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Directors Report of KCP Sugar & Industries Corporation Ltd.

Mar 31, 2015

Dear Members,

The Directors present their 20th Annual Report and the audited statement of accounts for the year ended 31st March 2015. The financial statements have been presented in the new format in accordance with the changes brought about by the Revised Schedule III to the Companies Act, 2013.

I. FINANCIAL RESULTS:

For the For the Year ended Year ended 31.03.2015 31.03.2014

Physical Performance

Cane crushed - in Tonnes 10,95,339 10,59,851

Sugar bagged - In Quintals 10,16,945 10,55,750

Financial Performance - Rs. Crores

Turnover 515.52 443.30

Other Income 8.94 6.91

Profit Before Tax (27.54) 33.28

Profit After Tax (16.17) 27.66

Surplus from Previous Year 106.27 92.89

Amount available for appropriation 90.10 120.55

Appropriations

Transfer to General Reserve -- 3.00

Proposed Dividend 1.13 9.64

Tax on proposed Dividend 0.23 1.64

Carried forward 88.74 106.27

2. PERFORMANCE:

During the financial year under review your Company recorded a Turnover of Rs. 515.52 crores (Prev. Year: Rs. 443.30 cr.) including Excise Duty of Rs. 12.96 crores (Prev. Year: Rs.10.86 cr.) and Inter-divisional transfers of Rs. 108.00 crores (Prev. year: Rs.93.04 cr.). The loss before finance cost and depreciation is Rs. 13.02 crores. Loss before tax is Rs. 27.54 crores and after adjustments relating to payment of Income Tax pertaining to earlier years and Deferred Tax, the Loss after tax is Rs. 16.17 crores.

The decrease in profit is due to lesser realisation besides increase cost of production.

3. DIVIDEND:

The Board of Directors recommends a dividend of Re.0.10 per equity share of face value of Re.1/- each on the Paid-up Equity Capital for the year ended 31.03.2015 as against Re.0.85 per equity share, approved for the previous year ended 31.03.2014. The dividend recommended by your Directors, if approved at the ensuing Annual General Meeting by the Shareholders would be paid within the stipulated time.

4. SHARE CAPITAL AND RESERVES:

As the Company sustain loss in the financial year under review, no amount was transferred to General Reserve, and the same stood reduced to Rs.112.09 crores on account of transitional effect arising out of re-computation of depreciation on various Assets in terms of Part 'C' of Schedule II of the Companies Act, 2013.

The total Reserves and Surplus was reduced to Rs.204.20 crores as on 31.03.2015 (as against Rs. 224.28 crores as on 31.03.2014) on account of loss (Rs.16.17 cr) and transitional effect of depreciation (Rs.3.91 cr.).

6. FUTURE PLANS:

- To identify new technologies wherever it is possible and makes use of the same for improved results.

- Complete mechanisation of sugarcane cultivation and harvesting in order to reduce the excessive dependence on manpower and reduce cost.

- In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

- Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

7. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

8. DIRECTORS:

Shri. Vinod R. Sethi, Director, retires by rotation at this AGM and is eligible for reappointment. He is proposed to be reappointed as a Director at this AGM. The Board recommends his reappointment and accordingly, resolution seeking approval of members for his reappointment has been included in the Notice for the forthcoming Annual General Meeting along with his brief profile.

9. PARTICULARS OF EMPLOYEES:

Statement required under Section 197 of the Companies Act, 2013 read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is not attached to this Report as none of the employees was in receipt of remuneration as prescribed under this Section and Rules.

10. DIRECTOR'S RESPONSIBILITY STATEMENT:

As required by Section 134 of the Companies Act, 2013, your Directors certify as follows:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there were no material departures there-from;

ii. that 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 ended 31st March 2014 and of the Profit of the Company for that year;

iii. that the Directors had 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;

iv. that the Directors had prepared the annual accounts on a going concern basis.

v. That the directors had laid down internal financial controls to be followed by the Company and that such financial controls are adequate and are operating effectively.

vi. That 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.

11. CREDIT RATING:

Credit Analysis & Research Ltd (CARE) has upgraded the Credit Rating on your Company as 'CARE 'A' (Single A) for long term bank facilities and 'CARE A1' (A One) for short term bank facilities assigned to your Company for the current year. Measured through industry yardstick these ratings are considered to be having adequate degree of safety and very strong degree of safety respectively, for a sugar mill.

12. ISO CERTIFICATION:

Your Company has been certified consecutively for the past seven years under BS EN ISO 14001:2004, BS EN ISO 9001:2000, and OHSAS 18001:2007 for Manufacture of sugar, associated products and site activities, and Occupational Health and Safety Management system by Lloyd's Registry Quality Assurance Limited.

13. RISK MANAGEMENT:

The Company has an effective risk management under which all probable risks are periodically identified, assessed and acted upon to minimize and mitigate their impact. These processes are subject to periodical review by the Management. Some of the risks identified are enumerated below:

i. Raw Material Risk:

Sugarcane being the main raw material for sugar, any disturbance in its timely availability will have a substantial impact on the operational cost. This in turn has a significant adverse effect since the market value does not factor the variable cost determined by the climatic conditions and the cane economics.

Mitigation Measure:

The Company always maintains healthy relationship with its farmers. It is one among very few companies in sugar industry paying its farmers within the stipulated time. The risk of raw material short supply is mitigated to a large extent by the goodwill and reputation for ethical dealings earned by the Company since inception. The experiments in farm mechanisation, drip irrigation, improved cane varieties, carefully monitored scheduling of cane planting and harvesting boost the confidence of the Company in mitigation of the risk.

ii. Policy Risk:

Central and State governments regulate the cane policies and they have a larger control on this industry by determining the raw material price and also influence the sugar selling price. The controls exercised by the Union and State governments over command area demarcation from time to time. Molasses movement control.

Mitigation Measure:

The Company is a member of South Indian Sugar Mills Association (SISMA) and works closely with it towards developing appropriate policy recommendations to represent the industry needs to the government. Formulation of policy on Ethanol doping, review of cogeneration policy, and review of sugar weightage in WPI are some of the issues addressed in close liaison with SISMA.

iii. Cyclicality / Commodity Risk:

The sugar price is determined by the cyclicality of the sugar business and hence it affects the profitability. Sugar being a commodity traded across the world, its price is influenced by the various factors including the normal supply and demand.

Mitigation Measure:

The Company takes the following measures, which enable the Company to insulate itself against price risk. ^ More focus on value-added downstream products ^ Integration of sugar with cogeneration power and alcohol.

14. CORPORATE GOVERNANCE REPORT, MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER INFORMATION REQUIRED UNDER COMPANIES ACT, 2013 AND LISTING AGREEMENT:

As per Clause 49 of the Listing Agreement with the Stock Exchanges Corporate Governance Report with Auditor's Certificate thereon and Management Discussion and Analaysis Report are attached and form a part of this Report.

Various information to be disclosed under the Companies Act and the Listing Agreement are set out in Annexure I and forms a part of this Report.

15. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The particulars as prescribed under Section 134 of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are set out in Annexure II of this Report.

16. CORPORATE SOCIAL RESPONSIBILITY (CSR):

The CSR policy of the Company and the details about the measures taken by the Company on CSR activities during the financial year as required under Companies (Corporate Social Responsibility Policy) Rules, 2014, have been disclosed in Annexure III.

17. BOARD EVALUATION:

During the financial year, the Board of Directors adopted a formal mechanism for evaluation of its performance as well as that of its Committees and individual Directors including Chairman of the Board. Through a structured evaluation process covering various aspects of the Board's functioning such as governance issues, performance of specific duties and obligations, experience and competencies. Separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board based on the parameters such as attendance at Board / Committee Meetings, contribution at Board / Committee Meetings and guidance given to Management and also based on questionnaire and feedback from all the Directors as a whole, Committee and self-evaluation.

A separate meeting of Independent Directors was convened on 13.11.2014 which reviewed the performance of the Board as a whole, the Non-Independent Directors and the Chairman of the Board. After the conclusion of the Independent Directors Meeting, the feedback of Independent Directors were discussed by the Chairman of Nomination and Remuneration Committee with the Chairman of the Board, covering the performance of the Board as a whole, performance of Non-Independent Directors and the performance of Chairman of the Board.

The performance evaluation of the Board was carried out based on the following:

^ Board's structure and composition

^ Establishment and Delineation of responsibilities to Committees

^ Efficacy of communication with external stakeholders

^ Effectiveness of Board process, information and functioning.

18. INDUCTION AND TRAINING OF BOARD MEMBERS:

On induction to the Board, the concerned director is issued a letter of appointment which spells out in detail, the terms of appointment, duties, responsibilities and other commitments. Each newly appointed director is taken through a formal induction programme which includes interactive sessions with Executive Committee members, functional heads and visit to the manufacturing site. The Managing Director and the Chairman of the Board apprise the appointee regarding the subtle aspects of Company's manufacturing, marketing, finance and other activities. The CFO and the Company Secretary brief the appointee regarding financial, legal and compliance related responsibilities.

19. FIXED DEPOSITS:

As on 31.03.2015 your Company had held deposits of Rs. 33.04 crores as against Rs. 35.59 crores as on 31.03.2014. As at 31.03.2015, there were matured and unclaimed deposits amounting to Rs. 0.44 crores in respect of 67 deposits. As on the date of this report, amount of unclaimed deposits is Rs.0.37 crores.

In compliance with the provisions of Investors Education and Protection Fund constituted under Section 124 of the Companies Act, 2013, the Company has transferred two deposits amounting to Rs.55,000/- which remained unclaimed beyond the period of seven years from the date of maturity to the Investor Education and Protection Fund.

