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Directors Report of Kesar Enterprises Ltd.

Dec 31, 2014

Dear Members,

The Directors present to you the 80th Annual Report and audited Statement of Accounts for the 18 months period ended 31st December, 2014.

CONSEQUENTIAL CHANGES AS PER THE COMPANIES ACT, 2013:

Alignment of Financial Year

As per Section 2(41) of the Companies Act, 2013, every Company is required to follow a homogeneous Financial Year starting from 1st April to 31st March of the following year within a transition period of 2 years from the date of commencement of the Companies Act, 2013. The Financial Year of the Company was from 1st July to 30th June of the following year. Hence to align the Financial Year, after obtaining the necessary prior approval from the Registrar of Companies, Mumbai, the Company had extended its Financial Year by 6 months i.e. from 01.07.2013 to 31.12.2014. Consequently, the next Financial Year will be for 15 months i.e. from 01.01.2015 to 31.03.2016.

Applicability as to relevant Financial Year

As per General Circular 08/2014 dated 04.04.2014 issued by the Ministry of Corporate Affairs, the Company is required to prepare its Financial Statements (and documents required to be attached thereto), Auditor''s Report and Directors'' Report for the Financial Year that commenced earlier than 1st April, 2014 as per the relevant provisions / schedules / rules of the Companies Act, 1956. The same are therefore prepared accordingly.

FINANCIAL RESULTS:

(Rs. in Lac)

2013-14 2012-13 [18 Months]

Profit / (Loss) before interest, depreciation & taxation (3928.00) 3430.97

Less: Interest and Finance Charges 5719.21 3637.54

Profit / (Loss ) before Depreciation & taxation (Cash Profit) (9647.21) (206.57)

Less: Depreciation 2354.74 1461.63

Profit / (Loss) (12001.95) (1668.20)

For the Financial Year 2013-14 for 18 months period, there is a loss of Rs.12001.95 lac as against a loss of Rs.1,668.20 lac in the previous year for 12 months period. The Company has incurred significant operational losses in Sugar Division due to a steep decline in sugar prices and unrealistically high cane prices set by the U P Government.

In view of the above, your Directors have not recommended any dividend for the year 2013-14.

WORKING OF THE DIVISIONS Sugar Division

The crushing for the season 2013-14 started on 07.12.2013 i.e. 12 days later as compared to 25.11.2012 in the previous season and ended on 26.03.2014 as against 15.04.2013, 20 days earlier than the previous season. During the season, the plant crushed 58.91 lac quintals of sugarcane in 109 days as against 85.80 lac quintals in 141 days in the previous season. The crushing was lower by 26.89 lac quintals during this season due to a short period of crushing for lack of availability of sugarcane. The sugar recovery overall was lower at 8.96% as against 9.14% in the previous season. The production of sugar was lower at 5.51 lac quintals, as against 7.81 lac quintals in the previous season.

The crushing for the season 2014-15 started on 02.12.2014 i.e. 5 days earlier as compared to 07.12.2013 in the previous season. During the period from 02.12.2015 to 31.01.2015, the plant crushed 18.70 lac quintals of sugarcane, the sugar recovery was at 9.60% and the production of sugar was 1.80 lac quintals.

For the season 2013-14, on 20.02.2013, the Central Government had hiked the Fair & Reasonable Price [FRP] of sugarcane from Rs.170/- a quintal to Rs.210/- a quintal at a base recovery of 9.5%.

For the season 2014-15, on 14.02.2014, the Central Government had hiked FRP of sugarcane from Rs.210/- a quintal to Rs.220/- a quintal at a base recovery of 9.50%.

For the season 2013-14, the U P Government had announced State Advised Price (SAP) of sugarcane of Rs.280/- a quintal same as that in the previous season, much beyond the paying capacity of the Sugar Mills, which resulted into substantial cane price arrears.

For the season 2014-15, the U P Government had announced a State Advised Price (SAP) of sugarcane of Rs.280/- a quintal same as that in the previous season. The said price would be paid to farmers in two instalments. The 1st instalment would be paid within 14 days @ Rs.240/- a quintal and if the payment is not made in 14 days, it would attract interest. The 2nd instalment of Rs.40/- a quintal has to be made within 3 months after crushing comes to an end. The State Government also announced a reimbursement and subsidy of Rs.20/- a quintal with a break-up of society commission @ Rs.6.60 a quintal; purchase tax @ Rs.2/- a quintal; entry tax on sugar @ Rs.2.80 a quintal; & an additional support @ Rs.8.60 a quintal on payment of entire cane price. In addition to this, the U P Government has linked its additional support of Rs.8.60 a quintal to market forces and has decided that if the price of sugar and its by-products viz. Molasses, bagasse, Press Mud go below or above the benchmark prices viz. Rs. 3,100/-; Rs. 390/-; Rs. 167/- & Rs. 26/- per tonne respectively, during 01.10.2014 to 31.05.2015, it would either reduce the support or increase it in proportion.

The cost of production in U.P. became the highest in the country, which rendered the U. P. Sugar Industry unviable, cash-starved and uncompetitive. There is an urgent need to rationalize the cane pricing policy in U.P. and adopt a ''linkage formula'' recommended by the Rangarajan Committee. The two major sugar producing States i.e. Maharashtra and Karnataka, who together contribute for almost 50% of the country''s sugar production, have adopted and implemented the ''linkage formula'' as recommended by the Rangarajan Committee for determining the cane price automatically. It is understood that a team of senior officials from U.P. had visited Maharashtra and Karnataka to study their cane pricing system and have submitted their report to the State Government but no decision is taken till date in the matter. The U P Government had announced to form a high level committee to determine a fair Sugarcane Pricing Policy.

Recently, the Supreme Court upheld the Allahabad High Court Order that the Sugar Mills must sell the sugar stocks, given as security to the Banks, to clear the sugarcane arrears to farmers.

The Banks have therefore become quite apprehensive due to seizure and forced auction of sugar stocks of several Companies by the State authorities, ignoring the first charge of Banks. The Banks have refused to renew credit facilities for the current season as they want clarity and transparency on the cane pricing policy to take further exposures on U.P. Sugar Mills.

In February 2014, the Central Government had extended sugar export incentives by way of subsidy @ Rs.3,300/- a tonne for export upto 4 million tonnes of raw sugar, which was increased to Rs.3,371/- a tonne for August & September 2014, to improve domestic sugar price and in turn the profitability of the Company.

In a move to bail out the ailing Sugar industry struggling with lower prices and higher stocks, in August 2014, the Food Ministry had hiked import duty on sugar from 15% to 25%; and raised the limit of Ethanol blending with Petrol to 10%.

On 14.8.2014, the U P Government had notified the Molasses Policy for 2013-14 (November-October) with retrospective effect. According to the new policy, 34% of the total molasses produced in U P were reserved for production of liquor, up from 20% earlier. The Policy made it mandatory for Sugar mills to sell molasses to country-liquor manufacturers at prices lower than the market rates.

During the season 2013-14, Molasses produced was 2.71 lac quintals as against 3.98 lac quintals. Bagasse produced was 18.23 lac quintals as against 26.07 lac quintals in the previous season.

The U P Government had announced its Molasses Policy for 2014-15 (November-October), wherein the molasses reservation rate to the country-liquor manufacturers had been reduced from 34% to 15%. The Policy had been specifically formulated to help the sick driven Sugar industry, which was required to reserve a part of their total molasses production for the country-liquor manufacturers at a rate which is much lower than the market specified prices.

