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Directors Report of Jocil Ltd.

Mar 31, 2015

The Directors have pleasure in presenting the Thirty Seventh Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2015.

(Rs. in Lakhs)

2014-15 2013-14

1. FINANCIAL RESULTS

Gross Sales 35854.62 41718.29

Less : Excise Duty 3725.48 4499.40

Net Sales 32129.14 37218.89

Processing Charges 923.06 292.92

Other Income 236.31 190.31

Total Income 33288.51 37702.12

Profit for the year before Interest and Depreciation (PBID) 2729.24 2819.81

Interest (94.56) (163.12)

Depreciation (666.77) (1026.23)

Profit Before Tax (PBT) 1967.91 1630.46

Provision for Current Tax (700.00) (650.00)

Deferred Tax / (credit) 42.74 142.53

(Short)/ Excess provision of Income Tax made in earlier years - 9.54

Profit After Ta x (PAT) 1310.65 1132.53

During the year the total turnover of the company has come down to Rs.370.14 crores from Rs. 422.01 crores in the previous year, a decline of 12% over the previous year. The sales of fatty acids, glycerin, industrial oxygen and biomass power have shown marginal increase over the previous year while the sales of toilet soap, soap noodles and power from wind mills has declined considerably. Shift in customer requirements of soap noodles from outright purchase to jobwork is another reason for decline in sales turnover. However, the Profit Before Interest and Depreciation (PBID) shows only 3% decline due to improved market conditions for fatty acids in the last quarter of the year and marginal increase in interest received from deposits. Profit Before Tax (PBT) improved by 20% due to lower provision for depreciation expenses as per the new regulations under the Companies Act, 2013 and reduction in interest expense.

The appropriations from the profit are as detailed below:

(Rs. in Lakhs)

2014-15 2013-14

Profit after Tax 1310.65 1132.53

Balance brought forward from previous year 1487.13 1374.13

Profit for appropriations 2797.78 2506.66

APPROPRIATIONS

Dividend 532.87 444.06

Provision for Tax on distributed profits @ 20.35765% 108.48 75.47

Transfer to General Reserve 1042.10 500.00

Balance carried forward 1114.33 1487.13

Total 2797.78 2506.66

Authorized Capital 1000.00 1000.00

Paid up Capital 888.16 888.16

Reserves & Surplus 13937.75 13310.55

2. DIVIDEND

Considering the profitability of the Company, the Board of Directors are pleased to recommend for the approval of the shareholders of the Company for payment of dividend for the year ended 31-3-2015, at Rs. 6 per equity share of Rs.10 each, which aggregates to Rs. 5,32,86,900 on the 88,81,150 equity shares of the Company. In the previous year, the Company paid dividend at Rs.5 per equity share of Rs.10 each on 88,81,150 shares amounting to Rs.4,44,05,750.

3. OPERATIONS 2014-15 2013-14 MT MT

Production (including processed on job work)

a) Fatty Acids 49445 48567

b) Toilet Soap & Soap Products 31955 37840

c) Biomass Power-kWh 26740889 25149728

d) Wind Power-kWh 9754843 11056328

Sales

a) Fatty Acids 28832 24759

b) Toilet Soap & Soap Products 19541 35941

c) Biomass Power-kWh 9804800 8491700

d) Wind Power-kWh 9754843 11056328

4. OUTLOOK

Fatty Acids and Soap

The difficult market conditions set in during the year 2013-14 continued in the year 2014-15 also. However, company strategies to face the competition in fatty acid marketing have yielded better volumes, where as in soap and soap products segment similar strategies have not found much acceptance from the customers due to competition from imports and drop in rural market for FMCG products. During the year the Company has also improved product range of fatty acids. Some of the competitors in the fatty acid and soap products have an edge over the Company due to their backward integration to source raw-materials. The units located in exempted areas continue to enjoy cost advantage over the Company and some of the MNC customers are sourcing part of their requirements of soap products from them. However, the overall capacity utilization of main plant has slightly improved over the previous year due to increase in fatty acid sales. The Company could improve sales volume of refined glycerine but the realization has come down due to excessive supply of glycerine in the market from bio-diesel production.

The inverted duty structure – Imported soap noodles are exempted from customs duty whereas Lauric Acid, one of the raw-materials in the manufacture of soap noodles, attracts import customs duty at 7.5% - is seriously affecting the industry. Further, the export duty imposed on crude vegetable oils by Malaysia and Indonesia to encourage processing of crude oils there itself is raising cost of raw materials in India. As a result cost of production of soap noodles within the country is going up and becoming uncompetitive with imports. There is under utilization of installed capacities within the country due to imports.

The market for fatty acids showed signs of improvement towards the end of the year 2014-15. The Company has recommenced export of fatty acids since April 2015 which was discontinued in 2013. Cost of raw- materials is a major component in total cost of production and the fluctuations in raw-material prices is a serious cause of concern to the Company particularly when the customers demand for long term forward contracts while the same is not possible with the raw-material suppliers.

Biomass Power Plant

The performance of the biomass power plant has improved during the year as compared to the previous year. The generation from the plant during the year is higher by 15.91 lakh units over the previous year. The Govt. of A.P. has provided additional tariff amount of Rs. 1.50 per unit to the Biomass Power Plant Developers in addition to the applicable tariff fixed by APERC subject to maximum ceiling of Rs. 6.50 per unit for a period of one year with effect from 1st April 2014. This has improved income from sale of power to the Company by Rs. 77.46 lakhs.

Wind Energy Generators (WEG)

Power generation during the year from the four Wind Energy Generators (WEGs) of the Company aggregating to 6.3 Mw capacity is lower than that of the previous year which itself was considered as very low. During the year the power generation from all the four WEGs together was 97.55 lakh units as against 110.56 lakh units in the previous year and 164.18 lakh units in 2012-13. As a result the revenue from wind power generation is lower by Rs. 39.67 lakh during the year as compared to the previous year and Rs.193.08 lakh as compared to 2012-13. Even though power generation depends upon wind velocity, the major reason for fall in generation is the failure on the part of Tamil Nadu Electricity Generation and Distribution Corporation Limited (TANGEDCO) to evacuate power on priority basis. The back down of WEGs for want of evacuation facility amounts to about 22% of available time during the year 2014-15 and 23% in 2013-14. The Indian Wind Power Association is fighting for 'must run' status to WEGs to avoid back down in future.

5. FINANCE

The Company availed working capital facilities under consortium arrangement from Andhra Bank and State Bank of India and the accounts are in order. The company complied with all the legal requirements and there are no outstanding statutory dues as on 31st March 2015. During the year there have been no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

6. CREDIT RATING

The Credit Rating Agency CARE reaffirmed the credit rating of the Company 'CARE A ' (adequate degree of safety regarding timely servicing of financial obligations) for long term facilities and 'CARE A1' (strong degree of safety regarding timely payment of financial obligations) for short term facilities from banks. Fixed Deposits of the company have been accorded CARE A1 (FD) rating.

7. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.

The Company has in place Internal Complaints Committee in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act 2013 to redress the complaints received on sexual harassment. During the year the Company has not received any complaints on sexual harassment of women at the workplace.

8. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established vigil mechanism as required under Sec. 177(10) of the Companies Act, 2013 for Directors and Employees to report genuine concerns as prescribed in the policy. The policy provides adequate safeguards against victimization of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.

9. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

a) During the year, pursuant to Section 149 (1) and 149(4) of the Companies Act, 2013, Dr. Manjulata Dasari was appointed as an Independent Director at the Board Meeting held on 13-09-2014 for a period of five years and shall hold office up to 12-09-2019. The company has received requisite notice in writing from a member proposing her name as Independent Director.

b) Shri Y. Narayanarao Chowdary, Director retired at the last AGM held on 6th September, 2014. He has been on the Board of Directors of the Company since 1st November 1980 for more than three decades continuously. As Promoter Director he had put in immense efforts in the initial stage of incorporation of the Company in the areas of finance, administration and other Company matters which were instrumental for the growth and success of the Company. The Board placed on record its appreciation of his services at the meeting held on 5th November 2014.

c) In accordance with the provisions of the Companies Act 2013 and Articles of Association of the Company, at the ensuing Annual General Meeting, Shri P. Narendranath Chowdary, Chairman and Shri M. Mrutyumjaya Prasad, Director retire by rotation and being eligible offer themselves for re-election.

d) The Company held five Board Meetings during the year. Board meeting dates and attendance particulars are available in 'Corporate Governance' under item 14.

e) The Company has received declarations from all the Independent Directors confirming that he / she meets the criteria of independence as provided under sub-section 6 of Sec. 149 of the Companies Act, 2013 at the first meeting of the Board in which he / she participated as a Director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his / her status as an Independent Director.

f) The Audit Committee consists of 3 Non-Executive Directors of which 2 are Independent Directors. Shri V.S. Raju, Independent Director is the Chairman of the Audit Committee. The remaining 2 members are Shri M.Thimmaraja, Non-Executive Director and Shri Subbarao V. Tipirneni, Independent Director. The Board accepted all the recommendations of the Audit Committee during the year.

g) Shri J. Murali Mohan, Managing Director and Shri P. Kesavulu Reddy, President & Secretary are the Key Managerial Personnel appointed under Sec. 203 of the Companies Act, 2013.

10. AUDITORS

M/s.Brahmayya & Co., Chartered Accountants, Guntur were appointed as Auditors for a period of 3 years at the 36th Annual General Meeting held on 6th September 2014 subject to ratification by the shareholders at the ensuing Annual General Meeting to continue as Auditors for the year 2015-16.

11. COST AUDITORS

M/s. Narasimha Murthy & Co., Cost Accountants, Hyderabad carried out the cost audit for applicable products during the year. They are eligible for re-appointment as Cost Auditors for the year 2015-16.

12. SECRETARIAL AUDIT

M/s.Nekkanti S.R.V.V.S. Narayana & Co., Company Secretaries, Hyderabad were appointed as Auditors for secretarial audit for the year 2014-15 under Sec. 204 of the Companies Act, 2013 and they have submitted their report.

13. The information required to be included in the Board of Directors Report under the Companies Act, 2013 and Rules made there under is annexed to and forms part of this report as detailed below.

Sl. No. Particulars Section Rule Annexure No.

1 Annual Return – Form MGT-9. 134 (3) (a) 1 & 92 (3) Companies (Management and Administration) Rules, 2014 12 (1)

2 Company's policy on Directors appointment and remuneration 134 (3) (e) 2 etc. provided under sub-sections (3) and (4) of Section 178

3 Particulars of loans, guarantees or investments under Section 186 134 (3) (g) 3

4 Particulars of contracts or arrangements with related parties 134 (3) (h) 4 referred to in sub-section (1) of Section 188 in Form AOC -2. Companies (Accounts) Rules, 2014 8 (2)

5 Conservation of energy, technology absorption and 134 (3) (m) 5 Foreign Exchange earnings and outgo. Companies (Accounts) Rules, 2014 8 (3) (A),(B) &(C)

6 Risk management policy for the company including 134 (3) (n) 6 identification therein of elements of risk if any.

7 Corporate Social Responsi- bility policy and initiatives taken 134 (3) (o) 7 during the year . Companies (Corporate Social Responsibility policy) Rules, 2014 8 (1)

8 Statement indicating the manner in which formal annual 134 (3) (p) 8 evaluation has been made by the Board of its own performance and that of its committees and Individual Directors. Companies (Accounts) Rules, 2014 8 (4)

9 Financial summary or highlights. 134 (3) (q) 9 Companies (Accounts) Rules, 2014 8 (5) (i)

10 Details relating to deposits covered under chapter V of the Act. 134 (3) (q) 10 Companies (Accounts) Rules, 2014 8 (5) (v) & (vi)

11 Ratio of the remuneration of each Director to the median 197 (12) 11 employee's remuneration and such other details. Companies (Appointment and Remuneration of Managerial 5 (1) Personnel) Rules, 2014

12 Variation in the market capitalization of the company, price 197 (12) 12 earnings ratio and percentage increase over decrease in the market quotations of the shares of the company etc. Companies (Appointment and Remuneration of Managerial 5 (1) (vii) Personnel) Rules, 2014

13 Particulars of employees in receipt of remuneration not less 197 (12) 13 than Rs. five lakh per month or Rs. sixty lakh per year etc. Companies (Appointment and Remuneration of Managerial 5 (2) Personnel) Rules, 2014

14 Secretarial Audit Report in Form MR-3. 204 (1) Companies (Appointment and Remuneration of Managerial 9 (1) 14 Personnel) Rules, 2014

14. CORPORATE GOVERNANCE

The Company is committed to maintain the standards of Corporate Governance prescribed by the Securities and Exchange Board of India (SEBI) codified in Clause 49 of the Listing Agreement with Stock Exchanges. The information required to be included in the Annual Report under Clause 49 of the Listing Agreement (L.A.) are given below.

Sl. No. Particulars Clause Annexure No.

1 Report on Corporate Governance 49 (x)(A) 15

2 Management Discussion and Analysis Report 49 (viii)(D) 16

3 Declaration by the Managing Director that all Board Members and Senior 49 (ii)(E)(2) 17 Management Personnel affirmed their compliance to the Code of Conduct on annual basis.

4 Compliance Certificate from Auditors on Corporate Governance 49 (xi) (A) 18

Related Party Transactions – L.A. 49 (viii) (A) (2)

The Company is having a policy to deal with Related Party Transactions and the same may be viewed in the Company's website www.jocil.in

Remuneration to Non Executive Directors - L.A. 49 (viii) (c) (3)

Non Executive Directors are paid sitting fee for attending Board Meetings and Committee Meetings in which they are the Members in addition to reimbursement of traveling, lodging, boarding and incidental expenses.

Performance Evaluation of Independent Directors – L.A. 49(ii)(b)(5)

The Nomination and Remuneration Committee laid down the evaluation criteria for performance evaluation of Independent Directors in the Nomination and Remuneration Policy of the Company. The criteria for evaluation is based on the parameters such as his / her participation in the Board Meetings, adherence to the Code of Conduct, ability to guide the Board, capability to get along with the other Directors in the Board etc., considered as reasonable and appropriate for the purpose.

Familiarization Programme for Independent Directors – L.A. 49 (ii)(b)(7)

The Company conducted familiarization programme for Independent Directors at the factory on 30th January 2015. They were explained about the nature of the industry in which the Company is operating, market conditions and business model of the Company. Then the Managing Director under the guidance of the Heads of Department took all the five Independent Directors to the plants and explained the manufacturing processes, generation of power from biomass, development of green belt, pollution control measures taken, and safety and security procedures etc., followed in the Company.

15. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) 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 and of the profit and loss of the company for that period;

c) 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;

d) the Directors had prepared the annual accounts on a going concern basis; and e) the Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and Explanation : For the purpose of this clause, the term 'internal financial controls' means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business including adherence to company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

f) 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. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of the Company for their sustained efforts and valuable contribution to the performance of the Company during the year.

17. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted and sincere cooperation the Company received from various departments of Central and State Governments, Bankers, Auditors, Dealers and Suppliers of the Company. The Directors also would like to express their grateful appreciation for the guidance and cooperation received from the Holding Company, M/s. The Andhra Sugars Limited, Tanuku.

For and on behalf of the Board of Directors

Hyderabad P. NARENDRANATH CHOWDARY

25th May 2015. Chairman


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the Thirty Sixth Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2014.

(Rs. in Lakhs)

2013-14 2012-13

1. FINANCIAL RESULTS

Gross Sales 41718.29 45346.36

Less : Excise Duty 4499.40 5160.22

Net Sales 37218.89 40186.14

Processing Charges 292.92 578.60

Other Income 190.31 162.80

Total Income 3 7702.12 40927.54

Profit before Interest and Depreciation 2819.81 3677.97

Interest (163.12) (382.13)

Depreciation (1026.23) (1001.38)

Profit before Tax 1630.46 2294.46

Provision for Current Tax (650.00) (850.00)

Deferred Tax / Credit 142.53 18.63

Excess/(Short) provision of Income Tax 9.54 (1.03) made in earlier years

Profit after Tax 1132.53 1462.06

During the year the turnover of the company has come down to Rs.417.18 crores from Rs. 453.46 crores in the previous year, a decline of 8% over the previous year. The Profit Before Interest and Depreciation (PBID) of Rs. 28.20 crores and Profit Before Tax (PBT) of Rs.16.30 crores in the current year have accounted for a drop by 23% and 29% respectively over the previous year. Turnover has come down during the year due to sluggish market for Fatty Acids and Toilet Soap. Severe competition and aggressive marketing by the other manufacturers affected the margins. The revenue from Wind Energy Generators (WEGs) has come down by Rs. 153.41 lakhs due to back down of WEGs for lack of evacuation facilities. Depreciation expense marginally increased due to few additions to assets while interest cost has come down because of reduced borrowings. The income for the year includes Rs. 233.07 lakhs (previous year''s Rs. 213.52 lakhs) received from APSPDCL for the power supplied in earlier years from 01-04-2004 to 31-03-2009 towards rate difference.

The appropriations from the profit are as detailed below:

(Rs. in Lakhs)

2013-14 2012-13

Profit after Tax 1132.53 1462.06

Balance brought forward from previous year 1374.13 1035.50

Profit for appropriations 2506.66 2497.56

APPROPRIATIONS

Dividend 444.06 532.87

Provision for Tax on distributed profits 75.47 90.56 @16.995%

Transfer to General Reserve 500.00 500.00

Balance carried forward 1487.13 1374.13

Total 2506.66 2497.56

4. OUTLOOK

Fatty Acids and Soap

The market for fatty acids mostly depends on their consumption for toilet soap production. During the year, the toilet soap market was stagnant and even the established brand owners are at difficulty to maintain their existing sales. Consequently the offtake by some of the major customers is abnormally low. Further, some of the competitors in the market for fatty acids have an edge over the company due to their backward integration to source raw material and few of such competitors are, curiously, vendors of raw materials to the company too. As a result the company could not utilize the full capacity of fatty acid, soap and glycerine plants after the recent expansion with latest technology.

Authorised Capital 1000.00 1000.00

Paid up Capital 888.16 888.16

Reserves & Surplus 13310.55 12697.54

2. DIVIDEND

Considering the profitability of the Company, the Board of Directors are pleased to recommend for the approval of the shareholders of the Company for payment of dividend for the year ended 31-3-2014, at Rs. 5 per equity share of Rs.10 each, which aggregates to Rs. 4,44,05,750 on the 88,81,150 equity shares of the Company. In the previous year, the Company paid dividend at Rs.6 per equity share of Rs.10 each on 88,81,150 shares amounting to Rs.5,32,86,900.

3. OPERATIONS 2013-14 2012-13 MT MT

Production (including processed on jobwork)

a) Fatty Acids 48567 51179

b) Toilet Soap 3495 7346

c) Soap Products 37270 43967

d) Glycerine 2381 3735

e) Industrial Oxygen (cubic meters) 459664 464432

f) Biomass Power-kwh 25149728 25799840

g) Wind Power-kwh 11056328 16418310

Sales

a) Fatty Acids 24759 23095

b) Toilet Soap 1395 2034

c) Soap Products 34546 36699

d) Glycerine 2254 3679

e) Industrial Oxygen (cubic meters) 454191 457681

f) Biomass Power (kWh) 8491700 7831000

g) Wind Power (kWh) 11056328 16418310

Biomass Power Plant

Restrictions on power consumption came into operation again from 06-02-2014 after a brief period of about six months. Yet, the company was able to carry out its operations normally, only because of Biomass Captive Power Plant. The company is not allowed to draw power even at extra cost during the periods of Biomass Power Plant maintenance due to restrictions on power consumption. Ironically, this year the company is not allowed to purchase power even under Open Access inspite of repeated representations, on frivolous grounds. Therefore the company is always at the risk of stoppage of production if there is any problem in power plant. Capacity utilization of Biomass Power Plant is satisfactory taking into consideration the fuel constraints experienced by the company. Since the continuous running of power plant is very essential, biomass fuels are having to be procured even at a higher cost.

Wind Energy Generators (WEGs)

Power generation during the year from the four Wind Energy Generators (WEGs) of the Company aggregating to 6.3 Mw capacity is very low at 110.56 lakh kwh as against the previous year 164.18 lakh units, mainly due to back down of WEGs for want of evacuation by Tamil Nadu Electricity Generation and Distribution Corporation Limited (TANGEDCO). The wind velocity during the year in general was considered good as compared to previous year and at least 10% increase in generation over the previous year was expected. TANGEDCO failed to evacuate power on priority basis as there were other cheaper sources of power at its disposal. The Indian Wind Power Association is fighting for ''must run'' status to WEGs to avoid back down in future. The estimated loss of income from the four WEGs due to back down is about Rs.200 lakhs during the year.

Credit Rating

The Credit Rating Agency CARE reaffirmed the credit rating of the Company ''CARE A '' (adequate degree of safety regarding timely servicing of financial obligations) for long term facilities and ''CARE A1'' (strong degree of safety regarding timely payment of financial obligations) for short term facilities from banks.

5. CONSERVATION OF ENERGY & ENVIRONMENTAL SAFETY

a) Air Handling Unit provided in Electrolyser Control Panel Room for reducing ambient temperature to avoid premature failure & malfunctioning of electronic components such as Programmed Logic Circuit (PLC), Control Cords etc.

b) Solar Photo Voltaic Cells (Plates) arranged at Biomass Collection Point to utilize solar power for Weigh Bridge.

c) Left over Hydrogen gas after reaction in Autoclave, successfully recovered and used in subsequent batches.

d) Heat released in condensation of glycerine, used to evaporate the Sweet Water in Glycerine Distillation Plant.

e) Steam generated from Vapour Liquid Separator in Continuous Neutralisation and Drying Plant, used for melting Lauric Acid.

f) Three thousand Eucalyptus saplings planted in the factory premises during the year to promote green belt.

6. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year under review, the Company earned foreign exchange equivalent to Rs.12,34,262 (previous year - 1,30,50,778). The exports have come down because of high raw-material prices and competition from countries like Malaysia and Indonesia for supply of similar products. The Company imported raw materials and equipment during the year resulting in foreign exchange outgo equivalent to Rs. 33,77,50,837 (previous year - Rs. 43,58,19,914).

7. FINANCE

The Company availed working capital facilities under consortium arrangement from Andhra Bank and State Bank of India and the accounts are in order. The company complied with all the legal requirements and there are no outstanding statutory dues as on 31st March 2014.

8. FIXED DEPOSITS

The Company has accepted Fixed Deposits from the public and shareholders during the year under review. There are no matured and unclaimed deposit as on 31st March 2014.

9. DIRECTORS

a) Pursuant to Section 149(4) of the Companies Act, 2013, Shri VS. Raju, Shri M. Gopalakrishna, Shri Subbarao V Tipirneni and Shri P Venkateswara Rao were appointed as Independent Directors with effect from 1-4-2014 and shall hold office up to 31-03-2019. The company has received requisite notices for each of the Directors separately in writing from members proposing their names as Independent Directors. The company has received declarations from all the Independent Directors of the company confirming that they meet the criteria of independence as prescribed under Sub Section 5 of Section 149 of Companies Act, 2013.

b) In accordance with the provisions of the Companies Act 2013 and Articles of Association of the Company at the ensuing Annual General Meeting Shri M. Thimmaraja, Director retires by rotation and being eligible offers himself for re-election and Shri Y. Narayanarao Chowdary, Director retires by rotation.

c) The present term of office of Shri Jagarlamudi Murali Mohan, Managing Director expires on 15-02-2015. During his tenure in office in the past twenty five years the company made appreciable progress in all aspects. The Board of Directors has recommended to the Shareholders for his reappointment at the ensuing Annual General Meeting.

d) The Board of Directors constituted Corporate Social Responsibility Committee comprising Shri P Narendranath Chowdary, as the Chairman and Shri J. Murali Mohan, Shri Mullapudi Thimmaraja and Shri Parvathaneni Venkateswara Rao as other members. The said Committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Responsibility (CSR) Policy indicating the activities to be undertaken by the company, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities.

e) The Board of Directors have also constituted Nomination and Remunaeration Committee comprising Shri VS. Raju, as the Chairman and Shri P Narendranath Chowdary, Shri Mullapudi Thimmaraja and Shri Subbarao V. Tipimeni as other members. The said Committee has been entrusted with the responsibility of formulating a policy on nomination and remuneration of Directors, Key Managerial Personnel, Senior Management and other employees.

10. AUDITORS

M/s.Brahmayya & Co., Chartered Accountants, Guntur retire at the ensuing Annual General Meeting and are eligible for re-appointment for a period of 3 years.

11. COST AUDITORS

M/s. Narasimha Murthy & Co., Cost Accountants, Hyderabad have been appointed as Cost Auditors for Cost Audit of the Cost Accounting Records maintained by the Company for the year 2013-14. Cost Auditors'' Report in respect of financial year 2012-13 has been filed with the Ministry of Corporate Affairs on 13-09-2913 i.e. within the stipulated due date of 30-09-2013. They are eligible for appointment as Cost Auditors for the year 2014-15.

12. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of the Company for their sustained efforts and valuable contribution to the performance of the Company during the year. The Statement of Particulars of Employees pursuant to Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is annexed to and forms part of this report.

13. CORPORATE GOVERNANCE

The Company is committed to maintain the standards of Corporate Governance prescribed by the Securities and Exchange Board of India (SEBI) codified in Clause 49 of the Listing Agreement with Stock Exchanges. Report on Corporate Governance and Management Discussion and Analysis (MD & A) Report along with Compliance Certificate from Auditors on Corporate Governance are set out as separate Annexures to this report.

14. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act,1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed that

a) in the preparation of the annual accounts for the year ended March 31, 2014, the applicable Accounting Standards read with requirements set out under Schedule VI to the Companies Act, 1956, 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 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 as at March 31, 2014 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 Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts of the Company on a ''going concern'' basis.

15. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted and sincere cooperation the Company received from various departments of Central and State Governments, Bankers, Auditors, Dealers and Suppliers of the Company. The Directors also would like to express their grateful appreciation for the guidance and cooperation received from the Holding Company, M/s. The Andhra Sugars Limited, Tanuku.

For and on behalf of the Board of Directors Hyderabad, P NARENDRANATH CHOWDARY 19 July, 2014 Chairman


Mar 31, 2013

The Directors have pleasure in presenting the Thirty Fifth Annual Report together with the Audited Statement of Accounts for the year ended 31st March 2013.

(Rs. in Lakhs) 2012-13 2011-12

1. FINANCIAL RESULTS

Gross Sales 45346.36 43014.76

Less: Excise Duty 5160.22 4228.64

Net Sales 40186.14 38786.12

Processing Charges 578.60 360.82

Other Income 162.80 258.42

Total Income 40927.54 39405.36

Profit before Interest and Depreciation (PBID) 3677.97 3090.75

Interest (382.13) (342.11)

Depreciation (1001.38) (888.22)

Profit before Tax (PBT) 2294.46 1860.42

Provision for Current Tax (850.00) (600.00)

Deferred Tax (Provision) / Withdrawal 18.63 (10.05)

Excess/(Short) provision of Income Tax made in earlier years (1-03)

Profit after Tax 1462.06 1250.37

During the year the turnover of the company has increased marginally from Rs. 430.15 crores to Rs. 453.46 crores recording a 5.42% growth over the previous year. The Profit Before Interest and Depreciation (PBID) of Rs. 36.78 crores and Profit Before Tax (PBT) of Rs. 22.94 crores during the year have grown by 19.00% and 23.33% respectively over the previous year. The performance of the company during the first half of the financial year was significantly better than that of the corresponding period in the previous year. However, during the second half of the financial year the Company experienced unfavourable conditions due to decline in prices, slump in market conditions and severe competition. As a result, the production, sales and operations were adversely affected and consequently the overall outcome for the financial year 2012-13 was only marginally better than the previous year.

The income for the year also includes Rs.213.52 lakhs received from AP Transco for the power supplied in earlier years towards rate difference. An increase in revenue by Rs. 77.75 lakhs was achieved from wind mills due to improved wind velocity over the previous year.

The appropriations from the profit are as detailed below :

(Rs. in Lakhs)

2012-13 2011-12

Profit after Tax 1462.06 1250.37

Balance brought forward from previous year 1035.50 1745.28

Profit for appropriations 2497.56 2995.65

APPROPRIATIONS

Dividend 532.87 444.06

Provision for Tax on distributed profits @ 16.995% 90.56 72.03

Transfer to General Reserve 500.00 1444.06

Balance carried forward 1374.13 1035.50

Total 2497.56 2995.65

Authorised Capital 1000.00 1000.00

Paid up Capital 888.16 888.16

Reserves & Surplus 12697.54 11858.91

2. DIVIDEND

Considering the profitability of the Company, the Board of Directors are pleased to recommend for the approval of the shareholders of the Company for payment of dividend for the year ended 31-3-2013, at Rs. 6/- per equity share of Rs.10 each, which aggregates to Rs. 5,32,86,900/- on the 88,81,150 equity shares of the Company. In the previous year, the Company paid dividend at Rs.5/- per equity share of Rs. 10 each on 88,81,150 shares amounting to Rs.4,44,05,750.