20. SUBSIDIARY COMPANIES:

Your Company has two wholly-owned Subsidiaries, viz, The Eimco-K.C.PLimited and KCP Sugars Agricultural Research Farms Limited. There are no Associated Companies within the meaning of section 2(6) of the Companies Act, 2013 and there has been no material change in the nature of business of the subsidiaries.

The income from the sale of products, services and other income of your wholly owned subsidiary The Eimco-K.C.PLtd was at Rs. 35.83 crores (PY Rs. 52.01 crores) with a reduced profit of Rs. 2.06 crores (PY Rs. 5.44 crores) for the year ended 31.03.2015.

The other wholly owned subsidiary, KCP Sugars Agricultural Research Farms Ltd, has reported an Income from the sale of products, services and other income of Rs. 0.28 crores for the financial year ended 31.03.2015 as against Rs. 0.10 crores for the previous year ended 31.03.2014. The Company earned a profit of Rs. 0.18 crores as against the loss of Rs. 0.001 crores in the previous financial year.

In terms of proviso to section 139(3) of the Companies Act, 2013, the salient features of the financial statement of the subsidiaries is set out in the prescribed form (AOC-1) under Rule 5 of the Companies (Accounts) Rules, 2014 (refer Annex. V).

21. AUDITORS:

Pursuant to the provisions of section 139 of the Companies Act, 2013 and the Rules framed under Companies (Audit & Auditors) Rules, 2014, M/s.B.Purushottam & Co., Chartered Accountants, were appointed Statutory Auditors of the Company from the conclusion of 19th Annual General Meeting (AGM) held on 11th September 2014, till the conclusion of the 22nd AGM to be held in the year 2017, subject to ratification of their appointment at every AGM. A written consent for appointment as Auditors and also a Certificate confirming that the appointment, if made, shall in accordance with the conditions as prescribed and in conformity with the criteria prescribed under section 141(3) of the Companies Act, 2013, have been received from them.

The matter relating to the appointment of B. Purushottam & Co. Chartered Accountants as statutory auditors of the Company is placed before the members at this 20th Annual General Meeting for ratification in pursuance of First Proviso to Section 139 (1) of the Companies Act, 2013.

22. COST AUDIT:

Mr. V. Srinivasan had been appointed by the Board of Directors of the Company as Cost Auditor to conduct the Cost Audit in respect of Sugar, Industrial Alcohol, Electricity, Fertilizer and Calcium Lactate for the financial year 2014-15, and his remuneration was ratified by the members at the 19th Annual General Meeting held on 11.09.2014. The Cost Audit Reports for 2014-15 are due for submission on or before 27.09.2015.

The Cost Audit reports for 2013-14 were e-filed with the Ministry of Corporate Affairs, New Delhi, vide, SRN S-31518954 dt. 02.10.2014.

In pursuance of Section 148 of the Companies Act, 2013, your Directors, on the recommendation of the Audit Committee, subject to ratification of his remuneration by the shareholders at this AGM, have appointed Shri. V. Srinivasan, Cost Accountant, Chennai, as the Cost Auditor to conduct the Cost Audit of Sugar, Industrial Alcohol, Electricity, Fertilizer, Calcium Lactate and CO2, for the financial year ending 31st March 2016. Mr.V.Srinivasan has confirmed that his appointment is within the limits of section 148 of the Companies Act, 2013 and has also certified that he is free from any disqualifications specified under section 148 of the Companies Act, 2013. The Audit Committee has also received a certificate from the said Cost Auditor certifying his independence and arms length relationship with the Company.

23. SECRETARIAL AUDIT

In pursuance of Section 204 of the Companies Act, 2013, M/s. V. Mahesh & Associates, Company Secretaries in practice have been appointed as Secretarial Auditors for the financial year 2014-15 and their report is annexed with the Board's Report (Ref. Annexure VI).

24. DOCUMENTS PLACED ON COMPANY'S WEBSITE: www.kcpsugar.com (as per Companies Act, 2013 & Listing Agreement with Stock Exchanges)

- Details of unpaid dividend as per section 124.

- Corporate Social Responsibility Policy as per section 135(4)(a)

- Stand-alone and Consolidated Financial statements of the Company along with relevant documents as per the 3rd proviso to section 136(1).

- Separate audited accounts in respect of subsidiaries as per the 4th proviso to section 136(1).

- Details of Vigil Mechanism for Directors and Employees to report genuine concerns as per section 177(10).

- The Terms and Conditions of appointment of Independent Directors in pursuance of Schedule IV {(IV) (6)} of the Companies Act, 2013.

- Disclosures under SEBI (Prohibition of Insider Trading) Regulations, 2015, and Code of Fair Disclosure and Conduct.

24. ACKNOWLEDGEMENT:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Cane growers, the Shareholders, Banks, Institutions, Central and State governments, Depositors, Sugar Dealers, Business Associates, as also other regulatory authorities for their continued support and cooperation.

Your Directors would also to place on record their sincere appreciation for the total commitment, dedication and hard work put in by all the employees, which contributed to the Company's progress during the year under review.

For and on behalf of the Board of Directors

Place : Chennai VINOD R. SETHI Date : 29.05.2015 Executive Chairman




Mar 31, 2014

Dear Members,

The Directors present their 19th Annual Report and the audited statement of accounts for the year ended 31st March 2014. The financial statements have been presented in the new format in accordance with the changes brought about by the Revised Schedule III to the Companies Act, 2013.

I. FINANCIAL RESULTS: For the For the Year ended Year ended 31.03.2014 31.03.2013

Physical Performance

Cane crushed - in Tonnes 10,59,851 10,45,524

Sugar bagged - In Quintals 10,55,750 10,44,649

Financial Performance - Rs. Crores

Turnover 443.30 505.57

Other Income 6.91 5.20

Profit Before Tax 33.28 55.60

Profit After Tax 27.66 38.76

Surplus from Previous Year 92.89 71.39

Amount available for appropriation 120.55 110.15

Appropriations

Transfer to General Reserve 3.00 4.00

Proposed Dividend 9.64 11.34

Tax on proposed Dividend 1.64 1.92

Carried forward 106.27 92.89

II. PERFORMANCE:

During the financial year under review your Company recorded a Turnover of Rs. 443.30 crores (Prev Year: Rs.505.57 cr.) including Excise Duty of Rs. 10.86 crores (Prev.Year: Rs.12.63 cr.) and Inter-divisional transfers of Rs. 93.04 crores (Prev. year: Rs.76.16 cr.). The profit before finance cost and depreciation is Rs. 48.92 crores. Profit before tax is Rs. 33.28 crores and after adjustments relating to payment of Income Tax pertaining to earlier years, provision for current tax and Deferred Tax, the Profit after tax is Rs. 27.66 crores.

The decrease in profit is due to reduction in sugar off-take coupled with lesser realisation.

III. DIVIDEND:

The Board of Directors recommends a dividend of Re.0.85 per equity share of face value of Re.1/- each on the Paid-up Equity Capital for the year ended 31.03.2014 as against Re.1.00 per equity share, approved for the previous year ended 31.03.2013. The dividend recommended by your Directors, if approved at the ensuing Annual General Meeting by the Shareholders would be paid within the stipulated time.

IV. SHARE CAPITAL AND RESERVES:

The Share Capital of the Company is Rs.11.33 crores. The General Reserve as at 01.04.2013 was Rs.113.00 crores and after transferring from Net Profits a sum of Rs. 3.00 crores to the General Reserve for the year ended 31.03.2014 the General Reserve stood at Rs. 116.00 crores as on 31.03.2014. The total Reserves and Surplus has increased to Rs.224.28 crores as on 31.03.2014 as against Rs. 207.89 crores as on 31.03.2013.

VI. FUTURE PLANS:

- To identify new technologies wherever it is possible and makes use of the same for improved results.

- Complete mechanisation of sugarcane cultivation and harvesting in order to reduce the excessive dependence on manpower and reduce cost.

- In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

- Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

VII. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

VIII. DIRECTORS:

Dr.Vithal Rajan and Shri.Ranvir R.Shah, Directors, who retire by rotation at this AGM and Shri.M.S.V.M.Rao, and Shri.Prathap K. Moturi, Directors, whose period of office is liable to determination by retirement of directors by rotation, are proposed to be appointed as Independent Directors at this AGM not liable to retire by rotation for a fixed term from 11.09.2014 to 31.03.2019, co-terminus with the expiry of five consecutive years in office from the commencement of section 149 of the Companies Act, 2013.

IX. STATUTORY COMPLIANCES:

i. In compliance with section 285 of the Companies Act, 1956 (section 173 of Companies Act, 2013) the Board of Directors met six times in the financial year 2013-14.

ii. All the independent directors have furnished declaration that they meet the criteria of independence as provided in section 149(6) of the Companies Act, 2013.

iii. In pursuance of section 178 of the Companies Act, 2013, the nomenclature of the existing Remuneration Committee has been changed to Nomination and Remuneration Committee and the said Committee is in the process of formulating the criteria for determining qualifications, positive attributes and the independence of director and for recommendation to the board a policy relating to the remuneration for the directors, key managerial personnel and other employees.

iv The company has complied with the provisions of section 372A of the Companies Act, 1956 (section 186 of the Companies Act, 2013).

v. The Company has complied with the provisions of section 188 of the Companies Act, 2013, in respect of related party transactions. There is no related party transaction which is material as per clause 49 - VII (C) of the Listing Agreement.

vi. Information as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 is annexed to and forms part of this Report.

vii. Information as per Section 217(2A) of the Companies Act, 1956 read with the Company (Particulars of Employees) Rules 1975, is annexed and forms part of this Report. However, as per the provisions of Section 219(1)(b) (iv) of the Companies Act, 1956, the Report and the Accounts are being sent to all shareholders of the Company, excluding the said annexure. Any Shareholder interested in obtaining a copy of the said statement may write to the Secretary at the Registered Office of the Company.

viii. As required by the Listing Agreements and Accounting Standards of the Institute of Chartered Accountants of India, the additional disclosures in respect of related party transactions have been made.

