Mar 31, 2018
The Directors have pleasure in presenting the 42nd Annual Report and audited financial statements for the year ended 31st March, 2018.
The Statement of Accounts have been prepared in accordance with Indian Accounting Standards (IND AS) which have been made applicable to the Company w.e.f. 1st April, 2017 as per the Rules laid down in this regard. Accordingly, accounts of the Company have been restated w.e.f. 1st April, 2016 (being comparative year for the current financial year) as per the IND AS requirements.
FINANCIAL HIGHLIGHTS
(Rs. in Crores)
Particulars |
For the year ended 31st March, 2018 |
For the year ended 31st March, 2017 |
Sales (including export incentives and net of Excise Duty, VAT/GST) |
326.44 |
340.79 |
Other Income |
4.37 |
9.36 |
TOTAL |
330.81 |
350.15 |
Gross Profit before Depreciation |
34.26 |
42.31 |
Deducting therefrom: |
||
Depreciation |
11.91 |
10.48 |
Provision for Tax - |
||
- Current Tax |
10.95 |
8.91 |
- Deferred Tax |
(3.17) |
2.43 |
Profit after Tax from continuing operations |
14.57 |
20.49 |
Other comprehensive income (net of tax) |
(0.70) |
0.60 |
Total comprehensive profit for the year |
13.87 |
21.09 |
Profit brought forward from previous year |
14.68 |
3.87 |
Balance Profit available |
29.25 |
24.36 |
for appropriation |
||
Appropriations : |
||
Dividend on Optionally Convertible Preference Shares |
0.85 |
0.79 |
Final dividend on equity shares at 25% |
2.27 |
2.27 |
Tax on dividend |
0.64 |
0.62 |
Transfer to General Reserve |
- |
6.00 |
Balance profit carried forward to next year |
25.49 |
14.68 |
Earnings per share (Rs.) |
||
Basic |
15.27 |
23.23 |
Diluted |
15.27 |
23.23 |
DIVIDEND
The Board has recommended a dividend @5.4029 % p.a. for the year ended 31st March, 2018 on the 929,412 Optionally Convertible Preference Shares of face value of Rs. 170/- each, subject to approval of the members at the ensuing Annual General Meeting, .
Considering the Company''s performance and financial position for the year under review, the Board has also recommended a dividend of Rs. 2.5 per share i.e. 25% of the face value of Rs. 10/- per share on the Equity Capital for the year ended 31st March, 2018, subject to approval of the members at the ensuing Annual General Meeting.
Together with Corporate Tax on dividend, the total outflow on account of dividend will be Rs. 376.55 lakhs including Rs. 85.36 lakhs on Preference Shares (Rs. 85.36 lakhs for the financial year 201617), vis-a-vis Rs. 375.93 lakhs paid for the financial year 2016-17 (paid in 2017-18).
During the year, unclaimed dividend of Rs. 3.86 lakhs pertaining to the year ended 31st March, 2010 was transferred to the Investor Education & Protection Fund after giving due notice to the members. Besides, upon complying with statutory formalities prescribed under the IEPF (Accounting, Audit, Transfer and Refund) Rules, 23706 shares corresponding to 171 holdings (records) which represent holdings with respect whereof dividend was not claimed and paid for a consecutive period of seven years, were transferred to the account of IEPF Authority, maintained with National Securities Depository Limited (NSDL) and the fact of the same was also apprised to the Board (Agenda 252.08 I) at its meeting dated 03-02-2018.
SHARE CAPITAL
The Authorised Share Capital of your Company is Rs. 358,000,040/- (Rupees Thirty Five Crores Eighty lakhs and Forty only) (comprising of two crore Equity Shares of Rs. 10/- each and 929,412 Optionally Convertible (non-cumulative) Preference Shares (OCPS) of Rs. 170/- each). Nitta Gelatin Inc., (NGI) Japan had not exercised the option to convert the OCPS shares into Equity Shares at the end of 18 months from date of its allotment as per terms of the issue.
RESERVES
No amount is transferred to General Reserve during the year as transfer of profit to Reserve Rules for declaration of Dividend is no longer in force. The Company has provided for an amount of Rs. 17.04 crores towards impairment in value of investments made in Reva Proteins Ltd. on account of accumulated loses in the said Company caused mainly due to restrictions in effluent discharge which have impacted the capacity utilization levels significantly. Such impairment provision is adjusted in the credit balance in the Profit and Loss account as stipulated by transitional provisions of IND AS. Reserves as on 31.03.2018 comprises of Security Premium Reserve of Rs. 2895.90 lakhs, equity contribution on External Commercial Borrowings and Preference Share Capital Rs. 664.95 lakhs, Special Export Reserve of Rs. 79.00 lakhs, General Reserve of Rs. 7836.64 lakhs, credit balance in the Profit and Loss Account of Rs. 2549.05 Lakhs and other comprehensive income reserve of (Rs. 4.89) lakhs aggregating to Rs. 14020.65 lakhs.
PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS
No Corporate Guarantee was provided during the year. However, the Company has received a request for providing Corporate Guarantee from Bamni Proteins Ltd. (Subsidiary Company) to the lenders towards its borrowings for working capital requirement to the extent of Rs. 750 lakhs and from Reva Proteins Ltd. (Subsidiary Company) towards its short terms working capital requirements to the tune of Rs. 500 lakhs.
Details in respect of other loans, guarantees and investments covered under the provision of Section 186 of the Companies Act, 2013 are given in the notes on accounts for the Financial Year ended 31st March, 2018.
PERFORMANCE
The gross revenue from operations of your Company during the year under review was Rs. 326.44 crores. There was decrease in unit sales realisation per unit of Gelatin in line with the decline in Gelatin prices worldwide which impacted the gross revenue from operations. Though there was decrease in sales realization of Gelatin, an exception was with respect to Collagen Peptide where there was increase in unit sales price.
The District Administration of Thrissur District, where one of the plants of the Company is situated, had ordered reduction in drawal of water by 80% for the period commencing from February 2017 and until the onset of monsoon, as a fall out of deficient monsoon in January 2017. This has affected the operations of the Ossein Division of the Company in the Ist quarter impacting revenue. Though the Company could manage to sustain the operations of Gelatin plant by procuring Ossein from the local manufacturers, the resultant higher cost of operations has impacted the operational results of the Company in the said quarter. In addition crushed bone charging was stopped from 23rd October, 2017 to 15th November, 2017 due to sabotage on the outlet effluent pipeline leading to restriction in discharge of effluent water. A stone grinder (ural) was removed from the pipeline with the help of the Government and the local police.
During the year, approval was received from the Irrigation Dept., Govt. of Kerala for rerouting the effluent pipeline at Ossein Division which was passing through a private property and was subjected to frequent attacks by the agitators for disrupting the Company''s operations. Accordingly, the Company has rerouted the effluent pipeline by by-passing the private property, in the month of January 2018.
With some of the Gelatin plants not in full scale operation during the year and the resultant low demand for crushed bone, crushed bone prices have decreased by 13% during 2017-18 as compared to the previous fiscal. However, the per unit price realization has come down for Ossein by around 6%, DCP by 3%, Gelatin by 5% during the year due to lower crushed bone prices. The sales of Collagen Peptide had witnessed a revival; however supply of raw material - fish protein - on account of regulatory issues / clearances continued to pose a challenge to the Company in terms of customer serviceability. The strengthening of the Rupee against USD during 2017-18 as compared to 201617 has also contributed to lower sales realisation on exports.
Despite the reduction in prices as explained above, the total sales turnover could be maintained with improvement in volume of sales on all the products except Gelatin (sales volume of Gelatin has declined by 2% during the year).
The decrease in price of crushed bone (though its poor quality continues to be a major concern) has helped the Company in maintaining profitability during the year.
In the backdrop of this situation, your Company exercised close monitoring and strict control over each significant element of cost, and achieved appreciable savings. In respect of utilities, the usage of LNG has increased due to maintenance issues in wood fired boilers but at the same time, efficiency of wood fired boilers has improved. There was significant reduction in power cost also as a result of various cost control measures in both the Divisions of the Company. Though the price of LNG, firewood and furnace oil has increased during the year, cost control measures helped the Company to keep the costs under control. Factory overheads witnessed cost increase due to the comprehensive annual shut down taken in Gelatin Division during the year and the disposal costs incurred for clearing the settled sludge in the aeration tanks of effluent treatment plant of both the Divisions. Administration overheads could be maintained at last year levels by establishing appropriate controls.
With regard to finance cost, Company could effectively leverage low cost foreign currency loans though interest rates based on LIBOR has gone up to 2.30% from 1.30% during the course of the year.
The sales mix during the year was such that the Company could achieve a reduction in selling expenses such as freight charges on products, discount and commission on sales, etc. aggregating to a saving of Rs. 0.48 crores during the year under review.
As a result of the above, the operations of the Company for the year 2017-18 have resulted in a pre-tax profit of Rs. 22.34 crores (negative impact of Rs. 6.67 crores due to restatements on account of changes in accounting treatment as well as Ind AS Accounting adjustments) as against Rs. 31.83 crores (which included Rs. 4.08 crores towards restatement of foreign exchange gains made during the year 2016-17 on account of change in accounting treatment.), inspite of the disruption in operations in Ossein Division in Q1 of the financial year. The results of the financial year 2016-17 have been restated in accordance with IND AS Accounting Standards during the financial year 2017-18.
The products of your Company continued to enjoy robust market demand during the year under review. The entire sale of Ossein / Limed Ossein, 46.08% of the total sale of Gelatin and 47.80% of Collagen Peptide was through exports. Your Company has arrangements with its overseas promoter, Nitta Gelatin Inc., Japan to leverage their expertise and market insights in servicing its customers in a pro-active manner in line with the global standards of NITTA Group.
The major production facilities of your Company are the Ossein Plant at Koratty, Thrissur District and Gelatin / Peptide Plant at Kakkanad, Ernakulam District, Kerala. All the factories owned by the Company are being operated in strict compliance with the applicable standards / norms prescribed by the Statutory authorities including the State Pollution Control Board. The Kadukutty Panchayat in Thrissur District did not renew the factory license for its Ossein Plant at Koratty for the year 2017-18 and the Company have moved the matter before the High Court of Kerala. The Court has ordered status quo in the matter till final disposal of the writ petition filed by the Company. In addition, during the year Company has also applied for Panchayat Licence for the financial year 2018-19 which was also rejected by the Panchayat. The High Court has stayed the operation of the Panchayat''s orders upto 8th June, 2018. The last review of the effluent management system at Ossein Division by the National Environmental Engineering Research Institute (NEERI) has confirmed the efficacy of the system on the basis of which the Pollution Control Board has renewed the Consent To Operate upto 30.06.2018. Based on expert legal advice, the earlier court verdicts and the facts of the situation as explained above, the Company expects a favourable resolution of the matter.
The National Green Tribunal(NGT) has passed an order dated 27.02.17, disposing different applications moved before that honorable forum challenging the operations of the Company as violative of the environmental regulations in force. The NGT while disposing of the application has concluded that on the analysis of the entire facts and materials that
- there is no material to establish that the industry has discharged sludge along with the treated liquid effluent into the Chalakkudy river.
- The sludge generated by the industry is non-hazardous and non-toxic.
- The effluent treatment plant is functioning efficiently and as of now the discharge of the treated effluent from the ETP to the Chalakkudy river has no adverse impact on the river water or the ground water.
However NGT by applying the precautionary principle to avoid any possibility of causing pollution to both air and water in the environment, directed the Company to install certain equipment to reinforce the effluent treatment process and technologies, besides adopting methods which help recycling of treated effluent and minimize the discharge into the river. The order also gave directions to the Kerala State Pollution Control Board (KSPCB) for amending some of the discharge standards.
The Order had detailed prescriptions for implementation in a time-bound manner. Whereas there were certain directions which needed a relook on a factual as well as practical consideration of the issues involved, the Company had filed a Petition before the Hon''ble Tribunal for a review of such directions. The Hon''ble NGT vide their Order dated 08.11.2017 allowed the review petition in part by way of modification of one of the directions, in view of practicality of implementation. The Company has subsequently filed a writ petition before the
Hon''ble High Court of Kerala pleading stay of operation of NGT orders dated 08.11.2017 for the remaining directions. The High Court has accepted a jurisdiction before it which was challenged by the Action Council and has stayed the operation of NGT Orders until further orders vide Order dated 14.03.2018. All the other directions which required implementation on the Company''s part have already been made except the one relating to installation of online monitoring systems for KSPCB which is expected to be completed by end July 2018.
The Company co-sponsored Japan Mela (organized by the Indo Japan Chamber of Commerce, Kerala) conducted in the 1st week of December, 2017 with a dedicated stall of the Company for display of materials relating to Nitta Gelatin Group worldwide. The Company''s major products including Gelixer and Agri products and CSR initiatives were displayed in the said Mela and received much public attention.
Operations Excellence fairs were conducted at the Ossein and Gelatin Divisions of the Company with active involvement from employees. Some of the nearby Panchayat members and Directors of the Company also participated in the fair which showcased the various types of products offered and also various initiatives pursued by the Company for the public at large.
MERGER OF SUBSIDIARY - REVA PROTEINS LTD.
The Subsidiary Company Reva Proteins Ltd. which began commercial production in the year 201213 could not be operated at planned capacity utilization levels due to restriction on discharge of treated effluent on account of non-commissioning of the marine discharge effluent pipeline as promised by the Gujarat Government. The delayed commissioning of the pipeline has resulted in accumulated losses for the Company for the past several years. Though the marine effluent discharge line was made operational during the year, after pressure testing and amendment in consolidated consent authorization as per marine norms as stipulated by Gujarat State Pollution Control Board, the high ammoniacal nitrogen content in effluent stream following the maintenance issues in marine effluent pipeline for discharge has also affected the capacity utilization levels for the year 2017-18 and significantly eroded the quantum of inventories and receivables with corresponding reduction in drawing power for working capital arrangement.
Under such circumstance, the Board of Directors of Reva Proteins Ltd. (Transferor Company) and Nitta Gelatin India Ltd. (TransfereeCompany) resolved at their meeting dated 03.02.2018 subject to required Regulatory approvals, to merge the activities of the former with the latter such that a total of 4,444,444 Redeemable Preference Shares of Rs 10 each, be credited as fully paid up Preference Share capital of the Transferee Company as consideration for the other share holders, in the following share exchange ratio;
-One Hundred (100) Redeemable Preference Shares of NGIL of INR 10/- each fully paid up for every One Hundred and Eight (108) Equity Shares of RPL of INR 10/- each fully paid up with the following terms:-
a. Such Preference Shares shall be entitled to a fixed dividend of 5% 6 months USD LIBOR as on the record date over a non-cumulative basis.
b. A right to exercise put and call option for repayment shall be given at the expiry of 5 years from the date of allotment subject to such approvals as may be required.
c. Such Preference shares shall be redeemable at par on the expiry of seven years from the date of allotment.
The Board of both Companies having approved the merger, it awaits clearance from Regulatory bodies - BSE / SEBI, besides the approval from the National Company Law Tribunal (NCLT).
CREDIT RATING
During the year, rating agency CRISIL has reaffirmed the rating of CRISIL A-/ and maintained outlook as "Negativeâ for Long Term Instruments and retained "CRISIL A2 â rating for short term instruments.
AWARDS & ACCOLADES
During the year your Company was awarded:
a. the second prize in its category for Excellence in Cost Management instituted by the Institute of the Cost and Management Accountants of India for the year 2016; and
b. Best Corporate Citizen from NIPM for Green Initiatives and CSR.
The following prestigious certifications are retained by your Company:-
(a) European Directorate for the Quality of Medicines & Health (EDQM) Certificate for Gelatin Division
(b) HACCP Certificate for Ossein Division and Gelatin Division for food safety.
(c) ISO 14001:2015 for Gelatin Division for Environment Management System
(d) ISO 9001:2015 for Quality Management System of the Company.
(e) ISO 18001:2007 for Ossein and Gelatin Divisions of the Company.
(f) FSSC Certification for Food Safety Management System for Gelatin Division
(g) FSSAI Certification for manufacturing, import/export of Gelatin & Collagen Peptide
(h) WHO GMP Certification for manufacture of Gelatin & Collagen Peptide
(i) Halal/Kosher Certification for Gelatin and Collagen Peptide
(j) NABL Accreditation for in-house laboratory
(k) OSHAS Certification by NVTQC for Occupational, Health and Safety Standards for Gelatin Division
(l) Sanitary Certificate received from the Health Inspector, Public Health Centre, Kathikudam for Ossein Division vide Order dt. 20.02.2018 for satisfactory compliance of sanitary conditions based on verification. Company''s factory license was often rejected by the Panchayat citing non-receipt of sanitary certificate in the past.
HEALTH, SAFETY AND ENVIRONMENT
Compliance with relevant regulations and effective management of the related issues is an integral part of the Company''s philosophy and your Company stands committed to continually improve on these objectives. The Company, year on year, increases its focus on improving matters relating to Health, Safety and Environment.
1. Health and Safety
The Company is committed to promoting the health and safety of its employees. In addition to the Head (Safety) for the Company, each of the plants of the Company is having a Safety Officer and Safety Committees which include representation from workmen. The Committees meet regularly to review issues impacting plant safety and employee health. Regular health checkup of the employees is carried out through reputed hospitals. Various training programmes are conducted at the plant on health and safety issues including emergency preparedness, work safety, first-aid, etc. The Company is augmenting resources to further strengthen the level of safety at its plants. Our Ossein factory has received the OSHAS certification during the year, which is a testimony to the Company''s commitment in this area. During the year, the Company has also entered into an agreement with Nitta Gelatin Inc. (NGI) where by as part of services in the areas of Environment, Health & Safety, NGI shall provide qualified expertise for providing assistance to ensure safety of operations of the Company and its subsidiaries. Responsibilities of such qualified expertise shall include benchmarking, sharing information on incidences in group companies, establishing robust and standardized procedures and controls, audits, action item, review and follow up, developing appropriate key performance indicators and regular reporting to the Company, NGI and Company''s Subsidiary managements.
2. Environment
The Company continuously endeavors to improve on Environmental Management and through all activities demonstrate its commitment to protecting the environment. The factories of the Company are equipped with modern effluent treatment plants for treating and discharging treated water with parameters well within the norms laid down by the respective State pollution Control Boards. The emissions from the boilers and generator stacks are regularly monitored for compliance. With the commissioning of two biogas generators at its Ossein plant, substantial portion of the raw effluent from the production process is now being subjected to biomethanisation thereby reducing the organic load in the subsequent treatment process whereby generation of sludge is reduced considerably and the biogas generated is being used for meeting the Company''s energy requirements. Diffused Air floatation System for effective grease removal and removal of suspended solids, Primary Treatment System Reinforcement and ETP Automation for sound effluent management system, introduction of Chemical treatment and Activated Carbon System in Fresh Water Treatment Plant for improving the water quality and improving the process stability, addition of 3 nos diffused aerators in ETP System and commissioning of multi grade Sand Filters before final discharge point of treated water are some of the initiatives carried out during the year to ensure protection of the environment and sustainability of operations at Ossein Division.
M/s. National Environmental Engineering Research Institute (NEERI), a constituent laboratory of the Council of Scientific & Industrial Research, Govt. of India, inspected the plant for assessment of implementation status of their own recommendations in June 2016 and observed that the Company has complied with the implementation of all the recommendations of NEERI excepting one i.e. cleaning of weeds along the banks of Chalakudy river for want of approval from regulatory authorities for carrying out the activity. They have also observed that based on the physio - chemical analysis of various effluent samples of ETP, the final treated effluent being discharged into Chalakudy river conforms to the discharge Standards stipulated by the KSPCB for the Company and also the CPCB General Standards for Discharge. It was also confirmed that there is no adverse impact on the River water quality because of the discharge of treated water from the factory in to the river.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company has formulated a well structured Policy aimed at providing focus and direction to the various activities on CSR. The Company is committed to identifying and supporting programmes aimed at:
- Empowerment of the disadvantaged / weaker sections of the society through education, skill development and the like;
- Provision of access to basic necessities like healthcare, drinking water & sanitation;
- Supporting environmental and ecological balance through afforestation, soil conservation, conservation of flora and similar programmes;
- Promotion of sports through training of sports persons;
- Rural development projects; etc
Total CSR expenditure incurred by your Company during the year was Rs. 43.50 lakhs meeting the statutory requirement of 2% of the average profit for the last three years.
- A CSR Committee has been constituted to act in an advisory capacity to the Board and Management with respect to policies and strategies that affect the Company''s role as a socially responsible organization.
- The CSR Committee monitors the progress of the projects and ensures that the implementation of the projects is in compliance with the CSR objectives and Policy of the Company.
-The CSR Policy can be accessed on the Company''s website www.gelatin.in. The CSR projects undertaken by the Company are in accordance with Schedule VII of the Companies Act, 2013. Annual Report on CSR activities is annexed herewith as Annexure I.
POLICY FOR DETERMINING MATERIAL SUBSIDIARIES
In view of the change in the definition of Material Subsidiary, Reva Proteins Limited which was a Material Subsidiary until 2015-16 was not a Material Subsidiary as per the LODR Regulations 2015. In accordance with LODR Regulations, the Company''s policy on materiality of Subsidiaries specifying the criteria for determining the Material Subsidiaries is available in the Company website www.gelatin.in. There has been no change in the nature of business of subsidiaries during the year under review.
As per the above criteria, the Company has no Material Subsidiary as of today.
SUBSIDIARY COMPANIES
BAMNI PROTEINS LIMITED
The annual production during the year in this Subsidiary Company was 2580 MT of Ossein and 6000 MT of Di Calcium Phosphate as against 2324 MT of Ossein and 5885 MT of Di-Calcium Phosphate during the previous year.
The operation of this Subsidiary for the year under review has resulted in a post-tax profit of Rs. 82.51 Lakhs (Rs. 71.96 lakhs in the previous year), other comprehensive loss of Rs. 5.35 lakhs (Rs. 2.82 lakhs in the previous year) and total comprehensive income of Rs. 77.16 lakhs (Rs. 69.14 lakhs in the previous year). Pre-tax profit during the year under review where Rs. 114.61 lakhs as against a pretax profit of Rs. 111.35 lakhs during the previous financial year.
