To the Members
Your Directors present the 57th Annual Report of the Company together withthe Audited Accounts for the year ended March 31 2018.
Financial Summary & Highlights of the Company
Rs. in lakhs
|Financial performance ||2017 - 2018 ||2016 - 2017 |
|Net Revenue ||29526 ||33457 |
|Profit/(Loss) before Interest Depreciation ||3320 ||4153 |
|Interest ||650 ||811 |
|Depreciation ||1386 ||1463 |
|Exceptional items ||1018 ||622 |
|Profit/(Loss) Before Tax ||267 ||1257 |
|Tax Adjustments including Deferred Tax ||219 ||209 |
|Profit / (Loss) after Tax before comprehensive Income ||48 ||1048 |
|Other Comprehensive Income Net of Tax ||(2.36) ||0.23 |
|Total Comprehensive Income ||45.66 ||1048.62 |
|Appropriations: || || |
|Transfer to Capital Redemption Reserve ||- ||- |
|Balance Carried Forward ||45.66 ||1048.62 |
Operational Review and State of Affairs
|Production performance ||2017 - 2018 ||2016 - 2017 |
|Cane Crushed (tones) ||550416 ||789583 |
|Sugar Recovery (%) ||9.19 ||8.89 |
|Sugar Produced from cane (Qtls) ||509860 ||706205 |
|Sugar Produced from imported raw sugar (Qtls) ||48580 ||- |
|Alcohol Produced (KL) ||12925 ||17110 |
|Power Produced (lakh kwh) ||499 ||707 |
The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazettedated February 16 2015 notified the Indian Accounting Standards (Ind AS) applicable tocertain classes of Companies. Ind AS has replaced the existing Indian GAAP prescribedunder Section 133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts)Rules 2014. For your company Ind AS is applicable from April 1 2017 with a transitiondate of April 1 2016.
The following are the areas which had an impact on account of transition to IndianAccounting Standard:
(a) Fair valuation of certain financial instruments.
(b) Employee costs pertaining to defined benefit obligations.
(c) Discounting of certain long-term liabilities.
The reconciliation and description of the effect of the transition to Ind AS have beenprovided in the notes to accounts in the standalone and consolidated financial statementsrespectively.
Sugar Industry Overview
The global sugar production in the sugar year 2017-2018 is expected to be around 190million MT as against the consumption of 175 million MT. This will lead to a surplus of 15million MT. Similarly 2018-2019 sugar year is also expected to be a surplus year. This ismainly on account of increased production in Brazil India European Union and Thailand.2017-2018 sugar years' global sugar consumption growth is reported as 1.4% and expected toincrease to 1.6% in 2018-2019 against the long term level of 2%.
India's sugar production for the Sugar Year 2017-2018 is expected to end up with31.5 million MT against previous sugar year production of 20.3 million MT. This yearproduction increase is mainly due to higher sugar cane yield and recovery fromMaharashtra UP and other northern states. 2018-2019 Sugar year will also be a surplus asthe preliminary estimates are showing a production of around 33 million MT. Theconsumption is reported to be around 25.5 million MT.
Tamil Nadu is affected due to failure of monsoon consecutively for the sixth yearin a row which resulted in severe drought in many parts of the state. 2017-18 sugar years'sugar production is expected to be around 0.58 million tons. The Company's cane area isalso facing severe drought conditions which may affect cane availability besides adverselyaffecting sugar cane yield and recovery.
Performance of Business Segment Sugar
The acreage of sugarcane cultivation has come down drastically in the state ofTamilnadu in the last 6 years due to scanty rainfall shift in cropping pattern andshrinkage of cultivable land. As a result the overall area under cane has come down and inturn cane availability has also come down and now Tamilnadu has moved down to 10thposition in the country's overall cane availability.
Your company crushed 550416 tons during 2017-18 financial year which is down by 30%compared to last year. This is mainly due to the water scarcity and severe drought beingfaced by the factory command area.
Your Company got an allotment of 5280 MT of raw sugar under duty free import scheme ofGovernment of India and processed it with one of the top most recovery of 96.01%. Yourcompany has not imported the second tranche of raw sugar allotment because of unviableprice and levy of 25% duty.
The Alcohol production reduced by 24% compared to the previous year because of shortageof molasses. Overall cane availability in the state has come down by 40% due to whichavailability of molasses also reduced.
Co-generation of power
The power generation reduced by 29% compared to the previous year because of lessnumber of operating days. Surplus bagasse from both the sugar units were sold in themarket.
Conservation of Energy / technology Absorption / Foreign Exchange Earning and outgo
(a) Conservation of energy
Higher capacity motor used for DM water transfer pump was replaced with high energyefficient lower capacity motor.
