Your Directors have pleasure in presenting the 38th Annual Report togetherwith the Audited Financial statements for the year ended 31st March 2017.
The Financial Results for the year ended 31st March 2017 are summarizedbelow:
|Particulars ||2016-17 ||2015-16 |
|Income (Sales and other Income) ||22741.86 ||21641.40 |
|Profit before Depreciation Interest & Taxes doubtful debts ||5023.85 ||3388.66 |
|Depreciation ||236.12 ||247.92 |
|Interest ||121.52 ||160.41 |
|Provision for doubtful debts / advance old inventory etc ||196.07 ||--- |
|Provision for Taxation ||1641.76 ||774.72 |
|Provision for Deferred Taxation ||143.53 ||(12.81) |
|Profit after Taxation ||2871.91 ||2218.42 |
|Profit brought forward from Previous year ||14822.78 ||13078.82 |
|Less: Adjustment for deprecation on fixed assets || ||-- |
|APPROPRIATIONS || || |
|Transfer to General Reserve || ||221.84 |
|Proposed Dividend || ||209.89 |
|Corporate Tax on Dividend || ||42.72 |
|Balance carried over to Balance Sheet ||17694.70 ||14822.78 |
Your Directors are pleased to recommend for your consideration a Dividend of ' 3.00 perequity share for the year ended 31.03.2017 which aggregates to ' 233.22 lacs excludingdividend distribution Tax.The Company has been paying dividend at ' 2.70 per share for thepast few years.
One of the challenges for the company is to honour timely payments to the cane growersso as to make sure that the operational targets are met with out any impediments. This isa very important factor in view of the seasonal character of the industry . It may also benoted that the cement plant of the company is more than three decades old and it isimperative that the company takes a pragmatic and scientific view whether the company'splant suffers from any serious impairment of its assets. If it is prudent to modernize apart of the machinery the company shall certainly draw-up a plan for acquisition of suchmachinery. It is therefore necessary on the part of the company to earmark funds forcapital expenditure for any modernization programme.
TRANSFER OF PROFITS TO RESERVES.
The company has proposed to transfer a sum of ' 287.19 lacs to reserves from out of thecurrent year's profits as against a sum of ' 221.84 lacs in the preceding year uponapproval of members.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
According to Section 205C of the Companies Act 2013 read with Investor Education andProtection Fund (Awareness and Protection of Investors)
Rules 2001 the company has transferred unclaimed dividend amounting to ' 84078 tothe Investor Education and Protection Fund established by the Central government duringthe year under review. The said transfer is in respect of the financial year 2008-2009.
MATERIAL CHANGES AND COMMITMENTS
In terms of Section 134 (3) (l) of the Companies Act 2013 there are no materialchanges and commitments affecting the financial position of the company which haveoccurred between the end of the financial year of the company to which the financialstatements relate and the date of the Report.
The company has not accepted any deposits during the year under review and there wereno outstanding deposits as at the end of the year.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS
There are no significant and material orders passed by the Regulators or courts ortribunals in the year under review impacting the going concern status and company'soperations in future.
RESIGNATION OF DIRECTOR
Shri A Chengappa (IAS) Retd an Independent Director of the company has resigned fromthe directorship with effect from 1st October 2016. The Board places on recordits appreciation for the services rendered by Shri A Chengappa IAS (Retd.) during histenure.
DIRECTORS RETIRING BY ROTATION
In accordance with the provisions of the Companies Act 2013 Smt. M VaralakshmiDirector retires by rotation at the ensuing Annual General Meeting and being eligibleoffers herself for reappointment.
The brief profile of Smt. M Varalakshmi director who is seeking re-appointment at theensuing Annual General Meeting is presented in this Annual Report.
As on 31st March 2017 7342634 shares were dematerialised with NationalSecurities Depository
Limited and Central Depository Services Limited which constitutes 94.45% of the sharesof the company. Members may please note that it is a mandatory requirement that thecompany shall endeavour to ensure that at least 50% of the shareholding of the publicshareholders is in the dematerialised mode.
The company therefore once again requests such of the public shareholders who have notyet dematerialised their shares to initiate immediate steps to complete the process ofdematerialisation.