REVA PROTEINS LIMITED
At Reva Proteins Ltd., owing to restrictions in the quantum of discharge of treated effluent, there has been considerable under utilization of capacity in the Ist Qtr. of the financial year. The clearance of the Consent to authorise and operate for Reva Plant by the Gujarat State Pollution Control Board was received in the month of June 2017 after the commissioning and high pressure testing of the effluent pipeline was completed in January 2017. In addition, the high ammoniacal nitrogen content in effluent stream following plant stoppages due to the maintenance issues in marine effluent pipeline for discharge has also affected the capacity utilization levels for the year 2017-18. Arising out of the above, the financial year 2017-18 witnessed a net loss of Rs. 1270.81 lakhs and a cash loss of Rs. 1029.89 lakhs as against a net loss of 871.87 lakhs and a cash loss of Rs. 620.72 lakhs during the previous financial year. Other comprehensive income during the current year was Rs. 1.27 lakhs as against Rs. 0.49 lakhs for the previous year. The annual production during 2017-18 was 1091 MT of Ossein, 450 MT of Dry Limed Ossein and 1519 MT of Di Calcium Phosphate as against 1909 MT of Ossein, 1096 MT of Dry Limed Ossein and 843 MT of Di Calcium Phosphate during the previous year. Your Company has proactively undertaken a comprehensive scheme for revival of the Subsidiary including merger of the same with the Company.
In accordance with Section 129(3) of the Companies Act, 2013, a consolidated financial statement of the Company and all its Subsidiary companies has been prepared, which is forming part of the Annual Report.
The statement containing the salient features of the financial statement of both the subsidiaries under first proviso to Sub-section (3) of Section 129 of the Act in form AOC I is attached as Annexure II.
In accordance with fourth proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing therein its standalone and consolidated financial statements has been uploaded on the website of the Company, www. gelatin.in. Further as per the fourth proviso of the said section, the annual accounts of the Subsidiary Companies and the related detailed information have also been uploaded on the website of the Company, www.gelatin.in.
Annual accounts of the Subsidiary Companies and related detailed information shall be made available to the shareholders of the Company and Subsidiary companies seeking such information at any point of time. The annual accounts of the Subsidiary Companies shall also be made available for inspection by any shareholder at the Registered Office of the Company and Subsidiary companies concerned. Hard copy of details of accounts of subsidiaries shall be furnished to any shareholder on demand. Further, pursuant to Indian Accounting Standard (Ind AS) 110 issued by the Institute of Chartered Accountants of India, consolidated financial statements presented by the Company include the financial information of its Subsidiaries.
STATUTORY AUDITORâS REPORT
Emphasis of Matter on the accounts of the Company referred to in the Auditor''s Report is explained in detail in Note No. 3.04 (a) of the Notes forming part of accounts for the year and hence no further comments are necessary.
SECRETARIAL AUDITORSâ REPORT - EXPLANATION TO OBSERVATIONS OF AUDIT
As prescribed under Section 204(1) of the Act, the Company has received the Secretarial Audit Report including a statement therein refering to complaince of applicable Secretarial Standards. The observations made therein and the corresponding explanations are given below:
Sl No |
Observation |
Our explanation |
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1 |
As per the provisions of FSSA Act read with Rules, quarterly return needs to be filed within 10 days from the end of each quarter. On analysis of the quarterly Returns filed by the Company, it is found that there are delays in filing those Returns which are stated herein below; |
Being in an initial phase, there often required multiple entries before the data finally got uploaded in the respective site. The delay was also due to the fact that the quarterly Returns introduced during the year 2017, had warranted uploading of the backlog Returns for previous periods. |
||||
Qtr |
Due Date |
Actual date of filing |
Delay in No. of days |
|||
1 |
July 10th 2017 |
06-01-18 |
180 |
|||
2 |
October 10th 2017 |
14-02-18 |
127 |
|||
3 |
January 10th 2018 |
19-03-18 |
68 |
|||
4 |
April 10th 2018 |
14-04-2018 |
4 |
|||
Company is advised to file quarterly Returns in time since any delay in filing will invite penalties. |
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2. |
With respect to creation of Charge for Rs 6 crores with YES Bank Limited, Company has filed the Form CHG-1 with Ministry of Corporate Affairs with 88 days of delay. Company is advised to closely monitor the same in future whenever credit facility is granted by Banks/Financial Institutions. |
The delay was due to the delay in documentation by the Bankers. |
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3 |
With respect to cessation of Alternate directorship of Mr. Raymond Merz, Company has filed Form DIR-12 with Ministry of Corporate Affairs with a delay of 23 days. |
The delay is admitted. Each successive attendance and absence (when original Director himself attends the meeting)of the Alternate Director, is warranting a filing in MCA portal. This is one such return where there was a delay. Care shall be taken to avoid such delays in filing, in future. |
COLLABORATORS
The Collaborators of your Company continue to be the relentless source of support and guidance for the Company in each of its key initiatives. Their patronage in areas of financial support, product development, marketing, quality improvement and training of personnel has contributed significantly to the growth of the Company. NGI, Japan has not only subscribed to the Optionally Convertible Preference Shares for an amount of Rs. 1580 lakhs issued by the Company in full, but also provided term loan assistance to the Company at attractive rates of interest. NGI, Japan has provided guidance and considerable financial support for the scheme of revival of the Subsidiary, Reva Proteins Ltd. Kerala State Industrial Development Corporation Ltd., the other promoter is also equally supportive to each and every development concerning your Company.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The information as required under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure III.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report as Annexure IVA to this report.
The Annual Report excluding the details of employees receiving remuneration in excess of the limits prescribed under Section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the shareholders of the Company in terms of first proviso to Section 136(1) of the Act 2013. The annexure is available for inspection at the Registered Office of the Company during business hours and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.
INTERNAL CONTROL SYSTEM
ADEQUACY OF INTERNAL CONTROL SYSTEMS
The Company has in place well defined and adequate internal controls commensurate with the size of the Company and the same were operating effectively throughout the year. The internal control systems operate through well documented Standard Operating Procedures, policies and process guidelines. These are designed to ensure that transactions are conducted and authorized within defined authority limit commensurate with the level of responsibility for each functional area. The Company''s accounting and reporting guidelines ensure that transactions are recorded and reported in conformity with the generally accepted accounting principles.
The Company has engaged a professional firm of Accountants with long years of experience to carry out the internal audit function. The Company has not placed any limitation on the scope and authority of the internal audit function. The internal audit function evaluates the efficacy and adequacy of internal control systems, its compliance with operating systems and policies of the Company and accounting procedures at all locations of the Company. To maintain its objectivity, effectiveness and independence, internal audit is being carried out on a quarterly basis and reports thereon, along with the remarks of the process owners on each of the observations of audit are placed before the Audit Committee of the Board. The Audit Committee reviews each of the internal audit reports as a separate item of agenda along with the internal / Statutory Auditors and the management representatives wherein the Committee gives their advice / suggestions on the audit points. Based on the report of the internal audit as well as the observations of the Audit Committee the process owners undertake requisite corrective action in their respective areas thereby further strengthening the control systems. Action Taken Reports are also reviewed by the Audit Committee for each actionable item. The minutes of the Audit Committee are reviewed by the Board of Directors.
INTERNAL CONTROLS OF FINANCIAL REPORTING
The Company has in place adequate financial controls commensurate with the size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weakness in the design or operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information.
The Company has adopted accounting policies which are in line with the Accounting Standards and the Companies Act. They are in accordance with the Generally Accepted Accounting Principles in India. Changes in policies, if required, are made in consultation with the auditors and are approved by the Audit Committee.
The Board is of the view that appropriate procedures and controls are operating effectively and monitoring procedures are in place.
RISK MANAGEMENT POLICY
The Board of Directors of the Company has entrusted the management of the Company to evaluate and manage various risks faced by the Company and appropriately apprise the Board periodically. Accordingly the management has constituted a Risk Management Committee comprising of Senior Management Personnel to develop and implement a Risk Management Policy including identification therein of elements of risks which in the opinion of the Board may impact the operations of the Company. The Board of Directors shall review the evaluation of risks and the mitigation measures taken by the Company in managing such risks to sustain the operations of the Company for the foreseeable future. Some of the key risk areas identified for mitigation and corrective action include crushed bone availability and pricing patterns, impact of high cost crushed bone on the yield levels, safety and security policies of the Company, succession planning for key executives, impact of the National Green Tribunal''s Orders impact, significant litigation against the Company having material financial impacts, moves of competitors, water scarcity for operational requirements, emergence of alternate substitutes for the products of the Company, adverse forex rate fluctuations, risk of losing premium commanded by the Company due to emergence of alternate Halal certifications etc.
MATERIAL POST BALANCE SHEET EVENTS
The business model of Bamni Proteins Ltd., Subsidiary of the Company, with which the Company had a job processing arrangement till the end of the financial year 2017-18 is set to change as an Independent manufacturer and seller w.e.f. 01.04.2018. This change was necessitated to avoid the impact of GST on processing charges which was introduced w.e.f. 01.07.2017. This business model change is expected to have an impact on the turnover of the Company as well as the profitability of the operations of the Company.
APPLICABILITY OF COST AUDIT REQUIREMENTS
As per the Company''s (Cost Records and Audit) Rules 2014, the Company''s products are not covered under Cost Audit and for the products for which the maintenance of cost record is required, since the relative turnover in respect of the products listed in the said Rules is less than threshold limit of Rs. 35 cr. maintenance of cost records is also not mandatory.
RESPONSIBILITY STATEMENT OF DIRECTORS
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act, 2013:
a) that in the preparation of the annual accounts for the year ended 31st March, 2018, the applicable Indian Accounting Standards have been followed along with proper explanation relating to material departures, if any;
b) that they had selected such accounting policies as mentioned in Note 1 of the notes to the Financial Statements and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2018 and of the profit of the Company for the year ended on that date;
c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) that they had prepared the annual accounts on a going concern basis;
e) that proper internal financial controls laid down by the Directors were followed by the Company and such internal financial controls are adequate and were operating effectively; and
f) that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions which is in line with the relevant provisions of the Companies Act and as well as SEBI (LODR) Regulations. The said policy as approved by the Board is available in the Company website www.gelatin.in. As per the said policy, prior omnibus approval of the Audit Committee is obtained on a quarterly basis for all the Related Party Transactions which are of a foreseen and repetitive nature. All Related Party Transactions actually taken place are subsequently reviewed by the Audit Committee on a quarterly basis in comparison with the conditions of omnibus approval and are recommended to the Board for approval. Additionally material Related Party Transactions foreseen in the year ahead, were got approved by the members also. Particulars of contracts of arrangements with Related Parties referred to in sub Section 1 of Section 188 read with Rule 8(2) of the (Companies Accounts) Rules, 2014 are attached in Form No. AOC 2 as Annexure V.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review as stipulated under SEBI (LODR) Regulations is presented in a separate section forming part of this Annual Report.
CORPORATE GOVERNANCE
The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (LODR) Regulations. A separate section on corporate governance under the Regulation, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance with the provisions of Schedule III of the Companies Act, 2013 and Indian Accounting Standards (IND AS) 110 and other applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the SEBI (LODR) Regulations and form part of the Annual Report.
DIRECTORS
Dr. Paul Antony IAS, who was Director and Chairman of the Company with effect from 27.09.2016 ceased to hold office on 03.02.2018 consequent on intimation by The Kerala State Industrial Development Corporation Limited (KSIDC) whose nominee the office of the Chairman continues to be, for the Company. Mr. T. K. Jose IAS who succeeded to office continued till 28.02.2018, when Dr. K. Ellangovan IAS who is also Principal Secretary, Dept. of Industries and Commerce & Dept. of NORKA, was nominated as the Chairman of the Board. Besides, Mr. Raymond Merz had again replaced Mr. Hiroshi Nitta as Alternate Director to Mr. Koichi Ogata.
Mr. Hiroshi Nitta, Nominee of Nitta Gelatin Inc. was appointed as Alternate Director wef. 09-052017 and ceased to be so wef. 29-07-2017. Mr. Koichi Ogata was appointed as Director in casual vacancy wef. 09-05-2017 and Mr. Raymond Merz who was appointed as Alternate Director to Mr. Koichi Ogata (29-07-2017) ceased to be so wef. 03-02-2018. Earlier, Mr. Seichi Nishikawa ceased to be a Director wef. 09-05-2017.
Mr. Sajiv K. Menon, Managing Director was reappointed as Managing Director wef. 01-04-2017 for a period of three years. Similarly, Mr. Takeo Yamaki Whole-time Director ceased to be so wef. 01-04-2017, while Dr. Shinya Takahashi got appointed as Whole-time Director wef. 09-05-2017.
Your Directors extend a warm welcome to Dr. K. Ellangovan IAS as Chairman of the Board and place on record the appreciation for valuable guidance and support extended by the Directors /Chairman who ceased to be Board members during the year, besides welcoming the other entrants to the Board of Directors during the year.
NOMINATION AND REMUNERATION COMMITTEE
The Board of Directors has constituted a Nomination and Remuneration Committee (NRC) consisting of the following person:-
1. Mr. A. K. Nair, Chairman
2. Mr. K. L. Kumar, Member
3. Dr. K. Cherian Varghese, Member
The terms of reference of the NRC are as follows:-
1. The NRC shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every director''s performance.
2. The NRC formulates the criteria for determining qualifications, positive attributes and independence of a director recommending to the Board and also a policy relating to the remuneration for the Directors, Key Managerial Personnel and senior management personnel meaning thereby employees of the Company who are members of core management excluding Board of Directors. This would comprise all members of management one level below the Executive Directors, including all functional heads.
3. The NRC formulates the Remuneration policy to ensure that:â
- the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate personnel as are herein referred at (2) above of the quality required to run the Company successfully;
relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and remuneration to Whole-time Directors, Key Managerial Personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.
During the year the NRC has met once.
KEY MANAGERIAL PERSONNEL
Rule 8(5)(iii) of Companies (Accounts) Rules, 2014 prescribes that Report of Directors should contain details of Directors and Key Managerial Personnel. Therefore, in addition to the details of Directors hereinabove given, it is brought to the notice of shareholders that Mr. P. Sahasranaman and Mr G.Rajesh Kurup continue as Chief Financial Officer (CFO) and Company Secretary, respectively.
BOARD EVALUATION
The Companies Amendment Act 2015 prescribes that there shall be a meeting of Independent Directors during each of the financial years. Accordingly, the meetings both of the Independent Directors followed by that of the Board had during the beginning of the year 2017-18, made an evaluation of the performance of the Directors / Independent Directors respectively and found them to have the requisite qualification, expertise and track record for performance of their duties as envisaged under Law.
All the Directors on the Board continued thereafter, until there was change in the office of Chairman during the last quarter consequent on change in nomination by The Kerala State Industrial Development Corporation Limited. There shall therefore, be meetings conducted during the course of the financial year 2018-19 by the Independent Directors and generally by the Board where there shall be evaluation of performance by the Directors on the Board so reconstituted.
MEETINGS
The Board of Directors met 5 (Five) times during the financial year 2017-18. The details of the Board meetings and the attendance of the Directors are provided in the Corporate Governance Report. The intervening time gap between the two consecutive meetings was within the period prescribed under the Companies Act, 2013.
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee has Mrs. Radha Unni as Chairperson, with Mr. A. K. Nair, Mr. K. L. Kumar and Dr. K. Cherian Varghese as members.
More details on the Committee are given in the Corporate Governance Report.
VIGIL MECHANISM
The Company has established a vigil mechanism for Directors and employees to report genuine concerns, while providing for adequate safeguards against victimization, providing direct access to chairperson of Audit Committee, the details regarding which have also been given in the Company''s official website.
DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.
Your Company has always believed in providing a safe and harassment free workplace for every individual working and associating with the Company, through various interventions and practices. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment.
A four member Internal Complaints Committee (ICC) is constituted with three lady employees and one lady NGO member. ICC is responsible for redressal of complaints relating to sexual harassment, as envisaged under the provisions of Act and Rules. Hitherto no complaints were received by ICC.
PREVENTION OF INDISER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company''s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code.
STATUTORY AUDITORS
At the Annual General Meeting dated 24th June, 2017 M/s. Walker Chandiok & Co. LLP (WCL LLP) Chartered Accountants (Firm Registration No. 001076N / N500013) were appointed as Statutory Auditors of the Company to hold office for a period of 5 years until the conclusion of the financial year 2021-22. As envisaged under the Company Law Provision, the appointment of M/s. Walker Chandiok & Co. LLP (WCC LLP) as Statutory Auditors for the year 2018-19 is being put up for ratification by members at the ensuring Annual General Meeting which would be subject to their continuing to conform to the eligibility norms prescribed under Section 141 of the Companies Act, 2013 and the Rules, thereon..
SECRETARIAL AUDIT
Pursuant to the provisions of the Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. Abhilash Nediyalil Abraham. (CP No. 14524, M No. 22601), Company Secretary-in-Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure VI.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT 9 are annexed herewith as Annexure VII.
ACKNOWLEDGEMENT
Your Directors are thankful to the esteemed shareholders for their continued patronage and the confidence reposed on the Company and its management. Your Directors place on record its sincere appreciation for the support and assistance extended by the State Government and The Kerala State Industrial Development Corporation Ltd. They also take this opportunity to extend their whole hearted gratitude to M/s. Nitta Gelatin Inc., Japan, for their timely and valuable guidance and inspiration. Your Board places on record its sincere appreciation for the significant contributions made by employees across the Company through their dedication and commitment. On this occasion, your Board thanks all the customers, suppliers, bankers and other associates for their unstinted co-operation.
For and on behalf of the Board of Directors,
Sajiv K. Menon Dr. M. Beena, IAS
Managing Director Director
(DIN : 00168228) (DIN: 03483417)
Kochi
04.05.2018
Mar 31, 2017
DIRECTORSâ REPORT
To
THE MEMBERS OF
NITTA GELATIN INDIA LIMITED
The Directors have pleasure in presenting the 41st Annual Report and audited financial statements for the year ended 31st March, 2017.
FINANCIAL HIGHLIGHTS (Rs. in Crores)
Particulars |
For the year ended 31st March, 2017 |
For the year ended 31st March, 2016 |
Sales (including export incentives and net of Excise Duty & VAT) |
330.26 |
358.57 |
Other Income |
4.40 |
2.42 |
TOTAL |
334.66 |
360.99 |
Gross Profit before Depreciation |
38.26 |
35.85 |
Deducting there from: |
|
|
Depreciation |
10.51 |
9.43 |
Provision for Tax - |
|
|
- Current Tax |
10.14 |
10.11 |
- MAT Credit Entitlement |
- |
(1.98) |
- Deferred Tax |
1.33 |
1.13 |
- Prior years |
(1.23) |
0.48 |
Profit after Tax |
17.51 |
16.68 |
Profit brought forward from previous year |
20.91 |
13.91 |
Adjustments for asset having no remaining useful life |
- |
- |
Balance Profit available |
38.42 |
30.59 |
for appropriation |
||
Appropriations : |
|
|
Proposed dividend on Optionally Convertible Preference Shares |
-* |
0.79 |
Proposed final dividend on equity shares |
-* |
2.27 |
Tax on dividend |
-* |
0.62 |
Transfer to General Reserve |
6.00 |
6.00 |
Balance profit carried forward to next year |
32.42 |
20.91 |
Earnings per share (Rs.) |
|
|
Basic |
19.28 |
17.33 |
Diluted |
19.28 |
16.79 |
* Proposed dividend on preference and equity shares and tax on dividend has not been recognized as a distribution of profit in the current yearâs accounts in accordance with the revised accounting standard-4 ''Contingencies and Events occurring after the Balance Sheet Dateâ (effective from 01.04.2016)
DIVIDEND
The Board has, subject to approval of the members at the ensuing Annual General Meeting, recommended a dividend @ 5.4029% p.a. for the year ended 31st March, 2017 on the 929,412 Optionally Convertible Preference Shares of face value of Rs. 170/- each.
Considering the Company''s performance and financial position for the year under review, the Board has also recommended a dividend of Rs. 2.5 per share i.e. 25% of the face value of Rs. 10/- per share on the Equity Capital for the year ended 31st March, 2017, subject to approval of the members at the ensuing Annual General Meeting.
Together with corporate tax on dividend, the total outflow on account of dividend will be Rs. 375.93 lakhs (including Rs. 102.74 lakhs on preference shares(Rs. 94.88 lakhs in the financial year 201516), vis-a-vis Rs. 368.07 lakhs paid for the financial year 2015-16.
During the year, unclaimed dividend of Rs. 2.53 lakhs pertaining to the year ended 31st March, 2009, was transferred to the Investor Education & Protection Fund after giving due notice to the members.
SHARE CAPITAL
The Authorized Share Capital of your Company is Rupees Thirty Five Crores Eighty lakhs and Forty only (comprising of two crores Equity Shares of Rs. 10/- each and 929,412 Optionally Convertible (non-cumulative) Preference Shares (OCPS) of Rs. 170/- each). Nitta Gelatin Inc., (NGI) Japan had not exercised the option to convert the OCPS shares into Equity Shares at the end of 18 months from date of its allotment as per terms of the issue.
RESERVES
An amount of Rs. 600.00 lakhs is transferred to General Reserve during the year. Reserves as on 31.03.2017 comprises of Security Premium Reserve of Rs. 2895.90 lakhs, Capital Investment subsidy of Rs. 15.00 lakhs, Special Export Reserve of Rs. 79.00 lakhs, General Reserve of Rs. 7836.64 lakhs, Hedge Equalization Reserve of Rs. 633.76 lakhs and credit balance in the Profit and Loss Account of Rs. 3242.13 Lakhs, aggregating to Rs. 14702.43 lakhs.
PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS
Corporate Guarantee for an amount of Rs. 300 lakhs was provided against a term loan of Rs. 300.00 lakhs sanctioned to Reva Proteins Ltd. (RPL) by M/s. Kerala State Industrial Development Corporation Ltd. during the year.
Details in respect of other loans, guarantees and investments covered under the provision of Section 186 of the Companies Act, 2013 are given in the notes on accounts for the financial year ended 31st March, 2017
PERFORMANCE
The gross revenue from operations of your Company during the year under review was Rs. 341.91 crores; though there has been an increase in the unit sales realization in the case of all our products during the year, increase in sales volumes could not be achieved due to various extraneous factors.
The District Administration of Trichur District, where one of the plants of the Company is situated has ordered reduction in drawal of water by 80% for the period commencing February 2017 and until the onset of monsoon, as a fall out of deficient monsoon. This has affected the operations of Ossein Division of the Company in the IVth quarter impacting revenue. Though the Company could manage to sustain the operations of Gelatin plant, by way of procurements from the local Ossein manufacturers, the disruption in operations has impacted the operational results of the Company in the said quarter.
