DIRECTORS' REPORT To THESHAREHOLDERS Your Directors have pleasure in presenting their Report and audited Accounts of the Company for the financial year ended 31st March, 2015. DIVIDEND: In view of losses company is unable to pay Dividend Your company has faced extensive damage and losses due to 2 consecutive years' of natural calamities. The Phailin Cyclone occurred in October' 2013 followed by Hudhud Cyclone in October'2014 which devastated the sugarcane quality in Riga area and reduced recovery in both years by about 0.5%. This resulted into estimated loss of Rs. 7 Crores for each financial year of 201314 and 2014-15. The State government of Bihar constituted a committee and visited the affected area to asses losses, but till date no relief has been provided to affected sugar mills in spite of genuine demand. The net sales of sugar unit increased from Rs.123 Cr. to Rs. 138 Cr. i.e. increase of 12%. The sales increased due to volume increase in sales quantity of sugar. There has been five years of continuous surplus production of sugar in the country leading to glut in domestic market and price decline drastically. The closing stock of sugar during the year end was valued lower than cost of production, leading to substantial loss in sugar segment despite accounting for the financial assistance equivalent to of Rs. 26.75 per qtl. of sugarcane from state government of Bihar. Throughout the year 2014-15 the sugar price remains subdued. After protected submission by the industry the government increased the import duty on sugar from 15% to 25% and then to 40%. But by then the unfettered import did irreparable damage to the domestic sugar industry. Moreover the import of raw sugar under advance license were allowed with exporting obligation of white sugar within 18 months. This also flooded the domestic market, which were already facing glut. The FRP for the season 2014-15 were increased by Central Government from Rs. 210 per qtl. to Rs. 220 per qtl. linked with basic recovery of 9.5%. During last 5 years the FRP has been increased by 110% inspite of the facts that sugar price has not shown any increase during these period. The CACP while recommending FRP for 2014-15 had projected sugar price of Rs.3200 to Rs. 3400 per qtl. But actual realization is much lower than that. Further the State governments continued to interfere in determination of sugarcane price, which is much higher than FRP, disregarding the sugar price realization in the market. This sugarcane price forced on sugar factories by state government has no link with sugar price and is disproportionately very high. Relief by Bihar Government In Bihar the cane Price for the season 2014-15 was maintained at Rs. 255 per qtl. for normal varieties, Rs. 245 per qtl. for lower varieties and Rs. 265 for premium Varieties. Transport rebate on out center cane remains at Rs. 15 per qtls. In a major boost the state government of Bihar has realized the problems being faced by the sugar industry and announced relief measures by way bonus on cane price of Rs. 5 per qtl. directly to the farmers and extend relief to sugar factories of Bihar equivalent to Rs. 27.50 per qtl. of sugarcane by way of reduction of purchase tax (Rs. 1.75 per qtl.), ZDC Commission ( Rs. 4.00 per qtl.) , increase in molasses price by Rs. 100 per qtl. (equivalent Rs. 5 per qtl of cane.) and subsidy in cash of Rs.16.75 per qtl. The above steps of state government has resulted into financial saving/benefit/ relief to the company to the extent of Rs. 13.18 Crores on cane crush of 47.94 Lacs Qtl. during the season 2014-15 in comparison to last year. However these relief proved insufficient in view of wide gap between lower sugar price realization in comparison to cost of production. The molasses price in Bihar during the year were revised from Rs. 187.50 to Rs. 287.50 per qtl. The continued higher interest rate during the year further impacted the profitability. Due to negative outlook of sugar industry the Bank downgraded the rating of sugar companies and thus cost of funds increased ETHANOL The company participated in Tender floated by Oil Marketing Companies (OMC) and got LOI for supply of ethanol to the depot of OMC in Bihar. The state government of Bihar during the year continued policy to allow only 5% of total molasses production in the state for manufacture of Ethanol by the state distilleries. As such our production of Ethanol during the year was 7.5 Lacs Litre . Now state government are considering to increase molasses allotment to 10% , which will definitely increase the Ethanol production. The ethanol supply price were revised to Rs. 49 per BL within delivery of 100kms and Rs. 49.50 per BL within delivery beyond 100 kms. to the Depot of OMC all inclusive. COUNTRY LIQUOR The manufacturing and supply of Country Liquor in sachets performed well during the year. The company's distillery got exclusive License for manufacture and supply of Country Liquor in Pet