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Empee Sugars & Chemicals Ltd.

BSE: 500132 Sector: Agri and agri inputs
NSE: EMPEESUG ISIN Code: INE928B01012
BSE 00:00 | 19 Jul 1.42 0.02
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NSE 05:30 | 01 Jan Empee Sugars & Chemicals Ltd
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VOLUME 2790
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OPEN 1.42
CLOSE 1.40
VOLUME 2790
52-Week high 6.40
52-Week low 1.39
P/E
Mkt Cap.(Rs cr) 6
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Empee Sugars & Chemicals Ltd. (EMPEESUG) - Director Report

Company director report

The Directors have pleasure in presenting their Report together with audited accountsfor the year ended March 31 2017.

Financial Results : (Rs. in lacs)
2016-17 2015-16
Particulars (Year ended 31.3.2017) (Year ended 31.3.2016)
Operating Profit/(Loss) before Interest and Depreciation (1163.70) (2829.33)
Other income 44.14 250.51
Less: Interest 46.22 5687.45
Less: Depreciation 2474.81 2473.58
Profit / (Loss) before Tax (3684.73) (10739.85)
Prior period items - -
Provision for Taxation (earlier year) - -
Deferred Tax Liability/(Asset) - -
Profit/(Loss) after Tax (3684.73) (10739.85)
Brought Forward Profit /(Loss) (55220.78) (44480.93)
Carry Forward Profit/(Loss) (58905.49) (55220.78)

Present status of the Company - referring to NCLT:

Pursuant to last year's annual report the Company which was registered as a SickCompany under the provisions of Sick Industries (Special) Provisions Act with BIFRcontinued to be under the purview of BIFR upto the November 2016. Consequent to theabolition of BIFR w.e.f. 1.12.2016 the Company falls under the provisions of insolvencyand Bankruptcy Act(IBC) 2016 and the Company has taken all efforts to register the Companyas corporate debtor under the said provisions of IBC with National Company Law TribunalHyderabad.

Assigning of Bank loans to Edeweiss Reconstruction Company (ARC):

As reported in the last year's Directors' Report the total borrowing of the Companyfrom Banks viz. (IOB BOI PNB UBI IB AB QBC BOM FB) led by BOI in the consortiumamounted to Rs.706.66 Crs. Besides this the Company had also borrowed from SugarDevelopment Fund to the tune of Rs.57.47 Crs. These loans were availed for the unitslocated at Naidupet and Ambasamudram. As on the date of this report the banks comprisingOBQ UBI IB AB PNB FB and BOM have assigned their loans aggregating Rs 512.47 Crs toEdelweiss ARC . It is apprised that the balance amount of Rs 194.07 Crs of the totaloutstanding in respect of BOi and IOB is outstanding. BOI has taken legal action underlineprovisions of SARFAESI Act to attach the assets located at Ambasamudram and the Companyhas taken suitable action to address the same. Besides this the Company is in discussionwith BOI for a possible assignment of outstanding loans to ARC. Likewise the Company is indiscussion with IOB for assignment of loans with ARC. This apart the Company had to repaySugar Development Fund of Rs. 57.47 Cr as on 31st March 2017.

Review of Financial Performance:

The operating loss before interest and depreciation for the year under review wasRs.1163.70 lacs. As reported in the Annual Report last year the Sugar mill atAmbasamudram could not be operated due to non-availability of sugar cane. As a consequenceof non-operations of the sugar mill the 50 MW power plant had to be shut due to dearth ofBagasse from Sugar plant and non availability of sufficient working capital for purchaseof coal being an alternate fuel.

However with the purchase of coal on credit basis Ambasamudram generated 40489500units of power resulting in a turnover of Rs 20.71 crs with a loss of Rs 5.46 crs.

During the year under review Sugar Unit at Naidupet crushed 128398 MTs of cane andproduced 10780.60 MT of Sugar and achieved a recovery rate of 8.40.% as against 8.86% inthe previous year.

The IAP Unit has produced 6541560 litres of ENA RS IS/DS during the year underreview.

Future Outlook:

Having been referred to BIFR and being referred to NCLT underIBC and due to lack offinance the Company may continue to perform at nominal levels in respect of Sugar (byoperating Naidupet Sugar Unit) Power and IAP portfolios. Further due to non-availabilityof sugar cane in and around Ambasamudram the chances to restart crushing operationscontinues to be remote.

Change in the nature of business if any:

There is no change in the nature of the business during the year under review.

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.

Dividend:

Due to a reference being made to NCLT under the provisions of IBC and in view ofaccumulated losses in the successive years from FY 2013 the Company is unable to declareany dividend.