During the year, the business model of Reva Proteins Ltd., a subsidiary of the Company was changed from a job processor of the Company to an independent manufacturer and seller, with the resultant fall in revenue.
With all the domestic Gelatin plants in full scale operation during the year and the resultant heavy demand for crushed bone, the quality and cost of supplies could not meet the export specifications for Ossein and Limed Ossein. This has led to a reduction in export volumes of Ossein / Limed Ossein by 30% during the year. The sales of Collagen Peptide witnessed a decline due to want of raw material - fish protein- on account of regulatory issues / clearances. In the domestic market, the unduly long delay in granting new product approvals by the regulatory authorities has resulted in poor offtake of Collagen Peptide.
Despite the reduction in volumes as explained above, the total sales turnover could be maintained with improvement in unit sales realization on all the products and the higher volume of Gelatin sales achieved during the year.
The improvement in USD / INR exchange rates during 2016-17 as compared to 2014-15 has also contributed to improved sales realization on exports.
The increase in price of crushed animal bone, apart from its poor quality as explained above, was not conducive for the profitability of the Company. Crushed bone prices have increased by 4.21% during 2016-17 as compared to the previous fiscal.
In the backdrop of the aforesaid adversities, your Company exercised close monitoring and strict control over each significant element of cost, and achieved appreciable savings. In respect of utilities, the usage of LNG was significantly substituted by firewood and at the same time, efficiency of wood fired boilers has improved. There was significant reduction in power cost also as a result of various cost control measures in both the Divisions of the Company. Aided also by the decline in the price of LNG and firewood, these measures have helped us to achieve an overall cost reduction of around Rs. 2.58 crores for utilities in comparison to Rs. 6.08 crores achieved in FY 2015-16. Significant savings were also made in factory and Administration overheads by keeping a tight vigil on each item of expenditure and establishing appropriate controls.
With regard to finance cost, Company could effectively leverage low cost foreign currency loans and achieve almost a one third reduction amounting to Rs. 2.34 crores.
The sales mix during the year was such that the Company could achieve a reduction in selling expenses such as freight charges on products, discount and commission on sales, etc. aggregating to Rs. 0.85 crores during the year under review.
As a result of the above, the operations of the Company for the year 2016-17 has resulted in a pre-tax profit of Rs. 27.75 crores as against Rs. 26.43 crores during 2015-16 inspite of drop in revenue following change in the business model of subsidiary Company RPL and disruption in operations in Ossein Division in Q4 of the financial year.
The products of your Company continued to enjoy robust market demand during the year under review. The entire sale of Ossein / Limed Ossein, 52.30% of the total sale of Gelatin and 51.80% of Collagen Peptide was through exports. Your Company has arrangements with our overseas promoter, Nitta Gelatin Inc., Japan to leverage their expertise and market insights in servicing our customers in a pro-active manner in line with the global standards of NITTA Group.
The major production facilities of your Company are the Ossein Plant at Koratty, Trichur District and Gelatin / Peptide Plant at Kakkanad, Ernakulam District, Kerala. All the factories owned by the Company are being operated in strict compliance with the applicable standards / norms prescribed by the Statutory authorities including the State Pollution Control Board. The Kadukutty Panchayat in Trichur District did not renew the factory licence for our Ossein Plant at Koratty for the year. Though the Kerala State Tribunal for Local Self Government Institutions has remanded back to the adjudicating authorities for a review of the orders, Panchayat has not reversed their original decision and we have moved the matter before the High Court of Kerala. The Court has ordered status quo in the matter till final disposal of the writ petition filed by the Company. The recent review of the effluent management system at Ossein Division by the National Environmental Engineering Research Institute (NEERI) has confirmed the efficacy of the system on the basis of which the Pollution Control Board has renewed the Consent to Operate up to 30.06.2018. Based on expert legal advice, the earlier court verdicts and the facts of the situation as explained above, the Company expects a favorable resolution of the matter.
The National Green Tribunal(NGT) has passed an order dtd 27.02.17, disposing different applications moved before that honorable forum challenging the operations of the company as volatile of the environmental regulations in force. The NGT while disposing of the application has concluded that on the analysis of the entire facts and materials that
- there is no material to establish that the industry has discharged sludge along with the treated liquid effluent into the Chalakkudy river.
- The sludge generated by the industry is non-hazardous and non-toxic.
- The effluent treatment plant is functioning efficiently and as of now the discharge of the treated effluent from the ETP to the Chalakudy river has no adverse impact on the river water or the ground water.
However NGT by applying the precautionary principle to avoid any possibility of causing pollution to both air and water in the environment, directed the Company to install certain equipment to reinforce the effluent treatment process and technologies, besides methods which help recycling of treated effluent and minimize the discharge into the river. The order also gave directions to the Kerala Pollution Control Board (KPCB) for enforcing the standards.
The Order has detailed prescriptions for implementation in a time-bound manner. Whereas there are certain directions which need a relook on a factual as well as, practical consideration of the issues involved, the Company has filed a Petition before the Hon''ble Tribunal for a review of such directions, which is pending consideration
CREDIT RATING
During the year, rating agency CRISIL has reaffirmed the rating of CRISIL A-/ but outlook was revised from âStable âto âNegativeâ for Long
Term Instruments and maintained "CRISIL A2 â rating for short term instruments. The change in outlook was following the disruptions in operation in Ossein Division as a result of the restrictions imposed by the District Administration for drawal of water for process requirements from the Chalakkudy river
AWARDS & ACCOLADES
During the year your Company was awarded the top export award in Ossein& Gelatin panel instituted by CAPEXIL for the years 2013 -14 and 2014-15.
The following prestigious certifications are retained by your Company:-
(a) European Directorate for the Quality of Medicines & Health (EDQM) Certificate for Gelatin Division
(b) HACCP Certificate for Ossein Division and Gelatin Division for food safety.
(c) ISO 14001:2004 for Gelatin Division for Environment Management System
(d) ISO 9001: 2008 for Quality Management System of the Company.
(e) FSSC Certification for Food Safety Management System for Gelatin Division
(f) Halal / Kosher Certification for Gelatin and Collagen Peptide
(g) NABL Accreditation for in-house laboratory
Besides the Company has newly acquired yet another prestigious recognition / certification, namely:
(h) OSHAS Certification by NVTQC for Occupational, Health and Safety Standards.
HEALTH, SAFETY AND ENVIRONMENT
Compliance with relevant regulations and effective management of the related issues is an integral part of the Company''s philosophy and your Company stands committed to continually improve on these objectives. The Company, year on year, increases its focus on improving matters relating to Health, Safety and Environment.
1. Health and Safety
The Company is committed to promoting the health and safety of its employees. In addition to the Head (Safety) for the Company, each of the plants of the Company is having a Safety Officer and Safety Committees which include representation from workmen. The Committees meet regularly to review issues impacting plant safety and employee health. Regular health checkup of the employees is carried out through reputed hospitals. Various training programmes are conducted at the plant on health and safety issues including emergency preparedness, work safety, first-aid, etc. The Company is augmenting resources to further strengthen the level of safety at its plants. Our Gelatin factory has received the OSHAS certification during the year while for the Ossein factory, this is at an advanced stage, which is a testimony to the Company''s commitment in this area.
2. Environment
The Company continuously endeavors to improve on environmental management and through all activities demonstrate its commitment to protecting the environment. The factories of the Company are equipped with modern effluent treatment plants for treating and discharging treated water with parameters well within the norms laid down by the Pollution Control authorities. The emissions from the boilers and generator stacks are regularly monitored for compliance. With the commissioning of two biogas generators at its Ossein plant, substantial portion of the raw effluent from the production process is now being converted into biogas used for meeting the Company''s energy requirements. Diffused Air floatation System for effective grease removal, Primary Treatment System Reinforcement and ETP Automation for sound effluent management system, introduction of Activated Carbon System in Fresh Water Treatment Plant for improving the water quality and improving the process stability, introduction of chemical mixing times for Water Treatment System, instrumentation system for turbidity control and better chlorination, addition of two Jet Aerators in ETP System and commissioning of multi grade Sand Filters before final discharge point of treated water are some of the initiatives carried out during the year to ensure protection of the environment and sustainability of operations.
M/s. National Environmental Engineering Research Institute (NEERI), a constituent laboratory of the Council of Scientific & Industrial Research, Govt. of India, conducted a plant visit for assessment of implementation status of their own recommendations in May 2016 and observed that the Company has complied with the implementation of all the recommendations of NEERI excepting one recommendation i.e. cleaning of weeds along the banks of Chalakudy river due to want of approval from Kadukutty Grama Panchayat for carrying out the activity. They have also observed that based on the physio
- chemical analysis of various effluent samples of ETP, the final treated effluent being discharged into Chalakudy river conforms to the discharge Standards stipulated by the KSPCB for M/s. NGIL and also the CPCB General Standards for Discharge.
Environment
The Company continuously endeavors to improve on environmental management and through all activities demonstrate its commitment to protecting the environment. The factories of the Company are equipped with effective effluent treatment plants for treating and discharging treated water with parameters well within the norms laid down by the Pollution Control authorities. The emissions from the boilers and generator stacks are regularly monitored for compliance. With the commissioning of two biogas generators at our Ossein plant, substantial portion of the raw effluent from the production process is now being converted into biogas used for meeting our energy requirements. Water recycling and water reuse are being regularly pursued and improved upon by the Company with specific targets.
In connection with the renewal of the Consent To Operate our Ossein plant, M/s. National Environmental Engineering Research Institute (NEERI), a constituent laboratory of the Council of Scientific & Industrial Research, Govt. of India, conducted a detailed study of the pollution status with respect to the air, water and solid waste generated from the Ossein plant and confirmed the efficacy of such systems. However, with a view to further enhance the infrastructure for environment management, water conservation, ambient air quality etc., the Company has mobilized Rs. 15.80 crores through the issue of Optionally Convertible (non-cumulative) Preference Shares. With the completion of this investment, your Company will be equipped with state-of-the-art facilities for management of environment and hence the health and safety of the employees and the local community at large.
The ambient air quality in our Ossein plant is being monitored on a continuous basis to conform to the regulations relating to ambient air quality standards. Out of the total plot area of approximately 1,53,900 sq. meters, about 10,000 sq. meters of land around the boundary of Gelatin Division and about 38,000 sq. meters of land in Ossein Division have been developed and maintained as green area.
These steps are expected to go a long way in furthering our efforts to protect the nature and environment around our plant.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company has formulated a well structured Policy aimed at providing focus and direction to the various activities on CSR. The Company is committed to identifying and supporting programmes aimed at:
- Empowerment of the disadvantaged / weaker sections of the society through education, skill development and the like;
- Provision of access to basic necessities like healthcare, drinking water& sanitation;
- Supporting environmental and ecological balance through forestation, soil conservation, conservation of flora and similar programmes;
- Promotion of sports through training of sports persons;
- Rural development projects;
Total CSR expenditure incurred by your Company during the year was Rs. 21.42 lakhs which was higher than the statutory requirement of 2% of the average profit for the last three years.
- A CSR Committee has been constituted to act in an advisory capacity to the Board and Management with respect to policies and strategies that affect the Company''s role as a socially responsible organization.
- The CSR Committee ensures that the implementation and monitoring of the projects are in compliance with the CSR objectives and Policy of the Company.
- The CSR Policy can be accessed on the Company''s website www.gelatin.in. The CSR projects undertaken by the Company are in accordance with Schedule VII of the Companies Act, 2013. Annual Report on CSR activities is annexed herewith as Annexure I.
POLICY FOR DETERMINING MATERIAL SUBSIDIARIES
In view of the change in the definition of material subsidiary, Reva Proteins Limited which was a material subsidiary hitherto, was not a material subsidiary as per the LODR Regulations 2015.
In accordance with LODR Regulations, the Company''s policy on materiality of subsidiaries specifying the criteria for determining the Material Subsidiaries is available in the Company website www.gelatin.in. There has been no change in the nature of business of subsidiaries during the year under review. However the business model of Reva Proteins Ltd one of the subsidiaries was changed from a job processor of the Company to an independent manufacturer and seller during the year.
As per the above criteria, the Company has no material subsidiary as of today
SUBSIDIARY COMPANIES
BAMNI PROTEINS LIMITED
The annual production during the year in this subsidiary company was 2524 MT of Ossein and 5885 MT of Di Calcium Phosphate as against 2349 MT of Ossein and 5508 MT of Di-Calcium Phosphate during the previous year.
The operation of this subsidiary for the year under review has resulted in a post-tax profit of Rs. 69.14 Lakhs (pre-tax profit of Rs. 107.14 lakhs) as against a post tax profit of Rs. 128.75 lakhs (pretax profit of Rs. 112.31 lakhs) during the previous financial year.
REVA PROTEINS LIMITED
At Reva Proteins Ltd., owing to restrictions in the quantum of discharge of treated effluent, there has been considerable under utilization of capacity. The common treated effluent discharge pipeline currently being set up by M/s. Narmada Cleantech Limited which was expected to be commissioned during mid 2015-16 has been delayed further. The commissioning and high pressure testing of the effluent pipeline got completed in January 2017 and the clearance of the consent to authorize and operate for Reva plant by the Gujarat State Pollution Control Board is in progress. Arising out of the above, the financial year 2016-17 witnessed a net loss of Rs. 779.04 lakhs and a cash loss of Rs. 521.69 lakhs as against a net loss of Rs. 941.17 lakhs and a cash loss of Rs. 684.59 lakhs during the previous financial year. The annual production during 2016
17 was 1909 MT of Ossein and 1095 MT of Limed Ossein as against 1554 MT of Ossein and 632 MT of Limed Ossein during the previous year. Taking into consideration the techno-commercial viability of the project once the pipeline is made available for Company''s operations post the clearance by the Gujarat State Pollution Control Board expected by the end of Quarter 1 of 2017-18, your Company has proactively undertaken a comprehensive scheme for revival of the subsidiary by way of capital investments and capital restricting / rescheduling of existing term loans.
It is expected that this subsidiary can achieve a turnaround in operations within a short time once the pipeline is made available for usage.
In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report.
The statement containing the salient features of the financial statement of both the subsidiaries under first proviso to sub-section (3) of section 129 of the Act in form AOC I is attached as Annexure II.
In accordance with fourth proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing therein its standalone and consolidated financial statements has been uploaded on the website of the Company, www. gelatin. in. Further as per the fourth proviso of the said section, the annual accounts of the subsidiary companies and the related detailed information have also been uploaded on the website of the Company, www.gelatin.in.
Annual accounts of the subsidiary companies and related detailed information shall be made available to the shareholders of the Company and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be available for inspection by any shareholder at the Registered Office of the Company and subsidiary companies concerned. Hard copy of details of accounts of subsidiaries shall be furnished to any shareholder on demand. Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, consolidated financial statements presented by the Company include the financial information of its subsidiaries.
STATUTORY AUDITORâS REPORT
Emphasis of Matter on the accounts of the Company referred to in the Auditor''s Report is explained in detail in Note No. 2.11.2 of the Notes forming part of accounts for the year and hence no further comments are necessary.
SECRETARIAL AUDITORSâ REPORT -EXPLANATION TO OBSERVATIONS OF AUDIT
As prescribed under Section 204(1) of the Act, the Company has received the Secretarial Audit Report. The observations made therein and the corresponding explanations are given below:
Sl No |
Observation |
Our explanation |
1 |
As per Regulation 24 (3) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,2015, the minutes of the meetings of the Board of Directors of the unlisted subsidiary shall be placed at the meeting of the Board of Directors of the listed entity. On examination of the Board minutes of Nitta Gelatin India Limited : Minutes of Reva Proteins Ltd (subsidiary) has placed only at the 1st Board Meeting during the Financial Year i.e. on 06.05.2016 and Minutes of Bamni Proteins Limited (Subsidiary) has not placed before the Board Meetings of Nitta. Kindly adopt a system of placing the Board Minutes of subsidiaries in the Board Meeting of Nitta as per the mandate of Regulation 24 (3) of LODR. |
We were regular in placing the minutes of Reva Proteins Ltd, till such time it was material subsidiary. There was irregularity thereafter. Hereafter, the minutes of the meetings of Subsidiary companies shall be placed before the Board meeting of the Holding company. |
2 |
As per Standard 6.4 of the Secretarial Standard 1 (SS-1), meetings of Board of Directors, "Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meetingâ. The Board has approved a circular resolution for authorization to Directors for migrating to GST on 10.01.2017. On analysis of the minutes of next Board meeting held on 06-02-2017 it is observed that there is inadequate compliance of Standard 6.4 in as much as the text of the resolution has not been recorded in the minutes as envisaged by the Standards 6.4. |
Noted. Henceforth the regulatory provision shall be conformed in entirety. |
3. |
The Company has paid additional fee of Rs.12000 to the Ministry with respect to modification of sanctioned credit facilities by SBI and HDFC bank. The cases with respect to delay in Charge filing with Bankers (i.e. SBI and HDFC) were found to be repetitive in nature when we compared the same with the last two financial years. This matter needs to be discussed with Bankers whenever new credit facilities sanctioned or existing credit facilities get renewed so that cases of such nature were not further get repeated. |
This happens with respect to additional documentation in the context of creation of Collateral Security and also renewal of existing facilities. We shall discuss with Bankers and find ways to avoid the delay in filing. |
4 |
As per the provisions of the Foreign Exchange Management Act, 1999, ECB Return (ECB-2) should be filed within seven working days from the end of each month. On analysis it is found that (i) ECB Return for the month of April, 2016 has been filed on 14th June, 2016 with a delay of 28 days, (ii) ECB Return for the month of May, 2016 has been filed on 14th June, 2016 with a delay of 4 days, (iii) ECB Return for the month of July, 2016 has been filed on 10th August, 2016 with a delay of 1 day, (iv) ECB Return for the month of October, 2016 has been filed on 22nd November, 2016 with a delay of 11 days and (v) ECB Return for the month of November 2016 has been filed on 15th December, 2016 with a delay of 5 days. |
The Returns are physically filed with the Authorized Dealer well within the statutory prescription of seven days, while an endorsement is obtained subsequent thereto. We shall henceforth endeavor to obtain the endorsement in such a way that it is within the statutory time limit for filing the document. |
5 |
The production of gelatin exceeds the limit as per FSSA License for the last two years 2015-16 and 2016-17 and hence found to be repetitive in nature without amending the license accordingly for the enhancement of the permissible quantity of gelatin . This is evident as per examination of Annual Return in Form D1 filed under Regulation 2.1.13 of the FSSA 2006 , and the total gelatin production comes about 3824 MT and 4003 MT respectively which are in excess of the limit of 3650 MT per year. The Company is advised to increase the licensed limit accordingly. |
The forthcoming renewal of the license shall take care of the requirement. |
COLLABORATORS
The Collaborators of your Company continue to be the relentless source of support and guidance for the Company in each of its key initiatives. Their patronage in areas of financial support, product development, marketing, quality improvement and training of personnel has contributed significantly to the growth of the Company. NGI, Japan has not only subscribed to the Optionally Convertible Preference Shares for an amount of Rs. 1580 lakhs issued by the Company in full, but also provided term loan assistance to the Company at attractive rates of interest. NGI, Inc. Japan has provided guidance and considerable financial support for the scheme of revival of the subsidiary, Reva Proteins Ltd. Kerala State Industrial Development Corporation Ltd., the other promoter is also equally supportive to each and every development concerning your Company.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The information as required under Section 134(3) (m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure III.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to remuneration and other details as required under section 197(12) of the Act read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report as Annexure IV to this report.
The Annual Report excluding the details of employees receiving remuneration in excess of the limits prescribed under section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the shareholders of the Company in terms of first proviso to Section 136(1) of the Act 2013. The annexure is available for inspection at the Registered Office of the Company during business hours and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.
INTERNAL CONTROL SYSTEM
ADEQUACY OF INTERNAL CONTROL SYSTEMS
The Company has in place well defined and adequate internal controls commensurate with the size of the Company and the same were operating effectively throughout the year. The internal control systems operate through well documented Standard Operating Procedures, policies and process guidelines. These are designed to ensure that transactions are conducted and authorized within defined authority limit commensurate with the level of responsibility for each functional area. The Company''s accounting and reporting guidelines ensure that transactions are recorded and reported in conformity with the generally accepted accounting principles.
The Company has engaged a professional firm of Accountants with long years of experience to carry out the internal audit function. The Company has not placed any limitation on the scope and authority of the internal audit function. The internal audit function evaluates the efficacy and adequacy of internal control systems, its compliance with operating systems and policies of the Company and accounting procedures at all locations of the Company. To maintain its objectivity, effectiveness and independence, internal audit is being carried out on a quarterly basis and reports thereon, along with the remarks of the process owners on each of the observations of audit are placed before the Audit Committee of the Board. The Audit Committee reviews each of the internal audit reports as a separate item of agenda along with the internal / statutory auditors and the management representatives wherein the Committee gives their advice / suggestions on the audit points. Based on the report of the internal audit as well as the observations of the Audit Committee the process owners undertake requisite corrective action in their respective areas thereby further strengthening the control systems. Action Taken Reports are also reviewed by the Audit Committee for each actionable item. The minutes of the Audit Committee are reviewed by the Board of Directors.
INTERNAL CONTROLS OF FINANCIAL REPORTING
The Company has in place adequate financial controls commensurate with the size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weakness in the design on operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.
The Company has adopted accounting policies which are in line with the Accounting Standards and the Act. They are in accordance with the generally accepted accounting principles in India. Changes in policies, if required, are made in consultation with the auditors and are approved by the Audit Committee.
The Board is of the view that appropriate procedures and controls are operating effectively and monitoring procedures are in place.
