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Kanco Enterprises Ltd.

BSE: 590084 Sector: Industrials
NSE: N.A. ISIN Code: INE248D01011
BSE 00:00 | 04 Mar Kanco Enterprises Ltd
NSE 05:30 | 01 Jan Kanco Enterprises Ltd
OPEN 1.66
52-Week high 1.66
52-Week low 0.00
Mkt Cap.(Rs cr) 3
Buy Price 1.67
Buy Qty 15.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1.66
CLOSE 1.66
52-Week high 1.66
52-Week low 0.00
Mkt Cap.(Rs cr) 3
Buy Price 1.67
Buy Qty 15.00
Sell Price 0.00
Sell Qty 0.00

Kanco Enterprises Ltd. (KANCOENTERP) - Director Report

Company director report

Dear Shareholders

The Directors of the Company present their 26th Annual Report and Company's AuditedFinancial Statement for the year ended 31st March 2017.


Your Company's financial performance was as follows : (Lakhs)
Particulars 31st March 2017 31st March 2016
Profit before Interest Depreciation and Tax (140.69) (74.07)
Less: Interest 967.08 1426.50
Gross Profit/ (Loss) for the Year (1107.77) (1500.57)
Less: Depreciation 266.82 431.69
Profit/(Loss) Before Tax (1374.59) (1932.26)
Less : Provision for Tax - -
Profit / (Loss) After taxation (1374.59) (1932.26)
Depreciation transferred on account of change in useful life of
Property Plant and Equipment - (113.40)
Balance Brought Forward from last Account (9676.67) (7631.01)
Balance Carried to Balance Sheet (11051.26) (9676.67)


The Cotton Yarn industry continues to struggle with cotton prices shooting up and Yarnexport demand remains tepid. Export of Yarn is on a downward trend.

The Company was forced to suspend manufacturing operations from September 30 2015 inview of large scale resignations of staff and workmen at the Company's factory situated at"Kanco Overseas" Village: Walthera Taluka: Dholka Ahmedabad - 387810.

The current Industry scenario is negative in view of this the company has decided tocontinue the Suspension. The management is watching the developments and will takeappropriate decision as and when the markets improve and the supply / demand mis-match isbridged.

The current period operations have resulted in a net loss of "1374.59Lakhs.


During the year under review the long term borrowings and short term borrowings of theCompany stands at " 434.35 Lakhs and " 1948.08 Lakhs respectivelyas on 31st March 2017.


The Directors of your Company do not recommend any dividend for the period underreview.


The details forming part of the extract of the Annual Return in Form No. MGT-9 asrequired under Section 92 of the Companies Act 2013 is annexed herewith marked asAnnexure A to this report.


The Government of India vide its notification dated 25th November 2016 has repealedSICA with effect from 1st December 2016 by notifying and bringing into effect theprovisions of the Sick Industrial Companies ( Special provisions) Repeal Act 2003.

In view of the notification the Company's reference bearing no.06/2013 filed with Boardfor Industrial and Financial Reconstruction under Section 15(1) of the Sick IndustrialCompanies (Special Provisions) Act 1985 for the year ended 30th September 2012 and theCompany's appeal under section 25(1) of the Sick Industrial Companies (Special Provisions)Act1985 against the order passed by the BIFR for reference no.3/2012 filed u/s 15(1) ofthe SICA1985 stands abated.


Mr. Susanta Banerjee (DIN:01173116) Director of the Company retires by rotation atthe ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Subject to the approval of the Shareholders at the ensuing Annual General Meeting theBoard of Directors on 29th May 2017 have proposed to reappoint Mr. Umang Kanoria(DIN:00081108) as Managing Director of the Company for a period of 5 years on such termsas set out in the Notice of the 26th Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed both under Section149(6) of the Companies Act 2013 read with the Companies (Appointment and Qualificationof Directors) Rules 2014 and Regulation 16(b) of the SEBI (Listing Obligations andDisclosures Requirements) Regulations 2015.


Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligationsand Disclosures Requirements) Regulations 2015 a structured questionnaire was preparedafter taking into consideration the various aspects of the Boards' functioningcomposition of the Board and its Committees culture execution and performance ofspecific duties obligations and governance.

The performance evaluation of the Independent Directors was completed. The performanceevaluation of the Chairman and the Non-Independent Directors was carried out by theIndependent Directors. The Board of Directors expressed their satisfaction with theevaluation process.