Bottle to Bihar State Beverage Corporation Limited for a period of 5 years starting from 1st April, 2014 in Muzzafarpur Zone. But due to delay in implementation by the state excise department in switching from sachet to pet bottle it started manufacturing in pet bottle from February, 2015. SEGMENT-WISE PERFORMANCE: During the reporting period sugar segment contributed 75 percent of net sales of the company whereas Distillery accounted for 25 percent. The company identified two business segments in line with the Accounting Standard on Segment Reporting, Segment-wise Revenue, Results and Capital Employed is stated in Note No.32 of financial statement enclosed with the Annual Report. INDUSTRY STRUCTURE & POLICY Structure Sugar Industry, is seasonal in nature and directly dependent on monsoon for availability of adequate sugar cane. India is the largest consumer and second largest producer of sugar in the world, contributing over 15 percent of the world's sugar production through over 600 sugar factories situated in different parts of the country. The sugar Industry is the largest agro based industry in India. This industry also provides valuable by-products like bagasse, molasses and press mud. The availability of these by-products had led to setting up of Alcohol/Ethanol/co-generation of Power and Organic Manure plants. Over 5 Crore farmers, large number of agricultural labourer are involved in sugarcane cultivation and its harvesting operations. The growth of sugar industry has a powerful impact on the rural economy. Integrated Sugar Industry (comprising sugar, molasses, alcohol, power and bio-fertilizer) enjoys annual turnover of about Rs. 85,000 Crore and contribute about Rs.3,000 crore to the Central Government Exchequer by way of central excise duty every year beside state taxes on sugarcane and hefty taxes collected by state as excise and VAT on sale of spirit in the state which run an estimated Rs.10,000 crores annually. Since sugar industry is in loss income tax is not being paid present, but the cola and confectioneries, Biscuit, Ice-cream company are making huge profit due to lower cost of sugar and thus paying hjgher Income Tax. Sugar Industry accelerates rural development through farm employment as well as business opportunities in transport and communication. Sugar has been declared as an 'essential commodity' under the Essential Commodities Act, 1955. Under Sugarcane (Control) Order, 1966, the Government of India fixes cane price called Fair and Remunerative Price (FRP) for sugarcane every year based on the recommendations of the Commission on Agricultural Costs & Prices. However many state government fixes higher cane price for the sugar factories in their state which is about 25% higher than FRP. Sugar Cycle The Indian sugar industry is characterized by cycle of high and low sugar production. This cycle of 3-4 years is broadly of two types viz. Natural comprising climatic variation, water availability and pest attacks. The other is induced cyclicality which have sequence like -- higher sugar production and accumulation of stock -- decline in sugar prices & profitability -- higher sugarcane arrears -- decline in area under cultivation & Lower cane production -- lower sugar production -- lower sugar availability and stock and thus increase in sugar prices --- improved profitability & low cane arrears -- higher cane production --higher sugar production and so on. Every time the cyclicality reaches its low government have to step in to provide Fiscal support in the form of Export subsidy, Buffer Stock creation, Interest Free Loans etc. This cycle has broken and India is having higher production of sugar for last five consecutive years. The fundamental problem of the Indian Sugar Industry is that there is no parity between the price of raw material i.e. sugarcane and its finished goods of sugar. Illogical intervention of state government cause wide economical distortation in sugar industry. In almost all major sugar producing countries of the world the price of cane paid to the farmers depends on realization from sugar. Rangrajan Committee Report-Linkage of Raw Material Costs and Sugar Realization The main recommendation of Rangrajan Committee report of the year 2012 regarding linkage of cane price with sugar price and its by products has not been implemented so far. The committee has suggested for revenue sharing model under which 70% of sugar value and each of its major three by-products would be paid to farmers. Rangrajan Committee has indicated a derived cane price formula. It indicates that cane price will not be an absolute but linked to another variable. Cane price will be linked to the price of sugar in the market place. The higher the sugar realizations, the greater will be the cane price. This is an internationally tested model. This ensures that any increase in sectors profitability is equitably shared between its manufactures and growers. The cane grower