Your Directors hereby present their Thirty third Annual Report of the Company togetherwith the Audited Accounts for the financial year ended 31st March 2017.
The performance of the Company for the Financial Year ended 31st March 2017is as under:
Rs in Lakhs
|Sl. No. ||Particulars ||2016-17 ||2015-16 |
|1 ||Turnover ||- ||- |
|2 ||(Loss)/Profit before Interest and Depreciation ||(92) ||38 |
|3 ||Finance charges ||4 ||1 |
|4 ||(Loss)/Profit before Depreciation and Tax ||(96) ||37 |
|5 ||Less: Provision for Depreciation ||479 ||502 |
|6 ||Loss before Tax ||(575) ||(465) |
|7 ||Less: Provision for Income Tax ||- ||- |
|8 ||Net Loss after Tax ||(575) ||(465) |
|9 ||Deficit Carried to Balance Sheet ||(10495) ||(9920) |
REVIEW OF OPERATIONS AND STATE OF COMPANY'S AFFAIRS:
During the year under review your Company could not make any sales and as such theTurnover was Rs.NIL (Previous year : Rs.Nil) and incurred a Net Loss of Rs.575 Lakhs(previous year Net loss: Rs.465 Lakhs).
PERFORMANCE & FINANCE:
Your company declared lock-out of its plant at Yanam with effect from 31.01.2012 afterthe devastating incident occurred on 27.01.2012. Since then there is no production in theplant.
Your Directors express their inability to recommend any dividend for the year underreview due to insufficient disposable income.
TRANSFER OF AMOUNT TO RESERVES:
The Company does not propose to transfer any amount to General Reserves for thefinancial year ended 31st March 2017.
CHANGE IN THE NATURE OF BUSINESS:
There is no change in the nature of business of the Company.
Your company submitted a claim on reinstatement value basis in accordance with thepolicy taken for loss/damage to the properties of the company. However as per the policyterms the Repairs/ Replacement of Plant & Machinery should have been completed within12 months from the date of incident. The policy condition has not been complied with dueto the precarious situation of labour unrest and as such the repairs/ replacement has notbeen carried out till date. The insurance company therefore denied the claim made by thecompany on the basis of Reinstatement Value. Your company is requesting forreconsideration of the decision taken and awaiting a favourable reply from the insurancecompany.
Your company paid full and final settlement amounts to those who have resigned from thecompany and waiting for the balance workmen to come forward for final settlement. Actioninitiated by your company against the workers involved in the Violence is pending fordisposal at the Labour Tribunal.
LENDERS' DUES SETTLEMENTS:
The company requested the lenders for sanction of revised OTS due to on-going agitationof the workers non receipt of insurance claim and inability of the promoters to mobilizefunds. Some lenders have sanctioned the same while others are in the process of examiningthe offer of the company. However as per rules the lenders initiated recovery actionagainst the company under the SARFAESI Act. The lenders also took symbolic Possessionunder Rule 8(1) of Security Interest (Enforcement) Rules 2002 of the properties inexercise of powers conferred on them under section 13(4) of the SARFAESI Act. Further thelenders also filed an application under section 19 of the Recovery of Debts due to Banksand Financial Institutions Act 1993 in the Debts Recovery Tribunal Hyderabad forrecovery of their dues.
REFERENCE TO AAIFR:
A reference made by your company to Board for Industrial and Financial Reconstruction(BIFR) as per the provisions under section 15(1) of Sick Industrial Companies (SpecialProvisions) Act 1985 and registered as case no. 19/2014 was abated and your companypreferred an appeal before AAIFR. The company lost the case in AAIFR also due to lack ofsupport from the lenders.
The future prospects of the Company and industry outlook are given in the ManagementDiscussion and analysis report.
All properties and insurable interests of the Company including building plant andmachinery and inventory were usually fully insured at the reinstatement values every year.However after the incident of 27.01.2012 the Insurance companies denied insurancecoverage for the good assets as the assessment could not be completed.
In compliance with Regulation 34 read with Para-C of Schedule V of Listing Regulationsa separate report on Corporate Governance has been included in this Annual Report togetherwith the Auditor's certificate confirming compliance of the Corporate Governance asstipulated under the said Regulations. All the Board members and the Senior ManagementPersonnel have affirmed compliance with the Companies "Code of Conduct for Board andSenior Management Personnel" for the financial year 2016-17. A certificate signed bythe Managing Director and Chief Financial Officer (CFO) certifying the financialstatements and other matters as required under Regulation 17(8) of the Listing Regulations forms part of this Annual Report.
