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Sejal Glass Ltd.

BSE: 532993 | NSE: SEJAL | Series: NA | ISIN: INE955I01036 | SECTOR: Glass & Glass Products

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Annual Report

For Year :
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Director’s Report

Dear Shareholders, The Directors have pleasure in presenting their Seventeenth Annual Report, together with the Audited Accounts of the Company, for the year ended March 31, 2015 as follows: (Amount in Rs.) Year 2014-15 Year 2013-14 Revenue from operations 144,029,357 1,263,687,880 Other Income 84,004,085 106,348,140 Total Revenue 228,033,442 1,370,036,020 Operating Expenditure 316,769,398 1,329,340,282 Profit / (Loss) before Interest & Depreciation (88,794,135) 40,695,738 Less: Interest 92,700,947 88,220,178 Less: Depreciation 48,241,782 24,585,443 Profit / (Loss) before exceptional, extraordinary items and tax (229,736,864) (72,109,883) Exceptional Items - - (Loss)/Profit on sale of Assets 4,341,815 (28,687,809) Prior Period (Expense) / Income (4,737,026) (1,796,069) Provision for Contingency (165,000,000) (85,000,000) Profit / (Loss) before tax (395,132,075) (187,593,761) Tax expense: (a) Current tax expense relating to prior years - - (b) Deferred tax (224,201,433) - Profit / (Loss) for the year (619,333,508) (187,593,761) 2. Operational Review The company registered a Net Turnover of Rs. 14.40 crores for the year ended 31st March 2015 as against Rs. 126.37 crores for the year ended 31st March 2014.Subdued market conditions in the Realty and Infrastructure sectors to which your company''s products mainly cater to and severe working capital constraints have impacted the business of the company during the F.Y. 2014-15. At the operating level the company has reported profit of Rs. 1.85 crores before Interest, Depreciation, Taxation and Exceptional items during F.Y. 2014-15 against Rs. 8.32 crores in F.Y. 2013-14. During F.Y. 2014-15 various measures were initiated to improve operational efficiency and productivity. Loss at the net level of Rs. 61.93 crores for the F.Y. 2014-15 was mainly on account of write-off of software cost and non recoverables Rs. 11.18 crores, Provision for contingencies of Rs. 16.50 crores and reversal of deferred tax asset of Rs 22.42 crores. 3. Management Discussion & Analysis A. ECONOMY /INDUSTRY OVERVIEW The macroeconomic environment continued to pose challenges in the Fiscal Year 2014-15, Though there has been a marginal growth in GDP, the consumer sentiment continued to be weak. Despite the rate of inflation being on the lower side, years of high inflation in the past have left continuing impact on disposable income and Final Private Consumption Expenditure. Every geography has been seeing ups and downs in short spells making it difficult to forecast and work on a stable marketing plan. While certain macro factors like fiscal deficit, inflation, foreign investor interest etc., show improvement besides structural correction initiatives by the New Government, these are yet to have any impact on the consumer demand and employment generation. It is expected that if reforms like land acquisition, recodification of labour laws, GST, and initiatives like infrastructure development, power generation and development of smart cities are kick started, India can get back to growth rates in excess of 7% in the coming years. Your Company operates in the Glass processing segment with a wide range of product processes. The product processes consist of Toughened glass, Heat strengthened glass, Insulated glass, Laminated glass, Decorative glass and fire rated glass. The market for glass processing is shared amongst organized branded players and unorganized players. The market for organized brands is estimated at about 70% of the total market. Company Overview: The Electronic commerce or e-Commerce as is known today has evolved as businesses (end to end process) started to shift from real time market to digital market. A lot of businesses today take place on the internet, sitting in the comfort of one''s own home. The Company has during the year under review had tied up with snapdeal for sale of its dcor products. The Company has as a beginning started with selling of its glass mirrors on line through snapdeal, and the concept is slowly picking pace. The Company proposes to gradually add few more categories of retail home and office interior products for online sales in the near future. B. GLASS INDUSTRY OVERVIEW - Global Overview And Demand - The global glass market has reached about 83 million tonnes in 2014 up from 60 million tonnes in 2011. - The Global Flat Glass market is poised to grow at a CAGR of 7.3% over the period 2014-2019. - The use of float glass is largely in the Building and Construction and Automotive sectors. - Flat glass is also used in solar equipment such as solar thermal panels and photovoltaic modules. - Flat glass finds application in interior fittings and decorations, furniture, and electronic equipment. - Flat glass is classified into float, sheet, and rolled. One key trend upcoming in this market is the demand for fabricated flat glass products for use in buildings and construction. Demand for fabricated flat glass products such as solar glass panels and electronic displays are on the rise. - Indian Glass Industry According to a recent study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) the domestic glass industry is poised to grow to Rs. 340 billion by 2015, which will be triggered by the growth