Directors' "Report To, The Members, Your Directors have pleasure in placing the 42nd Director's Report along with the Audited Statement of Accounts for 18 months ended on 31st March, 2015. It is also pertinent to mention here that in terms of the requirement of section 2(41) of the Companies Act, 2013, the Company aligned its financial year from April- March. Hence, accounts for the 18 months started on 1st October 2013 to 31st March, 2015 are being placed. Further, subsequent financial years of the Company shall begin on 1st April and end as on 31st March. Overall Performance For the period of 18 months ended on 31st March, 2015, sales stood at Rs. 55044.84 Lacs (net of excise duty) against the Rs. 27258.79 (net of excise duty) of previous financial year 2012-13( 12months ended on 30-09-2013). During the financial year under review, the company had done trading of sugar for Rs. 1330.34 lacs whereas during the preceding financial year sugar trading was Nil). Profit after interest and depreciation stood at Rs. 901 Lacs as against the profit of Rs. 1279 Lacs in preceding year. Profit after tax for the 18 months ended March 31, 2015 was Rs.749 Lacs compared to profit of Rs. 1260 Lacs in the preceding year. Dividend Due to accumulated losses your directors have not recommended any dividend for the financial year ended 31st March 2015. Transfer to reserves: Performance of Divisions:- Sugar Division Crushing season till 31st March, 2015 consisted of two sugar seasons for 18 months for the Company. The company has crushed 183.48 Lacs qtls. of cane and the season ran for 263 days. Sugar sale was Rs.47441 lacs as against Rs.23249 lacs. Co-Generation: During the crushing season reported the company produced 16,44,42,230 KWH power and exported 9,82,95,057 KWH to UPPCL. Power sale was Rs.4668 lacs as against Rs.2395 lacs. Distillery During the 18 months ended as at 31-03-2015, Company Produced 167.48 Lacs BL of Rectified Spirit with a recovery of 21.12% which is better in comparison of preceding year production of 85.96 Lacs BL. with a recovery of 20.41% during preceding Financial Year 2012-2013 ( twelve months). Sale of RS and Country liquor were Rs.6475 lacs as against Rs.2587 lacs Reference to BIFR Under Section 15 and Other Applicable provisions of the Chapter III of the Sick Industrial Companies ( Special Provisos ) Act , 1985 As mentioned in the last report that due to erosion of the Net worth of the Company, the reference was registered with the Board for Industrial and Financial Reconstruction (BIFR) in terms of the provisions of the Sick Industrial Companies ( Special Provisions) Act , 1985 on 28-02-2013 on the basis of audited accounts for the year ended 30th September,2012. The reference made with BIFR is still pending Auditors M/s. Mehrotra & Mehrotra, Chartered Accountants, New Delhi, Auditors of the Company retires at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. They have furnished a certificate to the effect that their proposed reappointment, if made, will be in accordance within the limits specified u/s 139 of the Companies Act, 2013. Pursuant to the provisions of Section 139, 142 and other applicable provisions, of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 the existing Auditors can be re-appointed to hold office maximum up to the conclusion of 44th Annual general meeting of the Company, whereafter new Auditor shall be required to be appointed. Accordingly the Board propose for re-appointment of existing Auditors to hold office up to the conclusion of 44th Annual General Meeting for audit of financial statements for year ending at 31st March, 2017, subject to ratification their continuance by shareholders at annual general meeting. Auditors' Report The comments on the statement of account referred to in the report of the auditors are self-explanatory, and explained in the appropriate notes to the accounts. Secretarial Auditors M/s Amit Gupta & Associates, Practicing Company Secretaries were appointed as secretarial auditors of the Company for the year 2013-15 as required under Section 204 of the Companies Act, 2013 and Rules made thereunder. The secretarial audit report for FY 2013-15 forms part of the Annual Report (Annexure to the Directors' Report in Form MR. 3) and carries no qualifications, reservations, adverse remarks or disclaimers and hence no explanations are required. The Board has further appointed M/s Amit Gupta & Associates, Practicing Company Secretaries, as secretarial auditor of the Company for the financial year 2015-16. Cost Auditors The Central Government approved the appointment of M/s. Aman Malviya & Company, Cost Auditor, Lucknow as Cost Auditors for conducting Cost Audit for Sugar and Industrial Alcohol businesses for the 18 months ended 31st March 2015, report of which shall be submitted in due course of time The Board has approved their appointment for the year 2015-16 and their