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Ador Fontech

BSE: 530431|ISIN: INE853A01022|SECTOR: Electrodes & Graphite
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Directors Report Year End : Mar '18    Mar 17

The Directors are delighted to present the 43rd Annual Report on the business operations of the Company and the financial statements for the year ended March 31, 2018.

At the outset, the year 2017-18 will remain historic with the introduction of GST (Goods and Services Tax), which subsumes many of the indirect tax legislations, thereby enabling simplified structures and easier compliances. Coupled with this, in terms of the mandate of the Ministry of Corporate Affairs and Listing Requirements, the financial statements for the year ended March 31, 2018 have been prepared in accordance with the Indian Accounting Standards (Ind-AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014. The estimates and judgements relating to the financial statements are made on a prudent basis, so as to reflect in a true and fair manner, the form and substance of transactions and reasonably present the Company''s state of affairs as at March 31, 2018 besides profits and cash flows for the year ended on that date.

FINANCIAL HIGHLIGHTS Rupees In Lakhs

Details

Standalone

Consolidated

2017-18

2016-17

2017-18

2016-17

Revenue

15,474

14,890

15,602

14,924

EBITDA*

1,728

1,635

1,535

1,413

Finance cost/Interest

-

-

15

12

Depreciation

302

326

346

376

Operating Profit

1,426

1,309

1,174

1,025

*EBITDA - Earnings before interest, tax, depreciation and amortisation

DIVIDEND

The Directors are happy to recommend a dividend of Rs. 3/- (rupees three only) per share, being one hundred and fifty percent and same as in the previous year.

TRANSFER TO RESERVES

The Directors propose to transfer rupees one crore, same as in the previous year to the General Reserve.

REVIEW OF BUSINESS OPERATIONS

Standalone

During the first quarter of the financial year, there was deferment of revenue, with most customers and dealers opting to take a very conservative approach during the transition phase to the Goods and Services Tax (GST). Nonetheless, to a great extent this was made up in the balance of the quarters and the Company surpassed its previous year’s achievement, both in terms of revenue and profitability.

Further, the economy has begun to rebound and it is hoped that it may have a positive impact on the business of the Company, besides internal improvement measures such as upgradation of Enterprise Resource Management (ERM) and robust Performance Management System (PMS), are believed to provide enhanced value addition to ensure long term sustained development and growth.

Consolidated

There has been a reasonable enhancement in the growth of 3D Future Technologies Private Limited (3DFT).

The business has expanded geographically and also in terms of the number of orthodontist associates. The total investment in equity in 3D Future Technologies Private Limited stood at rupees six crores and fifty lakhs as at March 31, 2018 of which rupees two crores and fifty lakhs was funded by Ador Fontech Limited during the financial year 2017-18. The Company has also provided lien mark on its investments to facilitate 3DFT to manage its working capital and remain self-sustaining.

DISINVESTMENT OF DORMANT BUSINESS UNITS

The Company owned three units/galas in Ashok Service Industrial Estate, Mumbai. The place where the units were situated was not congenial for business operations and hence the Company had to re-locate its divisional operations to a new business centre. The existing three non-operational/dormant business units/galas admeasuring 300 sq.ft. each were sold for rupees one crore and thirty nine lakhs and profit thereon has been accounted under ‘other income’. Details of transactions being in compliance of Section 179 and 180 of the Companies Act, 2013 and within the permissible limits of the Board (with investment being less than twenty percent of the net-worth of the Company), information was disseminated through the BSE portal under corporate announcement, vide Regulation 30 of SEBI (LODR) Regulations, 2015 dated December 2, 2017 before undertaking the transactions.

BOARD AND ITS COMPOSITION

The current policy is to have an appropriate mix of Executive and Independent Directors with distinctiveness in the functions of governance and management. At present, there are six Members on the Board.

Amongst the Non- Executive Directors, three of them are Independent and one woman Director. They represent varied fields of eminence including legal, marketing, technical, organisational development etc.

The Board and Audit Committee had met six times while Stakeholder Relationship Committee, Corporate Social Responsibility Committee, Management Development, Nomination and Remuneration Committee had met five times during the financial year 2017-18.

As required under the provisions of sub-section (3) of Section 178 of the Companies Act, 2013, the Company has adopted policies for Director’s appointment and remuneration.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013 the Directors affirm the following:

- In the preparation of Annual Accounts, the applicable accounting standards have been followed, along with proper explanations relating to material departures, if any.

