BOARD'S REPORT AND MANAGEMENT DISCUSSION & ANALYSIS TO THE MEMBERS OF SADHANA NITRO CHEM LIMITED Your Directors take pleasure in presenting the 43rd Annual Report together with Audited Financial Statements for the Financial Year ended 31st March, 2016. The Management Discussion and Analysis has also been incorporated into this report. 2. DIVIDEND In view of the loss, your Directors do not recommend any dividend for the FY 2015-16. During the year the unclaimed dividend pertaining to the financial year 2007-08 was transferred to the Investor Education & Protection Fund (IEPF). 3. REVIEW OF OPERATIONS The total revenue of your company for the financial year ending 31st March, 2016 has been Rs. 3524 Lakhs (PY Rs. 4845 Lakhs). The Company continued to face liquidity crunch which adversely affected its operational level. This increased cost of production though operating efficiency was in full check. Prices of raw materials were higher in the first eight months. This affected margins despite improved operating efficiency and keep-ing overheads under check. The Company could not achieve higher operating limits due to paucity of working Capital Funds. The Company is taking rigorous steps to stream line the production for achieving the optimum operating level. As a result, the EBIDTA from normal operation for 2015-16 was Rs. 223 lakhs (PY loss of Rs. 286 lakhs) and for last quarter of 2015-16 profit from normal operation was of Rs. 93 lakhs (Last quarter of PY loss of Rs. 270 lakhs) There was loss of Rs. 484 Lakhs (PY loss of Rs. 989 Lakhs) from normal operation despite lower turnover during the year. You will appreciate that the loss from normal operation activities has declined by about over 50%. 3.1 As per Rule 8(1) of Chapter IX- Companies (Accounts) Rules, 2014 - Report on the performance and financial position of its wholly owned subsidiary- Anuchem B.V.B.A is presented here under. 4. EXPORTS Despite recessionary trend and unfair severe price competition from China, the Exports of your company during the year were Rs. 2342 Lakhs (PY Rs. 2,714 Lakhs). Exports constituted about over 66% of the overall revenue from operation including other income. Company's Exports are well diversified in terms of product range as well as the Countries of Export. 4.1 Export Oriented Unit (EOU) Your Company had one of its plants Registered as an EOU with the Development Commissioner, SEEPZ which was valid upto 31.03.2015 and the Company has applied for its extension till 31.05.2015. Thereafter the Company de-registered its said plant from EOU status to DTA status. 5. FINANCE 5.1 Deposits The Company has not accepted deposits from the public falling within the ambit of Section 73 of Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014. 6. CHEMICAL INDUSTRY AND OPPORTUNITIES & THREATS Your company is engaged in manufacture of chemical intermediates, heavy organic chemicals and performance chemicals. India emerged as one of the major source for chemical intermediates. Your company has been known for maintaining the highest standard of quality of its products. With the lowering of crude prices, improving energy efficiency and other factors have allowed your company in recent times to be competitive with the Chinese competition and leverage the advantage of a better quality product Your company is in the industry since last over 43 years. It has a very high degree of operating synergy, economies of scale and high quality standards. The products of your company have diverse uses and applications in several industries ranging from paper, pharmaceutical, agro chemicals, thermal dyes, light stabilizer, aerospace, dyes and hair dyes etc. Your company has a good clientele base, which is well diversified over the World. Besides, the domestic market has shown growth. The major threat faced by the company are escalating raw material prices, crude oil prices, increasing interest rate and volatile foreign exchange market. 7. MARKET AND OUTLOOK Your company has healthy order book position. Despite continued slowdown in the Global economies, the demand of your company's end products have increased globally and are expected to do so signifi-cantly over the coming years. A better product mix, operational efficiency and stringent control on the cost have contributed towards increasing productivity, production and operating margins. These factors witnessed over the fourth quarter are expected to continue going forward. The Company continued to focus on cost control at every level to improve the operational efficiency which along with the increased operating level and upward revision of product prices is expected to improve the margin. Continuous efforts are being made for efficient energy and raw material consumption. The rate of flow of orders is encouraging. Production facilities are realigned to meet the demand. Your company, barring unforeseen circumstances, expects to further improve the turnover and performance. B. ENVIRONMENT AND SAFETY The Company is conscious of the importance of environmentally clean and safe operations. The company's policy requires the conduct of all operations in such manner so as to ensure safety of all concerned, compliance of statutory and industrial requirements for environmental protection and conservation of natural resources to the extent possible. Your Company has made arrangement for rain water harvesting and re-cycling water. 9. RESEARCH AND DEVELOPMENT Your company has continuously attached high priority to the R & D Department which is engaged in developing new processes and further improving the existing processes as an ongoing activity to enable your company to keep pace with technological advancement and improve operating efficiency. 10. HUMAN RESOURCE/INDUSTRIAL RELATIONS Human Resource programs and initiatives in SNCL are aligned to meet the business needs. Your company believes in investing in people to develop and expand their capability. The Company has been able to create a favourable work environment that motivates performance, customer focus and innovation SNCL's strategies are based, inter alia, on processes of continuous learning and improvement. 11. RISKS AND CONCERNS Macro-economic factors like the slow down, sluggish demand conditions, monetary policy & fiscal policy, unforeseen political and social upheavals, natural calamities may affect the business of your Company as also the industry at large. With competition intensifying in all segments of the industry, increasing the market shares and the consumer base is a continuing challenge. Since raw materials form an important component of your company's value chain, cost and availability of some of the key raw materials like benzene, nitric acid, caustic potash, sulphur based chemicals, iron powder are an area of concern. Your Company has however improved processes for better consumption norms and by substituting cheaper raw materials. Your company has technological superiority and strong distribution network. 12. ISO CERTIFICATON Your Company has certification as per ISO 9001-2008 by RINA, Certification for the ISO 14001:2004 and OHSAS B.S. 18001:2007 is under renewal for the development and manufacture of Chemical Interme-diates. 