TO THE MEMBERS
Your Directors have pleasure in presenting the Forty fifth Annual Report and theAudited Accounts of your company for the financial year ended 31st March 2017.
The Financial Results for the year ended 31st March 2017 is as follows:
| ||Year ended 31st March 2017 ||Year ended 31st March 2016 |
| || |
(Rs. in Lakhs)
|Sales Net of Excise Duty ||30779.52 ||27499.40 |
|Other operating revenue ||378.64 ||597.50 |
|Other income ||125.59 ||58.63 |
|Total revenue ||31283.75 ||28155.53 |
|Profit before Interest & Depreciation ||4056.50 ||3878.40 |
|Less: Interest ||556.34 ||771.90 |
|Depreciation ||1156.83 ||1367.74 |
| ||600.49 ||595.84 |
|Profit before tax ||2899.67 ||2510.66 |
|Less: Current tax (Net of MAT credit) ||789.00 ||685.00 |
|Deferred tax (Net) ||56.73 ||101.24 |
|Tax relating to earlier years ||- ||(-) 3.71 |
|Profit after tax ||2053.94 ||1728.13 |
|Add: Surplus brought forward || || |
|from previous year ||18553.50 ||17385.93 |
|Available for appropriations ||20607.44 ||19114.06 |
|Dividend at Re.1/- per share (2015-16: Re.1/-) ||50.32 ||50.32 |
|Corporate Dividend Tax ||10.24 ||10.24 |
|Transfer to General Reserve ||500.00 ||500.00 |
|Surplus carried forward to Balance Sheet ||20046.88 ||18553.50 |
|Company's Key Financial Ratios ||2017 ||2016 |
| ||Rs. ||Rs. |
|Earnings per share ||41 ||34 |
|Dividend per share ||1 ||1 |
|Return on Net worth ||5% ||4% |
Your Directors have pleasure in recommending a dividend of Re.1/- per Equity Share. Thequantum of dividend outgo on this account is Rs. 50.32 lakhs representing 2.45% of profitafter tax.
SEGMENTWISE / PRODUCTWISE PERFORMANCE
PRODUCTION I. CHEMICALS
During the year your company had produced 10411 MT of Sodium Hydrosulphite as against9141 MT in the previous year an increase by about 14%.
Liquid Sulphur Dioxide
During the year your Company had produced 10181 MT of Liquid Sulphur Dioxide asagainst 8330 MT in the previous year an increase by about 22%.
There was no production of Sulphoxylates during the year as in the previous year.
II. RECOVERY SALTS
The trisalt production was 4837 MT as against 4017 MT in the previous year anincrease by about 20%.
III. ELECTRIC POWER Electric Power Generation
Your company had generated 4126 lakh units of electricity as against 3714 lakh unitslast year from the Thermal Power Plant an increase by about 11%. The average Plant LoadFactor during the year under review was 73.89%. The Biomass based power plant had notgenerated electricity during the year as against 20 lakh units in the previous year. TheWind Mills had generated 301 lakh units of electricity as against 205 lakh units in theprevious year an increase by about 47%.
I. CHEMICALS Sodium Hydrosulphite
During the year your company had made sale of 10961 MT of Sodium Hydrosulphite asagainst 8579 MT in the previous year an increase by about 27%. The domestic sales is8920 MT the Export sales is 1888 MT and Deemed exports of 153 MT. The domestic saleswhich was 7417 MTs in the previous year rose to 8920 MTs in the current year anincrease by about 20% from the previous year's sales. This was mainly due to the increasein demand from the textiles industry which is now progressing well. The continuance of theanti-dumping duty has also helped in the revival of the demand. The diversifiedapplication of the products in the paper and pharma industries has also contributed to theincrease in the volume of the sales. The increase in demand for the product in the southTamil Nadu region is a new beginning for the growth in sales. Your company is preparing toexpand its market base in the current year.
Liquid Sulphur Dioxide
The sale of Liquid Sulphur Dioxide during the year was 1329 MT as against 512 MT inthe previous year an increase by about 160%.
There were no sale of Sulphoxylates during the year as in the previous year. This isdue to no production during this year.
The sale of Recovery salts was 4122 MT during the year as against 1735 MT in theprevious year an increase by about 137%. The Company had identified few buyers who usethe product for their indigenous production. We are exploring the possibility of sellingin new markets in the North India where its consumption is of substantial quantity.
During the year your Company had sold 3586 lakh units of electricity as against 3353lakh units in the previous year from the Thermal Power Plant an increase by about 7%. TheWind mills had exported 298 lakh units of electricity as against 152 lakh units in theprevious year an increase by about 96%. The Company sells power under Group CaptiveConsumers arrangement. The power generated up to 58 MW were sold to Group CaptiveConsumers and the balance power generated was towards captive consumption. The GroupCaptive Consumers arrangement Rules stipulate that the Group Captive Consumers should holdat least 26% share holding in the Company. As at 31st March 2017 there are about 56 GroupCaptive Consumers holding about 26.11% equity shareholding in the Company.
During the year your Company had exported 1888 MTs of Sodium Hydrosulphite as against1035 MTs during the previous year an increase by 82.42%. There were also exports ofSodium Sulphite and Sodium Formate during the year aggregating to 50 MTs. Hence the totalexports made by the Company during the year was 1938 MTs an increase by 87.25% over theprevious year.
