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TO THE SHARE HOLDERS
The Directors have pleasure in presenting the Fifty Eighth Annual Report, along with the Audited Accounts of the Company for the financial year ended 31st March 2018.
Detailed information on the performance of your Company appears in the Annual Report. A discussion on the operations of the Company is given in the sections titled ''Year in Review'' and ''New Frontiers''. Some of the statutory disclosures, however, appear in this Report. The Report, read along with the other sections, would provide a comprehensive overview of the Company''s performance and plans.
The financial performance of the Company for the year ended 31st March 2018 is summarized below:
Rs,Rs jn minion)
Profit before Depreciation, Finance Cost, Tax and Exceptional items
Depreciation and Amortisation expenses
Profit before Tax
Less: Tax expenses
Profit for the year
Other Comprehensive income for the year, net of tax
Total Comprehensive income for the year
During the year under review, the performance of the Company remained under pressure. The Chemicals business suffered from fluctuating commodity prices, particularly in inputs required for the products of the Company. Due to efficient functioning of both of its plants in Ankleshwar, Gujarat and Vizag, Andhra Pradesh, the Company has withstood the pressures in the market. The future, however, is looking much brighter.
The technological up gradation in the Formaldehyde plant at Ankleshwar was completed during this year. The Company is now looking to add a third location for a new plant in Andhra Pradesh.
In the solar power segment, generation continues to be good.
A brief description of the operations of the subsidiaries of the Company appears later in this report.
SCHEME OF AMALGAMATION
The Board of Directors, in its Meeting held on 18th May 2018, has approved a Scheme of Amalgamation for the amalgamation of the Company''s wholly owned subsidiary, Pipri Limited with the Company with effect from 1st April 2018, subject to necessary statutory and regulatory approvals, including sanction of the Hon''ble National Company Law Tribunal. The amalgamation will enable pooling and more effective utilization of the combined resources thereby benefiting the Company, its shareholders and all concerned.
MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments have occurred after the close of the financial year 2017-18 till the date of this Report, which affect the financial position of the Company.
The Board of Directors recommends, for consideration of the shareholders at the Annual General Meeting, a Dividend @ 30% (Rs. 1.50 per share) on Equity Shares of Rs. 5/- each for the financial year ended 31st March 2018.
CARE Ratings Limited (CARE) has reaffirmed CARE A (Single A Plus) rating for the long-term bank facilities of the Company.
CARE has also reaffirmed CARE A1 (A One Plus) ratings for the short-term bank facilities and Commercial Paper.
CONSOLIDATED FINANCIAL STATEMENT
As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) and provisions of the Companies Act, 2013, the audited Consolidated Financial Statement for the year ended 31st March 2018 has been annexed with the Annual Report.
During the year under review, the Company has not accepted any deposits from the public and that as at the end of the year there were no outstanding deposits under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
INTERNAL FINANCIAL CONTROL
The Company has in place adequate internal financial controls with respect to financial statements. The policies and procedures adopted by the Company ensure prevention and detection of frauds and errors, accuracy and completeness of the records and timely preparation of reliable financial statements. No reportable material weakness in the design or operation was observed during the year.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors, at its meeting held on 14th November 2017, has re-appointed Shri R. V. Kanoria (DIN: 00003792) as the Managing Director of the Company for further period of three years with effect from 10th January 2018, subject to the approval of the shareholders of the Company.
On the recommendation of the Nomination and Remuneration Committee, the Board of Directors, at its meeting held on 18th May 2018, has appointed Shri Sidharth Kumar Birla (DIN: 00004213) as an Additional Director of the Company in the category of Independent Director, not liable to retire by rotation, for a period of 5 consecutive years with effect from 18th May, 2018, subject to the approval of the shareholders.
Shri Sidharth Kumar Birla has given his consent to act as Director and declared that he is eligible for appointment as a Director and meets the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 (“Act”) and the Listing Regulations.
In the opinion of the Board, Shri Sidharth Kumar Birla fulfills the conditions for appointment as Independent Directors as specified in the Act and the Listing Regulations and is also independent of the Management.
As per Section 161 of the Companies Act, 2013, Shri Sidharth Kumar Birla as an Additional Director holds office up to the date of the 58th Annual General Meeting. The necessary resolution for his appointment as an Independent Director of the Company, not liable to retire by rotation, for a period of 5 consecutive years with effect from 18th May 2018, is being placed at the 58th Annual General Meeting for the approval of the shareholders. The Board of Directors recommends appointment of Shri Sidharth Kumar Birla as a Director in the interest of the Company.
