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Pennar Industries Ltd.

BSE: 513228 | NSE: PENIND |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE932A01024 | SECTOR: Steel - CR & HR Strips

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Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Director’s Report

Dear Members,

The Directors are pleased to present the 42nd Annual Report and the Company’s audited financial statement for the financial year ended 31st March, 2018.

Financial Results:

The Company’s financial performance, for the year ended 31st March, 2018 is summarized below:

Rs. in Lakhs

Particulars

Consolidated

Standalone

2017-18

2016-17

2017-18

2016-17

Revenue from Operations

1,79,841

1,71,132

1,24,864

1,06,950

Operating profit (PBIDT)

22,179

16,249

12,042

9,224

Profit before tax (PBT)

13,808

7,484

8,154

4,546

Income Tax and Deferred Tax

4,759

2,506

2,725

1,691

Profit after tax (PAT)

9,049

4,978

5,429

2,855

Other Comprehensive income

(44)

(64)

(5)

(69)

Total Comprehensive income for the year

9,005

4,914

5,424

2,786

Net profit attributable to Owners of the company

7,004

3,394

5,424

2,786

Profit brought forward from previous year

25,875

22,481

21,700

18,914

Surplus available for appropriation

32,879

25,875

27,124

21,700

Appropriations

Dividend

0

0

0

0

Corporate tax on proposed dividend

0

0

0

0

Transfer to General Reserve

0

0

0

0

Transfer to Capital Redemption Reserve

0

0

0

0

Transfer to Capital Redemption Reserve

32,879

25,875

27,124

21,700

Result of Operations and the state of Company’s affairs:

Your company has recorded highest ever consolidated gross sale at Rs. 2,043 Crores and highest ever EBIDTA at Rs. 221.8 Crores. Pennar has recorded consolidated net profit of Rs.70.3 crores. Your company’s new products and ability to increase new customer base has helped in achieving this. All the business units of the company are profitable and showed growth over previous year.

Consolidated Financial Statement:

The Consolidated Financial Statements of the Company, its subsidiaries prepared in accordance with the Companies Act, 2013 and applicable Indian Accounting Standards along with all relevant documents and the Auditors’ Report form part of this Annual Report. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

The Financial Statements as stated above are also available on the website of the Company and can be accessed at the website viz., www.pennarindia.com.

Subsidiaries’:

The following are three subsidiaries of the company as on 31st March, 2018.

a. M/s. Pennar Engineered Building Systems Limited

b. M/s. Pennar Enviro Limited

c. M/s. Pennar Global INC, USA

The performance of the subsidiaries is as hereunder:

(a) M/s. Pennar Engineered Building Systems Limited (PEBSL)

Your company’s subsidiary, M/s. Pennar Engineered Building Systems Limited, is one of the leading custom designed building systems solutions providers in India with gross sales of Rs. 601.05 Crores and EBIDTA of Rs. 45.59 crores. PEBSL has recorded a net profit of Rs. 15.80 crores.

(b) M/s. Pennar Enviro Limited (PEL)

Your company’s subsidiary, M/s. Pennar Enviro Limited, has recorded gross sales of Rs. 121.21 crores and EBIDTA of Rs. 38.37 crores. PEL has recorded a net profit of Rs. 22.96 crores.

(c) M/s. Pennar Global INC, USA

During the year your company has invested USD 280,000 in M/s. Pennar Global, Inc. to cater its products and services in United States of America. Pursuant to the aforesaid investment M/s. Pennar Global INC become subsidiary of the Company.

Sale of Subsidiary viz., M/s. Pennar Renewables Private Limited

During the year your company sold its entire stake in Pennar Renewables Private Limited to Greenko Solar Energy Private Limited.

The financial position of each of the subsidiaries, as per the Companies Act, 2013 is annexed. The Policy for determining material subsidiaries may be accessed on the Company’s website at the link: http://www.pennarindia.com/policy-determining-material.html. The information on subsidiaries pursuant to Section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure - A in Form AOC - 1.

Material Changes and Commitments if any affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report

There are no material changes and commitments affecting the financial position of the Company.

