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Premier Explosives Ltd.

BSE: 526247 Sector: Industrials
NSE: PREMEXPLN ISIN Code: INE863B01011
BSE 00:00 | 01 Jul 299.20 -2.30
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OPEN 297.00
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VOLUME 665
52-Week high 428.00
52-Week low 173.00
P/E 57.21
Mkt Cap.(Rs cr) 322
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OPEN 297.00
CLOSE 301.50
VOLUME 665
52-Week high 428.00
52-Week low 173.00
P/E 57.21
Mkt Cap.(Rs cr) 322
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Premier Explosives Ltd. (PREMEXPLN) - Director Report

Company director report

Dear Members

Your directors are pleased to present the 40th annual report including theaudited financial statements of your company for the year ended March 312020.

1. Financial summary

(Rs. in lakhs)

Standalone

Consolidated

2019-20 2018-19 2019-20 2018-19
Profit / (Loss) for the year
Operating revenue 15650.80 24093.35 16452.09 25303.19
Other income 140.00 259.03 146.18 264.79
Total revenue 15790.80 24352.38 16598.27 25567.98
EBIDTA (516.70) 2343.80 545.73 2322.84
% to Operating revenue -3.3% 9.7% -3.3% 9.2%
Profit / (Loss) before tax (1450.94) 1631.65 (1501.53) 1580.92
Profit / (Loss) after tax (958.24) 1172.55 (992.96) 1135.53
% to Total revenue -6.1% 4.8% -6.0% 4.4%
EPS (Rs.) (8.91) 11.00 (9.32) 10.57
Appropriations
Retained earnings at beginning of the year 10644.68 9792.72 10671.18 9856.24
Profit / (Loss) for the year (958.24) 1172.55 (992.96) 1135.53
Dividend paid for previous year and tax thereon (349.98) (320.59) (349.98) (320.59)
Retained earnings at end of the year 9336.46 10644.68 9328.24 10671.18

2. State of affairs

During the year your company faced many challenges like delayed pre despatchinspection (PDI) from defence customers and low prices from commercial customerswithdrawal from supplies to Coal India at un-remunerative prices longer monsoongenerally lower construction / quarrying activities and finally the impact of COVID-19 infourth quarter. Resultantly turnover has come down to Rs.15650.80 lakhs from Rs.24093.35 lakhs during previous year. Consequently EBIDTA has been negative at (Rs.516.70lakhs) compared to Rs.2343.80 lakhs in previous year. Profit after tax also has beennegative (Rs.958.24 lakhs) compared to Rs.1172.55 lakhs for the year 2018-19.

3. Operations

As your company has withdrawn from supplies to Coal India in second half production ofbulk explosives declined to 23989 tonnes from previous year's 41612 tonnes.

Production of detonators was 20.29 million pieces as against 29.26 million pieces inprevious year.

Operations & maintenance contracts at Sriharikota and Jagdalpur have beensatisfactory. In April 2020 the O&M contract at Solid Fuel Complex Jagdalpur hascome to an end and a 6-month extension has been made until a new tender is floated. Basedon its experience your company is confident of getting the contract for a further period.

4. Capital expenditure

During the year the company incurred a capital expenditure of Rs. 296.79 lakhs on fixedassets Rs.96.33 lakhs on intangible assets and Rs. 2732.75 lakhs on Capital work inprogress. Most of the capital expenditure has been towards Katepally greenfield projectwhich is expected to be capitalised during 2020-21.

5. Dividend

Considering the challenges in financial performance during the year 2019-20 and topreserve the financial resources towards de-risking COVID-19 impact your Board has notrecommended any dividend for the financial year under review.

6. Share capital and reserves

a) Share capital

Your company's equity share capital as on March 312020 stood at Rs. 1075.22 lakhssame as at the end of last year.

b) Reserves

Your company has not proposed to transfer any amount to the general reserve.

7. Deposits

Your company has not accepted any deposits during the year and there were no depositsoutstanding as at end of the year.

8. Change in the nature of business if any

During the year there was no change in the nature of business of the company.

9. Material changes and commitments after the reporting period

There have been no such changes. However one point that is worth mentioning is yourcompany received SCOMET license for export of propellant filled rocket motor for export.This rocket motor has been designed and developed by your company and the license wouldhelp in export of such products for the first time from India.