13. INSURANCE The assets of your Company are adequately insured. Your Company has also taken out suitable cover for Public Liability. 14. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES a) The Company has one wholly owned foreign subsidiary viz. Anuchem B.V.B.A. Belgium), and the Audited Financial Statements of the said subsidiary are considered for the purpose of preparing Consolidated Financial statements. b) No Company has become/ceased to be a joint venture or associate during the FY 2015-16. 15. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an adequate Internal Control System commensurate with the size and nature of its business. The preparation designing and documentation of Policy on Internal Financial Control has been finalised and implemented which will be reviewed periodically and modified suitably to ensure controls. The internal audit functions are carried out by a separate firm of Chartered Accountants. The quarterly audit reports, including significant audit observations and corrective actions thereon, are pre-sented to the Chairman of the Audit Committee. 16. VIGIL MECHANISM /WHISTLE BLOWER POLICY AND RISK MANAGEMENT POLICY The Company has a vigil mechanism / whistle blower policy which take cognizance of complaints made and suggestions given by employees and others. The Company also adopted Risk Assessment Procedure. The details of the same are mentioned in the Corporate Governance Report. 17. DIRECTORS All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 17.1 Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, 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 Stakeholder relationship Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. 17.2 Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is slated in the Corporate Governance Report. 17.3 Meetings During the year Four (4) Board Meetings and Four (4) Audit Committee 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. The composition of the Audit Committee as required under Section 177(8) of the Companies Act, 2013 has been mentioned in the Corporate Governance Report. 17.4 Appointment /Resignation of Key Managerial Personnel (KMP) a) During the year, Shri Sanjeev P. Shah, Chief Financial Officer has discontinued from his post of CFO w.e.f. 14th August, 2015. b) Shri Abhishek A. Javeri, Director was appointed as Chief Financial Officer of the Company w.e.f. 10th February, 2016. 18. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013 : a. that in the preparation of the annual financial statements for the year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b. that such accounting policies as mentioned in Note No.1 of the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made 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 losses of the Company for the year ended on that date; c. that proper and sufficient care has been taken 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. that the annual financial statements have been prepared on a going concern basis; e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. f. that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. 19. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. However as a matter of abundant caution, prior omnibus approval of Board of Directors and Members of the Company has been obtained under Section 188 of the Companies Act, 2013 for the transactions which are of a foreseen and repetitive nature. Approval of the Audit Committee has been obtained for all the related party transactions. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company. The particulars of contracts or arrangements with related parties referred to in subsection (1) of section 188 of the Companies Act, 2013 in the Form AOC-2 is attached as 'Annexure1'. 20. AUDITORS 20.1 Statutory Auditors The Company's Auditors, Messrs. V. Sankar Aiyar & Co., Chartered Accountants, Mumbai (Firm Regn. No. 109208W) who retire at the ensuing Annual General Meeting of the Company are eligible for reappointment. They have confirmed their eligibility under Section 141 of the Compa-nies Act, 2013 and the Rules framed thereunder for reappointment as Auditors of the Company. As required under Regulation 33(1)(d) of the SEBI (Listing Obligations and Disclosure Require-ments) Regulations, 2015, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Members' attention is invited to Note No.30 of the Notes to Accounts with respect to the observation made by the Auditors under "Emphasis of Matter" appearing in the Auditors Report which is self explanatory. 20.2 Cost Auditors Cost Audit is not applicable to the Company. 20.3 Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Makarand M. Joshi & Co., Company Secretaries in Practice, Mumbai, has been appointed to undertake the Secre-tarial Audit of the Company. The Secretarial Audit Report in form MR-3 is annexed herewith as 'Annexure II'. With respect to the observations, remarks made in the Secretarial Audit Report, the same has been taken note of and the company is in process to file the relevantforms with the appropriate authority. 21. CORPORATE GOVERNANCE Revised Clause 49 of the Listing Agreement Regulations 17 to 27, clauses (b) to (i) of Regulation 46(2) and Para C, D and E of Schedule V of SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015 is not mandatory to the Company however, the Company has voluntarily disclosed the Compliance to the best extent possible and accordingly the Management Discussion and Analysis, the Corporate Governance Report, together with the Auditors Certificate on compliance with the conditions of Corporate Governance as laid down are attached alongwith the Annual Report. 22. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Company prepared in accordance with relevant Account-ing Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report. 23. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules,2014, is annexed herewith as 'Annexure Ill'. 24. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as 'Annexure IV'. 25. PARTICULARS OF EMPLOYEES There is no Employee drawing Remuneration in excess of the limits prescribed by the Companies Act, 2013. The information required pursuant to Section 197 read with Rule, 5 of The Companies (Appoint-ment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secre-tary in this regard. 26. 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. 27. ACKNOWLEDGMENTS Your Directors would like to express their appreciation for the assistance and co-operation received from the Bankers, Central and State Government Departments, customers, vendors, and other business partners. The Directors also wish to place on record their appreciation to all the employees of the Company for their co-operation and continued contribution to the Company. Last but not least the Directors place on record their gratitude to the Investors, Clients and Shareholders of the Company for their support and trust reposed. For and On Behalf of the Board of Directors Asit D. Javeri Chairman & Managing Director Place : Mumbai Dale : 27th May, 2016 |