Ricoh India Ltd.
|BSE: 517496||Sector: Others|
|NSE: N.A.||ISIN Code: INE291B01015|
|BSE 00:00 | 04 Mar||Ricoh India Ltd|
|NSE 05:30 | 01 Jan||Ricoh India Ltd|
|BSE: 517496||Sector: Others|
|NSE: N.A.||ISIN Code: INE291B01015|
|BSE 00:00 | 04 Mar||Ricoh India Ltd|
|NSE 05:30 | 01 Jan||Ricoh India Ltd|
To the Members
A. FINANCIAL HIGHLIGHTS AND DISCLOSURES:
Your Directors are pleased to present the 24th Annual Report on the business andoperations of the Company together with the Audited Accounts for the financial year ended31 March 2017
1 FINANCIAL HIGHLIGHTS
(Rs. in Lacs)
In view of the loss for the period under review no Dividend has been recommended bythe Board of Directors of the Company.
3. SHARE CAPITAL
Following the approval by the Extraordinary General Meeting on 14 October 2016 andapproval by the Board on 15 October 2016 a recapitalisation was effected on 15 October2016. The recapitalisation saw the cancellation of the shares of NRG Group Limited (aco-promoter) and preferential issue of the same number of shares with the same rights toNRG Group Limited for a consideration of Rs 1123 Crores.
4. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF THE COMPANIESACT 2013
Under Section 186 of the Companies Act 2013 the Company has neither given any LoanGuarantee nor provided any Security in Connection with a Loan directly or indirectly toany person or other body corporate. The Company has also not made any investments by wayof subscription purchase or otherwise in the securities of any other body corporateduring the financial year ended 31 March 2017.
During the period under review the Company has not accepted or invited any depositsfrom the public.
6. NON-CONVERTIBLE DEBENTURES (NCDs)
The Company had raised NCDs amounting to Rs 200 Crores by way of Private Placementbasis. The outstanding NCDs as at 31 March 2017 stood at Rs 200 Crores. The NCD's arerated as IND 'BBB -/Stable by India Ratings & Research Private Limited.
7. TRANSFER TO RESERVES
During the year under review the Company has made no transfer to reserves.
B. STATE OF COMPANY AFFAIRS:
1. UPDATE ON TRADE SUSPENSION AND LISTING
As detailed in the financial statements and fully explained in the Annual Report2015-2016 the Company was impacted by financial irregularities and falsifications theimpact of which were included in the financial statements for the year ended 31 March2016. Due to these issues the Company was delayed in filing its accounts for the quarterand half year ended 30 September 2015 and for the quarter and nine month ended 31 December2015. As a result on 4 May 2016 BSE Limited issued a notice that the shares of theCompany would be suspended with effect from 26 May 2016 on account of non-compliance ofRegulation 33 of SEBI (LODR) 2015 for two consecutive quarters.
The Company published its financial results for the quarter and half year ended 30September 2015 on 18 May 2016. Following the investigations by PricewaterhouseCoopersPrivate Limited India (PwC) and an independent investigation team which were finalised on17 November 2016 the The Company was able to make rapid progress in bringing itscompliances up to date. Consequently on 18 November 2016 the results along with theauditors report for the quarter and nine months ended 31 December 2015 and quarter andyear ended 31 March 2016 were filed with BSE Limited. On 12 December 2016 the results andauditors report for the quarter ended 30 June 2016 and the results and auditors report forthe quarter and half year ended 30 September 2016 were filed with BSE Limited and thosefor the quarter and nine months ended 31 December 2016 were filed on 8 February 2017.Having brought its compliances up to date the Company preceded to file an application forrevocation of suspension of trading of shares of the Company with BSE Limited on 19December 2016. All necessary payments of penalties and filing fees were made at the sametime.
BSE Limited listed an appeal with the Hon'ble National Company Law Appellate Tribunal(NCLAT) on 21 November 2016. This appeal was in respect of the Order of the Hon'bleNational Company Law Tribunal (NCLAT) dated 30 September 2016 under which the NCLT hadapproved that the Company did not need to follow Sections 100 to 104 of the Companies Act1956. BSE Limited contended that the Company should follow such Sections and hence shouldhave filed an advance Scheme with BSE Limited prior to gaining NCLT approval on 23 August2016.
The Hon'ble NCLAT disposed of the appeal of BSE Limited on 23 May 2017. The Order ofthe NCLT stated that the Company should comply with SEBI rules but that Sections 100 to102 of the Companies Act 1956 were not relevant. The Company has subsequently met withBSE Limited to clarify the way forward since until the shares of NRG Group Limited arelisted BSE Limited will not lift the suspension on trading of shares of the Company.
It is the Company's view that it is not practical to follow SEBI rules that areapplicable to sections 100 to 102 of the Companies Act 1956 if both NCLT and Hon'bleNCLAT are of the view that the sections 100 to 102 are not relevant and hence do notapply.
The Company is now looking at ways in which requirements of BSE Limited may besatisfied retrospectively. However since it is practically impossible to reverse thecancellation and issuance of shares of NRG Group Limited without repaying such funds infull to NRG Group Limited there is no obvious legal process to follow. It is clear thatthe Company does not have the funds to repay NRG Group Limited and nor would its bankerssupport such removal of funds.
The current impasse is detrimental to non-promoter shareholders since it is preventingthem from trading. The Company will notify the shareholders of the progress as and when itis realized.