3. OPERATIONS 2012-13 2011-12 MT MT

Production

(including processed on jobwork)

a) Fatty Acids 51179 49710

b) Toilet Soap 7346 7472

c) Soap Products 43967 40077

d) Glycerine 3735 2300

e) Industrial Oxygen (cubic meters) 464432 424554

f) Biomass Power (kWh 25799840 20246932

g) Wind Power (kWh) 16418310 13676554

Sales

a) Fatty Acids 23095 23364

b) Toilet Soap 2034 2259

c) Soap Products 36633 35727

d) Glycerine 3679 2322

e) Industrial Oxygen (cubic meters) 457681 408072

f) Biomass Power (kWh) 7831000 3561300

g) Wind Power (kWh) 16418310 13676554

4. OUTLOOK

Fatty Acids and Soap

In the last annual report the members were informed that the company commissioned new equipment under expansion cum modernization programme implementing latest technology and increasing plant capacities. However, the production figures for the year under consideration could not be improved over the previous year due to unfavourable market conditions. Yet, the investment in new upgraded plant and machinery helped the company to sustain the bottom lines through reduced processing costs and improved efficiency.

The recession in European markets in recent times has adversely affected the business prospects of some of our major customers and as a result their offtake has come down. Stearic Acid and Soap Noodles markets were also disturbed by new entrants offering their products at low rates to get an entry into the market but these prices may not prevail for long and are expected to settle at a reasonable level. The overall market conditions are expected to improve soon from the slow down since October, 2012.

Biomass Power Plant

The extremely bleak power scenario at present had never been experienced in the past. Yet, we were able to carry out our operations normally only because of Biomass Cogeneration Captive Power Plant. The industry is not allowed to draw extra power even at additional cost since 7th November 2012 after the introduction of Revised Restriction and Control (R&C) measures by Andhra Pradesh Electricity Regulatory Commission (APERC). The company obtained No Objection Certificate (NOC) for purchase of power under Open Access from third parties as and when required to meet the exigencies. The capacity utilization of Biomass Power Plant has improved considerably during the year to 60% over the previous year at 47%, due to the extra efforts put in to procure biomass fuels. Since the continuous running of power plant is very essential, biomass fuels are being purchased at a higher cost.

During the year the company has received Rs.213.52 lakhs from Andhra Pradesh Power Coordination Committee towards differential tariff amount for the power exported during the period I st April 2004 to 31st March 201 las per the interim orders of the Hon''ble Appellate Tribunal for Electricity (ATE) dt. 1-2-2012. The ATE passed final orders dt.20-12-2012 giving directions to APERC to finalise the tariff which is yet to be complied with.

Wind Energy Generators (WEGs)

Power generation from the four wind energy generators (WEGs) of the Company aggregating to 6.3 Mw capacity has improved during the current year to 164.18 lakh units as against the previous year at 136.77 lakh units because of improved wind velocity. In the last two years power generation from the wind mills was much lower than expected due to prolonged winter season and low wind velocity.

Wind energy is a boon to the power starved Tamil Nadu State Government. Yet, the Tamil Nadu Electricity Generation and Distribution Corporation Limited (TANGEDCO) has been delaying payments for power supplied to it for more than a year. As on 31 st March, 2013, Rs.450.33 lakhs is due for payment by TANGEDCO. Indian Wind Power Association in which the Company is a Member, took up the issue and the Appellate Tribunal for Electricity (ATE) directed TANGEDCO to pay interest at 12% per annum on delayed payments. Inspite of these Orders TANGEDCO pays neither the interest nor the principal in time which is causing problems to the industry.

Credit Rating

The Credit Rating Agency CARE reaffirmed the credit rating of the Company ''CARE A '' (adequate degree of safety regarding timely servicing of financial obligations) for long term facilities and ''CARE Al'' (strong degree of safety regarding timely payment of financial obligations) for short term facilities from banks.

5. CONSERVATION OF ENERGY & ENVIRONMENTAL SAFETY

a) New Electrolyzer with improved technology installed, to save on electricity in producing hydrogen gas.

b) Fatty Acid Distillation Plants 5 & 6 interconnected, to reduce steam consumption for vacuum creation.

c) Water Vapour in Splitting Plant 2 & 3 condensed to water, to recover heat and to reuse the same water.

d) Vapor Liquid Separator system adopted in Batch Neutralisation and Drying Plant, to improve production of Noodles.

e) Power Control Panel Room (Power House-1) air-cooled with Air Handling Unit, to reduce heat emissions of panel and to avoid premature failure of changeover switches & breakers.

6. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year under review, the Company earned foreign exchange equivalent to Rs. 1,30,50,778 (previous year- Rs.2,18,08,672/-). The exports have come down because of competition from countries like Malaysia and Indonesia for supply of similar products. The Company imported raw materials and equipment during the year resulting in foreign exchange outgo equivalent to Rs. 43,58,19,914 (previous year Rs. 54,25,70,176/-).

7. FINANCE

The Company availed working capital facilities under consortium arrangement from Andhra Bank and State Bank of India and the accounts are in order. The Company complied with all the legal requirements and there are no outstanding statutory dues as on 31st March, 2013.

8. FIXED DEPOSITS

The Company has accepted Fixed Deposits from the public and shareholders during the year under review. There are no matured and unclaimed deposit as on 31st March 2013.

9. DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Shri M. Gopalakrishna, I.A.S. (Retd.), Shri Subbarao V. Tipimeni and Shri K.Srinivasa Rao, Directors, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Shri R Venkateswara Rao was appointed as Additional Director of the Company with effect from 29th September 2012 in accordance with Section 260 of the Companies Act, 1956, read with Article 113 of the Articles of Association of the Company. He will be holding office until the date of the forthcoming Annual General Meeting.

10. AUDITORS

M/s.Brahmayya & Co., Chartered Accountants, Guntur retire at the ensuing Annual General Meeting and are eligible for reappointment.

11. COST AUDITORS

Cost Audit of the Cost Accounting Records maintained by the Company in respect of the products Fatty Acids and Electricity is required for the year 2012-13. Accordingly for conducting the cost audit, M/s. Narasimha Murthy & Co., Cost Accountants, Hyderabad were appointed as Cost Auditors for both the products.

12. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of the Company for their sustained efforts and valuable contribution to the performance of the Company during the year. The Statement of Particulars of Employees pursuant to Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is annexed to and forms part of this report.

13. CORPORATE GOVERNANCE

The Company is committed to maintain the standards of Corporate Governance prescribed by the Securities and Exchange Board of India (SEBI) codified in Clause 49 of the Listing Agreement with Stock Exchanges. Report on Corporate Governance and Management Discussion and Analysis (MD & A) Report along with Compliance Certificate from Auditors on Corporate Governance are set out as separate Annexures to this report.

14. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed that

a) in the preparation of the annual accounts for the year ended March 31, 2013, the applicable Accounting Standards read with requirements set out under Schedule VI to the Companies Act, 1956, 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 March 31, 2013 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 Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts of the Company on a ''going concern'' basis.

15. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted and sincere cooperation the Company received from various departments of Central and State Governments, Bankers, Auditors, Dealers and Suppliers of the Company. The Directors also would like to express their grateful appreciation for the guidance and cooperation received from the Holding Company, M/s. The Andhra Sugars Limited, Tanuku.

