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Sakthi Sugars Ltd.

BSE: 507315 Sector: Agri and agri inputs
NSE: SAKHTISUG ISIN Code: INE623A01011
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OPEN 12.76
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VOLUME 9544
52-Week high 32.85
52-Week low 12.32
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Mkt Cap.(Rs cr) 150
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Sell Price 0.00
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OPEN 12.76
CLOSE 12.62
VOLUME 9544
52-Week high 32.85
52-Week low 12.32
P/E
Mkt Cap.(Rs cr) 150
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sakthi Sugars Ltd. (SAKHTISUG) - Director Report

Company director report

To the Members

The Board of Directors of the Company presents its Annual Report together with theAudited Financial Statements of the Company for the year ended 31st March 2017

FINANCIAL HIGHLIGHTS (Rs in lakhs)
Particulars 2016-17 2015-16
Sales (Net)
Sugar Division 6067727 3625473
Distillery Division 1328526 1446274
Cogeneration Division 567807 1927844
Soya Division 1304536 1210464
Total sales 9268596 8210059
Other Income 122785 366752
Total Income 9391381 8576811
Profit before Finance Cost and Depreciation & Amortisation and exceptional item 1379107 776223
Finance Cost 1336711 784943
Provision for Depreciation & Amortisation 895379 743700
Net Profit before exceptional item and Tax (852983) (752420)
Exceptional Items (Gain) 1017394 -
Net Profit before Tax 164411 (752420)
Provision for Tax 60017 (201709)
Net Profit after Tax 104394 (550711)
Balance Profit brought forward (3509037) (3130254)
Add: Transfer from revaluation reserve 171788 171928
Surplus carried to Balance Sheet (3232855) (3509037)

REVIEW OF OPERATION

The operational performance of Sugar Division has been better than the previousfinancial year The quantum of production of industrial alcohol has marginally come downas compared to the previous year The Co-generation Division has been affected as TamilNadu State has become surplus in power The selling price of sugar is better during thecurrent financial year compared to the previous financial year There has been increase inthe selling price of industrial alcohol The power division is losing its significance onaccount of surplus availability of power and sluggishness in demand resulting in drasticreduction in per unit price for power The performance of soya unit is satisfactory Therehas been no change in the nature of business during the financial year and until the dateof this report

SUGAR DIVISION

The quantum of sugarcane crushed at various units of the Company during the year2016-17 is as under:

name of the unit Cane crushed (in tonnes)
Sakthinagar : 907001
Sivaganga : 344291
Modakkurichi : 396195
Dhenkanal : 328383

During the year under review 176 lakh MT of sugar was produced by the Company whichis more by 054 lakh MT as compared to the previous year The quantum of sugar sales andthe sale value have also gone up as compared to the previous year

DISTILLERY DIVISION

During the year under review 22891 lakh litres (previous year 27082 lakh litres) ofindustrial alcohol was produced at Sakthinagar Distillery unit and 6128 lakh litres(previous year 6351 lakh litres) at Dhenkanal Distillery unit

SOYA DIVISION

21947 tonnes (previous year 21016 tonnes) of soya bean was crushed in the soya plantduring the year under review This division had exported products worth Rs149587 lakhs(previous year Rs 127801 lakhs) to various countries

CO-GENERATION DIVISION

The total power generated in the co-generation plants during the year was 271209 lakhunits (previous year 442494 lakh units) out of which 161455 lakh units (previous year358077 lakh units) of power was exported After the expiry of the Agreement with TANGEDCOon 31st May 2016 the Company is selling the power through Indian Power Exchange (IEX)

FUTURE OUTLOOK

While world's sugar production suggests a situation of surplus during 2017-18 there isuncertainty in the Indian scenario with near normalcy of production in the Northern Statesand deficit in Southern States Failure of both south west monsoon and north east monsoonlast year has affected planting of sugarcane in Tamil Nadu drastically resulting indeficiency in production of sugar during 2016-17 season The drought situation continuesduring the current year also with scanty rainfall in the southwest monsoon so far

There has been appreciation in the selling price of sugar to a reasonable level It isexpected that the current price may sustain through 2017-18 season The sugar mills haveto pay a higher price as Fair and Remunerative Price for 2017-18 season

