AND MANAGEMENT DISCUSSION AND ANALYSIS
Your Directors are pleased to present the 33rd Annual Report together with the AuditedFinancial Statements of the Company for the financial year ended March 31 2018.
|FINANCIAL PERFORMANCE: || || |
| || ||( Rs. in Lakh) |
|Particulars ||2018 ||2017 |
|Revenue from Operations ||10915 ||11709 |
|Other income ||318 ||245 |
|Total income ||11233 ||11954 |
|Operating Expenses ||8668 ||8864 |
|Profit before finance cost depreciation and amortisation ||2565 ||3090 |
|Depreciation and Amortisation Expense ||423 ||466 |
|Profit before tax ||2142 ||2624 |
|Provision for tax ||754 ||965 |
|Share of minority interest ||- ||- |
|Profit after tax ||1388 ||1659 |
|Proposed equity dividend ||448 ||224 |
|Corporate dividend tax ||92 ||46 |
|Total Outflow ||540 ||270 |
During the year under review the Company has achieved net turnover of Rs. 10915 lakhas compared to Rs. 11709 lakh in the previous year. The gross profit before tax were Rs.2565 lakh as compared to Rs. 3090 lakh. The operating expenses decreased by around 2% toRs. 8668 lakh as compared to Rs. 8864 lakh in last year.
Your Directors are pleased to recommend a final dividend of Rs. 16/- per equity shareamounting to Rs. 540 lakh (including dividend distribution tax) for the financial year2017-18 for approval of the members in the ensuing 33rd Annual General Meeting of theCompany.
MANAGEMENT DISCUSSION & ANALYSIS:
The Indian economy is expected to witness further improvement in the coming fiscal yearin view of normalization in cash conditions and the fading of GST disruptions. Over themedium term India's growth will gradually rise with continued implementation ofstructural reforms that will raise productivity and incentivise private investment.India's continues focus on structural reforms will help to reduce internal barriers totrade increase efficiency and improve tax compliance.
India's Consumer Price Index (CPI) inflation further softened to a five-month low of4.3% year-on-year (YoY) in Mar'18 from 4.4% YoY in the previous month marking theslowdown in inflation for the third consecutive month. The inflation changeover determinedwas expected as per market expectations with softening in food inflation which fell to afive-month low of 2.8% YoY in Mar'18. The inflation in the fuel group also softened to asix-month low of 5.7% YoY in Mar'18 from 6.8% in Feb'18. However global crude oil pricescontinued their rise recently amidst geopolitical tensions.
With these recent improvements the International Monetary Fund (IMF) in its latestWorld Economic Outlook (WEO) has projected India to grow at 7.4% in 2018 and 7.8% in 2019and seen India to be emerged as fastest growing economy in coming years. India's GDP isestimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3 per centin 2018-19.
The growth in advanced economies gained momentum in 2017. The recovery was markedlystronger than expected in the Euro Area and to a lesser degree in the United States andJapan. As economic slack diminishes and monetary policy becomes less accommodative growthis expected to gradually moderate yielding low potential growth rates in 2018-20. Growthin China continues to be resilient with drivers of activity shifting away from state-ledinvestment.
Your company expects to fully leverage these favourable economic conditions to focus onits agenda for growth. While growth in the core crucible market is likely to be gradualthe Company is focused on increasing their presence in adjacent and related markets withthe phased introduction of superior foundry products for the non-ferrous and ferrousfoundry industries as well as targeted entry into the upstream aluminium processingsegments. The strong automotive and durable goods sectors along with infrastructureinvestments will continue to be the demand drivers for our products.
Your company will also renew its focus on developing overseas markets with favourablemarket conditions presenting themselves in renewed mining activity in Mexico equatorialcountries of South America and South East Asia. We will expect to fully deploy technologytransferred from Europe from 2016-2018 to address these markets. Simultaneously yourcompany continuous its focus on achieving cost competitiveness through focused costoptimisation productivity improvements and value engineering.