10. Subsidiary companies Jointly controlled entity and consolidated financialstatements

a) PELNEXT Defence Systems Private Limited a 100% subsidiary company

Incorporated on July 15 2016 PELNEXT is expected to be operated as a special purposevehicle in defence explosives business. The company incurred a net loss of Rs. 0.64 lakhduring 2019-20 (Rs. 0.96 lakh during 2018-19).

As on 31st March 2020 Premier Explosives Limited held 10000 Equity shares in PELNEXTrepresenting 100% of equity share capital.

b) Premier Wire Products Limited (PWPL) an 80% subsidiary company

PWPL is engaged in manufacture of Galvanised Iron (GI) Wire catering to therequirements of detonator- manufacturers including Premier Explosives Limited. Thecompany's revenue for the year 2019-20 was Rs. 715.45 lakhs and there was a loss of Rs.43.80 lakhs (Revenue of Rs. 1334.63 lakhs and loss of Rs. 44.43 lakhs during previousyear). Turnover of the company has been affected by lower demand for GI wire fromdetonator-manufacturers and also during the year the company moved to contract-manufacture of GI wire.

As on 31st March 2020 Premier Explosives Limited held 5200000 Equity shares in PWPLrepresenting 80% of their equity share capital.

c) BF Premier Energy Systems Private Limited (BFPES) a 50% jointly controlled entity

This joint venture is yet to commence commercial operations. The company incurred a netloss of Rs.0.43 lakh during 2019-20 (Rs.0.52 lakh during 2018-19).

Your company and Kalyani Strategic Systems Limited each hold 100000 equity shares inthe share capital of BFPES as on 31st March 2020.

d) Consolidated financial statements

Your company has prepared consolidated financial statements in accordance with section129 (3) of the Companies Act 2013.

Details of consolidated entities are given in the Annexure 1 Form AOC-1: Statementcontaining salient features of the financial statements of subsidiaries / associatecompanies / joint ventures.

11. Impact of COVID-19

The outbreak of COVID-19 pandemic had its impact over the health of people and worldeconomy.

The Government of India had imposed a nationwide lockdown with effect from March 252020 and this has impacted your company's manufacturing activities also. Though explosivesmanufacturing was exempt from the lockdown measures operations continued to be on lowscale with restrictions on factory hours nos. of workers transport of goods decline indemand etc.

Your company expects gradual return to normalcy from third and fourth quarters of theyear 2020-21.

12. Future outlook

Your company places priority on defence explosives and continues commercial explosiveson feasibility basis.

At the macro level 'Make in India' is transforming into 'Atmanirbhar Bharat' in thewake of COVID-19 and more specifically in defence supplies in the aftermath of Galwanclashes with China.

Allowing automatic route for Foreign Direct Investment up to 74% of equity in defencecompanies is expected to attract foreign investors to infuse necessary capital intomanufacture of defence supplies in India.

Push for private coal mining also is expected to change the way of supply chain forexplosives and accessories giving more emphasis for quality and performance of explosivesin mining operations.

In August 2020 Government of India decided to impose embargo on import of 101 defenceitems including missiles ammunition and counter-measures. This embargo is expected toboost indigenous production of defence supplies.

Such proactive actions of the Government are expected to create more businessopportunities for companies engaged in high energy materials.

13. Board matters

A. Directors' responsibility statement pursuant to section 134 of the Companies Act2013

Your directors confirm that

a) the applicable accounting standards have been followed in preparation of annual accounts;
b) the accounting policies selected were applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 312020 and of the loss of the company for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis;
e) adequate internal financial controls have been laid down have been followed and have been operating effectively;
f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and those systems have been adequate and operating effectively.

B. Declaration of independent directors

All the independent directors confirmed that they have met the criteria of independenceas required u/s 149 of the Companies Act 2013.

C. Board meetings

During the financial year 2019-20 there were 4 Board meetings held on 18th May 201910th August 2019 14th November 2019 and 13th February 2020.

D. Board evaluation

Criteria and other details of Board evaluation have been provided in the Annexure -2Report on Corporate Governance.

E. Directors and Key Managerial Personnel

During the year under review Mr. T.V. Chowdary was re-appointed as Deputy ManagingDirector w.e.f. July 1 2019 for a period of three years and Mr. Y. Durga Prasad Rao wasappointed whole-time director designated as Director (Operations) w.e.f. 10th August 2019for a period of three years.

