To the Members
Your Directors are pleased to present the 37TH Annual Report of your Company alongwithAudited Financial Statement for the financial year ended 31st March 2019.
FINANCIAL RESULTS The financial performance of the Company for the year ended 31stMarch 2019 is summarized below:
| || ||(Rs. in Lacs) |
|Particulars ||2018-19 ||2017-18 |
|Sales ||37259.83 ||35483.68 |
|Total Income ||37320.34 ||35628.77 |
|Surplus before interest depreciation exceptional items and Tax ||4334.17 ||3745.88 |
|Less: Financial Cost ||2201.26 ||2633.22 |
|Cash Profit before tax ||2132.91 ||1112.66 |
|Less: Depreciation ||875.66 ||870.65 |
|Exceptional Items ||- ||- |
|Profit /(Loss) before taxation ||1257.25 ||242.01 |
|Provision for current tax ||278.56 ||47.58 |
|Income Tax of earlier year ||12.87 ||48.80 |
|Deferred tax ||176.08 ||(18.59) |
|Profit /(Loss) after taxation ||789.75 ||164.22 |
|Transfer to General Reserve ||- ||- |
|Earning Per Share (face value of Re. 1/- each) ||0.81 ||0.17 |
REVIEW OF OPERATIONS
FERTILIZER & CHEMICALS DIVISION
The year 2018-19 fared well for the Company. The prices of Sulphur and Sulphuric Acidremained high throughout the year mainly due to global sentiment and constrained domesticsupply. Even though it was not viable to produce and sell large quantities of Fertilizerdue to the high input costs of Sulphuric Acid the Company could capitalize on thesituation by selling higher quantities of Acid from its Sulphuric Acid Plants.
Being mostly rainfed with only around 40% land being irrigated India remains highlydependent on monsoons for its agricultural production. In 2018 the monsoons remainedbelow normal with deficit in the States of west Madhya Pradesh parts of MaharashtraRajasthan Gujarat etc. These are some of the main states where the Company sells itsfertilizer products.
The GOI could successfully implement the partial Direct Benefit Transfer system for theFertilizer Industry however some glitches remain. We are hopeful that they would also besorted out soon. The GOI has also agreed to keep the subsidy for the SSP sector separatelyearmarked within the overall Phosphates and Potassium' segment. This shall furtherimprove the liquidity in the sector once implemented.
During the year the turnover of your Company has increased from Rs. 35628.77 lacs forthe year 2017-18 to Rs. 37320.34 lacs for the year 2018-19 by about 15.70% theoperating income has increased from Rs 3745.88 lacs in 2017-18 to Rs. 4334.17 lacs in2018-19 and the cash profit has increased from Rs 1112.66 lacs to Rs 2132.91 in therespective periods while the net profit after tax has increased from Rs. 164.22 lacs toRs. 789.75 lacs.
The Company has produced 318554 MT (previous year 300375 MT) Single Super Phosphateand 180443 MT (previous year 90768 MT) Sulphuric Acid and sold 303679 MT (previous year338986 MT) Single Super Phosphate & 140329 MT (previous year 51194 MT) SulphuricAcid.
The Company is trying to diversify its portfolio and has initiated import of NPKfertilizers in a small way. The Company has imported nil NPK fertilizers (previous year10986 MT) and sold 7576 MT during the year (previous year 6884 MT). The Company hasalso added value added fortified fertilizers in its product range. Both the above productslaunched by the Company have been well accepted by the farmers.
The Company is continuing its efforts for optimizing its current assets to leveragesales on the one hand and diversifying into new geographical markets on the other. Focusis being laid on producing more value added fortified fertilizers to improve the productportfolio.
The raw material prices have increased and are now on an uptrend. To keep the endprices of fertilizers to the farmers within reasonable limits the Government hasmaintained the Nutrient Based Subsidy rates at Rs. 2734/- per MT.
In the coming year 2019-20 the long range forecast of monsoons is about normal. Thiscoupled with the rising trend in the commodity prices which will give bettermarketability to SSP vis a vis other NPK products and fortified grades of SSP we expectto perform better in this year.
Another important development in the Industry has been increased focus of the Ministryof Fertilizers towards quality compliance in the SSP Industry. The movement is alreadygaining momentum and expected to yield good results. With the improvement in the overallquality of the Industry the organized sector and the Industry as a whole is expected to dowell.
The Soya Industry is passing through a tough phase with widespread activities ofspeculation by Industry players. The Company has reduced its activities in this segment toa large extent alongwith total control on fixed expenses.
