Your Board is pleased to present the 25th Annual Report on the business and operationsof Opto Circuits (India) Limited together with the Financial Statements of your Companyfor the year ended March 31 2017.
Pursuant to the notification dated February 16 2015 issued by the Ministry ofCorporate A_airs the Company has adopted the Indian Accounting Standards ("IndAS") as prescribed under section 133 of the Companies Act read with the Companies(Indian Accounting Standards) Rules 2015 with effect from April 1 2016. Financialstatements for the year ended as at March 31 2016 have been restated to conform to IndAS.
Rs. in Lakhs
| ||STANDALONE ||CONSOLIDATED |
|Particulars for the year ended March 31st ||2017 ||2016 ||2017 ||2016 |
|Revenue from operations || || || || |
|Sales/Income from Operations ||5038.01 ||7667.15 ||21410.73 ||31158.96 |
|Other income (net) ||- ||- ||118.47 ||138.68 |
|Total income ||5038.01 ||7667.15 ||21529.19 ||31297.65 |
|Expenses || || || || |
|Operating Expenditure ||2802.82 ||4433.90 ||13802.31 ||22378.00 |
|Depreciation and amortization expenses ||879.45 ||949.60 ||1603.40 ||4136.71 |
|Other expenses ||735.09 ||887.61 ||27627.13 ||8236.89 |
|Total expenses ||4417.36 ||6271.11 ||43032.84 ||34751.59 |
|Profit from || || || || |
|Operations before other income Finance Cost and Exceptional Items ||620.65 ||1396.04 ||(21503.64) ||(3453.95) |
|Other income ||16.99 ||0.36 ||69.51 ||3380.51 |
|Finance Cost ||(785.21) ||(3151.68) ||(1707.14) ||(4366.33) |
|Exceptional Items ||(36256.56) ||- ||(26178.36) ||4360.65 |
|Profit before tax ||(36404.14) ||(1755.28) ||(49319.64) ||(79.11) |
|Tax Expenses ||- ||(46.58) ||(1510.84) ||(114.91) |
|Net Profit /(Loss) after tax ||(36404.14) ||(1801.86) ||(50830.48) ||(194.01) |
|Other comprehensive income || || || || |
|Minority interest ||- ||- ||(176.76) ||(48.63) |
|Total Comprehensive income ||(36404.14) ||(1801.86) ||(51007.24) ||(242.64) |
|Earnings Per Share || || || || |
|Basic ||(15.02) ||(0.74) ||(21.05) ||(0.10) |
|Diluted ||(15.02) ||(0.74) ||(21.05) ||(0.10) |
COMPANY'S PERFORMANCE ON STANDALONE BASIS
Standalone Total Revenue was at Rs. 5038.01 Lakhs for the financial year ended 31stMarch 2017 as against Rs. 7667.51 Lakhs for the corresponding financial year ended March31 2016 a decline of 34%. Standalone profit/ (Loss) after tax for the financial yearended 31st March 2017 is at Rs. (36404.14) lakhs as against Rs. 1801.86) lakhs for thecorresponding period financial year ended March 31 2016. Earnings per share for the yearended 31st March 2017 is at Rs (15.02) Basic.
ON CONSOLIDATED BASIS
Consolidated revenue is at Rs. 21410.73 Lakhs for the financial year ended 31st March2017 as against Rs. 31158.96 lakhs for the corresponding period of financial year 2016.Consolidated profit after tax for the year ended 31st March 2017 is at Rs. (50830.48)lakhs as against Rs. (194.01) lakhs for the corresponding period of financial year 2016.Earnings per share for the year ended 31st March 2017 is at Rs (21.05) Basic.
Your Directors have not recommended any dividend for the year ended 31st March 2017.
TRANSFER TO RESERVES
An amount of Rs. (36404.14) lakhs is proposed to be retained in the Statement ofProfit and Loss.
CHANGES IN SHARE CAPITAL
There is no change in the authorized and paid up Share Capital of the Company.
DISCLOSURE REGARDING ISSUE OF EQUITY SHARES WITH DIFFERENTIAL RIGHTS
During the year under review the Company has not issued Shares with Di_erentialRights.
DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS
During the year under review the Company has not issued Shares under Employee StockOptions.
DISCLOSURE REGARDING ISSUE OF SWEAT EQUITY SHARES:
During the year under review the Company has not issued Sweat Equity Shares.
SUBSIDIARIES JOINT VENTURE AND ASSOCIATE COMPANIES:
During the year under review the Company continues to have Nine (9) directsubsidiaries. In accordance with Section 129(3) of the Companies Act 2013 the Companyhas prepared consolidated financial statements of the Company and all its subsidiarieswhich forms part of the Annual Report. Further a statement containing the salientfeatures of the financial statement of our subsidiaries in the prescribed format AOC 1 is appended as Annexure A to the consolidated financial statement and hence notrepeated here for the sake of brevity.
The policy for determining material subsidiaries as approved may be accessed on theCompany's website at the link:http//www.optoindia.com/pdf/OCIL%20-20on%20Material%20Subsidiariesx.pdf
There has been no material change in the nature of the business of the subsidiaries.
