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Kohinoor Foods Ltd.

BSE: 512559 Sector: Agri and agri inputs
NSE: KOHINOOR ISIN Code: INE080B01012
BSE 00:00 | 14 Dec 33.05 -0.40
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OPEN 33.10
PREVIOUS CLOSE 33.45
VOLUME 14968
52-Week high 95.65
52-Week low 28.25
P/E
Mkt Cap.(Rs cr) 123
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 33.10
CLOSE 33.45
VOLUME 14968
52-Week high 95.65
52-Week low 28.25
P/E
Mkt Cap.(Rs cr) 123
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Kohinoor Foods Ltd. (KOHINOOR) - Director Report

Company director report

The following report should be read in conjunction with the audited financialstatements and notes for the year ended March 31 2018 and the audited financialstatements and notes for the year ended March 31 2017. This report contains forwardlooking statements which may be identified by their use of words like 'plans' 'expects''will' 'anticipates' 'believes' 'intends' 'projects' 'estimates' or other words ofsimilar meaning. All statements that address expectations or projections about the futureincluding but not limited to statements about the Company's strategy for growth marketposition expenditures and financial results are forward looking statements. Forwardlooking statements are based on certain assumptions and expectations of future events. TheCompany cannot guarantee that these assumptions and expectations are accurate or will berealized. The Company's actual results performance or achievements could thus differmaterially from those projected in any such forward looking statements. The Companyassumes no responsibility to publicly amend modify or revise any forward lookingstatements on the basis of any subsequent developments information or events.

Company – In General

Synonymous with the fine taste of India in its absolute authentic form the soleobjective of Kohinoor Foods Limited since its inception has been to make the worldexperience the true Indian flavor. The Company offers an extensive range that caters toconsumers' need in all parts of the world – a wide variety of Basmati Rice Ready toEat Curries & Meals Readymade Gravies Cooking Pastes Chutney's Spices andSeasonings to Frozen Breads Snacks & Paneer (Indian Cottage Cheese) healthy grainsedible oils. Today the most powerful brand of the Company "Kohinoor" is ahousehold name in the countries like UK USA UAE Canada Australia Middle EastSingapore Japan Mauritius & other European countries. As of now the brand'Kohinoor' is known worldwide. During the current year the company is promoting its"MONSOON" brand in India as well as worldwide and started selling product underthis new brand as well.

Your Directors have pleasure in presenting the 29th Annual Report and the AuditedAnnual Accounts of the Company for the Financial Year ended 31st March 2018.

Financial Overview

The financial highlights for the year ending 31st March 2018 are as under:

(Rs. In Million)

Particulars FY'18 FY'17
Total Turnover 8623.96 10533.35
Profit/(Loss) Before Interest Depreciation and Tax (PBIDT) 274.87 (800.90)
Profit/(Loss) Before Tax (695.80) (1908.58)
Less: Tax Expense 14.48 (722.35)
Profit/(Loss) After Tax (710.28) (1186.24)
Total Comprehensive income for the year (709.73) (1086.27)

The Board’s Report shall be prepared based on the stand alone financial statementsof the Company.

Operations:

For the financial year under review 2017-18 the company Export stand at INR 5322million as against INR 7797 million in previous year while as the Domestic Sales stood atINR 3262 million as against INR 2708 million in the last financial year.

The contribution made by Rice to the Company’s business is INR 7531 million asagainst INR 9063 million in the last financial year while the Food Business stood at INR728 million as against INR 587 million in the previous year.

The year saw a decrease of 31.11% in basmati rice exports from India in value terms incomparison to last year sales. Export market was down due to political instability incountries such as Iraq & Syria. During the year under review export relisation pricehad an upward trend as it is evident from the fact that average sale price was Rs 70987per MT as compared to Rs 56090 during the last year. These phenomena in the pricing led tothe sub-dude sentiment. Focused sales and marketing efforts in all the major basmati riceimporting countries of the world viz. UK Australia Saudi Arabia Iran UAE Yemen and USwere exercised to control the steep debacle in sale of Basmati Rice in internationalmarket.

• Launch of new brand of Basmati Rice ‘Monsoon’ with paralleldistribution of ‘Monsoon’ Brand of basmati Rice that was well accepted in marketand distribution was finalized for 6 countries. As on date we are present in 22 countries& hope to increase our presence in rest of the countries by next financial year. Weare putting our best efforts to establish our newly launched brand and are also furtherconsolidating our flagship Brand "KOHINOOR’ in the international market.

• Acquired business from new countries such as –Australia Greece SwedenUSA New Zealand Russia Bangladesh and Togo.

• We have entered domestic market settlement agreement between KSF & KFL. Thecompany is free to sell basmati rice under various brands in the current financial year.In-fact we have already launched "MONSOON "brand of Basmati Rice in domestic aswell as in the international market.

EXPORT MARKETS

Export- Basmati Rice

This year in the Export of Basmati Rice the company did the business of around INR4453 million as against INR 6454 million in the previous financial year.

Export- Food

This year the export of processed & packaged food products has shown an increase inrevenues and stood at INR 713 million as against INR 583 million in the previous year. Thenew food factory has started its operation effectively which improved our production &subsequent revenues.

Subsidiaries / Joint Venture:

U.K Operations

Indo European Foods Limited (IEFL) was incorporated in year 2000 in United Kingdom(UK) as a wholly owned subsidiary of Kohinoor Foods Limited (KFL) India to cater themarkets of UK and Europe.

IEFL Sales show marginal decreases from last year i.e GBP 24.15 Millions in comparisonof last year GBP 24.49 Millions. The Profit of this company decreases due to increase inAdministration cost and some adjustment in pre period items. This operation continues tofocus on profitable growth both in Rice and processed food range of products.

