Orient Abrasives Ltd.
|BSE: 504879||Sector: Engineering|
|NSE: ORIENTABRA||ISIN Code: INE569C01020|
|BSE 00:00 | 12 Aug||17.70||
|NSE 00:00 | 12 Aug||17.65||
|Mkt Cap.(Rs cr)||212|
|Mkt Cap.(Rs cr)||211.69|
Orient Abrasives Ltd. (ORIENTABRA) - Director Report
Company director report
Your Directors have pleasure in presenting the Forty Eight AnnualReport of the Company together with the Annual Statements of Accounts for the year ended31 March 2019.
COMPANY PERFORMANCE AND OPERATIONS:
Financial Year 2018-2019 witnessed challenges in the capacityutilization majorly on account of labour strike blast at the tilting furnace facilityweak domestic demand and volatile exchange rates in Indian Economy. Your Company suppliesproducts to refractory and abrasive industry. Though there was upward trend in the steelindustry the challenges faced by your Company was mainly on account of non-completion oforders to the long associated customers due to unforeseen circumstances during theFinancial Year 2018-2019.
In spite of that the Company's revenue from operations for the yearended 31 March 2019 marginally reduced by approx. 5% and stood at Rs. 31296.80 Lakhs asagainst Rs. 32818.54 Lakhs in the previous year the decrease in turnover was mainlyattributable to non-utilization of production capacity to the fullest extent due to aforementioned factors. Further the Company reported robust growth in export sales during theyear under review and stood at Rs. 8573.31 Lakhs as against Rs. 4553.96 Lakhs for theprevious year ended 31 March 2018. The Company reported slight downslide in the NetProfit after Tax Rs. 1627.54 Lakhs as against Rs.1695.97 lakhs for the previous yearended 31 March 2018.
Your Company also runs wind power plants of 11.1 Mega Watt (M.W.). inRajasthan and Karnataka. Both the plants in Karnataka and Rajasthan are operatingsatisfactorily. Due to installation of quick sensors the generation of power increased toa great extent as compared to that of the previous year. During the year under review thegross revenue from the sale of power to respective state power distribution companiesstood at Rs. 795.44 Lakhs as compared to Rs. 754.60 Lakhs for the previous year ended 31March 2018. Moreover your Company is also deliberating on measures required to be takenfor way forward improvement.
Your Company has a power plant capacity of 18 M.W. out of which 9.6M.W. is coal based whereas 9.0 M.W. is on furnace oil. Due to unaffordable price offurnace oil the furnace oil based power plant is operated on need based.
The management has accustomed to the state of affairs of your Companycompletely and is in better control of the situations hence in time to come yourmanagement is of the view that the performance of the Company shall improve gradually. Forthe Financial year 2019-2020 the Management envisages for better performance consideringthe positive changes in the economy at the domestic and global levels. In view of theincrease in potential demand your Company has invested in expansion for increasedcapacity and modernisation/atomization of the plant resulting in better operationalefficiency in order to reduce the cost at various levels substantially for better yield.
Based on the Company's performance and considering the dividend historyof the Company your Directors are pleased to recommend dividend @ 25 % per share on theface value of Rs.1/- each viz. Re. 0.25/- per Equity Share for the financial year ended 31March 2019. Payment of dividend is subject to the approval of the shareholders at theensuing Annual General Meeting.
The Dividend if declared will involve total outflow of Rs. 360.58 Lakhswherein Rs. 299.10 Lakhs will be towards dividend and Rs. 61.48 Lakhs towards dividendtax.
The Company has not proposed to transfer any amount to General Reserve.
During the financial year 2018-2019 there is no change in theauthorized issued subscribed and paid-up share capital of the Company. As on 31 March2019 the Company is having authorized share capital of Rs.180000000/- (Rupees EighteenCrores only) [consisting of 140000000 (Fourteen Crores Only) Equity Shares of Rs. 1/-each and 400000 (Four Lakhs) 6% Redeemable Cumulative Preference Shares of Rs. 100/-each].
The issued subscribed and paid-up equity share capital of the Companyas on 31 March 2019 is Rs. 119639200/- comprising of 119639200 equity shares of Rs.1/- each.
During the year under review the Company has not issued shares withdifferential rights as to dividend voting or otherwise or bought back any of itssecurities. The Company has not issued any sweat equity/bonus shares/employee stock optionplan under any scheme.