MANAGEMENT DISCUSSION AND ANALYSIS
Medical devices are an eminent part of the healthcare sector. The medical deviceindustry includes devices which simplify the prevention diagnosis and treatment ofdiseases and illnesses. The devices range from pacemakers dialysis machines tothermometers vital signs monitors and pulse oximetry sensor which are used in diverseprimary secondary and tertiary medical establishments. North America is the largestmarket accounting for over 40% followed by Europe and rest of the World. In rest of theWorld developing economies in particular China India Africa Middle East and Brazilhave been growth contributors over the past couple of years.
While an aging population chronic lifestyle diseases expansion of emerging marketsand advances in technology are expected to drive growth however there are certain factorswhich are considerably altering the healthcare demand and delivery landscape.
Companies in the industry need to adapt their R&D strategy. Policy on pricing andmechanics of their supply chain to strive in the changing regulatory clinical andbusiness landscape. Consequently companies will need to create technologies that helpreduce healthcare costs focus on the needs of the emerging markets and fit into thereimbursement patterns of developed economies.
The Indian medical device industry though in its nascent stages shows great potentialdue to its strong private healthcare system growing middle class with increasing incomelevels change in the disease profiles (lifestyle diseases) greater penetration of healthinsurance government focus on healthcare infrastructure development and arising awarenessof personal healthcare.
profiles (lifestyle diseases) greater penetration of health insurance governmentfocus on healthcare infrastructure development and arising awareness of personalhealthcare.
Opto Circuits (India) Limited is an established global medical devices and technologygroup with a diversified product portfolio which is headquartered out of Bangalore India.Your Company along with its subsidiaries are engaged in the design developmentmanufacture marketing and distribution of a range of medical products that are used byprimary secondary and tertiary healthcare establishments as well as in public accessfacilities such as schools fire stations policy offices in over 150 countries. YourCompany specializes in vital signs monitoring emergency cardiac care vascular treatmentsand sensing technologies. Your US FDA listed and CE marked products are manufactured inIndia Malaysia Germany and the United States.
Your Company's interventional products include stents balloons both drug eluting andnon-drug eluting and AV shunts used for the treatment of coronary and peripheral arterialdiseases as well as chatheters and implants that are inserted in the human body. YourCompany has proprietary technology with respect to the design and development of theseproducts allowing us to differentiate these from competing devices. Some of our well knownbrands in this segment are Dior Freeway E-Magic Plus and Genius Magic Siro PrimeFreeway Shunt Balloon Catheter.
Your Company develops manufacture and market a broad range of advanced cardiacdiagnostic and therapeutic devices and state of art patient monitoring systems. YourCompany's products include automated patient monitoring devices and services vital signsmonitors pulse oximeters and peripheral artery disease diagnostic equipment.
Your Company also sells a variety of related products and consumables and offer aportfolio of related training and key support services including the installationtraining monitoring and maintenance of our equipments which allow our customers tooptimize the usage of our products and provide us with recurring revenues on a contractedbasis. Some of our well known brands in this segment are RevoNCompass NGenuity Poet IQetc.
STRENGTHS OF YOUR COMPANY
One of the biggest competitive advantages is the propriety technology developed by ourin-house teams which gives us control over features and intellectual property costs ofdevices and helps minimize our dependence on third party technologies. The focus onresearch and development activities has enabled us to develop devices which we believe aretechnologically superior to other devices available in the market. Your Company'sdiversified product portfolio across invasive and non-invasive caters to the needs ofprimary secondary and tertiary care establishments is well balanced and includestechnologies that command high profit margins and also allows to achieve sales anddistribution synergies coupled with economies of scale. The global distribution network issupported by a large team of third-party distributors and highly qualified internationalteam of sales personal spread across Europe United States and other parts of the world.Your Company's extensive distribution sales and service network allows to be closer toend-users and enables us to be more responsive to market demand. Your Company has been inthe medical devices business since 1992 and have established long-standing relationshipswith physicians general practitioners and specialists clinics and hospitals. Furtheryour company believes that our long term relationships and the quality of our customerbase is a key strength that enables us to expand our business and operations.
BUSINESS PERFORMANCE ANALYSIS CONSOLIDATED
The Company reported consolidated Sales of Rs 215.98 Crores in Financial Year 2016-17a decline of 37% over Rs 346.78 Crores Sales reported in Financial Year 2015-16.
The decline is sales can be attributed to partly the hostile takeover of CSC& CSIreported elsewhere causing CSC& CSI not to be step down Subsidiaries of Opto Circuits(India) Limited hence the entire revenues of CSC& CSI were not taken into this year'srevenues combined with and a softening of European Markets and overall economic slowdown.Further Opto Eurocor Healthcare Limited and the Standalone entity were entities thatwitnessed a significant decrease in revenues thereby contributing to the overall declinein consolidated revenues.
