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Sical Logistics Ltd.

BSE: 520086 Sector: Others
NSE: SICAL ISIN Code: INE075B01012
BSE 11:57 | 17 Sep 12.52 1.13
(9.92%)
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11.39

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12.52

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11.39

NSE 11:44 | 17 Sep 12.50 1.10
(9.65%)
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11.35

HIGH

12.50

LOW

11.35

OPEN 11.39
PREVIOUS CLOSE 11.39
VOLUME 221520
52-Week high 21.98
52-Week low 8.60
P/E
Mkt Cap.(Rs cr) 73
Buy Price 12.52
Buy Qty 22566.00
Sell Price 0.00
Sell Qty 0.00
OPEN 11.39
CLOSE 11.39
VOLUME 221520
52-Week high 21.98
52-Week low 8.60
P/E
Mkt Cap.(Rs cr) 73
Buy Price 12.52
Buy Qty 22566.00
Sell Price 0.00
Sell Qty 0.00

Sical Logistics Ltd. (SICAL) - Director Report

Company director report

Your Directors are pleased to present this Sixty Fifth Annual Report of your companyand the audited financial statements for the year ended 31st March 2020.

FINANCIAL REVIEW

The stand-alone financial results for the year ended 31st March 2020 are summarisedbelow.

[Rs In lakhs]

Year ended 31 March 2020 2019
Sales and other income 85663 131063
Profit/Loss before interest depreciation and tax -1116 14862
Interest 2787 3577
Cash Profit / Loss -3903 11285
Depreciation 7118 6112
Profit / Loss before tax -11021 5173
Provision for tax -2575 2120
Net profit / Loss -8446 3053
Earnings per share [EPS] in Rs. [after exceptional items] -14.43 5.39

IMPACT ON PERFORMANCE

The performance of your company was impacted on account of the financial crunch due tothe sudden demise of the Promoter Mr. V.G. Siddhartha on 31st July 2019. After his demisethe company ran into liquidity crisis. The company has a healthy order book position butwas unable to capitalize the same with full penetration. The lower business volumesaffected the revenues and other financials. The Company also faced financial difficultiesin servicing the debt and there has been default in repayment of principal and interest tothe lenders as well as to the debenture holder. The Company is in the process ofidentifying a strategic investor for revival of the business activities of the Company.Due to pandemic of Covid-19 closure with a strategic financial investor has taken timeand prolonged the successful closure.

CHANGE IN PROMOTERS SHAREHOLDINGS

Pursuant to the approval of the shareholders at the AGM held on 12th September 2019and the approval of the stock exchanges viz BSE Limited and National Stock Exchange ofIndia Limited on 17th March 2020 the shares belonging to the MAC Group have beenreclassified as public shareholding.

DIVIDEND

Since the Company has made negative profits no dividend is recommended by the Board ofDirectors for the financial year 2019-20.

RESERVES

Debenture redemption reserve of Rs.25 crores equivalent to 25% of the debenture issuehas already been created until the financial year 2017-18 in accordance with theprovisions of Rule 18[7] of the Companies [Share Capital and Debenture] Rules 2014 andhence no fresh amount has been transferred to the Debenture Redemption Reserve for thefinancial year 2019-20.

CHANGES IN AUTHORISED SHARE CAPITAL

There has been no change in the authorised share capital of the Company during the yearunder review.

FRESH ISSUE OF SHARES / DEBENTURES

The Company has not issued any equity shares any shares / securities which areconvertible into equity shares or Non-convertible debentures during the financial year2019-20.

FIXED DEPOSITS

The Company has not invited any deposits from the public. There are no unclaimeddeposits which were matured as on 31st March 2020.

UNCLAIMED DIVIDENDS

Pursuant to the provisions of the Companies Act any dividend amount which remainsunpaid or unclaimed for a period of 7 years will have to be transferred to the InvestorEducation and Protection Fund of the Central Government. The Company does not have anyamount lying under unclaimed dividend as on 31st March 2020 and hence the said provisionsare not applicable. Under the circumstances the Company could not identify theshareholders whose name remains on the unclaimed dividend account over a period of 7 yearsfor transferring such shares to the IEPF account of the Central Government.

