DIRECTORS' REPORT 1.The Board has pleasure in presenting the Tenth Annual Report on business and operations of the Company for the year ended 31st March 2015. 2. PERFORMANCE REVIEW During the year under review, the performance of the Company continues to be severely impacted due to significant down turn in the Global Market. However in the last two quarters of the year , company got the orders worth 132.65 Mega Watt , because of which the Company could recommence the production and also logged in profit in the last quarter, though company incurred the loss on full year basis. Your Directors feel that the Company will be seeing a turn around in the coming quarters keeping in view the certain measures taken or expected to be taken by the Government to support of the domestic manufacturers in India viz. domestic content requirement policy , viability gap funding policy etc. During the year under review, the Company has not transferred any amount to any reserves due to heavy losses incurred. 4. DIVIDEND Due to non availability of profit, the Board does not recommend any dividend for the year ended 31st March 2015 5. STATUS OF IMPLEMENTATION OF 250 MW PROJECT The project is in the last stages of implementation and it is expected that it will get ready in near future. The Company is negotiating with the banks for the release of required funds to avoid further delays. 6. BOARD OF DIRECTORS AND ITS MEETINGS The Company has a professional board with right mix of knowledge, skills and expertise with an optimum combination of executive, non executive and independent Directors including one Women Director. The Board provides the strategic guidance and direction to the Company in achieving its business objectives and protecting the interest of the Stakeholders. One Meeting of the Board of Directors is held in each quarter. Additional meetings of the Board / Committees are convened as may be necessary for the proper management of the business operations of the Company. During the year ended 31st March 2015 , the Board of Directors met six times viz on 29th May 2014, 12th Aug 2014 ( two times) , 13th Oct 2014, 14th Nov 2014 & 19th Jan 2015. 7. DIRECTORS / KEY MANAGERIAL PERSONNEL APPOINTMENT OR RESIGNATION Our beloved Chairman , mentor and guide Mr Bhushan Kumar Gupta has left for the heavenly abode this 17th Aug. 2015. All the Members of Board on behalf of your Company acknowledge his immense contribution and pray that the great soul may rest in peace. As per Section 152 of the Companies Act 2013 , Mr Hulas Rahul Gupta Whole time Director retiring by rotation in 10th AGM being eligible has offered himself for the reappointment. Board has recommended the reappointment. During the year 2014-15 , The Board of Directors on the recommendation of the Nomination and Remuneration Committee appointed Ms Vinati Dev as additional director in the category of Independent and Non-Executive Director in the Board Meeting held on 12th Aug 2014 . Board in its meeting held on 12th Aug 2014 appointed Mr. Anand Kumar Agarwal as Chief Finance Officer w.e.f. 1st July 2014 for a period of five years. Shareholders in the Annual General Meeting held on 30th Sep 2014 appointed Mr Vidyut M Vora , Ms Vinati Dev and Mr Gautam Singh Kuthari as Independent Non-Executive Directors for the period of five years. . 8. EXTRACT OF THE ANNUAL RETURN The relevant extracts of the annual return in form MGT 9 for the Financial Year 2014-15 under the Companies Act 2013 is given in as Annexure I to this report. 9. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH THE RELATED PARTIES REFERRED TO IN SECTION 188(1) OF THE COMPANIES ACT , 2013. All the related party transactions that were entered during the financial year were in the ordinary course of business and were on arm's length basis . All the related party transactions , wherever applicable , are placed before the Audit Committee. The Quarterly disclosures of the transactions with the related party are made to the Audit Committee. The policy on Materiality of Related Party Transactions as approved by the Board is uploaded on the website www.indosolar.co.in . In compliance of Section 134(5) of the Companies Act , 2013 , the particulars of the contracts or arrangements with the related parties refered to in Section 188 (1) of the Companies Act are enclosed in Form AOC-2 , as a part of this report as Annexure - II. 10. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186: No loans , guarantees or investment as described under Section 186 of the Companies Act has been given by the Company during the Financial Year 2014-15. 