will not be treated outsider, but as partner of entire value chain. The Rangrajan committee has gone a step further in this proposed linkage; it has proposed a sharing percentage at a level higher than what is practiced abroad, which more than secures the interest of farmers. Fixation of cane price at high level than the market price of sugar should be made illegal. Various committees and high-level committee like Rangarajan have said so. According to Rangrajan Commitee, "A sugar unit without any by-products' business will have to pay cane price of 70% of its revenue realisation, while it will have to spend 30% on its functioning. On the other hand, a sugar factory with by-products business will have to pay cane price of 75% of its revenue realization from sugar. The cane price to be fixed taking into account this formula." Maharashtra and Karnataka Government have established Control Board to address market linked cane pricing over a period of time. But until these Board become fully effective and other key states also creates a similar mechanism for cane price , India will remain among the few major markets where the price of cane is not linked with market price of sugar. Consequently cost of production is often higher than the market price of sugar, creating losses to sugar mills and cane price arrears to the farmers. Distillery & Ethanol Movement and distribution of Molasses and its finished products Alcohol are governed entirely by the State Government. The ethanol blending program has suffered in most of the state as they are reluctant to allow permission for allocation of alcohol for production of ethanol. The state authority put hurdles on ethanol production due to perceptible fear of losing revenue and meeting state requirement for potable alcohol. Co-Gen of Power The Company has set-up co-generation Plant for producing additional 3 MW of Electricity. The Company has received all statutory approvals toward this, and Power Purchase Agreement (PPA) were signed on 1st September, 2014, but power could not be supplied during the season 2014-15 due to different hurdles at government department. The company is optimistic that co-gen will start selling power from season 2015-16. This forward integration will significantly contribute to the profitability of the company. Pollution Control- Zero Discharge Company The Sugar and Distillery factories of the company are Zero Discharge Plants as per norm of Central Pollution Control Board and Ministry of Forest and Environment. The company treat the entire solid waste generated from Sugar factory which is generated in the form of Press-mud and liquid generated from Distillery in the form of spent wash for production of Bio-Compost. For this the company has set-up Digesters, RO, Lagoon and Bio-compost facilities on 17 Acres of Land. The Digesters is capable of generating bio-gas which is replacement of fossil fuel.. The Bio-compost produced is rich in all organic nutrients required for fertility of the land. The said bio-compost is sold to farmers who supply sugarcane to company and also to other farmers and even used in Tea Gardens of Assam and Darjeeling. Further the water generated from RO is used in the plant for various purposes. Thus the company is not only zero discharge company, but is also generating economic value from such waste products and rejuvenating the farm land through use of organic fertilizer. The company has been awarded ISO 14000: 2004 in recognition of the organization's Environmental Management System which comply with ISO:14001:2004. CANE & SUGAR POLICY • The Fair and Remunerative Price (FRP) price of sugarcane for the season 2014-15 was fixed at Rs. 220 per qtl. (last year Rs.210) linked with basic recovery of 9.5% , subject to premium of Rs.2.32 per qtl. for every 0.1% increase. • The central government announced a subsidy of Rs. 4,000 per MT on production and exports of raw sugar for 1.4 millions tons of raw sugar for the season 2014-15. • The central government also hiked the import duty on sugar from 25% to 40%. • The period of for discharging export obligation under the advance authorization scheme for sugar was reduced to six months. • The central government replace the policy of procurement of ethanol for blending programme from Tender based to fixed Price. • The 12.5% excise duty on ethanol for blending purposes removed from 1st October, 2015. OPPORTUNITIES AND THREATS OPPORTUNITIES Sugar India is largest consumer and second largest producer of sugar in the world. Sugar is an essential item of mass consumption and with increase in income and spending power the consumption pattern of rural India is changing directly & indirectly. The consumption of sugar is on increasing trend and there are huge scope for further increase in demand as India is still lagging behind from many advanced countries in respect of per capita consumption of sugar. Thus there are opportunity in production and consumption of