The highlight of this year's performance is that for the first time we had exported25MTs of Sodium Sulphite to Pakistan and exports of Sodium Formate also resumed during theyear by shipment of 25MTs to Pakistan. In Egypt we had developed a new buyer to whom wehad exported 156 MTs during the year.
This year Sodium Hydrosulphite was exported to 9 countries spread across all theregions like the United States of America Europe South Asia Africa Central AsiaMiddle East and Far East. In keeping with the past trend the United States of America andthe Turkey were again the countries were major shipments were exported. We had exportedabout 59% of the total exports during the year to these two countries. We had alsoexported to Sri Lanka Egypt Uganda Pakistan Italy Kenya and Turkmenistan about 40% ofthe total exports during the year.
The international market has transformed itself into a price-sensitive market whereprice of the product determines the securing of the orders. Price has to be adjustedfrequently in keeping with the global price. Despite severe competition we could getgood price for the products especially from our regular buyers. But there is still astiff competition from China the world's largest producer and exporter of SodiumHydrosulphite. Their products pose a threat to our products primarily due to theirunbelievably low price at which they are offered to the buyers. There are buyers whoprefer the Company's products primarily due to its quality and timely shipments which arefavourable factors to the Company.
In the current year also the Company would be focusing on retaining the existingmarkets identifying new buyers in the existing markets and penetrating into new marketsin order to enhance the volume of exports.
The Credit rating assigned to the Company as at 31st March 2017 are as follows:
|Credit Rating Agency ||Credit Facilities ||Rating |
|CRISIL ||Bank borrowings Long term ||CRISIL BBB+/ Stable |
|CRISIL ||Bank borrowings Short term ||CRISIL A2 |
|CRISIL ||Fixed Deposits ||FA-/ Stable |
During the year your Company has stopped renewing / accepting deposits from 1stOctober 2016. The Company has been repaying the deposits on their maturity dates.
As at 31st March 2017 there were 1374 fixed deposits amounting to Rs.1395.59 lakhsand 508 cumulative deposits amounting to Rs.432.49 lakhs (maturity value Rs.574.05 lakhs)aggregating to 1882 deposits for an amount of Rs.1828.08 lakhs (for maturity value ofRs.1969.64 lakhs) that have not yet matured for repayment. These outstanding depositsinclude 6 cumulative deposits accepted from 4 members of the Company for an amount ofRs.52.64 lakhs (maturity value Rs.69.75 lakhs). There were 94 fixed deposits and 38cumulative deposits aggregating to 132 deposits for an amount of Rs. 65.30 lakhs that havematured but remained unclaimed (maturity value Rs.72.60 lakhs). The total amount ofdeposits matured and renewed during the year under review (up to 30th September 2016) wasRs. 290.33 lakhs and the total amount of deposits matured and repaid during the year underreview was Rs. 883.18 lakhs aggregating to Rs.1173.51 lakhs and the total amount ofdeposits that will be maturing as at 31st March 2018 will be Rs.360.24 lakhs. The totalamount of new deposits accepted during the year (up to 30th September 2016) was Rs.356.73lakhs. There were no deposits which were claimed but not paid by the Company. Appropriatesteps are being taken continuously to obtain the depositors' instructions so as to ensurerepayment of the matured deposits in time.
As per Section 76 of the Companies Act 2013 the credit rating agency CRISIL Limitedhas assigned a rating of CRISIL FA-/Stable' (pronounced "F A minus rating withstable outlook") for the Fixed Deposits accepted by the Company indicatingAdequate Safety'. This rating indicates that the degree of safety regarding timelypayment of interest and principal is satisfactory. The Ministry of Corporate Affairs videNotification No. G.S.R. 639(E) dated 29th June 2016 has notified the Companies(Acceptance of Deposits) Amendment Rules 2016 which provides that the companies mayaccept the deposits without deposit insurance contract till 31st March 2017 or till theavailability of a deposit insurance product whichever is earlier. The Company will obtaininsurance contract for its deposits as per the requirements of section 73 (2) (d) of theCompanies Act 2013 read with Rule 5 of the Companies (Acceptance of Deposits) Rules2014 as and when it becomes available.
The Company has deposited with the Indian Overseas Bank in a separate bank accountcalled as Deposit Repayment Reserve Account an amount of not less than 15% of the amountof its deposits maturing during the financial years 2017-18 and 2018-19 in accordance withthe requirements of section 73(2) (c) of the Companies Act 2013 read with Rule 13 of theCompanies (Acceptance of Deposits) Rules 2014.
The Company's outstanding deposits are within the limits laid down in Rule 3(4) of theCompanies (Acceptance of Deposits) Rules 2014 viz. 10% of the aggregate of the paid upshare capital and free reserves of the Company as at 31st March 2016 in the case ofdeposits accepted from the members and 25% of the aggregate of the paid up share capitaland free reserves of the Company as at 31st March 2016 in the case of deposits acceptedfrom the public.
The deposits accepted by the company from its members and the public are unsecureddeposits.
BOARD OF DIRECTORS
Composition of the Board:
The Board of Directors of the Company consists of professionals from varieddisciplines. The day to day management of the affairs of the Company is entrusted withExecutive Director (Whole time director) headed by the Managing Director who functionsunder the overall supervision direction and control of the Board of Directors of theCompany.
