DIRECTORS' REPORT To The Members, Your Directors have pleasure in submitting their 83rd Annual Report alongwith the audited annual accounts of the Company for the financial year ended 31st March, 2015. Operating Performance In face of overall subdued market conditions, your Company has delivered top line growth and performed ahead of underlying sugar season 2014-15 which is mainly due to having supply of good cane quality resulting into higher recoveries and expedite sales. A detailed analysis of the Company's operations, future expectations and business environment has been given in the Management Discussion & Analysis Report which is made an integral part of this Report and marked as Annexure "A". Financial Performance 2014-15 The Company had recorded Total Revenue of Rs. 1,38,386.60 lacs (including other income aggregating to Rs. 173.11 lacs) during the financial year ended 31st March, 2015. The Revenue from Operations (Gross) of the Company for the year 2014-15 stood at Rs. 1,42,965.29 lacs. The Profit before Finance Costs, Tax, Depreciation and Amortisation for the year under review stood at Rs. 4,569.59 lacs representing 3.30% of the total revenue. The decline in PBIDT of the Company during the period under review in mainly attributed to subdued sugar sales realisation. There is no change in the nature of business of the Company. There were no significant or material orders passed by regulators, courts or tribunals impacting the Company's operation in future. In view of continuing losses the Board does not propose to carry any amount to Reserves. There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year i.e. 31st March 2015 and date of this report. There exist a continuous process to identify, evaluate and manage significant risk faced though a risk management process designed to identify key risks facing each business. During the year risk analysis and assessment were conducted. Research & Development During the year under review the Company has undertaken Research & Development initiatives with an intention to improve the sugar recovery ratio and to educate the cane growers to cultivate improved variety of sugarcane and to otherwise increase the sucrose contents in their produce. Dividend In view of the losses/accumulated losses the Board of Directors do not recommend any dividend for the year under review. Share Capital During the year there were no changes in either the Equity Share capital of the Company or the Preference Share Capital of the Company, as the paid up Equity Share Capital as on 31st March 2015 stood at Rs. 2,604.43 lacs and whereas the paid up Preference Share Capital of the Company stood at Rs. 5,000.00 lacs. However, in terms of authorisation provided by the shareholders in their general meeting and subsequent to in - principle approval of both the Stock Exchanges, your Company has preferred an application for reduction of capital to the tune of Rs. 6,400/- only before the Hon'ble High Court at Allahabad, Lucknow Bench and the proceedings in the said application are pending. Scheme of Arrangement The Board of Directors at its meeting held on March 13, 2015 has consented to the Composite Scheme of Arrangement subject to approval of Shareholders, Lenders, Creditors, Hon'ble High Court, SEBI, CCI and other regulatory authorities, in order to rearrange its business activities, to achieve the Business alignment as per market dynamics and variant capital needs of each business, as well as ability to recognise the true value of assets in the books which have significantly appreciated over time and thereby improving the financial position and key ratios of the businesses. Corporate Governance Pursuant to Clause 49 of the Listing Agreement, Management Discussion & Analysis Report, the Report on Corporate Governance, Declaration of Managing Director on Code of Conduct and Auditors' Certificate on compliance of conditions of Corporate Governance form integral part of this Report and are annexed to this Report as Annexure "A", "B", "C", and "D" respectively. The Board of Directors comprises of seven Non-Executive Directors having experience in varied fields and a Chairman cum Managing Director. Out of seven Non-Executive Directors, four of them are Independent Directors. Mr. Aniket Agarwal ceased to be the Director of the Company with effect from 30th January, 2015 due to his resignation on account his illness & increasing professional engagement. The Board of Directors record their appreciation for the services rendered by him during his tenure as a Director of the Company. In order to fill up the casual vacancy caused in the office of Independent Director upon resignation of Mr. Aniket Agarwal, the name of Ms. Shashi Sharma as an Independent Director has been recommended both by the Nomination and Remuneration Committee and by the Board of Directors to ensure meeting compliances with the requirements of Section 149(1) of the Companies Act, 2013, read with rule 3(i) of the Companies (Appointment and Qualification of Directors) Rules, 2014, subject to the approval of the shareholders