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Kapston Facilities Management Ltd.

BSE: 535064 Sector: Others
NSE: KAPSTON ISIN Code: INE542Z01010
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Kapston Facilities Management Ltd. (KAPSTON) - Director Report

Company director report

Dear Members

The Board of Directors ("Board") of Kapston Facilities Management Limited("Kapston" or "Company") with immense pleasure present their Report onthe business and operations of your company together with the audited financial statementsfor the financial year ended 31st March2020.

1. FINANCIAL HIGHLIGHTS

The Company's performance during the financial year ended 31st March2020are summarized in the following table

( Rs in Lakhs)

Standalone
Particulars 2019-20 2018-19
Revenue form Operation 21339.27 14723.04
EBIDTA 1638.72 1334.08
Less: Finance Costs 395.05 253.39
Less: Depreciation and amortization expenses 204.40 128.33
Profit before prior period items 1039.26 952.35
Prior period items -- --
Profit before tax 1039.26 952.35
Less: Current Tax 160.96 226.26
Add: Deferred Tax Asset 141.45 129.64
Profit Available for appropriations/Loss 1019.76 855.73
Basic Earnings per Share (Rs)* 10.05 8.44*
Diluted Earnings per Share (Rs)* 10.05 8.84*
Paid up share capital (face 1014.40 869.49
value of INR 10 each)
Reserves and Surplus 3479.93 2605.08

* Note: Earning per share (EPS) is calculated based on paid up share capital as on 31stMarch2020.

2. STATE OF AFFAIRS/ COMPANY'S PERFORMANCE

The Company is primarily engaged in providing Private Security Services and FacilitiesManagement Services in the southern states of the country. As part of service to theunemployed people the Company has in partnership with various central & state levelgovernment agencies been undertaking training and development programmes for the"Unemployed Youth". Your Company's revenue from operations for the financialyear ending 31st March2020 stood as Rs 21339.27 lakhs compared to Rs14723.04 lakhs during the previous financial year. The Company has achieved EBIDTA(including other income) of Rs 1638.72 lakhs during the financial year 2020 as againstthat of EBIDTA of Rs 1334.08 lakhs for the previous financial year 2019. The profitbefore tax for the financial year under review is Rs 1039.26 lakhs as against Rs 952.35lakhs for the previous financial year 2019.Profit after tax was positively impactedby the tax benefits availed under Section 80JJAA of the Income Tax Act1961 and deferredtax benefits. During the financial year a new vertical namely Staffing Services has beenadded and it started billing. The Company expects good prospects for this vertical in thecoming years. Your Directors express their satisfaction on the overall financialperformance and the progress made by the Company during the year under review.

3. DIVIDEND

Your Directors would like to use the profits earned for improving business and hence donot propose any dividend for the financial year under review.

4. TRANSFER TO RESERVES

No amount has been transferred to reserves and the profit for the year has beenretained in the profit and loss account.

5. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The provision of Section 125 of Companies Act2013 is not applicable as the Company didnot declare any dividend.

6. SHARE CAPITAL

During the year under review the Authorized Share Capital was increased by the Companypursuant to the Ordinary Resolution passed by the Shareholders on 11thJanuary2020. The Authorized share capital was increased from Rs 90000000 (divided into9000000 equity shares of Rs 10 each) to Rs 115000000 (divided into 11500000equity shares of Rs 10 each).

Pursuant to the Ordinary resolution passed by the Shareholders on 11thJanuary2020 the Company has issued 1449152 Equity Shares as Bonus to the existingshareholders and allotted the same on 29th January2020.

As on 31st March2020 the Authorized Share Capital of the Company is Rs115000000 divided into 11500000 equity shares of Rs 10 each. The paid-up capital is Rs101440610 divided into 10144061 equity shares of Rs 10 each. There is no other changein the capital structure after closure of financial year ending on 31stMarch2020 till the date of this report.

LISTING OF EQUITY SHARES

The securities of the Company are listed on the National Stock Exchange of IndiaLimited (NSE). Further the Company has no equity shares carrying differential votingrights.

