Your Directors have pleasure in presenting the 32nd Annual Report of theCompany together with the Audited Accounts for the year ended 31st March 2019.
Your Company's performance during the year as compared with that during the previousyear is summarized below:
(Rs. in lakhs)
|Particulars || |
| ||2018-19 ||2017-18 ||2018-19 ||2017-18 |
|Total Income (including Other Income) ||89121 ||88487 ||89119 ||88423 |
|Profit/(Loss) before Finance Cost Depreciation and Tax ||3947 ||6768 ||3941 ||6777 |
|Finance Charges ||3398 ||3342 ||3398 ||3342 |
|Depreciation and Amortization ||2035 ||1977 ||2035 ||1977 |
|Profit/(Loss) before exceptional items and tax ||(1486) ||1449 ||(1492) ||1458 |
|Share of profit from associate ||137 ||94 ||- ||- |
|Profit/(Loss) before tax ||(1349) ||1543 ||(1492) ||1458 |
|Current Tax ||- ||540 ||- ||540 |
|Deferred Tax ||(654) ||(154) ||(654) ||(154) |
|Profit/(Loss) for the year ||(695) ||1157 ||(838) ||1072 |
|Other Comprehensive Income ||1 ||46 ||3 ||46 |
|Total Comprehensive Income ||(694) ||1203 ||(835) ||1118 |
|Balance of profit brought forward from previous year ||18389 ||17420 ||17998 ||17114 |
|TOTAL ||17695 ||18623 ||17163 ||18232 |
|Appropriation || || || || |
|Dividend on equity shares ||196 ||195 ||196 ||195 |
|Dividend distribution tax ||40 ||39 ||40 ||39 |
|Balance profit carried forward to balance sheet ||17459 ||18389 ||16927 ||17998 |
Your Directors are pleased to inform that your Company has received the followingawards during the year 201819:
i) Srikakulam Technical Unit and Ethakota Formulation have been awarded with the"Best Management Award" by the Government of Andhra Pradesh for ManagementPractices for yet another year 2018 by the hands of Hon'ble Chief Minister of AndhraPradesh. These award were given third time for each of the units in last four years.
ii) Srikakulam Plant received prestigious safety award of "Prashansa Patra"from the National Safety Council (NSC) for the year 2018 for its best Safety Practices byHon'ble minister of the State Labour and Employment Government of India and EthakotaFormulation Plant (Certificate has also received Safety Award-2018 of Appreciation) fromthe NSC.
iii) Crop Care Federation of INDIA has awarded NACL for the best "Safe Handling& Judicious Use of Agro Chemical Awareness".
iv) Srikakulam Technical unit has received "Social Responsibility ExcellenceRunner Up Award" from Pesticides Manufacturers and Formulators Association(PMFAI').
v) Srikakulam Technical Unit has received "Greentech Environment Award -2018" from Greentech Foundation Delhi India by the hands of Hon'ble Member ofParliament Govt. of India Shri Ranjan Rajan; Hon'ble Minister of State ExciseEnvironment & Forest of Assam Govt. Mr. Parimal Suklabaidya and Greetech ChairmanMr.K.Sharin.
The Company achieved a consolidated revenues of Rs.89121 lakhs during the year underreview as against Rs.88487 lakhs achieved in the previous year showing an increase of0.72%. During the year under review the Company has recorded a net loss of Rs. 694 lakhsagainst the net profit of Rs.1203 lakhs for the financial year 2017-18. The Company'sloss before exceptional item and tax is Rs.1486 lakhs during the year under reviewagainst the profit of Rs.1449 lakhs during the previous year 2017-18.
The loss is mainly attributable to poor domestic Rabi season steep raw material priceincrease due to temporary closure of some of the chemical manufacturing facilities inChina and rupee depreciation.
Dividend and Reserves:
Keeping in view of loss suffered by the Company your Directors regret their inabilityto recommend dividend for the year under review. No amount is being transferred to theGeneral Reserves.
The Srikakulam technical plant has achieved annual production of 5533 MT as comparedto 6023 MT in the previous year a reduction of production by about ~8%. The loss inproduction was mainly due to slackening in demand for various Technical grades beingcaptively used for domestic market requirements. However the plant could meet theenhanced demand for the various Active Ingredients/ Technicals in the export market. Theplant has been taking various initiatives for energy conservation cost savings andcapacity utilization by streamlining debottlenecking augmenting plant and enhancingproductivity. Efforts are being put in to increase the efficiency of Zero Liquid Dischargefacility by adopting latest technologies.
