The Board of Directors presents herewith the 58th Annual Report of yourCompany along with the Audited Statement of Accounts for the financial year 2018-19.
1. FINANCIAL RESULTS
The financial results for the year ended 31.03.2019 with the comparative figures ofcompany's operations for the previous year is as under:
| || ||(Rs. In Lakhs) |
|Particulars ||2018-19 ||2017-18 |
|Revenue from operations ||47199.01 ||24232.94 |
|Other Income ||11571.30 ||6859.97 |
|Total ||58770.31 ||31092.91 |
|Expenditure ||51514.51 ||50760.99 |
|Profit before Depreciation & Tax ||7255.80 ||(-)19668.08 |
|Less Depreciation ||175.69 ||676.84 |
|Profit /(Loss) before Exceptional Items and Tax ||7080.11 ||(-)20344.92 |
|Less : Exceptional Items ||- ||- |
|Less :(1) Current Tax ||- ||- |
|(2) Deferred Tax ||2069.00 ||- |
|Profit/(Loss) for the Period after Tax ||5011.11 ||(-)20344.92 |
|Other Comprehensive Income: || || |
|(i) Items that will not be reclassified to profit or loss ||0.00 ||0.00 |
|a) Revaluation of Plant property & equipments ||(569.17) ||12478.07 |
|Less: Deferred Tax assets ||(36.00) ||(2793.25) |
|b) Provision for duties& taxes ||381.22 ||- |
|c) Changes in defined benefit plan ||(156.89) ||873.02 |
|Other Comprehensive Income for the year Net of Tax ||-380.84 ||10557.84 |
|Total Other Comprehensive Income for the year ||4630.27 ||(9787.08) |
The Audited Financial Statements approved by the Board on 28th May 2019 wasrevised based on the provisional comments issued by Director General Audit Mumbai (O/o.Director General Audit and Member Audit Board I Mumbai) and approved by the Board on 29thJuly 2019.
2. CONSOLIDATED FINANCIAL STATEMENT
In accordance with the provisions of the Companies Act 2013("the Act") andInd AS 110 Consolidated Financial Statement the audited consolidated financial statementis provided in the Annual Report.
In view of the continuous losses during the previous years as well as carry forward ofthe accumulated losses of the previous years the Board of Directors do not recommend anyDividend for the year under review.
4. CHANGE IN NATURE OF BUSINESS IF ANY
Closure of Company's Rasayani Unit and consequent shifting of the Registered Office ofthe Company from Rasayani [Raigad District] to CBD Belapur [Thane District] within thesame ROC Mumbai.
As per the Govt. approved HOCL Restructuring Plan comprising among other approvalsincluded closure of Company's Rasayani unit sale of part of Rasayani land of the Companyto BPCL. Consequently on closure of Rasayani unit the Corporate Office was shiftedw.e.f. 2 nd July 2018 and w.e.f. 26/9/2019 Company's Registered Office wasshifted from Rasayani to office Nos. 401 402 & 403 4 th Floor V TimesSquare Plot No.3 Sector-15 CBD Belapur Navi Mumbai PIN-400614 Thane District withinthe same ROC Mumbai.
As per the approval of Government of India (viz. Govt.) the operation of all theplants at Rasayani Unit (except C NA / N204 plant along with the manpower transferred toISRO) has been closed. In Kochi unit two plants (Phenol and Hydrogen Peroxide plants) areoperational.
Further during the year under review out of the balance +/-191 acres of land approvedfor sale to BPCL (442-251 acre) sale of 38.687 acres has been completed for which anamount of Rs.53.62 Crore after deducting 1% TDS was received from BPCL. After adjustmentof part amount towards BPCL raw material supplies principal dues the balance amountreceived from BPCL has been utilised partially to pay off the other liabilities andpayment of salary dues of Kochi unit employees.
Subsequently during 2018 Government has also approved the sale of +/-10% 242 acres ofland at Rasayani to BPCL for Rs.381.27 Crore +/- .
During the year out of the 242 acres of land approved for sale sale of 85.27 acres hasbeen completed during the current year (on 13th May 2019) for which BPCLhas paid an amount of Rs.135.81 crore(net of 1% TDS). After adjustment of the raw materialsupplies secured dues towards interest accrued (DPC) amounting to Rs.57.62 crore on thePrincipal amount and GST @18% amounting to Rs.10.37 crore balance amount of Rs. 67.82crore was received on 13th May 2019. Part of sale proceeds amounting toRs.13.19 crore was utilised to pay off Govt. Plan Loan where charge was created on theimmovable properties of the company and balance to clear other liabilities to the extentpossible.