IEFL has created a wide network of distribution for our Rice & Processed fooditems in UK market. In Rice market ‘Kohinoor’ has achieved number "2"position in terms of market share. (Source: The Grocer December-2017.)

IEFL in recent times has focused more on Kohinoor processed food products and achieveda growth of more than 200%. Kohinoor cooking sauces and ready meals are currently listedand placed with prestigious multiple retail chains like -Tesco Asda Sainsburys Aldi& Bookers etc.

IEFL is poised to move to the next level in business growth as after having establishedthe ‘Kohinoor’ brand in UK for the last 15 years and attaining the pivotalposition of No. 2 in SKU’s of 5 kg. segment. We are expecting quantum jump in comingyears in its volumes and market share;

IEFL marketing team is also focused in doubling the ‘Kohinoor’ processedfoods having re-launched the sauces & RTE lines in fresh packaging & refurbishedrecipes.

USA Operations:

Kohinoor Foods USA Inc. was incorporated in year 2000 in the state of New Jersey USAas a wholly owned subsidiary of Kohinoor Foods Limited (KFL) India to cater to themarkets of US

& Canada. The brand ‘Kohinoor’ is well known in USA for its quality riceand food items.

However during the last year the business model of this company is changed to work oncommission basis for undertaking and improving sales in USA. The Company however wasmaking losses on account of huge operational cost the loss in the current year is mainlyon account of huge interest payment for its debts. We expect the company will improve itssales in USA and also improve its commission earnings to make it a profitable venture.

With the launch of ‘KOHINOOR’ Extra Fine (Silver) Rice in the US leadingcatering wholesalers viz. ‘Restaurant Depot’ we are expecting large volumesales; in the recent months the marketing team has prepared an aggressive promotional planfor the forthcoming festival seasons in October and November. A new Distributor has alsobeen appointed in Canada for rice and food products launch in ‘Walmart’; withall these activities the next year sales are looking to increase to the levels of highestever.

UAE Operations

The Rich Rice Raisers Factory LLC (RRR) is a Joint Venture Company having 25% equityof KFL. The RRR is not doing any business activity since the inception of Al DahraKohinoor Joint Venture. As per the terms of the JV agreement with Al-Dahra; Kohinoor FoodsLtd. have already initiated steps to exit from Rich Rice Raisers Factory LLCDubai."

During this financial year the export sale of Rice from Kohinoor Foods Limited to AlDahra Kohinoor LLC stood at 22486 MTs as against 30094 in last year.

FOOD BUSINESS:

During the year 2017-18 the export of processed & packaged food products has shownan increase in revenues and stood at INR 713 million as against INR 583 million in theprevious year. The new food factory has started its operation effectively which improvedour production & subsequent revenues.

UK Australia USA Canada are major markets for our range processed & packagedfood products. Kohinoor has introduced the new packaging of ready to eat curries andsimmer sauces to the World market where UK has got the maximum appreciation from theentire mainstream and got listed with top retails of the country such as TESCO ASDA COOP& many more...

It’s not just stop here strong Research and Development team has gainedappreciation from leading retail giants like as ALDI Australia ALDI UK Coles etc bysubmitting their new developments to these clients and same would definitely go for thelaunch once their respective procedure will be completed.

Highlights (2017-18)

• Developed new range of Namkeens with improved packaging & product quality toincrease our market share

• New Clients added such as Gourmet Foods to cater the Meal Kits requirement of UKMarket with all international flavours like as Japnese Katsu Curry Caribbean JerkChicken Chinese Kung Pao Indonesian Nasi Goreng & many more...

• Have developed new categories in Institutional business by importing Retortedjars from UK to develop Indian range of products like as Madras Curry Tikka Masala DalMkahani in 2.2 Kg jars to cater the QSR Restaurants & hotel market.

• Added new market such as Fiji Thailand for introductions of entire rangeNamkeens & Simmer Sauces.

CHALLENGES:

• Intermittent supplies from our major business partner resulted in delayed theshipment.

• Export of ready to eat rice to US with respective allowed MRL’s limit.

• Major changes in import procedures in markets like Australia US & UK.

FINANCIAL YEAR (2019-20)

• Kohinoor has obtain has obtained 100% Export Oriented Unit (EOU) status for itsfood processing unit to fetch new businesses from Australia UK & USA to import allrestricted Grains.

• Focus on mainstream private label of world leading retail giants of theirrespective local product lines which have bigger chunk in the market.

• Further introductions of new range of Ready to eat Curries & Simmer Saucesunder Kohinoor brand in UK market.

• Kohinoor Branded Namkeens will be under much focused category this year.

• New Dairy extensions such as Ras Malai Khoya Butter under Kohinoor brand willbe carried out after the success of Kohinoor Fresh & Frozen Paneer in world market.

Overview - Food Processing Industry

According to the data provided by the Department of Industrial Policies and Promotion(DIPP) the food processing sector in India has received around US$ 7.54 billion worth ofForeign Direct Investment (FDI) during the period April 2000-March 2017. The Confederationof Indian Industry (CII) estimates that the food processing sectors have the potential toattract as much as US$ 33 billion of investment over the next 10 years and also togenerate employment of nine million person-days. The food industry is always looking forthe best separation technology to obtain natural compounds of high purity healthyproducts of excellent quality with several industrial applications. The Indian marketoffers a huge potential for the food processing industry -more so because of the fact thatit promotes two main growing factors of our Indian Economy - Industry & Agriculture.During the last one decade India moved from a position of scarcity to surplus in Food.Given the trade in production of food commodities the Food Processing Industry in Indiais on an assured track of growth and profitability. It is expected to attract phenomenalinvestment in capital human technological and financial areas. A reason why the FoodProcessing Industry sector in India has been accorded high priority by the Government ofIndia with a number of fiscal relief and incentives to encourage commercialization andvalue addition. As per a study conducted by McKinsey and Confederation of Indian Industry(CII) the turnover of the total food market is approximately Rs.250000 Crores out ofwhich value-added food products comprise Rs.80000 Crores.

