THE MEMBERS OF
NITTA GELATIN INDIA LIMITED
Your Directors have pleasure in presenting the 44th Annual Report and audited financialstatements of your Company for the year ended 31st March 2020.
Accordance with Indian Accounting Standards (Ind AS) The Statement of Accounts has beenprepared in which are applicable to the Company w.e.f. 1st April 2017 as perthe Rules laid down in this regard.
The Authorised Share Capital of your Company as on 31st March 2020 wasRs.802444480/- (Rupees Eighty Crores Twenty Four lakhs Forty Four Thousand Four Hundredand Eighty only) comprising of four crore Equity Shares of Rs. 10/- each totaling to Rs.400000000/- 929412 Optionally Convertible non-cumulative Preference Shares (OCPS) ofRs. 170/- each totaling to Rs. 158000040/- two crore Optionally Convertiblenon-cumulative Preference Shares of Rs. 10/- each totaling to Rs. 200000000/- and4444444 Redeemable Preference Shares of Rs. 10/- each totaling to Rs. 44444440/-.Nitta Gelatin Inc. (NGI) Japan had not exercised the option to convert the OCPS shares ofRs. 170/- each into Equity Shares at the end of 18 months from date of its allotment asper terms of the issue.
ALLOTMENT OF PREFERENCE SHARES
The Company has allotted 4444444 Redeemable Preference Shares of Rs. 10/- each toM/s. Nitta Gelatin Inc. Japan on 27.11.2019 as consideration for their equity holding inthe erstwhile Reva Proteins Ltd. as per the Scheme of Merger approved by the shareholdersand the Hon'ble NCLT during the year.
The gross revenue from operations of your Company during the year under review was Rs.297.47 crores as compared to Rs. 261.19 crores in the previous year. There was an increasein sales realisation per unit of Gelatin with the growth in Gelatin demand worldwide.Increased quality of sales and per unit sales price of Gelatin and significant increase inper unit sales price of Collagen Peptide has enabled the Company in terms of higher grossrevenue from product sales. The Company was able to position Collagen Peptide in thepremium segment in the Indian market resulting in better unit sales realization.
Crushed Bone availability was tight due to reduced slaughtering because of stricterenforcement of regulations particularly against unlicensed slaughtering restrictions ontransportation of cattle and non-availability of migrant labour due to the nationalelections in April / May 2019. The Crushed Bone price as a result has increasedsignificantly by 17% during the year as the demand was higher than the supply. Quality ofCrushed Bone also continued to be poor. Raw material availability viz Crushed Bone (CB)which is a major concern for our capacity expansion was evaluated by M/s. Kantar IMRB areputed agency engaged in market research and consumer consulting. The study showed thatthere is a drop in the availability of Crushed Bone of around 3500~4000 MT/month in 2019from 2015 level. The study also projected a growth of only 7~8% in CB availability by2023-2024 if the current restrictions continue to exist. If the situation changes to thepre 2015 situation the availability can increase to 22~23% by 2023-24. The Companycontinues to look for opportunities for importing CB and good quality Hide to supplementraw material availability.
The Company also produced and exported Limed Ossein using imported Crushed Bone fromFrance. Limed Ossein production at Reva Division was initially affected due tostabilisation of ammoniacal nitrogen reduction in the effluent. Our efforts to stabilizethe system have yielded positive results helping the Company in significantly reducing thechemical costs incurred for ammoniacal nitrogen treatment. Production was disrupted atReva during the year due to problems faced with the discharge pipeline on account ofnon-availability of water and power and due to scaling of the pipeline connecting ourfactory discharge point to the marine pipeline. Reva Division was able to achieve bettercapacity utilisation levels in the II half of the financial year with the arrest of theleakage in the effluent pipe line following intervention by Narmada Clean Tech theCompany responsible for managing the pipe line from the discharge outlet to the marinepoint.
Debottlenecking of the sludge drier at Ossein Division is under progress and theCompany could achieve a throughput of 400 Kg/hr against the earlier rate of 280 Kg/ hr.Further fine tuning will be carried out in the coming year in consultation with theequipment manufacturer which is expected to bring significant progress in augmenting theCompany's sludge management and disposal systems. Quality of water in the river source ofCompany's Gelatin Division was affected in December 2019 due to delay in construction ofthe embankment to prevent ingress of saline water from the sea into the river. The Companymanaged the situation with minimal production disruption by purchase of fresh water fromprivate parties in tankers.