higher quantity of sugar in coming period. Distillery The consistent increase of demand of Rectified Spirit /Ethyl Alcohol in varied segment and mandatory provision of ethanol doping of 5% and its proposed increase to 10% will have strong support for growth of sugar industry. Ethanol production improves oil security and contributes to environmental protection. Power Sugar Industry offer immense scope for renewal energy project on co-generation basis, which provide clean energy. Due to this the increased demand of surplus bagasse has added imputes to revenue generation. Bio-Compost Fertiliser The bio-compost and vermi-compost fertilizers being produced by the company has got immense scope of demand in all major agriculture cultivation as it not only preserve the soil from excessive use of chemical fertilizer but also increase its fertility. The company is using distillery effluent and press mud from sugar and other agricultural waste to produce bio-compost which is very cost efficient. Thus the company apart from treatment of effluent and zero discharge adding value and thus expect good cash flow in near future. THREATS • No linkage of Sugar Price with cane price • Unreasonable increase in cane price in comparison to sugar selling price. • The sugar sector is exposed to political intervention. • Industry cyclicality. FUTURE PROSPECTS/OUTLOOK The Indian sugar industry has had five consecutive surplus sugar years between 2010-11to 2014-15. Over and above the sugar year 2015-16 is also going to be surplus year. The sugar year 2014-15 opened with a stock of 75 lac M/T against 93 lac M/T in 2013-14. The production for the season 2014-15 expected at 283 Lac M/T against 244 lac MT during previous season. The domestic consumption of sugar for 2014-15 expected at 248 lac M/T against 241 Lac M/T last year. The export of sugar for 201415 is expected at 8 Lac M/T against 22 Lacs MT last year , which is basically shipment against advance license import. The closing stock thus estimated at 102 Lac MT,is about 5 months domestic consumption. The Government announced an export incentive off Rs. 4000 per MT to facilitates export of raw sugar from the country. Surplus production in Brazil alongwith depreciating Brazillian currency weighed heavily on global raw sugar prices, which decline from 17.04 US cents per pound to 12.70 US cents per pound effectively, shutting down the window for export from India despite the export incentive from the government . Cane prices arrears mounted to an all time high of about Rs. 21,000 crores. The central government replace the policy for procurement of ethanol for blending programme from tender based to fixed price. Government announced removal of 12.50% excise duty on ethanol effective from season 2015-16. These measure would not only save valuable foreign exchange for the government, but would go a long way in encouraging the sugar industry in getting improved price of ethanol realization on long term basis. Prices of by-products such as bagasse and molasses continue to remain remunerative driven by healthy demand by consuming sectors such as power, paper, alcohol and ethanol. Higher realizations for Rectified Spirit and Fuel ethanol result in improved returns from by-products. Forward integration into distilleries, country liquor, power generation, bio-fertilisers gives value addition. A significant part of profitability of the integrated sugar mills comes from by-products. It is believed that forward integration will remain crucial for improving profitability and riding thorough the cyclicity of the sugar industry. SUGAR POLICY- TRAVESTY OF JUSTICE The Hon'ble Supreme Court in its landmark judgment dated 22nd Sept 1993 in the matter of Shri Malaprabha Cooperative Sugar Factory Limited vs Union of India stated that for the purpose of fixation of Levy Price under 3 (3-C) of the Essential Commodities Act, 1955 the Government must have regard to the four factors mentioned under section 3 (3-C) of the Act. Those factors are:- (1) Minimum Price of Sugarcane; (2) Manufacturing costs; (3) Taxes and duties; and (4) Reasonable return on the capital employed. The above factors were used to be taken into consideration while fixing the price of 60% portion of sugar (Levy Quota) in those years and balance 40% was meant for sale in the open market at higher price than Levy Price, to mop-up the average realization and compensate the loss on levy portion. But irony is that now 100% sugar is free, but factories are not able to get even the price as calculated under section 3 (3-C) of ECA mentioned above. Under the circumstance how it is possible to meet the cost and reasonable return. While fixing the Fair and Remunerative Price (FRP) of sugarcane, CACP have to keep in mind the following factors of different players:- FARMERS a. Cost of production of cane by farmers b. Return to the Farmers from alternative crops and general agriculture prices SUGARFACTORY c. Cost of cane on