Kernex Microsystems (India) Limited.
Your Directors have pleasure in presenting the Twenty Fifth Annual Report together withthe audited statement of accounts of your company for the year ending 31st March 2017.
Financial Results (Standalone)
| || |
Rs in Lakhs
| ||2016-2017 ||2015-2016 |
|Sales and Other Income ||1395.28 ||1422.42 |
|Profit/Loss before Depreciation || || |
|Finance Cost and Tax ||(3114.63) ||(2083.98) |
|Less:- Finance Cost ||331.14 ||401.43 |
|Less:- Depreciation ||255.72 ||321.01 |
|Less: Exceptional items ||521.31 ||0 |
|Add : Extra ordinary items ||2874.98 ||0 |
|Profit/Loss after Depreciation || || |
|Interest and before tax ||(174.10) ||(1361.55) |
|Tax expense ||216.66 ||(32.61) |
|Profit / Loss after Tax ||(390.77) ||(1328.94) |
|Add: Balance brought forward from previous year ||(529.93) ||799.01 |
|Less: Adjustments consequent to revision of useful life of certain assets pursuant to Schedule II of Companies Act2013 || || |
|Balance carried forward to || || |
|Balance sheet ||(920.70) ||(529.93) |
|Profit available for appropriation || || |
|Earnings Per Share (Rs.) || || |
|- Basic ||(3.13) ||(10.63) |
|- Diluted ||(3.13) ||(10.63) |
|Appropriations: || || |
|Transfer to General Reserve ||- ||- |
|Proposed Dividend ||- ||- |
|Income Tax on proposed Dividend || || |
|Balance carried to the Balance sheet ||(920.70) ||(529.93) |
1. Economy Industry and the Company's working during the year
The year gone by saw major developments in the global landscape with the UnitedKingdom's decision to leave the European
Union followed by the presidential elections in the United States. Geopolitical issuesdominated the global discourse. With regard to the global economy there was a moderationin growth in both developed and emerging markets. Global trade showed indications ofrevival. India stood out as a country taking major policy initiatives on several frontsincluding legislation on the Goods & Services Tax laying a strong foundation for thecountry's future growth
Your Company is operating in the Rail Safety equipment manufacturing and supply ofPrevention of Rail Collision Devices Train Protection warning systems Electronic InterLocking and providing necessary hard ware and software. The Industry in India is a focusedindustry of the Government providing several incentives for Investments and large scalespending on infrastructure
2. Future outlook
Your Company domestically having successfull yexecutd the Design DevelopmentManufacture supply and maintenance of the Anti Collision Devices Project in KonkanRailways was chosen for Train Collision Avoidance System Project of the Indian Railways.The Company has a strong R & D base for the development of new products. TheGovernment of India's thrust now being in Modernizing Railways with large infrastructurespending and Rail safety the Company is in a strong position to grab the opportunitiesthat are expected to be available.
Your Company with its experience and expertise gained domestically has made asuccessful foray into the International Markets in the Rail Sector in Egypt and SouthAfrica and is now exploring new markets and the outlook for the future appears promisingin the years to come.
Operations during the year
The Design and Development of Train Collision Avoidance System a development tenderawarded to Kernex is in the final stages of completion. The system designed and developedhas completed several phases of lab testing as well as field testing. From August 2016Field trials were conducted extensively to prove inter-operability of the system withother vendors along with passenger field trains to prove system working on RailwayOperating Conditions. System has been upgraded to adhere to the updated specificationreleased in Oct 2016 by RDSO. Further field trials on passenger trains were carried outfrom Dec 2016 with upgraded software to sort out logical issues as well as issuespertaining to inter-operability. The process of further field trials and approval of theproduct will be completed by end of Sep 2017.
As per the pink book issued by Railway for the year 2016-17 which details the workssanctioned for Indian Railway new projects of around 1400 Km has already been approvedand instructions were given to South Central Railway for early allocation of works.
TCAS being a safety system installed for passenger railway requires certification byan external Independent Safety Assessor which was entrusted to International agencyItalcettifer Milan Italy. Based on the latest updated Specification released by RDSOthe project documentation has been updated and the certification process is expected to becompleted by end of September 2017.
RBCT RYCAS - South Africa
Your Company on a trial basis before awarding the contract was required to prove theconcept of collision avoidance and execute the system over 10 locos and track equipment onthe ground to prevent collision and avoid the delays and break down in coal unloading anddispatching. The first phase of demonstration of the concept was successfully completedduring Apr-June'2016.The Project amounting to $846000 was successfully completed andsystems were manufactured and installed and commissioned during Feb-Mar'2017
Egyptian National Railways (ENR) Cairo
Your Company has supplied all the 136 gates and installed 96 gates and hasprovisionally handed over 68 gates for taking up for maintenance. The order for booms withtechnical modifications has been received and the same were identified in Internationalmarkets and proto types were got approved. During the year under review 200 booms wereinstalled and commissioned and further order is expected in the current year.