Further Mr. P.R. Tripathi Mr. Anil Kumar Mehta Mr. K. Rama Rao and Dr. A.Venkataraman were re-appointed as Independent Directors of the Company for a second termof five years in the annual general meeting held on 25th September 2019.

Rotation of director

Mr. T.V.Chowdary Deputy Managing Director retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers himself for reappointment.

The disclosures required pursuant to Regulation 36 of the SEBI Listing Regulations andClause 1.2.5 of the Secretarial Standard are given in the Notice of AGM forming part ofthe Annual Report.

Changes in Key Managerial Personnel

There have been no changes in the key managerial personnel during the financial year2019-20.

However after end of financial year Ms. K. Vijayshree has resigned as CompanySecretary w.e.f. 22nd May 2020 and later the Board has appointed Mrs. K. Jhansi Laxmi asthe Company Secretary w.e.f. 11th September 2020.

The following are the Key Managerial Personnel as on date: Dr. Amarnath Gupta -Chairman & Managing Director Mr. C. Subba Rao - Chief Financial Officer Mrs. K. JhansiLaxmi - Company Secretary

F. Company's policy on appointment and remuneration of directors

a) Criteria for appointment of directors

Director must have relevant experience in finance law management sales marketingadministration research corporate governance technical operations or other disciplinesrelated to company's business.

Director should possess the highest personal and professional ethics integrity andvalues.

Director must be willing to devote sufficient time and energy in carrying out theirduties and responsibilities.

Nomination and Remuneration Committee shall identify and ascertain the integrityqualification expertise and experience of the person for appointment as director andrecommend to the Board his / her appointment or re-appointment.

The committee has discretion to decide whether qualification expertise and experiencepossessed by a person are sufficient or satisfactory for the concerned position.

While appointing an independent director Nomination and Remuneration Committee shallconsider the 'independence' of the person also in addition to the above.

b) Policy on directors' remuneration

i. Policy

The Company shall remunerate its directors key managerial personnel seniormanagement other employees and workers appropriately to retain and motivate them as wellas to attract new talent when required.

ii. Components of remuneration

Remuneration package shall include fixed component for all employees and variablecomponent to the extent desirable and practicable.

iii. Fixed remuneration

It shall be competitive and based on the individual's education experienceresponsibilities performance industry benchmark in the area etc.

Fixed remuneration shall comprise of basic salary and other allowances like house rentallowance conveyance allowance etc. which are calculated as certain % of basic salary.

iv. Variable remuneration

It is paid to encourage the employees to achieve set targets and variable remunerationshall be determined on the following basis:

Category Nature Basis of variable remuneration
Whole time Directors Commission X% of Profit in a year during the contract period (% as recommended by Board and approved by Shareholders.
Management Team (CFO President Vice President Company Secretary GM) Profit sharing bonus X% of Profit divided among them in proportion of their basic salary (% as decided by Committee of Whole time Directors)
Officers (Below GM level) Profit sharing bonus X% of Profit divided among them in proportion of their basic salary.(Minimum period of services and other conditions for eligibility are decided by Committee of Whole time Directors)
Staff and Workers Production incentive Quantity of production as per the Wage Agreement revised every 3 years at Peddakandukuru (Those who are engaged in production and allied activities are eligible.

v. Statutory benefits

Employee benefits like Contribution to Provident Fund Gratuity Bonus Employees StateInsurance Workmen Compensation etc. shall be provided to all eligible employees.

vi. Perquisites and other benefits

Perquisite Amount
Reimbursement of medical expenses for self and family / Medical allowance Up to one month basic salary in a year to whom ESI is not applicable
Mediclaim and personal accident insurance Reasonable coverage to whom ESI is not applicable
Leave travel allowance Workers - as per wage agreement Others - one month basic salary.
Use of Company car with driver or reimbursement of driver salary fuel maintenance and insurance For Directors-as recommended by Board and approved by Shareholders
Telephone at home Club fee
Gas electricity water servant security gardener and soft furnishing.(Up to 10% of basic salary) For Management team-as approved by Committee of Whole time Directors

vii. Increments

Increments of Directors are decided by Nomination and Remuneration Committee and withinthe range authorized by members of the company.

Increments are made taking into account the individual performance inflation andcompany performance.