The margins in the Industry had improved in 2017-18 due to imposition of higher customsduty on import of palm oil. However during the current year the margins were again underpressure due to lowering of palm oil prices by Malaysia.
The Board of Directors is pleased to recommend final dividend of Re. 0.05 per equityshare (face value of Re. 1/- per share) for the financial year 2018-2019 previous yearRe.0.05 per equity share.
The paid up Equity Share Capital as on 31st March 2019 was Rs. 969.89 Lacs dividedinto 96989200 shares of Re. 1/- each. During the year under review the Company has notissued shares with differential voting rights nor granted stock options nor sweat equity.
RESERVES AND SURPLUS
The Company has not transferred any amount to General Reserves for the financial year2018-19.
INVESTORS EDUCATION & PROTECTION FUND
Dividend which was declared by the Company for the year ended March 31 2012 at theAnnual General Meeting held on August 3 2012 and remained unclaimed will be transferredto the Investor Education and Protection Fund of the Central Government on September 22019 pursuant to the provisions of Companies Act 2013. Thereafter no claim shall lie ondividend for the year ended March 31 2012 from the shareholders.
PROJECTS & FINANCE
Due to uncertainty in the economic environment the Company has neither undertaken anymajor capital expenditure nor has any fresh loan been raised from banks during the year.
The Company has not accepted any deposits from the public during the year under reviewpursuant to the provisions of Section 73 of the Companies Act 2013 & the DepositRules made there under.
CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
Information required under section 134(3)(m) of the Companies Act 2013 read with theCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 isannexed in Form-A of Annexure A' and forms part of the report.
Your Directors are of the opinion that the Company has already opted for latesttechnology for producing Single Super Phosphate Sulphuric Acid and Seed Processing &Oil Refinery. Hence information specified to be given in Form-B of Annexure A' isnot applicable.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In accordance with Schedule V(B) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Management Discussion and Analysis Report forms partof this Report (Annexure-B).
FOREIGN EXCHANGE EARNING AND OUTGO
The Company has earned Rs. NIL on export of goods (Previous year Rs. NIL) and incurredRs. 6694.67 lacs (Previous year Rs. 8312.95 lacs) on import of Raw Materials Fees &Subscription and Interest on Foreign Currency Loan.
In accordance with the provisions of Section 152 (6)(c) of the Companies Act 2013 andthe Articles of Association of the Company Shri Jagdish Lal Jajoo (DIN : 02758763) WholeTime Director of the Company is due to retire by rotation at forthcoming Annual GeneralMeeting and being eligible has offered himself for re-appointment. Directors recommendhis reappointment for the consideration of members of the Company at the ensuing GeneralMeeting.
The Board has re-appointed Shri Shailesh Khaitan (DIN:00041247) as a Chairman& Managing Director (KMP) of the Company for a period of three years from April 12019 to March 31 2022 subject to the approval of the members in ensuing General Meetingas a Special Resolution. The present terms of his appointment expired on 31.03.2019.Directors recommend his re-appointment. The Board has also re-appointed Shri VijayGupta (DIN:03511193) and Shri Balmukund Dakhera (DIN:05105269) as anIndependent Directors (Non-Executive) of the Company for a period of five years commencingfrom April 1 2019 to March 31 2024 subject to the approval of the members in ensuingGeneral Meeting as a Special Resolution. The present terms of their appointment expired on31.03.2019. Directors recommend their reappointments.
The Board has also re-appointed Shri Utsav Khaitan (DIN:03021454) as aWhole Time Director of the Company for a period of three years with retrospective effectfrom April 1 2019 to March 31 2022 subject to the approval of the members in ensuingGeneral Meeting as a Special Resolution. Shri Utsav Khaitan is son of Shri ShaileshKhaitan Promoter Chairman and Managing Director of the Company and to take him on theBoard for larger long term interest of the Company. Directors recommend hisre-appointment.
The Board has also re-appointed Ms. Veena Chadha (DIN:06886533) as anIndependent Director (Non-Executive) of the Company for a period of five years with effectfrom August 7 2019 to August 6 2024 subject to the approval of the members in ensuingGeneral Meeting as a Special Resolution. The present terms of her appointment is expiringon 06.08.2019. Directors recommend her re-appointment.
Particulars of the directors seeking appointment/re-appointment are provided in thenotes forming part of the notice for the ensuing Annual General Meeting as required underRegulation 36(3) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
The Company has received disclosures from all the directors and none of the directorshas been disqualified as stipulated under Section 164 of the Companies Act 2013 and rulesmade thereunder.