As of 31st March 2017 the Company's Board comprised of eight directors. The Boardcomprises of an optimum combination of Executive and Non-Executive Directors with sixdirectors being Non-Executive directors. The Non-Executive Directors thus constitutemore than 50% of the Board. There are four Independent Directors who exercise independentjudgement in the Board's deliberations discussions and decisions. Shri V.R.Venkataachalam Managing Director and Shri V. Rajasekaran Executive Director are the twoexecutive directors on the Board. Shri V.R. Venkataachalam is the Chairman of the Boardand accordingly the Chairman of the Company.
Director retiring by rotation and seeking reappointment:
Shri V. Sengutuvan (DIN 00053629) Director is retiring by rotation at this AnnualGeneral Meeting and he is eligible for re-appointment.
Appointment of Director made after the end of the Financial Year but before the datethis Report:
Ms. V. Samyuktha [DIN 02691981] who was appointed as an Additional Director of theCompany with effect from 25th May 2017 by the Board of Directors pursuant to Article 83of the Articles of Association of the Company and Section 161 of the Companies Act 2013("the Act") holds office up to the date of the ensuing 45th Annual GeneralMeeting and being eligible for appointment as Director of the Company pursuant to Section152 of the Act read with the Companies (Appointment and Qualifications of Directors)Rules 2014 offers herself for appointment as director by the members. The Company hasreceived a notice in writing from a member under Section 160 of the Act proposing thecandidature of Ms. V. Samyuktha for the office of Director of the Company. Theappointment if made will be in the category of Non Independent Director and WomanDirector liable to retirement by rotation.
The Board of Directors recommend the passing of the resolution set out in item no.5 ofthe Notice. Shri V. R. Venkataachalam director (father of the proposed appointee) andShri V. Sengutuvan director (brother of the proposed appointee) shall be deemed to beconcerned or interested in the proposed resolution. None of the other Directors and KeyManagerial Personnel of the Company or their respective relatives are concerned orinterested financially or otherwise in the proposed resolution.
Term of office of Managing Director:
At the 41st Annual General Meeting of the Company held on 27th September 2013 Shri V.R. Venkataachalam was reappointed as the Managing Director of the Company for a furtherterm of five years from 1st September 2013 to 31st August 2018.
Term of office of Executive Director:
At the 44th Annual General Meeting of the Company held on 23rd September 2016 ShriV. Rajasekaran was reappointed as the Executive Director of the Company for a further termof five years from 1st March 2017 to 28th February 2022.
The Audit Committee of the Company is constituted in accordance with the provisions ofSection 177 of the Companies Act 2013.
The Audit Committee comprises of the following members: Shri S. Varatharajan Chairmanof the Committee Shri R. Ravi Krishnan; and Shri M. Parthasarathi
All the members of the Audit Committee are Independent Directors. The members of thecommittee are financially literate with ability to read and understand the financialstatement. The Chairman of the committee has related financial management expertise by wayof experience in financial management in his field of business. The Company Secretary actsas the Secretary for the Audit Committee.
The Audit Committee shall have such powers duties and responsibilities and shallfunction in such manner as provided in Section 177 of the Companies Act 2013.
Pursuant to section 177(9) of the Companies Act 2013 read with Rule 7 of the Companies(Meetings of Board and its Powers) Rules 2014 the Company has established a VigilMechanism for directors and employees to report their genuine concerns or grievances. TheVigil Mechanism is monitored by the Audit Committee. The Vigil Mechanism provides foradequate safeguards against victimization of directors / employees who avail of themechanism and also provides for direct access to the Chairman of the Audit Committee inexceptional cases. It also ensures standards of professionalism honesty integrity andethical behavior.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee of the Board is constituted in accordancewith Section 178 (1) of the Companies Act 2013.
The Nomination and Remuneration Committee comprises of the following members: Shri S.Varatharajan Chairman of the Committee Shri M. Parthasarathi and Shri N. Jaiganesh;
All the members of the Committee are Independent directors. The Company Secretary actsas the secretary for the Nomination and Remuneration Committee.
The Nomination and Remuneration Committee shall carry out such functions as laid downin section 178 of the Companies Act 2013.
STAKEHOLDERS' RELATIONSHIP COMMITTEE
The Stakeholders' Relationship Committee of the Board is constituted in accordance withSection 178(5) of the Companies Act 2013.
The following Non-Executive directors are the members of the Stakeholders' RelationshipCommittee: Shri A.S. Thillainayagam Chairman of the Committee Shri V. Sengutuvan and ShriS. Varatharajan
The Chairman of the Committee is a Non-executive director. The company secretary actsas the secretary for the committee.
The Stakeholders' Relationship Committee was constituted to consider and resolve thegrievances of shareholders and other security holders of the Company. The Committee shallexpedite the process of share transfers. The Board has delegated the powers ofregistration of share transfers to the committee. All major share transfers approved atthe Stakeholders' Relationship Committee meetings are placed before the Board.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Pursuant to section 135(1) of the Companies Act 2013 the Board of directors at itsmeeting held on 30th May 2014 had constituted Corporate Social Responsibility (CSR)Committee. As required by section 135 (2) of the Companies Act 2013 the CSR Committeecomprises of the following three directors viz.
Shri V. R. Venkataachalam Chairman Shri V. Rajasekaran member; and Shri S.Varatharajan member
Shri S. Varatharajan is an independent director on the Board.
The CSR Committee shall carry out such functions as laid down in section 135 of theCompanies Act 2013.
