To the members of Simbhaoli Sugars Limited
Your directors have pleasure in presenting the Ninth Board's Report together withmanagement discussion and analysis report for the financial year ended on March 312020.
MANAGEMENT DISCUSSION AND ANALYSIS
Global Sugar Industry Overview
The global production of sugar for season 2020-21 is fore cast up 22 million metrictons (mmt) to188 mmt (raw value) due to higher production in Brazil India and Thailand.The consumption is expected to rise to a new record due to growth in markets such as Indiaand is projected to continue to draw lower stocks despite are bound in output. The exportsare forecast up sharply with rising supplies. The global production forecast is givenbelow:
Brazil's production is forecast to rebound 9.6 mmt to 39.5 mmt raw value as initialconcerns about the August-October dry spell in 2019 were off set by steady January-March2020 rainfall that improved the sugarcane harvest. The gasoline prices are expected todrastically change the dynamics for the Brazilian sugar/ethanol industry negativelyaffecting the ethanol industry and significantly increasing sugar production.
Thailand's production is forecast to recover 4.7 to 12.9 mmt raw value on favourablecane yields and sugar extraction rates. The consumption is expected to continue increasingdue to demand for direct sugar consumption and food-processing. With favourable suppliesand global demand exports are forecast at a record 11.0 mmt raw value and stocks areexpected to be the lowest level in 8 years.
China's production is forecast to recover from the previous year's drought up 0.5 mmtto 10.7 mmt raw value primarily due to a rebound in cane sugar production in southernChina. The consumption remain unchanged imports are up slightly and stocks are expectedto fall for a sixth consecutive year as government policies continue to discouragestockholding.
India's production is forecast to rebound 17 percent to 33.7 mmt as above average waterreservoir levels are expected to boost yields and to incentivize growers to harvestadditional acreage. The consumption is forecast at a record due to a growing economy.
The production forecast is presented by way of below graph:
The global sugar prices were hovering around 14.5 cents per pound since mid-January2020. However with the recent impact of fall in crude oil prices expectation of Brazilincreasing sugar production & due to spread of the coronavirus diseases (COVID-19)pandemic there has been a decline in the global prices as well. The raw sugar prices inthe international market were down by 20% to 11.8 cent per pound in March 2020 from 14.8cents per pound in February 2020.
Domestic Sugar Industry Overview
(All fig. in Million MT)
|Particulars ||2018-19 (A) ||2019-20 (P) ||2020-21 (E) ||% Change |
|Opening stock as on 1st Oct. ||10.6 ||14.5 ||11.5 ||-20% |
|Production during the season ||33.6 ||27.2 ||30.5 ||12% |
|Imports || ||- ||- || |
|Total Availability ||44.2 ||41.7 ||42.0 ||1% |
|Offtake || || || || |
|i) Consumption ||26.0 ||25.0 ||25.0 ||0% |
|ii) Exports ||3.7 ||5.2 ||6.0 || |
|Total Off-take ||29.7 ||30.2 ||31.0 ||3% |
|Closing Stock as on 30th Sept. ||14.5 ||11.5 ||11.0 ||-4% |
|Stock as % of Consumption ||56% ||46% ||44% || |
*The domestic sugar production is likely to increase to 30.5 Mmt in 2020-21 afteradjusting impact of diversion of B-heavy molasses and sugarcane juice for ethanolmanufacture.Source - ISMA and trade estimates
With an opening balance of 14.5 mmt in October 2019 sugar production of 27.2 mmtexpected domestic sales of 25 mmt and exports of 5.2 mmt during the current season theopening stocks in October 2020 has been estimated at 11.5 mmt. With the forecast of abountiful monsoon domestic sugar production is estimated at 30.5 mmt in the 2020-21crushing season with an increase by 12% than the production of 27.2 mmt this seasonassuming normal rainfall and other optimum conditions. The pan India cane acreage has beenpegged at 5.23 million hectares (MH) in 2020-21 8 per cent higher than this season'scropped area of 4.84 MH.Due to higher cane availability and surplus sugar production itis estimated that a larger quantity of cane juice and B-heavy molasses will get divertedfor ethanol production.
In coming months as and when the lockdown is lifted across States sugar consumptionis expected to pick up. Sugar is an essential commodity and with the continuation ofpackaged commodities in the Fast Moving Consumer Goods (FMCG) and reopening ofrestaurants cafe sweet shops bakeries and other eatable outlets the demand can'tremain low for a long period of time.
As of May 31 2020 the production in the north Indian state of Uttar Pradesh was downat 12.6 mmt. The western state of Maharashtra produced 6.1 mmt over the same periodreflecting the worst impact of the dry season in 2019. Karnataka produced 4.30 mmt untilMay 2020.
In the north and south the sugar cane is still available for crushing while canestocks for processing have already been exhausted in Maharashtra. Hence the mills innorthern and southern India are still producing sugar while mills in the western regionhave stopped crushing cane during April 2020.
The ex-mill domestic sugar price for financial year 2019-20 is ranging between Rs31500 to Rs 34200 per MT as compared with the previous year ranging between Rs 26500 toRs 33000 per MT due to the measures taken by the Government of India to safeguard thedomestic sugar industry. Reduced inventory higher exports and the minimum support price(MSP) on sugar which will protect margins are in fact positives for sugar mills.
Also despite lower prices globally Indian sugar mills have been receiving a premiumfor their sugar from Indonesia and Iran. Therefore the current sugar season endingSeptember 2020 is likely to finish with a lower closing stock than in the previous year.
The Government of India has been considering the minimum selling price of sugar with anincrease of Rs 2 per kg from existing Rs 31 per kg in order to help millers to clear canedues of about Rs 22000 Crore to farmers while the Commission for Agricultural Costs andPrices has recommended raising the fair and remunerative price (FRP) of sugarcane by Rs 10a quintal to Rs 285 for 2020-21. Other measures also being taken to ensure early clearanceof substantial cane arrears to farmers. Of the Rs 1 22000 Crore arrears about Rs 17683Crore is based on the FRP rate while the rest is based on SAP rates.
Domestic ethanol Industry
The Indian ethanol market is slated to grow and the Government has planned to enhanceethanol production to 9 billion litres from 3.55 billion litres in order to achieve theblending rate of 10% by 2022.The Government has given approvals to around 350 new plantsin sugar mills for adding 5.5 billion litres of capacity entailing an investment of Rs18000 Crore for that purpose.
Ethanol can be produced directly from cane juice as well as from B-grade and C-grademolasses. The price of ethanol from sugarcane juice has been fixed at Rs 59.48 per litrewhile ethanol extracted from B-grade molasses is priced at Rs 54.27 per litre and theprice of ethanol extracted from C-grade molasses has been fixed at Rs 43.75 per litre.India is required to have a minimum of 4.25 billion litres of ethanol to meet the 10%blending target.
In the previous year an aggregate of 1.91 billion litres of ethanol was blended withpetrol which resulted in 5.5% blending rate as against 175 billion litres in 2019-20which may result 4.5% blending in this year. The government plans to divert 8 lakh tonnesof surplus sugar in each of the next two years (2021- 2022) for ethanol production withthe objective of maximizing profitability earned by Indian sugar companies.
GOVERNMENT MEASURES AND POLICIES
The Government of India has implemented various measures/ initiatives are enumeratedbelow:
March 2019: The GOI has notified new schemes for extending financial assistance tosugar mills for enhancement and augmentation of ethanol molasses production capacity.