During the year the Board of Directors met 4 (Four) times. The details of the BoardMeetings and the attendance of the Directors are provided in the Corporate GovernanceReport(Annexure - C).
KEY MANAGERIAL PERSONNEL:
The following employees were designated as whole-time key managerial personnel asrequired under section 203 of the Companies Act 2013 by the Board of Directors during theyear under review:
(a) Shri Shailesh Khaitan Chairman & Managing Director;
(b) Shri Harsh Vardhan Agnihotri President & Chief Financial Officer and
(c) Shri Kamlesh Joshi Company Secretary (Compliance Officer) & General Manager
INDEPENDENT DIRECTORS DECLARATION
The Independent Directors have confirmed and declared that they are not disqualified toact as an Independent Director in compliance with the provisions of Section 149 of theCompanies Act 2013 read with Regulation 16 (B) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and the Board is also of the opinion that theIndependent Directors fulfill all the conditions specified in the Companies Act 2013making them eligible to act as Independent Directors.
Your Company has always strived to maintain appropriate standards of good corporategovernance. The report on corporate governance as stipulated under Schedule V (C) of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part ofthis Report. The requisite certificate confirming compliance with the conditions ofcorporate governance as stipulated under the said clause is attached to this report. (AnnexureC).
DETAILS OF SUBSIDIARY/JOINT VENTURES/ASSOCIATE COMPANIES:
The Company has no Subsidiary/Joint Venture/Associate Company.
PARTICULARS OF LOAN GUARANTEES INVESTMENTS:
During the year under review the Company has not made any investments or given loan orprovided security or guarantees falling under the provisions of Section 186 of the"the Act".
VIGIL MECHANISM / WHISTLE BLOWER POLICY
As per the requirement of Section 177 (9) of the Companies Act 2013 and Regulation 22of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015the Companyhas established a Vigil Mechanism called the Whistle Blower Policy' for Directorsand Employees to report concern of unethical behavior actual or suspected fraud orviolation of the Company's Code of Conduct or ethics policy and the details of the WhistleBlower Policy has been uploaded on the Company's website Web-link:http://khaitanchemfert.com/wp-content/uploads/2016/04/KCFL-Vigil-Mechanism-Policy
COMPOSITION OF AUDIT COMMITTEE
As per the requirement of Regulation 18 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 read with Section 177 of the Companies Act 2013. Thepresent strength of the Audit Committee comprises of Shri Balmukund Dakhera Shri VijayGupta and Ms. Veena Chadha. Shri Balmukund Dakhera Chartered Accountant is the Chairmanof the Audit Committee of the Company. All the members of the Audit Committee areindependent and non-executive directors. The recommendations of audit committee were dulyaccepted by the Board of Directors.
NOMINATION & REMUNERATION POLICY
Pursuant to Section 178 of the Companies Act 2013 the rules made there under andRegulation 19 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Nomination & Remuneration Committee comprises of Shri Balmukund DakheraChairman Shri Vijay Gupta and Ms. Veena Chadha as its members. The Nomination &Remuneration Committee framed a policy for selection and appointment re-appointmentremoval appraisals of Directors and Senior Management and the same is stated in theCorporate Governance Report (Annexure C).
AUDITORS & AUDIT REPORT
The Company had appointed M/s. NSBP & Co. Chartered Accountants New Delhi asStatutory Auditors of the Company for carrying out the Statutory Audit of the Company forthe Term of 5 years commencing from the conclusion of 35th Annual General Meeting to theconclusion of 40th Annual General Meeting of the Company (from Financial Year 2017-18 to2021-22) which will be subject to ratification by shareholders (every year) in ensuingAnnual General Meeting. The Company has received a certificate from them to the effectthat their appointment as Statutory Auditors of the Company would be within the limitprescribed u/s 139 & 141 of the Companies Act 2013 & also received a peer reviewcertificate issued by the ICAI Peer Review Board' as required under the provisionsof SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
There have been no instances of fraud reported by the Statutory Auditors underSection143(12) of the Act and Rules framed there under either to the Company or to theCentral Government.
The notes on accounts referred to and the Auditors' Report are self-explanatory andtherefore do not call for any explanatory note.
The Board of Directors in pursuance of an order under section 148 of the CompaniesAct 2013 read with Rule 14 of the Companies (Audit & Auditors) Rules 2014 issuedby the Central Government has appointed on the recommendation of Audit Committee M/s.M.P. Turakhia & Associates Cost Accountants Indore as Cost Auditors to conduct auditof the cost accounts maintained by the Company in respect of Fertilizer Sulphuric Acidand Soya products for the financial year 2019-20.
