DIRECTORS' REPORT To, The Members, Your Directors have pleasure in presenting the 24th Annual Report and the Audited Financial Statements for the Financial Year ended March 31, 2015. State of the Company's Affairs During the crushing season 2014-2015 Company has crushed 302799 MTs of cane as against 298953 MTs of cane crushed during crushing season 2013-14.The average recovery during the year under review was 9.16% as against 9.10% during last crushing season. Your Directors are hopeful of better performance with increased revenue in the next year. Sugar Industry Overview For the fifth consecutive year the world sugar production has recorded a surplus with major contribution coming from Brazil and India. Due to excess production, the international price registered a huge fall. This made the Indian sugar exports unviable with export realization far below the domestic price. The scenario in India is no different with the production outstripping demand for the fifth year in succession. For the sugar season 2014-15 (Oct-Sep) the estimated production in India will be around 28 million tonnes (with Maharashtra, Karnataka and Uttar Pradesh being the main contributors) as against the static demand of around 24.80 million tonnes, leading to a current year surplus of around 3.20 million tonnes. With a carryover of 7 million tones of previous years, the overall surplus sugar will be around 10.20 million tonnes. This has led to a crash in sugar price resulting in prices nose diving to around Rs.21 to Rs.22 per Kg. During the year under consideration, the Andhra Pradesh Government has passed the purchase tax of Rs.60 per MT payable by the mills to farmers. Due to imposition of tax @ 5% on sale of sugar within and outside the state, which works out to Rs.120/- per quintal, sales to markets in Tamil Nadu & Kerala (major markets for Andhra Pradesh) has become unviable resulting in complete loss of market share to Karnataka and Maharashtra since these states do not levy VAT. With mounting cane outstanding of around Rs.20,000 Crores (all India) the mills are under severe financial stress. To overcome this situation the sugar industry through its representative body (SISMA/ ISMA) has made representation to the Central/State Govt. to ease the situation and recommended the following measures : a. The cane price should be proportional to the sugar price as recommended by Dr. C. Rangarajan Committee. b. Excise Duty should be removed on production of Ethanol which will greatly help in the mandatory blending with petrol and will also result in savings in foreign exchange. c. Outright purchase of sugar to the extent of 10% of 2014-15 production by the Central Government and paying for the same of around Rs.8500 Crores which will enable the mills to clear the huge cane outstanding. d. Restructuring of loans taken by mills by extending repayment periods with interest reduction. Listing of Equity Shares The Company's Equity shares are listed at the following Recognized Stock Exchange: BSE Limited, Phiroze JeeJeebhoy Towers, Dalal Street, Mumbai-400 001; The Company has paid the Annual Listing Fees to the said Stock Exchange for the financial year 2014-15. Subsidiaries, Associates and Joint venture The Company doesn't have any Subsidiaries, Joint Ventures and Associate Companies. Number of Meetings of the Board of Directors During the year ended March 31, 2015, Seven (7) Board Meetings were held. The dates on which the Board meetings were held are 20.05.2014, 30.05.2014, 14.08.2014, 26.08.2014, 15.11.2014, 26.11.2014 and14.02.2015. Directors Responsibility Statement as required under Section 134 of the Companies Act, 2013 Pursuant to the requirement under Section 134 of the Companies Act, 2013, with respect to the Directors' Responsibility Statement, the Board of Directors of the Company hereby confirms that: i. in the preparation of the Annual Accounts, the applicable accounting standards have been followed; ii. 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 Profit and Loss Account of the Company for that period; iii. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. the Directors have prepared the Annual Accounts for the Financial Year ended March 31, 2015 on a going concern basis; v. the Directors have 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 have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Statement on Declaration given by Independent Directors under Sub-Section (6) of Section 149 The independent directors have submitted the declaration of independence, as required pursuant to section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in sub-section(6). Nomination and Remuneration Committee The Nomination and Remuneration Committee consists of the following Directors namely Mr.Y Ravinder Reddy, Chairman, Ms. Sadhana Bhansali, Mr. Kishore Jhunjhunwala, P Brief description of terms of reference • identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down and recommend to the Board for their appointment and removal; • carry on the evaluation of every director's performance; • formulation of the criteria for determining qualifications, positive attributes and independence of a director; • recommend to the Board a policy relating to the remuneration of the directors, key managerial personnel and other employees; • formulation of criteria for evaluation of Independent Directors and the Board; • devise a policy on Board diversity; and • any other matter as the Board may decide from time to time. P Nomination and Remuneration policy The objectives of the Policy 1. To lay down criteria and terms and conditions with regard to identifying persons who are qualified to become Directors (Executive and Non-Executive) and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration. 2. To determine remuneration based on the Company's size and financial position and trends and practices on remuneration prevailing in peer companies. 3. To carry out evaluation of the performance of Directors. 4. To provide them reward linked directly to their effort, performance, dedication and achievement relating to the Company's operations. 