Shri S. V. Kanoria (DIN: 02097441) retires by rotation at the ensuing AGM, under the applicable provisions of the Act, and being eligible, offers himself for appointment as a Director of the Company.
None of the Directors of the Company is disqualified for being appointed as a Director, as specified in Section 164(2) of the Act.
Additional information, pursuant to the Listing Regulations, in respect of Directors seeking appointment/re-appointment is given in the AGM Notice of the Company.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received declaration from all the Independent Directors of the Company, confirming that they meet the criteria of independence, as prescribed under the Companies Act, 2013 and the Listing Regulations.
The Company has framed the criteria for performance evaluation of Independent Directors, the Board, the Board Committees and other individual Directors. Criteria for performance evaluation of the Chairman & Managing Director, Executive Director and Non-Independent Director have also been framed.
The criteria for performance evaluation of Directors among others includes factors such as preparation, participation, engagement, personality and conduct, value addition, strategic planning and vision, team spirit and consensus building, leadership quality, understanding and focus on key business issues, independent thinking and judgment, quality of analysis, experience and business wisdom, management qualities, awareness, motivation, integrity, ethics and receptivity. The criteria for evaluating the Board''s functioning/effectiveness inter alia includes its structure, strategic review, business performance review, internal controls, process and procedures.
On the basis of the criteria framed, a process was followed by the Board for evaluating the performance of individual Directors, its own performance and its Committees. The Nomination and Remuneration Committee also evaluated the performance of every individual Director. The Independent Directors in their separate Meeting also carried out the performance evaluation of the Chairman & Managing Director, Executive Director and other non-independent Director as well as the Board of the Company. The Directors expressed overall satisfaction on the performance and functioning of the Board, its Committees and the Directors.
The details of programmers to familiarize the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model/procedures/processes of the Company, etc. through various programmers are put on the website of the Company and can be accessed at the link: http://www.kanoriachem.com/images/FamPro.pdf.
NUMBER OF MEETINGS OF BOARD OF DIRECTORS
During the Financial Year 2017-18, the Company held four Meetings of the Board of Directors. The details of the Meetings and attendance of each of the Directors thereat are provided in the Report on Corporate Governance forming part of the Annual Report. The maximum gap between any two consecutive Board Meetings did not exceed 120 days.
The Audit Committee of the Company comprises of Shri Amitav Kothari, Shri H. K. Khaitan and Prof. S. L. Rao, Independent Directors, and Shri R. V. Kanoria, Chairman & Managing Director of the Company. Shri Amitav Kothari is the Chairman of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report.
STAKEHOLDERS'' RELATIONSHIP COMMITTEE
The Stakeholders Relationship Committee of the Company comprises of Shri H. K. Khaitan and Shri Amitav Kothari, Independent Directors and Shri S. V. Kanoria, Wholetime Director of the Company. Shri H. K. Khaitan is the Chairman of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee of the Company comprises of Prof. S. L. Rao, Shri H. K. Khaitan, Shri Ravinder Nath and Shri G. Parthasarathy, Independent Directors, and Shri R. V. Kanoria, Chairman & Managing Director of the Company. Prof. S. L. Rao is the Chairman of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report.
The Board of Directors of the Company, based on the recommendation of the Nomination and Remuneration Committee, has formulated the Nomination and Remuneration Policy, which contains the matters with regard to criteria for appointment of Directors and determining Directors'' independence and policy on remuneration for Directors, Senior Managerial Personnel and other employees, and the same may be accessed at the Company''s website at the link: http://www.kanoriachem.com/images/NomRemPol.pdf.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Corporate Social Responsibility Committee of the Company comprises of Smt. Madhuvanti Kanoria, a Director, Shri R. V. Kanoria, Managing Director and Shri
H. K. Khaitan, an Independent Director. Smt. Madhuvanti Kanoria is the Chairperson of the Committee. The terms of reference of the Committee have been provided in the Corporate Governance Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company acts as a good Corporate Citizen and as its philosophy always strive to conduct its business in inclusive, sustainable, socially responsible, ethical manner and to continuously work towards improving quality of life of the communities. The Company has in place a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company. The Corporate Social Responsibility Policy of the Company enables it to continue to make responsible contribution towards welfare of the society.