11. AUDIT COMMITTEE The Company has an adequately qualified Audit Committee constituted in accordance to the provisions of Companies Act 2013 and Clause 49 of the listing agreement. As on 31st March 2015 , the Committee comprised of three members and all of them are Non-Executive Independent Directors viz. Mr Gautam Singh Kuthari , Mr Vidyut Manubhai Vora , Ms Vinati Dev. All the members are financially literate and have accounting or related financial management expertise. 12. CORPORATE SOCIAL RESPONSIBILITY ( CSR) Due to the continued heavy losses incurred by the Company, the CSR provisions of Companies Act, 2013, are not applicable. 13. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION INCLUDING THE CRITERIA FOR DETERMINING QUALIFICATIONS , POSITIVE ATTRIBUTES , INDEPENDENCE OF A DIRECTOR AND OTHER MATTERS AS PROVIDED UNDER SECTION 178(3) OF THE COMPANIES ACT, 2013. The Company strives to maintain an appropriate combination of executive , non executive and independent Directors subject to Min of 3 and Maximum of 12 Directors including at least one Women Director. The Nomination and Remuneration Committee of the Company leads the process for Board Appointment in accordance with the requirements of the Companies Act, 2013 , listing agreement and other applicable regulations or policy guidelines. During the current year under review the Company has adopted the Nomination and Remuneration Policy for Directors , KMPs and Other Senior Employees . The policy is attached as Annexure III. 14. PERFORMANCE EVALUATION OF BOARD , COMMITTEES & INDIVIDUAL DIRECTORS Nomination and Remuneration Committee carried out a formal evaluation of the performance of the Board , its committees, the Chairman and the Individual Directors. The evaluation was done using the questionnaire covering amongst others, vision , strategy , risk management , budgetary controls , receipt for the regular inputs and information, functioning performance and structure of the Board Committees , ethics and values , skill sets , knowledge & expertise of the Directors , leadership etc. 15. CHANGES IN CAPITAL STRUCTURE There has been preferential allotment of 2,29,85,973 Equity Shares pursuant to the provisions of Chapter VII of the Securities and Exchange Board of India ( Issue of Capital and Disclosure Requirements) Regulations 2009, as amended , as approved by the Board of Directors in their meeting held on 12th August 2014 and as approved by the shareholders of the Company in Annual General Meeting held on 30th September 2014. Out of the 22985973 shares, 20485973 shares have been allotted to Greenlite Lighting Corporation against the Conversion of ECB Loan and Cash. Balance 2500000 Equity shares have allotted to Skybase Infra Private Limited against the conversion of unsecured loan. 16. RISK MANAGEMENT The Board of Directors is overall responsible for identifying, evaluating and managing all the significant risks faced by the Company. The Board has approved the Risk Management Policy, which acts as the guideline by which the key risks are managed across the organization. In the opinion of the Board, none of the risk faced by the Company threaten its existence. However the following risks are considered to have the potential bearing on the performance of the Company: (i) Low prices of the Chinese Suppliers of the Solar Voltaic Cells (ii) Liquidity Crunch is resulting in the delay of completion of line C. (iii) Threat from new entrants in the Market. (iv) Inability of the Company to get the Continuous Orders throughout the year. The Risk Management Policy is available on the Company's Website www.indosolar.co.in 17. INTERNAL FINANCIAL CONTROLS AND ITS ADEQUACY The Company has put in place an adequate system of Internal and Financial Control commensurate with its size and nature of business which helps in ensuring the orderly and efficient conduct of its business. 18. VIGIL MECHANISM The Company has in place a Whistleblower policy , to support the Codes of Business Ethics. This policy documents the Company's commitment to maintain an open work environment in which employees , consultants and contractors are able to report instances of unethical or undesirable conduct, actual or suspected frauds or any violation of Company's Code of Busines Ethics at a significantly Senior Level without fear of intimidation or retaliation. The Company's Whistle Blower Policy has been posted on the Company's website www.indosolar.co.in . 19. STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS In terms of the definition of the "independent director" as prescribed under clause 49 of the Listing Agreement entered with Stock Exchange under Clause 49 of the Listing Agreement entered with Stock Exchanges and Section 149(6) of the Companies Act 2013 and based on the confirmation / disclosures received , following Non-Executive Directors are Independent Directors :- 20. AUDITORS STATUTORY AUDITORS Pursuant to the provisions of Section 139 of the Company's Act 2013 and the Rules framed there under M/s B S R & Co. LLP (earlier B S R & Co.), Chartered Accountants were appointed as the Statutory Auditors of the Company from the conclusion of 9th AGM held on 30th Sep 2014 till the conclusion of 13th AGM to be held in the Year 2018 subject to ratification of their appointment in every AGM. The Board of Directors recommends their ratification by way of an ordinary resolution in the forth coming AGM. COST AUDITOR In terms of Section 148 of the Companies Act , 2013 read with Companies ( Cost Records and Audit ) Rules , 2014, the Company is required to maintain cost accounting records and get them audited for the Financial Year 2015-16. The Board has appointed M/s Kabra & Associates Cost Accountants as the Cost Auditors for the Company for the Financial Year 2015-16 for the fees of Rs. 50000/- ( Rupees Fifty Thousand Only) plus applicable taxes and out of pocket expenses subject to the ratification of the said fees by the Shareholders at the ensuing AGM. SECRETARIAL AUDITOR Pursuant to the provisions of the Section 204 of the Companies Act , 2013 and the Companies ( Appointment and Remuneration ) Rules, 2014 , the Company had appointed M/s Chandrasekaran Associates a firm of Company Secretaries in Practise to undertake the secretarial audit of the company for the Financial Year 2014-15. The report of secretarial audit is annexed to this report as Annexure IV. The Secretarial Auditor's Report is self explanatory and does not require further comment. 21. STATUTORY AUDITORS' REPORT On the Auditors' qualified opinion with regards to Going Concern Status of the Company, the reply from the management is as under: 1. As regards inability to meet its liabilities of Rs 265.23 Cr due on the first CDR and on Account of purchase of materials and capital goods for Rs. 38.66 Cr as mentioned in para 4(a) of the Auditors' Report, it is submitted that the Company is in the last stages of the negotiation of 2nd CDR package and favorable policies like Domestic Content Requirements and Viability Gap Funding etc. are expected to be announced by the Government. 2. During the year under review , the performance of the Company continues to be severely impacted due to significant downturn in the Global Market . However in the last two quarters of the year , company got the orders worth 132.65 Mega Watt , because of which the Company could recommence the production and also logged in profit in the last quarter though company incurred the loss on full year basis. Your Directors feel that the Company will be seeing a turnaround in the coming quarters keeping in view the certain measures taken or expected to be taken by the Government to support the domestic manufacturers in India including domestic content requirement , viability gap funding etc. 3. The Long Disputed cases namely the dispute regarding the Capital Subsidy under Special Incentive Package has been decided in the favour of the Company. Refer Delhi High Court No. WP© 3625/2013. 4. The Dispute with MP Urja regarding the turnkey contract in in the final stages of getting settled. 5. The Dispute with the Custom's Authorities with regards to the Show Cause Notice being received for the demand of the Customs Duty foregone for importing 250 MW Project equipment has been dropped in the month of July 2015. 6. As regards inability of the auditors to express an opinion on financial statements and obtain all information and explanations mentioned in para 5 of the Auditors' Report, it is submitted that the auditors have not expressed any opinion on the financial results due to their inability to collect audit evidence to provide a basis for an audit opinion on account of multiple uncertainties created by external and internal factors like consideration of 2nd Corporate Debt Restructuring proposal of the Company and other key policy initiatives of the government etc. 22. DEPOSITS The Company has not accepted any deposits from public during the financial year under review. 23. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be furnished under the provisions of section 134 (3) (m) given as Annexure V to this report. 24. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134 of the Companies Act, 2013, the Directors confirm that :- i. in preparation of the accounts for financial year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii. the appropriate accounting policies have been selected and applied consistently and have 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 as at 31st March 2015 and of the loss of the Company for the year ended 31st March 2015; iii. proper and sufficient care has been taken for 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; iv. the annual accounts have been prepared on a going concern basis. v. Internal financial controls have been laid down to be followed by the Company and such internal financial controls are adequate and were operating effectively. vi Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 25. DISCLOSURES UNDER SECTION 197 OF THE COMPANIES ACT, 2013 AND RULE 5 OF THE COMPANIES ( APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL ) RULES, 2014 A-Disclosure pursuant to Section 197(12) of the Companies Act 2013 and Rule 5 of Companies ( Appointment and Remuneration of Managerial Personnel ) Rule, 2014 is provided below: 26. BUSINESS RESPONSIBILITY STATEMENT The Business Responsibility Report for the financial year 2014-15 forms the part of the annual report. 