RESPONSIBILITY STATEMENT OF DIRECTORS
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act, 2013:
a) that in the preparation of the annual accounts for the year ended 31st March, 2017, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;
b) that they had selected such accounting policies as mentioned in Note 1 of the notes to the Financial Statements and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2017 and of the profit of the Company for the year ended on that date;
c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) that they had prepared the annual accounts on a going concern basis;
e) that proper internal financial controls laid down by the Directors were followed by the Company and such internal financial controls are adequate and were operating effectively; and
f) that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions which is in line with the relevant provisions of the Companies Act and as well as SEBI (LODR) Regulations. The said policy as approved by the Board is available in the Company website www.gelatin.in. As per the said policy, prior omnibus approval of the Audit Committee is obtained on a quarterly basis for all the Related Party Transactions which are of a foreseen and repetitive nature. All Related Party Transactions actually taken place are subsequently reviewed by the Audit Committee on a quarterly basis in comparison with the conditions of omnibus approval and are recommended to the Board for approval. Additionally material Related Party Transactions foreseen in the year ahead, were got approved by the members also. Particulars of contracts of arrangements with Related Parties referred to in sub section 1 of Section 188 read with Rule 8(2) of the (Companies Accounts) Rules, 2014 are attached in Form No. AOC 2 as Annexure V.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review as stipulated under SEBI (LODR) Regulations is presented in a separate section forming part of this Annual Report.
CORPORATE GOVERNANCE
The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (LODR) Regulations. A separate section on corporate governance under the Regulation, along with a certificate from Practicing Company Secretary confirming the compliance, is annexed and forms part of the Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance with the provisions of Schedule III of the Companies Act, 2013 and Accounting Standards 21, 27 and other applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the SEBI (LODR) Regulations and form part of the Annual Report.
DIRECTORS
Mr. P. H Kurian IAS, who was a Director and Chairman of the Company with effect from 14.10.2013 ceased to hold office on 27.09.2016 consequent on the
Kerala State Industrial Development Corporation Limited (KSIDC) vide their letter dated 27.09.2016 nominating Mr. Paul Antony IAS, Additional Chief Secretary (Industries and Power), Govt. of Kerala as a Director of the Company.
Your Directors extend a warm welcome to Mr. Paul Antony as member of the Board. The Board also places on record the appreciation for the valuable guidance and support extended by Mr. P.H. Kurian IAS during his tenure as Director and Chairman.
Mr. Takeo Yamaki, Director(operations) resigned from the service of the company consequent on his being reverted to the service of NGI, Japan. He was replaced by Dr. Shinya Takahashi who was appointed as Director(Technical) at the Board meeting held on 09.05.2017. The terms and conditions of appointment, are to be confirmed at the forthcoming Annual General Meeting of the company. Similarly, Mr. Raymond Merz, Director, nominee of NGI, Japan was replaced and Mr. Koichi Ogata, President, NGI, Japan was appointed in casual vacancy at the Board meeting dated 09.05.2017. Mr. Hiroshi Nitta was appointed as Alternate Director to Mr. Koichi Ogata. The Board extended a warm welcome to the incoming directors.
KEY MANAGERIAL PERSONNEL
Rule 8(5)(iii) of Companies (Accounts) Rules, 2014 prescribes that Report of Directors should contain details of Directors and Key Managerial Personnel. Therefore, in addition to the details of Directors hereinabove given, it is brought to the notice of shareholders that Mr. P. Sahasranaman and Mr G. Rajeshkurup continue as Chief Financial Officer (CFO) and Company Secretary, respectively.
BOARD EVALUATION
As per Section 134(3)(P) of the Act, 2013 there has to be furnished to the shareholders as part of the Directors'' Report, a statement indicating the manner in which formal annual evaluation was made by the Board of their performance. Similarly, the Independent Directors as part of their mandate under Schedule VI of the Act need to make an evaluation of performance of the constituents of the Board apart from their self evaluation.
The Board at their meeting dt. 06.02.2017 had occasion to deliberate on the Guidance Note on Board Evaluation, issued by Securities Exchange Board of India(SEBI) dated 05.01.2017 and approved a Questionnaire for evaluation that captures the salient points discussed in the said Note. The questionnaire for evaluation (both, self and peer)are to be filled in, consolidated and discussed with the Chairman. The evaluation by the Independent Directors having been undertaken at their meeting dated 11.04.2017, the Board of Directors too undertook their evaluation and took into record that the Independent Directors have the requisite qualification, expertise and track record for performing their duties as envisaged under Law, and they add value in the decision making process of the Board.
MEETINGS
The Board of Directors met 4 (Four) times during the financial year 2016-17. The details of the Board meetings and the attendance of the Directors are provided in the Corporate Governance Report. The intervening time gap between the two consecutive meetings was within the period prescribed under the Companies Act, 2013.
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee has Mrs. Radha Unni as Chairperson, with Mr. A. K. Nair, Mr. K. L. Kumar and Dr. K. Cherian Varghese as members.
More details on the Committee are given in the Corporate Governance Report.
VIGIL MECHANISM
The Company has established a vigil mechanism for Directors and employees to report genuine concerns, while providing for adequate safeguards against victimization; providing direct access to chairperson of Audit Committee, the details regarding which have also been given in the Company''s official website.
DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.
Your Company has always believed in providing a safe and harassment free workplace for every individual working and associating with the company, through various interventions and practices. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment.
A four member Internal Complaints Committee (ICC) is constituted with three lady employees and one lady NGO member. ICC is responsible for redressal of complaints relating to sexual harassment, as envisaged under the provisions of Act and Rules. Hitherto no complaints were received by ICC.
PREVENTION OF INDISER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company''s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code.
STATUTORY AUDITORS
M/s Varma & Varma, Statutory Auditors completed their term of office within the meaning of Section 139 of the Companies Act,2013 consequent whereof M/s. Walker Chandiok & Co LLP was on recommendation by the Audit Committee at their meeting dated 06.02.2017, appointed as Statutory Auditors of the Company for a period of five years subject to yearly ratification, by the Board of Directors who held their meeting later during that day. This appointment which is confirmed by the Audit-firm as meeting all the qualifications and eligibility prescribed under the Companies Act 2013, applicable Rules and the provisions of SEBI (LODR) Regulations, has now to have the approval of the shareholders at the forthcoming Annual General Meeting of the Company.
SECRETARIAL AUDIT
Pursuant to the provisions of the Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. Abhilash Nediyalil Abraham. (CP No. 14524,
M No. 22601), Company Secretary in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure VI.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT 9 are annexed herewith as Annexure VII.
ACKNOWLEDGEMENT
Your Directors place on record its sincere appreciation for the support and assistance extended by the State Government and M/s. Kerala State Industrial Development Corporation Ltd. They also take this opportunity to extend their whole hearted gratitude to M/s. Nitta Gelatin Inc., Japan, for their timely and valuable guidance and inspiration. Your Board place on record its sincere appreciation for the significant contributions made by employees across the Company through their dedication and commitment. On this occasion, your Board thanks all the customers, suppliers, bankers and other associates for their unstinted co-operation. Your Directors are also thankful to the esteemed shareholders for their continued patronage and the confidence reposed on the Company and its management.
For and on behalf of the Board of Directors,
Kochi PAUL ANTONY IAS
09.05.2017 CHAIRMAN
(DIN: 02239492)
Mar 31, 2016
DIRECTORSâ REPORT
To
THE MEMBERS OF NITTA GELATIN INDIA LIMITED
The Directors have pleasure in presenting the 40th Annual Report and audited financial statements for the year ended 31st March, 2016.
FINANCIAL HIGHLIGHTS (Rs. in Crores)
Particulars |
For the year ended 31st March, 2016 |
For the year ended 31st March, 2015 |
Sales (including export incentives and net of Excise Duty & VAT) |
358.57 |
359.13 |
Other Income |
2.42 |
2.03 |
TOTAL |
360.99 |
361.16 |
Gross Profit before Depreciation |
35.85 |
20.41 |
Deducting there from: |
|
|
Depreciation |
9.43 |
10.38 |
Provision for Tax - |
|
|
- Current Tax |
10.11 |
2.24 |
- MAT Credit Entitlement |
(1.98) |
- |
- Deferred Tax |
1.13 |
2.58 |
- Prior years |
0.48 |
0.11 |
Profit after Tax |
16.68 |
5.10 |
Profit brought forward from previous year |
13.91 |
12.90 |
Adjustments for asset having no remaining useful life |
- |
(0.18) |
Balance Profit available |
30.59 |
17.82 |
for appropriation |
||
Appropriations : |
|
|
Proposed dividend on Optionally Convertible Preference Shares |
0.79 |
- |
Proposed final dividend on equity shares |
2.27 |
0.91 |
Tax on dividend |
0.62 |
0.18 |
Transfer to General Reserve |
6.00 |
2.82 |
Balance profit carried forward to next year |
20.91 |
13.91 |
Earnings per share (Rs.) |
|
|
Basic |
17.33 |
5.62 |
Diluted |
16.79 |
5.62 |
DIVIDEND
The Board has, subject to approval of the members at the ensuing Annual General Meeting, recommend a dividend @ 5.4029% p.a. for the year ended 31st March, 2016 on the 929,412 Optionally Convertible Preference Shares of face value of Rs. 170/- each on a pro-rata basis from the date of allotment.
Considering the Company''s performance and financial position for the year under review, the Board has also recommended a dividend of Rs. 2.50 per share i.e. 25% of the face value of Rs. 10/per share on the equity capital for the year ended 31st March, 2016, subject to the approval of the members at the ensuing Annual General Meeting.
Together with corporate tax on dividend, the total outflow on account of dividend will be Rs. 368.07 lakhs(including Rs. 94.88 lakhs on preference shares), vis-a-vis Rs. 109.27 lakhs paid for the financial year 2014-15.
During the year, unclaimed dividend of Rs. 1.69 lakhs pertaining to the year ended 31st March, 2008, was transferred to the Investor Education & Protection Fund after giving due notice to the members.
SHARE CAPITAL
The Authorized share capital of your Company has been enhanced from Rupees Twenty Crores (comprising of two crore equity shares of Rs. 10/each) to Rupees Thirty Five Crores Eighty lakhs and Forty only (comprising of two crore equity shares of Rs. 10/- each and 929,412 Optionally Convertible (non-cumulative) Preference Shares (OCPS) of Rs. 170/- each).
During the year, the Company has issued 929,412 Optionally Convertible (non-cumulative) Preference Shares of Rs. 170/- each aggregating to Rs. 15,80,00,040/- to M/s. Nitta Gelatin Inc., Japan, one of the promoters carrying a fixed dividend of 5.4029% and redeemable at par at the expiry of seven years from the date of allotment, 28.04.2015 with put and call option at the expiry of five years from the date of allotment. The said OCPS carry the option to get converted into equity shares either in full or in part at a value of Rs. 170/- per equity share of face value of Rs. 10/- and share premium of Rs. 160/- per share not later than 18 months from the date of allotment of OCPS, subject to the Company complying with Clause 38 of the SEBI (LODR) Regulations 2015, post conversion and NGI, Japan adhering to the SEBI Takeover Regulations. None of the OCPS shares have been converted into equity shares till date.
RESERVES
An amount of Rs. 600.00 lakhs is transferred to General Reserve during the year. Reserves as on 31.03.2016 comprises of Security Premium Reserve of Rs. 2895.90 lakhs, Capital Investment subsidy of Rs. 15.00 lakhs, Special Export Reserve of Rs. 79.00 lakhs, General Reserve of Rs. 7236.64 lakhs, Hedge Equalization Reserve of Rs. 151.02 lakhs and credit balance in the Profit and Loss Account of Rs. 2091.32 Lakhs, aggregating to Rs. 12468.88 lakhs.
PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS
In the wake of the progress made with regard to commissioning of the common treated effluent discharge pipeline for want of which the operations of M/s. Reva Proteins Ltd. (RPL), the subsidiary of the Company, was so far unviable, your company has made an investment of Rs. 1250 lakhs in the issue of 6% Optionally Convertible (Non-cumulative) Preference Shares of Rs. 10/each at par of the said subsidiary.
Corporate Guarantee for an amount of Rs. 271.31 lakhs was provided against a term loan of Rs. 300.00 lakhs sanctioned to RPL by M/s. Kerala State Industrial Development Corporation Ltd. during the year.
Details in respect of other loans, guarantees and investments covered under the provision of Section 186 of the Companies Act, 2013 are given in the notes on accounts for the financial year ended 31st March, 2016
PERFORMANCE
The gross revenue from operations of your Company during the year under review was Rs. 370.86 crores. Though there has been an increase in the unit sales realization in all our products during the year, increase in sales volumes could not be achieved due to various extraneous factors. With all the domestic Gelatin plants in full scale operation during the year and the resultant heavy demand for crushed bone, the quality of supplies could not meet the export quality specifications for Ossein and Limed Ossein. This has led to a reduction in export volumes of Ossein / Limed Ossein by 19% during the year. The demand for Collagen Peptide witnessed a setback in major overseas markets like Korea and Thailand. In the domestic market, the unduly long delay in granting new product approvals by the regulatory authorities has resulted in a poor off take of Collagen Peptide. Despite the reduction in volumes as explained above, the total sales turnover could be maintained with improvement in unit sales realization on all our products and the higher volume of Gelatin sales achieved during the year.
The improvement in USD / INR exchange rates during 2015-16 as compared to 2014-15 has also contributed to improved sales realization on exports.
The increase in price of crushed animal bone, apart from its poor quality as explained above, was not conducive for the business of the Company. Crushed bone prices have increased by 11% during 2015-16 as compared to the previous fiscal.
In the backdrop of the aforesaid adversities, your Company exercised close monitoring and strict control over each significant element of cost, and achieved appreciable savings. In respect of utilities, the usage of LNG was significantly substituted by firewood and at the same time, efficiency of wood fired boilers was improved. Aided also by the decline in the price of LNG and firewood, these measures have helped the company to achieve an overall cost reduction of around Rs. 6.08 crores for utilities.
With regard to finance cost, Company could effectively leverage low cost foreign currency loans and achieve almost a one third reduction amounting to Rs. 2.48 crores.
The sales mix during the year was such that the Company could achieve a reduction in selling expenses such as freight charges on products, discount and commission on sales, etc. aggregating to Rs. 3.52 crores during the year under review.
As a result of the above, the operations of the Company for the year 2015-16 has resulted in a pre-tax profit of Rs. 26.43 crores as against Rs. 10.03 crores during 2014-15.
The products of the your Company continued to enjoy an enviable market demand during the year under review. The entire sale of Ossein / Limed Ossein, 44.5% of the total sale of Gelatin and 38.6% of Collagen Peptide were through exports. Your Company has arrangements with its overseas collaborators, Nitta Gelatin Inc., Japan to leverage their expertise and market insights in servicing its customers in a pro-active manner in line with the global standards of NITTA Group.
The major production facilities of your Company are the Ossein Plant at Koratty, Trichur District and Gelatin / Peptide Plant at Kakkanad, Ernakulam District, Kerala. All the factories owned by the Company are being operated in strict compliance with the applicable standards / norms prescribed by the Statutory authorities including the State Pollution Control Board. The Kadukutty Panchayat in Trichur District did not renew the factory license for our Ossein Plant at Koratty for the year. However, the Kerala State Tribunal for Local Self Government Institutions has stayed the orders of the Panchayat until further orders. The denial of grant of factory license by the Kadukutty Panchayat for earlier years was challenged before the Hon''ble High Court of Kerala and the Court has ordered status quo in the matter till final disposal of the writ petition filed by the Company. The recent review of the effluent management system at Ossein Division by the National Environmental Engineering Research Institute (NEERI) has confirmed the efficacy of the system on the basis of which the Pollution Control Board has renewed the Consent To Operate up to 30.06.2018. Based on expert legal advice, the earlier court verdicts and the facts of the situation as explained above, the Company expects a favourable resolution of the matter.
CREDIT RATING
During the year, rating agency CRISIL has reaffirmed the rating of âCRISIL A-/ Stableâ rating for Long Term Debts and âCRISIL A2 â rating for short term borrowings.
AWARDS & ACCOLADES
During the year your Company was awarded the top export award in Ossein & Gelatin panel instituted by CAPEXIL for the year 2012-13.
The following prestigious certifications are retained by your Company:-
(a) European Directorate for the Quality of Medicines & Health (EDQM) Certificate for Gelatin Division
(b) HACCP Certificate for Ossein Division and Gelatin Division for food safety.
(c) ISO 14001:2004 for Gelatin Division for Environment Management System
(d) ISO 9001: 2008 for Quality Management System of the Company.
(e) FSSC Certification for Food Safety Management System for Gelatin Division
(f) Halal / Kosher Certification for Gelatin and Collagen Peptide
(g) NABL Accreditation for in-house laboratory
HEALTH, SAFETY AND ENVIRONMENT
Compliance with relevant regulations and effective management of the related issues is an integral part of the Company''s philosophy and we stand committed to continually improve on these objectives. The Company, year on year, increases its focus on improving matters relating to Health, Safety and Environment.
Health and Safety
The Company is committed to promoting the health and safety of its employees. Each of our plants is having a Safety Officer and Safety Committee which includes representation from workmen. The Committee meets regularly to review issues impacting plant safety and employee health. Regular health checkup of the employees is carried out through reputed hospitals. Various training programmes are conducted at the plant on health and safety issues including emergency preparedness, work safety, first-aid, etc. The Company is augmenting resources to further strengthen the level of safety at its plants.
Environment
The Company continuously endeavors to improve on environmental management and through all activities demonstrate its commitment to protecting the environment. The factories of the Company are equipped with effective effluent treatment plants for treating and discharging treated water with parameters well within the norms laid down by the Pollution Control authorities. The emissions from the boilers and generator stacks are regularly monitored for compliance. With the commissioning of two biogas generators at our Ossein plant, substantial portion of the raw effluent from the production process is now being converted into biogas used for meeting our energy requirements. Water recycling and water reuse are being regularly pursued and improved upon by the Company with specific targets.
In connection with the renewal of the Consent To Operate our Ossein plant, M/s. National Environmental Engineering Research Institute (NEERI), a constituent laboratory of the Council of Scientific & Industrial Research, Govt. of India, conducted a detailed study of the pollution status with respect to the air, water and solid waste generated from the Ossein plant and confirmed the efficacy of such systems. However, with a view to further enhance the infrastructure for environment management, water conservation, ambient air quality etc., the Company has mobilized Rs. 15.80 crores through the issue of Optionally Convertible (non-cumulative) Preference Shares. With the completion of this investment, your Company will be equipped with state-of-the-art facilities for management of environment and hence the health and safety of the employees and the local community at large.
The ambient air quality in our Ossein plant is being monitored on a continuous basis to conform to the regulations relating to ambient air quality standards. Out of the total plot area of approximately 1,53,900 sq. meters, about 10,000 sq. meters of land around the boundary of Gelatin Division and about 38,000 sq. meters of land in Ossein Division have been developed and maintained as green area.
These steps are expected to go a long way in furthering our efforts to protect the nature and environment around our plant.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company has formulated a well structured Policy aimed at providing focus and direction to the various activities on CSR. The Company is committed to identifying and supporting programmes aimed at:
- Empowerment of the disadvantaged / weaker sections of the society through education, skill development and the like;
- Provision of access to basic necessities like healthcare, drinking water & sanitation;
- Supporting environmental and ecological balance through afforestation, soil conservation, conservation of flora and similar programme;
- Promotion of sports through training of sports persons;
- Rural development projects;
- Total CSR expenditure incurred by your Company during the year was Rs. 19.48 lakhs which was higher than the statutory requirement of 2% of the average profit for the last three years.
- A CSR Committee has been constituted to act in an advisory capacity to the Board and Management with respect to policies and strategies that affect the Company''s role as a socially responsible organization.
- The CSR Committee ensures that the implementation and monitoring of the projects are in compliance with the CSR objectives and Policy of the Company.
- The CSR Policy can be accessed on the Company''s website www.gelatin.in. The CSR projects undertaken by the Company are in accordance with Schedule VII of the Companies Act, 2013. Annual Report on CSR activities is annexed herewith as Annexure I.
POLICY FOR DETERMINING MATERIAL SUBSIDIARIES
In accordance with the provisions of the SEBI (LODR) Regulations 2015, your Company had formulated a Material Subsidiary Policy specifying the criteria for determining the Material Subsidiaries. The said policy is available in the Company website www.gelatin.in. There has been no change in the nature of business of subsidiaries during the year under review.
As per the above policy, the Company has only one material subsidiary, Reva Proteins Ltd
SUBSIDIARY COMPANIES
BAMNI PROTEINS LIMITED
The annual production during the year in this subsidiary company was 2349 MT of Ossein and 5508 MT of Di Calcium Phosphate as against 2345 MT of Ossein and 5135 MT of Di-Calcium Phosphate during the previous year.
The operation of this subsidiary for the year under review has resulted in a post - tax profit of Rs. 128.75 Lakhs as against a net loss of Rs. 54.86 lakhs during the previous financial year.
REVA PROTEINS LIMITED
At Reva Proteins Ltd., owing to restrictions in the quantum of discharge of treated effluent, there has been considerable under utilization of capacity. The common treated effluent discharge pipeline currently being set up by M/s. Narmada Cleantech Limited, expected to be commissioned during mid
2015-16 has been delayed further. Arising out of the above, the financial year 2015-16 witnessed a net loss of Rs. 941.17 lakhs and a cash loss of Rs. 684.59 lakhs as against a net loss of 813.92 lakhs and a cash loss of Rs. 519.14 lakhs during the previous financial year. The annual production during 2015-16 was 900 MT of Ossein and 642.30 MT of Limed Ossein as against 1336.65 MT of Ossein and 521.90 MT of Limed Ossein during the previous year. M/s. Narmada Cleantech Limited, the agency entrusted with the setting up of the common effluent discharge pipeline has assured the commissioning of the pipeline by early 2016. Taking into consideration the techno-commercial viability of the project once the pipeline gets commissioned, your Company has proactively undertaken a comprehensive scheme for revival of the subsidiary. The main features of this scheme of revival are:
- Capital investment Rs. 900 lakhs financed out of term loans from the promoter, NGI Inc. Japan.
- Induction of capital of an amount of Rs. 1250 lakhs into the Company through the issue of 125 lakhs 6% Optionally Convertible (Non-cumulative) Preference Shares of Rs. 10/each at par.
- Rescheduling of existing term loans
- Change of business model into direct billing w.e.f. 01.04.2016 onwards.
With the implementation of the above scheme of revival, this subsidiary can achieve a turnaround in operations within a short time once the pipeline is commissioned.
In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report.
The statement containing the salient features of the financial statement of both the subsidiaries under first proviso to sub-section (3) of section 129 of the Act in form AOC I is attached as Annexure II.
In accordance with fourth proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing therein its standalone and consolidated financial statements has been uploaded on the website of the Company, www. gelatin. in. Further as per the fourth proviso of the said section, the annual accounts of the subsidiary companies and the related detailed information have also been uploaded on the website of the Company, www.gelatin.in.
