To the Members of E.I.D.- Parry (India) Limited
Your Directors have pleasure in presenting the Forty Third Annual Report together withthe audited financial statements for the year ended March 312018.
|Particulars || |
| ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Revenue from operations ||2079.83 ||2476.75 ||15437.58 ||14667.11 |
|Gross Revenue ||2281.69 ||2631.21 ||15610.99 ||14825.70 |
|Profit Before Interest and Depreciation (EBITDA) ||305.21 ||508.67 ||1454.96 ||1584.96 |
|Depreciation ||114.46 ||112.11 ||251.30 ||248.04 |
|Profit Before Interest and Tax (EBIT) ||190.75 ||396.56 ||1203.66 ||1336.92 |
|Finance Charges ||112.90 ||139.91 ||335.51 ||417.32 |
|Net Profit Before Tax ||77.85 ||256.65 ||868.15 ||919.60 |
|Tax Expenses ||(23.16) ||(26.96) ||350.72 ||211.35 |
|Net Profit After tax before minority interest ||101.01 ||283.61 ||517.43 ||708.25 |
|Minority Interest || || ||261.61 ||187.44 |
|Net profit After Tax and minority interest ||101.01 ||283.61 ||255.82 ||520.81 |
|Balance of Profit brought forward ||332.49 ||85.90 ||75.20 ||(381.26) |
|Transfer from Debenture Redemption Reserve (Net) ||(8.33) ||33.33 ||(8.33) ||19.17 |
|Balance Available for appropriation ||425.17 ||402.84 ||322.69 ||158.72 |
Note: The above standalone financial performance is inclusive of continuing anddiscontinuing operations.
Dividend and Reserves
Based on the Company's performance the Directors recommend for approval of themembers a dividend of Rs.3/- per share for the year ended March 312018. The finaldividend on equity shares if approved by the members would involve a cash outflow ofRs.53.10 crore.
The Company has not transferred any amount to the reserves for the year ended March312018.
The Paid up Equity Share Capital of the Company as on March 31 2018 was Rs.17.70Crore. During the year under review the Company allotted 49222 equity shares on exerciseof stock options under the ESOP Scheme 2007. The Company also allotted 1074861 EquityShares to the shareholders of Parrys Sugar Industries Limited (PSIL) consequent to mergerof PSIL with the Company.
Consolidated Revenue from operations of your Company for the year was Rs.15438 Croreas against Rs.14667 Crore in the previous year. Overall expenses for the year wasRs.14656 Crore as against Rs.13906 Crore in the previous year. Operating Profit (EBITDA)was Rs.1455 Crore as against Rs.1585 Crore in the previous year. Profit after Tax andminority interest for the year was Rs.256 Crore as against Rs.521 Crore in the previousyear.
Standalone Revenue from operations of your Company for the year was Rs.2080 Crore asagainst Rs.2477 Crore in the previous year. Operating Profit (EBITDA) was Rs.305 Croreas against Rs.509 Crore in the previous year. Profit after Tax for the year was at Rs.101Crore as against Rs.284 Crore in the previous year. One of the prime focus areas of theCompany has been to reduce debt which is important to improve the Company's risk profileand increase sustained earnings. The Company's total long term borrowings which wasRs.762 Crore as of March 312017 reduced to Rs.586 Crore as of March 312018. This coupledwith overall debt management enabled the Company to reduce finance charges to Rs.113 Croreas compared to Rs.140 Crore in the previous year.
The subdued performance of the Company was largely on account of lower sugar sellingprices which have been on a downward spiral since April 2017 after a significant high in2016-17. Further during the year the Company settled the cane price disputes pertainingto the sugar season 2013-14 to 2016-17 in Tamil Nadu by paying Rs.87 Crore over and abovethe statutory dues to the farmers. Though statutorily not liable the Company made thesepayments as a gesture of goodwill to secure cane supply and maintain enduring relationshipwith them. This additional payout came at a time when the sugar price had already taken atoll caused by huge domestic and international surplus. Despite the various setbacksmentioned above the Company could achieve an EBIDTA of Rs.305 Crore due to a slew ofinitiatives in its areas of operations including optimum efficiency in consuming steampower and reducing the downtime. The Company ensured that it utilised its distilleries tothe maximum capacity by procuring molasses from both domestic and overseas sources asTamilnadu ran short of molasses due to very low cane availability. The Company alsoparticipated in the raw sugar import program as allowed by the Government of India whichhelped the Company to sweat its assets during the off season which otherwise would haveremained idle.
The Company's on-going programme of systematic disposal of surplus non-performingassets continuous thrust on cost control rigorous cost restructuring exercises and focuson efficiency improvements have favorably impacted the profits. Despite the extremelychallenging operating environment your Company delivered a reasonable performance againstthe backdrop of high cane cost sluggish sugar price and lower cane availability. Thisdemonstrates the resilience of your Company's strong portfolio of sales mix superiorexecution of competitive strategies relentless focus on value creation and deep consumerinsights. The Company is well positioned to establish itself as the most trusted sugarproducer in the Indian market with continued focus on strong farmer relationship productquality R&D and operational excellence across the value chain.
BUSINESS OVERVIEW Sugar
Improved sugarcane availability is one of the important parameters for sustained growthand profitability of the sugar business. For the year 2017-18 the sugarcane availabilityin the State of Tamil Nadu (TN) was low due to widespread drought affecting a majoritysection of the command area. The Cane area in TN has seen a massive decline during thelast few years caused by deficit rain and farmers shifting to other competing crops. Thishas adversely affected the Company's TN operations where most of its plant capacityremained idle for a larger part of the year. The lower sugarcane crush in TN was furthercompounded by lower recovery in Nellikuppam due to varied climatic conditions. During theyear under review the cane crushed by the plants in TN was 12.30 LMT as against 24.61 LMTin the previous year. The average daily crush rate at 8819 TCD was lower than the averageactual crushing rate of 14291 TCD achieved in the previous year. The average recovery wasat 8.27% in the current year as against 8.89% in the previous year.
With respect to Karnataka units the cane crushed was higher at 19.80 LMT as comparedto 15.07 LMT in the previous year which was as per expectations. The average crushingdays increased from 102 to 128 and the average recovery was at 11.25 % as against 10.75%in the previous year. The threat of illegal cane poaching which affected the company'sperformance in the previous year was mitigated to a larger extent this year due to variousproactive measures initiated at the ground level. The availability of harvesting andtransportation labour was also a major issue this year in Karnataka as well as in TN andAndhra Pradesh (AP) due to the excess cane production in Maharashtra. The Company'sefforts in employing mechanical harvesters paid dividends as farmers adapted themselves tothe mechanised harvesting in an effective manner. The deployment of mechanical harvestersis proposed to be increased progressively to cover a large part of the area as shortage ofharvesting labour is going to be the order of the day.
With respect to the AP unit the cane crushed was at 4.62 LMT as compared to 4.76 LMTin the previous year. The average recovery was at 9.55% as against 9.67% in the previousyear.
The overall cane crushed by the Company as a whole came down to 36.72 LMT as against44.44 LMT in the previous year. The average sugar recovery went up from 9.61% in theprevious year to 10.04% in the current year.
The sustained availability of cane being a major concern a number of initiatives arebeing taken up by the Company including cooperative farming providing resources for dripand micro irrigation and facilitating the clean seed programme directly and throughagencies/ agri service providers etc. As a part of farmer centric and inclusive strategythe Company operates soil testing labs which provide soil health cards' to farmerfor improving soil health and fertility. These initiatives will help in increasing theyield per acre which in turn will increase the income per acre to the farmer. To haveconnection with the farmers throughout the life cycle of Cane crop a Farmer Connect Apphas been launched in TN and the same will be rolled out in AP and Karnataka in the comingyears. By this the cane and extension team will be in regular touch with the farmersduring the life cycle of the crop and assist the farmers immediately as and when the needarises.
The Company is also working closely with the Government on a number of subsidy schemesto promote drip irrigation like Sustainable Sugarcane Initiative (SSI). The company hasembarked on a program of ensuring clean seed for planting. In TN and AP the 3-TierNursery programme has been strengthened and varietal purities are being improved throughquality seed sourcing from Breeding Institutes and Company's own tissue culture seedlingproduction centres. In TN 168 shade nets have been installed through Govt SSI schemesthrough which the Company is promoting Pro Tray seedlings for quality cane better yieldand reduction in cost of cultivation. All these activities will pave the way for recoveryimprovement and ensure sustained sugarcane availability.
For the Sugar Season 2017-18 the Department of Food and Public Distribution Ministryof Consumer Affairs Food and Public Distribution fixed the Fair & Remunerative Price(FRP) for sugarcane at Rs.255/quintal for a basic recovery of 9.5% and a premium ofRs.2.68 for every 0.1% increase in the recovery rate as recommended by the Commission ofAgricultural Costs and Prices (CACP). The annual increase of FRP by the government is morethan the increase in the Minimum Support Price (MSP) of most other crops like wheat andpaddy. The progressive increase of FRP during the last several years has severely affectedthe industry. Internationally India is the most "expensive" producer of cane.While the MSP of wheat/paddy went up by around 47% over eight years the sugarcane pricewent up by almost 97% in the past nine years. Sugarcane farmers are thus beneficiaries ofbetter return than the grain growers. The FRP is not effectively linked to the marketprices of sugar and in most of the years the sugar mills have suffered losses due to poorrealisation from the market.
All India Sugar Production and Government Policies
The four prime stakeholders of the Indian sugar business are farmers sugar millsconsumers and the Government. Despite the sugar industry being deregulated since 2013 theGovernment continues to be the most dominant force of intervention amongst thestakeholders. The only policy of sugar is to have "policy of change" triggeredby market volatility and pressures exerted by other constituents. The Government of Indiahas been very dynamic in pursuing policies consistent with the requirements of the sugarmarket to avoid shocks to the millers and farmers. The Industry is also expected torespond in equal measure by ensuring prompt payments to farmers.
The previous Sugar season 2016-17 started with an opening balance of 77 LMT and a lowerseason production of 203 LMT due to drought in the Southern and Western States. There waspressure on the Government to import large quantity of sugar on the premise that thestocks would be critically low at the start of the 2017-18 sugar season and sugar priceswould rise to unprecedented levels. Interactions by ISMA with the Government helped toconvince the Government that only a small quantity of imports was required to ensuresufficient sugar stocks till the start of the 2017-18 season.
The Government on concerns of regional deficits allowed 5 LMT of imports in April2017 after confirmation of the actual sugar production in the season. Further instead ofallowing the 5 LMT of imports to come through any port after assessing regional shortage3 LMT was allowed to be imported through the ports in South India 1.5 LMT in the Westernregion and 0.50 LMT through the Eastern Region.
Government imposed a stock limit on mills such that no mill can keep more than 21% ofits total sugar availability of 2016-17 at the end of September 2017 and not more than 8%at the end of October 2017. The Government also continued the stock holding limit ontraders
allowing a dealer or trader in East and North-East India to store up to 1000 MT ofsugar and 500 MT elsewhere in the country.
This conscious and well calculated decision of the Government was aimed at ensuringthat the supply of sugar to the market was steady and domestic prices were stable for theconsumers and the sugar mills were able to cover their costs and pay cane price to thefarmers on time.
However with the commencement of the sugar season 2017-18 prices started dropping dueto anticipated huge supply of sugar. Hence the Govt mandated stock holding limit forSugar mills at 83% of January '18 closing stock and 86% of February '18 closing stocks.This imposition of the stock limit was to regulate the supply of sugar in order to holdthe sugar price at a sustainable level.