5. FINANCIAL HIGHLIGHTS
During the year 2018-19 the Company registered an impressive growth of 94.78% underRevenue. The Gross Income of the Company stood at Rs. 58770.31 Lakhs as against Rs.31092.91 Lakhsachieved during the previous year. The Profit before tax for the year2018-19 was Rs.7080.11 Lakhs as against the loss of Rs.20344.92 Lakhs (reinstated as perInd AS) incurred during the corresponding period of last year.
6. NUMBER OF MEETINGS OF BOARD (including the dates of Board and committeemeetings indicating the number of meetings attended by each director in every financialyear)
During the year the Board Meetings were held on the following dates: 29thMay 2018 10th August 2018 14th November 2018 13thFebruary 2019.
Other details are furnished in the Corporate Governance Report in Annexure IV to thisReport.
7. CORPORATE GOVERNANCE
The Company has complied with the various requirement of Corporate Governance underprovisions of Companies Act 2013 under SEBI LODRRs and various Rules / Regulations madethere under. The details in this regard forms part of Corporate Governance Report asAnnexure IV to this report.
8. MANNER IN WHICH FORMAL ANNUAL EVALUATION OF PERFORMANCE OF BOARD ITSCOMMITTEES AND INDIVIDUAL DIRECTORS HAS BEEN CARRIED OUT :
HOCL being a CPSU governed by the DPE Guidelines on the Annual Evaluation ofPerformance of Board its committees and of individual Directors have been carried out bythe Administrative Ministry (DCPC).
9. DETAILS OF DIRECTORS AND/OR KMP'S WHO HAVE BEEN APPOINTED OR RESIGNED DURINGTHE YEAR
In compliance with Regulation 36(3) of the LODRRs following information is furnished:i Govt. has appointed Mrs. Alka Tiwari AS & FA in the Ministry of Chemicals &Fertilizers as Govt Nominee Director in place of Ms. Meenakshi Gupta w.e.f 29-01-2019 fora period of three years or till the date of superannuation or till further orderswhichever is the earliest.
Mrs. Alka Tiwari AS & FA in the Ministry of Chemicals & Fertilizers GovtNominee Director HOCL retires by rotation at this Annual General Meeting (58th AGM) of theCompany and being eligible offers herself for re-appointment. ii GOI has appointed ShriChander Prakash Bhatia (Ex GM (Fin.) REC) as Director (Finance) on the Board of HOCL videGOI Order No. 51011/1/2018-CHEM. III-CPC dated 16th July 2019 w.e.f. the date ofassumption of charge of the post till the age of superannuation (31.07.2021) or untilfurther orders whichever is earlier. Shri Chander Prakash Bhatia assumed the charge ofDirector (Finance) HOCL on 07-08-2019. iii Tenure of Mrs Pushpa Trivedi IndependentDirector was ended on 14-06-2019 iv Mr. S. B. Bhide CMD HOCL also holds the Additionalcharge of Director Finance HOCL from 18-02-2018 upto 06-08-2019. v Shri Samir KumarBiswas Joint Secretary Govt Nominee Director retires at the 58th AGM and Govt Order isawaited.
10. COMPOSITION OF AUDIT COMMITTEE (AC) AND NON ACCEPTANCE OF ANY RECOMMENDATIONS OF AC(only for public and listed companies)
The Audit Committee is in existence during the year in compliance with the CompaniesAct 2013 and LODRRs. Details of Composition meetings of Audit Committee are provided inCorporate Governance Report in Annexure IV to this Report.
11. DIRECTOR'S RESPONSIBILITY STATEMENT
Your Directors make the following statement in terms of Section 134(5) of the CompaniesAct 2013 -
a. That in the preparation of the annual accounts for the year ended 31st March 2019;the applicable accounting standards had been followed along with proper explanationrelating to material departures.
b. That such accounting policies as mentioned in the Notes on Accounts had been appliedconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at the financial yearended 31st March 2019 and the profit or loss of the Company for that period.
c. That proper and sufficient care had been taken 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. That the annual accounts for the year ended 31st March 2019 had been prepared on agoing concern basis.
e. That the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
12. INDEPENDENT DIRECTORS DECLARATION
f. The Company has received Declarations of Independence as stipulated under Section149(7) of the Companies Act 2013 from Independent Directors confirmingthat he/she is notdisqualified from appointing/continuing as Independent Director.