For the season 2014-15, during the period 02.12.2014 to 31.12.2014, Molasses produced was 0.84 lac quintals. Bagasse produced was 5.36 lac quintals.

Power Division

During the sugar season 2013-14, the Plant started on 05.12.2013 as against 01.10.2012 and operated for 131 days as against 250 days in the previous sugar season. The Plant consumed 1.78 lac MT of bagasse as fuel to generate 1.01 lac MW as against 3.95 lac MT of bagasse as fuel to generate 1.89 lac MW in the previous sugar season. The total power exported to the grid was 0.73 lac MW amounting to Rs. 34.31 crore as against 1.47 lac MW amounting to Rs.70.22 crore in the previous sugar season.

For the sugar season 2014-15, the Plant started on 30.11.2014 as against 05.12.2013. During the period 30.11.2014 to 31.12.2014, the Plant consumed 0.50 lac MT of bagasse as fuel to generate 0.25 lac MW. The total power exported to the grid was 0.18 lac MW amounting to Rs. 10.25 crore.

Spirits Division

During the 18 months period under review, the production of Rectified Spirit (RS) was 129.54 lac bulk litres as against 83.88 lac bulk litres in 12 months period of the previous year. The production of Extra Neutral Alcohol (ENA) was 59.72 lac bulk litres as against 39.97 lac bulk litres in 12 months period of the previous year. The quantity of Country Liquor supplied was 14.85 lac cases as against 7.57 lac cases in 12 months period of the previous year. The sale of IMFL was lower at 1.93 lac cases as against 2.94 lac cases in 12 months period of the previous year.

Agrotech Division:

Seed Division

With effect from 1.7.2013, the Company has merged its Seed Division into Agrotech Division, in view of surrender of the farm lands by the Company in June 2013, which were declared as surplus under the U.P. Imposition of Ceiling on Land Holding Act, 1960.

SUBSEQUENT FINANCIAL YEAR 2015-16 (15 Months)

Sugar Division

The crushing season 2014-15 is already started from 02.12.2014 and is expected to continue up to end of March 2015.

The Central Government is likely to announce export incentives for the year 2014-15 (October/ September) by way of subsidy of Rs.4,000/- a quintal for export of about 1.4 million tonnes raw sugar to enable the Sugar Mills to export raw sugar at a competitive global prices and to trim inventry piled-up due to the 5th straight year of surplus output, before the end of the season, which may result into increase in the domestic price of Sugar.

Power Division

The Cogen Power Plant is already started from 30.11.2014 and is expected to run up to 2nd week of April 2015.

Recently in December 2014, UP Electricity Regulatory Commission has revised the tariff rate for sell of power from Rs.4.81 per unit to Rs.5.50 per unit w.e.f. 01.4.2014, which will result into additional revenue. The Company has applied for Renewable Energy Certificate for 5,271 units, which will generate additional revenue.

Spirits Division

The sugar cane crushing is expected to be the same as in the previous season. Therefore, the total molasses availability will also be almost the same.

RAISING FUNDS THROUGH OPTIONALLY CONVERTIBLE PREFERENCE SHARES

As you are aware, the Annual Accounts for the year 2012-13 had reported a loss of Rs.1668.20 lac, which resulted in reducing the Net Worth of the Company. The Promoters / Promoter Group Companies had given non-interest bearing unsecured loans amounting to Rs.11,30,00,000/- to the Company as per the requirement of the Lending Bankers out of which the Company had converted earlier Rs.8,23,50,000/- into Equity Shares through Optionally Convertible Preference Shares Issue leaving the balance Unsecured Loan amount of Rs.3,06,50,000/-.

Considering the immediate need of the Company to take steps to improve its net worth, as per the SEBI Regulations, on 27.3.2014, the Company had allotted 30,65,000 Zero Coupon Optionally Convertible Preference Shares ("OCPS") of Rs.10/- each aggregating to Rs.3,06,50,000/- to the Promoters / Promoter Group on Preferential basis with an option to convert the OCPS into Equity Shares of Rs.10/- each at a price of Rs.21/- per Equity Share (including premium of Rs.11/-) within a period of 18 months from the date of allotment of OCPS, in one or more tranches.

During the Financial Year 2013-14, on exercise of option to convert 28,95,900 OCPS [leaving the balance 1,69,100 OCPS] by the Promoters / Promoter Group, on 8.5.2014, the Company had allotted 13,79,000 Equity Shares of Rs.10/- each at a price of Rs.21/- per Equity Share (including premium of Rs.11/-) aggregating to Rs.2,89,59,000/-.

Thus, the Issued, Subscribed & Paid up Equity Share Capital of the Company stands increased from 86,20,162 Equity Shares of Rs.10/- each aggregating to Rs.8,62,01,620/- to 99,99,162 Equity shares of Rs.10/- each aggregating to Rs.9,99,91,620/-. The total shareholding of the Promoters & Persons acting in concert with the Promoter & Promoter Group stands increased from the existing 64.927% to 69.764%. The Company has obtained the necessary Listing & Trading approvals from BSE & NSE for the same.

REDEMPTION OF PREFERENCE SHARES

In 2004, the Company had allotted 20,00,000 - 1% Cumulative Redeemable Preference Shares (CRPS) of Rs.10/- each fully paid-up aggregating to Rs.2,00,00,000 to Industrial Development Bank of India (IDBI), as per the Consent Terms dated 17.10.2003 signed under the Negotiated Settlement. The said CRPS were to be redeemed in 3 annual installments respectively on 10.08.2011, 10.08.2012 and 10.08.2013. Accordingly, the Company has paid all the 3 installments as on date. The Cumulative Dividend for the years 2011-12 & 2012-13 will be paid on the respective balance amounts as and when the Company declares Dividend on its Equity Shares.

RESTRUCTURING OF TERM LOANS

In view of the operational losses in the Sugar Division, at the request of the Company, Allahabad Bank and UCO Bank have restructured their Term Loans for Cogen Project amounting to Rs. 43.73 crores and Rs 41.11 crores respectively. For the purpose of the restructuring, 01.07.2014 has been agreed as the cut-off date. As per the restructuring package, the Company shall be allowed to repay the Cogen Term Loans as on the cut-off date over a period of 8 years (including the moratorium period of 2 years). The Company shall also be allowed to service the interest on the Cogen Loans during the moratorium period (i.e. 01.07.2014 to 30.06.2016) from Funded Interest Term Loan [FITL] sanctioned under the restructuring package. The FITL sanctioned is Rs.10.80 crore and Rs.10.12 crore by the Allahabad Bank and UCO Bank respectively.

DIRECTORS

Shri K D Sheth resigned from the office of Director of the Company with effect from 03.11.2014, due to old age; Shri K Kannan, expired on 18.12.2014; Smt. M H Kilachand resigned from the office of Director of the Company w.e.f. 31.12.2014 as she was not able to participate actively in the deliberations of the Board as a Director of the Company due to her engagement in various social activities.

The Board of Directors placed on record its sincere appreciation for the valuable support and guidance given by Shri K D Sheth, Shri K Kannan and Smt. M H Kilachand to the Company during their tenure as Director of the Company.

Shri P Nayak (Nominee of General Insurance Corporation [GIC]), Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. The brief profile, pursuant to Clause 49 of the Listing Agreement of the Directors retiring by rotation at the ensuing Annual General Meeting and being eligible, for reappointment, forms part of the Corporate Governance.

