DIRECTORS' REPORT INCLUDING MANAGEMENT DISCUSSION TO THE MEMBERS Your Directors present the 39th Annual Report together with the Audited Financial Statements of the Company for the year ended 31st March, 2015. Corporate Overview Khaitan Electricals Limited is one of the India's Leading Fan manufacturers with interests in Home Appliances, Lightings and pump business having its corporate head quarters in Kolkata. Your Company prepares its financial statements in compliance with the requirements of the Companies Act, 2013 and the Generally Accepted Accounting Principles (GAAP) in India. Financial Review The year 2014-15 was a tough year and the Company witnessed a sharp drop in Turnover and Margins. Due to de-growth in business volumes, overheads and finance cost could not be absorbed which affected the bottom line. The Net Sales for the year was Rs.430.00 Crores against Rs.513.72 Crores in the previous year. The Company incurred a Loss before Tax of Rs.48.26 Crores as against a Loss of Rs.17.21 Crores during the Previous Year. Other income Other income consists of interest received, export incentives, rent receipt, cash discount, claims received etc. Financial Expenses Financial expenses for the year were to Rs. 41.73 Crores as against Rs. 41.30 Crores in the Previous Year. Depreciation Depreciation was at Rs.2.96 Crores compared to Rs.1.88 Crores in the previous year. Earning per Share Earnings Per Share (EPS) stood at (Rs.42.54) compared to EPS of (Rs.14.45) in the previous year. The cash earned per share stood at (Rs.39.96) as against (Rs.12.82) in the previous year. SHARE CAPITAL AND NET WORTH The paid up Equity Share Capital as on 31st March, 2015 was Rs.11.50 Crores. During the year under review the company has not issued any shares or convertible instruments. The net worth of the Company has reduced to Rs.44.59 Crores as compared to Rs.93.51 Crores in the previous year. Since the Company's accumulated losses had resulted into erosion of more than fifty percent of its peak net worth during the immediately preceding four financial years, the Company proposes to make necessary reference to the Board for Industrial and Financial Reconstruction (BIFR) in due course of time pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. HUMAN RESOURCES The Company employed good human resources practices. The Company is enjoying good and congenial industrial relations at all of its plants. As on 31st March, 2015, the total permanent employees were 509. DEBT RESTRUCTURING Considering the financial stress, the Company's bankers have been kind enough to approve the Debt Restructuring under JLF Mechanism. SAFETY ENVIRONMENT AND POLLUTION CONTROL The Company continuously works on high safety standards and a clean environment free from pollution. The manufacturing process does not generate effluents. ISO 9001:2008 The Plant of your Company located at Hyderabad and Faridabad is presently ISO 9001:2008 certified. CURRENT OUTLOOK Despite change of Government at Center and Political Stability, so far there is no sign of improvement in overall sentiments and the present market scenario does not appear to be very encouraging. Though the Company is making all out efforts to regain its growth trend with major thrust on consolidation of product mix, reduction in cost and containing of overheads and interest, the Company is quite concerned about the outlook for the Current Year. However, with the restructuring of debts by the banks, the Company is expected to come out of the financial stress to some extent which in turn should help in improvement of overall working of the Company. RISKS AND CONCERNS Wild currency fluctuations affect metal prices and may cause pressure on margins. No threat is witnessed from imports. Though the Company is realigning its products to mitigate the impact of rising cost, the steep rise in input cost is a major cause of concern. With no sign of improvement in overall economic scenario and stability in input cost, the company looks forward to year 2015-16 with caution. CLOSURE OF OPERATION AT KOLKATA FACTORY The operations at Company's Kolkata Works have been suspended for reducing overhead costs and achieving economies in operations and the workers dues have been settled. The production facility at Kolkata Works has been shifted to Hyderabad and Faridabad Works and therefore there was no major disruption in overall operations. FIRE AT HYDERABAD FACTORY A fire broke out on 10th of May 2015 in the Table Fan Manufacturing Division at our Hyderabad Works. All assets / goods are fully insured and there was no major disruption in operations due to such fire. PERFORMANCE OF ASSOCIATE COMPANY Performance of Khaitan Hotels Private Limited is given in Form AOC - 1 annexed to the Financial Statements. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company remains committed to maintain its internal control system and procedures to provide reasonable assurances for efficient conduct of business and security of its assets. The Company has an elaborate budgetary control system and actual performance is consistently monitored by the Management. The Company has a well defined organizational structure, authority levels and internal guidelines and rules. DEPOSITS The Company had not accepted / renewed any Deposit during the year under review and there was no outstanding Deposit. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND Pursuant to the provisions of section 125 of the Companies Act, 2013, dividends which remained unpaid or unclaimed for a period of 7 years have been transferred by the company to the Investor Education and Protection Fund. DIRECTORS Pursuant to the provisions of the section 161(1) of the Companies Act, 2013 read with the Articles of Association of the company, Mrs. Anjana Sharma (Din No. 07128630) was appointed as Additional Director and shall hold office only up to the date of the ensuing Annual General Meeting and being eligible offer herself for re-appointment as Independent Director. The Company has also received notice in writing under the provisions of Section 160 of the Companies Act, 2013, from a member along with requisite deposit, proposing the candidature of Mrs. Anjana Sharma for the office of director. The Directors recommend her appointment at the forthcoming Annual general Meeting. All independent directors have given declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and clause 49 of listing agreement. Mr. Sunil Krishna Khaitan, Director of the Company, retire by rotation and being eligible offer himself for reappointment. The Directors recommend his appointment at the forthcoming Annual general Meeting. The details of the Directors being recommended for appointment are contained in the accompanying Notice of the forthcoming Annual General Meeting. There has been no other change in the directorship of the Company. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186 Particulars of loans given, investments made, guarantees given and securities provided are provided in the Financial Statement. CHANGE IN KEY MANAGERIAL PERSONNAL During the year Mr. P. K. Bafana resigned from the post of VP (Finance) and Company Secretary with effect from 13th December, 2014 Mr. Sunil Sureka Joined as Chief Financial Officer (CFO) of the Company and Mr. Amit Choraria joined as Company Secretary (CS) of the Company with effect from 2nd February, 2015. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. CORPORATE GOVERNANCE REPORT A separate report on Corporate Governance is furnished as a part of the Annual Report and the certificate from the Company's Auditors regarding compliance with the said code is annexed to the said Report. AUDITORS M/s. V. S. Rao & Co., Chartered Accountants and M/s. G. P. Agrawal & Co., Chartered Accountants, Joint Auditors of the Company retire at the ensuing Annual General meeting and are eligible for re-appointment. NUMBER OF BOARD MEETINGS HELD The Board of Directors met 5 times during the financial year 2014 - 2015. The dates on which the meetings were held are as follows: 29th May, 2014, 13th August, 2014, 14th November, 2014, 13th February, 2015 and 27th March, 2015. PERFORMANCE EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board who were evaluated on parameters such as level of engagement and contribution and independence of judgment thereby safeguarding the interest of the Company. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The board also carried out annual performance evaluation of the working of its Audit, Nomination and Remuneration as well as stakeholder relationship committee. The Directors expressed their satisfaction with the evaluation process. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, Directors of your Company hereby state and confirm that: a) in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) they have 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 of the company for the same period; c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) they have prepared the annual accounts on a going concern basis; e) they have laid down internal financial controls in the company that are adequate and were operating effectively. f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and these are adequate and are operating effectively. SECRETARIAL AUDIT REPORT According to the provision of section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit Report submitted by Company Secretary in Practice is enclosed as a part of this report. REMUNERATION POLICY The Board has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy has been uploaded on the website of the Company at www.khaitan.com VIGIL MECHANISM In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been uploaded on the website of the Company at www.khaitan.com DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY The Company has been addressing various risks impacting the Company and the policy of the Company on risk management has been established. The Risk Management Policy has been uploaded on the website of the Company at www.khaitan.com RELATED PARTY TRANSACTIONS All transactions entered with related parties during the year under review were on arm's length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus disclosure in form AOC - 2 is not required. There were no materially significant related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. Transactions with related parties entered by the Company in the normal course of business are periodically placed before the Audit Committee for its omnibus approval. The Board of Directors of the Company has, on the recommendation of the Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules there under and the Listing Agreement. This Policy was considered and approved by the Board and has been uploaded on the website of the Company at www.khaitan.com CORPORATE SOCIAL RESPONSIBILITY As there has been carry forward losses, provisions of section 135 of the Companies Act, 2013 pertaining to Corporate Social Responsibility are not applicable to the Company. REMUNERATION RATIO OF THE DIRECTORS / KEY MANAGERIAL PERSONNEL (KMP) / EMPLOYEES: The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of employees of the Company and Directors is furnished here under: EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in Form MGT-9 is annexed herewith. PERSONNEL Relations with the employees remained cordial and harmonious. Your Directors wish to place on record their sincere appreciation for the dedicated services rendered by the Company's employees at all levels. The Directors thanks the Company's Customers, Distributors, Vendors, Investors, Bankers and Financial Institutions for their support to the Company. Sunil K. Khaitan Chairman Sunil K. Khaitan Chairman Place : Kolkata Date : 29th May, 2015 |