Basmati Rice

In the last couple of decades there has been considerable rise in disposable incomemasses are rushing to the cities the average age of a worker in India is the lowest inthe world i.e. 35 years & the employment opportunities are also improving; all thishas resulted in general improvement of life style including eating habits which has alsobrought BASMATI RICE into focus. Rice in past was perceived as low engagement category butwith sustained growth in Indian economy and consumer’s gradual shift towards brandedrice coupled with growth in modern retail have been major contributors. Though stillmajorly unorganized but year on year this category is experiencing good number ofconversions from unbranded to branded packaged Basmati Rice in terms of consumptions inIndia. This is mainly due to introduction of branded and package basmati rice in manyretail outlets; pertinent to say here in the Indian market context the introduction of GSThas helped in improving the sales of branded basmati rice. India's growing middle classhas augmented the domestic demand of branded rice. Moreover introduction of modern foodretail formats has also propelled the packaged food market facilitating the availabilityvisibility and accessibility of branded products. The domestic branded market in India isexpected to grow in double digits as compared to single digit growth for unbranded rice.Eating rice is common habit in most of the Indian households and it is usually a part ofone of the 3 meals cooked every day. Geographically the consumption of Basmati is higherin the Northern & Western part of the country while culturally its consumption isquite high in the Punjabi & Gujarati families. With the view of serving the best totheir customers & employees Basmati consumption is also higher in well recognizedhotels & large institutions. The consumption of branded packaged Basmati Rice is alsobeing driven by the modern retail that allows every consumer to select what they want.Hence basmati rice requirements shall keep increasing in volumes in India for many yearsto come.

Ambient Food - Ready Meals

Ready Meals is a category which is gaining popularity globally though still at agrowing stage; but the factors that has so far contributed to sales of Ready Meals havebeen increasing consumer base of working people who have less time to spend on cookingEating out of home becoming a common phenomena on weekends growth of Modern trade theConvenience of making exotic vegetarian & non-vegetarian dishes in just a few minutesetc. As this category grows an Innovative value addition to products with Health &Nutrition is expected to become an important aspect of it.

Frozen Food - Ready Meals

Though Frozen Food as a category constitutes many products majority of it being thefrozen unprocessed non-vegetarian food but within this segment vegetarian Frozen ReadyMeals snacks too is growing at significant rate. Frozen Meals considered very close toFresh Meals after re-constitution and hence preferred a lot by consumers. With varioustypes of value added frozen products that are now being offered by food processors thisfood category is growing a higher rate.

Risks & Concerns

The Banks have classified the Company's Accounts as Non Performing Asset and servedNotice under section 13(2) of The Securitization and Reconstruction of Financial Assetsand Enforcement of Security Interest Act 2002 in the month of July 2018. The Company isin the process of preparing reply of said notices and negotiating with different workableoptions.

The observations of the Auditor with regard to the management assessment of thecompany’s ability to continue as going concern in view of the liquidityproblems/decrease in business. The management of the company believes that they cancontinue to retain as going concern based on the Resolution plan submitted to the Banksby company and the interest shown by prospective investors in the company.

Macro-economic factors like recession subdued demand and political uncertainty mayaffect the business of the Company and the industry at large as well. The Company is awarethat uncertainties in business offer opportunities as well as downside risks and thus hasidentified and put in place mitigation tools for the same. Some key risk areas are:

Procurement risk:

In a country like India where more than 60 per cent of the area under cultivation isnot irrigated farm production is highly vulnerable to fluctuations in rainfall. Besideproduction risk Indian farmers also face high market risk. Farm harvest prices in thecountry show high inter and intra year volatility. Price variation is quite pronounced inthe regions and commodities where price support mechanism is not operative. Furtheradequate availability of key raw materials at the right prices is crucial for the Company.Being a generic natural product with low yield concentrated in a small region of theWorld production of Basmati depends on the vagaries of nature. Therefore any disruptionin the supply due to a natural or other calamity or violent changes in the cost structurecould adversely affect the Company's ability to reach its consumers with the right valueproposition. However we are ready with plans that might help us at such times. Howeverthe Company's long term relationship with farmers built on trust ensures constant supplyand thus over the years it has not faced any procurement problems. Also adequacy ofirrigation facilities in the Basmati producing regions mitigates these uncertainties.

High working capital requirement: Basmati rice requires to be aged for 9-12 monthsbefore selling leading to huge working capital requirements. This results in low ROCE forthe industry. Combating this risk efficient working capital management system has beenset in place by the Company and cash flow is monitored on daily basis.

Intense competition from unorganized sector: Another characteristic of thisindustry is the presence of unorganized sector offering basmati in loose unbranded formwhich intensifies competition. The Company is moving towards branded products and hasinvested significantly in building a strong brand which helps in differentiating theirproduct.

Dividend

Your Directors do not recommend any dividend for the financial year 2017-18.

Re-Appointment / Resignation of Directors

In accordance with the provisions of the Companies Act 2013 Mr. Jugal Kishore Arora(holding DIN – 00010704) Director of the Company retires by rotation at the ensuingAnnual General Meeting and being eligible offers himself for reappointment. Your Directorsrecommend this resolution for approval of the members.