X. DIRECTOR''S RESPONSIBILITY STATEMENT:

As required by Section 217 (2AA) of the Companies Act, 1956 (Section 134 of the Companies Act, 2013), your Directors certify as follows:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there were no material departures there-from;

ii. that 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 ended 31st March 2014 and of the Profit of the Company for that year;

iii. that the Directors had 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;

iv. that the Directors had prepared the annual accounts on a going concern basis.

v. That the directors had laid down internal financial controls to be followed by the Company and that such financial controls are adequate and are operating effectively.

vi. That 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.

XI. CREDIT RATING:

Credit Analysis & Research Ltd (CARE) has upgraded the Credit Rating on your Company as ''CARE ''A'' (Single A) for long term bank facilities and ''CARE A1'' (A One) for short term bank facilities assigned to your Company for the current year. Measured through industry yardstick these ratings are considered to be having adequate degree of safety and very strong degree of safety respectively, for a sugar mill.

XII. ISO CERTIFICATION:

Your Company has been certified consecutively for the past six years under BS EN ISO 14001:2004, BS EN ISO 9001:2000, and OHSAS 18001:2007 for Manufacture of sugar, associated products and site activities, and Occupational Health and Safety Management system by Lloyd''s Registry Quality Assurance Limited. These certification has been renewed for a further period of three years.

XIII. RISK MANAGEMENT:

The Company has an effective risk management under which all probable risks are periodically identified, assessed and acted upon to minimize and mitigate their impact. These processes are subject to periodical review by the Management. Some of the risks identified are enumerated below:

i. Raw Material Risk:

Sugarcane being the main raw material for sugar, any disturbance in its timely availability will have a substantial impact on the operational cost. This in turn has a significant adverse effect since the market value does not factor the variable cost determined by the climatic conditions and the cane economics.

Mitigation Measure:

The Company always maintains healthy relationship with its farmers. It is one among very few companies in sugar industry paying its farmers within the stipulated time. The risk of raw material short supply is mitigated to a large extent by the goodwill and reputation for ethical dealings earned by the Company since inception. The experiments in farm mechanisation, drip irrigation, improved cane varieties, carefully monitored scheduling of cane planting and harvesting boost the confidence of the Company in mitigation of the risk.

ii. Policy Risk:

Central and State governments regulate the cane policies and they have a larger control on this industry by determining the raw material price and also influence the sugar selling price. The controls exercised by the Union and State governments over command area demarcation from time to time. Molasses movement control.

Mitigation Measure:

The Company is a member of South Indian Sugar Mills Association (SISMA) and works closely with it towards developing appropriate policy recommendations to represent the industry needs to the government. Formulation of policy on Ethanol doping, review of cogeneration policy, and review of sugar weightage in WPI are some of the issues addressed in close liaison with SISMA.

iii. Cyclicality / Commodity Risk:

The sugar price is determined by the cyclicality of the sugar business and hence it affects the profitability. Sugar being a commodity traded across the world, its price is influenced by the various factors including the normal supply and demand.

Mitigation Measure:

The Company takes the following measures, which enable the Company to insulate itself against price risk.

> More focus on value-added downstream products

> Integration of sugar with cogeneration power and alcohol.

XIII. CORPORATE GOVERNANCE:

The Management Discussion and Analysis and the Report on Corporate Governance are included as a part of the Director''s Report. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is attached to this Report.

XIV. FIXED DEPOSITS:

As on 31.03.2014 your Company had held deposits of Rs. 35.59 crores as against Rs. 38.05 crores as on 31.03.2013. As at 31.03.2014, there were matured and unclaimed deposits amounting to Rs. 0.43 crores in respect of 62 deposits. As on the date of this report amount of unclaimed deposits Rs.0.21 crores.

Consequent to enactment of Companies Act, 2013 which came into effect from 1st April 2014, allowing acceptance / renewal of deposits by companies from public / members only after due compliance of the terms and conditions prescribed under the said Act read with Companies (Acceptance of Deposits) Rules, 2014, and on approval of the resolution by the shareholders in the ensuing AGM for acceptance / renewal of deposits, the Company has temporarily suspended the acceptance / renewal of deposits with effect from 1st April 2014. The Company is now seeking the approval of shareholders for acceptance / renewal of deposits.

In compliance with the provisions of Investors Education and Protection Fund constituted under Section 205C of the Companies Act, 1956, the Company has transferred one deposit amounting to Rs.25,000/- which remained unclaimed beyond the period of seven years from the date of maturity to the Investor Education and Protection Fund.

XV. SUBSIDIARY COMPANIES:

The income from the sale of products, services and other income of your wholly owned subsidiary The Eimco-K.C.P.Ltd was at Rs. 52.01 crores (P.Y Rs. 38.52 crores) with an improved profit of Rs. 5.44 crores (P.Y Rs. 2.23 crores) for the year ended 31.03.2014.

The other wholly owned subsidiary, KCP Sugars Agricultural Research Farms Ltd, has reported an Income from the sale of products, services and other income of Rs. 0.10 crore for the financial year ended 31.03.2014 as against Rs. 0.10 crores for the previous year ended 31.03.2013. The Company incurred a loss of Rs. 0.0013 crores as against the loss of Rs. 0.10 crores in the previous financial year.

The Statement as required under Section 212(3) of the Companies Act, 1956 in respect of the subsidiary companies is separately annexed.

XVI. AUDITORS:

The Statutory Auditors, M/s. B.Purushottam & Co., Chartered Accountants, Chennai, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. As per section 139 of the Companies Act, 2013, the Company proposes to appoint M/s. B.Purushottam & Co., Chartered Accountants, Chennai, for a period of three years from the conclusion of this Annual General Meeting, i.e., till the conclusion the 22nd Annual General Meeting, subject to ratification by members at every Annual General Meeting. The Company has received a written consent letter from the said Audit firm to such appointment and a certificate from the Audit firm that the appointment, if made, shall be in accordance with the conditions prescribed under section 139, 140 and 141 of the Companies Act, 2013. The Statutory Auditors of the Company have undergone the peer review process as stipulated under clause 41 of the Listing Agreement for issuance of Limited Review / Audit Report. Members are requested to consider their re-appointment for a period of three years from the conclusion of this AGM, on remuneration to be decided by the Audit Committee / Board of Directors.

The Company, since inception, remains in the regime of unqualified financial statements. The Company will comply with SEBI circular dt. 13.08.2012 and clause 31(a) of the Listing Agreement and submitt Form A along with Annual Report.

XVII. COST AUDIT:

Mr. V. Srinivasan, Cost Auditor, had been appointed by the Company to conduct the Cost Audit in respect of Sugar, Industrial Alcohol, Electricity, Fertilizer and Calcium Lactate for the financial year 2013-14. The Central Government''s approval had also been received to this appointment. The Cost Audit reports for 2013-14 are due for submission on or before 30.09.2014.

The Cost Audit Reports for the financial year ended 31.03.2013 had been e-filed with the Ministry of Corporate Affairs, New Delhi, vide, SRN S-22564868 both dt. 27.09.2013.

In pursuance of Section 148 of the Companies Act, 2013, your Directors, on the recommendation of the Audit Committee, subject to ratification of his remuneration by the shareholders at this AGM, have appointed Shri. V. Srinivasan, Cost Accountant, Chennai, as the Cost Auditor to conduct the Cost Audit of Sugar,

Industrial Alcohol, Electricity, Fertilizer and Calcium Lactate, for the financial year ending 31st March 2015. Mr.V.Srinivasan has confirmed that his appointment is within the limits of section 148 of the Companies Act, 2013 and has also certified that he is free from any disqualifications specified under section 148 of the Companies Act, 2013. The Audit Committee has also received a certificate from the said Cost Auditor certifying his independence and arms length relationship with the Company.

XVIII. ACKNOWLEDGEMENT:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Cane growers, the Shareholders, Banks, Institutions, Central and State governments, Depositors, Sugar Dealers, Business Associates, as also other regulatory authorities for their continued support and cooperation.

Your Directors would also to place on record their sincere appreciation for the total commitment, dedication and hard work put in by all the employees, which contributed to the Company''s progress during the year under review.

For and on behalf of the Board of Directors

VINOD R. SETHI EXECUTIVE CHAIRMAN

Place : Chennai Date : 26.05.2014


Mar 31, 2013

The Directors present their 18th Annual Report and the audited statement of accounts for the year ended 31st March 2013. The fi nancial statements have been presented in the new format in accordance with the changes brought about by the Revised Schedule VI to the Companies Act, 1956.

I. FINANCIAL RESULTS:

For the For the Year ended Year ended 31.03.2013 31.03.2012

Physical Performance

Cane crushed - in Tonnes 10,45,524 11,16,558

Sugar bagged - In Quintals 10,44,649 10,63,267

Financial Performance - Rs. Crores

Turnover 505.57 410.60

Other Income 5.20 8.61

Profi t Before Tax 55.60 31.75

Profi t After Tax 38.76 26.42

Surplus from Previous Year 71.39 56.89

Amount available for appropriation 110.15 83.31

Appropriations

Transfer to General Reserve 4.00 2.70

Proposed Dividend 11.34 7.94

Tax on proposed Dividend 1.92 1.28

-Carried forward 92.89 71.39

II. PERFORMANCE:

During the fi nancial year under review your Company recorded a Turnover of Rs. 505.57 crores (Prev.Year: Rs.410.60 cr.) including Excise Duty of Rs. 12.63 crores (Prev.Year: Rs.11.05 cr.) and Inter-divisional transfers of Rs. 76.16 crores (Prev. year: Rs.71.60 cr.). The profi t before fi nance cost and depreciation is Rs. 72.15 crores. Profi t before tax is Rs. 55.60 crores and after adjustments relating to payment of Income Tax pertaining to earlier years, provision for current tax and Deferred Tax, the Profi t after tax is Rs. 38.76 crores.