in the real estate sector, infrastructural development, retail sector, automotives sales and food & beverages sector. The current value of Indian glass industry is Rs. 225 billion. Indian glass market is set to increase at a compound annual growth rate (CAGR) of 15 per cent over the next three years. The glass consumption growth is expected in construction (10-12 per cent), automotive (20 per cent), consumer goods (15-20 per cent) and pharmaceuticals (15-18 per cent) sectors. The glass industry employs more than 40 lakh people. The organized sector accounts for 35 lakh and unorganized sector provides direct jobs to around 5-6 lakh people. A large number of man-power is involved indirectly in the sector, most of whom are unskilled workers. About 75 per cent of the total glass industries are concentrated in U.P, Maharashtra, Gujarat, Karnataka and Andhra Pradesh. Gujarat employs the highest number of people in the glass industry followed by Uttar Pradesh, Maharashtra and Andhra Pradesh. The glass packaging industry is facing tough competition from alternative medium. But with the key properties such as inertness, transparency and recyclability, glass will overcome the issues of fragility and bulkiness, which will satisfy the consumers. The increasing prices of the raw material is the biggest challenge faced by Indian glass manufacturers. With some steps taken by the government towards control in the increasing prices of raw materials and regularizing the cullet collection system in India, would help the industry to counter the competition from other alternative uses for glass. The per capita glass consumption in India is 1.2 kg, compared with 8-9 kg in developed countries and 30-35 kg in the US. Also, glass recycling is very high in developed countries at 70-80 per cent, whereas in India, only 40-45 per cent of the finished products come for recycling and the rest go for land filing. Recycling saves 10-20 per cent energy, 30 per cent air pollution and improves furnace efficiency by 20 per cent. The glass industry mainly consists of four segments-Container glasses, Specialty glass, Flat glass and Fiberglass. Container glass is the largest segment in the glass sector, catering to glass packaging for consumer goods and pharmaceutical industry. The specialty glass is used in technical applications such as electronics and engineering. Flat glass segment comprises of float glass and rolled glass, which are mostly used in architectural and automotive applications. - Glass Processing Industry The glass processing industry is highly fragmented in the country. It is clustered in six geographical locations that fall near the six industries or metro cities. The processing clusters are located in and around Delhi, Mumbai, Chennai, Hyderabad, Kolkata and Bangalore. Because of its fragmented nature, the glass processing industry in India is dominated by small players who put little effort to improve customer service, reducing costs, or systematically developing markets. The industry is also weighed down by the spiraling cost of manufacturing. Energy costs are increasing, as are those of raw materials and infrastructure. The glass processing involves lending various properties to glass in order to enhance life and aesthetic appeal of the glass as well as to customize it for the intended use. The glass processing units are required to be located in proximity to the major float glass producing centers as well as the markets of consumption to minimize losses on account of breakages and logistics cost. Processed Glass types - Heat strengthened glass - Fully toughened glass - Insulated glass - Noise insulating glass - Laminated glass - Decorative glass - Fire resistant glass Real estate: Driving growth The growth of the float glass industry is dependent on construction and architecture activities. The construction sector is the largest consumer of float glass. Around 70% of the total production is used by the construction sector. Real estate sector use flat glass for windows, doors, partitions and a host of other applications. It is expected that demand growth in this segment is going to be strong, as architects are increasingly seeking to bring natural environmental factors into the interior of buildings by maximizing natural daylight. This has been achieved through the use of larger glazed areas in faades and roofs, and through entirely glazed faades, where the glass is a structural component of the building. Interestingly, use of value-added glass has gained popularity in commercial buildings in the recent years. However, residential buildings, which are a major source of demand for these glass types, are not using much of these products. This is one area that is going to drive growth in the country. Automotive Sector: High Potential In India auto industry is a growing industry with an expected turnover of US$113 billion by 2020. The automobile sector is a big user of flat glass. The consumption of glass in this sector is likely to see a growth of close to 20 per cent in the coming year as glass is being increasingly used on cars, and strongly contributes to their design. C. HUMAN RESOURCES The Company believes in the highest standards of people management and personal growth. It instills in each of the members of the Sejal family a feeling of ownership, responsibility and performance to the par of excellence in each of the operations pertaining to production and servicing. The Company aspires to set the highest standards of internationally benchmarked human resource