The problem that would be created in terms of water availability at Gelatin Division bythe proposed relocation of the embankment due to the Water Metro boat service has beenescalated to higher levels of the government for a solution.
USA has withdrawn the preferential system of tariffs with India which has resulted in4% import duty for imports from India effective June 2019. This has impacted the per unitprice realisation of Company's Gelatin exports to USA. With all the Gelatin plants (exceptthe Ooty plant of Serling Biotech)in full scale operation during the year and theresultant high demand for crushed bone crushed bone prices increased significantly. Acidprices have gone up by 30%adversely impacting the cost of production. The per unit pricerealization has gone up by 5% for Ossein/Limed Ossein 4% for Gelatin and 63% for CollagenPeptide due to robust demand. Supply of the raw material fish protein on account ofregulatory issues continued to pose a challenge for Collagen Peptide sales. The weakeningof Rupee against USD during 2019-20 as compared to 2018-19 has also contributed to bettersales realisation on exports. In the backdrop of this situation your Company exercisedclose monitoring and strict control over each significant element of cost and achievedappreciable savings notwithstanding the higher costs incurred due to higher productionlevels. There was significant reduction in power cost as a result of various cost controlmeasures in both the Divisions of the Company. Though the price of LNG firewood andfurnace oil has increased during the year cost control measures helped the Company tokeep costs under control. Factory overheads witnessed cost increase due to thecomprehensive annual shut down taken in Gelatin Division during the year and the disposalcosts incurred for clearing the sludge. Administration overheads were maintained at lastyear levels through appropriate controls.
With regard to finance cost the Company could effectively leverage low cost foreigncurrency loans by negotiating with the Banks and introducing Banks that provide workingcapital funds at competitive rates. Interest rates for foreign currency loans have alsodropped as LIBOR has gone down from 2.6% to 1.4% during the course of the year.
The products of your Company continued to enjoy robust market demand during the yearunder review. The entire sale of Ossein/Limed Ossein 47.6% of the total sale of Gelatinand 44.1% of Collagen Peptide was through exports. Your Company has arrangement with itsoverseas promoter Nitta Gelatin Inc. Japan to leverage their expertise and marketinsights in servicing its customers in a pro-active manner in line with the globalstandards of NITTA Group.
In a very significant judgement the Panchayath Tribunal of Kerala has quashed thedecision of the Kadukuttty Panchayat to reject the Company's application for the FactoryLicense for Ossein Division and directed the Panchayat to issue the license to theCompany. The Panchayat Secretary has issued the License to the Company for a period of 5years in November 2019. This decision was however reversed by the Panchayath Presidentsubsequently. The Company had filed a case against the Panchayath President's decision inthe High Court and the Court stayed the order of the President. The Court subsequentlyinstructed the Central Pollution Control Board to study the assimilation capacity ofChalakudy river. In the report submitted by Central Pollution Control Board to High Courtthey have stated that the Company fully meets the discharge norms and has also made someobservations on operation of Effluent Treatment Systems. The petition is nowpending for adjudication by the High Court.
During the previous year the Pollution Control Board has renewed the validity of theConsent to operate up to 30th June 2023 for the Ossein Division. Similarly for GelatinDivision during the previous year the Company has renewed the Consent to operate up to30th June 2023. Reva Division's Consent to Operate issued by the Gujarat State PollutionControl Board is valid up to May 2021. Operational Excellence fairs were conducted at theOssein and Gelatin Divisions of the Company with active involvement of the employees. Someof the members of the nearby Panchayats and also the Directors of the Company participatedin the fair which showcased the various types of products offered and the initiativespursued by the Company for business excellence.
The operations of the Company for the year 2019-20 have resulted in a pre-tax profit ofRs. 6.87 crores (as against a pre-tax loss of Rs. 3.67 crores during the year 2018-19).
