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N K Industries Ltd.

BSE: 519494 Sector: Industrials
NSE: NKIND ISIN Code: INE542C01019
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OPEN 20.80
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VOLUME 1
52-Week high 58.30
52-Week low 19.90
P/E
Mkt Cap.(Rs cr) 13
Buy Price 23.00
Buy Qty 50.00
Sell Price 20.80
Sell Qty 999.00

N K Industries Ltd. (NKIND) - Director Report

Company director report

To

The Members

Your Directors are pleased to present the 31st Annual Report along withthe Standalone and Consolidated Audited Financial Statements of your Company for theFinancial Year ended on March 31 2019.

OVERVIEW OF THE ECONOMY

According to the survey commissioned by The Solvent ExtractorsAssociation of India (SEA) an estimated yield in the state of Gujarat was estimated at alower rate during the year 2018-19 as compared to the year 2017-18.

On Observing the above chart you will get to understand about thegrowth trend in the castor oil exports from India. There is an annualized growth trend ofcastor oil exports from India. During the year 2017 exports increased by more than 11%which declined in the year 2018 and it was further estimated to decline in the year 2019.

Castor Derivatives exports increasing steadily @ 8% per annum over last10 years. HCO 12 HSA RA constitutes more than 90% of total Castor derivatives exportsfrom India

The Company is focused on producing the basic and special castor oilgrades. The Company is also engaged in trading of castor oil derivatives mainly HCO. TheCompany is also manufacturing other derivatives viz.12 HSA and ricionic acid etc TheCompany has a capacity to crush over 27000 MT of castor seed per month.

(Note: The data mentioned herein above are provided as available fromstatistics provided in public domain on the website of The Solvent Extractors Associationof India and from news articles.)

FINANCIAL RESULTS

The Company has adopted Indian Accounting Standards (Ind AS) from 1stApril 2017. The figures for the Year ended

31st March 2019 are also Ind AS compliant.

The financial highlights are depicted below:

Standalone Consolidated
PARTICULARS Year Ended Year Ended Year Ended Year Ended
31.03.2019 31.03.2018 31.03.2019 31.03.2018
Revenue from operations 49631.11 11283.75 51591.73 13406.37
Other Income 427.41 61.18 447.50 91.91
Total Income 50058.52 11344.92 52039.23 13498.28
Total Expenditure 52190.83 10630.65 54019.09 12699.04
Profit / (Loss) before Finance Cost Depreciation (2132.31) 714.27 (1979.86) 799.24
& Amortization and Tax Expenses
Finance Cost 4.48 0.84 13.38 11.18
Depreciation & Amortization 671.41 969.48 712.45 1023.56
Profit / (Loss) Before Tax (2808.20) (256.05) (2705.69) (235.50)
(i) Current Tax - - 49.00 3.02
(ii) Deferred Tax 879.68 (41.55) (895.29) 60.16
(iii) Earlier period tax (written back) - - 5.55 21.91
Total Tax (i+ii) 879.68 (41.55) (840.74) 85.09
Profit / (Loss) after Tax (1928.52) (297.59) (1864.95) (320.59)
Other Comprehensive Income (2.11) (19.39) (2.11) (19.39)
Items that will not be reclassified to profit and loss 0.66 5.99 0.66 5.99
Total Comprehensive Income (1929.97) (310.99) (1866.40) (333.99)
(Comprising of Profit and Loss for the period)

Note: The above figures are extracted from the standalone andconsolidated financial statements.

PERFORMANCE HIGHLIGHTS

The key aspects of revenue and profits for the financial year 2018-19from the Company's Standalone and Consolidated

Results are as follows:

REVENUE STANDALONE

Our total income on a Standalone basis increased to `49631.11 lacsfrom `11283.75 lacs in the previous year at a growth rate of 30% (approximately). Netloss for the year increased from `310.99 lacs to `1929.97 lacs in the current year.

REVENUE CONSOLIDATED

Our total income on a consolidated basis increased to `51591.73 lacsfrom `13406.37 lacs in the previous year. Net loss for the year increased from `333.99lacs to `1866.40 lacs in the current year.