July 2019:The GOI with a view to improve liquidity of the sugar industry; enablingthem to clear cane price arrears of farmers and to stabilize domestic sugar pricenotified the Scheme for Creation and Maintenance of Buffer Stock of 40 Lakh MT of sugar bythe sugar mills for one year with effect from August 12019. The funds to be provided tothe sugar mills as reimbursement of the carrying cost towards maintenance of the bufferstock are to be used firstly for payment of cane price dues of farmers for the currentsugar season 2018-19 and 2019-20 as also for arrears of previous sugar seasons.
Sept 2019: Pursuant to the Scheme for providing assistance to sugar mills for sugarseason 2019-20 the Maximum Admissible Export Quantity (MAEQ) in respect of each sugarmill has been allocated.
Nov 2019: The GOI has allowed those sugar mills which had partially exported theirMinimum Indicative Export Quota (MIEQ) of 2018-19 sugar season till 30.09.2019 to exportthe balance quantity of their MIEQ of 2018-19 sugar season by 31.12.2019 over and aboveMAEQ allocated for 2019-20 sugar season.
March 2020: The Distilleries were given permission by the State Administration to makehand sanitizers to meet the requirement arising out of the spread of Coronavirus diseases(COVID-19) Pandemic. With this sufficient quantity of hand sanitizers manufacturingcapacities has been created in the country using ethanol as the key raw material.
Business Description: Operating Capacities
Simbhaoli group was started as a partnership firm in 1933 by Sardar Raghbir SinghSandhanwalia and in 1936 it was incorporated as a private limited company. In 1989 itwent public and has been listed on Indian Stock Exchange for the past 30 years. In 1992it acquired a distillery (owned by the family as an independent company) and therebyconverted the Simbhaoli sugar plant into an integrated sugar complex. At presentSimbhaoli is part-owned by the third and fourth generations of this family represented byMr Gurmit Singh Mann Chairman of the Company.
The group has three sugar complexes located at Simbhaoli (Western Uttar Pradesh)Chilwaria (Eastern Uttar Pradesh) and Brijnathpur (Western Uttar Pradesh) having anaggregate sugarcane crushing capacity of 19500 tons crushed per day (TCD) includingasugar refining capacity of 1200 tonsper day (TPD) forraw sugar processinginterchangeable with cane crushing capacities while the sugarcane is not available duringoff-season.
|Facilities ||Cane Sugar (tcd) ||Alcohol/ ethanol (kld) ||Power (mwh) ||Sugar refining (tpd) |
|Simbhaoli (Western UP) ||9500 ||90 ||62$ ||800 |
|Brijnathpur (Western UP) ||4000 ||60 ||8 ||400 |
|Chilwaria (Eastern UP) ||6000 ||60 ||38$ ||- |
|Total ||19500 ||210 ||108 ||1200 |
$Simbhaoli Power Private Limited subsidiary company
The sugar business is integrated with alcohol distillation and power generation. Thepower co-generation units of its subsidiary Simbhaoli Power Private Limited locatedwithin the Simbhaoli and Chilwaria complexes are capable to generate bio-mass based poweraggregating 100 mwh for supplying the power for the captive consumption of the sugarplants and sale of surplus power to the UP-State grid under the power purchase agreements.
Joint Venture Companies
The Company has a joint venture arrangement with Sindicatum Captive Energy Singapore(SCES) a clean energy fund in respect of its subsidiary Simbhaoli Power Private Limited(SPPL) engaged in the cogeneration of power from bagasse and other bio fuels. During theyear SCES has transferred all its shareholding rights and obligations in the sharecapital of SPPL to Sindicatum Bagasse India Private Limited a private limited Companyincorporated and registered under the laws of Singapore which is an affiliate of SCES.
SSL also has a joint venture with ED&F Man Holdings BV and Volcafe Pte Ltd inrespect of Uniworld Sugars Private Limited (USPL). During the year 2017 due to continuouslosses the USPL business having a 1000 TPD (300000 mt per annum) capacity sugarrefinery near Kandla Port Gujarat was discontinued the details mentioned elsewhere inthis report.
Impact of Industry Scenario on Business of the Company
Indian sugar industry has been facing difficulties on account of high sugar productionin the country since Financial Year 2016-17 resulting in surplus sugar. For the year endedMarch 31 2020 and previous years the Company has incurred losses due to high sugarcanecosts fixed by the Governments and comparatively lower prices of finished goods which arealso being regulated and controlled and other external factors. The operations of theCompany though remained intact however due to continuing losses its net worth has beeneroded resulting in its failure in meeting its payment obligations to lenders andsugarcane farmers in terms of respective agreements and understanding.
Meanwhile recognizing the industry requirements the Government has implemented anumber of measures to improve the financial health of the sugar industry includingsupport for liquidation of cane arrears fixing minimum obligation for export to managethe sugar inventory fixation of Minimum Support Price (MSP) of sugar providing cashsubsidies on production and export of sugar with allocation of MIEQ/MAEQ and mandatoryblending of ethanol with petrol at certain level with remunerative price of ethanol. Inaddition pursuant to an order of Hon'ble High Court of Uttar Pradesh pronounced infavour of sugar industry the sugar industry as well as the Company is confident toreceive much awaited amounts being accrued benefits due to it from state government underthe erstwhile New Sugar Industrial Promotion Policy 2004-08. All these measures areexpected to reflect in revival of the sugar industry on sustainable basis.
Based on these positive steps along with other internal measures the managementbelieves that operations at its manufacturing facilities will remain continued in the nearforeseeable future on regular basis.
On account of delays in servicing of loans the lenders to the Company have initiatedrecovery proceeding at various forums including filing of application before Hon'bleNational Company Law Tribunal under Section 7 of the Insolvency and Bankruptcy Code 2016by two of the lenders and approaching Debt Recovery Tribunal (DRT) for recovery of theirdues. One of the lenders had declared the Company and Guarantors to the credit facilityas Willful defaulters which has been set-aside by the Hon'ble Chandigarh High Court.Against a criminal complaint filed by one of the lenders with the investigating agenciesthe enforcement directorate had passed an attachment order against certain assets of theCompany to the extent of Rs 109.80 Crore against which the Company has preferred anappeal with the appropriate authority.
The Company has submitted a comprehensive debt resolution proposal with all thecommercial banks and realignment of dues with other lenders commensuration with itsfuture cash flows. The majority of commercial lenders have shown their inclination toaccept the debt resolution proposal of the Company.
Impact of Covid-19 and Nation-wide Lockdown on the Operations of the Company
The spread of Coronavirus diseases (Covid-19) pandemic and nationwide lockdown hascaused disruption of supply chain across businesses and industries in India. Since theCompany is engaged in the manufacturing of essential commodities timely steps taken bythe government have ensured regular operations of the sugar mills in UP. However Covid-19crisis has adversely impacted domestic demand of sugar and of ethanol during completelockdown periods. Under the directives of Ministry of Home affairs and State Governmentthe Company has started manufacturing of hand sanitizers in its distillery divisions. Thedemand for the Company's products is expected to recuperate with the gradual lifting ofnation wide lockdown by the Government.