During the year under review your company has purchased 49% stake of Diamond CrucibleCompany Limited (DCCL) from Terrassen Holdings Limited in the month of July 2017resulting in DCCL became wholly owned subsidiary of your Company. Further both theCompanies are in same line of business and share common Morgan corporate value andculture. With a view to maintain simple corporate holding structure and to eliminateduplicate corporate procedures it was desirable to integrate and combine both theentities which results in achieving economies of scale reduction in managerial andadministrative overheads and operational rationalisation. Accordingly your Companysubmitted application before the National Company Law Tribunal (NCLT) Mumbai bench forapproval of Scheme Amalgamation between Diamond Crucible Company Limited and MorganiteCrucible (India) Limited. The NCLT has approved the said amalgamation of both theCompanies on February 22 2018 from an appointed date of October 1 2017. As per the NCLTOrder the Company is publishing the complete financial statements for the financial yearending March 31 2018 therefore AOC-1 which prescribes a statement containing salientfinancial highlights of the subsidiary company for the year ended March 31 2018 is notapplicable.
The related detailed information of the subsidiary company shall be made available tomembers of the Company seeking such information and shall be kept open for inspection atthe Registered Office of the Company during office hours.
CHANGES IN SHARE CAPITAL
In compliance with the NCLT Order the authorised share capital of your Company isincreased from Rs. 50000000/- to Rs. 54500000/- divided into 5450000 equity sharesof Rs. 10/- each and paid-up capital stood at Rs. 28000000/-.
The Company has not accepted any deposits from the public/members under Section 73 ofthe Act read with Companies (Acceptance of Deposits) Rules 2014 during the financial yearunder review.
RELATED PARTY TRANSACTIONS:
During the year under review all related party transactions entered during the yearwere in the ordinary course of business and on arms-length basis. No material relatedparty transactions i.e. transactions exceeding ten percent of the annual consolidatedturnover as per the last audited financial statements were into entered during the yearby your Company. Accordingly the disclosure of Related Party Transactions as requiredunder Section 134(3) (h) of the Companies Act 2013 in Form AOC 2 is not applicable.Further the Company has not given any loans and advances in the nature of loans tosubsidiary company or to associate company or to firms/ companies in which directors areinterested hence disclosure as per Regulation 34(3) of SEBI LODR Regulations 2015 is notapplicable.
In compliance with the provisions of Section 188 of Companies Act 2013 and Regulation23 of Securities Exchange Board of India (SEBI') (Listing Obligations and DisclosureRequirements) (LODR') Regulations 2015 the Audit Committee had given omnibusapproval for related party transactions which were of repetitive in nature and enteredwith associates companies for sale purchase of goods and services for a period of oneyear. In every Audit Committee meeting during the year the schedule of related partytransactions for each quarter end were placed before the Committee to ensure transactionswere within limit of the approval.
As per Regulation 46 of SEBI LODR Regulations 2015 the Policy on Materiality ofRelated Party Transactions and dealing with Related Party Transactions is available onCompany's website at http://www.morganmms.com/en-gb/investors/
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THEFINANCIAL YEAR AND DATE OF REPORT:
During the year under review there have been no other material changes or commitmentsgiven which affects the financial position of the Company between the end of the financialyear and the date of the report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:
During the year under review the Company has not provided any loans given guaranteesand made investments covered under Section 186 of the Companies Act 2013.
BOARD OF DIRECTORS:
In accordance with provisions of Companies Act 2013 and the Article of Associations ofthe Company Mr Mirco Pavoni Director of the Company retires by rotation at the ensuingAnnual General Meeting and being eligible has offered himself for re-appointment.
The evaluation of Board including independent directors was carried out based onparameters of attendance in every Board and Committee meeting participation indiscussions and independent judgement. The Board carried out annual performance evaluationof the Board Committees and Individual Directors internally. The performance of eachCommittee was evaluated by the Board based on report on evaluation received fromrespective Board Committees.