Ethakota formulation unit has been able to satisfactorily meet not only the domesticformulation market demand but also that of the newer and expanding export market. The unitachieved production of 18639 MT/KL during the year under review compared to the previousyear production of 24738 MT/KL a reduction by about ~24%. The decrease in production wasmainly due to the reduction in domestic market demand. Export of Formulation trade wasaffected by price pressure and currency devaluation in South East Asia and East Africa.The unit has been in continuous growth mode being capable of handling any market demandboth in terms of flexibility in product mix and demand in higher volumes. The continuedfocus on areas of improving flexibility enhancing capacities increased productivityde-bottlenecking quality control and better supply chain initiatives are yieldingresults.
An amiable working environment in both units has enabled maintaining cordialrelationship with workers Unions and other Stakeholders.
In the year 2018 the south west monsoon was 91% of its long period average(LPA') which is a 9.4% deficit in the rainfall. The seasonal rainfalls over variousNorthwest India Central India South Peninsula and Northeast (NE) India were 98% 93%98% and 76% of respective LPA.
The country-wide deficiency in North east monsoon stands at 44%. Among the differentregions central India east and northeast India have fared the worst with deficits of 51%each. Northwest India has received 45% less rains than normal and the southern peninsulais 36% deficient.
This affected the Rabi spraying badly. Wheat acerage was normal Rice acerage was 22%below of normal Maize was 7% up and groundnut acerage was down by 21%. Despite theadverse competitive market conditions your Company achieved domestic sales of Rs.63389lakhs for the year under review against Rs.73341 lakhs in the previous year a reductionby ~13%. The reduction is mainly due to poor Rabi season. The deficit rain continue tohave negative impact on collection.
Global conventional crop protection market has grown by 6% to $ 57.56 billion in 2018(source: Agrow by Informa). Increase in the prices in China and ease out of the inventorysituation in Brazil have led this growth. Crop Protection chemical Exports from India haveincreased in FY 19 due to the situation in China and increase in the product prices.
The reduction of inventories has helped in resuming the agrochemical business inBrazil has contributed positively to your company's exports sales. Enforcement ofstricter environment norms in China has provided trading opportunities to supplyTechnicals to customers in Australia
New Zealand Russia and Vietnam. Contract manufacturing business was slightly affecteddue to less offtake of couple of products. Formulation business was impacted mainlybecause of price pressure currency devaluation in South East Asian and East AfricanCountries. However with business development activities that are being taken the outlookfor this business segment looks positive in the coming years. Your company continued itsefforts to register its brands in South East Asia and Africa and got two registrations inEthiopia and two new registrations in Myanmar.
In spite of the challenges the performance of Exports function has increased by nearly76% when compared to that of the last year. The sales were Rs. 22362 lakhs in the yearunder review as compared to Rs. 12741 lakhs in the previous year. This was possible dueto the initiatives that have been taken post fiscal 2013 and your company's continuedattempt in maintaining strong relationship with the Contract Manufacturing Customers.
During the year under review the Credit Analysis and Research Limited (CARE) hasre-affirmed the following existing rating for Long Term and Short Term Bank facilities ofthe Company: a) Long-term Bank facilities: CARE A- Stable (Single A minus;Outlook: Stable) and b) Short-term Bank facilities:CARE A2 (A two).
Fire Insurance Claim:
As reported in the previous year the Company aggrieved by the assessment andsettlement of claim by the Insurance Company with respect to fire accident at Srikakulamplant filed the differential claims before the sole Arbitrator in line with the orders ofHon'ble High Court of Delhi. The Arbitration proceedings are progressing satisfactorilyand in an advanced stage of hearing.
New Projects/Products: efficiencies In the direction focusing on cost andinnovation the Company's R&D Centre at Shadnagar near Hyderabad continues todevelop cost effective processes for manufacture of Active Ingredients (AIs)/Technical andIntermediates for Herbicides Insecticides and Fungicides. To take advantage of the Makein India manufacturing initiative processes for many generic products are under variousstages of development for manufacturing by NACL. Your Directors are pleased to inform thatthe R&D Centre has received the Certificate of Accreditation from the NationalAccreditation Board for Testing and Calibration of Laboratories (NABL)
Registration of the active ingredients and the final products is a major activity. ThisDepartment works on applying for registration in India as well as in Countries in Africaand SE Asia to enable marketing of the products. The total number of registrations NACLhas is 359 in India and 90 for exports.
Your Company continues to maintain high standards in environmental management with itsmanufacturing facilities operating well within stipulated norms due to the efficientrunning of the Zero Liquid Discharge (ZLD) facilities in Srikakulam and Ethakota.Srikakulam manufacturing site has an online effluent and emission monitoring devices thatcontinuously upload the data to Pollution Control Board website. These sites have alsoincreased plantation area within the factory premises. Your Company continues to enjoy thecertifications ISO:9001:2015 ISO:14001:2015 and ISO 45001:2018 accredited for its provenstandards covering in the areas of Quality Environment Safety and Health ManagementSystems respectively.