Share Capital:

The paid up share capital of the Company is 41972900 equity shares of Rs.10 &ach.The share application money of Rs.140.36 crs remains unallotted in favour of the holdingcompany namely Empee Distilleries Ltd due to a)non-obtainment of statutory approvals andb) the Company is under BIFR/IBC.

Deposits:

Your Company has not invited or accepted any fixed deposits either from the public orfrom the shareholders of the Company duringthe period under review.

Transfer to Reserves:

Due to losses of the Company for the year ended 31.3.2017 your Directors have notproposed any amount to be transferred to the General Reserves of the company.

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:

Chief Financial Officer:

The Company's effort to recruit CFO could not materialize for 1) the Professionalsdemand huge salaries and perks 2) the Company is unable to match to the requirements ofthe professionals in view of present financial condition. However constant efforts arebeing made by the Company to recruit CFO.

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.

Changes in the Directorate of the Company:

Due to sudden death of Mr. Shankar Menon on 22.01.2017 he ceased to be a Director ofthe Company. The Board recorded his valuable services and advice to the Company.

Mr. Suresh Raj Madhok was appointed as an Additional Independent Director vide a Boardresolution dated 13.02.2017 and will hold office till the conclusion of this AnnualGeneral Meeting. A notice in writing to appoint him as an independent Director has beenreceived pursuant to Sec. 160 of the Companies Act 2013 alongwith requisite deposit sum.A resolution to appoint him as an independent Director is included in the AGM notice forthe approval of the shareholders.

Ms.Nisha Purushothaman who retires by rotation offers herself for re-appointment. /

Declaration by Independent Directors :

The Independent Directors namely Mr.R.Rangachari and Mr.Suresh Raj Madhok have givendeclarations that they meet the criteria required under section 149(6) of the CompaniesAct 2013. Details of web link for familiarization program of Independent Directors aregiven at www.empeegroup.co.in

Details of Polices.

a. Nomination and Remuneration Policy: I

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and paymentof their remuneration. The Company's Remuneration Policy is available on the Company'swebsite www.empeegroup.co.in and the same is attached herewith as Annexure - C.

b. 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.

c. Whistle Blower Policy:

Your Company has formulated a Vigil Mechanism Policy with a view to provide a mechanismfor employees and directors of the Company to approach the Audit Committee to ensureadequate safeguards against victimisation. This policy would help to create an environmentwherein individuals feel free and secure to raise an alarm whenever any fraudulentactivity takes place or is likely to take place. It will also ensure that complainant(s)are protected from retribution whether within or outside the organization. The details ofestablishment of the Vigil Mechanism 1 Policy as per Annexure - D is displayed on thewebsite of the Company www.empeegroup.co.in .

Corporate Governance:

As required by Regulation 27 of SEBI's LODR 2015 with the Stock Exchanges theCorporate Governance Report and the Auditor's Certificate regarding compliance ofCorporate Governance forms part of the Annual Report.

Board Committees:

Name of the Committee Composition Details of Meetings held during the year 2016-17
Mr.R.Rangachari-Chairman
Audit Committee Mr.Suresh Raj Madhok 30.5.201611.8.2016 12.11.2016 and 13.02.2017
Ms.Nisha Purushothaman
Nomination & Remuneration Committee Mr.Suresh Raj Madhok - Chairman 30.5201611.08.201612.11.2016 13.2.2017
Mr.R.Rangachari
Ms.Nisha Purushothaman
Stakeholders' Relationship Mr.R.Rangachari - Chairman 18.4.201613.5.20164.6.2016 10.6.201620.6.201630.6.2016 8.8.201612.10.201619.10.2016 12.11.20162.12.201627.12.2016 31.12.201618.1.201731.1.2017 22.3.201731.3.2017
Committee Mr.Suresh Raj Madhok
Ms.Nisha Purushothaman

Details of recommendation of audit committee which were not accepted by the Board alongwith 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 - Not applicable

Subsidiaries

The consolidated accounts of the company includes the audited accounts of subsidiariesnamely Empee Power Company (India) Ltd and M/s.Appollo Wind Energy Pvt Ltd.

A statement containing salient features of the subsidiaries in form AOC1 is annexedherewith marked as Annexure - E and forms part of this report. Details of web link forPolicy for determining material subsidiaries are given at www.empeegroup.co.in .

Auditors'

Statutory Auditors:

M/s. Venkatesh & Co Chartered Accountants who was appointed as Statutory Auditorsfor five years in terms of Sec. 139141 of the Companies Act 2013 shall hold office tillthe conclusion of the 28th 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 the ratification of their appointment if made will be as per the requirements laiddown under Section 139 and 141 of the Companies Act 2013 read with Rule 4 of theCompanies (Audit and Auditors) Rules 2014 subject to approval of the Members..

