DIRECTORS' REPORT Dear Shareholders, Your Directors are presenting the 34th Annual Report of your Company and the Audited Financial Statements for the financial year ended 31st March 2015] HIGHLIGHTS OF THE COMPANY'S PERFORMANCE: During the year under review, the revenue of the Company fell to Rs. 2,69,72,71,885/-. Also, the expenses of the Company had reduced by 47.38%. However, the net profit of the Company increased by Rs.95,21,190/- i.e. 7.22%. The company has not been able to increase its sales turnover during the year due to various factors like fluctuations in the exchange rate of US Dollar vis-a-vis Indian Rupee and steep decrease in prices of Iron and steel products and volatile market conditions. However, the company has been able to improve the net profit of the company for the financial year 2014-15 due to its cautious approach. The management is of the view that, in the coming years the Ship Breaking industry as well as Iron and Steel sector will be stable and with expected boost in the economy the requirement of Iron and Steel will increase which will help the company to move towards its sustained path of growth. DIVIDEND: To consolidate the future position of the Company and support the fund requirements, your Board of Directors regret their inability to recommend any dividend for the year. RESERVES: The whole profit after tax has been transferred to Profit & Loss surplus. There is no amount that has been proposed to be carried to any other reserves. LOANS, GUARANTEE & INVESTMENTS: The particulars of loans, guarantees and investments have been disclosed in the financial statements. DEPOSITS: The Company has not accepted any deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014, or under Chapter V of the Act. RELATED PARTY TRANSACTIONS: The particulars of every contracts or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013, in prescribed Form No. AOC -2, is appended as Annexure 1 to the Board's Report. INTERNAL FINANCIAL CONTROLS: The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. DIRECTORS AND KEY MANAGERIAL PERSONNEL: A) Changes in Directors and Key Managerial Personnel (KMP) • Appointment and Resignation of Directors: During the year under review, in accordance with the provisions of the Companies Act, 2013, Mrs. Unnati Reniwal was appointed as an Additional Director w.e.f. 2nd June 2014 and was appointed as a Director at the Annual General Meeting of the Company held on 30th September 2014. Further, Mrs. Lalitadevi resigned from the Directorship of the Company w.e.f. 2nd June 2014. The Board of the Company is duly constituted. Mrs. Unnati Reniwal (DIN: 00041306), who is liable to retirement by rotation at the ensuing Annual General Meeting and being eligible, seek reappointment pursuant to Section 152 of the Companies Act, 2013. • Appointment and Resignation of KMP: The Board of Directors at its meeting held on 30th March 2015 appointed Mr. Rajeev Reniwal as Chief Financial Officer (CFO) and Ms. Disha Shah as a Company Secretary of the Company. Further, Mr. Shantisarup Reniwal, Managaing Director, was designated as a KMP. B) Declaration by an Independent Director(s) and re-appointment, if any All the Independent Directors have provided the declaration of Independence, as required pursuant to Section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in sub-section (6). PERFORMANCE EVALUATION OF THE BOARD: Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and other Committees. The same is found to be satisfactory. At a separate meeting of Independent Directors, performance of non-independent directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of Executive Directors and Non-Executive Directors. The same was discussed at the Board Meeting that followed the meeting of the Independent Directors, at which the performance of the Board, its committees and individual Directors was also discussed. BOARD MEETINGS: During the year under review, the Board met 18 (Eighteen) times. Details of this are covered under Corporate Governance section. EXTRACT OF ANNUAL RETURN: In accordance with Section 134(3)(a) and as provided under sub-section (3) of Section 92 of the Companies Act, 2013 an extract of the annual return in prescribed form MGT - 9 is appended as Annexure 2 to the Board's Report. CORPORATE GOVERNANCE: A separate section on Corporate Governance forming part of the Directors' Report and a Certificate from the Company Auditors is included in the Annual Report. Annexure - 3 is attached herewith. AUDITORS: M/s. P. D. Goplani & Associates, Chartered Accountants, Mumbai, having ICAI Firm Registration No. 118023W being eligible offer themselves for re-appointment. If re-appointed, it will be within the purview of Sections 139 and 142 of the Companies Act, 2013. Members are requested to appoint the auditors and to fix their remuneration. AUDITOR'S REPORT AND OBSERVATION: The Auditors in their report dated May 29, 2015 have opined that provision for gratuity and long term employee benefits as per AS-15 has not been made. In this connection, the Board would like to clarify that the Company has no employee in continuous