The Company has considered the potential impact of Covid-19 and related restrictions onthe carrying amount of inventory and financial and non-financial assets and based on theinformation available to it up to the date of approving the financial statements writtendown the value of inventory to net realizable value wherever required and madeprovisions in financial and nonfinancial assets. However the impact of Covid-19 as wellas negative out look of sugar sector on the carrying amount of its property plant andequipment and consequential impairment could not be ascertained and provided for due tonon- availability of requisite information on account of lockdown restrictions.
The ongoing Covid-19 pandemic is expected to put pressure on the sugar consumptionpatterns as there are curbs on social gatherings and outings. The industry is also facingreduced off-take from beverage and other FMCG companies amid the lockdown. This has evenled to fall in domestic & international sugar prices recently.
Manufacturing of Liquid Hand Sanitizers & Disinfectants
Company's manufacturing units located in rural areas of Uttar Pradesh have initiatedproduction of Liquid Hand Sanitizers & Disinfectants from April 2020 to help thenation and especially its rural districts to combat the Covid-19 Pandemic. The Companywill be utilizing the existing PAN India distribution network of its FMCG Brand Trust todistribute the sanitizers & disinfectants to not just lakhs of farmers and the localcommunities in UP but to reach people in Rural Districts across the country. TheCompany's goal is to ensure its Sanitizers reach at least 50% of the Rural Districts ofIndia. For this the Company is working on making the sanitizers extremely affordable andalso tailoring the packaging formats for rural India. This will become a shining exampleof the power of "For Rural India by Rural India". The Company is proud tosupport the efforts of the Governments of India and State of Uttar Pradesh as well ascommunities across the country in fighting the Covid-19 pandemic.
Legal proceedings of investigation in the matter related to complaint filed by OrientalBank of Commerce (OBC)
During the year 2017-18 the Oriental Bank of Commerce (OBC) one of the lendersarbitrarily initiated recovery actions against the Company in respect of its restructuredcorporate loan and also filed a criminal complaint in an arbitrary and wrongful manner inrespect of original loan facilities without the consent of the other lenders and withoutaffording any opportunity to the Company to present its case. The Company and itsmanagement have refuted the charges on their part and provided adequate documents whilefully cooperating with the investigation. They have reiterated its commitment forrepayment to all the lenders on the basis of future cash flows. Steps initiated by OBChave delayed the ongoing debt resolution process of the Company and adversely affected itsbusiness. Based on legal advice the Company has been taking appropriate actions at therelevant forums including but not limited to seeking appropriate counter claims.
Sugar Operations: Sugar production has decreased due to agro-climatic conditions.Moreover the rainfall in sugar season 2019-20 is higher as compared to the last sugarseason 2018-19 due to which the cane maturity was not up to the mark and hence resultingin lower recovery across the entire state of Uttar Pradesh. Similarly this has impactedthe Distillery operations as Bio composting was hampered due to adverse weather.
Distillery Operations: During the sugar season 2019-20 the distilleries operationshave been running at lower capacities due to rain foggy weather restriction duringfestivals and shortage of bagasse/fuel.
Branding and specialty Sugar segment: In present Covid-19 scenario where online salesin India is rapidly spreading its wings and becoming the norm for fast growing businessesyour Company is putting our best to emerge as an organization which provides easy andearly availability of its products to the doorstep of the customers. The Company hasintroduced e-commerce functionality on a wide range of its products through its Direct-to-consumer e-commerce website that will house its FMCG offerings.www.shop.simbhaolisugars.com.
The Company has been consistent in developing its sugar brand Trust'. The salesand marketing infrastructure development exercises for distribution through modern retailand wholesale trade channels have been further strengthened during the year. Trust brandedsugar sachets have created vast acceptability and leadership in the hospitality industry.Your Company has emerged as one of the largest sellers of Specialty Sugar which includessachets consumer packets pharmaceutical grade sugar etc. and it commands premium overand above the bulk sugar prices. Last year the Company has launched it diabetic friendlySugar brand with the name and style G-Low Sugar. During the year the Company has expandedproduction and distribution of its newly Launched sugar brands.
The Company actively participated in the export campaign in the year under theGovernment MIEQ & MAEQ scheme. The Company has continued export trade with marketslike Madagascar Sri Lanka Hong Kong Nepal Canada middle east nations like - Qatarand Kuwait. During the year the Company has exported 3619 MT of white sugar and 5300 MTof raw sugar under MIEQ Scheme. The Company has also exported 9005 MT of white sugar and41156 MT of raw sugar under MAEQ Scheme.
The Company has also exported 4325 Cases of Indian Made Foreign Liquor from itsdistillery units.
The Company believes in cordial employer-employees relationship. Time to time trainingsessions which inter-alia includes Electrical safety SAP Chemical Handling qualitybehavioural training motivational training are conducted in order to enhance work lifebalance of employees as well as to optimise the efficiency of all the units and employees.Keeping the philosophy of continuous training and job improvements the Company hasimparted 500 man-days (previous year 419 man-days) of training apart from the regular onthe job trainings to its employees.
The Company has always been vigil against the sexual harassment at workplaceand dulyconstituted Internal Complaint Committee for the purpose in pursuance with the provisionof Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013. Policy for prevention of Sexual Harassment is available on the website of theCompany. During the year no such complaint has been received.
The areas of operations of the Company are well diversified with multi products andservices spanning over a number of geographical locations. Each of the business segmentshas its own strengths and weaknesses and at the same time is subject to a variety ofopportunities and threats. The management is consistently strategizing and implementingthe restructuring exercises and cost optimisation for the business sustainability. Thegroup has the following SWOT attributes:
a. Over 9 decades of experience of Sugar Industry.
b. Our Manufacturing units are located in the sugarcane rich state of Uttar PradeshNorth India
c. Diversified Product Range including pharmaceutical- grade and specialty sugars tocater different categories of customers
d. Enhanced it reach though various e-Commerce platforms
e. Introduced its own dedicated E-commerce portal
f. Well irrigated sugarcane area which is not much dependant on weather pattern
g. Integrated facilities to produce white sugar using sugarcane as well as refining ofraw sugar
h. Premium range of quality products attracting a mark-up in domestic and globalmarkets
i. Presence in branded and packaged segment which has further growth potential
j. Diversification into Sanitizers and Disinfectant Manufacturing
a. Highly leveraged with high finance costs
b. Cyclical nature of the industry which is subject to climate and economic cycles
c. Low capacity utilisation in distillation segments
d. Lack of parity between cost of production and sale values of sugar resulting inun-paid sugarcane price position
e. Existing and anticipated litigation arising out of weak financial position of theCompany
f. Delay in financial restructuring pending over past three years resulting infinancial limitations
a. To produce and gain out of non-sugar base revenues including ethanol being thefocus area for the Company and also being encouraged by government policies
b. To be flexible in the refining of raw sugar for improving capacity utilisationthroughout the year
c. To be a regular trader in the commodities with quality brands and product mixwhenever there is a viability
d. Presence in branded and packaged segment which has further growth potential
e. Enhancement of Alcohol capacity for manufacture of disinfectants
a. Worldwide Covid-19 emergency and impact there of in India
b. Increase in production and distribution cost due to Lockdown scenario
c. Recovery steps initiated by the lenders for over due outstanding.
d. The vendors and creditors related uncertainties on account of payment defaults
e. Significant higher production of sugar in the country may lead to downward trends insugar prices
f. Volatile commodity markets have a bearing on international and domestic operations
g. Regulated environment may pose adversities for business decisions
h. Un-hedged positions in sugar and currency markets
i. Coercive actions by the State administration particularly for cane payment
Quality management system: The sugar units of the Company are compliant withinternationally recognized quality environment and food safety standards and are ISO9001 ISO 14001 and FSSC 22000 certified. Management systems are applied to develop asystematic work culture that emphasizes process ownership across all levels of theorganization.