The Company reported a Operating Loss of Rs 8.80 Crores for the Financial Year 2016-17[ as against an Operating Loss of Rs 44.39 Crores for the Financial Year 2015-16] beforethe Exceptional Items. Exceptional items account for Rs 498 Crores for the Financial Year2016-17 comprising of:
Opto Circuits [India] Ltd- Rs 362.50 Crores on account of Rs 222 Crores towardsProvision for Bad & Doubtful debts provision for non moving Stock amounting to Rs 140Crores;
Advanced Micronic Devices Ltd-Rs 14.29 Crores Past Tax liability provided
Opto Cardiac Care Ltd-Rs 76.50 Crores being provision for Bad &Doubtful Debts
Opto Eurocor Health Care Ltd Rs 45.30 Crores comprising of Rs 37.30 Crores nonmoving stock Provisioning and Rs 8.00 Crores reversal of Forex.
After providing for the above exceptional items the Company [consolidated] reported aNet Loss of Rs. 510 Crores in Financial Year 2016-17.
Further the Hostile takeover of two of the overseas Subsidiaries vizz Cardiac ScienceCorporation USA[ CSC] & Criticare Systems Inc USA[CSI]by / though DBS Bank Ltd havedented the Top Line apart from having a huge impact on the Cash flow and non moving stockspecifically earmarked for these entities resulting in huge losses.
Company along with its step down subsidiary (Cardiac Science Corporation) had borrowedfunds from DBS Bank Ltd. In the year 2014-15 the said loan was restructured and as part ofthe said process Rs.12678.41 lakhs borrowed by the company was also restructured. As perthe terms of the agreement with DBS Bank ltd upon default by step down subsidiary (Cardiac Science Corporation) the bank exercised their rights and assigned the debts to athird party and also exercised proxy voting rights to take management control of thecompany . As a result of this the loan borrowed by the company to the tune of Rs. 12678.41lakhs stands extinguished. DBS Bank has objected to the stand taken by the Company andalso want to classify the loan as red flagged account and recommended for a forensicaudit. The banks also have convened a Joint Lender Forum on the above matter.
The Company has raised objections to the stand taken by DBS Bank and moved the Courtand obtained a Mandatory Injunction Order [ Under Order F.R. NO: O.S. /292/2017 dated 06thMarch 2017 from the Hon'ble City Civil Court restraining the Bank [ DBS bank] from a]Declaring the Company as Willful defaulters b] Classifying the company's loan account assub standard or red flagged account c] Appointing/ conducting any forensic audit in theprecincts of the company.
The Company also made a claim of USD 160.82 Million against DBS Bank Ltd vide itsletter dated 24th January 2017 and this claim is part of the above petition filed beforethe Hon'ble Court by the Company and that the matter is sub judice. The Company has alsoinformed all the other lender Banks in the above matter.
The loan liability of Cardiac Science Corporation by secured lender DBS Bank Limitedwas sold by them to Aurora Capital through its Subsidiary CFS. The Shares of CriticareSystems Inc had also been pledged to DBS for additional lines granted by them to DBS.CFS has filed Chapter XI of the US Bankruptcy Code in US Bankruptcy Courts in the WesternDistrict of Wisconsin of Cardiac Science Corporation to facilitate Debt Restructuring andto protect itself from miscellaneous creditors. Opto Circuits (India) Limited and OptoCardiac Care Limited as owners of Cardiac Science Corporation are seeking appropriatelegal recourse to protect the rights of the Shareholders. Your Directors are fighting thelegal battle against this hostile takeover which may take some time but are confidentthat it will be to the benefit of your Company and also to Shareholders.
During the Financial year one of the Step down subsidiary company viz N.S. RemediesPrivate Ltd Kolkotta subsidiary of Opto Eurocor Health Care Ltd was sold as there wereno operations.
During the course of the Financial Year one of the Subsidiary company OptoInfrastructure Ltd have sold one of its property viz Altron Hotel Electronics City forRs. 32 Crores which was rendered as security to Standard Chartered Bank Ltd towards theworking Capital facilities by the bank to the Company. Major part of the proceeds of thesale was paid to Standard Chartered Bank Ltd [ Rs 20.79 Crores] towards part repayment ofthe OTS with Stanadard Chartered Bank Ltd[ SCB]
The Company has suspended its operations in one of its Divisions at Vizag SEZ w.e.fApril 01 2017 as an outcome of the losses suffered in Hud Hud Cyclone in Vizag and thatthe company's constant efforts to get the Insurance claim with the Insurance company didnot yield positive results. The Company is taking effective steps including legal remedyto have its claims settled with the insurance company. Further the operations wereimpacted due to the hostile take over of two of its step down overseas subsidiaries vizCSC USA & CSI USA.
During the Financial Year Mr. Valiveti Bhaskar Managing Director Opto Eurocor HealthCare Ltd subsidiary of the Company retired from the services on 31st March 2017.
OPTO CIRCUITS [INDIA] LTD- STANDALONE FINANCIAL
The Company reported Sales of Rs. 50.55 Crores in Financial Year 2016-17 [previousFinancial years Sales Rs 76.67 Crores a decline of 34% over Previous Financial Year.