Shri H R Kilachand was reappointed as the Chairman and Managing Director of the Company for a further period of 3 years with effect from 14.8.2013. Kesar Terminals and Infrastructure Limited (KTIL) had also reappointed Shri Kilachand as Whole Time Director designated as Executive Chairman for a further period of 3 years with effect from 14.09.2013. However, the total remuneration drawn and retained by Shri H R Kilachand from both the Companies shall not exceed the higher maximum limit admissible from any one of the Companies i.e the Company or KTIL as per the provisions of the Companies Act. Accordingly, Shri Kilachand had drawn remuneration of Rs.9.05 lac from the Company from 01.07.2013 to 30.06.2014. Shri Kilachand opted for not drawing any remuneration from 01.07.2014 in view of heavy operational losses incurred by the Company.

Pursuant to the provisions of Sections 196, 197 read with Schedule V and all other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification or re-enactment(s) thereof, for the time being in force) and the Articles of Association of the Company, subject to the approval of the Central Government, if required, and as approved by the Nomination & Remuneration Committee and the Board of Directors on 27.01.2015, Shri D J Shah was appointed as a Whole Time Director of the Company for a period of 3 years with effect from 27.01.2015 to 26.01.2018 on a remuneration, subject to your approval, as mentioned in the Special Resolution as placed before the Shareholders for approval.

DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 21 7(2AA) of the Companies (Amendment) Act 2000, the Directors state as under:

i) that in preparation of the annual accounts for the 18 months period ended on 31.12.2014, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss 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 this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the Annual Accounts for the 18 months period ended on 31.12.2014 on a going concern basis.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 217(1)(e) of the Companies Act, 1956 are given in the Appendix ''A'' and ''B'' forming part of this Report.

INSIDER TRADING

In compliance with the SEBI regulation on prevention of Insider Trading, your Company has framed a comprehensive code which lays down guidelines and advises the Directors and employees of the Company on procedures to be followed and disclosures to be made, while dealing in securities of the Company.

INSURANCE

The Company has taken adequate insurance for all its properties.

FIXED DEPOSITS

Fixed Deposits of Rs.93,000/- due for repayment on or before 31.12.2014 were not claimed by 3 depositors as on that date.

Further, as per the Companies Act, 2013, since the Company does not fall within the criteria stipulated under the Act, it has discontinued acceptance and renewal of fresh / existing Fixed Deposits w.e.f 01.10.2013. Since the Company is facing a financial crunch, the Company is not in a position to repay the entire outstanding Fixed Deposits on or before 31.3.2015 as stipulated under Section 74 of the Companies Act, 2013 and therefore will make necessary application to the concerned authorities for permission to repay the Fixed Deposits on its maturity date or at such extended time as may be approved by the concerned authorities.

AUDITORS'' REPORT

With respect to para (x) of the annexure to Auditors'' Report, the Shareholders may note that under the provisions of Section 2(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 [SlCA], the Company is regarded as a Sick Industrial Company as at the end of the Financial Year i.e. on 31.12.2014 for 18 months period, it has an Accumulated Losses exceeding its entire Net Worth.

Under the Companies Act, 2013, as per Section 253, sickness of a Company will be determined not on the basis of whether Accumulated Losses exceed Net Worth but on the basis of whether, on a demand by the secured creditors of the Company representing 50% or more of its outstanding amount of debt, the Company has failed to pay the debt within a period of 30 days of the service of the Notice of Demand. In such event, the said secured creditor may file an application to the National Company Law Tribunal [Tribunal] along with the relevant evidence for such default, non-repayment or failure to offer security or compound it, for a determination that the Company be declared as a Sick Company.

As Section 253 is not yet Notified and the Tribunal is not yet formed, the provisions of SICA will continue to apply to such Companies. As per Section 15 of SICA, a reference to the Board for Industrial and Financial Reconstruction [BIFR] will be made within 60 days from the date of finalization of the audited Accounts that the Company has become a Sick Industrial Company.

Report of the Board of Directors as to such erosion, causes for such erosion

As per the audited Accounts of the Company for the 18 months period ended 31.12.2014, the Loss of the Company is Rs.120.02 crore. The Accumulated Loss is Rs.150.59 crore. The Net Worth is Rs.(114.53) crore as calculated on the basis of book value of the Assets of the Company (without considering Revaluation of its Assets amounting to Rs.232.06 crore).

Causes for erosion:

The performance of the Company was adversely affected during the years 2011-12; 2012-13 & 2013-14 (18 months) on account of the following reasons:

1. In the year 2011-12, there was a loss of Rs.1998.50 lac, which included a onetime Exceptional Item relating to the payment of differential cane price of Rs.1281.54 lac pertaining to the Sugar Season 2007-08 as per the Hon''ble Supreme Court Order dated 17.12.2012.

2. In the year 2011-12 the Company had to sell 10% of its total production of sugar at levy price.

3. In the years 2011-12 and 2012-13, the State Advise Price (SAP) of sugarcane was increased substantially by UP Government by Rs.40/- per quintal in both the years, increasing it from Rs.200/- per quintal in the year 2010-11 to Rs.240/- and further to Rs.280/- per quintal for the years 2012-13 respectively and thereafter for 2013-14 also the same SAP was fixed, which substantially affected the cost of production of sugar in all the years. As compared to that the market price of sugar remained lower at about Rs.2,650/- per quintal than the cost of production during the years ranging between Rs.2,800/- per quintal and Rs.3,600/- per quintal. The above resulted into huge losses in the Sugar Division.

4. Sugarcane production went down due to excessive early rainfall affecting yield & recovery.

5. The sugar recovery was lower in all the years as compared to that in the year 2010-11.

6. Distillery was forced to shutdown for a while in the year 2012-13 due to the Kumbhmela.

Steps & Measures

1. Uttar Pradesh Power Corporation Limited (UPPCL) has revised the power tariff upward, which will result into additional profit.

2. In view of the expectation of announcement for incentive on export of raw sugar by the Central Government, the average realization of sugar sale rate may improve.

3. In the year 2013-14, the promoters have brought in fresh capital amounting to Rs.306.50 lac to improve the Net Worth.

4. Recovery is better this season due to wide spread rainfall and better cane varieties planted.

With respect to para (xvii) of the annexure to Auditors'' Report, the Directors would like to clarify that the necessary steps will be taken to raise long term funds in due course.

AUDITORS

M/s. Haribhakti & Co. LLP, Chartered Accountants, the Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for appointment.

INTERNAL CONTROL SYSTEM & INTERNAL AUDITORS

The Company has an adequate Internal Control System. All transactions are properly authorized, recorded and reported to the Management. The Company has Independent Auditors M/s. Ashok Jayesh & Co., Chartered Accountants to review critical areas of operations. The Audit Reports are reviewed periodically by the management and the Audit Committee of the Board and appropriate measures are taken to improve the process.

COST AUDITOR

Pursuant to the directives of the Central Government under Section 233B of the Companies Act, 1956, the Board had appointed Mr. Rishi Mohan Bansal, Cost Accountant as Cost Auditor of the Company to conduct Cost Audit for the products ''Sugar & Alcohol'' and ''Electricity Generation'' for the 18 months period ended 31.12.2014. The Cost Audit Report for the same will be submitted to the Central Government before the due date.

Similarly, pursuant to Sections 148 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014 and all other applicable provisions of the Companies Act, 2013, as recommended by the Audit Committee and approved by the Board of the Company, the appointment and payment of remuneration to M/s. R M Bansal & Co., Cost Accountant, Kanpur, as Cost Auditor is proposed at the ensuing Annual General Meeting, to conduct the audit of the cost records of the Company relating to Sugar & Industrial Alcohol and Generation of Power for the 15 months period ending 31st March, 2016.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed M/s. Ragini Chokshi & Co., Practicing Company Secretary, as Secretarial Auditor of the Company for a period of 5 Financial Years starting from the financial year 2015-16 to conduct Secretarial Audit and provide Secretarial Audit Report in Form MR3.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has continued to play its role as a responsible corporate citizen, adding value to society and addressing the contemporary societal needs and challenges. The Corporate Social Responsibility philosophy ensures that while business objectives are met and shareholder value is enhanced, the Company equally focuses on engaging with the wider community and sustainably addressing environmental concerns in its sphere of operations.