(b) technology absorption
Sugar colour at both Kattur and Sathamangalam plants improved to 51 ICUMSA and 56ICUMSA level respectively as against the industry norm of below 100 ICUMSA. This has beenachieved through in house R & D efforts. This is one of the best achieved sugar colourthrough sulphitation process.
(c) Foreign exchange earnings and Outgo
Rs. in lakhs
|Sl. No. ||Particulars ||2017 - 2018 ||2016 - 2017 |
|(i) ||Total Foreign Exchange earned ||- ||Nil |
|(ii) ||Total Foreign Exchange outflow ||1469.49 ||35.22 |
During the year 04 Board Meetings and 04 Audit Committee Meetings were held thedetails of which are given in the Corporate Governance Report. The intervening gap betweentwo meetings was within the period as prescribed under the Companies Act 2013 and SEBI(Listing Obligation and Disclosure Requirements) Regulations 2015.
The paid up equity share capital of the Company as on March 312018 was Rs. 8288.86Lakhs. In accordance with the order of Appellate Authority for Industrial and FinancialReconstruction (AAIFR) dated 17th June 2004 the Redeemable Preference Sharesof the Company issued on 19th July 2004 were entirely redeemed on 14thJune 2016 out of the accumulated profits of the Company. The company has neither issuedany shares with differential voting rights nor granted stock options or sweat equity.
Directors and Key Managerial personnel
Mr.Arjun B Kothari (DIN 07117816) was appointed as Managing Director till 31stMarch 2020 and he is liable to retire by rotation as a director at the ensuing AnnualGeneral Meeting and being eligible offers himself for re-appointment.
Mr.P.S. Balasubramaniam Mr.V.R. Deenadayalu and Mr.P.S. Gopalakrishnan IndependentDirectors' term expires on 31st March 2019 and the Board proposes tore-appoint them for a second term w.e.f. 01st April 2019 based on theirrespective performance evaluation.
Mr.Arjun B Kothari Managing Director Mr.R Krishnan Chief Financial Officer and Mr. RPrakash Company Secretary are the Key Managerial Personnel of the Company as per section203 of the Companies Act 2013.
Declaration from Independent Directors
The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 stating that each of them complywith the criteria of their Independence as laid down in Section 149(6).
Composition of Audit Committee
The Audit Committee comprises of the following directors for the year ended 31stMarch 2018:
|Sl. No. ||Name of Directors ||Designation |
|(i) ||Mr.P.S.Gopalakrishnan ||Chairman (Independent Director) |
|(ii) ||Mr.V.R.Deenadayalu ||Member (Independent Director) |
|(iii) ||Mr.P.S.Balasubramaniam ||Member (Independent Director) |
The Board has not rejected any proposal / recommendations of the Audit Committee duringthe year.
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Key Managerial Personnel andSenior Management and their remuneration. The details of the Remuneration Policy arestated in the Corporate Governance Report.
The Company has a vigil mechanism named "Whistle Blower Policy" to deal withgenuine concerns if any raised by the Directors / Employees. The details of the WhistleBlower Policy are explained in the Corporate Governance Report and also posted on theCompany's website www.hckotharigroup.com/kscl .
Prevention of Insider Trading
The Company has adopted a Code for Prevention of Insider Trading with a view toregulate trading in securities by the Directors and designated employees of the Company.The Code requires pre-clearance for dealing in the Company's shares and prohibits thepurchase or sale of Company's shares by the Directors and the designated employees whilein possession of unpublished price sensitive information in relation to the Company andduring the period when the Trading Window is closed. The Board is responsible forimplementation of the Code. All the Directors and the designated employees have confirmedcompliance with the Code.
Director's Responsibility Statement
In terms of Section 134(5) of the Companies Act 2013 the Directors state that:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this 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.
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Kothari International Trading Limited (KITL) is a wholly owned subsidiary of theCompany. It carries on the business as Merchants Traders and Commission Agents.
KITL has incurred a Loss of Rs.17.90 Lakhs for the year ended March 31 2018 as againsta Profit of Rs. 29.21 Lakhs in the previous year.
A Statement containing salient features of the financial statement of the subsidiaryCompany viz. KITL in form AOC-1 is attached as a part of the Consolidated FinancialStatement of the Company.
The Financial Statement of Kothari International Trading Limited Subsidiary Company iskept at the registered office for inspection of members during working hours and the sameis also available on the website of Kothari Sugars & Chemicals Limited. The Companyshall provide free of cost the copy of the financial statements of its subsidiary Companyto the shareholders upon their request.