PREFERENTIAL ALLOTMENT OF WARRANTS:
Pursuant to the resolution passed by the shareholders of the Companythrough Postal Ballot process on 19 January 2018 the Committee of Directors on 2February 2018 allotted 6296800 convertible warrants at a price of at a price of Rs.51.31 to Mr. Manan Chetan Shah (Promoter & Promoter Group member) ("WarrantHolder"). The said Convertible Warrants were convertible into Equity Shares in to oneor more tranches within a period of 18 months from the date of allotment i.e. on or before1 August 2019.
Further as required under the Listing Regulations the Warrant Holderhad deposited with the Company upfront 25% of total issue size i.e. Rs. 80772202 and thebalance 75% of issue size i.e. Rs. 242316606 was payable as an when the option toconvert is exercised by the Warrant Holder.
However the Company received a letter from the Warrant Holder for notto exercise the option of convertibility. Hence as required under SEBI (Issue of CapitalDisclosure Requirement) Regulations 2015 the upfront amount deposited by the WarrantHolder with the Company stands forfeited.
TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF):
In compliance with Section 124 of the Companies Act 2013 dividendpertaining to the Financial Year 2010-2011 which was lying unclaimed with the Company wastransferred to the Investor Education and Protection Fund (IEPF) during the financial year2018-2019. The details of unclaimed dividend transferred to the IEPF has been detailed inthe Corporate Governance Report forming part of the Annual Report.
Further as required under Section 124 of the Companies Act 201327067 equity shares in respect of which dividend has not been paid or claimed by theshareholders for seven consecutive years or more have been transferred by the Company toIEPF during the financial year under review. Details of shares transferred have beenuploaded on the website of IEPF as well as Company at www.orientabraisves.com.
During the year under review your Company did not accept any depositswithin the meaning of provisions of Chapter V Acceptance of Deposits by Companiesof the Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014.
SUBSIDIARIES/JOINT VENTURES/ASSOCIATE COMPANY:
The Company does not have Subsidiary/Joint Venture or AssociateCompany.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OFTHE COMPANY WHICH HAVE OCCURRED BETWEEN 31 MARCH 2019 AND 12 AUGUST 2019 (DATE OF THEREPORT):
During the year under review there are no material changes andcommitments affecting the financial position of the Company between the end of thefinancial year and the date of the report save and except as mentioned above.
SIGNIFICANT AND MATERIAL ORDERS BY THE REGULATIONS:
During the year under review no significant material orders werepassed by the regulators or courts or tribunals impacting the going concern status and theCompany's operations save and except as mentioned above.
CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
A report on 'Corporate Governance' along with the Certificate from M/s.Sanghavi & Co. Chartered Accountants regarding its compliance and 'ManagementDiscussion and Analysis Report' as stipulated by Regulation 34 of the Listing Regulationsare set out separately which form part of this Annual Report.
DIRECTOR'S RESPONSIBILITY STATEMENT:
In pursuance of Section 134(5) of the Companies Act 2013 theDirectors hereby confirm that:
(a) in the preparation of the annual accounts the applicableAccounting Standards have been followed along with proper explanation relating to materialdepartures;
(b) the Directors had selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the PROFIT of the Company for that period;
(c) the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
(d) the Directors had prepared the annual accounts on a going concernbasis;
(e) the Directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively and
(f) the directors have devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
DIRECTORS AND KEY MANAGERIAL PERSONNEL:
The following persons are the Key Managerial Personnel of the Companyas per the provisions of Section 203 of the Companies Act 2013.
?Mr. Manubhai Rathod Whole-time director & CEO
Mr. Bimal Parmar Company Secretary
The Board of Directors on the recommendation of the Nomination &Remuneration Committee recognized Mr. Manan Shah President of the Company as KeyManagerial Personnel of the Company.
The Board of Directors at their meeting held on 13 August 2018 on therecommendation of the Nomination & Remuneration Committee appointed Mr. V.Shashidharan as a Chief Financial Officer (CFO) of the Company as required under Section203 of the Companies Act 2013.
Pursuant to Section 134(3) (q) read with Rule 5 of Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Remuneration andother details of Key Managerial Personnel and other employees for the year ended 31 March2019 are annexed to this report.