MANAGEMENT DISCUSSION & ANALYSIS REPORT AND CORPORATE GOVERNANCE REPORT

As per Clause 49 of the Listing Agreement, the Management Discussion & Analysis Report and the Corporate Governance Report, along with a Certificate from the Secretarial Auditors'' confirming the compliance, are annexed, which forms part of this Report.

CMD / CFO CERTIFICATION

As required under Clause 49 of the Listing Agreement, the CMD / CFO Certificate forms part of this Report and is annexed hereto.

EMPLOYEES

Relation with the employees remained cordial throughout the year. Your Directors place on record their deep sense of appreciation for the devoted services of the employees of the Company. In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are prepared by the Company. However, as per the provisions of Section 219(I)(b)(iv) of the Companies Act, 1956, the Annual Report excluding the aforesaid information is sent to all the shareholders of the Company and others entitled thereto. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.

ACKNOWLEDGEMENT

Your Directors would like to place on record their grateful appreciation for the assistance and cooperation extended by the Banks, Financial Institutions and the wholehearted support extended by the Shareholders during the year under review.

By Order of the Board of Directors

H R KILACHAND 17th February, 2015 Chairman & Managing Director DIN: 00294835


Jun 30, 2013

To The Shareholders of Kesar enterprises Ltd.

Dear Members,

The Directors present to you the 79th Annual Report and Audited Statement of Accounts for the year ended 30th June, 2013.

FINANCIAL RESULTS:

(Rs. in Lacs)

2012-13 2011-12

Proft / (Loss) before interest, depreciation & taxation 3430.97 1496.66

Less : Interest and Finance Charges 3637.54 1876.34

Proft / (Loss) before Depreciation & taxation (Cash Proft) (206.57) (379.68)

Less : Depreciation 1461.63 558.29

Proft / (Loss) before Exceptional Item & Tax (1668.20) (937.97)

Add / (Less): Exceptional Item 1281.54

Proft / (Loss) before tax (1668.20) (2219.51)

Add / (Less): Taxation tax and MAt adjustment 182.67

(ii) Deferred tax Assets (403.68)

Proft / (Loss) after tax (1668.20) (1998.50)

For the year 2012-13, after considering Deferred tax Assets, there is a loss of Rs. 1,668.20 lac as against a loss of Rs. 1,998.50 lac in the previous year.

In view of the above, your Directors have not recommended any dividend for the year 2012-13.

WORKING OF THE DIVISIONS Sugar Division

the crushing for the season 2012-13 started on 25.11.2012 i.e. 3 days later as compared to 22.11.2011 in the previous season and ended on 15.4.2013 as against 14.4.2012, 1 day later than the previous season. During the season, the plant crushed 85.80 lac quintals of sugarcane as against 93.18 lac quintals in the previous season. the crushing was lower by 7.38 lac quintals during this season due to lack of availability of sugarcane. the sugar recovery overall was lower at 9.14% as against 9.48% in the previous season. the production of sugar was lower at 7.81 lac quintals, as against 8.88 lac quintals in the previous season.

As a part of Sugar Reforms, in April 2013, the Central Government dispensed with the Regulated Release Mechanism of sugar for domestic consumption with immediate effect. Further, obligation to supply sugar as Levy on production @ 10% at a control rate for Public Distribution System (PDS) has also been done away with for sugar produced form October 2012. the PDS requirements will be procured by the states through open market and the gap will be supported by the Central Government. However, the Deregulation process has remained incomplete as the issue of the State control on cane prices with lack of parity between sugar and cane prices has not been addressed.

the Central Government had hiked the FRP of sugarcane on 26.7.2012 from Rs. 145 per quintal to Rs. 170 per quintal at a base recovery of 9.5% for the season 2012-13.

For the season 2012-13, the U. P. Government had announced a steep hike of Rs. 40 a quintal in the State Advised Price (SAP) of sugarcane fxing SAP at Rs. 280 a quintal as against an already steep Rs. 240 a quintal in the previous year. the cost of production in U.P. has become the highest in the country, which has rendered the U.P. sugar Industry unviable, cash-starved and uncompetitive.

During the season, Molasses produced was 3.98 lac quintals as against 4.36 lac quintals. Bagasse produced was 26.07 lac quintals as against 31.43 lac quintals in the previous season. the Company had consumed almost the entire quantity of bagasse for its Cogeneration Power Plant. the Company had implemented major energy effcient measures in the boiling house of the sugar factory at Baheri, thereby reducing steam and power consumption signifcantly, resulting in large savings in bagasse.

Power Division

With stupendous efforts of the employees of the Company and full co-operation of manufacturers of various equipments & contractors, the 44 mw Bagasse based Cogeneration Power Plant at Baheri, U.P. was completed in July 2012 in a record time of 18 months inspite of some delay in receiving funds. the trial run of the Plant was made on 17.7.2012 and the plant started commercial operations from 1.10.2012. It is the most effcient and largest capacity single plant in the sugar Cogeneration Sector in U.P. and perhaps in the country having the state-of-the-art Process Control systems with performance monitoring software. During the year under review, the Plant operated for 250 days. the Plant consumed 3.95 lac Mt of bagasse as fuel to generate 1.89 lac MW. the total power exported to the grid was 1.47 lac MW amounting to Rs. 70.22 crore. the Plant was stopped from 7.6.2013.

the Sugar Development Fund, Allahabad Bank, UCO Bank and Yes Bank Ltd. have funded the said Project.

Spirits Division

During the year under review, the production of Rectifed Spirit (RS) was 83.88 lac bulk litres as against 112.23 lac bulk litres in the previous year. the production of extra Neutral Alcohol (eNA) was 39.97 lac bulk litres as against 52.43 lac bulk litres in the previous year. the low production was due to the forced shutdown of the Distillery during the period from 24.12.2012 to 22.2.2013 due to the Kumbhmela. the quantity of Country Liquor supplied was 7.57 lac cases as against 11.25 lac cases in the previous year. the sale of IMFL was higher at 2.94 lac cases as against 1.98 lac cases in the previous year. the Company has contract bottling arrangements with reputed parties, which ensures a higher capacity utilisation and reduction in operating overheads. the Company also has tie-up arrangements to get its own brands manufactured in other States.

Agrotech Division: Farm Land

In the year 1933, the Company was granted agriculture land admeasuring 610 hectres at Khurpia and later the said land was converted into lease for 20 years by the Superintendant of tarai & Bhabur under the Government Grant Act. thereafter, it was marked as Bhumidhari. Whereas, the Mundia & Bhavanipur farms were taken on lease. thus, the Company was in possession of 706.89 hectres of agriculture land situated at Mundia Farm in U.P. and Khurpia & Bhavanipur Farms in Uttaranchal, on which the Company was growing various crops including sugarcane. However, in the year 1976, the Prescribed Authority, Bareilly had passed an Order on 5.7.1976 declaring the above land as surplus under the U.P. Imposition of Ceiling on Land Holding Act, 1960. the Company had fled an Appeal before the District Judge against the said Order, which was partly allowed. thereafter, there were several court hearings. Finally, on 22.3.2012, the High Court summarily dismissed the Writ Petition against which the Company fled Review Application, which was also dismissed. the Company then fled a Special Leave Petition [SLP], which was dismissed by the Hon''ble Supreme Court. thereafter, the Company once again fled a fresh Writ Petition in the Allahabad High Court seeking relief for some time to enable the Company to harvest the standing crop and to remove the belongings of the Company. Accordingly, the Court granted time till February 2013. Meantime, the Company could get back 11 hectares of land at Mundia farm and expects about 16 hectars of land at Khurpia farm.

