DIRECTORS' REPORT TO, THE SHAREHOLDERS, SBEC SUGAR LIMITED Dear Members, Your Directors take pleasure in presenting the 21st Annual Report of the Company together with the Audited Accounts for the year ended 31st March 2015 OPERATIONS For the Financial Year 2014-15, there is a loss of Rs. (2861.45) lac as against a loss of Rs. (5356.09) lac in the previous year for 12 months period. The Company has incurred significant operational losses in due to a steep decline in sugar prices and unrealistically high cane prices set by the U P Government. DIVIDEND & RESERVES In view of the losses incurred, your Board is unable to recommend any dividend for the financial year ended March 31, 2015. The Company has not transferred any amount to the reserves for the year ended March 31, 2015. SHARE CAPITAL The paid up equity capital as on March 31, 2015 was Rs.47.65 Lacs. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweat equity. OPERATIONS The crushing for the season 2014-15 started on 29.11.2014 i.e.5 days earlier as compared to 2013-14 in the previous season and ended on 27.04.2015 as against 2013-14, 5 days earlier than the previous season. During the season, the plant crushed 111.03 lac quintals of sugarcane in 155 days as against 91.23 lac quintals in 138 days in the previous season. The crushing was higher by 19.80 lac quintals during this season due to increase period of crushing .The sugar recovery overall was higher at 9.17% as against 8.76% in the previous season. The production of sugar was higher at 2.19 lacs quintals, as compared to 0.09 lac quintals in the previous session. The Company continued to focus on cane development activities, comprising clean cane, varietal change and modern agriculture practices that is expected to improve recovery in the coming years. The market sentiments for sugar during the financial year remained bearish owing the continued mismatch between sugar and demand of sugar, affecting sales realization. Further during the year the UP Government has announced very high cane price which has resulted in the Loss before extraordinary expenses and provisions for taxation to Rs. 2861.45 Lacs against the Loss of Rs. 5356.09 Lacs last year. Due to continuing losses the company could not pay the cane dues to the farmer on time due to which they agitated and disturbed the operations at plant and the management was forced to close down the plant from 20th May, 2014 to 03rd September, 2014, which affected the administration, repair & maintenance work of the plant during the year under review. As the members are aware, the Company had reported the erosion in the net worth of the Company by more than 50% of the peak net worth as required under Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 to BIFR and the BIFR has declared the Company as sick and appointed IDBI as operating agency u/s 17(3) of the Act in its hearing held on dated 04th February, 2014. SUBSIDIARY As on March 31st 2015, the Company has one Wholly Owned Subsidiary i.e. SBEC Stockholding & Investments Limited and one Subsidiary i.e. SBEC Bioenergy Limited. There are no associates companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries. During the year 2014-15 M/s. Modi Casings and Packing Private Limited (formerly known as Modi Gourmet Limited) ceased to be Subsidiary of the Company w.e.f. 27.07.2014 under review. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. A statement containing salient features of the financial statements of the subsidiary companies is also included in the Annual Report in "Annexure-A". In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements has been placed on the website of the Company, www.sbecsugar.com Further, as per fourth proviso of the said section, audited annual accounts of each of the subsidiary companies have also been placed on the website of the Company, www.sbecsugar.com Shareholders interested in obtaining a copy of the audited annual accounts of the subsidiary companies may write to the Company Secretary at the Company's registered office. On the basis of Audited Financials Accounts of the Company for the FY. 14-15 the Company has two Material Subsidiaries Company i.e. SBEC Bioenergy Limited and SBEC Stockholding & Investment Limited. The Minutes of the Board Meetings of the subsidiary companies are placed at the Board Meetings of the Company. Details of significant transactions and arrangements entered into by the subsidiary companies are noted by the Board. The Audit Committee of the Company reviews the financial Statement of the subsidiary companies including investments made. The Company has adopted a policy for determining material subsidiaries. The said policy has been placed on the website of the Company www.sbecsugar.com and can be accessed through the following link <http://sbecsugar.com/wp-content/uploads/2011/07/> Material-Subsidiary-Policy.pdf DIRECTOR'S RESPONSIBILITY STATEMENT: Pursuant to the provisions contained in Section 134 (5) of the Companies Act, 2013, your Directors to the best of their knowledge and belief and according to information and explanations obtained from the management, confirm that: • in the preparation of the annual accounts for the financial year ended March 31, 2015, the applicable accounting standards have been followed and there are no material departures from the same; • the Directors have selected such accounting policies and applied them consistently and made judgements 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 