Your Directors have pleasure in presenting the Board s Report together with the auditedAccounts for the year ended 31st March 2017.
|FINANCIAL RESULTS || ||(Rs.in lacs) |
|Particulars ||2016-17 ||2015-16 |
| ||(For the Year ended 31.03.2017) ||(For the period ended 31.03.2016) |
|Total Income ||50160.47 ||61268.14 |
|Operating Profit before Interest and Depreciation ||(1148.13) ||4139.95 |
|Less : Interest ||3035.63 ||2504.36 |
|Depreciation ||1257.39 ||1298.42 |
|Profit before exceptional item and tax ||(3378.88) ||- |
|Extra-ordinary items (loss on sale of Investments) ||(2062.27) ||- |
|Profit / Loss before Tax ||(5441.15) ||337.17 |
|Provision for Taxation ||(2906.40) ||234.04 |
|Provision for Deferred Tax || ||(68.93) |
|Earlier Tax provision reversed ||- ||- |
|Exceptional Item ||- ||- |
|Profit /Loss After Tax ||(2534.75) ||172.07 |
|Profit brought forward ||(2534.75) ||- |
|Add : Prior period income Depreciation ||- ||- |
|Transfer of profit to General Reserve ||- ||- |
|Proposed Dividend ||- ||- |
|Dividend tax on proposed dividend ||- ||- |
|Profit carried forward ||(2534.75) ||172.07 |
PERFORMANCE REVIEW :
During the year under review your Company registered a total income of Rs.501.60 Crsand incurred a loss of Rs 54.41 Crs after extra-ordinary item i.e. loss on sale ofinvestments amounting to Rs 20.62 Crs and thus overall net operating loss stood at Rs.33.79 Crs as against the total income of Rs.612.68 crs and a profit of Rs.1.72 crs forthe year ended 31st March 2016. The performance during the year under reviewwas impacted due to (a) Demonetization of high value currencies in Dec. 2016 (b)Uncertain political environment in the wake of demise of Tamil Nadu s Chief Minister (c)Increase in price of basic raw materials like ENA Maize etc (d)Effect of desolateCyclone Vardah (e) Cash flow constraint for GBAP due to non sanction of working capitalfacilities by UBI (f) Closure of more than 3000 Retail Vending shops in TN & Keraladue to Govt policies (g) Non production of Power from Aranthangi unit due to restrictivemeasures taken by Tamil Nadu Govt.
IMFL Division :
IMFL units at Mevalurkuppam Palghat and Kolar registered a net turnover of Rs. 476.12crs and resulted in a net operating loss of Rs. 7.22 crs during FY 2016-17 as compared toa turnover of Rs. 544.04 crs and Rs. 8.60 crs. of profits in the last financial year(2015-16)
Power Division :
The revenue from the Power Division was Rs 376.30.lacs with a profit of Rs. 74.36 lacsduring the financial year under review as against the revenue of Rs 14.85 crs and netprofit of Rs 3.09 crs during the previous financial period 2015-16
Grain Based Alcohol Unit :
During the year 2016-17 the 60 KLPD Grain Based Alcohol unit at Chotkur Andhra Pradeshearned a revenue of Rs 21.72. crs with a net operating loss of Rs 27.31 crs as against arevenue of Rs 53.79 crs and a net loss of Rs 9.97 crs in the previous financial year.
REVIEW OF OPERATIONS :
The Economy/regular brands of the Company maintained a reasonable turnover while thinmargins resulted in overall loss during the year under review. The focus on the Premiumbrands such as Chevalier De Paris Brandy Carte Royale Brandy Elcanso Brandy and BlueCrystal Vodka added substantial value in terms of market penetration and the market sharein Tamilnadu Kerala Karnataka is moving forward. The export market for premium brandsare encouraging with exports Chevalier De Paris Brandy Carte Royale Brandy ElcansoBrandy and Blue Crystal Vodka to Singapore and Dubai.
The company s 10 MW power plant in the Aranthangi Tamilnadu could not be operatedduring the year due to imposition of restrictive measures by the Tamilnadu StateElectricity Board (TNEB).
