DIRECTORS' REPORT & MANAGEMENT DISCUSSION AND ANALYSIS Dear Shareholders, Your Directors are pleased to present the 51 st Annual Report together with the Audited Financial Statements for the year ended March31, 2015. The Management Discussion and Analysis is also included in this Report. 1. CORPORATE REVIEW THE SOUTHERN GAS LIMITED ("Your Company") is a leading Indian Gas supplying Company. The Company has its corporate headquarters at Gogol, Borda. Margao, Goa. 2. OVERVIEW OF THE ECONOMY The Government envisages GDP growth to accelerate to 8% in FY 2015-16 driven by strengthening macroeconomic fundamentals and implementation of policy refonns recently announced. Reforms like e-auctions of coal mines and telecom, FDI hike in insurance, speedier regulatory approvals etc. will be critical growth enablers to de-bottleneck stalled projects, improve the investment outlook and the ease of doing business in the country. Reforms currently underway such as GST implementation. Amendment to Land Acquisition Bill, Labour Reforms, etc are expected to provide the requisite thrust for growth in the medium term. 4. DIVIDEND AND RESERVES Your Directors recommend a Dividend at the rate of Rs.30/- per share to those shareholders whose names appear on the Register of Members as on 24th September, 2015 5. SHARE CAPITAL The paid-up Equity Share Capital as at March 31,2015 stood at Rs22,50,000/-. During the year under review, your Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity. As on March 31, 2015, none of the Directors of the Company hold instruments convertible into equity shares of the Company. 6. ANALYSIS AND REVIEW Industry Conditions Global economic turmoil, untamed competition and price swings, gas manufacturers must be bold about trans forming their business models. Manufacturer must ask two simple questions a. Where do we go to lock in demand? b. Are we prepared to thrive in a business environment that is oversupplied? If both questions are adequately and, in some cases, fearlessly - addressed, gas manufacturers should be able to forge a pathway for success, no matter how uncertain the prices for their products. Opportunities and Challenges Adjusting to the new reality Do we need to improve the efficiency of our operation or adjust our portfolio? Gas Manufacturers are emerging from a period of high growth and rapid expansion into an era of oversupply, must now redirect their efforts. Their primary focus now should be on driving capital and operating efficiency to preserve their margins and maintain the reinvestment rates necessary to grow production. Additionally manufacturers need to carefully evaluate their portfolios, field by field, to ensure that each operation is good fit for the company's core strengths, customer demographics and preferences. Only a few companies will successfully shore up demand and improve margins by consolidating their strongest assets, yet in our vie w i t is an essential element of survival in the industry today. Challenges: The biggest mistake that the manufacturer of the gases can make in this difficult business slowdown is to focus solely on reducing cost (either operating or general and administrative] and spending; this strategy is effective only in a very narrow range of market conditions and rarely effective enough to make businesses successful over the long term. Rather companies should carefully consider the supply of assets, analyse accessing available markets and ensure a long term presence in these markets without getting into a price war. Oversupply and lower prices are a real challenge to the industry, we therefore need to be prepared and adopt strategies that take advantage of new realities Performance Highlights With expectations set high-performing team can be an uncomfortable experience at times. Even when you are ahead of others, missed opportunities are disappointing. We therefore at The Southern Gas Ltd. have ensured that all our senior executives focus on identifying benchmarks, use metrics to make better decisions about how they run the business. Better performance management beginning with a more focused approach to measurement and reporting system. Raw Material The free saturated air is sucked from atmosphere passes through Compressor and Chilling Unit, Molecular sieve battery and oil absorber, dust filter and Air separation column, Heat exchange and so on to get our finished products. Although the raw material is free the real challenge is increased in electricity tariff, salaries, transportation fuel and all other overheads, which in turn have increased our cost of production, posing a real threat to manufacturer of Oxygen through Air Separation Plant. 7. FINANCE AND ACCOUNTS Your Company prepares its financial statements in compliance with the requirements of the Companies Act, 2013 and the Generally Accepted Accounting Principles (GAAP) in India. The financial statements have been prepared on historical cost basis. The estimates and judgements relating to the financial statements are made on a prudent basis, so as to reflect in a true and fair manner, the form and substance of transactions and reasonably present the Company's state of affairs, profits and cash flows for the year ended March31,2015. There is no audit qualification in the financial statements by the statutory auditors for the year under review. 8. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Bombay Stock Exchange, a separate section on coiporate governance practices followed by the Company, together with a certificate from CS Neville Fernandes, a Company Secretary in whole time practice, confinning compliance forms an integral part of this Report. 