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Nava Bharat Ventures Ltd.
|BSE: 513023||Sector: Others|
|NSE: NBVENTURES||ISIN Code: INE725A01022|
|BSE 10:51 | 17 Feb||70.00||
|NSE 10:49 | 17 Feb||70.00||
|Mkt Cap.(Rs cr)||1,233|
|Mkt Cap.(Rs cr)||1233.40|
Nava Bharat Ventures Ltd. (NBVENTURES) - Director Report
Company director report
Your directors are pleased to present the 46th annual report and the Company's auditedfinancial statements (standalone and consolidated) for the financial year ended March 312018.
The performance of the Company (standalone and consolidated) for the financial yearended March 31 2018 is summarized below:
(' in lakhs)
ECONOMIC AND BUSINESS REVIEW
As several factors are expected to help accelerate the pace of growth in 2018-19India's GDP is expected to grow by 7.4% in this period. However GDP growth is expected topick up to 7.8% in 2019 led by favourable macroeconomic scenario and ongoing structuralmeasures. Thus India is placed on a sweet spot and is gaining momentum both in domesticand international markets.
REVIEW OF OPERATIONS
During the year under review the performance of your Company significantly improvedover the previous year on account of resurgence of ferro alloy operations riding on aspurt in demand for steel and helped your Company overcome the daunting pressure on sugarprices in the last quarter of FY2018. Ferro Alloys division recorded highest quantitiesever in production and sales. The captive consumption of power also was the highest sincethe operationalization of the power division with attendant value addition throughtransfer pricing at Grid rates. The Company's conversion arrangement saw record volume ofproduction of High Carbon Ferro Chrome since operationalization of unit at Odisha. Therobust market for HCFC also helped the Company obtain better return on costs though for alimited period from Tata Steel under the Conversion contract.
Turnover for the year 2017-18 stood at ' 130864.00 lakhs compared to ' 99037.46 lakhsin the previous year and the profit after tax stood at ' 16155.79 lakhs increased from '7959.66 lakhs in the previous year.
Your Company achieved production of 95301 MT and sales of 97028.750 MT during FY2017-18 surpassing all previous records. This was achieved by production of differentgrades as per quality requirement with minimal maintenance breakdowns and also inswitching the grades in furnaces as per requirement of market with minimal/no off specsduring transition.
Due to demand from China for Manganese ore the major mining companies from AustraliaSouth Africa Gabon etc. continuously increased the rate quarter after quarter during FY2017-18. Indigenously Manganese Ore India Limited the principal supplier also revised theprice of Mn ore in tandem with international markets. The Company's strategy ofdiversifying the ore procurement geographically and resorting to blends helped it towithstand the increase in input cost though some more efforts are warranted as far as thereductant is concerned. The Company is mindful of US Dollar volatility against INR whichhas a salutary affect on the procurement costs as well as export realizations.
During the period under review the merchant power business reflecting the sectortrend remained quite subdued with Grid opting out of medium term procurement contractsand bearing down on the prices of merchant power. The performance of the 114 MW powerplant in Telangana was critically dependent on captive consumption of power wherein thevalue addition was higher than that of merchant sale. The Company's strategic shift offocus on ferro alloy production and thereby optimal captive power usage helped the powerUnit overcome the market vagaries of merchant power to a considerable extent.
The Company was able to utilize the higher prices on the Power exchange for a part ofsecond half aside from optimizing the captive power usage for HCFC conversion against 90MW earmarked for this purpose in the Odisha Power Plant. Given the limitation of captivepower consumption norms the performance for the year under review is quite satisfactory.The second 60 MW in Odisha however could not be operationalized owing to weak merchantpower market while certain last mile Grid clearances for open access were being pursued.
While grid curtailments impacted the operations of 150 MW power plant of NBEIL inTelangana in the first quarter higher coal costs eroded the margins in the secondquarter. The subsidiary dispatched the power to the Telangana Grid against short termtenders and through Power Exchange while endeavouring to sustain positive contribution torecover the fixed costs. Telangana Grid paid compensation for lower offtakes againstprevious contracts during the last quarter which helped the subsidiary to maintain a nearbreakeven level for FY 2018.
The Power Unit in Andhra Pradesh suffered on account of Grid curtailments in the firstquarter and lack of dispatch opportunity in the second quarter and so had to remain shut
for the remaining part of the year. The Company is exploring other options of revivingthis 20 MW Unit by leveraging the large free hold land on which it is situated on the EastCoast with excellent access to the Kakinada port and national highway.
The Sugar operations though started on a positive note and outlook turned worse withthe average realisations falling below the sugar cane cost towards the end of the yearunder review. The closing market price and inventory valuation of sugar reflect thedebilitating affect on sugar operations and profitability of the Unit going forward.
Income and cash flow changes arising out of Subsidiaries
The standalone financials received positive boost on account of O&M supportservices extended by the Company to the Zambian subsidiary without infringing upon theperformance guarantee obligations extended on behalf of O&M Operator being anotheroverseas subsidiary. The Company expects to leverage upon its expertise further withincreased scope of service as the Zambian company cedes the limited technical support ofthe EPC contractor in the coming periods and thereby increase revenues under this O&MSupport fee.
Members are aware that the Company had extended limited recourse by way of equity andequity commitment by way of LC to the Zambian step down subsidiary for implementing theCoal & Power Project. Owing to certain recent regulatory restrictions of RBI theCompany was required to fully fund the equity commitment to the extent of US$ 16.25Million instead of continuing the LC. This resulted in the Company drawing additionalrupee loan for equivalent amount and consequent higher debt position as at the end of FY2018.
