Thiru Arooran Sugars Ltd.
|BSE: 507450||Sector: Agri and agri inputs|
|NSE: THIRUSUGAR||ISIN Code: INE409A01015|
|BSE 00:00 | 31 May||Thiru Arooran Sugars Ltd|
|NSE 05:30 | 01 Jan||Thiru Arooran Sugars Ltd|
|BSE: 507450||Sector: Agri and agri inputs|
|NSE: THIRUSUGAR||ISIN Code: INE409A01015|
|BSE 00:00 | 31 May||Thiru Arooran Sugars Ltd|
|NSE 05:30 | 01 Jan||Thiru Arooran Sugars Ltd|
Your Directors present their 62nd Annual Report on the working of the Company for theyear ended March 31 2018.
In terms of Section 133 of the Companies Act 2013 and Rule 7 of the Companies(Accounts) Rules 2014 the Company had followed the Companies (Accounting Standards)Rules 2006 and Indian GAAP up to the Financial Year. Pursuant to the Notification datedFebruary 16 2015 issued by the Ministry of Corporate Affairs the Company has adopted theIndian Accounting Standards (Ind AS) from the Financial Year 2017-18 (with a transitiondate of April 01 2016) and reworked the Financial Statements for the previous FinancialYear 2016-17 for comparative information. Fair value of certain financial instruments andemployee costs relating to defined benefit obligations are the areas which had an impactdue to transition to Ind AS.
In view of the loss for the year no dividend is being recommended.
Share Capital :
The paid up Equity Share Capital of the Company as on March 31 2018 was $ 113.17million. During the year under review there was no change in Share Capital.
Company Performance :
The operations for the period under report reflect the performance of the Sugar andDistillery Divisions. During the year the performance of the Sugar Division was impactedby uneconomical realisations on sale of sugar reduced availability of sugarcane apartfrom lower recovery of sugar and lower production of Alcohol due to reduced availabilityof raw material viz. Molasses. In view of the aforesaid factors the Company has reportedLoss after Tax of $ 452.80 million as against $ 48.81 million for the previous year.
The performance of the Sugar Division as in the previous year continued to beimpacted by severe drought conditions in the command area of both the sugar mills. Due toreduced availability of sugarcane in the command area of the sugar unit at A Chitturthere was no crushing operation in the Unit during the sugar season 2017-18. The aggregatequantity of sugarcane crushed by both the factories during the year was substantiallylower at 1.81 lakh MTs as against 6.00 lakh MTs crushed during the previous year. Thesugar recovery was also affected by the draught and was lower at 7.64% as against 7.93%recorded in the previous year.
The Government of India had fixed the Fair and Remunerative Price (FRP) of sugarcanefor 2016-17 season at $ 2300/- per MT linked to average recovery of 9.5% whichtranslated to an FRP of $ 2300/- per MT for both the Tirumandankudi and the A. Chitturunits. The Company had announced cane price of $ 2425/- per MT for both the units asagainst the State Advised Price (SAP) of $ 2750/- per MT linked to average recovery of9.5%. However the Company has also borne the entire cost of cane transport theadditional burden of which worked out to $ 126/- per MT.
As against production of 47504 MTs of sugar during the previous year production forthe year under review aggregated to 25667 MTs which includes sugar produced by processingimported raw sugar.
During the year under review alcohol production was lower at 6067 KL as compared to9719 KL during the previous year. Average realisation on sale of alcohol during the yearwas higher at $ 49/- per litre as against $ 46/- per litre in the previous year.
Prospects for the 2017-18 season:
The Government of India has fixed the Fair and Remunerative Price (FRP) of sugarcanefor 2017-18 season at $ 2550/- per MT linked to a basic recovery rate average recovery of9.5% which translates to an FRP of
$ 2550/- per MT for both the Tirumandankudi and the A
Chittur units. The State Government has discontinued the policy of announcing StateAdvised Price (SAP) and has instead opted for the revenue sharing of price fixation modelfrom 2017-18 sugar season broadly based on the recommendation of the Dr RangarajanCommittee. However even under this new dispenstation the State Government has mandatedthat the cost of cane transport must be borne by the sugar mills.
The sugar mills in the private sector in Tamil Nadu have refused pay the State Advisedprice (SAP) announced by the State Government since the 2013-14 sugar season and had paideither the FRP or 'agreed price' which may be higher than FRP but lower than the SAP.Particulars of the cane price paid by the Sugar Units at Tirumandankudi and A Chittur areas under:
The price paid as above is in addition to the cost of cane transport borne by theCompany. Pursuant to the persistent demand from the cane growers the Company along withother sugar companies in the State has agreed to pay additional cane price of $ 40/- perMT for each of the aforesaid sugar seasons starting from 2013-14 to 2016-17.
