The Directors hereby present the 32nd Annual Report together with theaudited accounts of the company for the year ended 31st March 2018.
The performance of the company for the year ended 31st March 2018 is asfollows:
|Particulars || |
For the year ended
| ||31.03.2018 ||31.03.2017 |
|Revenue from operations (Gross) ||59455.45 ||64391.95 |
|Net Revenue (Excluding Excise Duty) ||57761.53 ||56714.96 |
|Total Expenditure ||47935.00 ||48882.29 |
|Operating Income ||9826.53 ||7832.67 |
|Other Income ||456.40 ||627.34 |
|Profit before Interest Depreciation Tax and Exceptional items ||10282.93 ||8460.01 |
|Interest ||2220.90 ||2433.12 |
|Depreciation ||1838.15 ||2255.00 |
|Profit before Tax & Exceptional items ||6223.88 ||3771.89 |
|Exceptional items ||15191.85 ||- |
|Profit/(Loss) before Tax ||(8967.97) ||3771.89 |
|Tax Expense/(credit) ||(3035.70) ||1202.46 |
|Profit/(Loss) after Tax ||(5932.27) ||2569.43 |
|Balance of profit brought forward from last year ||27408.25 ||25827.49 |
|Amount available for appropriations ||21475.98 ||28396.92 |
|Appropriations || || |
|Transfer to general reserve ||- ||- |
|Dividend paid during the year ||(1105.68) ||(773.97) |
|Tax on dividend ||(225.09) ||(144.25) |
|Other comprehensive Income/(Loss) ||(85.02) ||(70.45) |
|Balance profit carried to Balance Sheet ||20060.19 ||27408.25 |
The company has adopted "Ind AS" with effect from April 1 2017. Financialstatements for the year ended March 31 2017 have been re-stated to conform to Ind AS.
The Profit after Tax is negative due to the exceptional item of '15191.85 lakhs whichis the write off of advances and receivables due from Amtec Precision Products Inc. USA(Amtec) the wholly owned subsidiary of the company. The Board of Directors was of the viewthat the shareholders should not be denied the benefit of an improved performance andhence have considered and recommended a dividend of '10 per equity share on the22113625 equity shares of face value of '10 each out of the accumulated profits of thecompany for the approval of the shareholders at the ensuing Annual General Meeting. Thetotal dividend amount inclusive of distribution tax and surcharge thereon would be'2649.11 lakhs. The dividend if approved by the shareholders will be paid within thedue date to all the eligible shareholders whose names appear in the register of members ofthe company as on the record date fixed for this purpose. The dividend declared is as perthe dividend policy of the company. The dividend policy is disclosed in the website of thecompany www.ucalfuel.com weblink:http://www.ucalfuel.com/policy-dividend.pdf
The paid-up equity share capital of the company as on 31st March 2018 was'221136250. The company has not issued any shares nor granted stock options or sweatequity during the financial year 2017-18.
The revenue from operations of the company (net of excise duty) stood at '57761.53lakhs in the financial year 2017-18 as against '56714.96 lakhs in the financial year2016-17 resulting in an increased turnover of 2%. The increase in revenue can beattributed majorly to the increased off take of Air Suction Valve (ASV). The earningsbefore Interest Tax and Depreciation (EBITDA) stood at '10282.93 lakhs in the financialyear 2017-18 as against '8460.01 lakhs in the financial year 2016-17. The increase inrevenue combined with an improvement in operational efficiency has led to this improvedEBITDA.
The exports stood at '1263 lakhs in the financial year 2017-18 as compared to '1018lakhs in the financial year 2016-17. Though the company is EURO VI complaint the exportsdid not increase as anticipated due to a change in market requirements. However thecompany is reaching out to many manufacturers in Europe and hopes to improve its exportsin the current financial year. The spares sales of the company in the financial year2017-18 stood at '5470 lakhs as against that of '6328 lakhs in the previous financialyear. While there has been a marginal improvement in the off-take of spares by dealersthe off-take by the OEMs had reduced thereby affecting the total spares revenue. Thecompany is constantly striving to increase the spares revenue by extending the dealernetwork.
The Profit/(Loss) After Tax (PAT) for the financial year 2017-18 stood at ('5932.27lakhs) as against '2569.43 lakhs of the previous financial year. The Company's earningper share is "Nil" for the financial year 2017-18 due to the exceptional itemsof '15191.85 lakhs which is the write-off of advances and receivables due from the whollyowned subsidiary Amtec. However the consolidated financial statements of the company showa profit of '10122 lakhs with an earning per share of '45.77 as the write-off of advancesand receivables from Amtec gets offset in the consolidated financial statements.
