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Sarveshwar Foods Ltd.

BSE: 535054 Sector: Agri and agri inputs
NSE: SARVESHWAR ISIN Code: INE324X01018
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Sarveshwar Foods Ltd. (SARVESHWAR) - Director Report

Company director report

TO

THE MEMBERS

SARVESHWAR FOODS LIMITED

REGISTERED OFFICE: SARVESHWAR HOUSE BELOW GUMMAT

JAMMU-J&K

Dear Members

Your Directors have pleasure in presenting their 15th Annual Report on the business andoperations of the Company and the accounts for the Financial Year ended 31st March 2019.

FINANCIAL RESULTS

Your Company's financial performance for the year under review has been encouraging.Key aspects of Consolidated and Standalone Financial Performance of Sarveshwar FoodsLimited for the Financial Year 201819 along with the previous Financial Year 2017-18 aretabulated below:

(Rs. In Lakhs)
PARTICULARS

CONSOLIDATED

STANDALONE

Year Ended 31 March 2019 Year Ended 31 March 2018 Year Ended 31 March 2019 Year Ended 31 March 2018
Revenue from operations 56648 48074 23035 21673
Other Income 364 114 231 57
Total Income 57012 48188 23266 21731
Expenses 53068 43916 21426 19543
Earnings before Interest Tax Depreciation and Amortization (EBITDA) 3944 4272 1840 2188
Depreciation and Amortization Expenses 231 253 80 91
Finance Costs 1371 1845 471 636
Protit before Exceptional Items and Tax 2342 2174 1289 1461
Exceptional Items NIL NIL NIL NIL
Protit before Tax (PBT) 2342 2174 1289 1461
Current Year 538 524 378 399
Deferred Tax Credit -7.86 -2.38 -6 7
Protit After Tax (PAT) 1812 1653 917 1055
Minority Interest 2 2 NIL NIL
Protit after Taxes and Minority Interest 1810 1651 917 1055
Appropriations - - - -
Earning Per Share (Face Value of Rs. 10/- each) 7.37 8.97 3.73 5.74

FINANCIAL REVIEW:

Pushed by strong shift in consumer preference towards branded basmati rice in thedomestic market and export market Sarveshwar Foods reported excellent numbers during theyear 201819. The Company performed extremely well and the highlights of the performance onconsolidated basis are as under:

• Company's Revenue from Operations is Rs 57012 Lacs (PY Rs. 48187Lacs).

• Company's Profit before Tax increased by 7.73% to Rs 2342 Lacs (PY Rs 2172Lacs)and Profit after Tax (PAT) increased by 9.62 % to Rs 1812 Lacs (PY Rs 1653 Lacs).

• Net Worth of the Company increased by 12.64% to Rs. 15384 Lacs (PY Rs. 13657Lacs).

DIVIDEND:

The Board wishes to retain all its earnings to further improve the performance of theCompany and thus do not recommend any distribution of dividend for the Financial Yearended on 31st March 2019.

TRANSFER OF RESERVES:

In view of the robust financial strength of the Company a sum of Rs. 45.87 Lacs hasbeen transferred to General Reserves out of the amount available for appropriations.

SHARE CAPITAL:

There is no change in the Authorised Share Capital of the company during the financialyear 2018-19 and the authorised share capital of the company remains same as on 31stMarch 2019 i.e Rs. 300000000.

The paid up equity share capital of the Company as on March 31 2019 is Rs.245672000. The Company has no other type of securities except equity shares formingpart of paid up capital.

MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICHTHE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

No material changes and commitments affecting the financial position of the Companyoccurred between the end of the financial year to which this financial statements relatesand till the date of this Report.

CHANGE IN THE NATURE OF BUSINESS IF ANY:

There is no change in the nature of business of the Company during the financial year2018-19.

SEGMENT REPORTING:

A separate reportable segment forms part of Notes to the Accounts.

SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS:

Your Company has three subsidiaries viz. Sarveshwar Overseas Limited Himalayan BioOrganic Foods Private Limited and Natural Global Foods DMCC. There are no associatecompanies within the meaning of Section 2(6) of the Companies Act 2013 ("Act").Further there has been no material change in the nature of business of the subsidiariesduring the financial year 2018-19. The Consolidated Financial Statements of your Companyfor the financial year 2018-19 are prepared in compliance with applicable provisions ofthe Companies Act 2013 read with the Rules issued thereunder and the provisions of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 (hereinafter referredto as the " S EB I Listing Regulations"). The consolidated financial statementshave been prepared by consolidating audited financial statements of your Company and itssubsidiaries as approved by the respective Board of Directors. Further pursuant to theproviso of sub section (3) of section 129 of the C o m pa nies Act 2013 read withCompanies (Accounts) Rules 2014 a separate statement containing the salient features ofthe financial statements of Subsidiaries of the company in the prescribed Form AOC-1 isgiven in the Consolidated Financial Statements forming part of this Annual report.Consolidated Turnover is Rs. 57012 Lacs in current year as compared to Rs. 48187 Lacs inthe previous year. Consolidated Net Profit after Tax increase to Rs. 1812 Lacs as comparedto Rs. 1653Lacs in the previous year. The financial statements of the subsidiary companiesand related information are available for inspection by the members at the RegisteredOffice of your Company during business hours on all days except Sunday and holiday uptothe date of the Annual General Meeting ('AGM') as required under Section 136 of theCompanies Act 2013. Any member desirous of obtaining a copy of the said financialstatements may write to the Company Secretary at the Registered Office / Corporate Officeof your Company. The financial statements including the consolidated financial statementsStatement containing salient features of the financial statement of Subsidiaries and allother documents shall also be available on Company's website www.sarveshwarrice.comdownloadable format.

BOARD OF DIRECTORS:

As on March 312019 your Company's Board has a strength of 7 (Seven) Directorsincluding 1 (One) Woman Director. The Chairman of the Board is a Honorary Chairman. Thecomposition of the Board is as below:

Category Number of Directors % to Total Number of Directors
Executive Directors (Including Woman Director) 3 42.86%
Independent Non-Executive 4 57.14%

The detailed section on 'Board of Directors' is given in the 'Reporton Corporate Governance' forming part of this Annual Report. The Appointment of Mr.Adarsh Kumar Gupta (DIN: 08135776) an Independent Director was confirmed by theshareholders in the Annual General Meeting held on 25th September 2018.

Pursuant to the provisions of Section 149(13) of the Companies Act 2013 and Articlesof Association of the Company all directors except Independent Directors are liable toretire by rotation. The Independent Directors of your Company will hold office for 5(Five) consecutive years from the date of their respective appointments. No IndependentDirectors are liable to retire by rotation.

However they can resign from directorship any time before their respective tenure.

In accordance with the provisions of Section 152 of the Companies Act 2013 andArticles of Association of the Company Dr. Gayatri Tandon Executive Director retire byrotation at the ensuing Annual General Meeting is eligible for re-appointment. The briefresume of the Director being re-appointed the nature of her expertise in specificfunctional areas names of companies in which she has held Directorships CommitteeMemberships their shareholding etc. are furnished in the explanatory statement to thenotice of the ensuing Annual General Meeting and also forming part of Corporate GovernanceReport. The Board recommends her reappointment at the ensuing Annual General Meeting.

AUDIT COMMITTEE:

As on March 31 2019 the Audit Committee of Sarveshwar Foods Limited comprises offollowing 3 (Three) Members with majority of Independent Non Executive Directors:

Name Nature of Directorship Designation in Committee
Mr. Thayagarajan Kumaran Non-Executive Independent Director Chairman
Mr. Jagdish Lai Sharma Non-Executive Independent Director Member
Mr. Anil Kumar Executive Director Member

All the recommendation made by the Audit Committee was accepted by the Board ofDirectors. The Powers and role of the Audit Committee are included in report on CorporateGovernance forming part of this Annual Report.

KEY MANAGERIAL PERSONNELS:

The Key Managerial Personnels (KMPs) of the Company in accordance with the provisionsof Sections 2(51) and Section 203 of the Companies Act 2013 read with Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 (including anystatutory modification(s) or re-enactment(s) for the time being in force) are as follows:

S.N0 Name of KMP's Designation
01. Mr. Rohit Gupta Managing Director
02. Mr. Manoj Chopra Chief Financial Officer
03. Ms. Ishrat Gill Company Secretary

Ms. Ishrat Gill has been appointed as Company Secretary cum Compliance Officer of thecompany w.e.f. 26th December 2019. Mr. Manoj Chopra has been appointed as theChief Financial Officer of the Company w.e.f. 30th March 2019. Resignation ofMr. Deepak Sighvi from the post of Chief Financial Officer of the company w.e.f. 30thMarch 2019. Resignation of Mr. Rajesh Kurup from the post of post of Chief ExecutiveOfficer of the Company w.e.f. 19th May 2018.