Workers are given Variable Dearness Allowance as per Consumer Price Index semi-annuallyon 1st of April and 1st of October.

Wages of workers at Peddakandukuru are revised every 3 years as per the agreementbetween the management and unions.

Increments of other employees are made effective 1st April every year as approved byCommittee of Whole time Directors upon recommendation of heads of departments.

Mid-year increments are given in exceptional cases as approved by CMD uponrecommendation of concerned director and head of department.

viii. Remuneration to independent and non-whole time directors

Remuneration consists of sitting fee in respect of the Board and Committee meetingsattended at the rates approved by the Board and within the applicable provisions of theCompanies Act 2013.

ix. Service contracts notice period and severance fees:

Executive directors have entered into a service contracts with the company. The tenureof the contract is three years. Reappointment is done by the Board based on therecommendation of the Nomination and Remuneration Committee. Notice period is as mutuallyagreed between the director and the Board.

None of the directors is eligible for severance pay.

G. Formal annual evaluation by the Board

The Board has evaluated its own performance and of individual directors. The details asrequired u/s 134(3) (p) of the Companies Act 2013 are mentioned in the Annexure 2:Report on Corporate Governance.

14. Transfer of shares and unclaimed dividend to IEPF

As required under Section 124 of the Companies Act 2013 during the financial year2019-20 the Company transferred 12902 equity shares in respect of which dividends havenot been claimed by the members for seven consecutive years or more to the InvestorEducation and Protection Fund Authority (IEPF). Details of shares transferred have beenuploaded on website of the Company.

Unclaimed dividend amount aggregating to Rs.395713 pertaining to the financial year2011-12 lying with the Company for a period of seven years was transferred during thefinancial year 2019-20 to the Investor Education and Protection Fund (IEPF).

15. Auditors

a) Independent auditors

The Members at the 37th Annual General Meeting of the Company held onSeptember 27 2017 had appointed M/s. Majeti & Co. Chartered Accountants (FirmRegistration No. 015975S) as the Statutory Auditors of the Company to hold office for aterm of five years i.e. from the conclusion of the said Annual General Meeting until theconclusion of 42nd Annual General Meeting of the Company to be held in 2022subject to ratification of their appointment by the shareholders every year.

The Ministry of Corporate Affairs vide its Notification dated May 7 2018 hasdispensed with the requirement of ratification of Auditors' appointment by theshareholders every year. Hence from that date onwards there is no requirement ofshareholders' resolution for ratification of Auditors' appointment.

b) Internal auditors

M/s M. Venkata Ratnam & Associates Chartered Accountants were the internalauditors for the year 201920 and they being eligible the Board has re-appointed them forthe year 2020-21.

c) Cost auditors

The Company has been preparing cost records for relevant products prescribed under theCompanies Act

2013 and Companies (Cost Records and Audit) Rules

2014 and these records have been being audited by Cost Accountant.

M/s S. S. Zanwar & Associates Cost Accountants were cost auditors for 2019-20 andthey being eligible the Board has re-appointed them for the year 2020-21. Boardrecommends the resolution for members' ratification of their remuneration as requiredunder the provisions of Section 148(3) of the Companies Act 2013.

d) Secretarial auditor

Mr. K.V. Chalama Reddy a practicing company secretary was the secretarial auditor forthe financial year 2019-20 and he being eligible the Board has re-appointed him for theyear 2020-21.

16. Independent auditors' report

There are no qualifications reservations or adverse remarks made by the Independentauditors in their report.

17. Ratings

ICRA has revised the long-term credit rating to '[ICRA] A- (Negative)' from '[ICRA] A(Stable)' and short-term credit rating has been retained at '[ICRA] A2+'

18. Management discussion and analysis

A report on management discussion and analysis is placed as a separate section in theannual report.

19. Corporate governance

Pursuant to Schedule V of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a detailed report is given atAnnexure-2 along with the auditors' certificate in the Annexure-3 and CEO and CFOcertificate in the Annexure-4.

20. Secretarial audit report

In accordance with section 204 of the Companies Act 2013 the secretarial audit reportis attached as Annexure-5 and there are no qualifications reservations or adverse remarksmade by the Secretarial auditors in their report.

21. Conservation of energy technology absorption and foreign exchange earnings andoutgo

Information required under Section 134(3) (m) of the Companies Act 2013 read with Rule8 of the Companies (Accounts) Rules 2014 is given in Annexure- 6 to this Report.

