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Jocil Ltd.

BSE: 500561 Sector: Industrials
NSE: JOCIL ISIN Code: INE839G01010
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Jocil Ltd. (JOCIL) - Director Report

Company director report

Your Directors have pleasure in presenting the Fortieth Annual Report together with theAudited Statement of Accounts for the Financial Year ended 31 March 2018.

(Rs. in Lakhs)

2017-18 2016-17
1. FINANCIAL RESULTS
Gross Sales 34782.37 40745.21
Less : Excise Duty 698.59* 3557.68
Net Sales 34083.89 37187.53
Processing Charges 63.31 391.14
Other Income 214.73 341.76
Total Income 34361.82 37920.43
Profit for the year before Interest and Depreciation 1276.88 1885.43
Interest (128.64) (160.01)
Depreciation (653.38) (706.81)
Profit Before Tax 494.86 1018.61
Provision for Current Tax (130.00) (255.00)
Deferred Tax / (credit) 45.59 57.19
Profit After Tax 410.45 820.80

* w.e.f. 01 July 2017 GST was introduced and it is not to be included in the grosssales. Hence Excise Duty up to 30 June 2017 only has been deducted from gross sales.

The turnover of the company for the year at Rs. 348.45 crores is down by 15.29% overthe figure of Rs. 411.36 crores of the previous year. During the year the sales volume offatty acids has marginally increased by 1.64% whereas sales volume of soap noodles droppedby about 32% as compared to the previous year. Increase in prices of raw materials andsales at reduced margins resulted in decline in Profit Before Interest and Depreciation toRs. 1276.88 lakhs from Rs. 1885.43 lakhs in the previous year. The volume of toilet soapand soap products has come down due to intense price competition in the market. The ProfitBefore Tax (PBT) has come down to Rs. 4.95 crores as compared to Rs. 10.19 crores in theprevious year.

The appropriations from the profit are as detailed below.

(Rs. in Lakhs)

2017-18 2016-17
Profit after Tax (including comprehensive income) 709.68 955.68
Balance brought forward from previous year 2407.87 1652.19
Profit for appropriations 3117.55 2607.87
APPROPRIATIONS
Dividend (accounted in the year of payment)* 266.43 -
Provision for Tax on distributed profits @ 20.35765% on dividend (accounted in the year of payment) 54.24 -
Transfer to General Reserve - 200.00
Balance carried forward 2796.88 2407.87
TOTAL 3117.55 2607.87
Authorized Capital 1000.00 1000.00
Paid-up Capital 888.16 888.16
Reserves & Surplus 16320.29 15931.29

* In accordance with the requirements of Ind AS dividend is to be accounted in theyear of payment. Hence dividend paid during the year is given instead of dividenddeclared during the year.

2. DIVIDEND

The Board of Directors are pleased to recommend for the approval of the shareholders ofthe Company for payment of dividend for the year ended 31-03-2018 at Rs. 2.00 per equityshare of Rs. 10 each which aggregates to Rs.17762300 (excluding Dividend DistributionTax) on the 8881150 equity shares of the Company. In the previous year the Company paiddividend at Rs.3.00 per equity share of Rs.10 each on 8881150 shares amounting toRs.26643450 (excluding Dividend Distribution Tax).

3. TRANSFER OF AMOUNT TO RESERVES

The Company does not propose to transfer any amount to reserves.

4. OPERATIONS 2017-18 2016-17
MT MT
Production
(including processed on jobwork)
a) Fatty Acids 45483 52134
b) Toilet Soap & Soap Products 15908 26260
c) Biomass Power-kwh 24914266 29562238
d) Wind Power-kwh 14851184 14022372
Sales
a) Fatty Acids 35392 34822
b) Toilet Soap & Soap Products 14703 21583
c) Biomass Power-kwh 9603400 13959000
d) Wind Power-kwh 14851184 14022372

5. OUTLOOK

Fatty Acids and Soap

The sales of fatty acids have improved marginally during the year whereas soap noodlessales have been declining year after year due to availability of noodles at lower price intax exempted areas. The margins have narrowed down due to intense price competition in themarket. Indigenous market of soap noodles is also affected by cheaper imported soapnoodles due to inverted duty structure. This market condition of soap noodles is alsoaffecting sales of fatty acids as majority of fatty acids produced is used for soapnoodles production. Even after introduction of GST tax exemptions are continuing to beavailable for units located in exempted areas. As a result manufacturers in non-exemptareas doing jobwork are still finding it difficult to market their capacities.