During the year under review the independent directors has submitted certificate ofindependence under Section 149 (6) (d) of the Companies Act 2013. The policy on thefamiliarisation program for Independent Directors including details of NominationRemuneration committee and their roles and responsibility are provided in the CorporateGovernance Report. The evaluation of Board including independent directors was carried outbased on parameters of attendance in every Board and Committee meeting participation indiscussions and independent judgement.
The Board of Directors and Senior Management Personnel has confirmed compliance to theCode of Conduct of the Company and submitted the required annual compliance declaration tothe Company Secretary. Mr. Anirudha Karve Director has given affirmation to the Code ofConduct as attached Annexure - 4.
The details of the familiarization program for Independent Directors are posted on thewebsite of the Company and can be accessed at - http://www.morganmms.com/en-gb/investors/
BOARD MEETINGS AND ANNUAL GENERAL MEETING:
During the year the Board met six times on May 25 2017 June 26 2017 August 102017 November 9 2017 February 8 2018 and March 8 2018. The 32nd Annual GeneralMeeting was held on August 9 2017. The intervening gap between any two meetings waswithin the period prescribed by the Companies Act 2013.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION:
The policy of the Company on directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters provided under Section 178 (3) and Section 197 (12) of the CompaniesAct 2013 read with Rule 5 of Companies (Appointment And Remuneration of ManagerialPersonnel) Rules 2014 is annexed as Annexure - 1 to the Board's report.
PARTICULARS OF EMPLOYEES:
During the year under review no employee was in receipt of remuneration of Rs. 120lakh or more or employed for part of the year and in receipt of Rs. 8.50 lakh or more amonth under Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE:
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 (Act') and Rules made thereunder yourCompany has adopted a policy on Prevention of Sexual Harassment at Workplace. During theyear the Company has not received any complaint with allegations of sexual harassment.
RISK MANAGEMENT POLICY:
Morgan Group has established a risk management methodology which seeks to identifyprioritise and mitigate risks underpinned by a three lines of defence' modelcomprising an internal control framework internal monitoring and independent assuranceprocesses. The Morgan Group considers risk management and internal control are fundamentalto achieving and delivering long-term sustainable growth in shareholder value. The RiskFramework covers business operational and financial risks reviewed by the Committee on aperiodic basis.
During the year the Committee in its meeting held on November 9 2017 has reviewedrisk relating to competition operations people management and development productquality technological obsolescence quality of contract external risks of previous yearand development of action plan as prepared by the management for mitigating such risksrelating to above risks in the future.
CORPORATE SOCIAL RESPONSIBILITY (CSR):
Your Company's CSR efforts are focused on supporting physically challenged studentsyouth and girls by through various assistance programs in the domains of education healthand environment. During the year your Company has spent CSR funds on improvement in healthand safety of students at schools and orphanages saving in operating expenses byinstalling solar panels at their facilities etc. Further the Company has been exploringCSR projects for implementation in coming year hence could not spent complete amountduring the financial year.
The Company has formulated a Corporate Social Responsibility Policy indicating theactivities to be undertaken by the Company as recommended by the Corporate SocialResponsibility Committee and approved by the Board of Directors.
The Corporate Social Responsibility policy formulated by the Company is available onthe website of the Company at - http://www. morganmms.com/en-gb/investors/
The CSR activities as undertaken by the Company are attached as Annexure - 2 andform part of this annual report.
NOMINATION AND REMUNERATION COMMITTEE:
The Nomination and Remuneration Committee has been vested with the authority to interalia recommend nominations for Board Membership and senior management position of theCompany and establishing criteria for selection to the Board with respect to thecompetencies qualifications experience integrity and succession plans. The committeecomprises of independent and non-executive directors of Board which details are given inCorporate Governance Report.
During the year the Nomination and Remuneration Committee met once on March 8 2018for considering appointment of Mr Meereshwar Reddy as Manager' under provisions ofCompanies Act 2013 and re-designation of Mr Aniruddha Karve from Managing Director'to Director (Non-executive) effective from April 1 2018.
