TO THE MEMBERS OF SOVEREIGN DIAMONDS LIMITED
The Directors take pleasure in presenting the Forty - Fifth Annual Report together withthe Audited Financial Statements for the year ended 31st March 2019. TheManagement Discussion and Analysis has also been incorporated into this report.
1. FINANCIAL RESULTS
Key highlights of financial results for Sovereign Diamonds Limited for the financialyear 2018 - 19 are tabulated below:
(Rs. in Lakhs)
|Particulars ||Year Ended 31st March 2019 ||Year Ended 31st March 2018 |
|Income from Operations ||4025.38 ||3702.21 |
|Other Income ||0.11 ||1.44 |
|Total Income ||4025.49 ||3703.66 |
|Expenditure ||3776.77 ||3371.18 |
|Interest ||158.04 ||174.28 |
|Depreciation ||50.28 ||52.86 |
|Total Expenditure ||3985.09 ||3598.32 |
|Net Profit Before Tax ||40.40 ||105.34 |
|Provision for Taxation ||14.37 ||29.05 |
|(Add) / Less : Deferred Tax ||(1.76) ||(2.61) |
|Short / (Excess) Provision of earlier Years ||0.00 ||0.00 |
|Net Profit After Tax ||27.79 ||78.90 |
|Other Comprehensive Income ||(1.90) ||4.76 |
|Total Comprehensive Income ||25.89 ||83.66 |
|Balance brought forward from last year ||721.74 ||638.08 |
|Transfer to General Reserve ||0.00 ||0.00 |
|Balance carried forward to the Balance Sheet ||747.63 ||721.74 |
2. HIGHLIGHTS OF PERFORMANCE
Total net sales for the year were Rs. 4025.38 Lakhs as compared to Rs. 3702.21Lakhs in 2017-18.
Total profit before tax for the year was Rs. 40.40 Lakhs as compared to Rs.105.34 Lakhs in 2017-18.
3. TRANSFER TO RESERVES
The Board of Directors has not recommended transfer of any amount to reserves.
Your Directors do not recommend any dividend for the year as the profits earned need tobe ploughed back into the operations of your company and will be used for workingrequirements of your Company.
5. BUSINESS OPERATIONS
Your Company has changed its Bankers from Corporation Bank to HDFC Bank. It has reducedits limits from 14.50 Crores with Corporation Bank to just 12.00 Crores with HDFC Bank.This was done mainly due to availing Gold Loan facilities at much lower interest rates.This will bring down the finance cost considerably.
Your Company has leased out the Ground Floor of the Building for 5 years. This willalso add rental income into the company and help in liquidity.
Generally world markets were very slow due to political and economic issues everywhere.Accordingly your Company chose to reduce our exposure to these volatile markets. Most ofbusiness in the last 12 Months has been domestic sales where your Company feels to have astronger hold over the clients and their preferences. Your Company has added some Europeancustomers to the sales. This would help your Company very much in the long run as marginsare higher and credit period given to them is almost NIL.
Your Company feels that with the high profile banking scams in Jewellery industry inthe last 24 Months banks have tightened the rules even further on our industry. Keepingthis in mind your Company has started to reduce its bank facilities. Earlier Company hadcredit facilities of approx Rs. 14.50 Crores. Now Company have reduced this to Rs.
12.00 Crores and Company plans to reduce these even further by March 2020 by using upexisting stock and selling off what is not required immediately. Your Company are planninga lower inventory model for the next few years thereby reducing the interest burden onyour Company. This combined with lower rates of interest in Gold Loan would really work toour advantage. It's a time to cut expenses as far as possible.
There was no change in nature of business of your Company during the year underreview.
6. DISCLOSURES UNDER SECTION 134 (3) (l) OF THE COMPANIES ACT 2013
No material changes and commitments which could affect your Company's financialposition have occurred between the end of the financial year of your Company and date ofthis report.
7. SHARE CAPITAL
The paid up Equity Share Capital as on 31st March 2019 was Rs. 578.80Lakhs. During the year under review your Company has not issued shares with differentialvoting rights nor granted stock options nor sweat equity. There was no change in yourCompany's share capital during the year under review. The Promoter and Promoter Group areholding 3762744 shares equivalent to 65.01% of the total Issued and Paid- up ShareCapital.
8.1 Retirement by Rotation
Pursuant to Section 152(6) of the Companies Act 2013 and in terms of the Articles ofAssociation of your Company Mr. Ajay Gehani Executive Chairman retires by rotation atthe forthcoming Annual General Meeting. Being eligible he offers himself forre-appointment.