Pursuant to Section 178(3) of the Companies Act 2013 Nomination and RemunerationCommittee formulated the criteria for identification and selection of the suitablecandidates for various positions in senior management and also candidates who arequalified to be appointed as Director on the Board of the Company. The Committee alsorecommended a policy relating to the remuneration for the directors key managerialpersonnel and other senior management personnel and a process by which the performance ofthe directors could be evaluated and the details of this policy are given in the CorporateGovernance Report.


The following persons are the Key Managerial Personnel (KMP) of the Company incompliance with the provisions of Section 203 of the Companies Act 2013: a) Mr. U.Kanoria (DIN:00081108) Chairman and Managing Director b) Ms. Anupama Goel CompanySecretary (upto 19th December 2016) c) Ms. Sohini Shukla Company Secretary (w. e.f 14thMay 2017) d) Mr. S. V Tewary Chief Financial Officer


Five meetings of the Board of Directors were held during the year under review.


The Audit Committee comprises of Independent Directors namely Ms. Puja Borar(Chairperson) and Mr. Krishna Kumar Gupta and Mr. Susanta Banerjee Non-ExecutiveDirector. All the recommendations made by the Audit Committee were accepted by the Board.


The Directors hereby confirms that a) in the preparation of the Annual Accounts for theyear ended 31st March 2017 the applicable accounting standards read with requirementsset out under Schedule III to the Act have been followed and there are no materialdepartures from the same; b) they had selected such accounting policies and applied themconsistently and made judgements 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 31st March 2017and of the loss of the Company for the year ended on that date; c) they had taken properand sufficient care for the maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting fraud and other irregularities; d) they had not prepared the annual accountson a going concern basis; e) they had laid down internal financial control to be followedby the company and that such internal financial controls are adequate and were operatingeffectively; and f) they had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.


Messrs. B. R. Shah & Associates Chartered Accountants (Registration No. 129053W)Statutory Auditors of the Company hold office till the conclusion of the ensuing AnnualGeneral Meeting and are eligible for re-appointment. They have expressed their willingnessto continue as Statutory Auditors of the Company if so appointed by the Shareholders. TheCompany has received the consent and certificate from Messrs. B. R. Shah & AssociatesChartered Accountants to the effect that their re-appointment if made would be within thelimits prescribed under Section 141 of the Companies Act 2013 read with rules and thatthey are not disqualified for reappointment within the meaning of Section 141 of theCompanies Act 2013. They have also confirmed that they hold a valid peer reviewcertificate as prescribed under regulation 33(1)(d) of the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015.


The Auditors' have qualified their Report and the explanation in this regard forms partof the Directors' Report. The Statement on Impact of Audit Qualification as stipulated inRegulation 33(3)(d) is annexed herewith marked as Annexure B to this report.


(a) As referred to in note no. 21(2) (a) (i) (b) of financial statements during theyear ended September 30 2012 the Company has not accounted for Foreign Exchange loss of "117881338/- arising out of Cancellation of Forward Contract and disclosed the same ascontingent liability. On account of this accumulated loss as at March 31 2017 is lowerby the said amount. The loss above does not include interest if any.

During the year ended September 30 2012 State Bank of India (SBI) has unilaterallycancelled the forward contracts and debited "117881338/- being the losseson account of foreign exchange difference excluding interest if any into our cash creditaccount without any authorization from us. The Company is not in agreement with the actiontaken by the SBI and has lodged its objection with SBI. The Company filed a suit inHon'ble Court at Calcutta on 6th day of August 2013 against State Bank of India andtherefore disputes the forex losses. The said suit has been transferred to the City CivilCourt in Ahmedabad pursuant to the order dated 18th day of August 2014 of Calcutta HighCourt. The Company therefore has not recognized the said forex loss in its books ofaccounts. The dispute is sub-judice.

(b) As referred in note no. 6 (iii) & (iv) Company has stopped repaying Securedloan and interest thereon to State Bank of India and IDBI bank since 2011-2012. Interestcharged on borrowing from State Bank of India has been accounted as per last agreed rateof 2011-2012. We have been explained that the Company has no information about any changein the rate of interest so impact if any of the same in statement of profit and lossand Reserve and Surplus is not determinable. The said loans have been recalled by therespective lenders and matter is sub-judice.

Company has stopped repaying Secured loan and interest thereon to State Bank of Indiaand IDBI bank since 2011-2012. Interest charged on borrowing from State Bank of India hasbeen accounted as per last agreed rate of 2011-2012. We have been explained that theCompany has no information about any change in the rate of interest so impact if any ofthe same in statement of profit and loss and Reserve and Surplus is not determinable. Thesaid loans have been recalled by the respective lenders and matter is sub-judice.