External Training to ENR officials was completed. The Company during the year isexpecting an order for supply of spares and assemblies required for five years.
Research and Development
Your company has been working in the focused areas especially for Railways in designand supply of collision avoidance system Fog Pass' for helping locos to move in poorvisibility unmanned gate warning system universal loco break Interface unit developmentof online data and operational display units Driver Machine Interface etc.
3. Subsidiary Details with consolidated financial statement
Your Company has one 100% wholly owned subsidiary Avant Garde Infosystems Inc In USAand there were no joint ventures or associate Companies as of 31st March 2017. There hasbeen no change in the nature of business of subsidiary during the year under review. Inaccordance with section 129(3) of the Companies Act 2013 the Company has preparedConsolidated financial statement of the Company and the subsidiary in the form and manneras that of its own in compliance with the accounting standards and the listing regulationsof the stock exchanges which forms part of the Annual Report for laying before the AnnualGeneral Meeting. A report on the performance and financial position of the subsidiaryforms part of the consolidated statement in Form AOC-I.
4. Material changes and commitments affecting the financial position of thecompany
There have been no material changes and commitments affecting the financial position ofyour Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of the Report.
5. Share Capital
There is no change in Share Capital of your Company during the year.
6. Dividend and Reserves
Your company in the absence of distributable profits has not declared any dividendduring the year and no amount was transferred to reserves also.
7. Directors and Key Managerial Personnel
In accordance with the provisions of Section 152 of the Companies Act 2013 Mr RajuNarasa Mantena Director retire by rotation and being eligible offer himself forre-appointment.
Col L.V.Raju has resigned as Managing Director effective from 30th November' 2016.TheBoard has appointed Mr.K Krishnam Raju as additional director and Whole Time Director withthe designation of Director In charge effective from 29th October'2016.
Mrs.Jyoti Raju women director has resigned due to personal reasons effective from 09thAugust' 2016. Mr. B Murali Mohan Whole Time Director has resigned due to personal reasonseffective from 31st March'2017.
During the year Mr. V Ramayya a Chartered Accountant was appointed as CFO andMr.Srinivas Kiran Company Secretary has resigned.
The brief profile of the Directors who are to be appointed/re-appointed have beenfurnished in the notice convening AGM.
8. Declaration by Independent Directors
All the Independent Directors have submitted their disclosures to the Board that theyfulfill all the requirements as stipulated in Section 149 (6) of the Companies Act 2013 soas to qualify themselves to be appointed as Independent Directors under the provisions ofthe Companies Act 2013 and the rules framed there under
9. Nomination and Remuneration Policy of Directors Key Managerial Personnel andother Employees
In terms of section 178 (1) of the Companies Act 2013 the Board on the recommendationof the Nomination and remuneration committee approved the criteria and policy forselection and appointment of directors key managerial persons and their remuneration. Theremuneration policy forms part of the report on corporate governance.
10. Board Evaluation
Pursuant to the provisions contained in the Companies Act 2013 and listing regulationsthe Board has carried out annual performance evaluation of its own members The chairmanof the Board individual directors as well as the evaluation of the working of the AuditNomination and Remuneration committee and other committees. The evaluation was based onthe attendance contribution independence of judgment and preparedness for the meetings
11. Number of Meetings of the Board of
During the financial year 2016-17 the Board of Directors of the Company met 10 times on30/04/2016 28/05/2016 09/08/2016 24/08/2016 29/10/2016 08/11/2016 17/01/201728/01/2017 28/02/2017 & 10/03/2017. Audit committee met 4 times on 28/05/201608/08/2016 08/11/2016 and 28/01/2017. A separate meeting of the Independent Directors ofthe Company was also held on 08/11/2016 to discuss items enumerated under Schedule IV tothe Companies Act 2013 and Listing Regulations.
12. Public Deposits
During the year your Company has not accepted any deposits within the meaning of
Section 73 of the Companies Act 2013 read with Companies (Acceptance of Deposits)Rules 2014. No amount on account of principal or interest on deposits from public wasoutstanding as on Balance Sheet date.
13. Regulatory / Court Orders
No significant and material orders were passed by the regulators or courts or tribunalsimpacting the going concern status of the Company and its future operations.