DISCLOSURES AS PER SECTION 134 OF THE COMPANIES ACT 2013 READ WITH RULE 8(5) OF THECOMPANIES (ACCOUNTS) RULES 2014 Extract of Annual Return:
The extract of Annual Return in the Form No. MGT 9 is annexed to the Directors' Reportas Annexure I.
Number of meetings of the Board:
There were five Board meetings during the year.
Directors' Responsibility Statement:
To the best of their knowledge and belief and according to the confirmation andexplanations obtained by them your Directors make the following statement in terms ofSection 134(5) of the Companies Act 2013. i) That in the preparation of the AnnualAccounts for the year ended 31st March 2017 the applicable Accounting Standards had beenfollowed along with proper explanation for material departures if any; ii) That suchaccounting policies have been selected and applied consistently and judgements andestimates that are reasonable and prudent were made so as to give a true and fair view ofthe state of affairs of the Company as at the end of the financial year ended 31st March2017 and of the profit of the Company for the year ended on that date; iii) That properand sufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act 2013 for safe guarding the assets ofthe Company and for preventing and detecting fraud and other irregularities; iv) That theannual accounts for the year ended 31st March 2017 have been prepared on a going concernbasis. v) Internal financial controls had been laid down to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and;vi) Proper systems to ensure compliance with the provisions of all applicable laws hadbeen devised and that such systems were adequate and operating effectively.
Declaration by Independent Directors:
The Board has received the declaration from all the Independent Directors as per therequirement of section 149(7) of the Companies Act 2013 and the Board is satisfied thatall the Independent Directors meet the criterion of independence as mentioned in section149(6) of the Companies Act 2013.
Company's policy on Directors appointment and remuneration:
In accordance with the requirements of section 178 of the Companies Act 2013 theNomination and Remuneration Committee has put in place a policy for appointment ofdirectors taking into consideration the qualification and wide experience of the directorsin the fields of chemical power generation manufacturing finance administration andlegal apart from compliance of legal requirements of the Company. The Nomination andRemuneration Committee has also laid down remuneration criteria for the directors keymanagerial personnel and other employees in the Nomination and Remuneration Policy. It hasalso laid down in the Nomination and Remuneration Policy the evaluation criteria forperformance evaluation of the directors including independent directors. The Nominationand Remuneration Policy is annexed to the Directors' Report as Annexure II and is alsouploaded on the Company's website www.tcpindia.com.
Explanations or comments by the Board on every qualification reservation or adverseremark or disclaimer made in the Auditors' Report and in the Secretarial Audit Report:
The Auditors' Report to the Shareholders for the year under review states that theManagerial Remuneration paid by the Company for the year ended 31st March 2017 exceeds thelimit of 10% of the Net Profits of the Company for the year in which such remuneration ispaid by an amount of Rs. 13792660/-.
The Secretarial Audit Report to the Shareholders for the year under review states thatthe company has been advised to take necessary and adequate steps to ensure compliance ofthe Act in respect of excess managerial remuneration already paid.
Explanation to the observation:
The Managing Director and the Executive Director are being paid Managerial Remunerationcommensurate with their experience qualification and contribution to the Company over theyears. This is strictly as per Industry Standards for persons of such experience andcapability. Due to the economic slowdown and the shrinking profit margins theremuneration paid has exceeded the prescribed limit as per the provisions of the CompaniesAct 2013 though approved by the board/shareholders. The Company expects the profitmargins to get back to normal levels and that would ensure that the Managerialremuneration paid is well within the limits as per Companies Act 2013. However for theinterim period there is a technical non-compliance as per the Act for which the Companyis taking necessary steps including restructuring the Company's status in a manner moresuited to the current market conditions and business operations/style of the Company.
The Secretarial Audit Report given by a Company Secretary in practice states that thecompany could not spend the eligible amount on Corporate Social Responsibility Measures.
The explanation to this observation is given in the para "Reasons for not spendingthe amount that is to be spent during the financial year 2016-17" under the mainheading of Corporate Social Responsibility initiatives taken during the year'.
Particulars of loans guarantees or investments under section 186 of the Companies Act2013:
There are no loans made guarantees given or security provided during the year undersection 186 of the Companies Act 2013. The aggregate value of investments made by theCompany under section 186 of the Companies Act 2013 is within the limits prescribed inthe section.
Particulars of contracts or arrangements with related parties referred to in section188(1) of the Companies Act 2013:
The Related Party Transactions (RPT's) entered into by the Company are given in theNotes on Accounts attached to the Financial Statements. These transactions were enteredinto in the ordinary course of business and on an arm's length basis and were incompliance with the provisions of the Companies Act 2013. There are no contracts orarrangements with Related Parties referred to in section 188 (1) of the Companies Act2013. There are no materially significant related party transactions made by the Companywith the Promoters Directors Key Managerial Personnel or other designated persons whichmay have a potential conflict with the interest of the Company at large.
The statement of RPT's is placed before the Audit Committee and the Board on aquarterly basis. Omnibus approval was obtained for the transactions of repetitive nature.None of the directors have any pecuniary relationships or transactions with the Companyexcept for the payment of sitting fees. There are no particulars of RPT's to be disclosedin Form AOC-2.
The state of the Company's affairs:
The state of the Company's affairs is explained in the paragraph Segment wise/product wise performance' in the Directors' Report.
The amount if any carried to reserves:
The Company has transferred an amount of Rs. 5 crores to General Reserve.