MIGRATION TO THE MAIN BOARD OF NATIONAL STOCK EXCHANGE OF INDIA LIMITED

During the year under review the Shareholders have approved (through postal ballotincluding e-voting) migration of Company's equity shares from SME Platform of NationalStock Exchange of India Limited i.e NSE Emerge to Main Board of National Stock Exchange ofIndia Limited. Accordingly the Company has made application to Stock Exchange and thesame was approved by the Stock Exchange (NSE) vide it's letter dated 22ndMay2020 with effect from 27th May2020. The Company is listed on the MainBoard of "National Stock Exchange of India Limited" with effect from 27thMay2020.

7. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

During the year under review your Company has not made any investment given any loanor guarantee falling within the meaning of section 186 of the Companies Act2013 and therules made there under.

8. PUBLIC DEPOSITS

During the year under review your company has not accepted any deposits fallingwithin the meaning of Section 73 of Companies Act2013 read with the Companies (Acceptanceof Deposits) Rules2014.

9. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY

During the year under review all transactions with the related parties are incompliance with the provisions of the Companies Act2013 and the details have beendisclosed in the Financial Statements as required by the applicable accountingstandards.

Further there are no transaction as per Section 188(1) of the Companies Act2013therefore disclosure as per the provision of Section 134 (Form AOC-2) is not applicable.

10. RISK MANAGEMENT

Risk management is the process of identification assessment and prioritization ofrisks followed by coordinated efforts to minimize monitor and mitigate/control theprobability and/or impact of unfortunate events. The company has initiated a process ofpreparing a comprehensive risk assessment and minimization procedures. The major risks arebeing identified by the company in areas of operations financial processes humanresources and statutory compliance.

11. COVID- 19

Your Company has considered internal and external sources of information up to date ofapproval of these financial statements in evaluating possible effects that may result fromthe pandemic relating to COVID-19. Along with Health and public administration we –facility management services are the frontline warriors against COVID-19. We ensure safetyand hygiene of the people and the premises we protect.

12. MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY FROMTHE END OF THE FINANCIAL YEAR TILL THE DATE OF THE REPORT

Due to the Global Corona virus (COVID-19) pandemic your Company is forced totemporarily reduce the remuneration paid to employees Senior Management and ExecutiveDirectors till such time as they deem fit for ensuring financial health of the Company.

Due to the lockdown starting from 21st March2020 there were severerestriction on the movement of people. However we were able to place staff at customerlocations. We expect the operations to slowly come to normalcy.

13. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT2013

Your Company has always provided a safe and harassment free workplace for everyindividual especially for women in its premises through various policies and practices.Your company has been actively involved in ensuring that the clients and all the employeesare aware of the provisions of the POSH Act and rights there under. The company has inplace an Anti-Sexual Harassment Policy in line with the requirements of the SexualHarassment of Women at workplace (Prevention Prohibition and Redressal) Act2013. Thepolicy on prevention of sexual harassment is available on the website of the company athttps://www.kapstonfm.com/images/PDF/Policy-for-prevention-of-Sexual-Harassment.pdf.

Internal Complaint Committee has been set up to redress complaints received regardingsexual harassment. Your Company has received complaints as follows during the financialyear under review:

No. of Complaints received No. of Complaints resolved Pending Complaints
1 1 NIL

20th May2019

26th August2019

11th November2019

14th December2019

25th February2020

14. NUMBER OF BOARD MEETINGS DURING THE YEAR

During the year under review five meetings of the board were held in compliance withthe provisions of the Companies Act2013 SEBI (Listing Obligations and DisclosureRequirements) Regulations2015 and Secretarial Standards on Board Meeting. The details areas follows:

15. COMMITTEES OF THE BOARD

As on 31st March2020 the Board constituted the Audit CommitteeNomination and Remuneration Committee Corporate Social Responsibility (CSR) Committee andStakeholder Relationship Committee. A detailed note on the composition of the Board andits committees is provided in the Corporate Governance Report. In addition the Boardconstitutes other committees to perform specific roles and responsibilities as may bespecified by the Board from time to time.

16. CORPORATE GOVERNANCE

Your company will continue to uphold the true spirit of Corporate Governance andimplement the best governance practices. A report on Corporate Governance pursuant to theprovisions of Corporate Governance Code stipulated under SEBI (Listing Obligations andDisclosure Requirements) Regulations2015 is enclosed as Annexure I.

Full details of the various board committees are also provided therein along withSecretarial Auditors' Certificate regarding compliance of conditions of corporategovernance.