practices, which would be exemplary for other manufacturers. The industrial relations were cordial and the management thoroughly acknowledges the support from the employees at all levels. D. INTERNAL CONTROL SYSTEM The Company has an adequate system of internal controls to safeguard and protect from loss, unauthorized use or disposition of its assets. All transactions are properly authorized, recorded and reported to the management. The Company is following all the Accounting Standards for properly maintaining the books of accounts and reporting of financial statements. The Company has a full-fledged Internal Audit department and also external Internal Auditors to review various areas of the operations of the Company. The management and the Audit Committee of the Board review the audit reports periodically. E. RISKS AND CONCERNS The Company is exposed to normal industry risk factors of competition, economic cycle and uncertainties in the international and domestic markets and credit risk. The Company manages these risks, by maintaining a conservative financial profile and by following prudent business and risk management practices. 4. Share Capital During the year under review your Company''s Authorized Share Capital remained unchanged at Rs. 60,00,00,000/- (Rupees Sixty Crores Only) comprising of 6,00,00,000 Equity Shares of Rs. 10/- each. During the year under review Issued, Subscribed and Paid up Share Capital of your Company also remained unchanged at Rs. 33,55,00,000/-(Rupees Thirty Three Crores Fifty Five Lacs Only) comprising of 3,35,50,000 Equity Shares of Re. 10/- each Equity Shares each. 5. Depository System The trading in the equity shares of your Company is under compulsory dematerialization mode. As of date, equity shares representing 99.07% of the equity share capital are in dematerialized form. As the depository system offers numerous advantages, members are requested to take advantage of the same and avail of the facility of dematerialization of your Company''s shares. 6. Dividend In view of the loss for the year and the accumulated losses of the previous year, your Directors are unable to recommend any dividend for the year ended March 31, 2015. 7. Directors and KMP The Board consists of Executive and Non- Executive independent directors including who have wide and varied experience in different disciplines of corporate functioning. Mr. Amrut S. Gada, Chairman & Managing Director of the Company is liable to retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. During the year under review Mrs. Leena Gadit was appointed as Additional Director (Independent) of the Company with effect from 31.03.2015. Pursuant to section 203 the Companies Act, 2013 the appointment of following managerial personnel were formalized as Key Managerial Personnel (KMP) of the Company: - Mr. Amrut S. Gada Chairman & Managing Director. - Mr. A. Venkataramanan Chief Financial Officer (CFO) - Mr. Ashwin S. Shetty G.M. Compliance, Company Secretary 8. Other Disclosure Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: - 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 date of this report. - 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. - No complaint received from any employee, pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made there under. 9. Extract of Annual Return Pursuant to Section 134(3)(a), extract of Annual Return in Form MGT-9 has been annexed herewith as Annexure ''A''. 10. Corporate Governance Pursuant to Clause 49 of the Listing Agreement, a report on the Corporate Governance for the year under review along with Auditors'' Certificate regarding Compliance of Corporate Governance form part of this Report. 11. Public Deposits During the year under review your Company has not accepted deposits from public in pursuance of section 58A of the Companies Act, 1956 and rules framed under the Companies [Acceptance of Deposits] Rules, 1975. During the period under review, as on 31st March, 2015, the Company has outstanding fixed deposit of Rs. 12,70,70,058/-. The interest and repayment of matured deposits have also remained to be paid during the year under review due to severe liquidity constraints. Your Company has made an application to Hon''ble Company Law Board (CLB) under the provisions of section 74(2) of the Companies Act, 2013 for seeking extension of time for repaying the outstanding fixed Deposits along with interest thereon. The Company''s application with the CLB is yet pending disposal. 12. Board Evaluation The Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual Directors.The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. 13. Training of Independent Directors Your Company''s Independent Directors are highly qualified and have been associated with corporate and business organizations. They all understand Company''s business and activities very well, however, pursuant to the provisions of Clause 49 of the Listing agreement, the Board has shown all the Independent Director Company''s business and manufacturing activities and were also introduced to Company''s staff. 14. Declaration by Independent Directors: All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. 