Report of the Board of Directors Dear Shareholders Your Directors present their 59th Annual Report on the working of the Company for the year ended March 31, 2015. Dividend : In view of the loss for the year, no dividend is being recommended. Operations : The operations for the period under report reflect the performance of the Sugar and Distillery Divisions. The overall performance of the Company was severely impacted by uneconomical realizations on sale of sugar. This was further exacerbated by significant reduction in quantum of cane crushed as compared to the previous year. The aforesaid factors have together contributed to the Company reporting an unprecedented Loss of Rs.472.23 million as against Loss After Tax of Rs.159.55 million for the previous year. Sugar: The performance of the Sugar Division was impaired by severe drought conditions in the command area of both sugar mills. As a result, the aggregate quantity of sugarcane crushed by both the factories during the year was lower at 5.24 lakh MTs as against 7.15 lakh MTs crushed during the previous year, though the combined sugar recovery was higher at 8.90 % as against 8.42% recorded in the previous year. The Government of India fixed the Fair and Remunerative Price (FRP) of sugarcane for 2013-14 season at Rs.2,100/- per MT linked to average recovery of 9.5%, which translated to an FRP of Rs.2,100/- per MT for both the Tirumandankudi and the A.Chittur units. However, with a view to enthusing farmers to plant more sugarcane for the 2013-14 season and having regard to the sugar prices ruling at the start of the season, the Company announced payment of Rs.2,250/- per MT for both the units, as against the State Advised price of Rs.2,550/- per MT linked to average recovery 9.5%. This apart, the Company has borne the entire cost of cane transport, the additional burden of which worked out to Rs.129/- per MT. As against 60,371 MTs of sugar produced during the previous year, production for the year under review aggregated to 46,617 MTs. Distillery: The performance of the Distillery during the year has been gratifying. Alcohol production of 11,975 KL during the year, was almost the same as compared to 11,844 KL during the previous year and likewise, average realisation on sale of alcohol during the year was also higher as compared to the previous year. Prospects for the 2014-15 season: Sugar: The Government of India fixed the Fair and Remunerative Price (FRP) of sugarcane for 2014-15 season at Rs.2,200/-per MT linked to average recovery of 9.5%, which translates to an FRP of Rs.2,200/- per MT for both the Tirumandankudi and the A Chittur units. Thereafter, the Government of Tamil Nadu announced the State Advised Price (SAP) for the 201415 season at Rs.2,550/- per MT linked to average recovery of 9.5%. Since the SAP announced for 2014-15 season was way beyond the paying capacity of the industry, especially in the absence of any matching sugar realizations, the private sector sugar mills in the State continued to plead with the State Government, as in the previous year, for grant of suitable financial reliefs to facilitate payment of State Advised Price. Though, effective November 01,2014, the State Government removed the levy of Purchase Tax on sugarcane (Rs.60/-per MT), this relief was more than offset by the simultaneous introduction of VAT @ 5% ( and consequent CST @ 2%) on sale of sugar. This new impost had the instantaneous impact of rendering sugar produced in Tamil Nadu non-competitive even within Tamil Nadu, vis-a-vis sugar produced in the large-surplus States of Karnataka and Maharashtra, neither of which levy VAT / CST. With unabated inflow of sugar from these States, the sugar mills in Tamil Nadu suffered a severe erosion in selling price as well as offtake. Several representations made on behalf of the private mills, seeking waiver of the VAT levy, went unheeded, which in turn seriously impaired the ability of the sugar mills to pay any price in excess of FRP. Left with no other option, the private mills, through their Association, moved a Writ Petition before the Hon'ble High Court of Madras seeking quashing of the Government Order fixing SAP. Pending disposal of the Writ, the private mills have agreed to pay an additional price of Rs.100/- per MT of sugarcane, over and above the FRP. While so, the severe drought conditions prevailing across the State, consequent upon the third consecutive failure of the monsoons in 2014, have not only taken a heavy toll on cane yields and cane availability for the 2014-15 season, but also severely impacted planting of cane for supply during the 2015-16 season. Sugar production in the country during 2014-15 season is estimated at 28.3 million MTs, which is in excess of projected domestic offtake of 25.1 million MTs. With production in excess of consumption for the fifth successive season, even considering the export of 1.1 million MTs, the closing stock is estimated at 9.6 million MTs. Hence, sugar prices in the domestic market have continued to remain at unviable levels. As a result, the entire industry has been subject to severe financial hardship during the year, which, in turn has led to accumulation of cane arrears at a record high. In order to mitigate the financial crisis faced by the industry at large, so as to reduce the mounting cane price arrears, the Central Government has extended the following reliefs during the year under review: i) Incentive of Rs.4,000/- per MT for the production and export of raw sugar for 2014-15 season. ii) Hike in the import duty on sugar from 25% to 40%. iii) Soft Loan for cane payment with 10% interest subvention The aforesaid reliefs, however, are only short term palliatives at