SUBSIDIARy/ JOINT VENTURE COMPANIES

Your Company has three wholly owned subsidiaries as on 31st March2019. The Board of Directors also reviewed the affairs of the subsidiary companies. Inaccordance with the provisions of Section 129(3) of the Companies Act 2013 we haveprepared Consolidated Financial Statements of the Company and its Subsidiaries whichforms part of this Annual Report. The accounts of Joint Venture i.e. AWN Agro PrivateLimited has not been consolidated for the current year. The reason for non-consolidationis due to discontinuation of control on the management and financial affairs of the JointVenture Company.

Further a statement containing the salient features of thefinancialstatements of our Subsidiary Companies and Joint Venture Company in theprescribed format AOC-1 is appended as "Annexure-A" to theBoard's report.

SHARE CAPITAL

The paid up Equity Share Capital of the Company as at March 31 2019stood at`60099000. During the year under review the Company has neither issued anyshares with differential voting rights nor has granted any stock options or sweat equity.As on March 31 2019 none of the Directors of the Company hold any instrumentsconvertible into equity shares of the Company.

DIVIDEND AND RESERVES

Your Directors express their inability to recommend any dividend forthe year 2018-19 owing to accumulated losses of the Company. In view of this your Companywas unable to transfer any funds to the Reserves and Surplus Account.

FIxED DEPOSITS

The Company has neither invited nor accepted any deposits within themeaning of Section 73 of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014 from the public during the year ended March 31 2019. There were nounclaimed or unpaid deposits as on March 31 2019.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERREDTO IN SUB-SECTION (1) OF SECTION 188.

All related party transactions entered into during FY 2018-19 were onan arm's length basis and in the ordinary course of business and were in compliancewith the applicable provisions of the Companies Act 2013 (‘the Act') and theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015.

All related party transactions are placed before the Audit Committeefor review and approval of the Committee and also to the Board for approval. The policy onmateriality of related party transactions and dealing with related party transactions asapproved by the Board is available on the Company's website.

The details of related party transactions entered into by the Companyare provided in Form AOC-2 given as "Annexure B" of

Directors' Report. There are no materially significant relatedparty transactions Managerial Personnel or other designated persons which may havepotential conflict with interest of the Company at large. The Company has developed aRelated Party Transactions Policy through Standard Operating Procedures for the purpose ofidentification and monitoring of such transactions.

MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITIONOF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIALSTATEMENT RELATE AND THE DATE OF THE REPORT

The Company has entered into a Dry Lease Agreement with its GroupCompany viz. N K Proteins Private Limited on 15th April 2019 the terms andconditions of such lease are laid down in the Agreement itself whereby the FactoryPremise of the Company has been given on lease to M/s. N K Proteins Private Limited.

This decision as to giving the factory premise on lease was taken owingto the huge losses and other market conditions as well as unavoidable fixed cost andexpenses which the Company could not by any means was able to control. Therefore with thisstep we are now able to generate income without increasing the inadequate expenditures.

Apart from the above there are no other material changes that wouldaffect the financial position of the .

CORPORATE GOVERNANCE

All the mandatory provisions of Corporate Governance as prescribed inRegulations 17 to 27 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 are not applicable to the Company as it does not fall under the criteriaof its applicability pursuant to Regulation 15 of SEBI Listing Regulations.

MANAGEMENT DISCUSSION AND ANALYSIS REPORTS

In terms of the Regulation 34(e) read with Schedule V of SEBI (ListingObligations & Disclosure Requirements) Regulations 2015 MDA covering details ofRisks and Concerns Internal Control Systems and their Adequacy Discussion on Financial

Performance with respect to Operational Performance etc. for the yearunder review is set out in this Annual Report as

"Annexure C".

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 of Companies Act 2013read with Rule 5(1) of the Companies (Appointment & Remuneration of ManagerialPersonnel) Rules 2014 in respect of employees of the Company is annexed as "AnnexureD" Further no employee of the Company was employed during the year drawingremuneration exceeding the limits as prescribed under Rule 5(2) of the (Appointment andRemuneration of Managerial Personnel) Rules 2014. Hence the information under Rule 5(2)is not applicable.

BOARD DIVERSITY

The Company recognizes and embraces the benefits of having a Boardlevel as an essential element in maintaining a competitive advantage in the complexbusiness that it operates.