Annual accounts of the subsidiary companies and related detailed information shall be made available to the shareholders of the Company and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shall also be available for inspection by any shareholder at the Registered Office of the Company and subsidiary companies concerned. Hard copy of details of accounts of subsidiaries shall be furnished to any shareholder on demand. Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, consolidated financial statements presented by the Company include the financial information of its subsidiaries.
STATUTORY AUDITORâS REPORT
Emphasis of Matter on the accounts of the Company referred to in the Auditor''s Report is explained in detail in Note No. 2.11.1 of the Notes forming part of accounts for the year and hence no further comments are necessary.
SECRETARIAL AUDITORSâ REPORT - EXPLANATION TO OBSERVATIONS OF AUDIT
As prescribed under Section 204(1) of the Act, the Company has received the Secretarial Audit Report. The observations made therein and the corresponding explanations are given herein below:
Sl No |
Observation |
Our explanation |
1 |
Pursuant to Section 184(1) of the Companies Act,2013 every director shall disclose his concern or interest in any company or companies or body corporates etc. including shareholding at the first Board meeting held in every financial year in Form MBP-1. It is seen that the first meeting of the Board in the financial year 2015-16 was held on 17th April,2015 but no such disclosure was made available to the Board as per Section 184(1) of the Act. Nevertheless, the same was disclosed at the next Board Meeting held on 09.05.2015. |
In normal course, the first Board meeting of the FY, is the Q1 meeting which takes place in the first week of May(09.05.2015). We were to take declarations from Directors for placing before the said meeting. In between, a Board Meeting took place in April(17.04.2015) along with EGM when the declaration was not fully obtained. |
2 |
There was a delay of 159 days in filing Form CHG-1 for Rs 700 lacs availed from HDFC Bank Limited. Also modification of the Charge by way of enhancement of the above said loan of Rs.10 crores was filed only after 134 days from the date of modification. |
The Bank had not completed the documentation for enabling us to file CHG1, leading to this delay. |
3. |
The appointment of CFO on 01/12/2015 was informed to BSE Ltd on 08/12/2015 only. The disclosure is inadequate to the extent that brief profile of new incumbent was not given to Stock Exchange as well as reasons for not informing SE in time, was not mentioned in the disclosure pursuant to Regulation 30(6) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015 read with sub para 7.3 Para A of Part A of Sch III. |
The LODR came into force on 01.12.2015. We failed to gather the essence of these provisions well in time to file for an event that took place on that very date, while there was a delay of 7 days for such filing. |
4 |
In the following instances, Standard 1.3.7 of the Secretarial Standards on Meetings of the Board has not been followed; The agenda notes for the Board meeting on 08.09.2015 has to be send atleast by 01.09.2015 to all Directors but the same has been sent only on 02.09.2015.Similarly for the board meeting held on 1st February,2016, the notes on agenda has been sent on 27th January,2016 but which is ought to be send by 25th January,2016 |
These were meetings for approval of Quarterly / Audited results which were Unpublished Price Sensitive Information. Directors have subsequently approved a proposal, agreeing to a shorter notice for circulation of financial results being Unpublished Price Sensitive Information (UPSI). |
5 |
As per LODR 2015 Reg 30-Annexure I particularly point 4, Companies are required to intimate outcome of the meeting of the Board of Directors, containing the time of commencement and conclusion of the Board meeting. But on examination of the intimation of the outcome of the Board meeting dated 01/02/2016, the details regarding the time of commencement and conclusion of the Board meeting was not included in the outcome intimation letter. |
Noted for future action. |
6 |
As per FSSA license issued to the Company by the Central Government, the permissible limit of the food product Gelatin is 10 MT/day. On examination of Annual Return in Form D1 filed under Regulation 2.1.13 of the FSSA 2006 , dated 26.05.2015 the total gelatin production comes about 3670.42 MT and during the FY ended 31.03.2016 it even crosses 3900 MT which are in excess of the limit of 3650 MT per year. Hence, the Company is advised to increase the license limit per day so as the production not to exceed the license limit. |
The production was marginally above the licensed limit during the year 2014-15, and has increased further vis-a-vis the licensed limits during the year 2015-16. Endorsements will be sought from the authorities for the increased limit. |
COLLABORATORS
Your Collaborators continue to be the relentless source of support and guidance for the Company in each of its key initiatives. Their patronage in areas of financial support, product development, marketing, quality improvement and training of personnel has contributed significantly to the growth of the Company. NGI, Japan has not only subscribed the Optionally Convertible Preference Shares for an amount of Rs. 1580 lakhs issued by the Company in full, but also provided term loan assistance to the Company at attractive rates of interest. NGI, Inc. Japan has provided guidance and considerable financial support for the scheme of revival of the subsidiary, Reva Proteins Ltd. Kerala State Industrial Development Corporation Ltd., the other promoter is also equally supportive to each and every development concerning your Company.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The information as required under Section 134(3) (m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure III.
POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT PERSONNEL
The Nomination and Remuneration Committee shall identify persons who are qualified to become directors and who may be appointed in senior management cadre in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every directorâs performance.
The Nomination and Remuneration Committee does formulate the criteria for determining qualifications, positive attributes and independence of a director recommending to the Board a policy relating to the remuneration for the directors, key managerial personnel and senior management personnel meaning thereby employees of the company who are members of the core management excluding Board of Directors. This would comprise all members of management one level below the Executive Directors, including all functional heads.
The Remuneration policy to ensure that:â
- the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate personnel as are herein referred to above of the quality required to run the company successfully;
- relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
- remuneration to Whole-time directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to remuneration and other details as required under section 197(12) of the Act read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report as Annexure IVA to this report.
The Annual Report excluding the details of employees receiving remuneration in excess of the limits prescribed under section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the shareholders of the Company in terms of first proviso to Section 136(1) of the Act 2013. The annexure is available for inspection at the Registered Office of the Company during business hours and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.
INTERNAL CONTROL SYSTEM
ADEQUACY OF INTERNAL CONTROL SYSTEMS
The Company has in place well defined and adequate internal controls commensurate with the size of the Company and the same were operating effectively throughout the year. The internal control systems operate through well documented Standard Operating Procedures, policies and process guidelines. These are designed to ensure that transactions are conducted and authorized within defined authority limit commensurate with the level of responsibility for each functional area. The Company''s accounting and reporting guidelines ensure that transactions are recorded and reported in conformity with the generally accepted accounting principles.
The Company has engaged a professional firm of Accountants with long years of experience to carry out the internal audit function. The Company has not placed any limitation on the scope and authority of the internal audit function. The internal audit function evaluates the efficacy and adequacy of internal control systems, its compliance with operating systems and policies of the Company and accounting procedures at all locations of the Company. To maintain its objectivity, effectiveness and independence, the internal audit is being carried out on a quarterly basis and reports thereon, along with the remarks of the process owners on each of the observations of audit are placed before the Audit Committee of the Board. The Audit Committee reviews each of the internal audit reports as a separate item of agenda along with the internal / statutory auditors and the management representatives wherein the Committee gives their advice / suggestions on the audit points. Based on the report of the internal audit as well as the observations of the Audit Committee the process owners undertake requisite corrective action in their respective areas thereby further strengthening the control systems. The minutes of the Audit Committee are reviewed by the Board of Directors.
INTERNAL CONROLS OF FINANCIAL REPORTING
The Company has in place adequate financial controls commensurate with the size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weakness in the design on operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.
The Company has adopted accounting policies which are in line with the Accounting Standards and the Act. They are in accordance with the generally accepted accounting principles in India. Changes in policies, if required, are made in consultation with the auditors and are approved by the Audit Committee.
The Board is of the view that appropriate procedures and controls are operating effectively and monitoring procedures are in place.
RESPONSIBILITY STATEMENT OF DIRECTORS
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act, 2013:
a) that in the preparation of the annual accounts for the year ended 31st March, 2016, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;
b) that they had selected such accounting policies as mentioned in Note 1 of the notes to the Financial Statements and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2016 and of the profit of the Company for the year ended on that date;
c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) that they had prepared the annual accounts on a going concern basis;
e) that proper internal financial controls laid down by the Directors were followed by the Company and such internal financial controls are adequate and were operating effectively; and
f) that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions which is in line with the relevant provisions of the Company''s Act and as well as SEBI (LODR) Regulations. The said policy as approved by the Board is available in the Company website www.gelatin.in. As per the said policy, prior omnibus approval of the Audit Committee is obtained on a quarterly basis for all the Related Party Transactions which are of a foreseen and repetitive nature. All Related Party Transactions actually taken place are subsequently reviewed by the Audit Committee on a quarterly basis in comparison with the conditions of omnibus approval and are recommended to the Board for approval. Additionally material Related Party Transactions foreseen in the year ahead, were got approved by the members also. Particulars of contracts of arrangements with Related Parties referred to in sub section 1 of Section 188 read with Rule 8(2) of the (Companies Accounts) Rules, 2014 are attached in Form No. AOC 2 as Annexure V.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review as stipulated under SEBI (LODR) Regulations 2015 are presented in a separate section forming part of this Annual Report.
CORPORATE GOVERNANCE
The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (LODR) Regulations. A separate section on corporate governance under SEBI (LODR) Regulations 2015, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance with the provisions of Schedule III of the Companies Act, 2013 and Accounting Standards 21, 27 and other applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the SEBI (LODR) Regulations and form part of the Annual Report.
DIRECTORS
Your Board had appointed Dr. K. Cherian Varghese as an Additional Director on the Board w.e.f. 08.09.2015. Dr. K.Cherian Varghese, a banker by profession was General Manager in Indian Bank. He had a stint in South Indian Bank as their Chairman & CEO. He was the Executive Director of Central Bank of India before holding post as CMD successively, in two leading Public Sector Banks namely, Corporation Bank and Union Bank of India. He also served as member and Chairman of the Board for Industrial & Financial Reconstruction of Govt. of India.
Mr. Norimichi Soga, currently the Director & Chairman of Nitta Gelatin Inc., Japan was a member of the Board of Directors of your Company since May 2005. NGI, Japan vide their letter dt. 24.02.2016 withdrew their nomination of Mr. Soga as a director of the Company and instead nominated Mr. Raymond Merz, Director and Executive Officer, NGI, Japan. Mr. Seiichi Nishikawa of NGI, Japan has been appointed as an Alternate Director for Mr. Raymond Merz as envisaged under law.
The period of appointment of Mr. Takeo Yamaki as a Whole time Director designated as Director (Operations) has been extended for a further period of two years from 11.07.2016.
With great pleasure, your Directors welcome the new Directors, Dr. K. Cherian Varghese, Mr. Raymond Merz and the Alternate Director, Mr. Seiichi Nishikawa. The Board also placed on record its sincere appreciation for the valuable contribution made by Mr. Norimichi Soga during his tenure as the Director of the Company.
KEY MANAGERIAL PERSONNEL
Rule 8(5)(iii) of Companies (Accounts) Rules, 2014 prescribes that Report of Directors should contain details of Directors and Key Managerial Personnel. Therefore, in addition to the details of Directors hereinabove given, it is brought to the notice of shareholders that Mr. P. Sahasranaman is appointed as Chief Financial Officer (CFO) w.e.f.01.12.2015, while Mr. G. Rajesh Kurup who held office as Company Secretary, continues as such since commencement of the Act and Rules effective 01.04.2014.
BOARD EVALUATION
As per Section 134(3)(P) of the Act, 2013 there has to be furnished to the shareholders as part of the Directors'' Report, a statement indicating the manner in which formal annual evaluation was made by the Board of their performance. Similarly, the Independent Directors as part of their mandate under Schedule VI of the Act need to make an evaluation of performance of the constituents of the Board other than themselves.
Accordingly, the Board at their meeting dt. 01.02.2016 deliberated and took into record that the Independent Directors (IDs) have the requisite qualification, expertise and track record for performing their duties as envisaged under Law, and they make value addition in the decision making process of the Board. Similarly the IDs at their meeting that day evaluated and expressed satisfaction at the performance of other Directors on the Board.
Pursuant to the provisions of the Companies Act, 2013 and the SEBI (LODR) Regulation, the Board at its meeting dated 20.03.2015 carried out its own annual evaluation with specific reference to Independent Directors and criteria for their independence. The rest of the Board members including the Chairman of the Board were evaluated by the Independent Directors at their meeting dated 17.04.2015.
On the basis of report on performance evaluation by the Board, the Independent Directors were proposed for appointment before the Extraordinary General Meeting of the Company dated.17.04.2015, who had since been appointed
MEETINGS
The Board of Directors met 6 (six) times during the year 2015-16. The details of the Board meetings and the attendance of the Directors are provided in the Corporate Governance Report. The intervening time gap between the two consecutive meetings was within the period prescribed under the Companies Act, 2013.
COMPOSITION OF AUDIT COMMITTEE
The Board had re-constituted the Audit Committee with Mrs. Radha Unni as Chairperson, Mr. A. K. Nair, Mr. K. L. Kumar and Dr. K. Cherian Varghese as members.
More details on the Committee are given in the Corporate Governance Report.
VIGIL MECHANISM
The Company has established a vigil mechanism for Directors and employees to report genuine concerns, while providing for adequate safeguards against victimization; providing direct access to chairperson of Audit Committee, the details regarding which has also been given in the Company''s official website.
DISCLOSURE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.
Your Company has always believed in providing a safe and harassment free workplace for every individual working and associating with the company, through various interventions and practices. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment.
A four member Internal Complaints Committee (ICC) is constituted with three lady employees and one lady NGO member. ICC is responsible for redressal of complaints relating to sexual harassment, as envisaged under the provisions of Act and Rules. Hiterto no complaints were received by ICC.
PREVENTION OF INDISER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company''s shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code.
STATUTORY AUDITORS
As per Section 139 of the Act read with Rule 6 of the Companies (Audit and Auditors) Rule, 2014, M/s. Varma & Varma, Statutory Auditors, has time till AGM corresponding to the year ended 31.03.2017 for subjecting themselves to rotation. The Board at the meeting dt. 06.05.16 having proposed to the ensuing AGM, their re-appointment for yet another year, the Auditors vide letter confirmed their eligibility under Section 141 of the Companies
Act, 2013 and other applicable provisions for reappointment as auditors of the Company. As required under SEBI (LODR) Regulations, the auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. M/s. Varma & Varma have forwarded their confirmation that their re-appointment as above is within the limits specified under the Companies Act, 2013.
Their appointment as above is being put up for approval by members at the ensuing Annual General Meeting.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. Abhilash N. A. (CP No. 14524, M No. 22601), Company Secretary in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure VI.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT 9 are annexed herewith as Annexure VII.
ACKNOWLEDGEMENT
Your Directors place on record their sincere appreciation for the support and assistance extended by the Government of Kerala and M/s. Kerala State Industrial Development Corporation Ltd. They also take this opportunity to extend their whole hearted gratitude to M/s. Nitta Gelatin Inc., Japan, for their timely and valuable guidance and inspiration. Your Board placed on record its sincere appreciation for the significant contributions made by employees across the Company through their dedication and commitment. On this occasion, your Board thank all the customers, suppliers, bankers and other associates for their unstinted co-operation. Your Directors are also thankful to the esteemed shareholders for their continued patronage and the confidence reposed in the Company and its management.
For and on behalf of the Board of Directors,
Kochi P. H. KURIAN IAS
06.05.2016 CHAIRMAN
(DIN: 00027596)
Mar 31, 2015
Dear Members,
The Directors take pleasure in presenting the 39th Annual Report and
Audited Financial Statement of your Company for the year ended 31st
March, 2015. The Management Discussion and Analysis is also
incorporated into this report.
FINANCIAL RESULTS (Rs. in Crores)
For the year ended For the year ended
Particulars
31st March, 2015 31st March, 2014
Sales (including export incentives
and net of Excise
Duty & VAT) 359.13 289.24
Other Income 2.03 0.12
TOTAL 361.16 289.36
Gross Profit before Depreciation 20.41 3.32
Deducting therefrom:
Depreciation 10.38 10.63
Provision for Tax -
* Current Tax 2.24 -
* Deferred Tax 2.58 (2.97)
* Prior years 0.11 0.62
Profit / (Loss) after Tax 5.10 (4.96)
Balance Profit / (Loss) available
5.10 (4.96)
for appropriation
Appropriations :
Proposed dividend 0.91 NIL
Tax on dividend 0.18 NIL
Transfer to General reserve 2.82 NIL
Profit brought forward
12.90 17.86
from Previous Year
Balance Profit carried 14.09 12.90
to Balance Sheet 14.09 12.90
Basic & Diluted 5.62 (5.47)
Earnings per share (Rs.) 5.62 (5.47)
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.1/- per share
@ 10 % of the face value of Rs. 10/- per share on the equity capital
for the financial year 2014-15, for your approval in the ensuing
General Meeting. The total outflow on account of dividend inclusive of
corporate tax on dividend would be Rs.109.27 lakhs.
During the year, unclaimed dividend of Rs. 0.88 lakhs pertaining to the
year ended 31st March, 2007, was transferred to the Investor Education
& Protection Fund after giving due notice to the members.
SHARE CAPITAL
The paid-up equity share capital as on 31st March, 2015 was Rs.907.92
lakhs. During the year under review no issue of shares was made. Your
company has proposed the preferential issue of 929,412 Optionally
Convertible (non- cumulative) Preference Shares (OCPS) of Rs. 170/- each
aggregating to Rs. 158,000,040/- to one of the promoters, M/s. Nitta
Gelatin Inc., Japan. The proceeds of this issue are intended to be
utilized for augmenting the environment management infrastructure at the
production units of your company by upgrading the pollution control
facilities, reducing water consumption and enhancing the odour
mitigation systems. These shares carry a fixed dividend of 5.4029% and
are redeemable at par at the expiry of seven years from the date of
allotment with Put and Call option at the expiry of five years from the
date of allotment.
The said OCPS carry the option to get converted into equity shares
either in full or in part at a value of Rs. 170/- per Equity share of
face value of Rs. 10/- and share premium of Rs. 160/- per share not
later than 18 months from the date of allotment of OCPS, subject to the
Company complying with Clause 40A of the Listing Agreement with the
Stock Exchange post conversion and NGI, Japan adhering to the SEBI
Takeover Regulations.
To facilitate the issue of OCPS as above, the Authorized share capital
of your Company has been enhanced from the present Rupees Twenty Crores
(comprising of 2 crore Equity shares of Rs. 10/- each) to Rupees
Thirty Five Crores Eighty Lakhs and Forty only (comprising of 2 crore
Equity shares of Rs. 10/- each and 929,412 Optionally Convertible
(non-cumulative) Preference Shares of Rs. 170/- each).
The above proposals were approved by the members in the Extra Ordinary
General Meeting held on 17.04.2015 and the OCPS shares were allotted to
NGI, Japan on 28.04.2015.
RESERVES
From out of the net profits of the year, an amount of Rs. 282.00 lakhs
is transferred to General Reserve. Reserves as on 31.03.2015 comprised
of Security Premium Reserve of Rs. 2895.90 lakhs, Capital Investment
Subsidy of Rs. 15.00 lakhs, Special Export Reserve of Rs. 79.00 lakhs,
General Reserve of Rs. 6636.64 lakhs, Hedge Equalisation Reserve of Rs.
234.78 lakhs and credit balance in Profit & Loss Account of Rs. 1390.75
lakhs, aggregating to Rs. 11252.07 lakhs.
PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS
Details of Loans, Guarantees & Investments covered under the provisions
of Section 186 of the Companies Act, 2013 are given in the notes to the
Financial Statements.
PERFORMANCE
The gross revenue from operations of your Company touched an all-time
high of Rs. 371.80 crores. This increase of 25% as compared to the
previous year was achieved through increase in the production and sales
volume of all its major products, increase in the unit sales
realization of all its products (except in case of Di-Calcium
Phosphate, for which the decline in price was consistent with the
industry trend) besides a favourable foreign exchange rate movement in
USD / INR.
Increase in Gelatin selling price during the year was 6%, Ossein 13%
and Collagen Peptide 3% in comparison to previous year. In the case of
Di- Calcium Phosphate, the drop in sales realization was 9%. The
poultry industry in India, which had seen high growth for the past
couple of years, witnessed a correction during 2014-15, with the
farmers resorting to optimize costs with cheaper substitutes for feed
and cutting down on the poultry population itself to contain the
decline in product prices. In the case of Gelatin, though the domestic
market continued to be attractive, the demand at some of the global
markets declined considerably during the second half of the year.
Availability and quality of crushed bone, the main raw material,
continued to pose a challenge during the review period. Crushed bone
prices have registered an overall increase of 22% which dented the
operating margin for the year. Despite this, by exercising utmost
control over fixed overheads, prudent structuring of hedging mechanisms
for foreign currency exposure and keeping the physical performance
parameters under close vigil, your company could neutralise to a
significant extent the factors adversely impacting the profitability of
operations. This has resulted in a pre-tax profit of Rs. 10.03 crores
during 2014-15 as against a net pre-tax loss of Rs. 7.31 crores during
2013-14.
The products of your Company continue to enjoy enviable market equity.
The entire sale of Ossein, 48% of the total sales of Gelatin and 39% of
Collagen Peptide were exported. Your Company has arrangements with our
overseas collaborators, Nitta Gelatin Inc., Japan to leverage their
expertise and market insights in servicing its customers in a proactive
manner in line with the global standards of Nitta Group.
The consistent growth in the volume of all our products is a testimony
to the strong equity enjoyed by our products in markets, worldwide.
The major production facilities of your company are the Ossein plant at
Koratty, Trichur District and Gelatin/Peptide plant at Kakkanad,
Ernakulum District, Kerala. All the factories owned by the Company are
being operated in strict compliance with all the prescribed
standards/norms prescribed by the Statutory Authorities including the
State Pollution Control Board. The Kadukutty Panchayat in Trichur
District, where the Ossein plant is situated, has not renewed the
Panchayat license for the financial year 2015-16 as was the case from
2011 onwards. Denial of the license was challenged before the Hon'ble
High Court of Kerala and the Court has ordered status quo in the matter
till the final disposal of the petition. Your Company is complying with
all the norms specified by the Pollution Control Authorities and this
has been confirmed during the joint inspection by the National
Environmental Engineering Research Institute (NEERI), Pollution Control
Board Authorities and the District Administration. Based on expert legal
advice, the earlier Court verdicts in the matter and the real facts of
the situation, the Company believes that it has a very strong case and
expects a favourable decision in the appellate proceedings.