at the ensuing Annual General Meeting. She has given declaration that she fulfils and complies with all the conditions specified in the Companies Act 2013 making her eligible to be appointed as an Independent Director. The Board of Directors are also of the opinion that she fulfils all the conditions specified in the Companies Act, 2013 making her eligible for appointment as an Independent Director. IDBI Bank had made substitution of their nominee Director Mr. Umesh Jain with Mr. Arun Kumar Aggarwal with effect from 13th March, 2015. The Board of Directors records the appreciation of the services rendered by Mr. Jain during his tenure as a Director of the Company. Mr. Chand Bihari Patodia will retire by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment as Director of the Company. He is proposed to be re-appointed as Director and will be liable to retire by rotation. Mr. Anand Ashvin Dalal, Mr. Rohit Kumar Dhoot, Mr. Yashwant Kumar Daga and Mr. Nirad Kant Bagla were severally appointed as Independent Directors at the Annual General Meeting (AGM) held on 8th September, 2014 pursuant to the provisions of Section 149 of the Companies Act 2013 for a period of 5 years w.e.f. date of AGM and they will not be liable to retire by rotation during their respective terms of 5 years. The Independent Directors have confirmed and declared that they are not disqualified to act as an Independent Directors in compliance with the provisions of Section 149 of the Companies Act 2013 read with Listing Agreement and the Board is also of the opinion that Independent Directors fulfils all the conditions specified in the Companies Act, 2013 read with Listing Agreement to making them eligible to act as Independent Director. Other information on the Directors including required particulars of Directors retiring by rotation is provided in the Report of Corporate Governance annexed to this Report as Annexure "B". Key Managerial Personnel The following three persons were formally appointed as Key Managerial Personnel of the Company in compliance with Section 203 of the Companies Act 2013 viz: a. Mr. Chandra Shekhar Nopany, Chairman - cum -Managing Director b. Mr. Dilip Patodia, President and Chief Financial Officer c. Mr. Anand Sharma, Company Secretary All Directors, Key Managerial Personnel and Senior Management of the Company have confirmed compliance with the Code of Conduct & Ethics applicable to Directors & employees of the Company and a declaration to the said effect by the Managing Director is made part of Corporate Governance Report which forms part of this report. The Code is available on the Company's website at www.birla- sugar.com. All Directors have confirmed compliance with the provisions of Section 164 of the Companies Act, 2013. 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 Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. Audit Committee The Audit Committee was constituted on 25.08.2000 and the Committee now comprises of Mr. Anand Ashvin Dalal, Mr. Chand Bihari Patodia, Mr. Yashwant Kumar Daga, Mr. Rohit Kumar Dhoot and Mr. Nirad Kant Bagla. The Company Secretary acts as the Secretary to the Committee and the Chief Financial Officer is a permanent invitee to the meetings. During the year there were no instances where Board has not accepted the recommendation of Audit Committee. The Company has a vigil mechanism named Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Policy is explained in the Corporate Governance Report and also posted on the website of the Company. The details of the terms of reference, number and dates of meetings held, attendance of the Directors and remuneration paid to them are separately provided in the Corporate Governance Report. Stakeholders' Relationship Committee The Investors Grievance Committee was constituted on 25.08.2000 and was renamed as Stakeholders' Relationship Committee w.e.f. 13.05.2014 to comply with the requirements of the Companies Act 2013 and the Listing Agreement. The Committee now comprises of Mr. Nirad Kant Bagla, Mr. Yashwant Kumar Daga and Ms. Shashi Sharma. The Company Secretary acts as the Secretary to the Committee. The details of the terms of reference, number and dates of meetings held, attendance of the Directors and remuneration paid to them are separately provided in the Corporate Governance Report. Nomination And Remuneration Committee The Remuneration Committee was constituted on 02.09.2002 and was renamed as Nomination and Remuneration Committee w.e.f. 13.05.2014 to comply with the requirements of the Companies Act 2013 and the Listing Agreement. The Committee now comprises of Mr. Rohit Kumar Dhoot, Mr. Anand Dalal and Mr. Chand Bihari Patodia. The Company Secretary acts as the Secretary to the Committee. The details of the terms of reference, number and dates of meetings held, attendance of the Directors and remuneration paid to them are separately provided in the Corporate Governance Report. Corporate Social Responsibility Committee The Corporate Social Responsibility Committee was constituted on 13.05.2014 and the Committee now comprises