RISK ASSESSMENT AND MITIGATION
The sugar industry faces challenges from the evolving marketplace continuously thatimpacts important issues in risk management and threatens profit margins. The business ofthe Company is exposed to several kinds of risks from time to time which include thefollowing:
Strategic Risks: These risks are relating to the flux and movement of money and capitalin the Company. This will include cash flow management investment evaluation and creditdefault. These risks emanate out of the decisions the Company takes in the marketsresources and delivery of services.
Operational Risks: Most common and often combatable in all situations these risksrelated to business operations such as those relating to determination identification andprocurement of vendors services delivery to vendors security and surveillance labourissues blocking of funds and business activity disruptions.
Resource Risks: The Company may at times become susceptible to various risksassociated with the procurement of talent capital and infrastructure as may be specificto the industry.
Technological Risk: The business of the Company particularly potable alcohol andspeciality sugar is subject to frequent and revolutionary technology changes as newproducts are being developed in this segment. This also leads to risk of obsolescence ofmachinery as well as inventory.
Industry and Competition Risks: The risks relating to the sugar and alcohol industryincluding competition in the industry technical landscape risks arising out ofvolatilities of the manufacturing lines and those relating to brands of the Company.
Risk of Clash and Breakage: The risk of clash and breakage is mainly referred to therisks associated with the manufacturing output caused due to quiver bump squeezinglacquer desquamation nick and so on in transit. Fragmentation is mainly referred tofragile substances and includes loss including breaching and smash in transit due tocareless loading and unloading and bumping of conveyance and may also occur duringwarehousing.
Risk of Theft Pilferage and Non-Delivery: The risks relating to theft or pilferagewhen the goods manufactured are failed to be delivered to the buyer the risk ofnon-delivery concerns a situation where the whole cargo is not delivered to the consignee.
Currency Risks: The Company on account of international trading activities deals invarious foreign currencies and is exposed to fluctuations in the currency markets fromtime to time.
Risks relating to regulatory and compliance framework: The risks due to inadequatecompliance of regulations contractual obligations and intellectual property violationsleading to litigations and related costs and effect on brand value and image.
Business existence risk: The risk relating to management disruption due to change inownership as a result of ongoing restructuring.
The key objective of the risks analysis is to ensure sustainable business operationsand to promote an approach in risk management process by eliminating risks. In order toachieve this key objective the Company has implemented such policies which providespro-active approach to manage various types of risks associated with day to day affairs ofthe Company and minimize adverse impact on its business objectives.
Environmental Compliances: The Company considers its prime responsibility towardsprotection of hygienic and pollution free environment. The Company has remained is incompliance of all environmental laws of the country. Company's effluent treatment plantswere periodically inspected by State and Central Pollution Control Boards and otheragencies.
Internal Control System - Implementation of Internal Financial Controls and InternalAudit Processes.
The Company has established and implemented internal financial controls based on theformal system of internal financial controls under the Companies Act 2013 read withrelevant Indian Accounting Standards (AS) considering the essential components ofinternal controls stated in the Guidance Note on Audit of Internal Financial Controls withreference to consolidated financial statements issued by the Institute of CharteredAccountants of India (ICAI'). The system includes procedures policies the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to company's polices the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information as required under theCompanies Act 2013 (the Act'). The Company has been following-up the systems andcontrol to safeguard the assets and interest of stakeholders against loss from anyunwarranted action. All business transactions are authorized recorded and reportedaccordingly. Under the system certain Standard Operating Procedures/Policies withreference to the delegation of authorities material procurement and managementaccounting processes and systems payment authorization capex monitoring insurance andemployee welfare etc. have been adopted. Review systems have been established andimplemented to ensure the adequacy of control systems and their monitoring.
An independent internal audit process has been established with reference to thebusiness operations of the Company. The internal audit reports along-with managementcomments are regularly being placed before the audit committee of the Board.
The legal matters with the former director/senior executive employees due toirregularities/misappropriation of inventory of the Company are going on before theappropriate authorities. The management is confident that these cases shall be concludedwithout material financial implications on the Company.
Materiality of Related Party Transactions: The Board of Directors of the Company hason the recommendation of the Audit Committee adopted a policy to regulate transactionsbetween the Company and its related parties in compliance with the applicable provisionsof the Companies Act 2013 the rules made there under and the listing regulations. ThePolicy has been reviewing in order to make it align with recent updates in Companies Act2013 as well as SEBI Listing Regulations.
During the Financial Year 2019-20 all transactions with related parties were at arm'slength basis and were in the ordinary course of business. There was no materiallysignificant related party transaction with the Company's Promoters Directors KeyManagerial Persons (KMP) Management or their relatives which could have had a potentialconflict with the interests of the Company. Transactions with related parties entered bythe Company in the normal course of business are periodically placed before the AuditCommittee for its approval. The particulars of contracts entered during the year areenclosed herewith as Annexure 2 as per prescribed Form AOC-2.
Corporate Social Responsibility (CSR): Pursuant to the provisions of Section 135 of theCompanies Act 2013 (hereinafter referred to as the Act') read with Companies(Corporate Social Responsibility) Rules 2014 the Board of Directors of the Company hasformed a Corporate Social Responsibility Committee (hereinafter referred to as theCSR Committee') headed by an independent director to inter alia carry out thefollowing functions:
> to formulate and recommend to the Board a Corporate Social Responsibility Policyindicating activities to be undertaken as specified in prescribed Schedule VII of the saidAct;
> to recommend the amount of expenditure to be incurred on CSR activities; and
> to monitor the Corporate Social Responsibility Policy from time to time.
The Composition of Corporate Social Responsibility
Committee is mentioned elsewhere forming part of this Annual Report.
Company is not mandatorily required to spend any amount for Corporate SocialResponsibility in terms of criteria prescribed under the provisions of Section 135 of theCompanies Act 2013 yet Company has its own CSR policy indicating the guidelines forsocial welfare activities to be undertaken and implementing programs in the fields ofeducation healthcare clean water social welfare village infrastructure development inreserved areas of its sugar mills. The Company has been accepting its socialresponsibility obligations and encouraging cleaner surroundings improving village levelinfrastructure unclogged drains and spreading the awareness and providing necessarytraining and learning process for the value of good hygiene and sanitation. A Charitabletrust named Simbhaoli India Foundation (SIF) has also been working to ensure socialobligations of the Company.
The Company has been regular in CSR activities for the development upliftment andadvancement of the conditions of the people living in the villages in the vicinity ofmills however during the year under review separate accounts on the expenditureincurred have not been maintained for this purpose.
Information Technology - During nation wide lock-down due to CoVID-19 pandemic the ITdivision of your Company has provided tremendous support to enable employees smoothly workfrom Home as well as to get them connected over virtual meetings. The informationtechnology system of the Company is operating on SAP based enterprise resource planning(ERP) environment optimizing the performance of its businesses as well as the businessnetwork.
