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Goodricke Group Ltd.

BSE: 500166 | NSE: GOODRICKE | Series: NA | ISIN: INE300A01016 | SECTOR: Plantations - Tea & Coffee

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Annual Report

For Year :
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Director’s Report

Dear Members, The Directors have pleasure in presenting their Thirty-ninth Annual Report and Accounts for the year ended 31st December 2014. FINANCIAL RESULTS For the year ended 31st December 2014 2013 (Rs. in millions) GROSS SALES 6,001.63 5,783.10 PROFIT BEFORE TAXATION 290.39 486.18 Less: Provision for Taxation (net) 68.00 152.61 PROFIT AFTER TAX 222.39 333.57 Add: Profit brought forward from last year 47.85 48.67 270.24 382.24 APPROPRIATIONS: Dividend 97.20 97.20 Tax on Dividend 19.43 17.19 Transfer to General Reserve 110.00 220.00 Balance carried forward 43.61 47.85 The turnover for the year 2014 marginally increased by over 3.78% to Rs. 6,001.63 million from Rs5,783 million in the previous year essentially due to improved prices. OPERATIONS The total manufactured crop was slightly lower at 22.09 million kgs vis-a-vis 22.29 million kgs for 2013 on account of the severe drought in the early part of the year. Augmented irrigation facilities enabled the gardens to minimize crop loss vis-a-vis the rest of the region. Outsourced leaf production was higher than 2013 as concerted efforts were made in order to maximize this very remunerative operation. Withdrawal of monsoon by early October denied chances of a prolific backend harvest resultant of which the gardens were unable to attain the budgeted crop levels by minor margin. The increase in sale price did not substantially improve the profitability due to steep escalation in the cost of coal, fuel, oil, electricity, fertilizer, agrochemicals etc. Fresh wage agreements which would come into effect retrospectively from 1st April 2014 have also impinged on profitability levels in West Bengal gardens. All India tea production decreased by 1.33 percent to 1184 million kgs in 2014 against 1200 million kgs in 2013. The markets remained selective with the price levels of better quality teas maintaining and even surpassing 2013 levels by a fair margin. But the medium and plainer category of teas attracted only tepid demand resultant of which marks / gardens / producers who did not adhere to quality production were left at the mercy of market forces. Export markets were also selective with Iran especially being apprehensive of the adverse media reporting on proliferation of chemically tainted teas being produced in India. Nonetheless, the Company as a whole did manage to attain 2013 export levels in 2014 and the buoyant price levels attained in auction centers for all its marks did enable the Company to enhance its turnover over 2013. The Packet Tea Division continued to make inroads into the major established brands'' traditional domain and the newly launched Goodricke Khaass brand is currently recognized as a major rival to the established brands in the premium segment. As a part of our endeavour to adhere to global standards, four of our gardens in Dooars have been certified under the Rainforest Alliance regime. Goodricke is the first major tea manufacturer to attain this norm in Dooars. The certification of the balance gardens of Dooars will be pursued in the year ahead. The rest of the Dooars gardens are in the process of being certified under ISO 22000. The Company continues to avail Tea Board''s replanting/ rejuvenation subsidy schemes for replacement of old tea areas with quality planting material. These have been helpful in ensuring sustained growth and to improve productivity along with the quality profile of the Company. In terms of Corporate Governance disclosure under Clause 49 of the Stock Exchange Listing Agreement, the Management discussion and analysis report is given in annexure ''E'' forming part of the report. CORPORATE SOCIAL RESPONSIBILITY (CSR) Your Company is a constituent of Camellia Plc., U.K., one of the largest global producer of tea with interests in other plantation crop, agriculture, engineering and private banking. It is committed to CSR in its global operation. The Statement of Business Principles of the U. K. Principal, as well as norms followed by global bodies like Rainforest Alliance (RA) and Fair Trade Practices (FTP) are in place for environment sustainability. The policies adopted as standing operating procedures covers: Health & Safety Social Waste Management Environment Some of the major activities covered under the above groups are: Primary Hospitals at all gardens. Group Hospital with specialized equipment at Dooars, North Bengal Tracking of family health status at the gardens. Camps for sterilization, reconstructive surgery by overseas Doctors, eye surgery and child immunization programmes. Malaria prevention schemes for residents of Garden and adjoining villages. Primary schools at all gardens and buses for school children to go to the Secondary schools. Special School for making difference in the lives of physically challenged students at Siliguri. Self help centres for vocational training. Afforestation / vegetation on non- traditional tea areas in order to improve the Micro-environment. Scholarship scheme for meritorious students of the tea garden employees. Packing of teas by physically challenged students at The Indian Institute of Cerebral Palsy (IICP), as part of vocational training. Green initiative for sustainable operation through use of dual fired boilers to use woody biomass instead of coal thereby lowering consumption of carbon fuel and reducing methane emission. Water harvesting and Creation of Waterbodies to charge underground water table. Encourage use of smokeless chullas. DIVIDEND The Board recommends a dividend of Rs. 4.50/- per share (45%). Such dividend, on declaration, will be paid to those members recorded in the Registers of the Company at the close of business on 21st March, 2015, subject, however to the provision of Section 206A of the Companies Act, 1956/Section 126 of the Companies Act, 2013. FINANCE AND ACCOUNTS Overall increase in price have compensated to a certain extent the cost escalation of most of the