(All amounts in Rs. Crore unless otherwise stated)
|Particulars ||For the year ended 31st March 2020 ||For the year ended 31st March 2019 |
|Sales (including export incentives and net of Excise Duty & VAT) ||294.47 ||261.19 |
|Other Income ||3.30 ||0.71 |
|TOTAL ||297.77 ||261.90 |
|Gross Profit before Depreciation ||21.83 ||10.68 |
|Deducting therefrom: || || |
|Depreciation ||14.95 ||14.35 |
|Provision for Tax - || || |
|- Current Tax ||1.18 ||- |
|- MAT Tax ||(1.18) ||- |
|- Deferred Tax ||2.09 ||(1.03) |
|- Prior years ||(3.10) ||- |
|Profit/(Loss) after Tax from continuing operations ||7.89 ||(2.64) |
|Other comprehensive income/(loss) (net of tax) ||(5.88) ||1.13 |
|Total comprehensive profit for the year ||2.01 ||(1.51) |
|Profit brought forward from previous year ||(13.06) ||(7.69) |
|Balance Profit available for appropriation ||7.89 ||(2.64) |
|Appropriations : || || |
|Final dividend on equity shares- paid ||1.36 ||2.27 |
|Tax on dividend ||0.02 ||0.46 |
|Total ||1.38 ||2.73 |
|Balance profit carried forward to next year ||(6.55) ||(13.06) |
|Earnings per share (Rs.) || || |
|Basic ||8.70 ||(2.90) |
|Diluted ||8.70 ||(2.90) |
Note: Dividend on Preference Shares is considered as finance costs.
Considering the Company's performance the Board has recommended a dividend of Rs. 2.5per share i.e. 25% of the face value of Rs. 10/- per share on the Equity Capital for theyear ended 31st March 2020. The Board has also recommended dividend @ 5.4029% p.a. on the929412 Optionally Convertible Preference Shares of face value of Rs. 170/- each and adividend @7.65063% on the 4444444 Redeemable Preference Shares of the face value of Rs.10/- each for the year ended 31st March 2020. This dividend payment is out of the currentyear profits of the Company and is subject to approval of the members at the ensuingAnnual General Meeting.
The total outflow on account of dividend will be Rs. 346.15 lakhs (Rs. 221.55 lakhs inthe financial year 2018-19) comprising of Rs. 119.17 lakhs on Preference Shares (Rs. 85.36lakhs in the financial year 2018-19) and Rs. 226.98 lakhs on equity shares (Rs. 136.19lakhs in the financial year 2018-19).
During the year unclaimed dividend of Rs. 2.62 lakhs pertaining to the year ended 31stMarch 2012 was transferred on 13.08.2019 to the Investor Education & Protection Fundafter giving due notice to the members.
No amount is transferred to General Reserve during the year. The Company has recognizedcapital reserves amounting to Rs. 2750.62lakhs on account of the merger (includingdeferred tax asset on the unabsorbed business loss of Reva Proteins Ltd. carried over fromprevious years as per tax books for an amount of Rs. 1609 lakhs and other
Reserves as on 31.03.2020 comprises of Security Premium Reserve of Rs. 2895.90 lakhsequity contribution on External Commercial Borrowings and Preference Share Capital Rs.984.43 lakhs Special Export Reserve of Rs. 79 lakhs General Reserve of Rs. 7836.64lakhs Debit Balance in the Profit and Loss Account of Rs. 654.79Lakhs Capital Reserve of2750.62 lakhs Hedge Reserve of Rs. (408.56) lakhs and other comprehensive loss of Rs.73.85 lakhs aggregating to Rs. 13409.39lakhs.
PARTICULARS OF LOANS GUARANTEES & INVESTMENTS
The Company has provided Corporate Guarantee on behalf of Bamni Proteins Ltd.(subsidiary Company) to the lenders towards its borrowings for working capital requirementto the extent of Rs. 750 lakhs. Details in respect of other loans guarantees andinvestments covered under the provision of Section 186 of the Companies Act 2013 aregiven in the notes on accounts for the financial year ended 31st March 2020and suchloans guarantees and investments are within limits prescribed under that Section.
During the year rating agency CRISIL has reaffirmed the rating of CRISIL A-/ andrevised its rating outlook as "Stable" from "Negative" for Long TermInstruments and reaffirmed "CRISIL A2+" rating for short term instruments.
AWARDS & ACCOLADES
During the year your Company was awarded:
a) Capexil Top Export Award for the FY 2015 16 & 2016-
b) National Institute of Personnel Management's Best Corporate Citizen Award 2019 forthe various social welfare activities undertaken by the Company as part of its CSRinitiatives.
c) 5S Excellence Award for Gelatin Division under the Medium scale manufacturingcategory.
d) Kerala Management Association's All Kerala CSR Awards 2019 for Environment &Greenery Private Sector
e) Three awards in CII Southern Region Kaizen competition 1. in medium scale processindustry
f) Great Manager Institute (GMI) award. GMI along with Forbes India selected NittaGelatin India Ltd. as a Company having Great People Managers - one among the 50 Companiesacross India.
g) The National CSR Leadership Award for Best Environmental Sustainability forCompany's efforts towards environmental sustainability in the areas around where theCompany's factories are situated.
h) SAP award for operational excellence in Finance for SME sector
i) "Asia's Most Trusted Companies Award 2019" in the Gelatin and CollagenPeptide category in Asia Pacific from India region from IBC Info Media Pvt. Ltd. aDivision of International Brand Consulting Corporation USA.
