DIRECTORS' REPORT Dear Shareholders, Your Directors are pleased to present their Thirty Third Annual Report and the Company's audited financial statement for the financial year ended 31st March, 2016 Results of Operations and the State of the Company's Affairs With an increase in production of own tea and tea made from bought leaves by 141176 kgs and 156230 kgs compared to previous year, the Company's working results during the year had shown slight improvement. However, the Company's decision to create provision for bad debt on fifty per cent of unsecured loan and entire interest receivable lying outstanding with Kanco Enterprises Limited has reduced the profit of the Company by Rs. 252.36 lacs. The profit before tax subsequent to this provision for bad debt stood at Rs. 232.29 Lacs compared to Rs. 340.11 Lacs for the previous year. Your Company continued to take advantage of the Special Purpose Tea Fund Scheme announced by the Tea Board of India. In the financial year 2015-2016, 24.19 hectares, 24.10 hectares and 23.65 hectares of the plantation area were replanted, rehabilitated and uprooted respectively. Investment in factory machinery has also been made to upgrade the machineries and also to enhance quality of teas. The production of tea in the current season is more or less at par with the last year. However with better rainfall during the year, your Company anticipates increase in tea production in the current year also. The north India auction average price for the month of April, 2016 for new season teas is lower by 1.85% compared to corresponding period in the previous year. Your Company being producer of premium quality teas expects to be less affected by fall in tea prices as compared to medium and low quality producers. The increase in wage will hit the bottom line. The thrust on irrigation and replanting under SPTF will continue. Certifications The quality management system of Mackeypore Tea Estate, Kanco Tea & Industries Limited bearing ANZSIC Code: 2180 has been assessed and found to meet the requirements of ISO 9001:2008.The certificate no. IN/QMS/00270 is valid for manufacturing of black tea from green tea leaves till 14/09/2018. The food safety systems of Mackeypore Tea Estate, Kanco Tea & Industries Limited bearing ANZSIC Code: 2180 has been assessed and found to meet the requirements of HACCP (Hazard Analysis and Critical Point). The certificate no. IN/HACCP/00027 is valid for manufacturing of black tea from green tea leaves till 19/05/2019. The food safety systems of Mackeypore Tea Estate, Kanco Tea & Industries Limited has been assessed and found to meet the requirements of ISO 22000:2005 (Food Safety Management System). The certificate no. IN/FSMS/00065 is valid for manufacturing of black tea from green tea leaves till 20/05/2019. Mackeypore Tea Estate & Lakmijan Tea Estate has been issued verification certificate bearing no. TS-VC/CUC/03/ 834385/14 & TS-VC/CUC/04/8347386/14 under trustea code for sustainable tea in India by Control Union. The trustea code covers social, agronomic, food safety, occupational health & safety and environmental criteria. The certificates are valid till 22/12/2016. Appropriations Transfer to reserves Rs. 18.09 Lacs has been transferred to general reserve and Rs. 38.76 Lacs has been retained in surplus. Dividend The Directors of your Company has recommended a dividend of Rs. 7/- and Rs. 5/ (Last Year Rs. 7 /- and Rs. 5/-) per Preference Share of Face Value of Rs. 100/- and Equity Share of Face Value of Rs.10/-share respectively for the year under review. Extract of Annual Return The details forming part of the extract of the Annual Return in Form No. MGT-9 as required under Section 92 of the Companies Act, 2013 is annexed herewith marked as Annexure A to this report. Directors In accordance with the provisions of the Act and the Articles of Association of the Company, Mr. Govind Ram Banka (DIN: 00207385) as Non-Executive Non-Independent Director retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for reappointment. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Company has devised a Policy for Performance evaluation of Independent Directors, Board, Committees and other Individual Directors which includes criteria for performance evaluation of the non-executive directors and executive directors and is annexed herewith marked as Annexure B to this report. The performance evaluation of the Chairman and the non-independent Directors was carried out by the Independent Directors. On the basis of the Policy the Performance Evaluation of Independent Directors, Board, Committees and other individual Directors were carried. The Board of Directors expressed their satisfaction with the evaluation process. Policy on Directors' Appointment, Remuneration etc Pursuant to Section 178(3) of the Companies Act, 2013 Nomination and Remuneration Committee has formulated the criteria for identification and selection of the suitable candidates for various positions in senior management and also candidates who are qualified to be appointed as director on the Board of the Company. The Committee also