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Kesoram Industries Ltd.

BSE: 502937 Sector: Others
NSE: KESORAMIND ISIN Code: INE087A01019
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VOLUME 20022
52-Week high 173.25
52-Week low 73.35
P/E
Mkt Cap.(Rs cr) 1,054
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
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OPEN 75.70
CLOSE 76.05
VOLUME 20022
52-Week high 173.25
52-Week low 73.35
P/E
Mkt Cap.(Rs cr) 1,054
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Kesoram Industries Ltd. (KESORAMIND) - Director Report

Company director report

FOR THE YEAR ENDED 31st MARCH 2018

The Board presents its Ninety-ninth Annual Report together and theAudited Statement of Accounts of the Company for the year ended 31st March 2018.

FINANCIAL RESULTS

` in crores

Particulars

31st March 2018

31st March 2017

Total Revenue

3933.03

4243.44

Profit/(Loss) before Interest Depreciation Tax and other Amortizations ("EBIDTA")

159.19

129.69

Add : Exceptional (Expense)/Income

(75.23)

121.35

128.23

123.05

Less : Depreciation and Amortization Expenses
Finance Costs

421.24

282.10

Tax Expenses – Net

(2.00)

0.76

547.47

405.91

Profit/(Loss) for the year

(463.51)

(154.87)

Other Comprehensive Income (net of tax expense):
(Items that will not be reclassified subsequently to the statement of profit and loss)
Remeasurement of post-employment benefit obligations

(7.67)

(0.04)

Fair valuation of equity investments

7.93

7.88

(2.00)

(1.57)

Income tax relating to these items

(1.74)

6.27

Total comprehensive income/(loss) for the year

(465.25)

(148.60)

DIVIDEND

No dividend is recommended in view of the loss during the year andnon-availability of any carry forward surplus.

SHARE CAPITAL

The Paid-up Equity Share Capital as on 31st March 2018 amounted to`137.34 crores and was comprised as follows:

` in crores

Equity Share Capital as on 1st April 2017

117.27

Add: Equity Shares allotted on conversion of
a) Optionally Convertible Redeemable Preference Shares

7.50

b) Issued during the year to the Promoter Group on preferential basis

12.57

Closing Equity Share Capital

137.34

In addition the Company issued on preferential basis to the PromoterGroup 5250000 Convertible Warrants of `10/- each at a premium of `165/- per warrantamounting to `91.87 crores on which 90% consideration was received upto 31st March 2018.These Warrants were fully converted into Equity Shares on 6th April 2018.

`207.43 crores being premium received against preferential allotment ofEquity Shares has been credited to the Securities Premium Account.

ADOPTION OF INDIAN ACCOUNTING STANDARDS

The Company adopted the Indian Accounting Standards ("IndAS")notified under the Companies (Indian Accounting Standards) Rules 2015 during the year forpreparation and presentation of these Financial Statements. Consequently the FinancialStatements of the previous year have had to be restated to conform to the provisions ofIndAS. The corresponding reconciliation and description of the effects of this transitionfrom the provisions of the Companies (Accounting Standards) Rules 2005 has been providedunder Note 43 to the Financial Statements.

DEPOSITS

No deposit within the meaning of Section 73 of the Companies Act 2013("the Act") was accepted during the year. Deposits amounting `4.46 lakhs fromtwo depositors continue to remain unclaimed as at the end of the year. These depositorshave yet again been approached for instructions. There were no deposits not in compliancewith the requirements of Chapter V of the Companies Act 2013.

GENERAL REVIEW

Total Revenue of the Company for the year on a stand-alone basisamounted to `3933.03 crores as against `4243.44 crores in the previous year. Despite thelower turnover the Company's Earnings Before Interest Depreciation Taxation and otherAmortisztions ("EBIDTA") during the year rose to `159.19 crores as against`129.69 crores in the previous year an increase of nearly 23%.

Sale volumes of the Cement Business during the year were subduedlargely owing to a slowdown in construction activity in the markets that it services. Thiswas compounded by uncertainty in consumer behaviour in the months leading up to theimplementation of the Goods and Service Tax ("GST") in the country andimmediately thereafter. This affected cement offtake and in turn impacted net pricerealisations. Nonetheless the Business did well to improve EBIDTA as compared to theprevious year.

The Tyre Business had an indifferent first half with both volume andnet sale realisations on a downward cycle. The impact of GST was even more pronounced inthe Tyre Business. In the run up to the D-day of 1st July 2017 and subsequently themarket tended to postpone tyre buying decisions till "GST settled down". Marketsin the North began recovering their equilibrium post Diwali. The Tyre Business took fullcognisance of the altered dynamics and concentrated on growing sale volumes and augmentingmargins. The strategy yielded dividends and the fourth quarter showed a positive EBIDTA.Commendable progress in the second half of the year was made not only in the Business'sconventional segments but also in such segments as two and three wheelers and off the roadtyres.