Kothari Petrochemicals Limited (KPL) is an Associate Company and it produces highquality Poly Iso Butylene of various grades using Iso Butylenes being sourced fromRefineries / Petrochemical complex and it continues to retain its status as the"Largest Poly Iso Butylenes (PIB) manufacturer in India" with an annualinstalled capacity of 24000 tons.
In line with the requirement of Ind AS the investments in the equity shares of KothariPetrochemicals Ltd (Associate Company) have been restated at cost during the year.Consequently the differential amount due to re-statement in value of such investments byRs. 1178.60 Lakhs has been added to the Reserves and Surplus.
KPL has made a profit before tax of Rs.14.47 Crores for the year ended March 312018 asagainst Rs. 9.95 Crores in the previous year.
Extract of Annual Return
As required under section 92(3) of the Companies Act 2013 and Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of Annual Return in MGT- 9 is attached as a part of this Annual Report as Annexure-I.
a) Statutory Auditors
M/s. P.Chandrasekar LLP Chartered Accountants (Registration No.000580S/S200066) havebeen appointed as Statutory Auditors of the company till the conclusion of 61stAnnual General Meeting. As required under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Auditors have also confirmed that they hold a validcertificate issued by the Peer Review Board of the Institute of Chartered Accountants ofIndia.
b) Cost Auditor
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Amendment Rules 2014 the Cost Audit Records maintained by the Companyin respect of its Sugar Co-gen and Distillery Unit are required to be audited. YourDirectors on the recommendation of the Audit Committee appointed Mr.K.SuryanarayananCost Accountant in practice for conducting the audit of cost records of the Company.
As required under the Companies Act 2013 the remuneration payable to the Cost Auditoris required to be ratified by the Members in a general meeting. Accordingly a Resolutionseeking Member's ratification for the remuneration payable to Mr.K.Suryanarayanan CostAccountant is included at Item No.3 of the Notice convening this Annual General Meeting.
c) Secretarial Auditor
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 Mr. M. Alagar of M/s. M. Alagar and Associates Chennai Practicing CompanySecretary in Practice to undertake the Secretarial Audit of the Company. The SecretarialAudit Report is annexed as "Annexure II". The Report does not contain anyqualification.
The Company has not accepted deposits either from the members or public falling withinthe ambit of Chapter V of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014 during the year. There were no outstanding deposits during and atthe end of the financial year 2017 - 2018.
Significant & Material Orders Passed by the Regulators
There are no significant material orders passed by the Regulators / Courts which wouldimpact the going concern status of the Company and its future operations.
Internal Financial Control Systems and their Adequacy
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The Internal Audit function is carried out by an independentfirm of Chartered Accountants. The scope and authority of the Internal Audit function isdefined by the Audit Committee. The Internal Audit Reports are placed before the AuditCommittee for its scrutiny and suggestions if any. The Internal Auditors attend the AuditCommittee meetings.
The Internal Auditors monitor and evaluate the efficacy and adequacy of the internalcontrol system in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company. Based on the Report of theInternal Auditors the Company undertakes corrective action in the respective areas andstrengthens the controls.
Particulars of Loans Guarantees or Investments
The company has not given any Loans or Guarantees covered under the provisions ofsection 186 of the Companies Act 2013. The details of the investments made by company aregiven in the notes to the financial statements.
Pursuant to the requirement of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company had laid down the procedures to inform Board Members aboutthe risk assessment and minimization procedures. Accordingly the Company periodicallysubmits the Risk Management Review Report to the Board for review and their suggestions.
Corporate Social Responsibility policy
Pursuant to the provisions of section 135 and schedule VII of the Companies Act 2013Corporate Social Responsibility (CSR) Committee was formed to recommend (a) the policy onCorporate Social Responsibility (CSR) and (b) implementation of the CSR Projects orPrograms to be undertaken by the Company as per CSR Policy for consideration and approvalby the Board of Directors. The policy on Corporate Social Responsibility as approved bythe Board is posted on the Company's website www.hckotharigroup.com/kscl .
As part of its initiatives under "Corporate Social Responsibility" (CSR) thecompany has contributed funds for the schemes for promotion of education. Thecontributions in this regard have been made to a Registered Trust which is undertakingthese schemes. Detailed Report on CSR activities in the prescribed format is forming partof this Annual Report.
Related Party Transactions
All related party transactions entered into during the financial year were on an arm'slength basis and in the ordinary course of business. There were no 'material' contracts orarrangements or transactions and therefore disclosure in form AOC-2 is not required.