BONUS ISSUE & SHAREHOLDERS' RESOLUTIONS
The shareholders of the Company in the Extra Ordinary General Meeting
(EGM) on 24.08.2013 had resolved as follows:-
Issue of bonus shares in the ratio of 1:3 to the promoters of the
Company in partial modification of the resolution passed in relation to
the issue of bonus shares only to the public shareholders, as approved
in the EGM held on 29.05.2013 subject to such approvals and sanctions
as may be required.
Issue of 696,667 Equity shares of the Company under an Employee Stock
Purchase Scheme.
However, the issue of these shares was delayed in view of the
modifications to the earlier resolutions, and SEBI vide their letter of
14.02.2014 had declined to grant condonation for the delay in issue of
the aforesaid bonus shares beyond the period of two months prescribed
under Regulation 95(1) of the SEBI ICDR. The appeal preferred against
the said order of SEBI before the Securities & Appellate Tribunal has
been decreed against the Company.
In the aforesaid circumstances, it is not possible for your Company to
act upon the shareholders' resolutions referred to above.
CREDIT RATING
During the year, rating agency CRISIL has reaffirmed the rating of
"CRISIL A-/Stable" for Long Term Debts and "CRISIL A2 " rating for its
short term borrowings.
AWARDS & ACCOLADES
During the year your Company received the top export award in Ossein &
Gelatin panel instituted by CAPEXIL for the year 2012-13.
The following are the noteworthy certifications retained by your
company.
European Directorate for the Quality of Medicines & Health (EDQM)
Certificate for Gelatin Division HACCP Certificate for Ossein Division
and Gelatin Division for food safety. (c) ISO 14001:2004 for Gelatin
Division for Environment Management System
ISO 9001: 2008 for Quality Management System of the Company
FSSC Certification for Food Safety Management System for Gelatin
Division 2014
(f) Halal / Kosher Certification for Gelatin and Collagen Peptide
(g) NABL Accreditation for in-house laboratory
HEALTH SAFETY AND ENVIRONMENT
Compliance with all the applicable regulations and effective monitoring
for its continuance is an integral part of your company's operating
philosophy. We stand committed to continually improve on these
objectives. There was considerable focus on improving health, safety
and environment during the year by the Company.
Health and Safety
Your Company is committed to promote the health and safety of its
employees. The Company has put in place a safety committee at each of
its Divisions which meets regularly to review issues impacting plant
safety and employee health. Regular health check up of the employees is
carried out by reputed hospitals. The Company could maintain good
progress in the area of process safety with no major accidents reported
during the year.
Environment
Your Company continuously endeavors to improve on matters relating to
environmental management. Through all our activities, we demonstrate
our commitment to protect the environment. The quality of treated water
being discharged from the waste water treatment plant is well within
the norms laid down by the Pollution Control Authorities. The emissions
from the boilers and generator stacks are regularly monitored. With the
commissioning of the biogas generator at our Ossein plant, substantial
portion of the raw effluent from production is now being converted into
biogas. Water recycling and water reuse are being regularly pursued and
improved upon by the Company with specific targets.
At the instance of the Hon'ble High Court of Kerala, NEERI, a
constituent laboratory of the Council of Scientific & Industrial
Research, Govt. of India, conducted a detailed study into the pollution
status with respect to the air, water and solid waste generated from the
Ossein plant and the adequacy and efficacy of pollution control measures
adopted by the Company. While expressing satisfaction over the effluent
treatment systems in place at our Ossein plant, NEERI has made few
recommendations for further improvement of the systems, all of which are
being pursued for implementation by the Company. Subsequently, at the
instance of the Pollution Control Board, NEERI after conducting a joint
monitoring of the progress of implementation of their recommendations
along with representatives of the Pollution Control Board and the
District Administration has reported that the Company is implementing
the recommendations in all earnestness as per the recommended schedule.
As mentioned in this report, the Company has already mobilized funds to
the tune of Rs. 15.80 crores through the issue of Optionally Convertible
Preference Shares to finance various capital investments which are aimed
at further improving the infrastructure for effective environment
management and water conservation. With this, your Company will be
further equipped with state-of-the-art facilities for managing its
environment and hence the health and safety of the employees and the
local community at large.
The ambient air quality in our Ossein plant is being monitored on a
continuous basis to conform to the regulations relating to ambient air
quality standards. Out of the total plot area of approximately 1,53,900
sq. meters, about 10,000 sq. meters of land around the boundary of
Gelatin Division and about 38,000 sq. meters of land in Ossein Division
have been developed and maintained as a green belt.
These steps are expected to go a long way in furthering our efforts to
protect the nature and environment.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has formulated a well structured CSR Policy aimed at
providing focus and direction to the various activities on CSR being
undertaken by the Company including through the charitable trust, K. T.
Chandy - Seiichi Nitta Foundation and other approved agencies. The
projects undertaken by the Company are in the areas of education,
livelihood, health, water and sanitation. These projects are in
accordance with Schedule VII of the Companies Act, 2013. Annual Report
on CSR activities is annexed herewith as Annexure I.
POLICY FOR DETERMINING MATERIAL SUBSIDIARIES
In accordance with the provisions of the Listing Agreement, your
Company had formulated a Material Subsidiary Policy specifying the
criteria for determining the Material Subsidiaries. The said policy is
available in the Company website www. gelatin.in.
SUBSIDIARY COMPANIES
BAMNI PROTEINS LIMITED
The annual production during the year in this subsidiary company was
2345 MT of Ossein and 5135 MT of Dicalcium Phosphate as against 2417 MT
of Ossein and 5470 MT of Di-Calcium Phosphate during the previous year.
The operation of this subsidiary for the year under review has resulted
in a net loss of Rs. 54.86 Lakhs post tax as against a net profit of
Rs. 72.39 lakhs post tax for the previous financial year. This was
largely on account of product quality issues besides increase in the
cost of utilities.
REVA PROTEINS LIMITED
At Reva Proteins Ltd., the Plant capacity utilization was only around
50% during the financial year 2014- 15 owing to non-commissioning of the
pipeline by the Government, for marine discharge of the treated
effluent, thereby restricting the quantum of discharge of treated
effluent into the existing effluent discharge pipeline. Such
restrictions are expected to be withdrawn once the marine discharge
pipeline intended for Jhagadia Industrial Estate (now under
construction), and scheduled to go on stream during the middle of 2015-
16, gets commissioned.
During the financial year ended 31.03.2015, this subsidiary recorded a
net loss of Rs. 813.92 lakhs and a cash loss of Rs. 519.14 lakhs as
against a net loss of Rs. 231.06 lakhs and a cash profit of Rs. 283.80
lakhs during the previous financial year. The annual production during
2014-15 was 1336.65 MT of Ossein, 521.90 MT of Limed Ossein as against
1869.34 MT of Ossein and 1039.75 MT of Limed Ossein during the previous
year.
The statement containing the salient features of the financial
statement of both the subsidiaries under first proviso to sub-section
(3) of section 129 of the Act in form AOC 1 is attached as Annexure II.
Annual accounts of the subsidiary companies and related detailed
information shall be made available to shareholders of the Company and
subsidiary companies seeking such information at any point of time. The
annual accounts of the subsidiary companies shall also be available for
inspection by any shareholder at the Registered Office of the Company
and subsidiary companies concerned. Hard copy of details of accounts of
subsidiaries shall be furnished to any shareholder on demand. Further,
pursuant to Accounting Standard AS - 21 issued by the Institute of
Chartered Accountants of India, consolidated financial statements
presented by the Company include the financial information of its
subsidiaries.
STATUTORY AUDITORS' REPORT
Observation of audit vide para 7(b) of Annexure referred to in the
paragraph titled "Report on Other Legal and Regulatory Requirements" of
the Independent Auditor's Report for the year. The points covered in
the above para are explained in detail under para 2.28 of the Notes
forming part of the accounts for the year and hence no further comments
are called for.
SECRETARIAL AUDITORS' REPORT - EXPLANATION TO OBSERVATIONS OF AUDIT
As prescribed under Section 204 (1) of the Act, the Company has
received the Secretarial Audit Report. The observations made therein
and the corresponding explanations are given herein below:
Sl No Observation Reply
1 Pursuant to the provisions of Section 149 of the Companies Act, 2013
read with Rules and MCA General Circular No.14/2014 dated 09.06.2014,
the appointment of Independent Directors under the Companies Act, 2013
ought to have been made be- fore 31st March, 2015. But the Company had
not appointed In- dependent Directors at the General Meeting on or
before the said date. Nevertheless, the Company at their Board Meeting
had appointed Additional Directors meeting the criteria of In-
dependence in the category of Independent Director within the said date
and issued notice for Extra Ordinary General Meeting for the appointment
of Independent Directors which was only held on 17th April, 2015.
There was substantial compliance of the provisions, when Independent
Directors were identified against the criteria recognized / fixed by the
Board, and proposals made and notice sent to the shareholders for the
General Meeting, before 31.03.2015. The delay was only to the extent of
17 days, since the EGM held on 17.04.2015, appointed the Independent
Directors.
2 Pursuant to Section 158 of the Companies Act, 2013 every person or
company, while furnishing any return, information or particulars as are
required to be furnished under this Act, shall mention the Director
Identification Number(DIN) in such return, information or particulars in
case such return, informa- tion or particulars relate to the director or
contain any refer- ence of any director. But DIN Nos of the Directors
are not men- tioned in the AGM Notice dated 09/05/2014 ,Directors'
Report and Financial Statements and Resolutions filed with Registrar of
Companies.
Subsequent to the AGM notice dt. 09.05.2014 referred to by audit, the
notice for the EGM held on 17.04.2015, had conformed to the requirement
of showing the DIN No. of Directors in the corresponding resolutions.
3. The Company's Memorandum and Articles of Association
should be amended in order to align with the Companies Act,
2013. This is more specifically required since the Board of Di-
rectors had approved increase of Authorised capital at their meeting
held on 20.03.2015 and issued notice for the Extra Ordinary General
Meeting for approval of the shareholders for the alteration of MOA and
AOA. Consequently, the Sharehold- ers at the EGM held on 17.04.2015 had
approved the same. Hence, considering Section 5(9) of the Companies Act,
2013 too, the Company is advised to immediately amend the MOA and AOA in
order to align with the Companies Act, 2013.
With the governing provisions under Companies Act and SEBI Guidelines
having settled down we are soon initiating required amendments to the
MOA and AOA.
4 There was delay of 54 days in filing Form CHG-1 for the mod-
ification of Charge ID 90016886 in connection with the en-
hancement of working capital limit of Rs 487100000 to Rs 54
7100000 by the State Bank of India .
There were two reasons why we encountered a delay of 54 days in filing
CHG-1. This CHG form had to return from the charge holder banker after
affixing Digital Signature. Besides, when the form was thus ready for
uploading, they underwent modification in the said MCA format, resulting
in the delay.
5 The Clause 47 (C) Certificate for the half year ended 31.03.2014
pursuant to Listing Agreement stated that the Company had delivered
Debenture Certificate within 15 days under transfer but in reality the
Company had not issued any Debentures. The Clause 47 (C) Certificate for
the half year ended 30.09.2014 shows the period as 01.03.2014 to
31.08.2014, which does not reflect the status of transfer during the
month of September, 2014.
This shall be taken care in future.
6 Pursuant to Clause 54 of the Listing Agreement, even though
the Company is maintaining functional web site, certain ele-
ments like Shareholding Pattern, Compliance with Corporate
Governance, Financial Information, Contact information of the designated
officials of the company who are responsible for assisting and handling
investor grievances, details of agree- ments entered into with the media
companies and/or their associates, if any are not posted in the Web site
of the Com- pany, regularly.
The functional website shall soon be updated and arrangements made for
it to be updated regularly thereafter.
7 The Company is taking apprentices pursuant to the provisions
of the Apprentices Act, 1961.But on examination, has not found any
Contract of apprenticeship sent by the Company to the apprenticeship
advisor for registration.
Noted for corrective action
8 The Company is not notifying the vacancies to employment
exchanges as prescribed in Section 4 of the Employment Ex- change
(Compulsory Notification of Vacancies) Act, 1956 read with Rule 5.
Noted for corrective action
9 The Company has not furnished quarterly returns in Form
No.ER-1,Biennial return in Form ER-II to local employment ex- changes as
prescribed in Rule 6 made under the Employment Exchanges (Compulsory
Notification of Vacancies) Act,1956.
Noted for corrective action
COLLABORATORS
Your collaborators continue to extend their unstinted support and
co-operation to all the major initiatives of the Company. As mentioned,
NGI, Japan has fully subscribed for the Optionally Convertible
Preference Shares for an amount of Rs. 15.80 crores, apart from
providing technical information, training of personnel, deputing
trained technicians and marketing our products. Kerala State
Industrial Development Corporation Ltd, the Indian co-promoter is
providing valuable support and guidance in the management of the
Company.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS AND OUTGO
The information as required under Section 134(3) (m) of the Companies
Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014
is attached as Annexure III.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Disclosures pertaining to remuneration and other details as required
under Section 197(12) of the Act read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 are
provided in the Annual Report as Annexure IV-A to this Report.
Details of employees receiving the remuneration in excess of the limits
prescribed under Section 197 of the Act 2013 read with Rule 5(2) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules,
2014 are annexed as a statement and given in Annexure IV-B. In terms of
first proviso to Section 136(1) of the Act 2013 the Annual Report,
excluding the aforesaid annexure is being sent to the shareholders of
the Company. The annexure is availbale for inspection at the Registered
Office of the Company during business hours and any shareholder
interested in obtaining a copy of the said annexure may write to the
Company Secretary at the Registered Office of the Company.
RESPONSIBILITY STATEMENT OF DIRECTORS
To the best of their knowledge and belief and according to the
information and explanations obtained by them, your Directors make the
following statements in terms of Section 134(3)(c) of the Companies
Act, 2013:
a) that in the preparation of the annual accounts, the applicable
Accounting Standards had been followed along with proper explanation
relating to material departures;
b) that they 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 as at 31st March 2015 and of the profit of the Company for
the year ended on that date;
c) that they have taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 2013 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
d) that they had prepared the annual accounts on a going concern basis;
e) that they had laid down internal financial controls to be followed
by the Company and that such internal financial controls are adequate
and were operating effectively.
f) that they had devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate
and operating effectively.
RELATED PARTY TRANSACTIONS
The Company has formulated a policy on Related Party Transactions which
is in line with the relevant provisions of the Company's Act and the
Listing Agreement with the Stock Exchanges. The said policy as approved
by the Board is available in the Company website www.gelatin.in. As per
the said policy, omnibus approval of the Audit Committee is obtained
for all the Related Party Transactions which are of a foreseen and
repetitive nature. All Related Party Transactions actually taken place
are subsequently reviewed by the Audit Committee / Board on a quarterly
basis in comparison with the conditions of omnibus approval.
Additionally, material Related Party Transactions foreseen in the year
ahead, were got approved by the members also. Particulars of contracts
of arrangements with Related Parties referred to in sub section 1 of
Section 188 read with Rule 8(2) of the (Companies Accounts) Rules, 2014
are attached in Form No. AOC 2 as Annexure V.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges is presented in a separate section forming part of this
Annual Report.
CORPORATE GOVERNANCE
The Company has complied with the corporate governance requirements
under the Companies Act, 2013, and as stipulated under the Listing
Agreement with the Stock Exchange. A separate section on corporate
governance under the Listing Agreement, along with a certificate from
the auditors confirming compliance, is annexed and forms part of the
Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance
with the provisions of Schedule III of the Companies Act, 2013 and
Accounting Standards 21, 27 and other applicable Accounting Standards
issued by the Institute of Chartered Accountants of India and the
provisions of the Listing Agreement with the Stock Exchange and form
part of the Annual Report.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate internal financial controls with
reference to financial statements. During the year, such controls were
tested and no material weaknesses in the design or operation were
observed.
DIRECTORS
During the financial year 2014-15, both the promoters of the Company,
M/s. Nitta Gelatin Inc., Japan (NGI) and M/s. Kerala State Industrial
Development Corporation Ltd. (KSIDC) have agreed to reduce one nominee
director each to bring down the total number of nominee directors from
seven to five. Accordingly, NGI has withdrawn one of their nominees,
Mr. Yoshifumi Matsumoto as a Director of the Company.
Your Board has appointed an eminent banker, Smt. Radha Unni, Chief
General Manager (Retd.), State Bank of India as an Additional Director
of the Company in the category of Independent Directors w.e.f.
11.07.2014. Dr. Naotoshi Umeno, a faculty in management studies in Kobe
University, Japan since 1987 is also appointed as an Additional
Director of the Company categorized as Independent Director w.e.f.
13.11.2014.
Mr. A. K. Nair and Mr. K. L. Kumar appointed and continuing with the
Company as Independent Directors as at the date of the previous Annual
General Meeting were reappointed as Independent Directors of the
Company.
On the basis of a formal request from NGI, KSIDC has agreed to an
amendment to the promoters' agreement for appointing the nominee of NGI
as a Wholetime Director designated as Director (Technical).
Accordingly, Mr. Takeo Yamaki, a Director of the Company is appointed
as a Wholetime Director designated as Director (Technical) for a period
of two years from 11.07.2014.
All the aforesaid appointment of Directors was approved by the members
of your Company in the EGM held on 17th April, 2015.
All the Independent Directors have furnished declarations that they
meet the criteria of independence as laid down under Section 149(6) of
the Companies Act, 2013 and Clause 49 of the Listing Agreement.
KSIDC has nominated Dr. M. Beena IAS as a Director of the Company
replacing Mr. T. P. Thomaskutty, who has retired from the service of
KSIDC upon superannuation.
With great pleasure, your Directors welcome the new Directors Mrs.
Radha Unni, Dr. Naotoshi Umeno and Dr. M. Beena IAS. Your Directors
also record their deep sense of appreciation for the guidance and
support of Mr. T. P. Thomaskutty and Mr. Yoshifumi Matsumoto during
their tenure as the Directors of the Company.
Mr. K. Ramakrishnan, an Independent Director served with distinction on
the Board of the Company for a long term of around 17 years. He
preferred not to get reappointed as an Independent Director at the
Extraordinary General Meeting of the Company held on 17.04.2015. He was
therefore subject to retirement at this AGM by virtue of the provisions
as per section 152 of the Act. He does not also offer for
re-appointment. The Board hereby places on record its sincere thanks
and gratitude for the invaluable contribution made by Mr. K.
Ramakrishnan towards the growth and development of the Company during
his tenure as a director. The Board also on behalf of the members
wishes Mr. K. Ramakrishnan a long and healthy life. The Board will
take steps to find a replacement for Mr. K. Ramakrishnan at the
earliest.
BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of
the Listing Agreement, the Board at its meeting dated 20.03.2015
carried out its own annual evaluation of performance, both in terms of
Board and Committee membership, with specific reference to Independent
Directors and criteria for their independence. The rest of the Board
members including the Chairman of the Board were evaluated by the
Independent Directors at their meeting dated 17.04.2015. On the basis
of report on performance evaluation, the Independent Directors were
proposed for appointment before the Extraordinary General Meeting of
the Company dated.17.04.2015, who had since been appointed.
KEY MANAGERIAL PERSONNEL
Rule 8 (5)(iii) of Companies (Accounts) Rules, 2014 prescribes that
Report of Directors should contain details of Directors and Key
Managerial Personnel. Therefore, in addition to the details of Directors
hereinabove given, it is brought to the notice of shareholders that Mr.
K. Muraleedharan Nair was appointed as Chief Financial Officer (CFO) at
the Board meeting dated 09.05.2014, while Mr. G. Rajesh Kurup who held
office as Company Secretary, continues as such since commencement of the
Act and Rules effective 01.04.2014.
REMUNERATION POLICY
The Board has on the recommendation of the Nomination & Remuneration
Committee framed a policy for selection and appointment of Directors,
Key Managerial Personnel, Senior Management personnel and their
remuneration. The Remuneration policy is given as Annexure VI of this
report.
MEETINGS
The Board of Directors met 6 (six) times in the year 2014-15. The
details of the board meetings and the attendance of the Directors are
provided in the Corporate Governance Report. The intervening time gap
between the two consecutive meetings was within the period prescribed
under the Companies Act, 2013.
COMPOSITION OF AUDIT COMMITTEE
The Board had re-constituted the Audit Committee which comprises of
Mrs. Radha Unni as Chairperson with Mr. K. Ramakrishnan, Mr. A. K.
Nair and Mr. K. L. Kumar as the members.
More details on the Committee are given in the Corporate Governance
Report.
VIGIL MECHANISM
The Company has established a vigil mechanism for Directors and
employees to report genuine concerns, while providing for adequate
safeguards against victimization, providing direct access to
chairperson of Audit Committee, the details regarding which have also
been given in the Company's official website (www.gelatin.in).
DISCLOSURE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION,
PROHIBITION AND REDRESSAL) ACT, 2013.
Your Company has always believed in providing a safe and harassment
free workplace for every individual working and associating with the
company, through various interventions and practices. The Company
always endeavors to create and provide an environment that is free from
discrimination and harassment including sexual harassment.
A four member Internal Complaints Committee (ICC) is constituted with
three lady employees and one lady NGO member. ICC is responsible for
redressal of complaints relating to sexual harassment, as envisaged
under the provisions of Act and Rules. Hitherto no complaints were
received by ICC.
PREVENTION OF INDISER TRADING
The Company has adopted a Code of Conduct for Prevention of Insider
Trading with a view to regulate trading in securities by the Directors
and designated employees of the Company. The Code requires
pre-clearance for dealing in the Company's shares and prohibits the
purchase or sale of Company shares by the Directors and the designated
employees while in possession of unpublished price sensitive
information in relation to the Company and during the period when the
Trading Window is closed. The Board is responsible for implementation
of the Code.
BUSINESS RISK MANAGEMENT
Pursuant to section 134(3)(n) of the Companies Act, 2013 & Clause 49 of
the Listing Agreement, the Company has constituted a Business Risk
Management Committee. The committee is entrusted with the
responsibility to assist the Board in (a) Overseeing and approving the
Company's enterprise wide risk management framework; and (b) Overseeing
that all the risks that the organization faces such as strategic,
financial, credit, market, liquidity, security, property, IT, legal,
regulatory, reputational and other risks have been identified and
assessed and there is an adequate risk management infrastructure in
place capable of addressing those risks. The company manages, monitors
and reports on the principal risks and uncertainties that can impact
its ability to achieve its strategic objectives. The company's
management systems, organizational structures, processes, standards,
code of conduct and behaviors together form the management systems that
conducts the business of the company and manages associated risks.