The Board of Directors has also adopted a policy on Board Diversitywhich sets out the approach to diversify the Board of Directors. The Board DiversityPolicy is available at our website: http://www.nkindustriesltd.com/governance.html

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

The Company has not given any loans or guarantees during the year underreview within the purview of section 186 of the Companies Act 2013. The details of theinvestments made by Company are given in the notes to investments in the financialstatements.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration from each Independent Director ofthe Company under section 149 (7) of the Companies Act 2013 that he/she meets thecriteria of independence laid down in section 149 (6) of the Companies Act 2013.

BOARD EVALUATION

The Companies Act 2013 states that the formal annual evaluation needsto be made by Board of its own performance and that of its Committees and individualDirectors Schedule IV of the Companies Act 2013 states that performance evaluation ofthe Independent Directors shall be done by the entire Board of Directors excluding thedirector being evaluated. The evaluation of all the Directors and the entire Board wasconducted based on the criteria and framework adopted by the Board.

The Board approved the evaluation results as allotted by the Nominationand remuneration committee. The Companies Act

2013 states that the formal annual evaluation needs to be made by boardof its own performance.

APPOINTMENT AND RESIGNATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

In accordance with the provisions of Section 152(6) of the CompaniesAct and Articles of Association Mr. Nimish K. Patel (DIN: 00240621) Chairman and ManagingDirector of the Company shall retire by rotation and being eligible offers himself forreappointment at the ensuing Annual General Meeting of the Company.

Further during the year under review and upto the date of this reportthe following changes occurred in the composition of Board and Key Managerial Personnel ofthe Company:

1. Mr. Tushar Doshi was appointed as the Independent Director in theAnnual General Meeting held on 16th June 2018.

2. Mr. Hasmukh K. Patel has been re-appointed as the Whole TimeDirector of the Company w.e.f 1st June 2019 by the Board of Directors in the BoardMeeting held on 14th August 2019.

3. Ms. Akanksha Srivastava resigned w.e.f 12th June 2019 as theCompany Secretary and Compliance Officer of the Company.

4. Ms. Trusha Shah has been appointed w.e.f 14th August 2019 as theCompany Secretary and Compliance Officer of the Company by the Board in the meeting heldon 14th August 2019.

Approval of members is required for the appointment of Mr. HasmukhPatel as the Whole Time Director of the Company which is made part of the noticeconvening the ensuing 31st Annual General Meeting of the Company.

BOARD MEETINGS/ DETAILS OF OTHER MEETINGS

The Board of the Company is endlessly focused for the growth expansionof the Company. It is further involved to strategize the optimum utilization of theavailable resources and to reduce cost so as to improve the profitability of the Companyand also to generate additional opportunities for better performance as a whole.

The Management of the Company is also striving towards becoming a 100%compliant entity and to improve its investor relations by sharing latest and correctinformation with its stakeholders and thereby creating a transparent atmosphere. The Boardmet 5 times during the year under review viz. on 19th April2018 28thApril2018 11th August 2018 3rd November 2018 and 6thFebruary2019. The Board held one meeting in each quarter and the gap between any twomeetings was not more than one hundred and twenty days as prescribed under the CompaniesAct 2013.

Details of the Directors their positions attendance record at Boardmeetings and last Annual General Meeting held and convened during the financial year areas follows:

Sr. Name of directors Designation Number of Meetings Attended / Total Meetings held during the year 2018-19 Attended AGM on 16th June2018
No.
1. Mr. Nimish K. Patel Chairman and Managing Director 4/5 v
2. Mr. Nilesh K. Patel Managing Director 4/5 v
3. Mr. Hasmukh K. Patel Whole Time Director 5/5 v
4. Mr. Bhawani Singh Yadav Independent Director 5/5 v
5. Ms. Mridu Sharma Independent Women Director 5/5 v
6. Mr. Tushar H. Doshi* Independent Director 2/5 v

* Mr. Tushar H. Doshi (DIN: 08118621) appointed as an IndependentDirector of the Company w.e.f 16th June 2018.

INDEPENDENT DIRECTORS' MEETING

As per Schedule IV of the Companies Act 2013 a separate meeting ofIndependent Director was on 6th February 2019 at 11.30 A.M. at registered office of thecompany situated at Ahmedabad to discuss the agenda items as required under the CompaniesAct 2013.

COMMITTEES MEETING

As on 31st March 2019 the Board had three committees i.e.Audit Committee Nomination and Remuneration Committee and Stakeholders RelationshipCommittee. All committees are properly constituted with proper composition of IndependentDirectors as mentioned in relevant provisions of Companies Act 2013.