EXTRACTS OF ANNUAL RETURN
The Extracts of Annual Return is prepared in Form MGT-9 as per the provisions of theCompanies Act 2013 and Rule 12 of Companies (Management and Administration) Rules 2014and the same is enclosed as Annexure 1 to this Report.
1. Director(s) to retire by rotation:
In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association Dr G N Naidu Director retires by rotation at theforthcoming Annual General Meeting and being eligible offers himself for reappointment.
2. Changes in Directorship: a. Smt.Y. Vijaya Lakshmi (DIN: 02210385)appointed as an Independent Director of the Company with effect from 14th February 2017to hold office for 5 (Five) consecutive years for a term up to 13th February 2022."b. Smt G.Vijayavani ceased to be Non-Executive Director with effect from 14.02.2017
3. Independent Directors:
In terms of Sections 149152 read with Schedules IV and all other applicable provisionsof the Act and the Companies (Appointment and Qualification of Directors) Rules 2014(including any statutory modification(s) or re-enactment thereof for the time being inforce) the Independent Director can hold office for a term of up to five (5) consecutiveyears on the Board of Directors of the Company and will not be liable to retire byrotation. All the Independent Directors have given declaration that they meet the criteriaof independence laid down under Section 149(6) of the Act read with Regulation 16(b) ofListing Regulations.
4. Evaluation of performance of the Board of Directors:
Pursuant to the provisions of the Act and Listing Regulations the Board has carriedout the evaluation of its own performance and Committees of the Board the performances ofDirectors individually the Executive Director the Chairman of the Board etc. Variousparameters as recommended in the guidance note issued by the Institute of CompanySecretaries of India were considered for evaluation and after receiving the inputs fromthe Directors the performance evaluation exercise was carried out. The parameters includeintegrity credibility expertise and trustworthiness of Directors Board's monitoring ofvarious compliances laying down and effective implementation of various policies levelof engagement and contribution of the Directors safeguarding the interest of allstakeholders etc. The performance evaluation of the Board as a whole was carried out bythe Independent Directors. The performance evaluation of each Independent Director wascarried out by the Board. The Directors expressed their satisfaction with the evaluationprocess.
5. Familiarization Programme for the Independent Directors:
In compliance with the requirement of Listing Regulations the Company has put in placea familiarization programme for the Independent Directors to familiarize them with theirrole rights and responsibility as Directors the working of the Company nature of theindustry in which the Company operates business model etc. The same is available on thewebsite of the Company i.e. www.regencytiles.com. Through the Familiarization programmethe Company apprises the Independent Directors about the business model corporatestrategy business plans and operations of the Company. These Directors are also informedabout the financial performance annual budgets internal control system statutorycompliances etc. They are also familiarized with Company's vision core values ethics andcorporate governance practices. At the time of appointment of Independent Director aformal letter of appointment is given to him which explains his role responsibility andrights in the Company.
NUMBER OF MEETINGS OF THE BOARD
The details of the number of meetings of the Board held during the financial year2016-17 forms part of the Corporate Governance Report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE COMPANY
The details of Loans Guarantees Investments given during the Financial Year ended on31st March 2017 in terms of the provisions of Section 186 of the CompaniesAct 2013 read with Companies (Meetings of Board and its Powers) Rules 2014 : NIL
REMUNERATION AND NOMINATION POLICY
The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors Key Managerial Personnel and Senior Management of the Company.This policy also lays down criteria for selection and appointment of Board Members. Thedetails of this policy are explained in Corporate Governance Report.
STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
There are no employees in the company drawing remuneration in excess of Rs.5 lakhs permonth and the median remuneration of managerial personnel has not been disclosed as noremuneration is being paid to the Key Managerial Personnel of the Company.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties referred to insubsection (1) of Section 188 are prepared in Form No. AOC-2 pursuant to clause (h) ofsub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules2014 : NIL
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134(5) of the Companies Act 2013 withrespect to the Directors' Responsibility Statement the Board of Directors of the Companyhereby confirms:
1) that in the preparation of the annual accounts the applicable accounting standardshad been followed along with proper explanation relating to material departures;
2) that the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit and loss of the company for that period;
3) that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the company and for preventing and detecting fraud and other irregularities;
4) That the Directors have prepared the accounts for the financial year ended 31stMarch 2017 on a "Going Concern" basis.