As per the new pricing policy announced by the State Government based on the revenuesharing model farmers are assured of FRP as well as a share in profit which would accrueto the sugar mill over and above the FRP. In order to facilitate acceptance of thisrevenue sharing model of price fixation by farmers the State Government has announcedpayment of the difference between SAP for 2016-17 viz. $ 2750/- per MT and the price tobe paid under the new pricing policy as transitional production incentive directly payableby the Government to the farmers. Besides The Company has also agreed to pay additionalprice of $ 125/- per MT over and the above FRP of $ 2550/- for 2017-18 season.
The severe drought conditions prevailing across the State have not only taken a heavytoll on cane yields and cane availability for the 2017-18 season but also severelyimpacted planting of cane for supply during the 2018-19 season.
Sugar production in the country during the 2017-18 season is estimated around 32.5million MTs and the domestic offtake is projected around 25.4 million MTs. Considering theopening stock of 38.8 million MTs and 0.2 million MTs of white sugar produced fromimported raws the closing stock is estimated at around 10.72 million MTs. This closingstock of 10.72 million MTs which constitutes around 42% of the annual consumption andthe estimated production of 35.0 - 35.5 million MTs of sugar in the ensuing 2018-19 sugarseason project a gloomy outlook for the sugar mills for the current year and for the yearahead.
The steep decline in cane crushing in the State during the 2017-18 season has had asignificant impact on molasses and alcohol prices. Reduced availability of molasses lowerofftake of alcohol and liberal grant of permission for import of alcohol from other Statesare expected to adversely impact the performance of the Distillery during the currentFinancial Year.
Scrapping export duty on raw and refined sugar - duty reduced from 20% to nil.
Increase in the duty on sugar import - 40% to 50% in January 2017 and to 100% inFebruary 2018
Import of raw sugar upto 5 lakh MTs at nil customs duty
Import of additional 3 lakh MTs of raw sugar under TRQ at 25% of import duty
Stock holding limit imposed on sugar mills to stabilize sugar price
Fixation of minimum sale price for sugar at $ 2900/-per qtl by amending theEssential Commodities Act1955.
Subsidiary and Associate Companies:
The Subsidiary Company viz. Terra Energy Ltd recorded a turnover of $ 302.96 millionand reported a Loss of
$ 113.90 million for the year as against a turnover of
$ 191.52 million and Profit of $ 14.49 million for the previous year. The AssociateCompany viz. Shree Ambika Sugars Ltd recorded a turnover of $ 1870.10 million andreported Loss before Tax of $ 1112.04 million for the year as against a turnover of $3742.67 million and Loss before Tax of $ 168.78 million for the previous year.
Consolidated Financial Statements:
The Consolidated Financial Statements of the Company prepared in terms of Section 129of the Companies Act 2013 read with the Companies (Accounts) Rules 2014 and as per SEBI(Listing of Obligations and Disclosure Requirements) Regulations 2016 together with aseparate statement containing the salient features of the financial performance of theSubsidiary and Associate Companies and the Report of the Auditors thereof form part ofthe Annual Report.
As required under Section 136 of the Companies Act 2013 the Annual Report of theCompany containing its standalone and consolidated financial statements and the AnnualAccounts of the Subsidiary Company and the related detailed information have been placedon the website of the Company: www.tasugars.in.
The audited financial statements of the Subsidiary and Associate Companies will beavailable for inspection by any shareholder at the Registered Office of the Company duringthe business hours upto the date of the Annual General Meeting. A copy of the auditedfinancial statements of the Subsidiary and Associate Companies will be made available tothe shareholders of the Company on receipt of request.
Directors and Key Managerial Personnel: i) Mrs Malathi Ram Tyagarajan who retiredby rotation on September 30 2018 pursuant to Section 152 of the Companies Act 2013 hasbeen appointed as Additional Director of the Company with effect from October 01 2018.Pursuant to Section 161 of the Companies Act she vacates the office at the ensuing AnnualGeneral Meeting (AGM) of the Company.