service of 5 years or more. Hence, the provisions pertaining to Gratuity are not applicable to the Company. Apart from this the report is self-explanatory. SECRETARIAL AUDIT, REPORT AND OBSERVATION: The Board of Directors have appointed Mr. Dilip Bharadiya, Proprietor of M/s. Dilip Bharadiya & Associates, Practising Company Secretaries, Mumbai, to conduct Secretarial Audit for the financial year 2014-15, as required under Section 204 of the Companies Act, 2013 and the rules framed thereunder. The Secretarial Audit Report for the financial year 2014-15 forms part of the Directors' Report as Annexure 4. The Auditor has raised observations pertaining to delay in filing of forms in time. The management of the Company has assured that the Company will take adequate steps to streamline work and adhere with time guidelines provided under various acts, statutes, regulations. MATERIAL CHANGES AND COMMITMENTS: No material changes have took place affecting the financial position of the Company from the date of closure of financial year till the date of signing of this report. DIRECTORS' RESPONSIBILITY STATEMENT: Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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) the Directors, further state that they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; (vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: The information as required under Section 134(3)(m) of The Companies Act, 2013 read with Rule 8(3) of The Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo is given below: A. Conservation of energy: (i) the steps taken or impact on conservation of energy; The Company recognized the importance of energy conservation in decreasing the deleterious effects of global warming and climate change. The company has implemented various initiatives for the conservation of energy and all efforts are made to minimize energy costs. Company is engaged in Ship Breaking, manufacturing of Sponge Iron and Steel, trading in metal scrap, coals, graphite electrodes & other industrial inouts. No significant power consumption is required in ship breaking industry as major portion in production process consist of non mechanical processes. However, industrial gases are used in ship dismantling activities and the company has taken various measures to control the consumption of fuel and energy. Moreover, in its Steel & Power Unit, the Company has taken various measures to control the consumption of fuel and energy. (ii) the steps taken by the Company for utilising alternate sources of energy; Company is engaged in Ship Breaking and trading in metal scrap, coals, graphite electrodes & other industrial inouts. No significant power consumption is required in ship breaking industry as major portion in production process consist of non mechanical processes. However, industrial gases are used in ship dismantling activities. The Company has taken various measures to control the consumption of fuel and energy. (iii) the capital investment on energy conservation equipments; The Company is taking adequate steps to conserve energy though no such capital investment has been made. B. Technology absorption: The Company's operations do not require significant absorption of technology. CORPORATE RESPONSIBILITY STATEMENT (CSR): The Company is looking out for avenues to undertake CSR activity. AUDIT COMMITTEE: The Audit Committee was reconstituted in accordance with the provisions of Companies Act, 2013. The details pertaining to Audit Committee and its composition are included in the Corporate Governance Report, which forms part of this report. NOMINATION AND REMUNERATION COMMITTEE: The Company has constituted a Nomination and Remuneration Committee pursuant to Section 178(1) of the Companies Act, 2013 and has defined the policy on Director's appointment and payment of remuneration including criteria for determining qualifications, positive attributes, and independence of a Director. The Committee shall function in accordance with the terms and reference of the policy. Policy of the Company is enclosed herewith as Annexure 5. VIGIL MECHANISM: The Company has adopted a Whistle Blower Policy establishing vigil mechanism, 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. The policy of vigil mechanism is available on the Company's website. STAKEHOLDER'S RELATIONSHIP COMMITTEE: The details pertaining to composition of the Committee is included in the Corporate Governance Report, which forms part of this report. The role of the Committee is explained in detail in the Corporate Governance Report enclosed herewith. PERFORMANCE OF EMPLOYEES: A) The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: a. Details of the ratio of the remuneration of each director to the median employee's remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 The Company has not paid any remuneration to the Directors of the Company and hence the information is not furnished. b. The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the financial year: No remuneration is paid to any Director of the Company. Further, appointment of Chief Financial Officer, Company