13. DISCLOSURE ON REAPPOINTMENT OF INDEPENDENT DIRECTORS
- not applicable.
14. COMPANIES POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FORDETERMINING QUALIFICATIONS POSITIVE ATTRIBUTES INDEPENDENCE OF DIRECTORS ETC.
Company being a CPSE and appointments of all the Directors on the Board of the Companyare made by the Govt. of India/President of India and under the supervision control anddirectors of the DC&PC and the prescribed DPE Guidelines are being followed. The Termsand Conditions of appointment of Independent Directors and other directors are as per theGoverment Orders and are disclosed on the Company's website.
15. RATIO OF DIRECTORS REMUNERATION TO MEDIAN EMPLOYEES REMUNERATION AND OTHERPRESCRIBED ELABORATE DISCLOSURES AND DETAILS :
Company being a CPSE which is under the supervision control and directions of theDC&PC the prescribed DPE Guidelines are being followed in respect of employee'sremunerations and DPE Guidelines as well as CVC Guidelines are being followed as regardsto the other prescribed perquisites
a) M/s. M.B.Agarwal & Co Chartered Accountants were appointed as StatutoryAuditors of your Company for Rasayani unit / Corporate office for FY 2018-2019 byC&AG.
The Auditors have furnished a declaration confirming their independence as well astheir arm's length relationship with the Company as well as declaring that they have nottaken up any prohibited non-audit assignments for the Company. The Audit Committee reviewsthe independence and objectivity of the Auditors and the effectiveness of the Auditprocess. The Auditors attend the Annual General Meeting of the Company
b) M/s. BSJ & Associates Chartered Accountants were appointed as BranchAuditors of your Company for Kochi Unit for FY 2018-2019. M/s. BBS & AssociatesCost Accountants carried out the cost audit for applicable businesses during the year. TheBoard of Directors have appointed M/s. BBS &Associates Cost Accountants as CostAuditors of your Company for FY 2018-2019. A proposal for ratification of remuneration ofthe Cost Auditor for the financial year 2019-20 is placed before the shareholders.
c) i) M/s. JMT & Associates Chartered Accountants were appointed as InternalAuditor of your Company for Rasayani unit / Corporate office FY 2018-2019.
ii) M/s. Isaac & Suresh Chartered Accountants were appointed as theInternal Auditors of Company's Kochi unit for the FY 2018-19.
17. SECRETARIAL AUDITOR
The Board has appointed S.N. Ananthasubramanian & Co Practising CompanySecretary to conduct Secretarial Audit for the FY 2018-2019. The Secretarial Audit Reportfor the Financial Year ended March 31 2019 is annexed to this Report as Annexure andcomplied with Section 204 of Companies Act and Regulation 24A of SEBI LODRRs. The repliesto observations forms part as Annexure to this Report. The Company also obtained AnnualSecretarial Compliance Report form the same PCS S. N. Ananthasubramanian & Co. for theyear 2018-19 under Regulation 24A of LODRRs.
18. SAFETY HEALTH AND ENVIRONMENT
In the areas of Health Hygiene and Environment the company has undertakenperiodic medical examination as well as statutory requirements of fitness check-up underform no. 23 for its employees. In our commitment to environment we have ensured that thelevel of pollutants from the factory and nearby surroundings was much below thepermissible levels.
HOC Kochi unit received pollution control award among very large scale industries fromKerala State Pollution Control Board for substantial and sustained efforts in pollutioncontrol during the earlier years.
HOC Kochi unit received safety awards from Dept. of Factories & Boilers Govt. ofKerala for outstanding performance in industrial safety for the year 2012. No furtherawards received during the year 2018-2019.
19. INDUSTRIAL RELATIONS:
The overall Industrial Relation situation continues to be peaceful and cordial duringthe year. There was no strike or lockout during the year.
20. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THECOMPANIES ACT 2013
There are no loans Guarantees or investments made by the company under Section 186 ofthe Companies Act 2013 during the year under review and hence said provisions are notapplicable.
However the cumulative investment on the Subsidiary Company Hindustan Fluorocarbonsltd. 31.3.2019 stood at Rs.11.06 Crore. In addition the company has given Secured Loanof Rs.35.10 Crores to HFL [on the security of HFL Land] and Company has also extendedCorporate Guarantee to the working Capital loan to the subsidiary company HFL.