14. Disclosure under the sexual harassment of women at workplace (preventionprohibition and redressal) Act 2013
Your Company has put in place a Policy prevention of Sexual Harassment of Women at theWorkplace in line with the requirements of the Sexual Harassment of Women at the Workplace(Prevention Prohibition & Redressal) Act 2013. Internal Complaints Committee (ICC)of the Company has been constituted to redress complaints regarding sexual harassment.
15. Directors' Responsibility Statement
Pursuant to section 134 (3) (c) of the Companies Act 2013 the Directors to the best oftheir knowledge hereby state and confirm that
a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures
b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe loss of the Company for that period
c) the Directors had taken proper and sufficient care for the maintenance of a d e q ua t e a c c o u n t i n g r e c o r d s i n accordance with the provisions of the Act forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities
d) the Directors had prepared the annual accounts on a going concern basis and
e) the internal financial controls to be followed by the Company were laid down andsuch financial controls were adequate and were operating effectively
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and were operating effectively
16. Internal Financial Controls
Your Company has laid down policies and procedures to be adopted for ensuring theorderly and efficient conduct of its business including adherence to company's policiessafeguarding of its assets prevention and detection of frauds and errors accuracy andcompleteness of the accounting records and timely preparation of reliable financialinformation. An independent audit committee of the Board reviews the adequacy of internalcontrols
17. Particulars of Loans Guarantees and
The details of Loans Guarantees and Investments are covered under the provisions ofSection 186 of the Companies Act 2013 are given in notes forming part of the financialstatements.
18. Committees of the Board
The Board of Directors has the following Committees:
1. Audit Committee
2. Nomination and Remuneration Committee
3. Stakeholders' Relationship Committee
4. Risk Management Committee
The details of the Committees along with their composition number of meetings andattendance at the meetings are provided in the Corporate Governance section of thisReport.
19. Corporate Social Responsibility (CSR)
Your Company having regard to the net profit/turnover/ net worth is not covered underthe provisions of Section 135 of the Companies Act 2013 to constitute a committee andspend the amount towards CSR activities
20. Related Party Transactions
All the related party transactions by the Company during the year 2016-17 were on anarms length basis and were in the ordinary course of business and as such the provisionsof section 188 are not attracted. There are no materially significant Related PartyTransactions with Promoters Directors Key Managerial Persons or other designated personsduring the year. Since there have been no materially significant contracts / arrangements/ transactions with related parties disclosure under Form No.AOC-2 is not applicable.
21. Vigil Mechanism
Your Company in compliance with the provisions of Section 177(9) of the Companies Act2013 framed a whistle Blower Policy/Vigil Mechanism for reporting illegal or unethicalbehaviour. The employees are free to report violations of applicable laws and regulationsand the Code of Conduct. The Audit Committee reviews reports received from the employeeswho may also report to the Chairman of the Audit Committee. During the year under reviewno employee was denied access to the Audit Committee. The Directors and senior managementstaff are to maintain confidentiality of the reporting and ensure that the whistle blowersare not subjected to any kind of discrimination.
22. Familiarization Programme for Independent Directors
Your Company familiarizes all the independent directors about their roles rights andresponsibilities in the Company nature of Industry Risk Management Board evaluationprocess and procedures financial controls and management Board effectiveness strategicdirection etc. The Directors also were explained in detail the compliances required fromthem under the Companies Act SEBI (LODR) Regulations 2015 and other relevant regulationsand their affirmation taken with respect to the same. With a view to familiarize with theCompany's operations the Directors also were given detailed presentations giving theorganizational set up of the Company the functioning of various divisions / departmentsthe Company's market share and the markets in which it operates governance and internalcontrol processes and other relevant information pertaining to the Company's business. TheManaging Director/ Director In charge also has personal discussions from time to time withthe Independent Directors. The above initiatives help the Directors to understand theCompany its business and the regulatory framework in which the Company operates andequips them to effectively fulfill their role as Independent Directors of the Company.
23. Extract of Annual Return
The extract of the Annual Return in Form No MGT-9 as required under section 92 of thecompanies Act 2013 for the financial year ending March 31 2017 is annexed hereto asAnnexure-A and forms part of this report.
24. Risk Management
Your Company has in place a mechanism to identify assess monitor and mitigate variousrisks to key business objectives. Major risks identified by the businesses and functionsare systematically addressed through mitigating actions on a continuing basis. These arealso discussed at the meetings of the Audit Committee and the Board Your Company has putin place internal control systems and processes to optimise the risk mitigation measuresfor review by the audit Committee and approval by the Board. The executive management isguided from time to time by the Board to improve the risk mitigation measures and initiatetimely action
25. Transfer of unclaimed dividend
There are no Unclaimed/Unpaid dividend amounts to be transferred to IEPF (Investor
Education and Protection Fund) as no dividend was declared for the financial year2016-2017
Your Company's Auditors M/s GMK Associates Chartered Accountants Hyderabad (ICAIFirm Registration No. 006945S) were appointed at the last AGM to hold office until theconclusion of the forthcoming AGM and having. completed their full stipulated term asStatutory Auditors are vacating the office.