As required under Companies Act 2013 a resolution seeking members approval for theremuneration payable to cost Auditor forms part of the notice conveying the Annual GeneralMeeting for their ratification.
M/s. APAS & Company Chartered Accountants New Delhi is appointed as InternalAuditor of the Company to conduct the internal audit of the Company for the Financial Year2019-20 as required under Section 138 of the Act 2013 and the Companies (Accounts) Rules2014.
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope and authority of the Internal Audit function isdefined. The Audit Committee of the Board of Directors actively reviews the adequacy andeffectiveness of the Internal Control System and suggests improvements to strengthen thesame. To maintain its objectivity and independence the Internal Auditor reports to theChairman of the Audit Committee of the Board. Based on the report of internal auditfunction Company undertakes corrective action in their respective areas and therebystrengthens the controls. Recommendations along with corrective actions thereon arepresented to the Audit Committee of the Board and accordingly implementation has beencarried out by the Company.
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 on the recommendation of Audit Committee M/s. Ritesh Gupta & Co. CompanySecretaries Indore (C.P. No. 3764) to undertake the Secretarial Audit of the Company forthe financial year 2019-20.
The Secretarial Audit Report for the year 2018-19 is self-explanatory and therefore donot call for any explanatory note and the same is annexed herewith as (Annexure - D).
The Company has complied with the Secretarial Standards issued by The Institute ofCompany Secretaries of India (ICSI).
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
Pursuant to Section 135 of Companies Act 2013 and the relevant rules the CorporateSocial Responsibility Committee comprises of Shri Jagdish Lal Jajoo as the Chairman andShri Utsav Khaitan Shri Balmukund Dakhera Shri Vijay Gupta & Ms. Veena Chadha as itsmembers. The detailed CSR Policy has been uploaded on Company's Website Web-link:http://khaitanchemfert.com/ wp-content/uploads/2016/04/KCFL-CSR-Policy
The Company has not required to spend any amount towards CSR Expenditure as none of thethresholds as specified in Section 135 (1) of the Companies Act 2013 is crossed and thedetails is annexed herewith as (Annexure - E)
Pursuant to the provisions of section 134 (3)(p) of the Companies Act 2013 andapplicable Regulations of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Board adopted a formal mechanism for evaluating its performance andas well as that of its Committees and Individual Directors including the Chairman of theBoard. The exercise was carried out through a structured evaluation process coveringvarious aspects of the Boards functioning such as composition of the Board &committees experience & competencies performance of specific duties &obligations governance issues etc.
The evaluation of the Independent Directors was carried out by the entire Board andthat of the Chairman and the Non-Independent Directors were carried out by the IndependentDirectors.
The Directors were satisfied with the evaluation results which reflected the overallengagement and effectiveness of the Board and its Committees with the Company.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return for the year ended on31.03.2019 in Form MGT-9 is annexed herewith as (Annexure G). The details formingpart of the extract of the Annual Return for the year ended on 31.03.2019 in Form MGT-9has been uploaded on Company's Website in investor section at www.khaitanchemfert.com
DIRECTORS' RESPONSIBILITY STATEMENT
In terms of Section 134(5) of the Companies Act 2013 your Directors confirm that:
1. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
2. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st March 2019 and of the profit & lossof the Company for that period;
3. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 1956/2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
4. they have prepared the annual accounts on a going concern basis.
5. they have laid down internal financial controls to be followed by the Company andsuch internal financial controls are adequate and were operating effectively.
6. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and such systems were adequate and operating effectively.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY
As per the requirement of Regulation 23 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated the Policy on Materiality ofRelated Party Transactions. All such transactions that were entered into during thefinancial year were on an arm's length basis and in the ordinary course of business. Thereare no materially significant related party transactions made by the Company withPromoters Directors Key Managerial Personnel or other designated persons which may havea potential conflict with the interest of the Company at large.
All Related Party Transactions are placed before the Audit Committee and the same hasbeen approved by the Board. Prior omnibus approval of the Audit Committee is obtained forthe transactions which are of a foreseen and repetitive nature and the same is beenreviewed by the Audit Committee on quarterly basis. The company has framed Policy onMateriality of Related Party Transactions and on Dealing with Related Party Transactionsand is placed on the Company's website and the web link for the same ishttp://khaitanchemfert.com/wp-content/uploads/2016/04/Policy-on-materiality-of-RPT-KCFL.pdf.The Company has also formed Related Party Transactions Policy and the weblink for same is http://khaitanchemfert.com/wp-content/uploads/2016/04/Related-Party-Transactions-Policy.pdf.