PERFORMANCE

The company's revenues for the financial year 2019-20 was Rs.856.63 crore as againstRs.1310.63 crore in the previous year. Loss after tax was Rs84.46 crore as against theprofit of Rs.30.53 crore.

The performance of all the divisions were impacted due to non-availability of adequateworking capital. The company's presence includes the business segments of surface miningof coal/overburden removal and transportation mine development and operation roadlogistics supply chain solution and integrated logistics. Through subsidiaries and jointventures the Company has also performed in segments of container freight stations (CFS)rail logistics amongst others.

Due to the sudden demise of the promoter the ability of the company to access adequatefunds got affected which has the following impacts.

1. Reduction in the volumes of the company across all the segments affecting financialresults.

2. Unable to participate in tenders for new contracts

Sical Iron Ore Terminals Limited – Current status

As reported last year the SPV had completed all its construction activities for theiron ore terminal in the year 2010 at Kamarajar Port but however could not commence itscommercial operations due to the ban imposed on the export of iron ore out of theKarnataka Region. In order to utilize the idle terminal the company made constantrequests to the Kamarajar Port and Ministry of Shipping to allow handling of alternatecargoes in the terminal. Accordingly Kamarajar Port invited bids for modifying theexisting iron ore terminal also to handle coal and Sical Iron Ore Terminals Limitedemerged as the successful bidder and a fresh licence agreement was signed on 11th July2016. The project activities have been completed upto 78% but further progress could notbe achieved due to financial difficulties on account of non-disbursement for funds fromthe lenders to complete the project.

SUBSIDIARY COMPANIES FINANCIAL STATEMENTS

As per Section 129[3] of the Companies Act 2013 read with Rule 5 of the Companies[Accounts] Rules 2014 the Company has prepared consolidated financial statement and thesame is being placed before the members for their approval at the ensuing Annual GeneralMeeting. Also a separate statement containing the salient features of the financialstatement of the subsidiaries and joint ventures in Form AOC-1 is attached along with thefinancial statements.

DIRECTORS

The Company has 07 [seven] directors as on 31 Mar 2020 consisting of 04 [four]Independent Directors 02 [two] non-executive directors [including 1 woman director] and 01[one] executive director

INDEPENDENT DIRECTORS

In terms of the definition of Independence of Directors as prescribed under Regulation17 of the SEBI [Listing Obligations and Disclosure Requirements] Regulations 2015 andSection 149[6] of the Companies Act 2013 and based on the confirmation / disclosuresreceived from the Directors the following Non-Executive Directors are IndependentDirectors as on 31st March 2020.

1. Mr. H.R. Srinivasan
2. Mr. Harady Rathnakar Hegde
3. Mr. S. Ravinarayanan
4. Mr. Sudhir V Kamath

WHOLE-TIME DIRECTOR

Capt KN Ramesh was appointed Managing Director effective 31st October 2019 in place ofMr. Kush S Desai Joint Managing Director who resigned effective 31st October 2019.

NON-INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. R. Ram Mohan is the Chairman of the Board

Ms. Shweta Shetty [Woman Director]

APPOINTMENT / RESIGNATION OF DIRECTORS AND KMPs

Mr. Kush S Desai resigned from the position of the Joint Managing Director effective31st October 2019 and Capt KN Ramesh was appointed Managing Director with effect from31st October 2019.

Mr. Sumith R Kamath resigned from the position of Group CFO effective 20th November2019 and Mr. T. Subramanian was appointed Group CFO effective 20th November 2019.

DIRECTOR RETIRING BY ROTATION

In terms of Section 152 of the Companies Act 2013 Mr. R. Ram Mohan being longest inthe office shall retire at the ensuing AGM and being eligible to be re-appointed offershimself for re-appointment.