The apex body Indian Sugar Mills Association (ISMA) revised its forecast for thecountry's production at 315-320 LMT for the 2017-18 season as against its originalestimate of 255 LMT. With 40 LMT of carryover stock from the previous year the overallsurplus at the end of the sugar season 2017-18 was expected to jump to 95-100 LMT. The allIndia sugar production upto March 31 2018 reached 281.82 LMT as against 188.8 LMT in theprevious year for the same period. Due to this unexpected surplus sugar availabilitydomestic ex-mill prices crashed (Refer Chart 1).
In order to move the surplus stocks out of the country and thereby improve prices theGovernment in March 2018 announced an Minimum Indicative Export Quota of 20 LMT forexports. However due to depressed world sugar market the scheme did not achieve itsintended objective. The lower realization from domestic sales as well as depressed globalsugar market made it extremely difficult for the mills to generate sufficient funds forpayment of cane price to the farmers in time.
It will be next to impossible for the mills to handle the surplus without the necessarysupport of the government to industry in the form of some subsidies or incentives. It ishigh time the Government came
out with a long term viable policy to manage this situation impacting the industry. TheGovernment needs to holistically address the issue of unrealistic sugar cane pricing whichis currently not linked to the market price of sugar.
The Company has always been on the forefront of achieving manufacturing excellence anddriving cost optimisation across the value chain. The Company believes that this is theonly way it can insulate itself from the volatility in the prices of sugar and sugarcanewhich are beyond its control and are significantly affecting its operations. The TPMinitiative at the Company's units which was launched few years back has helped theCompany to achieve manufacturing excellence operational safety and higher level ofownership by employees. The better efficiencies on steam energy and chemicals consumptionbesides reduction of total losses have helped in ensuring that the costs remain undercontrol. Safety has been on top of the agenda across all the factories. Some of the areascovered under the Safety program include launch of TPM Safety Pillar safety patrol walkby the Plant management team safety review display of signage PPE usage etc forensuring safety and accident prevention.
Nellikuppam sugar factory is the first sugar factory in Tamil Nadu to move in thedirection of achieving Zero Liquid Discharge (ZLD) for the sugar units. The Company alsoenhanced the refining capacity of the Unit from 170 MT to 190 MT. The Company has beentrying to gradually increase the capacity of Karnataka plants over the past few years. Inline with this the units at Haliyal and Bagalkot have increased their capacity from 7000TCD to 7500 TCD and from 5400 to 5800 TCD respectively with minimal capital expenditure.The capacity of the Ramdurg a leased unit has been increased from 4000 tCd to 5000 TCD bythe Lessor Shri Dhanalaxmi Sahakari Sakkare Karkhane Niyamit.
In AP the performance of the Sankili Unit was moderate due to lower availability ofCane. The Sankili Unit's capacity was expanded from 4200 TCD to 4600 TCD.
Sales and Marketing
The Company's overall strategy is to de-risk the sugar business from the vagaries ofthe cyclicality of the industry by way of value addition and de-commoditization. TheCompany is working towards creating a differentiation in all aspects of its product andprocesses to sustain the competitive advantage and to counter the continuous risk ofcyclicality in sugar prices and rising cane costs. The Company has been continuouslyworking towards optimising its sales mix with increased sales to institutional segmentsand retail segments. The Company has to its credit a number of certifications andapprovals from competent authorities regarding food safety quality and sustainabilitywhich are being leveraged strategically with the institutional segments. The Company hasbeen successful in establishing a long term and fruitful relationship with its customersand has been selected as preferred
supplier by several MNC's including GSK Pepsi Abbott etc due to the consistency inquality and adoption of best practices.
The Company believes that its commitment to quality and the power of its strong andtrusted brand "Parry" which has been recognised and valued across segments ofthe market and customers over the years will bear fruit. Amrit' the Company'sretail brand of brown sugar has been well accepted by the customers.
Research & Extension Services
The company's state of the art R&D for the Sugar business was established 25 yearsback with the core purpose of enriching and energising lives by creating value addedproducts from agriculture. The Company is a leader and is one of the few select SugarCompanies in India to have an integrated R&D program for its farmers which isrecognized by the Department of Scientific and Industrial Research (DSIR) Ministry ofScience & Technology Government of India. Since sugarcane as a raw material is grownacross three states of the country spanning diverse agro-climatic conditions researchemphasis and approaches vary and are largely location oriented. The Company hasestablished a strong research infrastructure with a pioneering vision to improve theyield and reduce costs to farmer and also to improve quality of sugarcane and therebyimproving factory efficiencies. The R&D technologies are disseminated to the farmersthrough an exclusive extension function and novel technology transfer tools like mobilevillage theatres and method demonstrations.
The Company's processes and products are Customer Centric. Two of the Company's unitsare FSSC 22000 Certified and many other plants are qualified in ISO's Quality ManagementSystem. The refinery unit of the Company at Nellikuppam has several Pharmacopoeiaaccreditations such as Indian US British and Japanese thereby enabling it to cater tothe stringent needs of several leading Pharma company requirements for Drug Manufacturing.Also the Company supplies its Quality Sugar to many institutional Customers. The Companyhas won CII's Commendation Certification Award for Food Safety 2017 as StrongCommitment to Food Safety' a milestone in the Sugar Industry. Three of the Company'sunits are Bonsucro Certified so as to address the global requirements of Sustainableagriculture.
During the year the Bio Pesticides Division of the Company registered a revenue ofRs.138 Crore as against Rs.122 Crore in the previous year. PBIT for the year was atRs.30.02 Crore as against Rs.14.70 Crore during the previous year. Parry America Inc awholly owned subsidiary of the Company registered sales of USD 10 Mn achieving a growthof 18% over previous year. On a consolidated basis the Bio-Pesticides Business registereda revenue of Rs.152 Crore in 2017-18 as compared to Rs.123 Crore in the previous year.
During the year the Company successfully procured the highest ever volume of raw neemseeds from Tamil Nadu Karnataka & Andhra Pradesh. Due to improved seed arrivals theprocurement prices were fairly maintained. The export as well as the domestic marketsresponded well for the marginal improvement in selling price. which coupled with effectivecost control helped the business to achieve the planned operating profits. The businesshowever continued with its de-risking measures over short term and long term horizon inraw material procurement.
Parry's Azadirachtin with the highest purity and best stability continued tocommand a premium and maintain its leadership position both in the agriculture and indoorgarden segments. As a critical part of the future ready strategy for growth work is inprogress to foray into the Microbial segment'. The Company has undertaken a detailedstudy across the globe on major crop pest problems and identified the critical ones forwhich it would work to identify patentable microbial solutions. The bio pesticidesbusiness with its eco-friendly products that are safe to farmers and consumers envisagesto offer assured and sustainable crop protection solution for the global clients.
The bio pesticides market is driven by factors such as pest resistance to chemicalsIntegrated Pest Management (IPM) growth in demand for organic food heavy crop loss dueto pest attacks lower cost of raw materials and faster regulatory approval. NorthAmerica is expected to dominate the bio pesticides market owing to its highly streamlinedproduct registration process which makes it easier for most private companies to launchtheir products. Bio pesticides are expected to be a potential substitute for syntheticpesticides in Europe due to the stringent regulations on chemical usage and maximumresidue limit. The impending ban on neonicotinoids is expected to drive the growth of theEuropean bio pesticides market.
During the year the Nutraceuticals Division of the Company achieved a revenue fromoperations of Rs.68 crore as against Rs.71 crore during the previous year. PBIT for theyear was at Rs.8 Crore as against Rs.11 Crore during the previous year. The overseaswholly owned subsidiary US Nutraceuticals LLC achieved sales of US$ 22.7 MN against US$23.8 MN of previous year. On a consolidated basis the division registered a revenue ofRs.216 Crore in 2017-18 as compared to Rs.228 Crore in the previous year.
During the year overall sales volume of premium Organic Spirulina increased by 10%over previous year mainly due to improved sales volume in European market where premiumquality continues to be valued. Further the business launched Spirulina Granules underdifferent flavours and other value added formulation products. Implementation of TPM andCGMP resulted in improved product quality and productivity. The business has madeinvestments to improve the productivity of Organic Chlorella cultivation and downstreamprocesses which would enable the scaling up of Chlorella volumes in the coming years.
During the year the Company established a state of art laboratory facility to ensuregood laboratory practices as per regulatory requirements. As part of its clean labelprogram the Company has enrolled for Non GMO (Genetically Modified Organisms)verification program from Food Chain ID. The Company has obtained Non GMO certificate forits Organic Spirulina and Chlorella products (both powder and tablets) and the Companycould use the Non GMO logo in its product labels. As the global health markets arematuring up to micro-algal sources for nutrition the company stands to gain a major placein the industry that exemplifies clean and sustainable methods of cultivation andeco-friendly discharges from its facilities.
Joint Venture with Synthite Industries Ltd
During the year in line with its vision to grow the Nutraceuticals business throughvalue-added Algae products the Company entered into a 50:50 Joint Venture (JV) withSynthite Industries Ltd Cochin India to produce Phycocyanin a natural blue pigmentextracted from Spirulina. Phycocyanin is a complex of light-harvesting proteins extractedfrom Spirulina which has a characteristic deep blue colour. Phycocyanin offers excellentstability and flexibility for application in a variety of food and beverages and isapproved by all major regulatory bodies in USA EU Japan and South Korea as food colour.The JV will leverage on Parry Nutra's Spirulina cultivation strengths and Synthite'sextraction capabilities making it a good strategic fit for both the partners.
Sale of Bio Pesticides Division
During the year the shareholders based on the recommendation of the Board ofDirectors approved the sale and transfer of the Bio Pesticides Business together with allits employees as well as assets and liabilities including all concerned licences permitsconsents and approvals whatsoever comprising of manufacturing marketing and trading inBio Pesticides Products ("Bio Pesticides Business) as a "goingconcern" and by way of a slump sale to its subsidiary Company CoromandelInternational Ltd (CIL) with effect from April 1 2018. The sale of the entire shareholding in the wholly owned subsidiary Parry Amercia Inc to CIL was also approved. Thiswould complement CILs crop protection business. CILs extensive marketing network andexperience would enable this business to grow faster. The sale proceeds realized by theCompany would help the Company to reduce its debt which would improve its debt equityratio.
MANAGEMENT DISCUSSION AND ANALYSIS
(To avoid duplication between the Boards' Report and the Management Discussion andAnalysis we present below a composite summary of performance of the various businessesand functions of the Company.)
After a long hiatus Global growth strengthened in 2017 to 3.8% and is estimated tonotch up to 3.9% in 2018 and 2019 riding on a significant rebound in world trade anddriven by an investment recovery in advanced economies an expansionary fiscal policy inthe US continued growth momentum in Asia a notable upward trend in Europe and signs ofrecovery in several commodity markets. (World Economic Outlook).
While the outlook for advanced economies particularly for the euro area has improvedinflation remains weak in many countries with GDP growth constrained by weak productivityand rising old-age dependency ratios. Prospects for many emerging markets and developingeconomies in sub-Saharan Africa the Middle East and Latin America are lacklustre withseveral countries experiencing stagnant growth and unable to raise per capita incomes.Fuel exporters are particularly affected by the protracted adjustment to lower commodityrevenues.