Secretary was done at the Board Meeting held on 30th March 2015 which is for part year and hence the information pertaining to percentage increase in remuneration cannot be provided. c. The percentage increase in the median remuneration of employees in the financial year: The Company has not paid any remuneration to the Directors of the Company and hence the information cannot be furnished. d. The number of permanent employees on the rolls of Company: 14 e. The explanation on the relationship between average increase in remuneration and Company performance: There is no increase in the remuneration of Employees. Hence, information cannot be furnished. f. Comparison of the remuneration of the key managerial personnel against the performance of the Company: Appointment of key managerial personnel was done on 30th March 2015. Since this information is for part of the year, the same is not comparable. h. Percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer: During the financial year under review, the Company has not come out with any public offer. i. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: There is no increase in salaries of employees other than the managerial personnel in the last financial year. Company Secretary (Managerial Personnel) is for part year hence comparison cannot be made. j. Comparison of each remuneration of the key managerial personnel against the performance of the Company: Appointment of key managerial personnel was done on 30th March 2015. Since, this information is for part of the year, the same is not comparable. k. The key parameters for any variable component of remuneration availed by the directors: No remuneration is paid to any Director of the Company. l. The ratio of the remmuneration of th highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Directors during the year. Not applicable m. Affirmation that the remuneration is as per the remuneration policy of the Company: Remuneration paid to Key Managerial Personnel is as per the remuneration policy of the Company. B) Details of the every employee of the Company as required pursuant to 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 The Company has no such employee drawing remuneration more than mentioned under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. DETAILS OF SUBSIDIARY/JOINT VENTURES/ASSOCIATE COMPANIES: The Company does not have Subsidiary/Joint Ventures/Associate Companies. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: Management Discussion and Analysis Report for the financial year under review as stipulated in Clause 49 of the Listing Agreement entered into with the Stock Exchanges is provided in Annexure - 6. COST AUDIT: As per Section 148 of the Act, the Company is required to have the audit of its cost records conducted by a Cost Accountant in practice. The Board of Directors of the Company has approved the appointment of Mr. Sonu Sobhraj Kewlani, Partnership firm M/s Kewlani & Associates, having Registration No.101593 as the cost auditors of the Company to conduct cost audits pertaining to relevant products prescribed under the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time for the year ending March 31, 2016, at a remuneration of Rs.40000/- p.a. and have vast experience in the field of cost audit and have conducted the audit of the cost records of the Company for the past several years under the provisions of the erstwhile Companies Act, 1956. RISK MANAGEMENT: The Board of the Company has formed a Risk Management Committee on 30th March 2015 to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Policy to manage risk is also placed on the website of the Company. During the year, risk analysis and assessment was conducted and the details of the same are covered in the Management Discussion and Analysis Report of the Company. FAMILIARIZATION PROGRAMME: As per Clause 49 of the Listing Agreement entered into with the stock exchange, Corporate Governance Report with Auditors' Certificate thereon and Management Discussion and Analysisare attached, which form part of this report. Details of the Familiarization Programme of the Independent Directors are available on the website of the Company. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE: Your Directors state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. DETAILS OF VARIOUS PLANTS: Ship Breaking and Iron & Steel During the financial year 2014-15, ship breaking unit at Alang Ship Breaking Yard and Trading Unit have not been able to perform well during the year due to various factors like fluctuations in the exchange rate of US Dollar vis-a-vis Indian Rupee and steep decrease in prices of Iron and steel products and volatile market conditions. The management is of the view that, in the coming years the ship breaking industry will be stable and with expected boost in the economy the requirement of iron and steel will increase which will help the company to move towards its sustained path of growth. Trading unit of the company has not been able to sustain its performance in terms of sales as compared with the preceding financial year due to volatile