OPERATIONS OF SUBSIDIARY/ASSOCIATE COMPANIES
Simbhaoli Power Private Limited(SPPL): SPPL is a 51% subsidiary with a joint venturewith Sindicatum Captive Energy Singapore Pte Limited. SPPL is generating the power usingthe sugar mill bagasse and third-party biomass at the Simbhaoli and Chilwaria Sugarcomplexes of the Company and selling the surplus power to State utilities under thelong-term power purchase agreements. During the year SPPL has generated 2.27 lacs MWh ofpower (Previous year 3.43 lacs MWh) and exported 1.36 lacs MWh (Previous year 2.38 lacsMWh).
Recently Uttar Pradesh Electricity Regulatory Commission (UPERC) has notified theupdated UPERC (Captive and Renewable Energy Generating Plants) Regulations 2019 tosupersede the earlier Regulations of 2014. Under the new regulations the tariff ofbagasse-based power generation and supply to UPPCL has been reduced by nearly Rs 2 per Kwh(unit) which has affected the financials of SPPL substantially.
Financial Statements of SPPL have not yet been considered and approved by theirManagement. Therefore the results of SPPL for the financial year 2019-20 ended on March31 2020 are not available. For non-consolidation of accounts of SPPL detailed notes areforming part of Financial Statements.
Uniworld Sugars Private Limited(USPL): UniWorld Sugars Private Limited (USPL) a 50:50joint venture company of Simbhaoli Sugars Limited discontinued its operations in June2017 due to non-availability of the raw sugar. During the financial year 2018-19Corporate Insolvency Resolution Process (CIRP) was initiated against USPL by the Hon'bleNational Company Law Tribunal Allahabad Bench (NCLT) vide its order dated May 29 2018on an application of one of the vendors of the USPL. The 270 days of the CIRP period arecompleted on February 23 2019 and in the absence of any resolution plan the liquidationapplication was filed by the Resolution Professional with the Hon'ble NCLT on February 252019. The Hon'ble NCLT has granted additional time to find suitable Resolution Plan forthe Company on which the Resolution Professional is working with the lenders of the USPL.
Integrated Casetech Consultants Private Limited (ICCPL):
Integrated Casetech Consultants Private Limited (ICCPL) is an 85% subsidiary companyand the technology vertical of SSL. It has been providing the operations and maintenanceservices to various sugar companies in India and abroad.
Due to lack of working capital and Covid-19 the Company is facing problems regardingthe completion of the projects undertaken by it. During the year the Company has achievedtotal revenue of Rs 2401.07 Lacs (previous Year Rs 1633.09 lacs) reflecting a substantialincrease in revenue in the current year. Company has earned a profit of '28.68 Lacs incomparison to profit of '18.87 lacs in previous year.
Simbhaoli Global Commodities DMCC: Simbhaoli Global Commodities DMCC a wholly ownedsubsidiary company of Simbhaoli Sugars Limited was incorporated for trading in sugarmolasses ethyl alcohol fuel alcohol and other agro based commodities in the overseasmarket. The operations of the Company depend upon various national and internationalfactors.Sugar is the main part of the business upon which other businesses can derive theresultant benefits based on excess/ shortage of sugar in international market. Thegovernment regulations in India for export/import of these commodities adversely affectedthe running of its business through Dubai. Thus due to heavily regulated imports andexports by the Government and the recessionary conditions in the global market theCompany has not been able to do its business and therefore not able to operate in thecoming years as well. The Company has made an application for de-registration andtermination of the license with the Dubai Multi Commodities Centre Authority. The approvalis awaited.
Simbhaoli Specialty Sugars Private Limited (SSSPL):Simbhaoli
Specialty Sugars Private Limited is the wholly owned subsidiary of Simbhaoli SugarsLimited. No major business activities have been carried out by this Company during theyear. Company has earned income from other source of Rs 6.48 Lacs during Financial year2019-20.
A summary of the physical operations of all the business units of the Company for theyear 2019-20 is stated as under:
|Manufacturing Facilities ||Unit || |
|Particulars ||Sugar Year ||2019-20 ||2018-19 ||2019-20 ||2018-19 ||2019-20 ||2018-19 ||2019-20 |
|Sugarcane crushed ||Lacs mt ||14.46 ||15.18 ||4.44 ||5.10 ||5.31 ||4.74 ||24.21 |
|Sugar recovery ||% ||11.51 ||11.19 ||9.90 ||10.60 ||10.31 ||9.40 ||10.95 |
|Raw/ below grade sugar refined ||000'mt ||36.04 ||30.38 ||0.67 ||0.60 ||17.62 ||4.87 ||54.33 |
|Net Sugar produced# ||000' mt ||166.42 ||169.83 ||43.96 ||54.06 ||54.69 ||44.55 ||265.07 |
|Gross season for sugar plant ||Days ||187 ||188 ||114 ||133 ||180 ||171 ||NA |
|Date of start of the Sugar plant || ||04.11.2019 ||31.10.2018 ||27.1 1.2019 ||27.11.201 8 ||04.11.2019 ||09.1 1.2018 ||NA |
|Date of closure of Sugar plants || ||08.05.2020 ||07.05.2019 ||19.03.2020 ||09.04.2019 ||01.05.2020 ||29.04.201 9 ||NA |
|Days of operations of distillery ** ||Days ||253 ||206 ||157 ||107 ||213 ||140 ||NA |
|Alcohol/ Ethanol produced ** ||B.L (Lacs) ||104 ||91 ||72 ||54 ||109 ||66 ||285 |
including conversion of Raw and below grades white sugar into refined sugar.
**As per Financial Year
A summary of the standalone financial results of the Company for the year ended March31 2020 is stated as under:
(Rs in lacs)
|Particulars ||Financial Year 2019-20 ||Financial Year 2018-19 |
|Gross Sales/Income from operations ||120831.90 ||111109.11 |
|Other Income ||2574.42 ||1585.35 |
|Profit/(Loss) before Interest depreciation and exceptional items ||4598.76 ||2360.13 |
|Interest expense ||3163.07 ||3419.83 |
|Depreciation ||3600.60 ||3670.22 |
|Profit/(Loss) before tax & exceptional items ||(2164.91) ||(4729.92) |
|Exceptional (Gains)/Loss ||- ||184.59 |
|Net Profit/ (Loss) after Tax before Other Comprehensive Income ||(2164.91) ||(4914.51) |
|Other Comprehensive Income/(Loss) ||(272.14) ||(2261.27) |
|Net Profit/ (Loss) ||(2437.05) ||(7175.78) |
During the Financial Year 2019-20 Gross Sales have increased from '1111.09 Crore to1208.32 Crore and Net sales have increased from '952.13 'Crore to '1009.44 Crore. EBIDTAhas been at '45.99 Crore as against the previous year of Rs 23.60 Crore. Net loss for theyear is '24.37 Crore as against Net Loss of '71.76 Crore in previous year.
Dividend: During the year the business of the Company has been affected adversely onaccount of the lower realization from sugar sales less capacity utilisation ofdistilleries high finance cost and other industry related issues. There being no profitsduring the year your directors do not recommend any dividend.
Unpaid/unclaimed Dividend: There is no unpaid/unclaimed dividend in the Company. Henceprovisions of Section 125/126 of the Companies Act 2013 are not applicable.
Share Capital: The paid-up capital of the Company is '412790200 divided into41279020 equity shares of '10 each. Pursuant to exercise of option of conversion ofwarrants 1800000 and 2000000 equity shares were allotted on March 292018 and March29 2019 respectively to the specified promoters.