The Re-Appointment and Remunerations of Mr. Jugal Kishore Arora (DIN 00010704) Mr.Satnam Arora (DIN 00010667) and Mr. Gurnam Arora (DIN - 00010731) had been approved by theShareholders in the 28th Annual General Meeting of the Company held on 25th September2017 for the period of three years subject to the approval of the Central Government.Further the Company had already made application to the Central Government for approval inthis regard.

During the year the company has received resignation of Mr. Khedaim Abdulla Saeed FarisAl Darei (Investor Director) of the Company from Board and Committees of Kohinoor FoodsLimited w.e.f. 8th March 2018. The Board has accepted the resignation and necessary formhas been filed with Registrar of Companies NCT of Delhi and Haryana.

Further in compliance of the provisions of Stock Exchanges Circular having Ref No.NSE/CML/2018/24 dated 20th June 2018 Mr. Sandeep Kohli Independent Director of theCompany has voluntarily resigned from the Directorship of Kohinoor Foods Limitedeffective from 22nd June 2018 and necessary form has been filed in this regard.

This is to further inform that Mr. Nitin Arora Executive Director of the company hasresigned from the Board effective from 10th August 2018 and necessary form has been filedin this regard.

Appointment / Resignation of Chief Financial Officer

This is to inform that Mr. Kamal Deep Chawla has been appointed/designated as CFO ofthe Company w.e.f. 30th March 2018. This is to further inform that earlier Mr. Kamal DeepChawla was designated as General Manager Finance of the Company and was handling allFinance functions of the Company since October 2009.

This is to further inform that Mr. Prabhat Kumar (Ex-CFO) of the Company has attainsretirement age and consequently offered to retire from full time service as CFO of theCompany and hence resigned from the Company with effect from 28th February 2018.

Re-Valuation of Property Plant and Equipment

The Company has adopted revaluation model for Land & Building. All the assetsbelonging to these classes of assets are carried at revalued amount being its fair valueat the date of revaluation less subsequent depreciation. The company shall carry out therevaluation of these assets periodically after every 3 to 5 years.

Property Plant & Equipment under all other classes are stated at cost ofacquisition/installation inclusive of freight duties and taxes and all incidentalexpenses and net of accumulated depreciation. In respect of major projects involvingconstruction related pre-operational expenses form part of the value of assetscapitalized. Expenses capitalized also include applicable borrowing costs. Subsequentcosts are included in the asset’s carrying amount or recognized as a separate assetas appropriate only when it is probable that future economic benefits associated with theitem will flow to the entity and the cost can be measured reliably.

Property plant and equipment which are not ready for intended use as on the date ofBalance Sheet are disclosed as "Capital work-in-progress" and stated at theamount spent up to the date of balance sheet.

Intangible assets are stated at their cost of acquisition.

Subsidiary Joint Ventures and Associate Companies

The Company has no material subsidiary in accordance with the SEBI (Listing Obligationand Disclosure Requirements) Regulations 2015.

In accordance with section 129(3) of the Companies Act 2013 we have preparedconsolidated financial statements of the Company and all its subsidiaries which form partof the Annual Report. The statement provides the details of performance financialpositions of each of the subsidiaries.

Further these Financial Statements have been prepared in accordance with the IndianAccounting Standards (hereinafter referred to as the ‘Ind AS’) as notified byMinistry of Corporate Affairs pursuant to section 133 of the Companies Act 2013 read withRule 3 of the Companies (Indian Accounting Standards) Rules 2015 and Companies (IndianAccounting Standards) Amendment Rules 2016. These financial statements for the year endedMarch 31 2018 are prepared under Ind AS for the first time. For all periods up to andincluding the year ended March 31 2017 the financial statements were prepared inaccordance with the accounting standards notified under the section 133 of the CompaniesAct 2013 read together with paragraph 7 of the Companies (Accounts) Rules 2014(hereinafter referred to as ‘Previous GAAP’) used for its statutory reportingrequirement in India immediately before adopting Ind AS. The financial statements for theyear ended March 31 2017 and the opening Balance Sheet as at April 01 2016 have beenrestated in accordance with Ind AS for comparative information.

The Financial Statements have been prepared on the historical cost convention on goingconcern basis and on accruals basis unless otherwise stated.

The accounting policies are applied consistently to all the periods presented in thefinancial statements including the preparation of the opening Ind AS Balance Sheet as atApril 01 2016 being the ‘date of transition to Ind AS’.

The financial statements of Kohinoor Foods Limited ("Holding Company of KFL")together with its subsidiaries (hereinafter collectively referred to as "Group")are consolidated to form Consolidated Financial Statements (CFS). Consolidated FinancialStatements consolidate the financial statements of KFL and its Wholly Owned Subsidiaries.

The parent company has not received audited financial statement from its Joint ventureCompany Rich Rice Raisers LLC and Associate companies Al Dahra Kohinoor LLC and Al DahraKohinoor Industries LLC. The Management considers that the parent company is not inposition to exercise control over these entities. Hence the results of Joint VentureCompany and associate companies have not been considered in the Consolidated FinancialStatements.

Rich Rice Raisers LLC in which KFL hold 25% shareholding has closed its operation.KFL holds 20% share in each of its associates companies. Al-Dahra Kohinoor LLC hasexercised the call option which KFL has accepted. Upon completion of the formalities theshareholding of the parent company in both of these associates will reduce to NIL.