The investments made in HFL during earlier years under section 186 of the Companies Act2013 were shown in the financial statements.
However as the MDI Project was abandoned long ago the subsidiary company HOCLChematur Ltd's. name was struck off w.e.f. December 2018 under section 248 of theCompanies Act2013 after following due procedures there under.
As per Govt. approval the investment of the Company in the Equity of the Company'ssubsidiary Hindustan Fluorocarbons ltd. was set out for disinvestment during 2018.However as no bids were received Govt. has directed for the sale of HFL Land and to giveVRS to the employees etc. The action plan thereof is in progress.
21. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES
1. Details of Contracts or arrangement or transactions not at arm's length basis: -None
a) Name(s) of related party and nature of relationship
b) Nature of Contracts/arrangements/transactions
c) Duration of contracts/arrangements/transactions
d) Salient terms of the contracts or arrangements or transactions including the valueif any
e) Justification for entering into such contracts or arrangements or transactions date(s) of approval by the Board f) Amount paid as advances if any
g) Date on which a special resolution was passed in general meeting as required underfirst proviso to section 188
2. Details of material contracts or arrangements or transactions at arm's lengthbasis:- None.
a) Name(s) of related party and nature of relationship
b) Nature of contracts/arrangements/transactions
c) Duration of contracts/arrangements/transactions
d) Salient terms of the contracts or arrangements or transactions including the valueif any:
e) Date(s) of approval by the Board if any:
f) Amount paid as advance if any:]
22. EXPLANATION OR COMMENTS ON QUALIFICATIONS RESERVATIONS OR ADVERSE REMARKS ORDISCLAIMERS MADE BY THE AUDITORS AND PRACTISING COMPANY SECRETARY IN THEIR REPORTS
There were no qualifications reservations or adverse remarks made by the Auditorsin their Audit report.
The Secretarial Auditors of the company have submitted their Secretarial Audit Reportfor the year 2018-19 and management replies to the audit observations thereof are annexedto the Directors' Report and forming part of 58th Annual Report of the Company.
23. AMOUNTS IF ANY WHICH IT PROPOSES TO CARRY TO RESERVES
In view of the accumulated losses incurred during the previous years no amountsare transferred to reserves
24. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTSRELATE AND THE DATE OF THE REPORT
During the year under review out of the balance +/-151 acres of land approved forsale to BPCL (442-251 acre) sale of 38.687 acres has been completed for which an amountof Rs.53.62 Crore after deducting 1% TDS was received from BPCL. After adjustment of partamount towards BPCL raw material supplies principal dues the balance amount received fromBPCL has been utilised partially to pay off the other liabilities and payment of salarydues of Kochi Unit employees. Further out of the 242 acres of land approved for sale inthe year 2018 sale of 85.27 acres has been completed on 13th May 2019 forwhich BPCL has paid an amount of Rs.135.81 crore (net of % TDS). BPCL has paid balanceamount of Rs. 67.82 crore on 13th May 2019 after adjustment of the rawmaterial supplies secured dues towards interest accrued (DPC) amounting to Rs.57.62crore on the Principal amount and GST @18% amounting to Rs.10.37crore. Part of saleproceeds amounting to Rs.13.19 crore was utilised to pay off Govt.Loan where charge wascreated on the immovable properties of the company. The balance amount was utilised toclear other liabilities to the extent possible.
25. THE DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TOTHE FINANCIAL STATEMENTS :
Company ensures existence of adequate internal controls through documented policyand procedures laid down in the manuals to be followed by the executives at variouslevels. Internal controls are supported by periodical internal audits and managementreviews. The management is keen on these issues and initiated various measures such asupgrading the IT infrastructure evaluating and implementing ERP software web basedapplication and establishing connectivity amongst manufacturing units and branch officesfor effective and proactive services and businesses. Board periodically reviews theinternal controls audit programme financial results and recommendations the replies ofthe management to Government Audit and internal audit etc.