According to the International Monetary Fund (IMF) though the present economiccondition offers an opportunity for world nations to promote inclusive growth and addresssocial imbalances and environmental issues future prospects appear challenging withincreasing protectionist tendencies and retaliations posing a potential risk. Policymakersmust therefore adopt forward-looking policies as they prepare for these future challenges.
In India economic growth for 2017 stood at 6.7% due to the disruptions prolonging fromthe currency exchange initiative introduced in November 2016 and the transition costsrelated to the roll out of the Goods and Services Tax. However the International MonetaryFund (IMF) remains bullish on India's growth potential. India is projected to regain itsstatus as the world's fastest growing large economy with an expected growth rate of 7.4%in 2018 which is set to increase further to 7.8% in 2019. According to the IMF prospectsfor the Indian economy are bright propelled by strong consumption growth and structuralreforms. Further the transitory effects of reforms such as demonetization and the Goodsand Services Tax (GST) seems to be fading out. (World Economic Outlook Update)
As per Platts-Kingsman (International Sugar Analyst) global sugar production in sugarseason 2017-18 was at 195 MMT. Further global sugar production is estimated to increaseto a record 197 MMT to rise on the back of massive production gains projected for Chinathe EU and India as well as record production in Thailand. However Brazil which accountsfor 20-25% of the global output is not expected to contribute much to the estimatedsurplus. During the last one year international white sugar prices have come down due tohigher sugar production. From about $560/MT in February 2017 London Sugar Future priceswere trading at $340/MT in June 2018 weighed down by increase in global sugar production.
According to ISO early indications point towards a global surplus phase in the sugarcycle lasting for at least one more season making any rise in world market values ratherunlikely.
In India the annual sugar consumption is pegged at 25 MMT However according to IndianSugar Mills Association (ISMA) sugar production is estimated to touch a record high at31.5 MMT in the 2017-18 sugar season (October-September) and is likely to out balanceconsumption by around 6-6.5 MMT with sugar mills facing pressure on prices andprofitability in the near-term. After plunging to a low of around Rs.29000 per tonne inthe first week of February 2018 sugar prices picked up in the following weeks on the backof government initiatives such as the doubling of import duty to 100% and the impositionof limits on sugar sales by sugar mills.
According to estimates for SS18 while sugar output in UP is projected to grow and asharp recovery in production is foreseen in Maharashtra and Karnataka Tamil Nadu isestimated to produce less at 0.6 MT down from 1.1 MT in SS17 with mills operating at 20%capacity utilization severely impacting its cost of production.
As per estimates by USDA the closing stocks of sugar in India would significantlyincrease to around 10.5-11 MMT in SY2018 (sugar year 2017-18). The reverse stock limitsimposed by the government are valid up to March 31 2018. The upward revision in the sugarproduction estimate together with the liquidation of sugar stocks by several cash stressedsugar mills post March 2018 is likely to result in pressure on sugar prices from thecoming quarter.
The profitability of sugar mills is likely to come under severe stress on account ofthe higher cane cost of production (higher SAP or state advised price and FRP for thecurrent season) along with the likely pressure on sugar realisations during the firstquarter of FY2019.
The continuing control over cane costs by the states and price volatility based ondemand and supply are the key challenges facing sugar companies in India. While firm sugarprices favourable production and recovery ratios with strong cash accruals helpednorth-based mills pare debt exposure the performance of most south based mills were badlyimpacted by unfavourable climatic conditions leading to low production lower recoveryetc.
Going forward a projected sugar surplus in the current sugar season an unviableexport market at the prevailing international sugar prices together present a seriousproblem for the mills and any scope for further increase in domestic sugar prices hasdiminished. (Source : CARE Ratings)
Rising concerns over global warming ozone depletion and environmental pollution haveled World Nations to focus on bio fuels and green energy to reduce emissions. Globallyethanol is gaining importance as a fuel substitute with recent environmental datademonstrating that CO2 savings of ethanol reach an average 64% in the EUproving that ethanol is an effective tool to meet stringent emission targets intransportation.
The world ethanol industry is on a growth trajectory after a phase of consolidation in2017. Brazil is expected to be the main driver with a better cane crop and lower sugarprices boosting ethanol production after two years of decline. (World Ethanol andBiofuels Conference)
Firmer crude prices have also led Governments to explore alternate fuels and supportethanol blending with petrol to reduce dependence on oil imports. Around 85% of the totalethanol produced in the world is used as a fuel blend.
Government Policy continues to play a vital role for the success of the industry.Stringent legislation of emission standards government support by way of subsidies andtax incentives by both developed and developing countries is expected to lend traction tofuture growth. China and India within Asia-Pacific with ongoing Bio fuel programmesrepresent lucrative markets to mine.
The Government of India (GOI) has declared its commitment to explore alternaterenewable energy sources reduce the use of fossil fuels and reduce energy imports by 10%by 2022. The EU-India Clean Energy and Climate Partnership was established in 2016 forbringing together stakeholders and facilitate policy dialogue business solutions jointresearch and innovations for clean energy and climate change projects and furtheringmutual goals.
In line with this the European Investment Bank (EIB) has already provided loans andopen credit lines with the value of more than 2 Billion Euros to support implementation ofEnergy and Climate related projects in India.
The GOI has set an ambitious target of 3.13 Billion litres for its Ethanol BlendedProgramme (EBP) (majorly from lignocellulosic but molasses ethanol is also included) thisyear and a 20% ethanol blending in petrol by 2030.
In a move to support the industry the Cabinet Committee on Economic Affairs (CCEA)approved a price of Rs.40.85 a litre for procurement season 2017-18 (beginning December2017) as against Rs.39 a litre the previous season. The applicable Goods and Services Tax(GST) of 18% and transport charges would be borne by the OMCs. This is a boost for thesugar sector where by distilleries can increase their supply of the product to oilmarketing companies (OMCs) for blending with petrol.
Ethanol contributes 10-15% of sugar mills annual turnover. Uttar Pradesh's millscontribute nearly half the country's ethanol supply Since ethanol is manufactured frommolasses a by-product of sugar the mills do not incur any extra cost on the rawmaterial. Therefore higher realisation from ethanol would add to the profitability of theSugar mills.
COMPANY PERFORMANCE SUGAR DIVISION
EID Parry is ranked among the leading sugar manufacturers in India with 9 sugar millsspread across Tamil Nadu Puducherry Andhra Pradesh and Karnataka in addition to astandalone distillery in Sivaganga.
2017-18 was a challenging year for the Company's sugar business in terms of growth andprofitability. Severe drought conditions in its command areas in Tamil Nadu and AndhraPradesh for two consecutive years reduced cane availability and played havoc on sugarproduction with mills in Tamil Nadu operating at only about 20% of their total capacity.However favourable weather conditions in Karnataka led to an increase in cane productionand recovery.
The total cane crushed in the Plants at Karnataka recorded a 31% increase the totalcane crushed at 19.80 LMT in 2017-18 as against 15.07 LMT in the previous year due togood monsoons and increased cane planting by farmers. To ensure continuous supply of waterfor the farmers the Company is working towards getting the maximum benefit from the keyirrigation projects being implemented by the government in Haliyal Sankili and Bagalkotwhich would prove beneficial in the long term.
The total cane crushed in the Company's Tamilnadu plants decreased to 12.30 LMT in2017-18 as against 24.61 LMT in the previous year. The overall recovery in Tamil Nadu wentdown from 8.89% in 2016-17 to 8.27 % in 2017-18. Crushing in the Company's Andhra Pradeshplant was lower at 4.62 LMT compared to 4.76 LMT in the previous year.
The overall cane crushed by the Company was 36.72 LMT in 2017-18 (44.44 LMT previousyear). Overall recovery of all the units of the Company was 10.04% up from 9.61% in theprevious year.
The Company produced 657 Lakh Litres of alcohol from molasses in 2017-18 as against 708Lakh litres in 2016-17.
Besides own molasses purchase of molasses in Tamilnadu contributed to a higherproduction of alcohol by the distilleries. The Company sold 161 Lakh litres of Ethanol in2017-18.
Oil Manufacturing companies (OMCs) floated tender in October 2017 for procuring Ethanolon pan India basis. Nellikuppam Haliyal and Sankili participated in the tender.Nellikuppam received LOI for 50 lakh litres Haliyal for 60 Lakh litres and Sankili for 70Lakh litres.
The Company's Tamilnadu units exported 710 Lakh units of power during the year asagainst 1855 Lakh units in the previous year. The shortfall was mainly on account ofPugalur unit which did not generate power during the year 2017-18.
Karnataka Units: The cumulative power generated from the Bagalkot Haliyal and RamdurgPlants stood at 1768 Lakh units as against 2121 Lakh units in the previous year.
All three units in Karnataka are now exporting power under PPA. Recently both Haliyaland Bagalkot units have signed PPA with ESCOMs for a period of 5 years at Rs.4.19/unit.
Andhra Pradesh: Sankili unit exported 121 Lakh units as against 183 Lakh units previousyear the drop mainly due to lower cane crushing during the year.
Operational Performance (Sugar Division)
|Particulars ||2017-18 ||2016-17 |
|Cane Crushed (LMT) ||36.72 ||44.44 |
|Recovery (%) ||10.04 ||9.61% |
|Sugar Produced (LMT) ||4.94 ||4.33 |
|Power Generated (Lakh Units) ||3503 ||5540 |
|Alcohol Produced (Lakh Litres) ||657 ||708 |
|Sugar Sold (LMT) ||3.85 ||4.78 |
Financial Performance (Sugar Division)
|Particulars || |
| ||2017-18 ||2016-17 ||2017-18 ||2016-17 ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Revenue ||1491 ||1801 ||111 ||200 ||305 ||318 ||1907 ||2319 |
|EBITDA** ||28 ||207 ||27 ||64 ||55 ||93 ||110 ||364 |
** Earnings before interest tax depreciation and amortization.
The Company continued to pursue the execution excellence initiative to optimiseefficiencies reduce cost and eliminate wastage.
TPM deployment has been aggressively pursued and CII certification for excellence hasbeen obtained for Nellikuppam and Pudukottai Units. Sankili and Bagalkot Units have beenprogressing well as planned and will be subjected to CII Excellence Audit in FY 2018-19.
In its continued effort towards sustainable water utilisation the Company has embarkedon a Zero Liquid Discharge project at its Nellikuppam Plant. The condensate polishingsystem has been commissioned enabling recycling of 2400 m3 of water per day.
The Company has ensured compliance well within stipulated parameters with respect toemission and effluent generation with stringent online monitoring systems which are hookedup to the SPCB/ CPCB monitoring systems.
In addition the following initiatives were undertaken:
Promoted the Waste to Wealth initiative' with the waste from thedistillery effluent converted into potash rich fertilizer K-ash and K-boost. The productK boost has received overwhelming response from the farmers.
Continuing the process of sustainable practices in Sugar Production with theBonsucro Certification' for Pugalur Nellikuppam and Haliyal.
Plant specific safety project charters were rolled out with periodic review ofprogress.
Customer specific packaging and product specifications were resorted to ensurecustomer delight.
The Company's focus on energy and resource conservation has made its Co-gen and thesugar factories the best in its class with respect to efficiency and environment friendlyoperations.
The thrust on energy conservation has earned the Company various awards andrecognitions few of which are listed below:
"Excellent Energy Efficient Unit"- National award by CII on fouroccasions
"National Energy Conservation Award" from Bureau of Energy EfficiencyGovernment of India.