With a view to enhancing the Company's manufacturing presence in theState of West Bengal the undertakings of Spun Pipes & Foundries as well as HeavyChemicals disposed of effective close of business on 31st March 2016 were reacquiredduring the year. These Undertakings continue to be under suspension of work.

MANAGEMENT DISCUSSION & ANALYSIS AND CORPORATE GOVERNANCE

A Management Discussion & Analysis and the Report on CorporateGovernance are attached as Annexures I and II respectively of this Annual Report.

RISK MANAGEMENT

The Company's Risk Management Policy continues to be contemporarydealing as it does with perceived risks in its Businesses. It endeavours to minimise asfar as possible their adverse impact and fine tunes each Business's competitiveadvantages.

GOING CONCERN STATUS

There were no significant or material orders passed by regulators/courts / tribunals impacting or influencing the Company's going concern status and/or itsfuture operations.

INTERNAL FINANCIAL CONTROLS

The Company has a defined framework for internal financial controlsthrough a combination of business level controls process level controls and IT levelcontrols. Continuous internal monitoring mechanisms ensure that these controls arereinforced from time to time on an ongoing basis.

EVALUATION OF BOARD PERFORMANCE

As in previous years the performance of the Board each individualBoard Member including Independent Board Members as well as the performance of eachBoard Committee were evaluated during the year. A brief statement on the methodologyadopted in the evaluation process appears in the Corporate Governance Report. As mandatedunder the provisions of the Act a Meeting of all Independent Directors was convened andheld during the year.

NUMBER OF BOARD MEETINGS

A tentative calendar of Board Meetings to take place in each financialyear is prepared and circulated amongst Board Members and Key Management Personnel beforethe beginning of that financial year. During the year seven Board Meetings were convenedand held. These details appear in the Report on Corporate Governance.

NOMINATION AND REMUNERATION POLICY

The Company's Nomination and Remuneration Policy prepared in conformitywith the requirements of Section 178(3) of the Act is attached in Annexure III of thisReport.

AUDIT COMMITTEE

The Audit Committee is chaired by Amitabha Ghosh an eminent CharteredAccountant with additional qualifications in banking. K P Khandelwal Sudip Banerjee LeeSeow Chuan Jikyeong Kang and Siddhartha Mohanty are the other Members. Tridib Kumar DasWhole-time Director and Chief Financial Officer is a permanent invitee to the Meetings.The Company Secretary acts as Secretary to the Committee.

All recommendations of the Audit Committee made during the year wereaccepted by the Board and there were no instances of any disagreement between theCommittee and the Board.

CORPORATE SOCIAL RESPONSIBILITY

In the absence of profit there were no compulsions whatsoever on theCompany to incur any spends on Corporate Social Responsibility ("CSR"). TheCompany nonetheless recognises its commitment towards fulfilling its societalresponsibilities. Several programmes initiated in previous years keeping in mind theCompany's obligations to the society at large were continued during the year so that theuptrend in the number of beneficiaries of these schemes was preserved. The Company'ssingular initiative aimed at transforming the lives of youth through excellence in sportin the form of the CCFC-Kesoram Football Academy ("the Academy") gained furtherground during the year. The Academy today has a nucleus of some fifty talented young menmeticulously spotted from over six hundred hopefuls who had participated in the series oftrials. They are being put through the grind by a select group of qualified coaches forskill upgradation and developing the "big match" temperament. The teamconsisting of the senior trainees did well to top the Kolkata Second Division League in2017-18 and has been promoted to participate in the Kolkata First Division League duringthe ensuing football season. This development has been a source of inspiration for theyoung men at the Academy and their trainers.

The Academy has major plans to further hone in on the ingrained talentin these young men. It is contemplating conversion of the present coaching pattern into aresidential gurukul setting where both trainees and coaches will be housed in onelocation and trained in a dedicated complex equipped with the requisite facilities. Thefootball project is therefore so designed as to constitute a critical impetus to the gameof football in the country. At the same time the Academy endeavours to make a differenceto the lives of these young men drawn as they have been from the weaker sections ofsociety. The Academy hopes to see several of these young men being recruited by thecountry's premier football clubs as well as the teams competing in the Indian SoccerLeague . The Company's CSR Policy is available on www.kesocorp.com. The CSRCommittee of the Board consists of Manjushree Khaitan Chairperson Amitabha Ghosh andTridib Kumar Das.