9. EXTRACT OF ANN UAL RETURN The details forming part of the extract of the Annual Return in Form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as Annexure 'A' and forms an integral part of this Report. 10. DIRECTORS All the Independent Directors have given declarations that they meet the criteria of Independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Yogita G Pai Cacode retires by rotation at the forthcoming Annual General Meeting and being eligible, offers herself for re-appointmen 11. KEY MANAGERIAL PERSONNEL: Mr. Gautam V Pai Cacode, chairman & Managing Director of the company is the Key managerial Personnel of the company 12. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration of the various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of speciflc duties, obligations and governance. The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Non-independent Directors was carricd out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process. 13. NUMBER OF MEETINGS OFTHE BOARD The details of the number of meetings of the Board held during the Financial Year 2014-15 forms part of the Corporate Governance Report. 14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY Details of Loans, Guarantees and investments covered under the provisions of Section 186 of the Companies act, 2013 are given in the notes to Financial Statements. 15. WHISTLE BLOWER POLICY The Company has a whistle blower policy to report genuine concerns or grievances. The Whistle Blower Policy has been posted on the website of the Company (www.southerngasindia.com). 16. REMUNERATION AND NOMINATION POLICY The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors. Key Managerial Personnel of the Company. This policy also lays down criteria for selection and appointment of Board Members. The details of the policy is explained in the Corporate Governance Report. 17. RELATED PARTY TRANSACTIONS All transactions entered with Related Parties for the year under review were on arm's length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus disclosure in Form AOC 2 is not required. Further, there are no material related party transactions during the year under review with the Promoters, Directors or Key Managerial Personnel. The Company has developed a Related Party Transactions framework through Standard Operational Procedures for the purpose of identification and monitoring of such transactions. All Related Party Transactions are placed before the Audit Committee as also to the Board for approval. Omnibus approval was obtained on a quarterly basis for transactions which are of repetitive nature. Transactions entered into pursuant to omnibus approval are audited by the Risk Assurance Department and a statement giving details of all Related Party Transactions are placed before the Audit Committee and Board for review and approval on a quarterly basis. The Policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company. The web-link of the same has been provided in the Corporate Governance Report. None of the Directors has any pecuniary relationship or transactions vis-avis the Company. 18. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations. 19. 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 statement in terms of Section 134(3)(c) of the Companies Ac t, 2013: • 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, if any. • 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 at March 31,2015 and of the profits of the Company for the year ended on that date. • 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 forsafeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. • That the Directors have prepared the Annual Accounts on a going concern basis. • That the Directors have laid down internal financial controls to be followed and that such internal controls are adequate and are operating effectively. • 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. 20. STATUTORY AUDIT Messrs Varma & Varma, Chartered Accountants,(Firm Registration No:004532S) who are Statutory Auditors of the Company hold office upto the forthcoming Annual General Meeting and are recommended for reappointment to audit the accounts of the Company for the financial year 2015-16. As required under the provisions of Section 139 of the Companies Act, 2013, the Company has obtained written confirmation from Messrs Varma & Varma that their appointment, if made, would be in conformity with the limits specified in the said Section. 21. SECRETARIAL AUDIT REPORT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed Mr. Neville Fernandes a Company Secretary in whole time practice, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure-B and forms an integral part oft his Report. There is no secretarial audit qualification for the year under review. 22. INTERNA L CONTROL SYSTEMS AND THEIR ADEQUACY Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new / revised standard operating procedures. The Company's internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to the senior management officials . The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides bench marking controls with best practices in the industry. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strength the same. The Company has a robust Management Information System which is an integral part of the control mechanism. The Audit Committee of the Board of Directors, Stamtory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective action taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective action taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. 