PRODUCT QUALITY AND CERTIFICATIONS:
The Technical Services and Product Development (TSPD) team continues to strive toachieve Morgan's vision of becoming a world class material science company with requiredapplication engineering and reliable problem solving capabilities delivered ethically andsafely to the customers we serve. The TSPD team have continuous focus on new productdevelopment and product enhancement by introducing process changes re-engineering andre-designing projects. Your Company is also focusing on product applications for aluminiumdegassing hopper linings anti-vortex plates aluminium scrap melting ductile iron flowcontrol and induction furnace crucibles.
Your Company continues to remain ISO 9001:2015 certified for Quality Management SystemStandards certified by LUCIDEON Management Systems for continuously demonstrating focus oncustomer satisfaction through product quality and services delivery and on meetingstatutory and regulatory norms.
ENVIRONMENT HEALTH AND SAFETY (EHS):
The Morgan Group's EHS Policy sets out the Group's commitment to protect and enhancethe environment and to the health and safety of all those affected by our operations. Thegovernance of Morgan's EHS Policy is achieved through performance monitoring riskassessment and the management and mitigation of identified risks to help providecontinuous improvement in EHS performance in support of the Company's and Group'sstrategic priorities. With the long-term aim of a zero harm' workplace Morgan iscommitted to its health and safety core values and to conducting all its activities in amanner that achieves high standards of health and safety for all employees andstakeholders. The Morgan Group's long-term objective is zero harm'. We aim todeliver year-on-year improvements in performance as we progress towards this objective.Your Company is committed to providing an injury-free and environment-friendly workplaceand improved wellbeing of employees and contract workforce by regularly organisingoccupational health examinations consultation and counselling.
There were no lost time accidents in your Company's sites since August 2014 howeverduring the year there were 16 first aid injuries reported and immediate action has beentaken on the observations of unsafe actions and unsafe conditions. Further regularmonitoring of air water and soil pollution was being carried out throughout the yearthrough external agencies.
Operational Health and Safety Improvements:
Enhanced Efficiency of Kiln-3 through Recuperator at Mehsana unit
Drying and standardisation of process at Mehsana unit as per global norms
LPG leak detection system provided at entire plant in Aurangabad and Mehsanaunit
Graphite handling system for indirect _ring installed at Mehsana unit
Fall protection improvement for work at height at MMS India
Installed food waste decomposing machine of 50kg /day capacity to maintain ofthe garden in place on inorganic fertilizer.
Regular internal training/programs for developing awareness on health safetyand environment of employees and contractual labour
Annual medical check-ups was completed and suggestions has been given formonitoring health of employees and contractual labour
Behavioural Based Safety audits
FINANCE AND TAXATION:
During the Financial year 2017-18 your Company has successfully made the transitionfrom the indirect tax regime to Goods & Service Tax (GST) with the help of an internalcross functional team. All necessary con_guration changes have been implemented in our SAPERP systems for both the sites at Aurangabad & Mehsana. All the subsequent compliancespost implementation of GST like _ling of various returns like GSTR 3B GSTR 1 etc. havebeen fully complied with.
During the financial year 2017-18 your Company has carried forward and continued thegood work of its effort to liquidate the accumulated balances lying in CENVAT creditaccount as per provision of Excise laws and we have liquidated almost the entire amountand received the refund from the Authority before implementation of GST.
Your Company has continued to apply for Export Incentives under Merchant ExportIncentive Schemes (MEIS) as part of the Foreign Trade Policy 2015-20. During the year2017-18 we have actually received Duty Benefit Scripts of Rs. 157.63 Lakh.
Regarding our application for Advance Pricing Agreement (APA) with the CBDT & Govt.of India for International Intercompany related party transactions with AssociatedEnterprises (AE) the APA Commissioner Mumbai is yet to give us a scheduled date for theplant visit as they are giving priority to applications filed before March 2015. We expectto make further progress in successfully executing the APA during FY 2018-19 as this willgive us certainty in tax treatment on transactions with our Parent Company as well asother Morgan group companies.