Crops

So far, the Company has undertaken cultivation of high valued crops of Vegetable and fowers and is developing Bio-pesticides and Bio-fungicides for sugarcane cultivation such as trichoderma Verdi and trichocards. Initial trials of these new products have been successful and are now being replicated on a larger scale. the Company has a tissue culture laboratory for rapid multiplication of different sugarcane varieties.

Seed Division

Open Pollinated Seeds produced by the Company for wheat, paddy, mustard, toria, urad and peas have been very well received by the farmers. the Company has undertaken production & marketing of Hybrid Seeds of paddy, maize, sorghum sudan grass & pearl millet and different kinds of Vegetables. the Company has registered vegetable Seeds, which are sold under the brand name of ''Kesar Seeds''. the Company has obtained Seed Licenses in the States of Chattisgarh, Rajasthan, Uttar Pradesh, Uttarakhand, Bihar, Madhya Pradesh, Punjab and Haryana. the Research and Development (R&D) facility for hybrid crop seeds is fully functional near Hyderabad. Simultaneously, the R&D facility for development of vegetable seeds at Kichha, Uttarakhand has been operationalised. enhanced seed processing capacity of 6 mt/ hr is operational at Kichcha, Uttarakhand. the R&D department has released two hybrids such as K-606 (UMANG) and K-707 (HARSH). Both hybrids are well tested at feld level and all efforts are being taken to promote them at the farmer''s level. this year the Company has revamped the packaging of seeds to meet the expectation of industry and end users. the Company has supplied the seeds taking immense care in production and packing due to which complaints has been minimized.

SUBSEQUENT FINANCIAL YEAR 2013-14

Sugar Division

For the season 2013-14, the Sugar Factory is expected to start by last week of November, 2013.

the Central Government has hiked the FRP of sugarcane on 20.2.2013 from Rs. 170 per quintal to Rs. 210 per quintal at a base recovery of 9.5% for the season 2013-14.

For the season 2013-14, the U P Government has not yet announced the State Advised Price (SAP) of sugarcane.

Power Division

the Cogen Power Plant is expected to start by 2nd week of November 2013 and should run till June 2014.

Spirits Division

the sugar cane crushing is expected to be the same as the previous season. therefore, the total molasses availability will also be the same. the production of Rectifed Spirit / Special Denatured Spirit and eNA should be higher during this year. the sale of Country Liquor will be higher. IMFL is expected to be the same as in the previous year. the contract bottling arrangements continue. the overall performance of the Spirits Division for the current year is likely to be better as compared to the previous year.

Seed Division

With effect from 1.7.2013, the Company has merged its Agrotech Division into Seed Division, in view of surrender of the farm lands by the Company in June 2013, which were declared as surplus under the U.P. Imposition of Ceiling on Land Holding Act, 1960. the Company plans to expand operations in the eastern part of the country by entering Odisha and West Bengal, which hold enormous business potential for paddy and other kharif crops. In the north, operations are being reinforced with the induction of additional marketing force in Punjab and Haryana.

EXPANSION / MODERNISATION

Spirits Division

the Company is eligible to expand 25% capacity of the Distillery under U. P. excise policy. Considering the current market scenario and in order to reduce overall production cost, the Company is planning to expand & modernise the production capacity of the Distillery from 50,000 BL per day to 62,500 BL per day at the frst opportunity.

Seed Division

It is proposed to set up two seed processing plants, one in east Uttar Pradesh, which will service east U.P., Bihar, Jharkhand, Chattishgarh & Odisha and second one in Madhya Pradesh. With these plants, processing capacity is going to be doubled. Hybrid production is being increased as it will result in improved proftability. to cater the need of the existing customers and prospects of future growth, the Company has started outsourcing of products, which will help us to expand the geographical reach and to generate revenue to make the operations effective & proftable.

COMPOSITE LOGISTICS HUB PROJECT AT MADHYA PRADESH

During the year, the Special Purpose Vehicle Company (SPV) Kesar Multimodal Logistics Ltd (KMLL) formed by Kesar terminals & Infrastructure Limited (KtIL), the Lead Member and the Company had done the ''Bhoomipujan'' and ''Foundation Stone Laying'' Ceremony on 22.10.2012 at the Project site at Pawarkheda, Madhya Pradesh following which construction activities commenced in full swing. the Composite Logistics Hub, covering an area of 88.3 acres, includes development of an entire range of logistics infrastructure including rail sidings for cargo and container movement, rail-side warehouses, Inland Container Depot (ICD), Cold Storage, food grains warehouse, Agri processing units, development of common facilities, marketing of the same to potential customers along with operation and maintenance thereof. this Project land has been provided by the Madhya Pradesh State Agricultural Marketing Board (Mandi Board) on a Design, Build, Finance, Operate and transfer (DBFOt) basis through Public Private Participation (PPP). the project will be developed in 2 phases. It is expected the 1st phase will be operational by end of the year or early next year.

the necessary fnancial tie up of Rs. 108.11 crore has been arranged by KMLL through a Consortium of Bankers i.e. Dena Bank as the Lead Bank and Allahabad Bank and Union Bank of India as the Consortium Banks amounting to Rs. 58.11 crore, Rs. 25 crore and Rs. 25 crore respectively. the Company may not continue participation in this project of Madhya Pradesh.

RAISING FUNDS THROUGH OPTIONALLY CONVERTIBLE PREFERENCE SHARES

You are aware that the Company had sought & got the approval of the Shareholders to raise funds in order to enhance fnancial fexibility of the Company to fund the capital expenditure plans of the Company and/or to part fnance expansion/modernization of the sugar factory/ cogeneration projects at Baheri and/or acquisition/ investments in similar facilities to the extent of Rs. 50 crore.

You are also aware that in view of unfavourable market conditions, at that point of time, not conducive for the Issue of Rights Shares and also in view of substantial reduction of Net Worth of the Company due to loss in the year 2011-12, which resulted into taking immediate steps to improve it, the Company had decided to consider the Rights Issue at an appropriate time, and to consider frst, the Issue of Optionally Convertible Preference Shares on Preferential basis to the Promoters / Persons acting in concert with the Promoters in terms of Regulation 3(2) of the SeBI (Substantial Acquisition of Shares and takeovers) Regulations, 2011.