Alteration in Memorandum and Article of Association:
During the year under review the Company has entered into a Share Subscription andShareholders Agreement (SSSA') with the Investors (M/s.Krishi Rasayan ExportsPrivate Limited and Mr.Rajesh Kumar Agarwal and Mr.Atul Churiwal jointly representingM/s.Agro Life Science Corporation a registered Partnership Firm) and Promoters of theCompany. Pursuant to SSSA certain rights were given to the Investors for which theArticles of Association of the Company has been altered vide the special resolution passedby the shareholders in its Extraordinary General Meeting (EGM') held on 07thMarch 2019.
Further the Board in its meeting held on 03rd July 2019 has approved theadoption of the new Memorandum of Association to align with the new Companies Act 2013("Act") by merging the Objects under part C of Clause III "OtherObjects" with part B of Clause III "Objects Incidental or Ancillary tothe attainment of the Main Objects" and also to rename the part A & B Clause IIIof the Object Clause. The Board commends the Special Resolutions set out in Item No. 12 ofthe Notice for approval of the Members.
During the year under review your Company has allotted 174376 fully paid equityshares upon exercise of Stock Option by the eligible Employees of the Company pursuantto the Nagarjuna Agrichem Ltd. - Employee Stock Option Scheme 2015'(ESOS-2015') of the Company and these shares were duly admitted for trading on thestock exchange(s). Further pursuant to Section 42 62(1)(c) of the Companies Act 2013read with Chapter V of the Securities and Exchange Board of India (Issue of Capital andDisclosure Requirements) Regulations 2018 the Company has allotted 10937500 fullypaid Equity Shares on preferential basis to the Investors (i.e. M/s. Krishi RasayanExports Private Limited and Mr. Rajesh Kumar Agarwal and Mr. Atul Churiwal jointlyrepresenting M/s. Agro Life Science Corporation a registered Partnership Firm).Subsequent to the above allotments the paid up capital of your Company stand increasedfrom Rs.156308384/- (comprising of 156308384 fully paid up equity shares of Rs.1/-per equity share) to Rs.167420260/- (comprising of 167420260 fully paid up equityshares of Rs.1/- per equity share).
Employee Stock Option Scheme:
Your Company implemented "Nagarjuna Agrichem Ltd. Employee Stock OptionScheme 2015" (hereinafter referred to as "ESOS-2015") in accordancewith the Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 as amended from time to time and as approved by the members of theCompany at their Annual General Meeting held on 28th September 2015. In termsof the said ESOS-2015 the Compensation Committee is authorized and empowered toadminister and implement the Company's Employees Stock Option Scheme (ESOS-2015) includingdeciding and reviewing the eligibility criteria for grant issuance of stock options underthe Scheme allotment of shares upon exercise of the options etc. with regard to the1150000 (Eleven Lakhs Fifty Thousand Only) options reserved under the ESOS-2015. Duringthe previous year's 2016-17 2017-18 and 2018-19 930000 (Nine Lakhs Thirty ThousandOnly) 60000 (Sixty Thousand Only) and 90000 (Ninety Thousand Only) stock options weregranted to the eligible Employees with a vesting period spread over a maximum period offive years. Each option would entitle the holders of the option to apply for one equityshare of the Company. Upon exercise of the vested stock options by eligible Employeesunder the ESOS-2015 174376 equity shares were allotted during the year under review.Applicable disclosures relating to Employees Stock Options as at 31st March2019 pursuant to Regulation 14 and other applicable Regulations of SEBI (Share BasedEmployee Benefits) Regulations 2014 as amended from time to time are set out in theAnnexure-I to this Report. It was informed that there has been no material change in thesaid Scheme i.e. ESOS-2015 during the year under review.
During the year under review the Company has allotted 10937500 equity shares and25000000 convertible warrants on preferential basis under Chapter V of the Securitiesand Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations2018 to the following Investors and Promoter at an issue price of Rs.32/- pershares/warrants on 27th March 2019:
|S.No. ||Particulars ||Equity Shares ||Warrants |
|1) ||M/s. Krishi Rasayan Exports Private Limited ||7812500 ||7812500 |
|2) ||Mr. Rajesh Kumar Agarwal and Mr. Atul Churiwal jointly representing M/s. Agro Life Science Corporation aregistered Partnership Firm ||3125000 ||12500000 |
|3) ||Mrs.K.Lakshmi Raju Promoter ||- ||4687500 |
The Company has allotted the above equity shares and warrants against the receipt ofthe full consideration of Rs. 35 crores for equity and Rs.20 crores (Rs.8/- per warrantbeing 25% of issue price) for warrants aggregating to Rs.55 crores. The above warrantsshall be convertible within a period of 12 months from the date of allotment i.e. 27thMarch 2019.