Director retiring by rotation:
I. In accordance with the provisions of Section 152 of the CompaniesAct 2013 read with the Companies (Appointment and Qualification of Directors) Rules 2014and the Articles of Association of your Company Mr. Hemul Shah Director retires byrotation at the ensuing Annual General Meeting and being eligible has offered himself forre-appointment.
The brief particulars and expertise of the aforesaid Directorappointed/re-appointed and regularisation as required under Regulation 36 of ListingRegulations and Secretarial Standard - 2 forms part of the notice convening the ensuingAnnual General Meeting.
Continuation of Directorship:
II. In accordance with the provisions of Regulation 17 of ListingRegulations Mr. Harish Motiwalla Non-Executive Independent Director who shall attendthe age of seventy five (75) years in March 2020. The consent of the Members by way ofSpecial Resolution is being accorded by the Company for continuance of IndependentDirectorship upto 11 February 2023 on account of his attending the age of 75 years.
During the year under review Mrs. Sangeeta Bohra resigned as anIndependent Woman Director of the Company w.e.f 15 November 2018 due to personaldifficulty.
Your Board of Directors take this opportunity to express theirappreciation for the valuable services rendered by Mrs. Sangeeta Bohra during her tenureas an Independent Director of the Company.
Declaration by Independent Directors:
The Company has received declarations from all the IndependentDirectors of the Company confirming that they meet the criteria of independence inaccordance with the provisions of the Companies Act 2013 and the Listing Regulations.
Pursuant to the provisions of Companies Act 2013 Listing Regulationsand Performance Evaluation Policy of the Company the Board of Directors in consultationwith the Nomination & Remuneration Committee and Independent Directors carried out& analysed the annual performance evaluation of all the Directors the Board as awhole and its Committees.
The performance evaluation framework was designed keeping in view theGuidance Note on Board Evaluation issued by the Listing Regulations and accordingly astructured questionnaire was formulated having qualitative parameters such as functioninginformation availability leadership qualities compliance and governance effectivenessetc.
Evaluation of Directors was based on criteria such as participation andcontribution in Board and Committee meetings experience and expertise to provide feedbackand guidance to top management on business strategy governance and risk understanding ofthe organization's strategy risk and environment etc.
Based on the annual performance evaluation the Board expressed itssatisfaction with the evaluation process.
NOMINATION & REMUNERATION POLICY:
Pursuant to the provisions of the Company Act 2013 and ListingRegulations the Nomination & Remuneration Committee formulated the Nomination &Remuneration Policy that was duly adopted by the Board of Directors to ensure that leveland composition of remuneration is reasonable and sufficient relationship of remunerationto performance is clear and to meet appropriate performance benchmark. The Nomination& Remuneration Policy lays down the framework for selection and appointment ofDirectors including determining qualifications and independence of a Director KeyManagerial Personnel Senior Management Personnel and their remuneration.
The Nomination & Remuneration Committee after identifying andascertaining the integrity quotient qualification expertise and experience of theperson for appointment as Director KMP or at Senior Management Level recommends his/herappointment to the Board of Directors. The remuneration and commission paid to theWhole-time Director is in accordance with the percentage/slabs/ conditions as per theprovisions of the Companies Act 2013. The KMPs Senior Management Personnel and otheremployees of the Company are paid monthly remuneration as per the Company's HR policiesand/or as may be approved by the Committee. If the remuneration of KMPs or any otherofficer is to be specifically approved by the Committee and/or the Board of Directors thensuch approval will be accordingly procured.
The Policy on Nomination & Remuneration is available on the websiteof the Company viz. www.orientabrasives.com. The details about the Nomination &Remuneration Committee and payment of remuneration to the Directors are provided in theReport on Corporate Governance which forms part of this Annual Report.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:
The information required under Section 197 of the Companies Act 2013read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 inrespect of Directors/ employees of your Company is set out in "Annexure A"to this Report.
MEETINGS OF THE BOARD:
During the year under review the Board of Directors met Four (4)times. The intervening gap between the meetings was within the period prescribed under theCompanies Act 2013 and the Listing Regulations. The dates of the meetings alongwith theattendance of the Directors therein have been disclosed in the Corporate GovernanceReport.
The Company has an Audit Committee of the Board of Directors in place.The terms of reference of the Audit Committee are in line with Section 177 of theCompanies Act 2013 read with the Companies (Meetings of Board and its Powers) Rules 2014and Regulation 18 of the Listing Regulations. Detailed information pertaining to the AuditCommittee including its composition has been provided in the Corporate Governance Reportwhich forms part of this Annual Report.
