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Rainbow Papers Ltd.

BSE: 523523 Sector: Industrials
NSE: RAINBOWPAP ISIN Code: INE028D01025
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Mkt Cap.(Rs cr) 5
Buy Price 0.53
Buy Qty 2000.00
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OPEN 0.47
CLOSE 0.47
VOLUME 1000
52-Week high 1.58
52-Week low 0.47
P/E
Mkt Cap.(Rs cr) 5
Buy Price 0.53
Buy Qty 2000.00
Sell Price 0.47
Sell Qty 294369.00

Rainbow Papers Ltd. (RAINBOWPAP) - Director Report

Company director report

Dear Shareholders

Your Directors’ have pleasure in presenting the 32nd Annual Report ofthe Company together with the Audited Accounts for the financial year ended 31stMarch 2018.

1. FIRST YEAR OF IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (Ind AS)

This is the first year of implementation of Indian Accounting Standards (Ind AS). Thestandalone financial statements for the year ended 31st March 2018 have beenprepared in accordance with the Accounting Standards (Ind AS) notified under Section 133of the Companies Act 2013 read with Companies (Accounts) Rules 2014. The financialstatements for the year ended on 31st March 2017 have been restated inaccordance with Ind AS for comparative information.

2. FINANCIAL HIGHLIGHTS :

The standalone and consolidated financial results of the company for the year ended 31stMarch 2018 are as under:

(Rs. in Lacs)

FINANCIAL RESULTS 2017-18 2016-17
Revenue from Operations 28.39 5273
Depreciation 11111.72 13648
Profit before Exceptional & Extraordinary Items & Tax (19872.33) (16946)
Prior Period items / Exceptional items
Taxation: Less/ (Add) Current Tax
MAT credit reversal of earlier years /mat credit entitlement
Deferred Tax
Short/Excess Provision of Earlier Years
Net Profit After Tax For The Year (19872.33) (16946)
EPS (Face Value of Rs. 2 per share)
Basic (18.71) (15.95)
Diluted (18.71) (15.95)

3. DIVIDEND

Considering the continued losses in the Financial Year 2017-18 Board of Directors donot recommend any dividend for the year.

4. OPERATIONS

During the period under review the Company's operations continued to be affected dueto non availability of adequate working capital which has adversely affected the plant.

Furthermore the Company could not undertake necessary and regular capital expenditureas per industry norms for proper maintenance and upkeep of plant and equipment in theprevious year due to paucity of funds.

5. OUTLOOK

Your Company was in talks with Joint Lenders’ Forum (JLF) for approval of One TimeSettlement (OTS) as proposed by the prospective investor M/s. Kushal Limited along withthe Scheme of Compromise and Arrangement with the Unsecured Creditors of the Company andScheme of Amalgamation of M/s. Rainbow Papers Limited with M/s. Kushal Limited. Pursuantto approval of the said scheme and OTS by the JLF your Board on 14thSeptember 2017 approved the OTS and the scheme.

The said OTS was put to hold due to admission of petition filed under Insolvency andBankruptcy Code 2016 by one of the operational creditor M/s. Neeraj Paper AgenciesLimited. Accordingly Hon’ble National Company Law Tribunal (NCLT) had appointed Mr.George Samuel as the Interim Resolution Professional (IRP) vide its order dated 22ndSeptember 2018. Due to appointment of IRP powers of the Board of Directors were suspendedtill the completion of Corporate Insolvency Resolution Process (CIRP).

Mr. R. D. Choudhary was appointed as the Resolution Professional by the Committee ofCreditors formed under the provisions of the Insolvency and Bankruptcy Code 2016.Expression of Interest was called for the submission of Resolution Plan for reviving theoperations of the Company. After going through the proposals received Committee decidedto again call for the expression of interest. M/s. Kushal Limited was the sole bidder tosubmit the Resolution Plan and after going through the legality of the plan submitted itwas approved by the Committee of Creditors with requisite majority.

The said plan is placed before the NCLT for their kind consideration and approval.

6. PUBLIC DEPOSITS

The Company has not accepted or renewed any deposits from the public during thefinancial year 2017-18.

7. HUMAN RESOURCES

During the year under review workmen strenght has gone down substaintially due tooperations being adversely affected.