NUMBER OF THE MEETINGS OF THE BOARD

The Board met 11 [Eleven] times during the financial year 2019-20. Detailed informationon the meetings of the Board are included in the report on Corporate Governance whichforms part of the Directors Report.

Additionally several committee meetings were held including Audit Committee which met04 [Four] times during the year.

COMMITTEES OF THE BOARD

The Company has several committees which have been established as a part of the bestcorporate governance practices and are in compliance with the requirements of the relevantprovisions of applicable laws and statutes.

The Company has the following committees of the Board

O Audit Committee

O Stakeholders Relationship Committee

O Corporate Social Responsibility Committee

O Nomination and Remuneration Committee

O Risk Mitigation Committee

O Management Committee

The details with respect to the composition powers roles terms of reference ofrelevant mandatory committees are given in detail in the Report on Corporate Governancewhich forms part of the Directors Report.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

In compliance with Section 135 of the Companies At 2013 read with Companies [CorporateSocial Responsibility Policy] Rules 2014 the Company has established a Corporate SocialResponsibility [CSR] Committee and statutory disclosures with respect to the CSR Committeeand an Annual Report on CSR Activities form part of this Report as Annexure – 1.

PERFORMANCE EVALUATION OF THE BOARD

In accordance with Section 178 of the Companies Act 2013 and Regulation 17 of the SEBI[Listing Obligations and Disclosure Requirements] Regulations 2015 [earlier Clause 49 [IV] of the Listing Agreement] the Company has laid down a Nomination and RemunerationPolicy. Further to this the manner in which formal annual evaluation of the directors isto be carried out for the Board and Board level committees were devised by the Committee.Accordingly the evaluation of the performance of the members of the Board Board levelcommittee and the Board as a whole were carried out and the same was taken on record bythe Board at their meeting held on 17th August 2020. However due to the COVID-19pandemic that has been prevailing in the country physical meeting of the IndependentDirectors could not be held for the financial year 2019-20.

CORPORATE GOVERNANCE

The Company is committed to achieve the highest standards of Corporate Governance andstrives to comply with the requirements as set by the Regulators / applicable laws.

A separate section providing a Report on the Corporate Governance as stipulated underRegulation 34 [3] and Schedule V [c] of the SEBI [Listing Obligations and DisclosureRequirements] Regulations 2015 is attached as an Annexure to this report. The said reporton corporate governance also contains certain disclosures required under the CompaniesAct 2013.

A certificate from the Statutory Auditors M/s. SRSV & Associates CharteredAccountants conforming compliance to the conditions of Corporate Governance as stipulatedunder Regulation 34[3] of the SEBI [Listing Obligations and Disclosure Requirements]Regulations 2015 is annexed to the Report.

MANAGEMENT DISCUSSION AND ANALYSIS

A Management Discussion and Analysis Report pursuant to Schedule V [B] of the SEBI[Listing Obligations and Disclosure Requirements] Regulations 2015 is furnished as anAnnexure to this report.

VIGIL MECHANISM

The Company has implemented a Vigil Mechanism/ Whistle Blower Policy pursuant to whichWhistle Blowers are allowed to raise concerns relating to Reportable Matters [as definedin the Policy]. Further the policy encourages whistle blowers to bring the genuineconcerns or grievances and provides for adequate safeguards against victimisation ofWhistle Blower who avail of such mechanism and also provides for direct access to theChairman of the Audit Committee in exceptional circumstances. The functioning of thevigil mechanism is reviewed by the Audit Committee from time to time. None of the whistleblowers were denied access to the Audit Committee of the Board of Directors. The detailsof Vigil Mechanism / Whistle Blower Policy are available on the website of the Companywww.sical.in.

RISK MANAGEMENT POLICY

The Board has implemented the risk management policy for effective management of risksthat are envisaged on the conduct of business wherein all material risks faced by thecompany are identified and assessed and evolves assessment of controls and policies andput in place procedure for monitoring mitigating and reporting risk on a periodic basis.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were inthe ordinary course of business of the Company and were on arm's length basis. There wereno materially significant related party transactions entered into by the Company with thePromoters Directors Key Managerial Personnel or other persons which may have a potentialconflict with the interest of the Company. The details of such related party transactionsin Form AOC-2 is furnished as Annexure-2 to this Report.