remuneration is subject to approval by the Company in the forthcoming Annual General Meeting. Directors At the ensuing Annual General Meeting Shri L.K. Jhunjhunwala and Shri Adiya Jhunjhunwala, Directors of your Company, retire by rotation u/s 152 of the Companies Act, 2013 and being eligible had offered themselves for re-appointment at the ensuing Annual General Meeting. Ms. Shruti Modi who was appointed as an Additional Director of the Company by passing a resolution by circulation on 30-03-2015, resigned on 28-05-2015. Further, Shri L.K. Jhunjhunwala, Chairman-cum- Director, Shri Aditya Jhunjhunwala, Managing Director, Shri Sanjay Jhunjhunwala, Jt. Managing Director and Shri S.C. Agarwal, Executive Director were appointed at the Annual General Meeting held on 19-03-2012 for a period of three years w.e.f. 1st March,2013 to 28th February,2015 and their term expire thereafter. After having been recommended by the Nomination & Remuneration Committee of the Company, the Board recommended their appointment in the Board meeting held on 14-02-2015 for a period of 5 ( five ) years w.e.f. 1st March,2015 to 29th February,2020. Mrs. Madhu Mathur were appointed as Independent Directors of the Company by the Board in their meetings held on 28-05-2015 and Mr. H.P. Singhania, Mr. S.K. Gupta, Dr. Kirti Singh and Mr. R.S. Shukla were appointed as Independent Directors of the Company by the Board in their meetings held on 11-08-2015 respectively, subject to approval of the shareholders at general meeting. In terms of Section 149, 150 and 152 read with Schedule IV and any other applicable provisions, if any of the Companies Act, 2013 and rules made thereunder and Clause 49 of the Listing Agreement, the approval of the shareholders is sought for their appointment as Independent Directors for a term of five consecutive years from the original date of appointment. The Board considers that their continued association would be of immense benefit to the Company and it is desirable to continue to avail their services. Public Deposits During the financial year ended 31-03-2015 for the period 18 of months, the company has not accepted any public deposits. Listing Agreement The equity shares of the company are listed with the Bombay Stock Exchange Limited and National Stock Exchange Limited and listing fees for 2015-16 had been duly paid. Directors' Responsibility Statement In pursuance of sub-section (5) of Section 134 of the Companies Act, 2013, in respect of Directors' Responsibility Statement, the Board of Directors confirms: i. that in the preparation of the annual accounts for the 18 months ended on March 31, 2015 the applicable accounting standard have been followed by the Company. ii. that the directors of the company have selected such accounting policies, applied them consistently, 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 at the end of the financial year and of the profit of the Company for the year ended on that date. iii. that the directors of the Company have taken proper and sufficient care for the maintenance of adequate accounting in accordance with provisions of the Companies Act, 2013, for safeguarding the assets of the company and for detecting fraud and other irregularities; and that the directors of the Company have prepared the annual accounts on a going concern basis. iv. that 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. v.that 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. Significant and material orders There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and the Company's operations in future. Audit committee and vigil mechanism Pursuant to requirement of section 177(1) of Companies Act, 2013 read with Rule 6 of the Companies (Meeting of Board and its Powers) Rules, 2014 and Clause 49 of Listing Agreement, your Company has already formed the Audit Committee, composition of which is covered under Corporate Governance report section of this Annual Report. The Vigil Mechanism of the Company, which also incorporates a Whistle Blower Policy in terms of the Listing Agreement, includes appointment of a Whistle Officer who will look into the matter, conduct detailed investigation and take appropriate disciplinary action. Protected disclosures can be made by a whistle blower through an e-mail, or dedicated telephone line or a letter to the Whistle Blower Officer or to the Chairman of the Audit Committee. The Policy on vigil mechanism and whistle blower policy will be uploaded very soon on the Company's website at the link: <http://www.kmsugar.com>. During the year under review, no employee was denied access to Whistle Blower Officer or Audit Committee. Extract of annual return Extract of Annual Return of the Company is annexed herewith in form no. MGT-9 as Annexure 7 to this Report. Internal financial controls The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. Risk management The Company aims to have a