26. CONSERVATION ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
A. Conservation of energy: Nil
i. The steps taken or impact on conservation of energy : Nil
ii. The steps taken by the company for utilizing alternate sources of energy and :Nil
iii. The capital investment on energy conservation equipment: Nil
B. Technology Absorption Nil :
i. the efforts made towards technology absorption:Nil
ii. the benefits derived like product improvement cost reduction product developmentor import substitution : Nil
iii. in case of imported technology (imported during the last three years reckonedfrom the beginning of the financial year): Nil
(a) the details of technology imported;
(b) the year of import;
(c) whether the technology been fully absorbed;
(d) if not fully absorbed areas where absorption has not taken place and the reasonsthereof; and
iv. the expenditure incurred on Research and Development : Nil
27. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OFTHE COMPANY
Key Threats include :
o Competition from domestic / imports and fluctuation in the input prices
o High input costs
o High utility costs
o High overheads
o Continued availability of anti-dumping support for the main products Phenol andAcetone.
o Acute working capital shortage affecting continuous operations
o High interest cost and employee remuneration.
Some risks and concerns :
o High manpower cost per ton of finished product.
o Depreciated plants requiring high maintenance cost.
o Dumping in main products Phenol / Acetone.
o Volatility in main input Benzene.
28. SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES WHICH HAVE BECOME OR CEASED TOBE
HOC Chematur Ltd. (Company) a Joint Venture subsidiary abandoned the proposed MDIProject in the earlier years and Company has applied to the Registrar of Companies(ROC/MCA) for striking off the name of the Company under the Early Exit Scheme of the MCAduring the year 2017-18. ROC/MCA has approved the striking off the name of the Companyvide ROC/MCA Notice of Striking off and Dissolution order dated 06/12/2018.
Hence AOC-1 in respect of the Company (HOC Chematur Ltd.) is not being furnished.
29. DETAILS OF CSR POLICY AND ITS IMPLEMENTATION DURING THE YEAR
Company since its inception is very much aware about its social responsibility. Forover five decades as a socially responsible and sensitive corporate your Companycontinues to remain committed to social thought and action to serve society throughproviding basic civic amenities to the neighboring villages rendering assistance indifferent forms. Your Company is not required to carry out any CSR activities on accountof losses incurred in the previous Financial Year 2017-18 and carry forward of theaccumulated losses in the Year 2018-19. However Company has recognized its socialobligations and extended the following during the year under review.
On closure of Rasayani Unit Company has donated Rasayani unit' sold used tables fanschairs and cupboards etc. to Zilla Parishad Schools and other educational institutions andcharitable trusts etc during the year under review.
o As a part of social obligation the company is extending need based assistance todeserving students along with SC/ST students for their School / Graduate education.
o Vocational training facilities to the wards of employees of the company in the nearbyEngineering / Management colleges for enhancing skill / knowledge.
o Engaging professional students of ICAI/ICSI who have completed intermediate level astrainees for imparting practical knowledge of company working by paying stipend.
Further during the Previous Year (2017-18) in view of closure of Rasayaniunit Companyhas donated Rasayani unit's Library books valuing Rs. 3.19 lakhs (WDV) to Dr. BabasahebAmbedkar Marathwada University Aurangabad as a CSR activity as these books will beuseful to the students community at the university.
30. DISCLOSURES PRESCRIBED IN TERMS OF SECTION 67 (only for public and listedcompanies)- N.A.
31. DEPOSITS : Nil
During the period under review the Company has not invited or accepted any depositseither from the directors or from shareholders of the Company.
32. THE DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTSOR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:
The Joint Secretary (Industrial Relations) has passed the Order on 13-02-2019 for theClosure of Company's Rasayani Unit with effect from 13-03-2019 in accordance withsub-section (1) of Section 25(O) of the Industrial Disputes Act 1947.
Except the above there is no other order passed by the Regulators/ Courts/Tribunals inrespect to the Company during the financial year.
33. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 (Act') and rules made there under yourCompany has adopted a Sexual Harassment Policy for women to ensure healthy workingenvironment without fear of prejudice gender bias and sexual harassment. The policy hasbeen widely disseminated.
The Board states that there were no cases or complaints filed pursuant to the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
INTERNAL FINANCIAL CONTROLS
The Company has maintained adequate financial control system commensurate with thesize scale and complexity of its operations and ensures compliance with various policiespractices and statutes in keeping with the organization's pace of growth and increasingcomplexity of operations.
34. VIGILANCE MECHANISM: (Under Sec.177(9) of Companies Act2013)
Hindustan Organic Chemicals Limited being a Government Company a Vigilance Departmentis already existing in pursuance of CVC Guidelines. And therefore Vigilance Mechanism isbeing handled by the Vigilance Department and the Company has already adopted a VigilanceManual in pursuance of CVC Guidelines. Vigilance Manual is available on Company's Website.