During the under review Mr. Tushar H. Doshi (DIN: 08118621) appointedas an Independent Director of the Company w.e.f 16th June2018 consequentlythe Board reconstituted the committees of the Board in the Board Meeting held on 19thApril 2018.

A. AUDIT COMMITTEE AND ITS MEETINGS:

Audit Committee met 4 times during the year under review on 28thApril201811th August 2018 3rd November 2018 and 6thFebruary2019.

Constitution of Audit Committee was as per the following:

Sr. No. Name of the Director Status in Committee Nature of Directorship Total Meetings Attended/ Total Meetings Held
1. Mr. Nilesh K. Patel Member Managing Director 3/4
2. Mr. Bhawani S. Yadav Chairman & Member Independent Director 4/4
3. Ms. Mridu Sharma Member Independent Director 4/4

B. NOMINATION AND REMUNERATION COMMITTEE AND ITS MEETINGS:

Nomination and Remuneration Committee met 1 time during the year underreview on 28th April 2018. Constitution of Nomination and RemunerationCommittee was as per the following:

Sr. No. Name of the Director Status in Committee Nature of Directorship Total Meetings Attended/ Total Meetings Held
1. Mr. Nilesh K. Patel Member Managing Director 1/1
2. Mr. Bhawani S. Yadav Chairman & Member Independent Director 1/1
3. Ms. Mridu Sharma Member Independent Director 1/1

C. STAKEHOLDERS RELATIONSHIP COMMITTEE AND ITS MEETING:

Stakeholders Relationship Committee met 4 times during the year underreview on 27th April 2018 10th August 2018 1st November 2018 and 4th February 2019.

Constitution of Stakeholders Relationship Committee was as per thefollowing:

Sr. No. Name of the Director Status in Committee Nature of Directorship Total Meetings Attended/ Total Meetings Held
1. Ms. Mridu Sharma Member Independent Director 4/4
2. Mr. Bhawani S. Yadav Chairman & Member Independent Director 4/4
3. Mr. Nilesh K. Patel Member Managing Director 4/4

D. DISSOLUTION OF CORPORATE SOCIAL RESPONSIBILITY COMMITTEE:

The Board of Directors in its meeting held on 19th April 2018 decidedto dissolve the Corporate Social Responsibility Committee (CSR) as the provisions ofSection 135 r.w. Schedule VII of the Companies Act 2013 are not applicable to the Companyas on date.

E. OTHER INFORMATION RELATED TO BOARD COMMITTEES:

Name of the Committee Highlights of Duties Responsibilities and Activities
Audit Committee All recommendations made by the audit committee during the year were accepted by the Board.
The Company has adopted the Vigil mechanism for Directors and employees to report concerns about unethical behavior actual or suspected fraud or violation of the Company's Code of Conduct and Ethics.
In accordance with the requirements of the Companies Act 2013 the Company has formulated policies on related party transactions. The policies including the Vigil Mechanism Policy are available on our website:- http:// www.nkindustriesltd.com/Governance.html
Nomination and Remuneration Committee The committee oversees and administers executive compensation operating under a written charter adopted by our Board of Directors.
The committee has designed and continuously reviews the compensation program for our Directors with business objectives and to link compensation with the achievement of measurable performance goals.
The nomination and remuneration committee has framed the nomination and remuneration policy. The said policy is available on the website of the Company http://www.nkindustriesltd.com/Governance.html
Stakeholders Relationship The Committee reviews and ensures to redress investor grievances.
Committee The Committee noted that all the grievances of the shareholders during the year have been resolved.

NOMINATION AND REMUNERATION POLICY

The Policy of the Company on Director's appointment andremuneration including criteria for determining qualifications positive attributesIndependency of a Director and other matters provided under sub-section (3) of section 178of The Companies Act 2013 adopted by the board is available on the website i.e.http://www.nkindustriesltd.com/governance.html. We affirmthat the remuneration paid to theDirectors is as per the term laid out in the Nomination and remuneration policy of thecompany.