Considering the nature of the industry in which the Company operates related partytransactions are in the ordinary course of business on an arm's length basis. All suchrelated party transactions are placed before the Audit Committee for approval whereverapplicable. Prior omnibus approval for normal transactions is also obtained from the AuditCommittee for the related party transactions which are of repetitive in nature as well forthe normal transactions which can not be foreseen and accordingly the required disclosuresare made to the Committee on a quarterly basis in terms of the approval of the Committee.

The policy on Material Related Party Transactions and also on dealing with the RelatedParty Transactions as approved by the Board of Directors is uploaded on the website of theCompany and the link for the same is http://www.sical.in/policy.

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

Corporate guarantees were provided to banks / financial institutions / Port authoritiesfor the financial facilities availed by the company's subsidiaries / due performance ofcontracts by the subsidiaries after obtaining due approval from the shareholders throughpostal ballot wherever such transactions are considered to be material related partytransactions. The Company has not provided any fresh Corporate Guarantees on behalf ofother entities during the financial year 2019-20.

The following are the closing balances to the amounts extended as loans / advances tosubsidiaries as per Section 186 of the Companies Act 2013 as at 31st March 2020

Name of the Body Corporate Amount in Rs. Lakhs Nature of the Body Corporate
Sical Infra Assets Limited 4 Subsidiary
Sical Iron Ore Terminals Limited 85107 Subsidiary
Sical Logixpress Private Limited 3053 Subsidiary
Develecto Mining Limited 190 Subsidiary
Sical Mining Limited 4 Subsidiary
Patchems Private Limited 102 Subsidiary

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has laid down set of standards processes and structure which enables toimplement internal financial control across the organisation and ensure that the same areadequate and operating effectively. The statutory auditors M/s. SRSV & Associates LLPhave provided their report on the internal financial control as part of their auditreport.

Further more the Company has appointed M/s. Sundar Srini Sridhar CharteredAccountants as the internal auditors for carrying out internal audit functions based onthe comprehensive plans formulated in advance.

[a] Statutory Auditor

M/s. SRSV & Associates LLP Chartered Accountants retire at the conclusion of theensuing Annual General Meeting. In this connection the Audit Committee and Board ofDirectors have recommended for the approval of the shareholders at the ensuing AGM theappointment of SRSV & Associates Chartered Accountants with Firm Registration No.:0150415 as the Statutory Auditors of the Company for the current financial year 2020-21 atthe same remuneration as is paid for the previous financial year.

[b] Secretarial Auditor and Secretarial Audit Report

Pursuant to Section 204 of the Companies Act 2013 Mr. R. Kannan Practicing CompanySecretary Chennai was appointed the Secretarial Auditor for the financial year 2019-20.The report of the Secretarial Auditor for the FY 2019-20 is annexed to this report asAnnexure – 3. As required by Regulation 24A of the SEBI [LODR] Regulations 2015 theSecretarial Audit Reports of Ms. N. Aishwarya Practising Company Secretary Chennai forthe material subsidiaries viz. Sical Infra Assets Limited Sical Multimodal and RailTransport Limited and Sical Iron Ore Terminals Limited are also annexed to Annexure –3.

SICAL LOGISTICS LTD.

Statutory Auditors have expressed modified opinions with regard to the investment ofthe Company in the subsidiary Sical Iron Ore Terminals Limited and considering theperformance of the company and difficulty in servicing the debts of the Company during theyear under review on the going concern of the Company.

The Board of Directors deliberated in detail on the subject and expressed theircomments and observations on the same. The details of the audit qualification and theresponse of the Board are furnished below.