best, with no permanent solution, in the form of linkage of cane price to sugar realizations, in sight. Distillery: The steep reduction in cane crushing in the State during the 2014-15 season has had a significant impact on molasses and alcohol prices. Since the Company has built up adequate stocks of molasses and is also holding large stocks of alcohol, the performance of the Distillery is expected to be better compared to the financial year under review. Subsidiary and Associate Companies: The subsidiary Company viz. Terra Energy Ltd recorded a turnover of Rs.150.95 million and reported a Profit of Rs.5.25 million for the year as against a turnover of Rs.229.35 million and Profit of Rs.6.43 million for the previous year. The Associate Company viz. Shree Ambika Sugars Ltd recorded a turnover of Rs.3101.28 million and reported a Loss of Rs.803.61 million for the year as against a turnover of Rs.3132.7 million and Loss of Rs.273.49 million for the previous year. Consolidated Financial Statements: The Consolidated Financial Statements of the Company prepared in terms of Section 129 of the Companies Act,2013 read with the Companies (Accounts), Rules,2014 and as per the Listing Agreement, together with a separate statement containing the salient features of the financial performance of the subsidiary and associate companies and the Report of the Auditors thereof form part of the Annual Report. As required under Section 136 of the Companies Act,2013, the Annual Report of the Company containing its standalone and consolidated financial statements and the Annual Accounts of the subsidiary and associate Companies and the related detailed information have been placed on the website of the Company www.tasugars.in. The audited financial statements of the subsidiary and associate companies will be available for inspection by any shareholder at the Registered Office of the Company during the business hours upto the date of the Annual General Meeting. A copy of the audited financial statements of the subsidiary and associate companies will be made available to the shareholders of the Company on receipt of a request. Directors and Key Managerial personnel: Pursuant to Section 152 of the Companies Act, 2013, Mrs Malathi Ram Tyagarajan, Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for reappointment. As required under Clause 49 of the Listing Agreement, details of her qualification, expertise etc., are furnished in the Notice convening the forthcoming Annual General Meeting The Company has received declarations from the Independent Directors confirming that they meet the criteria of independence as stipulated under Section 149(6) of the Companies Act,2013 and Clause 49 of the Listing Agreement. The Independent Directors were fully kept informed of the Company's operations in all its segments. During the year under review, a separate meeting of Independent Directors was held on March 25, 2013. As required u/s 134 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board of Directors has evaluated its own performance and the performance of the various Committees of the Board and also the Directors individually. The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a Policy for selection and appointment of Directors and Key Managerial Personnel and the criteria for determining qualifications, positive attributes and independence of Directors. Policy on selection of Directors and Remuneration Policy is stated in the Corporate Governance Report. Six meetings of the Board of Directors were held during the year and the details thereof are given in the Report on Corporate Governance. Directors' Responsibility statement: Pursuant to Section 134(3)(c), the Directors confirm: i) that in the preparation of the Annual Accounts for the Year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii) that the Directors 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 as on March 31, 2015 and of the Loss of the Company for the year ended on that date; iii) that 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; iv) that the Directors have prepared the annual accounts on a going concern basis; v) that the Directors have laid down internal financial controls to be followed by the Company and that the said internal financial controls are adequate and are operating effectively; and vi) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Corporate Governance and Management Discussion and Analysis Reports: The Corporate Governance and Management Discussion and Analysis Reports form an integral part of this Report and are set out as Annexure I and II to this Report. The Certificate from the Auditors of the Company certifying compliance of conditions of Corporate Governance stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges is also annexed to the Report on Corporate Governance. Fixed Deposits: 26 Deposits aggregating to Rs.0.958 million due for repayment on or before March 31, 2015 were not claimed by the depositors on that date. As on the date of the Report, deposits aggregating to Rs.0.204 million thereof have been claimed and paid. The Company has discontinued acceptance of deposits from the public since April 01, 2014. As required under Section 74 of the Companies Act, 2013, deposits outstanding as on March 31, 2014 have been repaid along with interest due thereon on the due date or within one year from April 01, 2014, whichever is earlier. Auditors Statutory Auditors: The Company at its 58th Annual General Meeting (AGM) held on September 29, 2014 appointed M/s. S.N.S. Associates, Chartered Accountants, Chennai, having Firm Registration No.006297S allotted by The Institute of Chartered Accountants of India, as Statutory Auditors