The Company reported an Operating Loss of Rs 1.47 Crores for the Financial Year2016-17[ Previous Financial year 2015-16 Operating Loss was Rs 17.49 Crores] before theExceptional items. Exceptional Items for Financial Year 2016-17 was for Rs 362.56 Crorescomprising of Rs 222 Crores towards Provision for Bad & Doubtful debts provision fornon moving Stock amounting to Rs 140 Crores; After providing for Exceptional items [Rs362.56 Crores] the company reported a Net Loss of Rs 364 crores [for Previous Financialyear 2015-16 Net Loss was Rs 17.95 Crores] Receivables The Company hasprovided for Bad & doubtful debts with respect to Receivables which are over 3 years;This is despite constant efforts put in by the Management to recover the dues ; TheCompany would also seek the necessary approvals from Appropriate Regulatory Authoritiesfor write off of these receivables over 3 years.
Non Moving/ Obsolete Stock- Due to the loss of Cardiac Science Corporation [ CSCUSA]and Criticare Systems Inc[ CSI USA] the stock both raw materials and work inprogress meant for these two entities have piled up and were to be provided for in thebooks. The Company would seek the requisite approvals from Appropriate RegulatoryAuthorities for write off of these stock
Your Company continues efforts to win more customers and a bigger pie of the existingbusiness to improve the overall performance.
The Company has borrowings from State Bank of India HDFC Bank Ltd Yes Bank LtdStandard Chartered Bank Ltd and Bank of Nova Scotia Ltd for which no provision forinterest is made in the financial statements as these Banks have categorized therespective borrowings as NPA. The Management has submitted proposals for One TimeSettlement [OTS] with Standard Chartered Bank Ltd State Bank of India HDFC Bank Ltd andBank of Nova Scotia Ltd. With Standard Chartered Bank Ltd based on the proposal for OTSsubmitted to SCB Ltd the company has already Repaid Rs 20.79 Crores towards partsettlement of OTS and the balance of Rs 62 Crores in a phased manner[ 3 years time] whichis under consideration.
With State Bank of India the Company has made a proposal for OTS and had alreadyrepaid Rs 2.50 Crores towards OTS [out of total OTS Proposal of Rs 86.50 Crores] and thebalance amount with a schedule of repayment as submitted to SBI in 22 Months commencingfrom August 2017 and ending with May 2020 and that the proposal is with SBI forconsideration. With HDFC Bank Ltd and Bank of Nova Scotia Ltd the company has submittedproposals for OTS which are under discussion and negotiation.
The Management is actively pursuing the OTS proposals with the respective banks on anon-going' basis.
CONSERVATION OF ENERGY
Your Company does not fall under the category of power intensive industries. Howeversustained efforts are taken to reduce energy consumption. The organization is an ISO 14001certified Company which is an international Environmental Management System Standard. TheEnvironmental policy of your Company aims at conservation of natural resources andminimization of pollution.
FOREIGN EXCHANGE EARNINGS AND OUTGO.
Your Company earned Rs. 4590.13 Lakhs in foreign exchange in the year under review.
Foreign Exchange outflow was Rs. 2087.99 Lakhs.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
There were no employees who were in receipt of more or employed part of Rupees OneCrore Two Lakhs or more or employed part of year and in receipt of remuneration in excessof Rupees Eight Lakhs Fifty Thousand or more a month under information as per Section197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Amendment Rules 2016.
Having regard to the provisions of the first proviso to Section 136(1) of the Act andas advised the Annual Report excluding the information on Disclosures pertainingremuneration and other details as required under Section 197(12) of the Act read withRule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)Amendment Rules 2016 is being sent to the members of the Company. The said informationis available for inspection at the registered office of the Company during working hoursand any member interested in obtaining such information may write to the Company Secretaryand the same will be furnished on request.
The Company is committed to maintain the highest standards of corporate governance andadhere to the corporate governance requirements set out by SEBI. The report on corporategovernance as stipulated under the Listing Regulations forms an integral part of thisReport. The requisite certificate from the practicing company Secretary confirmingcompliance with the conditions of corporate governance is attached to the report oncorporate governance.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors state that
a) In the preparation of the Annual Accounts for the year ended March 31 2017the applicable accounting standards have been followed and there are no materialdepartures from the same.
b) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the company for that period;
c) The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance the provisions of the Act for safe guarding the assets ofthe Company and for preventing and detecting fraud and other irregularities.
d) The Directors have prepared the annual accounts on the going concerns 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.
LISTING OF SECURITIES
Your Company's Equity Shares continue to remain listed on BSE Limited and the NationalStock Exchange of India Limited. As per the requirements of the Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 whichcame in effect from December 1 2015 a shortened version of the Uniform Listing Agreementwas signed by the Company with both the Stock Exchanges. Your Company has paid the listingfees as payable to the BSE Limited and the National Stock Exchange of India Limited. forthe financial year 2017-18.
Your Company has not accepted any fixed deposits from the public during the financialyear under review.
DIRECTORS AND KEY MANEGERIAL PERSONNEL APPOINTMENTS
Based on recommendations of Nomination and Remuneration Committee the Board appointedMr. Nanjappaiah Madgondapalli Ramu (holding DIN: 07268616) as an additional Director inthe category of Independent
Director with effect from 16th April 2017 and approved the appointment of Mr. SomadasG.C (DIN: 00678824) as Managing Director for a period of three years effective from April16 2017 with remuneration subject to the approval of the Members.
