DIRECTORS' REPORT Dear Shareholders, The Directors of Haryana Leather Chemicals Ltd. are pleased to present the 30th Annual Report and Audited Statement of the Company's accounts for the year ended on 31st March, 2015 OPERATIONS During the year the Company has achieved a sales turnover of Rs. 4238 lacs against Rs. 4479 lacs for the previous year. The net profit for the year is Rs. 136.00 lacs against Rs. 272 lacs for the previous year. The exports are at Rs. 1314 lacs compared to the previous year's exports of Rs. 1632 lacs. Inspite of recessionary trends in Indian leather industry, the company registered an increase in domestic sales. The decline in exports is mainly in China. DIRECTORS The composition of the Board of Directors of the Company is furnished in the Corporate Governance Report annexed to this report. Pursuant to the provisions of the Articles of Association of the Company, the Directors - Mr. Harish Kumar Gupta and Mr. Narendra Kumar Jain retire by rotation at the forthcoming Annual General Meeting to be held on 28th September, 2015 and being eligible they offer themselves for re-appointment. STATUTORY AUDITORS The statutory auditors of the Company M/s S. C. DEWAN & Co., Chartered Accountants, Panchkula are retiring at the forthcoming Annual General Meeting and they are eligible for re-appointment, offers themselves for the same. Their appointment, if made, will be in accordance with section 139 and 142 of the Companies Act, 2013 (hereinafter referred to the "Act"). The Company has received letter from the Statutory Auditors consenting to the re-appointment and a confirmation to the effect that their appointment, would be within the prescribed limits and that they do not suffer from any disqualifications under Section 141 of the Companies Act, 2013 and the rules made there under. Auditor's report does not need any comments from the directors. PARTICULARS OF EMPLOYEES u/s 197 The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors, Key Managerial Personnel (KMP) and Employees of the Company are provided as follows: The Company did not employ any person drawing a remuneration of Rs. 5,00,000.00 or above for one month or part of the month or Rs. 60,00,000.00 or above for one year, whose particulars are required to be mentioned u/s 197 of the Companies Act, 2013. SECRETARIAL AUDITORS 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 has appointed M/s. V. Jhanwar & Co., a firm of Company Secretaries in Practice, to undertake the Secretarial Audit of the Company. The report on the Secretarial Audit carried out for the year 2014-15 is annexed herewith as 'Annexure - B'. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer. COST AUDITOR'S COMPLIANCE The Central Government has directed that a cost audit of the Company should be conducted in the manner specified in MCA order 52/26/CAB-2010 Dt. 24-01-2012, by a Cost Accountant within the meaning of the Cost and Works Accountants Act, 1959. However, as per Companies (cost records and audit) Rules, 2014 notified by Ministry of Corporate Affairs, cost audit is not applicable to the Company by virtue of its turnover being less than the prescribed limits. Therefore, the Board did not proceed with the appointment of cost auditor and cost audit for the year 2014-15. The Company is properly maintaining its cost Record internally. WOMAN DIRECTOR In terms of Section 149 of the Act 2013 read with the Companies (Appointment and Qualification of Directors, Rules, 2014 and Clause 49 of the Listing Agreement, the Company is required to have a woman director on its board. Mrs. Sippy Jain is already appointed as the whole-time Director of the Company. TRANSFER OF FUNDS TO INVESTOR EDUCATION AND PROTECTION FUND The Company is distributing dividend to its shareholders since 2006 on recommendation of the shareholders of the Company. For the unclaimed dividend for the year 2007-2008, the Board has decided to take necessary steps to transfer the unpaid / unclaimed dividend of Equity Shareholders for the year 2007-2008 to the Investor Education and Protection Fund (IEPF) of the Central Government established under sub-section (1) of section 205C of the Companies Act, 1956. NOMINATION AND REMUNERATION POLICY The Nomination and Remuneration Committee of Directors (NRC) reviews the composition of the board of Directors of the Company, to ensure that there is an appropriate mix of abilities, qualifications, experience and diversity to serve the interests of all shareholders and the Company. During the year, in accordance with the requirements under Section 178 of the Act 2013 and Clause 49 of Listing Agreement, the NRC formulated a Nomination and Remuneration Policy to govern the terms of nomination / appointment and remuneration of (i) Directors, (ii) Key Managerial Personnel (KMPs) and (iii) Senior Management Personnel (SMPs) of the Company. (iv) The same was approved the NRC also reviews succession planning of both SMPs and board. The Company's approach in recent years is to have a greater component of performance linked remuneration for SMPs. The process of appointing a director / KMPs / SMPs is, that when a vacancy arises, or is expected, the NRC will identify, ascertain the integrity, qualification, appropriate expertise and experience, having regard to the skills that the candidate will bring to the board / company, and the balance of skills added to that of which the existing members hold. The