience in the fieldof business industry and administration. Their presence on the Board is advantageous andfruitful in taking business decisions. Further details of Board evaluation are provided inthe Report on Corporate Governance.
Remuneration of Directors and Employees
The Board has considered the Company's policy on directors' appo ent andintmremuneration including criteria for determining qualifications positive attributes andindependence of a director. The information required pursuant to Section 197 of theCompanies Act 2013 read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 in respect of employees of the Company and Directors areannexed as Annexure -1 and forms part of this Report. No Directors of the Company hasreceived any remuneration from the subsidiary company.
Directors' Responsibility Statement
Pursuant to the requirement of Section 134 (3) and (5) of the Companies Act 2013 yourDirectors confirm that:-
(a) In the preparation of the Annual Accounts the applicable Accounting Standards havebeen followed and that there are no material departures.
(b) Selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of your Company at the end of the financial year and of the profit of theCompany for that period.
(c) Taken proper and sufficient care for the maintenance of adequate accounting recordsin accordance with the provisions of the Companies Act 2013 for safeguarding the assetsof your Company and for preventing and detecting fraud and other irregularities.
(d) Prepared the Annual Accounts on a going concern basis.
(e) Devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively.
(f) Had laid down internal financial controls to be followed by the Company and thatsuch internal financial controls are adequate and were operating effectively.
Internal Financial Controls
Internal financial control and their adequacy are included in the Management Discussionand Analysis forming part of this report.
Frauds reported by the Auditor
The Statutory Auditors of the Company have not reported any fraud as specified underthe second proviso to Section 143(12) of the Act.
Performance and financial position of the subsidiaries associates and joint ventures
Pursuant to Section 129(3) of the Companies Act 2013 ("Act") theconsolidated financial statements of the Company and its subsidiary prepared inaccordance with the relevant Accounting Standard under Section 133 of thespecified Actread with Rule 7 of the Companies (Accounts) Rules 2014 form part of this Annual Report.
Pursuant to the provisions of the said section a statement containing the salientfeatures of the financial statements of the Company's subsidiary in Form AOC-1 is given inthis Annual Report as Annexure - 2. Further pursuant to the provisions of Section 136 ofthe Act the standalone financial statements of the Company consolidated financialstatements of the Company and the relevant consolidated financial statements and separateaudited financial statements along with other relevant documents in respect ofsubsidiaries are available on the website of the Company. Except Shipnext SolutionsPrivate Limited the Company do not have subsidiaries associates and joint ventures.
The Company has not accepted any fixed deposits during the year to which the provisionsof Section 73 of the Companies Act 2013 are applicable.
Particulars of Loans Guarantees or Investments
Particulars of loans guarantees or investments under Section 186 of the Companies Act2013 are given in the notes to the Financial Statement. Company has invested र2.59Lakhs in Shipnext Solutions Private Limited and hold 55% shareholding (1441550 Equityshares of र1/- each) by share purchase from its shareholders at the agreed price ofRe.0.18 per share. Company has further agreed to provide financial assistance to ShipnextSolutions Private Limited in the form of loan or to give guarantee or provide security inconnection with a loan taken by it up to limit र100 Lakhs on requirement basis.
Contracts or Arrangements with Related Parties
There were no materially significant related party transactions which could have had apotential conflict with the interests of the Company. Transactions with related partiesare in the ordinary course of business on arm's length and are periodically placed beforethe Audit Committee and Board for its approvals and the particulars of contracts enteredduring the year in Form AOC-2 is enclosed as Annexure - 3.
The Board of Directors as recommended by the Audit Committee adopted a policy toregulate transactions between the Company and its Related Parties in compliance with theapplicable provisions of the Companies Act 2013 the Rules thereunder and the ListingAgreement. The policy on Related Party Transactions as amended in line with SEBI (LODR)(Amendment) Regulations 2018 is available on the website of the Company. The details ofthe transactions with related parties during the financial year are provided in thefinancial statements.
Corporate Social Responsibility
Company has generally taken corporate social responsibility (CSR) initiatives. Howeverthe present financial position of the Company does not mandate the implementation of CSRactivities pursuant to the provisions of Section 135 and Schedule VII of the CompaniesAct 2013.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
Your Company continues its efforts to improve energy conservation and utilization mostefficiently to nurture and preserve the environment and to exploit all its avenues toadopt latest technology in its operations. The information required under Section134(3)(m) of the Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules2014 regarding Conservation of Energy Technology Absorption Foreign Exchange Inflow andOutflow are given in Annexure - 4 to this report.
Company has developed and implemented a risk management policy and formed a RiskManagement Committee to address and evaluate various risks impacting the Company and areport on risk management is provided in this Annual Report in Management Discussion andAnalysis.
A Vigil Mechanism for directors and employees to report genuine concerns has beenestablished as required under the provisions of Section 177 of the Companies Act 2013.The Vigil Mechanism Policy has been uploaded on the website of the Company.
Material Orders of Judicial Bodies / Regulators
No significant and material orders were passed by Courts Tribunals and otherRegulatory Authorities affecting the going concern status of the Company's operations.
