DIRECTORS REPORT TO THE MEMBERS, The Directors have pleasure in presenting the 41st Annual Report and the Audited Statement of Accounts for the year ended March 31, 2016. Dividend The Directors are happy to recommend a dividend of Rs. 3.50 (Rupees three and paise fifty only) per share (One hundred and seventy five percent-same as in the previous year). 3. Reserves and surplus The Directors propose to transfer Rupees two crores (Previous year-Rupees four crores) to the General Reserve. Correspondingly, an approximate amount of Rupees twenty one crores (Previous year -Rupees twenty crores) would be retained in the Surplus. 4. Review of business operations Performance highlights: During the year, the Company established a state-of-the art 'Thermal Spray Coating' services/facilities at Nagpur. This will enable the Company to provide turnkey solutions to thermal spray coating challenges. The capex involved was rupees two and half crores, entirely funded through internal accruals. Standalone: In spite of tough economic and market conditions, the Company registered growth in revenue. Going forward, if the performance of the core sector industries significantly improves, it will surely enable the Company to rebounce with quantum leap in all parameters of business operations. Consolidated: Consolidated Financial Statements pertain to Ador Fontech Ltd., Dualrank Fontech (M) Sdn. Bhd. (Joint venture) and 3D Future Technologies Pvt. Ltd. (3DFT-Wholly owned subsidiary). As far as 3DFT is concerned, it commenced operations in the middle of the calendar year 2015 with focus on medical products. Infrastructure requirements have been established, an initial team of ten employees have come on board and the first 3D printer has been installed in Mumbai. The dental range of 3D printed products, will be sold under the brand name 'Flash' and is expected to enter the market by August 2016. 3DFT will strive to achieve break even position within the next two years. 5. Board and its composition The Company recognises the importance of diverse Board with Members possessing different perspectives, skills, knowledge etc. Further, the current policy is to have an appropriate mix of Executive and Independent Directors, maintain independence of the Board and separate its functions of governance and management. At present, there are six Members on the Board of whom two are Executive and four are Non-Executive Directors. Amongst the Non-Executive Directors, three of them are Independent. They represent varied fi el ds of eminen ce in cludin g legal, marketing, technical , organisational development etc. The Board and its Committees had met four times during the financial year 2015-16. 6. Directors' responsibility statement The Board of Directors of the Company hereby confirm that: a. In the preparation of the Annual Accounts, the applicable accounting standards have been followed, along with proper explanations relating to material departures, if any. b. The Directors have selected applicable accounting policies and applied them consistently, as also have made judgements and estimates that are reasonable and prudent, to give a true and fair view of the state of affairs as at the end of the financial year and of the profits of the Company for that period. c. The Directors have taken proper and sufficient care (i) for maintenance of adequate accounting records in accordance with the provisions of the Companies Act. (ii) for safeguarding the assets of the Company. (iii) for preventing/detecting frauds and other irregularities. d. The Directors have prepared annual accounts on a going concern basis. e. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls in the opinion of the Board are adequate. f. 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. 7. Directors Mrs. N Malkani Nagpal will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment. Further, all three Independent Directors have provided declaration that they meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013 and comply with Regulation 25 of SEBI (lODR). 8. Details of changes in Directors and/or Key Managerial Personnel There were no changes in the appointment or resignation of the Board and Key Managerial Personnel. In the Board meeting held on Oct 30, 2015 Mr. A T Malkani took over as the Chairman. Further, the Board placed on record the exemplary work of Mrs. N Malkani Nagpal. 9. Board evaluation The Company has conducted a formal annual performance evaluation of the Board of its own performance including its Committees, Individual Directors & Senior Management Executives. Detailed manner of evaluation has been explained in the Corporate Governance Report. 10. Audits Statutory Audit: In respect of the financial year 2015-16, there are no qualification(s) or reservation(s) or adverse remark(s) or disclaimer(s) specified in the Audit reports. Hence explanations or comments on the same do not become applicable. Secretarial Audit: The Secretarial audit report forms part of the Directors' Report & there are no adverse remarks expressed therein. Cost Audit: As per regulations and confirmation by the erstwhile Cost Auditor, it is not mandatory for the Company to have cost audit undertaken as revenues from business segments warranting cost audits are within threshold limits. Nonetheless, as per best practice, the Company maintains cost accounting records and has cost control measures in place, besides ensuring conduct of cost audits by external qualified Cost Auditors, year on year. Internal Financial Controls: In house quarterly audits and annual external audits are conducted to ensure that internal financial controls are adhered and function effectively. Statutory Audit: At the Annual General Meeting held on August 20, 2014, M/s. Amarnath Kamath and Associates, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2017. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of Auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Amarnath Kamath and Associates, as Statutory Auditors of the Company, is placed for ratification of the Shareholders. In this regard, the Company has received a certificate from the Auditors to the effect that if they are re-appointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. Secretarial Audit: The Board has appointed Ms. Manjula Narayan (ACS Membership No. 28374 & CP No.10150), Practicing Company Secretary having office at No. 22/A, 4th Cross, Devasandra, Krishnarajapuram, Bengaluru-36 as Secretarial Auditor for 2016-17. Cost Audit: M/s. Rao, Murthy and Associates (Firm Registration No. 000065) having office at 23/33 Surveyor's Street, Basavanagudi, Bengaluru-04, have been appointed as Cost Auditors for 2016-17. 12. Joint venture and subsidiary Wholly owned subsidiary - 3D Future Technologies Private Limited The Company had infused additional investment of rupees one crore during the financial year 2015-16 in 3DFT aggregating its capital contribution to rupees two crores. The wholly owned subsidiary has utilised the same towards purchase of fixed asset, primarily an imported 3D printer which is a pre-requisite for its functioning. Further, the Company has also provided lien on its mutual fund investments as security to enable 3DFT to meet its working capital requirements. The rationale is to support 3DFT at its nascent stage, but at the same time external funding and servicing of debt will ensure that 3DFT maintains financial prudence and discipline, with mandated prior approval(s) from the parent company at each threshold limits of rupees fifty lakhs over and above an initial utilisation of rupees two crores. The Company has filed requisite documents in this regard with the Registrar of Companies. The current utilisation of overdraft facility by 3DFT as on March 31, 2016 is rupees eighty six lakhs. Joint venture-Dualrank Fontech (M) Sdn. Bhd. The Company has made provision for dimunition in the value of investment of rupees seventy six lakhs as a matter of conservative approach and to take care of any contingencies, as the Malaysian Auditors' have expressed reservations on the going concern status of the venture. With initial gestation period of five years complete, the Company is closely monitoring and evaluating the functioning of the joint venture in terms of project viabilities and future sustenance. 13. Products The Company's products are manufactured to international standards and marketed under registered trade-marks. 14. Fixed deposits The Company did not accept fixed deposits during the year. 15. Liquidity While the Company continues to be debt-free, working capital of the Company has been on an increase in the recent. Concerted efforts are being made to reduce enhanced cycle time from procurement of raw materials to debtor's collection. As in the past, amount requisite for payment towards employees compensation, creditors and dividend are being maintained in the form of investments/bank deposits to suffice one financial year's requirement. 16. Particulars of loans, guarantee and investments During the financial year, the Company had provided inter-corporate-deposits (ICD) to its Associate, Ador Powertron Limited. Prior to extending this facility, the Company had sought legal opinion that it shall be within the compliance of legislative provisions. The ICD including interest has been repaid in full as at March 31, 2016. Further, the Company had also provided loans in tranches during the year, to Dualrank Fontech (M) Sdn. Bhd. amounting to Rs. 25 lakhs to tide over its working capital requirements, with an approximate equivalent contribution coming in from Duralrank (M) Sdn. Bhd. 17. Transactions with related parties Transactions with related parties are in the ordinary course of business and on an arms length basis. The same is based on legal opinion(s), approval/ratification of the Audit Committee (on a quarterly basis) and subject to compliance of transfer pricing regulations and audit. 18. Material changes, commitments and orders There has been no significant 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 this report. There were no significant orders passed against the Company, by the Regulators or Courts or Tribunals, impacting the going concern status and the Company's operations in the future. 19. Risk management The Company has in place risk management framework, to analyse and manage various financial and non-financial risks. Most of the strategic policy decisions are facilitated through consultative process of the top Management team. The Board further states that there are no elements of risks which threaten the existence of the Company. 20. Insurance The Company has sufficient insurance coverage on all its assets. They are renewed on time. 21. Employees As has been in the past, the industrial relations with the employees of the Company continue to be harmonious and cordial. The Company has Vigil mechanism/Committees in place to prevent harassment and redress grievances, if any. 22. Disclosures The following reports have been annexed/appended and forms part of the Directors' Report. (i) Management discussion and analysis report (ii) Corporate governance report. (iii) Report on CSR activities including policy, amounts spent & reasons for shortfall in spend. (iv) Nomination and remuneration policy. (v) Extract of annual return. (vi) Conservation of energy, technology absorption, foreign exchange earnings and outgo. (vii) Particulars of arrangements made with related parties. (viii) Particular of employees. (ix) Secretarial audit report. 23. Acknowledgements The Board of Directors thank the Shareholders, Authorised Dealers, Channel Partners, Overseas and Inland Business Associates, Bankers and the various Government agencies for their continued patronage and support. Further, wish to place on record special appreciation to the contribution made by employees at all levels. On behalf of the Board For Ador Fontech Limited A T Malkani Chairman DIN: 01585637 Place : Mumbai Date : May 09, 2016 |