Your Directors are pleased to present the 53rd Annual Report on the business andoperations of the Company together with the audited statement of accounts of the Companyfor the year ended March 312019.
The highlights of the financial results for the year ended March 312019 are asfollows:
(Rs. in crores)
|For the year ended March 31 || |
| ||2019 ||2018 ||2019 ||2018 |
|Tiles & Related businesses ||590.39 ||576.99 ||596.89 ||589.56 |
|Less: Excise duty including excise duty on traded products ||- ||15.32 ||- ||16.51 |
|NET Revenue from Tiles & Related businesses (Net of Excise duty) ||590.39 ||561.67 ||596.89 ||573.05 |
|Revenue from Real Estate Business ||1.57 ||29.99 ||1.57 ||32.25 |
|Net Comparable Revenue ||591.96 ||591.66 ||598.46 ||605.30 |
|Profit /(Loss) before interest depreciation and tax ||3.99 ||5.28 ||0.93 ||8.37 |
|Interest & Financial Charges (Net) ||(19.77) ||(8.46) ||(23.07) ||(13.86) |
|Depreciation ||(31.12) ||(72.46) ||(39.23) ||(80.53) |
|Exceptional Items ||- ||247.86 ||- ||247.86 |
|Profit/(loss) before tax ||(46.90) ||172.22 ||(61.37) ||161.84 |
|Provision for tax including reversal of taxes for earlier years ||- ||20.35 ||1.32 ||22.92 |
|Other Comprehensive Income ||0.15 ||(0.20) ||0.15 ||(0.20) |
|Profit/(loss) after tax ||(46.75) ||192.37 ||(59.90) ||184.56 |
|Minority interest ||- ||- ||(6.40) ||(4.13) |
|Balance carried forward ||(46.75) ||192.37 ||(53.50) ||188.69 |
Review of operation
Recent years have witnessed several major changes in government policies.Implementation of Goods & Service Tax (GST) Act Real Estate (Regulation &Development) Act ("RERA") and continuing effect of demonetization etc haveimpacted real estate as well as building material industry in particular. Under suchconstraints your Company was able to achieve net total revenue of Tiles & Relatedbusinesses of ' 590.39 crore an increase of 5.11% over last year. This was made possibledue to the strong brand equity enjoyed by the Company. The Company has achieved overallEBITDA of ' 3.99 crores in F.Y. 2018-19 against an EBITDA of ' 5.28 crores in F.Y.2017-18. The drop in EBITDA was on account of lower sales in real estate segment. At aconsolidated level the Company has achieved EBITDA of ' 0.93 crores (previous year ' 8.37crores) on account of losses incurred by subsidiary companies.
The paid up Equity Share Capital as at March 31 2019 stood at ' 71.86 crore. There wasno change in the share capital during the year under review.
Employee Stock Option Plan (ESOP)
With a view to motivate attract and retain key employees of the Company The Companyintroduced a "Nitco - Employees Stock Option Plan - 2019" (NITCO - ESOP - 2019).The Plan is introduced to create grant offer issue and allot such number of StockOptions convertible into Equity Shares of the Company ("Options") in one ormore tranches not exceeding 1200000 (twelve lakhs) equity shares of face value of ' 10each. Special Resolution to approve "NITCO - Employees Stock Option Plan - 2019"was passed by the shareholders through Postal Ballot on March 30 2019.
JMFARC had acquired 98% of the Company's debt from its lenders and sanctioned debtrestructuring effective from the Cut-Off date February 28 2018. Interest on restructuredloans has been provided in the books as per the Restructuring agreement with JMFARC.Further the company is negotiating with LIC for restructuring of its facility(outstanding ' 19.05 crs.) on terms similar to restructuring done by JMFARC. Pendingnegotiations with LIC no further adjustments in respect of LIC facility has been made.
Pending realisation from sale of non core assets there was default in repayment ofterm loan installments of ' 1101.71 lakhs. which were repayable as on 31.3.2019.
Joint Venture with New Vardhman Vitrified Tiles Pvt. Ltd.