The Shares of the Company are listed on the Bombay Stock Exchange Limited. The Companyhas paid Annual Listing Fee for the year 2017-18 to BSE Ltd.
The Shares of the Company were placed in Z category by BSE Limited with effect from 4May 2016 and subsequently suspended from trading on 26 May 2016.
The facility of trading in the shares of the Company on trade for trade basis in ZGroup on the first trading day of every week was discontinued by BSE Ltd with effect from13 December 2016.
On 19 December 2016 an application for revocation of suspension of trading of shareswas filed with BSE Limited.
3. OPERATIONAL REVIEW:
The year ended 31st March 2017 has seen the Company move to stability and start toaddress the significant operational losses being incurred.
As discussed at length in the Annual Report of 2015-2016 (which was finalised on 25November 2016) the Company was a victim of financial irregularities. These significantlyimpacted the Company and indeed much of the current financial year. Key events aresummarised as follows:
On 19 July 2016 the Promoter Ricoh Company Limited filed a petition with the NationalCompany Law Tribunal (NCLT) seeking various reliefs but in particular the recapitalisationof the Company.
On 24 August 2016 the NCLT issued an Order granting the cancellation of the shares ofeither Ricoh Company Limited or the Co - Promoter NRG Group Limited and thepreferential issue of the same number of shares for an amount equivalent to the estimatedunaudited loss announced on 19 July 2016 i.e. Rs 1123 Crores.
On 14 October 2016 an Extraordinary General Meeting was held that approved therecapitalisation by way of cancellation of the shares of NRG Group Limited andpreferential issue of the same number of shares to NRG Group Limited. On 15 October 2016the Board approved the cancellation issue and allotment for the consideration of Rs 1123Crores.
As a result of this infusion which had no impact on the shareholding structure of theCompany and because the Promoter Ricoh Company Limited has confirmed its support forat least 12 months from 26 May 2017 the Directors have confidence that the Company cancontinue to improve and develop its offerings and services.
Since 18 November 2016 when the accounts for the quarter and nine months ended 31December 2015 and for the quarter and year ended 31 March 2016 were filed the Company hasbrought all of its filing compliances up to date. The Company has ensured that the issuesthat led to falsification cannot recur and that the Company has a reputation forcompliance and business excellence.
While substantive improvements have been made in internal controls the Company isfocused on continuous improvement and hence improvement will be an ongoing processreflecting both changes in the business and the opportunities for automation and enhancedcontrols.
Most importantly the Company has focused on addressing the significant trading losses.The results are summarised as:
As can be seen above the loss before exceptional items in the year ended 31 March 2017has reduced. The Company has also addressed its quarter on quarter loss as can be seenbelow.
** normalised to exclude impacts of falsification and errors
Significant actions have been taken to reduce costs and these will continue. At thesame time the interest burden has been reduced by the capital infusion and furtherimprovements are anticipated through working capital management.
The Company enjoys a strong contractual base of Customers and with increasingconfidence of our employees the support of our Customers and the wider support of all ourStakeholders the Directors are confident that the business will return to profitability.
4. SUBSIDIARY AND ASSOCIATE COMPANIES
The Company does not have any subsidiary Company. However IDC Electronics Limited isan Associate Company of Ricoh India Limited. As per the requirement of Rule 5 of theCompanies (Accounts) Rules 2014 Form AOC-1 (Statement containing salient features offinancial statement of an Associate Company) is annexed and forms part of the DirectorsReport as Annexure `H'
5. HUMAN RESOURCES
At Ricoh Human Resource Development is considered vital for effective implementationof Business Plans Constant endeavors are being made to offer professional growthopportunities and recognition apart from imparting training to employees
6. CHANGE IN NATURE OF BUSINESS
There has been no change in the nature of the business of the Company.
7. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY WHICH HAVE OCCURRED BETWEEN 31 MARCH 2017 AND AS ON DATE
On 14 April 2017 the Company notified BSE Limited that a Contract in the State ofOdisha had been cancelled. This cancellation was due to the Project not proceeding whichthe Company had already anticipated. Hence there was no financial impact on the Company.
On 23 May 2017 the Hon'ble NCLAT disposed of the appeal of BSE Limited (See Comment onSuspension of trading of shares of the Company given elsewhere in the report)
1. QUALITY INITIATIVES
The Company strengthened its initiatives in the field of Business Excellence throughthe use of the Malcolm Baldrige self assessment maturity model Ricoh Way Guidingprinciples and values Ricoh Quality concept Customer & Partner Feedback Managementconformance to various Quality Management Systems which are ISO27001- 2005 and CMMI Level4 certification standards.
The Company continues to engage employees in the Innovation journey with the initiativeof IdeaZ and 'Each One KaiZen' wherein employees participate and deploy processimprovement initiatives. This year the Company also launched the 'incub@R' program whichstands for 'incubating accelerated excellence' at Ricoh an initiative to enable andempower employees towards innovation and growth.
2. SOCIAL & ENVIRONMENTAL INITIATIVES
Our CSR model is broadly divided into two parts: activities that respond to ourfundamental obligation to society and value-creating activities that have synergy with ourgrowth strategy. These two pillars support and strengthen our corporate value.