Energy Conservation Initiatives:
Direct Contact Heaters and Wide Gap Plate heat exchangers are extensivelydeployed for reduction in steam% cane.
Extensive deployment of variable frequency drives optimisation of pumps andfans conversion to Energy Efficient Gear Boxes and lighting systems have resulted inreduced specific energy consumption across the sugar factories.
Nellikuppam Plant received the CII Award for 'Strong Commitment to Food Safety'
Nellikuppam and Haliyal Plants upgraded to Food Safety System Certifications ISO22000 Ver 4.1
Pudukottai Nellikuppam and Haliyal Plants upgraded to Quality Management SystemISO 9001: 2015 Ver.
Nellikuppam and Haliyal qualified for SMETA 6.0 (Sedex Members Ethical TradeAudit)
Nellikuppam refinery participated and qualified in Quality Audits from severalFMCGs Pharma and other institutional client companies.
Initiated Quality Management pillar activities for TPM implementation atNellikuppam Pudukottai Sankili and Bagalkot plants
Marketing and Sales
All India production for Sugar Season 2016-17 was at a low of just 20.3 MMT against aconsumption of 25 MMT. Demand was good and prices were steady during initial part of theyear. With the start of the Sugar season 2017-18 production the prices started droppingunder the pressure of an anticipated bumper production much in excess of consumption.
The Company sold 3.85 LMT of sugar during the year across Tamil Nadu PuducherryKarnataka Kerala Andhra Pradesh and Orissa regions as against 4.78 LMT in the previous2016-17. The sharp drop in sales quantity is mainly due to lower sugar stocks consequentto lower production and also the government's restriction on sales. The company focused onachieving better price realisation through targeting select Institutional customers.
During the year the company sold over 1.39 LMT of sugar directly to institutionsaccounting for 36 % of total sales. The strategy during the year continued to be onproduct differentiation and value addition for better price realization from theinstitutional segment. The customer base includes institutions across sectors like softdrinks beverages Pharma food juices confectionery sweets dairy icecreams etc.
The Company continued sale of Bonsucro certified sugar produced from sustainablesugarcane both from TN and KN plants to discerning customers. With large multinationalsfocussing on sustainability and sustainable raw materials E.I.D Parry's Bonsucrocertified sugar is gaining a competitive advantage over others. During the year 2017-18the sale of Bonsucro sugar was 5870 MT.
In the retail segment the Company recorded consistent growth in numbers with itsstrategy of expanding market presence and market penetration. During the year the Companysold over 19000 MT of sugar directly through retail packs including "Amrit" theCompany's offering of 100% Natural Brown Sugar.
BIO- PESTICIDES DIVISION
Biopesticides which are defined as natural materials derived from animals plants andbacteria as well as certain minerals that are used for pest control currently comprise asmall share of the total crop protection market globally with a value of about $3 billionworldwide accounting for just 5% of the total crop protection market.
Scientists regulators and consumers globally continue to raise health concerns causedby usage of chemicals pesticides even for newer range of pesticides like neonicotinoids.Such concerns coupled with the increasing information access to consumers is estimated topropel biopesticides to grow at a CAGR 2.5 times higher than synthetic chemical pesticidewith compounded annual growth rates of more than 15%. Successful biopesticide companiesover the period have steadily grown in stature through careful investment infusionsconservative and well planned expenditures careful consideration of the marketopportunities efficacious products carefully planned partnerships and the tenacity oftheir management. In the US more than 200 products are reportedly available compared to60 analogous products in the European Union which is primarily due to the complexity inbiopesticide regulations at EU. More than 225 microbial bio pesticides are manufactured in30 OECD countries. The NAFTA countries (USA Canada and Mexico) use about 45% of the biopesticides sold while Asia lags behind with the use of only 5% of bio pesticides soldworld over.
The global biopesticides market was valued at US$ 3.47 Bn in 2016 and is expected toreach US$ 12.23 Bn by 2025 expanding at a CAGR of 14.8%. With the growing increase indemand for organic food and food security for the growing population control of pestswhich have gained resistance to chemical pesticides limited agricultural landavailability besides steady increase in crop loss due to pests and diseases the use ofbiopesticides is expected to grow multifold. Fruits & vegetables being the major groupof crops that would encourage biopesticide usage thanks to the increasing awareness totheir nutritional benefits and the rise in need for enhancement of quality and yield.
The division registered a revenue of Rs.138 Crore as compared to Rs.122 Crore in theprevious year accounting for 7% of the Company's revenue. The sale of Aza Productsregistered a growth of 18% over 2016-17 with exports registering a growth of 23% anddomestic registering a growth of 7% over 2016-17. In overseas markets USA
accounted for 60% of export sales while Europe and Asia accounted for 36% and 4%respectively.
Standalone Financial Performance
|Details ||2017-18 ||2016-17 |
|Revenue ||137.89 ||121.74 |
|EBITDA* ||31.52 ||15.81 |
Earnings before interest tax depreciation and amortization. Outlook
Expanding upon the role of bio pesticides in biocontrol resistance management isgaining a key consideration where pest resistance to conventional chemical pesticides is asignificant concern. Scientific research has repeatedly demonstrated that with continuoususe of the same class of pesticide populations of insect pests plant pathogensnematodes and weeds develop resistance quickly even to different types of functionallysimilar chemistries. This phenomenon called cross-resistance is caused by multi-chemistrydetoxification mechanisms present in many pest populations. Bio pesticides in combinationwith synthetic chemistries has emerged as a significant tool to effectively manage suchresistance. Additionally they typically have modes of action that are different fromsynthetic pesticides and do not rely on a single target site for efficacy. Properly usedthese bio pesticides have the potential to extend the effective field life of the newchemistry synthetics by curtailing the development of resistant pest populations. Biopesticides are noted among the low-risk and most highly effective tools for achieving cropprotection balancing optimal productivity with sustainability.
The growth of the bio pesticides market is driven by increasing investment from leadingcrop protection companies growing awareness about environmental safety increasing demandfor organic food and growing government initiatives to promote the use of bio pesticidesacross the globe. The key players in the global bio pesticides market are BASF SE BayerCropScience AG Marrone Bio Innovation Certis USA LLC The Dow Chemical Company andvarious other international players.Parry's Bio Products division is equipped with stateof the art equipment along with well-established insectarium and trial plots forconducting various studies. Apart from in house R&D the centre collaborates withvarious CROs in India and abroad. These technical collaborations besides helping indevelopment of knowledge facilitates enhancement of intellectual capabilities.
The nutraceutical ingredients market estimated at US$ 29.48 Bn in 2016 is projectedto grow at a CAGR of 7.5% to reach US$ 45.58 Bn by 2022. This constitutes around 8% ofthe total Nutraceuticals market (US$ 383 Bn).World demand for minerals and vitaminsconsumed in nutraceutical applications was US$6 Bn in 2015 growing at an annual rate of6% fuelled by growth in food and beverage fortification adult and paediatricnutritionals and
dietary supplements. Widespread acceptance of health and wellness benefits will keepminerals and vitamins among the most widely used nutraceutical ingredients.
By Region Asia-Pacific is projected to be the fastest-growing market for nutraceuticalingredients during this period. While USA and Europe is going to drive innovations APACwill drive the volumes. Based on projected investment levels in these industries andrising consumer incomes China is expected to evolve as the largest global producer andconsumer of nutraceutical ingredients by 2020 surpassing the United States and WesternEurope. Japan is the fastest-growing country market in the Asia-Pacific region. This isdue to the rapidly aging population in Japan. Global micro-algae based nutraceuticalingredient market currently valued at USD 0.6 bn is expected to grow at a healthy CAGR7.39% in the next 6 years.
The Nutraceuticals Division's revenue from operations was Rs.68 Crore for the yearended March 312018 representing 3% of the Company's revenue about 82% of whichrepresents exports. During the year Spirulina sales has grown by 8% and 14% respectivelyin North America region and rest of the world. This year business achieved growth of 76%in Spirulina value added Segment. Chlorella sales grown by 28% over previous year. In theretail segment business achieved growth of 63%. However due to drop in sales of Lycopeneand Traded Products overall turnover reduced by Rs.3 Crore compared to previous year.
Chlorella is gaining importance as an essential micro-algae supplement alongwithSpirulina. With the increase in popularity and adoption of vegan diets across evolvedhealth oriented consumers Chlorella is seen as a powerful detox agent with rich vitaminprofile. In 2017-18 the Company initiated commercial production of Chlorella and achievedreasonable success in stabilizing the cultivation and harvesting processes. Investmentsare being made further to stabilize the production process and scale up the volumes in thenext financial year.
The business in addition to the Organic and USFDA approval has embarked on a journeyto upgrade its overall Quality Management
System from supplier to end consumer. During the year various projects such aslaboratory control batch traceability facility and equipment qualification QMS andtraining were implemented as part of the process and will be further extended to all cGMPprocedures and norms. In addition as a part of clean label program Organic Spirulina andChlorella received the Non GMO verification.
Standalone Financial Performance
|Details ||2017-18 ||2016-17 |
|Revenue ||68.48 ||70.76 |
|EBITDA* ||12.20 ||14.58 |
*Earnings before interest tax depreciation and amortization.
Global trends in Nutraceutical ingredients will result in developing regions achievingmuch faster growth in both consumption and production than developed regions. TheCompany's Joint venture with Synthite Industries would launch Natural Blue colour(Phycocyanin) in the global color market. This will propel growth for value-added productsfrom Spirluna. Our R&D efforts would be focused on 3 broad areas - Green foodsProtein and Algal Omega 3. We expect to launch products under these categories in nextfinancial year. Further the business is embarking on a journey of sustainability and willmake investments to conserve and reuse rainwater in the coming year.
COMPANY FINANCIAL PERFORMANCE (STANDALONE)
|BUSINESS SEGMENTS ||2017-18 ||2016-17 |
|Sugar ||1491 ||1801 |
|Cogen ||111 ||200 |
|Distillery ||305 ||318 |
|Sugar Total ||1907 ||2319 |
|Biopesticides ||138 ||122 |
|Nutraceuticals ||68 ||71 |
|Others ||2 ||4 |
|Total ||2115 ||2516 |
Note: Above includes inter segmental revenue.
The Earnings before Interest Depreciation Tax and Amortization for the year wasRs.305 Crore representing 15% of total revenue and decrease of 40% over previous year'sRs.509 Crore.
EBIT for the year was Rs.191 Crore as against Rs.397 Crore in the previous year 2016-17.
The Company incurred finance charges of Rs.113 Crore for the year 2017-18 as comparedto Rs.140 Crore for the year 2016-17.
Depreciation was Rs.114 Crore for the year 2017-18 as compared to Rs.112 Crore for theyear 2016-17.
Profit Before Tax for the year stood at Rs.78 Crore as against Rs.257 Crore in theprevious year.
Profit After Tax for the year stood at Rs.101 Crore as against Rs.284 Crore in theprevious year.
FINANCIAL OVERVIEW Net worth
The Net worth as on March 31 2018 was Rs.1638 Crore as against Rs.1477 Crore inMarch 31 2017. Capital Redemption Reserve remained unchanged during the year whileDebenture Redemption Reserve increased vide transfer from Profit and Loss Account for Rs.8Crore.