market conditions and heavy foreign exchange fluctuations; however, it is hoped that the trading unit will show an increase in terms of sales and profits in the coming years. Steel and Power unit has been shut down during the year under review due to issues of uninterrupted availability of raw materials, local mining issues, rupee volatility and other similar factors at Hassan, Karnataka. With the changed circumstances, the company is hopeful that in the coming period the company will continue its ship breaking activities and take it to the level of extended growth and will contribute more to the overall growth of the business of the company. The trading in Ferrous and Non Ferrous Metals, Scrap, Coal etc activities of the company are contributing considerably to the profitability of the company. Moreover, the investment division of the company is also doing well. Your directors see a very positive and bright future prospects ahead for the company looking to the prevailing upward trend in the Iron and Steel sector in India and internationally. Industrial Gases: The company is into a partnership in M/s. Hariyana Air Products (with 60% share.) for the manufacture and supply of Industrial Oxygen Gas. During the year the oxygen plant at Bhavnagar, Gujarat has not been able to perform well and the company has earned loss from the said partnership firm of Rs. 27.00 Lacs as against loss of Rs. 27.17 Lacs last year. The reason for the loss is volatile market conditions and a competitive market with liquid oxygen suppliers. However, with proximity to Alang Ship Breaking Yard and huge captive consumption requirements of group companies, the company expects good long term benefits from the said partnership venture. Real Estate & Construction: The Company is also taking interest into real estate business. For which has been into Partnership in the name of "White Field Projects" (with 40% share) for construction & selling of residential apartments. The construction work of the Project is fully completed and all of the flats have been sold. The company's share of loss from the firm during the year under report is Rs. 0.42 Lacs. The Company has also been into Partnership and formed a Partnership Firm "Goyal Hariyana Construction" formally known as "Orchid Woods Projects" (with 50% share) for construction & selling of residential apartments. Presently the firm has two projects at Bangalore, Karnataka.The firm has acquired land at Kothanur Village, KrishnarajapuraHobli, Banglore, East Taluk and at Chokkanahalli Village, YelahankaHobli, Banglore, East Taluk with the an object of constructing 2 & 3 BHK Apartments. Likely date of completion of the project at Kothanur Village, KrishnarajapuraHobli, Banglore, East Taluk is October, 2015. The company has started the construction at Chokkanahalli Village, YelahankaHobli, Banglore, North Taluk on February, 2014 and expected to complete the project by May, 2016. The company's share of profit from the firm is Rs. 572.88 Lacs for the year ended 2015. The Company has also been into partnership (with 33.33% share) M/s. "Swastik Developers" for construction of building. The firm has acquired 66 Acres of land in Goa. The project is expected to commence soon. The company has also been into partnership in M/s. "White Mountain" (with 25% share). Presently the firm is having one project at Thindlu, Indrasanahalli & Singrahalli Village, KundanaHobli, Devanahalli Taluk. The firm has acquired 44 acres and 20 Guntas of land with the object of developing 386 plots of various sizes. Likely date of completion of the project is December 2015. The company's share of profit from the firm is Rs. 560.29 Lacs for the year ended 2015. The company has also been into partnership in M/s. "Orchid Lakeview Developers" (with 33.33% share). The firm is having the project at Bellandur Village, VarthurHobli, Bangalore, East Taluk with an object of construction 2 & 3 BHK apartments consisting 336 flats. Likely date of completion of the project is December, 2015. The company has also entered into partnership and formed a partnership firm "Goyal Hariyana Realty" (with 50% share). The firm has acquired land at Kannur Village, Bangalore, with the object of construction of Villas. The firm has already purchased Land and seeking NOC from concern departments. The firm has started construction in November, 2014 and expected to complete the projects on July, 2016. The company has also entered into partnership and formed a partnership firm "Shree Balaji Associates" (with 5% share). The firm is engaged in the business of trading in iron and steel. The company's share of profit from the firm is Rs. 3.46 Lacs for the year ended 2015. ACKNOWLEDGEMENT: Your Directors wish to place on record their appreciation for the co-operation extended by all the employees, Bankers, Financial Institutions, various State and Central Government authorities and stakeholders. For and on behalf of the Board of Directors Hariyana Ship Breakers Limited, Sd /-Shantisarup Reniwal Managing Director(DIN 00040355) - Sd/- Rakesh Reniwal Director (DIN 00029332) Place: Mumbai Date: 25th August 2015 |