The Directors of Haryana Leather Chemicals Ltd. are pleased to present the 34th AnnualReport and Audited Statement of the Company's accounts for the year ended on 31st March2019.
A summary of the financial results for the year 2018-2019 is given below:
| ||2018 - 19 ||2017 - 18 |
| ||(Rs. in Lacs) ||(Rs. in Lacs) |
|Sales Turnover (Net of Excise) ||3686.84 ||3639.43 |
|Gross Profit ||289.74 ||312.84 |
|Deductions: || || |
|Depreciation ||70.54 ||87.19 |
|Interest ||5.19 ||4.74 |
|Profit before tax ||214.01 ||220.91 |
|Less: Provision for Income Tax for the year ||46.97 ||48.63 |
|Add: Provision for Income Tax written back ||4.69 ||1.57 |
|Less: Previous year's adjustment ||- ||- |
|Less/(Add): Deferred tax liability ||(8.45) ||2.08 |
|Profit after tax and available for appropriation ||153.89 ||172.79 |
|Less: Provision for dividend ||39.27 ||39.27 |
|Less: Provision for dividend tax ||7.99 ||7.99 |
|Less: Transfer to general reserve ||0.00 ||26.00 |
|Profit Carried to Balance Sheet ||106.63 ||99.53 |
During the year the Company achieved a slight increase in sales turnover of Rs. 3686lakhs against Rs. 3639 lakhs of the previous year. There is significant increase indomestic sales that helped offset the drop in export particularly to EU countries. Thedecline in export is attributed to the exorbitant cost of REACH registration procedure.The company hopes to consolidate the gains made in domestic sales and explore growthopportunities in countries outside the EU territory. The reduction in net profit is alsomainly due to fire accident.
The Company as a policy endeavours to distribute a part of its consolidated annualprofits after tax as dividend in one or more tranches. Following the said policy theBoard of Directors have recommended dividend of Rs. 0.80/- per equity share having facevalue of Rs. 10/- on 4908470 equity shares (PY Rs. 0.80/- per equity share having facevalue of Rs. 10/- on 4908470 equity shares) amounting to Rs. 39.26 Lakhs (PY Rs. 39.26Lakhs).
The composition of the Board of Directors of the Company is furnished in the CorporateGovernance Report annexed to this report. Pursuant to the provisions of the Articles ofAssociation of the Company the Directors - Dr. K.S.V. Menon (DIN: 00920088) Dr. MassimiMedini (DIN: 00926147) Mr. Pradeep Behl (DIN: 00703855) Mr. Marco Medini (DIN: 03709885)and Mr. Kanishk Gupta (DIN: 02243899) are the Directors who are Non-Executive andIndependent and are to be appointed for a next consecutive period of five years and arenot eligible for retire by rotation. Mr. Vijay Kumar Garg (DIN: 00236460) retire byrotation at the forthcoming Annual General Meeting to be held on 25th September 2019 andbeing eligible they offer themselves for re-appointment.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from the Independent Directorsconfirming that they meet the criteria of independence as prescribed under the CompaniesAct 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015.Independent Directors are in compliance with the Code of Conduct prescribed under ScheduleIV of the Companies Act 2013.
The members had at the 32nd AGM of the Company appointed AKR & AssociatesChartered Accountants (Firm Registration No. 021179N) Panchkula as Statutory Auditors ofthe Company to hold the office from the close of the 32nd AGM till the conclusion of the35th AGM subject to their appointment being ratified by the members in every AGM. Themembers of the Company approved deletion of the requirement of seeking ratification ofappointment of Statutory Auditors at every AGM pursuant to amendment brought by theCompanies Amendment Act 2017.
The Auditors' Report for FY 19 forms part of this Annual Report and does not containany qualification reservation or adverse remark.
Auditor's report does not need any comments from the Directors.