The borrowings of the Company increased by 8% from Rs.943 Crore in 2016-17 to Rs.1018Crore in 2017-18. The Long Term Debt is 0.36 times of equity against 0.52 times of equityin the previous year. Working capital borrowing utilized was Rs.432 Crore on March 312018as against Rs.182 Crore in previous year.
The Company incurred Rs.50 Crore (Rs.65 Crore during the previous year) of Capitalexpenditure during the year.
The total investment of the Company as at March 31 2018 was Rs.878 Crore againstRs.786 Crore in 2016-17. The following investments were made during the year:
Rs.8 Crore in US Nutraceuticals LLC
Rs.58 Crore in Parry Sugars Refinery India Private Limited
During the year rating agency CRISIL has enhanced its credit rating to the Company'sLong Term Rating from "CRISIL A+" to "CRISIL AA-/ Stable" andreaffirmed Short Term Rating as "CRISIL A1+" for its Short Term borrowings.
Book Value and Earnings per Share
Book Value of the Company increased from Rs.84 per share to Rs.93 per share. Earningsper share decreased to Rs.5.70 per share for the year ended March 312018 from Rs.16.03for the year ended March 312017
|Particulars ||2017-18 ||2016-17 |
|Key Profitability Ratios || || |
|EBIDTA / Sales % ||14.85% ||20.69% |
|PAT / Sales % ||4.92% ||11.54% |
|PAT / Networth % (ROE) ||6.17% ||19.20% |
|Key Capital Structure Ratios || || |
|Net Debt / Equity Ratio ||0.62 ||0.64 |
|Long Term Debt /Equity Ratio ||0.36 ||0.52 |
|Outside Liabilities / Networth ||1.47 ||1.33 |
|Net Fixed Assets / Networth ||0.87 ||1.00 |
|Debt Service Coverage Ratio ||1.27 ||1.19 |
|Liquidity Ratios || || |
|Current Ratio ||0.78 ||0.83 |
|Inventory Turnover (days) ||165 ||115 |
|Receivables (day gross sales) ||35 ||35 |
|Earnings and Dividend Ratios || || |
|Dividend % ||300%* ||400% |
|Dividend Payout % ||53%* ||25% |
|Earnings Per share (?) ||5.70 ||16.03 |
|Book Value Per share (?) ||93 ||84 |
|P / E Multiple ||48.02 ||17.69 |
*Subject to approval of Shareholders
The Company follows a well-defined Risk Management policy which requires theorganisation to identify the risks in the businesses are exposed to and categorise thembased on the impact and probability of occurrence. Mitigation plans are laid out for eachrisk along with identification of the risk owner thereof. It is the endeavour of thecompany to continuously improve its systems processes and controls to mitigate the risks.
The Company has a robust Risk Management framework to identify evaluate business risksand opportunities. This framework seeks to create transparency minimize adverse impact onthe business objectives and enhance the Company's competitive advantage. The Company'sRisk Management framework defines the risk management approach across the enterprise atvarious levels including documentation and reporting.
|Risk Category ||Risk ||Mitigation Plan |
|Economic Risk ||Due to global macro factors such as inflation interest rate and economic slowdown there could be an adverse impact on business and profitability ||With the experience in the financial market the Company is able to source funds at competitive rates in the diverse market conditions. |
|Sugar Price Risk ||Due to Global & domestic surplus there could be sharp fall in softening steady sugar prices affecting the profitability. ||The Company is focusing on increasing Retail volumes and increasing the market share of Institution business. |
|Raw Materials Availability Risk ||Due to the adverse weather conditions and farmers switching to alternate crops etc. availability of crucial inputs such as sugarcane neem seeds water etc. may be impacted thereby diminishing profitability. ||The Company connects with farmers continuously by educating on scientific and sustainable sugarcane cultivation methods besides providing them high yielding sugarcane seeds / saplings that give better yield. The company launched "Farmers Connect" app for better interaction and to support the farmers instantly. The Company enjoys a good brand value and trust amongst the farmer community by ensuring timely payments and is thus a preferred partner for sugarcane supply. |
| || ||With regard to neem seeds the company is working with grassroot level pickers for sourcing neem seeds from front end traders avoiding middlemen. The company has accelerated Captive Plantation of Neem trees and a Project called "Maximise Sugar Partnership (MSP)" by utilising the services of Cane Divisions as Neem Collection Centres. |
| || ||The company is treating the water in lagoons for usage harvesting rain water and implementing the Zero Liquid Discharge (ZLD) to recycle and reuse the water as risk mitigation for Water availability. |
|Raw Material Pricing Risk ||The Central and State Governments decide sugarcane prices in a manner that is not linked to sugar prices. Unviable sugarcane prices may impact the profitability of the Sugar division. ||This is one of the major external risk. The Company through SISMA is taking up with the State Government to link the sugarcane prices to sugar prices to mitigate this risk. |
|Investment Risk ||The company has invested in PSRIPL Alimtec and Valensa all wholly owned subsidiaries. Any nonperformance of the invested entities will have a risk of sub-optimal return on investment. ||Periodical review mechanism is in place to monitor the investment risk of the portfolio of assets and management participation in decision making to oversee the strategic decision making. |
|Credit Risk ||Due to fixed sugarcane pricing but floating sugar realization the Company may face shortfall in availability of cash to pay to farmers. ||The Company has been very prudent in managing its cash flows and has well placed short-term credit facilities from various banks. This helps to mitigate the short term credit mismatch. |
|Foreign Exchange Risk ||The Company exports/imports sugar based on government policies and exports bio-pesticides and Nutraceuticals. Hence it has exposure to adverse currency fluctuations. ||The Company follows a comprehensive foreign exchange policy to hedge foreign currency fluctuation by taking cover through forward contract. |
|Cyber Security Risk ||The company may encounter non-availability of service or failure of multiple systems which may lead to disruption in business operation due to lack of adequate processes cyber security Backup and Disaster Recovery systems. ||Information Systems Backup and Disaster Recovery Policies are in place and periodical review of the same is in place. Robust Firewall and Security Event Information Management System are in place to monitor all types of Security breaches and take corrective measures. |
Internal Financial Controls
The Company has aligned its current systems of Internal Financial Control (IFC) withthe requirement of the Companies Act 2013. The Company has established a robust frameworkof IFC which includes entity level policies processes and operating level standardoperating procedures. The Company has well-established processes and clearly- definedroles and responsibilities for people at various levels.
The Company's internal controls are adequate with its size and the nature of itsoperations. These have been designed to provide reasonable assurance with regard torecording and providing consistent financial and operational information complying withthe applicable statutes safeguarding assets from unauthorized use executing transactionswith proper authorization and ensuring compliance with policies. Processes forformulating and reviewing annual and long-term business plans have been laid down. TheCompany uses a state-of- the-art enterprise resource planning (ERP) system SAP as abusiness enabler to record data for accounting consolidation and management informationpurposes.
To further strengthen assess and report on the internal financial control an in-houseManagement Audit Division has been established by the Company which is ISO 9001:2015certified. The internal audit is conducted based on the Annual Audit Plan which isreviewed and approved by the Audit Committee. The Internal Audit reports are presented tothe Audit Committee on a quarterly basis for review and deliberation. The CompanyManagement has assessed the effectiveness of the Company's internal control over financialreporting as of March 312018 and found the same to be adequate and effective.
There has been no change in the nature of business of the subsidiaries during the yearunder review. In accordance with Section 129(3) of the Companies Act 2013 the Companyhas prepared a consolidated financial statement of the Company and all its SubsidiaryCompanies which is forming part of the Annual Report. A statement containing the salientfeatures of the financial statements of the Subsidiary Companies Joint ventures andAssociates are given in Annexure-A to this Report.
In accordance with the provisions of Section 136(1) of the Companies Act 2013 theAnnual Report of the Company containing standalone and consolidated financial statementshas been placed on the website
of the Company www.eidparry.com. Further the audited accounts of the SubsidiaryCompanies and the related detailed information have also been placed on the website of theCompany www.eidparry.com. The annual accounts of the Subsidiary Companies will also beavailable for inspection by any shareholder/debenture trustees at the Registered office ofthe Company and of the Subsidiary Companies concerned during working hours upto the dateof the Annual General Meeting. A copy of annual accounts of subsidiaries will be madeavailable to shareholders seeking such information at any point of time.
Parry Sugars Refinery India Pvt Ltd (PSRIPL)
PSRIPL continues to engage itself in the business of importing raw sugar from theinternational market produce the refined sugar as per international quality and customerspecifications and export the same into the international market.
The global sugar market which was in deficit by 1.43 MMT during 201617 moved to asurplus of 5.85 MMT in 2017-18. Re-entry of EU into export market led to falling whitepremium trend during the year and thereby lowering the spreads.
During the year PSRIPL increased its refined sugar export volume by 18% to 6.70 LMT.Sales through containers recorded an impressive 31% increase in volume to cross 1LMT mark.During the year the company commenced direct exports to institutional customers and CIFsales to destination traders. Consequently the sales turnover of the company increasedfrom Rs.1847 Crore in 2016-17 to Rs.2418 Crore in 2017-18. The refinery operationssuccessfully improved its cost structure and increased its production of refined sugar to6.73 LMT from 6.23 LMT during 2016-17. The company also has been successful indebottlenecking its refinery capacity to 2500 TPD. The company managed to improve itsworking capital management and repaid Rs.60 Crore of long term borrowings as per schedule.A wholly owned subsidiary Parry International DMCC was incorporated during the year atDubai Multi Commodities Centre Dubai.
Due to higher levels of sugar production in countries like India and Thailand thesurplus in global sugar market is expected to reach 7 MMT levels during 2018-19. Due tothis supply overhang spreads are at historically lowest level. PSRIPL will respond tothis external challenge by increasing its value added sales and aggressively improving itscost structure of refining.
US Nutraceuticals LLC
During the year US Nutraceuticals LLC achieved sales of USD 22.7 MN against USD 23.8MN of previous year. The marginal drop in sales was due to lower sales of Astaxanthinbased formulation products. This impact was partly offset by 14% increase in the sales ofSaw Palmetto on account of healthy market demand. Further through improved supply chainprocesses strategic tolling actions the company has achieved better margins in the sawpalmetto segment compared to previous year. The Company expects that the efforts that arebeing taken to revive Astaxanthin based formulation sales would yield results in nextfinancial year. The company has been investing in clinical trials for developing newformulations. The Company expects these investments would improve the Company'sperformance in the next financial year.
Alimtec SA Chile the wholly owned subsidiary of the company has seen a temporarysetback in its operations during the year due to inclement weather and pond contaminationissues. The investment in window dryer has started yielding results with reduced dryinglosses compared to previous year levels. The Company would also invest in water filtration/ treatment systems during the next financial year and focus on improving the productivitylevels.
Parry America Inc.
During the year Parry America Inc the wholly owned subsidiary of the Companyregistered sales of USD 10 Mn achieving a growth of 18% over previous year. The companyheadquartered in Arlington Texas USA is a trusted manufacturer of Azadirachtin basedbio-pesticides which is marketed in North and South America besides Australia and Japan.Parry America had forged marketing tie ups with some of the leading overseas Agro chemicalcompanies for selling their Azadirachtin formulations by providing techno commercialsupport besides working with leading Research institutes for developing innovative IPprotected organic alternatives for chemical control.