Notice has been received from one of the members of the Company proposing the name ofMrs Malathi Ram Tyagarajan for appointment as the Director of the Company liable toretire by rotation. The Company has received declarations from the Independent Directorsconfirming that they meet the criteria of independence as stipulated under Section 149(6)of the Companies Act 2013. In terms of Section 149 of the Companies Act 2013 theCompany has a woman Director on its Board.
ii) Mr. R Vijayaraghavan who was appointed as a Non Executive Independent Director ofthe Company at the 58th Annual General Meeting (AGM) held on September 29 2014 incompliance with Section 149 of the Companies Act 2013 for a term of three consecutiveyears from September 29 2014 has resigned from the Board for personal reasons effectiveJuly 30 2018. The Board wishes to place on record its appreciation of the valuableservices rendered by him during his tenure as a Director of the Company and as a member ofthe various Board's Committees. The Company has initiated steps for appointment of anIndependent Director in the vacancy caused by the resignation by Mr R Vijayaraghavanwithin the time limit as stipulated under the Companies Act 2017 and the SEBI (Listing ofObligations and Disclosure Requirements) Regulations 2015.
iii) Mr Vikram Vijayaraghavan was appointed as Additional Director of the Company witheffect from August 13 2018 by the Board of Directors. He has vacated office at the closeof September 30 2018 in terms Section 161 of the Companies Act 2013.
As required under Regulation 36 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 details of the qualification age experience etc. of MrsMalathi Ram Tyagarajan are furnished in the Notice convening the forthcoming AnnualGeneral Meeting.
iv) Pursuant to Section 203 of the Companies Act 2013 the Board has on therecommendation of the Nomination and Remueration Committee appointed Mr C SSathiyanarayanan as the Chief Financial Officer with effect from June 12 2018 in thevacancy caused by the resignation of Mr R R Karthikeyan who was the Company Secretary andChief Financial Officer of the Company till April 30 2018.
Mr Sathiyanarayanan is a Member of the Institute of Cost and Works Accountants of Indiaand has the requisite knowledge and experience for being the Chief Financial Officer ofthe Comapny having held responsable positions relating to the finance function in theGroup Companies since July 2003.
Directors' Responsibility Statement:
Pursuant to Section 134(5) the Directors confirm: i) that in the preparation of theAnnual Accounts for the Year ended March 31 2018 the applicable accounting standardshave been followed along with proper explanation relating to material departures; ii) thatthe Directors have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as on March 31 2018 and of the Loss ofthe Company for the year ended on that date; iii) that the Directors have taken proper andsufficient care for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities; iv) that the Directors haveprepared the annual accounts on a going concern basis; v) that the Directors have laiddown internal financial controls to be followed by the Company and that the said internalfinancial controls are adequate and are operating effectively; and vi) that the Directorshave devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems are adequate and operating effectively.
Corporate Governance and Management Discussion and Analysis Reports:
The Corporate Governance and Management Discussion and Analysis Reports form anintegral part of this Report and are set out as Annexures I and II to thisReport. The Certificate from the Secretarial Auditors of the Company certifyingcompliance of conditions of Corporate Governance stipulated in SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 is also annexed to the Report on CorporateGovernance.
The Company has discontinued acceptance of deposits from the public since April 012014. As on the date of this Report the Company has unclaimed deposits aggregating to $0.25 million.
M/s. Guru & Ram LLP Chartered Accountants Chennai (Firm RegistrationNo.09723S/S200039) were appointed as the Statutory Auditors of the Company at the 61stAnnual General Meeting for a term of five years to hold office from the conclusion of the61st Annual General Meeting until the conclusion of the 66th Annual General Meeting onsuch remuneration as may be fixed by the Board of Directors on the recommendation of theAudit Committee from time to time. The aforesaid appointment is subject to ratificationat every Annual General Meeting as provided under the Companies Act 2013. Pursuant tothe Companies (Amendment) Act 2017 which came into force with effect from May 07 2018the requirement of ratification of the appointment at every Annual General Meeting hasbeen dispensed with. Accordingly no ratification is required and M/s Guru & Ram LLPwould continue as Statutory Auditors of the Company until the conclusion of the 66thAnnual General Meeting.
The Auditors' Report for the year ended March 31 2018 does not contain anyqualification or adverse remark and the same is attached with the Annual Report. Howeverit draws attention on material uncertainty related to the presumption of going concern.The Board of Directors state that the Company has reached the current difficult situationon account of several factors which are substantially outside the control of theManagement. The Board of Directors recognizes the need to raise substantial long termfunding to support the Company as well as its Subsidiary Company Terra Energy Ltd.Similarly the Associate Company Shree Ambika Sugars Ltd is also seeking to raise longterm funds. Once the Company is successful in raising long term funds the business plansof the Company as well as those of Shree Ambika Sugars Ltd are robust enough to tide overthe business and financial issues.
As per the Companies (Cost Records and Audit) Rules 2014 the Company's costaccounting records are subject to Cost Audit. The Board of Directors on therecommendation of the Audit Committee has appointed M/s. Vaasan Co. Cost Accountants asthe Cost Auditor to audit the cost accounting records maintained by the Company for theFinancial Year 2018-19 on a remuneration of $ 75000/- exclusive of reimbursement oftravel and out-of-pocket expenses that they may incur in connection with the audit. TheCompany has received certificate from M/s. Vaasan Co. confirming their eligibility asrequired under Section 141 of the Companies Act 2013. As required under the CompaniesAct 2013 a resolution seeking ratification of the Shareholders for payment ofremuneration as above as approved by the Board of Directors is included in the Noticeconvening the Annual General Meeting.