Material Changes and Commitments:
There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of the report.
Subsidiary Companies and Associate Companies and Consolidation of Financial Statements:
Pursuant to the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations") along withother applicable provisions of the Act and as per Indian Accounting Standards (IND AS 110 "Consolidated Financial Statements") the Audited Consolidated FinancialStatements for the year ended on 31st March 2019 are provided in this AnnualReport. The Company has prepared consolidated financial statements by incorporating thefinancial statements of its wholly owned subsidiaries M/s.LR
Research Laboratories Private Limited and M/s.Nagarjuna
Agrichem (Australia) Pty Ltd with its financial statements on line by line basis. Theinvestments of the Company in M/s.Nasense Labs Private Limited an Associate Company havebeen accounted for in these consolidated financial statements under the equity method inaccordance with IND AS 28 "Investments in Associates and Joint Ventures".
The Audited Annual Accounts and related information of Subsidiaries and Associate asapplicable will be made available upon request. The Statement required under Section 134of the Act is attached as Annexure - II (Form AOC-1) to this Directors' Report.
No other Company has become/ceased to be subsidiary or joint venture or associateCompany during the financial year. There has been no material change in the nature of thebusiness of the aforesaid Subsidiaries and Associate. The Company has no Subsidiary whichcan be considered as material in terms of the Listing Regulations.
In accordance with the provisions of Section 136(1) of the Act read with Regulation 46of the Listing Regulations the following have been placed on the website of the Companywww.naclind.com:
a) Annual Report of the Company containing therein its standalone and the consolidatedfinancial statements; and
b) Annual accounts of each of the subsidiary Companies.
Internal Financial Control Systems and their adequacy:
The Company has in place adequate internal financial controls commensurate with thesize and complexity of its operations. During the year such controls were tested and noreportable material weakness in the design or operations were observed. The Company haspolicies and procedure in place for ensuring proper and efficient conduct of its businesssafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of accounting records and the timely preparation of reliablefinancial information.
The Company has adopted accounting policies which are in line with the IndianAccounting Standards and the Act. These are in accordance with generally acceptedaccounting principles in India. Changes in policies if required are made in consultationwith the Auditors and are approved by the Audit Committee.
The Company's internal audit systems are geared towards ensuring adequate internalcontrols commensurate with the size and needs of the business with the objective ofefficient conduct of operations through adherence to the Company's policies identifyingareas of improvement evaluating the reliability of financial statements ensuringcompliances with applicable laws and Regulations and safeguarding of assets fromunauthorized use.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the Internal Statutory Costand Secretarial Auditors including audit of the internal financial controls overfinancial reporting by the Statutory
Auditors and the reviews performed by Management and the relevant Board and Committeesincluding the Audit Committee the Board is of the opinion that the Company's internalfinancial controls were adequate and effective during the financial year 2018-19.
a) Statutory Auditor and Audit Reports:
M/s. Deloitte Haskins & Sells LLP (Deloitte) Chartered Accountants Madhapur (FirmRegistration No.117366W/W100018) Chartered Accountants were appointed as StatutoryAuditors of the Company at the 30th Annual General Meeting held on 05thAugust 2017 for a period of 5 years commencing form the conclusion of 30thAnnual General Meeting till the conclusion of 35th Annual General Meeting to beheld in the year 2022. The firm has consented and confirmed that the appointment is withinthe limit specified under section 141(3)(g) of the Companies Act 2013. The statutoryauditors have also confirmed that they are not to be appointed as such in terms of theproviso to section 139(1) 141(2) and 141(3) of the Companies Act 2013 and the Companies(Audit and Auditors) Rules 2014.
In terms of Section 40 of the Companies (Amendment) Act 2017 notified by the Ministryof Corporate Affairs on 07th May 2018 the requirement for ratification of theappointment of Statutory Auditors by the members at every Annual General Meeting has beendone away with. Accordingly no resolution has been proposed for of the StatutoryAuditors who were appointed in the 30th Annual General Meeting held on 05thAugust 2017.