To augment its capacity to meet the specific needs of certain customers the companyspent '3182 lakhs in capital investments in the financial year 2017-18 as compared to'1837 lakhs spent in the financial year 2016-17. The company continues to lay emphasis onR&D and has spent '1167 lakhs in the financial year 2017-18 as against an amount of'911 lakhs spent in the previous financial year.
Mr. Ram Ramamurthy's (DIN: 06955444) term as Whole-time Director ends on 3rdSeptember 2018. It is proposed to re-appoint him as Whole-time director for a furtherperiod of two years from 4th September 2018 to 3rd September 2020 ona remuneration as set out in the Notice convening the Annual General Meeting. The Boardrecommends the re-appointment of Mr. Ram Ramamurthy as Whole-time Director as per theterms and conditions laid down in the Notice to the ensuing Annual General Meeting.Appropriate resolutions for the re-appointment and remuneration have been set out indetail in the Notice convening the ensuing Annual General Meeting.
Mr. S. Balasubramanian (DIN: 02849971) was appointed Additional Director (non-executiveand Independent category) in the Board meeting held on 21st May 2018 subjectto the appointment being approved by the shareholders at the ensuing Annual GeneralMeeting. Appropriate resolutions for the appointment has been set out in detail in theNotice convening the ensuing Annual General Meeting. The Board recommends his appointmentas Independent Director.
Ms. Rekha Raghunathan (DIN: 00057774) retires by rotation at the ensuing Annual GeneralMeeting and being eligible offers herself for re-appointment. Necessary resolution for herre-appointment has been set out in detail in the Notice convening the ensuing AnnualGeneral Meeting. The Board recommends her re-appointment as Director of the company.
The information on Board meetings committees of the Board independent directorsBoard diversity remuneration policy familiarization program for independent directorsand Board evaluation are mentioned in the Corporate Governance Report.
Brief resume/details of Directors who are to be appointed/re-appointed as mentionedherein has been furnished along with the explanatory statement in the Notice convening theensuing Annual General Meeting.
DIRECTORS' RESPONSIBILITY STATEMENT
In terms of section 134(3)(c) read with section 134(5) of the Companies Act 2013 thedirectors to the best of their knowledge and belief and according to information andexplanation obtained by them confirm that
(a) In the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to any material departures;
(b) Such accounting policies have been selected and applied consistently and suchjudgments 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 the end of the financialyear 31st March 2018 and of the profit of the company for the year ended 31stMarch 2018.
c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) The annual accounts have been prepared on a" going concern" basis.
(e) Proper internal financial controls to be followed by the company have been laiddown and such internal financial controls are adequate and are operating effectively.
(f) proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and such systems are adequate and are operating efficiently.
The audit committee conforms to the requirements of Section 177 of the CompaniesAct2013 and Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. Mr. S. Natarajan Dr. V. Sumantran Dr. M.S. Ananth and Mr. JayakarKrishnamurthy continue as members of the Audit Committee. Mr. S. Natarajan continues asthe Chairman of the Audit committee. The committee met seven times during the year.Detailed disclosure on the terms of reference and meetings are mentioned in the corporategovernance report.
M/s R. Subramanian and Company LLP Chartered Accountants Chennai (RegistrationNumber: 004137S/S200041) were appointed as statutory auditors of the company for a periodof 5 consecutive years commencing from the conclusion of the 31st AnnualGeneral Meeting held on 28th September 2017 till the conclusion of the 36thAnnual General meeting subject to ratification of their appointment by the shareholders atthe Annual General Meeting every year. However as per the amendment in Section 40 of theCompanies Amendment Act 2017 the ratification of the appointment of auditor at the AnnualGeneral Meeting every year is not required. Hence the company has not put forth theresolution for the ratification of the appointment of Statutory Auditor in the notice tothe ensuing Annual General Meeting.
The emphasis of matter specified in the Independent auditor's report on the StandaloneFinancial Statements has been explained in Note No. 37(c) and 32 of the notes to accounts.
Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the company hadappointed M/s. P. Sriram & Associates a firm of practicing company secretaries assecretarial auditor of the company to undertake secretarial audit of the company for thefinancial year 2017-18. The report of the secretarial auditor is given in Annexure-I andforms part of this report. It does not contain any qualification reservation adverseremark or disclaimer.
M/s. P. Chandrasekar Chartered Accountants are the internal auditors of the company.Their scope of work is as approved by the audit committee. It includes among other thingsa review of the operational efficiency effectiveness of systems and controls inexistence review of the processes to safeguard the assets of the company and assessingthe strength of the internal control in all areas. The internal auditor's report isdiscussed with the concerned stakeholders and corrective remedial action are taken on aregular basis in consultation with the audit committee. The internal auditors were presentat all audit committee meetings.