The Company is also required to fund the development activity for the Zambian Sugarproject Health Care Services venture in Singapore aside from administration costs inSingapore. The fund infusion for these requirements was US$ 1.385 Million during FY 2018and is envisaged at US$ 2.40 Million during FY 2019.
The 150 MW Unit of NBEIL has '157.89 Crs of long term debt outstanding at the end of FY2018. NBEIL charted a business plan to address debt service in the coming periods butcould require short term funding requirements from the Company.
The Board considered the better operational performance for FY 2017-18 facets ofsustenance and cash flow requirements of the Company during FY 2018-19 and recommended adividend on the equity shares at ' 1.50 per equity share of ' 2/- each for the FY 2017-18subject to shareholders' approval at the ensuing annual general meeting (AGM). Theaggregate dividend payout amounts to ' 3044.43 lakhs (including corporate dividend tax of' 514.99 lakhs).
No amounts were proposed to be transferred to Reserves for the period under review.
The Company has not accepted any deposits from Public and as such no amount on accountof principal or interest
on deposits from public was outstanding as on the date of balance sheet.
LISTING OF EQUITY SHARES
The securities of the Company are listed at National Stock Exchange of India Limited(NSE) and BSE Limited (BSE).
The Company has no equity shares carrying differential rights.
The Company has Indian and overseas direct and step down subsidiaries.
Consolidated financial statements have been prepared by the Company in accordance withthe requirements of Ind AS 27 issued by Institute of Chartered Accountants of India (ICAI)and as per the provisions of the Companies Act 2013.
As per the provisions of Section 136 of the Companies Act 2013 the Company has placedseparate audited financial statements of its subsidiaries on its website
The annual accounts of the subsidiary companies shall also be available for inspectionby any shareholder at the registered offices of the holding Company and of the subsidiarycompanies concerned.
A report on the performance and financial position of each of the subsidiariesassociates and joint venture companies included in the consolidated financial statementpursuant to Rule 8(1) of Companies (Accounts) Rules 2014 is enclosed as Annexure - 1 tothis report.
Statement containing the salient features of the financial statement of subsidiariesand Associate Company for the year ending March 31 2018 in Form AOC-1 (Pursuant to firstproviso to Sub-Section (3) of Section 129 read with Rule 5 of Companies (Accounts) Rules2014) is attached at the end of the notes to Accounts to Financial Statements.
OVERSEAS CORPORATE STRUCTURE
The Company has overseas investments in Coal Mining Power Generation Operation &Maintenance Services Healthcare Services and Commercial Agriculture spread acrossdifferent geographical regions.
The Company has created distinct intermediate holding companies being wholly ownedsubsidiaries in Singapore to cater separately to; Coal mining & Power Generationthrough Nava Bharat (Singapore) Pte. Ltd; O&M Services through Nava Energy Pte. Ltd;Healthcare Services through Nava Holding Pte. Limited; and Commercial Agriculture throughNava Agro Pte. Ltd. This structure will facilitate investment pursuits in a focusedmanner aside from induction of strategic/ financial investors at an appropriate time. Allthe investments will be routed through respective wholly owned subsidiaries in Singapore.
NAVA BHARAT (SINGAPORE) PTE. LIMITED (NBS)
NBS a Wholly Owned Subsidiary of the Company in Singapore will control theinvestments in coal and power generation principal investment in this space being inZambia.
NBS has to derive income form MCL by way of dividends or interest on Share Holder Loanswhich are expected to commence from FY 2020. Till then the Company is required to fund itsadministration over head. For FY 2018 NBS has total income of USD 6.13 Million and Lossof USD 1.07 Million.
MAAMBA COLLIERIES LIMITED (MCL)
MCL is a step down subsidiary of the Company in Zambia with NBS holding 64.69% of theequity stake while the balance 35.31% is held by ZCCM Investments Holdings Plc and others.MCL had revamped the Coal Mine operations and since established a 300 MW (2 X 150 MW) CoalFired Power Project. The 300 MW Power Plant was commissioned in phases by December 2016.During the year under review the 300 MW Power Plant also declared Commercial Operationsfrom August 2017. Accordingly the 300 MW Power Plant operations also would form part ofConsolidated Financials for a part of FY 2018 and for subsequent periods.
For FY 2018 MCL made a profit after tax of USD 15.59 Million on a total income of USD127.02 Million. MCL derived revenues from both coal mining and power operations with thelatter assuming the lead role going forward. MCL constitutes a significant portion of theconsolidated financials owing to the asset size as well as the share of profits.
The power plant operations have been stable at the rated availability factor and arededicated to the Zambian Utility under a Long Term PPA. While there have been delays incollection of receivables and gaps in certain payment obligations by the Utility theZambian company is assured of performance under the PPA by way of a Sovereign Guaranteefrom the Government of Zambia which holds the project in good stead. MCL has been engagingthe Government in this regard to effect part payments against the receivables and has beenable to effect debt service to the Project Lenders since March 2017 without default.
NAVA ENERGY PTE. LIMITED SINGAPORE (NEPL)
NEPL Singapore is a wholly owned subsidiary (WOS) of the Company and is theintermediate holding company in Singapore engaged in O&M services of power plantsabroad. It will avail technical support from Nava Bharat Ventures Limited the HoldingCompany having requisite expertise and operating experience of power plants and supplementit with technical support from Original Equipment Manufacturers (OEMs) or EPC contractorsas required.
NEPL has secured the O&M contract from Maamba Collieries Limited (MCL) for thelatter's 300 MW coal fired power plant in Zambia. For due performance of obligations underthe O&M contract NEPL has inter alia entered into a Long Term Technical SupportAgreement with the Indian Holding Company which has also extended performance guaranteeand bank guarantees as required under the O&M Contract with MCL. Your Companyconsiders this as an opportunity to leverage its rich experience in power plantoperations gained assiduously over the last three decades while a distinct revenue streamis established in O&M services.
