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Directors Report of Dhunseri Tea & Industries Ltd.

Mar 31, 2015

Dear Members,

We have pleasure in presenting the 18th Annual Report together with the Audited Financial Statements of the Company for the year ended 31st March, 2015.

1. Financial Results

(Rs in Lakhs) Particulars STANDALONE CONSOLIDATED Accounting year ended Accounting year ended 31/03/2015 31/03/2015

1 Income from Operations

a Net Sales / Income from Operations 16,379.21 26,754.58

b Other Operating Income 42.71 42.71

Total Income from Operations 16,421.92 26,797.29

2 Expenses

a Cost of Materials Consumed 3,397.29 3,397.29

b Changes in Inventories of finished goods and stock in trade (320.62) (8.75)

c Employee Benefits Expense 4,644.42 5,762.53

d Depreciation expense 612.36 979.88

e Freight, Delivery & Selling Expenses 896.70 1,400.30

f Power & Fuel 1,774.50 3,000.31

g Other Expenses 3,283.94 9,001.72

Total Expenses 14,288.59 23,533.28

3 Profit from Operations before Other Income, 2,133.33 3,264.01

Finance costs and Exceptional items (1-2)

4 Other Income 297.54 778.69

5 Profit from Ordinary activities before Finance costs and Exceptional 2,430.87 4,042.70

items (3 4)

6 Finance costs 358.98 818.57

7 Profit from Ordinary activities after Finance costs but before 2,071.89 3,224.13

Exceptional items (5-6)

8 Exceptional items - -

9 Profit from Ordinary Activities before Tax (7 - 8) 2,071.89 3,224.13

Particulars STANDALONE CONSOLIDATED Accounting year ended Accounting year ended 31/03/2015 31/03/2015

10 Tax Expense :

Current Year 435.00 435.00

Adjustment for earlier years (67.99) (67.99)

Deferred Tax (51.76) 26.27

11 Net Profit from Ordinary Activities after Tax (9 - 10) 1,756.64 2,830.85

12 Extraordinary Items (net of tax expense) - -

13 Net Profit for the period (11 - 12) 1,756.64 2,830.85

14 Paid up Equity Share Capital 700.50 700.50

(Face Value C10/- per share)

15 Earnings per share (of C10/- each) (not annualised):

(a) Basic (C) 25.08 40.41

(b) Diluted (C) 25.08 40.41

2. Dividend

The Directors recommend a dividend of C 7.50 per equity share

i.e. @ 75% for the financial year ended 31st March, 2015 subject to approval of the shareholders at the ensuing Annual General Meeting. The dividend on equity shares, if approved by the members would involve a cash outflow of C 632.32 lakhs including dividend tax.

3. Transfer to reserves

The Company proposes to transfer C 500.00 lakhs to the general reserve out of the amount available for appropriation and an amount of C 624.52 lakhs is proposed to be retained in the Profit and Loss Account.

4. Operations

The total tea manufacturing and sales in respect of the Indian operations for the year under review was 9.74 mn kg. and 9.35 mn kg. as against 10.10 mn kg. and 10.59 mn kg. respectively in the previous year. The production for the year under review was less due to adverse weather conditions. The sales in terms of volume were less by about 12% and the realisations were more by about 9.55% for the year under review in comparison to the previous year.

The total tea manufacturing and sales in respect of the African operations for the year under review was about 8.50 mn kg. and 9.15 mn kg. as against 8.81 mn kg. and 8.19 mn kg. respectively in the previous year. The production of tea for the year under review was less due to late arrival of monsoon which impacted the production in the fourth quarter. The tea sales in terms of volume were more by about 12% and the average realisation was less by about 14% in comparison to the previous year.

The production and sale of macadamia in terms of volume was about 0.61 mn kg. and 0.60 mn kg. as against 0.47 mn kg. and 0. 43 mn kg respectively in the previous year. The production and sale of macadamia in terms of volume was more by about 30% and 40% respectively in comparison to the previous year. The average realisation was also more by about 8% for the year under review in comparison to the previous year.

5. Subsidiary Companies

The Company has following three wholly owned subsidiaries as on March 31, 2015 :

i) Dhunseri Petrochem & Tea Pte Ltd (DPTPL)

ii) Makandi Tea & Coffee Estates Ltd (MTCEL)

iii) Kawalazi Estate Company Ltd (KECL)

Upon demerger of the Tea Division of erstwhile Dhunseri Petrochem & Tea Limited in favour of the Company as per the Scheme of Arrangement sanctioned by the Hon'ble High Court at Calcutta, the above subsidiaries are vested with the Company.