A Report on CSR activities as mandated under the Companies (CorporateSocial Responsibility Policy) Rules 2014 is given in Annexure IV to this Report.

RELATED PARTY TRANSACTIONS

As required under the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 related party transactions are placed before the AuditCommittee for approval. Wherever required prior approval of the Audit Committee isobtained on an omnibus basis for continual transactions. The corresponding actualtransactions then become a subject of review by the Committee at subsequent Meetings.

All related party transactions/arrangements entered into by the Companyduring the year were on an arm's length basis and in the ordinary course of business.There were no materially significant related party transactions entered into by theCompany with the Promoters Directors Key Management Personnel or other designatedpersons which could conflict with the interest of the Company as a whole. Consequentlydisclosures in Form AOC-2 pursuant to Rule 8(2) of the Companies (Accounts) Rules 2014are not required. The Company's Related Party Transactions Policy appears on its websitewith weblink www.kesocorp.com/DOCS/management corner.php#slide5.

SUBSIDIARY AND JOINT VENTURE COMPANY

As at 31st March 2018 the Company had a wholly owned subsidiaryCygnet Industries Limited ("Cygnet") and a Joint Venture Company Gondkhari CoalMining Limited (‘Gondkhari") The Financial Statements of Cygnet as at 31stMarch 2018 has been consolidated with the Financial Statements of the Company. TheConsolidated Financial Statements of the Company in respect of the year appears on pages132 to pages 200 of this Annual Report.

As reported in the previous Annual Report Gondkhari the SpecialPurpose Vehicle ("SPV") incorporated in 2009 as a Joint Venture between theCompany and two other corporate entities for developing and working a coal block in theState of Maharashtra lost its sub-structure once the coal block was de-allocated in 2014by the Supreme Court. The SPV is therefore non functional and the Company has made fullprovision against its portion of the investment in Gondkhari. A Statement containing thesalient features of the financial statements of Cygnet the wholly owned subsidiary andGondkhari in Form AOC-1 appears in Annexure V to this Annual Report.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

Inter corporate financial exposures during the year appears separatelyunder Note No. 7 to the Financial Statements. The Company had during the year issued aCorporate Guarantee on behalf of Cygnet Industries Limited ("Cygnet") itswholly owned subsidiary against a Term Loan of `500 crores availed by Cygnet from aScheduled Bank. Cygnet has since repaid `226 crores out of this Term Loan after the end ofthe year. Subject to converting `400 crores out of its existing loan to Cygnet into Equityas disclosed under Note No. 5 to the Financial Statements the Company has not made anyinvestment during the year. The Company has taken no other financial exposure during theyear within the meaning of Section 186 of the Act to any other Company.

VIGIL MECHANISM

The Whistle Blower Policy of the Company is available on its websitewww.kesocorp.com.

STATUTORY AUDIT AND REPORT

Shareholders at the Company's Ninety eighth Annual General Meetingappointed Messrs. Deloitte Haskins & Sells Chartered Accountants Auditors of theCompany for a period of five years from the conclusion of that Annual General Meeting. TheReport of the Auditors for the year ended 31st March 2018 forming part of this AnnualReport does not contain any qualification reservation observation adverse remark ordisclaimer.

COST AUDIT

Upon a recommendation from the Audit Committee Mani & Co. CostAccountants were appointed to audit the cost accounting records maintained by the Companyfor the financial year ended 31st March 2018 at a total remuneration of

`5.50 lakhs excluding taxation and reimbursement of out of pockets.The remuneration requires ratification by shareholders and an appropriate Resolution hasbeen incorporated in the Notice convening the Ninety-ninth Annual General Meeting.

SECRETARIAL AUDIT AND SECRETARIAL STANDARDS

Salil Banerjee Practising Company Secretary was appointed by theBoard to conduct audit of the Company's Secretarial records in respect of the FinancialYear 2017-18.

His Report appears under Annexure VI to this Report. There areno qualifications in the Report.

The Company during the year has complied with Secretarial Standards 1& 2 issued by The Institute of Company Secretaries of India.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other particulars asprescribed under the provisions of Section 197 of the Act read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are set outin Annexure VII and forms part of this Report. None of the employees listed in the saidAnnexure is related to any Director of the Company.

As per the provisions of Section 136 of the Act this Annual Report andAccounts is being sent to each Member and others entitled thereto excluding theinformation on employee particulars as per Rule 5(2) and Rule 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended. Thisinformation is readily available for inspection by Members at the Company's RegisteredOffice between 3 P.M. and 5 P.M. on all working days (excluding Saturdays) up to the dateof the forthcoming Annual General Meeting. Should any Member be interested in obtaining acopy (including through e-mail gg@kesoram.net) s/he should write to the Company Secretaryat the Company's Registered Office.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

The Company has in place the requisite Internal Committees as envisagedin the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013.

