TO THE MEMBERS
Your Directors are pleased to present the 45th Annual Report and the Audited FinancialStatement of the Company for the year ended December 31 2018.
1. FINANCIAL RESULTS
|Particulars ||Current Year ||Previous Year |
| ||31.12.2018 ||31.12.2017 |
| ||( in Millions) ||( in Millions) |
|Revenue from Operations (net) ||1930.16 ||2175.69 |
|Other Income ||61.27 ||38.44 |
|(a) Total Income: ||1991.43 ||2214.13 |
|(b) Total Expenditure: ||1528.44 ||1760.36 |
|Gross Profit before Depreciation and Amortization expenses ||462.99 ||453.77 |
|Less: Depreciation & Amortization expenses ||52.53 ||59.81 |
|Profit Before Exceptional Items and Tax ||410.46 ||393.96 |
|Add: Exceptional items ||141.08 ||- |
|Profit before tax ||551.55 ||393.96 |
|Less: Current Tax ||158.96 ||137.08 |
|Deferred tax ||(3.05) ||0.79 |
|(Excess)/Short provision of income tax of earlier years (Net) ||- ||(0.86) |
| ||155.91 ||137.02 |
|Profit After Tax ||395.64 ||256.94 |
|Add: Profit brought forward from previous year ||827.56 ||649.52 |
|Dividend on equity shares ||(75.17) ||(64.73) |
|Tax on Dividend ||(15.45) ||(13.18) |
|Remeasurement gains/(losses) on defined benefit plans (net of tax) ||(1.57) ||(0.99) |
|Profit available for appropriation ||1131.01 ||827.56 |
|Profit carried forward to Balance Sheet ||1131.01 ||827.56 |
2. PERFORMANCE OVERVIEW
The business environment in general and in particular of the textile industry remainedsomewhat subdued in 2018 contributed by liquidity issues and difficulty in obtainingfinance from Banks at our customers end. In financial year 2018 despite tough businessenvironment your Company has achieved standalone revenue from operations of Rs. 1930.16Million (Previous year Rs. 2175.69 Million) a decline of about 13% in revenue as comparedto previous year. The decline in revenue from operations is mainly on account of lowcapital investment by our customer(s) and textile industry in general which resulted inreduced demand for Company's Capital Products. However despite decline in sales with thequality products in hand and strong sales force your company has maintained the marginsand achieved Operational Profit of Rs. 410.46 Million (Previous year Rs. 393.96 Million);a growth of about 4% as compared to previous year. During the year the Company has madeprofit from exceptional item of Rs. 141.08 Million from divestment by the Company of its100% equity investment in Atul Sugar Screens Pvt. Ltd. ("Atul") and sale ofcertain identified assets of galvanic business to Atul.
Your Company has achieved consolidated revenue from operations of Rs. 1948.04 Millionand Operational Profit of Rs. 414 Million. The Company has also made profit fromexceptional item of Rs. 80.90 Million from divestment of 100% equity investment in Atuland sale of certain identified assets of galvanic business to Atul.
3. RESERVES AND SURPLUS:
The Company has not transferred any amount to General Reserves for the financial year2018.
Considering the Company's financial performance the Board of Directors haverecommended payment of Final Dividend of Rs. 55/- per equity share having face value ofRs. 10/- each (i.e. 550%) for the financial year ended on December 31 2018. Thiscomprises of normal dividend of Rs. 40/- per equity share and a special dividend of Rs.15/- per equity share on account of gain arising from divestment of equity investment andsale of assets of galvanic business. This Final Dividend is subject to the approval ofMembers in the 45th Annual General Meeting of the Company.
5. DIVESTMENT OF EQUITY INVESTMENT HELD IN WHOLLY OWNED SUBSIDIARY
Based on recommendation of Audit Committee the Board of Directors of the Company atits meeting held on March 1 2018 had in-principle approved divestment of 100% equityinvestment held by the Company in Atul a Wholly Owned Subsidiary Company (Not a MaterialSubsidiary) and constituted Divestment Committee to finalize the said divestment. TheDivestment Committee in its meeting held on March 7 2018 had approved divestment of 100%equity investment held in Atul for a total consideration of INR 104 Million pursuant to agroup restructuring exercise. The consideration was arrived at on the basis of valuationreport issued by Independent Valuer. Consequent to such divestment Atul ceased to besubsidiary of the Company w.e.f March 22 2018.