The Grain based Distillery unit at Chotkur could not perform during the year due tonon-availability of grains and the prices of grains.
The overall performance of the company was greatly affected due to many problems theCompany encountered during the year under review as stated above and hence the turnoverwas considerably low in 2016-17 resulting in a net operating loss of Rs.33.79 crs.
FUTURE OUTLOOK :
The outlook for 2017-18 is promising as the Company explored more avenues to exportIMFL products to Singapore Malaysia Dubai and other states in India from itsmanufacturing unit at Kolar and Palakkad. The power unit will be able to commenceoperations only after lifting of restrictive measures by TNEB and the Company is confidentin this regard. The Company is devising plans to gear up production of GBA at Chotkur inthe current Financial year (2017-18).
CHANGE IN THE NATURE OF BUSINESS IF ANY :
There is no change in the nature of the business during the year.
Due to losses for the FY 2016-17 the Board of Directors regret to recommend anydividend for the financial year ended 31.03.2017.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANYBETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT:
There are no material changes and commitments affecting the financial position of thecompany between the end of the financial year and the date of the report.
TRANSFER TO RESERVES :
Your Company does not propose to transfer amounts to the General Reserve due to lossesincurred during the year under review.
ISSUE OF 1166860 SHARE WARRANTS UNDER PRIVATE PLACEMENT :
The Company in order to improve the working capital liquidity issued 939727 EquityWarrants to EW India Special Assets Fund Pte Ltd and 227133 Equity Warrants of Rs 10/-each to Edelcap Securities Limited at a premium of Rs 54.54 per share aggregatingRs.7.53 crs pursuant to EGM approval dated 28th November 2016 19thJanuary 2017 and 15TH March 2017. These warrants were converted into 1166860equity shares of Rs.10 each on 21st March 2017 and the same were listed on BSEand NSE w.e.f 21st April 2017 and 11th May 2017 respectively.
SHARE CAPITAL :
Due to conversion of 1166860 share warrants into same number of equity shares thepaid-up share capital of the company as on the date of this report increased to 20175753equity shares of Rs.10/- each. There is no change in the Authorised share capital of thecompany during the year under review.
Your Company has not invited or accepted any fixed deposits either from the public orfrom the shareholders of the Company during the year under review.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 :
The particulars of loans guarantees and investments u/s 186 of the Companies Act 2013is annexed herewith as Annexure-A.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT :
The Management Discussion and Analysis Report is annexed herewith as Annexure B.
DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNEDDURING THE YEAR :
Due to sudden death of Mr.Shankar Menon on 22.01.2017 he ceased to be the Directorw.e.f. 22 01 2017.
Mr. M.P. Purushothaman who retires by rotation at this AGM offers himself forre-appointment at this AGM.
Mr. Suresh Raj Madhok was appointed as Additional Director w.e.f. 26.12.2016 by theBoard. As per the provisions of the Companies Act 2013 Mr. Suresh Raj Madhok is proposedto be appointed as Independent Director for a term of five years from the date of hisappointment as set out in the AGM Notice for the approval of Director.
The Independent Directors of the Company have submitted a declaration u/s.149(7) of theAct that each of them meets the criteria of independence as provided in Section 149(6) ofthe Act and there has been no change in the circumstances which may affect their status asIndependent Director during their directorship.
NUMBER OF BOARD MEETINGS HELD DURING THE YEAR 2016-17 :
The Company has duly complied with the provisions of the Companies Act 2013 in holdingBoard meetings and the details of the meetings are furnished in the Corporate GovernanceReport.
DETAILS OF POLICIES :
(i) Nomination and Remuneration Policy
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Company s Remuneration Policy is available on the Company s websitewww.empeegroup.co.in and the same is attached herewith as Annexure - C.
(ii) Corporate Social Responsibility Policy (CSR)
The Board has framed a CSR Policy and the same is available on the Company s websitewww.empeegroup.co.in. The said policy is attached herewith as Annexure-D.
Due to loss of Rs.25.35 crs for the year under review and lack of profits in the threeimmediate preceding financial years the Company could not allocate funds for CSRactivities.