8.2 Resignation of Woman Director and Chief Financial Officer
Mrs. Deepika Ajay Gehani Woman Director and Chief Financial Officer of your Companyresigned on 08th February 2019. The Board of Directors places on records hersincere thanks and gratitude to the contribution made by her to the progress and growth ofyour Company.
8.3 Appointment and Re-Appointment of Director and Chief Financial Officer
Your Company has at its Board Meeting held on 08th February 2019 appointedMrs.ArundhatiMaliasWomanDirectorandChiefFinancialOfficerfora periodof5yearsw.e.f. 08thFebruary 2019 in place of Mrs. Deepika Ajay Gehani. The approval from Members has beenproposed at Item No. 3 and 4 of the Notice of 45th Annual General Meeting. YourCompany has at its Board Meeting held on 08th February 2019 re-appointed Mr.Mohanram Pai and Mr. Rajesh Arora as Independent Directors for a second consecutive termof 5 years w.e.f. 01st April 2019. The approval from Members has been proposedat Item No. 5 and 6 of the Notice of 45th Annual General Meeting.
8.4 Declaration by Independent Directors
Your Company has received declarations from the Independent Directors of your Companyconfirming that they meet with the criteria of independence as prescribed
both under Section 149(6) of the Companies Act 2013 and under Regulation 17 of theSEBI (LODR) Regulations 2015.
8.5 Annual Board Evaluation
According to Regulation of 25(3) of the SEBI (LODR) Regulations 2015 and Circular No.SEBI/HO/CFD/CMD/CIR/P/2017/004 dated 5th January 2017 issued by SEBI onGuidance Note on Board Evaluation a meeting of the Independent Directors was held on 08thFebruary 2019 to inter alia evaluate the performance of the Non-Independent Directorsincluding the Chairman. The Board thereafter in its meeting held on the same day evaluatedthe performance of the Independent Directors.
8.6 Key Managerial Personnel
The following persons have been designated as Key Managerial Personnel of your Companypursuant to Section 2(51) and Section 203 of the Act read with Rule 8(5)(iii) of theCompanies (Accounts) Rules 2014 framed thereunder:
1. Mr. Ajay Geheni Managing Director
2. Mrs. Deepika Gehani Whole Time Director - CFO*
3. Mrs. Arundhati Mali Director - CFO$
*Resigned w.e.f. 08th February 2019 $Appointed w.e.f. 08thFebruary 2019
None of the Key Managerial Personnel have resigned during the year under review.
8.7 Remuneration Policy
The Board has in accordance with the provisions of Section 178(3) of the Companies Act2013 formulated the policy setting out the criteria for determining qualificationspositive attributes independence of a Director and policy relating to remuneration forDirectors Key Managerial Personnel and Senior Management Employees.
8.8 Board Meetings
A calendar of Meetings is prepared and circulated in advance to the Directors.
During the year your Company has held 5 (Five) Board Meetings which were held on 30thMay 2018; 14th August 2018; 03rd November 2018; 08thFebruary 2019 and 20th March 2019. The maximum interval between any twomeetings did not exceed 120 days.
9. PARTICULARS OF EMPLOYEES
During the year there was no employee in receipt of remuneration in excess of limit asprescribed in the Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014. The prescribed Particulars of Employees as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is attached as "Annexure A" and form part ofthis Report.
10. DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013:
a) that in the preparation of the Annual Financial Statements for the year ended 31stMarch 2019 the applicable accounting standards have been followed along withproper explanation relating to material departures if any;
b) that such accounting policies as mentioned in Note 4 of the Notes to the FinancialStatements have been selected and applied consistently and judgement and estimates havebeen made that are reasonable and prudent so as to give a true and fair view of the stateof affairs of your Company as at 31st March 2019 and of the profit of yourCompany for the year ended on that date;
c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of your Company and for preventing and detecting fraud and otherirregularities;
d) that the Annual Financial Statements have been prepared on a going concern basis;
e) that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively;
f) that systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.
11. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company maintains an adequate and effective Internal Control System commensuratewith its size and complexity. We believe that these internal control systems provideamong other things a reasonable assurance that transactions are executed with Managementauthorization and that they are recorded in all material respects to permit preparation offinancial statements in conformity with established accounting principles and that theassets of your Company are adequately safeguarded against significant misuse or loss.
An independent Internal Audit function is an important element of your Company'sinternal control system. The internal control system is supplemented through an extensiveinternal audit programme and periodic review by Management and Audit Committee.