DIRECTOR'S RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors make the followingstatements in terms of Clause (c) of Sub-Section (3) of Section 134 of the Companies Act2013 which states that—a) in the preparation of the annual accounts for the yearending March 31 2019 the applicable accounting standards have been followed along withproper explanation relating to material departures; b) the directors had selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe company at the end of the financial year and ofthe period; profit and lossof thecompany for that c) the directors had taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions of this Act forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities; d) the directors had prepared the annual accounts on a going concernbasis; e) the Directors have 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 have devised proper system to ensure compliance with theprovisions of all applicable laws and that such system were adequate and operatingeffectively.

AUDITORS

i. Statutory Auditors

M/s Parikh and Majmudar Chartered Accountants (Firm Registration No:107525W) were appointed as the Statutory Auditors of the Company for a consecutive periodof 5 years from 26th AGM till the conclusion of 31st AGM subject toratification at each AGM.

Moreover as per the provisions of Section 139 of the Companies Act2013 an Auditors' Firm can be re-appointed for second consecutive term of five years.Therefore it will be within the limits of the provisions of Section 139 if M/s. Parikh andMajmudar are re-appointed for a second term of 4 years.

The Company has obtained written consent from them and a certificateensuing 31st Annual General Meeting will be in accordance with the provisions of Section139 of the Companies Act

2013 and such conditions as may be prescribed.

The Board at their meeting held on 14th August 2019 decided tore-appoint them for a further term of 4 years in accordance with the provisions of Section139 of the Companies Act 2013 and the rules made thereunder. Their appointment will befor a consecutive period of 4 (four years) i.e from 31st Annual General Meeting (F.Y.2019-20) to the 35th Annual General Meeting (F.Y 2022-2023).

The members are requested to consider the matter of appointment ofAuditors and also to fix their remuneration. There are certain qualifications made by theAuditors in their Standalone Report for which the Board of Directors hereby give itscomments/explanation as under: i. National spot Exchange Limited (NSEL) has served anotice to N K Proteins Private Limited (Formerly known as N

K Proteins Limited) who was a Trading and Clearing Member at NSEL and NK Industries Limited was only a client Company of Trading Member i.e. N K ProteinsLimited. As regards the balances of trade receivables and trade payables arising out ofthe transactions through NSEL platform the same cannot be confirmed pursuant to thependency of litigations and as the matter is still pending before the respectiveauthorities.

Further the Home Department Government of Maharashtra has issued anotification under the MPID Act 1999 securing the attachment of Land & Building andPlant & Machinery of the Company. Against this the Company had challenged thenotification issued by Home department Government of Maharashtra before the Hon'bleHigh Court of Gujarat. The Hon'ble Gujarat High Court had disposed off theapplication of the Company vide its order dated 29th March 2017.Against thesaid order the Company had preferred a Special Leave Petition before the Hon'bleSupreme Court of India. The Hon'ble Supreme Court of India had disposed off theSpecial Leave Petition on 17/04/2017 with an observation to file an application beforethe Hon'ble Bombay High Court. The Company has filed petition before the Hon'bleBombay High Court in June 2017. Besides this the Company has also filed its objectionsagainst the attachment notification before the Designated Special MPID Court Mumbai andthe matter is subjudice. ii. With respect to point no.2 of qualified opinion of AuditorsReport it is hereby clarified that the Company has preferred an appeal before theHon'ble Appellate Tribunal under the Prevention of Money Laundering Act 2002. Thematter is sub-judice.

Further the Directorate of Enforcement (hereinafter referred to asED) Government of India had initiated proceedings of search/seizure on 30.05.2018 on thegroup company NKPL the promoters of the company

Shri Nilesh Patel and Shri Nimish Patel one of the family member aswell as on the company and thereafter on

29.06.2018 the ED Government of India had preferred an applicationu/s 17(4) of the Prevention of Money Laundering Act 2002 before the AdjudicatingAuthority New Delhi vide it's Application No. OA/236 of 2018 against the company aswell as group company NKPL and the promoters for retention of the seized properties andfor continuation of order of freezing the properties till finalization of theproceedings of the properties mentioned in the application u/s 17(4) of the PMLA Act2002 Against the said action the company along with Group Company and promoterschallenged the show cause notice issued by the adjudicating authority New Delhi beforethe Hon'ble High Court of Delhi and the Hon'ble High Court has set aside thesaid show cause notice. The Directorate of Enforcement has attached assets of the companygroup company NKPL and the promoters of the company by issuing a fresh show cause noticedated 30/08/2018 and thereafter the company has filed an appeal before PMLA AppellateTribunal Delhi. In view of the above that the matter is subjudice.

