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Pokarna

BSE: 532486|NSE: POKARNA|ISIN: INE637C01017|SECTOR: Ceramics & Granite
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Directors Report Year End : Mar '16    Mar 15

Dear Members,

The Directors take pleasure in presenting the 25th Annual Report with Audited Accounts for the year ended March 31, 2016.

FINANCIAL HIGHLIGHTS

Rs, In Lacs

Particulars

Standalone

Consolidated

2015-16

2014- 15

2015-16

2014- 15

Total income

19715.95

19593.36

39970.28

33350.81

Less-expenditure

16942.63

17061.48

31622.70

29809.59

Profit/(Loss) Before tax and extra-ordinary items

2773.32

2531.88

8347.58

3541.22

Total tax expenses

1048.51

906.39

1474.77

1197.03

Exceptional / Extra-ordinary item

-

-

1751.95

(791.96)

Profit after tax and Extra-ordinary item

1724.81

1625.49

5120.86

3136.15

DIVIDEND

The Directors are pleased to recommend the dividend of '' 10 per equity share (which includes one-time special silver jubilee dividend of '' 7 per equity share) for the Financial Year ended March 31, 2016. The dividend is subject to the approval of the Members at the Annual General Meeting (“AGM”) scheduled on Friday, September 16, 2016. The total dividend pay-out works out to 35.95 % (Financial Year 2014-15: 11.45%) of the net profit for the standalone results.

The Register of Members and Share Transfer Books will remain closed from September 10, 2016 to September 16, 2016 (both days inclusive) for the purpose of payment of the dividend for the Financial Year ended March 31, 2016 and the AGM.

TRANSFER TO RESERVES

No amount is proposed for transfer to the general reserve. An amount of '' 1,724.81 Lacs is proposed to be retained in the profit and loss account.

OVERVIEW AND THE STATE OF THE COMPANY AFFAIRS

Your company couldn''t operationalize new quarries in granite due to delays in getting leases and environmental clearances. Added to this is competition from Brazilian exporters who are selling in record quantities to the USA, but at low prices and giving extended payment terms. The above factors and tepid demand from China for granite blocks contributed to almost flat performance in granite business. Apparel manufacturing and retailing business have been through several iterations in its model to make it work, but gestation period seems to be longer than what we envisaged. Given the favorable demand outlook, quartz surfaces business is expected to further improve capacity utilization and is well placed to benefit from the accelerated growth in the sector.

During the financial year under review, on a standalone basis, the Company achieved revenue of Rs, 19,292.68 Lacs as against Rs,19,062.94 Lacs in the previous year, thereby registering a growth of 1.21%. EBIDTA for the year under review was Rs, 5,025.74 Lacs, as against Rs,4,878.80 Lacs representing a increase of 3.01%. The net profit for the year March 31, 2016 increased from Rs, 1,625.49 Lacs to Rs, 1,724.81 Lacs, showing a growth of 6.11%.

On a consolidated basis, during the financial year under review, the Company achieved revenue of Rs, 39,432.27 Lacs as against Rs, 32,635.93 Lacs in the previous year, thereby registering a growth of 20.82%. EBIDTA for the year under review was Rs, 13,853.48 Lacs, as against Rs, 9,072.29 Lacs representing a growth of 52.70%. The net profit for the year March 31, 2016 increased from Rs, 3,136.15 Lacs to Rs, 5,120.86 Lacs, showing a growth of 63.29%. The increased bottom line translated into improved earnings per share from Rs, 50.58 in 2014-15 to Rs, 82.58 in 2015-16 on a consolidated basis.

The Company could achieve such remarkable growth and performance due to wholly owned subsidiary viz Pokarna Engineered Stone Limited implementing tighter operating controls, prudent raw material sourcing, increased capacity utilization, superior product mix and controlled overheads.

DIRECTORS’ RESPONSIBILITY STATEMENT

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and the reviews performed by the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company''s internal financial controls were adequate and effective during the financial year 2015-16. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

- that they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied their recommendations 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 at the end of financial year and of the profit of the Company for that period;

- they have taken proper and sufficient care to the best of their knowledge and ability, 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;

- they have prepared the annual accounts on a going concern basis;

- they 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

- A proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

Pursuant to AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial information of Pokarna Engineered Stone Limited (“PESL”), the wholly owned subsidiary company. The Company had no joint venture or associate during the financial year 2015-16.