During the year the Board of Directors of the Company had reviewed the affairs of thesubsidiaries and a statement containing the salient features of the financial statement ofour subsidiaries in the prescribed format AOC-1 is enclosed as Annexure to the FinancialStatement and hence not repeated here for the sake of brevity.

In accordance with Section 136 of the Companies Act 2013 the audited financialstatement including the consolidated financial statements and related information of theCompany and audited accounts of each of its subsidiaries are available on our websitewww.kohinoorfoods.in/investor. These documents will also be available for inspectionduring business hours at our Registered Office.

Further the Policy for determining material subsidiaries as approved by the Board maybe accessed on the Company’s website at the link: www.kohinoorfoods.in/investor

Internal Control System

The Company has in place adequate internal control systems that facilitates theaccurate and timely compilation of financial statements and management reports ensuresregulatory and statutory compliance and safeguards investor interest by ensuring thehighest level of governance. The control system ensures that all assets are safeguardedand protected and that the transactions are authorised recorded and reported correctly. ACEO and CFO Certificate provided by Jt. Managing Director and CFO included in theCorporate Governance Report confirms the existence of effective internal control systemsand procedures in the Company Internal audit function evaluates the adequacy of andcompliance with policies plans regulatory and statutory requirements. The InternalAuditors directly report to the Board’s Audit Committee thus ensuring theindependence of the process. It also evaluates and suggests improvement in effectivenessof risk management controls and governance process. The Audit committee and Boardprovides necessary oversight and directions to the Internal audit function andperiodically reviews the findings and ensures corrective measures are taken. In theopinion of the management and the internal auditors there exists adequate safeguardagainst fraud and negligence within the Company.

Our Offices as well as the manufacturing facilities endorse the highest health safetysecurity and environmental standards.

Internal Financial Controls

The Company has in place well defined and adequate Internal Financial Controls whichare tested from time to time for necessary improvement if any required.

Listing at Stock Exchange

The Equity Shares of the Company are listed with BSE Limited and National StockExchange of India Ltd. The annual listing fee for the Financial Year 2018-2019 has beenpaid by the Company to BSE and invoice of listing fees of NSE is yet to be revised by NSE.

Registered Office

The Registered Office of the Company is situated at Pinnacle Business Tower 10thFloor Surajkund Shooting Range Road Faridabad Haryana 121001 w.e.f. 16th August 2017and in this regard a fresh certificate for change of registered office has been issued bythe Registrar of Companies NCT of Delhi & Haryana at New Delhi.

Corporate Governance

Your Company has taken adequate steps to ensure compliance with the provisions ofCorporate Governance as stipulated by the Stock Exchanges. Pursuant to SEBI (LODR)Regulation 2015 a report on the Corporate Governance Certificate regarding ComplianceSecretarial Audit Report and Jt. Managing Director (CEO) and CFO certification along withthe Auditors Certificate has been made part of the Annual Report.

Auditors

M/s Rajender Kumar Singal & Associates LLP Chartered

Accountants New Delhi Statutory Auditors of the Company was initially appointed asauditors of the Company for the first term valid till 31st March 2018.

This is to further note that M/s Rajender Kumar Singal & Associates LLP CharteredAccountants New Delhi Statutory Auditors of the Company holds office from theconclusion of ensuing Annual General Meeting to the conclusion of Fifth Annual GeneralMeeting to be held till the year 2023. The Board of Directors has received their consentand they have confirmed their eligibility to the effect that their re-appointment ifmade would be within the prescribed limits and they are not disqualified forre-appointment.

The Board pursuant to the provisions of Section 139 142 and other applicableprovisions of the Companies Act 2013 and on the recommendation of the Audit Committee hasconsidered the appointment of M/s Rajender Kumar Singal & Associates LLP CharteredAccountants New Delhi (Firm Registration No. 016379N) as Statutory Auditors of theCompany to hold office from the conclusion of ensuing Annual General Meeting till theconclusion of Fifth Annual General Meeting to be held in the year 2023. The Board ofDirectors accordingly recommends their reappointment as Statutory Auditors.

Auditors Report

The Company has received the Auditors Report duly signed by M/s Rajender Kumar Singal& Associates LLP Chartered Accountants New Delhi and took note on the same. Furtheras mentioned in the Auditors Report attention is drawn (Emphasis of Matters) to notes tothe Financial Statements the same has not been reproduced for the sake of brevityhowever the Board Discussed the same in details and the remarks given by the Directors ismentioned herein below:

As stated in Note 4 to the standalone financial statements the company has adjustedthe value of inventories by Rs 24445.09 Lacs as at the date of transition i.e. April 12016 by reducing the amount of borrowing cost included in the value of inventories dueto applicability of Ind AS.

As stated in Note 6 (C) to the standalone financial statements regardingcompany’s investment in its wholly owned subsidiary Kohinoor Foods USA Inc.amounting to Rs 3978.45 Lacs. This subsidiary company has been incurring continuous lossesand its net worth is fully eroded. However based on factors regarding future businessplan growth prospects of subsidiary as described in the said note Management believesthat the realizable value is higher than the carrying value of the investment due to which

Investments are recognised at carrying value.

As stated in Note 41 to the standalone financial statements and further as per advicereceived from legal experts and on the basis of merit of the case there is a highprobability that the income tax order will be set aside and the demand will be quashed.Accordingly management is of the view that no provision in respect of the above demand isrequired to be made in the books of accounts.

As stated in Note 44 of standalone financial statement as per information andexplanation given to us the company has not paid interest to banks and its outstandingbalance in loan accounts has exceeded its drawing power since February 2018.

Further Amount of interest paid to the banks over previous years needs to berecalculated based on actual entitlement of interest by the Banks and are to be verifiedand these figures may get reduced. Disputes with the banks over the rate of interestcharged and calculated are pending as such these cannot be treated as an admission of anyfact qua the Banks.