The Company focuses primarily on the following three programme areas with keyprojects/activities mentioned in-line as follows:
A. Harmony with Society:
a. With the objective to enhance the welfare of society 'ICT-enabled educationproject' for students of thirty primary schools in the Karimnagar and Warangal districtsof Telangana state was implemented on-ground.
b. Envisioning holistic development of students 'Project Adarsh Patra' with provisionof smart class technology and midday meal support was installed and implemented to enablenutrition and quality education for students of five junior high schools in the Mathuradistrict of Uttar Pradesh State.
c. 'Preventive Healthcare' leveraging remote healthcare delivery platform was organisedon World Red Cross Day (8 May 2016) for providing access to health care and ensure thewellbeing of community which benefitted nearly 400 residents of community.
B. Harmony with Environment:
a. Ricoh India Limited signed the declaration of India Business & BiodiversityInitiative (IBBI). To guide and mentor business organisations in India on conservation andsustainable use the CII-ITC Centre of Excellence for Sustainable Development launched theIBBI. This business-led initiative serves as a national platform for business to promotesharing and learning and will ultimately lead to mainstreaming sustainable management ofbiological diversity by business.
IBBI was initiated by the Ministry of Environment Forests and Climate Change (MoEFCC)Government of India and is supported by the Deutsche Gesellschaft fur InternationaleZusammenarbeit (GIZ).
b. Project Nature-Watch: To support conservation of biodiversity 'Project NatureWatch' by donation of monitoring equipment such as binoculars and underwater cameras waslaunched in April 2016 across states of India- Assam Andhra Pradesh Arunachal PradeshChhattisgarh Rajasthan Madhya Pradesh Kerala Goa Gujarat Maharashtra LakshadweepIsland Odisha Sikkim and West Bengal. The organisation conducted an impact study inFY'16-17 to assess the benefits of the distribution of equipment amongst the forestguards.
C. Raising the Next generation:
The Company launched 'View Finder Project' by donation of cameras and funding forbuilding photography skills among 100 children coming of difficult circumstances in thecities of Delhi NCT Kolkata Mumbai and Bangalore. A photo-book filled with a series ofstill yet moving visuals clicked by children from Kolkata and Delhi based on the theme'Share My World' was published at an event in Kolkata.
Educate and Evangelise 'Next-Gen' leaders on Sustainable Development
Realising the crucial role of management education in shaping of corporate leaders offuture Ricoh India works with premier management institutions and its faculty to educatestudents on the principles of responsible and inclusive business to enable a sustainableecosystem.
3. CORPORATE SOCIAL RESPONSIBILITY
Pursuant to Section 135 of the Companies Act 2013 and the relevant rules the Boardhas constituted the Corporate Social Responsibility (CSR) Committee under the Chairmanshipof Mr. UP Mathur Independent Director.
The other Members of the CSR Committee are Mr. AT Rajan Managing Director and CEO andMr. RK Pandey Director. A detailed CSR Policy has been framed which is placed on thewebsite of the Company.
The CSR activity(ies) are in accordance with Schedule VII of the Companies Act 2013 andthe Company's CSR Policy. Details of the CSR activities as required under Section 135 ofthe Companies Act 2013 and the Rules framed thereunder are given in the CSR Report asAnnexure `G' of the Directors Report.
The Corporate Social Responsibility Policy of the Company is available on the websiteof the Company www.ricoh.co.in at the linkhttps://ricoh.co.in/about/investors/policies/Corporate Social Responsibility Policy.
The Company's commitment towards social responsibility is woven into its Corporate DNAwhich has always been part of the Ricoh Way the foundation of all of our businessactivities. The Ricoh Way constitutes the basis of all Corporate activities of the RicohGroup. It comprises of Founding Principles (Love Your Neighbour Love Your Country LoveYour Work or The Spirit of Three Loves). Our CSR focuses inter-alia on using ourcapabilities as a business to improve lives and sustain our planet through contributionsto local communities and society at large. In other words to fully realise our potentialas a global organisation to make a better world through new value creation and innovation.
To grow as a respected enterprise the Ricoh Group must fully discharge its CSR from aconsistent global perspective and throughout every aspect of its operations. In thecontext of the above Ricoh India Limited would like to communicate its position as aMember of the community and establish for both internal and external stakeholders itsphilosophy guiding principles and areas of focus that it would as an organisation seek topromote in the arena of CSR.
Our CSR model is broadly divided into two parts: activities that respond to ourfundamental obligation to society and value-creating activities that have synergy withour growth strategy. These two pillars support and strengthen our corporate value.
By embedding value-creating CSR activities into our core business processes we makethe most of our talents and resources - technologies products services and employees Tohelp solve social issues while simultaneously fostering the growth of the Ricoh Group.
Drawing from its vision and mission statement through CSR Ricoh seeks to proactivelyengage with society by working with communities to improve their well-being in acompassionate and sensitive manner.
The Company will focus primarily on the following three programmes:
a. Harmony with Society - Community Development / Welfare of the Society
b. Raising the Next Generation - Education and Skills Development
c. Harmony with Environment-Sustainable Environment Management
Further the Company apart from the above mentioned programmes may also participateinto any other activity(ies) as stipulated under Schedule VII of the Companies Act 2013.
4. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Necessary information on Conservation of Energy Technology Absorption and ForeignExchange earnings and outgo required under Section 134(3) (m) of the Companies Act 2013read with Rule 8 of the Companies (Accounts) Rules 2014 is annexed herewith asAnnexure`F' of the Directors Report.