The Risk Management procedures shall be periodically reviewed by the
Committee to ensure that the Executive Management controls risk through
the means of a properly defined frame work.
In pursuance of the aforesaid, a Risk Management Policy was developed
and approved by the Board.
STATUTORY AUDITORS
In the Annual General Meeting of the Company held on 11th July, 2014 the
Statutory Auditors of the Company, M/s. Varma & Varma, Chartered
Accountants, Ernakulam were appointed as Statutory Auditors of the
Company to hold office until the conclusion of the AGM relating to the
financial year 2015-16. They have confirmed their eligibility under
Section 141 of the Companies Act, 2013 and the Rules framed thereunder
for reappointment as auditors of the Company. As required under Clause
49 of the Listing Agreement with the Stock Exchange, the auditors have
also confirmed that they hold a valid certificate issued by the Peer
Review Board of the Institute of Chartered Accountants of India. M/s.
Varma & Varma have forwarded their confirmation that their
re-appointment as above is within the limits specified under the
Companies Act, 2013.
Their appointment as above is being put up for ratification by the
members at the ensuing General Meeting.
SECRETARIAL AUDIT
Pursuant to the provisions of the Section 204 of the Companies Act,
2013 and The Companies (Appointment and Remuneration of Managerial
Personnel), Rules 2014, the Company has appointed Mr. Abhilash N. A.
(CP No. 14524, M No. 22601), the Company Secretary in practice to
undertake the Secretarial Audit of the Company. The Secretarial Audit
Report is annexed herewith as Annexure VII.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form
MGT 9 are annexed herewith as Annexure VIII.
ACKNOWLEDGEMENT
Your Directors place on record their sincere appreciation for the
support and assistance extended by the State Government and M/s.
Kerala State Industrial Development Corporation Ltd. They also take
this opportunity to express their whole hearted gratitude to M/s. Nitta
Gelatin Inc., Japan, for their timely and valuable guidance and
inspiration. The Board also acknowledges the enthusiastic co-operation,
hard work and dedication of all its employees in accomplishing the
objectives of the Company. On this occasion, your Board thanks all the
customers, suppliers, bankers and other associates for their unstinted
co-operation. Your Directors are also thankful to the esteemed
shareholders for their continued patronage and the confidence reposed
in the Company and its management.
For and on behalf of the Board of Directors,
Kochi P. H. KURIAN IAS
09.05.2015 CHAIRMAN
(DIN: 00027596)
Mar 31, 2013
To The Shareholders,
The Directors have pleasure in presenting the 37th Annual Report and
Audited Accounts of the Company for the year ended 31st March, 2013.
FINANCIAL RESULTS
(Rs. in Crores)
For the
year ended For the
year ended
Particulars 31st March,
2013 31st March,
2012
Sales (including export incentives and 306.22 245.81
net of Excise Duty & VAT)
Other Income 2.76 1.13
TOTAL 308.98 246.94
Gross Profit before Depreciation 35.87 15.51
Deducting therefrom:
Depreciation 9.74 8.97
Provision for Tax -
- Current Tax 9.37 2.20
- Deferred Tax 0.03 (0.23)
- MAT Credit - (0.48)
- Prior years 1.15 (0.03)
Profit after Tax 15.58 5.08
Balance Profit Available for Appropriation 15.58 5.08
Appropriations:
Interim Dividend 3.36 -
Final Dividend - 3.36
Tax on Dividend 0.57 0.54
Transfer to General Reserve 1.56 0.51
Profit brought forward from previous year 7.77 7.10
Balance Profit carried to Balance Sheet 17.86 7.77
DIVIDEND
The Board of Directors of the Company in their meeting held on 3rd May,
2013 declared an interim dividend of Rs. 4/- per share @ 40% of the
face value of Rs. 10/- per share absorbing a sum of Rs.393.10 Lakhs
(including dividend distribution tax of Rs.57.10 Lakhs) which is
subject to regularisation by the shareholders in the ensuing Annual
General Meeting.
The Board of Directors of the Company do not recommend any further
dividend for the year under consideration.
RESERVES
Reserves as on 31.03.2013 were Security Premium Reserve Rs. 2730.00
Lakhs, Capital Investment Subsidy Rs. 15.00 Lakhs, Special Export
Reserve Rs. 79.00 Lakhs, General Reserve Rs. 6412.56 Lakhs, Hedging
Reserve Rs.47.85 Lakhs and surplus in Statement of Profit and Loss Rs.
1786.08 Lakhs.
PERFORMANCE
The company could increase the production/sale of all its major
products during the year resulting in its gross turnover registering an
increase of 26% (as against 20% during the previous year) to touch an
all time high of Rs. 315 Crores. Both favourable exchange rate
movements as well as increase in unit sales realization had played a
key support role in accomplishing the said growth in turnover.
Inclusive of the impact of the favourable forex movements during the
current year, increase in Gelatin selling price was 30% (previous year
18%) and 11% for Ossein (25% in previous year). In the case of
Dicalcium Phosphate, the increase was 13% (previous year 10%) and 11%
for Collagen Peptide.
Though the availability of crushed bone was marginally better during
the year, quality thereof has not witnessed much improvement. In order
to mitigate the adverse impact of such poor quality of crushed bone on
the final product quality, the company in consultation with its
collaborators has identified a couple of remedial initiatives. Of
these, the company has already implemented a few and the remaining are
expected to go on stream in the near future. Attributable to the
persistent demand from poultry industry, crushed bone is also being
used for producing poultry feed ingredients thereby adding to its
demand. As a result of the above, crushed bone prices have further
increased by 6% during the year against a 9% increase in the previous
year. In addition to the above, the production at Ossein division,
Koratty has stabilized during the period resulting in a lesser
dependence on purchased Ossein/Limed Ossein for our captive
requirements leading to better margins. Besides, price of Hydrochloric
Acid has also shown a decline of 23% during the review period as
against 22% during the previous year compared to the respective prices
prevailed in the immediately preceding financial years. Increase in
power charges/ restrictions in usage of power at normal rates during
the period under review, had caused an incremental cost of Rs.3.76
Crores. Despite the economic turbulences in the global economic climate
and more particularly the weakening of Japanese Yen against USD, our
efforts for maximizing the shareholder worth has been successful to the
extent that the Net Profit before tax has increased to Rs. 2613.01
Lakhs during 2012-13 as against Rs. 653.48 Lakhs in the previous year.
The products of the company continued to witness enviable market demand
throughout the year. The continued patronage of our valued customers
demonstrates their confidence in our brand. The increase in sales
quantities gives credence to your company''s ability to keep growing in
the most competitive Pharma / Healthcare market as we continuously
update and respond to the changes in customer preferences. In respect
of Collagen Peptide, the sales increased by around 47% followed by 10%
in Dicalcium Phosphate.
The Kadukutty Panchayat, where our Ossein Plant is situated, has not
renewed our factory licence for the year commencing from 01.04.2011
without any valid reasons. Therefore the Company moved the Hon''ble High
Court of Kerala seeking renewal of factory licence. The matter is
currently pending before the said Court and the unit is in operation.
Simultaneously the company has successfully implemented the action plan
formulated by the expert committee and recommended by the Kerala State
Government to further improve the environment. The above initiatives
have brought to light the care and commitment of the company to nature
and environment besides strengthening its image among the local public
and civic bodies. Your company is continuing relentless efforts in
this direction and is confident that they shall meet with the approval
and blessings of all concerned.
DILUTION OF PROMOTER SHAREHOLDING
The company has initiated the following actions to bring down the
promoter shareholding from the existing 80.50% to less than 75% in
terms of Rule 19 (2) (b) of the Securities Contracts (Regulation) Act,
1956 and in terms of the Securities Contracts (Regulation) Rules,
1957:-
(a) Fresh issue of 100,000/- equity shares of face value of Rs. 10/-
each in the company to the permanent employees (other than the
promoters or belonging to the promoter group) of the company under an
Employee Stock Purchase Scheme framed in accordance with the SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999.
(b) Bonus issue of 579,160 equity shares in the company in the ratio of
1:3, ie., one new fully paid-up equity share of face value of Rs. 10/-
for every three existing equity share of Rs. 10/-each held in the
company (other than to members who constitute the promoter and promoter
group). The said bonus equity shares shall be issued and allotted to
those shareholders whose name appear in the register of members and in
the beneficial ownership position held with the depositories as on the
record date.
Both the above proposals, have been approved by the members in the
Extra Ordinary General Meeting and the formalities for issue of shares
are progressing.
AWARDS & ACCOLADES
Your company has honoured with several awards during the year under
review as well:-
(i) Corporate Excellence Award for Green initiatives 2012-13 instituted
jointly by the Federal Bank Ltd. and Kerala Management Association for
Ossein Division.
(ii) Second runner-up Safety Award under the Medium Category by the
Inspectorate of Factories & Boilers, Govt. of Kerala.
The following are the noteworthy Certifications retained by your
Company:
(i) European Directorate for the Quality of Medicines & Health (EDQM)
Certificate for Gelatin Division.
(ii) HACCP Certificate for Ossein Division & Gelatin Division for food
safety.
(iii) ISO 14001:2004 for Gelatin Division for Environmental Management
System.
(iv) ISO 9000 for Quality Management System of the Company.
(v) NABL Accreditation for in-house Laboratory.
HEALTH, SAFETY AND ENVIRONMENT
Compliance with relevant regulations and effective management of the
systems in place are an integral part of the Company''s operating
philosophy and we stand committed to continually improve on these
objectives. There was considerable focus on improving Health, Safety
and Environment during the year by the Company.
1. Health and Safety
The Company is committed to promote the health and safety of its
employees. The Company has a Safety Committee which meets regularly to
review the issues impacting plant safety and employee health. Regular
health check up of employees is carried out by a reputed hospital.
The company has made laudable progress in the area of process safety
with no major accidents reported during the period. As a testimony to
this, Ossein Division of the company is awarded the Second runner-up
Safety Award under the Medium category during the year instituted by
the Inspectorate of Factories & Boilers, Govt. of Kerala.
2. Environment
Your Company continuously endeavours to improve on environmental
management. Through all our activities, we demonstrate our commitment
to protect the environment.
All our plants are having state of the art waste water treatment
plants. The quality of treated water from the waste water treatment
plant is well within the norms laid down by the pollution control
authorities. The emissions from boilers and generator stacks are
monitored regularly. A major part of the solids generated at our Ossein
plant is now being used for bio-gas generation. Water recycling and
water re-use are activities continuously perused and improved upon by
the company, with specific targets.
The ambient air quality in our Ossein Plant is being monitored on a
continuous basis to conform to the compliance of ambient air quality
standards.
Out of the total plot area of approx. 1,53,900 Sq. Metres, about
10,000 Sq. Metres of land around the boundary of Gelatin Division and
about 38,000 Sq. Metres of land in Ossein Division have been allocated
as green area which constitute approximately 31% of the total land area
comprised in the two divisions.
Apart from the above, the Company has undertaken during the year major
anti-pollution drive at Ossein Division wherein massive investments
were made for reducing water consumption, setting up of biogas plant
using sludge generated from production, additional green belt around
the factory compound, odour monitoring system, etc.
These steps are expected to go a longway in furthering our resolve to
protect the nature and environment.
CORPORATE SOCIAL RESPONSIBILITY
K. T. Chandy - Seiichi Nitta Foundation, the charitable trust promoted
by the company to support our social initiatives have contributed
significantly for various welfare schemes aimed mainly at the
upliftment of the rural/financially backward communities around our
factories. A few noteworthy programmes conducted under the aegis of the
foundation mainly in the panchayaths housing our factories are :-
1. Drinking water / Lift irrigation schemes
a. Chathanchal irrigation and drinking water project - The scheme
provided financial assistance of about Rs 8 lakhs for Lift irrigation
project which benefitted around 400 families in the locality.
b. Nilampathinjimugal drinking water scheme- About 150 beneficiaries
for this project with a financial outlay of Rs 1. 50 lakhs.
c. Padathikkara Drinking water scheme - Rs 1.60 lakhs - Financial
support for installing motor and pumping line for the benefit of 300
families in the area.The project is under progress.
d. Financial support for Lift irrigation Project at Cheruvalur &
Vynthala with an outlay of Rs 3.80 lakhs and benefits about 350
families in the vicinity.
2. Environmental protection
As part of the initiatives to ensure health and hygienic environment in
Kadukutty panchayath, the company has promoted the installation of
twenty units of domestic bio gas plants including financial support.
The second phase covering 20 more plants at an outlay of Rs. 1.50 Lakhs
is in progress.
3. Initiatives on organic farming:
A project named ''Harithagramam'' has been initiated during the year to
promote vegetable cultivation in Kadukutty Grama Panchayath whereby
seed, manure etc. are provided for cultivation to about 150 families.
In addition, expert advice in agriculture and organic farming, for
creating awareness on various agricultural and farming activities are
also provided. The project shall cost around Rs. 3 Lakhs and aims at
promoting organic farming in the area.
4. Acitivies related to education
The Trust has organised many training programmes for the students of
local schools to familiarise on latest trends in Information
Technology, spoken english, computer literacy, skil development, on the
job training etc. In addition it contemplates financial assistance to
two tribal schools in Wayanad district to the advantige of around 200
under privileged children. Foundation also provides financial
assistance for noon meal to the students of nearby schools such as
Kathikudam UPS, Union Higher secondary school, Mambra and Nair Samajam
High School, Valoor. Akshaya noon meal programme was sponsored in
Ernakulam District. Distribution of study materials were undertaken
during the year in association with other organisations, clubs etc.
5.Medical camps
The foundation organized various programmes related to health which
included awareness campaigns, medical camps, distribution of medicines
through palliative care association and other organizations like
Samaritan Santhom Convent, Ambazhakad, free Diabetic detection camp,
counseling at Vayojana clubs etc. In addition it conducted three major
medical camps in Kadukutty Panchayath.
6.Sports coaching camps and tournaments
In order to promote sports talents among the school students, the
Company conducted various coaching camps, athletic competitions, games
etc. with active participation of nearby schools and various clubs.
SUBSIDIARY COMPANIES
1) BAMNI PROTEINS LIMITED
The annual production during the year in this subsidiary company was
2472 MT of Ossein and 5280 MT of Dicalcium Phosphate as against 2423 MT
of Ossein and 5290 MT of Dicalcium Phosphate during the previous year.
The Company has recorded a net profit of Rs. 102.24 Lakhs after tax as
against Rs. 13.59 Lakhs during the previous fiscal. But for the
increase in cost of power, the Company''s profitability would have been
even higher.
2) REVA PROTEINS LIMITED
Reva Proteins Limited could not be operated to its entire commissioned
capacity during the year for want of permission for the discharge of
effluent from the Pollution Control Authorities. We have reliably
learnt that the deficiency in infrastructure with the Pollution Control
Authorities are under augmentation.
During the financial year ended 31.03.2013, Reva Proteins Ltd. have
registered a net loss of Rs. 762.49 Lakhs as against Rs.61.47 Lakhs
during the previous financial year period 27.03.2012 to 31.03.2012.
The annual production during the year at this subsidiary was 950 MT of
Ossein and 852 MT of Dicalcium Phosphate.
Nitta Gelatin Inc, Japan has subscribed to 48 Lakhs equity shares
(25.45%) of face value of Rs.10/- each at a price of Rs.25/- per share
in this subsidiary during the year.
In terms of the general circular dated 8th February 2011 issued by
Government of India, Ministry of Corporate Affairs, copy of the balance
sheets, profit & loss accounts, reports of the Board of Directors and
auditors of the subsidiary companies have not been attached with the
balance sheet of the Company. Annual accounts of the subsidiary
companies and the related detailed information shall be made available
to shareholders of the Company and subsidiary companies seeking such
information at any point of time. The annual accounts of the subsidiary
companies shall also be available for inspection by any shareholder at
the Head Office of the Company and the subsidiary companies concerned.
Hard copy of accounts of subsidiaries shall be furnished to any
shareholder on demand. Further, pursuant to Accounting Standard (AS) -
21 issued by the Institute of Chartered Accountants of India,
consolidated financial statements presented by the Company include the
financial information of its subsidiaries.
AUDITORS'' REPORT
1. Emphasis of Matter on the accounts of the company referred to in
the Auditors'' Report is explained in detail under para 2.27.2 (i),
(ii), 2.27.1 (i) and 2.27.2(iii) of the Notes forming part of accounts
for the year and hence no further comments are necessary.
2. Observation of audit vide para 9(a) of the Annexure to the
Auditors'' Report. The amount referred to by audit, fully provided for
in the accounts, can be remitted only after the execution of a new
agreement with the Irrigation Department, Government of Kerala. The
said agreement is currently under finalization by the Government.
3. Observation of audit vide para 9 (b) of the Annexure to the
Auditors'' Report - The points covered in the above para are explained
in detail under para 2.27.2 (iii), (i) and (ii) respectively of the
Notes forming part of the accounts for the year and hence no further
comments are called for.
COLLABORATORS
Your Collaborators continue to extent their unstinted support and
co-operation to each and every initiate of the Company. They have been
supporting us by providing technical information, training of
personnel, deputing trained technicians to our Plants and marketing our
products.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS AND OUTGO
The information as required under Section 217(1) (e) of the Companies
Act, 1956, read with the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988 is annexed.
PARTICULARS OF EMPLOYEES
None of the employees of the Company are coming under the purview of
Section 217(2A) of the Companies Act, 1956.
RESPONSIBILITY STATEMENT OF DIRECTORS
Directors responsibility statement on the Annual Accounts of the
Company for the year ended 31.03.2013, pursuant to the provisions of
Section 217(2AA) of the Companies Act, 1956.
Your Directors confirm:
i) That in the preparation of the annual accounts, the applicable
Accounting Standards have been followed along with proper explanation
relating to material departures.
ii) That they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company as at 31st March 2013 and of the profit of the Company for
the year ended 31st March 2013.
iii) That they have taken proper and sufficient care for the
maintenance of adequate accounting records in safeguarding the assets
of the Company and for preventing and detecting fraud and other
irregularities.
iv) That they have got prepared the annual accounts on a going concern
basis.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Report on Management Discussion and Analysis is annexed.
CORPORATE GOVERNANCE
Your Directors reaffirm their continued commitment to good corporate
governance practices. During the year under review, your Company was in
compliance with the provisions of Clause 49 of the Listing Agreement
with the Stock Exchanges relating to Corporate Governance.
A separate section on Corporate Governance together with a certificate
from your Company''s Statutory Auditors forms part of this Annual
Report.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance
with the provisions of Accounting Standards 21, 27 and other applicable
Accounting Standards issued by the Institute of Chartered Accountants
of India and the provisions of the Listing Agreement with the Stock
Exchanges and forms part of the Annual Report.
ADDITIONAL DISCLOSURES
Keeping in view the requirements of the Listing Agreements and the
Accounting Standards of the Institute of Chartered Accountants of
India, your Company has made additional disclosures in respect of
Related Party Transactions and Segmental Reporting.
DIRECTORS
Mr. Alkesh Kumar Sharma IAS, who was a Director of the Company with
effect from 17.07.2009 ceased to hold office on 06.11.2012 consequent
on the Kerala State Industrial Development Corporation Limited (KSIDC)
vide their letter dated 06.11.2012 nominating Mr. Tom Jose IAS,
Managing Director, KSIDC as a Director of the Company. KSIDC has also
vide letter dated 03.04.2013 nominated Mr. T. P. Thomaskutty,
Executive Director, KSIDC as a Director of the company in the place of
Mr. Venu Nallur
Your Directors extend a warm welcome to Mr. Tom Jose IAS and Mr. T. P.
Thomaskutty as members of the Board. The Board also places on record
the appreciation for the valuable guidance and support extended by both
Mr. Alkesh Kumar Sharma IAS and Mr. Venu Nallur during their tenure as
Directors.
Under the provisions of the Articles of Association of the Company and
the Companies Act, 1956 Mr. N. Soga and Mr. A. K. Nair retire by
rotation and are eligible for re-appointment. Necessary resolution in
this behalf have been proposed for consideration of the members. Your
Directors have pleasure in recommending their re-appointment.
AUDITORS
The Board on the recommendation of the Audit Committee propose that
M/s. Varma & Varma, the retiring auditors, be re-appointed as Auditors
of the Company. M/s. Varma & Varma, Chartered Accountants, Cochin, has
forwarded their Certificate to the Company stating that the
re-appointment if made will be within the limit specified in that
behalf in sub-section 1(B) of Section 224 of the Companies Act, 1956. A
Special Resolution is being proposed for their re-appointment.
ACKNOWLEDGEMENT
Your Directors place on record their gratitude for the support,
co-operation and encouragement extended by the State Government and
M/s. Kerala State Industrial Development Corporation Limited for the
operations of the company. Your Directors also take this opportunity to
thank M/s. Nitta Gelatin Inc., Japan, for their learned guidance and
valuable direction. Your Directors also wish to place on record sincere
appreciation for the continuing support and whole-hearted efforts of
Vendors, Dealers, Business Associates and Employees in ensuring an
excellent all round operational performance. Your Directors are also
thankful to the esteemed Shareholders for their continued patronage and
the confidence reposed in the Company and its management.
For and on behalf of the Board
Kochi V. SOMASUNDARAN IAS
29th May 2013 Chairman
Mar 31, 2011
The Directors have pleasure in presenting the 35th Annual Report and
Audited Accounts of the Company for the year ended 31st March, 2011.
FINANCIAL RESULTS
For the year For the year
ended 31st ended 31st
March, 2011 March, 2010
(Rs. In (Rs. in
crores) crores)
Sales (Net of Excise Duty
& VAT) 196.50 189.41
Other Income (including
Export incentive) 8.65 7.98
TOTAL 205.15 197.39
Gross Profit before
Depreciation 10.94 38.19
Deducting therefrom:
Depreciation 8.43 7.43
Provision for Tax -
- Current Tax 0.52 9.93
- Deferred Tax 0.41 (0.20)
- MAT Credit - (4.37)
-Prior years (0.31) (0.06)
Profit after Tax 1.89 25.46
Balance Profit Available for
Appropriation 1.89 25.46
The appropriations are:
Dividend 3.36 5.04
Tax on Dividend 0.56 0.84
Transfer to General Reserve 0.19 13.16
Profit brought forward from Previous
Year 9.32 2.90
Balance Profit carried to Balance Sheet 7.10 9.32
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs. 4/- per share
@ 40% of the face value of Rs. 10/- per share on the equity capital for
the financial year ended 31st March 2011, for the approval of the
Company in General Meeting. The total outflow on account of dividend
inclusive of Corporate Tax on dividend would be Rs. 3.92 Crores.