The cost audit was conducted for 2017-18 by Mr. V. Kalyanaraman who was appointed asCost Auditor for the financial year 2017-18. Mr. V. Kalyanaraman was re-appointed as costauditor for the financial year 2018-19 at a remuneration of '500000/- per annum subjectto the remuneration being ratified by the shareholders at the ensuing Annual GeneralMeeting. Mr. V. Kalyanaraman has sent his consent for appointment as Cost Auditor for2018-19.
The company has two wholly owned subsidiaries.
Ucal Polymer Industries Limited (UPIL)-UPIL has recorded an increased revenue fromoperations of '4972 lakhs in the financial year 2017-18 as against that of '4085 lakhsin the financial year 2016-17. The increased revenue can be attributed to the increasedoff-take by the company which continues to be the major customer of UPIL. The net profitafter tax stood at '602 lakhs in the financial year 2017-18 mainly due to this increasedoff-take and an improvement of operations. A dividend of 50% has been declared by UPILfor the financial year 2017-18. Transfer of business from other vendors of the company toUPIL is a continuing process and has provided the company an advantage in terms of pricesquality and timeliness of supplies.
Amtec - The revenue from operations of Amtec was '24288 lakhs in the financial year2017-18 up from '22434 lakhs in the financial year 2016-17 thereby recording an increaseof 8% in terms of Indian Rupees due to exchange conversion rates though in terms of USdollar the revenue from operations was $37.40 million during financial year 2017-18 ascompared to $34.20 million in the financial year 2016-17 recording an increase of 9%.Amtec has earned a net profit after tax of '306 lakhs during the financial year 2017-18 asagainst a profit of '282 lakhs in the financial year 2016-17.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31st March 2018 ofthe company and its subsidiaries together with the auditor's report thereon is enclosed.The statement pursuant to sub section(3) of Section 129 of the Companies Act 2013 readwith Rule 5 of Companies(Accounts) Rules 2014 in the prescribed form AOC-1 relating tothe subsidiary companies is given in Annexure-II.
The consolidated results of the company and its subsidiaries show that a net profitafter tax of '10122 lakhs has been achieved during the financial year 2017-18 as againstthat of '3586 lakhs in the financial year 2016-17 as the writeoff of '15191.85 lakhs duefrom Amtec in the standalone financial statements gets off-set in the consolidatedfinancial statements. The consolidated financial statements of 2017-18 have been preparedtaking into account the audited financial statements of Amtec and UPIL USA Inc. for thefinancial year 2017-18 and all adjustments have been given effect to in the consolidatedstatements. The increased profit also reflects the better performance of all the companiesin terms of revenue and operations.
In terms of section 136 of the Companies Act 2013 the company has not attached thefinancial statements of the subsidiary companies. However the financial information of thesubsidiary companies are disclosed in the annual report. The annual accounts reports andother documents of the subsidiary companies will be available for inspection duringbusiness hours by any shareholder of the company at the registered office of the companyand also at the registered office of the concerned subsidiary and has also been posted inthe website of the company www.ucalfuel.com. The annual accounts reports and otherdocuments of the subsidiary companies will be dispatched to the shareholders upon receiptof a request from them.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The company's CSR activities continue in the field of education sports healthsanitation and preservation of culture and heritage through the two implementationagencies. The projects are in accordance with Schedule VII of the Companies Act 2013. Theaim is "To be a responsible corporate citizen by contributing to the well being ofthe society at large keeping in mind the national vision of ensuring a healthy educatedand a poverty free India and to protect the culture and heritage of this great ancientland". The constitution of the CSR committee and the other details are mentioned inthe corporate governance report. The annual report of the CSR activities carried outduring the financial year 2017-18 is given in Annexure-III.
During the financial year 2017-18 the company has not accepted any deposits from thepublic within the meaning of Section 73 of the Companies Act 2013 read with Companies(Acceptance of deposits) Rules 2014 and there is no outstanding amount on account ofprincipal or interest on deposits from public as on date.