D. CORPORATE GOVERNANCE:
1. DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provision of Section 134(3)(c) of the Companies Act 2013 theBoard of Directors affirm:-
a) that in the preparation of the annual accounts the applicable accounting standardshad been followed along with the proper explanation relating to material departure ifany;
b) 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 as the end of thefinancial year and of the profit and loss of the Company for that period;
c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) the Directors had prepared the Annual Accounts on a going concern basis; and
e) The Directors are responsible for laying down internal financial controls to befollowed by the Company. As detailed in these accounts and the Annual Report for 2015-16the Company was impacted by the falsification of its accounts. The irregularities hadimpacted the internal financial controls. The Directors have ensured that suitableinternal financial control has been instituted such that the issues that led tofalsification cannot recur. While substantive improvements have been made in internalfinancial controls the Company is focused on continuous improvement. Progress on controlimprovements are reported at every Audit Committee and Board Meeting.
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
2. BOARD OF DIRECTORS
In accordance with the provisions of Section 152 of the Companies Act 2013 Mr.Hiroyasu Kitada Director retires by rotation at the forthcoming Annual General Meeting ofthe Company and being eligible offers himself for re-appointment. The Board of Directorsof the Company in their meeting held on 16 March 2017 approved the proposal forre-appointment of Mr. AT Rajan as Managing Director and CEO of the Company for a furtherperiod of one year with effect from 1 April 2017 till 31 March 2018.
Mr. Yoshitaka Motomura and Mr. Noboru Akahane were appointed as Additional Directors ofthe Company with effect from 3 August 2017 as per Section 161 of the Companies Act 2013
The Company has received a notice in writing from a shareholder as per Section 160 ofthe Companies Act 2013 proposing the candidature of Mr. Yoshitaka Motomura and Mr.Noboru Akahane for the office of Directors of the Company at the ensuing Annual GeneralMeeting for their appointments as Non-executive Directors of the Company.
None of the Directors of the Company are disqualified from being appointed as Directorsas specified in Section 164 of the Companies Act 2013. The Board of Directors recommendstheir appointments.
Based upon the recommendation of the Nomination and Remuneration Committee the Boardof Directors at their meeting held on 30 August 2017 have re-appointed Mr. UP Mathur Mr.RK Pandey and Ms Ashish Garg as Independent Directors for another term of five years andthey are not liable to retire by rotation.
The Board on the recommendation of the Nomination and Remuneration Committee had at itsmeeting held on 26 May 2017 appointed Mr. Rajiv Ahuja as an Additional Director(Independent Director) of the Company with effect from 26 May 2017.
In terms of Section 161(1) of the Companies Act 2013 Mr. Rajiv Ahuja holds office upto the date of the ensuing Annual General Meeting and being eligible offers himself forappointment.
Consequent upon his resignation Mr. Ian Winham ceased to a Director of the Companywith effect from 3 August 2017. The Board of Directors would like to place on record theirappreciation for the valuable services rendered by Mr.Ian Winham
Necessary resolutions for the appointment/re-appointment of the concerned Directorshave been included in the Notice convening the ensuing AGM and details of the proposal forappointment/re-appointment are mentioned in the explanatory statement of the AGM Notice.
The Company has received notices under Section 160 of the Companies Act 2013 alongwith requisite deposits proposing the appointments of Mr. UP Mathur Mr. RK Pandey Mr.Rajiv Ahuja and Ms Ashish Garg as Independent Directors of the Company.
All the Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and SEBI (LODR)Regulations 2015.
During the year non-executive Directors of the Company had no pecuniary relationshipor transactions with the Company.
The composition of the Board Meetings of the Board held during the year and theattendance of the Directors have been mentioned in the Report on Corporate Governance inthe Annual Report.
Appointment of any new Director in the Company is done by the Board on the basis ofrecommendation of Nomination and Remuneration Committee while selecting new Directorsthe Board shall ensure that there is appropriate balance of skills experience andknowledge in the Board so as to enable the Board to discharge its functions and dutieseffectively.
3. RELATIONSHIP BETWEEN DIRECTORS INTER-SE
None of the Directors are related to each other within the meaning of the term"relative" as per Section 2(77) of the Companies Act 2013.
4. ANNUAL EVALUATION OF BOARD PERFORMANCE AND PERFORMANCE OF ITS COMMITTEES AND OFDIRECTORS
Pursuant to the provisions of the Companies Act 2013 and Regulation 25 of SEBI (LODR)2015 the Board has carried out an annual evaluation of its own performance performanceof the Directors as well as the evaluation of its Committees.
The Nomination and Remuneration Committee has defined the evaluation criteriaprocedure and time schedule for the performance evaluation process for the Board itsCommittees and Directors.
The detailed manner in which formal annual evaluation has been made by the Board hasbeen mentioned in the Corporate Governance Report which is part of this report.
5. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declarations from all Independent Directors of theCompany as required under Section 149(7) of the Companies Act 2013 that they meet thecriteria of independence laid down in Section 149(6) of the Companies Act 2013 and otherapplicable regulations.
6. SEPARATE MEETING OF THE INDEPENDENT DIRECTORS
The Independent Directors held a Meeting on 16 March 2017 without the attendance ofNon-Independent Directors and Members of Management. All the Independent Directors werepresent at the meeting. The following issues were discussed in detail:
I) Reviewed the performance of non-independent Directors and the Board as a whole;
II) Reviewed the performance of the Chairperson of the Company taking into account theviews of Executive Directors and Non-Executive Directors;
III) Assessed the quality quantity and timeliness of flow of information between theCompany Management and the Board that is necessary for the Board to effectively andreasonably perform their duties.