- The Directors have selected applicable accounting policies and applied them consistently, as also have made judgements and estimates that are reasonable and prudent, to give a true & fair view of the state of affairs as at the end of the financial year and of the profits of the Company for that period.

- The Directors have taken proper and sufficient care:

(i) for maintenance of adequate accounting records in accordance with the provisions of the Companies Act.

(ii) for safeguarding the assets of the Company.

(iii) for preventing/detecting fraud and other irregularities.

- The Directors have prepared annual accounts on a going concern basis.

- The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls in the opinion of the Board are adequate.

- The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and have been operating effectively.

DIRECTORS

Mrs. N Malkani Nagpal will retire by rotation at the ensuing Annual general meeting and is eligible for re-appointment. Further, all three Independent Directors have provided declaration that they meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013. Further, in terms of Section 149 none of the relatives of an Independent Director are:

- Indebted to the Company, its holding, subsidiary or associate company or their Promoters or Directors.

- Have given any guarantee or provided any security in connection with the indebtedness of any third person to the Company, its holding, subsidiary or associate company or their Promoters or Directors, at any time during the preceding financial years or during the current financial year.

DETAILS OF CHANGES IN DIRECTORS AND/OR KEY MANAGERIAL PERSONNEL

There were no changes in the Board during the financial year 2017-18.

AUDIT COMMITTEE RECOMMENDATIONS

The Board has accepted all the recommendations of the Audit Committee and hence no further explanations have been provided for in this Report.

PERFORMANCE EVALUATION

The policy and procedure of evaluation is categorised into two folds:

- Board and its Members

- Employees of the Company

Evaluation of the Board is undertaken in terms of achievement of set agreed targets comprising amongst others:

(i) Business strategies

(ii) Corporate budget

(iii) Capital expenditure

(iv) Performance of products

(v) Committee wise reviews

(vi) Other financial and business parameters

Each of the Board Member contribute in terms of their expertise and undertake think-tank-measures for organisational development, legal and compliance requirements, development of wholly owned subsidiary etc. The Board is confident that collectively and individually best possible efforts have been drawn.

Senior management of the Company and all other employees including shop floor personnel have been covered under the gamut of Performance Management System (PMS). This encompasses setting of corporate goals at the beginning of the year and synchronising corporate goals with departmental and individual goals. At the end of the year appraisal is conducted and percentage performance is arrived, which is mapped to a band and based on the band, compensation gets determined. The whole process is devoid of any bias and employees are provided freedom to work with their role and goal congruence aligned.

INTERNAL CONTROL SYSTEMS

The Company has in place well defined and adequate internal controls including financial controls commensurate with the size of the Company and the same has been operating effectively. The policies and procedures have been designed to ensure proper and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, as also accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has appointed external Auditors to conduct internal audits. Observations emanating from the reports are discussed, analysed and solutions are facilitated by the Board and Management team through - Plan, Do, Check and Act - approach. Further, the Statutory Auditors have also carried out an audit and their report on internal financial controls forms part of the Annual Report.

AUDITS

Statutory Audit

In respect of the financial year 2017-18, there are no qualification(s) or reservation(s) or adverse remark(s) or disclaimer(s) specified in the audit reports. Hence explanations or comments on the same do not become applicable.

Secretarial Audit

The Secretarial Audit Report for the financial year 2017-18 forms part of the Annual Report.

Cost Audit

The Company maintains cost accounting records and has cost control measures in place. As per best practices, the Company suo motto ensures conduct of cost audit.

Internal Financial Controls

Quarterly audits at the corporate, manufacturing units and major business locations are being conducted to ensure internal financial controls are adhered effectively.

During the year under review, neither the Statutory Auditors nor the Secretarial Auditor has reported to the Audit Committee under Section 143(12) of the Companies Act, 2013 any instance of fraud committed against the Company by its officers or employees, the details of which need to be mentioned in the Board’s report.

AUDITORS

Statutory Audit

The Board recommends ratification of appointment of Statutory Auditors, M/s. Srinivas and Subbalakshmi, Chartered Accountants (Firm Registration No. 011350S), having office at No. 237, 2nd cross, Cambridge Layout, Halasuru, Bengaluru 560 008. Further, the audit firm in compliance of law, has consented to continue with the assignment.

Secretarial Audit

The Board has appointed Ms. Manjula Narayan, Company Secretary (ACS Membership No. 28374 & CP No.10150), having office at No.22/A, 4th Cross, Venkateshwara Theatre Road, Devasandra, Krishnarajapuram, Bengaluru - 560 036 as the Secretarial Auditor of the Company for the financial year 2018-19.