The amount if any which it recommends should be paid by way of dividend:
The Board is recommending payment of dividend of Re.1/- per equity share on the paid upequity shares of the Company.
Material changes and commitments if any affecting the financial position of theCompany which have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of report:
There are no material changes and commitments affecting the financial position of theCompany that have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date of report viz. for the period from 31stMarch 2017 to 11th August 2017.
Conservation of energy technology absorption foreign exchange earnings and outgo:
The information pursuant to section 134(3) (m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is as follows: (A) Conservation of Energy:a. The Company ensures that the manufacturing operations are conducted in a manner wherebyoptimum utilization and maximum possible savings of energy is achieved. As the impact ofmeasures taken for conservation and optimum utilisation of energy are not quantitativeits impact on cost cannot be ascertained accurately. b. The Company's chemical plantengaged in manufacturing operations utilises the alternative sources of energy from theBiomass based power and power generated from windmills. c. No specific investment has beenmade on energy conservation equipment.
(B) Technology absorption:
The Company's products are manufactured by using in-house know how and no outsidetechnology is being used for manufacturing activities. Therefore no technology absorptionis required. The Company constantly strives for maintenance and improvement in quality ofits products and entire Research & Development activities are directed to achieve theaforesaid goal.
(C) Foreign exchange earnings and outgo:
During the year the foreign exchange earnings and outgo are as follows: Foreignexchange earnings:
Foreign exchange earnings from exports Rs.11.12 crores
Foreign exchange outgo:
Foreign exchange outgo on payments for imports Rs.30.80 crores and Rs.8.96 lakhs towardsexpenditure in Foreign Currency on travel.
A statement indicating development and implementation of a Risk Management Policy forthe Company including identification therein of elements of risk if any which in theopinion of the Board may threaten the existence of the Company:
The Company has framed a Risk Management Policy to identify communicate and managematerial risks across the organisation. The policy also ensures that responsibilities havebeen appropriately delegated for risk management. Key Risks and mitigation measures are asfollows: Risk Management is an ongoing process. The Board of directors has approved a RiskManagement Policy. The Board has defined the roles and responsibilities of personsidentified for implementation of the Risk Management Policy and has delegated themonitoring and reviewing of the Risk Management Plan to the Executive Director.
The Company maintains Risk Register listing all the risks likely to affect theachievement of the business goals set by the Company. Significant risks are identifiedusing a scoring methodology. The process of Risk Management includes Risk Identificationand Categorization Risk Description and Risk Mitigation. The Risk Owners are accountableto the Executive Director for identification assessment aggregation reporting andmonitoring of the risks related to their respective areas / functions.
The key implementation areas for Risk Mitigation are as follows:
|For Finance function: ||Treasury operations and fund transfers |
|For Computer systems and Data maintenance ||Data Security |
|For purchase and sales functions ||Credit Administration |
The Company is exposed mainly to Credit Risk Market risk (competition) interest raterisk and Cash Management Risk in its business operations. The experience in the sellingfunctions acquired by the Company over the years has helped to identify the creditworthiness of its customers for giving credit and has helped to mitigate the Credit Risk.The Company has maintained its quality in supply and services to its customers and hasearned a brand image for quality supplies and by this process manages to retain existingcustomers and bring in new customers. In this way it tries to mitigate the Market risk.The Company's debt servicing is a record without any default in the timely payment ofinterest for its working capital borrowings. The Company's profitability and financialsare improving every year. This strength of the Company helps to mitigate the interest raterisk. The Company's fund operations are centralized at the Head Office. The requirement offunds from the units are met from the Head Office. The spending at the units are monitoredby the accounts personnel at the Head office on a periodical basis. The Cash operations atthe Head Office is subjected to multi-level checks and controls the internal auditorperiodically verifies physical cash balance and in this way the Company mitigates the CashManagement Risk.
The details about the policy developed and implemented by the Company on CorporateSocial Responsibility initiatives taken during the year:
The objective of the CSR Policy of the Company is to continue to contribute towardssocial welfare projects for the benefit of the general public and in particular to thepeople living around the areas where the company's manufacturing / generation activitiesare located. The CSR Policy focuses on providing facilities for imparting educationvocational training and promoting health care to economically weaker and under privilegedsections of the society and to do such other activities as may be permissible undersection 135 of the Companies Act 2013 and the Companies (Corporate Social ResponsibilityPolicy) Rules 2014.
The Company has not spent on the CSR activities during the year 2016-17.
Reasons for not spending the amount that is to be spent during the financial year2016-17:
During the financial year ended 31st March 2017 the Company has to spend an amount ofRs. 8302725/- being the 2% of the average net profits of the Company made during thethree immediately preceding financial years as provided in section 135 (5) of theCompanies Act 2013. The CSR Committee has identified and approved various CSR Projectsfor Rs.55 lakhs to be spent in a phased manner. During the year the Company could notspent on CSR activities in pursuance of its CSR Policy. The amount unspent is Rs.8302725/-. During the financial year 2016-17 the Company was engaged in identificationof CSR activities and identifying Implementing agencies laying basic framework for theCSR Projects. The Company will ensure achievement of the target spend on CSR activities ina phased manner in the Financial years to follow.