of the Company to hold office for three consecutive years from the conclusion of the aforesaid AGM, subject to ratification at every AGM. The Auditors' Report for the year ended March 31, 2015 does not contain any qualification or adverse remark and the same is attached with the Annual Report. The Company has obtained certificate under Section 141 of the Companies Act, 2013 from M/s. S.N.S. Associates confirming their eligibility for being the Statutory Auditors of the Company for the Financial Year 2015-16. Cost Auditors: As per the Companies (Cost Records and Audit) Rules, 2014, Company's cost accounting records are subject to Cost Audit. The Board of Directors, on the recommendation of the Audit Committee, have appointed M/s. Vaasan Co., Cost Accountants, as the Cost Auditor to audit the cost accounting records maintained by the Company for the Financial Year 2015-16, on a remuneration of Rs.60,000/-, apart from Service Tax and reimbursement of travel and out-of-pocket expenses that they may incur in connection with the audit. The Company has received certificate from M/s. Vaasan Co. confirming their eligibility as required under Section 141 of the Companies Act, 2013. As required under the Companies Act,2013, a resolution seeking ratification of the Shareholders, for payment of remuneration as above approved by the Board of Directors, is included in the Notice convening the Annual General Meeting. The Cost Audit Report for the year ended March 31, 2014 was filed by the Cost Auditor on September 27, 2014, within the stipulated deadline of September 30, 2014. Secretarial Auditors: Pursuant to Section 204 of the Companies Act,2013, the Board of Directors have appointed M/s. R Sridharan and Associates, Practicing Company Secretaries, as the Secretarial Auditor to carry out the secretarial audit for the Financial Year 2014-15. The Secretarial Audit Report of M/s. R Sridharan and Associates is annexed as Annexure III to the Report. The said Report does not contain any qualification, reservation or adverse remark. Internal control and their adequacy: The Company has adequate internal control system to ensure to ensure that the assets of the Company are safeguarded, all the transactions are authorised and accounted for and all statutory obligations are complied with. The internal audit is carried out by one of the Senior Executives of the Company who attends the meetings of the Audit Committee and his Reports are placed at regular intervals before the Audit Committee for its scrutiny. DISCLOSURES: Information on conservation of energy, technology absorption, foreign exchange earnings and outgo. Information on conservation of energy, technology absorption, foreign exchange earnings and outgo are given in the Annexure IV to this Report, pursuant to Section 134(3)(m) of the Companies Act,2013 read with the Companies (Accounts) Rules 2014. Corporate Social Responsibility Section 135 of the Companies Act,2013 has mandated companies having minimum net worth of Rs.500 crores or turnover of Rs.1000 crores or a net profit of Rs.5 crores during any financial year to constitute a Corporate Social Responsibility Committee of the Board. As the Company does not meet any of the aforesaid stipulations, it remains outside the purview of Section 135 of the Companies Act,2013 and accordingly, is not required to make any disclosure in terms of the aforesaid Section. Annual Return Extract of Annual Return in the prescribed form is given as Annexure V to this Report as required under Section 134(3)(e) of the Companies Act,2013 read with the Companies (Accounts) Rules 2014. Employees' remuneration The Company does not have any employee drawing remuneration warranting disclosure under Section 197 of the Companies Act,2013 read with the Companies (Appointment and remuneration of Managerial Personnel) Rules 2014. Details as required under Section 197(12) are given in the Annexure VI to this Report. Details of related party transactions All related party transactions entered into during the financial year were on arm's length basis and were in the ordinary course of business. All related party transactions are placed before the Audit Committee and the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseeable and repetitive in nature. Particulars of contracts or arrangements with Related Party referred to in Section 188 (1) of the Companies Act, 2013 read with the Companies (Accounts) Rules,2014 in furnished in Form AOC - 2 (Annexure - VII). Audit Committee The Audit Committee comprises Mr R Vijayaraghavan, as Chairman, Mr V Thirupathi and Mr R V Tyagarajan, as Members. Details of loans / guarantees / investments made The Company has not given any loan or any guarantee or made any investment during the financial year under review in terms of Section 186 of the Companies Act, 2013. Other disclosures: There were no significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company's operations in future. There is no change in the nature of business of the Company during the year under review. There are no material changes and commitments in the business operations of the Company during the period from the close of the Financial Year 201415 to the date of this Report. During the year under review, there were no complaints/cases filed pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibitions and Redressal) Act, 2013. Acknowledgement : Your Directors wish to place on record their sincere thanks and appreciation to the Shareholders, Sugarcane Growers, Employees, Bankers, and also the Central and State Governments for their continued cooperation and support. On behalf of the Board R V Tyagarajan Chairman and Managing Director September 24, 2015 |