TO THE SHAREHOLDERS
We present herewith our Annual Report together with the Audited Financial Statements ofyour Company for the year ended March 31 2021.
| || ||(INR Lacs) |
| ||FY 2021 ||FY 2020 |
|Operations for the year resulted in a Profit before Interest and Depreciation (PBIDT) of ||4325.86 ||3201.36 |
|less: Interest & other finance costs ||1731.52 ||1858.27 |
|Profit before Depreciation and Tax (PBDT) ||2594.34 ||1343.09 |
|less: Depreciation ||1239.69 ||1221.34 |
|Profit Before Tax (PBT) ||1354.65 ||121.75 |
|less: Exceptional items (net) ||( 51.00 ) ||- |
|less: MAT credit for earlier years written off ||( 533.58 ) || |
|add: Tax adjustment for earlier years ||20.93 ||( 0.84 ) |
|Profit after Tax (PAT) ||791.00 ||120.91 |
|add : Other comprehensive income ||( 39.55 ) ||( 20.32 ) |
|add : Surplus brought forward ||( 161.44 ) ||( 262.03 ) |
|Balance available for appropriation ||590.01 ||( 161.44 ) |
|Which is appropriated as : || || |
|- Surplus carried forward ||590.01 ||( 161.44 ) |
Notwithstanding the clearly improved performance and a reasonable surpluscarried-forward deeming it prudent to conserve resources in the face of wide-ranginguncertainties the Directors do not recommend a Dividend.
Shareholders may note that these results are the aggregate of about one quarter ofseriously inhibited performance (due to the countrywide lockdown) and three quarters ofrecovering performance. A note of caution is expressed that unforeseen externalcircumstances and/or business conditions can affect the sustainability of theseperformance levels.
The tax adjustment for earlier years principally relates to writing off deferred taxassets required under a choice which the Company has opted for under the Income Tax Act(covered below in this report) and therefore does not have a direct relation to theoperating results for the year.
REVIEW OF KEY BUSINESS MATTERS
The year ended March 31 2021 was an unprecedented year for the economy businesses andcitizens alike. It brought about economic and personal distress that could not beimagined. We wish to respectfully empathize with the turmoil this pandemic has caused tomillions of lives in India and across the globe. Governments worldwide deployed a range ofpolicy tools to support citizens and economies. India too recognised the socio-economicdisruptions and announced some proactive strategies containment measures fiscal supportand demand push besides financial measures and structural reforms - which arecollectively facilitating recovery and trying to stabilize businesses in stress.
However the present second wave of Covid has as yet unpredictable socio-economicoutcomes. Enough has been written in the public domain on analysis of the macro-economicsituation and the impact on businesses lives and livelihoods. Of late various surveysincluding by the RBI flag the possibility of poor consumer sentiment - particularly fordiscretionary spending (which can affect the Company's ultimate markets). Manycommentators point out that exuberance in the stock markets may not be a pragmaticreflection of the state and condition of corporates and the economy. Recently someforecasters are scaling back growth estimates and remain alert for problems on thebad-loans front. It is possible that for some time this year the resilience of bothcitizens and companies across sectors may get seriously tested amid the ongoing Covid-19crisis. All aspects considered going forward one must be reasonably prepared forunforeseeable business challenges and an ultra-sensitive atmosphere in the banking system.
Throughout the challenging period of addressing Covid-19 issues the health safety andwell-being of our employees and people in our environs has been a management priority.Wherever possible work-from-home was implemented and our protocols for productiveactivities incorporate best practices as well as stipulated guidelines for safety. Strictstandards of hygiene and sanitation social distancing use of masks etc. have beenimplemented and suitable safe practices continue to evolve dynamically. Management'sprecautions helped to severely limit negative outcomes. There were no job losses at theCompany on account of Covid or lockdowns.
The Company's operations were temporarily suspended from March 24 2020 on impositionof general lockdown which was extended in multiple phases upto May 31 2020. Onresumption of economic activity the units resumed phased operations under toughguidelines. The first quarter's performance was an obvious washout. As a leading OE andindustrial supplier to the consumer durables and capacitor industries even in normaltimes the Company's production and revenues are always subject to swings in demand fromthese sectors and to our incoming and outgoing transport logistics. Thus extrapolation ofquarterly performance cannot yield exact trends.
