DIRECTORS' REPORT Dear Shareholders, Your Directors take pleasure in presenting the 29th Annual Report together with the audited accounts for the financial year ended 31 March 2015. Operational and Financial Review During 2014-15, we achieved Rs. 2,708.90 crore turnover (Rs. 2,592.63 crore in 2013-14), on account of focused marketing efforts and better outreach to customers nationally and internationally. Our operational EBIDTA stood at Rs. 122.44 crore against Rs. 8.91 crore in 2013-14 and a net loss of Rs. 21.53 crore against Rs. 8.18 crore in 2013-14. Our earnings per share stood at Rs. (1.42) and book value per share at Rs. 36.48 as on 31 March 2015. The year 2014-15, was one of the most challenging years in the recent past as the polyester industry saw several challenges. First, crude prices saw a sharp decline during the year, which triggered reduction in prices for Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG) (key raw materials for polyester manufacturing) prices. This resulted in significant inventory losses. Second, the government levied Anti-Dumping Duty on PTA imports, which resulted in an increase in raw material cost. Third, demand for polyester was subdued in the global markets. In the adverse environment your Company remained resilient. Your Company focused on widening product basket, expanding market reach, cost optimisation, growing portfolio of specialty products and elevating people potential. As a result, your company has creating a more robust business model. The demand for man-made fibres is showing signs of improvement and we are hopeful that the demand for polyester will see revival. Polyester demand will be driven by its growing relevance in daily life across home textiles, apparel, automotive, furnishing fabrics, technical textile and non-woven segments. Moving ahead, with rising demand in the domestic and international markets, we are hopeful that we will be able to enhance our production capacity and grow business volumes and value-added products. Change in the Nature of Business There was no change in the nature of the business of the Company and its subsidiaries during the year. There were no significant and material orders passed by regulators or courts or tribunals impacting the going concern status and Company's operations in future. Material Changes and Commitments There have not been any material changes and commitments affecting the financial position of the Company between the end of the financial year of the Company as on 31 March 2015 and the date of this report, i. e. 18 May 2015. Dividend Your Directors have recommended a dividend of Rs. 1 (i.e., 10%) per equity share (Last year Rs.1 per equity share) of the face value of Rs. 10/- each for the financial year ended 31 March 2015, amounting to Rs. 18.27 crore (including Dividend Distribution Tax), and is as per the financial needs of the business. The dividend payout is subject to approval of the shareholders at the ensuing Annual General Meeting. The dividend will be paid to the members, whose names appear in the Register of Members as on 23 July 2015 and in respect of shares held in dematerialised form, it will be paid to members, whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date Number of Meetings of the Board During the year four Board Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. Directors Pursuant to the provisions of Companies Act, 2013 and Articles of Association of the Company, the following changes took place in the office of Directors of the Company. Mr. Vishal Lohia, Whole-time Director of the Company, retire by rotation at the ensuing Annual General Meeting and, being eligible, offer himself for re-appointment. The Board has appointed Ms. Ranjana Agarwal as Additional Director - being an Independent Women Director on the Board of the Company with effect from 18 May 2015. The details of proposal of appointment/re-appointment of Mr. Vishal Lohia is mentioned in the Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 of the Notice of the 29th Annual General Meeting. Particulars of Employees and Key Managerial Personnel Mr. Sanjay Syal, President & Chief Financial Officer/KMP of the Company has resigned with effect from 7 November 2014 and the vacancy caused by his resignation is filled up by appointment of Mr. Sanjeev Aggarwal, President & Chief Financial Officer/KMP, with effect from 11 November 2014, in his place. Presently, Mr. Anant Kishore, Chief Executive Officer, Mr. Sanjeev Aggarwal, President & Chief Financial Officer and Mr. Jayant K Sood, Head-Corporate & Company Secretary of the Company are the Key Managerial Personnel of the Company. The Board hereby affirms that the remuneration paid to the Directors and Senior Management including Key Managerial Personnel is as per the Nomination and Remuneration Committee Policy adopted by the Company. Pursuant to Section 134(3) (q) read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Remuneration and other details of Key Managerial Personnel and other Employees for the year ended 31 March 2015 are annexed to this