of Mr. Chandra Shekhar Nopany, Mr. Chand Bihari Patodia, and Mr. Yashwant Kumar Daga. The Company Secretary acts as the Secretary to the Committee. The details of the terms of reference, number and dates of meetings held, attendance of the Directors and remuneration paid to them are separately provided in the Corporate Governance Report. Internal Complaints Committee An Internal Complaints Committee was constituted by the Company in terms of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Act aims at protecting women's right to gender equality, life and liberty at workplace to encourage women participation at work. The Committee meets all the criteria including its composition mentioned in the Act and relevant Rules. No complaint has been received by the Committee during the year under review. 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 as adopted by the Board of Directors is attached as Annexure "E" to this Report. The Committee has also framed criteria for performance evaluation of every Director and accordingly has carried out the performance evaluation. Corporate Social Responsibility Policy The Company continues to spend to support local initiatives to improve infrastructure as well as support in other corporate social responsibilities. The disclosure requirement with respect to CSR spends are not applicable to the Company in view of inadequate profits/ losses during the three immediately preceding financial years. The CSR Policy as approved by the Board is available on Company's website at www.birla-sugar.com Meetings A calendar of Meetings is prepared and circulated in advance to the Directors. During the year under review five Board Meetings, five Audit Committee Meetings, five Stakeholders' Relationship Committee Meetings, two Nomination & Remuneration Committee Meetings and one Corporate Social Responsibility Committee Meeting 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 Independent Directors of the Company have had a separate meeting on January 29, 2015 to review the performance and evaluation of Independent Directors and Board as a whole and assess the quality, quantity and timeliness of flow of information from the Company management to the Directors. 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 March 31, 2015, 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 2.1 of the Notes to the Financial Statements have been selected and applied consistently and judgement 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 March 31, 2015 and of the loss 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. Auditors, Audit Qualifications and Board's Explanations Statutory Auditors Messrs S R Batliboi & Co LLP, Chartered Accountants, hold office as Auditors of the Company till the conclusion of ensuing Annual General Meeting and being eligible, offered themselves for re-appointment. According to the certificate submitted to the Company by the said firm of Auditors the said re-appointment, if made by the Shareholders, will be well within the limits prescribed in Section 141 of the Companies Act, 2013. The Board, on the recommendation of the Audit Committee, proposed that Messrs S R Batliboi & Co LLP, Chartered Accountants, be re-appointed as the Statutory Auditors of the Company for a period beginning the conclusion of the ensuing Annual General Meeting of the Company and ending on the conclusion of the Annual General Meeting to be held next thereafter. The remarks / observations made by the Statutory Auditors in their report are self explanatory and does not require any further clarifications/ explanation. However, the Statutory Auditors have commented upon recognition of Deferred Tax Asset (net) of Rs. 12,904.91 lacs (including Rs. 3,771.71 lacs for the year up to 31.03.2015) based on the future profitability projections. The Industry is in active discussions with Central and State Governments on the matter of pricing of Sugarcane and other incentives in order to make operations viable. The Company is hopeful of positive outcome of the discussions with the Govt. and expects to be in a position to generate positive cash flows and profitability and is certain that there would be sufficient taxable income in future to claim the above tax credit. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its Sugar activity is required to be audited. Your Directors have, on the recommendation of the Audit Committee, appointed Messrs D Radhakrishnan & Co, Cost Accountants, as the Cost Auditors to audit the cost accounts of the Company for the financial year 2015-16. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company had appointed Messrs Vinod Kothari & Co., Practising Company Secretaries to undertake the Secretarial Audit of the Company for the financial year 2014-15. The Secretarial Audit Report is annexed herewith as "Annexure F" and which is self explanatory. Subsidiary Companies and Consolidated Financial Statements The Company has following wholly owned subsidiaries, one step down subsidiary and one joint venture company as per detail given below: i. Hargaon Investment & Trading Company Limited ii. Champaran Marketing Company Limited iii. OSM Investment & Trading Company Limited iv. Hargaon Properties Limited - step down subsidiary v. Palash Securities Limited vi. Allahabad Canning Limited vii. Vaishali Sugar & Energy Limited viii. Avadh Sugar & Energy Limited-AJoint Venture Company During the year three wholly owned subsidiaries being no. (v), (vi) & (vii) and one joint venture company being no. (viii) have been set up to facilitate the proposed scheme of re-arrangement and the said companies are yet to commence business. The Company has also formulated a policy for determining material subsidiaries in line with the requirement of Listing Agreement. The said Policy is being disclosed on the Company's website at www.birla-sugar.com The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting 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. The salient features of the financial statement of its subsidiaries are also provided in a separate statement being "Annexure G" and made part of this Report. The Annual Accounts of the subsidiary companies will be made available for inspection by any shareholder at the Registered Office of the Company and would also be available on the Company's website at www.birla- sugar.com. Furthermore, a hard copy of the detailed accounts of the subsidiaries would be furnished to any shareholder on demand at any point of time. Fixed Deposits The Company has not accepted any deposits from the public and as such there are no outstanding fixed deposits in terms of Companies (Acceptance of Deposit Rules) 2014. Investor Education and Protection Fund Pursuant to the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on the date of the last Annual General Meeting held on 8th September, 2014 on the website of the Company www.birla-sugar.com, as also on the website of the Ministry of Corporate Affairs www.mca.gov.in Internal Control The Company has in place an established internal control system designed to ensure proper recording of financial and operational information and compliances of various internal controls and other regulatory and statutory compliances, commensurate with the size, scale and complexity of its operations. The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal auditors function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. The Committee reviews the effectiveness of internal controls and compliance controls, financial and operational risks, and related party transactions. Self certification exercises are conducted by which senior management certifies effectiveness of internal control system, their adherence to the Company's code and policies for which they are responsible. Loans, Guarantee and Investments It is the Company's policy not to give any loans, directly or indirectly, to any person (other than to employees under contractual obligations) or to other body corporate or person. In compliance with section 186 of the Companies Act, 2013, loans to employees bear applicable interest rates. During the year under review, the Company has made investment in securities of other body corporate as disclosed for the purpose of proposed restructuring exercise. The details of Investments, Loans and Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes 13, 15 & 16 to the Standalone Financial Statements. Related Party Contracts / Arrangements 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. There were 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 at large. Accordingly, no transaction are being reported in Form AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The Company has developed a Related Party Transactions Policy for purpose of identification and monitoring of such transactions. Energy Conservation, Technology Absorption and Foreign Exchange Earnings & Outgo The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as 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 H". Particulars of 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, is attached as a separate "Annexure I" and forms an integral part of this Report. Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure J". CEO/CFO Certification Mr. Chandra Shekhar Nopany, the Chairman cum Managing Director and Mr. Dilip Patodia, President (Finance) & Chief Financial Officer have submitted certificates to the Board as contemplated in Clause 49 of the Listing Agreement. Acknowledgement Your Directors take this opportunity of recording their appreciation of the shareholders, financial institutions, bankers, suppliers and cane growers for extending their support to the Company. Your Directors are also grateful to various ministries in the Central Government and State Governments of Uttar Pradesh and Bihar, the Sugar Directorate and the Sugar Development Fund for their continued support to the Company. The Directors also recognise the valuable contribution made by the employees at all levels towards Company's progress. For and on behalf of the Board Chandra Shekhar Nopany Chairman-cum-Managing Director Place : Mumbai Dated 7th May, 2015 |