inputs. However the major factor for lower profitability is on account of substantial shortage in the Retirement Funds due to the negative swing in the Bond yields coupled with the proposed increase in labour wages. COST AUDIT For the Current financial year beginning on 1st January 2015 and ending on 31st December, 2015, the Board of Directors, based on the recommendation of the Audit Committee, has appointed Messrs. Shome & Banerjee, Cost Accountants as the Cost Auditors of the Company to comply with the provisions of Section 148 of the Companies Act, 2013 read with Rule 14 of Companies (Audit and Auditors) Rules 2014, as may be applicable. As required under Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Audit & Auditors) Rules 2014, the remuneration payable to the Cost Auditors for this year ending 31st December, 2015 will be placed before the members at the ensuing Annual General Meeting for ratification. PROSPECTS Overall prospect of the tea business appears to be encouraging with strong demand for CTC teas. The Company is in process of replacing high cost coal with alternative fuels i.e., waste wood, bio-mass etc. Modernisation of spraying equipments are under process which will reduce costs as well as deployment on pest control which had been a major drain on revenues over the past decades. Barring unforeseen adverse weather conditions, to combat which, substantial investment on augmenting irrigation infrastructure has been undertaken, the Company is expected to strengthen its profitability in future years with upgraded factories and renewed tea areas. The slower off-take of Orthodox teas by Iran is a cause for worry as is the proposed sharp increase in wages and the continuing clamour for minimum wages in tea by some sections of the Unions. CORPORATE GOVERNANCE & AUDIT COMMITTEE Clause 49 of the Listing Agreement on Corporate Governance in terms of quarterly and annual results etc. were complied with during the year. A certificate from the Statutory Auditors of your Company regarding the compliance by the Company of the conditions stipulated under Clause 49 of the Listing Agreement is also attached with this report. The Audit Committee of the Board was set up in 1997 well before it became mandatory. The Committee has played an important role during the year. It co-ordinated with the Statutory Auditors, Internal Auditors and other key personnel of the Company and has rendered guidance in the areas of Corporate Governance, internal audit, finance and accounts. The Code of Conduct for the Directors and Senior management personnel is being complied with and Risk Profile Analysis is being carried out from time to time. In terms of Clause 49 of the Listing Agreement, disclosures under Corporate Governance are given in Annexure - ''F'' of the report. STAKEHOLDERS'' RELATIONSHIP COMMITTEE The Committee has met regularly in course of the year. With the compulsory dematerialization of the Company''s shares and electronic mode of transfers, postal despatches which led to usual complaints, have been minimized. At the year end 97.97% of the total shares were dematerialized with no unresolved pending investor grievances. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee recommends to the Board the remuneration Package of Directors, Key Managerial Personnel and other employees. PERSONNEL The Company has a large work force employed on tea estates which are located in remote areas away from towns and cities. Inspite of these isolated locations and disturbed political environment in some areas, the morale of the managerial staff and other personnel were high throughout the year. There were no major disruptions of work at the garden or any other establishment of the Company during the year. Your Directors place on record the co-operation received and dedication of all employees at the gardens and other establishments of the Company. PARTICULARS IN TERMS OF SECTION 217 OF THE COMPANIES ACT, 1956 The particulars of Conservation of Energy and Technology absorption in terms of Section 217(1)(e) are given in Annexures A and B. The particulars of employees attracting the provisions of Section 217(2A) are given in Annexure C. Directors'' Responsibility Statement, in terms of Section 217(2AA), is given in Annexure ''D''. All the Annexures form part of the Report. DIRECTORS In terms of the provisions of the Companies Act, and the Company''s Articles of Association, Mr. A. K. Mathur shall retire by rotation and being eligible, offers himself for reappointment. The Board has re-appointed Mr. Arun Narain Singh as Managing Director and CEO for a period of three years with effect from 1st January, 2015. The Board recommends the appointment/ re-appointment of the aforesaid Directors on the ensuing Annual General Meeting. Pursuant to Section 149 and other applicable provisions of the Companies Act, 2013 the Board of Directors is seeking appointment of Mr. K. Sinha, Mr. P. K. Sen and Dr. S. Kaul as Independent Directors for a term of five consecutive years i.e. upto the conclusion of the forty fourth (44) Annual General Meeting to be held in 2020. Details of the proposal for appointment of Mr. K. Sinha, Mr. P.K. Sen and Dr. S. Kaul have been mentioned in the statement pursuant to Section 102 of the Companies Act 2013 in the Notice of the Annual General Meeting. The aforesaid Directors fulfill the conditions specified in the Companies Act, 2013 and Rules made thereunder for their appointment as Independent Directors. The Board is of the opinion that their continued association as Independent Directors shall immensely benefit the Company. The Board recommends their appointment as Independent Directors by the shareholders. AUDITORS The Auditors, Messrs Lovelock & Lewes, Chartered Accountants, retire and are eligible for reappointment. Applicability of the Companies Act, 1956 As clarified by the Govt. of India., Ministry of Corporate Affairs, vide its General Circular No. 08/2014 dated 4th April, 2014 the information given and contents of this Report are governed by the relevant provisions / schedules / Rules of the Companies Act, 1956. On behalf of the Board A. N. Singh Managing Director S. Kaul K. Sinha Kolkata P.K. Sen 20th February, 2015 Directors

Director’s Report