NEPL has set up a Zambian company Nava Energy Zambia Limited (NEZL) as its operatingsubsidiary to facilitate compliance with local laws in engagement of subcontractors andemployees to discharge the O&M Contract obligations.
The Company expects that its O& M experience in MCL will establish its foot printin this emerging service which it can leverage for further opportunities in this space.
For the FY2018 NEPL has made revenues of USD 10.18 Million and Profit after tax of USD1.56 Million.
NAVA ENERGY ZAMBIA LIMITED ZAMBIA (NEZL)
Nava Energy Zambia Limited is a Zambian Step down subsidiary and a WOS of NEPL. NEZLhas engaged qualified and experienced personnel and Sub-contractors in Zambia. In order toachieve smooth transition from the construction phase to operations phase NEZL has beenat the power plant site in Zambia for the last two years and has assimilated the technicalaspects of the 300 MW power plant operations from SEPCO being the EPC contractor.
During the Financial Year 2018 NEZL has made revenues of USD 10.13 Million and Profitafter tax of USD 0.48 Million.
NAVA AGRO PTE. LIMITED SINGAPORE (NAPL):
NAPL is a wholly owned subsidiary of the Company and is intended to be the intermediateholding company in Singapore to pursue investments in commercial agriculture and relatedbusinesses initially in Zambia through Kawambwa Sugar Limited.
Kawambwa Sugar Limited (formerly Kariba Sugar Limited) (KSL) is a Zambian company whichhas been allocated 10000 ha of land by the Government of Zambia to pursue Sugar businessinitially.
There are no reportable revenues for NAPL for FY 2018.
KAWAMBWA SUGAR LIMITED ZAMBIA (KSL)
Kawambwa Sugar Limited (formerly Kariba Sugar Limited) (KSL) is a Zambian company(step-down-subsidiary) which has been allocated 10000 ha of land by the Government ofZambia to pursue Sugar business initially. NAPL holds 100% shareholding of KSL.
The Company has enough expertise in Sugar manufacturing and operations and proposes toundertake the Construction of the KSLs sugar project as when an investment decision taken.
The Sugar project of KSL comprises inter alia Sugar estate development as a principalcomponent of the Project cost envisaged at USD 226 Million.
KSL has obtained the approval for Environmental Impact Assessment (EIA) study under theZambian laws and has initiated a pilot seedling plantation. Key aspects of the investmentrelate to size and composition of equity risk mitigation measures and bankable marketing& sale arrangement. These aspects are being addressed in parallel while the initialdevelopmental works continue at the site.
KSL has no reportable revenues being in implementation stage.
NAVA HOLDING PTE. LIMITED (NHPL)
Nava Holding Pte. Limited (NHPL) was incorporated in Singapore and will engage inHealthcare Services being undertaken by the Group with Singapore as headquarters.Initially investments in these services are undertaken through Tiash Pte. Limited whereinNHPL holds 65% stake.
Below is the structure of Companies involved in Healthcare activities to be pursued:
TIASH PTE. LIMITED (TPL) SINGAPORE
Nava Holding Pte. Limited holds 65% equity stake in Tiash Pte. Limited and balance 35%is held by Mr. Timothy Robert Cushway as Sweat Equity. TPL is designated to be engaged inthe health care related business.
Mr. Timothy Robert Cushway is the CEO of TIASH Pte Limited. COMPAI PHARMA PTE. LIMITED(CPPL) SINGAPORE
Compai Pharma Pte. Limited is 100% Subsidiary of TPL.
CPPL has entered in to an exclusive distribution arrangement in Malaysia for anintravenous iron supplement from a Danish company a market leader in this space. Thiswill be dealt with by CPPLs operating subsidiary Compai Healthcare SDN. BHD Malaysia.
COMPAI HEALTHCARE SDH.BHD (CHS) MALAYSIA
Incorporated on November 10 2017 and is a 100% subsidiary of Compai Pharma Pte.Limited Singapore.
TIS PTE. LIMITED (TPL) SINGAPORE
TIS Pte. Limited is a Subsidiary of TIASH Pte. Ltd. holding 90% stake while the balanceis held by professional director.
THE IRON SUITES PTE. LIMITED (TISPL) SINGAPORE
The Iron Suites Pte. Limited is a Subsidiary of TIS Pte. Limited holding 90% stakewhile the balance will be held by TPL. TISPL is engaged in actual administering of the IVformulation.
NB TANAGRO LIMITED TANZANIA (NBTL)
NB Tanagro Limited was set up as a step down subsidiary in Tanzania to pursueinvestment in Oil palm. As the Project has not been implemented for the last couple ofyears owing to protracted delays in identification of land land transfer timely issuanceof permits licenses and consent being the obligations of NDC the Joint VentureAgreement with National Development Corporation of Tanzania was terminated and NBTL isunder the process of winding up.
NB RUFIJI PVT. LIMITED TANZANIA (NBRPL)
NB Rufiji Pvt. Limited was set up as a step down subsidiary in Tanzania. As nodevelopment has taken place and is likely NBRPL is also under the process of winding up.
NAVA BHARAT ENERGY INDIA LIMITED (NBEIL)
NBEIL is a step down but wholly owned subsidiary of the Company with 26% of equitydirectly held by NBVL and 74% being held through Nava Bharat Projects Limited (NBPL).
NBEIL operated the 150 MW Independent Power Plant at Paloncha in Telangana on merchantbasis with an average PLF of 62.08% during FY 2017-18.
The contract with Telangana Discoms ended by May 2017 following which the power plantoperations were regulated depending on the spot rates of power obtained on the PowerExchange and based on limited period tenders from the Discoms.