production of sugar based on recovery % d. Cost of conversion from cane to sugar by the millers including labour, lime, sulphur, repair, maintenance, chemicals, packing materials, administrative cost etc. e. Interest and Return on capital employed by the factory f. Sale price of sugar and by products CONSUMER g. The availability of sugar to consumer at a fair price The sale price of sugar and by products must cover item (c), (d) and (e) above. But ironically even the item (c) above i.e. cost of cane (FRP) is not covered in sale price of sugar presently. The CACP has taken a sugar price realization between Rs. 3,200 /- per Qtl. to Rs. 3,400/- per Qtl., while calculating FRP for cane of Rs. 220 per Qtl. for season 2014-15 , but realization is much less than that. The result - Sugar Industry is Bleeding, Farmers are suffering, Bankers and Investors are tottering. All this mess in the name of Politics. General Public hardly consume 30% of sugar sold in India and sugar is not their priority items, but they strive for staple food, vegetable, dal, edibile oils whose price is high skyrocketing. Even the packet of idodised salt is costlier than sugar. But nobody is bothered. An upward movement from current price of sugar by Rs. 5 hardly affect a family of five as their monthly budget will go up by Rs. 25 only which is price of 1 litre mineral water, half kg vegetable, 250 gram of edible oil, 1 kg of salt, just 1 piece of Apple, half dozen of banana, 2 pieces of Mango, one day pocket money of class VIII school going children. But this Rs. 5 will save 5 Crore sugarcane farmers and their family. But it appears that government is under imminent pressure and is hell-bound to protect the interest of Institutional buyers of sugar like Cola, Beverage, Confectionery, Biscuits, Ice-cream, Sweet makers who consume 70% sugar. In this pursuit the government is :- (a) destroying the life of 5 crore farmers, (b) ruining the future of 600 plus sugar factories with Co-Gen, Alcohol, Bio-fertilizer and Power, (c) sinking Investment of more than Rs. 2,00,000 Crore in Sugar Industry, (d) hitting hard the banks because of growing NPA, (e) destroying the wealth of millions of investors who have invested in listed companies which owns hundreds of sugar factories with distillery & co-gen and (f) ultimately destroying the Rural economy. Again question arises - in whose interest government is following the distorted policy? Are we not helping the Brazil sugar industry on the cost of Indian farmers, by destroying our own sugar industry which has potential to become the prominent player in world in sugar export A question arises when there is cane price arrears mounting every year, why the farmers are sowing the surplus cane for last 5 five consecutive years and breaking the sugar cycle? The answer lies in the fact that sugarcane price is still better than other crops where the payment is also statutorily guaranteed. But how long the said price will be guaranteed unless the sugar factories do not get corresponding price of sugar? By this way the government is also violating the fundamental right as enshrined in Article 19(1) (g) of Constitution of India, which states that "All citizen shall have the right to practice any profession, or to carry on any occupation, trade or business." By distorted sugar policy the government is infringing and taking away the right of free and fair profession of Farmers and Business of sugar mills. In a welfare state the policy is made for benefit of the people at large. But by current policy the government is not benefiting the mass but handful of people and destroying the lives of crore of hapless people and Industry. Where is the Justice? When the FRP is legally mandated to pay then the end product , ' sugar' should also be legally mandated to have corresponding Fair & Reasonable Price. LONG TERM SOLUTION TO SAVE SUGAR INDUSTRY The Central Government cannot reduce the FRP, all though which is exorbitantly high compared to sugar price realisation. As such only increase in the sugar prices can save cane growers and sugar Industry. CACP in their recommendation while recommending FRP of Rs.230/- per Qtl for 2015-16 linked with basic recovery of 9.5% say as under:- "A scientifically sound and economically fair methodology to determine prices of cane is to adopt hybrid approach i.e. prices of cane be determined by Revenue Sharing formula (RSF) or FRP, whichever is higher. Under the RSF the Total Revenue Pot (TRP)generated from the cane-sugar value chain, which is the value of sugar and its first stage by-products, be shared between the farmers and the millers in the ratio of their relative costs in producing cane at farm level and converting that cane into sugar and its by-products at factory level. This ratio works out to 75:25 at 10.31% recovery rate .However; arrangement under RSF needs to be aligned with FRP to protect the farmers in the event of any downward movement in prices of