MEETINGS OF THE BOARD COMMITTEES & COMPLIANCE TO SECRETARIAL STANDARDS
The Board meets at regular intervals with gap between two meetings not exceeding 120days. During the year under review the Board met four times.
The Board has three Committees namely Audit Committee (AC) Nomination and RemunerationCommittee (NRC) and Stakeholders Relationship Committee (SRC). A detailed note on thecomposition of the Board and its Committees (AC NRC and SRC) is provided in the CorporateGovernance Report included in this Annual Report.
The minutes of the meetings are reviewed at every Board meeting.
During the year under the review the Company has complied with the provisions ofSecretarial Standard 1 (relating to meeting of the Board of Directors) and SecretarialStandard 2 (relating to General meeting).
PARTICULARS OF EMPLOYEES u/s 134(3) of the Companies Act 2013
The information required pursuant to Section 134 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofDirectors Key Managerial Personnel (KMP) and Employees of the Company are provided asfollows:
The Company did not employ any person drawing a remuneration of Rs.500000.00 or abovefor one month or part of the month or Rs. 6000000.00 or above for one year whoseparticulars are required to be mentioned u/s 197 of the Companies Act 2013.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. Kumar Rishi & Associates a firm of Company Secretaries in Practice (CPNo. 14063 to undertake the Secretarial Audit of the Company for the financial year ended2019-20. The report on the Secretarial Audit carried out for the year 2018-19 is annexedherewith as Annexure-B'. The Secretarial Audit Report does not contain anyqualification reservation adverse remark or disclaimer.
COST AUDITOR'S COMPLIANCE
The Central Government has directed that a cost audit of the Company'should beconducted in the manner specified in MCA order 52/26/CAB-2010 Dt. 24-01-2012 or anyamendment thereof by a Cost Accountant within the meaning of the Cost and WorksAccountants Act 1959 as amended thereof.
However as per Companies (cost records and audit) Rules 2014 notified by Ministry ofCorporate Affairs cost audit is not applicable to the Company by virtue of its turnoverbeing less than the prescribed limits. Therefore the Board did not proceed with theappointment of cost auditor and cost audit for the year 2018-19.
The Company is properly maintaining its cost Record internally.
CORPORATE SOCIAL RESPONSIBILITY
With the enactment of the Companies Act 2013 India has become the forerunner tomandate spend on Corporate Social Responsibility (CSR) activities through a statutoryprovision.
The new CSR provisions put formal and greater responsibility on companies in India toset out clear framework and processes to ensure strict compliance. However what theCompanies Act does is bring more companies into the fold and increase the total CSR spend.
Section 135(1) of Company Act 2013 mandates the CSR expenditure / CSR Applicability forthe following companies Every company having
a) Net worth of Rs. 500 crore
b) Turnover of Rs. 1000 crore
c) or net profit of Rs. 5.00 crore where net profit excludes income from overseasbranch & divided distributed by company on which this section apply.
As the Company Haryana Leather Chemicals Limited doesn't fall under any of thecategories as mentioned above the Company was not required to constitute any CSR policyor to make any expenditure towards CSR funds.
In terms of Section 149 of the Act 2013 read with Rule 3 of the Companies (Appointmentand Qualification of Directors Rules 2014 and SEBI Listing Obligations and DisclosureRequirements) Regulations 2015 the Company is required to have a woman Director on itsBoard. Mrs. Sippy Jain is already appointed as the Director of the Company.
PROTECTION OF WOMEN AGAINST SEXUAL HARASSMENT AT WORK PLACE
The Company has complied with provisions relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 [14 of 2013].
TRANSFER OF FUNDS TO INVESTOR EDUCATION AND PROTECTION FUND
The Company is distributing dividend to its shareholders since 2006 on recommendationof the shareholders of the Company. And pursuant to the provisions of sections 124 and 125of the Companies Act 2013 and Investor Education and Protection Fund (Accounting AuditTransfer and Refund) Rules 2016 as amended from time to time for the unclaimed dividendfor the year 2010-2011 amounting Rs. 271144.80 the Board has taken necessary steps totransfer the unpaid / unclaimed dividend of Equity Shareholders for the year 2010-11 tothe Investor Education and Protection Fund (IEPF) of the Central Government establishedunder section 124 and 125 of the Companies Act 2013.