During 2017 the Morgan Group introduced a new reward and recognition scheme theChairman's Awards. This is an awards scheme to reward distinctive contributions made byMorgan employees in six categories - Materials Science Application Engineering CustomerFocus Functional Excellence Ethical and Safe Working. Your Company was recognized andhonoured with two of these six awards for Customer Focus and Ethical and SafeWorking.
RESPONSIBILITY BUSINESS PROGRAMME (RBP) AND LEGAL GOVERNANCE:
The Responsible Business Programme (RBP) is the Group ethics and compliance programmecomprising of policies training risk assessment monitoring and assurance. The trainingcontent covers human rights anti-bribery and ethics anti-trust and contract riskmanagement and is refreshed on an annual basis.
Raising awareness of and educating employees on Group compliance policies and theapplicable laws and regulations is a fundamental part of the RBP. Group-wide inductiontraining is given to all employees in management positions or who interact with thirdparties (relevant employees') on human rights anti-bribery and corruptionanti-competitive practice and contract risk awareness.
Your Company is committed to conduct its business in compliance with a range ofnational and international laws and regulations relating with bribery and corruptionhuman rights trade/export compliance and competition/anti-trust activities. The ExportCompliance Policy and dedicated in-house review mechanism helps the Company to screen andidentify the restricted parties in regulated countries where your Company operates.
The Group plans to introduce a Code of Business Conduct to strengthen the framework forits stated Leadership behaviour of working ethically and safely'. This will besupported by an updated training programme both online and face to face as needed toassist in the transition to the Code.
Your Company understands that in order to achieve higher productivity and overallperformance of the Company the active engagement of all employees are essential. As partof its growth journey your Company aligns its organisational structure with its strategicbusiness plan for enhanced effectiveness. Moreover your Company will continue toundertake initiatives to enhance productivity and efficiency which motivates its people totake professional challenges and to help to create a happy transparent and productiveenvironment. The Morgan Group's execution priorities will continue into 2018 forincreasing investment in people development including key functional and technical skillsand the development of future leaders.
During the year your company has organised nearly 83 functional and leadershiptraining programs for nurturing existing people's talent and motivating them to attainorganisation goals. The employee turnover ratio was around 18.29 as at end of March 312018 as compared to 10.21 in the previous year.
During the year your Company has signed an updated Wage Agreement with the Union for aperiod of 3 years with moderate increase in permanent worker wages every year withoutaffecting its continuous business operation.
The Morgan Group recognises the accomplishments of its people individually and asteams and makes awards to acknowledge achievement loyalty and innovation. Recognitionawards continue to be made across local businesses as well as to senior management withawards linked to business performance.
Your Company has conducted various training programme such as Unfold leaders onyou' ISO 9001:2015 Risk Analysis and Action Deciding' Hazard Identification& Risk Assessment HIRA' 'Stress Management & Naturopathy' and othertechnical and functional trainings to the employee and workmen of the Company.
M/s B S R & Associates LLP Chartered Accountants Pune (Registration No.116231W/W-100024) were appointed as Statutory Auditors of the Company from conclusion of32nd Annual General Meeting until conclusion of 35th Annual General Meeting subject toratification by members in every annual general meeting.
Further Section 40 of the Companies (Amendment) Act 2017 and Section 139 of theCompanies Act 2013 as notified by the Central Government on May 7 2018 the ratificationof statutory auditor at every general meeting is no longer required however M/s B S R& Associates LLP Chartered Accountants has submitted their eligibility to continueas Statutory Auditor of the Company for the financial year 2018-19 on such remunerationand out-of-pocket expenses as agreed between the Board or Committee and the StatutoryAuditors in the Board of Directors meeting held on May 24 2018.
The report is given by the Auditors on the financial statements of the Company formspart of this Annual Report. There has been no qualification reservation adverse remarkor disclaimer given by the Auditors in their report.