After an almost lost first-quarter the rest of the year fortunately saw a rebound indemand for us (including pent-up demand) and therefore production volume for the full yearat 28478 MT (30298 MT) was lower only by 6% but net sales value of an improvedproduct-mix rose by over 5% to Rs.373.36 Crores. Operating PBIDT increased by about 35% toRs.4325.86 lacs (Rs.3201.36 lacs). Interest and financial costs were lower at Rs.1731.52lacs (Rs.1858.27 lacs) and accordingly Profit before Depreciation exceptional items andtax was Rs.2594.34 lacs (Rs.1343.09 lacs). Profit before exceptional items and tax wasRs.1354.65 lacs (Rs.121.75 lacs).
Some long-term initiatives and immediate liquidity support were initiated by theGovernment through the banking system; the Company has availed of certain facilities towhich it became entitled and this helped reinforce our resource position which in turnhelps working capital needs to support smooth and increased production. The cashgeneration has been adequate to meet the Company's debt-servicing obligations.
As a prudent measure the Company availed of a 6-month moratorium/deferral on paymentof term loan instalments falling due during lockdown from the consortium of Banks.Management had initially envisioned a restructuring of loans under the guidelines forresolution of Covid related stress. However with markets stabilizing the Company couldon its own cash flow meet repayments of loans and therefore withdrew its restructuringproposal. The Company was eligible for and was sanctioned Rs.22.60 Crores as Governmentguaranteed working capital term loans under the Emergency Credit Line Guarantee Scheme2.0. During the year overall debt decreased by Rs.33.74 Crores.
Operating details are annexed in the Managements' Discussion & Analysis which formsa part of this report. The Management is confident of maintaining its track record ofmeeting rated outputs when required the quality and competitiveness of product offeringsand of the service levels to clients. Under typical and reasonable conditions operationalcapability is not expected to be a constraining factor to improved financial performance.However relevant capacity enhancements may be a desirable way forward when the economyreturns to sustainable growth path.
The Company being essentially a business-to-business supplier has its output reallydetermined by the end-markets of its industrial clients. Resultantly demand and relatedpricing power of the Company can get influenced by several factors such as consumersentiment production of electrical goods and aggressive pricing tactics adopted byforeign suppliers (sometimes due to spillover from their regular markets).
The strategic consolidation and other steps taken over the past few years in theCompany have visibly played a positive role. The Company has engaged Deloitte ToucheTohmatsu India LLP to further drive sustainable cost reductions and operational efficiencyimprovements at the production units. The assignment has commenced recently and we arehopeful this will help the management in consolidating process improvements and upgradingcompetitiveness; we expect positive results to be derived regularly in subsequent periods.
The Dielectric film line (Biax Division - Unit II at Barjora West Bengal) deliveredhealthy volumes on production and sales build-up. This unit remains the solitary Indianmanufacturer for high-quality dielectric BOPP films and has established itself in themarket competing with imports from multiple suppliers in China (price-led) Japan SouthKorea and Europe (perceived quality-led). Exports to USA and Germany also continued welldespite the pandemic and shipping uncertainties. New groups of products continue to bedeveloped and gain client acceptance but at present the capacity demanded by regularproducts dominates the daily discourse.
Shareholders had approved at the EGM of April 16 2019 the sale transfer or disposalotherwise of Barjora Unit I (manufacturing mostly non-dielectric BOPP films). The salewhile contracted remained incomplete as necessary final (essentially routine) permissionsfrom the West Bengal Government end for sale/transfer are pending; the assets arereflected in the accounts as "held for sale". Barring unforeseen circumstancesthe transaction is now expected to be completed during the current year and the financialsand cash flows will be accounted for then. In the interim we have commenced tollmanufacturing at this unit for the purchaser as a holding arrangement.
Consumer durables including refrigerators (the significant client base for CoexDivision at Ranjangaon Maharashtra and Greater Noida UP) markets witnessed a quickresumption post the lock-down. Our clients could take advantage of the pent-up demandbesides that for larger and more advanced units following changing food patterns andlifestyles with work from home trends. Demand growth was pronounced in the latter part ofthe year but value addition stayed under pressure due to aggressive competition in theend-product markets. The Company continues to be the leading supplier of sheets and linersfor white goods of most leading brands. White goods hold good and long-term potential andcontinue to attract global players and we expect to expand our capacity appropriately asneeded. Coex division continued to supply cast films for use in surgical drapes and otherhygiene products used in Covid-19 applications.
The Company is exercising an option (w.e.f. AY 2020-21) allowed under Section 115BAA ofthe Income-tax Act 1961 in terms of the Taxation Laws (Amendment) Ordinance 2019. Thisoption reduces the effective corporate tax rate in future provided inter-alia that theCompany will not avail tax exemptions/incentives nor avail set-off of certain losses ordepreciation carried forward; the company would not be required to pay MAT. The DeferredTax Assets/Liabilities as at March 31 2021 and the estimate of Tax Expense for the yearended 31st March 2021 have been accordingly remeasured and Rs.533.58 lacs of net DeferredTax Asset (MAT credit) has been written off in the accounts for the year ended March 312021.