RETIREMENT AND REAPPOINTMENTS
As per the provisions of the Companies Act 2013 Dr.Suchitra Misra (DIN: 02254365)& Mr.Vinod Ramnani ( DIN 01580173) retires by rotation and being eligible offersthemselves for re-appointment at the ensuing Annual General Meeting. The Board ofDirectors recommends the appointment of Dr.Suchitra Misra and Mr.Vinod Ramnani as Directorof the Company.
None of the Independent Directors will retire at the ensuing Annual General Meeting.
At the 22nd Annual General Meeting held on September 30 2014 Mr.Rajkumar TulsidasRaisinghani (DIN: 01411084) was appointed as an Independent Director of the Company tohold office till the conclusion of Annual General Meeting to be held in year 2017.Pursuant to the recommendation of the Nomination and Remuneration Committee the Board ofDirectors of the Company approved subject to Members' approval re-appointment ofMr.Rajkumar Tulsidas Raisinghani as the Independent Director for a second term of fiveyears to hold office up to the conclusion of the 30th Annual General Meeting of theCompany based on his experience knowledge and outcome of performance evaluation.
The Company has received separate notices under section 160 from Members along withthe requisite deposit signifying their intention to propose appointment of Mr.Nanjappaiah Madgondapalli Ramu (DIN: 07268616) Mr. Somadas G.C (DIN: 00678824) andreappointment of Mr.Rajkumar Tulsidas Raisinghani (DIN: 01411084) as mentioned in thepreceding paragraphs. Accordingly necessary resolutions are being placed for approval ofthe Members at the 25th Annual General Meeting of the Company.
The Directors seek your support in confirming the appointments of Directors in theensuing Annual General Meeting.
Dr.Anvay Mulay resigned as Independent Director with effect from close of businesshours of January 04 2017.
Mr.Vinod Ramnani resigned as Managing Director of the Company w.e.f. April 01 2017 andcontinues to serve the organization as Non Executive Director & Chairman. The Boardplaces on record immense contributions made by Dr. Anvay Mulay and Mr. Vinod Ramnani tothe growth of your Company over the years.
DECLARATION BY INDEPENDENT DIRECTOR
The Company has received necessary declaration from Independent Directors that theymeet the criteria of Independence laid down in Section 149(6) of the Companies Act 2013and the provisions of Regulation 16(1) (b) of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015.
Training of Independent Directors.
To familiarize the new inductees with strategy operations and functions of our CompanySenior Managerial personnel make presentations on Company's strategy organizationstructure products technology quality facilities. Further at the time of appointmentof an Independent Director the Company issues a formal letter of appointment outlininghis or her role function duties.
Based on the confirmation received none of the Directors are disqualified for beingappointed/re-appointed as directors in terms of Section 164 the Companies Act 2013.
During the year under review no stock options were issued to the Directors of theCompany.
POLICY ON DIRECTORS APPOINTMENT REMUNERATION AND EVALUATION
Your Company has in place the Nomination Remuneration and Evaluation Policy of theCompany on Directors appointment and remuneration including criteria for determiningqualifications positive attributes independence of Director and other matters providedunder sub Section (3) of Section 178 of the Companies Act 2013. The Policy also containsthe evaluation framework as stipulated under SEBI Listing Regulations 2015 which mandatesthat the Board shall monitor and review the Board evaluation framework. The Companies Act2013 states that a formal annual evaluation needs to be made by the Board of its ownperformance and that of its committees and individual Directors. The evaluation of all theDirectors and the Board as a whole was conducted based on the criteria and frameworkadopted by the Board and as per Guidance Note on Board Evaluation issued by the SecuritiesExchange Board of India on January 05 2017.
MEETING OF THE BOARD
Nine Meetings of the Board of Directors were held during the year. For further detailsplease refer Corporate Governance section in this Annual Report.
COMMITTEES OF THE BOARD
Currently the Board has Five Committees: Audit and Risk Management CommitteeNomination and Remuneration Committee Corporate Social Responsibility Committee Stakeholders Relationship Committee and Finance Committee.
A detailed note on the composition and scope of the Committee is provided under theCorporate Governance Section in this Annual Report.
As the term of M/s. B.V. Swami & Co. Statutory Auditor comes to an end at theconclusion of ensuing Annual General Meeting approval of members is sought at the ensuing25th Annual General Meeting to appoint M/s. B.V. Swami & Co. Chartered AccountantsBangalore as Statutory Auditors for period of three years to hod office till theconclusion of 28th Annual General Meeting.
M/s. B.V. Swami & Co Chartered Accountants have conveyed their consent to beappointed as the statutory Auditors of the Company.
The Board has appointed Mr. Vijayakrishna K.T. Practicing Company Secretary toconduct Secretarial Audit for the financial year 2016-17. The Secretarial Audit Report forthe financial year ended March 31 2017 is annexed herewith marked as Annexure 1 in theForm of MR 3 to this Report. The Board of Directors of the Company hereby furnishfollowing explanations and clarifications with respect the observations made by theSecretarial Auditors in their report dated August 012017 under the heading observationsin points (a) to (c).
a) Due to technical issues in making the requisite returns digitally signing the sameand uploading delays occurred in filings of certain returns. Extreme levels of care andcaution will be exercised to ensure that such delays do not occur again.
b) The Company will ensure & take corrective action to strengthen Secretarialstandards & Certain provisions of the Act.
c) Extreme levels of care and caution will be exercised to ensure that such delays donot occur again.