5. To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons and create competitive advantage. Loans, Guarantees or Investments under Section 186 The company has not given any Loans, Guarantees, and made Investments during the Financial Year ended on March 31, 2015 in compliance with the provisions of Section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014. The company has invested Rs.125,000,000 in Prudential Ammana Sugars Ltd. and Rs.125,000,000 in Discovery Infoways Ltd. Particulars of Contracts or Arrangements with Related Parties Referred to in Sub-Section (1) of Section 188 During the year under review there are no contracts / arrangements / transactions entered by the Company during the financial year with related parties and do not attract the provisions of Section 188 of the Companies Act, 2013. Transfer of Amount to Reserves The Company doesn't propose to transfer any amount to the General Reserve for the Financial Year ended 31st March, 2015. Dividend The Board of Directors of the Company could not recommend Dividend for the financial year ended March 31, 2015. However, the Board of Directors of the Company has recommended payment of dividend to the share holders of the 16% Cum Redeemable Preference Shares at the appropriate time. Extracts of Annual Return The Extracts of Annual Return is prepared in Form MGT-9 as per the provisions of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014 and the same is enclosed as Annexure - 1 to this Report. The conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to provisions of Section 134(3)(m) of the Companies Act, 2013 (Act) read with the Companies (Accounts) Rules, 2014 Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is prepared and the same is enclosed as Annexure - 2 to this Report. Risk Management Committee Philosophy The Board has constituted Risk Management Committee to formulate a Risk Management Policy for dealing with different kinds of risks attributable to the operations of the Company outlining different kinds of risks and risk mitigating measures to be adopted. The Board shall be responsible for framing, implementing and monitoring the risk management plan of the Company. The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat the risk. The Risk management procedure will be reviewed by the Audit Committee and Board of Directors on a Quarterly basis at the time of review of Quarterly Financial Results of the Company. Mechanism for Evaluation of Board Evaluation of all Board members is done on an annual basis. The evaluation is done by the Board, Nomination and Remuneration Committee and Independent Directors with specific focus on the performance and effective functioning of the Board and Individual Directors. A. Criteria for evaluation of Board of Directors as a whole i. The frequency of meetings; ii. The length of meetings; iii. The administration of meetings; iv. The number of committees and their roles; v. The flow of information to board members and between board members; vi. The quality and quantity of information; and vii.The Disclosure of Information to the stakeholders. B. Criteria for evaluation of the Individual Directors i. Ability to contribute and monitor corporate governance practices; ii. Ability to contribute by introducing best practices to address top management issues; iii. Participation in long term strategic planning; iv. Commitment to the fulfillment of director obligations and fiduciary responsibilities; v. Guiding strategy; vi. Monitoring management performance and development; vii. Statutory compliance & Corporate governance; viii. Attendance and contribution at Board /Committee meetings; ix. Time spent by each of the member; and x. Core competencies. Directors Mr. Kurra Subba Rao, Director of the Company retires by rotation and being eligible himself offer for re-appointment. Mr. Maheswaran Nair Paramupillai, Director of the company has resigned from the board with effective from 10.04.2015 Details of Directors or Key Managerial Personnel who were appointed or have resigned during the year The shareholders of the Company have re-appointed Mr. Y. Ravinder Reddy, Mr. Kishore Jhunjhunwala, Mr. P.M. Nair and appointed Ms. Sadhana Bhansali as an Independent Director of the Company for a period of 5 years with effect from September 30, 2014. Mr. Pradeep Kumar Baid has been designated as Chief Financial Officer of the Company pursuant to provisions of Section 203 of the Companies Act, 2013. Deposits The Company has not accepted any deposits from the public in terms of Section 73 of the Companies Act, 2013. Statutory Auditors At the Annual General Meeting held on September 30, 2014, Laxminiwas & Jain, Chartered Accountants (Firm Registration No. 001859S), Hyderabad, were appointed as Statutory Auditors of the Company to hold office for a period of three years i.e., till the conclusion of the 26th 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 the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the said appointment of Laxminiwas & Jain, Chartered Accountants Hyderabad, as statutory auditors of the Company is placed for ratification by the Shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if their appointment is ratified, it would be in accordance with the provisions of Section 141 of the Act. The Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Internal Auditors The Board of Directors of the Company has appointed Mr. Pradeep Kumar Baid to conduct Internal Audit of the Company for the Financial Year ended 31st March, 2015. Audit Committee There is no such incidence where Board has not accepted the recommendation of the Audit Committee during the year under review. Corporate Governance A separate report on Corporate Governance and Management Discussion and Analysis is annexed as part of the Annual Report along with the Auditor's Certificate on its compliance. Vigil Mechanism The Board of Directors have adopted Whistle Blower Policy. The Whistle Blower Policy aims at conducting the affairs of the company in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy. A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud, or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases. Secretarial