formalised and systematic approach for managing risks across the Company. It encourages knowledge and experience sharing in order to increase transparency on the key risks to the Company to the extent possible. This approach increases risk awareness, and ensures proper management of risks as part of the daily management activities. I During the year, the Company has constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in: II Reviewing and approving the Company's Risk Management Policy so that it is consistent with the Company's objectives; and III Ensuring that all the risks that the Company faces such as strategic, operational, financial, compliance and other risks are identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. The Risk Management Policy was reviewed and approved by the Committee. The policy on Risk Management will be uploaded very soon on the Company's website at the link: <http://www.kmsugar.com> The objective of the Company's risk management process is to support a structured and consistent approach to identify, prioritize, manage, monitor and report on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Company has introduced several initiatives for risk management including the introduction of audit functions and processes to identify and create awareness of risks, optimal risk mitigation and efficient management of internal control and assurance activities. Corporate social responsibility The Company strongly believes in concept of sustainable development and is committed to operate and grow its operations in a socially and environmentally responsible way. Our vision is to expand our operations whilst reducing the environmental impact of our operations and increasing the positive social impact on our community. As per the Companies Act, 2013, all companies with a net worth of Rs. 100 crore or more, or turnover of Rs. 1,000 crore or more or a net profit of Rs. 5 crore or more during any financial year are required to constitute a Corporate Social Responsibility (CSR) committee of the Board of Directors comprising of three or more directors, at least one of whom should be an independent director and such company shall spend at least 2% of the average net profits of the company's immediately preceding three financial years on CSR activities. The provision regarding CSR were not applicable on the Company during the period under report. The Company has duly constituted a Corporate Social Responsibility (CSR) Committee pursuant to the requirement of Section 135(1) of Companies Act, 2013 and the Rules made thereunder. Conservation Of Energy, Technology Absorption and Foreign Exchange and Outgo Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in Annx-1. Research and Development The details relating to Research and Development activities carried out by the company during the year are stated in annexure to this report. Particulars of Employees The disclosure as required under the provisions of Section 197 (12) of the Companies Act, 2013, read with Rule 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of the employees of the Company has been given in 'Annexure 2' and forms part of this Report. Corporate Governance As stipulated in Clause 49 of the Listing Agreement, a separate section on Corporate Governance forming part of the Directors' Report and Management Discussion & Analysis Report and the certificate from Practicing Company Secretary confirming the compliance of the conditions on Corporate Governance are included in the Annual Report. The Report on Corporate Governance is attached as Annexure-3 to this report. A certificate from M/s. Amit Gupta & Associates, Company Secretaries regarding compliance of conditions of Corporate Governance as stipulated under 49 of the Listing Agreement is also annexed to this report. Management Discussion and Analysis Report The Management Discussion and Analysis Report on the business and operations of the company is attached to this report as 'Annexure-4'. Industrial Relation The industrial relations have been cordial at all plants of the Company during the year. Subsidiary Company Your Company has a subsidiary a company viz. M/s. K.M. Energy Private Limited, incorporated on 01-122014 for setting up of Solar Power Project. There was no operational activities during the period under review. However, this company has loss Rs.6.77 lacs for the year ended 31-03-2015. Further, your Company had given a loan of Rs.285.00 lacs to it at interest @10%. In terms of proviso to section 139(3) of the Companies Act,2013, the salient features of the financial statements of the subsidiary is set out in the prescribed form (AOC-1) under Rule-5 of the Companies (Accounts) Rules,2014 as Annex.5 The consolidated financial statements presented by the Company include financial information of its subsidiary prepared in compliance with applicable Accounting Standards. The Company will make available