Notwithstanding gradual withering of merchant power rates the Unit could sustainreasonable operating performance by resorting to varying blends of coal including slurriesand rejects and thereby maintaining a competitive cost of generation. Limited periodtenders by the Telangana Grid during the FY 2018 and release of compensation for lower offtakes by the Grid for earlier contractshelped the Unit achieve near break-even situationunder such trying circumstances.
NBEIL made a total income of '29419.71 Lakhs and Loss after tax of '271.47 Lakhs.
Ash Products Plant was established with state of the art technology to utilize the ashbeing generated from the150MW Power Plant to produce Ash bricks Pavers etc. which are farsuperior to the conventional clay bricks and bring about a lifecycle change in pavingroads kerbs etc. The plant is being operated through programmable logic controller (PLC)with semi-automation and commercial production commenced in January 2018. The primaryobjective of APP is the sustainable utilization of fly ash as prescribed by environmentalguidelines with incidental revenue generation.
NAVA BHARAT PROJECTS LIMITED (NBPL)
NBPL is a WOS of the Company and is engaged in project management supporttrading/export of goods or equipment.
Enforcement Directorate Hyderabad: The Enforcement Directorate Hyderabad (ED) videits Provisional Assessment Order dated July 22 2014 attached to the extent of '138.59crores in respect of the investment made by NBPL in the share capital of Nava BharatEnergy India Limited and the said Provisional Attachment Order was also confirmed by theAdjudicating Authority under Prevention of Money Laundering Act 2002 vide Order dated May20 2015.
Subsequently the ED issued a letter dated July 9 2015 to Nava Bharat Projects Limitedrequesting to transfer entire 739999994 equity shares of '2/- each of face value ofNava Bharat Energy India Limited held by NBPL within one week. Against the saidconfirmation Order of the Adjudicating Authority and letter dated July 9 2015 of ED anappeal was filed before the Appellate Tribunal constituted for hearing the appeals againstthe Order of the Adjudicating Authority under PMLA. The Appellate Tribunal granted stayagainst operation of the Letter dated July 9 2015 subject to certain conditions videOrder dated July 30 2015 and the said stay has been extended from time to time andcontinues during the pendency of the Appeal.
The NBEIL along with NBPL approached the Appellate/ Adjudicating Authority of theEnforcement Directorate vide separate applications with a request to allow provision ofalternate security by it to release attachment on the equity shares of NBEIL held by NBPLworth of '138.59 crores. The Hon'ble Appellate Tribunal for PMLA cases after hearing thematter of both the parties asked to file counters and since the ED filed the Counterfollowed by a rejoinder filed by NBPL and now the interim application filed by the NBPLfor substitution of the shares with the equivalent value of the security by way offurnishing FDR/ BG for release of the attached shares to facilitate NBPL for restructuringof the equity in the NBEIL. The matter is listed for hearing on July 11 2018 to July 132018.
Further the Hon'ble Special Court (PC Act) New Delhi also took cognizance of thecomplaint of the Enforcement Directorate and Ordered issue of Summons to accused therein.Accordingly NBPL was served Summons dated October 14 2017 on November 17 2017 throughOffice of the Joint Director Directorate of Enforcement Hyderabad under CRC No.01/2016 ECIR No.02/HZO/2013 under Section 3 punishable under Section 4 of the Preventionof Money Laundering Act 2002 in the matter of Directorate of Enforcement Vs Y. HarishChandra Prasad & Others to appear in the Court of the Hon'ble Sh. Bharat ParasharMegistrate Special Court (PC Act) Patiala House Courts New Delhi on January 30 2018.Thereafter NBPL through its authorized representative appeared before the said Court andthe scrutiny of the documents supplied through the complaint is in progress and the saidCRC is posted to July 16 2018.
NBPL made total income of '706.84 Lakhs and Profit after tax of '196.55 Lakhs.
BRAHMANI INFRATECH PRIVATE LIMITED (BIPL)
BIPL is a subsidiary of the Company with 65.74% equity stake. Following the surrenderof land of SEZ back to the Government BIPL has been engaged in investments in urban landsand properties to diversify its portfolio and to pursue urban infrastructural development.
Following the cessation of SEZ activity and surrender of land BIPL has been embroiledin protracted litigation including Arbitration of disputes with Mantri Group itsCo-developer and Technical Associate for SEZ.
The Arbitration Award by the Hon'ble Arbitrator is currently being disputed by BIPL andMantri Group on separate grounds and is sub-judice.
Mantri Technology Parks Private Limited (MTPPL) sought for injunction restraining theasset management company / mutual funds in repaying to BIPL on maturity before the CivilCourts Hyderabad OP No 571/2015 under Section 9 of the Arbitration and ConciliationAct 1996. BIPL is contesting the same and is sub-judice.
BIPL and MTPPL both have filed cross applications before Civil Court Hyderabad seekingreliefs against each other in setting aside the Arbitration Award no. 2/2013 under Sec 34of the Arbitration and Conciliation Act 1996 with regard to such portion of the Awardfavouring other party.
All the above are in the process of adjudication and are sub- judice. No materialOrders have been passed in any of the cases.
Post disposal of cases in NCLT/NCLAT in favour of BIPL Malaxmi Infra Ventures (India)Private Limited requisitioned an Extra-ordinary General Meeting (EGM) on certain agendaitems. BIPL has convened the EGM as per requisition on February 17 2018 and a copy ofsaid EGM minutes were provided to them as requested.
BIPL made a total income of '432.91 Lakhs and Profit after tax of '244.09 Lakhs.
NAVA BHARAT REALTY LIMITED AND NAVA BHARAT SUGAR AND BIO FUELS LIMITED
During the year Nava Bharat Realty Limited and Nava Bharat Sugar and Bio Fuels Limitedhave been struck off from the register of companies by the Registrar of CompaniesHyderabad.