5) The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
INDIAN ACCOUNTING STANDARDS -IndAS:
The Ministry of Corporate Affairs vide its notification dated 16th February 2015 hasnotified the Companies (Indian Accounting Standards) Rules 2015. In pursuance of the saidnotification the Company will adopt Indian Accounting Standards with effect from 01stApril 2017. The implementation of Indian Accounting Standards (IndAS) is a major changeprocess for which the Company has set up a dedicated team and is providing desiredresources for its completion within the time frame.
The Board of directors at their meeting held on 30.05.2017 recommended the appointmentof M/s K S Rao & Co. Chartered Accountants Hyderabad who have confirmed theireligibility to be appointed as Auditors in terms of section 141 of the Act read with Rule4 of the Rules in place of retiring Auditors M/s Brahmayya & Co. CharteredAccountants Hyderabad to hold office for a period of five consecutive years from theconclusion of this 33rd Annual General Meeting till the conclusion of 38thAnnual General Meeting to be held in the calendar year 2022 (subject to ratification oftheir appointment by the members of the Company at every Annual General Meeting held afterthis Annual General Meeting) in compliance with mandatory rotation of auditors asspecified in the section 139 of the Companies Act 2013 (Act) read with the Companies(Audit and Auditors) Rules 2014
M/s. Brahmayya & Co. Chartered Accountants (ICAI Regn. No.000513S) have issuedAuditors Report for the Financial Year ended 31st March 2017 being annexed to this AnnualReport.
i. Referring to Para on basis for qualified opinion of the Auditors' Report theDirectors would like to refer Notes forming part of Accounts which is self explanatory.The reference to note numbers are as under :
a. Para 1 of basis for qualified opinion Note No.25.3
b. Para 2 of basis for qualified opinion Note No.25.3
c. Para 3 of basis for qualified opinion Note No.25.8
d. Para 4 of basis for qualified opinion Note No.25.4
e. Para 5 of basis for qualified opinion Note No.25.9
f. Para 6 of basis for qualified opinion Note No.10 & 23
g. Para 7 of basis for qualified opinion Note No.10
h. Para 8 of basis for qualified opinion Note No.25.10
ii. Referring to Para 7 (a) and 7(b) of the Annexure to the Auditors report yourDirectors are of the opinion that the Company is in the process of executing variousalternative plans to control such delays in future. With regard to para 8 of the Annexureto the Auditors Report Directors are confident that the revised OTS will be sanctionedand the lenders dues will be fully settled.
The Board of Directors on the recommendation of Audit committee appointed M/s. BadriPrasad & Associates Practicing Cost Accountants Hyderabad as Cost Auditor to auditthe cost accounts of the Company. The Cost Audit Report for the financial year 2016-17 wasnot applicable to the company.
CUSTOMS EXCISE INCOME TAX & OTHER MATTERS:
1. Your Company preferred appeals before the Hon'ble CESTAT Bangalore against thedemand from Customs & Central Excise Department (Service Tax Cell) for service tax oninstallation erection and commissioning of plant & machinery imported during the year2005-06 and on GTA services during the year 2008-09 though paid by the service provider.
2. The Income Tax Appellate Tribunal Hyderabad disposed of the appeal preferred by theCompany partly in its favour on the demand from Dy Commissioner of Income Tax Hyderabadin respect of Assessment year 2004-05 for disallowance of additional depreciation forwhich the company is eligible under the Act.
3. Yanam Muncipality has demanded Property Tax of Rs.32.35 lakhs for the years from1998-99 to 2006-07 and your company disputed the same as the grounds are not just properand reasonable.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and rules madethereunder the Company has appointed Mr. K.V.Chalama Reddy Practicing Company Secretaryas Secretarial Auditor to undertake the Secretarial Audit of the company for the Financialyear ended on 31st March 2017.
Secretarial Audit Report issued by Practicing Company Secretary in Form MR-3 isenclosed as Annexure - 2 to this Annual Report and certificate is enclosed as Annexure-3.
With respect to observations made in the report our explanations are as follows:Regarding the observation Nos 1234 and 7 of the report the Company is unable tocomply with the same due to financial position of the Company. Regarding the observationNos. 5&6 the Company is in the process of rectifying the same. Regarding theObservation No.8 the Promoters are advised to convert their share holdings indematerlised form at the earliest.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS
The Company has appointed Internal Auditors to observe the Internal Controls whetherthe work flows of organization is being done through the approved policies of the Company.Internal Auditors will present to the Audit Committee the Internal Audit Report andManagement Comments on the Internal Audit observations.