Cost Audit

M/s. Rao, Murthy and Associates, Cost Accountants (Firm Registration No. 000065) having office at 23/33 Surveyor’s Street, Basavanagudi, Bengaluru 560 004 have been appointed as the Cost Auditor and resolution for ratification of remuneration have been placed before the Members.

JOINT VENTURE AND SUBSIDIARY

In terms of intimation provided to the (i) Stock Exchange vide Regulation 30 of SEBI (LODR) Regulations, 2015 dated January 30, 2017.

(ii) Ministry of Corporate Affairs/Registrar of Companies — MGT-14 — SRN G52452992 and

(iii) As informed in the Annual Report of 2016-17, the Company has started the process of exiting from the joint venture — Dualrank Fontech (M) Sdn. Bhd. To reiterate, the exit was essential to stop further and future recurring losses as also to focus on the Indian market, where potential is on an uphill. The process of exit is expected to be completed during the financial year 2018-19. On closure, the Company will file necessary documents, subject to the consent of the Board, with the Reserve Bank of India, which had facilitated investment under automatic approval route, in terms of unique identification number (UIN BGJAZ20120643). It may also be pertinent to note that as per Ind-AS fair value requirements, the Company has already provided for in its books of accounts towards equity (rupees seventy six lakhs) and loan including interest (rupees two hundred and nine lakhs), thereby ensuring that implication of financial requirements has been fully addressed. Further, with neither controlling interest nor an investment proposition subsisting as at the beginning of the financial year, consolidation of accounts has not been warranted.

As far as 3D Future Technologies Private Limited (3DFT), a strong base has been set and it is deemed that in the world over, 3D printing will be the in-thing of the future and the Company deems that it has an early advantage of entry in to this segment. To recapitulate, 3DFT has been formed as a Private limited company (CIN U74999MH2015PTC261114) with entire contribution to equity subscribed by Ador Fontech Limited, in terms of Section 179(3)(h)) read with sub-clause (e) of the Companies Act, 2013. Further, in terms of Section 179(3)(f) read with the Companies (Meetings of the Board and its Powers) Rules, 2014; the Company has provided lien by way of guarantee to the borrowings effected by 3DFT, of which charge has been registered with the Ministry of Corporate Affairs (MCA) vide ID no. 100038046 dated Oct 29, 2015 in favour of the HDFC Bank Limited.

PRODUCTS

The Company’s products are manufactured to international standards with adherence to quality systems and marketed under registered trade marks (TM).

FIXED DEPOSITS

The Company has not accepted fixed deposits and as such no amount was outstanding as on the date of the Balance Sheet.

LIQUIDITY

During the last few years, the Company has been funding 3D Future Technologies Private Limited in tranches, besides serving its own capex requirements. Further, all efforts are being made to ensure that debtors collection remains speeded up and payment towards its suppliers and creditors are maintained well on time. As always, the Company has endeavoured to maintain annual employee compensation by way of investment in fixed deposits and investments in mutual funds are earmarked for dividend payout and funding towards capital expenditure.

PARTICULARS OF LOANS, GUARANTEE AND INVESTMENTS

In the financial year 2017-18, the Company made an equity investment of rupees two crores and fifty lakhs in its wholly owned subsidiary — 3D Future Technologies Private Limited.

Inter-corporate-deposit (ICD) to Ador Powertron Limited (APL) was facilitated during the year, of which principal along with interest was duly repaid. The reckoning of interest was a clear four percent above the bank rate and safety of investment was covered through legal documentation, entailing rights over the assets of APL next only to their banker’s charge. Details of ICD was duly filed with the Registrar of Companies/Ministry of Corporate Affairs vide SRN G52452992 dated September 8, 2017.

Further, while details about APL are available on the website, it may be pertinent to state that APL is into digital electronics. They are a leading manufacturer of high voltage rectifier and transformer sets, power solution provider and design customised equipment. They have been in operation since 1995. The purpose for which ICD was requested by APL was to bridge finance their short term working capital requirements.

Note: Aggregate of investments and loans provided are within the powers and limits specified under Section 179, 185 and 186 of the Companies Act, 2013.

TRANSACTIONS WITH RELATED PARTIES

Transactions with related parties are in the ordinary course of business and on an arm’s length basis. The same is based on legal opinion(s), approval/ratification of the Audit Committee (on a quarterly basis) and subject to the compliance of transfer pricing requirements.