Annual Report on CSR activities for the financial year 2016-17:
Pursuant to Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules2014 the Annual Report on CSR activities to be included in the Directors' Report for thefinancial year 2016-17 in the format prescribed as Annexure to the Companies (CorporateSocial Responsibility Policy) Rules 2014 is annexed to the Directors' Report as AnnexureIII and is also uploaded on the Company's website www.tcpindia.com
Performance and financial position of the Subsidiary Company viz. TCP Hotels PrivateLtd:
The Company has one Subsidiary Company viz. TCP Hotels Private Limited. ThisSubsidiary Company is a non-material Indian unlisted subsidiary Company. The Companyholds 96% equity shareholding in its subsidiary company.
TCP Hotels Private Ltd:
TCP Hotels Private Ltd derives rental income from letting out its property and this isthe only source of income for the company for the year ended 31st March 2017. For the yearended 31st March 2017 the company has earned income of Rs.42 lakhs and had reported Netprofit (before tax) of Rs.3910368 (Rs. 3836221 in the previous year) and Net profit(after tax) of Rs.3019368 (Rs. 2945221 in the previous year). TCP Ltd is paying rentto TCP Hotels Private Ltd pursuant to a rental agreement entered into with TCP HotelsPrivate Ltd for taking on rent a portion of the premises owned by TCP Hotels Private Ltdand the amount of such rent paid during the year is Rs.36 lakhs. This is a related partytransaction in the ordinary course of business and made on arm's length basis. The omnibusapproval of the Audit Committee has been obtained for entering into this routinetransaction.
The annual report and annual accounts of the subsidiary company viz. TCP HotelsPrivate Ltd for the financial year ended 31st March 2017 and the related detailedinformation shall be made available to shareholders of the Company seeking suchinformation. The annual accounts of the subsidiary company shall also be kept forinspection by shareholders at the Registered Office of the company and the SubsidiaryCompany. The annual accounts of the subsidiary company shall be available on the websiteof the Company viz. www.tcpindia.com.
The financial summary or highlights:
The financial summary is given in the Paragraph Financial Results' in theDirectors' Report.
The change in the nature of business if any:
There is no change in the nature of business.
The details of directors or key managerial personnel who were appointed or haveresigned during the year:
There were no appointments or resignations of directors or key managerial personnelduring the year.
The names of companies which have become or ceased to be Subsidiaries joint venturesor associate companies during the year:
There are no companies which have become or ceased to be Subsidiaries joint venturesor associate companies during the year.
The details relating to deposits covered under Chapter V of the Companies Act 2013:
During the year the Company has stopped renewing / accepting deposits from 1st October2016. The Company has been repaying the deposits on their maturity dates.
(a) Accepted during the year: (upto 30th September 2016)
The total amount of deposits matured and renewed during the year under review was Rs.290.33 lakhs. The total amount of new deposits accepted during the year was Rs. 356.73lakhs. The aggregate amount of deposits accepted during the year is Rs.647.06 lakhs.
(b) Remained unpaid or unclaimed as at the end of the year:
There are 94 fixed deposits and 38 cumulative deposits aggregating to 132 deposits foran amount of Rs. 65.30 lakhs that have matured but remained unclaimed (maturity valueRs.72.60 lakhs).
(c) Whether there has been any default in repayment of deposits or payment of interestthereon during the year and if so number of such cases and the total amount involved:There has been no default in repayment of deposits or payment of interest thereon duringthe year.
The details of deposits which are not in compliance with the requirements of Chapter Vof the Companies Act 2013:
There are no deposits which are not in compliance with the requirements of Chapter V ofthe Companies Act 2013.
The details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future:
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
The details in respect of adequacy of internal financial controls with reference to theFinancial Statements:
The Company's well defined organizational structure documented policy guidelinesdefined authority matrix and internal financial controls ensure efficiency of operationsprotection of resources and compliance with the applicable laws and regulations. Moreoverthe Company continuously upgrades its systems and undertakes review of policies. Theinternal financial control is supplemented by regular reviews by management and standardpolicies and guidelines to ensure reliability of financial data and all other records toprepare the financial statements and other data. The Audit Committee reviews the internalfinancial controls and also monitors the implemented suggestions.
Disclosure under section 22 of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013:
There were no cases filed under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to Section 129(3) of the Companies Act 2013 read with Rule 5 of the Companies(Accounts) Rules 2014 a Consolidated Financial Statement of the Company and itsSubsidiary Company viz. TCP Hotels Private Ltd has been prepared in the same form andmanner in which the Company's Financial Statement has been prepared and such ConsolidatedFinancial Statement is attached to this Annual Report. The Consolidated FinancialStatement has been prepared in compliance with the applicable Accounting Standards. AStatement containing the salient features of the Financial Statement of the SubsidiaryCompany in Form AOC-1 is also attached to this Annual Report.
STATEMENT OF EMPLOYEES' PARTICULARS
Pursuant to Rules 5 (2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 the statement showing the particulars of the employeesemployed throughout the financial year ended 31st March 2017 and was in receipt ofremuneration for the year which in the aggregate was not less than Rs.60 lakhs isannexed to the Directors' Report as Annexure IV.
The managerial remuneration paid by a company to more than one managerial personnelshall not exceed 10% of the net profits of the company for the financial year in whichsuch remuneration is paid.