PERFORMANCE OF THE YEAR UNDER REVIEW
During the year under review the Cement Division has produced 281852 MT as against237027 MT in the year ago period thereby registering an increase of 18.91% in volume.The Cement Division has earned Profit Before Tax (PBT) of ' 13.27 crores in comparisonwith ' 9.31 crores in the previous year.
The Sugar Division crushed 244920 MT of sugarcane for the year under review asagainst 338582 MT in the previous year. The recovery rate stands at 10.69% in comparisonwith 10.80% in the previous year. Despite the fact that the company had to suffer from anoperationally difficult financial year the Company could clock impressive sales turnoverof ' 122.31 crores in 2016-2017 in comparison with ' 116.91 crores achieved in theprevious year. Better prices realized in the year under review enabled the company torecord a higher turnover of ' 122.31 crores there by posting an increase of 4.62%. TheSugar Division recorded profit before tax (PBT) of ' 6.18 crores as against a loss of '2.16 crores in the preceding year.
In the year under review the Power Division has generated 37492394 KWH as against67020044 KWH of power in the preceding year thereby recording a decline of 44.06%. Ithas been the practice of the company to generate power using alternative fuel when thereis cessation of operations in sugar division during the normal offseason period. Howeverthe company is required to obtain the approval from the government for generation of powerwith coal as alternative fuel. Of late the government has not been according permissionto power entities to generate power with coal as an alternative fuel. In view of thechanged stance of the government there was remarkable decline in its power generation inthe year under review. However the company's efforts to shore up its volumes wouldcontinue in all directions.
The power Division earned a Profit before tax (PBT) of ' 25.68 crores as against '22.66 Crores in the previous year
CURRENT YEAR OUTLOOK:
In the year under review the company has produced 281852 MT of cement as against thebudget estimate of 285120 MT there by recording a minor decline of 1.15% of targetproduction despite the prevalence of a sluggish market.
In our last Annual Report we had expressed optimism in the context of variousdevelopmental activities that have been undertaken by the Telangana State and the possibleand emerging opportunities that might accrue to the company in shoring up the performanceof its cement division. Similarly the company was visualizing good potential for itscement division in the wake of the efforts being made by the Government of Andhra Pradeshin building up a new capital region for the state.
However considering the point that these are all huge projects involving long gestationperiods it might take few years for the company to reap the benefits of significantbenefit in the demand .
Considering various factors the company has set a target for its production at275000 Mt for the current year.
Members are aware that sugar cane is a perennial crop that requires water through outthe year though peak water requirement commences from February and ends with May. Whilethis is so the Telangana State Monsoon season normally arrives in June and lasts till endof September. It therefore means that our zone area is not in a position to fetch rainfallduring the peak water requirement period. Therefore the crop is required to be irrigatedthrough borewells or canal irrigation. The Wyra Mandal is having maximum canal irrigationpotential through wyra project. Another distressing aspect of the Wyra profile is that ithas very less number of borewells. Thus the prospects for our sugar industry is directlylinked to the availability of adequate water and existence of borewells with functionalutility.
Taking into account the critical factors your company has set a target of 170000 MTof cane crushing in the current year.
The Company will make best endeavors to achieve enhanced level of power generation.However since it is related to government policy and to various other administrativeissues a great deal of uncertainty still remains as a sour factor.
All the properties of the Company including its buildings Plant and Machinery andStocks wherever required have been adequately insured.
Disclosures under the Companies Act 2013
I) EXTRACT OF THE ANNUAL RETURN:
The extract of the Annual Return as per provisions of section 92 of the Companies Act2013 and Rule 12 of Companies (Management and Administration) Rules 2014 in form MGT-9 isannexed to this Report. (Annexure-2)
II) BOARD MEETINGS:
During the year under review 4 (Four) Board Meetings were held. The details of theBoard Meetings and the attendance of the Directors are furnished in the CorporateGovernance Report.
III) CHANGES IN SHARE CAPITAL
There is no change in the Share Capital during the year under review.