The following prestigious certifications are retained by your Company:-
(a) European Directorate for the Quality of Medicines & Health (EDQM) Certificatefor Gelatin Division
(b) CAPEXIL plant approval certificate for Ossein Division and Gelatin Division for theexport of Ossein Gelatin and Collagen Peptide.
(c) HACCP Certificate for Ossein Division for food safety.
(d) ISO 14001:2015 for Gelatin Division for Environment Management System
(e) ISO 9001: 2015 for Quality Management System of the Company.
(f) FSSC Certification for Food Safety Management System for Gelatin Division
(g) FSSAI Certification for manufacturing import / export of Gelatin & CollagenPeptide
(h) WHO GMP Certification as per World Health Organisation/Codex for manufacture ofGelatin & Collagen Peptide
(i) Halal/Kosher Certification for Gelatin and Collagen Peptide
(j) NABL Accreditation for in-house laboratory of Gelatin Division.
(k) OHSAS 18001:2007 Certification for Occupational Health and Safety Standards forGelatin Division and Ossein Division.
HEALTH SAFETY AND ENVIRONMENT
Compliance with relevant regulations and effective management of the related issues isan integral part of the Company's philosophy.
1. Health and Safety
The Company is committed to protecting the health and safety of its employees. Inaddition to the Head (Safety) for the Company each plant has a Safety Officer and SafetyCommittees which include representation from workmen and executives. The Committees meetregularly to review issues impacting plant safety and employee health. Regular healthcheckup of the employees is carried out through tie-up with reputed hospitals. Varioustraining programmes are conducted at the plant on health and safety issues includingemergency preparedness work safety first-aid etc. Both Ossein and Gelatinfactories have received the OHSAS certification which is a testimony to the Company'scommitment in this area. The following are the major activities carried out during theyear :-
OHSAS 18001:2007- 2nd surveillance audit completed at Ossein division
OHSAS 18001:2007 - Recertification audit completed at Gelatin division
External safety audit completed at Reva Division
Action points identified based on experience at other factories of Nitta GelatinInc. Japan completed.
Fire license renewed at Ossein and Gelatin Divisions
Mock drills conducted at Ossein and Gelatin Divisions
ISO14001:2015 recertification audit of Gelatin Division is planned in September2020.
Ossein and Gelatin Divisions are planning to conduct an external Safety Audit by asuitable approved agency during the coming months.
The Company continuously endeavors to enhance Environmental Management and through allactivities demonstrates its commitment to protect the environment. The factories of theCompany are equipped with modern effluent treatment plants for treating and dischargingtreated water with parameters well within the norms laid down by the respective Statepollution Control Board. The emissions from the boilers and generator stacks are regularlymonitored for compliance. Various energy saving measures and efficiency improvementactivities were taken up last fiscal that reduced the consumption of fuels compared toprevious years. Our ETP operations were reinforced with the introduction of new equipmentand mixing tanks. Action plans have been drawn up to reduce consumption of water in thecoming years. During the year Central Pollution Control Board has stated that the Companyfully meets the discharge measures in their report to the High Court.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company has formulated a well-structured Policy aimed at providing focus anddirection to the various activities on CSR. The Company is committed to identifying andsupporting programmes aimed at:
Empowerment of the disadvantaged / weaker sections of the society througheducation skill development etc.;
Providing basic necessities like healthcare drinking water & sanitation;
Supporting environmental and ecological balance through afforestation soilconservation conservation of flora and similar programmes;
Promotion of sports through training of sports persons;
Rural development projects; etc Total CSR expenditure incurred by your Companyduring the year was Rs. 23.50 lakhs meeting the statutory requirement of 2% of the averageprofit for the last three years.
A CSR Committee has been constituted to act in an advisory capacity with respectto policies and strategies that affect the Company's role as a socially responsibleorganization.
The CSR Committee monitors the progress of the projects and ensures that theimplementation of the projects is in compliance with the CSR objectives and Policy of theCompany.