With a view to get assured supply of Soluble Salt Vitrified Tiles your Company hadacquired 51% equity stake in New Vardhman Vitrified Tiles Pvt. Ltd (NVVPL) during F.Y.2011-12 with a view to get assured supply of vitrified tiles at competitive prices. Due toadverse market conditions the market prices of the products being manufactured by NVVPLhas been continuously coming down. As a result the cost of production of NVVPL was higherthan the prevailing market prices. Considering the market conditions the production atNVVPL was temporarily suspended from October 2018. With suspension of production at NVVPLCompany made alternate arrangements for sourcing of the products manufactured by NVVPLfrom other vendors at competitive prices. During the F.Y. 2018-19 NVVPL has achieved nettotal turnover of ' 56.46 crore (previous year ' 126.59 crores) EBITDA loss of ' 3.59crore (previous year EBITDA profit of ' 1.32 crores) and loss before tax of ' 14.38 crore(previous year ' 11.00 crores). NVVPL has fully repaid the term loan sanctioned by thebank. The outstanding balance of cash credit as on March 31 2019 stands at '15.49 crores.The banker to NVVPL has sent a recall notice dated April 22 2019 for withdrawal of thefacilities being enjoyed by NVVPL. Details of transactions with NVVPL (includinginvestments and loans & advances have been provided in note no 36 (B) - "Relatedparty disclosures" of the financial statements
Subsidiary Companies and Consolidated Financial Statements
In accordance with the Companies Act 2013 and Accounting Standard (AS-21) onconsolidated financial statement the audited consolidated financial statement is providedin the Annual Report. The statement required under section 129(3) of the Companies Act2013 in respect of the subsidiary companies is provided in Annexure I of this report.
The annual accounts of the subsidiary companies and the related detailed informationwill be made available to any member of the Company / its subsidiaries who may beinterested in obtaining the same. The annual accounts of the subsidiary companies willalso be kept for inspection by any member at the Company's Registered Office and CorporateOffice and that of the respective subsidiary companies.
The last Credit Rating issued to the Company by CARE Limited was on October 1 2012.However the credit rating is under suspension at present as the Company was underCorporate Debt Restructuring.
Board does not recommend any dividend for the financial year ended March 312019.
No material changes or commitments have occurred between the end of the financial yearand the date of this report which affect the financial statements of the Company inrespect of the reporting year.
Internal Control System
(i) Internal Control Systems and their adequacy
The Company has in place adequate internal controls commensurate with the size of theCompany and nature of its business and the same were operating effectively throughout theyear. Internal Audit is carried out by external auditors and periodically covers all areasof business. The Internal Auditors evaluates the efficacy and adequacy of internal controlsystem its compliance with operating systems and policies of the Company and accountingprocedures at all the locations of the Company. Based on the report of the InternalAuditors process owners undertake corrective action in their respective areas and therebystrengthen the controls. Significant audit observations and corrective actions thereon areplaced before the Audit Committee of the Board.
(ii) Internal Controls over Financial Reporting
The Company has in place adequate internal financial controls commensurate with sizeand 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 procedures in place for ensuring proper and efficient conduct of itsbusiness the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timely preparationof reliable financial information.
Directors Responsibility Statement
The Directors confirm that:
a) I n the preparation of the annual accounts for the year ended March 31 2019 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed with proper explanation relating to material departures;
b) Appropriate accounting policies have been selected and applied consistently and havemade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company as on March 31 2019 and of the loss ofthe Company for the year ended March 312019;
c) Proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) The annual accounts have been prepared on a going concern basis.
e) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
During the year JM Financial Asset Reconstruction Company Limited (JMFARC) nominatedMr. Vivek Grover and Mr. Samir Chawla as nominee Directors. Mr. Pradeep Saxena-Independent Director of the company has resigned from the Board w.e.f. April 23 2019 dueto his pre-occupation.
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under section 149(6)ofthe Companies Act 2013. The Company has devised a Policy for performance evaluation ofIndependent Directors Board Committees and other individual Directors which includecriteria for performance evaluation of the non-executive directors and executivedirectors.
Pursuant to the provisions of the Companies Act 2013 and Regulation 17 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 a structuredquestionnaire was prepared after taking into consideration the various aspects of theBoard's functioning composition of the Board and its Committees culture execution andperformance of specific duties obligation and governance.