M/s KMP & Associates (ACS 32369 / COP 11947) Practicing Company Secretaries wereappointed to conduct the Secretarial Audit of the Company for the financial year 2017-18as required under Section 204 of the Companies Act 2013 and rules thereunder. TheSecretarial Audit Report for financial year 2017-18 forms part of the Board's Report as Annexure3. The Board has continued appointment of M/s KMP & Associates Practicing CompanySecretaries as Secretarial Auditor of the Company for the financial year 2018-19.
There has been no qualification reservation adverse remark or disclaimer given bySecretarial Auditor in their report.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company conducts its business operations with integrity and high standards ofethical behaviour and in compliance with the laws and regulations that govern itsbusiness. Your Company has a well-established framework of internal controls in operationsupported by Morgan Group's policies and guidelines including periodic monitoringassessment and internal audit. M/s R D Jaiswal & Co. Chartered Accountant wasappointed as internal auditors of the company to conduct internal audits for the financialyear 2017-18. M/s R D Jaiswal & Co. has conducted internal audit on half yearly basisand detailed report was submitted to Audit Committee. Further the Audit Committee reviewsthe adequacy and effectiveness of the implementation of audit recommendations includingthose relating to strengthening your company's risk management policies and systems.
Your Company has implemented Internal Financial Controls (IFC) with required policiesand procedures in its business operation. Further as required under Section 177(4)(vii) ofthe Companies Act 2013 ("Act") the Audit Committee needs to evaluate internalfinancial control system of the Company and make further reporting to the Board and as perSection 143(3) (i) of the Companies Act 2013 the Statutory Auditor of the Company isrequired to make representation in their Auditor Report that the Company has adequateinternal financial control system in place and operating effectively.
During the year your Company as well as internal auditor has made periodic checksrelating to prevention and detection of frauds and errors accuracy and completeness ofaccounting records timely preparation of financial statements and applicable statutorycompliances to the Company's business. The internal auditor and statutory auditor duringtheir audit have not found any significant gaps for the financial year 2017-18 howeverhave made certain recommendation for continuous improvement of the process.
In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of annualreturn referred to in sub-section (3) of Section 92 is appended as Annexure 5 tothe Board's Report.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement of Section 134 (3) (c) of the Companies Act 2013 withrespect to Directors' Responsibility Statement it is hereby confirmed that:
(i) In the preparation of the annual accounts for the financials year ended March 312018 the applicable accounting standards have been followed along with proper explanationrelating to material departures;
(ii) The Directors have 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 andprofit of the Company for the year;
(iii) The Directors have taken proper and sufficient care for maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
(iv) The Directors have prepared the annual accounts on a going concern' basis;
(v) The directors have laid down internal financial controls which are adequate andare operating effectively;
(vi) The directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and such systems are adequate and operating effectively.
As required under Securities Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 the auditors' certificate regardingcompliance of conditions of Corporate Governance is appended as Annexure 6 to theBoard's Report.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The particulars as prescribed under Sub-section (3)(m) of Section 134 of the CompaniesAct 2013 read with the Companies (Accounts) Rules 2014 are enclosed as Annexure 7 tothe Board's report.
VIGIL MECHANISM / WHISTLE BLOWER POLICY:
The Company has set up a Whistle Blower Policy with a view to provide a mechanism fordirectors and employees of the Company to raise concerns of any violations of legal orregulatory requirements incorrect or misrepresentation of any financial statements andreports etc. The policy is also available on the websitehttp://www.morganmms.com/en-gb/investors/
Your Directors take this opportunity to offer their sincere thanks to variousDepartments of the Central and State Governments our Bankers Shareholders Customers& Consultants for their unstinted support and assistance. Your Directors also placetheir deep appreciation to employees at all levels for their hard work solidaritydedication and commitment and look forward to their continued support in the future.
| ||For and on behalf of the Board || |
| ||Mukund Bhogale ||Aniruddha Karve |
| ||(Chairman) ||(Director) |
| ||DIN: 00072564 ||DIN: 07180005 |
|Place : Aurangabad || || |
|Date : May 24 2018 || || |