During the year there was lapse of 1200000 fully convertible warrants issued andallotted on December 22 2017 due to non-exercise of option by the allottee(s) for theconversion within stipulated period. Pursuant to the provisions of SEBI (Issue of Capitaland Disclosure Requirements) Regulations 2018 an amount of Rs 96.30 lacs being 25% ofthe subscription amount lying in the books towards upfront payment has been forfeited.
Long term borrowings: Long term borrowings are at '359.03 Lacs (previous year'525.22Lacs) as during the year loans were repaid to related parties.
Short term borrowings: During the year the short-term borrowings have been repaidresulting Nil Short term borrowings against the previous year of '137.95 lacs.
Investments: The Company has the following investments as on March 312020:
(Rs in Lacs)
|S. No. ||Particulars ||Opening balance as on April 1 2019 ||Additions/ (Deductions) during the year ||Balance as on March 31 2020 |
| ||200800 equity shares of Rs 10 each in Integrated Casetech Consultants Private Limited ||383.73 || ||383.73 |
|2 ||16807062 Equity shares of Rs 10 each in Uniworld Sugars Pvt. Ltd ||- ||- ||- |
|3 ||300 Equity Shares of AED 1000 each in Simbhaoli Global Commodities DMCC ||_ ||_ ||_ |
|4 ||5538734 Equity shares of Rs 10 each in Simbhaoli Power Pvt Ltd ||5493.59 || ||5493.59 |
|5 ||4892941 debentures of Rs 100 each of Simbhaoli Powers Pvt. Ltd. ||5108.99 ||(55.29) ||5053.70 |
|6 ||19000 equity shares of Rs 10 each of Simbhaoli Speciality Sugar Private Limited ||190.00 || ||190.00 |
|7 ||Investments in Government Securities (NSC- Post Office) ||2.11 ||- ||2.11 |
|8 ||Investment -Subsidiary (at Cost) ||45.00 ||- ||45.00 |
|9 ||Investments at the end of the year ||11223.42 ||(55.29) ||11168.13 |
Status of shares under pledge: Out of the promoters' shareholding 33.14% in the totalshare capital is pledged with the financial institutions as security against variouscredit facilities availed by the Company. Out of the 29011770 shares held by the Companyin Uniworld Sugars Private Limited the pledge on 11204708 shares to secure the termloan of USPL have been invoked by the IDBI Bank Limited.
Inventories: Inventory amounting to '55088.78 lacs (previous year '48094.92 lacs)include finished goods raw material process stocks and store items. The sugar stock atthe end of the year is valued of Rs 3168per qtl (previous year '3125 per qtl).
Sundry debtors: Sundry debtors (net) amounting to '3562.19 lacs (previous year'5668.00 lacs) are considered good and realisable. Provisions are generally made for alldebtors outstanding for over 360 days' subject to their scope of realization industrytrend and management's perception.
Cash and Cash Equivalents: Cash and Cash Equivalents are at '4288.57 lacs (previousyear '1306.69 lacs).
Bank Balances other than cash & Cash equivalents: Bank balance of '1632.74 lacs(previous year '1022.51 lacs)comprise of EMD paid to Banks for OTS of Rs 571.60 lacs(Previous Year Nil)and fixed deposits for an amount of Rs 1061.14lacs (previous year'1022.51 lacs) as pledged with banks for securing certain loans letters of creditguarantees and other short- term facilities.
Other Financial Assets (Non-Current): Other financial assets of '1328.80 lacs (previousyear '3256.49lacs) comprises interest accrued on debentures Nil (previous year '3046.10lacs) reclassified to Other Financial Assets (Current) interest accrued on fixed depositsRs 21.59 lacs (previous year '19.03 lacs). Further fixed deposits for an amount oR197.94lacs (previous year '127.19 lacs) are pledged with banks for securing certain loansletters of credit guarantees and other long term facilities. And Retention money fromSPPL of '1100.00 lacs has been reclassified here from Trade Receivable.
Other Financial Assets (Current): Other financial assets of '3557.89 lacs (previousyear '492.37 lacs) comprises interest accruedon debentures '3100.65 lacs reclassifiedfrom Other Financial Assets (Non-Current) and finance lease 'Nil (previous year '94.22lacs) and royalty '274.98 lacs (previous year '274.98 lacs) receivable from SimbhaoliPower Private Limited.
Other Current Assets: Other current assets of '8879.39 lacs (previous year '5325.48lacs) comprise a receivable of '590.84 lacs (previous year '961.58 lacs) are consideredgood and realisable. Provisions are generally made for all receivables outstanding forover 360 days subject to their scope of realization industry trend and management'sperception. Government Grant of '7292.25 (previous year '3700.72 lacs) Claim receivablesof '300.26 lacs (previous year '179.62 lacs) Balance with authorities '339.28 lacs(previous year '227.73 lacs) and prepaid expenses '239.15 lacs (previous year '150.21lacs).
Trade payables other current liabilities and provisions:
a) Trade payables at '90016.35 lacs (previous year '79278.02lacs) includes amountpayable against sugarcane supply other raw materials stores and services
b) Other current liabilities of '1532.06 lacs (previous year '1075.92 lacs) reflectamount payable against statutory dues advance received from customers other miscellaneousliabilities.
c) Provisions for employee benefits stood at '107.35 lacs (previous year'89.73 lacs) asper actuarial valuation.
Sales and other income: The segment wise allocation of revenues for the year 2019-20and for preceding two accounting years is as under:
(Rs in Lacs)
|Years/ Segment || |
|Turnover ||%age ||Turnover ||%age |
|2017-18 ||86504 ||95.07 ||4484 ||4.83 |
|2018-19 ||84470 ||74.43 ||29015 ||25.57 |
|2019-20 ||92040 ||72.31 ||35252 ||27.69 |
Other income of '2574.42 lacs (previous year '1585.35 lacs) comprises interest andrent received from subsidiary companies liabilities/provisions which are no longerrequired and written back and other miscellaneous earnings.
Raw Material Consumption: '82201.69 lacs (previous year '87477.74 lacs) includesugarcane and molasses as the principal raw materials consumed by the Company.
Employees cost: The employee cost at '5696.07 lacs (previous year '5334.48 lacs).
Finance cost: Finance costs decreased to'3163.04 lacs (previous year '3419.83 lacs)on account of non-provisioning of interest cost of Rs 13146.17 lacs for the current year(previous year 12336.46).
Other Expenses: Other expenses increased to'12513.04 lacs (previous year '12.411.69lacs).
Power and Fuel: Power and Fuel expenses increased to '2843.88 lacs from '1690.78 lacsin previous year due to higher bagasse purchased from outside during off season forrunning of Distilleries.
The analysis of the Company's financial statement for the year under review is givenbelow:
|Key Ratios || ||2019-20 ||2018-19 ||% Change |
|Debtor Turnover ||Times ||24.79 ||23.38 ||6% |
|Inventory Turnover ||Times ||2.35 ||2.89 ||-19% |
|Interest Coverage Ratio ||Times ||1.47 ||0.61 ||*141% |
|Current Ratio ||Times ||0.35 ||0.30 ||17% |
|#Debt Equity Ratio ||Times ||(84.89) ||88.44 ||-196% |
|"Operating Profit Margin Ratio(%) ||% ||5.69% ||2.52% ||126% |
|Net Profit Margin Ratio(%) or Sector specific equivalent Ratio ||% ||-2.09% ||-5.08% ||59% |
|##Return on Net Worth || ||(84.12) ||81.67 ||-203% |
* Lower losses on account of higher sales and better operations as compared to lastyear.