Modified Opinion Reply
Sical Iron Ore Terminals Limited [SIOT]
Independent Auditors of SIOT have reported that due to acute liquidity crunch coupled with delay in completing the project indicates that a material uncertainty exists that may cast significant doubt on SIOT's ability to continue as a going concern and there are impairment indications that cast a doubt that the carrying value of the Cash generating Unit (CGU) is likely to exceed its recoverable amount. However the accounts of SIOT has been prepared on a going concern basis. The SIOT project was initially for setting up of an iron ore terminal to handle export cargo of iron ore of 12 MMT/PA from the Kamarajar Port for a period of 30 years and the licence agreement was entered into in the year 2006. .MMTC Limited and L&T IDPL are the joint venture partners along with Sical Logistics Limited for executing the project.. The project was complete in all respects in the year 2010 and prior to commencing the trial run export of iron ore from out of Karnataka region was banned and hence no cargo was available for handling at the terminal. Subsequent to this in order to enable the terminal to put to right use the Company approached the Ministry of Shipping and was accorded the permission to convert the existing iron ore terminal also to handle coal in 2016 and a fresh licence agreement was signed for a period of 27 years. Subsequent to this considerable time was lost in obtaining the environmental clearance and upon receipt of the clearance in 2018 the project activities could recommence after obtaining a fresh loan facility from YES Bank at a revised estimate of Rs.210 crores for the conversion project. However since the basic facilities at the SIOTL facility had to be maintained such as upkeep of the existing equipments and the power connections at minimum demand assistance had to be extended by the holding company until the commencement of the operation of the terminal for which apart from the investment of Rs.82.90 crores advances to the extent of Rs.851.07 crores had to be made since the asset which had been idle for quite few years had to be put into use with the best possible option of handling the coal. However the project activities had suffered due to liquidity crunch that erupted in the holding company level being all bank / financial facilities availed were backed up by the personal guarantee of the Promoter and due to his sudden demise banks insisted for settlement of the existing facilities not providing any further / additional facilities and in certain cases holding the collections from operations. Further added to this the project has also been affected by the COVID19 pandemic and hence has now resulted in considerable delay in recommencing the project and the delayed disbursal of term loan facilities by the lenders. Management is of the view that once the situation improves at the Holding company level by infusing equity by any new investors and crossing the current hurdles thereby completing the project and starting operation of the terminal and hence it would be appropriate to take necessary action at the appropriate time and hence a provision is not required at this juncture.
Going Concern
The Group has incurred losses during the Financial year has excess of current liabilities over current assets loans that have fallen due for repayment loans which have fallen due of subsidiary companies for which the Holding Company is the guarantor. These events indicate that a material uncertainty related to the going concern assumption exists and the Group's ability to continue as a going concern is dependent on the financial support from the promoter and generation of the expected cash flows through operations to be able to meet its obligations as and when they arise. However the Group is confident of meeting its obligations in the normal course of business and accordingly the accounts of the Group have been prepared on a Going Concern basis. The company's operations were hampered during the financial year under review on account of the difficulties faced by the company in obtaining financial facilities from banks / financial institutions since such facilities were backed up by the personal guarantee of the promoter and due to his sudden demise the company could not substitute with any other guarantees or else infuse additional equity. This resulted in the company unable to carryout its usual / additional operations in its usual manner since a liquidity crunch erupted. This also resulted in delay / default in servicing the debts already availed. The Management is of the opinion that this situation would improve upon the Company able to get investment and upon resumption of normal course of business activities which are currently delayed due to the prevailing COVID19 pandemic globally. Also the projects in hand upon completion of which would fetch a considerable revenue to the Company on a consolidated basis improving the overall liquidity situation. Accordingly the current assets position would improve upon the gearing up of the operations of the company across all divisions when the liquidity crunch is tide over.

Secretarial Auditor has made the following observations in his Report.

The Company has made a delayed disclosure in respect of SEBI Circular No.SEBI/HO/CFD/CMD1/CIR/P/2019/140 dated 21/11/2019 on the default in repayment of principal/ interest to banks and financial institutions. However prior to the date of circularthere has been a downgrading of the credit rating by the agencies to D and thesedisclosures have duly been intimated to the stock exchanges at the appropriate time.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments affecting the financial position of thecompany which has occurred between the end of the financial year of the company i.e. 31stMarch 2020 and the date of the Directors Report i.e. 17th August 2020.