DETAILS OF DIRECTORS APPOINTED AND RESIGNED DURING THE YEAR:

The following Directors has been appointed and resigned during the year:-

s. No. Name of Persons Designation Appointment/ Resignation Date of Appointment/ Resignation
1. Mr. Adrash Gupta Independent Director Appointment 25/09/2018

POLICY ON REMUNERATION OF DIRECTORS KMPs SENIOR MANAGEMENT PERSONNEL AND OTHEREMPLOYEES:

The remuneration paid to the Directors is in accordance with the Nomination andRemuneration Policy of Sarveshwar Foods Limited formulated in accordance with Section134(3)(e) and Section 178(3) of the Companies Act 2013 read with Regulation 19 of SEBIListing Regulations (including any statutory modification(s) or re-enactment(s) for thetime being in force). The salient aspects covered in the Nomination and RemunerationPolicy have been outlined below:

I) To identify the persons who are qualified to become directors and who may beappointed in senior management in accordance with the criteria laid down and recommend tothe board of directors their appointment and removal.

ii) To formulate the criteria for determining qualifications positive attributes andindependence of a director and recommend to the Board a policy relating to theremuneration of Directors Key Managerial Personnel and other employees of SarveshwarFoods Limited.

iii) To formulate the criteria for evaluation of Independent Director and the Board.

iv) To evaluate the performance of the members of the Board and provide necessaryreport to the Board for further evaluation of the Board and to determining whether toextend or continue the term of appointment of the independent director on the basis ofthe report of performance evaluation of independent directors.

v) To recommend to the Board on Remuneration payable to the Directors Key ManagerialPersonnel and Senior Management.

vi) To provide to Key Managerial Personnel and Senior Management reward linked directlyto their effort performance dedication and achievement relating to the Company'soperations.

vii) To retain motivate and promote talent and to ensure long term sustainability oftalented managerial persons and create competitive advantage.

viii) To develop a succession plan for the Board and to regularly review the plan.

ix) To assist the Board in fulfilling responsibilities.

x) To implement and monitor policies and processes regarding principles of corporategovernance.

NUMBER OF MEETINGS OF THE BOARD:

During the Financial Year 2018-19 Eight Board meetings were held. For details thereofkindly refer to the section 'Board Meeting and Procedures - Details of Board Meetings heldand attended by the directors during the Financial Year 2018-19 in the report ofCorporate Governance forming part of this Annual Report.

BOARD EVALUATION:

In pursuance of Section 178 of the Companies Act 2013 read with Regulation 4(2)17(10) and 19(4) read with Schedule II Part D of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 and SecretarialStandards-I the Nomination and Remuneration Committee has framed the evaluation processand the performance evaluation of Independent Directors Executive Directors and Board asa whole as well as working of its Audit Nomination & Remuneration and otherCommittees has been carried out during the financial year 201819.

STATEMENT OF DECLARATION BY AN INDEPENDENT DIRECTOR(S) AND REAPPOINTMENT IF ANY:

All the Independent Directors have given their Independency declaration as provided insub-section (6) of Section 149 of the Companies Act 2013.

REMUNERATION POLICY:

The Company has framed Remuneration Policy in compliance with Section 178 of theCompanies Act 2013 read along with the applicable rules thereto and Regulation 19 ofSecurities and Exchange Board of India (Listing Obligation and Disclosure Requirements)Regulations 2015 and remuneration policy of the Company in compliance of Section 178 (4)of the Companies Act 2013.

EXTRACT OF ANNUAL RETURN:

As required pursuant to Section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in FormMGT- 9 as a part of this Annual Report as ANNEXURE I.