Although the prospects of sugar industry is looking good in view of the sugar pricebeing viable in the raw material front it appears to be gloomy in the southern statesdue to non-availability of adequate sugarcane for crushing on account of severe droughtWith a view to tide over the shortage in sugar production the Central government haspermitted import of 5 lakh MT of raw sugar in all India level and the Company has beenpermitted to import 37615 MT of raw sugar which the Company has imported for refinifngin its Tamilnadu units

unless the nature favours with good monsoon and adequate quantity of sugarcane is madeavailable the outlook of sugar industry especially in the south does not seem to beencouraging

DEPOSITS

The Company has not accepted any deposit during the financial year under review

At the end of the financial year 1 deposit amounting to Rs021 lakh (includinginterest) remained unclaimed The Company has transferred the unclaimed amount to IEPFaccount in May 2017

CORPORATE INFORMATION

At the request of the Company Bank of India has restructured the loans includinginterest granted by them by elongating the repayment period ie in 24 quarterlyinstalments in a ballooning manner A similar request has been made to Punjab NationalBank for restructure of the loans sanctioned by them amounting to Rs50 crores AllahabadBank have sold their loan portfolio in respect of the Company to Asset RestructuringCompany (India) Limited (Arcil)

FCCB (Series B) of face value of uSD 290 million had been settled at 75% of the facevalue as mentioned in the last report In respect of FCCB (Series B) of uSD 1 million forwhich a compromise has been arrived at with the bondholders based on the order of theMadras High Court on the compromise memo for settlement of FCCB of face value uSD 600000the Reserve Bank of India has just given its permission for remittance This settlement isyet to take place The order of the high Court on the compromise memo for the balance FCCBof face value of uSD 400000 is awaited

DIRECTORS

Sri MSrinivaasan (DIN:00102387) retires by rotation at the ensuing Annual generalMeeting and is eligible for re-appointment

During the financial year under review Arcil had withdrawn its Nominee Sri PSRavendernath from the Board of the Company on 27112016 and nominated Sri Jigar Dalal inhis place with effect from 212017 The Board places on record its appreciation of theservices rendered by Sri Ravendernath during his tenure as Nominee Director of theCompany

DIRECTORS RESPONSIBILITY STATEMENT

In pursuance of Section 134(5) of the Companies Act 2013 the Directors hereby confirmthat:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the Directors had 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 at the end of the financial year and ofthe profit of the Company for that financial year;

(c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this 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;

(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; and

(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively

MEETINGS OF BOARD OF DIRECTORS

The Board met 5 times during the financial year ended 31st March 2017 The details ofthe Board Meetings and the attendance of the Directors are given in the CorporateGovernance Report

COMPOSITION OF AUDIT COMMITTEE

The Audit Committee comprises the following Directors as its members:

1 Sri CRangamani Chairman

2 Sri NKvijayan

3 Sri kvRamachandran

4 Smt Priya Bansali

Details regarding meetings of the Audit Committee and the attendance of the members aregiven in the Corporate governance Report

BOARD EVALUATION

Pursuant to the provisions contained in the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board has carried out anannual performance evaluation of its own performance Committees of Directors andindividual Directors The manner of evaluation is given in the Corporate governanceReport

DETAILS OF REMUNERATION TO DIRECTORS

Details of ratio of remuneration to each Director to the median employee's remunerationand other disclosures required under Section 197(12) of the Companies Act 2013 and Rule5(1) and 5(2) of the Companies (Appointment and Remuneration) Rules 2014 are given inAnnexure-A

RISK MANAGEMENT POLICY

The Company has constituted a Risk Management Committee and the details of theCommittee are set out in the Corporate governance Report Pursuant to Regulation 17(9) ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board haslaid down risk management policy to identify evaluate and mitigate risks It seeks toensure transparency and to minimise adverse impact on the business operations of theCompany

ASSOCIATE COMPANY

Pursuant to Rule 6 of the Companies (Accounts) Rules 2014 the financial statements forthe year ended 31st March 2017 of Sakthi Auto Component Limited Associate Company havebeen consolidated and the consolidated financial results of the Company and the AssociateCompany form part of the audited financial statements of the Company In terms of Rule 8of the said Rules report on the performance and financial position of the said AssociateCompany are given hereunder:

(Rs in lakhs)

3132017 3132016
Revenue from operations 6637618 6828496
Profit before tax 326545 514161
Profit after tax 166440 319858

The statement containing the salient features of the Associate Company in Form AOC-1form part of the financial statement