KINNERA POWER COMPANY PVT.LTD (KPCPL) (Associate Company)
KPCPL is an associate of the Company with 26% equity stake which is continued asspecified by National Highway Authority of India (NHAI). As per the professed intentionand there being no economic interest the Company plans to fully offload its stake inKPCPL in favour of Meenakshi Infra Group in due course as per the regulations.Accordingly no economic interest from KPCPL is being factored in the consolidatedfinancials nor the accounts of KPCPL appended in the Annual report of the Company.
OUTLOOK AND FUTURE PLANS
"Management Discussion and Analysis" contains a section on the Company'soutlook and future plans and members may please refer the same on this.
CHANGE IN THE NATURE OF BUSINESS
There has been no change in the nature of business of the Company during the year underreview.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
In accordance with the provisions of Section 134 (3)(m) of the Companies Act 2013 therequired information relating to conservation of energy technology absorption and foreignexchange earnings and outgo have been enclosed as Annexure - 2 to this report.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company is committed towards betterment of society and protection of environmentwith constant efforts to build and nurture long lasting relationships with the society.Further the Company's CSR initiatives/ activities aim at improving quality of life of thecommunities and stakeholders in general and communities around the Company's manufacturingfacilities in particular and to contribute towards economic development of the societyfrom which your Company draws resources for its operations.
Your Company continues to remain focused on improving the quality of life and engagingcommunities through education livelihood health drinking water and sanitationenhancing vocational skills empowering women etc. During the year under review yourCompany spent over ' 264.44 Lakhs on CSR activities. The annual report on CSR activitiesin terms of Section 135 of the Companies Act 2013 is enclosed as Annexure - 3 to thisreport.
EXTRACT OF ANNUAL RETURN
In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theannual return in the prescribed format is enclosed as Annexure - 4 to this Report.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties referred to insub-section(1) of Sec.188 in Form No. AOC-2 pursuant to clause (h) of sub-section (3) ofSection 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules 2014 are enclosedas Annexure - 5 to this report.
The policy on materiality for and dealing with related party transactions as approvedby the Audit committee and the Board of directors is available on the website of theCompany under the web link: http://www.nbventures.com/corporate_policies.htm
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The details of loans given guarantees provided and investments made during theFinancial Year ended on March 31 2018 are enclosed in Annexure - 6 to this Report incompliance with the provisions of Section 186 of the Companies Act 2013 read with theCompanies (Meetings of the Board and its Powers) Rules 2014. The particulars of aggregateloans guarantees and investments under Section 186 of the Companies Act 2013 aredisclosed in Financial Statements which may be read as part of this Report.
Further pursuant to the authority vested by the members in the Board at their annualgeneral meeting held on August 24 2016 to make amendments to the matters specifiedtherein the Board of directors at their meeting held on May 30 2018 approved an increasein the value of Indemnity & Guarantee Guarantee towards liquidated damages andperformance bank Guarantee limits for the O& M Contract from USD 38.5 Million to USD43.67 Million with commensurate increase in O&M Fee on account of indexation.
MANAGEMENT DISCUSSION AND ANALYSIS
The Management Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is presented in a separate section forming part of this Report.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report as stipulated under Regulation 34(f) of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is not applicable forthe financial year 2017-18 since the Company did not form part of top 500 companies interms of market capitalization as on March 31 2018.
Your Company is committed to achieve the highest standards of Corporate Governance andadheres to the Corporate Governance requirements set by the Regulators/applicable laws.
A separate Report on Corporate Governance as stipulated under Regulation 34(3) of SEBI(LODR) Regulations 2015 is attached hereto as a part of this report. The report onCorporate Governance also contains certain disclosures required under the Companies Act2013.
Disclosure under Reg. 34(3) & Schedule V of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
Related Party disclosure as per Schedule V of SEBI (LODR) Regulations 2015
(' in Lakhs)
The Board of directors of the Company has a combination of Executive Non-Executive andIndependent Directors. The Board comprises ten directors and half of the Board comprisesindependent directors.
INDEPENDENT AND NON-EXECUTIVE DIRECTORS
As prescribed under LODR Regulations and as per Section 149(6) of the Companies Act2013. The Board of the Company comprises following Independent directors (including awoman director):
Mr. K.Balarama Reddi Dr.E.R.C.Shekar Dr.M.V.G. Rao Dr.D.Nageswara Rao and Dr.CVMadhavi.
They were appointed as Independent Directors by the shareholders at 42nd AGM on August8 2014 for a term of 5 (five) years.
NON-EXECUTIVE AND NON-INDEPENDENT DIRECTOR
Mr. D.Ashwin was co-opted as an additional director (nonexecutive and non-independent)w.e.f. August 18 2017.
Mr. D.Ashwin holds office upto the date of ensuing AGM and the Company had receivednotice from one of the shareholders as per Section 160 of the Companies Act 2013proposing his appointment as Director.
The Board of Company comprises following whole-time directors:
Mr. D.Ashok Mr. P.Trivikrama Prasad Mr. GRK Prasad and Mr. C V Durga Prasad.
None of the directors on the Board is a member of more than ten Committees across allthe Companies in which directorship is held. Necessary disclosures regarding committeepositions in other public companies as on March 312018 have been made by the Directors.
DECLARATIONS OF INDEPENDENT DIRECTORS
The independent directors declared pursuant to section 149(7) of the Companies Act2013 affirming that they meet the criteria of independence as provided in sub-section (6)of section149 of the Companies Act 2013.
CHANGES IN DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year under review Mr. D. Ashwin has been co-opted as an additional director(non-executive & non-independent) w.e.f August 18 2017.