recommended a policy relating to the remuneration for the directors, key managerial personnel and other senior management personnel and a process by which the performance of the directors could be evaluated and the same is annexed herewith marked as Annexure B to this report. Key Managerial Personnel The following persons are the Key Managerial Personnel (KMP) of the Company in compliance with the provisions of Section 203 of the Companies Act, 2013: a) Mrs. A. Kanoria (DIN:00081172), Whole-time Director b) Mr. A. K. Gangopadhyay, Company Secretary (resigned w.e.f 14/01/2016) c) Ms. Charulata Kabra, Company Secretary (w.e.f. 15/02/2016) d) Mr. S. K. Parhi, Chief Financial Officer Number of Meetings of the Board Five meeting of the Board of Directors were held during the year. Audit Committee The Audit Committee comprises of Independent Directors namely Mr. Navin Nayar (Chairman) and Mr. Golam Momen and Mr. Govind Ram Banka, Non-Executive Director. All the recommendations made by the Audit Committee were accepted by the Board. Directors' Responsibility Statement The Directors hereby confirms that a) in the preparation of the annual accounts, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) they had selected such accounting policies and applied them consistently and made judgements 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, 2016 and of the profit of the Company for the year ended on that date; c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) they had prepared the annual accounts on a going concern basis; e) they had laid down internal financial control to be followed by the company and that such internal financial controls are adequate and were operating effectively; and f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Statutory Auditors Messrs. Jain & Co., Chartered Accountants, Registration No. 302023E, Statutory Auditor of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. They have expressed their willingness to continue as Statutory Auditors of the Company, if so appointed by the members. Your Company has received the consent and certificate from Messrs. Jain & Co., Chartered Accountants to the effect that their re-appointment if made, would be within the limits prescribed under the section 141 of the Companies Act, 2013 read with rules and that they are not disqualified for reappointment within the meaning of Section 141 of the Companies Act 2013. They have also confirmed that they hold a valid peer review certificate as prescribed under regulation 33(1)(d) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. Statutory Auditors' Report The report by the Auditors is self-explanatory and has no qualification, reservation, adverse remark or disclaimer; hence no explanation or comments by the Board were required. Secretarial Audit Report 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 P.S. & Associates a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is annexed herewith marked as Annexure C to this report. Further, this report has no qualification, reservation, adverse remark or disclaimer; hence no explanation or comments by the Board were required. Particulars of Loans, Guarantees or Investments by Company Particulars of investments made by the Company are provided in note nos. 12 &15 to the financial statements. The Company has neither given any loan & guarantee nor provided any security during the financial year under review. The particulars of loan as on 01/04/2015 and 31/03/2016 are provided in note no. 13 to the financial statements. Contracts and Arrangements with Related Parties All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. Material Changes and commitments occurred between the end of the Financial Year under Review and the date of this report. No material changes and commitments have occurred between the end of the financial year under review and the date of this report. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo A statement pursuant to Section 134(3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 on conservation of energy, technology absorption, foreign exchange earnings and outgo is annexed herewith marked as Annexure D to this report. Risk Management As per requirement of Section 134(3) (n) of the Companies Act, 2013 the Board of Directors in its meeting held on 9th May, 2014 has approved the Risk Management Policy. The Board envisaged the following elements of risks which may threaten the existence of the Company- Nature Related Risk Tea being an agricultural produce is affected by the vagaries of weather. Weather plays a major role in determining the final output of produce. Both excess and scarcity of rainfall play havoc with the final output of produce. KTIL has carried out extensive drainage network to deal with the problem arising out of excess rainfall. KTIL has a detailed plan of action for bringing its plantation areas under irrigation and more than 70% of its plantation areas are under irrigation now. Pest Management Tea bushes are prone to attack by various pests like cater pillars, Loppers, Red Slugs, Red Spiders, Helopeltis, Thrips, Green