Palm stearin and PFAD are the major raw materials for manufacture of fatty acids andsoap. These are the by-products derived from the refining of crude palm oil. With theincrease in import duties on crude palm oil local raw material suppliers are not in aposition to supply Palm Stearin and PFAD at competitive prices. Accordingly we are havingto import Crude Palm Stearin and PFAD directly. Also in order to meet the requirements ofRoundtable on Sustainable Palm Oil (RSPO) Guidelines regarding processing of Mass Balanced(MB) Palm Stearin we are having to import MB Palm Stearin from Malaysia and Indonesia asit is not available locally.

Cost of raw materials is a major component in total cost of production and thefluctuation in raw material prices is a serious cause of concern to the companyparticularly when the customers demand long term forward contracts while the same is notpossible with the raw material suppliers.

There is stiff competition from manufacturers particularly from those having backwardintegration which gives them a cost advantage.

To safeguard against fluctuations in raw material prices the company tries to enterinto contracts for doing job-work both for fatty acids and soap wherein the customersthemselves supply/cover raw materials required for the total process and we receiveprocessing charges for the manufacture of final products. Presently the market situationhas improved and the Company is getting export orders for DFA and indigenous orders forSoap Noodles and Toilet Soap from the major customers.

Biomass Power Plant

During the year under review the performance of the Biomass Power Plant has declined.The generation from the plant during the year is lower by 46.48 lakh units a 15% declinefrom the previous year. Export of power to APSPDCL was stopped from 29 August 2017 to 20October 2017 due to non availability of fuels. Other technical problems resulted indecline in performance. However after the overhaul the plant performance has improved.

Wind Energy Generators (WEG)

Power generation during the year from the four Wind Energy Generators (WEGs) of 6.3 MWcapacity has marginally increased as compared to the previous year. During the year thepower generation from all the four WEGs is 148.51 lakh units as compared to 140.22 lakhunits in the previous year. Due to sustained efforts of the Indian Wind Power Associationin seeking "must run" status to WEGs to reduce back down time the back down ofWEGs for want of evacuation facilities has come down during the year from 8.58% of machineavailable hours to 5%.

6. FINANCE AND STATUTORY COMPLIANCES

The Company availed working capital facilities under consortium arrangement with AndhraBank and State Bank of India and the accounts are in order. During the year under reviewworking capital limits increased by Rs. 10 crores to cater to the increased volume ofprocurements for export orders obtained from major customers. The company complied withall the legal requirements and there are no outstanding statutory dues as on 31 March2018.

During the year there have been no significant and material orders passed by theregulators or courts or tribunals impacting the going concern status and company'soperations in future.

7. CREDIT RATING

During the year the Credit Rating Agency CARE revised the credit rating for variousfacilities as detailed hereunder when compared to previous year.

Rating Assigned
Nature of facilities 2017-18 2016-17
1. Working Capital facilities
i) Long Term facilities CARE A – (adequate degree of safety regarding timely servicing of financial obligations) CARE A + (adequate degree of safety regarding timely servicing of financial obligations)
ii) Short Term facilities CARE A 2 (Strong degree of safety regarding timely payment of financial obligations) CARE A 1 (Very strong degree of safety regarding timely payment of financial obligations)
2. Fixed Deposits CARE A2 (FD) (Strong degree of safety regarding timely payment of financial obligations) CARE A1 (FD) (Very strong degree of safety regarding timely payment of financial obligations)

8. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND 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. The Company has complied with provisions relating to the constitutionof Internal Complaints Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. During the year the Company has notreceived any complaints on sexual harassment of women at the workplace.

9. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established vigil mechanism as required under Sec. 177 of the CompaniesAct 2013 for directors and employees to report genuine concerns as prescribed in thepolicy. The policy provides adequate safeguards against victimization of persons who usesuch mechanism and makes provision for direct access to the Chairperson of the AuditCommittee in appropriate or exceptional cases.

10. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP) a) In accordance with theprovisions of the Companies Act 2013 and Articles of Association of the Company at theensuing Annual General Meeting Shri P. Narendranath Chowdary Chairman retires byrotation and being eligible offers himself for re-election. b) The Company held four BoardMeetings during the year. Board Meeting dates and attendance particulars are available inthe report on Corporate Governance. c) The Company has received declarations from all thefive Independent Directors confirming that he / she meets the criteria of independence asprovided under sub-section 6 of Sec. 149 of the Companies Act 2013 at the first meetingof the Board in which he / she participated as a Director and thereafter at the firstmeeting of the Board in every financial year or whenever there is any change in thecircumstances which may affect his / her status as an Independent Director. d) The AuditCommittee consists of 3 Non-Executive Directors of which 2 are Independent Directors.

Shri V.S. Raju Independent Director is the Chairman of the Audit Committee. Theremaining 2 members are Shri Mullapudi Thimmaraja Non-Executive Director and ShriSubbarao V. Tipirneni Independent Director. The Board accepted all the recommendations ofthe Audit Committee during the year. e) Shri P. Kesavulu Reddy President & Secretarywho was appointed as Key Managerial Personnel demitted office on the completion of histerm of employment on 30 November 2017. Shri K. Raghuram Dy. Secretary & AGM(Finance) was appointed as Key Managerial Personnel under Sec. 203 of the Companies Act2013 w.e.f. 01 December 2017. f) During the year under review the Company is having thefollowing persons as Key Managerial Personnel under Sec. 203 of the Companies Act 2013.

Name of the Official DIN / Membership No. Designation
Shri J. Murali Mohan 00114341 Managing Director
Shri P. Kesavulu Reddy (upto 30 November 2017) FCS - 6052 President & Secretary
Shri K. Raghuram (From 01 December 2017) FCS - 6712 Dy. Secretary & Asst. General Manager (Finance)

11. MEETING OF INDEPENDENT DIRECTORS

A separate meeting of Independent Directors as required under the Schedule IV of theCompanies Act 2013 was held on 24 May 2018 without presence of Executive Directors andPromoter Directors. This meeting was conducted to review and evaluate (a) the performanceof Non-Independent Directors and the Board as a whole (b) the performance of theChairperson of the company taking into account the views of Executive Directors andNon-Executive Directors and (c) assess the quality quantity and timeliness of flow ofinformation between the company management and the Board that is necessary for the Boardto effectively and reasonably perform their duties. The Independent Directors expressedtheir satisfaction with the performance of Non-Independent Directors and the Board as awhole and Shri V. S. Raju one of the Independent Directors briefed the outcome of themeeting to the Board.

12. AUDITORS

M/s. Chevuturi Associates Chartered Accountants Vijayawada were appointed as Auditorsfor a period of 5 years at the 39th Annual General Meeting held on 28 September 2017 tillthe year 2021-22. There are no qualifications reservations or adverse remarks in theaudit report issued by them for the financial year ended 31 March 2018.

13. COST RECORDS AND COST AUDITORS

Company is maintaining cost records as specified by the Central Government under subsection (1) of Section 148 of the Companies Act 2013. M/s. Narasimha Murthy & Co.Cost Accountants Hyderabad are conducting the cost audit for applicable products duringthe year. They are eligible for re-appointment as Cost Auditors for the year 2018-19.There are no qualifications reservations or adverse remarks in the audit report issued bythem for the financial year ended 31 March 2018.

14. SECRETARIAL AUDIT

M/s.Nekkanti S.R.V.V.S. Narayana & Co. Company Secretaries Hyderabad wereappointed as Auditors for secretarial audit for the year 2017-18 under Sec. 204 of theCompanies Act 2013 and they have submitted their report. There are no qualificationsreservations or adverse remarks in the audit report issued by them for the financial yearended 31 March 2018.