of Auditors Report it is hereby clarified that The Government ofiii. Withrespectto pointno.3ofqualified

Maharashtra (at the instance of Economic wing offence Mumbai) hasfiledsupplementary Charge sheet dated 25th

December 2018 under the various sections of IPC AND MPID Act againstthe company and its chairman Shri Nimish Patel. The Company has complied with all summonsin this matter and the matter is adjourned to 2nd August2019 In addition to the abovethe Auditors have made observations under the head "Emphasis of Matter" replyto the said observations is as under:-

1. Though the net worth of the company is negative the company ismaking sincere efforts for the revival of the business of the company whereby it is makingcontinues efforts to increase the volumes as well as to generate comprehensive margins andthereby revive the business.

2. During the year under review the Income Tax Department has raised ademand of `86 Lacs on the Company for the Assessment Year 2014-15 making the demand of `133 crores in aggregate. The said matter being disputed is still pending before the IncomeTax Authorities. In this regard the Income Tax Authorities have also attached theproperties of the Company against the said demand as mentioned in the Auditors in theirReport.

3. With respect to the survey carried out u/s 133 of the income tax actin 1999 and in response to the orders passed by 1st Appellate authority and 2ndAppellate Authority subsequently with respect to survey proceedings the company preferredApplication to the Hon'ble High Court of Gujarat which was disposed off by theHon'ble Court vide its order dated 20/06/2016 after giving relief on certain groundand dismissing certain ground. The Said order was challenged on before the Hon'bleSupreme Court which was dismissed by the Hon'ble Supreme Court vide order dated 16thJanuary 2017. The company has already provided for interest and tax in earlier yearstowards the said demand. It is further stated that the Order of Hon'ble Gujarat HighCourt is pending to be received from the department. Once the order is passed the neteffect will be a refund to the company and hence there is no need to make any furtherprovision in the books of accounts.

4. The demand raised by the Sales Tax Authorities is explained videNote No. 40. The said sales tax demand is disputed in view of the fact that the Companyhas preferred an appeal before the appellate authority and the Company has shown the saidliability as Contingent Liability under Note No. 27 of the notes forming part of theAccounts. In this view the Company has not made any provision for the said disputedliability.

5. As explained by the Auditors in their report at point no. 5 theCompany has sent letters obtaining confirmation of balances to various parties but due tonon-receipt of replies the balances of parties customers as well as various loans andadvances given are still awaited.

6. As explained in the report the company have not received any legalnotice/communication of such proceedings against the company and that the company ishaving basic information about such suit filed as reflected on the website of the MCA.

The qualification made by the Auditors in their Consolidated Report forwhich the Board of Directors hereby give its comment/explanation as under:

iv. The National Spot Exchange Limited (NSEL) has initiated recoveryproceedings against the Group Company N K

Proteins Private Limited (Formerly known as ‘N K ProteinsLimited') who was a trading and clearing member at NSEL. As regards the said recoveryproceedings initiated by NSEL and has made our Company a party to the said proceedingsthe matter is subjudice and still pending before the Hon'ble High Court of Mumbai.

Their report on Consolidated Financial Statements emphasizes on someadditional points which the management has to reply as under:

1. As explained earlier at point no. i above N K Proteins PrivateLimited (N K Proteins Limited) was a trading cum clearing member of National Spot Exchange(NSEL). In the said matter NSEL has filed a recovery suit in Bombay High Court against N KProteins Private Limited and others. N K Oil Mills Private Limited was neither a tradingmember nor a client of N K Proteins Private Limited. In this regard a Notice of Motion isfiled before the Hon'ble Bombay High Court on behalf of N K Oil Mills Private Limitedand the matter is sub-judice

2. The Home Department Maharashtra has through notification under theMaharashtra Protection of Interest of Depositors Act 1999 attached the properties ofBanpal Oilchem Private Limited as mentioned by the Auditors. The Company has filed itsdetailed Objections against the said attachment Notification before the Designated Courtat

Mumbai and the matter is still subjudice.

3. The Directorate of Enforcement had through a provisional attachmentorder dated 27/08/2014 attached the assets of one of the Subsidiary Company viz. BanpalOilchem Private Limited however the Company has challenged the said attachment orderbefore the PMLA Appellate Tribunal New Delhi and the matter is sub-judice.