loss of the Company for the year ended on that date; • 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; • The Directors have prepared the Annual Accounts on a going concern basis. • The Directors have laid down proper internal financial controls to be followed by the Company and such controls are adequate and operating effectively. • 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. DIRECTORS AND KEY MANAGERIAL PERSONNEL Shri. Santosh Chandra Gupta, expired on 03.09.2014 and Shri. G.C. Jain resigned from the office of Director of the Company with effect from 07.04.2015, due to old age. The Board of Directors placed on record its sincere appreciation for the valuable support and guidance given by Shri Santosh Chandra Gupta and Shri G.C. Jain to the Company during their tenure as Director of the Company. In accordance with the provisions of Section 152 of the Companies Act, 2013 and Articles of Association of the Company, Shri. Jayesh Modi (DIN 02849637), Non-Executive Director of the Company retire by rotation at the ensuing Annual General Meeting and being eligible offer himself for re-appointment. Shri. Vijay Kumar Modi appointed as an additional Non-executive Director on the Board of the Company w.e.f. 06th February, 2015. Shri. Rajeev Kumar Agarwal was appointed as an Additional Independent Director of the Company with effect from April 07, 2015 and holds office upto the date of the forthcoming Annual General Meeting. Shri. Jagdish Chandra Chawla and Shri. Shyam Babu Vyas was appointed as an Additional Independent Director of the Company with effect from May 27, 2015 and holds office upto the date of the forthcoming Annual General Meeting. Shri. Norland L.C. Suzor and Shri. Claude Philogene ceased to be the director of the Company under Section 167 of the Companies Act, 2013 w.e.f. 27th May, 2015. Shri. N.P. Bansal who has been appointed as alternate director during the absence of Mr. Louis Claude Norland Suzor be and is hereby ceased to be the alternate director and appointed Non-executive Director on the Board of the Company w.e.f. 27th May, 2015. As per provision of Section 149 and other applicable provisions, if any, of the Companies Act, 2013, Shri. Rajeev Kumar Agarwal, Shri. Jagdish Chandra Chawla and Shri. Shyam Babu Vyas are proposed to be appointed as Independent Directors of the Company for a period of five years commencing from September 24, 2015. All the Independent Directors viz., Shri. Rajeev Kumar Agarwal, Shri. Jagdish Chandra Chawla and Shri. Shyam Babu Vyas have submitted declarations confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges. Ms. Shwetambery Khurana has resigned from the post of Company Secretary and Compliance Officer of the Company w.e.f. 31st December, 2014 and Mr. Shobit Nehra was appointed as Company Secretary and Compliance Officer of the Company w.e.f. 07th April, 2015. Mr. Arun Gupta has resigned from the post of Chief Financial Officer of the Company w.e.f. 06th February, 2015 and in place of him Mr. Lakhmi Chand Sharma was appointed as Chief Financial Officer of the Company w.e.f. 07th April, 2015. The Board met Six times during the financial year 2014-15, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. In accordance with the provisions of Section 134 of the Act and Clause 49 of the Listing Agreement, the Board has carried out an evaluation of its own performance, the performance of Committees of the Board, namely, Audit Committee, Stakeholders Relationship Committee and Nomination and Remuneration Committee and also the directors individually. The manner in which the evaluation was carried out and the process adopted has been mentioned in the Corporate Governance Report. The Board, on the recommendation of the Nomination & Remuneration Committee, has framed a policy for selection and appointment of Directors, Senior Management and their remuneration and also framed the criteria for determining qualifications, positive attributes and independence of directors. The Remuneration Policy is given as "Annexure -B" to this Report. The Criteria, inter alia, includes: a person to be appointed on the Board of the Company should possess in addition to the fundamental attributes of character and integrity, appropriate qualifications, skills, experience and knowledge in one or more fields of engineering, banking, management, finance, marketing and legal, a proven track record, etc. Mr. Abhishek Modi, Whole Time Director; Mr. Shobit Nehra, Company Secretary and Mr. Lakhmi Chand Sharma, Chief Financial Officer are the Key Managerial Personnel of the Company As required under the provisions of Section 197(14) of the Companies Act, 2013, Mr. Abhishek Modi, Whole Time Director (Designated as Executive Director) of the Company confirms that he is receiving remuneration from (SBEC Bioenergy Limited) Subsidiary of the Company. STATEMENT ON DECLARATION GIVEN BY THE INDEPENDENT DIRECTORS As required under Section 149 (7) of the Companies Act, 2013, all the Independent Directors have given their respective declarations that they meet the criteria of independence as specified in Section 149 (6) of the Companies Act, 2013. AUDITORS AND AUDITORS REPORT The Shareholders at the 20th Annual General Meeting held on September 25, 2014, have appointed M/s Doogar & Associates., as Statutory Auditors of the Company to hold office until the conclusion of 21st Annual General Meeting subject to ratification of their appointment at every