8. CORPORATE SOCIAL RESPONSIBILITY (CSR)

In line with the provisions of the Companies Act 2013 and rules made thereunderCorporate Social Responsibility (CSR) Committee has been formed and the Composition of theCSR Committee is as under:

Name of Director Category of Directorship Designation
Shri Ajay Goenka Managing Director Chairperson
Shri Rahul Maheshwari Executive Director Member
Shri Kantibhai Patel Independent Director Member

On account of non applicability of CSR for the reporting period CSR policy asrecommended by the CSR Committee and approved by the Board of Directors is given in theAnnual Report on CSR Activities as an Annexure A to this Report but other detailsas required as per the Companies Act 2013 is not given due to non applicability.

9. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Ms. Aanal Trivedi Director of the Company retires by rotation and being eligiblehave offered themselves for re-appointment.

Shri Ajay Goenka Managing Director of the Company whose term ends on 20thAugust 2018 and in the board meeting held on 14th August 2018 has extendedterm of his appointment for further period of 5 years subject to approval of Members inthe General Meeting of the Company.

The Board recommends their re-appointment as Directors as detailed in the noticeconvening the Annual General Meeting.

10. COMPOSITION AND NUMBER OF MEETINGS OF THE BOARD

The Board of Directors of the Company comprises of well qualified and experiencedpersons having expertise in their respective areas. It has appropriate combination ofExecutive and Non-Executive Directors consisting of one Chairman & Managing Directorone Executive Director three Independent Director and one Woman Director as requiredpursuant to Section 149 of the Companies Act 2013.

The Board meets at regular intervals with gap between two meetings not exceeding 120days. During the year under review the Board met 9 times on 20th April 201730th May 2017 20th July 2017 24th July 2017 12thAugust 2017 29th August 2017 14th September 2017 28thNovember 2017 and 14th February 2018.

11. AUDIT AND RISK MANAGEMENT COMMITTEE

In compliance with the requirement of Section 177 of the Companies Act 2013 the Boardof Directors has constituted Audit Committee. The members of the Audit Committee possessfinancial/accounting expertise and exposure. The Audit Committee assists the Board in itsresponsibility for overseeing the quality and integrity of the accounting auditing andreporting practices of the Company and its compliance with the legal and regulatoryrequirements.

The Audit & Risk Management Committee comprises of the Independent Directors of theCompany under the Chairmanship of Mr. Abhilash Delwadia. The other independent directorsof the Committee are Mr. Indrasinh B. Zmdala and Mr.Kantibhai Patel.

Statutory Auditors and Internal Auditors are the permanent invitees at the committeemeetings. Company Secretary acts as the Secretary of the Committee.

For the Finanacial year 2017-18 the Audit Committee met 5 times on the followingdates: 30th May 2017 12th August 2017 14th September2017 28th November2017 and 14th February 2018.

The recommendations given by the Audit Committee are considered and reviewed by themembers of the Board of the Company. However there is no such case where the Boarddissented or did not accept the recommendation of the Audit Committee.

The Company has established the vigil mechanism through Whistle Blower Policy for allthe stakeholders of the Company which also provides for direct access to the chairpersonof the Audit Committee in appropriate or exceptional cases as per the Policy.

The Whistle Blower Policy will be applicable to all the stakeholder of the Companywhich is an extension of the Code of Business Conduct through which the Company seeks toprovide a mechanism for the Stakeholders to disclose their concerns and grievances onUnethical Behavior and Improper/Illegal Practices and Wrongful Conduct taking place in theCompany for appropriate action. The Company shall oversee the vigil mechanism only throughthe Audit Committee. If any of the members of the Audit Committee have a conflict ofinterest in a given case they should excuse themselves and the others in the Committeewould deal with the matter on hand.

12. POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR

DETERMINING QUALIFICATIONS POSITIVE ATTRIBUTES INDEPENDENCE OF A DIRECTOR AND OTHERMATTERS PROVIDED UNDER SUB-SECTION (3) OF SECTION 178

Pursuance to Section 178 of the Companies Act 2013 as applicable to the Company TheComposition of the Nomination & Remuneration Committee is as under:

1. Shri Kantibhai Patel Independent Director

2. Shri Indrasinh B. Zala Independent Director

3. Smt. Aanal N. Trivedi Professional Director

The Committee met once on 12th August 2017.

The Nomination & Remuneration Committee considers the requirement of the skill setson the Board integrity of the persons having standing in their respectivefield/profession and who can effectively contribute to the Company's business and policydecisions recommend the appointment to the Board for approval.

