DIRECTORS' REPORT TO THE MEMBERS Your directors are pleased to present the 25th Annual Report together with the Audited Accounts for the year ended on 31st March 2015: 2. BUSINESS OPERATIONS During the year under review, your company achieved production of 14026 MT during 2014-15 as compared to 11462 MT in previous year. Resultantly the turnover of the company from manufacturing activities has increased to Rs. 6433.08 Lacs during the year 2014-15 as compared to Rs. 5062.57 Lacs during previous year recording a growth of 27.07%. The profitability of the company is Rs. 86.00 Lacs during the year 2014-15 as compared to profit of Rs. 37.93 Lacs during previous year. Though the beginning of the current financial year 2015-16, saw high rise in the prices of the basic raw material, i.e. Molasses and high operational costs but gradually the company utilizing the limited resources available with concerted efforts achieved a turnover growth of 27% and an increase of 126% in the profits after tax. The operational performance during the year and the future outlook of the Company has been comprehensively covered in the Management Discussion and Analysis Report which is provided as a separate section in the Annual Report. 3. DIVIDEND Dividend for the year has not been proposed in order to plough back profits for the growth of the Company. 4. DIRECTORS AND KEY MANAGERIAL PERSONNEL In accordance with the provisions of the Companies Act, 2013 and pursuant to the company's new set of Articles of Association adopted at the 24th AGM, i.e. on 29.09.2014, the Independent Directors of the Company are not be liable to retire by rotation. In view of the above, and pursuant to Section 152(6), the remaining directors, being Executive Directors, are now made liable to retire by rotation at every Annual General Meeting. Thus, Mrs. Kavita Devi Kothari (DIN: 00120415) Whole-time Director of the Company retire by rotation and being eligible, offers herself for reappointment. Though, such determination of office by retirement and then re-appointment would not constitute a break in her tenure of service as the Whole-Time Director of the Company. Brief resume of Mrs. Kavita Devi Kothari, nature of her expertise in specific functional areas and the name of the public companies in which she holds the Directorship, as stipulated under Clause 49 of the Listing Agreement, is given in the notice convening the Annual General Meeting. The Board recommends her appointment as such. The Independent Directors have submitted their declaration that they fulfill the requirements as stipulated in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Pursuant to Section 203 of the Companies Act, 2013, the company designated the existing Chief Financial Officer, Mr. Arun Kumar Sekhani, as the Key Managerial Personnel of the Company. His consent along with all required disclosures as per the Act were duly obtained and recorded. 5. DIRECTORS' RESPONSIBILITY STATEMENT Based on the framework of internal financial controls and compliance systems established and maintained by the company, work performed by the internal, statutory and secretarial auditors and the reviews performed by the Board and its committees, the Board is of the opinion that the company's internal financial controls were adequate and effective during the financial year 2014-15. Pursuant to Sec.134 (5) of the Companies Act, 2013 the directors to the best of their knowledge and ability hereby report: i that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii. that the directors have selected 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 2014-15 and of the profit of the company for the year; 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 such internal financial controls are adequate and were operating effectively. vi. that 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. 6. CREDIT RATING Your company's domestic credit rating is 'BB+' as assigned for long term debt facilities with a Stable outlook and an 'A4+' for the short term debt facilities assigned by Credit Rating Information Services of India Limited (CRISIL). 7. AWARDS & ACCOLADES Your company has won the first prize: • 11th National Award for Excellence in Cost Management - 2013' for FY 2012-13 and • 12th National Award for Excellence in Cost Management - 2014' for FY 2013-14, from the prestigious Institute of Cost Accountants of India, Delhi in the Private - Manufacturing Organization (Small) category. The Award Ceremony was held on 25/11/14 for FY 2012-13 & on 15/7/15 for FY 2013-14. 8. AUDITORS AND AUDITOR'S REPORT A) Statutory Auditors M/s Nahata Jain & Associates, Chartered Accountants (Regn. No. 016351N), auditors of your company retire at the ensuing annual general meeting and being eligible offers themselves for re-appointment. The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limit under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. The Board recommends their appointment as auditors from the conclusion of this AGM to the conclusion of next AGM. The notes on accounts are self-explanatory with regards to auditors' observations. There were no qualifications, reservations or adverse remarks made by the Auditors for the year under review. B) Secretarial Auditor The Board had appointed M/s V.K. Sharma & Company, Practising Company Secretaries, as Secretarial Auditor to conduct the secretarial audit of the company for the financial year 2014-15, pursuant to the provisions of Section 204 of the Companies Act, 2013. The Report of the Secretarial Auditor forms part of the Board's Report as Annexure 'A'. "In respect of observations made by the Secretarial Auditors in their Report, it is mentioned that: 1. The company had applied in BSE for listing of 89.05 lacs equity shares issued preferentially to the promoter/ promoter group in the year 2008-09. The Company had applied for listing within stipulated time and furnished all requisite documents for the listing of the same to the BSE. Regular follow up has been done with BSE, but certain queries were raised by the exchange in the year 2012. The Company has duly provided with the exchange all required clarifications and replies and has even paid the additional listing fees, as required. The matter is pending with BSE for its necessary approval. 