Pursuant to the provisions of Section 139 of the Act and Rules framed there under asamended it is mandatory to rotate the Statutory Auditors on completion of maximum term asprovided therein. The Board on August 10 2017 has recommended appointment of M/s.PRSV&Co. LLP Chartered Accountants (ICAI Registration No.: S200016) as StatutoryAuditors of the Company to hold office for a period of 5 consecutive years from theconclusion of the 25th AGM till the conclusion of the 30th AGM subject to ratification oftheir appointment by the shareholders at every AGM.
Your Company has obtained consent of M/s. PRSV&Co. LLP and a certificate inaccordance with Section 139 141 and other applicable provisions of the Act to the effectthat their appointment if made shall be in accordance with the conditions prescribed andthat they are eligible to hold office as Statutory Auditors of the Company subject toapproval of the members in the forthcoming AGM.
Necessary resolution has been provided in the AGM notice seeking approval of members.
Reply to the Comments made in the Audit Report
Please refer to Note No.39 of the notes to accounts of Financial Statements regardingTrade Debtors.
Since cash system of accounting is followed by the 100% overseas Subsidiary company noprovision of interest of Rs.1.50 crores was made on the Loan taken by the subsidiary.
In terms of section 204 of the Companies Act 2013 and the Companies (Appointment andRemuneration of Managerial Personnel ) Rules 2014 the Company has appointed M/s A. J.Sharma & Associates Company Secretaries to conduct Secretarial Audit for the year2016-17 and their report is annexed as Annexure-D to this report
Reply to the Comments made in the Secretarial Audit Report
Your company was facing severe financial constraints since some time due to which KeyManagerial Personnel could not be put in position to look after the compliances undervarious applicable legislations from time to time. As such there was delay in submissionof returns and payment of statutory dues.
The Registered office of the Company during the year was shifted to new premises andthere is delay in establishing the necessary communication network Installation ofsystems and equipment. The same is being addressed now and focus is on appointment of KeyManagerial Personnel and adhering to the compliances including updating of Company'swebsite. The Registration under the Factories Act is completed during the current year.The CFO is designated under Regulation 30(5) of SEBI (LODR) Regulations 2015 foridentifying material events and necessary disclosures.
27. Conservation of Energy Technology Absorption and Foreign Exchange Earnings andoutgo:
The information pertaining to conservation of energy technology absorption foreignexchange earnings and outgo as required under section 134 (3) (m) of the Companies Act2013 read with Rule 8 (3) of the Companies (Accounts) Rules 2014 is furnished in Annexure-Band forms part of this report
28. Particulars Relating to Remuneration of Directors/Key Managerial Personnel andEmployees.
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided separately as Annexure C.
There were no employees drawing remuneration in excess of the limits contained in Rules5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
29. Other General Disclosures
No disclosure or reporting is required of the following as:-
a. No equity shares with differential rights as to dividend voting or otherwise wereissued
b. No sweat equity shares were issued
c. No remuneration or commission was received by the Managing Director/Whole-timeDirector of the Company from subsidiary Company.
d. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.
30. Corporate Governance Report
Your Company is committed to adhere to the corporate governance requirements. Thereport on Corporate Governance as stipulated under Schedule V of the listing regulationsis given separately as an Annexure - E.
The requisite certificate from the Statutory
Auditors of the Company confirming compliance with the conditions of corporategovernance is attached.
31. Management Discussion & Analysis (MDA)
Management's Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34(2) (e) of the Listing Regulations is presented in a separate sectionforming part of the Annual Report.
Your Directors would like to express their sincere appreciation for the guidanceassistance and co-operation received from the Indian Railways RDSO Egyptian NationalRailways Richard's Bay Coal Terminal of South Africa. State Bank of India Governmentauthorities and members during the year under review. Your Directors also wish to place onrecord their deep sense of appreciation for the commendable and dedicated contribution ofall employees.
|For and on behalf of the Board || |
|for KERNEX MICROSYSTEMS (INDIA) LIMITED || |
|K Krishnam Raju ||Raju Narasa Mantena |
|Director In-charge ||Director |
|(DIN: 01427121) ||(DIN 02666074) |
|Palce : Hyderabad || |
|Date : 10th August 2017 || |