Dividend, Fixed Deposits and General Reserves:

The company has been investing in new Capital to expand its product profile and increase the markets. This has already shown results by achieving highest sales and EBIDTA. Most of these activities are planned through internal sources.Therefore your Directors are not recommending dividend on equity shares. Your Company has not accepted any fixed deposits and no amount has been carried to General Reserves during the year.

Particulars of Loans given, Investments made, Guarantees given and Securities provided:

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement.

Internal Financial Controls:

The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

Contract and Arrangement 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 an arm’s length basis. During the year, the Company had entered into contract / arrangement / transaction with material related party which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company’s website at the link: http://www.pennarindia.com/policy-related-party-transactions.html.

The Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B in Form AOC-2.

Change in the nature of business, if any:

There is no material change in the nature of business affecting the financial position of the Company for the year ended 31st March, 2018.

Credit Rating:

CARE has reaffirmed the ‘CARE A’ (Single A; Outlook: Positive) with rating assigned to long term bank facilities. This rating is applicable to facilities having tenure of more than one year. Instruments with ‘CARE A’ rating are considered to have adequate degree of safety regarding timely servicing of financial obligations.

Further, CARE has also reaffirmed the ‘CARE A1’ (A One) rating to short term bank facilities of the Company. This rating is applicable to facilities having tenure up to one year. Instruments with ‘CARE A1’ rating are considered to have very strong degree of safety regarding timely payment of financial obligations and carry lowest credit risk.

Liquidity:

Your company has undertaken number of steps to maintain strong liquidity levels. The consolidated net debt level is at Rs.235.56 Crore. Your company continues to focus on generating strong cash flows to meet its future growth plans and is comfortable with its current liquidity positions.

Board of Directors and Key Managerial Personnel:

None of the Directors of the company are disqualified under the provisions of the Act or under the Listing Regulations.

Mr. Vishal Sood, and Mr. Nrupender Rao who retire by rotation and being eligible offer themselves for re-appointment. Your Board recommends their appointment.

The Board of Directors appointed Mr. Eric James Brown as Additional Non-Executive Director of the Company at its Meeting held on 10th November, 2017. His appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends his appointment.

The Board of Directors changed the designation of Mr. K Lavanya Kumar as Executive Director of the Company at its meeting held on 18th May, 2018. His appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends his appointment.

The Board of Directors reappointed Mr. Nrupender Rao as Executive Chairman of the Company at its meeting held on 14th August, 2018. His appointment has to be ratified by the Members at the ensuing Annual General Meeting. Your Board recommends his appointment.

Pursuant to the provisions of Listing Regulations, brief particulars of the Directors who are proposed to be appointed/re-appointed are provided as an annexure to the notice convening the Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the Non-Executive Directors and Executive Directors. The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: http://www.pennarindia.com/policy-familiarization-programme.html.

Meetings of the Board:

Six meetings of the Board of Directors were held during the year. For further details, please refer the same in Corporate Governance report in this Annual Report.

Scheme of Amalgamation

The Scheme of Amalgamation of Pennar Engineered Building Systems and Pennar Enviro Limited with Pennar Industries Limited (‘the Company’) and their respective shareholders under section 230 to 232 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 and the rules framed thereunder (‘Scheme’) was approved by the Board of Directors of the Company on 10 November 2017.

Subsequently, observation letters providing no objections were received by the Company from BSE Limited and the National Stock Exchange of India Limited on 26 April 2018.

Your company is in the process of compiling the documents and completing the other requirements to file the Scheme with the Hyderabad bench of the National Company Law Tribunal (‘NCLT’) to obtain necessary direction from NCLT with regard to meetings of shareholders and creditors.

Directors Responsibility Statement:

Your Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgements 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 31st March, 2018 and of the profit of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a ‘going concern’ basis;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

Corporate Governance:

The Company is committed to maintain the highest standard of corporate governance and adhere to the corporate governance requirements set out by Securities Exchange Board of India. The Report on corporate governance as stipulated under the Listing Regulations is annexed herewith as Annexure - C. The requisite certificate from Statutory Auditors confirming compliance with the conditions of corporate governance is annexed herewith as Annexure - D.