Accordingly a resolution is being placed before the Members for their approval asgiven in the AGM notice.

Audit Qualification :

a. Qualification: The accumulated losses of the company have exceeded the networth of the company. Hence the company has made a reference to BIFR under the sickindustrial companies Act and the Company has been registered under BIFR vide caseno:69/2014. However effective from December 2016 BIFR proceedings have been abated. TheCompany is to make an application under Insolvency and Bankruptcy Code 2016 before NCLTHyderabad. However the accounts have been prepared on a going concern basis.

Reply:

The Company has filed an application before NCLT Hyderabad and hence restructuring theoperations of the Company is dependent on admission of the Company under IBC and on the'Resolution process' to be finalised by NCLT.

b. Qualification: The company has received amount of Rs. 140.37 crores from 7thJuly 2008 to 30th September 2012 {refer note no 4) towards share applicationmoney from holding company Empee Distilleries Ltd. These shares could not be allotted tothe applicant company in view of the non-receipt of approval from the SEBI and stockExchange. By virtue of the Rules of the Companies Acceptance and Deposit Rules these arepublic deposits to be repaid. However the Company is of Opinion that this issue will haveto be decided by NCLT Hyderabad as the proceedings under BIER have since been abated.

Reply: Since the Company's net worth has been eroded and admission of the Companybefore NCLT Hyderabad as Corporate debtor is pending the status of share applicationmoney can be decided only by NCLT under resolution process.

c. Qualification: Confirmation of Sundry debtors Trade payables Advance to suppliersCane advances Harvester Advances and other deposit is subject to confirmation andreconciliation.

Reply: The same has since been reconciled.

d. Qualification: The Sugar Unit at Ambasamudram has not been functioning for the last4 years However no impairment of assets in accordance with AS 28 (impairment of Assets)at the sugar unit at Ambasamudram has been considered in accounts and the financial impactof the same is not presently ascertainable.

Reply: This will be addressed only upon NCLT Hyderabad admitting the Company'sapplication as Corporate Debtor under IBC.

e. Qualification:

Interest has not been provided on loans amounting in all to Rs.486 Crores availed frombanks and including Loans assigned by the banks in favor of Edelweiss Asset ReconstructionCompany Ltd.

Reply: This will be addressed only upon NCLT Hyderabad admitting the Company'sapplication as Corporate Debtor under IBC.

f. Qualification:

Bank Balances amounting to Rs.35.63 lakhs is subject to Confirmation.

Reply: Bankers confirmations have since been obtained.

Secretarial Auditors: ^

M/s. S Dhanapal & Associates a firm of Practicing Company Secretaries Chennaihas-been appointed as Secretarial Auditors of the Company for the Financial Year 2017-18in the Board meeting held on 29.05.2017.

The Secretarial Audit Report received from the Secretarial Auditors is annexed to thisreport marked as Annexure-F and forms part of this report.

Cost Auditors :

The Board has appointed Mr.N.Thagarajan as Cost Auditor of the Company in terms ofSection 148 of the Companies Act 2013 for the financial year 2017-18 in the Board meetingheld on 29.05.2017. A resolution to ratify the payment of remuneration to Mr.NThiagarajan Cost Auditor for the financial year 2016-17 is set out in the noticeconvening the AGM.

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 - G and forms part of this Report.

Related party Transactions:

The details of Related Party Transactions during the year ended 31.03.2017 being arm'slength transactions have been reported in the Financial statements and forms part of thisreport as per Annexure -H.

Details of Pecuniary relationship or transaction of the non-executive independentdirectors Vis a Vis the Company:

There is no pecuniary relationship or transactions of the Non-Executive IndependentDirectors vis-a-vis the company for the year ended 31.3.2017.

Managerial Remuneration/ Particulars of Employees :

The details/ particulars of employees/manageriai;persons remuneration as required fo begiven u/s 197 of the Companies Act 2013 read along with Rule 5(2) ofthe Companies (Appointment and Remuneration of Managerial personnel) Rules 2014 asapplicable is attached herewith as Annexure-I.

Board's Evaluation:

Pursuant to the provisions of the Companies Act 2013 Listing Agreement andRegulations of the LODR 2015 the Board has carried out the annual performanceevaluation performance of the Directors as well as the evaluation of the working of itsAudit Nomination and Remuneration and Compliance Committees.

While independent directors in their separate meeting have carried out to assess theperformance of Chairman and Managing Director and other Directors of the Board moreparticularly about their business acumen and contribution to the Company the performanceevaluation of the Independent 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 apd 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-J.

Industrial Relations:

The Industrial relations continued to remain congenial during the year.

Director's 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.

Acknowledgement:

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
M.P. Purushothaman
Place: Chennai Chairman & Managing Director
Date: 21.08.2017