The increase in profi t is due to higher quantum of sale of sugar coupled with better realisation.

III. DIVIDEND:

The Board of Directors recommends a dividend of Re.1/- per equity share of face value of Re.1/- each on the Paid-up Equity Capital for the year ended 31.03.2013 as against Re.0.70 per equity share, approved for the previous year ended 31.03.2012. The dividend recommended by your Directors, if approved at the ensuing Annual General Meeting by the Shareholders would be paid within the stipulated time.

IV SHARE CAPITAL AND RESERVES:

The Share Capital of the Company is Rs.11.33 crores. The General Reserve as at 01.04.2012 was Rs.109.00 crores and after transferring from Net Profi ts a sum of Rs. 4.00 crores to the General Reserve for the year ended 31.03.2013 the General Reserve stood at Rs. 113.00 crores as on 31.03.2013. The total Reserves and Surplus has increased to Rs.207.89 crores as on 31.03.2013 as against Rs. 182.40 crores as on 31.03.2012.

V. FUTURE PLANS:

- To identify new technologies wherever it is possible and makes use of the same for improved results.

- Complete mechanisation of sugarcane cultivation and harvesting in order to reduce the excessive dependence on manpower and reduce cost.

- In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

- Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

VI. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

VII. DIRECTORS:

As per Article 119 and Article 120 of the Articles of Association read with Section 255 and 256 of the Companies Act, 1956, Shri. K.A. Rangaswamy, Director, and Shri. M.S.V.M.Rao, Director, retire by rotation and being eligible, offer themselves for re-appointment. A brief resume, expertise and details of other Directorship are provided in the Notice of the ensuing Annual General Meeting. Your Directors recommend their reappointment as Directors of your Company.

VIII. STATUTORY COMPLIANCES:

i. Information as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 is annexed to and forms part of this Report.

ii. No employee of the Company was in receipt of remuneration in excess of sum prescribed under Section 217(2A) of the Companies Act, 1956 read with The Companies (Particulars of Employees) Rules, 1975, during the fi nancial year 2012-13.

iii. As required by the Listing Agreements and Accounting Standards of the Institute of Chartered Accountants of India, the additional disclosures in respect of related party transactions have been made.

IX. DIRECTOR''S RESPONSIBILITY STATEMENT:

As required by Section 217 (2AA) of the Companies Act, 1956, your Directors certify as follows:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there were no material departures there-from; therefor

ii. that 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 fi nancial year ended 31st March 2013 and of the Profi t of the Company for that year;

iii. that the Directors had taken proper and suffi cient 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;

iv that the Directors had prepared the annual accounts on a going concern basis.

X. CREDIT RATING:

Credit Analysis & Research Ltd (CARE) has upgraded the Credit Rating on your Company as ‘CARE ‘A (Single A) for long term bank facilities and ‘CARE A1'' (A One) for short term bank facilities assigned to your Company for the current year. Measured through industry yardstick these ratings are considered to be having adequate degree of safety and very strong degree of safety respectively, for a sugar mill.

XI. ISO CERTIFICATION:

Your Company has been certifi ed consecutively for the past fi ve years under BS EN ISO 14001:2004, BS EN ISO 9001:2000, and OHSAS 18001:2007 for Manufacture of sugar, associated products and site activities, and Occupational Health and Safety Management system by Lloyd''s Registry Quality Assurance Limited.

XII. RISK MANAGEMENT:

The Company has an effective risk management under which all probable risks are periodically identifi ed, assessed and acted upon to minimize and mitigate their impact. These processes are subject to periodical review by the Management. Some of the risks identifi ed are enumerated below:

i. Raw Material Risk:

Sugarcane being the main raw material for sugar, any disturbance in its timely availability will have a substantial impact on the operational cost. This in turn has a signifi cant adverse effect since the market value does not factor the variable cost determined by the climatic conditions and the cane economics.

Mitigation Measure:

The Company always maintains healthy relationship with its farmers. It is one among very few companies in sugar industry paying its farmers within the stipulated time. The risk of raw material short supply is mitigated to

a large extent by the goodwill and reputation for ethical dealings earned by the Company since inception. The experiments in farm mechanisation, drip irrigation, improved cane varieties, carefully monitored scheduling of cane planting and harvesting boost the confi dence of the Company in mitigation of the risk.

ii. Policy Risk:

Central and State governments regulate the cane policies and they have a larger control on this industry by determining the raw material price and also infl uence the sugar selling price. The controls exercised by the Union and State governments over command area demarcation from time to time. Molasses movement control.

Mitigation Measure:

The Company is a member of South Indian Sugar Mills Association (SISMA) and works closely with it towards developing appropriate policy recommendations to represent the industry needs to the government. Formulation of policy on Ethanol doping, review of cogeneration policy, and review of sugar weightage in WPI are some of the issues addressed in close liaison with SISMA.

iii. Cyclicality / Commodity Risk:

The sugar price is determined by the cyclicality of the sugar business and hence it affects the profi tability. Sugar being a commodity traded across the world, its price is infl uenced by the various factors including the normal supply and demand.

Mitigation Measure:

The Company takes the following measures, which enable the Company to insulate itself against price risk.

- More focus on value-added downstream products

- Integration of sugar with cogeneration power and alcohol.

XIII. CORPORATE GOVERNANCE:

The Management Discussion and Analysis and the Report on Corporate Governance are included as a part of the Director''s Report. A certifi cate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is attached to this Report.

XIV. FIXED DEPOSITS:

As on 31.03.2013 your Company had accepted deposits of Rs. 38.05 crores as against Rs. 37.62 crores as on 31.03.2012. As at 31.03.2013, there were matured and unclaimed deposits amounting to Rs. 2.28 crores in respect of 46 deposits. As on the date of this report amount of unclaimed deposits Rs.1.18 crores.

In compliance with the provisions of Investors Education and Protection Fund constituted under Section 205C of the Companies Act, 1956, the Company has transferred 6 deposit(s) amounting to Rs.1,80,000/- which remained unclaimed beyond the period of seven years from the date of maturity to the Investor Education and Protection Fund.

XV SUBSIDIARY COMPANIES:

The income from the sale of products, services and other income of your wholly owned subsidiary The Eimco- K.C.PLtd was at Rs. 38.52 crores (P.Y. Rs. 34.97 crores) with an improved profi t of Rs.2.23 crores (P.Y Rs. 1.92 crores) for the year ended 31.03.2013.

The other wholly owned subsidiary, KCP Sugars Agricultural Research Farms Ltd, has reported an Income from the sale of products, services and other income of Rs. 0.10 crores for the fi nancial year ended 31.03.2013 as against Rs. 0.27 crores for the previous year ended 31.03.2012. The Company incurred a loss of Rs. 0.10 crores as against the profi t of Rs. 0.16 crores in the previous fi nancial year.

The Statement as required under Section 212(3) of the Companies Act, 1956 in respect of the subsidiary companies is separately annexed.

XVI. AUDITORS:

The Statutory Auditors, M/s. B.Purushottam & Co., Chartered Accountants, Chennai, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. M/s. B.Purushottam & Co., Chartered Accountants, Chennai, have forwarded their Certifi cate to the Company stating that their reappointment, if made, will be within the limits specifi ed under Section 224 (1B) of the Companies Act, 1956. The Statutory Auditors of the Company have undergone the peer review process as stipulated under clause 41 of the Listing Agreement for issuance of Limited Review / Audit Report. Members are requested to consider their re-appointment for the fi nancial year ending 31st March 2014 on remuneration to be decided by the Audit Committee / Board of Directors.

XVII. COST AUDIT:

Mr. V. Srinivasan, Cost Auditor, had been appointed by the Company to conduct the Cost Audit in respect of Sugar, Industrial Alcohol, Electricity and Fertilizer for the fi nancial year 2012-13. The Central Government''s approval has been received to this appointment. The Cost Audit reports for 2012-13 are due for submission on or before 30.09.2013.

The Cost Audit Reports for the fi nancial year ended 31.03.2012 had been e-fi led with the Ministry of Corporate Affairs, New Delhi, vide, SRNs S20108486 and S20104501 both dt. 30.01.2013.

In pursuance of Section 233-B(2) of the Companies Act, 1956, your Directors, on the recommendation of the Audit Committee, and subject to the approval of the Central Government, have appointed Shri. V. Srinivasan, Cost Accountant, Chennai, as the Cost Auditor to conduct the Cost Audit of Sugar, Industrial Alcohol, Electricity Fertilizer and Calcium Lactate, for the fi nancial year ending 31st March 2014. Mr.V.Srinivasan has confi rmed that his appointment is within the limits of section 224(1B) of the Companies Act, 1956 and has also certifi ed that he is free from any disqualifi cations specifi ed under section 233B(5) read with section 224(3) or section 226(4) of the Companies Act, 1956. The Audit Committee has also received a certifi cate from the said Cost Auditor certifying his independence and arms length relationship with the Company.

XVIII. ACKNOWLEDGEMENT:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Cane growers, the Shareholders, Banks, Institutions, Central and State governments, Depositors, Sugar Dealers, Business Associates, as also other regulatory authorities for their continued support and cooperation.

Your Directors would also to place on record their sincere appreciation for the total commitment, dedication and hard work put in by all the employees, which contributed to the Company''s progress during the year under review.