4. Income tax department has attached the properties as menntioned inthe Emphasis of Matter against the outstanding tax demands pertaining to FY 2007-08 to FY2012-13. With respect to the said outstanding demands it is stated that all the demandsare disputed demands and has been challenged by the company at various appellate forums.The subsidiary company is hopeful of obtaining favourable order from the appellateauthorities. On receipt of the favorable order the demand would be deleted and attachmentshall vacate.

5. In view of the fact that the Management of our Company do not haveany control in the Joint Venture viz. AWN Agro Pvt. Ltd and as per the exemption providedunder the provisions of the Companies Act 2013 and the Accounting standard 21 & 27consolidation of the accounts of AWN Agro Pvt. Ltd. is not required with our company.

6. The order was passed under section 143(3) r.w. Section 142(A) of theIncome Tax Act 1961(the IT Act) the said order is passed without appreciating the factsof the case. The subsidiary company viz. Tirupati Retail (India) Private Limited beingaggrieved by the said order has preferred an appeal before CIT (Appeals). Also the ordersu/s 179 of the Income Tax Act 1961 are passed on the Directors of the Company which ispassed without appreciating the facts as the demand is contingent and highly debatable.The Directors are in the process of challenging the impugned order at appropriate forum.Further the Company is hopeful of getting the favourable orders from the CIT (Appeals).

Clarification with regard to the remark in point no. (i)(c) of the CARO(Report) annexed with the Auditors Report on standalone financial statements. i. Withreference to the said remark it is to be clarified that the Company is in process oftransferring the properties mentioned by the Auditors in their report in its name. ii.Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has appointed M/s Riddhi Khaneja & Associates Practicing Company Secretary(FCS- 10221 CP No. 17397) Ahmedabad to conduct a Secretarial Audit of the Company'sSecretarial and related records for the year ended 31st March 2019.

The Report on the Secretarial Audit for the year ended 31st March 2019is annexed herewith as "Annexure E" to this Board's Report. Therewerenoqualifications/observationsinthereport

iii. Cost Auditors Pursuant to Section 148 of the Companies Act2013 read with the Companies (Cost Records and Audit) Amendment Rules 2014 the Cost Auditrecords maintained by the Company are required to be audited by Cost Accountant. On therecommendations of the Audit Committee the Board of Directors of the Company hadappointed M/s. N D Birla & Co. Cost Accountants Ahmedabad as the Cost Auditors ofthe Company to carry out audit of Cost Accounting Records of the Company which was filedby the Company within the stipulated time during the year 2018-19 The Board of Directorson the recommendation of the Audit Committee has appointed M/s. N D Birla & Co. CostAccountants Ahmedabad as the Cost Auditors of the Company to carry out audit of costaccounting records of the Company for the financial year 2018- 19. As required under theCompanies Act 2013 a resolution seeking member's approval for the remunerationpayable to the Cost Auditor forms part of the Notice convening this 31st Annual General

Meeting.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS

1. An order dated 30/10/2018 was passed by Additional Senior CivilJudge at Vadodara Special Civil Suit No.986 of 2000 filed by Vemag Engineers Pvt. Ltdagainst the Company. In this matter the Court has ordered the Company to pay the plaintiffan amount of ` 1737705.00 (Rupees Seventeen Lakhs Thirty Seven Thousand & SevenHundred Five Only) along with the interest @24% from the date of institution of suit tillrealization of the amount. However the Company has a right to file an appeal against thesaid order and that the Company is hopeful of getting a favorable order under the appeal.

2. Further the provisional attachment orders as passed by theEnforcement Directorate under the process of investigation were confirmed by theAdjudicating Authority under PMLA. In this process of investigation further a search wascarried out at the business premise and residence of the Directors on 30.05.2018 duringwhich some additional movable assets were seized under PMLA. In this matter theadjudicating authority has allowed retention of said propertie to the EnforcementDirectorate for the purpose of further investigation. The Company has already filed anappeal against the said order before the PMLA Appellate Authority New Delhi which isadmitted and the next hearing of the matter is fixed on 26th August 2019. Thematter is still subjudice.

EXTRACTS OF ANNUAL RETURN

The details forming part of the extracts of Annual return in formMGT-9 as required under Section 92 of the Companies Act

2013 is included in this Report as "Annexure-F" andforms integral part of this report.