For and on behalf of the Board of Directors

Hyderabad, P NARENDRANATH CHOWDARY

25th May, 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the Thirty Fourth Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2012.

(Rs. in Lakhs)

2011-12 2010-11

1. FINANCIAL RESULTS

Gross Sales 43014.76 41353.74

Less: Excise Duty 4228.64 3565.51

Net Sales 38786.12 37788.23

Processing Charges 360.82 507.95

Other Income 258.42 364.06

Total Income 39405.36 38660.24

Profit for the year before Interest and Depreciation 3090.75 3790.77

Interest (342.11) (262.96)

Depreciation (888.22) (682.48)

Profit before Tax 1860.42 2845.33

Provision for Current Tax (600.00) (830.00) (Rs. in Lakhs)

2011-12 2010-11

Deferred Tax (Provision) / Withdrawal (10.05) (86.53)

Excess/(Short) provision of Income Tax made in earlier years _ 13.95

Profit after Tax 1250.37 1942.75

The Gross Sales during the year marginally increased from Rs.413.54 crores to Rs.430.15 crores recording a 4% growth over the previous year The Profit Before Interest and Depreciation (PBID) of Rs.31.05 crores and Profit Before Tax (PBT) of Rs. 18.60 crores during the current year have come down by 18% and 35% respectively over the previous year. The Financial Years 2009-10 and 2010-11 were rewarding years for the Company in terms of demand for the products and capacity utilization which resulted in PBT of Rs.32.02 crores and Rs.28.45 crores respectively. During the current year the company could not maintain the operations at such high levels due to lower demand for fatty acids and soap products in toilet soap industry Increase in cost of raw materials without corresponding increase in selling prices, lower revenue from wind mills due to low wind velocity, rise in finance expenses due to borrowings for expansion, higher provision for depreciation due to commissioning of new plants etc have all resulted in substantial fall in PBT of the company. As a result the Profit After Tax (PAT) during the current year stood at Rs. 12.50 crores as against Rs. 19.43 crores a year ago registering a 36% fall.

During the year the Company issued Bonus Shares to the shareholders at one fully paid equity share of Rs. 10 each for every one share held by them as on the Record Date of 28-09-2011. Consequently the equity share capital of the Company rose from 44,40,575 equity shares of Rs. 10 each aggregating to Rs.4,44,05,750 to 88,81,150 equity shares of Rs. 10 each aggregating to Rs.8,88,11,500.

The appropriations from the profit are as detailed below :

(Rs. in Lakhs)

2011-12 2010-11

Profit after Tax 1250.37 1942.75

Balance brought forward from previous year 1745.28 1215.41

Profit for appropriations 2995.65 3158.16

APPROPRIATIONS

Dividend 444.06 355.25

(Rs. in Lakhs)

2011-12 2010-11

Provision for Tax on distributed profits @ 16.225% on dividend 72.03 57.63

Transfer to General Reserve 1444.06 1000.00

Balance carried forward 1035.50 1745.28

Total 2995.65 3158.16

Authorised Capital 1000.00 500.00

Paid up Capital 888.16 444.11

Reserves & Surplus 11858.91 11568.69

2. DIVIDEND

Considering the profitability of the Company, the Board of Directors is pleased to recommend for the approval of the shareholders of the Company for payment of dividend for the year ended 31 -3-2012, at Rs. 5 per equity share of Rs. 10 each, which aggregates to Rs.4,44,05,750 on the 88,81,150 equity shares in the share capital of the Company. In the previous year the Company paid dividend at Rs.8 per equity share of Rs. 10 each on 44,40,575 shares (before bonus issue at 1:1) amounting to Rs. 3,55,24,600.

3. OPERATIONS 2011-12 2010-11 MT MT

Production

(including processed on job work)

a) Fatty Acids 49710 57485

b) Toilet Soap 7472 9630

c) Soap Products 40077 48229

d) Glycerine 2300 1704

e) Industrial Oxygen (cubic meters) 424554 426157

f) Biomass Power (kwh) 20246932 19060975

g) Wind Power (kwh) 13676554 15762891



2011-12 2010-11 MT MT

Sales

aj Fatty Acids 23364 25708

b) Toilet Soap 2259 1682

c) Soap Products 35727 42810

d) Glycerine 2322 1463

e) Industrial Oxygen (cubic meters) 408072 414458

f) Biomass Power (kwh) 3561300 4906300

g) Wind Power (kwh) 13676554 15762891

4. OUTLOOK

Fatty Acids and Soap

Production and sales of fatty acids have come down during the current year due to absence of exports of fatty acids and lower captive consumption of fatty acids for production of soap and soap products. The offtake of fatty acids and soap noodles by some of the major customers in the toilet soap industry was low because of sluggishness in the toilet soap market. The market for fatty acids consumed in industries, other than toilet soap, is encouraging and expected to grow further.

During the year, the company commissioned Hydrogenation Plant, Continuous Saponificaton & Soap Drying Plant and Glycerine Refining Plant, all with latest technologies, thereby completing the expansion cum modernization program of fatty acid, soap and glycerine plants. As a result, the company is now able to produce superior quality products, increase product range, reduce consumption of utilities and maintain additional production facilities to meet unexpected demands from the customers. The performance of the company is expected to improve once the market for toilet soap improves.

Biomass Power Plant

The availability of fuels continues to be the critical factor for running the 6 Mw Biomass Cogeneration Captive Power Plant. Collection of field residues like cotton stalk, chili stalk etc., is becoming difficult due to shortage of labour and increase in labour cost. Hence the plant was run at lower capacity to meet the steam and power requirements of process plants through out the year. Fuels are now being purchased at a higher price to procure more quantity and improve PLF

On the directions of the Hon'ble Supreme Court, the three member bench of Andhra Pradesh Electricity Regulatory Commission (APERC), reconsidered the issue of fixation of price for purchase of renewable energy by AP Transco and passed three different and independent orders as a result of which none of the orders could be enforceable. Hence, Biomass Energy Developers Association (BEDA) again filed an appeal before the Appellate Tribunal for Electricity (ATE) which passed interim orders to give effect to the orders of the Chairman of APERC. The appeal filed by AP Transco on these orders before the Hon'ble Supreme Court was dismissed. Therefore it is expected that the interim orders of ATE will be implemented and the company will receive the differential amount of about Rs. 2.3 crores soon.

The Central Electricity Regulatory Commission (CERC) had notified regulations for issue of Renewable Energy Certificates (RECs) to implement the mechanism envisaged in the Electricity Act, 2003 for encouraging generation and cogeneration of power from renewable energy sources like biomass, bagasse, wind, solar, mini hydel, municipal waste etc. The scheme if implemented strictly is expected to generate an additional revenue of about Rs. 2.4 crores per year to the company by sale of RECs obtained from capative consumption of renewable energy.

The Company is able to run processing plants continuously only on account of captive power generation plant without getting affected by the power cuts imposed by the Government due to power shortage.

Wind Energy Generators (WEG)

Power generation from the four wind energy generators (WEGs) of the Company aggregating to 6.3 Mw capacity continues to be much lower than expected for the second year in a row at 136.80 lakh units as compared to 157.63 lack units in the previous year because of low wind velocity and prolonged winter season. The low wind velocity is a temporary phenomenon due to wind cyles and the generation is expected to improve in the coming years.