Coromandel International Limited (CIL)
During the year the favourable agriculture environment in CILs key markets supportedby low channel stocks and stable raw material prices aided the agri input consumption andresulted in the improved performance of CIL across the businesses. During the year CILmade significant strides in expanding its market presence through differentiationimproving its sourcing efficiencies and manufacturing capability and scaling up itsbranding and customer connect initiatives through integrated marketing and agronomistteams. Phosphatic Fertiliser business of CIL improved its sales volumes by 11 percent to27.66 lakh tons registering significant growth in unique product segment. Market sharefor the year moved up to 15.8 percent (14.6 percent in FY17) with volume and market sharegrowth coming from all the States. Further normal monsoons in South and East marketsaided faster stock liquidation and the Company's channel stocks remains at comfortablelevels.
Crop Protection business registered topline growth in domestic and exports marketsimproving its turnover by 8% percent in FY17-18. However lower crop prices higher stockinventory in Latin American markets and rising raw material costs driven by strictenvironment restrictions in China impacted the margins.
During the year retail business of CIL benefitted from a favourable Kharif seasonimproving its scale and operational efficiency. The growth was primarily driven by strongperformance of non-fertiliser segment focused product and store approach reducedattrition and execution of demand generation enablers. Specialty Nutrients businessleveraged strengths of integrated marketing structure promoting its crop based approachin driving the volumes. New crop specific water soluble fertiliser products wereintroduced during the year and received positive response from the market. With thegovernment's thrust towards promoting balanced nutrition and water use efficiency thebusiness expects significant growth opportunities in coming years. During the year SSPbusiness operated at a higher capacity improving its sales by 9 percent to 5.20 lakhtons inspite of higher channel stocks and sub normal monsoons in its key operating WestCentral and North markets.
CILs Organic business grew its volumes by 11 percent to 1.45 lakh tons focusing onvalue added granulated products. CIL continued to be the market leader in the CityCompost segment marketing 0.26 lakh tons during the year. Overall CIL recorded a totaloperating revenue of Rs.10987 Crore. Profit for the year before depreciation interestand taxation was Rs.1278 Crore and Profit before Tax was Rs.1003 Crore. Net Profit afterTax was Rs.659 Crore.
E.I.D Parry's HR Vision "Building Organizational Capability to deliver SuperiorBusiness Performance" is delivered by a high level of policy deployment initiativesand contemporary HR practices focusing on four key imperatives: Capability DevelopmentTalent Management Employee Engagement and Productivity & Safety.
In a challenging and competitive environment the company believes that people are thekey assets to the growth of an organisation. The Company enables every employee to achievehigh standards of performance & take up challenging goal to their true potential byinstitutionalizing Competency Development Framework. The Company scales up capabilitiesacross by creating specialist knowledge / Subject Matter Experts in Sugar DistilleryCogeneration & Value Added Products to enhance the internal efficiencies. A lot ofinterventions have been rolled out in terms of enhancing the capabilities of executivesespecially the leadership team through Individual Development Plans Leadership coachaccreditation program etc.
The Company's Employee Engagement journey goes back to 2014 when it started EmployeeEngagement surveys through Project VOICES'. The Company worked around thearchitecture to enhance the engagement levels through its people strategy linked to itsEmployee Value Proposition - Enriching Employees'.
Based on the feedback from employees and their expressed expectations and requirementsthe Company designed and developed various initiatives under the Project CHOICES'.This further served as a strong foundation for integrating all HR processes using Hewitt'stool of engagement and the result was Project SMILE @ Work'. Spearheaded by theSenior Management team at Parry SMILE' an acronym for Succeed Motivate InspireLearn & Grow and Engage is a unique business and HR architecture designed to enhanceemployee engagement levels across the organisation. With an extensive roll-out ofengagement initiatives under the five different categories Project SMILE@Work'revolves around the Company's goal of offering the best environment and working experiencepossible. The Company believes that a motivated employee with a passion for innovation ina given environment of learning & growth would engage and succeed in all initiatives.
The number of permanent employees on the rolls of the Company as on 31st March 2018 was2651. Industrial relations remained cordial at all the Company's units during the yearunder review.
The Company has in place a prevention of sexual harassment policy in line with therequirements of the Sexual Harassment of women at the Workplace (Prevention Prohibitionand Redressal) Act 2013. An Internal Complaints Committee (ICC) has been set up toredress complaints received regarding sexual harassment. All employees are covered underthis policy. During the year one complaint was received and acted upon.
AWARDS & RECOGNITIONS
During the year the Company received the following awards:
"Commitment to Engagement" award from Aon Hewitt in May 2017.
Nellikuppam Unit - second prize in Best Industrial Relations Category for theperiod 2008-2014 from Hon'ble. Labour Minister. TN govt. for sustaining cordial industrialrelations climate in July 2017.
"Chennai Best Employer Award 2017" from Employer Branding InstituteIndia in Dec 2017.
ET Now's Best Corporate Social Responsibilities Practices Award during Feb 2018.
India's Best Sugar Manufacturing Company of the year 2017 Award by InternationalBrand Consulting Corporation USA.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Following were the changes in the composition of the Board:
Mr. Anand Narain Bhatia Independent Director who was appointed on July 302014 for a period of three years retired on July 29 2017.
Mr. V. Ramesh Managing Director took early retirement on July 312017.
Mr.A.Vellayan Chairman took early retirement from the Board on February 72018.
Mr. M.B.N. Rao Independent Director resigned from the Board on February 272018.
The Board wishes to place on record its appreciation for the valuable contribution madeby Mr.Anand Narain Bhatia Mr.V.Ramesh Mr.A.Vellayan and Mr.M.B.N. Rao during theirtenure as Members of the Board and Board Committees.
Mr. S. Suresh was appointed as the Managing Director of the Company for a period offive years w.e.f August 1 2017 which was approved by the shareholders at the AnnualGeneral Meeting held on August 4 2017.
Mr. Ramesh K B Menon and Mr.M.M.Venkatachalam joined the Board as non-executive nonindependent Directors on November 8 2017 and February 7 2018 respectively. Mr. C. K.Ranganathan and Mr. Ajay B Baliga joined the Board as Independent Directors on November 82017 and May 9 2018 respectively.
Consequent to the retirement of Mr.A.Vellayan the Board elected Mr.V.Ravichandran asChairman with effect from February 8 2018.
In accordance with the provisions of Section 161 of the Companies Act 2013 Mr. RameshK. B. Menon Mr.M.M.Venkatachalam Mr. C. K. Ranganathan and Mr. Ajay B Baliga hold officeup to the date of the ensuing Annual General Meeting. The Company has received lettersproposing their appointment as directors at the ensuing Annual General Meeting of theCompany.
As per the provisions of Section 152 of the Companies Act 2013 read with the Articlesof Association of the Company Mr. V. Ravichandran Director retires by rotation at theforthcoming Annual General Meeting and being eligible offers himself for reappointment andthe requisite details in this connection is contained in the notice convening the meetingand the Corporate Governance Report.
The Company has received declarations from all the Independent Directors confirmingthat they meet the criteria of independence as prescribed under section 149(6) of theCompanies Act 2013 and also comply with Regulations 16 & 25 of the SEBI (lODR)Regulations 2015.
Mr. S.Suresh Managing Director Mr.VSuri Chief Financial Officer and Ms. G.JalajaCompany Secretary are the Key Managerial Personnel of the Company as per Section 203 ofthe Companies Act 2013.
Number of Meetings of the Board
Seven Meetings of the Board of Directors were held during the year the details ofwhich are given in the Corporate Governance Report.
In accordance with the Companies Act 2013 and SEBI (LODR) Regulations the Board hascarried out an evaluation of its own performance the performance of Committees of theBoard and also the directors individually. The manner in which the evaluation was carriedout and the process adopted has been given in the Corporate Governance Report.
Policy on Directors' Appointment and Remuneration and Other Details
The Board has on the recommendation of the NRC framed a policy for selection andappointment of Directors Senior Management and their remuneration and also framed thecriteria for determining qualifications positive attributes and independence ofdirectors. The Remuneration Policy and criteria for Board nominations are available on theCompany's website at http://www.eidparry.com/investors/ Policies-Codes.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3) of the Companies Act 2013 your Directors to the best oftheir knowledge belief and according to information and explanations obtained from themanagement confirm that:
In the preparation of the annual accounts for the financial year ended March 312018 the applicable accounting standards have been followed and there are no materialdepartures from the same;
they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at March 312018 and of the profit of theCompany for the year ended on that date;
they have taken proper and sufficient care 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;
they have prepared the annual accounts on a going concern basis;
they have laid down proper internal financial controls to be followed by theCompany and such controls are adequate and operating effectively and
they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
AUDITORS AND AUDITORS' REPORT Statutory Auditors
M/s. Price Waterhouse Chartered Accountants LLP (FR No.012754N/ N500016) Chennai wereappointed as Statutory Auditors of the
Company by the shareholders at the 42nd Annual General Meeting held on August 4 2017to hold office up to the conclusion of the 47th Annual General Meeting.
As per the requirement of the Central Government and pursuant to Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 asamended from time to time your Company's cost records are subject to Cost Audit.
The Board of Directors on the recommendation of the Audit Committee have appointedM/s. Narasimha Murthy & Co Cost Accountants as the Cost Auditors to audit the costaccounting records maintained by the Company for the financial year 2018-19 on aremuneration of Rs.850000/- plus applicable tax and reimbursement of out of pocketexpenses. A resolution seeking members' ratification for the remuneration payable to theCost Auditor forms part of the notice convening the Annual General Meeting.
The cost audit report of the earlier Cost Auditor M/s. Geeyes & Co for thefinancial year 2016-17 was filed with the Ministry of Corporate Affairs on 8th September2017. The cost audit report for the financial year 2017-18 would be filed with theMinistry of Corporate Affairs on or before September 30 2018 as per the provisions of theCompanies Act 2013.
The Board appointed M/s. R Sridharan & Associates Practicing Company SecretariesChennai as the Secretarial Auditors to undertake the Secretarial Audit of the Company forthe year 2017-18. The Report of the Secretarial Auditors is provided in Annexure-B tothis Report.
There are no qualifications reservations or adverse remarks or disclaimers made by theStatutory / Secretarial Auditors in their respective reports.
The Statutory Auditors have not reported any incident of fraud during the year underreview to the Audit Committee of the Company.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
EID Parry's CSR initiatives primarily focus on improving the quality of life of thecommunities where it operates through socio welfare initiatives.The various CSRinitiatives undertaken by the Company during the last financial year include thefollowing:
The Company pursues a well managed Health Care programme across its units providingmedical amenities for people living in neighbouring villages. Hospital on Wheels' awell equipped mobile unit with diagnostic and medical intervention amenities makesemergency care possible for people living in remote areas. In addition mobile medicalunits cater to the needs of the elderly in the cane growing villages around the Plants.
In addition to the comprehensive health and medical care programmes for employeesacross the different Plants free pulse polio camps for the children of labourers andmedical camps offering health checkups and free medicines are conducted regularly for canegrowers harvesting and transport labourers.
As an important part of its CSR programmes E.I.D Parry promotes education in theneighbouring villages near its units. Besides contributing to infrastructure building andfacility upgradation at schools the Company provides educational assistance to canegrowers children and participates in their developmental needs. Baby care centres mid-daymeals for Balawadi school children of labourers training programmes for employees'children are few of the ongoing initiatives.