The Company has laid down risk assessment and minimization procedures which are in linewith the best practices in the industry and as per its experience and objectives. The RiskManagement system is reviewed periodically and updated.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal financial controls with reference tofinancial statements. During the year such controls were tested and no reportablematerial weakness in the design or operation were observed.
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 contract/ arrangement/transaction with related parties which could be considered material in accordance with thepolicy of the Company on materiality of related party transactions. The disclosure ofRelated Party transactions as required under Section 134(3)(h) of Companies Act 2013 inForm AOC 2 is is annexed herewith marked as Annexure 2.
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 the linkhttp://www.optoindia.com/pdf/OCIL - Policy on Related Party Transaction.pdf
Your Directors draw attention of the members to Note No. 33 to the financial statementwhich sets out related party disclosures.
PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN AND SECURITIES PROVIDED
The particulars of loans guarantees and investments have been disclosed in thefinancial statements.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Corporate Social Responsibility Committee (CSR Committee) appointed by the Boardhas formulated and recommended to the Board a Corporate Social Responsibility Policy (CSRPolicy) indicating the activities to be undertaken by the Company which has been approvedby the Board. The CSR Policy may be accessed on the Company's website at the link:http://www.optoindia.com/pdf/OCIL - CSR Policy.pdf
In terms of Section 134 of the Companies Act 2013 read with the Companies (CorporateSocial Responsibility Policy) Rules 2014 the annual report on Corporate SocialResponsibility activities of the Company is given in Annexure 3 to this report.
Due to non-availability of profits the Company was not required to spend any amount onCSR activities during the financial year 2016-17.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company promoters ethical behavior in all its business activities and has put inplace a mechanism for reporting illegal or unethical behavior. The Company has a vigilmechanism and whistle blower policy under which the employee are free to report violationsof applicable laws and regulations and the code of conduct to chief vigilance officer andAudit and Risk Management Committee of the Board. The Company further confirms that nopersonal have been denied access to the Audit and Risk Management Committee.
The policy on vigil mechanism and whistle blower policy may be accessed on theCompany's website at the link: http:// http://www.optoindia.com/pdf/OCIL - Whistle BlowerPolicy.pdf
POLICY ON DISCLOSURE OF MATERIAL EVENTS AND INFORMATION
Company your has adopted the Policy on Disclosure of Material Events and informationin accordance with Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 to determine the events and information whichare material in nature and are required to be disclosed to the Stock Exchanges.
The said policy is available on the website of the Company athttp://www.optoindia.com/pdf/OCIL - Policy on Disclosure of Material Event andInformationx.pdf
POLICY ON PRESERVATION OF DOCUMENTS AND RECORDS
Company your has adopted the policy on Preservation of Documents and Records inaccordance with Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015. The Policy ensures that the Company complies with theapplicable document retention laws preservation of various statutory documents and alsolays down minimum retention period for the documents and records in respect of which noretention period has been specified by any law/rule/regulation. The policy also providesfor the authority under which the disposal/ destruction of documents and records aftertheir minimum retention period can be carried out.
EXTRACT OF ANNUAL RETURN
Extract of Annual Return of the Company is annexed herewith as Annexure 4 to thisReport.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY.
There have been no material changes and commitments affecting the financial positionof the Company which occurred during between the end of the financial year to which thefinancial statements relate and the date of this report
SIGNIFICANT AND MATERIAL ORDERS
No order was passed by any court or regulator or tribunal during the year under reviewwhich impacts going concern status of the Company.
RESPONSE TO AUDITORS OBSERVATIONS
The Board of Directors of the company furnish following response to theQualifications/observations made by the Auditors in their Report dated May 30 2017 forthe Standalone Financial Statements and Consolidated Financial Statements.
OPTO CIRCUITS[INDIA] LIMITED
AUDITORS OBSERVATION ON STANDALONE FINANCIAL STATEMENTS
The Board of Directors of the Company response to the Qualifications/ observations madeby the Auditors in their Report dated 30th May 2017 for the Standalone FinancialStatements under the heading Basis for Qualified Opinion in points[ a] to [g.] andResponse to Annexure to the Auditors Report Point [i] to [viii]
RESPONSE TO QUALIFIED OPINION:
The Company is constantly pursuing these long overdues with the Debtors and that themanagement has taken a stand for provisioning of receivables over 36 months aggregatingto Rs. 22250 Lacs. The company will be seeking the requisite Regulatory approvals forwrite off of these receivables during the course of the current year.