As per the requirement of Section 129(3) of the Companies Act, 2013, a separate statement containing the salient features of the financial statements of the subsidiary in prescribed Form AOC-1 is attached to the financial statements of the Company. The Audited Accounts of the subsidiary companies will be available on the website of the Company - www.pokarna.com. The financial performance of PESL is given below:

During the financial year under review, PESL achieved revenue of Rs, 20,147.68 Lacs as against Rs, 13,573.59 Lacs in the previous year, thereby registering a growth of 48.43%. EBIDTA for the year under review was Rs, 9,106.64 Lacs as against Rs, 4,347.08 Lacs in the previous year, representing a growth of 109.49%. The net profit for the year March 31, 2016 increased from Rs, 3,397.73 Lacs to Rs, 1,511.02 Lacs, showing a growth of 124.86%.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Act, read with the Companies (Accounts) Rules, 2014 and Accounting Standard (AS)-21 on Consolidated Financial Statements, the Audited Consolidated Financial Statement is provided in the Annual Report.

CORPORATE DEBT RESTRUCTURING

PESL resorted to Corporate Debt Restructuring (“CDR”) mechanism in March 2012 due to the adverse business scenario. PESL achieved turnaround in very short period of about 4 years and has opted for voluntary exit from CDR mechanism. The exit from CDR mechanism is subject to approval by the competent authorities of respective banks and the CDR empowered group. This is one of the shortest turnarounds in the history of CDR mechanism. The provision for recompense amount of Rs, 1751.95 Lacs has been made in the Financials Statements of PESL for the year ended March 31, 2016. For further details, refer Note. 2.24 in Consolidated Financial Statements.

CDR exit will lead to greater operational and financial flexibility to PESL and it can go ahead with its growth plans.

CORPORATE GOVERNANCE

The Directors reaffirm their commitment to good corporate governance practices. During the year under review, the Company was in compliance with the provisions relating to corporate governance as provided under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“the Listing Regulations”). The compliance report is provided in the Corporate Governance section of this Annual Report. The auditor''s certificate on compliance with the conditions of corporate governance of the Listing Regulations is given in Annexure to this Report.

The Managing Director and Chief Financial Officer of the Company have issued necessary certificate pursuant to the provisions of Regulation 17(8) of the Listing Regulations and the same forms part of this Report.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

Management''s Discussion & Analysis Report for the year under review is presented in a separate section forming part of the Annual Report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, is not applicable to your Company for the financial year ending March 31, 2016.

CORPORATE SOCIAL RESPONSIBILITY

The Company is a caring corporate citizen and lays significant emphasis on the development of the host communities around which it operates. The Company, with this intent, has identified projects relating to Health Care, Sanitation, and Education during the year and initiated various activities in neighboring villages around its plant location. The Corporate Social Responsibility Policy is available on your Company''s website, http://www.pokarna.com/wp-content/uploads/2016/04/CSR-Policy.pdf.

The Annual Report on CSR activities is given in Annexure II to this Report

At the end of the year, there is an unspent CSR amount of Rs, 21,80,289/- Company proposes to accumulate the CSR funds, in order to take up the large projects, which would benefit the public at large.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mrs. Apurva Jain, retires by rotation and, being eligible, seeks re-appointment.

Based on the recommendation of the Nomination and Remuneration Committee, Mr. Rahul Jain was appointed as the Managing Director of the Company with effect from May 2, 2016, subject to the approval of the Members in the ensuing AGM.

The Board recommends the appointment of Mr. Rahul Jain and the re-appointment of Mrs. Apurva Jain. Items seeking your approval on the above are included in the Notice convening the AGM. Brief resumes of the directors being appointed / re-appointed form part of the Notice of the ensuing AGM.

During the financial year 2015-16, Mr. Gautam Chand Jain, Mr. Rahul Jain, and Mrs. Apurva Jain have not received any commission / remuneration from the subsidiary company.

FORMAL ANNUAL EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out an evaluation of its own performance, Committees, and performance of individual Directors. The performance of the Board, Committees, and individual directors was evaluated by seeking inputs from all Directors. The performance of the individual Directors, including Independent Directors performance and role of the Board / Committees were also discussed at the Board Meeting.

COMMITTEES OF THE BOARD AUDIT COMMITTEE

The Audit Committee comprises of Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Mr. Vinayak Rao Juvvadi and Mr. Mahender Chand, all Independent Directors. Further, details relating to the Audit Committee are provided in the Corporate Governance Report forming part of this Annual Report.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee(“NRC”) comprises of Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Mr. Mahender Chand, Independent Directors and Mr. Prakash Chand Jain, Non-Executive Director. Further, details relating to the NRC are provided in the Corporate Governance Report forming part of this Annual Report.