AUDITORS AND AUDITORS' REPORT:
M/s. Sanghavi & Co. Chartered Accountants (FRN: 109099W) wereappointed as statutory auditors of the Company at the 46 AGM held on 16 September 2017for a period of five years from the conclusion of the 46 AGM until the conclusion of the51 AGM to be held in the year 2022 subject to ratification by members of the Company atevery AGM to be held thereafter. However pursuant to notification issued by the Ministryof Corporate Affairs on 7 May 2018 amending Section 139 of the Companies Act 2013 andthe rules framed thereunder the mandatory requirement for ratification of appointment ofauditors by the members at every AGM has been omitted and accordingly the Company is notproposing ratification of appointment of auditors at this AGM.
The Auditor's Report for the Financial Year ended 31 March 2019 doesnot contain any qualification reservation or adverse remark.
Pursuant to Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 as amended from time to time the Board ofDirectors has on recommendation of the Audit Committee appointed M/s. S. K. Rajani &Co. Cost Accountants as the Cost Auditors of the Company to conduct audit of theCompany's Cost Accounting Records in respect of the products of the Company for thefinancial year 2019-2020 at the remuneration of Rs. 200000/- (Rupees Two Lakhs Only) perannum (Plus Goods & Service Tax).
Your Company has received consent from M/s. S. K. Rajani & Co.Cost Accountants to act as the Cost Auditors of your Company for the financial year2019-2020 along with a certificate confirming their independence. As per the provisions ofthe Companies Act 2013 a resolution seeking approval of the Members for the remunerationpayable to the Cost Auditors forms part of the Notice convening Annual General Meeting.
Pursuant to the provisions of Section 204 of the Companies Act 2013read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel)Rule 2014 the Company has appointed Ms. Dipti Gohil Practicing Company Secretary toundertake the Secretarial Audit of the Company for the Financial Year ended 31 March2019.
The Secretarial Audit Report in Form MR-3 is annexed herewith as"Annexure B".
Secretarial Auditors observations:
The Secretarial Auditors report contained the following qualificationreservation or adverse remarks:
1. The Company has appointed Chief Financial Officer (CFO) as requiredunder Section 203 (1) of the Companies Act 2013 w.e.f 13 August 2018.
2. The composition of the Audit Committee of the Company was not inaccordance with the provisions of Regulation 18 (1) of the Listing Regulations.
Board explanation/ comments on above remarks:
1. The Company was looking for a suitable person for appointment asChief Financial Officer (CFO) of the Company. However in order to comply with requirementof Section 203 of the Companies Act 2013 the Board of Directors on the recommendation ofNomination and Remuneration Committee and considering the financial and accountingexpertise of Mr. V. Shashidharan appointed him as the Chief Financial Officer of theCompany w.e.f. 13 August 2018.
2. Consequent to resignation of Mrs. Sangeeta Bohra and appointment ofMrs. Chaitali Salot as an Audit Committee Member the composition of the Audit committeewas disturbed as the number of Independent Directors fell below the requirement ofRegulation 18 (1) of Listing Regulations i.e. 2/3rd of the committee members shall beIndependent.
The Board Members considered the provisions of Listing Regulations andwere of the opinion that since the Audit Committee is comprising of 2 (Two) IndependentDirectors both with immense financial/accounting expertise & having a good grip overthe decision making process the Company has principally complied with the spirit of theprovisions of the Regulation 18 (1) of Listing Regulations.
Subsequently Mrs. Chaitali Salot Non-Executive Woman Directorunderstanding the framework of the Regulations & considering her other professionalcommitments offered to renounce her position and step down as a Member of Audit Committee.
The Board members appreciated the gesture and place on record theirdeep regret while stating that just to technically adhere to the requisitions a willing& able member of the Board and its Audit Committee some time has to compromise on herability to participate & contribute at the Audit Committee and share her expertise andwisdom in the best interest of the Company.
The Board Members acknowledged the kind gesture of Mrs. Salot anddecided to re-constitute the Audit Committee to technically fit into framework asprescribed under Regulation 18 (1) of Listing Regulations.
INTERNAL CONTROL SYSTEM & THIER ADEQUACY:
The Company has in place internal control systems commensurate with thesize and nature of the business and has experienced personnel positioned adequately in theorganization to ensure internal control processes and compliances.