The entire share capital of the subsidiaries i.e. MTCEL and KECL are held by DPTPL and that of DPTPL are held by the Company, making them 100% wholly owned subsidiaries of the Company.

There has been no material change in the nature of the business of the subsidiaries.

There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act").

Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company's subsidiaries in Form AOC-1 is attached to the financial statements of the Company.

Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the Company's website: www.dhunseritea.com.

6. Scheme of Arrangement

The scheme of arrangement which inter-alia provided for the demerger of the tea division of erstwhile Dhunseri Petrochem & Tea Limited to the Company, was sanctioned by the Hon'ble High Court at Calcutta by an Order dated 7th August, 2014.

The said scheme became effective from the appointed date

1. e.1st April, 2014 and the Reports and Accounts for the year ended 31st March, 2015 also contains the merged figures of the operations of all these Companies.

In terms of the scheme the Company had issued and allotted 70,04,951 equity shares of C10/- each on 22.09.2015 to the shareholders of erstwhile Dhunseri Petrochem & Tea Limited (DPTL), credited as fully paid up, in the ratio of 1 equity share of C10/- each fully paid up of the Company for every 5 equity shares of C10/- each fully paid up and held by them in DPTL as on the record date i.e. 19th September, 2014. The entire 50,000 equity shares of C10/- each fully paid up of the Company, which was held by DPTL as on 01.04.2014 stood cancelled upon issue and allotment of the aforesaid new equity shares by the Company.

All the required action have been taken by the Company in terms of the Scheme of Arrangement sanctioned by the Hon'ble High Court at Calcutta by its Order dated 07.08.2014.

7. Listing

The equity shares of the Company was listed and admitted to trading on the exchanges i.e. BSE and NSE with effect from 20th January, 2015.

8. Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013 the Board of Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;

(ii) that they 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 at the end of the financial year and of the profit and loss of the Company for that period;

(iii) that they have taken proper and sufficient care 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;

(iv) that they have prepared the annual accounts on a 'going concern' basis;

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

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

The work performed by the internal auditor, statutory auditor and secretarial auditor and the reviews performed by management and the audit committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2014-15.

9. Directors & Key Managerial Personnel

Mr. Bharat Bajoria was appointed as an Additional Director of the Company at the Board Meeting held on 19th May, 2014. At the 17th AGM held on 8th September, 2014 he was appointed as an Independent Director of the Company to hold office for five consecutive years w.e.f. the date of the said AGM.

To enable the restructuring of the Board, Mr. K. K. Tibrewalla and Mr. P. C. Dhandhania resigned from the directorship of the Company on 9th September, 2014. Mr. Rajiv Kumar Sharma and Mr. Basudeo Beriwala were appointed as directors of the Company in the said casual vacancies with effect from 9th September, 2014. Mr. Rajiv Kumar Sharma shall hold office only so long as the vacating director would have held the same if no vacancy had occurred and shall be eligible for reappointment.

Mr. Mrigank Dhanuka, who was appointed as a director of the Company on 1st February, 2014, in a casual vacancy, retires by rotation at the ensuing 18th Annual General Meeting, and being eligible offers himself for reappointment. The Board recommends his reappointment.

Mr. Chandra Kumar Dhanuka who was appointed in a casual vacancy, as a director of the Company on 1st, February, 2014, was subsequently appointed as the Managing Director of the Company, by the Board at its meeting held on 9th September, 2014 for a period of five years w.e.f. 9th September, 2014 on terms and conditions and subject to the approval of the members at the ensuing 18th AGM of the Company.

Ms. Nandini Khaitan, and Mr. Ashok Kumar Lohia were appointed as Additional Directors of the Company at the Board Meeting held on 9th September, 2014.

The Companies Act, 2013 provides for appointment of independent directors. Sub-section (10) of Section 149 of the Companies Act, 2013 provides that independent directors shall hold office for a term of upto five consecutive years on the Board of a company and shall be eligible for re-appointment on passing a special resolution by the shareholders of the company.

Sub-section (11) states that no independent director shall hold office for more than two consecutive terms but such independent director shall be eligible for appointment after the expiration of three years of ceasing to become an independent director.

Section 149 (13) states that the provisions of sub-sections (6) and (7) of Section 152 in respect of retirement of directors by rotation shall not be applicable to the appointment of independent directors.

Mr. Basudeo Beriwala, Ms. Nandini Khaitan and Mr. Ashok Kumar Lohia, who were inducted as non-executive directors of the Company at the Board Meeting held on 9th September, 2014, are now proposed to be appointed as independent directors of the Company for a term of five consecutive years w.e.f. 9th September, 2014 subject to members approval at the ensuing 18th AGM. The Board of Directors recommend their appointment.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges.