The CSR Policy can be accessed on the Company's website www.gelatin.in. The CSRprojects undertaken by the Company are in accordance with Schedule VII of the CompaniesAct 2013. The Annual Report on CSR activities is annexed herewith as Annexure I.
POLICY FOR DETERMINING MATERIAL
In accordance with SEBI LODR Regulations the Company's policy on materiality ofsubsidiaries specifying the criteria for determining the Material Subsidiaries isavailable in the Company website www.gelatin.in. As per such criteria the Company has nomaterial subsidiary as of 1st April 2020.
BAMNI PROTEINS LIMITED
The annual production during the year in this subsidiary Company was 2385 MT of Osseinand 5440 MT of Di-Calcium Phosphate as against 2193 MT of Ossein and 5240 MT of Di-CalciumPhosphate during the previous year.
The operation of this subsidiary for the year under review has resulted in a pre- taxprofit of Rs. 848.75 lakhs (Rs. 1165.78lakhs in the previous year) post-tax profit of Rs.627.82 Lakhs (Rs. 822.17 lakhs in the previous year) and other comprehensive loss of Rs.92.76 lakhs (Profit of Rs. 18.51 lakhs) during the previous financial year.
In accordance with Section 129(3) of the Companies Act 2013 a consolidated financialstatement of the Company and its subsidiary Company has been prepared which is formingpart of the Annual Report.
The statement containing the salient features of the financial statement of thesubsidiary under first proviso to Sub-Section (3) of Section 129 of the Act in Form AOC Iis attached as Annexure II.
In accordance with fourth proviso of Section 136(1) of the Companies Act 2013 theAnnual Report of the Company containing therein its standalone and consolidated financialstatements has been uploaded on the website of the Company www.gelatin.in. Further as perthe fourth proviso of the said section the annual accounts of the subsidiary Company andthe related detailed information have also been uploaded on the website of the Companywww.gelatin.in.
Annual accounts of the subsidiary Company and related detailed information shall bemade available to the shareholders of the Company and Subsidiary Company seeking suchinformation at any point of time. The annual accounts of the subsidiary Company shall alsobe made available for inspection by any shareholder at the
Registered Office of the Company and Subsidiary Company concerned. Hard copy of detailsof accounts of Subsidiary shall be furnished to any shareholder on demand. Furtherpursuant to Indian Accounting Standard (Ind AS) 110 issued by the Institute of CharteredAccountants of India consolidated financial statements presented by the Company includethe financial information of its Subsidiary.
STATUTORY AUDITORS' REPORT
Emphasis of Matter on the accounts of the Company referred to in the Auditors' Reportis explained in detail in Notes forming part of accounts for the year and hence no furthercomments are considered necessary.
SECRETARIAL AUDITORS' REPORT- EXPLANATION TO OBSERVATIONS OF AUDIT
As prescribed under Section 204(1) of the Act the Company has received the SecretarialAudit Report. The observations made therein and the corresponding explanations aregiven below:-
|Sl. Observation No. ||Our explanation |
|1. 86th Audit Committee Meeting of the Company was held on 6th May 2019 and the same was adjourned to 9th May 2019 since financial statements were not ready by the time. On the next day i.e. 7th May 2019 87th meeting of the Audit Committee of the Company was held. 87th meeting of the Audit Committee was held in between the 86th original meeting and adjourned meeting is on 7th May 2019. It is pertinent to note that 87th Audit Committee meeting was held without completion of the 86th Audit Committee meeting since the adjourned meeting held on 9th May is the continuation of the original meeting. Company is advised to conduct the meetings in seriatim to avoid possible conflict in decision making ||The adjourned 86th meeting was held on May 9 with a single agenda- finalisation of accounts. The 87th meeting considered all other points. There was therefore no lack of continuity or potential conflict. |
|2. As the provisions of Foreign Exchange Management Act ECB return has to be filed by the Company every month within 7 working days of the end of each month. On scrutiny of ECB returns filed during FY 2019-20 it is found that the following delay occurred in filing of the same: ||As the ECB return to be filed requires acknowledgment by the Bank there occurred a few days delay. This delay noted is with reference to the bank endorsement date with seal whereas the Returns were all filed with Bank within the stipulated time. |
|Month Filing Date Delay || |
|April 2019 08.05.2019 1 day || |
|June 2019 08.07.2019 1 day || |
|September 10.10.2019 3 days 2019 || |
|Company is advised to file ECB return in time in future. || |
Annual Report as Annexure IV to this report.