report. Declaration by Independent Directors Declaration given by Independent Directors meeting the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 is received and taken on record. Policy on Directors' Appointment and Remuneration The Company has a "Nomination and Remuneration Committee" of Directors in place. The Committee comprises of three Members, viz; Mr. Ashok Kumar Ladha as Chairman, Mr. Suman Jyoti Khaitan, Dr. Arvind Pandalai as Members. The Committee reviews and recommend to the Board for remuneration for Directors and Key Managerial Personnel. The detail of terms of reference of Nomination and Remuneration Committee, number and dates of meetings held, attendance of the directors and remunerations paid to them and the brief outline of the Remuneration policy of the Company are given separately in the attached Corporate Governance Report. The Company does not pay any remuneration to the NonExecutive/Independent Directors of the Company other than sitting fee for attending the meetings of the Board and Committees of the Board. Executive Director(s) do not take any sitting fee for attending such meetings. Remuneration to the Whole-time Director is governed under the relevant provisions of the Act and approvals. The Company has displayed the remuneration policy on its website in terms of Clause 49 (VIII)(C)(3). Directors' Responsibility Statement As stipulated in Section 134 (3) (c) read with Section 134(5) of the Companies Act, 2013, to the best of your Director's knowledge and belief and according to the information and explanations obtained, your Directors subscribe to the "Directors Responsibility Statement" and confirm that: (a) in the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; (b) 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 as on 31 March 2015 and the Profit and Loss of the Company for that year; (c) 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; (d) the Directors have prepared the annual accounts on a going concern basis; (e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Audit Committee The Audit Committee of the Board of Directors of the Company consisting of four members, Mr. Ashok Kumar Ladha as Chairman and Mr. Vishal Lohia, Mr. Suman Jyoti Khaitan and Dr. Arvind Pandalai as Members. The Company Secretary is the Secretary of the Committee. The Managing Director, Chief Financial Officer and Auditors are permanent invitees to the committee meetings. The detail of terms of reference of Audit Committee, number and dates of meetings held, attendance of the directors and remunerations paid to them are given separately in the attached Corporate Governance Report. During the year there were no instances where the board had not accepted the recommendations of the Audit Committee. Vigil Mechanism / Whistle Blower Policy Your Company established a Vigil Mechanism/Whistle Blower Policy, pursuant to the provisions of the Companies Act, 2013, for the Directors and Employees to report their genuine concerns or grievances. The Chairman of the Audit Committee, Mr. Ashok Kumar Ladha, will oversee the Vigil Mechanism and to ensure that adequate safeguards are provided to persons against victimization and protected disclosures can also be reported orally by leaving voice mail on toll free number, i.e., 18001035679. The details of the Vigil Mechanism Policy is explained in the Corporate Governance Report and also posted on the website of the Company. Credit Rating The Company's financial discipline and prudence is reflected in the strong credit ratings ascribed by CARE Ratings, CARE BBB- (Triple B Minus). Subsidiaries In accordance with the General Circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. As required under the Listing Agreements entered into with the Stock Exchanges, a consolidated financial statements presented by the Company in this Report include the financial results of the subsidiary company duly audited by the statutory auditors. The said statements have been prepared pursuant to Section 129 read with Rule 5 of Companies (Accounts) Rules, 2014 in Form AOC-1 and in accordance with the relevant accounting standards as prescribed under the Companies Act, 2013. The Company will provide a copy of separate financial statements in respect of each of its subsidiary to any shareholder of the Company, who asks for it and the said financial statements will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. Consolidated Financial Statement The Consolidated Financial Statements have been prepared by your Company in accordance with the applicable Accounting Standards (AS-21) issued by the Institute of Chartered Accountants of India and the provisions of the Listing Agreement with the Stock Exchanges. Together with the Auditors' Report, these forms part of the Annual Report. Particulars of Employees and related disclosures In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report. Extract of Annual Return The details forming part of the extract of the Annual Return in Form MGT 9 is annexed as Annexure - 1 to this report. Statutory Auditors M/s B S R and