2. The Company has made payment of Rs. 25 Lacs on account of stamp duty for registration of lease deed of the leasehold land of factory, during the year. The Board at its meeting held on 14.08.2015 reappointed M/s V.K. Sharma & Company, Practising Company Secretaries as Secretarial Auditor for FY 2015-16. C) Cost Auditors As per the provisions of erstwhile Companies Act, 1956 read with Companies (Cost Audit Report) Rules, 2011, the Central Government vide its order dated 24th of January, 2012 directed our industry for conducting of Audit of Cost Accounts and Records. Now, with the introduction of new Companies Act, the Ministry of Corporate Affairs (MCA) has by notification F No. 1/40/2013-CL-V dated 31-12-2014 notified the new Companies (Cost Records and Audit) Rules, 2014. As per new rules, our industry has not been included in the list of industries, which have to conduct Audit of Cost Accounts and Records. Hence, Cost Audit is now not applicable on the company. 9. CORPORATE GOVERNANCE The Company is complying with Clause 49 of the Listing Agreement with regard to Corporate Governance and reports to that effect are being regularly filed with the Stock Exchanges. A report on Corporate Governance practices and the Certificate from the Auditors on compliance of the mandatory requirements thereof are made a part of the annual report. 10. VIGIL MECHANISM The Company has established a vigil mechanism which is overseen by the Audit Committee for the genuine concerns expressed by the employees and the Directors. A comprehensive whistle blower policy has already been adopted by the company which provides adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of employees and the Company. The policy as approved by the Board is uploaded on the Company's website at <http://www.kothariveast.in/financial/policies/whistle_blower_policv.pdf>. 11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES All related party transactions are negotiated on an arms-length basis and are in the ordinary course of business. None of the transactions with any of related parties were in conflict with the Company's interest. Suitable disclosures as required by the Accounting Standards (AS 18) have been made in the notes to the financial statements. Therefore, the provisions of Section 188(1) of the Companies Act, 2013 are not applicable. The policy on dealing with Related Party Transactions as approved by the Board is placed on the website at http://www.kothariveast.in/financial^policies/related_partv_transactional_policv.pdf 12. RISK MANAGEMENT POLICY OF THE COMPANY We have adopted a Risk management policy to identify and categorize various risks, implement measures to minimize impact of these risks where it is deemed necessary and possible, and a process to monitor them on a regular basis. 13. REMUNERATION POLICY AND BOARD EVALUATION The Board has adopted a Remuneration Policy as recommended by the Nomination & Remuneration Committee. It provides for the following: • Criteria for determining Qualifications, Positive Attributes & Independence of the Directors. • The basis for determining remuneration of the Directors, KMP's and other senior managerial personnel. Some of the criteria's are: • Responsibilities & obligations of the personnel, • Strategies followed & successfully implemented, • Performance of the company, • Annual targets to the extent achieved, • In-depth knowledge & skills required for the job, etc. • Defining of the Roles and Responsibilities along with the Remuneration of the KMP's and Senior managerial personnel. 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 and the Directors individually. The manner of evaluation of Independent Directors, Chairman and the Board as a whole was done at a separate meeting held by Independent Directors. The performance evaluation of Independent Directors was done by entire Board, excluding Directors being evaluated. 14. DISCLOSURES a) Number of Board & Committee Meetings: During the year under review, Six Board meetings, Four Audit Committee meetings, Four Stakeholders Relationship Committee meetings and One Nomination & Remuneration Committee meeting were convened and held. Details and attendance of such Board & Committees meetings are mentioned in Corporate Governance Report. Pursuant to clause VII (1) of Schedule IV of the Companies Act, 2013, the Independent Directors had a separate meeting on 14.02.2015. The Familiarization Program for the Independent Directors has been developed and has been uploaded on the website at <http://www.kothariveast.in/financial/familiarization-programme-for-independent-directors.pdf>. b) Deposits - The Company has not accepted any deposit from public during the year under review. c) Share Capital - There was no change in the Company's share capital during the year under review. d) Audit Committee - The Company has duly constituted an Audit Committee, whose detailed composition and powers are provided in the Corporate Governance Report. There were no recommendations of the Audit Committee which have not been accepted by the Board during the financial year. e) Extract Of Annual Return - The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is furnished in Annexure 'B' and is attached to this Report. f) Disclosure pertaining to Managerial Remuneration - 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 as per Annexure 'C'. No employee is in receipt of remuneration as laid down in sec. 197(12) read with rule 5(2) and (3) of the above said rules. Hence the disclosure is not applicable on the company g) Particulars of Loans, Guarantees or Investments under Section 186 - There were no loans, guarantees or investments made by the company during the year under review. h) Prevention of Sexual Harassment - The Company has zero tolerance for sexual harassment at workplace. A policy has been adopted in line with the Sexual harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed there under. During the year, no complaints pertaining to sexual harassment were received. I No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. 15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORBTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information pertaining to conservation of energy, technology absorption, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure 'D' and is attached to this report. ACKNOWLEDGEMENTS Your Board of Directors is thankful to all the Shareholders for their constant faith reposed in the company. They also placed on record their sincere appreciation for the wholehearted devotion and co-operation extended by the employees at all levels, which has been a source of strength to the company. The Directors also wish to thank and deeply acknowledge the continued support, guidance and co-operation of the Customers, Auditors, Legal Advisers, Bankers, Dealers, Vendors and other stakeholders of the Company. For and on behalf of the Board Pramod Kumar Kothari Chairman & Managing Director Date: 14'h of August, 2015 Place: New Delhi |