STAKEHOLDER RELATIONSHIP COMMITTEE

The Stakeholder Relationship Committee (“SRC”) comprises of Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Independent Directors and Mr. Rahul Jain, Managing Director. Further, details relating to the SRC are provided in the Corporate Governance Report forming part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Corporate Social Responsibility Committee(“CSRC”) comprises of Mr. Meka Yugandhar, Mr. Vinayak Rao Juvvadi, Independent Directors, and Mr. Gautam Chand Jain, Chairman and Managing Director. Further, details relating to the CSRC are provided in the Corporate Governance Report forming part of this Annual Report.

RISK MANAGEMENT POLICY

In terms of provisions of Section 134(3)(n) of the Companies Act, 2013, the Company has framed and put in place a Risk Management policy to mitigate the risks, both internal and external, which the Company is exposed to. The risk management policy of the Company is uploaded on the website of the Company i.e.http://www.pokarna.com/ wp-content/uploads/2014/07/Risk-Management-Policy.pdf

Business Risk Assessment procedures have been set in place for self-assessment of business risks, operating controls and compliance with the Corporate Policies. The Company manages, monitors and reports on the principal risks and uncertainties that can impact the ability to achieve the objectives. This is an ongoing process to track the evaluation of risks and delivery of mitigating action plans.

There is no identification of risks which in the opinion of the Board may threaten the existence of the Company. RELATED PARTY TRANSACTIONS

All transactions entered with Related Parties for the year under review were on arm''s length basis and there are no material related party transactions as per the provisions of Section 188 of the Companies Act, 2013 and the Rules made there under. Thus, disclosure in form AOC-2 in terms of Section 134 of the Companies Act, 2013 is not required. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions.

All Related Party Transactions are placed before the Audit Committee as also to the Board for approval. Transactions entered into pursuant to omnibus approval are placed before the Audit Committee and the Board for review and approval on a quarterly basis.

The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company http://www.pokarna.com/wp-content/uploads/2016/04/RPT-policy.pdf

Your attention is drawn to the Related Party disclosures set out in Note no. 2.27 of the Standalone Financial Statements.

INTERNAL FINANCIAL CONTROLS

The Board of Directors “Board” has devised systems, policies and procedures / frameworks, which are currently operational within the Company for ensuring the orderly and efficient conduct of its business, which includes adherence to Company''s policies and standard operating procedures, safeguarding assets of the Company, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. In line with best practices, the Audit Committee and the Board reviews these internal control systems to ensure they remain effective and are achieving their intended purpose. Where weaknesses, if any, are identified as a result of the reviews, new procedures are put in place to strengthen controls. These controls are in turn reviewed at regular intervals.

The Company''s internal financial control system comprises in-house Internal Audit Division, supplemented by internal audit checks from M. Murali Jaganmohan, Chartered Accountant, the Internal Auditors. The Company''s system of internal audit includes: covering quarterly verification of inventory, a monthly review of accounts and a quarterly review of critical business processes. The Internal Auditors also concurrently audit the majority of the transactions in value terms.

To further strengthen the legal compliance process, the Company is in final stages of implementing web based comprehensive legal compliance tool that tracks compliances across factories, mines and other places of business. This tool drills down from the CMD to the executive level person who is responsible for compliance. This tool when fully implemented will automate the compliance process and will generate alerts for proper and timely compliance. The tool is expected to be made fully operational during FY 2017.

Due to the limitations inherent in any risk management system, the process for identifying, evaluating, and managing the material business risks is designed to manage, rather than eliminate risk. Besides it is created to provide reasonably, but not absolute assurance against material misstatement or loss.

Since the Company has strong internal control systems which get further accentuated by review of SEBI Regulations, Companies Act, 2013, the CMD and CFO give their recommendation for strong internal financial control to the Board.

Based on the information provided, nothing has come to the attention of the Directors to indicate that any material breakdown in the function of these controls, procedures or systems occurred during the year under review. There have been no significant changes in the Company''s internal financial controls during the year that have materially affected or are reasonably likely to materially affect its internal financial controls.

There are inherent limitations to the effectiveness of any system of disclosure, controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their objectives. Moreover, in the design and evaluation of the Company''s disclosure controls and procedures, the management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

AUDIT AND AUDIT REPORTS STATUTORY AUDITORS

Pursuant to the provisions of Section 139 of the Act and the Companies (Audit and Auditors) Rules, 2014, M/s. S. Daga & Co., Chartered Accountants ( Reg. No. 000669S), the Statutory Auditors of the Company, hold office up to the conclusion of the ensuing AGM and are eligible for re-appointment. The consent of the Auditors and certificate u/s 139 of the Act have been obtained from each of the Auditors to the effect that their re-appointment, if made, would be in accordance with the prescribed conditions and that they are eligible to hold the office of the Auditors of the Company. Auditors'' Report does not contain any qualification, reservation or adverse remark. With regard to observation on non-payment of advance tax for the financial year 2015-16, Company shall pay the same on or before the due date of filing of return of income, pursuant to Section 139 of Income Tax Act, 1961.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, as amended, Notifications/ Circulars issued by the Ministry of Corporate Affairs from time to time, your Board has appointed M/s. DZR & Co., Cost Accountants, Cost Accountants, Hyderabad, as the Cost Auditors to conduct the cost audit of the quarrying operations of the Company for the financial year 2016-17 at a remuneration as mentioned in the Notice convening the AGM.