IV) AUDIT COMMITTEE:
The terms of reference of the Audit Committee encompasses the requirements of Section177 of Companies Act 2013 and Regulation 18 of the Listing Regulations and inter aliaincludes:
a. To hold periodic discussions with the Statutory Auditors and Internal Auditors ofthe Company concerning the financial reports of the company and internal control systems.Examination of scope of audit and observations of the Auditors / Internal Auditors andoverseeing that the Company's financial reporting process and the disclosure of itsfinancial information to ensure that the financial statements are correct sufficient andcredible are part of the functions of the Audit committee;
b. To call for the comments of the auditors about internal control systems scope ofaudit including the observations of the auditors and review of financial statementsbefore their submission to the Board and also to discuss any related issues with theinternal and statutory auditors and the management of the company;
c. To evaluate internal financial controls and risk management systems;
d. Tointer-alia review Management Discussion and Analysis of financial conditionresults of operations and Statement of Significant Related Party transactions submitted bythe management before submission to the Board;
e. To investigate into any matter in relation to the items referred to it by the Boardand for this purpose obtain professional advice from external sources;
f. To make recommendations to the Board on any matter relating to the financialmanagement of the company including the Audit Report;
g. To approve Related Party Transactions.
h. Reviewing the functioning of the Whistle Blower mechanism;
i. Recommending the appointment re-appointment and if required the replacement orremoval of the statutory auditors and fixation of audit fee and approval for payment forany other services.
More details of the Audit Committee are furnished in the Corporate Governance Report.
V) REMUNERATION POLICY:
The Company follows a policy on remuneration of Directors and Senior Managementpersonnel. The Policy is approved by the Nomination and Remuneration Committee and theBoard.
More details on the same are given in the Corporate Governance Report.
NOMINATION AND REMUNERATION COMMITTEE:
The main scope of the committee is to determine and recommend to the Board the personsto be appointed / re-appointed as Executive Directors / Non-Executive Directors.
The committee also determines and recommends to the Board the financial component. Thecompensation of the Executive Directors comprises of fixed components and also commissionbased on the profits earned by the company.
The compensation is determined based on the levels of responsibility and the parametersprevailing in the industry. The Executive Directors are not paid any sitting fee for Board/ Committee meetings attended by them. The Non-Executive Directors are paid sitting feefor Board / Committee Meetings attended by them and no other payment is made to them.
The Nomination and Remuneration Committee examines and devises a policy on Boarddiversity and to formulate criteria for determining qualifications experience positiveattributes and independence. It also recommends to the Board the factors to be reckonedwith in determining the remuneration payable to the Directors.
More details of the committee are furnished in the Corporate Governance Report.
VI) RELATED PARTY TRANSACTIONS
Particulars of contracts / arrangements entered into by the company with RelatedParties referred to in Section 188 (1) of the Companies Act 2013 have been provided inForm No.AOC-2 pursuant to clause (b) of sub Section (3) of Section 134 of the Act and Rule8(2) of the Companies (Accounts)
Rules 2014 and the same are annexed to this Report. (Annexure-4)
VII) STATEMENT OF PARTIULARS OF APPOINTMENT AND REMUNERATION OF THE MANAGERIALPERSONNEL:
The statement of particulars of Appointment and Remuneration of Managerial Personnel asper Section 197(12) of the Companies Act 2013 read with Rule 5 of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 is annexed to this Report.(Annexure-3)
VIII) STATEMENT OF DECLARATION FURNISHED BY INDEPENDENT DIRECTORS UNDER SECTION 149(6)OF THE COMPANIES ACT 2013:
The independent Directors have submitted the declaration of independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in section 149(6) of the Companies Act 2013.
IX) CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO
The information relating to conservation of energy technology absorption and foreignexchange outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed to this Report.
The Composition and other details of the Nomination and Remuneration CommitteeStakeholders Relationship Committee and Risk Management Committee are furnished in theCorporate Governance Report. The other details in respect of Audit Committee and CorporateSocial Responsibility Committee are furnished in the Corporate Governance Report.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement under section 134 (3) (c) and 134 (5) of the Companies Act2013 with respect to the Director's Responsibility statement the Board of Directors ofthe Company hereby confirm:
a. That in the preparation of annual accounts the applicable accounting standards havebeen followed and that there were no material departures therefrom.
b. That the Directors have selected such accounting policies and applied themconsistently 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 on 31stMarch 2017 and of Profit of the Company for that period.
c. That the Directors have taken proper and sufficient care for maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
d. That the Directors have prepared the Annual Accounts for the Financial Year ended 31stMarch 2017 on a going concern basis.
e. That the Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls were adequate and were operatingeffectively.
f. That the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and were operatingeffectively.