23. RISK MANAGEMENT During the year under review, the Company has finalised the process to identify and evaluate elements of business risk. Consequently a revised robust Business Risk Management framework is in place. The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also documentation, mitigating controls and reporting mechanism of such risks. Some of the risks that the Company is exposed to are: Financial Risks The Company's policy to actively manage its foreign exchange risk within the framework laid down by the Company's forex policy approved by the Board. Given the interest rate fluctuations, the Company has adopted a prudent and conservative risk mitigation strategy to minimize interest costs. Commodity Price Risks The Company is exposed to the risk of price fluctuation of raw materials as well as finished goods. The Company proactively manages these risks through forward booking , inventory management and proactive vendor development practices. The Company's reputation for quality, product differentiation and service coupled with existence of powerful brand image with robust marketing network mitigates the impact of price risk on finished goods. Regulatory Risks The Company is exposed to risks attached to various statutes and regulations including the Competition Act. The Company is mitigating these risks through regular review of legal compliances carried out through internal as well as external compliance audits. Human Resources Risks Retaining the existing talent pool and attracting new talent are major risks. The Company has initiated various measures including rolling out strategic talent management system, training and integration of learning and development activities. 24. ENVIRONMENT AND SAFETY The Company is conscious of the importance of environmentally clean and safe operations. The Company's policy requires conduct of operations in such a manner so as to ensure safety of all concerned, compliances, environmental regulations and preservation of natural resources. As required by the Sexual Harrasmcnt of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, the Company has formulated and implemented a policy on prevention of sexual harassment at workplace with a mechanism of lodging complaints. Its redressal is placed on the internet for the benefit of employees. During the year under review, no complaints were reported to the Board. 25. HUMAN RESOURCES AND INDUSTRIAL RELATIONS The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. The Company has structured induction process at all locations and management development programs to upgrade skill of managers. Objective appraisal systems based on Key Result Areas are in place for senior management staff. The Company is committed to nurturing, enhancing and retaining top talent through superior Learning & Organisational Development. This is a part of Corporate HR function and is a critical pillar to support the organisation's growth and sustainability in the long run. 26. STATUTORY INFORMATION Pursuant to Section 134 (3) (m) of the Companies Act. 2013 read with rule 8(3) of the Companies (accounts) Rules, 2014, your Company continued to take steps to optimize energy consumption as in previous years. During the year there was no technology absorption. There was no foreign exchange earning. Foreign exchange outgo during the year is Rs. 55,51,333/-. During the year under review, there were no employees who were in receipt of Rs 60 lac per annum or more, nor in receipt of remuneration of Rs 5 Lacs per month. During FY 2015 the Company had 128 employees. The information required under Section 197 (12) of the Companies Act, 2013 read with Companies (appointment and Remuneration of Managerial Personnel) Rules, 2014 and forming part of the Directors' Report for the year ended March 31.2015 is given in a separate Annexure to this Report. None of the employees listed in the said Annexure is a relative of any Director of the Company. None of the employees hold (by himself or along with his spouse and dependent children) more than two percent of the equity shares of the Company. The Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. Save and except as otherwise specifically stated, there has been no material changes and commitments affecting the financial position of the Company which have occurred' between the end of the financial year and the date of the report. The Company has finalized the process of developing and implementing the corporate social responsibility initiatives during the year. The Business Responsibility Reporting as required by Clause 55 of the Listing Agreement with the Bombay Stock Exchange is not applicable to your Company for the financial year ending March 31,2015. 27. CAUTIONARY STATEMENT Statements in the Directors' Report & Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be 'forwardlooking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make the difference to the Company's operations include raw material availability and its prices, cyclical, demand and pricing in the Company's principle markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors. 28. APPRECIATION Your Company had recently completed 50 eventful years of its existence in this Country. Very few brands continue to remain relevant and become iconic over such a long passage of time. Your Directors are proud of this rich heritage and thank all our stakeholders who have contributed to the success of your Company. Your Directors wish to place on record their appreciation for the contribution made by the employees at all levels but for whose hard work, and support, your Company's achievements would not have been possible. Your Directors also wish to thank its customers, dealers, agents, suppliers, investors and bankers for their continued support and faith reposed in the Company. For and on behalf of the Board GAUTAM V. PAI CACODE Din No.02395512 Chairman and Managing Director Place : Goa, date : May 21,2015 |