sugarcane. The FRP would serve as the floor price, which the farmers would receive even when sugar prices fall to a level, which leads to prices (as determined by RSF, say PRSF) lower than FRP. The Commission recommends that if price as determined by revenue sharing formula is less than FRP', the difference be financed by the Sugar Stabilization Fund to be created by the Government." As such if CACP recommendations are fully accepted then the Government have to create a fund which can finance the differences between RSF (Revenue sharing Formula) and FRP. On the basis of today's sugar prices the RSF of different region, on an average government have to finance Rs.80/- /quintal of cane crushed from the sugar stabilization fund. Taking the expected production of sugar of 280 Lac tonne next year, on 10% recovery the cane crush of 2,800 Lacs tonne. So requirement of fund will be @ of Rs. 800/- per qtl. of sugar will be Rs. 22,400 crorers. Under present economic scenario creating such a huge fund that too year after year will be very difficult for the government . Thus, there is only one solution which can save all as mentioned below:-. (a) The government should fix MSP for sugar on the basis of recommendation of CACP calculated under the Essential Commodity Act to safeguard the sugar cane growers interest and to minimize the losses incurred by the industry. (b) It should be made legally binding that no sugar factories can sell, sugar below MSP as recommended by CACP. (c) To reduce the domestic inventory, export of 20% sugar production should be made compulsory. These export should be shipped out of sugar factories situated near the port and coastal area of the country. However keeping in mind the depressed international market conditions there will be losses on such export. To mitigate this export loss on 15% sugar exported, it should be allocated to balance 85% sugar meant for domestic consumption to MSP as per CACP calculation. For example if the quantum of loss on export of 15% sugar work out at Rs. 150 per qtl. of sugar meant for domestic consumption of 85%, then for MSP should be increased from Rs. 3,200 to Rs.3,350 in Maharashtra and Karnataka and from Rs.3,400 to Rs. 3,550 in Northern India. (d) Some people may say that it is in full control, but this is not in a full control, since factories are free to sell the sugar above MSP. There have to be restriction of selling maximum 8% of the sugar in one month including exports. Factories will be free within that 8% bar to take their own decision to sell any percentage upto 8% in any month. Through above mechanism the Central Government will not have to bear any burden and industry will be able to pay to the cane growers. If this is done, this will solve the problems of coming years. (e) To ward-off the Import the custom duty should be increased from 40% to 60%. (f) For the cane dues of last years, Government should advise the banks to restructure the accounts of the sugar companies by converting at-least 50% working capital loan to working capital term loan for 7 years at reasonable interest with two years moratorium. This will enable the factories to clear old outstanding and farmers will get their cane dues in time. This will be win-win situation for all. Sugar factories will realize the cane cost and conversion cost. Consumers will get sugar at a reasonable price i.e. 40/kg, which is prevailing in most part of the world and government will be saved from heavy burden of subsidy and Indian sugar trade will flourish in international market earning foreign exchange. Sugar machineries manufacturers will again start getting jobs and above all there will be no compelling circumstances to commit suicide by the poor farmers. Committee of the Board The details of composition of Audit Committee and other committees of the Board of Directors alongwith the attendance thereof is provided in the Corporate governance Report forming part hereof. Audit Committee The Audit Committee comprises Mr. Sharad Jha as its Chairman with Mr. Suyesh Borar and Mr. S.K.Goenka as members. All recommendations of the Audit Committee were accepted by the Board. Information pursuant to Section 134 of the Companies Act, 2013 a. Extract of the annual return as provided under Section 92(3) of Companies Act, 2013 is enclosed -Annexure I b. Eight meetings of the Board of Directors of the Company were held during the year on 25.05.2014, 29.05.2014, 12.08.2014, 26.09.2014, 08.11.2014, 14.02.2015, 17.03.2015 and 31.03.2015. c. All the Independent Directors of the company have furnished declarations that they satisfy the requirement of Section 149 (6) of the Companies Act, 2013. d. Relevant extracts of the Company's policy on directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided in section 178(3) of Companies Act, 2013 is enclosed - Annexure II. We affirm that the remuneration paid to the Directors is as per terms laid out in the Nomination and Remuneration