7. KEY MANAGERIAL PERSONNEL
As per the requirement of Section 203 of the Companies Act 2013 Mr. AT Rajan continuesto hold the position of Managing Director and CEO of the Company. He has been re-appointedas Managing Director and CEO of the Company for a further term of one more year till 31March 2018 by the Board of Directors in their meeting held on 16 March 2017.
Ms. Pooja Aggarwal was appointed as Chief Financial Officer (KMP) of the Company witheffect from 1 December 2016.
The Board of Directors on 28 November 2016 terminated the services of Mr. ArvindSinghal former Chief Financial Officer of the Company. While Mr. Manoj Kumar resignationas CEO of the Company was accepted by the Board with effect from 11 October 2016.
Mr. Manish Sehgal continues to hold the position of the Company Secretary in theCompany.
8. COMPOSITION OF AUDIT COMMITTEE
Pursuant to the provisions of Section 177 of the Companies Act 2013 your Company hasan Audit Committee of the Board of Directors which comprises of the following Members:
9. RELATED PARTY TRANSACTIONS
All Related Party transactions that were entered into during the year under review wereon an Arm's length basis and in the ordinary course of business. The Audit Committee hasgiven prior approval for the Related Party Transactions.
None of the transactions with any of Related Party(ies) were in conflict with theCompany's interest. Suitable disclosure as required by Accounting Standards (AS 18) hasbeen made in the Notes to the Financial Statements.
Further a Policy on Related Party Transactions as approved by the Board of Directorsof the Company is duly uploaded on the Company's website under the weblink:https://ricoh.co.in/about/Investors/Policies/Related Party Transaction Policy.
The particulars of Contracts or Arrangements with Related parties referred to inSection 188(1) is given in Form AOC-2 annexed as Annexure `E' of the Directors Report.
10. NOMINATION AND REMUNERATION POLICY
The Board on the recommendation of the Nomination and Remuneration Committee of theCompany has framed and adopted a policy namely Nomination and Remuneration Policy todeal with matters of appointment and remuneration of Directors Key Managerial PersonnelSenior Management and other Employees of the Company. The said policy focuses on thefollowing aspects:-
(a) The level and composition of remuneration is reasonable and sufficient to attractretain and motivate Directors of the quality required to run the Company successfully;
(b) Relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and (c) Remuneration to Directors Key Managerial Personnel andSenior Management involves a balance between fixed and incentive pay reflecting short andlong term performance objectives appropriate to the working of the Company and its Goals.
Details of the Remuneration Policy are given in the Corporate Governance Report.
11. STATUTORY AUDITORS
B S R & Co. LLP Chartered Accountants (Firm Registration No. 101248 W/W-100022)were appointed as Statutory Auditors of the Company to hold the Office of the Auditors fora period of (five) 05 years till the conclusion of 27th Annual General Meeting subject toratification by the Shareholders of the Company at every Annual General Meeting of theCompany.
Based on the recommendations of the Audit Committee the Board of Directors of theCompany recommend the ratification of appointment of B S R & Co. LLP CharteredAccountants (Firm Registration No. 101248 W/W-100022) as Statutory Auditors of the Companyby the Shareholders at the ensuing Annual General Meeting.
12. SECRETARIAL AUDITOR
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hasappointed Mr. Naresh Verma a Practising Company Secretary to conduct Secretarial Auditfor the Financial year 2016-2017.
The Secretarial Audit Report for the financial year ended 31 March 2017 is annexedherewith as Annexure `A' of the Directors' Report.
13. CORPORATE GOVERNANCE
The Company is committed to maintain the highest standard of Corporate Governance.
Accordingly your Company has taken adequate steps to ensure compliance with theprovisions of Corporate Governance as prescribed under SEBI (LODR) Regulations 2015.
A separate report on Corporate Governance from a Practising Company Secretaryconfirming compliance with the requirement as stated under SEBI (LODR) Regulations 2015is attached and forms part of this report.
E. CONTROL ENVIRONMENT AND BUSINESS OPERATIONS:
1. EXPLANATIONS OR COMMENTS BY THE BOARD ON EVERY QUALIFICATION RESERVATION OR ADVERSEREMARK OR DISCLAIMER MADE BY THE STATUTORY AUDITORS IN THEIR REPORT AND BY THE COMPANYSECRETARY IN PRACTICE IN HIS SECRETARIAL AUDIT REPORT
In the Chairman's Statement included in the Annual Report for 2015-2016 it was statedthat "The statutory audits and limited reviews to be completed by our auditors willcontinue to result in challenging audit reports. As noted above the current year has adisclaimer of opinion. It is likely that even though we will improve the current controlsand documentation we will have legacy issues for multiple periods ahead."
The statutory auditors in their report have also stated that significant improvementshave been made as compared to the previous year in certain areas. However the statutoryauditors have issued a disclaimer of opinion on the financial statements for the yearended 31 March 2017 on the basis that investigations are still not completed possibleeffect of irregularities reported for the year ended 31 March 2016 and non-availability ofcertain information and controls during the current year ended 31 March 2017.
The Company has ensured that the issues that led to falsification cannot recur. Whilesubstantive improvements have been made in internal controls the Company is focused oncontinuous improvement and hence improvement will be an ongoing process reflecting bothchanges in the business and the opportunities for automation and enhanced controls.Progress on control improvements are reported at every Audit Committee and Board Meeting.