EVALUATION OF THE BOARD'S PERFORMANCE:
In compliance with the provisions of Section 134 (3) (p) of the Companies Act 2013and Regulation 25 of SEBI (Listing obligations and Disclosure Requirements) Regulations2015 the performance evaluation of the Board was carried out during the year underreview.
More details on the same are furnished in the Corporate Governance Report.
M/s. Anandam & Company Chartered Accountants Secunderabad have been the StatutoryAuditors of the Company since inception of the company.
In accordance with the provisions of Section 139 and other applicable provisions of thecompanies Act 2013 read with the companies (Audit and Auditors) Rules 2014 and suchother applicable rules if any the company proposes to appoint M/s. Ramanatham & RaoChartered Accountants Secunderabad as Statutory Auditors for a period of five years fromthe conclusion of the forthcoming Annual General Meeting till the conclusion of the 43rdAnnual General Meeting.
The appointment of M/s. Ramanatham & Rao Chartered Accountants Secunderabad asStatutory Auditors of the company requires approval of the members and in this regardnecessary Resolutions are being placed before the members at the forthcoming AnnualGeneral Meeting for their approval.
As per section 148 of the companies Act 2013 read with the Companies ( Cost Recordsand Audit) Rules Cost records are required to be audited. Based on the recommendation ofAudit Committee your Board has appointed M/s. Narasimha Murthy Cost AccountantsHyderabad as Cost Auditors for the current year and necessary Resolution for ratificationof their remuneration is being placed before the shareholders for their approval in termsof Rule 14 (a) (ii) of the Companies (Audit and Auditors) Rules 2014.
The Board has appointed Smt. Manjula Aleti Company Secretary in whole-time Practice tocarry out Secretarial Audit under the provisions of Section 204 of the Companies Act 2013read with the Companies (Appointment and Remuneration of the Managerial Personnel) Rules2014 for the financial year 2016-2017.
The Secretarial Audit Report issued by Smt. Manjula Aleti practicing Company Secretaryin Form-MR 3 is annexed to this Report. (Annexure-1) The Secretarial Audit Report does notcontain any qualifications reservations or adverse remarks.
VIGIL MECHANISM AND WHISTLE BLOWING POLICY:
The Company has adopted a Whistle Blower Policy establishing a formal mechanism to theDirectors and employees to report concerns about unethical behavior actual or suspectedfraud or violation of code of conduct and ethics. It also provides for adequate safeguardsagainst the victimization of employees who avail of the mechanism and also envisagesdirect access to the Chairperson of the Audit Committee in exceptional cases. It isaffirmed that no personnel of the Company has been denied access to the Audit Committee.
The whistle blower policy aims at conduct of the affairs in a fair and transparentmanner by adopting highest standards of professionalism honesty integrity and ethicalbehavior. The policy on vigil mechanism and whistle blower policy may be accessed on thecompany's website:www.kakatiyacements.com .
RISK MANAGEMENT COMMITTEE:
The objective behind constitution of the Risk Management Committee is to identify riskdevelop appropriate risk mitigation strategies and to monitor activities of theorganization and also to highlight the systematic study safeguards against threats lossand damages of brand reputation and assets of the company. Improvement of level ofawareness and appreciating and managing material business risks are also the objectives ofthe Risk Management Committee.
The Committee besides identifying the risk factors is also expected to manage andmonitor risk and ensure that proper internal systems and processes are in place.
More details of the committee are furnished in the Corporate Governance Report.
The Company had installed Anti-pollution devices as part of the regulatory compliances.The Company has been making endeavors to protect the environment from the evil effects ofpollution from time to time through adoption of several measurs.
Planting of saplings and seedlings in and around the factories and colonies is beingdone on a continuous basis so as to develop green belt around the plant to improve theenvironment.
MANAGEMENT DISCUSSION AND ANALYSIS 2017
a) Industry Structure and Development:
The company has a well developed net work of dealers located in the states of Telenganaand Andhra Pradesh and the company therefore is in a reasonably comfortable position insecuring orders from its clients. Moreover the developmental activities that have beenadopted by the state of Telengana are expected to boost the opportunities for the company.On a similar note the development of infrastructure and construction activities that arebeing carried out in the capital region of Andhra Pradesh might in all probability throwup lot of opportunities for the cement industry.