PERFORMANCE
The Gross sales of the company touched Rs. 202 crores during the year
thereby maintaining the percentage increase of 4% over the previous
year. During the year, the Company could achieve improvement in net
realization for all its existing products over the previous year.
Ossein prices marked an increase of 8%, DCP 15% and Gelatin by 3% over
the previous year. Besides the Company has ventured into the retail
consumer market with its maiden consumer product GELIXER COLLAGENPEP
(for healthy joints, promotes cartilage health, maintains joint
flexibility and mobility) during the year under review and could attain
a sale of 1.23 Lakh Jars within nine months. Other new products
launched include SEEDAID and NUTRIGOLD (for higher germination rate of
seeds and growth rate for agricultural produces), MEAT MEAL (a pet food
ingredient) and CHITOSAN (applications in Cosmetics, Bio-medical and
Nutritional Products). In addition to BOVINE COLLAGEN PEPTIDE
introduced during the previous year, the Company has successfully
commenced the manufacture and sale of FISH COLLAGEN PEPTIDE as well.
Our main raw material, Crushed Bone is a byproduct of the meat
industry. Last year, in the aftermath of global recession, the meat
export from India reduced considerably. Moreover, there was a shift in
domestic consumption from beef to poultry products. These had reduced
slaughtering. Added to this, the growth of poultry industry increased
the consumption of Meat-cum-Bone Meal, a poultry feed ingredient made
out of bones. This scenario also had led to a reduction in the
production of Crushed Bone eventually leading to its increase in price.
Similarly, the demand for Caustic Soda had reduced due to which the
chlor- alkali companies reduced production of Hydrochloric Acid at a
time when there was a heavy demand. This has contributed to a
phenomenal increase in cost of Hydrochloric Acid, the other major raw
material for Ossein production.
As a result of the above, Crushed Bone price increased by 22% and HC1
prices by 92% over the previous year. This price increase had pulled
down the net profit by Rs. 1344.01 Lakhs due to Crushed Bone and Rs.
558.05 Lakhs due to Hydrochloric Acid. Companys first consumer
product, Gelixer CollagenPep, being a new entrant in the consumer
market, expenses on product launch and market promotion touched Rs.
393.11 Lakhs. The decline in USD/INR exchange rate from Rs. 46.81 in
the previous year to Rs. 45.27 in the current year had cost us Rs. 3.07
Crores. The Company is trying to pass on these escalation in costs to
our customers. However, due to the peculiarities of our
products/industry, it will take some time to accomplish this fully.
The incremental revenue that could be generated from improved sales
realization, enhancement in sale quantities and the launch of new
products was more than offset by the negative impact of all the
aforesaid adverse situations causing a decline in profits during the
year. Net Profit before tax for the year is Rs. 2.51 Crores. The
Company has made a net provision of Rs. 0.62 Crore as Income-Tax. Net
Profit for the year after tax works out to Rs. 1.89 Crores.
In spite of all these adverse factors, we could maintain our supplies
to our major customers. Also we continued our endeavour to grow.
Keeping in line with our strategy for growth, we have taken steps to
add more value added products in our basket. Besides, with newly
acquired facilities, we propose to establish a few of our new projects/
products. Your Company sold 1774 MT of Gelatin in the export market in
30 Countries and 1693 MT in the domestic market in 2010-11. The
continued patronage of our valued customers demonstrate their
confidence in our Brand. The constant demand for our product gives
credence to your Companys ability to keep growing in the most
competitive Gelatin market as we continuously update and respond to the
changes in customers preferences.
ACQUISITION OF FACTORY AT AROOR
During the year, your Company has acquired the assets including land
and factory building at a total outlay of Rs. 777.31 Lakhs in Aroor
Industrial Estate, Alappuzha District.
AWARDS & ACCOLADES
Your Company has received several awards during the year. Some of the
significant accolades received include:
1. Top Export Award from CAPEXIL - Ossein & Gelatin Panel.
2. ISO 14001:2004 for Gelatin Division for Environmental Management
System.
3. Best SME Award 2010 for International Trade from Yes Bank and
Business Today.
4. ISO 9000 for Quality Management System of the Company.
5. NABL Accreditation for in-house Laboratory.
The following internationally recognized Certifications have been
maintained by your Company:
1. European Directorate for the Quality of Medicines & Health (EDQM)
Certificate for Gelatin Division.
2. HACCP Certificate for Ossein Division & Gelatin Division for food
safety.
HEALTH, SAFETY AND ENVIRONMENT
Your Company continues to lay great emphasis on Health, Safety and
Environment. Every possible effort is being channelised by the Company
to comply with the relevant regulations and their effective management.
1. Health and Safety
The Company is committed to promoting the health and safety of its
employees for which regular medical check-ups are being arranged. All
its Divisions have Safety Committee which includes representation from
workmen. The Committee meets regularly to review issues impacting plant
safety and employee health. The plants are equipped with first-aid room
to meet any emergency. A cross functional team for employee health and
safety and an emergency action plan are in place.
2. Environment
Out of the total plot area of approx. 1,53,900 Sq. Metres, about
10,000 Sq. Metres of land around the boundary of Gelatin Division and
about 38,000 Sq. Metres of land in Ossein Division have been allocated
as green area which constitute approximately 31% of the total land area
comprised in the two divisions.
The Company has in place modern state of the art effluent treatment
plants both at Ossein Division and Gelatin Division for treating and
discharging effluent water well within the limits set by the
State Pollution Control Board. The emissions from boilers and generator
stacks are monitored regularly. A part of the effluent waste is used
for generating bio-gas for Ossein Division. We continue our endeavour
to protect the environment and at the same time avail incentives like
carbon credit. The Company continuously strives to improve on
environmental management to minimize any adverse impact.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has pursued its activities under Corporate Social
Responsibility during this year as well. A few noteworthy programmes
conducted under the aegis of the Company are - (i) provision of energy
efficient lamps for families staying in the vicinity of Ossein Division
(ii) conducting free medical camps (iii) conducting various awareness
programmes to local people etc.,
The activities of the Charitable Trust, K.T. Chandy - Seiichi Nitta
Foundation, promoted by the Company for spearheading CSR activities,
include donations for house construction for poor families jointly with
Koratty Panchayat. The other regular activities continued during the
year.
SUBSIDIARY COMPANIES
1) BAMNI PROTEINS LTD.
The annual production during the year in this subsidiary company was
2407 MT of Ossein and 5295 MT of Dicalcium Phosphate as against 2366 MT
and 5284 MT respectively during the previous year. The Company has
recorded a net profit of Rs. 27.52 Lakhs after tax as against Rs. 42.68
Lakhs during the previous year. But for the increase in cost of power
and other utilities, the Companys profitability would have been
higher.
The Directors Report, Balance Sheet and Profit & Loss Account of Bamni
Proteins Ltd. for the year 2010-11 are attached as required under
Section 212 of the Companies Act, 1956.
2) REVA PROTEINS LTD.
The new Plant owned by the subsidiary company "REVA PROTEINS LIMITED"
with a capacity to produce 1700 MT of Limed Ossein and the by- product,
Dicalcium Phosphate has reach ed an advanced stage of completion and is
slated for commissioning during the first quarter of 2011-12. The net
loss after tax of the Company was Rs. 31.96 Lakhs as against Rs. 60.31
Lakhs for the previous year.
The Directors Report, Balance Sheet and Profit & Loss Account of Reva
Proteins Limited for the year 2010-11 are attached as required under
Section 212 of the Companies Act, 1956.
AUDITORS REPORT
i) Note No. B 13 (b) (1) of Schedule - 19 to the accounts refered to in
para (3) of the Auditors
Report is self-explanatory and no further comments are called for.
ii) Observation of audit vide para 9 (b) of the Annexure to the report
is explained in detail in para B 13 (a) of Schedule - 19 to the
accounts.
COLLABORATORS
Your Collaborators continue to provide their whole- hearted
co-operation to your Company in all its activities. They have been
supporting us by providing technical information, training of personnel
and deputation of experts to our facilities.
CONSERVATION OF ENERGY, TECHNOLOG ABSORPTION, FOREIGN EXCHANGE EARNING
AND OUTGO
The information as required under Section 217(l)(e) of the Companies
Act, 1956, read with the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988 is annexed.
PERFORMANCE MANAGEMENT PROCESS
A Performance Management Process has been introduced in the Company in
earlier years to act as a catalyst for its ambitious growth plans. This
has been further streamlined to encompass every key area of operation
such as Purchase, Production, Marketing, Process Development, HR and
Finance. Under each of the key areas of operations, critical
parameters having a significant impact on the bottom-line are
identified and specific targets are set by the management to be
collectively pursued for attainment by various group of employees
selected from all levels and the achievements are constantly evaluated
against such targets. This has paved the way for a sense of
participation and togetherness among employees at all levels.
HUMAN RESOURCE
Your Company continuously strives to foster a culture of high
performance. Your Management has infused a lot of rigor and intensity
in its people development processes and in honing skill sets.
Companys HR processes are absolutely aligned to organizational goals.
Ongoing learning, aligning, recognition and rewards with performance
have enabled your Company to successfully manage its growth plans.
PARTICULARS OF EMPLOYEES
None of the employees of the Company are coming under the purview of
Section 217(2A) of the Companies Act, 1956. Details of managerial
remuneration under Section 198 of the Act, are furnished under Note No.
B2 of Schedule 19 forming part of the Accounts.
RESPONSIBILITY STATEMENT OF DIRECTORS
Directors responsibility statement on the Annual Accounts of the
Company for the year ended 31.3.2011, pursuant to the provisions of
Section 217(2AA) of the Companies Act, 1956.
Your Directors confirm:
i) That in the preparation of the annual accounts, the applicable
Accounting Standards have been followed along with proper explanation
relating to material departures.
ii) That they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company as at 31st March 2011 and of the profit of the Company for
the year ended 31st March 2011.
iii) That they have taken proper and sufficient care for the
maintenance of adequate accounting records in safeguarding the assets
of the Company and for preventing and detecting fraud and other
irregularities.
iv) That they have got prepared the annual accounts on a going concern
basis.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Report on Management Discussion and Analysis is annexed.
CORPORATE GOVERNANCE
Your Directors reaffirm their continued commitment to good corporate
governance practices. During the year under review, your Company was in
compliance with the provisions of Clause 49 of the Listing Agreement
with the Stock Exchanges relating to Corporate Governance.
A separate section on Corporate Governance together with a certificate
from your Companys Statutory Auditors forms a part of this Annual
Report.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared in accordance
with the provisions of Accounting Standards 21, 27 and other applicable
Accounting Standards issued by the Institute of Chartered Accountants
of India and the provisions of the Listing Agreement with the Stock
Exchanges and forms part of the Annual Report.
ADDITIONAL DISCLOSURES
Keeping in view the requirements of the Listing Agreements and the
Accounting Standards of the Institute of Chartered Accountants of
India, your Company has made additional disclosures in
respect of Related Party Transactions and Segmental Reporting.
DIRECTORS
Under the provisions of the Articles of Association of the Company and
the Companies Act, 1956, Mr. K.L. Kumar and Mr. T. Yamaki retire by
rotation and are eligible for re-appointment. The Managing Director Mr.
G. Suseelan completed his tenure of three years in office as per the
terms of his original appointment on 31.03.2011, while the Board of
Directors, on recommendation by the Remuneration Committee based on the
nomination received by it from M/s. Nitta Gelatin Inc., Japan,
reappointed him as Managing Director for a further term of 3 years
w.e.f. 01.04.2011. Necessary resolutions in this behalf have been
proposed for consideration of the members. Your Directors have pleasure
in recommending their re- appointment.
The information on the particulars of Directors seeking
appointment/re-appointment as required under Clause 49 of the Listing
Agreement executed with Stock Exchange has been furnished under
Corporate Governance Report.
AUDITORS
The Board on the recommendation of the Audit Committee propose that
M/s. Varma & Varma, the retiring auditors, be re-appointed as Auditors
of the Company. M/s. Varma & Varma, Chartered Accountants, Cochin, has
forwarded their Certificate to the Company stating that the
re-appointment if made will be within the limit specified in that
behalf in sub-section 1(B) of Section 224 of the Companies Act, 1956.
A Special Resolution is being proposed for their re-appointment.
ACKNOWLEDGEMENT
Your Directors acknowledge the dedication and commitment of your
Companys employees to the growth of your company. Their unstinted
support has been and continues to be an integral part to your Companys
on-going success.
The Board also wishes to thank M/s. Nitta Gelatin Inc., Japan, M/s.
Kerala State Industrial Development Corporation Limited, the State and
Central Governments, the Companys Bankers, Customers, Suppliers and
Shareholders for their continued co-operation and support.
For and on behalf of the Board,
T. BALAKRISHNAN IAS
Chairman
Thiruvananthapuram
10th May 2011
Mar 31, 2010
The Directors have pleasure in presenting the 34th Annual Report and
Audited Accounts of the Company for the year ended 31st March, 2010.
FINANCIAL RESULTS
For the year ended For the year ended
31st March, 2010 31st March, 2009
(Rs. in Crores) (Rs. in Crores)
Sales (Net of Excise Duty + VAT) 189.56 182.48
Other Income (including Export
incentive) 8.09 4.98
TOTAL 197.65 187.46
Gross Profit before Depreciation 38.19 33.21
Deducting therefrom:
Depreciation 7.43 8.55
Provision for Tax :
- Current Tax 9.93 2.79
- Deferred fax (0.20) 6.57
- Fringe Benefit Tax - 0.15
- MAT Credit (4.37)
- Prior years (0.06) 0.13
Profit after Tax 25.46 15.02
Balance Profit Available for
Appropriation 25.46 15.02
The appropriations are:
Dividend 5.04 2.52
Tax on Dividend 0.84 0.43
Transfer to General Reserve 13.16 4.00
Profit/(Loss) brought forward
from Previous Year 2.90 (5.17)
Balance Profit carried to Balance
Sheet 9.32 2.90
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs.6/- per share
@ 60% of the face value of Rs. 10/- per share (including a special
dividend of Rs. 2/- per share @ 20% of face value) on the equity
capital for the Financial Year ended 31st March 2010, for the approval
of the Company in General Meeting. The total outflow on account of
dividend inclusive of Corporate Tax on dividend would be Rs. 5.88
Crores.
PERFORMANCE
The Gross Sales of the Company increased by 4% over the previous year
to Rs. 194 Crores. The Company could achieve a 16% increase in sales
volume of Gelatin and an increased price realization for Gelatin and
Ossein during the year. However, in the case of Dicalcium Phosphate
(DCP)
the price reduced by Rs. 600/- per MT on an average. The reduction in
production of Ossein and DCP also affected Companys performance. The
cost of Crushed Bone increased substantially due to shortage of the
material in the market, resulting in an additional expenditure of Rs.
7.30 Crores compared to last year. The economic situation resulted in
reduction of export of meat and in turn the availability of bones.
Moreover, the quality of Crushed Bones affected the yield of products
adversely. The profit before tax has increased by 25% over the previous
year to Rs. 30.76 Crores. The Company has made a net provision of Rs.
5.30 Crores as Income-tax after setting off Minimum Alternate Tax
credit of Rs. 4.37 Crores. As a result, the profit after tax increased
by 69.51 % over the previous year to Rs. 25.46 Crores. During the year,
US Dollar was almost stable vis- a- vis the Rupee. The average
realization on Rupees per
US Dollar was Rs. 46.81 as against Rs. 46.57 during the previous year.
During the year, the production of Gelatin has increased by 13% to 3988
MT (3522 MT).
During this year also the Company economised its drying operations by
extending the use of firewood instead of furnace Oil to more areas,
resulting in substantial savings. Use of firewood instead of coal helps
in reducing carbon foot-print and as the firewood is costlier than
coal, we are eligible to get Carbon Credits. The process of validation
is in progress now. The withdrawal of power-cut and additional power
tariff with effect from June 2009 also resulted in reduction in power
cost. The increased realization and production of Gelatin, savings in
fuel cost helped your Company to increase the profit. The achievement
of 2009- 10 can be attributed to the strength of our brand and our
strong and enduring customer relationships backed by the support of our
collaborators M/s. Nitta Gelatin Inc., Japan.
Your company increased the production capacity of Gelatin by 500 MT
during the current year. Your Company is also making all out efforts
for further improvement of performance by increasing the overall yield
and optimising the cost of production.
Your company sold 1983 MT of Gelatin in the export market in 23
Countries and 2062 MT in the domestic market. The continued patronage
of our valued customers demonstrate their confidence in our Brand. The
increased turnover gives credence to your companys ability to keep
growing in the most competitive Gelatin market as we continuously
update and respond to the changes in customers preferences.
Your company successfully commissioned a project for manufacture of
Meat Meal, a pet food ingredient and Sterilized Bone Meal. A portion of
our raw materials, so far being discarded as waste, is being imparted
value addition for the ultimate benefit of the Company. The resultant
reduction in the waste material quantity enabled a reduction in waste
disposal cost as well. Your company also commissioned a project for
manufacture of Chitosan. These new products were under stabilization
during the year under review and their full benefit is expected to
accrue during the current year. As the quantities produced were
relatively small their capacity utilization have not been mentioned in
the Balance Sheet.
ENTERPRISE RESOURCE PLANNING
Your Company was operating under a semi- integrated software developed
in the year 2000- 01. To meet the operational requirements of the
Company and to increase efficiency and reduce production cost, a
decision was taken by your Board to implement an integrated ERP
software - my SAP ERP ECC 6.0 (SAP). Your Directors deem it most
appropriate to have adopted the above at a time when the Company is
venturing into many diversification projects. The ERP system (SAP) was
implemented with effect from 01.04.2010.
AWARDS & ACCOLADES
Your Company has earned several honours. Some of the significant
accolades received include:
1. Top Export Award from CAPEXIL - Ossein & Gelatin Panel.
2. ISO 14001:2004 for Gelatin Division for Environmental Management
System.
The following internationally recognized Certifications are maintained
by your Company:
1. European Directorate for the Quality of Medicines & Health (EDQM)
Certificate for Gelatin Division.
2. HACCP Certificate for Ossein Division & Gelatin Division for food
safety.
PARTICULARS OF EMPLOYEES
None of the employees of the Company is coming under the purview of
Section 217(2A) of the
Companies Act, 1956. Details of managerial remuneration under Section
198 of the Act, are furnished under Note No. B2 of Schedule 19 forming
part of the Accounts.
RESPONSIBILITY STATEMENT OF DIRECTORS
Directors responsibility statement on the Annual Accounts of the
Company for the year ended 31.3.2010, pursuant to the provisions of
Section 217(2AA) of the Companies Act, 1956.
Your Directors confirm:
i) That in the preparation of the annual accounts, the applicable
Accounting Standards have been followed along with proper explanations
relating to material departures.
ii) That they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company as at 31s March 2010 and of the profit of the Company for
the year ended 31st| March 2010.
iii) That they have taken proper and sufficient care for the
maintenance of adequate accounting records in safeguarding the assets
of the Company and for preventing and detecting fraud and other
irregularities.
iv) That they have got prepared the annual accounts on a going concern
basis.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Report on Management Discussion and Analysis, is annexed.
CORPORATE GOVERNANCE
A report on Corporate Governance along with Certificate of Compliance
from the Auditors is Annexed.
ADDITIONAL DISCLOSURES
Keeping in view the requirements of the Listing Agreements and the
Accounting Standards of the Institute of Chartered Accountants of
India, your Company has made additional disclosures in respect of
Consolidated Financial Statements, Related Party Transactions and
Segmental Reporting.
DIRECTORS
Mr. Manoj Joshi IAS, who had been the Chairman of the Company with
effect from 23.01.2009, ceased to hold office on 17.07.2009 consequent
on the Kerala State Industrial Development Corporation Limited (KSIDC)
withdrawing his nomination upon his assuming office as Secretary to
Government, Health Department, Government of Kerala. Mr. T.
Balakrishnan IAS, Additional Chief Secretary,
Industries & Commerce, Government of Kerala, was nominated as Director
and Chairman of the Company with effect from 17.07.2009. The Directors
place on record their deep appreciation of the guidance and directions
given by Mr. Manoj Joshi IAS, as the Chairman of the Company. KSIDC
has also nominated Mr. Alkesh Kumar Sharma IAS, Managing Director of
KSIDC, as Director of the Company with effect from 17.07.2009. Your
Directors extend warm welcome to Mr. T. Balakrishnan, IAS as Chairman
and Mr. Alkesh Kumar Sharma, IAS as Directors of the Company.
Under the provisions of the Articles of Association of the Company and
the Companies Act, 1956, Mr. A.K. Nair and Mr. K. Inoue retire by
rotation and are eligible for re-appointment. Necessary resolutions in
this behalf have been proposed for consideration of the members. Your
Directors have pleasure in recommending their re- appointment.
The information on the particulars of Directors seeking
appointment/re-appointment as required under Clause 49 of the Listing
Agreement executed with Stock Exchange has been furnished under
Corporate Governance Report.
AUDITORS
The Board on the recommendation of the Audit Committee propose that
M/s. Varma & Varma, the retiring auditors, be re-appointed as Auditors
of the Company. M/s. Varma & Varma, Chartered Accountants, Cochin, has
forwarded their Certificate to the Company stating that the re-
appointment if made will be within the limit specified in that behalf
in sub-section 1(B) of Section 224 of the Companies Act, 1956. A
Special Resolution is being proposed for their re- appointment.
ACKNOWLEDGEMENT
Your Directors acknowledge the dedication and commitment of your
Companys employees to the growth of your company. Their unstinted
support has been and continues to be an integral part to your Companys
on-going success.
The Board also wishes to thank M/s. Nitta Gelatin Inc., Japan, M/s.
Kerala State Industrial Development Corporation Limited, the State and
Central Governments, the Companys Bankers, Customers, Suppliers and
Shareholders for their continued co-operation and support.
For and on behalf of the Board,
Thiruvananthapuram T. BALAKRISHNAN IAS
7th May 2010 Chairman
On Behalf of the Board of Directors,
[ G. SUSEELAN ] [ T. BALAKRISHNAN IAS ]
MANAGING DIRECTOR CHAIRMAN
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