The Company takes abundant care in designing reviewing and monitoringregularly the working of inter control systems and their compliances for all importantfinancial internal control processes. Internal Auditors comprising of professional firmsof Chartered Accountants have been entrusted the job to conduct regular internal audit atall units/location and report to the management the observation if any. The Auditfindings are reported on quarterly basis to the Audit Committee of the Board headed by aNon-executive Independent Director.
CORPORATE SOCIAL RESPONSIBILITY:
Your Company embraces responsibility for impact of its operations andactions on all stakeholders including society and community at large. As per requirementsof Companies Act 2013 the Company had duly constituted Corporate Social ResponsibilityCommittee. The brief outline of the Corporate Social Responsibility (CSR) policy of theCompany and the initiative undertaken by the Company on CSR activities during the year areset out in "Annexure C" of this report in the format prescribed in theCompanies (Corporate Social Responsibility Policy) Rules 2014. The details of compositionof CSR Committee etc. are provided under the Corporate Governance Report.
VIGIL MECHANISM- WHISTLE BLOWER POLICY:
The Company has established a 'vigil mechanism' for its directors andemployees to report genuine concerns or grievances and accordingly formulated the WhistleBlower Policy in compliance with the provisions of Section 177 of the Companies Act 2013and the Listing Regulations. The Policy has been formulated with an objective to build andstrengthen a culture of transparency and trust within the Company and to provide aframework to its directors and employees for responsible and secure reporting of improperactivities (whistle blowing); and also to provide for adequate safeguards againstvictimization of directors/employees who avail of the mechanism; and for direct access tothe Chairman of the Audit Committee. The said Policy is available on the website of theCompany viz. www.orientabrasives.com.
During the year under review no compliant has been received under theWhistle Blower Policy (Vigil Mechanism). Further information on the Vigil Mechanism andthe Whistle Blower Policy of your Company can be referred to in the Report on CorporateGovernance.
RISK MANAGEMENT POLICY:
Your Company has laid down a Risk Management Policy for the Companythat identifies elements of risks inherent to the business and have entrusted the AuditCommittee with the responsibility of reviewing the said policy.
RELATED PARTY TRANSACTIONS:
All contracts/arrangements/transactions entered by the Company duringthe financial year under review with the Related Parties were in the ordinary course ofbusiness and on an arm's length basis. During the year the Company had not entered intoany contract/arrangement/transaction with the Related Parties which could be considered asmaterial in accordance with the Company's Policy on Related Party Transactions. In viewthereof the disclosure in Form AOC-2 is not required to be provided.
The Company places all Related Party Transactions before the AuditCommittee and also before the Board of Directors for approval on quarterly basis. Theomnibus approval was obtained from the Audit Committee in respect of transactions whichare repetitive in nature in accordance with the Company's Policy on Related PartyTransactions. The Audit Committee also reviewed the details of such Related PartyTransactions entered into by the Company pursuant to each of the omnibus approval given ona quarterly basis.
The Policy on Related Party Transactions as approved by the Board ofDirectors of the Company is available on the website of the Company viz.www.orientabrasives.com.
Your Directors draw attention of the members to Note no. 31 to thefinancial statements which sets out related party disclosures.
PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN ANDSECURITIES PROVIDED:
During the year under review no loans given investments madeguarantees given and securities provided in accordance with the provisions of Section 186of the Companies Act 2013.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO:
The particulars relating to conservation of energy technologyabsorption foreign exchange earnings and outgo as required to be disclosed under theCompanies Act 2013 are provided in "Annexure D" to this Report.
EXTRACT OF ANNUAL RETURN:
The Extract of Annual Return of the Company in Form MGT-9 as providedunder Section 92(3) of the Companies Act 2013 is annexed herewith as "AnnexureE" to this Report.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE:
The Company has adopted a Policy in line with the requirements of TheSexual Harassment of Women at the Workplace (Prevention Prohibition & Redressal) Act2013. The Company has set up an Internal Complaint Committee to redress the complaints ifany received.
During the year under review no complaint was received from anyemployee of the Company involving sexual harassment and thus no case was filed pursuantto the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013.
Your Directors wish to express their appreciation for the assistanceand co-operation received from the financial institutions banks employees investorscustomers Government & Government agencies Members & Shareholders and all otherbusiness associates for the continuous support given by them to the Company and theirconfidence in its management during the year under review and look forward for theircontributed support in future.