Policy off the company. e. There is no qualification, reservation or adverse remark or disclaimer made by the auditor in his report and by Company Secretary in practice in the secretarial audit report and hence no explanations or comments by the Board are required. f. The details of Loans, Guarantees and Investment covered under the provisions of section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements and also enclosed as Annexure-III. g. There has been no materially -significant related party transactions made by the company with the promoters, the directors, the key managerial personnel which may be in conflict with the interest of the company at large. The company has formulated a policy on related Party Transactions and also on dealing with Related Party Transactions. The policy is disclosed on the website of the company (www.rigasugar.com). All related party transactions as placed before the Audit Committee has also received approval from the Board. Your Directors draw attention of the members the Note No. 33 to the financial statement which set out Related Party Disclosures. h. Details of conservation of energy, technology absorption, foreign exchange earnings and outgo as prescribed vide Rule 8(3) of Companies (Accounts) Rules 2014 is enclosed - Annexure IV i. The company has laid down policy on risk assessment and minimization procedures and the same is periodically reviewed by the Board. The Policy facilitates in identification of risk at appropriate time and ensure necessary steps to be taken to mitigate the risk. Brief details of risks and concerns are given in this Board Report. j. The corporate Social Responsibility Committee has formulated and recommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicating the activities of the company. The Annual Report on CSR activities is not annexed herewith due to non- applicability of relevant provisions to the company due to losses. k. In compliance with the Companies Act, 2013 and clause 49 of the Listing Agreement, during the year Board adopted a formal mechanism for evaluating its performance as well as that of its Committee and Individual directors, including the Chairman of the Board. The evaluation of Independent was carried out by the entire Board and that of the chairman and Non-Independent directors were carried out by the Independent directors. The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its committee with the company. RISK AND CONCERN SUGAR (a) Delay in evolving a rational Sugarcane Pricing Policy having link with sugar price is detrimental to growth of the industry. (b) The output of sugar, an agro-based product, is influenced by climatic vagaries. (c) Sugar Industry being cyclic in nature, the growth is hampered during downtrend. DISTILLERY (a) Lack of clear cut policy of the State Government and time consuming regulation of the movement, distribution and pricing of molasses and Industrial Alcohol are major concerns in respect of Distillery operations. (b) Inconsistent policy of the State government in the implementation of the Ethanol Blending Programme is matter of concern. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: Your Company has adequate systems and internal control procedures to safeguard the assets of the company and to ensure maintenance of proper accounting records. There is also an Internal Audit System in place which reviews the key business and controls and also test checks on routine transactions and reports deviations. Besides, an Audit Committee periodically reviews the functioning of the entire system. CHANGE IN SHARE CAPITAL The company during the year on 25.09.2014 allotted 18,00,000 equity share warrants of Rs.10/- each at a price of Rs.15.20 per warrant convertible into equity share of Rs. 10 and premium of Rs. 5.20 each on preferential allotment basis as per SEBI (ICDR) Regulations, 2009. The company received Rs. 68.40 Lacs as 25% allotment amount as advance toward said issue of share warrants. The allottee have option to convert the said warrants into equity shares within 18 months of allotment of warrants. The company during last 6 years raised Rs. 13.56 Cr as equity CREDIT RATING CARE maintained credit rating for the company's Long-term and short-term debts at CARE B and CARE A4 respectively. FIXED DEPOSITS: The company has neither accepted nor renewed any deposit from public within the meaning of section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules, 2014 during the year under the review. AUDITORS (a) Statutory Auditors The observation of Statutory Auditors in their report, read with the relevant notes to accounts are self explanatory and therefore, do not require any further explanation. M/s. K.N. Gutgutia & Co., Chartered Accountants ( ICAI Registration No. 304153E) , Kolkata, Statutory Auditors of the Company, retire and being eligible offer themselves for re-appointment. (b) Cost Auditors The Board appointed M/s. Mani & Co., Cost