For and on behalf of the Board of Directors

Place : Chennai VINOD R. SETHI

Date : 29.05.2013 EXECUTIVE CHAIRMAN


Mar 31, 2012

Dear Members,

The Directors present their 17th Annual Report and the audited statement of accounts for the year ended 31st March 2012. The fi nancial statements have been presented in the new format in accordance with the changes brought about by the Revised Schedule VI tothe Companies Act, 1956.

I. FINANCIAL RESULTS:

For the For the Year ended Year ended 31.03.2012 31.03.2011

Physical Performance

Cane crushed - in Tonnes 11,16,558 10,49,613

Sugar bagged - In Quintals 10,63,267 10,34,579

Financial Performance - Rs. Crores

Turnover 410.60 269.76

Other Income 8.61 8.30

Profit Before Tax 31.75 13.28

Profit After Tax 26.42 11.83

Surplus from Previous Year 56.89 52.22

Amount available for appropriation 83.31 64.05

Appropriations

Transfer to General Reserve 2.70 1.27

Proposed Dividend 7.94 5.10

Tax on proposed Dividend 1.28 0.79

Carried forward 71.39 56.89

II. PERFORMANCE:

During the financial year under review your Company recorded a Turnover of Rs. 410.60 crores (Prev.Year: Rs.269.76 cr.) including Excise Duty of Rs. 11.05 crores (Prev.Year: Rs.7.12 cr.) and Inter-divisional transfers of Rs. 71.60 crores (Prev year: Rs.56.97 cr). The Profit before fi nance cost and depreciation is Rs. 48.92 crores. Profit before tax is Rs. 31.75 crores and after adjustments relating to refund / payment of Income Tax pertaining to earlier years, provision for current tax and Deferred Tax, the Profit after tax is Rs. 26.42 crores.

The increase in Profit is due to higher quantum of sale of sugar and Rectifi ed Spirit coupled with improved realisations.

III. DIVIDEND:

The Board of Directors recommends a dividend of Re.0.70 per equity share of face value of Re.1/- each on the Paid-up Equity Capital for the year ended 31.03.2012 as against Re.0.45 per equity share, approved for the previous year ended 31.03.2011. The dividend recommended by your Directors, if approved at the ensuing Annual General Meeting by the Shareholders would be paid within the stipulated time.

IV. SHARE CAPITAL AND RESERVES:

The Share Capital of the Company is Rs.11.33 crores. The General Reserve as at 01.04.2011 was Rs.106.30 crores and after transferring from Net Profits a sum of Rs.2.70 crores to the General Reserve for the year ended 31.03.2012 the General Reserve stood at Rs. 109.00 crores as on 31.03.2012. The total Reserves and Surplus has increased to Rs.182.40 crores as on 31.03.2012 as against Rs. 165.19 crores as on 31.03.2011.

VI. FUTURE PLANS:

- To identify new technologies wherever it is possible and makes use of the same for improved results.

- Complete mechanisation of sugarcane cultivation and harvesting in order to reduce the excessive dependence on manpower and reduce cost.

- In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

- Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

VII. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

VIII. DIRECTORS:

As per Article 119 and Article 120 of the Articles of Association read with Section 255 and 256 of the Companies Act, 1956, Shri. Ranvir R. Shah, Director, and Shri. Vinod R. Sethi, Director, retire by rotation and being eligible, offer themselves for re-appointment. A brief resume, expertise and details of other Directorship are provided in the Notice of the ensuing Annual General Meeting. Your Directors recommend their reappointment as Directors of your Company.

IX. STATUTORY COMPLIANCES:

i. Information as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 is annexed to and forms part of this Report.

ii. No employee of the Company was in receipt of remuneration in excess of sum prescribed under Section 217(2A) of the Companies Act, 1956 read with The Companies (Particulars of Employees) Rules, 1975, during the financial year 2011-12.

iii. As required by the Listing Agreements and Accounting Standards of the Institute of Chartered Accountants of India, the additional disclosures in respect of related party transactions have been made.

X. DIRECTOR'S RESPONSIBILITY STATEMENT:

As required by Section 217 (2AA) of the Companies Act, 1956, your Directors certify as follows:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there were no material departures therefrom;

ii. that 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 ended 31st March 2012 and of the Profit of the Company for that year;

iii. that the Directors had 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;

iv that the Directors had prepared the annual accounts on a going concern basis.

XI. CREDIT RATING

The Credit Rating of A- (Single A minus) for Fund-based facilities and A2 (A Two Plus) for Non-Fund based facilities assigned to your Company in the earlier year by Credit Analysis& Research Ltd (CARE), has been reaffi rmed by them for the current year also. Measured through industry yardstick these ratings are considered to be better ratings for a sugar mill.

XII. ISO CERTIFICATION

Your Company has been certifi ed consecutively for the past four years under BS EN ISO 14001:2004, BS EN ISO 9001:2000, and OHSAS 18001:2007 for Manufacture of sugar, associated products and site activities, and Occupational Health and Safety Management system by Lloyd's Registry Quality Assurance Limited.

XIII. RISK MANAGEMENT:

The Company has an effective risk management under which all probable risks are periodically identifi ed, assessed and acted upon to minimize and mitigate their impact. These processes are subject to periodical review by the Management. Some of the risks identifi ed are enumerated below:

i. Raw Material Risk:

Sugarcane being the main raw material for sugar, any disturbance in its timely availability will have a substantial impact on the operational cost. This in turn has a signifi cant adverse effect since the market value does not factor the variable cost determined by the climatic conditions and the cane economics.

Mitigation Measure:

The Company always maintains healthy relationship with its farmers. It is one among very few companies in sugar industry paying its farmers within the stipulated time. The risk of raw material short supply is mitigated to a large extent by the goodwill and reputation for ethical dealings earned by the Company since inception. The experiments in farm mechanisation, drip irrigation improved cane varieties, carefully monitored scheduling of cane planting and harvesting boost the confi dence of the Company in mitigation of the risk.

ii. Policy Risk:

Central and State governments regulate the cane policies and they have a larger control on this industry by determining the raw material price and also infl uence the sugar selling price. The controls exercised by the Union and State governments include sugar pricing (levy and release orders), command area demarcation from time to time. Molasses movement control.

Mitigation Measure:

The Company is a member of South Indian Sugar Mills Association (SISMA) and works closely with it towards developing appropriate policy recommendations to represent the industry needs to the government. Formulation of policy on Ethanol doping, review of cogeneration policy, decontrol of sugar and review of sugar weightage in WPI are some of the issues addressed in close liaison with SISMA.

iii. Cyclicality / Commodity Risk:

The sugar price is determined by the cyclicality of the sugar business and hence it affects the Profitability. Sugar being a commodity traded across the world, its price is infl uenced by the various factors including the normal supply and demand.

Mitigation Measure:

The Company takes the following measures, which enable the Company to insulate itself against price risk.

- More focus on value-added downstream products

- Integration of sugar with cogeneration power and alcohol.

XIII. CORPORATE GOVERNANCE:

The Management Discussion and Analysis and the Report on Corporate Governance are included as a part of the Director's Report. A certifi cate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is attached to this Report.

XIV. FIXED DEPOSITS:

As on 31.03.2012 your Company had accepted deposits of Rs.37.62 crores as against Rs. 39.49 crores as on 31.03.2011. As at 31.03.2012, there were matured and unclaimed deposits amounting to Rs. 0.37 crores in respect of 45 deposits. As on the date of this report amount of unclaimed deposits remained the same.

In compliance with the provisions of Investors Education and Protection Fund constituted under Section 205C of the Companies Act, 1956, the Company has transferred NIL deposit(s) amounting to Rs .NIL which remained unclaimed beyond the period of seven years from the date of maturity to the Investor Education and Protection Fund.

XV SUBSIDIARY COMPANIES:

The income from the sale of products, services and other income of your wholly owned subsidiary "The Eimco-K.CP.Ltd" was at Rs. 34.97 crores (P.Y Rs. 30.19 crores) with an improved Profit of Rs.1.92 crores (P.Y Rs. 0.93 crores) for the year ended 31.03.2012.

The other wholly owned subsidiary, KCP Sugars Agricultural Research Farms Ltd, has reported an Income from the sale of products, services and other income of Rs. 0.27 crores for the financial year ended 31.03.2012 as against Rs. 0.13 crores for the previous year ended 31.03.2011. The Company earned a Profit of Rs. 0.16 crores as against the Profit of Rs. 0.05 crores in the previous financial year.

The Statement as required under Section 212(3) of the Companies Act, 1956 in respect of the subsidiary companies is separately annexed.

XVI. AUDITORS:

The Statutory Auditors, M/s. B.Purushottam & Co., Chartered Accountants, Chennai, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. M/s. B.Purushottam & Co., Chartered Accountants, Chennai, have forwarded their Certificate to the Company stating that their reappointment, if made, will be within the limits specifi ed under Section 224 (1B) of the Companies Act, 1956. The Statutory Auditors of the Company have undergone the peer review process as stipulated under clause 41 of the Listing Agreement for issuance of Limited Review / Audit Report. Members are requested to consider their re-appointment for the fi nancial year ending 31st March 2013 on remuneration to be decided by the Audit Committee / Board of Directors.

XVII. COST AUDIT:

Mr. V. Srinivasan, Cost Auditor, had been appointed by the Company to conduct the Cost Audit in respect of Sugar, Industrial Alcohol, Electricity and Fertilizer for the financial year 2011-12. The Central Government's approval has been received to this appointment. The Cost Audit reports for 2011-12 are due for submission on or before 27.09.2012.

The Cost Audit Reports for the financial year ended 31.03.2011 had been fi led with the Ministry of Corporate Affairs, New Delhi, vide, SRNs B18963322, B18964379 both dt 25.08.2011 and B19486273 dt. 02.09.2011.