Accordingly, on 6.2.2013, the Board had allotted 82,35,000 Zero Coupon Optionally Convertible Preference Shares ("OCPS”) of Rs. 10/- each fully paid-up aggregating to Rs. 8,23,50,000/- to the Promoters & Persons acting in concert with the Promoters (Promoter Group Companies) on Preferential basis with an option to convert the OCPS within a period of 18 months from the date of allotment i.e. 6.2.2013, either partly or fully, in one or more tranches, in one or more fnancial years, by giving in writing 3 days advance notice to the Company as approved by the Shareholders through Postal Ballot voting process on 22.1.2013.

thereafter, the Promoter & Persons acting in concert with the Promoters (Promoter Group Companies) had exercised their option to convert OCPS in two tranches of 38,47,500 OCPS and 43,87,500 OCPS in two fnancial years 2012-13 & 2013-14. Hence, on 7.3.2013 i.e. during the Financial Year 2012-13 and on 13.5.2013, i.e. during the Financial Year 2013-14, the Board had allotted 8,55,000 equity Shares and 9,75,000 equity Shares aggregating to 18,30,000 equity Shares of Rs.10/- each at a premium of Rs. 35/- per share total aggregate amounting to Rs. 8,23,50,000/- by way of issue of new equity Shares.

thus, the Issued, Subscribed & Paid up equity Share Capital of the Company stands increased from 67,90,162 equity Shares of Rs.10/- each aggregating to Rs. 6,79,01,620/- to 86,20,162 equity shares of Rs. 10/- each aggregating to Rs. 8,62,01,620/-. the total shareholding of the Promoters & Persons acting in concert with the Promoters [Promoter Group] stands increased from the existing 55.455% to 64.928%.

the Company has obtained the necessary Listing & trading approvals from BSe & NSe for the same.

REDEMPTION OF PREFERENCE SHARES

In 2004, the Company had allotted 20,00,000 — 1% Cumulative Redeemable Preference Shares (CRPS) of Rs. 10/- each fully paid-up aggregating to Rs. 2,00,00,000 to Industrial Development Bank of India (IDBI), as per the Consent terms dated 17.10.2003 signed under the Negotiated Settlement. the said CRPS were to be redeemed in 3 annual installments respectively on 10.8.2011, 10.8.2012 and 10.8.2013. Accordingly, the Company has paid all the 3 installments as on date. the Cumulative Dividend for the years 2011-12 & 2012-13 will be paid on the respective balance amounts as and when the Company declares Dividend on its equity Shares.

DIRECTORS

Shri P Nayak (Nominee of General Insurance Corporation [GIC]) and Shri Ajeet Prasad, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. the brief profle, pursuant to Clause 49 of the Listing Agreement of the Directors retiring by rotation at the ensuing Annual General Meeting and being eligible, for reappointment, forms part of the Corporate Governance Report.

Shri P Nayak, General Manager, the New India Assurance Co. Ltd., Mumbai was appointed as Nominee Director of the Company in place of Shri S Sethuraman as requested by the General Insurers'' (Public Sector) Association of India (GIPSA) with effect from 29.8.2013. the Board placed on record its appreciation for the valuable services rendered by Shri S Sethuraman during his tenure.

Pursuant to the provisions of Section 198, 269, 309, Schedule XIII read with Section III thereto and other applicable provisions, if any, of the Companies Act, 1956, and as approved by the Remuneration Committee and the Board of Directors on 25.7.2013, Shri H R Kilachand was reappointed as the Chairman and Managing Director of the Company for a further period of 3 years with effect from 14.8.2013 at a remuneration, subject to your approval as mentioned in the Special Resolution as placed before the Shareholders for approval.

Your Company was informed by Kesar terminals and Infrastructure Limited (KtIL) that on 11.7.2013 the Shareholders of KtIL had reappointed Shri H R Kilachand as Whole-time Director designated as executive Chairman for a further period of 3 years with effect from 14.9.2013. However, the total remuneration drawn and retained by Shri H R Kilachand from both the Companies shall not exceed the higher maximum limit admissible from any one of the Companies i.e. the Company or KtIL as per the provisions of the Companies Act.

DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies (Amendment) Act 2000, the Directors state as under:

i) that in preparation of the annual accounts for the fnancial year ended on 30th June, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the fnancial year and of the loss for that year;

iii) that the Directors had taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the Annual Accounts for the fnancial year ended on 30th June, 2013 on a going concern basis.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 217(1)(e) of the Companies Act, 1956 are given in the Appendix ''A'' forming part of this Report.

INSIDER TRADING

In compliance with the SeBI regulation on prevention of Insider trading, your Company has framed a comprehensive code which lays down guidelines and advises the Directors and employees of the Company on procedures to be followed and disclosures to be made, while dealing in securities of the Company.

INSURANCE

the Company has taken adequate insurance for all its properties.

FIXED DEPOSITS

Fixed Deposits of Rs. 3,01,000/- due for repayment on or before 30th June, 2013 were not claimed by 3 depositors as on that date.

AUDITORS'' REPORT

With respect to para (x) of the annexure to Auditors'' Report, the Shareholders may note that under the provisions of Section 23 of SICA, the Accumulated Losses of the Company for the fnancial year ended 30th June, 2013 have resulted in erosion of more than 50% of its peak Net Worth during the immediately preceding four fnancial years. the Report of the Board of Directors as to such erosion and the causes for such erosion are given in the Annexure to the Notice of this Annual General Meeting.

With respect to para (xvii) of the annexure to Auditors'' Report, the Directors would like to clarify that necessary steps will be taken to raise long term funds for which an enabling resolution is proposed in the Notice of this Annual General Meeting.

AUDITORS

M/s. Haribhakti & Co., Chartered Accountants, the Auditors of the Company, hold offce until the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for appointment.

INTERNAL CONTROL SYSTEM & INTERNAL AUDITORS

the Company has an adequate Internal Control System. All transactions are properly authorized, recorded and reported to the Management. the Company has Independent Auditors M/s. Ashok Jayesh & Co., Chartered Accountants to review critical areas of operations. the Audit Reports are reviewed periodically by the management and the Audit Committee of the Board and appropriate measures are taken to improve the process.

COST AUDITOR

Pursuant to the directives of the Central Government under Section 233B of the Companies Act, 1956, the Board had appointed Mr. Rishi Mohan Bansal, Cost Accountant as Cost Auditor of the Company to conduct Cost Audit for the products Rs.Sugar & Alcohol'' and Rs.electricity'' for the year ended 30.6.2013. the Cost Audit Report for the same will be submitted to the Central Government before the due date.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has continued to play its role as a responsible corporate citizen, adding value to society and addressing the contemporary societal needs and challenges. the Corporate Social Responsibility philosophy ensures that while business objectives are met and shareholder value is enhanced, the Company equally focuses on engaging with the wider community and sustainably addressing environmental concerns in its sphere of operations.

MANAGEMENT DISCUSSION & ANALYSIS REPORT AND CORPORATE GOVERNANCE REPORT

As per Clause 49 of the Listing Agreement, the Management Discussion & Analysis Report and the Corporate Governance Report, along with a Certifcate from the Auditors confrming the compliance, are annexed, which forms part of this Report.

CMD / CFO CERTIFICATION

As required under Clause 49 of the Listing Agreement, the CMD (CeO) / CFO Certifcate forms part of this Report and is annexed hereto.

EMPLOYEES

Relation with the employees remained cordial throughout the year. Your Directors place on record their deep sense of appreciation for the devoted services of the employees of the Company. In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975, the names and other particulars of employees are prepared by the Company. However, as per the provisions of Section 219(I)(b)(iv) of the Companies Act, 1956, the Annual Report excluding the aforesaid information is sent to all the shareholders of the Company and others entitled thereto. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the registered offce of the Company.

ACKNOWLEDGEMENT

Your Directors would like to place on record their grateful appreciation for the assistance and cooperation extended by the Banks, Financial Institutions and the wholehearted support extended by the Shareholders during the year under review.

By Order of the Board of Directors

H R KILACHAND

29th August, 2013 Chairman & Managing Director


Jun 30, 2012

To The Shareholders, Kesar Enterprises Ltd.

Dear Members,

The Directors present to you the 78th Annual Report and audited Statement of Accounts for the year ended 30th June, 2012.