It should be noted that the Accounts for the year ended 31 March 2016 were onlyfinalised on 18 November 2016 and the Accounts for the quarter ended 31 December 2016 werefiled on 8 February 2017.The priority for the Company was to restore its compliance byfiling financial results and also to bring timely visibility of the Company performance toenable actions to be taken to address the underlying operational issues. Consequentlythere was limited time to address internal control and financial reporting deficiencies.Even so substantial improvements have been realised and improvements are ongoing.
Hence the audit qualifications have to be read in the context of the limitations andconstraints in which the Company was operating and priorities set by the Directors toaddress reporting compliance and operating performance and hence safeguard the long termfuture of the Company in the interest of the shareholders.
Further in the statement of impact of audit qualification the Directors haveconfirmed that they believe that there is no impact of audit qualifications and thatbased on their analysis and assumptions the balance sheet at 31 March 2017 is materiallycorrect.
The Directors comment on the audit report for the year ended 31 March 2017 is statedbelow. For ease the points are referenced as used in the auditor's report
4 (i) Following the financial irregularities the Company has been working with variousauthorities including the National Company Law Tribunal the Ministry of Corporate Affairsand the Securities & Exchange Board of India. Such inquires are ongoing. The Companyhas no reason to believe that any liabilities will arise out of its cooperation with anyinvestigation by such authorities and hence no provision is included in the accounts at 31March 2017.
4 (ii) The auditors disclaimed from an opinion on the accounts for the year ended 31March 2016. The Directors confirmed that based on their analysis and assumptions thatthe balance sheet at 31 March 2016 was materially correct. Given this the Directors are ofthe view that the disclaimer of opinion for the prior year has no material impact on theaccounts for the year ended 31 March 2017
4 (iii) a). The auditors were unable to be satisfied of the linkage of invoices to theproof of delivery documentation. The Directors can confirm that valid invoices were raisedduring the period. The Company addresses this linkage at the time of receipt or dispatchof the related invoices but were not maintained accordingly for the period since a largepart of the year was spent in dealing with legacy and compliance issues.
4 (iii) b) The Company tracks all claims notices demands and litigations. It is theDirector's view that this tracking is complete and do not believe that it is eitherappropriate or normal business practice to approach third parties for confirmation of noclaims etc. Further it is unlikely that a party who has claims against the Company wouldnot have progressed such claim with the Company.
4 (iii) c) The Company have prepared detailed computations of contract profitabilitybased on its analysis of costs and revenues. Whilst the auditors are concerned that costsmay not have been fully mapped by contract there is no example of any such material erroridentified by the auditor that was not rectified.
4 (iii) d) The Company retains a provision in respect of incidental cost on inventorypurchases. This provision of INR 717.14 lacs represents less than 1% of the totalpurchases for the year. Owing to the legacy issues IT systems and the volume of thetransactions the detailed analysis is in progress. Pending which it would not have beenprudent to take this to income for the year ending 31 March 2017.
4 (iii) e) The Company acknowledges it has been unable to trace original documents forfewer transactions. The Directors have no reason to believe that the copies provided arenot a true reflection of the originals.
4 (iv) The Company acknowledges that on certain contracts it had made accountingjudgments and estimates which the auditors did not accept. In such cases these related tomajor contracts and hence were adjusted by the Company.
There is no example of any such material error identified by the auditor that was notrectified. The Directors have no reason to believe that there are any material furtheradjustments since all the material contracts were reviewed and agreed with auditors.
4 (v) As in 4 (iii) (e) the Company has been unable to trace all original contracts forall lease arrangements in respect of previous years. The Company would point out that thisis not impeding payment or services in respect of such arrangements.
Whilst errors have been identified in the current year and such errors were de minimisand are an outcome of the volume of transactions such errors are not impeding payment orservices in respect of the arrangements.
4 (vi) As regards trade receivables:
(a) The Company legacy systems do not allow 100% correct aging. Consequently tradereceivables are managed on a line basis. The Company is evaluating improved systems thatwill address this issue.
(b) The Company acknowledges it has aged trade receivables and is managing collectionagainst these actively.
The Company has no basis to believe that such amount are not collectable.
(c) The Company has a significant number of customers who will not participate inreconciliation process. This was also experienced by the auditors where they did notreceive responses against confirmation request sent by them to our customers.
4 (vii) As regards inventories:
(a) The Company has carried out a physical inventory that has addressed over 80% of theinventory by value at 31 March 2017. For the remaining balance these will be covered overthe following year and books and records will be updated accordingly.
(b) Third party location inventory gets verified as and when the invoices are due to beraised on the customer as per the contract. No issues have been identified either by theauditors or by management in day to day operations.
(c) The Company reviews its aged stock for any necessary provision and provision ismade on best estimate basis. This estimate will be refined based on experience on valuerealized on actual sales. . Hence provisions for slow moving inventory are by necessitysubjective.
(d) Classification of cost has been done based on the availability of information fromlegacy systems. This does not impact the financial results of the Company.
4 (viii) The Company has reconciled all significant vendor balances. 90% of total tradepayable as of 31 March 2017 have been reconciled and 98% of total vendor payable as of 31March 2017 have been reconciled. The Company believes that the coverage of reconciliationis adequate. Further it is unlikely that a party who has any material claims or moniesreceivable from the Company would not have progressed such claim/receivable with theCompany.
(a) In respect of one vendor there is a significant recoverable balance. The Company ismanaging collection and has no basis to believe that such amount is not collectable.
4 (ix) The Company has verified fixed assets. During the previous year the excessassets found were recorded in fixed asset register at zero value. In the absence of anycredible basis of assigning a value to these assets it is only prudent to not take thearbitrary income in the income statement followed by depreciating the same over theassumed useful life of the asset.