INTERNAL CONTROL

The Company has internal control system commensurate with the size of the CompanyAdequate procedures are set out for detecting and preventing frauds and for protecting theCompany's assets The head of Internal Audit Team reports to the Chairman of the AuditCommittee for the purpose of maintaining independence and Internal Audit Reports areplaced before the Audit Committee together with statement of significant audit observationand the suggested corrective action followed by a report on action taken thereon Furtherthe Company has adequate internal financial control with respect to the financialstatements

VIGIL MECHANISM

The Company has a whistle blower policy and a vigil mechanism for directors andemployees to report genuine concerns in the prescribed manner The vigil mechanismprovides adequate safeguards against victimisation and for direct access to the Chairmanof the Audit Committee in appropriate or exceptional cases The details of the whistleblower policy are posted on the website of the Company No complaint has been receivedunder this mechanism during the year under review

CORPORATE GOVERNANCE

A Report on Corporate Governance along with Auditors Certificate with respect to itscompliance forms part of this Report

A detailed Management Discussion and Analysis Report also form part of this Report

OTHER DISCLOSURES UNDER THE COMPANIES ACT 2013

i Extract of Annual Return

Extract of the Annual Return is given in Annexure-B

ii Changes in Share Capital

As mentioned in the last report the paid-up share capital of the Company has gone upto Rs11885 crores in view of allotment of 22635757 equity shares on preferentialissue basis on 24th June 2016

iii Policy on Directors' Appointment and Remuneration

The Company's policy for selection and appointment of directors senior managementpersonnel and fixation of their remuneration including criteria for determiningqualifications positive attributes independence of a director are given in Annexure-C

iv Related Party Transactions

All the related party transactions are at arm's length basis and have taken place inthe ordinary course of business Prior approval of the Audit Committee has been obtainedfor the transactions with related parties A statement of all related party transactionsis placed before the Audit Committee on quarterly basis There has been no contract orarrangement with related parties attracting the provisions of Section 188(1) of theCompanies Act 2013

The Related Party Transactions Policy as approved by the Board is uploaded on theCompany's website wwwsakthisugars com The detailsof the transactions with Related Party are provided in the accompanying financialstatements

v Statement of declarations given by Independent Directors

The Independent Directors have given their declarations to the Board to the effect thatthey meet with the criteria of independence as provided in Section 149(6) of the CompaniesAct 2013 and the relevant rules

vi Significant material orders passed by court or authorities

There are no significant orders passed by Court or regulatory authorities which wouldimpact the status of the Company and its future operations

vii Particulars of loans guarantees or investments

The Company has not given any loan or guarantee or has acquired any security during thefinancial year 2016-17 under Section 186 of the Companies Act 2013

viii Energy Conservation Technology Absorption and Foreign Exchange Earnings andOutgo

The information on conservation of energy technology absorption and foreign exchangeearnings and out go as required under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 is given in Annexure-D

ix There are no material changes affecting the financial position of the Company whichhas occurred between the end of the financial year and the date of this report

STATUTORY AUDITORS

M/sPNRaghavendra Rao & Co Coimbatore Statutory Auditors of the Company (FirmRegistration No003328S) shall hold office till the conclusion of the 55th Annual GeneralMeeting as an audit firm which has completed the term of office for a particular periodcannot be considered for re-appointment for a period of five years pursuant to theprovisions of Section 139(2) of the Companies Act 2013 The Board of Directors wishes toplace on record the excellent professional services rendered by the said firm during thetenue of their office On the recommendation of the Audit Committee the Board hasproposed the appointment of M/s PK Nagarajan & Co Chartered Accountants (FirmRegistration Number 016676S) as Statutory Auditors of the Company for a period of fiveconsecutive years from the conclusion of the 55th Annual General Meeting (AGM) of theCompany subject to ratification at every AGM if required Necessary resolution in thisregard is included in the Notice of the AGM

SECRETARIAL AUDIT

Pursuant to Section 204 of the Companies Act 2013 the Board of Directors of theCompany has appointed M/sSkrishnamurthy & Co Company Secretaries Chennai asSecretarial Auditors to undertake the secretarial audit of the Company for the year ended31st March 2017 Secretarial Audit Report of M/s Skrishnamurthy & Co CompanySecretaries Chennai is annexed as Annexure-E