DIRECTORS RETIRING BY ROTATION
Pursuant to the provisions of the Companies Act 2013 Mr. D.Ashok retires at the AGMand being eligible offered himself for re-appointment.
The term of Mr. GRK Prasad Executive Director and Mr. CV Durga Prasad Director -Business Development expires on June 27 2018. Subject to the approval of the shareholdersat the ensuing annual general meeting your Board of directors considered and approved there-appointment of Mr. GRK Prasad and Mr. CV Durga Prasad for such term as proposed in therespective resolutions.
NUMBER OF MEETINGS OF THE BOARD
Regular meetings of the Board are held to discuss and decide on various businesspolicies strategies and other businesses. The schedule of the Board /Committee meetingsare circulated to the Directors in advance to enable them to plan their schedule forparticipation in the meetings.
The Board met six (6) times during the FY 2017-18 viz. on May 27 2017 August 9 2017August 18 2017 October 30 2017 January 29 2018 and March 24 2018.
PERFORMANCE EVALUATION OF THE BOARD
Pursuant to the provisions of the Companies Act 2013 and SEBI
(LODR) Regulations 2015 the Board has carried out annual performance evaluation ofits own performance the Directors individually as well as the working of its Auditcommittee Nomination and Remuneration committee Corporate Social Responsibilitycommittee and Stakeholders Relationship committee. A structured set of criteria wasadopted after taking into consideration the inputs received from the Directors coveringvarious aspects of the Board's functioning such as adequacy of the composition of theBoard and its Committees Board culture execution and performance of specific dutiesobligations and governance. Evaluation of the Board Members is conducted on an annualbasis by the Board Nomination and Remuneration committee and Independent Directors withspecific focus on the performance and effective functioning of the Board and individualDirectors.
The Nomination and Remuneration committee & the Board of Directors had laid downcriteria for performance evaluation of Directors Committees and Board as a whole.
Performance indicators for evaluation of Independent Directors:
Independent Directors have three key roles - governance control and guidance. Some ofthe performance indicators based on which the Independent Directors are evaluated are:
Ability to contribute to and monitor corporate governance practices.
Ability to contribute by introducing international best practices to address topmanagement issues.
Active participation in long term strategic planning.
Commitment to the fulfillment of a Directors' obligations and fiduciaryresponsibilities.
Attendance: The performance evaluation of Independent or Non-Executive Members is doneby the Board annually based on criteria of attendance and contributions at Board/Committee meetings and also the role played other than at meetings.
The evaluation process also considers the time spent by each of the Board Members corecompetencies personal characteristics accomplishment of specific responsibilities andexpertise.
The Company adopted a policy relating to the remuneration. This Policy covers theremuneration and other terms of employment for the Company's Executive Team. Theremuneration policy for Members of the Board and for Management aims at improving theperformance and enhancing the value of the Company by motivating and retaining them and toattract the right persons to the right jobs in the Company. The object of thisRemuneration Policy is to make your Company a desirable workplace for competent employeesand thereby secure competitiveness future
development and acceptable profitability. In order to achieve this it is imperativethat the Company is in a position to offer competitive remuneration in all its operationallocations.
Neither the Managing Director nor any Whole-time Director of the Company received anyremuneration or commission from any of its Subsidiaries.
A detailed policy on remuneration of the Directors and Senior Management is placed onthe Company's website under the web link:
POLICY FOR SELECTION OF DIRECTORS AND DETERMINING DIRECTORS' INDEPENDENCE
The Nomination and Remuneration committee identifies persons who are qualified tobecome directors and who may be appointed in senior management in accordance with thecriteria laid down and recommend to the Board their appointment and removal.
THE CRITERIA FOR THE APPOINTMENT OF DIRECTORS KMPs AND SENIOR MANAGEMENT
A person for appointment as director KMP or in senior management should possessadequate qualification expertise and experience for the position considered forappointment. The Committee decides whether qualification expertise and experiencepossessed by a person are sufficient for the concerned position. The committee ascertainsthe credentials and integrity of the person for appointment as director KMP or seniormanagement level and recommends to the Board his / her appointment.
The Committee while identifying suitable persons for appointment to the Board willconsider candidates on merit against objective criteria and with due regard for thebenefits of diversity on the Board.
The Nomination and Remuneration committee shall assess the independence of directors atthe time of appointment; reappointment and the Board shall assess the same annually. TheBoard shall re-assess determination of independence when any new interests orrelationships are disclosed by a Director.
The criteria of independence are determined as laid in the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
The Independent Directors shall abide by the Code for independent directors asspecified in Schedule IV of the Companies Act 2013.
COMMITTEES OF THE BOARD
Currently the Board has four committees: The Audit committee Nomination andRemuneration committee Corporate Social Responsibility committee and StakeholdersRelationship committee.
A detailed note on the Board and its Committees is provided under the CorporateGovernance Report section in this Report. The
Composition of the Committees and compliances as per the applicable provisions of theAct and Rules are as follows:
PARTICULARS OF EMPLOYEES
The names and other particulars in accordance with the provisions of Section 197(12) ofthe Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are enclosed as Annexure-8 to thisReport.
Particulars of every employee employed throughout the financial year and in receipt ofremuneration of Rupees One Crore and Two lakhs or more or employed for part of the yearand in receipt of ' 8.50 lakhs or more per month under Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are enclosed asAnnexure-9 to this Report.
NAVA BHARAT VENTURES GENERAL EMPLOYEES BENEFITS SCHEME
Nava Bharat Ventures Employee Welfare Trust (established vide Indenture of Trust datedJanuary 25 2012) has been reconstituted and aligned with the SEBI (Share Based EmployeeBenefits) Regulations 2014 by suitably amending the Trust Deed in line with theRegulations and General Employees Benefits Scheme (GEBS) with the current Regulationsfalling under Part D of the Regulations in accordance with the Special Resolution passedby the members in the 43rd Annual General Meeting held on August 27 2015.