AUDITORS:

The Auditors M/S K R A & CO Chartered Accountants Statutory Auditors of theCompany hold office till the conclusion of the ensuing Annual General Meeting and areeligible for re-appointment and have confirmed that they are not disqualified under anyprovisions of Section 141(3) of the Companies Act 2013 and have shown their willingnessto accept the office of Statutory Auditors. The Company has received a letter from them tothe effect that their re-appointment if made would be within the prescribed limits u/s141(3)(g) of the Companies Act 2013 and that they are not disqualified forre-appointment.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

The particulars of every contract or arrangements entered into by the company withrelated parties referred to in subsection (1) of Section 188 of the Companies Act 2013are disclosed in Form No. AOC-2 (Annexure III). With reference to Section 134(3)(h) ofCompanies Act 2013 all contracts and arrangement with related parties under Section188(1) entered by the Company during the financial year were in ordinary course ofbusiness and on arms length basis.

AUDITORS' REPORT:

The Auditors' Report does not contain any q ua lifi cat i o n Notes to Accounts andAuditors remarks in their report are self-explanatory and do not call for any furthercomments.

DETAILS OF SUBSIDIARY/JOINT VENTURES /ASSOCIATE COMPANIES:

Pursuant to sub-section (3) of Section 129 of the Act the statement containing thesalient feature of the financial statement of a Company's subsidiaries is given asAnnexure-V [Performance and financial position of each of the subsidiaries companiesincluded in the consolidated financial statement.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

The disclosures as per Rule 9 of Companies (Corporate Social Responsibility Policy)Rules 2014 related to CSR activities is detailed in (Annexure II).

AUDIT COMMITTEE:

In pursuance of Section 177 of the Companies Act 2013 read with Regulation 18 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has constituted the Audit Committee and the details inpursuance of Section 177 (8) of the Companies Act 2013 in respect of composition of AuditCommittee of the Company is given in Corporate Governance Report of the Company.

SECRETARIAL AUDIT REPORT:

In terms of Section 204 of the Act and Rules made there under M/s. Yamina Almas &Associates Practicing Company Secretary have been appointed Secretarial Auditors of theCompany. The report of the Secretarial Auditors is enclosed as Annexure IV to this report.The point-wise comments are enumerated as follows.

• Delay in filing forms: Due to oversight the Company failed to file some of theforms in prescribed time frame of Companies Act 2013 and applicable fees has already beenpaid to Ministry of Corporate Affairs.

INTERNAL AUDIT & CONTROLS:

In terms of Compliance of Section 138 of the Companies Act 2013 read with theCompanies (Accounts) rules 2014 the Company has appointed M/s Darpan Gupta & Co.Chartered Accountants as its Internal Auditors. During the year the Companycontinued to implement their suggestions and recommendations to improve the controlenvironment. Their scope of work includes review of processes for safeguarding the assetsof the company review of operational efficiency effectiveness of systems and processesand assessing the internal control strengths in all areas. Internal Auditors findings arediscussed with the process owners and suitable corrective actions taken as per thedirections of Audit Committee on an ongoing basis to improve efficiency in operations.

ISSUE OF EMPLOYEE STOCK OPTIONS:

There was no ESOP as per Rule 12 (9) of Companies (Share Capital and Debentures) Rules2014 issued by company during the year.

RISK MANAGEMENT POLICY:

Sarveshwar Foods Limited has in place comprehensive risk assessment and minimizationprocedures which are reviewed by the top management. During the year as per therequirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015and the Listing Agreement with the Stock Exchanges the Company has constituted "RiskManagement Committee" who plans risk management reviews monitors and identify therisk on regular basis.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE.

The Company has not received any significant or material orders passed by anyregulatory authority Court or Tribunal which shall impact the going concern status &Company's operations in future.

DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS:

According to Section 134 (5)(e) of the Companies Act 2013 the term Internal FinancialControl (IFC) means the policies and procedures adopted by the company for ensuring theorderly and efficient conduct of its business including adherence to Company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information.

The Company has a well placed internal financial control system which ensures all theassets are safeguarded and protected and that the transactions are authorised recordedand reported correctly. The Company's internal financial control system also comprises duecompliances with Company's policies and Standard Operating Procedures (SOPs) and audit andcompliance by Internal Auditors.

DEPOSITS:

The Company has neither accepted nor renewed any deposits falling under Chapter V ofCompanies Act 2013.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT2013:

The particulars of loans guarantees and investments have been disclosed in thefinancial statements.