Your Company has in place adequate Internal Financial Controls with reference toFinancial Statements. During the year such controls were tested and no reportablematerial weaknesses in the design or operation were observed.
The Audit Committee reviewed the audit program and findings of the Internal Auditdepartment and your Company when needed takes corrective actions.
12. COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINT VENTURES ORASSOCIATE COMPANIES
There are no companies which have become or ceased to be its Subsidiaries JointVenture or Associate Companies during the financial year 2018 - 19.
Your Company has not accepted deposit from the public and shareholders falling withinthe ambit of Section 73 of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014. Hence the requirement for furnishing details of deposits which arenot in compliance with the Chapter V of the Act is not applicable.
14. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the Notes to the Financial Statements.
15. RELATED PARTY TRANSACTIONS
A Related Party Policy has been adopted by the Board of Directors at its meeting heldon 13th August 2014 for determining the materiality of transactions withrelated parties and dealings with them. The Audit Committee reviews all related partytransactions quarterly.
Further the members may note that your Company has not entered into the followingkinds of related party transactions:
- Contracts / arrangement / transactions which are not at arms' length basis
- Any Material contracts / arrangement / transactions [as per Regulation 23 of the SEBI(LODR) Regulations 2015]
16. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
The criteria prescribed for the applicability of Corporate Social Responsibility underSection 135 of the Companies Act 2013 is not applicable to your Company.
17. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as "AnnexureB".
18. DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY
The nature of business is manufacturing of Jewellery. The inheritant risks to thebusiness of your Company are as follows:
a. Foreign Exchange Risk
b. Gold Price Risk
c. Stiff Competition
d. Government Policy on import of gold
e. Risk elements in business transactions
f. Labour Risk
The prices of Jewellery consist of Gold Diamonds & Labour out of this three Goldand diamonds consist of 90% of the price of Jewellery. Your Company has no control on theprice of Gold and Diamonds and the same is available through Exchanges Market and Banks.The said risk shall results in favourable / unfavourable to your Company. The nature ofrisk is dynamic of business and entrepreneurship.
Your Company has not formed Risk Management Committee as it is not applicable underRegulation 21 of the SEBI (LODR) Regulations 2015.
19. VIGIL MECHANISM / WHISTLE BLOWER POLICY
Your Company has a vigil mechanism to deal with instance of fraud and mismanagement ifany. During the financial year 2017 - 18 in accordance with the Regulation 22 of the SEBIRegulations and pursuant to Section 177 (9) read with Rule 7 of the Companies (Meetings ofBoard and its Powers) Rules 2014 your Company has adopted a Whistle Blower Policy. YourCompany promotes ethical behavior in all its business activities and has put in place amechanism of reporting illegal or unethical behavior. As per the Whistle Blower Policythe employees are free to report violations of laws rules regulations or un-ethicalconduct to their immediate superior. The confidentiality of those reporting / violationsis maintained and they are not subjected to any discriminatory practice.
20. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators / Courts which wouldimpact the going concern status of your Company and its future operations.
21.1 Statutory Auditors
M/s. Pulindra Patel & Co. Chartered Accountants were appointed as StatutoryAuditors of the Company for a period of 5 (Five) years from 2017 - 18 to 2021 - 22 at the43rd Annual General Meeting held on 29th July 2017. In view of theamendment to Section 139 of the Companies Act 2013 the Company is not required to ratifythe reappointment of the Statutory Auditor at every Annual General Meeting. Hence theitem of ratification of re-appointment of Statutory Auditor is not considered in thisAnnual General Meeting.
21.2 Statutory Auditors Observations
The Report given by the Auditors on the financial statements of your Company is part ofthe Annual Report. There has been no qualification reservation adverse remark ordisclaimer given by the Auditors in their Report.
21.3 Secretarial Audit
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hasappointed M/s. P. P. Shah & Co. Practicing Company Secretary to undertake theSecretarial Audit of your Company. The Report of the Secretarial Audit Report is annexedherewith as "Annexure C".
21.4 Qualifications in Secretarial Audit Report
A. Appointment of Company Secretary:
As per Section 203 (1) (ii) the Company is required to appoint Company Secretary. TheCompany has not appointed Company Secretary consequently the Annual Audited FinancialStatements for the financial year ended 31st March 2018 were not signed byCompany Secretary. In this regard the management of the Company has provided thefollowing reply:
(i) The Company has appointed Mr. Ajay Gehani Managing Director as Compliance Officerof the Company who looks after the compliance of the Companies Act 2013 and the SEBI Actand rules made thereunder.