The performance evaluation of the Independent Directors was completed. The performanceevaluation of the Chairman was carried out by the Independent Directors.
Key Managerial Personnel
The Company has following Key Managerial Personnel:
|Sr. No. ||Name of the person ||Designation |
|1. ||Mr. Vivek Talwar ||Chairman & Managing Director |
|2. ||#Mr. Mahesh Shah ||Chief Executive Officer |
|4. ||Mr. B. G. Borkar ||Chief Financial Officer |
|5. ||Mr. Puneet Motwani ||Company Secretary & Compliance Officer |
# Appointed as Chief Executive Officer w.e.f. October 24 2018 Corporate Governance
Pursuant to Regulation 34 read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a detailed report on Corporate Governanceforms a part of this Annual Report. A certificate from the auditors of the Companyconfirming compliance with the conditions of Corporate Governance as stipulated underRegulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is given in a separate statement which forms part of this Annual Report.
Management Discussion and Analysis
Management Discussion and Analysis on matters related to business performance asstipulated in Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is given in a separate statement which forms part of the Annual Report.
Contracts and Arrangements with Related Parties
All contracts / arrangements / transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis. During the year the Company had not entered into any new contract / arrangement /transaction with related parties which could be considered material in accordance with thepolicy of the Company on materiality of related party transactions.
Material related party transactions which are at arm's length are disclosed in formAOC-2 annexed as Annexure II.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at thelink: http://www.mtco. in/investors/nitco-policy.aspx. Your Directors draw attention ofthe members to Note 36 to the standalone financial statement which sets out related partydisclosures.
Transfer to Investor Education and Protection Fund (IEPF)
The Company has transferred ' 1.01 lakhs to Investor Education & Protection Fund(IEPF) account during the year under review on account of unclaimed dividend.
Corporate Social Responsibility
The Board has constituted a Corporate Social Responsibility ("CSR")Committee in terms of the provisions of Section 135 of the Act read with the Companies(Corporate Social Responsibility Policy) Rules 2014 inter alia to give strategicdirection to the CSR initiatives formulate and review annual CSR plans and programmesformulate annual budget for the CSR programmes and monitor the progress on various CSRactivities. Details of the composition of the CSR Committee have been disclosed separatelyas part of the Corporate Governance Report.
In view of continuous losses in the preceding financial years the Company is notrequired to contribute to the CSR activities as mandated under the provisions of section135 of the Companies Act 2013.
Risk and Concern
Changes in macro economic factors like GDP growth inflation energy cost interestrate world trade exchange rate etc. also play an important role in our industry therebyaffecting the operations of business. Any adverse change in the above may affect theperformance of your Company. Your Company periodically reviews the risk associated withthe business and takes steps to mitigate and minimize the impact of risk.
The Company has neither accepted nor renewed any deposit from the public within themeaning of Section 73 and 74 of the Companies Act 2013 read with Companies (Acceptance ofDeposits) Rules 2014 during the year ended March 312019.
At the Company's 51st Annual General Meeting (AGM) held on September 20 2017 M/s.Nayak & Rane Chartered Accountants (ICAI FRN 117249W) Mumbai were appointed as theCompany's Statutory Auditors from the conclusion of the 51st AGM till the conclusion ofthe 56th AGM (subject to ratification of their reappointment by the Members at every AGMheld after the AGM in which the appointment was made) of the Company on a remuneration asmay be agreed upon by the Board of Directors and the Auditors. Pursuant to the amendmentsmade to Section 139 of the Companies Act 2013 by the Companies (Amendment) Act 2017effective from May 7 2018 the requirement of seeking ratification of the Members for theappointment of the Statutory Auditors has been withdrawn from the Statute. Hence theresolution seeking ratification of the Members for continuance of their appointment atthis AGM is not being sought.
The Board has duly examined the statutory auditor's report to accounts andclarifications wherever necessary have been included in the Notes to Accounts section ofthe Annual Report. There is no qualification in statutory auditor's report.