CORPORATE SOCIAL RESPONSIBILITY

As per the provisions of the Companies Act 2013 "Corporate SocialResponsibility" (CSR) was not applicable to the Company during the year underreview. Therefore the Board of Directors has dissolved the Corporate SocialResponsibility Committee (CSR) in its meeting held on 19th April 2018.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has adopted a Vigil Mechanism/ Whistle Blower Policy toreport genuine concerns or grievances. The Vigil Mechanism has been placed on the Websiteof the Company http://www.nkindustriesltd.com/vigilmechanism.html.

INTERNAL FINANCIAL CONTROL SYSTEM AND ITS ADEQUACY

The Company has an Internal Control System commensurate with the sizescale and complexity of its operations. To maintain its objectivity and independence theCompany has appointed Independent Internal Auditor M/s. ADPRDP & Associates CharteredAccountants to submit Internal Audit reports to the Audit Committee of the Board.

The Internal Auditor monitors and evaluates the efficacy and adequacyof internal control system in the Company its compliance with operating systemsaccounting procedures and policies at all locations of the Company. Based on the report ofInternal Auditor Audit Committee undertakes corrective action if any in their respectiveareas and thereby strengthens the controls. Significant audit observations andrecommendations along with corrective actions if any thereon are presented to the AuditCommittee of the Board.

ENVIRONMENT HEALTH AND SAFETY

The Company is conscious of the importance of environmentally clean andsafe operations. The Company is committed to health and safety of its employeescontractors and visitors. The Company is conducting operations in such a manner so as toensure safety of all concerned compliances of environmental regulations and preservationof natural resources.

DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE(PREVENTION PROHIBITION AND REDRESSAL) ACT 2013

The Company has zero tolerance towards sexual harassment at theworkplace and has adopted a policy on prevention prohibition and redressal of sexualharassment at workplace in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder.

INDUSTRIAL RELATIONS

The Company is committed to nurturing enhancing and retaining toptalent through superior Learning and Organizational Management. During the year underreview your Company enjoyed cordial relationship with workers and employees at alllevels.

STATUTORY INFORMATION

  1. Conservation of Energy:

a) Company ensures that the manufacturing operations are conducted in the manner whereby optimum utilization and maximum possible savings of energy is achieved.

b) No specific investment has been made in reduction in energy consumption.

c) As the impact of measures taken for conservation and optimum utilization of energy are not quantitative its impact on cost cannot be stated accurately.

d) Since the Company does not fall under the list of industries which should furnish this information in Form-A as annexed to the aforesaid Rules the question of furnishing the same does not arise.

ii. Technology Absorption:

Company's products are manufactured by using in-house know how andno outside technology is being used for manufacturing activities. Therefore no technologyabsorption is required.

iii. Foreign Exchange Earning and Outgo:

During the period under review the foreign exchange earnings andoutflow was as follows:

year 2018-19 Amount in `
Foreign Earnings -
Foreign Outflow -

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company prepared inaccordance with Indian Accounting Standards (Ind AS) 110 issued by the Ministry ofCorporate Affairs forms part of this Annual Report.

PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Conduct for Prevention of InsiderTrading with a view to regulate trading in securities by the Directors and designatedemployees of the Company. The Code requires pre-clearance for dealing in theCompany's shares and prohibits the purchase or sale of Company shares by theDirectors and the designated employees while in possession of unpublished price sensitiveinformation in relation to the Company and during the period when the Trading Window isclosed. The Board is responsible for implementation of the Code.

RISK MANAGEMENT POLICY

All the mandatory provisions of Corporate Governance as prescribed inRegulations 17 to 27 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 are not applicable to your Company as the Company does not fall underthe criteria of its applicability pursuant to Regulation 15 of SEBI Listing Regulations.However all the Provisions Rules and Regulations under the Companies Act 2013 relatedto the Corporate Governance are applicable to the extent and have been comply by theCompany.

ACKNOWLEDGEMENT

Your Directors would like to express their appreciation for theassistance and co-operation received from the Company's customers vendors bankersauditors investors and government bodies during the year under review.

Your Directors place on record their appreciation of the contributionsmade by employees at all levels.

For and on behalf of the Board
Nimish K. Patel
Date : 14th August 2019 Chairman & Managing Director
Place : Ahmedabad DIN: 00240621