(c) As referred in note no. 4(ii) balance of secured loan and Interest thereon fromState bank of India and IDBI Bank are as per books of accounts and subject to confirmationby lenders.

Both SBI and IDBI have neither sent any statement of account nor issued any balanceconfirmation and therefore the management is unable to get the confirmation.

(d) As referred in note no. 5 (2) the company has not made provision for interest fordelayed in payment to vendors during the period as per agreed terms with vendors. Alsotrade Payables are subject to confirmations.

Consequently we were unable to determine whether any adjustments to these amounts werenecessary. As per the understanding reached with vendors the Company has decided not toprovide any interest on delayed payment due to financial constraints and closure ofoperation and during the year no such bill for interest has been raised by the vendors.Further no legal action has also been taken by the vendors for not providing interest ondelayed payment. The trade payable has been reduced from " 9555027/- inMarch 2016 to " 4452624/- in March2017.

(e) As referred in note no. 21 (2) (j) the company has not provided interest for theperiod from April 1 2015 to March 31 2016 on unsecured intercorporate loan of "43434766/- from related party from April 1 2016 to March 31 2017 on unsecuredintercorporate loan of " 92434766/- and unsecured loan of "1020000/- received during the current year from related party and unsecured loan ofRs.15000000/- received from non-related party from April 1 2015 to March 31 2017.Amount of the Interest for the current year on the said loan as per last agreed rate withthe parties is " 11117238/- ( PY " 5725768/-).

The Company has shut down its operation in September 2015 and lenders have recalledthe loan and the loan accounts have been declared NPA. The Company is facing acuteliquidity crunch and therefore unable to make any payment to its lenders at the moment andtherefore no interest has been provided on unsecured loans.


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 Mr. Asit Kumar Labh Practicing Company Secretary to undertake the SecretarialAudit of the Company. The Report of the Secretarial Auditor is annexed herewith marked asAnnexure C to this report.

The Secretarial Auditor has submitted his report with observation the explanation towhich is as under:

The Company has defaulted in repayment of the outstanding secured loans as it hassuffered huge losses due to external factors and overall depression in the industry overlast few years.


The Company has not made any investments. The Company has neither given any loan &guarantee nor provided any security during the year under review.


The Company has not entered into any contracts/arrangements with related parties asdefined under section 188 of the Companies Act 2013 during the year under review.


No material changes and commitments have occurred between the end of the financial yearunder review and the date of this report.


A statement pursuant to Section 134(3) (m) of the Companies Act 2013 read with Rule8(3) of the Companies (Accounts) Rules 2014 on conservation of energy technologyabsorption foreign exchange earnings and outgo is annexed herewith marked as Annexure Dto this report.


Management Discussion and Analysis Report for the period under review as stipulatedunder Regulation 34(3) read with Schedule V of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 is annexed herewithmarked as Annexure E to this report.


The report on Corporate Governance in accordance with Regulation 34(3) read withSchedule V of the SEBI (Listing Obligations and Disclosures Requirements) Regulations2015 approved by the Board together with a Certificate from Mr. Asit Kumar LabhPracticing Company Secretary in Practice regarding compliance with the conditions ofCorporate Governance is annexed herewith marked as Annexure F to this report.


As per requirement of Section 134(3) (n) of the Companies Act 2013 the Board ofDirectors in its meeting held on 9th May 2014 has approved the Risk Management Policy.The Board envisaged the following elements of risks which may threaten the existence ofthe Company-


The price of raw material and finished goods of KEL are volatile in nature and goesthrough many ups and downs. KEL has decided that: -a) The inventory level of raw materiali.e. cotton stock will always be maintained at a maximum level of three months and minimumlevel of ten days. The exception for keeping stock at minimum level of ten days is duringmonth of October and November during which new cotton crop comes in. b) KEL cannot enterinto more than three months forward sale without permission of Board of Directors. c)Board of Directors has to be intimated if finished goods inventory touches two monthproduction figure. d) The senior management of KEL gathers information from researchreport conducted by various agencies report published by Chambers/Associationrepresenting the Industry Statistics published by Ministry of Textiles GovernmentPolicies and regulations affecting the Industry to arrive at appropriate decision tomitigate the risks on account of volatility in prices of raw materials and finished goods.

Risk due to Fraud

KEL has installed adequate internal control measures to minimise the occurrence offraud and internal audit is also conducted at regular intervals by an external agency.