The Annual Report excluding the details of employees receiving remuneration in excessof the limits prescribed under Section 197 of the Act 2013 read with Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is being sentto the shareholders of the Company in terms of first proviso to Section 136(1) of the Act2013. The annexure is available for inspection at the Registered Office of the Companyduring business hours and any shareholder interested in obtaining a copy of the saidannexure may write to the Company Secretary at the Registered Office of the Company.
INTERNAL CONTROL SYSTEM
ADEQUACY OF INTERNAL CONTROL SYSTEMS
The Company has in place well defined and adequate internal controls commensurate withthe size of the Company and the same were operating effectively throughout the year. Theinternal control systems operate through well documented Standard Operating Procedurespolicies and process guidelines. These are designed to ensure that transactions areconducted and authorized within defined authority limit commensurate with the level ofresponsibility for each functional area. The Company's accounting and reporting guidelinesensure that transactions are recorded and reported in conformity with the generallyaccepted accounting principles.
The Company has engaged a professional firm of Accountants with long years ofexperience to carry out the internal audit function. The Company has not placed anylimitation on the scope and authority of the internal audit function. The internal auditfunction evaluates the efficacy and adequacy of internal control systems its compliancewith operating systems and policies of the Company and accounting procedures at alllocations of the Company. To maintain its objectivity effectiveness and independenceinternal audit is being carried out on a quarterly basis and reports thereon along withthe remarks of the process owners on each of the observations of audit are placed beforethe Audit Committee of the Board. The Audit Committee reviews each of the internal auditreports as a separate item of agenda along with the internal / statutory auditors and themanagement representatives wherein the Committee gives their advice/suggestions on theaudit points. Based on the report of the internal audit as well as the observations of theAudit Committee the process owners undertake requisite corrective action in theirrespective areas thereby further strengthening the control systems. Action Taken Reportsare also reviewed by the Audit Committee for each actionable item. The minutes of theAudit Committee are reviewed by the Board of Directors.
INTERNAL CONTROLS OF FINANCIAL REPORTING
The Company has in place adequate financial controls commensurate with the size scaleand complexity of its operations. During the year such controls were tested by themanagement and no reportable material weakness in the design or operations was observed.The Company has policies and procedures in place for ensuring proper and efficient conductof its business safeguarding of its assets prevention and detection of frauds anderrors accuracy and completeness of the accounting records and timely preparation ofreliable financial information.
The Company has adopted accounting policies which are in line with the AccountingStandards and the Companies Act and with the generally accepted accounting principles inIndia. Changes in policies if required are made in consultation with the auditors andare approved by the Audit Committee. The Board is of the view that appropriate proceduresand controls are operating effectively and monitoring procedures are in place.
RISK MANAGEMENT POLICY
The Board of Directors of the Company has entrusted the management of the Company toevaluate and manage various risks faced by the Company and appropriately apprise the Boardperiodically. Accordingly the management has constituted a Risk Management Committeecomprising of Senior Management Personnel to develop and implement a Risk ManagementPolicy including identification therein of elements of risks which in the opinion of theBoard may impact the operations of the Company. The Board of Directors review theevaluation of risks and the mitigation measures taken by the Company in managing suchrisks to sustain the operations of the Company for the foreseeable future. Some of the keyrisk areas identified for mitigation and corrective action include
crushed bone availability and pricing patterns
impact of the high cost of crushed bone on the cost of production
safety and security policies of the Company
succession planning for key executives
impact of the National Green Tribunal's Orders
significant litigation against the Company having material financial impacts
moves of competitors
water scarcity for operational requirements
emergence of alternate substitutes for the products of the Company
adverse forex rate fluctuations
risk of losing pricing premium commanded by the Company due to emergence ofalternate Halal certifications
sustaining operations in lock down conditions without disruption etc.
MATERIAL POST BALANCE SHEET EVENTS
During the month of March 2020 World Health Organisation declared COVID -19 to be aglobal pandemic. The spread of COVID-19 has impacted the normal operations of businessesin many countries including India. The country has witnessed several disruptions in normaloperations due to lockdowns imposed by the Government in the form of restrictions tomovement of people transportation and supply chain along with other stringent measures tocontain COVID-19 spread.
The Company has made an assessment of the business situation and has evaluated thepossible impact of the outbreak of COVID-19 on its business. Though the Government hasclassified the Company's operations as part of "essential services" and hasexempted the Company from lockdown restrictions the Company's operations have beenimpacted due to inadequate availability of raw materials and other necessary items. Thoughthe Company has partially restarted the operations the impact on future operations wouldto a large extent depend on how the pandemic develops and the resultant impact onbusinesses.