With regard to the payables over 3 years the company had taken up with the vendors andaddressed certain inadequacies in the quality specifications with respect to the materialssupplies by these vendors and the negotiations are underway to sort these out to arrive ata mutually acceptable settlement. It may further be noted that the payables over 3 yearshas come down from Rs 3308 Lacs reported in last Financial Year [fy 2015-16] to Rs 1229Lacs in Financial Year 2016-17.
b] SEZ &Stock:
SEZ-Vizag -As reported in the Last Annual Report post the HudHud cyclone and its aftereffects company's sustained efforts with the Insurance company to get the claim did notbear results; It may be noted that the company do not have any working capital funds tosustain its operations though there is demand for the company's products. Further withthe hostiletake over of Cardiac Science Corporation USA[CSC] &Criticare Systems IncUSA[CSI] by and though the action of DBS Bank Ltd for whose behalf lot of materials wereprocured and stored as inventory could not be shipped resulting in Sizable retention ofInventory [both raw materials and work in progress] got accumulated and these could not besold/or exported resulting in provisioning of these non-moving obsolete stock. TheCompany would be seeking the requisite approvals from Regulatory Authorities for write offof such block of stock during the course of the Current Year.
c] Bank Borrowings-NPA-OTS etc:
Noted. As explained the company had submitted proposals for One Time Settlement [OTS]with Standard Chartered Bank Ltd State Bank of India HDFC Bank Ltd and Bank of NovaScotia Ltd to reiterate its intention to repay the debts despite suffering a severesetback due to loss of management control and companies [ step down subsidiaries viz CSC& CSI in USA as stated] resulting in sizable loss of revenue and resultant losses andbusiness.
Standard Chartered Bank Ltd the company has already Repaid Rs 20.79 Crores towardspart settlement of OTS and the balance of Rs 62 Croresin a phased manner[ 3 years time]which is under consideration.
State Bank of India the Company has already Paid Rs 2.50 Crores towards OTS [ out oftotal OTS Proposal of Rs86.50 Crores] to be paid in 22 Months and that the proposal isunder consideration.
With HDFC Bank Ltd and Bank of Nova Scotia Ltd the company has submitted proposalwhich are under negotiation.
d] Investment in subsidiary- Opto Cardiac Care Ltd[ OCCL]
Noted . The company has taken up the matter with the Hon'ble Court in BangaloreKarnataka and obtained Mandatory Injunction against DBS Bank Ltd.
Further The Company also made a claim of USD 160.82 Million against DBS Bank Ltd videits letter dated 24th January 2017 and this claim is part of the above petition filedbefore the Hon'ble Court by the Company and that the matter is before the Hon'ble HighCourt and that the matter is sub-judice. The Company has also informed all the otherlender Banks in the above matter.
Further that the litigation is pending before the US Bankruptcy Courts and that theCompany is seeking appropriate legal relief to protect the rights of the shareholders.Your company will take a decision to impair the investments when these legal cases aresettled.
e] Working Capital & Action by the Banks
As stated in para[c] as above the company has already taken steps and submittedproposals for OTS with the Banks as detailed in para[c] and that the company isnegotiating with the respective banks for an amicable settlement of the liabilities.
As regards the Winding Up petition by HDFC Bank Ltd and Bank of Nova Scotia Ltd beforethe Hon'ble High Court Karnataka the company has filed its objections and also copies ofthe Settlement Proposals [OTS] before the Hon'ble High Court Karnataka Bangalore and thecompany is pursuing the matter through its Legal Counsels
f] Advanced Micronic Devices Ltd[ AMDL] - Noted.
The Company is taking efforts for a revival plan to revive the operations andwill takestand on this matter during the course of the current financial year.
g] Impairment of Assets AS36
As mentioned in para [b] as above there is inadequate working capital funds supportfor sustaining the operations the company is not able to allocate further resources forthis intangible assets
Response to Annexure to the Auditors Report[i] to [viii]
[i] The Company has taken note of the comments by the Auditors and that the companywould carryout physical verification of inventories on half yearly from this year.
[iii] The Company had granted unsecured loans to its subsidiaries to meet their workingcapital requirements and that no interest has been charged since the Company is notincurring interest costs.
[iv] with respect to the Auditors Comments and observations in para [viii-a] to theAnnexure this is noted and in future no delays would occur.
AUDITORS OBSERVATION ON CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors of the Company response to the Qualifications/ observations madeby the Auditors in their Report dated 30th May 2017 for the Consolidated FinancialStatements under the heading Basis for Qualified Opinion in points to  and Responseto Annexure to the Auditors Report Point  to 
RESPONSE TO QUALIFIED OPINION
1-a] Non movingstock :
The company is examining the quality of non moving stock and would take appropriateaction in due course ; this to be read with our response para[b] as above under headingSEZ & Stock in Opto Circuits [ India] Ltd Standalone Auditor's Report.
1-b]AdvancedMicronic Devices Ltd-Noted and that the management of Advanced MicronicDevices Ltd would take effective steps in this respect.
2. LONG OUTSTANDING RECEIVABLES/ PAYABLES
The Company is constantly pursuing these long overdues with the Debtors and that themanagement has taken a stand for provisioning of receivables over 36 months aggregatingto Rs 22250 Lacs. The company will be seeking the requisite Regulatory approvals forwrite off of these receivables as needed during the course of the current year.
With regard to the payables over 3 years the company had taken up with the vendors andaddressed certain inadequacies in the quality specifications with respect to the materialssupplies by these vendors and the negotiations are underway to sort these out to arrive ata mutually acceptable settlement.
[b] &[c] Advanced Micronic Devices Ltd-
Noted the observation on receivables over 360 days and the company would take effectivesteps to recover the same . On payables the company has taken up with the respectivecreditors seeking balance confirmation and awaiting response.