Accountants (Firm Registration No 000004), Kolkata, to conduct cost audit of the company relating to sugar (including industrial alcohol) for the financial year ended 31st March, 2014 and 31st March, 2015 after receiving clarification from government . The remuneration payable to the Cost Auditors for the said years being placed for ratification by the Members at the forthcoming Annual General Meeting. (c) Secretarial Auditor and Secretarial Audit Report In pursuance of section 204 of the Companies Act, 2013 M/s H.M. Choraria & co., Company Secretaries were appointed as secretarial Auditors to carry out Secretarial Audit for the financial year 2014-15. Their report is annexed to this report ass Annexure-V. DIRECTORS: Mrs. Sulekha Dutta, was appointed as Additional Director of the company in the category of Independent Director by the Board in its meeting held on 31st March, 2015. She shall hold office upto the date of ensuing Annual General Meeting of the company and will be eligible for re-appointment as Independent Director. 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 the Listing Agreement. Mr. Pankaj Tibrawalla ceased to be Director of the company wef 25th March, 2015 due to resignation. The Board placed on its record its appreciation for the services and advice made by Mr. Tibrawalla during his tenure as Director. DIRECTORS' REPONSIBILITY STATEMENT: Your Directors state that:- (i) in preparation of the annual accounts for the year ended 31st March, 2015 , the applicable accounting standards have been followed alongwith proper explanation relating to material departures, if any ; (ii) 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 and of the loss of the company as 31st March, 2015; (iii) 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) the Directors have prepared the annual accounts on 'going concern' basis; (v) the Directors have laid down internal financial controls to be followed by the company and such internal financial controls are adequate and are operating effectively; and (vi) directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. PERSONNEL: The particulars of employee are required under Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given as separate annexure attached hereto and forms part of this report as Annexure- VI. CORPORATE GOVERNANCE: The Corporate Governance form an integral part of this Report and are set out as Annexure- VII to this Report. The certificate from the Auditors of the company certifying compliance of condition of Corporate Governance stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges is also annexed to Report on Corporate Governance. KEY MANAGERIAL PERSONNELS In compliance of provisions of section 203 of the Companies Act, 2013 the following persons were the key managerial personnel of the company: (i) Mr. O.P.Dhanuka, Chairman & Managing Director (ii) Mr. S.Prasad, Company Secretary (iii) Mr. R.N.Sharma, Chief Financial Officer Code of conducts and ethics The Board of company has adopted a Code of Conducts and ethics for the Directors and Senior Executives of the company. The code is available on the company's website at www.rigasugar.com Significant & material orders passed by the regulators During the year under review, no significant and materials orders were passed by the Regulators or courts or Tribunals impacting the going concern status and the Company's operations. Whistleblower Policy The company has in place a whistleblower policy to deal with unethical behavior, victimizations, fraud and other grievances or concerns, if any. The Whistleblower policy can be accessed on the company's website www.rigasugar.com Material changes and commitments affecting the financial position of the company after 31st March, 2015 The sugar prices have further reduced after 31st March, 2015. LISTING OF EQUITY SHARES: The Shares of the Company are listed on the Stock Exchanges of Calcutta and Mumbai. The Company has been regularly paying the Listing Fees to each Stock Exchanges. ANNEXURES FORMING PART OF THIS REPORT OF THE DIRECTORS The Annexure referred to in this report and other information which are required to be disclosed are annexed herewith and forms a part of this report of the Directors:- Annexure Particulars I Extract of the Annual Return as per Form MGT-9 II Policy on selection of Directors appointment and remuneration III Details of Loan , Guarantees and Investment IV Particulars of conservation of energy, Technology Absorption and Foreign Exchange earnings and outgo V Secretarial Audit Report VI Particulars of Employees VII Corporate Governance Report APPRECIATION: Your Directors express their appreciation for the support and contribution by Cane Growers, Bankers, Central and Bihar State Government, Suppliers, Customers and the valuable services rendered by the Employees at all levels. For and on behalf of the Board, O. P. Dhanuka Chairman & Managing Director Dated : 29th May, 2015 Place : Kolkata, |