Auditor Report As per the provisions of Section 204 of the Companies Act, 2013, the Board of Directors have appointed M/s R.N.Goswami & Co., Company Secretaries as Secretarial Auditors to conduct Secretarial audit of the company for the Financial year ended on March 31, 2015. Secretarial Audit Report issued by Mr. R.N.Goswamy, Proprietor of M/s R.N.Goswami & Co., Company Secretaries in form MR-3 is enclosed as Annexure - 3 to this Annual Report. There are no qualifications in Secretarial Audit Report. Statement of particulars of appointment and remuneration of managerial personnel The Statement of particulars of Appointment and Remuneration of Managerial personnel as per Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure - 4 to this Annual Report. Insurance All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. Details in respect of adequacy of internal financial controls with reference to the Financial Statements 1. The Company has set internal control systems to maintain accurate and complete accounting records, to safeguard its assets, to prevent and detect any frauds and errors. 2. The Board of Directors of the Company have adopted various policies like Related Party Transactions Policy, Fixed Assets Policy, Whistle Blower Policy, Policy to determine Material Subsidiaries and such other procedures for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The names of companies which have become or ceased to be Company's Subsidiaries, joint ventures or associate companies during the year --- NIL – Change in the nature of business There is no change in the nature of business of the Company. The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future The Board of Directors of the Company at its meeting held in the Month of August, 2014 considered the proposal of the Chairman and passed a Resolution to sell, transfer, assign, deliver, novate or other dispose of the sugar business of the company to a prospective investor namely, Natems Sugar Limited subject to necessary approvals consents, permissions and sanctions from Banks, Institutions, and other Secured creditors in whose favor charge of the assets of the Company was existing and also, subject to the approval of shareholders. Accordingly the Resolution was put to vote through postal ballot in terms of Section 180(1)(a) of the Companies Act, 2013 to seek the assent/dissent of the shareholders. However, upon completion of the process of postal ballot (physical & e-voting) the company had received an ad-interim injunction order passed by the Hon'ble Court of II Additional Chief Judge, City Civil Court, Hyderabad against the petition filed by an investor pursuant to which the activities to follow the Postal Ballot were kept on hold. After the said injunction was vacated on 31.03.2015, the company had completed the rest of the activities relating to the postal ballot through which the said resolution was given assent by 99.96% of the shareholders who have participated in the Postal Ballot. The Board of Directors of the Company during its meeting in November 2014 endorsed the view that there was an urgent need to make the operations and management of the Company more effective in terms of optimization of sugarcane yield and also recovery of sugar by making meaningful use of the skills of the employees and also improve the administrative management of the company. Accordingly, the company had engaged the services of Nanda Ventures Private Limited, a company which has extensive experience and expertise in operating and managing the sugar factories by entering into an Operation and Management Agreement on specific terms and conditions to ensure the desired results. Subsequently, in the month of April, 2015, after vacation of interim injunction and the Resolution was passed by the shareholders, the company had entered into a Business Transfer Agreement with Natems Sugar Limited whereby the Operations and Management Agreement signed with Nanda Ventures Private Limited stood terminated. Consequent upon signing of the Business Transfer Agreement, the operations of the company are being managed by Natems Sugar Limited as per the terms and conditions stipulated in the said Agreement. However, the transfer of the sugar business is not completed in all respects and the conveyance of the assets of the sugar business has not been executed owing to pendency of the Appeal, against the order passed by the lower court dismissing the ad-interim injunction in the Hon'ble High Court of Judicature at Hyderabad Material changes and commitments affecting the financial position of the Company During the year the board of directors proposed to transfer the Sugar business of the company to a prospective investor namely, Natems Sugar Limited subject to necessary approvals consents, permissions and the same was approved by the share holders However, the transfer of the sugar business is not completed in all respects and the conveyance of the assets of the sugar business has not been executed owing to pendency of the Appeal, against the order passed by the lower court dismissing the ad-interim injunction in the Hon'ble High Court of Judicature at Hyderabad Policy on Sexual Harassment The Company has adopted policy on Prevention of Sexual Harassment of Women at Workplace in accordance with The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the financial year ended 31st March, 2015, the Company has not received any Complaints pertaining to Sexual Harassment. Acknowledgement The Directors take this opportunity to place on record their sincere thanks to the Banks and Financial Institutions, Insurance Companies, Central and State Government Departments and the shareholders for their support and co-operation extended to the Company from time to time. Directors are pleased to record their appreciation of the sincere and dedicated services of the employees and workmen at all levels. On behalf of the Board of Directors for Prudential Sugar Corporation Limited Kurra Subba Rao Vinod Baid Whole Time Director Director (DIN 02552019) (DIN 00010142) Place : Hyderabad Date : 28.09.2015 |