#Reduced due to increase in accumulated losses during the year.
**Ratio has improved due to increase in operating revenue on account higher sales andbetter operations during the current year ## Although Net revenues have increased duringthe year but due to increase in accumulated losses ratio has further gone negative.
The Company's Board of Directors accepts the responsibility for the preparation andpresentation of financial statements that give a true and fair view of the Financialposition financial performance cash flows and statement of changes in equity of theGroup in accordance with the accounting principles generally accepted in India includingthe Indian Accounting Standards (IND AS) prescribed under section 133 of the CompaniesAct 2013. The Board also accepts the responsibility for the integrity and objectivity ofthese financial statements as well as for various estimates/ judgments used inpreparation of these statements. The estimates and/or judgments have been made on aconsistent reasonable and prudent basis to reflect true and fair view of the state of theaffairs of the Company.
These financial statements have been prepared on going concern basis using thesignificant accounting policies and measurement bases. Accounting Policies have beenconsistently applied except where a newly issued accounting standard is initially adoptedora revision to an existing accounting standard requires a change in accounting policyhitherto in use. In those cases the new accounting policy is adopted in accordance withthe transitional provisions stipulated in that Ind AS and in absence of such specifictransitional provision the same is adopted retrospectively for all the periods presentedin these financial statements.
Loans Guarantees and Investments Under Section 186
The particulars of loans guarantees or investments made under Section 186 of theCompanies Act 2013 and rules made there under are furnished in Note 3 in the Notes toaccounts forming part of the Annual Report.
Particulars of Contracts or Arrangements made with Related Parties
The particulars of contracts or arrangements made with related parties made pursuant toSection 188 of the Companies Act 2013 SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and Indian Accounting Standards 24 issued by the Instituteof Chartered Accountants of India are furnished in Note 11 in the Notes to accountsforming part of the Annual Report.
Debt Servicing and Public Deposits
During the year pending completion of the debt resolution the Company has not beenable to meet its obligations towards the lenders for repayment of both principal andinterest. The Company has approached its lenders to implement debt resolution plan of itsoutstanding debts in accordance with its available future cash flows sustainability ofthe business and nature of the business of industry. There has been delays in submissionof the plan and its consideration on account of continuous changes in regulatoryframeworks particularly withdrawal of the arrangement of corporate debt restructuringand joint lenders forum. Subsequent to the intervention by the Hon'ble Supreme Court onsuch matter the revised plans have been submitted to all the lenders for suitableresolution which is under consideration by them. The specific requests have been made totake a collective approach with regard to possible resolution instead of taking multiplerecovery/coercive measures. The proposal includes waiver of un-paid interest on overdueloan accounts till implementation of the proposed restructuring. The Company hasapproached its lenders to implement debt resolution plan of its outstanding debts andaccordingly submitted a One Time Settlement Proposal (OTS) to its commercial lenderswherein resolution of outstanding debts of commercial banks are proposed to be settledthrough payment of One Time Agreed amount.In addition The Company has also proposedcertain percentage of shares in the equity share capital in direct proportion to lenders'outstanding principal amount. OTS proposal submitted by the Company is under considerationby the lenders.
With delays in repayment of the loans and the cane price arrears the Company's creditrating has continued to remain below investment grade.
The loans availed by the Company have been classified as NonPerforming Assets (NPA) byall the lenders and interest thereon is not being charged by them as per applicablepractices. The Company is hopeful that the resolution exercise including waiver of un-paidinterest on certain loan accounts shall be completed in due course of time andaccordingly interest expenses for the year ended March 312019 amounting to Rs 12336.46lacs (previous year Rs 11971.59 lacs) aggregating to Rs 24308 lacs has not beenrecognized in the financial statements.
Certain lenders to the Company have resorted to initiate recovery proceedings at DebtRecovery Tribunals for which replies are being submitted based upon the legal advices.The Company under discussions with its lenders has identified and taking all measures tosatisfy the lenders and to work out a common resolution plan to their satisfaction.
During the year one of the lenders to the Company has approached Hon'ble NationalCompany Law Tribunal (NCLT) Allahabad for initiating of Corporate Insolvency ResolutionProcess under Section 7 of the Insolvency and Bankruptcy Code 2016. Considering thenature of industry and ongoing discussions with the lenders the Company is hopeful thatdebt resolution shall be worked out with all the lenders leading to a consentedsettlement.
The Company has not accepted any public deposits and no deposits are unpaid for anyprevious year.
Material Changes and Commitments affecting the Financial position of the Company whichhave Occurred Between the end of the Financial Year and the Date of Report
During the year the Company has faced legal actions on account of defaults inrepayments of loans and delay in approval of debt resolution. The detail has been reportedelsewhere in this report.
Application for Reclassification of Promoters of the Company
The special resolution for reclassification of promoters was passed at 6th AnnualGeneral Meeting of the members of the Company. Thereafter an application seekingreclassification of certain members of Promoter group of the Companyto Public category interms of provisions of erstwhile regulation 31A (7) of SEBI (LODR) Regulations 2015 wasfiled with SEBI/Stock Exchanges. The Company has submitted the documents in support of theapplication as per the requirement.The exchange had advised that as per erstwhileregulation no 31A of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 as amended vide notification dated Nov 16 2018 it is required that the outgoingpromoters shall hold less than 10% shares in the share capital of the Company.
BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
At the ensuing Annual General Meeting of the members of the Company Ms. Gursimran KaurMann and Mr. Gurpal Singh shall be retiring by rotation in terms of the provisions ofSection 152 of the Companies Act 2013. They have offered themselvesfor re-appointment.The Board consideredand approved the reappointment subject to the approval by the members.
During the year Mr. Atul Mahindru and Mr. Shyam Sunder were appointed as AdditionalDirector (independent)to the Board of the Company under Section 149 and Section 160 of theAct and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and theyshall hold office for a period of 5 (five) consecutive years subject to the approval ofthe members at the ensuing annual general meeting.
During the year the Company has passed the resolutions for continuation of theappointment of Mr Gurmit Singh Mann Mr. S K Ganguli and Justice (Retd) C K Mahajan whohave attained the age of 75 years in terms of the provisions of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and they shall hold office till theunexpired period from the respective dates of their appointments.
Lt General (Retd) D S Sidhu an Independent Director has submitted his resignationfrom the directorship with effect from August 12 2019 on account of the otherpre-occupations. During his tenure he has guided the Company through his immenseknowledgeand experience. The Directors placed on record the appreciation and noted the valuablecontribution of the outgoing director during his association with the Company.
During the Year there was no change in the KMP's of the Company.
Declaration of Independent Directors
The Independent Directors of the Company have given declaration stating that theycontinue to confirm the criteria set out for Independent Directors under Section 149(6) ofthe Companies Act 2013 and Regulation 16 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
Company's Policy on Director's Appointment and Remuneration
The Company's policy relating to appointment of directors payment of managerialremuneration directors' qualifications positive attributes independence of directorsand other related matters as provided under Section 178(3) of the Companies Act 2013 hasbeen disseminated at the Company's website at the link-http://www.simbhaolisugars.com/company_policies.asp.
Number of Board Meetings conducted during the Year
During the year 5 meetings of Board of Directors have been conducted. Details ofmeetings have been disclosed in Corporate Governance Report forming part of the AnnualReport.