EMPLOYEE REMUNERATION

1. The statement containing particulars of the names of top ten employees in terms ofremuneration drawn as required under Sec 197[2][i] of the Companies Act 2013 is includedin Annexure – 4 to this report and the details relating to employees as requiredunder Section 197[2] [ii] of the Companies Act 2013 read with Rule 5[2] of the Companies[Appointment and Remuneration of Managerial Personnel] Rules 2014 as amended is notapplicable since none of the employees are in receipt of remuneration exceeding Rs.1.02crores p.a. or Rs.850000 per month during the financial year 2019-20.

2. The ratio of the remuneration of each director to the median employee's remunerationand other details in terms of sub-section 12 of Section 197 of the Companies Act 2013read with Rule 5[1] of the Companies [Appointment and Remuneration of ManagerialPersonnel] Rules 2014 are forming part of this report as Annexure – 4.

STATUTORY DISCLOSURES

[1] The disclosures to be made under sub-section [3][m] of Section 134 of the CompaniesAct 2013 read with Rule 8[3] of the Companies [Accounts] Rules 2014 are furnished below.

Since the company is engaged in providing logistics services the details as toconservation of energy and technology absorption are not applicable.

A. CONSERVATION OF ENERGY : NA
B. TECHNOLOGY ABSORPTION : NA

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

Total Foreign Exchange : Earned : Rs.578 lakhs
Used : Rs.4902 lakhs

[2] No significant and material orders were passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future during theyear under review.

[3] There were no complaints received / cases filed under Section 22 of the SexualHarrassment of Women at Workplace [Prevention Prohibition and Redressal] Act 2013.

[4] No stock options were issued to the Directors of the Company.

EXTRACTS OF ANNUAL RETURN

Pursuant to sub-section 3[a] of Section 134 and sub-section [3] of Section 92 of theCompanies Act 2013 read with Rule 12 of the Companies [Management and Administration]Rules 2014 the extracts of the Annual Return as at March 31 2020 forms part of thisreport as Annexure -5. However as per the amended provisions of the Companies [Amendment]Act 2017 the details have been posted in the website www.sical.in.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 134[5] of the Companies Act 2013 it is herebyconfirmed that:

[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 judgements 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 period.

[c] the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

[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.

[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.

ACKNOWLEDGEMENT

The Directors wish to thank the Port Authorities Governmental Agencies company'sbankers financial institutions customs authorities foreign collaborators suppliersstatutory regulators investors customers employees and all stakeholders for theircontinued support and patronage.

Place : Bengaluru For and on behalf of the Board
Date : 17th August 2020 R. Ram Mohan
Chairman
DIN : 02506342

ANNEXURE A to the Secretarial Audit Report

Our report of even date is to be read along with this letter.

1. Maintenance of secretarial records is the responsibility of the management of thecompany. Our responsibility is to express an opinion on these secretarial records based onour audit.

2. We have followed the audit process as were appropriate to obtain reasonableassurance about the correctness of the contents of the Secretarial records. Theverification was done on test basis to ensure that correct facts are reflected in theSecretarial records.

3. We have not verified the correctness and appropriateness of financial records andBooks of Accounts of the Company.

4. Wherever required we have obtained the Management representation about complianceof laws rules and regulations and happening of events etc.

5. The compliance of the provisions of the corporate laws and other applicable lawsrules regulations standards is the responsibility of the management. Our examination waslimited to the verification of procedures on test basis.

6. The Secretarial Audit Report is neither an assurance as to the future viability ofthe Company nor of the efficiency or effectiveness with which the management has conductedthe affairs of the company.

R. Kannan
Place : Chennai Practicing Company Secretary
Date : 17th August 2020 FCS 6718 / CP No 3363
UDIN: F00671813000541483
Peer Certificate No. 883/2020

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