Associates, Chartered Accountants (ICAI Firm Registration No. 128901W), were appointed as Statutory Auditors of the Company at the 28th Annual General Meeting of the Company held on 1 August 2014, who shall hold office till the conclusion of 31st Annual General Meeting of the Company in accordance with the provisions of the Companies Act, 2013. However, this appointment was subject to ratification by the members at every Annual General Meeting held after appointment during their tenure of office. The Auditors have confirmed their eligibility and qualification under Section 141 of Companies Act, 2013 and therefore, their ratification for appointment as Statutory Auditors for the year 2015-16 is being sought from the Members of the Company at the ensuing AGM. As regards the comments in the Auditors' Report, the relevant notes in the Accounts are self explanatory and may be treated as information/ explanation submitted by the Board as contemplated under provisions of the Companies Act, 2013. With regard to the observation made by the Auditors at point number vii (a) of the annexure of Auditors' Report, we would like to inform that: Delay in payment of Sales Tax / Value Added Tax dues for one quarter, the same has been paid along with interest. Cost Auditors Pursuant to a directive of the Central Government, your Company is required to conduct a cost audit in respect of its Polyester Operations every year until further notice. Accordingly, M/s Balaji & Associates, Cost Accountants, (Firm Registration No.000112) were appointed to carry out audit of the cost records maintained by the Company for the financial year 2014-15. Internal Auditor The Board has appointed M/s S.S. Kothari Mehta & Co., Chartered Accountants, (Firm Registration No. 000756N) as Internal Auditors of your Company, for the financial years 2015-16 and 2016-17. Secretarial Auditor The Board has appointed Ms. Rachna Aggarwal, Company Secretary (CP No. 4819 and Membership No. 15959), as Secretarial Auditor, to conduct secretarial audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended 31 March 2015 is annexed herewith marked as Annexure - 2 to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Information required pursuant to Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 relating to conservation of energy, technology absorption, foreign exchange earnings and outgo are set out in the Annexure - 3 forming part of this Report. Public Deposits Your Company has not invited/accepted any deposits during the year ended on 31 March 2015 within the meaning of Section 73 of the Companies Act, 2013 and the Rules made thereunder. Significant and Material Orders passed by the Regulators No material or significant order passed by the Regulator during the financial year 2014-15. Internal Control Systems and their Adequacy The Company has in place an established internal control system designed to ensure proper recording of financial and operational information and compliance of various internal controls and other regulatory and statutory compliances. Self-certification exercise is also conducted by which senior management certifies effectiveness of the internal control system of the company. Internal Audit has been conducted throughout the organization by qualified outside Internal Auditors. Findings of the internal Audit Report are reviewed by the top Management and by the Audit Committee of the Board and proper follow up action are ensured wherever required. The Statutory Auditors have evaluated the system of internal controls of the Company and have reported that the same are adequate and commensurate with the size of the Company and nature of its business. Particulars of Loans, Guarantee or Investments Particulars of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided under note no. 37 in the Standalone Financial Statement, for the financial year 2014-15. Risk Management Policy Your Company is aware of the risks associated with the business. It regularly analyses and takes corrective actions for managing / mitigating the same. Your Company's Risk management framework ensures compliance with the provisions of Clause 49 of the Listing Agreement. Your Company has institutionalized the process for identifying, minimizing and mitigating risks which is periodically reviewed. Some of the risks identified and been acted upon by your Company are: Securing critical resources; ensuring sustainable plant operations; ensuring cost competitiveness including logistics; completion of CAPEX; maintaining and enhancing customer service standards and resolving environmental and safety related issues. Corporate Social Responsibility (CSR) Committee Your Company aims to remain essential to the society with its social responsibility, strongly connected with the principle of sustainability, an organization based not only on financial factors, but also on social and environmental consequences. As stipulated under Schedule VII of the Companies Act, 2013, the Company has undertaken various activities under CSR compliance and during the year under report, the