Operations at the subsidiary company Xpro Global Limited remained insignificant withtrading activities suspended during the year while management seeks trading opportunitiesfor future. Following the extraordinary loss suffered by it last year on review the valueof investment in Xpro Global Limited was written down by Rs.51.00 lacs during the year.Further the erstwhile subsidiary Xpro Global Pte. Ltd. Singapore which had no businessactivity for some time had applied voluntarily and was accordingly struck off theRegister of Companies by the regulatory agency in Singapore with effect from February 82021. The net proceeds repatriated under this process resulted in a gain of Rs.5.54 lacswhich has been accounted for during the year.
DIRECTORS AND KEY MANAGEMENT PERSONNEL
Smt. Madhushree Birla retires by rotation at the ensuing Annual General Meeting. Beingeligible she offers herself for re-appointment in terms of Section 149 152 and otherapplicable provisions of the Companies Act 2013.
At the end of his term Sri C Bhaskar was re-appointed by the Board as ManagingDirector & Chief Executive Officer of the Company (on recommendation by theRemuneration and Nomination Committee) whose office shall not be liable to retirement byrotation under the Companies Act 2013 for a period of three years from January 1 2021(subject to necessary approval of the shareholders).
Key management personnel and senior-level progressions include promotion of SriHimangshu Bakshi as Senior President & Chief Operating Officer Sri Vinay Agarwal asPresident (Finance) & Chief Financial Officer and Sri N Ravindran as Joint President& Chief Marketing Officer w.e.f. January 15 2021. Sri Amit Dhanuka was appointedCompany Secretary w.e.f. July 1 2020 pursuant to the vacancy arising on thesuperannuation of Sri S. C. Jain.
During the year seven Board Meetings were convened and held as per details in theannexed Corporate Governance Report. The Independent Directors met separately on February10 2021 as required.
STATUTORY AND OTHER MATTERS
Information as per the requirements of the Companies Act 2013 ("the Act")our report on Corporate Governance and the Managements' Discussion & Analysis Reportform a part of this Report and are annexed hereto.
The Annual Return (Form MGT-7) is available on the Company's website atwww.xproindia.com/annual-reports.html. Information on Conservation of Energy Technologyabsorption & foreign exchange earnings and outgo is furnished in annexure hereto.
The Board has on the recommendation of the Remuneration and Nomination Committeeframed a Policy for appointment and remuneration of Directors and Senior ManagerialPersonnel as well as criteria for determining independence and other relevant matters(policy and criteria annexed herewith; policy also available on weblink:www.xproindia.com/Codes/XILPolicyRemuneration.pdf). Pursuant to the provisions of the Actand SEBI Listing Regulations 2015 the Board carried out annual evaluation of itsperformance and of individual directors (including independent) as well as the evaluationof its Audit Remuneration and Nomination and Stakeholders Relationship Committees. Theconcerned Director did not participate in the meeting while he/she was being evaluated. Aquestionnaire was circulated to all Directors. The Remuneration and Nomination Committeealso evaluated the performance aspects of every Director. The evaluation of the Chairmanand of the non-independent Directors was also carried out at the separate meeting ofIndependent Directors.
The Company has formulated a Policy for determining material subsidiaries as requiredunder Regulation 16(1)(c) of the SEBI Listing Regulations 2015 (weblink:www.xproindia.com/Codes/XILPolMatSubs.pdf). The Company has only one wholly ownedsubsidiary viz. Xpro Global Limited following the voluntary strike-off from the Registerof Companies Singapore of erstwhile subsidiary Xpro Global Pte. Ltd. Singapore duringthe year. Performance and Financial Position of the said Subsidiary is annexed herewith inForm AOC-1 as required.
The Company has a system of review of business risks by Senior Executives at plants.Further although not mandated under applicable regulations the Company during the yearvoluntarily constituted a Risk Management Committee of the Board to inter alia reviewbusiness risks. The Board is informed about the identified risks assessment thereof andminimization procedures and identification of risk elements which in the opinion of theCommittee may threaten existence of the Company. The Company has an internal controlsystem commensurate with its size of operations. The internal audit function is carriedout by external agencies which report to the Audit Committee. During the course ofinternal audit the efficacy and adequacy of internal control systems of the Company isalso evaluated. Based on the reports corrective actions are taken and the controlsstrengthened.