The Audit Report of Deloitte on the Financial Statements of the Company for theFinancial Year 2018-19 is a part of Annual Report and the report does not contain anyqualification reservation adverse remark or disclaimer.
b) Internal Auditor:
The Board of Directors of the Company have appointed M/s. M.Bhaskara Rao & Co.Chartered Accountants Hyderabad as Internal Auditors to conduct internal audit of theCompany for the financial year ended 31st March 2019 and their reports are reviewed bythe Audit Committee from time to time. The Board of Directors re-appointed M/s. BhaskaraRao & Co. Chartered Accountants Hyderabad as Internal Auditors for the financialyear ending 31st March 2020.
c) Cost Auditor:
The Board of Directors of the Company on the recommendation of the Audit Committeeappointed M/s. K. Narasimha Murthy & Co. Cost Accountants Hyderabad to conduct costaudits relating to Insecticides (Technical Grade and Formulations) of the Company for theyear ending 31st March 2020. The Company has received their written consentthat the appointment will be in accordance with the applicable provisions of the Act andrules framed thereunder. Pursuant to the provisions of Section 148 of the Act read withRules made thereunder members are requested to consider the of the remuneration payableto M/s. K.Narasimha Murthy & Co. Cost Accountants Hyderabad for the financial year2019-20. As a matter of record relevant cost audit report for financial year ended 31stMarch 2018 were filed with the Central Government within a stipulated timeline.
d) Secretarial Auditor and Secretarial Audit Report:
Pursuant to Section 204 of the Act read with the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Board has appointed Mr. K.V.Chalama Reddy Practicing Company Secretary to carry out secretarial audit in terms ofthe Act for the financial year 2018-19. The secretarial audit report issued byMr.K.V.Chalama Reddy Practicing Company Secretary in form MR-3 is enclosed to this reportas Annexure - III. The Secretarial Auditors have not expressed any qualification orreservation in their report and the report is self-explanatory.
As on the date of this report Company's Board comprises of 10 (Ten) Directors out ofwhich 2 (two) are Non-Executive Non-Independent Directors including 1 (One) WomanDirector. Further out of the remaining Directors 5 (five) are Non-Executive IndependentDirectors 2 (two) are Investors Nominee Directors and 1 (one) is an Executive Director.
a) Director(s) to retire by rotation:
In accordance with the provisions of Section 152 of the Act and Articles of Associationof the Company Mr.N.Vijayaraghavan Director (DIN: 02491073) of the Company retires byrotation at the forthcoming Annual General Meeting of the Company and being eligibleoffers himself for re-appointment.
b) Key Managerial Personnel:
In terms of Section 203 of the Companies Act 2013 the following are the Key ManagerialPersonnel of the Company:
i) Mr.V.Vijay Shankar Managing Director (upto 31st May 2019)
ii) Mr. M. Pavan Kumar Managing Director & CEO (with effect from 01stJune 2019)
iii) Mr.R.K.S Prasad Chief Financial Officer
iv) Mr.Satish Kumar Subudhi Company Secretary & Head-Legal.
During the financial year 2018-19 no KMP has been appointed or has retired/resigned.Mr.V.Vijay Shankar vide its letter dated 28th May 2019 to the Board has stepped downfrom the position of Managing Director as well as Director of the Company with effect from01st June 2019. The Board in its meeting held on 29th May 2019 hasaccepted the said letter and took note of the sincere appreciation of Mr.V.Vijay Shankarfor the notable contribution and valuable guidance to the Company during his associationof the Company for more than eight years. Further the Board in its meeting held on 29thMay 2019 on recommendation of Nomination and Remuneration Committee has appointed Mr.M. Pavan Kumar (DIN:01514557) as an Additional Director and Managing Director & CEO ofthe Company for a period of three years with effect from 01st June 2019.
c) Independent Directors:
In terms of Sections 149 152 Schedule IV and all other applicable provisions of theCompanies Act 2013 read with Companies (Appointment and Qualification of Directors)Rules 2014 (including any statutory modification(s) or re-enactment thereof for the timebeing in force) the Independent Director can hold office for a term of up to five (5)consecutive years on the Board of Directors of the Company and shall not be liable toretire by rotation.
All the Independent Directors including Additional Independent Director have givendeclaration that they meet the criteria of independence laid down under Section 149(6) ofthe Act read with Regulation 16(b) of Listing Regulations.