SECRETARIAL AUDITORS

During the year, Secretarial Audit was carried out by Mr. K.V. Chalamareddy Practicing Company Secretary, the Secretarial Auditor of the Company for the financial year 2015-16. There were no qualifications, reservations or adverse remarks given by Secretarial Auditors of the Company. The detailed report on the Secretarial Audit is appended as an Annexure IV to this Report.

DISCLOSURES

VIGIL MECHANISM / WHISTLEBLOWER POLICY

Your Company has established a robust Vigil Mechanism for reporting of concerns through the Whistleblower Policy of the Company. Adequate safeguards are provided against victimization to those who avail of the mechanism and access to the Chairman of the Audit Committee in exceptional cases is provided to them. The details of the Vigil Mechanism is also provided in the Corporate Governance Report and the Whistleblower Policy has been uploaded on the website of the Company http://www.pokarna.com/wp-content/uploads/2014/07/Whistle-Blower-Policy.pdf.

MEETINGS OF THE BOARD

The Board of Directors of your Company met six times during the year (including the separate meeting of independent directors) to deliberate on various matters. The meetings were held on May 25, 2015, July 22, 2015, September 16, 2015, October 29, 2015, February 08, 2016 and March 29, 2016. Further details on the Board of Directors are provided in the Corporate Governance Report forming part of this Annual Report.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans given, investments made, guarantees given and securities provided and investments covered under the provisions of Section 186 of the Act are covered in the Note 2.27 to the Financial Statements.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information relating to the conservation of energy, technology absorption and foreign exchange earnings and outgo, as stipulated under Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014, is given in Annexure ‘V'' to this Report.

EXTRACT OF ANNUAL RETURN

The extract of annual return in Form MGT-9 as required under Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014 is given in Annexure ‘I'' to this Report.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THE FINANCIAL STATEMENT RELATES AND THE DATE OF THE REPORT

Except as disclosed elsewhere in this Report, no material changes and commitments which could affect the Company''s financial position have occurred between the end of the financial year of the Company and the date of this Report.

PARTICULARS OF EMPLOYEES

None of the employees of the company was in receipt of remuneration in excess of limits prescribed under Rule 5(2) read with Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The Disclosure required under Section 197(12) of Companies Act 2013 read with the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is given in Annexure ‘III'' to this Report.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

As required by the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has formulated and implemented a policy on prevention of sexual harassment at the workplace with a mechanism of lodging complaints. During the year under review, no complaints were reported to the Committee.

DEPOSITS

During the year under review, the Company has not accepted or renewed any amount falling within the purview of provisions of Section 73 of the Companies Act, 2013 (the Act) read with the Companies (Acceptance of Deposits) Rules, 2014. Hence, the requirement for furnishing details of deposits which are not in compliance with Chapter V of the Act is not applicable.

HUMAN RESOURCES

Your Company believes that Human Resources will play a significant role in its future growth. With an unswerving focus on nurturing and retaining talent, your Company provides avenues for learning and development through functional, behavioral and leadership training programs, knowledge exchange conferences, communication channels for information sharing to name a few.

GENERAL

The Company has adopted the policies in line with new governance requirements including the Policy on Related Party Transactions, Policy on Material Subsidiaries, CSR Policy and Whistleblower Policy. These policies are available on the website of the Company at www.pokarna.com.

As on March 31, 2016, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity.

There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations.

ACKNOWLEDGMENT

Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to attain this position. The Board places on record its appreciation for the support and co-operation your Company has been receiving from its Suppliers, Distributors, Business partners and others associated with the Company. It will be the Company''s Endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and cooperation with each other, consistent with client interests.

The Directors also take this opportunity to thank all Investors, Customers, Vendors, Banks, Government and Regulatory Authorities and Stock Exchange, for their continued support.

For and on behalf of the Board

Sd/-

Gautam Chand Jain

Date : May 30, 2016 Chairman & Managing Director

Place: Secunderabad (DIN: 00004775)

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