15. The information required to be included in the Board of Directors Report underthe Companies Act 2013 and Rules made thereunder is annexed and forms part of this reportdetailed as follows.

Sl.No. Particulars Section Rule Annexure No.
1 Extract of the Annual Return – Form MGT-9. Companies (Management and Administration) Rules 2014 134 (3) (a) & 92 (3) 12 (1) 1
2 Company policy on Directors appointment and remuneration etc. provided under sub-sections (3) and (4) of Section 178 134 (3) (e) 2
3 Particulars of loans guarantees or investments under Section 186 134 (3) (g) 3
4 Particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 in Form AOC -2. Companies (Accounts) Rules 2014 134 (3) (h) 8(2) 4
5 Conservation of energy technology absorption and Foreign Exchange earnings and outgo. Companies (Accounts) Rules 2014 134 (3) (m) 8 (3) (A) (B) &(C) 5
6 Risk management policy for the company including identification therein of elements of risk if any. 134 (3) (n) 6
7 Corporate Social Responsibility policy and initiatives taken during the year . Companies (Corporate Social Responsibility policy) Rules 2014 134 (3) (o) 8 (1) 7
8 Statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and Individual Directors. Companies (Accounts) Rules 2014 134 (3) (p) 8 (4) 8
9 Financial summary or highlights. Companies (Accounts) Rules 2014 134 (3) (q) 8 (5) (i) 9
10 Details relating to deposits covered under Chapter V of the Act. Companies (Accounts) Rules 2014 134 (3) (q) 8 (5) (v) & (vi) 10
11 Ratio of the remuneration of each Director to the median employee.s remuneration and such other details. Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 197 (12) 5 (1) 11
12 Particulars of employees in receipt of remuneration not less than Rs. 850000 per month or Rs. 10200000 per year etc. Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 197 (12) 5 (2) 12
13 Secretarial Audit Report in Form MR-3. Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 204 (1) 9 (1) 13

16. INFORMTION UNDER LISTING REGULATIONS

The Company is committed to maintain the standards of Corporate Governance prescribedunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations). The information required to be included in the Annual Report under ScheduleV of the Listing Regulations are as follows.

Sl.No. Particulars Para Annexure No.
1 Related Party Disclosures A 14
2 Management Discussion and Analysis Report B 15
3 Report on Corporate Governance C 16
4 Declaration by the Managing Director that all Board Members and Senior Management Personnel affirmed their compliance to the Code of Conduct. D 17
5 Compliance Certificate from Auditors on Corporate Governance E 18
6 Disclosures with respect to Demat Suspense Account / Unclaimed Suspense Account F 19
7 Details of shares transferred to IEPF G 20

The Company is having a policy to deal with Related Party Transactions and the same maybe viewed in the Company's website www.jocil.in. Please see Note No.34 on Accounts fordisclosures in compliance with the Accounting Standards on "Related PartyDisclosures".

17. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors' Responsibility Statement it is hereby confirmed that a) in thepreparation of the annual accounts the applicable accounting standards had been followedalong with proper explanation relating to material departures; b) the Directors hadselected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company at the end of the financial year and of the profit and loss ofthe company for that period ; c) the Directors had taken proper and sufficient care forthe maintenance of adequate accounting records in accordance with the provisions of thisAct for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; d) the Directors had prepared the annual accounts on a going concernbasis; 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 and Explanation : For the purpose of this clause the term "internalfinancial controls" means the policies and procedures adopted by the company forensuring the orderly and efficient conduct of its business including adherence tocompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information. f) the directors had devised proper systemsto ensure compliance with the provisions of all applicable laws and that such systems wereadequate and operating effectively.

18. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of theCompany for their sustained efforts and valuable contribution to the performance of theCompany during the year.

19. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted andsincere cooperation the Company received from various departments of Central and StateGovernments Bankers Auditors Dealers and Suppliers of the Company. The Directors alsowould like to express their grateful appreciation for the guidance and cooperationreceived from the Holding Company M/s. The Andhra Sugars Limited Tanuku.

For and on behalf of the Board of Directors
Hyderabad P. NARENDRANATH CHOWDARY
03 August 2018 Chairman