The Committee has approved a policy with respect to the appointment and remuneration ofthe Directors and Senior Management personnel. The objectives of this policy are:

(a) to create a transparent system of determining the appropriate level of remunerationthroughout all levels of the Company;

(b) encourage people to perform to their highest level;

(c) allow the Company to compete in each relevant employment market;

(d) provide consistency in remuneration throughout the Company;

(e) align the performance of the business with the performance of key individuals andteams within the Company;

(f) long term value creation; and

(g) attract and retain the best professionals.

The policy details of the types of remuneration to be offered by the Company andfactors to be considered by the Board Nomination & Remuneration Committee andmanagement in determining the appropriate remuneration strategy.

13. BOARD EVALUATION

The Powers of Board has been suspended until the completion of Corporate InsolvencyResolution Process and thus no evaluation of Board Members has been carried out and noseparate meeting of the Independent Directors has been held.

14. INSURANCE

The Company’s properties including Building Plant and Machinery Stocks Storesetc. have been adequately insured.

15. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Companies Act 2013 the unclaimed dividend aggregatingto Rs. 190672/- lying with the Company for a period of seven years pertaining to theyear ended on 31st March 2010 was transferred during the year 2017-18 to theInvestor Education and Protection Fund established by the Central Government.

16. INFORMATION TECHNOLOGY

Most of the functional areas of your company are working on IT (Information Technology)platform. To name a few of them: Planning Raw Material Purchase Finance Sale WeightBridge Production HR etc.

We are working with live ERP systems modules and functions. Our entire plant is underobservation on CCTV cameras and PA System (Public Announcements) for safety and securitypurpose.

17. CORPORATE GOVERNANCE

Corporate Governance is an ethically driven business process that is committed tovalues aimed at enhancing an organization’s brand and reputation. This is ensured bytaking ethical business decisions and conducting business with a firm commitment tovalues while meeting stakeholders expectation. At Rainbow Papers Limited it isimperative that our company affairs ae managed in a fair and transpaperent manner. This isvital to gain and retain the trust of our stakeholders.

As stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Management Discussion and Analysis Report and Report on Corporate Governanceform part of this Annual Report. Certificate of the Auditors regarding compliance with theconditions of Corporate Governance as stipulated in Chapter IV of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 is also annexed to theDirectors’ Report.

18. DEMATERIALIZATION

The Equity shares of the Company are in compulsory demat segment and are available fortrading in the depository system of both National Securities Depository Ltd (NSDL) and theCentral Depository Services (India) Ltd. (CDSL). 105268895 nos. of equity shares forming99.11% of the equity share capital of the Company stands dematerialized on 31stMarch 2018.

19. LISTING OF SHARES

The equity shares of the Company are presently listed on the BSE Ltd (BSE) and theNational Stock Exchange of India Limited (NSE). The BSE & NSE have nationwideterminals and therefore shareholders/investors are not facing any difficulty in tradingin the shares of the Company from any part of the Country.

Your Company has not paid annual listing fees for financial year 2016-17 and 2017-18 toBSE and NSE on account of pending approval of resolution plan before the NCLT. YourCompany has not paid custodial fees to National Securities Depository Ltd. and CentralDepository Services (India) Ltd.

20. STATUTORY AUDITORS AND THEIR REPORT

M/s. Mehta Lodha & Co. Chartered Accountants the Statutory Auditors of theCompany who were appointed at the 29th Annual General Meeting to hold officetill 33rd Annual General Meeting are subject to ratification. They haveconfirmed their eligibility under Section 141 of the Companies Act 2013 and the rulesframed there under for ratification as Auditors of the Company. As required under SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the auditors havealso confirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India. furnished a certificate regarding theireligibility for re-appointment as Statutory Auditors of the Company pursuant to Section139 (1) of the Companies Act 2013 read with rules. The Board of Directors recommendstheir re-appointment.

The Auditors Report contains following qualification

"We draw attention to Note No. 46 of the accompanying financial statements inrespect of non-provision of interest on NPA accounts of banks of Rs. 136.86Crore(PreviousYear Rs. 143.31 Crore) for the year under consideration and the total amount of suchunprovided interest till date is Rs. 280.17Crore(Previous Year Rs.143.31Crore) The exactamounts of the said non provisions of interest are not determined and accounted for by thecompany and to that extend Bankers loan liabilities are understated and loss isunderstated"

21. INTERNAL AUDITORS

Pursuant to the provisions of Section 138 read with Rule 13 of the Companies (Accounts)Rules 2014 your Company has appointed M/s RNCA & Associates. Chartered Accountantsas the Internal Auditors of the Company for conducting internal audit for the financialyear 2018-19.