In terms of the provisions of Section 204 of the Act and Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board appointedM/s. Mayur More & Associates Practising Company Secretary to conduct SecretarialAudit for F.Y. 2018-19. The Secretarial Audit Report for the financial year ended March31 2019 is annexed herewith marked as Annexure III to this Report. The Secretarial AuditReport does not contain any qualification reservation or adverse remark.
In terms of the provisions of Section 148 of the Act read with Rule 14 of the Companies(Audit and Auditors) Rules 2014 the cost records in respect of marble business arerequired to be audited by a qualified Cost Accountant. The Board of Directors upon therecommendation of the Audit Committee had appointed M/s. R. K. Bhandari & Co CostAccountants as cost auditor for conducting the audit of cost records of the Company forthe applicable segment for F.Y. 2018-19.
The Cost Auditors' Report does not contain any qualifications or reservations.
The Audit Committee comprises Independent Directors namely *Mr. Pradeep Saxena(Chairman) Mr. Sharath Bolar and Mr. Vivek Talwar Managing Director.
(*Mr. Pradeep Saxeena has resigned from the office of the Company w.e.f. April 232019)
The Vigil Mechanism as envisaged in the provisions of sub-section (9) of Section 177 ofthe Act the Rules framed thereunder and Regulation 22 of the Listing Regulations isimplemented by the Company through a Whistle Blower Policy to enable the Directors itsemployees to voice their concerns or observations without fear or raise reports ofinstance of any unethical or unacceptable business practice or event of misconduct/unethical behavior actual or suspected fraud and violation code of conduct etc. to theCorporate Ethics and Governance Committee.
Under the Whistle Blower Policy confidentiality of those reporting violation(s) isprotected and they shall not be subject to any discriminatory practices. The Policy alsoprovides for adequate safeguards against victimization of persons who use such mechanismand make provision for direct access to the Chairman of the Audit Committee in appropriateand exceptional cases. The policy on vigil mechanism and whistle blower policy may beaccessed on the Company's website at the link: http://www.mtco.in/investors/nitco-policy.aspx.
Meetings of the Board
Four meetings of the Board of Directors were held during the year. For further detailsplease refer report on Corporate Governance.
The board has on the recommendation of the Nomination and Remuneration Committee frameda policy for the selection and appointment of Directors Key Managerial Personnel SeniorManagement and their remuneration. This policy along with the criteria for determining thequalification positive attributes and independence of a director is available on thewebsite of the Company i.e. http://www.nitco.in/Investors/PDFFiles/Nomination-and-Remuneration-Policy.pdf.
Prevention of Sexual Harassment of Women at Workplace
As required under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013 and Rules framed thereunder the Company has implemented a policyon prevention prohibition and redressal of sexual harassment at the workplace. This hasbeen widely communicated internally and is uploaded on the Company's intranet portal. Thecompany has constituted Internal Complaints Committee (ICC) to redress the complaintsreceived regarding sexual harassment. During the year under review no complaints werereceived by the Committee for Redressal.
Particulars of Loans given Investments made Guarantees given and Securities provided
Particulars of loans given investments made guarantees given and securities providedalong with the purpose for which the loan or guarantee or security is proposed to beutilized by the recipient are provided in the Note 5 13 19.1 to the standalone financialstatement.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act is annexedherewith as Annexure IV.
Extract of Annual Return
Extract of Annual Report (form MGT-9) of the Company is annexed herewith as Annexure Vof this Report.
Particulars of Employees and related disclosures
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided at Annexure- VI.
In terms of the provisions of rules 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 read with 2nd proviso of the rules astatement showing the names of employees and other particulars of the top ten employeesand employees drawing remuneration in excess of the limits as provided in the said ruleswill be provided on a request made in writing to the Company.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:
1. Details relating to deposits covered under Chapter V of the Act;
2. Issue of equity shares with differential rights as to dividend voting or otherwise;
3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme;
4. The Managing Director of the Company does not receive any remuneration or commissionfrom any of its subsidiaries;
5. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.
Appreciation and acknowledgement
Your Directors acknowledges with gratitude and wish to place on record their deepappreciation of continued support and cooperation received by the Company from the JMFARCBanks Lenders various Government Authorities Shareholders Business AssociatesDealers Customers and Investors during the year.
For and on behalf of the Board
Chairman & Managing Director
Mumbai May 312019