intermittent AGM. M/s Doogar & Associates., being eligible have expressed their willingness to continue as auditors of the Company and accordingly, the ratification of their appointment is recommended to the Shareholders. Qualifications The observation made in the Auditors' Report read together with relevant notes thereon are self-explanatory and hence, do not call for any further comments under Section 134 of the Companies Act, 2013. Reference to the Auditors comments on non-provision for interest on late payment of cane dues, it is hereby clarified that the company has not made provision of interest on late payment of cane dues, as it is negotiating with the farmers for its waiver. In case it has to be paid, it will be accounted for in the year of payment. Reference to the Auditors comments on physical verification of fixed assets and inventory, it is hereby clarified that the Company appointed an agency for conducting the physical verification of fixed assets and inventory. But due to continuing losses the Company could not pay the cane dues to the farmers on time due to which they agitated and disturbed the operations at plant and the management was forced to close down the pant from 20.05.2014 to 03.09.2014. Due to this reason the appointed agency could not conduct physical verification. However, from time to time management has reconciled stock of inventory as appearing in the records of bank with the records of the Company and no discrepancy was observed. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company during the year under review. COST AUDITORS As per Section 148 of the Companies Act 2013 read with Rule 4 of the Companies (Cost Records and Audit) Rules, 2014, the cost records maintained by the Company in respect of its Sugar activity are required to be audited by a Cost Auditor. The Board of Directors, based on the recommendation of the Audit Committee, appointed M/s. M.K. Singhal & Co., Cost Accountants, as the Cost Auditors for auditing the cost accounting records maintained by the Company for the financial year 2015-16 on a remuneration of Rs.60,000/- plus service tax as applicable and reimbursement of out of pocket expenses. As required under the Companies Act, 2013, a resolution seeking member's approval of the remuneration payable to the Cost Auditor forms part of the notice convening the Annual General Meeting. SECRETARIAL AUDITOR Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s R.K. Singhal, Company Secretaries in practice as the Secretarial Auditor to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is given in "Annexure-C" to this Report. The observation in secretarial audit report are self-explanatory and therefore not call for any further explanation. Reference to the Secretarial Auditors comment that there is an undisputed liability of Water Cess of Rs. 5,62,265/- and interest of Rs. 1,59,674/- to U.P. Pollution Control Board for the year 2012-13 for which fresh demand order has been received by the Company it is hereby clarified that Reference to the Secretarial Auditors comment that there is an undisputed liability of Water Cess of Rs. 5,62,265/-and interest of Rs. 1,59,674/- to U.P. Pollution Control Board for the year 2012-13 for which fresh demand order has been received by the Company it is hereby clarified that the Company has made the payment Rs. 4,28,114 against the total demand raised by the U.P. Pollution Control Board. RISK MANAGEMENT Pursuant to section 134 (3) (n) of the Companies Act, 2013 & Clause 49 of the listing agreement, the Company hasconstituted a business risk management committee. The Risk Management Committee consisting of Shri. R.K. Agarwal (Independent Director), Shri. N.P. Bansal, Director and Shri. J.C. Chawla, Director as Members of the Committee. After the decision of the Hon'ble Supreme Court empowering the State Government the State government to fix the Cane Price, one of the threat to the Sugar Industry except that the Committee has not identified any element of risk which may threaten the existence of the company. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has adequate Internal Financial Controls with proper checks to ensure that transactions are properly authorised, recorded and reported apart from safeguarding its assets. These systems are reviewed and improved on a regular basis. It has a comprehensive budgetary control system to monitor revenue and expenditure against approved budget on an ongoing basis. The internal auditors of the Company reviews the controls across the key processes and submits reports periodically to the Management and significant observations are also presented to the Audit Committee for review. Follow up mechanism is in place to monitor the implementation of the various recommendations. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES. Section 135 of the Companies Act, 2013 provides the threshold limit for applicability of the CSR to a Company i.e. (a) net worth of the Company to be Rs. 500 crore or more; or (b) turnover of the company to be Rs. 1,000 crore or more; or (c) net profit of the company to be Rs.5 crore or more. As the Company does not fall under any of the threshold limits given above, the provisions of Section 135 are not applicable to the Company. RELATED PARTY TRANSACTIONS All contracts/arrangements/transactions entered into during the financial year with the related parties were on arm's length basis and were in the ordinary course of business. Section 188(1) of the Companies Act, 2013 exempts related party transactions that are in the ordinary course of business and are on arm's length basis. However, under clause 49 of the Listing Agreement, all material Related Party Transactions requires approval of the shareholders through special resolution. Accordingly, the Company has obtained the approval of the shareholders by way of special resolution for the material related party transactions. The Board of Directors and the Audit Committee have also approved the said related party transactions. There are no materially significant related party transactions with the promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. The policy on dealing with Related Party Transactions as approved by the Board is available at the investors section of the Company's website at www.sbecsugar.com and can be accessed through the following link <http://sbecsugar.com/wp-content/uploads/2011/07/> Related-Party-Transacion-Policy.pdf. The particulars of the material contract and arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 read with clause 49 of the Listing Agreement is disclosed separately in Form No. AOC -2 as "Annexure-D" and forms part of this report. CORPORATE GOVERNANCE The Report on corporate governance as stipulated under the Listing Agreement forms part of this Report. The requisite certificate confirming compliance with the conditions of corporate governance is attached to the Corporate Governance Report. The report also contains the details as required to be provided on Board evaluation, remuneration policy whistle blower policy/vigil mechanism etc. The Whole Time Director and the Chief Financial Officer have submitted a certificate to the Board regarding the financial statements and other matters as required under the Listing Agreement. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement, form part of this Annual Report. DISCLOSURES Committees of the Board During the year in accordance with the Companies Act, 2013 the Board re-constituted/re-named some of its Committees and presently the Company has the following Committees: • Audit Committee • Nomination and Remuneration Committee • Stakeholders Relationship Committee The details of all the Committees along with their composition, terms of reference and meetings held during the year are provided in the "Report on Corporate Governance" forming part of this Annual Report. Vigil Mechanism & Whistle Blower Policy The Company has a vigil mechanism and a whistle blower policy. The same has been posted on the Company's website and the details of the same are given in the Corporate Governance Report. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 34(3) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in "Annexure-E" to this Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS: During the financial year 2014-15, the company has not made any investment nor given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. PARTICULARS OF EMPLOYEES The information required pursuant to Section 197(12) read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 relating to ratio of the remuneration of each Director to the median employee's remuneration and other details shall be provided on request, in accordance with the provisions of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard. In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, none of the employee is drawing remuneration in excess of the limits set out in the said Rules. EXTRACT OF THE ANNUAL RETURN The details of the extract of the Annual Return in Form MGT-9 are given in "Annexure-F" to this Report. FIXED DEPOSITS Fixed Deposits of Rs.6,58,25,000/- due for repayment on or before 31.03.2015 were not claimed by depositors as on that date. Further, the net worth of the Company becomes negative, and Company does not fall the criteria stipulated under the Act, it has discontinuance acceptance and renewal of fresh/existing Fixed Deposits. Since the Company is facing a financial crunch, the Company is not in a position to repay the entire outstanding Fixed Deposits on or before as stipulated under Section 74 of the Companies Act, 2013 and for compliance of the Act, the Company has obtained expert legal opinion that since the Company is registered with BIFR and IDBI appointed as Operating Agency so, Company is not require to repay the amount of deposit till the final order of BIFR/AAIFR. No significant or material orders were passed by the Regulators or courts or Tribunal which impact the going concern status and the Company's operations in future. PERSONNEL RELATIONS Your directors hereby place on record their appreciation for the services rendered by the executives, staff and workers of the Company for their hard work, dedication and commitment. During the year under review, relations between the employees and the management continued to remain cordial. APPRECIATION Your directors thank the various Central and State Government Authorities and Agencies for the continued help and cooperation extended by them. The Directors gratefully acknowledge all stakeholders of the Company viz., farmers, customers, members, dealers, vendors and banks for their excellent support during the year. The Directors also place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued cooperation to the Company. For & behalf of the Board SBEC Sugar Limited Umesh Kumar Modi (Chairman & President) (DIN: 00002757) Place: New Delhi Date: 13th August, 2015 |