Annual Report on CSR as required under Rule 8 of the Companies (Corporate SocialResponsibility Policy) Rules 2014 is also attached herewith as Annexure-E.
(iii) Risk Management Policy
Business Risk Evaluation and Management is an ongoing process within the Organization.Pursuant to Section 134(3)(n) of the Companies Act 2013 the Board has framed a RiskManagement Policy for the Company. The Company has in place a mechanism to identifyassess monitor and mitigate various risks to key business objectives. Major risksidentified by the business and functions are systematically addressed through mitigatingactions on a continuing basis.
At present the company has not identified any element of risk which may threaten thebusiness of the Company.
(iv) Whistle Blower Policy Vigil Mechanism
Your Company has formulated a Vigil Mechanism Policy with a view to provide a mechanismfor employees and directors of the Company to approach the Chairman of the Audit Committeeto ensure adequate safeguards against victimisation. This policy would help to create anenvironment wherein individuals feel free and secure to raise an alarm whenever anyfraudulent activity takes place or is likely to take place. It will also ensure thatcomplainant(s) are protected from retribution whether within or outside the organization.The Board has elected Mr.R.Rangachari who is the Chairman of the Audit Committee as theEthics Counsellor under the vigil mechanism policy. The details of establishment of theVigil Mechanism Policy as per Annexure F is displayed on the website of the Companywww.empeegroup.co.in.
As required by Regulation 27 of the SEBI s (LODR) 2015 of SEBI with the StockExchanges the Corporate Governance Report and the Auditor s Certificate regardingcompliance of conditions of Corporate Governance forms part of the Annual Report.
|Name of the Committee ||Composition ||Details of Meetings held during the year 2016-17 |
|AUDIT COMMITTEE ||Mr. R.Rangachari || |
| ||Mr. Shankar Menon upto 22.01.2017 ||30.5.2016 11.8.2016 12.11.2016 13.2.2017 |
| ||Mr. Suresh Raj Madhok || |
| ||Ms.Nisha Purushothaman || |
| ||Mr. Shankar Menon upto || |
|NOMINATION & REMUNERATION COMMITTEE ||22.01.2017 ||30.5.2016 11.8.2016 |
| ||Mr Suresh Raj Madhok ||12.11.2016 13.2.2017 |
| ||Mr. R.Rangachari || |
| ||Mr. M.P. Purushothaman || |
| ||Mr Suresh Raj Madhok || |
|CSR COMMITTEE ||Mr. R.Rangachari ||13.02.2017 |
| ||Ms. Nisha Purushothaman || |
|STAKEHOLDERS ||Mr. R.Rangachari ||30.5.2016 11.8.2016 |
|RELATIONSHIP ||Mr. Shankar Menon upto 22.01.2017 ||12.11.2016 13.2.2017 |
|COMMITTEE ||Mr Suresh Raj Madhok || |
| ||Ms. Nisha Purushothaman || |
DETAILS OF RECOMMENDATIONS OF AUDIT COMMITTEE WHICH WERE NOT ACCEPTED BY THE BOARDALONG WITH REASONS
The same is not applicable as the Audit Committee s recommendations were accepted andimplemented by the Board.
NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINT VENTURESOR ASSOCIATE COMPANIES DURING THE YEAR
Pursuant to EGM resolution dated 15th March 2017 the company has sold9889285 Equity shares of Rs.10 each held in Empee Hotels Ltd (Associate Company -unlistedentity) in favour of Appollo Alchobev Ltd and hence the percentage of shareholding hasdecreased from 39.05 % to 19.26%. Consequent to this the consolidation of accounts ofEmpee Hotels Ltd with the Company does not arise.