As stated in Note No. 5 of standalone financial statement the management has upwardlyrevalued the carrying amount of fixed assets by Rs 15885.18 Lakhs as at the date oftransition i.e. April 1 2016 which consequently resulted in increase of revaluationreserve.

Further your attention to clause (ii) of Annexure-A to the auditor’s report thatthe auditors did not have occasion to overview the physical stock taking done by themanagement during the financial year 2017-18 and have relied on the information andexplanations provided to them by the management.

Cost Auditors

The Cost Auditor M/s Cheena and Associates appointed as Cost Accountants of the Companyfor the year 2017-18 and has completed the audit of the cost record of the Company. TheCost Audit Report does not contain any qualification reservation or adverse remark.

The Board pursuant to the provisions of Section 148 and all other applicable provisionsof the Companies Act 2013 and Companies (Audit and Auditors) Rules 2014 (including anystatutory modification(s) or re-enactment thereof for the time being in force) on therecommendation of the Audit Committee has approved the appointment of M/s Cheena &Associates Cost Accountant Firm to conduct the audit of the cost records of the Companyfor the financial year ending on March 31 2019 and remuneration to be paid subject torectification by shareholders.

Secretarial Audit

The Board of Directors pursuant to the Provision of Section 204 of the Companies Act2013 has appointed M/s Vinod Aggarwal and Associates Company Secretary Firm (having FCSNo. 8007 and CP No. 8816) to conduct Secretarial Audit of the Company for the FinancialYear 2018-2019.

Secretarial Audit Report

The Secretarial Auditor M/s Vinod Aggarwal and Associates Company Secretariesappointed for the year 2017-18 and has completed the secretarial audit of the Company. TheSecretarial Audit Report as received from the Practicing Company Secretary is annexed tothe Annual Report as Form No.-MR-3. As per the Secretarial Audit Report the Company hascomplied with all the applicable acts laws rules and regulations and does not containany qualification reservation or adverse remark.

Internal Auditor

The terms of M/s SPMG & Co. Chartered Accountants New Delhi who was reappointedas Internal Auditor of the Company for the Financial Year 2017-18 expired on 31st March2018.

Your Directors have approved their reappointment in the Board Meeting dated 30th May2018 for the financial year 2018-19.

Deposits

During the year under review the Company has not accepted any deposit under Chapter Vof the Companies Act 2013.

Share Capital of the Company

During the year under review the Company did not issue equity shares. The paid upShare Capital of the Company is amounting to Rs. 352415300/- comprising of 35241530equity shares of Rs. 10/- each.

Board Meetings

The Board is headed by an executive Chairman. As on 31st March 2018 the Board ofDirectors consisted of Nine Directors including Chairman Joint Managing Directors WomanDirector Independent Director and others.

Six (6) Board Meetings were held during the year 2017-18 i.e. on 13th April 201730th May 2017 10th August 2017 14th November 2017 14th February 2018 and 31stMarch 2018 and the gap between two meetings did not exceed 120 days.

Audit Committee Meetings

During the year under review the Audit Committee met Five (5) times i.e. on 30th May2017 10th August 2017 14th November 2017 14th February 2018 and 31st March 2018 andthe maximum time gap between any two consecutive meetings did not exceed 120 Days. Theminutes of the meetings of the Audit Committee are noted by the Board.

Nomination and Remuneration Committee

During the year under review the Nomination and Remuneration Committee met Two (2)times i.e. on 10th August 2017 and 31st March 2018. The committee in the meeting heldon 10th August 2017 has discussed/considered and approve the re-appointment andremuneration of Mr. Jugal Kishore Arora as Chairman Mr. Satnam Arora and Mr. Gurnam Aroraas Joint Managing Directors of the Company and in the meeting of 31st March 2018 thecommittee has considered appointment/designate Mr. Kamal Deep Chawla as Chief FinancialOfficer (CFO) of the Company.

Remuneration Policy

On the recommendation of the Nomination and Remuneration Committee the Board hasformulated Remuneration Policy for appointment of Directors Key Managerial PersonnelSenior Management and their remuneration.

The Remuneration Policy of the Company forms part of this Report and may be accessed onthe Company’s website on the link www.kohinoorfoods.in/investor

Whistle Blower Policy/Vigil mechanism

The Company has established a vigil mechanism for Directors and Employees to reporttheir concerns about unethical behavior actual or suspected fraud or violation of theCompany’s code of conduct or ethics policy or any other grievances the details ofwhich are given in the Corporate Governance Report. The Whistle Blower Policy may beaccessed on the Company’s website on the link www.kohinoorfoods.in/investor.

Risk Management

The Company has constituted a Risk Management Committee comprising executives headed bythe Managing Director.

The Company has a Risk Management Policy to identify evaluate business risks andopportunities. The Company has adopted several strategies for Risk Management to mitigaterisks and uncertainties. This framework seeks to create transparency minimize adverseimpact on the business objectives and enhance the Company’s competitive advantage.

The Company has adopted a Risk Management Policy which establishes various levels ofaccountability and overview within the Company. In addition all the key risks getcontinuously deliberated and discussed at the Group Executive Committee level as well asthe Business Unit level. The said Policy is placed on the Company’s websitewww.kohinoorfoods.in/investor.

Particulars of Loan Given Investment made Guarantees given and Securities Provided

Particulars of loans given investments made guarantees and securities provided undersection 186 of the Companies Act 2013 are provided in the notes of standalone Financialsstatement and well within the limit approved by the Shareholders of the company.