The aggregate amount of remuneration paid to the Managing Director and the ExecutiveDirector during the financial year 2016-17 exceeds the prescribed limit of 10% of thenet profits of the Company for the financial year ended 31st March 2017 by an amount ofRs.13792660/-. This is due to inadequate profit during the financial year 2016-17 tomatch the remuneration paid. The Company is taking necessary and adequate steps to ensurecompliance of the provisions of the Companies Act 2013 in respect of excess managerialremuneration already paid.
M/s T. Selvaraj & Co. Chartered Accountants Chennai (Firm Registration No.003703S) the auditors of the company retire at the conclusion of the ensuing AnnualGeneral Meeting. The existing auditors M/s T. Selvaraj & Co. Chartered AccountantsChennai are not eligible for re-appointment as the auditors for the year 2017-2018pursuant to the provisions of rotation of auditors as specified in section 139 (2) of theCompanies Act 2013 as they have completed two terms of five consecutive years each asprovided therein. The provisions of section 139 (2) of the Companies Act 2013 is given inthe succeeding paras.
It is proposed to appoint M/s N S R & Co. Chartered Accountants Chennai (FirmRegistration No. 010522S) as the auditors of the Company (in the place of M/s. T. Selvaraj& Co. Chartered Accountants Chennai (Firm Registration No. 003703S) the retiringauditor whose tenure expires at the conclusion of the ensuing Annual General Meeting).The appointment of new auditor is made pursuant to the provisions of Sections 139 142 andother applicable provisions if any of the Companies Act 2013 and the Companies (Auditand Auditors) Rules 2014 (including any statutory modification(s) or re-enactmentthereof for the time being in force) and pursuant to the recommendation of the AuditCommittee and the Board of Directors.
The Company has received written consent from M/s N S R & Co. CharteredAccountants Chennai (Firm Registration No. 010522S) for being appointed as the auditor ofthe Company subject to the shareholders' approval of the appointment at the ensuing 45thAnnual General Meeting as provided in section 139(1) of the Companies Act 2013.
The Company has also received a Certificate from M/s N S R & Co. CharteredAccountants Chennai (Firm Registration No. 010522S) pursuant to section 139 of theCompanies Act 2013 read with Rule 4 of the Companies (Audit and Auditors) Rules 2014 inrespect of the matters specified in those Rules.
Certificate has also been received from them to the effect that their appointment asauditors of the Company if made would be within the limits prescribed under Sections 139& 141 of the Companies Act 2013. The Directors recommend their appointment. Membersare requested to consider their appointment. If appointed they shall hold office from theconclusion of this 45th Annual General Meeting till the conclusion of 50th Annual GeneralMeeting of the Company (subject to ratification of their appointment by Members at everyAnnual General Meeting till the 49th Annual General Meeting) for conducting audit of theaccounts of the Company for a term of five consecutive financial years commencing from 1stApril 2017.
Change of Auditors due to Rotation of Auditors prescribed under Section 139(2) of theCompanies Act 2013.
Section 139(2) of the Companies Act 2013 (the Act) inter alia provides that companiesbelonging to such class of companies as may be prescribed shall not appoint or reappointan audit firm as auditor for more than two terms of five consecutive years.
The first proviso to the sub-section provides that an audit firm which has completedtwo terms of five consecutive years shall not be eligible for re-appointment as auditor inthe same company for five years from the completion of such term.
The third proviso to the sub-section provides that every company which is required tocomply with the provisions of this sub-section shall comply with the requirements of thissub-section within a period which shall not be later than the date of the first annualgeneral meeting of the company held within the period specified under section 96 (1) ofthe Act after three years from the date of commencement of this Act.
Rule 5 of the Companies (Audit and Auditors) Rules 2014 prescribes the class ofcompanies that are required to comply with the provisions of Section 139(2) of the Act.The Rule inter alia provides all companies having public borrowings from financialinstitutions banks or public deposits of Rs.50 crores or more as companies to complywith the provisions of the Section 139(2) of the Act.
Your Company belongs to this class of Companies and hence is required to comply withthe provisions of Section 139(2) of the Act.
Rule 6(3) of the Companies (Audit and Auditors) Rules 2014 provides that for thepurpose of the rotation of auditors the period for which the audit firm has heldoffice as auditor prior to the commencement of the Act shall be taken into account forcalculating the period of 10 consecutive years.
M/s T. Selvaraj & Co. Chartered Accountants Chennai the existing statutoryauditors have held office as the auditors of the Company for a term of more than 10consecutive years and hence can hold such office only up to the conclusion of theForty-fifth Annual General Meeting of the company.
It is required to appoint a new auditor (other than M/s T. Selvaraj & Co.Chartered Accountants) to hold office from the conclusion of the Forty-fifth AnnualGeneral Meeting of the company. It is for this purpose that the change in the auditors ismade.
Pursuant to section 148 of the Companies Act 2013 read with Rule 14 of the Companies(Audit and Auditors) Rules 2014 Shri M. Kannan Cost Accountant in practice has beenappointed as the Cost Auditor of the company for the year 2017-18 for the audit of thecost records maintained by the Company.
Pursuant to section 138 of the Companies Act 2013 read with Rule 13 of the Companies(Accounts) Rules 2014 M/s Sankaran & Krishnan Chartered Accountants Chennai areappointed as internal auditors of the Company to conduct internal audit of the functionsand activities of the Company.
The Board has appointed Shri K. Elangovan M/s Elangovan Associates CompanySecretaries in Practice Chennai (Certificate of Practice No.3552) Membership No. FCS1808 to carry out Secretarial Audit under the provisions of section 204 of the CompaniesAct 2013 for the financial year 2016-17. The Secretarial Audit Report is annexed to theDirectors' report as Annexure V.