the annual report of subsidiary Company upon request by any shareholder of the Company interested in obtaining the same. Pursuant to the provisions of section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiary, are available on the website of the Company. Number of meetings of the Board The Board met six times during the financial year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and the Listing Agreement. Policy on directors' appointment and remuneration The Company seeks to maintain an appropriate mix of executive and independent directors in order to maintain the independence of the Board and segregate the functions of governance and management. As at year end, the Board consists of 10 members, four of whom are Whole-time directors, five are Independent directors and one is a Nominee director. The Company has five independent directors and all are qualified personnel with requisite qualifications, experience, positive attributes and satisfy all the criteria as set out under Schedule IV of Companies Act, 2013. These appointees are only eligible for sitting fees for attending Board meetings and Committee meetings and other out of pocket expenses duly made for attending meetings of the Board or any committee of the Board thereof. Remuneration proposed for whole time directors is in accordance with the Remuneration Policy approved by Nomination and Remuneration Committee of the Board. Your Company, in compliance with section 178(1) of the Companies Act, 2013 read with The Companies (Meeting of Board and its Powers) Rules, 2014, has duly constituted a Nomination and Remuneration Committee. This committee is chaired by an independent director and formulates the criteria for determining qualifications, positive attributes, independence of a director and other matters. Appointment and the remuneration of Board members, key managerial personnel or one level below the Board level is fixed on the basis of the recommendation of the Nomination and Remuneration Committee made to the Board, which may ratify them, with or without modifications. Disclosures pursuant to the requirements of section 197(12) read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been made in Annexure 2 of this Board Report. Declaration by independent directors As per the requirement of section 149(7), the Company has received a declaration from every Independent Director that he or she meets the criteria of independence as laid down under section 149(6) read with rule 5 of the Companies (Appointment and Qualification of Directors) Rule, 2014 and Clause 49 of the Listing Agreement. Board evaluation Pursuant to the requirement of the Companies Act, 2013, a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. The Act states that the performance evaluation of the independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board as explained under the Corporate Governance section of this Annual Report. In a separate meeting of independent Directors, performance of non-independentdirectors was evaluated. Committees of the board Currently, the Board has 4 nos of committees. A detailed note on the Board and its committees is provided in the Corporate Governance Report section of this Annual Report. The composition of the committees and compliances, as per applicable Particulars of Loans, Guarantee or Investments As per the requirement of section 186(4) of Companies Act, 2013, particulars of loans given, investments made, guarantees given or securities provided along with the purpose for which the loan or guarantee orsecurity is proposed to be utilized by the recipient are provided in the standalone financial statements. The Company is in compliance with the limits as prescribed under Section 186 of Companies Act, 2013 read with rule 11 of the Companies (Meeting of Board and its Powers) Rules, 2014. Particulars of contracts or arrangements with Related Party The Company's policy on related party transactions may be accessed on the Company's website at <http://www.kmsugar.com>.. Particulars of contracts or arrangements with Related Parties referred in Section 188(1) of the Companies Act, 2013 is furnished in accordance with Rule 8(2) of the Companies (Accounts) Rules, 2014 is given Not to Accounts no.2.29-(12-D) also in Form AOC-2 as Annexure-6. Material changes and commitments affecting financial position between the end of the financial year and date of report No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. Acknowledgement Yours Directors place on record their acknowledgement and sincere appreciation of all the bankers and financial institutions for their continued assistance. They further appreciate and acknowledge with gratitude the co-operation and assistance received from all executives, staff and workmen of the Company For and on behalf of the Board of K. M. Sugar Mills Ltd. Sd/- L. K. Jhunjhunwala Chairman Date: 11.08.2015 Place: Lucknow |