(ii) The Company has availed the services of Practicing Company Secretary for advisingon compliance of the Companies Act 2013 and the SEBI Act and rules made thereunder.
(iii) The Volume and Scope of work for the Company Secretary is less and it is not afull time work and the job of Company Secretary is not attractive commensurate with thescope of work and salary.
B. Website Posting:
As per the various sections of the Companies Act 2013 the SEBI (LODR) Regulations2015 and Secretarial Standard - 2 the Company is required to post various information /policies on the website of the Company. The Company has not posted any information /policies on the website of the Company. In this regard the management of the Companyhas provided the following reply:
(i) The Company has availed exemption under Regulation 15(2) in respect of websiteposting as per Regulation 46 of the SEBI (LODR) Regulation 2015. However the Company isfiling regularly all the information with BSE and all the information is available on thewebsite of BSE.
C. Composition of Nomination and Remuneration Committee:
In respect of the composition of the Nomination and Remuneration Committee we observeas follows:
As per Section 178 of the Companies Act 2013 the composition of Nomination andRemuneration Committee shall be as follows:
178 (1): "The Board of the Directors of every listed company and such other classor classes of companies as may be prescribed shall constitute the Nomination andRemuneration Committee consisting of 3 or more non-executive directors out of which notless than one half shall be independent directors:
Provided that the chairperson of the company (whether executive or nonexecutive)may be appointed as a member of the Nomination and Remuneration Committee but shall notchair such Committee."
The Nomination and Remuneration Committee of the Company comprises of 2 IndependentDirectors and 1 Executive Director. In this regard the Management has given the followingreply:
"The Company has 4 Directors out of them 2 are Executive and 2 are IndependentDirectors. Accordingly the composition of the Board is such that the Nomination andRemuneration Committee cannot comprise of 3 Non-Executive Directors. Mr. Ajay GehaniExecutive Director is one of the member of the Committee. However with the presentcomposition of Nomination and Remuneration Committee it has been ensured that majorityremains with Independent Directors and accordingly the spirit of Corporate Governance isachieved."
22. COMPLIANCE OF SECRETARIAL STANDARDS
During the year under review your Company has complied with the applicable SecretarialStandards issued by the Institute of Company Secretaries of India.
23. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as "Annexure D".
24. HUMAN RESOURCES
The relations of the employees of your Company have been cordial during the year.Employees are considered to be team members being one of the most critical resources inthe business which maximize the effectiveness of the Organization. Human resources buildthe Enterprise and the sense of belonging would inculcate the spirit of dedication andloyalty amongst them towards strengthening your Company's Polices and Systems. YourCompany maintains healthy cordial and harmonious relations with all personnel and therebyenhancing the contributory value of the Human Resources.
25. ENVIRONMENT AND SAFETY
Your Company is conscious of the importance of environmentally clean and safeoperations. Your Company's policy requires conduct of operations in such a manner so asto ensure safety of all concerned compliances of environmental regulations andpreservation of natural resources.
26. ENHANCING SHAREHOLDERS VALUE
Your Company believes that its Members are among its most important stakeholders.Accordingly your Company's operations are committed to the pursuit of achieving highlevels of operating performance and cost competitiveness consolidating and building forgrowth enhancing the productive asset and resource base and nurturing overall corporatereputation. Your Company is also committed to creating value for its other stakeholders byensuring that its corporate actions positively impact the socio-economic and environmentaldimensions and contribute to sustainable growth and development.
27. GREEN INITIATIVES
Electronic copies of the Annual Report 2018 - 19 and Notice of the 45thAnnual General Meeting are sent to all members whose email addresses are registered withyour Company / Depository Participant(s). For members who have not registered their emailaddresses physical copies of the Annual Report 2018 - 19 and Notice of the 45thAnnual General Meeting under Section 101 of the Companies Act 2013 are sent in thepermitted mode. Members requiring physical copies can send a request to your Company.
Your Company provides e-voting facility to all its members to enable them to cast theirvotes electronically on all resolutions set forth in the Notice. This is pursuant to theSection 108 of the Companies Act 2013 and Rule 20 of the Companies (Management andAdministration) Amendment Rules 2015.