During the year under review Mr.D.Ranga Raju has tendered his resignation from theDirectorship of the Company effective from 13th June 2018. Consequent upon theresignation of Mr.D.Ranga Raju from the directorship he ceased to be the member as wellas Chairman of the Audit Committee. The Board of Directors places on record his valuableand constructive contribution to the Company during his long association with the Company.Mr.Raghavender Mateti and Mr.K.Raghuraman have been appointed as Independent Directors ofthe Company by the shareholders at the 27th AGM of the Company held on 09thAugust 2014 for a period of 5 (five) years effective from 09th August 2014and to hold office up to 08th August 2019. Mr.Raghavender Mateti andMr.K.Raghuraman are eligible for re-appointment for the second term as IndependentDirectors. However Mr.K.Raghuraman vide its mail dated 01st July 2019 hascommunicated his desire for not seeking re-appointment for the second term due to personalreasons. The Board in its meeting held on 03rd July 2019 has duly consideredand noted his retirement with effect from 09th August 2019 and accordinglynot recommended his re-appointment for shareholders approval. The Board of Directorsplaces on record his valuable and constructive contribution to the Company during his longassociation with the Company. Based on the performance evaluation and recommendation ofthe Nomination and Remuneration Committee ("NRC") the Board has approved there-appointment of Mr.Raghavender Mateti as an Independent Director for the second term offive years and recommended to the shareholders for necessary approval in the ensuingAnnual General Meeting. The Board based on the recommendation of the NRC has alsoappointed Mr.Dorairaj Kuppurangam as an Additional Independent Directors on the Board ofthe Company with effect from 29th May 2019. The Board recommends theappointment of the Mr.Dorairaj Kuppurangam as an Independent Director of the Companyeffective from 29th May 2019 to the members at the ensuing Annual GeneralMeeting.
The brief resume/details regarding the Directors proposed to be appointed/re-appointedas above are furnished in the annexures to the AGM Notice. There have been no changes inthe Directors and Key Managerial Personnel of the Company other than the above.
d) Investor Nominee Directors:
During the year under review your Company has entered into a Share Subscription andShareholders Agreement (SSSA') entered with Investors and Promoters and as per theterms of SSSA the Investors would be entitled certain rights including right to appointtwo nominee directors on the Board of Directors of the Company. The Investors in theBoard Meeting held on 29th May 2019 have appointed Mr.Atul Churiwal andMr.Rajesh Kumar Agarwal as Investors Nominee Directors not liable to be retire byrotation with effect from 29th May 2019. The Investors shall have a right toappoint two Investor Nominee Director as long as they hold 10% of the equity shares of theCompany. In case the shareholding falls below 10% the Investors shall have a right toappoint only one Investor Nominee Director on the Board of the Company. However if theshareholding of the Investors falls below 5% of the equity shares of the Company theright to appoint Investor Nominee Director shall fall away.
e) Evaluation of performance of the Board of Directors:
Pursuant to the provisions of the Act and Listing Regulations the Board has carriedout the evaluation of its own performance and Committees of the Board the performances ofDirectors individually the Executive Director the Chairman of the Board etc. Variousparameters including the guidance note issued by the Institute of Company Secretaries ofIndia were considered for evaluation and after receiving the inputs from the Directorsthe performance evaluation exercise was carried out. The parameters include attendance ofDirectors at Board and Committee meetings integrity credibility expertise andtrustworthiness of Directors Board's monitoring of various compliances laying down andeffective implementation of various policies level of engagement and contribution of theDirectors safeguarding the interest of all stakeholders etc. The performance evaluationof the Board as a whole was carried out by the Independent Directors. The performanceevaluation of each Independent Director was carried out by the Board. The Directorsexpressed their satisfaction with the evaluation process.
In a separate meeting the Independent Directors evaluated the performance of theNon-Independent Directors and performance of the Board as a whole. They also evaluated theperformance of the Chairperson taking into account the views of Executive Director.
f) Meeting of Independent Directors:
The details on the separate meeting of the Independent Directors are reported in theReport on Corporate Governance.
g) Familiarization Programme for the Independent Directors:
In compliance with the requirement of Listing Regulations the Company has put in placenecessary familiarization programme for the Independent Directors to familiarize them withtheir role rights and responsibility as Directors the working of the Company nature ofthe industry in which the Company operates business model etc. The same is available onthe website of the Company i.e. www.naclind.com.
Through the Familiarization programme the Company apprises the Independent Directorsabout the business model corporate strategy business plans and operations of theCompany. These Directors are also informed about the financial performance annualbudgets internal control system statutory compliances etc. They are also familiarizedwith Company's vision core values ethics and corporate governance practices.
At the time of appointment of Independent Director necessary information includingvarious documents such as the information's about Company Memorandum and Articles ofAssociation Annual Reports for previous 2 years Investor Presentations and recent MediaReleases Brochures Organization policies are provided. Further a formal letter ofappointment has also given explaining fiduciary duties roles responsibility and theaccompanying liabilities that come with the appointment as an independent director of theCompany.
During the year under review 4 (four) Board Meetings were held. The details of thesame are given in Corporate Governance Report which forms part of this Annual Report.
The provisions of Act and the Listing Regulations were adhered to while consideringthe time gap between two meetings.