CORPORATE GOVERNANCE CERTIFICATE:

The report on Corporate Governance as Stipulated under Regulation 34(3) read with ParaC of Schedule V of the Listing Regulations is presented in separate section forming partof this Annual Report.

A Certificate from the Practicing Company Secretary regarding compliance of conditionsof corporate governance as stipulated in Regulation 27 of Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 is annexed withthe report.

MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis Report prepared in accordance of Regulation34(2)(e) of Listing Regulations forms part of this Annual Report for the year ended 31stMarch 2019.

WORKPLACE (PREVENTION PROHIBTION AND REDRESSAL) ACT 2013:

In order to prevent sexual harassment of women at work place a new act The SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 hasbeen notified on 9th December 2013. Under the said Act every company is required to setup an Internal Complaints Committee to look into complaints relating to sexual harassmentat work place of any women employee. The Company has adopted a policy for prevention ofSexual Harassment of Women at workplace and has set up Committee for implementation ofsaid policy. During the year the Company has not received any complaint of harassment.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The details of conservation of energy technology absorption foreign exchange earningsand outgo are as follows:

Conservation of energy:

The company continued to give major emphasis for Conservation of Energy and themeasures taken previous year were continued. The efficiency of Energy utilisation is beingmonitored at every Quarter in order to achieve effective Conservation of Energy. Thesignificant energy conservation during the year were:

Power & Fuel Consumption:

Particulars 2018-19 2017-18
Through Electricity Purchases
Units 865370 502520
Total Amount (Rs.) 38.96 23.21
Through Diesel
Total Amount (Rs.) 4.16 4.09

Lighting:

To conserve energy from Lighting replacement of Convectional Lamps Street LightingHalogen HPSV WITH LED Light Fixtures were undertaken at various stations during the year.As LEDs are extremely energy efficient and consume up to 60% less power than incandescentbulbs this helped in reducing the Power consumption and decreasing the maintenance costdue to its long lifespan.

(b) Technology Absorption Adaption and Innovation:

Technology is changing day by day. During the years the Company has taken significantsteps in adoption of new technologies thus improving overall efficiency of Plants. Similarsteps were taken in the current year as well by replacing the lower capacity machines withthe New Higher capacity Machines. Some such machines includes the Color Sorters which isone of the critical machine involved in the Rice processing industry. Some of the oldlower capacity color sorters were replaced with new upgraded and high capacity machinesresulting in reduction of rejection percentage improvement in final output and increasingoverall throughput. The Company has realised and agrees that the continuous improvementcan be achieved only if the employees involved in the process directly or indirectly arehighly trained on modern techniques and are aware of Global Standards. One such step takenby the Company in that direction is to start Manufacturing Excellence and ImprovementProgram. The key highlights of this improvement drive were - 5S Maintenance ImprovementTechniques Reliability Matrix MTTR & MTBF etc. which are highly beneficial andglobally accepted programs for process improvement.

(c) Foreign exchange earnings and Outgo:

During the year the total foreign exchange earnings and foreign exchange outgo are asmentioned below:

Particulars 2018-19 (Rs. In Lakhs) 2017-18 (Rs. In Lakhs)
Foreign Exchange earnings 3475.58 3653.91
Foreign Exchange outgo 51.50 22.33

Human Resources:

Your Company treats its "Human Resources" as one of its most importantassets. Your Company continuously invests in attraction retention and development oftalent on an ongoing basis. A number of programs that provide focused people attention arecurrently underway. Your Company thrust is on the promotion of talent internally throughjob rotation and job enlargement. The Company maintains healthy cordial and harmoniousindustrial relation at all levels. The enthusiasm amongst employees has enabled theCompany to remain at a leadership position in the industry.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 134(3) of the Companies Act 2013 the Director's based on therepresentations received from the operating management and after due inquiry 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 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 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; and

(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.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND:

Pursuant to Section 205A and 205C of the Companies Act 1956* read with 124 and 125 ofthe Companies Act 2013 the company has no dividend which remains unpaid/unclaimed for aperiod of seven years from the date of transfer to unpaid dividend account which isrequired to be transferred to the Investor Education and Protection Fund (IEPF)established by the Central Government.