E.I.D Parry has always played a key role in extending relief support to villagersduring natural calamities and helping the Government in its disaster managementinitiatives. Drought relief measures were extended to farmers in Tamil Nadu Karnataka andAndhra Pradesh to mitigate crop loss. Community development works were also undertaken inthe villages in and around the units. As part of its community welfare programmes theCompany undertook the desilting of Ponds and Canals to augment the water supply tovillages and schools. Tree Planting across schools and neighbourhoods were conducted aspart of the Green Environment initiatives.
The Company has constituted a CSR Committee in accordance with Section 135 of theCompanies Act 2013. The CSR Committee has formulated and recommended to the Board a CSRPolicy indicating the activities to be undertaken by the Company which has been approvedby the Board. The CSR Policy can be accessed on the Company's website at www.eidparry.com.
As per the provisions of the Companies Act 2013 the Company was required to spendRs.13.20 Lakh towards CSR activities for the year 2017-18. However the Company has beenactively involved in various CSR activities and an amount of Rs.123.46 Lakh was spentduring the year. The Annual Report on CSR activities is given in Annexure-C to thisReport.
During the year the Company has bagged the National CSR award under the category of"Best Overall Excellence in CSR" in National CSR Leadership Congress &Awards 2016.
RELATED PARTY TRANSACTIONS
All contracts / arrangements / transactions entered into by the Company during thefinancial year with the related parties were on arm's length basis and were in theordinary course of business. As the sale of Bio Pesticides business to CoromandelInternational Ltd (CIL) a related party transaction was not in the ordinary course ofbusiness the Company has obtained the approval of shareholders. There were no materiallysignificant related party transactions with Promoters Directors Key Managerial Personnelor other designated persons which may have a potential conflict with the interest of theCompany at large.
All Related Party Transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee is obtained on a quarterly basis for thetransactions which are of a foreseen and repetitive nature. The transactions entered intopursuant to the omnibus approval so granted are placed before the Audit Committee fortheir review on a quarterly basis. The policy on Related Party Transactions as approved bythe Board is available at the web link: http://www.eidparry.com/ investors/Policies-Codes.
EMPLOYEE STOCK OPTION SCHEME
The Company has introduced Employee Stock Options Scheme 2016 during the year 2016-17as approved by the shareholders. The details of the Options granted upto March 312018 andother disclosures as required under SEBI (Share Based Employee Benefits) Regulations 2014is available on the Company's website at www.eidparry.com.
The Company has received a certificate from the Statutory Auditors of the Company thatthe above referred Scheme had been implemented in accordance with the Securities andExchange Board of India (Share Based Employee Benefits) Regulations 2014 and theresolutions passed by the Members in this regard.
The report on corporate governance along with certificate from a practicing CompanySecretary as required under the SEBI (LODR) Regulations is annexed to this Report. Thereport also contains the details required to be provided on the board evaluationremuneration policy implementation of risk management policy whistle-blower policy /vigil mechanism etc.
The Managing Director and the Chief Financial Officer have submitted a certificate tothe Board regarding the financial statements and other matters as required underRegulation 17(8) read with Schedule II of Part B of the SEBI (LODR) Regulations.
TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the applicable provisions of the Companies Act 2013 read with the IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 ("the Rules") allunpaid or unclaimed dividends are required to be transferred by the Company to the IEPFestablished by the Central Government after the completion of seven years. Furtheraccording to the Rules the shares in respect of which dividend has not
been encashed by the shareholders for seven consecutive years or more is also requiredto be transferred to the demat account created by the IEPF Authority. Accordingly theCompany has transferred the unclaimed and unpaid dividends as well as the correspondingshares as per the requirements of the IEPF rules details of which are provided on ourwebsite at http://www.eidparry.com/Unpaid- Unclaimed-Dividend.
During the year the Company has transferred an amount of Rs.2251264/- being theunclaimed dividend for the year 2009-10 to the Investor Education and Protection Fundestablished by the Central Government. The Company has also transferred 689002 shares inrespect of which dividend has not been paid or claimed for seven consecutive years or moreas enunciated under Section 124 (6) of the Companies Act 2013.
DISCLOSURES Audit Committee
The Audit Committee comprises of Mr. V. Manickam Independent Director as the ChairmanMr. C. K. Ranganathan Independent Director Dr. (Ms) Rca Godbole Independent Directorand Mr.M.M.Venkatachalam Non- Executive Non- Independent Director as Members.
The CSR Committee comprises of Mr. V. Manickam Independent Director as the Chairmanand Mr. V .Ravichandran Non-Executive Non Independent Director and Mr. S. SureshManaging Director as members.
Vigil Mechanism & Whistle Blower Policy
The Company has a Vigil Mechanism for directors and employees to report genuineconcerns and grievances and provides necessary safeguards against victimisation ofemployees and directors.
The Audit Committee reviews on a quarterly basis the functioning of the Whistle Blowerand vigil mechanism. The Vigil Mechanism and Whistle Blower Policy have been posted on theCompany's website at www.eidparry. com and the details of the same are given in theCorporate Governance Report.
Business Responsibility Report (BRR)
The SEBI (LODR) Regulations mandate the inclusion of the BRR as part of the AnnualReport for top 500 listed entities based on market capitalisation. In compliance with theSEBI (LODR) Regulations the BRR forms part of this Annual Report.
Dividend Distribution Policy
Pursuant to Regulation 43A of Listing Regulations the top 500 listed Companies shallformulate a Dividend Distribution Policy. The Company's Dividend Distribution Policy asapproved by the Board is available on the Company's website atwww.eidparry.com/investors/Policies-Codes.
Conservation of energy technology absorption foreign exchange earnings and outgo
The particulars relating to conservation of energy technology absorption research anddevelopment foreign exchange earnings and outgo as required to be disclosed under Section134 (3)(m) of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts)Rules 2014 is given in Annexure - D to this Report.
Loans Guarantees and Investments
There were no loans and advances in the nature of loans to associate companies as wellas to firms/ companies in which Directors are interested during the financial year2017-18.
During the financial year the Company had given guarantees and made investments insubsidiaries/Joint venture within the limits as prescribed under Sections 185 and 186 ofthe Companies Act 2013. Details of Guarantees and investments are given in Annexure -E to this Report.
Particulars of Employees and Related Disclosures
The information required under Section 197(12) of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 and formingpart of the Board's Report for the year ended March 312018 are given in Annexure - F tothis Report.
Extract of Annual Return
The extract of the Annual Return of the Company in Form MGT-9 is given in Annexure -G to this Report.
Compliance of Secretarial Standard
The Company has complied with the Secretarial Standards issued by The Institute ofCompany Secretaries of India and approved by the Central Government as required underSection 118(10) of the Companies Act 2013.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:
1. Details relating to deposits covered under Chapter V of the Companies Act 2013.
2. Issue of equity shares with differential rights as to dividend voting or otherwise.
3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme save and except ESOP referred to in this Report.
The Managing Director of the Company does not receive any remuneration or commissionfrom any of its subsidiaries.
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impact the going concern status and Company's operations in future.
The Board places on record its appreciation for the cooperation and support receivedfrom investors customers farmers suppliers employees government authorities banksand other business associates.
| ||On behalf of the Board |
|Place : Chennai ||V.Ravichandran |
|Date : May 9 2018 ||Chairman |
ANNEXURE-A TO THE BOARD'S REPORT
STATEMENT CONTAINING SALIENT FEATURES OF THE FINANCIAL STATEMENT OF SUBSIDIARIES JOINTVENTURES AND ASSOCIATES PURSUANT TO SECTION 129(3) READ WITH RULE 5 OF COMPANIES(ACCOUNTS) RULES 2014.
|S.No ||Name of subsidiary company ||Reporting Currency ||Reporting period ||Exchange Rate ||1 ||Reserves & Surplus ||Total Liabilities* ||Total Assets # ||Total Income (incl. other income) ||Profit/ (Loss) Before Tax ||Provision for Tax ||Profit/ (Loss) after Tax ||Proposed Dividend (incl. Dividend Tax) ||Investments (included in Total Assets) ||Percentage of shareholding |
|1 ||Coromandel International Limited ||INR ||31-Mar-18 ||* ||2924 ||314252 ||659871 ||977047 ||1104434 ||100252 ||34311 ||65941 ||22874 ||28783 ||60.59 |
|2 ||Parry Chemicals Limited ||INR ||31-Mar-18 ||* ||1000 ||601 ||13 ||1614 ||93 ||17 ||9 || |
|* ||60.59 |
|3 ||CFL Mauritius Ltd ||USD ||31-Dec-17 ||63.88 ||10281 ||(5259) ||11 ||5033 ||* ||(28) ||- || |
|4804 ||60.59 |
|4 ||Coromandel Brasila Ltda ||BRL ||31-Dec-17 ||19.28 ||471 ||(546) ||109 ||34 ||208 ||59 ||8 || |
|* ||60.59 |
|5 ||Sabero Europe BV ||EURO ||31-Mar-18 ||80.25 ||19 ||(26) ||7 ||- ||- ||(5) ||- || |
|- ||60.59 |
|6 ||Sabero Australia Pty.Ltd ||AUD ||31-Mar-18 ||50.01 ||41 ||(48) ||8 ||1 ||10 ||(4) ||* || |
|1 ||60.59 |
|7 ||Sabero Organics America SA ||BRL ||31-Dec-17 ||19.28 ||888 ||(699) ||121 ||310 ||150 ||(88) ||(1) || |
|* ||60.58 |
|8 ||Sabero Argentina SA ||ARS ||31-Dec-17 ||3.43 ||18 ||(23) ||6 ||1 ||- ||(7) ||- || |
|- ||57.56 |
|9 ||Parry Infrastructure Co. Pvt Ltd ||INR ||31-Mar-18 ||* ||500 ||1669 ||1135 ||3304 ||191 ||31 ||15 || |
|1930 ||100.00 |
|10 ||Parrys Investments Limited ||INR ||31-Mar-18 ||* ||180 ||108 ||11 ||299 ||12 ||11 ||* || |
|298 ||100.00 |
|11 ||Parry America Inc ||USD ||31-Mar-18 ||64.92 ||38 ||1845 ||2511 ||4394 ||6533 ||498 ||162 || |
|- ||100.00 |
|12 ||Parrys Sugar Limited ||INR ||31-Mar-18 ||- ||150 ||149 ||1 ||300 ||15 ||15 ||- || |
|300 ||100.00 |
|13 ||US Nutraceuticals LLC ||USD ||31-Mar-18 ||64.92 ||9264 ||(1902) ||2306 ||9668 ||15290 ||525 ||* || |
|873 ||100.00 |
|14 ||Parry Agrochem Exports Ltd ||INR ||31-Mar-18 ||* ||5 ||24 ||1 ||30 ||2 ||1 ||* || |
|29 ||100.00 |
|15 ||Parry Sugars Refinery India Pvt Ltd ||INR ||31-Mar-18 ||* ||30125 ||(27616) ||144586 ||147095 ||254086 ||(7595) ||* || |
|2780 ||100.00 |
|16 ||Alimtec S A ||CHP ||31-Mar-18 ||0.11 ||5176 ||(3233) ||1030 ||2973 ||787 ||(640) ||- || |
|- ||100.00 |
|17 ||Parry International DMCC ||AED ||31-Mar-18 ||17.68 ||18 ||(12) ||22 ||28 ||* ||(12) ||* || |
|* ||100.00 |
|18 ||Coromandel Agronegocious De Mexico S.A De CM. ||MXN ||31-Dec-17 ||3.25 ||29 ||69 ||129 ||227 ||681 ||8 || || |
| ||60.59 |
|19 ||Liberty Pesticides and Fertilisers Ltd ||INR ||31-Mar-18 ||* ||75 ||180 ||10 ||265 ||17 ||16 ||3 || |
|* ||60.59 |
|20 ||Dare Investments Ltd ||INR ||31-Mar-18 ||- ||500 ||538 ||152 ||1190 ||- ||(4) ||- || |
|1190 ||60.59 |
* (Non-current liabilities + Current liabilities)
# (Non-current assets + Current Assets)
PART B: JOINT VENTURE & ASSOCIATES
|Name of the Entity ||Coromandel SQM (India) Pvt. Ltd. ||Yanmar Coromandel Agrisolutions Pvt. Ltd. ||Sabero Organics Phillipines Asia Inc. ||Labelle Botanics LLC |
|Relationship ||Joint Venture ||Joint Venture ||Associate ||Associate |
|Latest audited balance sheet ||March 312018 ||March 312018 ||December 312017 ||March 312018 |
|Number of shares held ||5000000 ||130040000 ||320 ||NA |
|Amount of Investment (' In lakh) ||500 ||1300 ||* ||873 |
|% of shareholding ||30.30 ||24.24 ||24.24 ||49.00 |
|Networth attributable to the Company (' In lakh) ||1195 ||453 ||(1) ||603 |
|Profit/(loss) considered in consolidation (' In lakh) ||211 ||(271) ||- ||55 |
*less than a lakh Notes:
1. All the joint ventures/associates have been considered for consolidation.
2. In case of Sabero Organics Philippines Asia Inc. an Associate there is significantinfluence due to percentage of voting share capital.