NOMINATION AND REMUNERATION POLICY
The Nomination and Remuneration Committee of Directors (NRC) reviews the composition ofthe Board of Directors of the Company to ensure that there is an appropriate mix ofabilities qualifications experience and diversity to serve the interests of allshareholders and the Company.
During the year in accordance with the requirements under Section 178 of the Act 2013and relevant clause of Listing Agreement the NRC formulated a Nomination and RemunerationPolicy to govern the terms of nomination / appointment and remuneration of
(ii) Key Managerial Personnel (KMPs) and
(iii) Senior Management Personnel (SMPs) of the Company.
(iv) The same was approved The NRC also reviews succession planning of both SMPs andBoard. The Company's approach in recent years is to have a greater component ofperformance linked remuneration for SMPs.
The process of appointing a Director / KMPs / SMPs is that when a vacancy arises oris expected the NRC will identify ascertain the integrity qualification appropriateexpertise and experience having regard to the skills that the candidate will bring to theBoard / Company and the balance of skills added to that of which the existing membershold.
The NRC will review the profile of persons and the most suitable person is eitherrecommended for appointment by the Board or is recommended to shareholders for theirelection. The NRC has discretion to decide whether qualification expertise and experiencepossessed by a person are sufficient / satisfactory for the concerned position.
NRC will ensure that any person(s) who is/are appointed or continues in the employmentof the Company as its executive chairman managing Director whole-time Director shallcomply with the conditions as laid out under Schedule V to the Act 2013.
NRC will ensure that any appointment of a person as an independent Director of theCompany will be made in accordance with the provisions of Section 149 read with ScheduleIV of the Act 2013 along with any other applicable provisions and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
While every employee's contract of employment stipulates that he will not discloseconfidential information about the employer's affairs in order to bring aboutaccountability and transparency there should be a mechanism to enable employees to voicetheir concerns where they discover information which they believe shows seriousmalpractice impropriety abuse or wrong doing within the organization. The employeesshould be encouraged and assisted to raise concerns without any fear of victimizationsubsequent discrimination or disadvantage. If the employee has acted in good faith it doesnot matter if one is mistaken and the Company'shall ensure protection from any harassmentor victimization of/against the disclosing employee.
The Company has adopted a Whistle Blower Policy which applies to all permanentemployees of the Company including those who are on probation and comes into effect fromApril 1 2014 to provide a formal mechanism to the Directors and employees to reporttheir concerns about unethical behaviour actual or suspected fraud or violation of theCompany's Code of Conduct or ethics policy. The Policy provides for adequate safeguardsagainst victimization of employees who avail of the mechanism and also provides for directaccess to the Chairman of the Audit Committee. It is affirmed that no personnel of theCompany has been denied access to the Audit Committee.
1. Policy and Procedure for disclosure enquiry and disciplinary action
1.1 Concerns which may be raised-illustrative list
A whole variety of issues could fall under malpractice impropriety abuse and wrongdoing some of which are listed below:
Breach of any Policy or Manual or Code adopted by the Company.
Fraud and corruption (e.g. receiving bribes).
Health and safety risks including risks to the public as well as otheremployees e.g. faulty electrical equipment).
Any sort of financial malpractice.
Abuse of power (e.g. Bullying/harassment).
Any unlawful act including failure to comply with legal or statutory obligationfor and on behalf of the Company. Any other unethical or improper conduct.
1.2 Concerns - how to raise/whom to disclose
The concern should be disclosed through letter e-mail telephone fax or any othermethod to any of the following persons who shall comprise the Corporate ComplianceCommittee headed by the Managing Director & Chairman reporting directly to the AuditCommittee of the Board.