22. COST AUDITORS

As there is no manufacturing activity during the reporting period cost auditor is notbeing appointed.

23. SECRETARIAL AUDIT REPORT

Pursuant to Section 204 read with Section 134(3) of the Companies Act 2013 ResolutionProfessional has appointed M/s. Yogesh Chhunchha & Co. Company Secretaries Ahmedabadas Secretarial Auditor of the Company for FY 2017-18. The Secretarial Audit Reportprovided by M/s Yogesh Chhunchha & Co. is annexed with the Board’s report as AnnexureB.

The Secretarial Audit Report contains following qualification

The Company has not complied with Section 124 (6) of the Act and Rules made thereunderin respect of Transfer of Shares in Investor Education and Provident Fund in respect ofwhich dividends have not been paid / claimed for seven consecutive years or more.

During the Financial Year under review the Company has not complied with Section 135of Companies Act 2013 and Rules made thereunder in respect of amount to be spent on CSRactivities.

The Company has not filed till date of this report Form MR-1 for Re-appointment ofMr. Rahul Maheshwari as Whole Time Director made at 31st AGM held on 28/09/2017 undersection 196 of the Act and Rules made thereunder.

The Company had not filled up the Casual Vacancy of "Chief Financial Officer"in terms of Section 203 of the Companies Act 2013."

24. MANAGEMENT’S VIEW ON QUALIFICATIONS

Directors would like to state that your Auditors have given Qualified Report for theFinancial Year 2017-18 and in that connection your Directors are of the following views.

"Financial Institutions and Banks have declared advances as NPA and thus theserequire no provision of interest in the books of accounts."

With regards to the qualifications mentioned in the Secretarial Audit Report yourdirectors would like to state that

"One of the operational creditors of the Company had filed suit against theCompany under Insolvency and Bankruptcy Code 2016 and the same was admitted by theNational Company Law Tribunal (NCLT) vide their order dated 12th September2017 and thus the powers of the Board were suspended and without power the said complianceof Section 124 in respect of Transfer of Shares in Investor Education and Provident Fundin respect of which dividends have not been paid / claimed for seven consecutive years ormore was not complied to.

Your Company is going through financial crisis and thus the amounts required to bespent towards Corporate Social Responsibility (CSR) has not been spent.

The powers of the Directors were suspended and thus the said form was not filed.

With respects to filing of casual vacancy for the post of Chief Financial Officer interms of Section 203 of the Companies Act your Directors were not able to find anysuitable candidate for the post and thus the position of KMP remains vacant. YourDirectors will strive harder to find a suitable candidate and will comply with thelaw"

25. DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134 (3) of the Companies Act 2013 in relation to the financialstatements for FY 2017-18 the Board of Directors states that:

a) In preparation of the annual accounts the applicable accounting standards have beenfollowed along with proper explanation relating to material departures if any;

b) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on 31st March 2018 and ofthe loss for the year ended 31st March 2018;

c) The Directors have taken proper and sufficient care for maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and

d) the financial statements have been prepared on a going concern basis.

e) the Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively. f) the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively ‘

26. STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION

(6) OF SECTION 149

Shri Kantibhai Patel Shri Indrasinh B. Zala and Shri Abhilash Delwadia IndependentDirectors of the Company have given their declarations to the Board that they meet thecriteria of Independence as provided under the applicable provisions of the Companies Act2013 and Listing Regulations.

27. DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SECTION 143(12) OF THE

COMPANIES ACT 2013 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

There had been no frauds reported by the auditors pursuant to section 143(12) of theCompanies Act 2013.

28. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

During the year under review there are no related party transactions that have takenplace between the related parties.

29. CODE OF CONDUCT

The Company has adopted a Code of Business Conduct based on the business principles ofthe Company. The Board has laid down the code of conduct for all Board members and Seniormanagement of the Company. The code of conduct has been posted on the website of thecompany. All Board members and Senior management personnel affirms the compliance with thecode on an annual basis in the prescribed format.

30. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION

PROHIBITION AND REDRESSAL) ACT 2013

The Company has put in place an Anti-Sexual Harassment mechanism in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Internal Complaints Committees have been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy. The Company has not received anycomplaint of sexual harassment during the year 2017-18.

31. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS

AND OUTGO

Operations of the Company were adversely affected due to liquidity crunch and we couldnot make plant operational throughout the year thus the details relating to conservationof energy technology absorption as prescribed under section 134 of the Companies Act2013 read with Companies (Account) Rules 2014 would not be applicable. Due to nonoperation of the plant throughout the year there is no foreign exchange earnings oroutgo.