| || ||For and on behalf of Board of Directors |
| ||S Suresh ||V. Ravichandran |
| ||Managing Director ||Chairman |
|Place : Chennai ||G Jalaja ||V Suri |
|Date : May 9 2018 ||Company Secretary ||Chief Financial Officer |
ANNEXURE - D TO THE BOARD'S REPORT
PARTICULARS OF CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGSAND OUTGO REQUIRED UNDER THE COMPANIES (ACCOUNTS) RULES 2014
A. CONSERVATION OF ENERGY Energy Conservation Initiatives:
The Company's focus on energy and resource conservation has made its Co-gen and thesugar factories the best in its class with respect to efficiency and environment friendlyoperations.
The thrust on energy conservation has earned the Company various awards andrecognitions few of which are listed below:
"Excellent Energy Efficient Unit"- National award by CII on fouroccasions
"National Energy Conservation Award" from Bureau of Energy EfficiencyGovernment of India.
Thermal Energy Conservation:
Direct Contact Heaters and Wide Gap Plate heat exchangers are extensivelydeployed for education in steam% cane.
Electrical Energy Conservation:
Extensive deployment of variable frequency drives optimisation of pumps andfans conversion to Energy Efficient Gear Boxes and lighting systems have resulted inreduced specific energy consumption across the sugar factories.
B. TECHNOLOGY ABSORPTION The details are as under:
(1) The efforts made towards technology absorption and benefits derived:
In its continued effort towards sustainable water utilisation the Company has embarkedon a Zero Liquid Discharge project at Nellikuppam sugar factory. The condensate polishingsystem has been commissioned enabling recycling of 2400 m3 of water per day.
(2) In case of imported technology (imported during the last three years reckoned fromthe beginning of the financial year)
The Company has initiated work with a Bio Technology firm at USA for the development ofhigh efficiency yeast culture for the production of Ethanol .
The objective is to achieve higher fermentation efficiency and reduction in effluentload at distilleries.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
The foreign exchange earned in terms of actual inflows during the year and the Foreignexchange outgo during the year in terms of actual outflows
| ||2017-I^H ||2016 - 17 |
|Foreign exchange earned ||14228 ||14552 |
|Foreign exchange outgo : || || |
|(i) Towards expenditure ||41795 ||1467 |
|(ii) Towards dividend ||- ||9 |
ANNEXURE - E TO THE BOARDS REPORT
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIESACT 2013 DETAILS OF LOAN GIVEN
|Name of the entity ||Alimtec S.A |
|Loans outstanding as on 1st April 2017(' in Lakh) ||130 |
|Loan given during the year ||- |
|Loans repaid including foreign exchange difference during the year ||(82) |
|Converted into Equity Shares during the year(' in Lakh) ||- |
|Converted into Preference Shares ||- |
|Loans outstanding as on 31st March 2018 ||48 |
|Purpose for the loan given ||Expansion & working capital requirement |
DETAILS OF GUARANTEES PROVIDED
|Name of the entity ||Particulars ||Amount (' In Lakh) ||Purpose |
|Parry Sugars Refinery India Private Limited ||Long Term guarantee Guarantee given to Debenture Trustee - IDBI Trusteeship Services Limited ||30000 ||Issue of Debentures for repaying the high cost loans availed by Parry Sugars Refinery India Private Limited |
|Alimtec S.A. ||Standby Letter of Credit (USD 1.4 Million) to BANCO DE CHILE ||912 ||Capital expenditure and Working Capital requirement. |
|US Nutraceuticals LLC. ||Standby Letter of Credit / USD 2.0 Million to Wells Fargo Bank N.A USA ||1303 ||Working Capital Requirement |
DETAILS OF INVESTMENTS
The details of investments made by the Company have been given in Note no. 5 & 6 ofthe Annual Accounts
ANNEXURE - F TO THE BOARD'S REPORT
PARTICULARS OF EMPLOYEES
(A) Information as per Section 197(12) read with Rule 5(1) of The Companies(Appointment & Remuneration of Managerial Personnel) Rules 2014:
(1). The ratio of Remuneration of each Director to the median remuneration of theemployees of the Company for the financial year:
|Name of Director ||Ratio |
|Mr. A. Vellayan* ||13.14 |
|Mr. V Ravichandran ||3.64 |
|Mr. VRamesh* ||33.08 |
|Mr. S.Suresh ||42.90 |
|Mr. Anand Narain Bhatia* ||1.07 |
|Mr. V Manickam ||3.64 |
|Mr. M. B. N. Rao* ||3.35 |
|Dr. Rca Godbole ||3.73 |
|Mr. Ramesh K B Menon* ||1.35 |
|Mr. C. K. Ranganathan* ||1.38 |
|Mr. M. M. Venkatachalam* ||0.52 |
* Part of the current financial year
The median remuneration of employees of the Company during the Financial year 2017-18was Rs.304536 (2). The percentage increase in remuneration of each Director ChiefFinancial Officer and Company Secretary in the financial year:
|NAME ||% increase in remuneration |
|Mr.A. Vellayan ||(60.86) |
|Mr.V. Ravichandran ||(5.19) |
|Mr. V. Ramesh ||(32.14) |
|Mr. S Suresh ||118.22 |
|Mr. V. Manickam ||5.21 |
|Mr. Anand Narain Bhatia ||(73.01) |
|Mr. M.B.N.Rao ||(12.51) |
|Dr. Rca Godbole ||(3.40) |
|Mr. Ramesh KB Menon ||NA |
|Mr. C K Ranganathan ||NA |
|Mr. M M Venkatachalam ||NA |
|Mr. V Suri Chief Financial Officer ||19.01 |
|Ms. G.Jalaja Company Secretary ||24.40 |
NA- Not comparable as the directors were appointed during the year 17-18.
(a) The remuneration to the Non-Executive Directors comprises provision for commissionmade in the financial year 2017-18 and sitting fees paid for attending the Board/Committeemeetings. There was no increase in Sitting fee during the year. The actual payment ofsitting fee is based on the number of meetings attended by the Director.
(3) The percentage increase in the median remuneration of employees in the financialyear: 12.96 %
(4) The number of permanent employees on the rolls of company: 2651
(5) The increase in the average salary of the employees is 8.50 % as compared todecrease in the managerial remuneration which is 10.87 %.
(6) The Company affirms that remuneration is as per the Remuneration Policy of theCompany.
(B) Information as per Section 197 (12) of the Companies Act 2013 read with Rule 5 (2)and 5 (3) the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014.
|Name/(Age) ||Designation of the Employee/ Duties ||Remuneration (') ||Qualification/ Experience (Years) ||Date of Commencement of Employment ||Previous Employment |
|Mr L K Baburaj (51) ||Business Head - Bio Products ||4447545 ||M.Sc Agriculture (27) ||February 212005 ||Dow Agro Sciences Limited |
|Ms. G. Jalaja (60) ||Senior Vice President Management Audit and Company Secretary ||8878829 ||B.Com ACA FCS (34) ||August 051983 ||Aicam Engineering Private Limited |
|Mr T Kannan (54) ||Vice President Operations - Karnataka ||5098604 ||B.Sc Chemistry; M.Sc Chemistry; Sugar Technology (29) ||August 20 2010 ||Sri Chamundeshwari Sugars |
|Mr. Manoj Kumar Jaiswal (53) ||Executive Vice President - Management Development Centre ||10946609 ||M.Sc. MBA (28) ||August 19 2008 ||Infosys Technologies Limited |
|Mr. Rajasekar. T (59) ||Senior Vice President - Special Projects ||8896478 ||B.Sc Maths B.Tech (Hons) in Electronics Engineering (34) ||November 17 2011 ||Asian Paints Limited |
|Mr. S.K Sathyavrdhan (50) ||Senior Vice President - HR ||6435381 ||B.Com M.Com PGDM (27) ||November 012000 ||Owens Brockway Ind Ltd |
|Mr.S. Suresh (52) ||Managing Director ||13064997 ||B.E Industrial Engineering PGDIE Industrial Engineering; PGDM Financial Management (30) ||July 012016 ||Parry Sugars Refinery India Private Limited |
|Mr. V. Suri (58) ||Executive Vice President and Chief Financial Officer ||8339984 ||B.Com. C.A CWA (32) ||October 19 2013 ||Coromandel International Limited |
|Mr. G. Madhavan# (52) ||Senior Associate Vice President - Sales ||5958923 ||BE (27) ||September 01 1994 ||Coromandel International Limited |
|Mr. T M Shankar (59) ||Sr. Vice President - Commercial & Corp. Affairs ||4742547 ||B.Com ACA (33) ||April 25 2012 ||Bannari Amman Sugars Limited |
|Mr. VRamesh# (61) ||Managing Director ||16136075 ||B.Com. Grad CWA PGDM (IIM) (37) ||January 30 2014 ||Carborundum Universal Limited |
# Employed for the part of the year.
1. The nature of employment of all employees above is whole time in nature andterminable with 3 months notice on either side.
2. Remuneration as shown above includes salary allowances leave travel assistanceCompany's contribution to Provident Fund Superannuation Fund and Gratuity Fund. Medicalfacilities and perquisites valued in terms of actual expenditure incurred by the Companyin providing the benefits to the employees excepting in case of certain expenses where theactual amount of expenditure cannot be ascertained with reasonable accuracy and in suchcases notional amount as per income tax rules has been adopted.
3. Remuneration as shown above does not include amount attributable to compensatedabsences as actuarial valuation is done for the Company as a whole only.
4. The deemed benefit on exercise of options under Company's ESOP Scheme has not beenconsidered as there is no Cost to the Company.
5. The above mentioned employees are not relatives (in terms of the Companies Act2013) of any Director of the Company.
6. No employee mentioned above is holding shares in the Company except Ms.G.JalajaCompany Secretary who is holding 38285 equity shares of Rs.1/- each representing 0.02% ofthe share capital of the Company.