Initially, the Company''s focus will be on the following areas:
- Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and the differently baled and livelihood enhancement projects.
- Empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens.
- Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation.
The Company may also undertake other need based initiatives in compliance with Schedule VII to the Companies Act, 2013.
The CSR Policy may be accessed on the Company''s website at the link: http://www.kanoriachem.com/images/CSRPol.pdf.
During the year, the Company has spent Rs. 1.80 million on the CSR activities.
The Annual Report on the CSR activities, pursuant to Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is provided as Annexure to this Report.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis is a part of the Annual Report.
APAG Holding AG, Switzerland (“APAG”) and Pipri Limited are the wholly owned subsidiaries of the Company. Kanoria Africa Textiles Plc, Ethiopia is a subsidiary of the Company. During the year, APAG incorporated a new wholly owned subsidiary in Canada by the name of APAG Electronic Corp., to set up a manufacturing plant to cater to the North American market. Further, APAG Electronic S. De R.L. De C.V. and APAG Services S. De R.L. De C.V., the wholly owned subsidiaries of APAG, in Mexico which were not in operation were liquidated. APAG now has APAG Electronic AG, APAG Electronic s.r.o, CoSyst Control Systems GmbH, APAG Electronic LLC and APAG Elektronik Corp. as its wholly owned subsidiaries.
The performance of the Automobile Electronics business in Europe, carried out by APAG Group has been exceedingly good during the year and strategic initiatives have proved to be rewarding. In a span of five years, the turnover of this business has increased by over 250%. The bottom line is also showing commensurate growth.
The Denim plant of Kanoria Africa Textiles Plc. in Ethiopia is now showing signs of turning the corner. The most difficult issues of labour turnover and consistent quality have been largely overcome. In order to align the product mix to current market requirements, fresh investments are being made for adding a ring spinning section. Further, the company is also getting into integrated manufacturing by adding garmenting in a small way. The loss during the year is much lower than the previous years and further improvement in performance is expected in the coming years.
A report on the performance and financial position of the subsidiaries of the Company, as per the Companies Act, 2013, is provided in the Annual Report and hence, the same is not repeated here for the sake of brevity.
The Policy for determining Material Subsidiaries as approved by the Board may be accessed on the Company''s website at the link: http://www.kanoriachem.com/images/MatSub.pdf.
PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED
Details of loans given, investments made, guarantees given and securities provided as covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Note No. 36 of the Standalone Financial Statements.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on arm''s length basis. None of the transactions with any of the related parties were in conflict with the Company''s interest. The Company had not entered into any transaction with related parties during the year which could be considered material, in terms of materiality threshold for the related party transactions.
The Policy on Related Party Transactions as approved by the Board may be accessed on the Company''s website at the link: http://www.kanoriachem.com/images/RelPar. pdf.
The Company promotes ethical behavior in all its business activities and has put in place a mechanism of reporting illegal or unethical behavior. In compliance with the provisions of Section 177(9) of the Companies Act, 2013 and the Listing Regulations, 2015, the Company has in place a Whistle Blower Policy for its Directors and Employees to report concerns about unethical behavior, actual or suspected fraud or violation of applicable laws and regulations and the Company''s Codes of Conduct. The concerns may be reported to the Audit Committee through the Nodal Officer and, in exceptional cases, may also be reported to the Chairman of the Audit Committee. The confidentiality of those reporting violations is maintained and they are not subjected to any discriminatory practice. During the year under review, no employee was denied access to the Audit Committee.
The Whistle Blower Policy may be accessed on the Company''s website at the link: http://www.kanoriachem.com/images/WhiBlo.pdf.
The Company adheres to good governance practices. Corporate Governance at KCI extends to all stakeholders and is embodied in every business decision. The Company places prime importance on reliable financial information, integrity, transparency, empowerment and compliance with the law in letter and spirit. While Management Discussion and Analysis Report that is an annexure to the Directors'' Report, appears in the Section titled Year in Review in the Annual Report, the Corporate Governance Report and the Certificate from the Auditors of the Company confirming compliance of the conditions of Corporate Governance are annexed hereto and form a part of the Directors'' Report.
There is a conscious effort to ensure that the values enshrined in the Codes of Conduct for the Directors and Senior Management Personnel and the Employees respectively, are followed in true spirit across all levels of the Company.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return of the Company as on the financial year ended 31st March 2018 is given in Form no. MGT- 9 as an Annexure to this Report.