The scheme is in compliance of SEBI (Share Based Employee Benefits) Regulations 2014as applicable. The Scheme is implemented as specified by SEBI in the Regulations.
Presently the Trust holds 1.57% of the total paid up share capital of the Company ason March 31 2018. Since Shares constitute about 99.42% of the total assets held by theEmployee Welfare Trust (EWT) for GEBS the Company and the Trust have to dispose of thesurplus shares over and above 10% of its total assets which the Trust can retain inaccordance with SEBI Regulations before October 28 2019.
The Company and the Trust shall after retaining 1823 shares which it is eligible toretain under the Regulations have to sell the surplus 2798177 shares within a period offive years from the date of the Regulations i.e. before October 28 2019.
Auditor's Certificate pursuant to Regulation 13 of SEBI (Share Based Employee Benefits)Regulations 2014 in respect of Nava Bharat Ventures General Employee Benefits Scheme2015 would be placed in the meeting.
The prescribed details are disclosed on the Company's website under the link:
The Trustee shall not be eligible to exercise voting rights in General Meetings on theshares of the Company held by the Trust.
Pursuant to Rule 16 of Companies (Share Capital and Debentures) Rules 2014 it isdisclosed that the Trustee abstained from voting at the AGM held on August 24 2016.
EMPLOYEES' STOCK OPTION SCHEME
During the year under review no employee stock options were granted. No ESOPs werealso exercised as there were no outstanding options as at the beginning of the year.
DIRECTORS' RESPONSIBILITY STATEMENT
Directors confirm that:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) they 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 at the end of the financial year and of the profitand loss of the company for that period;
(c) they took 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) they prepared the annual accounts on a going concern basis;
(e) they laid down internal financial controls to be followed by the company and thatsuch internal financial controls were adequate and operating effectively; and
(f) they devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
STATUTORY AUDITORS & AUDITOR'S REPORT
M/s. Walker Chandiok & Co. LLP Chartered Accountants (Firm Regn. No.001076N/N500013) has been appointed as the statutory auditors of the Company for a periodof 5 years i.e. till the conclusion 50th annual general meeting (AGM) by the members ofthe Company at their meeting held on August 9 2017 subject to ratification by the membersat their subsequent AGM as stipulated in Section 139 of Companies Act 2013. Whereas theprovisions of section 139 of Companies Act 2013 relating to ratification of appointmentof auditors by the members has been omitted by the Companies (Amendment) Act 2017 witheffect from May 7 2018. Hence their appointment is valid till the conclusion of 50th AGMof the Company to be held in the FY 2022.
The Auditor's Report on the financial statements of the Company for financial yearended March 31 2018 does not contain any reservation qualification or adverse remarksand their report together with notes to Financial Statements are self-explanatory andhence do not call for any further comments under Section 134 of the Companies Act 2013.
The Board appointed M/s. Narasimha Murthy & Co. Cost Accountants as Cost Auditorsfor conducting the audit of cost records of the Company for Sugar Industrial AlcoholSteel (Ferro Alloys) and Electricity for the Financial Year 2017-18 on the recommendationsof the Audit committee. The same was ratified by the Members at the 45th Annual GeneralMeeting held on August 9 2017.
The Cost Audit reports for FY 2016-17 were filed with Ministry of Corporate Affairs onAugust 31 2017.
Further the Board of directors based on the recommendations of the audit committeeappointed M/s. Narasimha Murthy & Co. Cost Accountants as Cost Auditors forconducting the audit of cost records of the Company for Sugar Industrial Alcohol Steel(Ferro Alloys) and Electricity for the FY 2018-19 subject to ratification of members atthe ensuing AGM.
INTERNAL AUDITORS FOR COSTING SYSTEMS AND COST ACCOUNTING RECORDS
M/s. Sagar & Associates Internal Auditors conducted internal audit of cost recordsfor the Financial Year 2017-18.
The Board appointed M/s Sagar & Associates as Internal Auditors for conduct ofinternal audit of cost records for the Financial Year 2018-19.
As per the provisions of Section 204 of the Companies Act 2013 the Board of directorshas appointed M/s.P.S.Rao & Associates Practicing Company Secretaries to conductsecretarial audit pursuant to the recommendations of the Audit committee for the FinancialYear 2017-18.
The Secretarial Audit Report for the financial year ended March 31 2018 issued byPracticing Company Secretary is enclosed as Annexure - 10 to this Report and does notcontain any reservation qualification or adverse remarks.
However the report states that Dr. ERC Shekar Independent Director was named in thelist of disqualified directors issued by MCA and a detailed explanation for erroneousinclusion of his name in the list has been provided therein.
Further the Board has appointed M/s.P.S.Rao & Associates Practicing CompanySecretaries to conduct secretarial audit pursuant to the recommendations of the Auditcommittee for the FY 2018-19.
MATERIAL CHANGES AND COMMITMENTS
There have been no material changes and commitments in the business operations of theCompany from the financial year ended March 31 2018 to the date of the signing of theDirectors' Report.
MATERIAL ORDERS PASSED BY THE REGULATORS
No significant/material orders were passed by the Regulators or courts or tribunalsimpacting the going concern status and Company's operations in future except as statedotherwise.
All the properties of the Company including buildings plant and machinery and stockshave been adequately insured.
ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The Company maintains all its records in SAP system and thework flow and approvals are routed through SAP.
The Internal Audit Department monitors and evaluates the efficacy and adequacy ofinternal control system in the
Company its compliance with operating systems accounting procedures and policies atall locations of the Company and its subsidiaries. Based on the report of internal auditfunction the Units undertake corrective action in their respective areas and strengthenthe controls. Significant audit observations and corrective actions thereon are presentedto the Audit committee of the Board periodically.