The Board of Directors at their meeting held on 9th September,

2014 appointed Mr. R. Mahadevan as Company Secretary & Compliance Officer and Mrs. Bhavana Khemka as, Chief Financial Officer of the Company with effect from that date.

The Board of Directors at their meeting held on 6th February, 2015 appointed Mr. P. C. Dhandhania as the Chief Executive Officer of the Company with effect from that date.

10. Number of Meetings of the Board

The Board met five times during the financial year 2014-15. The details have been provided in the Corporate Governance Report in terms of Clause 49 of the listing agreement, which is annexed to this Report.

11. Board evaluation

The Company is yet to initiate necessary steps with regard to annual evaluation of the performances of the Board, its committees and individual directors. It is proposed to carry out the annual performance evaluation of the Board, its committees and individual directors after the completion of one year from the date of the constitution of the Board / Committees etc.

12. Policy on Directors' appointment and remuneration and other details

The Company's policy on Directors' appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance Report, which forms part of the Directors' Report.

13. Internal financial control systems and their adequacy

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

14. Audit committee

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

15. Auditors

Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Lovelock & Lewes, Chartered Accountants, were appointed as Statutory Auditors of the Company for a period of five years at the 17th Annual General Meeting (AGM) of the Company held on 8th September, 2014, subject to ratification of their appointment at every AGM. Their appointment for the year 2015-16 is required to be ratified by the shareholders at the ensuing 18th AGM of the Company.

16. Auditors' report and Secretarial auditors' report

The auditors' report and secretarial auditors' report does not contain any qualifications, reservations or adverse remarks and have been annexed to the report.

17. Risk management

The Board of the Company has formed a risk management committee to frame, implement and monitor the risk management plan for the Company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The development and implementation of risk management policy has been covered in the Management Discussion and Analysis, which forms part of this report.

18. Particulars of loans, guarantees and investments

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

19. Transactions 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 not entered into any contract/ arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Your Directors draw attention of the members to Note 32 to the financial statement which sets out related party disclosures.

20. Management's Discussion and Analysis Report

Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is presented in a separate section forming part of the Annual Report.

21. Corporate Social Responsibility

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 I of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the Company's website: www.dhunseritea.com.

22. Extract of annual return

As provided under Section 92(3) of the Act, an extract of annual return is given in Annexure II in the prescribed Form MGT-9, which forms part of this report.

23. Particulars of employees

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

a. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Non-executive Directors Ratio to median remuneration*

1. Mr. Mrigank Dhanuka # -

2. Mr.R.K.Sharma (w.e.f. 09.09.2014) -

3. Mr.Bharat Bajoria (w.e.f. 09.09.2014) -

4. Mr. Basudeo Beriwala (w.e.f. 09.09.2014) -

5. Ms. Nandini Khaitan (w.e.f. 09.09.2014) -

6. Mr. Ashok Kumar Lohia (w.e.f. 09.09.2014) -

Executive directors

1. Mr. C. K. Dhanuka (w.e.f. 09.09.2014) -

b. The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year:

Director,Chief Executive officer, % increase in remuneration Chief Finacial officer in the financial year* and Company Secretary

1 Mr.C.K.Dhanuka Managing Director ( w.e.f. 09.09.2014) -

2. Mr. Mrigank Dhanuka # -

3. Mr. Bharat Bajoria (w.e.f. 09.09.2014) -

4. Mr. Basudeo Beriwala (w.e.f. 09.09.2014) -

5. Ms. Nandini Khaitan (w.e.f. 09.09.2014) -

6. Mr. Ashok Kumar Lohia (w.e.f. 09.09.2014) -

7. Mr. R. K. Sharma (w.e.f. 09.09.2014) -

8. Mr. P. C. Dhandhania Chief Executive Officer (w.e.f.06.02.2015) -

9. Ms. Bhavna Khemka Chief Financial Officer (w.e.f.09.09.2014) -

10. Mr. R. Mahadevan Company Secretary (w.e.f. 09.09.2014) -

c. The percentage increase in the median remuneration of employees in the financial year: 8.07%

d. The number of permanent employees on the rolls of Company: 5153

e. The explanation on the relationship between average increase in remuneration and Company performance:

On an average, employees received an annual increase of about 7 % . The individual increments varied from about 6% to 8%, based on individual performance.