Capacity enhancement of Food Factory

During the year the company has increased the Production capacity of its food factoryacquired in the year 2015-16 by 75000 ready meals per day from 15000 ready meals perday in the last year. Our focus would be on product innovation to develop healthy foodproducts from locally available raw material. We will continue to Invest & Innovateand expand our product offering to add value to our Food business operations.

The increase in capacity of new food facility would not only reduce the dependence onour existing out-sourced facilities but also help us to focus on business by acquiring newcustomers.

Present Status of litigations

As informed in the Annual Report for the financial year 2016-17 that in terms of theconfidential Mutual Settlement Agreement dated 13th April 2017 the Company M/s KohinoorFoods Limited (KFL) has settled all disputes with Kohinoor Speciality Foods India Pvt.Ltd. (KSF) and McCormick Switzerland GMBH which resulted all proceedings in LondonArbitration (LCIA) and in the Indian Court (NCLT) and have consequently withdrawn the casefiled in the respective Courts/Tribunal and the concerned apex court has issued therequired order in this regard.

This is to further inform you that in terms of the Settlement Agreement KFLtransferred its 15% shareholding of KSF to McCormick Singapore after receiving 75% of thetotal consideration after obtaining approval of RBI. Further as agreed in the agreementthe company will receive the second tranche being 25% of the agreed consideration onSeptember 28 2018 amounting to Rs. 25000000/- (Rupees Two Crores Fifty Lakhs Only).

The Board of Trustee of the port of Mumbai has filed a money suit for recovery of Rs.9.64 Cr. towards alleged outstanding demurrage charges against which the Company has filedits counter claim of Rs. 10.88 Cr. towards the financial losses interest on theinvestment refund of the license fees refund of the demurrage charges compensation anddamages etc. The matter is still pending.

An appeal is lying pending before the Dy. Excise & Taxation Commissioner-AppealPunjab against the Order received from Excise and Taxation Deptt. Punjab in respect ofYear 2009-10 and 2010-11 demanding a sum of Rs. 45041414/- towards the cess imposed bythe State Govt. on exports. The Company has challenged the validity of imposition of cesson export in its appeal as the same is not permissible under article 286 of theConstitution of India. Further demand has been raised for Rs. 541073/- after completingthe Sales Tax assessment for AY 2011-12 against which appeal has been filed.

An appeal before the Customs Excise & Service Tax Appellate Tribunal New Delhi islying pending against the order of Commissioner of Central Excise (Appeals) Delhi -III inrespect of additional excise duty of Rs. 4290580/- demanded by the Excise department inconnection of dispute over classification of goods -food product produced at BahalgarhFactory- as per the Central Tariff Act. As the matter is still pending before theTribunal no provision in the books of accounts have been made*

During the financial year 2016-17 the Company has received a order from Hon'bleCentral Excise and Service Tax Appellate Tribunal New Delh (CETSTAT) against the orderpassed by Commissioner of Service Tax (Adjudication) New Delhi demanding a service tax ofRs. 25925214/-. The Hon'ble CETSTAT vide its order dated 16/02/2017 has granted majorrelief of Rs. 25012963/- against the aforesaid demand.

All other litigations are mentioned under the Contingent note of the Balance Sheet forthe financial year 2017-18.

Conservation of Energy Research and Development Technology Absorption ForeignExchange Earning and Outgo

The particulars as prescribed in sub-section (3) of Section 134 of the Companies Act2013 read with Companies (Accounts) Rules 2014 are enclosed as Annexure B to thisReport.

Particulars of Employees and Related Disclosure

In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules are givenas under:

i) There are no Employee employed throughout the year and in receipt ofremuneration of Rs. 10200000/- or more per annum.

ii) There are no Employee employed part of the year and in receipt of remuneration ofRs. 850000/- or more per month during any part of the year.

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are set out in the annexure-D to thisreport.

Having regard to the provisions of Section 136(1) read with its relevant proviso of theCompanies Act 2013 the Board’s Report is being sent to the members without someannexures. The said annexures are available for inspection at the Registered/CorporateOffice of the Company during working hours and any member interested in obtaining suchannexures may write to the Company Secretary and the same will be furnished free of cost.

Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act 2013 the extract of theannual return in Form No. MGT – 9 is enclosed as Annexure C to this Report.

Management’s Discussion and Analysis Report

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (Listing Regulations) a Management Discussion and Analysis Report and aReport on Corporate Governance is attached in a separate section forming part of theAnnual Report.

A Certificate from the Statutory Auditors of the Company regarding the Compliance bythe Company of the conditions stipulated in Regulations Part C of Schedule V of theListing Regulations is also attached with this report.

A declaration by the Managing Director pursuant to Regulations Part C of Schedule V ofthe Listing Regulations stating that all the Board Members and Senior Management Personnelof the Company have affirmed compliance with the Code of Conduct during the financialyear ended 31st March 2018 is also attached with this report.

Directors' Responsibility Statement

Pursuant to section 134(5) of The Companies Act 2013 the Directors confirm that:

a) in the preparation of the annual accounts for the year ended 31st March 2018 theapplicable accounting standards read with requirements set out under Schedule III to theAct had been followed and there are no material departures from the same;

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 as at 31st March 2018 and of the profitof the Company for the year ended on that date;

c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors had prepared the annual accounts on a ‘going concern’ basis;

e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems are adequate and operating effectively.

Awards & Recognitions

Since its inception the Company has been earning awards and recognition like consumervalidated Super Brand Award (thrice in series) Reader’s Digest Most Trusted Brandaward (4 times in a row) Power Brand Award Guinness Book of World Record (for makingWorld’s Largest Biryani) National award for Export Excellence Brand Equity Award& many APEDA awards.