EXIT OFFER BY PROMOTER TO THE PUBLIC SHAREHOLDERS
Members may be aware that the equity shares of the Company were placed on theDissemination Board of The National Stock Exchange of India Ltd (NSE). The Securities andExchange Board of India (SEBI) vide their Circular SEBI/ HO/ MRD/ DSA/ CIR/ P/ 2016/110dated 10th October 2016 has laid down the procedure to be complied with by thosecompanies whose shares are placed on the Dissemination Board of a nationwide stockexchange in order to get themselves removed from the Dissemination Board by that StockExchange. Since the Company's shares were placed on the Dissemination Board of the NSEthe Company is required to comply with the procedure as laid down in the aforesaid SEBICircular and the procedure for exit opportunity as prescribed by the NSE.
The aforesaid SEBI Circular provides that in cases where those companies that areplaced on the Dissemination Board are not seeking listing in any nationwide stockexchange the Promoters of the Company has to provide an exit offer to the publicshareholders of the Company in accordance with the procedure laid down in that Circular.The Board of Directors of the Company took a decision not to seek listing in anynationwide stock exchange and therefore to request the promoters of the Company to provideexit offer to the public shareholders.
Accordingly Shri V.R. Venkataachalam one of the Promoters of the Company isproviding exit offer to the public shareholders of the Company.
The procedure states that those companies which are providing exit offer to the publicshareholders should submit their Letter of Intent and the Plan of Action to theirdesignated stock exchange (NSE for the Company) on or before 30th June 2017. Accordinglythe Company had submitted the Letter of Intent and the Plan of Action to the NSE on 27thJune 2017.
The Promoter providing the exit offer (Shri V.R. Venkataachalam) (hence forth referredto as Acquirer') has to appoint an Independent Valuer from the panel of IndependentValuers approved by the NSE to carry out valuation of the shares of the Company for thepurpose of determining the exit price to be offered to the public shareholders.Accordingly Indbank Merchant Banking Services Ltd' was appointed as the IndependentValuer. Indbank Merchant Banking Services Ltd has carried out a valuation of the fairvalue of the shares of the Company and has determined in their Valuation Report Rs.655/-per equity share as the exit price to be offered to the public shareholders. The Acquirerwill acquire shares from those shareholders who tender their shares for purchase by theAcquirer pursuant to the exit offer at the exit price of Rs.655/- per share. Inaccordance with the prescribed procedure the Acquirer has opened a Fund Escrow BankAccount with the Indian Bank Nandanam Branch Chennai 600035 with the name and TitleTCP Limited Exit Offer Escrow Account Operated by Indbank MerchantBanking Services Ltd' and has deposited therein the aggregate amount of considerationpayable to the public shareholders of the Company based on the Exit Offer price ofRs.655/- per share. The payment for the shares acquired will be made from this Escrow BankAccount.
Public Announcement of the Exit Offer has been given for publication in the followingnewspapers: The Financial Express' (in English) All Editions to bepublished on 12th August 2017 Malai Sudar' (in Tamil) Chennai Edition to be published on 12th August 2017 Jansatta' (in Hindi) Delhi Edition to be published on 13th August 2017; and Gujarathi Express' (in Gujarathi) Ahmadabad Edition to be published on 12th August 2017. The Company will be sendingThe Letter of Offer' to the Public Shareholders whose name appears in the Registerof Members as on 27th June 2017. However a request is made to those shareholders whohave since transferred their shares from that date to handover the Letter of Offer to thetransferee.
The Exit Offer opens on 25th September 2017 and closes by 5.30 P.M on 6th October 2017.The Form of Acceptance sent with the Letter of Offer has to be submitted by that time.The other details of the Exit Offer are given in the Letter of Offer. As per the SEBICircular the Acquirer will have to acquire the shares of those shareholders who tendertheir shares after the closure of the Exit Offer Window but within a period of one yearfrom that date viz. up to 6th October 2018 at the same exit price of Rs.655/- per share.
On the payment to those shareholders who have tendered their shares up to 6th October2018 the promoter shall certify to the satisfaction of the NSE that appropriate procedurehas been followed for providing exit to shareholders of the Company. Subsequently theNSE upon satisfaction shall remove the company from the Dissemination Board.
ANNEXURES TO THE DIRECTORS' REPORT
1. The Extract of Annual Return in Form MGT-9 Annexure I
2. The Nomination and Remuneration Policy Annexure II
3. Annual Report on CSR Activities Annexure III
4. Statement under Rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 Annexure IV; and
5. Secretarial Audit Report Annexure V
The Directors place on record their appreciation for the continued co-operation andperformance extended by all employees of the Company. The Directors also place on recordtheir appreciation for the unstinted support given by the shareholders supplierscustomers depositors the Tamil Nadu Generation and Distribution Corporation Ltd(TANGEDCO) and accredited agents who have been instrumental in the company's continuedsatisfactory performance. The Directors also acknowledge with deep sense of gratitudethe timely financial assistance provided by the Company's Bankers viz. Indian OverseasBank State Bank of India IDBI Bank and HDFC Bank for smooth and efficient functioningof the Company.
For and on behalf of the Board
V R Venkataachalam Chairman
Place : Chennai: 600 004
Date : 11th August 2017