17. COMPLIANCE WITH THE SECRETARIAL STANDARDS

The relevant Secretarial Standards issued by the Institute of Company Secretariesof India (ICSI) related to the Board Meetings and General Meeting have been complied withby the Company.

18. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS TheNomination and Remuneration Committee has adopted a policy as per Section 178(3) of theCompanies Act2013 for determination of remuneration and the manner of selection of theBoard of Directors CS and CFO & Managing Director and their remuneration.

Criteria for selection of Non-Executive Director

The Non-Executive Directors shall be of high integrity with relevant expertise andexperience in the fields of Service Industry Manufacturing Marketing Finance andTaxation Law Governance and General Management.

In case of appointment of independent directors the committee shall satisfy itselfwith regard to the criteria of independence of the directors vis--vis the company so asto enable the board to discharge its function and duties effectively.

The committee shall ensure that the candidate identified for appointment as a directoris not disqualified for appointment under Section 164 of the Companies Act2013.

The committee shall consider the following attributes whilst recommending to the boardthe candidature for appointment as director:

Qualification expertise and experience of the directors in their respective fields;Personal professional or business standing; Diversity of the Board. In case ofre-appointment of Non-Executive Directors the Board shall take into consideration theperformance evaluation of the Directors and their engagement level.

Remuneration

The Non-Executive Directors shall not be entitled to receive remuneration except byway of sitting fees reimbursement of expenses for participation in the board/committeemeetings and commission as approved by the Board of Directors. The independent directorsof the company shall not be entitled to participate in the Stock Option Scheme of thecompany. The aggregate commission payable if any to the Non-Executive Directors will bewithin the statutory limits.

Criteria for selection/appointment of Managing Director Executive Director CS andCFO For the purpose of selection of the Managing Director Executive Director CS andCFO the Committee shall identify persons of integrity who possess relevant expertiseexperience and leadership qualities required for the position. The Committee will alsoensure that the incumbent fulfils such other criteria with regard to age and otherqualifications as laid down under Companies Act2013 or other applicable laws.

Remuneration to Managing Director and Executive Director

At the time of appointment or re-appointment the Executive Director and ManagingDirector shall be paid such remuneration as may be mutually agreed between the Company(which includes the Committee and the Board of Directors) and the Executive Director/Managing Director within the overall limits prescribed under the Companies Act2013. Theremuneration shall be subject to the approval of the members of the Company in GeneralMeeting in compliance with the provisions of the Companies Act2013.

Remuneration Policy for the Senior Management Employees including CFO & CS

In determining the remuneration of Senior Management Employees the committee shallensure/consider the following: The relationship between remuneration and performancebenchmark; The balance between fixed and variable pay reflecting short and long-termperformance appropriate to the working of the company and its goals as mutually agreed.

The policy relating to remuneration of Directors Key Managerial Personnel SeniorManagement and other employees is available on the website of the Companyhttps://kapstonfm.com/images/PDF/ Nomination%20and%20Remuneration%20Policy.pdf

19. BOARD EVALUATION AND ASSESSMENT

The Board of Directors has carried out an annual evaluation of its own performanceBoard committees and individual Directors pursuant to the provisions of the Sections 134178 and Schedule IV of the Companies Act 2013. Evaluation was done after taking intoconsideration inputs received from the Directors covering various aspects of the Board'sfunctioning such as adequacy of the composition of the Board and its Committeesperformance of specific duties independence ethics and values attendance andcontribution at meetings etc. The performance of the Independent Directors was evaluatedindividually by the Board after seeking inputs from all the directors on the effectivenessand contribution of the Independent Directors. The performance of the Committees wasevaluated by the Board after seeking inputs from the Committee members based on thecriteria such as the composition of Committees effectiveness of Committee meetings etc.

The Board reviewed the performance of the individual Directors on the basis of thecontribution of the individual Director during Board and Committee meetings. In a separatemeeting of Independent Directors performance of Non-Independent Directors and theperformance of the Chairman was evaluated taking into account the views of executivedirectors and non-executive directors. The Independent Directors also assessed thequality frequency and timeliness of flow of information between the Board and themanagement that is necessary for effective performance.

20. DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED RESIGNED ORRE-DESIGNATED During the financial year under review Mr. Radha Krishna PinnamaneniNon-Executive Director resigned from the Board with effect from 01stJuly2019. Mr. Nageswara Rao Koripalli (DIN 08734786) has been co-opted onto the Board asAdditional Director (under Independent Category) with effect from 29thApril2020. He is proposed for appointment as Director (Independent Category) at theensuing Annual General Meeting. In the opinion of the Board of Directors Mr.Nageswara Rao Koripalli is a person of integrity possessing relevant experience expertiseand knowledge required for the position of Independent Director.

Retirement by Rotation

Dr. Chereddi Ramachandra Naidu (DIN 02096757) Executive Director will retire byrotation at the ensuing Annual General Meeting. Being eligible he offers himself forre-appointment

Key Managerial Personnel

Mr.Srikanth Kodali Managing Director Mr.Brendon Thomas Pereira Chief FinancialOfficer Ms. Amreen Gulnaaz Company Secretary are Key Managerial Personnel of the Companyin accordance with the provisions of Section(s) 2(51) and 203 of the Companies Act2013read with the Companies(Appointment and Remuneration of Managing Personnel) Rules2014.

21. RE-CLASSIFICATION OF STATUS OF PROMOTER. During the year under review Mr.Radha Krishna Pinnamaneni Promoter of the Company transferred his entire holding i.e356755 equity shares on 27th June2019 to Mr. Srikanth Kodali Promoter.Thereafter Mr. Radha Krishna Pinnamaneni resigned as Director of the Company.

In the Board Meeting held on 26th August2019 the Board of Directorsconsidered the request letter received from Mr.Radha Krishna Pinnamaneni to re-classifyhim from "Promoter and Promoter Group Category" to "Public Category".The Board of Directors in their meeting held on 14th December 2019 consideredand approved the request on the basis of undertaking received from Mr.Radha KrishnaPinnamaneni. The Shareholders approved the said re-classification on 27thMarch2020 through postal ballot (including e-voting) conducted by the Company asper the provisions of the Companies Act2013. On application National Stock Exchange ofIndia Limited approved the said re-classification vide it's letter dated 22ndMay2020 and Mr. Radha Krishna Pinnamaneni ceased to be promoter of the Company.

22. DECLARATION BY THE INDEPENDENT DIRECTORS

During the year under review the independent directors of the company havesubmitted their disclosures to the board that they fulfil all the requirements asstipulated in Section 149(6) of the Companies Act 2013 and Regulation 25 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 so as to qualify themselves tobe appointed as independent directors under the provisions of the Companies Act 2013 andthe relevant rules.

23. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and ability confirm that: i. In preparation of the annualaccounts the applicable accounting standards have been followed along with properexplanation relating to material departures; ii. The directors have selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe company at the end of the financial year and of the profit and loss of the company forthat period ; iii. The directors have taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions of this Act forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities; iv. The directors have prepared the annual accounts on a going concernbasis; v. The directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and are operatingeffectively; vi. The directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and effective.Further there are no more qualifications reservations or adverse remarks made by thestatutory auditor/secretarial auditor in their respective reports.

24. EXTRACT OF ANNUAL RETURN

In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theAnnual Return of the company for the financial year ended 31st March2020 isenclosed as Annexure II.

The extract of the Annual Return of the company is also hosted on the company's websiteat https:// www.kapstonfm.com/investors.html.

25. CORPORATE SOCIAL RESPONSIBILITY

The Board of Directors constituted Corporate Social Responsibility (CSR) Committee inaccordance with the provisions of section 135 of the Companies Act2013. The Board on therecommendation of CSR Committee and in compliance with the policy on Corporate SocialResponsibility invested the CSR Fund by contributing to activities related to Swach Bharatand on other activities as specified in Schedule VII of the Companies Act2013. The AnnualReport on CSR activities is enclosed as Annexure III to this Annual Report.

26. PARTICULARS OF EMPLOYEES

The information required under section 197 of the Companies Act2013 read with rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is presented in a separate section forming part of this Annual Report as Annexure IV.

27. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report for the year under review as stipulatedin SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is presentedin a separate section forming part of this annual report.

28. STATUTORY AUDITORS

M/S NSVR and Associates LLP Chartered Accountants (Firm RegistrationNo.0008801S/ S200060) Hyderabad was appointed as Statutory Auditor of the Company at the10th Annual General Meeting held on September 282018 till the conclusion of 14thAnnual General Meeting. They have confirmed their eligibility for the financial year2020-21 under Section 141 of the Companies Act 2013 and the Rules framed there under.