Corporate Social Responsibility

As per provisions under Section 135 of the Companies Act 2013 all companies havingnet worth of Rs. 500 crores or more or turnover of Rs.1000 crores or more or a netprofit of Rs. 5 crores or more during any financial year are required to constitute aCorporate Social Responsibility (CSR) Committee of Board of Directors comprising three ormore directors at least one of whom should be an Independent Director and such Companyshall spend 2% of the average net profits of the Company made during the three immediatelypreceding financial years.

Accordingly a detailed CSR Policy was framed by the Company with the approvals of theCSR Committee and Board. The Policy inter alia covers the following:

• Philosophy

• Scope

• List of CSR activities

• Modalities of execution of projects/programmes

• Implementation through CSR Cell

• Monitoring assessment of projects/programmes

CSR Policy gives an overview of the projects or programmes which are proposed to beundertaken by the Company in the coming years.

The composition of the CSR Committee

A Committee of the directors titled ‘Corporate Social ResponsibilityCommittee’ was constituted by the Board with the following members:

1. Mr. Satish Chand Gupta

2. Mr. M K Trisal

3. Mr. Satnam Arora

4. Mr. Gurnam Arora

5. Mr. Sandeep Kohli (Resigned w.e.f.22nd June 2018)

As the Average net Profit/(Loss) of the Company for last three financial years prior to2017-18 comes to average net loss and therefore the Company is not statutorily required tospent amount as prescribed for CSR expenditure.

Kohinoor also envisions to improve lives in communities we live around protectworkplace rights respect people support missions that help people have a better lifeprovide good jobs world class quality products and a healthy environment to all of usaround.

At Workplace Kohinoor Foods maintain high standards for fair and dignified treatmentof all the people who work for our Company. For all of its employees it is not just aplace to work but like another home and everybody in it like a big family closely bondedwith each other.

Kohinoor Foods also believes that a Company is as good as the people who work for it -their combined talents; skills knowledge experience and passion make a company what itis. Hence Company's continuous goal is to inspire and motivate its people to hone theirtalents increase their knowledge & skills and achieve extraordinary results at theirworkplace. In this endeavor we have offered subsidized meals to our employees at a verynominal cost.

Adherence to global human rights standards No minor labour Fair trade practicescomplete Medical facilities for its people Safe & sound working environment are thethings that Kohinoor Foods take utmost care about.

The CSR Policy may be accessed on the Company’s website at the link:www.kohinoorfoods.in/investor

Disclosure under Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013

The Company has zero tolerance towards sexual harassment at the workplace. The Companyhas in place a Sexual Harassment Policy in compliance with the requirements of the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. TheCompany always endeavors to create and provide an environment that is free fromdiscrimination and harassment including sexual harassment. The Sexual Harassment Committeehas been set up to redress complaints received regarding sexual harassment.

The Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.

Declaration by Independent Directors

The Company has received necessary declarations from all the Independent Directorsconfirming that they meet the criteria of independence as prescribed under Section 149(6)of the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulation 2015.

Board Evaluation

In accordance with the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 it is mandatory that the Board shall monitor and review the BoardEvaluation Framework. The Companies Act 2013 states that a formal annual evaluation needsto be made by the Board of its own performance and that of its committees and individualDirectors. Schedule IV of the Companies Act 2013 and Regulation 17 (10) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 states that the performanceevaluation of Independent Directors shall be done by the entire Board of Directorsexcluding the director being evaluated.

The Board and the Nomination and Remuneration Committee reviewed the performance of theindividual Directors on the basis of the criteria and framework adopted by the Board. Inaddition the performance of Board as a whole and committees were evaluated by the Boardafter seeking inputs from all the Directors on the basis of various criteria.

In a separate meeting of Independent Directors performance of Non-IndependentDirectors performance of Board as a whole and performance of the Chairman was evaluatedtaking into account the views of the Executive Directors and Non-Executive Directors. Theevaluation process has been explained in the Corporate Governance Report section of theAnnual Report.

Training of Independent Directors

The Company Secretary of the Company conducted a detailed training programme toprovide/update the changes in the SEBI (LODR) Regulation 2015/Companies Act 2013 andother relevant act to the Independent Directors.

Further the Company issues a formal letter of appointment to Independent Directorsoutlining their roles responsibilities functions and duties as an Independent Director.The format of the letter of appointment is available on the Company’s website at thelink: www.kohinoorfoods.in/investor

General

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend voting or otherwise.

3. Issue of shares (including sweat equity shares) to employee of the Company under anyscheme.

4. Issue of Employees Stock Option to employee of the Company under any scheme.

5. Neither the Managing Director nor the Whole-time Directors of the Company receiveany remuneration or commission from any of its subsidiaries.

6. 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.

7. Business Responsibility Report as per Regulation 34 (2)(f) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 describing the initiativestaken by them from an environmental social and governance perspective is not applicableto the Company for the financial year 2017-2018 as per the SEBI CircularSEBI/LAD-NRO/GN/2015-16/27 dated 22nd December 2015 and Frequently Asked Questions issuedby SEBI on SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 dated29th January 2016.

Acknowledgment

Your Directors would like to express their appreciation for the assistance andco-operation received from the Banks Government Authorities Customers Vendors JVPartners and Members during the year under review. Your Directors acknowledge withgratitude the commitment and dedication of the employees at all levels that hascontributed to the growth and success of the Company.

For and on Behalf of the Board
Sd/-
Jugal Kishore Arora Place : Faridabad
Chairman Date : August 14 th 2018