The Board of directors of the Company have adopted various policies like related partytransactions policy whistle blower policy policy to determine material subsidiaries andsuch other procedures for ensuring orderly and efficient conduct of its business forsafeguarding its assets prevention and detection of frauds and errors accuracy andcompleteness of the accounting records and timely preparation of reliable financialinformation.
TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Section 205A of the Companies Act 1956 (Sec. 124 (5) ofthe Companies Act 2013) an amount of ' 3130569/- relating to FY 2009-10 whichremained unclaimed for a period of 7 years had been transferred by the Company onSeptember 25 2017 to the Investor Education and Protection Fund and credited on September27 2017.
TRANSFER OF UNCLAIMED SHARES TO INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY
All shares in respect of which dividend has not been paid or claimed for sevenconsecutive years or more (relevant shares) upto and including the financial year 2009-10were transferred by the Company in the name of IEPF on December 5 2017 and the statementcontaining such details as may be prescribed is placed on Company's websitewww.nbventures.com .
The Company established a vigil mechanism for directors and employees to report genuineconcerns pursuant to Sec. 177 of the Companies Act 2013. The vigil mechanism provided foradequate safeguards against victimisation of employees who use such mechanism and fordirect access to the chairperson of the Audit committee in appropriate or exceptionalcases.
The policy lays down the mechanism for making enquiry into whistle blower complaintreceived by the Company. Employees who may become aware of any alleged wrongful conductare encouraged to make a disclosure to the Audit committee.
The details of such mechanism are communicated to all the directors and employees andit was also disclosed on the website of the Company http://www.nbventures.com/corporate_policies.htm
RISK MANAGEMENT POLICY
The Board formulated and implemented Risk Management Policy for the Company whichidentifies various elements of risks which in its opinion may threaten the existence ofthe Company and measures to contain and mitigate risks. The Company has adequate internalcontrol systems and procedures to combat the risk. The Risk Management procedures arereviewed by the Audit committee and the Board on periodical basis.
DIVIDEND DISTRIBUTION POLICY
The Dividend Distribution policy as stipulated in Regulation 43A of Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) (SecondAmendment) Regulations 2016 is not required to be disclosed in the annual report and onthe website of the Company as the provisions of the said regulations are not applicable toyour company.
However the Dividend Distribution Policy is placed on the Company's website under theweblink: http://www . nbventures.com/corporate_policies.htm onvoluntary basis.
INDUSTRIAL SAFETY AND ENVIRONMENT
Utmost importance continues to be given to the safety of personnel and equipment in allthe plants of the Company. The Company reviews thoroughly the various safety measuresadopted and takes effective steps to avoid accidents. Safety drills are also conducted atregular intervals to train the employees for taking timely and appropriate action in caseof accidents.
Your Company received the following awards/recognitions during 2017-18:
1. CII-ITC Sustainability Awards 2017 - NBVL
Paloncha is awarded "Commendation for Significant Achievement in Corporate SocialResponsibility"
for Commendable Results from Deployment of Policy and Processes on the journey toExcellence in Sustainable Business.
2. Gold Award for Best Technical Efficiency in the State of Andhra Pradesh from SouthIndian Sugarcane & Sugar Technologists Association (SISSTA) for the season 201617 (Theaward was received by Sugar Division).
3. Silver Award for Best Co-generation in the State of Andhra Pradesh from South IndianSugarcane & Sugar Technologists Association (SISSTA) for the season 201617 (The awardwas received by Sugar Division).
4. National Award for Excellence in Energy Management 2017 for Excellent EnergyEfficient Unit from Confederation of Indian Industry (The Power Plant - Odisha receivedthis award under the category of Captive Power Plant).
5. Best Overall Performance Sugar Mill 2017 for the states of Andhra Pradesh &Telangana from Bharatiya Sugar at the "5th Annual Symposium on Sugar Technology andSugarcane Agriculture" (The Sugar Division received the award for producing bestquality sugar - with minimum losses achieving best recovery and efficient plantoperation).
6. State Safety Award 2015 for Best Performance in Safety & Environment from TheDirectorate of Factories & Boilers Government of Odisha (The Odisha Works receivedthe award).
GREEN INITIATIVE IN CORPORATE GOVERNANCE BY HON'BLE MINISTRY OF CORPORATE AFFAIRS
The Ministry of Corporate Affairs (MCA) has taken a green initiative in CorporateGovernance by allowing paperless compliances by the Companies and permitted the service ofAnnual Reports and documents to the shareholders through electronic mode subject tocertain conditions and the Company continues to send Annual Reports and othercommunications in electronic mode to the members having email ids.
Industrial relations have been cordial during the year under review and your Directorsappreciate the sincere and efficient services rendered by the employees of the Company atall levels towards successful working of the Company.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
Your Company has zero tolerance towards sexual harassment at the workplace and thedetails of sexual harassment complaints as per the provisions of the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 and the Rulesthereunder are as follows:
No. of Complaints Received : Nil
No. of Complaints disposed off : NA
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND ANNUAL GENERAL MEETINGS
The Company has complied with secretarial standards issued by the Institute of CompanySecretaries of India on Board Meetings and Annual General Meetings.
Your Directors express their deep appreciation and gratitude for the assistancepatronage and co-operation received from the financial institutions bankers insurancecompanies Central Government Governments of Telangana Andhra Pradesh and Odisha theState utilities shareholders and other stakeholders during the year under review.
For and on behalf of the Board
P. Trivikrama Prasad
Managing Director DIN:00006887
Place : Hyderabad D. Ashok
Date : May 30 2018 Chairman