While wind energy generators are facing the problem of low generation for the past two years, the Tamil Nadu Electricity Generation and Distribution Corporation Limited (TANGECO) has been delaying payments for power supplied to it for more than a year. Indian Wind Power Association in which the Company is a Member took up the issue and the Appellate Tribunal for Electricity (ATE) directed TANGEDCO to pay interest at 12% per annum on delayed payments.

Credit Rating

The Credit Rating Agency CARE reaffirmed the credit rating of the Company 'CARE A ' (adequate degree of safely regarding timely servicing of financial obligations) for long term facilities and CARE A11 (strong degree of safety regarding timely payment of financial obligations) for short term facilities from banks

5. CONSERVATION OF ENERGY & ENVIRONMENTAL SAFETY

During the year, the following actions were taken for conservation of energy and environmental safety.

a. Vacuum Pumps in Drying Plant installed in place of Steam Jet Ejectors to reduce consumption of steam.

b. About 2500 Eucalyptus saplings planted in the factory premises, in addition to over 2000 trees existing of other varieties, for the development of green belt.

c. Compact Fluorescent Lamp (CFL) fittings used in new Glycerine Plant for energy conservation.

d. Environment friendly chilled water based Fan Coil Units (FCUs) used in certain areas for cooling, instead of conventional Air Conditioning Units, to reduce energy consumption.

e. Glycerine Distillation Plant installed with Lurgi technology to reduce waste generation.

f. Existing R.O. Plant modified to increase the production from 400 mVday to 500 mVday and to conserve power.

g. Effluent water generation reduced by collection and reuse of condensate water.

h. Bag filter installed at coal handling to reduce atmospheric emissions.

i. G.l. sheet fencing arranged at Husk yard to reduce air pollution.

6. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year under review, the Company earned foreign exchange equivalent to Rs.2,18,08,672 (previous year Rs.36,59,13,419). The exports have come down drastically because of higher raw-material prices and severe competition from countries like Malaysia and Indonesia for supply of similar products exported by the Company. The Company imported raw materials and equipment during the year resulting in foreign exchange outgo equivalent to Rs.54,25,70,176 (previous year Rs.91,67,71,890).

7. FINANCE

The Company availed working capital facilities under consortium arrangement from Andhra Bank and State Bank of India and the accounts are in order. The term loans and working capital facilities availed from Axis Bank, HDFC Bank and ICICI Bank were repaid during the year

8. FIXED DEPOSITS

The Company has accepted Fixed Deposits from the public and shareholders during the year under review. There are no matured and unclaimed deposit as on 31st March 2012

9. DIRECTORS

Dr. Mullapudi Harischandra Prasad, who steered the company to the present status for almost a quarter of the century, passed away on 03-09-2011 and Shri P Narendranath Chowdary was elected in his place as Chairman of the Company by the Board of Directors. In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Shri Y. Narayanarao Chowdary and Shri VS. Raju, Directors retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Shri M. Mrutyumjaya Prasad was appointed as Additional Director of the Company with effect from 5th November 2011 in accordance with Section 260 of the Companies Act, 1956, read with Article 113 of the Articles of Association of the Company. He will be holding office until the date of forthcoming Annual General Meeting.

10. AUDITORS

M/s. Brahmayya & Co., Chartered Accountants, Guntur retire at the ensuing Annual General Meeting and are eligible for re-appointment.

11. COST AUDITORS

Cost Audit of the Cost Accounting Records maintained by the Company in respect of the products Soap, Industrial Oxygen and Electricity is reguired for the year 2011-12. Accordingly, for conducting the cost audit, M/s. Narasimha Murthy & Co., Cost Accountants, Hyderabad were appointed as Cost Auditors for all the three products.

12. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of the Company for their sustained efforts and valuable contribution to the performance of the Company during the year. The Statement of Particulars of Employees pursuant to Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is annexed to and forms part of this report.

13. CORPORATE GOVERNANCE

The Company is committed to maintain the standards of Corporate Governance prescribed by the Securities and Exchange Board of India (SEBI) codified in Clause 49 of the Listing Agreement with Stock Exchanges. Report on Corporate Governance and Management Discussion and Analysis (MD & A) along with Corporate Governance Compliance Certificate from Auditors are set out as separate Annexures to this report.

14. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that

a. in the preparation of the annual accounts for the year ended March 31, 2012, the applicable Accounting Standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

b. the Directors have selected such accounting policies that are reasonable, prudent and applied them consistently and made judgments and estimates so as to give a true and fair view of the state of affairs of the Company as at March 31, 2012 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 Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d. the Directors have prepared the annual accounts of the Company on a 'going concern' basis.

15. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted and sincere cooperation the Company received from various departments of Central and State Governments, Bankers, Auditors, Dealers and Suppliers of the Company. The Directors also would like to express their grateful appreciation for the guidance and cooperation received from the Holding Company, M/s. The Andhra Sugars Limited, Tanuku.

For and on behalf of the Board of Directors

Dokiparru, P NARENDRANATH CHOWDARY

26th May, 2012 Chairman


Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting the Thirty Third Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2011.

(Rs. in Lakhs)

2010-11 2009-10

1. FINANCIAL RESULTS

Gross Sales 41353.74 31819.17

Less : Excise Duty 3608.87 2183.96

Net Sales 37744.87 29635.21

Processing Charges 507.95 531.15

Other Income 364.06 343.58

Total Income 38616.88 30509.94

Profit for the year before Interest and Depreciation 3790.77 3773.12

Interest (262.96) (55.25)

Depreciation (682.48) (510.86)

Profit before Tax 2845.33 3207.01

Provision for Current Tax (830.00) (1100.00)

Deferred Ta x (Provision) / Withdrawal (86.53) 24.50

Excess/(Short) provision of Income Tax made in earlier years 13.95 5.19

Profit after Tax 1942.75 2136.70

The Company achieved a sales turnover of Rs.413.54 crores during the year, an increase by 30% over the previous year turnover of Rs.318.19 crores. Marginal growth in quantity of production and sales apart, increase in turnover is mostly due to rise in prices of finished goods necessitated by increase in prices of raw materials. The profit before interest and depreciation remained almost same in spite of rise in turnover largely due to reduced margins. The Company could not pass on the entire burden in price rise in raw materials to its customers due to stiff competition in the market as was the case with the rest of the industry. The decrease in interest income and increase in interest expense is due to utilization of surplus cash in deposits and bank borrowings under modernization cum expansion programme of fatty acid, toilet soap and glycerine plants. Depreciation expense has also gone up because of commissioning of some of the plants under the above programme. Hence, though profit before interest and depreciation is comparable with last year, Profit Before Tax (PBT) has come down considerably.

The appropriations from the profit are as detailed below :

(Rs. in Lakhs)

2010-11 2009-10

Profit after Tax 1942.75 2136.70

Balance brought forward from previous year 1215.41 596.52

Profit for appropriations 3158.16 2733.22

APPROPRIATIONS

Dividend 355.25 444.06

Provision for Tax on distributed profits @ 16.2225% on dividend 57.63 73.75

Transfer to General Reserve 1000.00 1000.00

Balance carried forward 1745.28 1215.41

Total 3158.16 2733.22

Authorised Capital 500.00 500.00

Paid up Capital 444.11 444.11

Reserves & Surplus 11568.69 10038.82

2. DIVIDEND

Considering the profitability of the Company, the Board of Directors are pleased to recommend for the approval of the shareholders of the Company for payment of dividend for the year ended 31-3-2011, at Rs.8/- per equity share of Rs.10/- each, which aggregates to Rs.3,55,24,600/- on the 44,40,575 equity shares in the share capital of the Company. In the previous year the Company paid dividend at Rs.10/- per equity share of Rs.10/- each.