Fly, etc. KTIL has experienced competent senior personnel in the garden, who controls pest by way of timely detection and spray of agro-chemicals. KTIL has also a policy of keeping adequate agro chemicals in stock in anticipation of pest attack during a particular month based on past behavior of pests. KTIL is working out on a plan on integrated pest management, which will promote the use of physical, biological and mechanical control methods, and the least possible use of agrochemicals. Labour Tea being a labour intensive industry is prone to loss of output due to labour unrest. KTIL provides its entire workforce employed in the estate along with their families access to drinking water, food, housing and basic medical care as per the guideline of Plantation Labour Act, 1951 and Assam Plantation Labour Rules. Workers are paid the official agreed wage as per the agreement entered into between the recognised trade union and KTIL. KTIL follows a strict 'Non-Discrimination Policy' on the basis of race, creed, gender, political opinion and membership of trade union. KTIL always aim to maintain cordial relationship with its workforce. Market Risk The tea prices are volatile and affected by the conditions prevailing in the market. The inferior quality teas are affected more by volatility in prices in comparison to top quality teas. KTIL's thrust on making top quality teas minimized the risk due to volatility in prices. Bought Leaf Operation KTIL purchases green leaves from outside suppliers and produces it under a different mark called Lakmijan to protect its own mark Mackeypore. KTIL processes the bought leaves separately from its own leaves. The physical segregation of own tea leaves and bought leaves manufacturing process is clearly visible. The Company is vulnerable to volatility in selling price of tea made from bought leaves. Risks due to Fire, Accident, Theft, Etc. KTIL has taken appropriate insurance policy to safeguard itself against loss that may arise from risks associated with fire, earthquake etc. Risk due to Fraud KTIL has installed adequate internal control measures to minimise the occurrence of fraud and internal audit is also conducted at regular intervals by an external agency. Risk of Doubtful and Bad Debt The credit worthiness of sundry debtors is checked by the senior management to fix the credit period, if any to be given. The background check of new party is also carried out before deciding on the credit period. Corporate Social Responsibility The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR policy can be viewed at <http://kancotea.in/pdf/CSR%20POLICY.PDF> The Company's CSR activities shall primarily include one or more of the items covered under Schedule VII to the Act as detailed below: - (i) eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation and making available safe drinking water; (ii) promotion of education including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects; (iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; (iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water; (v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; (vi) measures for the benefit of armed forces veterans, war widows and their dependents; (vii) training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic sports; (viii)contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; (ix) contribution or funds provided to technology incubators located within academic institutions which are approved by the Central Government; (x) rural development projects. (xi) slum area development Preference shall be given to Company's Business and areas around Company's Tea Estates for spending the amount earmarked for CSR. During the year, the Company has spent Rs. 12,74,000/- (includes Rs. 8,86,737/- unspent in the previous year 20142015). The unspent amount of Rs. 4,05,043/- for which no plan of expenditure was presented by Kanco CSR Trust will be spent in the financial year 2016-2017. The Annual Report on CSR activities is annexed herewith marked as Annexure E to this report. Subsidiaries, Joint Ventures and Associate Companies As on 31st March, 2016, we have one wholly owned subsidiary namely Winnow Investments and Securities Private Limited. During the year, the Board of Directors reviewed the affairs of the subsidiary. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared the consolidated financial statement of the company and its subsidiary, which form part of the Annual Report. The revenue and profit after tax of the subsitiary for the financial year ended 31st March, 2016 was Rs. 9,95,833/- and Rs. 6,38,660/- respectively. The total asset of the subsidiary as on 31st March, 2016 was Rs. 1,02,73,006/- Further, a statement containing the salient features of the financial statement of our subsidiary in the prescribed format AOC-1 is annexed to the financial statements. During the year the following companies ceased to be Company's associate companies: - B.T Investments Private Limited - E.T Resources Private Limited - Facitcon Investments Private Limited Deposits During the year under review, the Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014. Material Orders Passed by the Regulators /Courts/ Tribunals There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future. Internal Controls The Company has an effective Internal Control system with reference to Financial Statements. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of the Internal Control System. The Company's internal Control System is commensurate with its size, scale and complexities of its operations. Vigil Mechanism The Company has a Vigil Mechanism / Whistle Blower policy to report genuine concerns and grievances. Protected disclosures can be made by a whistle blower through an email or dedicated telephone line or a letter to the Chairman of the Audit Committee. Website: <http://kancotea.in/pdf> VIGIL%20MECHANISM_WHISTLE%20BLOWER%20POLICY.PDF Stock Exchange The Company's equity shares are listed at the Calcutta Stock Exchange Limited (Scrip Code-10014107). The Company's equity shares are traded at the Bombay Stock Exchange Limited (Scrip Code- 590130) as per MOU signed between CSE and BSE. Listing Fees for the financial year 2016-2017 has been paid. Governance The Corporate Governance provisions as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is not applicable to the Company. Management Discussion and Analysis Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(3) read with Schedule V to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed herewith marked as Annexure F to this report. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 No complaints have been received during the year under review by the respective Internal Complaints Committee. Details pertaining to remuneration as required under section 197(12) of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 The percentage increase in remuneration of each Director, Chief Financial Officer and Company Secretary during the financial year 2015-16, ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2015-16 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under: (ii) The median remuneration of employees of the Company during the financial year was 1,41,183/- (iii) the percentage increase in median remuneration of the employees of the Company - 21.05 % (iv) Number of permanent employees on the rolls of the Company - 1570 (v) Explanation on the relationship between average increase in remuneration and company performance -The average increase in remuneration is 19.73%. The dip in profit is attributable to creation of provision for bad debt amounting to 252.36 Lacs. The increase in salary, which is as per agreement entered into with trade unions at tea estate and in line with the industry bench mark at the registered office is justified. (vi) Comparison of the remuneration of the Key Managerial Personnel Against the performance of the Company - The total remuneration of Key Managerial Personnel increased by 15.02%, whereas the profit before tax declined by 31.84%. The drop in profit is mainly attributable to creation of provision for bad debt amounting to 252.36 Lacs. The fixed part of the salary was paid to Whole-time Director and other KMPs were paid as per their experience, qualification, market trends and industry bench mark. (vii) Variations a) in the market capitalisation of the company- The market capitalisation as on March 31, 2016 was Rs..3601.35 Lacs (Rs..2219.89 Lacs as on March 31, 2015) b) in the Price Earning Ratio of the Company was 20.32 as at March 31,2016 and was 7.25 as at March 31, 2015. c) 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 in the year- Not Applicable. (viii) Average percentile increase already made in the last financial year a) In the salaries of employees other than the managerial personnel - 19.89% b) Percentile increase in the managerial remuneration - 15.02% c) Justification for such increase in remuneration & exceptional circumstances for increase in the managerial remuneration - (Please refer point-v) (ix) Key parameters for any variable component of remuneration availed by the directors - Rs..Nil for the year under review. (x) Ratio of remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year- Not applicable as there are no employees receiving higher remuneration than the highest paid director. (xi) It is hereby affirmed that the remuneration paid to the directors, key managerial personnel and other employees is as per the remuneration policy of the company. Note- Liability for gratuity and leave encashment as required by Accounting Standard-15 issued by The Institute of Chartered Accountants of India is provided on actuarial valuation report for the Company as a whole. The amount pertaining to individual employee is not ascertainable and therefore not included in the above calculation. B. Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are not applicable. Acknowledgement Your Directors place on record their appreciation for the cooperation and support extended by the Employees, Banks/ Financial Institutions and all other business partners. For and on behalf of the Board of Directors U.Kanoria Chairman & Director Date : Kolkata, the 14th May, 2016 |