APPLICABILITY OF COST AUDIT REQUIREMENTS
As per the Company's (Cost Records and Audit) Rules 2014 the Company's products arenot covered under Cost Audit and the Company maintains the relevant cost records for theproducts for which the maintenance of cost record is required as per the above Rules.
RESPONSIBILITY STATEMENT OF DIRECTORS
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134 of the Companies Act 2013:
a) that in the preparation of the annual accounts for the year ended 31st March 2020the applicable Indian Accounting Standards have been followed along with properexplanation relating to material departures if any;
b) that they had selected such accounting policies as mentioned in Note 1 of the notesto the Financial Statements and applied them consistently and made judgments and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of affairsof the Company as at 31st March 2020 and of the profit of the Company for the year endedon that date;
c) that they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) that they had prepared the annual accounts on a going concern basis;
e) that proper internal financial controls laid down by the Directors were followed bythe Company and such internal financial controls are adequate and were operatingeffectively; and
f) that they had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions which is in line withthe relevant provisions of the Companies Act and as well as SEBI (LODR) Regulations. Thesaid policy as approved by the Board is available in the Company website www.gelatin.in.As per the said policy prior omnibus approval of the Audit Committee is obtained on aquarterly basis for all the Related Party Transactions which are of a foreseen andrepetitive nature. All Related Party Transactions actually taken place are subsequentlyreviewed by the Audit Committee on a quarterly basis in comparison with the conditions ofomnibus approval and are recommended to the Board for approval. Additionally materialRelated Party Transactions foreseen in the year ahead were approved by the members.Particulars of contracts of arrangements with Related Parties referred to in sub section 1of Section 188 read with Rule 8(2) of the (Companies Accounts) Rules 2014 are attached inForm No. AOC 2 as Annexure V.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review as stipulated underSEBI (LODR) Regulations is presented in a separate section forming part of this AnnualReport.
The Company has complied with the corporate governance requirements under the CompaniesAct 2013 and as stipulated under the SEBI (LODR) Regulations. A separate section oncorporate governance under the Regulation along with a certificate from the auditorsconfirming the compliance is annexed and forms part of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance with theprovisions of Schedule III of the Companies Act 2013 and Indian Accounting Standards (IndAS) 110 and other applicable Accounting Standards issued by the Institute of CharteredAccountants of India and the provisions of the SEBI (LODR) Regulations and form part ofthe Annual Report.
Dr. Sharmila Mary Joseph IAS ceased to be Nominee Director on 26.09.2019 uponwithdrawal of the nomination by KSIDCwhere after Mr. M. G. Rajamanickam IAS wasappointed as Nominee Director on 12.12.2019 by KSIDC. Mr. A.K. Nair ceased to hold officeon 02.08.2019 on completion of his tenure as Independent Director. Retd. Justice M.Jaichandren was appointed as Additional Director qualifying as an Independent Director bythe Board of Directors on 04.11.2019.
The Board of Directors has constituted a Nomination and Remuneration Committee (NRC)consisting of the following Directors:-1. Dr. K. Cherian Varghese Chairman 2. Mr. E.Nandakumar Member 3. Mr. Yoichiro Sakuma Member The terms of reference of the NRC are asfollows:-
1. The NRC shall identify persons who are qualified to become Directors and who may beappointed in senior management in accordance with the criteria laid down recommend to theBoard their appointment and removal and shall carry out evaluation of every Director'sperformance.
2. The NRC formulates the criteria for determining qualifications positive attributesand independence of a Director for recommending to the Board and also a policy relating tothe remuneration for the Directors Key Managerial Personnel and senior managementpersonnel meaning thereby employees of the Company who are members of core managementexcluding Board of Directors. This would comprise all members of management one levelbelow the Executive Directors including all functional heads.
3. The NRC formulates the Remuneration policy to ensure that:the level andcomposition of remuneration is reasonable and sufficient to attract retain and motivatepersonnel as are herein referred at (2) above of the quality required to run the Companysuccessfully; relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and remuneration to Whole-time Directors key managerial personneland senior management involves a balance between fixed and incentive pay reflecting shortand long-term performance objectives appropriate to the working of the Company and itsgoals.