The Consolidated Accounts of the Company includes the audited accounts of subsidiariesnamely EDL Properties Ltd and M/s.Appollo Distilleries and Breweries Pvt Ltd. The accountsof the subsidiaries can be made available to the members upon request. M/s.Empee Sugarsand Chemicals Ltd (subsidiary company) has been referred to BIFR under the provisions ofSick Industrial Companies Act 1985 in November 2014. Since BIFR was abolished in December2016 Insolvency and Bankruptcy Code (IBC) has been introduced. As informed by the saidsubsidiary Company it has filed a petition as a Corporate Debtor with NCLT Hyderabadunder IBC. As such and in pursuance of AS-21 of Accounting Standard the consolidatedaccounts of Empee Sugars and Chemicals Ltd are not required to be given for the year underreview and hence the same has been dispensed with.
A statement containing salient features of the subsidiaries in Form AOC-1 is annexedherewith marked as Annexure - G and forms part of this report.
a. Statutory Auditors
M/s. Venkatesh & Co Chartered Accountants who was appointed as Statutory Auditorsfor five years in terms of Sec. 139 141 of the Companies Act 2013 shall hold office tillthe conclusion of the 34th AGM of the Company to be held in the year 2019however subject to ratification of their appointment at every AGM.
The Company has received a letter from the Statutory Auditors of the Company Venkatesh& Co (ICAI Firm Registration Number: 0046365) Chartered Accountants to the effectthat their ratification of their appointment if made will be as per the requirementslaid down under Section 139 and 141 of the Companies Act 2013 read with Rule 4 of theCompanies (Audit and Auditors) Rules 2014. subject to ratification/approval of theMembers..
Accordingly a resolution is being placed before the Members for theirratification/approval as given in the AGM notice.
a. Qualification : The company has made an investment of Rs.1.59 Crores as EquityShares and further investment by way of share application money of Rs.140.36 Crores to itssubsidiary Empee Sugars and Chemicals Limited and Rs.20.68 Crores as investment in EquityShares of Empee Hotels Limited. The Companies Empee Sugars and Chemicals Limited &Empee Hotels Limited have been incurring losses. No Provision for diminution in the valueof investment in respect of these companies have been considered in the accounts.
Reply : Since the subsidiary company namely Empee Sugars and Chemicals Limited has beenregistered with BIFR (now under IBC) by the order dated 24/11/2014 the company is unableto estimate the effect on the above qualification and the resultant is based on the orderof the NCLT Hyderabad on revival scheme to be filed by Empee Sugars and ChemicalsLimited.
Regarding share application money in Empee Sugars and Chemicals Ltd (ESCL) of Rs.140.36Crs pending for allotment in favour of EDL the holding Company it is stated that due tonon-receipt of certain statutory approvals the same is kept pending. However since thesemonies have been received prior to the Companies Act 2013 the Company is said to beattracted to the provisions of the Companies Acceptance of Deposit Rules 2014 andInvestors Education and Protections Fund. But the Company has reiterated that since theCompany has been registered under BIFR much ahead of the said Deposit Rules the sameshall not apply. In this connection it is pertinent to report that BIFR has been abolishedw.e.f. 1.12.2016 and in its place Insolvency and Bankruptcy Code (IBC) has been replaced.ESCL is in the process of making out an application as Corporate debtor to NCLTHyderabad. Further the Investors protection and Education Fund Rules do not apply in sofar as EDL has claimed the refund of share application money. ESCL could not refund theshare application money due to absence of the normal functioning of the Company andnegative cash flows which are the matters to be considered by NCLT under IBC.
As regards diminution in the value of investments of shares in Empee Hotels Ltd sinceanother company in the group namely Appollo Alcobev Ltd is likely to merge with EmpeeHotels Ltd the functioning of Empee Hotels Ltd may improve in near future and as such thediminution in the value of shares are deferred to next financial year 2017-18.
b. Qualification Other Loans & Advances amounting to Rs. 40.35 Crores out ofRs.40.98 Crores under the head other Current Assets Sundry Debtors to Rs. 65.08 Croresand Loan and advances to related parties Rs. 41.88 Crores Other Long Term Liabilities Rs.38.92 Crores and Trade Payable of Rs. 79.34 Crores are subject to confirmation andreconciliation. The impact on profitability is not ascertainable.