28. MANAGEMENT DISCUSSION AND ANALYSIS
As required under the Schedule V (B) of the SEBI (LODR) Regulations 2015 report on"Management Discussion and Analysis" is attached and forms part of this AnnualReport
29. CORPORATE GOVERNANCE
As per Regulation 15(2) of the SEBI (LODR) Regulations 2015 the provisions ofCorporate Governance are non-mandatory to the following class of Companies:
a. Companies having Paid-up Equity Share Capital not exceeding Rs. 10 Crore and Networth not exceeding Rs. 25 Crore as on the last day of the previous financial year;
Provided that where the provisions of Regulation 27 becomes applicable to a company ata later date such company shall comply with the requirements of Regulation 27 within sixmonths from the date on which the provisions became applicable to the company.
b. Companies whose equity share capital is listed exclusively on the SME and SME- ITPPlatforms.
The Paid-up Share Capital of your Company is Rs. 5.79 Crores as on 31stMarch 2019. The Reserve and Surplus is Rs. 8.44 Crores. Accordingly the Paid-up Capitaland Net Worth is below the prescribed limit for mandatory applicability of CorporateGovernance clause as per Regulation 15(2)(a) of the SEBI (LODR) Regulations 2015. YourCompany has decided not to opt for compliance of Regulation 27 for the time being. Theletter for the same has been filed with BSE on 28th May 2019.
30. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013
Your Company firmly believes in providing a safe supportive and friendly workplaceenvironment - a workplace where our values come to life through the supporting behaviours.Positive workplace environment and a great employee experience are integral part of ourculture. Your Company believes in providing and ensuring a workplace free fromdiscrimination and harassment based on gender.
Your Company educates its employees as to what may constitute sexual harassment and inthe event of any occurrence of an incident constituting sexual harassment your Companyprovides the mechanism to seek recourse and redressal to the concerned individualsubjected to sexual harassment.
Your Company has a Sexual Harassment Prevention and Grievance Handling Policy in placeto provide clarity around the process to raise such a grievance and how the grievance willbe investigated and resolved. An Internal Complaints Committee has been constituted inline with the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013.
No complaint has been raised during the year ended 31st March 2019.
31. MD AND CFO CERTIFICATION
Certificate from Mr. Ajay Gehani Managing Director and Mrs. Arundhati Mali Director& CFO pursuant to provisions of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 for the year under review was placed before the Board ofDirectors of your Company at its meeting held on 28th May 2019.
32. INDIAN ACCOUNTING STANDARDS (IND-AS)
Your Company has followed the relevant Accounting Standards notified by the Companies(Indian Accounting Standards) Rules 2015 while preparing financial statements.
33. DISCLOSURE WITH RESPECT TO DEMAT SUSPENSE ACCOUNT/UNCLAIMED SUSPENSE ACCOUNT
As on 31st March 2019 there are no outstanding shares lying in the dematsuspense account / unclaimed suspense account.
34. CAPITAL EXPENDITURE
Capital Expenditure during the year towards Tangible & Intangible Assets amountedto Rs. 13.91 Lakhs which was spent on Plant & Machinery Furniture and Fixture OfficeEquipment Vehicle and Computers.
35. SUBSIDIARY COMPANIES
Your Company has no Subsidiary Company.
36. PLEDGE OF SHARES
None of the equity shares of the Directors of your Company are pledged with any banksor financial institutions.
37. INFORMATION SYSTEM
In a business where information is critical Information Technology plays a vital rolefacilitating informed decision making to grow the business. Over the years your Companyhas invested extensively in infrastructure people and processes with the objective tocapture protect and transmit information with speed and accuracy.
38. LISTING WITH STOCK EXCHANGES
Your Company is listed with BSE Limited and your Company has duly paid the listing feesto the Exchange.
Your Directors thank the various Central and State Government DepartmentsOrganizations and Agencies for the continued help and co-operation extended by them. TheDirectors also gratefully acknowledge all stakeholders of your Company viz. customersmembers dealers vendors banks and other business partners for the excellent supportreceived from them during the year. The Directors place on record their sincereappreciation to all employees of your Company for their unstinted commitment and continuedcontribution to your Company.
40. CAUTIONARY STATEMENT
Statements in the Board's Report describing your Company's objectives expectations orforecasts may be forward-looking within the meaning of applicable securities laws andregulations. Actual results may differ materially from those expressed in the statement.Important factors that could influence your Company's operations include global anddomestic demand and supply conditions affecting selling prices of finished goods inputavailability and prices changes in government regulations tax laws economicdevelopments within the country and other factors such as litigation and industrialrelations.
| ||For and on behalf of the Board of Directors of Sovereign Diamonds Limited |
| ||Sd/- ||Sd/- |
|Place: Mumbai ||Ajay Gehani ||Arundhati Mali |
|Date: 28th May 2019 ||Managing Director ||CFO |