3. OPERATIONS 2010-11 2009-10

MT MT

Production (including processed on jobwork)

a) Fatty Acids 57485 55505

b) Toilet Soap 9630 9883

c) Soap Products 48229 43920

d) Glycerine 1704 1352

e) Industrial Oxygen (cubic meters) 426157 359572

f) Biomass Power (kwh) 19060975 25364665

g) Wind Power (kwh) 15762891 13817819

Sales

a) Fatty Acids 25708 27089

b) Toilet Soap 1682 1665

c) Soap Products 42810 38763

d) Glycerine 1463 1399

e) Industrial Oxygen (cubic meters) 414458 356317

f) Biomass Power (kwh) 4906300 9178600

g) Wind Power (kwh) 15762891 13817819

4. OUTLOOK

Fatty Acids and Soap

Production and sales of fatty acids, soap products and toilet soap during the year should have been much better than the figures posted but for the lower demand since February 2011. It could be due to rise in prices, high inventory with the customers caused by heavy purchases in anticipation of further increase in prices, slow down in industry etc. Under expansion cum modernization programme, installation and commissioning of Bleacher, Distillation Plant, Soap Finishing Line have been completed and Hydrogenation Plant, Continuous Saponification & Soap Drying Plant are under advanced stage and expected to be completed by July 2011. Glycerine Plant for processing crude to Refined Glycerine, a by-product from fatty acid splitting plant, not being a constraint for running other plants was taken up last and is expected to be completed by October 2011. On commissioning of these plants the Company will have on hand additional capacity with improved technology for producing additional range of superior quality products. The delay in implementation of some of the plants is due to prolonged rainy season and shortage of labour in 2010. Although the industry in general and toilet soap industry in particular may go through a rough patch in the initial part of the year it is expected to return to normalcy soon and the demand for fatty acids and soap noodles will pick up.

Biomass Power Plant

The availability of fuels continues to be the constraint in capacity utilization of Biomass Power Plant. Unexpected failure of turbine resulting in stoppage of power generation for a considerable period and running of power plant at lower capacity due to uncertainty of fuel availability, slipped generation to 190.61 lakh kwh from 224.50 lakh kwh in the previous year accounting for capacity utilization of less than 50%. While the fuel costs have gone up power purchase price by AP Transco came down from Rs.3.80 per kwh to Rs.3.54 per kwh, this being the price fixed by APERC for the biomass power plants which have completed 10 years of generation for surplus power exported.

The decision on the appeal filed by the Company before the Supreme Court for payment of fixed costs for supplies over 2.4 Mw is still pending. The legal action initiated by the Biomass Energy Developers Association (BEDA) on behalf of its members for increase in power purchase price by AP Transco before the Supreme Court was undecided as the Court redirected the issue for reconsideration by APERC.

The underlying positive factor of this plant is that it being a captive power generation plant, the Company is able to run the processing plants and meet the production targets effectively without getting affected by power cuts / interruptions during power shortage.

Wind Energy Generators (WEG)

There are 4 wind energy generators (WEGs) of the Company aggregating to 6.3 Mw all set up in the State of Tamil Nadu. The power generation during the year under review is 157.63 lakh units for installed capacity of 6.3 Mw as against 138.18 lakh units in the previous year for installed capacity of 4.8 Mw. The generation per Mw during the year under review was extremely low because of prolonged rainy season in which the wind velocity drops. The low wind velocity is a temporary phenomenon due to wind cycles and the generation is expected to improve in the next year.

Credit Rating

The Company obtained credit rating of CARE A (adequate safety for timely servicing of debt obligation) for long term facilities and PRI (strong capacity for timely repayment and carry lowest credit risk) for short term facilities from Banks through the credit rating agency CARE.

5. CONSERVATION OF ENERGY & ENVIRONMENTAL SAFETY

During the year, the following actions were taken for conservation of energy and environmental safety.

a) Fatty Acid Distillation Plant-6 is modified to reduce consumption of utilities and material changeover time.

b) Steam driven vapour absorption chilling unit of 415 TRU (energy efficient) is procured to replace Electrical Chiller & low efficiency low capacity vapour absorption chilling unit.

c) Energy efficient steam driven condensate pump is installed for chilling unit to recover steam condensate.

d) Bag filters have been installed for Thermic Fluid Heaters and low pressure steam boiler to reduce atmospheric emissions.

e) Soap lines are automated wherever possible to reduce manpower and energy consumption.

6. FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year under review, the Company exported Fatty Acids to Sri Lanka and earned foreign exchange equivalent to Rs.36,59,13,419/- (previous year Rs.44,61,48,528/-). The Company imported raw materials and equipment during the year resulting in foreign exchange outgo equivalent to Rs.91,67,71,890/- (previous year Rs.75,91,05,662/-).

7. FINANCE

The Company availed working capital facilities under consortium arrangement from Andhra Bank, State Bank of India and separately from Axis Bank and the accounts are in order. To meet part of the funds requirement for working capital as well as for expansion cum modernization programme, the Company also availed unsecured short term loans from HDFC Bank and ICICI Bank.

8. FIXED DEPOSITS

The Company has accepted Fixed Deposits from the Public and Shareholders during the year under review. There are no matured and unclaimed deposit as on 31st March, 2011.

9. DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company, Shri M. Thimmaraja and Shri K. Srinivasa Rao, Directors retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

10. AUDITORS

M/s. Brahmayya & Co., Chartered Accountants, Guntur retire at the ensuing Annual General Meeting and are eligible for re-appointment.

11. COST AUDITORS

The Company was directed by the Central Government for Cost Audit of the Cost Accounting Records maintained by the Company in respect of the products Soap and Industrial Oxygen for the year 2010-11. Accordingly for conducting the cost audit, M/s. Narasimha Murthy & Co., Cost Accountants, Hyderabad were appointed as Cost Auditors for both the products.

12. PERSONNEL

The Directors wish to place on record their appreciation to all the employees of the Company for their sustained efforts and valuable contribution to the performance of the Company during the year. The Statement of Particulars of Employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is annexed to and forms part of this report.

13. CORPORATE GOVERNANCE

The Company is committed to maintain the standards of Corporate Governance prescribed by the Securities and Exchange Board of India (SEBI) codified in Clause 49 of the Listing Agreement with Stock Exchanges. Report on Corporate Governance and Management Discussions and Analysis (MD & A) along with Corporate Governance Compliance Certificate from Auditors are set out as separate Annexures to this report.

14. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed that -

a) in the preparation of the annual accounts for the year ended March 31, 2011, the applicable Accounting Standards read with requirements set out under Schedule VI to the Companies Act, 1956, 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 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 as at March 31, 2011 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 Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) the directors have prepared the annual accounts of the Company on a going concern basis.

15. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the wholehearted and sincere cooperation the Company received from various departments of Central and State Governments, Bankers, Auditors, Dealers and Suppliers to the Company. The Directors also would like to express their grateful appreciation for the guidance and cooperation received from the Holding Company, M/s. The Andhra Sugars Limited, Tanuku.

For and on behalf of the Board of Directors

Dokiparru Dr. MULLAPUDI HARISCHANDRA PRASAD

28th May, 2011 Chairman







 
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