22. Particulars of loans guarantees or investments in terms of section 186 of theCompanies Act 2013

Your company

a) has not given any loan to any person or other body corporate other than usual advances for supply of materials and services
b) has not given any guarantee or provide security in connection with a loan to any other body corporate or person and
c) has not acquired the securities of any other body corporate by way of subscription purchase or otherwise exceeding sixty percent of its paid-up share capital free reserve and securities premium account or one hundred percent of its free reserves and securities premium account whichever is more.

23. Particulars of contracts or arrangements with related parties

Contracts or arrangements with related parties referred in section 188(1) of theCompanies Act 2013 have been at arm's length and the particulars are reported in theAnnexure - 7.

24. Risk management policy

Your company recognizes Risk Management as a very important part of business and haskept in place necessary policies procedures and mechanisms. The company proactivelyidentifies monitors and takes precautionary and mitigation measures in respect of variousrisks that threaten the operations and resources of the company.

The Risk Management Policy of the company is available at the linkhttp://www.pelgel.com/prm.htm.

25. Vigil mechanism policy

Pursuant to the provisions of Section 177 (9) and (10) of the Companies Act 2013 aWhistle Blower policy has been established. The policy is available at the website linkhttp:// www.pelgel.com/pwb.htm.

26. Corporate social responsibility (CSR) activities

During the year 2019-20 your company has spent an amount of Rs.39.49 lakhs (Rs. 39.90lakhs in previous year) on CSR activities against the minimum mandatory amount of Rs.39.15 lakhs (Rs. 36.23 lakhs in previous year) being 2% of average profit for the lastthree years.

Details of CSR activities are given in Annexure - 8.

27. Disclosure under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 (Nirbhaya Act)

There are 90 women employees in your company as on March 31 2020 (86 a year ago) andyour company has formulated an anti harassment policy to ensure safe working environment.Your company also has set up an Internal Complaint Committee to redress complaints ofwomen employees.

Details of awareness programmes and complaints are listed in Annexure - 9.

28. Disclosure of significant and material orders passed by regulators etc. under Rule8(5)(vii) of the Companies (Accounts) Rules 2014

There were no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future.

29. Disclosure of internal financial control systems and their adequacy Rule 8(5)(viii)of the Companies (Accounts) Rules 2014

The company has in place adequate internal financial controls with reference tofinancial statements through

- reviews of operations by Board and committees
- vetting of various reports by management
- periodical internal audits
- setting and implementing financial policies
- checks and balances in the ERP system and other measures.

30. Extracts of annual return and other disclosures under the Companies (Management& Administration) Rules 2014

In pursuance of Notification of Ministry of Corporate Affairs dated August 28 2020Extract of Annual Return in form no. MGT-9 as per Section 92(3) of the Companies Act 2013and Rule 12 (1) of the Company (Management & Administration) Rules 2014 is availableat the company's website (www.pelgel.com).

31. Remuneration of directors and employees and related disclosures

Remuneration is paid to directors and employees in accordance with the remunerationpolicy of the company and applicable statutory provisions.

Particulars required u/s 197(12) of the Act read with rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are given asAnnexure-10.

32. Listing on stock exchanges

Your Company's shares are listed on the Bombay Stock exchange (BSE) and National StockExchange (NSE).

During the year under review your company's share price on BSE had moved between amaximum of Rs. 260.20 and a minimum of Rs. 56.50. The price closed at Rs. 62.30 on March31 2020 a decrease of 75% over the price of Rs. 245.00 on March 29 2019.

On NSE your company's share price had moved between a maximum of Rs. 260.05 and aminimum of Rs. 55.10. The price closed at Rs. 61.50 on March 31 2020 a decrease of 75%over the price of Rs. 248.20 on March 29 2019.

Strength of shareholders has decreased from 10428 on 31.03.2019 to 10083 on31.03.2020.

33. Industrial relations

Your directors thank all the employees for their cooperation and the contributiontowards harmonious relationship and progress of the company.

34. Acknowledgements

Your directors place on record their appreciation of the continued support andcooperation from all employees customers suppliers financial institutions banksregulatory authorities and other business associates.

Secunderabad Dr. A.N. Gupta
11.09.2020 Chairman & Managing Director
DIN: 00053985

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