6. SALE OF IDENTIFIED ASSETS RELATED TO SUGAR SCREENS BUSINESS
Based on the recommendation of Audit Committee the Board of Directors of the Companyin its meeting held on April 5 2018 had approved the sale of identified assets relatedto Sugar Screens business and assignment of trademark "Atul" to Atul SugarScreens Pvt. Ltd. at a total consideration of INR 99.62 Million. The sale considerationwas arrived at as per valuation report issued by Independent Valuer.
7. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Information as required to be given under Section 134(3)(m) of the Act read with Rule8(3) of the Companies (Accounts) Rules 2014 is provided in Annexure I forming part ofthis Report.
8. FIXED DEPOSITS
During the year the Company has not accepted any deposits falling within the purviewof Section 73 of the Act and rules made there under.
9. CORPORATE GOVERNANCE
A separate report on Corporate Governance Compliance and a Management Discussion andAnalysis Report as required by SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations") forms part of the Director's Report asAnnexure-II and III respectively along with the required Certificate from the PracticingCompany Secretary regarding compliance of the conditions of Corporate Governance.
10. AUDIT COMMITTEE
The Company has in place an Audit Committee in terms of requirements of the Act readwith rules framed thereunder and Listing Regulations. The details relating to the AuditCommittee are given in the Corporate Governance Report forming part of this report. Therecommendations of Audit Committee were duly accepted by the Board of Directors.
11. DIRECTORS AND KEY MANAGERIAL PERSONNEL
On the recommendation of the Nomination and Remuneration Committee the Board ofDirectors has appointed Ms. Sangeeta Sachdev (DIN: 08118379) and Mr. Eiko Ris (DIN:07428696) as an Additional Director on the Board of the Company w.e.f May 2 2018 andMarch 12 2019 respectively who holds office up to the date of forthcoming Annual GeneralMeeting and are eligible for appointment as a Director of the Company. Notice underSection 160 of the Act has been received from Member(s) proposing their candidature forthe office of Director of the Company. The Board recommends their appointment as Directorsto the members of the Company.
Ms. Everdina Herma Slijkhuis (DIN: 06997013) due to her other pre-occupations hasresigned from the Board of the Company w.e.f. May 2 2018. The Board placed on record itsappreciation for the contribution made by her as a Board Member.
At the 45th Annual General Meeting Mr. Dirk Wim Joustra (DIN: 00481154) retires byrotation and being eligible offers himself for re-appointment.
The Members at the 41st Annual General Meeting appointed Mr. Khurshed. M. Thanawalla(DIN: 00201749) and Mr. Marco Wadia (DIN: 00244357) as an Independent Director of theCompany for a term of five consecutive years as per the requirement of the Act. Theabovenamed Independent Directors have furnished declarations to the Company confirmingthat they meet the criteria prescribed for Independent Directors under Section 149 (6) ofthe Act and Regulation 16(1)(b) of the Listing Regulations.
As per SEBI (Listing Obligations and Disclosure Requirements) Amendment Regulations2018 the Company has received the approval of Members of the Company by way of PostalBallot on January 2 2019 for continuation of directorship of Mr. K.M. Thanawalla whohas attained the age of seventy five years on December 24 2017 and for payment ofcommission to Mr. K.M. Thanawalla exceeding 50% of total commission that may be payable toIndependent Directors of the Company for the financial year 2018.
The tenure of Mr. Shailesh Wani as a Managing Director of the Company expires onSeptember 30 2019. The Board of Directors in its meeting held on February 14 2019 notedthat Company has grown under his leadership and it will be in the interest of the Companyto re-appoint him. Based on the recommendation of Nomination and Remuneration Committeethe Board has re-appointed Mr. Shailesh Wani as a Managing Director of the Company for afurther period of three years w.e.f. October 1 2019 subject to the approval of Membersof the Company.
Mrs. Varsha Adhikari resigned as a Company Secretary of the Company with effect fromthe close of business hours of January 21 2019. Consequently she also ceases to be theCompliance Officer and Key Managerial Personnel of the Company. The Board had appointedMr. Vijay Moolani as the Compliance Officer of the Company w.e.f. February 14 2019. Heresigned as the Compliance Officer of the Company w.e.f April 5 2019. The Board hasappointed Mr. Sanjeev Singh Sengar as the Company Secretary and Compliance Officer of theCompany w.e.f April 5 2019 and categorized him as a Whole-time Key Managerial Personnelof the Company.