15. Directors Responsibility Statement Your Company''s Directors confirm: (i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) the directors had selected such accounting policies and applied them 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 the financial year 31st March, 2015 and of the profit and loss of the Company for the financial year; (iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (iv) the directors had prepared the annual accounts on a going concern basis; and (v) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. (vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 16. Board Meetings Pursuant to Section 134(3)(b), details of Board meeting held in the year is mentioned in the Report of the Corporate Governance. During the year 5 (five) Board Meetings and 7 (seven) Audit Committee Meetings were held, details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. 17. Employee Stock Option Plan (ESOP) Your Company had approved ESOP 2012 at the Annual General Meeting of your Company held on September 29, 2012. As on date, your Company has not granted any options under ESOP 2012. 18. A. Auditors and Auditors Report The term of office of M/s. S. S. Puranik & Associates, as Statutory Auditors of the Company will expire with the conclusion of forth coming Annual General Meeting of the Company. M/s. S. S. Puranik & Associates have been auditors of the Company since inception of the Company in 1998-99. M/s. S. S. Puranik & Associates have expressed their unwillingness to be reappointed as the Statutory Auditors of the Company. The Board of Directors has recommended the appointment of M/s. D. D. Mehta & Company, Chartered Accountants as Statutory Auditors in place of the retiring Auditor M/s. S. S. Puranik & Associates. M/s. S. S. Puranik & Associates, over many years have successfully met the challenges that the size and scale of the Company''s operations pose for auditors and have maintained the highest level of governance, rigour and quality in their audit. The Board placed on record its appreciation for the services rendered by M/s. S. S. Puranik & Associates as the Statutory Auditors of the Company. 1. Auditor''s observations : Confirmation of balances from Debtors, Creditors and Borrowers of Loans & advances: Company''s explanation; As a part of accounts finalization process, letters seeking confirmation of balances as at 31.3.2015 were already sent to major Debtors, Creditors and Borrowers of Loans, ICDs and advances. Accounts of major raw materials suppliers (Glass, PVB, Sentry, Silicon, etc.) were reconciled and balance confirmations were confirmed. Regular monitoring and periodical reconciliations are being carried out in respect of current Debtors. Despite follow up confirmations were not received from old Debtors and few Borrowers of Loans & advances. However, based on Auditor''s recommendation provisions were created for doubtful Receivables and doubtful Loans and advances. 2. Auditor''s observations : Internal control procedures need to be strengthened: Company''s explanation; Critical areas would be identified and necessary actions would be initiated to plug the loopholes (including putting in place standard operating procedures etc.). 3. Auditor''s observations : Arrears of interest and Principle on Deposits accepted from Public: Company''s explanation; Due to business difficulty and severe cash flow constraints your company could not repay all the matured Public deposits and interest dues in time. Your company has already approached Company Law Board (CLB) under the provisions of section 74(2) of the Companies Act 2013 for seeking extension of time for repaying the overdue deposits. The Company''s application with the CLB is still pending disposal. 4. Auditor''s observations : Delays in payment of statutory Liabilities: Company''s explanation; Due to severe cash flow constraints your company could not pay statutory dues in time. However, the Management has initiated measures to mobilize funds through sale of un-productive assets, recovering of Loans and ICDs, etc. to meet these liabilities. 5. Auditor''s observations: Irregularity in Bank accounts: Company''s explanation; Due to business difficulty and consequent liquidity constraints, your company could not serve debts in time. As a result bankers'' have classified the credit facilities grant to your company as sub-standard and have initiated action under section 13(2) and 13(4) of the SARFAESI Act, 2002.Your company is in discussion with the Lenders to restructure the credit facilities or for settlement proposal. B. Secretarial Audit and Secretarial Audit Report The Board of Directors in their meeting held on March 31, 2015, on the recommendations of the Audit Committee, in accordance with the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, has appointed M/s. D. M. Zaveri & Co. to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is attached as Annexure ''B''. Company''s explanations to the Secretarial Auditor observations 1. Due to the ongoing liquidity crunch the Company has not been able to pay the processing fees to the BSE and the NSE for giving effect to the change in the name of the Company in the records of the respective Exchanges. The Company proposes to pay the same and get the change in name incorporated at the earliest. 2. The loans and advances were given by the Company to the Company in which Directors are interested out of surplus funds in the earlier years. No further loans and advances have been given during the year under review to any of the Companies in which Directors are interested. The said loans and advances shall be recovered from the said companies in due course. 