Risk of Doubtful and Bad Debt

The credit worthiness of sundry debtors is checked by the senior management to fix thecredit period if any to be given. The background check of new party is also carried outbefore deciding on the credit period.


During the period under review the Company has not accepted any deposits within themeaning of Section 73 of the Companies Act 2013 read with the Companies (Acceptance ofDeposits) Rules 2014.


There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future.


The Company has an effective Internal Control system with reference to FinancialStatements. The Audit Committee of the Board of Directors reviews the adequacy andeffectiveness of the Internal Control System. The Company's Internal Control System iscommensurate with its size scale and complexities of its operations.


The Company has a Vigil Mechanism/Whistle Blower policy to report genuine concerns andgrievances. Protected disclosures can be made by a whistle blower through an email ordedicated telephone line or a letter to the Chairman of the Audit Committee. The policycan be viewed at VIGIL%20MECHANISM_WHISTLE%20BLOWER.PDF


The Company's equity shares are listed at the Calcutta Stock Exchange Limited (ScripCode-10021381). The Company's equity shares are traded under "PermittedCategory" at the Bombay Stock Exchange Limited (Scrip Code- 590084) as per MOU signedbetween CSE and BSE. Listing Fees for the financial year 2017-2018 has been paid.

During the year under review The Bombay Stock Exchange Limited had discontinued thetrading permission of the company's equity shares on its platform with effect from08.03.2017 due to procedural reasons. However the trading permission on the Bombay StockExchange Limited resumed again from 26.04.2017 under Group XD vide Notice No. 20170424-27dated 24.04.2017.


No complaints have been received during the period under review by the respectiveInternal Complaints Committee.

Details pertaining to remuneration as required under section 197(12) of the CompaniesAct 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014

(i) The percentage increase in remuneration of each Director Chief Financial Officerand Company Secretary during the financial year April 2016 to March 2017 ratio of theremuneration of each Director to the median remuneration of the employees of the Companyfor the financial year April 2016 to March 2017:

Sl. No Name of Director / KMP and Designation Remuneration of Director/ KMP for F.Y April 2016 to March 2017 %increase in Remuneration in the F.Y April 2016 to March 2017 Ratio of remuneration of each Director to median remuneration of employees
1. Mr. Umang Kanoria
Managing Director 22.86 (24.10%) 25.85
2. Mr. Susanta Banerjee
Non-ExecutiveDirector 0.30 (40.00%) 0.34
3. Mr. Krishna Kumar Gupta 0.30 (25.00%) 0.34
Independent Director
4. Ms. Puja Borar 0.40 (33.33%) 0.45
Independent Director
5. Mr. S. V Tewary
Chief Financial Officer 20.26 (29.85%) 22.91
(refer note)
6. Ms. Anupama Goel 1.08 Please refer 1.22
Company Secretary Note Below
(w.e.f. 14th May 2016 to
19th December 2016)
(refer note)

ii) The median remuneration of employees of the Company during the financial year was "88424/-iii) The percentage increase in median remuneration of the employees of theCompany 3.59%.(The figure is not comparable in view of Majority of the employees havingresigned from services of the company) iv) Number of permanent employees on the rolls ofthe Company - 7 v) Average percentile increase already made in the last financial year a)In the salaries of employees other than the managerial personnel-b) Percentile increase inthe managerial remuneration-c) Justification for such increase in remuneration &exceptional circumstances for increase in the managerial remuneration -There has been noincrease in the salaries of employees other than managerial personnel managerial personnelduring the year.

vi) Key parameters for any variable component of remuneration availed by the directors-" Nil for period under review. vii) It is hereby affirmed that theremuneration paid to the directors key managerial personnel and other employees is as perthe remuneration policy of the company.

# Details not given as Ms. Anupama Goel was not employed in the previous period.

Note-The current period figures are for twelve months whereas previous period figuresare for eighteen months.

Large scale resignation took place in September 2015 and all but nine employeestendered resignation. On account of these factors the median presents a distorted pictureand the figures are not comparable.

B. Disclosures pertaining to remuneration and other particulars as prescribed under theprovisions of section 197 of the Act read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are annexed herewith marked as AnnexureG to this report.


Your Directors place on record their appreciation for the cooperation and supportextended by the Employees Banks/ Financial Institutions and all other business partners.

For and on behalf of the Board of Directors
Place: Kolkata Chairman & Managing Director
Dated: 29th May 2017 DIN:00081108