All Related Party Transactions are placed before the Audit Committee as well as to theBoard for approval. Prior omnibus approval of the Audit Committee is obtained for thetransactions which are foreseeable and of repetitive nature. For the transactions enteredinto pursuant to the omnibus approval so granted a statement giving details of allrelated party transactions is placed before the Audit Committee on a quarterly basis.
The policy on Related Party Transactions as approved by the Board is posted on theCompany's website www.hckotharigroup.com/kscl
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board has carried out the AnnualPerformance Evaluation of its own performance the Directors individually as well as theevaluation of the working of its Committees in the format (questionnaire) prescribed bythe Nomination and Remuneration Committee of the Company.
The structured questionnaire covers various aspects of the Board's functioning such asadequacy of the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations and governance.
The performance evaluation of the Directors (without participation of the relevantDirector) was carried out by the entire Board. The Directors expressed their satisfactionwith the evaluation process.
Separate Meeting of Independent Directors
The Independent Directors of the Company had met during the year to review theperformance of Non-Independent Directors and the Board as a whole reviewed theperformance of the Chairperson of the Company and also reviewed the access the qualityquantity and timeliness of flow of information between the company management and theBoard without the presence of the Non-Independent Directors and members of the Management.
Disclosure about Cost Audit
|Filing of Cost Audit Report ||2017-2018 ||2016 - 2017 |
|Due Date ||27.09.2018 ||27.09.2017 |
|Actual Date ||30.08.2018 (Target) ||28.09.2017 |
|Cost Auditor Details ||Mr.K.Suryanarayanan M.No.24946 Chennai ||Mr.K.Suryanarayanan M.No.24946 Chennai |
|Audit Qualification in Report ||- ||Nil |
Listing with Stock exchanges
The Company is listed in The National Stock Exchange of India Limited (NSE) Mumbai andthe Stock Code is KOTARISUG & ISIN INE419A01022. The Company confirms that it has paidthe Annual Listing Fees for the year 2018-2019 to NSE where the Company's Shares arelisted.
Corporate Governance and Shareholders Information:
Your Company has taken adequate steps to adhere to all the stipulations laid down inthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. A report onCorporate Governance is included as a part of this Annual Report. Certificate from thePractising Company Secretary confirming the compliance with the conditions of CorporateGovernance as stipulated under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is attached to this Report.
Management Discussion and Analysis Report
A detailed discussion on the industry structure (dealing with world sugar and Indiansugar) as well as on the financial and operational performance is contained in the'Management Discussion and Analysis Report' that forms an integral part of this Report.
Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act 2013 read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in the Annual Report.
PARTICULARS PURSUANT TO SECTION 197(12) AND THE RELEVANT RULES:
a) The ratio of the remuneration of each Director to the median employee's remunerationfor the financial year and such other details. No Director is in receipt of remunerationexcept sitting fees. (For this purpose Sitting fees paid to the Directors have not beenconsidered as Remuneration)
b) The percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year:
|Sl. No. ||Name ||Designation ||Percentage of Increase |
|(i) ||Mr.Arjun B. Kothari ||Managing Director ||No Salary was paid during the year |
|(ii) ||Mr.R.Krishnan ||Chief Financial Officer ||10% |
|(iii) ||Mr.R.Prakash ||Company Secretary ||10% |
c) 4.84% increase has been reported in the median remuneration of employees in thefinancial year.
d) The number of permanent employees on the rolls of company as on 31stMarch 2018: 494
e) Average percentile increase already made in the salaries of employee's other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and any exceptionalcircumstances for increase in the managerial remuneration:
Increase of remuneration for employees was in the range of 5% to 12% and for KMP theincrease was 10% for the year.
f) We affirm that the remuneration paid during the period under review is as per theRemuneration Policy of the company.
Consolidated Financial Statements
As stipulated by Regulation 34(2) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Consolidated Financial Statements have been preparedby the Company in accordance with applicable Accounting Standards along with AuditorsReport and form part of this Annual Report.
Statements in this Report particularly those which relate to Management Discussion andAnalysis describing the Company's objectives projections estimates and expectations mayconstitute 'forward looking statements' within the meaning of applicable laws andregulations. Actual results may differ from those either expressed or implied in thestatement depending on the circumstances.
Your Directors thank the Banks Customers Debenture/ZCB Holders Farmers FinancialInstitutions Government Authorities Suppliers and Shareholders for their continuedsupport. Your directors also place on record their appreciation for the services by theemployees of the Company.
| ||On behalf of the Board |
| ||for Kothari Sugars and Chemicals Limited |
|Place : Chennai ||Nina B. Kothari |
|Date : 28th May 2018 ||Chairperson |