12. BOARD MEETING
During the financial year ended December 31 2018 five meetings of the Board ofDirectors were held. The details of the attendance of Directors at the Board Meeting arementioned in the Corporate Governance Report annexed hereto.
Your Directors confirm that to the best of their knowledge and belief applicableprovisions related to Secretarial Standards on Meetings of the Board of Directors issuedby The Institute of Company Secretaries of India and approved by the Central Governmenthave been complied with.
13. PERFORMANCE EVALUATION
The details of Annual Performance Evaluation of Individual Directors includingChairperson Board of Directors and Committees of Board of Directors are mentioned in theCorporate Governance Report.
14. CORPORATE SOCIAL RESPONSIBILITY
In accordance with Section 135 of the Act and Rules framed thereunder the Company hasconstituted a Corporate Social Responsibility ("CSR") Committee of Directors.The details of composition of CSR Committee are given in the Corporate Governance Report.The details of CSR policy and CSR spending by the Company as required under the Companies(Corporate Social Responsibility Policy) Rules 2014 have been provided as Annexure-IV tothis report.
15. REMUNERATION POLICY
The details of the Remuneration Policy is mentioned in the Corporate Governance Report.A Statement of Disclosure of Remuneration pursuant to Section 197 of the Act read withRule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 (as amended) is provided as Annexure V forming part of this Report.
16. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope of Internal Audit is well defined in theorganization. The Internal Audit Report is regularly placed before the Audit Committee ofthe Board. The Management monitors and evaluates the efficacy and adequacy of internalcontrol systems in the Company its compliance with standard operating proceduresaccounting procedures and policies. Based on the report of Internal Auditors processowners undertake corrective action in their respective areas and thereby strengthening thecontrols continuously. Significant audit observations if any and corrective actionssuggested and taken are presented to the Audit Committee of the Board.
17. EXTRACTS OF ANNUAL RETURN
The extracts of Annual Return in Form MGT-9 as required under Section 92(3) of the Act(as amended) read with Rule 12 of the Companies (Management and Administration) Rules2014 (as amended) is available at the website of the Company at www.stovec.com athttps://www.spgprints.com/ spgprints-group/companies-agents/stovec-industries-ltd.
18. PARTICULARS OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTIES
The Particulars of contract or arrangement with Related Parties referred to in Section188 (1) of the Act in the prescribed Form AOC-2 forms part of this Report as Annexure VI.
Further based on the recommendation of Audit Committee the Board of Directors of theCompany at its meeting held on April 5 2019 subject to the approval of Members in theforthcoming Annual General Meeting have approved material related party transactionrelating to acquisition of Service and Spare Parts Business relating to rotary printingequipment which includes design & drawings customer & supplier database andother related assets each of which forms an integral part of the Service and Spare PartsBusiness from SPGPrints B.V. the Holding Company of the Company at a totalconsideration of Euro 2.49 Million (equivalent to approximately INR 199 Million) which isbased on independent valuation.
19. PARTICULARS OF LOANS GUARANTEE OR INVESTMENTS
The details of Investments under Section 186 of the Act is provided in note no. 5 ofNotes to the Standalone Financial Statements.
20. VIGIL MECHANISM
As per the provisions of Section 177(9) of the Act the Company is required toestablish a Vigil Mechanism for Directors and Employees to report genuine concerns. TheCompany has a Whistle Blower Policy (also known as Vigil Mechanism) in place and thedetails of the Whistle Blower Policy are provided in the Report on Corporate Governanceforming part of this Report.
The Company has disclosed information about the establishment of the WhistleblowerPolicy on its website at www.stovec.com athttps://www.spgprints.com/uploads/documents/Stovec/Stovec-policies/Whistle_Blower_Policy.pdf.
21. RISK MANAGEMENT
The Company has formulated Risk Management Policy to monitor the risks and toaddress/mitigate those risks associated with the Company. The Board of Directors do notforesee any elements of risk which in its opinion may threaten the existence of theCompany.
22. DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134 (3)(c) and 134 (5) of the Act your directorsconfirm to the best of their knowledge and belief:
a) that in the preparation of the annual financial statements for the year endedDecember 31 2018 the applicable accounting standards have been followed and that nomaterial departures have been made from the same;
b) that such accounting policies have been selected and applied consistently andjudgment and estimates have been made that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company as at December 31 2018 and ofthe profit of the Company 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 the Company and for preventing and detecting fraud and otherirregularities;
d) that the annual financial statements for the year ended December 31 2018 have beenprepared on a going concern basis;
e) that proper internal financial controls are in place in the Company and that suchinternal financial controls are adequate and are operating effectively; and f) that propersystems have been devised to ensure compliance with the provisions of all applicable lawsand that such systems are adequate and operating effectively.
23. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
The Company has in place a Policy on Prevention of Sexual Harassment of Women atWorkplace in line with the requirements of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and Rules framed thereunder and InternalComplaint's Committee has also been set up to redress complaints regarding sexualharassment and accordingly the Company has complied with the provisions relating to theconstitution of Internal Complaints Committee in terms of Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013. During the year no complaintwith allegations of sexual harassment was received by the Company.
24. REPORTING OF FRAUDS
There have been no instances of fraud reported by the Statutory Auditors under Section143(12) of the Act and Rules framed thereunder either to the Company or to the CentralGovernment.
25. STATUTORY AUDITORS
Pursuant to the provisions of Section 139 of the Act read with the Companies (Audit andAuditor's) Rules 2014 M/s. Deloitte Haskins & Sells LLP Chartered Accountants (FirmRegistration No. 117366W/W-100018) were appointed as Statutory Auditors of the Company fora term of 5 consecutive years to hold office from the conclusion of 43rd Annual GeneralMeeting until the conclusion of 48th Annual General Meeting subject to ratification oftheir appointment by Members at every subsequent Annual General Meeting.
The Ministry of Corporate Affairs vide Companies Amendment Act 2017 omitted therequirement related to ratification of appointment of Statutory Auditors at every AnnualGeneral Meeting w.e.f. May 7 2018. Pursuant to the amendment the Board hereby recommendsto the Members of the Company to delete the requirement of seeking ratification ofappointment of Statutory Auditors M/s. Deloitte Haskins & Sells LLP CharteredAccountants (Firm Registration No. 117366W/W-100018) at every Annual General Meeting fromthe resolution passed at the 43rd Annual General Meeting of the Company held on May 112017."
26. COST RECORDS AND COST AUDITORS
In terms of Section 148 of the Companies Act 2013 read with Rule 8 of the Companies(Accounts) Rules 2014 (as amended) it is stated that the cost accounts and records aremade and maintained by the Company as specified by Central Government.
Further the Board of Directors on the recommendation of the Audit Committee haveappointed M/s Dalwadi and Associates Cost Accountants (Firm Registration No.000338) asits Cost Auditors to audit the cost records of the Company for the financial year 2019 ata remuneration as mentioned in the Notice convening the 45th Annual General Meeting. Acertificate has been received from the Cost Auditors to the effect that their appointmentas Cost Auditors of the Company if made would be in accordance with the limits specifiedunder Section 141 of the Act and Rules framed thereunder. A resolution seeking Member'sapproval for the remuneration payable to Cost Auditors forms part of the Notice convening45th Annual General Meeting of the Company and the same is recommended for theconsideration and approval of Members. The Company had filed Cost Audit Report forfinancial year ended December 31 2017 on May 30 2018 which is within the time limit asprescribed under The Companies (Cost Records and Audit) Rules 2014 (as amended).
27. SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s Sandip Sheth & Associates Practicing Company Secretaries (COP No.4354) for conducting Secretarial Audit of the Company for the financial year ended onDecember 31 2018. The Secretarial Audit Report is provided as Annexure-VII to thisreport.
28. AUDITORS REPORT
There are no qualifications reservations or adverse remarks made by M/s. DeloitteHaskins & Sells LLP Chartered Accountants Statutory Auditors in their audit reportand by M/s. Sandip Sheth & Associates Practicing Company Secretaries SecretarialAuditors in their secretarial audit report and therefore need not require any commentsunder section 134(3)(f) of the Act.
29. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING FINANCIAL POSITION OF THECOMPANY FROM THE END OF FINANCIAL YEAR AND TILL THE END OF THIS REPORT.
There have been no material changes and commitments if any affecting the financialposition of the Company which have occurred between the end of the Financial Year of theCompany to which the Financial Statements relate and the date of this Report.
However the Company subject to the approval of Members in the forthcoming AnnualGeneral Meeting of the Company to be held on 9th May 2019 has proposed acquisition ofService and Spare Parts Business relating to rotary printing equipment from SPGPrintsB.V. the Holding Company of the Company at a total consideration of Euro 2.49 Million(equivalent to approximately INR 199 Million) based on independent valuation. The saidtransaction has also been reported at Sr. No. 18 to this report.
30. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
As on date of this report there are no significant and material orders passed by theRegulators or Courts or Tribunals impacting the going concern status and operations of theCompany in future.
31. PARTICULARS OF EMPLOYEES
The information on employees particulars as required under Section 197 (12) of the Actread with Rule 5 (2) and 5 (3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 (as amended) is provided in the Annexure forming partof the Report. In terms of Section 136 of the Act the Report and Financial Statements arebeing sent to the Members and others entitled thereto excluding aforesaid Annexure. Thesaid information is available for inspection by the Members at the Registered Office ofthe Company as per the details mentioned in the Notice of 45th Annual General Meeting onany working day of the Company (i.e. except Saturday Sunday and Public Holidays) up tothe date of the 45th Annual General Meeting. Any Member interested in obtaining a copy ofthe same may write to the Company Secretary of the Company.
Your Directors place on record their deep appreciation for the contribution made by theemployees of the Company at all levels.
The Board of Directors express its deep sense of appreciation for the contributionco-operation and confidence reposed in the Company by SPGPrints B.V. the ParentCompany. The Board of Directors also extend its gratitude to its valued shareholdersemployees customers bankers suppliers and other stakeholders for their continuedco-operation and support.
| ||For and on behalf of Board of Directors |
| ||Sd/- |
|Date: April 5 2019 ||K.M.Thanawalla |
|Place: Ahmedabad ||Chairman |
| ||DIN: 00201749 |
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
(Pursuant to provisions of Section 134(3)(m) of the Companies Act 2013 read with Rule8(3) of the Companies (Accounts) Rules 2014).
A. Conservation of Energy
|(i) The steps taken or impact on conservation of energy || Conducted third party energy audit and suitable actions are implemented as suggested in Audit report. |
| || Continued with initiatives such as |
| || Gradual replacement of old motors with new one for improved efficiency. |
| || Maintained Nickel bath efficiency by optimizing operating voltages. |
| || Maintained & improved power factor by installing additional capacitor banks. |
| || Replaced old lighting fixtures with LED lighting. |
| || Maintained high standards of condition monitoring and preventive maintenance which helped maintaining higher energy efficiency of equipment. |
|(ii) The steps taken by the company for utilizing alternate sources of energy. ||None |
|(iii) The capital investment on energy conservation equipment's ||Used energy efficient rectifiers in all the new installation and replacements made during the year. |
|B. Technology Absorption || |
|(i) The efforts made towards technology absorption ||The Company continues to perform R&D activities to improve quality of products and to reduce production cost to serve its customer better. |
|(ii) The benefits derived like product improvement cost reduction product development or import substitution || Development of New Products |
| || Reduction of Product cost |
| || Product and Process improvement |
|(iii) In case of imported technology (imported during the last three years reckoned from the beginning of the financial year) || |
|(a) the details of technology imported; ||Manufacturing of Nova Screen |
|(b) the year of import; ||2015 |
|(c) whether the technology been fully absorbed; ||The above technologies have been fully absorbed. |
|(d) if not fully absorbed areas where absorption has not taken place and the reasons thereof; ||Not Applicable |
|(iv) The expenditure incurred on ||Capital Expenditure - Nil |
|Research and Development ||Revenue Expenditure - INR 3790174 |
FOREIGN EXCHANGE EARNINGS AND OUTGO
|Particulars ||Amount (in ) |
|Earnings in foreign exchange from Goods and Services exported Commission etc. ||119669119 |
|Value of imports of raw materials components stores spares Commission technical know-how fees royalty etc. ||659968932 |