2 [d] & Point 4. Borrowings from Banks-NPA etc
As explained the company had submitted proposals for One Time Settlement [OTS] withStandard Chartered Bank Ltd State Bank of India HDFC Bank Ltd and Bank of Nova ScotiaLtd to reiterate its intention to repay the debts despite suffering a severe setback dueto loss of management control and companies [ step down subsidiaries viz CSC & CSI inUSA as stated] resulting in sizable loss of revenue and resultant losses and business.
Standard Chartered Bank Ltd the company has already Repaid Rs 20.75 Crores towardspart settlement of OTS and the balance of Rs 62 Crores in a phased manner[ 3 years time]which is under consideration. State Bank of India the Company has already Paid Rs 2.50Crores towards OTS [ out of total OTS Proposal of Rs86.50 Crores] to be paid in 22 Monthsand that the proposal is under consideration. With HDFC Bank Ltd and Bank of Nova ScotiaLtd the company has submitted proposal which are under negotiation.
As regards the Winding Up petition by HDFC Bank Ltd and Bank of Nova Scotia Ltd beforethe Hon'ble High Court Karnataka the company has filed its objections and also copies ofthe Settlement Proposals [OTS] before the Hon'ble High Court Karnataka Bangalore and thecompany is pursuing the matter through its Legal Counsels
3. INVESTMENT IN OPTO CARDIAC CARE LTD
Noted . Investment in OCCL is in turn towards its wholly owned overseas subsidiariesviz CSC USA & CSI USA. It may be noted that the company has taken up the matter withthe Hon'ble Court in Bangalore Karnataka and obtained Mandatory Injunction against DBSBank Ltd.
Further The Company also made a claim of USD 160.82 Million against DBS Bank Ltd videits letter dated 24th January 2017 and this claim is part of the above petition filedbefore the Hon'ble Court by the Company and that the matter is before the Hon'ble HighCourt and that the matter is sub- judice. The Company has also informed all the otherBanks in the above matter.
Further that the litigation is pending before the US Bankruptcy Courts and that theCompany is seeking appropriate legal recourse to protect the rights of the shareholders.Your company will take a decision to impair the investments when these legal cases aresettled.
5. ADVANCE TO AMDL
Advanced Micronic Devices Ltd[ AMDL] - Noted. The Company is making efforts for arevival of its operations and will take stand on this matter during the course of thecurrent financial year.
6. CRITICARE SYSTEMS [M] SDNBHD MALAYSIA
Criticare Systems [M] SdnBhd Malaysia subsidiary of CSI USA and astep down subsidiaryof Opto Cardiac Care Ltd have stopped operations in Malaysia and that no activity tookplace during the Year and not being material hence the financials were not available forsuch consolidation. of the assets and liabilities representing the investment.
7. IMPAIRMENT OF NON-CURRENT INVESTMENT/ INTANGIBLE ASSETS
[a] & [b] Please refer to our response in para[d] in Opto Circuits Stand aloneResponse. [c] & [d]
As mentioned in para [a &b] as above there is inadequate working capital fundssupport for sustaining the operations the company is not able to allocate furtherresources for this intangible assets.
9. ADVANCED MICRONIC DEVICES LTD-USA BRANCH
Advanced Micronic Devices Ltd has a branch at USA. There is no mandatory requirementfor such branch audit in the USA. The company has adequate internal control systemschecks and mechanisms in place and is directly monitoring the same.
10 & 11. ADVANCED MICRONIC DEVICES LTD
Noted . The company is taking effective steps to settle and clear the dues to itsemployees. The company is also following up the matter in the Hon'ble High Court. Unreconciled tax amount outstanding is out of the receipt of Rs 186 Lacs as Tax refundduring the year.
12. COMMENTS OF THE AUDITORS NOTED INDUSTRIAL RELATIONS
Industrial relations have been cordial and constructive which have helped your Companyto achieve production targets.
DISCLOSURE UNDER THE SEXUAL HARSSMENT OF WOEMN AT WORK PLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013:
Your company has always believed in providing a safe and harassment free workplace forevery individual working in Company's premises through various interventions andpractices. The Company always endeavors to create and provide an environment that is freefrom discrimination and harassment including sexual harassment.
A policy on prevention of Sexual Harassment a workplace has been released by theCompany. The policy aims at prevention of harassment of employees and lays down theguidelines for identification reporting and prevention of undesired behavior. Threemembers internal complaints Committee (ICC) was set up from the senior management withwomen employees constituting majority. The ICC is responsible for redressal of complaintsrelated to sexual harassment and follows the guidelines provided in the policy. Nocomplaints pertaining to sexual harassment was reported during the year.
Your Directors greatly appreciate the commitment and dedication of employees at alllevels that have contributed to the growth and success of your company. Your Company alsothanks all our stakeholders customers vendors Investors bankers and other businessassociates for their continued support and encouragement during the year.
| ||On behalf of the Board of Directors |
|Vinod Ramnani ||Somadas GC |
|Chairman ||Managing Director |
|(DIN:01580173) ||(DIN:00678824) |
|Place: Bengaluru || |
|Date: August 01 2017 || |