INTERNAL CONTROL SYSTEMS AND ADEQUACY
The company has an efficient internal control system commensurate with its size andnature of business to safeguard the assets of the company and to ensure effectiveutilisation of resources. These controls ensure that transactions are completed on timeand in an accurate manner and by following proper procedures and systems. The internalauditors cover a wide area of operations and this is being continuously reviewed by theaudit committee. Internal audit is conducted on a quarterly basis by a team of internalauditors and the reports together with the action taken reports are reviewed by the auditcommittee periodically. A system of management controls is also in place to ensure higherlevels of efficiency and to keep the organisation competitive. All the critical functionsof the company i.e. Sourcing and Procurement Manufacturing Costing Finance Dispatchand Sales are handled through Oracle system which is well integrated. Checks and controlshave been built into the system to handle the transactions. Existing internal controlsprovide adequate assurance to the management for all the transactions covering operationsinventory fixed assets financial records and compliance to statuary requirements. Thesystems and controls are reviewed periodically to ensure their effectiveness. The Boardhas adopted various policies like Material Subsidiary Policy Whistle Blower PolicyRelated Party transactions Policy to safe guard the assets of the company to ensuretimely information and to prevent and detect frauds and errors.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required under Section 134(3)(m)of the Companies Act 2013 read with Rule 8of the Companies (Accounts) Rules 2014 on energy conservation technology absorptionforeign exchange earnings and outgo is given in Annexure-IV.
EXTRACT OF ANNUAL RETURN
An extract of Annual Return in form MGT-9 is given in Annexure-V and forms part of thisreport.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT2013
Particulars of loans and advances given guarantees given securities provided andinvestments made are provided in the Note Nos. 3 4 10 and 44 of the notes to accounts ofthe Standalone Financial Statements.
MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments in the operations of the company affecting thefinancial position of the company have occurred between the end of the financial year ofthe company to which the financial statements relate and the date of the Board's report.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The company did not enter into any material transaction with any related party whichmay have potential conflict with the interest of company at large during the financialyear 2017-18 as per Section 188 of Companies Act 2013. All transactions entered into withrelated parties were on arms length basis and in the ordinary course of business. FormAOC-2 as required under Section 134(3)(h) of the Companies Act 2013 read with Rule 8(2)of the Companies (Accounts)Rules 2014 is given in Annexure-VI and forms part of thisreport. The company's related party transactions have been made to meet the requirementsof operations and at an arm's length basis and have been entered in the ordinary course ofbusiness.
CHANGE IN NATURE OF BUSINESS
There was no change in the nature of business of the company during the year underreview.
During the year 2017-18 no significant and material orders were passed by the courtsregulators or tribunals affecting the going concern status of the company and its futureoperations.
PARTICULARS OF EMPLOYEES
Mr. Jayakar Krishnamurthy-Chairman and Managing Director Mr. Ram Ramamurthy-Whole-timeDirector and Chief Financial Officer Ms. Rekha Raghunathan-Director and Company Secretaryhold the office of key managerial personnel of the company. The Information requiredpursuant to Section 197 of the Companies Act 2013 read with Rule 5 of the Companies(Appointment & Remuneration of Managerial Personnel) Rules 2014 in respect ofdirectors key managerial personnel and employees are given in Annexure-VII.
During the year cordial and healthy relations were maintained with all sections/levelsof employees.
WHISTLE BLOWER POLICY
The company has a whistle blower policy to deal with instances of fraud andmismanagement. The details are explained in the Corporate Governance Report and are alsoposted in the company's website www.ucalfuel.com.
SEXUAL HARASSMENT POLICY
The company has in place a policy for prevention of sexual harassment. An internalcommittee has been set up at each plant to redress sexual harassment complaints. Allemployees are covered under this policy. No complaint was received during the financialyear 2017-18.
RISK MANAGEMENT POLICY
Key business risks are identified and reviewed on a regular basis. A strategydevelopment committee has been formed to strategise on ways to mitigate the various risks.The necessary actions and precautions are taken on time to deal with various risksassociated with the company and the Board discusses the same from time to time. Thedetails are given in Corporate Governance Report.
PREVENTION OF INSIDER TRADING
The company has framed a code of conduct for prevention of insider trading based onSEBI (prohibition of insider trading) Regulations2015. This code is applicable to all theboard members / employees / officers of the company. This ensures prevention of dealingwith shares by people who have access to unpublished price sensitive information.
The company adheres to all the requirements of the code of corporate governance asstipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. A report on corporate governance along with certification of the Chairman andManaging Director and the Whole-time Director and Chief Financial Officer is attached inAnnexure-VIII. Certificate from the Statutory Auditor regarding compliance of theconditions of corporate governance as stipulated by SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is given in Annexure-IX. The ManagementDiscussion and Analysis Report is attached in Annexure-X.
STATEMENT ON COMPLIANCE TO APPLICABLE SECRETARIAL STANDARD
The company has complied with all the applicable secretarial standards as issued by theInstitute of Company Secretaries of India during the year 2017-18.
The Board thanks all its employees customers bankers vendors suppliers andgovernmental agencies for their continued support. The Board is grateful to theshareholders for their continued trust and confidence in the company.
| ||For and on behalf of the Board |
|Place: Chennai ||JAYAKAR KRISHNAMURTHY |
|Date: 29th August 2018 ||CHAIRMAN AND MANAGING DIRECTOR |