29. SECRETARIAL AUDITOR

Mr. D. S Rao Practising Company Secretary Hyderabad was appointed as SecretarialAuditor of the Company for the financial year 2019-2020. The Board of Directors hasre-appointed him as Secretarial Auditor of the Company for the financial year 2020-21.

30. INTERNAL AUDITOR

Ms.Sravanthi Karuturi Chartered Accountant Hyderabad was appointed as InternalAuditor of the Company for the financial year 2019-20. The Board has re-appointed her asInternal Auditor for the financial year 2020-21.

31. AUDITORS' REPORT AND SECRETARIAL AUDITORS' REPORT

The statutory auditors' report and secretarial auditors' report do not contain anyqualifications reservations or adverse remarks.

During the year the statutory auditor and secretarial auditors have not reported anyinstances of frauds committed in the Company by its officers or employees to the AuditCommittee under section 143(12) of the Companies Act2013. The report of the secretarialauditor is enclosed as Annexure V.

32. INTERNAL FINANCIAL CONTROL

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. Based on the audit reports your Company undertakescorrective action in their respective areas and strengthens the controls. The Board ofDirectors of the Company have adopted various policies like Related Party Transactionspolicy Whistle Blower Policy code of conduct for regulating monitoring and reportinginsider trading and such other procedures for ensuring the orderly and efficient conductof its business prevention and detection of frauds and errors accuracy andcompleteness of the accounting and timely preparation of financial information.

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations2015 as amended from time to time the revised code of conduct for prohibition of insidertrading as approved by the board as on 01st April 2019 is implemented by thecompany. The board has appointed Ms. Amreen Gulnaaz Company Secretary as the ComplianceOfficer under the code.

33. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

During the financial year under review there were no significant and materialorders passed by the regulators or courts or tribunals impacting the going concern statusand companyRss operations in the future.

34. VIGIL MECHANISM

In pursuance of the provisions of Section 177(9) & (10) of the Companies Act 2013and Regulation 22 of SEBI (LODR) Regulations2015 a Vigil Mechanism for directors andemployees to report genuine concerns has been established. The Policy on vigil mechanismi.e whistle blower policy may be accessed on the Company's website atwww.kapstonfm.com.The policy provides for a framework and process for the employees anddirectors to report genuine concerns or grievances about leakage of unpublished pricesensitive information (UPSI) illegal and unethical behaviour to the Chairman of the AuditCommittee.

35. CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENT TECHNOLOGY ABSORPTION

The Company being in the service industry does not have any power generation units anddoes not produce/generate any renewable or conventional power. However the Company hastaken steps to conserve energy in the work place by using energy saving lamps and byeducating the employees to converse energy.

The Company has adopted all new technology in terms of software and hardware for thebetter working and efficient reporting. The Company has an in house Information Technologyteam which constantly works on the adoption and implementation of new technology.

36. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year under review there is no foreign exchange earnings and outgo.

37. TRADEMARK

Your Company has a registered trade mark in the name of "Kapston FacilitiesManagement Limited" for providing security services and facilities managementservices.

38. OTHER DISCLOSURES

The Company does not have any subsidiary or group or associate company thereforestandalone financial statement is presented. The Company is not required to maintain costrecords as per the provisions of Section 148 of the Companies Act2013. Various policiesas approved by the Board of Directors in accordance with the provisions of CompaniesAct2013 and SEBI(LODR) Regulations2015 is hosted on the company's website athttps://kapstonfm.com/investors. html.

39. ACKNOWLEDGEMENT

Your directors place on record their gratitude to the Central Government various StateGovernments and Company's Bankers and advisors for the valuable advice guidanceassistance cooperation and encouragement they have extended to the Company from time totime. The Directors also take this opportunity to thank the company's customers suppliersand shareholders for their consistent support to the Company.

We place on record our appreciation of the contribution made by our employees at alllevels. Our consistent growth was made possible by their hard work solidaritycooperation and support.

On behalf of the Board of Directors

Sd/-
Dr. Chereddi Ramachandra Naidu
Executive Chairman
(DIN 02096757)
Date: August 142020
Place: Hyderabad

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