Details of related parties and transactions executed in aggregate with them during the financial year, forms part of the financial statements.

MATERIAL CHANGES, COMMITMENTS & ORDERS

There has been no significant material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report. There were no significant orders passed against the Company, by the Regulators or Courts or Tribunals, impacting the going concern status and Company’s operations in the future.

EMPLOYEES AND WORKPLACE CULTURE

The Company takes pride in the commitment, competence and dedication of its employees in all areas of business operations. Industrial relations with the employees of the Company continue to be harmonious and cordial. The Company is an equal opportunity employer and consciously strives to build a work culture that promotes dignity of all employees irrespective of caste, creed, gender and socio-economic status.

The Company has vigil mechanism (whistleblower) to provide a channel to report genuine concerns about unethical behaviour, actual or suspected fraud or violation of Code of Conduct. During the financial year 2017-18 there were no grievances or complaints received in this regard.

The Company is committed to adhere to the highest standards of ethical, moral and legal conduct of business operations.

POLICY ON PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company’s Policy on Prevention of Sexual Harassment at workplace is in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed thereunder. Internal Complaint Committee has also been set up to redress complaints received regarding sexual harassment. During the financial year 2017-18, there were no complaints received under this category. Further, the Company is committed to provide a safe and helpful work environment to all employees.

HEALTH AND SAFETY

Health and safety of every employee is one of the essential parameters of the organisation. Placards are displayed at vantage points, both in English and Vernacular, including pictorial representations to ensure awareness regarding safety. In respect of the factories/business units, the Chief Operating Officer (COO) and Plant-in-charge(s)/Unit head(s) will jointly be responsible to ensure industrial and safety law compliance(s). The Company makes available necessary health and safety equipment to its employees and there are no let or hindrance whatsoever on this account. The ‘Health and Safety’ policy also places a high personal responsibility on every individual employee of the Company at all levels to ensure safe working conditions

RISK MANAGEMENT

The Company has formulated a ‘Risk Management Policy’ to identify, reduce and prevent undesirable outcomes and to review past incidents and implement changes to prevent or reduce future occurrence, in the day to day operations of the Company. Some of the risks that the Company is exposed to include:

(i) Financial risks

- Risk on exchange rate fluctuations — While the Company does not have a hedging policy, it ensures that the duration between purchase and payment/remittance are kept close, thereby purchase decisions are more conscientious and need based.

- Risk of the wholly owned subsidiary’s deferment period to become financially independent — The Company is closely monitoring the activities of 3D Future Technologies Private Limited and is facilitating steady incremental growth.

(ii) Commodity price risks

The Company is exposed to the risk of price fluctuations of raw materials as well as finished goods. The Company manages these risks proactively through purchase and inventory management besides, robust vendor development practices.

(iii) Regulatory risks

The Company is exposed to risks attached to various statutes, laws and regulations. The Company is mitigating these risks through regular review of legal compliances carried out through internal as well as external com pli ance audits.

(iv) Human resource risks

Attract and retention of new incumbents into this profession is and will be a major challenge. The HR policies and practices are constantly re-aligned to meet the requirements of both new and existing employees.

INSURANCE

The Company has sufficient insurance coverage encompassing Assets, Inventories, Transit covering movement of materials, Vehicles etc.

Generally they are all risk cover policies. Besides, the employees are also covered for Personnel accident, Workmen compensation policy and Employees deposit linked insurance. It has been a general policy of the Company to have insurance cover renewed ahead of the commencement of each financial year.

DISCLOSURES

The following reports have been annexed/appended and forms part of the Directors’ Report:

- Management discussion and analysis report

- Corporate governance report

- Report on CSR activities (including details of activities undertaken and amount spent)

- Conservation of energy, technology absorption, foreign exchange earnings & outgo

- Particulars of arrangements/transactions made with related parties

- Particulars of employees

- Details of Subsidiary, Associates and Joint venture

All requisite policies including:

- Nomination and remuneration policy

- Extract of annual return have been duly uploaded on the website of the Company.

The web link is : ‘Ador Fontech Limited - Investors Info - Corporate Governance’ (http://www.adorfon.com/corporate-governance.html)

ACKNOWLEDGEMENTS

The Board wishes to place on record their deep sense of appreciation to the contribution made by employees at all levels and also extend special thanks to all the stakeholders and various Government agencies for their continued patronage and support.

For ADOR FONTECH LIMITED

A T MALKANI

Mumbai Chairman

May 29, 2018 DIN: 01585637

Source : Dion Global Solutions Limited
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