Corporate Social Responsibility (CSR):

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure - E of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company.

Nomination and Remuneration Policy:

The Nomination and Remuneration Committee of the Company identifies the persons, who are qualified to become Directors of the Company / who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal. The Committee also carries out evaluation of every Director’s performance. The Committee has formulated the criteria for determining qualifications, attributes, independence of the Directors and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and other employees.

Risk Management:

Pursuant to section 134 (3) (n) of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the company has formulated a policy on risk management. At present, the company has not identified any element of risk which may threaten the existence of the company.

Statutory Auditors:

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Registration No. 117366W/W-100018) were appointed as the Statutory Auditors of the Company to hold office for a term of 5 years from the conclusion of the 41st Annual General Meeting (AGM) held on 28th September, 2017 until the conclusion of the 46th AGM of the Company to be held in the year 2022.

Pursuant to the Notification issued by the Ministry of Corporate Affairs on 7th May, 2018, amending section 139 of the Companies Act, 2013, the mandatory requirement for ratification of appointment of Auditors by the Members at every AGM has been omitted and hence your Company has not proposed ratification of appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, at the forthcoming AGM.

The Auditors’ Report is unmodified i.e. it does not contain any qualification, reservation or adverse remark or disclaimer.

Cost Auditors:

The Cost Audit Report for the year ended 31st March, 2017 was reviewed by the Audit Committee at its meeting held on 12th August, 2017 and has been filed with Registrar of Companies on 23rd October, 2017. The Board of Directors at its meeting held on 14th August,

2017 appointed M/s. Shaik & Associates., Cost Accountants, Hyderabad as Cost auditors of the company for the year ending 31st March, 2018. The Cost Audit for the year ended 31st March 2018 is in progress and the Cost Audit Report will be filed with the Registrar of Companies within the stipulated time.

Secretarial Auditor

The Board has appointed Mr. Subhash Kishan Kandrapu, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended 31st March, 2018 is annexed herewith as Annexure - F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Audit Committee:

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of annual report.

Vigil Mechanism/Whistle Blower Policy:

Pursuant to Section 177 of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014, the Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report. The Policy on vigil mechanism and whistle blower policy may be accessed on the Company’s website at the link: http://www.pennarindia.com/vigil-mechanism.html

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure - G.

Extract of Annual Return:

Extract of Annual Return of the Company is annexed herewith as Annexure - H.

Particulars of Employees and related disclosures:

The information required under section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and the Statement under Section 134 of the Companies Act 2013 read with Rule 5 (2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure - I.

Disclosure under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has in place an Internal Complaints Committee which has been set up to redress complaints regarding sexual harassment. The following is the summary of sexual harassment complaints received and disposed off during the year:

i) No. of complaints received : nil

ii) No. of complaints disposed off: nil

Listing of Equity Shares:

The Company’s equity shares are listed at the Bombay Stock Exchange Limited, National Stock Exchange of India Limited. Dematerialisation of Shares:

99.04% of the company’s paid-up equity share capital is in dematerialized form as on 31st March, 2018 and balance 0.96% is in physical form.

Managing Director Certification under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:

The Vice-Chairman & Managing Director certification under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed herewith as Annexure-J.

Personnel / Industrial Relations:

The Company maintained cordial and harmonious relations at all levels at the offices and plants of the Company and its subsidiaries throughout the year under review.

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:

In terms of sub rule 5(vii) of Rule 8 of Companies (Accounts) Rules, 2014, there are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.throughout the year under review.

Management Discussion and Analysis:

The “Management Discussion and Analysis Report” highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. is furnished separately and forms part of this Board’s Report.

Appreciation:

Your directors take this opportunity to express their appreciation for the co-operation to all the suppliers and customers who have been associated with the Company as partners. The Directors would also like to take this opportunity to thank the financial institutions, banks, regulatory and government authorities as well as the shareholders for their continued co-operation and support. The Directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company. We look forward to further support.

By Order of the Board

for Pennar Industries Limited

Place : Hyderabad Nrupender Rao

Date : 14.08.2018 Chairman

Director’s Report