The Cost Audit Report for the year ended March 31 2017 was filed by the Cost Auditorwithin the stipulated deadline.
Pursuant to Section 204 of the Companies Act2013 the Board of Directors has appointedM/s. R Sridharan and Associates Practising Company Secretaries as the SecretarialAuditor to carry out the Secretarial Audit for the Financial Year 2017-18. TheSecretarial Audit Report of M/s. R Sridharan and Associates is annexed as Annexure IIIto the Report. The said Report does not contain any qualification or adverse remark.
Internal Financial Controls and their adequacy:
The Company has put adequate systems and procedures in place to ensure internalfinancial controls with reference to financial statements. The Company's internal auditorscarry out regular checks on the adequacy of the internal financial controls.
Information on conservation of energy technology absorption foreign exchange earningsand outgo.
Information on conservation of energy technology absorption foreign exchange earningsand outgo are given in the Annexure IV to this Report pursuant to Section
134(3)(m) of the Companies Act 2013 read with the Companies (Accounts) Rules 2014.
Corporate Social Responsibility
Section 135 of the Companies Act 2013 has mandated companies having minimum net worthof $ 500 crores or turnover of Rs.1000 crores or a net profit of $ 5 crores during anyfinancial year to constitute a Corporate Social Responsibility Committee of the Board. Asthe Company does not meet any of the aforesaid stipulations it remains outside thepurview of Section 135 of the Companies Act 2013 and accordingly is not required to makeany disclosure in terms of the aforesaid Section.
Annual Return in the prescribed form has been posted in the website of the Company: www.tasugars.inas required under Section 134(3)(a) of the Companies Act 2013 read with the Companies(Accounts) Rules 2014.
The Company does not have any employee drawing remuneration in excess of the limitspecified under Section 197 of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014. Details as requiredunder Section 197(12) are given in the Annexure V to this Report.
Details of Related Party Transactions
All Related Party Transactions (RPTs) entered into during the financial year were onarm's length basis and were in the ordinary course of business. All RPTs are placed beforethe Audit Committee and the Board for approval. Prior omnibus approval of the AuditCommittee is obtained for the transactions which are foreseeable and repetitive in nature.Particulars of contracts or arrangements with Related Party referred to in Section 188 (1)of the Companies Act 2013 read with the Companies (Accounts) Rules 2014 is furnished inForm AOC-2 (Annexure - VI)
The Audit Committee comprises Mr V Thirupathi as Chairman and Mr Vikram Vijayaraghavanand Mr R V Tyagarajan as Members.
Details of Loans / Guarantees / Investments made
The Company has not given any loan or any guarantee or made any investments during thefinancial year under review in terms of Section 186 of the Companies Act 2013.
There were no significant or material orders passed by the Regulators or Courts orTribunals which impact the going concern status and the Company's operations in future.
There is no change in the nature of business of the Company during the year underreview. There are no material changes and commitments in the business operations of theCompany during the period from the close of the Financial Year 2017-18 to the date of thisReport. During Financial Year 2015-16 the Company has availed Trade / Export Advance USD35.35 million ($ 234.21 crores) to be adjusted against the value of sugar exported/ to beexported over a period of time. The aforesaid advance is secured by Export PerformanceBank Guarantees issued by the Consortium of Banks. Due to reduced availability ofsugarcane during the current sugar year the Company could not export the specifiedquantity of sugar as per the terms of the contract entered into with Cargill InternationalTrading Pte Ltd (CITPL) and consequently CITPL has invoked the Bank Guarantees for theoutstanding Trade Advance. The Banks which have issued the guarantees have paid the amountclaimed by CITPL aggregating to USD 30.93 million equivalent to $ 225.56 crores. TheConsortium of Banks has issued notice to the Company requesting immediate repayment of thesaid amount. The Company is in discussion with the Consortium of Banks for resolving theissue.
There are no other material changes and commitments in the business operations of theCompany during the period from close of the Financial year to the date of this Report.During the year under review there were no complaints/ cases filed pursuant to theprovisions of Sexual Harassment of Women at Workplace (Prevention Prohibitions andRedressal) Act 2013.
Your Directors wish to place on record their sincere thanks and appreciation to theShareholders Sugarcane Growers Employees Bankers and also the Central and StateGovernments for their continued cooperation and support.
On behalf of the Board
R V Tyagarajan
Chairman and Managing Director September 30 2018