The Company has not granted any loan or issued any guarantee or made any investment towhich the provisions of Section 186 of the Act apply. The Company does not invite oraccept any Fixed Deposits and accordingly there are none outstanding as on March 31 2021.
Transactions with related parties during the year were in the ordinary course ofbusiness and on arm's length basis. There are no material related party transactionsentered into by the Company which may have a potential conflict of interest with that ofthe Company and to which Section 188(1) of the Act applies. Accordingly Form AOC-2 is notrequired to be annexed. As required under provisions of the Act and Regulation 23 of theSEBI Listing Regulations 2015 all proposed Related Party Transactions are placed beforethe Audit Committee for approval or for omnibus approval as necessary and a statement ofall such transactions is also placed for review. The Policy on Related Party Transactionsis uploaded on the website www.xproindia.com/Codes/XILPolRelPartyTrans.pdf. The AuditCommittee is compliant with Section 177 of the Act and Regulation 18 of SEBI ListingRegulations 2015; composition details are furnished in the Corporate Governance Report.There was no instance during the year where the Board did not accept any recommendation ofthe Audit Committee.
There are no significant and material orders passed by the Regulators/Courts/Tribunalswhich impact the going concern status of the Company and its future operations.
The Company has a vigil mechanism for directors and employees to report genuineconcerns in accordance with the Whistle Blower Policy; no employee is denied access to theAudit Committee in this regard. The said Policy provides for safe guards through ProtectedDisclosures against victimization of persons who use such mechanism and is displayed onthe Company's website. The details of the whistle blower policy are also annexed herewith.
Information required pursuant to Section 197(12) of the Act read with Rule 5 (asamended) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 in respect of employees is annexed. A Committee is set up to look into complaintsunder The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013; no related complaint was filed during the year and none are pending.
The Company has constituted a Committee on Corporate Social Responsibility (CSR)details of which are furnished in the Corporate Governance Report. While statutoryrequirements on spending are not applicable to the Company in view of inadequate profitsmall steps have always been taken by the Company for social and inclusive development inits local areas; however given the relatively small size of the units and theirgeographical spread it has not been practical to yet undertake any significant projectsbeyond these. The CSR Policy is annexed herewith.
DIRECTORS' RESPONSIBILITY STATEMENT
The CEO and CFO certified the Financial Statements as per Regulation 17(8) of SEBIListing Regulations 2015; which have been reviewed by the Audit Committee and taken onrecord by the Board. Having taken reasonable and bonafide care pursuant to Section134(3)(c) of the Act the Directors indicate that (i) in preparation of the annualaccounts applicable accounting standards had been followed along with proper explanationsrelating to material departures; (ii) the Directors selected such accounting policies andapplied them consistently and made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company at theend of the financial year and of the profit of the Company for the year; (iii) theDirectors had taken proper and sufficient care 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;(iv) the Directors had prepared the annual accounts on a going concern basis; (v) thedirectors had laid down internal financial controls to be followed by the company and thatsuch internal financial controls are adequate and were operating effectively; and (vi) theDirectors had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
The observations of Statutory Auditors and Secretarial Auditors are routine and in thenature of general disclosures.
M/s Walker Chandiok & Co LLP Chartered Accountants had been appointed as theStatutory Auditors of the Company at the Twentieth Annual General Meeting held onSeptember 5 2017 to hold office until the conclusion of the Twenty Fifth Annual GeneralMeeting of the Company i.e. for a term of five years.
Pursuant to Section 204 of the Act the Company appointed Sri K. C. Khowala PracticingCompany Secretary to undertake Secretarial Audit of the Company. The Report ofSecretarial Auditors is annexed herewith.
Cost Audit for the year ended March 31 2021 is being carried out by M/s SanghaviRanderia & Associates Cost Accountants Mumbai (Firm Registration No. 00175). TheBoard on recommendation by the Audit Committee has appointed M/s Sanghavi Randeria &Associates Cost Accountants Mumbai to conduct the audit of the cost records of theCompany for the year ending March 31 2022. In terms of Section 148 (3) of the Act theirremuneration is required to be approved at the forthcoming Annual General meeting.
We place on record our sincere appreciation of the valuable cooperation and supportreceived at all times by the Company from all its Bankers particularly the lead bankState Bank of India all concerned Government and other authorities and Shareholders.Relations with employees were generally cordial. We particularly record our appreciationof the sincere and dedicated services made by all employees during what has been a mosttrying year. We greatly appreciate the trust faith and confidence of the Shareholders asreposed in the Company.
| ||For and on behalf of the Board |
|New Delhi ||Sidharth Birla |
|May 25 2021 ||Chairman |