NRC will review the profile of persons and the most suitable person is either recommended for appointment by the board or is recommended to shareholders for their election. The NRC has discretion to decide whether qualification, expertise and experience possessed by a person are sufficient / satisfactory for the concerned position. NRC will ensure that any person(s) who is/are appointed or continues in the employment of the Company as its executive chairman, managing director, whole-time director shall comply with the conditions as laid out under Part-I of Schedule-V to the Act 2013. NRC will ensure that any appointment of a person as an independent Director of the Company will be made in accordance with the provisions of Section 149 read with Schedule-IV of the Act 2013 along with any other applicable provisions and Clause 49 of the Listing Agreement. VIGIL MECHANISM/ WHISTLE BLOWER POLICY While every employee's contract of employment stipulates that he will not disclose confidential information about the employer's affairs, in order to bring about accountability and transparency, there should be a mechanism to enable employees to voice their concerns where they discover information which they believe shows serious malpractice, impropriety, abuse or wrong doing within the organization. The employees should be encouraged and assisted to raise concerns without any fear of victimization, subsequent discrimination or disadvantage. If the employee has acted in good faith it does not matter if one is mistaken and the Company shall ensure protection from any harassment or victimization of/against the disclosing employee. The Company has adopted a Whistle Blower Policy which applies to all permanent employees of the Company including those who are on probation and comes into effect from April 1st, 2014, to provide a formal mechanism to the Directors and employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. 1. Policy and Procedure for disclosure, enquiry and disciplinary action 1.1 Concerns which may be raised-illustrative list A whole variety of issues could fall under malpractice, impropriety, abuse and wrongdoing, some of which are listed below: • Breach of any Policy or Manual or Code adopted by the Company. Fraud and corruption (e.g. receiving bribes). • Health and safety risks, including risks to the public as well as other employees e.g. Jaulty electrical equipment). • Any sort of financial malpractice. • Abuse of power (e.g. Bullying/harassment). • any unlawful act, including failure to comply with legal or statutory obligation for and on behalf of the Company. • Any other unethical or improper conduct. 1.2 Concerns - how to raise/whom to disclose The concern should be disclosed through letter, e-mail, telephone, fax or any other method to any of the following persons, who shall comprise the Corporate Compliance Committee, headed by the Managing Director & President reporting directly to the Audit Committee of the Board. The Corporate Compliance Committee comprises the Managing Director & President, the Executive Director & Company Secretary, the CFO and the VP-HR. All relevant information regarding the Concern should be disclosed not later than 1 year from the date on which the employee came to know of the Concern. Upon receipt of the disclosure, the member of the Compliance Committee receiving the same shall furnish a copy to the Managing Director & President who shall decide which member shall be responsible for the investigation. 1.3 Procedure for investigation • Obtain full details and clarifications of the complaint • Consider the involvement of the Company's Auditors or any other external investigation agency or person • Fully investigate into the allegation with the assistance where appropriate of other individuals/bodies • Prepare a detailed written report and submit the same to the Compliance Committee not later than 30 days from the date of disclosure of the Concern. Based on the findings in the written report and after conduct of such further investigation as it may deem fit, the Compliance Committee shall take a decision in the matter not later than 30 days from the date of the written report. If the complaint is shown to be justified then they shall invoke disciplinary or other appropriate action against the defaulting employee. A copy of all decisions of the Compliance Committee shall be placed before the Audit Committee at the meeting held immediately after such final decision. The employee making the disclosure as well as all other persons involved in the investigation and the members of the Compliance Committee shall not make public the Concern disclosed except with the prior written permission of the Audit Committee, except where the employee is called upon to disclose this by any judicial process. FIXED DEPOSIT The Company has not accepted / renewed any fixed deposits during the period under review. CORPORATE GOVERNANCE A certificate on the compliance of conditions of corporate governance has been obtained from the Statutory Auditors of the Company and the same has been given below as Annexure. DIRECTORS' RESPONSIBILITY STATEMENT AS PER SECTION 134(5) OF THE COMPANIES ACT, 2013. The Board of Directors of the Company confirms that: a. During the preparation of the annual accounts, the applicable accounting standards have been followed and no material departure has taken place. b. The selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudent so as to give an accurate view of the state of affairs of the Company as at 31st March, 2015 and of the profit of the Company for the year ended on that date. c. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company, and for preventing and detecting fraud and other irregularities. d. Annual accounts have been prepared on an ongoing concern basis. Related Party Transactions All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Related Parties which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT-9 is annexure herewith in the Annual Report. QUALITY CONTROL Growing domestic and international concern on Restricted Substances has been highest priority of company's QC team. The company ensures that its customers get highest quality products that are "certified free" from banned substances in accordance with REACH (Registration, Evaluation and Authorization of Chemicals). Complemented by R & D focus on "process" together with "products", additional in-process checks have also yielded higher batch to batch consistency and yield. The Company also successfully completed certification audits by British Certifications Inc. for ISO 9001:2008 and ISO 14001:2004 system. Certificate No. 12834 and 12833 valid up to 03.12.2017 issued by certifying agency have been received by the company. EXPORT OPERATIONS To streamline export operations, and to provide full range of products from single unit, the company has decided to close the 100% EOU unit and has completed the de-bonding from excise and custom authorities. The ex-bonding formalities with concerned authorities have been completed. This will significantly improve the delivery time for foreign customers. Decline of orders from China has stalled company's growth in short term, but prospects in Africa and Middle East look promising. The company hopes to balance out loss of sales from China with new markets mentioned above. The company has initiated search for new dealers in footwear segment in China which can be a new market segment. The growth prospects in China are still very promising but the search for new dealers and formalizing arrangements for technical services is likely to take some time. TECHNOLOGY DEVELOPMENT The company has made significant investment towards improving production efficiency and reducing equipment breakdowns. These investments were mainly directed towards material handling and dosing systems. The systems installed for storage of liquids, level sensing, and pneumatic pumping have completely replaced old systems and have significantly improved plant efficiency, resulting in faster deliveries and turnaround of raw materials. The technology development work on Di-Sulphone Syntan, Acrylic Impact and Flow Modifiers for use in PVC is completed and production equipment has been in operation - though demand for these items is yet to pick up. The company has also finalized some automation concepts relating to valve actuation, feed rate monitoring and batch logging. These concepts will be thoroughly validated on pilot scale during the FY 2015-16. Implementation of these technologies will further reduce skilled manpower requirement for plant operation and reduce risk of accident. DIVIDEND Though there was drop in sales revenue as compared to last year, however considering the profitability, the directors are pleased to recommend the dividend @7% this year also. PERSONNEL & INDUSTRIAL RELATION The staff and workers of the company remain motivated across all levels and have contributed significantly towards development and implementation of various new production technologies. The Company continues to maintain cordial relations with its workforce. The new on-line system of leave management has significantly reduced employee's grievance and brought transparency in entire leave sanction hierarchy. The Company has maintained the yearly increments and bonus system to its employees to ensure motivation at all levels. ENVIRONMENT & POLLUTION CONTROL MEASURES The Company has complied with all the required State Pollution Control Regulations and its Amendments from time to time. A new consultant has been retained to further improve key parameters like COD and BOD during pre-treatment cycle of waste water. The company has evaluated various proposals for RO treatment to reclaim atleast 60% waste water. Natural evaporation of RO waste is being tested at pilot scale. The land for evaporation ponds has been earmarked and construction is likely to begin within this year. The company hopes to achieve a Zero Discharge status within next 2 years. The key objectives defined in ISO 14001:2004 are improving the working environment to match the best industry standard worldwide. Emphases on better housekeeping, deployment of external agency for cleaning services has drastically improved the working environment and ambience. ACKNOWLEDGEMENT The Directors extend their sincere thanks to all employees for their contribution in implementation of new production techniques. The Directors also extend their most sincere thanks to Company's suppliers, domestic and international dealers, service providers, financial institutions and technical consultants for their continued support. For and on behalf of the Board of Directors of Haryana Leather Chemicals Limited NARENDRA KUMAR JAIN Chairman PANKAJ JAIN Managing Director-cum-Vice Chairman Place : Gurgaon Date : 26th May, 2015 |