27. MATERIAL AND SIGNIFICANT ORDERS PASSED BY REGULATORS & COURTS During the Financial Year following Significant orders have been passed by the court/ regulators. (i) Delhi High Court has ruled in Case No. : WP(C_ No.3625/2013 confirming the entitlement of the subsidy under special incentive scheme to Indosolar Limited. (ii) The Commissioner Central Excise Noida II has passed order in favour of Indosolar Limited against the show cause notice for the payment of Custom Duty of INR 94.30 Cr along with Interest and Penalties. 28. MANAGEMENT DISCUSSION AND ANALYSIS REPORT a. Industry Structure and Developments During the year under review , the demand across the globe has slowed down but the supply of SPV Cells has increased resulting in price war. The higher efficiency focus is expected to bring in results soon but it is not expected that it will bring any price increase. Most of the existing players in the PV cell manufacturing segment expanded their capacities. Also several new players entered the global PV cell manufacturing segment. It is clear that the market is looking at higher efficiency & reliability at lower cost. The worldwide installations of solar power plants in 2015-16 is expected to be similar to that of 2014-15. Hence the module prices will not see an upsurge in near future; unless demand is created from unexpected quarters. It is expected that the prices will remain at the same level in the coming year as well. This is a Challenging period of consolidation. Few companies may find it difficult to survive and this may lead to dumping of modules at much lower prices; leading to price war and pressure on margins. The financial and technologically well equipped companies will survive . A number of federal policies are being proposed to spur domestic demand for solar PV products have expired or reached their funding limits. More clarity is expected on domestic content, quality of domestic content w.r.t global content, Feed-in-Tariffs, benefit for investors, etc. b. Opportunities and Threats Opportunities a) Our strong brand positioning and state of the art manufacturing capabilities help us to leverage our position in domestic market in view of the mandatory use of domestic content under Jawaharlal Nehru National Solar Mission (JNNSM). b) MNRE under the JNNSM has targeted a domestic manufacturing capacity of 10,000 MW by 2017. Appx. 3000 MW of Solar Power in expected to be installed in next 12 Months. c) About 20 to 30 GW of solar installations are expected in the commercial parity space in the next 4 to 5years. d) Apart from JNNSM policy, other State Governments are running equal policies for installation of solar power projects which will also generate huge demand of solar cells in India. Threats a) Solar module prices fell by about 80% (USD 3/watt to USD 0.3 watt) during 2014-2015. b) Big players in India who may have a capability to install GW projects. c) Non-utilization of our available manufacturing capacity. d) Non-availability of full or part of any financial incentives which we have applied for. e) Delays and cost overruns in expansion of our manufacturing facilities as a result of factors beyond our control. f) The solar market is growing and competition is resulting decline in market share and margins. g) 60% of raw material cost is silicon wafer and its manufacturing is dominated by large / limited players. h) Continued dumping of PV Cells at cheap prices. c. Future Outlook According to International Monetary Fund (IMF), India is set to become the world's fastest growing economy by 2016 ahead of China . India will be an attractive destination for the Global Investments in the coming years. Under The domestic solar market is slated to explode with projects scheduled to be implemented under Jawaharlal Nehru National Solar Mission (JNNSM) and State Solar Mission. The overall domestic market is estimated to swell to the level of 20-30 GW by 2020. Indosolar, with the proposed up-gradation, the Company would move into top tier of the market segment, which not only provides insulation from the Chinese competition but also augments the pricing premiums. Solar