FINANCIAL RESULTS

(Rs. in Lac) 2011-12 2010-11

Profit before interest, depreciation, exceptional item & tax 1498.51 2623.71

Less: Interest and Finance Charges 1876.35 1997.88

Profit/ (Loss) before depreciation, exceptional item & (377.84) 625.83

Less: Depreciation 558.29 583.10

Profit / (Loss) before exceptional item & tax (936.13) 42.73

Less: Exceptional Ltem 1281.54

Profit / (Loss) before tax (2217.67) 42.73

Add /(Less): Provision for Tax

(i) Income Tax- Deferred Tax Assets 403.68 320.99

(ii) Current Tax (consists of wealth tax & MAT adjustment (184.51) (1.98)

Profit / (Loss) after tax (1998.50) 361.74

For the year 2011-12, after considering Deferred Tax Assets, there is a loss of Rs. 1,998.50 lac, which includes a one time Exceptional Item relating to the payment of differential cane price of Rs. 1,281.54 lac for the Sugar Season 2007-08 as per the Hon'ble Supreme Court Order dated 17.1.2012. This is applicable to all sugar mills in U. P. only. This is as against profit after tax of Rs. 361.74 lac in the previous year.

In view of the above, your Directors have not recommended any dividend on Cumulative Redeemable Preference Shares and Equity Shares for the year 2011-12.

WORKING OF THE DIVISIONS

Sugar Division

The crushing for the season 2011-12 started on 22.11.2011 i.e. 10 days earlier as compared to 2.12.2010 in the previous season and ended on 15.4.2012 as against 30.3.2011, 15 days later than the previous season. During the season, the plant crushed 93.18 lac quintals of sugarcane as against 73.80 lac quintals in the previous season. The crushing was higher by 1 9.39 lac quintals during this season. The sugar recovery overall was slightly lower at 9.48% as against 9.68% in the previous season. The production of sugar was higher at 8.88 lac quintals due to higher availability of sugarcane, as against 7.18 lac quintals in the previous season.

The Levy sugar price for the season 2011-12 was announced by the Central Government on 3.3.2012, increasing it from Rs. 1,900.88 to Rs.1,959.41 per quintal. The levy ratio is 10 %.

On 14.3.2011, the Central Government had hiked the 'Fair and Remunerative Price' (FRP) of sugarcane from Rs. 139.12 per quintal to Rs. 145.00 per quintal at a base recovery of 9.5% for the season 2011-12.

For the season 2011-12, the U. P. Government had announced a hike of Rs. 35.00 a quintal in the State Advised Price (SAP) of sugarcane fixing SAP at Rs. 240.00 a quintal as against Rs. 205.00 a quintal in the previous year. During the season, Molasses produced was 4.36 lac quintals as against 3.56 lac quintals. Bagasse produced was 31.43 lac quintals as against 22.79 lac quintals in the previous season due to higher crushing. The Company had stored the

ire surplus bagasse for its use in Cogeneration Power Plant, whereas in the previous season, the Company had sold 7.75 lac quintals of bagasse. The Company has implemented major energy efficient measures in the boiling house of the sugar factory at Baheri, thereby reducing steam and power consumption significantly, resulting in large savings in bagasse. Over and above that, there is lower power and steam consumption, resulting in reduced load on the boilers and turbines.

Spirits Division

During the year under review, the production of Rectified Spirit (RS) was 112.23 lac bulk litres as against 131.42 lac bulk litres in the previous year. The production of Extra Neutral Alcohol (ENA) was 52.44 lac bulk litres as against 39.42 lac bulk litres in the previous year. The quantity of Country Liquor supplied was 11.25 lac cases as against 8.82 lac cases in the previous year. The sale of IMFL was 1.98 lac cases as against 3.58 lac cases in the previous year. The Company has contract bottling arrangements with reputed parties, which ensures a higher capacity utilisation and reduction in operating overheads. The Company also has tie-up arrangements to get its own brands manufactured in other States.

Agrotech Division:

Crops

The Company has undertaken cultivation of high valued crops and is developing Bio-pesticides and Bio-fungicides for sugarcane cultivation such as Trichoderma Verdi and Trichocards. Initial trials of these new products have been successful and are now being replicated on a larger scale. The Company has also undertaken the development of floriculture like rose, gladiolus and gerbera in greenhouses. The Division has been producing sugarcane, rice, wheat, mustard and sunflower for seed purpose and carries on cane development activities. The Company has a tissue culture laboratory for rapid multiplication of different sugarcane varieties.

Seed Division

Open Pollinated Seeds produced by the Company for wheat, paddy, mustard, toria, urad and peas have been very well received by the farmers. The Company has undertaken production & marketing of Hybrid Seeds of paddy, maize, sorghum sudan grass & pearl millet. The Company has registered Vegetable Seeds, which are sold under the brand name of 'Kesar Seeds'. The Company is getting the open pollinated seeds produced and processed in Madhya Pradesh, Uttar Pradesh and Uttarakhand. The Company has obtained Seed Licenses in the States of Chattisgarh, Rajasthan, Uttar Pradesh, Uttarakhand, Bihar, Madhya Pradesh, Punjab and Haryana. The Research and Development (R&D) facility for hybrid crop seeds is fully functional near Hyderabad. Simultaneously, the R&D facility for development of vegetable seeds at Kichha, Uttarakhand has been operationalised. Enhanced seed processing capacity of 6 mt/ hr is operational at Kichcha, Uttarakhand. The R&D department has undertaken field trials of hybrid paddy at various locations and the results have been excellent.

SUBSEQUENT FINANCIAL YEAR 2012-13

Sugar Division

For the season 2012 -13, the Sugar Factory is expected to start by last week of November, 2012. The sugar season is expected to be better than the previous season. The Levy sugar price for the season 2012-13 is yet to be announced by the Central Government.

The Central Government has not revised the levy sugar price for the years 2003-04 to 2008-09. In May 2004, in one sugar mill case, the Supreme Court had mentioned that the SAP fixed by the State Government needs to be taken into account in the computation of the levy sugar price. On 31.3.2008, in another sugar mill case, the Supreme Court directed the Central Government to refix the price of levy sugar taking into account the SAP as against Statutory Minimum Price (SMP).

For the season 2012-13, the U. P. Government has not yet announced the State Advised Price (SAP) of sugarcane.

Spirits Division

The sugar cane crushing is expected to be higher than the previous season. Therefore, the total molasses availability will also be higher. The prices of molasses may drop. The production of Rectified Spirit / Special Denatured Spirit and ENA should be higher during this year. The sale of Country Liquor will be higher. IMFL is expected to be the same as in the previous year. The contract bottling arrangements continue. The overall performance of the Spirits Division for the current year is likely to be better as compared to the previous year.

Seed Division

The Company plans to expand operations in the eastern part of the country by entering Odisha and West Bengal, which hold enormous business potential for paddy and other kharif crops. In the north, operations are being reinforced with the induction of additional marketing force in Punjab and Jammu that will become operational for ensuing kharif season.

EXPANSION / MODERNISATION

Cogeneration Power Plant

With stupendous efforts of the employees of the Company and full co-operation of manufacturers of various equipments & contractors, the 44 mw Bagasse based Cogeneration Power Plant at Baheri, U.P. was completed in July 2012 in a record time of about 18 months. The trial run of the Plant was made on 17.7.2012. It is the most efficient and largest capacity single plant in the sugar Cogeneration Sector in U.P. and perhaps in the country, having the state-of-the-art Process Control systems with performance monitoring software. The Plant started commercial operations in October, 2012. The Company will substantially export power to the grid and will benefit from the well established government policies related to renewable energy and also get benefit of carbon trading rights / renewable energy certificate. The Sugar Development Fund, Allahabad Bank, UCO Bank and Yes Bank Ltd. have financed the said Power Project.