The same has been since reconciled.
b. Secretarial Auditors
As per provisions of Sec. 204 of the Companies Act read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company appointedM/s. S Dhanapal & Associates a firm of Practising Company Secretaries Chennai asSecretarial Auditors of the Company for the Financial year ended 31.03.2017. TheSecretarial Audit Report in Form No: MR 3 is attached as Annexure-H to this report.
c. Cost Auditors
Pursuant to Sec. 148(3) of the Act the Board of Directors had appointed Mr.N.Thiagarajan (Reg. No:103955) as Cost Auditors of the Company for conducting the audit forthe Financial year ended 31.03.2017
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO
Information regarding conservation of Energy Technology absorption and ForeignExchange earnings and outgo is given as Annexure - I and forms part of this Report.
RELATED PARTY TRANSACTIONS
There were no materially significant transactions with Related Parties during thefinancial year under review which were in conflict with the interest of the Company. Thedetails of Related Party Transactions during the year ending 31.03.2017 being arm slength transactions have been reported in the Financial statements and forms part of thisreport as per Annexure - J.
MANAGERIAL REMUNERATION/ PARTICULARS OF EMPLOYEES
The details/ particulars of employees/managerial persons remuneration as required to begiven u/s 197 of the Companies Act 2013 read along with Rule 5(2) of the Companies(Appointment and Remuneration of Managerial personnel) Rules 2014 as applicable isattached herewith as Annexure - K.
DETAILS OF PECUNIARY RELATIONSHIP OR TRANSACTIONS OF THE NON-EXECUTIVE INDEPENDENTDIRECTORS VIS--VIS THE COMPANY
There is no pecuniary relationship or transactions of the Non-Executive IndependentDirectors vis--vis the Company for the year ended 31.3.2017.
BOARD S EVALUATION
Pursuant to the provisions of the Companies Act 2013 and Clause 27 of the SEBI s(LODR) 2015 of SEBI the Board has carried out the annual performance evaluation of itsown performance the Directors individually as well as the evaluation of the working ofits Audit Nomination and Remuneration and Compliance Committees.
While independent directors in their separate meeting have carried out to assess theperformance of Chairman JMD and other Directors of the Board more particularly abouttheir business acumen and contribution to the Company the performance evaluation of theIndependent Directors was carried out by the entire Board.
The Independent Directors expressed their satisfaction with the evaluation processfunctioning such as adequacy of the composition of the Board and its Committees Boardculture execution and performance of duties obligations responsibilities andgovernance.
ADEQUACY OF INTERNAL FINANCIAL CONTROLS
The Company has a proper and adequate internal control system to ensure that all assetsare safeguarded and protected against loss from unauthorized use or disposition and thosetransactions are authorised recorded and reported correctly.
The Internal Audit/Control is exercised through an external auditor namely M/s.RameshSubramaniam & Co. Chartered Accountants Chennai. The audit observations andcorrective action taken thereon are periodically reviewed by the audit committee to ensureeffectiveness of the internal audit/control system.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND COMPANY S OPERATIONS IN FUTURE
There is no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company s operations in future
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as Annexure - L.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.
The Company has not received any complaint on sexual harassment during the financialyear ended 31.03.2017.
The Industrial relations continued to remain congenial during the year.
DIRECTORS RESPONSIBILITY STATEMENT
In terms of Section 134 (5) of the Companies Act 2013 the directors would like tostate that :
a. In the preparation of the annual accounts the applicable accounting standards havebeen followed.
b. The directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit or loss of the Company for the year under review.
c. The directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
d. The directors have prepared the annual accounts on a going concern basis.
e. The directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
f. The directors had devised proper system to ensure compliance with the provisions ofall applicable laws and that such system were adequate and operating effectively.
Your Directors wish to express their gratitude for the continuous assistance andsupport extended by the Banks Financial Institutions Customers and Governmentauthorities and also to the shareholders for their confidence in the management. Furtheryour Directors also place on record their deep sense of appreciation for the contributionsmade by employees at all levels to the growth and success of the company.
| ||For and on behalf of the Board of Directors |
|Place : Chennai ||M.P. Purushothaman |
|Date : 21.08.2017 ||Chairman |