In pursuance of Section 233-B(2) of the Companies Act, 1956, your Directors, on the recommendation of the Audit Committee, subject to the approval of the Central Government, have appointed Shri. V. Srinivasan, Cost Accountant, Chennai, as the Cost Auditor to conduct the Cost Audit of Sugar, Industrial Alcohol, Electricity and Fertilizer for the financial year ending 31st March 2013. Mr.V.Srinivasan has confi rmed that his appointment is within the limits of section 224(1B) of the Companies Act, 1956 and has also certifi ed that he is free from any disqualifi cations specifi ed under section 233B(5) read with section 224(3) or section 226(4) of the Companies Act, 1956. The Audit Committee has also received a Certificate from the said Cost Auditor certifying his independence and arms length relationship with the Company.

XVIII. ACKNOWLEDGEMENT:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Cane growers, the Shareholders, Banks, Institutions, Central and State governments, Depositors, Sugar Dealers, Business Associates, as also other regulatory authorities for their continued support and cooperation.

Your Directors would also to place on record their sincere appreciation for the total commitment, dedication and hard work put in by all the employees, which contributed to the Company's progress during the year under review.

For and on behalf of the Board of Directors

Place : Chennai VINOD R. SETHI

Date : 11.05.2012 EXECUTIVE CHAIRMAN


Mar 31, 2011

Dear Members,

The Directors present their 16th Annual Report and the audited statement of accounts for the year ended 31st March 2011.

I. FINANCIAL RESULTS:

For the For the Year ended Year ended 31.03.2011 31.03.2010

Physical Performance

Cane crushed - in Tonnes 10,49,613 6,40,281

Sugar bagged - In Quintals 10,34,579 5,93,316

Financial Performance - Rs. Crores

Turnover 269.76 301.55

Other Income 8.32 4.10

Profit Before Tax 13.28 34.31

Profit After Tax 11.83 23.74

Surplus from Previous Year 52.22 40.81

Amount available for appropriation 64.05 64.55

Appropriations

Transfer to General Reserve 1.27 2.38

Proposed Dividend 5.10 8.50

Tax on proposed Dividend 0.79 1.45

Carried forward 56.89 52.22



II. PERFORMANCE:

During the financial year under review your Company recorded a Turnover of Rs. 269.76 crores (Prev Year: Rs.301.55 cr.) including Excise Duty of Rs. 7.12 crores (Prev.Year: Rs.9.27 cr.) and Inter-divisional transfers of Rs. 56.97 crores (Prev. year: Rs.42.58 cr). The profit before interest and depreciation is Rs. 28.90 crores. Profit before tax is Rs. 13.28 crores and after adjustments relating to refund / payment of Income Tax pertaining to earlier years, and provision for current tax, the Profit after tax is Rs. 11.83 crores.

The decrease in profit is due to reduction in quantum of sale of sugar coupled with steep increase in cost of production.

III. DIVIDEND:

The Board of Directors recommends a dividend of 45 % on the Paid-up Equity Capital for the year ended 31.03.2011 as against 75 % approved for the previous year ended 31.03.2010. The dividend recommended by your Directors, if approved at the ensuing Annual General Meeting by the Shareholders would be paid within the stipulated time.

IV. SHARE CAPITAL AND RESERVES:

The Share Capital of the Company is Rs.11.33 crores. The General Reserve as at 01.04.2010 was Rs.105.03 crores and after transferring from Net Profits a sum of Rs. 1.27 crores to the General Reserve for the year ended 31.03.2011 the General Reserve stood at Rs.106.30 crores as on 31.03.2011. The total Reserves and Surplus has increased to Rs.165.19 crores as on 31.03.2011 as against Rs. 159.26 crores as on 31.03.2010.

VI. FUTURE PLANS:

- To identify new technologies wherever it is possible and makes use of the same for improved results.

- In view of the acute shortage of agricultural labour the following measures are explored to partially mechanize the cane cultivation:

a) Induce farmers to use power tiller drawn planters and mini-tractor drawn implements;

b) Identifying and developing suitable sugarcane harvester considering the soil conditions and land holdings of our command area.

- In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

- Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

VII. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

VIII. DIRECTORS:

As per Article 119 and Article 120 of the Articles of Association read with Section 255 and 256 of the Companies Act, 1956, Dr. Vithal Rajan, Director, and Shri. M.S.V.M.Rao, Director, retire by rotation and being eligible, offer themselves for re-appointment. A brief resume, expertise and details of other Directorship are provided in the Notice of the ensuing Annual General Meeting. Your Directors recommend their reappointment as Directors of your Company.

IX. STATUTORY COMPLIANCES:

i. Information as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 is annexed to and forms part of this Report.

ii. Statement required under Section 217(2A) of the Companies Act, 1956 is not attached to this report as none of the employees have received remuneration as prescribed under this Section read with the Companies (Particulars of Employees) Amendment Rules, 2011.

iii. As required by the Listing Agreements and Accounting Standards of the Institute of Chartered Accountants of India, the additional disclosures in respect of related party transactions have been made.

X. DIRECTOR'S RESPONSIBILITY STATEMENT:

As required by Section 217 (2AA) of the Companies Act, 1956, your Directors certify as follows:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there were no material departures therefrom;

ii. that 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 ended 31st March 2011 and of the Profit of the Company for that year;

iii. that the Directors had 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;

iv that the Directors had prepared the annual accounts on a going concern basis.

XI. CREDIT RATING

The Credit Rating of A- (Single A minus) for Fund-based facilities and PR2 (PR Two Plus) for Non-Fund based facilities assigned to your Company in the earlier year by Credit Analysis& Research Ltd (CARE), has been reaffirmed by them for the current year also. Measured through industry yardstick these ratings are considered to be better ratings for a sugar mill.

XII. ISO CERTIFICATION:

Your Company has been certified consecutively for the past three years under BS EN ISO 14001:2004, BS EN ISO 9001:2000, and OHSAS 18001:2007 for Manufacture of sugar, associated products and site activities, and Occupational Health and Safety Management system by Lloyd's Registry Quality Assurance Limited.

XIII. RISK MANAGEMENT:

The Company has an effective risk management under which all probable risks are periodically identified, assessed and acted upon to minimize and mitigate their impact. These processes are subject to periodical review by the Management. Some of the risks identified are enumerated below:

i. Raw Material Risk:

Sugarcane being the main raw material for sugar, any disturbance in its timely availability will have a substantial impact on the operational cost. This in turn has a significant adverse effect since the market value does not factor the variable cost determined by the climatic conditions and the cane economics.

Mitigation Measure:

The Company always maintains healthy relationship with its farmers. It is one among very few companies in sugar industry paying its farmers within the stipulated time. The risk of raw material short supply is mitigated to a large extent by the goodwill and reputation for ethical dealings earned by the Company since inception. The experiments in farm mechanisation, drip irrigation improved cane varieties, carefully monitored scheduling of cane planting and harvesting boost the confidence of the Company in mitigation of the risk.

ii Policy Risk:

Central and State governments regulate the cane policies and they have a larger control on this industry by determining the raw material price and also influence the sugar selling price. The controls exercised by the Union and State governments include sugar pricing (levy and release orders), command area demarcation from time to time. Molasses movement control.

Mitigation Measure:

The Company is a member of South Indian Sugar Mills Association (SISMA) and works closely with it towards developing appropriate policy recommendations to represent the industry needs to the government. Formulation of policy on Ethanol doping, review of cogeneration policy, decontrol of sugar and review of sugar weightage in WPI are some of the issues addressed in close liaison with SISMA.

iii. Cyclicality / Commodity Risk:

The sugar price is determined by the cyclicality of the sugar business and hence it affects the profitability. Sugar being a commodity traded across the world, its price is influenced by the various factors including the normal supply and demand.

Mitigation Measure:

The Company takes the following measures, which enable the Company to insulate itself against price risk.

- More focus on value-added downstream products

- Integration of sugar with cogeneration power and alcohol.

XIV. CORPORATE GOVERNANCE:

The Management Discussion and Analysis and the Report on Corporate Governance are included as a part of the Director's Report. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is attached to this Report.

XV. FIXED DEPOSITS:

As on 31.03.2011 your Company had accepted deposits of Rs.39.49 crores as against Rs. 27.43 crores as on 31.03.2010. As at 31.03.2011, there were matured and unclaimed deposits amounting to Rs. 0.20 crores in respect of 37 deposits. As on the date of this report an amount of unclaimed deposits remained the same.

In compliance with the provisions of Investors Education and Protection Fund constituted under Section 205C of the Companies Act, 1956, the Company has transferred twelve (13) deposit(s) amounting to Rs 44,000/- which remained unclaimed beyond the period of seven years from the date of maturity to the Investor Education and Protection Fund.

XVI. SUBSIDIARY COMPANIES:

The income from the sale of products, services and other income of your wholly owned subsidiary "The

Eimco-K.C.P.Ltd" was at Rs. 30.19 crores (P.Y Rs. 31.27 crores) with an improved profit of Rs. 0.93 crores (P.Y Rs. 0.56 crores) for the year ended 31.03.2011.

The other wholly owned subsidiary, KCP Sugars Agricultural Research Farms Ltd, has reported an Income from the sale of products, services and other income of Rs. 0.13 crores for the financial year ended 31.03.2011 as against Rs. 0.11 crores for the previous year ended 31.03.2010. The Company earned a profit of Rs. 0.05 crores as against the profit of Rs. 0.04 crores in the previous financial year.

The Statement as required under Section 212(3) of the Companies Act, 1956 in respect of the subsidiary companies is separately annexed.