Company has spent a sum of Rs. 1.8 million towards CSR activities in line with the compliance with Section 135 of the Companies Act 2013. As required under Section 135 of the Companies Act, 2013, the CSR Committee comprising of Mr. Om Prakash Lohia as the Chairman and Mr. Vishal Lohia and Dr. Arvind Pandalai as its Members. The CSR Committee of the Company has laid down the policy to meet the Corporate Social Responsibility. The CSR Policy includes any activity that may be prescribed as CSR activity as per the Rules of Companies Act, 2013. The main focus areas taken in the policy are Education, Health care and family welfare, Environmental Safety, contribution to any relief fund setup by the Government of India and any State Government. The details of amount spent on CSR activities and projects undertaken during the year are given in the Annexure- 4 to the Directors Reports. The detailed CSR policy of the Company is also available on the website of the Company, www.indoramaindia.com Contracts/Arrangements with Related Parties The details of contracts/arrangement with the Related Parties are appearing under note no. 34 and forms part of this Report. The particulars of contracts or arrangements with related party prepared under Section 188(1) of Companies Act, 2013 read with Rule 8 (2) of Companies (Accounts) Rule, 2014 is annexed with this Report in Form AOC- 2 as Annexure-5. All related party transactions that were entered into during the year under report were on arm's length basis and were in the ordinary course of business. Related party Transactions are placed before the Audit Committee as also to the Board for approval. The Policy on Related party Transactions as approved by the Board is uploaded on the Company's website, www.indoramaindia. com. The Company management ensures total adherence to the approved Policy on Related Party Transactions to establish Arm's Length Basis without any compromise. Board Evaluation 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 and Remuneration Committee. During the year under report, the Independent Directors met on 13 February 2015, inter-alia, to discuss: •Performance evaluation of Non Independent Directors and Board of Directors as a whole; • Performance evaluation of the Chairman of the Company; •Evaluation of the quality of flow of information between the Management and Board for effective performance by the Board. Listing The shares of your Company are listed at BSE Limited and National Stock Exchange of India Limited, Mumbai. The listing fees to the Stock Exchanges for the financial year 2015-16 have been paid. Corporate Governance Your Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. Your Company has also implemented several best corporate governance practices. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms integral part of this Annual Report. The requisite certificate from the Practicing Company Secretary confirming compliance with the conditions of corporate governance as stipulated under the aforesaid Clause 49 is attached to the Report on Corporate Governance. Management Discussion and Analysis Report Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with he Stock Exchanges, is presented in a separate chapter forming part of this Annual Report Transfer of unclaimed dividend to Investor Education and Protection Fund (IEPF) Pursuant to the provisions of Section 205A (5) & 205C of the Companies Act, 1956 (which are still applicable as the relevant sections under Companies Act, 2013 are yet to be notified), relevant amounts, which remained unpaid or unclaimed for a period of seven years have been transferred by the Company, from time to time on due dates, to the Investor Education and Protection Fund (IEPF). Pursuant to the provisions of Investor Education and Protection Fund, the Company has uploaded the details of unpaid and unclaimed dividend amounts lying with the Company as on 1 August 2014 (date of last Annual General Meeting) on the Company's website, www.indoramaindia . com, as also on the Ministry of Corporate Affairs' website. Industrial Relations / Human Resources Your Company maintained healthy, cordial and harmonious industrial relations at all levels during the year under report. Your Company firmly believes that a dedicated workforce constitute the primary source of sustainable competitive advantage. Accordingly, human resource development continues to receive focused attention. Your Directors wish to place on record their appreciation for the dedicated and commendable services rendered by the staff and workforce of your Company. There are 828 numbers of employees of the Company as on 31 March 2015. Acknowledgements Your Directors would like to express their appreciation for the assistance and co-operation received from the Financial Institutions, Banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company's executives, staff and workers. For and on behalf of the Board of Directors of Indo Rama Synthetics (India) Limited Om Prakash Lohia Chairman & Managing Director DIN: 00286807 Date: 18 May 2015 Place: Gurgaon |