Pursuant to the provisions of Section 134 (3) (h) of the Companies Act 2013 theparticulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 and prescribed in Form AOC-2 of Companies (Accounts)Rules 2014 are appended as Annexure-H to this report. Related Party Transactionsduring the year have been disclosed as a part of Financial Statements as required underAccounting Standard 18 issued by the Institute of Chartered Accountants of India.
LISTING OF SHARES
Shares of the Company are listed on The BSE Limited Mumbai which provides a wideraccess to the investors nationwide.
The Company has made all the compliances of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 including payment of annual listing fees up to31 March 2020 to the BSE.
DEMATERIALISATION OF SHARES
The shares of your Company are being traded in electronic form and the Company hasestablished connectivity with both the depositories i.e. National Securities DepositoryLimited (NSDL) and Central Depository Services (India) Limited (CDSL). In view of thenumerous advantages offered by the Depository system Members are requested to avail thefacility of dematerialization of shares with either of the Depositories as aforesaid andupdate their bank A/c and Email ID with the respective depository Participant. As on March31 2019 97.96% of the share capital stands dematerialised.
The Company has in place Risk Management Policy as per requirement of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 and Section 134(3)(n) of theCompanies Act 2013 which requires the Company to lay down procedure for risk assessmentand risk minimization. The Board of Directors Audit committee and the Senior Managementof the Company should periodically review the policy and monitor its implementation toensure the optimization of business performance to promote confidence amongst stakeholders in the business processes plan and meet strategic objectives and evaluate tackleand resolve various risks associated with the Company. The business of the Company isexposed to various risks arising out of internal and external factors i.e. IndustryCompetition Input Geography Financial Regulatory Other Operational InformationTechnology related other risks.
The details of Risk Management Policy as per requirement of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and Section 134(3)(n) of the Companies Act2013 has been uploaded on Company's Website in policies section at www.khaitanchemfert.com
Implementation of the Scheme:
The functional managers at all locations will be responsible for identifying andassessing the risks within their areas of responsibilities and actions agreed beforehandto resolve such risks. They will report for any new risk or changes in the existing riskto the President/Managing Director. The Board and the senior executives of the Companywill oversee the implementation of the policy and review the same periodically; the Boardwill be updated on key risks faced by the Company and the mitigating actions taken toresolve them.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITIONAND REDRESSAL)ACT 2013.
"The Company has in place an Anti Sexual Harassment Policy in line with therequirements of The Sexual Harassment of Women at the Workplace (Prevention Prohibitionand Redressal) Act 2013.
Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy.
The following is a summary of sexual harassment complaints received and disposed offduring the year 2018-19.
No of complaints received: NIL
No of complaints disposed off: Not Applicable".
MATERIAL CHANGES AFFECTING FINANCIAL POSITIONS OF THE COMPANY
No material changes have occurred and commitments made affecting the financialposition of the Company between the end of the financial year of the Company and the dateof this report. There is no order passed by any regulator or court or tribunal against thecompany impacting the going concern concept or future operations of the Company.
PARTICULARS OF EMPLOYEES
In terms of provisions of Section 197(12) of the Companies Act 2013 read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014and the rules there under as amended from time to time forms part of this report (Annexure-H).
There are no instances of employees who was in receipt of remuneration in excess of thelimit prescribed in provisions of Section 197 (12) of the Companies Act 2013 read withRule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 and the rules made thereunder.
In accordance with the provisions of Section 136 of the Act the Annual Report andAccounts are being sent to all the Members of the Company excluding the aforesaidinformation and the said particulars will be made available on request and also madeavailable for inspection at the Registered Office of the Company. Any Member interested inobtaining such particulars may write to the Company Secretary of the Company.
None of the employees listed in the said Annexure is a relative of any Director of theCompany. None of the employees hold (by himself or along with his spouse and dependentchildren) more than two percent of the equity shares of the Company.
The Board of Directors wish to place on record its sincere appreciation for thesupport and co-operation received from all its stakeholders including customerspromoters shareholders bankers suppliers auditors various departments/ agencies ofCentral/State Government and other business associates of the Company.
Your Board recognizes and appreciates the contributions made by all employees at alllevel that ensure sustained performance in a challenging environment.
| ||for and on behalf of the Board |
|Place: Gurugram ||(SHAILESH KHAITAN) |
|Date: 09.05.2019 ||CHAIRMAN & MANAGING DIRECTOR |
| ||DIN: 00041247 |