In compliance with the requirement of Section 134(3)(p) and Schedule IV of theCompanies Act 2013 and Rules framed there under and Regulation 17(10) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board of Directors of theCompany evaluated and assessed the performance of the Company's Chairman IndividualDirectors Board as a whole and its Committees on the basis of parameters set by theNomination and Remuneration Committee. Independent Directors of your Company have alsoconducted an evaluation of performance of Executive Directors Chairman of the Board andCommittee(s) of the Board.
All the independent directors possess the requisite qualifications and experience inthe respective areas. They have been discharging their duties diligently as defined inschedule IV to the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and are contributing towards improvement in the governancestandards of the Company.
Every year the independent directors review the performance of the non-independentdirectors based on the criterion such as job profile and market perceptionself-declaration on the jobs handled/taken up opinion from peer and sub-ordinates theirperformance evaluations reporting and participation in the Company meetings and they havefound their performance to be satisfactory period under review.The Directors haveconsidered the principles for review of the performance of the non-independent and alsothe independent directors based on certain appropriate criterion. They find the qualityquantity and timeliness of flow of information between the Company management and theBoard that is necessary for the Board to effectively and reasonably perform their dutiesto be satisfactory.
M/s Amit Gupta & Associates Company Secretaries have been engaged as theSecretarial Auditors of the Company under the provisions of the Companies Act 2013 forthe financial year 2020-21. Secretarial Audit Report for the FY 2019-20 is given asAnnexure-1 to this report.Secretarial Audit report of Simbhaoli Power Private Limitedmaterial subsidiary have also been attached as Annexure 1A.
Explanation or comments on qualifications reservations or adverse remarks ordisclaimers made by the Secretarial Auditors in their reports
There is no qualification in both the Secretarial Audit Report(s). HoweverComments/Remarks are there in the Secretarial Audit Report(s) which are self-explanatoryand explained at the appropriate sections in the Annual Report.
Cost Auditors and Cost Records
In terms of provision of Section 148(1) of the Companies Act 2013 maintenance of CostRecords is required by the Company and accordingly such accounts and records are made andmaintained.
The Board of Directors in compliance with the provisions of the Companies Act 2013Rules and Notifications issued thereunder have appointed M/s Satnam Singh Saggu CostAccountants as Cost Auditors to conduct Audit of the Cost Accounts maintained by theCompany for the Financial Year 2020-21.
Pursuant to the provisions of Section 92 (3) of the Companies Act 2013 a copy of theannual return of the Company has been placed on the website of the company under Investorssection and furnished in Annexure-3 and attached to this Report.
SUBSIDIARY JOINT VENTURE AND ASSOCIATE COMPANIES
The Company has four subsidiary companies viz. Simbhaoli Power Private Limited (SPPL)Integrated Casetech Consultants Private Limited (ICCPL) Simbhaoli Speciality SugarsPrivate Limited (SISPL) and Simbhaoli Global Commodities DMCC Dubai (SGC). UniworldSugars Private Limited (USPL) is a joint venture company under CIRP defined elsewhere.Theconsolidated financial statements presented by the Company include financial informationof its subsidiary companies prepared in compliance with applicable accounting standards.
A Statement containing salient features of Financial Statements of Subsidiaries/ JV/Associates Companies in Form AOC-1 is annexed as Annexure- 6.
FOREIGN EXCHANGE EARNINGS AND OUTGO:
Activities relating to export; initiatives taken to increase exports; development ofnew export markets for products and services; exports and import plans are mentionedelsewhere in the Directors Report.
During the year Foreign Exchange aggregating to '11.15 Crore was earned by the Companyagainst export of Company's product and '1.43 lakh was spent on travelling. The Foreigncurrency exposures not hedged by derivative instruments or otherwise are given in Notes tothe Financial Statements.
Material Orders Passed by Regulators Courts Or Tribunal
There were no significant or material orders passed by the Regulators Courts orTribunal which impact the goingconcern status of the Company and the Company's operationsin future.
EMPLOYEE STOCK OPTION SCHEME
No stock options schemes have been introduced during the year.
The Report on Corporate Governance from the Practicing Company Secretary andcertificate from Chief Operating Officer and Chief Financial Officer form part of thisAnnual Report.
The Company has established a vigil mechanism which overseas through the AuditCommittee the genuine concerns expressed by the employees and other directors. TheCompany has also provided direct access to the Chairman of the Audit Committee onreporting issues concerning the interests of co-employees and the Company in order toprovide adequate safeguards against victimization of all persons.
The policy on the vigil mechanism comprising of the whistle blower policy has beendisseminated at the Company's website at link-http://www.simbhaolisugars.com/company_policies.asp. During the year no such complainthas been received by the Company.
LISTING OF SECURITIES
The equity shares of the Company are listed with the BSE Limited and National StockExchange of India Limited. The annual Listing fee for the financial year 2020-21 has beenpaid to both the stock exchanges.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION INITIATIVES RESEARCH AND DEVELOPMENT ANDFOREIGN EXCHANGE EARNINGS AND OUTGO
The information pertaining to conservation of energy technology initiatives Researchand Development Foreign exchange Earnings and out go as required under Section 134(3)(m)of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 isfurnished in Annexure-4.
PARTICULARS OF EMPLOYEES
The disclosure under the provisions of Section 197 (12) of the Companies Act 2013 readwith Rule 5(1)of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is annexed as Annexure -5.
There was no employee of the Company who has been paid remuneration under rule 5(2) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
M/s Mittal Gupta & Co Chartered Accountants Kanpur were appointed as statutoryauditors of the Company for a period of five years completed in current financial year2019-20. Your directors have recommended their re-appointment for another term of fiveyears viz. 2020-212021 -22 2022-23 2023-24 and 2024-25.They have being eligibleoffered themselves for the aforesaid appointment.
Explanation or comments on qualifications reservations or adverse remarks ordisclaimers made by the Statutory Auditors in their reports
Explanation or comments on qualifications reservations or adverse remarks ordisclaimers made by the Statutory Auditors in their reports are self-explanatory andexplained in details in notes to the accounts and at other appropriate sections in theAnnual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) of the Companies Act 2013 read with theRules made there under with respect to the Directors' responsibility statement it ishereby confirmed:
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 2019-20ended on March 31 2020 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 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 provisions ofall applicable laws and that such systems were adequate and operating effectively.
Certain statements in this report may be forward looking and represent intention of themanagement. Actual results may differ materially due to a number of risks or uncertaintiesassociated with the business. Investors/stakeholders therefore are advised to make theirown judgments before taking any investment business decisions.
The Board of Directors sincerely submit appreciation remarks the guidance provided bythe Government of India State Government of Uttar Pradesh the lender banks andinstitutions and the cooperation and assistance received from all executives staff andworkmen of the Company.
They also express special thanks to the joint venture partners for their association inrunning the affairs of the business of the respective subsidiary/associate companiesbeing part of the future growth of the Company.
The Directors also wish to state the gratitude to the Indian Sugar Mills Associationfarmers suppliers and all other concerned persons who have continued their valuablesupport to the Company.
For and on behalf of the Board of Directors Simbhaoli Sugars Limited
| ||SD/- |
| ||Gurmit Singh Mann |
|Place : Dharamsala ||Chairperson |
|Date : July 30 2020 ||(DIN - 00066653) |