The Audit Committee comprising of Mr.Sudhakar Kudva as the Chairman andMr.K.Raghuraman Mr.Raghavender Mateti Mr.N.Vijayaraghavan as the members. During theyear under review Mr.D.Ranga Raju consequent to the resignation from the position of theDirectorship of the Company ceased to be the Chairman of the Audit Committee. Furtherthe Board has re-constituted the Audit Committee by appointing Mr.Sudhakar Kudva asChairman and inducted Mr.N.Vijayaraghavan as Member of the Committee.
The details about Audit Committee including the brief description of its terms ofreference and number of meetings held during the year are mentioned in the CorporateGovernance Report. There have been no instances during the year when recommendations ofthe Audit Committee were not accepted by the Board.
Criteria for selection of candidates for appointment as Directors Key ManagerialPersonnel and Senior Management Personnel.
Your Company has laid down well-defined criteria for the selection of candidates forappointment as Directors Key Managerial Personnel and Senior Management Personnel.
Criteria for making payment to Non-Executive Directors of the Company.
defined Your Company has laid down well- criteria for making payment to Non-ExecutiveDirectors of the Company. The details of the same are available at the Company's websiteat www.naclind.com.
Directors' Responsibility Statement:
Pursuant to Section 134(3)(c) and 134(5) of the Act the Board of Directors to thebest of their knowledge and ability confirm that:
a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanations relating to material departures;
b) it has selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st March 2019 and of theProfit/Loss of the Company for the year ended on that date;
c) it has taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;
d) it has prepared the Annual Accounts of the Company on a going concern' basis.
e) it has laid down internal financial controls to be followed by the Company and thatsuch internal financial controls are adequate and were operating effectively; and
f) it has devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
Corporate Social Responsibility:
Corporate Social Responsibility (CSR) has been an integral part of your Company'sculture and it has been associated directly or indirectly for contributing towardssociety's development. For the year under review Company did a number of CSR activitiesin and around Srikakulam and Ethakota where the Company's factories are situated. Suchactivities includes ongoing drinking water supplies to villages and maintenance of theCompany installed RO plants in the neighboring villages contribution to vidhya volunteerScheme street lightning and bore-well maintenance development of school facilitiescommunity centers and bus shelters in the surrounding villages of the factories providingmedical services and vocational courses and conducting various medical camps etc. Theseprojects are largely covered under Schedule VII of the Act.
In accordance with the CSR provisions in the Act the Company has formed a CSRCommittee and a CSR Policy is in conformity with the provisions of the Act. The CSR Policycan be accessed on the Company's website at http:// www.naclind.com. The Annual Report ofCSR activities are annexed herewith as Annexure-IV and forming part of this Report.
Change in the nature of business:
There is no change in the nature of business of the Company.
Significant and Material Orders passed by the Regulators or Courts:
During the year the Company has not received any significant and material orders passedfrom Regulators or Courts or Tribunals impacting the going concern status and theCompany's operations in future.
Particulars of Loans Guarantees or Investments under Section 186:
The details of Loans Guarantees and Investments made during the financial year ended31st March 2019 in compliance with the provisions of Section 186 of the Actread with the Companies (Meetings of the Board and its Powers) Rules 2014 have beendisclosed in the Financial Statements forming part of this Annual Report.
Extract of Annual Return:
The Extracts of the Annual Return in form MGT-9 as per the provisions of Section 92 ofthe Act read with Rule 12 of the Companies (Management and Administration) Rules 2014 isenclosed as Annexure-V to this Directors Report. The extract of the Annual Return of theCompany can also be accessed on the website of the Company at www.naclind.com.
Risk Management Policy:
Pursuant to the provisions of Section 134 and other applicable provisions if any ofthe Act and Listing Regulations the Company constituted the Risk Management Committee andframed Risk Management Policy which inter-alia covers implementation and monitoring ofthe risk management plan for the Company. The Committee is responsible for reviewing therisk management plan and ensuring its effectiveness. The details about Committee includingthe brief description of its terms of reference are given in the Corporate GovernanceReport. Major risks identified by the businesses and functions are systematicallyaddressed through mitigating actions on a continuing basis.
Related Party Transactions:
All the related party transactions are entered into during the financial year were onarm's length basis and in the ordinary course of Company's business and are in compliancewith the applicable provisions of the and Regulation 23 of Listing Regulations. TheCompany has not entered into any contract arrangement or transactions with any relatedparty which could be considered as material within the meaning of Regulation 23 of theListing Regulations. Related Party Transactions (RPTs) under IndAS (Indian AccountingStandards) -24 are disclosed in the notes to the financial statement.