4 (x) At 31 March 2016 due to the circumstances outlined above the accounts wereprepared on the basis of assumptions and estimates such that the Directors were able toconfirm that the balance sheet as of 31 March 2016 was materially true and fair.Inevitably during the current year there have been amounts identified that differ fromthose estimates assumptions and judgments. The Company do not believe that it is possibleto segregate without making significant further assumptions the split between error andchange in estimate.
4 (xi) The Company does not exercise control or has any significant influence over thefinancial and/or operating policies of IDC Electronics Limited('IDC'). Accordingly theCompany did not prepare consolidated financial statement as required under section 129subsection 3 of the Companies Act 2013. The investment is valued at 1 rupee.
The Directors will continue to ensure that the accounting policies are followedconsistently such that the results reported regardless of the audit disclaimer willgoing forward be a reflection of the Company's operating performance.
The statutory auditors have also raised matters in their report on Internal FinancialControls. As regards the comments of the auditors on internal financial controls wecomment as follows:
(a) IT control environment. The Company is enhancing its IT controls. This is anongoing process and will ultimately require investment in new systems. At this stagemanual controls are in place to ensure the integrity of reporting.
b) Deficiency of maintenance of books of accounts and documentation. These issuesprimarily relate to the falsification of accounts referenced in the Accounts for the yearended 31 March 2016 and gaps in operational documentation.
Specific controls have been put in place to address the related issues. The Company isimproving its documentation management and retention processes. Significant progress hasbeen made in this regard though inevitably gaps for prior periods will take time to close.
(c) Internal control systems relating to sales including maintenance of documentationlinkage of proof of deliveries with invoices and controls over manual invoicing. TheCompany can confirm that proof of delivery documentation is available. Whilst the auditorswere unable to be satisfied of the linkage of such documents to sales and purchases thislinkage has been addressed at the time of receipt or dispatch of the related invoices butwere not maintained accordingly for the period since a large part of the year was spent indealing with legacy & compliance issues.
(d) Errors in cost estimations and inadequate tracking of cost in relation to revenuecontracts. As noted above whilst the auditors are concerned that costs may not have beenfully mapped by contract there is no example of any such material error that is notrectified. The Directors believe all cost estimates are appropriate.
(e) Deficiencies on revenue recognition of accounting for leases. As noted above errorshave been identified in the current year and are outcome of the volume of transactions.The Company has been unable to trace all required details in all the contracts for leasearrangements to ensure accurate revenue recognition. Such errors are not impeding paymentor services in respect of the arrangements.
(f) Absence of periodic reconciliation with customers. As noted above the Company has asignificant number of customers who will not participate in reconciliation process. Thiswas also experienced by the auditor where they did not receive responses againstconfirmation request sent by them to our customers.
(g) Unreconciled differences in quantitative reconciliation of inventories and ofidentification of contract costs/ warranty costs from within traded goods. The Companyacknowledges that owing to the legacy IT Systems processes it is not practical to derivethis information. The Directors do not believe that manual tracking on a line item of suchinformation is cost effective.
The Directors comment on the secretarial audit report for the year ended 31 March 2017below.
1) The Company did not prepare consolidated financial statement for the year ended31.03.2016 in respect of investment in equity shares of I.D.C. Electronics Limited (anassociate Company) as required under section 129(3) of Companies Act 2013.
The Company does not exercise control or has any significant influence over thefinancial and/or operating policies of IDC Electronics Limited('IDC'). The Company has nottraded since the past many years. Accordingly the Company did not prepare consolidatedfinancial statement as required under section 129 subsection 3 of the Companies Act 2013.The investment is valued at 1 rupee. The Directors do not believe that there is anymaterial difference between the accounts reported on a stand alone basis and those thatwould be reported on a consolidated basis.
2). The Company has paid excess remuneration to its ex-managing Director Mr. ManojKumar during the year ended 31 March 2016 and is yet to take necessary central governmentapproval and / or steps to recover the same. The Company is in the process of commencingrecovery proceedings.
Mr Kumar's remuneration was based on the audited financials for the year ended 31 March2015 and the Company expectation for the year ended 31 March 2016. Following thefalsification of accounts the accounts for the year ended 31 March 2016 were onlyfinalised in November 2016 showing a significant loss and hence the remuneration comesinto question.
The Company did not pay any performance bonus to Mr. Kumar in respect of year ended 31March 2016.
3). There was no Internal Auditor appointed by the Company during the period 5 August2016 to 31 March 2017 during the year. Mr. Tomohiro Kitabatake was appointed as theinternal Auditor of the Company with effect from 20 April 2017.
On 20 April 2017 Mr. Kitibatake was appointed as Internal Auditor. The plans have beendiscussed with the Audit Committee and are now in progress. Prior to his appointment theCompany had made an offer to a candidate who could not join due to personal reasons.
2. PARTICULARS OF EMPLOYEES
A Statement containing the names of the every Employee employed throughout thefinancial year and in receipt of remuneration of Rs 1.02 Crore or more or employed forpart of the year and in receipt of Rs 8.50 Lakh or more a month under Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Persons) Amendment Rules 2016 isgiven in Annexure `B' of the Directors Report.
3. RATIO OF REMUNERATION
The information relating to remuneration of Directors of the Company as required underSection 197(12) of the Companies Act 2013 read with Rule 5 of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 is given in Annexure `C' of theDirectors Report.