32. RISK MANAGEMENT POLICY

The Board of Directors has developed and implemented risk management policy for theCompany ensuring that systems of risk management are in place. It has identified andassessed internal and external risks with potential impact and likelihood that mayimpact the Company in achieving its strategic objectives or may threaten its existence.The policy lays down procedures for risk identification assessment monitoring reviewand reporting.

33. PARTICULARS OF EMPLOYEES

The information required underpursuant to Section 197 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are provided below:

1. The ratio of the remuneration of each director to the median employee’sremuneration:

Sr. No. Name of the Director Ratio (Remuneration of Director to Median Remuneration)
1. Ajay R Goenka NA
2. Rahul J Maheshwari NA

2. The percentage increase in remuneration of each director Chief FinancialOfficer Chief Executive Officer Company Secretary or Manager if any in the financialyear:

Sr. No Name Designation % increase (incl. sitting fees)
1. Ajay Goenka Managing Director 0.00
2. Rahul Maheshwari Executive Director 0.00
3. Kanitibhai Patel Independent Director 0.00
4. Indrasinh Zala Independent Director 0.00
5. Abhilash Delwadia Independent Director 0.00
6. Aanal Trivedi Director 0.00
6 Shashikant Thakar Company Secretary 0.00

3. The percentage increase in the median remuneration of employees in thefinancial year: 0% (% increase in the remuneration of median employee as on31.03.2018)

4. Comparison of the remuneration of the Key Managerial Personnel against theperformance of the company:

During the year under review no remuneration has been increased for any KMP.

5. Variations in the market capitalization of the company price earnings ratioas at the closing date of the current financial year and previous financial year:

Market Capitalization BSE NSE
31.3.2018 248548482 249610655
31.3.2017 506656521 504532175
P/E Ratio BSE NSE
31.3.2018 (0.13) (0.13)
31.3.2017 (0.30) (0.30)

percentage increase over decrease in the market quotations of the shares of the companyin comparison to the rate at which the company came out with the last public offer in caseof listed companies.

6. Average percentile increase already made in the salaries of employees otherthan the managerial personnel in the last financial year:

average percentage increase is NIL in FY 17-18

7. Comparison of the each remuneration of the Key Managerial Personnel againstthe performance of the company

There is no increase in the remuneration paid to the Company Secretary.

8. The key parameters for any variable component of remuneration availed by thedirectors: NOT APPLICABLE.

9. The ratio of the remuneration of the highest paid director to that of theemployees who are not directors but receive remuneration in excess of the highest paiddirector during the year:

Sr. Name of the Employee Designation Ratio
No.
Not Applicable

10. Affirmation that the remuneration is as per the remuneration policy of the company:

We hereby affirm that the remuneration paid to the Key Managerial Personnel is as perthe remuneration policy of the Company.

11. Name of every employee of the company who- i. if employed throughout thefinancial year was in receipt of remuneration for that year which in the aggregate wasnot less than sixty lakh rupees --NIL ii. if employed for a part of the financialyear was in receipt of remuneration for any part of that year at a rate which in theaggregate was not less than five lakh rupees per month-- NIL iii. if employedthroughout the financial year or part thereof was in receipt of remuneration in that yearwhich in the aggregate or as the case may be at a rate which in the aggregate is inexcess of that drawn by the managing director or whole-time director or manager and holdsby himself or along with his spouse and dependent children not less than two percent ofthe equity shares of the company – NIL

34. INDUSTRIAL RELATIONS

Industrial Relations remained cordial throughout the year under review. Severalindustrial relation initiatives implemented by the Company have significantly helped inimproving the work culture enhancing productivity and enriching the quality of life ofthe workforce.

35. THE EXTRACT OF THE ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT 9 as requiredunder Section 134 (a) of the Companies Act 2013 is attached as Annexure C to thisReport.

36. APPRECIATION AND ACKNOWLEDGEMENTS

The Board of Directors places on record its appreciation for the continued support andconfidence received from its Bankers and employees of the Company.

The Directors are also thankful to all other stakeholders for their valuable sustainedsupport to the Company.

For behalf of the Suspended Board of Directors
Place : Ahmedabad R. D. Choudhary Ajay Goenka
Date : 14.08.2018 Resolution Professional Managing Director
Regd. No. IBBI/IPA-001/IP- DIN : 00139512
P00157/2017-18/10326