The Board of Directors of the Company has adopted Whistle Blower Policy. The WhistleBlower Policy aims for conducting the affairs in a fair and transparent manner by adoptinghighest standards of professionalism honesty integrity and ethical behavior. Allpermanent employees of the Company are covered under the Whistle Blower Policy. Amechanism has been established for employees to report concerns about unethical behavioractual or suspected fraud or violation of our Code of Conduct and Ethics. It alsoprovides for adequate safeguards against the victimization of employees who avail of themechanism and allows direct access to the Chairperson of the audit committee inexceptional cases.
RISK MANAGEMENT POLICY
The Company has a Risk Management Policy for dealing with different kinds of riskswhich it faces in day to day operations of the Company. Risk Management Policy of theCompany outlines different kinds of risks and risk mitigating measures to be adopted bythe Board. The Company has adequate internal control systems and procedures to combat therisk. The Risk management procedure will be reviewed by the Audit Committee and Board ofDirectors on a periodical basis at the time of review of Quarterly Financial Results ofthe Company.
RELATED PARTY TRANSACTIONS:
There are no related party transactions during the year 2016-17 except those reflectedin the Notes forming part of financial statements.
OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013
The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Woman at workplace (Prevention Prohibition and Redressal)Act 2013. Internal Complaints Committee has been set up to redress complaints receivedregarding Sexual Harassment. All employees (permanent contractual temporary and trained)are covered under the policy.
The following is a summary of sexual harassment complaints received and disposed offduring the financial year 2016-17:
A) No. of Complaints received NIL
B) No. of Complaints disposed off NIL
DECLARATION BY INDEPENDENT DIRECTORS
The independent directors have submitted the declaration of independence as requiredpursuant to section 149 (7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in sub-section 6 of Section 149 of the Companies Act 2013.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate Social Responsibility is commitment of the Company to improve the quality oflife of the workforce and their families and also the community and society at large. TheCompany believes in undertaking business in such a way that it leads to overalldevelopment of the stakeholders and society.
Pursuant to section 134 of the Companies Act 2013 and the relevant rules the Boardhas constituted the CSR Committee under the Chairmanship of Dr. G N Naidu with the othermembers as required.
The report on CSR activities as required under Companies(Corporate SocialResponsibility) Rules 2014 is set out as Annexure 4 forming part of this report.
MATERIAL CHANGES AND COMMITMENTS
There are no Material Changes and Commitments impacting the going concern status andCompany's operations in future.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:
During the year the Company has not received any significant and material orderspassed from Regulators or Courts or Tribunals impacting the going concern status and theCompany's operations in future.
The Company has not invited/accepted any deposits from the public in terms of Section73 of the Companies Act 2013 during the Financial Year 2016-17.
Your Company has always been known to maintain cordial industrial relations with itsemployees. Your Company believed in developing Human Resources at all levels by impartingcontinuous training motivation to attain higher productivity finer quality costcontrol safety and environment protection.
CONSERVATION OF ENERGY:
Your Company committed to energy conservation and had taken up the fuel savingtechnology for the manufacture of ceramic tiles and was constantly upgrading the same toreduce the consumption of gas and power. Regular maintenance and repairs of all theequipment and machinery were carried out to ensure optimum efficiency and to minimizewastage. Necessary steps were initiated for implementing the energy conservation acrossthe plant.
Your Company was continuously endeavoring to upgrade its technology from time to timein all aspects through R&D primarily aiming at reduction of cost of production andimproving the quality of the product. Your company developed several value added productsand high definition designs with laser printing.
FOREIGN EXCHANGE EARNINGS AND OUTGO
(Rs. In Lakhs)
|Foreign Exchange: ||2016-17 ||2015-16 |
|Foreign Exchange Inflow ||- ||- |
|Foreign Exchange Outflow ||- ||- |
The company places on record continued support and cooperation extended by the Banksand other secured lenders Central and state government departments GAIL Dealerscustomers suppliers and shareholders. The Company also places on record the deep sense ofappreciation for the dedicated efforts and contribution being made by employees at alllevels during the year.
| ||For and on behalf of the Board |
| ||Dr G N Naidu ||N Satyendra Prasad |
|Place : Hyderabad ||Chairman and Managing Director ||Executive Director |
|Date : 30.05.2017 ||DIN : 00105597 ||DIN : 01410333 |