4. RISK MANAGEMENT POLICY
In today's economic environment Risk Management is a very important part of thebusiness. The main aim of risk management is to identify monitor and take precautionarymeasures in respect of the events that may pose risks for the business. Your Companyrecognises risk management as an integral component of good corporate governance. TheCompany has developed and adopted a risk management policy. Risks that are assessedencompass operational risks internal control risks external risks informationtechnology risks etc.
5. ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS
As detailed in this Annual Report the Company was impacted by financial irregularitiesand falsifications. The impact of these was included in the financial statements for theyear ended 31 March 2016 which were finalised on 18 November 2016.
Clearly the Internal Financial Controls at that time were not adequate to address thefalsification misstatement and errors in the historic Financial Statements.
Subsequently the Company has been working on improving its financial processes andcontrols. Substantive improvements have been made. The Company is focused on continuousimprovement and hence improvement will be an ongoing process reflecting both changes inthe business and the opportunities for automation and enhanced controls. The focus is toensure that the issues that led to falsification or errors cannot recur and to ensure thatthe Company has a reputation for compliance and business excellence.
The position of Head of Internal Audit was filled on 20 April 2017. At the AuditCommittee meeting of 26 May 2017 the Head of Internal Audit proposed his initial plansfor the balance of the financial year which after discussions and input from the AuditCommittee were approved. These plans are now in progress.
6. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In accordance with the requirement of SEBI (LODR) Regulations 2015 the ManagementDiscussion and Analysis Report form part of this Report.
1. VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has put in place a mechanism of reporting illegal or unethical behaviorthrough its Whistle Blower Policy. Employees and Directors are free to report violationsof laws rules regulations or unethical conduct. The report if any in this regard asreceived from any person will be reviewed by the Audit Committee of the Company. It isaffirmed that no person has been denied access to the Audit Committee of the Company inthis respect. It is also ensured that confidentiality of such reporting is strictlymaintained and that Whistleblowers are not subjected to any discriminatory practice orharassment.
The Whistleblower Policy is uploaded on the Company's website under the weblink:https://ricoh.co.in/about/investors/ policies/whistle blower policy.
2. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementof The Sexual Harassment of Women at the workplace (Prevention Prohibition &Redressal) Act 2013. An Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.
There were no complaint(s) received from any employee during the financial year2016-2017.
3. DETAILS IN RESPECT OF FRAUD REPORTED BY THE AUDITORS UNDER SECTION 143(12) OF THECOMPANIES ACT 2013 OTHER THAN THOSE REPORTABLE TO CENTRAL GOVERNMENT
On 5 May 2016 B S R & Co. LLP Chartered Accountants the statutory auditors ofthe Company reported to the Audit Committee under Section 143(12) of the Companies Act2013. This report of the statutory auditors was made on the basis of the review of B S R& Co. LLP of the report of preliminary findings by PricewaterhouseCoopers PrivateLimited India (PwC) dated 20 April 2016. The Audit Committee responded to B S R & Co.LLP on 15 June 2016 confirming their understanding that the concerns raised were inaccordance with the issues identified in the PwC report of preliminary findings. Thestatutory auditors made the necessary reporting to the Central Government on 30 June 2016.
The Company's investigations were fully detailed in the Annual Report 2015-2016.
The Company is continuing to work with the relevant authorities to take action againstthose responsible in respect of the fraud committed against the Company. At the date ofthis Report all the matters are subject to legal process and consequently it isinappropriate for the Company to comment and potentially prejudice such action.
4. FUTURE PLANS
The conventional office space is evolving to a digital workplace which is notdependent on a base location. Work on the go or from home or from satellite offices arebecoming more and more common. These developments results in many organisations to manageinformation and workflows ensuring security at all times.
Ricoh understands customer's business challenges and how they directly affect theirbusiness whether it is compromising security workflow employee satisfaction or impactingbottom line. To address these challenges Ricoh plans to organize our technology offeringsand services expertise into a set of Ricoh Services towards workplace innovation.
Ricoh's concept of 'Workplace Innovation' will be aimed at meeting end-to-endtechnology needs of a mobile workforce in any work place environment connecting businessprocesses and making them seamlessly accessible to all. We plan to do this by integratingour offerings spread across Printing & Document Solutions IT Services and VisualCommunication Systems. This way Ricoh will strive to improve the way customer's entireorganisation works shares information communicate and collaborates across theorganization providing infrastructure to deliver the right information at the righttime in the right form no matter where they are.
5. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE
As a result of falsification of accounts referred to above the Company is working witha number of regulatory authorities. The Company has no reason to believe that anyliabilities will arise out of its cooperation with any investigation by such authoritiesand hence no provision is included in the accounts at 31 March 2017.
As detailed in the Section regarding comments on suspension of trading of shares of theCompany as mentioned elsewhere in this annual report the NCLAT disposed of the appeal ofBSE Limited on 23 May 2017. The actions of Company are fully detailed in the Sectionabove.
i) EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT - 9 is annexedherewith as Annexure `D' of the Directors Report.
(ii) NUMBER OF MEETINGS OF BOARD
During the year (Eighteen) 018 Board Meetings were convened and held. The details ofwhich are given in the Corporate Governance Report which forms part of this report.
The Directors wish to convey their appreciation to all stakeholders and businessassociates for their support and contribution during the year. The Directors would alsolike to thank the employees shareholders customers suppliers and bankers for thecontinued support given by them to the Company and their confidence reposed in management.