3. The constitution of the Nomination & Remuneration Committee has since been reconstituted and now the composition of the said committee comprises of three Non-Executive Independent. C. Cost Auditors In conformity with the directives of the Central Government, your Board of Directors has appointed M/s. V V & Associates, Cost Accountants, having office at 8, OM Kadambari Co - operative Housing Society Ltd.,B.T. Marg, Dahisar West, Mumbai 400 068 as Cost Auditor for the year 2014-15. Appointment of Cost Auditor for the year 2015-16 has also been done by the Company. D. Internal Auditor M/s. SPP Associates having office at 21, Akhurath, Plot No. 11, Sector 14, Sanpada, Opp. Palm Beach Road, Navi Mumbai 400 705 has been appointed as an Internal Auditor of the Company for the year ended 31st March, 2015. 19. Internal Financial Control Systems Your Company has well laid out policies on financial reporting, asset management, adherence to Management policies and also on promoting compliance of ethical and well defined standards. The management team regularly meets to monitor expectations and budgeted results and scrutinizes reasons for deviations in order to take necessary corrective steps. The Audit Committee which meets at regular intervals also reviews the internal control systems with the Management and the internal auditors. The internal audit is conducted at all the locations of Company and covers all key areas. All audit observations and follow up actions are discussed with the Management as also the Statutory Auditors and the Audit Committee reviews them regularly. 20. Industrial Relations The industrial relations continue to be cordial and harmonious at the manufacturing unit of the Company at Silvassa. 21. Subsidiary Company/ies During the year under review all the three Subsidiary Companies namely 1) Sejal Bluecity Realtors Private Limited 2) Sejal Bluecity Developers Private Limited 3) Sejal Bluecity Buildcon Private Limited have ceased to be the subsidiaries of your Company. 22. Related Party Transactions: All related party transactions that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus disclosure in form AOC-2 is not required. Further, there are no materially significant related party transactions made by the Company with promoters, key managerial personnel or other persons which may have a potential conflict with the interest of the Company. The Policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company and the link for the same is www.sejalglass.co.in 23. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo. The Company is undertaking the necessary energy consumption activities in accordance with the provisions of Section 134(3)(m)of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. Information on Conservation of energy, Technology Absorption and Foreign Exchange is given as Annexure ''C'' to this report. 24. Particulars of Loans, Guarantees and Investments: The particulars of loans, guarantees and investments have been disclosed in the financial statement. 25. Vigil Mechanism/Whistle Blower Policy: The Company has a vigil mechanism to deal with fraud and mismanagement, if any. The policy is on the website of the Company. 26. Particulars of Employees Your Company had 122 employees as of March 31, 2015. The statement containing particulars of employees as required under 197(2) of the Companies Act, 2013 read along with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is not applicable to the Company as no employees were in receipt of remuneration above the limits specified in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Remuneration Policy/Terms of Reference is stated in the Corporate Governance Report. The ratio of the remuneration of each Director to the median employee''s remuneration and other details in terms of Section 197(12) of the Companies Act, 2013 read along with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed herewith as Annexure ''D'' and forms part of this Report. 27. Corporate Social Responsibility Policy The information required to be provided under Section 134 (3) (o) of the Companies Act, 2013 read with the Rule 9 of the Companies (Accounts) Rules, 2014 in relation to disclosure about Corporate Social Responsibility are currently not applicable to the Company since the Company is not required to undertake any CSR activities for the financial year 2014-15 as per section 135 of the Companies Act, 2013. 28. Risk Management Your Company has developed and implemented a Risk Management Policy which includes identification of elements of risk, if any, which in the opinion of the Board, may threaten the existence of the Company. Your Company has a risk identification and management frame work appropriate to the size of your Company and the environment under which it operates. Risks are being continuously identified in relation to business strategy, operations and transactions, statutory/legal compliance, financial reporting, information technology system and overall internal control framework. 29. Cautionary Statements This Directors Report and the Management Discussion and Analysis Report may contain certain statements, which are futuristic in nature. Such statements represent the intentions of the Management and the efforts being put in by them to realize certain goals. The success in realizing these goals depends on various factors both internal and external. Therefore, the investors are requested to make their own independent judgments by taking into account all relevant factors before taking any investment decision. 30. Acknowledgment 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 of Directors Sd/- Amrut S. Gada Chairman and Managing Director Place: Mumbai Date: August 13, 2015

Director’s Report