Statutory Auditors and Auditors' Report
M/s. Walker Chandiok & Co LLP Chartered Accountants Kochi were appointed as theAuditors of the Company at the Annual General Meeting held on 6th July 2017 to hold officefor a period of 5 consecutive years. Necessary certificate and consent has been obtainedfrom the Auditors as per Section 139(1) and 141 of the Companies Act 2013 and theCompanies (Audit and Auditors) Rules 2014 for their continuance as the Auditors of theCompany. They Auditors have confirmed that they hold a valid certificate issued by thePeer Review Board of the ICAI. Since ratification by Shareholders every year for theappointment of the Statutory Auditors is not required the Notice of ensuing Annual GeneralMeeting does not include the proposal for seeking Shareholders approval for ratificationof Statutory Auditors appointment.
The Auditors' Report on the financial statement of the Company forms part of thisAnnual Report and it does not contain any qualif ications reservations or adverse remarksor disclaimer. The Auditor's observations are suitably explained in notes to the Accountsand are self-explanatory.
Secretarial Audit Report
The secretarial audit report on the compliance of the applicable Acts Laws RulesRegulations Guidelines Listing Agreement Standards etc. as stipulated by Section 204 ofthe Companies Act 2013 read with the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this report as Annexure - 5. The findingsof the audit have been satisfactory.
Compliance with Secretarial Standards
The Company has complied with Secretarial Standards issued by the Institute of CompanySecretaries of India on Board meetings and Annual General Meetings.
Corporate Insolvency Resolution Process
No application filed for corporate insolvency resolution process by financial oroperational creditor or by the company under The Insolvency and Bankruptcy Code 2016before the National Company Law Tribunal during the year.
The Board of Directors approved the proposal to convert 900000 OutstandingRedeemable Preference Shares into Equity Shares by issue of equity shares throughPreferential Allotment route to the Preference Shareholders. Company is in the process ofgetting approval from Kerala State Industrial Development Corporation to take furthersteps for the proposed conversion of Preference Shares.
In compliance with Section 134 of the Act the Annual Return is uploaded on Companieswebsite and can be accessed at www.easterntreads.com. Extract of Annual Return in Form MGT9 pursuant to Section 92 of Companies Act 2013 and Rule 12(1) of the Companies(Management and Administration) Rules 2014 is annexed herewith as Annexure 6.
Corporate Governance Report
Your Company has been complying with the principles of good Corporate Governance overthe years and is committed to the highest standards of compliance. Pursuant to the ListingAgreement read with Regulation 15(2) of the SEBI (LODR) Regulations 2015 the compliancewith the corporate governance provisions as specified in regulations 17 to 27 and clauses(b) to (i) of Regulation 46(2) and para C D and E of Schedule V shall not apply theCompany. However as a good Corporate Governance practice the Company has generallycomplied with the Corporate Governance requirements and a report on Corporate Governanceis annexed as Annexure - 7 and forms part of this Report.
Management Discussion and Analysis Report
As required under SEBI (LODR) Regulations 2015 the Management Discussion and AnalysisReport is annexed as Annexure 8 and forms part of this Report.
Employee Wellbeing and Safety
Your Company has implemented policies and procedures with the objective of ensuringemployee safety security and wellbeing at the workplace. As stated in our Code ofConduct we are committed to provide gender friendly workplacea equal opportunities formen and women prevent/redress sexual harassment and institute good employment practices.The Company has adopted policy on prevention of sexual harassment in line with therequirements of the Sexual Harassment of Women at the work place (Prevention Prohibitionand Redressal) Act 2013.
Internal Complaints Committee has been set up to redress complaints received regardingsexual harassment. All employees (permanent contractual temporary trainees) are coveredunder this policy. The following is a summary of sexual harassment complaints received anddisposed of during the year:
|a) Number of complaints pending at the beginning of the year ||: Nil |
|b) Number of complaints received during the year ||: Nil |
|c) Number of complaints disposed off during the year ||: Nil |
|d) Number of cases pending at the end of the year ||: Nil |
Cost Records and Cost Audit
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 the Cost Audit Report is not mandatorily applicable to ourCompany for the financial year hence no such audit has been carried out during the year.The Cost accounts and records as required to be maintained under Section 148 (1) of Actare duly made and maintained by the Company.
Listing and Dematerialisation
The equity shares of the Company are listed on the BSE Limited. Shareholders arerequested to convert their holdings to dematerialized form to derive its benefits byavailing the demat facility provided by NSDL and CDSL.
Your Directors wish to place on record their gratitude to Bankers Share TransferAgents Auditors Customers Suppliers and Regulatory Authorities for their timely andvaluable assistance and support. The Board values and appreciates the professionalismcommitment and dedication displayed by employees at all levels. Your Directors arethankful to the shareholders for their continued support and confidence.
| ||For and on behalf of the Board |
|Kochi ||Navas M Meeran |
|27/05/2019 ||Chairman |
| ||DIN: 00128692 |