power in India at current levels is already cheaper than electricity generated through diesel. Support from various state Governments for solar power industry is continuously increasing. Indian manufacturers of solar equipment are seeking anti-dumping duty on imports on the grounds that local industry is bleeding because of "ridiculously low" price of foreign equipment. Use of domestically manufactured 'cells and modules' has been made mandatory for all projects in the second batch of JNNSM under grid connected applications. d. Risks and Concerns Due to industry downturn and resultant fall in demand, the capacities of the Company are underutilized. The plant remained closed during the year due to considerable fall in selling prices. Despite low capacity utilization and production, the Company has to incur fixed costs. The Company has implemented a Risk Management Policy to have a systematic process to assist in the identification , assessment , treatment and monitoring of risks .which provides effective tools to manage the identified risks. e. Internal Control Systems and its Adequacy The Company has a proper and adequate system of internal controls commensurate with its size to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly. The internal control system is designed to ensure that all financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets. f. Financial Performance viz-a-viz Operational Performance During the year under review, the Company's Net Sales were Rs. 291.93 Crores as against Rs. 15.39 Crores last year. EBITDA was Rs. 51.65 Crores as against Rs. (-) 26.01 Crores last year. The Company produced photovoltaic solar cells of 98.35 MWp as against 0.616 MWp last year. g. Human Resource The Company has adequate Human Resources which commensurate with the current volume of activity and is reviewed by the Management periodically and company would induct competent persons on increase / expansion of the activity. h. Cautionary Statement Statements in Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations may be "forward looking statements' within the meaning of applicable securities laws and regulations. Actual result could differ materially 29. CORPORATE GOVERNANCE REPORT Your Company strives to ensure that best Corporate Governance Practices are identified , adopted and consistently followed . The Report on the Corporate Governance forms an integral part of this report and is set out as Annexure VI to this report. The Certificate from the practicing Company Secretary "Chandrasekaran Associates Company Secretaries" certifying compliance with the conditions of the Corporate Governance as stipulated in Clause 49 of the listing agreement is annexed with the report on Corporate Governance. 30. LISTING OF SHARES The Equity Shares of the Company are listed on BSE Limited and National Stock Exchange of India Limited. The listing fees for the Financial Year 2015-16 has been paid. 31. APPRECIATION Your Directors wish to place on record their sincere appreciation of the efforts and dedicated services of all the employees which have contribute by staying with the Company in the tough period . 32. PREVENTION OF SEXUAL HARASSMENT The Company is committed to provide a protective environment at workplace for all its women employees. To ensure that every woman employee is treated with dignity and respect and as mandate under " The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal ) Act, 2013" the Company has in place a formal policy for prevention of sexual harassment of its women employees. The Company has in place an Anti Sexual Harassment Policy in line with the requirement of "The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal ) Act, 2013". Further, the Company has constituted Internal Complaints Committee to redress Complaints received regarding sexual harassment during the period. The following is a summary of sexual harassment complaints received and disposed off during the period: | | | | | Number of Complaints received | Nil | | | Number of Complaints disposed off | Nil | | | | | |
33. ACKNOWLEDGEMENTS The Board of Directors places on record its appreciation for the support, assistance and co-operation received from Government, Regulators and the bankers to the Company, i.e. Union Bank of India, Andhra Bank, Bank of Baroda, Corporation Bank and Indian Bank. The Board is thankful to the shareholders for their support to the Company. The Board is also thankful to the employees of the Company for their co-operation and unstinted dedication to duty leading to cordial industrial relations during the year under review. On behalf of the Board of Directors For INDOSOLAR LIMITED GAUTAM SINGH KUTHARI (Director) DIN: 00945195 H.R. GUPTA (MANAGING DIRECTOR) DIN: 00297722 Place : Greater Noida Date : 21.08.2015 |