The Corporate Compliance Committee comprises the Managing Director & Chairman theExecutive Director & Company'secretary the CEO and the HR.
All relevant information regarding the concern should be disclosed not later than 1year from the date on which the employee came to know of the concern. Upon receipt of thedisclosure the member of the Compliance Committee receiving the same shall furnish a copyto the Managing Director & Chairman who shall decide which member shall be responsiblefor the investigation.
1.3 Procedure for investigation
Obtain full details and clarifications of the complaint.
Consider the involvement of the Company's Auditors or any other external investigationagency or person.
Fully investigate into the allegation with the assistance where appropriate of otherindividuals/bodies.
Prepare a detailed written report and submit the same to the Compliance Committee notlater than 30 days from the date of disclosure of the concern.
Based on the findings in the written report and after conduct of such furtherinvestigation as it may deem fit the Compliance Committee shall take a decision in thematter not later than 30 days from the date of the written report. If the complaint isshown to be justified then they shall invoke disciplinary or other appropriate actionagainst the defaulting employee.
A copy of all decisions of the Compliance Committee shall be placed before the AuditCommittee at the meeting held immediately after such final decision.
The employee making the disclosure as well as all other persons involved in theinvestigation and the members of the Compliance Committee shall not make public theConcern disclosed except with the prior written permission of the Audit Committee exceptwhere the employee is called upon to disclose this by any judicial process.
The Company has not accepted/renewed any fixed deposits during the period under review.
The Company has taken the requisite steps to comply with the recommendations concerningCorporate Governance. A separate statement on Corporate Governance together with acertificate on the compliance of conditions of corporate governance as stipulated underSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 has been obtainedfrom the Statutory Auditors of the Company and the same has been given below as Annexure.
DIRECTORS' RESPONSIBILITY STATEMENT AS PER SECTION 134(5) OF THE COMPANIES ACT 2013.
The Board of Directors acknowledge the responsibility for ensuring compliances with theprovisions of section 134(3)(c) read with section 134(5) of the Companies Act 2013 in thepreparation of Annual Accounts for the financial year ended on 31st March 2019.
The Board of Directors of the Company confirms that:
a. During the preparing of the annual accounts the applicable accounting standardshave been followed and no material departure has taken place.
b. The selected accounting policies were applied consistently and the Directors madejudgments and estimates that are reasonable and prudent so as to give an accurate view ofthe state of affairs of the Company as on March 31 2019 and of the profit of the Companyfor the year ended on that date.
c. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
d. Annual accounts have been prepared on an ongoing concern basis.
e. The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Related Parties which mayhave a potential conflict with the interest of the Company at large. All Related PartyTransactions are placed before the Audit Committee as also the Board for approval.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal financial controls with reference toFinancial Statements. During the year under review such controls were tested by theAuditors and no reportable material weakness was observed.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith in the Annual Report.
The Company's quality control set up continues to consolidate its customer canteredapproach and QC systems have ensured systematic redressal of quality and feedback from thecustomer base. ISO 9001:2008 and ISO 14001:2004 systems undergo regular internal andexternal audits and have ensured very tight quality control. Quality variances to thecustomer are minimized. The addition of new tests on various sensitive inputs hassignificantly reduced any chance of quality errors from batch to batch.
The Company continues to update guidelines on Restricted Substances (RS) applicable toleather industry from time to time. Company's "Green -Trek" safety andenvironmental ethos have been widely recognized by the customers. Under the "Green-Trek Firewall" concept internal screening calibrated with external testing haseliminated any possible inclusion of banned substances listed under REACH (RegistrationEvaluation and Authorization of Chemicals).
Company's export has declined mainly due to loss of business from Europe. REACHregistration procedure that the EU importers have to undertake are not being preferred bythe EU buyers and they have started diverting orders to European suppliers. The cost ofREACH registration is very prohibitive and many disputes have been raised by importers andexporters relating to cost of preparing the registration dossier.