XVII. AUDITORS:

The Statutory Auditors, M/s. B.Purushottam & Co., Chartered Accountants, Chennai, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. M/s. B.Purushottam & Co., Chartered Accountants, Chennai, have forwarded their Certificate to the Company stating that their reappointment, if made, will be within the limits specified under Section 224 (1B) of the Companies Act, 1956. Members are requested to consider their re-appointment for the financial year ending 31st March 2012 on remuneration to be decided by the Audit Committee / Board of Directors.

XVIII. COST AUDIT:

Mr. G. Suryanarayanan, Cost Auditor, had been appointed by the Company to conduct the Cost Audit in respect of Sugar and Industrial Alcohol for the financial year 2010-11. The Central Government's approval has been received to this appointment. The Cost Audit reports for 2010-11 are due for submission on or before 30.09.2011.

The Cost Audit Reports for the financial year ended 31.03.2010 had been filed with the Ministry of Corporate Affairs, New Delhi, on 02.09.2010.

In pursuance of Section 233-B of the Companies Act, 1956, your Directors have, subject to the approval of the Central Government, appointed Shri. V. Srinivasan, Cost Accountant, Chennai, as the Cost Auditor to conduct the Cost Audit of Sugar, Industrial Alcohol, Electricity and Fertilizer for the financial year ending 31st March 2012.

XIX. ACKNOWLEDGEMENT:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Cane growers, the Shareholders, Banks, Institutions, Central and State governments, Depositors, Sugar Dealers, Business Associates, as also other regulatory authorities for their continued guidance and support.

Your Directors would also to place on record their sincere appreciation for the total commitment, dedication and hard work put in by all the employees, which contributed to the Company's progress during the year under review.

For and on behalf of the Board of Directors

Place : Chennai VINOD R. SETHI

Date : 27.05.2011 EXECUTIVE CHAIRMAN




Mar 31, 2010

The Directors present their 15th Annual Report and the audited statement of accounts for the year ended 31 st March 2010.

I. FINANCIAL RESULTS:

For the For the Year ended Year ended 31.03.2010 31.03.2009

Physical Performance

Cane crushed - in Tonnes 6,40,281 7,17,363

Sugar bagged- In Quintals 5,93,316 7,34,306

Financial Performance - Rs. Crores

Turnover 301.55 250.35

Other Income 4.10 5.35

Profit Before Tax 34.31 18.25

Profit After Tax 23.74 11.33

Surplus from Previous Year 40.81 39.91

Amount available for appropriation 64.55 51.24

Appropriations

Transfer to General Reserve 2.38 1.14

Proposed Dividend 8.50 7.94

Tax on proposed Dividend 1.45 1.35

Carried forward 52.22 40.81

II. PERFORMANCE:

During the financial year under review your Company recorded a Turnover of Rs. 301.55 crores (Prev.Year: Rs.250.35 cr.) including Excise Duty of Rs. 9.27 crores (Prev.Year: Rs.10.96 cr.) and Inter-divisional transfers of Rs. 42.58 crores (Prev. year: Rs.56.15 cr.). The profit before interest and depreciation is Rs. 48.13 crores. Profit before tax is Rs. 34.31 crores and after providing Rs. 10.57 crores for Income tax and deferred tax the Profit after tax is Rs. 23.74 crores.

The improvement in financial results is mainly due to buoyant realisation from the sale of free sugar despite reduction in volume of cane crushed and recovery.

III. DIVIDEND:

The Board of Directors recommends a dividend of 75% on the Paid-up Equity Capital for the year ended 31.03.2010 as against the total 70% approved for the previous year ended 31.03.2009. The dividend recommended by your Directors, if approved at the ensuing Annual General Meeting by the Shareholders would be paid within the stipulated time.

IV. SHARE CAPITAL AND RESERVES:

The Share Capital of the Company is Rs. 11.33 crores. The General Reserves & Surplus as at 01.04.2009 was Rs. 102.65 crores and after transferring from Net Profits a sum of Rs.2.38 crores to the General Reserve for the year ended 31.03.2010, the General Reserve stood at Rs. 105.03 crores as on 31.03.2010. The total Reserves and Surplus has increased to Rs. 159.26 crores as on 31.03.2010 as against Rs. 145.46 crores as on 31.03.2009.

V. MANAGEMENT DISCUSSION AND ANALYSIS:

a. Sugar Industry - Opportunities, Threats and Future Outlook:

Opportunities:

The long term outlook for sugar remains positive and promising on account of:

- Continued efforts towards reduction in process energy consumption by adopting innovative process control methods.

- Growing energy consumption in India allowing the sugar industry to play a vital role.

- Environmental friendly power generated by Cogeneration Units equipped with high-pressure boilers and turbines that intelligently use the fuel to get optimum energy output.

- Usage of dry sugarcane trash to its full potential through better collection mechanism as bio-mass fuel for generating energy through incidental cogeneration plants.

- More emphasize on Bio-composting process and consequent efforts to convert organic and inorganic matter into bio-manure to ensure zero discharge from the distillery combining with press mud.

- Clearly defined Clean Development Mechanism and the expected flow of Carbon Credits.

- Implementation of Kyoto Protocol by India requiring fuel Ethanol blending with petrol and exploring the possibilities of enhancing the blending proportion.

- Growing demand for bio manure, which works as the perfect soil conditioner. Bio manure made from distillery and organic matter does not allow leaching of chemicals and hence can offer a solution to the problem of depletion of soil productivity.

Threats:

Sugar industry is at present confronted by the following threats:

- Continued impact on the industry on account of various controls and administrative measures by the Central and State Governments.

- Dearth in availability of farm labour for harvesting, transportation, loading and unloading of sugar cane and sugar.

- The spurt in cane procurement prices is expected to remain volatile for a couple of years.

- Cyclical nature of industry and local climatic conditions over the crop affecting both the quantity and quality of cane available .

- Sugar weightage in WPI.

- Short crushing season.

Future Outlook:

The future outlook of sugar would depend on the following:

- Volume of cane crushed.

- Agro-climatic conditions in major sugar producing countries.

- Fair and reasonable allotment of sugar for public distribution system considering the availability of sugar.

- Fixation of fair and remunerative prices for levy quota.

- Industry-friendly release mechanism to ensure standard and remunerative prices for sugar.

- Fixation of fair and remunerative prices for encouraging higher production of Ethanol and Energy.

- Total decontrol of sugar for sustained growth of sugar industry as the present trend is very much in favour of decontrol.

b. REVIEW OF OPERATIONS:

i. SUGAR UNITS AT VUYYURU AND LAKSHMIPURAM:

The summary of cane crushed, sugar bagged, etc. of both the Sugar Units for the last two seasons and financial year wise are presented herein below:

SEASONWISE

UNIT / SEASON VUYYURU LAKSHMIPURAM

PARTICULARS 2009-10 2008-09 2009-10 2008-09

Crushing commenced on 05.12.2009 08.12.2008 10.12.2009 13.12.2008

Crushing completed on 06.03.2010 23.03.2009 12.02.2010 22.02.2009

No.of days 92 106 65 71

Cane crushed (in MT) 4,89,522 5,38,686 1,50,759 1,35,957

Sugar Bagged (in qtls) 4,64,110 5,64,140 1,29,206 1,22,686

Recovery (%) 9.50 10.45 8.58 9.05

FINANCIAL YEARWISE

UNIT/YEAR ENDED VUYYURU LAKSHMIPURAM DETAILS 31.03.2010 31.03.2009 31.03.2010 31.03.2009

01.04..2008 to 16.04.2008 & -- 13.12.2008 to 2008-09 Season - From / To - 08.12.2008 to 22.02.2009 23.03.2009

05.12.2009 to 10.12.5009 to 2009-10 Season -From/To -- -- 06.03.2010 12.02.2010

No. of days 92 122 65 71

Cane crushed (in MT) 4,89,522 5,81,406 1,50,759 1,35,957

Sugar Bagged (in qtls) 4,64,110 6,11,620 1,29,206 1,22,686

Recovery (%) 9.50 10.52 8.58 9.05

ii. INDUSTRIAL CHEMICALS / COGENERATION / OTHER UNITS:

Vuyyuru Distillery Unit produced 35.94 lakh litres during the year ended 31.03.2010 as against 64.03 lakh litres during the previous financial year. As against this, the said Unit sold 28.63 lakh litres valued at Rs. 9.29 crores during the year under review as against 48.05 lakh litres valued at Rs. 12.40 crores during the previous year.

The Bio-fertilizer unit at Vuyyuru sold about 1.59 lakh Qtls valued at Rs.2.99 crores as against 1.59 lakh qtls valued at Rs. 3.50 crores during the previous year. Efforts are on to increase the quantum of sales in the coming years.

Cogeneration Unit at Vuyyuru produced 25,174 MW of power during the financial year under review as against 14,605 MW in the previous year, and the Lakshmipuram Unit produced 3,653 MW of power as against 3,113 MW in the previous year. In all, total export of electrical energy was 11,479 MW resulting in a turnover of Rs. 3.25 crores as against 994 MW at a turnover of Rs. 0.29 crores during the previous year. The Carbon dioxide and Calcium Lactate plants together contributed Rs. 0.95 crores towards its turnover of the Company as against a turnover of Rs. 0.96 crores during the previous year.