During the year the NRC has met Four times on 04.05.2019 06.05.2019 adjourned to09.05.2019 20.09.2019 and 07.02.2020.
KEY MANAGERIAL PERSONNEL
Rule 8(5)(iii) of Companies (Accounts) Rules 2014prescribes that Report of Directorsshould contain details of Directors and Key Managerial Personnel.
Therefore in addition to the details of Directors herein above given it is brought tothe notice of shareholders that Mr. P. Sahasranaman and Mr. G. Rajesh Kurup continue asChief Financial Officer(CFO) and Company Secretary (CS) respectively.
The Companies Amendment Act 2015 prescribes that there shall be a meeting ofIndependent Directors during each of the financial years. Accordingly the IndependentDirectors who met on 07.02.2020 evaluated the performance of the Directors other thanthemselves which are followed by an evaluation made by the Board in the presence of theChairman at their Meeting held on that date. The evaluation found each of the Directors tohave requisite qualification expertise and track record for performance of their dutiesas envisaged by law.
The Board of Directors met 5 (Five) times during the financial year 2019-20. Thedetails of the Board meetings and the attendance of the Directors are provided in theCorporate Governance Report. The intervening time gap between the two consecutive meetingswas within the period prescribed under the Companies Act 2013.
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee has Mrs. Radha Unni as Chairperson with Dr. K. Cherian Vargheseand Mr. E. Nandakumar as members. More details on the Committee are given in the CorporateGovernance Report.
The Company has established a vigil mechanism for Directors and employees to reportgenuine concerns while providing for adequate safeguards against victimizationprovidingdirect access to chairperson of Audit Committee the details regarding which have alsobeen given in the Company's official website.
DISCLOSURE UNDER SEXUAL
HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013.
Your Company has always believed in providing a safe and harassment free workplace forevery individual working and associating with the Companythrough various interventionsand practices. The Company always endeavors to create and provide an environment that isfree from discrimination and harassment including sexual harassment. A four memberInternal Complaints Committee(ICC) is constituted with three lady employees and one ladyNGO member. ICC is responsible for redressal of complaints relating to sexualharassmentas envisaged under the provisions of Act and Rules. Hitherto no complaints werereceived by ICC.
PREVENTION OF INSIDER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider Trading with a viewto regulate trading in securities by the Directors and designated employees of theCompany. The Code requires pre-clearance for dealing in the Company's shares and prohibitsthe purchase or sale of Company shares by the Directors and the designated employees whilein possession of unpublished price sensitive information in relation to the Company andduring the period when the Trading Window is closed. The Board is responsible forimplementation of the Code.
M/s. Walker Chandiok & Co. LLP (WCC LLP) Chartered Accountants (Firm RegistrationNo. 001076N / N500013) who were appointed as Statutory Auditors of the Company for a 5year term at the Annual General Meeting in the year 2017 continues to hold office whilesuch appointment for the remaining period for the 5 year termwere ratified at the AnnualGeneral Meeting in the year 2019. Hence no specific item regarding the appointment is putup for transaction at the forthcoming Annual General Meeting and the Notice for theMeeting makes no such mention as part of Ordinary Business.
Pursuant to the provisions of the Section 204 of the Companies Act 2013 and TheCompanies (Appointment and Remuneration of Managerial Personnel)Rules 2014 the Companyhas appointed Mr.. Abhilash Nediyalil Abraham. (CP No. 14524 M. No. 22601) CompanySecretary-in-practice to undertake the Secretarial Audit of the Company. The SecretarialAudit Report is annexed herewith as Annexure VI.
The Company has a website https://www.gelatin.in where the annual return of the Companywill be published complying with the provisions of Section134 (3) (a) of the Companies Act2013.
Your Directors are thankful to the esteemed shareholders for their continued patronageand the confidence reposed on the Company and its management. Your Directors place onrecord its sincere appreciation for the support and assistance extended by the StateGovernment and The Kerala State Industrial Development Corporation Ltd. The Board takesthis opportunity to extend their whole hearted gratitude to M/s. Nitta Gelatin Inc.Japanfor their timely and valuable guidance and inspiration. Your Board places on record itssincere appreciation for the significant contributions made by employees across theCompany through their dedication and commitment. On this occasionyour Board thanks allthe customers suppliersbankers and other associates for their unstinted co-operation.
For and on behalf of the Board of Directors
|Dr. K. Ellangovan IAS || |
|Chairman || |
|DIN: 05272476 ||Kochi |
| ||08.06.2020 |