As there are no materially significant related party transactions made by the Companywith Promoters Directors or Key Managerial Personnel's etc. which may have potentialconflict with the interest of the Company at large the disclosure in Form AOC-2 is notapplicable. Necessary disclosures and the statement of all related party transactions ispresented before the Audit Committee and the Board of Directors on a quarterly basisspecifying the nature value and terms and conditions of the transactions. All RelatedParty Transactions are approved by the Audit Committee and omnibus approval is obtainedfor the transactions which are foreseen and repetitive in nature. The transactions enteredinto pursuant to the omnibus approval so granted are reviewed on a quarterly basis by theAudit Committee. Approval of the shareholders is being sought for 2 (two) material RPTs atthe ensuing Annual General Meeting.
The Related Party Transactions Policy as approved by the Board is uploaded on theCompany's website www.naclind.com. The details of the transactions with RelatedParties are provided in the accompanying financial statements.
Vigil Mechanism/Whistle Blower Policy:
The Company has implemented Whistle Blower Policy to deal with any fraud irregularityor mismanagement in the Company. The policy enables any employee or Director to directlycommunicate to the Chairman of the Audit Committee to report any fraud irregularity ormismanagement in the Company. The policy ensures strict confidentiality while dealing withconcerns and also that no discrimination or victimization is meted out to anywhistleblower. The Whistle Blower Policy as approved by the Board is uploaded on theCompany's website www.naclind.com. During the year under review your Company has notreceived any complaints under the said policy of the Company. It is affirmed that nopersonnel of the Company has been denied access to the Audit Committee.
Nomination and Remuneration Policy:
Pursuant to Section 178(3) of the Act the Company has adopted a policy on Nominationand Remuneration of Directors Key Managerial Personnel and Senior Management Personnel.The Nomination and Remuneration Committee (NRC) has formulated the criteria fordetermining qualification positive attributes and independence of Directors in terms ofprovisions of Section 178(3) of the Act and as Listing Regulations. The details aboutCommittee including the brief description of its terms of reference are given in theCorporate Governance Report.
In compliance with Regulation 34 read with Para-C of Schedule V of Listing Regulationsa separate report on Corporate Governance has been included in this Annual Report togetherwith the Auditor's Certificate confirming compliance of the Corporate Governance asstipulated under the said Regulations. All the Board members and the Senior ManagementPersonnel have affirmed compliance with the Companies "Code of Conduct for Board andSenior Management Personnel" for the financial year 2018-19.
A certificate signed by the Managing Director and Chief Financial Officer (CFO)certifying the financial statements and other matters as required under Regulation 17(8)of the Listing Regulations forms part of this Annual Report.
Management Discussion and Analysis Report:
Management Discussion and Analysis Report for the year under review as stipulatedunder Regulation 16(b) of the Listing Regulations is presented in a separate sectionforming part of this Annual Report.
Policy on Sexual Harassment:
The Company has zero tolerance for sexual harassment at workplace and has adopted a"Policy on Sexual Harassment of Associates" in accordance with the provisions ofthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013 and the Rules made thereunder. The Policy aims to provide protection to employees atthe workplace and prevent and redress complaints of sexual harassment and for mattersconnected or incidental thereto and framed with the objective of providing a safe workingenvironment where employees feel secure. There were no cases reported during thefinancial year 2018-19 under the said Policy.
Your Company has taken appropriate actions against counterfeits fakes and other formsof unfair competitions/ trade practices.
Your Company has not accepted any fixed deposits from the public during the year underreview and no such amount on account of principal or interest on public deposits wasoutstanding as on the date of the Balance Sheet.
The industrial relations at the factories and head office continued to be cordial.
All the assets and insurable interests of your Company including inventoriesbuildings plant and machinery enactments are adequately insured.
Particulars of Employees and Remuneration:
The information required under Section 197(12) of the Act read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed asAnnexureVI to this report.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo:
Disclosures required under the Section 134(3)(m) of the Act relating to conservation ofenergy technology absorption and foreign exchange outgo and earning in terms of Rule 8of the Companies (Accounts) Rules 2014 are set out in a separate statement attachedhereto as Annexure-VII and forms part of this report.
Your Directors thank the Company's Bankers and the Financial Institutions for theirhelp and co-operation extended throughout the year. Your Directors place on record theirappreciation for the support and co-operation that the Company received from itsStakeholders Customers Agents Suppliers Employees various Government/Non-GovernmentDepartments Associates and Community in the vicinity of the plants. Your Directors alsorecord their appreciation for the excellent operational performance of the staff of theCompany. The Directors also acknowledge with much gratitude the continued trust andconfidence reposed by the Dealers/Customers of the Company. Your Directors look forward tothe future with confidence.
For and on behalf of the Board
| ||K.Lakshmi Raju |
|Place: Hyderabad ||Chairperson |
|Date: 03rd July 2019 ||(DIN:00545776) |