The increase in remuneration is in line with the market trends. In order to ensure that remuneration reflects Company performance, the same is also linked to organisation performance apart from an individual's performance.

f. Comparison of the remuneration of the Key Managerial Personnel (KMP) against the performance of the Company:

Aggregate remuneration of KMP in Financial Year 2015 (C lakhs) 103.25

Revenue (C lakhs) 16379

Remuneration of KMPs (as % of revenue) 0.63

Profit before Tax (PBT) (C lakhs) 2072

Remuneration of KMP (as % of PBT) 4.98

g. Variations in the market capitalisation of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year:

Particulars March 31, 2015 March 31, 2014 * % Change

Market 14402.18 - - Capitalisation (Rs lakhs)

Price Earnings Ratio 8.20 - -

h. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

The average annual increase was around 7%. However, during the course of the year, the total increase is approximately 8%, after accounting for promotions and other event based compensation revisions.

Increase in the managerial remuneration for the year : Since this information is for part of the year, the same is not comparable.

i. Comparison of each remuneration of the key managerial personnel against the performance of the Company:

(C in lakhs)

Mr.C.K.Dhanuka Mr.P.C.Dhandhania Ms.Bhavana Khemka Mr.R.Mahadevan Managing Chief Executive Chief Financial Company Director Officer Officer Secretary*

Remun eration in FY15 72.24 17.30 8.94 4.77

Revenue 16,379

Remune ration as 0.44 0.11 0.05 0.03 % of revenue

Profit before 2,072 Tax (PBT)

Remune 3.49 0.83 0.43 0.23 ration (as % of PBT)

j. The key parameters for any variable component of remuneration availed by the directors:

There is no variable component of remuneration availed by non-executive directors of the Company. They are entitled to only sitting fees for attending Board / Committee Meetings.

k. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year: None.

l. Affirmation that the remuneration is as per the remuneration policy of the Company:

The Company affirms remuneration is as per the remuneration policy of the Company.

m. The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is set out in Annexure IV forming part of this report.

24. Disclosure requirements

As per Clause 49 of the listing agreements entered into with the stock exchanges, Corporate Governance Report with Auditors' Certificate thereon and Management Discussion and Analysis are attached, which form part of this report.

Details of the familiarisation programme of the independent directors are available on the Company's website (http:// dhunseritea.com/wp-content/uploads/2015/06/Familiarisation- Programme-of-Independent-Directors.pdf).

Policy for determining material subsidiaries of the Company is available on the Company's website (http://dhunseritea.com/ wp-content/uploads/2015/03/policy-for-determining-material- subsidiary.pdf).

Policy on dealing with related party transactions is available on the Company's website (http://dhunseritea.com/wp-content/ uploads/2015/04/Related-party-transaction-policy.pdf).

The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and the revised Clause 49 of the Listing Agreements with stock exchanges and the said policy is available on the Company's website (http://dhunseritea.com/wp- content/uploads/2015/03/vigil-mechanism.pdf).

25. Deposits from public

The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.

26. State of Company's affairs

The present state of the Company's affairs is progressive enough viz-a-viz the industry and there is no any development which could result in an adverse situation for the Company in the near future. There is neither any change in the nature of business of the Company nor any significant and material orders were passed by any regulator or court or tribunals impacting the going concern status affecting the Company's operation in future.

27. Material changes and commitments, if any, affecting the financial position of the Company

There are no such material changes and commitments 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.

28. Particulars regarding conservation of energy & technology absorption etc

The particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure III which forms part of this report.

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

The Company has set up Internal Complaints Committee (ICC) under The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. There were no complaints received and /or disposed off during 2014-15.

30. Green Initiatives

As part of our green initiative, the electronic copies of this Annual Report including the Notice of the 18th AGM are sent to all members whose email addresses are registered with the Company / Depository Participant(s). For members who have not registered their email addresses, physical copies of this Annual Report including the Notice of the 18th AGM are sent by permitted mode.

The Company is providing e-voting facility to all its members to enable them to cast their votes electronically on all resolutions set forth in the Notice. This is pursuant to Section 108 of the Companies Act, 2013 and Rule 20 of the Companies (Management and Administration) Rules, 2014. The instructions for e-voting is provided in Note 10 annexed to the Notice.

31. Acknowledgement

Your Directors take this opportunity to express their grateful appreciation for the excellent assistance and cooperation received from the banks and other authorities. Your Directors also thank the employees of the Company for their valuable service and support during the year. Your Directors also gratefully acknowledge with thanks the cooperation and support received from the shareholders of the Company.

For and on behalf of the Board of Directors

Kolkata, C.K.Dhanuka 29th May, 2015 Chairman

Annual Report, 2014-15 27

 
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