Even the export to China which was company's main market is suffering recessions dueto international trade disputes. The Company has however ensured maintenance of dealer andcustomer base but the volumes have remained static due to most tanneries running at lowercapacities. Business from Russia Turkey Central Asia and Africa has been stable and newgrowth opportunities have been identified in these regions through personal interactionswith local dealers. The digital marketing set up has been completed and a "regionspecific" campaign design is under initial stage of implementation. Thecompany'successfully maintains Star Export Status' granted by the DGFT Ministry ofCommerce & Industry Govt. of India vide Certificate No. A/1877 as per Foreign TradePolicy 2015-2020.
The company undertook several activities towards technology development particularlyin the field of (1) Pigment dispersions and milling (2) Ultra soft Acrylics bindersresistant to cold cracks. For Pigment milling the company evaluated three availabletechnologies: Ultrasonic High shear rotor-stator and Horizontal bead mills. After manytrials a new design of bead mill was shortlisted that could achieve sub- micron grinding.A techno commercial team also visited various equipment suppliers in China. Thecompany has completed nearly 70% replacement work old machines have been phased out andnew machines are operational with very satisfactory results.
The development work on "Ultra Soft" acrylic binders focussed on achievingproperties suitable for garment and upholstery leather. So far company's products lackedvery high cold crack resistance (upto -30 deg. C). After much iteration company's R &D team was able to successfully complete the prototyping of new range that can now betargeted for improving market share in countries like Russia and Turkey. Trial productionruns have also been undertaken with satisfactory results.
Though there was drop in net profit as compared to last year but considering the salesgrowth and future trends the Directors are pleased to recommend dividend @ 8% this yearalso.
PERSONNEL & INDUSTRIAL RELATION
The year saw some extraordinary event that brought to fore exemplary collaborationbetween managers and workers of the Company. After the fire accident in June thatdestroyed two important warehouses workers and managers demonstrated unprecedentedcapability in coordinating revival of production activity within 48 hours to meet variousproduction targets. This was possible due to the new organizational structure that allowedmore freedom transparency and decentralization of authority. There was completecordiality and trust between the management and its workforce during the crises.
The practice of yearly appraisal and rewarding performance bonus has been maintained.All managers and workers of the Company'stand firmly committed to company's management inadapting various process and system improvements; safety and environment goals. There wasno incidence of industrial dispute. Legal proceeding initiated in previous year against asenior manager Mr. Ramesh Goyal for data theft and destruction remains sub-judice.
ENVIRONMENT & POLLUTION CONTROL MEASURES
The company's environment and pollution control measures rely on company's legacy ofinnovation leadership and action in sustainability. The company remains committed notonly to excelling on its products and solutions but also to its sustainability goals thatgo beyond statutory regulations by setting a higher bar for social and environmentalprogress. Company is also implementing CEMS (Continuous Emission/Effluent MonitoringSystem) to provide continuous information to HSPCB.
The company encourages candid conversations about product safety safety at workplaceand transparency in operations with its employees partners customers and the public ingeneral. Company's environment control strategies revolve around latest trends on ZeroLiquid Discharge (ZLD) waste water minimization highest standard in clean and safemanufacturing practices.
The Directors extend their most sincere thanks to all employees for their support tohelp mitigate the effects of fire accident and adoption of new technologies andenvironmental policy. Company's suppliers dealers service providers and technicalconsultants have continued their whole hearted support and the Directors deeply appreciatetheir role. The Directors are thankful to the esteemed shareholders for their continuedsupport and the confidence reposed in the Company and its management.
| ||For and on behalf of the Board of Directors of Haryana Leather Chemicals Limited || |
|Place : Gurugram ||NARENDRA KUMAR JAIN ||PANKAJ JAIN |
|Date : 9th August 2019 ||Chairman ||Managing Director-cum-Vice Chairman |