Good rainfall and availability of proper irrigation facilities will determine thefortunes of sugar industry it being an agro-based industry.
The company produces power with bagasse as fuel when the sugar division is activeduring its crushing season. The company had earlier produced power with coal as analternative fuel during the off-season of the sugar division upon receipt of approval fromthe government. Of late the Government as matter of policy has not been permittingpower entities to produce power with coal as an alternative fuel.
The company will however endeavour its best to obtain the approval from the Governmentfor usage of coal as an alternative fuel for production of power during off-season in thesugar industry.
b) Opportunities and Threats:
The company is desirious of reaping the benefits of its well positioned dealer net workacross the states of Telengana and Andhra Pradesh and therefore the company will makeevery effort to overcome the bottlenecks in achieving the targeted operations in Sugar andPower Divisions.
c) Segment or product-wise performance:
Segment-wise and product-wise performance has been furnished elsewhere in this Report.
Division-wise outlook has been furnished elsewhere in this Report.
e) Risks and concerns:
The Cement Sugar and Power industries being core industries there is no risk ofproduct obsolescence or steep fall in demand by way of product substitution or otherwiseand therefore your Directors do not foresee any major risks and concerns in the nearfuture except as discussed elsewhere in this Report.
However the company shall make its best efforts to position the machinery in all thedivisions in robust condition so as to keep the bottlenecks at bay.
f) Internal control systems and their adequacy:
As stated elsewhere in this Report the Company has adequate internal control systemsand the Reports of Internal Auditors are being placed before the Audit Committee andcorrective measures if any are being taken care of by the Company. The Chief FinancialOfficer will monitor the Internal audit Reports and brief the Audit Committee in case anydeficiency in the system is noticed.
g) Financial Performance with respect to operational performance:
This has been discussed elsewhere in this Report.
h) Human Resource Development and Industrial Relations:
The company believes that the quality of its employees is the key to success and istherefore committed to provide necessary human resource development and trainingopportunities to equip employees with additional skills to enable them to adapt tocontemporary technological advancements.
Industrial Relations during the year continued to be cordial through effectivecommunication meetings and negotiations with the work force.
The Company's strength consists of 609 employees directly and indirectly as on 31stMarch 2017.
i) Corporate Social Responsibility:
In compliance with Section 134(3) (a) of the Companies Act 2013 read with theCompanies Corporate Social Responsibility
(CSR) policy Rules 2014 the company has established CSR Committee comprising of Shri KVenkat Rao as Chairperson Shri P Veeraiah and Shri J S Rao as members. The committee isresponsible for formulating and monitoring the CSR policy of the Company.
The annual report of CSR activities forms part of this Report. (Annexure-5)
PARTICULRS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT2013.
There are no loans guarantees or investments made or given under Section 186 of theCompanies Act 2013.
Statements in this "Management Discussion & Analysis" may be consideredto be "forward looking statements" within the meaning of applicable securitiesLaws or Regulations. Actual results could differ materially from those expressed orimplied. Important factors that could make a difference to the Company's operationsinclude global and Indian demand-supply conditions increased installed capacity finishedgoods prices raw material availability and prices cyclical demand and pricing in theCompany's markets changes in Government Regulations tax regimes besides other factorssuch as litigations and labour negotiations.
Your Directors take this opportunity to place on record their sincere thanks to theBanks the Director of Sugar and Cane Commissioner the Transco Authorities of Telanganaand Andhra Pradesh States and to various departments of the Central Government and theState Governments of Telangana and Andhra Pradesh for their support to the Industry.
The Directors thank the entire net work of dealers who have enabled the Company toachieve the desired volumes despite the market being sluggish for a considerable periodduring the year under review.
The Directors record their appreciation for committed support to the Company by all theemployees at all levels throughout the year under reference.
The Directors record their gratitude to all the Shareholders who have been reposingconfidence in the Company and its Management.
| ||By order of the Board |
| ||for Kakatiya Cement Sugar & Industries Limited |
| ||P Veeraiah |
| ||Chairman and |
|Place : Hyderabad ||Managing Director |
|Date : 26th May 2017 ||DIN : 00276769 |
| || |