REPORT OF THE DIRECTORS TO THE SHAREHOLDERS We present herewith our Annual Report together with the Audited Accounts of your Company for the year ended March 31, 2016. REVIEW OF KEY BUSINESS MATTERS Positive government policies, actions and structural reforms to foster strong sustainable growth helped make India one of the fastest growing economies in the world. Moderate oil prices over the last 2 years helped curtail inflation and make room for increased spending on goods and services besides helping current account deficit, external and fiscal positions. Consequently, the country’s outlook is positive with GDP growth at 7.6% in 2015-16 on the strength of domestic absorption, despite global headwinds and poor monsoons over the last 2 years during which the rupee also weakened against major currencies. While India’s overall economic prospects are on a recovery path, domestic demand conditions (like exports) have not fully recovered. Capacity utilization across many industries is sub-optimal and private business has still been hesitant about fresh investments. Challenges to economic prospects include possible rise in oil prices, uncertain monsoons, debt overhang in businesses, and slow revival of customer confidence. The end-markets for many of the Company’s products also suffered depressed demand and low growth, including a decline in consumer durables production during the first half-year. A volatile petro-product price environment coupled with a weakened rupee amplified negative dimensions to profitability, since all the advantages of falling oil prices did not translate to similar reduction in prices of our raw materials. The company achieved higher (but less than forecast) aggregate production volumes at 21,645 MT, and gross sales 7% higher at Rs.308 Crores against Rs.288 Crores last year. The loss before depreciation (excluding extraordinary items) was Rs.5.61 Crores against a loss of Rs.4.88 crores in the previous year. Deferred tax asset created in earlier years to the extent of Rs.10.10 crores has also been reversed but as a matter of prudence and ample caution. REVIEW OF KEY BUSINESS MATTERS Positive government policies, actions and structural reforms to foster strong sustainable growth helped make India one of the fastest growing economies in the world. Moderate oil prices over the last 2 years helped curtail inflation and make room for increased spending on goods and services besides helping current account deficit, external and fiscal positions. Consequently, the country’s outlook is positive with GDP growth at 7.6% in 2015-16 on the strength of domestic absorption, despite global headwinds and poor monsoons over the last 2 years during which the rupee also weakened against major currencies. While India’s overall economic prospects are on a recovery path, domestic demand conditions (like exports) have not fully recovered. Capacity utilization across many industries is sub-optimal and private business has still been hesitant about fresh investments. Challenges to economic prospects include possible rise in oil prices, uncertain monsoons, debt overhang in businesses, and slow revival of customer confidence. The end-markets for many of the Company’s products also suffered depressed demand and low growth, including a decline in consumer durables production during the first half-year. A volatile petro-product price environment coupled with a weakened rupee amplified negative dimensions to profitability, since all the advantages of falling oil prices did not translate to similar reduction in prices of our raw materials. The company achieved higher (but less than forecast) aggregate production volumes at 21,645 MT, and gross sales 7% higher at Rs.308 Crores against Rs.288 Crores last year. The loss before depreciation (excluding extraordinary items) was Rs.5.61 Crores against a loss of Rs.4.88 crores in the previous year. Deferred tax asset created in earlier years to the extent of Rs.10.10 crores has also been reversed but as a matter of prudence and ample caution. STATUTORY AND OTHER MATTERS Information as per the requirements of the Companies Act, 2013 ("the Act"), our report on Corporate Governance and the Managements’ Discussion & Analysis Report form a part of this Report and are annexed hereto. The extract of the Annual Return in Form MGT-9 is annexed herewith. The Board has, on the recommendation of the Remuneration and Nominations Committee, framed a Policy for appointment and remuneration of Directors and Senior Managerial Personnel as well as criteria for determining independence and other relevant matters (policy and criteria annexed herewith). Pursuant to the provisions of the Act and SEBI Listing Regulations, 2015, the Board carried out annual evaluation of its performance, and of individual directors (including independent) as well as the evaluation of its Audit, Remuneration and Nominations, and Stakeholders Relationship Committees. The concerned Director did not participate in the meeting while he/she was being evaluated. A questionnaire was circulated to all Directors. The Remuneration and Nominations Committee also evaluated the performance of every Director. The evaluation of the Chairman and of the non-independent Directors was also carried out at the separate meeting of Independent Directors. Information on Conservation of Energy, Technology absorption & foreign exchange earnings and outgo is furnished in annexure hereto. The Company has formulated a Policy for determining material subsidiaries as required under Regulation 16(1)(c) of the SEBI Listing Regulations, 2015 (weblink: www.xproindia.com/data/XILPolMatSubs.pdf). The Company has two wholly owned subsidiaries viz. Xpro Global Limited and Xpro Global Pte. Ltd., Singapore. Performance and Financial Position of the said Subsidiaries is annexed herewith in Form AOC-1 as required. The Company has a system of review of business risks by Senior Executives at plants. The Audit Committee and the Board are informed about the identified risks, assessment thereof and minimization procedures and identification of risk elements which in the opinion of the Board may threaten existence of the Company. The Company has an internal control system commensurate with its size of operations. The internal audit function is carried