AUDITORS AND AUDITORS'' REPORT
As per the provisions of Section 139 of the Companies Act, 2013, M/s. Jitendra K Agarwal & Associates, Chartered Accountants (Firm Registration No. 318086E) were appointed, at the 57th Annual General Meeting of the Company held on 4th September, 2017, as the Statutory Auditors of the Company for a term of 5 years commencing from the conclusion of the 57th AGM till the conclusion of the 62nd AGM.
The Auditors'' Report for the financial year ended 31st March, 2018 does not contain any qualification, reservation or adverse remark.
During the year under review, the Auditors have not reported any matter under Section 143 (12) of the Companies Act, 2013, therefore no detail is required to be disclosed under Section 134 (3) (ca) of the Act.
Pursuant to Section 148 of the Companies Act, 2013, the Board has, on the recommendation of the Audit Committee, approved the appointment of M/s N. D. Birla & Co., Cost Accountants (Firm Registration No. 000028), Ahmadabad, as the Cost Auditors for conducting the audit of the cost records of the Company for the financial year ending on 31st March 2019, at a remuneration of Rs. 1,45,000/- (Rupees One Lakh Forty Five Thousand only) plus applicable taxes and reimbursement of travelling and other incidental expenses to be incurred in the course of cost audit.
Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed M/s Vinod Kothari & Co., Practicing Company Secretaries (UIN: P1996WB042300), to conduct Secretarial Audit of the Company for the financial year 2017-18. The Secretarial Audit Report for the financial year 2017-18 is provided as an Annexure to this Report. The Report does not contain any qualification, reservation or adverse remark.
The Company''s management systems, organizational structures, processes, codes of conduct together form the basis of risk management system that governs and manages associated risks. The Risk Management Committee of the Company assesses the significant risks that might impact the achievement of the Company''s objectives and develops risk management strategies to mitigate/minimize identified risks and designs appropriate risk management procedures. The Board does not foresee any risk which may threaten the existence of the Company.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO
As required under Section 134 of the Companies Act, 2013 and the rules framed there under, the statement containing necessary information in respect of conservation of energy, technology absorption, foreign exchange earnings and outgo is provided in the Annexure to this Report.
EMPLOYEES INFORMATION AND RELATED DISCLOSURES
As required under Section 197(12) of the Companies Act, 2013 read with the Rules 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, disclosures of remuneration and other details/particulars of the Directors and employees of the Company are provided in the Annexure to this Report.
SAFETY AND ENVIRONMENT
The Company is committed to sustainable development and a safe workplace. Its approach to environment management is guided by the principle of provision of safe working environment through continuous up-gradation of technologies, prevention of pollution and conservation of resources and recycling waste.
As a result of its sustained compliance to Health, Safety, Environment and Quality standards, the Company''s Alco Chemical Divisions at Ankleshwar and Vishakhapatnam are ISO 9001, 14001 and OHSAS 18001 certified.
The Company has a documented Health & Safety Policy that is displayed and communicated to all employees at plant locations. With the view to achieve a ''Zero Accidents'' status, the Company has developed health and safety procedures as well as safety targets and objectives.
The Company also lays thrust on renewable energy sources and solar energy.
HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS
The Company''s human resource development is founded on a strong set of values. The policies seek to instill spirit of trust, transparency and dignity among all employees. The Company continues to provide ongoing training to its employees at different levels.
Industrial relations with the employees and workers across all locations of the Company continued to be cordial during the year.
DIRECTORS'' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(5) of the Companies Act, 2013:
a) that in the preparation of the annual financial statements for the year ended 31st March, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
b) that such accounting policies have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March 2018 and of the profit of the Company for the year ended on that date;
c) that proper and sufficient care has been taken 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:
d) that the annual financial statements have been prepared on a going concern basis;
e) that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and are operating effectively; and
f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
During the year under review, no case was filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS
During the year under review, no significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.
Your Directors acknowledge with gratitude the commitment and dedication of the employees for their untiring personal efforts as well as their collective contributions at all levels that have led to the growth and success of the Company. The Directors would like to thank other stakeholders including lenders and business associates who have continued to provide support and encouragement.
For and on behalf of the Board,
71, Park Street R. V. Kanoria
Kolkata 700 016 Chairman & Managing Director
Date: 18th May 2018 DIN:00003792