No complaints on the issues covered by the above Act were receivedduring the year.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Act and based upon representationsfrom the Management the Board to the best of its knowledge and belief states that: (a)in the preparation of the Annual Accounts applicable accounting standards has beenfollowed along with proper explanation relating to material departures; (b) suchaccounting policies have been selected and applied consistently and such judgments andestimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year ended 31stMarch 2018 and of the loss for that period; (c) proper and sufficient care was taken forthe maintenance of adequate accounting records in accordance with the provisions of thisAct for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; (d) the Annual Accounts have been prepared on a going concern basis;(e) internal financial controls have been laid down to be followed by the Company and thatsuch internal financial controls are adequate and operating effectively; and (f) propersystems have been devised to ensure compliance by the Company with the provisions ofapplicable laws and that such systems were adequate and working effectively.

DIRECTORS

Upon a favourable recommendation from the Board's Nomination andRemuneration Committee the Board appointed Jikyeong Kang (DIN 08045661) as an AdditionalIndependent Director effective 10th January 2018. Ms. Kang vacates office at theforthcoming Annual General Meeting and is eligible to be appointed an Independent Directorfor a term of five years.

An appropriate Ordinary Resolution is therefore being included in theNotice convening the Ninety-ninth Annual General Meeting. A respected academic Ms. Kangis at present the President and Dean of the Asian Institute of Management ManilaPhilippines.

Similarly based upon a recommendation of the Nomination andRemuneration Committee Chander Kumar Jain (DIN 08125968) Head Manufacturing CementBusiness has been appointed a Whole-time Director for one year effective 4th May 2018. Anappropriate Resolution to this effect is also being proposed at the forthcoming AGM. TheLife Insurance Corporation of India during the year replaced its nominee Vinay Sah (DIN02425847) with Siddhartha Mohanty (DIN 08058830). Mr. Mohanty is the Corporation'sExecutive Director Legal. The Board wishes to place on record its sincere appreciationfor Mr. Sah's wise advice and guidance during his tenure on the Board. Basant Kumar Birla(DIN 00055856) Chairman of the Board retires by rotation and being eligible offershimself for re appointment.

All Independent Directors have furnished to the Company the requisitedeclarations that they meet the relevant independence criteria as laid down in Section149(6) of the Act as well as the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

Brief profiles of Directors being appointed / re-appointed at theforthcoming Ninety-ninth Annual General Meeting have been given in the Report on CorporateGovernance.

KEY MANAGERIAL PERSONNEL

The following persons functioned as Key Managerial Personnel during theyear:

Manjushree Khaitan Executive Vice Chairperson (DIN 00055898)
Tridib Kumar Das Whole - time Director and Chief Financial Officer (DIN 01063824)
Gautam Ganguli Company Secretary

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGAND OUTGO

Information on conservation of energy technology absorption andforeign exchange earnings and outgo stipulated under Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8 of The Companies (Accounts) Rules 2014 set out in AnnexureVIII to this Report.

MATERIAL CHANGES BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OFREPORT

There has been no material change between the end of the Financial Yearand the date of this Report. The conversion of Warrants issued to the Promoter Group intoEquity Shares of the Company features elsewhere in this Report.

EXTRACTS FROM ANNUAL RETURN

Details forming extracts from the Company's Annual Return in Form MGT-9appears in Annexure IX to this Report.

ANNEXURES FORMING PART OF THIS REPORT

Annexure Particulars
I Management Discussion & Analysis
II Report on Corporate Governance
III Nomination & Remuneration Policy
IV Report on Corporate Social Responsibility (CSR) activities
V AOC – 1
VI Secretarial Audit Report
VII Remuneration related disclosures per Section 197
VIII Energy Conservation Particulars
IX Annual Return Extracts

APPRECIATION

The Board gratefully acknowledges the understanding and supportreceived by the Company from its employees. It also places on record its deep gratitudefor the unstinted support the Company has received from the Banks the Central Governmentthe various State Governments and the local authorities during the year.

Specific acknowledgment is also made for the confidence andunderstanding shown by the Members in the Company.

Basant Kumar Birla

Chairman

Manjushree Khaitan

Executive Vice Chairperson

Amitabha Ghosh Lee Seow Chuan

Kashi Prasad Khandelwal Directors Sudip Banerjee

Tridib Kumar Das

Whole-time Director & Chief Financial Officer

Chander Kumar Jain

Whole-time Director

Gautam Ganguli

Company Secretary

Place: Kolkata Date: 11th May 2018