Spirits Division

The Company is eligible to expand 25% capacity of the Distillery under U. P. Excise policy. Considering the current market scenario and in order to reduce overall production cost, the Company is planning to expand & modernise the production capacity of the Distillery from 50,000 BL per day to 62,500 BL per day.

Seed Division

It is proposed to set up two seed processing plants, one in East Uttar Pradesh, which will service East U.P., Bihar, Jharkhand, Chattishgarh & Odisha and second one in Madhya Pradesh. With these plants, processing capacity is going to be doubled. Hybrid production is being increased as it will result in improved profitability.

JOINT PROJECT IN MADHYA PRADESH

A Consortium of Kesar Terminals & Infrastructure Limited (KTIL), the Lead Member, and the Company had received a Letter of Award [LOA] from The Madhya Pradesh State Agricultural Marketing Board (the Mandi Board) confirming the Consortium as a successful bidder for setting up of a "Composite Logistics Hub" at Pawarkheda, District Hoshangabad, Madhya Pradesh on a Design, Build, Finance, Operate and Transfer (DBFOT) basis through Public Private Participation (PPP). The project includes development of an entire range of logistics infrastructure including rail sidings for cargo and container movement, rail side warehouses, Inland Container Depot (ICD), Cold Storage, food grains warehouse, development of common facilities, marketing of the same to potential customers along with operation and maintenance thereof. The estimated Project cost is Rs. 150 crore. The said Project is being executed through a Special Purpose Vehicle named "Kesar Multimodal Logistics Limited" (KMLL) incorporated by KTIL & the Company in which the Company has invested Rs. 2,50,000/- towards its equity share capital. KMLL has executed a Concession Agreement with the Mandi Board on 24.10.2011 in the matter. The Project is in progress as per schedule.

REDEMPTION OF PREFERENCE SHARES

In 2004, the Company had allotted 20,00,000 - 1% Cumulative Redeemable Preference Shares (CRPS) of Rs.10/- each fully paid-up aggregating to Rs. 2,00,00,000 to Industrial Development Bank of India (IDBI), as per the Consent Terms dated 17.10.2003 signed under the Negotiated Settlement. The said CRPS are to be redeemed in three annual installments respectively on 10.8.2011, 10.8.2012 and 10.8.2013. Accordingly, the Company had paid the 1st instalment of Rs. 67,00,000/- on 10.8.2011 and the 2nd instalment of Rs. 67,00,000/- on 10.8.2012. The balance amount of Rs. 66,00,000/- will be payable on 10.8.2013.

RAISING FUNDS THROUGH RIGHTS ISSUE

The Board has approved raising funds up to an amount not exceeding Rs.15 crore inclusive of premium, if any, by issue of further equity share capital on Rights basis to the existing shareholders, subject to the approval of SEBI & Stock Exchanges (BSE & NSE) on the terms and conditions like offer ratio, quantum of shares, offer price etc. as may be determined in consultation with the Lead Manager / Advisor to the Rights Issue and such other authorities and agencies as may be required to be consulted by the Company. The Shareholders have already passed a Special Resolution under section 81(1A) of the Companies Act through Postal Ballot process on 3.10.2012 to raise the funds through issue of securities upto an amount not exceeding Rs. 50 Crore. To decide various matters concerning the Rights Issue at the earliest and also for administrative convenience, the Board has constituted a Rights Issue Committee comprising of 4 Directors viz. Shri H R Kilachand, Chairman & Managing Director, Shri A S Ruia, Shri K Kannan and Shri Ajeet Prasad.

DIRECTORS

Shri K Kannan and Shri A S Ruia, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. The brief profile, pursuant to Clause 49 of the Listing Agreement of the Directors retiring by rotation at the ensuing Annual General Meeting and being eligible, for reappointment, forms part of the Corporate Governance Report.

Shri N ] Vakil resigned as Director of the Company from 14.2.2012. Shri Prakash Dubey was appointed as Additional Director from 18.4.2012. Shri S Sethuraman, General Manager, The New India Assurance Co. Ltd., Mumbai was appointed as Nominee Director of the Company in place of Shri I S Phukela as requested by The General Insurers' (Public Sector) Association of India (GIPSA), New Delhi from 13.8.2012.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies (Amendment) Act 2000, the Directors state as under:

i) that in preparation of the annual accounts for the financial year ended on 30th June, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss 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 this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the Annual Accounts for the financial year ended on 30th June, 2012 on a going concern basis.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 217(1)(e) of the Companies Act, 1956 are given in the Appendix 'A' forming part of this Report.

MANAGEMENT DISCUSSION & ANALYSIS REPORT AND CORPORATE GOVERNANCE REPORT

As per Clause 49 of the Listing Agreement, the Management Discussion & Analysis Report and the Corporate Governance Report are annexed, which forms part of this report.

INSURANCE

The Company has taken adequate insurance for all its properties.

FIXED DEPOSITS

Out of the total Fixed Deposits amount of Rs. 395 lac, the Fixed Deposit of Rs. 1.82 lac due for repayment on or before 30th June, 2012 were not claimed by 4 depositors as on that date.

AUDITORS' REPORT

With respect to paras (x) & (xvii) of the annexure to Auditors' Report, the Directors would like to clarify as under:

(a) Para (x); that the current year's cash loss is mainly due to an Exceptional item of a one time payment for differential sugarcane price for the season 2007-08 as per the Supreme Court Order dated 1 7.1.2012. However, the

Cogeneration Power Plant has started supplying power to the grid from October, 2012, which will result into high earnings during the current year;

(b) Para (xvii): that necessary steps will be taken to raise long term funds partially inter-alia through Rights Issue.

AUDITORS

M/s. Haribhakti & Co., Chartered Accountants, the Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and being eligible, offers themselves for appointment.

INSIDER TRADING

In compliance with the SEBI regulation on prevention of Insider Trading, your Company has framed a comprehensive code which lays down guidelines and advises the Directors and employees of the Company on procedures to be followed and disclosures to be made, while dealing in securities of the Company.

INTERNAL CONTROL SYSTEM & INTERNAL AUDITORS

The Company has an adequate Internal Control System. All transactions are properly authorized, recorded and reported to the Management. The Company has Independent Auditors M/s. Ashok jayesh & Co., Chartered Accountants to review critical areas of operations. The Audit Reports are reviewed periodically by the management and the Audit Committee of the Board and appropriate measures are taken to improve the process.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has continued to play its role as a responsible corporate citizen, adding value to society and addressing the contemporary societal needs and challenges. The Corporate Social Responsibility philosophy ensures that while business objectives are met and shareholder value is enhanced, the Company equally focuses on engaging with the wider community and sustainably addressing environmental concerns in its sphere of operations.

EMPLOYEES

Relation with the employees remained cordial throughout the year. There is no employee whose information is required to be given under the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended.

ACKNOWLEDGEMENT

Your Directors would like to express their grateful appreciation for the assistance and cooperation extended by the Banks & Financial Institutions during the year under review. Your Directors wish to place on record their deep sense of appreciation for the devoted services of the employees of the Company for its success.

By Order of the Board of Directors

Registered Office:

Oriental House, D J SHAH

7, Jamshedji Tata Road, Sr. Vice President (Legal)

Churchgate, & Company Secretary

Mumbai - 400 020.

9th November, 2012

 
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