COST AUDIT

M/s STR & Associates Cost & Management Accountants Tiruchirapalli are theCost Auditors for auditing the cost accounting records relating to Sugar IndustrialAlcohol Power and Soya Divisions of the Company for the year ended 31st March 2017 Thesaid Firm has been appointed for the financial year ending 31st March 2018 and necessaryresolution for ratification of their remuneration is included in the Notice for theensuing Annual General Meeting

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to the provisions of Section 135 of the Companies Act 2013 and Schedule vIIthereto the Company has constituted a CSR Committee and has adopted a CSR Policy As theCompany has incurred loss for the three preceding financial years the requirement ofincurring expenditure towards fulfilment of its corporate social responsibility did notarise during the financial year under review

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013

The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013 An Internal Complaints Committee (ICC) has been set up at every workplace to redress complaints received regarding sexual harassment All employees(permanent contractual temporary trainees) are covered under this policy No sexualharassment complaint has been received during the financial year 2016-17

AUDITORS' REPORT

With reference to the Statutory Auditors' remarks your Directors wish to state asunder:

a) The unprovided interest and guarantee commission to Promoter group company(erstwhile holding company) will be accounted subject to the approval of the Lenders

b) Non-provision of interest is as per the original agreement entered into with theAssociate Company

The Statement of Impact on Audit Qualification is attached as Annexure-F

acknowledgement

Your Directors wish to place on record their appreciation of the valuable assistanceand co-operation extended by the shareholders cane growers banks financial institutionsand Government authorities They also wish to appreciate the dedicated services renderedby officers staff and workers of the Company

On behalf of the Board of Directors
Coimbatore M Manickam
11th August 2017 Executive Chairman

ANNEXURE - A TO THE BOARD'S REPORT

PARTICULARS OF REMUNERATION

The information required under Section 197 of the Companies Act 2013 and the Rules madethereunder in respect of Directors/key Managerial Personnel/employees of the Company is asfollows:-

(a) The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:

Name of Persons Ratio to median remuneration
I Non-Executive Directors:
Sri PkChandran 029
Sri SSMuthuvelappan 026
Sri Nkvijayan 037
Sri CRangamani 037
Sri kvRamachandran 040
Sri SChandrasekhar 026
Sri SBalasubramanian 022
Smt Priya Bhansali 037
Sri PSRavendernath 011
Sri Jigar Dalal -
II Executive Directors
Dr MManickam Executive Chairman -
Sri MBalasubramaniam Managing Director -
Sri MSrinivaasan Joint Managing Director -
Sri vkSwaminathan Executive Director -

(b) The percentage of increase in remuneration of each Director Chief FinancialOfficer & Company Secretary in the financial year:

Name of Persons % increase in remuneration
I Non-Executive Directors:
Sri PkChandran -
Sri SSMuthuvelappan -
Sri Nkvijayan 1111
Sri CRangamani -
Sri kvRamachandran 1000
Sri SChandrasekhar -
Sri SBalasubramanian 2000
Smt Priya Bhansali 4286
Sri PSRavendernath 5000
Sri Jigar Dalal -
II Executive Directors
Dr MManickam Executive Chairman -
Sri MBalasubramaniam Managing Director -
Sri MSrinivaasan Joint Managing Director -
Sri vkSwaminathan Executive Director -
III key Managerial Personnel:
SriSBaskar Chief Financial Officer & Company Secretary 1380

i The remuneration to Non-Executive Directors consists of sitting fees paid for themeetings of Board and Committees thereof attended by each Director The sitting fees paidper meeting attended by the Directors is the same as that of the last year

ii No remuneration has been paid to the Executive Chairman Managing Director JointManaging Director and the Executive Director during the financial year as approval of theCentral Government is yet to be received

c) The percentage increase in the median remuneration of employees in the financialyear is 651%

d) The number of permanent employees on the rolls of the Company as on 3132017 is1420

e) Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:

The average increase in salaries of employees other than managerial personnel in theyear 2016-17 was 459% The managerial personnel have not been paid any remuneration

f) Affirmation that the remuneration is as per the remuneration policy of the Company:

It is affirmed that the remuneration paid during the financial year ended 31st March2017 to Directors Key Managerial Personnel and other employees is as per the remunerationpolicy of the Company

g) A statement showing the names of top ten employees as required under Rule 5(2) and5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is attached

On behalf of the Board of Directors

M Manickam

Executive Chairman

Coimbatore

11th August 2017