C. INTERNAL CONTROL SYSTEMS:

The Company has a well-established internal control system in place to ensure smooth functioning of operations. The control mechanism involves well-documented policies, authorisation guidelines commensurate with the level of responsibility and standard operating procedures. The Internal Auditor periodically reviews and makes continuous assessments of the adequacy and effectiveness of the internal control and systems. The Board, Audit Committee and the Management review the findings and recommendations of the Internal Auditor and take corrective action wherever necessary. The Company is committed in its endeavour to ensure an effective internal control environment that provides assurance on the effectiveness of operations, statutory compliance, and reliability of financial reporting and security of assets.

d. HUMAN RESOURCES:

The Company had 1028 employees including non-seasonal employees at the sugar units as on 31.03.2010. The Company ensures high standards of safety for its employees and periodically conducts meetings to minimize operational hazards. The Company believes that people are the key to success and hence the human resources function pro-actively develops innovative and business focussed methods to attract, motivate, develop and retain talented, competitive manpower sources.

e. AWARDS:

During the year under review, your Company had received following Awards in respect of outstanding performance in Industrial Safety and Industrial Relations:

1. Winner of Lowest frequency rate of accidents in Industry (Distillery) under Scheme VII, for 2007.

2. Winner of Longest Accident-free period (Distillery) under Scheme II, for 2007.

3. Winner of Best Management Award by Government of Andhra Pradesh for 2010.

4. For outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

f. OTHERS:

- The gross block of Fixed Assets has increased to Rs.224.43 crores from Rs. 217.85 crores, mainly on account of installation of AC Drives in place of Mill Turbine at Vuyyuru and Lakshmipuram, Direct cane unloading system at Vuyyuru in Mill I, and other routine additions. The Company has valid Pollution Control clearances in respect of both Air and Water for sugar units at Vuyyuru and Lakshmipuram and also for Distillery unit at Vuyyuru. The Company also takes adequate steps to safeguard the environment.

g. CAUTIONARY NOTE:

It is explicitly stated that some of the statements in this Management Discussion and Analysis report may be "forward looking" within the meaning of applicable laws and regulations. It may so happen that the actual events or results may be different from what the Board of Directors / Management perceives in terms of the future performance and outlook due to factors having a bearing on them and which are unforeseeable.

VI. FUTURE PLANS:

- To identify new technologies wherever it is possible and make use of the same for improved results.

- In view of the acute shortage of agricultural labour the following measures are explored to partially mechanize the cane cultivation:

a) Induce farmers to use power tiller drawn planters and mini-tractor drawn implements;

b) Identifying and developing suitable sugarcane harvester considering the soil conditions and land holdings of our command area.

- In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

- Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

VII. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh.

VIII. DIRECTORS:

As per Article 119 and Article 120 of the Articles of Association read with Section 255 and 256 of the Companies Act, 1956, Shri. Vinod R. Sethi, Director, and Shri. K.A. Rangaswamy, Director, retire by rotation and being eligible, offer themselves for re-appointment. A brief resume, expertise and details of other Directorship are provided in the Notice of the ensuing Annual General Meeting. Your Directors recommend their reappointment as Directors of your Company.

IX. STATUTORY COMPLIANCES:

i. Information as per Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 is annexed to and forms part of this Report.

ii. Information as per Section 217(2A) of the Companies Act, 1956 read with the Company (Particulars of Employees) Rules, 1975 is annexed and forms part of this Report. However, as per the provisions of Section 219(1)(b) (iv) of the Companies Act, 1956, the Report and the Accounts are being sent to all shareholders of the Company, excluding the said annexure. Any Shareholder interested in obtaining a copy of the said statement may write to the Secretary at the Registered Office of the Company.

iii. As required by the Listing Agreements and Accounting Standards of the Institute of Chartered Accountants of India, the additional disclosures in respect of related party transactions have been made.

X. DIRECTORS RESPONSIBILITY STATEMENT:

As required by Section 217 (2AA) of the Companies Act, 1956, your Directors certify as follows:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there were no material departures therefrom;

ii. that 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 ended 31 st March 2010 and of the Profit of the Company for that year;

iii. that the Directors had 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;

iv. iv. that the Directors had prepared the annual accounts on a going concern basis.

XI. CREDIT RATING

As required under BASEL II Norms for Corporate borrowers with indebtedness of Rs.5.00 crores and above, your Company has been credit-rated with CARE A- (Single A minus) for Fund-based facilities and PR2+ (PR Two Plus) for Non-Fund based facilities by Credit Analysis& Research Ltd (CARE). Measured through industry yardstick these ratings are considered to be better ratings for a sugar mill.

XII. ISO CERTIFICATION:

Your Company has been certified consecutively for the past two years under BS EN ISO 14001:2004, BS EN ISO 9001:2000, and OHSAS 18001:2007 for Manufacture of sugar, associated products and site activities, and Occupational Health and Safety Management system by Lloyds Registry Quality Assurance Limited:

XIII. RISK MANAGEMENT:

The Company has an effective risk management under which all probable risks are periodically identified, assessed and acted upon to minimize and mitigate their impact. These processes are subject to periodical review by the Management. Some of the risks identified are enumerated below:

i. Raw Material Risk:

Sugarcane being the main raw material for sugar, any disturbance in its timely availability will have a substantial impact on the operational cost. This in turn has a significant adverse effect since the market value does not factor the variable cost determined by the climatic conditions and the cane economics.

Mitigation Measure:

The Company always maintains healthy relationship with its farmers. It is one among very few companies in sugar industry paying its farmers within the stipulated time. The risk of raw material short supply is mitigated to a large extent by the goodwill and reputation for ethical dealings earned by the Company since inception. The experiments in farm mechanisation, drip irrigation improved cane varieties, carefully monitored scheduling of cane planting and harvesting boost the confidence of the Company in mitigation of the risk.

ii Policy Risk:

Central and State governments regulate the cane policies and they have a larger control on this industry by determining the raw material price and also influence the sugar selling price. The controls exercised by the Union and State governments include sugar pricing (levy and release orders), command area demarcation from time to time. Molasses movement control.

Mitigation Measure:

The Company is a member of South Indian Sugar Mills Association (SISMA) and works closely with it towards developing appropriate policy recommendations to represent the industry needs to the government. Formulation of policy on Ethanol doping, review of cogeneration policy, decontrol of sugar and review of sugar weightage in WPI are some of the issues addressed in close liaison with SISMA.

iii. Cyclicality / Commodity Risk:

The sugar price is determined by the cyclicality of the sugar business and hence it affects the profitability. Sugar being a commodity traded across the world, its price is influenced by the various factors including the normal supply and demand.

Mitigation Measure:

The Company takes the following measures, which enable the Company to insulate itself against price risk.

- More focus on value-added downstream products

- Integration of sugar with cogeneration power and alcohol.

- 50 KLPD Distillery-cum-Ethanol plant commissioned in 2004-05, with the in-built flexibility to manufacture Industrial Alcohol, Extra Neutral Alcohol and Ethanol as the prevailing scenario warrants.

XIV. CORPORATE GOVERNANCE:

The Management Discussion and Analysis and the Report on Corporate Governance are included as a part of the Directors Report. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is attached to this Report.

XV. FIXED DEPOSITS:

As on 31.03.2010 your Company had accepted deposits of Rs.27.43 crores as against Rs. 24.13 crores as on 31.03.2009. As at 31.03.2010, there were matured and unclaimed deposits amounting to Rs. 0.13 crores in respect of 33 deposits. However, of these as on the date of Report, 7 deposits amounting to Rs. 0.04 crores have since been repaid / renewed resulting in the balance of 26 deposits amounting to Rs.0.09 crores yet to be claimed.

In compliance with the provisions of Investors Education and Protection Fund constituted under Section 205C of the Companies Act, 1956, the Company has transferred twelve (12) deposit(s) amounting to Rs 2,30,000/- which remained unclaimed beyond the period of seven years from the date of maturity to the Investor Education and Protection Fund.

XVI. SUBSIDIARY COMPANIES:

The income from the sale of products, services and other income of your wholly owned subsidiary "The Eimco-K.C.RLtd" was higher at Rs. 31.27 crores (RY Rs. 29.62 crores) with a profit of Rs. 0.56 crores (RY. Rs. 0.33 crores) for the year ended 31.03.2010.

The other wholly owned subsidiary, KCP Sugars Agricultural Research Farms Ltd, has reported decrease in the Income from the sale of products, services and other income of about Rs.0.11 crores for the financial year ended 31.03.2010 as against Rs. 0.16 crores for the previous year ended 31.03.2009. The Company earned a profit of Rs. 0.03 crores as against the profit of Rs. 0.05 crores in the previous financial year.

The Statement as required under Section 212(3) of the Companies Act, 1956 in respect of the subsidiary companies is separately annexed.

XVII. AUDITORS:

The Statutory Auditors, M/s. B.Purushottam & Co., Chartered Accountants, Chennai, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. The Board, on the recommendation of the Audit Committee, has proposed that M/s. B.Purushottam & Co., Chartered Accountants, Chennai, be reappointed as Statutory Auditors of the Company for the financial year ending March 31, 2011 and to hold office till the conclusion of the next Annual General Meeting of the Company. M/s. B.Purushottam & Co., Chartered Accountants, Chennai, have forwarded their Certificate to the Company stating that their reappointment, if made, will be within the limits specified under Section 224 (1B) of the Companies Act, 1956.

XVIII. COST AUDIT:

In pursuance of Section 233-B of the Companies Act, 1956, your Directors have with the approval of the Central Government, appointed Shri. G.Suryanarayanan, Cost Accountant, Chennai, as the Cost Auditor to conduct the Cost Audit of Sugar and Industrial Alcohol for the financial year ending 31 st March 2011.

XIX. ACKNOWLEDGEMENT:

Your Directors would like to take this opportunity to express their deep sense of gratitude to the Cane growers, the Shareholders, Banks, Institutions, Central and State governments, Depositors, Sugar Dealers, Business Associates, as also other regulatory authorities for their continued guidance and support.

Your Directors would also like to place on record their sincere appreciation for the total commitment, dedication and hard work put in by all the employees, which contributed to the Companys progress during the year under review.

For and on behalf of the Board of Directors

Place : Chennai VINOD R. SETHI

Date : 17.06.2010 EXECUTIVE CHAIRMAN



 
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