out by external agencies which report to the Chairman of the Audit Committee. During the course of internal audit the efficacy and adequacy of internal control systems of the Company is also evaluated. Based on the reports, corrective actions are taken and the controls strengthened. The Company has not granted any loan or issued any guarantee or made any investment to which the provisions of Section 186 of the Act apply, except an inter-corporate deposit to Digjam Limited. Closing balance: Nil; previous year Rs.50 lacs; maximum outstanding at any point of time during the year: Rs.2.50 Crores; previous year: Rs.5.13 Crores. Further, the Company has not invited/accepted any Fixed Deposits under Chapter V of the Act and there are none outstanding as on March 31, 2016. There are no Related Party transactions entered into by the Company which may have a potential conflict of interest with that of the Company and to which Section 188(1) of the Act applies. Accordingly Form AOC-2 is not required to be annexed. As required under provisions of the Act and Regulation 23 of the SEBI Listing Regulations, 2015, all Related Party Transactions are placed before the Audit Committee for approval or for omnibus approval as necessary. The Statement of all such transactions entered into is placed before the said Committee for review. The Policy on Related Party Transactions as approved by the Board is uploaded on the Company’s website (http://www.xproindia.com/data/XILPolRelPartyTrans.pdf). There are no significant and material orders passed by the Regulators/Courts/Tribunals which impact the going concern status of the Company and its future operations. The Audit Committee meets requirements of Section 177 of the Act and Regulation 18 of SEBI Listing Regulations, 2015; details of its composition are furnished in the Corporate Governance Report. There was no instance during the year where the Board did not accept any recommendation of the Audit Committee. The Company has a vigil mechanism for directors and employees to report genuine concerns in accordance with the Whistle Blower Policy; no employee is denied access to the Audit Committee in this regard. The said Policy provides for safe guards through Protected Disclosures against victimization of persons who use such mechanism, and is displayed on the Company’s website. The details of the whistle blower policy are also annexed herewith. Information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is annexed. The Company has set up a Committee to look into the complaints under The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013; no complaint relating to sexual harassment at the work place was received during the year. The Company has constituted a Committee on Corporate Social Responsibility (CSR), the details of which are furnished in the Corporate Governance Report. While the statutory requirements on spending are not applicable to the Company in view of loss/inadequate profit, small steps have always been taken by the Company for social and inclusive development in its local areas; however given the relatively small size of the units and their geographical spread, it has not been practical to yet undertake any significant projects beyond these. The CSR Policy of the Company is annexed herewith. Employees Stock Option ("ESOP") Schemes are implemented in accordance with SEBI Guidelines. Details of options granted earlier and presently outstanding along, with other particulars as required, are annexed hereto. DIRECTORS’ RESPONSIBILITY STATEMENT The CEO and CFO have certified the Financial Statements as per requirements of Regulation 17(8) of the SEBI Listing Regulations, 2015, which has been reviewed by the Audit Committee and taken on record by the Board. Having taken reasonable and bonafide care, pursuant to Section 134 (3)(c) of the Act, the Directors indicate that (i) in the preparation of the annual accounts the applicable accounting standards had been followed along with proper explanations relating to material departures; (ii) the Directors had 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 at the end of the financial year and of the loss of the Company for the year; (iii) the Directors had 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 had prepared the annual accounts on a going concern basis; (v) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and (vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. AUDITORS' OBSERVATIONS The observations of Statutory Auditors and Secretarial Auditors are routine and in the nature of general disclosures. AUDITORS M/s Deloitte Haskins & Sells, Chartered Accountants, had been appointed as the Statutory Auditors of the Company at the Seventeenth Annual General Meeting held on July 31, 2014 to hold office until the conclusion of the Twentieth Annual General Meeting of the Company i.e. for a term of three years. As provided in Section 139 of the Act, the said appointment is being placed for ratification at the forthcoming Annual General Meeting. Pursuant to the provisions of Section 204 of the Act, the Company had appointed Sri K. C. Khowala, Practicing Company Secretary, to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditors is annexed herewith. Cost Audit for the financial year ended March 31, 2016 is being carried out by M/s Sushil Kumar Mantri & Associates, Cost Accountants, appointed for the purpose. The Board of Directors of the Company on the recommendation of the Audit Committee, has appointed M/s Sushil Kumar Mantri & Associates, Cost Accountants, to conduct the audit of the cost records of the Company for the financial year ending March 31, 2017. In terms of Section 148 (3) of the Act, the remuneration payable to them is required to be approved at the forthcoming Annual General meeting. ACKNOWLEDGEMENTS We place on record our sincere appreciation of the valuable cooperation and support received at all times by the Company from all its Bankers, particularly the lead bank, State Bank of India, all concerned Government and other authorities and Shareholders. Relations with employees were generally cordial; we record our appreciation of contributions made by employees during the year For and on behalf of the Board Sidharth Birla Chairman Place ; New Delhi Date : May 5, 2016 |